-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ONngYb9TJ6l1tAfc/Yerkv5yvlylWVV9Hgvhj79cxhhoEfPSA+tv0LNSHKzNB/q6 lUvNAt71+G0wbEAGIcmOZA== 0000950134-97-001047.txt : 19970222 0000950134-97-001047.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950134-97-001047 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PANHANDLE ROYALTY CO CENTRAL INDEX KEY: 0000315131 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 731055775 STATE OF INCORPORATION: OK FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-09116 FILM NUMBER: 97533175 BUSINESS ADDRESS: STREET 1: 5400 NW GRAND BLVD STREET 2: GRAND CENTRE STE 210 CITY: OKLAHOMA CITY STATE: OK ZIP: 73112 BUSINESS PHONE: 4059481560 10QSB 1 FORM 10-QSB FOR QUARTER ENDED DECEMBER 31, 1996 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB ( X ) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the period ended December 31, 1996 ( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________________ to _____________________ Commission File Number 0-9116 PANHANDLE ROYALTY COMPANY - ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) OKLAHOMA 73-1055775 - -------------------------------------- -------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Grand Centre Suite 210, 5400 NW Grand Blvd., Okla. City, Oklahoma 73112 - ------------------------------------------------------------------------------ (Address of principal executive offices) Registrant's telephone number including area code (405) 948-1560 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes No ---- --- Outstanding shares of Class A Common stock (voting) at February 5, 1997: 677,846 2 INDEX Page Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - December 31, 1996 (unaudited) and September 30, 1996.................................. 1 Condensed Consolidated Statements of Income - Three months ended December 31, 1996 and 1995 (unaudited).............. 2 Condensed Consolidated Statements of Cash Flows - Three Months ended December 31, 1996 and 1995 (unaudited)......................................... 3 Notes to Condensed Consolidated Financial Statements (unaudited) ............................. 4 Item 2. Management's discussion and analysis of financial condition and results of operations................. 4 Part II. Other Information Item 6. Exhibits and reports on Form 8-K.................... 6 3 PART I. FINANCIAL INFORMATION PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Information at December 31, 1996 is unaudited)
December 31, September 30, ASSETS 1996 1996 ------ ------------------ ------------- Current Assets: Cash and cash equivalents $ 137,441 $ 399,423 Oil and gas sales and other receivables 981,795 817,258 Prepaid expenses 19,684 4,520 ------------------ ------------- Total current assets 1,138,920 1,221,201 Properties and equipment, at cost, based on successful efforts accounting: Producing Oil and Gas Properties 18,077,045 17,594,577 Nonproducing Oil and Gas Properties 5,167,107 5,112,785 Other 192,647 190,473 ------------------ ------------- 23,436,799 22,897,835 Less accumulated depreciation, depletion and amortization 13,921,622 13,700,007 ------------------ ------------- Net properties and equipment 9,515,177 9,197,828 Other assets 107,716 107,716 ------------------ ------------- $ 10,761,813 $ 10,526,745 ================== ============= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable, accrued liabilities and gas imbalance liability $ 210,253 $ 210,280 Dividends payable 29,056 28,656 Income taxes payable 209,406 164,843 Deferred income taxes 250,000 250,000 ------------------ ------------- Total current liabilities 698,715 653,779 Long-term debt 600,000 750,000 Deferred income taxes 908,000 908,000 Stockholders' equity: Class A voting common stock, $.10 par value; 1,000,000 shares authorized, 677,846 issued and outstanding at December 31, 1996 and 677,846 at September 30, 1996 67,785 67,785 Capital in excess of par value 383,790 383,790 Retained earnings 8,103,523 7,763,391 ------------------ ------------- Total stockholders' equity 8,555,098 8,214,966 ------------------ ------------- $ 10,761,813 $ 10,526,745 ================== =============
(See accompanying notes) (1) 4 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Dec. 31, ----------------------------------- 1996 1995 ---------------- -------------- Revenues: Oil and gas sales $ 1,543,383 $ 1,178,810 Lease bonuses and rentals 1,108 1,800 Interest 4,108 6,052 Other 8,940 787 ---------------- -------------- 1,557,539 1,187,449 Costs and expenses: Lease operating expenses, production taxes 231,528 225,507 Dry hole costs 160,980 12,838 Depreciation, depletion and amortization 226,864 246,225 General & administrative 341,320 263,058 Interest Expense 14,745 23,237 ---------------- -------------- 975,437 770,865 Income before provision for income taxes 582,102 416,584 Provision for income taxes 106,000 64,500 ---------------- -------------- Net Income $ 476,102 $ 352,084 ================ ============== Net income per share of common stock $ .70 $ .52 ================ ============== Dividends declared per share of common stock $ .20 $ .15 ================ ============== Weighted average shares outstanding 677,846 679,628 ================ ==============
(See accompanying notes) (2) 5 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months ended Dec. 31, ------------------------------------ 1996 1995 --------------- --------------- Cash flows from operating activities: Net income $ 476,102 $ 352,084 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 226,864 246,225 Dry Hole Costs 160,980 12,838 Cash provided (used) by changes in assets and liabilities: Oil and gas sales and other receivables ( 164,537) ( 76,889) Prepaid expenses and other assets ( 15,164) ( 13,358) Income taxes payable 44,563 61,850 Accounts payable, accrued liabilities and dividends payable 373 225,401 ---------------- ---------------- Total adjustments 253,079 456,067 ---------------- ---------------- Net cash provided by operating activities 729,181 808,151 Cash flows from investing activities: Purchases of and development of properties and equipment ( 705,193) (2,511,432) ---------------- ---------------- Net cash used in investing activities ( 705,193) (2,511,432) Cash flows from financing activities: Loan proceeds -- 2,100,000 Payment of loan principal ( 150,000) ( 100,000) Acquisition of the Company's common shares -- ( 943) Payment of dividends ( 135,970) ( 101,879) ---------------- ---------------- Net cash provided (used) in financing activities ( 285,970) 1,897,178 ---------------- ---------------- Increase (decrease) in cash and cash equivalents ( 261,982) 193,897 Cash and cash equivalents at beginning of period 399,423 443,862 ---------------- ---------------- Cash and cash equivalents at end of period $ 137,441 $ 637,759 ================ ================ Supplemental disclosures of cash flow information: Interest paid $ 14,745 $ 23,237 Income taxes paid $ 57,742 $ 2,650 ---------------- ---------------- $ 72,487 $ 25,887 ================ ================
(See accompanying notes) (3) 6 PANHANDLE ROYALTY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The consolidated results presented for the three-month periods ended December 31, 1996 and 1995 are unaudited, but management of Panhandle Royalty Company believes that all adjustments necessary for a fair presentation of the consolidated results of operations for the periods have been included. All such adjustments are of a normal recurring nature. The consolidated results are not necessarily indicative of those to be expected for the full year. 2. The Company utilizes tight gas sands production tax credits to reduce its federal income tax liability. These credits are scheduled to be available through the year 2002. 3. Earnings per share of common stock are computed using the weighted average number of shares outstanding during the period. 4. The Company has a revolving line of credit with Bank One, Texas, in the amount of $2,500,000. The credit matures on January 3, 1998. At February 5, 1997, the Company had $600,000 outstanding under the facility. 5. Certain reclassifications have been made in the financial statements for the quarter ended December 31, 1995 to conform to the financial statement presentation at December 31, 1996. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS All statements concerning the Company other than purely historical information (collectively "Forward-Looking Statements") provided herein are subject to all the risks and uncertainties incident to the acquisition, development, and exploration for oil and gas reserves. These risks include, but are not limited to, oil and natural gas price risk, drilling risk, reserve quantity risk and operations and production risks. For all the above reasons, actual results may vary materially from any forward-looking statements and there is no assurance that the assumptions used are necessarily the most likely to occur. LIQUIDITY AND CAPITAL RESOURCES At December 31, 1996, working capital was $440,205 as compared to $567,422 at September 30, 1996. Cash and cash equivalents were $137,441 at December 31, 1996. Cash flow provided by operating activities for the first quarter of 1997 was $729,181 as compared to $808,151 for the first quarter of 1996. The reduction in cash flow is principally the result of timing of payment on the Company's accounts payable and of receipts of its oil and gas sales revenues. The Company continues the trend of increasing expenditures on the development of its oil and gas properties. During the 1997 first quarter, approximately $700,000 was spent for oil and gas exploration and production activities as compared to approximately $400,000 spent for that purpose during the 1996 first quarter. However, during the 1996 first quarter, the Company also spent $2,115,000 to purchase a 50% interest in 65,632 net mineral acres located principally in Oklahoma and Texas. The purchase was funded by accessing the Company's line-of-credit for $2,100,000. First quarter 1997 expenditures were funded from cash flow and cash reserves. (4) 7 At December 31, 1996 the Company had commitments for ongoing and proposed drilling and equipment costs on new wells totaling $760,000. These costs, as well as Company operating costs for the remainder of fiscal 1997 are expected to be funded from cash flow and available working capital. In addition, the Company anticipates having sufficient cash available to make principal payments on the bank line-of-credit and to make dividend payments to the Company's shareholders. However, should cash flow be lower than expectations, or should the Company require additional funds for increased drilling or asset acquisitions, principal payments could be scaled back and/or additional funds could be borrowed under the line-of-credit. RESULTS OF OPERATIONS Revenues increased in the fiscal 1997 three-month period ended December 31, 1996 by $370,090, or 31%, as compared to the same period in fiscal 1996. This growth in revenues was a result of increased oil and gas sales revenues; which were the result of higher sales prices for both oil and natural gas and increased sales volumes of natural gas, partially offset by a decrease in the sales volume of oil. The chart below outlines the Company's production and average sales prices for oil and natural gas for the first quarter of fiscal 1997 and 1996.
BARRELS AVERAGE MCF AVERAGE SOLD PRICE SOLD PRICE ------- --------- ------- ----------- Quarter ended 12/31/96 30,927 $ 23.61 370,846 $ 2.16 Quarter ended 12/31/95 36,811 $ 17.36 349,739 $ 1.50
The decrease in oil sales volume is the result of production allowable limitations on certain wells in the Dagger Draw field of New Mexico. These limitations will reduce those wells oil production for the remainder of fiscal 1997, but new wells coming on line during the second quarter of fiscal 1997 should marginally increase oil production for the remaining three quarters of 1997 as compared to the first quarter. Oil prices have increased compared to the 1996 quarter and management anticipates prices in the low $20.00 range, on average, during fiscal 1997. Gas production volumes were slightly increased in the 1997 quarter as compared to the 1996 quarter due to the early cold winter weather and the resulting demand for natural gas for heating purposes. This demand had the natural effect of raising sales prices for the 1997 quarter as compared to the 1996 quarter. Management feels demand for natural gas will remain relatively strong through the second quarter and then decline somewhat during the third and fourth quarters. Natural gas sales prices are anticipated to be in the $2.00 per MCF area by summer 1997. Costs and expenses increased $204,572 in the 1997 quarter as compared to the 1996 quarter. The increase was the result of higher dry hole costs and additional general and administrative expenses. These increases were offset slightly by decreased depreciation, depletion and amortization (DD&A) expense, which was due to lower oil production volumes, and decreased interest expense. Dry hole costs increased $148,142 in the 1997 period as compared to the 1996 period. Dry hole costs are the result of the Company participating in the drilling of exploratory wells which are nonproductive. There is no way to predict these costs from quarter to quarter. The Company will continue drilling exploratory wells, thus future dry holes are anticipated. General and administrative costs increased $78,262 in the 1997 quarter, as compared to the 1996 quarter, due to bonus payments made to all employees in December, 1996, the addition of one employee to the payroll, and costs related to the Company's seventieth anniversary. DD&A costs were slightly lower in 1997 as several marginally producing wells amortization rates were increased in the 1996 period, thus increasing DD&A for the 1996 quarter. In addition, interest expense declined in the 1997 period as the bank line-of-credit principal amount had been substantially reduced during the 1997 quarter as compared to the 1996 quarter. (5) 8 The provision for income taxes is higher in the 1997 period due to the increase in income before taxes; however, the provision continues to be favorably affected by tax credits available from the Company's production of "tight gas sands" natural gas and from excess percentage depletion. Net income and net income per share both increased for the 1997 quarter as compared to the 1996 quarter. This increase is a function of the above discussed oil and gas sales revenues increase offset, somewhat, by higher costs and expenses in the 1997 quarter. As sales prices of both oil and natural gas are expected to remain somewhat higher than the average fiscal 1996 levels and production volumes should be roughly equivalent to fiscal 1996 levels, management expects fiscal 1997 financial results will be comparable to those of fiscal 1996. However, should several of the Company's 1997 exploratory drilling projects result in dry holes, earnings would be negatively impacted. PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - Exhibit 27 -- Financial Data Schedule (b) There were no reports on FORM 8-K filed for the three months ended December 31, 1996. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PANHANDLE ROYALTY COMPANY February 12, 1997 /s/ H W Peace II - ----------------------- ---------------------------------- Date H. W. Peace II, President February 12, 1997 /s/ Michael C. Coffman - ------------------- ---------------------------------- Date Michael C. Coffman, Vice President, Chief Financial Officer and Secretary and Treasurer (6) 9 EXHIBIT INDEX EXHIBIT-27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS SEP-30-1997 OCT-01-1996 DEC-31-1996 137,441 0 981,795 0 0 1,138,920 23,436,799 13,921,622 10,761,813 698,715 0 0 0 67,785 8,487,313 10,761,813 1,543,383 1,557,539 231,528 729,164 0 0 14,745 582,102 106,000 476,102 0 0 0 476,102 .70 .70
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