-----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, F+bLhi+W+A2OprQ6vB9iJtTKU6cJjGOVk2UxYZFl1iiJsItwV2Fp2/hQapX+yzwn r5lCybzPnIxSzkDAgkbNww== 0000950134-97-004029.txt : 19970520 0000950134-97-004029.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950134-97-004029 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97608230 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 MARCH 31, 1997 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 March 31, 1997 ------------------- ( ) 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 May 5, 1997: 677,460 - ------------ 2 INDEX
Page ---- Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 1997 (unaudited) and September 30, 1996.................................. 1 Condensed Consolidated Statements of Income - Three months and six months ended March 31, 1997 and 1996 (unaudited).............. 2 Condensed Consolidated Statements of Cash Flows - Six Months ended March 31, 1997 and 1996 (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 4. Submission of matters to a vote of security holders................................. 7 Item 6. Exhibits and reports on Form 8-K.................... 7
3 PART I. FINANCIAL INFORMATION PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Information at March 31, 1997 is unaudited)
March 31, September 30, ASSETS 1997 1996 ------ ----------- ----------- Current Assets: Cash and cash equivalents $ 515,434 $ 399,423 Oil and gas sales and other receivables 1,204,825 817,258 Prepaid expenses 11,728 4,520 ----------- ----------- Total current assets 1,731,987 1,221,201 Properties and equipment, at cost, based on successful efforts accounting: Producing Oil and Gas Properties 18,956,517 17,594,577 Nonproducing Oil and Gas Properties 5,063,239 5,112,785 Other 192,647 190,473 ----------- ----------- 24,212,403 22,897,835 Less accumulated depreciation, depletion and amortization 14,334,661 13,700,007 ----------- ----------- Net properties and equipment 9,877,742 9,197,828 Other assets 107,716 107,716 ----------- ----------- $11,717,445 $10,526,745 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Accounts payable, accrued liabilities and gas imbalance liability $ 334,190 $ 210,280 Dividends payable 29,456 28,656 Income taxes payable 402,736 164,843 Deferred income taxes 250,000 250,000 ----------- ----------- Total current liabilities 1,016,382 653,779 Long-term debt 300,000 750,000 Deferred income taxes 908,000 908,000 Stockholders' equity: Class A voting common stock, $.10 par value; 1,000,000 shares authorized, 677,460 issued and outstanding at March 31, 1997 and 677,846 at September 30, 1996 67,746 67,785 Capital in excess of par value 375,047 383,790 Retained earnings 9,050,270 7,763,391 ----------- ----------- Total stockholders' equity 9,493,063 8,214,966 ----------- ----------- $11,717,445 $10,526,745 =========== ===========
(See accompanying notes) (1) 4 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended Mar. 31, Six Months Ended Mar. 31 --------------------------- ----------------------- 1997 1996 1997 1996 ------------- ------------- ---------- ---------- Revenues: Oil and gas sales $2,491,004 $1,519,977 $4,034,387 $2,698,787 Lease bonuses and rentals 7,336 6,757 8,444 8,557 Interest 1,782 5,973 5,890 12,025 Other 11,193 300 20,134 1,087 ---------- ---------- ---------- ---------- 2,511,315 1,533,007 4,068,855 2,720,456 Costs and expenses: Lease operating expenses, production taxes 341,907 253,122 573,436 478,629 Dry hole costs 100,858 65,294 261,838 78,132 Depreciation, depletion and amortization 413,039 317,593 639,903 563,818 General & administrative 235,507 221,693 576,827 484,751 Interest expense 12,288 39,624 27,033 62,861 ---------- ---------- ---------- ---------- 1,103,599 897,326 2,079,037 1,668,191 ---------- ---------- ---------- ---------- Income before provision for income taxes 1,407,716 635,681 1,989,818 1,052,265 Provision for income taxes 325,000 130,000 431,000 194,500 ---------- ---------- ---------- ---------- Net income $1,082,716 $ 505,681 $1,558,818 $ 857,765 ========== ========== ========== ========== Net income per share of common stock $ 1.60 $ .74 $ 2.30 $ 1.26 ========== ========== ========== ========== Dividends declared per share of common stock $ .20 $ .15 $ .40 $ .30 ========== ========== ========== ========== Weighted average shares outstanding 677,825 679,460 677,835 677,702 ========== ========== ========== ==========
(See accompanying notes) (2) 5 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Six Months ended March 31, -------------------------- 1997 1996 ----------- ----------- Cash flows from operating activities: Net income $ 1,558,818 $ 857,765 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 639,903 563,818 Dry Hole Costs 261,838 78,132 Cash provided (used) by changes in assets and liabilities: Oil and gas sales and other receivables (387,567) (186,624) Prepaid expenses and other assets (7,208) (13,359) Income taxes payable 237,893 156,850 Accounts payable, accrued liabilities and dividends payable 124,710 203,984 ----------- ----------- Total adjustments 869,569 802,801 ----------- ----------- Net cash provided by operating activities 2,428,387 1,660,566 Cash flows from investing activities: Purchases of and development of properties and equipment (1,581,655) (2,895,596) ----------- ----------- Net cash used in investing activities (1,581,655) (2,895,596) Cash flows from financing activities: Loan proceeds -- 2,100,000 Payment of loan principal (450,000) (450,000) Acquisition of the Company's common shares (8,782) (3,230) Payment of dividends (271,939) (203,972) ----------- ----------- Net cash provided (used) in financing activities (730,721) 1,442,798 ----------- ----------- Increase in cash and cash equivalents 116,011 207,768 Cash and cash equivalents at beginning of period 399,423 443,862 ----------- ----------- Cash and cash equivalents at end of period $ 515,434 $ 651,630 =========== =========== Supplemental disclosures of cash flow information: Interest paid $ 27,033 $ 62,861 Income taxes paid 193,107 67,650 ----------- ----------- $ 220,140 $ 130,511 =========== ===========
(See accompanying notes) (3) 6 PANHANDLE ROYALTY COMPANY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The consolidated results presented for the three-month and six-month periods ended March 31, 1997 and 1996 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. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share. This change will not effect the Company's prior periods and is not expected to have a material effect on the Company's earnings per share calculations. 5. 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, 2001. At May 5, 1997, the Company had no balance outstanding under the facility. 6. Certain reclassifications have been made in the financial statements for the period ended March 31, 1996 to conform to the financial statement presentation at March 31, 1997. 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 acquisitions, 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 March 31, 1997, working capital was $715,605 as compared to $567,422 at September 30, 1996. Cash flow provided by operating activities for the first six months of 1997 was $2,428,387 as compared to $1,660,566 for the first six months of 1996. The increase in cash flow is the result of significantly increased oil and gas sales revenues in fiscal 1997, which were principally the result of increased oil and natural gas sales prices. The Company continues to increase its expenditures for the development of its oil and gas properties. During the 1997 six-month period approximately $1,582,000 was spent on oil and gas activities with the majority of those costs (4) 7 being to drill and equip new wells. This compares with approximately $700,000 spent to drill and equip wells in the 1996 period. Another $2,115,000 was spent in the 1996 period to purchase mineral acreage. At March 31, 1997 the Company had commitments for ongoing and proposed drilling and equipment costs on wells totaling $882,000. All of the fiscal 1997 expenditures to date have been funded from cash flow and the remaining 1997 drilling commitments mentioned above, as well as Company operating costs for the remainder of fiscal 1997, are expected to be funded from cash flow and available working capital. The Company paid the remaining $300,000 due on the Bank One line- of-credit in April 1997, thus the entire $2,500,000 line-of-credit is available should the Company require additional funds for a large asset acquisition or for unforeseen drilling costs. RESULTS OF OPERATIONS Revenues increased substantially for both the three-month and six-month periods ended March 31, 1997, as compared to the comparable periods in fiscal 1996. The increases were the result of oil and gas sales revenues increasing 50% and 64% for the 1997 six-month and three-month periods, respectively, as compared to the same periods in fiscal 1996. Oil and gas revenues increased principally as the result of increased oil and natural gas sales prices and increased sales volumes of natural gas. The chart below outlines the Company's production and average sales prices for oil and natural gas for the three- month and six-month periods of fiscal 1996 and 1997.
BARRELS AVERAGE MCF AVERAGE SOLD PRICE SOLD PRICE ------ ------- ------- -------- Three months ended 3/31/97 39,544 $ 23.21 495,472 $ 3.18 Three months ended 3/31/96 36,637 $ 18.86 424,641 $ 1.99 Six months ended 3/31/97 70,471 $ 23.57 866,318 $ 2.74 Six months ended 3/31/96 73,448 $ 18.18 744,377 $ 1.79
Natural gas sales prices and production volumes increased in the 1997 periods due to the early cold winter weather experienced in parts of the Country and the resulting demand for natural gas for heating purposes. This strong demand had the resulting effect of raising sales prices for the 1997 periods as compared to the 1996 periods. As the weather has turned warmer, natural gas sales prices have decreased substantially and are currently in the $1.90 per MCF range. Natural gas prices are anticipated to remain near the $2.00 range for the remainder of fiscal 1997 and production volumes should remain relatively flat during remainder of fiscal 1997. Oil sales prices were also affected by the cold winter with the demand for heating oil increasing oil sales prices. The decrease in oil sales volumes for the six-month period 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. However, the increase in oil production for the three-month 1997 period was due to certain new oil wells initial production in New Mexico. These new wells production should allow overall oil production to remain relatively stable for the remainder of fiscal 1997, however, oil sales prices are anticipated to be in the $18 to $20 range for last half of fiscal 1997. Costs and expenses increased $206,273 in the 1997 second quarter as compared to the 1996 second quarter and increased $410,846 in the 1997 six-month period as compared to the 1996 six-month period. Lease operating expenses and production taxes are higher in each 1997 period due to the increased severance taxes paid on the increased oil and gas sales revenues in each period. Depreciation, depletion and amortization (DD&A) increased in each 1997 period due (5) 8 to the increased production volumes of natural gas, as the Company calculates DD&A on the units of production method and, in addition, in the second quarter of fiscal 1997 the Company fully impared the costs of certain oil and gas leasehold costs on two prospects totaling $112,000. It currently appears that additional wells may not be drilled on this leasehold. Dry hole costs increased in both 1997 periods. These costs are the result of the Company participating in the drilling of exploratory wells which are nonproductive. There is no way to anticipate these costs from quarter to quarter. The Company will continue drilling exploratory wells, thus future dry hole costs are anticipated. General and administrative costs increased $13,814 in the 1997 quarter and $92,076 in the 1997 six-month period. The six-month increase is due to bonus payments made to all employees in December 1996, the addition of one employee to the payroll, costs related to the Company's seventieth anniversary and increased health insurance costs. Interest expense declined in the 1997 periods as the bank line-of-credit principal amount has been substantially reduced during fiscal 1997 compared to fiscal 1996. The provision for income taxes is higher in the 1997 periods because of substantially increased income before taxes (due to the factors discussed above). 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 periods. These increases are a result of the above discussed oil and gas sales revenue increases, offset, somewhat, by higher costs and expenses in each period. As sales prices for both oil and natural gas, on average, are expected to be lower in the remaining six months of 1997, management anticipates earnings will be lower in the last six months of fiscal 1997 as compared to the first six months. In addition, should more of the Company's 1997 exploratory drilling projects result in dry holes, earnings could be further impacted. (6) 9 PART II. OTHER INFORMATION Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) The annual meeting of shareholders was held on February 28, 1997. (b) Two directors were elected for three year terms at the meeting. Also, ratification of the selection of Ernst & Young LLP as independent auditors for the Company was voted upon. The directors elected and the results of voting were as follows:
VOTES ------------------------------ For Against Withheld ------- ------- -------- Directors E. Chris Kauffman 835 20 Sam J. Cerny 834 22 Auditors Ernst & Young LLP 837 6 13
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 March 31, 1997. 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 May 13, 1997 /s/ H W Peace II - ------------------- ---------------------------------- Date H. W. Peace II, President and Chief Executive Officer May 13, 1997 /s/ Michael C. Coffman - ------------------- ---------------------------------- Date Michael C. Coffman, Vice President, Chief Financial Officer and Secretary and Treasurer (7) 10 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 6-MOS SEP-30-1997 OCT-01-1996 MAR-31-1997 515,434 0 1,204,825 0 0 1,731,987 24,212,403 14,334,661 11,717,445 1,016,382 0 67,746 0 0 9,425,317 11,717,445 4,034,387 4,068,855 573,436 1,478,568 0 0 27,033 1,989,818 431,000 1,558,818 0 0 0 1,558,818 2.30 2.30
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