-----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, QvoTe1TcYJDRPq52Agd/Fa6Benpz4/zpU0KPDtE+DlMc7qE85EILDeK9UklGXFFI 9hdPxDI5aDcRVnGxhVBiww== 0000950134-97-006061.txt : 19970814 0000950134-97-006061.hdr.sgml : 19970814 ACCESSION NUMBER: 0000950134-97-006061 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 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: 97658744 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 JUNE 30, 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 June 30, 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 August 6, 1997: 677,420 - ------------ 2 INDEX Page Part I. Financial Information Item 1. Financial Statements Condensed Consolidated Balance Sheets - June 30, 1997 (unaudited) and September 30, 1996........................................ 1 Condensed Consolidated Statements of Income - Three months and nine months ended June 30, 1997 and 1996 (unaudited)........................ 2 Condensed Consolidated Statements of Cash Flows - Nine Months ended June 30, 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 6. Exhibits and reports on Form 8-K.......................... 6 3 PART I. FINANCIAL INFORMATION PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (Information at June 30, 1997 is unaudited)
June 30, September 30, ASSETS 1997 1996 ----------- ----------- Current Assets: Cash and cash equivalents $ 500,768 $ 399,423 Oil and gas sales and other receivables 961,331 817,258 Prepaid expenses 13,208 4,520 ----------- ----------- Total current assets 1,475,307 1,221,201 Properties and equipment, at cost, based on successful efforts accounting: Producing Oil and Gas Properties 19,574,338 17,594,577 Nonproducing Oil and Gas Properties 5,114,578 5,112,785 Other 192,647 190,473 ----------- ----------- 24,881,563 22,897,835 Less accumulated depreciation, depletion and amortization 14,612,841 13,700,007 ----------- ----------- Net properties and equipment 10,268,722 9,197,828 Other assets 107,716 107,716 ----------- ----------- $11,851,745 $10,526,745 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable, accrued liabilities and gas imbalance liability $ 349,585 $ 210,280 Dividends payable 29,456 28,656 Income taxes payable 444,336 164,843 Deferred income taxes 250,000 250,000 ----------- ----------- Total current liabilities 1,073,377 653,779 Long-term debt 0 750,000 Deferred income taxes 908,000 908,000 Stockholders' equity: Class A voting common stock, $.10 par value; 1,000,000 shares authorized, 677,420 issued and outstanding at June 30, 1997 and 677,846 at September 30, 1996 67,742 67,785 Capital in excess of par value 374,132 383,790 Retained earnings 9,428,494 7,763,391 ----------- ----------- Total stockholders' equity 9,870,368 8,214,966 ----------- ----------- $11,851,745 $10,526,745 =========== ===========
(See accompanying notes) (1) 4 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended June 30, Nine Months Ended June 30 ----------------------------- ----------------------------- 1997 1996 1997 1996 ------------- ------------- ------------- ------------- Revenues: Oil and gas sales $ 1,459,520 $ 1,644,659 $ 5,493,907 $ 4,343,446 Lease bonuses and rentals 5,248 5,806 13,692 14,363 Interest 6,093 6,209 11,983 18,234 Other 4,912 7,275 25,046 8,363 ------------- ------------- ------------- ------------- 1,475,773 1,663,949 5,544,628 4,384,406 Costs and expenses: Lease operating expenses, production taxes 260,790 265,244 834,226 743,873 Dry hole costs 80,929 17,580 342,767 95,712 Depreciation, depletion and amortization 278,180 418,725 918,083 982,543 General & administrative 205,027 179,706 781,854 664,457 Interest expense 2,139 32,493 29,172 95,354 ------------- ------------- ------------- ------------- 827,065 913,748 2,906,102 2,581,939 Income before provision for income taxes 648,708 750,201 2,638,526 1,802,467 Provision for income taxes 135,000 220,000 566,000 414,500 ------------- ------------- ------------- ------------- Net income $ 513,708 $ 530,201 $ 2,072,526 $ 1,387,967 ============= ============= ============= ============= Net income per share of common stock $ .76 $ .78 $ 3.06 $ 2.05 ============= ============= ============= ============= Dividends declared per share of common stock $ .20 $ .15 $ .60 $ .45 ============= ============= ============= ============= Weighted average shares outstanding 677,424 676,283 677,698 678,453 ============= ============= ============= =============
(See accompanying notes) (2) 5 PANHANDLE ROYALTY COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Nine Months ended June 30, -------------------------- 1997 1996 ----------- ----------- Cash flows from operating activities: Net income $ 2,072,526 $ 1,387,967 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 918,083 982,543 Dry Hole Costs 342,767 95,712 Cash provided (used) by changes in assets and liabilities: Oil and gas sales and other receivables (144,073) (185,392) Prepaid expenses and other assets (8,688) (10,441) Deferred income taxes -- 286,700 Income taxes payable 279,493 50,000 Accounts payable, accrued liabilities and dividends payable 140,105 115,687 ----------- ----------- Total adjustments 1,527,687 1,334,809 ----------- ----------- Net cash provided by operating activities 3,600,213 2,722,776 Cash flows from investing activities: Purchases of and development of properties and equipment (2,331,744) (3,344,556) ----------- ----------- Net cash used in investing activities (2,331,744) (3,344,556) Cash flows from financing activities: Loan proceeds 0 2,100,000 Payment of loan principal (750,000) (850,000) Acquisition of the Company's common shares (9,701) (76,204) Payment of dividends (407,423) (305,526) ----------- ----------- Net cash provided (used) in financing activities (1,167,124) 868,270 ----------- ----------- Increase in cash and cash equivalents 101,345 246,490 Cash and cash equivalents at beginning of period 399,423 443,862 ----------- ----------- Cash and cash equivalents at end of period $ 500,768 $ 690,352 =========== =========== Supplemental disclosures of cash flow information: Interest paid $ 29,172 $ 95,354 Income taxes paid 286,507 77,800 ----------- ----------- $ 315,679 $ 173,154 =========== ===========
(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 nine-month periods ended June 30, 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 August 6, 1997, the Company had no balance outstanding under the facility. 6. Certain reclassifications have been made in the financial statements for the period ended June 30, 1996 to conform to the financial statement presentation at June 30, 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 June 30, 1997 working capital was $401,930 as compared to $567,422 at September 30, 1996. Cash flow provided by operating activities for the first nine months of 1997 was $3,600,213 as compared to $2,722,776 for the first nine months of 1997. The increased cash flow is the result of significantly increased oil and gas sales revenues through the first nine months of fiscal 1997 and was principally the result of increased oil and natural gas sales prices and a slight increase in natural gas sales volumes. The Company continues to increase its expenditures for the development of its oil and gas properties. During the 1997 nine-month period approximately $2,332,000 was spent on oil and gas activities with the majority of those costs being to drill and equip new wells. This compares with approximately $1,230,000 (4) 7 spent to drill and equip wells in the 1996 nine-month period. Another $2,115,000 was spent in the 1996 period to purchase mineral acreage. At June 30, 1997 the Company had commitments for ongoing and proposed drilling and equipment costs totaling $773,000. All of the fiscal 1997 capital expenditures and debt payments 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 has a $2,500,000 bank line-of-credit available should additional funds be required for a large asset acquisition, unforeseen drilling costs or operating expenses. RESULTS OF OPERATIONS Revenues increased for the nine-month period ended June 30, 1997, but decreased for the three-month period ended June 30, 1997 as compared to the same periods in fiscal 1996. The revenue increase for the nine-month period was a result of substantially increased oil and gas sales revenues in the first six months of fiscal 1997, followed by lower oil and gas sales revenues in the third fiscal quarter of 1997. The nine-month increase in oil and gas sales revenues in fiscal 1997 is a result of natural gas sales volumes increasing from 1,178,546 MCF in the 1996 nine-month period to 1,227,208 in the 1997 period, and the average sales price of natural gas increasing from $1.86 in the 1996 period to $2.47 in the 1997 period. Oil sales volumes were relatively flat in the two periods while the average oil price increased $2.71 per barrel in the 1997 period to $22.07. Conversely for the three-month period ended June 30, 1997 gas sales volumes decreased 11% to 360,890 MCF and the average sales price decreased 7% to $1.85 per MCF. Again oil sales volumes were relatively stable for the three-month period of 1997 as compared to the 1996 period while the average oil sales price decreased $2.13 per barrel to $19.48. The increased gas sales volumes during the first six months of 1997 were due principally to the cold winter in 1995-1996 and the resulting demand for natural gas. The third quarter brought mild spring weather and the demand for natural gas dropped as did the sales price. During the third quarter of fiscal 1996 natural gas storage facilities were being filled but this demand has not been there in fiscal 1997. Thus gas sales volumes will probably remain flat through the fourth quarter of fiscal 1997, but management anticipates gas sales prices to moderately increase in the fourth quarter of fiscal 1997. Oil sales volumes are remaining flat due to field production limitations on certain wells in the Dagger Draw field of New Mexico. These limitations will affect oil production for the remainder of fiscal 1997, however new oil wells beginning production may allow oil production to slightly increase in the fourth quarter. Costs and expenses increased $324,163 in the 1997 nine-month period as compared to the 1996 nine-month period and decreased $86,683 in the 1997 third quarter as compared to the 1996 third quarter. Lease operating expenses and production taxes were higher for the 1997 nine-month period due to increased severance taxes paid on the increased oil and gas sales revenues in fiscal 1997. Conversely, these expenses were lower in the 1997 three-month period due to the lower oil and gas sales revenues in the 1997 third quarter as compared to the 1996 third quarter. Dry hole costs were substantially greater in both 1997 periods as compared to the same periods in 1996. These increased costs are a result of the Company's increased drilling of exploratory prospects. If these exploratory wells are nonproductive, dry hole costs result, but there is no way to anticipate these costs from quarter to quarter. As the Company continues to expand its drilling activity, more exploratory wells may be drilled and the potential for additional dry hole costs thus increases. Depreciation, depletion and amortization (DD&A) decreased in each 1997 period as compared to the 1996 periods due to the Company substantially increasing (5) 8 amortization rates on several properties which were deemed marginal producers in the 1996 periods. Thus a large portion of the remaining value of these properties was amortized in the 1996 periods. General and administrative costs (G&A) increased both in the three-month and nine-month periods of 1997 as compared to the 1996 periods. The increases were due primarily to increased payroll costs and increased health insurance costs. The Company recently changed health insurance plans, thus insurance costs will decrease in future periods. Interest expense declined in the 1997 periods as the bank line-of-credit was fully paid off in April 1997. The provision for income taxes is higher in the 1997 nine-month period due to increased income before taxes. However, the Company's provision for income taxes 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 was affected in the third quarter of 1997 by declining sales prices for natural gas and oil during the warm summer months along with relatively flat oil production and lower natural gas sales volumes. Gas prices are expected to increase somewhat in the fourth quarter of fiscal 1997, but both oil and natural gas production volumes should be relatively flat. Thus, fourth quarter 1997 results are expected to be modestly improved but results could be negatively impacted should more of the Company's 1997 exploratory drilling projects result in dry holes. 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 June 30, 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 August 11, 1997 /s/ H W Peace II - -------------------------- ------------------------------------ Date H. W. Peace II, President and Chief Executive Officer August 11, 1997 /s/ Michael C. Coffman - -------------------------- ------------------------------------ Date Michael C. Coffman, Vice President, Chief Financial Officer and Secretary and Treasurer (6) EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS SEP-30-1997 OCT-01-1996 JUN-30-1997 500,768 0 961,331 0 0 1,475,307 24,881,563 14,612,841 11,851,745 1,073,377 0 0 0 67,742 9,802,626 11,851,745 5,493,907 5,544,628 834,226 2,876,930 0 0 29,172 2,638,526 566,000 2,072,526 0 0 0 2,072,526 3.06 3.06
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