-----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, T+TPy/JkF+EjSKLdmtu4KVGmu1hr6s+CgH2mQmwel8tKJj7o8FX1I09tmjm6//e7 w6aD3vBqClvw2PvVub1S/A== 0000033325-98-000015.txt : 19981109 0000033325-98-000015.hdr.sgml : 19981109 ACCESSION NUMBER: 0000033325-98-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EQUITY OIL CO CENTRAL INDEX KEY: 0000033325 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 870129795 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-00610 FILM NUMBER: 98739338 BUSINESS ADDRESS: STREET 1: P O BOX 959 CITY: SALT LAKE CITY STATE: UT ZIP: 84110 BUSINESS PHONE: 8015213515 MAIL ADDRESS: STREET 1: P O BOX 959 CITY: SALT LAKE CITY STATE: UT ZIP: 84110 10-Q 1 3RD QUARTER 1998 FORM 10-Q FORM 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 OR [ ] 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: 0-610 EQUITY OIL COMPANY (Exact name of registrant as specified in its charter) COLORADO 87-0129795 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Suite 806, #10 West Third South, Salt Lake City, Utah 84101 (Address of principal executive offices) (Zip Code) (801) 521-3515 Registrant's telephone number, including area code (Former name, former address and former fiscal year, if changed since last report) 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. Yes X No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 12,629,440 ITEM I: Financial Statements EQUITY OIL COMPANY Statements of Operations For the Nine Months Ended September 30, 1998 and 1997 (Unaudited) 1998 1997 ------------ ----------- REVENUES Oil and gas sales ...................... $ 9,622,792 $ 12,504,373 Partnership income ..................... 23,500 225,000 Interest income ........................ 48,887 113,339 Other .................................. 178,069 747,620 ------------ ------------ 9,873,248 13,590,332 EXPENSES Operating costs ........................ 4,592,540 4,520,122 Depreciation, depletion and amortization ......................... 3,700,000 3,300,000 Leasehold abandonments ................. 170,601 82,420 Equity loss in Symskaya Exploration, Inc. ....... 399,457 236,589 3D seismic ............................. 431,075 -- Exploration ............................ 1,918,606 1,930,692 General and administrative ............. 1,595,641 1,575,129 Interest ............................... 959,731 550,458 ------------ ------------ 13,767,651 12,195,410 Income (loss) before income taxes ........... (3,894,403) 1,394,922 Provision for (benefit from) income taxes ....................... (1,107,843) 501,495 ------------ ------------ NET INCOME (LOSS) ........................... $ (2,786,560) $ 893,427 ============ ============ Basic and diluted net income (loss) per common share .......... $ (0.22) $ 0.07 ============ ============ Cash dividends declared per share ........... $ .00 $ .00 Weighted average shares outstanding ......... 12,620,885 12,696,093 The accompanying notes are an integral part of these statements. EQUITY OIL COMPANY Statements of Operations For the Three Months Ended September 30, 1998 and 1997 (Unaudited) 1998 1997 ----------- ----------- REVENUES Oil and gas sales ..................... $ 3,105,521 $ 3,758,655 Partnership income .................... 8,000 75,000 Interest income ....................... 8,561 29,821 Other ................................. 76,364 195,463 ------------ ------------ 3,198,446 4,058,939 EXPENSES Operating costs ....................... 1,561,678 1,481,187 Depreciation, depletion and amortization ........................ 1,250,000 1,100,000 Leasehold abandonments ................ 6,510 41,468 Equity loss in Symskaya Exploration, Inc. ...... 80,344 92,752 3D seismic ............................ 302 -- Exploration ........................... 1,172,724 702,645 General and administrative ............ 498,502 467,111 Interest .............................. 389,826 226,286 ------------ ------------ 4,959,886 4,111,449 Loss before income taxes ................... (1,761,440) (52,510) Benefit from income taxes .................. (510,614) (4,352) ------------ ------------ NET LOSS ................................... $ (1,250,826) $ (48,158) ============= ============ Basic and diluted net loss per common share .................. $ (0.10) $ (0.00) ============ ============ Cash dividends declared per share .......... $ .00 $ .00 Weighted average shares outstanding ........ 12,629,440 12,678,883 The accompanying notes are an integral part of these statements. EQUITY OIL COMPANY Balance Sheet as of September 30, 1998 and December 31, 1997 (Unaudited) September 30, December 31, ASSETS 1998 1997 - ------ ------------ ------------ Current assets: Cash and cash equivalents ........ $ 50,223 $ 378,801 Accounts and advances receivable . 3,232,001 3,641,535 Income taxes receivable .......... 41,275 88,174 Deferred tax asset ............... 17,929 18,934 Other current assets ............. 388,866 514,713 ------------- ------------- 3,730,294 4,642,157 Property and equipment ............. 116,506,929 113,371,891 Less accumulated depletion, depreciation and amortization .... 68,431,805 64,846,514 ------------- ------------- 48,075,124 48,525,377 Other assets: Investment in Raven Ridge Pipeline Partnership ........... 229,140 268,821 Other assets ..................... 73,699 105,284 ------------- ------------- 302,839 374,105 TOTAL ASSETS ....................... $ 52,108,257 $ 53,541,639 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ................. $ 1,402,782 $ 1,327,120 Accrued liabilities .............. 202,251 120,039 Accrued profit sharing ........... 144,000 188,973 Income taxes payable ............. 546,713 354,002 ------------- ------------- 2,295,746 1,990,134 Revolving credit facility .......... 16,500,000 13,978,830 Deferred income taxes .............. 3,298,636 4,851,966 ------------- ------------- 19,798,636 18,830,796 Stockholders' equity Common stock ..................... 12,794,040 12,761,100 Paid in capital .................. 3,714,493 3,667,707 Retained earnings ................ 14,033,644 16,820,204 Less cost of treasury stock ...... (528,302) (528,302) ------------- ------------- 30,013,875 32,720,709 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............. $ 52,108,257 $ 53,541,639 ============= ============= The accompanying notes are an integral part of these statements. EQUITY OIL COMPANY Statement of Cash Flows For the Nine Months Ended September 30, 1998 and 1997 (Unaudited) 1998 1997 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ............................. $(2,786,560) $ 893,427 Adjustments Depreciation, depletion and amortization .............................. 3,700,000 3,300,000 Partnership distributions in excess of income .......................... 39,681 106,314 (Gain) loss on property dispositions ..................... 167,887 (210,063) Equity loss in Symskaya Exploration, Inc. ............ 399,457 236,589 Change in other assets .................. 31,585 31,586 Common stock issued for services ............ 79,725 29,375 Decrease in deferred income taxes ........... (1,552,325) (334,498) Increase (decrease) from changes in: Accounts and advances receivable ............ 409,534 289,738 Other current assets ........................ 125,847 (72,727) Accrued profit sharing ...................... (44,973) (35,100) Accounts payable and accrued liabilities ............................... 157,874 (1,117,173) Income taxes receivable/payable ............. 239,610 346,248 Net cash provided ----------- ----------- by operating activities ..................... 967,342 3,463,716 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Advances to Symskaya Exploration .............. (399,457) (236,589) Proceeds from sale of properties .............. -- 339,385 Sale of temporary cash investments ............ -- 49,802 Capital expenditures .......................... (3,417,633) (4,656,248) ----------- ----------- Net cash used in investing activities ...................... (3,817,090) (4,503,650) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock .................... -- (162,706) Net borrowings on revolving credit facility .............. 2,521,170 700,000 Net cash provided by financing ----------- ----------- activities ................................. 2,521,170 537,294 ----------- ----------- NET DECREASE IN CASH ............................. (328,578) (502,640) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ........................ 378,801 787,961 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD .............................. $ 50,223 $ 285,321 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Income taxes $ 246,185 $ 607,694 Interest $ 959,731 $ 550,458 The accompanying notes are an integral part of these statements. NOTES TO FINANCIAL STATEMENTS Note 1. Interim Financial Statements The accompanying financial statements of Equity Oil Company (the Company) have not been audited by independent accountants, except for the Balance Sheet at December 31, 1997. In the opinion of the Company's management, the financial statements reflect the adjustments, all of which are of a normal and recurring nature, necessary to present fairly the financial position of the Company as of September 30, 1998, and the results of its operations for the three and nine month periods ended September 30, 1998 and 1997, and its cash flows for the nine month periods ended September 30, 1998 and 1997. The financial statements and the accompanying notes to financial statements have been prepared according to rules and regulations of the Securities and Exchange Commission. Accordingly, certain notes and other information have been condensed or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. These financial statements should be read in conjunction with the Company's 1997 Annual Report on Form 10-K, and the Company's Form 10-Q's for the first and second quarters of 1998. The results for the three and nine month periods ended September 30, 1998 are not necessarily indicative of future results. Note 2. Net Income (Loss) Per Share Earnings per share for all periods presented has been restated to reflect the adoption of Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS 128 requires companies to present basic earnings per share, and if applicable, diluted earnings per share, instead of primary and fully diluted earnings per share. Basic earnings per share excludes dilution and is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if options to issue common stock were exercised into common stock. Options to purchase approximately 912,000 shares of common stock at prices of $3.56 to $6.00 per share were outstanding during the first nine months of 1998. Options to purchase approximately 922,500 shares of common stock at prices of $3.56 to $6.00 per share were outstanding during the first nine months of 1997. The outstanding options were not included in the computation of diluted earnings per share because the exercise prices of the options were greater than the average market price of the Company's common shares during the period. Basic and diluted earnings (loss) per share are the same for each of the periods presented. PART I ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION RESULTS OF OPERATIONS Financial Results The Company's financial results continue to be adversely affected by depressed oil prices in 1998. The Company recorded a net loss for the first nine months this year in the amount of $(2,786,560), or $(.22) per share, compared to net income for the first nine months of 1997 in the amount of $893,427, or $.07 per share. Total revenues for the first nine months of 1998 were $9,873,248, a decrease of 27% from revenues of $13,590,332 recorded during the same period of 1997. The decline in revenues reflects the 36% decrease in oil prices received year-to-date in 1998. The Company recorded a net loss for the third quarter of 1998 in the amount $(1,250,826), or $(.10) per share on revenues of $3,198,446. This compared to a net loss during the third quarter of 1997 of $(48,158), or $(.00) per share, on revenues of $4,058,939. Operating Activities Sharply reduced cash flows have caused the Company to decrease the number of wells drilled in 1998 from the prior year. The Company has participated in a total of 11 wells year to date in 1998, completing 1 oil and 6 gas wells, with the remaining wells being plugged and abandoned. Included in the well count are 10 exploratory wells. Six of those wells have been completed as oil or gas wells, and 4 were dry holes. Six wells have been drilled on the Company's 3D projects in the Sacramento Basin of California, 5 of which have been successful. Current plans call for 1 additional well to be drilled in California during the fourth quarter of 1998. Included in the 1998 well count is an exploratory well drilled in California on the Company's 16 square mile Merlin 3-D seismic project. The #1-15 Henning, located in Glenn County, California, tested at a rate of 1.4 million cubic feet per day from perforations at 5,565 - 5,568 feet in the Cretaceous Forbes formation and 5.9 million cubic feet per day from 5,518 to 5,556 feet. The well is currently on production from the lower zone at a rate of 1.3 million cubic feet per day. Equity operates and has a 50% working interest in the well and the Merlin project. A second discovery on the Merlin project, the Equity #1-21 Otto Lohse tested 2.4 million cubic feet per day from perforations at 5,525-5,540 feet, in the Cretaceous Forbes formation. In addition, a second Forbes reservoir from 5,414 - 5,463 feet, which drill stem tested 6.5 million cubic feet per day, represents proved behind pipe reserves. A third well, the Equity #1-22 Otto Lohse, was drilled, plugged, and abandoned in the third quarter as a dry hole. At the Company's Davis Ranch prospect, also located in the Sacramento Basin, the Equity #1-8 Westcott drill stem tested 7.5 million cubic feet per day from the Cretaceous Forbes formation at a depth of 7,507-7,524 feet. This well is currently producing 2.5 million cubic feet per day. The Company has a 60% working interest at Davis Ranch. Slawson Exploration completed the #1-18 Armstrong during the second quarter. Equity is a 25% working interest participant in the well and the 16 square mile West Orion Sacramento Basin 3D project, where the well was drilled. In addition, Slawson also completed the #1-30 Driver and the #1-25 Border Tule wells, drilled on the same prospect, in the third quarter. All three wells will be placed on production during the fourth quarter. Following the successful production testing in April of 1998 of a second pay zone in the Westport Oil and Gas Company #24-15 Beaver Creek in Golden Valley County, North Dakota, the well was placed on production at a rate exceeding 1,100 barrels of oil per day, and continued to produce at an average daily rate of 1,000 barrels per day during the month of September. Equity has a 32.5% working interest in the well. Westport Oil and Gas Company operates the well and holds the remaining working interest. The Company also participated in an additional successful development well in 1998 at its Siberia Ridge field in Sweetwater County, Wyoming. The well was placed on production at a rate of 700 MCFD. The Company has a 50% interest in the well. The Company recently announced that it has reached an agreement with a private company to begin a drilling program in the Mancos formation on the Rangely anticline in Rio Blanco County, Colorado. Under the terms of the agreement, the first five wells drilled will be funded 100% by the Company's partner. Each well will earn an interest in 20 acres. Any well completed for commercial production will be owned 50% by Equity. Using modern logging technology to identify fracture systems downhole, and new drilling techniques such as horizontal drilling, it may be possible to find new reserves in this field, where production dates back to 1906. Equity owns a 100% working interest in over 10,000 acres in the shallow Mancos zone, having reserved horizons down to 2,500 feet in its 1943 farmout to Chevron of the deeper Weber sandstone. Drilling should begin before the end of 1998. The Company is continuing to pursue additional outside financing for its Symskaya project in Russia. The Company recently announced that its 50% owned subsidiary, Symskaya Exploration, Inc. has entered into a Bottom Hole Contribution Agreement with the Committee for Natural Resources of the Krasnoyarsk Krai in Eastern Siberia to support the drilling of the Averinskaya - 150 well, an exploratory well that is being drilled near the town of Yeniseysk. The well is adjacent to the southern block of acreage that Symskaya holds as part of its 1.1 million acre exploration, development and production license. The well is being drilled to evaluate the oil and gas potential of the same geologic section that Symskaya targeted in the drilling of its Lemok No. 1 well on the northern acreage block of its license area. In exchange for a nominal payment, Symskaya will receive all pre-drilling data from the well, drilling data acquired during the drilling of the well, and all final reports on the well including logs, test results, core and drill cutting samples, and samples of any oil, water or gas recovered during drilling. In addition, Symskaya personnel will have complete access to the drill site during drilling, the right to collect drill cuttings and other samples, and the right to witness all coring and testing. The well is currently drilling below 7,000 feet, and is projected to be drilled to a total depth of 11,500 feet. CAPITAL RESOURCES AND LIQUIDITY Cash, cash equivalents, and temporary cash investments totaled $50,223 as of September 30, 1998, a decrease of $328,578 since year-end 1997. Working capital at September 30, 1998 was $1,434,548, and the Company's ratio of current assets to current liabilities was 1.62 to 1. Cash flow from operating activities, also negatively impacted by lower oil prices and their resultant reduced revenues, decreased from $3,463,716 during the first nine months of 1997 to $967,342 in the same period of 1998. Investment in property and equipment for the first nine months of 1998 totaled $3,417,633. Investment in property and equipment for the same period of 1997 totaled $4,656,248. As a result of the severely depressed oil prices, and their negative effects on cash flows, the Company has reduced its 1998 capital budget. The Company continues to high-grade both exploratory and development projects based on their assumed risks and rewards, balancing this with projects that have specific lease related drilling commitments. Other projects have been delayed or deferred until oil prices strengthen and cash flows increase. The Company purchased 51,000 shares of its stock on the open market during the first nine months of 1997, at an average price of $3.19 per share. No treasury stock was purchased during the first nine months of 1998. During the first nine months of 1997, the Company increased borrowings under its credit facility by $700,000, compared to borrowings of $2,521,170 in 1998, which were used to fund investments in property and equipment and for working capital purposes. On March 30, 1998, the Company amended its credit agreement, increasing the current commitment from $15 million to $18 million. In addition, on June 24, 1998, the facility was further amended in order to set the first principal payment date under the facility to July 1, 2001 from July 1, 1999. The Company's commitment under its borrowing base credit facility is subject to a redetermination as of July 1 and January 1 of each year, with estimated future prices being determined by the Company's lender. Using a reduced oil price deck, brought about by continued low oil prices, the Company's borrowing base was lowered to $17 million after the July 1, 1998 redetermination, and the Company was notified to this effect in September of 1998. Accordingly, at September 30, 1998, the Company had approximately $500,000 of remaining availability on the facility. The Company is in compliance with all its facility covenants. The Company believes that existing cash balances, cash flow from operating activities, and funds available under the Company's credit facility will provide adequate resources to meet all of its remaining capital and exploration spending objectives for 1998, which have been significantly curtailed due to low oil prices. Should the low oil price environment continue for an extended period of time, the Company may have difficulty in meeting its ongoing exploration and development drilling objectives. The Company has adequate liquidity to maintain its operations as they currently exist. COMPARISON OF THIRD QUARTER 1998 WITH THIRD QUARTER 1997 Oil and gas sales decreased 17% in the third quarter of 1998 to $3,105,521 versus $3,758,655 in the same quarter of last year. Sharply lower oil prices were offset somewhat by increases in both oil and gas production. Total revenues decreased 21% from 1997 to 1998. Oil production increased 11% in the third quarter of 1998, primarily due to production from the Westport #24-15 Beaver Creek well in North Dakota. Oil production for the quarter was 177,000 barrels, compared to 159,400 barrels in the third quarter of 1997. Gas production increased 15% from 524,000 Mcf in 1997 to 600,000 Mcf in 1998. The increase in gas production is a result of the Company's continued successful exploration program in northern California. Average prices received for crude oil were $12.04 per barrel during the third quarter of 1998, down 33% from the $17.99 received in 1997. Gas prices also dropped during the third quarter to $1.60 per Mcf in 1998, compared to $1.78 in 1997, a decrease of 10%. During the third quarter of 1997, the Company sold its minority interest in an oil field technology research company. In connection with the sale, the Company recognized a gain of $175,000, which is included in other income. There were no similar transactions during 1998. Despite higher production levels, lease operating costs increased only slightly over the prior year. The small increase was accomplished by shutting in high-cost, marginal production during the quarter due to low prices, and lower value-based production taxes. The increase in production in 1998 did contribute to higher depreciation, depletion, and amortization (DD&A) charges. In addition, DD&A per unit charges increased slightly from $4.50 per BOE to $4.57 per BOE in 1998. Higher exploration expenses in 1998 resulted from higher dry hole costs in the third quarter. During the period, the Company drilled 4 dry holes, incurring total costs of $745,000. Dry holes during the same quarter of 1996 were only $337,000. Included in the 1998 third quarter dry holes were the first exploratory well drilled at the Company's O'Brien Springs 3D project in Wyoming, where the Company maintained a 50% working interest, as well as the aforementioned #1-22 Otto Loshe well in California, also a 50% owned well. General and administrative expenses increased slightly in 1998, primarily due to increased compensation and investor relations expenses. Higher interest costs in 1998 reflect the higher amount of debt outstanding under the Company's credit facility. The income tax benefits recorded for both periods result primarily from the deferred tax benefits associated with net losses reported. COMPARISON OF FIRST NINE MONTHS OF 1998 WITH FIRST NINE MONTHS OF 1997 Oil and gas sales decreased 23% in the first nine months of 1998 to $9,622,792 versus $12,504,373 in the same period of last year. This decrease was caused by lower oil prices, partially offset by increased oil and gas production. Oil production for the first nine months was 517,000 barrels, up 9% from 1997 production of 476,000 barrels. Gas production for the period increased 16% to 1,770,000 Mcf from 1,526,000 Mcf in 1997. Average prices received for crude oil were $12.54 per barrel during the first nine months of 1998, compared to $19.52 received in 1996, a decrease of 36%. Gas prices decreased slightly to $1.84 per Mcf in 1998, compared to $1.90 in 1997. During the first nine months of 1997, the Company recorded a gain on the sale of certain oil and gas properties of approximately $325,000. In addition, in 1997 the Company sold its minority interest in an oil field technology research company. In connection with the sale, the Company recognized a gain of $175,000. There were no corresponding events in 1998. Total expenses in the first nine months of 1998 increased 13% over 1997 levels. Lease operating costs remained flat, while depreciation, depletion and amortization increased 12%, primarily due to increased oil and gas production in 1998. The Company incurred 3D seismic charges of $431,075 in 1998 associated with its Sequoia project in the San Joaquin Basin of California. The initial well at Sequoia has been delayed until the first half of 1999. The Company did not participate in any 3D seismic programs during the first nine months of 1997. The Company abandoned certain undeveloped leaseholds during the first nine months of 1998 associated with a Lodgepole prospect that was acquired in 1995 and 1996. This was the primary cause of a 1998 charge to expense of $170,601 for leasehold abandonments. The Company did not renew selected leases in the area on their renewal date due to a lack of prospectivity. Higher interest costs in 1998 reflect the higher amount of debt outstanding under the Company's credit facility. The equity loss in Symskaya Exploration increased by approximately $163,000 during the first nine months of 1998. This increase included a write down of approximately $125,000 of accrued interest income on a senior note between Symskaya and the Company that had been recognized in prior periods. In addition, the 1998 increase included the Company's share of a bottom hole contribution discussed earlier. There were no corresponding events in 1997. OTHER ITEMS In June of 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income. The Statement establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. This Statement is effective for fiscal years beginning after December 15, 1997. The adoption of this Statement did not have a material effect on the Company's financial statements. The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on the results of operations or financial position of the Company. Based on that review, the Company believes that none of these pronouncements will have a significant effect on current or future earnings or operations. YEAR 2000 The Company uses computers principally for processing and analyzing geological and engineering data, map making, and administrative functions such as word processing, accounting, and financial reporting. The Company does not use any software developed specifically for its own use, and all of it's principal computer systems have been purchased since December 31, 1995. The Company has an ongoing program to ensure that its operational and financial systems will not be adversely affect by year 2000 software failures. While the Company believes it is taking all appropriate steps to assure year 2000 compliance, it is dependent substantially on vendor compliance. The Company intends to modify or replace those systems that are not year 2000 compliant. The Company is requiring its systems and software vendors to represent that the services and products provided are, or will be, year 2000 compliant, and has an on-going program to test compliance. The Company's financial accounting system is year 2000 compliant. Software vendors for the Company's technical software have represented that their software is on track to be compliant by mid-1999. The Company estimates that the cost to redevelop, replace, or repair any technology as needed will not be material. FORWARD LOOKING STATEMENTS Forward-looking statements in this Form 10-Q, future filings by the Company with the Securities and Exchange Commission, the Company's press releases and oral statements by authorized officers of the Company are intended to be subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the risk of a significant natural disaster, the inability of the Company to ensure against certain risks, the adequacy of its loss reserves, fluctuations in commodity prices, the inherent limitations in the inability to estimate oil and gas reserves, changing government regulations, as well as general market conditions, competition and pricing. The Company believes that forward-looking statements made by it are based upon reasonable expectations. However, no assurances can be given that actual results will not differ materially from those contained in such forward-looking statements. The words "estimate", "anticipate", "expect", "predict", "believe" and similar expressions are intended to identify forward-looking statements. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. The answers to items listed under Item 3 are inapplicable or negative. PART II OTHER INFORMATION The answers to items listed under Part II are inapplicable or negative. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EQUITY OIL COMPANY (Registrant) DATE: November 6, 1998 By /s/ Paul M. Dougan ----------------------- ------------------- Paul M. Dougan, President Chief Executive Office DATE: November 6, 1998 By /s/ Clay Newton ------------------------ ---------------- Clay Newton, Treasurer Principal Accounting Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 50,223 0 3,232,001 0 0 3,730,294 116,506,929 68,431,805 52,108,257 2,295,746 0 0 0 12,794,040 0 52,108,257 9,622,792 9,873,248 0 12,807,920 0 (2,934,672) 959,731 (3,894,403) (1,107,843) (2,786,560) 0 0 0 (2,786,560) (.22) (.22)
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