-----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, DHKUVBBRhrFXZttP5Q81IioUvn8etPwtQYBTQy+7BIkiuHgpigUwkXZIuHQ4XAT4 29vx8DWsyNglQ0BwQsb7Ig== 0000033325-00-000008.txt : 20000515 0000033325-00-000008.hdr.sgml : 20000515 ACCESSION NUMBER: 0000033325-00-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000512 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: 627913 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 1ST QUARTER 2000 FORM 10Q UNITED STATES FORM 10Q 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 March 31, 2000 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: 12,643,440 1 ITEM I: Financial Statements EQUITY OIL COMPANY Statements of Operations For the three months ended March 31, 2000 and 1999 (Unaudited) 2000 1999 ------------ ------------ REVENUES Oil and gas sales .................. $ 5,388,023 $ 2,610,852 Other .............................. 750,908 39,158 ------------ ------------ 6,138,931 2,650,010 EXPENSES Operating costs .................... 1,642,923 1,286,158 Depreciation, depletion and amortization ..................... 1,025,000 1,100,000 3D Seismic ......................... 191,678 -- Exploration ........................ 437,452 417,678 General and administrative ......... 514,682 428,270 Interest ........................... 339,446 298,327 ------------ ------------ 4,151,181 3,530,433 Income (loss) before income taxes ........... 1,987,750 (880,423) Provision for (benefit from) income taxes ........ 735,000 (307,724) ------------ ------------ NET INCOME (LOSS) ........................... $ 1,252,750 $ (572,699) ============ ============ Net income (loss) per share Basic .............................. $ .10 $ (.05) Diluted ............................ $ .10 $ (.05) Weighted average shares outstanding Basic .............................. 12,643,440 12,629,440 Diluted ............................ 12,966,440 12,629,440 The accompanying notes are an integral part of these statements. 2 EQUITY OIL COMPANY Balance Sheets as of March 31, 2000 and December 31, 1999 March 31, December 31, ASSETS 2000 1999 - ------ ------------- ------------- (Unaudited) Current assets: Cash and cash equivalents .............. $ 1,937,659 $ 1,006,602 Accounts and advances receivable ....... 3,593,923 3,382,361 Income taxes receivable ................ 290,332 221,199 Deferred income taxes .................. 19,632 19,632 Other current assets ................... 361,133 277,595 ------------- ------------- 6,202,679 4,907,389 Property and equipment ................... 103,920,643 103,574,626 Less accumulated depreciation, depletion and amortization .............. 63,752,091 62,800,100 ------------- ------------- 40,168,552 40,774,526 Other assets ............................. 478,338 435,420 ------------- ------------- TOTAL ASSETS ............................. $ 46,849,569 $ 46,117,335 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable ....................... $ 1,562,380 $ 1,541,834 Accrued liabilities .................... 134,562 177,550 Income taxes payable ................... 238,907 321,981 ------------- ------------- 1,935,849 2,041,365 Revolving credit facility ................ 14,000,000 15,000,000 Deferred income taxes .................... 2,252,648 1,667,648 ------------- ------------- 16,252,648 16,667,648 Stockholders' Equity: Common stock ........................... 12,808,040 12,808,040 Paid in capital ........................ 3,719,743 3,719,743 Less cost of treasury stock ............ (528,302) (528,302) Retained earnings ...................... 12,661,591 11,408,841 ------------- ------------- 28,661,072 27,408,322 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................... $ 46,849,569 $ 46,117,335 ============= ============= The accompanying notes are an integral part of these statements. 3 EQUITY OIL COMPANY Statements of Cash Flows For the three months ended March 31, 2000 and 1999 (Unaudited) 2000 1999 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ............................ $ 1,252,750 $ (572,699) Adjustments Depreciation, depletion and amortization ............................ 1,025,000 1,100,000 (Gain) loss on property sales ......... (505,789) -- Change in other assets ................ 33,217 3,028 Equity loss in Symskaya Exploration ... 42,363 43,425 Change in deferred income taxes ........... 585,000 (308,400) ----------- ----------- 2,432,541 265,354 Increase (decrease) from changes in: Accounts and advances receivable ......... (211,562) 407,834 Other current assets ..................... (83,538) 13,325 Accounts payable and accrued liabilities ........................... (22,442) (536,650) Income taxes receivable/payable .......... (152,206) 75,590 ----------- ----------- Net cash provided by operating activities ................... 1,962,793 225,453 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ......................... (426,535) (172,831) Proceeds from property sales ................. 513,298 -- Change in other assets ....................... (50,000) -- Advances to Symskaya Exploration ............. (42,363) (43,425) ----------- ----------- Net cash used in investing activities ........ (5,600) (216,256) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of credit facility fees .............. (26,136) -- Payments on credit facility .................. (1,000,000) -- ----------- ----------- Net cash used in financing activities ................. (1,026,136) -- ----------- ----------- NET INCREASE IN CASH ........................... 931,057 9,197 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ....................... 1,006,602 444,476 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ............................. $ 1,937,659 $ 453,673 =========== =========== The accompanying notes are an integral part of these statements. 4 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Interim Financial Statements In the opinion of the Company's management, the financial statements reflect the necessary adjustments, all of which are of a normal and recurring nature, to present fairly the financial position of the Company as of March 31, 2000, and the results of its operations and its cash flows for the three month periods ended March 31, 2000 and 1999. 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 1999 Annual Report on Form 10-K. The results for the three month period ended March 31, 2000 are not necessarily indicative of future results. Note 2. Net Income (Loss) Per Share Income (loss) per share for all periods presented reflects 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 1,347,000 shares of common stock at prices of $1.06 to $6.00 per share were outstanding during the first three months of 2000, 323,000 of which were included in the computation of diluted net income per share for the period. Options to purchase approximately 1,024,000 shares of common stock at prices of $2.50 to $6.00 per share were outstanding during the first three months of 1999, none of which were included in the computation of net loss per share at March 31, 1999 because the effect would have been antidilutive. Note 3. Reclassifications Certain balances in the March 31, 1999 financial statements have been reclassified to conform to the current year presentation. These changes had no effect on the previously reported net loss, total assets, liabilities or stockholders' equity. 5 PART I ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Sharply higher oil prices combined with increased oil production to produce a 106% increase in oil and gas sales for the first quarter of 2000. Total revenues for the period were $6,138,931, compared to $2,650,010 during the first quarter of 1999. The Company recorded net income for the 2000 first quarter of $1,252,750, or $.10 per share. This compares to a net loss for the first quarter of 1999 of $(572,699), or $(.05) per share. Oil production in the 2000 first quarter was 170,000 barrels, compared to 154,000 in the same period last year. The increase was attributable to production from low-margin wells that were shut-in during early 1999. Gas production decreased to 450 million cubic feet in 2000 from 550 million cubic feet in 1999. The reduction was due primarily to the Company's reduced drilling program in California during 1999. Revenues were decreased by $196,170 in losses associated with the Company's hedging program, which was instituted in 1999 to help manage oil price volatility. The Company has 900 barrels of oil per day hedged under costless collars. The collars have floors of $18.00 per barrel and a weighted average ceiling of $26.37 per barrel. The floor and ceilings are based on the average near month WTI price on the New York Mercantile Exchange (NYMEX). After taking into consideration the hedging losses, average crude prices received in the first quarter this year were $25.40 per barrel, compared to $11.29 per barrel received during the same period of 1999. Gas prices also increased in the first quarter of 2000, averaging $2.37 per Mcf, compared to $1.58 per Mcf received during the first quarter of 1999. Included in first quarter 2000 revenues was $506,000 in property sales due to the sale of a small, non-core oil property effective February 1, 2000. First quarter revenues also include approximately $100,000 in overhead income associated with the Company's newly operated properties in the Big Horn Basin. This level of overhead income should continue to be recognized each quarter for the forseeable future. Higher revenues were offset by higher operating costs, 3D seismic expenses, and administrative costs. Operating costs rose 28% from 1999 levels, as the Company returned its higher-cost, lower-margin oil properties to full production. In addition, higher oil prices resulted in higher value-based production taxes. 6 First quarter expenses include the initial costs associated with two new Company operated 3D seismic surveys, one in the Sacramento Basin of California and one in North Dakota. The Company did not participate in any 3D seismic programs during the first quarter of 1999. General and administrative expenses increased slightly from 1999 first quarter levels. The increase was due to higher compensation and other administrative expenses. During the low oil price environment of early 1999, the Company froze salaries, reduced employee benefits, and made other compensation reductions. As oil prices have increased, the Company has restored some of these previous reductions. In addition, the Company recorded overhead expenses associated with its new Cody, Wyoming office of approximately $40,000, an amount which should continue to be expensed each quarter for the forseeable future. Higher interest costs in 2000 reflect higher interest rates applied to the amount of debt outstanding under the Company's credit facility. CAPITAL RESOURCES AND LIQUIDITY Improved financial results have led to a strengthening in the Company's financial position at March 31, 2000. The Company's cash balances increased by 92% from December 31, 1999. Working capital at March 31, 2000 was 106% higher than that at December 31, 1999. The Company's ratio of current assets to current liabilities also improved, reaching 3.20 to 1 at March 31, 2000, compared to 2.40 to 1 at the end of 1999. Cash flow from operating activities in the first quarter of 2000 increased by more than 700% over 1999 levels. Investment in property and equipment for the first three months of 2000 totaled $426,535, a 146% increase from the amount recorded during the corresponding three months of 1999. As a result of severely depressed oil prices in early 1999, and their negative effects on cash flows, the Company reduced its 1999 capital budget to ensure that the bulk of its projects would be funded by discretionary cash flows. Higher cash flows in 2000 will allow the Company to continue to expand its exploration and exploitation activities. The bulk of the Company's drilling should occur during the second through fourth quarters of the year. Higher cash flows during the quarter enabled the Company to make further reductions in its long-term debt. Debt outstanding at March 31, 2000 was $14 million, down $1 million from year-end 1999 amounts, reflecting the Company's plan of using excess cash flow to aggressively manage its balance sheet. The Company's commitment under its credit facility is subject to a redetermination as of May 1 and November 1 of each year, with estimated future oil and gas prices used in the evaluation determined by the Company's lender. The Company's current commitment under its credit facility is $17 million. Accordingly, 7 as of March 31, 2000, the Company had $3 million 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 its capital and exploration spending objectives for 2000. OTHER ITEMS In June 1998, the Financial Accounting Standards Board released Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities Information." As amended by Statement No. 137 issued in June 1999, this statement, which must be adopted beginning no later than January 1, 2001 for calendar year companies such as the Company, establishes accounting and reporting standards for derivative instruments. The statement requires that an entity recognize all derivatives as either assets or liabilities in the financial statements and measure those instruments at fair value, and it defines the accounting for changes in the fair value of the derivatives depending on the intended use of the derivative. The Company is in the process of determining the impact of this statement on its financial statements. The Company has reviewed all other 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. FORWARD LOOKING STATEMENTS The preceding discussion and analysis should be read in conjunction with the consolidated financial statements, including the notes thereto, appearing in the Company's annual report on Form 10-K. Except for the historical information contained herein, the matters discussed in this report contain forward- looking statements within the meaning of Section 27a of the Securities Act of 1933, as amended, and Section 2le of the Securities Exchange Act of 1934, as amended, that are based on management's beliefs and assumptions, current expectations, estimates, and projections. Statements that are not historical facts, including without limitation statements which are preceded by, followed by or include the words "believes," "anticipates," "plans," "expects," "may," "should" or similar expressions are forward-looking statements. Many of the factors that will determine the Company's future results are beyond the ability of the Company to control or predict. These statements are subject to risks and uncertainties and, therefore, actual results may differ materially. The Company disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. 8 Important factors that may effect future results include, but are not limited to: the risk of a significant natural disaster, the inability of the Company to insure against certain risks, fluctuations in commodity prices, the inherent limitations in the ability to estimate oil and gas reserves, changing government regulations, as well as general market conditions, competition and pricing, and other risks detailed from time to time in the Company's SEC reports, copies of which are available upon request from the Company's investor relations department. 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 there unto duly authorized. EQUITY OIL COMPANY (Registrant) DATE: May 12, 2000 By /s/ Paul M. Dougan ---------------------- --------------------- Paul M. Dougan, President DATE: May 12, 2000 By /s/ Clay Newton ----------------------- --------------------- Clay Newton, Treasurer Principal Accounting Officer 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE EQUITY OIL COMPANY FORM 10-Q FOR THE PERIOD ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-2000 MAR-31-2000 1,937,659 0 3,593,923 0 0 6,202,679 103,920,643 63,752,091 46,849,569 1,935,849 0 0 0 12,808,040 3,719,743 46,849,569 5,388,023 6,138,931 0 3,811,735 0 0 339,446 1,987,750 735,000 1,252,750 0 0 0 1,252,750 .10 .10
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