-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, CoxOJN7hy/8lSPNnyH5n1BwRlE+7zj5hpBG+cXKPTjPXRLIfo0IpDLozL8wrDOTv 0iQ6c9vhoj52fCtSfVmGdg== 0000033325-95-000020.txt : 19950814 0000033325-95-000020.hdr.sgml : 19950814 ACCESSION NUMBER: 0000033325-95-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 000-00610 FILM NUMBER: 95561256 BUSINESS ADDRESS: STREET 1: 10 W THIRD S STE 806 CITY: SALT LAKE CITY STATE: UT ZIP: 84101 BUSINESS PHONE: 8015213515 MAIL ADDRESS: STREET 1: P O BOX 959 CITY: SALT LAKE CITY STATE: UT ZIP: 84110 10-Q 1 2ND QUARTER 1995 FORM 10Q 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 June 30, 1995 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: 12,528,100 ITEM I: Financial Statements EQUITY OIL COMPANY Statement of Operations For the Six Months Ended June 30, 1995 and 1994 (Unaudited) 1995 1994 --------- --------- REVENUES Oil and gas sales $6,128,107 $5,554,823 Partnership income 150,000 151,100 Interest income 125,218 149,787 Other 307,865 20,557 --------- --------- 6,711,190 5,876,267 EXPENSES Operating costs 2,360,568 2,352,828 Depreciation, depletion and amortization 2,250,000 2,200,000 Leasehold abandonments 25,500 23,650 3-D seismic 237,604 - Exploration 697,558 804,281 General and administrative 982,262 825,896 Interest 29,545 43,410 --------- --------- 6,583,037 6,250,065 Income (loss) before income taxes 128,153 (373,798) (Benefit) for income taxes (44,057) (161,055) ---------- ----------- NET INCOME (LOSS) $ 172,210 $ (212,743) ========== =========== Net income (loss) per common share $ 0.01 $(0.02) ========== ========== Cash dividends declared per share $.00 $.00 Weighted average shares outstanding 12,535,130 12,536,721 The accompanying notes are an integral part of these statements. EQUITY OIL COMPANY Statement of Operations For the Three Months Ended June 30, 1995 and 1994 (Unaudited) 1995 1994 --------- --------- REVENUES Oil and gas sales $3,105,505 $2,932,381 Partnership income 75,000 76,800 Interest income 64,959 81,900 Other 129,312 17,518 --------- --------- 3,374,776 3,108,599 EXPENSES Operating costs 1,207,430 1,157,797 Depreciation, depletion and amortization 1,100,000 1,150,000 Leasehold abandonments 14,300 9,800 Exploration 388,859 378,824 General and administrative 579,817 415,696 Interest 15,539 22,614 --------- --------- 3,305,945 3,134,731 Income (loss) before income taxes 68,831 (26,132) Provision (benefit) for income taxes 6,726 (50,347) ---------- --------- NET INCOME $ 62,105 $ 24,215 ========== ========= Net income per common share $ 0.00 $ 0.00 Cash dividends declared per share $.00 $.00 Weighted average shares outstanding 12,529,314 12,535,753 The accompanying notes are an integral part of these statements. EQUITY OIL COMPANY Balance Sheet as of June 30, 1995, and December 31, 1994 (Unaudited) June 30, December 31, ASSETS 1995 1994 - ------ ---------- ----------- Current assets: Cash and cash equivalents $ 428,802 $ 363,342 Temporary cash investments 1,502,544 2,466,728 Accounts and advances receivable 3,153,270 3,434,955 Income taxes receivable 293,440 293,440 Deferred income taxes 48,281 48,281 Other current assets 448,103 389,613 ---------- ---------- 5,874,440 6,996,359 Property and equipment 96,863,531 95,048,505 Less accumulated depletion, depreciation and amortization 56,486,588 54,236,588 ---------- ---------- 40,376,943 40,811,917 Other assets: Investment in and note receivable from Symskaya Exploration 4,361,865 3,415,123 Investment in Raven Ridge Pipeline Partnership 604,360 684,937 Other assets 182,690 - ---------- ---------- 5,148,915 4,100,060 TOTAL ASSETS $51,400,298 $51,908,336 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 915,160 $ 1,156,611 Accrued liabilities 152,089 151,948 Accrued profit sharing 65,700 157,073 Income taxes payable 215,928 50,931 Deferred lease rental revenue - 178,553 Current portion - note payable - 460,000 --------- --------- 1,348,877 2,155,116 Note payable - 460,000 Revolving credit facility 924,830 - Deferred income taxes 9,800,531 10,088,189 ---------- ---------- 10,725,361 10,548,189 Stockholders' equity Common stock 12,593,631 12,593,631 Paid in capital 2,934,792 2,934,792 Retained earnings 23,961,028 23,788,818 Less cost of treasury stock (163,391) (112,210) ---------- ---------- 39,326,060 39,205,031 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $51,400,298 $51,908,336 ========== ========== The accompanying notes are an integral part of these statements. EQUITY OIL COMPANY Statement of Cash Flows For the Six Months Ended June 30, 1995 and 1994 (Unaudited) 1995 1994 ----------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 172,210 $ (212,743) Adjustments Depreciation, depletion and amortization 2,250,000 2,200,000 Partnership distribution in excess of income 80,577 72,762 Leasehold abandonments 25,500 23,650 Decrease in deferred income taxes (287,658) (161,278) Increase (decrease) from changes in: Accounts and advances receivable 281,685 (134,870) Other current assets (58,490) (48,063) Deferred lease revenue (178,553) - Accounts payable and accrued liabilities (241,310) (65,204) Income taxes receivable/payable 164,997 (150,144) Accrued profit sharing (91,373) (74,550) --------- --------- Net cash provided by operating activities 2,117,585 1,449,560 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Advances to Symskaya Exploration (946,742) (376,243) Sale of temporary cash investments 964,184 - Capital expenditures (1,840,526) (1,972,061) --------- --------- Net cash used in investing activities (1,823,084) (2,348,304) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of note payable (920,000) (230,000) Purchase of treasury stock (51,181) (18,235) Increase in other assets (182,690) - Revolving credit facility 924,830 - --------- --------- Net cash used in financing activities (229,041) (248,235) --------- --------- NET INCREASE (DECREASE) IN CASH 65,460 (1,146,979) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 363,342 5,194,013 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 428,802 $ 4,047,034 ========== ========== CASH, CASH EQUIVALENTS AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $ 1,931,346 $ 4,047,034 ========== ========== Supplemental disclosures of cash flow information: Cash paid during the period for: Income Taxes $ 90,950 $ - Interest $ 29,545 $ 43,410 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, 1994. 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 June 30, 1995, and the results of its operations for the three and six month periods ended June 30, 1995 and 1994, and its cash flows for the six month periods ended June 30, 1995 and 1994. 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 From 10-Q. These financial statements should be read in conjunction with the Company's 1994 Annual Report on Form 10-K, and the Company's Form 10-Q for the first quarter of 1995. The results for the three and six month periods ended June 30, 1995 are not necessarily indicative of future results. Note 2. Net Income (Loss) Per Share Net income (loss) per share is based on the weighted average number of common shares outstanding during the period. Primary and fully diluted earnings per share are essentially the same. Note 3. Reclassifications Certain balances in the June 30, 1994 financial statements have been reclassified to conform with the current year presentation. These changes had no effect on previously reported net income, total assets, liabilities or stockholders' equity. Note 4. Revolving Credit Facility In March of 1995, the Company obtained a $20 million borrowing base credit facility, with an initial commitment of $10 million. The facility calls for interest payments only, at the lower of prime or LIBOR plus 2%, for 2 years, at which time it converts to a 3 year term note. Credit facility fees, which are reflected as other assets in the accompanying Balance Sheet, will be amortized on a straight line basis over 60 months. PART I ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Continued stronger oil prices through most of the second quarter of 1995 combined with increases in other income and an income tax benefit to enable the Company to record net income of $172,210, or $.01 per share, for the six months ended June 30, 1995. This compares to a net loss in the same period of 1994 of $(212,743), or $(.02) per share. Total revenues for the first half of 1995 were $6,711,190, compared to $5,876,267 during the same period of 1994. Second quarter 1995 net income was $62,105, or $.00 per share, on total revenues of $3,374,776. 1995 results improved from second quarter 1994 net income of $24,215, or $.00 per share, on total revenues of $3,108,599. Posted prices for Western Colorado crude oil, which accounts for 64% of the Company's total oil production, averaged $18.88 during the first half of 1995, an increase of 18% from $16.00 during the same period of 1994. GROWTH STRATEGY In February, the Company announced a new growth strategy, encompassing a balanced approach in four areas. Those areas included 1) acquisitions, 2) focused exploration drilling, 3) development drilling and exploitation of existing assets, and 4) international exploration. The Company is making good progress in each of the areas. ACQUISITIONS. During the first half of 1995, several acquisition opportunities have been evaluated, with offers made on selected packages that fit strategically with other Company assets. The Company expects to close shortly on the acquisition of an additional 5% working interest in the Cessford field in Alberta, Canada, which will be effective May 1st. This purchase will add approximately 100,000 proved developed barrels of oil equivalent at a total purchase price of approximately $400,000. Discovered in 1972, this field has produced in excess of 3.8 million barrels of oil, and is currently being evaluated for waterflood potential. Two successful wells were drilled at the field in 1994, and four new infill locations are currently being drilled at the field. Prior to this acquisition, the Company had a 45% working interest in the field, which currently has 17 producing wells. FOCUSED EXPLORATION DRILLING. Total expenses increased somewhat over 1994 first half levels, in part due to 3-D seismic expenses incurred in connection with the Company's California exploration programs. The largest of these 3-D programs is a 41.5 square mile survey for which data acquisition was completed in March of 1995. Processing and interpretation of the data is now being completed, and the permitting of locations will begin shortly. The Company expects to begin drilling on as many as 4 wells in California during the last half of 1995. DEVELOPMENT DRILLING. During the first half of 1995, the Company has participated in the drilling of six development wells. Drilling began at the Company's Retlaw prospect in Alberta, Canada, where a second well was drilled to accelerate recovery from 2,000 Mcf per day to 11,000 Mcf per day. The increased production has the potential to increase Equity's 1995 gas production by 500,000 Mcf. Equity has a net working interest of 14.1% in the wells. The development drilling at the Company's Cessford field, mentioned previously, began in July of 1995. There are currently 4 wells in various stages of progress. The Company also participated in an offset to a successful gas well drilled in 1994 in Rio Blanco County, Colorado. Mitchell Energy is currently completing the #1-35-2-104 Park Mountain Federal well, which found over 40 feet of Dakota pay. The well is expected to be hooked up to a gathering system for 1995 winter sales. The Company has a 30% working interest in this well. Development drilling at the Company's Siberia Ridge area will continue pending drilling permit approval by the BLM. INTERNATIONAL EXPLORATION. Emphasizing that a good deal of additional testing will be required in order to develop more complete information, on June 28, 1995 the Company reported oil shows at the Lemok No. 1 well being drilled in Eastern Siberia by Symskaya Exploration, Inc., fifty percent owned by Equity and fifty percent owned by Leucadia National Corporation. The oil shows occurred between 6,890 and 6,985 feet in a dolomite section of probable Cambrian age. The well is the first exploratory test to be drilled on Symskaya's 1.1 million acre License in the Symskaya area of the Krasnoyarsk Krai. Further evaluation of the section is being conducted, but information relating to the extent and productivity of this section, if any, will only be available following the drilling of the well to its estimated total depth of 14,500 feet. Drilling is continuing, and it is estimated that total depth should be reached during the fourth quarter of 1995 if no problems are encountered. CAPITAL RESOURCES AND LIQUIDITY Cash, cash equivalents, and temporary cash investments totaled $1,931,346 as of June 30, 1995, a decrease of $898,724 since year-end 1994. Working capital at June 30, 1995 was $4,525,563, down slightly from $4,841,243 at December 31, 1994. Cash provided by operating activities was $2,117,585 in the first six months of 1995, 46% higher than the same period of 1994. Cash provided by operating activities was aided in 1995 by the higher net income discussed earlier, and a net increase in cash flow from working capital items. The Company's ratio of current assets to current liabilities improved from 3.25 to 1 at December 31, 1994 to 4.35 to 1 at June 30, 1995. Investment in property and equipment for the first six months of 1995, coupled with advances the Company made to Symskaya Exploration, totaled $2,787,268, a 19% increase from the amount recorded during the corresponding six months of 1994. Approximately $950,000 was advanced to Symskaya during the first half of 1995, compared to approximately $375,000 during the same period of 1994. The increased level of advances reflects the commencement of the drilling phase of the project. The Company expects that advances to Symskaya will continue at their current levels for the balance of 1995. In 1995, the Company used proceeds from its revolving credit facility to retire its previously outstanding note payable. In 1994, the Company make the scheduled principal payments on this note payable. The Company believes that existing cash balances, cash flow, and the aapproximate $9.0 million of borrowing capacity under the revolving credit facility will provide adequate resources to meet its capital, exploration, and acquisition spending objectives. COMPARISON OF SECOND QUARTER 1995 WITH SECOND QUARTER 1994 Oil and gas sales increased 6% in the second quarter of 1995 to $3,105,505, compared to $2,932,381 in the same quarter of last year. This increase was brought about principally by higher oil prices that prevailed during the second quarter of 1995. The average posted price for crude at the Rangely Weber Sand Unit during the quarter was $19.16 per barrel, compared to $17.44 during the second quarter of 1994, an increase of 10%. Total production increased year-to-year on an equivalent barrel basis. Oil production increased slightly from 152,000 barrels in the second quarter of 1994 to 156,000 during the same quarter of 1995. Gas production rose from 311,000 Mcf in 1994 to 334,000 Mcf in 1995. During the second quarter of 1995, the Company received $71,000 as its share of a settlement relating to prior production litigation which caused the significant increase in other income. There was no corresponding settlement in 1994. Slight increases in operating costs were offset by equal decreases in DD&A charges for the current quarter. Decreased DD&A charges reflect the positive impact on reserve volumes of higher product prices, offset by higher production volumes. Higher exploration expenses are a reflection of increased geological and geophysical costs associated with the Company's current exploration prospects. Internal costs associated with property acquisition activities, as well as increases in legal fees and investor relations expenses caused administrative costs to increase during the second quarter of 1995 over 1994. The Company's tax provision for the second quarter of 1995 is lower than the statutory rate because of excess allowable percentage depletion and the use of foreign tax credits. COMPARISON OF FIRST HALF 1995 WITH FIRST HALF 1994 The higher year-to-year oil prices discussed earlier paved the way to higher revenues for the first half of 1995. Oil and gas sales increased 10% in the first half of 1995 to $6,128,107 versus $5,554,823 in the same period of last year. The Company recorded increases in both oil and gas production during the first half of 1995. Oil production of 305,000 barrels was up from 1994 production of 301,000 barrels. Natural gas production increased from 554,000 Mcf in 1994 to 645,000 Mcf in 1995. Other income includes the recognition in the first quarter of 1995 of income arising from a lease option agreement that was deferred in 1994, as well as the second quarter 1995 litigation settlement proceeds discussed earlier. Total expenses increased 5% over 1994 first half levels, due in part to $237,600 of 3-D seismic expenses incurred in 1995 in connection with the Company's California exploration programs. The seismic expenses were offset to a large degree by lower exploration expenses. Through the first six months of 1994, the Company had expensed approximately $230,000 in dry holes costs. No dry holes costs have been incurred during the first half of 1995. As mentioned previously, internal costs associated with property acquisition activities, as well as increases in personnel expenses, legal fees and investor relations expenses caused administrative costs to increase during the first half of 1995 over 1994. The Company's tax provision for the first half of 1995 is lower than the statutory rate because of excess allowable percentage depletion and the use of foreign tax credits. OTHER ITEMS The Company is currently evaluating SFAS 121, Accounting for the Impairment of Long-Lived Assets, to determine the impact, if any, of its future adoption. PART II OTHER INFORMATION The answers to items listed under Part II are inapplicable or negative, except as shown below. Item 4. Submission of Matters to a Vote of Security Holders. At the Company's annual meeting, held on May 10, 1995, stockholders were asked to elect Mr. Paul M. Dougan, Mr. Douglas W. Brandrup, and Mr. Joseph C. Bennett to serve three year terms on the Board of Directors, to amend the Articles of Incorporation to reduce voting requirements below two-thirds in certain situations, and to amend the Articles of Incorporation to limit Directors' liability in certain cases. The following votes were recorded for each item. ELECTION OF DIRECTORS. Each director nominee received at least 96% of the shares voted at the meeting. Dougan Brandrup Bennett Affirmative votes 10,536,756 10,456,647 10,536,756 Withhold authority 267,051 258,160 267,051 AMENDMENT TO REDUCE VOTING REQUIREMENTS. # of votes % Affirmative votes 7,414,641 59.1 Negative votes 773,633 6.2 Abstentions/Not voted 4,353,326 34.7 This proposal did not receive the necessary amount of affirmative votes for passage. AMENDMENT TO REDUCE DIRECTORS' LIABILITY. # of votes % Affirmative votes 9,019,169 71.9 Negative votes 1,389,407 11.1 Abstentions/Not voted 2,133,024 17.0 This proposal received the necessary amount of affirmative votes for passage, and was therefore approved by the stockholders. 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: August 11, 1995 By /s/ Paul M. Dougan Paul M. Dougan, President DATE: August 11, 1995 By /s/ Clay Newton Clay Newton, Treasurer EX-27 2 ART 5 FDS FOR 2ND QUARTER 10-Q
5 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 428,802 0 3,153,270 0 0 5,874,440 96,863,531 56,486,588 51,400,298 1,348,877 0 12,593,631 0 0 0 51,400,298 6,128,107 6,711,190 0 6,583,037 0 0 29,545 128,153 (44,057) 172,210 0 0 0 172,210 .01 .01
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