-----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, WDlxkZkgvuX1yUXr4LTGKAhWVZDVotUC4QtvmNHK74QFDrg65acO548NSSNNaXyl 31wWrFYSMsdXMnKnfv49Uw== 0000033325-97-000012.txt : 19971117 0000033325-97-000012.hdr.sgml : 19971117 ACCESSION NUMBER: 0000033325-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 000-00610 FILM NUMBER: 97717852 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 3RD QUARTER FORM 10Q 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, 1997 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: 12,671,100 ITEM I: Financial Statements EQUITY OIL COMPANY Statements of Operations For the Nine Months Ended September 30, 1997 and 1996 (Unaudited) REVENUES 1997 1996 ---- ---- Oil and gas sales ...................... $ 12,504,373 $ 11,542,851 Partnership income ..................... 225,000 225,000 Interest income ........................ 113,339 104,952 Other .................................. 747,620 245,554 13,590,332 12,118,357 EXPENSES Operating costs ........................ 4,520,122 4,110,248 Depreciation, depletion and amortization ......................... 3,300,000 2,850,000 Leasehold abandonments ................. 82,420 31,642 Equity loss in Symskaya Exploration, Inc. ........... 236,589 5,250,000 3D seismic ............................. -- 457,536 Exploration ............................ 1,930,692 1,418,578 General and administrative ............. 1,575,129 1,630,706 Interest ............................... 550,458 -- 12,195,410 15,748,710 Income (loss) before income taxes ........... 1,394,922 (3,630,353) Provision (benefit) for income taxes ........ 501,495 (1,691,138) NET INCOME (LOSS) ........................... $ 893,427 $ (1,939,215) Net income (loss) per common share .......... $ 0.07 $ (0.15) Cash dividends declared per share ........... $ .00 $ .00 Weighted average shares outstanding ......... 12,696,093 12,734,711 The accompanying notes are an integral part of these statements. EQUITY OIL COMPANY Statements of Operations For the Three Months Ended September 30, 1997 and 1996 (Unaudited) REVENUES 1997 1996 Oil and gas sales ..................... $ 3,758,655 $ 3,974,173 Partnership income .................... 75,000 75,000 Interest income ....................... 29,821 34,047 Other ................................. 195,463 122,480 4,058,939 4,205,700 EXPENSES Operating costs ....................... 1,481,187 1,488,321 Depreciation, depletion and amortization ........................ 1,100,000 1,050,000 Leasehold abandonments ................ 41,468 16,550 Equity loss in Symskaya Exploration, Inc. .......... 92,752 5,250,000 3D seismic ............................ -- 153,439 Exploration ........................... 702,645 492,098 General and administrative ............ 467,111 411,734 Interest expense ...................... 226,286 -- 4,111,449 8,862,142 Loss before income taxes ................... (52,510) (4,656,442) Benefit for income taxes ................... (4,352) (1,896,171) NET LOSS ................................... $ (48,158) $ (2,760,271) Net loss per common share .................. $ (0.00) $ (0.22) Cash dividends declared per share .......... $ .00 $ .00 Weighted average shares outstanding ........ 12,678,883 12,746,339 The accompanying notes are an integral part of these statements. EQUITY OIL COMPANY Balance Sheet as of September 30, 1997 and December 31, 1996 (Unaudited) September 30, December 31, ASSETS 1997 1996 Current assets: Cash and cash equivalents ........ $ 285,321 $ 787,961 Temporary cash investments ....... -- 49,802 Accounts and advances receivable . 3,370,932 3,660,670 Income taxes receivable .......... 44,311 311,393 Deferred tax assets .............. 31,053 31,053 Other current assets ............. 445,428 372,701 Total current assets 4,177,045 5,213,580 Property and equipment ............. 109,357,426 106,147,145 Less accumulated depletion, depreciation and amortization .... 63,715,369 61,732,014 Total property and equipment 45,642,057 44,415,131 Other assets: Investment in and note receivable from Symskaya Exploration ...... -- -- Investment in Raven Ridge Pipeline Partnership ........... 299,014 405,328 Other assets ..................... 115,812 147,398 Total other assets 414,826 552,726 TOTAL ASSETS ....................... $ 50,233,928 $ 50,181,437 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ................. $ 805,892 $ 1,880,420 Accrued liabilities .............. 110,822 153,467 Accrued profit sharing ........... 144,000 179,100 Income taxes payable ............. 270,675 191,509 Total current liabilities 1,331,389 2,404,496 Revolving credit facility .......... 9,578,830 8,878,830 Deferred income taxes .............. 5,231,475 5,565,973 Non-current liabilities 14,810,305 14,444,803 Stockholders' equity Common stock ..................... 12,761,100 12,751,100 Paid in capital .................. 3,667,708 3,648,333 Retained earnings ................ 17,924,785 17,031,358 Less cost of treasury stock ...... (261,359) (98,653) Total stockholders' equity 34,092,234 33,332,138 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............. $ 50,233,928 $ 50,181,437 The accompanying notes are an integral part of these statements. EQUITY OIL COMPANY Statement of Cash Flows For the Nine Months Ended September 30, 1997 and 1996 (Unaudited) 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) .................. $ 893,427 $(1,939,215) Adjustments Depreciation, depletion and amortization ................... 3,300,000 2,850,000 Partnership distributions in excess of income ............... 106,314 108,553 (Gain) loss on property dispositions .......... (210,063) 31,642 Equity loss in Symskaya Exploration ........... 236,589 5,250,000 Change in other assets ........... 31,586 31,585 Common stock issued for services . 29,375 103,313 Decrease in deferred income taxes (334,498) (2,031,251) Net cash provided before changes in working capital items ........... 4,052,730 4,404,627 Increase (decrease) from changes in: Accounts and advances receivable . 289,738 282,826 Other current assets ............. (72,727) 125,733 Accrued profit sharing ........... (35,100) (4,771) Accounts payable and accrued liabilities .................... (1,117,173) 98,516 Income taxes receivable/payable .. 346,248 154,075 Net cash provided by operating activities .......... 3,463,716 5,061,006 CASH FLOWS FROM INVESTING ACTIVITIES: Advances to Symskaya Exploration ... (236,589) (2,793,811) Proceeds from sale of properties ... 339,385 -- Sale of temporary cash investments . 49,802 756,645 Capital expenditures ............... (4,656,248) (5,945,334) Net cash used in investing activities ........... (4,503,650) (7,982,500) CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock ......... (162,706) (43,056) Net borrowings on revolving credit facility ....... 700,000 2,860,000 Exercise of incentive stock options ................... -- 84,375 Net cash provided by financing activities ...................... 537,294 2,901,319 NET INCREASE (DECREASE) IN CASH ....... (502,640) (20,175) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............. 787,961 511,252 CASH AND CASH EQUIVALENTS AT END OF PERIOD ................... $ 285,321 $ 491,077 Supplemental disclosures of cash flow information: Cash paid during the period for: Income taxes ................ $ 607,694 $ 175,745 Interest ................... $ 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, 1996. 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, 1997, and the results of its operations for the three and nine month periods ended September 30, 1997 and 1996, and its cash flows for the nine month periods ended September 30, 1997 and 1996. 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 1996 Annual Report on Form 10-K, and the Company's Form 10-Q's for the first and second quarters of 1997. The results for the three and nine month periods ended September 30, 1997 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. Investment in Symskaya Exploration In the third quarter of 1996, Symskaya Exploration, Inc, the Company's 50% owned subsidiary, charged the costs of drilling the Lemok No. 1 well in Russia to expense. The Company's equity share of the loss was $5.25 million ($3.3 million after taxes). Further discussion of this item can be found under Results of Operations in Item 2. PART I ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operation RESULTS OF OPERATIONS Financial Results The Company recorded net income for the first nine months of 1997 in the amount of $893,427, or $.07 per share, compared to a net loss during the same period of 1996 in the amount of $(1,939,215), or $(.15) per share. Included in the 1996 figures is an equity loss in Symskaya Exploration, Inc. of $5,250,000 $(3,309,075 net of taxes). Total revenues for the first nine months of 1997 were $13,590,332, an increase of 12% over revenues of $12,118,357 recorded during the same period of 1996. The Company recorded a net loss for the third quarter of 1997 in the amount $(48,158), or $(.00) per share on revenues of $4,058,939. This compared to a net loss during the third quarter of 1996 of $(2,760,271), or $(.22) per share, on revenues of $4,205,700, which included the equity loss in Symskaya Exploration, Inc. Operating Activities The Company has participated in a total of 22 wells year to date in 1997, completing 14 as oil and gas wells, with the remaining wells being plugged and abandoned. Included in the well count are 17 exploratory wells. Nine of those wells have been completed as oil or gas wells, and 8 were dry holes. Fourteen wells have been drilled at the Company's 3D projects in the Sacramento Basin of California, 8 of which have been successful. The dry holes included the first test at the company's Davis Ranch 3-D project in the Sacramento Basin. Current plans call for 7 additional wells to be drilled in California during the fourth quarter of 1997. Effective July 1, 1997, the Company purchased a 50% working interest in the Merlin Prospect, Glenn County, California for $200,000. The prospect, which the Company now operates, includes more than 5,000 acres under lease, a producing well, a shut-in well, a gas gathering system and 15.5 square miles of 3-D seismic data. Under the terms of the agreement, the Company will be required to drill two wells during the fourth quarter of 1997. The Company recently began its exploitation and exploration program on certain Big Horn Basin properties acquired in 1995. The initial well, a developmental test of the Madison formation, is in the process of being completed as an oil well. Two additional exploratory wells will be drilled in the fourth quarter. Pending results of this drilling, the Company is currently planning additional drilling and production enhancing workovers in 1998. The Company has recorded a 100% success rate in development drilling projects in 1997, completing all 5 wells drilled. Two of the wells were drilled at the Company's Siberia Ridge field in Wyoming, where plans call for two additional wells to be drilled in 1998. CAPITAL RESOURCES AND LIQUIDITY Cash, cash equivalents, and temporary cash investments totaled $285,321 as of September 30, 1997, a decrease of $552,442 since year-end 1996. Working capital at September 30, 1997 was $2,845,656, up slightly from $2,809,084 at December 31, 1996. The Company's ratio of current assets to current liabilities was 3.14 to 1 at September 30, 1997, compared to 2.17 to 1 at December 31, 1997. Cash provided by operating activities before working capital changes was $4,052,730 in the first nine months of 1997, 8% lower than the same period of 1996. Cash flow from operating activities decreased from $5,061,006 during the first nine months of 1996 to $3,463,716 in the same period of 1997. The principal cause of the decline is the reduction in Accounts Payable balances, which is mainly a function of timing. Investment in property and equipment for the first nine months of 1997, including proved property acquisitions, totaled $4,656,248. Investment in property and equipment for the same period of 1996, including advances to Symskaya Exploration and proved property acquisitions, totaled $5,945,334. Approximately $2.8 million was advanced to Symskaya during the first nine months of 1996, compared to approximately $236,000 during the same period of 1997. The Company spent $1.8 million on proved property acquisitions during the first nine months of 1996, compared to only $160,000 during the first nine months of 1997. Costs expended on the Company's domestic drilling programs during the first nine months of 1997 increased 8% in 1997 to $4,496,248, compared to $4,149,334 in the same period of 1996. The investment activity was partially funded by proceeds from the sale of properties in 1997, and by the sale of temporary cash investments in both years. 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. The purchases were made pursuant to a share repurchase program adopted by the Company in June of 1997. The Company purchased 12,000 shares of its stock during the same period of 1996. The Company has drawn down its credit facility by $700,000 during 1997, compared to $2.86 million in 1996, with funds being used for property acquisitions and other working capital needs. On October 17, 1997, the Company amended its credit agreement, increasing the current commitment from $10 million to $15 million. The Company believes that existing cash balances, cash flow from operating activities, and the remaining borrowing capacity under the revolving credit facility, which is approximately $10.4 million, will provide adequate resources to meet its capital, exploration, and acquisition spending objectives. COMPARISON OF THIRD QUARTER 1997 WITH THIRD QUARTER 1996 Oil and gas sales decreased 5% in the third quarter of 1997 to $3,758,655 versus $3,974,173 in the same quarter of last year. Lower revenues were caused by lower oil prices, which offset increases in oil and gas production and gas prices. Total revenues decreased 3% from year to year. Oil production increased 4% in the third quarter of 1997. Oil production for the quarter was 159,400 barrels, compared to 154,000 barrels in the third quarter of 1996. Gas production increased 33% from 395 Mmcf in 1996 to 524 Mmcf in 1997. 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 $17.99 per barrel during the third quarter of 1997, down 20% from the $22.48 received in 1996. Gas prices increased to $1.78 per Mcf in 1997, compared to $1.30 in 1996, an increase of 37%. 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. Higher exploration expenses in 1997 result from higher dry hole costs in the third quarter, reflecting the Company's increased pace of exploratory drilling. During the period, the Company drilled 4 dry holes, incurring costs of $337,000. Dry holes during the same quarter of 1996 were only $79,999. Higher dry hole costs were partially offset by lower 3D seismic charges in 1997. During the third quarter of 1996, the Company incurred 3-D charges of $153,000, while no such expenses were incurred during the same period of 1997. General and administrative expenses increased year-to-year, primarily due to increased investor relations expenses. As discussed previously, during the third quarter of 1996 Symskaya Exploration, Inc, the Company's 50% owned subsidiary, abandoned the Lemok No. 1 well. As a consequence, Symskaya charged the costs of drilling the Lemok No. 1 to expense at September 30, 1996. The Company's equity share of the loss was $5.25 million ($3.3 million after taxes). During 1996, because of its ongoing exploration project in Russia, the Company was required to capitalize all interest paid. With activity in Russia curtailed in 1997 as a result of the Lemok #1 being abandoned in 1996, interest is now being expensed. Interest expense during the third quarter of 1997 was $226,286, compared to no interest expense during the third quarter of 1996. 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 1997 WITH FIRST NINE MONTHS OF 1996 Oil and gas sales increased 8% in the first nine months of 1997 to $12,504,373 versus $11,542,851 in the same period of last year. This increase was brought about principally by increased oil and gas production and higher natural gas prices. Oil production for the first nine months was 476,000 barrels, up slightly from 1996 production of 468,000 barrels. Gas production for the period increased 6% to 1,526 Mmcf from 1,440 Mmcf in 1996. Production increases reflect the ongoing success of the Company's drilling programs. Gas prices increased to $1.90 per Mcf in 1997, compared to $1.35 in 1996, an increase of 41%. Higher gas prices were partially offset by lower crude prices. Average prices received for crude oil were $19.52 per barrel during the first nine months of 1997, compared to $20.51 received in 1996, a decrease of 5%. The increase in oil and gas sales for the period was augmented by an increase in other income. During the first half of 1997, the Company recorded a gain on the sale of certain oil and gas properties of approximately $325,000. The properties sold had reserves of less than 15,000 barrels of oil. There was no corresponding event in 1996. In addition, 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. Total expenses, excluding the equity loss in Symskaya Exploration, Inc. increased 16% over 1996 nine month levels. Lease operating costs increased 10%, primarily as a result of increased oil production and non-recurring workover expenses. Depreciation, depletion and amortization increased 16%, primarily due to increased oil production in 1997 and the new properties added to the depletion base during 1997 and 1996. Exploration expense increased slightly from year to year, as lower 3-D seismic expenses were offset by higher dry hole costs. General and administrative expenses decreased by 3% from 1996 nine month levels. The decrease was mainly due to reduced compensation expense during 1997. As discussed earlier, during the third quarter of 1996 Symskaya Exploration, Inc, the Company's 50% owned subsidiary, abandoned the Lemok No. 1 well. As a consequence, Symskaya charged the costs of drilling the Lemok No. 1 to expense at September 30, 1996. The Company's equity share of the loss was $5.25 million ($3.3 million after taxes). During 1996, because of its ongoing exploration project in Russia, the Company was required to capitalize all interest paid. With activity in Russia curtailed in 1997, interest is now being expensed. Interest expense during the first nine months of 1997 was $550,458, compared to no interest expense during the same period of 1996. Income tax expense for the first nine months of 1997 includes additional taxes arising from an audit of the Company's Canadian tax returns. The adjustment resulted in the accrual of approximately $175,000 in additional Canadian taxes related to prior years. OTHER ITEMS In March 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings per Share. This statement establishes standards for computing and presenting earnings per share ("EPS") and applies to entities with publicly-held common stock or potential common stock. This statement simplifies the standards for computing EPS and makes them comparable to international EPS standards. This statement is effective for financial statements for both interim and annual periods ending after December 15, 1997. The Company is currently evaluating the impact of the recently issued statement and will adopt the requirements for the year ending December 31, 1997. 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 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. 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 13, 1997 /s/ Paul M. Dougan ------------------------ Paul M. Dougan, President DATE: November 13, 1997 /s/ Clay Newton ------------------------ Clay Newton, Treasurer EX-27 2 FDS --
5 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 285,321 0 3,370,932 0 0 4,177,045 109,357,426 63,715,369 50,233,928 1,331,389 0 0 0 12,761,100 0 50,223,928 12,504,373 13,590,332 0 11,644,952 0 0 550,458 1,394,922 501,495 893,427 0 0 0 893,427 .07 .07
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