-----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, Vxx5BP1XZKcnuzdsuUnAZzHqGSv1XIRoKs4IDUEOrIyutCeshS4VmZ/q48PLPo4i ecgHAe11brdpBdTO6CgsQA== 0000033325-98-000009.txt : 19980518 0000033325-98-000009.hdr.sgml : 19980518 ACCESSION NUMBER: 0000033325-98-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 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: 98622676 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 1998 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 March 31, 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: 12,615,440 ITEM I: Financial Statements EQUITY OIL COMPANY Statement of Operations For the three months ended March 31, 1998 and 1997 (Unaudited) 1998 1997 ------- ------- REVENUES Oil and gas sales .................. $ 3,500,460 $ 4,842,278 Partnership income ................. 8,000 75,000 Interest income .................... 34,029 54,926 Other .............................. 34,956 114,800 ------------ ------------ 3,577,445 5,087,004 EXPENSES Operating costs .................... 1,648,930 1,542,768 Depreciation, depletion and amortization ..................... 1,250,000 1,100,000 3D Seismic ......................... 409,743 -- Exploration ........................ 390,128 656,857 Equity loss in Symskaya Exploration ............. 83,498 85,725 General and administrative ......... 438,578 558,817 Interest ........................... 279,534 150,323 ------------ ------------ 4,500,411 4,094,490 Income (loss) before income taxes ........... (922,966) 992,514 Provision for (benefit from) income taxes ....................... (280,960) 212,139 ------------ ------------ NET INCOME (LOSS) ........................... $ (642,006) $ 780,375 ============ ============ Basic and diluted net income (loss) per common share ..... $ (.05) $ 0.06 ============ ============ Cash dividends per share declared ........... $ .00 $ .00 ============ ============ Weighted average shares outstanding ......... 12,610,179 12,717,311 The accompanying notes are an integral part of these statements. EQUITY OIL COMPANY Balance Sheet as of March 31, 1998, and December 31, 1997 March 31, December 31, ASSETS 1998 1997 ------------- ------------- (Unaudited) Current assets: Cash and cash equivalents .................. $ 324,981 $ 378,801 Accounts and advances receivable ........... 3,461,648 3,641,535 Income taxes receivable .................... 39,058 88,174 Deferred income taxes ...................... 18,934 18,934 Other current assets ....................... 611,195 514,713 ------------- ------------- 4,455,816 4,642,157 Property and equipment ....................... 114,331,942 113,371,891 Less accumulated depreciation, depletion and amortization .................. 66,031,078 64,846,514 ---------- ---------- 48,300,864 48,525,377 Other assets: Investment in Raven Ridge Pipeline Partnership ..................... 214,140 268,821 Other assets ............................... 105,284 105,284 ------------- ------------- 319,424 374,105 TOTAL ASSETS ................................. $ 53,076,104 $ 53,541,639 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ........................... $ 1,144,468 $ 1,327,120 Accrued liabilities ........................ 132,990 120,039 Federal, state and foreign income taxes payable ..................... 447,182 354,002 Accrued profit sharing ..................... -- 188,973 ------------- ------------- 1,724,640 1,990,134 Revolving credit facility .................... 14,778,830 13,978,830 Deferred income taxes ........................ 4,446,580 4,851,966 ------------- ------------- 19,225,410 18,830,796 Stockholders' Equity: Common stock ............................... 12,780,040 12,761,100 Paid in capital ............................ 3,696,118 3,667,707 Less cost of treasury stock ................ (528,302) (528,302) Retained earnings .......................... 16,178,198 16,820,204 ------------- ------------- 32,126,054 32,720,709 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................... $ 53,076,104 $ 53,541,639 ============= ============= The accompanying notes are an integral part of these statements. EQUITY OIL COMPANY Statement of Cash Flows For the three months ended March 31, 1998 and 1997 (Unaudited) 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) .......................... $ (642,006) $ 780,375 Adjustments Depreciation, depletion and amortization .......................... 1,250,000 1,100,000 Partnership distributions in excess of income ................... 54,681 41,408 Property dispositions ................... -- 18,440 Common stock issued for services .... 47,350 -- Change in other assets .............. -- 10,529 Equity loss in Symskaya ............. 83,498 85,725 Decrease in deferred income taxes ....... (405,386) (132,967) -------- -------- Net cash provided before changes in working capital items ................... 388,137 1,903,510 Increase (decrease) from changes in: Accounts and advances receivable ....... 179,887 (11,412) Other current assets ................... (96,482) 35,299 Accounts payable and accrued liabilities ......................... (169,701) (403,132) Income taxes receivable/payable ........ 142,296 319,648 Accrued profit sharing ................. (188,973) (131,100) ----------- ----------- Net cash provided by operating activities ................. 255,164 1,712,813 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures ....................... (1,025,486) (1,466,951) Advances to Symskaya Exploration ........... (83,498) (85,725) Sale of temporary cash investments ......... -- 49,802 --------- --------- Net cash used in investing activities ...... (1,108,984) (1,502,874) CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of treasury stock ................. -- (56,647) Proceeds from revolving credit facility .... 800,000 ----------- ----------- Net cash provided by (used in) financing activities ............... 800,000 (56,647) ----------- ----------- NET INCREASE (DECREASE) IN CASH .............. (53,820) 153,292 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ..................... 378,801 787,961 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD ........................... $ 324,981 $ 941,253 =========== =========== The accompanying notes are an integral part of these statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Interim Financial Statements The accompanying consolidated 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 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, 1998, and the results of its operations and its cash flows for the three month periods ended March 31, 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. The results for the three month period ended March 31, 1998 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. Basic and diluted earnings per share are the same. Note 3. Reclassifications Certain balances in the March 31, 1997 financial statements have been reclassified to conform with the current year presentation. These changes had no effect on the previously reported net income, total assets, liabilities or stockholders' equity. PART I ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS Severely depressed oil prices offset increases in oil and gas production, resulting in a 30% decline in total revenues for the first quarter of 1998. Total revenues for the period were $3,577,445, compared to $5,087,004 during the first quarter of 1997. As a result of the lower revenues, the Company recorded a net loss for the 1998 quarter of $(642,006), or $(.05) per share. This compares to net income for the first quarter of 1997 of $780,375, or $.06 per share. As a result of its acquisition and drilling activities in 1997, the Company recorded increases in both oil and gas production in 1998. Oil production of 170,000 barrels was up 6% from 161,000 barrels in 1997. Gas production increased from 502,000 Mcf produced in 1997 to 620,000 Mcf produced during the first quarter of 1998, an increase of 24%. Average prices received for oil during the first quarter of 1998 declined 35% from first quarter 1997 levels. Average crude prices received in 1998 were $13.25 per barrel, compared to $20.30 per barrel received during the same period of 1997. Gas prices also decreased during the first quarter of 1998, averaging $1.95 per Mcf, compared to $2.68 per Mcf received during the first quarter of 1997. Other income decreased by approximately $80,000 during the first quarter of 1998. Other income in 1997 included approximately $70,000 received from the sale of certain mineral rights. There was no similar transaction during the first quarter of 1998. Total expenses in 1998 increased 10% over 1997 first quarter levels. Higher production levels contributed to higher lease operating costs and depreciation, depletion, and amortization (DD&A) charges. While lease operating costs increased 7%, per BOE costs declined from $6.31 per BOE to $6.03 per BOE. DD&A per unit charges increased slightly from $4.50 per BOE to $4.57 per BOE in 1998. The decrease in exploration expense was primarily due to lower dry hole costs in 1998. During the first quarter of 1997, the Company participated in two dry holes. There were no dry holes drilled during 1998. The Company incurred 3D seismic charges of $409,743 in 1998 associated with its Sequoia project in the San Joaquin Basin of California. The initial well at Sequoia is scheduled to drill during the third quarter of 1998. The Company did not participate in any 3D seismic programs during the first quarter of 1997. General and administrative expenses decreased 22% from 1997 first quarter levels. The decrease was due to reduced compensation, insurance, and other administrative expenses. Higher interest costs in 1998 reflect the higher amount of debt outstanding under the Company's credit facility. During the first quarter of 1998, the Company participated in the drilling of 3 wells, all of which have been completed as producing wells. Included in the 1998 well count is an exploratory well drilled in California on the Company's 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 at a rate of 3 MMCFD. Equity operates and has a 50% working interest in the well and the Merlin project. Another exploratory well successfully completed in 1998 was the #24-15 Beaver Creek well in Golden Valley County, North Dakota. The well, in which Equity has a 32.5% working interest, was drilled to a total depth of 12,550 feet, and has been completed as an oil well in the Duperow formation at 10,856 - 10,878 feet. The well is now on production at an initial daily rate of 390 barrels of oil, 130 MCF of gas and 67 barrels of water per day. In addition to the Duperow, well logs and drill stem tests conducted during the drilling of the well indicate that as many as three other zones in the well may be productive. Westport Oil & Gas Company operates the well and holds the remaining working interest. The Company also drilled 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 per day. The Company has a 50% interest in the well. 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 projected to be drilled to a total depth of 11,500 feet. Costs associated with the Symskaya project are expected to be minimal during 1998, with expenses similar to those incurred in 1997. CAPITAL RESOURCES AND LIQUIDITY Cash and cash equivalents were $324,981 at March 31, 1998, down from $378,801 at year-end 1997. Working capital at March 31, 1998 was $2,731,176, compared to working capital of $2,652,023 at December 31, 1997. The net loss brought about by reduced oil prices also led to sharply reduced cash flows. For the first three months of 1998, net cash provided before working capital changes decreased by 80% over the same period of 1997. Investment in property and equipment for the first three months of 1997 totaled $1,025,486, a 30% decrease from the amount recorded during the corresponding three months of 1997. As a result of the severely depressed oil prices, and their negative effects on cash flows, the Company has reduced its 1998 capital budget to ensure that the bulk of its projects will be paid from discretionary cash flows. The Company has high-graded both exploratory and development projects based on their assumed risks and rewards, and balanced 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's revised budget includes 17 exploration projects and 7 development and exploitation projects. The bulk of the Company's drilling should occur during the third and fourth quarters of the year. During the three months ended March 31, 1997, the Company purchased 18,000 shares of treasury stock for a total price of $56,600. No treasury stock has been purchased during the first quarter of 1998. The Company borrowed $800,000 on its credit facility during the first quarter of 1998, primarily for working capital purposes. The Company did not draw down any funds on its line of credit during the first quarter of 1997. On March 30, 1998, the Company amended its credit agreement, increasing the current commitment from $15 million to $18 million. The Company believes that existing cash balances, cash flow, and funds available under the Company's credit facility will provide adequate resources to meet all of its current capital and exploration spending objectives for 1998. 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. 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 there unto duly authorized. EQUITY OIL COMPANY (Registrant) DATE: May 13, 1998 By /s/ Paul M. Dougan ---------------------- ------------------- Paul M. Dougan, President DATE: May 13, 1998 By /s/ Clay Newton ----------------------- ---------------- Clay Newton, Treasurer Principal Accounting Officer EX-27 2 FINANCIAL DATA SCHEDULE WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 (Replace this text with the legend) 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 324,981 0 3,461,648 0 0 4,455,816 114,331,942 66,031,078 53,076,104 1,724,640 0 0 0 12,780,040 0 53,076,104 3,500,460 3,577,445 0 0 4,220,877 0 279,534 (922,966) (280,960) (642,006) 0 0 0 (642,006) $(.05) $(.05)>
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