-----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, T3E1TPG0QXvXCkml8e9+IHtBwRppGtYIrbQ8XaOJyDE8Mo40UdbhxtK/+jarbJEj RlDLSOB/oVgwJtMgeBj8CQ== 0000914760-00-000130.txt : 20000516 0000914760-00-000130.hdr.sgml : 20000516 ACCESSION NUMBER: 0000914760-00-000130 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MAYNARD OIL CO CENTRAL INDEX KEY: 0000063528 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 751362284 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05704 FILM NUMBER: 631959 BUSINESS ADDRESS: STREET 1: 8080 N CENTRAL EXPWY STE 660 CITY: DALLAS STATE: TX ZIP: 75206 BUSINESS PHONE: 2148918880 MAIL ADDRESS: STREET 1: 8080 N CENTRAL EXPWY STE 660 CITY: DALLAS STATE: TX ZIP: 75206 FORMER COMPANY: FORMER CONFORMED NAME: HOMA OIL & GAS CO DATE OF NAME CHANGE: 19710902 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ending March 31, 2000 Commission File #0-5704 ------------------ --------- MAYNARD OIL COMPANY - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 75-1362284 - -------------------------------------------------------------------------------- (State or other jurisdic- (IRS Employer tion of incorporation) Identification No.) 8080 N. Central Expressway, Suite 660, Dallas, Texas 75206 - -------------------------------------------------------------------------------- Registrant's telephone number, including area code: (214)891-8880 ------------------------- 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ------ ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of May 10, 2000. 4,880,859 shares of common stock, par value $0.10 - -------------------------------------------------------------------------------- MAYNARD OIL COMPANY AND SUBSIDIARY Index to Consolidated Financial Statements and Schedules Page ---- Part I. Financial Information Consolidated Balance Sheets March 31, 2000 and December 31, 1999 3 Consolidated Statements of Operations Three Months ended March 31, 2000 and 1999 4 Consolidated Statement of Shareholders' Equity Three Months ended March 31, 2000 5 Consolidated Statements of Cash Flows Three Months ended March 31, 2000 and 1999 6 Notes to Consolidated Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K 14 Signatures 15 2 MAYNARD OIL COMPANY AND SUBSIDIARY Consolidated Balance Sheets (Unaudited)
March 31, December 31, --------- ------------ 2000 1999 ---- ---- ASSETS Current assets: Cash and cash equivalents $ 16,122,857 $ 12,910,321 Accounts receivable, trade 6,334,309 6,029,188 Income taxes receivable 750,000 750,000 Other current assets 896,376 836,554 ----------- ----------- Total current assets 24,103,542 20,526,063 ----------- ----------- Property and equipment, at cost: Oil and gas properties, successful efforts method 154,986,054 151,655,045 Other property and equipment 448,691 337,546 ----------- ----------- 155,434,745 151,992,591 Less accumulated depreciation and amortization (80,249,249) (78,158,395) ----------- ----------- Net property and equipment 75,185,496 73,834,196 ----------- ----------- Deferred income taxes 123,000 348,000 ----------- ----------- $ 99,412,038 $ 94,708,259 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 7,650,000 $ 5,737,500 Accounts payable 4,955,940 4,249,724 Accrued expenses 2,396,668 1,257,618 Income taxes payable 1,343,212 960,212 ---------- ----------- Total current liabilities 16,345,820 12,205,054 ---------- ----------- Long-term debt 30,600,000 32,512,500 Shareholders' equity: Preferred stock of $.50 par value. Authorized 1,000,000 shares; none issued -- -- Common stock of $.10 par value. Authorized 20,000,000 shares; 4,880,859 and 4,880,887 shares issued and outstanding 488,086 488,089 Additional paid-in capital 18,831,138 18,831,138 Retained earnings 33,146,994 30,671,478 ----------- ----------- Total shareholders' equity 52,466,218 49,990,705 ----------- ----------- Contingencies and Commitments $ 99,412,038 $ 94,708,259 =========== =========== See accompanying Notes to Consolidated Financial Statements.
3 MAYNARD OIL COMPANY AND SUBSIDIARY Consolidated Statements of Operations (Unaudited)
Three Months ended March 31, ---------------------------- 2000 1999 ---- ---- Revenues: Oil and gas sales and royalties $10,792,820 $3,435,148 Interest and other 227,326 246,968 ---------- ---------- 11,020,146 3,682,116 ---------- ---------- Costs and expenses: Operating expenses 3,089,664 1,511,147 Exploration, dry holes and abandonments 7,841 8,178 General and administrative 1,115,421 571,158 Depreciation and amortization 2,355,805 1,537,915 Interest and other 750,551 171,280 ---------- ---------- 7,319,282 3,799,678 ---------- ---------- Income (loss) before income taxes 3,700,864 (117,562) ---------- ---------- Income tax expense (benefit) 1,225,000 (40,000) ---------- ---------- Net income (loss) $2,475,864 $ (77,562) ========== ========== Weighted average number of common shares outstanding 4,880,879 4,884,082 ========== ========== Net income (loss) per common share $ .51 $ (.02) ========== ========== (basic and diluted) See Accompanying Notes to Consolidated Financial Statements
4 MAYNARD OIL COMPANY AND SUBSIDIARY Consolidated Statement of Shareholders' Equity Three Months Ended March 31, 2000 (Unaudited)
Additional Common Stock Paid-in ------------ Capital Retained Shares Amount Amount Earnings Total ------ ------ ------ -------- ----- Balance at December 31,1999 4,880,887 $488,089 $18,831,138 $30,671,478 $49,990,705 Net income --- --- --- 2,475,864 2,475,864 Purchase and retirement of common stock (28) (3) -- (348) (351) --------- ------- ---------- ---------- ---------- Balance at March 31, 2000 4,880,859 $488,086 $18 831,138 $33,146,994 $52,466,218 ========= ======= ========== ========== ========== See accompanying Notes to Consolidated Financial Statements.
5 MAYNARD OIL COMPANY AND SUBSIDIARY Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended March 31, ---------------------------- 2000 1999 ---- ---- Cash flows from operating activities: Net income (loss) $ 2,475,864 $ (77,562) Adjustments to reconcile net income (loss)to net cash provided by operating activities: Depreciation and amortization 2,355,805 1,537,915 Deferred income taxes 225,000 (30,000) Exploration, dry holes and abandonments 6,777 4,905 Current year costs of dry holes and abandonments (1,275) (1,900) (Increase) decrease in current assets: Accounts receivable (305,121) 184,988 Income taxes receivable -- (10,000) Other current assets (59,822) (13,788) Increase (decrease) in current liabilities: Accounts payable 706,216 (767,387) Accrued expenses 1,139,050 345,688 Income taxes payable 383,000 -- ------------ ------------ Net cash provided by operating activities 6,925,494 1,172,859 ------------ ------------ Cash flows from investing activities: Additions to property and equipment (3,712,607) (100,313) ------------ ------------ Net cash used by investing activities (3,712,607) (100,313) ------------ ------------ Cash flows from financing activities: Principal payments on long-term debt -- (1,250,000) Purchase of common stock (351) (9,551) ------------ ------------ Net cash used by financing activities (351) (1,259,551) ------------ ------------ Net increase (decrease) in cash and cash equivalents 3,212,536 (187,005) Cash and cash equivalents at beginning of year 12,910,321 20,889,742 ------------ ------------ Cash and cash equivalents at end of period $ 16,122,857 $ 20,702,737 ============ ============ See Accompanying Notes to Consolidated Financial Statements.
6 MAYNARD OIL COMPANY AND SUBSIDIARY Notes to Consolidated Financial Statements March 31, 2000 Note l Unaudited Financial Statements The accompanying consolidated financial statements of Maynard Oil Company (the "Company") have been prepared in accordance with generally accepted accounting principals, pursuant to the rules and regulations of the Securities and Exchange Commission included in the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial information included herein is unaudited but, in the opinion of management, contains all adjustments, consisting of all recurring adjustments, necessary to present fairly the Company's financial position as of March 31, 2000 and the results of operations and cash flows for the three months ended March 31, 2000. The December 31, 1999 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements in the 1999 Annual Report to Shareholders. Certain reclassifications of prior period statements have been made to conform with the 2000 presentation. Note 2 Earnings Per Share Net income per common share is based on the weighted average number of shares outstanding in each period, which was 4,880,879 and 4,884,082 shares at March 31, 2000 and 1999, respectively. As of March 31, 2000 and 1999, the Company had no potentially dilutive common shares, and therefore, basic and diluted earnings per common share were the same. Note 3 Risk Management During 1999, the Company entered into a derivative financial instrument whereby the Company has hedged 2,500 barrels of daily production from November 1, 1999 through June 30, 2000 with a ceiling price of $23.90/bbl and a floor price of $14.00/bbl. The contracts call for a monthly settlement such that if the average WTI for the month is greater than $23.90/bbl, Maynard remits to the counterparty the excess times the number of barrels hedged during the month. Conversely, if the average WTI for the month is less than $14.00/bbl, the counterparty pays Maynard for the difference times the number of barrels hedged during the month. If the average WTI for the month falls between $14.00/bbl and $23.90/bbl, no 7 settlement is made. As a result of this arrangement, the Company's oil and gas revenues were reduced by approximately $1,100,000 during the quarter ended March 31, 2000. A second derivative instrument was entered into effective March 1, 2000 through June 30, 2000 which mirrored the first except the ceiling and floor amounts were $28.30 and $25.00 per barrel, respectively. This second instrument was cancelled by the Company effective April 1, 2000. As a result of this arrangement, the Company's first quarter 2000 oil and gas revenues were reduced by approximately $146,000. Note 4 Income Taxes The provision for income taxes consists of the following (thousands of dollars): Three Months Ended March 31 --------------------------------- 2000 1999 ---- ---- Federal: Current (benefit) $1,000 $ (10) Deferred 225 (30) ----- ---- $1,225 $ (40) ===== ==== Note 5 Commitments and Contingencies The Company is the defendant in certain non-environmental litigation arising from operations in the normal course of business. While it is not feasible to determine the outcome of these actions, it is the Company's opinion that the ultimate outcome of the litigation will not have a material adverse effect on the financial position or results of the operations of the Company. All of the Company's operations are generally subject to Federal, state and local environmental regulations. To the best of management's knowledge, the Company is in substantial compliance with such laws and regulations. Note 6 Subsequent Events Effective April 1, 2000, the Company purchased interests in 8 producing wells in Garza, Dawson, and Ector counties, Texas at auction for $3.8 million. The Company's existing cash resources were utilized to fund this acquisition. During the second quarter of 2000, the Company sold certain producing properties (which had originally been acquired in the Questar purchase effective November 1, 1999) at auction for approximately $596,000 resulting in a loss of approximately $150,000. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - ------------------------------------------------------------------------------- OF OPERATIONS - ------------- Quarter Ended March 31, 2000 Compared to Quarter Ended March 31, 1999 - --------------------------------------------------------------------- For the first quarter of 2000, the Company earned fifty-one cents per share on revenues of $11,020,146 compared to a loss of two cents per share during the first quarter of 1999 on revenues of $3,682,116. The first quarter loss in 1999 was primarily related to lower oil and gas pricing, which did not begin to make a recovery until the second quarter of 1999. However, this pricing recovery continued through the balance of 1999 and the first three months of 2000. Thus, product pricing improvement, coupled with the operating results derived from producing properties acquired last year, form the basis for the current quarter earnings. Revenues - -------- Oil and gas revenues rose $7,357,672 between the two quarterly periods, or over 200%, due to both pricing increases and higher volumes resulting from 1999's property acquisitions. Oil and gas prices were $12.56 per barrel and eighty-three cents per thousand cubic feet of gas (mcf) higher than the same quarter a year ago. Oil volumes increased in excess of 47% and gas volumes rose approximately 131% over this same period. Costs and Expenses - ------------------ On a net equivalent barrel basis (NEB), lease operating expenses were $1.18 per NEB higher than the first quarter of 1999 resulting from additional workover expenses and higher severance taxes which relate proportionally to increased oil and gas revenues. 9 The general and administrative expense category reflects an increase of $544,263, primarily the result of phantom stock adjustments. During the current quarter, phantom stock expense was charged $525,250 compared with $107,438 during the previous year's quarter, an increase of $417,812. Phantom stock charges and credits arise as a result of stock price fluctuations. Closing stock prices at March 31, 2000 and December 31, 1999 were $15.25 and $9.75 per share, respectively. At March 31, 1999 and December 31, 1998, closing stock prices were $8.625 and $7.50 per share. The balance of the G&A category increase is the result of additional staffing to properly manage the properties purchased in 1999. Depreciation and amortization expense rose $817,980, or 53%, between the first quarters of 2000 and 1999 due to the acquisition of producing properties last year. Interest expense also increased $579,482 between the two quarterly periods because of additional bank debt incurred in connection with the properties acquired from Questar Exploration and Production Company in November, 1999. Liquidity and Capital Resources - ------------------------------- Cash and cash equivalents totaled $16.1 million and $12.9 million at March 31, 2000 and December 31, 1999, respectively. Working capital was $7.8 million at March 31, 2000 compared with $8.3 million at December 31, 1999. 10 The following summary table reflects cash flows for the three months ended March 31, 2000 (in thousands): Net cash provided by operating activities: $6,925 Net cash used by investing activities: 3,713 Net cash used by financing activities: -- At March 31, 2000, the Company's total debt was $38,250,000. The Company believes it has sufficient cash being generated from operating activities plus cash currently in the bank, or additional borrowing capacity, to fund its planned drilling activities and to make additional property acquisitions. Recent Accounting Pronouncements - -------------------------------- In June 1998, the Financial Accounting Standards Board issued Statement No. 133 ("SFAS 133"), "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires enterprises to recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. The requisite accounting for changes in the fair value of a derivative will depend on the intended use of the derivative and the resulting designation. The Company must adopt SFAS 133 effective January 1, 2001. Based on the Company's outstanding derivative contracts, the Company believes that the impact of adopting this standard would not have a material adverse affect on the Company's operations or consolidated financial condition. However, no assurances can be given with regard to 11 the level of the Company's derivative activities at the time SFAS 133 is adopted or the resulting effect on the Company's operations or consolidated financial condition. Certain Factors that Could Affect Future Operations - --------------------------------------------------- Certain information contained in this report, as well as written and oral statements made or incorporated by reference from time to time by the Company and its representatives in other reports, filings with the Securities and Exchange Commission, press releases, conferences or otherwise, may be deemed to be 'forward-looking statements' within the meaning of Section 21E of the Securities and Exchange Act of 1934 and are subject to the 'Safe Harbor' provisions of that section. Forward-looking statements include statements concerning the Company's and management's plans, objectives, goals, strategies and future operations and performance and the assumptions underlying such forward-looking statements. These statements are based on current expectations and involve a number of risks and uncertainties, including those described in the context of such forward-looking statements. Actual results and developments could differ materially from those expressed in or implied by such statements. Such factors include, among others, the volatility of oil and gas prices, the Company's drilling results, the Company's ability to compete in the acquisition of producing property, the Company's ability to replace reserves, the availability of capital resources, the reliance upon estimates of proved reserves, operating hazards, uninsured risks, competition, government regulation, and other factors referenced in this Form 10-Q. 12 ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Commodity Risk - -------------- The Company's primary commodity market risk exposure is to changes in the pricing applicable to its oil production, which is normally priced with reference to a defined benchmark, such as light, sweet crude oil traded on the New York Mercantile Exchange (WTI). Actual prices received vary from the benchmark depending on quality and location differentials. The markets for crude oil historically have been volatile and are likely to continue to be volatile in the future. From time to time, the Company enters into financial market transactions, including collars, with creditworthy counterparties, primarily to reduce the risk associated with the pricing of a portion of the oil and natural gas that it sells. The policy is structured to underpin the Company's planned revenues and results of operations. During 1999, the Company entered into a derivative financial instrument whereby the Company has hedged 2,500 barrels of daily production from November 1, 1999 through June 30, 2000 with a ceiling price of $23.90/bbl and a floor price of $14.00/bbl. The contracts call for a monthly settlement such that if the average WTI for the month is greater than $23.90/bbl, the Company remits to the counterparty the excess times the number of barrels hedged during the month. Conversely, if the average WTI for the month is less than $14.00/bbl, the counterparty pays the Company for the difference times the number of barrels hedged during the month. If the average WTI for the month falls between $14.00/bbl and $23.90/bbl, no settlement is made. As a result of this arrangement, the 13 Company's oil and gas revenues were reduced by approximately $1,100,000 during the quarter ended March 31, 2000. A second derivative instrument was entered into effective March 1, 2000 through June 30, 2000 which mirrored the first, except the ceiling and floor amounts were $28.30 and $25.00 per barrel, respectively. This second instrument was cancelled by the Company effective April 1, 2000. As a result of this arrangement, the Company's first quarter 2000 oil and gas revenues were reduced approximately $146,000. PART II. OTHER INFORMATION ITEM 6: Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter. 14 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MAYNARD OIL COMPANY By: /s/ Glenn R. Moore ---------------------- Glenn R. Moore President BY: /s/ Kenneth W. Hatcher -------------------------- Kenneth W. Hatcher Vice President of Finance Dated: May 12, 2000 15 EX-27 2 FDS --
5 1,000 3-MOS DEC-31-2000 MAR-31-2000 16,123 0 6,387 53 587 24,104 155,435 80,249 99,412 16,346 0 0 0 488 51,978 99,412 10,793 11,020 3,089 7,319 0 0 751 3,701 1,225 2,476 0 0 0 2,476 0.51 0.51
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