-----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, Tsr2TBQyg3sWdzVnpd+AX8LEZpRErZx8cYYEvF4k9QumOeouwIvFFLIcQCOBBPik ktzC3hgl47i/FiQUjmcWJg== 0000914760-98-000200.txt : 19981116 0000914760-98-000200.hdr.sgml : 19981116 ACCESSION NUMBER: 0000914760-98-000200 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981113 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: 98748215 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 September 30, 1998 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 November 6, 1998. 4,886,168 shares of common stock, par value $0.10 MAYNARD OIL COMPANY AND SUBSIDIARIES Index to Consolidated Financial Statements and Schedules Page Part I. Financial Information Consolidated Balance Sheets September 30, 1998 and December 31, 1997 Consolidated Statements of Operations Nine Months and Three Months ended September 30, 1998 and 1997 Consolidated Statements of Shareholders' Equity Nine Months ended September 30, 1998 Consolidated Statements of Cash Flows Nine Months ended September 30, 1998 and 1997 Notes to Consolidated Financial Statements Management's Discussion and Analysis of Financial Condition and Results of Operations Part II. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures MAYNARD OIL COMPANY AND SUBSIDIARIES Consolidated Balance Sheets
September 30 December 31, 1998 1997 (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents $ 23,849,003 $ 24,584,288 Accounts receivable, trade 3,121,210 3,267,255 Other current assets 611,986 546,238 Total current assets 27,582,199 28,397,781 Property and equipment, at cost: Oil and gas properties, successful efforts method 105,197,747 104,031,352 Other property and equipment 547,789 548,668 105,745,536 104,580,020 Less accumulated depreciation and amortization (59,878,121) (54,692,225) Net property and equipment 45,867,415 49,887,795 $ 73,449,614 $ 78,285,576 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 5,000,000 $ 5,000,000 Accounts payable 2,533,216 4,271,662 Accrued expenses 1,785,742 1,402,021 Income taxes payable 40,799 220,798 Total current liabilities 9,359,757 10,894,481 Deferred income taxes 2,832,000 2,632,000 Long-term debt 7,500,000 11,250,000 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; 4,886,772 and 4,889,450 shares issued and outstanding 488,677 488,945 Additional paid-in capital 18,831,138 18,831,138 Retained earnings 34,438,042 34,189,012 Total shareholders' equity 53,757,857 53,509,095 Commitments $ 73,449,614 $ 78,285,576 See accompanying Notes to Consolidated Financial Statements.
MAYNARD OIL COMPANY AND SUBSIDIARIES Consolidated Statements of Operations
Nine Months ended Three Months ended September 30, September 30, 1998 1997 1998 1997 Revenues: Oil and gas sales $12,694,374 $19,971,221 $ 3,871,029 $ 5,994,485 Interest and other 1,038,331 892,693 361,019 305,769 Gain (loss) on disposition of assets 6,390 204,524 (3,405) 147,232 13,739,095 21,068,438 4,228,643 6,447,486 Costs and expenses: Operating expenses 6,462,956 7,530,286 2,031,659 2,578,098 Exploration, dry holes and abandonments 56,554 447,821 11,244 57,061 General and administrative 700,135 824,936 161,452 163,530 Depreciation and amortization 5,391,277 5,268,165 1,775,015 1,775,900 Interest and other 766,498 1,008,656 230,800 324,533 13,377,420 15,079,864 4,210,170 4,899,122 Income before income taxes 361,675 5,988,574 18,473 1,548,364 Income tax expense (benefit) 85,000 1,587,500 (30,000) 117,500 Net income $ 276,675 $ 4,401,074 $ 48,473 $1,430,864 Weighted average number of common shares outstanding 4,888,652 4,889,450 4,887,274 4,889,450 Net income per common share $ .06 $ .90 $ .01 $ .29 See accompanying Notes to Consolidated Financial Statements.
MAYNARD OIL COMPANY AND SUBSIDIARIES Consolidated Statements of Shareholders' Equity Nine Months Ended September 30, 1998 (Unaudited)
Additional Common Stock Paid-in Capital Retained Shares Amount Amount Earnings Total Balance at December 31, 1997 4,889,450 $488,945 $18,831,138 $34,189,012 $53,509,095 Net income -- -- -- 276,675 276,675 Purchase and retirement of common stock (2,678) (268) -- (27,645) (27,913) Balance at September 30, 1998 4,886,772 $488,677 $18,831,138 $34,438,042 $53,757,857 See accompanying Notes to Consolidated Financial Statements.
MAYNARD OIL COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1998 1997 Cash flows from operating activities: Net income $ 276,675 $4,401,074 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 5,391,277 5,268,165 Deferred income taxes 200,000 305,000 Dry holes and abandonments 13,305 447,821 Current year costs of dry holes and abandonments (13,305) (447,821) (Gain) on disposition of assets (6,390) (204,524) (Increase) decrease in current assets: Accounts receivable 146,015 943,772 Other current assets (65,748) (389,390) Increase (decrease) in current liabilities: Accounts payable (1,738,446) (615,245) Accrued expenses 383,721 795,100 Income taxes payable (179,999) (2,891,242) Net cash provided by operating activities 4,407,105 7,612,710 Cash flows from investing activities: Proceeds from disposition of assets 28,337 276,089 Additions to property and equipment (1,392,814) (2,562,775) Net cash provided (used) by investing activities (1,364,477) (2,286,686) Cash flows from financing activities: Principal payments on long-term debt (3,750,000) (3,750,000) Purchase of common stock (27,913) -- Net cash provided (used) by financing activities (3,777,913) (3,750,000) Net increase (decrease) in cash and cash equivalents (735,285) 1,576,024 Cash and cash equivalents at beginning of year 24,584,288 21,817,447 Cash and cash equivalents at end of period $23,849,003 $23,393,471 See Accompanying Notes to Consolidated Financial Statements.
MAYNARD OIL COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 1998 1. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, consisting of all recurring adjustments, necessary to present fairly the Company's financial position as of September 30, 1998 and December 31, 1997, the results of operations for the nine months ended September 30, 1998 and 1997 and changes in cash and cash equivalents for the nine months ended September 30, 1998 and 1997. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements in the 1997 Annual Report to Shareholders. 2. Net income for the nine months ended September 30, 1998 is not necessarily indicative of the results of the operations of Maynard Oil Company and Subsidiaries for the year ending December 31, 1998, and is subject to audit adjustments at year-end. 3. Net income per common share is based on the weighted average number of shares outstanding in each period, which was 4,888,652 and 4,889,450 shares at September 30, 1998 and 1997, respectively. 4. The provision for income taxes consists of the following (thousands of dollars): Nine Months Ended Three Months Ended September 30, September 30, 1998 1997 1998 1997 Current $ (115) $1,283 $(180) $ 68 Deferred 200 305 150 50 $ 85 $1,588 $ (30) $ 118 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS At December 31,1997, the weighted average product prices of $15.72 per barrel for crude oil and $2.05 per thousand cubic feet (mcf) for natural gas were applied to the estimates of recoverable hydrocarbon reserves to arrive at future net revenues that the Company might ultimately receive. At that time, the Company recognized an impairment loss on certain properties whose investment would not be recoverable under the above pricing scenarios in accordance with Statement of Financial Accounting Standards No. 121 ("SFAS 121"), Accounting for the Impairment of Long Lived Assets and for Long-Lived Assets to be Disposed of. During the first nine months of 1998, the Company's hydrocarbon sales averaged $12.93 per barrel for crude oil and $2.17 per mcf for natural gas. NYMEX crude oil pricing estimates for December, 1998 contracts vary between $13.84 and $14.20 per barrel, and Henry Hub estimates for December, 1998 natural gas contracts vary between $2.44 and $2.57 per mcf. The Company believes it has made adequate provision for depreciation and amortization expense in its September 30, 1998 financial statements, but should crude oil prices remain at current levels, an additional impairment loss could be recognized in the fourth quarter. Nine Months Ended September 30, 1998 Compared to Nine Months Ended September 30, 1997 The Company reported net income of $246,675, or six cents per share, on revenues of $13,739,095 for the nine months ended September 30, 1998 compared with net income of $4,401,074, or ninety cents per share, on revenues of $21,068,438 for the same period a year ago. Earnings for the 1998 period were adversely affected by the sharp reduction in oil prices, and to a lesser extent, by production declines in the volumes of oil and gas sold. Gas volumes dropped almost 16% from a year ago, while oil volumes declined almost 7% over the same period. Crude oil prices plunged $6.71 per barrel between the two nine month periods, and gas prices declined thirty-three cents per mcf. Thus, oil and gas revenues were $7,276,847 less than nine months a year ago, a 36% reduction. Operating expenses reflected a decrease of $1,067,330, primarily attributable to lower severance taxes. Exploration costs, which include dry holes and abandonments, dropped $391,267 between the two nine month periods. During the 1997 nine months, the Company participated in two seismic shoots and drilled an exploratory dry hole, but during the current period the exploratory costs incurred were to complete earlier projects. General and administrative expense declined $124,801, almost 15%, due to increased overhead billings on Company operated properties, which are recorded as reductions to general and administrative expense. Interest expense decreased over 24% between the prior period and the current nine months due to scheduled debt payments. Quarter Ended September 30, 1998 Compared with Quarter Ended September 30, 1997 For the quarter ended September 30, 1998, the Company earned $48,473, or one cent per share, compared with net income of $1,430,864, or twenty- nine cents per share, for the same quarter a year ago. Results for the current quarter were, once again, driven by lower oil and gas prices. Revenues from sales were $2,123,456 below the same quarter a year ago. Liquidity and Capital Resources At September 30, 1998, the Company s primary source of liquidity was $23,849,003 in cash and marketable securities. Historically, the cash generated by operating activities and proceeds from bank borrowings have been utilized to finance the growth of the Company. The Company anticipates utilizing the same strategy to finance future property acquisitions and planned development and exploratory work. Year 2000 Issues The "Year 2000 Issue" is the result of computer programs that were written using two digits rather than four to define the applicable year. Any systems developed with this methodology could fail to operate or fail to produce correct results if "00" is interpreted to mean 1900, rather than 2000. In response to the potential impact of the Year 2000 issue on the Company's business and operations, certain Company executives have been appointed to serve on its Year 2000 Readiness Team. This group will inventory and assess the readiness for Year 2000 compliance by the Company and its vendors, suppliers, customers and other significant business relationships. In 1990, as part of a business modernization program intended to reduce cycle time and improve profitability, the Company purchased a new accounting package which runs on PC and LAN platforms. The software vendor has provided written assurance that dating changes have been throughly tested and were found to be functioning correctly. The Company will conduct further testing of this system, along with other ancillary financial systems, during the second quarter of 1999 and anticipates completion by September 30, 1999. The costs of these efforts have been funded by cash flow from operations. The Company is in the data gathering phase with regard to non- financial software and embedded chip technology. Further activity in this area involves implementing software upgrades to selected equipment and verifying Year 2000 compliance. The Company anticipates completion of these activities by the end of the third quarter of 1999. Additionally, the Company is in the process of identifying and contacting critical suppliers, vendors, and customers to determine the extent to which the Company's interface systems are vulnerable to those third parties' failure to remedy their own Year 2000 issues. It is expected that full identification will be completed by June 30, 1999. To the extent that responses regarding Year 2000 readiness are unsatisfactory, the Company intends to change external business relationships to those who have demonstrated Year 2000 readiness. Given the complexity of the Year 2000 issue, there can be no assurance that the Company will be able to address these problems without costs and uncertainties that might affect future financial results or cause reported financial information not to necessarily be indicative of future operating results or future financial condition. PART II. OTHER INFORMATION ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K: None 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. 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: November 13, 1998 EX-27 2
5 9-MOS DEC-31-1998 SEP-30-1998 23,849 0 3,171 50 286 27,582 105,746 59,878 73,450 9,360 0 0 0 489 53,269 73,450 12,694 13,739 6,463 13,377 0 0 766 362 85 277 0 0 0 277 0.06 0.06
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