-----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, B+4y/oGkK8x1+uJNbFhpjD/x94dIjYpWrE5sNCFKIW1rAF/3CNvfS73jeh6Pyo+T Srp2QvsACmpvPN/AjVD9Nw== 0000914760-99-000157.txt : 19990817 0000914760-99-000157.hdr.sgml : 19990817 ACCESSION NUMBER: 0000914760-99-000157 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 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: 99691295 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 Ended June 30, 1999 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 August 6, 1999. 4,883,473 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 Item 1. Financial Statements Consolidated Balance Sheets June 30, 1999 and December 31, 1998 3 Consolidated Statements of Operations Six Months and Three Months ended June 30, 1999 and 1998 4 Consolidated Statements of Shareholders' Equity Six Months ended June 30, 1999 5 Consolidated Statements of Cash Flows Six Months ended June 30, 1999 and 1998 6 Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk 14 Part II. Other Information Item 1. Legal Proceedings 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 6. Exhibit and Reports on Form 8-K 15 Signatures 16 MAYNARD OIL COMPANY AND SUBSIDIARY Consolidated Balance Sheets June 30, December 31, -------- ------------ 1999 1998 ---- ---- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 21,905,232 $ 20,889,742 Accounts receivable, trade 2,638,456 2,568,807 Income taxes receivable 977,587 977,587 Other current assets 410,642 478,680 ------------- ------------- Total current assets 25,931,917 24,914,816 ------------- ------------- Property and equipment, at cost: Oil and gas properties, successful efforts method 108,031,841 107,292,314 Other property and equipment 460,475 460,475 ------------- ------------- 108,492,316 107,752,789 Less accumulated depreciation and amortization (75,855,398) (72,985,138) ------------- ------------- Net property and equipment 32,636,918 34,767,651 Deferred income taxes 681,000 681,000 ------------- ------------- $ 59,249,835 $ 60,363,467 ============= ============= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current installments of long-term debt $ 5,000,000 $ 5,000,000 Accounts payable 2,315,182 2,583,357 Accrued expenses 1,407,373 842,368 Income taxes payable 177,799 40,799 ------------- ------------- Total current liabilities 8,900,354 8,466,524 ------------- ------------- Deferred income taxes 130,000 -- Long-term debt 3,750,000 6,250,000 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; 4,883,473 and 4,884,597 shares issued and outstanding 488,347 488,460 Additional paid-in capital 18,831,138 18,831,138 Retained earnings 27,149,996 26,327,345 ------------- ------------- Total shareholders' equity 46,469,481 45,646,943 ------------- ------------- Contingencies and commitments $ 59,249,835 $ 60,363,467 ============= ============= See accompanying Notes to Consolidated Financial Statements. MAYNARD OIL COMPANY AND SUBSIDIARY Consolidated Statements of Operations (Unaudited)
Six Months ended Three Months ended June 30, June 30, ---------------- ------------------ 1999 1998 1999 1998 ---- ---- ---- ---- Revenues: Oil and gas sales $7,995,443 $8,823,345 $4,560,295 $4,133,471 Interest and other 493,831 677,312 246,863 339,346 Gain on disposition of assets 402,781 9,795 402,781 7,375 ---------- ---------- ---------- ---------- 8,892,055 9,510,452 5,209,939 4,480,192 ---------- ---------- ---------- ---------- Costs and expenses: Operating expenses 3,695,242 4,431,297 1,902,869 2,114,413 Exploration, dry holes and abandonments 106,177 45,310 97,999 29,359 General and administrative, net 658,657 538,683 368,725 218,770 Depreciation and amortization 2,976,279 3,616,262 1,438,364 1,824,304 Interest and other 323,353 535,698 152,073 262,979 ---------- ---------- ---------- ---------- 7,759,708 9,167,250 3,960,030 4,449,825 ---------- ---------- ---------- ---------- Income before income taxes 1,132,347 343,202 1,249,909 30,367 Income tax expense 300,000 115,000 340,000 10,000 ---------- ---------- ---------- ---------- Net income $ 832,347 $ 228,202 $ 909,909 $ 20,367 ========== ========== ========== ========== Weighted average number of common shares outstanding 4,883,784 4,889,352 4,883,488 4,889,262 ========== ========== ========== ========== Net income per common share $ .17 $ .047 $ .19 $ .004 ========== ========== ========== ========== (basic and diluted) See accompanying Notes to Consolidated Financial Statements
MAYNARD OIL COMPANY AND SUBSIDIARY Consolidated Statements of Shareholders' Equity Six Months Ended June 30, 1999 (Unaudited)
Additional Common Stock Paid-in ------------ Capital Retained Shares Amount Amount Earnings Total ------ ------ ------ -------- ----- Balance at December 31, 1998 4,884,597 $488,460 $18,831,138 $26,327,345 $45,646,943 Net income -- -- -- 832,347 832,347 Purchase of common stock (1,124) (113) -- (9,696) (9,809) --------- ------- ---------- ---------- ---------- Balance at June 30, 1999 4,883,473 $488,347 $18,831,138 $27,149,996 $46,469,481 ========= ======= ========== ========== ========== See accompanying Notes to Consolidated Financial Statements.
MAYNARD OIL COMPANY AND SUBSIDIARY Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, ------------------------- 1999 1998 ---- ---- Cash flows from operating activities: Net income $ 832,347 $ 228,202 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,976,279 3,616,262 Deferred income taxes 130,000 50,000 Dry holes and abandonments 101,279 8,554 Current year costs of dry holes and abandonments (8,063) (8,554) (Gain) on disposition of assets (402,781) (9,795) (Increase) decrease in current assets: Accounts receivable (69,649) 357,018 Prepaid expenses and other current assets 68,038 58,115 Increase (decrease) in current liabilities: Accounts payable (268,175) (1,149,081) Accrued expenses 565,005 161,145 Income taxes payable 137,000 (179,999) ---------- ---------- Net cash provided by operating activities 4,061,280 3,131,867 ---------- ---------- Cash flows from investing activities: Proceeds from disposition of assets 539,066 19,334 Additions to property and equipment (1,075,047) (676,161) ---------- ---------- Net cash used by investing activities (535,981) (656,827) ---------- ---------- Cash flows from financing activities: Purchase of common stock (9,809) (8,777) Principal payments on long-term debt (2,500,000) (2,500,000) ---------- ---------- Net cash used by financing activities (2,509,809) (2,508,777) ---------- ---------- Net increase (decrease) in cash and cash equivalents 1,015,490 (33,737) Cash and cash equivalents at beginning of year 20,889,742 24,584,288 ---------- ---------- Cash and cash equivalents at end of period $21,905,232 $24,550,551 ========== ========== See Accompanying Notes to Consolidated Financial Statements.
MAYNARD OIL COMPANY AND SUBSIDIARY Notes to Consolidated Financial Statements June 30, 1999 Note 1 Unaudited Financial Statements The accompanying consolidated financial statements of Maynard Oil Company (the 'Company') have been prepared in accordance with generally accepted accounting principles, 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 June 30, 1999 and December 31, 1998, the results of operations for the six months ended June 30, 1999 and 1998 and changes in cash and cash equivalents for the six months ended June 30, 1999 and 1998. The December 31, 1998 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 1998 Annual Report to Shareholders. 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 4,883,784 and 4,889,352 shares at June 30, 1999 and 1998, respectively. As of June 30, 1999 and 1998, the Company had no potentially dilutive common shares, and therefore, basic and diluted earnings per common share were the same. Note 3 Income Taxes The provision for income taxes consists of the following (thousands of dollars): Six Months Ended Three Months Ended June 30, June 30, -------- ------------------ 1999 1998 1999 1998 ---- ---- ---- ---- Federal: Current (benefit) $ 170 $ 65 $ 180 $ (15) Deferred 130 50 160 25 ---- ----- ---- ---- $ 300 $ 115 $ 340 $ 10 ==== ==== ==== === Note 4 Asset Dispositions During the second quarter of 1999, the Company sold certain producing properties for approximately $540,000, resulting in a gain of approximately $400,000. 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 Event Effective August 1, 1999, the Company purchased interests in 15 producing wells in Hardeman, Webb, and Duval counties, Texas from Phillips Petroleum Company for $10.4 million. These funds were provided from the Company's cash resources. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS - -------------------------------------------------------------------------------- OF OPERATIONS - ------------- Recent Activities The Company has mentioned in its communications with shareholders that its strategy to build oil and gas reserves and shareholder value is to acquire producing properties. On July 21, 1999, the Company was successful in purchasing interests in fifteen producing wells located in three counties in Texas (Hardeman, Webb and Duval Counties) for cash consideration of $10,400,000. The Company assumed ownership effective August 1, 1999, and estimates that this acquisition will add 215 net barrels of oil and 4,000 net mcf of gas to Maynard's daily production. Results of Operations Quarter Ended June 30, 1999 Compared with Quarter Ended June 30, 1998 - --------------------------------------------------------------------- For the quarter ended June 30, 1999, the Company earned $909,909, or nineteen cents per share, on revenues of $5,209,939, compared with net income of $20,367, or less than one-half cent per share, on revenues of $4,480,192, for the same quarter a year ago. The current quarter's results were favorably affected by increased revenues and lower costs and expenses. Revenues Oil and gas sales for the second quarter of 1999 totaled $4,560,295, a 10% increase from the second quarter of 1998, due to higher quarterly oil prices ($16.00/bbl during the second quarter of 1999 compared to $12.32/bbl during the second quarter of 1998). This increase in prices was partially offset by a decrease in production for the quarter from approximately 330,000 net equivalent barrels (NEB) in the second quarter of 1998 to approximately 300,000 net equivalent barrels (NEB) in the second quarter of 1999. In addition, second quarter of 1999 revenues were bolstered by a $402,781 gain from non-recurring property sales Costs and Expenses Also contributing to the current quarter's increase in earnings were lower lease operating expenses which were 10% lower than the same quarter a year ago due to cost saving measures implemented in field operations and reduced depreciation and amortization expense, which declined to $4.79 per NEB during the current quarter from $5.53 per NEB during the previous year because of normal production volume declines. Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998 - ------------------------------------------------------------------------- The Company reported net income of $832,347, or seventeen cents per share, on revenues of $8,892,055 for the six months ended June 30, 1999 compared with net income of $228,202, or five cents per share, on revenues of $9,510,452 for the same period a year ago. Earnings for the 1999 period were favorably affected by a fifteen percent reduction in costs and expenses which offset a seven percent decline in revenues. Revenues Oil and gas revenues fell $827,902 between the two six month periods, or slightly over 9%, primarily because of volume declines from normal depletion; oil volumes were down approximately 10% and gas volumes 4%. Interest income also dropped $183,481 due to the utilization of cash for capital expenditures and normal debt repayments. However, revenue levels were aided during the current six month period by non-recurring property sales which resulted in a gain in excess of $400,000. Costs and Expenses Operating expenses reflected the largest expense category decrease of $736,055, or a reduction of 16% due primarily to cost reduction measures implemented by the Company, and to a lesser extent, lower severance taxes resulting from declines in oil and gas sales. On a net equivalent barrel basis (NEB), operating expenses declined from $6.71 per NEB during the prior six months to $6.15 per NEB in the current six months. Exploration costs rose $60,867 between the two six month periods due primarily to an exploratory dry hole being drilled. Because the Company follows the successful efforts method of accounting, the Company's results of operations may be adversely affected during any accounting period in which seismic costs, exploratory dry hole costs, and unproved property costs are expensed. General and administrative (G&A) expenses increased $119,974, or slightly in excess of 22% to reflect higher phantom stock expense (which relates to fluctuations in the Company's common stock price). This rise in G&A expense was offset by increased overhead billings on Company operated properties, which are recorded as reductions to G&A expenses. Additionally, depreciation and amortization expense declined almost 10% during the current six months (from $5.48 per NEB for the 1998 period to $4.96 per NEB currently) and interest expense decreased $212,345 in the 1999 period reflecting lower outstanding bank debt due to scheduled loan repayments. Liquidity and Capital Resources Cash and cash equivalents totaled $21.9 million and $20.9 million at June 30, 1999, and December 31, 1998, respectively. Working capital was $17 million at June 30, 1999, compared with $16.4 million at December 31, 1998. The following summary table reflects cash flows for the Company for the six months ended June 30, 1999 (in thousands): Net cash provided by operating activities $4,061 Net cash used by investing activities $ 536 Net cash used by financing activities $2,510 At June 30, 1999, the Company's total debt was $8,750,000. The Company believes that it has sufficient cash being generated from operating activities plus cash currently in the bank, or additional borrowing capacity, to fund its planned development and exploratory work or to make additional property acquisitions. Year 2000 Issues The Company's Year 2000 Readiness Team is continuing to monitor and evaluate information obtained from vendors, suppliers, customers, and other significant business relationships with regard to the potential impact of the century change on the Company's operations. To date, the Company has not received information suggesting the Company is vulnerable to potential Year 2000 failures by these parties. Testing of the Company's financial systems are continuing and should be completed by September 30, 1999. The costs associated with assessing Year 2000 readiness and related systems upgrades have been funded from cash flow from operations and have not been material. 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. 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. ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS - -------------------------------------------------------------------- Oil and gas sold by the Company is normally priced with reference to a defined benchmark. Actual prices received vary from the benchmark depending on quality and location differentials. PART II. OTHER INFORMATION ITEM 1. Legal Proceedings ----------------- See discussion of legal proceeding in Note 5 Commitments and Contingencies. ITEM 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- (a) The Annual Meeting of Stockholders was held on May 20, 1999. (b) Not applicable. (c) 1. Set forth below is the tabulation of the votes on each nominee for election of a director: WITHHOLD NAME FOR AUTHORITY ---- --- --------- Ralph E. Graham 4,148,750 2,879 Robert B. McDermott 4,148,750 2,879 James G. Maynard 4,148,750 2,879 2. Not applicable. ITEM 6. Exhibit and Reports on Form 8-K ------------------------------- (a) Exhibits: Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K: On August 4, 1999, the Registrant filed its Current Report on Form 8-K with the Securities and Exchange Commission reporting the acquisition of certain producing oil and gas properties on July 21, 1999. 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: August 13, 1999 EX-27 2
5 1,000 6-MOS DEC-31-1999 JUN-30-1999 21,905 0 2,691 53 205 25,932 108,492 75,855 59,250 8,900 0 0 0 488 45,981 59,250 7,995 8,892 3,695 7,760 0 0 323 1,132 300 832 0 0 0 832 0.17 0.17
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