-----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, U4aSr4DGpfI3PLsMY5W7T7mAf6fPEbPjFdiQGAMKPvuw3g02+I4depGuDgpFoIHR KoUsL9R5MmWq53HdjGSR9w== 0000788965-98-000009.txt : 19981105 0000788965-98-000009.hdr.sgml : 19981105 ACCESSION NUMBER: 0000788965-98-000009 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HALLADOR PETROLEUM CO CENTRAL INDEX KEY: 0000788965 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 841014610 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-14731 FILM NUMBER: 98737625 BUSINESS ADDRESS: STREET 1: 1660 LINCOLN ST STE 2700 CITY: DENVER STATE: CO ZIP: 80264 BUSINESS PHONE: 3038395505 MAIL ADDRESS: STREET 1: 1660 LINCOLN STREET STREET 2: SUITE 2700 CITY: DENVER STATE: CO ZIP: 80264 FORMER COMPANY: FORMER CONFORMED NAME: KIMBARK OIL & GAS CO /CO/ DATE OF NAME CHANGE: 19900102 FORMER COMPANY: FORMER CONFORMED NAME: KIMBARK INC DATE OF NAME CHANGE: 19860624 10QSB 1 THIRD QTR FORM 10QSB U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT Commission File Number 0-14731 HALLADOR PETROLEUM COMPANY (Exact name of small business issuer as specified in its charter) COLORADO 84-1014610 (State of incorporation) (IRS Employer Identification No.) 1660 Lincoln Street, Suite 2700, Denver, Colorado 80264 (Address of principal executive offices) 303-839-5504 FAX: 303-832-3013 (Issuer's telephone numbers) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ] Shares outstanding as of November 3, 1998: 7,093,150 PART I. FINANCIAL INFORMATION HALLADOR PETROLEUM COMPANY Consolidated Balance Sheet (in thousands) September 30, December 31, 1998 1997* -------- --------- ASSETS Current assets: Cash and cash equivalents $ 3,440 $ 6,047 Available-for-sale securities 978 1,800 Accounts receivable- Oil and gas sales 265 331 Well operations 384 336 ------ ------ Total current asset 5,067 8,514 ------ ------ Oil and gas properties (successful efforts), at cost: Unproved properties 669 378 Proved property 18,797 18,366 Less - accumulated depreciation depletion, amortization and impairment (13,405) (13,039) ------ ------ 6,061 5,705 ------ ------ Other assets 288 266 ------ ------ $11,416 $14,485 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 390 $ 360 Oil and gas sales payable 101 211 Debt to TCW 3,177 2,492 ------ ------ Total current liabilities 3,668 3,063 ------ ------ Debt to TCW 2,831 ------ ------ Deferred bonus plan 214 205 ------ ------ Other 101 105 ------ ------ Minority interest 4,848 4,926 ------ ------ Stockholders' equity: Net unrealized loss on available-for-sale securities (587)** Preferred stock, $.10 par value; 10,000,000 shares authorized; no shares issued Common stock, $.01 par value; 100,000,000 shares authorized; 7,093,150 shares issued 71 71 Additional paid-in capital 18,061 18,061 Accumulated deficit (14,960) (14,777) ------ ------ 2,585 3,355 ------ ------ $11,416 $14,485 ====== ====== - ---------------------- *Derived from the Form 10-KSB. **At November 2, 1998 this amount was a ($293,000). See accompanying notes. HALLADOR PETROLEUM COMPANY Consolidated Statement of Operations (in thousands, except per share amounts)
Nine months ended Three months ended September 30, September 30, 1998 1997 1998 1997 ------ ------ ------ ------ (restated) (restated) Revenue: Oil $2,052 $2,978 $ 669 $ 949 Gas 520 260 199 93 NGLs 227 310 57 89 Interest and other 294 168 97 82 Gain on sale of prospects 343 113 106 ----- ----- ----- ----- 3,436 3,829 1,022 1,319 ----- ----- ----- ----- Costs and expenses: Lease operating 2,148 2,048 753 766 Depreciation, depletion and amortization 366 329 124 118 General and administrative 479 314 149 111 Impaired leasehold costs 26 12 Geological and geophysical 305 696 203 171 Dry hole 73 357 73 33 Interest 326 379 97 125 ----- ----- ----- ----- 3,697 4,149 1,399 1,336 ----- ----- ----- ----- Loss before minority interest (261) (320) (377) (17) Minority interest 78 5 113 5 ----- ----- ----- ----- Net loss $ (183) $ (315) $ (264) $ (12) ----- ----- ----- ----- Net loss per share $ (.03) $ (.04) $ (.04) $ (.00) ===== ===== ===== ===== Weighted average shares outstanding 7,093 7,093 7,093 7,093 ===== ===== ===== =====
See accompanying notes. HALLADOR PETROLEUM COMPANY Consolidated Statement of Cash Flows (in thousands)
Nine months ended September 30, 1998 1997* -------- ------- (restated) Net cash provided by operating activities $ 48 $ 92 ------ ------ Cash flows (used in) investing activities: Short-term investments 235 (3,212) Additions to properties (722) (1,060) Other assets (22) (88) ------ ------ Net cash (used in) investing activities (509) (4,360) ------ ------ Cash flows from financing activities: Yorktown investment 5,025 Repayments of debt (2,146) (498) ------ ------ Net cash provided by (used in) financing activities (2,146) 4,527 ------ ------ Net increase (decrease) in cash and cash equivalents (2,607) 259 Cash and cash equivalents, beginning of period 6,047 2,898 ------ ------ Cash and cash equivalents, end of period $ 3,440 $ 3,157 ====== ======
See accompanying notes. HALLADOR PETROLEUM COMPANY Notes to Financial Statements 1. The interim financial data is unaudited; however, in the opinion of management, the interim data includes all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the results for the interim periods. The financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principals have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures included herein are adequate to make the information presented not misleading. The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the Company's financial statements filed as part of the Company's 1997 Form 10-KSB. This quarterly report should be read in conjunction with such annual report. 2. During the fourth quarter of 1997, the Company changed from the full cost method to the successful efforts method of accounting for its oil and operations. 3. Comprehensive loss for the nine-month period ended September 30, 1998 is approximately $594,000 and the loss for the three-month period ended September 30, 1998 is approximately $675,000. Per share amounts are losses of $.08 and $.10, respectively. HALLADOR PETROLEUM COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF OPERATIONS YEAR-TO-DATE COMPARISON - ----------------------- The table below provides sales data and average prices for the period.
1998 1997 Sales Volume Average Price Sales Volume Average Price ------------ ------------- ------------ ------------- Oil - barrels 173,810 $11.80 163,690 $18.19 Gas - mcf 243,390 2.14 105,200 2.47 NGLs- barrels 21,520 10.54 22,962 13.51
Significantly lower oil prices caused the reduction in oil revenues. Gas production more than doubled due to the two new gas wells in the Merlin prospect, see below. The increase in oil production is attributable primarily to TCW relinquishing its 18% net profits interest in the South Cuyama field pursuant to the debt restructuring as discussed below. South Cuyama field oil and gas prices at November 3, 1998, were $11.72/bbl and $1.80/mcf. Gas prices in the Merlin prospect are currently $2.06/mcf. QUARTER-TO-DATE COMPARISON - -------------------------- The table below provides sales data and average prices for the third quarters.
1998 1997 Sales Volume Average Price Sales Volume Average Price ------------ ------------- ------------ ------------- Oil - barrels 57,060 $11.72 57,292 $16.56 Gas - mcf 89,550 2.23 39,400 2.35 NGLs- barrels 7,008 8.12 7,766 11.51
The explanations above for the year-to-date comparisons also apply to the quarter-to-date comparisons; except that during the third quarter 1997, upon resolution of an ownership matter, the Company received approximately $27,000 in oil revenue that related to prior periods. Consequently, 2,300 bbls of the third quarter production related to those periods. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash, short-term investments, and cash to be provided from operations are expected to enable the Company to meet its obligations as they come due and fund current planned activities. THE FOLLOWING DISCUSSION UPDATES THE MD&A CONTAINED IN ITEM 6 OF THE 1997 FORM 10-KSB AND SHOULD BE READ IN CONJUNCTION THEREWITH. PROSPECT DEVELOPMENT AND EXPLORATION ACTIVITY - --------------------------------------------- THE MERLIN PROSPECT OF THE SAC BASIN - NORTHERN CALIFORNIA ----------------------------------------------------------- There are two producing gas wells in this field. Due to depletion and high line pressure, the current production from both wells has declined to 1.3 mmcfpd. Field compression is being installed which should bring the combined production to 2 mmcfpd. There are additional reserves behind pipe that will be perforated when the existing zones are depleted. During September, another well was drilled resulting in a dry hole. The existing 3-D seismic data and the new subsurface information gained from this dry hole are being evaluated to identify future drilling prospects. Based on the results of this evaluation, two wells are tentatively scheduled to be drilled during early 1999. BIG HORN BASIN - WYOMING ----------------------- In January 1998, the Company sold a half interest in four of the nine prospects it is developing for $597,000 to MCNIC Oil and Gas Corporation, a large public utility headquartered in Detroit, Michigan resulting in a gain of $320,000. During the third quarter, seismic operations were completed on five prospect areas where the Company has working interests ranging from 50% to 100%. The Company has incurred $154,000 in seismic cost ($94,000 net to the Company), and depending on the results, plans to drill a horizontal well when oil prices improve. The Company will be the operator and the well is estimated to cost $500,000 ($250,000 net to the Company). In late April, the joint venture with Blackstone Energy was terminated; the Company continues to remain active in the area. SOUTH TEXAS ----------- On May 4, 1998, the Company entered into a joint venture with Indexgeo & Associates of Houston, Texas to acquire seismic options in Colorado County, Texas (75 miles west of Houston). The costs for the seismic options to Hallador's 90% JV interest are $153,000. It is the intent of the JV to turn the options to a third party to shoot 3-D seismic. 3-D seismic has been successful in this area in identifying economic drilling locations in the Yegua and Wilcox formations. To date, the Company has entered into options to lease approximately 4,500 acres. The joint venture has sold 43% of the prospect on a promoted basis (1/3 for 1/4) and plans to sell an additional 32% by year-end. If successful, the joint venture will recover all of its costs and be carried for a 25% interest in the seismic costs. If well locations are identified from the 3-D seismic, the joint venture will be responsible for its 25% share. PARADOX BASIN - UTAH -------------------- During June, approximately 6,000 acres were leased in the Paradox Basin, Utah (within 25 miles of the Four Corners) within the Rapids Prospect area. Geologic and geophysical studies are underway in support of a future 3-D seismic survey. The Company plans to invest $200,000 in this area. The Company plans to sell 75% of this prospect on a promoted basis (1/3 for 1/4) which would result in a 25% carried interest in the acreage and seismic costs. CARBON COUNTY - MONTANA ----------------------- During October, the Company participated in a new discovery located in the Dry Creek field of Carbon County, Montana. The Company has a 7.5% WI (4.875% APO) and a 6% NRI (3.9% APO). The well was drilled based on 3-D surveys. In mid-1999, the Company plans to participate in additional wells. The total prospect covers 3,000 acres. LOW OIL PRICES - -------------- Due to low oil prices in the South Cuyama field, the Company implemented cost reduction measures. These included the shut-in of marginal wells and the reduction in the utilization of service rigs. These factors helped the Company achieve lower operating costs, but also resulted in lower production for the second and third quarters. Approximately 150 bopd in marginal production have been shut-in. Based on current South Cuyama field oil prices of $11.72, the field is generating minimal cash flow. CATALYTIC CONVERTER INVESTMENT - ------------------------------ On April 21, 1998, Hallador paid $20,000 for a six-month option to acquire a 5% ownership position in Catalytic Solutions, Inc. located in Oxnard, California (a Los Angeles suburb). The Company declined to exercise its option on October 19, 1998. Negotiations are on going to restructure the Company's potential $300,000 investment for a 5% ownership position. TCW DEBT - -------- The South Cuyama field, the Company's principal asset, is pledged to TCW. On April 9, 1998, the debt was restructured. In return for (i) a cash payment of $1.8 million on May 1, 1998, (ii) monthly payments of $92,000 beginning June 1, 1998, (iii) a balloon payment approximating $2.7 million due on June 1, 1999, and (iv) an increase in the interest rate from 9% to 12% TCW agreed to relinquish its 18% net profits interest in the field effective April 1, 1998. AVAILABLE-FOR-SALE SECURITIES - -----------------------------
September 30, 1998 Shares Costs Market Value ------ -------- ------------ R&B Falcon Corporation (FLC-NYSE) 26,000 $ 579,000 $ 314,000 Rowan Companies Inc. (RDC-NYSE) 26,000 513,000 294,000 Pool Energy Services Company (PESC-NASDAQ) 13,000 122,000 118,000 Ensco International Inc. (ESC-NYSE) 19,000 306,000 207,000 --------- --------- Totals $1,520,000 $ 933,000 ========= =========
November 2, 1998 Shares Costs Market Value ------ -------- ------------ R&B Falcon Corporation (FLC-NYSE) 26,000 $ 579,000 $ 387,000 Rowan Companies Inc. (RDC-NYSE) 23,000 471,000 362,000 Pool Energy Services Company (PESC-NASDAQ) 10,000 95,000 142,000 Ensco International Inc. (ESC-NYSE) 13,000 228,000 189,000 --------- --------- Totals $1,373,000 $1,080,000 ========= =========
During the second quarter, the Company decided to make several investments in certain publicly traded drilling and service companies. Through November 2, 1998 $77,500 in short-term gains were recognized from trading the above securities. THE YEAR 2000-Y2K - ----------------- During 1997, the Company installed a new accounting system that is year 2000 compliant. The Company is investigating the computer system used in the operations of the Field to determine what revisions are required in order for the software to be year 2000 compliant. Such costs are not expected to be material. The Company does not anticipate any Y2K problems with any of its significant customers or suppliers. NEW ACCOUNTING PRONOUNCEMENTS - ----------------------------- None of the new accounting pronouncements that have been issued will affect the Company's future financial reporting. OUTLOOK - ------- If the low oil price environment continues, the Company anticipates a loss for the year. Pursuant to FAS 121, Impairment of Long-lived Assets, management periodically assesses the recoverability of the Company's investment in oil and gas properties. Management believes that the low oil price environment will not continue in the near term and that the Company will ultimately recover its investment in the South Cuyama field. Accordingly, no write-down is expected during 1998. PART II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 27 - Financial Data Schedule; EDGAR filing only (b) No reports on Form 8-K were filed during the quarter. SIGNATURE In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HALLADOR PETROLEUM COMPANY Date: November 3, 1998 By: /s/ Victor P. Stabio -------------------- Victor P. Stabio Chief Executive Officer and Chief Financial Officer Signing on behalf of the registrant and as principal financial officer. EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 0000788965 HALLADOR PETROLEUM COMPANY 1000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 3,440 978 649 0 0 6,299 18,797 13,405 11,416 3,668 3,177 0 0 71 0 11,416 2,799 3,436 0 3,697 0 0 326 (183) 0 (183) 0 0 0 (183) (.03) (.03)
EX-27 3 FINANCIAL DATA SCHEDULE
5 This schedule contains certain restated summary financial information for the nine-month period ended September 30, 1997. 0000788965 HALLADOR PETROLEUM COMPANY 1000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 3,548 0 4,149 0 0 379 (315) 0 (315) 0 0 0 (315) (.04) (.04)
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