-----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, R6BNvVeYMfdljMDCDK0pHhJvkahI/yU8QdCwg0N9raldOI/poKdCqmwhpHWYh8Ip RVKYLiDIuClZd4kT7GEjwQ== 0000788965-01-500013.txt : 20010815 0000788965-01-500013.hdr.sgml : 20010815 ACCESSION NUMBER: 0000788965-01-500013 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010814 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: 1934 Act SEC FILE NUMBER: 000-14731 FILM NUMBER: 1712464 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 INC DATE OF NAME CHANGE: 19860624 FORMER COMPANY: FORMER CONFORMED NAME: KIMBARK OIL & GAS CO /CO/ DATE OF NAME CHANGE: 19900102 10QSB 1 sjune2001q.txt JUNE 30, 2001 FINANCIALS UNITED STATES 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 June 30, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-14731 HALLADOR PETROLEUM COMPANY (Exact name of registrant as specified in its charter) COLORADO 84-1014610 (State of incorporation) (I.R.S. Employer Identification No.) 1660 Lincoln Street, Suite 2700, Denver, Colorado 80264-2701 (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 Securities 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 August 13, 2001: 7,093,150 PART I. FINANCIAL INFORMATION HALLADOR PETROLEUM COMPANY Consolidated Balance Sheet (in thousands)
June 30, December 31, 2001 2000* --------- ----------- ASSETS Current assets: Cash and cash equivalents $ 3,035 $ 2,489 Accounts receivable- Oil and gas sales 849 716 Well operations 193 583 ------ ------ Total current assets 4,077 3,788 ------ ------ Oil and gas properties at cost (successful efforts): Unproved properties 308 313 Prepaid drilling cost 176 477 Proved properties 23,029 21,597 Less - accumulated depreciation, depletion, amortization and impairment (15,316) (14,934) ------ ------ 8,197 7,453 ------ ------ Oil and gas operator bonds 396 312 Investment in Catalytic Solutions 175 175 Other assets 50 51 ------ ------ $12,895 $11,779 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 215 $ 626 Oil and gas sales payable 511 440 Bank debt 231 ------ ------ Total current liabilities 957 1,066 ------ ------ Bank debt 231 ------ Key employee bonus plan 320 295 ------ ------ Future site restoration 250 189 ------ ------ Minority interest 5,852 5,441 ------ ------ Stockholders' equity: 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 (12,616) (13,575) ------ ------ 5,516 4,557 ------ ------ $12,895 $11,779 ====== ====== - ------------------------------ *Derived from the Form 10-KSB.
See accompanying notes. HALLADOR PETROLEUM COMPANY Consolidated Statement of Operations (in thousands, except per share amounts)
Six months ended Three months ended June 30, June 30, 2001 2000 2001 2000 ------ ------ ------ ------ Revenue: Oil $2,685 $3,158 $1,398 $1,529 Gas 1,761 439 1,276 213 NGLs 204 188 76 95 Interest and other 78 71 35 47 Gain on prospect sale 67 120 67 120 ----- ----- ----- ----- 4,795 3,976 2,852 2,004 ----- ----- ----- ----- Costs and expenses: Lease operating 2,091 1,693 971 796 Exploration costs Geological and geophysical 20 17 Dry hole expense 32 239 32 209 Delay rentals 32 47 14 18 Contract termination fee 30 30 Depreciation, depletion and amortization 452 519 238 286 General and administrative 462 413 215 171 Purchase of employee stock options 300 Interest 26 62 12 34 ----- ----- ----- ----- 3,425 2,993 1,512 1,531 ----- ----- ----- ----- Income before minority interest 1,370 983 1,340 473 Minority interest (411) (295) (402) (142) ----- ----- ----- ----- Net income $ 959 $ 688 $ 938 $ 331 ===== ===== ===== ===== Basic net income per share $ .14 $ .10 $ .13 $ .05 ===== ===== ===== ===== Diluted net income per share $ .13 $ .09 $ .12 $ .04 ===== ===== ===== ===== Basic weighted average shares outstanding 7,093 7,093 7,093 7,093 ===== ===== ===== ===== Diluted weighted average shares outstanding 7,492 7,305 7,545 7,516 ===== ===== ===== =====
See accompanying notes. HALLADOR PETROLEUM COMPANY Consolidated Statement of Cash Flows (in thousands)
Six months ended June 30, 2001 2000 --------- -------- Net cash provided by operating activities $1,696 $1,552 ----- ----- Cash flows from investing activities: Properties (1,126) (835) Other assets (91) (96) Prospect sale 67 120 ----- ----- Net cash used in investing activities (1,150) (811) ----- ----- Net increase in cash and cash equivalents 546 741 Cash and cash equivalents, beginning of period 2,489 1,957 ----- ----- Cash and cash equivalents, end of period $3,035 $2,698 ===== =====
See accompanying notes. HALLADOR PETROLEUM COMPANY Notes to Financial Statements 1. The interim financial data is unaudited; however, in our opinion, it 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 pursuant to the SEC's rules and regulations. Certain information and footnote disclosures normally included in GAAP financial statements have been condensed or omitted pursuant to the SEC's rules and regulations. Certain amounts have been reclassified to the 2001 presentation. 2. Our organization and business, the accounting policies we follow and other information are contained in the notes to our financial statements filed as part of our 2000 Form 10-KSB. This quarterly report should be read in conjunction with that annual report. 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 periods.
2001 2000 ------------------------ ---------------------- Sales Average Sales Average Volume Price Revenue Volume Price Revenue ------- ------- ------ ------ ----- ------- Oil - barrels South Cuyama field 107,950 $24.44 $2,638 120,140 $26.20 $3,148 Cox 41-5 755 25.40 19 Other 1,039 26.78 28 395 27.04 10 Gas - mcf South Cuyama field 25,883 11.24 291 21,020 3.09 65 Cox 41-5 64,821 12.91 837 Northern California 33,335 11.01 367 70,710 2.68 190 South Texas 16,659 5.90 98 42,960 2.74 118 New Mexico 27,548 5.66 156 25,305 2.59 65 Other * * 12 * * 1 NGLs - barrels South Cuyama field 6,631 23.41 155 8,094 18.43 149 New Mexico 2,530 18.90 48 2,254 16.77 38 Other * * 1 * * 1 - ---------------- * Not meaningful
Current oil and gas prices for the South Cuyama field are about $23.50 per barrel for oil and $4.00 per MCF for gas. Current gas prices in Northern California are $3.00, South Texas prices are $3.00 and New Mexico prices are $2.85. The table below (in thousands) shows lease operating expenses (LOE) by field.
2001 2000 ---- ---- South Cuyama field: LOE excluding electricity $1,341 $1,201 Electricity 659 400 ----- ----- 2,000 1,601 Northern California 8 21 South Texas 14 20 New Mexico 51 32 Other 18 19 ----- ----- Total $2,091 $1,693 ===== =====
Oil revenue is down compared to last year due to lower prices and volumes. The increase in gas revenue is due primarily to the Cox 41-5 and to the abnormally high gas prices. NGL revenue increased due to higher prices as indicated in the tables above. LOE increased primarily due to higher electricity costs as set forth in the table above. In January 2001, we purchased from certain employees 177,777 options at a cost of $1.6875 per option (about $300,000), which was recorded as compensation expense. QUARTER-TO-DATE COMPARISON - ----------------------- The table below provides sales data and average prices for the periods.
2001 2000 ------------------------ ---------------------- Sales Average Sales Average Volume Price Revenue Volume Price Revenue ------- ------- ------ ------ ----- ------- Oil - barrels South Cuyama field 54,945 $24.73 $1,359 58,690 $25.98 $1,524 Cox 41-5 755 25.40 19 Other 755 26.35 20 150 29.87 5 Gas - mcf South Cuyama field 14,531 14.19 206 10,810 3.48 38 Cox 41-5 62,350 13.20 823 Northern California 15,194 10.31 157 25,375 3.20 81 South Texas 8,497 5.08 43 18,160 3.04 55 New Mexico 11,520 3.41 39 11,805 3.23 38 Other * * 8 * * 1 NGLs - barrels South Cuyama field 2,967 18.19 54 4,493 16.69 75 New Mexico 1,318 16.30 21 1,088 18.30 20 Other * * 1 * * * - ---------------- * Not meaningful
The table below (in thousands) shows lease operating expenses (LOE) by field.
2001 2000 ---- ---- South Cuyama field: LOE excluding electricity $ 505 $ 525 Electricity 430 203 ---- ---- 935 728 Northern California 4 19 South Texas 5 17 New Mexico 22 18 Other 5 14 ---- ---- Total $ 971 $ 796 ===== =====
The explanations above for the year-to-date comparisons also apply to the quarter-to-date comparisons. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash, cash flow from operations and bank borrowings are expected to enable us to meet our obligations as they become due during the next several years. THE FOLLOWING DISCUSSION UPDATES THE MD&A CONTAINED IN ITEM 6 OF THE 2000 FORM 10-KSB AND THE TWO DISCUSSIONS SHOULD BE READ TOGETHER. PROSPECT DEVELOPMENT AND EXPLORATION ACTIVITY - --------------------------------------------- South Cuyama Field ------------------ During October 2000, we completed a 3-D project on adjoining acreage east of the South Cuyama field (SC Field). The cost of this project was $350,000 to the 100%. We have a 70% WI in this project. The data was evaluated in January 2001 and several drillable prospects were identified. The first exploratory gas well (the Cox 41-5) was drilled in March 2001. Currently, the well is producing 1,000 MCF per day from a depth of about 3,400 feet. The well is capable of additional production, but due to pipeline constraints, this is all wee are able to produce. We have given written notice for additional pipeline capacity, but other producers have a higher priority than we do. In May 2001, the well began producing oil and is currently producing about 100 barrels per day. We are the operator and own a 70% WI (60% NRI). The cost to drill and complete this well was about $300,000 to the 100%. This well is an important step in validating our 3-D seismic project. We are reviewing our 3-D seismic data to identify other locations to drill. Because of the California electricity crisis natural gas prices were abnormally high at during the first six months of the year. Due to the success of the Cox 41-5, in April, we sent our gas purchaser a contract termination notice. We were able to cancel the contract prematurely effective April 1, 2001 by paying the purchaser $50,000 ($30,000 net to us). Our new gas contract pays market prices, is month to month, and can be canceled by either party with 30 days notice. During the second quarter were selling the gas for as high at $16 per MCF. Currently, the prices are about $4. We estimate the gas reserves for this well to the 100% to be about 1,800,000 MCF (1.8 BCF). The zone we are currently producing from has estimated gas reserves of 330,000 MCF. The zone above it has estimated reserves of 1,330,000 MCF and the upper most zone has estimated reserves of 165,000 MCF. Oil reserves are estimated to be 20,000 barrels to the 100%. We would like to drill an offset well or produce from the upper zones, but these plans are on hold due to pipeline constraints. Due to the California electricity crisis our electricity costs have increased significantly. Last year our average monthly electricity cost in the field was $73,000; currently our monthly electricity costs are double that amount. With all of the current uncertainty and turmoil that exists in the California electricity market, we can provide no assurance as to the timing and nature of the resolution of this crisis. If electricity costs continue to increase, we will have to shut in certain oil wells. As this crisis continues, future cash flow will decrease and so will reserve estimates. We are continuing to develop the proper strategy to optimize the cash flow from the SC Field considering these high electricity costs. Merlin Prospect of the Sac Basin - Northern California -------------------------------------------------------- This field is located about 70 miles north of Sacramento, California. Equity Oil Company of Salt Lake City, Utah is the operator. Presently, we have two producing gas wells. These wells have an estimated remaining life of four years. We participated in an exploratory, dry hole, gas well during July 2001. Our share of the dry hole cost was about $118,000. No more drilling is planned for this prospect. South Texas - Alleyton ----------------------- This gas field is located about 75 miles west of Houston in Colorado County. Marquee Corporation of Corpus Christi, Texas is the operator of these gas wells. We have a 14% WI (11% NRI) in this field. Presently, we have two gas wells. These wells have an estimated remaining life of three years. During March 2001, we recompleted an existing well, which produced for a few months. It is currently shut-in pending evaluation. We participated in an exploratory, dry hole, gas well during April 2001. Our share of the dry hole cost was about $32,000. South Texas - Bonus ------------------- We are participating with Forest Oil Company of Denver in a nine-well developmental prospect in Wharton County, Texas located about 70 miles southwest of Houston. One of the wells has reached total depth of 14,000 feet and the results look very encouraging. The second well is in the drilling phase. Of the remaining seven wells, one is to be drilled this year and rest next year. We have a 5% WI (4% NRI). These wells are very expensive and the estimated costs to drill and complete are $5 million per well. Our share of this prospect, if all of the wells are drilled, will be in the $2 - $3 million range. Many of the wells in the area are producing 10,000 MCF per day. Currently, there is litigation surrounding proper title. If we lose the lawsuit, we will recover only our investment through net revenue from successful wells. We are at risk for any dry hole costs. San Juan Basin -------------- This gas field is located in the northwest corner of New Mexico in San Juan County. Three development wells were drilled in early spring 2000. We have an interest in 20 wells and are the operator. These wells have long-lived reserves. Our WIs in this field ranges from 5%-10% with NRIs between 4%-8%. Due to regulators requiring an environmental impact statement, the nine additional development wells planned to be drilled later this year and next year will be delayed until 2002 and 2003. The costs to the 100% to drill and complete these wells are about $700,000 each. East Texas ---------- This is a new prospect located about 150 miles southeast of Dallas in Nacogdoches County. We participated in an exploratory gas well (the Fulton - Fuller 1H), which was completed in April 2001. The well is currently producing about 400 MCF per day at a price of $2.75. The cost to drill and complete this well to the 100% was about $2,000,000. We have a 25% WI (20% NRI) in this well. The well may be fracted or placed on a compressor in order to increase production. Pure Resources of Midland, Texas is the operator. A second exploratory gas well is planned to be drilled in late August 2001 in Shelby County, Texas, about 20 miles east from the Fulton - Fuller 1H. El Paso Energy will be the operator. We have a 7% WI (6% NRI). The cost to drill and complete this well to the 100% is about $2,000,000; our share would be about $150,000. Environmental and Regulation - ---------------------------- We are directly affected by changing environmental rules and regulations. Although we believe our operations and facilities are in compliance with applicable environmental regulations, risk of substantial cost and liabilities resulting from an unintentional breach of environmental regulations are inherent to oil and gas operations. It is possible that other developments, such as increasingly strict environmental laws, regulations, and enforcement policies or claims for damages could result in significant costs and liability in the future. In January 1999, the California legislature passed a bill, which will increase our operator's bond from $100,000 to $250,000 to be phased in over a five-year period. In addition, an idle-well bill was passed to insure that funds would be available to properly plug and abandon (P&A) California wells upon their depletion. Over the next seven years, we are required to place in an interest- bearing escrow account $500 per year for each idle-well in the SC Field until such well is plugged and abandoned or until $5,000 has been deposited. Installments of $60,000, $68,000 and $58,000 were paid in June 1999, 2000 and 2001, respectively. We estimate that after ten annual installments we will have met our current funding obligation of $700,000 considering the interest to be earned. As the SC Field depletes, and more wells move from the producing category to the idle-well category we will have to make additional annual payments. Presently, there are 280 wells in the SC Field, 140 of which are classified as "idle." During 1999, we began amortizing; using the units-of-production method, our share of the estimated future costs ($1,207,000) to P&A the SC Field's 280 wells. Included in the DD&A expense for YTD 2001 and 2000 was $61,000 and $56,000, respectively, and QTD 2001 and 2000 were $31,000 and $28,000, respectively, associated with these estimated future costs. Washington County, Colorado Gas Plant - ------------------------------------- In late February 2001, we were notified by the Colorado Oil and Gas Conservation Commission that we must conduct a site investigation of a gas plant that our predecessor operated 40 years ago. During May 2001, our consulting environmental engineer made a site visit and performed a water test. The results were satisfactory; accordingly, we estimate the site restoration costs to be less than $10,000. New Accounting Pronouncements - ----------------------------- In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets." These statements prohibit pooling-of-interests accounting for transactions initiated after June 30, 2001, require the use of the purchase method of accounting for all combinations after June 30, 2001, and establish new standards for accounting for goodwill and other intangibles acquired in business combinations. Currently, these pronouncements have no affect on us. In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This standard is effective for fiscal years beginning after June 15, 2002, and provides accounting requirements for asset retirement obligations associated with tangible long-lived assets. We have not yet determined the effects of this standard on our financial statements but expect it to be material. PART II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibits - None. (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: August 13, 2001 By: /s/VICTOR P. STABIO Victor P. Stabio Chief Executive Officer and Chief Financial Officer Signing on behalf of registrant and as principal financial officer. -----END PRIVACY-ENHANCED MESSAGE-----