-----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, UECunD9o3NF6pT2amqMEIZFZF4PGj/p5TwacqpWw9Xeqshak8RipGy3t/mXNNaXe h1GiYdk6MQW4CqlAJzhhYw== 0000788965-04-000010.txt : 20040517 0000788965-04-000010.hdr.sgml : 20040517 20040517132750 ACCESSION NUMBER: 0000788965-04-000010 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040517 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: 04811162 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 smar04q.txt MARCH 31, 2004 FORM 10-QSB FOR HALLADOR PETROLEUM 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 March 31, 2004 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 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 May 14, 2004: 7,093,150 PART I - FINANCIAL INFORMATION Consolidated Balance Sheet (in thousands)
March 31, December 31, 2004 2003* -------- ---------- ASSETS Current assets: Cash and cash equivalents $ 4,214 $ 3,319 Accounts receivable- Oil and gas sales 995 1,019 Well operations 207 543 ------ ------ Total current assets 5,416 4,881 ------ ------ Oil and gas properties, at cost (successful efforts): Unproved properties 472 450 Proved properties 26,021 25,910 Less - accumulated depreciation, depletion, amortization and impairment (19,989) (19,749) ------ ------ 6,504 6,611 ------ ------ Oil and gas operator bonds 216 216 California plug and abandonment deposits 291 291 Investment in Catalytic Solutions 150 164 Other assets 49 49 ------ ------ $12,626 $12,212 ====== ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 1,142 $ 1,383 Oil and gas sales payable 558 598 ------ ------ Total current liabilities 1,700 1,981 ------ ------ Key employee bonus plan 266 253 ------ ------ Future site restoration 1,320 1,294 ------ ------ Minority interest 5,244 5,047 ------ ------ Commitments and contingencies Stockholders' equity: Preferred stock, $.10 par value; 10,000,000 shares authorized; none 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 (14,036) (14,495) ------ ------ 4,096 3,637 ------ ------ $12,626 $12,212 ====== ====== *Derived from the Form 10-KSB.
See accompanying notes. Consolidated Statement of Operations (in thousands)
Three months ended March 31, 2004 2003 -------- -------- Revenue: Oil $1,797 $2,103 Gas 464 348 Other 103 112 ----- ----- 2,364 2,563 ----- ----- Costs and expenses: Lease operating 1,122 1,237 Exploration costs 30 20 Depreciation, depletion and amortization 265 285 General and administrative 291 342 ----- ----- 1,708 1,884 ----- ----- Income before cumulative effect of change in accounting principle 656 679 Cumulative effect of change in change in accounting principle (181) ----- ----- Income before minority interest 656 498 Minority interest (197) (149) ----- ----- Net income $ 459 $ 349 ===== ===== Income per share - basic and diluted: Before cumulative effect of change in accounting principle $ .06 $ .07 Cumulative effect of change in accounting principle (.02) ----- ----- Net income $ .06 $ .05 ===== ===== Weighted average shares outstanding - basic 7,093 7,093 ===== ===== Weighted average shares outstanding - diluted 7,295 7,093 ===== =====
See accompanying notes. Consolidated Statement of Cash Flows (in thousands)
Three months ended March 31, 2004 2003 -------- -------- Net cash provided by operating activities $1,027 $1,245 ----- ----- Cash flows from investing activities: Properties (132) (87) ----- ----- Net increase in cash and cash equivalents 895 1,158 Cash and cash equivalents, beginning of period 3,319 1,647 ----- ----- Cash and cash equivalents, end of period $4,214 $2,805 ===== =====
See accompanying notes. 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; accordingly, certain information and footnote disclosures normally included in GAAP financial statements have been condensed or omitted. 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 2003 Form 10-KSB. This quarterly report should be read in conjunction with that annual report. 3. In July 2001, the FASB issued SFAS 143, Accounting for Asset Retirement Obligations. SFAS 143 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset and is effective for fiscal years beginning after June 15, 2002. We adopted SFAS 143 on January 1, 2003 and increased our liability for asset retirement obligations by $264,000 (using an 8% discount rate) and recorded a cumulative effect of change in accounting principle of $181,000. For the three months ended March 31, 2004 and 2003, we recognized $26,000 and $18,000, respectively, of accretion on the liability as a component of depletion expense. 4. As allowed in SFAS 123, Accounting for Stock-Based Compensation, we continue to apply APB 25, Accounting for Stock Issued to Employees, and related interpretations in recording compensation related to our plan. The pro forma effect on our net income was not material for any of the periods presented. No grants were issued during the 2004 and 2003 periods. 5. As discussed in previous filings, the SC Field was purchased from ARCO (Atlantic Richfield which is now part of BP p.l.c.) in May 1990. As part of the Purchase and Sale Agreement, ARCO agreed to indemnify us for certain environmental liabilities connected with their 40-year ownership of the field and gas plant ("ARCO Indemnity"). Part of the gas plant has not been operational during the past twenty-five years. There is evidence of asbestos in the non-operational part of the gas plant. It is our position, and the opinion of our legal counsel, that the ARCO Indemnity covers future abandonment and clean-up costs associated with this gas plant. We have had several discussions with BP regarding this matter and have retained a Los Angeles law firm to assert our rights under the ARCO Indemnity. BP continues to deny any responsibility. The costs to abandon and clean up the gas plant area and other oil and gas areas at the field will be significant. There is a chance, depending on the negotiations and legal proceedings with BP, that some or all of the costs could be borne by us. At this time we are unable to estimate what these costs could ultimately be but we expect that such costs could have a material adverse effect on our financial condition, results of operations and cash flows. HALLADOR PETROLEUM COMPANY Management's Discussion and Analysis or Plan of Operation RESULTS OF OPERATIONS YEAR-TO-DATE COMPARISON - ----------------------- The table below (in thousands) provides sales data and average prices for the period.
2004 2003 ------------------------ ---------------------- Sales Average Sales Average Volume Price Revenue Volume Price Revenue ------- ------- ------ ------ ----- ------- Oil - barrels South Cuyama field 52 $33.56 $1,745 65 $31.71 $2,061 Other 2 26.00 52 2 21.00 42 Gas - mcf South Cuyama field 56 5.46 306 21 5.81 122 San Juan-New Mexico 16 4.75 76 13 4.77 62 Other 15 5.47 82 27 6.07 164
Oil revenue decreased due to lower production although prices were slightly higher. Field production to the 100% for the 2004 and 2003 periods averaged 780 and 942 bopd, respectively. Current field production to the 100% is about 840 bopd. Gas revenue increased primarily due to higher production in the Field. Last year the gas was shut in for about half of the quarter due to gas quality issues with SOCAL as previously disclosed. Current prices are about $39 for oil and $6 for gas. The table below (in thousands) shows lease operating expenses (LOE) for our two primary fields.
2004 2003 ------ ------ South Cuyama field: LOE excluding electricity $ 767 $ 858 Electricity 312 320 ----- ----- 1,079 1,178 San Juan - New Mexico 28 26 Other 15 33 ----- ----- $1,122 $1,237 ===== =====
CRUDE OIL PUT OPTIONS - --------------------- Through mid February 2003, we had never entered into any commodity derivative agreements since acquiring the Field. During mid February 2003 oil prices in the Field reached a level of about $36 per barrel. For the first time we purchased puts on 23,000 barrels of oil for the month of June 2003 (strike price of $29.00 per barrel) and 16,500 barrels of oil for the month of July 2003 (average strike price of $30.48 per barrel). Our total investment was $83,000. Our net gain from these transactions was approximately $40,000. On May 14, 2004, we purchased puts on 20,000 barrels of oil at $3.50 per barrel (a total of $70,000 with a strike price of $39 per barrel). These puts expire November 15, 2004. Depending on the price of oil, we may buy additional puts. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Cash and cash to be provided from operations are expected to enable us to meet our obligations as they become due during the next several years. We have no bank debt, no special purpose entities and no off-balance sheet arrangements nor did we enter into any related party transactions during the two years of 2003 and 2004. THE FOLLOWING DISCUSSION UPDATES THE MD&A CONTAINED IN ITEM 6 OF THE 2003 FORM 10-KSB AND THE TWO DISCUSSIONS SHOULD BE READ TOGETHER. PROSPECT DEVELOPMENT AND EXPLORATION ACTIVITY - --------------------------------------------- SOUTH CUYAMA FIELD ------------------ As disclosed in the 2003 Form 10-KSB, Santa Barbara County has asked us to perform an endangered species survey before we commence drilling one of the six wildcats sites located outside the Field's boundaries (about 4 miles from the Field). We were planning to drill one of the wells this summer and the remaining five over the next two to three years. Due to delays in the survey, drilling of the first well has been postponed until sometime this fall. SOCAL ----- The pipeline we use to sell our gas is owned by BP, but leased by SOCAL. There have been rumors that SOCAL will not renew the lease which comes up for renewal in May 2004. We have yet to be notified whether the lease was renewed. If SOCAL does not renew the lease, the line could switch from a carrier line to a proprietary line. If it becomes a proprietary line there is no guarantee that we will have an outlet to market our gas. This situation has no effect on our oil sales. Monthly gas sales, net to us, are about $100,000. There are no other significant changes or developments to report from what we disclosed in the 2003 Form 10-KSB. ITEM 3. CONTROLS AND PROCEDURES We maintain a system of disclosure controls and procedures that are designed for the purposes of ensuring that information required to be disclosed in our SEC reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our CEO as appropriate to allow timely decisions regarding required disclosure. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our CEO of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, our CEO, who is also our CFO, concluded that our disclosure controls and procedures are effective for the purposes discussed above. There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation. PART II-OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 31 - SOX 302 Certification 32 - SOX 906 Certification Signature In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HALLADOR PETROLEUM COMPANY Dated: May 14, 2004 By: /S/VICTOR P. STABIO CEO and CFO Signing on behalf of registrant and as principal financial officer. EX-31 2 exhibit31.txt SOX 320 CERTIFICATION EXHIBIT 31 CERTIFICATION I, Victor P. Stabio, certify that: 1. I have reviewed the report on Form 10-QSB of Hallador Petroleum Company; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and I have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusion about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors; a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 14, 2004 /S/ VICTOR P STABIO - ------------------- CEO and CFO EX-32 3 exhib32.txt SOX 902 CERTIFICATION Exhibit 32 CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Hallador Petroleum Company (the "Company"), on Form 10-QSB for the period ended March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, in the capacities and dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 14, 2004 By: /S/VICTOR P. STABIO CEO and CFO -----END PRIVACY-ENHANCED MESSAGE-----