-----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, TSrugPhuIxJfjyWOr4gq9fS7eceT2bE1LYaG0pUqaL14c9X01NleLgAVKMC3jEy1 8FPQOagpt5yD+h4nh4bzgQ== 0000788965-04-000025.txt : 20041122 0000788965-04-000025.hdr.sgml : 20041122 20041122170413 ACCESSION NUMBER: 0000788965-04-000025 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041122 DATE AS OF CHANGE: 20041122 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: 041161413 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 ssep04q.txt SEPTEMBER 30, 2004 FORM 10-QSB FOR HPC 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 September 30, 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 November 19, 2004: 7,093,150 PART I - FINANCIAL INFORMATION Consolidated Balance Sheet (in thousands)
September 30, 2004 ----------- ASSETS Current assets: Cash and cash equivalents $23,321 Oil and gas operator bonds 250 Accounts receivable- Oil and gas sales 1,064 Well operations 207 Note receivable-E&B Resources 3,538 ------ Total current assets 28,380 ------ Oil and gas properties, at cost (successful efforts): Unproved properties 298 Proved properties 2,144 Less - accumulated depreciation, depletion, amortization and impairment (1,732) ------ 710 ------ Investment in Catalytic Solutions 150 Other assets 67 ------ $29,307 ====== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 644 Oil and gas sales payable 624 Income taxes payable 1,300 Key employee bonus plan 285 Bonuses, and stock options payable 3,004 ------ Total current liabilities 5,857 ------ Minority interest 9,477 ------ 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 Additional paid-in capital 18,061 Accumulated deficit (4,159) ------ 13,973 ------ $29,307 ======
See accompanying notes. Consolidated Statement of Operations (in thousands, except per share data)
Nine months ended Three months ended September 30, September 30, 2004 2003 2004 2003 ------ ------ ------ ------ Revenue: Oil $ 172 $ 126 $ 65 $ 43 Gas 490 567 163 172 Interest and other 18 67 8 6 ------ ----- ----- ----- 680 760 236 221 ------ ----- ----- ----- Costs and expenses: Lease operating 138 165 56 29 Exploration costs 167 136 27 73 Depreciation, depletion and amortization 33 175 9 55 General and administrative 621 606 175 181 ------ ----- ----- ----- 959 1,082 267 338 ------ ----- ----- ----- Loss from continuing operations before minority interest (279) (322) (31) (117) Minority interest 84 97 9 35 ------ ----- ----- ----- Loss from continuing operations (195) (225) (22) (82) Income from discontinued operations net of minority interest of $607, $432, $236 and $145 1,414 1,007 552 340 Gain on sale of discontinued operations, net of taxes of $1,300 and net of minority interest of $3,907 9,117 9,117 Cumulative effect of change in accounting principle net of minority interest of $54 (127) ------ ----- ----- ----- Net income $10,336 $ 655 $9,647 $ 258 ====== ===== ===== ===== Income (loss) per share-basic Continuing operations $ (.03) $ (.03) $ $ (.01) Discontinued operations .20 .14 .07 .05 Gain on sale of discontinued operations 1.29 1.29 Change in accounting principle (.02) ------ ----- ----- ----- Net earnings per share $ 1.46 $ .09 $ 1.36 $ .04 ====== ===== ===== ===== Weighted average shares outstanding -basic 7,093 7,093 7,093 7,093 ====== ===== ===== =====
See accompanying notes. Consolidated Statement of Cash Flows (in thousands)
Nine months ended September 30, 2004 2003 ------ ------ Net cash provided by operating activities $ 2,210 $ 2,893 ------ ------ Cash flows from investing activities: Proceeds from sale of property 18,111 Properties (245) (945) Other (74) (91) ------ ------ Net cash provided by (used in) investing activities 17,792 (1,036) ------ ------ Cash flows from financing activites: Debt retirement (251) Cash calls from joint interest owners 967 ------ Net cash from financing activities 716 ------ Net increase in cash and cash equivalents 20,002 2,573 Cash and cash equivalents, beginning of period 3,319 1,647 ------ ------ Cash and cash equivalents, end of period $23,321 $ 4,220 ====== ====== 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. One October 1, 2003 we changed our estimate and increased our liability by an additional $300,000. All but $7,000 of this liability relates to the South Cuyama field, which was sold on September 30, 2004 as described below. 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. On August 10, 2004, we entered into an agreement with E&B Natural Resources Management Corporation (a private company) to sell all of our interest in the South Cuyama field and adjacent exploration areas for $23 million; consisting of $19.5 million in cash and an interest bearing (3.5%) note of $3.5 million due on September 30, 2005. Closing occurred on September 30, 2004, with an effective date of June 1, 2004. We recorded a pre-tax gain of approximately $14.3 million. The estimated tax of $1.3 million due on the gain on sale is less than the statutory rate due to the utilization of NOLs, statutory depletion carryforwards and the 30% minority interest. On October 8, 2004 we purchased back 749,723 outstanding employee stock options at a price equal to $2.80 per share minus the exercise price of each option for a total amount of $1,305,000. The options were cancelled and are available for reissuance and no options remain outstanding. The $1,305,000 was accrued for as of September 30, 2004. In addition to the stock options which were purchased, bonuses of approximately $1,544,000 were paid in early October and were accrued for as of September 30, 2004. Additionally, the Key Employee Bonus Plan was paid out. HALLADOR PETROLEUM COMPANY Management's Discussion and Analysis or Plan of Operation For background information for the readers of this Form 10-QSB, on July 21, 1997, Yorktown Energy Partners II and affiliates (Yorktown) invested $5,025,000 in Hallador Petroleum, LLP (the "Partnership"), a newly formed limited liability limited partnership. We are the general partner and received a 70% interest in the partnership in return for contributing our net assets, and Yorktown, representing the limited partners, received a 30% interest for its $5,025,000 cash contribution. As general partner, we consolidate the activity of the partnership and present the 30% limited partners' interest as a minority interest. Due to the sale of the South Cuyama field and the adjacent exploration areas, the joint board of directors of Hallador Petroleum Company and the Executive Committee of the Partnership, voted to terminate the partnership effective October 1, 2004. Currently, the Partnership's assets consist of cash, the $3.5 million note receivable, oil and gas properties in New Mexico and Texas, and other miscellaneous assets. On October 1, 2004, the joint board of directors of Hallador Petroleum Company, and the Executive Committee of the Partnership, valued the oil and gas properties in New Mexico and Texas and the other miscellaneous assets at $4 million. No later than the first quarter 2005, we plan to distribute a substantial amount of cash to each of the general and limited partners. We now plan to concentrate our oil and gas activity in the Rocky Mountain region. The Board of Directors plan to meet in January 2005, to discuss liquidity options for our shareholders. Ideas on the table include, stock buybacks and/or one-time cash dividends. RESULTS OF OPERATIONS YEAR-TO-DATE COMPARISON - ----------------------- The table below provides sales data and average prices for the periods.
2004 2003 ------------------------ ------------------------- Sales Average Sales Average Volume Price Revenue Volume Price Revenue ------- ------- ------ ------ ----- ------- Oil - barrels San Juan-New Mexico* 5,048 $23.13 $117,000 4,587 $17.00 $78,000 Krueger-Texas 769 37.08 28,000 1,088 30.35 33,000 Other 752 35.93 27,000 542 28.14 15,000 Gas - mcf San Juan-New Mexico 53,517 5.15 276,000 42,750 4.54 194,000 Krueger-Texas 34,385 5.87 202,000 47,299 5.82 275,000 Other 2,502 5.05 12,000 15,659 6.28 98,000
_________________ * NGLs Oil revenue increased primarily due to higher prices. Gas revenue decreased due to lower production offset by slightly higher prices. Two gas wells included in the "Other" category in the table above for 2003 were subsequently plugged and abandoned. DD&A decreased due to higher reserve estimates for the Krueger wells during 2004 compared to 2003. The table below shows lease operating expenses (LOE) for our two primary fields.
2004 2003 -------- -------- San Juan-New Mexico $ 93,000 $ 86,000 Krueger-Texas 27,000 26,000 Other 18,000 53,000 ------- ------- $138,000 $165,000 ======= =======
QUARTER-TO-DATE COMPARISON - -------------------------- The table below provides sales data and average prices for the periods.
2004 2003 ------------------------ ------------------------- Sales Average Sales Average Volume Price Revenue Volume Price Revenue ------- ------- ------ ------ ----- ------- Oil - barrels San Juan-New Mexico* 1,610 $26.98 $ 43,000 1,714 $17.42 $30,000 Krueger-Texas 192 41.67 8,000 319 29.22 9,000 Other 352 38.95 14,000 174 25.86 4,000 Gas - mcf San Juan-New Mexico 18,565 5.49 102,000 16,817 4.44 75,000 Krueger-Texas 9,089 6.18 56,000 13,860 5.28 73,000 Other 1,018 5.27 5,000 3,777 6.28 24,000 _________________ *NGLs
The explanations above for the year-to-date comparisons also apply to the quarter-to-date comparisons. DD&A decreased due to higher reserve estimates for the Krueger wells during 2004 compared to 2003. The table below shows lease operating expenses (LOE) for our two primary fields.
2004 2003 -------- -------- San Juan-New Mexico $ 30,000 $ 8,000 Krueger-Texas 9,000 10,000 Other 17,000 11,000 ------- ------- $ 56,000 $ 29,000 ======= =======
LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Due to the large amount of cash on hand, liquidity is not a concern at the present time. We have no bank debt, no special purpose entities and no off-balance sheet arrangements nor did we enter into any related party transactions. 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 - --------------------------------------------- San Juan - New Mexico - --------------------- We have made offers to buyout our joint interest partners. If all of the offers were accepted, our obligation would be approximately $10 million. Most of the partners have indicated that they are not interested, but we are negotiating with a few partners, and could be purchasing an additional $2 million of working interest. 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. Exhibit 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: November 19, 2004 By:/S/ VICTOR P. STABIO CEO and CFO Signing on behalf of registrant and as principal financial officer. EX-31 2 exh31.txt SOX 302 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: November 19, 2004 /S/ VICTOR P STABIO CEO and CFO EX-32 3 exh32.txt SOX 906 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 September 30, 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: November 19, 2004 By:/S/ VICTOR P. STABIO CEO and CFO -----END PRIVACY-ENHANCED MESSAGE-----