-----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, QqxY8LO3KcGXsgZ4oBgIbK+ACzzFHSg3sd7rR9wHNqmmeHkR2eZaTW3QjzJvhPMi Ofw97UrgSKqY6pDUjUZEHA== 0000788965-99-000011.txt : 19991117 0000788965-99-000011.hdr.sgml : 19991117 ACCESSION NUMBER: 0000788965-99-000011 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99756422 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 QUARTER 10QSB 1999 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, 1999 [ ] 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 12, 1999: 7,093,150 PART I. FINANCIAL INFORMATION
HALLADOR PETROLEUM COMPANY Consolidated Balance Sheet (in thousands) September 30, December 31, 1999 1998* ------------- ------------ ASSETS Current assets: Cash and cash equivalents $ 1,490 $ 3,073 Marketable securities (cost-$1,060 and $2,029) 742 1,224 Accounts receivable- Oil and gas sales 421 226 Well operations 176 234 Right-of-way rental 166 Prospect sale 167 ------- ------- Total current assets 2,829 5,090 ------- ------- Oil and gas properties (successful efforts), at cost: Unproved properties 275 264 Proved properties 19,958 18,878 Less - accumulated depreciation depletion, amortization and impairment (13,892) (13,508) ------- ------- 6,341 5,634 ------- ------- Oil and gas operator bonds 228 155 Investment in Catalytic Solutions 70 70 Other assets 122 113 ------- ------- $ 9,590 $ 11,062 ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Brokerage account-marketable securities $ 208 $ 284 Accounts payable and accrued liabilities 244 224 Oil and gas sales payable 73 70 ------- ------- Total current liabilities 525 578 ------- ------- Bank debt 1,385 3,231 ------- ------- Key employee bonus plan 228 218 ------- ------- Other 101 101 ------- ------- Minority interest 4,610 4,614 ------- ------- 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 Net unrealized gain (loss) on marketable securities 127 (305) Accumulated deficit (15,518) (15,507) ------- ------- 2,741 2,320 ------- ------- $ 9,590 $ 11,062 ======= ======= - ------------------------------ *Derived from the Form 10-KSB.
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, 1999 1998 1999 1998 ------- ------- ------- ------- Revenue: Oil $ 2,024 $ 2,052 $ 922 $ 669 Gas 296 520 112 199 NGLs 149 227 58 57 Gain on sale of prospects 343 Interest and other 66 246 21 60 Non-recurring water disposal fee, net 208 Gain on stock sales 358 48 142 37 ----- ----- ----- ----- 3,101 3,436 1,255 1,022 ----- ----- ----- ----- Costs and expenses: Lease operating 1,835 2,148 660 753 General and administrative 516 479 187 149 Exploration costs 268 378 2 276 Interest 113 326 29 97 Depreciation, depletion and amortization 384 366 145 124 ----- ----- ----- ----- 3,116 3,697 1,023 1,399 ----- ----- ----- ----- Income (loss) before minority interest (15) (261) 232 (377) Minority interest 4 78 (70) 113 ----- ----- ----- ----- Net income (loss) $ (11) $ (183) $ 162 $ (264) ===== ===== ===== ===== Net income (loss) per share (1) $ (.03) $ .02 $ (.04) ===== ===== ===== Weighted average shares outstanding 7,093 7,093 7,093 7,093 ===== ===== ===== ===== - ---------------------- (1) Per share amount less than $.01.
See accompanying notes. HALLADOR PETROLEUM COMPANY Consolidated Statement of Cash Flows (in thousands)
Nine months ended September 30, 1999 1998 ------- ------ Net cash provided by operating activities $ 71 $ 48 ------ ------ Cash flows from investing activities: Marketable securities 1,260 235 Properties (1,095) (722) Other assets (82) (22) Prospect sale 175 ------ ------ Net cash provided by investing activities 258 (509) ------ ------ Cash flows from financing activities: Repayments of debt (1,846) (2,146) Brokerage account (66) ------ ------ Net cash used in financing activities (1,912) (2,146) ------ ------ Net decrease in cash and cash equivalents (1,583) (2,607) Cash and cash equivalents, beginning of period 3,073 6,047 ------ ------ Cash and cash equivalents, end of period $ 1,490 $ 3,440 ====== ======
See accompanying notes. Notes to Financial Statements 1. The interim financial data is unaudited; however, in our opinion, 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 data has been prepared pursuant to the SEC's rules and regulations; accordingly, certain information and footnote disclosures normally included in annual financial statements have been omitted. We strongly encourage readers of this quarterly report to read our 1998 Form 10-KSB which includes information about our organization and accounting policies. 2. Commencing January 1, 1999, we began amortizing, using the units-of- production method, our share of the estimated future costs ($1,068,000) to P&A the Field's 278 wells. 3. Comprehensive income for the nine-month period ended September 30, 1999 was $78,000 and the loss for the nine-month period ended September 30, 1998 was $594,000. 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.
1999 1998 Sales Volume Average Price Sales Volume Average Price ------------ ------------- ------------ ------------- Oil - barrels South Cuyama field 138,080 $14.55 172,650 $11.79 Other 1,090 13.35 1,160 13.78 Gas - mcf South Cuyama field 24,700 2.28 51,170 2.15 Other 129,540 1.85 192,220 2.13 NGLs- barrels South Cuyama field 11,470 10.80 18,670 9.86 Other 3,160 8.21 2,850 14.98
Higher oil prices offset lower oil production from the South Cuyama field (the "Field"). Gas production continues to decline in the Field. New production from the Merlin prospect has offset this to some degree; however, production from these wells declined compared to last year. During the fourth quarter we expect the new South Texas gas wells and the reworked Merlin wells to alleviate part of our declining gas production. The Field's oil price on November 12, 1999 was $21.82/bbl. Gas prices in the Merlin prospect are currently $3.10/mcf. During January 1999, we earned over $242,000 in non-recurring fees for allowing a third party to dispose water in the Field's disposal system from a blowout gas well 80 miles away. Related expenses were about $34,000. We recently decided to begin amortizing, using the units-of-production method, our share of the estimated future costs ($1,068,000) to P&A the Field's 278 wells. Included in DD&A expense for the nine months ended September 30, 1999 was $56,000 associated with such costs. QUARTER-TO-DATE COMPARISON - -------------------------- The table below provides sales data and average prices for the period.
1999 1998 Sales Volume Average Price Sales Volume Average Price ------------- ------------- ------------ ------------- Oil - barrels South Cuyama field 48,600 $18.87 56,700 $11.72 Other 260 17.67 360 12.04 Gas - mcf South Cuyama field 10,380 2.65 17,640 2.07 Other 41,070 2.06 71,910 2.27 NGLs- barrels South Cuyama field 3,900 11.74 6,080 7.77 Other 1,180 10.69 930 10.38
The explanations above for the year-to-date comparisons also apply to the quarter-to-date comparisons. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- We expect that our cash, marketable securities, and cash to be provided from operations will enable us to meet our obligations as they come due and fund planned activities. The Field, our principal asset, is pledged to U. S. Bank under a $3,231,000 revolving line of credit executed on March 10, 1999. The proceeds from this revolver were used to payoff Trust Company of the West. The principal is due on March 31, 2002. On March 15, 1999, at our discretion, we paid down $1,846,000 on the revolver. THE FOLLOWING DISCUSSION UPDATES THE MD&A CONTAINED IN ITEM 6 OF THE 1998 FORM 10-KSB AND THE TWO DISCUSSIONS SHOULD BE READ TOGETHER. PROSPECT DEVELOPMENT AND EXPLORATION ACTIVITY - --------------------------------------------- South Cuyama Field ------------------ In late September 1999, we decided to terminate the 3-D seismic project. Exit costs were about $20,000. The money originally budgeted for the 3-D seismic project will now be used for four exploitation projects in the Field at a cost of about $750,000 to the 100%. We have a 79% WI (66% NRI) in the Field. The two wells completed in August proved successful and together are producing about 100 bopd. The results of the four projects mentioned above should be known by mid-December; the first of the wells was spud November 7, 1999. Presently the Field is producing an average of 860 bopd, compared to an average of 885 for the same period last year. Merlin Prospect of the Sac Basin - Northern California ------------------------------------------------------ The two wildcats drilled in March and April resulted in one dry hole and one successful well. Another exploratory well is planned for late November. Combined production from this field is about 2.8 mmcfpd. We have a 30% WI (24% NRI) in this prospect. Equity Oil Company of Salt Lake City, Utah is the operator. Big Horn Basin - Wyoming ------------------------ We have sold all but a minor portion of our interest in this prospect and have no development plans for the future. South Texas ----------- The first two wells were drilled and completed in June and a third well was drilled and completed in August. Currently, the field is producing about 1.4 mmcfpd. We have a 19% WI (16.25% NRI). Indexgeo & Associates of Houston, Texas is the operator. A fourth well was spud on November 5, 1999 and pipe was run on November 11. Potential pay zones will be evaluated based on electric logs and results will be known by the end of November. Drilling and completion costs to the 100% for this well are estimated to be $170,000. Paradox Basin - Utah -------------------- Now that oil prices have rebounded we plan to devote more time in turning this prospect. San Juan Basin -------------- During the first quarter next year, we plan to drill three development wells in this prospect at a cost of $500,000 per well. We are the operator, but have a small working interest of about 6% (4% NRI). Catalytic Solutions Investment - ------------------------------ We declined our option to purchase more shares that were offered to existing shareholders in November 1999. We still have an option to increase our ownership that expires November 1, 2000. Our current ownership in CSI is about one-half of one percent. Available-For-Sale Securities - ----------------------------- During the second quarter of 1998, we made several investments in certain publicly traded drilling and service companies. During the fourth quarter of 1998 we recognized an impairment of $400,000 for the R&B Falcon investment and an impairment of $100,000 for the Rowan investment. During the nine months ended September 30, 1999 $56,500 of the $400,000 impairment was recognized as profit due to the sale of certain Falcon shares. The table below shows the positions at September 30, 1999 and November 12, 1999. Trading profits of $358,000 were recognized during the first nine months and from October 1, through November 12, they were $14,000. Cumulative trading profits from the second quarter of 1998 through November 12, 1999 have been $462,000.
September 30, 1999 Shares Cost Market Value ------- ----------- ------------ R&B Falcon Corporation (FLC-NYSE) 26,000 $ 575,000 $ 341,000 Rowan Companies Inc. (RDC-NYSE) 18,000 369,000 293,000 Ensco International Inc. (ESV-NYSE) 6,000 116,000 108,000 --------- -------- Subtotal 1,060,000 742,000 Impairment (444,500) --------- -------- $ 615,500 $ 742,000 ======== ========
November 12, 1999 Shares Cost Market Value ------- --------- ------------ R&B Falcon Corporation (FLC-NYSE) 29,000 $ 614,000 $ 369,750 Rowan Companies Inc. (RDC-NYSE) 18,000 369,100 302,600 -------- -------- Subtotal 983,100 672,350 Impairment (444,500) -------- -------- $ 538,600 $ 672,350 ======== ======== /TABLE> Y2K - ------- During June 1999, we upgraded our accounting software to be Y2K compliant. The Company has no contingency plans because if necessary, all critical functions can be performed without the aid of computers. The Company has no reason to believe that there will be Y2K type problems with its customers or suppliers. New Accounting Pronouncements - ----------------------------- None of the new accounting pronouncements that have been released will affect our 1999 financial reporting. 1999 Outlook - ------------ If the recent increase in oil prices is sustained, we expect positive cash flow from operations, before exploration costs, for the remainder of the year. 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 liabilities in the future. The California legislature passed a bill, which increased 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 will be available to properly plug and abandon (P&A) California wells upon their depletion. Over the next ten years, we as the Field's operator, are required to place in an interest-bearing escrow account $500 per year for each idle well in the Field until such well is plugged and abandoned or until $5,000 has been deposited. The first $60,000 installment was paid in June 1999. We estimate that after eight annual installments ($480,000) we will have met the current funding obligation of $600,000 considering the interest to be earned. As the 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 278 wells in the Field, 119 of which are classified as "idle." We recently decided to begin amortizing, using the units-of-production method, the estimated future costs ($1,068,000) to P&A the Field's 278 wells. Included in DD&A expense for the first nine months ended September 30, 1999 was $56,000 associated with these estimated future costs. PART II. Other Information Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule; EDGAR filing only 10.3 - Crude Oil Purchase Contract dated September 2, 1999 by and between EOTT Energy Operating Limited Partnership and Hallador Production Company (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 12, 1999 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 FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-1999 SEP-30-1999 1,490 742 597 0 0 2,829 19,958 13,892 9,590 525 1,385 0 0 71 0 9,590 2,469 3,101 0 3,116 0 0 113 (11) 0 (11) 0 0 0 (11) (.001) (.001)
EX-99 3 EOTT ENERGY Operating Limited Partnership 5400 ALDRIN COURT BAKERSFIELD, CA 93313 September 2, 1999 CRUDE OIL PURCHASE CONTRACT HALLADOR PRODUCTION COMPANY 1660 LINCOLN STREET, SUITE 2700 DENVER, CO 80264 EOTT CONTRACT #36937 The undersigned "Seller" whether one or more, hereby represents, warrants and declares that it is authorized to deliver and sell (and receive 100% of the proceeds) for all of the "oil" produced from the following: Lease (s): South Cuyama Lease #5093872; Hibberd Lease #5093873 Described as: Santa Barbara County, CA This Crude Oil Purchase Agreement ("Agreement") between Hallador Production Company, hereinafter called "Seller," and EOTT ENERGY Operating Limited Partnership, hereinafter called "Buyer," sets forth the terms and conditions under which Seller agrees to sell and deliver, and Buyer agrees to purchase and receive, the crude and/or condensate ("oil") from the above described Lease(s), to wit: I. TERM: Effective January 01, 2000 through March 31, 2000 continuing thereafter on a 30 day evergreen II. TYPE OF OIL: Buena Vista Hills III. QUANTITY: About 700 to 1400 barrels per day IV. DELIVERY: Delivery shall be made from designated shipping tanks and/or through sales meters into EOTT's designated carrier from the South Cuyama Lease #5093872; Hibberd Lease #5093873. Title shall pass from Hallador Production Company to EOTT as crude oil passes through the outlet flange of the tank. V. PRICE: Average of Chevron, Union, & Equiva's Buena Vista Posting, plus $0.85 per barrel, gravity adjusted, EDQ. VI. PAYMENT: Payment shall be made on the twentieth (20th) of the month following the month of delivery. VII. INVOICES: All invoices, invoicing documents and invoicing matters for EOTT Energy Operating Limited Partnership, shall be sent to the following address: CONTRACTS: EOTT ENERGY Operating Limited Partnership Attn: Shellie Williams/Lease Acquisitions 5400 Aldrin Court Bakersfield, CA 93313 Phone #(661)397-3900 Fax #(661)834-5410 INVOICES: EOTT ENERGY Operating Limited Partnership Attn: Crude Oil Accounting 111 West Ocean Blvd., Suite 1700 Long Beach, CA 90802 Fax invoices to: (562)436-8319 DIVISION ORDERS: EOTT ENERGY Operating Limited Partnership Attn: Division Order Department P.O. Box 4666 Houston, TX 77251-4666 HALLADOR PRODUCTION COMPANY EOTT ENERGY Operating Limited Partnership By: /S/VICTOR P. STABIO By: /S/TED MCCURDY Printed: Victor P. Stabio Printed: Ted McCurdy Title: President Title: Manager, Lease Acquisitions Date: 9/3/99 Date: September 2, 1999 Tax ID#: 84-0428142 Please return one executed copy in the self addressed envelope. EOTT ENERGY CORP. General Partner -----END PRIVACY-ENHANCED MESSAGE-----