þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE
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73-0237060
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(State or Other Jurisdiction of Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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6801 BROADWAY EXT., SUITE 300
OKLAHOMA CITY, OKLAHOMA 73116-9037
(405) 848-7551
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(Address and telephone number, including area code, of registrant’s principal executive offices)
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ
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March 31,
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December 31,
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|||||||
2013
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2012
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|||||||
(Unaudited)
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(Derived from audited financial statements)
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|||||||
Current Assets:
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||||||||
Cash and Cash Equivalents
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$ | 10,880,206 | $ | 10,842,311 | ||||
Available-for-Sale Securities
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6,652,590 | 6,652,590 | ||||||
Trading Securities
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424,629 | 389,335 | ||||||
Refundable Income Taxes
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270,373 | 518,077 | ||||||
Receivables
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1,885,757 | 1,736,169 | ||||||
Prepaid Expenses
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70,190 | — | ||||||
20,183,745 | 20,138,482 | |||||||
Investments:
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||||||||
Equity Investment
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593,622 | 594,855 | ||||||
Other
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151,839 | 151,839 | ||||||
745,461 | 746,694 | |||||||
Property, Plant and Equipment:
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||||||||
Oil and Gas Properties, at Cost,
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||||||||
Based on the Successful Efforts Method of Accounting –
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Unproved Properties
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1,033,005 | 874,367 | ||||||
Proved Properties
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41,058,730 | 39,329,747 | ||||||
42,091,735 | 40,204,114 | |||||||
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Less – Accumulated Depreciation, Depletion, Amortization and Valuation Allowance
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26,510,695 | 25,726,672 | ||||||
15,581,040 | 14,477,442 | |||||||
Other Property and Equipment, at Cost
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426,306 | 425,024 | ||||||
Less – Accumulated Depreciation
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277,726 | 268,095 | ||||||
148,580 | 156,929 | |||||||
Total Property, Plant and Equipment
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15,729,620 | 14,634,371 | ||||||
Other Assets
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367,407 | 363,722 | ||||||
Total Assets
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$ | 37,026,233 | $ | 35,883,269 |
March 31,
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December 31,
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|||||||
2013
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2012
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|||||||
(Unaudited)
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(Derived from audited financial statements)
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Current Liabilities:
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Accounts Payable
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$ | 205,109 | $ | 519,654 | ||||
Other Current Liabilities – Deferred Income Taxes and Other
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286,395 | 207,430 | ||||||
491,504 | 727,084 | |||||||
Long-Term Liabilities:
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Asset Retirement Obligation
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1,217,764 | 1,162,078 | ||||||
Dividends Payable
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1,516,906 | 1,535,568 | ||||||
Deferred Tax Liability, Net
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3,386,637 | 3,274,807 | ||||||
6,121,307 | 5,972,453 | |||||||
Total Liabilities
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6,612,811 | 6,699,537 | ||||||
Stockholders’ Equity:
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Common Stock
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92,368 | 92,368 | ||||||
Additional Paid-in Capital
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65,000 | 65,000 | ||||||
Retained Earnings
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31,141,876 | 29,898,866 | ||||||
31,299,244 | 30,056,234 | |||||||
Less – Treasury Stock, at Cost
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885,822 | 872,502 | ||||||
Total Stockholders’ Equity
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30,413,422 | 29,183,732 | ||||||
Total Liabilities and Stockholders’ Equity
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$ | 37,026,233 | $ | 35,883,269 |
Three Months Ended
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March 31,
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||||||||
2013
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2012
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Operating Revenues:
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Oil and Gas Sales
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$ | 3,824,316 | $ | 3,381,732 | ||||
Lease Bonuses and Other
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22,068 | 132,502 | ||||||
3,846,384 | 3,514,234 | |||||||
Operating Costs and Expenses:
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Production
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727,505 | 620,148 | ||||||
Exploration
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241,803 | 17,614 | ||||||
Depreciation, Depletion, Amortization and Valuation Provisions
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872,955 | 733,132 | ||||||
General, Administrative and Other
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431,970 | 442,100 | ||||||
2,274,233 | 1,812,994 | |||||||
Income from Operations
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1,572,151 | 1,701,240 | ||||||
Other Income, Net
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54,364 | 80,351 | ||||||
Income Before Provision for Income Taxes
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1,626,515 | 1,781,591 | ||||||
Provision for Income Taxes:
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Current
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227,710 | 324,766 | ||||||
Deferred
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155,795 | 111,937 | ||||||
Total Provision for Income Taxes
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383,505 | 436,703 | ||||||
Net Income
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$ | 1,243,010 | $ | 1,344,888 | ||||
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Per Share Data:
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Net Income, Basic and Diluted
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$ | 7.73 | $ | 8.35 | ||||
Weighted Average Shares Outstanding, Basic and Diluted
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160,747 | 160,981 |
Three Months Ended
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March 31,
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||||||||
2013
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2012
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Net Cash Provided by Operating Activities
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$ | 2,229,181 | $ | 2,467,280 | ||||
Cash Flows Applied to Investing Activities:
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Proceeds from Disposal of Property, Plant and Equipment
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— | 2,943 | ||||||
Purchase of Property, Plant and Equipment
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(2,175,804 | ) | (875,426 | ) | ||||
Cash Distribution from Equity Investee
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16,500 | — | ||||||
Net Cash Applied to Investing Activities
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(2,159,304 | ) | (872,483 | ) | ||||
Cash Flows Applied to Financing Activities:
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Dividends Paid to Stockholders
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(18,662 | ) | (13,697 | ) | ||||
Purchase of Treasury Stock
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(13,320 | ) | (10,080 | ) | ||||
Total Cash Applied to Financing Activities
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(31,982 | ) | (23,777 | ) | ||||
Net Change in Cash and Cash Equivalents
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37,895 | 1,571,020 | ||||||
Cash and Cash Equivalents, Beginning of Period
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10,842,311 | 10,150,742 | ||||||
Cash and Cash Equivalents, End of Period
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$ | 10,880,206 | $ | 11,721,762 |
Three Months Ended
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March 31,
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||||||||
2013
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2012
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Net Realized and Unrealized Gain on Trading Securities
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$ | 35,074 | $ | 62,877 | ||||
Gain on Asset Sales
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3,683 | 2,930 | ||||||
Interest Income
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5,844 | 7,350 | ||||||
Equity Earnings in Investee
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15,267 | 18,294 | ||||||
Other Income
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3,219 | 274 | ||||||
Interest and Other Expenses
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(8,723 | ) | (11,374 | ) | ||||
Other Income, Net
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$ | 54,364 | $ | 80,351 |
Balance at December 31, 2012
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$ | 1,162,078 | ||
Liabilities incurred for new wells
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47,090 | |||
Accretion expense
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8,596 | |||
Balance at March 31, 2013
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$ | 1,217,764 |
March 31, 2013
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Level 1 Inputs
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Level 2 Inputs
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Level 3 Inputs
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Financial Assets:
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Available-for Sale Securities –
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U.S. Treasury Bills Maturing in 2013
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$ | — | $ | 6,652,590 | $ | — | ||||||
Trading Securities:
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Domestic Equities
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263,689 | — | — | |||||||||
International Equities
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114,565 | — | — | |||||||||
Others
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46,375 | — | — |
December 31, 2012
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Level 1 Inputs
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Level 2 Inputs
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Level 3 Inputs
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Financial Assets:
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Available-for Sale Securities –
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U.S. Treasury Bills Maturing in 2013
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$ | — | $ | 6,652,590 | $ | — | ||||||
Trading Securities:
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Domestic Equities
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211,103 | — | — | |||||||||
International Equities
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115,106 | — | — | |||||||||
Others
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63,126 | — | — |
ITEM 2.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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ITEM 4.
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CONTROLS AND PROCEDURES
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(1) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; | ||
(2)
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Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and
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(3)
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Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material adverse effect on the financial statements.
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ITEM 1A.
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RISK FACTORS
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ISSUER PURCHASES OF EQUITY SECURITIES
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Period
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Total Number of Shares Purchased
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Average Price Paid Per Share
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Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs1
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Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs1
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January 1 to January 31, 2013
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9
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$ 180.00
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—
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—
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February 1 to February 28, 2013
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63
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$ 180.00
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—
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—
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March 1 to March 31, 2013
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2
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$ 180.00
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—
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—
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Total
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74
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$ 180.00
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—
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—
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Exhibit
Number
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Description
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31.1*
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31.2*
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32*
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101.INS*#
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XBRL Instance Document
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101.SCH*#
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XBRL Taxonomy Extension Schema Document
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101.CAL*#
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XBRL Taxonomy Calculation Linkbase Document
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101.LAB*#
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XBRL Taxonomy Label Linkbase Document
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101.PRE*#
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XBRL Taxonomy Presentation Linkbase Document
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______________________________
* Filed electronically herewith.
# Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
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THE RESERVE PETROLEUM COMPANY | |
(Registrant) | |
Date: May 15, 2013 | /s/ Cameron R. McLain |
Cameron R. McLain, | |
Principal Executive Officer | |
Date: May 15, 2013 | /s/ James L. Tyler |
James L. Tyler | |
Principal Financial Officer |
1.
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I have reviewed this report on Form 10-Q of The Reserve Petroleum Company;
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2.
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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;
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3.
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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;
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4.
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The registrant’s other certifying officer and I are 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 have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within this entity, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions 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
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d)
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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
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5.
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The registrant’s other certifying officer and 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 the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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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
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b)
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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.
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Date: May 15, 2013 | /s/ Cameron R. McLain |
Cameron R. McLain | |
Principal Executive Officer |
1.
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I have reviewed this report on Form 10-Q of The Reserve Petroleum Company;
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2.
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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;
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3.
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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;
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4.
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The registrant’s other certifying officer and I are 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 have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within this entity, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions 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
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d)
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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
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5.
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The registrant’s other certifying officer and 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 the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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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
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b)
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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.
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Date: May 15, 2013 | /s/ James L. Tyler |
James L. Tyler | |
Principal Financial and Accounting Officer
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly present, in all material respects, the financial condition and results of operations of the Company for the quarter ended March 31, 2013.
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May 15, 2013 | /s/ Cameron R. McLain |
Cameron R. McLain, President
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(Principal Executive Officer)
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/s/ James L. Tyler | |
James L. Tyler, 2nd Vice President
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(Principal Financial Officer)
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ASSET RETIREMENT OBLIGATION
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3 Months Ended | ||||||||||||||||||||
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Mar. 31, 2013
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Asset Retirement Obligation [Abstract] | |||||||||||||||||||||
ASSET RETIREMENT OBLIGATION | Note 5 – ASSET RETIREMENT OBLIGATION
The Company records the fair value of its estimated liability to retire its oil and natural gas producing properties in the period in which it is incurred (typically the date of first sale). The estimated liability is calculated by obtaining current estimated plugging costs from the well operators and inflating it over the life of the property. Current year inflation rate used is 4.08%. When the liability is first recorded, a corresponding increase in the carrying amount of the related long-lived asset is also recorded. Subsequently, the asset is amortized to expense over the life of the property and the liability is increased for the change in its present value which is currently 3.25%.
A reconciliation of the Company’s asset retirement obligation liability is as follows:
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