SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-7914
BASIC EARTH SCIENCE SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 84-0592823
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
633 Seventeenth Street, Suite 1670, Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
(303) 294-9525
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Shares of common stock outstanding on November 14, 1997: 16,580,487
<PAGE>
BASIC EARTH SCIENCE SYSTEMS, INC.
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Balance Sheets - September 30, 1997
and March 31, 1997 3
Consolidated Statements of Operations - Quarter Ended
and Six Months Ended September 30, 1997 and
September 30, 1996 5
Consolidated Statements of Cash Flows - Six Months Ended
September 30, 1997 and September 30, 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis 10
Results of Operations 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults Upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Basic Earth Science Systems, Inc.
Consolidated Balance Sheets
Page 1 of 2
<TABLE>
<CAPTION>
September 30 March 31
1997 1997
(Unaudited)
------------ ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $116,000 $97,000
Accounts receivable
Oil and gas sales 238,000 255,000
Joint interest and other receivables 94,000 128,000
Less: allowance for doubtful accounts (45,000) (40,000)
Other current assets 211,000 283,000
------------ ------------
Total current assets 614,000 723,000
------------ ------------
Property and equipment
Oil and gas property (full cost method) 32,427,000 32,171,000
Support equipment 450,000 445,000
------------ ------------
32,877,000 32,616,000
Accumulated depletion - FCP (includes
cumulative ceiling limitation charges
of $14,091,000) (30,084,000) (29,812,000)
Accumulated depreciation (363,000) (357,000)
------------ ------------
Net property and equipment 2,430,000 2,447,000
Other noncurrent assets 74,000 75,000
------------ ------------
Total Assets $3,118,000 $3,245,000
============ ============
</TABLE>
See accompanying notes.
<PAGE>
Basic Earth Science Systems, Inc.
Consolidated Balance Sheets
Page 2 of 2
<TABLE>
<CAPTION>
September 30 March 31
1997 1997
(Unaudited)
------------ ------------
<S> <C> <C>
LIABILITIES
Current liabilities
Accounts payable $442,000 $466,000
Accrued liabilities 115,000 119,000
------------ ------------
Total current liabilities 557,000 585,000
Long-term debt, less current portion 474,000 649,000
------------ ------------
Total Liabilities 1,031,000 1,234,000
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value
Authorized - 3,000,000 shares
Issued - 0 shares --- ---
Common stock, $.001 par value
32,000,000 shares authorized;
16,580,487 shares outstanding at March 31
and at September 30 17,000 17,000
Additional paid-in capital 22,692,000 22,692,000
Accumulated deficit (20,607,000) (20,683,000)
Less: treasury stock (299,265 shares at March 31
and September 30); at cost (15,000) (15,000)
Total shareholders' equity 2,087,000 2,011,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,118,000 $3,245,000
============ ============
</TABLE>
See accompanying notes.
<PAGE>
Basic Earth Science Systems, Inc.
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Quarter Ended
September 30 September 30
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE
Oil and gas sales $1,359,000 $1,480,000 $709,000 $755,000
Well service revenue 12,000 17,000 11,000 6,000
---------- ---------- ---------- ----------
Total revenue 1,371,000 1,497,000 720,000 761,000
---------- ---------- ---------- ----------
EXPENSES
Oil and gas production 794,000 789,000 391,000 404,000
Production tax 123,000 140,000 63,000 70,000
Well service expenses 13,000 17,000 12,000 5,000
Depreciation, depletion
and amortization 279,000 273,000 157,000 141,000
General & administrative 66,000 83,000 38,000 41,000
---------- ---------- ---------- ----------
Total expenses 1,275,000 1,302,000 661,000 661,000
---------- ---------- ---------- ----------
Income from operations 96,000 195,000 59,000 100,000
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest and other
income (expense) 5,000 10,000 (3,000) 7,000
Interest expense (25,000) (45,000) (14,000) (21,000)
---------- ---------- ---------- ----------
Total other expense (20,000) (35,000) (17,000) (14,000)
---------- ---------- ---------- ----------
Income before
income taxes 76,000 160,000 42,000 86,000
Income taxes --- --- --- ---
---------- ---------- ---------- ----------
NET INCOME $76,000 $160,000 $42,000 $86,000
========== ========== ========== ==========
Weighted average number
of shares outstanding 16,580,487 16,580,487 16,580,487 16,580,487
========== ========== ========== ==========
NET INCOME PER SHARE $.005 $.010 $.003 $.005
========== ========== ========== ==========
</TABLE>
See accompanying notes.
<PAGE>
Basic Earth Science Systems, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
September 30
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $76,000 $160,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion & amortization 279,000 273,000
Change in current assets and
current liabilities:
Accounts receivable, net 54,000 8,000
Accounts payable & accrued liabilities (30,000) (137,000)
Other current assets 69,000 2,000
Other noncurrent assets 1,000 2,000
Other adjustments 9,000 7,000
---------- ----------
Net cash provided by operating activities 458,000 315,000
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures:
Oil and gas property (258,000) (150,000)
Support equipment (6,000) (4,000)
Proceeds from sale of property and equipment --- 1,000
---------- ----------
Net cash used in investing activities (264,000) (153,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt payments (175,000) (180,000)
Proceeds from borrowing --- 42,000
---------- ----------
Net cash used in financing activities (175,000) (138,000)
---------- ----------
CASH
Net increase 19,000 24,000
Balance at beginning of period 97,000 92,000
---------- ----------
Balance at end of period $116,000 $116,000
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $25,000 $45,000
</TABLE>
See accompanying notes.
<PAGE>
Basic Earth Science Systems, Inc.
Notes to Financial Statements
September 30, 1997
The accompanying interim financial statements of Basic Earth Science Systems,
Inc. (Basic or the Company) are unaudited. However, in the opinion of
management, the interim data includes all adjustments, consisting of normal
recurring adjustments, necessary for a fair presentation of the results for the
interim period.
The financial statements included herein have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations.
Management believes the disclosures made are adequate to make the information
not misleading and suggests that these condensed financial statements be read in
conjunction with the financial statements and notes hereto included in Basic's
March 31, 1997 Form 10-KSB.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
RECLASSIFICATIONS Certain prior year amounts may have been reclassified to
conform to current year presentation.
CASH AND CASH EQUIVALENTS For purposes of the Consolidated Balance Sheets and
Statements of Cash Flows, Basic considers all highly liquid investments with a
maturity of ninety days or less when purchased to be cash equivalents.
USE OF ESTIMATES The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. There are many factors, including global events, that may influence
the production, processing, marketing, and valuation of crude oil and natural
gas. A reduction in the valuation of oil and gas properties resulting from
declining prices or production could adversely impact depletion rates and
ceiling test limitations.
RECENT ACCOUNTING PRONOUNCEMENTS On March 3, 1997, the Financial Accounting
Standards Board ("FASB") issued the Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share." This pronouncement provides a different
method of calculating earnings per share than is currently used in accordance
with Accounting Principles Board Opinion No. 15, "Earnings per Share." SFAS No.
128 provides for the calculation of "Basic" and "Diluted" earnings per share.
Basic earnings per share includes no dilution and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution of securities that could share in the earnings of an entity, similar to
fully diluted earnings per share. The Company will adopt SFAS No. 128 in fiscal
1998 and its implementation is not expected to have a material effect on the
financial statements.
In June 1997, FASB issued SFAS No. 130, "Reporting Comprehensive Income" which
establishes standards for reporting and display of comprehensive income, its
components and accumulated balances. Comprehensive income is defined to include
all changes in equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS No. 130 requires that
all items that are required to be recognized under current accounting standards
as components of comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial statements.
Also, in June 1997, FASB issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" which supersedes SFAS No. 14, "Financial
Reporting for Segments of a Business Enterprise." SFAS No. 131 establishes
standards for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products
and services, geographic areas and major customers. SFAS No. 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance.
Both SFAS No. 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Because of the recent issuance of these
standards, management has been unable to fully evaluate the impact, if any, they
may have on future financial statement disclosures. Results of operations and
financial position, however, will be unaffected by implementation of these
standards.
FORWARD-LOOKING STATEMENTS
This Form 10-QSB includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical fact, included in this Form 10-QSB regarding the
Company's financial position and liquidity, the amount of and its ability to
make debt service payments, its strategies, financial instruments, and other
matters, are forward-looking statements. Although the Company believes that the
expectations reflected in such forward-looking statements are reasonable, it can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from the
Company's expectations are disclosed in this Form 10-QSB in conjunction with the
forward-looking statements included in this Form 10-QSB.
The Company's intentions and expectations described in this Form 10-QSB with
respect to possible development activities concerning properties in which it
holds interests may be deemed to be forward-looking statements. These
statements are made based on management's current assessment of the development
merits of the particular property in light of the geological information
available at the time and based on the Company's relative interest in the
property and its estimate of its share of the development cost. Subsequently-
obtained information concerning the merits of any property, as well as changes
in estimated development costs and ownership interest, may result in revisions
to management's expectations and intentions and, thus, the Company may alter its
plans regarding these development activities. Furthermore, circumstances beyond
the Company's control may cause such prospects to be eliminated from further
consideration as development prospects.
INCOME TAXES
At March 31, 1997, the Company had available approximately $11,552,000 of net
operating loss carryforwards which expire in varying amounts in the years 1998
through 2011. The Company also has available a depletion carryover of
approximately $3,723,000.
The Company recognizes deferred income tax assets and liabilities based upon
enacted tax laws for all temporary differences between financial reporting and
tax bases of assets, liabilities and carryforwards. Deferred tax assets are
then reduced, if deemed necessary (i.e., more likely than not), by a valuation
allowance for the amount of any tax benefits which, based on current
circumstances, are not expected to be realized. The Company's net deferred tax
asset of $5,099,000 was offset by a valuation allowance of an equal amount,
resulting in no cumulative effect on operations.
The Company's deferred tax liabilities and assets are comprised of the following
components at March 31, 1997:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax liabilities
Depreciation and depletion $(582,000)
Deferred tax assets
Net operating loss carryforwards 4,292,000
Statutory depletion carryforward 1,389,000
Valuation allowance (5,099,000)
------------
Net deferred tax asset $0
============
</TABLE>
The Company has established a valuation allowance due to the uncertainty that
the full amount of the operating loss carryforwards will be utilized due to
expiration and other factors. Although management expects improvement in future
results of operations, it emphasizes past performance rather than income
projections when determining the valuation allowance. Any subsequent
adjustments to the valuation allowance, if deemed appropriate due to changed
circumstances, will be recognized as a separate component of the provision for
income taxes.
Item 2. Management's Discussion and Analysis
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY During the six months just ended, current assets decreased 15% from
$723,000 at year ended March 31, 1997 (March 31) to $614,000 at September 30,
1997 (September 30) and current liabilities decreased 5% from $585,000 at March
31 to $557,000 at September 30. Consequently, the Company's current ratio
decreased from 1.24:1 at March 31 to 1.10:1 at September 30.
The decrease in current assets was due to (1) lower accounts receivable and (2)
fewer other current assets at September 30. Oil and gas sales receivable was
lower due to decreases in volumes sold and average prices. Joint interest
receivables were lower due to the receipt of payments during the normal course
of business. Other current assets decreased from March 31 due to either the
sale of unused lease and well equipment to unrelated third parties or the
transfer of such equipment to other wells operated by the Company.
The decrease in current liabilities consisted primarily of payments of ad
valorem and production taxes as well as the payment of invoices during the
normal course of business.
The increase in property and equipment from March 31 consisted primarily of
costs associated with two successful recompletions in the first six months of
the fiscal year, one in North Dakota and the other in Montana.
DEBT During the six months ended September 30, 1997, long-term debt decreased
as the result of monthly principal payments. The Company has no obligation to
make regularly scheduled principal payments until such time as the outstanding
debt exceeds the borrowing base, which was at $905,000 at September 30, 1997.
However, the Company has made and intends to continue making monthly debt
payments in amounts comparable to prior periods. There were no changes to the
terms of the Company's debt facilities. Reference should be made to the
Company's Form 10-KSB as of March 31, 1997 for disclosure regarding the
Company's debt.
HEDGING At September 30, 1997, the Company had 34 open futures and/or options
contracts to hedge future deliveries with maturities ranging from October 1997
through November 1998 at prices ranging from $20.27 to $21.18 per barrel. It
should be noted that 34 contracts does not necessarily indicate that the Company
has hedged 34,000 barrels of production in that some futures contracts and
option contracts may offset each other in volume.
LIQUIDITY OUTLOOK The Company's primary source of funding is the net cash flow
from the sale of its oil and gas production. The profitability and cash flow
generated by the Company's operations in any particular accounting period will
be directly related to: (a) the volume of oil and gas produced and then sold,
(b) the average realized prices for oil and gas sold, and (c) lifting costs.
Management believes the cash generated from operations and hedging activities
will enable the Company to meet its existing and normal recurring obligations as
they become due in fiscal year 1998.
STRATEGY IMPLEMENTATION
The Company previously disclosed the recompletion of a Divide County, North
Dakota well into the Gunton formation, and subsequently, salt related production
problems. The Company has devised a method to control the salt precipitation in
the well and expects to initially stabilize production at approximately 79
barrels of oil per day (BOPD) and 23 barrels of water per day (BWPD). To date,
the Company has spent approximately $47,000 on the recompletion and capital
equipment.
During the quarter just ended, the Company recompleted a Sheridan County,
Montana well. Following several unsuccessful attempts in various formations,
the Company successfully established production from the Duperow formation with
an initial potential of 23 BOPD and 29 BWPD. The well previously produced 16
BOPD and 214 BWPD from the Red River and Nisku formations. To date, the Company
has spent $100,500 on the recompletion attempts.
OUTLOOK FOR REMAINDER OF FISCAL YEAR 1998
To the extent that funds are available, the Company intends to pursue the
acquisition of producing properties and the exploitation of both existing
properties and those which it acquires. However, the Company may alter or vary
its plan of operation based upon changes in circumstances, unforeseen
opportunities, inability to negotiate favorable acquisition or loan terms, lack
of funding, change in oil or gas prices, lending institution requirements and
other events which the Company is not able to anticipate.
RESULTS OF OPERATIONS
YEAR-TO-DATE COMPARISON
OVERVIEW
Operations in the six months ended September 30, 1997 (1997) resulted in net
income of $76,000 compared to net income of $160,000 for the same period in 1996
(1996).
REVENUES
Oil and gas sales revenue decreased $121,000 (8%) in 1997 from 1996. Of this
amount, -$23,000 (-19%) was attributable to a decrease in oil production while
oil price decreases accounted for a negative variance of -$68,000 (-56%). Gas
volume decreases accounted for a negative variance of -$35,000 (-29%) and gas
price increases accounted for a positive variance of $5,000 (4%).
VOLUMES AND PRICES
Total liquid production decreased slightly (2%) from 69,200 barrels in 1996 to
68,000 barrels in 1997 and the price per barrel decreased 5% from $18.79 in 1996
to $17.78 in 1997. Total gas production decreased 20% from 110,400 MCFs in 1996
to 88,600 MCFs in 1997 while the price per MCF increased 4% from $1.63 in 1996
to $1.69 in 1997. The decrease in both liquid and gas production was
primarily due to normal production decline.
EXPENSES
Oil and gas production expense, including production tax, decreased $12,000 (1%)
in 1997 from 1996. This decrease was primarily the result of lower production
taxes associated with the lower oil and gas sales revenue. In spite of the
decreased production expense, the overall lifting cost per equivalent barrel
increased 4% from $10.61 in 1996 to $11.08 in 1997 as a result of the decrease
in sales volumes.
Depreciation, depletion and amortization expense increased $6,000 (2%) in 1997
over 1996 due to the decrease in the Company's reserves at the end of fiscal
1997. As a result, the average depletion expense per equivalent barrel
increased 9% from $3.03 in 1996 to $3.29 in 1997.
Net general and administrative expense decreased $17,000 (20%) in 1997 from
1996. The largest decrease occurred in outside professional fees which alone
decreased 50%. Increases occurred in general office expenses, which increased
approximately $7,000 (19%). As a result of the overall decrease, and in
conjunction with decreased production volumes in 1997 compared to 1996, net
general and administrative expense per equivalent barrel decreased from $.95 in
1996 to $.80 in 1997.
QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1996
OVERVIEW
Operations in the quarter ended September 30, 1997 (1997) resulted in net income
of $42,000 compared to net income of $86,000 in the quarter ended September 30,
1996 (1996).
REVENUES
Oil and gas sales revenue decreased $46,000 (6%) in 1997 from 1996. Oil price
decreases accounted for a negative variance of -$75,000 (-155%) while
approximately $34,000 (70%) was attributable to an increase in oil production.
Gas volume decreases accounted for a negative variance of -$17,000 (-38%) and an
increase in gas prices accounted for a positive $12,000 (23%) of the total
variance.
VOLUMES AND PRICES
Total liquid production increased 5% from 33,800 barrels in 1996 to 35,600
barrels in 1997 while the price per barrel decreased 11% from $19.61 in 1996 to
$17.48 in 1997. Total gas production decreased 19% from 60,000 MCFs in 1996 to
48,600 MCFs in 1997 while the price per MCF increased 15% from $1.57 in 1996 to
$1.80 in 1997. The decrease in gas production was primarily due to normal
production decline.
EXPENSES
Oil and gas production expense, including production tax, decreased $20,000 (4%)
in 1997 from 1996. The majority of this decrease occurred in production
expense, which decreased $13,000 (3%) in 1997 due to lower lease operating
expenses and workovers. The overall lifting cost per equivalent barrel
decreased 4% from $10.82 in 1996 to $10.39 in 1997.
Depreciation, depletion and amortization expense increased $16,000 (11%) in 1997
from 1996 due to the decrease in the Company's reserves at the end of fiscal
1997. As a result, the average depletion expense per equivalent barrel
increased 12% from $3.13 in 1996 to $3.50 in 1997.
Net general and administrative expense decreased $3,000 (7%) in 1997 from 1996.
This decrease was primarily the result of decreases in outside professional
fees. Increases occurred in general office expenses, which increased $5,000
(28%). As a result of the overall decrease, and in conjunction with decreased
gas production volumes in 1997 compared to 1996, net general and administrative
expense per equivalent barrel decreased from $.94 in 1996 to $.87 in 1997.
(Intentionally left blank)
<PAGE>
LIQUIDS AND NATURAL GAS PRODUCTION, SALES PRICE AND PRODUCTION COSTS
The following table shows selected financial information for the six months and
quarter ended September 30 in the current and prior year. Certain prior year
amounts may have been reclassified to conform to current year presentation.
<TABLE>
<CAPTION>
Six Months Ended Quarter Ended
September 30 September 30
1997 1996 1997 1996
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales volume
Oil (barrels) 68,000 69,200 35,600 33,800
Gas (mcf) 88,600 110,400 48,600 60,000
Revenue
Oil $1,209,000 $1,301,000 $622,000 $662,000
Gas 150,000 179,000 87,000 93,000
---------- ---------- ---------- ----------
1,359,000 1,480,000 709,000 755,000
Total production exp.(1) 917,000 929,000 454,000 474,000
---------- ---------- ---------- ----------
Gross profit $442,000 $551,000 $255,000 $281,000
========== ========== ========== ==========
Depletion expense $272,000 $265,000 $153,000 $137,000
Depl. exp. per BOE(3) $3.29 $3.03 $3.50 $3.13
Average production
expense(2)(3) $11.08 $10.61 $10.39 $10.82
Average sales price(3)
Oil (per barrel) $17.78 $18.79 $17.48 $19.61
Gas (per mcf) 1.69 1.63 1.80 1.57
</TABLE>
- ----------------------------
(1) Operating expenses, including production tax
(2) Operating expenses, including production tax, per equivalent barrel (6 mcf
of gas is equivalent to 1 barrel of oil)
(3) Averages calculated based upon non-rounded figures
(Intentionally left blank)
<PAGE>
PART II. OTHER INFORMATION
(Cumulative from March 31, 1997)
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Subsequent to the quarter just ended, the Company purchased, at auction, a
twenty-percent working interest in a non-operated Red River well in Williams
County, North Dakota. The company spent $30,000 in this effort.
The Company has submitted a sizable offer to an unrelated third party for eight
wells in North Dakota. Management expects to receive a response to this offer
by the end of its third fiscal quarter.
The Company has several other acquisition prospects it is evaluating and expects
to submit offers in the current fiscal quarter.
Item 6. Exhibits and Reports on Form 8-K
None.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
is signed by the following authorized person on behalf of Basic.
BASIC EARTH SCIENCE SYSTEMS, INC.
/s/ Ray Singleton /s/ Karen E. Riner
- ------------------ -------------------
Ray Singleton, President Karen E. Riner, Controller
Principal Accounting Officer
Date: November 14, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets, statements of operations, and statements of cash
flows found on pages 3, 4, 5 and 6 of the Company's Form 10-QSB for the
year-to-date and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 116,000
<SECURITIES> 0
<RECEIVABLES> 332,000
<ALLOWANCES> (45,000)
<INVENTORY> 0
<CURRENT-ASSETS> 614,000
<PP&E> 32,877,000
<DEPRECIATION> (30,447,000)
<TOTAL-ASSETS> 3,118,000
<CURRENT-LIABILITIES> 557,000
<BONDS> 0
0
0
<COMMON> 17,000
<OTHER-SE> 17,000
<TOTAL-LIABILITY-AND-EQUITY> 3,118,000
<SALES> 1,359,000
<TOTAL-REVENUES> 1,371,000
<CGS> 1,275,000
<TOTAL-COSTS> 1,275,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,000
<INTEREST-EXPENSE> 25,000
<INCOME-PRETAX> 76,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 76,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,000
<EPS-PRIMARY> .005
<EPS-DILUTED> .005
</TABLE>
