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 December 31, 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 Identification No.)
incorporation or organization)
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 February 16, 1998: 16,529,487
<PAGE>
BASIC EARTH SCIENCE SYSTEMS, INC.
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION
Page
-----
Item 1. Financial Statements 3
Consolidated Balance Sheets - December 31, 1997
and March 31, 1997 3
Consolidated Statements of Operations - Quarter Ended
and Nine Months Ended December 31, 1997 and
December 31, 1996 5
Consolidated Statements of Cash Flows - Nine Months Ended
December 31, 1997 and December 31, 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis 10
Results of Operations 11
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>
December 31 March 31
1997 1997
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash & cash equivalents $45,000 $97,000
Accounts receivable
Oil and gas sales 218,000 255,000
Joint interest and other receivables 216,000 128,000
Less: allowance for doubtful accounts (50,000) (40,000)
Other current assets 207,000 283,000
------------ ------------
TOTAL CURRENT ASSETS 636,000 723,000
------------ ------------
PROPERTY AND EQUIPMENT
Oil and gas property (full cost method) 32,526,000 32,171,000
Support equipment 447,000 445,000
------------ ------------
32,973,000 32,616,000
Accumulated depletion - FCP (includes
cumulative ceiling limitation charges
of $14,091,000) (30,210,000) (29,812,000)
Accumulated depreciation (367,000) (357,000)
------------ ------------
Net property and equipment 2,396,000 2,447,000
Other noncurrent assets 59,000 75,000
------------ ------------
TOTAL ASSETS $3,104,000 $3,245,000
============ ============
</TABLE>
See accompanying notes.
<PAGE>
Basic Earth Science Systems, Inc.
Consolidated Balance Sheets
Page 2 of 2
<TABLE>
<CAPTION>
December 31 March 31
1997 1997
------------ ------------
(Unaudited)
<S> <C> <C>
LIABILITIES
CURRENT LIABILITIES
Accounts payable $356,000 $466,000
Accrued liabilities 122,000 119,000
------------ ------------
TOTAL CURRENT LIABILITIES 478,000 585,000
Long-term debt, less current portion 684,000 649,000
------------ ------------
TOTAL LIABILITIES 1,162,000 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;
16,529,487 shares outstanding at
December 31 and 16,580,487 shares
outstanding at March 31 17,000 17,000
Additional paid-in capital 22,692,000 22,692,000
Accumulated deficit (20,744,000) (20,683,000)
Less: treasury stock (350,265 shares at
December 31 and 299,265 shares at
March 31); at cost (23,000) (15,000)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 1,942,000 2,011,000
------------ ------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $3,104,000 $3,245,000
============ ============
</TABLE>
See accompanying notes.
<PAGE>
Basic Earth Science Systems, Inc.
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Quarter Ended
December 31 December 31
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUE
Oil and gas sales $1,908,000 $2,288,000 $549,000 $808,000
Well service revenue 18,000 26,000 6,000 9,000
---------- ---------- ---------- ----------
TOTAL REVENUE 1,926,000 2,314,000 555,000 817,000
---------- ---------- ---------- ----------
EXPENSES
Oil and gas production 1,237,000 1,378,000 443,000 589,000
Production tax 172,000 210,000 49,000 70,000
Well service expenses 21,000 26,000 8,000 9,000
Depr., depletion and
amortization 407,000 429,000 128,000 156,000
General & administrative 118,000 130,000 52,000 47,000
---------- ---------- ---------- ----------
TOTAL EXPENSES 1,955,000 2,173,000 680,000 871,000
---------- ---------- ---------- ----------
INCOME (LOSS) FROM
OPERATIONS (29,000) 141,000 (125,000) (54,000)
OTHER INCOME (EXPENSE)
Interest & other income 10,000 13,000 5,000 3,000
Interest expense (42,000) (67,000) (17,000) (22,000)
---------- ---------- ---------- ----------
TOTAL OTHER INC. (EXP.) (32,000) (54,000) (12,000) (19,000)
---------- ---------- ---------- ----------
NET INCOME (LOSS) BEFORE
INCOME TAXES (61,000) 87,000 (137,000) (73,000)
Income taxes --- --- --- ---
---------- ---------- ---------- ----------
NET INCOME (LOSS) $(61,000) $87,000 $(137,000) $(73,000)
========== ========== ========== ==========
BASIC WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 16,561,265 16,580,487 16,523,031 16,580,487
========== ========== ========== ==========
NET INCOME (LOSS)
PER SHARE $(.004) $.005 $(.008) $(.004)
========== ========== ========== ==========
</TABLE>
See accompanying notes.
<PAGE>
Basic Earth Science Systems, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(61,000) $87,000
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation, depletion & amortization 407,000 429,000
Loss on sale of assets 1,000 ---
Change in current assets and current
liabilities:
Accounts receivable, net (45,000) (59,000)
Accounts payable and accrued
liabilities (110,000) 8,000
Other current assets 74,000 (12,000)
Other noncurrent assets 2,000 3,000
Other adjustments 16,000 11,000
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 284,000 467,000
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
Oil and gas property (358,000) (315,000)
Support equipment (3,000) (5,000)
Proceeds from sale of property & equipment --- 1,000
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (361,000) (319,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowing 210,000 132,000
Long-term debt payments (175,000) (270,000)
Purchase of treasury stock (10,000) ---
---------- ----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 25,000 (138,000)
---------- ----------
CASH
Net increase (decrease) (52,000) 10,000
Balance at beginning of period 97,000 92,000
---------- ----------
Balance at end of period $45,000 $102,000
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $42,000 $67,000
</TABLE>
See accompanying notes.
<PAGE>
Basic Earth Science Systems, Inc.
Notes to Financial Statements
December 31, 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
RECLASSIFICATION 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 In June 1997, the 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 statements that is displayed with the same
prominence as other financial statements.
Also, in June 1997, the 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 wells 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 past three fiscal quarters, current assets decreased 12%
from $723,000 at year ended March 31, 1997 (March 31) to $636,000 at December
31, 1997 (December 31) and current liabilities decreased 18% from $585,000 at
March 31 to $478,000 at December 31. Because the change in current liabilities
was greater than the change in current assets, the Company's current ratio
increased from 1.24:1 at March 31 to 1.33:1 at December 31.
The decrease in current assets was due to (1) lower oil and gas sales
receivable; (2) fewer other current assets; and (3) a lower cash balance at
December 31. Oil and gas sales receivable was lower due to decreases in volumes
sold and average oil prices. Other current assets decreased from March 31 due
to the sale of unused lease and well equipment to unrelated third parties or, if
necessary, the transfer of unused equipment to other wells operated by the
Company. The lower cash balance was due to the payment of invoices during the
normal course of business. In addition, invoices related to unanticipated
workovers and planned recompletions during the past three fiscal quarters
contributed significantly to the decrease in cash since March 31. The above-
mentioned decreases more than offset the increase in joint interest and other
receivables, which was higher at December 31 primarily due to two third-quarter
events: (1) the sale of equipment to an unrelated third party and (2) the sale
of the Company's working interest in two non-operated wells in North Dakota.
The decrease in current liabilities since March 31 consisted primarily of
payments of ad valorem and production taxes as well as the payment of invoices
during the normal course of business and the additional volume of workover and
recompletion invoices just mentioned.
Other noncurrent assets have decreased 21% from $75,000 at March 31 to $59,000
at December 31 primarily due to monthly hedging transactions. 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 nine months ended December 31, 1997, long-term debt increased
$35,000 as the result of drawing $210,000 on the Company's line of credit, which
exceeded total principal payments of $175,000. 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 $840,000 at December 31, 1997.
However, with the exception of two months so far this fiscal year, the Company
has made and intends to continue making monthly debt payments in amounts
comparable to prior periods.
On October 31, 1997, the following modifications were made to the Company's
hedging revolving line of credit (RLOC): (1) the maturity date was extended from
December 31, 1997 to December 31, 1998; and (2) the face amount of the loan was
decreased from $900,000 to $150,000. This reduction was made following the
Company's decision to use put options rather than futures contracts as the
Company's primary hedging instrument. There were no changes to the terms of the
Company's declining balance revolving line of credit (DBRLOC). Reference should
be made to the Company's Form 10-KSB for March 31, 1997 for complete disclosure
regarding the Company's debt.
HEDGING At December 31, 1997, the Company had 24 open put options to hedge
future deliveries with maturities ranging from January 1998 through December
1998 at strike prices of $19.00 and $20.00 per barrel.
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.
Despite the Company's increased monthly debt repayment and interest
requirements, 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 the remainder of fiscal year 1998.
STRATEGY IMPLEMENTATION
During 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 and a twenty-six percent interest in a non-operated Red River well
in McKenzie County, North Dakota. The company spent $30,000 and $3,500,
respectively, in these efforts.
The Company has several other acquisition prospects it is evaluating and expects
to submit offers in the current fiscal quarter.
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 nine months ended December 31, 1997 (1997) resulted in a net
loss of ($61,000) compared to net income of $87,000 in the nine months ended
December 31, 1996 (1996).
REVENUES
Oil and gas sales revenue decreased $380,000 (-17%) in 1997 from 1996. Of this
amount, oil price increases accounted for a negative variance of $196,000 (-52%)
and decreases in oil production accounted for a negative variance of $139,000 (-
37%). Gas volume decreases accounted for a negative variance of $62,000 (-16%)
while gas price increases accounted for an $17,000 positive variance (5%).
VOLUMES AND PRICES
Total liquid production decreased 7%, from 102,900 barrels in 1996 to 95,700
barrels in 1997, while the average price per barrel decreased 11% from $19.48 in
1996 to $17.42 in 1997. Total gas production decreased 22% from 163,300 MCF in
1996 to 127,400 MCF in 1997, while the price per MCF increased 8% from $1.74 in
1996 to $1.88 in 1997. Liquid sales were adversely impacted when produced
inventory was not sold in time to be included with third quarter sales. The
decrease in gas production was primarily due to normal production decline.
EXPENSES
Oil and gas production expense, including production tax, decreased $179,000 (-
11%) in 1997 from 1996. Oil and gas production expense would have been $34,000
less in 1997 had it not been for a major wellbore repair on a North Dakota
property. This decrease in production expense, in conjunction with lower sales
volumes, lead to a decrease in the overall lifting cost per equivalent barrel
from $12.20 in 1996 to $11.82 in 1997 (-3%).
Total depreciation, depletion and amortization expense decreased $22,000 (-5%)
in 1997 from 1996 due to the lower sales volumes. Because the change in sales
volumes was greater than the change in depletion expense, the average depletion
expense per equivalent barrel actually increased 6% from $3.21 in 1996 to $3.40
in 1997.
Net general and administrative expense decreased $12,000 (-9%) in 1997 from
1996. Professional fees were lower in 1997, which more than offset an increase
in office expenses. As a result of the overall decrease, which was less than
the decrease in sales volumes in 1997 compared to 1996, net general and
administrative expense per equivalent barrel actually increased slightly from
$1.00 in 1996 to $1.01 in 1997.
QUARTER ENDED DECEMBER 31, 1997 COMPARED TO QUARTER ENDED DECEMBER 31, 1996
OVERVIEW
Operations in the quarter ended December 31, 1997 (1997) resulted in a net loss
of ($137,000) compared to a net loss of ($73,000) in the quarter ended December
31, 1996 (1996).
REVENUES
Oil and gas sales revenue decreased $259,000 (-32%) in 1997 from 1996. Of this
amount, oil production decreases accounted for a negative variance of $126,000
(-49%) while oil price decreases accounted for a negative variance of $120,000
(-46%). Gas volume decreases accounted for a negative variance of $28,000 (-
11%) while an increase in gas prices accounted for a positive $15,000 (6%) of
the total variance.
VOLUMES AND PRICES
Total liquid production decreased 18%, from 33,700 barrels in 1996 to 27,700
barrels in 1997, while the average price per barrel decreased 20%, from $20.88
in 1996 to $16.61 in 1997. Total gas production decreased 27%, from 52,900 MCF
in 1996 to 38,800 MCF in 1997, while the price per MCF increased 19%, from $1.98
in 1996 to $2.36 in 1997. Liquid sales were adversely impacted when produced
inventory was not sold in time to be included with third quarter sales. The
decrease in gas production was primarily due to normal production decline.
EXPENSES
Oil and gas production expense, including production tax, decreased $167,000 (-
25%) in 1997 from 1996. Oil and gas production expense would have been $34,000
less in 1997 had it not been for a major wellbore repair on a North Dakota
property. This decrease in production expense, in conjunction with lower sales
volumes, lead to a decrease in the overall lifting cost per equivalent barrel
from $15.40 in 1996 to $14.40 in 1997 (-7%).
Total depreciation, depletion and amortization expense decreased $28,000 (-18%)
in 1997 from 1996 as a result of lower sales volumes. Because the change in
sales volumes was greater than the change in depletion expense, the average
depletion expense per equivalent barrel actually increased 3% from $3.60 in 1996
to $3.70 in 1997.
Net general and administrative expense increased $5,000 (11%) in 1997 compared
to 1996 primarily as a result of higher office expenses. Because of the overall
increase, and in conjunction with decreased production volumes in 1997 compared
to 1996, net general and administrative expense per equivalent barrel increased
from $1.11 in 1996 to $1.50 in 1997.
<PAGE>
LIQUIDS AND NATURAL GAS PRODUCTION, SALES PRICES AND PRODUCTION COSTS
The following table shows selected financial information for the nine months and
quarter ended December 31 in the current and prior year. Certain prior year
amounts may have been reclassified to conform to current year presentation.
<TABLE>
<CAPTION>
Nine Months Ended Quarter Ended
December 31 December 31
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Production
Oil (barrels) 95,700 102,900 27,700 33,700
Gas (mcf) 127,400 163,300 38,800 52,900
Revenue
Oil $1,668,000 $2,004,000 $459,000 $703,000
Gas 240,000 284,000 90,000 105,000
---------- ---------- ---------- ----------
1,908,000 2,288,000 549,000 808,000
Total production exp.(1) 1,409,000 1,588,000 492,000 659,000
---------- ---------- ---------- ----------
Gross profit $499,000 $700,000 $57,000 $149,000
========== ========== ========== ==========
Depletion expense $398,000 $418,000 $126,000 $153,000
Depl. exp. per BOE(3) $3.40 $3.21 $3.70 $3.60
Average sales price (3)
Oil (per barrel) $17.42 $19.48 $16.61 $20.88
Gas (per mcf) $1.88 $1.74 $2.36 $1.98
Average production
expense (2)(3) $11.82 $12.20 $14.40 $15.50
</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 numbers
(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
None.
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
--------------------
Date: February 16, 1998 Ray Singleton
President and Acting Treasurer
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 45,000
<SECURITIES> 0
<RECEIVABLES> 434,000
<ALLOWANCES> (50,000)
<INVENTORY> 0
<CURRENT-ASSETS> 636,000
<PP&E> 32,973,000
<DEPRECIATION> (30,577,000)
<TOTAL-ASSETS> 3,104,000
<CURRENT-LIABILITIES> 478,000
<BONDS> 0
0
0
<COMMON> 17,000
<OTHER-SE> 17,000
<TOTAL-LIABILITY-AND-EQUITY> 3,104,000
<SALES> 1,908,000
<TOTAL-REVENUES> 1,926,000
<CGS> 1,955,000
<TOTAL-COSTS> 1,955,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 42,000
<INCOME-PRETAX> (61,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (61,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (61,000)
<EPS-PRIMARY> (.004)
<EPS-DILUTED> (.004)
</TABLE>
