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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995 Commission file number 0-5426
------------------------------
THE WISER OIL COMPANY
A DELAWARE CORPORATION
I.R.S. EMPLOYER IDENTIFICATION NO. 55-0522128
8115 PRESTON ROAD, SUITE 400
DALLAS, TEXAS 75225
TELEPHONE: (214) 265-0080
Securities registered pursuant to Section 12(b) of the Act
Title of each class
Common Stock - Par Value, $3.00 Per Share
Registrant has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and
has been subject to such filing requirements for the past 90 days.
As of March 7, 1996, registrant had outstanding 8,939,368 shares of common
stock, $3.00 par value ("Common Stock"), which is registrant's only class of
common stock.
The aggregate market value of registrant's Common Stock held by non-
affiliates based on the closing price on March 7, 1996 was approximately $111
million.
DOCUMENTS INCORPORATED BY REFERENCE
(Specific incorporations are identified under the applicable item herein.)
Portions of the registrant's Annual Report to Stockholders for 1995 and the
Proxy Statement for the May 15, 1995 Annual Meeting of Stockholders (the "1995
Annual Report to Stockholders" and "the Proxy Statement") are incorporated by
reference in Parts I, II, and IV of this Report.
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TABLE OF CONTENTS
DESCRIPTION
Item Page
---- -----
PART I
1. BUSINESS.................................................. 3
2. PROPERTIES................................................ 14
3. LEGAL PROCEEDINGS......................................... 19
4. RESULTS OF VOTES OF SECURITY HOLDERS...................... 19
PART II
5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS.................................... 20
6. SELECTED FINANCIAL AND OTHER DATA.......................... 21
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................ 22
8. FINANCIAL STATEMENTS....................................... 28
9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES...... 28
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......... 29
11. MANAGEMENT REMUNERATION AND TRANSACTIONS................... 29
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................. 29
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............. 29
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K................................................... 30
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THE WISER OIL COMPANY
---------------------
PART I
ITEM 1 - BUSINESS
------------------
The Wiser Oil Company ("Wiser" or the "Company") is a Delaware
corporation formed in 1970, but was originally organized in Oklahoma in
1905. Wiser is currently engaged in the exploration for, production and
acquisition of crude oil and natural gas reserves onshore in the United
States and Canada. The Company has its primary United States oil and gas
property interests located in Texas, New Mexico, Kentucky and Michigan.
Its primary oil and gas property interests in Canada are located in the
Province of Alberta. On December 15, 1993, the Company listed its stock on
the New York Stock Exchange, after having been traded on the NASDAQ Over-
the-Counter market since 1972.
1995 RESULTS
In 1995, Wiser reported net income of $2,193,000 or $0.25 per share on
revenues of $71,681,000. These results compare to 1994 income of $8,988,000
or $1.01 per share on revenues of $65,356,000. Included in 1995 earnings
are pre-tax gains of $14,092,000, primarily from the sale of a portion of
Wiser's security holdings and, to a lesser extent, oil and gas property
sales. Without these gains, Wiser would have reported a $8,111,000 pre-tax
loss in 1995 compared to a pre-tax loss net of $9,367,000 in asset sales of
$65,000 in 1994. The Company's 1995 pre-tax U.S. profit of $1,624,000,
excluding property and security gains, was largely offset by a pre-tax loss
of $9,735,000 in Canada. Canadian results were unfavorably impacted by weak
natural gas prices, higher than anticipated DD&A costs, and a $4,893,000
non-cash property impairment charge. Operating cash flow for 1995 was $19.2
million.
Wiser's 1995 oil and condensate sales increased 10%, while 1995
natural gas sales declined 13%. The sharp decline in gas revenues was
fueled by a 21% drop in price from $1.73 per MCF in 1994 to $1.37 per MCF
from 1995. This decrease in price was offset by increased sales volumes of
1.1 million MCF or 10% from 1994. The daily production averaged
approximately 5,700 BBL of oil, 33,346 MCF of natural gas, and 642 BBL of
Natural Gas Liquids.
The Company's estimated proved reserves at December 31, 1995, were
50,527,000 Barrels of Oil Equivalent (BOE), of which 64% was oil. The
Company increased its proved reserves by 22% over 1994.
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WISER'S GROWTH STRATEGY
The Company's growth in production, proved reserves, and cash flow is
through a combination of acquisitions, moderate risk exploration and
exploitation of its inventory of existing projects. The Company also
emphasizes reducing operating costs and selling marginal or nonstrategic
properties.
The Company believes the reduced margins and low domestic returns will
continue to cause the major integrated oil companies' migration of
investments overseas, and that undercapitalized domestic independents will
continue to be compromised by ongoing price volatility. These events will
create opportunities by bringing desirable properties to market. Wiser
believes that it has the financial resources and skills to take advantage
of these opportunities.
For Wiser, a property acquisition is only one phase in a continuing
process of business growth. Acquisitions are followed by a cycle of
reserve enhancement, property consolidation and cash flow acceleration,
enabling asset growth and debt reduction. This approach requires well-
planned and carefully executed property development and commitment to a
selective program of ongoing property dispositions. Wiser targets
acquisitions that have ascertainable additional reserve potential, Wiser
applies an active drilling, workover and recompletion program to the
acquired undeveloped and partially developed properties. Wiser prefers to
operate its properties so that it can best influence their exploitation,
and the Company therefore operates over two thirds of its production.
In 1991, Wiser embarked on a plan to cautiously increase its
exploration risk profile by drilling prospects with larger reserves
potential per well, taking larger working interests in attractive
prospects, and concentrating on properties with significant additional
development drilling opportunities. To achieve these goals while
controlling risk at an acceptable level, a program was implemented to
identify prospects in a handful of focus areas where three dimensional (3-
D) seismic technology can be used to reduce risk and where there are
multiple well drilling opportunities. Four major onshore areas were
identified: the Permian Basin of West Texas and New Mexico, the Gulf of
Texas and Louisiana.
While Wiser's focus is on medium risk prospects where technology can
improve project economics, the Company also evaluates selected higher
potential/high risk opportunities and will allocate a small portion of its
exploration budget to these projects where there appears to be exposure to
large reserve potential at reasonable cost.
This focused approach to exploration maximizes Wiser's resources and
allows the Company to limit its investment in unproven properties by
maintaining holdings in undeveloped leases only in areas of active
interest. At yearend 1995, Wiser held 122,378 net acres of undeveloped
oil and gas leases.
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The Company's domestic exploration and production activities are in
four principal areas, West Texas, San Juan Basin, Kentucky and Michigan.
In addition, the Company recently acquired assets in Canada which are
discussed further in Recent Acquisitions and Rationalizations.
WEST TEXAS
The West Texas area includes the Permian Basin of both Texas and New
Mexico. Since 1991, the Company has participated in 3-D seismic activity in
the Horseshoe Atoll area and made acquisitions in both New Mexico and Texas
which have made this area the Company's largest and most important.
The Scurry Reef 3-D Seismic Project
-----------------------------------
In the Horseshoe Atoll area, only a few exploration opportunities
remain to be drilled from an original 3-D survey. During 1995, the Company
drilled eight wells, five of which were successfully completed. The most
significant well was the O'Daniel B1 well, drilled on the Bull's Ear
Prospect. Wiser has a 60% working interest in the well, which encountered
natural gas in the Cisco Reef. The Company's working interest in the other
four wells ranged between 15% and 17%. There are approximately six
prospects remaining in Wiser's Pinnacle Reef prospect inventory.
Wellman Unit, Terry County, Texas
---------------------------------
Wiser has a 62% working interest in the Wellman Unit, a Wolfcamp Reef
reservoir located on the northwest edge of the Horseshoe Atoll in the
Permian Basin. Wellman produces from an 824 foot gross section under a
carbon dioxide (CO\\2\\) enhanced recovery flood. A $6.0 million gross AFE
to install CO\\22\\ membranes and reactivate the gas plant was completed in
June 1995. Gross natural gas liquids (NGL) averaged 925 barrels per day
(BPD) since this time.
An active remedial program increased gross oil production by 10% over
1994 volumes to 1,951 BOPD. During the last six months of 1995, oil
production averaged over 2,100 BOPD.
Operating costs were again significantly lower than originally
expected primarily due to the purchased CO\\2\\ volumes being reduced to
three MMCF per day due to high bottom hole pressure. This decrease in
purchased CO\\2\\volume reduces gross operating costs by $3.0 million per
year. It is expected to continue at this lower-purchased volume rate for
at least two more years.
An active remedial program will continue into 1996 to maintain current
production rates. A compressor reactivation should be completed by June
1996 to gain an additional 4 million MCF per day of reinjection capacity
which will accelerate production rates by over 300 barrels of liquids per
day for a total gross cost of $500,000.
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Maljamar Area, Lea County, New Mexico
-------------------------------------
In the Maljamar area of Lea County, Wiser has a 100% working interest
in two oil units with substantial waterflood potential. After a successful
six well pilot program in 1993, the Company began a multi-year 79 well
drilling program in 1994 to increase well density to 20 acres spacing from
40 acres currently and reduce the five spot water injection pattern to 40
acres from 80 acres.
In a further expansion of our efforts in the Maljamar area, Wiser
traded for and assumed operatorship of the Skelly Unit on September 1,
1995. This unit, formerly operated by Texaco, will be developed in a
fashion similar to that planned for the other two units (discussed further
in Recent Acquisitions and Rationalizations).
Wiser plans to spend $48.0 million exploiting these three units over
the next two years. Average gross production from the area at December 31,
1995 was 1,300 BBL of oil per day and is expected to increase to 4,000 BBL
per day at December 31, 1996, and 5,400 BBL per day at December 31, 1997.
In order to capture the economy of scale provided by the now three
unit development project, closer cooperation with several large service
companies was investigated during 1995. At the end of that investigation,
alliance agreements were finalized with Halliburton and Continental Emsco.
The services provided by these two companies cover approximately 35% of the
remaining capital cost for this project and significant cost reductions are
expected to result from these arrangements. In fact, a 10% reduction
relative to our pre-alliance cost basis has already been achieved,
representing almost $2,000,000 in savings for the project as a whole.
SAN JUAN BASIN, NEW MEXICO
Wiser has small non-operated interests in over 2,200 natural gas wells
in the San Juan Basin of Northwestern New Mexico. Its share of daily
production averaged 6,650 MCFD of natural gas in 1995 versus 5,160 MCFD in
1994. Approximately half of Wiser's San Juan Basin output is from coal
seams, which generate Section 29 tax credits. During 1995, the Company
participated in a 15 well Dakota/Mesaverde drilling program in the Rincon
Unit, where it owns a 2.5% working interest. All of the wells were
successfully completed and are on production. During the year, the Company
also began marketing directly a portion of its production and, through new
gathering agreements, has increased deliveries from its properties.
Although Wiser does not operate in this area and its working interests are
small, these properties represent a steady, long-lived production base that
provide a reliable ongoing stream of cash flow and tax credits.
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KENTUCKY
Wiser has operated in Kentucky since 1917 and has interest in 22
shallow natural gas fields with over 300 wells. In most of its Kentucky
wells, the Company has a 100% working interest. Although daily production
from individual wells is low, this Appalachian production receives a
premium price because of its location near high-value markets in the
Northeastern United States. Typically, Wiser's gas is priced at a premium
to the benchmark price for natural gas traded on New York Mercantile
Exchange. In addition, Wiser owns and operates an extensive gas gathering
system in Kentucky and Tennessee, which gives it a strategic position to
deliver gas to market at low cost.
In early 1995, Wiser expanded its Appalachian operations by acquiring
a 75% interest in several gas properties in Clay and Kanawha Counties, West
Virginia, including 13,431 acres mostly held by production and began an
active drilling program during the year (discussed further in Recent
Acquisitions and Rationalizations).
During 1995, net sales from the Kentucky and West Virginia operations
were 7,700 MCFD of natural gas compared to 6,050 MCFD in 1994. Operating
costs were reduced during the year and efficiency improved through reducing
personnel and increasing employee productivity. Improved lift systems were
installed to maximize deliverability and well equipment from marginal
producers is being redeployed in drilling operations. Through these
efforts, lifting costs in Kentucky were reduced to less than $4.00 per BOE
from a cost in excess of $5.00 per BOE.
Wiser drilled nine wells in Kentucky during 1995 with four gas and two
oil completions. In its new West Virginia operation, the Company
successfully completed seven natural gas wells, with eight additional wells
scheduled for early 1996.
MICHIGAN
Wiser owns a 99.5% working interest in the South Buckeye Dundee
waterflood project which was largely completed in 1992. In 1994, one
additional well was drilled, which offset natural declines. As a result,
net oil production for the year averaged 485 BPD, and output is expected
to decline slowly over the foreseeable future.
RECENT ACQUISITIONS AND RATIONALIZATIONS
Canadian Acquisition
--------------------
The Wiser Oil Company Canada Ltd. ("Wiser Canada") was formed in June
1994 to acquire US$53 million in Canadian oil and gas assets from Eagle
Resources Ltd. The Eagle acquisition and the formation of the Canadian
subsidiary represented a significant strategic development for The Wiser
Oil Company by creating an important new core focus area for the Company
and greatly expanding its exploration opportunities. As part of the
acquisition, Wiser Canada acquired:
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[ ] Proved reserves (after royalties of 21.4 BCF of natural gas and
3.7 million barrels of crude oil and other liquids
[ ] Probable reserves (before royalties) of 8 BCF and 1.5 million
barrels
[ ] Exploration prospects, many of which were ready to drill
[ ] 99,000 net undeveloped leasehold acres
[ ] An extensive seismic database
As part of the transaction, Wiser Canada also acquired an interest in
a favorable natural gas sales contract, as well as accounting, land,
marketing and operating systems and equipment. In addition, the Company
will receive significant tax benefits from certain tax attributes of the
acquired properties.
Substantially all of Wiser Canada's properties are located in Alberta
and are balanced between oil and natural gas. Eight fields account for more
than 70% of total reserves. The most important fields include two Wiser
operated fields: the Evi oil field, a Paleozoic Granite Wash sandstone
producer that accounts for 21% of the Company's total reserves, and the
Grande Prairie oil field, which produces from the Triassic Halfway
Formation and accounts for 13% of total reserves. The Provost (Wiser
operated), Leahurst and Pine Creek Fields account for another 24% of
reserves.
Net daily production (after royalties) during 1995 averaged 1,850 BPD
of liquids and 705 MCFD of natural gas from 242 gross wells (68 net wells).
Wiser Canada is currently active in seven principal Alberta plays:
Pine Creek, Groat, Evi, Provost, Portage, Maria and Joan. During 1995, the
Company participated in the drilling of 13 wells (8 net), of which 7
wells (4 net) were successful. On a net well basis, the Company has a 50%
success rate. Spending in Canada totaled $9.6 million in 1995, most of
which was for exploration and development. Drilling activities accounted
for more than 1.2 million equivalent barrels of reserve additions, more
than replacing production during the year. Combined with upward revisions
and reserve purchase, reserve additions were 184% of production during the
year.
Agaritta Field Sale and Subsequent Acquisitions
-----------------------------------------------
During February 1995, The Wiser Oil Company sold its interest in the
Agaritta Field and several smaller properties located in Concho County,
Texas, to a private company. Wiser operated the 59.9% owned Agaritta
Field, which it discovered in 1989, and drilled a total of 55 wells through
1994. The sale price was $6.2 million and the total proved reserves at
February 28, 1995 was estimated to be 704,000 BOE.
In February 1995 and March 1995, Wiser purchased properties in
Louisiana, Texas and West Virginia in two unrelated transactions. The
Louisiana and Texas properties were purchased from a private company in
Midland, Texas, for $2.5 million. Total proved reserves, all of which are
producing, are estimated to be 2.0 BCF of natural gas. Approximately 83%
of the reserves are located in Reeves County, Texas, one of the
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Company's primary focus areas.
The West Virginia properties were purchased for approximately $3.4
million, and have an estimated 5.0 BCF of proved reserves. The properties
are located in Clay and Kanawha Counties, West Virginia and include a 75%
working interest in 55 wells, 16,000 undeveloped acres on the
properties and a field gathering system. Wiser has agreed to drill a
minimum of 15 wells on the properties by December 1996. The Company has
drilled 7 wells during 1995, and plans to drill the other 8 wells in 1996.
These transactions were completed as a tax-free exchange and resulted
in a net increase of 502,000 BOE of total proved reserves. The acquired
properties have a much longer reserve life than the Agaritta Field which
will cause a modest reduction in our operating income and cash flow in 1995
and 1996. However, management believes that the increase in proved
reserves plus the West Virginia developmental opportunities will add
substantially more long term value to the Company.
Skelly Field Property Exchange
------------------------------
In a further expansion of our efforts in the Maljamar area, Wiser
traded for and assumed operatorship of the Skelly Unit on September 1,
1995. Wiser traded several Permian Basin properties for the Skelly Unit.
The deal netted Wiser 5.3 million BOE's. Wiser traded 7.7 BCF and 774,000
BBL of crude oil and liquids for 2.7 BCF and 6,946,000 BBL of crude oil.
In addition, Wiser will have to incur approximately $30.9 million to
develop this property over the next two years.
Property Rationalization
------------------------
As part of the Company's goal of focusing its operations in a small
number of key areas, Wiser completed an active domestic property
rationalization program during the year. In 1994, the Company sold oil and
gas properties with reserves of 2.7 million BOE. Most of these properties
had either marginal revenues, high operating expenses or high depletion
rates. Wiser completed the transactions without intermediaries, which
resulted in an efficient and timely sales process with maximum financial
yields. Proceeds of approximately $14 million were used to reduce debt.
Because of the active divestiture program in 1994, few properties were
earmarked for disposition in 1995. However, several unusual opportunities
materialized which allowed Wiser to make tax-free exchanges of mature or
non-strategic reserves for properties that hold greater long-term potential
for the Company (discussed further in Recent Acquisitions and
Rationalizations). The Company completed property exchanges with a total
value of $14 million.
Future Acquisitions
-------------------
Wiser regularly pursues and evaluates acquisition opportunities and at
any given time may be in various stages of evaluating such opportunities.
Such stages may take the form of internal financial and oil and gas
property analysis, preliminary due diligence, the
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submission of an indication of interest, preliminary negotiations,
negotiation of a letter of intent, or negotiation of a definitive
agreement. While Wiser is currently evaluating a number of potential
acquisition opportunities (some of which could be material in size to
Wiser), it has not signed a letter of intent with respect to any such
material acquisition and currently has no assurance of completing any
particular material acquisition or of entering into negotiations with
respect to any particular material acquisition.
Although Wiser expects that its primary acquisition focus for 1996
will be in areas where it currently operates wells, it may acquire
properties located outside those areas if desirable opportunities arise.
Wiser may also acquire interests in producing or other properties located
offshore United States, in foreign countries, or offshore foreign
countries. Future acquisitions of properties may take many forms,
including purchases for cash or securities, and may include various forms
of direct or indirect ownership of oil and gas properties or companies
associated with the oil and gas business.
OIL AND NATURAL GAS PRICES
In the current market environment, natural gas prices remain volatile.
Until recently, demand for natural gas has tended to be seasonal in nature,
with peak demand and higher prices occurring in the colder winter months.
Wiser's gas price averaged $1.73 per MCF in 1994, 21% higher than the 1995
average of $1.37 per MCF.
Oil prices, especially vulnerable to complex and unpredictable
political and economic forces, plunged to a five year low in December 1993.
Management believes that, absent a comprehensive U.S. energy policy, oil
prices will continue to fluctuate in response to changes in the policies of
the Organization of Petroleum Exporting Countries and events in the Middle
East. Wiser's oil price averaged $16.91 in 1995 or 8% higher than the prior
year average of $15.60.
From time to time, Wiser buys or sells contracts for the future
delivery of oil or gas to hedge a limited portion of its production against
exposure to spot market price changes. See Note 1 to the Company's
financial statements under Item 8 below.
The Company's business will be affected by future changes in domestic
and international oil and gas prices and the relationship between oil and
gas prices. No assurance can be given as to the trend in, or level of,
future oil and gas prices.
GOVERNMENTAL REGULATION OF THE OIL AND GAS INDUSTRY
The Company's exploration, production and marketing operations are
regulated extensively at the federal, state and local levels, as well as by
other countries, in which the Company does business. Oil and gas
exploration, development and production activities are subject to various
laws and regulations governing a wide variety of matters. For example,
hydrocarbon-producing states have statutes or regulations addressing
conservation practices and the protection of correlative rights, and such
regulations may
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affect Wiser's operations and limit the quantity of hydrocarbons Wiser may
produce and sell. Other regulated matters include marketing, pricing,
transportation, and valuation of royalty payments.
Federal legislation and regulatory controls in the United States have
historically affected the price of the natural gas produced by the Company
and the manner in which such production is marketed. The transportation
and sales for resale of natural gas in interstate commerce are regulated
pursuant to the Natural Gas Act of 1938 (the "NGA"), the Natural Gas Policy
Act of 1978 (the "NGPA") and the FERC regulations promulgated thereunder.
Maximum selling prices of "first sales" of certain categories of natural
gas, whether sold in interstate or intrastate commerce, previously were
regulated pursuant to the NGPA. "First sales" typically include sales made
by producers and by non-pipeline, non-local distribution company marketers
of natural gas. The NGPA established various categories of natural gas and
provided for gradual deregulation of prices for such sales of several
categories of natural gas. All price deregulation contemplated under the
NGPA has now taken place. Effective January 1, 1993, the Natural Gas
Wellhead Decontrol Act of 1989 deregulated natural gas prices for all
"first sales" of natural gas, which includes all sales by the Company of
its own production; consequently, sales of the Company's natural gas
currently may be made at market prices, subject to applicable contract
provisions.
The FERC also regulates interstate natural gas pipeline transportation
rates and service conditions, which affect the marketing of natural gas
produced by the Company, as well as the revenues received by the Company
for sales of such natural gas. Since the latter part of 1985, through
Order No. 436, Order No. 500 and Order No. 636 rule makings, the FERC has
endeavored to make natural gas transportation more accessible to gas buyers
and sellers on an open and non-discriminatory basis. The FERC's efforts
have significantly altered the marketing and pricing of natural gas. A
related effort has been made with respect to intrastate pipeline operations
pursuant to the FERC's NGPA Section 311 authority, under which the FERC
establishes rules by which intrastate pipelines may participate in certain
interstate activities without becoming subject to full NGPA jurisdiction.
These orders have gone through various permutations, but have generally
remained intact as promulgated. The FERC considers these changes necessary
to improve the competitive structure of the interstate natural gas industry
and to create a regulatory framework that will put natural gas sellers into
more direct contractual relations with natural gas buyers than has
historically been the case.
The FERC's latest action in this area, Order No. 636 issued April 8,
1992, reflected the FERC's finding that under the current regulatory
structure, interstate pipelines and other gas merchants, including
producers, do not compete on a "level playing field" in selling natural
gas. The FERC asserted that Order No. 636 was designed to equalize that
marketplace. This equalization process was to be implemented through
negotiated settlements in individual pipeline service restructuring
proceedings, designed specifically to "unbundle" those services (e.g.,
transportation, sales and storage) provided by any interstate pipeline so
that producers of natural gas may secure services from the most economical
source, whether interstate pipelines or other parties. In many instances,
the
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result of the FERC initiatives has been to substantially reduce or bring to
an end the interstate pipelines' traditional role as wholesalers of natural
gas in favor of providing only storage and transportation services. The
FERC has issued final orders in virtually all pipeline restructuring
proceedings.
ENVIRONMENTAL MATTERS
Wiser, as an owner or lessee and operator of oil and gas properties,
is subject to various federal, state, local and foreign country laws and
regulations relating to discharge of materials into, and protection of, the
environment. These laws and regulations may, among other things, impose
liability on the lessee under an oil and gas lease for the cost of
pollution clean-up resulting from operations, subject the lessee to
liability for pollution damages, require suspension or cessation of
operations in affected areas and impose restrictions on the injection of
liquids into subsurface aquifers that may contaminate groundwater.
Wiser has made and will continue to make expenditures in its efforts
to comply with these requirements, which it believes are necessary business
costs in the oil and gas industry. These costs are inextricably connected
to normal operating expenses such that the Company is unable to separate
the expenses related to environmental matters; however, the Company does
not believe any such additional expenses materially affect its business.
Although environmental requirements do have a substantial impact upon the
energy industry, generally these requirements do not appear to affect Wiser
any differently or to any greater or lesser extent than to other companies
in the industry.
Wiser does not believe that compliance with federal, state or local
provisions regulating the discharge of Wiser's materials into the
environment, or otherwise relating to the protection of the environment,
will have a material adverse effect upon the capital expenditures, earnings
or competitive position of the Company or its subsidiaries, but there is no
assurance that changes in or additions to laws or regulations regarding the
protection of the environment will not have such an impact.
OPERATIONAL RISKS AND INSURANCE
The Company's operations are subject to the usual hazards incident to
the drilling and production of oil and natural gas, such as blowouts,
catering, explosions, uncontrollable flows of oil, natural gas or well
fluids, fires, formations with abnormal pressures, pollution, releases of
toxic gas and other environmental hazards and risks. These hazards can
cause personal injury and loss of life, severe damage to and destruction of
property and equipment, pollution or environmental damages and suspension
of operations. As a result, the Company could incur substantial
liabilities to third parties or governmental entities, the payment of which
could reduce or eliminate the funds available for development, acquisitions
or exploration, or result in the loss of the Company's properties.
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The Company maintains insurance of various types to cover its
operations. The Company presently maintains a $1 million general liability
policy and a $20 million excess liability policy. The Company also carries
additional insurance, including policies covering certain commercial
property (including the Company's gas gathering and processing plants),
workers' compensation policies, a business auto policy and an electronic
equipment protection policy.
The Company's insurance does not cover every potential risk associated
with the drilling and production of oil and natural gas. Among other
things, coverage is not obtainable for certain types of environmental
hazards. The occurrence of a significant adverse event, the risks of which
are not fully covered by insurance, could have a material adverse effect on
the Company's financial condition and results of operations.
COMPETITION
The oil and gas industry is highly competitive. As an independent oil
and gas company, the Company frequently competes for reserve acquisitions,
exploration leases, licenses, concessions and marketing agreements against
companies with substantially larger financial and other resources that the
Company possesses.
EMPLOYEES
On December 31, 1995, Wiser had 123 full-time employees.
OFFICES
Wiser's principal office is located at 8115 Preston Road, Suite 400,
Dallas, Texas 75225. The Company maintains a regional office in Corbin,
Kentucky. The office of Wiser's Canadian subsidiary, The Wiser Oil Company
Canada Ltd. is 645 7th Avenue, S.W., Suite 2550, Calgary, Alberta T2P-4G8.
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ITEM 2 - PROPERTIES
-------------------
PRODUCTIVE OIL AND GAS WELLS
The following table sets forth, as of December 31, 1995, Wiser's
productive oil and gas wells (both producing wells and wells capable of
production). The numbers in parentheses indicate the number of wells with
multiple completions.
United States Canada Total
------------- ------ -----
Gross Wells (a)
Oil 839 170 1,009
Gas 2,641 72 2,713
----- --- -----
Total 3,480 242 3,722
===== === =====
Net Wells (b)
Oil 582 43 625
Gas 397 25 422
----- --- -----
Total 979 68 1,047
===== === =====
(a) The total number of wells in which interests are owned.
(b) The sum of fractional interests.
Approximately 2,200 of the Company's gross gas wells are located in the
San Juan Basin. The Company has a non-operated working interest in these wells
ranging from .5% to 2.5%.
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<PAGE>
WELLS DRILLED
In the table below are the gross and net wells drilled by the Company
in the United States and Canada for the years ended December 31, 1995,
1994, and 1993.
UNITED STATES CANADA (1) TOTAL
------------- ----------- ------------
1995 Gross Net Gross Net Gross Net
----- ----- ------ --- ----- -----
Exploratory:
Oil 6 2 0 0 6 2
Gas 3 1 3 2 6 3
Dry 10 3 4 2 14 5
-- -- -- - -- --
Total 19 6 7 4 26 10
Development:
Oil 24 20 0 0 24 20
Gas 24 7 4 2 28 9
Dry 2 2 2 2 4 4
-- -- -- - -- --
Total 50 29 6 4 56 33
-- -- -- - -- --
TOTAL 1995 69 35 13 8 82 43
1994
Exploratory:
Oil 4 1 2 1 6 2
Gas 0 0 1 1 1 1
Dry 7 2 7 3 14 5
-- -- -- - -- --
Total 11 3 10 5 21 8
Development:
Oil 14 12 1 0 15 12
Gas 20 3 0 0 20 3
Dry 6 2 1 0 7 2
-- -- -- - -- --
Total 40 17 2 0 42 17
-- -- -- - -- --
TOTAL 1994 51 20 12 5 63 25
1993
Exploratory:
Oil 11 5 11 5
Gas 2 1 2 1
Dry 17 5 17 5
-- -- -- --
Total 30 11 30 11
Development:
Oil 16 10 16 10
Gas 7 2 7 2
Dry 4 3 4 3
-- -- -- --
Total 27 15 27 15
-- -- -- --
TOTAL 1993 57 26 57 26
(1) Prior to 1994 all operations were located in the United States.
15
<PAGE>
ACREAGE
The undeveloped and developed leased acreage that Wiser held as of
December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Undeveloped Developed
----------- ---------
Gross Acres Net Acres Gross Acres Net Acres
<S> <C> <C> <C> <C>
Alabama 1,225 189 0 0
Illinois 315 141 0 0
Kentucky 21,665 20,840 80,634 72,583
Louisiana 1,170 246 2,933 589
Michigan 919 88 5,362 4,960
N. Dakota 18,619 2,309 1,480 353
New Mexico 4,977 4,377 29,634 21,989
Ohio 205 205 181 85
Tennessee 2,266 2,030 4,879 4,716
Texas 26,454 8,241 44,501 19,019
West Virginia 4,379 3,065 14,855 10,366
Wyoming 60 1 0 0
Canada, Alberta 162,516 78,338 54,736 18,048
Canada, British Columbia 4,678 2,308 519 114
--------- ------- ------- -------
249,448 122,378 239,714 152,822
========= ======= ======= =======
</TABLE>
The undeveloped and developed mineral and royalty acreage that Wiser held
as of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
Undeveloped Developed
----------- ---------
Gross Acres Net Acres Gross Acres Net Acres
<S> <C> <C> <C> <C>
Alabama 1,029 45 0 0
Arkansas 2,773 340 40 5
Colorado 22,276 1,256 640 43
Kentucky 661 501 6,273 6,098
Michigan 3,404 323 1,695 144
Montana 350,923 64,987 42,804 8,482
New Mexico 5,950 703 12,013 1,185
N. Dakota 753,421 105,462 65,968 8,437
Oregon 36,671 3,113 0 0
Ohio 0 0 80 50
Oklahoma 2,367 710 3,522 2,342
South Dakota 37,613 4,846 4,400 393
Tennessee 0 0 164 164
Texas 8,936 2,307 32,879 2,533
Utah 42,115 6,112 33,747 593
Wyoming 8,166 381 2,666 234
Canada, Saskatchewan 24,936 3,197 1,760 163
Canada, Manitoba 5,120 387 0 0
Other (17 states) 93,320 9,677 0 0
--------- ------- ------- -------
1,399,681 204,347 208,651 30,866
========= ======= ======= =======
</TABLE>
16
<PAGE>
PRODUCTION, PRICE AND COST
The following table sets forth, for the three years ended December 31,
Wiser's production, average prices and production cost of oil and gas.
Production costs are the costs incurred in lifting the oil and gas to the
surface and include gathering, treating, primary processing, field storage,
property taxes and insurance on proved properties, but do not include
depreciation, depletion and amortization, royalties, income taxes, interest,
general and administrative and other expenses.
1995 1994 1993 (1)
------ ------ --------
Production:
Oil (MBBL)
United States 1,445 1,794 1,323
Canada 635 310 -
------ ------ -------
Total Company 2,080 2,104 1,323
Gas (MMCF)
United States (2) 9,418 9,804 8,296
Canada 2,753 1,272 -
------ ------ -------
Total Company 12,171 11,076 8,296
NGL (MBBL)
United States 212 163 145
Canada 40 10 -
------ ------ -------
Total Company 252 173 145
Average Prices:
Oil (per BBL)
United States 17.14 15.48 16.44
Canada 16.38 16.32 -
------ ------ -------
Total Company 16.91 15.60 16.44
Gas (per MCF)
United States 1.46 1.79 2.07
Canada 1.05 1.23 -
------ ------ -------
Total Company 1.37 1.73 2.07
NGL (per BBL)
United States 9.67 8.93 9.42
Canada 12.45 10.15 -
------ ------ -------
Total Company 10.11 9.00 9.42
Average Cost per BOE (3)
United States 5.37 5.74 6.27
Canada 2.76 3.22 -
------ ------ -------
Total Company 4.74 5.41 6.27
(1) Prior to 1994 all of the Company's reserves were located in the United
States.
(2) Natural gas sales volumes have been increased for volumes attributable
to resales as follows: 1995 -500 MMCF, 1994 - 469 MMCF, and 1993 - 666
MMCF.
(3) Gas volumes have been converted to equivalent barrels based on a 6:1
ratio.
17
<PAGE>
ESTIMATED RESERVE AND RESERVE VALUE INFORMATION
The following information relating to estimated reserve quantities, reserve
values and discounted future net revenues is derived from, and in its entirety
by reference to, the more complete reserve and revenue information and
assumptions included in the Company's financial statements under Item 8 below.
There are numerous uncertainties inherent in estimating quantities of proved
reserves and projecting future rates of production and timing of development
expenditures. The following reserve information represents estimates only and
should not be construed as being exact.
1995 1994 1993
-------- -------- --------
Estimated Proved Reserves:
Oil, Condensate & NGL (MBBL) 32,208 23,430 21,242
Natural Gas (MMCF) 109,915 107,920 103,317
Barrels of Oil Equivalent (MBOE) 50,527 41,417 38,462
Future Net Revenue before taxes (M$) 401,037 272,776 241,251
Present Value of Future Net
Revenues before taxes (M$) 235,416 160,804 137,149
Estimated Proved Developed Reserves:
Oil, Condensate & NGL (MBBL) 21,556 18,799 17,112
Natural Gas (MMCF) 102,026 98,370 96,069
Barrels of Oil Equivalent (MBOE) 38,560 35,194 33,124
Average Prices Used In Value Calculation:
Oil & Condensate (per BBL) $ 18.19 $ 16.11 $ 13.35
Natural Gas Liquids $ 12.87 $ 9.80 $ 9.07
Natural Gas (per MCF) $ 1.84 $ 1.57 $ 2.34
See supplementary financial information of the 1994 Annual Report for
additional information.
The Company believes that no major discovery or other favorable or adverse
event has occurred since December 31, 1995, which would cause a significant
change in the estimated proved reserves reported herein. The estimates above are
based on year-end pricing in accordance with the Securities and Exchange
Commission guidelines and do not reflect current prices.
TITLE TO INTERESTS
The Company believes that its title to the various interests set forth
above is satisfactory and consistent with the standards generally accepted in
the oil and gas industry, subject only to immaterial exceptions which do not
detract substantially from the value of the interests or materially interfere
with their use in the Company's operations. The interest owned by the Company
may be subject to one or more royalty, overriding royalty and other outstanding
interests customary in the industry. The interest may additionally be subject to
burdens such as net profits interests, liens incident to operating agreements
and current taxes, development obligations under oil and gas leases and other
18
<PAGE>
encumbrances, easements and restrictions, none of which detract substantially
from the value of the interest or materially interfere with their use in the
Company's operations.
ITEM 3 - LEGAL PROCEEDINGS
---------------------------
The Company and its subsidiaries and affiliates are named defendants
in lawsuits and are involved in governmental proceedings from time to
time, all arising in the ordinary course of business. Although the outcome
of these lawsuits and proceedings cannot be predicted with certainty,
management does not expect these matters to have a material adverse effect
on the financial position of the Company.
ITEM 4 - RESULTS OF VOTES OF SECURITY HOLDERS
----------------------------------------------
No matters were submitted to security holders during the fourth
quarter of the year ended December 31, 1995.
19
<PAGE>
THE WISER OIL COMPANY
---------------------
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND
------------------------------------------------------
RELATED SECURITY HOLDER MATTERS
-------------------------------
Wiser's common stock, par value $3.00 per share, began trading on the
New York Stock Exchange on December 15, 1993, under the symbol WZR,
previously the stock had traded Over-the-Counter with the NASDAQ symbol:
WISE.
The quarterly high and low sales prices for the Common Stock of The
Wiser Oil Company and dividends per share during the years ended December
31, 1995, 1994 and 1993 were as follows:
High Low Dividends
---- --- Paid
----
1995
1st Quarter $14.75 $13.38 $.10
2nd Quarter 15.00 13.13 .10
3rd Quarter 14.38 13.00 .10
4th Quarter 13.75 10.88 .10
1994
1st Quarter 18.88 15.75 .10
2nd Quarter 16.63 15.00 .10
3rd Quarter 17.38 15.75 .10
4th Quarter 17.75 13.13 .10
1993
1st Quarter 15.63 13.13 .10
2nd Quarter 18.13 15.38 .10
3rd Quarter 17.25 15.50 .10
4th Quarter 19.13 16.00 .10
At March 1, 1996, the Company's 8,939,368 shares of common stock
outstanding were held by approximately 1,164 shareholders of record and
approximately 4,100 beneficial owners.
Each share of the Company's common stock also represents one common
stock purchase right which, under certain circumstances, would entitle the
holder to acquire additional shares of common stock. Refer to Item 14(B)
2.
The Company does not have a dividend policy, although it has paid cash
dividends for the previous 101 quarters. Dividends are reviewed and
declared by the Board of Directors each quarter, and no assurances can be
made as to the amount or whether such dividends will be continued in the
future.
20
<PAGE>
ITEM 6 - SELECTED FINANCIAL AND OTHER DATA
-------------------------------------------
The following table presents selected financial and operating information
for each of the five years ended December 31. Share and per share amounts
refer to common shares. The following information should be read in
conjunction with the financial statements presented elsewhere herein.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
FINANCIAL DATA (000's except per
Share Data)
Revenues $ 71,681 $ 65,356 $ 42,921 $ 40,182 $ 41,992
Net Income $ 2,193 $ 8,988 $ 1,016 $ 477 $ 2,498
Operating Cash Flow $ 19,239 $ 23,134 $ 16,777 $ 17,653 $ 22,007
Cash and Cash Equivalents $ 1,397 $ 2,714 $ 3,499 $ 14,525 $ 16,581
Long Term Debt $ 74,171 $ 78,013 $ 46,777 $ 213 $ 265
Stockholders' Equity $ 101,132 $ 105,427 $ 105,116 $ 87,241 $ 90,339
Total Assets $ 203,407 $ 210,791 $ 177,782 $ 102,340 $ 106,894
Shares Outstanding 8,939 8,939 8,939 8,938 8,938
Per Share Data
Net Income* $ .25 $ 1.01 $ .11 $ .05 $ .28
Cash Dividends $ .40 $ .40 $ .40 $ .40 $ .50
Stockholders' Equity $ 11.31 $ 11.79 $ 11.76 $ 9.76 $ 10.11
Capital Expenditures $ 31,052 $ 73,186 $ 72,321 $ 17,218 $ 15,656
NUMBER OF EMPLOYEES 123 130 116 109 99
WELLS DRILLED
Gross Wells 82 63 57 43 88
Net Wells 43 25 26 24 43
Oil Wells 22 14 15 6 19
Gas Wells 12 4 3 7 10
Dry holes 9 7 8 11 14
Footage Drilled (000's) 205 132 201 97 175
NET ACREAGE
Undeveloped Lease 122,378 139,959 62,300 107,500 117,200
Mineral and Royalty 235,213 234,035 233,500 232,200 232,100
PRODUCTION (000's)
Oil Production (BBL) 2,080 2,104 1,323 1,159 1,192
Natural Gas Sales (MCF) 12,171 11,076 8,296 6,996 6,291
Liquids Sales (BBL) 252 173 145 139 139
AVERAGE PRICES
Oil Price per BBL $ 16.91 $ 15.60 $ 16.44 $ 19.07 $ 19.85
Gas Price per MCF 1.37 1.73 2.07 1.95 1.91
NGL Price per BBL 10.11 9.00 9.42 10.11 11.08
</TABLE>
* Based on average number of shares outstanding.
21
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-----------------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
COMPARISON OF 1995 RESULTS TO 1994
Net income for 1995 was $2.2 million, compared to net income in 1994 of $9.0
million. In 1995, Wiser adopted Statement of Financial Accounting Standards No.
121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed of" (SFAS 121). As a result of the new accounting standard and
low gas prices in Canada, the Company recognized a non-cash charge of $4.9
million against 1995 earnings, all related to impairments of its Canadian
properties. No such charge was required in 1994. Wiser continued to liquidate
its portfolio of marketable securities in 1995, with a realized gain of $13.1
million, which exceeded the $7.5 million in security sales gains realized in
1994. Deferred taxes increased by $3.2 million in 1995 as the Company did not
benefit from the recognition of previously reserved deferred tax assets as it
had in 1994. Earnings per share was $0.25 in 1995 compared to $1.01 in 1994.
Total revenues for 1995 were $71.7 million, a $6.3 million increase from 1994.
The increase was primarily attributed to a $5.6 million increase in security
sales gains in 1995 as the Company continued to liquidate its portfolio of
marketable securities. Oil and gas sales revenues remained relatively constant,
increasing approximately 2.0% to $54.4 million due to a 6.0% growth in
production of barrels of oil equivalent (BOE), partially offset by a 4.0% drop
in the average price received per BOE. Natural gas prices dropped by 21.0% in
1995 to $1.37 per MCF, while oil and natural gas liquids (NGL) prices improved
8.0% and 12.0% from 1994 to average $16.91 and $10.11, respectively, during
1995.
Revenues from production for 1995 were $54.4 million, slightly greater than
1994 net revenue. Average daily production during 1995 was 11,949 BOE, up from
11,296 BOE in 1994, although average product prices dropped $0.51 per BOE to
$12.47 per BOE in 1995. The Company placed 64 wells on production in 1995,
including 16 wells in the expanded Maljamar project and 7 wells on Wiser's
Canadian prospects. The Company plans to continue the development of the
expanded Maljamar project in 1996, as well as pursue various projects in the
United States and Canada. Additionally, in 1995 the Company completed several
exchanges of properties to enhance its interests in strategic locations.
Production and operating expenses for 1995 decreased by 7% to $20.7 million as
Wiser realized the benefits of non-strategic property sales in late 1994.
Operating costs per BOE, were $4.74 per BOE, down from $5.41 per BOE in 1994.
Dividends and interest revenues were down 25.0% in 1995, to $1.2 million from
$1.6 million, due primarily to the Company's continued liquidation of its
marketable securities portfolio and less cash on-hand for investment.
Depreciation and depletion (D&D) costs increased 9.0% to $19.8 million in 1995.
The increase was due to an additional $4.8 million in Canadian D&D (due to a
full year of ownership in 1995), partially offset by a $3.2 million decrease
from the 1994 sale of non-strategic properties with high D&D rates.
22
<PAGE>
The D&D rate per BOE increased slightly to $4.54 per BOE in 1995 from $4.41 per
BOE in 1994. Management anticipates that the D&D rate will stabilize in 1996
based on engineering estimates.
Exploration costs in 1995 increased $1.7 million, a 41.0% increase from 1994.
The increase was due primarily to higher dry hole costs in 1995.
General and administrative expenses increased 26.0% in 1995 to $8.2 million.
$1.0 million of the increase was due to a full year of Canadian operations,
while another $0.7 million was attributable to legal costs.
Interest expense increased to $5.6 million in 1995 from $3.9 million in 1994
due to a full year's interest on the $52.0 million in debt incurred for the
purchase of Wiser Canada. In February 1995, the Company entered into an
agreement to cap interest rates on its debt at 7.0% from April 1995 through
September 1996. The agreement provides a notional principal amount of $78.0
million. The cost of the cap of $445 thousand will be amortized over the life
of the agreement. Any benefits realized as a result of the agreement will be
recorded as a reduction in interest expense. Management believes that in the
current environment of interest rate uncertainty, this agreement provides
stability and will better position the Company to manage its cost of funds.
The effective income tax rate jumped to 63.3% in 1995 from 4.7% in 1994, due
primarily to 1994 benefits realized from recognition of previously reserved
deferred tax assets and an increased impact of foreign net operating losses for
which no current tax benefit is available.
COMPARISON OF 1994 RESULTS TO 1993
Net income for 1994 was $9.0 million compared to $1.0 million in 1993.
Increased earnings were due to gains on the sales of both securities and oil
and gas properties of $7.5 million and $1.9 million, respectively. Pre-tax
results of operations, excluding gains on asset sales were $65 thousand in 1994
contrasted with a loss of $1.0 million in 1993.
Oil and gas sales increased 33% over 1993, primarily due to a full year impact
of the mid-1993 Mobil acquisition and revenues from the mid-1994 Canadian
purchase. Increased production was partially offset by lower average prices in
1994. Average oil and gas prices dropped 5% and 16%, respectively from 1993.
Reported 1994 results from Canadian operations were slightly lower than
expected as a result of unanticipated dry hole costs and slightly higher
operating costs.
Total 1994 revenues jumped to $65.4 million from $42.9 million in 1993. The
increase was due to gains on asset sales of $9.4 million and an increase
totaling $13.1 million, or 31%, in oil and gas sales revenues. The 31% jump was
due to increased production of all products, partially offset by lower average
prices compared to 1993. Major factors in the increase were a full year of
production on the Mobil acquisition, which accounted for $9.3 million, and the
effects of the Canadian purchase, which added $6.7 million. Increased
production and revenues were also realized in the Maljamar Grayburg and
Caprock Maljamar Units as a result of enhanced recovery projects. This area
generated production revenues of $2.9 million in 1994 compared to $2.1 million
in 1993. These increases were slightly offset by a $1.4 million decline in
revenues due to sales of non-strategic properties.
Production and operating expenses increased 24.6% in 1994 to $22.3 million, in
line with production.
23
<PAGE>
The increase was partially offset by savings of $3.0 million due to increased
cost controls and approximately $0.9 million of benefits realized due to non-
strategic property sales. Production and operating expenses per BOE dropped
from $6.27 in 1993 to $5.41 in 1994. Significant cost reductions were realized
in both the Maljamar Field and the Wellman Unit. As a result of fully
implementing enhanced recovery projects and focusing on controlling field level
expenses, costs per BOE in these areas dropped from $9.85 in the Maljamar Field
and $19.00 in the Wellman Unit, respectively in 1993, to $7.19 and $9.00,
respectively, in 1994. The Canadian properties also contributed to the overall
decline in costs per BOE by averaging $3.22 per BOE in operating costs in 1994.
D&D increased 24% in 1994 to $18.2 million. The effects of increased production
from the Canadian and Mobil acquisitions were slightly offset by property
sales. D&D per BOE dropped from $5.14 in 1993 to $4.41 in 1994.
1994 exploration expenses increased slightly to $4.1 million from $3.6 million
due mostly to new exploratory drilling activity in the Company's Canadian
operations.
The acquisition of Wiser Canada also required additional personnel, which
caused $0.9 million of the $1.1 million increase in general and administrative
expenses from 1993.
Interest expense increased in 1994 as the Company paid a full year of interest
on the debt related to the Mobil acquisition and incurred interest on an
additional $52.0 million in debt related to the mid-1994 Canadian acquisition.
Income taxes in 1994 were reduced by utilizing $1.3 million in tax credits
generated from the Company's San Juan Basin properties. Wiser was able to
utilize only $0.5 million of these credits in 1993. In 1994, management
determined that certain tax assets that had been reserved were likely
realizable due to Company plans to liquidate its marketable securities
portfolio. As a result, in 1994 Wiser reduced income tax expense by $2.3
million and its effective income tax rate for 1994 dropped to 4.7%.
CAPITAL COMMITMENTS
During 1995, Wiser incurred $31.0 million in capital expenditures, composed of
$16.6 million in costs to develop oil and gas properties, $6.2 million in
property acquisitions, $5.0 million for exploration and $3.2 million on gas
plant expansion projects.
The main focus of development and exploration costs in 1995 was in the Maljamar
area, where the Company continues to be involved in a significant development
project. In 1995, Wiser spent approximately $8.7 million on the project,
resulting in 16 productive wells, with 5 wells in various stages of completion
or drilling at yearend. The project increased average daily gross production in
the Maljamar area to 890 barrels per day from 650 barrels per day in 1994.
Average daily gross production exceeded 1,300 barrels per day in December 1995.
In Canada, 4 development wells were completed in 1995, focusing on the Pine
Creek Field, where Wiser has a 26.25% interest. In total, the Company
participated in 82 wells, completing 64 as producing, compared to 63 and 42
wells in 1994. Exploration and development expenditures are expected to
approach $53 million in 1996 as the expanded Maljamar project is further
developed.
24
<PAGE>
The Company spent $6.2 million in acquisitions in 1995, of which $3.2 million
related to Canadian acquisitions in and around owned properties. During 1995,
Wiser completed several property exchanges, the most significant of which was
the acquisition of the Skelly Unit in Eddy County, New Mexico. This acquisition
was treated as an exchange of similar assets and has increased the scope of the
Maljamar project, with estimated net proved reserves totaling
approximately 7.4 million BOE at yearend 1995.
In 1995, the Company expended $3.2 million on the Wellman Unit in conjunction
with a $6 million project to enhance recovery of gas and NGLs. Results have
been positive, with oil and NGL production up to 2,175 barrels per day (BPD)
and 1,000 BPD from 1,800 BPD of oil and no NGLs prior to project
implementation.
CAPITAL RESOURCES
Wiser had total assets of $203.4 million at December 31, 1995. Total
capitalization was $175.3 million, composed 42% of long-term debt and 58% of
stockholders' equity. During 1995, net cash provided by operations was $19.2
million, a decrease of 17% from 1994.
The Company maintains a $150.0 million revolving credit facility (1994
Revolver). The amounts available for borrowing are determined under formulas
related to oil and gas reserves. The borrowing base at December 31, 1995 was
$80.0 million. Available loan and interest options are base rate loans at the
bank's prime interest rate and one to six month term loans with fixed interest
at either the LIBOR or CD rate plus .63%. A .25% commitment fee is charged on
the unused borrowing base. The credit agreement requires the Company to, among
other things, maintain certain minimum net worth and current ratio
requirements, as well as certain other restrictions. At December 31, 1995,
$73.0 million was outstanding on the 1994 Revolver.
During 1995, the Company obtained a $50.0 million multiple advance term credit
facility (Maljamar Debt) (see Footnote 3 to financial statements) to finance
its expanded Maljamar project. The credit facility is collateralized by and has
recourse against only the Maljamar project properties. By entering into this
agreement, the Company has limited its liabilities while retaining a higher
borrowing base under the 1994 Revolver. These benefits come with a cost of a
1.37% to 1.80% higher interest rate on the Maljamar Debt as compared to the
terms of the 1994 Revolver. At December 31, 1995, $1.2 million was outstanding
on the Maljamar Debt.
In 1994, the Company decided to begin an orderly liquidation of its securities
portfolio. Wiser plans to liquidate the portfolio in such a manner as to
maximize available tax credits in order to minimize the tax impact of
liquidation. Proceeds will initially be used to reduce debt but may be
reinvested in oil and gas assets.
25
<PAGE>
LIQUIDITY
The Company believes it has adequate capital resources to meet the requirements
of its business. However, future cash flows are subject to many variables
including production levels and oil and gas prices. No assurances can be made
that operations or capital resources will provide cash in sufficient amounts to
maintain planned levels of capital expenditures.
Wiser's Canadian operations are subject to exchange rate fluctuations based on
the relative value of the Canadian dollar (CDN) to the U.S. dollar. Exchange
rate fluctuations are recorded as translation adjustments directly to
stockholders' equity. The Company could be subject to risk of loss to the
extent that Canadian assets are sold at lower exchange rates than when they
were acquired. Historically, Wiser has not entered into agreements to hedge
this risk, but may in the future if it is deemed advantageous.
FUTURE TRENDS
Wiser intends to continue increasing production and reserves through drilling
and property acquisitions. Although future performance is difficult to predict,
the following factors will likely impact future operating results and financial
condition:
CONTINUING VOLATILITY OF PRODUCT PRICES
Spot gas prices remained volatile during 1995. Average 1995 monthly prices
ranged from approximately $1.61 per MCF in December to $1.18 per MCF in August.
The overall average gas price received dropped from $1.73 per MCF in 1994 to
$1.37 per MCF in 1995. Spot oil prices, which are volatile due to a myriad of
unpredictable political and economic forces, improved during 1995. Wiser's 1995
average realized price varied from a low of $16.05 per BBL in October to a high
of $18.21 per BBL in April. The annual average oil price increased from $15.60
per BBL in 1994 to $16.91 per BBL during 1995. Absent a comprehensive U.S.
energy policy, management believes that oil prices will continue to fluctuate
in response to changes in OPEC policies and events in both the Middle East and
certain other non-OPEC countries. Management also believes that gas price
volatility will continue and may not conform to historical cycles based on
heating seasons. To mitigate some of this volatility, the Company plans to
continue to prudently use various commodity hedging techniques. In 1996, the
Company has entered into positions to hedge 3.1 BCF of 1996 gas production and
1.3 million barrels of oil at average prices of $1.92 per MMBTU and oil price
collars from $15.91 to $19.66 per BBL, respectively.
ENVIRONMENTAL REGULATION
The Company operates under numerous state and federal laws regulating the
discharge of materials into, and the protection of, the environment. In the
ordinary course of business, Wiser conducts an ongoing review of the effects of
these various environmental laws on its business and operations. The estimated
costs of continued compliance with current environmental laws, based on
currently available information, is not material to the Company's financial
position or results of operations.
26
<PAGE>
INFLATION
While certain costs are affected by the general level of inflation, factors
unique to the petroleum industry result in independent price fluctuations. Over
the past five years, significant fluctuations have occurred in oil and gas
prices. Although it is particularly difficult to estimate future prices of oil
and gas, price fluctuations have had, and will continue to have, a material
effect on the Company.
27
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS
------------------------------
The following financial statements of the Company and report of Independent
Public Accountants set forth in the Company's 1995 Annual Report to
Stockholders are incorporated herein by reference:
Consolidated Statements of Income and Retained Earnings for the years ended
December 31, 1995, 1994 and 1993
Consolidated Balance Sheets as of December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flow for the years ended December 31, 1995,
1994 and 1993
Notes to Consolidated Financial Statements
Supplemental Financial Information
Report of Independent Public Accountants
ITEM 9 - DISAGREEMENTS ON ACCOUNTING
-------------------------------------
AND FINANCIAL DISCLOSURES
-------------------------
No disagreements on accounting and financial disclosures occurred during the
twenty-four months prior to December 31, 1995.
28
<PAGE>
THE WISER OIL COMPANY
---------------------
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS
------------------------------------------
OF THE REGISTRANT
-----------------
The information required by this item will be contained in the Company's
definitive Proxy Statement for the May 20, 1996 Annual Meeting of Stockholders
(the Proxy Statement) under the headings "Election of Officers" and "Executive
Officers" and is incorporated herein by reference.
ITEM 11 - MANAGEMENT REMUNERATION AND TRANSACTIONS
--------------------------------------------------
The information required by this item will be contained in the Company's
definitive Proxy Statement for the May 20, 1996 Annual Meeting of Stockholders
under the heading "Executive Compensation" and is incorporated herein by
reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
--------------------------------------------------
OWNERS AND MANAGEMENT
---------------------
The information required by this item will be contained in the Company's
definitive Proxy Statement for the May 20, 1996 Annual Meeting of Stockholders
under the heading "Beneficial Ownership of Common Stock" and is incorporated
herein by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND
-----------------------------------
RELATED TRANSACTIONS
--------------------
No transactions have occurred during the year which require disclosure under
this item.
29
<PAGE>
THE WISER OIL COMPANY
---------------------
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES
-------------------------------------------------
AND REPORTS ON FORM 8-K
-----------------------
A. Financial Statements
1. All financial statements as set forth under Item 8 of this report on Form
10-K.
2. Financial Statement Schedules
Included in Part IV of this report: Page
Consent of Independent Public Accountants 32
Schedules are omitted because of the absence of conditions under which they
are required or because the required information is given in the financial
statements or notes thereto.
B. No reports on Form 8-K were filed during the last quarter of the year
covered by this annual report.
C. Exhibits
Exhibit
Numbers
-------
(3.1) Certificate of Incorporation, as amended, incorporated by reference
to Exhibit 4.2 to the Company's report on Form 8-K (Commission File
No.0-5426), dated November 9, 1993 (Date of Event: October 25, 1993).
(3.2) Bylaws of the Company, as amended, incorporated by reference to
Exhibit 4.3 to the Company's report on Form 8-K (Commission File No.
0-5426), dated November 9, 1993 (Date of Event: October 25, 1993).
(4.1) Rights Agreement dated as of October 25, 1993 by and between the
Company and Chemical Bank (as successor to Bank One Texas, N.A.), as
Rights Agent, which includes as Exhibit 2 thereto the Form of Rights
Certificate, incorporated by reference to Exhibit 4.1 to the
Company's report on Form 8-K (Commission File No. 0-5426), dated
November 9, 1993 (Date of Event: October 25, 1993).
(4.2) Credit Agreement dated June 23, 1994 among The Wiser Oil Company and
The Wiser Oil Company Canada Ltd., as Borrowers, and NationsBank of
Texas, N.A., as Agent, and Certain Financial Institutions Listed on
the Signature Pages Thereto, as Banks, incorporated by reference to
the Exhibit 10.1 to the report on Form 8-K dated
30
<PAGE>
July 11, 1994 as amended August 17, 1994.
(4.3) Credit Agreement dated November 29, 1995 among The Wiser Oil Company
and Maljamar Development Partnership,L.P. as Borrowers, and
NationsBank of Texas, N.A., as Agent, and Certain Financial
Institutions Listed on the Signature Pages thereto, as Banks.
(10.1) Purchase and Sale Agreements made as of May 31, 1994 among Eagle
Resources Ltd., Caneagle Resources Corporation, The Erin Mills
Investment Corporation and The Wiser Oil Company, incorporated by
reference to Exhibit 10 to the report on Form 8-K dated July 11, 1994
as amended August 17, 1994.
(10.2)* Employment Agreement dated August 1, 1994 between the Company and
Allen J. Simus, incorporated by reference to Exhibit 10 (d) to the
Company's Annual Report on Form 10-K for the year ended December 31,
1994.
(10.3)* Employment Agreement dated July 1, 1991 between the Company and
Andrew J Shoup, Jr.
(10.4)* The Wiser Oil Company 1991 Stock Incentive plan, as amended,
incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (Commission File No. 33-62441),
filed on September 8, 1995.
(10.5)* The Wiser Oil Company 1991 Non-employee Directors' Stock Option Plan.
(10.6)* Employment Agreement dated November 1, 1993 between the Company and
Lawrence J. Finn.
(10.7)* Employment Agreement dated January 24, 1994 between the Company and
A. Wayne Ritter.
(13) Portions of the 1995 Annual Report to Stockholders incorporated by
reference into this Report on Form 10-K.
(23) Consent of Independent Public Accountants.
(27) Financial Data Schedule.
* The documents filed or incorporated by reference as Exhibits 10.2,
10.3, 10.4, 10.5, 10.6 and 10.7 represent management compensatory
plans or agreements.
31
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To the Shareholders of The Wiser Oil Company:
As independent public accountants, we hereby consent to the incorporation by
reference in this Form 10-K of our report dated February 22, 1996, included in
The Wiser Oil Company's annual report to shareholders for the year ended
December 31, 1995.
ARTHUR ANDERSEN LLP
Dallas, Texas,
February 22, 1996
32
<PAGE>
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
THE WISER OIL COMPANY
BY: ANDREW J. SHOUP, JR. (SIGNED)
------------------------------
Andrew J. Shoup, Jr.
President and Chief
Executive Officer
BY: LAWRENCE J. FINN (SIGNED)
------------------------------
Lawrence J. Finn
Vice President Finance & CFO
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report is signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated. The signatures below are for the
Form 10-K Annual Report for calendar year 1995.
JOHN C. WRIGHT (SIGNED) Chairman of the March 27, 1996
- ---------------------------------- Board --------------
ANDREW J. SHOUP, JR. (SIGNED) President & March 27, 1996
- --------------------------------- Chief Executive --------------
Officer & Director
PAUL D. NEUENSCHWANDER (SIGNED) Director March 27, 1996
- --------------------------------- --------------
C. FRAYER KIMBALL, III (SIGNED) Director March 27, 1996
- ---------------------------------- --------------
HOWARD G. HAMILTON (SIGNED) Director March 27, 1996
- ---------------------------------- --------------
A. W. SCHENCK, III (SIGNED) Director March 27, 1996
- ---------------------------------- --------------
RONALD A. LENSER (SIGNED) Director March 27, 1996
- ---------------------------------- --------------
JOHN W. CUSHING, III (SIGNED) Director March 27, 1996
- ---------------------------------- --------------
33
<PAGE>
JON L. MOSLE, JR. (SIGNED) Director March 27, 1996
- ---------------------------------- --------------
LORNE H. LARSON (SIGNED) Director March 27, 1996
- ---------------------------------- --------------
34
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS
-----------------------------
THE WISER OIL COMPANY
Consolidated Statements of Income and Retained Earnings
for the years ended December 31, 1995, 1994 and 1993
(000's except per share data) 1995 1994 1993
------- ------- -------
Revenues:
Oil and gas sales $ 54,400 $ 53,559 $ 40,329
Dividends and interest 1,241 1,641 1,855
Security sales gains 13,101 7,475 -
Other 2,939 2,681 737
------ ------ ------
71,681 65,356 42,921
------ ------ ------
Costs and Expenses:
Production and operating 20,690 22,313 17,864
Purchased natural gas 727 759 1,182
Depreciation and depletion 19,778 18,189 14,659
Property impairments and abandonments 4,893 124 693
Exploration 5,801 4,130 3,639
General and administrative 8,193 6,502 5,429
Interest expense 5,618 3,907 530
------ ------ ------
65,700 55,924 43,996
------ ------ ------
Income (Loss) Before Income Taxes 5,981 9,432 (1,075)
Provision (Credit) For Income Taxes 3,788 444 (2,091)
------ ------ ------
NET INCOME 2,193 8,988 1,016
Retained Earnings, beginning of year 62,414 57,002 59,563
Dividends Paid (3,577) (3,576) (3,577)
------ ------ ------
Retained Earnings, end of year $ 61,030 $ 62,414 $ 57,002
====== ====== ======
Average Outstanding Shares 8,939 8,939 8,939
====== ====== ======
Earnings Per Share $ .25 $ 1.01 $ .11
====== ====== ======
Cash Dividends Per Share $ .40 $ .40 $ .40
====== ====== ======
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
THE WISER OIL COMPANY
Consolidated Balance Sheets
December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
(000's) 1995 1994 1993
---------- -------- ----------
Assets
Current Assets:
<S> <C> <C> <C>
Cash and cash equivalents $ 1,397 $ 2,714 $ 3,499
Accounts receivable 10,426 10,900 9,427
Due from federal government - - 437
Inventories 1,517 1,144 800
Prepaid expenses 833 852 647
-------- ------- --------
Total current assets 14,173 15,610 14,810
-------- ------- --------
Marketable Securities 19,592 27,337 34,781
-------- ------- --------
Property, Plant and Equipment, at cost:
Oil and gas properties (successful
efforts method) 265,692 250,156 232,264
Other properties 4,422 5,443 4,592
-------- ------- --------
270,114 255,599 236,856
Accumulated depreciation and
depletion (101,025) (88,228) (109,148)
-------- ------- --------
Net Property, Plant and Equipment 169,089 167,371 127,708
-------- ------- --------
Other Assets 553 473 483
-------- ------- --------
$ 203,407 $ 210,791 $ 177,782
======== ======= ========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 10,143 $ 9,562 $ 6,124
Accrued income taxes 1,527 1,518 438
Accrued liabilities 1,449 2,139 1,716
Current portion of debt 20 78 78
-------- ------- --------
Total current liabilities 13,139 13,297 8,356
-------- ------- --------
Long Term Debt 74,171 78,013 46,777
-------- ------- --------
Deferred Benefit Cost 1,120 1,052 1,092
-------- ------- --------
Deferred Income Taxes 12,699 13,002 16,441
-------- ------- --------
Other Long Term Liabilities 1,146 - -
-------- ------- --------
Stockholders' Equity:
Common stock - $3 par value
20,000,000 shares authorized;
9,115,572 shares issued;
8,939,368 shares outstanding 27,347 27,347 27,347
Paid-in capital 3,078 3,078 3,078
Retained earnings 61,030 62,414 57,002
Marketable securities valuation
adjustment 11,684 16,013 20,418
Foreign currency translation 722 (696) -
Treasury stock; 176,204 shares, at
cost at December 31,
1995, 1994 and 1993 (2,729) (2,729) (2,729)
-------- ------- --------
Total stockholders' equity 101,132 105,427 105,116
-------- ------- --------
$ 203,407 $ 210,791 $ 177,782
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
THE WISER OIL COMPANY
Consolidated Statements of Cash Flow
for the years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
(000's) 1995 1994 1993
-------- -------- --------
Cash Flow From Operating Activities:
<S> <C> <C> <C>
Net income $ 2,193 $ 8,988 $ 1,016
Adjustments to reconcile net income to
operating cash flow-
Depreciation and depletion 19,778 18,189 14,659
Deferred income taxes 1,914 (1,145) (2,233)
Security & property sale gains (before
current income tax expense effect
of $1,757 for 1995 and $1,589 for 1994) (14,092) (9,367) -
Foreign currency translation (34) 87 -
Dry hole cost, abandonments and property
impairments 9,392 3,054 4,217
Other Changes -
Accounts receivable 474 (1,473) (2,720)
Inventories (373) (344) (58)
Prepaid expenses 19 (204) (290)
Other assets (80) 11 (16)
Accounts payable 661 3,438 2,500
Income taxes, net 9 1,516 (795)
Accrued liabilities (690) 424 284
Deferred benefits cost 68 (40) 213
------- ------- -------
Operating Cash Flow 19,239 23,134 16,777
------- ------- -------
Cash Flow From Investing Activities:
Additions to property, plant and (26,162) (71,765) (69,112)
equipment
Proceeds from sales of property,
plant and equipment 1,280 13,581 -
Proceeds from security sales 14,492 8,250 -
Dry hole cost (2,689) (1,645) (1,775)
------- ------- -------
Investing Cash Flow (13,079) (51,579) (70,887)
Cash Flow From Financing Activities:
Long term debt issued 11,170 55,600 46,700
Payments on long term debt (15,070) (24,364) (58)
Dividends paid (3,577) (3,576) (3,577)
Treasury stock issued - - 19
------- ------- -------
Financing Cash Flow (7,477) 27,660 43,084
------- ------- -------
Net Decrease In Cash (1,317) (785) (11,026)
Cash and Cash Equivalents, beginning of 2,714 3,499 14,525
year ------- ------- -------
Cash and Cash Equivalents, end of year $ 1,397 $ 2,714 $ 3,499
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
THE WISER OIL COMPANY
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
1. Summary of Significant Accounting Policies
a. Principles of Consolidation - The consolidated financial statements
include the accounts of The Wiser Oil Company (Company), a Delaware
corporation, and its wholly owned subsidiaries: T.W.O.C., Inc., The Wiser
Marketing Company, Maljamar Wiser Inc., Maljamar Development Partnership,
L.P., and The Wiser Oil Company Canada Ltd. T.W.O.C., Inc. is a Delaware
holding company responsible for the management of investment activities. The
Wiser Marketing Company functions as a natural gas marketer and broker.
Maljamar Wiser Inc. was formed in 1995 and is a wholly owned subsidiary of
the Wiser Oil Corporation. It was formed in order for the Company to fund
its $53,000,000 development of the Maljamar area with the use of nonrecourse
debt. The Maljamar Development Partnership, L.P. was formed in 1995 for the
same reason. The Company is the general partner of the Maljamar Development
Partnership, L.P. and owns 99% of the partnership. Maljamar Wiser Inc. owns
1% of the Maljamar Development Partnership, L.P. as a limited partner. Wiser
Canada was formed in 1994 to conduct the Company's Canadian activities.
Prior to the formation of Wiser Canada, the Company's oil and gas operations
were conducted primarily in the United States. Intercompany accounts and
transactions have been eliminated. Certain reclassifications have been made
to conform prior years' amounts to current presentation.
b. Risks and Uncertainties - 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 and disclosure of contingent 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.
c. Oil and Gas Properties - The Company is engaged in the exploration and
development of oil and gas in the United States and Canada. The Company
follows the "successful efforts" method of accounting for its oil and gas
properties. Under this method of accounting, all costs of property
acquisitions and exploratory wells are initially capitalized. If a well is
unsuccessful, the capitalized costs of drilling the well, net of any salvage
value, are charged to expense. The capitalized costs of unproven properties
are periodically assessed to determine whether their value has been impaired
below the capitalized cost, and if such impairment is indicated, a loss is
recognized. Geological and geophysical costs and the costs of retaining
undeveloped properties are expensed as incurred. Expenditures for
maintenance and repairs are charged to expense, and renewals and betterments
are capitalized. Upon disposal, the asset and related accumulated
depreciation and depletions are removed from the accounts, and any resulting
gain or loss is reflected currently in income.
Prior to 1995, the Company evaluated the carrying value of its oil and
gas properties based on undiscounted future net revenues on a company wide
basis. During 1995, the Company adopted Statement of Financial Accounting
Standards No. 121 ("SFAS 121"), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of". SFAS 121 requires the
Company to assess the need for an impairment of capitalized costs of oil and
gas properties on a property-by-property basis. If an impairment is
indicated based on undiscounted expected future cash flows, then an
impairment is recognized to the extent that net capitalized costs exceed
discounted future cash flows. During 1995, the Company provided impairments
of $4,893,000. Management's estimate of future cash flows is based on their
estimate of reserves and prices. It is reasonably possible that a change in
reserve or price estimates could occur in the near term and adversely impact
management's estimate of future cash flows and consequently the carrying
value of properties.
d. Depreciation and Depletion - Depreciation and depletion of the
capitalized costs of producing oil and gas properties are computed for
individual properties using the units-of-production method based on total
proved reserves. Depreciation of transportation, office and other properties
is computed generally using the straight-line method over the estimated
useful lives of these assets.
e. Cash and Cash Equivalents - Cash equivalents generally consist of
short-term investments maturing in three months or less from the date of
acquisition. These investments of $3,058,000 in 1995, $1,662,000 in 1994 and
$1,476,000 in 1993 are recorded at cost plus accrued interest, which
approximates market.
f. Inventories - Oil and gas product inventories are recorded at the
average cost of production. Materials and supplies are recorded at the lower
of average cost or market.
g. Accrued Liabilities - Accrued liabilities include accrued vacation and
payroll of $535,000 in 1995, $519,000 in 1994 and $517,000 in 1993.
h. Postretirement Benefits - The Financial Accounting Standards Board's
Statement of Financial Accounting Standards ("SFAS") No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions, has no
significant impact on the Company. The Company has no significant
liabilities for postretirement benefits, other than pensions, and has
historically recognized such liabilities as they are incurred.
4
<PAGE>
I. Gas Imbalances - Gas imbalances are accounted for using the sales
method. The Company's net imbalance position is not material at December 31,
1995, 1994 and 1993.
j. Hedges - During 1995 and early 1996, the Company entered into numerous
natural gas price swap agreements to hedge approximately 10,000 to 12,000
MMBTU per day for January 1996 through September 1996. During 1994, 1995 and
early 1996, the Company has entered into numerous oil price collar
agreements, with three contracts at 1,000 barrels per day and one contract
at 800 barrels per day to hedge against price fluctuations during 1996. The
Company is exposed to losses in the event of nonperformance by the counter
parties to its oil and gas swap agreements.
These arrangements are summarized as follows:
Effective dates Daily Volume Price per Barrel
(BBL) (Floor/Ceiling)
OIL PRICE COLLARS:
October 1994 to September 1996 800 $18.00/19.66
January 1996 to December 1996 1,000 16.00/18.85
January 1996 to December 1996 1,000 16.00/19.08
January 1996 to December 1996 1,000 21.80/25.55 *
NATURAL GAS PRICE SWAPS: (MMBTU) Price per MMBTU
January 1996 to March 1996 6,000 $ 1.95
January 1996 to March 1996 6,000 2.06
February 1996 to February 1996 5,000 2.48
April 1996 to April 1996 5,000 2.05
May 1996 to September 1996 5,000 1.76
April 1996 to September 1996 5,000 1.83
*Canadian Dollars
Gains or losses from hedging transactions are recognized as oil and gas
sales in the accompanying Consolidated Statements of Income and Retained
Earnings as the underlying hedged production is sold. As of December 31,
1994, the Company had deferred $135,017 in net gains related to their
hedging activities. As of December 31, 1995 and 1993, the Company had no
deferred net gains or net losses. During 1995 and 1994, the Company did not
incur any material hedging gains or losses.
k. Foreign Currency Translation - The functional currency of Wiser Canada
is the Canadian dollar. In accordance with SFAS No. 52, The Wiser Oil
Company Canada's financial statements have been translated from Canadian
dollars to U.S. dollars with the cumulative translation adjustment gain of
$722,000 for 1995 and a loss of $696,000 for 1994 classified in
Stockholders' Equity.
2. Marketable Securities
At December 31, 1993, the Company adopted the accounting procedures as
established by the Financial Accounting Standards Board in its Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments
in Debt and Equity Securities (Statement No. 115). Under Statement No. 115,
marketable securities, such as those owned by the Company, are classified as
available-for-sale securities and are to be reported at market value, with
unrealized gains and losses, net of income taxes, excluded from earnings and
reported as a separate component of stockholders' equity. The market value
of these securities at December 31, 1995, 1994 and 1993 was $19,592,000,
$27,337,000 and $34,781,000, respectively.
During 1995 and 1994, the Company liquidated a portion of its marketable
securities portfolio and recognized a pretax gain of $13,101,000 for 1995,
$7,475,000 for 1994 and none for 1993.
3. Long Term Debt
a. On June 23, 1994, the Company entered into a revolving credit agreement
with NationsBank of Texas, N. A. as agent. The agreement provides the
Company with up to a $150 million line of credit through September 30, 2000.
The amounts available for borrowing are determined under formulas related to
oil and gas reserves. The Company's borrowing base at December 31, 1995 is
$80,000,000. Available loan and interest options are base rate loans, at the
bank's prime interest rate and one to six month term loans with
5
<PAGE>
fixed interest at either the LIBOR or CD rate plus 0.63%. The average interest
rate during 1995 under the revolver was 6.62%. A 0.25% commitment fee is paid on
the unused borrowing base. The credit agreement requires the Company to, among
other things, maintain certain minimum net worth and current ratio requirements
as well as certain restrictions on sales of assets, payment of dividends and
incurrence of indebtedness.
On November 29, 1995, the Company entered into a credit agreement with
NationsBank of Texas, N.A. as agent. The agreement provides the Company with
up to a $50 million nonrecourse facility to develop the expanded Maljamar
project area. The amounts available for borrowing are determined under
formulas related to oil and gas reserves and capital spent on the Maljamar area
properties offset by net operating income from these same properties. The
Company's borrowing base at December 31, 1995 was $35,000,000. Available loan
and interest options are base rate loans, at the bank's prime interest rate and
one to six month term loans with fixed interest at LIBOR plus 2.0%. The
average interest rate during 1995 under the multiple advance term credit
facility was 7.94%. A 0.375% commitment fee is paid on the unused borrowing
base. The credit agreement requires the Company to, among other things,
maintain certain minimum collateral value requirements as well as certain
restrictions on sales of assets, payment of dividends and incurrence of
indebtedness.
The Company paid $5,618,000 in interest during 1995, $3,889,000 during 1994, and
$501,000 during 1993.
b. Other Long Term Liabilities - At December 31, 1995, the Company recorded
the $1.1 million Canadian property acquisition. This acquisition was funded by
the Company during January 1996 using the revolving credit agreement.
Long term debt consists of the following (000's):
December 31,
------------------------------
1995 1994 1993
------ ------ ------
Multiple Advance Term Credit Facility at $ 1,171 $ - $ -
7.94% interest rate
Revolving Credit Agreement -
6.38% interest rate at December 31, 73,000 78,000 46,700
1995, 6.56% interest rate at
December 31, 1994, and 3.94% to
6.00% interest rate at December 31,
1993.
Other, at 11.00% 20 91 155
------ ------ ------
74,191 78,091 46,855
Less current maturities (20) (78) (78)
------ ------ ------
$ 74,171 $ 78,013 $ 46,777
====== ====== ======
The annual requirements for reduction of principal of long-term debt outstanding
as of December 31, 1995 are estimated as follows:
1996 $ 20
1997 3,916
1998 16,834
1999 15,664
Thereafter 37,757
------
$ 74,191
======
6
<PAGE>
4. Property Acquisitions and Sales
During 1995, the Company traded some of its Permian Basin properties for
properties located mainly in New Mexico (the Skelly Unit) and West Virginia.
The acquisition of these properties was accounted for as an exchange of similar
assets. The overall results of these trades increased Wiser's total proved
BOE's as of December 31, 1995 by 5,846,000.
On June 24, 1994, the Company acquired the Eagle Properties, which consist
of certain oil and gas properties located in Alberta, Canada, for US$52
million. The purchase was funded through the Company's revolving credit
agreement, see Note 3, and with existing cash and cash equivalents. The purchase
method of accounting was followed.
During 1994, the Company disposed of various non-strategic higher operating
cost properties with combined production of 1,000 barrels per day and 3,000 MCF
per day. The majority of these property sales were closed during the 4th
quarter.
Unaudited pro forma results of operations, as if the 1994 acquisition of
the Eagle properties took place at January 1, 1994, are as follows (000's):
1994(1)
-------
Revenues $63,888
Expenses 57,341
-------
Net Income $ 6,547
=======
Earnings per share $ .73
=======
(1) The pro forma results exclude the gain of $1.9 million of property
sales recognized in 1994.
On October 1, 1993, the Company purchased oil and gas properties from Mobil
Exploration & Producing U.S. Inc. and the Mobil Foundation, Inc., for $58.8
million. The purchase was funded through the Company's revolving credit
agreement, see Note 3, and with existing cash and cash equivalents. The
purchase method of accounting was followed.
5. Income Taxes
The Company provides deferred income taxes for differences between the tax
reporting basis and the financial reporting basis of assets and liabilities.
The Company follows the accounting procedures as established by the Financial
Accounting Standards Board in its Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes. The Company paid $1,967,000 in 1995, no
income taxes in 1994, and $1.0 million in 1993.
The provisions (credits) for income taxes for the three years ended
December 31, 1995 were as follows (000's):
1995 1994 1993
----- ------- -------
Current:
Federal $ 1,607 $ 1,473 $ 158
State 150 116 (16)
----- ------ ------
1,757 1,589 142
----- ------ ------
Deferred:
Federal 1,934 1,085 (2,122)
State 97 107 (111)
Reversal of valuation allowance - (2,337) -
----- ------ ------
2,031 (1,145) (2,233)
----- ------ ------
Total provision (credit) for income $ 3,788 $ 444 $ (2,091)
taxes ===== ====== ======
7
<PAGE>
A reconciliation of the statutory federal income tax rate to the Company's
effective tax rate follows:
1995 1994 1993
------ ------ ------
Statutory federal income tax rate 34.0% 34.0% 34.0%
Statutory depletion in excess of cost
basis on certain properties (1.7) (2.2) 24.4
Non-deductibility of foreign operating
loss 55.4 8.6 -
Reversal of tax credit valuation
allowance - (24.8) -
State taxes net of FIT benefits 1.6 2.0 14.7
Dividends received credit (4.4) (3.8) 32.6
Nonconventional fuels credit (22.4) (14.1) 69.4
Other, net 0.8 5.0 19.3
----- ----- -----
Effective tax rate 63.3% 4.7% 194.4%
===== ===== =====
The deferred tax liabilities and assets for the three years ended December
31, 1995 were as follows (000's):
1995 1994 1993
---------- ---------- -------
Deferred tax liabilities (assets):
Intangible drilling and development cost $ 9,203 $ 7,052 $ 6,467
Marketable securities valuation
adjustment 6,015 8,241 10,518
Deferred pensions and compensation (527) (520) (533)
Alternative minimum tax credit
carryforwards (2,429) (2,010) (2,337)
Excess property basis on Wiser Canada (3,930) (3,978) -
Valuation allowance 4,479 3,978 2,337
Other (112) 239 (11)
------ ------ ------
$ 12,699 $ 13,002 $ 16,441
====== ====== ======
The only way to realize the benefits of tax credit carryforwards is to
generate future regular tax liability in excess of alternative minimum tax
liability. Prior to 1994, a valuation allowance was provided due to
uncertainty of realizing these tax credits. Due to the Company's sale of a
portion of its marketable securities portfolio during 1995 and 1994 and the
Company's plans relating to its remaining marketable securities, the Company
believes it is more likely than not that the alternative minimum tax credits
will be fully realized. Accordingly, during 1994 the valuation allowance was
reversed. As of December 31, 1995, Wiser had Canadian net deferred tax assets
of $3,930,000 and United States deferred tax assets of $549,000. A valuation
allowance has been provided against all of these net deferred tax assets at
December 31, 1995.
8
<PAGE>
6. Oil and Gas Producing Activities
Set forth below is certain information regarding the aggregate capitalized
costs of oil and gas properties and costs incurred in oil and gas property
acquisitions, exploration and development activities (000's):
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994 1993
--------------------- -------------------- ----
Total
U.S. Canada Total U.S. Canada Total Company
--------- -------- -------- --------- ------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Capitalization Costs:
Proved properties $ 191,567 $ 56,427 $ 247,994 $ 183,978 $ 47,629 $ 231,607 $ 219,457
Unproved properties 10,110 7,588 17,698 11,427 7,122 18,549 12,807
------- ------- ------- ------- ------ ------- --------
201,677 64,015 265,692 195,405 54,751 250,156 232,264
Accumulated depreciation
and depletion (81,561) (16,766) (98,327) (80,189) (3,555) (83,744) (106,247)
------- ------- ------- ------- ------ ------- --------
Net capitalized costs $ 120,116 $ 47,249 $ 167,365 $ 115,216 $ 51,196 $ 166,412 $ 126,017
======= ======= ======= ======= ====== ======= ========
Costs Incurred:
Property acquisition $ 3,027 $ 3,210 $ 6,237 $ 2,544 $ 52,988 $ 55,532 $ 57,871
Exploration 2,753 2,270 5,023 2,036 2,057 4,093 6,115
Development 12,477 4,123 16,600 11,059 1,727 12,786 8,335
Gas plants 3,192 - 3,192 775 - 775 -
</TABLE>
7. Employee Pension Plan
The Company has a noncontributory defined benefit pension plan, which
covers substantially all full-time employees. Plan participants become fully
vested after five years of continuous service. The retirement benefit formula
is based on the employee's earnings, length of service and age at retirement.
Contributions required to fund plan benefits are determined according to the
Projected Unit Credit Method. The assets of the plan are primarily invested in
equity and debt securities.
The net periodic pension costs were determined as follows (000's):
1995 1994 1993
------- ----- -----
Current service cost $ 368 $ 362 $ 362
Interest cost on projected benefit
obligation 802 779 755
Actual return on assets (1,575) (37) (981)
Net amortization and deferral 932 (648) 328
------ ---- ----
Net periodic pension cost $ 527 $ 456 $ 464
====== ==== ====
The principal assumptions for 1995 and 1994 utilized in computing pension
expense include an 8.0% discount rate, an 8.5% rate of return on plan assets,
and a 5.0% rate of increase in compensation levels. For 1993, the assumptions
utilized included a 7.5% discount rate, an 8.5% rate of return on plan assets,
and a 5.0% rate of increase in compensation levels. An amendment to the pension
plan, effective January 1, 1993, reduced the normal retirement age from 65 years
to 62 years.
9
<PAGE>
The following table presents the actuarial valuation of the plan's funded
status, as of December 31 (000's):
1995 1994 1993
------- ------- --------
Actuarial present value of pension
benefits obligations:
Vested $ 9,817 $ 9,369 $ 9,508
Nonvested 354 172 175
------ ------ ------
Accumulated 10,171 9,541 9,683
Projected salary increases 705 1,069 1,084
------ ------ ------
Projected benefits obligations 10,876 10,610 10,767
Plan assets at fair value 10,247 9,315 9,714
------ ------ ------
Plan assets less than projected
benefits obligations 629 1,295 1,053
------ ------ ------
Items not yet recognized:
Unrecognized net gain 1,169 490 668
Unamortized transition amount 208 241 276
Unamortized prior service cost (1,106) (1,254) (1,404)
------ ------ ------
Net pension liability $ 900 $ 772 $ 593
====== ====== ======
8. The Employee Savings Plan
The Company has a qualified Savings Plan available to all employees. An
employee may elect to have up to 10% of the employee's base monthly
compensation, exclusive of other forms of special or extra compensation,
withheld and placed in the Savings Plan account. On a monthly basis, the
Company contributes to this account an amount equal to 50% of the employee's
contribution, limited to 3% of the employee's base compensation. Company
contributions to the Savings Plan were $122,000, $116,000 and $108,000, in 1995,
1994 and 1993, respectively.
10
<PAGE>
9. Business Segment Information
The Company operates in one industry segment, the exploration for and
production of reserves of oil and gas, with sales made to domestic and Canadian
energy customers.
The following table summarizes the oil and gas activity of the Company by
geographic area for 1995 and 1994. Prior to 1994, the Company had no
significant export sales or foreign operations.
Year Ended December 31, 1995
--------------------------------------------
Geographic Areas: U.S. Canada Total
------- ----------- ----------
Total revenues $ 57,839 $ 13,842 $ 71,681
Cost and expenses-
Production and operating 17,555 3,135 20,690
Purchased natural gas 727 - 727
Exploration 4,173 1,628 5,801
Depreciation and depletion 11,418 8,360 19,778
Property impairments - 4,893 4,893
Other operating 8,250 5,561 13,811
------- ------ -------
Pretax income (loss) 15,716 (9,735) 5,981
Income tax expense 3,788 - 3,788
------- ------ -------
Results of operations 11,928 (9,735) 2,193
======= ====== =======
Identifiable assets $ 152,710 $ 50,034 $ 202,744
======= ====== =======
Year Ended December 31, 1994
---------------------------------
Geographic Areas: U.S. Canada Total
------- ------ -------
Total revenues $ 58,586 $ 6,770 $ 65,356
Cost and expenses-
Production and operating 20,598 1,715 22,313
Purchased natural gas 759 - 759
Abandonments 124 - 124
Exploration 2,757 1,373 4,130
Depreciation and depletion 14,613 3,576 18,189
Other operating 7,921 2,488 10,409
------- ------ -------
Pretax income (loss) 11,814 (2,382) 9,432
Income tax expense 444 - 444
------- ------ -------
Results of operations 11,370 (2,382) 8,988
======= ====== =======
Identifiable assets $ 157,498 $ 54,075 $ 211,573
======= ====== =======
Annually, four or five of the Company's purchasers of oil and natural gas
individually account for 10% to 15% of gross revenues. However, due to the
nature of the oil and natural gas industry, the Company is not dependent upon
any of these purchasers. The loss of any major customer would not have a
material adverse impact on the Company's business. In Canada, one customer
accounts for approximately 80% of Wiser Canada's sales.
11
<PAGE>
10. Treasury Stock
During 1993, the Company issued 1,250 shares of its Common Stock, at a
book value of $19,000, under the 1991 Stock Incentive Plan, see Note 11. During
1991, the Company acquired on the open market 100,000 shares of its Common
Stock at a cost of $1,578,000, and awarded 5,000 shares at a cost of $77,000
under the 1991 Stock Incentive Plan, see Note 11.
11. Stock Option Plan
At the 1995 Annual Meeting, the shareholders approved an amendment to the
1991 Stock Incentive Plan increasing the number of shares of the Company's
Common Stock from 240,000 to 600,000 and the date through which options and
awards may be made from June 30, 1996 to June 30, 2001 to key employees. The
1991 Non-Employee Directors' Stock Option Plan remains at 30,000 shares of the
Company's Common Stock with options and awards being made through June 30, 1996
to Directors. No options are exercisable before six months after the date of
the grant and expire five or ten years after the date of the grant. The option
prices may not be less than the fair market value of the stock on the date of
the grant. Stock may be issued from authorized but unissued Common Stock or
Treasury Stock.
During 1991, a restricted share award of 5,000 shares was awarded and
issued from Treasury Stock. Certain restrictions still apply to 1,250 shares of
this award until June 30, 1996.
At December 31, 1995, stock options granted under these plans are 254,500
shares with exercise prices ranging from $13.8125 to $18.875 per share. These
options expire at various dates through November 15, 2004. The potential stock
dilution from these stock options is not material.
Transactions involving the plans are as follows:
1995 1994 1993
-------- ------- -------
Options outstanding, beginning of year 253,500 95,750 83,000
Options: Granted 16,000 157,750 15,250
Exercised - - (1,250)
Forfeited (15,000) - (1,250)
------- ------- ------
Options outstanding, end of year 254,500 253,500 95,750
======= ======= ======
Options exercisable 56,725 60,000 40,500
======= ======= ======
12. Preferred Stock
In addition to Common Stock, the Company is authorized to issue 300,000
shares of Preferred Stock with a par value of $10 per share, none of which has
been issued.
12
<PAGE>
THE WISER OIL COMPANY
Supplemental Financial Information
for the years ended December 31, 1995, 1994 and 1993 (Unaudited)
The following pages include unaudited supplemental financial information as
currently required by the Securities and Exchange Commission (SEC) and the
Financial Accounting Standards Board.
Quarterly Financial Data (Unaudited) Net Earnings
(000's except per share data) Income (Loss)
Quarterly Revenues (Loss) Per Share
--------- ------- ----------
1995
First $ 16,247 $ 1,238 $ .14
Second 14,583 (720) ( .08)
Third 18,265 1,854 .21
Fourth 22,586 (179) ( .02)
1994
First $ 12,583 $ 66 $ .01
Second 13,507 839 .09
Third 15,347 677 .08
Fourth (1) 23,919 7,406 .83
1993
First $ 10,704 $ 49 $ .01
Second 10,041 73 .01
Third 8,646 (284) ( .03)
Fourth 13,530 1,178 .12
(1) During the fourth quarter of 1994, the Company recognized gains on the
sale of marketable securities and properties of $7,475,000 and $1,892,000,
before taxes, respectively, and a benefit from the reversal of the valuation
allowance on deferred tax assets of $2,337,000.
Estimated Quantities of Oil and Gas Reserves (Unaudited)
Following is a reconciliation of the Company's estimated net quantities of
proved oil and gas reserves, as estimated by independent petroleum consultants.
Proved reserves are the estimated quantities of crude oil, natural gas and
natural gas liquids, which upon analysis of geological and engineering data
appear with reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions. Proved developed
reserves are proved reserves which can be expected to be recovered through
existing wells with existing equipment and under existing operating conditions.
The estimation of reserves requires substantial judgment on the part of
petroleum engineers and may result in imprecise determinations, particularly
with respect to new discoveries. Accordingly, it is expected that the estimates
of reserves will change as future production and development information becomes
available and that revisions in these estimates could be significant.
13
<PAGE>
<TABLE>
<CAPTION>
United States Canada (1) Total
-------------------- -------------------- --------------------
Oil Gas Oil Gas Oil Gas
(MBBL) (MMCF) (MBBL) (MMCF) (MBBL) (MMCF)
------- ------ ------ ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
Proved Reserves
Balance December 31, 1992 11,756 70,034 - - 11,756 70,034
Revisions of previous estimates (1,656) 6,207 - - (1,656) 6,207
Properties sold and abandoned (54) (87) - - (54) (87)
Reserves purchased in place 12,130 33,097 - - 12,130 33,097
Extensions, discoveries and other
additions 534 1,696 - - 534 1,696
Production (1,468) (7,630) - - (1,468) (7,630)
------ ------- -------- --------- ------ -------
Balance December 31, 1993 21,242 103,317 - - 21,242 103,317
Revisions of previous estimates 1,801 (2,205) - - 1,801 (2,205)
Properties sold and abandoned (1,513) (7,031) - - (1,513) (7,031)
Reserves purchased in place 97 314 3,666 21,395 3,763 21,709
Extensions, discoveries and other
additions 343 1,488 71 1,249 414 2,737
Production (1,957) (9,335) (320) (1,272) (2,277) (10,607)
------ ------- -------- --------- ------ -------
Balance December 31, 1994 20,013 86,548 3,417(2) 21,372(2) 23,430 107,920
Revisions of previous estimates 4,322 4,912 563 (1,140) 4,885 3,772
Properties sold and abandoned (187) (333) - - (187) (333)
Reserves purchased in place 5,825 695 307 1,132 6,132 1,827
Extensions, discoveries and other
additions 124 2,046 157 6,354 281 8,400
Production (1,657) (8,918) (676) (2,753) (2,333) (11,671)
------ ------- -------- -------- ------ -------
Balance, December 31, 1995 28,440 84,950 3,768(2) 24,965(2) 32,208 109,915
====== ======= ======== ======== ====== =======
Proved Developed Reserves
Balance, December 31, 1992 9,202 69,669 - - 9,202 69,669
Balance, December 31, 1993 17,112 96,069 - - 17,112 96,069
Balance, December 31, 1994 15,590 84,715 3,209(2) 13,655(2) 18,799 98,370
Balance, December 31, 1995 17,939 77,915 3,617(2) 24,111(2) 21,556 102,026
</TABLE>
(1) Prior to 1994 all of the Company's reserves were located in the
United States.
(2) Reserve volumes as assigned by third party engineers have been
increased to reflect the effect of the Alberta Royalty Tax Credit refund.
Total proved and proved developed reserves were increased by 364 MBBL and
2,323 MMCF respectively for 1994 and increased by 397 MBBL and 2,744
MMCF respectively for 1995.
14
<PAGE>
Standardized Measure of Discounted Future
Net Cash Flows of Proved Oil and Gas Reserves (Unaudited)
The Company has estimated the standardized measure of discounted future net
cash flows and changes therein relating to proved oil and gas reserves in
accordance with the standards established by the Financial Accounting Standards
Board through its Statement No. 69. The estimates of future cash inflows and
future production and development cost are based on current yearend sales
prices for oil and gas, estimated future production of proved reserves and
estimated future production and development costs of proved reserves based on
current costs and economic conditions.
This standardized measure of discounted future net cash flows is an attempt
by the Financial Accounting Standards Board to provide the users of financial
statements with information regarding future net cash flows from proved
reserves. However, the users of these financial statements should use extreme
caution in evaluating this information. The assumptions required to be used in
these computations are subjective and arbitrary. Had other equally valid
assumptions been used, significantly different results of discounted future net
cash flows would result. Therefore, these estimates do not necessarily reflect
the current value of the Company's proved reserves or the current value of
discounted future net cash flows for the proved reserves.
15
<PAGE>
The following are the Company's estimated standardized measure of discounted
future net cash flows from proved reserves (000's):
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------
U.S. Canada Total
---------- -------- -----------
<S> <C> <C> <C> <C>
Future cash flows $ 679,754 $ 90,978 $ 770,732
Future production and development costs (343,867) (25,828) (369,695)
Future income tax expense (74,433) - (74,433)
-------- ------- --------
Future net cash flows 261,454 65,150 326,604
10% Annual discount for estimated
timing of cash flows (111,193) (20,809) (132,002)
Standardized measure of discounted
future net cash flows $ 150,261 $ 44,341 $ 194,602
======== ======= ========
December 31, 1994
--------------------------------------
U.S. Canada Total 1993 (1)
-------- ------- -------- --------
Future cash flows $ 449,797 $ 79,208 $ 529,005 $ 509,892
Future production and development costs (234,189) (22,040) (256,229) (268,641)
Future income tax expense (34,690) - (34,690) (40,080)
-------- ------- -------- --------
Future net cash flows 180,918 57,168 238,086 201,171
10% Annual discount for estimated
timing of cash flows (77,178) (18,876) (96,054) (88,748)
Standardized measure of discounted
future net cash flows $ 103,740 $ 38,292 $ 142,032 $ 112,423
======== ======= ======== ========
</TABLE>
(1) Prior to 1994, all reserves were located in the United States.
The following are the sources of changes in the standardized measure of
discounted net cash flows (000's):
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Standardized measure beginning of year $ 142,032 $ 112,423 $ 86,559
Sales, net of production costs (32,907) (29,949) (21,211)
Net change in price and production cost 19,536 6,471 (23,320)
Reserves purchased in place 26,087 46,169 46,704
Extensions, discoveries and improved
recoveries 9,297 4,543 2,906
Change in future development cost 12,652 (14,265) 5,638
Revision of previous quantity estimates
and disposals 26,525 5,080 (1,593)
Sales of reserves in place (798) (9,562) -
Accretion of discount 16,081 13,715 11,679
Changes in timing and other (1,863) 1,455 (446)
Net change in income taxes (22,040) 5,952 5,507
------- ------- -------
Standardized measure end of year $ 194,602 $ 142,032 $ 112,423
======= ======= =======
</TABLE>
16
<PAGE>
THE WISER OIL COMPANY
Common Stock (Unaudited)
The Wiser Oil Company's Common Stock began trading on the New York Stock
Exchange on December 15, 1993 under the symbol WZR, previously the stock had
traded Over-the-Counter with the NASDAQ symbol: WISE.
The quarterly high and low sales prices for the Common Stock of The Wiser
Oil Company and dividends per share during the years ended December 31, 1995,
1994 and 1993 were:
<TABLE>
<CAPTION>
High Low Dividends
<S> <C> <C> <C>
1995 -
1st Quarter $ 14.75 $ 13.38 $ .10
2nd Quarter 15.00 13.13 .10
3rd Quarter 14.38 13.00 .10
4th Quarter 13.75 10.88 .10
1994 -
1st Quarter $ 18.88 $ 15.75 $ .10
2nd Quarter 16.63 15.00 .10
3rd Quarter 17.38 15.75 .10
4th Quarter 17.75 13.13 .10
1993 -
1st Quarter $ 15.63 $ 13.13 $ .10
2nd Quarter 18.13 15.38 .10
3rd Quarter 17.25 15.50 .10
4th Quarter 19.13 16.00 .10
</TABLE>
17
<PAGE>
Report of Independent Public Accountants
To the Shareholders of The Wiser Oil Company:
We have audited the accompanying consolidated balance sheets of The Wiser
Oil Company (a Delaware corporation) and subsidiaries as of December 31,
1995, 1994 and 1993 and the related consolidated statements of income and
retained earnings and cash flow for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The Wiser
Oil Company and subsidiaries as of December 31, 1995, 1994 and 1993 and the
results of their operations and their cash flow in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the consolidated financial statements, at
December 31, 1995, the Company changed its method of accounting for the
impairment of long-lived assets.
ARTHUR ANDERSEN LLP
Dallas, Texas,
February 22, 1996
18
<PAGE>
Exhibit 10.5
------------
THE WISER OIL COMPANY
1991 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
The purposes of the 1991 Non-Employee Directors' Stock Option Plan (the
"Plan") are to promote the long-term success of The Wiser Oil Company (the
"Company") by creating a long-term mutuality of interests between the non-
employee Directors and stockholders of the company, to provide an additional
inducement for such Directors to remain with the Company and to provide a means
through which the company may attract able persons to serve as Directors of the
company.
SECTION 1
ADMINISTRATION
The Plan shall be administered by a Committee (the "Committee") appointed
by the Board of Directors of the Company (the "Board") and consisting of not
less than two members of the Board. The Committee shall keep records of action
taken at its meetings. A majority of the Committee shall constitute a quorum at
any meeting, and the acts of a majority of the members present at any meeting at
which a quorum is present, or acts approved in writing by a majority of the
Committee, shall be the acts of the Committee.
The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as it
shall deem to be necessary and advisable for the administration of the Plan
consistent with the purposes of the Plan. All questions of interpretation and
application of the Plan, or as to stock options granted under the Plan, shall be
subject to the determination of the Committee, which shall be final and binding.
Notwithstanding the above, the selection of the Directors to whom stock
options are to be granted, the timing of such grants, the number of shares
subject to any stock option, the exercise price of any stock option, the periods
during which any stock option may be exercised and the term of any stock option
shall be as hereinafter provided, and the Committee shall have no discretion as
to such matters.
SECTION 2
SHARES AVAILABLE UNDER THE PLAN
The aggregate number of shares which may be issued or delivered and as to
which grants of stock options may be made under the Plan is 30,000 shares of the
Common Stock, $3.00 par value, of the Company (the "Common Stock"), subject to
adjustment and substitution as set forth in Section 5. If any stock option
granted under the Plan is cancelled by mutual consent or terminates or expires
for any reason without having been exercised in full, the number
<PAGE>
of shares subject thereto shall again be available for purposes of the Plan. The
shares which may be issued or delivered under the Plan may be either authorized
but unissued shares or reacquired shares or partly each, as shall be determined
from time to time by the Board.
SECTION 3
GRANT OF STOCK OPTIONS
On the first business day following the day of each annual meeting of the
stockholders of the Company, each person who is then a member of the Board and
who is not then an employee of the Company or any of its subsidiaries (a "non-
employee Director") shall automatically and without further action by the Board
or the Committee be granted a "nonstatutory stock option" (i.e., a stock option
which does not qualify under Section 422 or 423 of the Internal Revenue Code of
1986 (the "Code")) to purchase 750 shares of Common Stock, subject to adjustment
and substitution as set forth in Section 5. If the number of shares then
remaining available for the grant of stock options under the Plan is not
sufficient for each non-employee Director to be granted an option for 750 shares
(or the number of adjusted or substituted shares pursuant to Section 5), then
each non-employee Director shall be granted an option for a number of whole
shares equal to the number of shares then remaining available divided by the
number of non-employee Directors, disregarding any fractions of a share.
SECTION 4
TERMS AND CONDITIONS OF STOCK OPTIONS
Stock options granted under the Plan shall be subject to the following
terms and conditions:
(A) The purchase price at which each stock option may be exercised (the
"option price") shall be one hundred percent (100%) of the fair market value per
share of the Common Stock covered by the stock option on the date of grant,
determined as provided in Section 4(G).
(B) The option price for each stock option shall be paid in full upon
exercise and shall be payable in cash in United States dollars (including check,
bank draft or money order), which may include cash forwarded through a broker or
other agent-sponsored exercise or financing program; provided, however, that in
lieu of such cash the person exercising the stock option may pay the option
price in whole or in part by delivering to the Company shares of the Common
Stock having a fair market value on the date of exercise of the stock option,
determined as provided in Section 4(G), equal to the option price for the shares
being purchased; except that (i) any portion of the option price representing a
fraction of a share shall in any event be paid in cash and (ii) no shares of the
Common Stock which have been held for less than one year may be delivered in
payment of the option price of a stock option. If the person exercising a
2
<PAGE>
stock option participates in a broker or other agent-sponsored exercise or
financing program, the Company will cooperate with all reasonable procedures of
the broker or other agent to permit participation by the person exercising the
stock option in the exercise or financing program. Notwithstanding any procedure
of the broker or other agent-sponsored exercise or financing program, if the
option price is paid in cash, the exercise of the stock option shall not be
deemed to occur and no shares of the Common Stock will be issued or delivered
until the Company has received full payment in cash (including check, bank draft
or money order) for the option price from the broker or other agent. The date of
exercise of a stock option shall be determined under procedures established by
the Committee, and as of the date of exercise the person exercising the stock
option shall be considered for all purposes to be the owner of the shares with
respect to which the stock option has been exercised. Payment of the option
price with shares shall not increase the number of shares of the Common Stock
which may be issued or delivered under the Plan as provided in Section 2.
(C) No stock option shall be exercisable during the first six months of its
term except in case of death as provided in Section 4(E). Subject to the terms
of Section 4(E) providing for earlier termination of a stock option, no stock
option shall be exercisable after the expiration of five years from the date of
grant. A stock option to the extent exercisable at any time may be exercised in
whole or in part.
(D) No stock option shall be transferable by the grantee otherwise than by
Will, or if the grantee dies intestate, by the laws of descent and distribution
of the state of domicile of the grantee at the time of death. All stock options
shall be exercisable during the lifetime of the grantee only by the grantee or
the grantee's guardian or legal representative.
(E) If a grantee ceases to be a Director of the Company, any outstanding
stock options held by the grantee shall be exercisable and shall terminate,
according to the following provisions:
(i) If a grantee ceases to be a Director of the Company for any
reason other than resignation, removal for cause or death, any then
outstanding stock option held by such grantee shall be exercisable by
the grantee (but only to the extent exercisable by the grantee
immediately prior to ceasing to be a Director) at any time prior to
the expiration date of such stock option or within one year after the
date the grantee ceases to be a Director, whichever is the shorter
period;
(ii) If during his term of office as a Director a grantee resigns
from the Board or is removed from office for cause, any outstanding
stock option held by the grantee which is not exercisable by the
grantee immediately prior to resignation or
3
<PAGE>
removal shall terminate as of the date of resignation or removal, and
any outstanding stock option held by the grantee which is exercisable
by the grantee immediately prior to resignation or removal shall be
exercisable by the grantee at any time prior to the expiration date of
such stock option or within 90 days after the date of resignation or
removal, whichever is the shorter period;
(iii) Following the death of a grantee during service as a
Director of the Company, any outstanding stock option held by the
grantee at the time of death (whether or not exercisable by the
grantee immediately prior to death) shall be exercisable by the person
entitled to do so under the Will of the grantee, or, if the grantee
shall fail to make testamentary disposition of the stock option or
shall die intestate, by the legal representative of the grantee at any
time prior to the expiration date of such stock option or within two
years after the date of death, whichever is the shorter period;
(iv) Following the death of a grantee after ceasing to be a
Director and during a period when a stock option is exercisable, any
outstanding stock option held by the grantee at the time of death
shall be exercisable by such person entitled to do so under the Will
of the grantee or by such legal representative at any time prior to
the expiration date of such stock option or within one year after the
date of death, whichever is the shorter period.
(F) All stock options shall be confirmed by an agreement, or an amendment
thereto, which shall be executed on behalf of the Company by the Chief Executive
Officer (if other than the President), the President or any Vice President and
by the grantee.
(G) Fair market value of the Common Stock shall be the mean between the
following prices, as applicable, for the date as of which fair market value is
to be determined as quoted in The Wall Street Journal (or in such other reliable
publication as the Committee, in its discretion, may determine to rely upon):
(a) if the Common Stock is listed on the New York Stock Exchange, the highest
and lowest sales prices per share of the Common Stock as quoted in the NYSE-
Composite Transactions listing for such date, (b) if the Common Stock is not
listed on such exchange, the highest and lowest sales prices per share of Common
Stock for such date on (or on any composite index including) the principal
United States securities exchange registered under the Securities Exchange Act
of 1934 (the "1934 Act") on which the Common Stock is listed, or (c) if the
Common Stock is not listed on any such exchange, the highest and lowest sales
prices per share of the Common Stock for such date on the National Association
of Securities Dealer Automated Quotations System or any successor system then in
use ("NASDAQ"). If there are no such sale price quotations for the date as of
which fair market value is to be
4
<PAGE>
determined but there are such sale price quotations within a reasonable period
both before and after such date, then fair market value shall be determined by
taking a weighted average of the means between the highest and lowest sales
prices per share of the Common Stock as so quoted on the nearest date before and
the nearest date after the date as of which fair market value is to be
determined. The average should be weighted inversely by the respective numbers
of trading days between the selling dates and the date as of which fair market
value is to be determined. If there are no such sale price quotations on or
within a reasonable period both before and after the date as of which fair
market value is to be determined, then fair market value of the Common Stock
shall be the mean between the bona fide bid and asked prices per share of Common
Stock as so quoted for such date on NASDAQ, or if none, the weighted average of
the means between such bona fide bid and asked prices on the nearest trading
date before and the nearest trading date after the date as of which fair market
value is to be determined, if both such dates are within a reasonable period.
The average is to be determined in the manner described above in this Section
4(G). If the fair market value of the Common Stock cannot be determined on the
basis previously set forth in this Section 4(G) for the date as of which fair
market value is to be determined, the Committee shall in good faith determine
the fair market value of the Common Stock on such date. Fair market value shall
be determined without regard to any restriction other than a restriction which,
by its terms, will never lapse.
(H) The obligation of the Company to issue or deliver shares of the Common
Stock under the Plan shall be subject to (i) the effectiveness of a registration
statement under the Securities Act of 1933, as amended, with respect to such
shares, if deemed necessary or appropriate by counsel for the Company, (ii) the
condition that the shares shall have been listed (or authorized for listing upon
official notice of issuance) upon each stock exchange, if any, on which the
Common Stock shares may then be listed and (iii) all other applicable laws,
regulations, rules and orders which may then be in effect.
Subject to the foregoing provisions of this Section 4 and the other
provisions of the Plan, any stock option granted under the Plan may be subject
to such restrictions and other terms and conditions if any, as shall be
determined, in its discretion, by the Committee and set forth in the agreement
referred to in Section 4(F), or an amendment thereto.
SECTION 5
ADJUSTMENT AND SUBSTITUTION OF SHARES
If a dividend or other distribution shall be declared upon the Common
Stock payable in shares of the Common Stock the number of shares of the Common
Stock set forth in Section 3, the number of shares of the Common Stock then
subject to any outstanding stock options and the number of shares of the Common
Stock which may be issued or delivered under the Plan but are not then subject
to outstanding stock options shall be adjusted by adding thereto the number of
shares of the Common Stock which would have been distributable thereon if such
5
<PAGE>
shares had been outstanding on the date fixed for determining the stockholders
entitled to receive such stock dividend or distribution.
If the outstanding shares of the Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Company or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
shares of the Common Stock set forth in Section 3, for each share of the Common
Stock subject to any then outstanding stock option, and for each share of the
Common Stock which may be issued or delivered under the Plan but which is not
then subject to any outstanding stock option, the number and kind of shares of
stock or other securities into which each outstanding share of the Common Stock
shall be so changed or for which each such share shall be exchangeable.
In case of any adjustment or substitution as provided for in this
Section 5, the aggregate option price for all shares subject to each then
outstanding stock option prior to such adjustment or substitution shall be the
aggregate option price for all shares of stock or other securities (including
any fraction) to which such shares shall have been adjusted or which shall have
been substituted for such shares. Any new option price per share shall be
carried to at least three decimal places with the last decimal place rounded
upwards to the nearest whole number.
No adjustment or substitution provided for in this Section 5 shall
require the Company to issue or deliver or sell a fraction of a share or other
security. Accordingly, all fractional shares or other securities which result
from any such adjustment or substitution shall be eliminated and not carried
forward to any subsequent adjustment or substitution.
SECTION 6
EFFECT OF THE PLAN ON THE RIGHTS OF COMPANY AND STOCKHOLDERS
Nothing in the Plan, in any stock option granted under the Plan, or in
any stock option agreement shall confer any right to any person to continue as a
Director of the company or interfere in any way with the rights of the
stockholders of the Company or the Board of Directors to elect and remove
Directors.
SECTION 7
AMENDMENT AND TERMINATION
The right to amend the Plan at any time and from time to time and the
right to terminate the Plan at any time are hereby specifically reserved to the
Board; provided always that no such termination shall terminate any outstanding
stock options granted under the Plan; and provided further that no amendment of
the Plan shall (a) be made without stockholder approval if stockholder approval
of the amendment is at the time required for stock options under the Plan to
qualify for the exemption from Section 16(b) of the 1934 Act provided by Rule
16b-3 or by
6
<PAGE>
the rules of the NASDAQ National Market System or any stock exchange on which
the Common Stock may then be listed, (b) amend more than once every six months
the provisions of the Plan relating to the selection of the Directors to whom
stock options are to be granted, the timing of such grants, the number of shares
subject to any stock option, the exercise price of any stock option, the periods
during which any stock option may be exercised and the term of any stock option
other than to comport with changes in the Code or the rules and regulations
thereunder or (c) otherwise amend the Plan in any manner that would cause stock
options under the Plan not to qualify for the exemption provided by Rule 16b-3.
No amendment or termination of the Plan shall, without the written consent of
the holder of a stock option theretofore awarded under the Plan, adversely
affect the rights of such holder with respect thereto.
Notwithstanding anything contained in the preceding paragraph or any
other provision of the Plan or any stock option agreement, the Board shall have
the power to amend the Plan in any manner deemed necessary or advisable for
stock options granted under the Plan to qualify for the exemption provided by
Rule 16b-3 (or any successor rule relating to exemption from Section 16(b) of
the 1934 Act), and any such amendment shall, to the extent deemed necessary or
advisable by the Board, be applicable to any outstanding stock options
theretofore granted under the plan notwithstanding any contrary provisions
contained in any stock option agreement. In the event of any such amendment to
the Plan, the holder of any stock option outstanding under the Plan shall, upon
request of the Committee and as a condition to the exercisability of such
option, execute a conforming amendment in the form prescribed by the Committee
to the stock option agreement referred to in Section 4(F) within such reasonable
time as the Committee shall specify in such request.
SECTION 8
EFFECTIVE DATE AND DURATION OF PLAN
The effective date and date of adoption of the Plan shall be July 1,
1991, the date of adoption of the Plan by the Board, provided that on or prior
to June 30, 1992 such adoption of the Plan by the Board is approved by the
affirmative vote of the holders of at least a majority of the outstanding shares
of voting stock of the company represented in person or by proxy at a duly
called and convened meeting of such holders. Notwithstanding any other
provisions contained in the Plan, no stock option granted under the Plan may be
exercised until after such stockholder approval. No stock option may be granted
under the Plan subsequent to June 30, 1996.
7
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