FORM-10Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Quarter Ended May 31, 1996 Commission File Number 0-9098
OIL CITY PETROLEUM, INC.
(Exact name of Registrant as specified in its Charter)
Texas 75-1614001
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5579 South Lewis, Tulsa, Oklahoma 74105
(Address of principal executive offices) (Zip Code)
(918) 749-0483
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports re-
quired to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days. Yes X No
The Registrant had 14,912,492 shares of common stock, no par value outstanding
as of the close of the period covered by this report.
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OIL CITY PETROLEUM, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Statement of Operations - Nine Months Ended
May 31, 1996 and 1995 3
Balance Sheet - May 31, 1996 and August 31, 1995 4
Statement of Cash Flows - Nine Months Ended
May 31, 1996 and 1995 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OIL CITY PETROLEUM, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
May 31, May 31,
1996 1995 1996 1995
Revenues:
Oil and Gas Sales $ 8,758 $ 13,355 $ 32,525 $ 35,273
Rental Income 9,035 8,327 27,673 20,033
Interest and Other Income 329 371 1,061 991
Gain (Loss) on Sale of Assets -0- 50 (175) 525
18,122 22,103 61,084 56,822
Costs and Expenses:
Oil & Gas Operating Expenses 18,814 11,057 41,005 36,960
Rental Expenses 6,578 3,959 22,476 18,439
Depreciation, Depletion & Amort. 5,274 6,075 16,041 18,225
Administrative and General 18,309 32,839 77,332 82,078
Interest Expense- Non-Affiliates 4,312 4,598 13,160 13,964
Interest Expense- Affiliates 21,345 19,352 62,620 56,030
74,632 77,880 232,634 225,696
Net Income or (Loss) $ (56,510) $ (55,777) $(171,550) $(168,874)
Net Income or (Loss) Per Share $ (.01) $ (.01) $ (.01) $ (.01)
Average Number of Shares
Outstanding 14,912,492 14,912,492 14,912,492 14,912,492
SEE NOTES TO FINANCIAL STATEMENTS
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OIL CITY PETROLEUM, INC.
BALANCE SHEET
(UNAUDITED)
May 31, Aug. 31,
ASSETS 1996 1995
Current Assets:
Cash $ 2,264 $ 3,964
Short-term Investments 25,000 25,000
Accounts Receivable 11,714 12,693
Crude Oil Inventory 3,315 3,315
Other Current Assets 2,221 3,957
Total Current Assets 44,514 48,929
Property and Equipment, at Cost:
Oil and Gas Properties, Successful Efforts Method 1,091,042 1,088,142
Field Equipment 7,945 7,945
Building, Land and Office Equipment 256,831 306,393
Total Property and Equipment, at Cost 1,355,818 1,402,480
Less Accumulated Depreciation, Depletion,
and Amortization (708,245) (736,500)
Net Property and Equipment 647,573 665,980
Other Assets -- --
Total Assets $ 692,087 $ 714,909
SEE NOTES TO FINANCIAL STATEMENTS
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OIL CITY PETROLEUM, INC.
BALANCE SHEET
(UNAUDITED)
May 31, Aug. 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
Current Liabilities:
Accounts Payable and Accrued Expenses $ 16,188 $ 24,171
Current Portion of Long-Term Debt 10,963 10,963
Note and Accrued Interest Payable to Affiliate 1,410,385 1,245,561
Total Current Liabilities 1,437,536 1,280,695
Long-Term Debt Less Current Portion 151,447 159,560
Shareholders' Equity:
Common Stock, No Par Value - Authorized
30,000,000 Shares, Issued and Outstanding
14,912,492 Shares 5,692,571 5,692,571
Additional Paid-in Capital 1,567,243 1,567,243
Accumulated Deficit (8,156,710) (7,985,160)
Total Shareholders' Equity (Deficit) (896,896) (725,346)
Total Liabilities and Shareholders' Equity $ 692,087 $ 714,909
SEE NOTES TO FINANCIAL STATEMENTS
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OIL CITY PETROLEUM, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
May 31,
1996 1995
Cash Flows from Operating Activities:
Net Loss $(171,550) $(168,874)
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation, Depletion, and Amortization 16,041 18,225
Interest Expense - Affiliates 62,620 56,030
Net (Gain) Loss on Sale of Assets 175 (525)
Change in Assets and Liabilities:
(Increase) Decrease in Receivables 979 (6,342)
(Increase) Decrease in Inventory -- --
(Increase) Decrease in Other Current Assets 1,736 1,489
Increase (Decrease) in Accounts
Payable and Accrued Expenses (7,983) (12,619)
Total Adjustments 73,568 56,258
Net Cash Used in Operating Activities (97,982) (112,616)
Cash Flows from Investing Activities:
Decrease (Increase) in Capital Expenditures (2,900) (6,270)
Proceeds from Sale of Assets 5,090 525
Net Cash Provided (Used) by Investing Activities 2,190 (5,745)
Cash Flows from Financing Activities:
Increase in Borrowings from Affiliate 102,205 143,503
Principal Payments on Long-term Debt (8,113) (7,309)
Net Cash Provided by Financing Activities 94,092 136,194
Net Increase (Decrease) (1,700) 17,833
Cash at Beginning of Year 3,964 911
Cash at End of Period $ 2,264 $ 18,744
SEE NOTES TO FINANCIAL STATEMENTS
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of the management, all adjustments considered
necessary for a fair presentation have been included. Operating results for
the nine-month period ended May 31, 1996 are not necessarily indicative of the
results that may be expected for the year ended August 31, 1996. For further
information, refer to the financial statements and notes thereto included in
the Registrant's annual report on Form 10-K for the year ended August 31, 1995.
NET LOSS PER SHARE
Loss per share is computed based on the net loss for the period, divided
by the weighted average number of common shares outstanding during each period.
Common equivalent shares are not included in the computation because of their
anti-dilutive effect.
LONG-TERM DEBT
Since 1987, cash advances have been made to the Registrant by National Oil
& Gas, Inc., an affiliated entity, in order to finance working capital
deficits. The terms of the notes representing such cash advances are 6% to 9%
interest with all principal and accrued interest due on demand. Outstanding
principal and accrued interest of $1,410,385 at May 31, 1996 are classified on
the balance sheet as a current liability as these notes are payable on demand.
National Oil & Gas, Inc. is an affiliated company controlled by Mr. William G.
Moser, Chairman of the Board of the Registrant.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
FINANCIAL CONDITION
In view of the continuing volatile conditions in the oil and gas industry
and the significant sales of oil and gas properties in recent years, the
Registrant anticipates that cash flow from operations will not be sufficient
to provide for the payment of its indebtedness, necessitating the renewal or
refinancing of such indebtedness at maturity. No assurance can be given that
the Registrant will be able to renew or refinance such indebtedness or that
additional cash infusions will be available.
RESULTS OF OPERATIONS
Three Months Ended May 31, 1996 and 1995
Oil and gas sales of $8,758 for the period ended May 31, 1996 decreased
$4,597 from the same quarter of the prior year. This increase is primarily due
to prairie grass fires which damaged plastic flow lines, shutting down
production for several weeks.
Rental income of $9,035 increased $708 from the same quarter of the prior
year due to a higher occupancy rate in the current year.
Oil & Gas operating expenses of $18,814 increased $7,757 from $11,057
experienced in the same quarter of the prior year, due to the grass fires
combined with some well workovers to stimulate production.
Rental expenses of $6,578 increased $2,619 from the same quarter of the
prior year, due to higher utility bills combined with new carpeting for a
previously vacant office suite.
Depreciation and depletion expense of $5,274 decreased $801 from $6,075
experienced during the same quarter of the prior year due to lower depletion
rates on oil leases, and due to the sale of a depreciating storage building in
Louisiana.
Administrative and general expense of $18,309 decreased $14,530 from that
experienced during the same period of the prior year, due to lower fees from
accountants, and due to the fact that no legal fees were incurred as they were
in the same period of the prior year.
Interest expense to affiliates increased $1,993 from that experienced in
the same period of the prior year because the Registrant's debt to affiliates
has increased $110,475 since that time.
Nine Months Ended May 31, 1996 and 1995
Oil and gas sales of $32,525 for the period ended May 31, 1996 decreased
$2,748 from $35,273 experienced during the same period of the prior year. The
decrease is primarily due to prairie grass fires which shut down production for
several weeks, offset by increased production from well workovers and equipment
upgrades made in the previous year.
Rental income of $27,673 increased $7,640 from the same period of the
prior year due to the rental of 1,200 square feet of previously vacant office
space.
Oil & gas operating expenses of $41,005 increased $4,045 from $36,960
experienced during the same period of the prior year, mostly due to the grass
fires combined with some well workovers to stimulate production.
Rental expenses of $22,476 increased $4,037 from $18,439 experienced
during the same period of the prior year, due to higher utility bills, combined
with new carpeting for a previously vacant office suite.
Depreciation and depletion expense of $16,041 decreased $2,184 from
$18,225 experienced during the same period of the prior year due to lower
depletion rates on oil leases, and due to the sale of a depreciating storage
building in Louisiana.
Administrative and general expense of $77,332 decreased $4,746 from
$82,078 experienced during the same period of the prior year, due to the fact
that no legal fees were incurred this year, partially offset by higher fees
from consultants.
Interest expense to affiliates increased $6,590 from that experienced in
the same period of the prior year because the Registrant's debt to affiliates
has increased $110,475 since that time.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required by Item 601 of Regulation S-X:
None.
(b) Reports on Form 8-K during the three months ended
May 31, 1996:
None.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OIL CITY PETROLEUM, INC.
Date: July 12, 1996 Herman E. Nichols, Jr.
Herman E. Nichols, Jr.
President
