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 February 28, 1997 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.
<PAGE>
OIL CITY PETROLEUM, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Statement of Operations - Six Months Ended
February 28, 1997 and 1996 3
Balance Sheet - February 28, 1997 and August 31, 1996 4
Statement of Cash Flows - Six Months Ended
February 28, 1997 and 1996 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
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
OIL CITY PETROLEUM, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
Feb. 28, Feb. 28,
1997 1996 1997 1996
Revenues:
Oil and Gas Sales $ 13,472 $ 12,085 $ 29,690 $ 23,766
Rental Income 10,935 9,493 20,863 18,638
Interest and Other Income 323 369 647 732
Gain (Loss) on Sale of Assets 100 (175) 100 (175)
24,830 21,772 51,300 42,961
Costs and Expenses:
Oil & Gas Operating Expenses 11,322 10,799 24,481 22,191
Rental Expenses 10,406 11,469 14,644 15,897
Depreciation, Depletion & Amort. 4,974 5,274 9,948 10,767
Administrative and General 22,006 24,791 54,131 59,023
Interest Expense- Non-Affiliates 4,087 4,395 8,250 8,848
Interest Expense- Affiliates 22,972 20,907 45,313 41,275
75,767 77,635 156,767 158,001
Net Income or (Loss) $ (50,937) $ (55,863) $(105,467) $(115,040)
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
<PAGE>
OIL CITY PETROLEUM, INC.
BALANCE SHEET
(UNAUDITED)
Feb. 28, Aug. 31,
ASSETS 1997 1996
Current Assets:
Cash $ 9,261 $ 311
Short-term Investments 25,000 25,000
Accounts Receivable 13,971 15,119
Crude Oil Inventory 4,992 4,992
Other Current Assets 737 3,597
Total Current Assets 53,961 49,019
Property and Equipment, at Cost:
Oil and Gas Properties, Successful Efforts Method 1,094,018 1,094,018
Field Equipment 7,945 7,945
Building, Land and Office Equipment 261,101 254,331
Total Property and Equipment, at Cost 1,363,064 1,356,294
Less Accumulated Depreciation, Depletion,
and Amortization (722,664) (712,716)
Net Property and Equipment 640,400 643,578
Other Assets -- --
Total Assets $ 694,361 $ 692,597
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
OIL CITY PETROLEUM, INC.
BALANCE SHEET
(UNAUDITED)
Feb. 28, Aug. 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1996
Current Liabilities:
Accounts Payable and Accrued Expenses $ 9,105 $ 14,670
Current Portion of Long-Term Debt 12,171 12,171
Note and Accrued Interest Payable to Affiliate 1,584,530 1,465,807
Total Current Liabilities 1,605,806 1,492,648
Long-Term Debt Less Current Portion 141,463 147,390
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 (8,312,722) (8,207,255)
Total Shareholders' Equity (Deficit) (1,052,908) (947,441)
Total Liabilities and Shareholders' Equity $ 694,361 $ 692,597
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
OIL CITY PETROLEUM, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Six Months Ended
Feb. 28,
1997 1996
Cash Flows from Operating Activities:
Net Loss $(105,467) $(115,040)
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation, Depletion, and Amortization 9,948 10,767
Interest Expense - Affiliates 45,313 41,275
Net (Gain) Loss on Sale of Assets -- 175
Change in Assets and Liabilities:
(Increase) Decrease in Receivables 1,148 1,735
(Increase) Decrease in Inventory -- --
(Increase) Decrease in Other Current Assets 2,860 2,726
Increase (Decrease) in Accounts
Payable and Accrued Expenses (5,565) (9,165)
Total Adjustments 53,704 47,513
Net Cash Used in Operating Activities (51,763) (67,527)
Cash Flows from Investing Activities:
Decrease (Increase) in Capital Expenditures (6,770) (1,437)
Proceeds from Sale of Assets -- 5,090
Net Cash Provided (Used) by Investing Activities (6,770) 3,653
Cash Flows from Financing Activities:
Increase in Borrowings from Affiliate 73,410 70,279
Principal Payments on Long-term Debt (5,927) (5,338)
Net Cash Provided by Financing Activities 67,483 64,941
Net Increase (Decrease) 8,950 1,067
Cash at Beginning of Year 311 3,964
Cash at End of Period $ 9,261 $ 5,031
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
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 six-month period ended February 28, 1997 are not necessarily indicative of
the results that may be expected for the year ended August 31, 1997. 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, 1996.
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 $1,605,806 at February 28, 1997 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.
<PAGE>
RESULTS OF OPERATIONS
Three Months Ended February 28, 1997 and 1996
Oil and gas sales of $13,472 for the period ended February 28, 1997
increased $1,387 from the same quarter of the prior year. This increase is
primarily due to increased production from well workovers performed during the
prior year.
Rental income of $10,935 increased $1,442 from the same quarter of the
prior year due to a higher occupancy rate in the current year.
Oil & Gas operating expenses of $11,322 increased $523 from $10,799
experienced in the same quarter of the prior year, due to bulldozer work to
improve access roads on one of the leases.
Rental expenses of $10,406 decreased $1,063 from the same quarter of the
prior year, due to lower utility bills and less interest expense on the
building mortgage.
Depreciation and depletion expense of $4,974 decreased $300 from $5,274
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 $22,006 decreased $2,785 from that
experienced during the same period of the prior year, primarily due to lower
fees from consultants.
Interest expense to affiliates increased $2,065 from that experienced in
the same period of the prior year because the Registrant's debt to affiliates
has increased $138,868 since that time.
Six Months Ended February 28, 1997 and 1996
Oil and gas sales of $29,690 for the period ended February 28, 1997
increased $5,924 from $23,766 experienced during the same period of the prior
year. The decrease is primarily due to increased production from well
workovers performed during the prior year.
Rental income of $20,863 increased $2,225 from the same period of the
prior year due to a higher occupancy rate in the current year.
Oil & gas operating expenses of $24,481 increased $2,290 from $22,191
experienced during the same period of the prior year, due to downhole pump
repairs performed in an attempt to increase production, and bulldozer work to
improve access roads on one of the leases.
<PAGE>
Rental expenses of $14,644 decreased $1,253 from $15,897 experienced
during the same period of the prior year, due to lower utility bills and less
interest expense on the building mortgage.
Depreciation and depletion expense of $9,948 decreased $819 from $10,767
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 $54,131 decreased $4,892 from
$59,023 experienced during the same period of the prior year, due to lower fees
from consultants.
Interest expense to affiliates increased $4,038 from that experienced in
the same period of the prior year because the Registrant's debt to affiliates
has increased $138,868 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
February 28, 1997:
None.
<PAGE>
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: March 26, 1997 s/b Herman E. Nichols, Jr.
Herman E. Nichols, Jr.
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OIL CITY
PETROLEUM, INC.'S SECOND QUARTER 10-Q DATED FEBRUARY 28, 1997, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
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