<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
( X ) Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the period ended March 31, 1999
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _____ to ______
Commission File Number 0-9116
PANHANDLE ROYALTY COMPANY
------------------------------------------------------
(Exact name of registrant as specified in its charter)
OKLAHOMA 73-1055775
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification No.)
Grand Centre Suite 210, 5400 N Grand Blvd., Oklahoma City, Oklahoma 73112
- ----------------------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number including area code (405) 948-1560
--------------------------
Indicate by check mark whether the registrant (1) 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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
--- ---
Outstanding shares of Class A Common stock (voting) at May 10, 1999: 2,047,542
---------
<PAGE> 2
INDEX
Part I. Financial Information
Item 1. Financial Statements Page
Condensed Consolidated Balance Sheets -
March 31, 1999 (unaudited) and
September 30, 1998......................................... 1
Condensed Consolidated Statements of Income -
Three Months and Six months ended
March 31, 1999 and 1998 (unaudited)........................ 2
Condensed Consolidated Statements of Cash Flows -
Six months ended March 31, 1999 and 1998
(Unaudited)................................................ 3
Notes to Condensed Consolidated Financial
Statements (unaudited)..................................... 4
Item 2. Management's discussion and analysis of financial
condition and results of operations......................... 5
Part II. Other Information
Item 4. Submission of matters to a vote of security holders......... 7
Item 5. Other Information........................................... 7
Item 6. Exhibits and reports on Form 8-K............................ 8
<PAGE> 3
PART I. FINANCIAL INFORMATION
PANHANDLE ROYALTY COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Information at March 31, 1999 is unaudited)
<TABLE>
March 31, September 30,
1999 1998
------------ -------------
<S> <C> <C>
Assets
Current assets:
Cash $ 91,649 $ 320,210
Oil and gas sales and other receivables 634,764 716,648
Income taxes receivables 277,090 152,090
Prepaid expenses 10,156 27,391
----------- -----------
Total current assets 1,013,659 1,216,339
Properties and equipment, at cost, based on
successful efforts accounting
Producing Oil and Gas Properties 23,095,665 22,360,790
Non producing Oil and Gas Properties 5,720,717 5,693,399
Other 249,492 241,567
----------- -----------
29,065,874 28,295,756
Less accumulated depreciation,
depletion and amortization 17,336,409 16,600,499
----------- -----------
Net properties and equipment 11,729,465 11,695,257
Other assets 107,716 107,716
----------- -----------
$12,850,840 $13,019,312
=========== ===========
Liabilities And Stockholders' Equity
Current liabilities:
Accounts payable, accrued liabilities
and gas imbalance liability $ 414,047 $ 620,413
Dividends payable 32,456 31,656
Income taxes payable -- --
Deferred income taxes 112,000 112,000
----------- -----------
Total current liabilities 558,503 764,069
Deferred income taxes 1,532,000 1,451,000
Long-term debt 300,000 --
Stockholders' equity
Class A voting Common Stock, $.0333 par value;
6,000,000 shares authorized,
2,047,542 issued and outstanding at
March 31,1999 and 2,047,602 at
September 30, 1998 68,251 68,254
Capital in excess of par value 515,379 515,823
Retained Earnings 9,876,707 10,220,166
----------- -----------
10,460,337 10,804,243
----------- -----------
Total stockholders' equity $12,850,840 $13,019,312
=========== ===========
</TABLE>
(1)
<PAGE> 4
PANHANDLE ROYALTY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
Three Months Ended March 31, Six Months Ended March 31,
---------------------------- ----------------------------
1999 1998 1999 1998
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $ 937,682 $ 1,322,550 $ 1,968,815 $ 3,132,319
Lease bonuses and rentals 2,381 200 6,852 7,651
Interest 1,479 12,663 5,262 21,861
Other 128 251 3,214 772
----------- ------------- ----------- -------------
941,670 1,335,664 1,984,143 3,162,603
Costs and expenses:
Lease operating expenses
and production taxes 205,682 249,048 409,637 533,003
Exploration costs 208,984 206,175 297,067 265,564
Depreciation, depletion,
amortization
and impairment 363,167 244,383 735,910 613,444
General and administrative 275,478 264,783 646,287 627,776
Interest expense 8,104 1,559 8,890 1,559
----------- ------------- ----------- -------------
1,061,415 965,948 2,097,791 2,041,346
----------- ------------- ----------- -------------
Income (loss) before provision
for income taxes (119,745) 369,716 (113,648) 1,121,257
Provision (benefit) for income taxes (44,000) 70,000 (44,000) 235,000
----------- ------------- ----------- -------------
Net income (loss) $ (75,745) $ 299,716 $ (69,648) $ 886,257
=========== ============= =========== =============
Basic earnings (loss) per share (Note 4) $ (.04) $ .15 $ (.03) $ .43
=========== ============= =========== =============
Diluted earnings (loss) per share (Note 4) $ (.04) $ .15 $ (.03) $ .43
=========== ============= =========== =============
Dividends declared
per share of common stock $ .07 $ .10 $ .13 $ .17
=========== ============= =========== =============
</TABLE>
(See accompanying notes)
(2)
<PAGE> 5
PANHANDLE ROYALTY COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Six months ended March 31,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (69,648) $ 886,257
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation, depletion and amortization 735,910 613,444
Deferred income taxes 81,000 --
Exploration costs 297,067 265,564
Cash provided (used) by changes in assets
and liabilities:
Oil and gas sales and income tax receivable (43,116) 99,112
Prepaid expenses and other assets 17,235 (15,884)
Income taxes payable -- 22,134
Accounts payable, accrued liabilities,
gas imbalance liability and dividends
payable (205,566) (73,049)
----------- -----------
Total adjustments 926,530 911,321
----------- -----------
Net cash provided by operating activities 812,882 1,797,578
Cash flows from investing activities:
Purchase of and development of
properties and equipment (1,067,185) (1,337,353)
----------- -----------
Net cash used in investing activities (1,067,185) (1,337,353)
Cash flows from financing activities:
Borrowings under line of credit 300,000 --
Acquisition of Company's common shares (447) (2,724)
Payment of dividends (273,811) (340,909)
----------- -----------
Net cash provided (used)
in financing activities 25,742 (343,633)
----------- -----------
Increase (decrease) in cash and cash
equivalents (228,561) 116,592
Cash and cash equivalents at beginning of
period 320,210 872,797
----------- -----------
Cash and cash equivalents at ed of period $ 91,649 $ 989,389
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 8,890 $ 1,559
Income taxes paid 180 212,866
----------- -----------
$ 9,070 $ 214,425
=========== ===========
</TABLE>
(See accompanying notes)
(3)
<PAGE> 6
PANHANDLE ROYALTY COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated results presented for the six-month and three-month
periods ended March 31, 1999 and 1998 are unaudited, but management of
Panhandle Royalty Company believes that all adjustments necessary for a
fair presentation of the consolidated results of operations for the
periods have been included. All such adjustments are of a normal
recurring nature. The consolidated results are not necessarily
indicative of those to be expected for the full year.
2. The Company utilizes tight gas sands production tax credits to reduce
its federal income tax liability, if any. These credits are scheduled
to be available through the year 2002.
3. On February 26, 1999, the Company's Board of Directors approved a
proposal to (1) amend the Company's duration from fifty years to
perpetuity; (2) amend the Company's Articles of Incorporation to
increase the number of authorized shares of Class A Common Stock from
1,000,000 shares to 6,000,000 shares; (3) effect a 3-for-1 stock split
of the outstanding Class A Common Stock and a corresponding reduction
of the par value per share from $.10 to $.03 a; (4) adopt amendments to
the Articles of Incorporation and Bylaws to change voting rights from
one vote per shareholder to one vote per share; and (5) amend the
Articles of Incorporation to provide that generally any merger,
consolidation, liquidation or dissolution of the Company or sale of
substantially all of the assets of the Company require the affirmative
vote of the holders of 66 2/3% or more of the Company's outstanding
Class A Common Stock. On May 7, 1999, these proposals were put forth to
a vote of the shareholders, for which a majority of the shareholders
voted in favor of each proposal, causing these proposals to become
effective on such date. The Class A Common Stock split will be effected
in the form of a stock dividend to be distributed on June 1, 1999, to
shareholders of record on May 7, 1999.
All agreements concerning Common Stock of the Company, including the
Company's Employee Stock Ownership Plan and the Company's commitment
under the Deferred Compensation Plan for Non-Employee Directors,
provide for the issuance or commitment, respectively of additional
shares of the Company's stock due to the declaration of the stock
split. All references to number of shares, per share, and authorized
share information in the accompanying condensed consolidated financial
statements has been adjusted to reflect the stock split and increase in
authorized shares approved on May 7, 1999, at the Special Meeting of
the Shareholders of the Company.
4. In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which was adopted by the Company
on December 31, 1997. The Company's diluted earnings per share
calculation takes into account certain shares that may be issued under
the Non-Employee Director's Deferred Compensation Plan. The following
table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
Three months ended March 31, Six months ended March 31,
------------------------------ ----------------------------
1999 1998 1999 1998
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Numerator for primary
and diluted earnings
per share:
Net income (loss) $ (75,745) 299,716 $ (69,648) $ 886,257
------------ ----------- ----------- -----------
Denominator:
For basic earnings per share
Weighted average shares 2,047,557 2,039,325 2,047,578 2,039,394
Effect of potential diluted shares:
Directors deferred
compensation shares 15,038 10,890 14,919 10,890
------------ ----------- ----------- -----------
Denominator for diluted earnings
per share - adjusted weighted
average shares and potential
shares 2,062,595 2,050,215 2,062,497 2,050,284
============ =========== ========== ===========
Basic earnings (loss) per share $ (.04) $ .15 $ (.03) $ .43
============ =========== ========== ===========
Diluted earnings (loss) per share $ (.04) $ .15 $ (.03) $ .43
============ =========== ========== ===========
</TABLE>
(4)
<PAGE> 7
5. The Company has a revolving line of credit with Bank One, Texas, in the
amount of $2,500,000. The credit facility matures on January 3, 2001.
At March 31, 1999, and on May 4, 1999, the Company had $300,000
outstanding under the facility.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
Forward-Looking Statements for 1999 and later periods are made in this
document. Such statements represent estimates of management based on the
Company's historical operating trends, its proved oil and gas reserves and other
information currently available to management. The Company cautions that the
forward-looking statements provided herein are subject to all the risks and
uncertainties incident to the acquisition, development and marketing of, and
exploration for oil and gas reserves. These risks include, but are not limited
to, oil and natural gas price risk, environmental risks, drilling risk, reserve
quantity risk and operations and production risk. For all the above reasons,
actual results may vary materially from the forward-looking statements and there
is no assurance that the assumptions used are necessarily the most likely to
occur.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999 working capital was $425,156 as compared to $452,270
at September 30, 1998. Cash flow from operating activities for the first six
months of fiscal 1999 was $812,882 as compared to $1,797,578 for the first six
months of fiscal 1998. This decrease of $984,696 is directly attributable to a
decline in oil and gas sales revenue during the fiscal 1999 six months. The
decline in oil and gas sales revenues is discussed in detail in "Results of
Operations".
Capital expenditures on oil and gas activities in the first six months
of 1999 amounted to $1,067,185 as compared to $1,337,353 in the first six months
of fiscal 1998. This decreased spending on oil and gas property development was
mainly a result of the low market price of crude oil. Several oil wells
projected to be drilled in the 1999 six month period were postponed until oil
prices recover or in some instances, may not be drilled. The Company expects to
continue its ongoing business strategy of actively pursuing the development of
its oil and gas properties by participating in the drilling of additional wells
on these properties. Currently, crude oil market prices are recovering and
management expects drilling in the last six months of fiscal 1999, to increase
over levels seen in the first six months of fiscal 1999. The Company has
historically funded this drilling and other capital expenditures as well as
overhead costs and dividend payments from operating cash flow. However, in
December 1998, the Company borrowed $300,000 under its bank line of credit to
help fund these costs.
At March 31, 1999, the Company had remaining projected costs of
$1,300,465, for its share of drilling and equipment costs on working interest
wells which have been proposed or were in the process of being drilled or
completed. The Company's cash flow for the year may be less than the amount
needed to fully fund the above drilling obligations, overhead and dividend
payments. Thus, the bank line of credit may be utilized, on an as needed basis,
to allow the Company to continue its aggressive approach of developing its oil
and gas properties. The line of credit and expected cash flow are more than
sufficient to meet all expected capital obligations. Future capital expenditure
amounts may vary due to many factors, including drilling results, oil and gas
prices, industry conditions and acquisition opportunities, among others. A
significant acquisition of producing properties could increase capital
expenditures greatly and would again be financed by additional debt or possibly
debt and equity.
(5)
<PAGE> 8
RESULTS OF OPERATIONS
Revenues decreased for both the three month and six month periods ended
march 31,1999, as compared to the same periods in fiscal 1998. The decreases
were the result of oil and gas sales revenues decreasing 37% and 29% for the
1999 six month and three month periods, respectively, as compared to the same
periods in fiscal 1998. The chart below outlines the Company's production and
average sales prices for crude oil and natural gas for the three month and six
month periods of fiscal 1999 and 1998:
<TABLE>
BARRELS AVERAGE MCF AVERAGE
SOLD PRICE SOLD PRICE
------- ------- ------- -------
<S> <C> <C> <C> <C>
Three months ended 3/31/99 15,185 $ 11.49 456,219 $ 1.68
Three months ended 3/31/98 28,253 $ 14.33 433,206 $ 2.12
Six months ended 3/31/99 34,169 $ 11.90 835,885 $ 1.87
Six months ended 3/31/98 59,865 $ 16.93 875,254 $ 2.42
</TABLE>
As shown by the chart both oil production and the average oil sales
price decreased for both the three month and six month periods of fiscal 1999,
compared to the respective periods in fiscal 1998. Oil sales volumes continued
to be adversely affected by the operator of the Dagger Draw Field in New Mexico
(the Company's major oil producing field) electing to shut-in those wells due to
low crude oil market prices. In late March these wells began being placed back
on production, thus, management expects oil production volumes to increase
somewhat during the third and fourth fiscal quarter of 1999. Gas sales volumes
remained relatively steady in the 1999 periods, as compared to the 1998 periods.
Management expects gas sales volumes to increase for the remainder of fiscal
1999, as compared to the first six months, as several new wells continue
producing and additional wells come on line.
Costs and expenses increased marginally in both 1999 periods as compared
to the 1998 periods. The increases were principally due to increased
depreciation, depletion, amortization, and impairment costs (DD&A) in the 1999
periods, offset somewhat by decreased lease operating expenses and production
taxes in the 1999 periods. The increase DD&A expenses were the result of high
DD&A rates on several of the Company's newer wells in fiscal 1999. These new
wells are producing initial flush production, which increases the
units-of-production DD&A. In addition, DD&A rates were increased on several of
the Company's marginal producing wells during the 1999 six month period as these
wells are producing at less than expected rates, and may not have reserve
quantities which had been expected. Production taxes were lower in the fiscal
1999 periods as these taxes are paid as a percentage of oil and sales revenues.
The provision for income taxes for the 1999 periods is at the statutory
rate. The rate in 1998 differs from the statutory rate due to tight sands
production tax credits and percentage depletion.
Net income decreased substantially for both the 1999 periods, as
compared to the 1998 periods, due to the factors discussed above. Currently,
both oil and natural gas prices have increased over the prices seen in the first
six months of fiscal 1999. In addition, both oil and gas sales volumes are
expected to increase in the last six months of fiscal 1999, thus, financial
results for the last half of fiscal 1999 should improve as compared to the first
half of fiscal 1999. Should additional exploratory drilling prospects result in
non-productive wells which would increase exploration costs, and/or the market
price of oil or natural gas decline, expected earnings would be negatively
impacted.
YEAR 2000 ISSUES
Much of the computer software in use today may not be able to
accurately process data beyond the year 1999. The majority of computer systems
process data using two digits for the year of transaction, rather than the full
four digits. This may cause many systems to be unable to accurately process year
2000 transactions.
The Company has completed its assessment of both its computer ("IT
systems") and operational equipment ("non-IT systems") as of June 30, 1998. The
Company has replaced its computer system hardware with new hardware which has
operating systems that are represented as being 2000 compliant. The Company's
software supplier is in the process of revising software licensed by the Company
with software represented to be year 2000 compliant. The system software
reprogramming is expected to be complete in mid 1999 with installation and
testing by July 1999. The Company has no non-IT systems which are expected to be
impacted in any material manner by year 2000.
(6)
<PAGE> 9
The cost of replacement of the Company's IT systems noted above was
less than $25,000. Cost of the year 2000 compliant system software will be
included in the Company's standard annual license fee. Other costs to access the
year 2000 matter or become compliant therewith are not expected to be
significant.
Should any of the operators of the properties in which the Company
has an interest, purchasers who buy oil and gas from the Company's properties or
financial institutions ("External Agents") used by the Company not properly
address the year 2000 matter, there could be some delay in the Company receiving
payment for the sale of oil and gas. Should this occur, the Company may be
required to borrow additional amounts on its available line of credit, thus
incurring additional interest expense over that otherwise anticipated. However,
the Company does not expect the year 2000 will have a material impact on its
financial position or results of operations. The Company has no systems which
directly interface with External Agents.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders was held on February 26, 1999.
(b) Three directors were elected for three year terms at the meeting.
Also, ratification of the selection of Ernst & Young LLP as
independent auditors for the Company was voted upon. The directors
elected and the results of voting were as follows:
Shareholders
--------------------------------
For Against Withheld
Directors --- ------- --------
- ---------
HW Peace II 806 22
Robert A. Reece 805 23
Jerry L. Smith 808 20
Auditors
- --------
Ernst & Young LLP 801 7 19
Item 5. Other Information
(a) On February 26, 1999, the Company's Board of Directors approved
five proposals to (1) amend the Company's duration from fifty
years to perpetuity; (2) amend the Company's Articles of
Incorporation to increase the number of authorized shares of Class
A Common Stock from 1,000,000 shares to 6,000,000 shares; (3)
effect a 3-for-1 stock split of the outstanding Class A Common
Stock and a corresponding reduction of the par value per share
from $.10 to $.03 a; (4) adopt amendments to the Articles of
Incorporation and Bylaws to change voting rights from one vote per
shareholder to one vote per share; and (5) amend the Articles of
Incorporation to provide that generally any merger, consolidation,
liquidation or dissolution of the Company or sale of substantially
all of the assets of the Company require the affirmative vote of
the holders of 66 2/3% or more of the Company's outstanding Class
A Common Stock. On May 7, 1999, these proposals were put forth to
a vote of the shareholders, for which a majority of the
shareholders voted in favor of each proposal, causing these
proposals to become effective on such date. The Class A Common
Stock split will be effected in the form of a stock dividend to be
distributed on June 1, 1999, to shareholders of record on May 7,
1999.
(7)
<PAGE> 10
The Results of Voting were as Follows:
<TABLE>
<CAPTION>
Shareholders
---------------------------------------------------------------------
For Against Withheld Broker Non-Votes
----- ------- -------- ----------------
<S> <C> <C> <C> <C>
Proposal 1. 1,364 16 30 155
Proposal 2. 1,349 33 28 151
Proposal 3. 1,348 39 25 151
Proposal 4. 1,264 119 27 152
Proposal 5. 1,335 49 29 151
</TABLE>
Item 6. EXHIBITS AND REPORT ON FORM 8-K
(a) Exhibits - Exhibit 3(i) -- Certificate of Amendment to Articles
of Incorporation
- Exhibit 27 -- Financial Date Schedule
(b) FORM 8-K dated February 26, 1999, disclosing board of directors
approval of proposals referred to in Item 5. (a) herein.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PANHANDLE ROYALTY COMPANY
May 14, 1999 /s/ H W PEACE II
- ------------------ --------------------------------------
Date H W Peace II, President
and Chief Executive Officer
May 14, 1999 /s/ MICHAEL C. COFFMAN
- ------------------ --------------------------------------
Date Michael C. Coffman,
Vice President,
Chief Financial Officer and
Secretary and Treasurer
(8)
<PAGE> 11
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3(i) Certificate of Amendment to Articles of Incorporation
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 3(i)
Certificate of Amendment to
Articles of Incorporation
of
Panhandle Royalty Company
We, the undersigned officers of Panhandle Royalty Company, an Oklahoma
corporation (the "Corporation"), in order to effect an amendment to the Articles
of Incorporation of the Corporation, hereby certify as follows:
1. The amendment set forth herein was duly adopted in accordance with the
procedures set forth in Section 1077 of the Oklahoma General
Corporation Act.
2. The Articles of Incorporation of the Corporation is hereby amended as
follows:
(i) ARTICLE THREE of the Articles of Incorporation of the
Corporation is amended and restated in its entirety to read
as follows:
The duration of this corporation is perpetual.
(ii) ARTICLE FIVE of the Articles of Incorporation is amended and
restated in its entirety to read as follows:
The total number of shares of capital stock which the
Corporation shall have authority to issue is six
million five hundred shares (6,000,500), divided into
six million (6,000,000) shares of Class A Common Stock
of the par value of three and one-third cents (3 1/3
cents) per share and five hundred (500) shares of Class
B Common Stock of the par value of one and no/100
Dollars($1.00) per share.
With respect to all matters to which the holders of
Class A Common Stock are entitled to vote, each holder
of Class A Common Stock shall be entitled to vote for
each share of Class A Common Stock that is registered
in such shareholder's name on the applicable record
date, except as may be otherwise required by law. Class
B Common Stock shall be nonvoting stock of the
corporation.
(iii) A new ARTICLE NINE shall be added to the Articles of
Incorporation to read as follows:
<PAGE> 2
No merger, consolidation, liquidation or dissolution of the
corporation, nor any action that would result in the same or
other disposition of all or substantially all of the assets
of the corporation shall be valid unless first approved by
the affirmative vote of the holders of at least sixty-six
and two-thirds percent (66 2/3%) of the outstanding shares
of capital stock then entitled to vote on such matters;
provided, however, that if any such action has been approved
prior to the vote by the shareholders by a two-thirds of the
corporation's whole Board, the affirmative vote of the
holders of a majority of the outstanding shares of capital
stock then entitled to vote on such matters shall be
required, to the extent such shareholder approval is
otherwise required by the Oklahoma General Corporation Act.
The provisions set forth in this Article may not be
repealed, altered or amended, in any respect whatsoever,
unless such repeal, alteration or amendment is approved by
either (a) the affirmative vote of holders of sixty-six and
two-thirds percent (66 2/3%) of the shares of capital stock
of the corporation then issued and outstanding and entitled
to vote on such matters, or (b) the affirmative vote of
two-thirds of the whole Board of the corporation and the
affirmative vote of holders of a majority of the shares of
the corporation's capital stock then issued and outstanding
and entitled to vote on such matters.
3. The remaining paragraphs of Articles of Incorporation shall remain in
full force and effect and shall not be affected by this amendment.
IN WITNESS WHEREOF, the undersigned officers have signed this Certificate
of Amendment on this 7th day of May, 1999.
PANHANDLE ROYALTY COMPANY
an Oklahoma corporation
BY: /s/ HW PEACE II
------------------------
, President
ATTEST:
/s/ MICHAEL C. COFFMAN
- ------------------------
, Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 91,649
<SECURITIES> 0
<RECEIVABLES> 911,854
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,013,659
<PP&E> 29,065,874
<DEPRECIATION> 17,336,409
<TOTAL-ASSETS> 12,850,840
<CURRENT-LIABILITIES> 558,503
<BONDS> 0
0
0
<COMMON> 68,251
<OTHER-SE> 10,392,086
<TOTAL-LIABILITY-AND-EQUITY> 12,850,840
<SALES> 1,968,815
<TOTAL-REVENUES> 1,984,143
<CGS> 409,637
<TOTAL-COSTS> 1,679,264
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,890
<INCOME-PRETAX> (113,648)
<INCOME-TAX> (44,000)
<INCOME-CONTINUING> (69,648)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (69,648)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
