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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1999 Commission File No. 1-10437
TEXAS VANGUARD OIL COMPANY
(Exact name of registrant as specified in its charter)
Texas 74-2075344
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
9811 Anderson Mill Rd., Suite 202
Austin, Texas 78750
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (512) 331-6781
Former name, address and fiscal year, if changed since last report:
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. Yes X or No ___.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 30, 1999
Common Stock, $.05 par value 1,417,087 shares
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TEXAS VANGUARD OIL COMPANY
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<CAPTION>
INDEX
Page
Number
<C> <C>
Part I: Financial Information
Item 1 - Financial Statements
Condensed Balance Sheets -
June 30, 1999 and December 31, 1998 3
Condensed Statements of Earnings -
Three and six months ended June 30, 1999 and 1998 4
Condensed Statements of Cash Flows -
Six months ended June 30, 1999 and 1998 4
Notes to the Condensed Financial Statements 5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Part II. Other Information 7
Signatures 8
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In the opinion of the Registrant, all adjustments (consisting of normal
recurring accruals) necessary to a fair statement of the results of the
interim periods have been included.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TEXAS VANGUARD OIL COMPANY
Condensed Balance Sheets
(Unaudited)
Assets
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
<C> <C> <C>
Current assets:
Cash and temporary investments $ 438,034 1,009,802
Trade accounts receivable 88,538 87,860
--------- ---------
Total current assets 526,572 1,187,662
--------- ---------
Property and equipment, at cost:
Oil and gas properties - successful
efforts method of accounting 4,012,888 3,494,307
Office furniture and vehicles 148,986 97,891
--------- ---------
4,161,874 3,592,198
Less accumulated depreciation, depletion and
amortization (544,206) (449,293)
--------- ---------
Total property and equipment 3,617,668 3,142,905
--------- ---------
Other assets 1,600 2,200
--------- ---------
TOTAL ASSETS $ 4,145,840 4,332,767
--------- ---------
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<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<C> <C> <C>
Current liabilities:
Trade accounts payable $ 31,244 72,766
Notes payable and current installments
of long-term debt 1,576,131 1,718,615
--------- ---------
Total current liabilities 1,607,375 1,791,381
--------- --------
Deferred tax liability 220,657 167,000
Long-term debt, excluding current installments 321,868 482,606
--------- ---------
Total Liabilities 2,149,900 2,440,987
Stockholders' equity:
Common stock 70,854 70,854
Additional paid-in capital 1,890,005 1,890,005
Retained earnings (deficit) 35,081 (69,079)
--------- ---------
Total stockholders' equity 1,995,940 1,891,780
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,145,840 4,332,767
--------- ---------
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Earnings
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 1998 1999 1998
<C> <C> <C> <C> <C>
Revenue:
Operating revenue $ 506,491 378,185 852,931 780,612
Other income 2,521 1,975 5,135 4,589
--------- --------- --------- ---------
Total revenue 509,012 380,160 858,066 785,201
--------- --------- --------- ---------
Costs and expenses:
Production cost 189,584 168,654 380,388 331,763
Exploration cost 339 168 654 560
Depreciation, depletion
and amortization 58,494 30,514 97,464 62,691
General and
administrative 65,537 72,215 133,051 135,807
Interest 44,533 28,452 88,692 63,265
--------- --------- --------- ---------
Total costs and expenses 358,487 300,003 700,249 594,086
--------- --------- --------- ---------
Earnings before
federal income taxes 150,525 80,157 157,817 191,115
--------- --------- --------- ---------
Income taxes:
Deferred federal income tax 51,178 27,253 53,657 64,979
--------- -------- --------- ---------
Net earnings $ 99,347 52,904 104,160 126,136
========= ========= ========= =========
Weighted average number of
shares outstanding 1,417,087 1,417,087 1,417,087 1,417,087
========= ========= ========= =========
Basic and diluted earnings
per share .07 .04 .07 .09
========= ========= ========= =========
</TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1999 1998
<C> <C> <C>
Net cash flows from operating activities $ 211,130 193,286
Net cash flows from investing activities (569,676) (163,222)
Net cash flows from financing activities (303,222) (674,320)
--------- ---------
Net change in cash and temporary investments (661,768) (644,256)
Cash and temporary investments at
beginning of period 1,099,802 1,105,264
---------- ---------
Cash and temporary investments at
end of period $ 438,034 461,008
--------- ---------
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
June 30, 1999
Note 1: Oil and Gas Properties
Texas Vanguard Oil Company (the Company) follows the "successful efforts"
method of accounting for oil and gas exploration and production operations.
Accordingly, costs incurred in the acquisition and exploratory drilling of
oil and gas properties are initially capitalized and either subsequently
expensed if the properties are determined not to have proved reserves, or
reclassified as a proven property if proved reserves are discovered.
Costs of drilling development wells are capitalized. Geological, geophysical,
carrying and production costs are charged to expense as incurred.
Costs related to acquiring unproved lease and royalty acreage are periodically
assessed for possible impairment of value. If the assessment indicates impair-
ment, the costs are charged to expense.
Depreciation, depletion and amortization of proved oil and gas property costs,
including related equipment and facilities, is provided using the units-of-
production method.
Note 2: Income Taxes
The Company uses the "asset and liability method" of income tax accounting
which bases the amount of current and future taxes payable on the events
recognized in the financial statements and on tax laws existing at the balance
sheet date. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period that includes enactment date.
The federal income tax expense of $53,657 for the six month period ended,
June 30, 1999 is a deferred tax liability and does not result in cash outflows.
In addition, the Company has approximately $360,000 of unused net operating
loss carryforwards for federal income tax purposes at December 31, 1998.
Note 3: Statement of Cash Flows
Cash and cash equivalents as used in the Condensed Statements of Cash Flows
include cash in banks and certificates of deposit owned.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
The following information is provided in compliance with SEC guidelines to
explain financial information shown in the Condensed Financial Statements.
RESULTS OF OPERATIONS
Operating revenues increased by $128,306 (34%) and $72,319 (9%) for the
three-month and six-month period ended June 30, 1999 from the comparable
prior year periods primarily as a result of higher oil in 1999 as compared
to 1998 as well an increase in the number of properties owned and operated
by the Company. The $20,930 (12%) and $48,625 (15%) increase in production
cost for the three-month and six-month periods ended June 30, 1999 as
compared to 1998 is primarily attributable to an increase in the number
of properties owned and operated by the Company as well as to new equipment
installed by the Company to enhance gas production capabilities.
General and administrative expenses for the six-month period ended June 30,
1999 were comparable to the prior year period as the Company made every
effort to control the level of these type expenses. Interest expense increased
approximately $16,081 (57%) and $25,427 (40%) for the three-month and six-month
periods ended June 30, 1999 from the comparable 1998 periods primarily due to
higher average outstanding balances. Depreciation, depletion and amortization
increased by $34,773 (55%) for the six-month period ended June 30, 1999
for the comparable prior-year period. Depreciation, depletion and amortization
varies from year to year because of changes in reserve estimates, changes in
quantities of oil and gas produced, as well as the acquisition, discovery or
sale of producing properties.
LIQUIDITY AND CAPITAL RESOURCES
During the period ended June 30, 1999, the Company's liquidity remained strong
enough to meet its short-term cash needs. The sources of liquidity and capital
resources are generated from cash on hand, cash provided by operations and
from credit available from financial institutions. Working capital at June 30,
1999 has decreased to .33 to 1 from .66 to 1 at December 31, 1998 primarily
due to the Company's continued policy of making strategic investments in
producing oil and gas properties in the same or similar fields to properties
already operated by the Company, which are primarily financed with short term
notes payable and cash from operations. Cash flow from operations remains
positive at $211,130 for the six months ended June 30, 1999. Notes payable
decreased by $142,484 and long-term debt decreased by $160,738 for the
six-month period ended June 30, 1999, by using cash on hand and cash generated
from operations.
The worldwide crude oil prices continue to fluctuate in 1999. The Company
cannot predict how prices will vary during the remainder of 1999 and
what effect they will ultimately have on the Company, but management
believes that the Company will be able to generate sufficient cash from
operations to service its bank debt and provide for maintaining current
production of its oil and gas properties.
PART II.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None.
b) Reports on Form 8-K: None.
SIGNATURES
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.
TEXAS VANGUARD OIL COMPANY
--------------------------
(Registrant)
Robert N. Watson, Jr., President
--------------------------------
Robert N. Watson, Jr., President
(Principal Financial and
(Accounting Officer)
Date: August 6, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 438,034
<SECURITIES> 0
<RECEIVABLES> 88,538
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 526,572
<PP&E> 4,161,874
<DEPRECIATION> 544,206
<TOTAL-ASSETS> 4,145,840
<CURRENT-LIABILITIES> 1,607,375
<BONDS> 0
<COMMON> 1,417,087
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,145,840
<SALES> 852,931
<TOTAL-REVENUES> 858,066
<CGS> 380,388
<TOTAL-COSTS> 380,388
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88,692
<INCOME-PRETAX> 157,817
<INCOME-TAX> 53,657
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 104,160
<EPS-BASIC> .07
<EPS-DILUTED> .07
<PAGE>
</TABLE>
