---------------------------------------------------------------------
---------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
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, 2000 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, 2000
Common Stock, $.05 par value 1,417,087 shares
<PAGE>
TEXAS VANGUARD OIL COMPANY
<TABLE>
<CAPTION>
INDEX
Page
Number
<C> <C>
Part I: Financial Information
Item 1 - Financial Statements
Condensed Balance Sheets -
June 30, 2000 and December 31, 1999 3
Condensed Statements of Earnings -
Three and six months ended June 30, 2000 and 1999 4
Condensed Statements of Cash Flows -
Six months ended June 30, 2000 and 1999 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
</TABLE>
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,
2000 1999
<C> <C> <C>
Current assets:
Cash and temporary investments $ 795,953 1,805,685
Trade accounts receivable 90,656 155,708
--------- ---------
Total current assets 886,609 1,961,393
--------- ---------
Property and equipment, at cost:
Oil and gas properties - successful
efforts method of accounting 3,955,299 4,036,807
Office furniture and vehicles 182,434 182,434
--------- ---------
4,137,733 4,219,241
Less accumulated depreciation, depletion and
amortization (915,670) (697,388)
--------- ---------
Total property and equipment 3,222,063 3,521,853
--------- ---------
Other assets 1,000 1,000
--------- ---------
TOTAL ASSETS $ 4,109,672 5,484,246
--------- ---------
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity
<C> <C> <C>
Current liabilities:
Trade accounts payable $ 82,867 229,920
Notes payable and current installments
of long-term debt 475,256 1,648,316
Related party payable 71,000 ---
Deferred revenue --- 83,114
--------- ---------
Total current liabilities 629,123 1,961,350
--------- --------
Deferred tax liability 349,734 253,199
Long-term debt, excluding current installments 884,314 1,210,588
--------- ---------
Total Liabilities 1,863,171 3,425,137
Stockholders' equity:
Common stock 70,854 70,854
Additional paid-in capital 1,890,005 1,890,005
Retained earnings 285,642 98,250
--------- ---------
Total stockholders' equity 2,246,501 2,059,109
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,109,672 5,484,246
--------- ---------
</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,
2000 1999 2000 1999
<C> <C> <C> <C> <C>
Revenue:
Operating revenue $ 990,462 506,481 1,881,552 852,931
Other income 3,597 2,521 6,105 5,135
--------- --------- --------- ---------
Total revenue 994,059 509,012 1,887,567 858,066
--------- --------- --------- ---------
Costs and expenses:
Production cost 595,317 189,584 974,609 380,388
Exploration cost 78 339 871 654
Depreciation, depletion
and amortization 115,738 58,494 219,231 97,464
General and
administrative 85,507 65,537 165,069 133,051
Abandonment of leaseholds 139,750 --- 156,649 ---
Interest 39,955 44,533 87,211 88,692
--------- --------- --------- ---------
Total costs and expenses 976,345 358,487 1,603,640 700,249
--------- --------- --------- ---------
Earnings before
federal income taxes 17,714 150,525 283,927 157,817
--------- --------- --------- ---------
Income taxes:
Deferred federal income tax 6,023 51,178 96,535 53,657
--------- -------- --------- ---------
Net earnings $ 11,691 99,347 187,392 104,160
========= ========= ========= =========
Weighted average number of
shares outstanding 1,417,087 1,417,087 1,417,087 1,417,087
========= ========= ========= =========
Basic and diluted earnings
per share .01 .07 .13 .07
========= ========= ========= =========
</TABLE>
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
2000 1999
<C> <C> <C>
Net cash provided by operating activities $ 488,994 211,130
Net cash used in investing activities (70,392) (569,676)
Net cash used in financing activities (1,428,334) (303,222)
--------- ---------
Net change in cash and temporary investments (1,009,732) (661,768)
Cash and temporary investments at
beginning of period 1,805,685 1,099,802
---------- ---------
Cash and temporary investments at
end of period $ 795,953 438,034
--------- ---------
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
June 30, 2000
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 $96,535 for the six month period ended,
June 30, 2000 is a deferred tax liability and does not result in cash outflows.
In addition, the Company has approximately $144,000 of unused net operating
loss carryforwards for federal income tax purposes at December 31, 1999.
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 $483,971 (96%) and $1,028,621 (121%) for the
three-month and six-month period ended June 30, 2000 from the comparable prior
year periods primarily as a result of higher oil prices in 2000 as compared
to 1999 as well as an increase in the number of properties owned and operated
by the Company. The $405,733 (214%) and $594,221 (156%) increase in production
cost for the three-month and six-month periods ended June 30, 2000 as
compared to 1999 is primarily attributable to an increase in the number
of properties owned and operated by the Company and the higher lease operating
costs associated with operating more producing properties in addition to the
application of new technology by the Company which maximizes gas production
capabilities.
General and administrative expenses increased $19,970 (30%) and $32,018 (24%)
for the three-month and six-month periods ended June 30, 2000 as compared to
the prior year periods. Interest expense decreased approximately $4,578 (10%)
and $1,481 (2%) for the three-month and six-month periods ended June 30, 2000
from the comparable 1999 periods primarily due to lower average outstanding
balances. Depreciation, depletion and amortization increased by $121,767
(125%) for the six-month period ended June 30, 2000 from 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. For the three-month and six-month periods ended June 30, 2000, the
Company provided a provision of $139,750 and $156,649 for the impairment of
value of oil and gas properties due to less than expected production history
of specific wells and for wells that were plugged and abandoned.
LIQUIDITY AND CAPITAL RESOURCES
During the period ended June 30, 2000, 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,
2000 has increased to 1.41 to 1 from 1.00 to 1 at December 31, 1999. The
Company continued it's 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
$488,994 for the six months ended June 30, 2000. Notes payable decreased
by $1,102,060 and long-term debt decreased by $326,274 for the six-month
period ended June 30, 2000, by using cash on hand and cash generated from
operations.
The worldwide crude oil prices continue to fluctuate in 2000. The Company
cannot predict how prices will vary during the remainder of 2000 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.
Inflation is not anticipated to have a significant impact on the Company's
operatons.
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 8, 2000
