<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1998
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from N/A to
----------- -----------
Commission File Number 2-70145
SOUTH TEXAS DRILLING & EXPLORATION, INC.
(Exact name of registrant as specified in its charter)
TEXAS 74-2088619
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
9310 Broadway, Bldg. I, San Antonio, Texas 78217
(Address of principal executive offices)
(Zip Code)
210-828-7689
(Registrant's telephone number, including area code)
-------------------------------------------------------------------------
(Former name, address and former 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 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 No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. N/A
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at February 11, 1999
----- --------------------------------
<S> <C>
Common Stock, $.10 par value 6,000,784
</TABLE>
<PAGE> 2
SOUTH TEXAS DRILLING & EXPLORATION, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, March 31,
ASSETS 1998 1998
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 1,080,240 2,586,710
Receivables 1,559,531 440,922
Contract drilling in progress 146,490 965,677
Prepaid expenses 305,434 114,020
------------ ------------
Total current assets 3,091,695 4,107,329
------------ ------------
Property and equipment 17,585,420 16,968,191
Accumulated depreciation, depletion and amortization 9,830,604 8,573,771
------------ ------------
Net property and equipment 7,754,816 8,394,420
------------ ------------
Total assets 10,846,511 12,501,749
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt 15,000 60,000
Current installments, long-term debt 449,002 646,014
Accounts payable 1,685,522 1,649,958
Prepaid drilling contracts 302,950 99,000
Accrued expenses 580,404 533,450
------------ ------------
Total current liabilities 3,032,878 2,988,422
Long term debt 2,465,509 2,696,919
------------ ------------
Total liabilities 5,498,387 5,685,341
------------ ------------
Shareholders' equity:
Preferred stock, Series A, 8%, Cumulative, convertible,
$2.00 redemption and liquidation value. Authorized
400,000 shares; issued and outstanding 400,000
shares at December 31, and at March 31, 1998. 800,000 800,000
Preferred stock, Series B, 8%, cumulative, convertible,
$16.25 redemption and liquidation value. Authorized
184,615 shares; issued and outstanding 184,615 shares
at December 31 and at March 31, 1998. 2,999,994 2,999,994
Common stock, $0.10 par value
Authorized 15,000,000 shares; issued and out-
standing 6,000,784 at December 31 and
6,171,964 at March 31, 1998. 600,078 617,196
Additional paid-in capital 16,259,031 16,337,006
Retained earnings (deficit) (15,310,979) (13,800,883)
------------ ------------
5,348,124 6,953,313
Less Treasury stock, at cost, no shares at December 31, and
339,767 shares at March 31, 1998. -- 136,905
------------ ------------
Total shareholders' equity 5,348,124 6,816,408
------------ ------------
Total Liabilities and shareholders equity $ 10,846,511 12,501,749
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
2
<PAGE> 3
SOUTH TEXAS DRILLING & EXPLORATION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------------ ------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Contract Drilling $ 2,053,809 5,475,953 9,953,464 13,302,979
Oil and gas 36,690 84,759 132,341 254,775
Management fees and other 25,390 24,123 75,408 93,069
----------- ----------- ----------- -----------
Total operating revenues 2,115,889 5,584,835 10,161,213 13,650,823
----------- ----------- ----------- -----------
Costs and expenses:
Contract drilling 1,758,234 4,904,168 9,090,390 11,030,474
Oil and gas 35,348 42,170 155,184 126,526
Depreciation, depletion and amortization 579,646 310,513 1,322,358 748,367
General and administrative 241,759 204,809 627,170 606,203
----------- ----------- ----------- -----------
Total operating costs and expenses 2,614,987 5,461,660 11,195,102 12,511,570
----------- ----------- ----------- -----------
Earnings (loss) from operations (499,098) 123,175 (1,033,889) 1,139,253
----------- ----------- ----------- -----------
Other income (expense):
Interest expense (75,205) (91,349) (250,593) (210,694)
Interest income 20,951 6,007 76,600 18,335
Gain (loss) on sale of assets (4,718) -- (45,983) 13,248
----------- ----------- ----------- -----------
Total other income (expense) (58,972) (85,342) (219,976) (179,111)
----------- ----------- ----------- -----------
Earnings (loss) before income taxes (558,070) 37,833 (1,253,865) 960,142
Income taxes (1,399) 20,000 28,231 20,000
----------- ----------- ----------- -----------
Net earnings (loss) (556,671) 17,833 (1,282,096) 940,142
Preferred stock dividend requirements 76,000 16,000 228,000 45,333
----------- ----------- ----------- -----------
Net earnings (loss) applicable to common
stockholders $ (632,671) 1,833 (1,510,096) 894,809
=========== =========== =========== ===========
Earnings (loss) per common share-Basic $ (0.11) 0.00 (0.26) 0.16
=========== =========== =========== ===========
Earnings (loss) per common share-Diluted $ (0.11) 0.00 (0.26) 0.12
=========== =========== =========== ===========
Weighted average number of shares
outstanding-Basic 5,993,175 5,814,107 5,913,736 5,676,173
=========== =========== =========== ===========
Weighted average number of shares
outstanding-Diluted 5,993,175 7,929,049 5,913,736 7,579,286
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
3
<PAGE> 4
SOUTH TEXAS DRILLING & EXPLORATION, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
------------------------------
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $(1,282,096) 940,142
Adjustments to reconcile net earnings
to net cash provided (used) by operating activities:
Depreciation, depletion, amortization 1,322,358 748,367
Stock issued to directors as compensation -- 55,000
Gain (loss) on sale of assets 45,983 (13,248)
Changes in current assets and liabilities:
Accounts and note receivable (1,118,609) (2,101,673)
Contract drilling in progress 819,187 (517,777)
Prepaid expenses (191,413) 62,605
Accounts payable 35,564 1,675,882
Prepaid drilling contracts 203,950 602,652
Accrued expenses (90,609) 231,503
----------- -----------
Net cash provided (used) by operations (255,685) 1,683,453
----------- -----------
Cash flows from financing activities:
Payments of debt (473,422) (579,701)
Proceeds from notes payable -- 171,236
Payment of dividends on preferred stock (64,000) --
Purchase of preferred stock -- (75,000)
Proceeds from issuance of preferred stock -- 765,000
Proceeds from exercise of warrants and options 15,375 14,500
----------- -----------
Net cash provided (used) by financing activities (522,047) 296,035
----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (787,103) (1,960,488)
Proceeds from sale of equipment 58,365 223,868
----------- -----------
Net cash used by investing activities (728,738) (1,736,620)
----------- -----------
Net increase (decrease) in cash (1,506,470) 242,868
Beginning cash and cash equivalents 2,586,710 407,755
----------- -----------
Ending cash and cash equivalents $ 1,080,240 650,623
=========== ===========
Supplementary Disclosure:
Equipment purchased with debt -- 2,549,118
Equipment purchased with stock -- 300,000
Common stock issued to directors 26,437 --
Retirement of treasury stock (136,905) --
Interest paid 250,969 209,391
Income taxes paid 86,592 11,000
</TABLE>
See accompanying notes to condensed consolidated financial statements
4
<PAGE> 5
SOUTH TEXAS DRILLING & EXPLORATION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The condensed consolidated financial statements include the accounts of
South Texas Drilling & Exploration, Inc. and its wholly-owned
subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation.
2. The accompanying unaudited condensed consolidated 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 management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included.
3. The Company uses the asset and liability method of Statement 109 for
accounting for income taxes. Pursuant to this method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
Under Statement 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that
includes the enactment date.
4. At April 1, 1998, the Company had investment tax credit carryforwards
for Federal income tax purposes of approximately $15,000 (expiring 1999
through 2001) which are available to reduce future Federal income taxes.
In addition, the Company had net operating loss carryforwards of
approximately $14,934,000 (expiring 1999 through 2007) which are also
available to reduce future Federal income taxes. A valuation allowance
has been established due to the uncertainty of the realization of the
deferred tax asset created by the investment tax credit and the net
operating loss carryforwards.
5. Subsequent to the end of the current quarter but prior to the issuance
of these statements, the Company sold its interest in the nineteen oil
wells which the Company had been operating in the Serbin field of south
central Texas for $285,000 cash. During the current quarter, due to low
oil and gas prices, the Company wrote down the value of the oil and gas
properties to approximate market value. Because of the write down the
sale of the properties in the fourth quarter of fiscal 1999 will not
have a significant impact on the Company's net income.
6. The following table presents a reconciliation of the numerators and
denominators of the basic EPS and diluted EPS computations as required
by FAS 128:
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1998
------------------
Weighted
Average
Income Shares
(Numerator) (Denominator) Per-Share Amount
-------------- ------------- ----------------
<S> <C> <C> <C>
Net loss $ (556,671)
Less: Preferred stock dividends (76,000)
--------------
Basic EPS
Income available to common stockholders
Basic and Diluted $ (632,671) 5,993,175 $ (0.11)
============== =========== ==========
</TABLE>
5
<PAGE> 6
SOUTH TEXAS DRILLING & EXPLORATION, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended
December 31, 1997
------------------
Weighted
Average
Income Shares
(Numerator) (Denominator) Per-Share Amount
-------------- ------------- ----------------
<S> <C> <C> <C>
Net earnings $ 17,833
Less: Preferred stock dividends (16,000)
-----------
Basic EPS
Income available to common stockholders-Basic 1,833 5,814,107 $ 0.00
============
Effect of Dilutive Securities
Warrants 128,007
Options 1,186,935
Preferred stock 16,000 800,000
----------- -----------
Diluted EPS
Income available to common stockholders and
assumed conversions-Diluted $ 17,833 7,929,049 $ 0.00
=========== =========== ============
</TABLE>
<TABLE>
<CAPTION>
Nine months Ended
December 31, 1998
-----------------
Weighted
Average
Income Shares
(Numerator) (Denominator) Per Share Amount
-------------- ------------- ----------------
<S> <C> <C> <C>
Net (loss) $(1,282,096)
Less: Preferred stock dividends (228,000)
-----------
Basic EPS
Income available to common stockholders
Basic and Diluted (1,510,096) 5,913,736 $ (0.26)
=========== =========== ============
</TABLE>
6
<PAGE> 7
SOUTH TEXAS DRILLING & EXPLORATION, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
Nine Months Ended
December 31, 1997
-----------------
Weighted
Average
Income Shares
(Numerator) (Denominator) Per-Share Amount
----------- ------------- -----------------
<S> <C> <C> <C>
Net earnings $ 940,142
Less: Preferred stock dividends (45,333)
----------
Basic EPS
Income available to common stockholders-Basic 894,809 5,676,173 $ 0.16
========
Effect of dilutive securities
Warrants 123,568
Options 1,020,272
Preferred stock 45,333 759,273
---------- -----------
Diluted EPS
Income available to common stockholders and
assumed conversions-Diluted $ 940,142 7,579,286 $ 0.12
========== =========== ========
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Liquidity and Capital Resources
Cash and cash equivalents at December 31, 1998 were $1,080,240 compared to
$2,586,710 at March 31, 1998. The current ratio at December 31, 1998 was 1.02
compared to 1.37 at March 31, 1998. Working capital decreased to $58,819 at
December 31, 1998 from $1,118,907 at March 31, 1998. Accounts receivable
increased to $1,559,531 at December 31, 1998 from $440,922 at March 31, 1998.
Contract drilling in progress decreased to $146,490 at December 31, 1998 from
$965,677 at March 31, 1998. The substantial increase in accounts receivable and
the corresponding decrease in contract drilling in progress at December 31, 1998
compared to March 31, 1998 was due to the completion of several drilling
contracts near the end of the current quarter.
The Company had executed several loans with a third party lender which were
secured by drilling equipment, transportation equipment and land and
improvements. The loans, with payments based on amortization periods of three to
seven years, were scheduled to mature in June, 1999. In November, 1998, the
Company refinanced its debt with the lender creating one note which matures in
November, 2000. In addition, the lender agreed to reduce the interest rate,
redefine several items pertinent to the calculation of covenants and waive past
violations of the debt service coverage covenant. According to the terms of the
refinanced debt agreement, the loan carries an interest rate of prime (7.75% at
December 31, 1998) plus 1.75%; and is payable in equal monthly installments of
principal, based on a seven-year amortization, plus interest. The loan also
provides for an early prepayment penalty of 2% in the first year of the loan and
1% thereafter. At December 31, 1998, the Company had obtained a waiver with
respect to the total debt service coverage covenant and was in compliance with
all other negative and affirmative covenants on this note.
7
<PAGE> 8
SOUTH TEXAS DRILLING & EXPLORATION, INC. AND SUBSIDIARIES
Since March 31, 1998, the Company has spent a net of $617,229 for property
and equipment. Of this amount, $721,610 was spent on drilling equipment, $26,434
was spent on transportation equipment, $1,051 was spent on furniture and
fixtures and $25,447 was spent on investment in oil and gas properties. Drilling
equipment of $132,121 and transportation equipment of $25,192 were sold or
disposed of during the nine months ended December 31, 1998.
Debt obligations in the form of notes payable, both short term and long
term, decreased by $473,422 from March 31, 1998 to December 31, 1998. Accounts
payable at December 31, 1998 were $1,685,522, an increase of $35,564 from
$1,649,958 at March 31, 1998. Accrued expenses increased to $580,402 at December
31, 1998 from $533,450 at March 31, 1998.
Results of Operations
Contract drilling revenue for the quarter ended December 31, 1998 was
$2,053,809 compared to $5,475,953 in the same quarter a year earlier. This
decrease in drilling revenue was the result of a decrease in drilling days and
decreased day rates. In the current quarter, the Company had 227 drilling days
compared to 548 drilling days in the same quarter in fiscal 1998. The reason for
the decrease in the number of drilling days in the current quarter was the
decreased drilling activity due to lower oil and gas prices. The rig utilization
rate for the current quarter was 41% compared to 85% in the same quarter a year
earlier. The average daily drilling rate decreased to $9,048 from $9,993 in the
corresponding quarter of fiscal 1998.
Oil and gas revenue for the quarter ended December 31, 1998 was $36,690
compared to $84,759 in the same quarter a year earlier. This decrease in revenue
in the current quarter was due to lower production of both oil and gas and lower
average prices for oil and gas. In the current quarter, production was the
equivalent of 3,473 barrels of oil while in the same quarter a year earlier,
production was the equivalent of 4,682 barrels of oil. In the current quarter,
the average prices received by the Company were $10.60 per barrel of oil and
$1.77 per mcf of gas. In the same quarter in fiscal 1998, the Company received
$18.78 per barrel of oil and $2.91 per mcf of gas.
Total operating costs and expenses for the quarter ended December 31, 1998
were $2,614,987, down $2,846,673 from operating costs and expenses of $5,461,660
in the same quarter a year earlier. When compared with the same quarter a year
earlier, contract drilling costs decreased $3,145,934 in the quarter ended
December 31, 1998. Average drilling costs per day in the current quarter were
$7,746 compared to $8,949 in the same quarter a year earlier. The average daily
drilling margin, daily drilling revenue less daily drilling costs, increased to
$1,302 in the current quarter from $1,044 in the corresponding quarter a year
earlier. Oil and gas costs and expenses were $35,348 in the quarter ended
December 31, 1998 compared with $42,170 in the same quarter a year earlier.
Depreciation, depletion and amortization costs increased to $579,646 in the
quarter ended December 31, 1998 from $310,513 in the quarter ended December 31,
1997. This increase was the result of increased depreciation expense due to the
addition of equipment since December 31, 1997 and increased depletion. Depletion
expense for the current quarter included a charge of $179,894 to write down the
value of oil and gas properties due to the current low prices for oil and gas.
General and administrative expenses increased to $241,759 in the current quarter
from $204,809 in the same quarter a year earlier. This increase was primarily
the result of the accrual of a settlement agreement negotiated with Robert R.
Marmor, the Company's former Chairman of the Board. The amount charged to
expense in the current quarter, discounted due to payments being made in the
future, was approximately $107,000.
Other income and expense decreased to $58,972 of net expenses in the
current quarter from $85,342 of net expenses in the same quarter a year earlier,
primarily due to decreased interest expense and increased interest income.
Contract drilling revenue for the nine months ended December 31, 1998 was
$9,953,464 compared to $13,302,979 in the same period in fiscal 1998. This
decrease in drilling revenue was the result of decreased dayrates and decreased
utilization. In the nine months ended December 31, 1998, the Company had 957
drilling days compared to 1,368 drilling days in the same period in fiscal 1998.
The rig utilization rate for the nine months ended December 31, 1998 was 58%
compared
8
<PAGE> 9
SOUTH TEXAS DRILLING & EXPLORATION, INC. AND SUBSIDIARIES
to 82% in the same period in fiscal 1998. Average revenues per drilling day were
$10,401 compared to $9,724 in the same period in fiscal 1998. The increase in
the current year in average revenue per drilling day was the result of more
revenue being earned on turnkey contracts in the current year (52%) than in the
same period in fiscal 1998 (39%).
Oil and gas revenue for the nine months ended December 31, 1998 was
$132,341 compared to $254,775 in the same period a year earlier. This decrease
in revenue in the current year was due to lower production and lower average
prices for both oil and gas. In the current year, production was the equivalent
of 11,516 barrels of oil while in the same period in the prior year production
was the equivalent of 13,653 barrels of oil. In the current year, the average
prices received by the Company were $11.64 per barrel of oil and $1.92 per mcf
of gas compared to $20.66 per barrel of oil and $2.79 per mcf of gas in the same
period in fiscal 1998.
Total operating costs and expenses for the nine months ended December 31,
1998 were $11,195,102, down $1,316,468 from operating costs and expenses of
$12,511,570 in the same period a year earlier. Drilling costs decreased
$1,940,084 in the current year when compared to the same period in fiscal 1998.
Average drilling costs per day in the current year were $9,499 compared to
$8,063 in the same period a year earlier. The increase in average daily drilling
costs resulted from the drilling of more contracts on a turnkey basis and losses
of approximately $621,000 on two turnkey contracts in the current year. Oil and
gas costs and expenses were $155,184 in the nine months ended December 31, 1998
compared with $126,526 in the same period a year earlier. Depreciation,
depletion and amortization costs increased to $1,322,358 in the nine months
ended December 31, 1998 from $748,367 in the same period in fiscal 1998. General
and administrative expenses increased to $627,170 in the nine months ended
December 31, 1998 from $606,203 in the same period in fiscal 1998.
Other income and expenses increased to $219,976 of net expenses in the nine
months ended December 31, 1998 from $179,111 of net expenses in the same period
a year earlier.
Accounting Matters
In June, 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This statement establishes standards for reporting
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS No. 130 requires that all items that are required to
be recognized under accounting standards as components of comprehensive income
be reported in a financial statement displayed with the same prominence as other
financial statements. SFAS No. 130 is effective for fiscal years beginning after
December 15, 1997. The Company believes that the disclosure of comprehensive
income in accordance with the provisions of SFAS No. 130 will not impact the
manner of presentation of its financial statements as currently and previously
reported because there are no items of other comprehensive income.
In June, 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This statement establishes standards for
the way that public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major customers.
SFAS No. 131 is effective for fiscal years beginning after December 15, 1997.
The Company believes that the reporting requirements regarding segments of an
enterprise will not significantly impact the manner of presentation of its
financial statements.
Year 2000
In fiscal 1998, the Company began the process of identifying, evaluating
and implementing changes to computer programs necessary to address the year 2000
issue. This issue affects computer systems that have time-sensitive programs
that may not
9
<PAGE> 10
SOUTH TEXAS DRILLING & EXPLORATION, INC. AND SUBSIDIARIES
properly recognize the year 2000. This could result in system failures or
miscalculations. The Company has addressed its internal year 2000 issue with
some modifications to existing programs. Additionally, contact has been made
with financial institutions, major vendors and customers with regard to the year
2000 issue. The Company does not expect to incur any material expenses relating
to year 2000 compliance. If the Company were to take no action in dealing with
the potential problem, management believes the Company would still be able to
continue its operations. The Company does not rely on any computer-driven
equipment to perform its drilling operations. If any equipment were to be
affected, it would be in the general and administrative area, primarily
accounting and document preparation. These activities could be performed
manually until the computer-related problems could be remedied.
SUBSEQUENT EVENT
Subsequent to the end of the current quarter but prior to the issuance of
these statements, the Company sold its interest in the nineteen oil wells which
the Company had been operating in the Serbin Field of South Central Texas for
$285,000 cash. Since the oil and gas properties had been written down in the
current quarter, the sale of the properties in the fourth quarter of Fiscal 1999
will not have a significant impact on the Company's net income. The sale,
however, will have a positive effect on the Company's cash position.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
In November, 1998, Mr. Robert R. Marmor resigned as Chairman of the Board
of the Company. He was succeeded by Mr. Michael E. Little who also assumed the
position of Chief Executive Officer. Mr. Little was previously the Chairman,
Chief Executive Officer and President of Dawson Production Services, a San
Antonio, Texas-based oil service firm. Mr. Wm. Stacy Locke, who was President
and Chief Executive Officer, remained President of the Company and also assumed
the position of Chief Operating Officer.
10
<PAGE> 11
SOUTH TEXAS DRILLING & EXPLORATION, INC. AND SUBSIDIARIES
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.
SOUTH TEXAS DRILLING &
EXPLORATION, INC.
/s/ Michael E. Little
------------------------------------
Michael E. Little
Chairman of the Board
Dated: February 11, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael E. Little Chairman of the Board February 11, 1999
- ------------------------ and Chief Executive Officer
Michael E. Little
/s/ Wm. Stacy Locke President and Chief February 11, 1999
- ------------------------ Operating Officer
Wm. Stacy Locke
/s/ Chris F. Parma Vice President and Chief February 11, 1999
- ------------------------ Financial Officer
Chris F. Parma
</TABLE>
11
<PAGE> 12
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
27 -- Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 1,080,240
<SECURITIES> 0
<RECEIVABLES> 1,706,021
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,091,695
<PP&E> 17,585,420
<DEPRECIATION> 9,830,604
<TOTAL-ASSETS> 10,846,511
<CURRENT-LIABILITIES> 3,032,878
<BONDS> 0
0
3,799,994
<COMMON> 600,078
<OTHER-SE> 948,052
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<CGS> 155,184
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<INCOME-TAX> 28,231
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<NET-INCOME> (1,282,096)
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</TABLE>
