FORM 10Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] 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: 0-610
EQUITY OIL COMPANY
(Exact name of registrant as specified in its charter)
COLORADO 87-0129795
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 806, #10 West Third South, Salt Lake City, Utah 84101
(Address of principal executive offices)
(Zip Code)
(801) 521-3515
Registrant's telephone number, including area code
(Former name, former 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 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 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.
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: 12,717,600
1
<PAGE>
ITEM I: Financial Statements
EQUITY OIL COMPANY
Statement of Operations
For the three months ended March 31, 1996 and 1995
(Unaudited)
1996 1995
------------ --------
REVENUES
Oil and gas sales $3,658,346 $3,022,602
Partnership income 75,000 75,000
Interest income 38,749 60,259
Other 60,577 178,553
--------- ---------
3,832,672 3,336,414
--------- ---------
EXPENSES
Operating costs 1,333,996 1,153,138
Depreciation, depletion and
amortization 900,000 1,150,000
Leasehold abandonments 10,000 11,200
Exploration 506,500 308,699
3-D Seismic 304,097 237,604
General and administrative 621,009 402,445
Interest - 14,006
--------- ---------
3,675,602 3,277,092
--------- ---------
Income before income taxes 157,070 59,322
Provision (benefit) for income taxes 51,363 (50,783)
---------- ----------
NET INCOME $ 105,707 $ 110,105
========== ==========
Net income per common share $ 0.01 $ 0.01
========== ==========
Cash dividends per share declared $.00 $.00
========== ==========
Weighted average shares outstanding 12,714,350 12,541,011
The accompanying notes are an integral part of these statements.
2
<PAGE>
EQUITY OIL COMPANY
Balance Sheet
as of March 31, 1996, and December 31, 1995
March 31, December 31,
ASSETS 1996 1995
- ------ ---------- -------
(Unaudited)
Current assets:
Cash and cash equivalents $ 504,332 $ 511,252
Temporary cash investments 253,201 955,967
Accounts and advances receivable 3,294,704 3,253,865
Income taxes receivable 278,871 264,300
Other current assets 353,523 378,594
---------- ----------
4,684,631 5,363,978
Property and equipment 100,536,099 99,242,754
Less accumulated depreciation,
depletion and amortization 58,449,855 57,549,855
42,086,244 41,692,899
Other assets:
Investment in and notes receivable
from Symskaya Exploration 6,976,120 6,160,442
Other assets 178,983 189,511
Investment in Raven Ridge
Pipeline Partnership 503,290 540,220
--------- ----------
7,658,393 6,890,173
TOTAL ASSETS $54,429,268 $53,947,050
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,112,317 $ 1,182,877
Accrued liabilities 432,978 145,422
Federal, state, and foreign
income taxes payable 141,471 155,063
Deferred income taxes 10,796 10,796
Accrued profit sharing 48,000 148,771
--------- ---------
1,745,562 1,642,929
Revolving credit facility 5,218,830 4,918,830
Deferred income taxes 8,595,263 8,654,698
---------- ----------
13,814,093 13,573,528
Stockholders' Equity
Common stock 12,717,600 12,711,100
Paid in capital 3,512,300 3,485,487
Retained earnings 22,639,713 22,534,006
---------- ----------
38,869,613 38,730,593
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $54,429,268 $53,947,050
========== ==========
The accompanying notes are an integral part of these statements.
3
<PAGE>
EQUITY OIL COMPANY
Statement of Cash Flows
For the three months ended March 31, 1996 and 1995
(Unaudited)
1996 1995
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 105,707 $ 110,105
Adjustments
Depreciation, depletion and
amortization 900,000 1,150,000
Partnership distributions
in excess of income 36,930 41,409
Property dispositions 10,000 11,201
Common stock issued for services 33,312 -
Change in other assets 10,528 -
Decrease in deferred income taxes (59,435) (135,216)
Increase (decrease)from changes in:
Accounts and advances receivable (40,839) (152,344)
Other current assets 25,071 (96,652)
Accounts payable and accrued
liabilities 216,996 110,169
Income taxes receivable/payable (28,163) 58,551
Deferred lease revenue - (178,553)
Accrued profit sharing (100,771) (118,074)
---------- ----------
Net cash provided
by operating activities 1,109,336 800,596
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,303,344) (517,760)
Advances to Symskaya Exploration (815,678) (488,312)
Sale of temporary cash investments 702,766 479,622
---------- ----------
Net cash used in investing activities (1,416,256) (526,450)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock - (9,908)
Increase in other assets - (43,633)
Proceeds from revolving credit facility 300,000 920,000
Payments on long term debt - (920,000)
---------- ----------
Net cash provided by (used in)
financing activities 300,000 (53,541)
----------- ----------
NET INCREASE (DECREASE) IN CASH (6,920) 220,605
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 511,252 363,342
---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 504,332 $ 583,947
========== ==========
CASH, CASH EQUIVALENTS AND
TEMPORARY CASH INVESTMENTS
AT END OF PERIOD $ 757,533 $ 2,571,053
========== ==========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Income Taxes $ 195,800 $ 25,882
Interest $ - $ 14,006
The accompanying notes are an integral part of these statements.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Interim Financial Statements
The accompanying consolidated financial statements of Equity Oil Company (the
Company) have not been audited by independent accountants, except for the
Balance Sheet at December 31, 1995. In the opinion of the Company's management,
the financial statements reflect the necessary adjustments, all of which are of
a normal and recurring nature, to present fairly the financial position of the
Company as of March 31, 1996, and the results of its operations and its cash
flows for the three month periods ended March 31, 1996 and 1995.
The financial statements and the accompanying notes to financial statements have
been prepared according to rules and regulations of the Securities and Exchange
Commission. Accordingly, certain notes and other information have been condensed
or omitted from the interim financial statements presented in this Quarterly
Report on Form 10-Q. These financial statements should be read in conjunction
with the Company's 1995 Annual Report on Form 10-K.
The results for the three month period ended March 31, 1996 are not necessarily
indicative of future results.
Note 2. Net Income Per Share
Net income per share is based on the weighted average number of common shares
outstanding during the period. Primary and fully diluted earnings per share are
essentially the same.
Note 3. Accounting for Stock Based Compensation
The Company adopted SFAS #123, Accounting for Stock Based Compensation,
effective January 1, 1996. The Company has elected to follow the disclosure
method of reporting for its stock based compensation.
5
<PAGE>
PART I
ITEM 2
Managements Discussion and Analysis of Financial Condition and
Results of Operation
RESULTS OF OPERATIONS
Increases in oil and gas production combined with stronger oil prices
to help the Company record a 15% increase in revenues during the first quarter
of 1996. Total revenues for the period were $3,832,672, compared to $3,336,414
during the first quarter of 1995. Net income for the first quarter of 1996 was
$105,707, or $.01 per share, compared to $110,105, or $.01 per share, during the
first quarter of 1995.
The Company recorded increases in both oil and gas production. Oil
production of 156,000 barrels was up 5% from 149,000 barrels in 1995. Gas
production increased 60%, from 311,000 Mcf produced in 1995 to 496,000 Mcf
produced during the first quarter of 1996, primarily as a result of new gas
wells drilled in 1995 and 1996.
The net price received for Western Colorado crude oil, which accounts
for 60% of the Company's total oil production, averaged $20.60 during the first
quarter of 1996, an increase of 8% from $19.02 during the same quarter of 1995.
Prices at other Company properties increased at similar levels.
Increases in oil and gas sales were offset by lower other income. Other
income in 1995 included the recognition of income arising from a lease option
agreement that was deferred in 1994. There was no similar transaction during the
first quarter of 1996.
Total expenses increased 12% over 1995 first quarter levels. Lease
operating costs increased 16%, primarily as a result of increased production and
higher revenue-based production taxes. Conversely, depreciation, depletion, and
amortization (DD&A) charges decreased 22% during the quarter. The majority of
the decrease is attributable to the adoption of SFAS #121 in 1995, which removed
$2.2 million from the DD&A base that was almost entirely associated with
marginally economic, high-cost wells with high depletion rates. The adoption of
SFAS #121 was effective July 1, 1995. There was no property impairment charge
for the first quarter of 1996.
Increases in exploration and administrative costs are primarily due to
increased exploratory drilling activity, higher compensation expenses, as well
as increased insurance, legal, and investor relations fees.
6
<PAGE>
The Company incurred 3-D seismic charges of $304,000 during the first
quarter of 1996 compared to $237,000 during the same period of 1995. These
charges represent the Company's continued development of its California
exploration programs.
The Company's tax provision for the first quarter of 1995 is lower than
the statutory rate because of percentage depletion carryovers form prior years
and the use of foreign tax credits. The carryover benefits were not available to
the Company in 1996.
During the first quarter of 1996, the Company participated in the
drilling of 5 wells, compared to 1 during the same time period of 1995. Of the 5
wells drilled this year, 4 wells have been completed as producers, and 1 well is
currently being tested.
Included in the 1996 well count is the first well drilled at the Sage
Creek Unit, which was acquired in 1995 as part of the Mountain Oil and Gas
acquisition. Estimated reserves for the well are 95,500 barrels of oil, drilled
at a cost of $1.26 per barrel. Using the result from this well, the Company has
identified several potential development locations at the unit.
Two wells were also drilled in 1996 at the Company's Orion 3-D seismic
project in the Sacramento Basin of California. These wells bring the total
drilled at the Orion project to six, five of which have been completed as
producing gas wells, for an 83% success ratio. Three of the completed wells are
now on production at a combined daily rate of 8,000 Mcf per day. The other two
wells are awaiting pipeline connections, and should be on production by the end
of the second quarter of 1996. Those two wells were tested at a combined daily
rate of 4,000 Mcf per day. The Company expects to drill a total of 9 wells on
this project during 1996, with the next two wells scheduled to spud during May.
Progress is continuing at the Lemok #1, Symskaya Exploration's initial
well in the Krasnoyarsk Krai in Eastern Siberia. Drilling at the well was
expected to be completed by the end of the first quarter of 1996, but mechanical
drilling problems have further delayed the drilling process. It is now expected
that drilling will be completed, and testing at the well initiated, shortly
before the end of the second quarter of 1996.
CAPITAL RESOURCES AND LIQUIDITY
Cash, cash equivalents, and temporary cash investments totaled $757,533
as of March 31, 1996, down from $1,467,219 at year-end 1995. Working capital at
March 31, 1996 was $2,939,069, compared to working capital of $3,721,049 at
December 31, 1995. For the first three months of 1996, net cash provided by
operating activities increased 39% over the same period of 1995, primarily due
to the increase in current liabilities which was only partially offset by the
net increase in receivables.
7
<PAGE>
Investment in property and equipment, including advances to Symskaya
Exploration, for the first three months of 1996 totaled $2,119,022, a 110%
increase from the amount recorded during the corresponding three months of 1995.
This change in capital spending is a reflection of the Company's increased level
of drilling activities in 1996.
During the three months ended March 31, 1996, the Company borrowed
$300,000 on its credit facility, primarily for working capital purposes. During
the three months ended March 31, 1995, the Company used $920,000 of borrowing on
its credit facility to pay off its long-term debt.
The Company believes that existing cash balances, cash flow, and funds
available under the Company's credit facility will provide adequate resources to
meet all of its current capital and exploration spending objectives.
PART II
OTHER INFORMATION
The answers to items listed under Part II are inapplicable or negative.
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.
EQUITY OIL COMPANY
(Registrant)
DATE: May 13, 1996 By /s/ Paul M. Dougan
---------------------- -------------------
Paul M. Dougan, President
DATE: May 13, 1996 By /s/ Clay Newton
----------------------- ----------------
Clay Newton, Treasurer
8
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 504,332
<SECURITIES> 0
<RECEIVABLES> 3,294,704
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,684,631
<PP&E> 100,536,099
<DEPRECIATION> 58,449,855
<TOTAL-ASSETS> 54,429,268
<CURRENT-LIABILITIES> 1,745,562
<BONDS> 0
<COMMON> 12,717,600
0
0
<OTHER-SE> 0
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<SALES> 3,658,346
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<INCOME-PRETAX> 157,070
<INCOME-TAX> 51,363
<INCOME-CONTINUING> 105,707
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