FORM 10Q
UNITED STATES
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, 1997
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: 12,704,100
1
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ITEM I: FINANCIAL STATEMENTS
EQUITY OIL COMPANY
Statement of Operations
For the three months ended March 31, 1997 and 1996
(Unaudited)
1997 1996
---------- ----------
REVENUES
Oil and gas sales ................... $ 4,842,278 $ 3,658,346
Partnership income .................. 75,000 75,000
Interest income ..................... 54,926 38,749
Other ............................... 114,800 60,577
----------- -----------
5,087,004 3,832,672
EXPENSES
Operating costs ..................... 1,542,768 1,333,996
Depreciation, depletion and
amortization ...................... 1,100,000 900,000
Leasehold abandonments .............. 18,440 10,000
Equity loss in
Symskaya Exploration .............. 85,725 --
Exploration ......................... 638,417 810,597
General and administrative .......... 558,817 621,009
Interest ............................ 150,323 --
----------- -----------
4,094,490 3,675,602
Income before income taxes ................... 992,514 157,070
Provision for income taxes ................... 212,139 51,363
----------- -----------
NET INCOME ................................... $ 780,375 $ 105,707
=========== ===========
Net income per common share .................. $ 0.06 $ 0.01
=========== ===========
Cash dividends per share declared ............ $ .00 $ .00
=========== ===========
Weighted average shares outstanding .......... 12,717,311 12,714,350
The accompanying notes are an integral part of these statements.
2
<PAGE>
EQUITY OIL COMPANY
Balance Sheet
as of March 31, 1997, and December 31, 1996
March 31, December 31,
ASSETS 1997 1996
- ------ ---------- ----------
(Unaudited)
Current assets:
Cash and cash equivalents .............. $ 941,253 $ 787,961
Temporary cash investments ............. -- 49,802
Accounts and advances receivable ....... 3,672,082 3,660,670
Income taxes receivable ................ 256,108 311,393
Deferred income taxes .................. 31,053 31,053
Other current assets ................... 337,402 372,701
------------- -------------
5,237,898 5,213,580
Property and equipment ................... 107,575,852 106,147,145
Less accumulated depreciation,
depletion and amortization .............. 62,812,210 61,732,014
------------- -------------
44,763,642 44,415,131
Other assets:
Investment in Raven Ridge
Pipeline Partnership ................. 363,920 405,328
Other assets ........................... 136,869 147,398
------------- -------------
500,789 552,726
TOTAL ASSETS ............................. $ 50,502,329 $ 50,181,437
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................... $ 1,482,607 $ 1,880,420
Accrued liabilities .................... 148,148 153,467
Federal, state and foreign
income taxes payable ................. 455,872 191,509
Accrued profit sharing ................. 48,000 179,100
------------- -------------
2,134,627 2,404,496
Revolving credit facility ................ 8,878,830 8,878,830
Deferred income taxes .................... 5,433,006 5,565,973
------------- -------------
14,311,836 14,444,803
Stockholders' Equity
Common stock ........................... 12,751,100 12,751,100
Paid in capital ........................ 3,648,333 3,648,333
Less cost of treasury stock ............ (155,300) (98,653)
Retained earnings ...................... 17,811,733 17,031,358
------------- -------------
34,055,866 33,332,138
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ................... $ 50,502,329 $ 50,181,437
============= =============
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, 1997 and 1996
(Unaudited)
1997 1996
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................. $ 780,375 $ 105,707
Adjustments
Depreciation, depletion and
amortization .......................... 1,100,000 900,000
Partnership distributions
in excess of income ................... 41,408 36,930
Property dispositions ................... 18,440 10,000
Common stock issued for services ........ -- 33,312
Change in other assets .................. 10,529 10,528
Equity loss in Symskaya Exploration ..... 85,725 --
Decrease in deferred income taxes ....... (132,967) (59,435)
Net cash provided before changes in ----------- -----------
working capital items ................... 1,903,510 1,037,042
Increase (decrease) from changes in: ----------- -----------
Accounts and advances receivable ....... (11,412) (40,839)
Other current assets ................... 35,299 25,071
Accounts payable and accrued
liabilities ......................... (403,132) 216,996
Income taxes receivable/payable ........ 319,648 (28,163)
Accrued profit sharing ................. (131,100) (100,771)
----------- -----------
Net cash provided
by operating activities ................. 1,712,813 1,109,336
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ....................... (1,466,951) (1,303,344)
Advances to Symskaya Exploration ........... (85,725) (815,678)
Sale of temporary cash investments ......... 49,802 702,766
---------- ----------
Net cash used in investing activities ...... (1,502,874) (1,416,256)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock ................. (56,647) --
Increase in other assets ................... -- --
Proceeds from revolving credit facility .... -- 300,000
Payments on long term debt ................. -- --
---------- ----------
Net cash provided by (used in)
financing activities ............... (56,647) 300,000
---------- ----------
NET INCREASE (DECREASE) IN CASH .............. 153,292 (6,920)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD ..................... 787,961 511,252
---------- ----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD ........................... $ 941,253 $ 504,332
========== ==========
CASH, CASH EQUIVALENTS AND
TEMPORARY CASH INVESTMENTS
AT END OF PERIOD ........................... $ 941,253 $ 757,533
========== ==========
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, 1996. 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, 1997, and the results of its operations and its cash
flows for the three month periods ended March 31, 1997 and 1996.
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 1996 Annual Report on Form 10-K.
The results for the three month period ended March 31, 1997 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. RECLASSIFICATIONS
Certain balances in the March 31, 1996 financial statements have been
reclassified to conform with the current year presentation. These changes had no
effect on the previously reported net income, total assets, liabilities or
stockholders' equity.
5
<PAGE>
PART I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
Increases in oil and gas production combined with stronger oil prices to
help the Company record a 33% increase in revenues during the first quarter of
1997. Total revenues for the period were $5,087,004, compared to $3,832,672
during the first quarter of 1996. Net income for the first quarter of 1997 was
$780,375, or $.06 per share, compared to $105,707, or $.01 per share, during the
first quarter of 1996.
The Company recorded increases in both oil and gas production. Oil
production of 161,000 barrels was up 3% from 156,000 barrels in 1995. Gas
production increased of 502,000 Mcf produced in 1997 from 496,000 Mcf produced
during the first quarter of 1997.
Averages prices received for oil during the first quarter of 1997 were
$20.30 per barrel, an increase of 12% over the $18.14 per barrel received during
the same period of 1996. Gas prices also increased during 1997, averaging $2.68
per Mcf, compared to $1.42 per Mcf received during the first quarter of 1996.
Increases in oil and gas sales were augmented by higher other income. Other
income in 1997 includes approximately $70,000 received from the sale of certain
mineral rights. There was no similar transaction during the first quarter of
1996.
Total expenses in 1997 increased 11% over 1996 first quarter levels. Lease
operating costs increased 16%, primarily as a result of increased production and
higher revenue-based production taxes. Depreciation, depletion and amortization
(DD&A) increased 22%, primarily due to increased production in 1997 and the new
properties added to the depletion base during 1996.
The decrease in exploration expense was primarily due to reduced geological
and geophysical expenses in 1997, the bulk of which consisted of lower 3-D
seismic expenses. General and administrative expenses decreased by 10% from 1996
first quarter levels. The decrease was mainly due to reduced compensation
expense during 1997.
During the first quarter of 1997, the Company participated in the drilling
of 4 wells, compared to 5 during the same time period of 1996. Of the 4 wells
drilled this year, 2 wells have been completed as producers, and 2 wells were
plugged and abandoned. During the first quarter of 1996, 4 wells were completed
as producers, and 1 well was plugged and abandoned.
Included in the 1997 well count are 3 exploratory wells drilled in
California on the Company's 3-D seismic projects. Two of those wells were dry
holes. Despite the dry holes, the Company is continuing to develop additional
prospects through its use of 3-D seismic data. The Company recently completed
processing of a seismic shoot at its Davis Ranch prospect, a 17 square mile
survey, and the first well has been staked.
The Company has a total capital investment program of $7.9 million outlined
for 1997. The program includes 29 exploration projects and 26 development and
exploitation projects. The bulk of the Company's drilling should occur during
the third and fourth quarters of the year.
The Company is continuing to pursue additional outside financing for its
Symskaya project in Russia. Costs associated with the project are expected to be
minimal during 1997.
6
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Cash, cash equivalents, and temporary cash investments totaled $941,253 as
of March 31, 1997, up from $837,763 at year-end 1996. Working capital at March
31, 1997 was $3,103,271, compared to working capital of $2,809,084 at December
31, 1996. For the first three months of 1997, net cash provided by operating
activities increased 54% over the same period of 1996, primarily due to the
increase in net income discussed earlier.
Investment in property and equipment for the first three months of 1997
totaled $1,466,951, a 13% increase from the amount recorded during the
corresponding three months of 1996. The increase reflects higher lease
acquisition costs during 1997. In the first 3 months of 1996, the Company
advanced approximately $816,000 to Symskaya Exploration in connection with the
drilling of the Lemok #1 well in Russia, compared to $85,725 during the same
period of 1997.
During the three months ended March 31, 1997, the Company purchased 18,000
shares of Treasury Stock for a total price of $56,600. During the first quarter
of 1996, the Company borrowed $300,000 on its credit facility, primarily for
working capital purposes. The Company did not draw down any funds on its line of
credit during the first quarter of 1997.
The Company believes that existing cash balances, cash flow, and the
borrowing capacity available under the Company's credit facility will provide
adequate resources to meet all of its current capital and exploration spending
objectives.
OTHER ITEMS
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings per Share. This statement
establishes standards for computing and presenting earnings per share ("EPS")
and applies to entities with publicly-held common stock or potential common
stock. This statement simplifies the standards for computing EPS and makes them
comparable to international EPS standards. This statement is effective for
financial statements for both interim and annual periods ending after December
15, 1997. The Company is currently evaluating the impact of the recently issued
statement and will adopt the requirements for the year ending December 31, 1997.
The Company has reviewed all other recently issued, but not yet adopted,
accounting standards in order to determine their effects, if any, on the results
of operations or financial position of the Company. Based on that review, the
Company believes that none of these pronouncements will have a significant
effect on current or future earnings or operations.
7
<PAGE>
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: April 24, 1997 By /s/ Paul M. Dougan
---------------------- -------------------
Paul M. Dougan, President
DATE: April 24, 1997 By /s/ Clay Newton
----------------------- ----------------
Clay Newton, Treasurer
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 941,523
<SECURITIES> 0
<RECEIVABLES> 3,672,082
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,237,898
<PP&E> 107,575,852
<DEPRECIATION> 62,812,210
<TOTAL-ASSETS> 50,502,329
<CURRENT-LIABILITIES> 2,134,627
<BONDS> 0
0
0
<COMMON> 12,751,100
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 50,502,329
<SALES> 4,842,278
<TOTAL-REVENUES> 5,087,004
<CGS> 0
<TOTAL-COSTS> 3,944,167
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 150,323
<INCOME-PRETAX> 992,514
<INCOME-TAX> 212,139
<INCOME-CONTINUING> 780,375
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 780,375
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
