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 June 30, 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: 12,697,100
<PAGE>
ITEM I: Financial Statements
EQUITY OIL COMPANY
Statement of Operations
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
----------- -----------
REVENUES
Oil and gas sales ................... $ 8,745,718 $ 7,568,678
Partnership income .................. 150,000 150,000
Interest income ..................... 83,518 70,905
Other ............................... 552,157 123,074
----------- -----------
9,531,393 7,912,657
EXPENSES
Operating costs ..................... 3,038,935 2,621,927
Depreciation, depletion and
amortization ...................... 2,200,000 1,800,000
Equity loss in
Symskaya Exploration .............. 143,837 --
Leasehold abandonments .............. 40,952 15,092
Exploration ......................... 1,228,047 1,230,577
General and administrative .......... 1,108,018 1,218,972
Interest ............................ 324,172 --
----------- -----------
8,083,961 6,886,568
Income before income taxes ................... 1,447,432 1,026,089
Provision (benefit) for income taxes ......... 505,847 205,033
NET INCOME ................................... $ 941,585 $ 821,056
=========== ===========
Net income per common share .................. $ 0.07 $ 0.06
=========== ===========
Weighted average shares outstanding .......... 12,704,840 12,728,834
The accompanying notes are an integral part of these statements.
<PAGE>
EQUITY OIL COMPANY
Statement of Operations
For the Three Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
----------- -----------
REVENUES
Oil and gas sales ................... $ 3,903,440 $ 3,910,332
Partnership income .................. 75,000 75,000
Interest income ..................... 28,592 32,156
Other ............................... 437,357 62,497
----------- -----------
4,444,389 4,079,985
EXPENSES
Operating costs ..................... 1,496,167 1,287,931
Depreciation, depletion and
amortization ...................... 1,100,000 900,000
Equity loss in
Symskaya Exploration .............. 58,112 --
Leasehold abandonments .............. 22,512 5,092
Exploration ......................... 589,630 419,980
General and administrative .......... 549,201 597,963
Interest ............................ 173,849 --
----------- -----------
3,989,471 3,210,966
Income before income taxes ................... 454,918 869,019
Provision for income taxes ................... 293,708 153,670
----------- -----------
NET INCOME ................................... $ 161,210 $ 715,349
=========== ===========
Net income per common share .................. $ 0.01 $ 0.06
Weighted average shares outstanding .......... 12,692,693 12,741,781
The accompanying notes are an integral part of these statements.
<PAGE>
EQUITY OIL COMPANY
Balance Sheet
as of June 30, 1997, and December 31, 1996
June 30, December 31,
ASSETS 1997 1996
- ------ ------------- -------------
(Unaudited)
Current assets:
Cash and cash equivalents .............. $ 576,106 $ 787,961
Temporary cash investments ............. -- 49,802
Accounts and advances receivable ....... 3,296,784 3,660,670
Income taxes receivable ................ 106,770 311,393
Deferred income taxes .................. 31,053 31,053
Other current assets ................... 310,740 372,701
------------- -------------
4,321,453 5,213,580
Property and equipment ................... 109,066,076 106,147,145
Less accumulated depreciation,
depletion and amortization .............. 63,764,028 61,732,014
------------- -------------
45,302,048 44,415,131
Other assets:
Investment in Raven Ridge
Pipeline Partnership ................. 331,467 405,328
Other assets ........................... 126,341 147,398
------------- -------------
457,808 552,726
TOTAL ASSETS ............................. $ 50,081,309 $ 50,181,437
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................... $ 881,611 $ 1,880,420
Accrued liabilities .................... 179,775 153,467
Federal, state and foreign
income taxes payable ................. 427,359 191,509
Accrued profit sharing ................. 96,000 179,100
------------- -------------
1,584,745 2,404,496
Revolving credit facility ................ 8,878,830 8,878,830
Deferred income taxes .................... 5,421,183 5,565,973
------------- -------------
14,300,013 14,444,803
Stockholders' Equity
Common stock ........................... 12,761,100 12,751,100
Paid in capital ........................ 3,667,708 3,648,333
Less cost of treasury stock ............ (205,200) (98,653)
Retained earnings ...................... 17,972,943 17,031,358
------------- -------------
34,196,551 33,332,138
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ................... $ 50,081,309 $ 50,181,437
============= =============
The accompanying notes are an integral part of these statements.
<PAGE>
EQUITY OIL COMPANY
Statement of Cash Flows
For the Six Months Ended June 30, 1997 and 1996
(Unaudited)
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ......................... $ 941,585 $ 821,056
Adjustments
Depreciation, depletion and
amortization .......................... 2,200,000 1,800,000
Partnership distributions in
excess of income ...................... 73,861 71,622
(Gain) loss on
property dispositions ............. (284,105) 15,092
Decrease in deferred income taxes ....... (144,790) (4,617)
Equity loss in
Symskaya Exploration .............. 143,837 --
Change in other assets .............. 21,057 21,057
Common stock issued for services .... 29,375 103,313
Net cash provided before changes in ----------- -----------
working capital items .................. 2,980,820 2,827,523
Increase (decrease) from changes in:
Accounts and advances receivable ...... 363,886 18,521
Other current assets .................. 61,961 53,158
Accounts payable and accrued
liabilities ......................... (972,501) (221,537)
Income taxes receivable/payable ....... 440,473 60,901
Accrued profit sharing ................ (83,100) (52,771)
----------- -----------
Net cash provided
by operating activities ................. 2,791,539 2,685,795
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to Symskaya Exploration .......... (143,837) (1,577,729)
Sale of temporary cash investments ........ 49,802 699,044
Proceeds from sale of properties .......... 339,384 --
Capital expenditures ...................... (3,142,196) (2,619,825)
----------- -----------
Net cash used in investing
activities .............................. (2,896,847) (3,498,510)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock ................ (106,547) --
Exercise of incentive stock options ....... -- 84,375
Borrowings under
revolving credit facility ................ -- 2,210,000
----------- -----------
Net cash provided by (used in)
financing activities ................... (106,547) 2,294,375
----------- -----------
NET INCREASE (DECREASE) IN CASH .............. (211,855) 1,481,660
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD .................... 787,961 511,252
----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD .......................... $ 576,106 $ 1,992,912
=========== ===========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Income Taxes $ 278,156 $ 270,340
Interest $ 324,172 $ --
The accompanying notes are an integral part of these statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note 1. Interim Financial Statements
The accompanying financial statements of Equity Oil Company ("Equity" or
"the Company") have not been audited by independent accountants, except for the
Balance Sheet as of December 31, 1996. In the opinion of the Company's
management, the financial statements reflect the adjustments, all of which are
of a normal and recurring nature, necessary to present fairly the financial
position of the Company as of June 30, 1997, and the results of its operations
for the three and six month periods ended June 30, 1997 and 1996, and its cash
flows for the six month periods ended June 30, 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, and the
Company's Form 10-Q for the first quarter of 1997.
The results for the three and six month periods ended June 30, 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 and common share equivalents outstanding during the period. Primary and
fully diluted earnings per share are essentially the same.
Note 3. Reclassifications
Certain balances in the June 30, 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.
<PAGE>
PART I
ITEM 2
Management's Discussion and Analysis of Financial Condition and
Results of Operation
RESULTS OF OPERATIONS
Financial Results
Net income for the first six months of 1997 was $941,585, or $.07 per
share, 15% higher than net income of $821,056, or $.06 per share recorded during
the first half of 1996. Total revenues of $9,531,393 were 20% higher than total
revenues of $7,912,657 recorded in the first half of 1996.
Second quarter 1997 net income was $161,210, or $.01 per share, compared to
second quarter 1996 net income of $715,349, or $.06 per share. Second quarter
revenues in 1997 of $4,444,389 were 9% higher than the $4,079,985 reported in
the second quarter of 1996.
Operating Results
During the first half of 1997, the Company participated in a total of 16
wells, 11 of which have been completed as oil and gas wells. In California,
where the Company continues to drill on 3D seismic surveys, 6 of 9 wells were
completed as gas wells. The Company currently has 15 additional wells scheduled
to be drilled in California before the end of the year, including the first well
at its Davis Ranch prospect, which should spud by the end of July.
In drilling outside of California, the Company completed 5 of 7 wells
during the first half of 1997. Included in the successful well count is a
development well at the Company's Siberia Ridge field in Wyoming, where the
Company owns a 50% working interest. The Company completed additional
development wells in Alberta, Wyoming and North Dakota, and completed 1
exploratory well in Texas.
During the first half of 1996, the Company participated in 8 wells, 7 of
which were completed as producing wells.
CAPITAL RESOURCES AND LIQUIDITY
Cash, cash equivalents, and temporary cash investments totaled $576,106 as
of June 30, 1997, a decrease of $261,657 since year-end 1996. Working capital at
June 30, 1997 was $2,736,708, compared to $2,809,084 at December 31, 1996. The
Company's ratio of current assets to current liabilities improved from 2.17 to 1
at December 31, 1996 to 2.73 to 1 at June 30, 1997. Cash provided by operating
activities was $2,791,539 in the first six months of 1997, compared to
$2,685,795 during the same period of 1996.
Investment in property and equipment for the first six months of 1997 of
$3,142,196 was 20% higher than the investment made during the first half of
1996, reflecting the Company's increased drilling activity domestically. During
the fist half of 1996, the Company made advances to Symskaya Exploration of
$1,577,729, compared to $143,837 during 1997, reflecting Symskaya's reduced
activity in 1997. The investment activity was partially funded by proceeds from
the sale of properties in 1997, and by the sale of temporary cash investments in
both years.
The Company purchased 35,000 shares of its stock on the open market during
the first half of 1997, at an average price of $3.04 per share. No treasury
stock was purchased during the first half of 1996.
During the first half of 1997, the Company did not increase borrowings
under its credit facility, compared to borrowings of $2,210,000 in 1996, which
were used to fund investments in properties and equipment. At June 30, 1997, the
Company had approximately $10.1 million of availability on the facility.
The Company believes that existing cash balances, cash flow, and borrowing
capacity under the revolving credit facility will provide adequate resources to
meet its capital, exploration, and acquisition spending objectives.
<PAGE>
COMPARISON OF SECOND QUARTER 1997 WITH SECOND QUARTER 1996
Oil and gas sales in the second quarter of 1997 of $3,903,440 were slightly
lower than the $3,910,332 recorded for the same quarter of last year. Increases
in oil production were offset by lower crude oil prices, while decreases in gas
production were offset by higher gas prices. The average net price for crude oil
received by the Company during the quarter was $18.64 per barrel, compared to
$20.30 during the second quarter of 1996, a decrease of 8%. Average gas prices
received during the second quarter of 1997 were $1.85 per Mcf, compared to $1.38
per Mcf during the second quarter of 1996.
Total production increased slightly year-to-year on an equivalent barrel
basis. Oil production increased from 158,000 barrels in the second quarter of
1996 to 163,000 during the same quarter of 1997, while gas production dropped
from 549,000 Mcf in 1996 to 526,000 Mcf in 1997.
During the second quarter of 1997, the Company recorded a gain on the sale
of certain oil and gas properties of approximately $325,000. The properties sold
had proved reserves of less than 15,000 barrels of oil. There was no
corresponding event in 1996.
Total expenses in 1997 increased 24% over 1996 second quarter levels. Lease
operating costs increased 16%, primarily as a result of increased oil production
and non-recurring workover expenses. Depreciation, depletion and amortization
increased 22%, primarily due to increased oil production in 1997 and the new
properties added to the depletion base during 1997 and 1996. Exploration expense
increased due to higher dry hole costs, which were approximately $185,000 higher
in the second quarter of 1997 compared to the same period in 1996.
During 1996, because of its ongoing exploration project in Russia, the
Company was required to capitalize interest on its investment in this project.
With activity in Russia curtailed in 1997 as a result of the Lemok #1 being
abandoned in the fourth quarter of 1996, interest is now being expensed.
Interest expense during the 2nd quarter of 1997 was $173,849, compared to no
interest expense during the 2nd quarter of 1996.
Income tax expense rose during the second quarter due to adjustments
arising from an audit of the Company's Canadian tax returns. The adjustment
resulted in the accrual of approximately $175,000 in additional Canadian taxes
related to prior years.
COMPARISON OF FIRST HALF 1997 WITH FIRST HALF 1996
Higher oil and gas prices during the first half of 1997 combined with
increases in oil production to produce an 20% increase in total revenues over
the same period of 1996. Average oil prices received by the Company during the
first half of 1997 were $19.47 per barrel, compared to $18.66 per barrel during
the first half of 1996. Average gas prices received during the first half of
1996 were $1.37 per Mcf, which compared to $2.22 per Mcf during the first half
of 1997. Oil production of 324,000 barrels was up 3% from 1996 production of
314,000 barrels. Natural gas production decreased slightly, from 1,045,000 Mcf
in 1996 to 1,028,000 Mcf in 1997.
The increase in oil and gas sales for the period was augmented by an
increase in other income. During the first half of 1997, the Company recorded a
gain on the sale of certain oil and gas properties of approximately $325,000.
The properties sold had reserves of less than 15,000 barrels of oil. There was
no corresponding event in 1996.
Total expenses in 1997 increased 17% over 1996 first half levels. Lease
operating costs increased 16%, primarily as a result of increased oil production
and non-recurring workover expenses. Depreciation, depletion and amortization
increased 22%, primarily due to increased oil production in 1997 and the new
properties added to the depletion base during 1997 and 1996.
Exploration expense remained constant from year to year, as lower 3-D
seismic expenses were offset by higher dry hole costs. General and
administrative expenses decreased by 9% from 1996 first half levels. The
decrease was mainly due to reduced compensation expense during 1997.
During 1996, because of its ongoing exploration project in Russia, the
Company was required to capitalize interest on its investment in this project.
With activity in Russia curtailed in 1997, interest is now being expensed.
Interest expense during the first half of 1997 was $324,172, compared to no
interest expense during the same period of 1996.
Income tax expense rose during the first half due to adjustments arising
from an audit of the Company's Canadian tax returns. The adjustment resulted in
the accrual of approximately $175,000 in additional Canadian taxes related to
prior years.
<PAGE>
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.
PART II
OTHER INFORMATION
The answers to items listed under Part II are inapplicable or negative,
except as shown below.
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's annual meeting, held on May 14, 1997, stockholders were
asked to elect Mr. William D. Forster and Mr. Randolph G. Abood to serve three
year terms on the Board of Directors. The following votes were recorded.
Forster Abood
Affirmative votes 10,433,574 10,455,153
Withhold authority 159,982 138,403
Each director nominee received at least 98% of the shares voted at the meeting.
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: August 8, 1997 By /s/ Paul M. Dougan
--------------- -------------------------
Paul M. Dougan, President
DATE: August 8, 1997 By /s/ Clay Newton
--------------- -------------------------
Clay Newton, Treasurer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 576,106
<SECURITIES> 0
<RECEIVABLES> 3,296,784
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,321,453
<PP&E> 109,066,076
<DEPRECIATION> 63,764,028
<TOTAL-ASSETS> 50,081,309
<CURRENT-LIABILITIES> 1,584,745
<BONDS> 0
0
0
<COMMON> 12,761,100
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 50,081,309
<SALES> 8,745,718
<TOTAL-REVENUES> 9,531,393
<CGS> 0
<TOTAL-COSTS> 7,759,789
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 324,172
<INCOME-PRETAX> 1,447,432
<INCOME-TAX> 505,847
<INCOME-CONTINUING> 941,585
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 941,585
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
