UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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, 1995
OR
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ______________________
COMMISSION FILE NUMBER 0-9946
GOLDEN OIL COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 84-0836562
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
550 Post Oak Boulevard, Suite 550, Houston, Texas 77027
(Address of principal executive offices) (Zip Code)
(713) 622-8492
(Registrants telephone number, including area code)
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 [ ]
As of May 1, 1995, the Registrant had outstanding 1,404,291 shares of
common stock, par value $.01 per share and 22,254 shares of Class B convertible
common stock, par value $.01 per share.
Page 1 of 15
<PAGE>
CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
-- Consolidated Statements of Operations .......................... 3
-- Consolidated Balance Sheets .................................... 4
-- Consolidated Statements of Cash Flows .......................... 6
-- Notes to Consolidated Financial Statements ..................... 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations .................. 11
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K ............................... 15
2
<PAGE>
GOLDEN OIL COMPANY
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31,
---------------------------
1995 1994
----------- -----------
Revenues:
Oil and gas production ...................... $ 327,353 $ 362,214
Other ....................................... 8,220 6,131
----------- -----------
Total revenues ............... 335,573 368,345
----------- -----------
Costs and expenses:
Production costs ............................ 198,586 275,345
Depreciation, depletion and
amortization .............................. 130,189 175,978
General and administrative .................. 92,001 134,010
----------- -----------
Total costs and expenses ..... 420,776 585,333
----------- -----------
Gain (loss) on sale of property,
equipment and other assets ................. 8,000 (429)
Interest expense ............................... (9,216) (13,885)
Other income (expense) ......................... (1,288) (12,759)
----------- -----------
Net earnings (loss) ............................ $ (87,707) $ (244,061)
=========== ===========
Net earnings (loss) per
common share ................................. $ (.06) $ (.17)
=========== ===========
Weighted average number of
common shares and common
share equivalents outstanding ............ 1,404,291 1,404,291
=========== ===========
See Notes to Consolidated Financial Statements.
3
<PAGE>
GOLDEN OIL COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, DECEMBER 31,
ASSETS 1995 1994
----------- -----------
Current assets:
Cash and cash equivalents ..................... $ 7,744 $ 92,609
Short-term investments ........................ 23,528 23,528
Accounts receivable, net ...................... 442,078 461,619
Prepaid expenses and other .................... 70,802 44,183
----------- -----------
Total current assets ........... 544,152 621,939
----------- -----------
Property and equipment, at cost:
Oil and gas properties
(using the successful efforts
method of accounting)
Producing properties ..................... 5,853,999 5,994,169
Non-producing properties ................. 105,000 105,000
----------- -----------
Total oil and gas properties ... 5,958,999 6,099,169
----------- -----------
Pipeline, field and other well
equipment ..................................... 281,026 280,982
Other property and equipment ..................... 461,125 455,610
----------- -----------
6,701,150 6,835,761
Less accumulated depreciation,
depletion and amortization .................... (3,075,857) (3,085,838)
----------- -----------
Net property and equipment .................... 3,625,293 3,749,923
----------- -----------
Investment in commercial realty .................. 226,064 228,076
Other assets ..................................... 1,481 1,481
----------- -----------
$ 4,396,990 $ 4,601,419
=========== ===========
(Continued)
See Notes to Consolidated Financial Statements.
4
<PAGE>
GOLDEN OIL COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
MARCH 31, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
------------ ------------
Current liabilities:
Notes payable and
current portion of long-term debt ......... $ 333,737 $ 389,237
Accounts payable ............................ 1,159,453 1,222,417
Accrued expenses ............................ 114,027 112,285
------------ ------------
Total current liabilities ............. 1,607,217 1,723,939
------------ ------------
Other liabilities .............................. 37,214 37,214
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.01;
authorized 10,000,000 shares, none issued . -- --
Common stock, par value $.01;
authorized 15,000,000 shares,
issued and outstanding 1,404,291
shares at March 31, 1995 and
December 31, 1994 ......................... 14,043 14,043
Class B convertible common stock,
par value $.01; authorized 3,500,000
shares, issued and outstanding
22,254 shares at March 31,1995
and December 31, 1994 ..................... 223 223
Additional paid-in capital ..................... 13,819,679 13,819,679
Accumulated deficit ............................ (11,081,386) (10,993,679)
------------ ------------
Total stockholders' equity ............ 2,752,559 2,840,266
------------ ------------
$ 4,396,990 $ 4,601,419
============ ============
See Notes to Consolidated Financial Statements.
5
<PAGE>
GOLDEN OIL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
-----------------------
1995 1994
--------- ---------
Cash flows from operating activities:
Net earnings (loss) ............................. $ (87,707) $(244,061)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion
and amortization ............................ 130,189 175,978
Equity in net loss of
investment in commercial realty ............ 2,012 --
(Gain) loss on sale of property
and equipment .............................. (8,000) 429
(Gain) loss on sale of long term
investments ............................... -- 12,759
Changes in components of working capital:
(Increase) decrease in accounts
receivable, net ......................... 19,541 (13,670)
(Increase) decrease in prepaid
expenses and other ...................... (26,619) (32,418)
Increase (decrease) in accounts
payable ................................. (62,964) (34,295)
Increase (decrease) in other
liabilities ............................. -- (2,067)
Increase (decrease) in accrued
expenses ................................ 1,742 (252)
--------- ---------
Net cash provided by (used
in) operating activities ............... $ (31,806) $(137,597)
--------- ---------
(Continued)
See Notes to Consolidated Financial Statements.
6
<PAGE>
GOLDEN OIL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
------------------------
1995 1994
-------- ---------
Cash flows from investing activities:
Proceeds from sale of property
and equipment .............................. $ 8,000 $ 74,650
Additions of other property and
equipment .................................. (5,559) (3,268)
Decrease (increase) in short-term
investments ................................ -- (179)
Decrease (increase) in other assets .......... -- 30,573
-------- ---------
Net cash provided by (used in)
investing activities ....................... $ 2,441 $ 101,776
-------- ---------
Cash flows from financing activities:
Payment of long-term debt .................... (55,500) (74,000)
-------- ---------
Net cash provided by (used in)
financing activities ....................... $(55,500) $ (74,000)
-------- ---------
Net increase (decrease) in cash and
cash equivalents ............................. (84,865) (109,821)
Cash and cash equivalents at
beginning of period .......................... 92,609 262,553
-------- ---------
Cash and cash equivalents at
end of period ................................ $ 7,744 $ 152,732
======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest expense was $4,075 and $11,389 for the three
months ended March 31, 1995 and 1994, respectively. No cash was paid for income
taxes during the same corresponding periods.
See Notes to Consolidated Financial Statements.
7
GOLDEN OIL COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
For a summary of significant accounting principles, see Notes
to Consolidated Financial Statements and Note 1 thereof contained in
the Annual Report on Form 10-K of Golden Oil Company ("Golden" or
"Company") for the year ended December 31, 1994, which is incorporated
herein by reference. The Company follows the same accounting policies
during interim periods as it does for annual reporting purposes.
The accompanying consolidated financial statements are
condensed and unaudited and have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC"). In
the opinion of management, the unaudited interim financial statements
reflect all adjustments of a normal recurring nature which are
necessary to present a fair statement of the results for the interim
periods presented. Interim results are not necessarily indicative of a
full year of operations. Certain information and note disclosures
normally included in annual financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to SEC rules and regulations; however, the Company
believes that the disclosures made are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the financial statements and the notes thereto
included in the Company's Form 10-K for the year ended December 31,
1994.
RECLASSIFICATIONS
Certain amounts from prior periods have been reclassified to
conform to the presentation format for the 1995 Consolidated Financial
Statements with no effect on reported results of operations.
ACCOUNTS RECEIVABLE
Amounts shown as accounts receivable are net of $35,000 at
March 31, 1995 and December 31, 1994 to reflect estimated provisions
for doubtful collection of certain non-recourse obligations primarily
in connection with certain working interest participants and drilling
arrangements of a Company subsidiary.
8
INVESTMENTS
The Company adopted the provision of Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities ("SFAS" 115) effective January 1, 1994.
There was no impact resulting from the adoption of this standard as
aggregate cost of investments approximates market value. The Company's
short-term investments at March 31, 1995 and December 31, 1994
consisted of a certificate of deposit held by a federally insured bank.
Prior to the adoption of SFAS 115, investment securities were
carried at the lower of average cost or market.
The Company holds approximately a 23% interest in its
headquarters office building. The Company accounts for its investment
using the equity method and recognizes its pro rata share of net income
currently in operations.
(2) AGREEMENTS TO PURCHASE OIL AND GAS PROPERTIES
During the fourth quarter of 1993, the Company entered into an
agreement to purchase proved producing reserves in the State of New
Mexico. The New Mexico properties are located, respectively, adjacent
to and within acreage operated by Golden Operating Company, a
subsidiary of the Company, in its South Lindrith Field.
The Company intends to close the purchase of the New Mexico
properties using its own funds, including borrowings, formation of
joint ventures, sales of interests to limited or industry partners or
other financing methods, if necessary. However, there can be no
guarantee that the Company will be able to perform as required. If the
Company were to fail to complete the purchase, it would forfeit
non-refundable deposits on the properties of $42,000 of its total
purchase price. The purchase price is currently subject to adjustment
for production since the original effective date of the agreement and
other factors.
If none of the foregoing transactions are completed the
Company would recognize charges to operations of approximately $66,000
incurred in connection with such acquisition.
(3) CERTAIN FIXED PRICE SALE AGREEMENTS
In order to better protect the Company from possible
recurrence of sudden drops in oil and gas prices, during the first
quarter of 1995 the Company entered into fixed price agreements with
two principal purchasers of its oil production.
9
Under the agreements, the Company has covered approximately eighty
percent (80%) of its current average daily production at prices, net of
all transport charges or "basis differential" adjustments, of $17.00
per barrel. The agreements, which may be extended or modified, are for
an initial term through at least March 1, 1996.
(4) STRATEGIC CONSIDERATIONS
In earlier stages of its development, the Company's strategic
emphasis focused on oil and gas exploration. As a result of this
strategy, in the mid 1970's the South Dog Creek field was discovered by
the Company by Mr. A.M. Alloway, a leader in the development of
production in Osage County, Oklahoma. In recent years, the Company has
concentrated on plans for secondary development of reserves in Osage
County, and also on establishing a broader scope of operations and
greater geographic and production diversity. As a result, the Company
has completed extensive engineering and regulatory work related to the
South Dog Creek field, and has diversified through the acquisition of
operations and production in other areas, particularly the San Juan
Basin of New Mexico.
During late 1993 and 1994, the Company further diversified
through acquisition of a limited interest in a commercial office
building in Houston, Texas. The Company is actively reviewing more
substantial transactions outside the energy sector, including real
estate and financial services.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
Golden Oil Company is a diversified company whose current operations
emphasize oil and gas production and development. Over the last several years,
the Company has substantially increased the size and scope of its oil and gas
operations through a number of corporate transactions, primarily involving asset
purchases and mergers. Corporate transactions also have been undertaken or
considered in other business sectors, including real estate and financial
services. To date only limited investment has been made in such business
sectors. However, the Company is actively reviewing more substantial
transactions outside the energy sector.
The Company's operations during 1994 and to date during 1995 were
funded primarily through existing working capital, borrowings under its credit
facilities, sale of scattered nonstrategic oil and gas properties, and
internally generated funds from operating activities. Management anticipates
that the Company will meet ordinary operating needs for working capital from
internal sources. However, in order to complete development of its present
undeveloped reserves, pending and anticipated acquisitions and to further its
business plan, the Company will require additional financing. The Company may
arrange new financing through public or private offerings of the Company's
securities, asset sales, joint ventures, or other means. If the Company is
successful in its financing efforts, one use of proceeds will be to improve the
Company's working capital position. In addition, the Company plans to
restructure and extend its scheduled maturities of indebtedness.
The Company maintains credit agreements with certain banks for the
purpose of acquiring oil and gas properties, maintaining working capital and
outlays for capital expenditures. The Company maintains promissory notes with a
bank in the aggregate amount of $525,000 under which the Company had an
outstanding amount of $114,000 at March 31, 1995. The terms of the credit
agreement require payments, including principal and interest, of $18,500 each
month through November 1, 1995. The Company also maintains a $100,000 line of
credit with the same bank. At March 31, 1995, the Company has borrowed $70,000
under the line of credit. Upon expiration of this line of credit, the Company
expects the principal amount outstanding will be amortized over a period of not
less than one year. The Company also maintains a $150,000 line of credit with
another bank. At March 31, 1995, the Company had borrowed $149,737 of the total
amount available under the line of credit. Upon expiration of this credit line,
the Company is obligated to amortize the principal outstanding over a period not
to exceed two years.
11
Cash flows from operating activities was ($31,806) for the first
quarter of 1995 compared to ($137,597) for the first quarter of 1994. The
increase from the first quarter of 1994 primarily reflects an increase in
average oil prices received in the first quarter of 1995 from the first quarter
of 1994, partially offset by a decline in production volumes due to the sale of
certain nonstrategic properties during 1994. During the first quarter of 1995,
the Company obtained fixed prices at an average net price of approximately
$17.00 per barrel on the majority of its oil production. The fixed price of
$17.00 represents an increase of $3.90 per barrel compared to an average price
of $13.10 per barrel received in the first quarter of 1994. The Company believes
revenues generated under the fixed price arrangements and the effect of
reductions in corporate overhead during the past two quarters will generate cash
flows sufficient to meet its operating and capital requirements.
At March 31, 1995, the Company had a working capital deficit of
$1,063,065 and a current ratio of .34 to 1.00 compared to a working capital
deficit of $1,102,000 and a current ratio of .36 to 1.00 as of December 31,
1994. The decrease in the working capital deficit at March 31, 1995 primarily
results from the reduction in the Company's current portion of long-term debt.
At March 31, 1995, the Company's remaining debt obligations are reflected in
current liabilities, thus the ongoing payment of its scheduled principal
reductions of approximately $18,500 per month are expected to continue to reduce
the working capital deficit in 1995.
Due to factors including changes in tax laws, adverse changes in the
economics of exploration drilling and the availability to the Company of
alternative uses of capital, during the late 1980's, the Company curtailed
exploration activities. If the Company commences such programs in the future, it
intends to continue its previous policy of sharing exploration risks with third
party drilling participants. Certain of the Company's oil and gas leases provide
for ongoing drilling arrangements for periodic development of proved reserves.
The Company's principal development obligations under such agreements have been
suspended pending clarification of title assignments on certain federal leases.
The Company expects to obtain drilling participations form industry partners so
as to reduce the amount of the Company's required drilling commitments. The
Company believes that conditions in the independent oil and gas industry may
continue to generate opportunities to expand its scope of operations through
corporate transactions.
12
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1995 WITH THE THREE MONTHS ENDED
MARCH 31, 1994.
REVENUES
Revenues from oil and gas production decreased from $362,214 during the
first three months of 1994 to $327,353 in the first three months of 1995, a
decrease of $34,861 (10%). The primary reason for the decrease was due to a
decline in the average production volumes in the first quarter of 1995 as a
result of the sale of certain scattered nonstrategic properties during the
second, third, and fourth quarters in 1994. The production volume declines were
partially offset by the increase in average oil price postings of $3.90 per
barrel from $13.10 per barrel for the first quarter of 1994 to $17.00 per barrel
in the first quarter of 1995. Additionally, in February and March 1995, the
Company entered into certain fixed price arrangements at an average net price of
approximately $17.00 per barrel for the majority of its oil production for a
period through March 1996.
Gain on sale of property and equipment during the first three months of
1995 of $8,000 is due to the sale of certain scattered, nonstrategic properties
in 1995. Net proceeds to the Company from such sales were $8,000.
COSTS AND EXPENSES
Oil and gas production costs decreased from $275,345 for the first
three months of 1994 to $198,586 for the first three months of 1995, a decrease
of $76,759, due primarily to decreases in field operating expenses related to
properties sold in 1994. General and administrative expenses decreased from
$134,010 for the first quarter of 1994 to $92,001 for the first quarter of 1995,
a decrease of $42,009. The decrease is primarily attributable to reductions in
personnel and corporate overhead made during the fourth quarter of 1994 and the
first quarter of 1995.
Depreciation, depletion, and amortization expense decreased $45,789
from $175,978 for the first quarter of 1994 to $130,189 for the comparable
period of 1995 due primarily to disposals of certain nonstrategic properties
during 1994 and the first quarter of 1995.
The decrease in interest expense of $4,669 from $13,885 for the first
quarter of 1994 compared to $9,216 for the first quarter of 1995 is due to a
decrease in average aggregate amounts outstanding for borrowings under the
Company's financing arrangements.
13
Other income (expense) was a net expense of ($1,288) for the first
three months of 1995, compared to net expense of ($12,759) for the first three
months of 1994. The net expense of ($12,759) during the first quarter of 1994 is
due to a loss on the sale of a long-term investment.
Primarily reflecting the factors discussed above, the Company reported
a net loss for the three months ended March 31, 1995 of $87,707 compared to a
net loss of $244,061 for the same period of 1994.
14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
15
GOLDEN OIL COMPANY
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOLDEN OIL COMPANY
Date: May 12, 1995 By: /S/ RALPH T. MCELVENNY, JR.
Chief Executive Officer
By: /S/ JEFFREY V. HOUSTON
Chief Financial and
Accounting Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED
MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 7,744
<SECURITIES> 23,528
<RECEIVABLES> 442,078
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 70,802
<PP&E> 6,701,150
<DEPRECIATION> (3,075,857)
<TOTAL-ASSETS> 4,396,990
<CURRENT-LIABILITIES> (1,607,217)
<BONDS> 0
<COMMON> (14,266)
0
0
<OTHER-SE> (2,738,293)
<TOTAL-LIABILITY-AND-EQUITY> (4,396,990)
<SALES> (335,573)
<TOTAL-REVENUES> (343,573)
<CGS> 198,586
<TOTAL-COSTS> 420,776
<OTHER-EXPENSES> 1,288
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,216
<INCOME-PRETAX> 87,707
<INCOME-TAX> 0
<INCOME-CONTINUING> 87,707
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,707
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
