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 SEPTEMBER 30, 1996
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
of incorporation or organization) Identification No.)
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 November 1, 1996, the Registrant had outstanding 1,424,291
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 22
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CONTENTS
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- Consolidated Statements of Operations......... 3
- Consolidated Balance Sheets................... 5
- Consolidated Statements of Cash Flows......... 7
- Notes to Consolidated Financial Statements.... 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..... 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.................. 21
Page 2 of 22
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GOLDEN OIL COMPANY
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED SEPTEMBER 30,
----------------------------
1996 1995
----------- -----------
Revenues:
Oil and gas production .................. $ 477,313 $ 293,631
Other ................................... 7,760 8,500
----------- -----------
Total revenues ..................... 485,073 302,131
----------- -----------
Costs and expenses:
Production costs ........................ 295,904 203,989
Depreciation, depletion and
amortization .......................... 114,730 131,045
General and administrative .............. 123,875 127,245
----------- -----------
Total costs and expenses ........... 534,509 462,279
----------- -----------
Gain (loss) on sale of property,
equipment & other assets ................ (100) --
Equity in net loss of investments ......... (4,391) --
Property acquisition costs ................ -- (66,142)
Interest expense .......................... (6,928) (6,292)
Other income (expense) .................... 1,258 (1,699)
----------- -----------
Net earnings (loss) ....................... $ (59,597) $ (234,281)
=========== ===========
Net earnings (loss) per common share ...... $ (0.04) $ (0.17)
=========== ===========
Weighted average number of
common shares and common
share equivalents outstanding ........ 1,424,291 1,404,291
=========== ===========
See Notes To Consolidated Financial Statements.
Page 3 of 22
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GOLDEN OIL COMPANY
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------
1996 1995
----------- -----------
Revenues:
Oil and gas production .................... $ 1,071,882 $ 929,677
Other ..................................... 22,473 25,400
----------- -----------
Total revenues ....................... 1,094,355 955,077
----------- -----------
Costs and expenses:
Production costs .......................... 689,069 608,495
Depreciation, depletion and
amortization ............................ 316,696 391,455
General and administrative ................ 256,016 314,852
----------- -----------
Total costs and expenses ............. 1,261,781 1,314,802
----------- -----------
Gain (loss) on sale of property,
equipment and other assets ................ (100) 8,337
Equity in net loss of investments ............ (14,145) --
Property acquisition costs ................... -- (66,142)
Interest expense ............................. (18,174) (25,303)
Other income (expense) ....................... 4,274 (3,740)
----------- -----------
Net earnings (loss) before cumulative
effect of accounting change ............... (195,571) (446,573)
Cumulative effect of accounting
change (Note 1) ........................... (39,770) --
----------- -----------
Net earnings (loss) .......................... $ (235,341) $ (446,573)
=========== ===========
Net earnings (loss) per common share ......... $ (0.17) $ (0.32)
=========== ===========
Weighted average number of
common shares and common
share equivalents outstanding ........ 1,424,291 1,404,291
=========== ===========
See Notes to Consolidated Financial Statements.
Page 4 of 22
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GOLDEN OIL COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1996 1995
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents ................. $ 54,944 $ 67,599
Short-term investments .................... 24,264 24,264
Accounts receivable, net .................. 377,285 388,695
Prepaid expenses and other ................ 53,781 29,227
----------- -----------
Total current assets ................. 510,274 509,785
----------- -----------
Property and equipment, at cost:
Oil and gas properties
(using the successful efforts
method of accounting)
Producing properties ................. 6,018,519 5,847,201
Non-producing properties ............. 105,000 105,000
----------- -----------
Total oil and gas properties ......... 6,123,519 5,952,201
----------- -----------
Pipeline, field and other well
equipment ................................. 268,046 267,743
Other property and equipment ................. 461,125 461,125
----------- -----------
6,852,690 6,681,069
Less accummulated depreciation,
depletion and amortization ................ (3,810,879) (3,454,413)
----------- -----------
Net property and equipment ................ 3,041,811 3,226,656
----------- -----------
Investments in commercial realty ............. 191,703 205,848
Other assets ................................. 1,481 1,481
----------- -----------
$ 3,745,269 $ 3,943,770
=========== ===========
(Continued)
See Notes to Consolidated Financial Statements.
Page 5 of 22
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GOLDEN OIL COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and
current portion of long-term debt ......... $ 141,955 $ 122,079
Accounts payable ............................ 1,278,467 1,234,474
Accrued expenses ............................ 87,688 126,375
------------ ------------
Total current liabilities .............. 1,508,110 1,482,928
------------ ------------
Long-term debt ................................. 98,198 86,540
Other liabilities .............................. 87,213 87,213
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 1,424,291
shares at September 30, 1996 and
December 31, 1995 .......................... 14,243 14,243
Class B convertible common stock,
par value $.01; authorized 3,500,000
shares, issued and outstanding
22,254 shares at September 30, 1996
and December 31, 1995 ...................... 223 223
Additional paid-in capital ..................... 13,839,479 13,839,479
Accumulated deficit ............................ (11,802,197) (11,566,856)
------------ ------------
Total stockholders' equity .............. 2,051,748 2,287,089
------------ ------------
$ 3,745,269 $ 3,943,770
============ ============
See Notes to Consolidated Financial Statements.
Page 6 of 22
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GOLDEN OIL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1995
--------- ---------
Cash flows from operating activities:
Net earnings (loss) .............................. $(235,341) $(446,573)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion
and amortization ............................ 316,696 391,455
Equity in net loss of
investment in commercial realty ............. 14,145 6,037
Reserve for deferred property
acquisition costs ........................... -- 66,142
(Gain) loss on sale of property
and equipment ............................... 100 (8,337)
Cumulative effect of accounting
change ...................................... 39,770 --
Changes in components of working capital:
(Increase) decrease in accounts
receivable, net .......................... 11,410 5,638
(Increase) decrease in prepaid
expenses and other ....................... (24,554) (7,563)
Increase (decrease) in accounts
payable .................................. 43,993 94,260
Increase (decrease) in accrued
expenses ................................. (38,687) (29,910)
--------- ---------
Net cash provided by (used
in) operating activities ............. $ 127,532 $ 71,149
--------- ---------
(Continued)
See Notes to Consolidated Financial Statements.
Page 7 of 22
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GOLDEN OIL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1996 1995
--------- ---------
Cash flows from investing activities:
Proceeds from sale of property
and equipment .............................. $ 400 $ 9,500
Proceeds from sale of producing
properties ................................. -- 21,053
Additions of oil and gas properties .......... (171,318) (12,277)
Additions of other property and
equipment .................................. (803) (7,413)
Decrease (increase) in short-term
investments ................................ -- (707)
--------- ---------
Net cash provided by (used in)
investing activities ....................... $(171,721) $ 10,156
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of
long-term debt ............................. 127,161 --
Payment of long-term debt .................... (95,627) (161,500)
--------- ---------
Net cash provided by (used in)
financing activities ....................... $ 31,534 $(161,500)
--------- ---------
Net increase (decrease) in cash and
cash equivalents ............................. (12,655) (80,195)
Cash and cash equivalents at
beginning of period .......................... 67,599 92,609
--------- ---------
Cash and cash equivalents at
end of period ................................ $ 54,944 $ 12,414
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest expense was $19,349 and $32,816 for the nine
months ended September 30, 1996 and 1995, respectively. No cash was paid for
income taxes during the same corresponding periods.
See Notes To Consolidated Financial Statements.
Page 8 of 22
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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, 1995, 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 financial position and
results of operations 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, 1995.
On January 1, 1996, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 121, "Accounting for the Impairment of
Long-lived Assets and for Long-lived Assets to be Disposed Of." There
was no effect on the financial position or results of operations from
the adoption of this standard. In the future, however, adjustments
could be required to the Company's producing oil and gas properties
should prices for oil and gas decline significantly or if the Company
were to revise its estimates of recoverable oil and gas reserves.
RECLASSIFICATIONS
Certain amounts from prior periods have been reclassified to
conform to the presentation format for the 1996 Consolidated Financial
Statements with no effect on reported results of operations.
Page 9 of 22
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GOLDEN OIL COMPANY
ACCOUNTS RECEIVABLE
Amounts shown as accounts receivable are net of $91,171 at
September 30, 1996 and $73,118 at December 31, 1995 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.
INVESTMENTS
The Company adopted the provisions of Statement of Financial
Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities ("SFAS 115") effective January 1, 1994.
Prior to the adoption of SFAS 115, investment securities were carried
at the lower of average cost or market. 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
September 30, 1996 and December 31, 1995 consisted of a certificate of
deposit held by a federally insured bank.
The Company holds an ownership interest in its headquarters
office building. For presentation purposes in the accompanying
financial statements, the Company accounts for its investment using the
equity method and recognizes its pro-rata share of net income or loss
in its current operating statements.
ACCOUNTING CHANGE
Effective January 1, 1996 the Company changed its depletion
method on producing oil and gas properties from the
property-by-property basis to the field basis of applying the
unit-of-production method. The field basis provides for the aggregation
of wells that have a common geological reservoir or field. The Company
believes that the field basis provides a better matching of expenses
with revenues over the productive life of the properties and,
therefore, that the new method is preferable to the
property-by-property basis. The cumulative effect of this change in
accounting method of $39,770 ($.03 per share) is reported separately in
the accompanying consolidated statements of operations. At the date of
the change in accounting method, the net effect of the change was a
$21,600 decrease in depletion and depreciation expense and a $21,600
increase in net income ($.02 per share) reported for the three months
ended March 31, 1996. Had the change in method been implemented at the
beginning of 1995, the pro forma impact on the results of operations
for the three months ended March 31, 1995 would have been a decrease in
depletion and depreciation expense of approximately $22,800 and a
$22,800 increase in net income ($.02 per share).
Page 10 of 22
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GOLDEN OIL COMPANY
(2) CERTAIN FIXED PRICE SALE AGREEMENTS
In order to plan Company operations and protect against sudden
declines in oil and gas prices the Company entered into a fixed price
agreement with one principal purchaser of its oil production in its
South Dog Creek field in Oklahoma. Under such agreements, the Company
has contracted for the sale of approximately fifty percent of its
current average daily oil production at prices, net of all transport
charges or "basis differential" adjustments, of $17.01 per barrel. Such
agreements, which may be extended or modified, cover a term through at
least December 31, 1996. The Company has also entered into a second
fixed price agreement with one principal purchaser of its oil
production in its San Juan Basin field in New Mexico. The Company has
contracted for the sale of approximately twenty-five percent of its
average daily oil production at prices, net of all transport charges or
"basis differential" adjustments, of $21.17 per barrel. The agreement
covers a term through June 30, 1997.
(3) DEVELOPMENT OF SOUTH DOG CREEK FIELD
During the third quarter of 1996 the Company completed initial
stage field work for the waterflood development of its South Dog Creek
field in Osage County, Oklahoma. All of the Company's joint working
interest owners have elected to participate in such development and to
pay their respective pro-rata shares of the initial stage costs. At
September 30, 1996 the Company has expended approximately $165,000 to
complete the initial phase of development. Although substantially all
of the field work has been completed, the Company does not anticipate
the possibility of significant increases in production volumes from the
South Dog Creek field until the reservoir is repressurized by
waterflood injection and the field's response is evaluated. The Company
will evaluate the response from the initial phase of development before
proceeding with possible further development of the field. The
Company's further development of the South Dog Creek field also is
subject to the availability of financing from third party sources.
Until actual production results are available there can be no
determination as to the availability of such financing.
Page 11 of 22
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GOLDEN OIL COMPANY
(4) INDEBTEDNESS
In April 1996, the Company entered into a new credit agreement
with a commercial bank which provides for an increase of the Company's
borrowings from $150,000 up to $400,000 and extends the maturity
schedule of the Company's debt to four years, subject to certain
conditions.
Proceeds from the additional financing are needed to refinance
short-term debt currently outstanding, to acquire additional interests
in Company-operated properties and to pay other payables. At March 31,
1996 the Company had a working capital deficit of approximately
$1,000,000. In order to obtain the new financing the Company was
required by the lending bank to provide a personal guarantee from a
principal officer of the Company for repayment in full to the bank of
all principal, interest and related costs. The Company's management and
the bank were concerned about factors including the Company's lack of
liquidity, the working capital deficit, and the threat of a repeat of
the oil price collapse such as occurred throughout the first half of
1994. As a result of its financial position, the Company was not able
to pay a cash fee for the personal guarantee required by the lender as
a condition of extending credit to the Company as above. In lieu of
cash payment, the Company proposed to pay the financing fee by
delivering to the guarantor unregistered shares of its common stock. On
March 29, 1996 the Board of Directors approved execution by the Company
of the bank credit agreement and the payment and delivery to the
guarantor of warrants to purchase 250,000 unregistered shares of common
stock of the Company through March 2006 for an exercise price of $.20
per share. Prior to approving execution of the agreement to obtain
additional bank credit and the related guarantee arrangements, the
Board of Directors retained an independent investment banking firm to
advise concerning the fairness, from a financial point of view, of
terms proposed to be paid for such guarantee. In the regular course of
its business, such investment banking firm renders advice and opinions
regarding mergers, acquisitions, financing arrangements, and cash and
share transactions for small capitalization natural resource companies.
At the meeting of the Board of Directors on March 29, 1996 such
independent investment bank delivered to the Board its written opinion
to the effect that the proposed transaction was fair, from a financial
point of view, to the Company and its stockholders.
Under the Company's new credit agreement, the Company is
required to make monthly payments of principal and interest, beginning
in May 1996, of approximately $10,400 through April 2000. As of
November 15, 1996, the Company had borrowed $277,000 and had $123,000
remaining available under the new credit agreement.
Page 12 of 22
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GOLDEN OIL COMPANY
In addition, the Company is paying down a line of credit with
a second commercial bank under which a principal amount of $35,000
remains owed at September 30, 1996. Effective March 1996, the Company
began reducing the principal amount borrowed under such line by $5,000
each month. No additional credit is available under such line.
(5) STRATEGIC CONSIDERATIONS
In earlier stages of its development, the Company's strategic
emphasis focused on oil and gas production and development,
particularly of the substantial potential value possibly recoverable by
waterflood of the South Dog Creek field in Oklahoma and of the high
quality but higher fixed cost production in the San Juan Basin, New
Mexico. More recently, a number of material adverse changes have
occurred in the industry. These adverse developments have affected in
particular small oil and gas companies whose operations were not
diversified into other business sectors. In response to the changed
operating environment, the Company is actively considering transactions
by which its operations may be further diversified. In this process the
Company may prune its oil and gas operations while strengthening its
activities in real estate, financial services or other sectors.
During late 1993 and 1994, the Company diversified outside of
the energy sector through acquisition of interests in the commercial
office building in Houston, Texas where the Company maintains its
principal offices. The Company is actively reviewing more substantial
transactions outside the energy sector. While such diversification
appears to offer more attractive long-term opportunities than are
offered by the oil and gas sector currently, the Company's ability to
arrange financing to enter into a material transaction is subject to a
number of other factors, certain of which are difficult to predict or
are beyond management's control. Such factors include the degree of the
Company's future success in development of its proved undeveloped
reserves; the respective future performance of oil and gas prices; and
the availability to the Company of financing for other business.
End of Notes to Consolidated Financial Statements.
Page 13 of 22
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GOLDEN OIL COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
The Company is a diversified enterprise whose current operations
emphasize oil and gas production and development. Over the last several years,
the Company has 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. To date, an investment has been made in the real estate
sector through the acquisition of a limited partnership interest in the
Company's headquarters office building in Houston, Texas. The Company is seeking
new operations and is actively reviewing transactions involving diversification
outside the energy sector.
The Company's operations during 1995 and to date during 1996 have been
funded primarily through internally generated funds from operating activities,
sale of scattered nonstrategic oil and gas properties, and from existing working
capital and borrowings under its credit facilities. During the second quarter of
1996, the Company completed negotiations to obtain new credit from a commercial
bank, the result of which increased its available borrowings to $400,000.
Management anticipates that the Company will meet ordinary operating needs for
working capital from internal sources. However, the Company will require
additional financing in order to complete development of its proved undeveloped
reserves, or to make acquisitions either within or outside of the oil and gas
sector. 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, a significant use
of proceeds will be to improve its current working capital position.
Page 14 of 22
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GOLDEN OIL COMPANY
In April 1996, the Company executed its new credit agreement which
increased its line of credit to $400,000 and extended the maturity schedule an
additional four years through April 2000, subject to certain conditions.
Proceeds from the additional financing are needed to refinance
short-term debt currently outstanding, to acquire additional interests in
Company-operated properties and to pay other payables. At March 31, 1996 the
Company had a working capital deficit of approximately $1,000,000. In order to
obtain the new financing the Company was required by the lending bank to provide
a personal guarantee from a principal officer of the Company for repayment in
full to the bank of all principal, interest and related costs. The Company's
management and the bank were concerned about factors including the Company's
lack of liquidity, the working capital deficit, and the threat of a repeat of
the oil price collapse such as occurred throughout the first half of 1994. As a
result of its financial position, the Company was not able to pay a cash fee for
the personal guarantee required by the lender as a condition of extending credit
to the Company as above. In lieu of cash payment, the Company proposed to pay
the financing fee by delivering to the guarantor unregistered shares of its
common stock. On March 29, 1996 the Board of Directors approved execution by the
Company of the bank credit agreement and the payment and delivery to the
guarantor of warrants to purchase 250,000 unregistered shares of common stock of
the Company through March 2006 for an exercise price of $.20 per share. Prior to
approving execution of the agreement to obtain additional bank credit and the
related guarantee arrangements, the Board of Directors retained an independent
investment banking firm to advise concerning the fairness, from a financial
point of view, of terms proposed to be paid for such guarantee. In the regular
course of its business, such investment banking firm renders advice and opinions
regarding mergers, acquisitions, financing arrangements, and cash and share
transactions for small capitalization natural resource companies. At the meeting
of the Board of Directors on March 29, 1996 such independent investment bank
delivered to the Board its written opinion to the effect that the proposed
transaction was fair, from a financial point of view, to the Company and its
stockholders.
Under the Company's new credit agreement, effective as of April 12,
1996, the Company is required to make monthly payments, including principal and
interest, beginning in May 1996 of approximately $10,400 through April 2000 and,
as of November 15, 1996, the Company had borrowed $277,000 and had $123,000
remaining available.
In addition, the Company is paying down a line of credit with a second
commercial bank under which $35,000 in principal amount remained owed at
September 30, 1996. Effective during March 1996, the Company began reducing the
principal amount borrowed under such line by $5,000 per month. There is no
additional credit available under such line.
Page 15 of 22
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GOLDEN OIL COMPANY
Cash flow generated by operating activities was $127,532 for the first
nine months of 1996 compared to $71,149 the first nine months of 1995. The
increase from the first nine months of 1995 primarily reflects an increase in
oil and gas revenues due to an increase in oil and gas prices and the Company
purchasing additional interests in Company-operated properties in New Mexico
partially offset by an increase in production costs as a result of such
purchases. Additionally, general and administrative expenses have decreased
through reductions in personnel and fees for outside services.
In order to plan Company operations and protect against sudden declines
in oil and gas prices, the Company has entered into a fixed price agreement with
one principal purchaser of its oil production in its South Dog Creek field in
Oklahoma. Under such agreement, the Company has contracted for the sale of
approximately fifty percent of its current average daily oil production at
prices, net of all transport charges or "basis differential" adjustments, of
$17.01 per barrel. Such agreement, which may be extended or modified, cover a
term through at least December 31, 1996. In the third quarter of 1996, the
Company entered into a second fixed price agreement with one principal purchaser
of its oil production in its San Juan Basin field in New Mexico. The Company has
contracted for the sale of approximately twenty-five percent of its average
daily oil production at prices, net of all transport charges or "basis
differential" adjustments, of $21.17 per barrel. The agreement covers a term
through June 30, 1997.
During the third quarter of 1996 the Company completed initial stage
field work for the waterflood development of its South Dog Creek field in Osage
County, Oklahoma. All of the Company's joint working interest owners have
elected to participate in such development and to pay their respective pro-rata
shares of the initial stage costs. At September 30, 1996 the Company has
expended approximately $165,000 to complete the initial phase of development.
Although substantially all of the field work has been completed, the Company
does not anticipate significant increases in production volumes from the South
Dog Creek field until the reservoir is repressurized by waterflood injection and
the field's response is evaluated. The Company will evaluate the field response
from the initial phase of development before proceeding with possible further
development. The Company's further development of the South Dog Creek field also
is subject to the availability of financing from third party sources. Until
actual production results are available there can be no determination as to the
availability of such financing.
Page 16 of 22
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GOLDEN OIL COMPANY
At September 30, 1996, the Company had a working capital deficit of
$997,836 compared to a working capital deficit of $973,143 at December 31, 1995,
and a current ratio of .34 to 1.00 as of September 30, 1996 compared to a
current ratio of .34 to 1.00 as of December 31, 1995. The increase in the
working capital deficit at September 30, 1996 primarily reflects payables
associated with the increased capital expenditures on the waterflood project
partially offset by a reduction in receivables from working interest
participants.
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 1980s 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 participation from industry partners so
as to reduce the amount of the Company's required drilling commitments.
Page 17 of 22
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GOLDEN OIL COMPANY
RESULTS OF OPERATIONS
Comparison of the three months ended September 30, 1996 with the three months
ended September 30, 1995.
REVENUES
Revenues from oil and gas production increased from $293,631 during the
third quarter of 1995 to $477,313 in the comparable 1996 quarter, an increase of
$183,682. The increase is primarily attributable to an increase in average oil
price of $2.00 per barrel from $16.89 per barrel during the third quarter of
1995 to $18.89 per barrel during the third quarter of 1996. Additionally,
average gas prices increased $.25 per mcf from $.94 per mcf during the third
quarter of 1995 to $1.19 per mcf during the third quarter of 1996. In addition,
production volume increased 5,800 barrels and 27,000 mcf in the third quarter of
1996 compared to the same period in 1995 primarily due to the Company purchasing
additional interests in Company-operated properties in New Mexico.
Other revenue was $7,760 for the third quarter of 1996 compared to
$8,500 for the comparable period in 1995, primarily due to a decrease in
gathering and operating fees resulting from the shut-in of certain marginally
producing wells in the San Juan Basin field in New Mexico.
COSTS AND EXPENSES
Oil and gas production costs increased by $91,915 from $203,989 for the
third quarter of 1995 to $295,904 for the same period in 1996. Such increases
are primarily due to the production costs associated with the purchases of
additional interests in Company-operated properties. General and administrative
expenses decreased by $3,370 from $127,245 for the third quarter of 1995 to
$123,875 for the same period in 1996.
Depreciation, depletion and amortization expenses decreased from
$131,045 for the third quarter of 1995 to $114,730 for the comparable period of
1996.
Loss on sale of property and equipment during the third quarter of 1996
of $100 reflects the sale of field equipment. Property acquisition costs during
the third quarter of 1995 of $66,142 reflects the writedown of deferred property
acquisition costs related to the proposed purchase of properties in New Mexico.
Interest expense increased by $636 from $6,292 for the third quarter of 1995 to
$6,928 for the same period in 1996 due to an increase in average outstanding
borrowings.
Primarily reflecting the factors discussed above, the Company reported
a net loss for the three months ended September 30, 1996 of $59,597 compared to
a net loss of $234,281 for the same period of 1995.
Page 18 of 22
<PAGE>
GOLDEN OIL COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 WITH THE NINE MONTHS
ENDED SEPTEMBER 30, 1995.
REVENUES
Revenues from oil and gas production increased from $929,677 during the
first nine months of 1995 to $1,071,882 in the first nine months of 1996, an
increase of $142,205. The increase is primarily attributable to an increase in
average oil price of $1.16 per barrel from $17.32 per barrel during the first
nine months of 1995 to $18.48 during the first nine months of 1996.
Additionally, average gas prices increased $.14 per mcf from $.94 during the
first nine months of 1995 to $1.08 for the same period in 1996. Overall, gas
production volumes remained relatively constant and oil production volumes
increased 3,300 barrels in the first nine months of 1996 compared to the same
period in 1995 resulting from the Company purchasing additional interests in
Company-operated properties in New Mexico in the third quarter of 1996.
Other revenue was $22,473 for the first nine months of 1996 compared to
$25,400 for the comparable period in 1995, primarily due to a decrease in
gathering and operating fees resulting from the shut-in of certain marginally
producing wells in the San Juan Basin field in New Mexico.
COSTS AND EXPENSES
Oil and gas production costs increased by $80,574 from $608,495 for the
first nine months of 1995 to $689,069 for the same period in 1996. Such increase
is primarily due to the production costs associated with the purchases of
additional interests in Company-operated properties. General and administrative
expenses decreased by $58,836 from $314,852 for the first nine months of 1995 to
$256,016 for the same period in 1996. The decrease is primarily attributable to
continuing reductions in personnel and corporate overhead.
Depreciation, depletion and amortization expenses decreased from
$391,455 for the first nine months of 1995 to $316,696 for the comparable period
of 1996.
Gain on property and equipment during the first nine months of 1995 of
$8,337 reflects the sale of a certain scattered, nonstrategic well. Property
acquisition cost during the first nine months of 1995 of $66,142 is due to the
writedown in the third quarter of deferred property acquisition costs related to
the proposed purchase of properties in New Mexico. Interest expense decreased by
$7,129 from $25,303 for the first nine months of 1995 to $18,174 for the same
period in 1996 due to reductions in average principal amounts outstanding for
the corresponding periods.
Page 19 of 22
<PAGE>
GOLDEN OIL COMPANY
As discussed more fully in Note 1 to the Consolidated Financial
Statements, the Company recognized a nonrecurring noncash charge for the
cumulative effect of a change in the accounting method for depletion of $39,770.
Primarily reflecting the factors discussed above, the Company reported
a net loss for the nine months ended September 30, 1996 of $235,341 compared to
a net loss of $446,573 for the same period of 1995.
Page 20 of 22
<PAGE>
GOLDEN OIL COMPANY
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (MATERIAL EVENT).
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
Page 21 of 22
<PAGE>
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: November 14, 1996 By: /S/ RALPH T. MCELVENNY, JR.
Chief Executive Officer
By: /S/ JEFFREY V. HOUSTON
Chief Financial and Accounting
Officer
Page 22 of 22
<TABLE> <S> <C>
<ARTICLE> 5
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 54,944
<SECURITIES> 24,264
<RECEIVABLES> 377,285
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 510,274
<PP&E> 6,852,690
<DEPRECIATION> (3,810,879)
<TOTAL-ASSETS> 3,745,269
<CURRENT-LIABILITIES> 1,508,110
<BONDS> 0
0
0
<COMMON> 14,466
<OTHER-SE> 2,037,282
<TOTAL-LIABILITY-AND-EQUITY> 3,745,269
<SALES> 1,071,882
<TOTAL-REVENUES> 1,094,355
<CGS> 689,069
<TOTAL-COSTS> 1,261,781
<OTHER-EXPENSES> 49,741
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,174
<INCOME-PRETAX> (235,341)
<INCOME-TAX> 0
<INCOME-CONTINUING> (235,341)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (235,341)
<EPS-PRIMARY> (.17)
<EPS-DILUTED> (.17)
</TABLE>
