================================================================================
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 JUNE 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 of incorporation (I.R.S. Employer
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 August 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 21
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.............................. 20
Page 2 of 21
GOLDEN OIL COMPANY
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
JUNE 30,
----------------------------
1996 1995
----------- -----------
Revenues:
Oil and gas production .................... $ 316,912 $ 308,693
Other ..................................... 7,707 8,680
----------- -----------
Total revenues ....................... 324,619 317,373
----------- -----------
Costs and expenses:
Production costs .......................... 200,694 205,920
Depreciation, depletion and
amortization ............................ 99,810 130,221
General and administrative ................ 82,299 95,606
----------- -----------
Total costs and expenses ............. 382,803 431,747
----------- -----------
Gain (loss) on sale of property,
equipment and other assets ................ -- 337
Equity in net loss of investments ............ (6,954) --
Interest income .............................. 314 --
Interest expense ............................. (6,383) (9,795)
Other income (expense) ....................... 2,056 (753)
----------- -----------
Net earnings (loss) .......................... $ (69,151) $ (124,585)
=========== ===========
Net earnings (loss) per common share ......... $ (.05) $ (.09)
=========== ===========
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 21
GOLDEN OIL COMPANY
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
----------------------------
1996 1995
----------- -----------
Revenues:
Oil and gas production .................... $ 594,569 $ 636,046
Other ..................................... 14,713 16,900
----------- -----------
Total revenues ....................... 609,282 652,946
----------- -----------
Costs and expenses:
Production costs .......................... 393,165 404,506
Depreciation, depletion and
amortization ............................ 201,966 260,410
General and administrative ................ 132,141 187,607
----------- -----------
Total costs and expenses ............. 727,272 852,523
----------- -----------
Gain (loss) on sale of property,
equipment and other assets ................ -- 8,337
Equity in net loss of investments ............ (9,754) --
Interest income .............................. 626 --
Interest expense ............................. (11,246) (19,011)
Other income (expense) ....................... 2,390 (2,041)
----------- -----------
Net earnings (loss) before cumulative
effect of accounting change ............... (135,974) (212,292)
Cumulative effect of accounting
change (Note 1) ........................... (39,770) --
----------- -----------
Net earnings (loss) .......................... $ (175,744) $ (212,292)
=========== ===========
Net earnings (loss) per common share ......... $ (.12) $ (.15)
=========== ===========
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 21
GOLDEN OIL COMPANY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
JUNE 30, DECEMBER 31,
1996 1995
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents ................. $ 16,013 $ 67,599
Short-term investments .................... 24,264 24,264
Accounts receivable, net .................. 358,549 388,695
Prepaid expenses and other ................ 33,309 29,227
----------- -----------
Total current assets ................. 432,135 509,785
Property and equipment, at cost:
Oil and gas properties
(using the successful efforts
method of accounting)
Producing properties ................ 5,901,428 5,847,201
Non-producing properties ............. 105,000 105,000
----------- -----------
Total oil and gas properties ......... 6,006,428 5,952,201
----------- -----------
Pipeline, field and other well
equipment ................................. 268,305 267,743
Other property and equipment ................. 461,125 461,125
----------- -----------
6,735,858 6,681,069
Less accumulated depreciation,
depletion and amortization ................ (3,696,149) (3,454,413)
----------- -----------
Net property and equipment ................ 3,039,709 3,226,656
----------- -----------
Investments in commercial realty ............. 196,094 205,848
Other assets ................................. 1,481 1,481
----------- -----------
$ 3,669,419 $ 3,943,770
=========== ===========
(Continued)
See Notes to Consolidated Financial Statements.
Page 5 of 21
GOLDEN OIL COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and
current portion of long-term debt ......... $ 161,048 $ 122,079
Accounts payable ............................ 1,139,546 1,234,474
Accrued expenses ............................ 109,923 126,375
------------ ------------
Total current liabilities .............. 1,410,517 1,482,928
------------ ------------
Long term debt ................................. 60,344 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 June 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
June 30,1996 and December 31, 1995 ........ 223 223
Additional paid-in capital ..................... 13,839,479 13,839,479
Accumulated deficit ............................ (11,742,600) (11,566,856)
------------ ------------
Total stockholders' equity ............. 2,111,345 2,287,089
------------ ------------
$ 3,669,419 $ 3,943,770
============ ============
See Notes to Consolidated Financial Statements.
Page 6 of 21
GOLDEN OIL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
-----------------------
1996 1995
--------- ---------
Cash flows from operating activities:
Net earnings (loss) ............................. $(175,744) $(212,292)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion
and amortization ............................ 201,966 260,410
Equity in net loss of
investment in commercial realty ............. 9,754 4,025
(Gain) loss on sale of property
and equipment ............................... -- (8,337)
Cumulative effect of accounting
change ...................................... 39,770 --
Changes in components of working capital:
(Increase) decrease in accounts
receivable, net ........................... 30,146 30,680
(Increase) decrease in prepaid
expenses and other ........................ (4,082) (7,325)
Increase (decrease) in accounts
payable ................................... (94,928) 65,119
Increase (decrease) in accrued
expenses .................................. (16,452) (19,257)
--------- ---------
Net cash provided by (used
in) operating activities .................. $ (9,570) 113,023
--------- ---------
(Continued)
See Notes to Consolidated Financial Statements.
Page 7 of 21
GOLDEN OIL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 30,
------------------------
1996 1995
-------- ---------
Cash flows from investing activities:
Proceeds from sale of property
and equipment .............................. $ -- $ 9,500
Additions to oil and gas properties .......... (54,227) (12,277)
Additions of other property and
equipment .................................. (562) (5,550)
Decrease (increase) in short-term
investments ................................ -- (502)
-------- ---------
Net cash provided by (used in)
investing activities ....................... $(54,789) $ (8,829)
-------- ---------
Cash flows from financing activities:
Proceeds from issuance of
long-term debt ............................. 67,811 --
Payment of long-term debt .................... (55,038) (111,000)
-------- ---------
Net cash provided by (used in)
financing activities ....................... $ 12,773 $(111,000)
-------- ---------
Net increase (decrease) in cash and
cash equivalents ............................. (51,586) (6,806)
Cash and cash equivalents at
beginning of period .......................... 67,599 92,609
-------- ---------
Cash and cash equivalents at
end of period ................................ $ 16,013 $ 85,803
======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest expense was $12,498 and $24,722 for the six months
ended June 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 21
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 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, 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 21
GOLDEN OIL COMPANY
ACCOUNTS RECEIVABLE
Amounts shown as accounts receivable are net of $73,118 at June 30,
1996 and 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 June 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. The net effect of
the change in method resulted in 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 21
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 as experienced in late 1993 and the first
half of 1994, during the first quarter of 1996 the Company entered into
fixed price agreements with one principal purchaser of its oil production.
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.
(3) DEVELOPMENT OF SOUTH DOG CREEK FIELD
During the second quarter of 1996 the Company continued with 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 June 30, 1996 the Company
has spent approximately $120,000 of an anticipated aggregate cost of
approximately $150,000 to complete the initial phase of development.
Although a substantial portion 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 11 of 21
GOLDEN OIL COMPANY
(4) INDEBTEDNESS
During April 1995 the Company extended until November 1995 the
maturity date of its line of credit with a commercial bank, and thereafter
began making payments, including principal and interest, of approximately
$7,000 per month scheduled through November 1997. Subsequent to the close
of the first quarter of 1996 the Company entered into a new credit
agreement with a commercial bank which provides an increase of the
Company's borrowings from $150,000 up to $400,000 and extends the maturity
schedule of its 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 of the proposed financing. Instead, 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 August 15, 1996, the
Company had borrowed $222,000 and had $178,000 remaining available under
the new credit agreement.
Page 12 of 21
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 $50,000 remains
owed at June 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 maybe 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 Financial Statements.
Page 13 of 21
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, as a result of which the Company 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 21
GOLDEN OIL COMPANY
In April 1995 the Company extended to November 1995 the maturity date of
its line of credit with a commercial bank, and thereafter began making monthly
payments, including principal and interest of approximately $7,000 each month
scheduled through November 1997. Under its new credit agreement the Company
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 of the proposed financing. Instead, 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 August 15, 1996, the Company had borrowed $222,000 and had $178,000
remaining available.
In addition, the Company is paying down a line of credit with a second
commercial bank under which $50,000 in principal amount remained owed at June
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 21
GOLDEN OIL COMPANY
Cash flow generated by operating activities was ($9,570) for the first six
months of 1996 compared to $113,023 the first six months of 1995. The decrease
from the first six months of 1995 primarily reflects the Company paying down
their vendor payables, partially offset by reductions in general and
administrative expenses 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 as experienced in late 1993 and the first half of 1994,
during the first quarter of 1996 the Company entered into fixed price agreements
with one principal purchaser of its oil production. 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.
During the second quarter of 1996 the Company continued with 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 June 30, 1996 the Company has spent approximately
$120,000 of an anticipated aggregate cost of approximately $150,000 to complete
the initial phase of development. Although a substantial portion 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.
At June 30, 1996, the Company had a working capital deficit of $978,382
compared to a working capital deficit of $973,143 at December 31, 1995, and a
current ratio of .31 to 1.00 as of June 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 June 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.
Page 16 of 21
GOLDEN OIL COMPANY
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's from 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.
Page 17 of 21
GOLDEN OIL COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1996 WITH THE THREE MONTHS ENDED
JUNE 30, 1995.
REVENUES
Revenues from oil and gas production increased from $308,693 during the
second quarter of 1995 to $316,912 in the comparable 1996 quarter, a increase of
$8,219. The increase is primarily attributable to an increase in oil price of
$1.68 per barrel from $17.14 per barrel during the second quarter of 1995 to
$18.82 per barrel during the second quarter of 1996. The increase in oil price
was partially offset by a slight decline in the average production volume due to
the Company performing fieldwork in its San Juan Basin field in New Mexico
during the second quarter of 1996.
Other revenue was $7,707 for the second quarter of 1996 compared to $8,680
for the comparable period in 1995, primarily due to a decrease in gathering and
operating fees.
COSTS AND EXPENSES
Oil and gas production costs decreased by $5,226 from $205,920 for the
second quarter of 1995 to $200,694 for the same period in 1996. General and
administrative expenses decreased by $13,307 from $95,606 for the second quarter
of 1995 to $82,299 for the same period in 1996. The decrease is primarily
attributable to reductions in personnel and corporate overhead.
Depreciation, depletion and amortization expenses decreased from $130,221
for the second quarter of 1995 to $99,810 for the comparable period of 1996.
Gain on sale of property and equipment during the second quarter of 1995
of $337 reflects the sale of field equipment. Interest expense decreased by
$3,412 from $9,795 for the second quarter of 1995 to $6,383 for the same period
in 1996 due to reductions in average amounts outstanding under its borrowing
arrangements.
Primarily reflecting the factors discussed above, the Company reported a
net loss for the three months ended June 30, 1996 of $69,151 compared to a net
loss of $124,585 for the same period of 1995.
Page 18 of 21
GOLDEN OIL COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 WITH THE SIX MONTHS ENDED JUNE
30, 1995.
REVENUES
Revenues from oil and gas production decreased from $636,046 during the
first six months of 1995 to $594,569 in the first six months of 1996, a decrease
of $41,477. The decrease is primarily attributable to a temporary decline in
production volumes on certain properties resulting from the Company performing
field work for waterflood development of its South Dog Creek field in Osage
County, Oklahoma during the first quarter of 1996. Production volumes from these
properties have returned to normal levels in the second quarter of 1996 upon
completion of well workovers related to the waterflood project.
Other revenue was $14,713 for the first six months of 1996 compared to
$16,900 for the comparable period in 1995, primarily due to a decrease in
gathering and operating fees.
COSTS AND EXPENSES
Oil and gas production costs decreased by $11,341 from $404,506 for the
first six months of 1995 to $393,165 for the same period in 1996. General and
administrative expenses decreased by $55,466 from $187,607 for the first six
months of 1995 to $132,141 for the same period in 1996. The decrease is
primarily attributable to reductions in personnel and corporate overhead.
Depreciation, depletion and amortization expenses decreased from $260,410
for the first six months of 1995 to $201,966 for the comparable period of 1996.
Gain on property and equipment during the first six months of 1995 of
$8,337 reflects the sale of a certain scattered, nonstrategic well. Interest
expense decreased by $7,765 from $19,011 for the first six months of 1995 to
$11,246 for the same period in 1996 due to reductions in principal amounts
outstanding.
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 six months ended June 30, 1996 of $175,744 compared to a net
loss of $212,292 for the same period of 1995.
Page 19 of 21
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 20 of 21
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: August 14, 1996 By: /s/ RALPH T. MCELVENNY, JR.
Ralph T. McElvenny, Jr.
Chief Executive Officer
By: /s/ JEFFERY V. HOUSTON
Jeffery V. Houston
Chief Financial and Accounting Officer
Page 21 of 21
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 16,013
<SECURITIES> 24,264
<RECEIVABLES> 358,549
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 432,135
<PP&E> 6,735,858
<DEPRECIATION> (3,696,149)
<TOTAL-ASSETS> 3,669,419
<CURRENT-LIABILITIES> 1,410,517
<BONDS> 0
0
0
<COMMON> 14,466
<OTHER-SE> 2,096,879
<TOTAL-LIABILITY-AND-EQUITY> 3,669,419
<SALES> 594,569
<TOTAL-REVENUES> 609,282
<CGS> 393,165
<TOTAL-COSTS> 727,272
<OTHER-EXPENSES> 46,508
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,246
<INCOME-PRETAX> (175,744)
<INCOME-TAX> 0
<INCOME-CONTINUING> (175,744)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (175,744)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
