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, 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
(State or other jurisdiction of incorporation
or organization)
84-0836562
(I.R.S. Employer 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 May 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 or 19
CONTENTS
PAGE
----
PART I. FINANCIAL INFORMATION
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.................. 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................... 17
Page 2 of 19
GOLDEN OIL COMPANY
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1996 1995
----------- -----------
Revenues:
Oil and gas production ........... $ 277,657 $ 327,353
Other ............................ 7,006 8,220
----------- -----------
Total revenues .............. 284,663 335,573
----------- -----------
Costs and expenses:
Production costs ................. 192,471 198,586
Depreciation, depletion and
amortization ................... 102,156 130,189
General and administrative ....... 49,842 92,001
----------- -----------
Total costs and expenses .... 344,469 420,776
----------- -----------
Gain (loss) on sale of property,
equipment and other assets ....... -- 8,000
Equity in net loss of investments ... (2,800) --
Interest income ..................... 312 --
Interest expense .................... (4,863) (9,216)
Other income (expense) .............. 334 (1,288)
----------- -----------
Net earnings (loss) before cumulative
effect of accounting change ...... (66,823) (87,707)
Cumulative effect of accounting
change (Note 1) .................. (39,770) --
----------- -----------
Net earnings (loss) ................. $ (106,593) $ (87,707)
=========== ===========
Net earnings (loss) per common share $ (.07) $ (.06)
=========== ===========
Weighted average number of
common shares and common
share equivalents outstanding . 1,424,291 1,404,291
=========== ===========
See Notes to Consolidated Financial Statements.
GOLDEN OIL COMPANY
Page 3 of 19
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, DECEMBER 31,
1996 1995
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents ..................... $ 72,070 $ 67,599
Short-term investments ........................ 24,264 24,264
Accounts receivable, net ...................... 297,158 388,695
Prepaid expenses and other .................... 22,634 29,227
----------- -----------
Total current assets ..................... 416,126 509,785
----------- -----------
Property and equipment, at cost:
Oil and gas properties
(using the successful efforts
method of accounting)
Producing properties .................... 5,875,819 5,847,201
Non-producing properties ................. 105,000 105,000
----------- -----------
Total oil and gas properties ............. 5,980,819 5,952,201
----------- -----------
Pipeline, field and other well
equipment ..................................... 268,305 267,743
Other property and equipment ..................... 461,125 461,125
----------- -----------
6,710,249 6,681,069
Less accumulated depreciation,
depletion and amortization .................... (3,596,339) (3,454,413)
----------- -----------
Net property and equipment .................... 3,113,910 3,226,656
----------- -----------
Investments in commercial realty ................. 203,048 205,848
Other assets ..................................... 1,481 1,481
----------- -----------
$ 3,734,565 $ 3,943,770
=========== ===========
(Continued)
See Notes to Consolidated Financial Statements.
Page 4 of 19
GOLDEN OIL COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(UNAUDITED)
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and
current portion of long-term debt ..............$ 134,133 $ 122,079
Accounts payable ................................. 1,174,347 1,234,474
Accrued expenses ................................. 106,462 126,375
----------- ------------
Total current liabilities ................... 1,414,942 1,482,928
----------- ------------
Long -term debt ..................................... 51,914 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 March 31, 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 March 31,1996
and December 31, 1995 .......................... 223 223
Additional paid-in capital .......................... 13,839,479 13,839,479
Accumulated deficit .................................(11,673,449) (11,566,856)
----------- ------------
Total stockholders' equity .................. 2,180,496 2,287,089
----------- ------------
$ 3,734,565 $ 3,943,770
=========== ============
See Notes to Consolidated Financial Statements
Page 5 of 19
GOLDEN OIL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1996 1995
--------- ---------
Cash flows from operating activities:
Net earnings (loss) ............................. $(106,593) $ (87,707)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion
and amortization ............................ 102,156 130,189
Equity in net loss of
investment in commercial realty ............. 2,800 2,012
(Gain) loss on sale of property
and equipment ............................... -- (8,000)
Cumulative effect of accounting
change ...................................... 39,770 --
Changes in components of working capital:
(Increase) decrease in accounts
receivable, net ........................... 91,537 19,541
(Increase) decrease in prepaid
expenses and other ........................ 6,593 (26,619)
Increase (decrease) in accounts
payable ................................... (60,127) (62,964)
Increase (decrease) in accrued
expenses .................................. (19,913) 1,742
--------- ---------
Net cash provided by (used
in) operating activities ............... $ 56,223 $ (31,806)
--------- ---------
(Continued)
See Notes to Consolidated Financial Statements.
Page 6 of 19
GOLDEN OIL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
THREE MONTHS ENDED
MARCH 31,
1996 1995
-------- --------
Cash flows from investing activities:
Proceeds from sale of property
and equipment .......................... $ -- $ 8,000
Additions to oil and gas properties ...... (28,618) --
Additions of other property and
equipment .............................. (562) (5,559)
-------- --------
Net cash provided by (used in)
investing activities ................... $(29,180) $ 2,441
-------- --------
Cash flows from financing activities:
Payment of long-term debt ................ (22,572) (55,500)
-------- --------
Net cash provided by (used in)
financing activities ................... $(22,572) $(55,500)
-------- --------
Net increase (decrease) in cash and
cash equivalents ......................... 4,471 (84,865)
Cash and cash equivalents at
beginning of period ...................... 67,599 92,609
-------- --------
Cash and cash equivalents at
end of period ............................ $ 72,070 $ 7,744
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest expense was $6,661 and $4,075 for the three
months ended March 31, 1996 and 1995, respectively. No cash was paid for income
taxes during the same corresponding periods.
See Notes to Consolidated Financial Statements.
Page 7 of 19
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 8 of 19
GOLDEN OIL COMPANY
ACCOUNTS RECEIVABLE
Amounts shown as accounts receivable are net of $73,118 at
March 31, 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
March 31, 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 9 of 19
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 proceeded with
field work for waterflood development of its South Dog Creek field in
Osage County, Oklahoma. All of the Company's joint working interest
owners have elected to join in such development and to pay their
respective pro-rata shares of initial stage costs, the capital costs of
which are expected to aggregate approximately $135,000. Although field
work has begun, the Company does not anticipate significant increases
in production volumes from the South Dog Creek field until further
development occurs. Upon completion of the initial phase of
development, the Company will evaluate the field response before
proceeding with possible further development. Also, further development
of the South Dog Creek field is subject to the availability of
financing from third party sources. Until actual production results are
available there can be no assurance as to the availability of such
financing.
Page 10 of 19
GOLDEN OIL COMPANY
(4) INDEBTEDNESS
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. Subsequent to the close of the first quarter of 1996 the Company
negotiated a new credit agreement providing for increase of its
borrowings from $125,000 to $400,000 and further extended the maturity
schedule 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 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
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, including the
working capital deficit, as well as the threat of any possible repeat
of an oil price collapse such as occurred in the first half of 1994. As
a result of such factors the Company was not able to pay a guarantee
fee in cash, and instead proposed to offer unregistered shares of its
Company stock. On March 29, 1996 the Board of Directors approved
execution by the Company of 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 voting to approve the new
bank credit and the guarantee arrangement, the Board of Directors
retained an independent investment banking firm to advise concerning
the fairness of terms proposed 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 capital natural resource
companies. At the meeting on March 29, 1996 the Board of Directors were
delivered a 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 May 15, 1996, the
principal balance was approximately $175,000.
Page 11 of 19
GOLDEN OIL COMPANY
In addition, the Company is paying down a line of credit with
a second commercial bank under which $70,000 principal amount remains
owed. Effective during 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
the Company's South Dog Creek field in Oklahoma. More recently, a
number of material adverse changes have occurred in the industry. These
have particularly affected small companies having oil and gas
operations which were not diversified or offset by operations in
another sector. In response to its changed operating environment, the
Company is giving active consideration to diversification into other
business sectors.
The Company has completed extensive engineering and regulatory
work related to the waterflood development of the South Dog Creek
field. Also during late 1993 and 1994, the Company diversified outside
of the energy sector through acquisition of limited 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 involves a number of factors. These include the degree of
the Company's future success in development of its proved undeveloped
reserves; the performance of oil and gas prices, respectively; and the
availability to the Company of alternative opportunities to redeploy it
capital.
End of Notes to Financial Statements.
Page 12 of 19
GOLDEN OIL COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
Golden Oil Company is a diversified enterprise whose current operations
emphasize oil and gas production and development. Over the last several years,
the Company 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. However, the Company is actively
reviewing more substantial transactions 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, existing working capital,
and borrowings under its credit facilities. During the second quarter of 1996,
the Company increased its line of credit under an existing bank facility from
$150,000 to $400,000. Management anticipates that the Company will meet ordinary
operating needs for working capital from internal sources. However, 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 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 its current working capital position.
Page 13 of 19
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. Subsequent to the close of the first
quarter of 1996 the Company negotiated a new credit agreement providing for
increase of its borrowings from $125,000 to $400,000 and further extended the
maturity schedule 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 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 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,
including the working capital deficit, as well as the threat of any possible
repeat of an oil price collapse such as occurred in the first half of 1994. As a
result of such factors the Company was not able to pay a guarantee fee in cash,
and instead proposed to offer unregistered shares of its Company stock. On March
29, 1996 the Board of Directors approved execution by the Company of 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 voting to approve the new bank
credit and the guarantee arrangement, the Board of Directors retained an
independent investment banking firm to advise concerning the fairness of terms
proposed 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
capital natural resource companies. At the meeting on March 29, 1996 the Board
of Directors were delivered a 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 May 15, 1996, the principal balance was approximately $175,000.
In addition, the Company is paying down a line of credit with a second
commercial bank under which $70,000 principal amount remains owed. Effective
during 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.
Page 14 of 19
GOLDEN OIL COMPANY
Cash flow generated by operating activities was $56,223 for the first
three months of 1996 compared to ($31,806) the first three months of 1995. The
increase from the first three months of 1995 primarily reflects reductions in
field operating expenses and reductions in general and administrative expenses
partially offset by a decline in production revenues due to low production on
certain properties in the first three months of 1996 from the first three months
of 1995. In addition, the Company continues to make reductions in corporate
overhead, both through reductions in personnel and fees for outside services.
During the first quarter of 1996, the Company entered into fixed price
arrangements at an average net price of approximately $17.01 per barrel on
approximately fifty percent of its oil production. The Company believes revenues
generated under the fixed price arrangements and the effect of reductions in
corporate overhead during the past year will generate cash flows sufficient to
meet its operating and capital requirements.
During the second quarter of 1996 the Company proceeded with field work
for waterflood development of its South Dog Creek field in Osage County,
Oklahoma. All of the Company's joint working interest owners have elected to
join in such development and to pay their respective pro-rata shares of initial
stage costs, the capital costs of which are expected to aggregate approximately
$135,000. Although field work has begun, the Company does not anticipate
significant increases in production volumes from the South Dog Creek field until
further development occurs. Upon completion of the initial phase of development,
the Company will evaluate the field response before proceeding with possible
further development. Also, further development of the South Dog Creek field is
subject to the availability of financing from third party sources. Until actual
production results are available there can be no assurance as to the
availability of such financing.
At March 31, 1996, the Company had a working capital deficit of
$998,816 compared to a working capital deficit of $973,143 at December 31,1995,
and a current ratio of .29 to 1.00 as of March 31, 1996 compared to a current
ratio of .34 to 1.00 as of December 31, 1995. The increase in the working
capital deficit at March 31, 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 15 of 19
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 16 of 19
GOLDEN OIL COMPANY
RESULTS OF OPERATIONS
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1996 WITH THE THREE MONTHS ENDED
MARCH 31, 1995.
REVENUES
Revenues from oil and gas production decreased from $327,353 during the
first quarter of 1995 to $277,657 in the comparable 1996 quarter, a decrease of
$49,696. 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 are expected to return to normal levels in the second quarter of 1996
upon completion of initial fieldwork related to the waterflood project.
Other revenue was $7,006 for the first quarter of 1996 compared to
$8,220 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 $6,115 from $198,586 for the
first quarter of 1995 to $192,471 for the same period in 1996. General and
administrative expenses decreased by $42,159 from $92,001 for the first quarter
of 1995 to $49,842 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
$130,189 for the first quarter of 1995 to $102,156 for the comparable period of
1996.
Loss on property and equipment during the first quarter of 1995 of
$8,000 reflects the sale of certain scattered, nonstrategic wells. Interest
expense decreased by $4,353 from $9,216 for the first quarter of 1995 to $4,863
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 three months ended March 31, 1996 of $106,593 compared to a
net loss of $87,707 for the same period of 1995.
Page 17 of 19
GOLDEN OIL COMPANY
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 28.4. Letter from independent accountants
concerning accounting change.
(b) Reports on Form 8-K
None.
Page 18 of 19
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 15, 1996 By:
Chief Executive Officer
By:
Chief Financial and Accounting Officer
Page 19 of 19
EXHIBIT 28.4
Golden Oil Company
550 Post Oak Boulevard
Suite 550
Houston, Texas 77027
We are providing this letter to you for inclusion as an exhibit to your
Form 10-Q filing pursuant to Item 601 of Regulation S-K.
We have read management's justification for the change in accounting,
related to calculating unit-of-production depletion of its oil and gas assets
from an individual lease basis to an aggregation of wells by a common geological
structure, contained in the Company's Form 10-Q for the quarter ended March 31,
1996. Based on our reading of the data and discussions with Company officials of
the business judgment and business planning factors relating to the change, we
believe management's justification to be reasonable. Accordingly, in reliance on
management's determination as regards elements of business judgment and business
planning, we concur that the newly adopted accounting principle described above
is preferable in the Company's circumstances to the method previously applied.
We have not audited any financial statements of Golden Oil Company as
of any date or for any period subsequent to December 31, 1995, nor have we
audited the application of the change in accounting principle disclosed in Form
10-Q of Golden Oil Company for the three months ended March 31, 1996;
accordingly, our comments are subject to revision on completion of an audit of
the financial statements that include the accounting change.
COOPERS & LYBRAND, L.L.P.
Houston, Texas
May 15, 1996
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