SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended:
September 30, 1997 Commission File No. 0-9675
GREAT NORTHERN GAS COMPANY
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 38-1900351
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
621 Seventeenth Street
Suite 2150
Denver, Colorado 80293
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 295-0938
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 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
----- -----
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock as of the latest practicable date:
Shares As of Close of
Title of Class Outstanding Business on
- -------------- ----------- -----------
Common Stock,
$.01 Par Value 3,357,584 November 10, 1997
Page 1 of 10 sequentially numbered pages.
<PAGE>
GREAT NORTHERN GAS COMPANY
INDEX
PART I. FINANCIAL INFORMATION Page No. (s)
------------
Balance Sheets as of September 30, 1997
and December 31, 1996 (Unaudited) 3-4
Statements of Operations for the Three
Months Ended September 30, 1997 and 1996 (Unaudited) 5
Statements of Earnings for the Nine
Months Ended September 30, 1997 and 1996 (Unaudited) 6
Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996 (Unaudited) 7
Notes to Unaudited Financial Statements for the Nine
Months Ended September 30, 1997 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION 10
SIGNATURES 10
2
<PAGE>
GREAT NORTHERN GAS COMPANY
BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
ASSETS
September 30, December 31,
1997 1996
----------- ------------
CURRENT ASSETS:
Cash and cash equivalents $1,948,756 $1,404,099
Short term investments -- 242,474
Accounts receivable:
Oil and gas sales 72,814 132,054
Joint interest billings 109,182 116,005
Income taxes -- 6,075
Accrued interest receivable -- 7,245
Other 9,619 9,619
---------- ----------
Total current assets 2,140,371 1,917,571
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, accounted for
using the full cost method 2,383,314 3,327,289
Furniture, fixtures and automobile 60,104 57,660
---------- ----------
2,443,418 3,384,949
Less accumulated depreciation, depletion
and amortization 797,781 1,224,116
---------- ----------
Net property and equipment 1,645,637 2,160,833
---------- ----------
$3,786,008 $4,078,404
========== ==========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
3
<PAGE>
GREAT NORTHERN GAS COMPANY
BALANCE SHEETS - CONTINUED
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 30, December 31,
1997 1996
------------ -------------
CURRENT LIABILITIES:
Accounts payable:
Trade $ 42,458 $ 20,410
Oil and gas sales 92,466 115,866
Ad valorem taxes 65,885 51,840
------------ -------------
Total current liabilities 200,809 188,116
------------ -------------
DEFERRED INCOME TAXES 205,383 172,167
------------ -------------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value;
authorized 50,000,000 shares,
issued 3,357,584 shares at
September 30, 1997 and 3,603,313
shares at December 31, 1996 33,576 36,033
Additional paid-in-capital 39,102,563 39,502,517
Accumulated deficit (35,756,323) (35,820,429)
----------- -----------
Total stockholders' equity 3,379,816 3,718,121
------------ ------------
$ 3,786,008 $ 4,078,404
=========== ============
The accompanying notes to unaudited financial statements are an
integral part of these statements.
4
<PAGE>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
Three Months Ended September 30,
--------------------------------
1997 1996
----------- ------------
REVENUES:
Oil and gas sales $ 132,507 $ 172,604
Interest and other income 35,491 36,943
----------- -----------
167,998 209,547
----------- -----------
EXPENSES:
Lease operating 54,785 149,199
Production taxes 11,112 12,847
Depreciation, depletion and amortization 45,963 35,244
General and administrative 94,347 99,708
----------- -----------
206,207 296,998
----------- -----------
LOSS BEFORE INCOME TAXES (38,209) (87,451)
INCOME TAX BENEFIT 14,520 33,231
----------- -----------
NET LOSS $ (23,689) $ (54,220)
=========== ===========
LOSS PER COMMON SHARE $ (.01) $ (.01)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,392,861 3,808,302
=========== ===========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
5
<PAGE>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
Nine Months Ended September 30,
-------------------------------
1997 1996
----------- ------------
REVENUES:
Oil and gas sales $ 631,387 $ 661,195
Interest and other income 157,374 96,302
----------- -----------
788,761 757,497
----------- -----------
EXPENSES:
Lease operating 164,214 216,399
Production taxes 48,471 41,895
Depreciation, depletion and amortization 190,721 142,509
General and administrative 437,822 273,308
----------- -----------
841,228 674,111
----------- -----------
GAIN FROM SALE OF PROPERTIES 155,864 --
----------- -----------
EARNINGS BEFORE INCOME TAXES 103,397 83,386
INCOME TAX PROVISION (39,290) (31,687)
----------- -----------
NET EARNINGS $ 64,107 $ 51,699
=========== ===========
EARNINGS PER COMMON SHARE $ .02 $ .01
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,477,326 3,860,923
=========== ===========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
6
<PAGE>
<TABLE>
<CAPTION>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
Nine Months Ended September 30,
-------------------------------
1997 1996
----------- ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $ 64,107 $ 51,699
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation, depletion and amortization 190,721 142,509
Gain on sale of properties (155,865) --
Decrease in accounts receivable 73,308 25,542
Increase in other current assets -- (2,197)
Increase in current liabilities 12,693 126,240
Deferred income tax provision 39,291 31,687
----------- -----------
Net cash provided by operating activities 224,255 375,480
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of short-term investments 242,474 1,216,949
Proceeds from sale of oil and gas properties 1,570,979 --
Additions to property and equipment (1,090,640) (963,422)
----------- -----------
Net cash provided by investing activities 722,813 253,527
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repurchase of Common Stock (402,411) (144,414)
----------- -----------
Net cash used in financing activities (402,411) (144,414)
----------- -----------
INCREASE IN CASH AND
CASH EQUIVALENTS 544,657 484,593
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,404,099 1,176,279
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,948,756 $ 1,660,872
=========== ===========
The accompanying notes to
unaudited financial statements are an integral part of these
statements.
7
</TABLE>
<PAGE>
GREAT NORTHERN GAS COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Note 1 - Financial Statements - Basis of Presentation
- -----------------------------------------------------
Great Northern Gas Company (the "Company") is exclusively engaged in the
business of oil and gas exploration, development and production.
The financial statements included herein are unaudited. In the opinion of
management, such statements include all adjustments, consisting of normal
recurring adjustments, necessary to present fairly the Company's financial
position for all periods presented.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted as permitted by the rules and regulations of the
Securities and Exchange Commission. Although the Company believes that the
disclosures are adequate to make the information presented not misleading, it is
suggested that these financial statements be read in conjunction with the
December 31, 1996 financial statements and the notes thereto as reported on the
Company's Annual Report on Form 10-KSB.
Results of operations for the nine month period ended September 30, 1997
are not necessarily indicative of the results to be expected for the full year.
Note 2 - Income Taxes
- ---------------------
The Company's net deferred tax liability at September 30, 1997 and December
31, 1996 primarily relates to book basis being in excess of tax basis partially
offset by loss carryforwards.
Note 3 - Sale of Properties
- ---------------------------
On April 11, 1997 and May 9, 1997, respectively, the Company closed on the
sale of its interest in the White River Dome and Gasaway properties. The White
River Dome properties are located in Rio Blanco County, Colorado and the Gasaway
properties are located in Garfield County, Colorado. The White River Dome
properties and the Gasaway properties were sold for a total of $739,223,
resulting in a gain on the sale of $533,901. This gain was partially offset by a
$378,037 loss from the sale of the South Douglas Creek properties which occurred
in the first quarter of 1997.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Note 4 - Repurchase of Common Stock
- -----------------------------------
During the nine months ended September 30, 1997 the Company repurchased
245,729 shares of the Company's Common Stock. The shares were retired.
Liquidity and Capital Resources
- -------------------------------
At September 30, 1997 the Company had working capital of $1,939,562
compared to working capital of $1,729,455 at December 31, 1996. The increase in
working capital is primarily related to the proceeds from the sale of the White
River Dome properties and the Gasaway properties partially offset by the
additions to property and equipment.
Net cash provided by operating activities was $224,255 for the first nine
months of 1997 compared to net cash provided by operating activities of $375,480
for the comparable period of 1996.
Analysis of Result of Operations:
- ---------------------------------
Three Months Ended September 30, 1997
- -------------------------------------
The $132,507 in oil and gas sales for the three months ended September 30,
1997 is $40,097 less than for the same period in 1996 primarily due to the sale
of the South Douglas Creek properties which occurred in February 1997. Lease
operating expenses for the three months ended September 30, 1997 are $94,414
less than for the same period in 1996 mainly due to major workover expenses in
the Pretty Water area in September 1996 and partially to the sale of the South
Douglas Creek properties.
Nine Months Ended September 30, 1997
- ------------------------------------
The $631,387 in oil and gas sales for the first nine months of 1997 is
$29,808 less than for the same period in 1996. Other income has increased due to
the well operation income generated by Gasaway and White River Dome properties
which were purchased in December 1996 but sold in 1997. Lease operating expenses
for 1997 are $52,185 less than 1996 mainly due to major workover expenses in the
Pretty Water area in September 1996. General and administrative expenses for the
nine months ended September 30, 1997 increased significantly compared to the
same period in 1996 primarily due to an increase in salaries and consulting
fees.
9
<PAGE>
PART II - OTHER INFORMATION
Items 1 thru 5 not applicable.
Item 6 - Exhibits and Reports on Form 8-K
None.
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.
GREAT NORTHERN GAS COMPANY
(Registrant)
Dated: November 13, 1997 By: /s/ Frank S. DiGrappa
----------------- -----------------------------------
Frank S. DiGrappa
Chairman of the Board,
and Treasurer
Dated: November 13, 1997 By: /s/ Thomas L. DiGrappa
----------------- -----------------------------------
Thomas L. DiGrappa
President and Chief
Operating Officer
10
<PAGE>
Quinn & Associates, P.C.
- --------------------------------------------------------------------------------
Certified Public Accountants and Consultants
1801 Broadway, Suite 800
Denver, Colorado 80202
(303) 298-7262
Fax (303) 298-7503
Thomas DiGrappa, President
Great Northern Gas Company
621 17th Street, Suite 2150
Denver, CO 80293
We have compiled the accompanying balance sheets of Great Northern Gas Company
as of September 30, 1997 and the related unaudited statements of earnings and
cash flows for the nine months then ended in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants.
Quinn & Associates, P.C. is not independent of the Company.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, we do not
express an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures required by
generally accepted accounting principles. If the omitted disclosures were
included in the financial statements, they might influence the user's
conclusions about the company's financial position, results of operations, and
cash flows. Accordingly, these financial statements are not designed for those
who are not informed about such matters.
/s/ Quinn & Associates, P.C.
- -----------------------------
Quinn & Associates, P.C.
November 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,948,756
<SECURITIES> 0
<RECEIVABLES> 181,996
<ALLOWANCES> 0
<INVENTORY> 9,619
<CURRENT-ASSETS> 2,140,371
<PP&E> 2,443,418
<DEPRECIATION> (797,781)
<TOTAL-ASSETS> 3,786,008
<CURRENT-LIABILITIES> 200,809
<BONDS> 205,383
0
0
<COMMON> 33,576
<OTHER-SE> 3,346,240
<TOTAL-LIABILITY-AND-EQUITY> 3,786,008
<SALES> 631,387
<TOTAL-REVENUES> 944,625
<CGS> 212,685
<TOTAL-COSTS> 403,406
<OTHER-EXPENSES> 437,822
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 103,397
<INCOME-TAX> (39,290)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64,107
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
