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:
June 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 3,481,584 August 6, 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 June 30, 1997
and December 31, 1996 (Unaudited) 3-4
Statements of Earnings for the Three
Months Ended June 30, 1997 and 1996 (Unaudited) 5
Statements of Earnings for the Six
Months Ended June 30, 1997 and 1996 (Unaudited) 6
Statements of Cash Flows for the Six Months
Ended June 30, 1997 and 1996 (Unaudited) 7
Notes to Unaudited Financial Statements for the Six
Ended June 30, 1997 and 1996 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION 10
SIGNATURES 10
Page 2
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GREAT NORTHERN GAS COMPANY
BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
ASSETS
------
June 30, December 31,
1997 1996
---------- -----------
CURRENT ASSETS:
Cash and cash equivalents $1,502,962 $1,404,099
Short term investments 654,784 242,474
Accounts receivable:
Oil and gas sales 64,098 132,054
Joint interest billings 96,413 116,005
Income taxes -- 6,075
Accrued interest receivable -- 7,245
Other 9,619 9,619
---------- ----------
Total current assets 2,327,876 1,917,571
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, accounted for
using the full cost method 2,423,754 3,327,289
Furniture, fixtures and automobile 60,104 57,660
---------- ----------
2,483,858 3,384,949
Less accumulated depreciation, depletion
and amortization 751,818 1,224,116
---------- ----------
Net property and equipment 1,732,040 2,160,833
---------- ----------
$4,059,916 $4,078,404
========== ==========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 3
<PAGE>
GREAT NORTHERN GAS COMPANY
BALANCE SHEETS - CONTINUED
JUNE 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, December 31,
1997 1996
------------ ------------
CURRENT LIABILITIES:
Accounts payable:
Trade $ 33,385 $ 20,410
Oil and gas sales 125,116 115,866
Ad valorem taxes 61,235 51,840
------------ ------------
Total current liabilities 219,736 188,116
------------ ------------
DEFERRED INCOME TAXES 219,903 172,167
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value;
authorized 50,000,000 shares,
issued 3,481,584 shares at
June 30, 1997 and 3,603,313
shares at December 31, 1996 34,816 36,033
Additional paid-in-capital 39,318,095 39,502,517
Accumulated deficit (35,732,634) (35,820,429)
------------ ------------
Total stockholders' equity 3,620,277 3,718,121
------------ ------------
$ 4,059,916 $ 4,078,404
============ ============
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 4
<PAGE>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
Three Months Ended June 30,
---------------------------
1997 1996
----------- -----------
REVENUES:
Oil and gas sales $ 160,981 $ 247,482
Interest and other income 60,924 22,884
----------- -----------
221,905 270,366
----------- -----------
EXPENSES:
Lease operating 70,524 40,778
Production taxes 15,315 17,495
Depreciation, depletion and amortization 65,823 45,049
General and administrative 152,078 75,280
----------- -----------
303,740 178,602
----------- -----------
GAIN FROM SALE OF PROPERTIES 533,901 --
----------- -----------
EARNINGS BEFORE INCOME TAXES 452,066 91,764
INCOME TAX PROVISION (171,786) (34,870)
----------- -----------
NET EARNINGS $ 280,280 $ 56,894
=========== ===========
EARNINGS PER COMMON SHARE $ .08 $ .01
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,486,873 3,872,906
=========== ===========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 5
<PAGE>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
Six Months Ended June 30,
---------------------------
1997 1996
----------- -----------
REVENUES:
Oil and gas sales $ 498,880 $ 488,591
Interest and other income 121,883 59,359
----------- -----------
620,763 547,950
----------- -----------
EXPENSES:
Lease operating 109,429 67,200
Production taxes 37,359 29,048
Depreciation, depletion and amortization 144,758 107,265
General and administrative 343,475 173,600
----------- -----------
635,021 377,113
----------- -----------
GAIN FROM SALE OF PROPERTIES 155,864 --
----------- -----------
EARNINGS BEFORE INCOME TAXES 141,606 170,837
INCOME TAX (PROVISION) BENEFIT (53,810) (64,918)
----------- -----------
NET EARNINGS $ 87,796 $ 105,919
=========== ===========
EARNINGS PER COMMON SHARE $ .02 $ .03
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,520,259 3,887,523
=========== ===========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 6
<PAGE>
<TABLE>
<CAPTION>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
Six Months Ended June 30,
----------------------------------
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $ 87,796 $ 105,919
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 144,758 107,265
Gain on sale of properties (155,865) --
Decrease in accounts receivable 94,794 9,358
Increase in other current assets -- (2,196)
Increase in current liabilities 31,620 145,437
Deferred income tax provision (benefit) 53,810 64,918
----------- -----------
Net cash provided by (used in) operating activities 256,913 430,701
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of oil and gas properties 1,412,028 --
Additions to property and equipment (972,129) (967,688)
Proceeds from sale of short term investments -- 1,216,949
Purchase of short term investments (412,310) --
----------- -----------
Net cash provided by (used in) investing activities 27,589 249,261
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES-
Repurchase of Common Stock (185,639) (66,638)
----------- -----------
Net cash provided by (used in) financing activities (185,639) (66,638)
----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 98,863 613,324
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,404,099 1,176,279
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,502,962 $ 1,789,603
=========== ===========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 7
</TABLE>
<PAGE>
GREAT NORTHERN GAS COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 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 six month period ended June 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 June 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 properties and the 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 taken
against the $378,037 loss from the sale of the South Douglas Creek properties
which occurred in the first quarter of 1997.
Note 4 - Repurchase of Common Stock
- -----------------------------------
During the first and second quarters of 1997 the Company repurchased
121,720 shares of the Company's Common Stock. The shares were retired.
Page 8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
At June 30, 1997 the Company had working capital of $2,108,140 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.
Net cash provided by operating activities was $256,913 for the first six
months of 1997 compared to net cash provided by operating activities of $430,701
for the comparable period of 1996. Such change is primarily due to the decrease
in oil and gas sales payable for 1997.
Analysis of Results of Operations
- ---------------------------------
The $498,880 in oil and gas sales for the first six months of 1997 is
$10,289 greater 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 the fourth quarter of 1997. Lease operating
expenses and production taxes are greater than 1996 mainly due to the White
River Dome and Gasaway purchase. General and administrative expenses for the six
months ended June 30, 1997 increased significantly compared to the same period
in 1996 mainly due to an increase in salaries and consulting fees.
Page 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: August 12, 1997 By: /s/ Frank S. DiGrappa
----------------------------------------
Frank S. DiGrappa
Chairman of the Board,
and Treasurer
Dated: August 12, 1997 By: /s/ Thomas L. DiGrappa
----------------------------------------
Thomas L. DiGrappa
President and Chief
Operating Officer
Page 10
<PAGE>
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 June 30, 1997 and the related unaudited statements of earnings and cash
flows for the six 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 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.
Quinn & Associates, P.C.
August 8, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,502,962
<SECURITIES> 654,784
<RECEIVABLES> 160,511
<ALLOWANCES> 0
<INVENTORY> 9,619
<CURRENT-ASSETS> 2,327,876
<PP&E> 2,483,858
<DEPRECIATION> (751,818)
<TOTAL-ASSETS> 4,059,916
<CURRENT-LIABILITIES> 219,736
<BONDS> 219,903
0
0
<COMMON> 34,816
<OTHER-SE> 3,585,461
<TOTAL-LIABILITY-AND-EQUITY> 4,059,916
<SALES> 498,880
<TOTAL-REVENUES> 776,627
<CGS> 146,788
<TOTAL-COSTS> 291,546
<OTHER-EXPENSES> 343,214
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 261
<INCOME-PRETAX> 141,606
<INCOME-TAX> (53,810)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87,796
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
