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:
March 31, 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 3,500,304 May 5, 1997
Page 1 of 9 sequentially numbered pages.
<PAGE>
GREAT NORTHERN GAS COMPANY
INDEX
PART I. FINANCIAL INFORMATION Page No. (s)
------------
Balance Sheets as of March 31, 1997
and December 31, 1996 (Unaudited) 3-4
Statements of Earnings for the Three
Months Ended March 31, 1997 and 1996 (Unaudited) 5
Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996 (Unaudited) 6
Notes to Unaudited Financial Statements for the
Three Months Ended March 31, 1997 and 1996 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION 9
SIGNATURES 9
Page 2
<PAGE>
GREAT NORTHERN GAS COMPANY
BALANCE SHEETS
MARCH 31, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
------
March 31, December 31,
1997 1996
----------- ------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $1,622,411 $1,404,099
Accounts receivable:
Oil and gas sales 61,007 132,054
Joint interest billings 99,852 116,005
Income taxes 6,075 6,075
Short term investments 737,573 242,474
Accrued interest receivable -- 7,245
Other 15,203 9,619
---------- ----------
Total current assets 2,542,121 1,917,571
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, accounted for
using the full cost method 1,752,927 3,327,289
Furniture, fixtures and automobile 60,105 57,660
---------- ----------
1,813,032 3,384,949
Less accumulated depreciation, depletion
and amortization 685,995 1,224,116
---------- ----------
Net property and equipment 1,127,037 2,160,833
---------- ----------
$3,669,158 $4,078,404
========== ==========
</TABLE>
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 3
<PAGE>
<TABLE>
<CAPTION>
GREAT NORTHERN GAS COMPANY
BALANCE SHEETS - CONTINUED
MARCH 31, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
March 31, December 31,
1997 1996
------------ ------------
CURRENT LIABILITIES:
Accounts payable:
<S> <C> <C>
Trade $ 17,789 $ 20,410
Oil and gas sales 125,959 115,866
Ad valorem taxes 100,735 51,840
------------ ------------
Total current liabilities 244,483 188,116
------------ ------------
DEFERRED INCOME TAXES 54,193 172,167
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value;
authorized 50,000,000 shares,
issued 3,500,304 shares at
March 31, 1997 and 3,603,313
shares at December 31, 1996 35,003 36,033
Additional paid-in-capital 39,348,394 39,502,517
Accumulated deficit (36,012,915) (35,820,429)
------------ ------------
Total stockholders' equity 3,370,482 3,718,121
------------ ------------
$ 3,669,158 $ 4,078,404
============ ============
</TABLE>
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 4
<PAGE>
<TABLE>
<CAPTION>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
Three Months Ended March 31,
--------------------------------------
1997 1996
----------- -----------
REVENUES:
<S> <C> <C>
Oil and gas sales $ 337,899 $ 241,109
Interest and other income 60,959 36,475
----------- -----------
398,858 277,584
----------- -----------
EXPENSES:
Lease operating 38,905 26,422
Production taxes 22,044 11,553
Depreciation, depletion and amortization 78,935 62,216
General and administrative 191,397 98,320
----------- -----------
331,281 198,511
----------- -----------
LOSS FROM SALE OF PROPERTIES 378,037 --
----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES (310,460) 79,073
INCOME TAX (PROVISION) BENEFIT 117,975 (30,048)
----------- -----------
NET EARNINGS (LOSS) $ (192,485) $ 49,025
=========== ===========
EARNINGS (LOSS) PER COMMON SHARE $ (.05) $ .01
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,554,016 3,902,139
=========== ===========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
Three Months Ended March 31,
------------------------------------
1997 1996
------------ ------------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C>
Net earnings (loss) $ (192,485) $ 49,025
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 78,935 62,216
Loss on sale of properties 378,037 --
(Increase) decrease in accounts receivable 94,445 (167,573)
Increase in other current assets (5,584) (2,196)
Increase in current liabilities 56,367 80,892
Deferred income tax provision (benefit) (117,975) 30,048
---------- ------------
Net cash provided by (used in) operating activities 291,740 52,412
---------- ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of oil and gas properties 672,805 --
Additions to property and equipment (95,981) (897,241)
Proceeds from sale of short term investments -- 1,459,423
Purchase of short-term investments (495,099) --
---------- --------------
Net cash provided by (used in) investing activities 81,725 562,182
---------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Repurchase of Common Stock (155,153) (29,663)
---------- --------------
Net cash provided by (used in) financing activities (155,153) (29,663)
---------- --------------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 218,312 584,931
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,404,099 1,176,279
---------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $1,622,411 $1,761,210
========== ==========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 6
</TABLE>
<PAGE>
GREAT NORTHERN GAS COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 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 three month period ended March 31, 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 March 31, 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 February 28, 1997, the Company closed on the sale of its interest in all
the South Douglas Creek properties in Rio Blanco County, Colorado. The
properties had a total of 12,163 gross acres. The properties were sold for
$672,805, resulting in a net loss on the sale of $378,037, as the reserves for
such properties exceed 25% of all reserves at the time of sale. Subsequent to
March 31, 1997 the Company sold all of its interests in the White River Dome and
Gasaway properties for $750,000. Such properties were purchased in December 1996
for $200,000.
Note 4 - Repurchase of Common Stock
- -----------------------------------
During the first quarter of 1997 the Company repurchased 103,000 shares of
the Company's Common Stock. The shares were retired.
Page 7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
At March 31, 1997 the Company had working capital of $2,297,638 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 South Douglas
Creek properties. To minimize its tax gain on sale, the Company intends to
reinvest such proceeds under the provisions of Internal Revenue Code Section
1031.
Net cash provided by operating activities was $291,740 for the first three
months of 1997 compared to net cash provided by operating activities of $52,412
for the comparable period of 1996. Such change is primarily due to the decrease
in oil and gas sales receivable for 1997.
Analysis of Results of Operations
- ---------------------------------
The $337,899 in oil and gas sales for the first three months of 1997 is
$96,790 greater than for the same period in 1996 primarily due to the revenues
from the White River Dome and Gasaway properties purchased effective October 1,
1996, but sold in April, 1997. Other income has increased due to the well
operation income generated by Gasaway and White River Dome Properties. 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 three months ended March 31, 1997 increased significantly compared to the
same period in 1996 mainly due to salaries and consulting fees.
Page 8
<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: May 12, 1997 By: /S/ FRANK S. DiGRAPPA
-----------------------------------------
Frank S. DiGrappa
Chairman of the Board, and Treasurer
Dated: May 12, 1997 By: /S/ THOMAS L. DiGRAPPA
----------------------------------------
Thomas L. DiGrappa
President and Chief Operating Officer
Page 9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,622,411
<SECURITIES> 737,573
<RECEIVABLES> 166,934
<ALLOWANCES> 0
<INVENTORY> 15,203
<CURRENT-ASSETS> 2,542,121
<PP&E> 1,813,032
<DEPRECIATION> (685,995)
<TOTAL-ASSETS> 3,669,158
<CURRENT-LIABILITIES> 244,483
<BONDS> 54,193
0
0
<COMMON> 35,003
<OTHER-SE> 3,335,479
<TOTAL-LIABILITY-AND-EQUITY> 3,669,158
<SALES> 337,899
<TOTAL-REVENUES> 398,858
<CGS> 60,949
<TOTAL-COSTS> 139,884
<OTHER-EXPENSES> 569,303
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 131
<INCOME-PRETAX> (310,460)
<INCOME-TAX> 117,975
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (192,485)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
