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, 1998 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 3,115,984 May 8, 1998
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, 1998
and December 31, 1997 (Unaudited) 3-4
Statements of Operations for the Three
Months Ended March 31, 1998 and 1997 (Unaudited) 5
Statements of Cash Flows for the Three Months
Ended March 31, 1998 and 1997 (Unaudited) 6
Notes to Unaudited Financial Statements for the
Three Months Ended March 31, 1998 and 1997 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, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
ASSETS
------
March 31 December 31,
1998 1997
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $1,255,894 $1,812,386
Accounts receivable:
Oil and gas sales 52,880 90,902
Joint interest billings 129,516 139,201
Short term investments 1,136,046 --
Other 9,619 9,619
---------- ----------
Total current assets 2,583,955 2,052,108
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, accounted for
using the full cost method 1,782,361 2,682,627
Furniture, fixtures and automobile 60,105 60,105
---------- ----------
1,842,466 2,742,732
Less accumulated depreciation, depletion
and amortization 941,848 881,735
---------- ----------
Net property and equipment 900,618 1,860,997
---------- ----------
$3,484,573 $3,913,105
========== ==========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 3
<PAGE>
GREAT NORTHERN GAS COMPANY
BALANCE SHEETS - CONTINUED
MARCH 31, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
March 31, December 31,
1998 1997
----------- -------------
CURRENT LIABILITIES:
Accounts payable:
Trade $ 21,561 $ 24,404
Oil and gas sales 172,339 229,707
Income taxes 1,286 17,286
Other 73,906 88,099
------------ ------------
Total current liabilities 269,092 359,496
------------ ------------
DEFERRED INCOME TAXES 172,525 192,161
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value;
authorized 50,000,000 shares,
issued 3,115,984 shares at
March 31, 1998 and 3,297,343
shares at December 31, 1997 31,160 32,975
Additional paid-in-capital 38,719,373 39,004,013
Accumulated deficit (35,707,577) (35,675,540)
------------ ------------
Total stockholders' equity 3,042,956 3,361,448
------------ ------------
$ 3,484,573 $ 3,913,105
============ ============
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 4
<PAGE>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
Three Months Ended March 31,
----------------------------
1998 1997
----------- -----------
REVENUES:
Oil and gas sales $ 171,102 $ 337,899
Interest and other income 27,059 60,959
----------- -----------
198,161 398,858
----------- -----------
EXPENSES:
Lease operating 63,399 38,905
Production taxes 13,370 22,044
Depreciation, depletion and amortization 60,113 78,935
General and administrative 112,952 191,397
----------- -----------
249,834 331,281
----------- -----------
LOSS FROM SALE OF PROPERTIES -- (378,037)
----------- -----------
LOSS BEFORE INCOME TAXES (51,673) (310,460)
INCOME TAX BENEFIT 19,636 117,975
----------- -----------
NET LOSS $ (32,037) $ (192,485 )
=========== ===========
EARNINGS (LOSS) PER COMMON SHARE $ (.01) $ (.05)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,161,401 3,554,016
=========== ===========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 5
<PAGE>
<TABLE>
<CAPTION>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
Three Months Ended March 31,
---------------------------------
1998 1997
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings (loss) $ (32,037) $ (192,485)
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 60,113 78,935
Loss on sale of properties -- 378,037
Decrease in accounts receivable 47,707 94,445
Increase in other current assets -- (5,584)
(Decrease) Increase in current liabilities (90,404) 56,367
Deferred income tax benefit (19,636) (117,975)
----------- -----------
Net cash provided by (used in) operating activities (34,257) 291,740
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of oil and gas properties 1,136,046 672,805
Additions to property and equipment (235,780) (95,981)
Purchase of short-term investments (1,136,046) (495,099)
----------- -----------
Net cash provided by (used in) investing activities (235,780) 81,725
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Repurchase of Common Stock (286,455) (155,153)
----------- -----------
Net cash provided by (used in) financing activities (286,455) (155,153)
----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (556,492) 218,312
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,812,386 1,404,099
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,255,894 $ 1,622,411
=========== ===========
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, 1998 AND 1997
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, 1997 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, 1998 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, 1998 and December 31,
1997 primarily relates to book basis being in excess of tax basis partially
offset by loss carryforwards.
Note 3 - Sale of Properties
- ---------------------------
On March 13, 1998 , the Company closed on the sale of its interest in all
the Haybarn properties in Freemont County, Wyoming. These properties were
acquired in June of 1997. These properties were sold for $1,136,046. The
proceeds have been recorded as a reduction of the full cost pool.
Note 4 - Repurchase of Common Stock
- -----------------------------------
During the first quarter of 1998 the Company repurchased 181,539 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, 1998 the Company had working capital of $2,314,863 compared to
working capital of $1,692,612 at December 31, 1997. The increase in working
capital is primarily related to the proceeds from the sale of the Haybarn
properties. To minimize the taxes on such transactions, the Company intends to
reinvest the proceeds under the provisions of Internal Revenue Code Section
1031.
Net cash used in operating activities was $34,257 for the first three
months of 1998 compared to net cash provided by operating activities of $291,740
for the comparable period of 1997. Such change is promarily due to the reduction
in oil and gas revenues as stated below.
Analysis of Results of Operations
- ---------------------------------
The $171,102 in oil and gas sales for the first three months of 1998 is
$166,797 less than for the same period in 1997 primarily due to the sale of
South Douglas Creek, White River Dome and Gasaway properties in 1997. Other
income has decreased due to the well operation income that was generated by
Gasaway and White River Dome Properties. Lease operating expenses are greater
than 1997 mainly due to the Haybarn purchase in June of 1997. General and
administrative expenses for the three months ended March 31, 1998 decreased
compared to the same period in 1997 mainly due to bonuses paid in 1997.
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 15, 1998 By: /s/ Frank S. DiGrappa
-------------- ---------------------------------
Frank S. DiGrappa
Chairman of the Board,
and Treasurer
Dated: May 15, 1998 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-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,255,894
<SECURITIES> 1,136,046
<RECEIVABLES> 182,396
<ALLOWANCES> 0
<INVENTORY> 9,619
<CURRENT-ASSETS> 2,583,955
<PP&E> 1,842,466
<DEPRECIATION> (941,848)
<TOTAL-ASSETS> 3,484,573
<CURRENT-LIABILITIES> 269,092
<BONDS> 172,525
0
0
<COMMON> 31,160
<OTHER-SE> 3,011,796
<TOTAL-LIABILITY-AND-EQUITY> 3,484,573
<SALES> 171,102
<TOTAL-REVENUES> 198,161
<CGS> 76,769
<TOTAL-COSTS> 136,882
<OTHER-EXPENSES> 112,952
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (51,673)
<INCOME-TAX> 19,636
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,037)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
