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, 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 3,115,484 August 10, 1998
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, 1998
and December 31, 1997 (Unaudited) 3-4
Statements of Operations for the Three
Months Ended June 30, 1998 and 1997 (Unaudited) 5
Statements of Operations for the Six Months
Ended June 30, 1998 and 1997 (Unaudited) 6
Statements of Cash Flows for the Six Months
Ended June 30, 1998 and 1997 (Unaudited) 7
Notes to Unaudited Financial Statements for the
Six Months Ended June 30, 1998 and 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
JUNE 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
ASSETS
------
June 30, December 31,
1998 1997
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $1,205,094 $1,812,386
Accounts receivable:
Oil and gas sales 87,249 90,902
Joint interest billings 148,085 139,201
Short term investments 1,146,450 --
Other 9,619 9,619
---------- ----------
Total current assets 2,596,497 2,052,108
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, accounted for
using the full cost method 1,744,606 2,682,627
Furniture, fixtures and automobile 60,105 60,105
---------- ----------
1,804,711 2,742,732
Less accumulated depreciation, depletion
and amortization 976,726 881,735
---------- ----------
Net property and equipment 827,985 1,860,997
---------- ----------
$3,424,482 $3,913,105
========== ==========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
3
<PAGE>
GREAT NORTHERN GAS COMPANY
BALANCE SHEETS - CONTINUED
JUNE 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
June 30, December 31,
1998 1997
------------ -------------
CURRENT LIABILITIES:
Accounts payable:
Trade $ 27,177 $ 24,404
Oil and gas sales 122,778 229,707
Income taxes 1,286 17,286
Other 65,531 88,099
------------ ------------
Total current liabilities 216,772 359,496
------------ ------------
DEFERRED INCOME TAXES 169,857 192,161
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value;
authorized 50,000,000 shares,
issued 3,115,484 shares at
June 30, 1998 and 3,297,343
shares at December 31, 1997 31,155 32,975
Additional paid-in-capital 38,718,628 39,004,013
Accumulated deficit (35,711,930) (35,675,540)
------------ ------------
Total stockholders' equity 3,037,853 3,361,448
------------ ------------
$ 3,424,482 $ 3,913,105
============ ============
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 JUNE 30, 1998 AND 1997
(UNAUDITED)
Three Months Ended June 30,
---------------------------
1998 1997
----------- -----------
REVENUES:
Oil and gas sales $ 143,957 $ 160,981
Interest and other income 39,645 60,924
----------- -----------
183,602 221,905
----------- -----------
EXPENSES:
Lease operating 44,062 70,524
Production taxes 10,835 15,315
Depreciation, depletion and amortization 34,878 65,823
General and administrative 100,848 152,078
----------- -----------
190,623 303,740
----------- -----------
GAIN FROM SALE OF PROPERTIES -- 533,901
----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES (7,021) 452,066
INCOME TAX BENEFIT (PROVISION) 2,668 (171,786)
----------- -----------
NET EARNINGS (LOSS) $ (4,353) $ 280,280
=========== ===========
EARNINGS PER COMMON SHARE $ * $ .08
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,115,830 3,486,873
=========== ===========
*less than $.01 per share
The accompanying notes to unaudited financial statements are an
integral part of these statements.
5
<PAGE>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
Six Months Ended June 30,
1998 1997
----------- -----------
REVENUES:
Oil and gas sales $ 315,059 $ 498,880
Interest and other income 66,704 121,883
----------- -----------
381,763 620,763
----------- -----------
EXPENSES:
Lease operating 107,461 109,429
Production taxes 24,205 37,359
Depreciation, depletion and amortization 94,991 144,758
General and administrative 213,800 343,475
----------- -----------
440,457 635,021
----------- -----------
GAIN FROM SALE OF PROPERTIES -- 155,864
----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES (58,694) 141,606
INCOME TAX BENEFIT (PROVISION) 22,304 (53,810)
----------- -----------
NET EARNINGS (LOSS) $ (36,390) $ 87,796
=========== ===========
EARNINGS (LOSS) PER COMMON SHARE $ (.01) $ .02
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,138,490 3,520,259
=========== ===========
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 SIX MONTHS ENDED JUNE 30, 1998 AND 1997
(UNAUDITED)
Six Months Ended June 30,
-------------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings (loss) $ (36,390) $ 87,796
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 94,991 144,758
Gain on sale of properties -- (155,865)
(Increase) decrease in accounts receivable (5,231) 94,794
(Decrease) Increase in current liabilities (142,724) 31,620
Deferred income tax (benefit) provision (22,304) 53,810
----------- -----------
Net cash provided by (used in) operating activities (111,658) 256,913
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of oil and gas properties 1,206,046 1,412,028
Additions to property and equipment (268,025) (972,129)
Purchase of short-term investments (1,146,450) (412,310)
----------- -----------
Net cash provided by (used in) investing activities (208,429) 27,589
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Repurchase of Common Stock (287,205) (185,639)
----------- -----------
Net cash provided by (used in) financing activities (287,205) (185,639)
----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (607,292) 98,863
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,812,386 1,404,099
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,205,094 $ 1,502,962
=========== ===========
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 SIX MONTHS ENDED JUNE 30, 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 six month period ended June 30, 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 June 30, 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. On June 1,
1998, the Company closed on the sale of its interest in all the East Plateau
properties in Mesa County, Colorado. These properties were sold for $70,000. The
proceeds have been recorded as a reduction of the full cost pool.
Note 4 - Repurchase of Common Stock
- -----------------------------------
During the first and second quarters of 1998 the Company repurchased
181,859 shares of the Company's Common Stock. The shares were retired.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
At June 30, 1998 the Company had working capital of $2,379,725 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 $111,658 for the first six months
of 1998 compared to net cash provided by operating activities of $256,913 for
the comparable period of 1997. Such change is primarily due to the reduction in
oil and gas revenues as stated below.
Analysis of Results of Operations
- ---------------------------------
The $315,059 in oil and gas sales for the first six months of 1998 is
$183,821 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. Production taxes have decreased also
primarily due to the sale of these properties. General and administrative
expenses for the six months ended June 30, 1998 decreased compared to the same
period in 1997 mainly due to bonuses paid in 1997.
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 13, 1998 By: /s/ Frank S. DiGrappa
---------------- -------------------------------
Frank S. DiGrappa
Chairman of the Board,
and Treasurer
Dated: August 13, 1998 By: /s/ Thomas L. DiGrappa
---------------- ------------------------------
Thomas L. DiGrappa
President and Chief
Operating Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,205,094
<SECURITIES> 1,146,450
<RECEIVABLES> 235,334
<ALLOWANCES> 0
<INVENTORY> 9,619
<CURRENT-ASSETS> 2,596,497
<PP&E> 1,804,711
<DEPRECIATION> (976,726)
<TOTAL-ASSETS> 3,424,482
<CURRENT-LIABILITIES> 216,772
<BONDS> 169,857
0
0
<COMMON> 31,155
<OTHER-SE> 3,006,698
<TOTAL-LIABILITY-AND-EQUITY> 3,424,482
<SALES> 315,059
<TOTAL-REVENUES> 381,763
<CGS> 131,666
<TOTAL-COSTS> 226,657
<OTHER-EXPENSES> 213,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (58,694)
<INCOME-TAX> 22,304
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (36,390)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
