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, 1999 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 3,074,690 May 11, 1999
Page 1 of 9 sequentially numbered pages.
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GREAT NORTHERN GAS COMPANY
INDEX
PART I. FINANCIAL INFORMATION Page No. (s)
------------
Balance Sheets as of March 31, 1999
and December 31, 1998 (Unaudited) 3-4
Statements of Operations for the Three
Months Ended March 31, 1999 and 1998 (Unaudited) 5
Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998 (Unaudited) 6
Notes to Unaudited Financial Statements for the Three Months
Ended March 31, 1999 and 1998 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION 9
SIGNATURES 9
2
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GREAT NORTHERN GAS COMPANY
BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
ASSETS
------
March 31, December 31,
1999 1998
---- ----
CURRENT ASSETS:
Cash and cash equivalents $1,367,363 $2,075,657
Accounts receivable:
Oil and gas sales 17,612 24,469
Joint interest billings 164,522 162,349
Note receivable - related party 400,000 --
Other 9,619 9,619
---------- ----------
Total current assets 1,959,116 2,272,094
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, accounted for
using the full cost method 2,301,071 2,054,565
Furniture, fixtures and automobile 60,105 60,105
---------- ----------
2,361,176 2,114,670
Less accumulated depreciation, depletion
and amortization 935,631 899,775
---------- ----------
Net property and equipment 1,425,545 1,214,895
---------- ----------
$3,384,661 $3,486,989
========== ==========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
3
<PAGE>
GREAT NORTHERN GAS COMPANY
BALANCE SHEETS - CONTINUED
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
March 31, December 31,
1999 1998
---- ----
CURRENT LIABILITIES:
Accounts payable:
Trade $ 13,198 $ 6,485
Oil and gas sales 136,207 153,902
Income taxes 2,247 10,847
Other 70,579 71,704
------------ ------------
Total current liabilities 222,231 242,938
------------ ------------
DEFERRED INCOME TAXES 171,549 201,128
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value;
authorized 50,000,000 shares,
issued 3,074,690 shares at
March 31, 1999 and 3,079,710
shares at December 31, 1998 30,747 30,797
Additional paid-in-capital 38,676,294 38,680,024
Accumulated deficit (35,716,160) (35,667,898)
------------ ------------
Total stockholders' equity 2,990,881 3,042,923
------------ ------------
$ 3,384,661 $ 3,486,989
============ ============
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 MARCH 31, 1999 AND 1998
(UNAUDITED)
Three Months Ended March 31,
----------------------------
1999 1998
---- ----
REVENUES:
Oil and gas sales $ 60,961 $ 171,102
Interest and other income 28,631 27,059
----------- -----------
89,592 198,161
----------- -----------
EXPENSES:
Lease operating 23,941 63,399
Production taxes 4,292 13,370
Depreciation, depletion and amortization 35,856 60,113
General and administrative 103,344 112,952
----------- -----------
167,433 249,834
----------- -----------
LOSS BEFORE INCOME TAXES (77,841) (51,673)
INCOME TAX BENEFIT 29,579 19,636
----------- -----------
NET LOSS $ (48,262) $ (32,037)
=========== ===========
LOSS PER COMMON SHARE $ (.02) $ (.01)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,079,037 3,161,401
=========== ===========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
5
<PAGE>
<TABLE>
<CAPTION>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
Three Months Ended March 31,
----------------------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C>
Net loss $ (48,262) $ (32,037)
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation, depletion and amortization 35,856 60,113
Decrease in accounts receivable 4,684 47,707
Decrease in current liabilities (20,707) (90,404)
Deferred income tax benefit (29,579) (19,636)
----------- -----------
Net cash used in operating activities (58,008) (34,257)
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Issuance of note receivable to related party (400,000) --
Proceeds from sale of oil and gas properties -- 1,136,046
Additions to property and equipment (246,506) (235,780)
Purchase of short-term investments -- (1,136,046)
----------- -----------
Net cash provided by (used in) investing activities (646,506) (235,780)
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Repurchase of Common Stock (3,780) (286,455)
----------- -----------
Net cash provided by (used in) financing activities (3,780) (286,455)
----------- -----------
DECREASE IN CASH AND
CASH EQUIVALENTS (708,294) (556,492)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,075,657 1,812,386
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,367,363 $ 1,255,894
=========== ===========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
6
</TABLE>
<PAGE>
GREAT NORTHERN GAS COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
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, 1998 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, 1999 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, 1999 and December 31,
1998 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 1999 the Company repurchased 5,020 shares of
the Company's Common Stock. The shares were retired.
7
<PAGE>
GREAT NORTHERN GAS COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Note 5 - Issuance of Short Term Note to Related Party
- -----------------------------------------------------
During the first quarter of 1999 the Company issued a short term interest
bearing note to one of the officers of the Company. The interest rate is
variable as published by Merrill Lynch.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
At March 31, 1999 the Company had working capital of $1,736,885 compared to
working capital of $2,029,156 at December 31, 1998. The decrease in working
capital is primarily related to the additions to property and equipment and also
the decreased revenues generated by oil and gas sales.
Net cash used in operating activities was $458,000 for the first three
months of 1999 compared to net cash used in operating activities of $34,257 for
the comparable period of 1998. Such change is primarily due to the issuance of
the short term note and also the reduction in oil and gas revenues.
Analysis of Results of Operations
- ---------------------------------
The $60,961 in oil and gas sales for the first three months of 1999 is
$110,141 less than for the same period in 1998 primarily due to the sale of
Haybarn and East Plateau properties in 1998. Lease operating expenses are less
than 1998 also mainly due to the sale of Haybarn and East Plateau properties in
1998. General and administrative expenses for the three months ended March 31,
1999 decreased compared to the same period in 1998 mainly due to bonuses and
audit expenses paid in 1998.
Management's Assessment of Year 2000 Issues
- -------------------------------------------
The Company is aware of and has evaluated the Year 2000 issues. The
Company's own systems are compliant with Year 2000. The Company has also
confirmed with outside sources of their Year 2000 readiness.
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 13, 1999 By: /s/ Frank S. DiGrappa
------------- --------------------------------
Frank S. DiGrappa
Chairman of the Board,
and Treasurer
Dated: May 13, 1999 By: /s/ Thomas L. DiGrappa
------------- --------------------------------
Thomas L. DiGrappa
President and Chief
Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,367,363
<SECURITIES> 0
<RECEIVABLES> 582,134
<ALLOWANCES> 0
<INVENTORY> 9,619
<CURRENT-ASSETS> 1,959,116
<PP&E> 2,361,176
<DEPRECIATION> (935,631)
<TOTAL-ASSETS> 3,384,661
<CURRENT-LIABILITIES> 222,231
<BONDS> 171,549
0
0
<COMMON> 30,747
<OTHER-SE> 2,960,134
<TOTAL-LIABILITY-AND-EQUITY> 3,384,661
<SALES> 60,961
<TOTAL-REVENUES> 89,592
<CGS> 28,233
<TOTAL-COSTS> 64,089
<OTHER-EXPENSES> 103,344
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (77,841)
<INCOME-TAX> 29,579
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (48,262)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
</TABLE>
