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:
September 30, 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 November 11 1999
Page 1 of 10 sequentially numbered pages.
<PAGE>
GREAT NORTHERN GAS COMPANY
INDEX
PART I. FINANCIAL INFORMATION Page No. (s)
------------
Balance Sheets as of September 30, 1999
and December 31, 1998 (Unaudited) 3-4
Statements of Operations for the Three
Months Ended September 30, 1999 and 1998 (Unaudited) 5
Statements of Operations for the Nine
Months Ended September 30, 1999 and 1998 (Unaudited) 6
Statements of Cash Flows for the Nine Months
Ended September 30, 1999 and 1998 (Unaudited) 7
Notes to Unaudited Financial Statements for the
Nine Months Ended September 30, 1999 and 1998 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
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
ASSETS
------
September 30, December 31,
1999 1998
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $1,430,130 $2,075,657
Accounts receivable:
Oil and gas sales 48,872 24,469
Joint interest billings 170,608 162,349
Note receivable - related party 200,000 --
Other 9,619 9,619
---------- ----------
Total current assets 1,859,229 2,272,094
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, accounted for
using the full cost method 2,363,350 2,054,565
Furniture, fixtures and automobile 60,105 60,105
---------- ----------
2,423,455 2,114,670
Less accumulated depreciation, depletion
and amortization 1,007,266 899,775
---------- ----------
Net property and equipment 1,416,189 1,214,895
---------- ----------
$3,275,418 $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
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 30, December 31,
1999 1998
------------ ------------
CURRENT LIABILITIES:
Accounts payable:
Trade $ 22,326 $ 6,485
Oil and gas sales 126,909 153,902
Income taxes -- 10,847
Other 72,072 71,704
------------ ------------
Total current liabilities 221,307 242,938
------------ ------------
DEFERRED INCOME TAXES 128,841 201,128
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value;
authorized 50,000,000 shares,
issued 3,074,690 shares at
September 30, 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 (35,781,771) (35,667,898)
------------ ------------
Total stockholders' equity 2,925,270 3,042,923
------------ ------------
$ 3,275,418 $ 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 SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
Three Months Ended September 30,
1999 1998
----------- -----------
REVENUES:
Oil and gas sales $ 109,122 $ 135,413
Interest and other income 19,982 40,891
----------- -----------
129,104 176,304
----------- -----------
EXPENSES:
Lease operating 52,299 36,807
Production taxes 4,275 9,320
Depreciation, depletion and amortization 33,646 55,837
General and administrative 88,849 386,909
----------- -----------
179,069 488,873
----------- -----------
LOSS BEFORE INCOME TAXES (49,965) (312,569)
INCOME TAX BENEFIT 18,987 118,815
----------- -----------
NET LOSS $ (30,978) $ (193,754)
=========== ===========
LOSS PER COMMON SHARE $ (.01) $ (.06)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,074,690 3,093,241
=========== ===========
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 NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
Nine Months Ended September 30,
1999 1998
----------- -----------
REVENUES:
Oil and gas sales $ 283,284 $ 450,472
Interest and other income 68,509 107,595
----------- -----------
351,793 558,067
----------- -----------
EXPENSES:
Lease operating 122,831 144,268
Production taxes 16,101 33,525
Depreciation, depletion and amortization 107,491 150,828
General and administrative 289,037 600,709
----------- -----------
535,460 929,330
----------- -----------
LOSS BEFORE INCOME TAXES (183,667) (371,263)
INCOME TAX BENEFIT 69,794 141,119
----------- -----------
NET LOSS $ (113,873) $ (230,144)
=========== ===========
LOSS PER COMMON SHARE $ (.04) $ (.07)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,076,123 3,123,241
=========== ===========
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 NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
Nine Months Ended September 30,
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C>
Net loss $ (113,873) $ (230,144)
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation, depletion and amortization 107,491 150,828
Decrease (increase) in accounts receivable (32,662) 47,048
Decrease in current liabilities (21,631) (95,061)
Deferred income tax benefit (72,287) (141,119)
----------- -----------
Net cash used in operating activities (132,962) (268,448)
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Issuance of note receivable to related party (400,000) --
Repayment of note receivable by related party (200,000) --
Proceeds from sale of oil and gas properties -- 1,206,046
Additions to property and equipment (308,785) (273,363)
----------- -----------
Net cash (used in) provided by investing activities (508,785) 932,683
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Repurchase of Common Stock (3,780) (321,322)
----------- -----------
Net cash used in financing activities (3,780) (321,322)
----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (645,527) 342,913
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,075,657 1,812,386
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,430,130 $ 2,155,299
=========== ===========
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 NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
Note 1 - Financial Statements - Basis of Presentation
- -----------------------------------------------------
Great Northern Gas Company (the "Company") is 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 nine month period ended September 30, 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 September 30, 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. 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 quarter of 1999 the Company repurchased 5,020 shares of
the Company's Common Stock. The shares were retired.
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.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- -------------------------------
At September 30, 1999 the Company had working capital of $1,637,922
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 a loan made to a related party.
Net cash used in operating activities was $132,962 for the first nine
months of 1999 compared to net cash used in operating activities of $268,448 for
the comparable period of 1998. During 1998 bonuses were paid related to the sale
of properties (see note 3) combined with an increase in accounts receivable and
a reduction in accounts payable in 1999.
Analysis of Results of Operations
- ---------------------------------
Three Months Ended September 30, 1999
- -------------------------------------
The $109,122 in oil and gas sales for the three months ended September 30,
1999 is $26,291 less than for the same period in 1998 primarily due to the
decrease in production from the sale of properties and a reduction in price
received in the Company's Oklahoma properties. The $19,982 in interest and other
income is $20,909 less than 1998 mainly due to interest income that was
generated by the funds in escrow from the Haybarn sale. Lease operating expenses
are $15,492 more than 1998 due to an increase in costs. General and
administrative expenses for the three months ended September 30, 1999 decreased
by $298,060 compared to the same period in 1998 because of bonuses paid in 1998
related to the sale of properties.
Nine Months Ended September 30, 1999
- ------------------------------------
The $283,284 in oil and gas sales for the first nine months in 1999 is
$167,188 less than for the same period in 1998 primarily due to the decrease in
production from the sale of properties and a reduction in price received in the
Company's Oklahoma properties and also to the sale of the Haybarn and East
Plateau properties in 1998. Interest and other income has decreased mainly due
to interest income that was generated by the funds in escrow from the Haybarn
sale. Lease operating expenses are $21,437 less than 1998 primarily due to the
sale of the Haybarn and East Plateau properties partially offset by an increase
in costs. Production taxes have decreased also due to the sale. General and
administrative expenses for the first nine months in 1999 decreased by $311,672
compared to the same period in 1998 mainly due to the bonuses paid in
conjunction with the sale of property.
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.
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: November 29, 1999 By: /s/ Frank S. DiGrappa
- ------------------------ -------------------------
Frank S. DiGrappa
Chairman of the Board,
and Treasurer
Dated: November 29, 1999 By: /s/ Thomas L. DiGrappa
- ------------------------ --------------------------
Thomas L. DiGrappa
President and Chief
Operating Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,430,130
<SECURITIES> 0
<RECEIVABLES> 419,480
<ALLOWANCES> 0
<INVENTORY> 9,619
<CURRENT-ASSETS> 1,859,229
<PP&E> 2,423,455
<DEPRECIATION> (1,007,266)
<TOTAL-ASSETS> 3,275,418
<CURRENT-LIABILITIES> 221,307
<BONDS> 128,841
0
0
<COMMON> 30,747
<OTHER-SE> 2,894,523
<TOTAL-LIABILITY-AND-EQUITY> 3,275,418
<SALES> 283,284
<TOTAL-REVENUES> 351,793
<CGS> 138,932
<TOTAL-COSTS> 246,423
<OTHER-EXPENSES> 289,037
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (183,667)
<INCOME-TAX> 69,794
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (113,873)
<EPS-BASIC> (.04)
<EPS-DILUTED> 0
</TABLE>
