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, 2000 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 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 2,806,535 October 31, 2000
Page 1 of 10 sequentially numbered pages.
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GREAT NORTHERN GAS COMPANY
INDEX
PART I. FINANCIAL INFORMATION Page No. (s)
-------------
Balance Sheets as of September 30, 2000
and December 31, 1999 (Unaudited) 3-4
Statements of Operations for the Three
Months Ended September 30, 2000 and 1999 (Unaudited) 5
Statements of Operations for the Nine
Months Ended September 30, 2000 and 1999 (Unaudited) 6
Statements of Cash Flows for the Nine Months
Ended September 30, 2000 and 1999 (Unaudited) 7
Notes to Unaudited Financial Statements for the Nine Months
Ended September 30, 2000 and 1999 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II. OTHER INFORMATION 10
SIGNATURES 10
Page 2
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GREAT NORTHERN GAS COMPANY
BALANCE SHEETS
(UNAUDITED)
ASSETS
------
September 30, December 31,
2000 1999
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $1,456,883 $1,516,081
Trading securities 372,396 --
Accounts receivable:
Oil and gas sales 52,682 43,836
Joint interest billings 85,636 4,336
Affiliate 1,103 1,103
Other 9,619 9,619
---------- ----------
Total current assets 1,978,319 1,574,975
---------- ----------
PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, accounted for
using the full cost method 2,237,521 2,546,038
Furniture, fixtures and automobile 35,433 35,433
---------- ----------
2,272,954 2,581,471
Less accumulated depreciation, depletion
and amortization 1,098,437 1,013,993
---------- ----------
Net property and equipment 1,174,517 1,567,478
---------- ----------
$3,152,836 $3,142,453
========== ==========
The accompanying notes to unaudited financial statements are an integral
part of these statements.
Page 3
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GREAT NORTHERN GAS COMPANY
BALANCE SHEETS - CONTINUED
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September 30, December 31,
2000 1999
------------- -------------
CURRENT LIABILITIES:
Accounts payable:
Oil and gas sales $ 164,018 $ 124,360
Income taxes 44,103 64,886
Other 5,979 9,667
------------ ------------
Total current liabilities 214,100 198,913
------------ ------------
DEFERRED INCOME TAXES 185,753 84,978
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value;
authorized 50,000,000 shares,
issued 2,810,235 shares at
September 30, 2000 and 3,072,690
at December 31, 1999 28,102 30,727
Additional paid-in-capital 38,351,964 38,674,814
Accumulated deficit (35,627,083) (35,846,979)
------------ ------------
Total stockholders' equity 2,752,983 2,858,562
------------ ------------
$ 3,152,836 $ 3,142,453
============ ============
The accompanying notes to unaudited financial statements are an integral
part of these statements.
Page 4
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GREAT NORTHERN GAS COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30,
---------------------------
2000 1999
----------- -----------
REVENUES:
Oil and gas sales $ 142,977 $ 109,122
Interest and other income 17,081 19,982
Unrealized gain on trading securities 24,563 --
----------- -----------
184,621 129,104
----------- -----------
EXPENSES:
Lease operating 52,767 52,299
Production taxes 4,681 4,275
Depreciation, depletion and amortization 26,998 33,646
General and administrative 91,368 88,849
----------- -----------
175,814 179,069
----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES 8,807 (49,965)
PROVISION FOR INCOME TAX (EXPENSE) BENEFIT:
Current -- --
Deferred (3,346) 18,987
----------- -----------
(3,346) 18,987
----------- -----------
NET EARNINGS (LOSS) $ 5,461 $ (30,978)
=========== ===========
BASIC LOSS PER SHARE
OF COMMON STOCK $ -- $ (.01)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,038,750 3,074,690
=========== ===========
The accompanying notes to unaudited financial statements are an integral
part of these statements.
Page 5
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GREAT NORTHERN GAS COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
September 30,
---------------------------
2000 1999
----------- -----------
REVENUES:
Oil and gas sales $ 406,637 $ 283,284
Gain on sale of property 396,567 --
Interest and other income 125,974 68,509
Unrealized gain on trading securities 26,776 --
----------- -----------
955,954 351,793
----------- -----------
EXPENSES:
Lease operating 200,846 122,831
Production taxes 13,012 16,101
Depreciation, depletion and amortization 84,445 107,491
General and administrative 302,979 289,037
----------- -----------
601,282 535,460
----------- -----------
EARNINGS (LOSS) BEFORE INCOME TAXES 354,672 (183,667)
----------- -----------
PROVISION FOR INCOME TAX (EXPENSE) BENEFIT:
Current (34,000) --
Deferred (100,775) 69,794
----------- -----------
(134,775) 69,794
----------- -----------
NET EARNINGS (LOSS) $ 219,897 $ (113,873)
=========== ===========
BASIC EARNINGS (LOSS) PER SHARE
OF COMMON STOCK $ .07 $ (.04)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,058,530 3,076,123
=========== ===========
The accompanying notes to unaudited financial statements are an integral
part of these statements.
Page 6
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<TABLE>
<CAPTION>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
-------------------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Earnings (Loss) $ 219,897 $ (113,873)
Adjustments to reconcile net earnings (loss)
to net cash used in operating activities:
Gain on sale of property and equipment (396,567) --
Unrealized gain on trading securities (26,776) --
Depreciation, depletion and amortization 84,445 107,491
Changes in operating assets and liabilities:
Increase in accounts receivable (90,146) (32,662)
Increase (decrease) in current liabilities 15,187 (21,631)
Deferred income tax expense (benefit) 100,775 (72,287)
Purchase of trading securities (345,620) --
----------- -----------
Net cash used in operating activities (438,805) (132,962)
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of property 786,392 --
Issuance of note receivable to related party -- (400,000)
Repayment of note receivable by related party -- 200,000
Additions to property and equipment (81,310) (308,785)
----------- -----------
Net cash provided by (used in)
investing activities 705,082 (508,785)
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Repurchase of Common Stock (325,475) (3,780)
----------- -----------
Net cash used in financing activities (325,475) (3,780)
----------- -----------
DECREASE IN CASH AND CASH EQUIVALENTS (59,198) (645,527
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,516,081 2,075,657
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,456,883 $ 1,430,130
=========== ===========
The accompanying notes to unaudited financial statements are an integral
part of these statements.
Page 7
</TABLE>
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GREAT NORTHERN GAS COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
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 and results of operations 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, 1999 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, 2000
are not necessarily indicative of the results to be expected for the full year.
Note 2 - Gain on Sale
---------------------
The Company sold an option to purchase the Fletcher Gulch prospect in Rio
Blanco County, CO to Suncor Energy for net proceeds of $618,778. Direct costs of
sale as well as an estimate of capitalized costs based on a ratio of net
proceeds received to the fair market value of the undeveloped property have been
written off against proceeds, resulting in a gain of $396,567.
Note 3 - Income Taxes
---------------------
Deferred tax liability at September 30, 2000 and December 31, 1999
primarily relates to book basis being in excess of tax basis partially offset by
loss carryforwards.
Note 4 - Repurchase of Common Stock
-----------------------------------
During the third quarter of 2000 the Company repurchased 234,409 shares of
the Company's Common Stock. The shares were retired.
Page 8
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GREAT NORTHERN GAS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
Liquidity and Capital Resources
-------------------------------
At September 30, 2000 the Company had working capital of $1,764,219
compared to working capital of $1,376,062 at December 31, 1999.
Net cash used in operating activities was $438,805 for the first nine
months of 2000 compared to $132,962 for the comparable period of 1999. Such
change is primarily due to the purchase of trading securities.
Analysis of Results of Operations
---------------------------------
Three Months Ended September 30, 2000
-------------------------------------
The $142,977 in oil and gas sales for the three months ended September 30,
2000 is $33,855 greater than the sales for the same period in 1999 mainly due to
an increase in oil and gas prices over the past year.
Nine Months Ended September 30, 2000
------------------------------------
The $406,637 in oil and gas sales for the first nine months of 2000 is $123,353
greater than the same period in 1999 primarily due to the significant increase
in price received for oil and gas. Lease operating expenses are $78,015 greater
than 1999 mainly due to the Manta prospect purchased in 1999 and costs
associated with the operation of the Federal 1-36 and Foster Gulch prospects.
Other income has increased over 1999 due to an adjustment relative to the East
Plateau and Rangely sales. Depreciation, depletion, and amortization have
decreased due to an overall decline in quantities of oil and gas sold.
Page 9
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PART II - OTHER INFORMATION
Items 1 through 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 14, 2000
By: /s/ Frank S. DiGrappa
---------------------------------
Frank S. DiGrappa
Chairman of the Board,
and Treasurer
Dated: November 14, 2000
By: /s/ Thomas L. DiGrappa
---------------------------------
Thomas L. DiGrappa
President and Chief
Operating Officer
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