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, 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 3,044,644 July 31, 2000
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, 2000
and December 31, 1999 (Unaudited) 3-4
Statements of Operations for the Three
Months Ended June 30, 2000 and 1999 (Unaudited) 5
Statements of Operations for the Six
Months Ended June 30, 2000 and 1999 (Unaudited) 6
Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 (Unaudited) 7
Notes to Unaudited Financial Statements for the Six Months
Ended June 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
<PAGE>
GREAT NORTHERN GAS COMPANY
BALANCE SHEETS
(UNAUDITED)
ASSETS
------
June 30, December 31,
2000 1999
---------- ------------
CURRENT ASSETS:
Cash and cash equivalents $1,709,888 $1,516,081
Trading securities 298,446 --
Accounts receivable:
Oil and gas sales 57,005 43,836
Joint interest billings 2,264 4,336
Affiliate 1,103 1,103
Other 9,619 9,619
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Total current assets 2,078,325 1,574,975
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PROPERTY AND EQUIPMENT, at cost:
Oil and gas properties, accounted for
using the full cost method 2,389,079 2,546,038
Furniture, fixtures and automobile 35,433 35,433
---------- ----------
2,424,512 2,581,471
Less accumulated depreciation, depletion
and amortization 1,071,440 1,013,993
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Net property and equipment 1,353,072 1,567,478
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$3,431,397 $3,142,453
========== ==========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 3
<PAGE>
GREAT NORTHERN GAS COMPANY
BALANCE SHEETS - CONTINUED
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
------------ ------------
CURRENT LIABILITIES:
Accounts payable:
<S> <C> <C>
Oil and gas sales $ 161,728 $ 124,360
Income taxes 111,831 64,886
Other 5,979 9,667
------------ ------------
Total current liabilities 279,538 198,913
------------ ------------
DEFERRED INCOME TAXES 111,261 84,978
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value;
authorized 50,000,000 shares,
issued 3,044,644 shares at
June 30, 2000 and 3,072,690 at
December 31, 199 30,446 30,727
Additional paid-in-capital 38,642,696 38,674,814
Accumulated deficit (35,632,544) (35,846,979)
------------ ------------
Total stockholders' equity 3,040,598 2,858,562
------------ ------------
$ 3,431,397 $ 3,142,453
============ ============
</TABLE>
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 4
<PAGE>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30,
----------------------------
2000 1999
----------- -----------
REVENUES:
Oil and gas sales $ 144,039 $ 113,201
Gain on sale of property 396,567 --
Interest and other income 30,775 19,896
Unrealized loss on trading securities (9,427) --
----------- -----------
561,954 133,097
----------- -----------
EXPENSES:
Lease operating 86,079 46,591
Production taxes 5,708 7,534
Depreciation, depletion and amortization 28,979 37,989
General and administrative 104,114 96,844
----------- -----------
224,880 188,958
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EARNINGS (LOSS) BEFORE INCOME TAXES 337,074 (55,861)
PROVISION FOR INCOME TAX (EXPENSE) BENEFIT:
Current (105,145) --
Deferred (22,943) 21,228
----------- -----------
NET EARNINGS (LOSS) $ 208,986 $ (34,633)
=========== ===========
BASIC EARNINMGS (LOSS) PER SHARE
OF COMMON STOCK $ .07 $ (.01)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,065,910 3,074,690
=========== ===========
The accompanying notes to unaudited financial statements are an
integral part of these statements
Page 5
<PAGE>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended June 30,
---------------------------
2000 1999
------------ -----------
REVENUES:
Oil and gas sales $ 263,660 $ 174,162
Gain on sale of property 396,567 --
Interest and other income 108,893 48,527
Unrealized gain on trading securities 2,213 --
----------- -----------
771,333 222,689
----------- -----------
EXPENSES:
Lease operating 148,079 70,532
Production taxes 8,332 11,826
Depreciation, depletion and amortization 57,447 73,845
General and administrative 211,611 200,188
----------- -----------
425,469 356,391
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EARNINGS (LOSS) BEFORE INCOME TAXES 345,864 (133,702)
PROVISION FOR INCOME TAX (EXPENSE) BENEFIT:
Current (105,145) --
Deferred (26,283) 50,807
----------- -----------
NET EARNINGS (LOSS) $ 214,436 $ (82,895)
=========== ===========
BASIC EARNINMGS (LOSS) PER SHARE
OF COMMON STOCK $ .07 $ (.03)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,069,300 3,076,851
=========== ===========
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 6
<PAGE>
GREAT NORTHERN GAS COMPANY
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
--------------------------
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C>
Net Earnings (Loss) $ 214,436 $ (82,895)
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Gain on sale of property and equipment (396,567) --
Depreciation, depletion and amortization 57,447 73,845
Increase in accounts receivable (11,098) (21,934)
Increase (decrease) in current liabilities 80,625 (18,557)
Deferred income tax expense (benefit) 26,283 (50,807)
Purchase of trading securities (298,446) --
----------- -----------
Net cash used in operating activities (327,320) (100,348)
----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of property 618,778 --
Issuance of note receivable to related party -- (400,000)
Additions to property and equipment (65,252) (294,452)
----------- -----------
Net cash provided by (used in)
investing activities 553,526 (694,452)
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Repurchase of Common Stock (32,399) (3,780)
----------- -----------
Net cash used in financing activities (32,399) (3,780)
----------- -----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 193,807 (798,580)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,516,081 2,075,657
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,709,888 $ 1,277,077
=========== ===========
</TABLE>
The accompanying notes to unaudited financial statements are an
integral part of these statements.
Page 7
<PAGE>
GREAT NORTHERN GAS COMPANY
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 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 six month period ended June 30, 2000 are not
necessarily indicative of the results to be expected for the full year.
Note 2 - Gain on Sale
---------------------
The Company sold of an option to purchase the Fletcher Gulch prospect in
Rio Blanco County, Colorado 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 June 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 second quarter of 2000 the Company repurchased 28,046 shares of
the Company's Common Stock. The shares were retired.
Page 8
<PAGE>
GREAT NORTHERN GAS COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
Liquidity and Capital Resources
-------------------------------
At June 30, 2000 the Company had working capital of $1,798,787 compared to
working capital of $1,376,062 at December 31, 1999.
Net cash used in operating activities was $327,320 for the first six
months of 2000 compared to $100,348 for the comparable period of 1999. Such
change is due to the purchase of trading securities.
Analysis of Results of Operations
---------------------------------
Three Months Ended June 30, 2000
--------------------------------
The $144,039 in oil and gas sales for the first three months ended June
30, 2000 is $30,838 more than the sales for the same period in 1999 mainly due
to an increase in oil and gas prices over the past year. Lease operating
expenses are $39,488 higher than for the same period last year due to costs for
the Foster Gulch and Federal 1-36 wells which started producing in the last
three months as well as from costs associated with the Manta prospect. The
$7,270 increase in general and administrative expenses over the same period last
year can be attributed to costs associated with the preparation and execution of
the sale of the Fletcher Gulch prospect rights.
Six Months Ended June 30, 2000
------------------------------
The $263,660 in oil and gas sales for the first six months of 2000 is
$89,498 more than for the same period in 1999 primarily due to the significant
increase in price received for oil and gas. Lease operating expenses are more
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
<PAGE>
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: August 11, 2000 By: /s/ Frank S. DiGrappa
--------------- ----------------------------
Frank S. DiGrappa
Chairman of the Board,
and Treasurer
Dated: August 11, 2000 By: /s/ Thomas L. DiGrappa
--------------- ---------------------------
Thomas L. DiGrappa
President and Chief
Operating Officer
