UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ____________________
Commission file number 1-5507
MAGELLAN PETROLEUM CORPORATION
................................................................................
(Exact name of registrant as specified in its charter)
DELAWARE 06-0842255
................................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
149 Durham Road, Madison, Connecticut 06443
................................................................................
(Address of principal executive offices) (Zip Code)
(203) 245-7664
................................................................................
(Registrant's telephone number, including area code)
................................................................................
(Former name, former address and former fiscal year,
if changed since last report)
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 for 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.
|X| Yes |_| No
The number of shares outstanding of the issuer's single class of common
stock as of May 4, 1999 was 25,032,495.
<PAGE>
MAGELLAN PETROLEUM CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998
------------ ------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 11,405,199 $ 12,436,297
Accounts receivable 961,999 567,175
Marketable securities 1,568,811 1,265,495
Reimbursable development costs 23,912 191,266
Inventories 182,269 218,359
Other assets 307,932 296,933
------------ ------------
Total current assets 14,450,122 14,975,525
------------ ------------
Marketable securities 1,710,597 1,201,890
------------ ------------
Property and equipment:
Oil and gas properties (successful efforts method) 41,244,829 39,196,101
Land, buildings and equipment 1,704,922 1,510,666
Field equipment 1,300,245 1,262,464
------------ ------------
Total property and equipment 44,249,996 41,969,231
Less accumulated depletion, depreciation and amortization (21,092,725) (18,949,917)
------------ ------------
Net property and equipment 23,157,271 23,019,314
------------ ------------
Other assets 596,258 582,251
------------ ------------
Total assets $ 39,914,248 $ 39,778,980
============ ============
LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,282,208 $ 1,918,880
Accrued liabilities 709,315 806,150
------------ ------------
Total current liabilities 1,991,523 2,725,030
------------ ------------
Long term liabilities:
Deferred income taxes 6,308,138 5,854,261
Reserve for future site restoration costs 769,740 657,288
------------ ------------
Total long term liabilities 7,077,878 6,511,549
------------ ------------
Minority interests 12,810,685 13,123,313
------------ ------------
Stockholders' equity:
Common stock, par value $.01 per share:
Authorized 50,000,000 shares
Outstanding 25,032,495 and 24,982,495 shares, respectively 250,325 249,825
Capital in excess of par value 43,572,363 43,532,238
------------ ------------
Total capital 43,822,688 43,782,063
Accumulated deficit (19,614,512) (19,350,036)
Accumulated other comprehensive loss (6,174,014) (7,012,939)
------------ ------------
Total stockholders' equity 18,034,162 17,419,088
------------ ------------
Total liabilities, minority interests and stockholders' equity $ 39,914,248 $ 39,778,980
============ ============
</TABLE>
<PAGE>
MAGELLAN PETROLEUM CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
Revenues:
<S> <C> <C> <C> <C>
Oil sales $ 492,143 $ 851,429 $ 1,848,445 $ 3,224,357
Gas sales 2,500,074 2,425,972 7,265,096 8,174,007
Other production related revenues 153,638 347,489 451,836 911,753
Interest income 173,222 195,481 523,761 559,358
Loss on sale of assets - (636,203) - (636,203)
----------- ----------- ----------- -----------
3,319,077 3,184,168 10,089,138 12,233,272
----------- ----------- ----------- -----------
Costs and expenses:
Production costs 1,640,961 951,573 3,742,196 2,756,787
Exploration and dry hole costs 501,911 265,415 1,876,041 2,049,721
Salaries and employee benefits 324,736 366,296 1,048,068 1,237,233
Depletion, depreciation and amortization 597,979 504,437 1,653,076 1,620,380
Auditing, accounting and legal services 95,259 113,178 447,666 391,204
Shareholder communications 23,529 22,228 164,906 153,928
Other administrative expenses 147,931 218,545 579,811 794,269
Bad debts - - - 239,201
----------- ----------- ----------- -----------
3,332,306 2,441,672 9,511,764 9,242,723
----------- ----------- ----------- -----------
Income (loss) before income taxes and minority interests (13,229) 742,496 577,374 2,990,549
Income tax provision (credit) 98,186 245,655 417,737 1,017,364
----------- ----------- ----------- -----------
Income (loss) before minority interests (111,415) 496,841 159,637 1,973,185
Minority interests 37,941 323,846 424,113 1,264,019
----------- ----------- ----------- -----------
Net income (loss) $ (149,356) $ 172,995 $ (264,476) $ 709,166
============ =========== ============ ===========
Average number of shares outstanding
Basic 25,032,495 24,982,495 25,027,495 24,939,370
========== ========== ========== ==========
Diluted 25,032,495 25,149,934 25,027,495 25,106,882
========== ========== ========== ==========
Net income (loss) per share
Basic and Diluted EPS $(.01) $.01 $(.01) $.03
====== ==== ====== ====
</TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Capital in Other Comprehensive
Number Common excess of Accumulated Comprehensive income
of shares stock par value Deficit loss Total (loss)
--------- ----- --------- ------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C>
June 30, 1998 24,982,495 $249,825 $43,532,238 $(19,350,036) $(7,012,939) $17,419,088 $(26,362,975)
Net income (loss) (264,476) (264,476) (264,476)
Currency translation
adjustments - - - - 838,925 838,925 838,925
Exercise of stock
options 50,000 500 40,125 - - 40,625 -
---------- -------- ----------- ------------ ----------- ----------- ------------
Comprehensive
income (loss) - - - - - - 574,449
---------- -------- ----------- ------------ ----------- ----------- ------------
March 31, 1999 25,032,495 $250,325 $43,572,363 $(19,614,512) $(6,174,014) $18,034,162 $ 25,788,526
========== ======== =========== ============= ============ =========== ============
</TABLE>
<PAGE>
MAGELLAN PETROLEUM CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
March 31,
1999 1998
----------- -----------
Operating Activities:
<S> <C> <C>
Net income (loss) $ (264,476) $ 709,166
Adjustments to reconcile net income
to net cash provided by operating activities:
Exploratory and dry hole costs 420,748 844,156
Depletion, depreciation and amortization 1,653,076 1,815,388
Deferred income taxes 453,877 102,652
Minority interests 424,113 1,264,019
Increase (decrease) in operating assets and liabilities:
Accounts receivable (249,319) 205,950
Reimbursable development costs 189,459 5,807
Other assets (39,013) 118,884
Inventories 76,867 217,222
Accounts payable and accrued liabilities (261,105) (254,533)
----------- -----------
Net cash provided by operating activities 2,404,227 5,028,711
----------- -----------
Investing Activities:
Marketable securities (purchased) sold (812,023) 2,211,205
Net additions to property and equipment (2,257,030) (2,589,979)
----------- -----------
Net cash used in investing activities (3,069,053) (378,774)
----------- -----------
Financing Activities:
Dividends to MPAL minority shareholders (686,567) (1,506,103)
Exercise of MPC stock options 40,625 123,375
----------- -----------
Net cash used in financing activities (645,942) (1,382,728)
----------- -----------
Effect of exchange rate changes on cash
and cash equivalents 279,670 (1,801,279)
----------- -----------
Net increase (decrease) in cash and cash equivalents (1,031,098) 1,465,930
Cash and cash equivalents at beginning of year 12,436,297 12,942,862
----------- -----------
Cash and cash equivalents at end of period $11,405,199 $14,408,792
=========== ===========
</TABLE>
<PAGE>
MAGELLAN PETROLEUM CORPORATION
PART I - FINANCIAL INFORMATION
March 31, 1999
Item 1. Financial Statements - Notes
The information for the three and nine month periods ended March 31,
1999 and 1998, is unaudited but includes all adjustments which the Company
considers necessary for a fair presentation of the results of operations for
those periods. All adjustments are of a normal recurring nature. The
consolidated financial statements include the Company's 50.7% owned subsidiary,
Magellan Petroleum Australia Limited ("MPAL").
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Statements included in Management's Discussion and Analysis of
Financial Condition and Results of Operations which are not historical in nature
are intended to be, and are hereby identified as, "forward looking statements"
for purposes of the "Safe Harbor" Statement under the Private Securities
Litigation Reform Act of 1995. The Company cautions readers that forward looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those indicated in the forward looking
statements.
The Company follows the successful efforts method of accounting for its
oil and gas operations; therefore, the results of operations may vary materially
from quarter to quarter. An active exploration program may result in greater
exploration and dry hole costs. Under this method, the cost of drilling a dry
hole is written off immediately.
As of July 1, 1998, the Company adopted Statement 130, Reporting
Comprehensive Income. Statement 130 establishes new rules for the reporting and
display of comprehensive income and its components; however, the adoption of
this Statement had no impact on the Company's net income or shareholders'
equity. Statement 130 requires unrealized gains or losses on the Company's
available-for-sale securities and foreign currency translation adjustments to be
included in other comprehensive income. Prior to the adoption of Statement 130,
these items were reported separately in stockholders' equity. Prior year
financial statements have been reclassified to conform to the requirements of
Statement 130.
The Company has assessed its Year 2000 readiness and believes that it
is presently compliant. The cost to implement this plan was approximately
$120,000 and is not considered material and would have been incurred in the
normal course of equipment replacement. The Year 2000 change should have no
material impact on the Company's internal operations or financial results.
Although, the Company will be dependent on its suppliers, partners and customers
to make their systems Year 2000 compliant, it does not expect this reliance to
have a material impact on its operations or financial results.
<PAGE>
MAGELLAN PETROLEUM CORPORATION
PART I - FINANCIAL INFORMATION
March 31, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Total comprehensive income (loss) during the three and nine month
periods ended March 31, 1999 and 1998 was as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
March 31, March 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income (loss) $ (149,356) $(172,995) $(264,476) $ 709,166
Currency translation adjustments 1,151,898 191,573 838,925 (2,259,257)
----------- ---------- ---------- -------------
Total comprehensive income (loss) $1,002,542 $ 18,578 $ 574,449 $(1,550,091)
========== ========== ========= ============
</TABLE>
Liquidity and Capital Resources
Consolidated
At March 31, 1999, the Company on a consolidated basis had
approximately $14.7 million in cash and securities.
A summary of the major changes in cash and cash equivalents during the
nine month period ended March 31, 1999 is as follows:
Cash and cash equivalents at beginning of period $12,436,000
Cash provided by operations 2,404,000
Net additions to property and equipment (2,257,000)
Purchase of marketable securities (812,000)
Dividend to MPAL minority shareholders (687,000)
Other 321,000
-----------
Cash and cash equivalents at end of period $11,405,000
===========
As to MPC
At March 31, 1999, Magellan Petroleum Corporation ("MPC"), on an
unconsolidated basis, had working capital of approximately $3.9 million. MPC's
annual operating budget is approximately $700,000. During fiscal 1999, MPC has
budgeted approximately $200,000 for oil and gas exploration compared to the
$111,000 expended during fiscal 1998. MPC has in the past invested and may in
the future invest substantial portions of its cash to maintain its majority
interest in its subsidiary company, Magellan Petroleum Australia Limited
("MPAL").
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
During November 1998, MPAL paid a dividend of A.$.05 per share. MPC's
share of this dividend after withholding taxes was approximately $600,000, which
was added to its working capital.
As to MPAL
At March 31, 1999, MPAL had working capital of approximately $10.3
million. MPAL has budgeted approximately $3.6 million for exploration in fiscal
1999 as compared to the $3.3 million expended during fiscal 1998. The current
composition of MPAL's oil and gas reserves are such that the Company's future
revenues in the long term are expected to be derived from the sale of gas in
Australia.
Results of Operations
Three month period ended March 31, 1999 vs. March 31, 1998.
The Company had a consolidated a net loss of $149,356 for the three
month period ended March 31, 1999 compared to net income of $172,995 for the
comparable 1998 period. The components of consolidated net income for the
comparable periods were as follows:
Three month period ended
March 31,
1999 1998
---------- ----------
MPC unconsolidated pretax loss $(188,328) $(159,491)
Share of MPAL pretax income 88,715 456,931
Share of MPAL income tax provision (49,743) (124,445)
---------- ----------
Consolidated net income (loss) $(149,356) $ 172,995
========== =========
Net income (loss) per share $(.01) $.01
====== ====
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Revenues
Oil sales decreased by 42% in the current quarter to $492,000 from
$851,000 in 1998 because of a 17% decrease in oil prices, the 5% Australian
foreign exchange rate decrease discussed below and a 20% decrease in the number
of units sold. Oil sales are expected to continue to decline unless additional
development wells are drilled to maintain production levels. Low oil prices have
made additional drilling uneconomic. If the recent increase in oil prices
continues, additional wells will be considered after the completion of the
current two gas well drilling program. MPAL is dependent on the operator (65%
control) of the Mereenie field to maintain production. Oil unit sales (before
deducting royalties) in barrels ("bbls") and the average price per barrel sold
during the periods indicated were as follows:
Three month period ended March 31,
1999 Sales 1998 Sales
----------------------- -----------------------
Average price Average price
bbls per bbl bbls per bbl
Australia-Mereenie 57,589 A.$17.84 72,359 A.$21.57
Gas sales increased 3% to $2,500,000 in 1999 from $2,426,000 in 1998
primarily because of a 6% increase in the volume of gas sold which was partially
offset by the 5% Australian foreign exchange rate decrease discussed below. The
volumes in billion cubic feet ("bcf") (before deducting royalties) and the
average price of gas per thousand cubic feet ("mcf") sold during the periods
indicated were as follows:
Three month period ended March 31,
1999 Sales 1998 Sales
--------------------- ----------------------
Average price Average price
bcf per mcf bcf per mcf
(A.$) (A.$)
Australia:
Palm Valley
Alice Springs contract .352 2.98 .301 2.98
Darwin contract .541 2.02 .541 2.02
Mereenie:
Darwin contact .537 2.02 .567 2.05
Other .368 2.80 .287 2.68
----- -----
Total 1.798 1.696
===== =====
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Other production related revenues decreased 56% to $154,000 in 1999
from $347,000 in 1998. The primary reason for this decrease was that MPAL's
share of gas pipeline tariffs decreased to $124,000 in 1999 from $318,000 in
1998 because of a continuing dispute regarding the producers' share of the
tariffs. The parties are currently discussing a possible settlement of the
matter.
Interest decreased 11% to $173,000 in 1999 from $195,000 in 1998. The
decrease in interest income is the result of lower interest rates and the 5%
Australian foreign exchange rate decrease discussed below.
Costs and Expenses
Production costs increased 72% in 1999 to $1,641,000 from $952,000 in
1998. The increase relates to the costs at Mereenie where substantial remedial
work was performed on certain wells and the costs associated with the proposed
LPG plant totaling approximately $490,000 which were expensed.
Exploration and dry hole costs totaled $502,000 in 1999 compared to
$265,000 in 1998. Because of a lack of progress in Belize, the remaining costs
of the project totaling $421,000 were written off.
Salaries and employee benefits decreased 11% from $366,000 in 1998 to
$325,000 in 1999. Compensation costs decreased in Australia together with the 5%
Australian foreign exchange rate decrease discussed below.
Depletion, depreciation and amortization increased 19% from $504,000 in
1998 to $598,000 in 1999. The increase is attributable to the capital
expenditures being incurred to upgrade the Central Treatment Plant at Mereenie.
Auditing, accounting and legal expenses decreased 16% from $113,000 in
1998 to $95,000 in 1999. Operational activities during the 1998 period were
greater than in the 1999 period.
Other administrative expenses decreased 32% from $211,000 in 1998 to
$143,000 in 1999. Rent and travel expenses decreased and there was a 5%
Australian foreign exchange rate decrease discussed below.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Income Taxes
Income tax expense decreased from $246,000 in 1998 to $98,000 in 1999
because of MPAL's reduced income. The components of tax income expense between
MPC and MPAL were as follows:
1999 1998
---- ----
MPC $ - $ -
MPAL 98,000 324,000
------- --------
Consolidated $98,000 $324,000
======= ========
Exchange Effect
The value of the Australian dollar relative to the U.S. dollar
increased to $.6343 at March 31, 1999 compared to a value of $.6123 at December
31, 1998. This resulted in a $1,152,000 credit to the foreign currency
translation adjustments account for the three month period ended March 31, 1999.
The average exchange rate used to translate MPAL's operations in Australia was
$.6358 for the quarter ended March 31, 1999, which is a 5% decrease compared to
the $.6669 rate for the quarter ended March 31, 1998.
Nine month period ended March 31, 1999 vs. March 31, 1998.
The Company had a consolidated net loss of $264,476 for the nine month
period ended March 31, 1999 compared to net income of $709,166 for the
comparable 1998 period. The components of consolidated net income for the
comparable periods were as follows:
Nine month period ended
March 31,
1999 1998
------------ ------------
MPC unconsolidated pretax loss $ (594,191) $ (587,576)
MPC income tax (105,732) (1,000)
Share of MPAL pretax income 593,506 1,812,614
Share of MPAL income tax provision (158,059) (514,872)
------------ ------------
Consolidated net income (loss) $ (264,476) $ 709,166
============ ===========
Net income (loss) per share (basic & diluted) $(.01) $.03
====== ====
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Revenues
Oil sales decreased by 43% in the current period to $1,848,000 from
$3,224,000 in 1998 because of a 24% decrease in oil prices, a 14% decrease in
the number of units sold and the 11% Australian foreign exchange decrease
discussed below. Oil sales are expected to continue to decline unless additional
development wells are drilled to maintain production levels. Low oil prices have
made additional drilling uneconomic. If the recent increase in oil prices
continues, additional wells will be considered after the completion of the
current two gas well drilling program. MPAL is dependent on the operator (65%
control) of the Mereenie field to maintain production. Oil unit sales in barrels
("bbls") and the average price per barrel sold during the periods indicated were
as follows:
Nine month period ended March 31,
1999 Sales 1998 Sales
------------------------ ------------------------
Average price Average price
bbls per bbl bbls per bbl
Australia-Mereenie 183,396 A$19.26 213,089 A.$25.31
Gas sales decreased 11% to $7,265,000 in 1999 from $8,174,000 in 1998
primarily because of the 11% Australian foreign exchange decrease discussed
below which was partially offset by a 2% increase in the volume of gas sold.
Total gas volumes are expected to continue at least at current levels in the
short term. The volumes in billion cubic feet ("bcf"), (before deducting
royalties) and the average price of gas per thousand cubic feet ("mcf") sold
during the periods indicated were as follows:
Nine month period ended March 31,
1999 Sales 1998 Sales
---------------------- ---------------------
Average price Average price
bcf per mcf bcf per mcf
(A.$) (A.$)
Australia:
Palm Valley
Alice Springs contract .962 2.96 .892 2.95
Darwin contract 1.857 2.02 1.761 2.02
Mereenie:
Darwin contact 1.705 2.04 1.604 2.01
Other .953 2.74 1.130 2.76
----- -----
Total 5.477 5.387
===== =====
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Other production related revenues decreased 50% to $452,000 in 1999
compared to $912,000 in 1998. The primary reason for this decrease was that
MPAL's share of gas pipeline tariffs decreased to $359,000 in 1999 from $820,000
in 1998 because of a continuing dispute regarding the producers' share of the
tariffs. The parties are currently discussing a possible settlement of the
matter.
Interest decreased 6% in 1999. The decrease from $559,000 in 1998 to
$524,000 in 1999 resulted from the combination of lower interest rates, and the
5% Australian foreign exchange decrease discussed below which was partially
offset by additional capital available for investment.
Costs and Expenses
Production costs increased 36% in 1999 to $3,742,000 from $2,757,000 in
1998. The increase relates to the costs at Mereenie where substantial remedial
work was performed on certain wells and the costs associated with the LPG plant
totaling $490,000 which were expensed.
Exploration and dry hole costs totaled $1,876,000 in 1999 compared to
$2,050,000 in 1998. The costs in 1999 relate primarily to the cost of drilling
the Schilling-1 well offshore Western Australia which was plugged and abandoned
during the first quarter of the fiscal year and the Belize project which was
written off in the current quarter.
Salaries and employee benefits decreased 15% from $1,237,000 in 1998 to
$1,048,000. Compensation costs decreased in Australia together with the 11%
Australian foreign exchange rate decrease discussed below.
Depreciation, depletion and amortization increased 2% in 1999 to
$1,653,000 from $1,620,000 in 1998.
Auditing, accounting and legal services increased 14% in 1999 to
$448,000 from $391,000 in 1998. The increase in the 1999 period relates to the
legal and tax advice sought in connection with an unsuccessful bid to acquire
certain oil and gas properties in Australia.
Other administrative expenses decreased 27% from $794,000 in 1998 to
$580,000 in 1999. MPAL's rent, business taxes and travel expenses decreased
during the 1998 period. Rent expense decreased in the 1998 period because MPAL
renegotiated its Brisbane office lease. The 1998 period included a stamp duty on
the consolidation of certain properties. During the 1999 period, there was a
substantial decrease in MPAL's foreign operations which reduced the related
travel expenses.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Income Taxes
Income tax expense decreased from $1,017,000 in 1998 to $418,000 in
1999. The effective income tax rate for 1999 was 72% compared to 34% in 1998.
The statutory income tax rate in Australia is 36%. In 1999, there was no tax
benefit recognized on the $421,000 Belize project write off. In addition, there
was no Australian withholding tax on MPC's 1998 dividend from MPAL compared to
the $106,000 withholding tax in 1999. Generally, there is no Australian
withholding tax on dividends in any year that a corporation tax pays income
taxes. The components of tax income expense between MPC and MPAL were as
follows:
1999 1998
---- ----
MPC $ 106,000 $ 1,000
MPAL 312,000 1,016,000
---------- ----------
Consolidated $ 418,000 $1,017,000
========== ==========
Exchange Effect
The value of the Australian dollar relative to the U.S. dollar
increased to $.6343 at March 31, 1999 compared to a value of $.6194 at June 30,
1998. This resulted in a $839,000 credit to the foreign currency translation
adjustments account for the nine month period ended March 31, 1999. The 2%
increase in the value of the Australian dollar decreased the reported asset and
liability amounts in the balance at March 31, 1999 from the June 30, 1998
amounts. The average exchange rate used to translate MPAL's operations in
Australia was $.6196 for the nine month period ended March 31, 1999, which is a
11% decrease compared to the $.6982 rate for the period ended March 31, 1998.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company does not have any significant exposure to market risk as
the only market risk sensitive instruments are its investments in marketable
securities. At March 31, 1999, the carrying value of such investments was
approximately $3.3 million, which approximates the fair value of the securities.
Since the Company expects to hold the investments to maturity, the maturity
value should be realized. During the nine month period ended March 31, 1999, the
value of the Australian dollar relative to the U.S. dollar increased 2% and
increased the reported asset amounts at March 31, 1999 from the June 30, 1998
amounts.
<PAGE>
MAGELLAN PETROLEUM CORPORATION
PART II - OTHER INFORMATION
March 31, 1999
Item 5. Other Information
During April 1999, MPAL and its partner Beach Petroleum NL were
awarded two exploration blocks in South Australia's Cooper Basin. Both
exploration blocks require expenditures during the five year period of the
permit as follows:
Block CO98I A. $ 4.2 million (U.S. $ 2.7 million)
Block CO98J A. $ 6.1 million (U.S. $ 3.9 million)
During April 1999, MPAL was awarded Block W98-22, offshore Western
Australia in the Canning Basin. The minimum expenditure obligations for the
first three year period totals A.$500,000 (U.S.$317,000). The discretionary
commitment for years 4-6 totals approximately A.$7.3 million (U.S.$4.6 million).
During March 1999, MPAL relinquished its 15% interest in ATP 626P in
Surat Basin, Queensland, Australia.
MPAL expects that EP15, the Ngalia Basin permit, will be allowed to
expire on May 14, 1999, the end of its current three year term.
During April 1999, MPAL and its Mereenie partner began a two well
development/appraisal program. The program is designed to increase field
deliverability to implement the 1997 agreement for the sale of 58 bcf over a ten
year period.
It is unlikely that the proposed LPG plant in the Mereenie oil and gas
field in Australia will be built because the project is currently uneconomic.
A third compressor (800 HP) has been installed in the Palm Valley gas
field to increase the deliverability of the gas being produced.
MPAL is preparing a drilling program for the first of possibly two
wells in ATP 613P in the Maryborough Basin, Queensland. Drilling operations are
expected to commence around mid-year.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
MAGELLAN PETROLEUM CORPORATION
Registrant
Date: May 11, 1999 By /s/ James R. Joyce
--------------------------------------
James R. Joyce, President and
Chief Financial and Accounting Officer
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