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 December 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
l934 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 February 4, 2000 was 25,108,226.
<PAGE>
MAGELLAN PETROLEUM CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
ASSETS ................................................... (unaudited)
Current assets:
<S> ...................................................................................... <C> <C>
Cash and cash equivalents .............................................................. $ 12,256,557 $ 13,380,699
Accounts receivable .................................................................... 3,478,611 676,710
Marketable securities .................................................................. 495,280 392,973
Reimbursable development costs ......................................................... 159,707 95,743
Inventories ............................................................................ 351,512 215,953
Other assets ........................................................................... 240,061 282,900
------------ ------------
Total current assets ........................................................... 16,981,728 15,044,978
------------ ------------
Marketable securities .................................................................... 2,217,531 1,709,455
------------ ------------
Property and equipment:
Oil and gas properties (successful efforts method) ..................................... 45,749,190 46,430,741
Land, buildings and equipment .......................................................... 1,792,062 1,822,094
Field equipment ........................................................................ 1,349,839 1,373,326
------------ ------------
Total property and equipment ................................................... 48,891,091 49,626,161
Less accumulated depletion, depreciation and amortization .............................. (24,402,107) (22,901,263)
------------ ------------
Net property and equipment ............................................................. 24,488,984 26,724,898
------------ ------------
Other assets ........................................................................... 741,638 754,639
------------ ------------
Total assets ........................................................................... $ 44,429,881 $ 44,233,970
============ ============
LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ....................................................................... $ 2,158,362 $ 1,372,043
Accrued liabilities .................................................................... 700,596 780,570
Income taxes payable ................................................................... 118,080 120,150
------------ ------------
Total current liabilities ...................................................... 2,977,038 2,272,763
------------ ------------
Long term liabilities:
Deferred income taxes .................................................................. 5,542,561 6,060,402
Reserve for future site restoration costs .............................................. 930,906 849,311
------------ ------------
Total long term liabilities .................................................... 6,473,467 6,909,713
------------ ------------
Minority interests ....................................................................... 15,045,043 15,317,698
------------ ------------
Stockholders' equity:
Common stock, par value $.01 per share:
Authorized 50,000,000 shares
Outstanding 25,108,226 shares ........................................................ 251,082 251,082
Capital in excess of par value ......................................................... 43,586,606 43,586,606
------------ ------------
Total capital .......................................................................... 43,837,688 43,837,688
Accumulated deficit .................................................................... (17,932,059) (18,404,824)
Accumulated other comprehensive loss ................................................... (5,971,296) (5,699,068)
------------ ------------
Total stockholders' equity ..................................................... 19,934,333 19,733,796
------------ ------------
Total liabilities, minority interests and stockholders' equity ........................... $ 44,429,881 $ 44,233,970
============ ============
</TABLE>
<PAGE>
MAGELLAN PETROLEUM CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
December 31, December 31,
1999 1998 1999 1998
Revenues:
<S> <C> <C> <C> <C>
Oil sales $ 1,220,774 $ 666,132 $2,033,032 $1,356,302
Gas sales 2,936,405 2,565,181 5,380,764 4,765,022
Other production related revenues 279,709 167,840 467,875 298,198
Interest income 185,224 170,728 370,145 350,539
----------- ----------- ----------- -----------
4,622,112 3,569,881 8,251,816 6,770,061
---------- ---------- ---------- ----------
Costs and expenses:
Production costs 1,376,359 1,025,342 2,341,358 2,101,235
Exploration and dry hole costs 853,824 315,704 1,133,898 1,374,130
Salaries and employee benefits 389,467 375,679 1,016,754 723,332
Depletion, depreciation and amortization 1,214,547 535,426 1,848,243 1,055,097
Auditing, accounting and legal services 74,169 171,534 230,856 352,407
Shareholder communications 107,925 107,413 139,226 141,377
Other administrative expenses 192,444 250,260 429,334 431,880
---------- ---------- ---------- ----------
4,208,735 2,781,358 7,139,669 6,179,458
--------- --------- --------- ---------
Income before income taxes and minority interests 413,377 788,523 1,112,147 590,603
Income tax provision (530,641) 372,386 (302,953) 319,551
------------ ----------- ------------- -----------
Income before minority interests 944,018 416,137 1,415,100 271,052
Minority interests 614,581 357,955 942,335 386,172
----------- ----------- ----------- -----------
Net income (loss) $ 329,437 $ 58,182 $ 472,765 $ (115,120)
=========== =========== =========== ===========
Average number of shares outstanding
Basic 25,108,226 25,032,495 25,108,226 25,025,352
========== ========== ========== ==========
Diluted 25,130,373 25,128,482 25,130,373 25,121,339
========== ========== ========== ==========
Net income per share
Basic and Diluted EPS $ .01 $ $ .02 $
===== == ====== =
</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>
July 1, 1999 ............. 25,108,226 $251,082 $43,586,606 $(18,404,824) $(5,699,068) $19,733,796
Net income ............. -- -- -- 472,765 -- 472,765 $472,765
Currency translation -- -- -- (272,228) -- 272,228
-------
Comprehensive income $200,537
--------- ----- --------- ------- ---- ----- ========
December 31, 1999 ........ 25,108,226 $251,082 $43,586,606 $(17,932,059) $(5,971,296) $19,934,333
======== ======== =========== ============ =========== ===========
</TABLE>
<PAGE>
MAGELLAN PETROLEUM CORPORATION
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six months ended
December 31,
1999 1998
Operating Activities:
<S> ......................................................................... <C> <C>
Net income (loss).......................................................... $ 472,765 $ (115,120)
Adjustments to reconcile net income(loss)
to net cash provided by operating activities:
Depletion, depreciation and amortization ................................ 1,848,243 1,055,097
Deferred income taxes ................................................... (519,911) 140,530
Minority interests ...................................................... 942,335 386,172
Increase (decrease) in operating assets
and liabilities:
Accounts receivable ..................................................... (2,594,372) (345,558)
Reimbursable development costs .......................................... (50,397) (17,089)
Other assets ............................................................ 68,840 68,533
Inventories ............................................................. (105,421) 98,111
Accounts payable and accrued liabilities ................................ 966,574 (196,865)
------------ ------------
Net cash provided by operating activities ................................... 1,028,656 1,073,811
------------ ------------
Investing Activities:
Purchase of marketable securities (net) ................................... (610,383) (318,245)
Net additions to property and equipment ................................... (566,355) (2,288,146)
------------ ------------
Net cash (used) in investing activities ..................................... (1,176,738) (2,606,391)
------------ ------------
Financing Activities:
Dividends to MPAL minority shareholders ................................... (730,709) (686,567)
Exercise of stock options ................................................. -- 40,625
------------ ------------
Net cash (used)in financing activities ............................... .... (730,709) (645,942)
------------ ------------
Effect of exchange rate changes on cash
and cash equivalents ...................................................... (245,351) (101,454)
------------ ------------
Net decrease in cash and cash equivalents ................................... (1,124,142) (2,279,976)
Cash and cash equivalents at beginning of year ............................ 13,380,699 12,436,297
------------ ------------
Cash and cash equivalents at
end of period ........................................................... $ 12,256,557 $ 10,156,321
============ ============
</TABLE>
<PAGE>
MAGELLAN PETROLEUM CORPORATION
PART I - FINANCIAL INFORMATION
December 31, 1999
Item 1. Financial Statements - Notes
The accompanying unaudited condensed consolidated financial statements
include the Company's 51% owned subsidiary, Magellan Petroleum Australia Limited
("MPAL") and have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included. All
such adjustments are of a normal recurring nature. Operating results for the
three month and six month periods ended December 31, 1999 and 1998 are not
necessarily indicative of the results that may be expected for the year ending
June 30, 2000. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-K for the year ended June 30, 1999.
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.
<PAGE>
PART I - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
December 31, 1999
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Anderson Oil & Gas, Inc. ("Anderson"), the operator of the Kotaneelee gas
field, has reported to the Company that development costs totaling approximately
Cdn. $841,000, of which the Company's share is U.S. $15,000, remained to be
recovered at October 31, 1999. The amount of remaining recoverable costs is one
of the issues being contested in the Kotaneelee litigation. The Company claims,
and the defendants deny, that the defendants have made improper charges to the
carried interest account and one defendant (Amoco Canada Oil and Gas) maintains
that the carried interest account should be charged additional amounts for gas
processing fees. Amoco claims that the remaining costs to be recovered at July
31, 1999 were either Cdn. $72,369,000 or Cdn. $33,911,000 depending on inclusion
of interest compared to the operator's reported amount of Cdn. $6,921,000 at the
same date.
Anderson has notified the Company that it will not make any payments to
the carried interest owners, including the Company, until the issue of the
amount of recoverable costs under the carried interest account has been resolved
by the Court. Anderson has stated that it will deposit the Company's share of
net production proceeds in an interest bearing account with an escrow agent.
During December 1999, a motion was filed in Canada by the plaintiffs to direct
Anderson to make timely payments of all current and future amounts due from its
share of field revenues.
Previous projections by the operator indicated that the carried interest
account might reach payout status prior to the end of 1999. Based on production
reports it appears that the payment status was reached during November 1999 and
the Company has accrued its estimated share of revenues from the field for
November and December 1999 of approximately $43,000. Inasmuch as there are
uncertainties as to production levels, gas pricing, field operating expenses and
additional capital expenditures there is no assurance that the Company's share
of field revenues will continue or that the plaintiff will prevail on the motion
to receive timely payments.
The Company's Annual Report on Form 10-K for the year ended June 30,
1999 should be read for a detailed discussion of the Kotaneelee litigation.
Liquidity and Capital Resources
Consolidated
At December 31, 1999, the Company on a consolidated basis had
approximately $15 million in cash and securities.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
A summary of the major changes in cash and cash equivalents during the
period is as follows:
Cash and cash equivalents at beginning of period $13,381,000
Cash provided by operations 1,029,000
Net additions to property and equipment (566,000)
Purchase of marketable securities (610,000)
Dividend to MPAL minority shareholders (731,000)
Other (246,000)
-------------
Cash and cash equivalents at end of period $12,257,000
===========
As to MPC
At December 31, 1999, Magellan Petroleum Corporation ("MPC"), on an
unconsolidated basis, had working capital of approximately $3.8 million. MPC's
annual operating budget is approximately $700,000 and its current cash position
and annual MPAL dividend should be adequate to meet its current cash
requirements. During fiscal 2000, MPC has budgeted approximately $100,000 for
oil and gas exploration compared to the $92,000 expended during fiscal 1999. MPC
has in the past invested and may in the future invest substantial portions of
its cash to maintain its majority interest in MPAL.
During November 1999, MPAL paid a dividend of A.$.05 per share. MPC's
share of this dividend after withholding taxes was approximately $646,000, which
was added to its working capital.
As to MPAL
At December 31, 1999, MPAL had working capital of approximately $12.4
million MPAL has budgeted approximately $3.8 million for exploration in fiscal
2000 as compared to the $2 million expended during fiscal 1999. 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.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
The only item included in accumulated other comprehensive loss is the
Company's currency translation adjustments. Total comprehensive income (loss)
during the three and six month periods ended December 31, 1999 and 1998 were as
follows:
<TABLE>
<CAPTION>
<S> ..................................................................... <C> <C> <C> <C>
Three months ended Six months ended
December 31, .. December 31,
1999 1998 1999 1998
Net income (loss) ....................................................... $ 329,437 $ 58,182 $ 472,765 $(115,120)
Currency translation adjustments ........................................ 202,659 391,338 (272,228) (312,973)
--------- --------- --------- ---------
Total comprehensive income (loss) ....................................... $ 532,098 $ 449,520 $200,537 $(428,093)
========= ========= ========= =========
</TABLE>
Three month period ended December 31, 1999 vs. December 31, 1998.
The Company had consolidated net income of $329,437 for the three month
period ended December 31, 1999 compared to net income of $58,182 for the
comparable 1998 period. The components of consolidated net income for the
comparable periods were as follows:
Three month period ended
December 31,
1999 1998
MPC unconsolidated pretax loss $(195,741) $(203,592)
MPC income tax (113,990) (105,732)
Share of MPAL pretax income 310,536 502,587
Share of MPAL income tax (provision) benefit 328,632 (135,081)
--------- ----------
Consolidated net income $329,437 $ 58,182
========= =========
Net income per share (basic & diluted) $ .01 $ -
===== ====
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Revenues
Oil sales increased by 83% in the current quarter to $1,221,000 from
$666,000 in 1998 because of a 92% increase in oil prices, the 3% Australian
foreign exchange rate increase discussed below and a 22% 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. 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 December 31,
1999 Sales 1998 Sales
---------------------------- ------------------------------
Average price Average price
bbls per bbl bbls per bbl
Australia-Mereenie 48,243 A.$36.23 61,518 A.$18.94
Gas sales increased 14% to $2,936,000 in 1999 from $2,565,000 in 1998
because of the 6% increase in the volume of gas sold, increased prices (up an
average 8%) and the 3% Australian foreign exchange rate increase discussed
below. The volumes in billion cubic feet ("bcf") (before deducting royalties)
and the average price of gas per thousand cubic feet ("mcf") sold during the
periods indicated were as follows:
Three month period ended December 31,
1999 Sales 1998 Sales
----------------------- -------------------------
Average price Average price
bcf per mcf bcf per mcf
Australia: (A.$) (A.$)
Palm Valley
Alice Springs contract .278 2.97 .325 2.98
Darwin contract .560 2.02 .593 2.02
Mereenie:
Darwin contract .681 2.31 .642 2.08
Other .500 3.08 .340 2.72
------- ------
Total 2.019 1.900
===== =====
Other production related revenues increased 67% to $280,000 in 1999
compared to $168,000 in 1998. The reason for this increase was that MPAL's share
of gas pipeline tariffs increased to $261,000 in 1999 compared to $136,000 in
1998.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Interest income increased 8% to $185,000 in 1999 from $171,000 in 1998.
The increase in interest income is the result of the additional funds available
for investment,higher interest rates and the 3% Australian foreign exchange rate
decrease as discussed below.
Costs and Expenses
Production costs increased 34% in 1999 to $1,376,000 from $1,025,000 in
1998. The increase relates to the costs at Mereenie where substantial remedial
work was performed on certain wells and the field facilities. Field production
began in September 1984 and additional remedial work probably will be required
in the future.
Exploration and dry hole costs totaled $854,000 in 1999 compared to
$316,000 in 1998. The 1999 costs related primarily to the work being performed
on MPAL's offshore Western Australia properties.
Salaries and employee benefits increased 4% from $376,000 in 1998 to
$389,000 in 1999. The Australian foreign exchange rate increased 3% during the
1999 period.
Depletion, depreciation and amortization increased 127% from $535,000
in 1998 to $1,215,000 in 1999. The operator of the Mereenie field recently
proposed a program for additional drilling and capital improvements. The
estimated cost of these proposed expenditures increased the amount of
depletion by approximately $452,000 in the 1999 period. In addition, there
was a 4% net decrease in reserves used to calculate the depletion rate
during the 1999 period and a 3% increase in the Australian exchange rate
discussed below.
Auditing, accounting and legal expenses decreased 57% from $172,000 in
1998 to $74,000 in 1999. The expense in the 1998 period related in part to legal
and tax advice sought in connection with an unsuccessful bid to acquire certain
oil and gas properties in Australia.
Shareholder communications increased 0% from $107,000 in 1998 to
$108,000 in 1999.
Other administrative expenses decreased 23% from $250,000 in 1998 to
$192,000 in 1999. Consulting and Insurance expenditures decreased during the
1999 period.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Income Taxes
Income tax expense decreased from a $372,000 expense in 1998 to a tax
benefit of $531,000 in 1999.Australia has enacted corporate tax rate reductions
for the fiscal year ending June 30, 2001 (36% to 34%) and for the fiscal year
ending June 30, 2002 (34% to 30%). At December 31, 1999, the Company recorded a
$721,000 benefit in the amount of deferred income tax payable to reflect the
change in rates. The components of income tax expense between MPC and MPAL were
as follows:
1999 1998
---- ----
MPC (Australian withholding tax) $114,000 $106,000
MPAL (645,000) 266,000
----------- ---------
Consolidated tax provision (benefit) $(531,000) $372,000
========== ========
Exchange Effect
The value of the Australian dollar relative to the U.S. dollar
increased to $.6560 at December 31, 1999 compared to a value of $.6521 at
September 30, 1999. This resulted in a $203,000 credit to the foreign currency
translation adjustments account for the three month period ended December 31,
1999. The average exchange rate used to translate MPAL's operations in Australia
was $.6438 for the quarter ended December 31, 1999, which is a 3% increase
compared to the $.6240 rate for the quarter ended December 31, 1998.
Six month period ended December 31, 1999 vs. December 31, 1998.
The Company had consolidated net income of $472,765 for the six month
period ended December 31, 1999 compared to a net loss of $115,120 for the
comparable 1998 period. The components of consolidated net income (loss)
for the comparable periods were as follows:
Six month period ended
December 31,
1999 1998
MPC unconsolidated pretax loss $(393,266) $ (405,863)
MPC income tax (113,990) (105,732)
Share of MPAL pretax income 767,463 504,791
Share of MPAL income tax(provision)benefit) 212,558 (108,316)
----------- ------------
Consolidated net income (loss) $ 472,765 $ (115,120)
========= ===========
Net income (loss) per share (basic & diluted) $ .02 $ ( - )
======= =======
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Revenues
Oil sales increased by 50% in the current period to $2,033,000 from
$1,356,000 in 1998 because of a 70% increase in oil prices and the 6% Australian
foreign exchange increase as discussed below which was partially offset by a 23%
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. 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:
Six month period ended December 31,
1999 1998
Average price Average price
bbls per bbl bbls per bbl
Australia-Mereenie 97338 A.$33.89 125,807 A.$19.91
Gas sales increased 13% to $5,703,000 in 1999 from $5,381,000 in 1998
because of the increased prices (up an average 7%), 6% Australian foreign
exchange increase as discussed below and a 2% increase in the volume of gas
sold. Total gas volumes are expected to continue at least at current levels in
the short term. The volumes in billion cubic feet ("bcf"), (before deducting
royalties) and the average price of gas per thousand cubic feet ("mcf") sold
during the periods indicated were as follows:
Six month period ended December 31,
1999 1998
Average price Average price
bcf per mcf bcf per mcf
Australia: (A.$) (A.$)
Palm Valley
Alice Springs contract .569 2.95 .611 2.97
Darwin contract 1.134 2.02 1.315 2.02
Mereenie:
Darwin contact 1.257 2.27 1.168 2.04
Other .792 3.03 .585 2.70
----- ---- ----- ----
Total 3.752 3.679
===== =====
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Other production related revenues increased 57% to $468,000 in 1999
compared to $298,000 in 1998. The reason for this increase was that MPAL's share
of gas pipeline tariffs increased to $420,000 in 1999 compared to $235,000 in
1998.
Interest income increased 6% in 1999. The decrease from $351,000 in
1998 to $370,000 in 1999 resulted from the combination of lower interest
rates, and the 14% Australian foreign exchange decrease as discussed below
which was partially offset by additional capital available for investment.
Costs and Expenses
Production costs increased 11% in 1999 to $2,341,000 from $2,101,000 in
1998. The increase relates to the costs at Mereenie where substantial remedial
work was performed on certain wells and the field facilities. Field production
began in September 1984 and additional remedial work probably will be required.
Exploration and dry hole costs totaled $1,134,000 in 1999 compared to
$1,374,000 in 1998. The 1999 costs related primarily to the work being performed
on MPAL's offshore Western Australian properties.
Salaries and employee benefits increased 41% to $1,018,000 from
$723,000 in 1998. The Australian foreign exchange rate increased 6% during
the 1999 period.
Depreciation, depletion and amortization increased 75% in 1999 to 1,848,000
from $1,055,000 in 1998. The operator of the Mereenie field recently proposed a
program for additional drilling and capital improvements. The estimated cost of
these proposed expenditures increased the amount of depletion by approximately
$452,000 in the 1999 period. In addition, there was a 4% net decrease in
reserves used to calculate the depletion rate during the 1999 period and a 3%
increase in the Australian exchange rate discussed below.
Auditing, accounting and legal services decreased 34% in 1999 to $231,000
from $352,000 in 1998. The expense in the 1998 period related inpart to legal
and tax advice sought in connection with an unsuccessful bid to acquire certain
oil and gas properties in Australia.
Shareholder communications decreased 2% in 1999 to $139,000 compared to
$141,000 in 1998.
Other administrative expenses decreased 1% from $432,000 in 1998 to
$429,000 in 1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Income Taxes
Income tax expense decreased from a $320,000 expense in 1998 to a tax
benefit of $303,000 in 1999. Australia has enacted corporate tax rate reductions
for the fiscal year ending June 30, 2001 (36% to 34%) and for the fiscal year
ending June 30, 2002 (34% to 30%). At December 31, 1999, the Company recorded a
$721,000 benefit in the amount of deferred income tax payable to reflect the
change in rates. The components of income tax expense between MPC and MPAL were
as follows:
1999 1998
---- ----
MPC (Australian withholding tax) $114,000 $106,000
MPAL (417,000) 214,000
---------- ---------
Consolidated tax (benefit) $303,000 $320,000
======== ========
Exchange Effect
The value of the Australian dollar relative to the U.S. dollar
decreased to $.6560 at December 31, 1999 compared to a value of $.6675 at June
30, 1999. This resulted in a $272,000 charge to the foreign currency translation
adjustments account for the six month period ended December 31, 1999. The 2%
decrease in the value of the Australian dollar decreased the reported asset and
liability amounts in the balance at December 31, 1999 from the June 30, 1999
amounts. The average exchange rate used to translate MPAL's operations in
Australia was $.6470 for the six month period ended December 31, 1999, which is
a 6% increase compared to the $.6114 rate for the period ended December 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 (including those
classified as cash and cash equivalents) in marketable securities. At December
31, 1999, the carrying value of such investments was approximately $14.8
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 first half of fiscal 2000, the value of the Australian
dollar relative to the U.S. dollar decreased 2% and reduced the reported asset
amounts at December 31, 1999 from the June 30, 1999 amounts.
<PAGE>
PART II - OTHER INFORMATION
MAGELLAN PETROLEUM CORPORATION
December 31, 1998
MAGELLAN PETROLEUM CORPORATION
PART II - OTHER INFORMATION
December 31, 1999
Item 4. Submission of Matters to a Vote of Security Holders.
(a) On December 2, 1999, the Company held its 1999 Annual
General Meeting of Stockholders.
(b) The following directors were reelected as directors of the
Company. The vote was as follows:
Shares Stockholders
For Withheld For Withheld
James R. Joyce 21,013,693 598,031 2,592 228
Timothy L. Largay 21,015,034 596,690 2,594 226
(c) The firm of Ernst & Young LLP, was appointed as the
Company's independent auditors for the year ending June 30, 2000. The vote was
as follows:
Shares Stockholders
For 21,037,381 2,619
Agains 239,896 81
Abstain 334,447 120
Item 5. Other Information.
During early February 2000, the first of two more crestal
wells began drilling in the Mereenie field. These wells will be used to increase
sales gas deliverability for existing contracts.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
<PAGE>
16
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: February 11, 2000 By /s/ James R. Joyce
James R. Joyce, President and
Chief Financial and Accounting Officer
<PAGE>
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