SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ending September 30, 1996 Commission File #0-5704
MAYNARD OIL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 75-1362284
(State or other jurisdic- (IRS Employer
tion of incorporation) Identification No.)
8080 N. Central Expressway, Suite 660, Dallas, Texas 75206
Registrant's telephone number, including area code: (214) 891-8880
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, 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 November 11, 1996.
4,889,450 shares of common stock, par value $0.10
MAYNARD OIL COMPANY AND SUBSIDIARIES
Index to Consolidated Financial Statements and Schedules
Page
Part I. Financial Information
Consolidated Balance Sheets
September 30, 1996 and December 31, 1995
Consolidated Statements of Operations
Nine Months and Three Months ended
September 30, 1996 and 1995
Consolidated Statements of Shareholders' Equity
Nine Months ended September 30, 1996
Consolidated Statements of Cash Flows
Nine Months ended September 30, 1996 and 1995
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information
Item 6. Exhibit and Report on Form 8-K
Signatures
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
September 30 December 31,
1996 1995
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $20,272,042 $ 6,138,903
Accounts receivable, trade 4,725,176 3,297,933
Other current assets 461,874 465,426
Total current assets 25,459,092 9,902,262
Property and equipment, at cost:
Oil and gas properties, successful
efforts method 102,604,153 111,473,388
Other property and equipment 533,353 507,953
103,137,506 111,981,341
Less accumulated depreciation and
amortization (48,378,347) (49,045,024)
Net property and equipment 54,759,159 62,936,317
$80,218,251 $72,838,579
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 5,000,000 $ 4,812,500
Accounts payable 3,671,638 4,126,013
Accrued expenses 1,554,492 920,653
Income taxes payable 783,596 412,695
Total current liabilities 11,009,726 10,271,861
Deferred income taxes 2,762,510 2,212,510
Long-term debt 17,500,000 21,250,000
Shareholders' equity:
Preferred stock of $.50 par value.
Authorized 1,000,000 shares; none
issued -- --
Common stock of $.10 par value.
Authorized 20,000,000 shares;
4,889,470 and 4,889,970 shares
issued and outstanding at September
30, 1996 and December 31, 1995,
respectively 488,947 488,997
Additional paid-in capital 18,831,138 18,831,138
Retained earnings 29,625,930 19,784,073
Total shareholders' equity 48,946,015 39,104,208
Commitments $80,218,251 $72,838,579
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Operations
<CAPTION>
Nine Months ended Three Months ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales and royalties $22,951,258 $15,160,524 8,075,656 $ 5,056,361
Interest and other 382,661 460,633 150,289 222,550
Gain on sale of assets 6,176,109 1,010,806 5,694,865 870,405
29,510,028 16,631,963 13,920,810 6,149,316
Costs and expenses:
Operating expenses 7,539,495 6,328,838 2,512,760 2,309,875
Exploration, dry holes and
abandonments 196,691 130,407 11,024 23,426
General and administrative 890,137 635,666 368,731 200,851
Depreciation and amortization 7,054,655 4,960,876 2,326,365 1,725,969
Interest and other 1,283,188 719,541 368,702 279,509
16,964,166 12,775,328 5,587,582 4,539,630
Income before income taxes 12,545,862 3,856,635 8,333,228 1,609,686
Income tax expense 2,700,000 945,500 1,450,000 395,500
Net income $ 9,845,862 $ 2,911,135 $ 6,883,228 $1,214,186
Weighted average number of common
shares outstanding 4,889,768 4,890,801 4,889,607 4,889,912
Net income per common share $2.01 $ .60 $1.41 $ .25
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
Nine Months Ended September 30, 1996
(Unaudited)
<CAPTION>
Additional
Common Stock Paid-in
Capital Retained
Shares Amount Amount Earnings Total
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 4,889,970 $488,997 $18,831,138 $19,784,073 $39,104,208
Net income -- -- -- 9,845,862 9,845,862
Purchase of common stock (500) (50) -- (4,005) (4,055)
Balance at September 30, 1996 4,889,470 $488,947 $18,831,138 $29,625,930 $48,946,015
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<CAPTION>
Nine Months Ended September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $9,845,862 $2,911,135
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,054,655 4,960,876
Deferred income taxes 550,000 150,000
Dry holes and abandonments 180,224 95,684
Current year costs of dry holes and
abandonments (90,514) (95,684)
(Gain) on disposition of assets (6,176,109) (1,010,806)
(Increase) decrease in current assets:
Accounts receivable (1,427,243) (179,394)
Recoverable income taxes -- 320,500
Inventories 27,332 54,051
Prepaid expenses and other current assets (23,780) 12,539
Increase (decrease) in current liabilities:
Accounts payable (454,375) 2,010,301
Accrued expenses 633,839 465,432
Income taxes payable 370,901 479,369
Net cash provided by operating
activities 10,490,792 10,174,003
Cash flows from investing activities:
Proceeds from disposition of assets 8,892,728 3,404,198
Additions to property and equipment (1,683,826) (13,717,831)
Net cash provided (used) by
investing activities 7,208,902 (10,313,633)
Cash flows from financing activities:
Proceeds from issuance of long-term debt -- 9,500,000
Principal payments on long-term debt (3,562,500) (2,656,250)
Purchase of common stock (4,055) (161,818)
Exercise of stock options -- 108,000
Net cash provided (used) by
financing activities (3,566,555) 6,789,932
Net increase in cash and cash
equivalents 14,133,139 6,650,302
Cash and cash equivalents at beginning of year 6,138,903 5,836,389
Cash and cash equivalents at end of period $ 20,272,042 $12,486,691
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
MAYNARD OIL COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1996
1. In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, consisting of all recurring
adjustments, necessary to present fairly the Company's financial position
as of September 30, 1996 and December 31, 1995, the results of operations
for the nine months ended September 30, 1996 and 1995 and changes in cash
and cash equivalents for the nine months ended September 30, 1996 and 1995.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements in the 1995 Annual Report
to Shareholders.
2. Net income for the nine months ended September 30, 1996 is not necessarily
indicative of the results of the operations of Maynard Oil Company and
Subsidiaries for the year ending December 31, 1996, and is subject to audit
adjustments at year-end.
3. Net income per common share is based on the weighted average number of
shares outstanding in each period, which was 4,889,768 and 4,890,801
shares at September 30, 1996 and 1995, respectively. There is no
difference in primary and fully diluted earnings per share since all
outstanding stock options were exercised in 1995.
4. During 1996, the Company sold its interest in approximately 130 producing
wells in Texas and Oklahoma for cash proceeds of $8,892,728, realizing a
gain totaling $6,176,109. This gain was generated through transactions
with seven separate entities.
5. The provision for income taxes consists of the following (thousands of
dollars):
Nine Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
Current $2,150 $ 796 $ 700 $ 396
Deferred 550 150 750 --
$2,700 $ 946 $1,450 $ 396
6. In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of." This statement requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. No. 121
establishes guidelines for determining recoverability based on future net
cash flows from the use of the asset and for the measurement of the
impairment loss. Impairment loss under SFAS 121 is calculated as the
difference between the carrying amount of the asset and its fair value.
Any impairment loss is recorded in the period in which the recognition
criteria are first applied and met.
Under the successful efforts method of accounting for oil and gas
operations, the Company periodically assessed its proved properties for
impairments by comparing the aggregate net book carrying amount of all
proved properties with their aggregate future net cash flows. At December
31, 1995, the future net cash flows of these proved properties was $86.47
million as compared to the net book carrying amount of $62.67 million. The
new statement requires the impairment review be performed at the lowest
level of asset groupings for which there are identifiable cash flows. In
the case of the Company, this results in a field by field impairment
review.
The Company adopted SFAS 121 on January 1, 1996 recognizing a $57,000
impairment loss which is included in depreciation and amortization expense
on the Consolidated Statement of Operations for the nine months ended
September 30, 1996. The loss was recorded as the difference between the
asset book carrying amounts and future cash flow projections, giving
consideration to recent prices, pricing trends, probable and possible
reserve recoveries, and discount rates. These projections represent the
Company's best estimate of fair value based on the information available.
7. Certain reclassification of 1995 accounts have been made to conform to the
1996 presentation.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995
The Company reported net income of $9,845,862, or two dollars and one cent
per share, on revenues of $29,510,028 for the nine months ended September 30,
1996 compared with net income of $2,911,135, or sixty cents per share, on
revenues of $16,631,963 for the same period a year ago. Earnings for the 1996
period were favorably affected by a $6,176,109 gain from the sale of producing
properties, $1.26 per share. The prior year nine months included a gain from
the sale of producing properties which totaled $1,010,806, or $.21 per share.
Oil and gas revenues improved 51% between the two nine month periods
presented. Volumes produced and prices received for each product increased as
follows:
Nine Months Ended
September 30, September 30,
1996 1995
Oil Sales
Barrels 919,911 700,038
Average Price $19.90 $17.15
Gas Sales
MCF (Thousand Cubic Feet) 2,368,235 2,059,217
Average Price $ 1.96 $ 1.45
On a dollar basis, operating expenses reflected an increase of
$1,210,657. However, when converted to a net equivalent barrel basis ("NEB",
conversion of 6 mcf equal to 1 NEB), the current period reflects a thirty-three
cent per barrel reduction - $5.74 per NEB during 1996 compared to $6.07 during
1995.
Exploration costs climbed 51% between the two nine month periods.
During 1996, the Company impaired a portion of its undeveloped leasehold
associated with its three-dimensional seismic programs and also drilled an
exploratory dry hole, while the 1995 period included only the results of a dry
hole.
General and administrative expenses rose 40% to reflect the accrual of
employee phantom stock options relating to an increase in the Company's common
stock price from $6.75 per share at the beginning of the year to $9.625 per
share at September 30, 1996.
Depreciation and amortization expense, which includes an impairment of
$57,000 related to the adoption of SFAS 121 (see Note 6 to the Consolidated
Financial Statements), rose from $4.76 per NEB in 1995 to $5.37 per NEB in 1996,
a 13% increase.
Interest expense increased from $719,541 in the 1995 period to
$1,283,188 in the current year period, reflecting the increase in bank debt from
$13,843,750 a year ago to $22,500,000 currently.
Quarter Ended September 30, 1996 Compared with Quarter Ended September 30, 1995
For the quarter ended September 30, 1996, the Company earned $6,883,228, or
one dollar and forty-one cents per share, compared with net income of
$1,214,186, or twenty-five cents per share, for the same quarter a year ago.
The current quarter's results improved because the majority of the property
sales referred to in Note 4 to the Consolidated Financial Statements occurred
during this quarter and also because oil and gas revenues rose.
Liquidity and Capital Resources
The Company ended its first nine months of 1996 with working capital of
approximately $14,449,000 compared to working capital of approximately
$6,191,000 year ago. The improvement in working capital is attributable to the
proceeds received from the property sales mentioned above. At September 30,
1996 the Company's total debt was $22,500,000, which was utilized to finance the
acquisition of oil and gas properties over the last year and a half. The
Company believes that it has sufficient cash being generated from operating
activities or additional borrowing capacity to fund its planned activities.
PART II. OTHER INFORMATION
ITEM 6. Exhibit and Report on Form 8-K
(a) Exhibit:
Exhibit 27 - Financial Data Schedule
(b) Report on Form 8-K:
On October 15, 1996, the Company filed Form 8-K with the
Securities and Exchange Commission to report the sale of
producing oil and gas properties. Pro forma financial
information was included in the report.
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.
MAYNARD OIL COMPANY
By: /s/ Glenn R. Moore
------------------------------
Glenn R. Moore
President
By: /s/ Kenneth W. Hatcher
------------------------------
Kenneth W. Hatcher
Vice President of Finance
Dated: November 14, 1996
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 20,272
<SECURITIES> 0
<RECEIVABLES> 4,775
<ALLOWANCES> 50
<INVENTORY> 257
<CURRENT-ASSETS> 25,459
<PP&E> 103,138
<DEPRECIATION> 48,378
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0
0
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<OTHER-SE> 48,457
<TOTAL-LIABILITY-AND-EQUITY> 80,218
<SALES> 22,951
<TOTAL-REVENUES> 29,510
<CGS> 7,539
<TOTAL-COSTS> 16,964
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,283
<INCOME-PRETAX> 12,546
<INCOME-TAX> 2,700
<INCOME-CONTINUING> 9,846
<DISCONTINUED> 0
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<CHANGES> 0
<NET-INCOME> 9,846
<EPS-PRIMARY> 2.01
<EPS-DILUTED> 2.01
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