<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20539
(Mark One)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended December 31, 1996
----------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from --------------- to ----------------
For Quarter Ended December 31, 1996 Commission File No. 0-6994
---------------------
MEXCO ENERGY CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-0627918
- - ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
214 W. Texas, Suite 1101, Midland, TX 79701
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (915) 682-1119
NONE
- - ------------------------------------------------------------------
(Former Name, Former Address & 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.
YES X NO
------ ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 31, 1996
- - ---------------------------- --------------------------------
Common stock, $.50 par value 1,423,229
1
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MEXCO ENERGY CORPORATION
Index
Page
Part I. Financial information:
Condensed Balance Sheets as of
March 31, 1996 and December 31, 1996 3
Condensed Statements of Operations
for the three months ended
December 31, 1996 and 1995 4
Condensed Statements of Operations
for the nine months ended December 31, 5
1996 and 1995
Condensed Statements of Cash Flows
for the nine months ended December 31,
1996 and 1995 6
Notes to condensed Financial Statements 7
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8
Part II. Other information: Not Applicable
2
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MEXCO ENERGY CORPORATION
CONDENSED BALANCE SHEETS
December 31, 1996 and March 31, 1996
ASSETS
------
<TABLE>
<CAPTION>
December 31, March 31,
1996 1996
----------- ---------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 148,870 $ 172,112
Accounts Receivable 143,040 108,583
Prepaid Assets 450 0
---------- ----------
Total current assets 292,360 280,695
PROPERTY AND EQUIPMENT
Oil and gas properties-accounted for
under the full cost method 5,802,657 4,900,230
Office furniture and fixtures 2,431 2,431
---------- -----------
5,805,088 4,902,661
Less accumulated depreciation,
depletion and amortization (2,817,950) (2,571,317)
---------- -----------
Net property and equipment 2,987,138 2,331,344
---------- -----------
TOTAL ASSETS $3,279,498 $ 2,612,039
========== ===========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable-trade $ 372,977 $ 32,584
Income taxes payable 5,972 0
---------- ----------
Total current liabilities 378,949 32,584
DEFERRED INCOME TAXES 94,851 34,310
---------- ----------
Total liabilities 473,800 66,894
STOCKHOLDERS' EQUITY
Common Stock-$.50 par value, authorized
5,000,000, issued and outstanding-
1,423,229 711,614 711,614
Paid in capital 1,975,429 1,975,429
Retained Earnings (Accumulated Deficit) 118,655 (141,898)
---------- ----------
Total stockholders' equity 2,805,698 2,545,145
---------- ----------
TOTAL LIABILITIES & EQUITY $3,279,498 $2,612,039
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
MEXCO ENERGY CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
Three months ended December 31,
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Revenues:
Gross revenues from oil and gas
production $ 287,979 $ 176,343
Production costs 93,451 75,647
---------- ----------
Net revenues from oil and gas
production 194,528 100,696
Administrative service charges and
reimbursements 1,252 1,203
---------- ----------
195,780 101,899
---------- ----------
Costs and expenses:
Depreciation, depletion and amortization 84,974 62,919
General and administrative 30,079 19,529
Other income - (7,039)
Interest income (2,151) (6,510)
---------- ----------
112,902 68,899
---------- ----------
Income before income tax expense 82,878 33,000
Income tax expense 21,890 1,498
---------- ----------
NET INCOME $ 60,988 $ 31,502
========== ==========
Net income per share $.04 $.02
========== ==========
Weighted average common shares
outstanding 1,423,229 1,423,229
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
MEXCO ENERGY CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
Nine months ended December 31,
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Revenues:
Gross revenues from oil and gas
production $ 888,866 $ 524,133
Production costs 238,782 201,590
---------- -----------
Net revenues from oil and gas
production 650,084 322,543
Administrative service charges
and reimbursements 3,757 6,176
---------- -----------
653,841 328,719
---------- -----------
Costs and expenses:
Depreciation, depletion and amortization 246,633 179,855
General and administrative 85,813 65,632
Other income (607) (7,990)
Interest income (6,060) (13,461)
---------- -----------
325,779 224,036
---------- -----------
Income before income tax expense 328,062 104,683
Income tax expense 67,509 6,683
---------- -----------
NET INCOME $ 260,553 $ 98,000
========== ===========
Net income per share $.18 $.07
========== ===========
Weighted average common shares
outstanding 1,423,229 1,315,956
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
MEXCO ENERGY CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
Nine Months ended December 31,
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
- - -------------------------------------
Cash received from oil & gas operations $ 845,697 $ 535,570
Cash paid for oil & gas operations 114,080 (238,856)
General & administrative expenses (86,263) (64,282)
Interest received 6,060 13,461
Other cash received 607 7,990
Income taxes paid (996) (38,523)
--------- ---------
Net cash provided by operations 879,185 215,360
Cash flows from investing activities:
- - -------------------------------------
Capital expenditures (945,687) (479,800)
Sales of assets 43,260 1,500
--------- ---------
Net cash used in investing activities (902,427) (478,300)
--------- ---------
Cash flows from financing activities:
- - -------------------------------------
Sale of common stock - 500,000
--------- ---------
Net increase (decrease) in cash & cash
equivalents (23,242) 237,060
Cash & cash equivalents at the beginning
of the period 172,112 220,974
--------- ---------
Cash & cash equivalents at the end
of the period $ 148,870 $ 458,034
========= =========
Reconciliation of net income to net cash
- - ----------------------------------------
provided by operating activities:
---------------------------------
Net income $ 260,553 $ 98,000
--------- ---------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 246,633 179,855
Increase in accounts receivable (34,457) (27,275)
Increase (decrease) in accounts payable 340,393 (4,730)
(Increase) decrease in prepaid expenses (450) 1,350
Increase (decrease) in income taxes payable 66,513 (31,840)
--------- ---------
Total adjustments 618,632 117,360
--------- ---------
Net cash provided by operating activities $ 879,185 $ 215,360
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
MEXCO ENERGY CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments necessary to present fairly the
financial position of the Company as of March 31, 1996 and December 31,
1996, the results of its operations for the three-month and nine-month
periods ended December 31, 1996 and 1995 and the cash flows for the nine-
month periods ended December 31, 1996 and 1995. All adjustments are of a
normal and recurring nature.
The results of operations for the three-month and nine-month periods ended
December 31, 1996 are not necessarily indicative of the results to be
expected for the full year.
The condensed balance sheets as of March 31, 1996 have been prepared based
upon the Registrant's audited balance sheets as of that date.
NOTE B - ACQUISITION OF OIL AND GAS PROPERTIES
In June 1996, the Company purchased an additional 2.5% (net 1.875%) working
interest comprising approximately 520 acres, including eleven (11) wells
located on producing and non-producing oil and gas leases in the Lazy JL
Field, Garza County, Texas.
In July 1996, the Company purchased a 30% (net 22.5%) working interest in
approximately 1,000 acres of non-producing oil and gas leases adjacent to
the Lazy JL Field, Garza County, Texas.
In September 1996, the Company purchased an additional .05% overriding
royalty interest in producing oil and gas leases in the Viejos Field, Pecos
County, Texas.
In December, 1996 the Company purchased a 30% (22.5% net) working interest
in approximately 1,119 acres of non-producing oil and gas leases adjacent
to the Lazy JL Field, Garza County, Texas.
Also in December 1996, the Company purchased an additional .5% (.375% net)
working interest in producing and non-producing oil and gas leases in the
Viejos Field, Pecos County, Texas.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE CONDENSED STATEMENTS OF OPERATIONS
Results of Operations - 3 Months Ended December 31, 1996
--------------------------------------------------------
Operating revenues increased $ 111,636 (63%) from the third quarter of
fiscal 1995 due to increased oil and gas prices and production. Oil and
gas revenues increased $88,103 (88%) and $23,533 (30%) respectively due to
increased numbers of wells, acquisitions of properties and higher oil and
gas prices. The average oil price for the third quarter of 1996 was $24.88
per barrel compared to $17.44 per barrel in the third quarter of 1996. The
average gas price for the third quarter of 1996 was $2.18 per MCF compared
to $1.68 per MCF in the third quarter of 1995.
Production costs increased $17,804 (24%) due to increased production taxes
of $2,438 (22%) and lease operating expenses of $15,366 (27%).
Depreciation, depletion and amortization increased $22,055 (35%) as
compared to the same quarter during the prior year due to the addition of
oil and gas properties.
General and administrative costs increased $10,550 (54%) primarily due to
increased accounting and engineering costs and increased salaries.
Interest income decreased $4,539 (67%) due to decreased funds invested in
money market accounts.
Other income decreased $7,039 (100%) primarily due to the non-recurrence of
gathering fees collected at the Viejos Field Gas Gathering Unit in Pecos
County, Texas.
During the quarter, the Company participated in the successful drilling and
completion of three (3) wells (each with approximately an 8.2% working
interest and a 6.2% net revenue interest) in the Viejos Field, Pecos
County, Texas. The Company also participated in the successful completion
of four (4) wells (each with a 30% working interest and a 22.5% net revenue
interest) in the Lazy JL Field, Garza County, Texas. The Company
participated in the unsuccessful drilling attempt of one well in Howard
County, Texas resulting in dry hole costs of approximately $57,000.
Results of Operations - 9 Months Ended December 31, 1996
--------------------------------------------------------
Operating revenues increased $364,733 (70%) from the first nine months of
fiscal 1995 due to increased oil and gas prices and production. Oil and
gas revenues increased $231,915 (69%) and $132,818 (69%) respectively due
to increased numbers of wells, acquisitions of properties and higher oil
and gas prices. The average oil price for the first nine months of 1996
was $22.21 per barrel compared to $17.14 per barrel in the first nine
months of
8
<PAGE>
1995. The average gas price for the first nine months of 1996 was $2.16
per MCF compared to $1.44 per MCF in the first nine months of 1995.
Production costs increased $37,192 (18%) due to increased production taxes
of $19,464 (63%) and lease operating expenses of $17,728 (10%).
Revenue from administrative service charges and reimbursements decreased
$2,419 (39%) due to non-recurrence of operating overhead charges in 1995
resulting from the plugging of nine wells operated by the Company.
Depreciation, depletion and amortization increased $66,778 (37%) due to the
addition of oil and gas properties.
General and administrative costs increased $20,181 (31%) due primarily to
increased accounting and engineering costs and increased salaries.
Interest income decreased $7,401 (55%) due to decreased funds invested in
money market accounts.
During the nine months, the Company participated in the successful drilling
and completion of four (4) wells (each approximately a 7.9% working
interest and a 5.9% net revenue interest) in the Viejos Field, Pecos
County, Texas. The Company also participated in the successful completion
of five (5) wells (one with a 37.5% working interest and a 28.125% net
revenue interest and the other four each with a 30% working interest and a
22.5% net revenue interest) in the Lazy JL Field, Garza County, Texas. The
Company participated in the unsuccessful drilling attempt of one well in
Howard County, Texas resulting in dry hole costs of approximately $57,000.
Financial Condition
-------------------
Working capital decreased by $362,331 (146%) as compared to March 31, 1996
due to property acquisitions and drilling costs.
In August 1996, the Registrant entered into a loan agreement providing a
revolving line of credit of $500,000 collateralized by a deed of trust,
covering substantially all of the Registrant's properties. Such loan would
be payable in installments of $15,000 per month plus interest, and in full
on April 15, 1997. On January 7, 1997 the Registrant borrowed $100,000
against this line of credit to pay drilling costs as described in the
Results of Operations - 3 Months Ended December 31, 1996.
--------------------------------------------------------
The increase in accounts payable reflects drilling expenses incurred at the
end of the current period.
Management cannot specifically identify the effects of inflation and other
price changes on operations.
9
<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.
MEXCO ENERGY CORPORATION
(A Colorado Corporation)
------------------------------
Nicholas C. Taylor,
President and Treasurer
Date: Februay 3, 1997
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> MAR-31-1997 MAR-31-1996
<PERIOD-START> APR-01-1996 APR-01-1995
<PERIOD-END> DEC-31-1996 MAR-31-1996
<CASH> 148,870 172,112
<SECURITIES> 0 0
<RECEIVABLES> 143,040 108,583
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 292,360 280,695
<PP&E> 5,805,088 4,902,661
<DEPRECIATION> 2,817,950 2,571,317
<TOTAL-ASSETS> 3,279,498 2,612,039
<CURRENT-LIABILITIES> 378,949 32,584
<BONDS> 0 0
0 0
0 0
<COMMON> 711,614 711,614
<OTHER-SE> 2,094,084 1,833,531
<TOTAL-LIABILITY-AND-EQUITY> 3,279,498 2,612,039
<SALES> 888,866 798,589
<TOTAL-REVENUES> 899,290 834,073
<CGS> 238,782 272,892
<TOTAL-COSTS> 238,782 272,892
<OTHER-EXPENSES> 332,446 348,876
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 328,062 212,305
<INCOME-TAX> 67,509 11,699
<INCOME-CONTINUING> 260,553 200,606
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 260,553 200,606
<EPS-PRIMARY> .183 .149
<EPS-DILUTED> 0 0
</TABLE>
