<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20539
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For quarterly period ended September 30, 1997
-------------------------------------------
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 September 30, 1997 Commission File No. 0-6994
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MEXCO ENERGY CORPORATION
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(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)
(915) 682-1119
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Registrant's telephone number, including area code
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 September 30, 1997
- - ------------------------------- ---------------------------------
Common stock, $.50 par value 1,623,229
1
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MEXCO ENERGY CORPORATION
Index
<TABLE>
<CAPTION>
Page
<S> <C>
Part I. Financial information:
Consolidated Balance Sheets as of
September 30, 1997 and March 31, 1997 3
Consolidated Statements of Operations
for the three months ended
September 30, 1997 and 1996 4
Consolidated Statements of Operations
for the six months ended
September 30, 1997 and 1996 5
Consolidated Statements of Cash Flows
for the six months ended September 30,
1997 and 1996 6
Notes to consolidated Financial Statements 7
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8
Part II. Other information: Not Applicable
</TABLE>
2
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MEXCO ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, 1997 and March 31, 1997
<TABLE>
<CAPTION>
September 30, March 31,
ASSETS 1997 1997
------ ------------- ----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 134,065 $ 40,813
Accounts receivable 219,977 291,254
Prepaid assets 2,490 -
----------- -----------
Total current assets 356,532 332,067
PROPERTY AND EQUIPMENT
Oil and gas properties-accounted for under the
full cost method 9,402,998 7,819,986
Office furniture and fixtures 19,950 6,293
----------- -----------
9,422,948 7,826,279
Less accumulated depreciation, depletion and amortization (3,451,177) (3,049,147)
----------- -----------
Net property and equipment 5,971,771 4,777,132
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TOTAL ASSETS $ 6,328,303 $ 5,109,199
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable-trade $ 140,990 $ 167,913
Income taxes payable 1,935 40,093
----------- -----------
Total current liabilities 142,925 208,006
BANK LINE OF CREDIT 1,822,000 1,637,000
DEFERRED INCOME TAXES 371,813 341,181
----------- -----------
Total liabilities 2,336,738 2,186,187
STOCKHOLDERS' EQUITY
Common Stock-$.50 par value, authorized-40,000,000,
issued and outstanding-1,623,229 at September 30, 1997
and 1,423,229 at March 31, 1997 811,614 711,614
Preferred Stock-$1.00 par value, authorized-10,000,000,
none issued - -
Paid in capital 2,875,429 1,975,429
Retained earnings 304,522 235,969
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Total stockholders' equity 3,991,565 2,923,012
----------- -----------
TOTAL LIABILITIES & EQUITY $ 6,328,303 $ 5,109,199
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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MEXCO ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months ended September 30
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Revenues
Oil and gas $ 499,536 $ 333,873
Administrative service charges and reimbursements 1,278 1,253
Interest Income 629 1,738
Other Income 722 599
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Total revenues 502,165 337,463
Costs and expenses
Production costs 166,469 74,475
Depreciation, depletion and amortization 210,658 91,414
General and administrative 45,625 20,566
Interest 27,259 -
---------- ----------
Total costs and expenses 450,011 186,455
Income before income tax expense 52,154 151,008
Income tax expense 8,233 21,243
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NET INCOME $ 43,921 $ 129,765
========== ==========
Net income per share $ .03 $ .09
========== ==========
Weighted average common shares outstanding 1,623,229 1,423,229
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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MEXCO ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months ended September 30
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Revenues
Oil and gas $ 954,239 $ 600,887
Administrative service charges and reimbursements 2,556 2,505
Interest Income 900 3,909
Other Income 1,285 607
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Total revenues 958,980 607,908
Costs and expenses
Production costs 294,370 145,331
Depreciation, depletion and amortization 402,030 161,659
General and administrative 117,997 55,734
Interest 58,824 -
---------- ----------
Total costs and expenses 873,221 362,724
Income before income tax expense 85,759 245,184
Income tax expense 17,205 45,619
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NET INCOME $ 68,554 $ 199,565
========== ==========
Net income per share $ .04 $ .14
========== ==========
Weighted average common shares outstanding 1,566,398 1,423,229
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
MEXCO ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months ended September 30
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
- - ------------------------------------
Cash received from oil & gas operations $ 1,027,545 $ 568,010
Cash paid for oil & gas operations (308,751) (92,374)
General & administrative expenses (136,953) (52,273)
Interest received 900 3,909
Interest paid (58,970)
Other cash received 1,285 607
Income taxes paid (24,731) ( 6,351)
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Net cash provided by operations 500,325 421,528
Cash flows from investing activities:
- - ------------------------------------
Capital expenditures (1,592,073) (313,506)
----------- ---------
Net cash used in investing activities (1,592,073) (313,506)
Cash flows from financing activities:
- - ------------------------------------
Borrowings 685,000 -
Principal payments on long-term debt (500,000) -
Proceeds from issuance of common stock 1,000,000 -
----------- ---------
Net cash provided by financing activities 1,185,000 -
Net increase in cash & cash equivalents 93,252 108,022
Cash & cash equivalents at the beginning of the period 40,813 172,112
----------- ---------
Cash & cash equivalents at the end of the period $ 134,065 $ 280,134
=========== =========
Reconciliation of net income to net cash
- - ----------------------------------------
provided by operating activities:
- - ----------------------------------
Net income $ 68,554 $ 199,565
----------- ---------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 402,030 161,659
Deferred income taxes 30,632 -
(Increase) decrease in accounts receivable 71,277 (38,900)
Increase (decrease) in accounts payable (31,520) 56,475
Increase in prepaid expenses (2,490) (900)
Increase (decrease) in income taxes payable (38,158) 43,629
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Total adjustments 431,771 221,963
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Net cash provided by operating activities $ 500,325 $ 421,528
=========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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MEXCO ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997 and 1996
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 September 30, 1997, the results of its operations for the
three-month and six-month periods ended September 30, 1997 and 1996. All
adjustments are of a normal and recurring nature.
The results of operations for the three-month and six-month periods ended
September 30, 1997 are not necessarily indicative of the results to be expected
for the full year.
The consolidated balance sheets as of March 31, 1997 have been prepared based
upon the Company's audited balance sheets as of that date.
NOTE B - ACQUISITION OF OIL AND GAS PROPERTIES
During the first quarter, the Company purchased approximately 1.5% in additional
mineral and royalty interests in a producing gas well located in the Gomez
field, Pecos County, Texas. This well is currently producing at the rate of
approximately six million cubic feet of gas per day.
During the second quarter, the Company purchased additional royalty interests in
the Gomez Field, Pecos County, Texas and additional working interests in the
Lazy JL Field, Garza County, Texas.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE CONSOLIDATED STATEMENTS OF OPERATIONS
Results of Operations - 3 Months Ended September 30, 1997
- - ---------------------------------------------------------
Operating revenues increased $165,663 (50%) from the second quarter of fiscal
1996 due to increased oil and gas production from acquisitions and development
of oil and gas properties. Oil revenues increased $85,177 (40%) and gas revenues
increased $80,486 (65%). The average oil price for the second quarter of 1997
was $18.47 per barrel compared to $21.32 per barrel in the second quarter of
1996. The average gas price for the second quarter of 1997 was $2.09 per MCF
compared to $2.17 per MCF in the second quarter of 1996.
Production costs increased $91,994 (124%) due to increased production taxes and
lease operating expenses. Production taxes increased $13,292 (71%) in proportion
to increased revenues and lease operating costs increased $78,702 (141%) due to
acquisitions and development of working interests.
Depreciation, depletion and amortization increased $119,244 (130%) as compared
to the same quarter during the prior year due to the addition of oil and gas
properties.
General and administrative costs increased $25,059 (122%) primarily due to
increased accounting, engineering and legal costs associated with property
acquisitions and a private placement.
Interest income decreased $1,109 (64%) due to decreased funds invested in money
market accounts.
Interest expense relates to principal borrowings against the Company's line of
credit.
During the quarter, the Company participated in the successful drilling and
completion of two (2) producing wells (each with approximately 43% working
interest and 32% net revenue interest) in the Lazy JL Field, Garza County,
Texas. The Company also participated in the drilling of one (1) well in the same
field which will be used as a water injection well.
Results of Operations - 6 Months Ended September 30, 1997
- - ---------------------------------------------------------
Operating revenues increased $353,352 (59%) from the first six months of fiscal
1996 due to increased oil and gas production. Oil and gas revenues increased
$186,218 (49%) and $167,134 (75%) respectively due to increased numbers of wells
from acquisitions and development of properties. The average oil price for the
first six months of 1997 was $18.31 per barrel compared to $21.09 per barrel in
the first six months of 1996. The average gas price for the first six months of
1997 was $2.00 per MCF compared to $2.15 per MCF in the first six months of
1996.
Production costs increased $149,039 (103%) due to increased production taxes and
lease operating expenses. Production taxes increased $25,704 (76%) in proportion
to increased revenues and lease operating costs increased $123,335 (111%) due to
acquisitions and development of working interests.
8
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Depreciation, depletion and amortization increased $240,371 (149%) due to the
addition of oil and gas properties.
General and administrative costs increased $62,263 (112%) due primarily to
increased accounting, engineering and legal costs associated with property
acquisitions and a private placement.
Interest income decreased $3,009 (77%) due to decreased funds invested in money
market accounts.
Interest expense relates to principal borrowings against the Company's line of
credit.
During the six months, the Company participated in the successful drilling and
completion of six (6) producing wells (each with approximately 43% working
interest and 32% net revenue interest) in the Lazy JL Field, Garza County,
Texas. The Company also participated in the drilling of one (1) well which will
be used as a water injection well and one (1) well which is currently shut in
pending evaluation.
Liquidity and Capital Resources and Commitments
- - -----------------------------------------------
Working capital increased $89,546 from March 31, 1997 primarily due to increased
revenues. During the first quarter, the Company increased capital by $1,000,000
from the issuance of 200,000 shares of common stock at $5.00 per share through a
private placement. $500,000 of these proceeds were used to reduce the principal
borrowings under the line of credit and the remaining proceeds were used for
property acquisitions and drilling activity.
The Company has a $3,000,000 revolving line of credit with a borrowing base of
$2,200,000 which is reduced by $50,000 each month throughout the term of the
loan. The loan is reviewed by the bank annually and matures on August 15, 1999.
The Company currently has outstanding borrowings of $1,822,000 against the line.
At the current level of borrowing no principal payments will be due during the
current fiscal year. The obligations under the loan agreement are secured by
substantially all of the oil and gas properties of the Company and its
subsidiary. The loan agreement contains certain covenants relating to the
financial condition of the Company. Interest is payable monthly at the prime
rate as established by the bank.
The Company also has a letter of credit with the same bank which provides for
unsecured borrowings up to $25,000 in lieu of a plugging bond with the Texas
Railroad Commission covering properties operated by the Company.
The Company believes that it will have sufficient capital available from
borrowings combined with cash flows from operations to fund future capital
expenditures and to meet its financial obligations for the next twelve months.
Management cannot specifically identify the effects of inflation and other price
changes on operations.
9
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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)
/s/ Nicholas C. Taylor
--------------------------------------------
Nicholas C. Taylor,
President and Treasurer
Date: November 13, 1997
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 12-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1997
<PERIOD-START> APR-01-1997 APR-01-1996
<PERIOD-END> SEP-30-1997 MAR-31-1997
<CASH> 134,065 40,813
<SECURITIES> 0 0
<RECEIVABLES> 219,977 291,254
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 356,532 332,067
<PP&E> 9,422,948 7,826,279
<DEPRECIATION> 3,451,177 3,049,147
<TOTAL-ASSETS> 6,328,303 5,109,199
<CURRENT-LIABILITIES> 142,925 208,006
<BONDS> 0 0
0 0
0 0
<COMMON> 811,614 711,614
<OTHER-SE> 3,179,951 2,211,398
<TOTAL-LIABILITY-AND-EQUITY> 6,328,303 5,109,199
<SALES> 954,239 1,453,124
<TOTAL-REVENUES> 958,980 1,465,907
<CGS> 294,370 346,765
<TOTAL-COSTS> 294,370 346,765
<OTHER-EXPENSES> 520,027 590,853
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 58,824 12,787
<INCOME-PRETAX> 85,759 515,502
<INCOME-TAX> 17,205 137,635
<INCOME-CONTINUING> 68,554 377,867
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 68,554 377,867
<EPS-PRIMARY> .044 .265
<EPS-DILUTED> 0 0
</TABLE>
