<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 December 31, 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 December 31, 1997 Commission File No. 0-6994
---------------------- ------
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
- - --------------------------------------------------
Registrant's telephone number, including area code
NONE
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(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
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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, 1997
- - -------------------------------------- --------------------------------
Common stock, $.50 par value 1,623,229
1
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MEXCO ENERGY CORPORATION
Index
Page
Part I. Financial information:
Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1997 3
Consolidated Statements of Operations
for the three months ended
December 31, 1997 and 1996 4
Consolidated Statements of Operations
for the nine months ended
December 31, 1997 and 1996 5
Consolidated Statements of Cash Flows
for the nine months ended December 31,
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
2
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MEXCO ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and March 31, 1997
<TABLE>
<CAPTION>
December 30, March 31,
ASSETS 1997 1997
------ ------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 146,391 $ 40,813
Accounts receivable 313,541 291,254
Prepaid assets 1,245 -
----------- -----------
Total current assets 461,177 332,067
PROPERTY AND EQUIPMENT
Oil and gas properties-accounted for under the
full cost method 9,671,878 7,819,986
Other 20,252 6,293
----------- -----------
9,692,130 7,826,279
Less accumulated depreciation, depletion and amortization (3,719,229) (3,049,147)
----------- -----------
Net property and equipment 5,972,901 4,777,132
----------- -----------
TOTAL ASSETS $ 6,434,078 $ 5,109,199
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Accounts payable-trade $ 77,416 $ 167,913
Income taxes payable 16,283 40,093
----------- -----------
Total current liabilities 93,699 208,006
BANK LINE OF CREDIT 1,822,000 1,637,000
DEFERRED INCOME TAXES 415,844 341,181
----------- -----------
Total liabilities 2,331,543 2,186,187
STOCKHOLDERS' EQUITY
Common Stock-$.50 par value, authorized-40,000,000,
issued and outstanding-1,623,229 at December 31, 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 415,492 235,969
----------- -----------
Total stockholders' equity 4,102,535 2,923,012
----------- -----------
TOTAL LIABILITIES & EQUITY $ 6,434,078 $ 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 December 31
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Revenues
Oil and gas $ 733,812 $ 287,979
Administrative service charges and reimbursements 1,278 1,252
Interest Income 42 2,151
Other Income 9,819 -
---------- ----------
Total revenues 744,951 291,382
Costs and expenses
Production costs 226,649 93,451
Depreciation, depletion and amortization 268,052 84,974
General and administrative 41,434 30,079
Interest 39,468 -
---------- ----------
Total costs and expenses 575,603 208,504
Earnings before income tax expense 169,348 82,878
Income tax expense 58,379 21,890
---------- ----------
NET EARNINGS $ 110,969 $ 60,988
========== ==========
Basic earnings per share $.07 $.04
========== ==========
Weighted average common shares outstanding 1,623,229 1,423,229
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
MEXCO ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months ended December 31
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
----------- ----------
<S> <C> <C>
Revenues
Oil and gas $1,688,051 $ 888,866
Administrative service charges and reimbursements 3,834 3,757
Interest Income 942 6,060
Other Income 11,104 607
---------- ----------
Total revenues 1,703,931 899,290
Costs and expenses
Production costs 521,019 238,782
Depreciation, depletion and amortization 670,082 246,633
General and administrative 159,431 85,813
Interest 98,292 -
---------- ----------
Total costs and expenses 1,448,824 571,228
Earnings before income tax expense 255,107 328,062
Income tax expense 75,584 67,509
---------- ----------
NET EARNINGS $ 179,523 $ 260,553
========== ==========
Basic earnings per share $ .11 $ .18
========== ==========
Weighted average common shares outstanding 1,585,411 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
Nine Months ended December 31
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ----------
<S> <C> <C>
Cash flows from operating activities:
- - -------------------------------------
Cash received from oil & gas operations $ 1,668,501 $ 845,697
Cash paid for oil & gas operations (570,452) (224,395)
General & administrative expenses (176,488) (86,263)
Interest received 942 6,060
Interest paid (97,897) -
Other cash received 11,104 607
Income taxes paid (24,731) (996)
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Net cash provided by operations 810,979 540,710
Cash flows from investing activities:
- - -------------------------------------
Capital expenditures (1,890,401) (607,212)
Sales of assets - 43,260
----------- ---------
Net cash used in investing activities (1,890,401) (563,952)
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 (decrease) in cash & cash equivalents 105,578 (23,242)
Cash & cash equivalents at the beginning of the period 40,813 172,112
----------- ---------
Cash & cash equivalents at the end of the period $ 146,391 $ 148,870
=========== =========
Reconciliation of net earnings to net cash
- - ------------------------------------------
provided by operating activities:
- - -----------------------------------
Net earnings $ 179,523 $ 260,553
----------- ---------
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation, depletion and amortization 670,082 246,633
Deferred income taxes 74,663 -
Increase in accounts receivable (22,287) (34,457)
Increase (decrease) in accounts payable (65,947) 1,918
Increase in prepaid expenses (1,245) (450)
Increase (decrease) in income taxes payable (23,810) 66,513
----------- ---------
Total adjustments 631,456 280,157
----------- ---------
Net cash provided by operating activities $ 810,979 $ 540,710
=========== =========
</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
December 31, 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 December 31, 1997, the results of its operations for the
three-month and nine-month periods ended December 31, 1997 and 1996. All
adjustments are of a normal and recurring nature. Certain reclassifications
have been made to the December 31, 1996 statement of cash flows to conform to
the December 31, 1997 presentation.
The results of operations for the three-month and nine-month periods ended
December 31, 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.
During the third quarter, the Company purchased additional royalty interests in
the Viejos Field, Pecos County, Texas.
NOTE C - ADOPTION OF ACCOUNTING PRONOUNCEMENT
The Company adopted the provisions of Statement of Financial Accounting Standard
No. 128, Earnings Per Share, during the quarter ended December 31, 1997. Since
the Company has only Common Stock outstanding the adoption had no effect on the
Company's financial statements.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE CONSOLIDATED STATEMENTS OF OPERATIONS
Results of Operations - 3 Months Ended December 31, 1997
- - --------------------------------------------------------
Operating revenues increased $445,833 (155%) from the third quarter of fiscal
1996 due to increased oil and gas production from acquisitions and development
of oil and gas properties. Oil revenues increased $169,966 (90%) and gas
revenues increased $275,867 (273%). The average oil price for the third quarter
of 1997 was $18.54 per barrel compared to $24.88 per barrel in the third quarter
of 1996. The average gas price for the third quarter of 1997 was $2.98 per MCF
compared to $2.18 per MCF in the third quarter of 1996. Of total oil and gas
revenues $357,794 (49%) was attributable to oil sales and $376,018 (51%) was
attributable to gas sales in the third quarter of 1997 as compared to $187,378
(65%) from oil sales and $100,601 (35%) from gas sales in the third quarter of
1996.
Production costs increased $133,198 (143%) due to increased production taxes and
lease operating expenses. Production taxes increased $27,405 (167%) in
proportion to increased revenues and lease operating costs increased $105,793
(137%) due to acquisitions and development of working interests.
Depreciation, depletion and amortization increased $183,078 (215%) as compared
to the same quarter during the prior year due to the addition of oil and gas
properties.
General and administrative costs increased $11,355 (38%) primarily due to
increased engineering and legal costs associated with property acquisitions and
financing arrangements.
Interest income decreased $2,109 (98%) due to decreased funds invested in money
market accounts.
Other income during the third quarter of 1997 consists of the recovery of a bad
debt.
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 one (1) producing well (approximately 43% working interest and 32%
net revenue interest) in the Lazy JL Field, Garza County, Texas.
Results of Operations - 9 Months Ended December 31, 1997
- - --------------------------------------------------------
Operating revenues increased $799,185 (90%) from the first nine months of fiscal
1996 due to increased oil and gas production. Oil and gas revenues increased
$356,184 (63%) and $443,001 (137%) respectively due to increased numbers of
wells from acquisitions and development of properties. The average oil price for
the first nine months of 1997 was $18.40 per barrel compared to $22.21 per
barrel in the first nine months of 1996. The average gas price for the first
nine months of 1997 was $2.98 per MCF compared to $2.16 per MCF in the first
nine months of 1996. Of total oil and gas revenues $923,180 (55%) was
attributable to oil sales and $764,871 (45%) was attributable to gas sales
during 1997 as compared to $566,605 (64%) from oil sales and $322,261 (36%) from
gas sales during 1996.
Production costs increased $282,237 (118%) due to increased production taxes and
lease operating expenses. Production taxes increased $53,109 (106%) in
proportion to increased revenues and lease operating costs increased $229,128
(122%) due to acquisitions and development of working interests.
8
<PAGE>
Depreciation, depletion and amortization increased $423,449 (172%) due to the
addition of oil and gas properties.
General and administrative costs increased $73,618 (86%) due primarily to
increased accounting, engineering and legal costs associated with property
acquisitions, a private placement of the Company's stock and bank financing
arrangements.
Interest income decreased $5,118 (84%) due to decreased funds invested in money
market accounts.
The increase in other income is primarily due to the recovery of a bad debt.
Interest expense relates to principal borrowings against the Company's line of
credit.
During the nine 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 has
been converted to a water injection well and one (1) well which is currently
shut in pending possible conversion to a water injection well or a salt water
disposal well.
Liquidity and Capital Resources and Commitments
- - -----------------------------------------------
Working capital increased $243,417 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 the stock of
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
<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)
/s/ Nicholas C. Taylor
---------------------------------------------
Nicholas C. Taylor,
President and Treasurer
Date: February 12, 1998
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 12-MOS
<FISCAL-YEAR-END> MAR-31-1998 MAR-31-1997
<PERIOD-START> APR-01-1997 APR-01-1996
<PERIOD-END> DEC-31-1997 MAR-31-1997
<CASH> 146,391 40,813
<SECURITIES> 0 0
<RECEIVABLES> 313,541 291,254
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 461,177 332,067
<PP&E> 9,692,130 7,826,279
<DEPRECIATION> 3,719,229 3,049,147
<TOTAL-ASSETS> 6,434,078 5,109,199
<CURRENT-LIABILITIES> 93,699 208,006
<BONDS> 0 0
0 0
0 0
<COMMON> 811,614 711,614
<OTHER-SE> 3,290,921 2,211,398
<TOTAL-LIABILITY-AND-EQUITY> 6,434,078 5,109,199
<SALES> 1,688,051 1,453,124
<TOTAL-REVENUES> 1,703,931 1,465,907
<CGS> 521,019 346,765
<TOTAL-COSTS> 521,019 346,765
<OTHER-EXPENSES> 927,805 590,853
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 98,292 12,787
<INCOME-PRETAX> 255,107 515,502
<INCOME-TAX> 75,584 137,635
<INCOME-CONTINUING> 179,523 377,867
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 179,523 377,867
<EPS-PRIMARY> .113 .265
<EPS-DILUTED> 0 0
</TABLE>
