UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITY EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITY EXCHANGE ACT OF 1934
For the transition period from .............. to.................
Commission File No. 1-8523
MSR Exploration Ltd.
(Exact name of Registrant as specified in its charter)
Alberta, Canada None
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
500 Main Street, Suite 210, Fort Worth, Texas 76102
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code: (817) 877-3151
Securities registered pursuant to Section 12(g) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Shares United States
no par value American Stock Exchange
Securities registered pursuant to Section 12(b) of the Act: None
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months and (2) has been
subject to such filing requirement for the past 90 days. Yes X No __
Check whether the registrant has filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after distribution of
securities under a plan confirmed by a Court. Yes__ No X because there was
no distribution of securities under the Registrant's confirmed plan.
Common Shares outstanding at March 31, 1996: 13,712,014
Transitional Small Business Disclosure Format: Yes [ ] or No [ X ]
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
MSR Exploration, Ltd. and Subsidiaries
(Incorporated Under the Laws of Alberta)
<TABLE>
CONSOLIDATED BALANCE SHEETS
U.S. DOLLARS
March 31, December 31,
1996 1995
ASSETS (unaudited) (audited)
<S> <C> <C>
Cash and cash equivalents $79,000 $280,000
Accounts receivable 719,000 700,000
Inventories 184,000 184,000
Prepaid expenses 96,000 12,000
Total current assets 1,078,000 1,176,000
PROPERTIES, PLANT AND EQUIPMENT - NET
("full cost") 28,953,000 29,040,000
OTHER ASSETS 524,000 538,000
$30,555,000 $30,754,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt $81,000 $91,000
Accounts payable 173,000 368,000
Accrued liabilities 482,000 503,000
Total current liabilities 736,000 962,000
LONG-TERM DEBT 6,367,000 6,252,000
DEFERRED INCOME TAXES 3,984,000 4,003,000
STOCKHOLDERS' EQUITY
Common stock, without par value
Authorized 20,000,000 shares, issued and
outstanding 13,712,014 17,796,000 17,796,000
Less notes receivable arising from
the issuance of common stock (190,000) (190,000)
Foreign currency translation adjustment (91,000) (98,000)
Retained earnings 1,953,000 2,029,000
19,468,000 19,537,000
$30,555,000 $30,754,000
</TABLE>
See Condensed Notes to Financial Statements
MSR Exploration, Ltd. and Subsidiaries
(Incorporated Under the Laws of Alberta)
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1996 and 1995
(UNAUDITED)
U.S. DOLLARS
1996 1995
REVENUE
Oil sales $556,000 $500,000
Gas sales 415,000 44,000
Interest, dividends and other income 18,000 31,000
Total revenues 989,000 575,000
EXPENSES
Operating expenses 311,000 305,000
Production taxes 56,000 62,000
Depletion and depreciation 316,000 174,000
General and administrative 221,000 283,000
Interest 180,000 55,000
Total expenses 1,084,000 879,000
Loss before income taxes (95,000) (304,000)
Income tax benefit 19,000 32,000
Net income (loss) ($76,000) ($272,000)
Per share net income (loss) ($0.01) ($0.02)
Weighted average number of shares
outstanding 13,712,014 14,312,014
See Condensed Notes to Financial Statements
<TABLE>
MSR Exploration, Ltd. and Subsidiaries
(Incorporated Under the Laws of Alberta)
CONSOLIDATED STATEMENTS OF CASH FLOW
Three months ended March 31, 1996 and 1995
(UNAUDITED)
U.S. DOLLARS
<CAPTION>
1996 1995
CASH PROVIDED BY (USED FOR):
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) ($76,000) ($272,000)
Charges and credits to net loss not affecting cash
Depletion and depreciation 326,000 174,000
Changes in assets and liabilities (331,000) (149,000)
NET CASH FROM (USED FOR) OPERATING ACTIVITIES (81,000) (247,000)
INVESTING ACTIVITIES
Acquisition of properties and equipment (225,000) (53,000)
FINANCING
Principal payments on long-term debt (45,000) (440,000)
Notes payable, bank proceeds 150,000 750,000
Payment of financing costs (187,000)
NET CASH FROM (USED FOR) FINANCING ACTIVITIES 105,000 123,000
NET INCREASE (DECREASE) IN CASH (201,000) (177,000)
CASH AT BEGINNING OF PERIOD 280,000 527,000
CASH AT END OF PERIOD $79,000 $350,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for interest expense $159,000 $42,000
Cash payments for income taxes $0 $0
</TABLE>
See Condensed Notes to Financial Statements
MSR Exploration, Ltd. and Subsidiaries
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended March 31, 1996 and 1995
ACCOUNTING POLICIES AND DISCLOSURES
Note 1. In the opinion of management of MSR Exploration, Ltd.
(the "Company"), the Company's Consolidated Financial Statements
contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position of
the Company as of March 31, 1996, and the results of its
operations and its cash flows for the three months ended March
31, 1996 and 1995.
The Company has reclassified royalties paid to other interest
owners, which were previously categorized as an operating
expense, by reducing both oil and gas revenues and operating
expenses by the amount of royalty paid. This change in reporting
policy has no affect on profit or loss, and is more in line with
industry practice.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto
included in the Form 10-KSB for the year ended December 31, 1995.
The results of operations for the three month period ended March
31, 1996 and 1995 are not necessarily indicative of the operating
results to be expected for the full fiscal year.
Note 2. NOTE PAYABLE AND LONG-TERM DEBT.
March December
31, 1996 31, 1995
The notes payable and long-term (Unaudited) (Audited)
debt consists of :
Prime rate plus 1.0% note payable
to Banque Paribas (9.25% at March $ 6,150,000 $ 6,000,000
31, 1996)
Various pre-petition claims at
interest rates ranging from 6% to
10%, due in monthly, quarterly and
annual installments. 299,000 343,000
6,448,000 6,343,000
Less current maturities ( 81,000) (91,000)
$ 6,367,000 $ 6,252,000
During the first quarter of 1995, the Company entered into a
revolving credit/term loan agreement. The agreement allows the
Company to borrow up to $15,000,000 under a revolving credit
arrangement for a two year period, at which time any outstanding
balance shall convert to a five year term loan to be repaid in
quarterly installments. The interest rate on amounts outstanding
shall be the London Interbank Offered Rate (LIBOR) + 2.5% or bank
prime plus 1%. The collateral for this loan agreement consists
of substantially all of the existing assets of the Company and
any future reserves acquired.
MSR Exploration, Ltd. and Subsidiaries
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Three Months Ended March 31, 1996, compared to Three Months Ended
March 31, 1995.
Revenue. Total revenue for the first quarter ended March 31,
1996 was $989,000 a 72% increase compared to the $575,000
reported for the first quarter of 1995. The increase is
primarily attributed to significantly higher gas sales.
Oil sales for the first quarter of 1996 were $556,000, an 11%
increase compared to $500,000 of oil sales in the same period
last year. The average price received for oil during the first
quarter of 1996 increased 10% to $17.34 per barrel compared to
the $15.75 average price for the same period in 1995. Oil sales
volumes for the quarters ended March 31, 1996 and 1995 were
32,100 barrels and 31,800 barrels, respectively. This modest
increase is primarily due to development drilling during the past
two quarters in Montana.
Gas sales for the quarter ended March 31, 1996 were $415,000, an
increase eight times the $44,000 reported for the first quarter
of 1995. The average sale price the Company received for gas
sold during the first quarter of 1996 was $2.03 per Mcf an
increase of 42% compared to the $1.43 in 1995. Gas sales
volumes for the first quarter of 1996 were 204,500 Mcf, some
seven times the 28,800 Mcf sold in the 1995 quarter. The
increase in sales is attributable to three gas wells purchased in
Southeast Texas in July, 1995. The first quarter gas sales
were at a reduced level due to normal production declines and
wells were shut-in for maintenance.
Interest, dividends and other income for the quarters ended March
31, 1996 and 1995 were $18,000 and $31,000, respectively,
.
Expenses. Total expenses for the first quarter 1996 were
$1,084,000, an increase of 23% compared to $879,000 for the first
quarter of 1995. Operating expenses for the 1996 quarter were
$311,000, an increase of $6,000 or 2% compared to the 1995
quarter. Production taxes for the quarters ended March 31, 1996
and 1995 were $56,000 and $62,000 respectively. This decrease in
production taxes is primarily due to reduced tax rates in
Montana. Depletion and depreciation expenses increased 72% to
$316,000 for the first quarter of 1996 compared to $174,000 for
1995 primarily due to the increase in gas sales volumes. General
and administrative expenses decreased 22% from $283,000 reported
for the 1995 period to $221,000 reported in first quarter 1996.
The 1995 general and administrative expense were up principally
due to the Company moving its headquarters to Fort Worth, Texas
and to an increase in professional personnel. Interest expense
increased some three times when comparing the $180,000 for the
quarter ended March 31, 1995 to the $55,000 in 1995. The
increase is attributable to the increase in long-term debt.
Net Income (Loss). The Company's results of operations for the
quarter ended March 31, 1996 was a net loss of $76,000 as
compared to a net loss of $272,000 for the same period in 1995.
This improvement was primarily attributable to the increase in
gas sales from the Company's new Southeast, Texas properties.
Liquidity and Capital Resources - March 31, 1996 vs. December 31,
1995. The Company's liquidity position at March 31, 1996 shows
a current ratio of 1.5 to 1 with working capital of approximately
$343,000. This compares to a current ratio of 1.2 to 1 and
working capital of approximately $318,000 at December 31, 1995.
Cash used in operating activities for the first quarter 1996 was
$81,000 compared to $247,000 used for operating activity in the
first quarter 1995.
Investing activities for the first quarter 1996 used cash of
$225,000 compared to $53,000 for the first quarter 1995. There
were no drilling activities in the first quarter of 1995.
Net cash from financing activities was $105,000 for the first
quarter 1996 compared to $123,000 from financing activities for
the same quarter in 1995.
MSR Exploration, Ltd. and Subsidiaries
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings: None
ITEM 2. Changes in Securities: None
ITEM 3. Defaults Upon Senior Securities: None
ITEM 4. Submission of Matters to a Vote of Security Holders:
None
ITEM 5. Other Information: None
ITEM 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K (None)
MSR EXPLORATION LTD.
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 dully authorized.
Dated May 2, 1996
MSR Exploration, Ltd.
By: /s/ Otto J. Buis
Otto J. Buis, Chairman of the Board
President and Chief Executive Officer
By: /s/ Howard N. Boals
Howard N. Boals, Vice President of Finance
Chief Accounting Officier
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 79000
<SECURITIES> 0
<RECEIVABLES> 719000
<ALLOWANCES> 0
<INVENTORY> 184000
<CURRENT-ASSETS> 1078000
<PP&E> 47618000
<DEPRECIATION> 18665000
<TOTAL-ASSETS> 30555000
<CURRENT-LIABILITIES> 736000
<BONDS> 0
0
0
<COMMON> 17796000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 30555000
<SALES> 0
<TOTAL-REVENUES> 989000
<CGS> 683000
<TOTAL-COSTS> 683000
<OTHER-EXPENSES> 221000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 180000
<INCOME-PRETAX> (95000)
<INCOME-TAX> (19000)
<INCOME-CONTINUING> (76000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (76000)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
