SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Check One
|X| Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended September 30, 2000
or
|_| Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 Commission file number 0-12500
ISRAMCO, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-3145265
(State or other Jurisdiction of I.R.S. Employer Number
Incorporation or Organization)
11767 Katy Freeway, Houston, TX 77079
(Address of Principal Executive Offices)
713-621-5946
(Issuer's Telephone Number, Including Area Code)
Indicate by check whether the registrant: (1) filed all reports required
to be filed by Section 13 or 15(d) of the 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 |_|
The number of shares outstanding of the registrant's Common Stock as
November 14, 2000 was 2,639,853.
<PAGE>
2
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 2000 and December 31, 1999
Consolidated Statement of Operations for the nine months ended September
30, 2000 and 1999
Consolidated Statements of Operations for the three months and nine months
ended September 30, 2000 and 1999
Consolidated Statements of Cash Flows for the nine months ended September
30, 2000 and 1999
Notes to Consolidated Financial Statements
Item 2. Management's discussion and analysis of financial statements
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon senior securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
Signatures
<PAGE>
3
ISRAMCO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except for share information)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,445 $ 15,314
Marketable securities, at market 3,871 2,692
Accounts receivable 970 381
Prepaid expenses and other current assets 1,637 1,222
-------- --------
Total current assets 20,923 19,609
PROPERTY AND EQUIPMENT, (successful efforts
method for oil and gas properties),
less accumulated amortization of $2,366 at
September 30, 2000 and $2,031 at
December 31,1999, respectively 5,067 4,965
OTHER ASSETS:
Marketable securities, at market 4,654 3,113
Investment in affiliate 3,091 2,925
Covenants not to compete, less accumulated amortization
of $380 at September 30, 2000 and $410 at December 31,1999,
respectively 30 60
Deferred tax asset -- 85
Other 406 7
-------- --------
Total assets $ 34,171 $ 30,764
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt -- $ 1,404
Deferred tax liability 770 --
Accounts payable and accrued expenses 3,969 1,362
Advance payment received -- 1,701
-------- --------
Total current liabilities 4,739 4,467
-------- --------
COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
SHAREHOLDERS' EQUITY:
Common stock $.0l par value; 75,000,000 shares
authorized, 2,669,120 shares issued and outstanding
At September 30,2000 and at December 31, 1999 27 27
Additional paid-in capital 26,286 26,168
Accumulated earnings (deficit) 1,245 (1,122)
Accumulated other comprehensive income - unrealized
gain on marketable securities, net of taxes 2,038 1,388
Treasury stock, 29,267 shares at September 30, 2000
and at December 31, 1999 (164) (164)
-------- --------
Total shareholders' equity 29,432 26,297
-------- --------
Total liabilities and shareholders' equity 34,171 30,764
======== ========
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
4
ISRAMCO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except for share information)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Operator fees from related party 401 660 831 858
Oil and gas sales 513 314 1,331 961
Interest income 327 75 878 542
Office services to related party 321 208 1,292 635
Gain (loss) on marketable securities 59 (13) 197 177
Realized gain on investment in affiliate -- 100 -- 100
Gain on BG transaction -- -- 3,626 --
Equity in net income (loss) of investees (10) -- 166 --
---------- ---------- ---------- ----------
Total revenues 1,611 1,344 8,321 3,273
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Interest expense -- 38 53 114
Depreciation, depletion and amortization 119 171 376 534
Lease operating expenses and severance taxes 175 126 426 307
Exploration costs 17 103 553 107
Operator expense 137 131 417 342
General and administrative 317 255 1,015 699
---------- ---------- ---------- ----------
Total expenses 765 824 2,840 2,103
---------- ---------- ---------- ----------
Income before income taxes 846 520 5,481 1,170
Income taxes (475) (130) (3,114) (225)
---------- ---------- ---------- ----------
Net income 371 390 2,367 945
========== ========== ========== ==========
Earnings per common share-basic $ 0.14 $ 0.15 $ 0.90 $ 0.36
Earnings per common share-diluted $ 0.14 $ 0.15 $ 0.89 $ 0.36
Weighted average number of shares 2,639,853 2,639,853 2,639,853 2,639,853
Outstanding-basic ========== ========== ========== ==========
Weighted average number of shares 2,677,369 2,639,853 2,661,179 2,639,853
Outstanding-diluted ========== ========== ========== ==========
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
5
ISRAMCO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
------------------------------
2000 1999
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net income 2,367 $ 945
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 376 534
Gain on marketable securities (83) (44)
Realized gain on investment in affiliate -- (100)
Gain on BG transaction (3,626) --
Equity in net income of investee (166) --
Employee stock awards 118 --
Changes in assets and liabilities:
Accounts receivable (589) (910)
Prepaid expenses and other current assets (415) (103)
Other assets -- 8
Accounts payable and accrued expenses 2,571 209
-------- --------
Net cash provided by operating activities 553 539
-------- --------
Cash flows from investing activities:
Addition to property and equipment (444) (90)
Investment in affiliate -- (2,207)
Purchase of convertible promissory notes (403) --
Purchase of remaining interests of Jay
Management, LLC -- (60)
Purchase of marketable securities (2,861) (2,318)
Proceeds from sale of marketable securities 1,765 2,210
Proceeds from sale of marketable affiliate securities -- 1,018
Proceeds from BG transaction 1,925 --
-------- --------
Net cash used in investing activities (18) (1,447)
-------- --------
Cash flows from financing activities:
Principal payments on long-term debt (1,404) (280)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (869) (1,188)
Cash and cash equivalents - beginning of year 15,314 14,240
-------- --------
Cash and cash equivalents - end of period $ 14,445 $ 13,052
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 53 $ 114
======== ========
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1
As used in these financial statements, the term "Company" refers to Isramco,
Inc. and subsidiaries.
NOTE 2
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of Management, all adjustments (consisting of only normal recurring adjustments)
considered necessary for a fair presentation have been included. Results for the
three and nine month periods ended September 30, 2000, are not necessarily
indicative of the results that may be expected for the year ended December 31,
2000. For further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1999. Certain reclassification of prior year
amounts have been made to conform to current presentation..
NOTE 3 - Consolidation
The consolidated financial statements include the accounts of the Company, its
direct and indirect wholly-owned subsidiaries Isramco Oil and Gas Ltd. (Oil and
Gas) and Isramco Resources Inc., a British Virgin Islands company, its wholly
owned subsidiaries, Jay Petroleum, L.L.C. (Jay), Jay Management L.L.C. (Jay
Management), IsramTec Inc. (IsramTec) and a wholly-owned foreign subsidiary.
Intercompany balances and transactions have been eliminated in consolidation.
NOTE 4 - Acquisition of Oil and Gas Properties
Although the Company continues to seek to acquire oil and gas properties, no
such purchases were made in the first nine months of 2000. However, there were
certain drilling related activities in the third quarter of 2000 with an
aggregate cost of $328,000 to the Company.
NOTE 5 - Long-term Debt
In May 2000, the Company repaid in full the principal and accrued interest on
its loan from Comerica Bank-Texas.
NOTE 6 - Earnings Per Share Computation
SFAS No. 128 requires a reconciliation of the numerator (income) and denominator
(shares) of the basic earnings per share ("EPS") computation to the numerator
and denominator of the diluted EPS computation. In the three-month and
nine-month periods ended September 30, 2000, there were no potential dilutive
common shares. The Company's reconciliation is as follows:
For the Three Months Ended September 30,
<TABLE>
<CAPTION>
2000 1999
---- ----
Income Shares Income Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Earnings per common share-Basic $ 371,000 2,639,853 $ 390,000 2,639,853
Effect of dilutive securities:
Stock Options -- 37,516 -- --
---------- --------- ---------- ---------
$ 371,000 2,677,369 $ 390,000 2,639,853
========== ========== ========== ==========
</TABLE>
<PAGE>
7
For the Nine Months Ended September 30,
<TABLE>
<CAPTION>
2000 1999
---- ----
Income Shares Income Shares
------ ------ ------ ------
<S> <C> <C> <C> <C>
Earnings per common share-Basic $2,367,000 2,639,853 $ 945,000 2,639,853
Effect of dilutive securities:
Stock Options -- 21,326 -- --
---------- --------- ---------- ---------
$2,367,000 2,661,179 $ 945,000 2,639,853
========== ========== ========== ==========
</TABLE>
NOTE 7 - Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities". This
Statement, as amended by SFAS No. 137 and SFAS No. 138, establishes standards of
that accounting for and disclosures of derivative instruments and hedging
activities. This statement requires all derivative instruments to be carried on
the balance sheet at fair value and is effective for the Company beginning
January 1, 2001. The Company is currently assessing the impact that this
statement will have on its financial condition and results of operations. The
Company believes the statement will not have a material impact.
In March 2000, the FASB issued Interpretation No. 44, Accounting for Certain
Transactions Involving Stock Compensations: an Interpretation of APB Opinion No.
25. Among other issues, Interpretation No. 44 clarifies the application of
Accounting Principles Board Opinion No. 25 (APB No. 25) regarding (a) the
definition of employee for purposes of applying APB No. 25, (b) the criteria for
determining whether a plan qualifies as a non-compensatory plan, (c) the
accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
options in a business combination. The provisions of Interpretation No. 44
affecting the Company are being applied on a prospective basis beginning July 1,
2000. The provisions of Interpretation No. 44 did not have a material impact on
the Company's financial statements when adopted.
NOTE 8 - Geographical Segment Information
The Company's operations involve a single industry segment--the exploration,
development, production and transportation of oil and natural gas. Its current
oil and gas activities are concentrated in the United States, Israel, and the
Republic of Congo, Africa. Operating in foreign countries subjects the Company
to inherent risks such as a loss of revenues, property and equipment from such
hazards as exploration, nationalization, war and other political risks, risks of
increases of taxes and governmental royalties, renegotiation of contracts with
government entities and changes in laws and policies governing operations of
foreign-based companies.
The Company's oil and gas business is subject to operating risks associated with
the exploration, and production of oil and gas, including blowouts, pollution
and acts of nature that could result in damage to oil and gas wells, production
facilities or formations. In addition, oil and gas prices have fluctuated
substantially in recent years as a result of events, which were outside of the
Company's control. Financial information, summarized by geographic area, is as
follows (in thousands):
Geographic Segment
<TABLE>
<CAPTION>
United Consolidated
States Israel Africa Total
------ ------ ------ -----
<S> <C> <C> <C> <C>
Identifiable assets at September 30, 2000 $ 2,208 $ 159 $2,700 $ 5,067
Cash and corporate assets $ 29,104
--------
Total Assets at September 30, 2000 $ 34,171
========
Identifiable assets at December 31, 1999 $ 2,175 $ 90 $2,700 $ 4,965
Cash and corporate assets $ 25,799
--------
Total assets at December 31, 1999 $ 30,764
========
Nine Months Ended September 30, 2000
Sales and other operating revenue $ 1,937 $1,517 $ -- $ 3,454
Costs and operating expenses $(1,302) $ (470) $ -- (1,772)
------- ------ ------ --------
Operating profit $ 635 $1,047 $ -- $ 1,682
======== ======= ====== ========
Interest Income, gain on marketable
securities, gain on BG transaction and other
corporate revenues $ 4,867
General corporate expenses $ (1,015)
Interest expense $ (53)
Income taxes $ (3,114)
--------
Net Income $ 2,367
========
</TABLE>
<PAGE>
8
<TABLE>
<CAPTION>
United Consolidated
States Israel Africa Total
------ ------ ------ -----
<S> <C> <C> <C> <C>
Three Months Ended September 30, 2000
Sales and other operating revenue $ 550 $ 685 $ -- $ 1,235
Costs and operating expenses $ (289) $ (159) $ -- $ 448
------- ------ ------ --------
Operating profit $ 261 $ 526 $ -- $ 787
======= ====== ====== ========
Interest Income, gain on marketable
securities and other $ 376
General corporate expenses $ (317)
Interest expense $ --
Income taxes $ (475)
--------
Net Income $ 371
========
Nine Months Ended September 30, 1999
Sales and other operating revenue $ 1,020 $1,434 -- $ 2,454
Costs and operating expenses $ (825) $ (465) -- $ (1,290)
------- ------ ------ --------
Operating profit $ 195 $ 969 -- $ 1,164
======= ====== ====== ========
Interest Income, gain on marketable
securities and other $ 819
General corporate expenses $ (699)
Interest expense $ (114)
Income taxes $ (225)
--------
Net Income $ 945
========
Three Months Ended September 30, 1999
Sales and other operating revenue $ 338 $ 844 -- $ 1,182
Costs and operating expenses $ (288) $ (243) -- $ (531)
------- ------ ------ --------
Operating profit $ 50 $ 601 -- $ 651
======= ====== ====== ========
Interest Income, gain on marketable
securities and other $ 162
General corporate expenses $ (255)
Interest expense $ (38)
Income taxes $ (130)
--------
Net income $ 390
========
</TABLE>
<PAGE>
9
NOTE 9 - Marketable securities
At September 30, 2000 and December 31, 1999, the Company had net unrealized
gains on trading securities of $11,000 and $8,000, respectively. The change in
the net unrealized holding gains included in earnings is a gain of $3,000 for
the nine months ended September 30, 2000.
Trading securities, which are primarily traded on the Tel-Aviv Stock Exchange,
consists of the following:
<TABLE>
<CAPTION>
September 30, 2000 December 31, 1999
------------------ -----------------
Cost Market Value Cost Market Value
---- ------------ ---- ------------
<S> <C> <C> <C> <C>
Debentures and
Convertible Debentures $3,060,000 $3,108,000 $2,012,000 $1,968,000
Equity securities $ 800,000 $ 763,000 $ 517,000 $ 569,000
Investment Trust Fund $ -- $ -- $ 155,000 $ 155,000
---------- ---------- ---------- ----------
$3,860,000 $3,871,000 $2,684,000 $2,692,000
========== ========== ========== ==========
</TABLE>
Available-for-sale securities, which are primarily traded on the Tel-Aviv Stock
Exchange, consist of equity securities, with amortized cost of $1,725,000, gross
unrealized holding gains of $2,929,000 and a fair market value of $4,654,000 at
September 30, 2000.
Sales of marketable securities resulted in realized gains of $80,000 for the
nine months ended September 30, 2000.
NOTE 10
The Company's comprehensive income for the three and nine months ended September
30, 2000 and 1999 was as follows:
<PAGE>
10
<TABLE>
<CAPTION>
Three months ended September 30, Nine months ended September 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 371,000 $ 390,000 $2,367,000 $ 945,000
Other comprehensive income
- unrealized gain on
marketable securities 49,000 863,000 650,000 1,043,000
---------- ---------- ---------- ----------
Comprehensive income 420,000 1,253,000 3,017,000 1,988,000
========== ========== ========== ==========
</TABLE>
NOTE 11
During the first quarter ended March, 31, 2000 the Company completed its
transaction with BG International Limited, a member of the British Gas Group
("BG") which included the sale of participation interests in certain licenses
offshore Israel to BG and BG's replacement of the Company as operator of the Med
Yavne license. As a result of the transaction, the Company recognized a gain of
approximately $3,626,000.
NOTE 12
In June 2000, the Company established IsramTec, Inc., a Delaware corporation and
wholly-owned subsidiary (hereinafter, "IsramTec") for purposes primarily of
identifying and investing in promising high-tech ventures. The Company intends
to remit to IsramTec, in the Company's sole discretion and as needed from time
to time, up to $2.5 million to enable such investments by IsramTec. In July
2000, IsramTec invested approximately $400,000 in a high tech venture by way of
the purchase of 5% convertible promissory notes issued by such venture,
convertible at the discretion of IsramTec, under certain conditions, into equity
capital of such venture.
<PAGE>
11
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this document as well as
statements made in press releases and oral statements that may be made by the
Company or by officers, directors or employees of the Company acting on the
Company's behalf that are not statements of historical or current fact
constitute "forward looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown factors that could cause the actual results of the
Company to be materially different from the historical results or from any
future results expressed or implied by such forward looking statements.
Liquidity and Capital Resources
The decrease in the Company's consolidated cash and cash equivalents of
$869,000 from $15,314,000 at December 31, 1999 to $14,445,000 at September 30,
2000, is primarily attributable to the repayment by the Company in May 2000 of
its loan to Comerica Bank.
In June 2000, the Company established IsramTec, Inc., a Delaware
corporation and wholly-owned subsidiary (hereinafter, "IsramTec") for purposes
primarily of identifying and investing in promising high-tech ventures. The
Company intends to remit to IsramTec, in the Company's sole discretion and as
needed from time to time, up to $2.5 million to enable such investments by
IsramTec. In July 2000, IsramTec invested approximately $400,000 in a high tech
venture by way of the purchase of 5% convertible promissory notes issued by such
venture, convertible at the discretion of IsramTec, under certain conditions,
into equity capital of such venture.
The Company believes that existing cash balances and cash flows from
activities will be sufficient to meet its financing needs. The Company intends
to finance its ongoing oil and gas exploration activities from working capital.
Results of Operations
Nine Months Ended September 30, 2000 (the "2000 Period") Compared to Nine
Months Ended September 30, 1999 (the "1999 Period") and the Three Months Ended
September 30, 2000 Compared to the Three Months Ended September 30, 1999:
The Company reported net income of $2,367,000 ($0.90 per basic share) for
the 2000 Period compared to a net income of $945,000 ($0.36 per basic share) for
the 1999 Period and $371,000 ($0.14 per basic share) for the three months ended
September 30, 2000 compared to $390,000 ($0.15 per basic share) for the same
period in 1999. The increase in net income for the 2000 Period compared to the
1999 Period is primarily attributable to transactions with BG International
Limited, a member of the British Gas Group, ("BG") providing for BG's
replacement of the Company as operator of the Med Yavne license.
<PAGE>
12
Set forth below is a break-down of these results.
United States
Oil and Gas Revenues (in thousands)
<TABLE>
<CAPTION>
Three Months Ended September 30, Nine Months Ended September 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Oil Volume Sold (Bbl) 6 4 18 18
Gas Volume Sold (MCF) 76 131 258 381
Oil Sales ($) 184 81 508 251
Gas Sales ($) 329 233 823 710
Average Unit Price
Oil ($/Bbl) * $30.7 $20.2 $28.2 $13.9
Gas ($/MCF) ** $ 4.3 $ 1.8 $ 3.2 $ 1.9
</TABLE>
* Bbl - Stock Market Barrel Equivalent to 42 U.S. Gallons
** MCF - 1,000 Cubic Feet
Israel
The Negev Med Licenses
The Med Tel-Aviv, Med Hadera and Med HaSharon licenses expired on June 14,
2000.
Med Yavne
In May 2000, the license participants approved a budget for the year 2000
for approximately $3.4 million, which amount includes payment for a 3D seismic
survey (that was conducted ) and its processing and interpretation, as well as
other actions relating to the license. Additionally, the partners approved the
operator's application to the petroleum commissioner respecting the grant of a
lease within the area covered by the Med Yavne License (that includes, amongst
others, the "Or 1" and the "Or South" structures, in which gas was found). In
June 2000, the Israel Petroleum Commissioner advised the license participants
that they had been granted a 30 year lease respecting 250 square kilometers
(approximately 62,000 acres) of the Med Yavne license area, subject to certain
conditions. The license with respect to the remaining area has expired
The Company's participation share in the Med Yavne license is comprised of
0.4585%.
<PAGE>
13
BG serves as the operator of the lease.
Med Ashdod
Drilling of the Nir 1 well (within the area covered by the "Yam Ashdod"
Carveout) commenced on June 13, 2000. The Nir 1 well is situated approximately
17 kilometers (approximately 10.6 miles) off the coast of Israel. Production
tests were undertaken and results indicated a daily gas flow rate of up to 15
million cubic feet. Test results were further analyzed by an independent
engineering consulting firm. A reserves study was completed in October 2000 and
the estimated total gas reserves (in place) in the Nir 1 well were placed at 274
billion cubic feet of natural gas.
The license was scheduled to expire on June 14, 2000. However, based on
the Nir I discovery, the Israeli Petroleum Commissioner extended the duration of
the license to June 14, 2002. The extension specifies, among other things, the
following: (i) that a 3D seismic survey of an area encompassing no less than 350
kilometers (approximately 219 miles) will be undertaken by April 1, 2001 and the
processing and interpretation of the results of such survey to be completed by
October 1, 2001, (ii) a work program for the development of the discovered gas
site to be presented by December 1, 2001, (iv) the drilling of a well by May 1,
2002.
In addition, the Company, as operator of the license, presented in October
2000 to the license participants, a work program covering the following:
(i) mapping of gas objectives based on a seismic 3-D survey previously
performed with respect to the southern part of the license; and
(ii) shooting of a new 3-D seismic survey covering the Yam structure in
the northern and central part of the license and the mapping of two deep
oil prospects.
The participants were requested to approve the work program and a budget of $3.1
million, which approval was obtained in November 2000.
A 3-D survey covering an area comprised of 190 kilometers (approximately
119 miles) covering the yam structure was completed in October 2000. The results
were processed and are currently being interpreted.
Offshore Preliminary Permit - Marine North
In April 2000, the participants approved an AFE in the amount of
$1,167,000 to perform a 3D seismic survey, its processing and interpretation.
The survey was completed in May 2000. The results were processed and are
currently being interpreted.
In November 2000 Company applied to the Israeli Petroleum Commissioner for
two (2) licenses covering the area subject to the permit.
The Company serves as operator and holds a 1% participation interest in
the permit.
<PAGE>
14
Offshore Preliminary Permit - Marine Center
In April 2000, the participants approved an AFE in the amount of $776,000
to perform a 3D seismic survey, its processing and interpretation. The survey
was completed in May 2000. The results were processed and are currently being
interpreted. Preliminary results indicate the presence of gas prospects. On
November 14, 2000, the particpants in the permit authorized the drilling of an
offshore gas well. The drilling is currently scheduled to commence in December
2000, subject to the receipt of a license covering the area.
In November 2000, Company has applied to the Israeli Petroleum
Commissioner for a license covering the area subject to the permit.
The Company serves as operator and holds a 1% participation interest in
the permit.
Offshore Preliminary Permit - Marine South & Marine South B
In June 2000, the Company was awarded an offshore preliminary permit known
as "Marine South", covering an area of approximately 142 square kilometers
offshore Israel and an additional permit known as "Marine South B", covering an
area of approximately 40 square kilometers offshore Israel . The permits expire
on July 8, 2001. The permits include a preferential right to obtain a license.
The Company serves as operator of the permits and holds a 1% participation
interest in the permit; the remaining participation interests are held by
affiliated entities.
A budget (AFE) of $310,000 was approved in July 2000. A seismic survey was
performed and the survey results were processed and are currently being
interpreted.
United States
In July 2000, Jay Management LLC, the Company's wholly-owned entity, as
operator of Hoover No. 2 well, commenced drilling for gas in Garfield County,
Oklahoma. Jay Petroleum, LLC, which is wholly-owned by the Company, holds a 75%
participation interest in the well. The drilling budget is approximately
$300,000. Initial test flow indicated rates of 600 MCF per day. The well has
been connected to pipeline and production has commenced.
The Company entered into a 3 year supply agreement for the sale of the gas
to unaffiliated third parties at prevailing market prices.
Congo
Drilling on an onshore well, the Tilapia-Land 1 within the Tilapia permit
in the Congo, commenced in September 2000. An estimated budget of approximately
$2.8 million (inclusive of production tests) was previously approved.
<PAGE>
15
An offshore well, Tilapia-1, previously drilled by ELF, tested oil at a
rate of 2,000 barrels per day, from a sandstone reservoir. The current onshore
drilling on Tilapia-Land-1, is planned as a deviated well, to reach the same
sandstone reservoir. It is intended, subject to results of the test, to complete
the well for production.
The Company holds a 50% interest in the rights to the Tilapia permit. The
remaining interest is held by an affiliated entity.
Operator's Fees
During the 2000 Period, the Company earned $831,000 in operator fees
compared to $858,000 for the 1999 Period and $401,000 for the three months ended
September 30, 2000 compared to $660,000 in respect of the same period in 1999.
Operator fees for the 1999 period were primarily attributable to the drilling of
the Or 1 well offshore Israel (Med Yavne) and operator fees for the 2000 period
were primarily attributale to drilling of the Nir 1 well offshore Israel (Med
Ashdod).
Oil and Gas Revenues
For the 2000 Period, the Company has oil and gas revenues of $1,331,000
compared to $961,000 for the 1999 Period and $513,000 for the three months ended
September 30, 2000 compared to $314,000 for the same period in 1999. The
increase is attributable to an increase in oil and gas prices.
Lease Operating Expenses and Severance Taxes
Lease operating expenses and severance taxes were primarily in connection
with oil and gas fields in the United States. Oil and gas lease operating
expenses and severance taxes for the 2000 Period were $426,000 compared to
$307,000 for the 1999 Period and $175,000 for the three months ended on
September 30, 2000 compared to $126,000 for the same period in 1999. The
increase is attributable to increased work-over costs and severance taxes.
Interest Income
Interest income in respect of the 2000 Period was $878,000 compared to
$675,000 for the 1999 Period and $327,000 in respect of the three months ended
September 30, 2000 compared to $138,000 for the same period in 1999. The
increase in interest income is primarily attributable to an increase in
liquidity.
Gain on Marketable Securities
During the 2000 Period the Company recognized net realized and unrealized
gains on trading securities, including interest and dividends, of $197,000
compared to $177,000 for the 1999 Period and gain of $59,000 in respect of the
three months ended September 30, 2000 compared to a loss of $13,000 for the same
period in 1999.
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Increases or decreases in the gains and losses from marketable securities
are dependent on the market prices in general and the composition of the
portfolio of the Company.
Operator Expense
There was no material change in operator costs for the 2000 Period
compared to the 1999 period and for the three months ended September 30, 2000
compared to the same period in 1999.
General and Administrative Expenses
General and administrative expenses for the 2000 Period were $1,015,000
compared to $699,000 for the 1999 period and $317,000 for the three month period
ended on September 30, 2000 compared to $255,000 for the same period in 1999.
The increase was primarily due to non-cash charges attributable to the issuance
of stock options to, and recruitment of, senior Company personnel.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Market risks relating to changes in interest rates and foreign currency
exchanges rates were reported in Item 7A of the Company's Annual Report on Form
10-K for the year ended December 31, 1999. There has been no material change in
these market risks since the end of the fiscal year 1999.
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17
PART II
Item 1. Legal Proceedings
Not Applicable
Item 2. Change in Securities & Use of Proceeds
Not Applicable
Item 3. Default Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on 8-K
a) Reports on From 8-K for the three month period ended Mach 31, 2000
None
b) Exhibit 27 - - Financial Data Schedule
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SIGNATURES
In accordance with 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.
ISRAMCO, INC.
Registrant
Date: November 14, 2000 By /s/ Haim Tsuff
Chairman of the Board,
Chief Executive Officer
and Chief Financial Officer
