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 June 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 Small Business Issuer as Specified in its Charter)
Delaware 13-3145265
(State or other Jurisdiction of I.R.S. Employer Number
Incorporation or Organization)
1770 St. James Place, Suite 607 Houston, TX 77056
(Address of Principal Executive Offices)
713-621-3882
(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
August 14, 2000 was 2,639,853.
<PAGE>
2
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 2000 and December 31, 1999 3
Consolidated Statement of Operations for the three months ended June 30,
2000 and 1999 4
Consolidated Statements of Operations for the six months ended June 30,
2000 and 1999 4
Consolidated Statements of Cash Flows for the six months ended June 30,
2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's discussion and analysis of financial statements 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults upon senior securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
Exhibit 27 - Financial Data Schedule
</TABLE>
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3
ISRAMCO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except for share information)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 2000 1999
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 16,919 $ 15,314
Marketable securities, at market 2,179 2,692
Accounts receivable 825 381
Prepaid expenses and other current assets 863 1,222
-------- --------
Total current assets 20,786 19,609
PROPERTY AND EQUIPMENT, (successful efforts
method for oil and gas properties), net 4,800 4,965
OTHER ASSETS:
Marketable securities, at market 4,583 3,113
Investment in affiliate 3,101 2,925
Covenants not to compete, less accumulated amortization
of $390 at June 30, 2000 and $410 at December 31, 1999
respectively 40 60
Deferred tax asset -- 85
Other 4 7
-------- --------
Total assets $ 33,314 $ 30,764
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt -- $ 1,404
Provision for deferred tax 744 --
Accounts payable and accrued expenses 3,558 1,362
Advance payment received -- 1,701
-------- --------
Total current liabilities 4,302 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 June 30,2000 and at December 31, 1999 27 27
Additional paid-in capital 26,286 26,168
Accumulated earnings (deficit) 874 (1,122)
Accumulated other comprehensive income - unrealized
gain on marketable securities, net of taxes 1,989 1,388
Treasury stock, 29,267 shares at December 31, 1999 (164) (164)
-------- --------
Total shareholders' equity 29,012 26,297
-------- --------
Total liabilities and shareholders' equity 33,314 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 June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Operator fees from related party 340 90 430 198
Oil and gas sales 424 319 818 647
Interest income 206 189 551 468
Office services to related party 752 242 971 427
Gain on marketable securities 8 101 138 189
Gain on BG transaction -- -- 3,626 --
Equity in net income of investees 243 -- 176 --
---------- ---------- ---------- ----------
Total revenues 1,973 941 6,710 1,929
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Interest expense 15 37 53 76
Depreciation, depletion and amortization 168 173 257 363
Lease operating expenses and severance taxes 130 95 251 181
Exploration costs 520 4 536 4
Operator expense 141 107 280 211
General and administrative 413 224 698 444
---------- ---------- ---------- ----------
Total expenses 1,387 640 2,075 1,279
---------- ---------- ---------- ----------
Income before income taxes 586 301 4,635 650
Income taxes (339) (50) (2,639) (95)
---------- ---------- ---------- ----------
Net income 247 251 1,996 555
========== ========== ========== ==========
Earnings per common share-basic $ 0.09 $ 0.10 $ 0.76 $ 0.21
========== ========== ========== ==========
Earnings per common share-diluted $ 0.09 $ 0.10 $ 0.75 $ 0.21
========== ========== ========== ==========
Weighted average number of shares
outstanding-basic 2,639,853 2,639,853 2,639,853 2,639,853
========== ========== ========== ==========
Weighted average number of shares
outstanding-diluted 2,663,452 2,639,853 2,652,784 2,639,853
========== ========== ========== ==========
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
5
ISRAMCO INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) 1,996 $ 555
Adjustment to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 257 363
Gain on marketable securities (73) (120)
Gain on BG transaction (3,626) --
Equity in net income of investee (176) --
Employee stock awards 118 --
Changes in assets and liabilities:
Accounts receivable (444) (164)
Prepaid expenses and other current assets 359 (65)
Other assets -- 8
Accounts payable and accrued expenses 2,155 (36)
------- -------
Net cash provided by operating activities 566 541
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Addition to property and equipment (68) (75)
Investment in affiliate -- (725)
Purchase of remaining interest of
Jay Management, LLC -- (60)
Purchase of marketable securities (537) (1,083)
Proceeds from sale of marketable securities 1,123 997
Proceeds from BG transaction 1,925 --
------- -------
Net cash provided by (used in)
investing activities 2,443 (946)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term debt (1,404) (187)
------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,605 (592)
Cash and cash equivalents-beginning of year 15,314 14,240
------- -------
Cash and cash equivalents-end of period $16,919 $13,648
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $53 $76
======= =======
</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 six month periods ended June 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 six months of 2000.
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 six-month
periods ended June 30, 2000, there were no potential dilutive common shares. The
Company's reconciliation is as follows:
For the Three Months Ended June 30,
-------------------------------------------
2000 1999
-------------------- --------------------
Income Shares Income Shares
------ ------ ------ ------
Earnings per common share-Basic $247,000 2,639,853 $251,000 2,639,853
Effect of dilutive securities:
Stock Options -- 23,599 -- --
-------- --------- -------- ---------
$247,000 2,663,452 $251,000 2,639,853
======== ========= ======== =========
For the Six Months Ended June 30,
-------------------------------------------
2000 1999
-------------------- --------------------
Income Shares Income Shares
------ ------ ------ ------
Earnings per common share-Basic $1,996,000 2,639,853 $555,000 2,639,853
Effect of dilutive securities:
Stock Options -- 12,931 -- --
---------- --------- -------- ---------
$1,996,000 2,652,784 $555,000 2,639,853
========== ========= ======== =========
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
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 has not yet determined the impact of this statement on its financial
condition or results of operations.
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7
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 June 30, 2000 $1,984 $116 $2,700 $ 4,800
Cash and corporate assets $28,514
-------
Total Assets at June 30, 2000 $33,314
=======
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
=======
Six Months Ended June 30, 2000
Sales and other operating revenue $ 1,387 $ 832 $ -- $ 2,219
Costs and operating expenses $(1,013) $(311) $ -- (1,324)
------- ----- ------ -------
Operating profit $ 374 $ 521 $ -- $ 895
======= ===== ====== =======
Interest Income, gain on marketable
securities, gain on BG transaction and other
corporate revenues $ 4,491
General corporate expenses $ (698)
Interest expense $ ( 53)
Income taxes $(2,639)
-------
Net Income $ 1,996
=======
</TABLE>
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8
<TABLE>
<CAPTION>
United Consolidated
States Israel Africa Total
------ ------ ------ -----
<S> <C> <C> <C> <C>
Three Months Ended June 30, 2000
Sales and other operating revenue $ 967 $ 549 $ -- $ 1,516
Costs and operating expenses $ (809) $(150) $ -- $ (959)
-------- ----- ------ -------
Operating profit $ 158 $ 399 $ -- $ 557
======= ===== ====== =======
Interest Income, gain on marketable
securities and other corporate revenues $ 457
General corporate expenses $ (413)
Interest expense $ (15)
Income taxes $ (339)
-------
Net Income $ (247)
=======
Six Months Ended June 30, 1999
Sales and other operating revenue $ 682 $ 590 $ -- $ 1,272
Costs and operating expenses $ (537) $(222) $ -- $ (759)
-------- ----- ------ -------
Operating profit $ 145 $ 368 $ -- $ 513
======== ===== ====== =======
Interest Income, gain on marketable
securities and other corporate revenues $ 657
General corporate expenses $ (444)
Interest expense $ (76)
Income taxes $ (95)
-------
Net Income $ 555
=======
Three Months Ended June 30, 1999
Sales and other operating revenue $ 337 $ 314 $ -- $ 651
Costs and operating expenses $ (263) $(116) $ -- $ (379)
-------- ----- ------ -------
Operating profit $ 74 $ 198 $ -- $ 272
======== ===== ====== =======
Interest Income, gain on marketable
securities and other corporate revenues $ 290
General corporate expenses $ (224)
Interest expense $ (37)
Income taxes $ (50)
-------
Net income $ 251
=======
</TABLE>
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9
NOTE 9 - Marketable securities
At June 30, 2000 and December 31, 1999, the Company had net unrealized gains on
trading securities of $24,000 and $8,000, respectively. The change in the net
unrealized holding gains included in earnings is a gain of $16,000 for the six
months ended June 30, 2000.
Trading securities, which are primarily traded on the Tel-Aviv Stock Exchange,
consists of the following:
June 30, 2000 December 31, 1999
------------- -----------------
Cost Market Value Cost Market Value
---- ------------ ---- ------------
Debentures and
Convertible Debentures $1,666,000 $1,705,000 $2,012,000 $1,968,000
Equity securities $ 489,000 $ 474,000 $ 517,000 $ 569,000
Investment Trust Fund $ -- $ -- $ 155,000 $ 155,000
---------- ---------- ---------- ----------
$2,155,000 $2,179,000 $2,684,000 $2,692,000
========== ========== ========== ==========
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 $2,858,000 and a fair market value of $4,583,000 at
June 30, 2000.
Sales of marketable securities resulted in realized gains of $57,000 for the six
months ended June 30, 2000.
NOTE 10
The Company's comprehensive income for the three and six month periods ended
June 30, 2000 and 1999 was as follows:
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
Net Income $ 447,000 $ 251,000 $2,196,000 $ 555,000
Other comprehensive gain
-available-for-sale
securities $ 601,000 $ 305,000 $ 601,000 $ 180,000
---------- ---------- ---------- ----------
Comprehensive income $1,048,000 $ 556,000 $2,797,000 $ 735,000
========== ========== ========== ==========
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 during the three months ended March 31, 2000.
<PAGE>
10
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 increase in the Company's consolidated cash and cash equivalents of
$1,605,000 from $15,314,000 at December 31, 1999 to $16,919,000 at June 30,
2000, is primarily attributable to operating activities and proceeds received
from the BG transaction.
In May 2000, an indebtedness of Jay in the amount of $1,404,000 under a
bank loan facility of $10 million from Comerica Bank-Texas was repaid in full.
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
Six Months Ended June 30, 2000 (the "2000 Period") Compared to Six Months
Ended June 30, 1999 (the "1999 Period") and the Three Months Ended June 30, 2000
Compared to the Three Months Ended June 30, 1999:
The Company reported net income of $1,996,000 ($0.76 per share) for the
2000 Period compared to a net income of $555,000 ($0.21 per share) for the 1999
Period and $247,000 ($0.09 per share) for the three months ended on June 30,
2000 compared to $251,000 ($0.10 per share) for the same period in 1999. The
increase in net income for the 2000 Period compared to the 1999 Period is
primarily attributable to transactions with BG International Limited, a member
of the British Gas Group, ("BG") providing for BG's replacement of the Company
as operator of the Med Yavne license.
<PAGE>
11
Set forth below is a break-down of these results.
United States
Oil and Gas Revenues (in thousands)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Oil Volume Sold (Bbl) 5 8 12 14
Gas Volume Sold (MCF) 88 111 181 250
Oil Sales ($) 150 102 324 170
Gas Sales ($) 274 217 494 477
Average Unit Price
Oil ($/Bbl) * $ 30 $ 12.75 $ 27 $ 12.14
Gas ($/MCF) ** $ 3.11 $ 1.95 $ 2.73 $ 1.91
</TABLE>
* Bbl - Stock Market Barrel Equivalent to 42 U.S. Gallons
** MCF - 1,000 Cubic Feet
Israel
The Negev Med License
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. As of January 1, 2000, BG has served as operator of the license.
Med Ashdod
In April 2000, the Company, as operator of the Med Ashdod License,
announced that a contract was signed with a drilling contractor to have the
drilling rig "Atwood Southern Cross" commence gas drilling during June 2000
within the area covered by the "Yam Ashdod" Carveout. Drilling of the Nir 1 well
commenced on June 13, 2000. On July 23, 2000, the drilling reached a depth of
1,900 meters (approximately 6,200 feet). The analysis of the logs indicated the
presence of a gas reservoir. The operator
<PAGE>
12
recommended that production tests be undertaken. Additionally, in light of the
results of the 3D seismic survey, the operator recommended that the drilling be
deepened by another 500 meters (approximately 1,600 feet) for purposes of
examining the possibility of the existence of an additional gas reservoir at a
deeper level.
In July 2000, the license participants approved production tests and
supplemented the drilling budget to an aggregate amount of approximately $13.3
million for drilling and production tests. At the commencement of production
tests, natural gas flowed to the surface and was flared. The flow rate of the
gas will be measured in the course of the production tests. As of the filing of
this Report, the production tests have not been completed.
The license was scheduled to expire on June 14, 2000; However, such
scheduled expiration date was extended until the completion of the drilling of
the Nir 1 well. If gas in commercial quantities is discovered, then the license
will be extended in accordance with Israeli law
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 and the data is being processed. The
Company serves as operator and holds a 1% participation interest in the permit.
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 and the data is being processed. 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
referred to as the "Marine South" covering an area of approximately 142 square
kilometers offshore Israel and an additional permit referred to 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 are being processed and interpreted.
The conditions pertaining to the grant of the permits are as follows: (i)
the acquisition, processing and interpretation of 150 square kilometers of
existing seismic lines by no later than November 2000, (ii) the execution of an
agreement for the performance of seismic survey by no later than August 8, 2000
and (iii) the performance of a seismic survey by no later than January 8, 2001.
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 with a flowing
wellhead pressure of 750 psi on a 12/64 inch choke. The well is currently
shut-in awaiting pipeline connection.
Congo
In June 2000, an agreement with a drilling contractor for the drilling of
an onshore well, the Tilapia-Land 1 within the Tilapia permit in the Congo, was
signed. The drilling is scheduled for September 2000 at an estimated budget of
approximately $2.8 million (inclusive of production tests).
<PAGE>
13
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% participation interest in the Tilapia permit. The
remaining participation interest is held by an affiliated entity, Naphtha Israel
Petroleum Corp. Ltd., which holds approximately 50.2% of the issued and
outstanding stock of the Company.
Operator's Fees
During the 2000 Period, the Company earned $430,000 in operator fees
compared to $198,000 for the 1999 Period and $340,000 for the three months ended
June 30, 2000 compared to $90,000 in respect of the same period in 1999. The
increase is primarily attributable to fees collected in connection with the
drilling of the Nir 1 well (Med Ashdod)
Oil and Gas Revenues
For the 2000 Period, the Company has oil and gas revenues of $818,000
compared to $647,000 for the 1999 Period and $424,000 for the three months ended
June 30, 2000 compared to $319,000 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 $251,000 compared to the
$181,000 for the 1999 Period and $130,000 for the three months ended on June 30,
2000 compared to $95,000 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 $551,000 compared to
$468,000 for the 1999 Period and $206,000 in respect of the three months ended
June 30, 2000 compared to $189,000 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 $138,000
compared to $189,000 for the 1999 Period and gain of $8,000 in respect of the
three months ended June 30, 2000 compared to gain of $101,000 for the same
period in 1999.
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 Costs
There was no material change in operator costs for the 2000 Period
compared to the 1999 period and for the three months ended June 30, 2000
compared to the same period in 1999.
General and Administrative Expenses
General and administrative expenses for the 2000 Period were $698,000
compared to $444,000 for the 1999 period and $413,000 for the three month period
ended on June 30, 2000 compared to $224,000 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.
<PAGE>
14
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.
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
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15
Item 6. Exhibits and Reports on 8-K
a) Reports on Form 8-K for the three month period ended March 31, 2000
Report on Form 8-K dated June 23, 2000
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: August 18, 2000 By /s/ Haim Tsuff
Chairman of the Board,
Chief Executive Officer
and Chief Financial Officer
