UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q SB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
--------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
--- ---
Commission File No. 0-14788
TATUM PETROLEUM CORPORATION
---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 33-0117736
- ------------------------------ ---------------------------------------
State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization
667-E Lakeview Plaza Boulevard, Worthington, OH 43085
---------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (614) 888-3637
---------------
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. [X]Yes [ ]No
At March 12, 1997, 10,418,855 shares of common stock, $.01 par value
were outstanding.
Page 1 of 10 pages.
<PAGE>
TATUM PETROLEUM CORPORATION
INDEX TO FORM 10-Q SB
SEPTEMBER 30, 1997
PAGE NO.
--------
PART I
FINANCIAL STATEMENTS
a. BALANCE SHEETS - March 31, 1997 and
September 30, 1997 (Unaudited) 3
b. STATEMENTS OF OPERATIONS - For the Three Months
and Six Months Ended September 30, 1997 and
1996 (Unaudited) 4
c. STATEMENTS OF CASH FLOWS - For the Six Months
Ended September 30, 1997 and 1996 (Unaudited) 5
d. NOTES TO THE FINANCIAL STATEMENTS 6
MANAGEMENT'S DISCUSSION AND ANALYSIS 7
PART II
a. OTHER INFORMATION 9
b. SIGNATURES 10
<PAGE>
TATUM PETROLEUM CORPORATION
BALANCE SHEETS
MARCH 31, SEPTEMBER 30,
1997 1997
-------- --------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 212,000 $ 56,000
Receivables:
Oil and gas 326,000 464,000
Joint interest owners 48,000 119,000
Related party 124,000 83,000
Other 15,000 15,000
Inventory 66,000 10,000
---------- ----------
Total current assets 791,000 747,000
PROPERTY AND EQUIPMENT, at cost:
Oil and gas producing properties
(using the successful efforts
method of accounting):
Proved 7,111,000 7,251,000
Unproved 546,000 318,000
Other equipment 168,000 197,000
---------- ----------
7,825,000 7,766,000
Less accumulated depreciation,
depletion, amortization and
impairment (5,436,000) (5,400,000)
---------- ----------
2,389,000 2,366,000
OTHER ASSETS 17,000 3,000
---------- ----------
TOTAL ASSETS $3,197,000 $3,116,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable $ 230,000 $ 426,000
Accounts payable 193,000 167,000
Revenue and ad valorem taxes payable 389,000 402,000
Advances from working interest owners 127,000 30,000
Accrued liabilities 88,000 77,000
Income tax payable 30,000 25,000
Accrued legal settlement - current 336,000 336,000
---------- ----------
Total current liabilities 1,393,000 1,463,000
DEFERRED TAX LIABILITY - -
ACCRUED LITIGATION SETTLEMENT - LONG TERM 230,000 51,000
COMMITMENT AND CONTINGENCIES (Note 2)
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value;
authorized 15,000,000 shares,
10,418,855 shares issued and
outstanding 104,000 104,000
Additional paid-in capital 4,877,000 4,877,000
Accumulated deficit (3,407,000) (3,379,000)
---------- ----------
Total stockholders' equity 1,574,000 1,602,000
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $3,197,000 $3,116,000
========== ==========
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
3
<PAGE>
TATUM PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE SIX
MONTHS ENDED MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET REVENUES
Oil and gas sales $ 660,000 $ 725,000 $1,297,000 $1,425,000
Drilling arrangement
income 18,000 8,000 72,000 15,000
Operating fees 41,000 37,000 82,000 70,000
---------- ---------- ---------- ----------
719,000 770,000 1,451,000 1,510,000
COSTS AND EXPENSES:
Oil and gas
production costs 207,000 141,000 349,000 253,000
General and
administrative expenses 154,000 172,000 328,000 305,000
Depreciation, depletion and
amortization 111,000 109,000 222,000 218,000
Exploration costs 137,000 84,000 339,000 339,000
Dry hole costs 16,000 104,000 87,000 88,000
Legal settlements, net - 99,000 - 99,000
---------- ---------- ---------- ----------
625,000 709,000 1,325,000 1,302,000
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE) 4,000 (38,000) (99,000) (35,000)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 98,000 23,000 27,000 173,000
---------- ---------- ---------- ----------
INCOME TAX EXPENSE:
Current - - - -
Deferred - (9,000) - (65,000)
---------- ---------- ---------- ----------
- (9,000) - (65,000)
---------- ---------- ---------- ----------
NET INCOME $ 98,000 $ 14,000 $ 27,000 $ 108,000
========== ========== ========== ==========
NET INCOME PER SHARE $ .01 $ - $ - $ .01
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 10,418,855 10,418,855 10,418,855 10,418,855
========== ========== ========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
4
<PAGE>
TATUM PETROLEUM CORPORATION
STATEMENTS OF CASH FLOWS
(Unaudited)
FOR THE SIX
MONTHS ENDED
SEPTEMBER 30,
---------------
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 27,000 $ 108,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 248,000 218,000
Deferred income taxes (5,000) 65,000
Gain (loss) on disposal of
equipment (284,000) 43,000
Changes in operating assets
and liabilities:
Receivables (168,000) (201,000)
Inventory 56,000 (166,000)
Prepaid expenses and other 15,000 3,000
Payables (110,000) 112,000
Accrued liabilities (164,000) 231,000
---------- ----------
Net cash provided by
operating activities $ (385,000) 413,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment 59,000 (621,000)
Proceeds from sale of property
and equipment - 18,000
---------- ----------
Net cash used in investing
activities 59,000 (603,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line-of-credit 825,000 1,180,000
Repayments on line-of-credit (665,000) (1,165,000)
---------- ----------
Net cash provided by financing
activities 170,000 15,000
NET INCREASE (DECREASE) IN CASH (156,000) (175,000)
CASH, beginning of period 227,000 416,000
---------- ----------
CASH, end of period $ 71,000 $ 241,000
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 41,000 $ 12,000
========== ==========
Seismic data received for working
interest in producing properties $ - $ -
========== ==========
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
5
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. GENERAL:
-------
Pursuant to rules and regulations of the Securities and Exchange
Commission, the Company has elected to omit substantially all the
disclosures normally included in financial statements prepared under
generally accepted accounting principles. Readers of these financial
statements should refer to the Company's Form 10-SB filed for the year
ended March 31, 1997, for additional disclosures.
The Company's balance sheet as of September 30, 1997, and the
statement of operations for the three and six months ended September
30, 1997 and 1996 are taken from the Company's books and records
without audit. Management believes, however, that such information
includes all accruals, which are considered recurring in nature,
required for the fair presentation of the Company's financial position
and results of their operations as of and for the periods then ended.
The results of operations for the interim periods presented are not
necessarily indicative of results expected for the full year.
The preparation of the Company's financial statements in conformity
with generally accepted accounting principles requires the Company's
management to make estimates and assumptions that affect the amounts
reported in these financial statements and accompanying notes. Actual
results could differ from those estimates.
2. CONTINGENCIES:
-------------
None.
6
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATIONS
----------------------------------------------------------
THIS REGISTRATION STATEMENT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933. SUCH FORWARD--LOOKING
STATEMENTS MAY BE FOUND IN THIS SECTION AND UNDER "DESCRIPTION OF
BUSINESS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OR OPERATIONS" AND
"PROPERTIES." ACTUAL EVENTS OR RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS.
THREE AND SIX MONTH PERIODS ENDED SEPTEMBER 30, 1997 VS. SEPTEMBER 30, 1996
- ---------------------------------------------------------------------------
RESULTS OF OPERATIONS - The Company had net income for the three and six
month periods ended September 30, 1997 of $98,000 and $27,000 compared to
$14,000 and $108,000 for the three and six month periods ended September
30, 1996. This decrease in net income was primarily a result of the sale
for a loss of two non-commercial Clinton Sandstone wells and the plugging
and abandonment of four impaired Rose Run wells.
REVENUES - Oil and gas sales for the six month periods ended September 30,
1997 totaled $1,297,000 compared to approximated revenues of $1,425,000 for
the six month periods ended September 30, 1996. Oil production decreased
from 15,500 barrels to 14,200 barrels for a net decrease of 1,300 barrels
or 8.4% for the six months ended September 30, 1997. Gas production
decreased from 526,200 MCFs to 372,900 MCFs for a net decrease of 153,300
MCFs or 29.1% for the six months ended September 30, 1997. These changes
in revenue and fluctuations in production have resulted in a total decrease
in oil and gas revenue of 9.0%. The dramatic decrease in gas production is
a result of the decline of the one exceptional well which has been in
production approximately 21 months and was expected to have a short
production life. Revenues for the three month periods ended September 30,
1997 and 1996 were $660,000 and $725,000, respectively.
Drilling arrangement income increased from $8,000 and $15,000 for the three
and six month periods ended September 30, 1996, to $18,000 and $72,000 for
the three and six month periods ended September 30, 1997, an increase of
380%. This increase is a result of the Company selling more working
interest in the new wells being drilled and is more in line with prior
years' income.
Management fee income increased from $37,000 and $70,000 for the three and
six month periods ended September 30, 1996, to $41,000 and $82,000 for the
three and six month periods ended September 30, 1997. The increase in
revenue is a result of the Company managing additional wells that were
brought into production during the current period.
COSTS AND EXPENSES
- ------------------
Oil and gas production costs for the three and six month periods ended
September 30, 1997 totaled $207,000 and $349,000 for a 46.8% and 37.9%
increase over the three and six month periods ended September 30, 1996
costs of $141,000 and $253,000. The increased costs were primarily a
result of additional wells that were brought into production during the
current period along with the further treating of six marginal wells.
7
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
General and administrative expenses totaled $154,000 and $328,000 for the
three and six month periods ended September 30, 1997 as compared to
$172,000 and $305,000 for the three and six month periods ended September
30, 1996 for a six month increase of 7.5%. This increase was primarily due
to the increase in interest expense incurred in connection with the
Company's settlement with Columbia Gas.
Depreciation, depletion and amortization costs for the current three and
six month periods totaled $111,000 and $222,000 for an increase of $2,000
and $4,000 over the three and six month periods ended September 30, 1996
costs of $109,000 and $218,000. There was virtually no change in the
periods compared.
Exploration costs and dry hole costs increased from $84,000 and $339,000
for three and six month periods ended September 30, 1996 to $137,000 and
$339,000 for the three and six month periods ended September 30, 1997. The
Company's approach to exploration has not changed significantly from the
prior period.
OTHER INCOME (LOSS)
- -------------------
Other income (loss) for the three and six month periods ended September 30,
1997, was a gain of $4,000 and a loss of ($99,000), a decrease of
($34,000) and ($134,000) from the three and six month periods ended
September 30, 1996 revenues of $38,000 and $35,000. This decrease was due
to the loss recognized on the sale of two non-commercial Clinton Sandstone
wells and the plugging and abandonment of four impaired Rose Run wells.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the six month period ended September 30, 1997, the Company
experienced an increase in working capital deficiency from $(602,000) at
March 31, 1997 to $(716,000) in the current period. This decrease in
working capital of $114,000 was due to the reduction of inventory and the
increased use of the Company's line-of-credit. Cash as of September 30,
1997 was $56,000, a $156,000 decrease from March 31, 1997, while cash
provided by operations at September 30, 1997 reflected a 193.2% decrease
from the $413,000 at September 30, 1996. This decrease was due to
increased workover activities coupled with the ongoing payments of the
Columbia Gas settlement liability, along with a 51.2% reduction in accounts
payable liability.
The Company used it's line-of-credit along with advances from industry
investors to facilitate the drilling of 7 wells during the six months ended
September 30, 1997. Two of these wells were dry holes. Of the five
commercial wells, the Company retained an average of 54.1% working
interest.
The Company anticipates continuing the sale of working interest to industry
related investors and bank borrowings to facilitate its working capital
needs and its drilling activities for the remainder of the fiscal year.
8
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
PART II - OTHER INFORMATION
ITEM NO. 1 - LEGAL PROCEEDINGS
-----------------
None.
ITEM NO. 2 - CHANGES IN SECURITIES
---------------------
None
ITEM NO. 3 - DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None
ITEM NO. 4 - SUBMISSION OF MATTER TO A VOTE OF SECURITIES HOLDERS
----------------------------------------------------
None
ITEM NO. 5 - OTHER INFORMATION
-----------------
None
ITEM NO. 6 - EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
None
9
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 and 15(d) 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.
TATUM PETROLEUM CORPORATION
/s/ ZACHARY T. TATUM
- -----------------------------------------
Zachary T. Tatum, President,
Chief Executive Officer, Principal
Financial and Accounting Officer
/s/ LORI POWELL
- -----------------------------------------
Lori Powell, Controller and Treasurer
Date: November 20, 1997
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 56
<SECURITIES> 0
<RECEIVABLES> 681
<ALLOWANCES> 0
<INVENTORY> 10
<CURRENT-ASSETS> 747
<PP&E> 7,766
<DEPRECIATION> 5,400
<TOTAL-ASSETS> 3,116
<CURRENT-LIABILITIES> 1,463
<BONDS> 0
0
0
<COMMON> 104
<OTHER-SE> 4,877
<TOTAL-LIABILITY-AND-EQUITY> 3,116
<SALES> 719
<TOTAL-REVENUES> 719
<CGS> 207
<TOTAL-COSTS> 625
<OTHER-EXPENSES> 418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 98
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
