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 December 31, 1996
-------------------
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
DECEMBER 31, 1996
PAGE NO.
PART I
FINANCIAL STATEMENTS
a. BALANCE SHEETS - March 31, 1996 and
December 31, 1996 (Unaudited) 3
b. STATEMENTS OF OPERATIONS - For the Three Months
and Nine Months Ended December 31, 1996
and 1995 (Unaudited) 4
c. STATEMENTS OF CASH FLOWS - For the Nine Months
Ended December 31, 1996 and 1995 (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, DECEMBER 31,
1996 1996
-------- --------
(Unaudited)
ASSETS
------
CURRENT ASSETS:
Cash $ 416,000 $ 242,000
Receivables:
Oil and gas 642,000 519,000
Joint interest owners 42,000 101,000
Other - -
Inventory 19,000 131,000
---------- ----------
Total current assets 1,119,000 993,000
PROPERTY AND EQUIPMENT, at cost:
Oil and gas producing properties
(using the successful efforts method
of accounting):
Proved 6,135,000 6,911,000
Unproved 475,000 584,000
Other equipment 132,000 162,000
---------- ----------
6,742,000 7,657,000
Less accumulated depreciation,
depletion, amortization and
impairment (3,464,000) (3,775,000)
---------- ----------
3,278,000 3,882,000
OTHER ASSETS 20,000 17,000
---------- ----------
TOTAL ASSETS $4,417,000 $4,892,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Note payable $ 360,000 $ 400,000
Accounts payable 230,000 229,000
Revenue and ad valorem taxes payable 515,000 485,000
Advances from working interest owners 322,000 129,000
Accrued liabilities 83,000 280,000
Income tax payable 20,000 -
---------- ----------
Total current liabilities 1,530,000 1,523,000
DEFERRED TAX LIABILITY 280,000 350,000
ACCRUED LITIGATION SETTLEMENT - 293,000
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 (2,374,000) (2,255,000)
---------- ----------
Total stockholders' equity 2,607,000 2,726,000
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,417,000 $4,892,000
========== ==========
SEE ACCOMPANYING NOTES TO THESE FINANCIAL STATEMENTS.
3
<PAGE>
TATUM PETROLEUM CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
-------------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET REVENUES:
Oil and gas sales $ 635,000 $ 691,000 $2,062,000 $2,116,000
Drilling arrangement income 6,000 11,000 21,000 87,000
Operating fees 40,000 28,000 109,000 75,000
---------- ---------- ---------- ----------
681,000 730,000 2,192,000 2,278,000
COSTS AND EXPENSES:
Oil and gas production costs 148,000 161,000 396,000 387,000
General and administrative
expenses 233,000 165,000 538,000 445,000
Depreciation, depletion
and amortization 112,000 98,000 331,000 247,000
Exploration costs 85,000 71,000 429,000 390,000
Dry hole costs 71,000 2,000 159,000 220,000
Legal settlements, net - - 99,000 -
---------- ---------- ---------- ----------
649,000 497,000 1,952,000 1,689,000
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE) (17,000) 38,000 (52,000) 56,000
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 15,000 271,000 188,000 645,000
---------- ---------- ---------- ----------
INCOME TAX EXPENSE:
Current - -
Deferred (5,000) (103,000) (70,000) (245,000)
---------- ---------- ---------- ----------
(5,000) (103,000) (70,000) (245,000)
---------- ---------- ---------- ----------
NET INCOME $ 10,000 $ 168,000 $ 118,000 $ 400,000
========== ========== ========== ==========
NET INCOME PER SHARE $ - $ .02 $ .01 $ .04
========== ========== ========== ==========
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 NINE
MONTHS ENDED
DECEMBER 31,
1996 1995
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 118,000 $ 400,000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation, depletion and
amortization 331,000 247,000
Deferred income taxes 70,000 245,000
(Gain) loss on disposal of equipment
and settlements 99,000 (219,000)
Changes in operating assets and
liabilities:
Receivables 64,000 (288,000)
Inventory (112,000) 9,000
Prepaid expenses and other 3,000 (33,000)
Payables (1,000) 583,000
Accrued liabilities 149,000 (37,000)
---------- ----------
Net cash provided by operating
activities 721,000 907,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (935,000) (807,000)
Proceeds from sale of property and
equipment - -
---------- ----------
Net cash used in investing
activities (935,000) (807,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on line-of-credit 1,780,000 880,000
Repayments on line-of-credit (1,740,000) (1,060,000)
---------- ----------
Net cash provided by financing
activities 40,000 (180,000)
NET INCREASE (DECREASE) IN CASH (174,000) (80,000)
CASH, beginning of period 416,000 325,000
---------- ----------
CASH, end of period $ 242,000 $ 245,000
========== ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 19,000 $ 13,000
========== ==========
Cash paid for income taxes $ 33,000 $ 1,000
========== ==========
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, 1996, for additional disclosures.
The Company's balance sheet as of December 31, 1996, and the statement
of operations for the three and nine months ended December 31, 1995
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:
-------------
In August 1996 the Company settled a dispute with a purchaser of its
gas whereby it received $447,687.50.
Subsequent to December 31, 1996, the Company settled certain
litigation with a company which was formally related to the previously
mentioned gas purchaser. The settlement stipulates a payment of
$34,000 per month to be paid over eighteen months commencing May 1st
1997.
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 NINE-MONTH PERIODS ENDED DECEMBER 31, 1996 VS. DECEMBER 31, 1995
- -------------------------------------------------------------------------
RESULTS OF OPERATIONS - The Company had net income for the three and
nine-month periods ended December 31, 1996 of $10,000 and $118,000 compared
to $168,000 and $400,000 for the three and nine-month periods ended December
31, 1995. This decrease in net income was primarily a result of increased
exploration costs along with a reduction of income from sale of working
interest and the accrual for a proposed settlement of a litigation
contingency.
REVENUES - Oil and gas sales for the nine-month period ended December 31,
1996 totaled $2,062,000 compared to approximated revenues of $2,116,000 for
the nine-month period ended December 31, 1995. Oil production decreased
from 25,973 barrels to 22,162 barrels for a net decrease of 3,811 barrels
or 15.7% for the nine months ended December 31, 1996. Gas production
decreased from 794,187 MCFs to 751,764 MCFs for a net decrease of 42,423
MCFs or 5.3% for the nine months ended December 31, 1996. These changes in
revenue and fluctuations in production have resulted in a total decrease in
revenue of 2.6%. Revenues for the three-month periods ended December 31,
1996 and 1995 were $635,000 and $691,000, respectively.
Drilling arrangement income decreased from $11,000 and $87,000 for the
three and nine-month periods ended December 31, 1995, to $6,000 and $21,000
for the three and nine-month periods ended December 31, 1996, a reduction
of 75.9%. This decrease is a result of the Company retaining more working
interest in the new wells being drilled.
Management fee income increased from $28,000 and $75,000 for the three and
nine-month periods ended December 31, 1995, to $40,000 and $109,000 for the
three and nine-month periods ended December 31, 1996. 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 nine-month periods ended
December 31, 1996 totaled $148,000 and $396,000 in comparison with the
three and nine-month periods ended December 31, 1995 costs of $161,000 and
$387,000. The increased costs were primarily a result of additional wells
that were brought into production during the current period.
General and administrative expenses totaled $233,000 and $538,000 for the
three and nine-month periods ended December 31, 1996 as compared to
$165,000 and $445,000 for the three and nine-month periods ended December
31, 1995 for a total increase of 41.2% and 20.9%. This increase was due to
additional legal fees incurred in connection with the Company's lawsuit
with Columbia Gas, additional fees associated with returning
7
<PAGE>
TATUM PETROLEUM CORPORATION
NOTES TO FINANCIAL STATEMENTS
to reporting status with the S.E.C., along with salary increases.
Depreciation, depletion and amortization costs for the current three and
nine-month periods totaled $112,000 and $331,000 for an increase of $14,000
and $84,000 over the three and nine-month periods ended December 31, 1995
costs of $98,000 and $247,000. This increase is consistent with an
increase in the depreciable assets owned by the Company, as well as
adjustments to depletion rates based on year end reserve quantities.
Exploration costs and dry hole costs decreased a total of 3.6% from $73,000
and $610,000 for three and nine-month periods ended December 31, 1995 to
$156,000 and $588,000 for the three and nine-month periods ended December
31, 1996. The Company's approach to exploration has not changed
significantly from the prior period.
The Company accrued approximately $566,000 for a proposed settlement of
certain litigation, and has also realized a gain of $467,000 in a
bankruptcy settlement of a company previously affiliated with the company
involved in the current litigation. These legal actions have resulted in
a net expense of $99,000 for the nine-month period ended December 31, 1996.
OTHER INCOME (LOSS)
- -------------------
Other income (loss) for the three and nine-month periods ended December 31,
1996, was a loss of $17,000 and $52,000, a decrease of $55,000 and $108,000
from the three and nine-month periods ended December 31, 1995 revenues of
$38,000 and $56,000. This decrease was due to the loss resulting from the
accrued settlement proposal during the current period.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the nine-month period ended December 31, 1996, the Company
experienced an increase in working capital deficiency from $(411,000) at
March 31, 1996 to $(530,000) in the current period. This decrease in
working capital of $119,000 was primarily due to the accrual of the
proposed settlement with Columbia Gas. Cash as of December 31, 1996 was
$242,000, a $174,000 decrease from March 31, 1996. This was due to
increased drilling activity and purchase of inventory pipe to take
advantage of low prices. Cash provided by operations was $242,000 at
December 31, 1996 which is in line with the $245,000 at December 31, 1995.
The Company used it's line-of-credit along with advances from industry
investors to facilitate the drilling of 17 wells during the nine months
ended December 31, 1996. Four of these wells were dry holes. Of the
thirteen commercial wells, the Company retained an average of 56.1% 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: May 8, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Form 10-QSB for the quarter ended December 31, 1996
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 242
<SECURITIES> 0
<RECEIVABLES> 620
<ALLOWANCES> 0
<INVENTORY> 131
<CURRENT-ASSETS> 993
<PP&E> 7,657
<DEPRECIATION> (3,775)
<TOTAL-ASSETS> 4,892
<CURRENT-LIABILITIES> 1,523
<BONDS> 0
0
0
<COMMON> 104
<OTHER-SE> 2,622
<TOTAL-LIABILITY-AND-EQUITY> 4,892
<SALES> 2,062
<TOTAL-REVENUES> 2,192
<CGS> 727
<TOTAL-COSTS> 1,952
<OTHER-EXPENSES> 52
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19
<INCOME-PRETAX> 188
<INCOME-TAX> 70
<INCOME-CONTINUING> 118
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 118
<EPS-PRIMARY> .001
<EPS-DILUTED> .001
</TABLE>
