SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999 Commission File Number: 0-13871
VINEYARD OIL & GAS COMPANY
(Exact name of Registrant as specified in its Charter)
PENNSYLVANIA 25 1349204
(State or other jurisdiction of incorporation or organization (I.R.S.
Employer Identification Number)
10299 West Main Road, North East, Pennsylvania 16428-0391
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (814) 725-8742
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to section 12(g) of the Act:
Common Stock, without par value
(Title of Class)
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.
Yes X No ___
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Parts II or III of this
Form 10-KSB or any amendment to this Form 10-KSB. (X)
State issuer's revenues for its most recent fiscal year: $13,816,887
As of March 31, 2000, there were 5,125,562.50 shares of common stock issued
and outstanding. The aggregate value of the voting stock held by non-
affiliates of Vineyard oil & Gas Company (hereinafter referred to as
Vineyard, Company, or Registrant) on that date is unknown. The
Registrant's stock is not listed on any exchange and private sale
information is unavailable to management.
Documents Incorporated By Reference
None.
<PAGE>
TABLE OF CONTENTS
ITEM PAGE
PART I
1.BUSINESS 2
2.PROPERTIES 5
3.LEGAL PROCEEDINGS 9
4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9
PART II
5.MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
STOCK-HOLDER MATTERS 10
6.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATION 10
7.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 12
8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 12
PART III
9.DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT 13
10.EXECUTIVE COMPENSATION 14
11.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 15
12.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 16
PART IV
13.EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON
FORM 8-K 17
SIGNATURES 18
INDEX OF FINANCIAL STATEMENTS AND SCHEDULES 19
INDEX OF EXHIBITS 41
<PAGE>
PART I
ITEM 1.BUSINESS
General Development of Business
Originally, Vineyard obtained oil/gas leases and developed those leaseholds
into oil & gas production properties for its own account and on behalf of
Limited Partners.
Over the past twelve years, Vineyard Oil & Gas Company has shifted its primary
business objectives towards the marketing of natural gas. Although remaining
in the oil and gas production business, the 'gas marketing' segment of the
company has become the dominant factor of the company's financial progress.
As a result of the company's original mission, several related 'profit
centers' were established to service the company's oil & gas production,
as well as unrelated third parties. Well Service, Equipment Rental,
Pipeline Transmission and, Gas and Electricity Marketing, have all
become part of Vineyard's business activities.
At present, Vineyard has no subsidiaries. The company is however, a 45%
owner of Northern Pipeline, a Limited Liability Company that gathers and
markets gas for third party producers. See investment in jointly owned
company in Note D to the financial statements dated December 31, 1999,
included in this form 10-KSB.
The most recent addition to Vineyard's business activities is that of
marketing electricity to consumers of electric power within the state of
Pennsylvania.
Vineyard was incorporated under the laws of Pennsylvania in November of 1978.
Its principal executive office is at 10299 West Main Road, North East, PA.
16428, with a telephone number of (814) 725-8742.
(e-mail address [email protected])
Further information concerning the industry segments of the Registrant can be
found in Note F, to the financial statements dated December 31, 1999, included
in this Form 10-KSB.
<PAGE>
NARRATIVE DESCRIPTION OF BUSINESS DURING FISCAL 1999
Exploration and Development Activities
Vineyard engaged in no exploration and development activities during the
year 1999. The Company does plan to explore the possibility for exploration
and development of natural gas and oil during the year 2000.
Until only lately, market conditions for oil and gas drilling have not
warranted company or investor interest in exploration or development.
The company retains the ability to engage in all phases of drilling and
completion of wells, other than the actual drilling.
Operation of Oil and Gas Wells
The Company operates approximately 163 gas wells and 16 oil wells on behalf
of itself and Limited Partnerships of which it is also the General Partner,
as well as operating approximately 41 wells for third parties. Such
operations are primarily in New York and Pennsylvania.
Management of Investment Partnerships
As of March 31, 2000, the Company was the General Partner of 4 Limited
Partnerships for which it maintained all books, records and annually
provided appropriate tax information.
Revenue from Activities
The total revenue contributed by each of the various activities of the
Company for the last two fiscal years is set forth in the Income Statement
attached to this report.
Sources and Availability of Raw Materials
The Company has not drilled a well since 1987. The equipment the Company
possesses from the drilling era is now being used to service wells, to
repair wells and to install pipeline(s). Both plastic and steel pipe products
are readily available and should continue to be available in 2000.
The Company is cognizant, however, that the oil and gas industry is subject
to tremendous flux and a sudden increase in prices could result in shortages.
Seasonality of Business
The various segments of the Registrant's business are subject to seasonal
changes. Revenues generated by the sale of natural gas are somewhat seasonal
with more demand coming in the colder winter months when heating consumption is
high. Vineyard has continued to stabilize its sales of natural gas by entering
into contracts with several individual industrial end-users that use gas in the
summer only, to provide for a more level consumption of natural gas on a twelve
(12) month basis.
<PAGE>
Comments Concerning Liquidity and Capital Resources
Information concerning Vineyard's practices with respect to liquidity and
capital resources is set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources" included in Item 6.
Major Customers
See Related Parties Transactions and Business Segment Information, and
Major Customers and Suppliers contained in Note H to the Financial Statements
dated December 31, 1999, included in this Form 10-KSB.
Competition
Vineyard's business activities in the service field, as well as gas and
electric marketing, are faced with competition from many similarly placed
companies, as well as much larger companies and companies which are affiliates
of major pipeline companies. The inconsistent price of natural gas has
eliminated some competitors and has adversely affected many others, just as
it has adversely affected Vineyard. The existence of other companies in the
oil and gas business has not influenced the price of supplies, subcontracted
services, and equipment consumed by Vineyard. Vineyard does not deem its oil
and gas operations to be a significant factor in the industry as a whole, but
believes that they are significant in it's immediate area of operations in
Northwestern Pennsylvania.
Markets
Over 97% of Vineyard's gas production is serviced by two(2) major natural
gas transportation companies. The vast majority of wells owned and
operated by Vineyard are adjacent to the first (NFG) of the two (2) natural
gas transmission companies. The second company (Norse Pipeline, LLC)
has only gathering lines near Vineyard's wells, which in turn delivers the
gas to a third transmission company (Tennessee Gas Pipeline). Consequently,
the Company is in an unequal bargaining position in contracting for price and
volumes of natural gas to be purchased by natural gas pipeline companies
Vineyard markets its natural gas production, via the two pipelines mentioned
above, to various endusers of natural gas rather than sell the gas directly to
these pipelines. This marketing ability substantially increases the price
Vineyard receives for its gas production
The agreements that Vineyard has with the pipeline companies permit
transportation of Vineyard's production to end-users. While the existence and
availability of end-users is benefiting the Company in regards to a higher
price for productions, as well as the taking of higher volumes, said end-user
market is dependent on the pipeline companies. Lack of sales to end-users
would cause a reduction in the price received by the Company for which the
Company could sell on a day-to-day basis. The Company is confident that it
possesses the contacts, knowledge, and information necessary to continue to
market natural gas to end-users. The Company's ability to market to end-
users is such that it is now marketing significant volumes of natural gas
for third party producers of natural gas to industrial and commercial end
users for a fee payable to the Company.
<PAGE>
Gas Marketing
Demand for the Company's gas depends on many factors beyond Vineyard's
control, including the level of domestic production, foreign imports, the
price of fuel oil, access to pipelines, seasonal demands for fuel and
government regulation. To help offset the impact of these factors, during
the early 1980's, the Company began to market its gas as well as that of
other producers directly to end-users and to broker gas via spot deals
with suppliers and end-users. This portion of Vineyard's business has grown
to higher levels and has become a major part of the Company's over-all
business.
Pipelines
Vineyard Oil & Gas Company owns approximately 48 miles of pipelines that
gather both its productions and that of other companies to be transported
to the major transmission companies and directly to end-users. The Company
is in the process of expanding this gathering system to allow producers to
consolidate compression and dehydration.
The Company also owns a 45% interest in Northern Pipeline Company, LLC which
imposes a gathering charge for the collection of natural gas.
Environmental Regulation
Vineyard's drilling and well services are subject to existing laws and
regulations designed to protect the environment. Compliance with said laws
and regulations has decreased the efficiency of the Company's operations
but has not materially increased the cost of doing business. Environmental
regulations are no more burdensome to Vineyard than to other similar oil
and gas companies. Additional laws and regulations which could be passed
or repealed at any time could result in a material increase or decrease in
the cost of doing business.
Employees
On March 31, 2000, the Company had 13 full-time employees. None of
Vineyard's employees are presently represented by a union for collective
bargaining purposes.
ITEM 2. PROPERTIES
Information Concerning Reserves, Production Wells, Acreage, Drilling
Activities, and Real Estate are as follows:
Introduction
The Company believes that it has satisfactory title to its interests in
developed oil and gas properties, all of which are located primarily in New
York and Pennsylvania. The Company's developed oil and gas properties
are also subject to customary royalty interest generally contracted for in
connection with the acquisition of the properties, burdens incident to
operating agreements, current taxes, and easements and restrictions
(collectively, "Burdens"). The Burdens are customary in the Company's
industry and do not place the Company in a competitive disadvantage.
As is customary in the oil and gas industry in the case of undeveloped
properties, little or no investigation of title is made at the time of
acquisition (other than a preliminary review of local real estate records).
However, investigations are generally made, and in virtually every case, a
title opinion is obtained from local counsel before drilling operations
begin.
<PAGE>
The Company's headquarters in North East, Pennsylvania include an office
complex, a four unit apartment house, a single family dwelling, a repair
shop, a storage building and 19 acres of land zoned Industrial.
Definitions
The following words have the following definitions when used herein:
Gross Well or Gross Acre: A gross well or gross acre is a
well or acre in which an interest
is owned. The number of gross
wells or acres is the total number
of wells or acres in which an
interest is owned.
Net Well or Net Acre: A net well or net acre is deemed to
exist when the sum of fractional
ownership interests in gross wells
or net acres equals one. The number
of net wells or net acres is the
sum of the fractional interests owned
in gross wells or gross acres.
Proved Oil and Gas Reserves: Proved oil and gas reserves are the
estimated quantities of crude oil,
natural gas, and natural gas
liquids which geological and
engineering data demonstrate with
reasonable certainty to be
recoverable in the future from
known reservoirs under existing
economic and operating conditions;
i.e., prices and costs as of the
date the estimate is made. Prices
include consideration of changes in
existing prices provided only by
contractual arrangements, but not
of escalations based upon future
conditions.
Proved Developed Oil and
Gas Reserves: Proved developed oil and gas
reserves are reserves that can be
expected to be recovered through
existing wells with existing
equipment and available operating
methods.
Proved Undeveloped Reserves: Proved undeveloped oil and gas
reserves are reserves that are
expected to be recovered from new
wells on undrilled acreage, or from
existing wells where a relatively
major expenditure is required for
recompletion. Reserves on
undrilled acreage are limited to
those drilling units that offset
productive units and that are
reasonably certain of production
when drilled.
<PAGE>
Developed Acreage: Developed acreage is acreage that
is spaced or assignable to
productive wells or is acreage held
by production which eventually
could receive additional wells.
Undeveloped Acreage: Undeveloped acreage is acreage on
which wells have not been drilled
or completed to a point which would
permit production of commercial
quantities of oil and gas
regardless of whether or not such
acreage contains proved reserves.
<PAGE>
Exploratory Well: A well drilled to find and produce
oil or gas in an unproven area, to
find a new reservoir in a field
previously found to be productive
of oil or gas in another reservoir,
or to extend a known reservoir.
Development Well: A well drilled within the proved
area of an oil or gas reservoir to
the depth of stratigraphic horizon
known to be productive.
Dry Well: A dry well is an exploratory or a
development well found to be
incapable of producing either oil
or gas in sufficient quantities to
justify completion as an oil or gas
well.
Barrels (Bbls.): Equal to 42 U.S. gallons and
represents the basic unit for
measuring oil production.
Mcf: Equal to the volume of 1,000 cubic
feet of natural gas under
prescribed conditions of pressure
and temperature and represents the
basic unit for measuring natural
gas.
Significant Properties
As of March 31, 2000, the Company had no individual interests in an oil and
gas property that accounted for more than 10% of the Company's proved
developed oil or gas reserves, including the Company's interest in reserves
owned by four Partnerships.
Oil and Gas Reserve Information
See Proved Reserves Table included in Note J (unaudited) to the Financial
Statements dated December 31, 1999, included in this Form 10-KSB
Reserves Reported to Other Agencies
Vineyard does not file any estimates of total proved net oil or gas
reserves with any other Federal authority or agency, other than the
Securities and Exchange Commission on this Form 10-KSB.
<PAGE>
Oil and Gas Production
The following table sets forth net quantities of oil and natural gas
produced by Vineyard, including its proportional share in production of
partnerships, for the years indicated. All production is from wells
located in the United States. For further information see Note J to the
Financial Statements dated December 31, 1999, included in this Form 10-KSB.
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
GAS (mcfs) 120,857 129,309
OIL (barrels) 1,089 602
</TABLE>
Average Annual Sales Prices and Production Costs
The following table sets forth the average annual sales price per unit of
oil and gas produced by the Company, including its proportional interest in
the production of Partnerships.
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Average Annual Sales Price
per Unit of Gas (mcf) $2.72 $2.63
Average Annual Sales Price
per Unit of Oil (barrel) $16.76 $13.62
</TABLE>
<TABLE>
<CAPTION>
Equivalent Average Annual Production Cost
<S> <C> <C>
1999 1998
Gas (per mcf) $2.17 $1.54
Oil (per barrel) $6.77* $29.86*
</TABLE>
* The price can change while the oil is being produced, therefore, certain
production can be sold below production cost. Production costs were
substantially reduced in 1999 due to the reduced production of the oil wells.
Also, the number of oil wells in 1999 was reduced to five compared to 13 oil
wells in 1998 due to the sale of oil wells.
Oil and Gas Wells
The following table sets forth information as of March 31, 2000, regarding
the Company's productive oil and gas wells.
<TABLE>
<CAPTION>
Gross Wells Net Wells
<S> <C> <C>
Gas Wells 84 49.1
Oil Wells 5 2.4
</TABLE>
<PAGE>
Acreage
The following table sets forth information as of March 31, 2000, regarding
the Company's developed and undeveloped oil and gas acreage.
LEASEHOLD ACREAGE
<TABLE>
<CAPTION>
Gross Acreage Net Acreage
<S> <C> <C>
Developed Natural Gas Acreage 13,947.35 4,762.45
Undeveloped Natural Gas Acreage* -0- -0-
Developed Oil Acreage 75 27
Undeveloped Oil Acreage 25 25
</TABLE>
* The lack of drilling activity in the Company's area of operations has
resulted in large amounts of undeveloped acreage being freed from the
obligations of oil and gas leases. The Company currently has undrilled
locations on acreage held for the benefit of the Company by production and
is confident that it can acquire acreage in amounts in excess of its needs
in the event of an up-turn in drilling activity.
Natural gas lease acreage typically costs the Company between $2.00 and
$5.00 per acre in delayed rentals. No delay rentals are currently paid.
The majority of the natural gas leases entered into by the Company are for
a two-(2) year period, and typically is a 7/8th interest. Oil acreage
generally is burdened by additional third party royalty interest and
generally a lease is being held by production on some part of that lease.
Drilling Activity
There has been no drilling activity during the years 1998 and 1999.
Present Activities
As of March 31, 2000, no wells were in the process of being drilled.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings for the Company other than
being party to several actions which arise in the normal course of the
Company's business. In Management's opinion, none of these lawsuits or
proceedings should, individually or in the aggregate, have a material
adverse affect upon the financial position of the Company.
See Note G to the Financial Statements dated December 31, 1999, included in
this Form 10-KSB.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the year 1999.
PART II
<PAGE>
ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market and Value of Common Stock
There is no established public trading market for Vineyard's common stock.
Vineyard's common stock is traded privately on a sporadic basis principally
in the Northwestern Pennsylvania market.
Number of Holders of Common Stock
As of March 31, 2000, the stock ledger of the Registrant indicated that
there were 975 shareholders of its common stock.
Dividends
The Company did not declare or pay a dividend during fiscal 1999. The
Board of Directors does not anticipate paying or declaring a dividend
during fiscal 2000 or in the near future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
The Company's results of operation for the year ended December 31, 1999,
and its financial condition at December 31, 1999, are discussed in the
following paragraphs and should be read in conjunction with the financial
statements of the Company.
Business Overview
The year 1999 was a transitional year for Vineyard. With the announcement
that the President and Chairman of the Board, James Concilla, would be
retiring, a major focus was put on identifying a successor.
Focus was also placed upon negotiations with existing and new gas marketing
executives to solidify and bolster Vineyard's success in this area.
As these management matters were being settled, Vineyard, along with all
other marketers of natural gas, took the necessary steps to adjust to new
procedures and regulations put in place by the pipelines and utilities on
which it transacts its business (National Fuel Gas Transmission Corp.,
National Fuel Gas Distribution Co., and Norse Pipeline Co.).
Although these changes implemented by the pipelines were significant, Vineyard
Oil & Gas believes that all necessary steps have been taken to continue its
marketing activity and improve its efficiency and profitability.
The Company showed a net operating loss of $72,440, down from a net profit of
$186,658 a year ago.
Significant pipeline storage fees, a substantial inventory write down, and a
reduction in gas marketing margins played significant roles in the 1999 loss.
The Company does not foresee these storage fees recurring at the 1999 levels.
Also, the inventory value is now in order with current market values and is not
expected to vary markedly.
Looking forward, the Company has a variety of strategies designed for improved
efficiencies, accountability, and growth specifically in those business
segments in which Vineyard has the proven potential to succeed.
<PAGE>
The Board of Directors has selected Stephen Millis, previously the Vice
President, to succeed James Concilla. The Board has also elected James
MacFarlane as its Chairman. These changes will take effect April 1, 2000.
The Company closed seven of its remaining 11 Limited Partnerships programs.
The wells associated with these programs are now completely owned by the
Company and will improve the production profit center.
The Northern Pipeline, LLC will continue to be an expansion project for the
Company. As the Company continues to put more of the pipeline into operation,
marketing volumes will also increase thereby spurring continued growth in
that area.
The Company also plans expansion of marketing efforts on pipelines here-to-fore
avoided by the Company. With addition of staff, the use of subcontracted
sales-people, and the ability to acquire recently discovered gas volumes
adjacent to these pipelines, Vineyard plans to increase its market share
and gas through-put levels.
Liquidity and Capital Resources
The cash flow of Vineyard Oil & Gas Company is dependent primarily on gas
marketing sales.
The Company will continue to review the various cost centers in an effort to
control and reduce expenses where possible.
Comparative Results of Operations
The total revenues for 1999 increased $986,716, or 8%, over 1998. Gas and
electric marketing accounted for $1,123,438 of the increase, due to
increased volumes at increased prices.. Well services increased $25,834, due
mainly to an increase in charges for service. Production decreased
$36,780, or 10%, from 1998, reflecting the decrease in gas production for
the year. Equipment rental and field services decreased $104,603, or 43%,
from 1998. In 1999, the company had fewer large outside contracts and
spent more time on non-billable company projects.
Other income decreased $50,700 from 1998. The 1998 amount included asset sales
of $73,293.
Equity in earnings of jointly owned company increased by $29,527 over 1998.
Vineyard's share of the sale of an unused portion of pipeline accounted for
$44,403. Conversely, operating revenue decreased $14,876.
Direct costs increased $1,158,657 over 1998. Gas and electric marketing
accounted for $1,191,644. Well services costs increased $66,066 due mainly to
inventory write-downs. Equipment expenses decreased $40,372 from 1998,
$33,420 of which was the result of terminating marina supervision operations
in 1999.
General and administrative expenses increased $82,182, or 18%, in 1999,
over 1998. In 1999, the Company ceased paying commissions to officers and
adjusted salaries accordingly. In 1999, marketing commissions were decreased
$56,323 and a similar amount was added to salaries included in general and
administrative expenses.
<PAGE>
Net income decreased $259,008. Gas and electric marketing income decreased
$68,206. Volume and price increases and electric brokering were offset by gas
storage costs ("TBF" and other costs) and decreased margins on spot market
sales. Well service net loss increased $40,232 from 1998 due mainly to
inventory adjustments and deletions. Production net income increased
$18,668. Other income decreased $50,700 and general and administrative
expenses increased $82,182.
Net current assets at December 31, 1999, decreased $2,806 over 1998. Accounts
receivable increased $298,630 and accounts payable increased $327,683.
Inventory decreased $74,961 and unrestricted cash increased $74,458.
Fixed assets increased $148,382 due mainly to the purchase of partnership
assets. The Company purchased the entire minimum interest in seven
partnerships and an increased interest in three partnerships for a total
cost of $104,316. Allowance for depreciation changed by the amount
charged to operations in 1999.
Cash restricted for well plugging decreased in 1999 by $85,233. The amount
increased by interest earned during the year and was decreased by the
purchase of partnership assets.
Investments represent the Company's interest in a jointly owned company.
The decrease of $27,391 in 1999 was the result of the Company's share of
net income for the year of $61,134 offset by distributions to Vineyard of
$88,525.
Deferred revenues increased $18,695 in 1999. This represents interest earned
on the escrowed cash amount during the year.
Net cash provided by operations was $110,216. Increases in accounts
receivable were offset by increases in accounts payable. The operating
loss was offset by non cash items, depreciation, amortization and provision
for losses on accounts receivable. A decrease in inventory contributed to
an increase in cash flow. The overall effect was a decrease in cash of
$10,775 in 1999.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this is submitted in a separate section of this report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The firm of Gorzynski, Felix and Gloekler, P.C., was retained by the
Company for the 1999 audit. There were no disagreements with the auditors
on any matters of accounting principles or practices, financial statement
disclosures, or auditing scope and procedures for the years ended December
31, 1999, and 1998.
<PAGE>
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors, Officers, and Nominees as of March 31, 2000.
Name Age
James J. Concilla 62 Board Chairman, President, Director and a member
of the Executive Committee. Mr. Concilla has a
Bachelors of Science degree from Edinboro
University and a Masters degree in Mathematics
from the state of Pennsylvania. Mr. Concilla has
been an employee, director, and officer of the
Company since its organization in 1978.
Charles L. Valone 68 A Director and member of the Wage and Bonus
Committee. Mr. Valone has been
a director of the Company since its founding. Mr.
Valone has owned and operated vineyards in North
East, Pennsylvania, since 1948. These operations
are unrelated to the Company.
Jeffery L. Buchholz 53 Secretary, Treasurer, Director, and a member of
the Executive, and Audit Committees. Mr.
Buchholz holds a Bachelors degree in Business
Administration from Lambuth College, Jackson,
Tennessee, and a Masters degree in Education from
Georgia Southern University, Statesboro, Georgia.
Mr. Buchholz, a Director since 1989, and the
Secretary/Treasurer since 1990, has been a teacher
and Union Officer in the Ripley, New York, school
system since 1970.
Stephen B. Millis 42 Vice-President, Director, and a member of the
Executive Committee. Mr. Millis holds a Bachelor
of Arts degree from Gannon University. Mr.
Millis, an employee since 1982, was elected Vice-
President and a Director in 1992. (Mr. Millis was
required to resign from the Board as part of
negotiations to become President effective
April 1, 2000).
James J. MacFarlane 38 Mr. MacFarlane was elected a Director in 1993.
Mr. MacFarlane is a member of the Wage/Bonus
Committee. Mr. MacFarlane holds a Bachelor
of Science degree from the University of Pittsburgh.
Mr. MacFarlane has been President of MacTech Mineral
Management, Inc., since 1998. He has been employed
at MacTech Mineral Management, Inc., in Bradford
Pennsylvania since 1987. MacTech Mineral Management,
Inc. is unrelated to the Company.
W. Eric Johnson 41 Mr. Johnson was elected as a Director in 1997.
Mr.Johnson is a member of the Audit and Wage/
Bonus Committees. Mr. Johnson holds a Bachelor
of Science Degree from the University of Dayton.
Mr. Johnson has been an investment broker with
Thomas F. White and Company, Inc. Erie, PA since
1989. Thomas F. White and Company, Inc. is
unrelated to the Company.
<PAGE>
David H. Stetson 41 Mr. Stetson was elected as a Director in 1998. Mr.
Stetson is a member of the Audit committee. Mr.
Stetson has been President and Co-owner of Stetson
Brother's Hardware Store, Inc. in North East, PA.,
for the past twenty years. Stetson Brothers, Inc. is
unrelated to the Company.
Current Officers Title/Office Year in Which Term to Expire
and Directors Service as at Annual
Director Began Meeting in
James J. Concilla Board Chairman/President 1978 2002
Jeffery L. Buchholz Director/Secretary/Treasurer 1989 2002
Charles L. Valone Director 1978 2001
Stephen B. Millis Director/Vice-President 1992 2000
James J. MacFarlane Director 1993 2001
W. Eric Johnson Director 1997 2000
David H Stetson Director 1998 2000
March 31, 2000 Board Committees and Members
Executive Audit Wage/Bonus
David H. Stetson Jeffery L. Buchholz Charles Valone
Jeffery L. Buchholz W. Eric Johnson James J. Concilla
James J. MacFarlane David H. Stetson James J. MacFarlane
ITEM 10. EXECUTIVE COMPENSATION
Executive Officers
The following table sets forth certain information concerning compensation
during fiscal 1997, 1998 and 1999 by the Company to each of the Company's
executive officers.
Summary Compensation Table
Name and Year Base Salary Commissions Bonus Other
Principal Position (1) (2) (3) (4) (5) (6)
James J. Concilla 1999 $75,000 0 0 0
President, Chairman 1998 $75,000 $61,129 0 $3,000
of the Board 1997 $47,341 $31,928 0 $3,000
Stephen B. Millis 1999 $65,000 0 0 0
Vice-President 1998 $50,970 $88,074 0 $3,000
1997 $36,941 $43,289 0 $3,000
Jeffery L. Buchholz 1999 $1,933 0 0 0
Secretary/Treasurer 1998 $2,431 0 0 0
1997 $ 874 0 0 0
(1) In 1998 the company changed Mr. Concilla's compensation to salary only of
$75,000 per year.
(2) In 1998 the Company changed Mr. Millis's compensation to salary only of
$65, 000 per year.
<PAGE>
(3) Reflects commissions related to the sale of natural gas. The commissions
paid to Mr. Concilla in 1998 were earned during 1996 and 1997. The 1998
commissions reported above for Mr. Millis were earned during the years 1996
1997 and 1998 up to June 30, 1998. The commissions reported above for 1996
and 1997 represent commissions paid in 1996 and 1997, which were in part
earned in prior years.
(4) No stock bonus was awarded to any directors, executive officers or other
employees of the Company during the years 1997 and 1998. In 1999, compensation
contracts were negotiated for Mr. Millis and employee Mr. Scott Sampson which
include stock bonus awards to be given in the year 2000.
(5) In April, 1995, the Board of Directors established life insurance plans
for Mr. Concilla and Mr. Millis, and contributed annually in the amounts as
shown.
(6) Mr. Concilla and Mr. Millis are given the use of Company vehicles for
Company business and the Company provides Mr. Buchholz, a part-time employee,
with personal automobile labor maintenance.
No officer received any other non-cash compensation during the years ending
December 31, 1997, 1998 or 1999, other than health insurance which all full-
time employees of the Company are entitled to receive.
Executive Officer Severance Package
An Executive Officer severance package which was in effect for Chief
Executive Officer Concilla and Vice President Millis was withdrawn by the
Wage/Bonus Committee, which is a majority of the Board of Directors, in
December of 1997. Mr. Millis disputed his severance and compensation package
during 1999. This has subsequently been settled in the first quarter of 2000.
No stock options were awarded to any directors, executive officers or other
employees of the Company during fiscal 1999.
Directors
Directors are paid $150 for each meeting of the Board of Directors at which
the director is present. In addition, directors attending Wage/Bonus
and/or Audit Committee meetings are also each paid $150.00 per meeting.
There is no compensation for directors attending Executive Committee
meetings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
Set forth below is information, as of March 31, 2000 concerning the stock
ownership of all persons who own of record or are known to the Company to
own beneficially at least 5% of the outstanding common stock, all directors
owning stock and all officers and directors as a group.
<PAGE>
<TABLE>
<CAPTION>
Name and Address Number of Shares (1)(2) Percentage of Class
<S> <C> <C>
James J. Concilla 307,261. 6.0%
20 Blaine Street
North East, PA 16428
Charles L. Valone 142,000 2.8%
11217 Old Lake Road
North East, PA 16428
Stephen B. Millis 221,650 4.3%
11370 Martin Road
North East, PA 16428
Jeffery L. Buchholz 2,375.5 .05%
149 Orchard Beach Park
North East, PA 16428
W. Eric Johnson 38,345.63 .7%
830 Compass Drive
Erie, PA 16505
David H. Stetson 81,475.5 1.6%
9916 East Lake Road
North East, PA. 16428
All Officers and Directors
as a group (6 individuals) 793,107.63 15.5%
</TABLE>
NOTE: Director MacFarlane is not a shareholder.
(1) On July 23, 1999, directors Concilla, Valone, and Johnson joined with
six additional stockholders in a 13D filing to the Security Exchange
Commission. The purpose of the filing was to form a group to attract a
purchaser for the stock of the group members. The aggregate number of shares
of common stock beneficially owned by this group was approximately 17.1% of
stock outstanding. The group subsequently filed two amendments to the 13D
the last of which was to report the expiration of the agreement between group
members.
(2) All shares are beneficially owned and the sole investment and voting
power is held by the persons named. Includes shares which may be owned
beneficially by the wives and/or minor children and/or trusts for the
benefit of the minor children of the persons names, as to which beneficial
interest is disclaimed.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
<PAGE>
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1), (2), and (3) The response to this portion of Item 13 is
submitted as a separate section of this Report.
(b) Reports on Form 8-K filed in the fourth quarter 1999: None.
(c) Other reports on Form 8-K: None.
(d) Exhibits - The response to this portion of Item 13 is submitted as a
separate section of this Report.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 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.
VINEYARD OIL & GAS COMPANY
Stephen B. Millis President
STEPHEN B. MILLIS
James J. MacFarlane Chairman, Board of Directors
JAMES J. MACFARLANE
/s/Jeffery L. Buchholz Secretary/Treasurer, Director
JEFFERY L. BUCHHOLZ
James J. Concilla Director
JAMES J. CONCILLA
Charles L. Valone Director
CHARLES L. VALONE
W. Eric Johnson Director
W. ERIC JOHNSON
/s/David H. Stetson Director
DAVID H. STETSON
/s/Melissa A. Carris Controller
MELISSA A. CARRIS
<PAGE>
FORM 10-KSB ITEM 7
VINEYARD OIL AND GAS COMPANY
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
1. Balance Sheet - December 31, 1999
2. Income Statements - Years Ended December 31, 1999 and 1998
3. Statements of Shareholders' Equity - Years Ended December 31,
1999 and 1998
4. Statements of Cash Flows - Years Ended December 31, 1999 and
1998
5. Notes to Financial Statements - December 31, 1999
<PAGE>
Independent Auditors' Report
Board of Directors
Vineyard Oil and Gas Company
North East, Pennsylvania
We have audited the accompanying balance sheet of Vineyard Oil
and Gas Company as of December 31, 1999, and the related statements
of income, shareholders' equity, and cash flows for each of the two
years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to provide reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes an assessment of the accounting principles used and
significant estimates made by management, as well as an evaluation
of the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned financial statements
present fairly, in all material respects, the financial position of
Vineyard Oil and Gas Company at December 31, 1999, and the results
of its operations and its cash flows for each of the two years in
the period ended December 31, 1999 in conformity with generally
accepted accounting principles.
Gorzynski, Felix and Gloekler, P.C.
March 24, 2000
Erie, Pennsylvania
<PAGE>
VINEYARD OIL AND GAS COMPANY
Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current Assets
Cash $ 507,161
Accounts receivable, less allowance for
doubtful accounts of $90,100 3,297,071
Inventories (note A) 97,500
Prepaid expenses 32,204
__________
Total current assets $3,933,936
__________
Property, Plant and Equipment (Note A)
Land and land improvements $ 193,680
Building and improvements 257,008
Oil and gas properties and transmission
equipment 6,804,544
Drilling and other equipment 1,231,658
__________
$8,486,890
Less: accumulated depletion, depreciation and
amortization ( 8,000,460)
__________
$ 486,430
__________
Other Assets
Cash restricted for well plugging (note A) $ 360,006
Investments - at equity (note D) 158,226
__________
$ 518,232
__________
$4,938,598
==========
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
<S> <C>
Current Liabilities
Accounts payable
Trade $2,729,620
Limited partnerships 279,059
Accrued expenses 20,822
__________
Total current liabilities $3,029,501
__________
Deferred Revenue (Note A) $ 372,277
__________
Commitments and Contingencies (Note G) $ 0
__________
Shareholders' Equity
Common stock, authorized 15,000,000 shares
without par value, issued 5,125,563 shares
at December 31, 1999, at stated value of $.05 $ 256,278
Additional paid-in capital 4,935,430
__________
$5,191,708
Retained Earnings (Deficit) ( 3,429,968)
__________
$1,761,740
Less: Cost of 67,944 Shares Held in Treasury ( 224,920)
__________
$1,536,820
__________
$4,938,598
==========
</TABLE>
<PAGE>
VINEYARD OIL AND GAS COMPANY
Income Statements
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Earned Revenues
Gas and electric marketing $12,964,654 $11,841,216
Well services 249,628 223,794
Production and royalties 319,143 355,923
Equipment rental and service income 141,005 245,608
___________ ___________
$13,674,430 $12,666,541
Other income 81,323 132,023
Equity in earnings of jointly owned
company 61,134 31,607
___________ ___________
$13,816,887 $12,830,171
___________ ___________
Costs and Expenses
Direct costs of earned revenues
Gas and electric marketing $12,688,707 $11,497,063
Well services 473,322 407,256
Production 92,446 147,894
Equipment expenses 9,021 49,393
Depreciation and amortization 69,861 73,094
___________ ___________
$13,333,357 $12,174,700
General and administrative 539,134 456,952
Depreciation 16,836 11,482
Interest 0 469
___________ ___________
$13,889,327 $12,643,603
___________ ___________
Net Income (Loss) Before Income Taxes ($ 72,440) $ 186,568
Income Taxes (Note C) 0 0
___________ ___________
Net Income (Loss) ($ 72,440) $ 186,568
=========== ===========
Income (Loss) Per Common Share ($ .014) $ .036
=========== ===========
</TABLE>
See notes to financial statements.
<PAGE>
VINEYARD OIL AND GAS COMPANY
Statements of Shareholders' Equity
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Capital in Retained
Common Excess of Earnings Treasury
Stock Par Value (Deficit) Stock
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $256,278 $4,935,430 ($3,544,096) ($224,920)
Net Income For the Year 0 0 186,568 0
________ __________ ____________ __________
Balance at December 31, 1998 $256,278 $4,935,430 ($3,357,528) ($224,920)
Net Income (Loss) For the Year 0 0 ( 72,440) 0
________ __________ ____________ __________
Balance at December 31, 1999 $256,278 $4,935,430 ($3,429,968) ($224,920)
======== ========== ============ ==========
</TABLE>
See notes to financial statements.
<PAGE>
VINEYARD OIL AND GAS COMPANY
Statements of Cash Flows
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Operating Activities
Net income (loss) ($ 72,440) $ 186,568
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depletion, depreciation and
amortization 86,697 84,576
Provision for losses on accounts
receivable 16,400 3,700
(Gain) on disposal of assets 0 ( 74,751)
Changes in operating assets and
liabilities providing (using) cash:
Accounts receivable ( 315,030) ( 575,402)
Inventories 74,961 2,198
Prepaid expenses ( 2,435) 13,217
Accounts payable 327,683 75,336
Accrued expenses ( 24,315) 17,750
Deferred revenue 18,695 ( 40,990)
__________ __________
Net cash provided by (used in)
operating activities $ 110,216 ($ 307,798)
__________ __________
Investing Activities
Purchases of property, plant and
equipment ($ 148,382) ($ 2,500)
Proceeds from sale of equipment 0 76,377
Change in investment in jointly-owned
company 27,391 49,342
__________ __________
Net cash provided by (used in)
investing activities ($ 120,991) $ 123,219
__________ __________
Increase (Decrease) in Cash ($ 10,775) ($ 184,579)
Cash at Beginning of Year 877,942 1,062,521
__________ __________
Cash at End of Year (Note B) $ 867,167 $ 877,942
=========== ==========
</TABLE>
See notes to financial statements.
<PAGE>
VINEYARD OIL AND GAS COMPANY
Notes to Financial Statements
December 31, 1999
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - Vineyard Oil and Gas Company is a
producer and marketer of its own oil and natural gas and gas
produced by others. It also transports natural gas and performs
well maintenance, service, construction, trucking and other jobs
related to the oil and gas industry. The Company is also a marketer
of electricity produced by others. It principal markets are
industrial end-users, third party producers and utility companies
located mostly in Pennsylvania and New York.
Restricted Cash - Restricted cash consists of cash collected
from limited partnerships, which is held in escrow in separate bank
accounts, and a certificate of deposit required by the state to be
maintained to offset future plugging costs. Since these funds will
be restricted for a period of more than one year, the assets and
any deferred revenue related thereto have been classified as
noncurrent items. (See Deferred Revenue.)
Inventories - Inventories are stated at the lower of cost
(first-in, first-out method) or market. Inventory consists of
parts and piping utilized in the Company's oil and gas operations.
Inventory at December 31, 1999 has been written down to estimated
net realizable value, and results of operations for 1999 include
a charge of $63,000, which represents the excess of cost over market.
Development Costs of Oil and Gas Properties - The Company
follows the successful efforts method of accounting for its oil and
gas producing activities as prescribed by FASB Statement No. 19.
Under this method, all costs of production equipment, properties
and wells were capitalized and are depleted on the units of
production method based on the estimated recoverable oil and gas
reserves. Costs of acquiring undeveloped oil and gas leasehold
acreage were capitalized. Geological expenses were charged against
income as incurred.
For income tax purposes, tangible costs are depreciated using
accelerated tax methods and intangible costs are expensed when
incurred.
Property, Plant and Equipment - Property, plant and equipment
is stated on the basis of cost. Expenditures for major additions
or betterments are capitalized. Maintenance and repairs are
charged to expense as incurred. Differences between amounts
received and net carrying value of assets retired or disposed of
are included in the income statement. For the years ended December
31, 1999 and 1998, the Company realized net gains on the disposal
of assets of $0 and $74,751, respectively. These amounts are
reported as other income in these financial statements.
<PAGE>
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Depreciation of assets is computed by the straight-line method for
financial reporting purposes at rates sufficient to amortize the
costs over their estimated useful lives and by accelerated methods
for income tax purposes.
Investments in Limited Partnerships - The Company accounts for
its investments in limited partnerships under the proportional
consolidation method, which recognizes its share of earnings or
losses after the date of acquisition.
Deferred Revenue - The Company, as general partner, has
withheld from prior years' quarterly partnership distributions an
estimated fee for future well plugging charges. The plugging fees
are recorded as a deferred cost until the actual plugging costs
have been incurred by the partnerships. The Company holds in
escrow cash collected from the partnerships, plus earnings thereon,
designated to cover these future costs. Future collections are
contingent upon future revenue distributions and therefore are
currently indeterminable. The Company plugged 28 oil and 4 gas
wells in 1998 at a cost of $48,000. No wells were plugged in 1999.
See note G for additional information.
Income Taxes - The Company provides for taxes based on income
as reported in the income statement. Deferred income taxes are
provided on certain income and expenses which are recognized in
different periods for tax and financial reporting purposes.
Earnings Per Share - Basic earnings per share are determined
by dividing net income by the weighted average number of common
shares outstanding (5,125,563 in 1999 and 1998).
The following schedule summarizes the changes in the number of
shares of capital stock:
<TABLE>
<CAPTION>
Common
Stock
<S> <C>
Balance at January 1, 1998 5,125,563
Issuance of shares 0
_________
Balance at December 31, 1999 and 1998 5,125,563
=========
</TABLE>
Other - Certain reclassifications were made to the prior
year's financial statements to conform to current presentations.
Concentrations of Credit Risk - Financial instruments that
potentially subject the Company to concentrations of credit risk
consist principally of cash investments and trade accounts
receivable.
At December 31, 1999, accounts receivable, net of allowance,
amounted to $3,297,071.
<PAGE>
NOTE A - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
At December 31, 1999, the carrying amount of the Company's
deposits was $867,167 and the bank balance was $1,190,267. Of the
bank balance, $300,188 was covered by federal depository insurance,
$256,146 was insured under a brokerage firm's umbrella policy, and
$633,933 was uninsured.
Credit risk with respect to trade accounts receivable is
generally diversified due to the number of entities comprising the
Company's customer base and their dispersion across many different
industries.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Investment Tax Credits - Investment credits are accounted for
as a reduction of income tax expense in the years they are
available for use under the flow through method. In accordance
with the 1982 Tax Act, an amount equal to 50% of the allowable
investment credit on property and equipment acquired after December
31, 1982 and has been applied to reduce the tax basis of such
property and equipment.
NOTE B - CASH FLOW INFORMATION
For purposes of the statement of cash flows, cash includes
demand deposits, certificates of deposit, and short-term
investments with original maturities of three months or less.
Short term investments consist of money market funds, and are
reported at market value, which equals cost.
The Company's non-cash investing and financing activities and
cash payments for interest and income taxes were as follows:
Cash paid during the year for:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Interest $ 0 $ 469
Income taxes 0 0
</TABLE>
<PAGE>
NOTE B - CASH FLOW INFORMATION (CONTINUED)
Cash consists of the following at the end of each year
presented:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Cash in bank $611,021 $514,128
Short-term investments 256,146 363,814
________ ________
$867,167 $877,942
======== ========
</TABLE>
Cash is classified as follows for financial statement
reporting purposes:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Unrestricted cash $507,161 $432,703
Cash restricted for well plugging 360,006 445,239
________ ________
$867,167 $877,942
======== ========
</TABLE>
NOTE C - INCOME TAXES
The taxes on pretax income are reconciled with income tax
expense as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Expected tax on pretax income from
continuing operations at statutory
rates $ 0 $ 56,012
Tax (benefit) expense of excess
financial basis depreciation ( 6,090) ( 15,845)
Tax (benefit) expense of net
operating loss carryover 6,090 ( 40,167)
________ ________
Income tax expense $ 0 $ 0
======== ========
</TABLE>
<PAGE>
NOTE C - INCOME TAXES (CONTINUED)
Amounts for deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Deferred tax liability $ 0 $ 0
========== ==========
Deferred tax asset $1,649,226 $1,892,569
Valuation allowance ( 1,649,226) ( 1,892,569)
__________ __________
$ 0 $ 0
========== ==========
</TABLE>
The net change in the valuation allowance was $243,343 between
1999 and 1998.
The following temporary differences gave rise to the deferred
tax asset at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Excess of financial accounting over
tax depreciation $ 6,090 $ 15,845
Tax credit carryforward 277,523 461,491
Net operating loss carryforward 1,365,613 1,415,233
__________ __________
$1,649,226 $1,892,569
========== ==========
</TABLE>
The Company has available at December 31, 1999, unused
investment credits and operating loss carryforwards, which may
provide for future tax benefits expiring as follows:
<TABLE>
<CAPTION>
Unused
Year of Investment Unused Operating
Expiration Credits Loss Carryforward
<S> <C> <C> <C>
2000 $226,056 $ 0
2001 51,467 0
2002 0 675,068
2003 0 1,544,234
2004 0 1,593,565
2005 0 0
2006 0 102,646
2007 0 5,592
2008 0 51,581
<PAGE>
NOTE C - INCOME TAXES (CONTINUED)
</TABLE>
<TABLE>
<CAPTION>
Unused
Year of Investment Unused Operating
Expiration Credits Loss Carryforward
<S> <C> <C> <C>
2009 0 0
2010 0 0
2011 0 43,824
2012 0 0
2013 0 0
2014 0 31,840
________ __________
$277,523 $4,048,350
======== ==========
</TABLE>
NOTE D - INVESTMENT IN JOINTLY OWNED COMPANY
The Company owns a 45% interest in Northern Pipeline Company,
LLC, which operates a pipeline for the transportation of natural
gas and which began operations in July, 1997. This investment is
carried at cost, under the equity method and is adjusted for the
Company's proportionate share of undistributed earnings or losses.
Following is a summary of unaudited financial position and
unaudited results of operations of Northern Pipeline Company, LLC:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Current assets $ 58,808 $ 78,735
Property and equipment, net 555,820 594,521
Other assets, net 1,855 3,091
________ ________
$616,483 $676,347
======== ========
Current liabilities $ 79,541 $ 93,011
Equity 536,942 583,336
________ ________
$616,483 $676,347
======== ========
Sales $206,843 $238,852
======== ========
Net income $135,854 $ 70,237
======== ========
</TABLE>
<PAGE>
NOTE E - RELATED PARTY TRANSACTIONS
1. The Company is reimbursed for actual and necessary expenses
paid or incurred in connection with its management of various
related limited partnerships. It also charges the partnerships for
certain well-tending and related services provided.
Transactions and balances for the years ended December 31,
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Well services revenue $124,577 $ 89,083
Production and royalties revenue 287,871 273,922
Gas marketing revenue 5,500 6,832
________ ________
$417,948 $369,837
======== ========
Accounts receivable $156,224 $ 80,999
======== ========
Accounts payable $279,059 $142,836
======== ========
</TABLE>
2. The Company charges Northern Pipeline, LLC, for equipment
rental. It also charges the LLC a monthly management fee.
Transactions and balances for the years ended December 31,
1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Equipment rental and service
income $ 2,894 $ 16,370
Other income 5,280 4,320
________ ________
$ 8,174 $ 20,690
======== ========
Accounts receivable $ 4,800 $ 0
======== ========
Accounts payable $ 34,751 $ 39,683
======== ========
</TABLE>
3. In 1999, the Company purchased various related limited partnerships
at a cost of $104,316. These oil and gas interests are included as
property, plant and equipment and are being amortized over their
estimated useful lives. No accounts payable balance was due at
December 31, 1999.
<PAGE>
NOTE F - BUSINESS SEGMENT INFORMATION
Description of the types of products and services from which
each reportable segment derives its revenue:
The Company's three reportable business segments are gas
and electric marketing, well services and equipment rental and oil
and gas production. The Company's gas marketing operation involves
purchasing gas from local producers and interstate pipeline
sources, as well as marketing gas from the Company's managed
limited partnerships, and reselling that gas to industrial gas
users through transportation arrangements on intrastate and
interstate pipeline systems.
In the well services and equipment rental operation, the
Company rents well service equipment (e.g. for use in water
hauling, pipeline installation, and welding) and provides workover
and well tending services for producing wells.
The Company's well services are performed principally for
limited partnerships of which the Company is the general partner.
Revenues from oil and gas production operations are primarily
derived from working and royalty interests in the sale of oil and
gas production and for the transmission of such production.
Measurement of segment profit or loss and segment assets:
The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The
Company evaluates performance based on profit and loss from
operations before income taxes not including nonrecurring gains and
losses.
The Company accounts for intersegment sales and transfers as
if the sales or transfers were to third parties, that is, at
current market prices.
Factors management used to identify the Company's reportable
segments:
The Company's reportable segments are strategic business units
that offer different products and services. They are managed
separately because each segment requires different technology and
marketing strategies.
<PAGE>
NOTE F - BUSINESS SEGMENT INFORMATION (CONTINUED)
The Company's segment profit or loss and assets are as
follows:
<TABLE>
<CAPTION>
Gas and Well Services
Electric and Equipment Oil & Gas a) All
Marketing Rental Production Others Totals
<S> <C> <C> <C> <C> <C>
1999 revenues
from
external
customers $12,964,654 $390,633 $319,143 $ 0 $13,674,430
Intersegment
revenues 0 0 0 0 0
Other revenue 0 0 0 142,457 142,457
Depreciation
and
amoritization 0 43,806 26,055 16,836 86,697
Segment
profit (loss) 275,947 ( 135,516) 200,642 ( 413,513) ( 72,440)
Segment
assets 3,244,767 405,117 673,910 614,804 4,938,598
Expenditures
for segment
assets 0 9,062 8,956 25,956 43,974
1998 revenues
from
external
customers $11,841,216 $469,402 $355,923 $ 0 $12,666,541
Intersegment
revenues 0 0 0 0 0
Other revenue 0 0 0 163,630 163,630
Depreciation
and
amortization 0 41,843 31,251 11,482 84,576
</TABLE>
<PAGE>
NOTE F - BUSINESS SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Gas and Well Services
Electric and Equipment Oil & Gas a) All
Marketing Rental Production Others Totals
<S> <C> <C> <C> <C> <C>
Segment
profit (loss) $ 344,153 ($ 29,090) $176,778 ($305,273) $ 186,568
Segment
assets 3,027,987 462,133 683,201 515,654 4,688,975
Expenditures
for segment
assets 0 874 0 0 874
</TABLE>
a) Revenue from segments below quantitative thresholds are
attributable to the Company's equity in earnings of its
jointly owned company and unallocated revenues such as
interest income and gains recognized on the disposition of
assets. General and administrative expenses are not allocated
to the Company's three business segments. This activity is
reported as "all others".
NOTE G - COMMITMENTS AND CONTINGENCIES
1. Well-Plugging
All except four of the limited partnerships in which the
Company was the general partner have closed and their assets have
reverted to the Company. Prior to the closing of the partnerships,
the Company had been escrowing partnership cash to provide for
future well-plugging costs. (See Note A.) Upon closing of the
partnerships, the Company will now assume all well-plugging
responsibilities associated with the wells which were previously
assets of the partnerships. As of December 31, 1999, the wells
transferred to the Company from these partnerships continued to
produce oil and gas. Also, as of December 31, 1999, the Company
owned 159 oil and gas wells, excluding wells in which the Company
has an interest as a general partner.
Under current promulgated regulations of the Pennsylvania
Department of Environmental Protection Oil and Gas Division, to
the extent that the mechanical integrity of the wells is sound,
non-producing wells can receive a permit to be placed on inactive
status for an indefinite period of time and not be plugged. Also,
wells that fail to produce enough gas to feed transportation lines
will still produce some gas; at that time, instead of being
plugged, the wells would be available to be turned over to
landowners, who could use gas produced for personal home utilities.
<PAGE>
NOTE G - COMMITMENTS AND CONTINGENCIES (CONTINUED)
Lastly, future explorations may discover formations deeper
than those existing, and non-producing wells may be deepened to
access them. For these reasons, no well-plugging liability
relating to gas wells owned directly by the Company, or in which
the Company has an interest as a general partner, has been recorded
as of December 31, 1999. Contingent upon the quantity of wells
which would revert to landowners and based on the average cost to
currently plug wells, the well plugging liability could range from
zero to one million, two hundred thousand dollars.
2. Other
The Company is also a party to several actions which arise in
the normal course of the Company's business. In management's
opinion, none of these lawsuits or proceedings should, individually
or in the aggregate, have a material adverse effect upon the
financial position of the Company.
NOTE H - MAJOR CUSTOMERS AND SUPPLIERS
The Company made a substantial portion of its gas marketing
sales to five customers in 1999 and three customers in 1998.
During 1999 and 1998, sales to these customers aggregated
approximately $5,167,000 (40%) and $6,626,000 (56%), respectively.
At December 31, 1999 and 1998, amounts due from those customers
included in trade accounts receivable were approximately $1,158,000
and $1,460,000, respectively.
The Company purchased approximately $7,706,000 (61%) from
six suppliers and $7,536,000 (65%) from three suppliers of gas
for resale, during 1999 and 1998, respectively. At December 31,
1999 and 1998, amounts due to those suppliers included in accounts
payable were approximately $1,563,000 and $1,461,000, respectively.
NOTE I - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate
the fair value of each class of financial instruments:
Cash - Fair value approximates carrying value due to the
initial maturities of the instruments being three months or less.
<PAGE>
NOTE I - FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Company's financial
instruments as of December 31, 1999, are as follows:
<TABLE>
<CAPTION>
Carrying
Amount Fair Value
<S> <C> <C>
Financial assets:
Cash $867,167 $867,167
======== ========
</TABLE>
NOTE J - SUPPLEMENTARY OIL AND GAS DISCLOSURES (UNAUDITED)
In November 1982, the Financial Accounting Standards Board
issued Statement No. 69, "Disclosures About Oil and Gas Producing
Activities". This Statement establishes a standardized
comprehensive set of supplemental unaudited disclosures for oil and
gas exploration and production activities which are included in the
schedules that follow.
Proved Reserves - The following schedule presents estimates of
proved oil and natural gas reserves attributable to the Company,
all of which are located in the United States. Proved reserves are
estimated quantities of oil and natural gas which geological and
engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs under existing
economic and operating conditions. Proved-developed reserves are
those which are expected to be recovered through existing wells
with existing equipment and operating methods. All proved reserves
are developed. Reserves are stated in barrels of oil and thousands
of cubic feet of natural gas.
<TABLE>
<CAPTION>
Gas (MCF) Oil (BBL)
<S> <C> <C>
Proved reserves at December 31, 1997 814,808 7,236
Production (129,309) ( 602)
Revisions in previous quantity estimates 82,629 (3,892)
_______ _____
Proved reserves at December 31, 1998 768,128 2,742
Production (120,857) (1,089)
Revisions in previous quantity estimates 285,128 1,184
_______ _____
Proved reserves at December 31, 1999 932,399 2,837
======= =====
</TABLE>
<PAGE>
NOTE J - SUPPLEMENTARY OIL AND GAS DISCLOSURES (UNAUDITED)(CONTINUED)
Capitalized Costs - The Company's net investment in oil and
gas producing properties, at December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Proved oil and gas properties $6,804,544 $6,700,228
Accumulated depletion, depreciation
and amortization ( 6,624,449) ( 6,598,394)
__________ __________
$ 180,095 $ 101,834
========== ==========
</TABLE>
Costs Incurred in Oil and Gas Property Acquisitions, Exploration
and Development Activities - There were no costs incurred in oil and gas
property acquisitions, exploration and development activities for the
years ended December 31, 1999 and 1998.
Results of Operations for Oil and Gas Producing Activities -
The following summarizes the "Results of Operations for Producing
Activities" as defined by FASB 69, for the years ended December 31,
1999 and 1998. As required, income taxes are included in the
results, but were computed under FASB guidelines using statutory
tax rates, while considering the effects of permanent differences
and tax credits relating to oil and gas producing activities.
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Revenues $319,143 $355,923
________ ________
Less:
Production costs $ 92,446 $147,894
Depletion, depreciation
and amortization 26,055 31,251
________ ________
$118,501 $179,145
________ ________
$200,642 $176,778
Income taxes 0 0
________ ________
Results of operations from oil and
gas producing activities before
corporate overhead and interest costs $200,642 $176,778
======== ========
</TABLE>
Geological and engineering estimates of proved oil and natural gas reserves
at any one point in time are highly interpretive, inherently imprecise, and
subject to ongoing revisions that may be substantial in amount. Although
every reasonable effort is made to ensure that the reserve estimates reported
represent the most accurate assessments possible, these estimates are by their
nature generally less precise than other estimates presented in connection
with financial statement disclosures.
<PAGE>
NOTE J - SUPPLEMENTARY OIL AND GAS DISCLOSURES (UNAUDITED) (CONTINUED)
Standardized Measure of Discounted Future Net Cash Flows - The
following schedule presents estimates of the standardized measure
of discounted future net cash flows from the Company's proved
reserves. Estimated future cash flows are determined using year-
end prices adjusted only for fixed and determinable increases for
natural gas provided by contractual agreement. Estimated future
production and development costs are based on economic conditions
at year end. Future federal income taxes are computed by applying
the applicable statutory federal income tax rates to the
differences between the future pretax net cash flows and the tax
basis of proved oil and gas properties. Future net cash flows from
oil and gas production have been discounted at ten percent as
required by the FASB. Therefore, all properties are discounted at
the same rate regardless of the attendant risk. The assumptions
used to compute the standardized measure are, therefore, those
required by the FASB and, as such, do not necessarily reflect the
Company's expectations of actual revenues to be derived from those
reserves nor their present worth.
Because the standardized measure of future net cash flows was
prepared using the prevailing economic conditions existing at the
respective year end, it should be emphasized that such conditions
continually change, as evidenced by the fluctuations in natural gas
and crude oil prices during the last several years. Accordingly,
such information should not serve as a basis in making any judgment
on the potential value of the Company's recoverable reserves, or in
estimating future results of operations.
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Future cash inflows $2,548,000 $2,484,000
Future production costs ( 946,000) ( 1,250,000)
Future income tax expense 0 0
__________ __________
Future after-tax net cash
flows $1,602,000 $1,234,000
10% annual discount ( 854,000) ( 776,000)
__________ __________
Standardized measure of
discounted future net
cash flows $ 748,000 $ 458,000
========== ==========
</TABLE>
Changes in Standardized Measure of Discounted Future Net Cash
Flows-FASB 69 requires a reconciliation which displays the
principal sources of changes in the standardized measure of
discounted future net cash flows during the year. The Company
believes that such a reconciliation may suggest a degree of
accuracy that is inappropriate in light of the subjectivity and
imprecision of the underlying reserve estimates. The Company
cautions users not to infer an unwarranted degree of reliance on
the amounts and the reasons for the changes in those standardized
measures.
<PAGE>
NOTE J - SUPPLEMENTARY OIL AND GAS DISCLOSURES (UNAUDITED)(CONTINUED)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Beginning of year $458,000 $690,000
________ ________
Changes resulting from:
Sales of production ($319,000) ($356,000)
Net change in prices
relating to future
production ( 380,000) ( 228,000)
Extensions and discoveries 0 0
Revisions in previous
quantity estimates 767,000 204,000
Accretion of discount 78,000 63,000
Net change in income taxes 0 0
Other 144,000 85,000
________ ________
Net increase (decrease) $290,000 ($232,000)
________ ________
End of year $748,000 $458,000
======== ========
</TABLE>
NOTE K - SUBSEQUENT EVENT
On April 1, 2000 the Company entered into an employment contract
with its new president until April 1, 2002. The contract provides
for an established salary, certain payments under a covenant not to
compete, stock rights and incentives based on the Company's attainment
of specified earnings.
NOTE L - LETTER OF CREDIT
At December 31, 1999, the Company had a $250,000 outstanding
letter of credit. The letter is secured by certain real estate
owned by the Company.
<PAGE>
FORM 10-KSB ITEM 13
VINEYARD OIL AND GAS COMPANY
EXHIBITS
Exhibit Number Document
11 Computation of earnings per share
27 Financial data schedule
<PAGE>
EXHIBIT NUMBER 11
COMPUTATION OF EARNINGS PER SHARE
For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Net Income (Loss) ($ 72,440) $ 186,568
Weighted Average Number of Common
Equivalent Shares Outstanding 5,125,563 5,125,563
__________ _________
Net Income (Loss) Per Common Share ($ .014) $.036
========== =========
</TABLE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
EXHIBIT NUMBER 27
FINANCIAL DATA SCHEDULE
For the Year Ended December 31, 1999
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 507,161
<SECURITIES> 0
<RECEIVABLES> 3,387,171
<ALLOWANCES> 90,100
<INVENTORY> 97,500
<CURRENT-ASSETS> 3,933,936
<PP&E> 8,486,890
<DEPRECIATION> 8,000,460
<TOTAL-ASSETS> 4,938,598
<CURRENT-LIABILITIES> 3,029,501
<BONDS> 0
0
0
<COMMON> 256,278
<OTHER-SE> 1,280,542
<TOTAL-LIABILITY-AND-EQUITY> 4,938,598
<SALES> 13,674,430
<TOTAL-REVENUES> 13,816,887
<CGS> 13,333,357
<TOTAL-COSTS> 13,333,357
<OTHER-EXPENSES> 555,970
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> ( 72,440)
<INCOME-TAX> 0
<INCOME-CONTINUING> ( 72,440)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> ( 72,440)
<EPS-BASIC> ( .014)
<EPS-DILUTED> ( .014)
</TABLE>
