U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File Number 0-14731
HALLADOR PETROLEUM COMPANY
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1014610
(State of incorporation) (IRS Employer Identification No.)
1660 Lincoln Street, Suite 2700, Denver, Colorado 80264
(Address of principal executive offices)
303-839-5504 FAX: 303-832-3013
(Issuer's telephone numbers)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months, and (2)
has been subject to such filing requirements for the past 90 days. Yes
[x] No [ ]
Shares outstanding as of May 15, 1998: 7,093,150
This report contains eight pages.
1
<PAGE>
PART I. FINANCIAL INFORMATION
HALLADOR PETROLEUM COMPANY
Consolidated Balance Sheet
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997*
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 8,064 $ 6,047
Short-term investments 1,800
Accounts receivable-
Oil and gas sales 302 331
Well operations 211 336
------ ------
Total current assets 8,577 8,514
------ ------
Oil and gas properties (successful efforts), at cost:
Unproved properties 159 378
Proved properties 18,626 18,366
Less - accumulated depreciation
depletion, amortization and impairment (13,139) (13,039)
------- ------
5,646 5,705
------- ------
Other assets 272 266
------- ------
$ 14,495 $ 14,485
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 281 $ 360
Oil and gas sales payable 125 211
Debt to TCW 2,478 2,492
------- -------
Total current liabilities 2,884 3,063
------- -------
Debt to TCW 2,845 2,831
------- -------
Deferred bonus plan 207 205
------- -------
Other 105 105
------- -------
Minority interest 4,978 4,926
------- -------
Stockholders' equity:
Preferred stock, $.10 par value; 10,000,000
shares authorized; no shares issued
Common stock, $.01 par value; 100,000,000
shares authorized; 7,093,150 shares issued 71 71
Additional paid-in capital 18,061 18,061
Accumulated deficit (14,656) (14,777)
------- -------
3,476 3,355
------- -------
$ 14,495 $ 14,485
======= =======
</TABLE>
*Derived from the Form 10-KSB.
See accompanying notes.
2
<PAGE>
HALLADOR PETROLEUM COMPANY
Consolidated Statement of Operations
(in thousands,except per share amounts)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
------ ------
(restated)
<S> <C> <C>
Revenue:
Oil $ 673 $1,079
Gas 99 93
NGLs 85 130
Gain on sale of prospects 320 7
Interest and other 109 43
----- -----
1,286 1,352
----- -----
Costs and expenses:
Lease operating 680 630
General and administrative 140 107
Geological and geophysical 73 395
Interest 120 129
Depreciation, depletion and amortization 100 102
----- -----
1,113 1,363
----- -----
Income (loss) before minority interest 173 (11)
Minority interest (52)
----- -----
Net income (loss) $ 121 $ (11)
===== =====
Basic and diluted earnings (loss) per share $ .02 $(.001)
===== =====
Weighted average number of shares outstanding 7,094 7,094
</TABLE>
See accompanying notes.
3
<PAGE>
HALLADOR PETROLEUM COMPANY
Consolidated Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
1998 1997
------ ------
(restated)
<S> <C> <C>
Net cash provided by operating activities $ 343 $ 382
----- -----
Cash flows provided by (used in) investing activities:
Short-term investments 1,800
Additions to properties (126) (576)
----- -----
1,674 (576)
----- -----
Cash flows used in financing activities:
Repayments of debt (381)
-----
Net increase (decrease) in cash and cash equivalents 2,017 (575)
Cash and cash equivalents, beginning of period 6,047 2,898
----- -----
Cash and cash equivalents, end of period $8,064 $2,323
===== =====
</TABLE>
See accompanying notes.
4
<PAGE>
HALLADOR PETROLEUM COMPANY
Notes to Financial Statements
1. The interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting
only of normal recurring adjustments necessary for a fair statement
of the results for the interim periods. The financial statements
included herein have been prepared by the Company pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principals have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the
disclosures included herein are adequate to make the information
presented not misleading.
The organization and business of the Company, accounting policies
followed by the Company and other information are contained in the
notes to the Company's financial statements filed as part of the
Company's 1997 Form 10-KSB. This quarterly report should be read in
conjunction with such annual report.
2. During the fourth quarter of 1997, the Company changed from the full
cost method to the successful efforts method of accounting for its
oil and operations.
5
<PAGE>
HALLADOR PETROLEUM COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
YEAR-TO-DATE COMPARISON
- -----------------------
The table below provides sales data and average prices for the period.
<TABLE>
<CAPTION>
1998 1997
Sales Volume Average Price Sales Volume Average Price
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Oil- barrels 53,509 $12.58 51,635 $20.90
Gas - MCF 43,950 2.24 30,313 3.08
NGLs- barrels 6,518 13.10 7,388 17.60
</TABLE>
Significantly lower oil prices caused the reduction in oil revenues. Gas
production increased 14,500 MCF due to the new gas well in the Merlin
Prospect, offset by slightly lower production in the South Cuyama field.
LIQUIDITY AND CAPITAL RESOURCE
- ------------------------------
Cash, short-term investments and cash to be provided from operations are
expected to enable the Company to meet its obligations as they come due
and fund current planned activities.
The following discussion updates the MD&A contained in Item 6 of the 1997
Form 10-KSB and should be read in conjunction therewith.
PROSPECT DEVELOPMENT AND EXPLORATION ACTIVITY
- ---------------------------------------------
THE MERLIN PROSPECT OF THE SAC BASIN - NORTHERN CALIFORNIA
-----------------------------------------------------------
The fifth well spud on May 10, 1998; the results should be known on or
before May 20, 1998.
BIG HORN BASIN - WYOMING
------------------------
In January 1998, the Company sold a half interest in four of the nine
prospects it is developing for $597,000 to MCNIC Oil and Gas Corporation,
a large public utility headquartered in Detroit, Michigan resulting in a
gain of $320,000. In June 1998, the Company intends to spend $50,000 in
seismic cost ($25,000 net to the Company), and depending on the results,
plans to drill a horizontal well. The Company will be the operator and
the well is estimated to cost $500,000 ($250,000 net to the Company).
In late April, the joint venture with Blackstone Energy was terminated;
the Company continues to remain active in the area.
6
<PAGE>
SOUTH TEXAS
-----------
On May 4, 1998, the Company entered into a joint venture with Indexgeo &
Associates of Houston, Texas to acquire options in Colorado County, Texas
(75 miles west of Houston). The budget for the seismic options to
Hallador's 90% JV interest is $200,000. It is the intent of the JV to
turn the options to a third party to shoot 3-D seismic. 3-D seismic has
been successful in this area in identifying economic drilling locations in
the Yegua and Wilcox formations. The Company also entered into an
agreement to take a 15% working interest in a 7300 foot, Wilcox
exploratory well from Indexgeo in Lavaca County, Texas (which adjoins
Colorado County). The Company's turnkey cost through logging or plugging
and abandonment is $46,000. The Company's completion cost if the well is
successful would be approximately $24,000.
SOUTH CUYAMA FIELD - CATALYTIC CONVERTER INVESTMENT
---------------------------------------------------
On April 21, 1998, Hallador paid $20,000 for a six-month option to acquire
a 5% ownership position in Catalytic Solutions, Inc. (Catalytic) located
in Oxnard, California (a Los Angeles suburb).
Catalytic is a private company founded in January 1996 to exploit the
capabilities of a unique family of metal-oxide materials developed by the
company's co-founder, Dr. Steve Golden. The company is developing a new
generation of catalytic materials that are not based on precious metals
such as platinum, palladium, and rhodium. The worldwide market for
catalytic materials is $6 billion annually, and Catalytic believes their
product cost will be a fraction of the cost of competing technologies.
A catalytic converter is currently being tested in the South Cuyama field.
Initial results are encouraging.
TCW DEBT
- --------
The South Cuyama field, the Company's principal asset, is pledged to TCW.
On April 9, 1998, the debt was restructured. In return for (i) a cash
payment of $1.8 million on May 1, 1998, (ii) monthly payments of $92,000
beginning June 1, 1998, (iii) a balloon payment approximating $3 million
due on June 1, 1999, and (iv) an increase in the interest rate from 9% to
12% TCW agreed to relinquish its 18% net profits interest in the field
effective May 1, 1998.
1998 OUTLOOK
- ------------
If the low oil price environment continues, the Company anticipates a loss
for the year. Pursuant to FAS 121, Impairment of Long-lived Assets,
management periodically assesses the recoverability of the Company's
investment in oil and gas properties. Management believes that the low
oil price environment will not continue in the near term and that the
Company will ultimately recover its investment in the South Cuyama field
from future cash flows. Accordingly, no write-down is expected during
1998.
7
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 -- Financial Data Schedule; EDGAR filing only
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HALLADOR PETROLEUM COMPANY
Date: May 15, 1998 By: /s/ Victor P. Stabio
--------------------
Victor P. Stabio
Chief Executive Officer and
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial officer.
8
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 8,064
<SECURITIES> 0
<RECEIVABLES> 513
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,577
<PP&E> 18,785
<DEPRECIATION> 13,139
<TOTAL-ASSETS> 14,495
<CURRENT-LIABILITIES> 2,884
<BONDS> 2,845
0
0
<COMMON> 71
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,495
<SALES> 0
<TOTAL-REVENUES> 1,286
<CGS> 0
<TOTAL-COSTS> 853
<OTHER-EXPENSES> 140
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120
<INCOME-PRETAX> 121
<INCOME-TAX> 0
<INCOME-CONTINUING> 121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 121
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information for the first quarter
1997.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 1,352
<CGS> 0
<TOTAL-COSTS> 1,127
<OTHER-EXPENSES> 107
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 129
<INCOME-PRETAX> (11)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11)
<EPS-PRIMARY> .001
<EPS-DILUTED> .001
</TABLE>
