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, 1999
[ ] 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 17, 1999: 7,093,150
PART I. FINANCIAL INFORMATION
HALLADOR PETROLEUM COMPANY
Consolidated Balance Sheet(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998*
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,436 $ 3,073
Marketable securities (cost-$1,793 and $2,029) 1,230 1,224
Accounts receivable-
Oil and gas sales 207 226
Well operations 129 186
Right-of-way rental 166
Water disposal 441
AFE prepayments 151 48
Prospect sale 167
------- ------
Total current assets 3,594 5,090
------- ------
Oil and gas properties (successful efforts), at cost:
Unproved properties 230 264
Proved properties 19,052 18,878
Less - accumulated depreciation
depletion, amortization and impairment (13,599) (13,508)
------- -------
5,683 5,634
------- -------
Oil and gas operator bonds 155 155
Investment in Catalytic Solutions 70 70
Other assets 113 113
------- -------
$ 9,615 $ 11,062
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Brokerage account-marketable securities $ 174 $ 284
Accounts payable and accrued liabilities 507 224
Oil and gas sales payable 66 70
------- -------
Total current liabilities 747 578
------- -------
Bank debt 1,385 3,231
------- -------
Key employee bonus plan 223 218
------- -------
Other 101 101
------- -------
Minority interest 4,609 4,614
------- -------
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
Net unrealized loss on marketable securities (63) (305)
Accumulated deficit (15,519) (15,507)
------- -------
2,550 2,320
------- -------
$ 9,615 $ 11,062
======= =======
</TABLE>
- -----------------------------
*Derived from the Form 10-KSB.
See accompanying notes.
HALLADOR PETROLEUM COMPANY
Consolidated Statement of Operations
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
------ ------
<S> <C> <C>
Revenue:
Oil $ 441 $ 673
Gas 95 99
NGLs 44 85
Gain on sale of prospects 320
Interest and other 30 109
Non-recurring water disposal fee, net 208
Gain on stock sales 75
------ ------
893 1,286
Costs and expenses: ------ ------
Lease operating 523 680
General and administrative 150 140
Exploration costs 92 73
Interest 54 120
Depreciation, depletion and amortization 91 100
------ ------
910 1,113
------ ------
Income (loss) before minority interest (17) 173
Minority interest 5 (52)
------ ------
Net income (loss) $ (12) $ 121
====== ======
Net income (loss) per share (1) $ .02
======
Weighted average shares outstanding 7,093 7,093
====== ======
</TABLE>
(1) Less than $.01.
See accompanying notes.
HALLADOR PETROLEUM COMPANY
Consolidated Statement of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 1998
------ ------
<S> <C> <C>
Net cash provided by operating activities $ 176 $ 343
------ ------
Cash flows from investing activities:
AFE prepayments (124)
Marketable securities 236 1,800
Evaluated properties (105) (126)
Prospect sales 201
------ ------
Net cash provided by investing activities 208 1,674
------ ------
Cash flows from financing activities:
Repayments of debt (1,846)
Brokerage account (110)
Other (65)
------
Net cash used in financing activities (2,021)
------
Net increase (decrease) in cash and cash equivalents (1,637) 2,017
Cash and cash equivalents, beginning of period 3,073 6,047
------ ------
Cash and cash equivalents, end of period $ 1,436 $ 8,064
====== ======
</TABLE>
See accompanying notes.
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 1998 Form 10-
KSB. This quarterly report should be read in conjunction with such annual
report.
2. Comprehensive loss for the three-month period ended March 31, 1999 was
approximately $56,000.
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>
1999 1998
Sales Volume Average Price Sales Volume Average Price
------------ ------------- ------------ -------------
<S> <C> <C> <C> <C>
Oil - barrels 45,390 $9.71 53,509 $12.58
Gas - mcf 50,120 1.90 43,950 2.24
NGLs- barrels 4,550 9.60 6,518 13.10
</TABLE>
Significantly lower oil prices and production caused the reduction in oil
revenues. On April 9, 1998, we restructured the debt with Trust Company of the
West resulting in the relinquishment of their 18% net profits interest (NPI) in
the South Cuyama field (the "Field"). Production would have been higher this
period compared to last year due to the NPI relinquishment that resulted in
us having a higher net revenue interest; however, due to historically low oil
prices, several of the wells in the Field were shut-in. With the increase in
oil prices, we have started to bring wells back on line. Gas production for
the Field in 1999 was less than 5,000 mcf compared to 14,000 mcf for 1998.
Gas production from the Merlin prospect was 14,000 mcf in 1998 compared to
28,000 mcf in 1999.
The Field's oil price on May 14, 1999 was $14.92/bbl. Gas prices in the Merlin
prospect are currently $2.25/mcf.
During January 1999, we earned over $242,000 in non-recurring fees for allowing
a third party to dispose water in the Field's disposal system from a blowout gas
well 80 miles away. Associated expenses were approximately $34,000.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
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 Field, our principal asset, is pledged to U. S. Bank under a $3,000,000
revolving line of credit executed on March 10, 1999. The proceeds from this
revolver were used to payoff Trust Company of the West. The principal is due
on March 31, 2002. On March 15, 1999, at our discretion, we paid down
$2,000,000 on the revolver.
THE FOLLOWING DISCUSSION UPDATES THE MD&A CONTAINED IN ITEM 6 OF THE 1998
FORM 10-KSB AND THE TWO DISCUSSIONS SHOULD BE READ TOGETHER.
PROSPECT DEVELOPMENT AND EXPLORATION ACTIVITY
- ---------------------------------------------
South Cuyama Field
------------------
During the next twelve months we plan to shoot 3-D seismic in the Field and
adjacent property which is budgeted for $500,000. In addition, certain drilling
and completion projects are budgeted for $600,000.
San Juan Basin
---------------
We may participate in a 14,000' exploratory well which Burlington Resources
plans to drill in June. Our share of the dry hole costs are estimated to be
$100,000 and the completion costs another $50,000.
Merlin Prospect of the Sac Basin - Northern California
-------------------------------------------------------
The two wildcats drilled in March and April resulted in one dry hole and one
successful well. In June, we plan to participate in another wildcat. Our share
of the dry hole costs are estimated to be $50,000 and completion costs another
$30,000. If successful, three more development wells may be drilled in the
prospect.
Big Horn Basin - Wyoming
------------------------
The horizontal planned for June has been cancelled, and we plan to sell all of
our interest in this area.
South Texas
-----------
We plan to participate in the drilling of three wells in June. Indexgeo &
Associates will be the operator. Our share of the dry hole costs are estimated
to be $50,000 and completion costs another $45,000.
Paradox Basin - Utah
--------------------
There has been no change from what we discussed in the Form 10-KSB.
Catalytic Solutions Investment
- ------------------------------
There has been no change from what we discussed in the Form 10-KSB.
Available-For-Sale Securities
- -----------------------------
During the second quarter of 1998, we made several investments in certain
publicly traded drilling and service companies. During the fourth quarter of
1998 we recognized an impairment of $400,000 for the R&B Falcon investment and
an impairment of $100,000 for the Rowan investment. The table below shows
the positions at March 31, 1999 and May 14, 1999. Trading profits of $75,000
were recognized during the first quarter and from April 1 through May 14,
they were $87,000. Cumulative trading profits through May 14, 1999 have been
$252,000.
<TABLE>
<CAPTION>
March 31, 1999
Shares Cost Market Value
------ ---- ------------
<S> <C> <C> <C>
R&B Falcon Corporation (FLC-NYSE) 44,000 $ 756,000 $ 379,000
Rowan Companies Inc.(RDC-NYSE) 29,000 550,000 368,000
Pool Energy Services Company (PESC-NASDAQ) 15,000 186,000 230,000
Ensco International Inc. (ESV-NYSE) 19,000 301,000 253,000
Impairment recorded in 1998 (500,000)
--------- ---------
$1,293,000 $1,230,000
========= =========
</TABLE>
<TABLE>
<CAPTION>
May 14, 1999
Shares Cost Market Value
------ ----- ------------
<S> <C> <C> <C>
R&B Falcon Corporation (FLC-NYSE) 32,000 $ 652,000 $ 344,000
Rowan Companies Inc. (RDC-NYSE) 20,000 415,000 308,000
Pool Energy Services Company (PESC-NASDAQ)10,000 118,000 163,000
Ensco International Inc. (ESV-NYSE) 5,000 91,000 86,000
Impairment recorded in 1998 (500,000)
-------- ---------
$ 776,000 $ 901,000
========= =========
</TABLE>
Y2K
- ---
There has been no change from what we discussed in the Form 10-KSB.
New Accounting Pronouncements
- -----------------------------
None of the new accounting pronouncements that have been released will affect
our 1999 financial reporting.
1999 Outlook
- ------------
If the recent increase in oil prices is sustained, we expect positive cash
flow from operations before exploration and G & G costs for the remainder of the
year.
Environmental and Regulation
- ----------------------------
We are directly affected by changing environmental rules and regulations.
Although we believe our operations and facilities are in compliance with
applicable environmental regulations, risk of substantial cost and liabilities
resulting from an unintentional breach of environmental regulations are
inherent to oil and gas operations. It is possible that other developments,
such as increasingly strict environmental laws, regulations, and enforcement
policies or claims for damages could result in significant costs and liability
in the future.
The California legislature passed a bill, which will increase our operator's
bond from $100,000 to $250,000 to be phased in over a five-year period. In
addition, an idle well bill was passed to insure that funds will be available to
properly plug and abandon (P&A) California wells upon their depletion.
Over the next ten years, we are required to place in an interest-bearing escrow
account $500 per year for each idle well in the Field until such well is plugged
and abandoned or until $5,000 has been deposited. Our first $60,000 installment
is due on or before June 1, 1999. We estimate that after eight annual
installments ($480,000) we will have met our current funding obligation of
$600,000 because of the interest to be earned. As the Field depletes, and more
wells move from the producing category to the idle-well category we will have to
make additional annual payments. Presently, there are 276 wells in the field,
120 of which are classified as "idle."
We implemented our electrification program for the Field and are 70% complete.
Until oil prices increase on a sustained level no further electrification is
planned for the Field.
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule; EDGAR filing only
10.1 - Credit Agreement dated as of March 10, 1999, by and among Santa
Barbara Partners and Hallador Petroleum, LLP and U.S. Bank
National Associtation.
(b) No reports on Form 8-K were filed during the quarter.
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 17, 1999 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.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,436
<SECURITIES> 1,230
<RECEIVABLES> 928
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,594
<PP&E> 19,052
<DEPRECIATION> 13,599
<TOTAL-ASSETS> 9,615
<CURRENT-LIABILITIES> 747
<BONDS> 1,385
0
0
<COMMON> 71
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,615
<SALES> 0
<TOTAL-REVENUES> 893
<CGS> 0
<TOTAL-COSTS> 910
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> (12)
<INCOME-TAX> 0
<INCOME-CONTINUING> (12)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12)
<EPS-PRIMARY> (.002)
<EPS-DILUTED> (.002)
</TABLE>
