SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number0-8157
THE RESERVE PETROLEUM COMPANY
(Exact name of small business issuer as specified in its charter)
Delaware 73-0237060
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification number)
6801 N. Broadway, Suite 300, Oklahoma City, Oklahoma73116-9092
(Address of principal executive offices)
(405)848-7551
(Registrant's telephone number, including area code)
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 __NO _X_
As of August 10, 1995, 169,613 shares of the Registrant's $.50 par value
common stock were outstanding.
Transitional Small Business Disclosure Format (check one) Yes___ No X
<PAGE>
PART I
FINANCIAL INFORMATION
THE RESERVE PETROLEUM COMPANY
BALANCE SHEETS (Unaudited)
<TABLE>
ASSETS
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 97,137 $ 112,564
Available for Sale Securities 2,198,256 2,715,502
Trading Securities 375,828 87,574
Receivables 204,428 163,729
Refundable Income Taxes 9,449 1,449
Prepayments and Other 4,669 6,042
---------- ----------
2,889,767 3,086,860
---------- ----------
Investments:
Partnership and Limited
Liability Companies 469,646 459,251
Other 11,430 11,430
---------- ----------
481,076 470,681
---------- ----------
Property, Plant & Equipment:
Oil & Gas Properties, at Cost Based
on the Successful Efforts Method
of Accounting
Unproved Properties 431,720 444,831
Proved Properties 4,700,837 4,977,386
---------- ----------
5,132,557 5,422,217
Less - Valuation Allowance and
Accumulated Depreciation,
Depletion & Amortization 3,206,351 3,580,350
---------- ----------
1,926,206 1,841,867
---------- ----------
Other Property & Equipment, at Cost 323,136 329,431
Less - Accumulated Depreciation,
Depletion & Amortization 171,456 172,634
---------- ----------
151,680 156,797
---------- ----------
2,077,886 1,998,664
---------- ----------
Other Assets 271,298 241,881
---------- ----------
$5,720,027 $5,798,086
========== ==========
(Continued)
<FN>
See Accompanying Notes
</TABLE>
<PAGE>
<TABLE>
THE RESERVE PETROLEUM COMPANY
BALANCE SHEETS
(Unaudited)
(Concluded)
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Current Liabilities
Accounts Payable $ 33,508 $ 51,676
Other Current Liabilities
Gas Balancing Commitments 57,858 57,858
Dividends Payable, Current Portion 10,000 10,000
---------- ----------
101,366 119,534
---------- ---------- -
Dividends Payable 124,421 115,066
---------- ----------
Deferred Federal Income Taxes 149,708 119,329
---------- ----------
-
Stockholders' Equity:
Common Stock 92,368 92,368
Additional Paid-in Capital 65,000 65,000
Retained Earnings 5,337,959 5,430,847
---------- ----------
5,495,327 5,588,215
Less:Treasury Stock, at cost 150,795 144,058
---------- ----------
5,344,532 5,444,157
---------- ----------
$5,720,027 $5,798,086
========== ==========
<FN>
See Accompanying Notes
</TABLE>
<PAGE>
<TABLE>
THE RESERVE PETROLEUM COMPANY
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Operating Revenues:
Oil & Gas Sales $281,110 $323,472 $533,472 $631,303
Lease Bonuses & Rentals 1,291 8,010 1,291 8,090
Prospect Sales 19,695 ---- 37,695 ----
-------- -------- -------- --------
302,096 331,482 572,458 639,393
-------- -------- -------- --------
Operating Costs & Expenses:
Production Costs 79,252 81,042 148,331 169,140
Exploration & Develop-
ment Costs 1,315 42,238 22,443 89,763
Depreciation, Depletion,
Amortization &
Valuation Provisions 58,867 74,760 113,469 147,685
General, Administrative
and Other Expenses 131,928 192,326 285,180 354,027
-------- -------- -------- ---------
271,362 390,366 569,423 760,615
-------- -------- -------- ---------
Income (Loss) from
Operations 30,734 (58,884) 3,035 (121,222)
Other Income, Net 57,743 32,881 101,859 10,385
-------- -------- -------- ---------
Income (Loss) Before
Income Taxes 88,477 (26,003) 104,894 (110,837)
Provision For (Benefit
from) Income Taxes 25,213 (2,182) 28,002 (20,010)
-------- -------- -------- ---------
Net Income (Loss) $ 63,264 $(23,821) $ 76,892 $ (90,827)
======== ======== ======== =========
Per Share Data:
Net Income (Loss) - $ .37 $ (.14) $ .45 $ (.53)
======== ========= ======== =========
Cash Dividends $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== =========
Weighted Average
Shares Outstanding 169,699 170,227 169,773 170,259
======== ======== ======== =========
<FN>
See Accompanying Notes
</TABLE>
<PAGE>
<TABLE>
THE RESERVE PETROLEUM COMPANY
STATEMENTS OF CASH FLOW
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<CAPTION>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Net Cash Provided by Operating Activities $ 97,517 $ 5,304
---------- ----------
Cash Flows from Investing Activities:
Sale of Available for Sale Securities 258,310 525,700
Purchase of Available for
Sale Securities -0- (28,983)
Property Dispositions 16,081 37,027
Property Additions (213,923) (337,845)
Contribution to Partnership/Ltd.
Liability Company (6,250) (19,800)
---------- ----------
Net Cash Provided by
Investing Activities 54,218 176,099
---------- ----------
Cash Flows from Financing Activities:
Payments of Dividends (160,425) (157,416)
Purchase of Treasury Stock (6,737) (1,662)
---------- ----------
Net Cash Applied to Financing Activities (167,162) (159,078)
---------- ----------
Net Change in Cash and Cash Equivalents (15,427) 22,325
Cash and Cash Equivalents,
Beginning of Period 112,564 98,553
---------- ----------
Cash and Cash Equivalents,
End of Period $ 97,137 $ 120,878
========== ==========
Supplemental Disclosures of Cash Flow
Information:
Cash Paid During the Periods For:
Interest $ 3,752 $ 28
Income Taxes $ 8,000 $ 8,000
<FN>
See Accompanying Notes
</TABLE>
<PAGE>
THE RESERVE PETROLEUM COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
June 30, 1995
(Unaudited)
Note 1 - ADJUSTMENTS
In the opinion of Management, the accompanying financial statements
reflect all adjustments which are necessary for a fair statement of the
results for the interim periods presented.
Note 2 - MATERIAL CONTINGENCY
In August 1993, the Company filed an action in the District Court of
Leon County, Texas to quiet title to its 13/32nd interest in
approximately 245 mineral acres associated with two producing oil and
gas wells completed in 1988. The Company claims title through deeds
recorded in 1932; the defendants claim title under a deed nine years
prior to the Company's deeds, but not recorded until seven years after
the Company's deeds were recorded. Approximately $825,000 of proceeds
from oil and gas sales were held in suspense by the unit operator at
June 30, 1995, and have not been recorded as revenue by the Company.
The Company has expended $415,000 in drilling, completion and operating
costs for these wells, of which $241,500 was included in the Company's
net investment in oil and gas properties at June 30, 1995. If the
Company is successful in quieting title to its mineral interests in this
litigation and recovers the suspended oil and gas proceeds, management
believes the outcome will have a material favorable effect on the
Company and its financial condition. If the Company is unsuccessful in
this litigation, management believes that such outcome will not have a
material adverse effect on the Company's financial condition.
<PAGE>
THE RESERVE PETROLEUM COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
June 30, 1995
(Unaudited)
This discussion and analysis of financial condition and results of
operations should be read with reference to a similar discussion in the
Company's December 31, 1994, Form 10-K filed with the Securities and
Exchange Commission, as well as the condensed financial statements
included in this Form 10-QSB.
1. Liquidity and Capital Resources
Management is unaware of any material trends, demands, commitments,
events or uncertainties which would impact liquidity and capital
resources to the extent that the discussion presented in Form 10-K for
December 31, 1994, would not be representative of the Company's current
position.
2. Material Changes in Results of Operations Six Months Ended June 30,
1995, compared with six Months Ended June 30, 1994
The Company had net income of $76,892 in 1995 as compared to a net
loss of $90,827 in 1994. A discussion of material changes in the
Statements of Operations line items follows.
Operating Revenues. Operating revenues decreased $66,935 (10%) as a
$97,831 (16%) reduction in oil and gas sales was partially offset by a
$30,896 increase in other operating revenues. The decline in oil and
gas sales was the net result of a $9,557 increase in oil sales, and a
$107,388 decrease in gas and gas product sales.
The average price received for oil sales rose $2.63 per barrel (Bbl)
or 19% to $16.44 in 1995 from $13.81 in 1994, reflecting an industry
trend, and resulting in a $37,838 favorable price variance. The
volume of oil sales declined 2,048 Bbls (12%) to 14,387 in 1995 from
16,435 in 1994, resulting in an unfavorable volume variance of $28,281.
For the most part, the volume decline was the result of decreased
production from two wells in their initial flush production phase in
1994.
The average price received for gas sales fell $.57 per thousand cubic
feet (MCF), or 28%, to $1.50 in 1995 from $2.07 in 1994, resulting in
an $113,355 unfavorable price variance. The expiration of a long-term
gas contract in November, 1994, resulted in a $38,000 reduction in 1995
revenues as the replacement contract is based on the spot market price.
For the most part, the remaining decline was the result of an industry
wide price decline. The volume of gas sales increased 3,877 MCF (2%)
resulting in a favorable volume variance of $8,024.
Operating Costs and Expenses. Operating costs and expenses fell
$191,192 (25%) with significant declines in each line item.
Production costs decreased $20,809 (12%). The decrease was the result
of a $12,659 (9%) decline in lease operating expense and a $7,710 (19%)
decline in gross production tax. A signi-ficant factor contributing to
the reduced lease operating expense was the April, 1994, sale of
marginal producing leaseholds with high operating costs. Gross
production tax declined as a result of reduced revenue from oil and gas
sales.
Exploration and development costs declined $67,320 (75%). For the
most part, the decline was the result of reduced costs associated with
unsuccessful drilling
Depreciation, depletion, amortization and valuation provisions
declined $34,261 (23%). Units-of-production depreciation of oil and
gas properties fell $37,138 (35%) mostly because of the 1994 rapid
depreciation of wells with initial flush production and marginal wells
which were fully reserved in 1994.
General, Administrative and Other Expenses. This expense category
fell $68,847 (19%). Legal fees decreased $44,848 because of reduced
fees relating to the Leon County, Texas quiet title litigation
discussed in Note 2., to the accompanying condensed financial
statements. Taxes other than income declined $10,439, mostly as the
result of the receipt and payment of a 1993 assessed tax statement in
1994. Substantially all of the remaining decline occurred because of an
increase in the percentage of shared costs allocated to affiliated
entities.
Other Income, Net. Other income, net increased $91,474 to $101,859 in
1995 from $10,385 in 1994. Major items contributing to the increase
were interest income and trading securities net gains. Interest
income, mostly from available-for-sale securities, increased $25,499
(65%) to $64,995 as higher rates of return more than offset the decline
in securities average balance. Trading securities net gains were
$24,102 in 1995 as compared to a net loss of $41,648 in 1994, resulting
in an increase of $65,750. Of the $65,750 increase, $76,039 was an
unrealized holding gain that was partially offset by a realized loss of
$10,289 .
3. Material Changes in Results of Operations Quarter Ended June 30, 1995,
Compared with Quarter Ended June 30, 1994
There were no material changes between the quarters which were not
discussed in item 2, above, for the six months.
<PAGE>
PART II
OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of stockholders' was held on Tuesday, May 2,
1995. A brief description of each matter voted on at the meeting
is given in the paragraphs below.
The registrant's board of directors was re-elected in its entirety.
A summary of voting by individual directors follows:
RESULTS OF VOTE
BY PROXY IN PERSON
WITHHOLD WITHHOLD
FOR AUTHORITY FOR AUTHORITY
MASON McLAIN 47,442 511 51,000 ----
R.T. McLAIN 47,506 447 51,000 ----
M.D. RALSTON 47,026 927 51,000 ----
LOYD TERRY 47,026 927 51,000 ----
ROBERT SAVAGE 47,026 927 51,000 ----
MARVIN E. HARRIS 47,026 927 51,000 ----
JERRY L. CROW 47,026 927 51,000 ----
The stockholders approved all actions of the directors since the
stockholders' annual meeting on Tuesday May 3, 1994. The stockholders
cast 99,053 votes for the proposal. There were no abstentions, broker
non-votes or votes cast against the proposal.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 27. Financial Data Schedule
(b) No reports on Form 8-K were required to be filed by the
Registrant for the six months ended June 30, 1995.
SIGNATURES
Pursuant to the requirements 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.
THE RESERVE PETROLEUM COMPANY
(Registrant)
MASON McLAIN
Date: August 10, 1995 Mason McLain, President
JERRY L. CROW
Date: August 10, 1995 Jerry L. Crow
Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-QSB FOR THE QUARTERLY PERIOD ENDING MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 97,137
<SECURITIES> 2,574,084
<RECEIVABLES> 204,428
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,889,767
<PP&E> 5,455,693
<DEPRECIATION> 3,377,807
<TOTAL-ASSETS> 5,720,027
<CURRENT-LIABILITIES> 101,366
<BONDS> 0
<COMMON> 92,368
0
0
<OTHER-SE> 5,252,164
<TOTAL-LIABILITY-AND-EQUITY> 5,720,027
<SALES> 533,472
<TOTAL-REVENUES> 572,458
<CGS> 0
<TOTAL-COSTS> 148,331
<OTHER-EXPENSES> 135,912
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 104,894
<INCOME-TAX> 28,002
<INCOME-CONTINUING> 76,892
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 76,892
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
