<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 March 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-8157
THE RESERVE PETROLEUM COMPANY
(Exact name of small business issuer as specified in its charter)
Delaware 73-0237060
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6801 N. Broadway, Suite 300, Oklahoma City OK 73116-9092
(Address of principal executive offices)
(405) 848-7551
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) 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
--- ---
As of May 9, 1997, 168,450.73 shares of the Registrant's $.50 par value common
stock were outstanding.
Transitional Small Business Disclosure Format (check one) Yes No X
--- ---
<PAGE> 2
PART 1
FINANCIAL INFORMATION
2
<PAGE> 3
THE RESERVE PETROLEUM COMPANY
BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 417,867 $ 385,136
Available for Sale Securities 3,257,370 2,942,004
Trading Securities 407,186 414,751
Receivables 278,973 309,147
Prepayments & Deferred Income Taxes 8,876 5,625
---------- ----------
4,370,272 4,056,663
---------- ----------
Investments:
Partnership and Limited
Liability Companies 430,680 448,908
Other 16,230 16,230
---------- ----------
446,910 465,138
Property, Plant & Equipment
Oil & Gas Properties, at Cost Based on the
Successful Efforts Method of Accounting
Unproved Properties 560,392 543,454
Proved Properties 4,788,553 4,704,113
---------- ----------
5,348,945 5,247,567
Less - Valuation Allowance and Accumulated
Depreciation, Depletion & Amortization 3,377,521 3,399,478
---------- ----------
1,971,424 1,848,089
---------- ----------
Other Property & Equipment, at Cost 326,404 322,398
Less - Accumulated Depreciation & Amortization 163,807 173,190
---------- ----------
162,597 149,208
---------- ----------
2,134,021 1,997,297
---------- ----------
Other Assets 321,580 344,518
---------- ----------
$7,272,783 $6,863,616
========== ==========
</TABLE>
(continued)
See Accompanying Notes
3
<PAGE> 4
THE RESERVE PETROLEUM COMPANY
BALANCE SHEETS
(Unaudited)
(Concluded)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ------------
<S> <C> <C>
Current Liabilities:
Accounts Payable $ 93,159 $ 25,342
Income Taxes Payable 117,272 187,272
Other Current Liabilities
Gas Balancing Commitment 49,333 49,333
Other 10,000 11,502
---------- ----------
269,764 273,449
---------- ----------
Dividends Payable 126,392 128,474
---------- ----------
Commitments & Contingencies (Note 2)
Stockholders' Equity
Common Stock 92,368 92,368
Additional Paid-in Capital 65,000 65,000
Retained Earnings 6,891,474 6,475,980
---------- ----------
7,048,842 6,633,348
Less - Treasury Stock at Cost 172,215 171,655
---------- ----------
6,876,627 6,461,693
---------- ----------
$7,272,783 $6,863,616
========== ==========
</TABLE>
See Accompanying Notes
4
<PAGE> 5
THE RESERVE PETROLEUM COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1997 1996
--------- ---------
<S> <C> <C>
Operating Revenues:
Oil and Gas Sales $ 952,408 $ 629,920
Lease Bonuses and Other 3,294 80
--------- ---------
955,702 630,000
--------- ---------
Operating Costs and Expenses:
Production 93,814 92,531
Exploration and Development 51,141 50,701
Depreciation, Depletion, Amortization
and Valuation Provisions 91,223 389,279
General, Administrative and Other 193,236 215,190
--------- ---------
429,414 747,701
--------- ---------
Income (Loss) from Operations 526,288 (117,701)
Other Income, Net 30,906 21,442
--------- ---------
Income (Loss) Before Income Taxes 557,194 (96,259)
Provision for (Benefit From)
Income Taxes 141,700 (86,942)
--------- ---------
Net Income (Loss) $ 415,494 $ (9,317)
========= =========
Per Share Data
Net Income (Loss) - 2.47 $ (.06)
========= =========
Weighted Average Shares
Outstanding 168,466 169,455
========= =========
</TABLE>
See Accompanying Notes
5
<PAGE> 6
THE RESERVE PETROLEUM COMPANY
STATEMENTS OF CASH FLOW
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1997 1996
--------- ---------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 495,410 $ 135,705
--------- ---------
Cash Flows from Investing Activities:
Sale and Maturity of Available
for Sale Securities 276,928 376,191
Purchase of Available for Sale Securities (592,295) --
Property Dispositions 18,426 13,417
Property Additions (182,598) (127,882)
Cash Distributions from Equity Investments 19,500 13,500
Cash Payments for Equity Investments -- (4,800)
--------- ---------
Net Cash Provided by
(Applied to) Investing Activities (460,039) 270,426
--------- ---------
Cash Flows from Financing Activities:
Decrease in Dividends Payable (2,081) (1,176)
Purchase of Treasury Stock (560) (3,903)
--------- ---------
Cash Applied to Financing Activities (2,641) (5,079)
--------- ---------
Net Change in Cash and Cash Equivalents 32,730 401,052
Cash and Cash Equivalents,
Beginning Period 385,136 175,014
--------- ---------
Cash and Cash Equivalents,
End of Period $ 417,866 $ 576,066
========= =========
Supplemental Disclosures of
Cash Flow Information,
Cash Paid During the Periods for:
Interest $ 3,750 $ 3,750
Income Taxes $ 190,000 $ 8,000
</TABLE>
See Accompanying Notes
6
<PAGE> 7
THE RESERVE PETROLEUM COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 1997
(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 of 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 203 mineral acres associated with two producing oil and
gas wells completed in 1988. Following a jury trial held in August,
1996, a judgment was entered for the Company. Some defendants have
perfected the right to appeal. The Company does not know when the
appellate proceedings will be completed.
Approximately $850,000 of proceeds from oil and gas sales are held in
suspense by the unit operator. These proceeds will be recorded as
revenue by the Company when released by the unit operator. The
Company has expended approximately $438,000 in drilling, completion
and operating costs for these wells of which $230,895 was included in
the Company's net investment in oil and gas properties at March 31,
1997.
7
<PAGE> 8
THE RESERVE PETROLEUM COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 1997
(Unaudited)
The discussion and analysis of financial condition and results of
operations should be read with reference to the Company's December 31,
1996, Form 10-KSB 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.
The Company's net working capital at March 31, 1997, was $4,100,508, an
amount which, along with the cash flow from operations, is adequate to
fund all currently budgeted investing and financing activities.
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-KSB for
December 31, 1996, would not be representative of the Company's current
position.
2. Material Changes in Results of Operations Three Months Ended March 31,
1997 Compared with Three Months Ended March 31, 1996.
Operating Revenues. Revenues from oil and gas sales increased $322,488 or
51% to $952,408 in 1997. A price/volume analysis disclosed that revenues
from oil and gas sales declined $43,797 (7%) as a result of a drop in
volume, but increased $365,675 because of an increase in price.
For the most part, the volume decline occurred because production which
came on line after March 31, 1996, was not adequate to offset the rapid
decline of properties which were first produced in late 1995 and the
first quarter of 1996.
The average price received for crude oil sales increased $4.70 per barrel
(Bbl) from $17.60 in 1996 to $22.30 in 1997. The average price received
for natural gas sales increased $1.41 per thousand cubic feet (MCF) from
$1.77 in 1996 to $3.18 in 1997.
An analysis of sales by month disclosed declines in average price
received for both oil and gas after February 1997. The average price for
March revenues was $20.03 per Bbl for oil and $2.64 per MCF for gas,
amounts which were well below the average price noted above for the
quarter. Oklahoma spot market price for May 7, 1997 was $18.25 per Bbl
for Oklahoma Sweet Crude and $1.70 per million British Thermal units,
which roughly approximates MCF's, for gas. Because of the downward trend
in prices, the Company anticipates a significant decrease in revenues
from oil and gas sales for the second quarter and possibly beyond.
8
<PAGE> 9
Operating Costs and Expenses. Production costs remained flat between the
period, but there were significant changes in the cost components. Lease
operating expense declined $23,842 (43%). The decline was offset by an
increase in gross production taxes of $18,268 (80%) and transportation
costs of $16,858 from $743.
There was little change between the periods in total exploration and
development costs charged to expense. However, at May 9, 1997, the
Company had a working interest well in process which was awaiting
participant approval for a completion attempt. The Company has
accumulated lease-hold and exploration costs of approximately $330,000 in
the well. At least $270,000 will be charged to exploration and
development expense if the well is not successfully completed.
Depreciation, depletion, amortization and valuation provisions declined
$298,056 to $91,223. To a great extent, the decline was the result of a
$296,549 impairment loss recorded in the first quarter of 1996. The
impairment loss resulted from a required change in accounting principle
regarding long-lived assets. No additional impairment was required for
the first quarter of 1997.
General, administrative and other expenses decreased $21,954. For the
most part, the decrease was the result of a $59,165 (93%) decline in
legal fees, as offset by an increase of $25,846 in real estate taxes and
$5,552 in salaries. Most of the legal fees were related to the legal
proceedings discussed in Note 2, to the accompanying financial
statements.
Provision for (Benefit from) Income Taxes. In 1997, an estimated deferred
tax provision of $21,700 plus estimated current tax expense of $120,000
resulted in a calculated provision for income taxes of $141,700. In 1996,
an estimated deferred tax benefit of $152,490 exceeded the estimated
current tax expense of $65,548 by $86,942 resulting in a calculated
benefit from income tax.
9
<PAGE> 10
PART II
OTHER INFORMATION
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 three months ended March 31, 1997.
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 thereto duly authorized.
THE RESERVE PETROLEUM COMPANY
----------------------------------
(Registrant)
Date: May 9, 1997 MASON McLAIN
----------------------------------
Mason McLain,
President
Date: May 9, 1997 JERRY L. CROW
---------------------------------
Jerry L. Crow
Principal Financial and
Accounting Officer
10
<PAGE> 11
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- -----------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM
10-QSB FOR THE QUARTERLY PERIOD ENDING MARCH 31, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 417,867
<SECURITIES> 3,664,556
<RECEIVABLES> 278,973
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,370,272
<PP&E> 5,675,349
<DEPRECIATION> 3,541,328
<TOTAL-ASSETS> 7,272,783
<CURRENT-LIABILITIES> 269,764
<BONDS> 0
0
0
<COMMON> 92,368
<OTHER-SE> 6,784,259
<TOTAL-LIABILITY-AND-EQUITY> 7,272,783
<SALES> 952,408
<TOTAL-REVENUES> 955,702
<CGS> 0
<TOTAL-COSTS> 93,814
<OTHER-EXPENSES> 142,364
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 557,194
<INCOME-TAX> 141,700
<INCOME-CONTINUING> 415,494
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 415,494
<EPS-PRIMARY> 2.47
<EPS-DILUTED> 2.47
</TABLE>
