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, 1999
[ ] 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 10, 1999, 167,729.73 shares of the Registrant's $.50 par value common
stock were outstanding.
Transitional Small Business Disclosure Format (check one) Yes___ No X
<PAGE>
PART 1
FINANCIAL INFORMATION
<PAGE>
THE RESERVE PETROLEUM COMPANY
BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------- --------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 453,052 $ 339,015
Available for Sale Securities 4,596,340 4,538,772
Trading Securities 479,663 450,768
Receivables 139,803 152,460
Prepayments & Deferred Income Taxes 3,750 13,127
--------------- --------------
5,672,608 5,494,142
--------------- --------------
Investments:
Partnership and Limited
Liability Companies 450,445 462,951
Other 19,048 19,048
--------------- --------------
469,493 481,999
--------------- --------------
Property, Plant & Equipment:
Oil & Gas Properties, at Cost Based on the
Successful Efforts Method of Accounting
Unproved Properties 676,992 668,332
Proved Properties 4,209,991 4,189,787
--------------- --------------
4,886,983 4,858,119
Less - Valuation Allowance and Accumulated
Depreciation, Depletion & Amortization 3,801,934 3,751,113
--------------- --------------
1,085,049 1,107,006
--------------- --------------
Other Property & Equipment, at Cost 324,104 324,104
Less - Accumulated Depreciation & Amortization 180,911 179,192
-------------- --------------
143,193 144,912
--------------- --------------
1,228,242 1,251,918
--------------- --------------
Other Assets 429,510 407,569
--------------- --------------
$ 7,799,853 $ 7,635,628
=============== ==============
</TABLE>
(continued)
See Accompanying Notes
<PAGE>
THE RESERVE PETROLEUM COMPANY
BALANCE SHEETS
(Unaudited)
(Concluded)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
--------------- --------------
<S> <C> <C>
Current Liabilities:
Accounts Payable $ 32,972 $ 45,656
Income Taxes Payable 48,730 49,331
Other Current Liabilities
Gas Balancing Commitment 41,410 41,410
Other 16,856 15,000
--------------- --------------
139,968 151,397
--------------- --------------
Dividends Payable 123,908 125,210
--------------- --------------
Stockholders' Equity:
Common Stock 92,368 92,368
Additional Paid-in Capital 65,000 65,000
Retained Earnings 7,565,244 7,388,288
--------------- --------------
7,722,612 7,545,656
Less - Treasury Stock, at Cost 186,635 186,635
--------------- --------------
7,535,977 7,359,021
--------------- --------------
$ 7,799,853 $ 7,635,628
=============== ==============
</TABLE>
See Accompanying Notes
<PAGE>
THE RESERVE PETROLEUM COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
------------ ------------
<S> <C> <C>
Operating Revenues:
Oil and Gas Sales $ 339,588 $ 500,572
Lease Bonuses and Other 39,827 848
------------ ------------
379,415 501,420
------------ ------------
Operating Costs and Expenses:
Production 66,630 89,987
Exploration 5,989 28,842
Depreciation, Depletion, Amortization
and Valuation Provisions 56,956 69,147
General, Administrative and Other 164,263 177,208
------------ ------------
293,838 365,184
------------ ------------
Income from Operations 85,577 136,236
Other Income, Net 129,034 58,827
------------ ------------
Income Before Income Taxes 214,611 195,063
Provision for
Income Taxes 37,655 52,923
------------ ------------
Net Income $ 176,956 $ 142,140
============ ============
Per Share Data
Net Income, Basic and Diluted $ 1.05 $ .84
============ ============
Weighted Average Shares
Outstanding, Basic and Diluted 167,768 168,310
============ ============
</TABLE>
See Accompanying Notes
<PAGE>
THE RESERVE PETROLEUM COMPANY
STATEMENTS OF CASH FLOW
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
------------- -------------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 177,208 $ 224,637
------------- -------------
Cash Flows Applied to Investing Activities:
Purchase of Available for Sale Securities (57,568) (287,578)
Property Dispositions 1,500 837
Property Additions (50,801) (150,373)
Cash Distributions from Equity Investments 45,000 13,500
------------- -------------
Net Cash Applied to Investing Activities (61,869) (423,614)
------------- -------------
Cash Flows Applied to Financing Activities:
Decrease in Dividends Payable (1,302) (435)
Purchase of Treasury Stock ---- (740)
------------- -------------
Total Cash Applied to Financing Activities (1,302) (1,175)
------------- -------------
Net Change in Cash and Cash Equivalents 114,037 (200,152)
Cash and Cash Equivalents,
Beginning of Period 339,015 313,540
------------- -------------
Cash and Cash Equivalents,
End of Period $ 453,052 $ 113,388
============= =============
Supplemental Disclosures of
Cash Flow Information,
Cash Paid During the Periods for:
Interest $ 3,750 $ 3,750
Income Taxes $ 47,000 $ ----
</TABLE>
See Accompanying Notes
<PAGE>
THE RESERVE PETROLEUM COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 1999
(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.
<PAGE>
THE RESERVE PETROLEUM COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 1999
(Unaudited)
The 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, 1998, 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, 1999, was $5,532,640, an
amount which, along with the cash flow from operations, is adequate to fund
all currently budgeted investing and financing activities.
For the quarter ended March 31, 1999, cash flows from operations declined
$47,429 (21%) to $177,208 from $224,637 for the quarter ended March 31,
1998. The decline was the result of reduced price received for oil and gas
sales and reduced volume of product sales, as offset by reduced operating
costs and expenses and an increase in other income. Recently reported spot
market prices have been increasing for crude oil and, to a lessor degree,
for natural gas, indicating a possible turn around. See item 2, below for
further discussion.
Management is unaware of any additional 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, 1998, would not be representative of the Company's
current position.
2. Material Changes in Results of Operations Three Months Ended March 31, 1999
---------------------------------------------------------------------------
Compared with Three Months Ended March 31, 1998.
-----------------------------------------------
Operating Revenue. Crude oil and natural gas sales decreased $160,984 (32%)
to $339,588 as a result of declines in both average price received for
product sales and the volume of product sold. Revenues from oil sales fell
$56,458 (40%) to $83,543 because of a decline in volume of 1,516 barrels
(Bbls) to 7,722 Bbls and a decline in the average price received for oil
sales of $4.34 per Bbls to $10.82. The result was a negative volume
variance of $22,945 and a negative price variance of $33,513. Revenue from
gas sales decreased $102,342 (29%) to $253,973 as the volume of gas sales
fell 15,398 thousand cubic feet (MCF), or 9% to 146,909 MCF resulting in a
negative volume variance of $33,722, and the average price received for gas
sales declined $.46 per MCF to $1.73 resulting in a negative price variance
of $68,620.
As of May 10, 1999, national spot crude oil prices were reported as high as
$18.58 per Bbl and natural gas prices were reported as high as $2.25 per
MCF. As noted in the above paragraph, the average unit price received for
sales in the first quarter of 1999 was $10.82 per Bbl for crude oil and
$1.73 for natural gas.
<PAGE>
Operating Costs and Expenses. A $23,357 (26%) decrease in production costs
occurred to a great extent because of a $10,000 drop in both gross
production tax and lease operating expense. Depreciation, depletion,
amortization and valuation provision declined $12,191 (18%) mostly as a
result of a decrease in unit-of-production depletion and depreciation on
producing properties. General, administrative and other expenses fell
$12,945 (7%) as a result of an $8,000 decrease in legal expenses and a
$5,000 decrease in salary expense.
Other Income Net. The $70,207 (119%) increase was, to a great extent, the
result of a $20,000 settlement with a pipeline company, an increase of
$20,330 upon an equity investment's finalization of an Oklahoma real estate
sale, and an increase in unrealized gain on trading securities of $18,382.
Year 2000 Issue Update. In the continuing review and testing of its
internal computer system, company personnel uncovered a possible year 2000
problem with its main operating system. A correction packet has been
ordered and should be received and installed shortly.
<PAGE>
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, 1999.
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 10, 1999 /s/ Mason McLain
-------------- -----------------------------
Mason McLain,
President
Date: May 10, 1999 /s/ Jerry L. Crow
---------------- -----------------------------
Jerry L. Crow
Principal Financial and
Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THIS FORM
10-QSB FOR THE THREE MONTHS ENDING MARCH 31, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 453,052
<SECURITIES> 5,076,003
<RECEIVABLES> 139,803
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,672,608
<PP&E> 5,211,087
<DEPRECIATION> 3,982,845
<TOTAL-ASSETS> 7,799,853
<CURRENT-LIABILITIES> 139,968
<BONDS> 0
0
0
<COMMON> 92,368
<OTHER-SE> 7,443,609
<TOTAL-LIABILITY-AND-EQUITY> 7,799,853
<SALES> 339,588
<TOTAL-REVENUES> 379,415
<CGS> 0
<TOTAL-COSTS> 66,630
<OTHER-EXPENSES> 62,945
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 214,611
<INCOME-TAX> 37,655
<INCOME-CONTINUING> 176,956
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 176,956
<EPS-PRIMARY> 1.05
<EPS-DILUTED> 1.05
</TABLE>
