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, 2000
[ ] 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 8, 2000, 167,609.73 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
1
<PAGE>
THE RESERVE PETROLEUM COMPANY
BALANCE SHEETS
(Unaudited)
ASSETS
------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ -------------
Current Assets:
<S> <C> <C>
Cash and Cash Equivalents $ 422,105 $ 367,963
Available for Sale Securities 4,340,866 4,372,573
Trading Securities 674,787 562,176
Receivables 245,803 256,647
Refundable Income Taxes 66,624 75,964
Prepayments 3,750 58,735
------------ ------------
5,753,935 5,694,058
------------ ------------
Investments:
Partnership and Limited
Liability Companies 426,960 430,302
Other 19,048 19,048
------------ ------------
446,008 449,350
------------ ------------
Property, Plant & Equipment:
Oil & Gas Properties, at Cost Based on the
Successful Efforts Method of Accounting
Unproved Properties 683,147 662,765
Proved Properties 4,263,383 4,157,016
------------ ------------
4,946,530 4,819,781
Less - Valuation Allowance and
Accumulated Depreciation,
Depletion & Amortization 3,877,887 3,896,557
------------ ------------
1,068,643 923,224
------------ ------------
Other Property & Equipment, at Cost 337,474 337,474
Less - Accumulated Depreciation &
Amortization 168,460 165,996
------------ ------------
169,014 171,478
------------ ------------
1,237,657 1,094,702
------------ ------------
Other Assets 481,357 490,738
------------ ------------
$ 7,918,957 $ 7,728,848
============ ============
</TABLE>
(continued)
See Accompanying Notes
2
<PAGE>
THE RESERVE PETROLEUM COMPANY
BALANCE SHEETS
(Unaudited)
(Concluded)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ -------------
Current Liabilities:
<S> <C> <C>
Accounts Payable $ 68,293 $ 28,504
Other Current Liabilities-
Gas Balancing Commitment 38,839 38,839
Other 30,258 20,439
------------ ------------
137,390 87,782
------------ ------------
Dividends Payable 126,265 127,008
------------ ------------
Stockholders' Equity:
Common Stock 92,368 92,368
Additional Paid-in Capital 65,000 65,000
Retained Earnings 7,730,120 7,545,405
Accumulated Other Comprehensive Loss (43,151) -----
----------- ------------
7,844,337 7,702,773
Less - Treasury Stock, at Cost 189,035 188,715
----------- ------------
7,655,302 7,514,058
----------- ------------
$ 7,918,957 $ 7,728,848
=========== ============
</TABLE>
See Accompanying Notes
3
<PAGE>
THE RESERVE PETROLEUM COMPANY
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------
2000 1999
------------ ------------
Operating Revenues:
<S> <C> <C>
Oil and Gas Sales $ 418,947 $ 339,588
Lease Bonuses and Other 8,713 39,827
------------ ------------
427,660 379,415
------------ ------------
Operating Costs and Expenses:
Production 83,706 66,630
Exploration 64,632 5,989
Depreciation, Depletion, Amortization
and Valuation Provisions 47,383 56,956
General, Administrative and Other 153,879 164,263
------------ ------------
349,600 293,838
------------ ------------
Income from Operations 78,060 85,577
Other Income, Net 175,619 129,034
------------ ------------
Income Before Income Taxes 253,679 214,611
Provision for
Income Taxes 68,964 37,655
------------ ------------
Net Income $ 184,715 $ 176,956
============ ============
Per Share Data
Net Income, Basic and Diluted $ 1.10 $ 1.05
============= ============
Weighted Average Shares
Outstanding, Basic and Diluted 167,623 167,768
============ ============
</TABLE>
See Accompanying Notes
4
<PAGE>
THE RESERVE PETROLEUM COMPANY
STATEMENTS OF CASH FLOW
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------------------
2000 1999
------------ -----------
<S> <C> <C>
Net Cash Provided by Operating Activities $ 183,429 $ 177,208
------------ -----------
Cash Flows Applied to Investing Activities:
Purchase of Available for Sale Securities (887,453) (57,568)
Sales of Available for Sale Securities 853,779 ----
Property Dispositions 10,674 1,500
Property Additions (113,473) (50,801)
Cash Distributions from Equity Investments 8,250 45,000
------------ -----------
Net Cash Applied to Investing Activities (128,223) (61,869)
------------ -----------
Cash Flows Applied to Financing Activities:
Decrease in Dividends Payable (744) (1,302)
Purchase of Treasury Stock (320) ----
----------- -----------
Total Cash Applied to Financing Activities (1,064) (1,302)
----------- -----------
Net Change in Cash and Cash Equivalents 54,142 114,037
Cash and Cash Equivalents,
Beginning of Period 367,963 339,015
----------- -----------
Cash and Cash Equivalents,
End of Period $ 422,105 $ 453,052
=========== ===========
Supplemental Disclosures of
Cash Flow Information,
Cash Paid During the Periods for:
Interest $ ---- $ 3,750
Income Taxes $ ---- $ 47,000
</TABLE>
See Accompanying Notes
5
<PAGE>
THE RESERVE PETROLEUM COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
Note 1 - BASIS OF PRESENTATION
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. The results of operations
for the current interim periods are not necessarily indicative of the
operating results for the full year.
Note 2 - COMPREHENSIVE INCOME
Total comprehensive income was $141,564 for the three months ended
March 31, 2000. Total comprehensive income for the three months ended
March 31, 1999, was $176,956.
Note 3 - UNREALIZED GAIN ON TRADING SECURITIES
This statement of operations for the period ended March 31, 2000,
included unrealized gains on trading securities of $94,271. Subsequent
sales of trading securities in inventory at March 31, 2000, resulted in
net realized gains of $19,181. The fair value of trading securities on
hand at March 31, 2000, and still in inventory at May 8, 2000, had
declined $57,509.
6
<PAGE>
THE RESERVE PETROLEUM COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
March 31, 2000
(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, 1999, 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 cash, cash equivalents and available for sale securities at March
31, 2000, totaled $4,762,971, an amount which, along with the cash flow from
operations, is adequate to fund all currently budgeted investing and financing
activities. For the quarter ending March 31, 2000, cash provided from operations
of $183,429 along with cash from property dispositions of $10,674 and equity
investees cash distributions of $8,250 was sufficient to fund property additions
of $113,473 and financing activities of $1,064. The remaining balance of $87,816
was used to purchase available for sale securities totaling $33,674 and increase
cash and cash equivalents by $54,142.
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, 1999,
would not be representative of the Company's current position.
2. Material Changes in Results of Operations Three Months Ended March 31, 2000
----------------------------------------------------------------------------
Compared with Three Months Ended March 31, 1999.
- -----------------------------------------------
Operating Revenue. Oil and gas sales totaled $418,947 in 2000, an increase of
$79,359 (23%) from 1999. Oil sales rose $72,593 (87%) to $156,136 as the average
price received increased $15.98 per barrel to $26.80 and barrels sold declined
1,895 barrels to 5,827.
Also, there was a marginal increase in gas sales of $716 to $254,689. An
increase in gas sales of $56,182 resulting from a $.49 per thousand cubic feet
(MCF) increase in average price to $2.22 per MCF was almost totally offset by a
decrease in sales of $55,466 caused by a 32,061 MCF decline in the volume of gas
sold to 114,848 MCF.
The remaining increase in oil and gas sales of $6,050 was the result of an
increase in sales of plant and miscellaneous products to $8,122.
Forward-Looking Summary. A McClain County, Oklahoma exploratory well in
which the company has a 18% working interest was begun in January 2000 and
completed as an oil producer in April. At May 8, 2000, the well was producing at
a rate of approximately 70 barrels per day. Current evaluation indicates the
well should be capable of sustaining that production rate up to one year. If the
well performs as expected, a development well will be proposed for late in 2000
7
<PAGE>
or in 2001. Also, an exploratory well on another structure in the prospect is
scheduled to begin in June 2000, and if successful, there is a possibility of a
development well.
The initial test well on a second McClain County, Oklahoma prospect is scheduled
to be drilled in July or August 2000.
A Cimarron County, Oklahoma, exploratory well in which the company has a 28%
working interest began drilling in February 2000, and was completed in April as
a gas producer. It is a shallow, low cost well with decent production and the
prospect has room for several development wells; however, a favorable gas
contract will be required to make development economic. Gas contract negotiation
was on going at May 8, 2000.
Operating Costs and Expenses. Production costs increased $17,076 (26%) to
$83,706. To a great extent, the increase was caused by an increase of $16,470
in gross production taxes. These taxes fluctuate with oil and gas sales.
Exploration costs increased $58,643 to $64,632. Of the increase, $56,468 was the
result of geological and geophysical costs, most of which relate to seismic data
being developed on a North Texas/Southern Oklahoma exploratory prospect.
The $9,573 decline in depreciation, depletion, amortization and valuation
provisions was, for the most part caused by a $9,330 (31%) decrease in the
provision for impairment of undeveloped leaseholds to $20,367.
Other Income, Net. The components of this item most responsible for the $46,585
(36%) net increase include an increase of $84,011 in realized and unrealized
gains on trading securities, an increase in gains from sales of assets of $9,873
and increased interest income of $7,074, as offset by a decrease of income from
equity investees of $27,587 and a reduction of $20,142 in receipts from pipeline
settlements.
Provision For Income Taxes. For the three months ended March 31, 2000, the
company had an estimated provisions for income taxes of $68,964 as estimated
current tax expense of $9,340 was increased by estimated deferred tax expense of
$59,624. For the comparable period in 1999, the Company had an estimated
provision for income taxes of $37,655 as estimated current tax expense of
$46,400 was decreased by a deferred tax benefit of $8,745.
8
<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, 2000.
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 8, 2000 /s/ Mason McLain
------------- ---------------------------------------
Mason McLain,
President
Date: May 8, 2000 /s/ Jerry L. Crow
--------------- ---------------------------------------
Jerry L. Crow
Principal Financial and Accounting
Officer
9
<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, 2000, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 422,105
<SECURITIES> 5,015,653
<RECEIVABLES> 245,803
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,753,935
<PP&E> 5,284,004
<DEPRECIATION> 4,046,347
<TOTAL-ASSETS> 7,918,957
<CURRENT-LIABILITIES> 137,390
<BONDS> 0
0
0
<COMMON> 92,368
<OTHER-SE> 7,562,934
<TOTAL-LIABILITY-AND-EQUITY> 7,918,957
<SALES> 418,947
<TOTAL-REVENUES> 427,660
<CGS> 0
<TOTAL-COSTS> 83,706
<OTHER-EXPENSES> 112,015
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 253,679
<INCOME-TAX> 68,964
<INCOME-CONTINUING> 184,715
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 184,715
<EPS-BASIC> 1.10
<EPS-DILUTED> 1.10
</TABLE>
