SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 8-K
Current Report Pursuant to Section 13 or 15(d) of The Securities
Act of 1934
Date of Report (date of earliest event reported): March 15, 1999
Mallon Resources Corporation
(exact name of registrant as specified in its charter)
Colorado 0-17267 84-1095959
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
999 18th Street, Suite 1700, Denver, Colorado 80202
(address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (303) 293-2333
not applicable
(former name or former address, if changed since last report)
Item 5. Other Events
Mallon Resources Corporation (the "Company") issued the following
press release, dated March 15, 1999, the text of which follows:
Denver, Colorado -- Mallon Resources Corporation (Nasdaq:
"MLRC") reported today Mallon Resources Corporation (Nasdaq:
"MLRC") today reported that in 1998 it achieved record levels
of oil and gas production, revenues, cash flow, and reserves for
the third consecutive year. The Company attributed its record
operating results to the continuing success of its East Blanco
Gas Project in New Mexico's San Juan Basin.
The Company's average daily production in 1998 rose 104% to
19.8 million cubic feet of natural gas equivalents ("Mmcfe"),
compared to 1997's average of 9.7 Mmcfe. Revenues of $13,178,000
in 1998 were up 52% from the $8,651,000 recorded in 1997.
Operating cash flow for 1998 was $4,453,000 ($0.63 per basic
share), up 59% from 1997's $2,802,000 ($0.60 per basic share).
Mallon's oil and gas reserves at December 31, 1998, were 91.7
billion cubic feet of natural gas equivalents ("Bcfe"), a 58%
increase over the 58.2 Bcfe reported at year-end 1997.
The Company achieved these corporate record operating results
despite the fact that its operations were significantly adversely
affected by lower prices for oil and natural gas. Compared to
the average prices received in 1997, the average natural gas
price received by the Company in 1998 declined 16% to $1.72 from
$2.04 per thousand cubic feet ("mcf"), and the average oil
price fell 33% to $12.99 from $19.31 per barrel. The average
price realized per Mmcfe was $1.81, a 26% decrease from the 1997
average of $2.43. The even further depressed year-end prices
required the Company to incur a $16,842,000 fourth quarter
ceiling test write-down of its oil and gas properties.
Largely due to lower prices and the non-cash ceiling test
charge, Mallon reported a net loss for 1998 of $18,186,000 and a
net loss attributable to common shareholders of $18,306,000
($2.61 per basic share) compared to 1997's net loss attributable
to common shareholders of $4,292,000 ($0.92 per basic share).
Excluding the 1998 fourth quarter write-down and a 1997 fourth
quarter impairment charge for its investment in Laguna Gold
Company, the Company's net loss attributable to common
shareholders for 1998 was $1,464,000, compared to 1997's net loss
attributable to common shareholders of $658,000.
The $16,842,000 fourth quarter ceiling test write-down
reduced the carrying value of the Company's oil and gas
properties. The non-cash charge was driven by low prevailing oil
and gas prices and was made in accordance with Securities and
Exchange Commission rules for oil and gas companies employing the
full cost accounting method. The full cost ceiling is calculated
based on the present value of projected future net cash flows
from estimated proved reserves, assuming constant prices and a
10% discount rate. The ceiling is not intended to represent an
estimate of the fair market value of the Company's oil and gas
properties. In calculating its ceiling, the Company used
December 31, 1998, oil and gas prices of $10.03 per barrel of oil
and $1.43 per mcf of gas. The non-cash charge in 1998 will have
the effect of reducing the Company's future depletion,
depreciation and amortization costs per unit of oil and gas
production. The write-down may not be reversed in future
periods, even though higher oil and gas prices may subsequently
increase the ceiling. The write-down and depressed oil and gas
prices also caused the Company to be in technical non-compliance
with two conditions of the agreement governing its revolving line
of credit. Based on discussions with its bankers, Mallon is
confident that its non-compliance will be waived.
In fourth quarter 1998, the Company's average daily
production rose 77% to 22.8 Mmcfe compared to fourth quarter
1997's 12.9 Mmcfe. Fourth quarter revenues were $3,490,000 in
1998, up 25% over the year earlier period. The increased
revenues reflect the higher levels of production, which partially
offset the 29% decline in prices per Mcfe to $1.65 from $2.34.
The net loss for fourth quarter 1998 was $17,841,000 and the net
loss attributable to common shareholders was $17,871,000 ($2.54
per basic share) compared to the net loss attributable to common
shareholders for fourth quarter 1997 of $3,017,000 ($0.60 per
basic share). Operating cash flow for fourth quarter 1998 was
$848,000 ($0.12 per basic share) compared to $1,070,000 ($0.21
per basic share) for 1997, primarily as a result of depressed
prices for the period.
George O. Mallon, Jr., Chairman, said, "Although the Company
faced difficult industry conditions during 1998, we achieved our
goal of continuing to rapidly build our reserve base, which grew
by 58%. Based on recent discoveries on our La Jara Canyon
acreage, we believe that we can continue to increase reserves at
approximately 50% per year over the next three years. When
prices recover from their depressed levels of recent months, we
believe that Mallon will be well-positioned to add substantially
to shareholder value while maintaining a prudent financial
structure."
Attachment A hereto sets forth certain selected financial and
operating data.
The foregoing information contains forward-looking statements
and forecasts, the realization of which cannot be assured.
Actual results may differ significantly from those forecast.
Inaccurate geologic interpretations, the volatility of commodity
prices, unbudgeted cost increases, unforeseen delays in
operations, and operations that prove less successful than
anticipated are risks that can significantly effect the Company's
operations. These and other risk factors that affect the
Company's business are discussed in the Company's Annual Report.
Mallon Resources Corporation is a Denver, Colorado, based oil
and gas exploration and production company operating primarily in
the San Juan and Delaware Basins of New Mexico. Mallon's Common
Stock is quoted on Nasdaq under the symbol "MLRC."
Attachment A
SELECTED FINANCIAL AND OPERATING DATA
(In thousands, except per unit data)
<TABLE>
<CAPTION>
For the Three Months For the Years Ended
Ended December 31, December 31,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Selected Results
Revenues $ 3,490 $2,798 $13,178 $8,651
Costs and expenses 21,331 (A) 3,017 31,364 (A) 9,111
Net loss (17,841)(A) (2,987)(B) (18,186)(A) (3,704)(B)
Net income (loss) attributable to common
shareholders (17,871)(A) (3,017)(B) (18,306)(A) (4,292)(B)
Net loss per basic share attributable
to common shareholders $(2.54)(A) $(0.60)(B) $(2.61)(A) $(0.92)(B)
EBITDA (C) 1,304 (1,433)(B) 5,343 (A) 56 (B)
EBITDA per basic share $0.19 $(0.29)(B) $0.76 (A) $0.01 (B)
Cash flow (D) 848 1,070 4,453 2,802
Cash flow per basic share $0.12 $0.21 $0.63 $0.60
Basic weighted average shares outstanding 7,025 4,995 7,015 4,682
Other Operating Data
Net Production:
Gas (Mmcf) 1,796 797 5,852 2,350
Oil (Mbbls) 50 65 230 196
Mmcfe 2,096 1,187 7,232 3,526
MBOE 349 198 1,205 588
Average realized sales price
Gas ($/Mcf) $1.62 $2.05 $1.72 $2.04
Oil ($/Bbl) $11.28 $17.60 $12.99 $19.31
Mcfe ($/Mcfe) $1.65 $2.34 $1.81 $2.43
BOE ($/BOE) $9.93 $14.02 $10.85 $14.60
</TABLE>
_______________________
A. Includes a write-down of oil and gas properties of
$16,842,000 pursuant to the rules of the Securities and Exchange
Commission for companies employing the full cost method of
accounting.
B. At December 31, 1997, Mallon reduced the carrying value of
its investment in Laguna Gold Company to $0.
C. EBITDA is earnings before income taxes, interest expense,
depreciation, depletion and amortization, impairment, and
extraordinary loss.
D. Cash flow from operating activities before working capital
adjustments.
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 hereunto duly authorized.
Mallon Resources Corporation
March 18, 1999 By: __/s/ Roy K. Ross____________________
Roy K. Ross, Executive Vice President
