U.S. Securities and Exchange Commission
Washington, D. C. 20549
Form 10-QSB
Annual Report Under Section 13 or 15(d)
of the
Securities Exchange Act of 1934
for the quarterly period ended
December 31, 1996
Commission File Number: 1-10425
WICHITA RIVER OIL CORPORATION, Debtor-in-Possession
(Name of Small Business Issuer in its Charter)
Delaware 13-3544163
(State of Incorporation) (IRS Employer Identification Number)
3500 N. Causeway Blvd., Suite 410
Metairie, Louisiana 70002
(Address of Principle Executive Office) (Zip Code)
(504)-831-0381
(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of The Exchange Act:
Title of Each Class Name of Exchange on which Registered
Common Stock $0.01 par value None
Securities registered under Section 12(g) of The Exchange Act: None
Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 .
Check if Transitional Small Business Format: Yes No x .
Applicable Only To Corporate Issuers
State the number of shares outstanding of each of the issuer's
classes of equity.
As of May 14, 1997, approximately 7,974,000 shares of Common Stock, $0.01
par value per share, were issued and outstanding.
<PAGE>
<TABLE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Condensed Consolidated Balance Sheets
Unaudited
<CAPTION>
December 31, December 31,
1996 1995
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 77,000 $ 28,000
Accounts receivable 473,000 919,000
__________ _________
Total Current Assets 550,000 947,000
Property and Equipment:
Oil and gas properties
(full cost method) 55,521,000 53,815,000
Less - Accumulated depletion and
writedown of oil and gas
properties (39,035,000) (38,019,000)
Net Property and Equipment 16,486,000 15,796,000
____________ ____________
Total Assets $ 17,036,000 $ 16,743,000
___________ ___________
Liabilities and Stockholders' Equity (Deficit)
Current Liabilities:
Accounts payable $1,076,000 $1,323,000
Undistributed production
receipts 2,180,000 1,954,000
Accrued liabilities 984,000 753,000
Accrued interest 3,620,000 1,285,000
Current maturities of
long-term debt 21,350,000 21,350,000
__________ __________
Total Current Liabilities 29,210,000 26,665,000
Stockholders' Equity (Deficit):
Common stock, voting, $.01
par value, shares authorized
10,000,000, shares outstanding
7,974,000 and 7,974,000,
respectively 81,000 81,000
Additional paid-in capital 12,987,000 12,987,000
Subscriptions receivable (319,000) (319,000)
Retained earnings (deficit) (24,923,000) (22,671,000)
__________ __________
Total Stockholders' Equity
(Deficit) (12,174,000) (9,922,000)
___________ __________
Total Liabilities &
Stockholders' Equity (Deficit) $17,036,000 $16,743,000
___________ __________
</TABLE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
Unaudited
<CAPTION>
Additional Stock
Common Stock Paid-in Subscriptions Retained Stockholders'
Shares Amount Capital Receivable Earnings (Deficit) Equity (Deficit)
<S> <C> <C> <C> <C> <C> <C>
Balance Dec. 31, 1995 7,974,000 $81,000 $12,987,000 $(319,000) $(22,671,000) $(9,922,000)
Net Loss - - - - - - - - (2,252,000) (2,252,000)
_________ _______ ___________ _________ ____________ ____________
Balance Dec. 31, 1996 7,974,000 $81,000 $12,987,000 $(319,000) $(24,923,000) $(12,174,000)
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these financial statements.
2
<PAGE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Condensed Consolidated Statements of Operations
Unaudited
<TABLE>
<CAPTION>
Year Ended December 31, Quarter Ended December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Oil and gas sales $3,864,000 $3,199,000 $ 820,000 $ 631,000
Expenses:
Production expenses 1,572,000 732,000 523,000 182,000
General and administrative 1,090,000 1,106,000 153,000 309,000
Interest expense 2,438,000 2,216,000 672,000 557,000
Depreciation, depletion
and amortization 1,016,000 1,952,000 202,000 656,000
Writedown of oil and gas properties - - 9,216,000 - - 9,216,000
_________ __________ __________ __________
Total expenses 6,116,000 15,222,000 1,550,000 10,920,000
Income (loss) before income taxes (2,252,000) (12,023,000) (730,000) (10,289,000)
Income tax benefit - - - - - - - -
___________ ____________ ___________ ____________
Net Income (Loss) $(2,252,000) $(12,023,000) $ (730,000) $(10,289,000)
Earnings (Loss) Per Share $(0.28) $(1.51) $(0.09) $(1.29)
Number of shares outstanding 7,974,000 7,974,000 7,974,000 7,974,000
</TABLE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Unaudited
<TABLE>
<CAPTION>
Years Ended December 31, 1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net income (loss) $(2,252,000) $(12,023,000)
Adjustment to reconcile net income (loss)
to net cash from operating activities:
Depreciation, depletion and amortization 1,016,000 1,952,000
Writedown of oil and gas properties - - 9,216,000
___________ _________
Operating cash flow (Loss) before (1,236,000) (855,000)
non-cash charges
Changes in assets and liabilities
Decrease (increase) in accounts receivable
and other assets 446,000 ( 98,000)
Increase (decrease) in accounts payable
and other liabilities 2,545,000 2,003,000
_________ ________
Net cash provided by operating activities $1,755,000 $1,050,000
Cash Flows from Investing Activities:
Capital expenditures $(1,706,000) $(1,293,000)
Proceeds for sale of equipment - - 75,000
___________ ___________
Net cash (used in) investing activities $(1,706,000) $(1,218,000)
Cash Flows from Financing Activities: $ - - $ - -
Cash and Cash Equivalents:
At beginning of period $ 28,000 $ 196,000
Net increase (decrease) during period 49,000 (168,000)
_________ _________
At end of period $ 77,000 $ 28,000
Supplemental Cash Flow Information:
Cash paid during period for interest $ - - $1,112,000
Cash paid during period for income taxes $ - - $ - -
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these financial statements.
3
<PAGE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Notes to Condensed Consolidated Financial Statements for December 31, 1996
Summary of Significant Accounting Policies
Principles of Consolidation: The condensed consolidated financial statements
include the accounts of Wichita River Oil Corporation, Debtor-in-Possession and
its wholly owned subsidiaries (collectively referred to as the "Company").
The Company's wholly owned subsidiaries are Equitable Petroleum Corporation
and WRO Operating Company. The Company is an oil and gas exploration,
development and production company. All material intercompany accounts and
transactions are eliminated in consolidation.
Cash Equivalents: The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash equivalents.
Property and Equipment: Property and equipment are stated at cost. The Company
uses the "full cost" method of accounting for oil and gas properties.
Accordingly, costs incurred in the acquisition, exploration and development of
oil and gas properties are capitalized. Under the full cost method, intangible
drilling costs, dry hole costs, geologic costs and certain internal costs
related to exploration and development efforts are included as part of oil
and gas properties. Proceeds from the sale of oil and gas properties reduce
property and equipment and no gains or losses are normally recognized under
the full cost method. As the Company becomes aware of costs to be incurred for
site restoration, dismantlement and/or abandonment, it records the liability.
To date, no such liability has been recorded.
Depreciation, depletion and amortization of proved oil and gas properties is
computed using the units of production method based on total proved oil and
gas reserves. Depreciation of other fixed assets, primarily office equipment,
is determined using the straight-line method over their estimated useful lives.
Upon abandonment or disposal of depreciable assets, the cost and accumulated
allowance for depreciation are eliminated from the accounts and any gain or
loss is reflected in results of operations.
Income Taxes: Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes" ("SFAS 109"), which requires the Company to use an asset and liability
approach to accounting for income taxes. Deferred tax assets or liabilities are
measured by applying the provisions of enacted tax laws to differences between
the tax bases of assets and liabilities and amounts reported on the Company's
balance sheet. A valuation allowance must be established for any portion of a
deferred income tax asset, if it is more likely than not that a tax benefit
will not be realized.
Reclassifications: Certain prior years' amounts have been reclassified to
conform with the 1996 presentation.
Earnings (Loss) Per Share: The weighted average number of shares of common
stock outstanding during the periods is used to compute earnings (loss) per
share. Stock options and warrants are considered common stock equivalents to
the extent they have a dilutive effect on earnings per share.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4
<PAGE>
Wichita River Oil Corporation, Debtor-in-Possession
and Subsidiaries
Notes to Condensed Consolidated Financial Statements for December 31, 1996
Current Maturities of Long-Term Debt
On February 1, 1992, the Company entered into a long-term credit agreement
("1992 Credit Agreement") with a bank providing a borrowing capacity of
$20,000,000, which was immediately drawn. The proceeds were used primarily
to retire the $15,000,000 loan under an existing credit agreement and the
remainder of a production payable incurred in a 1991 merger.
Outstanding borrowings, which were increased and then subsequently reduced to
$21.5 million in August of 1993, under the loan are secured by a first security
interest in the oil and gas properties of the Company. On October 1, 1995, a
$2.7 million payment ($2.0 million of principal and $0.7 million of accured
interest) was due on the Company's $21.3 million senior-secured debt. The
Company was unable to pay to $2.7 million, and the note holder's remedies for
nonpayment include acceleration of the loan and initation of foreclosure
proceedings. Immediately prior to October 1, 1995, the Company's original
lender transferred the debt to a new note holder. Subsequently, the note
holder and the Company discussed various debt amendment ideas as well as various
recapitalization and/or refinancing alternatives. On April 11, 1996, the note
holder delivered to the Company a notice of default and declared the debt due
and payable. On April 17, 1996, alleged unsecured creditors of the Company
filed an involuntary petition with the United States Bankruptcy Court in the
Eastern District of Louisiana seeking a Chapter 11 reorganization of the
Company. On July 15, 1996, an Order for Relief was entered and Wichita River
Oil Corporation became Debtor-in-Possession.
Management believes that anticipated cash flows from operations will be
adequate to meet the Company's foreseeable financial obligations provided
the Company's properties can be fully developed. The Company's ability to
continue the development of its properties during the near future is subject
to the determination of certain issues in bankruptcy proceedings.
Common Stock
During 1994, the Company issued 1,258,000 shares of common stock and
stockholders' equity was increased by $1,023,000. Included were 237,729
shares with a market value $259,000 for settlement of litigation, 250,000
shares to a consultant to the company for a subscription receivable of
$190,000, and the balance of 770,000 shares for reducing the Company's
current liabilities by $764,000. The Company had incurred the current
liabilities primarily as a result of capital expenditures associated with
production enhancement operations.
The following table identifies the changes during the past two years for the
Company's stock purchase warrants and stock options as well as the issued and
outstanding warrants and options as of December 31, 1996.
<TABLE>
<CAPTION>
Number Price Number Price
of Warrants Per Share of Options Per Share
<S> <C> <C> <C> <C>
Outstanding Dec. 31, 1993 567,500 $0.01 - 1.25 40,000 $1.56 - 6.25
Forfeited during 1994-net (8,000) - - - - - -
Exercised during 1994 (41,000) 1.25 - - - -
_______ ___________ ______ ___________
Outstanding Dec. 31, 1994: 518,500 0.01 - 1.25 40,000 1.56 - 6.25
Forfeited during 1995-net (12,000) - - (16,000) 6.25
Exercised during 1995 - - - - - - - -
_______ ____________ ______ ____________
Outstanding Dec. 31, 1995: 506,500 $0.01 - 1.25 24,000 $1.56 - 6.25
Forfeited during 1996 (506,500) $0.01 - 1.25 - - - -
Exercised during 1996 - - - - - - - -
_______ ____________ ______ ____________
Outstanding Dec. 31, 1996: - - - - 24,000 $1.56 - 6.25
Consisting of: 20,800 $1.56
3,200 $6.25
</TABLE>
As of December 31, 1996, a total of 24,000 shares of Company common stock were
reserved for issuance under stock option plans.
5
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Liquidity and Capital Resources
On October 1, 1995, a $2.7 million payment ($2.0 million of principal and $0.7
million of accrued interest) was due on the Company's $21.3 million senior-
secured debt. The Company was unable to pay the $2.7 million, and the note
holder's remedies for nonpayment include acceleration of the loan and
initiation of foreclosure proceedings. Immediately prior to October 1,
1995, the Company's original lender transferred the debt to a new note
holder. Subsequently, the note holder and the Company discussed various
debt amendments ideas as well as various recapitalization and/or refinancing
alternatives. On April 11, 1996, the note holder delivered to the Company a
notice of default and declared the debt due and payable. On April 17, 1996,
alleged unsecured creditors of the Company filed an involuntary petition with
the United States Bankruptcy Court in the Eastern District of Louisiana seeking
a Chapter 11 reorganization of the Company. On July 15, 1996, an Order of
Relief was entered and Wichita River Oil Corporation became Debtor-in-
Possession.
The Company's balance sheet as of December 31, 1996, includes the entire amount
of senior-secured debt in current liabilities, resulting in deficit working
capital of $28.7 million, including $21.3 million of principal and an additional
$3.6 million of accured interest.
The Company's independent auditors, Arthur Andersen LLP, did not express an
opinion on the Company's financial statements as of December 31, 1995. The
auditors requested the note holder to return an ordinary audit debt
confirmation. The note holder refused to confirm the debt terms and
maturities. The auditors further stated that there is "substantial doubt
about the Company's ability to continue as a going concern." Consequently,
the auditors stated "we do not express an opinion on the financial
statememts..."
Management believes that anticipated cash flows from operations will be
adequate to meet the Company's foreseeable financial obligations provided the
Company's properties can be fully developed. The Company's ability to continue
the development of its properties during the near future is subject to the
determination of certain issues in bankruptcy proceedings.
As of December 31, 1995, the capitalized cost of the Company's oil and gas
properties was less than the cost ceiling established by the Company's proved
reserves. However, uncertainty regarding the Company's ability to fund
development of its proved undeveloped reserves in the near future may limit
the cost ceiling to the value of the Company's proved developed reserves.
By limiting its property value to the cost ceiling established by proved
developed reserves, a writedown of $9.2 million for impairment of the Company's
stated property value was recorded during the fourth quarter of 1995.
6
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Net cash provided by operating activities during 1996 was $1,775,000, including
an operating cash loss of $1,236,000. Comparable figures for 1995 were cash
provided by operating activities of $1,050,000, including an operating cash
loss of $855,000. Net cash used in investing activities in 1996 was $1,706,000
for capital expenditures compared to net cash used in investing activities in
1995 of $1,281,000. There were no financing activities during either 1996 or
1995.
Wichita River Oil Corporation and the Company's subsidiary Equitable Petroleum
Corp. are defendants in various lawsuits arising in the ordinary course of
business. The Company believes it has meritorious defenses to the lawsuits
and will defend against them. Based on its evaluation of such claims, as
discussed with its outside legal counsel, Company management is of the
opinion that the ultimate resolution of such matters will not have a material
adverse effect on the Company's financial position or results of operations and
that such matters are not material for an investment decision regarding the
Company's securities.
Results of Operations
First Quarter of 1996 Compared to First Quarter of 1995. When compared to a
year earlier, oil and gas sales were 4% higher due primarily to a 48% increase
in average prices ($18.09 per BOE v. $12.26), primarily because natural gas
prices during 1996 were higher ($3.08 per mcf compared to $1.61 during 1995).
The higher prices were partially offset by a 30% decrease in daily production
volumes (582 BOE v. 835). Production expenses, exclusive of production
taxes, were 48% higher in 1996 when compared to 1995. Average operating
expenses per BOE in 1996 were $2.52 compared to $1.20 in 1995. Production taxes
were 23% lower than in 1995, despite higher oil prices ($17.61 per barrel
compared to $15.45 in 1995), due primarily to lower production volumes.
General and administrative expenses in 1996 were more than double the level in
1995, due primarily to expenses associated with the Company's financial
difficulties. Interest expense in 1996 was 6% higher due to a higher amount
of interest-bearing debt outstanding. Depreciation, depletion and
amortization costs were 40% lower in 1996 due to lower production volumes.
The average depletion rate in 1996 was $4.72 per BOE v. $5.54 in 1995.
7
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations - continued
Second Quarter of 1996 Compared to Second Quarter 1995. When compared to a year
earliers, oil and gas sales were 21% higher dur primarily to a 23% increase in
average prices ($16.79 per BOE v. $13.68), primarily because natural gas prices
during 1996 were higher ($2.54 per mcf compares to $1.93 during 1995). The
higher prices were partially offset by a 1% decrease in daily production volumes
(723 BOE v. 733). Production expenses, exclusive of production taxes, were four
times higher in 1996 than during 1995 due to costs associated with compliance
with new environmental laws. Average operating expenses per BOE in 1996 were
$4.70 compared to $1.16 in 1995. Production taxes were 10% lower than in 1995,
despite higher oil prices ($18.15 per barrel compared to $16.30 in 1995), due
primarily to lower production volumes.
General and administrative expenses in 1996 were relatively unchanged from the
level experienced during 1995. Interest expense in 1996 was also relatively
unchanged. Depreciation, depletion and amortization costs were 27% lower in
1996 due to lower production volumes and lower average depletion rates. The
average depletion rate in 1996 was $4.50 per BOE v. $5.56 in 1995.
First Half of 1996 Compares to First Half of 1995. When compared to a year
earlier, oil and gas sales were 10% higher due primarily to a 34% increase in
average prices ($17.29 per BOE v. $12.93), primarily because natural gas prices
during 1996 were higher ($2.82 per mcf compared to $1.76 during 1995). The
higher prices were partially offset by an 18% decrease in daily production
volumes (644 BOE v. 783). Production expenses, exclusive of production taxes,
were 2.5 times higher in 1996 when compared to 1995 due to costs associated with
compliance with new environmental laws. Average operating expenses per BOE in
1996 were $3.80 compared to $1.18 in 1995. Production taxes were 16% lower
than in 1995, despite higher oil prices ($17.69 per barrel compared to $15.85 in
1995), due primarily to lower production volumes.
General and administrative expenses in 1996 were 57% higher than in 1995, due
primarily to expenses associated with the Company's financial difficulties.
Interest expense in 1996 was 3% higher due to a higher amount of interest-
bearing debt outstanding. Depreciation, depletion and amortization costs were
36% lower in 1996 due to lower production volumes and to lower average depletion
rates. The average depletion rate in 1996 was $4.68 per BOE v. $5.55 in 1995.
Third Quarter of 1996 Compared to Third Quarter 1995. When compared to a year
earilier, oil and gas sales were 34% higher due primarily to a 44% increase in
average prices ($16.49 per BOE v. $11.45), primarily because natural gas prices
during 1996 were higher ($2.30 per mcf compared to $1.35 during 1995). The
higher prices were partially offset by a 7% decrease in daily production volumes
(647 BOE v. 698). Production expenses, exclusive of production taxes, were four
times higher in 1996 than during 1995 due to costs associated with compliance
of new enviromental laws. Average operating expenses for BOE in 1996 were $5.65
compared to $1.29 in 1995. Production taxes were 3% higher than in 1995 due to
24% higher oil prices ($18.88 per barrel compared to $15.17 in 1995) despite
lower production volumes.
General and administrative expenses in 1996 were 42% lower than in 1995 due to
austerity changes. Interest expense in 1996 were 13% higher due to a higher
amount of interest-bearing debt outstanding. Depreciation, depletion and
amoritzation costs were 40% lower in 1996 due to lower production volumes and
lower average depletion rates. The average depletion rate in 1996 was $4.50
per BOE v. $6.50 in 1995.
First Nine Months of 1996 Compared to First Nine Months of 1995. When compared
to a year earlier, oil and gas sales were 19% higher due primarily to a 37%
increase in average prices ($17.07 per BOE v. $12.47), primarily because natural
gas prices during 1996 were higher ($2.64 per mcf compared to $1.64 during
1995). The higher prices were partially offset by a 14% decrease in daily
production volumes (651 BOE v. 754). Production expenses, exclusive of
production taxes, were 3.1 times higher in 1996 when compared to 1995 due to
costs associated with compliance with new environmental laws. Average operating
expenses for BOE in 1996 were $4.37 compared to $1.22 in 1995. Production taxes
were 10% higher oil prices ($18.26 per barrel compared to $15.63 in 1995).
8
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations - continued
General and administrative expenses in 1996 were 18% higher than in 1995, due
primarily to expenses associated with the Company's financial difficulties.
Interest expense in 1996 was 6% higher due to a higher amount of interest-
bearing debt outstanding. Depreciation, depletion and amortization costs
were 37% lower in 1996 due to lower production volumes and to lower average
depletion rates. The average depletion rate in 1996 was $4.57 per BOE v. $6.20
in 1995.
Fourth Quarter 1996 Compared to Fourth Quarter 1995. When compared to a year
earlier, oil and gas sales were 30% higher due primarily to a 44% increase in
average prices ($18.27 per BOE v. $12.72). The average oil price was $21.48 per
barrel v. $14.45 and the average gas price was $2.50 per mcf v. $1.87. The
increase in prices were partially offset by 10% lower daily production volumes
(488 BOE v. 539). Production expenses, exclusive of taxes, were three times
greater in 1996 than in 1995 due to compliance with new environmental
regulations associated with water disposal. Lease operating costs per BOE
averaged $7.46 in 1996 compared to $2.25 in 1995. Production taxes were 45%
higher in 1996 when compared to 1995 ($2.27 per BOE v. $1.42) reflecting the
higher oil prices (depicted above) while oil production was essentially
unchanged (247 barrels per day v. 248). Natural gas production volumes were
17% lower in 1996 (1,449 mcf per day v. 1,745 mcf).
General and administrative expenses in 1996 were 50% lower than in 1995
reflecting the Company's continued austerity program. Interest expense
increased 21% due to an increased amount of interest bearing debt outstanding.
Depreciation, depletion and amortization costs were 69% lower in 1996 due to
lower production volumes and to lower average depletion rates. The depletion
rate was reduced by 41% ($4.50 per BOE v. $7.67 in 1995) due to the writedown
in the value of the Company's oil and gas property at the end of 1995.
Year 1996 Compared to Year 1995. When compared to a year earlier, oil and gas
sales were 21% higher due to a 38% increase in average prices ($17.31 per BOE v.
$12.52) reflecting the increased prices received for oil ($18.90 per barrel v.
$15.40) and gas ($2.61 per mcf v. $1.68). Average production rates of 1996 were
13% lower than in 1995 (610 BOE per day v. 700). Production expenses,
exclusive of taxes, were three times greater in 1996 than in 1995 due to
compliance with new environmental regulations associated with water disposal.
Lease operating costs per BOE averaged $4.99 in 1996 compared to $1.42 in 1995.
Production taxes were essentially unchanged in 1996 when compared to 1995 ($1.65
per BOE v. $1.45) reflecting the higher oil prices (depicted above) while oil
production was essentially unchanged (309 barrels per day v. 320). Natural gas
production volumes were 17% lower in 1996 (1,804 mcf per day v. 2,283).
General and administrative expenses in 1996 were slightly lower than in 1995.
Interest expenses increased 10% in 1996 due to a greater amount of interest
bearing debt outstanding. Depreciation, depletion and amortization costs were
48% lower in 1996 due to lower production volumes and lower average depletion
rates. The average depletion was less in 1996 than in 1995 due to lower
production volumes and to lower average depletion rates. The average depletion
was less in 1996 than in 1995 ($4.55 per BOE v. $6.20) due to the writedown
in the value of the Company's oil and gas property at the end of 1995.
9
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Legal Proceedings
On April 17, 1996, unsecured creditors of the Company filed an involuntary
petition with the United States Bankruptcy Court in the Eastern District of
Louisiana seeking a Chapter 11 reorganization of the Company. On July 15, 1996,
an Order of Relief was entered, permitting the Company to continue operations
under Chapter 11 as debtor-in-possession. Subsequently, the Company filed suit
on March 20, 1997 against Swiss Bank Corporation, Odyssey Partners, L.P. and
Nomura Holding America, Inc. in U.S. District Court in the Eastern District of
Louisiana seeking $100 million of damages from the defendants for fraud,
detrimental reliance, breach of contract and lender liability. The Company also
filed suit against other parties in the U.S. Bankruptcy Court during March 1997
seeking approximately $2 million for breach of certain agreements.
Wichita River Oil Corporation and the Company's subsidiary are defendants in
various lawsuits arising in the ordinary course of business. The Company
believes it has meritorious defenses to the lawsuits and will defend against
them. Based on its evaluation of such claims, as discussed with its outside
legal counsel, Company management is of the opinion that the ultimate
resolution of such matters will not have a material adverse effect on the
Company's financial position or results of operations and that such matters are
not material for an investment decision regarding the Company's securities.
The Company is a defendant in an action styled John H. Hauberg, et al v.
Wichita River Oil Corporation, et al, No. 54,837, 23rd JDC, Ascension Parish,
La. in which the royalty owners of a lease that is operated by the Company are
seeking approximately $300,000 in unpaid royalties plus penalties and interest
and attorney's fees. The Company has acknowledged and accrued the $300,000
liability for unpaid royalties but has denied the claim for penalties, which
exceeds $1.2 million. The Company believes it has meritorious defeses against
the claim for penalties.
The Company owns approximately 75% working interest in the lease in question.
Other working interest owners and royalty owners who had not been involved
directly in the case mentioned above have filed recently claims and crossclaims
and counterclaims both with and against the Company for reimbursement for any
penalties which may result from this litigation.
Submission of Matters to a Vote of Security Holders
None.
Exhibits and Reports on Form 8-K
None.
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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 in New Orleans, State of
Louisiana on May 14, 1997.
Wichita River Oil Corporation
By: /s/ Michael L. McDonald By:/s/ James P. McGinnis
Michael L. McDonald James P. McGinnis
Chairman and President Controller
May 14, 1997
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of
Operations and is qualified in its entirety by reference to such on Form 10-QSB
for the nine months period ended December 31, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 77,000
<SECURITIES> 0
<RECEIVABLES> 473,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 550,000
<PP&E> 55,521,000
<DEPRECIATION> 39,035,000
<TOTAL-ASSETS> 17,036,000
<CURRENT-LIABILITIES> 29,210,000
<BONDS> 0
0
0
<COMMON> (12,174,000)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 17,036,000
<SALES> 0
<TOTAL-REVENUES> 3,864,000
<CGS> 1,572,000
<TOTAL-COSTS> 6,116,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,438,000
<INCOME-PRETAX> (2,252,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,252,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,252,000)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> 0
