<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
Commission file number 0-18836
MIDLAND RESOURCES, INC.
(Exact name of small business issuer as specified in its charter)
Texas 75-2286814
(State or other jurisdiction (IRS Employer
of incorporation) Identification Number)
616 FM 1960 West, Suite 600, Houston, Texas 77090
(Address of principal executive offices)
(281) 580-9989
(ISSUER'S TELEPHONE NUMBER)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
Common Stock, $.001 par value: 4,440,459 shares outstanding at September 30,
1997
<PAGE>
MIDLAND RESOURCES, INC.
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets as of September 30, 1997 (Unaudited)
and December 31, 1996 3
Unaudited Consolidated Statements of Operations for the three and nine
month periods ended September 30, 1997 and September 30, 1996 5
Unaudited Consolidated Statements of Cash Flows for the three and nine
month periods ended September 30, 1997 and September 30, 1996 7
Note to Unaudited Financial Statements 9
Management's Discussion and Analysis or Plan of Operation 10
PART II. OTHER INFORMATION 14
SIGNATURES 15
<PAGE>
PART I - FINANCIAL INFORMATION
MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
----------- -----------
Unaudited
ASSETS
- ------
Current assets:
Cash $ 36,139 $ 366,677
Accounts receivable:
Oil and gas sales 575,609 834,269
Related parties - 360,479
Property operations and other 366,991 359,600
Property held for sale 592,397 1,241,515
Other current assets 51,088 104,180
Deferred tax asset 378,000 378,000
----------- -----------
Total current assets 2,000,224 3,644,720
Property and equipment, at cost, partially pledged:
Oil and gas properties and equipment,
using successful efforts method 29,193,165 26,936,826
Transportation equipment 228,066 282,532
Computer equipment and software 244,138 229,155
Office furniture and equipment 96,732 94,299
Land, building and leasehold improvements 14,000 105,559
Wells in progress - 241,209
Less accumulated depreciation, depletion
and amortization (14,306,733) (14,076,100)
----------- -----------
Property and equipment, net 15,469,368 13,813,480
Other assets:
Investment in oil and gas limited partnership 41,651 -
Deferred tax asset 116,064 -
Goodwill, net of amortization 727,256 747,271
Contracts and leases, net of amortization 198,261 414,633
Note receivable 307,291 317,759
Other 65,431 38,783
----------- -----------
Total Other Assets 1,455,954 1,518,446
----------- -----------
Total assets $18,925,546 $18,976,646
----------- -----------
----------- -----------
The accompanying note is an integral part
of the financial statements.
Page 3
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MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
1997 1996
----------- -----------
Unaudited
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Current portion of long-term debt $ 1,164,782 $ 1,680,830
Accounts payable and accrued expense 1,450,220 1,194,344
Drilling advances 9,613 393,254
----------- -----------
Total current liabilities 2,624,615 3,268,428
Long-term debt 7,903,196 7,166,421
Deferred income tax liability - 47,044
Payable for the purchase of subsidiary and other 222,279 317,493
----------- -----------
Total liabilities 10,750,090 10,799,386
Stockholders' equity:
Preferred stock, par value $0.01 per share;
20,000,000 shares authorized; none issued - -
Common stock, par value $0.001 per share;
80,000,000 shares authorized; 4,440,459
and 4,401,031 shares issued September 30,
1997 and December 31, 1996, respectively 4,440 4,401
Additional paid in capital 8,410,684 7,898,199
Unearned compensation (214,735) -
Retained earnings (Deficit) (24,933) 274,660
----------- -----------
Total stockholders' equity 8,175,456 8,177,260
----------- -----------
Total liabilities and stockholders' equity $18,925,546 $18,976,646
----------- -----------
----------- -----------
The accompanying note is an integral part
of the financial statements.
Page 4
<PAGE>
MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended September 30,
--------------------------------
1997 1996
---------- ----------
Unaudited Unaudited
Operating revenue:
Oil and gas sales $1,411,687 $1,765,338
Management fees - 15,000
Property operator fees 38,642 21,128
Other 4,319 5,137
---------- ----------
Total operating revenue 1,454,648 1,806,603
---------- ----------
Operating costs and expenses:
Oil and gas production 844,098 780,814
Exploration costs 17,869 361,784
Depreciation, depletion and amortization 339,473 272,863
General and administrative 382,658 391,422
Other - 29,373
---------- ----------
Total operating costs and expenses 1,584,098 1,836,256
---------- ----------
(129,450) (29,653)
Other income and (expenses):
Gain on sale of property 24,427 4,497
Interest and other income 7,311 20,798
Interest expense (237,215) (184,318)
---------- ----------
Total other income and expenses (205,477) (159,023)
---------- ----------
Loss before income taxes (334,927) (188,676)
Deferred federal income tax benefit (117,817) (64,149)
---------- ----------
Net loss $ (217,110) $ (124,527)
---------- ----------
---------- ----------
Net loss per common share $ (0.05) $ (0.03)
---------- ----------
---------- ----------
Average shares outstanding 4,438,263 4,401,031
---------- ----------
---------- ----------
The accompanying note is an integral part
of the financial statements.
Page 5
<PAGE>
MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine months ended September 30,
-------------------------------
1997 1996
---------- ----------
Unaudited Unaudited
Operating revenue:
Oil and gas sales $4,758,502 $4,870,664
Management fees - 45,000
Property operator fees 89,792 64,717
Partnership income 101,260 -
Other 10,721 7,767
---------- ----------
Total operating revenue 4,960,275 4,988,148
---------- ----------
Operating costs and expenses:
Oil and gas production 2,293,627 2,203,103
Exploration costs 378,153 880,562
Impairment write downs 356,000 -
Depreciation, depletion and amortization 973,706 746,024
General and administrative 1,199,841 1,018,250
Other - 29,373
---------- ----------
Total operating costs and expenses 5,201,327 4,877,312
---------- ----------
(241,052) 110,836
Other income and (expenses):
Gain on sale of property 400,932 35,174
Interest and other income 25,466 53,472
Interest expense (648,047) (496,900)
---------- ----------
Total other income and expenses (221,649) (408,254)
---------- ----------
Loss before income taxes (462,701) (297,418)
Deferred federal income tax benefit (163,108) (101,120)
---------- ----------
Net loss $ (299,593) $ (196,298)
---------- ----------
---------- ----------
Net loss per common share $ (0.07) $ (0.04)
---------- ----------
---------- ----------
Average shares outstanding 4,423,651 4,394,234
---------- ----------
---------- ----------
The accompanying note is an integral part
of the financial statements.
Page 6
<PAGE>
MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Three months ended September 30,
--------------------------------
1997 1996
--------- -----------
Unaudited Unaudited
<S> <C> <C>
Cash flows from operating activities:
Net loss $(217,110) $ (124,527)
Deferred federal income tax benefit (117,817) (64,149)
Depreciation, depletion and amortization 339,473 272,863
Gain on sale of property (24,427) (4,497)
Non-cash stock based compensation 50,217 -
(Increase) decrease in accounts receivable 139,967 (56,295)
Decrease in accounts payable (425,145) (44,649)
Decrease in other current assets 32,815 58,581
Other 14,597 131,043
--------- -----------
Net cash provided (used) by operating activities (207,430) 168,370
--------- -----------
Cash flows from investing activities:
Proceeds from sale of marketable equity securities - 26,239
Proceeds from sales of property and equipment 125,000 3,736
Additions to property and equipment (684,000) (699,439)
Investment in limited partnership (10,327) -
Other (27,922) -
Purchase of Summit Petroleum Corporation - (1,653,049)
--------- -----------
Net cash used in investing activities (597,249) (2,322,513)
--------- -----------
Cash flows from financing activities:
Exercise of warrants and options 15,598 20,909
Long-term borrowings 800,000 1,730,000
Principal payments on long-term debt (68,332) (6,183)
Collection of note receivable from officer/director - 453,641
All other 13,172 -
--------- -----------
Net cash provided by financing activities 760,438 2,198,367
--------- -----------
Net increase (decrease) in cash (44,241) 44,224
Cash, beginning of the period 80,380 44,738
--------- -----------
Cash, end of period $ 36,139 $ 88,962
--------- -----------
--------- -----------
</TABLE>
The accompanying note is an integral part
of the financial statements.
Page 7
<PAGE>
MIDLAND RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Nine months ended September 30,
-------------------------------
1997 1996
----------- -----------
Unaudited Unaudited
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (299,593) $ (196,298)
Deferred federal income tax benefit (163,108) (101,120)
Depreciation, depletion and amortization 973,706 746,024
Gain on sale of property (400,932) (35,174)
(Increase) decrease in accounts receivable 251,269 (107,487)
Impairment write downs 356,000 -
Non cash stock based compensation 167,264 -
Increase in accounts payable 286,306 232,131
Decrease in other current assets 53,092 36,206
Other 37,222 99,759
----------- -----------
Net cash provided by operating activities 1,261,226 674,041
----------- -----------
Cash flows from investing activities:
Proceeds from sale of marketable equity securities 36,086
Proceeds from sales of property and equipment 1,797,982 37,736
Additions to property and equipment (1,909,268) (2,518,158)
Investment in marketable equity securities - (344,866)
Summit stock redemptions (95,214) -
Cost reimbursement from limited partnership 360,479 -
Purchase of Summit Petroleum Corporation (1,653,049)
Investment in limited partnership (1,576,478)
Other (37,500) -
----------- -----------
Net cash used in investing activities (1,459,999) (4,442,251)
----------- -----------
Cash flows from financing activities:
Exercise of warrants and options 130,525 38,412
Short term borrowing from bank - 70,000
Long-term borrowings 1,856,250 3,550,000
Principal payments on short-term debt - (70,000)
Principal payments on long-term (1,745,367) (699,491)
Collection of notes receivable 10,468 453,641
Drilling advances 617,573 -
Repayment of drilling advances (1,001,214) -
----------- -----------
Net cash provided by (used in) financing
activities (131,765) 3,342,562
----------- -----------
Net decrease in cash (330,538) (425,648)
Cash, beginning of the period 366,677 514,610
----------- -----------
Cash, end of period $ 36,139 $ 88,962
----------- -----------
----------- -----------
</TABLE>
The accompanying note is an integral part
of the financial statements.
Page 8
<PAGE>
MIDLAND RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Midland Resources, Inc. ("Company") was organized in 1990 with the
issuance of common stock and warrants in exchange for oil and gas partnership
interests. The Company and its wholly owned subsidiaries are headquartered
in Houston, Texas. The Company is involved in the acquisition, exploration,
development and production of oil and gas and owns producing properties and
undeveloped acreage in Texas, Colorado, Illinois and Oklahoma. The majority
of its activities are centered in the Permian Basin of West Texas. Midland
Resources Operating Company, Inc. ("MRO"), a wholly owned subsidiary, is in
the business of oil and gas property operations. Summit Petroleum
Corporation ("Summit") is a wholly owned subsidiary engaged in oil and gas
acquisition, exploration, development, production and property operations.
Summit was acquired in 1996 in a transaction accounted for as a purchase and
has been included in the Company's consolidated financial statements since
September 30, 1996.
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated balance sheets include the accounts of the
Company and its wholly owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of the Company and its wholly owned subsidiaries as of
September 30, 1997, the results of operations and cash flows for the three
month and nine month periods ended September 30, 1997 and 1996. The results
of operations for the periods presented are not necessarily indicative of the
results to be expected for a full year. The accounting policies followed by
the Company are set forth in more detail in Note A of the "Notes to
Consolidated Financial Statements" in the Company's annual report on Form
10-KSB filed with the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in this Form 10-QSB pursuant to the
rules and regulations of the Securities and Exchange Commission. However,
the disclosures herein are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Form 10-KSB.
LOSS PER COMMON SHARE
Net loss per common share is based on the weighted average number of shares
outstanding during the periods presented. Common stock equivalents (options
and warrants) are excluded since their inclusion would have an antidilutive
effect on loss per share.
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings Per Share" which
requires changes in the computation and reporting of earnings per share. This
pronouncement, which becomes effective for periods ending after December 15,
1997, provides for the presentation of basic earnings per share, computed
without regard to options, warrants, and other stock equivalents, and diluted
earnings per share, which gives effect to common stock equivalents. The
Company has not fully determined the effects of these new rules on its reported
loss per share.
Page 9
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MIDLAND RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis or Plan of Operation ("MD&A")
contains "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1937, as amended (the "Exchange Act").
All statements other than statements of historical fact included in MD&A,
including statements regarding the Company's operating strategy, plans,
objectives and beliefs of management for future operations, planned capital
expenditures and acquisitions are forward-looking statements. Although the
Company believes that the assumptions upon which such forward-looking
statements are based are reasonable, it can give no assurance that such
assumptions will prove to be correct.
PLAN OF OPERATION
The Company's initial capitalization was through the acquisition of the
interests of seven public oil and gas income limited partnerships in exchange
for common stock and warrants of the Company. There were 2,264,522 shares of
common stock issued and, for each share of common stock issued, two warrants
were issued entitling the holder to purchase one share of common stock at
$2.50 and one share at $4.00 during the period November 1990 to November
2002. In October 1995, the Company called for the redemption of its $2.50
warrants. Holders received a redemption payment of $0.05 per warrant for
aggregate payments of $63,373, which was charged to additional paid in
capital. 997,009 of the $2.50 warrants were exercised, resulting in net
proceeds of approximately $1,831,000. During the first nine months of 1997,
8,428 of the $4.00 warrants were exercised.
On December 20, 1996, the Company completed the acquisition of Summit, an
affiliated entity engaged in oil and gas acquisition, development and
exploration activities which owned interests in many of the same properties
as the Company. The Company's total investment in acquiring Summit was
approximately $2,011,000.
The Company has increased its proved reserves by more than 240% since 1990
through acquisitions with ascertainable additional reserve potential and a
selective program of drilling, work overs, recompletions and re-entries.
Historically, the Company's growth has been primarily through the acquisition
and subsequent development of proved oil and gas properties. In 1995, the
Company changed its focus from an acquisition strategy to exploration and
exploitation, based on the advanced technology application of 3D seismic.
Projects were generated and acquired in 1995 and 1996, with exploration
drilling commencing in mid 1996. During 1996, the Company drilled three
successful development wells and three exploratory wells, one of which was
completed as a discovery well. During the first nine months of 1997, the
Company completed seven additional successful exploratory wells, two of which
are held by a limited partnership in which the Company serves as managing
general partner. During this period, only one unsuccessful exploratory well
was drilled. The majority of these wells were drilled on recent 3D seismic
discovery locations. The Company intends to continue increasing production
and reserves through exploration and further development of existing oil and
gas properties and future acquisitions. These future drilling plans will
depend on the Company's ability to raise necessary financing.
The costs of the Company's exploration and development programs have been
funded from debt financing, as well as from operations.
CAPITAL RESOURCES AND LIQUIDITY
In the first nine months of 1997, cash flow was a negative $330,538,
primarily due to expenditures for the Company's exploration program as
discussed below.
In the first nine months of 1997, cash flows from operating activities were
$1,261,226, which includes the effects of a net increase in accounts payable
of $286,306 and net decreases in accounts receivable and other current assets
totaling $304,361, but also includes exploratory dry hole costs of $332,468.
Investing activities required the use of $1,459,999 in cash due to drilling
and development activities which required $3,299,237, including the Company's
Page 10
<PAGE>
share of expenditures through an oil and gas limited partnership. This was
partially offset by the sales of oil and gas properties of $1,672,982 and
real property of $125,000, including $1,647,407 from the sale of the Redfish
Bay properties. These properties were sold in order for the Company to devote
additional resources to its exploration program in West Texas. Other
investing activities resulted in net cash of $41,256 to the Company.
Financing activities resulted in a net decrease in cash of $131,765,
primarily due to the repayment of bank debt of $1,647,407 from proceeds of
the Redfish Bay sale. Also, drilling advances were reduced by a net of
$383,641. These decreases were offset, in part, by proceeds from bank
borrowings of $1,856,250, used in the Company's exploration and development
program, as well as from $130,525 received from warrant and option
conversions. Other financing activities required the use of $87,492.
At September 30, 1997, the Company had negative working capital of
approximately $624,000 compared to positive working capital of approximately
$376,000 at December 31, 1996, for a net decrease of $1,000,000. This is due
primarily to the funding of the Company's oil and gas exploration and
development program from both operations and bank borrowings during 1997.
The Company has recently limited its drilling program pending its efforts to
access additional capital.
In October 1996, the borrowing base under the Company's credit facility
with its bank was increased from $7,000,000 to $9,500,000, and in March 1997
was reduced to $8,200,000 as a result of the sale of the Company's interest
in the Redfish Bay properties. Currently, the borrowing base is $9,250,000.
Amounts outstanding under this loan agreement currently bear interest at a
rate which, at the Company's option, either fluctuates with the bank's prime
rate, or with the London Interbank Offered Rate. Interest is payable monthly
as it accrues. The credit facility also provides for the payment of a
commitment fee equal to 1/2 of 1% of the unused balance of the borrowing base;
payable quarterly. The borrowing base is reduced by $125,000 per month
beginning September 1997 with final maturity in October 2000. The balance of
this debt at September 30, 1997 was $9,015,554. In October 1997, an
additional $261,000 was borrowed and a principal payment of $26,554 was made.
This note is secured by substantially all of the Company's assets.
The prices of crude oil have fluctuated significantly in recent years as
well as in recent months. As of September 30, 1997, the Company was
receiving an average of $19.60 per bbl as compared to $25.00 at January 1,
1997. Fluctuations in price have a significant impact on the Company's
financial condition and liquidity.
Although the Company has, as noted above, completed a number of the wells
it has drilled, some of these wells were completed in secondary zones with
resulting production being less than originally targeted. The significant
expenditures for geologic and drilling activities, coupled with achieved
results being less than originally targeted, has adversely impacted the
Company's liquidity. The Company is currently considering various
alternatives both to secure adequate capital to complete drilling commitments
and opportunities as well as strategic transactions involving the whole
Company. To assist and advise the Company, principally in strategic
transactions, it engaged First Union Capital Markets Corp. on August 11, 1997.
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net loss increased from a loss of $124,527 for the three months ended
September 30, 1996, to a net loss of $217,110 for the same period in 1997, an
increase of $92,583. Individual categories of income and expense are
discussed below.
Oil and gas sales decreased from $1,765,338 in the third quarter of 1996 to
$1,411,687 in the same period of 1997. This decrease of $353,651 or 20%
resulted from decreased oil and gas production and decreased oil prices. Oil
and gas production quantities were 46,447 bbls and 229,077 mcf for the third
quarter of 1997 and 54,198 bbls and 259,511 mcf in 1996, a decrease of 7,751
bbls or 14% and a decrease of 30,434 mcf, or 12%. These production declines
result from selling the Redfish Bay properties in 1997, and normal production
declines on most properties, partially offset by production from new wells
drilled in 1997. Average gas prices were $2.39 per mcf in 1996 and 1997,
while average oil prices decreased from $21.11 per bbl in 1996 to $18.60 per
bbl in 1997.
Page 11
<PAGE>
Production costs increased from $780,814 in the third quarter of 1996 to
$844,098 for the same period of 1997, an increase of $63,284 or 8%. This
increase was primarily attributable to higher service rates and major repairs
in 1997.
In the third quarter of 1996, the Company incurred exploration costs of
$361,784, including exploratory dry hole costs of $203,983 and 3D seismic
costs of $157,801 under a program which is substantially completed.
Exploration costs for the third quarter of 1997 were $17,869.
General and administrative expenses ("G&A") were $382,658 in the third
quarter of 1997, a decrease of $8,764 from the third quarter of 1996.
Depreciation, depletion and amortization ("DD&A") based on production and
other methods increased from $272,863 in the third quarter of 1996 to
$339,473 in the same period of 1997, an increase of $66,610 or 24%, due
primarily to the addition of Summit properties and normal reserve declines on
some properties.
In the third quarter of 1997, interest expense was $237,215, an increase of
$52,897 over the same period in 1996. This is due primarily to increases in
long-term debt used to fund the Company's drilling program in 1997.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net loss increased from $196,298 in the first nine months of 1996 to
$299,593 in the first nine months of 1997. Individual categories of income
and expenses are discussed below.
Oil and gas sales decreased from $4,870,664 in the first nine months of
1996 to $4,758,502 in the same period of 1997. This decrease of $112,162 or
2% resulted from decreased oil production, partially offset by increased oil
and gas prices. Oil and gas sales included a $25,860 loss in 1996 from gas
swap contracts. Oil and gas production quantities were 157,982 bbls and
740,771 mcf in 1996 and 141,197 bbls (excluding the Company's share of
production through a limited partnership of 6,236 bbls) and 745,059 mcf in
1997, a decrease of 16,785 bbls or 11% and an increase of 4,288 mcf. This
decline in oil production is primarily attributable to the sale of the
Redfish Bay properties in 1997 and normal production declines on other
properties, partially offset by production from wells drilled in 1997.
Average gas prices increased from $2.30 per mcf in 1996 to $2.55 per mcf in
1997, while average oil prices increased from $20.22 per bbl in 1996 to
$20.25 per bbl in 1997.
In the first nine months of 1997, the Company's share of net income from an
oil and gas limited partnership was $101,260 which included oil revenue of
$116,630 from 6,236 bbls of production, in addition to quantities discussed
above. There was no similar item in 1996.
Production costs increased from $2,203,103 in the first nine months of 1996
to 2,293,627 for the same period of 1997, an increase of $90,524 or 4%.
In the first nine months of 1996, exploration costs were $880,562, which
included 3D seismic costs of $467,630 and exploratory dry hole costs of
$412,932. In the first nine months of 1997, exploration costs were $378,153
which included $332,468 in exploratory dry hole costs.
G&A increased from $1,018,250 in the first nine months of 1996 to
$1,199,841 in the same period of 1997, an increase of $181,591 or 18%. This
was due primarily to non-cash stock based compensation charges of $167,264 in
1997 and increased legal and accounting fees, partially offset by reductions
in other areas.
DD&A based on production and other methods increased from $746,024 in the
first nine months of 1996 to $973,706 in the same period of 1997, an increase
of $227,682 or 31%, due primarily to the addition of Summit's properties and
normal reserve declines.
Interest expense increased from $496,900 for the first nine months of 1996
to $648,047 for the same period of 1997, an increase of $151,147 or 30% due
to increased long-term borrowing used to finance 1997 property acquisition,
exploration and development activities as well as the Summit acquisition in
1996.
Page 12
<PAGE>
In 1997, the Company provided for impairment losses on its oil and gas
properties of $356,000. There was no similar item in 1996.
Page 13
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
Item 2. CHANGES IN SECURITIES
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
27 Article 5 Financial Data Schedule for second quarter 10-QSB
(only filed electronically)
b. None
Page 14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
MIDLAND RESOURCES, INC.
(Registrant)
Date: November 12, 1997 By: /s/ Deas H. Warley III
-------------------------------------------
Deas H. Warley III, President
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following person on behalf of the
Registrant and in the capacity and on the date indicated.
Date: November 12, 1997 By: /s/ Howard E. Ehler
-------------------------------------------
Howard E. Ehler, Chief Financial Officer
Page 15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 36,139
<SECURITIES> 0
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0
0
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</TABLE>
