UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT
UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission file number 0-19766
HOME-STAKE OIL & GAS COMPANY
(Exact name of small business issuer as specified in its charter)
Oklahoma 73-0288030
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15 East 5th Street, Suite 2800
Tulsa, Oklahoma 74103
(Address of principal executive offices)
(918) 583-0178
(Registrant's telephone number)
Check whether the issuer (1) has 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 | |
The number of shares outstanding of the Registrant's common stock, all
of which comprise a single class with $ .01 par value, as of July 31, 2000, the
latest practicable date, was 4,353,827.
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HOME-STAKE OIL & GAS COMPANY
FORM 10-QSB
JUNE 30, 2000
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - June 30, 2000
and December 31, 1999....................................... 4
Condensed Statements of Income and Retained
Earnings - six months ended June 30, 2000 and 1999 ......... 5
Condensed Statements of Income and Retained
Earnings - three months ended June 30, 2000 and 1999 ....... 6
Condensed Statements of Cash Flows -
six months ended June 30, 2000 and 1999 .................... 7
Notes to Condensed Financial Statements ...................... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................ 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings ............................................ 12
Item 2. Changes in Securities......................................... 12
Item 3. Defaults upon Senior Securities .............................. 12
Item 4. Submission of Matters to a Vote of Security Holders .......... 12
Item 5. Other Information ............................................ 12
Item 6. Exhibits and Reports on Form 8-K ............................. 12
SIGNATURES .............................................................. 13
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
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HOME-STAKE OIL & GAS COMPANY
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
June 30, December 31,
2000 1999
---- ----
Current assets:
Cash and cash equivalents...................... $ 5,801 $ 84,458
Accounts receivable............................ 2,134,555 1,746,062
Prepaid expenses............................... 165,699 140,810
------------ ------------
Total current assets.................... 2,306,055 1,971,330
Property and equipment, at cost:................. 51,927,972 49,821,238
Less accumulated depreciation,
depletion and amortization.................. 27,832,420 26,856,930
------------ ------------
Net property and equipment.............. 24,095,552 22,964,308
Other assets..................................... 19,668 247,382
------------ ------------
$ 26,421,275 $ 25,183,020
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities....... $ 1,246,867 $ 1,097,442
Income taxes payable........................... 441,423 368,353
Current note payable........................... 1,000,000 1,200,000
------------ ------------
Total current liabilities............... 2,688,290 2,665,795
Long-term note payable........................... - 1,300,000
Deferred income taxes............................ 3,656,833 3,362,953
Stockholders' equity:
Preferred stock, $1 par value -
2,000,000 shares authorized; none issued
Common stock, $ .01 par value -
12,000,000 shares authorized,
4,597,363 shares issued...................... 45,974 45,974
Additional paid-in capital..................... 15,855,821 15,855,821
Retained earnings.............................. 5,482,413 3,260,533
------------ ------------
21,384,208 19,162,328
Less treasury stock, at cost - 243,536 shares.. (1,308,056) (1,308,056)
------------ ------------
Total stockholders' equity.............. 20,076,152 17,854,272
------------ ------------
$ 26,421,275 $ 25,183,020
============ ============
See accompanying notes.
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HOME-STAKE OIL & GAS COMPANY
CONDENSED STATEMENTS OF INCOME
AND RETAINED EARNINGS
Six months ended June 30, 2000 and 1999
(Unaudited)
2000 1999
---- ----
Revenues:
Oil and gas sales.............................. $ 8,012,579 $ 4,526,110
Gain on sales of assets........................ 43,627 44,136
Other income................................... 133,043 127,634
------------ ------------
8,189,249 4,697,880
Costs and expenses:
Production..................................... 1,800,386 1,521,966
Exploration.................................... 334,017 53,755
General and administrative..................... 1,082,386 830,891
Depreciation, depletion and amortization....... 1,058,151 1,448,200
Interest....................................... 84,577 218,711
Property and other taxes....................... 110,381 115,220
------------ ------------
4,469,898 4,188,743
Income before provision for income taxes......... 3,719,351 509,137
Provision for income taxes:
Current........................................ 833,515 64,356
Deferred....................................... 293,880 66,228
------------ ------------
1,127,395 130,584
------------ ------------
Net income....................................... 2,591,956 378,553
Retained earnings at beginning of year........... 3,260,533 1,272,945
Cash dividends ($.085 per share - 2000,
$ .04 per share - 1999)..................... (370,076) (170,953)
------------ ------------
Retained earnings at end of period............... $ 5,482,413 $ 1,480,545
============ ============
Weighted average number of common shares
outstanding:
Basic.......................................... 4,353,827 4,273,827
============ ============
Diluted........................................ 4,475,841 4,273,827
============ ============
Net income per common share:
Basic.......................................... $ .60 $ .09
===== =====
Diluted........................................ $ .58 $ .09
===== =====
See accompanying notes.
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HOME-STAKE OIL & GAS COMPANY
CONDENSED STATEMENTS OF INCOME
AND RETAINED EARNINGS
Three months ended June 30, 2000 and 1999
(Unaudited)
2000 1999
---- ----
Revenues:
Oil and gas sales.............................. $ 4,070,247 $ 2,358,538
Gain on sales of assets........................ 44,077 40,811
Other income................................... 54,890 51,220
------------ ------------
4,169,214 2,450,569
Costs and expenses:
Production..................................... 875,625 788,761
Exploration.................................... 305,891 29,802
General and administrative..................... 481,555 375,029
Depreciation, depletion and amortization....... 560,267 677,400
Interest....................................... 28,489 105,606
Property and other taxes....................... 69,619 59,318
------------ ------------
2,321,446 2,035,916
Income before provision for income taxes......... 1,847,768 414,653
Provision for income taxes:
Current........................................ 436,516 51,666
Deferred....................................... 119,324 60,395
------------ ------------
555,840 112,061
------------ ------------
Net income....................................... 1,291,928 302,592
Retained earnings at beginning of period......... 4,408,177 1,263,429
Cash dividends ($.05 per share - 2000,
$ .02 per share - 1999)..................... (217,692) (85,476)
------------ ------------
Retained earnings at end of period............... $ 5,482,413 $ 1,480,545
============ ============
Weighted average number of common shares
outstanding:
Basic.......................................... 4,353,827 4,273,827
============ ============
Diluted........................................ 4,475,841 4,273,827
============ ============
Net income per common share:
Basic.......................................... $ .30 $ .07
===== =====
Diluted........................................ $ .29 $ .07
===== =====
See accompanying notes.
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HOME-STAKE OIL & GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2000 and 1999
(Unaudited)
2000 1999
---- ----
Operating activities:
Oil and gas sales, net of production taxes..... $ 7,278,238 $ 4,296,882
Other.......................................... 133,043 127,634
------------ ------------
7,411,281 4,424,516
Cash paid to suppliers and employees........... 1,865,484 1,986,931
Interest paid.................................. 84,577 218,711
Property and other taxes....................... 110,381 115,220
Income taxes paid.............................. 760,445 -
------------ ------------
2,820,887 2,320,862
------------ ------------
Net cash provided by operating activities.... 4,590,394 2,103,654
Investing activities:
Proceeds from sales of property and equipment.. 45,776 77,975
Acquisition of property and equipment.......... (2,845,297) (1,653,054)
------------ ------------
Net cash used in investing activities........ (2,799,521) (1,575,079)
Financing activities:
Loan proceeds.................................. - 735,000
Note payments.................................. (1,500,000) (1,305,000)
Cash dividends paid............................ (369,530) (169,506)
------------ ------------
Net cash used in financing activities........ (1,869,530) (739,506)
------------ ------------
Net decrease in cash and cash equivalents........ (78,657) (210,931)
Cash and cash equivalents at beginning of year... 84,458 212,031
------------ ------------
Cash and cash equivalents at end of period....... $ 5,801 $ 1,100
============ ============
See accompanying notes.
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HOME-STAKE OIL & GAS COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Description of business
Home-Stake Oil & Gas Company ("HSOG" or the "Company") is an independent oil and
gas producer actively engaged in the acquisition, exploration, development and
production of oil and gas properties. Oil and gas exploration and production
activities are subject to numerous risks inherent in the business. These include
the volatility of oil and gas prices, environmental concerns and governmental
regulations, general business risks and hazards involving the acquisition and
operation of oil and gas properties, the ability to continue to find new
reserves to replace those being depleted and the highly competitive nature of
the business. Its principal geographic operating areas lie within the states of
Oklahoma, Montana, New Mexico and Texas.
Note 1 - General
The unaudited financial information provided in this report includes all normal
recurring adjustments which are, in the opinion of management, necessary to
fairly present the financial position, results of operations and cash flows of
the Company. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted or condensed. The Company believes that the
disclosures herein are adequate to make the information presented not
misleading; however, these financial statements should be read in conjunction
with the audited financial statements and related notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1999.
The results for interim periods are not necessarily indicative of trends or of
results to be expected for the full year.
Note 2 - Net income per share
Basic net income per share is calculated based on the weighted-average shares
outstanding during the period. Diluted net income per share includes the
dilutive effect of stock options. Options to purchase 275,650 shares of common
stock at an exercise price of $4.50 per share were outstanding at June 30, 1999,
but were not included in the computation of 1999 diluted net income per share as
their inclusion would be anti-dilutive.
Note 3 - Notes payable
Notes payable at June 30, 2000 consisted of a Bank note due April 30, 2001,
requiring monthly principal payments of $100,000, plus interest at prime less
3/4% (8 3/4% at June 30, 2000).
The Company has a revolving term line-of-credit in the amount of $5,000,000
available until November 30, 2000 which provides for monthly payments of
interest on the outstanding borrowings at bank prime less 1%. In connection with
this line of credit, the Company has issued a letter of credit in the amount of
$25,000, which is guaranteed by this line, and pays a commitment fee of
three-eights of one per cent (3/8%) per annum on the unused portion of the line.
Note 4 - Contingencies
The Company is involved in various legal actions arising in the normal course of
business. In the opinion of management, the Company's liabilities, if any, in
these matters will not have a material effect on the Company's financial
position, results of operations or cash flows.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations - First six months of 2000 compared with first six months
of 1999
Net income for the six months ended June 30 increased $2,213,403 (585%) from
$378,553 in 1999 to $2,591,956 in 2000. The principal reasons for this increase
are as follows:
Oil sales increased $2,562,705 (113%) in 2000. The Company's oil production
increased from 176,268 barrels in 1999 to 183,639 barrels in 2000. In addition,
the average price of crude oil increased from $12.86 per barrel in 1999 to
$26.30 per barrel in 2000.
Gas sales increased 39% ($874,937), primarily due to higher average gas prices
which increased from $1.69 per mcf in 1999 to $2.61 per mcf in 2000. Gas
production also increased from 1,308,254 mcf in 1999 to 1,314,542 mcf in 2000.
These increases were partially offset by a negative adjustment of $258,665
(131,637 Mcf) associated with the underpayment of certain royalty interests.
Production expenses increased $278,420, due primarily to a $264,775 increase in
production taxes attributable to the higher oil and gas sales described above.
Exploration costs increased $280,262 in 2000. Dry hole costs increased $267,300
in 2000 due to costs associated with an exploratory dry hole drilled by the
Company in the second quarter. There were no comparable costs in 1999. Condemned
and abandoned property expense decreased $12,962.
General and administrative expenses increased $251,495, from $830,891 in 1999 to
$1,082,386 in 2000. This increase is primarily attributable to the costs
associated with the Company's hiring of an investment banking firm to assist it
in reviewing various strategic alternatives to maximize shareholder value and
improve shareholder liquidity, and higher legal fees and directors' expenses.
Depreciation, depletion and amortization decreased $390,049. The net book value
of each producing oil and gas property is amortized over the estimated life of
the related oil and gas reserves. At the end of 1999, the Company recognized
significant increases in the estimated oil and gas reserves on many properties,
primarily as a result of the increases in product prices that occurred during
the year. These increases had the effect of lowering the rates of amortization
for most producing properties.
Interest expense decreased $134,134 in 2000 due to the lower outstanding
borrowings for the year as compared to 1999.
The Company's effective tax rate in 2000 was 30%, compared to 26% in 1999 due to
the full utilization in 1999 of certain statutory depletion carryforwards.
Results of Operations - Second quarter 2000 compared with second quarter 1999
Net income for the second quarter increased $989,336 (327%) from $302,592 in
1999 to $1,291,928 in 2000. The principal reasons for this increase are as
follows:
Oil sales increased $1,646,225 (124%). The Company's oil production increased
from 84,255 barrels in 1999 to 97,057 barrels in 1999. In addition, the average
oil price increased from $15.75 per barrel in 1999 to $26.07 per barrel in 2000.
Gas sales increased 5% ($49,126), primarily due to higher natural gas prices
which increased from $1.70 per mcf in 1999 to $2.93 per mcf in 2000. This
increase was partially offset by lower natural gas production which decreased
from 594,640 mcf in 1999 to 511,303 mcf in 2000, primarily due to a negative
adjustment of $258,665 (131,637 Mcf) associated with the underpayment of certain
royalty interests.
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Production expenses increased $86,684, due primarily to an increase in
production taxes attributable to the higher oil and gas sales described above.
Exploration costs increased $276,089 in 2000. Dry hole costs increased $285,003
in 2000 due to a higher incidence of dry holes. Condemned and abandoned property
expense decreased $8,914.
General and administrative expenses increased $106,526 (28%), from $375,029 in
1999 to $481,555 in 2000. This increase is primarily attributable to higher
legal fees and directors' expenses, along with the costs associated with the
Company's hiring of an investment banking firm to assist it in reviewing various
strategic alternatives to maximize shareholder value and improve shareholder
liquidity.
Depreciation, depletion and amortization decreased $117,133. The net book value
of each producing oil and gas property is amortized over the estimated life of
the related oil and gas reserves. At the end of 1999, the Company recognized
significant increases in the estimated oil and gas reserves on many properties,
primarily as a result of the increases in product prices that occurred during
the year. These increases had the effect of lowering the rates of amortization
for most producing properties.
Interest expense decreased $77,117 in 2000 due to the lower outstanding
borrowings for the year as compared to 1999.
Financial Condition and Liquidity
The Company's operating activities have traditionally been self-financed through
internally generated cash flows. The principal use of cash flows has generally
been to fund the Company's exploration and production activities and for the
payment of dividends to stockholders. The use of borrowed funds has generally
been limited to the acquisition of producing oil and gas properties where future
revenues from such purchases are expected to fund the debt.
The Company's capital exploration budget for 2000 is $5.5 million. During the
first six months of 2000, the Company had exploration expenditures of
approximately $1.4 million and has remaining drilling commitments for 2000/2001
of approximately $3.2 million. The Company is also continuing to actively pursue
opportunities for the acquisition of producing properties whenever possible. In
June 2000, the Company exercised its preferential purchase right to acquire an
additional interest in a developmental Texas prospect operated by the Company.
Cost for this additional interest was approximately $847,500.
The working capital deficit at June 30, 2000 was $382,000. The Company's working
capital and internally generated cash flows are expected to be sufficient to
finance the Company's note payments and budgeted 2000 exploration and
development activities. In addition, the Company has a $5 million revolving line
of credit available until November 30, 2000. There are no outstanding borrowings
under this line of credit at July 31, 2000, however the line does guarantee the
payment of a $25,000 letter of credit.
Inflation
In recent years inflation has not had a significant impact on the Company's
operations or financial condition. The general economic pressures limiting oil
and gas prices in recent years have generally been accompanied by corresponding
downward pressure on costs to develop and operate oil and gas properties as well
as the costs of drilling and completing wells. The impact of inflation on the
Company in the future will depend on the relative increases, if any, in the
selling price of oil and gas and in the Company's operating, development and
drilling costs.
Forward-Looking Statements
Certain statements included in this report which are not historical facts are
"forward-looking statements", including statements with respect to oil and gas
reserves, the number and anticipated costs of wells to be drilled, future
capital expenditures (including the amount and nature thereof), anticipated date
of repayment of bank debt and other such matters. These forward-looking
statements are based on current expectations, estimates, assumptions and beliefs
of management; and words such as "expects", "believes", "anticipates",
"intends", "plans" and similar expressions are intended to identify such
forward-looking statements. These forward-looking statements involve risks and
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uncertainties, including, but not limited to: dependence upon the prices for oil
and natural gas which prices are subject to significant fluctuations in response
to relatively minor changes in supply and demand for such products, market
uncertainty, political conditions in oil producing regions, domestic and foreign
government regulations, the price and availability of alternative fuels and a
variety of other factors; competition in the acquisition of oil and gas
properties and the development, production and marketing of oil and natural gas;
operating hazards typically associated with the exploration, development,
production and transportation of oil and natural gas; federal, state and local
laws relating to the exploration, development, production and marketing of oil
and natural gas, including environmental and safety matters; changes in laws and
regulations; and other factors, most of which are beyond the control of the
Company. Accordingly, actual results and developments may differ materially from
those expressed in the forward-looking statements. The Company assumes no
obligation to update publicly any forward-looking statements, whether as a
result of new information, future events or otherwise.
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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.
The Annual Meeting of the Company's stockholders was held in the
offices of the Company on May 22, 2000 for the purpose of electing
three directors whose terms were expiring. The nominees for Director
were James L. Houghton, Joseph J. McCain, Jr. and Robert C. Simpson.
The nominees proposed by management were reelected for terms expiring
in 2003. Mr. Houghton and Mr. Simpson each received 3,438,265 votes
for and 31,990 votes were withheld. Mr. McCain received 3,437,680
votes for and 32,575 votes were withheld. The continuing Directors are
L. W. Allegood, Chris K. Corcoran, Larry F. Grindstaff, Ronald O.
Gutman and I. Wistar Morris III.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
The following documents are included as exhibits to this Form 10-QSB.
Exhibit
Number Description
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended June
30, 2000.
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Signatures
In accordance with the requirements of the Exchange Act , the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Home-Stake Oil & Gas Company
(Registrant)
Date: August 4, 2000 By: /s/ Robert C. Simpson
-------------------------
Robert C. Simpson
Chairman of the Board, C.E.O.
and President
Date: August 4, 2000 By: /s/ Chris K. Corcoran
-------------------------
Chris K. Corcoran
Executive Vice President,
Chief Financial Officer and
Corporate Secretary
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INDEX OF EXHIBITS
The following documents are included as exhibits to this Form 10-QSB.
Exhibit
Number Description
27 Financial Data Schedule.
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