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 March 31, 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 May 12, 2000, the
latest practicable date, was 4,353,827.
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HOME-STAKE OIL & GAS COMPANY
FORM 10-QSB
MARCH 31, 2000
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets - March 31, 2000
and December 31, 1999................................... 4
Condensed Statements of Income and Retained
Earnings - three months ended March 31, 2000 and 1999 .. 5
Condensed Statements of Cash Flows - three months
ended March 31, 2000 and 1999 .......................... 6
Notes to Condensed Financial Statements .................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................... 9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings .......................................... 11
Item 2. Changes in Securities and Use of Proceeds .................. 11
Item 3. Defaults upon Senior Securities ............................ 11
Item 4. Submission of Matters to a Vote of Security Holders ........ 11
Item 5. Other Information .......................................... 11
Item 6. Exhibits and Reports on Form 8-K ........................... 11
SIGNATURES ............................................................ 12
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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
March 31, December 31,
2000 1999
---- ----
Current assets:
Cash and cash equivalents............... $ 217,465 $ 84,458
Accounts receivable..................... 1,890,887 1,746,062
Prepaid expenses........................ 137,421 140,810
-------------- --------------
Total current assets............. 2,245,773 1,971,330
Property and equipment, at cost:.......... 50,489,854 49,821,238
Less accumulated depreciation,
depletion and amortization....... 27,300,489 26,856,930
-------------- --------------
Net property and equipment....... 23,189,365 22,964,308
Other assets.............................. 34,899 247,382
-------------- --------------
$ 25,470,037 $ 25,183,020
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities..................... $ 943,815 $ 1,097,442
Income taxes payable.................... 386,797 368,353
Current notes payable................... 1,200,000 1,200,000
-------------- --------------
Total current liabilities........ 2,530,612 2,665,795
Long-term notes payable................... 400,000 1,300,000
Deferred income taxes..................... 3,537,509 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....................... 4,408,177 3,260,533
-------------- --------------
20,309,972 19,162,328
Less treasury stock, at cost -
243,536 shares....................... (1,308,056) (1,308,056)
-------------- --------------
Total stockholders' equity....... 19,001,916 17,854,272
-------------- --------------
$ 25,470,037 $ 25,183,020
============== ==============
See accompanying notes.
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HOME-STAKE OIL & GAS COMPANY
CONDENSED STATEMENTS OF INCOME
AND RETAINED EARNINGS
Three months ended March 31, 2000 and 1999
(Unaudited)
2000 1999
---- ----
Revenues:
Oil and gas sales....................... $ 3,942,332 $ 2,167,572
Gain (loss) on sales of assets.......... (450) 3,325
Other income............................ 78,153 76,414
-------------- --------------
4,020,035 2,247,311
Costs and expenses:
Production.............................. 924,761 733,205
Exploration............................. 28,126 23,953
General and administrative.............. 600,831 455,862
Depreciation, depletion and
amortization......................... 497,884 770,800
Interest................................ 56,088 113,105
Property and other taxes................ 40,762 55,902
-------------- --------------
2,148,452 2,152,827
Income before provision for
income taxes......................... 1,871,583 94,484
Provision for income taxes:
Current................................. 396,999 12,690
Deferred................................ 174,556 5,833
-------------- --------------
571,555 18,523
-------------- --------------
Net income................................ 1,300,028 75,961
Retained earnings at beginning of year.... 3,260,533 1,272,945
Cash dividends ($ .035 per share -
2000, $ .02 per share - 1999)........ (152,384) (85,477)
-------------- --------------
Retained earnings at end of period........ $ 4,408,177 $ 1,263,429
============== ==============
Weighted average number of shares
outstanding:
Basic................................... 4,353,827 4,273,827
============== ==============
Diluted................................. 4,421,008 4,273,827
============== ==============
Net income per common share:
Basic................................... $ .30 $ .02
===== =====
Diluted................................. $ .29 $ .02
===== =====
See accompanying notes.
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HOME-STAKE OIL & GAS COMPANY
CONDENSED STATEMENTS OF CASH FLOWS
Three months ended March 31, 2000 and 1999
(Unaudited)
2000 1999
---- ----
Operating activities:
Oil and gas sales, net of
production taxes..................... $ 3,614,480 $ 1,900,703
Other................................... 78,153 76,414
-------------- --------------
3,692,633 1,977,117
Cash paid to suppliers and employees.... 1,101,382 797,201
Interest paid........................... 56,088 113,105
Property and other taxes................ 40,762 55,902
Income taxes paid....................... 378,555 -
-------------- --------------
1,576,787 966,208
-------------- --------------
Net cash provided by operating
activities........................... 2,115,846 1,010,909
Investing activities:
Proceeds from sales of property
and equipment........................ 628 3,325
Acquisition of property and equipment... (930,233) (155,621)
-------------- --------------
Net cash used in investing
activities........................... (929,605) (152,296)
Financing activities:
Note payments........................... (900,000) (975,000)
Cash dividends paid..................... (153,234) (84,007)
-------------- --------------
Net cash used in financing
activities........................... (1,053,234) (1,059,007)
-------------- --------------
Net increase (decrease) in cash and
cash equivalents..................... 133,007 (200,394)
Cash and cash equivalents at
beginning of year.................... 84,458 212,031
-------------- --------------
Cash and cash equivalents at
end of period........................ $ 217,465 $ 11,637
============== ==============
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 231,250 shares of common
stock at an exercise price of $4.50 per share were outstanding at March 31,
1999, but were not included in the computation of diluted net income per share
as their inclusion would be antidilutive.
Note 3 - Notes payable
Notes payable at March 31, 2000 consisted of the following balances:
Bank note due September 30, 2002, requiring monthly
principal payments of $100,000, plus interest at
prime less3/4% (8% at March 31, 2000).................... $ 1,600,000
Less current portion....................................... 1,200,000
--------------
$ 400,000
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.
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HOME-STAKE OIL & GAS COMPANY
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
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 quarter 2000 compared with first quarter 1999
Net income for the first quarter increased $1,224,067 from $75,961 in 1999 to
$1,300,028 in 2000. The principal reasons for this increase are as follows:
Oil sales increased $916,480 (98%), due principally to the increase in the
average oil price from $10.21 per barrel in 1999 to $26.55 per barrel in 2000.
This price increase was partially offset by a 6% decrease in oil production from
92,013 barrels in 1999 to 86,582 barrels in 2000. The decreased production
volume is primarily attributable to normal depletion of existing reserves and
the sale in the third quarter of 1999 of the Company's interest in the Pine Unit
in Montana.
Gas sales increased 68% ($825,811), primarily due to the increase in the average
gas price from $1.69 per Mcf in 1999 to $2.37 per Mcf in 2000. Sales volumes
decreased 6% from 713,614 Mcf in 1999 to 671,601 Mcf in 2000. This decrease is
primarily attributable to normal depletion of existing reserves.
Production expenses rose $191,556, due primarily to increased production taxes
attributable to the higher oil and gas revenues described above.
General and administrative expenses increased $144,969, from $455,862 in 1999 to
$600,831 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.
Depreciation, depletion and amortization decreased $272,916. 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 $57,017 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 20% in 1999. The
effective tax rate in 1999 was lower due to the benefits of certain statutory
depletion carryforwards which were fully utilized during that year and no longer
available in 2000.
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 budget for 2000 is $5.5 million. During the first quarter
the Company had capital expenditures of approximately $750,000 and has remaining
drilling commitments for 2000 of approximately $3.5 million.
The working capital deficit at March 31, 2000 was $285,000. The Company's
working capital and internally generated cash flows from operations 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 May 12, 2000, however the
line does guarantee the payment of a $25,000 letter of credit.
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Year 2000 Impact
The Company did not experience any significant adverse Year 2000 effects on its
systems and operations and does not expect any in the future.
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, Y2K readiness 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 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 and Use of Proceeds.
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.
The following documents are included as exhibits to this Form 10-QSB.
Exhibit
Number Description
4 Rights Agreement dated as of January 3, 2000, by and
between the Company and UMB Bank, N.A., as Rights Agent
(filed as Exhibit 4.1 to the Company's Registration
Statement of Form 8-A, dated March 22, 2000).
10 First Amendment to Special Loan Agreement dated February 9,
2000 between the Company and Bank of Oklahoma, N.A. (Filed
as Exhibit 1.09 to the Company's Annual Report on Form 10-
KSB for the year ended December 31, 1999).
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
March 31, 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: May 12, 2000 By: /s/ Robert C. Simpson
-------------------------
Robert C. Simpson
Chairman of the Board, C.E.O.
and President
Date: May 12, 2000 By: /s/ Chris K. Corcoran
-------------------------
Chris K. Corcoran
Executive Vice President,
Chief Financial Officer and
Corporate Secretary
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INDEX TO EXHIBITS
The following documents are included as exhibits to this Form 10-QSB. Those
exhibits below incorporated by reference herein are indicated as such by the
information supplied in the parenthetical thereafter. If no parenthetical
appears after an exhibit, such exhibit is filed herewith.
Number Description
4 Rights Agreement dated as of January 3, 2000, by and between the
Company and UMB Bank, N.A., as Rights Agent (filed as Exhibit 4.1
to the Company's Registration Statement of Form 8-A, dated March
22, 2000).
10 First Amendment to Special Loan Agreement dated February 9, 2000
between the Company and Bank of Oklahoma, N.A. (Filed as Exhibit
1.09 to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1999).
27 Financial Data Schedule.
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<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-2000
<PERIOD-END> Mar-31-2000
<CASH> 217,465
<SECURITIES> 0
<RECEIVABLES> 1,890,887
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,245,773
<PP&E> 50,489,854
<DEPRECIATION> 27,300,489
<TOTAL-ASSETS> 25,470,037
<CURRENT-LIABILITIES> 2,530,612
<BONDS> 400,000
0
0
<COMMON> 45,974
<OTHER-SE> 15,855,821
<TOTAL-LIABILITY-AND-EQUITY> 25,470,037
<SALES> 3,942,332
<TOTAL-REVENUES> 4,020,035
<CGS> 0
<TOTAL-COSTS> 924,761
<OTHER-EXPENSES> 28,126
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,088
<INCOME-PRETAX> 1,871,583
<INCOME-TAX> 571,555
<INCOME-CONTINUING> 1,300,028
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,300,028
<EPS-BASIC> .30
<EPS-DILUTED> .29
</TABLE>
