<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
------- EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
--------------------
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
------- EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission File Number 1-7796
TIPPERARY CORPORATION
(Exact name of registrant as specified in its charter)
Texas 75-1236955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
633 Seventeenth Street, Suite 1550
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 293-9379
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding August 11, 1994
---------------------------- ---------------------------
Common Stock, $.02 par value 11,188,004 shares
<PAGE>
TIPPERARY CORPORATION AND SUBSIDIARIES
Index to Form 10-Q
<TABLE>
<CAPTION>
Page No.
<C> <S> <C>
PART I. FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
Consolidated Balance Sheet
June 30, 1995 and September 30, 1994 1
Consolidated Statement of Operations
Three months and nine months ended
June 30, 1995 and 1994 3
Consolidated Statement of Cash Flows
Nine months ended June 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 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
</TABLE>
<PAGE>
Item 1. Financial Statements
------
TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
-------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,580 $ 2,308
Receivables 2,890 3,339
Inventory 190 190
Current portion of deferred income taxes,
net 145 209
Other current assets 171 388
-------- -------------
Total current assets 8,976 6,434
-------- -------------
Property, plant and equipment, at cost:
Oil and gas properties, full cost method 111,370 111,203
Other property and equipment 1,961 1,788
-------- -------------
113,331 112,991
Less accumulated depreciation, depletion and
amortization (80,453) (76,369)
-------- -------------
Property, plant and equipment, net 32,878 36,622
-------- -------------
Noncurrent portion of deferred income taxes, net 3,046 2,982
Investment in preferred stock 1,770 1,770
Investment in NGL fractionating plant 1,033 316
Other noncurrent assets 64 129
-------- -------------
$ 47,767 $ 48,253
======== =============
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
1<PAGE>
<PAGE>
TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet - Continued
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1995 1994
-------- -------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ - $ -
Accounts payable 1,170 675
Accrued liabilities 213 219
Income taxes payable 76 -
Production taxes payable 251 287
Royalties payable 147 288
-------- -------------
Total current liabilities 1,857 1,469
-------- -------------
Long-term debt, net of current portion 15,746 15,746
Deferred lease obligation - 7
Commitments and contingencies (Note 2)
Stockholders' equity:
Preferred stock - -
Common stock; par value $.02; 20,000,000
shares authorized; 11,215,804 issued
and 11,188,004 outstanding 224 224
Capital in excess of par value 98,354 98,354
Accumulated deficit (68,343) (67,476)
Treasury stock, at cost; 27,800 shares (71) (71)
-------- -------------
Total stockholders' equity 30,164 31,031
-------- -------------
$ 47,767 $ 48,253
======== =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
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TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
------------------ -----------------
1995 1994 1995 1994
------- -------- ------- -------
<S> <C> <C> <C> <C>
From continuing operations:
Revenues $ 3,132 $ 3,490 $ 9,236 $10,697
Costs and expenses:
Operating 1,468 1,481 4,293 4,608
General and administrative 335 303 987 953
Depreciation, depletion
and amortization 1,210 1,145 4,113 3,668
------- -------- ------- -------
Total costs and expenses 3,013 2,929 9,393 9,229
------- -------- ------- -------
Operating income (loss) 119 561 (157) 1,468
------- -------- ------- -------
Other income (expense):
Interest income 42 13 86 34
Dividend income 22 - 66 -
Interest expense (266) (242) (790) (725)
Research and development expense (12) (45) (24) (107)
------- -------- ------- -------
Total other expense (214) (274) (662) (798)
------- -------- ------- -------
Income (loss) from continuing
operations before income tax (95) 287 (819) 670
Current income tax expense (48) (41) (48) (51)
Deferred income tax benefit - 77 - 287
Income (loss) from continuing ------- -------- ------- -------
operations (143) 323 (867) 906
------- -------- ------- -------
From discontinued operations:
Loss from discontinued gas trams-
mission operations, including
litigation expenses of $210 and
net of income tax benefit of $10 - (2) - (204)
------- -------- ------- -------
Income (loss) before cumulative effect
of change in method of accounting for
income taxes (143) 321 (867) 702
------- -------- ------- -------
Cumulative effect of change in method
of accounting for income taxes - - - 3,000
------- -------- ------- -------
Net income (loss) $ (143) $ 321 $ (867) $ 3,702
======= ======== ======= =======
</TABLE>
(Continued)
See accompanying notes to consolidated financial statements.
3
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TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations - Continued
(in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
June 30, June 30,
------------------ -----------------
1995 1994 1995 1994
------- -------- -------- -------
<S> <C> <C> <C> <C>
Primary income (loss) per share:
From continuing operations $ (.01) $ .03 $ (.08) $ .08
From discontinued operations - - - (.02)
------- -------- -------- -------
Net income (loss) before
cumulative effect of change
in accounting principle (.01) .03 (.08) .06
------- -------- -------- -------
Cumulative effect of change in
accounting principle - - - .27
------- -------- -------- -------
Net income (loss) $ (.01) $ .03 $ (.08) $ .33
======= ======== ======== =======
Weighted average shares outstanding 11,188 11,048 11,188 11,211
======= ======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
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TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine months ended
June 30,
-----------------
1995 1994
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (867) $ 3,702
------- -------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and amortization 4,113 3,668
Deferred lease obligation (7) (7)
Deferred income tax benefit - (287)
Income tax effect of stock option exercise - 7
Cumulative effect of accounting change - (3,000)
Changes in assets and liabilities:
(Increase) decrease in receivables 449 (853)
Decrease in other current assets 217 185
Increase (decrease) in accounts payable,
accrued liabilities, income taxes
payable and production taxes payable 529 (36)
Increase (decrease) in royalties payable (141) 124
Other 36 110
------- -------
Total adjustments 5,196 (89)
------- -------
Net cash provided by operating activities 4,329 3,613
------- -------
Cash flows from investing activities:
Proceeds from asset sales 5,046 13
Investment in NGL fractionating plant (717) -
Capital expenditures (5,386) (1,726)
------- -------
Net cash used in investing activities (1,057) (1,713)
------- -------
Cash flows from financing activities:
Principal repayments - (1,950)
Acquisition of treasury stock - (71)
------- -------
Net cash used in financing activities - (2,021)
------- -------
Net increase (decrease) in cash and cash equivalents 3,272 (121)
Cash and cash equivalents at beginning of period 2,308 2,151
------- -------
Cash and cash equivalents at end of period $ 5,580 $ 2,030
======= =======
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 790 $ 754
Income taxes $ 52 $ 41
</TABLE>
See accompanying notes to consolidated financial statements.
5
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TIPPERARY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT'S REPRESENTATION
In the opinion of management, the accompanying unaudited financial statements
reflect all adjustments, consisting only of normal recurring adjustments, which
are necessary for a fair presentation of the consolidated financial position of
Tipperary Corporation (the "Company") at June 30, 1995, and the results of its
operations for the three-month and nine-month periods ended June 30, 1995 and
1994. The consolidated financial statements include the accounts of Tipperary
Corporation and its subsidiaries, all wholly-owned, and its share of assets,
liabilities, revenues and expenses of unincorporated joint ventures and
partnerships. The accounting policies followed by the Company are included in
Note 1 to the Consolidated Financial Statements in the Annual Report on Form 10-
K for the year ended September 30, 1994. These financial statements should be
read in conjunction with the Form 10-K.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
The Company is a Defendant in a lawsuit filed on September 20, 1991, styled
VALERO TRANSMISSION, L.P. V. J. L. DAVIS V. TIPPERARY CORPORATION, Cause No. 91-
09-00357-CVF, in the 81st Judicial District, Frio County, Texas. The case
involves gas purchase contracts between Valero and Davis. The Company
previously owned 50% of Davis' interest in the contracts. Valero claimed it had
overpaid Davis under the contracts and requested damages for breach of contract
from Davis. Davis thereafter filed a third-party petition against the Company
requesting that the Company reimburse Davis for 50% of any amounts paid to
Valero on account of the claims made by Valero in its original petition. Valero
and Davis have now settled the claims between themselves and Davis has requested
that the Company reimburse Davis for 50% of such settlement to the extent that
the settlement covers time periods in which Davis and the Company each owned a
50% interest in the contracts. The Company has answered the lawsuit, denying
the claims of Davis, and the Company intends to vigorously defend all claims
made in the suit. The Company does not anticipate that this matter will have a
material adverse effect on its financial condition or results of operations.
The Company is subject to various possible contingencies which arise primarily
from interpretation of federal and state laws and regulations affecting the oil
and gas industry. Although management believes it has complied with the various
laws and regulations, administrative rulings and interpretations thereof,
adjustment could be required as new interpretations and regulations are issued.
NOTE 3 - PROPERTY SALES
The Company sold its interest in certain gas properties and related assets in La
Plata County, Colorado for approximately $4,500,000 on May 1, 1995. The Company
sold its interest in other oil and gas properties in southern Louisiana for
approximately $600,000 on February 24, 1995. The two property sales involved
non-operated working interests and represented approximately 5.4% of the
Company's total discounted future net revenues and 486,000 barrels of oil
equivalent ("BOE"), or 7.7% of the Company's total proved reserve volumes as of
September 30, 1994. Under the full cost method of accounting, no gain was
recognized on the property sales; the proceeds were credited to the full cost
pool, thereby reducing the book value of the Company's oil and gas properties.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
During the nine months ended June 30, 1995 the Company continued its exploration
projects in Queensland, Australia and in the Williston Basin of Montana.
Additionally, construction continued on the Alabama natural gas liquids ("NGL")
fractionating plant in which the Company has invested along with several other
participants. These projects accounted for the majority of the Company's
capital expenditures during the period, with $3,318,000 expended on the Comet
Ridge coalbed methane project in Australia, $758,000 expended on the Williston
Basin project in Montana, and $717,000 advanced toward the construction of the
NGL fractionating plant. Approximately $945,000 was expended on various
domestic drilling and recompletion projects, and approximately $365,000 was
expended on other property, plant and equipment additions. Offsetting capital
expenditures were proceeds of approximately $600,000 from the February 1995 sale
of interests in certain producing oil and gas properties in Louisiana and
approximately $4,500,000 from the May 1995 sale of the Company's interest in
certain gas properties and related assets in La Plata County, Colorado. During
the nine months ended June 30, 1994 capital expenditures totaled $1,726,000, of
which $214,000 was expended on the Comet Ridge project and $277,000 was expended
on conversion of the Company's New Mexico saltwater disposal system, with the
balance primarily attributable to various development drilling projects.
Cash flows were provided primarily by the Company's producing oil and gas
properties during both the nine months ended June 30, 1995 and June 30, 1994.
Net cash provided by operating activities was $4,329,000 and $3,613,000 for the
nine months ended June 30, 1995 and June 30, 1994, respectively. During the
nine months ended June 30, 1995, no principal payments were made on long term
debt, while during the nine months ended June 30, 1994, $1,950,000 was paid in
reduction of long-term debt. During both periods, the Company's only
outstanding long-term debt was owed to its commercial bank lender. During the
nine months ended June 30, 1994, the Company paid $210,000 to settle litigation
related to the Company's discontinued gas transmission operations.
Cash on hand was $5,580,000 as of June 30, 1995 versus $2,308,000 as of
September 30, 1994. The Company has continued to utilize cash on hand along
with cash flows from producing properties and sales of properties to fund its
domestic and international exploration projects as well as its funding
commitment for construction of the NGL fractionating plant. Some of the cash
currently on hand may be utilized in reduction of bank debt and/or funding of
exploration projects underway. The Company may also generate additional cash by
selling a portion of its Williston Basin project prior to drilling.
The following is a recapitulation of activities involving the Company's major
capital projects:
INTERNATIONAL EXPLORATION. During the nine months ended June 30, 1995, the
Company and its co-venturers ("the Group") drilled 13 additional wells on
the Comet Ridge coalbed methane project area in Queensland, Australia.
Subsequent to June 30, 1995 one additional well was drilled. Of the total
wells drilled within the Group's Authority to Prospect ("ATP"), two are
currently capable of gas production with minimal water production and are
shut-in, nine are being de-watered, and five are awaiting further
completion procedures. All of these wells have encountered coals
containing methane gas, and seven of the nine wells being de-watered are
producing gas. Efforts to establish marketing contracts for the gas have
begun and approximately 100 miles of 2-D seismic data has been shot in the
Fairview area to further delineate coal deposits. Plans for pipeline
construction are anticipated upon confirmation of gas markets and sales
prices available. The Group's ATP covers approximately 1,365,000 acres.
The Company's interest bears 30% of capital costs and 28.125% of operating
expenses, and its net revenue interest is 25.3125% prior to project payout.
Subsequent to project payout, the Company's interest bears 24% of capital
and operating expenses and its net revenue interest is 21.6%.
DOMESTIC EXPLORATION. During the nine months ended June 30, 1995, the
Company continued to acquire leasehold acreage in its Williston Basin 3-D
seismic project area. As of June 30, 1995, the Company owned an undivided
87.5% interest in approximately 45,000 acres. Total investment in the
project was approximately $1,766,000 as of June 30, 1995. A seismic survey
covering approximately 30% of the
7
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project acreage has been completed and data is currently being processed.
It is anticipated that initial drilling will commence in the fall of 1995.
NGL FRACTIONATING PLANT INVESTMENT. Construction of the plant continued
during the nine months ended June 30, 1995. As of June 30, 1995 the
Company had advanced $1,033,000 of its $1,148,000 total commitment for
capital contributions. The Company will fund the remaining $115,000 due
under the agreement upon start up of the plant. The Company owns a 45%
interest in plant profits prior to payout of its investment and a 27%
interest thereafter. The Company's interest is owned indirectly through
its ownership of an interest in a Utah limited liability company ("LLC").
This LLC in turn owns an interest in an Alabama LLC which was formed for
the purpose of owning and operating the plant.
The Company's bank debt outstanding of $15,746,000 as of September 30, 1994
remained unchanged as of June 30, 1995. Of this total, $10,000,000 is payable
in full on September 30, 1996 and bears interest at a fixed rate of 5.92%.
While principal reductions are not required until maturity, interest is payable
monthly. Under the Company's existing agreement with the bank, the $10,000,000
fixed rate debt would be reflected as a current liability effective September
30, 1995. However, the Company is currently involved in discussions with the
bank and anticipates that part or all of its existing bank debt will be
restructured such that required principal reductions within one year from
September 30, 1995 will be significantly less than the $10,000,000. Borrowings
in excess of the $10,000,000 fixed-rate loan are pursuant to a revolving loan,
which is scheduled to convert to a four-year term loan on April 5, 1997. The
Company's bank credit agreement provides a maximum facility of $40,000,000,
subject to borrowing base limitations described below. At the Company's option,
interest on the revolving loan is payable at either the bank's base rate or the
London Interbank Offered Rate ("LIBOR") plus 1.5%. The LIBOR-based option may
be selected for periods not exceeding 90 days. At June 30, 1995, the weighted
average interest rate for amounts under the revolver was 7.89%. Although the
LIBOR/Base Rate loan is a two-year revolver, the Company has made voluntary
principal reductions in the past and expects to do so in the future. The
maximum borrowing base is calculated by the bank and is based upon its
assessment of the value of the Company's properties. This bank valuation is
based upon the bank's assumptions about reserve quantities, oil and gas prices,
operating expenses and other assumptions which may not agree with the Company's
assumptions. As of June 30, 1995 the borrowing base was $16,400,000. The
Company is obligated to pay a commitment fee of % per annum on the difference
between the average outstanding loan balance and the nominated borrowing base.
While the Company's cash flows are directly affected by oil and gas prices, the
Company's existing hedge positions partially mitigate the effects of lower oil
prices. The Company presently has hedged, under swap agreements, 20,000 barrels
(approximately 40%) per month of its remaining fiscal 1995 oil production at a
New York Mercantile Exchange ("NYMEX") average floor price of approximately
$17.21 per barrel. These hedging agreements allow upside participation
percentages averaging 37% of price increases above the floor level. The
Company's actual price received at the wellhead has recently averaged $2.00 to
$3.00 per barrel below NYMEX prices. None of the Company's gas production is
currently hedged. Net (payments) receipts pursuant to the Company's hedging
activities for the nine months ended June 30, 1995 and 1994 were ($164,000) and
$236,000, respectively. Notwithstanding the Company's hedging positions,
decreases in oil and gas prices could cause a reduction in cash flows that are
available for the funding of capital projects and reduction of bank debt.
The Company paid approximately $24,000 and $107,000 during the nine months ended
June 30, 1995 and 1994, respectively, to Texas Tech University ("Texas Tech") to
fund a research project for the further development of a new oil cleanup
technology. The technology is designed to biodegrade absorbent materials
utilized in the containment and cleanup of oil spills, and to release absorbed
oil to the liquid phase. Additional studies relating to the separation,
treatment and recovery of the released oil have been conducted by Texas Tech.
The procedure has been performed successfully in a laboratory environment.
Management believes that such a process, if proven to be commercial, could
provide value in degradation and/or reduction of oil saturated material that
must be disposed of in toxic landfills. The Company has the right to acquire
exclusive licensing rights to the technology for no additional consideration,
subject to a maximum 10% sales royalty to be paid to Texas Tech. Costs
incurred pursuant to this agreement are expensed as incurred. While the Company
has no further funding commitments, it may incur additional costs as efforts are
underway to establish commercial applications of this technology.
The Company currently anticipates funding its existing projects through cash on
hand, cash flows generated from oil and gas operations and bank borrowing. Due
to the natural decline in oil and gas production rates and because
8
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the Company has borrowed nearly the maximum available amount in its credit
facility, other means of financing may be pursued in the future. In the event
that current projects require capital investments beyond the aforementioned cash
sources, the Company may pursue project financing, private debt issuances and
equity offerings.
RESULTS OF OPERATIONS - COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 1995 AND
1994
Operating revenues from continuing operations for the three months ended June
30, 1995 decreased $358,000, or 10%, to $3,132,000 from $3,490,000 in the
corresponding fiscal 1994 period. Oil volumes decreased 16,000 barrels, or 10%,
to 145,000 barrels versus 161,000 barrels in the prior year period, decreasing
revenue by $239,000. Gas volumes decreased 134,000 Mcf, or 21%, to 493,000 Mcf
in the current period compared to 627,000 Mcf in the three months ended June 30,
1994, resulting in a $220,000 decrease in revenues. The decreases in volumes
produced are attributable to both the sale of producing properties and to
natural decline in oil and gas production rates. Average oil prices increased
10% to $16.45 per barrel for the three months ended June 30, 1995 from $14.93
per barrel for the corresponding prior year quarter, resulting in a $220,000
increase in revenue. Gas prices decreased 13% to $1.43 per Mcf in the current
quarter versus $1.64 in the prior year quarter, resulting in a $104,000 revenue
decrease. Saltwater disposal and other income decreased $15,000 from the
corresponding fiscal 1994 quarter.
Income from continuing operations for the three months ended June 30, 1995
decreased $466,000, or 144%, resulting in a loss of $143,000 compared to income
of $323,000 for the corresponding fiscal 1994 period. The current period
reflected the above mentioned decrease in revenue as well as increased
depreciation, depletion and amortization ("DD&A"), general and administrative
expense and interest expense. Additionally, the prior year period included a
net income tax benefit of $36,000 while the current year period included a net
income tax expense of $48,000 related to the aforementioned property sales.
Operating expenses decreased $13,000, or 1%, to $1,468,000 from $1,481,000
reported in fiscal 1994. The decrease was primarily attributable to the
disposition of producing properties. The Company's average lifting cost per
equivalent barrel increased 14% to $6.27 in the three month period of fiscal
1995 from $5.49 in the prior year period. This increase was attributable
primarily to declining production rates.
General and administrative expenses increased by $32,000, or 11%, to $335,000
during the three months ended June 30, 1995 compared to $303,000 for the prior
year period. The increase was attributable to general salary increases and
increased expenses associated with the Company's exploration activities.
DD&A expense for the three months ended June 30, 1995 increased by $65,000, or
6%, to $1,210,000 from $1,145,000 reported for the comparable fiscal 1994
period. The increase is attributable to a higher DD&A rate per equivalent
barrel of oil, resulting from a significant reduction in proved undeveloped
reserves as of September 30, 1994.
Interest expense for the three months ended June 30, 1995 increased $24,000, or
10%, to $266,000 from $242,000 for the three months ended June 30, 1994. Such
increase is attributable to general increases in interest rates.
RESULTS OF OPERATIONS - COMPARISON OF THE NINE MONTHS ENDED JUNE 30, 1995 AND
1994
Operating revenues from continuing operations for the nine months ended June 30,
1995 decreased $1,461,000, or 14%, to $9,236,000 from $10,697,000 in the
corresponding fiscal 1994 period. Oil volumes decreased 72,000 barrels, or 14%,
to 431,000 barrels versus 503,000 barrels in the prior year period, decreasing
revenue by $1,036,000. Gas volumes decreased 284,000 Mcf, or 15%, to 1,652,000
Mcf in the current period compared to 1,936,000 Mcf in the nine months ended
June 30, 1994, resulting in a $474,000 decrease in revenues. The volume
decreases are attributable to both the sale of producing properties and to
natural decline in oil and gas production rates. Average oil prices increased
8% to $15.57 per barrel for the nine months ended June 30, 1995 from $14.39 per
barrel for the corresponding prior year period, resulting in a $509,000 increase
in revenue. Gas prices decreased 13% to $1.45 per Mcf in the current period
versus $1.67 in the prior year period, resulting in a $363,000 revenue decrease.
Saltwater disposal and other income decreased $97,000 from the corresponding
fiscal 1994 period.
9
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Income from continuing operations for the nine months ended June 30, 1995
decreased $1,773,000, or 196%, resulting in a loss of $867,000 compared to
income of $906,000 for the corresponding fiscal 1994 period. The current period
reflected the above mentioned decrease in revenue as well as increased general
and administrative expense, interest expense and DD&A. Additionally, a net
$236,000 income tax benefit was recorded in the prior year period related to an
an adjustment of the net deferred tax asset, while the current year period
includes a current net income tax expense of $48,000 related to the
aforementioned property sales.
Operating expenses decreased $315,000, or 7%, to $4,293,000 from $4,608,000
reported in fiscal 1994. The decrease was primarily attributable to the
disposition of producing properties. The Company's average lifting cost per
equivalent barrel increased 9% to $5.90 in the first nine months of fiscal 1995
from $5.44 in the prior year period. This increase was attributable primarily
to declining production rates.
General and administrative expenses increased by $34,000, or 4%, to $987,000
during the nine months ended June 30, 1995 compared to $953,000 for the prior
year period, due to various miscellaneous increases.
DD&A expense for the nine months ended June 30, 1995 increased by $445,000, or
12%, to $4,113,000 from $3,668,000 reported for the comparable fiscal 1994
period. The increase is attributable to a higher DD&A rate per equivalent
barrel of oil, resulting from a significant reduction in proved undeveloped
reserves as of September 30, 1994.
Interest expense for the nine months ended June 30, 1995 increased $65,000, or
9%, to $790,000 from $725,000 for the nine months ended June 30, 1994. Such
increase is attributable to general increases in interest rates.
The loss from discontinued operations during the nine months ended June 30, 1994
includes an expense of $210,000 in settlement of litigation relating to the
Company's discontinued gas transmission business.
As discussed in previous filings, the Company has substantial NOL carryforwards
available to reduce the Company's effective federal tax rate from approximately
35% to approximately 2%. The carryforwards totaled approximately $45,000,000 as
of September 30, 1994 and expire over various dates through fiscal 2004. These
carryforwards would be subjected to an annual limitation should there be a
change of over 50% in the stock ownership of the Company during any three year
period. The Company adopted SFAS 109 effective October 1, 1993. Because of the
Company's significant NOL and other carryforwards, it recorded a deferred tax
asset under SFAS 109. However, because of uncertainties regarding utilization,
a substantial valuation allowance was deducted from the value of the asset.
After valuation, the net deferred tax asset recorded on the October 1, 1993
balance sheet was $3,000,000. This amount is reflected in net income for the
nine months ended June 30, 1994 as the cumulative effect of a change in method
of accounting for income taxes. The realization of the deferred tax asset will
have the effect of reducing future earnings through a charge in lieu of income
taxes. The Company will continue to review income trends and projected NOL
utilizations and will from time to time adjust the valuation allowance
accordingly.
The Company does not believe that inflation has had a materially adverse effect
on its operations during recent years.
10
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See Note 2 to the consolidated financial statements under Part I
- Item 1.
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:
Filed in Part I
11. Computation of per share earnings
Filed in Part II
None
(b) Reports on Form 8-K:
On May 19, 1995 the Company filed a Current Report on Form 8-K
incorporating by reference a Shareholder Letter dated May 9,
1995 with regard to its Comet Ridge Project in Queensland,
Australia and other matters.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Tipperary Corporation
---------------------------------------------
Registrant
Date: August 11, 1995 By: /s/ Carter G. Mathies
---------------------------------------------
Carter G. Mathies, President, Chief Executive
Officer and Chairman of the Board of Directors
Date: August 11, 1995 By: /s/ David L. Bradshaw
---------------------------------------------
David L. Bradshaw, Vice President, Chief
Operating Officer, Chief Financial Officer
and Director
Date: August 11, 1995 By: /s/ Wayne W. Kahmeyer
---------------------------------------------
Wayne W. Kahmeyer, Controller and Principal
Accounting Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOUND ON
PAGES 1 THROUGH 4 OF THE COMPANY'S FORM 10-Q FOR THE NINE MONTHS ENDED JUNE 30,
1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> JUN-30-1995
<CASH> 5,580
<SECURITIES> 0
<RECEIVABLES> 2,890
<ALLOWANCES> 0
<INVENTORY> 190
<CURRENT-ASSETS> 8,976
<PP&E> 113,331
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<COMMON> 224
0
0
<OTHER-SE> 29,940
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<SALES> 9,236
<TOTAL-REVENUES> 9,236
<CGS> 0
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<INTEREST-EXPENSE> 790
<INCOME-PRETAX> (819)
<INCOME-TAX> 48
<INCOME-CONTINUING> (867)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (867)
<EPS-PRIMARY> (.08)
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