<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1997
--------------
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 0-2517
TOREADOR ROYALTY CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 75-0991164
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
530 Preston Commons West
8117 Preston Road
Dallas, Texas 75225
- ---------------------------------------- -------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 369-0080
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 twelve months, 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.
<TABLE>
<CAPTION>
Class Outstanding at March 31, 1997
- ------------------------------- -----------------------------
<S> <C>
Common Stock, $.15625 par value 5,138,271
</TABLE>
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOREADOR ROYALTY CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, March 31, December 31,
1997 1996 1996
----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,422,579 $ 2,609,630 $ 3,074,111
Marketable securities, at market value -- 674,731 --
Accounts receivable 242,104 148,401 508,793
Federal income tax receivable -- 54,899 54,899
Other current assets 88,472 39,828 65,101
----------- ----------- -----------
Total current assets 3,753,155 3,527,489 3,702,904
----------- ----------- -----------
Properties and equipment, less accumulated
depreciation, depletion and amortization 3,213,099 3,194,931 3,306,020
Other assets 108,089 131,284 --
----------- ----------- -----------
Total assets $ 7,074,343 $ 6,853,704 $ 7,008,924
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 29,228 $ 105,076 $ 256,298
Federal income taxes payable 71,593 -- 62,938
----------- ----------- -----------
Total current liabilities 100,821 105,076 319,236
Deferred tax liabilities 88,420 67,262 65,508
----------- ----------- -----------
Total liabilities 189,241 172,338 384,744
----------- ----------- -----------
Stockholders' equity:
Preferred stock, $1.00 par value, 4,000,000
shares authorized; none issued -- -- --
Common stock, $.15625 par value, 10,000,000
shares authorized; 5,356,571,
5,349,071 and 5,356,571 issued 836,964 835,792 836,964
Capital in excess of par value 3,577,385 3,560,042 3,577,385
Retained earnings 3,026,688 2,143,217 2,842,483
Net unrealized gain on marketable securities -- 361,992 --
Minimum pension liability -- -- (88,543)
----------- ----------- -----------
7,441,037 6,901,043 7,168,289
Treasury stock at cost:
218,300, 88,425 and 213,900 shares (555,935) (219,677) (544,109)
----------- ----------- -----------
Total stockholders' equity 6,885,102 6,681,366 6,624,180
----------- ----------- -----------
Total liabilities and stockholders' equity $ 7,074,343 $ 6,853,704 $ 7,008,924
=========== =========== ===========
</TABLE>
The Company uses the successful efforts method of accounting for its
oil and gas producing activities.
See accompanying notes to the consolidated financial statements.
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<PAGE> 3
TOREADOR ROYALTY CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Revenues:
Oil and gas sales $ 677,835 $ 463,513
Lease bonuses and rentals 109,938 300
Interest and other income 37,377 50,298
---------- ----------
Total revenues 825,150 514,111
Costs and expenses:
Lease operating expense 138,215 90,756
Dry holes and abandonments 53,455 34,205
Depreciation, depletion and amortization 57,588 51,974
Geological and geophysical 74,014 67,198
General and administrative 229,796 227,067
---------- ----------
Total costs and expenses 553,068 471,200
---------- ----------
Income before federal income taxes 272,082 42,911
Provision for federal income taxes 87,877 15,435
---------- ----------
Net income $ 184,205 $ 27,476
========== ==========
Income per share $ 0.04 $ 0.01
========== ==========
Weighted average shares outstanding 5,140,960 5,264,843
========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
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<PAGE> 4
TOREADOR ROYALTY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
March 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 184,205 $ 27,476
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 57,588 51,974
Dry holes and abandonments 53,455 34,205
Decrease in accounts receivable 266,689 20,345
Decrease in federal income tax receivable 54,899 32,551
Increase in pension obligation (19,546) (12,959)
Increase in other current assets (23,371) (17,656)
Decrease in accounts payable and accrued liabilities (227,070) (88,163)
Increase in federal income taxes payable 8,655 --
Deferred tax expense 22,912 15,427
----------- -----------
Net cash provided by operating activities 378,416 63,200
----------- -----------
Cash flows from investing activities:
Expenditures for oil and gas property and equipment (95,757) (79,818)
Proceeds from lease bonuses and rentals 77,635 --
----------- -----------
Net cash used by investing activities (18,122) (79,818)
----------- -----------
Cash flows from financing activities:
Purchase of treasury stock (11,826) (165,327)
----------- -----------
Net cash used by financing activities (11,826) (165,327)
----------- -----------
Net increase (decrease) in cash and cash equivalents 348,468 (181,945)
Cash and cash equivalents, beginning of period 3,074,111 2,791,575
----------- -----------
Cash and cash equivalents, end of period $ 3,422,579 $ 2,609,630
=========== ===========
Supplemental schedule of cash flow information:
Cash received during the period for income taxes $ 58,589 $ 32,551
Cash paid during the period for income taxes $ 60,000 $ --
</TABLE>
See accompanying notes to the consolidated financial statements.
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<PAGE> 5
TOREADOR ROYALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements should be read in the context of
the consolidated financial statements and notes thereto filed with the
Securities and Exchange Commission in Toreador Royalty Corporation's (the
"Company") 1996 Annual Report on Form 10-K. In the opinion of the Company, the
information furnished herein reflects all adjustments consisting of only normal
recurring adjustments, necessary for a fair presentation of the results of the
interim periods reported herein. Operating results from the interim period may
not necessarily be indicative of the results for the year ended December 31,
1997. Certain previously reported financial information has been reclassified
to conform to the current period's presentation.
NOTE 2 - MARKETABLE SECURITIES
The Company does not own any marketable securities. The Company eliminated
its position in the San Juan Basin Royalty Trust in the third quarter of 1996.
NOTE 3 - NON-PRODUCING MINERAL AND ROYALTY INTERESTS
Principal properties include mineral fee interests acquired by the Company
during 1951 and 1958. These interests totaled approximately 530,000 net mineral
acres underlying approximately 870,000 surface acres in the Texas Panhandle and
West Texas. It is recognized that the ultimate realization of the investment in
these properties is dependent upon future exploration and development
operations which are dependent upon satisfactory leasing and drilling
arrangements with others. Additionally, the Company owns working or royalty
interests in Texas, New Mexico, Oklahoma, Arkansas, Louisiana and Colorado.
NOTE 4 - INTEREST AND OTHER INCOME
Items in interest and other income consist of:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------
1997 1996
------- -------
<S> <C> <C>
Interest - Certificates of Deposit and
U. S. Treasury Bills $36,233 $33,724
Distribution from Grantor Trust:
San Juan Basin Royalty Trust -- 7,225
Other income 1,144 9,349
------- -------
$37,377 $50,298
======= =======
</TABLE>
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<PAGE> 6
TOREADOR ROYALTY CORPORATION
For the three months ended March 31, 1997
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Disclosures Regarding Forward-Looking Statements
This report on Form 10-Q includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. All statements
other than statements of historical facts included in this Form 10-Q,
including, without limitation, statements contained in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the Company's financial position, business strategy, plans and
objectives of management of the Company for future operations, and industry
conditions, are forward-looking statements. Although the Company believes that
the expectations reflected in such forward-looking statements are reasonable,
it can give no assurance that such expectations will prove to have been
correct. Any forward-looking statements herein are subject to certain risks and
uncertainties inherent in petroleum exploration, development and production,
including, but not limited to the risk that no commercially productive oil and
gas reservoirs will be encountered; inconclusive results from 3-D seismic
projects; delays or cancellation of drilling operations as a result of a
variety of factors; volatility of oil and gas prices due to economic and other
conditions; intense competition in the oil and gas industry; operational risks
(e.g., fires, explosions, blowouts, cratering and loss of production);
insurance coverage limitations and requirements; and potential liability
imposed by intense governmental regulation of oil and gas production; all of
which are beyond the control of the Company. Any one or more of these factors
could cause actual results to differ materially from those expressed in any
forward-looking statement. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the cautionary statements disclosed in
this paragraph and otherwise in this report.
Liquidity and Capital Resources
Historically, most of the exploration activity on the Company's
acreage has been funded and conducted by other oil companies and this activity
is expected to continue. Exploration activity typically generates lease bonus
and option income to the Company. If drilling is successful, the Company
receives royalty income from the oil or gas production but bears none of the
capital or operating costs. In order to accelerate the evaluation of its
acreage as well as increase its ownership in any reserves discovered, the
Company intends to increase its level of participation in exploring its acreage
by acquiring working interests. The extent to which the
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<PAGE> 7
TOREADOR ROYALTY CORPORATION
For the three months ended March 31, 1997
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Company may acquire working interests will depend on the availability of
outside capital and cash flow from operations. Currently, the primary sources
of capital for the financing of the Company's operations are cash flow provided
from revenues generated by its proportionate share in oil and natural gas sales
and existing cash, including that from a private offering completed in 1994. To
the extent cash flow from operations does not significantly increase and
external sources of capital are limited or unavailable, the Company's ability
to make the capital investment to participate in 3-D seismic surveys and
increase its interest in projects on its acreage will be limited. Future funds
are expected to be provided through production from existing producing
properties and new producing properties that may be discovered through
exploration of the Company's acreage by third parties or by the Company itself.
Funds may also be provided through external financing in the form of debt or
equity. There can be no assurance as to the extent and availability of these
sources of funding.
The Company has no debt and maintains its excess cash funds in
interest-bearing deposits and commercial paper. The Company is not aware of any
demands, commitments or events which will result in its liquidity increasing or
decreasing in a material way. From time to time, the Company may receive lease
bonuses that cannot be anticipated and, when funds are available, the Company
may elect to participate in exploratory ventures. The Company also may acquire
producing oil and gas assets which could require the use of debt.
Management believes that sufficient funds are available internally to
meet anticipated capital requirements for fiscal 1997.
The Company has used $539,190.62 of its cash reserves to purchase
212,600 shares of its Common Stock, as of March 31, 1997. These purchases were
made pursuant to stock repurchase programs authorized by the Board of Directors
on October 10, 1995, of up to 100,000 shares of Common Stock and a second stock
repurchase program on April 22, 1996, of up to 150,000 shares of common stock.
A third stock repurchase program was authorized by the Board of Directors on
April 21, 1997, of up to 300,000 shares of common stock. As of May 12, 1997,
the Company had purchased the balance of the shares under the second repurchase
program at a purchase price of $91,837.50 and an aggregate of 51,600 shares at
a purchase price of $125,755.00 under the third repurchase program. The
repurchases of the Company's shares of Common Stock were made in unsolicited
open-market purchases, at market (not premium) prices, without fixed terms and
not contingent upon the tender of a fixed minimum number of shares or in
response to a third party bid and otherwise in accordance with Rule 10b-18
under the Securities Exchange Act of 1934, as amended.
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<PAGE> 8
TOREADOR ROYALTY CORPORATION
For the three months ended March 31, 1997
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 VS
THREE MONTHS ENDED MARCH 31, 1996
Revenues for the first quarter of 1997 were $825,150 versus $514,111
for the same period in 1996. Oil and gas sales were $677,835 on volumes of
17,859 BBLs of oil and 79,323 MCF of natural gas as compared to $463,513 on
volumes of 16,275 BBLs and 86,031 MCF in 1996. The $214,322 increase in oil and
gas sales resulted from higher oil and gas prices. Oil prices increased 25.5%
to $22.79/BBL in 1997 from $18.16/BBL in 1996, while gas prices increased 74.9%
to $3.41/MCF in 1997 from $1.95/MCF in 1996. Lease bonuses and rentals
increased to $109,938 in 1997 versus $300 in 1996, as a result of receiving
bonuses from two exploratory agreements on the Company's minerals. Interest and
other income was $37,377 in 1997 down from $50,298 in 1996. This decrease was
primarily due to the Company liquidating the remainder of its marketable
securities in the San Juan Basin Royalty Trust in August 1996.
Costs and expenses were $553,068 in 1997 versus $471,200 in 1996.
Lease operating expenses increased to $138,215 in 1997 from $90,756 in 1996 due
to the acquisitions made in 1996. Dry holes and abandonments increased to
$53,455 in 1997 from $34,205 in 1996. Depreciation, depletion and amortization
increased 10.8% to $57,588 in 1997 from $51,974 in 1996, reflecting more
property owned by the Company. Geological and geophysical expenses increased
10.1% to $74,014 in 1997 from $67,198 in 1996, primarily as a result of
retaining and training a consultant to replace a former employee. General and
administrative expenses increased slightly to $229,796 from $227,067 a year
ago.
The Company recognized net income of $184,205 or $0.04 per share, for
the first quarter of 1997 versus net income of $27,476, or $0.01 per share, for
the same period in 1996.
OTHER MATTERS
Recent Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128 ("SFAS 128"), "Earnings Per Share". This Statement is
effective for financial statements issued for periods ending after December 15,
1997. Earlier adoption is not permitted. SFAS 128 requires dual presentation of
basic and diluted EPS for entities with complex capital structures. The impact
of adopting this statement will not have a material effect on the Company's
earnings per share calculation.
-8-
<PAGE> 9
TOREADOR ROYALTY CORPORATION
March 31, 1997
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The information required by this Item 6(a) is set forth in the
Index to Exhibits accompanying this quarterly report and is incorporated herein
by reference.
(b) Reports on Form 8-K
None.
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.
TOREADOR ROYALTY CORPORATION,
Registrant
/s/ John Mark McLaughlin
--------------------------------------
John Mark McLaughlin,
Chairman and President
May 12, 1997
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<PAGE> 10
TOREADOR ROYALTY CORPORATION
March 31, 1997
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<S> <C>
27 Financial Data Schedule
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TOREADOR
ROYALTY CORPORATION UNAUDITED FINANCIAL STATEMENTS FOR THE PERIOD ENDED MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1997.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,422,579
<SECURITIES> 0
<RECEIVABLES> 242,104
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,753,155
<PP&E> 4,849,549
<DEPRECIATION> (1,636,450)
<TOTAL-ASSETS> 7,074,343
<CURRENT-LIABILITIES> 100,821
<BONDS> 0
0
0
<COMMON> 836,964
<OTHER-SE> 6,048,138
<TOTAL-LIABILITY-AND-EQUITY> 7,074,343
<SALES> 677,835
<TOTAL-REVENUES> 825,150
<CGS> 0
<TOTAL-COSTS> 553,068
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 272,082
<INCOME-TAX> 87,877
<INCOME-CONTINUING> 184,205
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 184,205
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
</TABLE>
