Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2015 | Aug. 07, 2015 | |
Entity Registrant Name | RESERVE PETROLEUM CO | |
Entity Central Index Key | 83,350 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Well-known Seasoned Issuer | No | |
Entity Common Stock, Shares Outstanding (in shares) | 158,521 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2015 | |
Document Fiscal Year Focus | 2,015 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
Balance Sheet (Current Period U
Balance Sheet (Current Period Unaudited) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
Current Assets: | ||
Cash and Cash Equivalents | $ 15,829,688 | $ 15,203,558 |
Available-for-Sale Securities | 6,653,794 | 6,654,303 |
Trading Securities | 459,460 | 445,476 |
Refundable Income Taxes | 462,277 | 154,393 |
Receivables | 1,017,795 | 2,142,356 |
Prepaid Seismic | 86,856 | |
Total Current Assets | 24,423,014 | 24,686,942 |
Investments: | ||
Equity Investment | 388,135 | 352,995 |
Other | 676,856 | 672,416 |
Total Investments | 1,064,991 | 1,025,411 |
Oil and Gas Properties, at Cost, Based on the Successful Efforts Method of Accounting - | ||
Unproved Properties | 2,070,331 | 1,728,944 |
Proved Properties | 53,307,676 | 53,110,630 |
Oil and Gas Properties, Gross | 55,378,007 | 54,839,574 |
Less – Accumulated Depreciation, Depletion, Amortization and Valuation Allowance | 39,422,261 | 36,883,078 |
Oil and Gas Properties, Net | 15,955,746 | 17,956,496 |
Other Property and Equipment, at Cost | 392,918 | 440,284 |
Less – Accumulated Depreciation | 232,090 | 329,429 |
Other Property and Equipment, Net | 160,828 | 110,855 |
Total Property, Plant and Equipment | 16,116,574 | 18,067,351 |
Other Assets | 391,290 | |
Total Assets | 41,604,579 | 44,170,994 |
Current Liabilities: | ||
Accounts Payable | 413,461 | 819,010 |
Other Current Liabilities – Deferred Income Taxes and Other | 186,344 | 263,234 |
Total Current Liabilities | 599,805 | 1,082,244 |
Long-Term Liabilities: | ||
Asset Retirement Obligation | 1,688,672 | 1,645,597 |
Dividends Payable | 1,470,726 | 1,451,635 |
Deferred Tax Liability, Net | 2,672,484 | 3,249,291 |
Total Long-Term Liabilities | 5,831,882 | 6,346,523 |
Total Liabilities | 6,431,687 | 7,428,767 |
Stockholders’ Equity: | ||
Common Stock | 92,368 | 92,368 |
Additional Paid-in Capital | 65,000 | 65,000 |
Retained Earnings | 36,409,492 | 37,946,212 |
Stockholders' Equity Before Treasury Stock | 36,566,860 | 38,103,580 |
Less – Treasury Stock, at Cost | 1,393,968 | 1,361,353 |
Total Stockholders’ Equity | 35,172,892 | 36,742,227 |
Total Liabilities and Stockholders’ Equity | $ 41,604,579 | $ 44,170,994 |
Statements of Income (Unaudited
Statements of Income (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Operating Revenues: | ||||
Oil and Gas Sales | $ 2,081,048 | $ 5,103,967 | $ 4,233,996 | $ 10,379,177 |
Lease Bonuses and Other | 112,933 | 414,592 | 648,147 | 615,534 |
Total Operating Revenues | 2,193,981 | 5,518,559 | 4,882,143 | 10,994,711 |
Operating Costs and Expenses: | ||||
Production | 663,560 | 817,889 | 1,354,416 | 1,662,489 |
Exploration | 203,600 | 559,906 | 353,750 | 1,217,377 |
Depreciation, Depletion, Amortization and Valuation Provisions | 1,091,139 | 1,102,494 | 2,661,489 | 1,970,126 |
General, Administrative and Other | 404,636 | 433,423 | 847,009 | 871,664 |
Operating Costs and Expenses | 2,362,935 | 2,913,712 | 5,216,664 | 5,721,656 |
Income/(Loss) from Operations | (168,954) | 2,604,847 | (334,521) | 5,273,055 |
Other Income, Net | 89,534 | 211,357 | 92,267 | 195,799 |
Income/(Loss) Before Provision for Income Taxes | (79,420) | 2,816,204 | (242,254) | 5,468,854 |
Income Tax Provision/(Benefit): | ||||
Current | 68,228 | 720,433 | 412,651 | 1,623,195 |
Deferred | (178,964) | 24,262 | (703,697) | (200,553) |
Total Income Tax Provision/(Benefit) | (110,736) | 744,695 | (291,046) | 1,422,642 |
Net Income | $ 31,316 | $ 2,071,509 | $ 48,792 | $ 4,046,212 |
Per Share Data | ||||
Net Income, Basic and Diluted (in dollars per share) | $ 0.20 | $ 13.03 | $ 0.31 | $ 25.43 |
Cash Dividends Declared and/or Paid (in dollars per share) | $ 10 | $ 20 | $ 10 | $ 20 |
Weighted Average Shares Outstanding, Basic and Diluted (in shares) | 158,560 | 159,006 | 158,609 | 159,116 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2015 | Jun. 30, 2014 | |
Net Cash Provided by Operating Activities | $ 2,996,667 | $ 7,216,668 |
Cash Applied to Investing Activities: | ||
Purchases of Available-for-Sale Securities | (6,653,795) | (6,654,786) |
Maturity of Available-for-Sale Securities | 6,654,303 | 6,653,823 |
Proceeds from Disposal of Property, Plant and Equipment | 6,192 | 21,188 |
Purchase of Property, Plant and Equipment | (1,214,015) | (2,528,483) |
Cash Paid for Investment | (4,440) | |
Cash Distribution from Equity Investee | 287,595 | |
Cash Distribution from Other Investments | 50,000 | |
Cash Received from Life Insurance Policies | 390,253 | |
Net Cash Applied to Investing Activities | (771,502) | (2,220,663) |
Cash Applied to Financing Activities: | ||
Dividends Paid to Stockholders | (1,566,420) | (3,021,888) |
Purchase of Treasury Stock | (32,615) | (98,141) |
Total Cash Applied to Financing Activities | (1,599,035) | (3,120,029) |
Net Change in Cash and Cash Equivalents | 626,130 | 1,875,976 |
Cash and Cash Equivalents, Beginning of Period | 15,203,558 | 10,764,506 |
Cash and Cash Equivalents, End of Period | $ 15,829,688 | $ 12,640,482 |
Note 1 - Basis of Presentation
Note 1 - Basis of Presentation | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Basis of Accounting [Text Block] | Note 1 – BASIS OF PRESENTATION The accompanying balance sheet as of December 31, 2014, which has been derived from audited financial statements, the unaudited interim financial statements and these notes, have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain disclosures normally included in financial statements prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) have been omitted. The accompanying financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014. In the opinion of management, the accompanying financial statements reflect all adjustments (consisting of normal recurring accruals), which are necessary for a fair statement of the results of the interim periods presented. The results of operations for the current interim periods are not necessarily indicative of the operating results for the full year. |
Note 2 - Other Income, Net
Note 2 - Other Income, Net | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Other Income and Other Expense Disclosure [Text Block] | Note 2 – OTHER INCOME, NET The following is an analysis of the components of Other Income/(Loss), Net: Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Net Realized and Unrealized Gain/(Loss) on Trading Securities $ 19,565 $ 39,942 $ 13,570 $ (5,983 ) Gain on Asset Sales 6,136 14,745 6,136 15,868 Interest Income 2,560 4,477 6,311 9,809 Equity Earnings in Investee 23,057 29,865 35,140 57,110 Other Income 50,225 133,586 55,123 141,516 Interest and Other Expenses (12,009 ) (11,258 ) (24,013 ) (22,521 ) Other Income, Net $ 89,534 $ 211,357 $ 92,267 $ 195,799 |
Note 3 - Investments and Relate
Note 3 - Investments and Related Commitments and Contingent Liabilities, Including Guarantees | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Equity Method Investments and Joint Ventures Disclosure [Text Block] | Note 3 – INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTEES Equity Investment consists of a 33% ownership interest in Broadway Sixty-Eight, Ltd. (the “Partnership”), an Oklahoma limited partnership, which owns and operates an office building in Oklahoma City, Oklahoma. Although the Company invested as a limited partner, it agreed, jointly and severally, with all other limited partners to reimburse the general partner for any losses suffered from operating the Partnership. The indemnity agreement provides no limitation to the maximum potential future payments. To date, no monies have been paid with respect to this agreement. |
Note 4 - Provision for Income T
Note 4 - Provision for Income Taxes | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Income Tax Disclosure [Text Block] | Note 4 – PROVISION FOR INCOME TAXES In 2015 and 2014, the effective tax rate was different than the statutory rate, primarily as a result of allowable depletion for tax purposes in excess of the cost basis in oil and gas properties and the corporate graduated tax rate structure. Excess federal percentage depletion, which is limited to certain production volumes and by certain income levels, reduces estimated taxable income projected for any year. The federal excess percentage depletion estimates are updated throughout the year until finalized with the detail well-by-well calculations at year-end. When a provision for income taxes is recorded, federal excess percentage depletion benefits decrease the effective tax rate. The benefit of federal excess percentage depletion is not directly related to the amount of pre-tax income recorded in a period. Accordingly, in periods where a recorded pre-tax income is relatively small, the proportional effect of these items on the effective tax rate may be significant. |
Note 5 - Asset Retirement Oblig
Note 5 - Asset Retirement Obligation | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Asset Retirement Obligation Disclosure [Text Block] | Note 5 – ASSET RETIREMENT OBLIGATION The Company records the fair value of its estimated liability to retire its oil and natural gas producing properties in the period in which it is incurred (typically the date of first sale). The estimated liability is calculated by obtaining current estimated plugging costs from the well operators and inflating it over the life of the property. Current year inflation rate used is 4.08%. When the liability is first recorded, a corresponding increase in the carrying amount of the related long-lived asset is also recorded. Subsequently, the asset is amortized to expense over the life of the property and the liability is increased annually for the change in its present value which is currently 3.25%. A reconciliation of the Company’s asset retirement obligation liability is as follows: Balance at December 31, 2014 $ 1,645,597 Liabilities incurred for new wells (net of revisions) 22,184 Liabilities settled (wells sold or plugged) (2,875 ) Accretion expense 23,766 Balance at June 30, 2015 $ 1,688,672 |
Note 6 - Fair Value Measurement
Note 6 - Fair Value Measurements | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Fair Value Disclosures [Text Block] | Note 6 – FAIR VALUE MEASUREMENTS Inputs used to measure fair value are organized into a fair value hierarchy based on the observability of the inputs. Level 1 inputs consist of quoted prices in active markets for identical assets. Level 2 inputs are inputs, other than quoted prices, for similar assets that are observable. Level 3 inputs are unobservable inputs. Recurring Fair Value Measurements Certain of the Company’s assets are reported at fair value in the accompanying balance sheets on a recurring basis. The Company determined the fair value of the available-for-sale securities using quoted market prices for securities with similar maturity dates and interest rates. At June 30, 2015 and December 31, 2014, the Company’s assets reported at fair value on a recurring basis are summarized as follows: June 30, 2015 Level 1 Inputs Level 2 Inputs Level 3 Inputs Financial Assets: Available-for Sale Securities – U.S. Treasury Bills Maturing in 2015 $ --- $ 6,653,794 $ --- Trading Securities: Domestic Equities 317,211 --- --- International Equities 126,749 --- --- Others 15,500 --- --- December 31, 2014 Level 1 Inputs Level 2 Inputs Level 3 Inputs Financial Assets: Available-for Sale Securities – U.S. Treasury Bills Maturing in 2015 $ --- $ 6,654,303 $ --- Trading Securities: Domestic Equities 183,168 --- --- International Equities 124,998 --- --- Others 137,310 --- --- 6 Non- R ecurring Fair Value Measurements The Company’s asset retirement obligation annually represents a non-recurring fair value liability. The fair value of the non-financial liability incurred in the six months ended June 30, was $22,184 in 2015 and $32,272 in 2014 and was calculated using Level 3 inputs. See Note 5 above for more information about this liability and the inputs used for calculating fair value. The impairment losses in the six months ended June 30 of $556,734 in 2015, with none for 2014, also represents non-recurring fair value expenses calculated using Level 3 inputs. See Note 7 below for a description of the impairment loss calculation. Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash and cash equivalents, trade receivables, marketable securities, trade payables and dividends payable. At June 30, 2015 and December 31, 2014, the historical cost of cash and cash equivalents, trade receivables, trade payables and dividends payable are considered to be representative of their respective fair values due to the short-term maturities of these items. |
Note 7 - Long-Lived Assets Impa
Note 7 - Long-Lived Assets Impairment Loss | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
Long Lived Assets Impairment Loss [Text Block] | Note 7 - LONG-LIVED ASSETS IMPAIRMENT LOSS Oil and gas producing properties, are monitored for potential impairment when circumstances indicate that they are not expected to recover their entire carrying value through future cash flows. The evaluations involve significant judgment since the results are based on estimated future events, such as inflation rates, future sales prices for oil and gas, future production costs, estimates of future oil and gas reserves to be recovered and the timing thereof, the economic and regulatory climates and other factors. The need to test a property for impairment may result from significant declines in sales prices or unfavorable adjustments to oil and gas reserves. Between periods in which reserves would normally be calculated, the Company updates the reserve calculations utilizing updated projected future price decks current with the period. The assessment determined no impairment provisions were needed for the three months ended June 30, 2015 and 2014. For the six months ended June 30, 2015, the assessment resulted in an impairment provision of $556,374. No impairment was needed for the same period in 2014. The impairment provision for the six months ended June 30, 2015, is principally the result of lower projected future prices for oil and gas. A reduction in oil or gas prices, or a decline in reserve volumes, could lead to additional impairment that may be material to the Company. |
Note 8 - New Accounting Pronoun
Note 8 - New Accounting Pronouncements | 6 Months Ended |
Jun. 30, 2015 | |
Notes to Financial Statements | |
New Accounting Pronouncements and Changes in Accounting Principles [Text Block] | Note 8 – NEW ACCOUNTING PRONOUNCEMENTS In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). ASU 2014-09 clarifies the principles for recognizing revenue and develops a common revenue standard under U.S. GAAP under which an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 is effective for the Company beginning January 1, 2018. The new standard allows application either retrospectively to each prior reporting period presented or as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the adoption method and the impact ASU 2014-09 will have on the Company, but it is not expected to have a material effect on the Company’s financial position, results of operations or cash flows. On April 7, 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2015-03, Interest - Imputation of Interest 15, 2015. The Company currently has no debt nor any plans to issue any debt. Accordingly, adoption of ASU 2015-03 will have no effect on the Company’s financial position, results of operations or cash flows. There were no other accounting pronouncements issued and none that became effective since December 31, 2014 that were directly applicable to the Company. |
Note 2 - Other Income, Net (Tab
Note 2 - Other Income, Net (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Notes Tables | |
Interest and Other Income [Table Text Block] | Three Months Ended Six Months Ended June 30, June 30, 2015 2014 2015 2014 Net Realized and Unrealized Gain/(Loss) on Trading Securities $ 19,565 $ 39,942 $ 13,570 $ (5,983 ) Gain on Asset Sales 6,136 14,745 6,136 15,868 Interest Income 2,560 4,477 6,311 9,809 Equity Earnings in Investee 23,057 29,865 35,140 57,110 Other Income 50,225 133,586 55,123 141,516 Interest and Other Expenses (12,009 ) (11,258 ) (24,013 ) (22,521 ) Other Income, Net $ 89,534 $ 211,357 $ 92,267 $ 195,799 |
Note 5 - Asset Retirement Obl14
Note 5 - Asset Retirement Obligation (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Notes Tables | |
Schedule of Asset Retirement Obligations [Table Text Block] | Balance at December 31, 2014 $ 1,645,597 Liabilities incurred for new wells (net of revisions) 22,184 Liabilities settled (wells sold or plugged) (2,875 ) Accretion expense 23,766 Balance at June 30, 2015 $ 1,688,672 |
Note 6 - Fair Value Measureme15
Note 6 - Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2015 | |
Notes Tables | |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] | June 30, 2015 Level 1 Inputs Level 2 Inputs Level 3 Inputs Financial Assets: Available-for Sale Securities – U.S. Treasury Bills Maturing in 2015 $ --- $ 6,653,794 $ --- Trading Securities: Domestic Equities 317,211 --- --- International Equities 126,749 --- --- Others 15,500 --- --- December 31, 2014 Level 1 Inputs Level 2 Inputs Level 3 Inputs Financial Assets: Available-for Sale Securities – U.S. Treasury Bills Maturing in 2015 $ --- $ 6,654,303 $ --- Trading Securities: Domestic Equities 183,168 --- --- International Equities 124,998 --- --- Others 137,310 --- --- |
Note 2 - Schedule of Components
Note 2 - Schedule of Components of Other Income, Net (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Net Realized and Unrealized Gain/(Loss) on Trading Securities | $ 19,565 | $ 39,942 | $ 13,570 | $ (5,983) |
Gain on Asset Sales | 6,136 | 14,745 | 6,136 | 15,868 |
Interest Income | 2,560 | 4,477 | 6,311 | 9,809 |
Equity Earnings in Investee | 23,057 | 29,865 | 35,140 | 57,110 |
Other Income | 50,225 | 133,586 | 55,123 | 141,516 |
Interest and Other Expenses | (12,009) | (11,258) | (24,013) | (22,521) |
Other Income, Net | $ 89,534 | $ 211,357 | $ 92,267 | $ 195,799 |
Note 3 - Investments and Rela17
Note 3 - Investments and Related Commitments and Contingent Liabilities, Including Guarantees (Details Textual) | Jun. 30, 2015 |
Equity Method Investment, Ownership Percentage | 33.00% |
Note 5 - Asset Retirement Obl18
Note 5 - Asset Retirement Obligation (Details Textual) | 6 Months Ended |
Jun. 30, 2015 | |
Current Year Inflation Rate | 4.08% |
Change In Present Value Percent | 3.25% |
Note 5 - Schedule of Asset Reti
Note 5 - Schedule of Asset Retirement Obligation (Details) | 6 Months Ended |
Jun. 30, 2015USD ($) | |
Balance at December 31, 2014 | $ 1,645,597 |
Liabilities incurred for new wells (net of revisions) | 22,184 |
Liabilities settled (wells sold or plugged) | (2,875) |
Accretion expense | 23,766 |
Balance at June 30, 2015 | $ 1,688,672 |
Note 6 - Fair Value Measureme20
Note 6 - Fair Value Measurements (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Fair Value, Measurements, Nonrecurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||||
Impairment Of Oil And Gas Cost Properties | $ 556,734 | $ 0 | ||
Asset Retirement Obligation, Liabilities Incurred | 22,184 | 32,272 | ||
Impairment Of Oil And Gas Cost Properties | $ 0 | $ 0 | 556,374 | $ 0 |
Asset Retirement Obligation, Liabilities Incurred | $ 22,184 |
Note 6 - Schedule of Fair Value
Note 6 - Schedule of Fair Value Reported on a Recurring Basis (Details) - USD ($) | Jun. 30, 2015 | Dec. 31, 2014 |
US Treasury Securities [Member] | Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | ||
Financial Assets: | ||
Available-for Sale Securities – U.S. Treasury Bills Maturing in 2015 | $ 6,653,794 | $ 6,654,303 |
Domestic Equities [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | ||
Financial Assets: | ||
Domestic Equities | 317,211 | 183,168 |
International Equities [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | ||
Financial Assets: | ||
Domestic Equities | 126,749 | 124,998 |
Other [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | ||
Financial Assets: | ||
Domestic Equities | 15,500 | 137,310 |
Available-for Sale Securities – U.S. Treasury Bills Maturing in 2015 | 6,653,794 | 6,654,303 |
Domestic Equities | $ 459,460 | $ 445,476 |
Note 7 - Long-Lived Assets Im22
Note 7 - Long-Lived Assets Impairment Loss (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2015 | Jun. 30, 2014 | Jun. 30, 2015 | Jun. 30, 2014 | |
Impairment Of Oil And Gas Cost Properties | $ 0 | $ 0 | $ 556,374 | $ 0 |