Document And Entity Information
Document And Entity Information - shares | 6 Months Ended | |
Jun. 30, 2016 | Aug. 05, 2016 | |
Document Information [Line Items] | ||
Entity Registrant Name | RESERVE PETROLEUM CO | |
Entity Central Index Key | 83,350 | |
Trading Symbol | rsrv | |
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) | 158,077 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2016 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false |
Balance Sheets (Current Period
Balance Sheets (Current Period Unaudited) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Current Assets: | ||
Cash and Cash Equivalents | $ 12,479,468 | $ 13,937,215 |
Available-for-Sale Securities | 8,641,014 | 8,642,053 |
Trading Securities | 413,066 | 410,724 |
Refundable Income Taxes | 477,404 | 488,052 |
Receivables | 693,533 | 644,868 |
Total Current Assets | 22,704,485 | 24,122,912 |
Investments: | ||
Equity Investments | 1,000,020 | 964,770 |
Other, at Cost | 1,156,856 | 876,856 |
Total Investments | 2,156,876 | 1,841,626 |
Unproved Properties | 2,482,185 | 1,874,283 |
Proved Properties | 52,798,329 | 52,735,721 |
Oil and Gas Properties, Gross | 55,280,514 | 54,610,004 |
Less – Accumulated Depreciation, Depletion, Amortization and Valuation Allowance | 43,793,330 | 42,535,199 |
Oil and Gas Properties, Net | 11,487,184 | 12,074,805 |
Other Property and Equipment, at Cost | 406,430 | 392,918 |
Less – Accumulated Depreciation | 217,367 | 244,362 |
Other Property and Equipment, Net | 189,063 | 148,556 |
Total Property, Plant and Equipment | 11,676,247 | 12,223,361 |
Total Assets | 36,537,608 | 38,187,899 |
Current Liabilities: | ||
Accounts Payable | 242,944 | 225,648 |
Other Current Liabilities – Deferred Income Taxes and Other | 94,652 | 38,493 |
Total Current Liabilities | 337,596 | 264,141 |
Long-Term Liabilities: | ||
Asset Retirement Obligation | 1,704,682 | 1,677,328 |
Dividends Payable | 1,306,915 | 1,407,959 |
Deferred Tax Liability, Net | 1,290,757 | 1,613,883 |
Total Long-Term Liabilities | 4,302,354 | 4,699,170 |
Total Liabilities | 4,639,950 | 4,963,311 |
Stockholders’ Equity: | ||
Common Stock | 92,368 | 92,368 |
Additional Paid-in Capital | 65,000 | 65,000 |
Retained Earnings | 33,211,313 | 34,475,369 |
Stockholders’ Equity Before Treasury Stock | 33,368,681 | 34,632,737 |
Less – Treasury Stock, at Cost | 1,471,023 | 1,408,149 |
Total Stockholders’ Equity | 31,897,658 | 33,224,588 |
Total Liabilities and Stockholders’ Equity | $ 36,537,608 | $ 38,187,899 |
Statements of Operations (Unaud
Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Operating Revenues: | ||||
Oil and Gas Sales | $ 1,344,396 | $ 2,081,048 | $ 2,389,933 | $ 4,233,996 |
Lease Bonuses and Other | 47,356 | 112,933 | 48,885 | 648,147 |
Total Operating Revenues | 1,391,752 | 2,193,981 | 2,438,818 | 4,882,143 |
Operating Costs and Expenses: | ||||
Production | 517,529 | 663,560 | 1,048,850 | 1,354,416 |
Exploration | 69,510 | 203,600 | 167,422 | 353,750 |
Depreciation, Depletion, Amortization and Valuation Provisions | 410,592 | 1,091,139 | 1,424,317 | 2,661,489 |
General, Administrative and Other | 410,381 | 404,636 | 836,120 | 847,009 |
Total Operating Costs and Expenses | 1,408,012 | 2,362,935 | 3,476,709 | 5,216,664 |
Loss from Operations | (16,260) | (168,954) | (1,037,891) | (334,521) |
Other Income, Net | 201,784 | 89,534 | 268,477 | 92,267 |
Income/(Loss) Before Provision/(Benefit) for Income Taxes | 185,524 | (79,420) | (769,414) | (242,254) |
Income Tax Provision/(Benefit): | ||||
Current | 44,683 | 68,228 | 10,655 | 412,651 |
Deferred | (6,385) | (178,964) | (306,440) | (703,697) |
Total Income Tax Provision/(Benefit) | 38,298 | (110,736) | (295,785) | (291,046) |
Net Income/(Loss) | $ 147,226 | $ 31,316 | $ (473,629) | $ 48,792 |
Per Share Data | ||||
Net Income/(Loss), Basic and Diluted (in dollars per share) | $ 0.93 | $ 0.20 | $ (2.99) | $ 0.31 |
Cash Dividends Declared and/or Paid (in dollars per share) | $ 5 | $ 10 | $ 5 | $ 10 |
Weighted Average Shares Outstanding, Basic and Diluted (in shares) | 158,125 | 158,560 | 158,225 | 158,609 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
Net Cash Provided by Operating Activities | $ 618,710 | $ 2,996,667 |
Cash Applied to Investing Activities: | ||
Purchases of Available-for-Sale Securities | (8,641,014) | (6,653,795) |
Maturity of Available-for-Sale Securities | 8,642,053 | 6,654,303 |
Proceeds from Disposal of Property, Plant and Equipment | 21,395 | 6,192 |
Purchase of Property, Plant and Equipment | (1,018,028) | (1,214,015) |
Cash Paid for Investment | (280,000) | (4,440) |
Cash Distribution from Other Investments | 155,000 | 50,000 |
Cash Received from Life Insurance Policies | 390,253 | |
Net Cash Applied to Investing Activities | (1,120,594) | (771,502) |
Cash Applied to Financing Activities: | ||
Dividends Paid to Stockholders | (892,989) | (1,566,420) |
Purchase of Treasury Stock | (62,874) | (32,615) |
Total Cash Applied to Financing Activities | (955,863) | (1,599,035) |
Net Change in Cash and Cash Equivalents | (1,457,747) | 626,130 |
Cash and Cash Equivalents, Beginning of Period | 13,937,215 | 15,203,558 |
Cash and Cash Equivalents, End of Period | $ 12,479,468 | $ 15,829,688 |
Note 1 - Basis of Presentation
Note 1 - Basis of Presentation | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
Basis of Accounting [Text Block] | Note 1 – BASIS OF PRESENTATION The accompanying balance sheet as of December 31, 2015, 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, 2015. 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, 2016 | |
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 June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net Realized and Unrealized Gain on Trading Securities $ 24,964 $ 19,565 $ 1,720 $ 13,570 Gain on Asset Sales 15,289 6,136 19,744 6,136 Interest Income 14,518 2,560 24,840 6,311 Equity Earnings in Investees 18,532 23,057 35,250 35,140 Other Income 140,369 50,225 210,664 55,123 Interest and Other Expenses (11,888 ) (12,009 ) (23,741 ) (24,013 ) Other Income, Net $ 201,784 $ 89,534 $ 268,477 $ 92,267 |
Note 3 - Investments and Relate
Note 3 - Investments and Related Commitments and Contingent Liabilities, Including Guarantees | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
Equity Method Investments and Joint Ventures Disclosure [Text Block] | Note 3 – INVESTMENTS AND RELATED COMMITMENTS AND CONTINGENT LIABILITIES, INCLUDING GUARANTEES The Company’s Equity Investments include 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. The Company’s Equity Investments also include a 47% ownership in Grand Woods Development, LLC (the “LLC”) an Oklahoma limited liability company acquired in November 2015. The LLC owns approximately 26.3 acres of undeveloped real estate in northeast Oklahoma City. The Company has guaranteed a loan for which the proceeds were used to purchase a portion of the undeveloped real estate acreage. |
Note 4 - Provision for Income T
Note 4 - Provision for Income Taxes | 6 Months Ended |
Jun. 30, 2016 | |
Notes to Financial Statements | |
Income Tax Disclosure [Text Block] | Note 4 – PROVISION FOR INCOME TAXES In 2016 and 2015, 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, 2016 | |
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, 2015 $ 1,677,328 Liabilities incurred for new wells (net of revisions) 10,992 Liabilities settled (wells sold or plugged) (7,147 ) Accretion expense 23,509 Balance at June 30, 2016 $ 1,704,682 |
Note 6 - Fair Value Measurement
Note 6 - Fair Value Measurements | 6 Months Ended |
Jun. 30, 2016 | |
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, 2016 and December 31, 2015, the Company’s assets reported at fair value on a recurring basis are summarized as follows: June 30, 2016 Level 1 Inputs Level 2 Inputs Level 3 Inputs Financial Assets: Available-for-Sale Securities – U.S. Treasury Bills Maturing in 2016 $ – $ 8,641,014 $ – Trading Securities: Domestic Equities 269,352 – – International Equities 118,393 – – Others 25,321 – – December 31, 2015 Level 1 Inputs Level 2 Inputs Level 3 Inputs Financial Assets: Available-for-Sale Securities – U.S. Treasury Bills Maturing in 2016 $ – $ 8,642,053 $ – Trading Securities: Domestic Equities 292,820 – – International Equities 100,920 – – Others 16,984 – – 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 $10,992 in 2016 and $22,184 in 2015 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 $508,964 in 2016, with $556,734 for 2015, 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, 2016 and December 31, 2015, 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, 2016 | |
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, 2016 and 2015. For the six months ended June 30, 2016, the assessment resulted in an impairment provision of $508,964, with $556,374 for the same period in 2015. The impairment provision for the six months ended June 30, 2016 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, 2016 | |
Notes to Financial Statements | |
New Accounting Pronouncements and Changes in Accounting Principles [Text Block] | Note 8 – NEW ACCOUNTING PRONOUNCEMENTS See the “New Accounting Pronouncements” disclosures on page 25 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. There were no other accounting pronouncements issued since December 31, 2015 that were directly applicable to the Company or will have any material impact on the Company’s financial position, results of operations or cash flows. |
Note 2 - Other Income, Net (Tab
Note 2 - Other Income, Net (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Notes Tables | |
Interest and Other Income [Table Text Block] | Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net Realized and Unrealized Gain on Trading Securities $ 24,964 $ 19,565 $ 1,720 $ 13,570 Gain on Asset Sales 15,289 6,136 19,744 6,136 Interest Income 14,518 2,560 24,840 6,311 Equity Earnings in Investees 18,532 23,057 35,250 35,140 Other Income 140,369 50,225 210,664 55,123 Interest and Other Expenses (11,888 ) (12,009 ) (23,741 ) (24,013 ) Other Income, Net $ 201,784 $ 89,534 $ 268,477 $ 92,267 |
Note 5 - Asset Retirement Obl14
Note 5 - Asset Retirement Obligation (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Notes Tables | |
Schedule of Asset Retirement Obligations [Table Text Block] | Balance at December 31, 2015 $ 1,677,328 Liabilities incurred for new wells (net of revisions) 10,992 Liabilities settled (wells sold or plugged) (7,147 ) Accretion expense 23,509 Balance at June 30, 2016 $ 1,704,682 |
Note 6 - Fair Value Measureme15
Note 6 - Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
Notes Tables | |
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block] | June 30, 2016 Level 1 Inputs Level 2 Inputs Level 3 Inputs Financial Assets: Available-for-Sale Securities – U.S. Treasury Bills Maturing in 2016 $ – $ 8,641,014 $ – Trading Securities: Domestic Equities 269,352 – – International Equities 118,393 – – Others 25,321 – – December 31, 2015 Level 1 Inputs Level 2 Inputs Level 3 Inputs Financial Assets: Available-for-Sale Securities – U.S. Treasury Bills Maturing in 2016 $ – $ 8,642,053 $ – Trading Securities: Domestic Equities 292,820 – – International Equities 100,920 – – Others 16,984 – – |
Note 2 - Schedule of Components
Note 2 - Schedule of Components of Other Income, Net (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Net Realized and Unrealized Gain on Trading Securities | $ 24,964 | $ 19,565 | $ 1,720 | $ 13,570 |
Gain on Asset Sales | 15,289 | 6,136 | 19,744 | 6,136 |
Interest Income | 14,518 | 2,560 | 24,840 | 6,311 |
Equity Earnings in Investees | 18,532 | 23,057 | 35,250 | 35,140 |
Other Income | 140,369 | 50,225 | 210,664 | 55,123 |
Interest and Other Expenses | (11,888) | (12,009) | (23,741) | (24,013) |
Other Income, Net | $ 201,784 | $ 89,534 | $ 268,477 | $ 92,267 |
Note 3 - Investments and Rela17
Note 3 - Investments and Related Commitments and Contingent Liabilities, Including Guarantees (Details Textual) | 3 Months Ended | ||
Mar. 31, 2016USD ($) | Jun. 30, 2016 | Nov. 30, 2015a | |
Broadway Sixty-Eight Partnership [Member] | |||
Operating Leases, Rent Expense | $ | $ 0 | ||
Equity Method Investment, Ownership Percentage | 33.00% | ||
Grand Woods Development, LLC [Member] | |||
Equity Method Investment, Ownership Percentage | 47.00% | ||
Area of Real Estate Property | a | 26.3 |
Note 5 - Asset Retirement Obl18
Note 5 - Asset Retirement Obligation (Details Textual) | 6 Months Ended |
Jun. 30, 2016 | |
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, 2016USD ($) | |
Balance, asset retirement obligation liability | $ 1,677,328 |
Liabilities incurred for new wells (net of revisions) | 10,992 |
Liabilities settled (wells sold or plugged) | (7,147) |
Accretion expense | 23,509 |
Balance, asset retirement obligation liability | $ 1,704,682 |
Note 6 - Fair Value Measureme20
Note 6 - Fair Value Measurements (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member] | ||||
Impairment of Oil and Gas Properties | $ 508,964 | $ 556,734 | ||
Fair Value, Inputs, Level 3 [Member] | ||||
Asset Retirement Obligation, Liabilities Incurred | 10,992 | 22,184 | ||
Asset Retirement Obligation, Liabilities Incurred | 10,992 | |||
Impairment of Oil and Gas Properties | $ 0 | $ 0 | $ 508,964 | $ 556,374 |
Note 6 - Schedule of Fair Value
Note 6 - Schedule of Fair Value Reported on a Recurring Basis (Details) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
US Treasury Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Available-for-Sale Securities | ||
US Treasury Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Available-for-Sale Securities | 8,641,014 | 8,642,053 |
US Treasury Securities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Available-for-Sale Securities | ||
Domestic Equities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Trading Securities | 269,352 | 292,820 |
Domestic Equities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Trading Securities | ||
Domestic Equities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Trading Securities | ||
International Equities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Trading Securities | 118,393 | 100,920 |
International Equities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Trading Securities | ||
International Equities [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Trading Securities | ||
Other [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member] | ||
Trading Securities | 25,321 | 16,984 |
Other [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member] | ||
Trading Securities | ||
Other [Member] | Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member] | ||
Trading Securities | ||
Available-for-Sale Securities | 8,641,014 | 8,642,053 |
Trading Securities | $ 413,066 | $ 410,724 |
Note 7 - Long-lived Assets Im22
Note 7 - Long-lived Assets Impairment Loss (Details Textual) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Impairment of Oil and Gas Properties | $ 0 | $ 0 | $ 508,964 | $ 556,374 |