FORM 10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
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: 0-610
EQUITY OIL COMPANY
(Exact name of registrant as specified in its charter)
COLORADO 87-0129795
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 806, #10 West Third South, Salt Lake City, Utah 84101
(Address of principal executive offices)
(Zip Code)
(801) 521-3515
Registrant's telephone number, including area code
--------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 12,643,440
ITEM I: Financial Statements
EQUITY OIL COMPANY
Statements of Operations
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
1999 1998
---- ----
REVENUES
Oil and gas sales ............ $10,422,320 $ 9,622,792
Partnership income ........... 22,500 23,500
Interest income .............. 32,543 48,887
Other ........................ 139,649 178,069
---------- ----------
Total Revenues ............... 10,617,012 9,873,248
---------- ----------
EXPENSES
Operating costs .............. 4,271,325 4,592,540
Depreciation, depletion and
amortization ............... 3,100,000 3,700,000
Leasehold abandonments ....... 29,954 170,601
Equity loss in
Symskaya Exploration, Inc. . 130,203 399,457
3D seismic ................... -- 431,075
Exploration .................. 1,019,503 1,918,606
General and administrative ... 1,310,126 1,595,641
Interest ..................... 911,636 959,731
---------- ----------
Total expenses ............... 10,772,747 13,767,651
---------- ----------
Loss before income taxes . (155,735) (3,894,403)
Benefit from income taxes ......... (117,513) (1,107,843)
---------- ----------
NET (LOSS) ........................ $ ( 38,222) $(2,786,560)
========== ==========
Basic and diluted net
(loss) per common share ....... $ (0.00) $ (0.22)
Basic and diluted weighted
average shares outstanding 12,636,671 12,620,885
Cash dividends declared per share . $ .00 $ .00
The accompanying notes are an integral part of these statements.
2
EQUITY OIL COMPANY
Statements of Operations
For the Three Months Ended September 30, 1999 and 1998
(Unaudited)
1999 1998
----------- ----------
REVENUES
Oil and gas sales .............. $ 4,303,735 $ 3,105,521
Partnership income ............. 7,500 8,000
Interest income ................ 13,348 8,561
Other .......................... 83,453 76,364
--------- ---------
Total revenues ................. 4,408,036 3,198,446
--------- ---------
EXPENSES
Operating costs ................ 1,615,929 1,561,678
Depreciation, depletion and
amortization ................. 1,050,000 1,250,000
Leasehold abandonments ......... 21,100 6,510
Equity loss in
Symskaya Exploration, Inc. ... 23,997 80,344
3D seismic ..................... -- 302
Exploration .................... 275,853 1,172,724
General and administrative ..... 391,720 498,502
Interest ....................... 319,002 389,826
--------- ---------
Total expenses ................. 3,697,601 4,959,886
--------- ---------
Net income (loss) before income taxes 710,435 (1,761,440)
Provision for (benefit from)
income taxes ............... 287,903 (510,614)
--------- ---------
NET INCOME (LOSS) ................... $ 422,532 $ (1,250,826)
========= =========
Net income (loss) per common share:
Basic ...................... $ 0.03 $ (0.10)
Diluted .................... $ 0.03 $ (0.10)
Weighted average shares outstanding:
Basic .......................... 12,643,440 12,629,440
Diluted ........................ 13,663,440 12,629,440
Cash dividends declared per share $ .00 $ .00
The accompanying notes are an integral part of these statements.
3
EQUITY OIL COMPANY
Balance Sheet
as of September 30, 1999 and December 31, 1998
(Unaudited)
September 30, December 31,
ASSETS 1999 1998
- ------ ------------ ---------
Current assets:
Cash and cash equivalents ........ $ 661,699 $ 444,476
Accounts and advances receivable . 3,354,394 2,696,160
Income taxes receivable .......... 10,747 291,597
Deferred income taxes ............ 18,800 19,417
Other current assets ............. 207,616 318,904
----------- -----------
4,253,256 3,770,554
----------- -----------
Property and equipment ............. 105,539,623 104,407,815
Less accumulated depreciation,
depletion and amortization ........ 64,256,230 61,191,368
----------- -----------
41,283,393 43,216,447
Other assets:
Investment in Raven Ridge
Pipeline Partnership ........... 205,773 220,997
Other assets ..................... 243,497 63,170
----------- -----------
449,270 284,167
----------- -----------
TOTAL ASSETS ....................... $ 45,985,919 $ 47,271,168
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................. $ 696,641 $ 1,675,758
Accrued liabilities .............. 127,679 164,163
Federal, state and foreign
income taxes payable ........... 145,292 212,583
Accrued profit sharing ........... 54,073 90,413
----------- -----------
1,023,685 2,142,917
----------- -----------
Revolving credit facility .......... 16,500,000 16,500,000
Deferred income taxes .............. 1,495,655 1,642,700
----------- -----------
17,995,655 18,142,700
----------- -----------
Stockholders' equity:
Common stock ..................... 12,808,040 12,794,040
Paid in capital .................. 3,719,743 3,714,493
Less cost of treasury stock ...... (528,302) (528,302)
Retained earnings ................ 10,967,098 11,005,320
----------- -----------
26,966,579 26,985,551
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY ............. $ 45,985,919 $ 47,271,168
=========== ===========
The accompanying notes are an integral part of these statements.
4
EQUITY OIL COMPANY
Statement of Cash Flows
For the Nine Months Ended September 30, 1999 and 1998
(Unaudited)
1999 1998
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) ......................... $ ( 38,222) $(2,786,560)
Adjustments:
Depreciation, depletion and
amortization ................... 3,100,000 3,700,000
Partnership distributions in
excess of (less than) income ... (22,500) 39,681
Loss on property dispositions .... 29,954 167,887
Equity loss in
Symskaya Exploration, Inc. . 130,203 399,457
Change in other assets ....... 37,724 31,585
Common stock issued for services . 19,250 79,725
Decrease in deferred income taxes (146,428) (1,552,325)
Increase (decrease) from changes in:
Accounts and advances receivable . (658,234) 409,534
Other current assets ............. 111,288 125,847
Accrued profit sharing ........... (36,340) (44,973)
Accounts payable and accrued
liabilities .................... (1,015,601) 157,874
Income taxes receivable/payable .. 213,559 239,610
Net cash provided ----------- -----------
by operating activities .......... 1,724,653 967,342
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to Symskaya Exploration ... (130,203) (399,457)
Capital expenditures ............... (1,196,900) (3,417,633)
Net cash used in ----------- -----------
investing activities ........... (1,327,103) (3,817,090)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of loan fees ............... (180,327) --
Net borrowings on
revolving credit facility ....... -- 2,521,170
----------- -----------
Net cash provided by financing
activities ...................... (180,327) 2,521,170
----------- -----------
NET INCREASE (DECREASE) IN CASH ....... 217,223 (328,578)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD ............. 444,476 378,801
----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD ................... $ 661,699 $ 50,223
=========== ===========
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Income taxes $ 127,938 $ 246,185
Interest $ 911,636 $ 959,731
The accompanying notes are an integral part of these statements.
5
NOTES TO FINANCIAL STATEMENTS
Note 1. Interim Financial Statements
The accompanying financial statements of Equity Oil Company ("Equity" or
"the Company") have not been audited by independent accountants, except for the
Balance Sheet as of December 31, 1998. In the opinion of the Company's
management, the financial statements reflect the adjustments, all of which are
of a normal and recurring nature, necessary to present fairly the financial
position of the Company as of September 30, 1999, and the results of its
operations for the three and nine month periods ended September 30, 1999 and
1998, and its cash flows for the nine month periods ended September 30, 1999 and
1998.
The financial statements and the accompanying notes to financial statements
have been prepared according to rules and regulations of the Securities and
Exchange Commission. Accordingly, certain notes and other information have been
condensed or omitted from the interim financial statements presented in this
Quarterly Report on Form 10-Q. These financial statements should be read in
conjunction with the Company's 1998 Annual Report on Form 10-K, and the
Company's Form 10-Q for the first and second quarters of 1999.
The results for the three and nine month periods ended September 30, 1999
are not necessarily indicative of future results.
Note 2. Net Income (Loss) Per Share
Income (loss) per share for all periods presented reflects the adoption of
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS
128"). SFAS 128 requires companies to present basic earnings per share, and if
applicable, diluted earnings per share, instead of primary and fully diluted
earnings per share. Basic earnings per share excludes dilution and is computed
by dividing net earnings available to common stockholders by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share reflects the potential dilution that could occur if options to issue
common stock were exercised into common stock.
Basic net income (loss) per share was computed by dividing the net income
(loss) by the weighted average number of common shares outstanding. Diluted net
income (loss) per share was computed by dividing the net income (loss) by the
sum of the weighted average number of common shares and the effect of dilutive
unexercised stock options. Options to purchase approximately 1,024,000 shares of
common stock at prices of $2.50 to $6.00 per share were outstanding during the
first nine months of 1999 and were included in the computation of diluted net
income per share for the three months ended September 30, 1999. Options to
purchase approximately 985,000 shares of common stock at prices of $3.56 to
$6.00 per share were outstanding during the first nine months of 1998. For all
other periods presented, options were not included in the computation of net
loss per share because the effect would have been antidilutive.
Note 3. Credit Facility
In September of 1999, the Company announced a new $50 million reducing
revolving credit facility with Bank One Texas, N.A. The facility has an initial
commitment of $17 million, and replaces a prior facility with HSBC Investment
Bank, which has exited the energy industry. The maturity date of the facility is
September 9, 2002, three years from the date of closing. The new facility has a
LIBOR or a prime interest rate option; the interest rate at closing was 7.69
percent.
As part of the new credit facility, the Company is required to hedge at
least 50% but not more than 75% of its daily oil production, at a price not
lower than the lowest price used in the bank's price deck, for a period between
12 and 18 months. The Company has 120 days after the closing date to have the
hedge or hedges in place. The Company entered into one collar agreement for 12
months effective October 1, 1999, covering 400 barrels per day with a floor at
$18.00 per barrel and a ceiling at $25.30 per barrel. Additional agreements will
be consummated within the 120 day period required by the bank.
6
PART I
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
RESULTS OF OPERATIONS
FINANCIAL RESULTS
Rising oil and gas prices during the third quarter of 1999, coupled with
reductions in most expense categories, enabled the Company to record positive
net income for the quarter, improve its liquidity, and generate additional cash
to fund its future drilling programs. The Company recorded net income for the
third quarter of 1999 in the amount of $422,532, or $.03 per share, on revenues
of $4,408,036. This compared to a net loss during the third quarter of 1998 of
$(1,250,826), or $(.10) per share, on revenues of $3,198,446.
The Company recorded a net loss for the first nine months this year in the
amount of $(38,222), or $(.00) per share, compared to a net loss for the first
nine months of 1998 in the amount of $(2,786,560), or $.(22) per share. Total
revenues for the first nine months of 1999 were $10,617,012, an increase of 8%
from revenues of $9,873,248 recorded during the same period of 1998.
OPERATING ACTIVITIES
In recognition of recently depressed oil prices, reduced cash flows in the
first half of 1999, and the ongoing volatility in the oil markets, the Company
has decreased the number of wells drilled in 1999, in addition to cutting its
operating expenses. During the first nine months of 1999, the Company
participated in a total of 6 wells, 4 of which have been completed as producing
wells. In addition to the drilling, the Company has recompleted or reworked
several of its producing wells with encouraging results.
As reported previously, included in the 1999 successful well count is an
exploratory well drilled in California on the Company's Merlin 3D seismic
project. The Equity P51B tested at a rate of 1.8 million cubic feet per day from
the Kione formation at a depth of 3,800 feet, and was placed on production in
May of 1999. Equity operates and has a 50% working interest in the well and the
Merlin project.
The second successful well is the #2-9 Davis Ranch drilled on Equity's
Davis Ranch 3-D seismic project. The well was drilled to a total depth of 7,550
feet and encountered three potentially productive sands that tested at a rate of
2 MMCFD. The well was placed on production in July of 1999. Equity operates and
has a 60% working interest in the well.
The third successful 1999 well is the #1-30 Wallace well drilled at the
Moon Bend 3D survey in the Sacramento Basin. The well was completed in the
Forbes formation at an initial production rate of 2.2 MMCFD. The Company has a
12% working interest in the well, which is operated by Slawson Exploration.
7
The initial exploratory test well at the Company's Sequoia project in the
San Joaquin Basin was a dry hole. In October, the second well drilled at Sequoia
was also a dry hole. Drilling results are currently being evaluated, and the
data acquired will be used to help identify the next drilling location.
In addition to the wells drilled, three of the Company's wells were
successfully recompleted or reworked during the third quarter. This work
included the Beaver Creek #24-15 in North Dakota, where gross oil production
increased from 800 barrels per day to approximately 1,250 barrels per day
following an acid stimulation. The Company has a 33% working interest in the
well. This flowing well has recorded cumulative production of 460,000 barrels
since May, 1998.
The Company also recompleted 2 wells at its Merlin project in the
Sacramento Basin. Gross gas production from the #1-15 Henning and #1-22 Otto
Lohse wells increased from 500 Mcf per day to 3,000 Mcf per day. The Company has
a 50% working interest in each well. The Merlin survey has produced in excess of
1 billion cubic feet of gas, with current field production of 3,200 Mcf per day
from three wells.
The Company continues to conduct operations with respect to Symskaya
Exploration in a maintenance mode. Drilling operations have resumed at the
Averinskaya - 150 well, an exploratory well that is being drilled near the town
of Yeniseysk in Eastern Siberia by the regional geological committee. The well
is adjacent to the southern block of acreage that Symskaya holds as part of its
1.1 million acre exploration, development and production license. The well is
being drilled to evaluate the oil and gas potential of the same geologic section
that Symskaya targeted in the drilling of its Lemok No. 1 well on the northern
acreage block of its License area. The well is currently drilling below 9,000
feet, and is projected to be drilled to a total depth of 11,500 feet.
CAPITAL RESOURCES AND LIQUIDITY
The Company's cash balances increased by $217,000 from December 31, 1998 to
September 30, 1999. The Company's improved financial results and reduced capital
expenditures were largely offset by a significant reduction in trade payables,
as well as an increase in accounts receivable. Overall, the Company's financial
position has been strengthened, as working capital at September 30, 1999 was
almost double that of December 31, 1998. The Company's ratio of current assets
to current liabilities more than doubled, reaching 4.15 to 1 at September 30,
compared to 1.76 to 1 at the end of 1998. Cash flow from operating activities
increased by 78% over 1998 levels, also a result of improved financial results.
During the first nine months of 1999, the Company cut its capital spending
by 65% over the same period of 1998. The reduction reflects lower first half oil
and gas prices, as well as the uncertainty surrounding the futures markets. The
goal of the Company is to fund all of its drilling projects in 1999 from
discretionary cash flows. The Company continues to high-grade both exploratory
and development projects based on their assumed risks and rewards, balancing
this with projects that have specific lease related drilling commitments. Should
oil prices continue to approximate current levels, the Company will add
additional projects to its drilling program in the fourth quarter.
8
In September of 1999, the Company announced a new $50 million reducing
revolving credit facility with Bank One Texas, N.A. The facility has an initial
commitment of $17 million, and replaces a prior facility with HSBC Investment
Bank, which has exited the energy industry. The maturity date of the facility is
September 9, 2002, three years from the date of closing. The new facility has a
LIBOR or a prime interest rate option; the interest rate at closing was 7.69
percent.
The Company's commitment under its credit facility is subject to a
redetermination as of May 1 and November 1 of each year, with estimated future
prices used in the evaluation determined by the Company's lender. As of
September 30, 1999, the Company had approximately $500,000 of remaining
availability on the facility. The Company is in compliance with all its facility
covenants.
During the first nine months of 1998, the Company increased borrowings
under its credit facility by $2,521,170, which were used to fund investments in
property and equipment and for working capital purposes. Since that time, the
Company has made no additional draws on its credit facility.
As part of the new credit facility, the Company is required to hedge at
least 50% but not more than 75% of its daily oil production, at a price not
lower than the lowest price used in the bank's price deck, for a period between
12 and 18 months. The Company has 120 days after the closing date to have the
hedge or hedges in place. The Company entered into one collar agreement for 12
months effective October 1, 1999, covering 400 barrels per day with a floor at
$18.00 per barrel and a ceiling at $25.30 per barrel. Additional agreements will
be consummated within the 120 day period required by the bank.
The Company believes that existing cash balances, cash flow from operating
activities, and funds available under the Company's credit facility will provide
adequate resources to meet its capital and exploration spending objectives for
1999, which have been significantly curtailed due to volatile oil prices. The
Company has adequate liquidity to maintain its operations as they currently
exist.
COMPARISON OF THIRD QUARTER 1999 WITH THIRD QUARTER 1998
Oil and gas sales increased 39% in the third quarter of 1999 to $4,303,735
versus $3,105,521 in the same quarter of last year. Higher oil and gas prices
were offset somewhat by decreases in both oil and gas production. Total revenues
increased 38% from 1998 to 1999.
9
Oil production decreased 8% in the third quarter of 1999, primarily due to
normal production declines. Oil production for the quarter was 162,000 barrels,
compared to 177,000 barrels in the third quarter of 1998. Gas production
decreased 12% to 530,000 Mcf in 1999 from 600,000 Mcf in 1998, also due to
normal production declines.
Average crude oil prices during the third quarter were significantly higher
in 1999. The Company's average oil price was $19.04, 58% higher than the $12.04
per barrel realized during the third quarter of 1998. Gas prices were also
higher, averaging $2.29 per Mcf in 1999 compared to $1.60 per Mcf in 1998.
Lease operating costs increased 3% over the prior year. Higher per unit
costs were offset by reduced volumes. Per unit costs rose as the Company had all
of its high-cost producing properties on production during the third quarter in
1999, while many of those properties had been shut in during 1998.
DD&A per unit charges decreased from $4.51 per BOE in 1998 to $4.19 per BOE
in 1999. The primary reason for the per unit decrease was the elimination of
approximately $4 million from the Company's depletable base through a property
impairment charge in the fourth quarter of 1998. In addition, higher oil prices
enabled the Company to record positive reserve revisions, which in turn
decreased DD&A rates for many of the Company's oil properties.
The equity loss in Symskaya Exploration decreased by $56,347 during the
third quarter of 1999. The 1998 amount included the Company's share of a bottom
hole contribution that was not repeated in 1999.
Lower exploration costs in 1999 resulted from the Company's reduced
drilling program. During the third quarter of 1999 the Company incurred no dry
hole costs. During the third quarter of 1998, the Company drilled 4 dry holes,
incurring total costs of $745,000. During October of 1999, the Company
participated in 2 dry holes, with a total cost of $210,000 net to the Company's
interest. This amount will be charged to exploration expense in the fourth
quarter.
General and administrative expenses decreased 21% from 1998 second quarter
levels. The decrease was due to reduced compensation and other administrative
expenses. Lower interest costs in 1999 reflect lower average interest rates on
the debt outstanding under the Company's credit facility.
The income tax expense/benefit recorded for both periods reflects the
Company's estimate of taxes arising from its operations during the respective
periods.
COMPARISON OF FIRST NINE MONTHS OF 1999 WITH FIRST NINE MONTHS OF 1998
Oil and gas sales increased 8% in the first nine months of 1999 as higher
oil and gas prices offset lower production volumes. Oil production for the first
nine months was 480,000 barrels, down 7% from 1998 production of 517,000
barrels. Oil production decreased year over year as the Company had shut in much
of its low-margin production during the first quarter of 1999. In addition to
normal production declines, the Company's reduced drilling program has resulted
in no additional oil wells added to production in 1999. Gas production for the
period decreased 12% from 1,770,000 Mcf in 1998 to 1,550,000 Mcf in 1999. The
reduction was caused by normal production declines, as well as a smaller number
of new wells added to production during this year.
10
Average prices received for crude oil were $15.36 per barrel during the
first nine months of 1999, compared to $12.54 received in 1998, an increase of
22%. Gas prices rose 9%, averaging $2.00 per Mcf in 1999 compared to $1.84 in
1998.
Lease operating costs declined 7% in 1999, as oil and gas volumes declined.
Per unit costs rose 2% over 1998 levels.
DD&A per unit charges decreased from $4.56 per BOE in 1998 to $4.20 per BOE
in 1999. The primary reason for the per unit decrease was the elimination of
approximately $4 million from the Company's depletable base through a property
impairment charge in the fourth quarter of 1998. In addition, higher oil prices
enabled the Company to record positive reserve revisions, which in turn
decreased DD&A rates for many of the Company's oil properties.
During the first nine months of 1998, the Company abandoned certain
Lodgepole prospect undeveloped leaseholds due to a lack of prospectivity. This
was the primary cause of a 1998 charge to expense of $170,601 for leasehold
abandonments. There was no corresponding event in 1999.
The Company incurred 3D seismic charges of $431,075 in 1998 associated with
its Sequoia project in the San Joaquin Basin of California. The Company did not
participate in any 3D seismic programs during the first nine months of 1999.
The Company recorded an equity loss in Symskaya of $130,203 during the
first nine months of 1999, down from $399,457 in the first half of 1999. The
1998 amount included a writedown of approximately $125,000 in interest income on
a senior note between Symskaya and the Company that had been accrued in prior
periods, as well as the Company's share of a bottom hole contribution. Neither
of these two events were recurring.
Lower exploration costs in 1999 resulted from the Company's reduced
drilling program described earlier, and the corresponding reduction in dry hole
costs. Total dry hole costs for the first nine months of 1999 were approximately
$175,000, compared to approximately $750,000 during the same period of 1998.
General and administrative expenses decreased 18% from 1998 third
quarter levels. The decrease was due to reduced compensation and other
administrative expenses. Lower interest costs in 1998 reflect lower average
interest rates on the debt outstanding under the Company's credit facility.
The income tax benefit recorded for both periods reflects the Company's
estimate of taxes arising from its operations during the respective periods.
11
OTHER ITEMS
The Company has reviewed all recently issued, but not yet adopted,
accounting standards in order to determine their effects, if any, on the results
of operations or financial position of the Company. Based on that review, the
Company believes that none of these pronouncements will have a significant
effect on current or future earnings or operations.
YEAR 2000.
In 1998 the Company began a project to ensure that its computer systems
were year 2000 compliant. The Company identified this project as a priority and
has allocated personnel and financial resources to it in an effort to minimize
the impact of year 2000 date related problems. An officer of the Company is
supervising the project. In addition, the Company is conducting a year 2000
compliance assessment of those of its vendors and customers whose relationship,
in the Company's business judgment, is material. Although the Company's
assessment of its year 2000 issues is not complete, the Company has made a
preliminary determination of its mission-critical and non-mission-critical
items.
The Company's mission-critical items include its financial accounting,
engineering, and lease/land software. Each of these items has been certified by
the vendor as year 2000 compliant. All nonmission-critical systems have been
certified as being compliant. The Company is conducting tests to support these
claims.
The Company does not anticipate incurring any significant expense to
ensure compliance. Although the Company is undertaking this project, no
assurance can be given that such a program will be able to solve the year 2000
issues applicable to the Company or that failure to solve them will not have a
material adverse effect on the Company.
FORWARD LOOKING STATEMENTS
The preceding discussion and analysis should be read in conjunction with
the consolidated financial statements, including the notes thereto, appearing in
the Company's annual report on Form 10-K. Except for the historical information
contained herein, the matters discussed in this report contain forward-looking
statements within the meaning of Section 27a of the Securities Act of 1933, as
amended, and Section 2le of the Securities Exchange Act of 1934, as amended,
that are based on management's beliefs and assumptions, current expectations,
estimates, and projections. Statements that are not historical facts, including
without limitation statements which are preceded by, followed by or include the
words "believes," "anticipates," "plans," "expects," "may," "should" or similar
expressions are forward-looking statements. Many of the factors that will
determine the Company's future results are beyond the ability of the Company to
control or predict. These statements are subject to risks and uncertainties and,
therefore, actual results may differ materially. The Company disclaims any
obligation to update any forward-looking statements whether as a result of new
information, future events or otherwise.
12
Important factors that may affect future results include, but are not
limited to: the risk of a significant natural disaster, the inability of the
Company to insure against certain risks, fluctuations in commodity prices, the
inherent limitations in the ability to estimate oil and gas reserves, changing
government regulations, as well as general market conditions, competition and
pricing, and other risks detailed from time to time in the Company's SEC
reports, copies of which are available upon request from the Company's investor
relations department.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is not aware of any pending or threatened litigation at this
time that will have a material adverse effect on the Company or any of its
properties.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- -------- -----------
10 Loan agreement between Equity Oil Company and
Bank One Texas, N.A.
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.
EQUITY OIL COMPANY
(Registrant)
DATE: November 12, 1999 By /s/ Paul M. Dougan
----------------------- ---------------------
Paul M. Dougan, President
DATE: November 12, 1999 By /s/ Clay Newton
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Clay Newton, Treasurer
Principal Financial Officer