FORM 10-Q
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, 1995
----------------------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to____________________
Commission file number 1-5507
MAGELLAN PETROLEUM CORPORATION
..............................................................................
(Exact name of registrant as specified in its charter)
DELAWARE 06-0842255
.............................................................................
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification No.)
149 Durham Road, Madison, Connecticut 06443
.............................................................................
(Address of principal executive offices) (Zip Code)
203-245-8380
.............................................................................
(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 (l) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
l934 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. |X| Yes |_| No
The number of shares outstanding of the issuer's single class of common
stock as of November 1, 1995 was 24,568,745.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET
(unaudited)
September 30, June 30,
1995 1995
ASSETS
Current assets:
Cash and cash equivalents $ 8,967,771 $ 8,982,582
Accounts receivable 2,303,037 1,772,342
Reimbursable development costs 255,516 141,015
Inventories 249,066 208,334
------------ ------------
Total current assets 11,775,390 11,104,273
------------ ------------
Property and equipment:
Oil and gas properties (full cost method) 60,274,994 54,334,921
Land, buildings and equipment 2,239,419 2,084,616
Field equipment 1,580,254 1,457,894
----------- ------------
64,094,667 57,877,431
Less accumulated depletion, depreciation
and amortization (22,538,430) (20,516,580)
------------ ------------
Net property and equipment 41,556,237 37,360,851
------------ ------------
Other assets:
Other assets 386,566 363,084
------------ ------------
$53,718,193 $48,828,208
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,833,961 $ 1,416,315
Accrued liabilities 935,466 881,734
------------ ------------
Total current liabilities 2,769,427 2,298,049
------------ ------------
Long term liabilities and minority interests:
Deferred income taxes 9,908,162 8,877,253
Reserve for future restoration costs 2,265,421 2,127,805
Minority interests 18,325,016 16,616,405
----------- -----------
30,498,599 27,621,463
----------- -----------
Stockholders' equity:
Common stock, par value $.01 per share:
Authorized 50,000,000 shares
Outstanding 24,548,745 and 24,543,745 shares,
respectively 245,487 245,437
Capital in excess of par value 43,116,076 43,112,376
----------- -----------
43,361,563 43,357,813
Deficit (19,343,475) (19,615,984)
Foreign currency translation adjustments (3,567,921) (4,833,133)
------------ ------------
Total stockholders' equity 20,450,167 18,908,696
------------ -----------
$53,718,193 $48,828,208
=========== ===========
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Three months ended
September 30,
1995 1994
Revenues:
Oil sales $ 1,310,237 $ 1,487,427
Gas sales 2,144,888 1,745,150
Interest and other income 479,651 217,059
----------- -----------
3,934,776 3,449,636
----------- -----------
Costs and expenses:
Production costs 1,058,777 917,055
Salaries and employee benefits 452,782 317,395
Depletion, depreciation and
amortization 696,839 871,014
Auditing, accounting and
legal services 213,087 222,584
Shareholder communications 27,850 17,472
Other 293,287 277,900
Interest 5,774 7,460
----------- -----------
2,748,396 2,630,880
----------- -----------
Income before minority interests
and income taxes 1,186,380 818,756
Minority interests 686,804 531,967
----------- -----------
Income before income taxes 499,576 286,789
Income tax provision 227,067 198,708
----------- -----------
Net income $ 272,509 $ 88,081
=========== ==========
Average number of shares
outstanding 24,547,495 24,389,080
=========== ==========
Net income per share $.01) $( - )
===== ======
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
Capital in Accumulated
Number Common excess of translation
of shares stock par value Deficit adjustments Total
June 30, 1995 24,543,745 $245,473 $43,112,376 $(19,615,984) $(4,833,133) $18,908,696
Net income - - - 272,509 - 272,509
Currency
translation - - - - 1,265,212 1,265,212
adjustments
Exercise of stock options 5,000 50 3,700 - - 3,750
---------- -------- ----------- ------------ ----------- -----------
September 30, 1995 24,548,745 $245,487 $43,116,076 $(19,343,475) $(3,567,921) $20,450,167
========== ======== =========== ============= ============ ===========
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Three months ended
September 30,
1995 1994
Operating Activities:
Net income $ 272,509 $ 88,081
Adjustments to reconcile net income
to net cash provided by operating activities:
Depletion, depreciation and amortization 696,839 871,014
Deferred income taxes 809,843 304,377
Minority interests 686,804 531,967
Increase (decrease) in operating assets and liabilities:
Accounts receivable (513,032) (34,169)
Reimbursable development costs (112,632) (84,861)
Other assets (19,949) (12,153)
Inventories (38,577) 14,882
Accounts payable and accrued
liabilities 494,445 497,218
----------- ----------
Net cash provided by operating activities 2,276,250 2,176,356
----------- ----------
Investing Activities:
Net additions to property and equipment (2,532,666) (1,506,741)
------------ -----------
Net cash used in investing activities (2,532,666) (1,506,741)
------------ -----------
Financing Activities:
Exercise of MPC stock options and stock issued 3,750 1,972
------------ -----------
Net cash provided in financing activities 3,750 1,972
------------ ------------
Effect of exchange rate changes on cash
and cash equivalents 237,855 66,023
------------ ------------
Net increase (decrease) in cash and cash equivalents (14,811) 737,610
Cash and cash equivalents at
beginning of year 8,982,582 8,350,577
------------ ------------
Cash and cash equivalents at
end of period $ 8,967,771 $ 9,088,187
============ ============
PART I - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1995
Item 1. Financial Statements - Notes
The information for the three month period ended September 30, 1995 and
1994, is unaudited but includes all adjustments which the Company considers
necessary for a fair presentation of the results of operations for those
periods. All adjustments are of a normal recurring nature. The consolidated
financial statements include the Company's 50.7% owned subsidiary, Magellan
Petroleum Australia Limited ("MPAL").
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Consolidated
At September 30, 1995, the Company on a consolidated basis had
approximately $8,968,000 of cash and cash equivalents. A summary of the major
changes in cash items during the period is as follows:
Cash and cash equivalents at beginning of year $8,983,000
Cash provided by operations 2,276,000
Net additions to property and equipment (2,533,000)
Other 242,000
----------
Cash and cash equivalents at end of period $8,968,000
==========
As to the Company (unconsolidated)
At September 30, 1995, Magellan Petroleum Corporation ("MPC"), on an
unconsolidated basis, had cash and cash equivalents of approximately $1,204,000.
MPC's normal annual operating budget is approximately $750,000 and its current
cash position and its future dividends from MPAL should be adequate to meet its
current cash requirements. During fiscal 1996, MPC has budgeted approximately
$200,000 for oil and gas exploration. MPC also has available a $1.5 million bank
line of credit. MPC has in the past invested and may in the future invest
substantial portions of its available funds to maintain its majority interest in
MPAL.
During September 1995, MPAL announced that its Board of Directors had
recommended a dividend of A.$.10 per share. MPC's share of this dividend is
approximately $1,700,000 less Australian withholding taxes of $255,000. The net
proceeds of $1,445,000 will be added to MPC's working capital. The dividend was
approved at MPAL's Annual General Meeting held on November 2, 1995.
PART I - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1995
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
As to MPAL
At September 30, 1995, MPAL had cash and cash equivalents of approximately
$7,764,000. MPAL has budgeted approximately $5.5 million for exploration in
fiscal 1996 in comparison to the $2.8 million incurred during fiscal 1995. MPAL
expects to fund its exploration and development costs through its cash flow from
Australian operations, and if necessary, any additional requirements from its
A.$10 million bank line of credit.
Results of Operations
Three month period ended September 30, 1995 vs. September 30, 1994.
The Company had consolidated net income of $272,509 for the three month
period ended September 30, 1995 compared to net income of $88,081 for the
comparable 1994 period. The components of consolidated net income for the
comparable periods were as follows:
Three month period ended
September 30,
1995 1994
MPC unconsolidated pretax loss $(205,654) $(259,371)
MPC income tax expense - (2,400)
Share of MPAL pretax income 705,127 546,160
Share of MPAL income tax provision (226,964) (196,308)
-------- -------
Consolidated net income $ 272,509 $ 88,081
========= =========
Net income per share $.01 $ -
==== ====
PART I FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1995
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Oil and Gas Sales
Oil and gas sales (in thousands) by geographic location for the
comparable periods were as follows:
Three month period ended September 30,
--------------------------------------
1995 1995 1994 1994
Sales % Sales %
Australia $3,455 100 $3,085 95
United States - - 148 5
------ ----- ------ ----
$3,455 100 $3,233 100
====== ===== ====== ====
Oil Sales
Oil sales decreased by 12% in the current quarter. Oil sales in Australia
decreased because of a 9% decrease in oil prices which was partially offset by a
8% increase in the number of units sold. MPAL's share of oil sales in the United
States decreased because the producing properties were sold on March 31, 1995.
Oil unit sales in barrels ("bbls") and the average price per barrel sold during
the periods indicated were as follows:
Three month period ended September 30,
--------------------------------------
1995 Sales 1994 Sales
Average Average
price price
bbls per bbl bbls per bbl
Australia-Mereenie 87,750 A.$22.01 81,544 A.$24.08
PART I - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1995
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Gas Sales
Gas sales increased 23%. Gas sales in Australia increased with a 10%
increase in the volumes of gas sold and modest price increases. Total gas
volumes are expected to continue at least at current levels in the short term.
The volumes in billion cubic feet ("bcf"), (before deducting royalties) and the
average price of gas per thousand cubic feet ("mcf") sold during the periods
indicated were as follows:
Three month period ended September 30,
--------------------------------------
1995 Sales 1994 Sales
Average Average
price price
bcf per mcf bcf per mcf
Australia:
Palm Valley
Alice Springs contract .247 A.$2.85 .232 A.$2.73
Darwin contract .653 A.$2.00 .821 A.$1.97
Mereenie:
Darwin contact .400 A.$1.85 .216 A.$1.23
Other .168 A.$2.62 .059 A.$2.60
---- ----
Total 1.468 1.328
===== =====
Interest and other income
Interest and other income increased 121% in 1995. Interest and other income
includes $203,000, MPAL's share of gas pipeline tariffs which commenced in May
1995. Interest income also increased $47,000.
PART I - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1995
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Costs and Expenses
Production costs increased 15%. The increase in Australia relates to an
increase in costs at Mereenie because of the present work to increase
production. Production costs by geographic area (in thousands) are as follows:
Three months ended September 30,
1995 1994
Australia $1,059 $ 938
United States - (21)
------ -----
$1,059 $ 917
====== =====
Salaries and employee benefits increased 43% primarily because of increased
compensation costs in Australia.
Depreciation, depletion and amortization decreased 20% in 1995. The costs
in Australia increased 10% because of the increase in the number of units sold.
The U.S. amounts have decreased because the producing properties were sold on
March 31, 1995. The following table is a summary of the depreciation, depletion
and amortization expense (in thousands) by geographic area:
Three month period ended September 30,
1995 1994 % Change
Australia $697 $634 10%
United States - 237
---- ----
$697 $870
==== ====
Shareholder communications increased 59% because of a timing difference in
the holding of the Annual Meeting of Stockholders.
PART I - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1995
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Income Taxes
Effective July 1, 1995, the Australian income tax rate increased from 33%
to 36%. The effect of the change was to increase the consolidated income tax
provision for the 1995 quarter by $19,000.
A reconciliation of the income tax provisions (in thousands) for the
periods is as follows:
Three month period
ended September 30,
1995 1994
Pretax consolidated income $ 500 $ 287
Losses not recognized:
MPC's U.S. operations 206 259
MPAL's U.S. operations 114 41
Permanent differences (189) 10
----- -----
Book taxable income $ 631 $ 597
==== ====
Australian tax rate 36% 33%
==== ====
MPC income tax provision $ - $ 2
MPAL deferred income tax provision 227 197
---- ----
Consolidated $ 227 $ 199
==== ====
Exchange Effect
The value of the Australian dollar relative to the U.S. dollar increased to
$.7556 at September 30, 1995 compared to a value of $.7097 at June 30, 1995.
This resulted in a $1,265,000 credit to the foreign currency translation
adjustments account for the three month period ended September 30, 1995. The 6%
increase in the value of the Australian dollar increased the reported asset and
liability amounts in the balance at September 30, 1995 from the June 30, 1995
amounts. The average exchange rate used to translate MPAL's operations in
Australia was $.7411 for the quarter ended September 30, 1995, which is a .3%
increase compared to the $.7391 rate for the quarter ended September 30, 1994.
PART II - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1995
Item 5. Other Information.
None.
Item 6. Exhibits and 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:
MAGELLAN PETROLEUM CORPORATION
Registrant
Date: November 8, 1995 By /s/ James R. Joyce
James R. Joyce, President and
Chief Financial and Accounting Officer