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, 1996
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[ ] 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)
203-245-7664
...............................................................................
(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, 1996 was 24,691,245.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEET
(unaudited)
September 30, June 30,
1996 1996
ASSETS
Current assets:
Cash and cash equivalents $14,119,248 $ 11,278,957
U. S. Government securities 946,946 -
Accounts receivable 1,878,602 2,496,085
Reimbursable development costs 50,086 237,112
Inventories 328,528 371,925
------------ ------------
Total current assets 17,323,410 14,384,079
---------- ----------
Property and equipment:
Oil and gas properties (full cost method) 66,715,933 65,621,151
Land, buildings and equipment 2,250,681 2,328,174
Field equipment 1,495,952 1,621,561
------------ -----------
70,462,566 69,570,886
Less accumulated depletion, depreciation and amortization (26,840,375) (26,053,222)
------------ ------------
Net property and equipment 43,622,191 43,517,664
---------- ----------
Other assets 522,334 519,759
------------ ------------
$61,467,935 $58,421,502
=========== ===========
LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $2,153,048 $ 1,504,167
Accrued liabilities 998,972 1,041,372
Income tax payable 1,990,627 1,980,817
----------- -----------
Total current liabilities 5,142,647 4,526,356
----------- -----------
Long term liabilities:
Deferred income taxes 9,867,832 9,054,117
Reserve for future restoration costs 3,922,238 3,902,909
----------- ---------
13,790,070 12,957,026
---------- ----------
Minority interests: 19,862,245 18,966,281
----------- ----------
Stockholders' equity:
Common stock, par value $.01 per share:
Authorized 50,000,000 shares
Outstanding 24,691,245 shares 246,912 246,912
Capital in excess of par value 43,244,901 43,244,901
---------- -----------
43,491,813 43,491,813
Deficit (18,175,040) (18,735,378)
Foreign currency translation adjustments (2,643,800) (2,784,596)
------------ ------------
Total stockholders' equity 22,672,973 21,971,839
----------- -----------
$61,467,935 $58,421,502
=========== ===========
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
Three months ended
September 30,
---
1996 1995
Revenues:
Oil sales $1,758,328 $ 1,310,237
Gas sales 2,770,943 2,144,888
Other production related revenues 356,719 310,754
Interest income 223,936 168,897
------------ -----------
5,109,926 3,934,776
----------- ---------
Costs and expenses:
Production costs 1,284,818 1,058,777
Salaries and employee benefits 433,376 452,782
Depletion, depreciation and
amortization 865,885 696,839
Auditing, accounting and
legal services 194,049 213,087
Shareholder communications 19,036 27,850
Other 213,916 293,287
Interest 7,882 5,774
-------------- -------------
3,018,962 2,748,396
---------- ----------
Income before income taxes and minority interests 2,090,964 1,186,380
Income tax provision 768,459 448,133
----------- -----------
Income before minority interests 1,322,505 738,247
Minority interests 762,167 465,738
----------- -----------
Net income $ 560,338 $ 272,509
============ =============
Average number of shares outstanding 24,691,245 24,547,495
========== ==========
Net income per share $.02 $.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, 1996 24,691,245 $246,912 $43,244,901 $(18,735,378) $(2,784,596) $21,971,839
Net income - - - 560,338 - 560,338
Currency translation
adjustments - - - - 140,796 140,796
---------------- ------------- ----------------- ----------------- ----------- ------------
September 30, 1996 24,548,745 $246,912 $43,244,901 $(18,175,040) $(2,643,800) $22,672,973
========== ======== =========== ============== ============ ===========
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Three months ended
September 30,
1996 1995
Operating Activities:
Net income $ 560,338 $ 272,509
Adjustments to reconcile net income
to net cash provided by operating activities:
Depletion, depreciation and amortization 865,885 696,839
Deferred income taxes 813,715 809,843
Minority interests 762,167 686,804
Increase (decrease) in operating assets and liabilities:
Accounts receivable 636,238 (513,032)
Reimbursable development costs 188,382 (112,632)
Other assets 2,344 (19,949)
Inventories 46,703 (38,577)
Accounts payable and accrued liabilities 632,771 494,445
------------ ------------
Net cash provided by operating activities 4,508,543 2,276,250
----------- -----------
Investing Activities:
Purchase of U.S. Government securities (946,946) -
Net additions to property and equipment (765,981) (2,532,666)
------------- ------------
Net cash used in investing activities (1,712,927) (2,532,666)
------------ ------------
Financing Activities:
Exercise of MPC stock options and stock issued - 3,750
------------------ --------------
Net cash provided in financing activities - 3,750
------------------ -------------
Effect of exchange rate changes on cash
and cash equivalents 44,675 237,855
------------- ------------
Net increase (decrease) in cash and cash equivalents 2,840,291 (14,811)
Cash and cash equivalents at
beginning of year 11,278,957 8,982,582
------------ ------------
Cash and cash equivalents at
end of period $14,119,248 $ 8,967,771
=========== ===========
PART I - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1996
Item 1. Financial Statements - Notes
The information for the three month period ended September 30, 1996 and
1995, 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, 1996, the Company on a consolidated basis had
approximately 14,119,000 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 period $11,279,000
Cash provided by operations 4,509,000
Net additions to property and equipment (766,000)
Purchase of U.S. Government securities (947,000)
Other 44,000)
---------------
Cash and cash equivalents at end of period $14,119,000
===========
As to the Company (unconsolidated)
At September 30, 1996, Magellan Petroleum Corporation ("MPC"), on an
unconsolidated basis, had working capital of approximately $1,953,000. MPC's
normal annual operating budget is approximately $700,000 and its current cash
position and its future dividends from MPAL should be adequate to meet its
current cash requirements. During fiscal 1997, MPC has budgeted approximately
$350,000 for oil and gas exploration. MPC also has available a $1.5 million bank
line of credit. MPC has in the past invested and may in the future invest
substantial portions of its available funds to maintain its majority interest in
MPAL.
During September 1996, MPAL announced that its Board of Directors had
recommended a dividend of A.$.10 per share. MPC's share of this dividend is
approximately $1,775,000 less Australian withholding taxes of $266,000. The net
proceeds of $1,509,000 will be added to MPC's working capital. The dividend was
approved at MPAL's Annual General Meeting held on October 31, 1996 and is
payable on November 26, 1996.
PART I - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
As to MPAL
At September 30, 1996, MPAL had working capital of approximately
$10,228,000. MPAL has budgeted approximately $5.6 million for exploration in
fiscal 1997 in comparison to the $2.9 million incurred during fiscal 1996. 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, 1996 vs. September 30, 1995.
The Company had consolidated net income of $560,338 for the three month
period ended September 30, 1996 compared to net income of $272,509 for the
comparable 1995 period. The components of consolidated net income for the
comparable periods were as follows:
Three month period ended
September 30,
1996 1995
MPC unconsolidated pretax loss $(219,957) $(205,654)
MPC income tax (2,206) -
Share of MPAL pretax income 1,170,671 705,127
Share of MPAL income tax provision (388,170) (226,964)
---------- ----------
Consolidated net income $ 560,338 $ 272,509
======== =========
Net income per share $.02 $.01
==== ====
PART I FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Revenues
Oil sales increased by 34% in the current quarter increased because of
a 17% increase in oil prices and because of a 13% increase in the number of
units sold. The average value of the Australian dollar also increased 6% during
the 1996 period. 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,
--------------------------------------
1996 Sales 1995 Sales
Average price Average price
bbls per bbl bbls per bbl
Australia-Mereenie 98,927 A.$25.75 87,750 A.$22.01
Gas sales increased 29% with a 7% increase in the volumes of gas sold
and price increases as shown below. The average value of the Australian dollar
also increased 6% during the 1996 period. 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,
1996 Sales 1995 Sales
Average price Average price
bcf per mcf bcf per mcf
Australia:
Palm Valley
Alice Springs contract .232 A.$2.94 .247 A.$2.85
Darwin contract .377 A.$2.02 .653 A.$2.00
Mereenie:
Darwin contact .626 A.$2.17 .400 A.$1.85
Other .338 A.$2.69 .168 A.$2.62
---- ----
Total 1.573 1.468
===== =====
PART I - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Cont'd)
Other production related revenues increased 15% to $357,000 in 1996
compared to 311,000 in 1995. The primary reason for the increase is that MPAL's
share of gas pipeline tariffs increased during the 1996 period.
Interest increased 33% in 1996. The increase from $169,000 in 1995 to
$224,000 in 1996 results from the combination of additional funds available for
investment and higher interest rates.
Costs and Expenses
Production costs increased 21%. The increase relates to an increase in
costs at Mereenie because of the current work program to increase production.
Depreciation, depletion and amortization increased 24% in 1996. The
increase reflects the increase in the number of units sold.
Shareholder communications decreased 32% from $28,000 in 1995 to
$19,000 in 1996 because of cost saving efforts.
Other costs decreased 27% from $293,000 in 1995 to $214,000 in 1996. The
primary reason for the decrease is a reduction in the amount paid to consultants
in the 1996 period.
PART I - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1996
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Cont'd)
Income Taxes
A reconciliation of the income tax provisions (in thousands) for the
periods is as follows:
Three month period
ended September 30,
1996 1995
---- ----
Pretax consolidated income $2,091 $1,186
Losses not recognized:
MPC's U.S. operations 220 206
MPAL's non Australian operations 339 224
Permanent differences (522) (372)
-------- --------
Book taxable income $2,128 $1,244
====== ======
Australian tax rate 36% 36%
=== ===
Australian tax provision 766 448
U.S. tax provision 2 -
------- --------
Consolidated income tax provision $768 $448
==== ====
Exchange Effect
The value of the Australian dollar relative to the U.S. dollar
increased to $.7914 at September 30, 1996 compared to a value of $.7875 at June
30, 1996. This resulted in a $141,000 credit to the foreign currency translation
adjustments account for the three month period ended September 30, 1996. The .5%
increase in the value of the Australian dollar increased the reported asset and
liability amounts in the balance at September 30, 1996 from the June 30, 1996
amounts. The average exchange rate used to translate MPAL's operations in
Australia was $.7887 for the quarter ended September 30, 1996, which is a 6%
increase compared to the $.7411 rate for the quarter ended September 30, 1995.
PART II - FINANCIAL INFORMATION
MAGELLAN PETROLEUM CORPORATION
September 30, 1996
Item 5. Other Information.
The Company expects that a drilling rig will be on location in
Belize, C.A. to begin drilling an exploration well in the Gladden Basin by mid
December 1996.
Item 6. Exhibits and Reports on Form 8-K
On September 24, 1996, the Company filed a Current Report on
Form 8-K to announce the date, time and place of the Annual Meeting of
Stockholders for fiscal year 1996.
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 12, 1996 By /s/ James R. Joyce
James R. Joyce, President and
Chief Financial and Accounting Officer