FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
Commission File No. 0-9392
CLX ENERGY, INC.
(Exact name of registrant as specified in its charter)
CO 84-0749623
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1776 Lincoln Street, Suite 806, Denver, CO 80203
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (303) 894-0763
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 [ ]
Indicate the number of shares outstanding of each of the issuer's
class of common stock, as of the latest practicable date.
4,054,154 shares of Common Stock, $.01 par value at August 10, 1998
CLX ENERGY, INC.
June 30, 1998
INDEX
Form 10-Q
Part I. - Financial Information
Balance Sheets - June 30, 1998 and
September 30, 1997
Statements of Operations for the nine months
and three months ended June 30,
1998 and 1997
Statements of Cash Flows for the nine months
ended June 30, 1998 and 1997
Notes to Unaudited Financial Statements
Management's Discussion and Analysis of
Financial Condition and Results of
Operations
Part II. - Other Information
Signatures
CLX ENERGY, INC.
BALANCE SHEETS
June 30, 1998 and September 30, 1997
(Unaudited)
June 30, September 30,
ASSETS: 1998 1997
Current assets:
Cash $ 32,478 34,763
Accounts Receivable:
Trade - 59,471
Oil and gas sales 9,326 12,010
------- -------
Total current assets 41,804 106,244
------- -------
Property and equipment, at cost:
Oil and gas properties
(successful effort method):
Proved 329,732 329,732
Unproved 18,314 20,060
Office equipment 3,618 3,618
------- -------
351,664 353,410
Less accumulated depreciation
and depletion (212,149) (193,135)
------- -------
139,515 160,275
------- -------
Total assets $ 181,319 266,519
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 83,599 116,393
Due joint interest owners 8,355 8,355
------- -------
Total current liabilities 91,954 124,748
------- -------
Stockholders' equity:
Preferred stock, $.01 par value,
2,000,000 shares authorized,
600,000 shares designated Series A
$.06 cumulative convertible:
134,000 shares issued and outstanding
(aggregate involuntary liquidation
preference of $134,000 plus unpaid
dividends) 1,340 1,340
Common stock, $.01 par value,
50,000,000 shares authorized,
4,054,154 shares issued and
outstanding 40,542 40,542
Additional paid-in capital 541,417 541,417
Accumulative deficit (493,934) (441,528)
------- -------
Net stockholders' equity 89,365 141,771
------- -------
Total Liabilities and Equities $ 181,319 266,519
======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
CLX ENERGY, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Nine Months Ended Three Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues:
Oil and gas sales $ 65,871 89,617 20,587 17,591
Management fees 900 21,583 - 4,535
------- ------- ------- -------
Total revenue 66,771 111,200 20,587 22,126
Operating costs and expenses:
Lease operating and
production taxes 18,256 27,519 5,629 6,209
Lease rentals and abandonments 1,785 1,913 230 246
Dry hole costs - 6,430 - 6,430
Depreciation and depletion 19,014 17,884 6,807 5,046
General and administrative 77,905 106,757 17,483 29,620
------- ------- ------- -------
Total operating costs and expenses 116,960 160,503 30,149 47,551
------- ------- ------- -------
Operating loss ( 50,189) ( 49,303) ( 9,562) ( 25,425)
------- ------- ------- -------
Other income (expenses):
Gain on sale of assets 632 5,000 ( 37) -
Interest expense ( 2,849) ( 1,201) ( 993) -
------- ------- ------- -------
Total other income (expenses) ( 2,217) 3,799 ( 1,030) -
------- ------- ------- -------
Net loss $( 52,406) ( 45,504) ( 10,592) ( 25,425)
======= ======= ======= =======
Weighted average number of common
shares outstanding - basic and
diluted 4,054,154 3,855,741 4,054,154 4,054,154
========= ========= ========= =========
Net loss per common share
- basic and diluted $( .01) ( .01) ( * ) ( .01)
======= ======= ======= =======
* Less than $( .01) per share.
<FN>
The accompanying notes are an integral part of these financial statements.
CLX ENERGY, INC.
STATEMENTS OF CASH FLOWS
Nine Months Ended June 30, 1998 and 1997
(Unaudited)
1998 1997
Cash flows from operating activities:
Net income (loss) $( 52,406) ( 45,504)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation and depletion 19,014 17,884
Gain on sale of assets ( 632) ( 5,000)
(Increase) decrease in
accounts receivable 62,155 3,624
Decrease in
prepaid expenses - 49
Increase (decrease) in
accounts payable ( 32,794) 2,009
Increase (decrease) in
accrued expenses and other - ( 356)
------- -------
Net cash provided by (used in)
operating activities ( 4,663) ( 27,294)
------- -------
Cash flows from investing activities:
Proceeds from sale of property and equipment 7,130 5,000
Purchase of property and equipment ( 4,752) ( 7,900)
------- -------
Net cash provided by (used in)
investing activities 2,378 ( 2,900)
------- -------
Cash flows from financing activities:
Payments on short-term borrowings - ( 57,000)
Payments on long-term borrowings - ( 4,134)
Proceeds from issuance of common stock - 125,000
------- -------
Net cash provided by (used in)
financing activities - 63,866
------- -------
Net increase (decrease) in cash ( 2,285) 33,672
Cash, beginning of period 34,763 15,245
------- -------
Cash, end of period $ 32,478 48,917
======= =======
Supplemental disclosures of cash
flow information - cash paid
during period for interest $ - 1,557
======= =======
<FN>
The accompanying notes are an integral part of these financial statements.
CLX ENERGY, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 1998
Note A - Basis of Presentation
The balance sheet as of June 30, 1998, the statements of operations
for the nine months and three months ended June 30, 1998 and 1997 and
the statements of cash flows for the nine months ended June 30, 1998
and 1997 have been prepared by the Company, without audit. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position, results
of operations and cash flows at June 30, 1998 and for all periods
presented have been made.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principals have been condensed or omitted as permitted by
the rules and regulations of the Securities and Exchange Commission.
While the Company believes that the disclosures are adequate to make
the information presented not misleading, it is suggested that these
financial statements be read in conjunction with the September 30, 1997
financial statements of CLX Energy, Inc., the notes thereto and the
Independent Auditors' Report thereon.
Note B - Net income (loss) per common share
Net loss per common share is computed on the basis of the weighted average
number of common shares outstanding during the period as illustrated below:
Nine Months Ended Three Months Ended
June 30, June 30,
1998 1997 1998 1997
Net Loss $( 52,406) ( 45,504) ( 10,592) ( 25,425)
Preferred stock dividends ( 6,030) ( 6,030) ( 2,010) ( 2,010)
------- ------- ------- -------
Net loss, basic and diluted,
applicable to common
stockholders $( 58,436) ( 51,534) ( 12,602) ( 27,435)
======= ======= ======= =======
Weighted average number of
shares outstanding - basic
and diluted 4,054,154 3,855,741 4,054,154 4,054,154
========= ========= ========= =========
Net loss per share, basic and
diluted, applicable to
common shareholders $( .01) ( .01) ( * ) ( .01)
======= ======= ======= =======
* Less than $(.01) per share.
Options to purchase 475,000 shares of common stock were outstanding at
June 30, 1998 (743,750 at June 30, 1997) but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.
Note C - Preferred stock
Each share of the Company's outstanding Series A preferred stock was
convertible into one share of common stock until the conversion
privilege expired on April 30, 1983. Except in certain specified
circumstances, the Series A preferred stock is nonvoting. The Series A shares
are redeemable at the option of the Company at $1.50 per share, plus any
accrued and unpaid dividends. The Series A preferred stock has an involuntary
liquidation preference of $1 per share plus accrued and unpaid dividends.
Dividends on preferred stock of $.06 per share, $8,040, were not declared in
1984 through 1998 for a total of $120,600 and are in arrears at June 30, 1998.
Note D - Contingency
The Company has been advised by Panhandle Eastern Pipe Line Company that on
September 10, 1997 the Federal Energy Regulatory Commission (FERC) issued an
order that requires first sellers of gas to make refunds for all Kansas Ad
Valorem tax reimbursements collected for the period from October 3, 1983
through June 28, 1988, with interest.
This claim resulted from a Federal Energy Regulatory Commmission (FERC) order
issued September 10, 1997 which stated that ad valorem tax levied by the State
of Kansas could not be considered as an add-on to the Maximum Lawful Price
(MLP) of gas sold under the NGPA of 1978 covering the period from
October 3, 1983 through June 28, 1988. This order reversed the FERC rules in
effect during that time period that ad valorem taxes paid to the State of
Kansas by producers could recover from the pipeline company by the producers
over and above the MLP of gas sold under the guidelines set forth in the NGPA
of 1978.
The predecessor of the Company, Calvin Exploration Inc. was operator of certain
Kansas gas wells during the period covered by the order. Panhandle Eastern
Pipe Line Company has advised the Company that Calvin Exploration Inc., as
first seller, was paid $57,732 in Kansas Ad Valorem taxes. The Company was
also advised that as successor in interest to the first seller, the amount of
the refund that must be repaid with interest approximates $198,000 at
June 30, 1998.
The Company believes that, based on the law as it exists today, its liability
is limited to its ownership percentage. Accounts payable includes
approximately $48,000 in connection with the FERC claim, including interest and
estimated legal expenses.
The Kansas Independent Oil and Gas Association (KIOGA) has intervened with the
FERC requesting elimination of the interest charge on the claimed refunds. The
interest amounts to approximately 70% of the total refunds claimed. Bills have
been introduced in both the U.S. House of Representatives and Senate seeking
the same relief.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Analysis of Financial Condition
During the nine months ended June 30, 1998, the Company acquired proved and
unproved oil and gas properties at a cost of $4,752. During the same period,
the Company sold part of its interest in unproved oil and gas prospects for
$7,130. The Company received $900 in management fees for operating a drilling
program during the nine months ended June 30, 1998. In December 1996, the
Company sold in a private placement 833,333 shares of common stock for $.15 per
share for a total of $125,000.
Capital Resources and Liquidity
At June 30, 1998 the Company had negative working capital of $50,150.
Revenues from existing oil and gas production and management fees from
operating a drilling program are not adequate to cover the normal operating
expenses of the Company without a reduction of general and administrative
expenses.
The Company currently has drilling prospects which it is actively marketing to
industry participants. If these prospects are successfully sold, the Company
will receive a front-end payment and an interest carried free of costs in these
prospects which would improve the Company's cash flow.
Analysis of Results of Operations
Oil and gas sales decreased for the nine months ended June 30, 1998 as a result
of lower oil and gas prices and declining production. Oil and gas sales
increased for the three months ended March 31, 1998 primarily as a result of
normal fluctuations in production. Management fees decreased for the nine
months and the three months ended June 30, 1998 since the drilling program that
the Company acts as operator has terminated.
Lease operating expenses and production taxes decreased for the nine months
ended June 30, 1998 due to lower production taxes as a result of the decrease
in sales, and a general decrease in operating costs caused by mild weather
conditions. Lease operating expenses and production taxes increased for the
three months ended June 30, 1998 as a result of the increase in sales and other
normal fluctuations. Depreciation and depletion increased primarily as a
result of increased depreciation and depletion on a property with a high cost
basis. General and administrative expenses decreased for the nine months and
the three months ended June 30, 1998 as compared to the prior periods primarily
due to a general decrease in activity and reduced salary expense.
During the nine months ended June 30, 1998 the Company sold part of its
interest in unproved oil and gas prospects that resulted in a gain of $632.
During the nine months ended June 30, 1997 the Company sold part of its
interests in an unproved oil and gas prospect that resulted in a gain of
$5,000. Interest expense increased due to the interest accruing on its
estimated liability for the FERC ordered refund on Kansas gas pricing.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 27. Financial Data Schedule
(b) 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.
CLX ENERGY, INC.
/s/ E. J. Henderson
By: E. J. Henderson
President and Chief
Financial Officer
Dated: August 10, 1998