United States
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-14731
HALLADOR PETROLEUM COMPANY
(Exact name of small business issuer as specified in its charter)
COLORADO 84-1014610
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1660 Lincoln St., Suite 2700, Denver, Colorado 80264
(Address of principal executive offices) (Zip Code)
303-839-5504 FAX 303-832-3013
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 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 [ ]
As of May 12, 1995 7,661,264 shares of the issuer's common
stock were outstanding.
This report contains 11 pages. There are no exhibits.
HALLADOR PETROLEUM COMPANY
FORM 10-QSB
INDEX
Page
PART I. Financial Information: No.
Consolidated Balance Sheet - March 31, 1995
and December 31, 1994............................ 3
Consolidated Statement of Operations - three months
ended March 31, 1995 and 1994.................... 5
Consolidated Statement of Cash Flows - three months
ended March 31, 1995 and 1994.................... 6
Notes to Financial Statements...................... 7
Management's Discussion and Analysis or Plan of
Operation........................................ 8
PART II. Other Information:
Legal Proceedings.................................. 11
Exhibits and Reports on Form 8-K................... 11
Signature.......................................... 11
2
PART I. FINANCIAL INFORMATION:
HALLADOR PETROLEUM COMPANY
Consolidated Balance Sheet
(in thousands)
ASSETS
March 31, December 31,
1995 1994*
------------- ------------
(unaudited)
Current assets:
Cash and cash equivalents $ 637 $ 438
Accounts receivable-
Oil and gas sales 409 504
Well operations 271 251
-------- -------
Total current assets 1,317 1,193
-------- -------
Oil and gas properties (full cost
accounting), at cost:
Evaluated properties 39,385 39,352
Less - accumulated depreciation,
depletion, amortization (31,310) (31,154)
-------- --------
8,075 8,198
-------- --------
Other assets 156 156
-------- --------
$ 9,548 $ 9,547
======== ========
*Derived from the Form 10-KSB.
See accompanying notes.
3
HALLADOR PETROLEUM COMPANY
Consolidated Balance Sheet
(in thousands, except share data)
LIABILITIES AND STOCKHOLDERS' DEFICIT
March 31, December 31,
1995 1994*
----------- -----------
(unaudited)
Current liabilities:
Accounts payable and
accrued liabilities $ 285 $ 262
Oil and gas sales payable 167 114
Convertible debt to related
parties including accrued
interest of $230 and $154 5,191 5,115
Debt with recourse only to
the South Cuyama Field 803 826
------- -------
Total current liabilities 6,446 6,317
------- -------
Debt with recourse only to the
South Cuyama Field 6,383 6,497
------- -------
Key Employee Bonus Plan 108 102
------- -------
Other 65 65
------- -------
Stockholders' deficit:
Common stock, $.01 par value;
100,000,000 shares authorized;
7,661,264 shares issued 77 77
Preferred stock, $.10 par value;
10,000,000 shares authorized;
no shares issued
Additional paid-in capital 9,995 9,995
Accumulated deficit (13,526) (13,506)
------- -------
(3,454) (3,434)
------- -------
$ 9,548 $ 9,547
======= =======
*Derived from the Form 10-KSB.
See accompanying notes.
4
HALLADOR PETROLEUM COMPANY
Consolidated Statement of Operations
(in thousands, except per share amounts)
(unaudited)
Three months ended
March 31,
------------------
1995 1994
-------- --------
Revenue:
Oil $ 884 $ 695
Gas 150 309
NGLs 140 135
Interest and other 8 5
------- -------
1,182 1,144
------- -------
Costs and expenses:
Lease operating 721 658
Depreciation, depletion and
amortization 156 169
General and administrative 88 96
Interest 237 251
------- -------
1,202 1,174
------- -------
Net (loss) $ (20) $ (30)
======= =======
Net (loss) per share $ (.0026) $ (.0046)
======= =======
Weighted average shares outstanding 7,661 6,488
======= =======
See accompanying notes.
5
HALLADOR PETROLEUM COMPANY
Consolidated Statement Of Cash Flows
(in thousands)
(unaudited)
Three months ended
March 31,
1995 1994
---------- ---------
Cash flows from
operating activities $ 369 $ 94
------- -------
Cash flows from investing activities:
Additions oil and gas properties (33) (93)
------- -------
Cash flows from financing activities:
Repayments of debt (137) (115)
------- -------
Net increase (decrease) in cash and
cash equivalents 199 (114)
Cash and cash equivalents,
beginning of period 438 369
------- -------
Cash and cash equivalents,
end of period $ 637 $ 255
======= =======
See accompanying notes.
6
HALLADOR PETROLEUM COMPANY
NOTES TO FINANCIAL STATEMENTS
(unaudited)
1. The interim financial data is unaudited; however, in the
opinion of management, the interim data includes all adjustments,
consisting only of normal recurring adjustments, necessary for a
fair statement of the results for the interim periods. The
financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance
with generally accepted accounting principals have been condensed
or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures included herein are adequate
to make the information presented not misleading.
The organization and business of the Company, accounting
policies followed by the Company and other information are
contained in the notes to the Company's financial statements filed
as part of the Company's December 31, 1994 Form 10-KSB. This
quarterly report should be read in conjunction with such annual
report.
2. As previously reported in 1992, the Company was named a
defendant in an action styled Kenneth Eugene Hahn, et al. v. Love
Process Engineering, Inc., et al (Case Number SM074020) filed in
the Santa Barbara Superior Court, North County Santa Maria Branch,
Santa Maria, California. This matter has been settled with no
material monetary affect to the Company.
7
HALLADOR PETROLEUM COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
Convertible Debt to Related Parties
-----------------------------------
During third quarter 1992, the Company reached an agreement to
restructure the debt with its majority shareholder, the Robert C.
Hardie family, and other investors in the original bridge loan.
The Company exchanged debt due September 30, 1992, bearing interest
at 9%, for new convertible notes totalling $4,982,000 (including
capitalized interest of $237,000) due September 30, 1994, bearing
interest at 6% and subsequently extended until December 16, 1994.
The new notes are collateralized (second to TCW, see below) by the
Company's interest in its California property and are convertible
into company common stock at a price of $.20 per share, which
approximated fair market value at the time of the agreement.
Interest is payable, at the option of the Company, either in cash
or in common stock using a fixed price of $.20 per share. In
addition, the Company issued to the noteholders four-year warrants
to purchase 5,000,000 shares of common stock at an exercise price
of $.25 in exchange for outstanding warrants to purchase 3,400,000
shares at various prices ranging from $.22 to $1.08. Approximately
26,000,000 new common shares would be issued assuming total
conversion of the bridge loan plus interest through May 12, 1995.
As the debt is currently due, substantial doubt exists
regarding the Company's ability to continue as a going concern if
the debt is not restructured. Management believes the debt will be
extended or restructured within the next six months.
TCW Debt
--------
The South Cuyama Field (the "Field"), the Company's primary
asset which accounts for approximately 92% of the Company's revenue
and 96% of reserves, is pledged by non-recourse debt to Trust
Company of the West (TCW). The Company owns 92% of Santa Barbara
Partners (SBP), an Oklahoma general partnership, which in turn owns
an 84% working interest (69% net revenue interest) in the Field
subject to an 18% net profits interest. Eighty-five percent of
SBP's cash flow from the property is used to service the TCW debt.
Interest at 9%is paid monthly. The other 15% of SBP's cash flow
from the Field is distributed to SBP's partners.
8
RESULTS OF OPERATIONS
Revenue increased slightly due primarily to higher prices for
oil and NGLs offset by declining gas production and declining gas
prices. As reported in the Company's 1994 Form 10-KSB, gas
reserves were reduced by approximately 40%. Currently, gas
production is less than expected and it is possible that a further
gas reserve reduction in the 10% range would be required sometime
during the remainder of 1995. Average product prices and volumes
are set forth in the following table:
1995 1994
Sales Volume Average Price Sales Volume Average Price
------------ ------------- ------------ -------------
Oil - barrels 56,505 $15.64 60,075 $11.56
Gas - MCF 102,271 1.46 150,860 2.05
NGLs- barrels 11,270 12.43 12,900 10.43
Lease operating expenses increased due to fractionation costs
of approximately $50,000 for two wells during the quarter and
severe weather conditions requiring electrical repairs. The
Company is accounting for fractionation costs similar to well
workover expense as opposed to capitalizing such fractionation
costs.
9
OUTLOOK FOR REMAINDER OF 1995
Fractionation Project
---------------------
The Company initiated a study to fractionate(frac) certain
wells in the Field as reported in the 1994 Form 10-KSB. Through
May 12, 1995 five wells have been fractionated. Although the
results from the first frac job were encouraging; the results from
the additional four frac jobs have not been as encouraging.
Consequently, the Company is evaluating their results before making
decisions regarding future fractionations.
Hedging
-------
Currently, California oil prices are in line with gravity
adjusted West Texas Intermediate oil prices. Therefore, management
is investigating if hedging strategies would prove beneficial to
the Company. As of May 12, 1995, the Company is receiving $17.35
per barrel for its California production as compared to an average
price of $15.62 during the first quarter of 1995.
Currently, the Company is receiving approximately $1.20/MCF
for its California production which is less than the average price
received of $1.46 during the first quarter 1995. Management does
not plan to implement any hedging strategies for its gas
production.
Liquidity and Capital Resources
-------------------------------
Cash from operations is expected to enable the Company to meet
its obligations as they become due through 1995 other than the debt
to related parties discussed above. Because of the uncertainty
surrounding the restructuring of the related party debt,
substantial doubt exists regarding the Company's ability to
continue as a going concern. Management believes the debt will be
extended or restructured within the next six months.
Cash from operations is expected to fund the fractionation
project.
Results of Operations
---------------------
Assuming product prices do not decline, a small loss is
expected for the second quarter due to the costs incurred for the
fractionation of three wells during the second quarter. As stated
earlier, the Company is evaluating the status of the fractionation
project; if additional frac jobs are incurred during the second
quarter, the result would be a larger loss for the quarter. The
outcome for the remaining six months of 1995 will also depend on
the fractionation project and future product prices. If, as
discussed earlier, the gas reserves are reduced, DD&A expense would
increase.
10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
As previously reported in 1992, the Company was named a
defendant in an action styled Kenneth Eugene Hahn, et al. v. Love
Process Engineering, Inc., et al (Case Number SM074020) filed in
the Santa Barbara Superior Court, North County Santa Maria Branch,
Santa Maria, California. This matter has been settled with no
material monetary affect to the Company.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
No reports on Form 8-K were filed by the Company during the
quarter ended March 31, 1995.
There are no exhibits to this report.
SIGNATURE
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HALLADOR PETROLEUM COMPANY
(REGISTRANT) HALLADOR PETROLEUM COMPANY
BY (SIGNATURE) \S\ Victor P. Stabio
(NAME AND TITLE) Victor P. Stabio, Chief Executive
Officer and
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial and accounting officer.
(DATE) May 12, 1995
11