U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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 Identification No.)
Incorporation or organization)
1660 Lincoln Street, Suite 2700, Denver, Colorado 80264
(Address of principal executive offices)
303-839-5504 FAX: 303-832-3013
(Issuer's telephone numbers)
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, and
(2) has been subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
Shares outstanding as of November 13, 1997: 7,093,150
This report contains ten pages and the exhibit index is on page 9.
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PART I. FINANCIAL INFORMATION:
HALLADOR PETROLEUM COMPANY
Consolidated Balance Sheet
(in thousands)
September 30, December 31,
1997 1996*
------------ -----------
ASSETS
Current assets:
Cash and cash equivalents $ 3,157 $ 2,898
Short-term investments 4,112 900
Accounts receivable-
Oil and gas sales 391 505
Well operations 543 365
------- -------
Total current assets 8,203 4,668
------- -------
Oil and gas properties (full-cost
accounting), at cost:
Unproved properties 1,707 711
Evaluated properties 40,784 39,527
Less - accumulated depreciation
depletion, amortization (33,153) (32,691)
------- -------
9,338 7,547
------- -------
Other assets 269 165
------- -------
$17,810 $12,380
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 663 $ 317
Oil and gas sales payable 196 169
Debt with recourse only to the
So. Cuyama Field 425 590
------- -------
Total current liabilities 1,284 1,076
------- -------
Debt with recourse only to the
So. Cuyama Field 4,898 5,231
------- -------
Deferred bonus plan 200 178
------- -------
Other 105 110
------- -------
Minority interest 5,032
------- -------
Preferred stock, $.10 par value;
10,000,000 shares authorized;
no shares issued Common Stock,
$.01 par value; 100,000,000 shares
authorized; 7,093,150 shares issued 71 71
Additional paid-in capital 18,061 18,061
Accumulated deficit (11,841) (12,347)
------- -------
6,291 5,785
------- -------
$17,810 $12,380
======= =======
*Derived from the Form 10-KSB.
See accompanying notes.
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HALLADOR PETROLEUM COMPANY
Consolidated Statement of Income
(in thousands, except per share amounts)
Nine months ended Three months ended
September 30, September 30,
1997 1996 1997 1996
----- ----- ----- -----
Revenue:
Oil $2,978 $3,105 $ 949 $1,067
Gas 260 235 93 80
NGLs 310 367 89 122
Interest 168 159 82 55
Other 39 4
------ ------ ----- -----
3,716 3,905 1,213 1,328
------ ------ ----- -----
Costs and expenses:
Lease operating 2,048 2,068 766 657
Depreciation, depletion
and amortization 462 425 176 141
General and
administrative 314 343 111 95
Interest 379 453 125 146
------ ------ ------ ------
3,203 3,289 1,178 1,039
------ ------ ------ ------
Income before minority
interest 513 616 35 289
Minority interest 7 7
------ ------ ------ ------
Net income $ 506 $ 616 $ 28 $ 289
====== ====== ====== ======
Net income per share $ .07 $ .09 (1) $ .04
====== ====== ====== ======
Weighted average shares
outstanding 7,094 7,094 7,094 7,094
====== ====== ====== ======
(1) Less than one cent.
See accompanying notes.
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HALLADOR PETROLEUM COMPANY
Consolidated Statement of Cash Flows
(in thousands)
Nine months ended
September 30,
1997 1996
-------- --------
Cash flows from operating activities $ 1,058 $ 1,233
------ ------
Cash flows used in investing activities:
Short-term investments (3,212) (2,831)
Additions to properties (2,026) (360)
Other assets (88)
------ ------
Net cash used in investing activities (5,326) (3,191)
------ ------
Cash flows from financing activities:
Yorktown investment 5,025
Repayments of debt (498) (670)
------ ------
Net cash provided by (used in)
financing activities 4,527 (670)
------ ------
Net increase (decrease) in cash and
cash equivalents 259 (2,628)
------ ------
Cash and cash equivalents, beginning of period 2,898 3,459
------ ------
Cash and cash equivalents, end of period $ 3,157 $ 831
====== ======
See accompanying notes.
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HALLADOR PETROLEUM COMPANY
Notes to Financial Statements
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
counting 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 1996 Form 10-KSB. This quarterly report should be read in
conjunction with such annual report.
2. On July 21, 1997, Yorktown Energy Partners II and affiliates
(Yorktown) invested $5,025,000 cash in Hallador Petroleum, LLP, a
newly formed limited liability limited partnership. The Company is
the general partner and received a 70% interest in the partnership in
return for contributing its net assets and Yorktown represents the
limited partners and received a 30% interest for its $5,025,000
contribution. The Company, being the general partner, consolidates
the activity of the partnership and presents the 30% limited
partners' interest as a minority interest.
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HALLADOR PETROLEUM COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
YEAR-TO-DATE COMPARISON
-----------------------
The table below provides sales data and average prices for the
period.
1997 1996
Sales Volume Average Price Sales Volume Average Price
------------ ------------- ------------ -------------
Oil - barrels 163,690 $18.19 165,077 $18.81
Gas - MCF 105,200 2.47 152,781 1.54
NGLs- barrels 22,962 13.51 29,841 12.30
Significantly higer gas prices partially neutralized the reduction in
revenue resulting from declining production. Interest income will
increase in future periods due to the Yorktown investment.
The tables below provide sales and expense data for each quarter through
September 30, 1997.
1997 Sales Volume by Quarter and Year-to-date
First Second Third Year-to-date
---------- ---------- ---------- ------------
Oil - barrels 51,637 54,761 57,292 163,690
Gas - MC 30,313 35,487 39,400 105,200
NGLs- barrels 7,389 7,807 7,766 22,962
1997 Average Prices by Quarter and Year-to-date
First Second Third Year-to-date
---------- ---------- ---------- ------------
Oil - barrels $20.90 $17.35 $16.56 $18.19
Gas -MCF 3.08 2.06 2.35 2.47
NGLs- barrels 17.60 11.65 11.51 13.51
Production levels are trending up because of the pump program discussed
below. Management expects to maintain or slightly increase the third
quarter production levels because of the pump program.
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1997 Expenses by Quarter and Year-to-date
First Second Third Year-to-date
---------- ---------- ---------- ------------
LOE $630 $652 $766 $2,048
DD&A 134 152 176 462
G&A 107 96 111 314
Interest 129 125 125 379
The upward trend in lease operating expense (LOE) is expected to
continue due to the higher electricity costs related to the pump program.
The upward trend in depreciation, depletion and amortization (DD&A) will
continue due to more costs being subject to amortization and because of the
increased level of activity resulting from the Yorktown investment. The
upward trend in general and administrative expenses will continue due to the
hiring of a vice-president on July 7, 1997, and because of the increased level
of activity resulting from the Yorktown investment.
Interest expense will stay at about the same level for the remainder
of the year.
QUARTER-TO-DATE COMPARISON
--------------------------
The table below provides sales data and average prices for the
period.
1997 1996
Sales Volume Average Price Sales Volume Average Price
--------------------------- ---------------------------
Oil - barrels 57,292 $16.56 54,362 $19.62
Gas - MCF 39,400 2.35 41,802 1.92
NGLs- barrels 7,766 11.51 10,020 12.17
Revenue decreased slightly due primarily to lower average oil prices.
See the table above for average prices by quarter for 1997.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
Cash, short-term investments and cash to be provided from operations
are expected to enable the Company to meet its obligations as they come
due and fund current planned activities
The following discussion updates the MD&A contained in Item 6 of the
1996 Form 10-KSB and should be read in conjunction therewith.
PROSPECT DEVELOPMENT AND EXPLORATION ACTIVITY
---------------------------------------------
At September 30 and November 13, 1997, the Company had investments in
unproved properties of $1,707,000 and $1,815,000, respectively. These
costs, most of which represent high-risk, high-reward investments may or
may not prove successful.
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SACRAMENTO BASIN-CALIFORNIA
---------------------------
The first well was drilled and completed in late May and placed on
production August 4. The well is producing 200 mcf/day from the Kione
zone (the Forbes zone - the primary zone-was dry) and the gas is being
sold at $2.14/mcf. Gas reserves for this well, net to the Company's
interest, are estimated to be less than 100,000 mcf. The Company's net
revenue interest in this well, considering the assignment discussed below,
is 24%. The second well, a dry hole, reached total depth on June 9. In
late July, the Company assigned half its 60% interest to Equity Oil
Company for $158,000 and a 30% carried interest through completion in the
next two wells to be drilled on or before December 31, 1997. After these
two wells are drilled, the Company is responsible for its 30%
proportionate share in all future drilling costs in the prospect.
Depending on the success of the next two wells, five to seven additional
wells could be drilled during the next 18 months.
WILLISTON BASIN-NORTH DAKOTA
----------------------------
In the first quarter 1997, the Company entered into a joint venture
(JV) which obtained five-year leases covering 30,000 net acres in North
Dakota. The Company has a 55% profits interest in the JV and, to date,
has invested approximately $684,000; the other party contributed seismic
and geological studies for its 45% profits interest. The Company is
entitled to recoup its investment before the other joint venture partners
shares in any profits. The Company plans to sell the acreage and retain
an overriding royalty interest or carried working interest.
BIG HORN BASIN-WYOMING
----------------------
On October 20, 1997, the Company reached an agreement to sell 50% of
its interest in the this prospect and closing is expected to occur on or
before November 17, 1997. The Company will essentially recover its
investment in the prospect but due to the full-cost method of accounting,
no gain will be recognized. Drilling is planned for the summer of 1998.
CALIFORNIA OIL PRICES
---------------------
As of November 13, the Company was receiving $17.01 for its California oil
production which is $.45 above the average prices received for the third
quarter of 1997 and about $2.54 below the average price received during
the calendar year 1996. On November 1, 1997, the Company began selling
its oil to TOSCO Energy under a one-year contract, which includes a $.30
premium.
SOUTH CUYAMA FIELD
------------------
During the third quarter Phase I of the pump program was completed by
installing ten electric, submersible pumps in the South Cuyama Field (Field).
The total cost net to the Company's interest was approximately $478,000.
The Company qualified for a rebate program with Pacific Gas & Electric
(PG&E), who supplies the electricity to the Field, and on November 12,
received $179,000 to its share. Such amount is included in accounts
receivable in the accompanying balance sheet.
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The Company is evaluating Phase II of the pump project for 1998.
Several more pumps could be purchased. It is possible that the Company would
receive another PG&E rebate under its 1998 program.
Some of the benefits of using electrical pumps are (i) an increase in
natural gas revenue since gas is sold as opposed to being consumed in the
Field, (ii) lower repair and maintenance expense, (iii) increased oil and
gas production because more water is being moved, and (iv) less emissions,
which results in less environmental regulation and costs. The downside is
the capital cost and the higher electricity bills; the advantages more
than offset the disadvantages.
Due to lower oil prices and the costs associated with the pump
progam, no new drilling into the Colgrove formation is planned for the
remainder of 1997.
NEW ACCOUNTING RULES
--------------------
In February 1997, FAS 128 dealing with earnings per share
calculations was issued and will be effective for the 1997 year-end
reporting. In addition, during June, FAS 130 and 131 were issued dealing
with comprehensive income and segment reporting, respectively, and are
required for 1998 reporting. The adoption of 128 and 130 will have no
material effect on the Company's financial reporting. Management is
evaluating the disclosure impact of FAS 131.
FUTURE RESULTS OF OPERATIONS
----------------------------
Assuming no success from the current exploration activities and
stable production, management projects 1997 net income to be lower than
1996 reported net income due to lower oil prices and higher expenses as
discussed above.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.14 -- Tosco Oil Contract
27 -- Financial Data Schedule; EDGAR filing only
(b) On July 24, 1997 the Company filed a Form 8-K to report the Yorktown
investment.
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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
Date: November 13, 1997 By: /s/ Victor P. Stabio
Victor P. Stabio
Chief Executive Officer and
Chief Financial Officer
Signing on behalf of the
registrant and as principal
financial officer.
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