UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
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
For the transition period from ________________ to _________________
Commission File Number 1-7796
TIPPERARY CORPORATION
(Exact name of registrant as specified in its charter)
Texas 75-1236955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
633 Seventeenth Street, Suite 1550
Denver, Colorado 80202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303)293-9379
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 classes of
common stock, as of the latest practicable date.
Class Outstanding May 12, 1995
- - - - - ------------------------------- ------------------------
Common Stock, $.02 par value 11,188,004 shares
TIPPERARY CORPORATION AND SUBSIDIARIES
Index to Form 10-Q
Page No.
PART I. FINANCIAL INFORMATION (UNAUDITED)
Item 1. Financial Statements
Consolidated Balance Sheet
March 31, 1995 and September 30, 1994 1
Consolidated Statement of Operations
Three months and six months ended
March 31, 1995 and 1994 3
Consolidated Statement of Cash Flows
Six months ended March 31, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 12
TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
(in thousands)
(unaudited)
March 31, September 30,
1995 1994
--------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 1,545 $ 2,308
Receivables 2,869 3,339
Inventory 190 190
Current portion of deferred income taxes,
net 129 209
Other current assets 113 388
-------- ------------
Total current assets 4,846 6,434
-------- ------------
Property, plant and equipment, at cost:
Oil and gas properties, full cost method 113,543 111,203
Other property and equipment 1,924 1,788
-------- ------------
115,467 112,991
Less accumulated depreciation, depletion and
amortization (79,252) (76,369)
-------- ------------
Property, plant and equipment, net 36,215 36,622
-------- ------------
Noncurrent portion of deferred income taxes, net 3,062 2,982
Investment in preferred stock 1,770 1,770
Investment in NGL fractionating plant 1,033 316
Other noncurrent assets 90 129
-------- ------------
$ 47,016 $ 48,253
-------- ------------
-------- ------------
(Continued)
See accompanying notes to financial statements.
1
TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet - Continued
(in thousands)
(unaudited)
March 31, September 30,
1995 1994
--------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ - $ -
Accounts payable 413 675
Accrued liabilities 181 219
Production taxes payable 242 287
Royalties payable 125 288
-------- --------
Total current liabilities 961 1,469
-------- --------
Long-term debt, net of current portion 15,746 15,746
Deferred lease obligation 2 7
Commitments and contingencies (Note 2)
Stockholders' equity:
Preferred stock - -
Common stock; par value $.02; 20,000,000 shares
authorized; 11,215,804 issued and 11,188,004
outstanding 224 224
Capital in excess of par value 98,354 98,354
Accumulated deficit (68,200) (67,476)
Treasury stock, at cost; 27,800 shares (71) (71)
-------- --------
Total stockholders' equity 30,307 31,031
-------- --------
$ 47,016 $ 48,253
-------- --------
-------- --------
See accompanying notes to consolidated financial statements.
2
TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
(in thousands, except per share data)
(unaudited)
Three months ended Six months ended
March 31, March 31,
-------------------- -------------------
1995 1994 1995 1994
--------- -------- -------- --------
From continuing operations:
Revenues $ 3,163 $ 3,466 $ 6,104 $7,207
Costs and expenses:
Operating 1,451 1,658 2,825 3,127
General and administrative 315 337 652 650
Depreciation, depletion and amortization 1,472 1,217 2,903 2,523
--------- -------- -------- --------
Total costs and expenses 3,238 3,212 6,380 6,300
--------- -------- -------- --------
Operating income (loss) (75) 254 (276) 907
--------- -------- -------- --------
Other income (expense):
Interest income 24 9 44 21
Dividend income 22 - 44 -
Interest expense (264) (236) (524) (483)
Research and development expense - (4) (12) (62)
--------- -------- -------- --------
Total other expense (218) (231) (448) (524)
--------- -------- -------- --------
Income (loss) from continuing operations
before income tax (293) 23 (724) 383
Current income tax expense - (4) - (10)
Deferred income tax benefit - 110 - 210
--------- -------- -------- --------
Income (loss) from continuing operations (293) 129 (724) 583
--------- -------- -------- --------
From discontinued operations:
Income (loss) from discontinued gas transmission
operations, including litigation expenses of
$210 and net of income tax benefit of $8 - 19 - (202)
--------- -------- -------- --------
Income (loss) before cumulative effect of change
in method of accounting for income taxes (293) 148 (724) 381
Cumulative effect of change in method
of accounting for income taxes - - - 3,000
--------- -------- -------- --------
Net income (loss) $ (293) $ 148 $ (724) $3,381
--------- -------- -------- --------
--------- -------- -------- --------
(Continued)
See accompanying notes to consolidated financial statements.
3
TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations - Continued
(in thousands, except per share data)
(unaudited)
Three months ended Six months ended
March 31, March 31,
------------------ ----------------
1995 1994 1995 1994
------- ------- ------- ------
Primary income (loss) per share:
From continuing operations $ (.02) $ .01 $ (.06) $ .05
From discontinued operations - - - (.02)
------- ------- ------- ------
Net income (loss) before cumulative
effect of change in accounting principle (.02) .01 (.06) .03
Cumulative effect of change in
accounting principle - - - .27
Net income (loss) $ (.02) $ .01 $ (.06) $ .30
------- ------- ------- ------
------- ------- ------- ------
Weighted average shares outstanding 11,188 11,053 11,188 11,292
------- ------- ------- ------
------- ------- ------- ------
See accompanying notes to consolidated financial statements.
4
TIPPERARY CORPORATION AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
Six months ended
March 31,
--------------------
1995 1994
-------- --------
Cash flows from operating activities:
Net income (loss) $ (724) $ 3,381
-------- --------
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation, depletion and
amortization 2,903 2,523
Deferred lease obligation (5) (5)
Deferred income taxes - (210)
Income tax effect of stock option exercise - 7
Cumulative effect of accounting change - (3,000)
Change in assets and liabilities:
(Increase) decrease in receivables 470 (530)
Increase in inventory - (42)
Decrease in other current assets 275 246
Decrease in accounts payable, accrued
liabilities and production taxes payable (345) (275)
Increase (decrease) in royalties payable (163) 92
Other 19 50
-------- --------
Total adjustments 3,154 (1,144)
-------- --------
Net cash provided by operating activities 2,430 2,237
-------- --------
Cash flows from investing activities:
Proceeds from asset sales 575 4
Investment in NGL fractionating plant (717) -
Capital expenditures (3,051) (1,204)
-------- --------
Net cash used in investing activities (3,193) (1,200)
-------- --------
Cash flows from financing activities:
Principal repayments - (1,300)
-------- --------
Net cash used in financing activities - (1,300)
-------- --------
Net decrease in cash and cash equivalents (763) (263)
Cash and cash equivalents at beginning of period 2,308 2,151
-------- --------
Cash and cash equivalents at end of period $ 1,545 $ 1,888
-------- --------
-------- --------
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 521 $ 514
Income taxes $ - $ 3
See accompanying notes to consolidated financial statements.
5
TIPPERARY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
MANAGEMENT'S REPRESENTATION
In the opinion of management, the accompanying unaudited financial statements
reflect all adjustments, consisting only of normal recurring adjustments, which
are necessary for a fair presentation of the consolidated financial position of
Tipperary Corporation (the "Company") at March 31, 1995, and the results of
its operations for the three-month and six-month periods ended March 31, 1995
and 1994. The consolidated financial statements include the accounts of
Tipperary Corporation and its subsidiaries, all wholly-owned, and its share of
assets, liabilities, revenues and expenses of unincorporated joint ventures
and partnerships. The accounting policies followed by the Company are included
in Note 1 to the Consolidated Financial Statements in the Annual Report on
Form 10-K for the year ended September 30, 1994. These financial statements
should be read in conjunction with the Form 10-K.
NOTE 2 - COMMITMENTS AND CONTINGENCIES
The Company is a Defendant in a lawsuit filed on September 20, 1991, styled
VALERO TRANSMISSION, L.P. V. J. L. DAVIS V. TIPPERARY CORPORATION, Cause
No. 91-09-00357-CVF, in the 81st Judicial District, Frio County, Texas.
The case involves gas purchase contracts between Valero and Davis. The
Company previously owned 50% of Davis' interest in the contracts.
Valero claimed it had overpaid Davis under the contracts and requested damages
for breach of contract from Davis. Davis thereafter filed a third-party
petition against the Company requesting that the Company reimburse Davis for 50%
of any amounts paid to Valero on account of the claims made by Valero in its
original petition. Valero and Davis have now settled the claims between
themselves and Davis has requested that the Company reimburse Davis for 50% of
such settlement to the extent that the settlement covers time periods in which
Davis and the Company each owned a 50% interest in the contracts. The Company
has answered the lawsuit, denying the claims of Davis, and the Company intends
to vigorously defend all claims made in the suit. The Company does not
anticipate that this matter will have a material adverse effect on its financial
condition or results of operations.
The Company is subject to various possible contingencies which arise primarily
from interpretation of federal and state laws and regulations affecting the oil
and gas industry. Although management believes it has complied with the various
laws and regulations, administrative rulings and interpretations thereof,
adjustment could be required as new interpretations and regulations are issued.
NOTE 3 - PROPERTY SALES
The Company entered into a Purchase and Sale Agreement dated February 28,
1995 providing for the sale of its interest in certain gas properties and
related assets in La Plata County, Colorado for approximately $4,500,000,
which sale closed on May 1, 1995. The Company sold its interest in other oil
and gas properties in southern Louisiana for approximately $600,000 on
February 24, 1995. The two property sales involved non-operated working
interests and represented approximately 5.4% of the Company's total
discounted future net revenues and 486,000 barrels of oil equivalent ("BOE"),
or 7.7% of the Company's total proved reserve volumes as of September 30,
1994. Under the full cost method of accounting, no gain was recognized on
the February 24, 1995 property sale; the proceeds were credited to the full
cost pool, thereby reducing the book value of the Company's oil and gas
properties. The same accounting treatment will apply to the sale which
closed May 1, 1995.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
During the six months ended March 31, 1995 the Company continued its
exploration projects in Queensland, Australia and in the Williston Basin of
Montana. Additionally, construction continued on the Alabama natural gas
liquids ("NGL") fractionating plant in which the Company has invested along
with several other participants. These projects accounted for the majority
of the Company's capital expenditures during the period, with $1,633,000
expended on the Comet Ridge coalbed methane project in Australia, $709,000
expended on the Williston Basin project in Montana, and $717,000 advanced
toward the construction of the NGL fractionating plant. Approximately
$264,000 was expended on domestic drilling and recompletion projects.
Offsetting capital expenditures were proceeds of approximately $600,000 from
the February 24, 1995 sale of interests in certain producing oil and gas
properties located in Louisiana. During the six months ended March 31, 1994
capital expenditures totalled $1,204,000, of which $214,000 was expended on
the Comet Ridge project, $256,000 was expended on conversion of the Company's
saltwater disposal system, with the balance attributable to various
development drilling projects.
Cash flows were provided primarily by the Company's producing oil and gas
properties during both the six months ended March 31, 1995 and March 31, 1994.
Net cash provided by operating activities was $2,430,000 and $2,237,000 for the
six months ended March 31, 1995 and March 31, 1994, respectively. During the
six months ended March 31, 1995 no principal payments were made on long term
debt, while during the six months ended March 31, 1994, $1,300,000 was paid in
reduction of long-term debt. During both periods, the Company's only
outstanding long-term debt was owed to its commercial bank lender. During the
six months ended March 31, 1994, the Company paid $210,000 to settle litigation
related to the Company's discontinued gas transmission operations.
Cash on hand was $1,545,000 as of March 31, 1995 versus $2,308,000 as of
September 30, 1994. The Company continues to utilize cash on hand along with
cash flows from producing properties and sales of properties to fund its
domestic and international exploration projects as well as its funding
commitment for construction of the NGL fractionating plant. Subsequent to
March 31, 1995 the Company sold certain of its producing gas properties for
approximately $4,500,000 in cash. Proceeds will be utilized in reduction of
bank debt and/or funding of exploration projects underway. The Company may
also generate cash by selling a portion of its Williston Basin 3-D seismic
project prior to drilling.
The following is a recapitulation of activities involving the Company's major
capital projects:
INTERNATIONAL EXPLORATION. During the six months ended March 31, 1995,
the Company and its co-venturers ("the Group") drilled nine additional
wells on its Comet Ridge coalbed methane project area in Queensland,
Australia. Subsequent to March 31, 1995 two more wells were drilled.
Of the total wells drilled within the Group's Authority to Prospect
("ATP"), three are currently capable of production, four are being
de-watered and six are awaiting further completion procedures. All of
these wells have encountered coals containing methane gas. Further
drilling is underway and efforts to establish marketing contracts for the
gas have begun. Additionally, approximately 100 miles of 2-D seismic data
has been shot and processed by the group. Plans for pipeline construction
are anticipated upon confirmation of gas markets and sales prices
available. The Group's ATP covers approximately 1,365,000 acres. The
Company's interest bears 30% of capital costs and 28.125% of operating
expenses, and its net revenue interest is 25.3125% prior to project payout.
Subsequent to project payout, the Company's interest bears 24% of capital
and operating expenses and its net revenue interest is 21.6%.
DOMESTIC EXPLORATION. During the six months ended March 31, 1995, the
Company continued to acquire leasehold acreage in its Williston Basin 3-D
seismic project area. As of March 31, 1995, the Company owned an
undivided 87.5% interest in approximately 40,000 net acres. Total
investment in the project was approximately $1,717,000 as of March 31,
1995. A seismic survey covering approximately 30% of the project acreage
has been completed and data is currently being processed. It is
anticipated that initial drilling will commence in the summer of 1995.
7
NGL FRACTIONATING PLANT INVESTMENT. Construction of the Plant commenced
during the six months ended March 31, 1995 and is expected to be completed
during the third fiscal quarter ending June 30, 1995. As of March 31, 1995
the Company had advanced $1,033,000 of its $1,148,000 total commitment for
capital contributions. The Company will fund the remaining $115,000 due
under the agreement upon start up of the Plant. The Company owns a 45%
interest in Plant profits prior to payout of its investment and a 27%
interest thereafter. The Company's interest is owned indirectly through
its ownership of an interest in a Utah limited liability company ("LLC").
This LLC in turn owns an interest in an Alabama LLC which was formed for
the purpose of owning and operating the Plant.
The Company's bank debt outstanding of $15,746,000 as of September 30, 1994
remained unchanged as of March 31, 1995. Of this total, $10,000,000 is payable
in full on September 30, 1996 and bears interest at a fixed rate of 5.92%.
While principal reductions are not required until maturity, interest is payable
monthly. Borrowings in excess of the $10,000,000 fixed-rate loan are pursuant
to a revolving loan, which was scheduled to convert to a four-year term loan on
April 5, 1996. This conversion date was extended to April 5, 1997. The
Company's bank credit agreement provides a maximum facility of $40,000,000,
subject to borrowing base limitations described below. At the Company's option,
interest is payable at either the bank's Base Rate or the London Interbank
Offered Rate ("LIBOR") plus 1.5%. The LIBOR-based option may be selected for
periods not exceeding 90 days. At March 31, 1995, the weighted average interest
rate for amounts under the revolver was 7.93%. Although the LIBOR/Base Rate
loan is a two-year revolver, the Company has made voluntary principal reductions
in the past and expects to do so in the future. The maximum borrowing base is
calculated by the bank and is based upon its assessment of the value of the
Company's properties. This bank valuation is based upon the bank's assumptions
about reserve quantities, oil and gas prices, operating expenses and other
assumptions which may not agree with the Company's assumptions. As of March 31,
1995 the borrowing base was $17,500,000. The Company is obligated to pay a
commitment fee of 3/8% per annum on the difference between the average
outstanding loan balance and the nominated borrowing base.
While the Company's cash flows are directly affected by oil and gas prices, the
Company's existing hedge positions partially mitigate the effects of lower oil
prices. The Company presently has hedged, under swap agreements, 20,000 barrels
per month of its remaining fiscal 1995 oil production at a New York Mercantile
Exchange ("NYMEX") average floor price of approximately $17.21 per barrel.
These hedging agreements allow upside participation percentages averaging 31%
of price increases above the floor level. The Company's actual price received
at the wellhead has recently averaged $2.00 to $3.00 per barrel below NYMEX
prices. None of the Company's gas production is currently hedged. Net
(payments) receipts pursuant to the Company's hedging activities for the six
months ended March 31, 1995 and 1994 were ($90,000) and $257,000, respectively.
Notwithstanding the Company's hedging positions, decreases in oil and gas prices
could cause a reduction in cash flows available for the funding of capital
projects and reduction of bank debt.
The Company paid approximately $12,000 and $62,000 during the six months ended
March 31, 1995 and 1994, respectively, to Texas Tech University ("Texas Tech")
to fund a research project for the further development of a new oil cleanup
technology. The technology is designed to biodegrade absorbent materials
utilized in the containment and cleanup of oil spills, and to release absorbed
oil to the liquid phase. Additional studies relating to the separation,
treatment and recovery of the released oil have been conducted by Texas Tech.
The procedure has been performed successfully in a laboratory environment.
Management believes that such a process, if proven to be commercial, could
provide value in degradation and/or reduction of oil saturated material that
must be disposed of in toxic landfills. The Company has the right to acquire
exclusive licensing rights to the technology for no additional consideration,
subject to a maximum 10% sales royalty to be paid to Texas Tech. Costs
incurred pursuant to this agreement are expensed as incurred. While the
Company has no further funding commitments, it may incur additional costs as
efforts are underway to establish commercial applications of this technology.
The Company currently anticipates funding its existing projects through cash on
hand, cash flows generated from oil and gas operations and bank borrowing.
Due to the natural decline in oil and gas production rates and the Company's
limited borrowing capacity under its existing credit facility, other means of
financing may be pursued in the future. In the event that current projects
require capital investments beyond the aforementioned cash sources, the Company
may pursue project financing, private debt issuances and equity offerings.
8
RESULTS OF OPERATIONS - COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1995 AND
1994
Operating revenues from continuing operations for the three months ended
March 31, 1995 decreased $303,000, or 9%, to $3,163,000 from $3,466,000 in the
corresponding fiscal 1994 period. Oil volumes decreased 26,000 barrels, or 15%,
to 143,000 barrels versus 169,000 barrels in the prior year period, decreasing
revenue by $347,000. Gas volumes decreased 77,000 Mcf, or 11%, to 596,000 Mcf
in the current period compared to 673,000 Mcf in the three months ended
March 31, 1994, resulting in an $129,000 decrease in revenues. The decreases
in volumes produced are attributable to both the sale of marginal properties
and to declining production rates. Average oil prices increased 19% to $15.87
per barrel for the three months ended March 31, 1995 from $13.36 per barrel for
the corresponding prior year quarter, resulting in a $359,000 increase in
revenue. Gas prices decreased 13% to $1.46 per Mcf in the current quarter
versus $1.68 in the prior year quarter, resulting in a $131,000 revenue
decrease. Saltwater disposal and other income decreased $55,000 from the
corresponding fiscal 1994 quarter.
Income from continuing operations for the three months ended March 31, 1995
decreased $422,000, or 327%, resulting in a loss of $293,000 compared to
income of $129,000 for the corresponding fiscal 1994 period. The current
period reflected the above mentioned decrease in revenue as well as increased
depreciation, depletion and amortization ("DD&A") and interest expenses.
Additionally, the prior year period included a net income tax benefit of
$106,000 while the current year period reflected no corresponding benefit.
Operating expenses decreased $207,000, or 12%, to $1,451,000 from $1,658,000
reported in fiscal 1994. The decrease was primarily attributable to the
disposition of marginal properties. The Company's average lifting cost per
equivalent barrel increased 2%, however, to $5.82 in the three month period of
fiscal 1995 from $5.70 in the prior year period. This increase was attributable
primarily to declining production rates.
General and administrative expenses decreased by $22,000, or 7%, to $315,000
during the three months ended March 31, 1995 compared to $337,000 for the prior
year period. The decrease was attributable to a decrease in employee incentive
compensation payments.
Depletion, depreciation and amortization expense for the three months ended
March 31, 1995 increased by $255,000, or 21%, to $1,472,000 from $1,217,000
reported for the comparable fiscal 1994 period. The increase is attributable to
a higher DD&A rate per equivalent barrel of oil, resulting from a significant
reduction in proved undeveloped reserves as of September 30, 1994.
Interest expense for the three months ended March 31, 1995 increased $28,000, or
12%, to $264,000 from $236,000 for the three months ended March 31, 1994. Such
increase is attributable to general increases in interest rates.
RESULTS OF OPERATIONS - COMPARISON OF THE SIX MONTHS ENDED MARCH 31, 1995 AND
1994
Operating revenues from continuing operations for the six months ended March
31, 1995 decreased $1,103,000, or 15%, to $6,104,000 from $7,207,000 in the
corresponding fiscal 1994 period. Oil volumes decreased 56,000 barrels, or
16%, to 286,000 barrels versus 342,000 barrels in the prior year period,
decreasing revenue by $792,000. Gas volumes decreased 150,000 Mcf, or 11%,
to 1,159,000 Mcf in the current period compared to 1,309,000 Mcf in the six
months ended March 31, 1994, resulting in a $252,000 decrease in revenues.
The volume decreases are attributable to both the sale of marginal properties
and to declining production rates. Average oil prices increased 7% to $15.12
per barrel for the six months ended March 31, 1995 from $14.14 per barrel for
the corresponding prior year period, resulting in a $280,000 increase in
revenue. Gas prices decreased 13% to $1.46 per Mcf in the current period
versus $1.68 in the prior year period, resulting in a $255,000 revenue
decrease. Saltwater disposal and other income decreased $84,000 from the
corresponding fiscal 1994 period.
Income from continuing operations for the six months ended March 31, 1995
decreased $1,307,000, or 224%, resulting in a loss of $724,000 compared to
income of $583,000 for the corresponding fiscal 1994 period. The current
period reflected the above mentioned decrease in revenue as well as increased
interest expense and depreciation, depletion and amortization. Additionally,
a net $200,000 income tax benefit was recorded in the prior year period,
while no income tax benefit or expense was recorded in the current year
period.
9
Operating expenses decreased $302,000, or 10%, to $2,825,000 from $3,127,000
reported in fiscal 1994. The decrease was primarily attributable to the
disposition of marginal properties. However, the Company's average lifting cost
per equivalent barrel increased 6% to $5.73 in the first six months of fiscal
1995 from $5.42 in the prior year period. This increase was attributable
primarily to declining production rates.
General and administrative expenses increased by $2,000, or less than 1%, to
$652,000 during the six months ended March 31, 1995 compared to $650,000 for the
prior year period.
Depletion, depreciation and amortization expense for the six months ended
March 31, 1995 increased by $380,000, or 15%, to $2,903,000 from $2,523,000
reported for the comparable fiscal 1994 period. The increase is attributable to
a higher DD&A rate per equivalent barrel of oil, resulting from a significant
reduction in proved undeveloped reserves as of September 30, 1994.
Interest expense for the six months ended March 31, 1995 increased $41,000, or
8%, to $524,000 from $483,000 for the six months ended March 31, 1994. Such
increase is attributable to general increases in interest rates.
The loss from discontinued operations during the six months ended March 31, 1994
includes an expense of $210,000 in settlement of litigation relating to the
Company's discontinued gas transmission business.
As discussed in previous filings, the Company has substantial NOL carryforwards
available to reduce the Company's effective federal tax rate from approximately
35% to approximately 2%. The carryforwards total approximately $46,000,000 and
expire over various dates through fiscal 2004. These carryforwards would be
subjected to an annual limitation should there be a change of over 50% in the
stock ownership of the Company during any three year period. The Company
adopted SFAS 109 effective October 1, 1993. Because of the Company's
significant NOL and other carryforwards, it recorded a deferred tax asset for
carryforwards under SFAS 109. However, because of uncertainties regarding
utilization, a substantial valuation allowance was deducted from the value of
the asset. After valuation, the net deferred tax asset recorded on the
October 1, 1993 balance sheet was $3,000,000. This amount is reflected in net
income for the six months ended March 31, 1994 as the cumulative effect of a
change in method of accounting for income taxes. An additional deferred income
tax benefit of $210,000 was recognized in the same period as a result of
adjustments to the net deferred tax asset. The realization of the deferred tax
asset will have the effect of reducing future earnings through a charge in lieu
of income taxes. The Company will continue to review income trends and projected
NOL utilizations and will from time to time adjust the valuation allowance
accordingly.
The Company does not believe that inflation has had a materially adverse effect
on its operations during recent years.
10
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
See Note 2 to the consolidated financial statements under Part I - Item 1.
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:
Filed in Part I
11. Computation of per share earnings
Filed in Part II
4.46 Third Amendment of Revolving Credit and Term Loan
Agreement dated March 31, 1995 by and among Colorado
National Bank f/k/a Central Bank, N.A., Tipperary
Corporation and Tipperary Oil & Gas Corporation.
10.39 Amended Warrant to Purchase the Registrant's common
stock dated February 1, 1995, issued to James A.
McAuley.
(b) Reports on Form 8-K:
None
11
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.
Tipperary Corporation
-------------------------------------
Registrant
Date: May 12, 1995 By: /s/ Carter G. Mathies
--------------------------------------
Carter G. Mathies, President, Chief
Executive Officer and Chairman of the
Board of Directors
Date: May 12, 1995 By: /s/ David L. Bradshaw
---------------------------------------
David L. Bradshaw, Vice President, Chief
Operating Officer, Chief Financial
Officer and Director
Date: May 12, 1995 By: /s/ Wayne W. Kahmeyer
----------------------------------------
Wayne W. Kahmeyer, Controller and
Principal Accounting Officer
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