SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ending June 30, 1998 Commission File #0-5704
MAYNARD OIL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 75-1362284
(State or other jurisdic- (IRS Employer
tion of incorporation) Identification No.)
8080 N. Central Expressway, Suite 660, Dallas, Texas 75206
Registrant's telephone number, including area code: (214) 891-8880
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, 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 August 7, 1998.
4,888,613 shares of common stock, par value $0.10
MAYNARD OIL COMPANY AND SUBSIDIARY
Index to Consolidated Financial Statements and Schedules
Page
Part I. Financial Information
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
Consolidated Statements of Operations
Six Months and Three Months ended
June 30, 1998 and 1997
Consolidated Statements of Shareholders' Equity
Six Months ended June 30, 1998
Consolidated Statements of Cash Flows
Six Months ended June 30, 1998 and 1997
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II. Other Information and Reports on Form 8-K
Item 4. Submission of Matters to a Vote of
Security Holders
Signatures
MAYNARD OIL COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
June 30, December 31,
1998 1997
(Unaudited) (Audited)
ASSETS
Current assets:
Cash and cash equivalents $24,550,551 $24,584,288
Accounts receivable, trade 2,910,237 3,267,255
Other current assets 488,123 546,238
Total current assets 27,948,911 28,397,781
Property and equipment, at cost:
Oil and gas properties, successful
efforts method 104,676,840 104,031,352
Other property and equipment 547,789 548,668
105,224,629 104,580,020
Less accumulated depreciation and
amortization (58,286,474) (54,692,225)
Net property and equipment 46,938,155 49,887,795
$74,887,066 $78,285,576
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ 5,000,000 $ 5,000,000
Accounts payable 3,122,581 4,271,662
Accrued expenses 1,563,166 1,402,021
Income taxes payable 40,799 220,798
Total current liabilities 9,726,546 10,894,481
Deferred income taxes 2,682,000 2,632,000
Long-term debt 8,750,000 11,250,000
Shareholders' equity:
Preferred stock of $.50 par value.
Authorized 1,000,000 shares; none
issued -- --
Common stock of $.10 par value.
Authorized 20,000,000 shares;
4,888,613 and 4,889,450 shares
issued and outstanding 488,861 488,945
Additional paid-in capital 18,831,138 18,831,138
Retained earnings 34,408,521 34,189,012
Total shareholders' equity 53,728,520 53,509,095
Contingencies and commitments $74,887,066 $78,285,576
See accompanying Notes to Consolidated Financial Statements.
MAYNARD OIL COMPANY AND SUBSIDIARY
Consolidated Statements of Operations
Six Months ended Three Months ended
June 30, June 30,
1998 1997 1998 1997
Revenues:
Oil and gas sales $ 8,823,345 $13,976,736 $ 4,133,471 $ 6,207,323
Interest and other 677,312 586,924 339,346 314,493
Gain on disposition of assets 9,795 57,292 7,375 55,260
9,510,452 14,620,952 4,480,192 6,577,076
Costs and expenses:
Operating expenses 4,431,297 4,952,188 2,114,413 2,500,111
Exploration, dry holes
and abandonments 45,310 390,760 29,359 316,512
General and administrative 538,683 661,406 218,770 344,208
Depreciation and amortization 3,616,262 3,492,265 1,824,304 1,792,265
Interest and other 535,698 684,123 262,979 332,597
9,167,250 10,180,742 4,449,825 5,285,693
Income before income taxes 343,202 4,440,210 30,367 1,291,383
Income tax expense 115,000 1,470,000 10,000 435,000
Net income $ 228,202 $ 2,970,210 $ 20,367 $ 856,383
Weighted average number of common
shares outstanding 4,889,352 4,889,450 4,889,262 4,889,450
Net income per common share $.047 $.607 $.004 $.175
See accompanying Notes to Consolidated Financial Statements.
MAYNARD OIL COMPANY AND SUBSIDIARY
Consolidated Statements of Shareholders' Equity
Six Months Ended June 30, 1998
(Unaudited)
Additional
Common Stock Paid-in
Capital Retained
Shares Amount Amount Earnings Total
Balance at December 31, 1997 4,889,450 $488,945 $18,831,138 $34,189,012 $53,509,095
Net income -- -- -- 228,202 228,202
Purchase of common stock (837) (84) -- (8,693) (8,777)
Balance at June 30, 1998 4,888,613 $488,861 $18,831,138 $34,408,521 $53,728,520
See accompanying Notes to Consolidated Financial Statements.
MAYNARD OIL COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
Six Months Ended June 30,
1998 1997
Cash flows from operating activities:
Net income $ 228,202 $2,970,210
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,616,262 3,492,265
Deferred income taxes 50,000 255,000
Dry holes and abandonments 8,554 390,760
Current year costs of dry holes and
abandonments (8,554) (390,760)
(Gain) on disposition of assets (9,795) (57,292)
(Increase) decrease in current assets:
Accounts receivable 357,018 1,104,895
Prepaid expenses and other current assets 58,115 (31,425)
Increase (decrease) in current liabilities:
Accounts payable (1,149,081) (556,346)
Accrued expenses 161,145 372,685
Income taxes payable (179,999) (3,326,239)
Net cash provided by
operating activities 3,131,867 4,223,753
Cash flows from investing activities:
Proceeds from disposition of assets 19,334 65,662
Additions to property and equipment (676,161) (1,900,379)
Net cash provided (used) by
investing activities (656,827) (1,834,717)
Cash flows from financing activities:
Purchase of common stock (8,777) --
Principal payments on long-term debt (2,500,000) (2,500,000)
Net cash provided (used) by
financing activities (2,508,777) (2,500,000)
Net increase (decrease) in cash and cash
equivalents (33,737) (110,964)
Cash and cash equivalents at beginning of year 24,584,288 21,817,447
Cash and cash equivalents at end of period $24,550,551 $21,706,483
See Accompanying Notes to Consolidated Financial Statements.
MAYNARD OIL COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1998
1. In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments,
consisting of all recurring adjustments, necessary to present fairly
the Company's financial position as of June 30, 1998 and
December 31, 1997, the results of operations for the six months
ended June 30, 1998 and 1997 and changes in cash and cash
equivalents for the six months ended June 30, 1998 and 1997.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements in the 1997 Annual
Report to Shareholders.
2. Net income for the six months ended June 30, 1998 is not necessarily
indicative of the results of the operations of Maynard Oil Company
and Subsidiary for the year ending December 31, 1998, and is subject
to audit adjustments at year-end.
3. Net income (loss) per common share is based on the weighted average
number of shares outstanding in each period, which was 4,889,352
and 4,889,450 shares at June 30, 1998 and 1997, respectively.
4. The provision for income taxes consists of the following (thousands
of dollars):
Six Months Ended Three Months Ended
June 30, June 30,
1998 1997 1998 1997
Federal:
Current $ 65 $1,215 $ (15) $ 315
Deferred (benefit) 50 255 25 120
$ 115 $1,470 $ 10 $ 435
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Overview
At December 31,1997, the weighted average product prices of $15.72
per barrel for crude oil and $2.05 per thousand cubic feet (mcf) for
natural gas were applied to the estimates of recoverable hydrocarbon
reserves to arrive at future net revenues that the Company might
ultimately receive. At that time, the Company recognized an impairment
loss on all properties whose investment would not be recoverable under
the above pricing scenarios in accordance with Statement of Financial
Accounting Standards No. 121 ("SFAS 121"), Accounting for the Impairment
of Long Lived Assets and for Long-Lived Assets to be Disposed of. During
the first six months of 1998, the Company's hydrocarbon sales averaged
$13.35 per barrel for crude oil and $2.23 per mcf for natural gas. NYMEX
crude oil pricing estimates for December, 1998 contracts vary between
$14.78 and $15.71 per barrel, and Henry Hub estimates for December, 1998
natural gas contracts vary between $2.46 and $2.66 per mcf. The Company
believes it has made adequate provision for depreciation and amortization
expense in its June 30, 1998 financial statements, but should crude oil
prices remain at current levels, an additional impairment loss could be
recognized in future periods.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
The Company reported net income of $228,202, or five cents per share,
on revenues of $9,510,452 for the six months ended June 30, 1998 compared
with net income of $2,970,210, or sixty-one cents per share, on revenues
of $14,620,952 for the same period a year ago. Earnings for the 1998
period were adversely affected by the sharp reduction in oil prices, and
to a lesser extent, by production declines in the volumes of oil and gas
produced and sold. Gas volumes dropped almost 14% from a year ago, while
oil volumes fell slightly in excess of 5% over the same period. Crude
oil prices plunged $7.24 per barrel between the two six month periods,
and gas prices declined forty-nine cents per mcf. Thus, oil and gas
revenues were $5,153,391 less than six months a year ago, a 37% decline.
Operating expenses reflected a decrease of $520,891, primarily
attributable to lower severance taxes from reduced oil and gas sales.
When converted to a net equivalent barrel basis ( NEB , conversion of 6
mcf equal to 1 NEB), the amounts are similar - $6.71 per NEB during 1998
compared to $6.95 per NEB in 1997.
Exploration costs, which include dry holes and abandonments,
dropped $345,450 between the two six month periods. During the 1997 six
months, the Company participated in a seismic shoot and drilled an
exploratory dry hole, but during the current period, minimal exploratory
costs were expended to complete earlier projects.
General and administrative expenses declined $122,723, almost
19%, to reflect lower phantom stock expense (which relates to
fluctuations in the Company's common stock price) and increased overhead
billings on Company operated properties, which are recorded as reductions
to administrative expense.
Depreciation and amortization expense rose $123,997 during the
current six months (from $4.90 per NEB for the 1997 period to $5.48 per
NEB currently). Expressed as a percentage of net book value, the overall
depletion and amortization rate rose from 6.2% in 1997 to 7.2% in 1998.
Interest expense decreased $148,425 in the 1998 period
reflecting reductions in outstanding bank debt due to scheduled loan
repayments.
Quarter Ended June 30, 1998 Compared with Quarter Ended June 30, 1997
For the quarter ended June 30, 1998, the Company earned
$20,367, or less than a half cent per share, compared with net income of
$856,383, or eighteen cents per share, for the same quarter a year ago.
The current quarter s results were adversely affected by the precipitous
drop in oil prices during the second quarter of 1998 compared to the
second quarter of 1997. Oil prices for the current quarter were $12.32
compared to $18.54 for the same quarter a year ago.
Liquidity and Capital Resources
The Company ended its first six months of 1998 with working capital
of $18,222,365 compared to working capital of $15,267,815 a year ago.
The improvement in working capital is attributable to cash generated from
normal operating activities. At June 30, 1998, the Company's total debt
was $13,750,000. The Company believes that it has sufficient cash being
generated from operating activities plus cash currently in the bank, or
additional borrowing capacity, to fund its planned development and
exploratory work or to make future property acquisitions.
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on May 20,
1998.
(b) Not applicable.
(c) 1. Set forth below is the tabulation of the votes on each
nominee for election of a director:
WITHHOLD
NAME FOR AUTHORITY
Ralph E. Graham 4,651,940 4,090
Robert B. McDermott 4,651,940 4,090
James G. Maynard 4,651,940 4,090
2. Not applicable.
ITEM 6. Exhibit 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 and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
MAYNARD OIL COMPANY
By: /s/ Glenn R. Moore
___________________________
Glenn R. Moore
President
By: /s/ Kenneth W. Hatcher
___________________________
Kenneth W. Hatcher
Vice President of Finance
Dated: August 7, 1998