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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended June 30, 2001 Commission file number 0-5426
THE WISER OIL COMPANY
A DELAWARE CORPORATION
I.R.S. Employer Identification No. 55-0522128
8115 Preston Road, Suite 400
Dallas, Texas 75225
Telephone (214) 265-0080
Former name, former address and former fiscal year, if changed since last
report. NONE
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.
x
----- _____
Yes No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding at June 30, 2001
------------- ----------------------------
$.01 par value 9,161,133
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THE WISER OIL COMPANY
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
The consolidated condensed financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. The financial statements
reflect all adjustments which are, in the opinion of management, necessary to
fairly present such information. Although the Company believes that the
disclosures are adequate to make the information presented not misleading,
certain information and footnote disclosures, including significant accounting
policies, normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations. It is suggested that these condensed financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form 10-K.
2
THE WISER OIL COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
2001 2000
--------- ------------
Assets (000's) except share data
Current Assets:
Cash and cash equivalents............................................ $ 22,729 $ 34,144
Restricted cash...................................................... -- 992
Accounts receivable.................................................. 15,313 16,621
Inventories.......................................................... 592 420
Fair value of derivatives............................................ 3,486 --
Prepaid expenses..................................................... 1,207 426
------------------------
Total current assets............................................. 43,327 52,603
------------------------
Property and Equipment, at cost:
Oil and gas properties (successful efforts method)................... 345,321 284,615
Other properties..................................................... 3,914 3,964
------------------------
349,235 288,579
Accumulated depreciation, depletion and amortization................. (122,001) (128,211)
------------------------
Net property and equipment........................................... 227,234 160,368
Other Assets.......................................................... 3,435 3,342
------------------------
$ 273,996 $ 216,313
========================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable..................................................... $ 11,083 $ 14,310
Current portion of long-term debt.................................... -- 500
Dividends payable.................................................... 319 265
Accrued liabilities.................................................. 3,269 2,357
------------------------
Total current liabilities.......................................... 14,671 17,432
------------------------
Long-term Debt........................................................ 144,317 124,600
Deferred Income Taxes................................................. 12,419 --
Stockholders' Equity (Note 2):
Series C convertible preferred stock - $10 par value;
1,000,000 shares authorized; 1,000,000 shares issued and
outstanding at June 30, 2001 and 600,000 shares outstanding
at December 31, 2000 - at $25 liquidation value per share 10,000 6,000
Common stock - $.01 par value; shares authorized - 30,000,000;
shares issued - 9,337,337 at June 30, 2001 and 9,209,113 at
December 31, 2000; shares outstanding - 9,161,133 at June 30,
2001 and 9,032,909 at December 31, 2000; ........................... 93 92
Preferred stock discount, net of $323,000 amortization............... (9,683) --
Paid-in capital...................................................... 55,128 38,568
Retained earnings.................................................... 47,147 31,721
Accumulated other comprehensive income............................... 2,633 629
Treasury stock; 176,204 shares, at cost.............................. (2,729) (2,729)
------------------------
Total stockholders' equity......................................... 102,589 74,281
------------------------
$ 273,996 $ 216,313
========================
The notes to financial statements included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2000 are an integral part of
these financial statements.
3
THE WISER OIL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months For the Six Months
-------------------- ------------------
Ended June 30, Ended June 30,
-------------- --------------
2001 2000 2001 2000
------- ------- ------- -------
(000's except per share data)
Revenues:
Oil and gas sales......................... $20,407 $16,200 $44,236 $30,878
Gain on sale of property.................. 8,296 -- 8,296 --
Interest income........................... 369 399 908 696
Other..................................... 410 260 541 450
------- ------- ------- -------
29,482 16,859 53,981 32,024
------- ------- ------- -------
Costs and Expenses:
Production and operating.................. 7,472 6,139 14,361 11,418
Depreciation, depletion and amortization.. 4,605 3,929 8,796 7,731
Property impairments...................... -- 680 -- 680
Exploration............................... 1,657 784 3,904 2,240
General and administrative................ 2,006 3,474 3,924 5,176
Interest expense.......................... 3,322 3,176 6,480 6,344
------- ------- ------- -------
19,062 18,182 37,465 33,589
------- ------- ------- -------
Earnings (Loss) Before Income Taxes......... 10,420 (1,323) 16,516 (1,565)
Income Taxes................................ (189) -- (189) --
------- ------- ------- -------
Net Income (Loss)........................... $10,231 $(1,323) $16,327 $(1,565)
======= ======= ======= =======
Earnings (Loss) Per Share:
Basic...................................... $ 1.05 ($0.16) $ 1.69 ($0.19)
======= ======= ======= =======
Diluted.................................... $ 0.75 ($0.16) $ 1.23 ($0.19)
======= ======= ======= =======
The notes to financial statements included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2000 are an integral part of
these financial statements.
4
THE WISER OIL COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 2001
Shares Amount
------- ---------
Series C convertible preferred stock, $10 par value (000's)
- ---------------------------------------------------
Balance at beginning of period..................... 600 $ 6,000
Issuance of preferred stock........................ 400 4,000
----- --------
Balance at end of period........................... 1,000 10,000
===== --------
Common stock, $0.01 par value:
- ------------------------------
Balance at beginning of period..................... 9,209 92
Issuance of common stock........................... 128 1
----- --------
Balance at end of period........................... 9,337 93
--------
Preferred stock discount:
- -------------------------
Balance at beginning of period..................... --
Issuance of preferred stock........................ (10,006)
Amortization of preferred stock discount........... 323
--------
Balance at end of period........................... (9,683)
--------
Paid-in capital:
- ----------------
Balance at beginning of period..................... 38,568
Issuance of preferred stock........................ 6,000
Beneficial conversion option....................... 9,192
Issuance of common stock........................... 549
Issuance of warrants............................... 813
--------
Balance at end of period........................... 55,128
--------
Retained earnings:
- ------------------
Balance at beginning of period..................... 31,721
Net income......................................... 16,327
Dividends on preferred stock....................... (578)
Amortization of preferred stock discount........... (323)
--------
Balance at end of period........................... 47,147
--------
Accumulated other comprehensive income:
- ---------------------------------------
Balance at beginning of period..................... 629
Foreign currency translation adjustment............ (731)
Net change in derivative fair value:
Cumulative effect of accounting change.......... (3,083)
Change in derivative fair value................. 4,281
Reclassification adjustments.................... 1,537
--------
Balance at end of period........................... 2,633
--------
Treasury stock:
- ---------------
Balance at beginning and end of period............. (176) (2,729)
----- --------
Total Stockholders' Equity........................... 9,161 $102,589
===== ========
The notes to financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2000 are an integral part of these
financial statements.
5
THE WISER OIL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months
--------------------
Ended June 30,
--------------------
2001 2000
-------- --------
(000's)
Cash Flows From Operating Activities:
Net Income (Loss)............................................. $ 16,327 $ (1,565)
Adjustments to reconcile net income to operating cash flows:
Depreciation, depletion and amortization.................... 8,796 7,731
Deferred income taxes....................................... (90) --
Property sale gains......................................... (8,296) (11)
Foreign currency translation................................ (731) 36
Property impairments and abandonments....................... 1,660 1,701
Amortization of other assets................................ 343 338
Other Changes:
Accounts receivable....................................... 1,308 (2,087)
Restricted cash........................................... 992 --
Inventories............................................... (172) 3
Fair value of derivative.................................. (319) --
Prepaid expenses.......................................... (781) (493)
Other assets.............................................. (399) 78
Accounts payable.......................................... (3,227) (560)
Accrued liabilities....................................... 912 1,096
Deferred benefits cost.................................... -- (216)
-------- --------
Operating Cash Flows................................... 16,323 6,051
-------- --------
Cash Flows From Investing Activities:
Capital expenditures.......................................... (56,949) (10,387)
Proceeds from sales of property and equipment................. -- 11
-------- --------
Investing Cash Flows................................... (56,949) (10,376)
-------- --------
Cash Flows From Financing Activities:
Increase in long-term debt.................................... 19,180 --
Preferred stock issued, net of issuance costs................. 10,000 13,675
Common stock issued........................................... 25 --
Warrants for common stock issued.............................. 6 9
-------- --------
Financing Cash Flows................................... 29,211 13,684
-------- --------
Net Increase (Decrease).......................................... (11,415) 9,359
Cash and Cash Equivalents, beginning of period................... 34,144 21,447
-------- --------
Cash and Cash Equivalents, end of period......................... $ 22,729 $ 30,806
======== ========
The notes to financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2000 are an integral part of these
financial statements.
6
THE WISER OIL COMPANY
Notes to Financial Statements
Note 1. Hedging Activities
As of August 14, 2001 the Company's hedging arrangements were as follows:
The Wiser Oil Company
Crude Oil: Daily Volume Price per Bbl
---------- ------------ ----------------------------
July 1, 2001 to September 30, 2001 1,750 Bbls (1) $28.63
October 1, 2001 to December 31, 2001 1,750 Bbls $28.18
July 1, 2001 to September 30, 2001 1,000 Bbls (2) $25.00 floor, $30.46 ceiling
October 1, 2001 to December 31, 2001 1,000 Bbls (2) $25.00 floor, $30.41 ceiling
January 1, 2002 to March 31, 2002 1,000 Bbls (2) $25.00 floor, $29.34 ceiling
Natural Gas: Daily Volume Price per MMBTU
------------ ------------ ----------------------------
July 1, 2001 to December 31, 2001 10,000 MMBTU (2) $4.00 floor, $6.10 ceiling
January 1, 2002 to June 30, 2002 10,000 MMBTU (3) $4.01
Invasion Energy Inc.
Natural Gas: Daily Volume Price per MMBTU
------------ ------------ ----------------------------
July 1, 2001 to October 31, 2001 4,000 MMBTU (2) $4.06 floor, $5.85 ceiling
July 1, 2001 to October 31, 2001 4,000 MMBTU (2) $4.17 floor, $5.53 ceiling
(1) This swap is extendable into the fourth quarter of 2001 at the same
daily volume and price per barrel at the option of the counterparty.
As such, it does not qualify for hedge accounting and changes in fair
value have been recorded in earnings.
(2) These are "collar" hedges whereby the Company will receive the actual
market price if the actual market price is between the floor price and
the ceiling price. If the actual market price is below or above the
floor or ceiling prices, the price received by the Company will be
limited to the floor price or ceiling price, respectively.
(3) This swap is extendable to March 31, 2003 at the same daily volume and
price per mcf at the option of the counterparty. As such, it does not
qualify for hedge accounting and changes in fair value will be
recorded in earnings.
During the second quarter of 2001, oil and gas sales were increased by
$0.03 million and other income was increased by $0.3 million from the Company's
hedging activities. During the first half of 2001, oil and gas sales were
decreased by $1.5 million and other income was increased by $0.3 million from
the company's hedging activities. Based on June 30, 2001 NYMEX futures prices,
the fair value of the Company's hedging arrangements at June 30, 2001 was a gain
of $2.5 million for collars and $1.0 million for swaps. A 10% increase in both
the oil price and the gas price would decrease this gain by $1.9 million and a
10% decrease in both the oil price and the gas price would increase this gain by
$1.8 million.
Note 2. Convertible Preferred Stock
On June 1, 2001, the Company sold an additional 396,000 shares of Series C
Cumulative Convertible Preferred Stock ("Preferred Stock") to Wiser Investors,
L.P., a Delaware limited partnership ("Investors") for $9.9 million, or $25 per
share and 4,000 shares of Preferred Stock to A. Wayne Ritter for $100,000 or $25
per share. Wiser Investment Company, LLC ("WIC") is the general partner of
Investors. The Preferred Stock is convertible at the option of the holder into
shares of the Company's common stock at a conversion price of $4.25 per common
share, subject to customary adjustments. The Preferred Stock pays dividends in
cash or in shares of the Company's common stock, at the option of the Company,
at an annual rate of 7%. The holders of the Preferred Stock have the same voting
rights as the holders of the Company's common stock with each share of the
Preferred Stock having one vote for each share of common stock into which it is
convertible.
7
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
Any shares of Preferred Stock not previously converted will convert
automatically to common stock on May 26, 2003, or whenever the market price of
the Company's common stock exceeds $10.00 per share for a period of 60
consecutive trading days.
On June 1, 2001, WIC acquired warrants to purchase 296,686 shares of
the Company's common stock at $4.25 per share. The purchase price of the
warrants is $0.02 per warrant. The warrants are not exercisable until May 26,
2002 and will expire on May 26, 2007.
The warrants were recorded based on their relative fair value to the
Preferred Stock at the time of issuance. Because the market price of the
Company's common stock exceeded the conversion price of the preferred stock on
the date of issuance, a preferred stock discount was recorded. This discount is
being amortized as a reduction of net income available to common stock until the
redemption date of May 26, 2003. If the preferred stock is converted prior to
May 2003, the unamortized discount will be recognized in the period of
conversion.
Note 3. Acquisition of Invasion Energy Inc.
On May 22, 2001, the Company acquired 100% of the outstanding common
stock of Invasion Energy Inc. ("Invasion") through its wholly-owned subsidiary
The Wiser Oil Company of Canada ("Wiser Canada"). The total purchase price was
$37.5 million which was financed with $22.6 million of cash and $14.9 million of
borrowings by Wiser Canada under its credit facility.
The aggregate purchase price is computed as follows (000's):
Aggregate
Purchase Price
--------------
Aggregate purchase price for 100% of
Invasion Common Stock $ 21,419
Nonrecurring cash transaction costs 1,201
--------
Aggregate purchase price $ 22,620
========
The following table represents the allocation of the total purchase
price of Invasion to the acquired assets and liabilities of Invasion (000's).
Allocation of
Aggregate
Purchase Price
--------------
Net working capital $ 1,142
Property and equipment 48,145
Long-term debt (14,928)
Deferred income taxes (11,739)
----------
Aggregate purchase price $ 22,620
==========
8
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
Following are the unaudited pro forma results of operations for the
Company for the six months ended June 30, 2001 and June 30, 2000, as if the
acquisition of Invasion took place on January 1, 2000 (000's):
Six Months Ended June 30,
-------------------------
2001 2000
---- ----
Revenues $ 63,543 $ 36,547
Expenses 45,296 39,685
-------- --------
Net Income $ 18,247 $ (3,138)
======== ========
Earnings per share - Basic $ 1.90 $ (0.36)
======== ========
Earnings per share - Diluted $ 1.38 $ (0.36)
======== ========
Note 4. Gain on Sale of Assets
On June 29, 2001, Wiser Canada entered into an Asset Exchange Agreement
to acquire producing properties and exploration acreage valued at $25.3 million
(CDN $38.3 million). Under the Agreement, Wiser Canada exchanged certain of its
producing properties valued at $16.2 million and paid $9.1 million in cash,
before closing adjustments. The exchange of producing properties valued at $16.2
million has been accounted for as a sale of assets and, accordingly, a gain of
$8.3 million has been recognized in the consolidated statements of income. The
$9.1 million cash portion of the transaction was funded with $4.5 million of
cash on hand and $4.6 million of bank debt.
Note 5. Net Income per Common Share
Basic net income per common share is computed based on the weighted
average shares of common stock outstanding. Net income per share computations to
reconcile basic and diluted net income consist of the following (in thousands,
except per share data):
For the Quarter For the Six Months
Ended June 30, Ended June 30,
-------------- --------------
2001 2000 2001 2000
-------- --------- -------- -----------
Net income (loss)................................. $ 10,231 $ (1,323) $ 16,327 (1,565)
Less preferred dividends.......................... (319) (100) (578) (100)
Less amortization of preferred stock discount .... (323) - (323) -
-------- --------- -------- -----------
Net income (loss) available to common stock....... 9,589 (1,423) 15,426 (1,665)
Plus: Income impact of assumed conversions:
Dividends on preferred stock and amortization... 642 100 901 100
-------- --------- -------- -----------
Net income (loss) available to common plus
assumed conversions........................... $ 10,231 $ (1,423) $ 16,327 $ (1,665)
======== ========= ======== ==========
Basic weighted average shares..................... 9,161 8,952 9,121 8,952
Effect of dilutive securities:
Convertible preferred stock..................... 4,305 - 3,929 -
Warrants........................................ 231 - 186
Stock options................................... 4 - 4 -
-------- --------- --------- ----------
Diluted weighted average shares................... 13,701 8,952 13,240 8,952
======== ========= ======== ==========
Net Income (Loss) per Share:
Basic.......................................... $ 1.05 $ (0.16) $ 1.69 $ (0.19)
Diluted........................................ 0.75 (0.16) 1.23 $ (0.19)
9
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
Note 6. Comprehensive Income
Comprehensive income is as follows (000's):
For the Quarter For the Six Months
Ended June 30, 2001 Ended June 30, 2001
------------------- -------------------
Net income.............................................. $ 10,231 $ 16,327
Foreign currency translation adjustment................. (708) (731)
Net change in derivative fair value:
Cumulative effect of accounting change................ -- (3,083)
Change in derivative fair value....................... 2,577 4,281
Reclassification adjustments - contract settlements .... (29) 1,537
--------- ---------
Comprehensive Income.................................... $ 12,071 $ 18,331
========== =========
Note 7. Long-term Debt
On May 21, 2001 the Company entered into an $80 million revolving credit
facility ("Union Revolver") with Union Bank of California, N.A. and National
Bank of Canada. The initial aggregate borrowing base under the Union Revolver
is $40 million and is allocated $30 million for general corporate purposes and
$10 million exclusively for acquisition of oil and gas properties. The $40
million aggregate borrowing base is also allocated $20 million for Canadian
borrowings and $20 million for U.S. borrowings. The aggregate borrowing base is
re-determined by the banks semi-annually starting in October 2001. At June 30,
2001, the Company had $19.7 million of Canadian borrowings outstanding and $20.3
million was available primarily for U.S. borrowings. Available loan and interest
options are (i) Prime Rate Loans, at the banks' prime interest rate; (ii)
Eurodollar Loans, at LIBOR plus 2.125%, 2.375% or 2.625% depending on the
percentage of the borrowing base actually borrowed by the Company; (iii)
Canadian Prime Rate Advances, at the Canadian bank's prime interest rate, and
(iv) Canadian Banker's Acceptances, at the Canadian drawing fee rate. The
average interest rate during the second quarter of 2001 under the Union Revolver
was 7.04%. The commitment fee on the unused borrowing base is 0.375%. The Union
Revolver imposes certain restrictions on sales of assets, payment of dividends,
incurring of indebtedness and requires the Company to maintain certain financial
ratios. Under the Union Revolver, there is no requirement to maintain restricted
cash balances after May 21, 2001.
Note 8. Summary of Guaranties of 9 1/2% Senior Subordinated Notes
In May 1998, the Company issued $125 million aggregate principal amount
of its 9 1/2% Senior Subordinated Notes due 2007 pursuant to an offering exempt
from registration under the Securities Act of 1933. The notes are unsecured
obligations of the Company, subordinated in right of payment to all existing and
any future senior indebtedness of the Company. The notes rank pari passu with
any future senior subordinated indebtedness and senior to any future junior
subordinated indebtedness of the Company. The notes are fully and
unconditionally guaranteed, jointly and severally, on an unsecured, senior
subordinated basis by certain wholly owned subsidiaries of the Company (the
"Subsidiary Guarantors"). At the time of the initial issuance of the notes,
Wiser Oil Delaware, Inc., The Wiser Marketing Company, Wiser Delaware LLC,
T.W.O.C., Inc. and The Wiser Oil Company of Canada were the Subsidiary
Guarantors (the "Initial Subsidiary Guarantors"). Except for two wholly owned
subsidiaries that are inconsequential to the Company on a consolidated basis,
the Initial Subsidiary Guarantors comprise all of the Company's direct and
indirect subsidiaries.
10
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
Sections 13 and 15(d) of the Securities Exchange Act of 1934 require
presentation of the following unaudited summarized financial information of the
Subsidiary Guarantors. The Company has not presented separate financial
statements and other disclosures concerning each Subsidiary Guarantor because
such information is not material to investors. There are no significant
contractual restrictions on distributions from each of the Subsidiary Guarantors
to the Company.
Condensed Income Statement for the Wiser Oil Subsidiary Consolidation
Quarter Ended June 30, 2001 (Parent) Guarantors Adjustments Total
---------- ----------- ------------- ---------
(000's)
Revenues:
Oil and gas sales $12,037 $ 8,370 $ - $20,407
Other 742 8,333 - 9,075
------- ------- ------------- -------
Total revenues 12,779 16,703 - 29,482
------- ------- ------------- -------
Costs and Expenses:
Production and operating 6,050 1,422 - 7,472
DD&A and impairments 2,116 2,489 - 4,605
Exploration 1,271 386 - 1,657
General and administrative 1,473 533 - 2,006
Interest expense 3,209 113 - 3,322
------- ------- ------------- -------
Total Expenses 14,119 4,943 - 19,062
------- ------- ------------- -------
Income (Loss) Before Taxes (1,340) 11,760 - 10,420
Income tax -- 189 - 189
------- ------- ------------- -------
Net Income (Loss) $(1,340) $11,571 $ - $10,231
======= ======= ============= =======
Condensed Income Statement for the
Quarter Ended June 30, 2000
Revenues:
Oil and gas sales $ 9,850 $ 6,350 $ - $16,200
Other 647 12 - 659
------- ------- ------------- -------
Total revenues 10,497 6,362 - 16,859
------- ------- ------------- -------
Costs and Expenses:
Production and operating 5,177 962 - 6,139
DD&A and impairments 2,324 2,285 - 4,609
Exploration 641 143 - 784
General and administrative 2,609 865 - 3,474
Interest expense 3,176 - - 3,176
------- ------- ------------- -------
Total Expenses 13,927 4,255 - 18,182
------- ------- ------------- -------
Income (Loss) Before Taxes (3,430) 2,107 - (1,323)
------- ------- ------------- -------
Net Income (Loss) $(3,430) $ 2,107 $ - $(1,323)
======= ======= ============= =======
11
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
Condensed Income Statement for the Wiser Oil Subsidiary Consolidation
Six Months Ended June 30, 2001 (Parent) Guarantors Adjustments Total
---------- ----------- ------------- ---------
(000's)
Revenues:
Oil and gas sales $28,424 $15,812 $ - $44,236
Other 1,357 8,388 - 9,745
------- ------- ------------- -------
Total revenues 29,781 24,200 - 53,981
------- ------- ------------- -------
Costs and Expenses:
Production and operating 11,913 2,448 - 14,361
DD&A and impairments 4,633 4,163 - 8,796
Exploration 2,936 968 - 3,904
General and administrative 2,895 1,029 - 3,924
Interest expense 6,367 113 - 6,480
------- ------- ------------- -------
Total Expenses 28,744 8,721 - 37,465
------- ------- ------------- -------
Income Before Taxes 1,037 15,479 - 16,516
Income tax -- (189) - (189)
------- ------- ------------- -------
Net Income $ 1,037 $15,290 $ - $16,327
======= ======= ============= =======
Condensed Income Statement for the
Six Months Ended June 30, 2000
Revenues:
Oil and gas sales $19,264 $11,614 $ - $30,878
Other 1,104 42 - 1,146
------- ------- ------------- -------
Total revenues 20,368 11,656 - 32,024
------- ------- ------------- -------
Costs and Expenses:
Production and operating 9,552 1,866 - 11,418
DD&A and impairments 4,652 3,759 - 8,411
Exploration 749 1,491 - 2,240
General and administrative 3,924 1,252 - 5,176
Interest expense 6,344 - - 6,344
------- ------- ------------- -------
Total Expenses 25,221 8,368 - 33,589
------- ------- ------------- -------
Income (Loss) Before Taxes (4,853) 3,288 - (1,565)
------- ------- ------------- -------
Net Income (Loss) $(4,853) $ 3,288 $ - $(1,565)
======= ======= ============= =======
12
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
Condensed Statement of Cash Flows for Wiser Oil Subsidiary Consolidation
The Six Months Ended June 30, 2001 (Parent) Guarantors Adjustments Total
---------- ----------- ------------- ---------
(000's)
Cash Flows From Operating Activities:
Net income $ 1,037 $ 15,290 $ - $ 16,327
Add back reconciling items 8,190 (6,508) - 1,682
Other changes (798) (888) - (1,686)
------- -------- ------------- --------
Operating Cash Flows 8,429 7,894 - 16,323
------- -------- ------------- --------
Cash Flows From Investing Activities:
Capital expenditures (8,790) (48,159) - (56,949)
Proceeds from property sales - - - -
------- -------- ------------- --------
Investing Cash Flows (8,790) (48,159) - (56,949)
------- -------- ------------- --------
Cash Flows From Financing Activities:
Intercompany transfers (20,500) 20,500 - -
Long term debt (500) 19,680 - 19,180
Preferred stock issued 10,000 - - 10,000
Common stock issued 25 - - 25
Warrants issued 6 - - 6
------- -------- ------------- --------
Financing Cash Flows (10,969) 40,180 - 29,211
------- -------- ------------- --------
Net Increase (Decrease) in Cash (11,330) (85) - (11,415)
Cash and Cash Equivalents, beginning of period 29,518 4,626 - 34,144
------- -------- ------------- --------
Cash and Cash Equivalents, end of period $18,188 $ 4,541 $ - $ 22,729
======= ======== ============= ========
Condensed Statement of Cash Flows for
The Six Months Ended June 30, 2000
Cash Flows From Operating Activities:
Net income (loss) $(4,853) $ 3,288 $ - $ (1,565)
Add back reconciling items 6,036 3,759 - 9,795
Other changes (1,386) (793) - (2,179)
------- -------- ------------- --------
Operating Cash Flows (203) 6,254 - 6,051
------- -------- ------------- --------
Cash Flows From Investing Activities:
Capital expenditures (4,476) (5,911) - (10,387)
Proceeds from property sales - 11 - 11
------- -------- ------------- --------
Investing Cash Flows (4,476) (5,900) - (10,376)
------- -------- ------------- --------
Cash Flows From Financing Activities:
Preferred stock issued 13,675 - - 13,675
Warrants issued 9 - - 9
------- -------- ------------- --------
Financing Cash Flows 13,684 - - 13,684
------- -------- ------------- --------
Net Increase (Decrease) in Cash 9,005 354 - 9,359
Cash and Cash Equivalents, beginning of period 18,779 2,668 - 21,447
------- -------- ------------- --------
Cash and Cash Equivalents, end of period $27,784 $ 3,022 $ - $ 30,806
======= ======== ============= ========
13
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
Condensed Balance Sheets Wiser Oil Subsidiary Consolidation
June 30, 2001 (Parent) Guarantors Adjustments Total
---------- ---------- ------------ -------------
Assets:
Current assets $ 29,271 $ 14,056 $ - $ 43,327
Net property and equipment 118,328 108,906 - 227,234
Other assets 90,264 - (86,829) 3,435
-------- -------- -------- --------
Total Assets $237,863 $122,962 $(86,829) $273,996
======== ======== ======== ========
Liabilities and Stockholders' Equity:
Current liabilities $ 7,345 $ 7,326 $ - $ 14,671
Long-term debt 124,637 19,680 - 144,317
Deferred income taxes - 12,419 - 12,419
Stockholders' equity 105,881 83,537 (86,829) 102,589
-------- -------- -------- --------
Total Liabilities and Stockholders' Equity $237,863 $122,962 $(86,829) $273,996
======== ======== ======== ========
Condensed Balance Sheets
December 31, 2000
Assets:
Current assets $ 41,737 $ 10,866 $ - $ 52,603
Net property and equipment 115,372 44,996 - 160,368
Other assets 51,273 - (47,931) 3,342
-------- -------- -------- --------
Total Assets $208,382 $ 55,862 $(47,931) $216,313
======== ======== ======== ========
Liabilities and Stockholders' Equity:
Current liabilities $ 9,501 $ 7,931 $ - $ 17,432
Long-term debt 124,600 - - 124,600
Stockholders' equity 74,281 47,931 (47,931) 74,281
-------- -------- -------- --------
Total Liabilities and Stockholders' Equity $208,382 $ 55,862 $(47,931) $216,313
======== ======== ======== ========
(1) Includes the accounts of Wiser Oil Delaware, Inc., Wiser Delaware LLC and
The Wiser Oil Company of Canada.
See other notes to financial statements included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2000.
14
THE WISER OIL COMPANY
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison of Quarters Ended June 30, 2001 and June 30, 2000
Revenues for the second quarter of 2001 increased $12.6 million or 75% from
the second quarter of 2000, due to an $8.3 million gain on sale of property and
significantly higher oil and gas prices received in the second quarter of 2001.
Oil sales for the second quarter of 2001 were $1.3 million higher than the
second quarter of 2000 as the average price received for oil sales in the first
quarter of 2001 was $25.64 per barrel, up $3.77 per barrel or 17% from the
second quarter of 2000. Net oil production for the second quarter of 2001 was
380,000 barrels, down 6,000 barrels or 2% from 386,000 barrels in the second
quarter of 2000. Gas sales for the second quarter of 2001 were $3.3 million
higher than the second quarter of 2000 due to higher realized prices which were
partially offset by lower gas production. The average price received for gas
sales in the second quarter of 2001 was $4.21 per Mcf, an increase of $1.44 per
Mcf or 52% from the second quarter of 2000. Net gas production for the second
quarter of 2001 was 2,327 MMCF, down 35 MMCF or 1% from the second quarter of
2000. Net gas production from the Dimmitt/Slash Ranch properties in the second
quarter 2001 was 126 MMCF less than the second quarter of 2000, offset by 353
MMCF increased gas production in the second quarter 2001 from the Invasion
acquisition effective May 22, 2001. During the second quarter of 2001, oil and
gas sales were increased by $0.03 million and other income was increased by $0.3
million from the Company's hedging activities. Hedging activities reduced oil
and gas sales by $2.6 million in the second quarter of 2000.
Production and operating expense for the second quarter of 2001 increased
$1.3 million or 22% from the second quarter of 2000 and, on a BOE basis,
production and operating expense in the second quarter of 2001 increased to
$9.24 per BOE or 22% from $7.32 per BOE during the second quarter of 2000. The
increase in production and operating expense was attributable primarily to the
Maljamar and Wellman fields which were $0.4 million higher in the second quarter
of 2001 than the second quarter of 2000. Production and operating expense also
increased by $0.3 million from the Invasion acquisition. Depreciation, depletion
and amortization, ("DD&A") for the second quarter of 2001, increased $0.7
million or 17% from the second quarter of 2000 due primarily to the Invasion
acquisition.
Exploration expense for the second quarter of 2001 was $1.7 million, up
$0.9 million from the second quarter of 2000 due to increased exploration
activities in the second quarter of 2001. General and administrative expense in
the second quarter of 2001 was $2.0 million, down $1.5 million from the second
quarter of 2000 due primarily to $2.2 million of officer termination expense
recognized in the second quarter of 2000. Interest expense during the second
quarter of 2001 was $3.3 million, up $0.1 million or 5% from the second quarter
of 2000 due to borrowings under the Credit Agreement for the Invasion
acquisition.
The Company had a net operating loss carryforward for Federal income tax
purposes of $18.6 million at December 31, 2000. The tax benefits of
carryforwards are recorded as an asset to the extent that management assesses
the future utilization of such carryforwards as "more likely than not." When
the future utilization of some portion of the carryforwards is determined not to
be "more likely than not," a valuation allowance is provided to reduce the
recorded tax benefits from such assets. At June 30, 2001, a valuation allowance
was provided to reduce deferred tax assets to an amount equal to deferred tax
liabilities. Accordingly, no Federal income tax expense was recognized in the
second quarter of 2001, and income tax benefits were recognized in 2000 only to
the extent of the Company's existing deferred income tax liability. Canadian
income tax expense, related to the Invasion properties, of $0.2 million was
recognized in the second quarter of 2001.
The Company realized net income available for common stock of $9.6 million
and basic net earnings per share of $1.05 in the second quarter of 2001 compared
to a net loss of $1.3 million and net loss per share of $0.16 during the second
quarter of 2000.
15
THE WISER OIL COMPANY
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison of Six Months Ended June 30, 2001 and June 30, 2000
Revenues for the first half of 2001 increased $22.0 million or 69% from the
first half of 2000, due to an $8.3 million gain on sale of property and
significantly higher oil and gas prices received in the second quarter of 2001.
Oil sales for the first half of 2001 were $3.2 million higher than the first
half of 2000 as the average price received for oil sales in the first half of
2001 was $26.09 per barrel, up $3.41 per barrel or 15% from the first half of
2000. Net oil production for the first half of 2001 was 773,000 barrels, up
26,000 barrels or 4% from 747,000 barrels in the first half of 2000. Gas sales
for the first half of 2001 were $10.8 million higher than the first half of 2000
due to higher realized prices which were partially offset by lower gas
production. The average price received for gas sales in the first half of 2001
was $4.99 per Mcf, an increase of $2.49 per Mcf or 99% from the first half of
2000. Net gas production for the first half of 2001 was 4,469 MMCF, down 135
MMCF or 3% from the first half of 2000. Net gas production from the
Dimmitt/Slash Ranch properties and San Juan Basin properties in the second
quarter 2001 was 257 MMCF less than the second half of 2000, offset by 353 MMCF
increased gas production in the second half of 2001 from the Invasion
acquisition effective May 22, 2001. During the first half of 2001, oil and gas
sales were reduced by $1.5 million and other income was increased by $0.3
million from the Company's hedging activities. Hedging activities reduced oil
and gas sales by $4.0 million in the second half of 2000.
Production and operating expense for the first half of 2001 increased $2.9
million or 26% from the first half of 2000 and, on a BOE basis, increased to
$9.01 per BOE or 29% from $7.00 per BOE. Higher oil and gas prices led to
increased production taxes in the first half of 2001 which were $1.1 million
higher than the first half of 2000. Production and operating expense at the
Maljamar and Wellman fields in the first half of 2001 was $0.6 million higher
than the first half of 2000. Production and operating expense was also increased
by $0.3 million from the Invasion acquisition. Depreciation, depletion and
amortization, ("DD&A") for the first half of 2001, increased $1.0 million or 14%
from the first half of 2000 due primarily to the Invasion acquisition.
Exploration expense for the first half of 2001 was $3.9 million, up $1.7 million
from the first half of 2000 due to increased exploration activities in the first
half of 2001. General and administrative expense in the first half of 2001 was
$3.9 million, down $1.3 million from the first half of 2000 due primarily to
$2.2 million of officer termination expense in the first half of 2000. Interest
expense during the first half of 2001 was $6.5 million, up $0.1 million or 2%
from the first half of 2000 due to borrowings under the Credit Agreement for the
Invasion acquisition.
The Company had a net operating loss carryforward for Federal income tax
purposes of $18.6 million at December 31, 2000. The tax benefits of
carryforwards are recorded as an asset to the extent that management assesses
the future utilization of such carryforwards as "more likely than not." When
the future utilization of some portion of the carryforwards is determined not to
be "more likely than not," a valuation allowance is provided to reduce the
recorded tax benefits from such assets. At June 30, 2001, a valuation allowance
was provided to reduce deferred tax assets to an amount equal to deferred tax
liabilities. Accordingly, no Federal income tax expense was recognized in the
first half of 2001, and income tax benefits were recognized in 2000 only to the
extent of the Company's existing deferred income tax liability. Canadian income
tax expense of $0.2 million was recognized in the first half of 2001 related to
the Invasion properties.
The Company realized net income available for common stock of $15.4 million
and basic net earnings per share of $1.69 in the first half of 2001 compared to
a net loss of $1.6 million and net loss per share of $0.19 during the first
half of 2000.
16
THE WISER OIL COMPANY
Liquidity and Capital Resources
Operating cash flows during the first half of 2001 were $16.5 million, up
$10.5 million from the first half of 2000. Higher oil and gas sales increased
cash flows from operations by $13.4 million while changes in working capital
decreased cash flows from operations by $1.7 million. Capital expenditures
during the first half of 2001 were $56.9 million, up $46.5 million from $10.4
million in the first half of 2000 due primarily to the Invasion acquisition and
the asset exchange on June 29, 2001. On a cash basis, the Company paid $6.1
million in interest expense in the first half of 2001 and no income taxes were
paid in the first quarter of 2001.
Cash flows from financing activities in the first half of 2001 included
$19.2 million of borrowings under the Company's credit facility (see Note 7.
Long-term Debt) and $10.0 million of net proceeds from the issuance of preferred
stock in June 2001. Cash flows from financing activities in the first half of
2000 included $13.7 million of net proceeds from the issuance of preferred stock
in May 2000.
Cash and cash equivalents during the first half of 2001 decreased $11.4
million from $34.1 million at December 31, 2000 to $22.7 million at June 30,
2001. The decrease was attributable primarily to capital expenditures of $56.9
million which were greater than operating cash flows of $16.3 million and
financing cash flows of $29.2 million for the first half of 2001.
17
THE WISER OIL COMPANY
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See Note 1 "Hedging Activities".
18
THE WISER OIL COMPANY
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The annual meeting of stockholders of The Wiser Oil Company was held
in Dallas, Texas, at 3:00 p.m., local time, on May 21, 2001.
(b) Proxies were solicited by the Board of Directors of The Wiser Oil
Company pursuant to Regulation 14A under the Securities Exchange Act
of 1934. There was no solicitation in opposition to the Board of
Directors nominees as listed in the proxy statement and all of such
nominees were duly elected.
(c) Out of a total of 12,690,544 votes, representing one vote per share in
respect to the 9,161,133 shares of Common Stock issued and outstanding
and 3,529,411 votes with respect to the 600,000 shares of Convertible
Preferred Stock issued and outstanding as of the April 12, 2001 record
date, 10,581,881 votes were present in person or by proxy,
representing approximately 83 percent of the total number of votes.
The stockholders at the annual meeting voted three matters, as fully
described in the proxy statement. The results of voting were as
follows:
1. To elect A.W. Schenck, III and Eric D. Long to serve three-year
terms on the Board of Directors of The Wiser Oil Company.
Nominee Number of Shares Number of Shares
For Re-election Voting FOR Election WITHHOLDING AUTHORITY
As Director as Director to Vote for Election as Director
--------------- ------------------- --------------------------------
A.W. Schenck, III 10,209,612 372,269
Eric D. Long 10,492,824 89,057
2. Proposal to approve amendments to the 1991 Non-Employee Directors'
Stock Option Plan to increase the number of shares of the Company's
common stock, par value $.01 per share, that may be offered pursuant
to the Non-Employee Directors' Stock Option Plan from 65,000 to
100,000 shares and to extend the duration of the Plan.
Number of Shares Number of Shares Number of Shares
Voting FOR Voting AGAINST ABSTAINING
Proposal Proposal From Voting
---------------- ---------------- ----------------
10,265,122 268,184 48,575
19
THE WISER OIL COMPANY
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (continued)
3. Proposal to approve amendment to the 1991 Stock Incentive Plan to
extend the duration of the Plan.
Number of Shares Number of Shares Number of Shares
Voting FOR Voting AGAINST ABSTAINING
Proposal Proposal From Voting
---------------- ---------------- ----------------
10,106,922 456,420 18,469
The following individuals continued their respective terms of service
as Directors of The Wiser Oil Company following the meeting:
George K. Hickox, Jr.
C. Frayer Kimball, III
Lorne H. Larson
Richard R. Schreiber
Scott W. Smith
20
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
The information required by this Item 6 (a) is set forth in the Index
to Exhibits accompanying this quarterly report and is incorporated
herein by reference.
(b) Reports on Form 8-K
-------------------
1. The Company filed a report on Form 8-K on June 6, 2001 disclosing
under Item 2. thereof that on May 22, 2001 it acquired 100% of the
outstanding common stock of Invasion Energy Inc. ("Invasion") through
its wholly-owned subsidiary The Wiser Oil Company of Canada. This Form
8-K was amended on August 6, 2001 to include unaudited financial
statements of Invasion Energy, Inc. for the year ended August 31, 2000
and unaudited pro forma condensed combined financial statements for
the three months ended March 31, 2001 and the year ended December 31,
2000.
21
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.
THE WISER OIL COMPANY
-------------------------------
(Registrant)
Date: August 14, 2001 /s/ George K. Hickox, Jr.
-------------------------------
George K. Hickox, Jr.
Chairman of the Board and
Chief Executive Officer
Date: August 14, 2001 /s/ Richard S. Davis
-------------------------------
Richard S. Davis
Vice President of Finance
22
THE WISER OIL COMPANY
Index to Exhibits
Exhibit
Number Exhibit
- ------ -------
4.16* Second Amended and Restated Credit Agreement dated May 21, 2001 among
The Wiser Oil Company and The Wiser Oil Company of Canada, as
borrowers, and Union Bank of California, N.A. as U.S. administrative
agent, and National Bank of Canada, as Canadian administrative agent,
and the banks named therein.
10.21* Subscription Agreement dated June 1, 2001 between the Company and
Wiser Investors, L.P.
10.22* Subscription Agreement dated June 1, 2001 between the Company and
A. Wayne Ritter.
10.23* Warrant Agreement dated June 1, 2001 between the Company and
Wiser Investment Company, LLC.
10.24* Assignment of Rights as Purchaser dated June 1, 2001 among the
Company, Wiser Investment Company, LLC, Wiser Investors, L.P. and A.
Wayne Ritter.
23