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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 September 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 September 30, 2001
------------- ---------------------------------
$.01 par value 9,172,954
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The Wiser Oil Company
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
THE WISER OIL COMPANY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
2001 2000
------------- ------------
(000's) except share data
Assets
Current Assets:
Cash and cash equivalents........................................ $ 23,878 $ 34,144
Restricted cash.................................................. -- 992
Accounts receivable.............................................. 13,773 16,621
Inventories...................................................... 588 420
Fair value of derivatives........................................ 6,009 --
Prepaid expenses................................................. 3,685 426
--------- ---------
Total current assets......................................... 47,933 52,603
--------- ---------
Property and Equipment, at cost:
Oil and gas properties (successful efforts method)............... 350,231 284,615
Other properties................................................. 3,958 3,964
--------- ---------
354,189 288,579
Accumulated depreciation, depletion and amortization............. (127,432) (128,211)
--------- ---------
Net property and equipment....................................... 226,757 160,368
Other Assets...................................................... 3,332 3,342
--------- ---------
$ 278,022 $ 216,313
========= =========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable................................................. $ 11,755 $ 14,310
Current portion of long-term debt................................ -- 500
Dividends payable................................................ 441 265
Accrued liabilities.............................................. 6,447 2,357
--------- ---------
Total current liabilities...................................... 18,643 17,432
--------- ---------
Long-term Debt.................................................... 143,792 124,600
Deferred Income Taxes............................................. 12,006 --
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 September 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 - 9,380,558 at September 30, 2001 and 9,209,113
at December 31, 2000; shares outstanding - 9,172,954 at
September 30, 2001 and 9,032,909 at December 31, 2000......... 94 92
Preferred stock discount, net of $1,333,000 amortization......... (8,673) --
Paid-in capital.................................................. 55,126 38,568
Retained earnings................................................ 48,075 31,721
Accumulated other comprehensive income........................... 1,843 629
Treasury stock - 207,604 shares at September 30, 2001
and 176,204 shares at December 31, 2000, at cost............... (2,884) (2,729)
--------- ---------
Total stockholders' equity..................................... 103,581 74,281
--------- ---------
$ 278,022 $ 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
THE WISER OIL COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the Three Months For the Nine Months
-------------------- -------------------
Ended September 30, Ended September 30,
------------------- -------------------
2001 2000 2001 2000
------- ------- ------- -------
(000's except per share data)
Revenues:
Oil and gas sales............................. $19,179 $17,585 $63,415 $48,463
Gain on sale of property...................... 111 -- 8,407 --
Interest income............................... 208 535 1,116 1,231
Other......................................... 2,139 109 2,680 559
------- ------- ------- -------
21,637 18,229 75,618 50,253
------- ------- ------- -------
Costs and Expenses:
Production and operating...................... 7,023 6,150 21,383 17,568
Depreciation, depletion and amortization...... 4,987 3,803 13,783 11,534
Property impairments.......................... -- - -- 680
Exploration................................... 1,621 638 5,525 2,878
General and administrative.................... 1,885 1,687 5,810 6,863
Interest expense.............................. 3,486 3,156 9,966 9,500
------- ------- ------- -------
19,002 15,434 56,467 49,023
------- ------- ------- -------
Earnings Before Income Taxes.................... 2,635 2,795 19,151 1,230
Income Taxes.................................... (256) -- (445) --
------- ------- ------- -------
Net Income...................................... $ 2,379 $ 2,795 $18,706 $ 1,230
======= ======= ======= =======
Earnings Per Share:
Basic.......................................... $0.10 $0.28 $1.79 $ 0.10
======= ======= ======= =======
Diluted........................................ $0.10 $0.22 $1.34 $ 0.10
======= ======= ======= =======
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
THE WISER OIL COMPANY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 2001
Shares Amount
-------- --------
(000's)
Series C convertible preferred stock, $10 par value
- ---------------------------------------------------
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.................................................. 172 2
-------- --------
Balance at end of period.................................................. 9,381 94
-------- --------
Preferred stock discount:
- -------------------------
Balance at beginning of period............................................ --
Issuance of preferred stock............................................... (10,006)
Amortization of preferred stock discount.................................. 1,333
--------
Balance at end of period.................................................. (8,673)
--------
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.................................................. 553
Issuance of warrants...................................................... 813
--------
Balance at end of period.................................................. 55,126
--------
Retained earnings:
- ------------------
Balance at beginning of period............................................ 31,721
Net income................................................................ 18,706
Dividends on preferred stock.............................................. (1,019)
Amortization of preferred stock discount.................................. (1,333)
--------
Balance at end of period.................................................. 48,075
--------
Accumulated other comprehensive income:
- ---------------------------------------
Balance at beginning of period............................................ 629
Foreign currency translation adjustment................................... (1,852)
Net change in derivative fair value:
Cumulative effect of accounting change................................. (3,083)
Change in derivative fair value........................................ 7,216
Reclassification adjustments........................................... (1,067)
--------
Balance at end of period.................................................. 1,843
--------
Treasury stock:
- ---------------
Balance at beginning of period............................................ (176) (2,729)
Purchase of treasury stock................................................ (32) (155)
-------- --------
Balance at end of period.................................................. (208) (2,884)
-------- --------
Total Stockholders' Equity.................................................. 9,173 $103,581
======== ========
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
THE WISER OIL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months
-------------------
Ended September 30,
-------------------
2001 2000
-------- --------
(000's)
Cash Flows From Operating Activities:
Net Income (Loss)............................................. $ 18,706 $ 1,230
Adjustments to reconcile net income to operating cash flows:
Depreciation, depletion and amortization.................... 13,783 11,534
Deferred income taxes....................................... 471 --
Property sale gains......................................... (8,407) (11)
Foreign currency translation................................ (298) 1
Property impairments and abandonments....................... 1,907 2,201
Amortization of other assets................................ 507 507
Other Changes:
Accounts receivable....................................... 2,848 (4,640)
Restricted cash........................................... 992 (2,985)
Inventories............................................... (168) 7
Fair value of derivative.................................. (2,335) --
Prepaid expenses.......................................... (3,259) (579)
Other assets.............................................. (442) 84
Accounts payable.......................................... (2,555) 922
Accrued liabilities....................................... 4,090 2,440
Deferred benefits cost.................................... -- (216)
-------- --------
Operating Cash Flows................................... 25,840 10,495
-------- --------
Cash Flows From Investing Activities:
Capital expenditures.......................................... (65,237) (14,317)
Proceeds from sales of property and equipment................. 219 11
-------- --------
Investing Cash Flows................................... (65,018) (14,306)
-------- --------
Cash Flows From Financing Activities:
Increase in long-term debt.................................... 19,036 --
Preferred stock issued, net of issuance costs................. 10,000 13,675
Common stock issued........................................... 25 --
Treasury stock purchased...................................... (155) --
Warrants for common stock issued.............................. 6 9
-------- --------
Financing Cash Flows................................... 28,912 13,684
-------- --------
Net Increase (Decrease).......................................... (10,266) 9,873
Cash and Cash Equivalents, beginning of period................... 34,144 21,447
-------- --------
Cash and Cash Equivalents, end of period......................... $ 23,878 $ 31,320
======== ========
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
THE WISER OIL COMPANY
Notes to Financial Statements
Note 1. Hedging Activities
Following are the Company's hedging arrangements that were in effect on
October 1, 2001 or entered into before November 14, 2001:
The Wiser Oil Company
Crude Oil: Daily Volume Price per Bbl
---------- ------------ ----------------------------
October 1, 2001 to December 31, 2001 1,750 Bbls $28.18
October 1, 2001 to December 31, 2001 1,000 Bbls (1) $25.00 floor, $30.41 ceiling
January 1, 2002 to March 31, 2002 1,000 Bbls (1) $25.00 floor, $29.34 ceiling
January 1, 2002 to March 31, 2002 (a) 2,000 Bbls $27.00
April 1, 2002 to June 30, 2002 (b) 1,000 Bbls $26.75
January 1, 2002 to June 30, 2002 (d) 1,000 Bbls $22.05
Natural Gas: Daily Volume Price per MMBTU
------------ ------------ ----------------------------
October 1, 2001 to December 31, 2001 10,000 MMBTU (1) $4.00 floor, $6.10 ceiling
January 1, 2002 to June 30, 2002 (c) 10,000 MMBTU $4.01
January 1, 2002 to June 30, 2002 (d) 5,000 MMBTU $3.15
April 1, 2002 to October 31, 2002 5,000 MMBTU (1) $3.00 floor, $3.62 ceiling
July 1, 2002 to September 30, 2002 (d) 5,000 MMBTU $3.32
October 1, 2002 to December 31, 2002 5,000 MMBTU (1) $3.15 floor, $4.00 ceiling
October 1, 2001 to December 31, 2001 4,000 MMBTU (1) $4.06 floor, $5.85 ceiling
October 1, 2001 to December 31, 2001 4,000 MMBTU (1) $4.17 floor, $5.53 ceiling
(1) 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.
(a) This swap is extendable to June 30, 2002 at the same daily volume and price
per bbl 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.
(b) This swap is extendable to September 30, 2002 at the same daily volume and
price per bbl 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.
(c) 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.
(d) This swap is extendable to December 31, 2002 at the same daily volume and
price per mcf or bbl 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 third quarter of 2001, oil and gas sales were increased by $2.6
million and other income was increased by $2.0 million from the Company's
hedging activities. During the first nine months of 2001, oil and gas sales
were increased by $1.1 million and other income was increased by $2.3 million
from the Company's hedging activities. Based on September 30, 2001 NYMEX
futures prices, the fair value of the Company's hedging arrangements at
September 30, 2001 was a gain of $2.9 million for collars and $3.1 million for
swaps. A 10% increase in both the oil price and the gas price would decrease
this gain by $2.0 million and a 10% decrease in both the oil price and the gas
price would increase this gain by $3.2 million. The counterparty for all of the
Company's hedging arrangements is Enron North America Corp.
7
The Wiser Oil Company
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
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.
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
=======
8
The Wiser Oil Company
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
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
========
Following are the unaudited pro forma results of operations for the Company
for the nine months ended September 30, 2001 and September 30, 2000, as if the
acquisition of Invasion took place on January 1, 2000 (000's):
Nine Months Ended September 30,
-------------------------------
2001 2000
------- -------
Revenues $85,180 $59,428
Expenses 64,666 58,661
------- -------
Net Income $20,514 $ 767
======= =======
Earnings per share - Basic $ 1.98 $ 0.04
======= =======
Earnings per share - Diluted $ 1.46 $ 0.04
======= =======
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.
9
The Wiser Oil Company
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
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 Nine Months
Ended September 30, Ended September 30,
------------------- -----------------------
2001 2000 2001 2000
------- -------- ------- ------
Net income (loss).......................................... $ 2,379 $ 2,795 $18,706 $ 1,230
Less preferred dividends................................... (441) (265) (1,019) (365)
Less amortization of preferred stock discount.............. (1,010) - (1,333) -
------- ------- ------- -------
Net income (loss) available to common stock................ 928 2,530 16,354 865
Plus: Income impact of assumed conversions:
Dividends on preferred stock and amortization............ 1,451 265 2,352 365
------- ------- ------- -------
Net income (loss) available to common plus
assumed conversions...................................... $ 2,379 $ 2,795 $18,706 $ 1,230
======= ======= ======= =======
Basic weighted average shares.............................. 9,202 8,952 9,152 8,952
Effect of dilutive securities:
Convertible preferred stock.............................. 5,882 3,529 4,582 -
Warrants................................................. 262 - 213 -
Stock options............................................ 54 1 57 -
------- ------- ------- -------
Diluted weighted average shares............................ 15,400 12,482 14,004 8,952
======= ======= ======= =======
Net Income (Loss) per Share:
Basic.................................................... $ 0.10 $ 0.28 $ 1.79 $ 0.10
Diluted.................................................. 0.10 0.22 1.34 0.10
The effect of the convertible preferred stock for the quarter ended
September 30, 2001 and the year ended September 30, 2000 was antidilutive.
Note 6. Comprehensive Income
Comprehensive income is as follows (000's):
For the Quarter For the Nine Months
Ended September 30, 2001 Ended September 30, 2001
------------------------ ------------------------
Net income........................................... $ 2,379 $ 18,706
Foreign currency translation adjustment.............. (1,121) (1,852)
Net change in derivative fair value:
Cumulative effect of accounting change............. -- (3,083)
Change in derivative fair value.................... 2,935 7,216
Reclassification adjustments - contract settlements.. (2,604) (1,067)
------- --------
Comprehensive Income................................. $ 1,589 $ 19,920
======= ========
10
The Wiser Oil Company
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
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 $20 million for U.S. borrowings. The aggregate borrowing base is
re-determined by the banks semi-annually starting in October 2001. At September
30, 2001, the Company had CDN$ 30.0 million (USD$ 19.1 million) of Canadian
borrowings outstanding and $20.0 million was available primarily for U.S.
borrowings. Available loan and interest options are (i) Prime Rate Loans, at
the bank's 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 third quarter of
2001 under the Union Revolver was 6.90%. 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.
11
The Wiser Oil Company
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 September 30, 2001 (Parent) Guarantors Adjustments Total
---------- ----------- ------------- ---------
(000's)
Revenues:
Oil and gas sales $ 10,136 $ 9,043 $ - $ 19,179
Other 2,302 156 - 2,458
-------- ------- ----- ---------
Total revenues 12,438 9,199 - 21,637
-------- ------- ----- ---------
Costs and Expenses:
Production and operating 5,170 1,853 - 7,023
DD&A and impairments 2,008 2,979 - 4,987
Exploration 1,230 391 - 1,621
General and administrative 1,278 607 - 1,885
Interest expense 3,157 329 - 3,486
-------- ------- ----- ---------
Total Expenses 12,843 6,159 - 19,002
-------- ------- ----- ---------
Income (Loss) Before Taxes (405) 3,040 - 2,635
Income tax -- (256) - (256)
-------- ------- ----- ---------
Net Income (Loss) $ (405) $ 2,784 $ - $ 2,379
======== ======= ===== =========
Condensed Income Statement for the
Quarter Ended September 30, 2000
Revenues:
Oil and gas sales $ 10,957 $ 6,628 $ - $ 17,585
Other 594 50 - 644
-------- ------- ----- ---------
Total revenues 11,551 6,678 - 18,229
-------- ------- ----- ---------
Costs and Expenses:
Production and operating 5,213 937 - 6,150
DD&A and impairments 2,357 1,446 - 3,803
Exploration 343 295 - 638
General and administrative 1,363 324 - 1,687
Interest expense 3,150 6 - 3,156
-------- ------- ----- ---------
Total Expenses 12,426 3,008 - 15,434
-------- ------- ----- ---------
Income (Loss) Before Taxes (875) 3,670 - 2,795
-------- ------- ----- ---------
Net Income (Loss) $ (875) $ 3,670 $ - $ 2,795
======== ======= ===== =========
12
The Wiser Oil Company
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
Condensed Income Statement for the Wiser Oil Subsidiary Consolidation
Nine Months Ended September 30, 2001 (Parent) Guarantors Adjustments Total
---------- ----------- ------------- ---------
(000's)
Revenues:
Oil and gas sales $ 38,559 $ 24,856 $ - $ 63,415
Other 3,660 8,543 - 12,203
-------- -------- ----- ---------
Total revenues 42,219 33,399 - 75,618
-------- -------- ----- ---------
Costs and Expenses:
Production and operating 17,083 4,300 - 21,383
DD&A and impairments 6,641 7,142 - 13,783
Exploration 4,166 1,359 - 5,525
General and administrative 4,172 1,638 - 5,810
Interest expense 9,524 442 - 9,966
-------- -------- ----- ---------
Total Expenses 41,586 14,881 - 56,467
-------- -------- ----- ---------
Income Before Taxes 633 18,518 - 19,151
Income tax -- (445) - (445)
-------- -------- ----- ---------
Net Income $ 633 $ 18,073 $ - $ 18,706
======== ======== ===== =========
Condensed Income Statement for the
Nine Months Ended September 30, 2000
Revenues:
Oil and gas sales $ 30,221 $ 18,242 $ - $ 48,463
Other 1,699 91 - 1,790
-------- -------- ----- ---------
Total revenues 31,920 18,333 - 50,253
-------- -------- ----- ---------
Costs and Expenses:
Production and operating 14,765 2,803 - 17,568
DD&A and impairments 7,010 5,204 - 12,214
Exploration 1,092 1,786 - 2,878
General and administrative 5,287 1,576 - 6,863
Interest expense 9,494 6 - 9,500
-------- -------- ----- ---------
Total Expenses 37,648 11,375 - 49,023
-------- -------- ----- ---------
Income (Loss) Before Taxes (5,728) 6,958 - 1,230
-------- -------- ----- ---------
Net Income (Loss) $ (5,728) $ 6,958 $ - $ 1,230
======== ======== ===== =========
13
The Wiser Oil Company
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
Condensed Statement of Cash Flows for Wiser Oil Subsidiary Consolidation
the Nine Months Ended Sept. 30, 2001 (Parent) Guarantors Adjustments Total
---------- ----------- ------------- ---------
(000's)
Cash Flows From Operating Activities:
Net income $ 633 $ 18,073 $ - $ 18,706
Add back reconciling items 8,498 (535) - 7,963
Other changes 2,588 (3,417) - (829)
-------- -------- ----- ----------
Operating Cash Flows 11,719 14,121 - 25,840
-------- -------- ----- ----------
Cash Flows From Investing Activities:
Capital expenditures (12,275) (52,962) - (65,237)
Proceeds from property sales - 219 - 219
-------- -------- ----- ----------
Investing Cash Flows (12,275) (52,743) - (65,018)
-------- -------- ----- ----------
Cash Flows From Financing Activities:
Intercompany transfers (19,500) 19,500 - -
Long term debt (500) 19,536 - 19,036
Preferred stock issued 10,000 - - 10,000
Common stock issued 25 - - 25
Treasury stock purchased (155) - - (155)
Warrants issued 6 - - 6
-------- -------- ----- ----------
Financing Cash Flows (10,124) 39,036 - 28,912
-------- -------- ----- ----------
Net Increase (Decrease) in Cash (10,680) 414 - (10,266)
Cash and Cash Equivalents, beginning of period 29,518 4,626 - 34,144
-------- -------- ----- ----------
Cash and Cash Equivalents, end of period $ 18,838 $ 5,040 $ - $ 23,878
======== ======== ===== ==========
Condensed Statement of Cash Flows for
the Nine Months Ended Sept. 30, 2000
Cash Flows From Operating Activities:
Net income (loss) $ (5,728) $ 6,958 - $ 1,230
Add back reconciling items 8,305 5,927 - 14,232
Other changes (3,159) (1,808) - (4,967)
-------- -------- ----- ----------
Operating Cash Flows (582) 11,077 - 10,495
-------- -------- ----- ----------
Cash Flows From Investing Activities:
Capital expenditures (5,936) (8,381) - (14,317)
Proceeds from property sales - 11 - 11
-------- -------- ----- ----------
Investing Cash Flows (5,936) (8,370) - (14,306)
-------- -------- ----- ----------
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 7,166 2,707 - 9,873
Cash and Cash Equivalents, beginning of period 18,779 2,668 - 21,447
-------- -------- ----- ----------
Cash and Cash Equivalents, end of period $ 25,945 $ 5,375 $ - $ 31,320
======== ======== ===== ==========
14
The Wiser Oil Company
THE WISER OIL COMPANY
Notes to Financial Statements (continued)
Condensed Balance Sheets Wiser Oil Subsidiary Consolidation
September 30, 2001 (Parent) Guarantors Adjustments Total
---------- ----------- ------------- ---------
(000's)
Assets:
Current assets $ 32,992 $ 14,941 $ - $ 47,933
Net property and equipment 119,655 107,102 - 226,757
Other assets 89,161 - (85,829) 3,332
-------- -------- -------- --------
Total Assets $241,808 $122,043 $(85,829) $278,022
======== ======== ======== ========
Liabilities and Stockholders' Equity:
Current liabilities $ 11,392 $ 7,251 $ - $ 18,643
Long-term debt 124,655 19,137 - 143,792
Deferred income taxes - 12,006 - 12,006
Stockholders' equity 105,761 83,649 (85,829) 103,581
-------- -------- -------- --------
Total Liabilities and Stockholders' Equity $241,808 $122,043 $(85,829) $278,022
======== ======== ======== ========
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 Stockholder's 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.
Note 9. Recent Accounting Pronouncements
On June 30, 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard No. 143, "Accounting for Asset
Retirement Obligations," (SFAS 143) on the accounting for obligations associated
with the retirement of long-lived assets. SFAS 143 requires a liability to be
recognized in the financial statements for retirement obligations meeting
specific criteria. Measurement of the initial obligation is to approximate fair
value with an equivalent amount recorded as an increase in the value of the
capitalized asset. The asset will be depreciable in accordance with normal
depreciation policy and the liability will be increased, with a charge to the
income statement, until the obligation is settled. SFAS 143 is effective for
fiscal years beginning after June 15, 2002. The Company is currently evaluating
the effect that adoption of the provisions of SFAS 143 will have on its results
of operations and financial position.
15
The Wiser Oil Company
THE WISER OIL COMPANY
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison of Quarters Ended September 30, 2001 and September 30, 2000
Revenues for the third quarter of 2001 increased $3.4 million or 19% from
the third quarter of 2000, due primarily to higher oil revenues and other
income. Oil sales for the third quarter of 2001 were $1.6 million higher than
the third quarter of 2000 as the average price received for oil sales in the
third quarter of 2001 was $25.20 per barrel, up $3.78 per barrel or 18% from the
third quarter of 2000. Net oil production for the third quarter of 2001 was
401,000 barrels, up 31,000 barrels or 8% from 370,000 barrels in the third
quarter of 2000. The increase in oil production was attributable primarily to
the Evi-Loon field acquired in the second quarter of 2001 in an asset exchange
in Canada (see Note 4). Gas sales for the third quarter of 2001 were unchanged
from the third quarter of 2000 as a result of lower realized prices which were
partially offset by higher gas production. The average price received for gas
sales in the third quarter of 2001 was $3.28 per Mcf, a decrease of $0.38 per
Mcf or 10% from the third quarter of 2000. Net gas production for the third
quarter of 2001 was 2,640 MMCF, up 307 MMCF or 13% from the third quarter of
2000. The increase in net gas production was attributable primarily to an
additional 850 MMCF from the Invasion acquisition effective May 22, 2001, offset
by reduced gas production of 247 MMCF from several Canadian gas properties that
were disposed of in the second quarter 2001 asset exchange in Canada. During the
third quarter of 2001, oil and gas sales were increased by $2.6 million and
other income was increased by $2.0 million from the Company's hedging
activities. Hedging activities reduced oil and gas sales by $4.1 million in the
third quarter of 2000.
Production and operating expense for the third quarter of 2001 increased
$0.9 million or 14% from the third quarter of 2000 and, on a BOE basis,
production and operating expense in the third quarter of 2001 increased to $8.10
per BOE or 6% from $7.66 per BOE during the third 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 third quarter of 2001
than the third quarter of 2000. Production and operating expense also increased
by $0.7 million from the Invasion acquisition. Depreciation, depletion and
amortization, ("DD&A") for the third quarter of 2001, increased $1.2 million or
31% from the third quarter of 2000 due primarily to the Invasion acquisition.
Exploration expense for the third quarter of 2001 was $1.6 million, up $1.0
million from the third quarter of 2000 due primarily to $0.8 million of dry hole
expense in the third quarter of 2001. General and administrative expense in the
third quarter of 2001 was $1.9 million, up $0.2 million from the third quarter
of 2000. Interest expense during the third quarter of 2001 was $3.5 million, up
$0.3 million or 10% from the third 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 $19.8 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 September 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 third 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
$0.3 million was recognized in the third quarter of 2001.
The Company realized net income available for common stock of $0.9 million
and basic net earnings per share of $0.10 in the third quarter of 2001 compared
to net income of $2.5 million and net income per share of $0.28 during the
third quarter of 2000.
16
The Wiser Oil Company
THE WISER OIL COMPANY
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison of Nine Months Ended September 30, 2001 and September 30, 2000
Revenues for the first nine months of 2001 increased $25.4 million or 50%
from the first nine months of 2000, due to an $8.3 million gain on sale of
property and significantly higher oil and gas revenues in the first nine months
of 2001. Oil sales for the first nine months of 2001 were $5.4 million higher
than the first nine months of 2000 as the average price received for oil sales
in the first nine months of 2001 was $25.80 per barrel, up $3.54 per barrel or
16% from the first nine months of 2000. Net oil production for the first nine
months of 2001 was 1,174,000 barrels, up 57,000 barrels or 5% from 1,117,000
barrels in the first nine months of 2000. Gas sales for the first nine months of
2001 were $10.8 million higher than the first nine months of 2000 due to higher
realized prices and increased gas production. The average price received for
gas sales in the first nine months of 2001 was $4.35 per Mcf, an increase of
$1.46 per Mcf or 50% from the first nine months of 2000. Net gas production for
the first nine months of 2001 was 7,109 MMCF, up 172 MMCF or 2% from the first
nine months of 2000. The increase in net gas production was attributable
primarily to an additional 1,202 MMCF from the Invasion acquisition effective
May 22, 2001, offset by reduced gas production of 247 MMCF from several Canadian
gas properties that were disposed of in the second quarter 2001 asset exchange
(see Note 4) and also by reduced production from the San Juan, South Texas and
Dimmitt/Slash Ranch properties. During the first nine months of 2001, oil and
gas sales were increased by $1.1 million and other income was increased by $2.4
million from the Company's hedging activities. Hedging activities reduced oil
and gas sales by $8.1 million in the first nine months of 2000.
Production and operating expense for the first nine months of 2001
increased $3.8 million or 22% from the first nine months of 2000 and, on a BOE
basis, increased to $8.69 per BOE or 20% from $7.21 per BOE. Higher oil and gas
prices led to increased production taxes in the first nine months of 2001 which
were $0.8 million higher than the first nine months of 2000. Production and
operating expense was also increased by $0.9 million from the Invasion
acquisition and production expense at the Maljamar and Wellman fields in the
first nine months of 2001 was $0.4 million higher than the first nine months of
2000. Depreciation, depletion and amortization, ("DD&A") for the first nine
months of 2001, increased $2.2 million or 20% from the first nine months of 2000
due primarily to the Invasion acquisition. Exploration expense for the first
nine months of 2001 was $5.5 million, up $2.6 million from the first nine months
of 2000 due to increased exploration activities in the first nine months of
2001. General and administrative expense in the first nine months of 2001 was
$5.8 million, down $1.1 million from the first nine months of 2000 due primarily
to $2.2 million of officer termination expense in the first nine months of 2000.
Interest expense during the first nine months of 2001 was $10.0 million, up $0.5
million or 5% from the first nine months 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 $19.8 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 September 30, 2001, a valuation
allowance was provided to reduce US deferred tax assets to an amount equal to
deferred tax liabilities. Accordingly, no US Federal income tax expense was
recognized in the first nine months 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 $0.4 million was recognized in the
first nine months of 2001 related to the Invasion properties.
The Company realized net income available for common stock of $16.4 million
and basic net earnings per share of $1.79 in the first nine months of
2001 compared to net income of $0.9 million and net income per share of $0.10
during the first nine months of 2000.
17
The Wiser Oil Company
Liquidity and Capital Resources
Operating cash flows during the first nine months of 2001 were $25.8
million, up $15.3 million from the first nine months of 2000. Higher oil and
gas sales increased cash flows from operations by $15.0 million while changes in
working capital decreased cash flows from operations by $0.8 million. Capital
expenditures during the first nine months of 2001 were $65.2 million, up $50.9
million from $14.3 million in the first nine months of 2000 due primarily to the
Invasion acquisition and the asset exchange in Canada (see Note 4). On a cash
basis, the Company paid $6.0 million in interest expense in the first nine
months of 2001 and no income taxes were paid in the first nine months of 2001.
Cash flows from financing activities in the first nine months of
2001 included USD$19.0 million (CDN$ 30.0 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 nine months 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 nine months of 2001 decreased
$10.3 million from $34.1 million at December 31, 2000 to $23.8 million at
September 30, 2001. The decrease was attributable primarily to capital
expenditures of $65.2 million which were greater than operating cash flows of
$25.8 million and financing cash flows of $28.9 million for the first nine
months of 2001.
18
The Wiser Oil Company
THE WISER OIL COMPANY
PART II - OTHER INFORMATION
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See Note 1 "Hedging Activities".
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
None
(b) Reports on Form 8-K
-------------------
None
19
The Wiser Oil Company
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: November 14, 2001 /s/ George K. Hickox, Jr.
------------------------------
George K. Hickox, Jr.
Chairman of the Board and
Chief Executive Officer
Date: November 14, 2001 /s/ Richard S. Davis
------------------------------
Richard S. Davis
Vice President of Finance
20
The Wiser Oil Company
THE WISER OIL COMPANY
Index to Exhibits
Exhibit
Number Exhibit
- ------ -------
None
21