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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, 1998 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, 1998
----------- ----------------------------
$3 par value 8,951,965
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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,
1998 1997
---------- -------------
(000's) except share data
ASSETS
Current Assets:
Cash and cash equivalents.................................... $ 58 $ 13,255
Accounts receivable.......................................... 11,307 13,765
Inventories.................................................. 1,034 1,007
Income taxes receivable...................................... 3,055 725
Prepaid expenses............................................. 1,328 438
--------- ---------
Total current assets...................................... 16,782 29,190
--------- ---------
Property, Plant and Equipment, at cost:
Oil and gas properties (successful efforts method)........... 365,411 346,655
Other properties............................................. 5,545 5,399
--------- ---------
370,956 352,054
Accumulated depreciation, depletion and amortization......... (143,878) (131,346)
--------- ---------
Net property, plant and equipment............................ 227,078 220,708
Other Assets.................................................. 3,894 4,658
--------- ---------
$ 247,754 $ 254,556
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable............................................. $ 11,386 $ 18,396
Accrued liabilities.......................................... 2,954 2,985
--------- ---------
Total current liabilities.................................. 14,340 21,381
--------- ---------
Long Term Debt................................................ 134,341 124,304
Deferred Benefit Cost......................................... 1,248 1,169
Deferred Income Taxes......................................... 9,102 10,278
Stockholders' Equity:
Common stock - $3 par value; 20,000,000 shares authorized;
shares issued - 9,128,169; shares outstanding - 8,951,965... 27,385 27,385
Paid-in capital.............................................. 3,223 3,223
Retained earnings............................................ 59,862 68,630
Foreign currency translation................................. 982 915
Treasury stock; 176,204 shares, at cost...................... (2,729) (2,729)
--------- ---------
Total stockholders' equity................................. 88,723 97,424
--------- ---------
$ 247,754 $ 254,556
========= =========
The notes to financial statements included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997 are an integral part of
these financial statements.
3
THE WISER OIL COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(UNAUDITED)
FOR THE THREE MONTHS FOR THE SIX MONTHS
--------------------- -------------------
ENDED JUNE 30, ENDED JUNE 30,
--------------------- -------------------
1998 1997 1998 1997
--------- -------- -------- -------
(000's except per share data)
Revenues:
Oil and gas sales......................... $15,471 $16,207 $ 32,545 $39,269
Dividends and interest.................... 67 337 212 457
Marketable security sales................. - - - 1,813
Other..................................... 481 1,282 677 1,860
------- ------- -------- -------
16,019 17,826 33,434 43,399
------- ------- -------- -------
Costs and Expenses:
Production and operating.................. 6,273 6,760 12,435 13,561
Purchased natural gas..................... 350 261 738 773
Depreciation, depletion and amortization.. 6,821 5,243 13,662 11,010
Exploration............................... 3,654 3,517 7,007 4,139
General and administrative................ 2,553 2,553 4,979 4,931
Interest expense.......................... 3,227 2,091 6,373 3,355
------- ------- -------- -------
22,878 20,425 45,194 37,769
------- ------- -------- -------
Earnings (Loss) Before Income Taxes......... (6,859) (2,599) (11,760) 5,630
Income Tax Expense (Benefit)................ (2,184) (655) (3,529) 1,433
------- ------- -------- -------
NET INCOME (LOSS)........................... (4,675) (1,944) (8,231) 4,197
Retained Earnings, beginning of period...... 64,806 72,258 68,630 66,385
Dividends Paid.............................. (269) (269) (537) (537)
------- ------- -------- -------
Retained Earnings, end of period............ $59,862 $70,045 $ 59,862 $70,045
======= ======= ======== =======
Weighted Average Outstanding Shares......... 8,952 8,950 8,952 8,950
======= ======= ======== =======
Earnings (Loss) Per Share:
Basic..................................... ($0.52) ($0.22) ($0.92) $ 0.47
======= ======= ======== =======
Diluted................................... ($0.52) ($0.22) ($0.92) $ 0.47
======= ======= ======== =======
Cash Dividends Per Share.................... $0.03 $0.03 $0.06 $ 0.06
======= ======= ======== =======
The notes to financial statements included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997 are an integral part of
these financial statements.
4
THE WISER OIL COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX MONTHS
--------------------
ENDED JUNE 30,
--------------------
1998 1997
--------- ---------
(000's)
Cash Flows From Operating Activities:
Net Income (Loss)............................................. $ (8,231) $ 4,197
Adjustments to reconcile net income to operating cash flows:
Depreciation, depletion and amortization.................... 13,662 11,010
Deferred income taxes....................................... (1,176) 449
Marketable securities and property sale gains............... (391) (3,595)
Foreign currency translation................................ 67 (11)
Exploration expense......................................... 7,007 4,139
Amortization of other assets................................ 292 -
Other Changes:
Accounts receivable....................................... 2,458 3,510
Inventories............................................... (27) (467)
Income taxes receivable................................... (2,331) 518
Prepaid expenses.......................................... (890) (55)
Other assets.............................................. 509 -
Accounts payable.......................................... (7,010) (3,828)
Accrued liabilities....................................... (31) 1,145
Deferred benefits cost.................................... 79 35
-------- --------
Operating Cash Flows................................... 3,987 17,047
-------- --------
Cash Flows From Investing Activities:
Capital and exploration expenditures.......................... (28,700) (40,762)
Proceeds from sales of property, plant and equipment.......... 2,053 2,945
Proceeds from marketable securities sales..................... - 1,929
-------- --------
Investing Cash Flows................................... (26,647) (35,888)
-------- --------
Cash Flows From Financing Activities:
Long term debt issued......................................... 10,000 125,000
Payments on long term debt.................................... - (78,654)
Debt issuance costs and fees.................................. - (4,890)
Common stock issued........................................... - 162
Dividends paid................................................ (537) (537)
-------- --------
Investing Cash Flows................................... 9,463 41,081
-------- --------
Net Increase In Cash............................................. (13,197) 22,240
Cash and Cash Equivalents, beginning of period................... 13,255 5,870
-------- --------
Cash and Cash Equivalents, end of period......................... $ 58 $ 28,110
======== ========
The notes to financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 are an integral part of these
financial statements.
5
THE WISER OIL COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF QUARTERS ENDED JUNE 30, 1998 AND JUNE 30, 1997
Revenues for the second quarter of 1998 decreased $1.8 million or 10% from
the second quarter of 1997, due primarily to lower oil prices. Oil sales for the
second quarter of 1998 were $2.6 million lower than the second quarter of 1997
as the average price received for oil sales in the second quarter of 1998 was
$12.33 per barrel, down $4.99 per barrel or 29% from the second quarter of 1997.
Net oil production for the second quarter of 1998 was 592,000 barrels, up 3%
from 574,000 barrels in the second quarter of 1997 due primarily to increased
production from the Provost and Evi fields in Canada. Gas sales for the second
quarter of 1998 were $2.3 million higher than the second quarter of 1997 as the
average price received for gas sales was $1.96 per mcf, an increase of $0.19 per
mcf or 11% from the second quarter of 1997. Net gas production for the second
quarter of 1998 was 3,768 MMCF, up 875 MMCF or 30% from the second quarter of
1997 due primarily to production from the Welder Ranch field in South Texas
which was acquired in June 1997. During the second quarter of 1998, there were
no adjustments to oil and gas sales from the Company's hedging activities
compared to a reduction of $0.4 million in oil and gas sales in the second
quarter of 1997. The Company liquidated its remaining portfolio of marketable
securities during 1997. Accordingly, there were no sales of marketable
securities in the second quarter of 1998, and there were no sales of marketable
securities in the second quarter of 1997.
Production and operating expense for the second quarter of 1998 decreased
$0.5 million or 7% primarily as a result of cost cutting measures implemented at
the Maljamar and Wellman fields. On a BOE basis (excluding 140 MMCF and 133
MMCF of gas purchased for resale during the second quarter of 1998 and 1997,
respectively), production and operating expense during the second quarter of
1998 decreased to $4.89 per BOE or 19% from $6.01 per BOE during the second
quarter of 1997. Depreciation, depletion and amortization, ("DD&A") for the
second quarter of 1998, increased $1.6 million or 30% over the second quarter of
1997 due primarily to higher DD&A from the Maljamar field in New Mexico.
Exploration expense for the second quarter of 1998 was $3.7 million, up $0.2
million from the second quarter of 1997. General and administrative expense in
the second quarter of 1998 was comparable with the second quarter of 1997.
Interest expense during the second quarter of 1998 was $3.2 million or 54%
higher than the second quarter of 1997 due to the increase in long term debt
associated with the issuance of $125 million of Senior Subordinated Notes in May
1997 and $10 million of borrowings under the Credit Agreement in the second
quarter of 1998. The effective income tax rate during the second quarter of 1998
was 32% compared to 25% in the second quarter of 1997.
The Company realized a net loss of $4.7 million and net loss per share of
$0.52 in the second quarter of 1998 compared to a net loss of $1.9 million and
net loss per share of $0.22 during the second quarter of 1997. The Company's
Canadian operations incurred a pre-tax loss of $0.8 million during the second
quarter of 1998 compared to a pre-tax loss of $2.0 million during the second
quarter of 1997.
6
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, 1998 AND JUNE 30, 1997
Revenues for the first half of 1998 decreased $10.0 million or 23% from the
first half of 1997, due primarily to lower oil prices. Oil sales for the first
half of 1998 were $6.5 million lower than the first half of 1997 as the average
price received for oil sales in the first half of 1998 was $13.27 per barrel,
down $5.30 per barrel or 29% from the first half of 1997. Net oil production
for the first half of 1998 was 1,275,000 barrels, up 1% from 1,260,000 barrels
in the first half of 1997 due primarily to increased production from the Provost
and Evi fields in Canada. Gas sales for the first half of 1998 were $0.6 million
higher than the first half of 1997 as net gas production for the first half of
1998 was 7,198 MMCF, up 1,135 MMCF or 19% from the first half of 1997 due
primarily to production from the Welder Ranch field in South Texas which was
acquired in June 1997. The average price received for gas sales during the
first half of 1998 was $1.96 per mcf, a decrease of $0.26 per mcf or 12% from
the first half of 1997. During the first half of 1998, there were no adjustments
to oil and gas sales from the Company's hedging activities compared to a
reduction of $1.8 million in oil and gas sales in the first half of 1997. The
Company liquidated its remaining portfolio of marketable securities during 1997.
Accordingly, there were no sales of marketable securities in the first half of
1998 compared to $1.8 million in gain from sales of marketable securities in the
first half of 1997.
Production and operating expense for the first half of 1998 decreased $1.1
million or 8% from the first half of 1997 primarily as a result of cost cutting
measures implemented at the Maljamar and Wellman fields and the sale of
properties in Michigan in the first quarter of 1997. On a BOE basis (excluding
305 MMCF and 301 MMCF of gas purchased for resale during the first half of 1998
and 1997, respectively), production and operating expense during the first half
of 1998 decreased to $4.81 per BOE or 15% from $5.66 per BOE during the first
half of 1997. DD&A for the first half of 1998, increased $2.7 million or 24%
over the first half of 1997 due primarily to higher DD&A from the Maljamar field
in New Mexico and from the South Texas properties acquired in June 1997.
Exploration expense for the first half of 1998 was $7.0 million, up $2.9 million
from the first half of 1997 due primarily to higher seismic expense in the U.S.
General and administrative expense in the first half of 1998 was comparable with
the first half of 1997. Interest expense during the first half of 1998 was $6.4
million which was $3.0 million or 90% higher than the first half of 1997 due to
the increase in long term debt associated with the issuance of $125 million of
Senior Subordinated Notes in May 1997 and $10 million of borrowings under the
Credit Agreement in the first half of 1998. The effective income tax rate during
the first half of 1998 was 30% compared to 25% in the first half of 1997.
The Company realized a net loss of $8.2 million and net loss per share of
$0.92 in the first half of 1998 compared to net income of $4.2 million and
earnings per share of $0.47 during the first half of 1997. The Company's
Canadian operations incurred a pre-tax loss of $1.5 million during the first
half of 1998 compared to a pre-tax loss of $2.9 million during the first half of
1997.
7
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, 1998 AND JUNE 30, 1997 (CONTINUED)
Operating cash flows during the first half of 1998 were $4.0 million, down
$13.1 million from the first half of 1997 primarily as a result of decreased oil
sales combined with higher interest expense and a reduction in accounts payable.
Capital and exploration expenditures during the first half of 1998 were $28.7
million, down $12.1 million from $40.8 million during the first half of 1997.
YEAR 2000 ISSUE
The Company has assessed and continues to assess the impact of the "year 2000"
issue on its reporting systems and operations. The "year 2000" issue exists
because many computer systems and applications currently use two-digit date
fields to designate a year. As the century date occurs, two-digit date systems
will recognize the year 2000 as 1900 or not at all. This inability to recognize
the year 2000 may cause systems to process critical financial and operational
information incorrectly. The Company anticipates that all its significant
computer systems and software will be year 2000 compliant during 1998.
Management does not estimate future expenditures related to the year 2000
exposure to be material.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. COMPREHENSIVE INCOME
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130 "Reporting Comprehensive Income"("SFAS 130") which
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. Comprehensive
income includes net income and other comprehensive income, which includes, but
is not limited to, unrealized gains for marketable securities and future
contracts, foreign currency translation adjustments and minimum pension
liability adjustments. The impact of adopting SFAS No. 130 on the six months
ended June 30, 1998 and June 30, 1997 is as follows:
JUNE 30,
-------------------
1998 1997
--------- --------
Net Income (Loss)............................... $(8,231) $4,197
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments...... 67 (11)
Unrealized gains on marketable securities..... - (600)
------- ------
Comprehensive income (loss)..................... $(8,164) $3,586
======= ======
8
NOTE 2. SUMMARY OF GUARANTIES OF 9 1/2% SENIOR SUBORDINATED NOTES
In May 1997, 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
subidiaries that are inconsequential to the Company on a consolidated basis, the
Initial Subsidiary Guarantors comprise all of the Company's direct and indirect
subsidiaries.
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.
9
THE WISER OIL COMPANY
SUBSIDIARY GUARANTORS
------------------------------
THE WISER
WISER T.W.O.C. MARKETING COMBINED
CANADA(1) INC. COMPANY TOTAL
----------- --------- --------- --------
(000's)
REVENUES
- --------
FOR THE QUARTER ENDED JUNE 30,1998..... $ 3,778 $ - $ 540 $ 4,318
For the quarter ended June 30, 1997.... 3,320 48 410 3,778
FOR THE SIX MONTHS ENDED JUNE 30,1998.. 7,558 1 1,100 8,659
For the six months ended June 30,1997.. 7,401 1,908 1,087 10,396
INCOME (LOSS) BEFORE INCOME TAXES
- ---------------------------------
FOR THE QUARTER ENDED JUNE 30,1998..... $ (777) $ (4) $ 90 $ (691)
For the quarter ended June 30, 1997.... (2,013) 44 48 (1,921)
FOR THE SIX MONTHS ENDED JUNE 30,1998.. (1,486) (8) 156 (1,338)
For the six months ended June 30,1997.. (2,920) 1,900 116 (904)
NET INCOME (LOSS)
- ----------------
FOR THE QUARTER ENDED JUNE 30,1998..... $ (522) $ (3) $ 63 $ (462)
For the quarter ended June 30, 1997.... (1,510) 33 36 (1,441)
FOR THE SIX MONTHS ENDED JUNE 30,1998.. (1,040) (6) 109 (937)
For the six months ended June 30,1997.. (2,190) 1,409 86 (695)
CURRENT ASSETS
- --------------
JUNE 30,1998........................... $ 2,921 $ 36 $ 141 $ 3,098
December 31, 1997...................... 4,808 44 165 5,017
TOTAL ASSETS
- ------------
JUNE 30,1998........................... $54,305 $ 36 $ 561 $54,902
December 31, 1997...................... 52,083 44 492 52,619
CURRENT LIABILITIES
- -------------------
JUNE 30,1998........................... $ 5,711 $ - $ 283 $ 5,994
December 31, 1997...................... 6,646 - 250 6,896
NONCURRENT LIABILITIES
- ----------------------
JUNE 30,1998........................... $ - $ - $ - $ -
December 31, 1997...................... 9,474 - - 9,474
STOCKHOLDER'S EQUITY
- --------------------
JUNE 30,1998........................... $48,594 $ 36 $ 278 $48,908
December 31, 1997...................... 35,963 44 242 36,249
(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, 1997.
10
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 4:00 p.m., local time, on May 18, 1998.
(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 8,951,965 shares of The Wiser Oil Company common
stock outstanding and entitled to vote as of the March 27, 1998 record
date, 7,783,771 shares were present in person or by proxy,
representing approximately 87 percent of outstanding shares. The only
matter voted on by the stockholders, as fully described in the proxy
statement for the annual meeting, was the election of Jon L. Mosle,
Jr. and A.W. Schenck, III to serve three-year terms on the Board of
Directors of The Wiser Oil Company. The results of voting were as
follows:
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
--------------- ------------------- --------------------------------
Jon L. Mosle, Jr. 6,827,914 955,857
A.W. Schenck, III 6,825,697 958,074
The following individuals continued their respective terms of service
as Directors of The Wiser Oil Company following the meeting:
John W. Cushing, III
Howard G. Hamilton
G. Frayer Kimball, III
Lorne H. Larson
Paul I. Neuenschwander
Andrew J. Shoup, Jr.
11
THE WISER OIL COMPANY
PART II - OTHER INFORMATION
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
-------------------
None.
12
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 12, 1998 /s/ Andrew J. Shoup, Jr.
-----------------------------
Andrew J. Shoup, Jr.
President and
Chief Executive Officer
Date: August 12, 1998 /s/ Lawrence J. Finn
-----------------------------
Lawrence J. Finn
Vice President, Finance and
Chief Financial Officer
13
THE WISER OIL COMPANY
INDEX TO EXHIBITS
Exhibit
Number Exhibit
- ------ -------
10.13* Retirement Restoration Plan
27 Financial Data Schedule
* Filed herewith.
14