UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended DECEMBER 31, 2004
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to ____________________
Commission file number 1-5507
MAGELLAN PETROLEUM CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-0842255
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Columbus Boulvard, Hartford, CT 06106
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(860) 293-2006
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
The number of shares outstanding of the issuer's single class of common
stock as of February 11, 2005 was 25,783,243.
MAGELLAN PETROLEUM CORPORATION
FORM 10-Q
DECEMBER 31, 2004
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
----
ITEM 1 Financial Statements (unaudited)
Condensed consolidated balance sheets at December 31, 2004 and June 30, 2004 3
Condensed consolidated statements of income (loss) for the three and six
months ended December 31, 2004 and 2003 4
Condensed consolidated statements of cash flows for the six months
ended December 31, 2004 and 2003 5
Notes to condensed consolidated financial statements 6
ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9
ITEM 3 Quantitative and Qualitative Disclosure About Market Risk 16
ITEM 4 Disclosure Controls and Procedures 16
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings 17
ITEM 2 Unregistered Sales of Equity Securities and Use of Proceeds 17
ITEM 4 Submission of Matters to a Vote of Security Holders 17
ITEM 6 Exhibits 17
Signatures 18
Certifications 19-20
2
MAGELLAN PETROLEUM CORPORATION
FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
December 31, June 30,
------------ ------------
ASSETS 2004 2004
------------ ------------
Current assets: (unaudited) (Note)
Cash and cash equivalents $ 20,770,067 $ 20,406,620
Accounts receivable-Trade 3,609,234 2,931,609
Accounts receivable-Working Interest Partners 449,725 1,044,619
Marketable securities 3,014,186 2,584,296
Inventories 616,903 595,948
Income taxes receivable 225,492 -
Other assets 253,533 318,141
------------ ------------
Total current assets 28,939,140 27,881,233
------------ ------------
Marketable securities 891,357 592,138
Property and equipment:
Oil and gas properties (successful efforts method) 81,640,036 69,970,134
Land, buildings and equipment 2,597,419 2,264,004
Field equipment 1,659,583 1,482,639
------------ ------------
85,897,038 73,716,777
Less accumulated depletion, depreciation and amortization (58,516,631) (49,295,770)
------------ ------------
Net property and equipment 27,380,407 24,421,007
------------ ------------
Total assets $ 57,210,904 $ 52,894,378
============ ============
LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,543,503 $ 4,367,305
Accrued liabilities 1,422,450 1,550,045
Income taxes payable - 267,645
------------ ------------
Total current liabilities 5,965,953 6,184,995
------------ ------------
Long term liabilities:
Deferred income taxes 571,836 403,261
Asset retirement obligations 5,601,867 4,852,416
------------ ------------
Total long term liabilities 6,173,703 5,255,677
------------ ------------
Minority interests 18,058,693 16,533,491
Commitments
Stockholders' equity:
Common stock, par value $.01 per share:
Authorized 200,000,000 shares
Outstanding 25,783,243 257,832 257,832
Capital in excess of par value 44,402,182 44,402,182
------------ ------------
Total capital 44,660,014 44,660,014
Accumulated deficit (15,625,817) (15,248,422)
Accumulated other comprehensive loss (2,021,642) (4,491,377)
------------ ------------
Total stockholders' equity 27,012,555 24,920,215
------------ ------------
Total liabilities, minority interests and stockholders' equity $ 57,210,904 $ 52,894,378
============ ============
Note: The balance sheet at June 30, 2004 has been derived from the audited
consolidated financial statements at that date.
See accompanying notes.
3
MAGELLAN PETROLEUM CORPORATION
FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(unaudited)
Three months ended Six months ended
December 31, December 31,
----------------------------- -----------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
REVENUES:
Oil sales $ 1,490,512 $ 1,181,111 $ 3,401,359 $ 2,274,213
Gas sales 3,457,733 3,087,632 5,824,540 6,918,131
Other production related revenues 505,854 329,713 805,641 802,619
------------ ------------ ------------ ------------
Total revenues 5,454,099 4,598,456 10,031,540 9,994,963
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Production costs 1,316,141 1,478,694 2,843,931 2,777,749
Exploration and dry hole costs 934,792 1,338,733 2,053,252 1,904,932
Salaries and employee benefits 649,438 717,651 1,319,578 1,280,606
Depletion, depreciation and amortization 2,053,759 1,665,642 3,454,417 2,743,601
Auditing, accounting and legal services 101,073 98,996 281,908 240,405
Accretion expense 101,281 88,591 195,651 170,464
Shareholder communications 111,341 87,717 154,852 120,482
Other administrative expenses 232,689 158,158 334,082 295,932
------------ ------------ ------------ ------------
Total costs and expenses 5,500,514 5,634,182 10,637,671 9,534,171
------------ ------------ ------------ ------------
Operating income (loss) (46,415) (1,035,726) (606,131) 460,792
Interest income 377,035 242,022 732,687 577,434
------------ ------------ ------------ ------------
Income (loss) before income taxes and minority
interests 330,620 (793,704) 126,556 1,038,226
Income tax (provision) benefit (152,463) 61,874 (157,797) (348,868)
------------ ------------ ------------ ------------
Income (loss) before minority interests 178,157 (731,830) (31,241) 689,358
Minority interests (254,169) 226,196 (340,293) (127,706)
------------ ------------ ------------ ------------
NET INCOME (LOSS) (76,012) (505,634) (371,534) 561,652
============ ============ ============ ============
Average number of shares outstanding
Basic 25,783,243 25,727,376 25,783,243 25,355,947
============ ============ ============ ============
Diluted 25,818,243 25,727,376 25,814,095 25,363,042
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE (BASIC AND DILUTED) $ - $ (.02) $ (.01) $ .02
============ ============ ============ ============
See accompanying notes.
4
MAGELLAN PETROLEUM CORPORATION
FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six months ended
December 31,
-----------------------------
2004 2003
------------ ------------
OPERATING ACTIVITIES:
Net income (loss) $ (371,534) $ 561,652
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depletion, depreciation and amortization 3,454,417 2,743,601
Accretion expense 195,651 170,464
Deferred income taxes 121,698 (81,228)
Minority interests 340,293 127,706
Exploration and dry hole costs 1,184,593 1,614,037
Increase (decrease) in operating assets and liabilities:
Accounts and notes receivable 366,458 452,777
Other assets 64,607 (65,341)
Inventories 49,108 4,869
Accounts payable and accrued liabilities (633,106) (353,935)
Income taxes payable and receivable (485,135) (15,928)
------------ ------------
Net cash provided by operating activities 4,287,050 5,158,674
INVESTING ACTIVITIES:
Additions to property and equipment (3,120,445) (4,250,536)
Oil and gas exploration activities (1,184,593) (1,614,037)
Marketable securities matured 2,580,977 2,619,051
Marketable securities purchased (3,310,086) (3,166,201)
------------ ------------
Net cash used in investing activities (5,034,147) (6,411,723)
------------ ------------
FINANCING ACTIVITIES:
Dividends to MPAL minority shareholders (821,732) (744,971)
------------ ------------
Net cash used in financing activities (821,732) (744,971)
------------ ------------
Effect of exchange rate changes on cash
and cash equivalents 1,932,276 1,540,771
------------ ------------
Net increase (decrease) in cash and cash equivalents 363,447 (457,249)
Cash and cash equivalents at beginning of year 20,406,620 20,041,464
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20,770,067 $ 19,584,215
============ ============
See accompanying notes.
5
Note 1. Basis of Presentation
Magellan Petroleum Corporation (the Company or MPC) is engaged in the sale
of oil and gas and the exploration for and development of oil and gas reserves.
At December 31, 2004, MPC's principal asset was a 55% equity interest in its
subsidiary, Magellan Petroleum Australia Limited (MPAL), which has one class of
stock that is publicly held and traded in Australia. MPAL's major assets are two
petroleum production leases covering the Mereenie oil and gas field (35% working
interest) and one petroleum production lease covering the Palm Valley gas field
(52% working interest). Both fields are located in the Amadeus Basin in the
Northern Territory of Australia. MPC has a direct 2.67% carried interest in the
Kotaneelee gas field in the Yukon Territory of Canada.
The accompanying unaudited consolidated financial statements include the
accounts of MPC and MPAL and have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered necessary
for a fair presentation have been included. All such adjustments are of a normal
recurring nature. Operating results for the three and six month periods ended
December 31, 2004 are not necessarily indicative of the results that may be
expected for the year ending June 30, 2005. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended June 30, 2004. All
amounts presented are in United States dollars, unless otherwise noted.
Certain reclassifications have been made to previously disclosed amounts to
conform to current period reporting.
Note 2. Kotaneelee Litigation
During September 2003, the litigants in the Kotaneelee litigation entered
into a settlement agreement. During October 2003, the Company received
approximately $851,000, after Canadian withholding taxes and reimbursement of
certain past legal costs. The plaintiffs agreed to terminate all litigation
against the defendants related to the field, including the claim that the
defendants failed to fully develop the field. Since each party agreed to bear
its own legal costs, there were no taxable costs assessed against any of the
parties. The components of the settlement payment, which was recorded in
September 2003, were as follows:
Gas sales $ 1,135,000
Interest income 102,000
Canadian withholding taxes (386,000)
-----------
Total $ 851,000
===========
Note 3. Capital and stock options
MPC through its stock repurchase plan may purchase up to one million
shares of its common stock in the open market. Through December 31, 2004, MPC
had purchased 680,850 of its shares at a cost of approximately $686,000, all of
which shares have been cancelled. No purchases of shares under the repurchase
plan were made by MPC during the three and six month periods ended December 31,
2004.
On July 10, 2003, a subsidiary of Origin Energy, Sagasco Amadeus Pty.
Limited, agreed to exchange 1.2 million shares of MPAL for 1.3 million shares of
the Company's common stock. The exchange was completed on September 2, 2003. The
fair value of the 1,300,000 shares on July 10, 2003 was $1,508,000, based on the
closing price of the Company's common stock on the Nasdaq SmallCap market on
that date.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB No. 25) and related
interpretations in accounting for its stock options because the alternative fair
value accounting provided under FASB Statement No. 123, "Accounting for Stock
Based Compensation," as amended by SFAS 148 "Accounting for Stock-based
Compensation - Transition and Disclosure" requires use of option valuation
models to value stock options. Under APB No. 25, because the exercise price of
the Company's stock options equals the market price of the underlying stock on
the date of grant, no compensation expense is recognized.
6
EXPIRATION NUMBER OF
DATES SHARES EXERCISE PRICES ($)
----------- --------- ------------------------
OPTIONS OUTSTANDING
June 30, 2002 871,000 1.28-1.57
Granted Jan. 2008 50,000 .85
--------
June 30, 2003 921,000 .85-1.57
Expired (126,000) 1.57
Cancelled (25,000) .85
Exercised (175,000) .85-1.28
--------
June 30, 2004 595,000 1.28
Granted July 1, 2014 30,000 1.45
--------
December 31, 2004 625,000 ($1.29 weighted average)
========
SUMMARY OF OPTIONS OUTSTANDING AT December 31, 2004
EXPIRATION EXERCISE
DATES TOTAL VESTED PRICES ($)
---------- ------- ------- ----------
Granted 2000 Feb. 2005 595,000 595,000 1.28
Granted 2004 July 2014 30,000 - 1.45
-------
Total 625,000 595,000
-------
OPTIONS RESERVED FOR FUTURE GRANTS 175,000
=======
Option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. The assumptions used in the 2004
valuation model were: risk free interest rate - 4.95%, expected life - 10 years,
expected volatility - .518, expected dividend - 0. These models assumes that the
options will vest ratably over three years.
Pro forma information regarding net income and earnings per share is
required by Statement 148, and has been determined as if the Company had
accounted for its stock options under the fair value method of Statement 123.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model. The Company's pro forma information follows:
THREE MONTHS ENDED THREE MONTHS ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
------------------- --------------------
Net loss as reported $(76,012) $ (-) $(505,634) $(.02)
Stock option expense (4,500) - - -
-------- ----- --------- -----
Pro forma net loss $(80,512) $ (-) $(505,634 $(.02)
======== ===== ========= =====
SIX MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 2004 DECEMBER 31, 2003
-------------------- ------------------
Net income (loss) as reported $(371,534) $(.01) $561,652 $ .02
Stock option expense (9,000) - - -
--------- ----- -------- -----
Pro forma net income (loss) $(380,534) $(.01) $561,652 $ .02
--------- ----- -------- -----
Note 4. Depletion, depreciation and amortization (DD&A)
The operator of the Mereenie field has implemented an extensive program
for additional drilling and capital improvements to meet gas sales' contract
requirements. During 2004, the Mereenie Producers installed additional
compression equipment in the field at a cost of $13.1 million (MPAL share $4.6
million) designed to increase field deliverability and partially meet certain
gas contract requirements. During the last quarter of 2004, two gas wells
necessary to improve field deliverability and meet gas contractual requirements
through 2009 were drilled and completed. The wells have been suspended pending
installation of surface and gas gathering facilities.
Note 5. Comprehensive income (loss)
Total comprehensive income (loss) during the three and six month periods
ended December 31, 2004 and 2003 is as follows:
7
ACCUMULATED OTHER
THREE MONTHS ENDED SIX MONTHS ENDED COMPREHENSIVE
DECEMBER 31, DECEMBER 31, LOSS
--------------------------- -------------------------- -----------------
2004 2003 2004 2003
------------ ------------ ------------ -----------
Balance at June 30, 2004 $(4,491,377)
Net income (loss) (76,012) $ (505,634) $ (371,534) $ 561,652
Foreign currency translation 2,469,735
adjustments 1,865,163 2,491,304 2,469,735 2,733,141
----------- ----------- ----------- -----------
Total comprehensive
income (loss) $ 1,789,151 $ 1,985,670 $ 2,098,201 $ 3,294,793
=========== =========== =========== ===========
Balance at December 31, 2004 $(2,021,642)
===========
Note 6. Investment in MPAL
During the first quarter of fiscal 2004, MPC invested $29,466 in 31,606
shares of MPAL. This increased MPC's interest in MPAL from 55.06% to 55.13%. The
difference between the acquisition cost of the MPAL shares and the book value of
the additional MPAL interest acquired was allocated to oil and gas properties.
Note 7. Earnings per share
Earnings per common share are based upon the weighted average number of
common and common equivalent shares outstanding during the period. The Company's
basic and diluted calculations of EPS are the same for the three month and six
month periods ended December 31, 2004 and 2003. The potential dilution items are
the outstanding stock options disclosed in Note 3.
Note 8. Segment Information
The Company has two reportable segments, MPC and its subsidiary, MPAL.
Each company is in the same business; MPAL is also a publicly held company with
its shares traded on the Australian Stock Exchange. MPAL issues separate audited
consolidated financial statements and operates independently of MPC. Segment
information (in thousands) for the Company's two operating segments is as
follows:
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------- -------------------
2004 2003 2004 2003
---------- --------- ------- --------
Revenues:
MPC $ 118 $ 91 $ 158 $ 1,326
MPAL 5,337 4,508 9,874 8,669
--------- -------- ------- --------
Total consolidated revenues $ 5,455 $ 4,598 $10,032 $ 9,995
========= ======== ======= ========
Net income (loss):
MPC $ (338) $ (229) (689) $ 406
MPAL 262 (276) 317 156
--------- -------- ------- --------
Consolidated net income (loss) $ (76) $ (505) (372) $ 562
========= ======== ======= ========
Note 9. Exploration and Dry Hole Costs
The 2004 and 2003 costs related primarily to the exploration work being
performed on MPAL's properties. The dry holes were drilled on MPAL properties in
Australia and New Zealand.
8
Note 10. Asset Retirement Obligations
A reconciliation of the Company's asset retirement obligations for the six
months ended December 31, 2004, is as follows:
Balance at July 1, 2004 $ 4,852,000
Liabilities incurred
Liabilities settled -
Accretion expense 196,000
Revisions to estimate -
Exchange effect 554,000
-------------
Balance at December 31, 2004 $ 5,602,000
=============
Note 11. Pension plan costs
On August 31, 2004, the MPAL board formally terminated MPAL's defined benefit
plan. The termination was effective as of June 30, 2004 and a settlement and
curtailment loss of $1,237,425 was recognized during the fourth quarter of 2004.
All amounts have been paid out. Therefore, there were no pension costs during
the three and six month periods ended December 31, 2004. Pension costs for the
three and six month periods ended December 31, 2003 were approximately $ 39,000
and 84,000, respectively.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD LOOKING STATEMENTS
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature are
intended to be, and are hereby identified as, forward looking statements for
purposes of the "Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995. The Company cautions readers that forward looking statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those indicated in the forward looking statements.
Among these risks and uncertainties are pricing and production levels from the
properties in which the Company has interests, and the extent of the recoverable
reserves at those properties. In addition, the Company has a large number of
exploration permits and faces the risk that any wells drilled may fail to
encounter hydrocarbons in commercially recoverable quantities. The Company
undertakes no obligation to update or revise forward-looking statements, whether
as a result of new information, future events, or otherwise.
CRITICAL ACCOUNTING POLICIES
Oil and Gas Properties
The Company follows the successful efforts method of accounting for its oil
and gas operations. Under this method, the costs of successful wells,
development dry holes and productive leases are capitalized and amortized on a
units-of-production basis over the life of the related reserves. Cost centers
for amortization purposes are determined on a field-by-field basis. The Company
records its proportionate share in joint venture operations in the respective
classifications of assets, liabilities and expenses. Unproved properties with
significant acquisition costs are periodically assessed for impairment in value,
with any impairment charged to expense. The successful efforts method also
imposes limitations on the carrying or book value of proved oil and gas
properties. Oil and gas properties are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amounts may not be
recoverable. The Company estimates the future undiscounted cash flows from the
affected properties to determine the recoverability of carrying amounts. In
general, analyses are based on proved developed reserves, except in
circumstances where it is probable that additional resources will be developed
and contribute to cash flows in the future.
Exploratory drilling costs are initially capitalized pending determination of
proved reserves but are charged to expense if no proved reserves are found.
Other exploration costs, including geological and geophysical expenses,
leasehold expiration costs and delay rentals, are expensed as incurred. Because
the Company follows the successful efforts method of accounting, the results of
operations may vary materially from quarter to quarter. An active exploration
program may result in greater exploration and dry hole costs.
Asset Retirement Obligations
Effective July 1, 2002, the Company adopted the provisions of Statement of
Financial Accounting Standards ("SFAS") 143, "Accounting for Asset Retirement
Obligations." SFAS 143 requires legal obligations associated with the retirement
of long-lived assets to be recognized at their fair value at the time that the
obligations are incurred.
9
Upon initial recognition of a liability, that cost is capitalized as part of the
related long-lived asset (oil & gas properties) and amortized on a
units-of-production basis over the life of the related reserves. Accretion
expense in connection with the discounted liability is recognized over the
remaining life of the related reserves. See Note 10 to the consolidated
financial statements regarding the cumulative effect of the accounting change
and its effect on net income.
The estimated liability is based on the future estimated cost of land
reclamation, plugging the existing oil and gas wells and removing the surface
facilities equipment in the Palm Valley, Mereenie, Kotaneelee, Nockatunga and
Dingo fields. The liability is a discounted liability using a credit-adjusted
risk-free rate on the date such liabilities are determined. A market risk
premium was excluded from the estimate of asset retirement obligations because
the amount was not capable of being estimated. Revisions to the liability could
occur due to changes in the estimates of these costs, acquisition of additional
properties and as new wells are drilled.
Estimates of future asset retirement obligations include significant
management judgment and are based on projected future retirement costs. Such
costs could differ significantly when they are incurred.
Revenue Recognition
The Company recognizes oil and gas revenue from its interests in producing
wells as oil and gas is produced and sold from those wells. Oil and gas sold is
not significantly different from the Company's share of production. Revenues
from the purchase, sale and transportation of natural gas are recognized upon
completion of the sale and when transported volumes are delivered. Shipping and
handling costs in connection with such deliveries are included in production
costs. Revenue under carried interest agreements is recorded in the period when
the net proceeds become receivable, measurable and collection is reasonably
assured. The time the net revenues become receivable and collection is
reasonably assured depends on the terms and conditions of the relevant
agreements and the practices followed by the operator. As a result, net revenues
may lag the production month by one or more months.
Use of Estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Estimates are particularly
sensitive in the calculation of proven reserves, depletion, depreciation and
amortization and the amount of the Company's asset retirement obligations.
Actual results could differ from those estimates.
New Accounting Standards
In December 2004, the Financial Accounting Standards Board (FASB) published
Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), (SFAS
123(R)) "Share Based Payment". SFAS 123(R) establishes standards for the
accounting for transactions in which an entity exchanges its equity instruments
for goods or services. SFAS 123(R) eliminates the ability to account for
share-based compensation transactions using APB Opinion No. 25 (APB 25),
"Accounting for Stock Issued to Employees", and generally requires that such
transactions be accounted for using a fair-value-based method. SFAS 123(R) is
effective as of the first interim or annual reporting period that begins after
June 15, 2005, therefore, the effective date for the Company is July 1, 2005.
SFAS 123(R) applies to all awards granted after the required effective date and
to awards modified, repurchased, or cancelled after that date and as a
consequence future employee stock option grants and other stock based
compensation plans will be recorded as expense over the vesting period of the
award based on their fair values at the date the stock based compensation is
granted. The cumulative effect of initially applying SFAS 123(R) is to be
recognized as of the required effective date using a modified prospective
method. Under the modified prospective method the Company will recognize
stock-based compensation expense from July 1, 2005 as if the fair value based
accounting method had been used to account for all outstanding unvested employee
awards granted, modified or settled in prior years. The ultimate impact on
future years results of operation and financial position will depend upon the
level of stock based compensation granted in future years.
For further information regarding equity- based compensation, see Note 3
"capital and stock options" to the consolidated financial statements
LIQUIDITY AND CAPITAL RESOURCES
Consolidated
At December 31, 2004, the Company on a consolidated basis had approximately
$20.8 million of cash and cash equivalents and $3.9 million of marketable
securities.
10
Net cash provided by operations was $4.3 million during the six months ended
December 31, 2004 compared to cash provided by operations of $5.2 million during
the six months ended December 31, 2003. The decrease in cash provided by
operations is primarily related to the absence in 2004 of cash received from the
Kotaneelee settlement, lower MPAL net income and payment of 2003 payables in
2004 related to the Palm Valley drilling program.
During 2004, the Company had net investments in marketable securities of
$729,000 compared to $547,000 in 2003.
The Company invested 4.3 million and $5.9 million in oil and gas property
and exploration activities during the six months ended December 31, 2004 and
2003, respectively. The net decrease resulted from less investments in the
Mereenie and Palm Valley fields in 2004 versus 2003. In addition, the Company
purchased the Nockatunga oil field in 2003. The Company continues to invest in
exploratory projects that result in exploratory and dry hole expenses in the
consolidated financial statements.
Effect of exchange rate changes
The value of the Australian dollar relative to the U.S. dollar increased
11.5% to $.7801 at December 31, 2004, compared to a value of $.6993 at June 30,
2004.
As to MPC
At December 31, 2004, MPC, on an unconsolidated basis, had working capital of
approximately $3.4 million. MPC's current cash position and its annual MPAL
dividend should be adequate to meet its current cash requirements. MPC has in
the past invested and may in the future invest substantial portions of its cash
to maintain or increase its majority ownership interest in its subsidiary.
During November 2004, MPC received a dividend of approximately $975,000 from
MPAL.
MPC through its stock repurchase plan may purchase up to one million shares
of its common stock in the open market. Through December 31, 2004, MPC had
purchased 680,850 of its shares at a cost of approximately $686,000, all of
which shares have been cancelled. No purchases of shares under the repurchase
plan were made by MPC during the three and six month periods ended December 31,
2004.
As to MPAL
At December 31, 2004, MPAL had working capital of approximately $19.6
million. MPAL has budgeted approximately $4 million for specific exploration
projects in fiscal year 2005 as compared to the $5 million expended during
fiscal 2004. However, the total amount to be expended may vary depending on when
various projects reach the drilling phase. MPAL's future revenues are expected
to be derived from the sale of gas in Australia, based on its current
composition of oil and gas reserves. MPAL's current contracts for the sale of
Palm Valley and Mereenie gas will expire during fiscal year 2012. Unless MPAL is
able to obtain additional contracts for its remaining gas reserves or be
successful in its current exploration program, its revenues will be materially
reduced after 2012.
OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS
We do not use off-balance sheet arrangements such as securitization of
receivables with any unconsolidated entities or other parties. The Company does
not engage in trading or risk management activities and does not have material
transactions involving related parties. The following is a summary of our
consolidated contractual obligations:
Payments Due by Period
MORE
LESS THAN THAN
Contractual Obligations TOTAL 1 YEAR 1-3 YEARS 3-5 YEARS 5 YEARS
------------ ----------- --------- ----------- ---------
Operating Lease Obligations 858,000 163,000 347,000 348,000 -
Purchase Obligations(1) 4,496,000 4,102,000 394,000 - -
Asset Retirement Obligations 5,602,000 40,000 159,000 4,382,000 1,021,000
------------ ----------- --------- ----------- ---------
Total $ 10,956,000 $ 4,305,000 $ 900,000 $ 4,730,000 1,021,000
============ =========== ========= =========== =========
11
(1) Represents firm commitments for exploration and capital expenditures.
Exploration contingent expenditures of $36.4 million which are not legally
binding have been excluded from the table above and, based on exploration
decisions, would be due as follows: $17.2 million (less than 1 year), $16.6
million (1-3 years), $2.6 million (3-5 years).
MPAL expects to fund its exploration costs through its cash and cash
equivalents and cash flow from Australian operations. MPAL also expects that it
will seek partners to share the above exploration costs. If MPAL's effort to
find partners is unsuccessful, it may be unable or unwilling to complete the
exploration program for some of its properties. In addition to the expenditures
discussed above, the operator of the Mereenie field is implementing an extensive
program for additional drilling and capital improvements to meet gas sales'
contract requirements. During October 2004, one of two gas wells necessary to
meet gas contractual requirements through 2009 was drilled. The second well will
be drilled later in fiscal 2005.
RESULTS OF OPERATIONS THREE MONTHS ENDED December 31, 2004 vs. December 31, 2003
REVENUES
OIL SALES INCREASED 26% in the 2004 quarter to $1,491,000 from $1,181,000 in
2003 because of the 6% Australian foreign exchange rate increase discussed
below, and a 35% increase in the average sales price per barrel, partially
offset by a decrease in volumes sold. Oil unit sales (after deducting royalties)
in barrels (bbls) and the average price per barrel sold during the periods
indicated were as follows:
THREE MONTHS ENDED DECEMBER 31,
------------------------------------------------
2004 Sales 2003 Sales
AVERAGE AVERAGE
PRICE PRICE
BBLS A.$ PER BBL BBLS A.$ PER BBL
------ ----------- ------ -----------
Australia:
Mereenie field 26,462 52.63 31,023 40.02
Cooper Basin 1,113 47.85 1,602 37.49
Nockatunga project 8,332 53.46 9,206 35.25
------ ----- ------ -----
Total 35,907 52.68 41,831 38.91
====== ===== ====== =====
GAS SALES INCREASED 12% to $3,458,000 in 2004 from $3,088,000 in 2003. This
is the result of the 6% Australian foreign exchange rate increase discussed
below, as well as increased volume and average price during the 2004 period.
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
2004 2003
------------- -------------
Australia $ 3,340,000 $ 2,996,000
Canada-recurring 118,000 92,000
------------- -------------
Total $ 3,458,000 $ 3,088,000
============= =============
During the 2004 period, the volume of gas sold in Australia increased 3.9%,
and the average price of gas sold increased 16.5%. The volumes in billion cubic
feet (bcf) (after deducting royalties) and the average price of gas per thousand
cubic feet (mcf) sold during the periods indicated were as follows:
THREE MONTHS ENDED DECEMBER 31,
-------------------------------------------------------
2004 Sales 2003 Sales
A.$ AVERAGE PRICE A.$ AVERAGE PRICE
----------------- -----------------
PER PER
BCF MCF BCF MCF
------ ----------------- ------ -----------------
Australia: Palm Valley .514 2.14 .591 2.25
Australia: Mereenie 1.049 3.46 .914 2.84
------ ---- ----- ----
Total 1.563 3.03 1.505 2.60
====== ==== ===== ====
OTHER PRODUCTION RELATED REVENUES INCREASED 53% to $506,000 in 2004 from
$330,000 in 2003. Other production related revenues are primarily MPAL's share
of gas pipeline tariff revenues.
INTEREST INCOME INCREASED 56% to $377,000 in 2004 from $242,000 in 2003
primarily because of the 6% Australian foreign exchange rate increase discussed
below and higher cash balances.
COSTS AND EXPENSES
PRODUCTION COSTS DECREASED 11% IN 2004 to $1,316,000 from $1,479,000 in 2003.
The decrease is the
12
result of less money spent during the 2004 quarter in all areas. This was
partially offset by the 6% Australian foreign exchange rate increase discussed
below.
EXPLORATION AND DRY HOLE COSTS DECREASED 30% to $935,000 in 2004 from
$1,339,000 in 2003. These costs related to the exploration work performed on
MPAL's properties. The primary reason for the decrease is lower expenditures in
Southern Australia partially offset by the 6% Australian foreign exchange rate
increase discussed below.
SALARIES AND EMPLOYEE BENEFITS DECREASED 10% to $649,000 in 2004 from
$718,000 in 2003. During the 2004 period, there was a 6% increase in the
Australian foreign exchange rate discussed below. This was partially offset by
the termination of the MPAL defined benefit plan discussed in Note 11.
DEPLETION, DEPRECIATION AND AMORTIZATION INCREASED 23% from $1,666,000 in
2003 to $2,054,000 in 2004. During the 2004 period, there was a 6% increase in
the Australian foreign exchange rate as discussed below. Depletion expense for
the Palm Valley and Mereenie fields increased during the period primarily
because of the increased depletion rate for 2004 due to lower reserves and
increased capital expenditures. In addition, depletion increased in the 2004
period for the Nockatunga project and the Cooper Basin.
AUDITING, ACCOUNTING AND LEGAL EXPENSES INCREASED 2% in 2004 to $101,000 from
$99,000 in 2003 primarily because of the 6% Australian foreign exchange rate
increase discussed below. The Company anticipates that it will be required in
the future to incur significant administrative, auditing and legal expenses with
respect to new SEC and accounting rules adopted pursuant to the Sarbanes-Oxley
Act of 2002, particularly the requirements to document, test and audit the
Company's internal controls to comply with Section 404 of the Act and rules
adopted thereunder that will apply to the Company for the first time with
respect to its annual report for the fiscal year ending June 30, 2006.
ACCRETION EXPENSE INCREASED 13% IN THE 2004 PERIOD from $89,000 in 2003 to
$101,000 in 2004. Accretion expense represents the accretion on the asset
retirement obligations (ARO) under SFAS 143 that was adopted effective July 1,
2002. The increase in the 2004 period is primarily the 6% increase in the
Australian foreign exchange rate discussed below and the increased rate used for
the Palm Valley and Mereenie fields.
SHAREHOLDER COMMUNICATIONS COSTS INCREASED 26% from $88,000 in 2003 to
$111,000 in 2004 primarily because of MPC and MPAL's increased costs related to
their status as public companies and the 6% increase in the Australian foreign
exchange rate discussed below.
OTHER ADMINISTRATIVE EXPENSES INCREASED 47% from $158,000 in 2003 to $233,000
in 2004. During the 2004 period, there was a 6% increase in the Australian
foreign exchange rate discussed below and increases in insurance and consulting
costs.
INCOME TAX PROVISION INCREASED IN 2004 to a tax provision of $152,000 from a
tax benefit of $62,000 in 2003 because of higher book taxable income in 2004.
The components of the income tax (in thousands) between MPC and MPAL are as
follows:
2004 2003
--------- -----------
Income (loss) before income taxes and minority interests $ 331 $ (794)
MPC's non Australian loss (income) (a) 360 206
Permanent differences-Australia (278) (159)
-------- ----------
Book taxable income (loss)-Australia $ 413 $ (747)
======== ==========
Australian tax rate 30% 30%
======== ==========
Australian income tax provision (benefit) 124 $ (224)
Tax benefit of MPAL losses 139
MPC income tax provision (a) 28 23
-------- ----------
Income tax provision (benefit) $ 152 $ (62)
======== ==========
Current income tax provision $ 28 $ 23
Deferred income tax provision (benefit) 124 (85)
-------- ----------
Income tax provision (benefit) $ 152 $ (62)
======== ==========
Effective tax rate 46% (8%)
(a) MPC did not recognize a deferred tax for its non Australian income tax
losses during the quarter, as it is not likely that such deferred assets will be
realized.
EXCHANGE EFFECT
THE VALUE OF THE AUSTRALIAN DOLLAR RELATIVE TO THE U.S. DOLLAR INCREASED TO
$.7801 AT
13
DECEMBER 31, 2004 compared to a value of $.7168 at September 30, 2004. This
resulted in a $1,503,000 credit to the foreign currency translation adjustments
account for the three months ended December 31, 2004. The average exchange rate
used to translate MPAL's operations in Australia was $.7570 for the quarter
ended December 31, 2004, which was an 6% increase compared to the $.7167 rate
for the quarter ended December 31,2003.
SIX MONTHS ENDED DECEMBER 31, 2004 VS. DECEMBER 31, 2003
REVENUES
OIL SALES INCREASED 50% in the six months to $3,401,000 from $2,274,000 in
2003 because of the 7% Australian foreign exchange rate increase discussed
below, and a 50% increase in the average sales price per barrel partially offset
by a decrease in volumes sold. Oil unit sales (after deducting royalties) in
barrels (bbls) and the average price per barrel sold during the periods
indicated were as follows:
SIX MONTHS ENDED DECEMBER 31,
----------------------------------------------
2004 Sales 2003 Sales
AVERAGE
AVERAGE PRICE PRICE
BBLS A.$ PER BBL BBLS A.$ PER BBL
------ ------------- ----- ------------
Australia:
Mereenie field 58,461 60.24 59,310 40.33
Cooper Basin 2,223 52.14 4,196 35.69
Nockatunga project 15,098 54.17 16,440 35.90
------ ----- ------ -----
Total 75,782 58.84 79,946 39.25
====== ===== ====== =====
GAS SALES DECREASED 16% to $5,825,000 in 2004 from $6,918,000 in 2003. The
decrease was the result of the one time proceeds of $1,135,000 from the
Kotaneelee gas field settlement recorded in 2003 and the decrease in volume.
This was partially offset by the 7% Australian foreign exchange rate increase
discussed below and the increase in price per mcf sold.
SIX MONTHS ENDED DECEMBER 31,
------------------------------
2004 2003
------------- -------------
Australia $ 5,667,000 $ 5,592,000
Canada-recurring 158,000 191,000
Canada-settlement - 1,135,000
------------- -------------
Total $ 5,825,000 $ 6,918,000
============= =============
During the 2004 period, the volume of gas sold in Australia decreased 4%, and
the average price of gas sold increased 2%. The volumes in billion cubic feet
(bcf) (after deducting royalties) and the average price of gas per thousand
cubic feet (mcf) sold during the periods indicated were as follows:
SIX MONTHS ENDED DECEMBER 31,
-----------------------------------------------------
2004 Sales 2003 Sales
A.$ AVERAGE PRICE A.$ AVERAGE PRICE
PER PER
BCF MCF BCF MCF
----- ----------------- ----- -----------------
Australia: Palm Valley 1.056 2.14 1.206 2.21
Australia: Mereenie 1.776 2.87 1.743 2.82
----- ---- ---- ----
Total 2.832 2.60 2.949 2.56
===== ==== ===== ====
OTHER PRODUCTION RELATED REVENUES INCREASED .4% to $806,000 in 2004 from
$803,000 in 2003. Other production related revenues are primarily MPAL's share
of gas pipeline tariff revenues.
INTEREST INCOME INCREASED 27% to $733,000 in 2004 from $577,000 in 2003
primarily because of the 7% Australian foreign exchange rate increase discussed
below and higher cash balances.
COSTS AND EXPENSES
PRODUCTION COSTS INCREASED 2% IN 2004 to $2,844,000 from $2,778,000 in 2003.
The increase in 2004 was primarily the result of the 7% Australian foreign
exchange rate increase discussed below partially offset by lower expenditures
for the Nockatunga project.
EXPLORATION AND DRY HOLE COSTS INCREASED 8% to $2,053,000 in 2004 from
$1,905,000 in 2003. These costs related to the exploration work performed on
MPAL's properties. The primary reasons for the increase in 2004 were seismic
work performed on the Nockatunga project, costs related to exploration
activities in New Zealand and the 7% Australian foreign exchange rate increase
discussed below. These costs were partially offset by less
14
costs incurred in 2004 on properties in Southern Australia.
SALARIES AND EMPLOYEE BENEFITS INCREASED 3% to $1,320,000 in 2004 from
$1,281,000 in 2003. The increase in 2004 was the result of the 7% increase in
the Australian foreign exchange rate discussed below and the regular annual
increases in salaries. This was partially offset by the termination of the MPAL
defined benefit plan discussed in Note 11.
DEPLETION, DEPRECIATION AND AMORTIZATION INCREASED 26% from $2,744,000 in
2003 to $3,454,000 in 2004. During the 2004 period, there was a 7% increase in
the Australian foreign exchange rate discussed below. Depletion expense for the
Palm Valley and Mereenie fields increased 16% during the period primarily
because of the increased depletion rate for 2004 due to lower reserves and
increased capital expenditures. In addition, depletion increased in the 2004
period for the Nockatunga project and the Cooper Basin.
AUDITING, ACCOUNTING AND LEGAL EXPENSES INCREASED 17% IN 2004 to $282,000
from $240,000 in 2003 primarily because of the 7% Australian foreign exchange
rate increase discussed below and because of the increased statutory
requirements applicable to public companies. The Company anticipates that it
will be required in the future to incur significant administrative, auditing and
legal expenses with respect to new SEC and accounting rules adopted pursuant to
the Sarbanes-Oxley Act of 2002, particularly the requirements to document, test
and audit the Company's internal controls to comply with Section 404 of the Act
and rules adopted thereunder that will apply to the Company for the first time
with respect to its annual report for the fiscal year ending June 30, 2006.
ACCRETION EXPENSE INCREASED 15% IN THE 2004 PERIOD from $170,000 in 2003
to $196,000 in 2004. Accretion expense represents the accretion on the asset
retirement obligations (ARO) under SFAS 143 that was adopted effective July 1,
2002. The increase in the 2004 period is primarily the 7% increase in the
Australian foreign exchange rate discussed below and the increased rate used for
the Palm Valley and Mereenie fields.
SHAREHOLDER COMMUNICATIONS COSTS INCREASED 29% from $120,000 in 2003 to
$155,000 in 2004 primarily because of MPC and MPAL's increased costs related to
their status as public companies and the 7% increase in the Australian foreign
exchange rate discussed below.
OTHER ADMINISTRATIVE EXPENSES INCREASED 13% from $296,000 in 2003 to
$334,000 in 2004. During the 2004 period, there was a 7% increase in the
Australian foreign exchange rate discussed below.
INCOME TAX PROVISION DECREASED IN 2004 to a tax provision of $158,000 from
a tax provision of $349,000 in 2003 because of lower book taxable income in
2004. The components of the income tax (in thousands) between MPC and MPAL are
as follows:
2004 2003
------- -------
Income(loss) before income taxes and minority interests $ 127 $ 1,038
MPC's non Australian loss (income) (a) 751 (839)
Permanent differences-Australia (481) (482)
------- -------
Book taxable income (loss)-Australia $ 397 $ (283)
======= =======
Australian tax rate 30% 30%
======= =======
Australian income tax (benefit) provision 119 $ (85)
Tax benefit of MPAL losses
MPC income tax provision (a) 39 434
------- -------
Income tax provision $ 158 $ 349
======= =======
Current income tax provision $ 39 $ 434
Deferred income tax (benefit) provision 119 (85)
------- -------
Income tax provision $ 158 $ 349
======= =======
Effective tax rate 124% 34%
======= =======
(a) MPC did not recognize a deferred tax for its non Australian income tax
losses during the quarter, as it is not likely that such deferred assets will be
realized.
EXCHANGE EFFECT
THE VALUE OF THE AUSTRALIAN DOLLAR RELATIVE TO THE U.S. DOLLAR INCREASED
TO $.7801 AT December 31, 2004 compared to a value of $.6993 at June 30, 2004.
This resulted in a $2,470,000 credit to the foreign currency translation
adjustments account for the six months ended December, 2004. The average
exchange rate used to translate MPAL's operations in Australia was $.7334 for
the six month period ended December 31, 2004, which was an 7% increase compared
to the $.6878 rate for the six month period ended December 31, 2003.
15
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company does not have any significant exposure to market risk, other
than as previously discussed regarding foreign currency risk and the risk of
fluctuations in the world price of crude oil, as the only market risk sensitive
instruments are its investments in marketable securities. For the six month
period ended December 31, 2004, oil sales represented approximately 34% of
production revenues, therefore, an increase in the world price of crude oil
would have a positive impact on the Company's earnings, while a decrease in
crude oil prices would have a similar negative impact on earnings. Gas sales,
which represented approximately 58% of production revenues in 2004, are derived
primarily from the Palm Valley and Mereenie fields in the Northern Territory of
Australia and the gas prices are set according to long term contracts that are
subject to changes in the Australian Consumer Price Index (ACPI). Accordingly,
the price of gas will increase or decrease consistent with movement in the ACPI.
At December 31, 2004, the carrying value of our investments in marketable
securities including those classified as cash and cash equivalents was
approximately $25 million, which approximates the fair value of the securities.
Since the Company expects to hold the investments to maturity, the maturity
value should be realized.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the
participation of the Company's management, including Daniel J. Samela, the
Company's President, Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) promulgated
under the Securities and Exchange Act of 1934) as of December 31, 2004. Based on
this evaluation, the Company's President concluded that the Company's disclosure
controls and procedures were effective such that the material information
required to be included in the Company's SEC reports is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms
relating to the Company, including its consolidated subsidiaries, and was made
known to him by others within those entities, particularly during the period
when this report was being prepared.
Internal Control Over Financial Reporting
There have not been any changes in the Company's internal control over
financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) during the fiscal quarter ended December 31, 2004 that
have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
Section 404 of the Sarbanes-Oxley Act of 2002 (the "Act") will require the
Company to include an internal control report from management in its annual
report for the year ending June 30, 2006 and in subsequent annual reports
thereafter. The internal control report must include the following: (1) a
statement of management's responsibility for establishing and maintaining
adequate internal control over financial reporting, (2) a statement identifying
the framework used by management to conduct the required evaluation of the
effectiveness of the Company's internal control over financial reporting, (3)
management's assessment of the effectiveness of the Company's internal control
over financial reporting as of June 30, 2006, including a statement as to
whether or not internal control over financial reporting is effective, and (4) a
statement that the Company's independent auditors have issued an attestation
report on management's assessment of internal control over financial reporting.
Management acknowledges its responsibility for establishing and
maintaining internal controls over financial reporting and seeks to continually
improve those controls. In addition, in order to achieve compliance with Section
404 of the Act within the required timeframe, the Company intends to initiate a
process to document, review and test its internal controls over financial
reporting during the remainder of the fiscal year ending June 30, 2005. As part
of its Section 404 compliance project, the Company intends to make improvements
to its internal controls over financial reporting when and as required by the
Act and make disclosure with respect to any such improvements to the extent such
improvements are deemed material to the Company's internal control over
financial reporting.
16
MAGELLAN PETROLEUM CORPORATION
FORM 10-Q
PART II - OTHER INFORMATION
December 31, 2004
ITEM 1 LEGAL PROCEEDINGS
During September 2003, the litigants in the Kotaneelee litigation entered
into a settlement agreement. During October 2003, the Company received
approximately $851,000, after Canadian withholding taxes and reimbursement of
certain past legal costs. The plaintiffs terminated all litigation against the
defendants related to the field, including the claim that the defendants failed
to fully develop the field. Since each party agreed to bear its own legal costs,
there were no taxable costs assessed against any of the parties.
ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following schedule sets forth the number of shares that the Company
has repurchased under any of its repurchase plans for the stated periods, the
cost per share of such repurchases and the number of shares that may yet be
repurchased under the plans:
TOTAL NUMBER OF SHARES
PURCHASED AS PART OF MAXIMUM NUMBER OF SHARES
TOTAL NUMBER OF AVERAGE PRICE PUBLICLY ANNOUNCED PLAN THAT MAY YET BE
PERIOD SHARES PURCHASED PAID SHARE (1) PURCHASED UNDER PLAN
- --------------- ---------------- ------------- ----------------------- ------------------------
Oct. 1-31, 2004 0 0 0 319,150
Nov. 1-30, 2004 0 0 0 319,150
Dec. 1-31, 2004 0 0 0 319,150
(1) The Company through its stock repurchase plan may purchase up to one
million shares of its common stock in the open market. Through December
31, 2004, the Company had purchased 680,850 of its shares at an average
price of $1.01 per share or a total cost of approximately $686,000, all of
which shares have been cancelled.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) On December 7, 2004, the Company held its 2004 Annual General
Meeting of Stockholders.
(b) The following directors were reelected as directors of the
Company. The vote was as follows:
Shares Stockholders
------ ------------
For Withheld For Withheld
---------- -------- ----- --------
Walter C. McCann 22,454,094 935,730 1,598 154
Ronald Pettirossi 22,475,574 914,250 1,601 151
(c) The firm of Deloitte & Touche LLP was appointed as the Company's
independent auditors for the year ending June 30, 2005. The vote was
as follows:
Shares Stockholders
---------- ------------
For 22,957,308 1,629
Against 295,027 51
Abstain 137,489 72
ITEM 6. EXHIBITS
31. Rule 13a-14(a) Certifications.
Certification of Daniel J. Samela, President, Chief Executive
Officer and Chief Financial and Accounting Officer, pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934 is filed herein.
32. Section 1350 Certifications.
17
Certification of Daniel J. Samela, President, Chief Executive
Officer and Chief Financial and Accounting Officer, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, is furnished herein.
18
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:
MAGELLAN PETROLEUM CORPORATION
------------------------------
Registrant
Date: February 11, 2005 By /s/ Daniel J. Samela
------------------------------------
Daniel J. Samela,
President and Chief Executive Officer,
Chief Financial and Accounting Officer
19