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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 2005.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______ to _______.
Commission file number 0-8532
OAKRIDGE ENERGY, INC.
(Exact name of small business issuer as specified in its charter)
Utah
(State or other jurisdiction of
incorporation or organization)
87-0287176
(I.R.S. Employer
Identification No.)
4613 Jacksboro Highway
Wichita Falls, Texas 76302
(Address of principal executive offices)
(940) 322-4772
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
The number of shares outstanding of each of the issuer's classes of common
equity, as of July 15, 2005: Common Stock, $.04 par value, 4,283,242 shares
Transitional Small Business Disclosure Format (check one);
YES [ ] NO [ X ]
Check whether the issuer (1) filed all reports required to be filed by section
13 or 15(d) or the Exchange Act during the past 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. YES [X] NO [ ]
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INDEX
Page #
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Part I - Financial Information
Item 1. Financial Statements
Condensed Balance Sheets at
February 28, 2005 and May 31, 2005 1
Condensed Statements of Operations
For the Three Months Ended May 31, 2005 and 2004 2
Statements of Cash Flows
For the Three Months Ended May 31, 2005 and 2004 3
Notes to Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis or Plan of Operation 5
Item 3. Controls and Procedures 13
Part II - Other Information
Item 6. Exhibits 14
Signatures 14
Index to Exhibits 15
ITEM 1. FINANCIAL STATEMENTS.
OAKRIDGE ENERGY, INC.
CONDENSED BALANCE SHEETS
ASSETS
MAY 31, 2005 FEBRUARY 28, 2005
-------------- -----------------
CURRENT ASSETS: (UNAUDITED)
CASH AND CASH EQUIVALENTS $ 2,352,469 2,294,548
TRADE ACCOUNTS RECEIVABLE 178,770 150,459
INVESTMENT SECURITIES AVAILABLE FOR SALE 760,793 664,199
PREPAID EXPENSES AND OTHER 15,218 20,492
----------- -----------
TOTAL CURRENT ASSETS 3,307,250 3,129,698
----------- -----------
OIL AND GAS PROPERTIES, AT COST USING THE SUCCESSFUL EFFORTS METHOD OF
ACCOUNTING, NET OF ACCUMULATED DEPLETION AND DEPRECIATION OF
$6,324,431 ON MAY 31, 2005 AND $6,303,976 ON FEBRUARY 28, 2005 972,399 989,464
COAL AND GRAVEL PROPERTIES, NET OF ACCUMULATED DEPLETION AND DEPRECIATION
OF $8,051,719 ON MAY 31, 2005 AND $8,051,719 ON FEBRUARY 28, 2005 260,488 260,488
REAL ESTATE HELD FOR DEVELOPMENT 3,039,688 3,029,759
OTHER PROPERTY AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION
OF $409,313 ON MAY 31, 2005 AND $402,903 ON FEBRUARY 28, 2005 135,667 142,076
DEFERRED INCOME TAXES 184,557 198,038
OTHER NON-CURRENT ASSETS 860,076 860,076
----------- -----------
$ 8,760,125 $ 8,609,599
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
ACCOUNTS PAYABLE $ 80,723 $ 58,671
ACCRUED EXPENSES 43,425 47,048
DEFERRED INCOME TAXES 206,427 170,715
CURRENT PORTION OF ASSET RETIREMENT OBLIGATIONS 223,708 223,708
----------- -----------
TOTAL CURRENT LIABILITIES 554,283 500,142
ASSET RETIREMENT OBLIGATIONS 412,350 407,748
----------- -----------
TOTAL LIABILITIES 966,633 907,890
----------- -----------
STOCKHOLDERS' EQUITY:
COMMON STOCK, $.04 PAR VALUE, 20,000,000
SHARES AUTHORIZED, 10,157,803 SHARES ISSUED 406,312 406,312
ADDITIONAL PAID-IN CAPITAL 805,092 805,092
RETAINED EARNINGS 16,465,266 16,433,803
ACCUMULATED OTHER COMPREHENSIVE INCOME 351,936 291,053
----------- -----------
18,028,606 17,936,260
LESS TREASURY STOCK, AT COST, 5,872,936 SHARES ON MAY 31, 2005
AND 5,872,811 ON FEBRUARY 28, 2005 10,235,114 10,234,551
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 7,793,492 7,701,709
----------- -----------
$ 8,760,125 $ 8,609,599
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
1
OAKRIDGE ENERGY, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
3 MONTHS ENDED MAY 31,
2005 2004
----------- -----------
REVENUES:
OIL AND GAS $ 363,024 $ 273,100
GRAVEL 12,500 18,585
----------- -----------
TOTAL REVENUES 375,524 291,685
----------- -----------
OPERATING EXPENSES:
OIL AND GAS 196,670 205,589
COAL AND GRAVEL 15,717 24,188
REAL ESTATE DEVELOPMENT 24 74
GENERAL AND ADMINISTRATIVE 134,843 449,027
----------- -----------
TOTAL OPERATING EXPENSES 347,254 678,878
----------- -----------
INCOME (LOSS) FROM OPERATIONS 28,270 (387,193)
OTHER INCOME 21,648 9,308
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 49,918 (377,885)
INCOME TAX EXPENSE (BENEFIT) 18,455 (139,704)
----------- -----------
NET INCOME (LOSS) $ 31,463 $ (238,181)
=========== ===========
BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE $ 0.01 $ (0.06)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 4,284,886 4,301,574
=========== ===========
COMPREHENSIVE INCOME (LOSS) FOR THE THREE MONTHS ENDED MY 31, 2005 AND 2004 WAS
$96,595 AND $(25,497), RESPECTIVELY. INCLUDED IN COMPREHENSIVE INCOME (LOSS) IS
THE CHANGE IN AVAILABLE FOR SALES SECURITIES AND NET INCOME (LOSS).
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
2
OAKRIDGE ENERGY, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
3 MONTHS ENDED MAY 31,
2005 2004
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 31,463 $ (238,181)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
DEPLETION AND DEPRECIATION 26,864 46,209
ACCRETION OF DISCOUNT ON ASSET RETIREMENT OBLIGATIONS 4,603 --
DEFERRED FEDERAL INCOME TAXES 13,481 (144,124)
NET CHANGES IN ASSETS AND LIABILITIES:
TRADE ACCOUNTS RECEIVABLE (28,311) (21,908)
PREPAID EXPENSES AND OTHER CURRENT ASSETS 5,274 4,999
ACCOUNTS PAYABLE 22,052 33,819
ACCRUED EXPENSES (3,624) (3,205)
ASSET RETIREMENT OBLIGATION -- (234)
----------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 71,802 (322,625)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
ADDITIONS TO OIL AND GAS PROPERTIES (3,389) (84,344)
ADDITIONS TO REAL ESTATE HELD FOR DEVELOPMENT (9,929) (10,071)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (13,318) (94,415)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
PURCHASES OF TREASURY STOCK (563) (64,171)
----------- -----------
NET CASH USED IN FINANCING ACTIVITIES (563) (64,171)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 57,921 (481,211)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,294,548 2,853,798
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,352,469 $ 2,372,587
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
INCOME TAXES PAID $ 16,559 $ 16,252
RECOGNITION IN STOCKHOLDERS' EQUITY OF THE NET UNREALIZED HOLDING GAIN (LOSS) ON
AVAILABLE FOR SALE SECURITIES OF $60,883 NET OF TAX EFFECT OF $35,712 DURING
THE QUARTER ENDED MAY 31, 2005 AND ($16,071) NET OF TAX EFFECT OF ($9,426)
DURING THE QUARTER ENDED MAY 31, 2004.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
3
OAKRIDGE ENERGY, INC.
Notes to Condensed Financial Statements
(Unaudited)
The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
for interim financial statements and with the instructions to Form 10-QSB and
Regulation S-B for the three month periods ended May 31, 2005 and 2004 and
reflect, in the opinion of management, all adjustments, which are of a normal
and recurring nature, necessary for a fair presentation of the results for such
periods. The foregoing financial statements do not include all information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. However, except as
disclosed herein, there has been no material change in the information disclosed
in the notes to the financial statements for the year ended February 28, 2005
included in the Company's Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission. The interim unaudited financial statements should be
read in conjunction with the annual financial statements and accompanying notes
included in the Company's Annual Report on Form 10-KSB for the year ended
February 28, 2005. Operating results for the three months ended May 31, 2005 are
not necessarily indicative of the results that may be expected for the year
ending February 28, 2006. The Company's operating segments are set forth in the
annual financial statements and accompanying notes for the fiscal year ended
February 28, 2005.
Information regarding operations and assets by segment is as follows:
For the three months ended May 31,
2005 2004
----------- -----------
Business segment revenue:
Oil and gas $ 363,024 $ 273,100
Gravel 12,500 18,585
----------- -----------
$ 375,524 $ 291,685
----------- -----------
Business segment profit (loss):
Oil and gas $ 166,354 $ 67,511
Coal and gravel (3,217) (5,603)
Real estate development (24) (74)
General corporate (134,843) (449,027)
----------- -----------
Profit (loss) from operations 28,270 (387,193)
Interest income and other, net 21,648 9,308
----------- -----------
Income (loss) before income taxes $ 49,918 $ (377,885)
----------- -----------
As of As of
May 31, 2005 February 28, 2005
------------ -----------------
Total assets:
Oil and gas $ 4,492,538 $ 4,340,258
Coal and gravel 260,488 260,488
Real estate development 3,039,688 3,029,759
General corporate 967,411 979,094
----------- -----------
$ 8,760,125 $ 8,609,599
----------- -----------
4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion should be read in conjunction with Items 6 and
7 of the Company's Annual Report on Form 10-KSB for the fiscal year ended
February 28, 2005 and the Notes to Condensed Financial Statements contained in
this report.
RESULTS OF OPERATIONS
The Company had a net income of $31,463 ($0.01 per share) for the three
months ended May 31, 2005 (the "2005 period") compared to a net loss of $238,181
($0.06 per share) for the three months ended May 31, 2004 (the "2004 period"). A
$315,000 bonus paid to the Company's Chief Executive Officer in April 2004 for
her extraordinary services over a number of years with respect to the Company's
proposed Colorado real estate development project was the principal reason for
the loss during the 2004 period.
Oil and gas revenues for the 2005 period were $363,024, compared to
$273,100 for the 2004 period, representing an increase of approximately $89,900
(32.9%). This increase was due primarily to a significant rise in the Company's
average oil price received during the 2005 period, and a smaller increase in the
average gas price received. For the 2005 period, the Company's oil sales volumes
declined slightly, while its gas sales volumes increased significantly, as
compared to the 2004 period. The following table compares the Company's oil and
gas revenues, sales volumes and average prices received during the 2005 period
with those during the 2004 period:
THREE MONTHS THREE MONTHS
ENDED ENDED PERCENTAGE
MAY 31, 2005 MAY 31, 2004 DIFFERENCE
------------- ------------ ----------
Oil:
Revenues $ 306,716 $ 228,869 + 34.0%
Volume (Bbls.) 5,916 6,177 - 4.2
Average Price
(per Bbl.) $ 51.84 $ 37.05 + 39.9
Gas:
Revenues $ 47,158 $ 34,256 + 37.7%
Volume (MCF) 7,609 6,361 + 19.6
Average Price
(per MCF) $ 6.20 $ 5.38 + 15.2
5
Non-material amounts of natural gas liquids revenues and sales are excluded from
the foregoing table.
The Company's principal producing oil and gas property in Madison
County, Texas is in the process of being waterflooded. Revenues from this
property increased during the 2005 period, as they had during the prior year,
due to the rise in the Company's average oil price received from the property.
Sales volumes from this property for both oil and gas were at roughly the same
levels during the 2005 period, as was the case during each of the preceding two
fiscal quarters. The Company's management believes that this may be a sign that
production volumes from the property are stabilizing. Any significant increase
in oil production volumes from the property is not expected to occur until
fiscal 2008 due to the substantial lag time for the buildup of sufficient water
volumes to push the incremental secondary oil reserves to producing wells and
the actual production of the incremental reserves.
The Company's gravel revenues for the 2005 period were $12,500,
compared to $18,585 for the 2004 period, representing a decrease of
approximately $6,100 (32.7%). This decrease was the result of the lack of any
gravel sales and road usage fees. The only gravel revenue earned was for surface
rental during the 2005 period. A dispute developed in fiscal 2004 between the
Company and Four Corners Materials, which at the time was conducting gravel
mining operations on the Company's Colorado property. The dispute was detailed
in the Company's Annual Report on Form 10-KSB for the fiscal year ended February
28, 2005. As a result of such ongoing dispute, Four Corners Materials is no
longer mining the property. Gravel sales from the stockpiles of gravel ceased
prior to the 2005 period. The Company would consider leasing the property again
for gravel operations but has no intention of conducting any operations itself.
The expenses of the Company's oil and gas operations for the 2005
period were $196,670, compared to $205,589 for the 2004 period, representing a
decrease of approximately $8,900 (4.3%). This decrease resulted as all
categories of oil and gas expenses for the 2005 period (depletion and
depreciation expenses, lease operating expenses, ad valorem taxes, engineering
expenses and field payroll expenses) either declined or were no greater in
amount than during the 2004 period. Depletion and depreciation expenses declined
approximately $17,700 (46.4%) for the 2005 period
6
compared to the 2004 period. Such decline was primarily attributable to the
Madison County, Texas property. This property experienced a reduced per barrel
amortization rate resulting from the higher quantity of proven oil and gas
reserves at the fiscal 2005 year end compared to the prior year in relation to
the current production volume for the property. Lease operating expenses
declined approximately $1,800 (1.4%) for the 2005 period compared to the 2004
period as the slight expense increases from the Madison County, Texas and North
Texas Area properties were offset by the expense decrease in the Panola County,
Texas property. The Panola County, Texas property expense decrease was due to
the absence of workover expenses on the Hunt well during the 2005 period.
Production taxes increased approximately $7,100 (71.4%) for the 2005 period
compared to the 2004 period due to the increase in oil and gas revenues. The
Company did not incur any exploration expenses, dry hole expenses or leasehold
abandonment charges during either the 2005 period or the 2004 period.
The expenses of the Company's coal and gravel operations for the 2005
period were $15,717, compared to $24,188 for the 2004 period, representing a
decrease of approximately $8,500 (35.0%). This decrease was primarily as a
result of the decline in legal expenses incurred in connection with the dispute
with Four Corners Materials and a slight decrease in ad valorem tax expenses.
There were engineering expenses incurred during the 2005 period that were not
present during the 2004 period due to the Company's work to reduce the amount of
the performance bond required for coal reclamation work with the Colorado
Division of Minerals and Geology. The Company incurred virtually no real estate
development expenses (as opposed to capitalized costs) during either the 2005 or
2004 periods after the Company made the decision during the 2004 period to
attempt to sell its proposed "Oakridge at Durango" project.
General and administrative expenses for the 2005 period were $134,843,
compared to $449,027 for the 2004 period, representing a decrease of
approximately $314,200 (70.0%). This decrease was primarily attributable to the
absence of the $315,000 bonus paid to Sandra Pautsky in April 2004 and the
employer portion of payroll taxes associated with such bonus. A decrease in
shareholder reporting expenses of approximately $6,600 due to timing and an
increase of approximately $5,000 in the reporting costs to the Securities and
Exchange Commission due to required amended filings during the 2005 period
compared to the 2004 period comprise the largest differences in general and
administrative expenses.
7
Other income increased approximately $12,300 (132.6%) in the 2005
period as compared to the 2004 period. Interest and dividend income both
continued to increase in the 2005.
The Company's weighted average shares outstanding decreased
approximately 0.4% for the 2005 period compared to the 2004 period. The Company
purchased 125 shares of its stock from unrelated parties during the period.
FINANCIAL CONDITION AND LIQUIDITY
For the 2005 period, operating activities provided funds with the
investing and financing activities being net users of funds. As a consequence,
the Company's cash and cash equivalents increased by approximately $58,000 for
the 2005 period compared to the 2004 period. The Company did not incur any
extraordinary expenses during the 2005 period, and oil and gas prices increased
resulting in the Company's operating activities providing approximately $71,800
of funds. The Company's investing activities for the 2005 period used
approximately $13,300, primarily due to additions to oil and gas properties and
real estate held for development. In addition, the Company did not receive any
funds from sales of oil and gas properties or other property and equipment
during the 2005 period. The Company's financing activities used approximately
$600 during the 2005 period on purchases of the Company's common stock. At May
31, 2005, the Company had no indebtedness, and cash, cash equivalents and
investment securities available for sale totaled approximately $3,113,300.
The Company expects to fund its contemplated operations and any
purchases of the Company's stock it makes during the remainder of fiscal 2006
from its cash and cash equivalents, sales of all or a portion of its investment
securities available for sale and any cash flow from its operations. Given the
Company's decision to attempt to sell its proposed Colorado real estate
development project, the Company currently does not expect to make any material
expenditure on such project for the remainder of fiscal 2006.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The foregoing discussion and analysis of the Company's results of
operations and financial condition and liquidity is based upon the financial
statements, which have been prepared in accordance with U.S. generally accepted
accounting principles. The preparation of these financial statements requires
the Company to make
8
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses. In response to Securities and Exchange Commission (the
"Commission") Release No. 33-8040, "Cautionary Advice Regarding Disclosure About
Critical Accounting Policies," the Company has identified certain of its
accounting policies as being of particular importance to the portrayal of the
Company's results of operations and financial position and which require the
application of significant judgment by management. The Company analyzes its
estimates, including those related to oil and gas revenues, oil and gas
properties, income taxes, contingencies and litigation, and bases its estimates
on historical experience and various other assumptions that the Company believes
to be reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions. The Company believes the
following critical accounting policies affect its more significant judgments and
estimates used in the preparation of the Company's financial statements:
SUCCESSFUL EFFORTS METHOD OF ACCOUNTING: The Company accounts for its
natural gas and crude oil exploration and development activities utilizing the
successful efforts method of accounting. Under this method, costs of productive
exploratory wells, development dry holes and productive wells, costs to acquire
mineral interests and three-dimensional (3-D) seismic costs are capitalized.
Exploration costs, including personnel costs, certain geological and geophysical
expenses including two-dimensional (2-D) seismic costs and delay rentals for oil
and gas leases, are charged to expense as incurred. Exploratory drilling costs
are initially capitalized, but charged to expense if and when the well is
determined not to have found reserves in commercial quantities. The sale of a
partial interest in a proved property is accounted for as a cost recovery and no
gain or loss is recognized.
The application of the successful efforts method of accounting requires
managerial judgment to determine the proper classification of wells designated
as developmental or exploratory which will ultimately determine the proper
accounting treatment of the costs incurred. The results from a drilling
operation can take considerable time to analyze and the determination that
commercial reserves have been discovered requires both judgment and industry
experience. Wells may be completed that are assumed to be productive but
actually deliver oil and gas in quantities insufficient to be economic, which
may result in the abandonment of the wells at a later date. Wells may be drilled
that target geologic structures that are both developmental and exploratory in
nature and an allocation of costs is required to properly account for the
results. The evaluation of oil and gas leasehold acquisition costs requires
managerial judgment to estimate the fair value of these costs with reference to
drilling activity in a given area. Drilling activities in an area by other
companies may also effectively condemn leasehold positions.
9
The successful efforts method of accounting can have a significant
impact on the operational results reported when the Company is entering a new
exploratory area in hopes of funding an oil and gas field that will be the focus
of future development drilling activity. The initial exploratory wells may be
unsuccessful and will be expensed.
RESERVE ESTIMATES: The Company's estimates of oil and gas reserves, by
necessity, are projections based on geologic and engineering data, and there are
uncertainties inherent in the interpretation of such data as well as the
projection of future rates of production and the timing of development
expenditures. Reserve engineering is a subjective process of estimating
underground accumulations of oil and gas that are difficult to measure. The
accuracy of any reserve estimate is a function of the quality of available data,
engineering and geological interpretation and judgment. Estimates of
economically recoverable oil and gas reserves and future net cash flows
necessarily depend upon a number of variable factors and assumptions, such as
historical production from the area compared with production from other
producing areas, the assumed effects of regulations by governmental agencies and
assumptions governing future oil and gas prices, future operating costs,
severance taxes, development costs and workover gas costs, all of which may in
fact vary considerably from actual results. The future drilling costs associated
with reserves assigned to proved undeveloped locations may ultimately increase
to an extent that these reserves may be later determined to be uneconomic. For
these reasons, estimates of the economically recoverable quantities of oil and
gas attributable to any particular group of properties, classifications of such
reserves based on risk of recovery and estimates of the future net cash flows
expected there from may vary substantially. Any significant variance in the
assumptions could materially affect the estimated quantity and value of the
reserves, which could affect the carrying value of the Company's oil and gas
properties and/or the rate of depletion of the oil and gas properties. Actual
production, revenues and expenditures with respect to the Company's reserves
will likely vary from estimates and such variances may be material.
IMPAIRMENT OF OIL AND GAS PROPERTIES: The Company reviews its oil and
gas properties for impairment at least annually and whenever events and
circumstances indicate a decline in the recoverability of their carrying value.
The Company estimates the expected future cash flows of its oil and gas
properties and compares such future cash flows to the carrying amount of the
properties to determine if the carrying amount is recoverable. If the carrying
amount exceeds the estimated undiscounted future cash flows, the Company will
adjust the carrying amount of the oil and gas properties to their fair value.
The factors used to determine fair value include, but are not limited to,
estimates of proved
10
reserves, future commodity pricing, future production estimates, anticipated
capital expenditures and a discount rate commensurate with the risk associated
with realizing the expected cash flows projected.
Given the complexities associated with oil and gas reserve estimates
and the history of price volatility in the oil and gas markets, events may arise
that would require the Company to record an impairment of the recorded book
values associated with oil and gas properties. The Company has recognized
impairments this year and in prior years and there can be no assurance that
impairments will not be recognized in the future.
ASSET RETIREMENT OBLIGATIONS: Effective March 1, 2003, the Company
adopted Statement of Financial Accounting Standards No. 143, Accounting for
Asset Retirement Obligations. The asset retirement obligations represent the
estimated present value of the amounts expected to be incurred to plug, abandon,
and remediate the producing properties at the end of their productive lives, in
accordance with state laws, as well as the estimated costs associated with the
reclamation of the property surrounding and including the Company's previous
coal mining operations. The Company determines the asset retirement obligations
by calculating the present value of estimated cash flows related to the
liability. The asset retirement obligations are recorded as a liability at the
estimated present value as of the asset's inception, with an offsetting increase
to producing properties. Periodic accretion of the discount related to the
estimated liability is recorded as an expense in the statement of operations.
The estimated liability is determined using significant assumptions,
including current estimates of plugging and abandonment costs, annual inflation
of these costs, the productive lives of wells, and a risk-adjusted interest
rate. Changes in any of these assumptions can result in significant revisions to
the estimated asset retirement obligations. Revisions to the asset retirement
obligations are recorded with an offsetting change to producing properties,
resulting in prospective changes to depletion and depreciation expense and
accretion of the discount. Because of the subjectivity of assumptions and the
relatively long lives of most of the wells, the costs to ultimately retire the
Company's wells may vary significantly from prior estimates.
FORWARD-LOOKING STATEMENTS
Certain information included in this Quarterly Report on Form 10-QSB
and other materials filed by the Company with the Commission contain
forward-looking statements relating to the Company's operations and the oil and
gas industry. Such forward-looking statements are based on management's current
projections and estimates and are identified by words such as "expects,"
"intends,"
11
"plans," "believes," "estimates," "anticipates" and similar words. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions that are difficult to predict. Therefore, actual
results may differ materially from what is expressed in such forward-looking
statements.
Among the factors that could cause actual results to differ materially
are crude oil and natural gas price fluctuations, failure to achieve expected
production and the timing of receipt of revenues from existing and future
exploration and development projects (including, particularly, the secondary
recovery project on the Madison County, Texas property), higher than estimated
oil and gas and coal reclamation costs and delays with respect to, or failure to
obtain, governmental permits and approvals necessary to proceed with real estate
development. In addition, these forward-looking statements may be affected by
general domestic and international economic and political conditions.
12
ITEM 3. CONTROLS AND PROCEDURES.
The term "disclosure controls and procedures" is defined in Rules
13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, or the Exchange
Act. This term refers to the controls and procedures of a company that are
designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified by the Securities and
Exchange Commission. Our management, including our Chief Executive Officer and
Principal Financial Officer, has evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this Quarterly
Report on Form 10-QSB. Based upon that evaluation, our Chief Executive Officer
and Principal Financial Officer have concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this Quarterly
Report on Form 10-QSB.
There were no changes to our internal control over financial reporting
during our last fiscal quarter that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting.
13
ITEM 6. EXHIBITS
(31) Rule 13a-14(a)/Rule 15d-14(a) Certifications:
(i) Certification of Sandra Pautsky, Principal Executive
Officer of the Company, filed herewith.
(ii) Certification of Carol J. Cooper, Principal Financial
Officer of the Company, filed herewith.
(32) Section 1350 Certifications - Certifications of Sandra
Pautsky, Principal Executive Officer of the Company, and Carol
J. Cooper, Principal Financial Officer of the Company, filed
herewith.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
OAKRIDGE ENERGY, INC.
(Registrant)
DATE: July 15, 2005 By /s/ Sandra Pautsky
-------------------------------------
Sandra Pautsky, President and
Principal Executive Officer
DATE: July 15, 2005 By /s/ Carol J. Cooper
-------------------------------------
Carol J. Cooper, Principal Financial
Officer
14
INDEX TO EXHIBITS
The exhibits filed with this report are filed in accordance with the
requirements of Item 601 of Regulation S-B for filings on Form 10-QSB. For
convenient reference, each exhibit is listed according to the number assigned
to it in the Exhibit Table of such Item 601.
(31) Rule 13a-14(a)/Rule 15d-14(a) Certifications:
(i) Certification of Sandra Pautsky, Principal Executive Officer
of Oakridge Energy, Inc., filed herewith.
(ii) Certification of Carol J. Cooper, Principal Financial Officer of
Oakridge Energy, Inc., filed herewith.
(32) Section 1350 Certifications - Certification of Sandra Pautsky,
Principal Executive Officer of Oakridge Energy, Inc. and Carol J.
Cooper, Principal Financial Officer of Oakridge Energy, Inc., filed
herewith.