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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------------------------
For the quarter period ended JUNE 30, 1995 Comm. File# 0-12813
AMERICAN ATLAS RESOURCE CORPORATION
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(Formerly Wepco Energy Co.)
(Exact name of small business registrant as specified in its charter)
DELAWARE 84-0809164
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
240 WEST JESSUP STREET, BRIGHTON, COLORADO 80601
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(Address of principal executive office)
Registrant's telephone number, including area code: (303) 659-8203
Check whether the registrant (1) has filed all reports to be filed by Section 13
or 15(d) of the Securities 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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The number of shares outstanding of each of the registrant's class of common
stock or common stock equivalents
Class Outstanding at June 30, 1995
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COMMON STOCK $.01 PAR VALUE 72,043 SHARES
PREFERRED STOCK 523,903 SHARES*
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* CONVERTIBLE INTO 523,903 COMMON SHARES
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AMERICAN ATLAS RESOURCE
CORPORATION (Formerly Wepco
Energy Co.)
Form 10QSB - For the Quarter Ended June 30, 1995
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
A. Consolidated Balance Sheet - June 30, 1995 3
B. Consolidated Statements of Operations - Six Months
and Three Months ended June 30, 1995 and 1994 4
C. Consolidated Statements of Changes in Cash Flows - Six
Months Ended June 30, 1995 and 1994 5
D. Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
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PART I. FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
AMERICAN ATLAS RESOURCE CORPORATION
AND SUBSIDIARIES
(Formerly Wepco Energy Co.)
CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 13,600
Accounts Receivable (less $7,500 allowances for doubtful accounts) 141,300
Parts and Equipment Inventory 90,100
Prepayments and Other 11,500
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TOTAL CURRENT ASSETS 256,500
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PROPERTY AND EQUIPMENT:
Oil and Gas Properties, (at cost on the successful
efforts method of accounting)
Proved Properties 4,209,900
Unproved Properties 5,800
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4,215,700
Compressors 1,007,500
Land and Building 141,900
Automobiles, Trucks and Heavy Equipment 131,300
Shop Machinery, Equipment, Furniture and Fixtures 58,400
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5,554,800
Accumulated Depreciation, Depletion and Amortization (4,006,600)
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1,548,200
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OTHER ASSETS: 1,100
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TOTAL ASSETS $ 1,805,800
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $ 382,000
Oil and Gas Revenue Payable 226,200
Production Taxes Payable 69,300
Current Portion of Long-Term Debt 222,700
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TOTAL CURRENT LIABILITIES 900,200
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LONG-TERM DEBT AND OTHER LIABILITIES:
Long-Term Debt 167,600
Production Taxes Payable 25,400
Advances From Joint Owners and Affiliates 53,500
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246,500
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COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY:
Serial Preferred Stock, $.01 par value; 1,000,000 shares authorized:
Series A, 462,890 shares issued and outstanding;
face value $3.82 per share 1,768,200
Series B, 61,013 shares issued and outstanding;
face value $5.00 per share 305,100
Common Stock, $.01 par value; 12,000,000
shares authorized; 72,043 shares issued and outstanding 700
Additional Paid-In Capital 5,318,500
Accumulated Deficit (6,733,400)
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TOTAL STOCKHOLDERS' EQUITY 659,100
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TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,805,800
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The accompanying notes are an integral part of these consolidated financial
statements.
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AMERICAN ATLAS RESOURCE CORPORATION
AND SUBSIDIARIES
(Formerly Wepco Energy Co.)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended Three Months Ended
-------------------------- ------------------------
June 30 June 30
-------------------------- ------------------------
1995 1994 1995 1994
-------------------------- ------------------------
REVENUES:
Oil and Gas Sales $173,600 $ 196,200 $ 88,400 $ 91,700
Compressor Rental Income 187,000 215,500 86,200 113,300
Gain on Sale of Oil and Gas Properties (Net) 3,900 125,100 3,900 31,300
Sales and Services of Oil Field Equipment 15,900 29,900 13,500 13,200
Management and Operator Fees 24,300 26,900 3,800 4,200
Other Income 19,100 6,200 13,500 3,900
-------- --------- --------- --------
423,800 599,800 209,300 257,600
-------- --------- --------- --------
COSTS AND EXPENSES:
Oil and Gas Production Costs 105,100 178,200 51,800 89,000
Compressor Operating Costs 84,000 114,900 35,500 47,000
Costs of Oil Field Equipment and Services 17,700 38,300 11,400 19,400
Dry Holes and Exploration Expense -- 44,200 -- 1,000
Depreciation, Depletion and Amortization 154,100 147,100 76,000 71,500
General and Administrative 121,200 211,100 62,300 95,600
Interest Expense 22,800 30,700 12,500 14,800
-------- --------- --------- --------
504,900 764,500 249,500 338,300
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LOSS BEFORE INCOME TAXES (81,100) (164,700) (40,200) (80,700)
PROVISION FOR INCOME TAXES:
Income Tax Benefit -- -- -- --
-------- --------- --------- --------
NET LOSS (81,100) (164,700) (40,200) (80,700)
LESS PREFERRED DIVIDENDS -- 33,100 -- 3,700
NET LOSS TO COMMON STOCKHOLDERS $(81,100) $(197,800) $ (40,200) $(84,400)
======== ========= ========= ========
NET LOSS PER COMMON SHARE $ (1.13) $ (2.75) $ (0.56) $ (1.17)
======== ========= ========= ========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 72,000 72,000 72,000 72,000
======== ========= ========= ========
The accompanying notes are an integral part of these consolidated financial
statements.
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AMERICAN ATLAS RESOURCE CORPORATION
AND SUBSIDIARIES
(Formerly Wepco Energy Co.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
--------------------------
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) Income $ (81,100) $ (164,700)
Adjustments to Reconcile Net (Loss) Income to
Net Cash Provided by Operating Activities:
Depreciation, Depletion and Amortization 154,100 147,100
Gain on Sale of Oil and Gas Properties (3,900) (125,100)
Dry Hole and Exploration Expense -- 16,300
Bonus Interest 4,000 4,800
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73,100 (121,600)
Changes in Operating Assets/Liabilities:
Decrease in Accounts Receivable 4,900 27,300
Decrease (Increase) in Parts and Equipment Inventory 16,700 (54,000)
Decrease (Increase) in Prepayments and Other (8,900) 200
Decrease (Increase) in Other Assets -- 2,300
(Decrease)Increase in Accounts Payable
and Accrued Expenses 29,900 (33,300)
(Decrease) Increase in Undistributed Revenue (5,200) 10,900
(Decrease) Increase in Production Taxes Payable (38,500) (50,700)
(Decrease) Increase in Advances from Joint Owners -- 6,300
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NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES 72,000 (212,600)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from Sale of Oil and Gas Properties (Net) 3,900 144,400
Proceeds from Sale of Compressors -- 20,700
Additions to Oil and Gas Properties (Net) (5,000) (21,100)
Additions to Compressors and Other Equipment (2,800) (110,400)
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NET CASH PROVIDED (USED) IN INVESTING ACTIVITIES (3,900) 33,600
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Issuance of Preferred Stock (Net) -- 293,400
Borrowings from Notes 18,000 ---
Payments on Notes (86,100) (118,900)
Payment of Preferred Stock Dividends -- (33,100)
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NET CASH PROVIDED BY (USED) FINANCING ACTIVITIES (68,100) 141,400
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NET (DECREASE) INCREASE IN CASH -- (37,600)
CASH, Beginning of Year 13,600 62,400
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CASH, End of Quarter $ 13,600 $ 24,800
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SUPPLEMENTAL INFORMATION:
Cash Paid During the Quarter For Interest $ 12,900 $ 25,900
Net Book Value of Equipment Exchanged For Note Payable $ -- $ 46,800
The accompanying notes are an integral part of the consolidated financial
statements.
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AMERICAN ATLAS RESOURCE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 1995 and the related consolidated
statements of operations for the six months and three months ended June 30, 1995
and 1994, and the consolidated statements of changes in cash flows for the
periods then ended have been prepared by the Company, without audit. In the
opinion of management, the accompanying financial statements contain all
adjustments necessary to present fairly the financial position of the Company as
of June 30, 1995 and results of operation for the periods then ended except for
normal recurring year-end adjustments.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Therefore, it is suggested that these financial
statements be read in conjunction with the financial statements and notes
included in the Company's 1994 Form 10-KSB. The accounting policies utilized in
the preparation of the financial statements herein presented are the same as set
forth in the Company's annual financial statements except as modified for
appropriate interim accounting policies. The operating results of the six months
ended June 30, 1995 are not necessarily indicative of those which the Company
may experience for fiscal 1995.
Consolidation:
The financial statements include the accounts of the Company and its
wholly-owned subsidiaries, States Exploration Co. ("States"), Schreider &
Company, Inc. ("Schreider"), and American Gas Compression Services, Inc.
("AGCSI"). All significant intercompany transactions have been eliminated.
Certain reclassification's have been made to the June 30, 1994 statement of
operations to conform with the current period's presentation.
Net Loss Per Common and Common Equivalent Share:
Net loss per common share is computed on the basis of the weighted average
number of common shares outstanding during the period. Common Stock equivalents
are not included in the weighted average shares or net loss per share
calculation for the six months and three months ended June 30, 1995 and 1994,
due to their effect being antidilutive.
Stockholders Equity:
Preferred Stock - During the quarter ended June 30, 1994, the Company
sold 61,013 Units of 1993 Series B Convertible Preferred Stock and Warrants to
purchase Common Stock (the "Units"). Each Unit consists of one share of 1993
Series B Convertible Preferred Stock ("Series B Preferred Stock"), one Class A
Common Stock Purchase Warrant, and one Class B Common Stock Purchase Warrant
(the "Series B Warrants"). The Units were offered through a private placement
under a Securities and Exchange Commission Regulation D filing.
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The features of the Series B Preferred Stock include: (a) an annual cumulative
dividend payable quarterly of 7% of the face value of $5.00 per share; (b) each
Series B Preferred share is convertible to one share of Common Stock; (c) each
share is entitled to one vote on all matters brought before the Company's
shareholders; (d) the Series B Preferred Stock is redeemable for $5.00 per share
after December 31, 1995; and does not have any liquidation preference.
The exercise price and term of each Series B Warrant is as follows:
Class A Warrants Exercisable at $6.00 per share from the date of
issuance through December 31, 1995
Class B Warrants Exercisable at $7.00 per share from the date of
issuance through December 31, 1996
Additionally, the Series B Warrants will have customary antidilution protection.
ITEM 2 - MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources:
The Company management and employees are continuing their effort to survive the
ongoing downturn in natural gas prices which continue to have a direct adverse
effect on both it's Baca County, Colorado, gas production cash flow and the
employment of it's small horsepower natural gas compressor rental fleet which
comprises over half of it's available inventory. Since January 1, 1995 customers
have elected to return a total of twelve units through June 30, 1995. In early
July 1995 two of the returned units were placed in service with new customers.
The Company currently has 29 compressor packages on it's idle inventory list
which can be placed in service with minimal additional cash outflow. Gross
rental of these units represents monthly revenue of $32,000.
The Company is actively marketing all of it's residual inventory from
reclamation efforts including several trucks that are in excess of it's current
needs. During the second quarter two of these trucks, the Company's share of a
pumping unit and miscellaneous other inventory was liquidated.
The temporary strengthening of oil prices in the first quarter did not hold and
drilling activity remains low.
The Company has remained current on it's secured indebtedness and is currently
discussing the possibility of extending and increasing it's equipment financing
facility to take advantage of several purchases of additional compressors at
very attractive prices.
Bonus Interest Notes remain delinquent in the amount of $34,000 as of June 30,
1995.
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General accounts payable are averaging 60 days as in the first quarter with no
significant change in vendor relations.
There has been no change in the Company's goals of selling inventory and leasing
its rental fleet which will insure its survival. Future prices for natural gas
are moving above the $1.50 per MCF range as the shoulder months of fall
approach. The Company is well positioned to take full advantage of opportunities
which will arise if gas and oil prices regain seasonal strength, but as stated
previously, oil and gas are commodities and the selling price cannot be
controlled or influenced by the actions of management.
Results of Operations:
For the six months ended June 30, 1995, the Company had a net loss, of $81,100
or $1.13 per share, compared to a loss of $197,800, or $2.75 per share for the
same period of 1994 (1994's loss included $33,100 in Preferred Stock Dividends
or $0.46 per share). For the three month period ended June 30, 1995 the loss was
$40,200 compared to $84,400 in 1994 or $0.56 loss per share vs. $1.17 (which
included $0.05 per share of Preferred Stock Dividends) for the respective
periods.
Oil and gas sales declined 11% and 3% for the six and three month periods ending
June 30, 1995 compared to 1994 results. Oil and gas production costs declined
69% and 72% for the same periods.
The following table shows the components of these changes on a production unit
basis:
June 30,
----------------------------
1995 1994
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Production:
Oil-bbl 5,700 6,600
Gas-MCF 52,000 63,800
Sale:
Oil $ 96,900 $ 87,100
Gas $ 76,600 $ 109,100
Average Price:
Oil $ 17.08 $ 13.23
Gas $ 1.47 $ 1.71
Production Costs: $105,100 $ 178,200
Equivalent Barrels: 14,367 17,233
Sales $ 12.08 $ 11.39
Cost of Sales $ 7.32 $ 10.34
Margin $ 4.76 $ 1.05
Production declines are attributed to one oil well with mechanical problems and
one gas well with an increase in H2S content being shut-in. The Company
experienced substantial
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workover costs in 1994 which were not repeated in 1995. Compressor rental income
decreased by 15% and 31% for the six and three month periods while cost
decreased 37% and 34% for the comparable periods. Gross compressor profits were
$103,000 and $52,700 for the six month period in 1995 compared to $100,600 and
$66,300 in 1994.
The compression business segment contributed approximately 10% of the Company's
loss for the periods shown while it consumed nearly 100% of the Company's cash
flow from operating activities to service indebtedness associated with the
acquisition of the rental fleet and related assets.
During the six months of 1994 the Company sold its interests in 19 wells located
in Oklahoma. The total proceeds were $144,000 resulting in a gain of $125,100.
During the same period in 1995 the Company sold interest in four wells having a
net gain of $3,900.
The dry hole and exploration expense of $44,200 represents a dry hole drilled by
the Company in the first quarter of 1994. No wells have been drilled in 1995.
Depreciation, depletion and amortization is comparable between periods shown.
General and administrative expenses have remained consistent for the first two
quarters of 1995 and the decreases from 1994 levels reflects the departure of
two officers-directors, the closing of the offices in downtown Denver, and the
deferral of the audit for 1994.
The efforts of the Company's management and employees are far greater than the
results reflected in the first six months of 1995. The goal of a profitable
operation remains elusive but attainable.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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SIGNATURES
In accordance with 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.
AMERICAN ATLAS RESOURCE CORPORATION
/s/Rudy C. Schreider, Jr August 07, 1995
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Rudy C. Schreider, Jr Chief Executive Officer Date
Director
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EXHIBIT INDEX
Exhibit No. Exhibit Description Page
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27 Financial Data Schedule