1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 SEPTEMBER 30, 1995
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM TO
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Commission file number 0-2517
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TOREADOR ROYALTY CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 75-0991164
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
530 Preston Commons West
8117 Preston Road
Dallas, Texas 75225
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 369-0080
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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 twelve months, and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at September 30,1995
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Common Stock, $.15625 par value 5,343,371
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOREADOR ROYALTY CORPORATION
CONSOLIDATED BALANCE SHEET
September 30, September 30, December 31,
1995 1994 1994
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(Unaudited) (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,216,002 $ 3,958,373 $ 3,893,666
Marketable securities, at market value 727,650 820,260 674,730
Accounts receivable 128,968 185,464 160,701
Federal income tax receivable 68,014 21,431 68,014
Prepaid expenses and deposits 61,228 31,403 14,340
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Total current assets 4,201,862 5,016,931 4,811,451
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Properties and equipment, less accumulated
depreciation, depletion and amortization 2,869,674 2,638,630 2,733,101
Other assets 58,465 57,576 105,352
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Total assets $ 7,130,001 $ 7,713,137 $ 7,649,904
============= ============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 96,574 $ 90,863 $ 164,763
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Total current liabilities 96,574 90,863 164,763
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Deferred tax liabilities 241,372 242,901 223,380
Other liabilities --- 14,145 ---
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Total liabilities 337,946 347,909 388,143
Stockholders' equity:
Preferred stock, $1.00 par value, 4,000,000 shares
authorized; none issued --- --- ---
Common stock, $.15625 par value, 10,000,000
shares authorized; 5,349,071 shares issued 835,792 835,792 835,792
Capital in excess of par value 3,560,042 3,559,382 3,560,042
Retained earnings 2,021,530 2,573,662 2,526,164
Minimum pension liability --- (37,965) ---
Net unrealized gain on marketable securities 391,435 451,101 356,507
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6,808,799 7,381,972 7,278,505
Less 5,700 shares of common stock
in treasury, at cost (16,744) (16,744) (16,744)
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Total stockholders' equity 6,792,055 7,365,228 7,261,761
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Total liabilities and stockholders' equity $ 7,130,001 $ 7,713,137 $ 7,649,904
============= ============= =============
The Company uses the successful efforts method of accounting for its oil
and gas producing activities. See accompanying notes to the consolidated
financial statements.
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TOREADOR ROYALTY CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
----------- ----------- ----------- ------------
Revenues:
Oil and gas sales $ 315,657 $ 306,646 $ 958,721 $ 1,051,346
Lease bonuses and rentals 22,010 31,641 63,906 258,421
Interest and other income 41,627 53,051 159,454 153,545
----------- ----------- ----------- ------------
Total revenues 379,294 391,338 1,182,081 1,463,312
Costs and expenses:
Lease operating expense 83,279 58,948 245,213 216,406
Dry holes and abandonments --- --- 175,378 35,543
Depreciation, depletion and
amortization 69,317 73,237 179,280 222,177
Geological and geophysical 66,629 56,422 178,709 128,593
General and administrative 224,220 209,327 908,128 698,981
----------- ----------- ----------- ------------
Total costs and expenses 443,445 397,934 1,686,708 1,301,700
----------- ----------- ----------- ------------
Income (loss) before federal income taxes (64,151) (6,596) (504,627) 161,612
Provision (benefit) for federal income
tax expense --- (11,470) --- (11,470)
----------- ----------- ----------- ------------
Net income (loss) $ (64,151) $ 4,874 $ (504,627) $ 173,082
=========== =========== =========== ============
Income per share $ (0.01) $ 0 $ (0.09) $ 0.04
=========== =========== =========== ============
Weighted average shares outstanding 5,343,371 5,379,019 5,343,371 4,929,535
=========== =========== =========== ============
See accompanying notes to the consolidated financial statements.
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TOREADOR ROYALTY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1995 1994 1995 1994
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Cash flows from operating activities:
Net (loss) income $ (64,151) $ 4,874 $ (504,627) $ 173,082
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation, depletion and amortization 69,317 73,237 179,280 222,177
Dry holes and abandonments --- --- 175,378 35,543
Gain on sale of oil and gas
properties and equipment --- --- --- (24,731)
Decrease (increase) in accounts
receivable 22,663 (11,035) 31,733 8,681
Increase in federal income tax receivable --- (11,470) --- (21,431)
Pension funding in excess of expense (1) 3,386 (1) 10,160
Increase in prepaid expenses and deposits --- (17,063) --- (17,063)
(Decrease) increase in accounts payable
and accrued liabilities (8,314) 28,321 (68,196) (42,073)
Decrease in taxes payable --- --- --- (70,039)
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Net cash provided by (used for)
operating activities 19,514 70,250 (186,433) 274,306
Cash flows from investing activities:
Expenditures for oil and gas property
and equipment (21,105) 67,750 (487,887) (403,064)
Purchase of furniture and fixtures --- --- (3,344) (8,055)
Proceeds from sale of oil and gas
properties and equipment --- --- --- 24,731
Lease of undeveloped acreage --- --- --- 95,372
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Net cash (used for) investing activities (21,105) 67,750 (491,231) (291,016)
---------- --------- ------------ -----------
Cash flows from financing activities:
Net proceeds from issuance of common
stock --- (817) --- 2,615,059
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Net cash provided by financing activities --- (817) --- 2,615,059
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Net (decrease) increase in cash and cash
equivalents (1,591) 137,183 (677,664) 2,598,349
Cash & cash equivalents, beginning of
period 3,217,593 3,821,190 3,893,666 1,360,024
---------- --------- ------------ -----------
Cash & cash equivalents, end of period $3,216,002 $3,958,373 $3,216,002 $3,958,373
========== ========== ========== ==========
Supplemental schedule of cash
flow information:
Cash paid during the period for:
Income taxes --- --- --- $ 80,000
See accompanying notes to the consolidated financial statements.
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TOREADOR ROYALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These consolidated financial statements should be read in the context of
the consolidated financial statements and notes thereto filed with the
Securities and Exchange Commission in the 1994 Annual Report on Form 10-K of
Toreador Royalty Corporation (the "Company" or "Toreador"). In the opinion of
the Company, the information furnished herein reflects all adjustments
consisting of only normal recurring adjustments, necessary for a fair
presentation of the results of the interim periods reported herein. Operating
results from the interim period may not necessarily be indicative of the
results for the year ended December 31, 1995.
CAPITALIZATION POLICY FOR OIL AND GAS ACTIVITIES
The Company follows the successful efforts method of accounting for oil
and gas exploration and development expenditures. Under this method, costs
of successful exploratory wells and all development wells are capitalized.
Costs to drill exploratory wells which do not find proved reserves are
expensed. Acquisition costs of mineral interests in oil and gas
properties remain capitalized until they are impaired or a determination has
been made to discontinue exploration of the lease, at which time all
related costs are charged to expense. Impairment of unproved properties is
assessed and recorded on a property-by-property basis. Upon sale or
abandonment of units of property or the disposition of miscellaneous
equipment, the cost is removed from the asset account, the related reserves
relieved of the accumulated depreciation or depletion and the gain or loss
is credited to or charged against operations. Maintenance and repairs are
charged to expense; betterments of property are capitalized and depreciated.
EARNINGS PER SHARE
Earnings per common share is based on the weighted average number of
shares, including common share equivalents (except where inclusion of such
common share equivalents would have an antidilutive effect), outstanding.
FEDERAL INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for
Income Taxes", which was adopted effective January 1, 1993.
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TOREADOR ROYALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 1995
NOTE 2 - MARKETABLE SECURITIES
Marketable securities are comprised of 105,840 shares in the San Juan
Basin Royalty Trust at September 30, 1995 and 1994. The Company's cost in
this royalty trust is $126,258. At September 30, 1995, the market value of
these securities which are designated as available for sale aggregated
$727,650, resulting in a gross unrealized gain in the amount of $601,392 and
an unrealized gain, net of tax effect, of $391,435. At September 30, 1994,
the market value of these securities was $820,260, resulting in a gross
unrealized gain in the amount of $694,002 and an unrealized gain, net of
tax effect, of $451,101. At December 31, 1994, the market value of these
securities was $674,730, resulting in a gross unrealized gain in the
amount of $548,472, and an unrealized gain, net of tax effect, of $356,507.
NOTE 3 - NON-PRODUCING MINERAL AND ROYALTY INTERESTS
Principal properties include mineral fee interests acquired by the
Company during 1951 and 1958. These interests totaled approximately 530,000
net mineral acres underlying approximately 870,000 surface acres in the
Texas Panhandle and West Texas. It is recognized that the ultimate
realization of the investment in these properties is dependent upon future
exploration and development operations which are dependent upon satisfactory
leasing and drilling arrangements with others. Additionally, the Company
owns working or royalty interests in Texas, New Mexico, Oklahoma, Arkansas,
Louisiana and Colorado.
NOTE 4 - INTEREST AND OTHER INCOME
Items in interest and other income consist of:
Three Months Ended
September 30,
--------------------------------
1995 1994
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Interest - Certificates of Deposit and
U. S. Treasury Bills $ 34,062 $ 40,444
Distribution from Grantor Trust:
San Juan Basin Royalty Trust 7,565 8,607
Management fees --- 4,000
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$ 41,627 $ 53,051
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TOREADOR ROYALTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three and nine months ended September 30, 1995
NOTE 5 - CAPITAL
On May 23, 1994, the Company privately placed 809,071 shares of common
stock for an aggregate consideration of $2,831,749. In its private placement
agreement with the purchasers, the Company granted them registration
rights, pursuant to which a registration statement on Form S-3 covering all
the shares was filed on June 22, 1994. The registration statement was
declared effective July 11, 1994 and the Company is obligated to maintain
such effectiveness until May 23, 1996. In connection with the private
placement, the Company's placement agent received a five-year warrant to
purchase 106,867 shares of common stock at a price of $4.375 per share.
The placement agent has rights to participate in registered offerings of
common stock by the Company.
The net proceeds to the Company from the private placement (after
deducting the placement agent's fee of $141,112 and expenses of approximately
$75,000) were approximately $2,616,000.
NOTE 6 - STOCKHOLDER RIGHTS PLAN
The Company adopted a stockholder rights plan on April 3, 1995 designed
to assure that the Company's stockholders receive fair and equal treatment
in the event of any proposed takeover of the Company and to guard against
partial tender offers and other abusive takeover tactics to gain control of
the Company without paying all stockholders a fair price. Under the
rights plan, the Company declared a dividend of one right ("Right") on each
share of Toreador common stock. Each Right will entitle the holder to purchase
one one-hundredth of a share of a new Series A Junior Participating Preferred
Stock, par value $1.00 per share, at an exercise price of $12.00. The
Rights are not currently exercisable and will become exercisable only in the
event a person or group acquires beneficial ownership of 20 percent or more
of Toreador's outstanding common stock or announces a tender offer or
exchange offer to acquire such ownership level. The Rights are subject to
redemption by the Company for $.01 per Right at any time prior to the tenth
day after the first public announcement of the acquisition by any person or
group of beneficial ownership of 20 percent or more of Toreador common
stock. The dividend distribution was made on April 13, 1995 to stockholders
of record at the close of business on that date. The rights will expire on
April 13, 2005.
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TOREADOR ROYALTY CORPORATION
For the three and nine months ended September 30, 1995
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
Historically, most of the exploration activity on the Company's acreage
has been funded and conducted by other oil companies and this activity is
expected to continue. Exploration activity typically generates lease bonus
and option income to the Company. If drilling is successful, the Company
receives royalty income from the oil or gas production but bears none of the
capital or operating costs. In order to accelerate the evaluation of its
acreage as well as increase its ownership in any reserves discovered, the
Company intends to increase its level of participation in exploring its
acreage by acquiring working interests. The extent to which the Company
may acquire working interests will depend on the availability of outside
capital and cash flow from operations. Currently, the primary sources of
capital for the financing of the Company's operations are cash flow provided
from revenues generated by its proportionate share in oil and natural gas
sales and existing cash, including that from a private offering completed
in 1994. To the extent cash flow from operations does not significantly
increase and external sources of capital are limited or unavailable, the
Company's ability to make the capital investment to participate in 3-D
seismic surveys and increase its interest in projects on its acreage will
be limited. Future funds are expected to be provided through production from
existing producing properties and new producing properties that may be
discovered through exploration of the Company's acreage by third parties or
by the Company itself. Funds may also be provided through external
financing in the form of debt or equity. There can be no assurance as to
the extent and availability of these sources of funding.
The Company has no debt and maintains its excess cash funds in
interest-bearing deposits and commercial paper. The Company is not aware
of any demands, commitments or events which will result in its liquidity
increasing or decreasing in a material way. From time to time, the Company
may receive lease bonuses that cannot be anticipated and, when funds are
available, the Company may elect to participate in exploratory ventures.
The Company also may acquire producing oil and gas assets which could require
the use of debt.
Management believes that sufficient funds are available internally to
meet anticipated capital requirements for fiscal 1995.
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TOREADOR ROYALTY CORPORATION
For the three and nine months ended September 30, 1995
RESULTS OF OPERATIONS
Three Months Ended September 30, 1995 vs
Three Months Ended September 30, 1994
Revenues for the third quarter 1995 were $379,294 versus $391,338 for
the same period in 1994. Oil and gas sales were $315,657 in 1995 versus
$306,646 in 1994. The average gas price for the period dropped 15.7% to
$1.29 per MCF in 1995 from $1.53 per MCF for the same quarter of 1994. The
Company continued to experience a number of gas wells being shut-in or
curtailed during the past ninety days. This resulted in gas volumes
declining by 20.8% to 60,054 MCF in 1995 from 75,804 MCF in 1994. Oil
volumes increased 26.4% to 14,833 BBL for the third quarter 1995 compared to
11,733 for the same period in 1994. Oil prices remained relatively flat
as the 1995 average price per barrel was $16.08 as compared to $16.24 per
barrel in 1994. Interest and other income was $41,627 in 1995 versus
$53,051 in 1994. Interest income decreased by $6,382 to $34,062 in 1995
from $40,444 in 1994 due to reductions in short term investment rates.
Royalty trust distributions declined by $1,042 to $7,565 in 1995 from $8,607
in 1994. The acreage joint venture for which the Company received $4,000 in
management fees in 1994 ended in the fourth quarter of 1994.
Costs and expenses were $443,445 in 1995 compared to $397,934 for the
same period in 1994. Lease operating expenses were $83,279 versus $58,948
in 1994. These increased expenses are primarily a result of the Company's
participation in the successful development program occurring on the Company's
minerals in Motley County, Texas. Geological and geophysical costs were
$66,629 compared to $56,422 for the same period in 1994. The geological and
geophysical costs increased due to the Company's continued efforts to evaluate
and develop Company-owned mineral interests. Depreciation, depletion and
amortization declined by approximately $4,000 in 1995 to $69,317.
General and administrative expenses increased by $14,893 to $224,220 from
$209,327 in 1994. The increase results from the Company finalizing its
various state franchise tax obligations for the current year along with final
expenses associated with defending an attempt to take control of the
Company.
The Company recognized a loss of $64,151, or $(.01) per share, for
the quarter versus a $4,874 net income for the same period of 1994.
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TOREADOR ROYALTY CORPORATION
For the three and nine months ended September 30, 1995
Nine Months Ended September 30, 1995 vs
Nine Months Ended September 30, 1994
Revenues for the nine months ended September 30, 1995 decreased 19.2%
to $1,182,081 compared to $1,463,312 for 1994. Oil and gas sales declined
8.8% to $958,721 in 1995 from $1,051,346 in 1994, resulting from the reduction
of equivalent barrel production in 1995 of 75,382 from 81,346 in 1994.
This decline in equivalent barrel production was compounded as the price
per equivalent barrel slipped $.20 to $12.72 in 1995 from $12.92 in 1994.
Lease bonus and rental income decreased by 75.3% to $63,906 in 1995 from
$258,421 in 1994. The decrease is due to the Company evaluating its own
mineral interests for future development. Interest and other income
increased 3.8%, or $5,909, to $159,454 from $153,545 in 1994. Increased
investment balances resulting from the successful private placement of stock
in the second quarter of 1994 contributed to this increase.
Total costs and expenses through nine months of 1995 were $1,686,708
compared to $1,301,700 for the same period of 1994, representing a 29.6%
increase. Of this increase, 54.3% is attributable to general and
administrative expenses as a direct result of the Company defending an attempt
to take control of the Company by a competing slate of directors submitted
by a Boston-based group of investors, which increased these expenses to
$908,128 in 1995 from $698,981 in 1994. The Company completed its
participation in the evaluation of certain drilling commitments resulting in
expenses from dry holes and abandonments of $175,378 in 1995 versus $35,543
in 1994 representing 36.3% of the increase in total costs and expenses.
Geological and geophysical costs increased $50,116, to $178,709 from
$128,593, or 13.0% of the increase in total costs and expenses. The
remaining component, contributing 7.5% of the increase in total costs and
expenses, is lease operating expense which increased $28,807 to $245,213
from $216,406 in 1994. These increases were partly offset by the decline in
depreciation, depletion and amortization of $42,897 to $179,280 from $222,177
in 1994.
The Company recognized a loss of $504,627, or $(.09) per share, in 1995
as compared to net income of $173,082, or $.04 per share, for the same
period in 1994.
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TOREADOR ROYALTY CORPORATION
September 30, 1995
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
The information required by this Item 6(a) is set forth in
the Index to Exhibits accompanying this quarterly report
and is incorporated herein by reference.
(b) Reports on Form 8-K
Form 8-K dated October 12, 1995 (Date of Event: October
6, 1995), which reported the Company's acquisition of an
additional 11.5% working interest in the five well Matador Field,
and the Company's adoption of a Share Repurchase Plan.
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.
TOREADOR ROYALTY CORPORATION,
Registrant
/s/ PETER R. VIG
_________________________________
Peter R. Vig, Chairman;
the Principal Executive, Financial
and Accounting Officer
November 13, 1995
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TOREADOR ROYALTY CORPORATION
September 30, 1995
INDEX TO EXHIBITS
Exhibit
Number Exhibit
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27 Financial Data Schedule
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