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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1997.
( ) 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 0-8532
OAKRIDGE ENERGY, INC.
(Exact name of small business issuer as specified in its charter)
Utah 87-0287176
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of 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 ( )
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
YES ( X ) NO ( )
The number of shares outstanding of each of the issuer's classes of common
equity, as of November 30, 1997: Common Stock, $.04 par value - 4,930,209
shares
Transitional Small Business Disclosure Format (check one);
YES ( ) NO ( X )
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INDEX
Page #
PART I - FINANCIAL INFORMATION
1. FINANCIAL STATEMENTS:
CONDENSED BALANCE SHEETS AT
FEBRUARY 28, 1997 AND NOVEMBER 30, 1997 1
CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1996 AND 1997 AND
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1996 AND 1997 2
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED NOVEMBER 30, 1996 AND 1997 3
NOTES TO CONDENSED FINANCIAL STATEMENTS 4
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 6
PART II - OTHER INFORMATION
6. EXHIBITS AND REPORTS ON FORM 8-K 10
SIGNATURES 11
(i)
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Oakridge Energy, Inc.
CONDENSED BALANCE SHEETS
ASSETS
As of As of
February 28, 1997 November 30, 1997
----------------- ----------------
Current assets: (Unaudited)
Cash and cash equivalents $ 195,631 $ 272,791
Trade accounts receivable 807,005 883,790
Other receivables 29,558 22,514
Investment securities 1,399,344 1,596,942
Current maturities of long-term notes receivable 4,760 5,053
Federal income tax receivable 230,602 0
Deferred tax asset 44,303 124,114
Prepaid expenses and other 27,571 9,885
------------ ------------
Total current assets 2,738,774 2,915,089
------------ ------------
Investment securities 1,347,663 580,646
Long-term notes receivable, net of current maturities 27,894 24,067
Oil and gas properties, at cost using the successful efforts method of
accounting, net of accumulated depletion and depreciation of
$2,864,407 on February 28, 1997 and $3,556,748 on November 30, 1997 3,180,284 4,001,336
Coal and gravel properties, net of accumulated depletion and depreciation
of $8,330,649 on February 28, 1997 and $8,345,114 on November 30, 1997 404,130 389,818
Real estate held for development 2,275,977 2,459,615
Other property and equipment, net of accumulated depreciation
of $733,429 on February 28, 1997 and $652,452 on November 30, 1997 172,611 153,300
Other assets 1,213,043 1,299,048
------------ ------------
$ 11,360,376 $ 11,822,919
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 239,906 $ 361,390
Accrued expenses 56,008 44,117
Federal income tax payable -- 4,500
------------ ------------
Total current liabilities 295,914 410,007
------------ ------------
Deferred federal income taxes 481,238 726,238
------------ ------------
Total liabilities 777,152 1,136,245
------------ ------------
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 17,188,379 17,904,988
Net unrealized loss on investment securities available for sale (86,002) (240,929)
------------ ------------
18,313,781 18,875,463
Less treasury stock, at cost; 5,074,444 shares on February 28, 1997
and 5,227,594 on November 30, 1997 (7,730,557) (8,188,789)
------------ ------------
Total stockholders' equity 10,583,224 10,686,674
============ ============
$ 11,360,376 $ 11,822,919
============ ============
The accompanying notes are an integral part of these financial statements.
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Oakridge Energy, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For 3 Months For 3 Months For 9 Months For 9 Months
Ended Ended Ended Ended
November 30, 1996 November 30, 1997 November 30, 1996 November 30, 1997
----------------- ----------------- ----------------- -----------------
Revenues:
Oil and gas $ 538,242 $ 1,114,235 $ 1,323,561 $ 3,011,602
Coal and gravel 17,382 19,148 47,161 47,937
Other 12,450 10,650 34,350 31,950
----------- ----------- ----------- -----------
Total revenues 568,074 1,144,033 1,405,072 3,091,489
----------- ----------- ----------- -----------
Operating expenses:
Oil and gas 355,799 667,040 1,071,563 1,708,607
Coal and gravel 33,298 35,629 84,409 91,841
Real estate development 31,884 9,653 47,248 66,845
General and administrative 118,245 109,264 354,404 344,842
----------- ----------- ----------- -----------
Total operating expenses 539,226 821,586 1,557,624 2,212,135
----------- ----------- ----------- -----------
Income (loss) from operations 28,848 322,447 (152,552) 879,354
----------- ----------- ----------- -----------
Other income (expense):
Interest income 72,598 44,283 221,937 144,192
Interest expense (24,137) (1,177) (53,752) (11,359)
Other, net 38,521 133 53,266 37,555
----------- ----------- ----------- -----------
Total other income 86,982 43,239 221,451 170,388
----------- ----------- ----------- -----------
Income before income taxes 115,830 365,686 68,899 1,049,742
----------- ----------- ----------- -----------
Provision for income taxes 39,383 100,059 65,767 333,133
----------- ----------- ----------- -----------
Net income $ 76,447 $ 265,627 $ 3,132 $ 716,609
=========== =========== =========== ===========
Net income per
common share $ 0.01 $ 0.05 $ 0.00 $ 0.14
=========== =========== =========== ===========
Weighted average shares outstanding 5,102,270 4,939,072 5,113,256 4,973,408
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
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Oakridge Energy, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
For 9 Months For 9 Months
Ended Ended
November 30, 1996 November 30, 1997
----------------- -----------------
Cash flows from operating activities:
Net income $ 3,132 $ 716,609
Adjustments to reconcile net income to net cash used in
operating activities:
Depletion and depreciation 510,650 730,459
Abandoned leaseholds 0 107,055
Accretion on investment securities, net (14,746) (13,163)
Gain on sales of oil and gas properties (7,410) (133)
Gain on sales of other property and equipment (45,856) (30,051)
Deferred federal income taxes 355,721 245,000
Net changes in assets and liabilities:
Trade accounts receivable (80,002) (76,785)
Other accounts receivable (20,796) 7,044
Federal income tax receivable (332,295) 230,602
Prepaid expenses and other current assets 16,360 17,686
Accounts payable 77,188 121,484
Accrued expenses (30,196) (11,891)
Federal income tax payable 0 4,500
----------- -----------
Net cash provided by operating activities 431,750 2,048,416
----------- -----------
Cash flows from investing activities:
Additions to oil and gas properties (1,475,184) (1,632,048)
Additions to coal and gravel properties (22,439) 0
Additions to real estate held for development (113,262) (187,664)
Additions to other property and equipment (31,284) (470)
Increase in other assets (302,398) (86,005)
Proceeds from sale of oil and gas properties 13,410 11,734
Proceeds from sale of other property and equipment 49,593 30,051
Purchases of investments available for sale 0 (152,156)
Maturities of investments held to maturity 165,000 0
Maturities of investments available for sale 0 500,000
Principal payments received on notes receivable 3,263 3,534
----------- -----------
Net cash used in investing activities (1,713,301) (1,513,024)
----------- -----------
Cash flows from financing activities:
Other liabilities 1,377,559 0
Purchases of treasury stock (56,721) (458,232)
----------- -----------
Net cash provided by (used in) financing activities 1,320,838 (458,232)
----------- -----------
Net increase in cash and cash equivalents 39,287 77,160
Cash and cash equivalents at beginning of period 44,300 195,631
----------- -----------
Cash and cash equivalents at end of period $ 83,587 $ 272,791
=========== ===========
Supplemental disclosures of cash flow information:
Interest paid $ 51,967 $ 11,359
Income taxes paid $ 42,340 $ 63,893
Recognition in Stockholders' Equity of the net unrealized holding gains
(losses) on available for sale securities of $49,894, net of tax effect of
$25,702 during the nine months ended November 30, 1996 and ($154,927), net of
tax effect of ($79,811) during the nine months ended November 30, 1997.
The accompanying notes are an integral part of these financial statements.
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OAKRIDGE ENERGY, INC.
Notes to Condensed Financial Statements
(Unaudited)
(1) The accompanying unaudited financial statements for the three-and nine-
month periods ended November 30, 1996 and 1997 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.
(2) The foregoing financial statements should be read in conjunction with the
annual financial statements and accompanying notes for the fiscal year
ended February 28, 1997.
(3) In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS No. 128"), which is required to be adopted by the Company on
February 28, 1998. At that time, the Company will be required to change
its presentation of earnings per share ("EPS") to replace primary EPS with
a presentation of basic EPS and to restate EPS for all prior periods
presented. Basic EPS is computed by dividing income available to common
stockholders by the weighted-average number of common shares outstanding
for the period. The adoption of SFAS No. 128 is not expected to have a
material impact on the Company's financial statements.
In February 1997, the FASB also issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure"
("SFAS No. 129"). SFAS No. 129 establishes standards for disclosing
information about an entity's capital structure and applies to all
entities. This statement continues the previous requirements to disclose
certain information about an entity's capital structure found in APB
Opinions No. 10, Omnibus Opinion-1966, and 15, Earnings per Share, and
FASB Statement of Financial Accounting Standards No. 47, "Disclosure of
Long-Term Obligations", for entities that were subject to the requirements
of those standards. SFAS No. 129 supersedes specific disclosure
requirements of APB Opinions 10 and 15 and SFAS No. 47 and consolidates
them for ease of retrieval and for greater visibility to non-public
entities. SFAS No. 129 is effective for financial statements for periods
ending after December 15, 1997. It is not expected that the Company will
experience any material revision in its disclosures when SFAS No. 129 is
adopted.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general purpose financial statements. SFAS No. 130 requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial statements.
It does not require a specific format for that financial statement but
requires
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that an enterprise display an amount representing total comprehensive
income for the period in that financial statement. SFAS No. 130 is
effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. SFAS No. 130 will have no impact on the
financial condition or results of operations of the Company, but will
require changes in the Company's disclosure requirements.
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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, 1997 and the Notes to Condensed Financial Statements contained in
this report.
RESULTS OF OPERATIONS
During the three and nine-month periods ending November 30, 1997,
the Company had net income of $265,627 ($.05 per share) and $716,609 ($.14 per
share) compared to net income of $76,447 ($.01 per share) and $3,132 ($.00 per
share) in the matching 1996 periods. The principal reason for the improved
performance continued to be significantly increased oil and gas revenues from
the Company's Madison County, Texas property.
Oil and gas revenues increased approximately $576,000 (107.0%)
and $1,688,000 (127.5%) during the three and nine months ended November 30,
1997, respectively, primarily due to higher production levels from the
Company's Madison County, Texas property. Increased gas production from the
Company's Limestone County, Texas property also contributed to the nine-month
period rise in revenues.
The following table reflects the changes in the levels of
production from the Madison County property between the 1996 and 1997 periods:
Three-Month Three-Month
Period Ending Period Ending
November 30, 1996 November 30, 1997 Increase
----------------- ----------------- --------
Oil (Bbls.) 11,517 37,372 25,855
Gas (MCF) 3,028 39,388 36,360
Nine-Month Nine-Month
Period Ending Period Ending
November 30, 1996 November 30, 1997 Increase
----------------- ----------------- --------
Oil (Bbls.) 24,654 104,003 79,349
Gas (MCF) 3,028 108,662 105,634
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During the three months ended November 30, 1997, the Company drilled two gross
(.50 net) wells in Madison County, both of which were productive. At November
30, 1997, the Company had 24 gross (6.00 net) productive wells in Madison
County and was participating in the drilling of two additional (.50 net) wells.
The increase in oil and gas revenues during the 1997 periods was
accomplished despite significantly lower average oil prices received by the
Company. The Company's average oil prices received in the three and nine-month
1997 periods were $19.09 and $18.87 per barrel, respectively, down
approximately 19.1% and 14.3%, respectively, from such prices received in the
1996 periods. The Company's average gas price received increased approximately
$1.00 per MCF (53.7%) in the 1997 three-month period and approximately $.26 per
MCF (12.6%) in the nine-month period primarily due to significantly higher
prices received for the gas production from the Company's Limestone and Madison
Counties, Texas properties.
Gravel revenues increased approximately $1,800 and $800 in the
three and nine months ended November 30, 1997, respectively, due to slight
increases in sales from the Company's Colorado property. Other income
(overhead fees received by the Company as operator in the North Texas area)
declined $1,800 and $2,400 in the three and nine-month 1997 periods,
respectively, due to a reduction in the number of wells being operated by the
Company in the area.
The expenses of the Company's oil and gas operations increased
approximately $311,200 (87.5%) and $637,000 (59.5%) in the three and nine-month
1997 periods, respectively. Such expenses typically consist of depletion and
depreciation expense, lease operating expense, production taxes, dry hole costs
and abandoned leaseholds expense. The first three categories of such expenses
rose substantially primarily due to the increased level of operations in the
East Texas area during both periods. Dry hole costs declined approximately
$54,300 (71.6%) in the three months ended November 30, 1997 but increased
approximately $8,300 (3.4%) in the nine-month period. The Company incurred
abandoned leaseholds expense of $107,055 in the three and nine months ended
November 30, 1997 due to its decisions to let most of the remainder of its
undeveloped acreage in New Mexico expire and to write off the cost of the
Company's interest in certain leases acquired in Kansas after a dry hole was
drilled on the acreage. No abandoned leaseholds expense was incurred in the
1996 periods.
The expenses of the Company's coal and gravel operations
increased approximately $2,300 (7.0%) and $7,400 (8.8%) in the three and nine
months ended November 30, 1997, respectively, due to higher ad valorem taxes in
both periods and an increase in environmental fees in the nine-month period.
Real estate development expenses declined approximately $22,200 (69.7%) in the
three months ended November 30, 1997 but increased approximately
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$19,600 (41.5%) in the nine-month period. In the three months ended November
30, 1996, the Company incurred substantial expense for heavy equipment repairs
as it prepared to commence work on the golf course the Company is building on
approximately 170 acres of the 2,025 acres of land the Company owns in La Plata
County, Colorado. The absence of any comparable expense in the 1997 three-
month period was the principal reason for the decline in expenses during such
period. Virtually all categories of real estate development expenses increased
in the nine-month 1997 period.
General and administrative expense declined approximately $9,000
(7.6%) and $9,600 (2.7%) in the three and nine months ended November 30, 1997.
Lower payroll expense was the principal reason for the decline in both periods.
In the nine-month 1997 period, the increased expense of the annual independent
petroleum engineering report obtained with respect to the Company's proven oil
and gas reserves incurred in the first three months of the year and higher tax
accounting expense offset the absence during the period of any letter of credit
fees associated with the Company's coal and gravel properties and litigation
expense.
Interest and dividend income decreased approximately $28,300
(39.0%) and $77,700 (35.0%) in the three and nine-month 1997 periods,
respectively. The Company funded its operations for most of the 1997 year
primarily with proceeds from maturities of investment securities. This
funding method resulted in a significant reduction in the amount of funds the
Company had invested in the 1997 periods. Interest expense declined
approximately $23,000 (95.1%) and $42,400 (78.9%) in the three and nine months
ended November 30, 1997, respectively. Although the Company utilized a small
amount of margin account borrowings to fund a portion of its operations in the
1997 periods, the level of such borrowings was not as great as in the 1996
periods when such borrowings were its principal funding source. The "other,
net" category of other income and expense continued to be an income item in
both 1997 periods, but the level of such income declined approximately $38,400
in the three-month period and $15,700 in the nine-month period primarily due to
the absence of comparable sales of other property and equipment that occurred
in the 1996 periods.
Income tax expense increased approximately $60,700 and $267,400
in the three and nine-month 1997 periods, respectively, primarily due to the
rise in the level of the Company's pre-tax income in the 1997 periods. In the
1996 nine-month period, the Company's provision for income taxes constituted
approximately 95% of its pre-tax income due to the payment of approximately
$29,400 in state franchise taxes and $12,900 in quarterly federal income tax
estimates during such period.
The Company's average weighted shares outstanding declined
approximately 3.2% and 2.7% in the three and nine months ended November 30,
1997, respectively. The Company purchased a total of 12,800 shares in the
three-month period and an additional
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140,350 shares in the nine-month period. 61,250 of the shares purchased in the
nine-month period were from an affiliate and an employee. The balance of the
shares purchased by the Company in the 1997 periods was from unaffiliated
shareholders.
FINANCIAL CONDITION AND LIQUIDITY
During the first nine months of fiscal 1998, the Company's
operating activities provided approximately $2,048,400 in funds; however, the
Company's investing activities (principally additions to oil and gas properties
and to real estate held for development, reduced by net investment proceeds)
and financing activities (purchases of shares of the Company's stock) required
approximately $1,513,000 and $458,200 in funds, respectively. As a result, the
Company's cash and cash equivalents increased by only approximately $77,200 at
November 30, 1997.
Notwithstanding the substantial increase in the Company's oil and
gas revenues which occurred in the first nine months of the fiscal year and
which the Company expects to continue for the remainder of the year, the
Company continues to expect that its activities in the oil and gas business and
real estate development during the remainder of fiscal 1998 will be net users
of cash. To the extent that the needed funds are not provided by the Company's
operating activities, the Company anticipates funding such activities from a
combination of margin account borrowings and the sale and maturities of its
investment securities. At November 30, 1997, the Company held investment
securities totaling approximately $2,177,600.
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PART II - Other Information
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits - Financial Data Schedule for the nine months ended
November 30, 1997 filed as Exhibit 27.
(b) Reports on Form 8-K - No reports on Form 8-K were filed by the
Company during the three months ended November 30, 1997.
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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: January 14, 1998 By /s/ Sandra Pautsky
----------------------------------------
Sandra Pautsky, Executive Vice President
and Chief Accounting Officer
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INDEX TO EXHIBITS
The exhibits filed herewith are filed in accordance with the
requirements of Item 601 to 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.
(2) - Plan of acquisition, reorganization, arrangement,
liquidation or succession - not applicable.
(3) - (i) Articles of Incorporation - not applicable.
(ii) Bylaws - not applicable.
(4) - Instruments defining the rights of security
holders, including indentures - not applicable.
(10) - Material contracts - not applicable.
(11) - Statement re computation of per share earnings -
not applicable.
(15) - Letter on unaudited interim financial information -
not applicable.
(18) - Letter on change in accounting principles - not
applicable.
(19) - Reports furnished to security holders - not
applicable.
(22) - Published report regarding matters submitted to
vote - not applicable.
(23) - Consents of experts and counsel - not applicable.
(24) - Power of Attorney - not applicable.
(27) - Financial Data Schedule - filed herewith.
(99) - Additional exhibits - not applicable.