UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20539
Form 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For quarterly period ended June 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _________________ to ________________
Commission File No. 0-6994
MEXCO ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-0627918
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
214 W. Texas, Suite 1101, Midland, TX 79701
(Address of principal executive offices) (Zip Code)
(915) 682-1119
Registrant's telephone number, including area code
NONE
(Former Name, Former Address & Former Fiscal Year if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [ X ] NO [ ]
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 June 30, 1998
Common stock, $.50 par value 1,623,289
MEXCO ENERGY CORPORATION
Index
Page
Part I. Financial information:
Consolidated Balance Sheets as of
June 30, 1998 and March 31, 1998 3
Consolidated Statements of Operations
for the three months ended
June 30, 1998 and 1997 4
Consolidated Statements of Cash Flows
for the three months ended June 30,
1998 and 1997 5
Notes to consolidated Financial Statements 6
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7
Part II. Other information: Not Applicable
MEXCO ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 1998 and March 31, 1998
June 30, March 31,
ASSETS 1998 1998
------------ ------------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents ................ $ 124,942 $ 241,348
Accounts receivable ...................... 212,312 207,900
Prepaid assets ........................... 28,155 15,185
------------ ------------
Total current assets ................... 365,409 464,433
PROPERTY AND EQUIPMENT
Oil and gas properties-accounted
for under the full cost method ......... 10,120,958 9,915,701
Other .................................... 20,252 20,252
------------ ------------
10,141,210 9,935,953
Less accumulated depreciation,
depletion and amortization ............ (6,354,244) (5,857,900)
------------ ------------
Net property and equipment ......... 3,786,966 4,078,053
------------ ------------
TOTAL ASSETS ........................ $ 4,152,375 $ 4,542,486
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable-trade ................... $ 56,547 $ 121,131
Current maturities of bank line
of credit ............................. 472,000 322,000
------------ ------------
Total current liabilities .............. 528,547 443,131
BANK LINE OF CREDIT ........................ 1,350,000 1,500,000
------------ ------------
Total liabilities ...................... 1,878,547 1,943,131
STOCKHOLDERS' EQUITY
Common Stock-$.50 par value,
authorized-40,000,000, issued
and outstanding-1,623,289 .............. 811,644 811,644
Preferred Stock-$1.00 par value,
authorized-10,000,000,
none issued ............................ -- --
Paid in capital .......................... 2,875,399 2,875,399
Retained earnings ........................ (1,413,215) (1,087,688)
------------ ------------
Total stockholders' equity ............. 2,273,828 2,599,355
------------ ------------
TOTAL LIABILITIES & EQUITY ......... $ 4,152,375 $ 4,542,486
============ ============
The accompanying notes are an integral part of these financial statements.
MEXCO ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months ended June 30
(Unaudited)
1998 1997
----------- ------------
Revenues
Oil and gas ............................. $ 449,495 $ 454,703
Administrative service
charges and reimbursements ............ 1,043 1,278
Interest Income ......................... 1,298 271
Other Income ............................ 928 563
----------- -----------
Total revenues ........................ 452,764 456,815
Costs and expenses
Production costs ........................ 176,383 127,901
Depreciation, depletion and
amortization .......................... 496,345 191,372
General and administrative .............. 66,415 72,372
Interest ................................ 39,148 31,565
----------- -----------
Total costs and expenses .............. 778,291 423,210
----------- -----------
Earnings (loss) before
income tax expense ...................... (325,527) 33,605
Income tax expense ........................ -- 8,972
----------- -----------
NET EARNINGS (LOSS) ....................... $ (325,527) $ 24,633
=========== ===========
Basic and diluted earnings
(loss) per share ........................ $ (.20) $ .02
=========== ===========
Weighted average common shares
outstanding, basic and diluted .......... 1,623,289 1,508,943
=========== ===========
The accompanying notes are an integral part of these financial statements.
MEXCO ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months ended June 30
(Unaudited)
1998 1997
----------- -----------
Cash flows from operating activities:
Cash received from oil & gas
operations ............................... $ 432,436 $ 530,165
Cash paid for oil & gas operations ......... (155,258) (178,028)
General & administrative expenses .......... (77,262) (83,585)
Interest received .......................... 1,298 271
Interest paid .............................. (39,148) (33,027)
Other cash received ........................ 928 563
Income taxes paid .......................... -- (18,749)
----------- -----------
Net cash provided by operations .......... 162,994 217,610
Cash flows from investing activities:
Capital expenditures ....................... (279,400) (593,308)
----------- -----------
Net cash used in investing
activities .............................. (279,400) (593,308)
Cash flows from financing
activities:
Principal payments on
long-term debt ......................... -- (500,000)
Proceeds from issuance
of common stock ........................ -- 1,000,000
----------- -----------
Net cash provided by
financing activities ................... -- 500,000
----------- -----------
Net increase (decrease) in
cash & cash equivalents .................... (116,406) 124,302
Cash & cash equivalents at
the beginning of the period ................ 241,348 40,813
----------- -----------
Cash & cash equivalents at the
end of the period .......................... $ 124,942 $ 165,115
=========== ===========
Reconciliation of net earnings
(loss) to net cash provided
by operating activities:
Net earnings (loss) .......................... $ (325,527) $ 24,633
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation, depletion
and amortization ..................... 496,345 191,372
Deferred income taxes .................. -- 20,599
(Increase) decrease in
accounts receivable .................. (4,412) 79,943
Increase (decrease) in
accounts payable ..................... 9,558 (59,826)
Increase in prepaid expenses ........... (12,970) (3,735)
Decrease in income taxes
payable .............................. -- (30,376)
----------- -----------
Total adjustments ..................... 488,521 192,977
----------- -----------
Net cash provided by operating
activities ................................. $ 162,994 $ 217,610
=========== ===========
The accompanying notes are an integral part of these financial statements.
MEXCO ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998 and 1997
NOTE A - BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments necessary to present fairly the financial position of
the Company as of June 30, 1998 and the results of its operations for the
three-month periods ended June 30, 1998 and 1997.
The results of operations for the three-months ended June 30, 1998 are not
necessarily indicative of the results to be expected for the full year.
The consolidated balance sheets as of March 31, 1998 have been prepared based
upon the Company's audited balance sheets as of that date.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE CONSOLIDATED STATEMENTS OF OPERATIONS
Results of Operations for the Quarter Ended June 30, 1998
For the quarter ended June 30, 1998, revenues from the sale of oil and gas were
$183,462 and $266,033, respectively. The Company's production for the first
quarter was 14,206 bbls and 126,734 mcf. Average oil and gas prices were $12.91
and $2.10, respectively. For quarter ended June 30, 1997, revenues from the sale
of oil and gas were $269,441 and $185,262, respectively. The Company's
production was 14,849 bbls and 96,658 mcf. Average oil and gas prices were
$18.15 and $1.92, respectively. Oil revenues decreased $85,979 or 32% for the
first quarter of fiscal 1998 as compared to the same period of fiscal 1997, due
to price and production decreases. Production decreases were primarily due to
normal declines, offset in part by the acquisition and development of producing
properties. Gas revenues increased $80,771 or 44% for the first quarter of
fiscal 1998 as compared to the same period of fiscal 1997 due to price and
production increases. Production increases were primarily due to the acquisition
and development of producing properties.
Production costs increased from $127,901 for the first quarter of fiscal 1997 to
$176,383 for the quarter ended June 30, 1998. This increase of $48,482 or 38%
was primarily attributable to additional operating costs from the acquisition
and development of producing proper
ties.
Depreciation, depletion and amortization increased, by $304,973 or 159%, to
$496,345 for the quarter ended June 30, 1998, as compared to the same period of
fiscal 1997. This increase is primarily attributable to an impairment of oil and
gas properties of $288,393 resulting from lower oil prices and the related
downward adjustment of estimated reserves.
General and administrative expenses decreased from $72,372 for the three months
ended June 30, 1997 to $66,415 for the same period of fiscal 1998. The decrease
of $5,957 or 8% is due primarily to accounting and legal costs associated with
property acquisitions in fiscal 1997.
Interest income increased $1,027 due to increased funds invested in a money
market account.
Interest expense increased $7,583 or 24% due to additional principal borrowings
against the Company's line of credit.
During the first quarter, the Company participated in the successful drilling
and completion of four producing wells (approximately 10% working interest and
8% net revenue interest) in the Viejos Field, Pecos County, Texas.
Liquidity and Capital Resources and Commitments
Working capital decreased $284,440 from March 31, 1998 primarily due to current
maturities of long term debt.
The Company has a $3,000,000 revolving line of credit with a borrowing base of
$2,200,000 which is reduced by $50,000 each month throughout the term of the
loan. The loan is reviewed by the bank annually and matures on August 15, 2000.
The Company currently has outstanding borrowings of $1,822,000 against the line.
The obligations under the loan agreement are secured by substantially all of the
oil and gas properties of the Company and the stock of its subsidiary. The loan
agreement contains certain covenants relating to the financial condition of the
Company. Interest is payable monthly at the prime rate (8.5% at June 30, 1998)
as established by the bank.
The Company also has a letter of credit with the same bank which provides for
unsecured borrowings of up to $25,000 in lieu of a plugging bond with the Texas
Railroad Commission covering properties operated by the Company.
The Company believes that it will have sufficient capital available from
borrowings combined with cash flows from operations to fund future capital
expenditures and to meet its financial obligations for the next twelve months.
Management cannot specifically identify the effects of inflation and other price
changes on operations.
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.
MEXCO ENERGY CORPORATION
(A Colorado Corporation)
Nicholas C. Taylor
-----------------------
Nicholas C. Taylor,
President and Treasurer
Date: August 10, 1998