UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
Amendment No. 1
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2008
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 000-18774
SPINDLETOP OIL & GAS CO.
(Exact name of registrant as specified in its charter)
Texas (State or of | 75-2063001 (I.R.S. Employer Identification No.) | |
12850 Spurling Rd., Suite 200, Dallas, TX 75230
(Address of principal executive offices)(Zip Code)
(972) 644-2581
(Registrant’sRegistrant's telephone number, including area code)
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 Companyregistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesþx Noo¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, anand accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “non-accelerated filer”, “accelerated filer“filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act).
Act. Large accelerated filer¨ Non-accelerated filer ¨ (Do not check if smaller reporting company) Accelerated filer ¨ Smaller reporting company x
|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEEDINGPRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yeso [ ] Noo
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’sissuer's classes of common stock, as of the latest practicable date.
Common Stock, $0.01 par value (Class) | 7,650,803 (Outstanding at |
(1) |
EXPLANATORY NOTE
No other changes have been made to the Commission’s comments, we have amended our Form 10-Q for the quarter ended March 31, 2008 to modify the language in Item 4 — Controls and Procedures to state that the Company’s disclosure controls and procedures were effective10-Q. This Amendment No. 1 speaks as of the endoriginal filing date of the period covered byForm 10-Q, does not reflect events that may have occurred subsequent to the report.
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
FORM 10-Q
For the quarter ended March 31, 2008
Index to Consolidated Financial Statements and Schedules
Part I – Financial Information: | Page | ||||||
Item 1. – Financial Statements | |||||||
June 30, 2011 (Unaudited) and December 31, 2010 | 3 - 4 | ||||||
Consolidated Statements of Operations (Unaudited) | |||||||
Six Months Ended June 30, 2011 and 2010, and | |||||||
Three Months Ended June 30, 2011 and 2010 | 5 | ||||||
Consolidated Statements of Cash Flow (Unaudited) | |||||||
Six Months Ended June 30, 2011 and 2010 | 6 | ||||||
Notes to Consolidated Financial Statements | 7 | ||||||
Item 2. – Management’s Discussion and Analysis of Financial | |||||||
Condition and Results of Operations | 8 | ||||||
Item 4. – Controls and Procedures | 12 | ||||||
Part II – Other Information: | |||||||
Item 1A. – Risk Factors | 8 | ||||||
Item | 13 | ||||||
14 |
Part I - Financial Information:
Item 1. - Financial Statements
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES | ||
CONSOLIDATED BALANCE SHEETS | ||
June 30, | December 31, | |
2011 | 2010 | |
(Unaudited) | ||
ASSETS | ||
Current Assets | ||
Cash and cash equivalents | $ 8,053,000 | $ 6,244,000 |
Accounts receivable, Trade | 1,036,000 | 1,088,000 |
Prepaid income tax | 140,000 | 446,000 |
Other short-term investments | 400,000 | 400,000 |
Total Current Assets | 9,629,000 | 8,178,000 |
Property and Equipment - at cost | ||
Oil and gas properties (full cost method) | 18,528,000 | 17,884,000 |
Rental equipment | 399,000 | 399,000 |
Gas gathering system | 145,000 | 145,000 |
Other property and equipment | 245,000 | 245,000 |
19,317,000 | 18,673,000 | |
Accumulated depreciation and amortization | (9,387,000) | (8,844,000) |
Total Property and Equipment | 9,930,000 | 9,829,000 |
Real Estate Property - at cost | ||
Land | 688,000 | 688,000 |
Commercial office building | 1,580,000 | 1,580,000 |
Accumulated depreciation | (551,000) | (501,000) |
Total Real Estate Property | 1,717,000 | 1,767,000 |
Other Assets | ||
Other long-term investments | 1,000,000 | 1,000,000 |
Other | 3,000 | 3,000 |
Total Other Assets | 1,003,000 | 1,003,000 |
Total Assets | $ 22,279,000 | $ 20,777,000 |
- | - | |
The accompanying notes are an integral part of these statements |
(3) |
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES | ||
CONSOLIDATED BALANCE SHEETS | ||
June 30 | December 31, | |
2011 | 2010 | |
(Unaudited) | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||
Current Liabilities | ||
Notes payable, current portion | $ 120,000 | $ 120,000 |
Accounts payable and accrued liabilities | 2,635,000 | 2,276,000 |
Tax savings benefit | 97,000 | 97,000 |
Total Current Liabilities | 2,852,000 | 2,493,000 |
Noncurrent Liabilities | ||
Notes payable, long-term portion | 780,000 | 840,000 |
Asset Retirement Obligation | 901,000 | 854,000 |
Total Noncurrent Liabilities | 1,681,000 | 1,694,000 |
Deferred Income Tax Payable | 3,076,000 | 3,009,000 |
Total Liabilities | 7,609,000 | 7,196,000 |
Shareholders' Equity | ||
Common Stock, $.01 par value, 100,000,000 shares authorized; 7,677,471 shares issued and 7,640,803 shares outstanding at June 30, 2011; 7,677,471 shares issued and 7,640,803 shares outstanding at December 31, 2010. | 77,000 | 77,000 |
Additional paid-in capital | 919,000 | 919,000 |
Treasury Stock, at cost | (18,000) | (18,000) |
Retained earnings | 13,692,000 | 12,603,000 |
Total Shareholder's Equity | 14,670,000 | 13,581,000 |
Total Liabilities and Shareholders' Equity | $ 22,279,000 | $ 20,777,000 |
- | - | |
The accompanying notes are an integral part of these statements |
(4) |
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
(Unaudited) | ||||
Six Months Ended | Three Months Ended | |||
June 30 | June 30 | June 30 | June 30 | |
2011 | 2010 | 2011 | 2010 | |
Revenues | ||||
Oil and gas revenues | $ 4,019,000 | $ 3,161,000 | 1,823,000 | 1,484,000 |
Revenue from lease operations | 151,000 | 133,000 | 76,000 | 63,000 |
Gas gathering, compression, equip rental | 78,000 | 71,000 | 39,000 | 33,000 |
Real estate rental income | 227,000 | 247,000 | 114,000 | 122,000 |
Interest Income | 31,000 | 84,000 | 14,000 | 45,000 |
Other | 191,000 | 37,000 | 11,000 | 18,000 |
Total Revenues | 4,697,000 | 3,733,000 | 2,077,000 | 1,765,000 |
Expenses | ||||
Lease operations | 987,000 | 643,000 | 495,000 | $ 394,000 |
Production taxes, gathering and marketing | 379,000 | 347,000 | 173,000 | $ 167,000 |
Pipeline and rental operations | 5,000 | 17,000 | 3,000 | $ 7,000 |
Real estate operations | 89,000 | 99,000 | 40,000 | $ 47,000 |
Depreciation and amortization | 593,000 | 424,000 | 349,000 | $ 195,000 |
ARO accretion expense | 24,000 | 43,000 | 12,000 | $ 21,000 |
General and administrative | 1,470,000 | 1,548,000 | 720,000 | $ 784,000 |
Interest expense | 28,000 | 33,000 | 13,000 | $ 16,000 |
Total Expenses | 3,575,000 | 3,154,000 | 1,805,000 | 1,631,000 |
Income Before Income Tax | 1,122,000 | 579,000 | 272,000 | 134,000 |
Current income tax provision (benefit) | (34,000) | 94,000 | (113,000) | $ 63,000 |
Deferred income tax provision (benefit) | 67,000 | (17,000) | 104,000 | $ (76,000) |
33,000 | 77,000 | (9,000) | (13,000) | |
Net Income | $ 1,089,000 | $ 502,000 | 281,000 | $ 147,000 |
Earnings per Share of Common Stock | ||||
Basic and Diluted | $ 0.14 | $ 0.07 | $ 0.04 | $ 0.02 |
Weighted Average Shares Outstanding | ||||
Basic and Diluted | 7,640,803 | 7,630,803 | 7,640,803 | 7,630,803 |
The accompanying notes are an integral part of these statements |
(5) |
- 2 -
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES | ||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
(Unaudited) | ||
Six Months Ended June 30, | ||
2011 | 2010 | |
Cash Flows from Operating Activities | ||
Net Income | $ 1,089,000 | $ 502,000 |
Reconciliation of net income to net cash | ||
provided by operating activities | ||
Depreciation and amortization | 593,000 | 425,000 |
Accretion of asset retirement obligation | 24,000 | 43,000 |
Changes in accounts receivable | 52,000 | (180,000) |
Changes in prepaid income tax | 306,000 | 93,000 |
Changes in accounts payable | 359,000 | (446,000) |
Changes in current tax payable | - | - |
Changes in deferred tax payable | 67,000 | (17,000) |
Other | - | (2,000) |
Net cash provided by operating activities | 2,490,000 | 418,000 |
Cash Flows from Investing Activities | ||
Capitalized acquisition, exploration and development costs | (620,000) | (858,000) |
Purchase of other property and equipment | - | (60,000) |
Capitalized tenant improvements and broker fees | (1,000) | - |
Net cash used by investing activities | (621,000) | (918,000) |
Cash Flows from Financing Activities | ||
Repayment of note payable to bank | (60,000) | (60,000) |
Net cash used by financing activities | (60,000) | (60,000) |
Increase (decrease) in cash | 1,809,000 | (560,000) |
Cash at beginning of period | 6,244,000 | 9,153,000 |
Cash at end of period | $ 8,053,000 | $ 8,593,000 |
Interest Paid in Cash | $ 29,000 | $ 33,000 |
Income taxes paid | $ 100,000 | $ - |
The accompanying notes are an integral part of these statements |
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
As of | ||||||||
March 31 | December 31 | |||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Current Assets | ||||||||
Cash | $ | 7,516,000 | $ | 6,325,000 | ||||
Accounts receivable, trade | 2,142,000 | 1,413,000 | ||||||
Total Current Assets | 9,658,000 | 7,738,000 | ||||||
Property and Equipment, at cost | ||||||||
Oil and gas properties (full cost method) | 11,144,000 | 11,041,000 | ||||||
Rental equipment | 399,000 | 399,000 | ||||||
Gas gathering systems | 145,000 | 145,000 | ||||||
Other property and equipment | 183,000 | 183,000 | ||||||
11,871,000 | 11,768,000 | |||||||
Accumulated depreciation and amortization | (6,063,000 | ) | (5,902,000 | ) | ||||
Total Property and Equipment, net | 5,808,000 | 5,866,000 | ||||||
Real Estate Property, at cost | ||||||||
Land | 688,000 | 688,000 | ||||||
Commercial office building | 1,549,000 | 1,542,000 | ||||||
Accumulated depreciation | (227,000 | ) | (204,000 | ) | ||||
Total Real Estate Property, net | 2,010,000 | 2,026,000 | ||||||
Other Assets | 1,000 | 1,000 | ||||||
Total Assets | $ | 17,477,000 | $ | 15,631,000 | ||||
- 3 -
As of | ||||||||
March 31 | December 31 | |||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current Liabilities | ||||||||
Notes payable, current portion | $ | 120,000 | $ | 120,000 | ||||
Accounts payable and accrued liabilities | 2,162,000 | 2,272,000 | ||||||
Income tax payable | 329,000 | 8,000 | ||||||
Tax savings benefit payable | 97,000 | 97,000 | ||||||
Total current liabilities | 2,708,000 | 2,497,000 | ||||||
Noncurrent Liabilities | ||||||||
Notes payable, long-term portion | 1,170,000 | 1,200,000 | ||||||
Asset retirement obligation | 642,000 | 564,000 | ||||||
1,812,000 | 1,764,000 | |||||||
Deferred income tax payable | 2,265,000 | 1,855,000 | ||||||
Shareholders’ Equity | ||||||||
Common stock, $.01 par value; 100,000,000 shares authorized; 7,677,471 shares issued and 7,610,803 shares outstanding at March 31, 2008; 7,677,471 shares issued and 7,610,803 shares outstanding at December 31, 2007 | 77,000 | 77,000 | ||||||
Additional paid-in capital | 874,000 | 874,000 | ||||||
Treasury Stock | (32,000 | ) | (32,000 | ) | ||||
Retained earnings | 9,773,000 | 8,596,000 | ||||||
Total Shareholders’ Equity | 10,692,000 | 9,515,000 | ||||||
Total Liabilities and Shareholders’ Equity | $ | 17,477,000 | $ | 15,631,000 | ||||
- 4 -
Three Months Ended | ||||||||
March 31 | March 31 | |||||||
2008 | 2007 | |||||||
Revenues | ||||||||
Oil and gas revenue | $ | 3,117,000 | $ | 1,125,000 | ||||
Revenue from lease operations | 47,000 | 36,000 | ||||||
Gas gathering, compression and Equipment rental | 40,000 | 25,000 | ||||||
Real estate rental income | 131,000 | 125,000 | ||||||
Interest income | 74,000 | 85,000 | ||||||
Other | 1,000 | 21,000 | ||||||
Total revenue | 3,410,000 | 1,417,000 | ||||||
Expenses | ||||||||
Lease operations | 649,000 | 295,000 | ||||||
Pipeline and rental operations | 6,000 | 12,000 | ||||||
Real estate operations | 66,000 | 66,000 | ||||||
Depreciation, depletion, and amortization | 185,000 | 136,000 | ||||||
Asset retirement obligation accretion | 6,000 | 9,000 | ||||||
General and administrative | 570,000 | 448,000 | ||||||
Interest expense | 20,000 | 33,000 | ||||||
Total Expenses | 1,502,000 | 999,000 | ||||||
Income Before Income Tax | 1,908,000 | 418,000 | ||||||
Current tax provision | 321,000 | 111,000 | ||||||
Deferred tax provision | 410,000 | 91,000 | ||||||
731,000 | 202,000 | |||||||
Net Income | $ | 1,177,000 | $ | 216,000 | ||||
Earnings per Share of Common Stock | ||||||||
Basic and diluted | $ | 0.15 | $ | 0.03 | ||||
Weighted Average Shares Outstanding | ||||||||
Basic and diluted | 7,610,803 | 7,597,859 | ||||||
- 5 -
Three Months Ended | ||||||||
March 31 | March 31 | |||||||
2008 | 2007 | |||||||
Cash Flows from Operating Activities | ||||||||
Net Income | $ | 1,177,000 | $ | 216,000 | ||||
Reconciliation of net income to net cash provided by Operating Activities | ||||||||
Depreciation, depletion and amortization | 185,000 | 136,000 | ||||||
Employee compensation paid with treasury stock | — | 11,000 | ||||||
Changes in prepaid expense | — | 60,000 | ||||||
Changes in accounts receivable, trade | (729,000 | ) | 227,000 | |||||
Changes in prepaid income taxes | — | 111,000 | ||||||
Changes in accounts payable | (110,000 | ) | 369,000 | |||||
Changes in current taxes payable | 321,000 | — | ||||||
Changes in deferred tax payable | 410,000 | 91,000 | ||||||
Changes in asset retirement obligation | 78,000 | 8,000 | ||||||
Other | — | (1,000 | ) | |||||
Net cash provided by operating Activities | 1,332,000 | 1,228,000 | ||||||
Cash flows from Investing Activities | ||||||||
Capitalized acquisition, exploration and development costs | (102,000 | ) | (407,000 | ) | ||||
Purchase of other property and equipment | (1,000 | ) | — | |||||
Capitalized tenant improvements | (8,000 | ) | — | |||||
Net cash used for Investing Activities | (111,000 | ) | (407,000 | ) | ||||
Cash Flows from Financing Activities | ||||||||
Decrease in notes payable | (30,000 | ) | (30,000 | ) | ||||
Net cash used for Financing Activities | (30,000 | ) | (30,000 | ) | ||||
Increase in cash | 1,191,000 | 791,000 | ||||||
Cash at beginning of period | 6,325,000 | 5,759,000 | ||||||
Cash at end of period | $ | 7,516,000 | $ | 6,550,000 | ||||
Interest paid in Cash | $ | 20,239 | $ | 21,845 | ||||
- 6 -
(Unaudited)
1. BASIS OF PRESENTATION AND ORGANIZATION
The accompanying financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by generally accepted accounting principles or those normally made in the Company’sCompany's annual Form 10-K filing. Accordingly, the reader of this Form 10-Q may wish to refer to the Company’sCompany's Form 10-K for the year ended December 31, 20072010 for further information.
The consolidated financial statements presented herein include the accounts of Spindletop Oil & Gas Co., a Texas corporation (“("the Company”Company") and its wholly owned subsidiaries, Prairie Pipeline Co., a Texas corporation and Spindletop Drilling Company, a Texas Corporation.corporation. All significant inter-company transactions and accounts have been eliminated.
In the opinion of management, the accompanying unaudited interim financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, the results of operations and changes in cash flows of the Company and its consolidated subsidiaries for the interim periods presented. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with generally accepted accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations.
Recently Issued Accounting Pronouncements
The FASB issued ASC Topic 820, “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in the U.S. GAAP and IFRS” in May, 2011. This ASC Topic changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. The Company plans to adopt this statement in early 2012. The adoption of this statement will not have a material impact on the consolidated financial statements of the Company
The FASB issued ASC Topic 220, “Comprehensive Income” in June, 2011. This ASC Topic gives an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. For public entities, the amendments are effective for fiscal years and interim periods within those years, beginning after December 15, 2011. The Company plans to adopt this statement in early 2012. The adoption of this statement will not have a material impact on the consolidated financial statements of the Company.
Subsequent Events:
The Company has evaluated subsequent events through the issuance date of this report of August 19, 2011.
2. COMMON STOCK
Effective August 1, 2011, the Company issued 10,000 shares of restricted common stock (5,000 shares to each of two individuals) to key employees pursuant to an employment package. The shares were valued at $1.70 per share, the believed market value for free trading shares at the time of issue. The amounts were expensed as general and administrative expense. The shares of common stock were issued out of Treasury Stock and reduced the amount of the Company’s common stock held in Treasury from 36,668 to 26,668 shares.
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
WARNING CONCERNING FORWARD LOOKING STATEMENTS
The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report.
This Report on Form 10-Q may contain forward-looking statements within the meaning of the federal securities laws, principally, but not only, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We caution investors that any forward-looking statements in this report, or which management may make orally or in writing from time to time, are based on management’s beliefs and on assumptions made by, and information currently available to, management. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “result” and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors, that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We caution you that while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.
- 7 -
The current global economic and financial crisis could lead to an extended national or global economic recession. A slowdown in economic activity caused by a recession would likely reduce national and worldwide demand for oil and natural gas and result in lower commodity prices for long periods of time. Prices for oil and natural gas are volatile. Costs of exploration, development and production have not yet adjusted to current economic conditions. Prolonged,substantial decreases in oil and natural gas prices would likelyhave a material adverse effect on the Company’s business, financial condition and results of operations, could further limit the Company's access to liquidity and credit and could hinder its ability to satisfy its capital requirements.
Capital and credit markets experienced unprecedented volatility and disruption over the last few years and continue to be unpredictable. Given the current levels of market volatility and disruption, the availability of funds from those markets has diminished substantially. Further, arising from concerns about the stability of financial markets generally and the solvency of borrowers specifically, the cost of accessing the credit markets has increased as many lenders have raised interest rates, enacted tighter lending standards or altogether ceased to provide funding to borrowers.
Due to these capital and credit market conditions, Spindletop cannot be certain that funding will be available to the Company in amounts or on terms acceptable to the Company. The Company is evaluating whether current cash balances and cash flow from operations alone would be sufficient to provide working capital to fully fund the Company's operations. Accordingly, the Company is evaluating alternatives, such as joint ventures with third parties,or sales of interest in one or more of its properties. Such transactions if undertaken could result in a reduction in the Company's operating interests or require the Company to relinquish the right to operate the property. There can be no assurance that any such transactions can be completed or that such transactions will satisfy the Company's operating capital requirements. If the Company is not successful in obtaining sufficient funding or completing an alternative transaction on a timely basis on terms acceptable to the Company, Spindletop would be required to curtail its expenditures or restructure its operations, and the Company would be unable to continue its exploration, drilling, and recompletion program, any of which would have a material adverse effect on Spindletop's business, financial condition and results of operations.
(8) |
The Obama Administration has recently set forth budget proposals which if passed, would significantly curtail our ability to attract investors and raise capital. Proposed changes in the Federal income tax laws which would eliminate or reduce the percentage depletion deduction and the deduction for intangible drilling and development costs for small independent producers, will significantly reduce the investment capital available to those in the industry as well as our Company. Lengthening the time to expense seismic costs will also have an adverse effect on our ability to explore and find new reserves.
Other sections of this report may also include suggested factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risks may emerge from time to time and it is not possible for management to predict all such matters; nor can we assess the impact of all such matters on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our quarterly reports on Form 10-Q for future periods and current reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Forms 8-K or otherwise.
Results of Operations
2008 ComparedSix months ended June 30, 2011 compared to 2007six months ended June 30, 2010
Oil and gas revenues for the first quartersix months of 20082011 were $3,117,000, an increase of $1,992,000 over revenues from$4,019,000, as compared to $3,161,000 for the same period in 2007.
Natural gas revenues for the first threesix months of 20082011 were $2,648,000$1,734,000 compared to $825,000$2,042,000 for the same period in 2007, an increase2010, a decrease of $1,823,000,$308,000, or 221%15.1%. Natural gas sales volumes for the first quartersix months of 20082011 were approximately 364,200 mcf338,000 MCF compared to approximately 132,500 mcf399,000 MCF during the first quartersix months of 2007, an increase2010, a decrease of approximately 231,70061,000 mcf or 175 %. This increase was due to the addition of six new Barnett Shale wells subsequent to the first quarter of 2007.
Average natural gas prices received were $7.27$5.02 per mcfMCF in the first quartersix months of 20082011 as compared to $6.23$5.37 per mcfMCF in the first quartersix months of 2007, an increase2010, a decrease of approximately 16.7%$0.35 per MCF or 6.5%.
Oil sales for the first threesix months of 20082011 were approximately $469,000$2,285,000 compared to approximately $300,000 in$1,119,000 for the first quartersame time period of 2007,2010, an increase of approximately $169,000$1,166,000 or 56%104.2%. Oil sales volumes for the first quartersix months of 20082011 were approximately 5,800 bbls28,000 BBLS, compared to approximately 5,600 bbls15,000 BBLS during the first quartersame time period of 2007, and2010, an increase of approximately 200 bbls,13,000 BBLS, or 3.6%86.7%.
- 8 -
Revenue from the ownership of One Spindletop Centre forlease operations was approximately $151,000 during the first quartersix months of 2008 was approximately $6,000 greater than2011 compared to $133,000 for the same quarter in 2007. This is due to the leasingtime period of 2010, an increase of approximately 1,400 square feet of office space during$18,000, or 13.5%. This increase results from field operations and operator overhead income on wells acquired subsequent to the second quarter of 2007. Currently this office building is fully leased2010.
Revenue from gas gathering, compression and occupied.
Real estate income was approximately $227,000 during the first six months of cash invested in certificates of deposit2011 compared to $247,000 for the previous yearsame time period of 2010, a decrease of approximately $20,000, or 8.1%. This decrease is due to lease incentives and lower rental rates on some new leases on the office building owned by Company.
Interest income was not$31,000 during the first six months of 2011 as great, andcompared to $84,000 during the same period in 2010, a decrease of approximately $53,000 or 63.1%. This was due to a drop in interest rates between periods. The interest rate on certain deposit accounts at one of the banks in which the Company is a depositor was decreased significantly in the last twelve months.
(9) |
Other income for certificatesthe first six months of deposit reinvested during 2007 were generally lower than2011 was $191,000 as compared to $37,000 for the same time period in previous periods.
Lease operations expense in the first quartersix months of 2008 were $649,0002011 was $987,000 as compared to $295,000$643,000 for the same time period in 2010, a net increase of approximately $344,000, or 53.5%. Of this net increase, approximately $261,000 was from the firstoperations of wells acquired subsequent to the second quarter of 2007,2010. Also, there was a reduction in workover costs between the time periods of $34,000 as well as a reduction of plugging costs of $68,000. Additionally, there was an increase of approximately $354,000,$133,000 in lease operations expense from non-operated properties.
Production taxes, gathering and marketing expenses in the six months of 2011 were approximately $379,000 as compared to $347,000 for the same time period of 2010, an increase of approximately $32,000 or 120%9.2%. Approximately $164,000The majority of this increase is attributable to several new Barnett Shale horizontal gas wells located in Parker County, Texas which were placed into production subsequent to the first quarter of 2007. Another $64,000 of the increase was due to remedial activity on our Titus County, Texas wellsincreased production from newly acquired wells.
Pipeline and rental operations expense for the six months ended 2011 was $5,000 compared to $17,000 for the same time period in 2008 to return several shut-in wells to production. The remaining net increase in operating expenses2010. This decrease of 12,000 or 70.6% is due to a reduction in trucking expense and repair of rental equipment from 2010.
Real estate operations expense in the overall increases for oil field services, equipment, and labor as well as additional remedial repair projects that arefirst six months of 2011 was approximately $89,000 compared to $99,000 during the same period in addition to normal operating expenses. In addition to increases in operating expenses, the Company anticipates receiving2010, a creditdecrease of approximately $49,000$10,000 or 10.1%. This decrease is due to a drop in electricity cost for a high cost gas exemption of severance taxes covering four new Barnett Shale wells drilled in 2007. This anticipated credit, when approvedthe office building owned by the State Comptroller of Texas, will be offset against severance taxes payable for second quarter 2008 production.
Depreciation, depletion, and amortization expense for the first quartersix months of 20082011 was $185,000$593,000 as compared to $136,000$424,000 for the first quartersix months of 2007,2010, an increase of $49,000,$169,000, or 36%39.9%. $533,000 of the amount for the first six months of 2011 was for amortization of the full cost pot of capitalized costs as compared with $361,000 for the first six months of 2010, an increase of $172,000 or 47.7%. The companyCompany re-evaluated its proved oil and gas reserve quantities as of December 31, 2007,2010. This re-evaluated reserve base was adjusted for first and increased its depletion ratesecond quarter 2011 additions and dispositions of reserves, and reduced for 2008 to 5.883% of the total capitalized cost of oil and gas properties (the “fullreserves that were produced during the period. A depletion rate of 4.321% for the six month period ended June 30, 2011 was calculated and applied to the Company’s full cost pot”pot of capitalized oil and gas properties.
Asset Retirement Obligation (“ARO”), expense for the first six months of 2011 was approximately $24,000 as compared to approximately $43,000 for the same time period in 2010; a ratedecrease of 5.041% used at December 31, 2006 and the first three quarters of 2007. In addition, the undepleted amount of the full cost pot increased from approximately $8,606,000 at the end of the first quarter of 2007, to approximately $10,496,000 at the end of the first quarter of 2008. The increased basis of the full cost pot and the increased depletion rate resulted in the increased depreciation, depletion, and amortization amount.
General and administrative costs for the first quartersix months of 20082011 were upapproximately $1,470,000 as compared to approximately $1,548,000 for the first six months of 2010, a decrease of $78,000 or 5.0%. The decrease in expense is due to the additiona decrease of several full-time employees during 2007 and the first quarter of 2008. The resulting increase is due mainly to payrollapproximately $33,000 in personnel costs and associated employee benefit costs.
Interest expense was approximately $20,000$28,000 for the first quartersix months of 20082011 compared to approximately $33,000 for the same period in 2007,2010, a decrease of approximately $13,000.$5,000. This is due to the continued reduction of the principal amount of the loan on the office building owned by the Company as interest on the note is calculated and paid based on the unpaid balance of the loan.
Three months ended June 30, 2011 compared to three months ended June 30, 2010
Oil and gas revenues for the three months ended June 30, 2011 were $1,823,000, compared to $1,484,000 for the second quarter of 2010, an increase of $339,000, or 22.8%.
Natural gas revenues for the second quarter of 2011 were $908,000 compared to $886,000 for the same period in 2010, an increase of $22,000 or 2.5%. Natural gas volumes sold for the second quarter of 2011 were approximately 164,000 MCF compared to approximately 198,000 MCF during the same period of 2010, a decrease of approximately 34,000 MCF, or 17.2%.
Average natural gas prices received were approximately $5.28 per MCF in the second quarter of 2011 as compared to approximately $4.71 per MCF during the same period in 2010, an increase of approximately $0.57, or 12.1%.
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Average oil prices received were approximately $99.12 per BBL in the second quarter of 2011 compared to $73.55 per BBL during the same period of 2010, an increase of approximately $25.57 per BBL, or 34.8%.
Revenue from lease operations for the second quarter of 2011 was approximately $76,000 compared to approximately $63,000 for the second quarter of 2010, an increase of about $13,000 or 20.6%. This increase results from field operations and operator overhead income on wells acquired subsequent to the second quarter of 2010.
Revenue from gas gathering, compression and equipment rental for the second quarter of 2011 was approximately $39,000, compared to approximately $33,000, an increase of $6,000 or 18.2% for the same period in 2010.
Real estate income was approximately $114,000 during the second quarter of 2011 compared to $122,000 for the same time period of 2010, a decrease of approximately $8,000, or 6.6%. This decrease is due to lease incentives and lower rental rates on some new leases on the office building owned by Company.
Interest income for the second quarter of 2011 was approximately $14,000 as compared with approximately $45,000 for the same period in 2010 a decrease of about $31,000 or 68.9%. This was due to a drop in interest rates between periods. The interest rate on certain deposit accounts at one of the banks in which the Company is a depositor was decreased significantly in the last twelve months.
Other income for second quarter of 2011 was approximately $11,000 as compared with approximately $18,000 for the same period in 2010, a decrease of approximately $7,000 or 38.9%.
Lease operating expenses in the second quarter of 2011 were $495,000 as compared to $394,000 for the same period in 2010, a net increase of approximately $101,000, or 25.6%. Of this increase, approximately $123,000 was from the operations of wells acquired subsequent to the second quarter of 2010. There was a reduction in workover costs between the time periods of $36,000 as well as a reduction of plugging costs of $56,000. The remaining increase is from lease operating expenses from non-operated properties.
Production taxes, gathering, transportation and marketing expenses for the second quarter of 2011 were approximately $173,000 as compared to $167,000 during the second quarter of 2010, a net increase of approximately $6,000 or 3.6%.
Pipeline and rental operations expense for the second quarter of 2011 was $3,000 compared to $7,000 for the same time period in 2010. This decrease of $4,000 or 57.1% is due extensive is due to a reduction in trucking expense and repair of rental equipment from 2010.
Real estate expenses during the second quarter 2011 were approximately $40,000 compared to approximately $47,000 for the same period in 2010, a decrease of $7,000 or 14.9%. This decrease is due to a drop in electricity cost for the office building owned by the Company.
Depreciation, depletion, and amortization for the second quarter of 2011 was $349,000 as compared to $195,000 for the same period in 2010, an increase of $154,000, or 79.0%. $313,000 of the amount for the second quarter of 2011 was for amortization of the full cost pot of capitalized costs compared to $163,000 for the second quarter of 2010, an increase of $150,000 or 92.0%. The Company re-evaluated its proved oil and gas reserve quantities as of December 31, 2010. This re-evaluated reserve base was adjusted at the end of each quarter for the estimated addition and disposition of reserves during the first six months of 2011 and reduced for oil and gas reserves that were produced or sold during the periods. A depletion rate of 1.784% for the first quarter of 2011 and a depletion rate of 2.537% for the second quarter of 2011 was calculated and applied to the Company’s full cost pot of capitalized oil and gas properties compared to a total depletion rate of 3.412% for the first six months of 2010.
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General and administrative costs for the second quarter of 2011 were $720,000 compared to $784,000 for the same period in 2010, a decrease of approximately $64,000 or 8.2%. The decrease in expense is due to a decrease of approximately $35,000 in personnel costs and benefits, and an approximate reduction of $29,000 in other costs and expenses.
Interest expense was approximately $13,000 for the second quarter of 2011 compared to approximately $16,000 for the same period in 2010, a decrease of approximately $3,000. This is due to the continued reduction of the principal amount of the loan on the office building owned by the Company as interest on the note is calculated and paid based on the unpaid balance of the loan.
Financial Condition and Liquidity
The Company’sCompany's operating capital needs, as well as its capital spending program are generally funded from cash flow generated by operations. Because future cash flow is subject to a number of variables, such as the level of production and the sales price of oil and natural gas, the Company can provide no assurance that its operations will provide cash sufficient to maintain current levels of capital spending. Accordingly, the Company may be required to seek additional financing from third parties in order to fund its exploration and development programs.
Item 4. —- Controls and Procedures
(a) As of the end of the period covered by this report, Spindletop Oil & Gas Co. carried out an evaluation, under the supervision and with the participation of the Company’sCompany's management, including the Company’sCompany's Principal Executive Officer and Principal Financial and Accounting Officer, of the effectiveness of the design and operation of the Company’sCompany's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 and 15d-15. Based upon the evaluation, the Company’sCompany's Principal Executive Officer and Principal Financial and Accounting Officer concluded that the Company’sCompany's disclosure controls and procedures were effective as of the end of the period covered by the report.
(b) There have been no changes in the Company’sCompany's internal controls over financial reporting during the quarter ended March 31, 2008June 30, 2011 that have materially affected, or are reasonably likely to materially affect the Company’sCompany's internal controls over financial reporting.
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Part II —- Other Information
Item 5. —– Other Information
Texas Barnett Shale Leasehold
Effective June 1, 2011, the Company drilled two wells under its joint Barnett Shale horizontal drilling development program with an unrelated third party. The Buxton G.U.acquired a 100% working interest and 78.0% net revenue interest in the O. C. Rogers Estate #1 well in Ochiltree, County. The well produces gas from the Farnsworth-Conner (Des Moines) Field but is located on our Weatherford W. Blockcurrently shut in.
North Texas
Effective April 21, 2011, the Company agreed to participate for 16.26% working interest and 12.5125% net revenue interest in the Fuller G.U. #1drilling of the Pyramid Acres Unit 6-Bryant SA#1H well, is located on our Weatherford SW Block. Both wells area development well located in the southwest quarter of Parker County, Texas. The Buxton G.U. #1Newark East Barnett Shale Field in Tarrant County. This well was drilled to a measuredtotal vertical depth of 8,850 ft6,625 ft. and the Fuller G. U. #1 H well was drilled tohas a measured depth of 9,07610,750 ft. Both wells were flowed backThe well was cased and tested. It has now been determined thatis being currently being completed.
Louisiana
Effective June 1, 2011, the frac jobs on bothCompany acquired a 39.0016667% operated working interest and 29.144608% net revenue interest in the E.S. Mayers #1 well and the Savoy #2 SWD well located Gray’s Creek Field in Livingston Parish, Louisiana. The E.S. Mayers #1 well was producing from the Evans Formation at an approximate rate of these wells penetrated21 bopd and 850 bswpd from perforations between 9,646’ and 9,713’ as of the underlying water bearing Ellenberger Formation and that both formations are now in communication. Both wells are currently shut-in. Theeffective date.
West Texas
Effective April 4, 2011, the Company owns a 50%agreed to participate for 4.68750% non-operated working interest in boththe drilling of these wells.
For all of the joint Barnett Shale horizontal drilling program. The Ray Clark #1H and the Ray Clark #2H have been fraced. Theabove wells, were placed into production in May, 2008.
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The following exhibits are filed herewith or incorporated by reference as indicated.
Exhibit | ||||
Designation | Exhibit Description | |||
3.1 | (a) | Amended Articles of Incorporation of Spindletop Oil & Gas Co. (Incorporated by reference to Exhibit 3.1 to the General Form for Registration of Securities on Form 10, filed with the Commission on August 14, 1990) | ||
3.2 | Bylaws of Spindletop Oil & Gas Co. (Incorporated by reference to Exhibit 3.2 to the General Form for Registration of Securities on Form 10, filed with the Commission on August 14, 1990) | |||
31.1 | * | Certification pursuant to Rules 13a-14 and 15d under the Securities Exchange Act of | ||
31.2 | * | Certification pursuant to Rules 13a-14 and 15d under the Securities Exchange Act of | ||
32.1 | * | Certification pursuant to 18 U.S.C. Section |
____________________________
* filed herewith
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SPINDLETOP OIL & GAS CO | ||
(Registrant) | ||
Date: August 19, 2011 | By:/s/ Chris G. Mazzini | |
Chris G. Mazzini | ||
President, Principal Executive Officer | ||
Date: | By:/s/ Michelle H. Mazzini | |
Vice President, Secretary | ||
Date: August 19, 2011 | By:/s/ Robert E. Corbin | |
Robert E. Corbin | ||
Controller, Principal Financial and | ||
Accounting Officer |
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Exhibit 31.1
CERTIFICATION
I, Chris G. Mazzini, certify that:
1. I have reviewed this report on Form 10-Q of Spindletop Oil & Gas Co.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13-15(e) and 15d-15e) and have internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the controls and procedures as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.
Date: August 19, 2011 | |
By:/s/ Chris G. Mazzini | |
Chris G. Mazzini | |
President, |
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Exhibit 31.2
CERTIFICATION
I, Robert E. Corbin, certify that:
1. I have reviewed this report on Form 10-Q of Spindletop Oil & Gas Co.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13-15(e) and 15d-15e) and have internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
(c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the controls and procedures as of the end of the period covered by this report based on such evaluation; and
(d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls.
Date: August 19, 2011 | |
By:/s/ Robert E. Corbin | |
Robert E. Corbin | |
Controller, Principal Financial and | |
Accounting Officer |
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Exhibit 32.1
Certification Pursuant to 18 U.S.C. Section 1350
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of Spindletop Oil & Gas Co. (the “Company”), on Form 10-Q for the quarter ended June 30, 2011 as filed with the Securities Exchange Commission on the date hereof (the “Report”), the undersigned Principal Executive Officer and Principal Financial and Accounting Officer of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: | ||||
By:/s/ Chris G. Mazzini | ||||
Chris G. Mazzini | ||||
President, Principal Executive Officer | ||||
By: | /s/ Robert E. Corbin | |||
Robert E. Corbin | ||||
Controller, Principal Financial | ||||
Accounting Officer |
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