T
|
Quarterly
Report under Section 13 or 15(d) of the Securities Exchange Act of
1934
|
o
|
Transition
Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
|
Delaware
|
84-0637348
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
employer identification
number)
|
Large
Accelerated Filer
|
o |
Accelerated
Filer
|
o
|
Non-Accelerated
Filer
|
o |
Smaller
Reporting Company
|
x
|
Part
I – Financial Information
|
||
Item
1. Financial Statements (restated)
|
||
3-4
|
||
5-6
|
||
7
|
||
|
||
8
|
||
9-17
|
||
18-19
|
||
20
|
||
Item
4T. Controls and Procedures
|
20
|
|
Part
II – Other Information
|
||
Item
1. Legal Proceedings
|
21
|
|
Item
1A. Risk Factors
|
21
|
|
21
|
||
Item
3. Defaults Upon Senior Securities
|
21
|
|
22
|
||
Item
5. Other Information
|
22
|
|
Item
6. Exhibits
|
23
|
|
24
|
September
30, 2008
Unaudited
and Restated)
|
December
31, 2007
(Audited
and Restated)
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 23,888,000 | $ | 25,373,000 | ||||
Restricted
cash and cash equivalents
|
7,863,000 | 3,633,000 | ||||||
Accounts
receivable (net)
|
23,393,000 | 21,311,000 | ||||||
Due
from related parties
|
92,000 | 32,000 | ||||||
Prepaid
expenses
|
1,470,000 | 1,391,000 | ||||||
Derivative
contracts
|
1,426,000 | 1,332,000 | ||||||
Inventory
at cost
|
6,017,000 | 3,705,000 | ||||||
Deferred
income tax
|
1,649,000 | 1,582,000 | ||||||
Total
current assets
|
65,798,000 | 58,359,000 | ||||||
Property
and equipment, at cost
|
||||||||
Oil
and gas properties (successful efforts method), net
|
221,836,000 | 237,852,000 | ||||||
Field
and office equipment
|
8,927,000 | 8,209,000 | ||||||
Net
property and equipment
|
230,763,000 | 246,061,000 | ||||||
Other
assets
|
821,000 | 1,245,000 | ||||||
Total
assets
|
$ | 297,382,000 | $ | 305,665,000 |
September,
2008
(Unaudited
and Restated)
|
December
31, 2007
(Audited
and Restated)
|
|||||||
LIABILITIES
and STOCKHOLDERS' EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Current
bank debt
|
$ | 24,900,000 | $ | 34,950,000 | ||||
Accounts
payable
|
31,072,000 | 26,780,000 | ||||||
Current
portion of asset retirement and other long term obligation
|
2,849,000 | 1,065,000 | ||||||
Derivative
liability short term
|
4,618,000 | 4,340,000 | ||||||
Accrued
liabilities
|
12,766,000 | 10,032,000 | ||||||
Due
to related parties
|
1,175,000 | 520,000 | ||||||
Total
current liabilities
|
77,380,000 | 77,687,000 | ||||||
Long-term
bank debt
|
85,500,000 | 120,050,000 | ||||||
Indebtedness
to related parties
|
20,000,000 | -- | ||||||
Asset
retirement obligation
|
17,747,000 | 16,936,000 | ||||||
Derivative
liability long term
|
9,650,000 | 3,369,000 | ||||||
Deferred
income taxes
|
25,137,000 | 26,022,000 | ||||||
Total
liabilities
|
235,414,000 | 244,064,000 | ||||||
Minority
interest
|
13,303,000 | 12,929,000 | ||||||
Stockholders'
equity:
|
||||||||
Preferred
stock, $.10 par value, authorized 5,000,000 shares, none
issued
|
-- | -- | ||||||
Common
stock, $.10 par value, authorized 10,000,000 shares; issued
7,694,970 in 2008 and 2007
|
769,000 | 769,000 | ||||||
Paid
in capital
|
11,024,000 | 11,024,000 | ||||||
Retained
earnings
|
81,707,000 | 72,885,000 | ||||||
Accumulated
other comprehensive income(loss), net
|
(8,022,000 | ) | (3,618,000 | ) | ||||
85,478,000 | 81,060,000 | |||||||
|
||||||||
Treasury
stock, at cost, 4,644,829 common shares at 2008 and 4,558,484
common shares at 2007
|
(36,813,000 | ) | (32,388,000 | ) | ||||
Total
stockholders' equity
|
48,665,000 | 48,672,000 | ||||||
Total
liabilities and stockholders, equity
|
$ | 297,382,000 | $ | 305,665,000 |
2008
Restated
|
2007
Restated
|
|||||||
Revenue:
|
||||||||
Oil
and gas sales
|
$ | 108,574,000 | $ | 87,804,000 | ||||
Field
service income
|
18,760,000 | 18,179,000 | ||||||
Administrative
overhead fees
|
6,791,000 | 7,126,000 | ||||||
Other
income
|
332,000 | 181,000 | ||||||
Total
revenue
|
134,457,000 | 113,290,000 | ||||||
Costs
and expenses:
|
||||||||
Lease
operating expense
|
32,313,000 | 25,829,000 | ||||||
Field
service expense
|
14,787,000 | 13,341,000 | ||||||
Depreciation,
depletion and amortization
|
50,840,000 | 42,741,000 | ||||||
General
and administrative expense
|
11,184,000 | 10,301,000 | ||||||
Exploration
costs
|
458,000 | 525,000 | ||||||
Total
costs and expenses
|
109,582,000 | 92,737,000 | ||||||
Add
gain/(loss) on sale and exchange of assets
|
98,000 | 581,000 | ||||||
Income
from operations
|
24,973,000 | 21,134,000 | ||||||
Other
income and expenses
|
||||||||
Less: Interest
expense
|
6,185,000 | 7,845,000 | ||||||
Add
interest income
|
354,000 | 670,000 | ||||||
Less: Minority
interest
|
5,680,000 | 3,076,000 | ||||||
Income
before provision for income taxes
|
13,462,000 | 10,883,000 | ||||||
Provision
for income taxes
|
4,640,000 | 3,918,000 | ||||||
Net
income
|
$ | 8,822,000 | $ | 6,965,000 | ||||
Basic
income per common share
|
$ | 2.88 | $ | 2.19 | ||||
Diluted
income per common share
|
$ | 2.31 | $ | 1.77 |
2008
Restated
|
2007
Restated
|
|||||||
Revenue:
|
||||||||
Oil
and gas sales
|
$ | 33,926,000 | $ | 35,570,000 | ||||
Field
service income
|
6,011,000 | 6,379,000 | ||||||
Administrative
overhead fees
|
2,292,000 | 2,314,000 | ||||||
Other
income
|
135,000 | 15,000 | ||||||
Total
revenue
|
42,364,000 | 44,278,000 | ||||||
Costs
and expenses:
|
||||||||
Lease
operating expense
|
11,153,000 | 8,816,000 | ||||||
Field
service expense
|
5,204,000 | 4,291,000 | ||||||
Depreciation,
depletion and amortization
|
15,211,000 | 22,130,000 | ||||||
General
and administrative expense
|
3,894,000 | 3,251,000 | ||||||
Exploration
costs
|
159,000 | 106,000 | ||||||
Total
costs and expenses
|
35,621,000 | 38,594,000 | ||||||
Add
gain/(loss) on sale and exchange of assets
|
20,000 | (30,000 | ) | |||||
Income
from operations
|
6,763,000 | 5,654,000 | ||||||
Other
income and expenses
|
||||||||
Less: Interest
expense
|
1,809,000 | 3,333,000 | ||||||
Add
interest income
|
93,000 | 175,000 | ||||||
Less: Minority
interest
|
1,786,000 | 1,162,000 | ||||||
Income
before provision for income taxes
|
3,261,000 | 1,334,000 | ||||||
Provision
for income taxes
|
1,189,000 | 480,000 | ||||||
Net
income
|
$ | 2,072,000 | $ | 854,000 | ||||
Basic
income per common share
|
$ | 0.68 | $ | 0.27 | ||||
Diluted
income per common share
|
$ | 0.54 | $ | 0.22 |
Common
Stock
|
||||||||||||||||||||||||||||
Shares
|
Amount
|
Paid
In Capital
|
Retained
Earnings
|
Accumulated
Other
Comprehensive
Income/Loss
|
Treasury
Stock
|
Total
|
||||||||||||||||||||||
Balance
at December 31, 2007
|
7,694,970 | $ | 769,000 | $ | 11,024,000 | $ | 72,885,000 | $ | (3,618,000 | ) | $ | (32,388,000 | ) | $ | 48,672,000 | |||||||||||||
Purchased
86,345 shares of common Stock
|
(4,425,000 | ) | (4,425,000 | ) | ||||||||||||||||||||||||
Net
income
|
8,822,000 | 8,822,000 | ||||||||||||||||||||||||||
Other
comprehensive income, net of taxes
|
(4,404,000 | ) | (4,404,000 | ) | ||||||||||||||||||||||||
Balance
at September 30, 2008
|
7,694,970 | $ | 769,000 | $ | 11,024,000 | $ | 81,707,000 | $ | (8,022,000 | ) | $ | (36,813,000 | ) | $ | 48,665,000 |
2008
Restated
|
2007
Restated
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 8,822,000 | $ | 6,965,000 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation,
depletion, amortization and accretion
|
||||||||
On
discounted liabilities
|
50,840,000 | 42,741,000 | ||||||
Dry
hole and abandonment expense
|
-- | 318,000 | ||||||
Gain
on sale of properties
|
(98,000 | ) | (581,000 | ) | ||||
Provision
for deferred taxes
|
1,527,000 | 3,774,000 | ||||||
Minority
Interest in earnings of Partnership
|
5,680,000 | 3,076,000 | ||||||
Changes
in assets and liabilities:
|
||||||||
(Increase)
decrease in accounts receivable
|
(1,081,000 | ) | 11,930,000 | |||||
(Increase)
decrease in due from related parties
|
7,000 | 949,000 | ||||||
(Increase)
decrease in inventories
|
327,000 | 598,000 | ||||||
(Increase)
decrease in prepaid expenses and other assets
|
(2,237,000 | ) | 8,000 | |||||
Increase
(decrease) in accounts payable
|
5,595,000 | (5,635,000 | ) | |||||
Increase
(decrease) in accrued liabilities
|
5,178,000 | 3,834,000 | ||||||
Increase
(decrease) in due to related parties
|
1,185,000 | 1,011,000 | ||||||
Net
cash provided by operating activities
|
||||||||
Net
cash provided by operating activities:
|
75,745,000 | 68,988,000 | ||||||
Cash
flows from investing activities:
|
||||||||
Capital
expenditures, including exploration expense
|
(45,076,000 | ) | (94,620,000 | ) | ||||
Proceeds
from sale of property and equipment
|
98,000 | 581,000 | ||||||
Net
cash (used in) investing activities
|
(44,978,000 | ) | (94,039,000 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Purchase
of treasury stock
|
(4,425,000 | ) | (3,669,000 | ) | ||||
Proceeds
from long-term bank debt
|
88,075,000 | 83,574,000 | ||||||
Repayment
of long-term bank debt
|
(113,137,000 | ) | (64,710,000 | ) | ||||
Distribution
to minority interest
|
(2,765,000 | ) | (1,974,000 | ) | ||||
Net
cash provided by (used in) financing activities
|
(32,252,000 | ) | 13,221,000 | |||||
Net
increase (decrease) in cash and cash equivalents
|
(1,485,000 | ) | (11,830,000 | ) | ||||
Cash
and cash equivalents at the beginning of the period
|
25,373,000 | 29,056,000 | ||||||
Cash
and cash equivalents at the end of the period
|
$ | 23,888,000 | $ | 17,226,000 |
As
Reported
September 2008
|
Adjustments (a)
|
As
Restated
September 2008
|
||||||||||
ASSETS:
|
||||||||||||
Current
assets:
|
||||||||||||
Cash
and cash equivalents
|
$ | 23,888,000 | $ | -- | $ | 23,888,000 | ||||||
Restricted
cash and cash equivalents
|
7,863,000 | -- | 7,863,000 | |||||||||
Accounts
receivable, net
|
23,697,000 | (304,000 | ) | 23,393,000 | ||||||||
Due
from related parties
|
941,000 | (849,000 | ) | 92,000 | ||||||||
Prepaid
expenses
|
1,470,000 | -- | 1,470,000 | |||||||||
Derivative
contracts
|
1,426,000 | -- | 1,426,000 | |||||||||
Inventory
at cost
|
6,015,000 | 2,000 | 6,017,000 | |||||||||
Deferred
income tax
|
1,651,000 | (2,000 | ) | 1,649,000 | ||||||||
Total
current assets
|
66,951,000 | (1,153,000 | ) | 65,798,000 | ||||||||
Property
and equipment, at cost:
|
||||||||||||
Oil
and gas properties (successful efforts method), net
|
221,741,000 | 95,000 | 221,836,000 | |||||||||
Field
service equipment
|
8,927,000 | -- | 8,927,000 | |||||||||
Total
net property and equipment
|
230,668,000 | 95,000 | 230,763,000 | |||||||||
Other
assets
|
812,000 | 9,000 | 821,000 | |||||||||
Total
assets
|
$ | 298,431,000 | $ | (1,049,000 | ) | $ | 297,382,000 |
As
Reported
September 2008
|
Adjustment (a)
|
As
Restated September
2008
|
||||||||||
LIABILITIES
and STOCKHOLDERS’ EQUITY:
|
||||||||||||
Current
liabilities:
|
||||||||||||
Current
bank debt
|
$ | 24,900,000 | $ | -- | $ | 24,900,000 | ||||||
Accounts
payable
|
31,398,000 | (326,000 | ) | 31,072,000 | ||||||||
Current
portion of asset retirement and other long-term
obligations
|
2,847,000 | 2,000 | 2,849,000 | |||||||||
Derivative
liability short term
|
4,618,000 | -- | 4,618,000 | |||||||||
Accrued
liabilities
|
12,752,000 | 14,000 | 12,766,000 | |||||||||
Due
to related parties
|
2,018,000 | (843,000 | ) | 1,175,000 | ||||||||
Total
current liabilities
|
78,533,000 | (1,153,000 | ) | 77,380,000 | ||||||||
Long-term
bank debt
|
85,500,000 | -- | 85,500,000 | |||||||||
Indebtedness
to related parties
|
20,000,000 | -- | 20,000,000 | |||||||||
Asset
retirement obligations
|
17,747,000 | -- | 17,747,000 | |||||||||
Derivative
liability long term
|
9,650,000 | -- | 9,650,000 | |||||||||
Deferred
income taxes
|
25,137,000 | -- | 25,137,000 | |||||||||
Total
liabilities
|
236,567,000 | (1,153,000 | ) | 235,414,000 | ||||||||
Minority
interest
|
13,199,000 | 104,000 | 13,303,000 | |||||||||
Stockholders’
equity:
|
||||||||||||
Preferred
stock, $.10 par value, authorized 5,000,000 shares; none
issued
|
||||||||||||
Common
stock, $.10 par value, authorized 10,000,000 shares; issued 7,694,970 in
2008 and 2007
|
769,000 | -- | 769,000 | |||||||||
Paid
in capital
|
11,024,000 | -- | 11,024,000 | |||||||||
Retained
earnings
|
81,707,000 | -- | 81,707,000 | |||||||||
Accumulated
other comprehensive income (loss), net
|
(8,022,000 | ) | -- | (8,022,000 | ) | |||||||
85,478,000 | -- | 85,478,000 | ||||||||||
Treasury
stock, at cost 4,644,829 common shares in 2008 and 4,558,544 in
2007
|
(36,813,000 | ) | -- | (36,813,000 | ) | |||||||
Total
stockholders’ equity
|
48,665,000 | -- | 48,665,000 | |||||||||
Total
liabilities and stockholders’ equity
|
$ | 298,431,000 | $ | (1,049,000 | ) | $ | 297,382,000 |
As
Reported
|
As
Restated
|
|||||||||||
September 2008
|
Adjustments (a)
|
September 2008
|
||||||||||
Revenue:
|
||||||||||||
Oil
and gas sales
|
$ | 108,574,000 | $ | -- | $ | 108,574,000 | ||||||
Field
service income
|
18,765,000 | (5,000 | ) | 18,760,000 | ||||||||
Administrative
overhead fees
|
6,791,000 | -- | 6,791,000 | |||||||||
Other
income
|
332,000 | -- | 332,000 | |||||||||
134,462,000 | (5,000 | ) | 134,457,000 | |||||||||
Costs
and expenses:
|
||||||||||||
Lease
operating expense
|
32,313,000 | -- | 32,313,000 | |||||||||
Field
service expense
|
14,787,000 | -- | 14,787,000 | |||||||||
Depreciation,
depletion and amortization
|
50,809,000 | 31,000 | 50,840,000 | |||||||||
General
and administrative expense
|
11,184,000 | -- | 11,184,000 | |||||||||
Exploration
costs
|
458,000 | -- | 458,000 | |||||||||
109,551,000 | 31,000 | 109,582,000 | ||||||||||
Add
gain on sale and exchange of assets
|
98,000 | -- | 98,000 | |||||||||
Income
from operations
|
25,009,000 | (36,000 | ) | 24,973,000 | ||||||||
Other
income and expense:
|
||||||||||||
Less: Interest
expense
|
6,185,000 | -- | 6,185,000 | |||||||||
Add
interest income
|
349,000 | 5,000 | 354,000 | |||||||||
Less: Minority
interest
|
5,711,000 | (31,000 | ) | 5,680,000 | ||||||||
Income
before provision for income taxes
|
13,462,000 | -- | 13,462,000 | |||||||||
Provision
for income taxes
|
4,640,000 | -- | 4,640,000 | |||||||||
Net
income
|
$ | 8,822,000 | $ | -- | $ | 8,822,000 | ||||||
Basic
net income per common share
|
$ | 2.88 | $ | 0.00 | $ | 2.88 | ||||||
Diluted
net income per common share
|
$ | 2.31 | $ | 0.00 | $ | 2.31 |
As
Reported
September 2008
|
Adjustments (a)
|
As
Restated
September 2008
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income
|
$ | 8,822,000 | $ | -- | $ | 8,822,000 | ||||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
Depreciation,
depletion, amortization and accretion on discounted
liabilities
|
50,809,000 | 31,000 | 50,840,000 | |||||||||
Dry
hole and abandonment costs
|
-- | -- | -- | |||||||||
Gain
on sale of properties
|
(98,000 | ) | -- | (98,000 | ) | |||||||
Provision
for deferred income taxes
|
1,527,000 | -- | 1,527,000 | |||||||||
Minority
interest in earnings of partnerships
|
5,711,000 | (31,000 | ) | 5,680,000 | ||||||||
Changes
in assets and liabilities:
|
||||||||||||
(Increase)
decrease in accounts receivable
|
(1,081,000 | ) | -- | (1,081,000 | ) | |||||||
(Increase)
decrease in due from related parties
|
7,000 | -- | 7,000 | |||||||||
(Increase)
decrease in inventories
|
325,000 | 2,000 | 327,000 | |||||||||
(Increase)
decrease in prepaid expenses and other assets
|
(2,244,000 | ) | 7,000 | (2,237,000 | ) | |||||||
Increase
(decrease) in accounts payable
|
5,573,000 | 22,000 | 5,595,000 | |||||||||
Increase
(decrease) in accrued liabilities
|
5,194,000 | (16,000 | ) | 5,178,000 | ||||||||
Increase
(decrease) in due to related parties
|
1,191,000 | (6,000 | ) | 1,185,000 | ||||||||
Net
cash provided by operating activities
|
75,736,000 | 9,000 | 75,745,000 | |||||||||
Cash
flows from investing activities
|
||||||||||||
Capital
expenditures, including exploration expense
|
(41,087,000 | ) | (3,989,000 | ) | (45,076,000 | ) | ||||||
Proceeds
from sale of properties and equipment
|
98,000 | -- | 98,000 | |||||||||
Net
cash used in investing activities
|
(40,989,000 | ) | (3,989,000 | ) | (44,978,000 | ) | ||||||
Cash
flows from financing activities
|
||||||||||||
Purchase
of stock for treasury
|
(4,425,000 | ) | -- | (4,425,000 | ) | |||||||
Increase
in long-term bank debt and other long-term obligations
|
88,075,000 | -- | 88,075,000 | |||||||||
Repayment
of long-term bank debt and other long-term obligations
|
(113,137,000 | ) | -- | (113,137,000 | ) | |||||||
Distribution
to minority interest
|
(2,685,000 | ) | (80,000 | ) | (2,765,000 | ) | ||||||
Net
cash provided by (used in) financing activities
|
(32,172,000 | ) | (80,000 | ) | (32,252,000 | ) | ||||||
Net
increase(decrease) in cash and cash equivalents
|
2,575,000 | (4,060,000 | ) | (1,485,000 | ) | |||||||
Cash
and cash equivalents at the beginning of the period
|
21,313,000 | 4,060,000 | 25,373,000 | |||||||||
Cash
and cash equivalents at the end of the period
|
$ | 23,888,000 | $ | -- | $ | 23,888,000 |
As
Reported December 2007
|
Adjustments (a)
|
As
Restated December 2007
|
||||||||||
ASSETS:
|
||||||||||||
Current
assets:
|
||||||||||||
Cash
and cash equivalents
|
$ | 25,373,000 | $ | -- | $ | 25,373,000 | ||||||
Restricted
cash and cash equivalents
|
3,633,000 | -- | 3,633,000 | |||||||||
Accounts
receivable, net
|
21,456,000 | (145,000 | ) | 21,311,000 | ||||||||
Due
from related parties
|
218,000 | (186,000 | ) | 32,000 | ||||||||
Prepaid
expenses
|
1,391,000 | -- | 1,391,000 | |||||||||
Derivative
contracts
|
1,332,000 | -- | 1,332,000 | |||||||||
Inventory
at cost
|
3,705,000 | -- | 3,705,000 | |||||||||
Deferred
income tax
|
1,582,000 | -- | 1,582,000 | |||||||||
Total
current assets
|
58,690,000 | (331,000 | ) | 58,359,000 | ||||||||
Property
and equipment, at cost:
|
||||||||||||
Oil
and gas properties (successful efforts method), net
|
237,724,000 | 128,000 | 237,852,000 | |||||||||
Field
and office equipment
|
8,209,000 | -- | 8,209,000 | |||||||||
Total
net property and equipment
|
245,933,000 | 128,000 | 246,061,000 | |||||||||
Other
assets
|
1,236,000 | 9,000 | 1,245,000 | |||||||||
Total
assets
|
$ | 305,859,000 | $ | (194,000 | ) | $ | 305,665,000 |
As
Reported December 2007
|
Adjustment (a)
|
As
Restated December 2007
|
||||||||||
LIABILITIES
and STOCKHOLDERS’ EQUITY:
|
||||||||||||
Current
liabilities:
|
||||||||||||
Current
bank debt
|
$ | 34,950,000 | $ | -- | $ | 34,950,000 | ||||||
Accounts
payable
|
26,945,000 | (165,000 | ) | 26,780,000 | ||||||||
Current
portion of asset retirement and other long-term
obligations
|
1,065,000 | -- | 1,065,000 | |||||||||
Derivative
liability short term
|
4,340,000 | -- | 4,340,000 | |||||||||
Accrued
liabilities
|
10,018,000 | 14,000 | 10,032,000 | |||||||||
Due
to related parties
|
700,000 | (180,000 | ) | 520,000 | ||||||||
Total
current liabilities
|
78,018,000 | (331,000 | ) | 77,687,000 | ||||||||
Long-term
bank debt
|
120,050,000 | -- | 120,050,000 | |||||||||
Asset
retirement obligations
|
16,936,000 | -- | 16,936,000 | |||||||||
Derivative
liability long term
|
3,369,000 | -- | 3,369,000 | |||||||||
Deferred
income taxes
|
26,022,000 | -- | 26,022,000 | |||||||||
Total
liabilities
|
244,395,000 | (331,000 | ) | 244,064,000 | ||||||||
Minority
interest
|
12,792,000 | 137,000 | 12,929,000 | |||||||||
Stockholders’
equity:
|
||||||||||||
Preferred
stock, $.10 par value, authorized 5,000,000 shares; none
issued
|
||||||||||||
Common
stock, $.10 par value, authorized 10,000,000 shares; issued 7,694,970 in
2007 and 2006
|
769,000 | -- | 769,000 | |||||||||
Paid
in capital
|
11,024,000 | -- | 11,024,000 | |||||||||
Retained
earnings
|
72,885,000 | -- | 72,885,000 | |||||||||
Accumulated
other comprehensive income (loss), net
|
(3,618,000 | ) | -- | (3,618,000 | ) | |||||||
81,060,000 | -- | 81,060,000 | ||||||||||
Treasury
stock, at cost 4,639,191 common shares in 2007 and 4,558,54 in
2006
|
(32,388,000 | ) | -- | (32,388,000 | ) | |||||||
Total
stockholders’ equity
|
48,672,000 | -- | 48,672,000 | |||||||||
|
||||||||||||
Total
liabilities and stockholders’ equity
|
$ | 305,859,000 | $ | (194,000 | ) | $ | 305,665,000 |
As Reported September 2007
|
Adjustments (a)
|
As Restated September 2007
|
||||||||||
Revenue:
|
||||||||||||
Oil
and gas sales
|
$ | 87,804,000 | $ | -- | $ | 87,804,000 | ||||||
Field
service income
|
18,179,000 | -- | 18,179,000 | |||||||||
Administrative
overhead fees
|
7,126,000 | -- | 7,126,000 | |||||||||
Other
income
|
181,000 | -- | 181,000 | |||||||||
113,290,000 | -- | 113,290,000 | ||||||||||
Costs
and expenses:
|
||||||||||||
Lease
operating expense
|
25,829,000 | -- | 25,829,000 | |||||||||
Field
service expense
|
13,341,000 | -- | 13,341,000 | |||||||||
Depreciation,
depletion and amortization
|
42,713,000 | 28,000 | 42,741,000 | |||||||||
General
and administrative expense
|
10,301,000 | -- | 10,301,000 | |||||||||
Exploration
costs
|
525,000 | -- | 525,000 | |||||||||
92,709,000 | 28,000 | 92,737,000 | ||||||||||
Add
gain on sale and exchange of assets
|
581,000 | -- | 581,000 | |||||||||
Income
from operations
|
21,162,000 | (28,000 | ) | 21,134,000 | ||||||||
Other
income and expense:
|
||||||||||||
Less: Interest
expense
|
7,845,000 | -- | 7,845,000 | |||||||||
Add
interest income
|
670,000 | -- | 670,000 | |||||||||
Less: Minority
interest
|
3,104,000 | (28,000 | ) | 3,076,000 | ||||||||
Income
before provision for income taxes
|
10,883,000 | -- | 10,883,000 | |||||||||
Provision
for income taxes
|
3,918,000 | -- | 3,918,000 | |||||||||
Net
income
|
$ | 6,965,000 | $ | -- | $ | 6,965,000 | ||||||
Basic
net income per common share
|
$ | 2.19 | $ | 0.00 | $ | 2.19 | ||||||
Diluted
net income per common share
|
$ | 1.77 | $ | 0.00 | $ | 1.77 |
As
Reported September 2007
|
Adjustments (a)
|
As
Restated September 2007
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income
|
$ | 6,965,000 | $ | -- | $ | 6,965,000 | ||||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||||
Depreciation,
depletion, amortization and accretion on discounted
liabilities
|
42,713,000 | 28,000 | 42,741,000 | |||||||||
Dry
hole and abandonment costs
|
318,000 | -- | 318,000 | |||||||||
Gain
on sale of properties
|
(581,000 | ) | -- | (581,000 | ) | |||||||
Provision
for deferred income taxes
|
3,774,000 | -- | 3,774,000 | |||||||||
Minority
interest in earnings of partnerships
|
3,104,000 | (28,000 | ) | 3,076,000 | ||||||||
Changes
in assets and liabilities:
|
||||||||||||
(Increase)
decrease in accounts receivable
|
11,930,000 | -- | 11,930,000 | |||||||||
(Increase)
decrease in due from related parties
|
950,000 | (1,000 | ) | 949,000 | ||||||||
(Increase)
decrease in inventories
|
598,000 | -- | 598,000 | |||||||||
(Increase)
decrease in prepaid expenses and other assets
|
(1,000 | ) | 9,000 | 8,000 | ||||||||
Increase
(decrease) in accounts payable
|
(5,656,000 | ) | 21,000 | (5,635,000 | ) | |||||||
Increase
(decrease) in accrued liabilities
|
3,848,000 | (14,000 | ) | 3,834,000 | ||||||||
Increase
(decrease) in due to related parties
|
1,017,000 | (6,000 | ) | 1,011,000 | ||||||||
Net
cash provided by operating activities
|
68,979,000 | 9,000 | 68,988,000 | |||||||||
Cash
flows from investing activities
|
||||||||||||
Capital
expenditures, including exploration expense
|
(90,208,000 | ) | (4,412,000 | ) | (94,620,000 | ) | ||||||
Proceeds
from sale of properties and equipment
|
581,000 | -- | 581,000 | |||||||||
Net
cash used in investing activities
|
(89,627,000 | ) | (4,412,000 | ) | (94,039,000 | ) | ||||||
Cash
flows from financing activities
|
||||||||||||
Purchase
of stock for treasury
|
(3,669,000 | ) | -- | (3,669,000 | ) | |||||||
Increase
in long-term bank debt and other long-term obligations
|
83,574,000 | -- | 83,574,000 | |||||||||
Repayment
of long-term bank debt and other long-term obligations
|
(64,710,000 | ) | -- | (64,710,000 | ) | |||||||
Distribution
to minority interest
|
(1,974,000 | ) | -- | (1,974,000 | ) | |||||||
Net
cash provided by (used in) financing activities
|
13,221,000 | -- | 13,221,000 | |||||||||
Net
increase(decrease) in cash and cash equivalents
|
(7,427,000 | ) | (4,403,000 | ) | (11,830,000 | ) | ||||||
Cash
and cash equivalents at the beginning of the period
|
24,653,000 | 4,403,000 | 29,056,000 | |||||||||
Cash
and cash equivalents at the end of the period
|
$ | 17,226,000 | $ | -- | $ | 17,226,000 |
a)
|
The
adjustments reflect the changes related to the updated audited restated
December 31, 2007 Financial
Statements.
|
September
30, 2008
|
December
31, 2007
|
|||||||
Accounts Receivable: | ||||||||
Joint
interest billing
|
$ | 7,048,000 | $ | 3,192,000 | ||||
Trade
receivables
|
2,461,000 | 2,352,000 | ||||||
Oil
and gas sales
|
13,932,000 | 14,785,000 | ||||||
Income
tax receivable
|
— | 795,000 | ||||||
Other
|
245,000 | 415,000 | ||||||
$ | 23,686,000 | $ | 21,539,000 | |||||
Less,
allowance for doubtful accounts
|
(293,000 | ) | (228,000 | ) | ||||
$ | 23,393,000 | $ | 21,311,000 | |||||
Accounts Payable: | ||||||||
Trade
|
$ | 6,621,000 | $ | 12,364,000 | ||||
Royalty
and other owners
|
19,127,000 | 11,209,000 | ||||||
Other
|
5,324,000 | 3,207,000 | ||||||
Total
|
$ | 31,072,000 | $ | 26,780,000 | ||||
Accrued Liabilities: | ||||||||
Compensation
and related expenses
|
$ | 4,094,000 | 1,687,000 | |||||
Property
cost
|
2,807,000 | 4,551,000 | ||||||
Income
tax
|
2,264,000 | — | ||||||
Other
|
3,601,000 | 3,794,000 | ||||||
Total
|
$ | 12,766,000 | $ | 10,032,000 |
September 30,
2008
|
December 31,
2007
|
|||||||
Proved
oil and gas properties, at cost
|
$ | 413,667,000 | $ | 378,908,000 | ||||
Unproved
oil and gas properties, at cost
|
285,000 | 4,458,000 | ||||||
Less,
accumulated depletion and depreciation
|
(192,116,000 | ) | (145,514,000 | ) | ||||
$ | 221,836,000 | $ | 237,852,000 | |||||
Field
service equipment and other
|
19,949,000 | 18,029,000 | ||||||
Less,
accumulated depreciation
|
(11,022,000 | ) | (9,820,000 | ) | ||||
$ | 8,927,000 | $ | 8,209,000 | |||||
Total
net property and equipment
|
$ | 230,763,000 | $ | 246,061,000 |
Operating
Leases
|
||||
2008
|
$ | 148,000 | ||
2009
|
350,000 | |||
2010
|
71,000 | |||
2011
|
5,000 | |||
Thereafter
|
— | |||
Total
minimum payments
|
$ | 574,000 |
September 30,
2008
|
December 31,
2007
|
|||||||
Asset
retirement obligation – beginning of period
|
$ | 17,361,000 | $ | 7,047,000 | ||||
Liabilities
incurred
|
318,000 | 468,000 | ||||||
Liabilities
settled
|
(461,000 | ) | (367,000 | ) | ||||
Accretion
expense
|
946,000 | 461,000 | ||||||
Revisions
in estimated liabilities
|
1,390,000 | 9,752,000 | ||||||
Asset
retirement obligation – end of period
|
$ | 19,554,000 | $ | 17,361,000 |
|
•
|
Level
1: Valuations utilizing quoted, unadjusted prices for identical assets or
liabilities in active markets that the Company has the ability to access.
This is the most reliable evidence of fair value and does not require a
significant degree of judgment. Examples include exchange-traded
derivatives and listed equities that are actively
traded.
|
|
•
|
Level
2: Valuations utilizing quoted prices in markets that are not considered
to be active or financial instruments for which all significant inputs are
observable, either directly or indirectly for substantially the full term
of the asset or liability. Financial instruments that are valued using
models or other valuation methodologies are included. Models used should
primarily be industry-standard models that consider various assumptions
and economic measures, such as interest rates, yield curves, time value,
volatilities, contract terms, current market prices, credit risk or other
market-corroborated inputs. Examples include most over-the-counter
derivatives (non-exchange traded), physical commodities, most structured
notes and municipal and corporate
bonds.
|
|
•
|
Level
3: Valuations utilizing significant, unobservable inputs. This provides
the least objective evidence of fair value and requires a significant
degree of judgment. Inputs may be used with internally developed
methodologies and should reflect an entity’s assumptions using the best
information available about the assumptions that market participants would
use in pricing an asset or liability. Examples include certain corporate
loans, real-estate and private equity investments and long-dated or
complex over-the-counter
derivatives.
|
|
|
Depending on the particular
asset or liability, input availability can vary depending on factors such
as product type, longevity of a product in the market and other particular
transaction conditions. In some cases, certain inputs used to measure fair
value may be categorized into different levels of the fair value
hierarchy. For disclosure purposes under SFAS No. 157, the lowest level
that contains significant inputs used in valuation should be chosen. Per
SFAS No. 157, the Company has classified its assets and liabilities into
these levels depending upon the data relied on to determine the fair
values. The fair values of the Company’s natural gas and crude oil price
collars and swaps are valued based upon quotes obtained from
counterparties to the agreements and are designated as Level
3.
|
Quoted
Prices in Active
Markets For
Identical Assets
(Level
1)
|
Significant
Other
Observable
Inputs (Level
2)
|
Significant
Unobservable
Inputs (Level
3)
|
Balance
as of September
30, 2008
|
|||||||||||||
Assets
|
||||||||||||||||
Interest
Rate and Commodity Derivative Contracts
|
— | — | $ | 1,730,000 | $ | 1,730,000 | ||||||||||
Total
Assets
|
— | — | $ | 1,730,000 | $ | 1,730,000 | ||||||||||
Liabilities
|
||||||||||||||||
Commodity
Derivative Contracts
|
— | — | $ | (14,268,000 | ) | $ | (14,268,000 | ) | ||||||||
Total
Liability
|
— | — | $ | (14,268,000 | ) | $ | (14,268,000 | ) | ||||||||
Net
liabilities as of January 1,
2008
|
$ | (3,618,000 | ) | |
Total
realized and unrealized
losses:
|
||||
Included
in earnings
(a)
|
(7,449,000 | ) | ||
Included
in other comprehensive
income
|
(2,040,000 | ) | ||
Purchases,
sales, issuances and settlements,
net
|
569,000 | |||
Net
liabilities as of September 30,
2008
|
$ | (12,538,000 | ) | |
(a)
|
Amounts
reported in net income are classified as oil and gas sales for commodity
derivative instruments and as a reduction to interest expense for interest
rate swap instruments.
|
Crude Oil Price
Collar
|
||||||||||||||||||||
Contract
Period
|
Volume
In
Mbbl
|
Weighted
Average Price Floor/Ceiling/Third
Tier (per
Bbl)
|
Net
Unrealized (Loss)/Gain
(In
thousands)
|
|||||||||||||||||
Fourth
Quarter 2008
|
18 | $ | 65.00/ | $ | 79.25/ | $ | 100.00 | |||||||||||||
Fourth
Quarter 2008
|
51 | $ | 60.00/ | $ | 81.25 | |||||||||||||||
Fourth
Quarter 2008
|
15 | $ | 60.00/ | $ | 78.00 | |||||||||||||||
Full
Year 2008
|
84 | $ | (1,074 | ) | ||||||||||||||||
First
Quarter 2009
|
51 | $ | 60.00/ | $ | 79.70 | |||||||||||||||
First
Quarter 2009
|
6 | $ | 60.00/ | $ | 77.75 | |||||||||||||||
First
Quarter 2009
|
12 | $ | 65.00/ | $ | 86.50 | |||||||||||||||
Second
Quarter 2009
|
17 | $ | 60.00/ | $ | 79.70 | |||||||||||||||
Second
Quarter 2009
|
38 | $ | 60.00/ | $ | 77.40 | |||||||||||||||
Second
Quarter 2009
|
2 | $ | 60.00/ | $ | 77.75 | |||||||||||||||
Second
Quarter 2009
|
12 | $ | 65.00/ | $ | 86.50 | |||||||||||||||
Third
Quarter 2009
|
57 | $ | 60.00/ | $ | 77.40 | |||||||||||||||
Third
Quarter 2009
|
12 | $ | 65.00/ | $ | 86.50 | |||||||||||||||
Fourth
Quarter 2009
|
57 | $ | 60.00/ | $ | 77.40 | |||||||||||||||
Fourth
Quarter 2009
|
12 | $ | 65.00/ | $ | 86.50 | |||||||||||||||
Full
Year 2009
|
276 | $ | (3,976 | ) | ||||||||||||||||
First
Quarter 2010
|
51 | $ | 65.00/ | $ | 80.90 | |||||||||||||||
First
Quarter 2010
|
9 | $ | 65.00/ | $ | 84.14 | |||||||||||||||
Second
Quarter 2010
|
51 | $ | 65.00/ | $ | 80.90 | |||||||||||||||
Second
Quarter 2010
|
9 | $ | 65.00/ | $ | 84.14 | |||||||||||||||
Third
Quarter 2010
|
51 | $ | 65.00/ | $ | 80.90 | |||||||||||||||
Third
Quarter 2010
|
9 | $ | 65.00/ | $ | 84.14 | |||||||||||||||
Fourth
Quarter 2010
|
51 | $ | 65.00/ | $ | 80.90 | |||||||||||||||
Fourth
Quarter 2010
|
9 | $ | 65.00/ | $ | 84.14 | |||||||||||||||
Full
Year 2010
|
240 | $ | (3,496 | ) | ||||||||||||||||
First
Quarter 2011
|
45 | $ | 65.00/ | $ | 84.14 | |||||||||||||||
Full
Year 2011
|
45 | $ | (609 | ) | ||||||||||||||||
Natural Gas Price
Swaps
|
||||||||||||
Contract
Period
|
Volume
in Mmcf
|
Weighted
Average Price (per
Mcf)
|
Net
Unrealized Gain
(In
thousands)
|
|||||||||
First
Quarter 2009
|
555 | $ | 9.76 | $ | 609 | |||||||
Full
Year 2009
|
555 | $ | 9.76 | $ | 609 | |||||||
Nine Months Ended September 30,
2008
|
Nine Months Ended September 30,
2007
|
|||||||||||||||||||||||
Net
Income
|
Number
of Shares
|
Per
Share Amount
|
Net
Income
|
Number
of Shares
|
Per
Share Amount
|
|||||||||||||||||||
Net
income per common share
|
$ | 8,822,000 | 3,066,684 | $ | 2.88 | $ | 6,965,000 | 3,184,363 | $ | 2.19 | ||||||||||||||
Effect
of dilutive securities:
|
||||||||||||||||||||||||
Options
|
754,030 | 752,988 | ||||||||||||||||||||||
Diluted
net income per common share
|
$ | 8,822,000 | 3,820,714 | $ | 2.31 | $ | 6,965,000 | 3,937,351 | $ | 1.77 |
Three
Months Ended September 30,
2008
|
Three
Months Ended September 30,
2007
|
|||||||||||||||||||||||
Net
Income
|
Number
of Shares
|
Per
Share Amount
|
Net
Income
|
Number
of Shares
|
Per
Share Amount
|
|||||||||||||||||||
Net
income per Common share
|
$ | 2,072,000 | 3,050,331 | $ | 0.68 | $ | 854,000 | 3,167,893 | $ | 0.27 | ||||||||||||||
Effect
of dilutive Securities:
|
||||||||||||||||||||||||
Options
|
755,496 | 752,875 | ||||||||||||||||||||||
Diluted
net income per common share
|
$ | 2,072,000 | 3,805,827 | $ | 0.54 | $ | 854,000 | 3,920,678 | $ | 0.22 |
Item
2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
Nine
Months Ended
September
30
|
Three
Months Ended
September
30
|
|||||||||||||||||||||||
2008
|
2007
|
Increase
/
(Decrease)
|
2008
|
2007
|
Increase
/
(Decrease)
|
|||||||||||||||||||
Barrels
of Oil Produced
|
469,000 | 419,000 | 50,000 | 149,000 | 155,000 | (6,000 | ) | |||||||||||||||||
Average
Price Received
|
$ | 95.05 | $ | 62.34 | $ | 32.71 | $ | 96.89 | $ | 72.05 | $ | 24.84 | ||||||||||||
Oil
Revenue
|
$ | 44,577,000 | $ | 26,120,000 | $ | 18,457,000 | $ | 14,437,000 | $ | 11,167,000 | $ | 3,270,000 | ||||||||||||
MCF
of Gas Produced
|
6,838,000 | 8,362,000 | (1,524,000 | ) | 2,115,000 | 3,677,000 | (1,562,000 | ) | ||||||||||||||||
Average
Price Received
|
$ | 9.36 | $ | 7.38 | $ | 1.98 | $ | 9.21 | $ | 6.64 | $ | 2.57 | ||||||||||||
Gas
Revenue
|
$ | 63,997,000 | $ | 61,684,000 | $ | 2,313,000 | $ | 19,489,000 | $ | 24,403,000 | $ | (4,914,000 | ) | |||||||||||
Total
Oil & Gas Revenue
|
$ | 108,574,000 | $ | 87,804,000 | $ | 20,770,000 | $ | 33,926,000 | $ | 35,570,000 | $ | (1,644,000 | ) | |||||||||||
Nine
Months Ended
September
30
|
Three
Months Ended
September
30
|
|||||||||||||||||||||||
2008
|
2007
|
Increase
/
(Decrease)
|
2008
|
2007
|
Increase
/
(Decrease)
|
|||||||||||||||||||
Oil
Price
|
$ | 111.46 | $ | 61.65 | $ | 49.81 | $ | 116.19 | $ | 72.09 | $ | 44.10 | ||||||||||||
Gas
Price
|
$ | 9.95 | $ | 6.73 | $ | 3.22 | $ | 10.22 | $ | 6.20 | $ | 4.02 |
|
Item
3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
ITEM
4T.
|
CONTROLS AND
PROCEDURES
|
|
Item
1.
|
LEGAL PROCEEDINGS
|
Item
1A.
|
RISK FACTORS
|
|
Item
2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
2008
Month
|
Number
of Shares
|
Average
Price Paid per
share
|
Maximum
Number of Shares that
May Yet Be Purchased Under The Plan
(1)
|
|||||||||
January
|
60,684 | $ | 50.06 | 224,871 | ||||||||
February
|
558 | $ | 54.68 | 224,313 | ||||||||
March
|
10,465 | $ | 50.25 | 213,848 | ||||||||
April
|
5,500 | $ | 58.05 | 208,348 | ||||||||
May
|
435 | $ | 61.23 | 207,913 | ||||||||
June
|
6,726 | $ | 55.62 | 201,187 | ||||||||
July
|
1,777 | $ | 55.14 | 199,410 | ||||||||
August
|
200 | $ | 64.04 | 199,210 | ||||||||
September
|
— | $ | — | 199,210 | ||||||||
Total/Average
|
86,345 | $ | 51.24 |
(1)
|
In
December 1993, we announced that our board of directors authorized a stock
repurchase program whereby we may purchase outstanding shares of our
common stock from time-to-time, in open market transactions or negotiated
sales. A total of 2,700,000 shares have been authorized, to date, under
this program. Through September 30, 2008 we repurchased a total of
2,500,790 shares under this program for $33,533,761 at an average price of
$13.41 per share. Additional purchases may occur as market conditions
warrant. We expect future purchases will be funded with internally
generated cash flow or from working
capital.
|
|
Item
3.
|
DEFAULTS UPON SENIOR
SECURITIES
|
|
Item
4.
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
|
Item
5.
|
OTHER INFORMATION
|
|
Item
6.
|
EXHIBITS
|
Exhibit
No.
|
|
Certification
of Chief Executive Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as amended (filed
herewith).
|
|
Certification
of Chief Financial Officer pursuant to Rule 13(a)-14(a)/15d-14(a) of the
Securities Exchange Act of 1934, as amended (filed
herewith)
|
|
Certification
of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
|
Certification
of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
PrimeEnergy
Corporation
|
|
(Registrant)
|
|
March
26, 2009
|
/s/
Charles E. Drimal, Jr.
|
(Date)
|
Charles
E. Drimal, Jr.
|
President
|
|
Principal
Executive Officer
|
|
March
26, 2009
|
/s/
Beverly A. Cummings
|
(Date)
|
Beverly
A. Cummings
|
Executive
Vice President
|
|
Principal
Financial Officer
|
|
March
26, 2009
|
/s/
Lynne Pizor
|
(Date)
|
Lynne
Pizor
|
Controller,
Principal Accounting
Officer
|