SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended June 30, 2002
Commission File No. 0-18774
SPINDLETOP OIL & GAS CO.
(Exact name of registrant as specified in its charter)
Texas 75-2063001
State or other jurisdiction (IRS Employer or ID #)
of incorporation or organization)
331 Melrose, Suite 102, Richardson, TX 75080
(Address of principal executive offices) (Zip Code)
(972) 644-2581
(Company's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock par value $0.01 per share
(Title of Class)
Indicate by check mark whether the Company (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
Company was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES ___X___ NO _______
As of June 30, 2002, 7,525,804 shares of the Company's common stock were
issued and outstanding, and the aggregate market value of the voting stock
held by non-affiliates of the company as of that date is not determinable
since no significant public trading market has been established for the
Company's common stock.
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
FORM 10-Q
JUNE 30, 2002
Index to Consolidated Financial Statements and Schedules
Page
Part I - Financial Information:
Item 1. - Financial Statements
Consolidated Balance Sheets
June 30, 2002 (Unaudited) and December 31, 2001. . . . . . . 3-4
Consolidated Statements of Income or Loss (Unaudited)
Six Months Ended June 30, 2002 and 2001
Three Months Ended June 30, 2002 and 2001 . . . . . . . . . 5
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2002 and 2001, and
Three Months Ended June 30, 2002 and 2001 . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . 7
Item 2. - Management`s Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 8-9
Part II - Other Information:
Item 6. - Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 . . . . . . . . . . . . . . . . . . 10
Part I - Financial Information
Item 1. - Financial Statements
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of
--------------------------
June 30 December 31
2001 2002
----------- -----------
(Unaudited)
ASSETS
Current Assets
Cash $ 2,286,000 $ 2,323,000
Accounts receivable 207,000 175,000
Prepaid income tax 89,000 89,000
----------- -----------
Total Current Assets 2,585,000 2,587,000
----------- -----------
Property and Equipment, at cost
Oil and gas properties (full cost method) 3,486,000 3,224,000
Rental equipment 397,000 397,000
Gas gathering systems 145,000 145,000
Other property and equipment 85,000 85,000
----------- -----------
4,095,000 3,851,000
Accumulated depreciation and amortization (3,023,000) (2,952,000)
----------- -----------
Total Property and Equipment, net 1,072,000 899,000
----------- -----------
Total Assets $ 3,654,000 $ 3,486,000
=========== ===========
The accompanying notes are an integral part of these statements.
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - (Continued)
As of
--------------------------
June 30 December 31
2002 2001
----------- -----------
(Unaudited)
LIABILITIES AND SHAREHOLDERS` EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 539,000 $ 358,000
Notes payable, related party 35,000 231,000
Income tax payable 41,000 -
Tax savings benefit payable 97,000 97,000
----------- -----------
Total current liabilities 712,000 686,000
----------- -----------
Notes payable, related party 35,000 55,000
----------- -----------
Deferred income tax payable 121,000 121,000
----------- -----------
Shareholders` Equity
Common stock, $.01 par value; 100,000,000
Shares authorized; 7,525,804 shares
Issued and outstanding at
June 30, 2002 and December 31, 2001 75,000 75,000
Additional paid-in capital 733,000 733,000
Retained earnings 1,978,000 1,816,000
----------- -----------
Total Shareholders` Equity 2,786,000 2,624,000
----------- -----------
Total Liabilities and Shareholders` Equity $ 3,654,000 $ 3,486,000
=========== ===========
The accompanying notes are an integral part of these statements.
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Six Months Ended Three Months Ended
---------------------- ----------------------
June 30 June 30 June 30 June 30
2002 2001 2002 2001
---------- ---------- ---------- ----------
Revenues
Oil and gas revenue $ 803,000 $1,461,000 $ 375,000 $ 933,000
Revenue from lease operations 17,000 14,000 8,000 9,000
Gas gathering, compression
and Equipment rental 86,000 140,000 40,000 68,000
Interest income 35,000 42,000 19,000 27,000
Other 3,000 6,000 - 49,000
---------- ---------- ---------- ----------
Total revenue 944,000 1,721,000 42,000 1,086,000
---------- ---------- ---------- ----------
Expenses
Lease operations 400,000 499,000 243,000 228,000
Pipeline and rental operations 11,000 17,000 6,000 9,000
Depreciation and amortization 71,000 93,000 36,000 37,000
General and administrative 240,000 200,000 139,000 124,000
Interest expense 4,000 16,000 1,000 9,000
---------- ---------- ---------- ----------
Total Expenses 726,000 825,000 425,000 407,000
---------- ---------- ---------- ----------
Income Before Income Tax 218,000 896,000 17,000 679,000
---------- ---------- ---------- ----------
Current tax provision 56,000 80,000 6,000 -
Deferred tax provision - - - -
---------- ---------- ---------- ----------
56,000 80,000 6,000 -
---------- ---------- ---------- ----------
Net Income (Loss) $ 162,000 $ 816,000 $ 11,000 $ 679,000
========== ========== ========== ==========
Earnings (Loss) per Share
Of Common Stock $ 0.02 $ 0.11 $ 0.00 $ 0.09
========== ========== ========== ==========
Weighted Average Shares
Outstanding 7,525,804 7,525,804 7,525,804 7,525,804
========== ========== ========== ==========
The accompanying notes are an integral part of these statements.
SPINDLETOP OIL & GAS CO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
------------------------
June 30 June 30
2002 2001
----------- -----------
Cash Flows from Operating Activities
Net Income (Loss) $ 162,000 $ 816,000
Reconciliation of net income (loss)
to net cash provided by (used for)
Operating Activities
Depreciation and amortization 71,000 93,000
Changes in accounts receivable (32,000) (90,000)
Changes in acct receivable, related party - 8,000
Changes in accounts payable 181,000 (138,000)
Changes in current taxes payable 41,000 (20,000)
Amortization of note discount (3,000) 16,000
----------- -----------
Net cash provided by (used for) operating
Activities 420,000 685,000
----------- -----------
Cash flows from Investing Activities
Capitalized acquisition, exploration
and development costs (244,000) 5,000
----------- -----------
Net cash provided by (used for) Investing
Activities (244,000) 5,000
----------- -----------
Cash Flows from Financing Activities
Reduction of notes payable to
related party (213,000) (119,000)
----------- -----------
Net cash provided by (used for) Financing
Activities (204,000) (119,000)
----------- -----------
Increase (decrease) in cash (37,000) 571,000
Cash at beginning of period 2,323,000 1,585,000
----------- -----------
Cash at end of period $ 2,286,000 $ 2,156,000
=========== ===========
The accompanying notes are an integral part of these statements.
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(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`s annual Form 10-K filing.
Accordingly, the reader of this Form 10-Q may wish to refer to the
Company`s Form 10-K for the year ended December 31, 2001 for further
information.
The consolidated financial statements presented herein include the accounts
of Spindletop Oil & Gas Co., a Texas corporation and its wholly owned
subsidiaries, Prairie Pipeline Co., a Texas corporation and Spindletop
Drilling Company, a Texas Corporation. All significant intercompany
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.
2. SUBSEQUENT EVENTS
Subsequent to June 30, 2002, the board of directors of the Company
authorized the issuance of 55,667 shares of restricted common stock at a
value of $.30 per share, along with payment of $17,800 cash and an option
to purchase additional shares of restricted common stock of the Company in
consideration for the purchase of an undivided 10% working interest (7.7%
net revenue interest), in certain oil and gas leases covering 903 mineral
acres in Tarrant County, Texas. The stock option agreement grants a one
year option in which to purchase an additional 70,000 restricted shares of
the Company`s common stock at cost of $.30 per share.
Item 2. - Management`s Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Six months ended June 30, 2002 compared to six months ended June 30, 2001
Oil and gas revenues reported for the six months ended June 30, 2002 were
$803,000, while the oil and gas revenues reported for the same period in
2001 were $1,461,000. The primary reason for the decline was a significant
reduction in the average selling price of both oil and gas between the two
periods. The average gas sales price for operated properties during the
first six months of 2001 was $5.75 per mcf as compared with $2.81 per mcf
for 2002, a 51% decrease between the two periods. The average sales price
for oil for operated properties during the first six months of 2001 was
$26.92 per bbl as compared with $22.41 per bbl in 2002, a 17% decrease
between the two periods.
Gas production for operated properties during the first six months of 2002
decreased by approximately 7% as compared to operated gas production for
the same period in 2001. Oil production for the first six months in 2002
increased by approximately 29%. Gas sales for the first six months of 2002
represented approximately 89% of total oil and gas revenue, while oil sales
contributed approximately 11% of the total. As a result, the significant
decrease in gas prices between the periods coupled with a slight decline in
production, caused the decrease in reported oil and gas revenues.
Lease operations in the six months ended June 30, 2002 are slightly lower
than in 2001, due to a reduction in work-over projects and the postponing
of unnecessary maintenance projects. As natural gas prices fell during
2001 and continued to fall into the first half of 2002, the Company
deferred several re-work projects as well as other capital expenditure and
acquisition projects until future periods when gas prices increase and
become more stable.
The depletion calculation for the six months ended June 30, 2002 is lower
than that calculated in 2001 as the company re-evaluated and increased its
proved oil and gas reserve quantities as of January 1, 2002. Production
for the first half of 2002 is also slightly lower than the production for
the same period in 2001, thus the percentage of reserves produced during
the 1st half of 2002 is a smaller percentage of the overall reserve base,
reducing the rate of depletion to be taken against the full cost pool of
unamortized oil and gas assets.
Approximately $24,000 of the increase in General and administrative costs
for the six months ended June 30, 2002 was due to an August, 2001 increase
in management fees charged by a related entity which provides management,
accounting and administrative services to the Company.
The decrease in interest expense for the six months ended June 30, 2002
compared to the same period in 2001, is due to the significant reduction of
the principal amount of the note payable to a related party.
Three months ended June 30, 2002 compared to three months ended June 30,
2001
Oil and gas revenues reported for the three months ended June 30, 2002 are
$375,000, which is $558,000 less than the $933,000 reported for the same
period in 2001. The principal reason for the decline was a significant
reduction in the average selling price of both oil and gas. The average
gas sales price for operated properties during the three month period ended
June 30, 2001 was $4.70 per mcf as compared with $3.28 per mcf for the same
period in 2002,approximately a 30% decrease between the two periods. The
average oil sales price for operated properties during the three months
ended June 30, 2001 was $26.20 per bbl as compared with $24.79 per bbl in
2002, approximately a 5% decrease between the two periods.
Gas production for operated properties during the three months ended June
30, 2002 decreased by approximately 10% as compared to operated gas
properties for the same period in 2001. Oil production for the three
months ended June 30, 2002 increased by approximately 600 bbls or 72%. Gas
sales for the 2nd quarter of 2002 represent approximately 94% of the total
oil and gas sales whereas oil sales represent approximately 6% of the
total. Therefore, the increased oil production had an insignificant effect
on overall sales for the period.
In addition to the above, the 2nd quarter gas sales reported are
approximately $104,000 less than gas revenue that was actually booked
during the period due to timing of accruals. The Company had accrued this
amount during the first quarter of 2002 in anticipation of the receipt of
revenue from non-operated properties that applied to revenues from prior
years and for revenue from a non-operated work-over well and development
well completed during the 1st quarter of 2002. These revenues were
actually received and booked during the 2nd quarter ending on June 30,
2002.
Approximately $12,000 of the increase in General and administrative costs
for the three months ended June 30, 2002 was due to an August, 2001
increase in management fees charged by a related entity which provides
management, accounting and administrative services to the Company.
The decrease in interest expense for the three months ended June 30, 2002
compared to the same period in 2001, is due to the significant reduction of
the principal amount of the note payable to a related party.
Financial Condition and Liquidity
The Company`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.
Part II - Other Information
Item 6. - Exhibits and Reports on Form 8-K
Exhibit 99.1
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
(18 U.S.C. SECTION 1350)
In connection with the Quarterly Report of Spindletop Oil & Gas Co. ("the
Company") on Form 10-Q for the period ending June 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof ("the Report"),
We, Chris G. Mazzini, President and Robert E. Corbin, Controller of the
Company, hereby certify that to our knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or
78o(d)); and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Company.
Date: August 14, 2002 By: /s/ Chris G. Mazzini
Chris G. Mazzini
President
Date: August 14, 2002 By: /s/ Robert E. Corbin
Robert E. Corbin
Controller
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.
SPINDLETOP OIL & GAS CO.
(Registrant)
Date: August 14, 2002 By: /s/ Chris G. Mazzini
Chris G. Mazzini
President
Date: August 14, 2002 By: /s/ Michelle H. Mazzini
Mich elle H. Mazzini
Secretary
Date: August 14, 2002 By: /s/ Robert E. Corbin
Robert E. Corbin
Controller