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 September 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 September 30, 2002, 7,582,471 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
SEPTEMBER 30, 2002
Index to Consolidated Financial Statements and Schedules
Page
Part I - Financial Information:
Item 1. - Financial Statements
Consolidated Balance Sheets
September 30, 2002 (Unaudited) and December 31, 2001 . . . . 3-4
Consolidated Statements of Income or Loss (Unaudited)
Nine Months Ended September 30, 2002 and 2001
Three Months Ended September 30, 2002 and 2001. . . . . . . 5
Consolidated Statements of Changes in
Shareholders' Equity (Unaudited)
Nine Months Ended September 30, 2002 and 2001
Three Months Ended September 30, 2002 and 2001. . . . . . . 6
Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2002 and 2001, and
Three Months Ended September 30, 2002 and 2001. . . . . . . 7
Notes to Consolidated Financial Statements . . . . . . . . . . 8
Item 2. - Management`s Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . 9-10
Item 4. - Controls and Procedures. . . . . . . . . . . . . . . . . 10
Part II - Other Information:
Item 6. - Certification Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 . . . . . . . . . . . . . . . . . . 11
Part I - Financial Information
Item 1. - Financial Statements
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of
--------------------------
September 30 December 31
2002 2001
----------- -----------
(Unaudited)
ASSETS
Current Assets
Cash $ 2,235,000 $ 2,323,000
Accounts receivable 283,000 175,000
Prepaid income tax 139,000 89,000
----------- -----------
Total Current Assets 2,657,000 2,587,000
----------- -----------
Property and Equipment, at cost
Oil and gas properties (full cost method) 3,618,000 3,224,000
Rental equipment 404,000 397,000
Gas gathering systems 145,000 145,000
Other property and equipment 85,000 85,000
----------- -----------
4,252,000 3,851,000
Accumulated depreciation and amortization (3,067,000) (2,952,000)
----------- -----------
Total Property and Equipment, net 1,185,000 899,000
----------- -----------
Total Assets $ 3,842,000 $ 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
--------------------------
September 30 December 31
2002 2001
----------- -----------
(Unaudited)
LIABILITIES AND SHAREHOLDERS` EQUITY
Current Liabilities
Accounts payable and accrued liabilities $ 481,000 $ 358,000
Notes payable, related party 36,000 231,000
Income tax payable 107,000 -
Tax savings benefit payable 97,000 97,000
----------- -----------
Total current liabilities 721,000 686,000
----------- -----------
Notes payable, related party 21,000 55,000
----------- -----------
Deferred income tax payable 121,000 121,000
----------- -----------
Shareholders` Equity
Common stock, $.01 par value; 100,000,000
Shares authorized; 7,582,471 and
7,525,804 shares issued and outstanding
at September 30, 2002 and December 31,
2001, respectively 76,000 75,000
Additional paid-in capital 749,000 733,000
Retained earnings 2,154,000 1,816,000
----------- -----------
Total Shareholders` Equity 2,979,000 2,624,000
----------- -----------
Total Liabilities and Shareholders` Equity $ 3,842,000 $ 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)
Nine Months Ended Three Months Ended
September 30 September 30
---------------------- ----------------------
2002 2001 2002 2001
---------- ---------- ---------- ----------
Revenues
Oil and gas revenue $1,278,000 $1,901,000 $ 475,000 $ 440,000
Revenue from lease operations 30,000 23,000 13,000 9,000
Gas gathering, compression
and Equipment rental 132,000 183,000 46,000 43,000
Interest income 61,000 65,000 26,000 23,000
Other 15,000 76,000 12,000 12,000
---------- ---------- ---------- ----------
Total revenue 1,516,000 2,248,000 572,000 527,000
---------- ---------- ---------- ----------
Expenses
Lease operations 563,000 710,000 163,000 211,000
Pipeline and rental operations 21,000 29,000 10,000 12,000
Depreciation and amortization 115,000 141,000 44,000 48,000
General and administrative 347,000 303,000 107,000 103,000
Interest expense 10,000 26,000 6,000 10,000
---------- ---------- ---------- ----------
Total Expenses 1,056,000 1,209,000 330,000 384,000
---------- ---------- ---------- ----------
Income Before Income Tax 460,000 1,039,000 242,000 143,000
---------- ---------- ---------- ----------
Current tax provision 122,000 243,000 66,000 163,000
Deferred tax provision - - - -
---------- ---------- ---------- ----------
122,000 243,000 66,000 -
---------- ---------- ---------- ----------
Net Income (Loss) $ 338,000 $ 796,000 $ 176,000 $ (20,000)
========== ========== ========== ==========
Earnings (Loss) per Share
Of Common Stock fully
Diluted $ 0.04 $ 0.11 $ 0.02 $ -
========== ========== ========== ==========
Weighted Average Shares
Outstanding 7,557,819 7,525,804 7,620,804 7,525,804
========== ========== ========== ==========
The accompanying notes are an integral part of these statements.
SPINDLETOP OIL & GAS CO AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
Common Stock Additional
------------------------ Paid-In Retained
Shares Amount Capital Earnings
----------- ----------- ----------- -----------
Balance December 31, 2000 7,525,804 $ 75,000 $ 733,000 $ 1,040,000
Net Income (Loss) - - - 776,000
----------- ----------- ----------- -----------
Balance December 31, 2001 7,525,804 75,000 733,000 $ 1,816,000
Issuance of 56,667 shares
of Common Stock for the
purchase of drilling
prospect 56,667 1,000 16,000 -
Net Income for the nine
months ended September 30,
2002 - - - 338,000
----------- ----------- ----------- -----------
7,582,471 $ 76,000 $ 749,000 $ 2,154,000
=========== =========== =========== ===========
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
September 30
------------------------
2002 2001
----------- -----------
Cash Flows from Operating Activities
Net Income (Loss) $ 338,000 $ 796,000
Reconciliation of net income (loss)
to net cash provided by (used for)
Operating Activities
Depreciation and amortization 115,000 141,000
Changes in accounts receivable (108,000) 88,000
Changes in acct receivable, related party - 8,000
Changes in accounts payable 123,000 (177,000)
Changes in current taxes payable 107,000 (51,000)
Amortization of note discount (10,000) (39,000)
----------- -----------
Net cash provided by (used for) operating
Activities 515,000 868,000
----------- -----------
Cash flows from Investing Activities
Capitalized acquisition, exploration
and development costs (401,000) (56,000)
----------- -----------
Net cash provided by (used for) Investing
Activities (401,000) (56,000)
----------- -----------
Cash Flows from Financing Activities
Reduction of notes payable to
related party (219,000) (85,000)
Issuance of 56,667 shares of common stock 17,000 -
----------- -----------
Net cash provided by (used for) Financing
Activities (202,000) (85,000)
----------- -----------
Increase (decrease) in cash (88,000) 727,000
Cash at beginning of period 2,323,000 1,585,000
----------- -----------
Cash at end of period $ 2,235,000 $ 2,312,000
=========== ===========
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. ISSUANCE OF COMMON STOCK
Effective July 23, 2002, the board of directors of the Company authorized the
issuance of 56,667 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
Nine months ended September 30, 2002 compared to nine months ended
September 30, 2001
Oil and gas revenues reported for the nine months ended September 30, 2002 were
$1,278,000, while the oil and gas revenues reported for the same period in 2001
were $1,901,000. The primary reason for the decline was a decline 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 nine months of 2001
was $4.87 per mcf as compared with $2.97 per mcf for 2002, a 39% decrease
between the two periods. The average sales price for oil for operated
properties during the first nine months of 2001 was $26.22 per bbl as compared
with $23.37 per bbl in 2002, a 10.8% decrease between the two periods.
Gas production for operated properties during the first nine months of 2002 was
approximately 249,000 mcf as compared to operated gas production of
approximately 289,000 mcf for the same period in 2001, a decrease of
approximately 13.9%. Oil production for the first nine months in 2002 was
approximately 3,100 bbls, a decrease of 12.9% over the approximate 3,500 bbls
produced during the same period in 2001.
Gas sales for the first nine months of 2002 represented approximately 87% of
total oil and gas revenue, while oil sales contributed approximately 13% 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 nine months ended September 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 nine months ended September 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 three quarters of 2002 is also slightly lower than the production for
the same period in 2001, thus the percentage of reserves produced during the
first three quarters 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 $40,000 of the increase in general and administrative costs for
the nine months ended September 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 nine months ended September 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 September 30, 2002 compared to three months ended September
30, 2001
Oil and gas revenues reported for the three months ended September 30, 2002 are
$475,000, which is $35,000 more than the $440,000 reported for the same period
in 2001. The principal reason for the increase was an increase in the average
selling price of both oil and gas for the third quarter of 2002 over the third
quarter of 2001. Although the average gas prices for the first three quarters
of 2002 decreased significantly over those of the first three quarters of 2001,
the gas prices rallied a bit and were substantially the same as the average
third quarter gas prices for the previous year. The average gas sales price for
operated properties during the three month period ended September 30, 2001 was
$3.08 per mcf as compared with $3.08 per mcf for the same period in 2002. The
average oil sales price for operated properties during the three months ended
September 30, 2001 was $26.22 per bbl as compared with $23.37 per bbl in 2002,
approximately a 10.9% decrease between the two periods.
Gas production for operated properties during the three months ended September
30, 2002 decreased by approximately 26.9% as compared to operated gas
properties for the same period in 2001. Oil production for the three months
ended September 30, 2002 also decreased by approximately 854 bbls. Gas sales
for the 3rd quarter of 2002 represent approximately 85.7% of the total oil and
gas sales whereas oil sales represent approximately 14.3% of the total.
The decrease in interest expense for the three months ended September 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.
Item 4. - Controls and Procedures
Based on their most recent evaluation, which was completed within 90 days of
the filing of this Form 10-Q, our Acting Principal Executive Officer and Acting
Chief Financial Officer, believe our disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) are effective. There were not
any significant changes in internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation,
and there has not been any corrective action with regard to significant
deficiencies and material weaknesses.
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 September 30, 2002 as filed with
the Securities and Exchange Commission on the date hereof ("the Report"), We,
Chris G. Mazzini, President and Acting Principal Executive Officer and
Robert E. Corbin, Controller and Acting Principal Financial Officer 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: November 15, 2002 By: /s/ Chris G. Mazzini
Chris G. Mazzini
President, Acting Principal
Executive Officer
Date: November 15, 2002 By: /s/ Robert E. Corbin
Robert E. Corbin
Controller, Acting Principal
Financial Officer
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: November 15, 2002 By: /s/ Chris G. Mazzini
Chris G. Mazzini
President, Acting Principal
Executive Officer
Date: November 15, 2002 By: /s/ Michelle H. Mazzini
Michelle H. Mazzini
Secretary
Date: November 15, 2002 By: /s/ Robert E. Corbin
Robert E. Corbin
Controller, Acting Principal
Financial Officer
CERTIFICATION
I, Chris Mazzini, Acting Principal Executive Officer of Spindletop Oil and Gas
Co. ("the Company"), certify that:
1) I have reviewed this quarterly report on Form 10-Q of the Company;
2) Based on my knowledge, this quarterly 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 quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4) I am responsible for establishing and maintaining internal controls and
procedures and have:
a) designed such internal controls to insure that material information
relating to the company and its consolidated subsidiaries is made known to
me by others within those entities, particularly for the periods presented
in this quarterly report;
b) evaluated the effectiveness of the Company's internal controls as of a
date within 90 days prior to the filing date of this quarterly report; and
c) presented in this quarterly report my conclusions about the effectiveness
of the disclosure controls and procedures based on a date within 90 days
prior to the filing date of this quarterly report;
5) I have disclosed to the Company's auditors and Audit Committee of the Board
of directors (or persons fulfilling the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize, and report financial data and have identified for the
Company's auditors any material weakness in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls;
and
CERTIFICATION (continued)
6) I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most
recent evaluation, including corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ Chris G. Mazzini
Chris G. Mazzini
Acting Principal Executive Officer
November 15, 2002
CERTIFICATION
I, Robert E. Corbin, Acting Principal Financial Officer of Spindletop Oil and
Gas Co. ("the Company"), certify that:
1) I have reviewed this quarterly report on Form 10-Q of the Company;
2) Based on my knowledge, this quarterly 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 quarterly report;
3) Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;
4) I am responsible for establishing and maintaining internal controls and
procedures and have:
a) designed such internal controls to insure that material information
relating to the company and its consolidated subsidiaries is made known to
me by others within those entities, particularly for the periods presented
in this quarterly report;
b) evaluated the effectiveness of the Company's internal controls as of a
date within 90 days prior to the filing date of this quarterly report; and
c) presented in this quarterly report my conclusions about the effectiveness
of the disclosure controls and procedures based on a date within 90 days
prior to the filing date of this quarterly report;
5) I have disclosed to the Company's auditors and Audit Committee of the Board
of directors (or persons fulfilling the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the Company's ability to record,
process, summarize, and report financial data and have identified for the
Company's auditors any material weakness in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal controls;
and
CERTIFICATION (continued)
6) I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of my most
recent evaluation, including corrective actions with regard to significant
deficiencies and material weaknesses.
/s/ Robert E. Corbin
Robert E. Corbin
Acting Principal Financial Officer
November 15, 2002