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, 2003
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 registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes_______ No ___X__
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, 2003, 7,607,471 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
JUNE 30, 2003
Index to Consolidated Financial Statements and Schedules
Page
Part I - Financial Information:
Item 1. - Financial Statements
Consolidated Balance Sheets
June 30, 2003 (Unaudited) and December 31, 2002 3-4
Consolidated Statements of Income or Loss (Unaudited)
Six Months Ended June 30, 2003 and 2002
Three Months Ended June 30, 2003 and 2002 5
Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended June 30, 2003 and 2002 6
Notes to Consolidated Financial Statements 7
Item 2. - Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - Other Information:
Part I - Financial Information
Item 1. - Financial Statements
SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of
--------------------------
June 30 December 31
2003 2002
(Unaudited)
----------- -----------
ASSETS
Current Assets
Cash $ 2,596,000 $ 2,046,000
Accounts receivable 159,000 274,000
Prepaid income tax - 109,000
----------- -----------
Total Current Assets 2,755,000 2,429,000
----------- -----------
Property and Equipment, at cost
Oil and gas properties (full cost method) 4,377,000 3,936,000
Rental equipment 399,000 399,000
Gas gathering systems 145,000 145,000
Other property and equipment 85,000 85,000
----------- -----------
5,006,000 4,565,000
Accumulated depreciation and amortization (3,362,000) (3,230,000)
----------- -----------
Total Property and Equipment, net 1,644,000 1,335,000
----------- -----------
Other Assets 5,000 -
----------- -----------
Total Assets $ 4,404,000 $ 3,764,000
=========== ===========
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
2003 2002
(Unaudited)
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities$ 667,000 $ 414,000
Notes payable, related party - 42,000
Income Tax Payable 45,000 -
Tax savings benefit payable 97,000 97,000
----------- -----------
Total current liabilities 809,000 553,000
----------- -----------
Deferred income tax payable 179,000 179,000
----------- -----------
Shareholders' Equity
Common stock, $.01 par value; 100,000,000
Shares authorized; 7,607,471 shares
issued and outstanding at June 30, 2003
and 7,582,471 shares issued and outstanding
at December 31, 2002. 103,334 shares of
Treasury Stock at June 30, 2003 and
December 31, 2002 76,000 76,000
Additional paid-in capital 776,000 776,000
Treasury Stock (18,000) (18,000)
Retained earnings 2,582,000 2,198,000
----------- -----------
Total Shareholders' Equity 3,416,000 3,032,000
----------- -----------
Total Liabilities and Shareholders' Equity $ 4,404,000 $ 3,764,000
=========== ===========
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
2003 2002 2003 2002
---------- ---------- ---------- ----------
Revenues
Oil and gas revenue $1,302,000 $ 803,000 $ 584,000 $ 375,000
Revenue from lease
Operations 37,000 17,000 21,000 8,000
Gas gathering, compression
and Equipment rental 71,000 86,000 29,000 40,000
Interest income 54,000 35,000 24,000 19,000
Other 3,000 3,000 - -
---------- ---------- ---------- ----------
Total Revenue 1,467,000 944,000 658,000 442,000
---------- ---------- ---------- ----------
Expenses
Lease operations 527,000 400,000 258,000 243,000
Pipeline and rental
Operations 16,000 11,000 7,000 6,000
Depreciation and
Amortization 132,000 71,000 71,000 36,000
General and administrative 252,000 240,000 140,000 139,000
Interest expense 2,000 4,000 - 1,000
---------- ---------- ---------- ----------
Total Expenses 929,000 726,000 476,000 425,000
---------- ---------- ---------- ----------
Income Before Income Tax 538,000 218,000 182,000 17,000
---------- ---------- ---------- ----------
Current tax provision 154,000 56,000 61,000 6,000
Deferred tax provision - - - -
---------- ---------- ---------- ----------
154,000 56,000 61,000 6,000
---------- ---------- ---------- ----------
Net Income $ 384,000 $ 162,000 $ 121,000 $ 11,000
========== ========== ========== ==========
Earnings (Loss) per Share
of Common Stock
Basic $ 0.05 $ 0.02 $ 0.02 $ -
========== ========== ========== ==========
Diluted $ 0.05 $ 0.02 $ 0.02 $ -
========== ========== ========== ==========
Weighted Average Shares
Outstanding 7,605,537 7,525,804 7,603,582 7,525,804
========== ========== ========== ==========
Diluted Shares
Outstanding 7,750,399 7,525,804 7,748,304 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
2003 2002
----------- -----------
Cash Flows from Operating Activities
Net Income $ 384,000 $ 162,000
Reconciliation of net income
to net cash provided by
Operating Activities
Depreciation and amortization 132,000 71,000
Amortization of note discount (3,000) (3,000)
Changes in accounts receivable 115,000 (32,000)
Changes in prepaid income taxes 109,000 -
Changes in accounts payable 253,000 181,000
Changes in current taxes payable 45,000 41,000
Changes in other assets (5,000) -
----------- -----------
Net cash provided by operating
activities 1,030,000 420,000
----------- -----------
Cash flows from Investing Activities
Capitalized acquisition, exploration
and development costs (441,000) (244,000)
----------- -----------
Net cash (used for) Investing
activities (441,000) (244,000)
----------- -----------
Cash Flows from Financing Activities
Reduction of notes payable to
related party (39,000) (213,000)
----------- -----------
Net cash (used for) Financing
Activities (39,000) (213,000)
----------- -----------
Increase (decrease) in cash 550,000 (37,000)
Cash at beginning of period 2,046,000 2,323,000
----------- -----------
Cash at end of period $ 2,596,000 $ 2,286,000
=========== ===========
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, 2002 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 AND STOCK OPTIONS
Effective October 7, 2002, the board of directors of the Company authorized
the issuance of 25,000 shares of restricted common stock at a value of $0.30
per share, along with payment of cash, and an option to purchase an
additional 75,000 shares of restricted common stock of the Company in
consideration for the purchase of certain oil and gas leases in North Texas.
The options granted under the stock option agreement expire in July, 2004.
The above options, along with options to acquire another 70,000 shares of
common stock of the Company, which expire in July 2003, were accounted for in
2002, using FASB Statement 123, Accounting for Stock-Based Compensation,
which had the effect of charging the oil and gas properties account with
$26,850, which will be amortized using the full cost method of accounting.
Subsequent to June 30, 2003, options to purchase 70,000 shares of stock were
exercised and 70,000 shares of common stock were issued. The 75,000
remaining options, which expire in July, 2004, do not have a dilutive effect
on earnings per share.
3. EARNINGS PER SHARE
Earnings per share ("EPS") are calculated in accordance with Statement of
Financial Accounting Standards No. 128, Earnings per Share (SFAS 128), which
was adopted in 1997 for all years presented. Basic EPS is computed by
dividing income available to common shareholders by the weighted average
number of common shares outstanding during the period. The adoption of SFAS
128 had no effect on previously reported EPS. Diluted EPS is computed based
on the weighted number of shares outstanding, plus the additional common
shares that would have been issued had the options outstanding been
exercised.
Item 2. - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Six months ended June 30, 2003 compared to six months ended June 30, 2002
Oil and gas revenues reported for the first six months ended June 30, 2003
were $1,302,000, while the oil and gas revenues reported for the same period
in 2002 were $803,000. The primary reason for the increase was a significant
increase 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 2003 was $5.84 per mcf as compared with $2.81 per mcf for
2002, a 107% increase between the two periods. The average sales price for
oil for operated properties during the first six months of 2003 was $31.32
per bbl as compared with $22.41 per bbl in 2002, a 40% increase between the
two periods.
Oil and gas production for the first six months of 2003 was higher than that
in 2002, due primarily to the acquisition of over 25 producing oil and gas
wells that the Company operates, since the third quarter of 2002. The
majority of the wells acquired are oil wells, which have significantly
increased the oil reserves of the Company.
The increase in lease operations is due to the additional operated wells that
have been acquired. In addition, as the gas prices increased during the
year, the Company increased the amount of work-over projects that needed to
be done.
The depletion calculation for the first six months of 2003 is higher than
that calculated in 2002. The company has re-evaluated and increased its
proved oil and gas reserve quantities, but at the same time increased the
capitalized costs that are being amortized as well as increase the provision
for the amount of cost to develop proven but undeveloped reserves. In
addition, production is up for the first six months of 2003 due to the added
properties.
Three months ended June 30, 2003 compared to three months ended June 30, 2002
Oil and gas revenue increased for the three months ended June 30, 2003 as
compared to the same period in 2003 due primarily to the higher average
prices discussed above. Gas prices spiked upward in the 1st Quarter of 2003,
and remained significantly higher for the 2nd quarter of 2003, than the
average gas prices for the second quarter of 2002. The average price
received for gas in the second quarter of 2003 was $5.74 compared with an
average price of $3.41 for the second quarter of 2002. Oil prices averaged
$28.91 in the second quarter of 2003, higher than the average price of $26.86
in the second quarter of 2002.
In addition to price increases for natural gas and crude oil, production for
the second quarter of 2003 was slightly higher than in 2002 due to the
purchase of several operating interests in both oil and gas properties during
the third and fourth quarters of 2002, and the first quarter of 2003. These
properties were on-line and being produced during the second quarter.
The increase in lease operations is due to the additional operated wells that
have been acquired. In addition, as the gas prices increased during the
year, the Company increased the amount of work-over projects that needed to
be done.
The depletion calculation for the second quarter of 2003 is higher than that
calculated in 2002. The company has re-evaluated and increased its proved
oil and gas reserve quantities, but at the same time increased the
capitalized costs that are being amortized. In addition, production is up
for the second quarter of 2003 due to the added properties.
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
(a) Exhibits
Exhibit 31.1 - Certification Pursuant to Rules 13a-14 and 15d-14 Under the
Securities Exchange Act of f1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, signed by Chris G. Mazzini, Acting Principal
Executive Officer, filed herewith.
Exhibit 31.1 - Certification Pursuant to Rules 13a-14 and 15d-14 Under the
Securities Exchange Act of f1934, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002, signed by Robert E. Corbin, Acting Principal
Financial Officer, filed herewith.
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, filed herewith.
(b) Reports on Form 8-K - None
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 19, 2003 By: /s/ Chris G. Mazzini
Chris G. Mazzini
President, Acting Principal
Executive Officer
Date: August 19, 2003 By: /s/ Michelle H. Mazzini
Michelle H. Mazzini
Secretary
Date: August 19, 2003 By: /s/ Robert E. Corbin
Robert E. Corbin
Controller, Acting Principal
Financial Officer
Exhibit 31.1
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 (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the Company and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my supervision,
to ensure 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) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under my
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.
c) evaluated the effectiveness of the Company's disclosure controls and
procedures and presented in this report my conclusions about the
effectiveness of the disclosure 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 Company's internal control
over financial reporting that occurred during the Company's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial
reporting; and
5) I have disclosed based on my most recent evaluation of internal control
over financial reporting, to the Company's auditors and Audit Committee of
the Board of directors (or persons fulfilling the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control which are reasonably likely to adversely
affect the Company's ability to record, process, summarize, and report
financial data; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal control
over financial reporting.
/s/ Chris G. Mazzini
Chris G. Mazzini
Acting Principal Executive Officer
August 19, 2003
Exhibit 31.2
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 (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the Company and have:
a) designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under my supervision,
to ensure 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) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under my
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.
c) evaluated the effectiveness of the Company's disclosure controls and
procedures and presented in this report my conclusions about the
effectiveness of the disclosure 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 Company's internal control
over financial reporting that occurred during the Company's most recent
fiscal quarter that has materially affected, or is reasonably likely to
materially affect, the Company's internal control over financial
reporting; and
5. I have disclosed based on my most recent evaluation of internal control
over financial reporting, to the Company's auditors and Audit Committee of
the Board of directors (or persons fulfilling the equivalent function):
a) all significant deficiencies and material weaknesses in the design or
operation of internal control which are reasonably likely to adversely
affect the Company's ability to record, process, summarize, and report
financial data; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Company's internal control
over financial reporting.
/s/ Robert E. Corbin
Robert E. Corbin
Acting Principal Financial Officer
August 19, 2003
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
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 period ending June 30, 2003 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: August 19, 2003 By: /s/ Chris G. Mazzini
Chris G. Mazzini
President, Acting Principal
Executive Officer
Date: August 19, 2003 By: /s/ Robert E. Corbin
Robert E. Corbin
Controller, Acting Principal
Financial Officer