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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended March 31, 1996 Commission File No. 0-6694
MEXCO ENERGY CORPORATION
Incorporated in the State of Colorado 84-0627918
(I.R.S. Employer
Identification No.)
1101 Petroleum Building, Midland, Texas 79701
(Principal Executive Office)
Telephone Number: (915) 682-1119
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Exchange on Which Registered
------------------- ------------------------------------
Common Stock, $.50 par value None
Indicate by check-mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve (12) months (or for such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter)is not contained herein, and will
not be contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or an amendment to this Form 10-K. [X]
The aggregate market value of the common stock of the Registrant held by non-
affiliates was approximately $ 576,792 based upon the closing bid price of the
Registrant's common stock as of May 31, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Item 601 of Regulation S-K with respect to this
Form 10-K has either been included or omitted because of non-applicability.
The index to the Exhibits is located on page 20 herein.
2
PART I
Item No. 1. Business
--------
Mexco Energy Corporation (the "Registrant"), a Colorado corporation, was
organized in 1972, and maintains its principal office at 1101 Petroleum
Building, Midland, Texas. Since its incorporation, the Registrant has been
engaged in the acquisition, exploration and development of oil and gas
properties located in the United States. The bulk of its activities are, and
have been since its incorporation, conducted in the State of Texas.
The Registrant's corporate name was formerly Miller Oil Company. In 1980
the shareholders of the Registrant amended the Articles of Incorporation
("Articles") of the Registrant to change the corporate name to Mexco Energy
Corporation. Also at that time, the shareholders of the Registrant approved
amendments to the Articles resulting in a one-for-fifty reverse stock split of
the Registrant's common stock ($0.50 par value). The corporate name change and
reverse stock split became effective April 30, 1980.
The Registrant's operations are not divided into industry segments. Since
its inception, the Registrant's entire business has been acquiring, and
developing oil and gas properties and producing oil and gas within the oil and
gas industry. All sales of oil and gas are to unaffiliated customers. See the
Registrant's financial statements and notes thereto for an account of the
Registrant's past operating results attributable to its oil and gas operations.
The Registrant acquires interests in producing and non-producing oil and
gas leases purchased from landowners and leaseholders in areas considered
favorable for oil and gas exploration and production by the Registrant. In
addition, oil and gas prospects are acquired by joining with other oil and gas
operators in drilling prospects which such third parties have generated. The
Registrant employs a combination of the above methods of obtaining producing
acreage and related prospects. In recent years, the Registrant has been placing
primary emphasis on evaluation and purchase of producing oil and gas properties.
As of March 31, 1996, the Registrant held leasehold rights covering in
excess of 59,928 gross acres (2,207 net acres), all of which have producing oil
and gas wells located thereon. The Registrant is the operator of seven (7) of
the producing wells in which it owns an interest and other companies operate
eight hundred sixty-eight (868) of the remaining producing wells.
The Registrant's oil and gas activities involve oil and gas drilling, which
carries high risk including the risk that no commercial oil or gas production
will be obtained. The cost of drilling, completing and operating wells is often
uncertain. Further, drilling may be curtailed or delayed as a result of many
factors, including title problems, weather conditions, delivery delays, and in
past years, shortage of pipe and equipment.
3
The Registrant is subject to all the risks inherent in the exploration for,
and development and production of, oil and gas, including blowouts, fires, and
other casualties. The Registrant maintains insurance coverage but losses can
occur from uninsured risks or in amounts in excess of existing insurance
coverage. The occurrence of an event which is not insured or not fully insured
could have an adverse impact upon the Registrant.
The oil and gas industry in which the Registrant is engaged is a highly
competitive and speculative business. Competitors include well-capitalized oil
and gas companies and other companies having financial and other resources
greater than those of the Registrant. The Registrant's ability to locate and
produce oil and gas reserves is essential to the ultimate realization of income
and value from the Registrant's properties and, therefore, may be considered to
be a raw material essential to the Registrant's business. The availability of
drilling rigs, fuel, tubular goods and other drilling and production equipment
is also essential to the Registrant's business. The Registrant relies on the
acquisition of leases and other oil and gas interests on which to explore for,
develop and/or produce oil and gas. The availability of such property is
essential to the Registrant's continuing business.
Crude oil and condensate produced from the properties in which the
Registrant owns an interest are sold to oil companies and pipeline companies at
prices posted by the principal purchasers in the Registrant's producing area.
As of March 31, 1996 the principal purchasers (percentage purchased) of the
Registrant's crude oil production were Navajo Crude Oil Marketing Company (66%)
and Sun Refining and Marketing Company (22%).
Natural gas obtained from the properties in which the Registrant has an
interest is sold pursuant to contracts negotiated between operators of producing
wells and purchasers of natural gas (subject to the Natural Gas Policy Act). As
of March 31, 1996 the principal purchasers (percentage purchased) of the
Registrant's natural gas production were approximately: Aquila Southwest
Pipeline Corporation (23%), Midland Marketing Corporation (19%), Energy
Development Corporation ("EDC") (16%), Texaco Inc. (13%), and GPM Gas
Corporation (11%). The Registrant does not believe that the loss of any of
these purchasers would have a material impact on Registrant's business because
of the demand for oil, gas and casinghead gas production. Oil and gas
production is transported by trucks and pipelines, respectively. The Registrant
does not own any bulk storage facilities or pipelines.
As of March 31, 1996, the Registrant had two employees, who currently work
part time in and out of the office. The Registrant believes that relations with
these employees are generally satisfactory. The Registrant's employees are not
covered by collective bargaining arrangements.
The Registrant, by nature of its oil and gas operations, is subject to
compliance with federal, state and local provisions regulating the discharge of
materials into the environment or
4
otherwise relating to the protection of the environment. At the present time,
however, such compliance does not require any substantial capital expenditures,
does not materially affect the Registrant's earnings and in the Registrant's
opinion will not materially affect future operations.
The Registrant is not engaged in operations in foreign countries, and no
portion of sales or revenues is derived from customers in foreign countries.
Item No. 2. Properties
----------
Office Facilities
- - -----------------
The Registrant occupies its principal offices at 1101 Petroleum Building,
Midland, Texas pursuant to a lease which terminates in less than one (1) year.
Oil and Gas Properties and Reserves
- - -----------------------------------
Registrant owns 100% of five (5) producing oil wells which it operates and
owns partial interests in an additional eight hundred seventy-one (871) wells
located in the states of Texas, New Mexico and Oklahoma. Of the wells, eight
hundred seventy-five (875) are producing. The Registrant also operates one (1)
water source well and one (1) injection well. Additional information concerning
these properties and the oil and gas reserves of the Registrant is provided as
follows.
Oil and Gas Properties
- - ----------------------
The following table indicates the net oil and gas production of the
Registrant in each of the last five (5) years, all of which is located within
the United States.
Year Oil (Bbls.) Gas (MCF)
1996 29,058 186,419
1995 21,844 140,010
1994 13,390 77,126
1993 12,331 55,370
1992 11,711 42,398
5
The following table indicates the Registrant's total gross and net
productive oil and gas wells and the total gross and net producing acreage as of
March 31, 1996.
Wells Producing
--------------------------- --------------
Oil Gas Acreage (a)
------------- ----------- --------------
Gross Net Gross Net Gross Net
----- ------ ----- ----- ------ ------
Texas 780 11.596 42 1.255 45,915 2,049
New Mexico 3 .066 2 .133 2,476 136
Oklahoma -- -- 7 .026 4,021 17
Wyoming 2 .020 -- -- 320 3
Louisiana 39 .009 -- -- 6,876 2
Arkansas 1 .001 -- -- 320 --
--- ------ -- ----- ------ -----
TOTAL 825 11.692 51 1.414 59,928 2,207
(a) A gross well or acre is one in which an interest is owned. A net well
or acre indicates the percentage of interest of the gross well or acre
owned by the Registrant.
(b) Of these wells none are shut-in pending plugging and abandonment.
The following table sets forth the results of the drilling activity by the
Registrant for the years ended March 31, 1996, 1995 and 1994.
Net Net Net Net
Gross Productive Dry(1) Productive Dry
Year Wells Exploratory Exploratory Development Development
- - ---- ----- ----------- ----------- ----------- -----------
1996 9 0 .063 .815 0
1995 6 0 0 1.125 0
1994 2 0 0 .25 .19
- - -------------
(1) One of the net dry exploratory wells accounted for .0625 was drilled in
1995, but not plugged and abandoned until 1996.
6
The following table presents, for the periods indicated, the average sales
price per unit and average production costs per unit attributable to the
Registrant's interest in producing oil and gas properties.
Year Ended March 31,
--------------------------
1996 1995 1994
------ ------ ------
Average sales price
per product:
Oil (per Bbl.) $17.45 $16.40 $14.87
Gas (per MCF) 1.57 1.32 1.66(1)
Average production costs per
barrel equivalent (gas con-
verted to barrel equivalent
to 6 MCF per barrel of oil) 4.54 4.60 7.39
Production cost per dollar
of sales .35 .38 .50
(1) This price excludes settlement proceeds from litigation regarding sales
of natural gas.
Oil and Gas Reserves
- - --------------------
See Note G of the Notes to Financial Statements herein for information
regarding the estimated quantities of proved oil and gas reserves owned by the
Registrant. The oil and gas reserves have been estimated in accordance with
regulations promulgated by the Securities and Exchange Commission.
The following table indicates estimates by the Registrant's Independent
Petroleum Engineers, T. Scott Hickman & Associates, Inc., of Midland, Texas, of
the availability to the Registrant of proved oil and gas reserves, all of which
are located in the United States, for the year 1996. The estimates for the
years 1994 and 1995 were prepared by the Registrant's consulting engineer, R.F.
Bailey of Midland, Texas. For 1996, T. Scott Hickman & Associates, Inc. has
estimated 424,737 barrels of oil and 1,920,107 MCF of gas for a combined
$4,627,526 of future net revenue discounted at ten percent (10%) per annum.
Reserve estimate calculations as of March 31, 1996, include decontrol of oil
prices, and repeal of the Windfall Profits Excise Tax but do not include
decontrol or escalation of gas prices, except as provided in existing gas
contracts. Since no provisions were made for changes in product prices and
costs, the Registrant does not believe that these estimates of reserves and
future net revenues fully reflect possible future revenue values. Estimates of
oil and gas reserves are projections based on engineering information and data.
There are uncertainties inherent in the interpretation of such data, and there
can be no assurance that the reserves set forth below will be ultimately
realized.
7
Proved Developed and Undeveloped Reserves
-----------------------------------------
Present Worth of
Future Net Revenues
Oil (bbls) Gas (MCF) Discounted at 10%
---------- --------- ------------------
March 31, 1996 424,737 1,920,107 $4,627,526
March 31, 1995 207,065 1,566,720 $2,028,365
March 31, 1994 79,855 671,303 $1,073,325
No major discovery or other favorable or adverse event has caused a
material change in the estimated proved reserves since March 31, 1996 except for
the increase in the Registrant's proved oil and gas reserves as of March 31,
1996 due primarily to purchases and development of producing properties and
except for normal production declines, price and related adjustments.
The Registrant has not filed any oil or gas reserve estimates or included
any such estimates in reports to any other federal or foreign governmental
authority or agency within the past twelve (12) months.
The Registrant has no foreign operations and has no agreements with foreign
governments.
As of March 31, 1996, one (1) well was to be drilled by the Registrant.
There were no other operations of material importance to Registrant such as
waterfloods and pressure maintenance projects being installed by the Registrant.
Title to Oil and Gas Properties
- - -------------------------------
Registrant currently has no properties mortgaged to secure indebtedness.
The Registrant's properties are generally subject to the customary royalty and
overriding royalty interests, liens incident to operating agreements, liens for
current taxes and other burdens and minor encumbrances, easements and
restrictions. The Registrant believes that none of such burdens materially
detract from the value of such properties or materially interferes with their
use in the operation of the Registrant's business.
As is common industry practice, little or no investigation of title is made
at the time of acquisition of undeveloped properties, other than preliminary
review of local mineral records. Title investigations, in most cases including
obtaining a title opinion of local counsel, are made before commencement of
drilling operations. The Registrant believes that its methods of investigating
title to its properties are consistent with practices customary in the oil and
gas industry in connection with the
8
acquisition of such properties, and that such practices are adequately designed
to enable it to acquire good title to such properties.
Undeveloped Acreage
- - -------------------
The Registrant currently does not own any material inventory of non-
productive acreage in partially developed prospects except those located in the
Viejos Devonian Field of Pecos County, Texas and the Lazy JL Spraberry Field of
Garza County, Texas. The Registrant owns from 6.00% working interest to 9.51%
working interest (net revenue interest 4.5% to 7.13%) in the Viejos Field of
Pecos County, Texas, consisting of 2,574 gross acres and ten (10) wells.
The Registrant owns a 35% working interest (net revenue interest 26.25%) in
ten (10) wells in the Lazy JL (Lower Spraberry) Field of Garza County, Texas,
consisting of 1,284 acres in which the Registrant owns from a 25% to 35% working
interest at March 31, 1996. The Registrant is unable to determine the extent of
future development, if any, in these two (2) fields.
Item No. 3. Legal Proceedings
-----------------
The Registrant is not involved in any pending or threatened legal
proceedings except as set forth in Note F of the Notes to Financial Statements
herein.
Item No. 4. Submission of Matters to a Vote of Security
-------------------------------------------
Holders
-------
No matter has been submitted to a vote of security holders during the
fourth quarter of the fiscal year being reported upon.
9
PART II
-------
Item No. 5. Market For Registrant's Common Equity and Related
-------------------------------------------------
Stockholder Matters.
-------------------
"Common Stock"
- - --------------
The Registrant's common stock is traded in the over-the-counter market.
The high and low bid quotations for the calendar periods indicated are shown on
the following table.
Bid Price
----------------
High Low
---- ---
1996 April - June 1995 $3.00 $2.00
July - September 1995 3.00 2.00
October - December 1995 3.00 2.00
January - March 1996 3.00 2.00
1995 April - June 1994 $2.50 $1.50
July - September 1994 2.50 1.50
October - December 1994 2.50 1.50
January - March 1995 2.50 1.50
Bid quotations representing prices between dealers do not include retail
mark up, mark down or commissions, and do not necessarily represent actual
transactions.
Number of Shareholders
- - ----------------------
As of March 31, 1996, there were approximately 1,476 shareholders of
record of the Registrant's common stock.
Dividends
- - ---------
The Registrant has not paid any dividends on its common stock, and the
payment of any dividends at a future date would be dependent upon the earnings,
financial condition and capital needs of the Registrant at such time.
10
Item No. 6. Selected Financial Data
-----------------------
Revenues:
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
Oil & gas
income $ 798,589 $ 543,267 $ 374,322 $ 331,412 $ 288,948
Proceeds from
settlement of
litigation --- --- 1,160,933 --- ---
Administrative
service charges
and reimburse-
ments 7,380 10,123 26,553 16,924 18,218
Other income 28,104 20,531 18,071 4,350 9,582
Net income (loss) 200,606 104,843 1,028,718 ( 8,975) 14,869
Net Income (loss)
per share .15 .09 .88 ( .01) .01
---------- ---------- ---------- ---------- ----------
Net Income (loss)
from continuing
operations 200,606 104,843 1,028,718 ( 8,975) 14,869
========== ========== ========== ========== ==========
Net Income (loss)
from continuing
operations per
share .15 .09 .88 ( .01) .01
========== ========== ========== ========== ==========
Total Assets 2,612,039 1,951,896 1,868,369 817,805 737,075
Total Long-Term
Debt --- --- --- --- ---
Weighted average
shares
outstanding 1,342,628 1,173,229 1,173,229 1,157,479 1,152,229
Dividends --- --- --- --- ---
========== ========== ========== ========== ==========
11
Item No. 7. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Liquidity and Capital Resources and Commitments
- - -----------------------------------------------
As indicated by the Statements of Cash Flows for the past three fiscal
years, the Registrant generally has generated cash from operating activities
which has been used primarily for purposes of acquiring producing and non-
producing oil and gas properties.
On July 28, 1995, the Registrant completed a private placement with
accredited investors of 250,000 shares of its unregistered, restricted common
stock, par value $0.50 per share, for total proceeds of $500,000 or $2.00 per
share to the Registrant. The proceeds are being used in developing the
Registrant's existing oil and gas properties and for the purchase of additional
oil and gas properties. Such shares were issued to six (6) shareholders,
representing 17.57% of the total issued and outstanding shares after said sale.
Registrant also has a letter of credit with NationsBank of Texas, N.A.,
Midland, Texas, which provides for unsecured borrowings up to $50,000 in lieu of
a plugging bond with the Railroad Commission for properties currently shut-in.
In the past years, the oil and gas industry has suffered because of price
decreases for oil. An oversupply of petroleum in both the domestic and
international markets appeared to be the reason for the price decline. The
Registrant is unable to predict price changes or the possible effects on the
Registrant at this time. Past changes in tax laws and the decline in oil prices
have had the effect industry-wide of limiting funds available for oil and gas
exploration.
During the fiscal year ended March 31, 1996, the Registrant's oil
production increased 7,214 barrels (33%) from 1995 and gas production increased
46,409 MCF (33%) as a result of additional producing oil and gas properties.
Results of Operations
- - ---------------------
Business Segment
----------------
The Registrant only has a single line of business which is oil and gas
acquisition, exploration and production.
12
Fiscal 1996 Compared to Fiscal 1995
-----------------------------------
Registrant participated in the drilling of nine (9) gross (.815 net) wells,
of which seven (7) were productive oil wells in fiscal 1996.
An increase in working capital of $20,300 for fiscal 1996, compared to a
decrease of $466,825 for fiscal 1995 was a result of increased receipts of oil
and gas sales and proceeds of a private placement of the Registrant's common
stock.
Gross revenue from oil and gas production increased in 1996 compared to
1995 by $255,322 (47%) and the Registrant reflected net earnings of $200,606.
Revenues increased due to the increase in oil and gas production from
acquisition and development of oil and gas properties. This increase was
affected by increase in revenues from sales of crude oil and natural gas during
the current period. The average 1996 price for crude oil is $17.45 per barrel
compared to the 1995 price of $16.40. Average prices paid per MCF of gas for
1996 and 1995 were $1.57 and $1.32, respectively.
Administrative services income and reimbursement to the Registrant
decreased $2,743 (27%) due to the plugging and abandonment of certain wells
during the current year.
Production costs increased $65,263 (31%) from 1995 primarily from the
addition of new wells drilled in 1996.
Other income in 1996 consisted primarily of $17,285 of interest income from
investment in a liquid asset money market fund and $6,979 of gas gathering fees
from the Viejos field.
Overall, costs and expenses increased in 1996 by $162,672 (36%). Normal
depreciation, depletion and amortization increased in 1996 as compared to 1995
by $91,669 (54%) due to increased acquisition, development and production of
properties. General and administrative expenses increased $5,740 (7%).
Fiscal 1995 Compared to Fiscal 1994
-----------------------------------
Registrant participated in the drilling of six (6) gross (1.125 net) wells,
of which all six (6) were productive oil wells in fiscal 1995.
A decrease in working capital of $466,825 for fiscal 1995, compared to an
increase of $711,649 for fiscal 1994 was a result of increased acquisition,
drilling and development costs and non-recurring receipt of proceeds aggregating
$1,160,933 in 1994 from litigation regarding natural gas sales.
13
Gross revenue from oil and gas production increased in 1995 compared to
1994 by $168,945 (45%) and the Registrant incurred a profit of $104,843.
Revenues increased due to the increase in oil and gas production from additions
of oil and gas properties as compared to the prior year. This increase was
affected by increase in revenues from sales of crude oil and natural gas during
the current period. The average 1995 price for crude oil was $16.40 per barrel
compared to the 1994 price of $14.87. Average prices paid per MCF for 1995 and
1994 were $1.32 and $1.66, respectively.
Administrative services income and reimbursement to the Registrant
decreased $16,430 (62%) due to non-recurrence of drilling overhead charges
during the current year.
Production costs increased $13,682 (7%) from 1994 primarily from the
addition of new wells drilled in 1995.
Other income in 1995 consisted primarily of $15,334 of interest income from
investment in a liquid asset money market fund.
Overall, costs and expenses decreased in 1995 by $32,162 (6.55%). Normal
depreciation, depletion and amortization increased in 1995 as compared to 1994
by $18,394 (12%) due to increased development and acquisition of properties. In
1994 an impairment of $65,794 was recorded due to the Company's full cost pool
exceeding the full cost ceiling. General and administrative expense increased
$3,112 (4%).
Item No. 8. Financial Statements and Supplementary Data
-------------------------------------------
See Index to Financial Statements elsewhere herein.
Item No. 9. Changes in and Disagreements on Accounting and
----------------------------------------------
Financial Disclosures
---------------------
There were no changes or disagreements.
PART III
--------
Item No. 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
Name Age Position
- - ----------------------------- --- -------------------
William G. Duncan, Jr. 53 Director
Nicholas C. Taylor 58 Director, President
and Treasurer
Donna Gail Yanko 52 Director, Vice
President and
Secretary
14
At the Annual Meeting held on November 29, 1995, the above persons were
elected to serve on the Board of Directors for a term of one year and until
their successors are duly elected and qualified.
The following is a brief account of the business experience during the last
five years of each director and executive officer:
William G. Duncan, 53, since October 1991, has been the Senior Vice
-----------------
President and Chief Investment Officer of Southeastern Financial Services,
Louisville, Kentucky. For the previous twenty-five (25) years, he held several
positions at Liberty National Bank and Trust Company, Louisville, Kentucky,
serving as Senior Vice President and Manager of the bank's Personal Trust
Investment Section, member of Liberty's Trust Executive Committee, and several
positions in Liberty's Commercial Banking Division. Mr. Duncan was appointed to
the position of Director on July 22, 1994, after the resignation of Thomas
Graham, Jr. to become a United States Ambassador, and was elected a Director in
1994.
Nicholas C. Taylor, 58, was elected President, Treasurer and Director of
------------------
the Registrant in 1983 and serves in such capacities on a part time basis, as
required. From 1974 to 1993, he was a director and shareholder of the law firm
of Stubbeman, McRae, Sealy, Laughlin & Browder, Inc., Midland, Texas, and a
partner of the predecessor firm. Since 1993 he has been engaged in the practice
of law and investments, primarily in oil and gas. In 1995 he was appointed by
the Governor of Texas to serve as a member of the State Securities Board.
Donna Gail Yanko, 52, has worked as part-time administrative assistant to
----------------
the President and controlling shareholder for the past nine years. She served as
Assistant Secretary of the Company from 1986 to 1992 and was elected a Director
and appointed Vice President of the Company in 1990 and Secretary in 1992.
Item No. 11. Executive Compensation
----------------------
The following table sets forth all cash compensation received by the
executive officers and directors of the Registrant as a group setting forth
individually executive officers and directors who received in excess of $60,000,
including cash bonuses.
Summary Compensation Table/(1)/
-------------------------------
Name and
Principal Position Year Salary
- - -------------------- ---- -------
4 Officers & 1996 $38,400
Directors 1995 $33,559
as a group 1994 $29,400
(1) Directors are paid $100 per meeting of which there were three (3) for the
period.
15
Item No. 12. Security Ownership of Certain Beneficial Owners
-----------------------------------------------
and Management
--------------
The following table sets forth as of March 31, 1996 the owners of five
percent (5%) or more of its common stock:
(1) Title (2) Name and (3) Amount and (4) Percent
of Class Address of Nature of Bene- of Class
Beneficial Owner ficial Ownership
- - --------------------------------------------------------------------
Common Nicholas C. Taylor(1) 1,062,770 74.67%
214 West Texas
Suite 1101
Midland, TX 79701
Common Howard E. Cox, Jr. 160,000 11.24%
One Federal Street
26th Floor
Boston, MA 02110
- - -------------
(1) Mr. Taylor, by virtue of his share of ownership, may be deemed to be a
"parent" of the Company as defined under Rule 405 promulgated by the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933 as
amended (the "Securities Act").
The information set forth below shows as of June 1, 1996, all shares of the
Registrant's common stock beneficially or indirectly owned by all directors, and
all directors and officers as a group without naming them.
The following table sets forth the ownership of executive officers and
directors of the Registrant.
(1) Title (2) Name and (3) Amount and (4) Percent
of class Address of Nature of Bene- of Class
Beneficial Owner ficial Ownership
- - ----------------------------------------------------------------
Common Nicholas C. Taylor 1,062,770 74.67%
Donna Gail Yanko 7,140 .50%
Kay M. Castle(2) 1,055 .07%
All Directors and 1,070,965 75.25%
Officers as a Group
- - -------------
(2) Mrs. Castle resigned as Comptroller of the Company effective May 23, 1996.
16
Item No. 13. Certain Relationships and Related Transactions
----------------------------------------------
Registrant's principal shareholder owns working interests varying from
93.75% to 100% in certain wells which it operates. Registrant operates these
wells on a contract basis charging the same or greater administrative fees as
the previous operator. See Note E of the Notes to Financial Statements.
PART IV
-------
Item No. 14. Exhibits, Financial Statement Schedules, Reports
------------------------------------------------
on Form 8-K
-----------
(a) Financial Statements, Schedules and Exhibits
1. Financial Statements
2. Financial Statement Schedules
All schedules are omitted because of the absence of conditions
under which they are required or because the information is
included in the financial statements or notes thereto.
3. Exhibits
The exhibits and financial statement schedules filed as a part of
this report are listed below according to the number assigned to it in
the exhibit table of Item 601 of Regulation S-K:
(3) Restated Articles of Incorporation and Bylaws.
(4) Instruments defining the rights of security holders,
including indentures - None.
(9) Voting Trust Agreement - None, consequently, omitted.
(10) Material Contract - None, consequently omitted.
(11) Statement regarding computation of per share earnings - Not
Applicable.
(12) Statement regarding computation of ratios - Not Applicable.
(13) Annual Report to security holders, Form 10-Q or quarterly
report to security holders - Not Applicable.
17
(18) Letter regarding change in accounting principles - No
change during fiscal 1996.
(19) Previously unfiled documents - No documents have been
executed or in effect during the reporting period which should have
been filed, consequently, this exhibit has been omitted.
(22) Subsidiaries of the Registrant - There are no subsidiaries
of the Registrant, consequently, this exhibit has been omitted.
(23) Published report regarding matters submitted to vote of
security holders - None, consequently omitted.
(24) Consent of experts - Not applicable.
(25) Power of Attorney - There are no signatures contained within
this report pursuant to a power of attorney, consequently, this
exhibit has been omitted.
(28) Additional Exhibits - None.
(b) Reports on Form 8-K.
No report on Form 8-K was filed by the Registrant during the last quarter
of the period covered by this report.
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
behalf of the undersigned thereunto duly authorized.
MEXCO ENERGY CORPORATION
By: /s/ Nicholas C. Taylor
----------------------------
Nicholas C. Taylor, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ Nicholas C. Taylor President, June 24, 1996
------------------------- Treasurer,
Nicholas C. Taylor Director
/s/ Donna Gail Yanko Vice President, June 24, 1996
------------------------- Director
Donna Gail Yanko
/s/ Teresa C. Mitchell Comptroller June 24, 1996
-------------------------
Teresa C. Mitchell
19
EXHIBIT INDEX
-------------
Number Exhibit Page
- - -------- ------------------------------------ ----
(1) *
(2) *
(3) Articles of Incorporation and Bylaws **
(4) Instruments defining the rights of security
holders, including indentures Omit
(5) *
(6) *
(7) *
(8) *
(9) Voting Trust Agreement Omit
(10) Material Contracts Omit
(11) Statement regarding computation of per
share earnings Omit
(12) Statement regarding computation of ratios Omit
(13) Annual Report to security holders, Form 10-Q,
or quarterly report to security holders Omit
(14) *
(15) *
(16) *
(17) *
(18) Letter regarding change in accounting
principles Omit
(19) Previously unfiled documents Omit
(20) *
(21) *
(22) Subsidiaries of the Registrant Omit
(23) Published report regarding matters submitted
to vote of security holders Omit
(24) Consent of experts Omit
(25) Power of Attorney Omit
(26) *
(27) *
(28) Additional Exhibits Omit
* This exhibit is not required to be filed in accordance with
Item 601 of Regulation S-K.
** Incorporated by reference to the Registrant's Annual Report to the
Securities & Exchange Commission on Form 10-K, dated June 23, 1995.
20
MEXCO ENERGY CORPORATION
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
--------------------
Page
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS F-2
BALANCE SHEETS AS OF MARCH 31, 1996 AND 1995 F-3
STATEMENTS OF OPERATIONS FOR THE YEARS ENDED MARCH 31,
1996, 1995, AND 1994 F-4
STATEMENT OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
MARCH 31, 1996, 1995, AND 1994 F-5
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31,
1996, 1995, AND 1994 F-6
NOTES TO FINANCIAL STATEMENTS F-7
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors
Mexco Energy Corporation
We have audited the accompanying balance sheets of Mexco Energy Corporation, as
of March 31, 1996 and 1995, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended March 31, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Mexco Energy Corporation, as of
March 31, 1996 and 1995, and the results of its operations and its cash flows
for each of the three years in the period ended March 31, 1996 in conformity
with generally accepted accounting principles.
GRANT THORNTON LLP
Oklahoma City, Oklahoma
May 23, 1996
F-2
MEXCO ENERGY CORPORATION
BALANCE SHEETS
March 31,
ASSETS 1996 1995
----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 172,112 $ 220,974
Accounts receivable, including $12,297 in 1996 and
$7,888 in 1995 from a related party (note E) 108,583 71,981
Prepaid expenses - 1,350
Recoverable income taxes - 9,126
---------- ----------
Total current assets 280,695 303,431
PROPERTY AND EQUIPMENT - AT COST
Oil and gas properties, using the full cost method
of accounting (notes D and G) 4,900,230 3,954,959
Other property 2,431 2,431
---------- ----------
4,902,661 3,957,390
Less accumulated depreciation, depletion, and
amortization 2,571,317 2,308,925
---------- ----------
2,331,344 1,648,465
---------- ----------
$2,612,039 $1,951,896
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 32,584 $ 37,472
Income taxes payable - 38,148
---------- ----------
Total current liabilities 32,584 75,620
DEFERRED INCOME TAXES (note B) 34,310 31,737
---------- ----------
Total liabilities 66,894 107,357
STOCKHOLDERS' EQUITY
Common stock - $.50 par value; authorized, 5,000,000
shares; issued and outstanding, 1,423,229 shares in
1996 and 1,173,229 shares in 1995 711,614 586,614
Additional paid-in capital 1,975,429 1,600,429
Accumulated deficit (141,898) (342,504)
---------- ----------
2,545,145 1,844,539
---------- ----------
$2,612,039 $1,951,896
========== ==========
The accompanying notes are an integral part of these statements.
F-3
MEXCO ENERGY CORPORATION
STATEMENTS OF OPERATIONS
Year ended March 31,
1996 1995 1994
---------- ---------- ----------
Revenues
Oil and gas $ 798,589 $ 543,267 $ 374,322
Proceeds from settlement of litigation (note F) - - 1,160,933
Administrative services, charges, and
reimbursements 7,380 10,123 26,553
Interest 17,285 15,334 18,071
Other income 10,819 5,197 -
---------- ---------- ----------
834,073 573,921 1,579,879
Costs and expenses
Production 272,892 207,629 193,947
Depreciation, depletion, and amortization 262,392 170,723 152,329
Impairment of oil and gas properties - - 65,794
General and administrative 86,484 80,744 77,632
Interest - - 1,556
---------- ---------- ----------
621,768 459,096 491,258
---------- ---------- ----------
Earnings before income tax
expense 212,305 114,825 1,088,621
Income tax expense (note B) 11,699 9,982 59,903
---------- ---------- ----------
NET EARNINGS $ 200,606 $ 104,843 $1,028,718
========== ========== ==========
Earnings per share $.15 $.09 $.88
========== ========== ==========
Weighted average outstanding shares 1,342,628 1,173,229 1,173,229
========== ========== ==========
The accompanying notes are an integral part of these statements.
F-4
MEXCO ENERGY CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
Years ended March 31, 1996, 1995, and 1994
Common stock Additional Total
---------------------- paid-in Accumulated stockholders'
Shares Amount capital deficit equity
------------ -------- ----------- -------------- ----------
Balance at April 1, 1993 1,173,229 $586,614 $1,600,429 $(1,476,065) $ 710,978
Net earnings - - - 1,028,718 1,028,718
--------- -------- ---------- ----------- ----------
Balance at March 31, 1994 1,173,229 586,614 1,600,429 (447,347) 1,739,696
Net earnings - - - 104,843 104,843
--------- -------- ---------- ----------- ----------
Balance at March 31, 1995 1,173,229 586,614 1,600,429 (342,504) 1,844,539
Net earnings - - - 200,606 200,606
Proceeds from issuance of
common stock 250,000 125,000 375,000 - 500,000
--------- -------- ---------- ----------- ----------
Balance at March 31, 1996 1,423,229 $711,614 $1,975,429 $ (141,898) $2,545,145
========= ======== ========== =========== ==========
The accompanying notes are an integral part of this statement.
F-5
MEXCO ENERGY CORPORATION
STATEMENTS OF CASH FLOWS
Year ended March 31,
1996 1995 1994
---------- ---------- -----------
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities
Cash received from oil and gas operations $ 769,367 $ 537,247 $ 397,335
Proceeds from settlement of litigation - - 1,160,933
Cash paid for oil and gas operating expenses (276,430) (252,259) (153,835)
Cash paid for general and administrative expenses (86,484) (80,744) (77,632)
Interest received 17,285 15,334 17,515
Interest paid - - (1,556)
Income taxes refunded (paid) (38,148) 30,874 (40,000)
Other receipts 10,819 5,197 -
--------- --------- ----------
Net cash provided by operating activities 396,409 255,649 1,302,760
Cash flows from investing activities
Payments for purchase of oil and gas properties (969,271) (800,591) (512,992)
Proceeds from sale of assets 24,000 26,463 3,300
--------- --------- ----------
Net cash used in investing activities (945,271) (774,128) (509,692)
Cash flows from financing activities
Payments on long-term debt - - (64,000)
Proceeds from issuance of common stock 500,000 - -
--------- --------- ----------
Net cash provided by (used in) financing activities 500,000 - (64,000)
--------- --------- ----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (48,862) (518,479) 729,068
Cash and cash equivalents at beginning of year 220,974 739,453 10,385
--------- --------- ----------
Cash and cash equivalents at end of year $ 172,112 $ 220,974 $ 739,453
========= ========= ==========
Reconciliation of Net Earnings to Net Cash Provided by
Operating Activities
Net earnings $ 200,606 $ 104,843 $1,028,718
Adjustments to reconcile net earnings to net cash provided
by operating activities
Depreciation, depletion, and amortization 262,392 170,723 218,123
Deferred income taxes 2,573 31,737 -
(Increase) decrease in
Accounts receivable (36,602) (16,143) (3,259)
Recoverable income taxes 9,126 9,906 (19,032)
Prepaid expenses 1,350 7,636 (7,636)
Increase (decrease) in
Accounts payable (4,888) (52,266) 46,911
Income taxes payable (38,148) (787) 38,935
--------- --------- ----------
Net cash provided by operating activities $ 396,409 $ 255,649 $1,302,760
========= ========= ==========
The accompanying notes are an integral part of these statements.
F-6
MEXCO ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
March 31, 1996, 1995, and 1994
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
The major operations of Mexco Energy Corporation (the Company) consist of
exploration, production, and sale of crude oil and natural gas in the United
States with an area of concentration in Texas.
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying financial statements follows.
1. Oil and Gas Properties
----------------------
The full cost method of accounting is used to account for oil and gas
properties. Under this method of accounting, all costs incident to the
acquisition, exploration, and development of properties (both developed and
undeveloped), including costs of abandoned leaseholds, lease rentals,
unproductive wells, and well drilling and equipment costs, are capitalized.
Costs are amortized using the units-of-production method. The units-of-
production method is based primarily on estimates of reserve quantities. Due
to uncertainties inherent in this estimation process, it is at least reasonably
possible that reserve quantities will be revised significantly in the near
term. If the Company's unamortized costs exceed the cost center ceiling
(defined as the sum of the present value, discounted at 10%, of estimated
unescalated future net revenues from proved reserves, less related income tax
effects), the excess is charged to expense in the year in which the excess
occurs. Generally, no gains or losses are recognized on the sale or
disposition of oil and gas properties.
2. Depreciation
------------
Depreciation of office furniture, fixtures, and equipment is provided on the
straight-line method over estimated useful lives of three to ten years.
3. Production Costs and Administrative Service Arrangements
--------------------------------------------------------
Production costs include lease operating expenses and production taxes.
Reimbursements related to administrative service arrangements are recorded as
revenues.
4. Earnings Per Share
------------------
Earnings per share is calculated using the weighted average number of shares
outstanding during each year.
5. Cash and Cash Equivalents
-------------------------
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less and money market funds to be cash equivalents.
The carrying amount of cash and cash equivalents approximates fair value
because of the short maturity and highly liquid nature of those instruments.
.
F-7
MEXCO ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 1996, 1995, and 1994
NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
- CONTINUED
5. Cash and Cash Equivalents - Continued
-------------------------------------
The Company maintains its cash in bank deposit accounts and money market funds,
some of which are not federally insured. The Company has not experienced any
losses in such accounts and believes it is not exposed to any significant
credit risk.
6. Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates based on management's
knowledge and experience. Due to their prospective nature, actual results
could differ from those estimates.
NOTE B - INCOME TAXES
The Company accounts for income taxes using the liability method. Income tax
expense for years ended March 31 is as follows:
1996 1995 1994
-------- ---------- --------
Current expense (benefit)
Federal $ 9,126 $(21,755) $20,968
State - - 38,935
------- -------- --------
9,126 (21,755) 59,903
Deferred expense, exclusive of benefits of
operating loss carryforwards
Federal 2,150 38,281 -
State 423 5,217 -
------- -------- --------
2,573 43,498 -
Benefits of operating loss carryforwards - (11,761) -
------- -------- --------
$11,699 $ 9,982 $59,903
======= ======== ========
The income tax provision reconciled to the tax computed at the statutory
federal rate for years ended March 31 is as follows:
1996 1995 1994
--------- --------- ----------
Tax expense at statutory rate $ 72,184 $ 39,041 $ 370,131
Decrease in valuation allowance (5,806) (21,845) (337,033)
State income taxes 1,461 3,410 38,934
Prior year underaccrual (overaccrual) (16,308) 11,823 -
Effect of graduated rates (34,194) (13,420) -
Other (5,638) (9,027) (12,129)
-------- -------- ---------
$ 11,699 $ 9,982 $ 59,903
======== ======== =========
F-8
MEXCO ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 1996, 1995, and 1994
NOTE B - INCOME TAXES - CONTINUED
Amounts of deferred tax assets, valuation allowance, and deferred tax
liabilities at March 31 are as follows:
1996 1995
---------- ----------
Deferred tax assets
Operating loss carryforwards $ - $ 11,761
Percentage depletion carryforwards 66,791 67,814
-------- ---------
66,791 79,575
Less valuation allowance 3,072 8,878
-------- ---------
63,719 70,697
Deferred tax liability
Excess financial accounting bases over tax bases
of property and equipment (98,029) (102,434)
-------- ---------
Net deferred tax liability $(34,310) $ (31,737)
======== =========
Decrease in valuation allowance for the year $ 5,806 $ 21,845
======== =========
As of March 31, 1996, the Company has statutory depletion carryforwards of
approximately $325,000 which do not expire.
NOTE C - SEGMENT INFORMATION AND MAJOR CUSTOMERS
The Company operates exclusively within the United States in the onshore
exploration and production of oil and gas. In the normal course of business,
the Company extends credit to customers in the oil and gas industry and
therefore has significant credit risk in this sector of the economy.
Historically, the Company has not had significant bad debts and, as such, no
allowance for doubtful accounts has been provided in the accompanying financial
statements.
Customers which accounted for 10% or more of revenues are as follows:
Year ended March 31,
----------------------
1996 1995 1994
------- ------ -----
Navajo Crude Oil Marketing Company 40% 22% -
Sun Refining and Marketing Company 13% - -
Phillips Petroleum Company - 15% -
F-9
MEXCO ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 1996, 1995, and 1994
NOTE D - OIL AND GAS COSTS
The costs related to the oil and gas activities of the Company were incurred as
follows:
Year ended March 31,
----------------------------
1996 1995 1994
-------- -------- --------
Property acquisition costs $650,496 $444,274 $351,066
Development costs $318,775 $356,317 $161,926
The Company had the following aggregate capitalized costs relating to the
Company's oil and gas property activities at March 31:
1996 1995
---------- ----------
Proved oil and gas properties $4,900,230 $3,954,959
Less accumulated depreciation, depletion,
and amortization 2,569,291 2,306,899
---------- ----------
$2,330,939 $1,648,060
========== ==========
NOTE E - RELATED PARTY TRANSACTIONS
The Company serves as operator of properties in which the majority stockholder
has interests and, in that capacity, bills the majority stockholder for lease
operating expenses on a monthly basis subject to usual trade terms. The
billings totaled approximately $106,198, $152,597, and $270,573 for the years
ended March 31, 1996, 1995, and 1994, respectively. Accounts receivable
include $12,297 and $7,888 due from the majority stockholder at March 31, 1996
and 1995, respectively.
NOTE F - LITIGATION
The Company is one of several plaintiffs in a lawsuit for damages in
connection with a gas contract. This suit is set for trial in the latter part
of July, 1996. Counsel for the Company at this time is unable to determine the
outcome of such litigation, which, if successful, could result in significant
income to the Company.
The Company was a defendant in a lawsuit concerning an oil and gas lease in
which the Company is an interest owner. The suit involved alleged
environmental damage resulting from an oil spill and was defended by the
operator of the property. During 1995, a settlement was reached resulting in
no liability to the Company.
In the year ended March 31, 1994, the Company received approximately $1,160,000
in the settlement of a lawsuit. The lawsuit involved failure to timely pay
royalty owners the proper royalties for the production and sale of gas from
certain gas units.
F-10
MEXCO ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 1996, 1995, and 1994
NOTE F - LITIGATION - CONTINUED
The Company is subject to certain legal proceedings and claims which have
arisen in the ordinary course of its business which management believes will
not result in any material liability.
NOTE G - OIL AND GAS RESERVE DATA (UNAUDITED)
In accordance with Statement of Financial Accounting Standards No. 69 (SFAS 69)
and Securities and Exchange Commission (SEC) rules and regulations, the
following information is presented with regard to the Company's proved oil and
gas reserves, all of which are located in the United States. Information for
oil is presented in barrels (Bbls) and for gas in thousand cubic feet (Mcf).
The SEC has adopted SFAS 69 accounting guidelines for oil and gas producers.
These rules require the Company to include as a supplement to the basic
financial statements a standardized measure of discounted future net cash flows
relating to proved oil and gas reserves.
The standardized measure, in management's opinion, should be examined with
caution. The basis for these disclosures is an independent petroleum
engineer's reserve study which contains imprecise estimates of quantities and
rates of production of reserves. Revision of prior year estimates can have a
significant impact on the results. Also, exploration costs in one year may
lead to significant discoveries in later years and may significantly change
previous estimates of proved reserves and their valuation. Values of unproved
properties and anticipated future price and cost increases or decreases are not
considered. Therefore, the standardized measure is not necessarily a "best
estimate" of the fair value of the Company's oil and gas properties or of
future net cash flows.
The following summaries of changes in reserves and standardized measure of
discounted future net cash flows were prepared from estimates of proved
reserves developed by independent petroleum engineers. The Company's future
income tax expense in its standardized measure of discounted future net cash
flows has been reduced because of significant statutory depletion
carryforwards.
F-11
MEXCO ENERGY CORPORATION
NOTES TO FINANCIAL STATEMENTS - CONTINUED
March 31, 1996, 1995, and 1994
NOTE G - OIL AND GAS RESERVE DATA (UNAUDITED) - CONTINUED
Summary of Changes in Proved Reserves
(Unaudited)
1996 1995 1994
------------------- ------------------- ------------------------
Bbls Mcf Bbls Mcf Bbls Mcf
------- --------- -------- --------- ------------ --------
Proved developed and undeveloped
reserves
Beginning of year 207,000 1,567,000 80,000 671,000 83,000 585,000
Revision of previous estimates 11,000 29,000 124,000 376,000 (38,000) 123,000
Purchase of minerals in place 111,000 352,000 4,000 568,000 48,000 40,000
Extensions and discoveries 126,000 217,000 24,000 95,000 - -
Production (29,000) (188,000) (22,000) (140,000) (13,000) (77,000)
Sales of minerals in place (1,000) (57,000) (3,000) (3,000) - -
------- --------- -------- --------- ------------ ----------
End of year 425,000 1,920,000 207,000 1,567,000 80,000 671,000
======= ========= ======== ========= ============ ==========
Proved developed reserves
Beginning of year 183,000 1,472,000 80,000 671,000 83,000 585,000
End of year 209,000 1,593,000 183,000 1,472,000 80,000 671,000
Standardized Measure of Discounted Future Net Cash Flows
Relating to Proved Oil and Gas Reserves
(Unaudited)
March 31,
----------------------------------------
1996 1995 1994
------------ ------------ ----------
Future oil and gas revenues $ 12,239,000 $ 5,408,000 $2,479,000
Future production and development costs (4,576,000) (2,042,000) (744,000)
Future income tax expense (740,000) (320,000) (97,000)
------------ ----------- ----------
Future net cash flows 6,923,000 3,046,000 1,638,000
Discounted at 10% for estimated timing of cash flows (2,742,000) (1,210,000) (626,000)
------------ ----------- ----------
Standardized measure of discounted future net cash flows $ 4,181,000 $ 1,836,000 $1,012,000
============ =========== ==========
Changes in Standardized Measure of Discounted
Future Net Cash Flows
Related to Proved Oil and Gas Reserves
(Unaudited)
Year ended March 31,
--------------------------------------
1996 1995 1994
--------- ----------- ---------
Sales and transfers of oil and gas produced, net of
production costs $(526,000) $(336,000) $(180,000)
Net changes in prices and production costs 734,000 (215,000) (29,000)
Extensions and discoveries, less related costs 954,000 165,000 -
Revisions of previous quantity estimates 95,000 804,000 (205,000)
Accretion of discount 203,000 101,000 103,000
Net change due to purchases and sales of minerals in place 1,150,000 382,000 341,000
Net change in income taxes (254,000) (133,000) (61,000)
Other (11,000) 56,000 12,000
--------- -------- --------
Net increase (decrease) 2,345,000 824,000 (19,000)
Balance at beginning of year 1,836,000 1,012,000 1,031,000
--------- -------- --------
Balance at end of year $ 4,181,000 1,836,000 $1,012,000
========= ======== =========
F-12