Attached files
file | filename |
---|---|
EX-32 - EX-32 - OAKRIDGE ENERGY INC | a11-3941_1ex32.htm |
EX-31.1 - EX-31.1 - OAKRIDGE ENERGY INC | a11-3941_1ex31d1.htm |
EX-31.2 - EX-31.2 - OAKRIDGE ENERGY INC | a11-3941_1ex31d2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| |
For the quarterly period ended November 30, 2010 | |
| |
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to .
Commission File Number: 000-8532
OAKRIDGE ENERGY, INC.
(Exact name of registrant as specified in its charter)
Utah (State or other jurisdiction of incorporation or organization) |
|
87-0287176 (I.R.S. Employer Identification No.) |
|
|
|
4613 Jacksboro Highway Wichita Falls, Texas (Address of principal executive offices) |
|
(Zip Code) |
(940) 322-4772
(Registrants telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
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 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 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (check one):
Large accelerated filer o |
|
Accelerated filer o |
|
|
|
Non-accelerated filer o |
|
Smaller reporting company x |
(Do not check if a smaller reporting company) |
|
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of January 13, 2011, 4,030,345 shares of the registrants common stock, par value $.04 per share, were outstanding.
OAKRIDGE ENERGY, INC.
|
|
November 30, |
|
February 28, |
| ||
|
|
(Unaudited) |
|
|
| ||
Assets |
|
|
|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
795,593 |
|
$ |
1,480,775 |
|
Trade accounts receivable |
|
117,018 |
|
129,797 |
| ||
Investment securities available for sale |
|
217,658 |
|
128,030 |
| ||
Prepaid expenses and other |
|
11,051 |
|
16,715 |
| ||
Certificates of deposit |
|
306,273 |
|
204,399 |
| ||
Total current assets |
|
1,447,593 |
|
1,959,716 |
| ||
|
|
|
|
|
| ||
Oil and gas properties, at cost, using the successful efforts method of accounting, net of accumulated depletion and depreciation of $6,895,700 and $6,886,657, respectively |
|
334,475 |
|
346,577 |
| ||
|
|
|
|
|
| ||
Coal and gravel properties, at cost, net of accumulated depreciation of $5,589,936 |
|
260,488 |
|
260,488 |
| ||
|
|
|
|
|
| ||
Other property and equipment, net of accumulated depreciation of $297,548 and $291,948, respectively |
|
101,532 |
|
107,132 |
| ||
|
|
|
|
|
| ||
Real estate held for sale |
|
3,168,107 |
|
3,168,107 |
| ||
|
|
|
|
|
| ||
Deferred income taxes |
|
919,366 |
|
754,499 |
| ||
|
|
|
|
|
| ||
Other non-current assets |
|
446,367 |
|
446,367 |
| ||
|
|
|
|
|
| ||
Total assets |
|
$ |
6,677,928 |
|
$ |
7,042,886 |
|
See accompanying notes to financial statements.
OAKRIDGE ENERGY, INC.
BALANCE SHEETS (continued)
|
|
November 30, |
|
February 28, |
| ||
|
|
(Unaudited) |
|
|
| ||
Liabilities and Stockholders Equity |
|
|
|
|
| ||
Current liabilities: |
|
|
|
|
| ||
Accounts payable |
|
$ |
166,296 |
|
$ |
210,784 |
|
Accrued expenses |
|
131,602 |
|
45,172 |
| ||
Current portion of asset retirement obligations |
|
81,696 |
|
81,696 |
| ||
Total current liabilities |
|
379,594 |
|
337,652 |
| ||
|
|
|
|
|
| ||
Asset retirement obligations |
|
421,385 |
|
413,149 |
| ||
Total liabilities |
|
800,979 |
|
750,801 |
| ||
|
|
|
|
|
| ||
Commitments and contingencies |
|
|
|
|
| ||
|
|
|
|
|
| ||
Stockholders equity: |
|
|
|
|
| ||
Common stock, par value $.04 per share, 20,000,000 shares authorized, 10,157,803 shares issued |
|
406,312 |
|
406,312 |
| ||
Additional paid-in capital |
|
805,092 |
|
805,092 |
| ||
Retained earnings |
|
15,521,619 |
|
15,809,759 |
| ||
Accumulated other comprehensive income, net of tax |
|
30,981 |
|
13,913 |
| ||
Stockholders equity before treasury stock |
|
16,764,004 |
|
17,035,076 |
| ||
Less treasury stock, at cost; 6,126,776 shares and 6,071,689 shares, respectively |
|
10,887,055 |
|
10,742,991 |
| ||
Total stockholders equity |
|
5,876,949 |
|
6,292,085 |
| ||
Total liabilities and stockholders equity |
|
$ |
6,677,928 |
|
$ |
7,042,886 |
|
See accompanying notes to financial statements.
OAKRIDGE ENERGY, INC.
(UNAUDITED)
|
|
Three Months Ended |
|
Nine Months Ended |
| ||||||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
| ||||
Oil and gas revenues |
|
$ |
256,444 |
|
$ |
259,844 |
|
$ |
844,006 |
|
$ |
754,452 |
|
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses: |
|
|
|
|
|
|
|
|
| ||||
Oil and gas |
|
240,194 |
|
210,623 |
|
733,589 |
|
655,548 |
| ||||
Coal and gravel |
|
33,542 |
|
2,104 |
|
43,406 |
|
24,671 |
| ||||
Real estate development |
|
55,229 |
|
61,213 |
|
132,954 |
|
202,694 |
| ||||
General and administrative |
|
103,393 |
|
121,667 |
|
405,566 |
|
420,289 |
| ||||
Gain on sale of property |
|
(726 |
) |
(14,395 |
) |
(2,268 |
) |
(74,325 |
) | ||||
Total operating expenses |
|
431,632 |
|
381,212 |
|
1,313,247 |
|
1,228,877 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Loss from operations |
|
(175,188 |
) |
(121,368 |
) |
(469,241 |
) |
(474,425 |
) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Interest and other, net |
|
549 |
|
1,087 |
|
12,093 |
|
15,489 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Loss before income taxes |
|
(174,639 |
) |
(120,281 |
) |
(457,148 |
) |
(458,936 |
) | ||||
|
|
|
|
|
|
|
|
|
| ||||
Income tax benefit |
|
64,564 |
|
44,469 |
|
169,008 |
|
169,669 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
|
$ |
(110,075 |
) |
$ |
(75,812 |
) |
$ |
(288,140 |
) |
$ |
(289,267 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Basic and diluted loss per common share: |
|
|
|
|
|
|
|
|
| ||||
Net loss |
|
$ |
(0.03 |
) |
$ |
(0.02 |
) |
$ |
(0.07 |
) |
$ |
(0.07 |
) |
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares outstanding |
|
4,045,038 |
|
4,101,838 |
|
4,061,950 |
|
4,182,715 |
|
Comprehensive loss for the three months ended November 30, 2010 and 2009 was $69,118 and $42,403, respectively. Comprehensive loss for the nine months ended November 30, 2010 and 2009 was $271,072 and $211,088, respectively. Included in comprehensive loss is the change in available for sale securities, net of tax.
See accompanying notes to financial statements.
OAKRIDGE ENERGY, INC.
(UNAUDITED)
|
|
Nine Months Ended November 30, |
| ||||
|
|
2010 |
|
2009 |
| ||
Operating Activities |
|
|
|
|
| ||
Net loss |
|
$ |
(288,140 |
) |
$ |
(289,267 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
| ||
Depletion and depreciation |
|
14,643 |
|
15,615 |
| ||
Accretion of discount on asset retirement obligations |
|
11,321 |
|
1,656 |
| ||
Gain on sale of investment securities available for sale |
|
(9,245 |
) |
|
| ||
Gain on settlement of asset retirement obligation |
|
|
|
(34,116 |
) | ||
Loss on certificates of deposit |
|
|
|
2,871 |
| ||
Gain on sales of oil and gas properties |
|
(2,268 |
) |
(74,325 |
) | ||
Deferred income taxes |
|
(173,659 |
) |
(176,877 |
) | ||
Change in reclamation bond liability |
|
|
|
(25,307 |
) | ||
Abandoned leaseholds |
|
5,191 |
|
377 |
| ||
Changes in operating assets and liabilities: |
|
|
|
|
| ||
Trade accounts receivable |
|
12,779 |
|
44,890 |
| ||
Prepaid expenses and other |
|
5,664 |
|
6,841 |
| ||
Accounts payable |
|
(44,488 |
) |
(169,571 |
) | ||
Accrued expenses |
|
86,430 |
|
158,292 |
| ||
Asset retirement obligation |
|
(3,085 |
) |
(48,439 |
) | ||
Net cash used in operating activities |
|
(384,857 |
) |
(587,360 |
) | ||
|
|
|
|
|
| ||
Investing Activities |
|
|
|
|
| ||
Additions to investment securities available for sale |
|
(160,088 |
) |
(100,343 |
) | ||
Additions to oil and gas properties |
|
(3,008 |
) |
(13,876 |
) | ||
Purchases of certificates of deposit |
|
(101,874 |
) |
(251,524 |
) | ||
Proceeds from maturities of certificates of deposit |
|
|
|
2,632,000 |
| ||
Proceeds from sale of investment securities available for sale |
|
105,565 |
|
|
| ||
Proceeds from sales of oil and gas properties |
|
3,144 |
|
74,325 |
| ||
Net cash provided by (used in) investing activities |
|
(156,261 |
) |
2,340,582 |
| ||
|
|
|
|
|
| ||
Financing Activity |
|
|
|
|
| ||
Purchases of treasury stock |
|
(144,064 |
) |
(356,241 |
) | ||
Net increase (decrease) in cash and cash equivalents |
|
(685,182 |
) |
1,396,981 |
| ||
Cash and cash equivalents at beginning of period |
|
1,480,775 |
|
207,244 |
| ||
Cash and cash equivalents at end of period |
|
$ |
795,593 |
|
$ |
1,604,225 |
|
|
|
|
|
|
| ||
Supplemental Disclosure of Cash Flow Information |
|
|
|
|
| ||
Income taxes paid |
|
$ |
6,057 |
|
$ |
7,894 |
|
|
|
|
|
|
| ||
Supplemental Disclosure of Non-Cash Information |
|
|
|
|
| ||
Change in unrealized gain on investment securities, net of tax |
|
$ |
17,068 |
|
$ |
78,179 |
|
See accompanying notes to financial statements.
OAKRIDGE ENERGY, INC.
(Unaudited)
A. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Regulation S-K for the three and nine month periods ended November 30, 2010 and 2009 and reflect, in the opinion of management, all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the results for such periods. The foregoing financial statements do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the fiscal year ended February 28, 2010 included in the Annual Report on Form 10-K of Oakridge Energy, Inc. (the Company) filed with the Securities and Exchange Commission (the SEC). The interim unaudited financial statements should be read in conjunction with the annual financial statements and accompanying notes included in the Companys Annual Report on Form 10-K for the fiscal year ended February 28, 2010. Operating results for the three and nine months ended November 30, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending February 28, 2011. The Companys operating segments are set forth in the annual financial statements and accompanying notes for the fiscal year ended February 28, 2010.
B. Fair Value
Effective March 1, 2008, the Company adopted Statement of Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements (FASB ASC Topic 820). FASB ASC Topic 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.
FASB ASC Topic 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
· Level 1 Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
· Level 2 Include other inputs that are directly or indirectly observable in the marketplace.
· Level 3 Unobservable inputs which are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The Companys cash
equivalents, certificates of deposit and marketable securities are classified within Level 1 assets and are summarized below at the dates indicated:
|
|
|
|
Fair Value Measurement at |
| ||||||||
|
|
November 30, |
|
Quoted Prices In |
|
Significant |
|
Significant |
| ||||
Assets: |
|
|
|
|
|
|
|
|
| ||||
Money market funds |
|
$ |
719,662 |
|
$ |
719,662 |
|
$ |
|
|
$ |
|
|
Investment securities available for sale |
|
217,658 |
|
217,658 |
|
|
|
|
| ||||
Certificates of deposit |
|
306,273 |
|
306,273 |
|
|
|
|
| ||||
Non-current certificates of deposit |
|
405,834 |
|
405,834 |
|
|
|
|
| ||||
|
|
$ |
1,649,427 |
|
$ |
1,649,427 |
|
$ |
|
|
$ |
|
|
|
|
|
|
Fair Value Measurement at |
| ||||||||
|
|
February 28, |
|
Quoted Prices In |
|
Significant |
|
Significant |
| ||||
Assets: |
|
|
|
|
|
|
|
|
| ||||
Money market funds |
|
$ |
1,401,601 |
|
$ |
1,401,601 |
|
$ |
|
|
$ |
|
|
Investment securities available for sale |
|
128,030 |
|
128,030 |
|
|
|
|
| ||||
Certificates of deposit |
|
204,399 |
|
204,399 |
|
|
|
|
| ||||
Non-current certificates of deposit |
|
405,834 |
|
405,834 |
|
|
|
|
| ||||
|
|
$ |
2,139,864 |
|
$ |
2,139,864 |
|
$ |
|
|
$ |
|
|
C. Segment Information
Information regarding operations and assets by segment is as follows:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
| ||||||||
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
| ||||
Business segment revenue: |
|
|
|
|
|
|
|
|
| ||||
Oil and gas |
|
$ |
256,444 |
|
$ |
259,844 |
|
$ |
844,006 |
|
$ |
754,452 |
|
|
|
|
|
|
|
|
|
|
| ||||
Business segment profit (loss): |
|
|
|
|
|
|
|
|
| ||||
Oil and gas |
|
$ |
16,976 |
|
$ |
63,616 |
|
$ |
112,685 |
|
$ |
173,229 |
|
Coal and gravel |
|
(33,542 |
) |
(2,104 |
) |
(43,406 |
) |
(24,671 |
) | ||||
Real estate development |
|
(55,229 |
) |
(61,213 |
) |
(132,954 |
) |
(202,694 |
) | ||||
General corporate |
|
(103,393 |
) |
(121,667 |
) |
(405,566 |
) |
(420,289 |
) | ||||
Loss from operations |
|
(175,188 |
) |
(121,368 |
) |
(469,241 |
) |
(474,425 |
) | ||||
Interest income and other, net |
|
549 |
|
1,087 |
|
12,093 |
|
15,489 |
| ||||
Loss before income taxes |
|
$ |
(174,639 |
) |
$ |
(120,281 |
) |
$ |
(457,148 |
) |
$ |
(458,936 |
) |
|
|
As of |
|
As of |
| ||
Total assets: |
|
|
|
|
| ||
Oil and gas |
|
$ |
2,730,916 |
|
$ |
3,084,610 |
|
Coal and gravel |
|
260,488 |
|
260,488 |
| ||
Real estate held for sale |
|
3,168,107 |
|
3,168,107 |
| ||
General corporate |
|
518,417 |
|
529,681 |
| ||
|
|
$ |
6,677,928 |
|
$ |
7,042,886 |
|
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with Item 7 of the Companys Annual Report on Form 10-K for the fiscal year ended February 28, 2010 and the Notes to Financial Statements contained in this Quarterly Report on Form 10-Q.
Results of Operations
Net Income (Loss). The Company had a net loss of $110,075 ($0.03 per share) in the three months ended November 30, 2010 (the three month 2010 period) compared to a net loss of $75,812 ($0.02 per share) in the three months ended November 30, 2009 (the three month 2009 period) as a result of the items discussed below. In the nine months ended November 30, 2010 (the nine month 2010 period and together with the three month 2010 period, the 2010 periods), the Company had a net loss of $288,140 ($0.07 per share) compared to a net loss of $289,267 ($0.07 per share) in the nine months ended November 30, 2009 (the nine month 2009 period and together with the three month 2009 period, the 2009 periods) as a result of the items discussed below.
Revenues. Combined oil and gas revenues for the three month 2010 period were $256,444 compared to $259,844 for the three month 2009 period, representing a decrease of $3,400 (1.3%). Combined oil and gas revenues for the nine month 2010 period were $844,006 compared to $754,452 for the nine month 2009 period, representing an increase of $89,554 (11.9%). The changes in the 2010 periods as compared to the 2009 periods were due to an increase in the Companys average price received for oil and gas, which was partially offset by a decline in oil and gas sales volumes. The following tables compare the Companys oil and gas revenues, sales volumes and average prices received during the 2010 periods with those during the 2009 periods:
|
|
Three Months Ended |
|
Three Months Ended |
|
Percentage |
| ||
Oil: |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
Revenues |
|
$ |
228,374 |
|
$ |
230,679 |
|
(1.0 |
)% |
Volume (Bbls.) |
|
2,933 |
|
3,204 |
|
(8.5 |
)% | ||
Average Price (per Bbl.) |
|
$ |
77.87 |
|
$ |
72.00 |
|
8.2 |
% |
|
|
|
|
|
|
|
| ||
Gas: |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
Revenues |
|
$ |
19,071 |
|
$ |
20,015 |
|
(4.7 |
)% |
Volume (MCF) |
|
4,393 |
|
5,660 |
|
(22.4 |
)% | ||
Average Price (per MCF) |
|
$ |
4.34 |
|
$ |
3.54 |
|
22.6 |
% |
|
|
Nine Months Ended |
|
Nine Months Ended |
|
Percentage |
| ||
Oil: |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
Revenues |
|
$ |
752,914 |
|
$ |
673,902 |
|
11.7 |
% |
Volume (Bbls.) |
|
9,879 |
|
11,028 |
|
(10.4 |
)% | ||
Average Price (per Bbl.) |
|
$ |
76.22 |
|
$ |
61.11 |
|
24.7 |
% |
|
|
|
|
|
|
|
| ||
Gas: |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
| ||
Revenues |
|
$ |
61,108 |
|
$ |
53,100 |
|
15.1 |
% |
Volume (MCF) |
|
13,456 |
|
17,086 |
|
(21.2 |
)% | ||
Average Price (per MCF) |
|
$ |
4.54 |
|
$ |
3.11 |
|
46.0 |
% |
Non-material amounts of natural gas liquids revenues and sales are excluded from the foregoing tables.
Madison County, Texas Property. The Companys oil and gas property in Madison County, Texas (the Madison County, Texas Property) continues to be waterflooded. Oil and gas revenue received from the Madison County, Texas Property decreased $5,018 (3.4%) for the three month 2010 period as compared to the three month 2009 period. Average oil prices received by the Company from the Madison County, Texas Property increased $5.49 per barrel (7.7%) in the three month 2010 period compared to the three month 2009 period, however, oil sales volumes decreased 163 barrels (8.5%) in the three month 2010 period as compared to the three month 2009 period, resulting in a decrease in revenue. Operating expenses on the Madison County, Texas Property increased $10,396 (8.4%) for the three month 2010 period as compared to the three month 2009 period resulting in net income from the property for the three month 2010 period in the amount of approximately $7,900 as compared to approximately $23,300 in net income for the three month 2009 period.
Oil and gas revenue received from the Madison County, Texas Property increased $39,775 (9.2%) for the nine month 2010 period as compared to the nine month 2009 period. Average oil prices received by the Company from the Madison County, Texas Property increased $14.93 per barrel (24.6%) in the nine month 2010 period as compared to the nine month 2009 period, which was partially offset by decreased oil sales volumes of 856 barrels (12.7%) in the nine month 2010 period as compared to the corresponding 2009 period. Operating expenses on the Madison County, Texas Property decreased $67,701 (15.7%) for the nine month 2010 period as compared to the nine month 2009 period due to decreased repairs, well servicing and tubing replacement costs. The Company received net income from the property of approximately $108,300 for the nine month 2010 period as compared to approximately $800 in net income for the nine month 2009 period.
Gravel. The Companys gravel property is located on the Companys land in La Plata County, Colorado. There are no current operations on the gravel property.
Coal. The Companys Carbon Junction Coal Mine permit covers 192 acres and is
located in La Plata County, Colorado. Currently, the Colorado Division of Reclamation, Mining and Safety (the CDRMS) holds a $405,834 financial warranty on the property.
On July 30, 2008, the Company submitted a Phase III final bond release application to the CDRMS seeking final reclamation liability release and monetary release of the remaining financial warranty. On May 14, 2009, the CDRMS advised the Company that it had not demonstrated that one of the approved post-mining land uses (residential) had substantially commenced to the satisfaction of the CDRMS. The CDRMS advised that the Phase III bond release application would be held pending further information from the Company. In May 2010, the Company submitted additional information to the CDRMS; however, the CDRMS concluded that the Company still had not adequately demonstrated substantial commencement of the residential post-mining land use. The full release of the Companys remaining $405,834 financial warranty (and legal reclamation liability) is subject to the CDRMSs confirmation that the residential post-mining land use has been implemented. On September 30, 2010, the CDRMS proposed denial of the Companys Phase III final bond release or approval of a lesser release by the deadline of November 1, 2010. In response, the Company employed legal counsel to evaluate its options in response to the proposed denial of the bond release application and the position of the CDRMS regarding post-mining land use. The November 1, 2010 deadline has passed and the Company anticipates a draft decision from the CDRMS in January 2011. The Company is also in discussions with the Colorado State Attorney Generals Office regarding the bond release application.
Expenses. The Companys oil and gas operating expenses for the three month 2010 period were $240,194 compared to $210,623 for the three month 2009 period, representing an increase of $29,571 (14.0%). The Companys oil and gas operating expenses for the nine month 2010 period were $733,589 compared to $655,548 for the nine month 2009 period, representing an increase of $78,041 (11.9%). Increases in lease operating expense, ad valorem taxes and accretion of the asset retirement obligation were the primary reasons for the increased oil and gas operating expenses for the three month 2010 period as compared to the three month 2009 period. The primary reasons for increases in oil and gas operating expenses for the nine month 2010 period as compared to the nine month 2009 period were increases in lease operating expenses, accretion of the asset retirement obligation, increased production taxes and write-offs of abandoned leasehold interests. The Company also recognized a gain in the nine month 2009 period related to the completion of a plugging program on certain previously abandoned North Texas oil and gas properties in the amount of $34,116. No such gain was recognized in the nine month 2010 period. The Company did not incur any exploration expenses or dry hole expenses during the 2009 periods or the 2010 periods.
The Companys coal operating expenses for the three month 2010 period were $33,542 as compared to $2,104 for the three month 2009 period, representing an increase of $31,438 (1,494.2%). The Companys coal operating expenses for the nine month 2010 period were $43,406 as compared to $24,671 for the nine month 2009 period, representing an increase of $18,735 (75.9%). The increases in the three month 2010 period as compared to the three month 2009 period were due to increased reclamation costs, legal fees related to reclamation bond release and increased CDRMS compliance and site inspection costs. The increases in the nine month 2010 period as compared to the nine month 2009 period were due to increased legal fees
related to reclamation bond release and CDRMS compliance and site inspection costs which were partially offset by decreased reclamation costs. These expenses are expected to continue until final reclamation of the Carbon Junction Coal Mine and full release of the financial warranty required under the mine permit is obtained from the CDRMS.
Real estate development expenses were $55,229 for the three month 2010 period as compared to $61,213 for the three month 2009 period, representing a decrease of $5,984 (9.8%). The Companys real estate development expenses for the nine month 2010 period were $132,954 as compared to $202,694 for the nine month 2009 period, representing a decrease of $69,740 (34.4%). Decreased ad valorem taxes which were partially offset by increases in location maintenance, including road repair, were the primary reasons for the decreases in real estate development expenses in both 2010 periods as compared to the 2009 periods. The ad valorem taxes decreased as a result of a successful ad valorem protest to the La Plata County Assessor.
General and administrative expenses for the three month 2010 period were $103,393 as compared to $121,667 for the three month 2009 period, representing a decrease of $18,274 (15.0%). General and administrative expenses for the nine month 2010 period were $405,566 compared to $420,289 for the nine month 2009 period, representing a decrease of $14,723 (3.5%). Decreases in both 2010 periods as compared to the 2009 periods are primarily due to decreased payroll costs which were partially offset by repair costs associated with the Companys headquarters.
Interest and Other Income. Interest and other income for the three month 2010 period was $549 compared to $1,087 for the three month 2009 period, representing a decrease of $538 (49.5%). Interest and other income for the nine month 2010 period was $12,093 compared to $15,489 for the nine month 2009 period, representing a decrease of $3,396 (21.9%). Interest income decreased in both 2010 periods primarily due to lower interest rates and smaller principal amounts. However, the increased interest income in the nine month 2009 period was partially offset by a loss on the sale of certificates of deposit realized during the nine month 2009 period. A gain on the sale of securities available for sale recognized in the nine month 2010 period partially offset the decrease in interest income for that period.
The Company repurchased 25,000 shares of its common stock during the three month 2010 period at an average price of $2.05 per share.
Financial Condition and Liquidity
During the nine month 2010 period, operating activities were net users of funds primarily due to the Companys net loss and related change in deferred income taxes for the nine month 2010 period. During the nine month 2010 period, investing activities were net users of funds primarily due to the purchase of certificates of deposit and the purchase of investment securities available for sale in excess of proceeds from sales of investment securities available for sale. In addition, during the nine month 2010 period, the Company used $144,064 to repurchase shares of its common stock. As a result, the Companys cash and cash equivalents decreased by $685,182 for the nine month 2010 period. At November 30, 2010, the Company had no
indebtedness, and had cash and cash equivalents and certificates of deposit of $795,593 and $306,273, respectively.
The Company expects to fund its contemplated operations and any purchases of shares of the Companys common stock it makes, if any, during the remainder of fiscal 2011 from its cash and cash equivalents and any cash flow from its operations.
Critical Accounting Policies and Estimates
The Company did not have any material changes in critical accounting policies or in significant accounting estimates during the nine months ended November 30, 2010. Please see the Companys Annual Report on Form 10-K for the fiscal year ended February 28, 2010 for a detailed discussion of the Companys critical accounting policies and estimates.
Recent Updates
On September 27, 1010, the Board of Directors of the Company appointed Arbie M. Ray as President, Chief Executive Officer and Chief Financial Officer of the Company to fill the vacancies resulting from the passing of Sandra Pautsky on September 22, 2010. Ms. Rays extensive knowledge and long-term involvement in the day-to-day operations of the Company are expected to facilitate her succession into these positions.
Forward-Looking Statements
Certain information included in this Quarterly Report on Form 10-Q and other materials filed by the Company with the Securities and Exchange Commission (the SEC) contain forward-looking statements relating to the Companys operations and the oil and gas industry. Such forward-looking statements are based on managements current projections and estimates and are identified by words such as expects, intends, plans, believes, estimates, anticipates and similar words. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially from what is expressed in such forward-looking statements.
Among the factors that could cause actual results to differ materially are oil and gas price fluctuations, failure to achieve expected production and the timing of receipt of revenues from existing and future exploration and development projects (including, particularly, the secondary waterflooding recovery project on the Madison County, Texas Property), changes in oil and gas regulations, higher than estimated oil and gas and coal reclamation costs and delays with respect to, or failure to obtain, governmental permits and approvals necessary to proceed with real estate development. In addition, these forward-looking statements may be affected by general domestic and international economic and political conditions.
ITEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
The term disclosure controls and procedures is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the Exchange Act). This term refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported within the time periods specified by the SECs rules and forms. In designing and evaluating the Companys disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.
The Companys management, namely the President, Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the President, Chief Executive Officer and Chief Financial Officer has concluded that the Companys disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report on Form 10-Q because of the following deficiency involving internal control over financial reporting that constituted a material weakness as discussed below.
The material weakness identified was that the Company does not have the required technical expertise to properly calculate complex oil and gas required disclosures for FASB ASC Topic 740, Income Taxes (FASB ASC Topic 740) and relies on outside sources for that calculation.
The Company has not implemented a control to mitigate the material weakness related to FASB ASC Topic 740 calculations and disclosures. At any time, if it appears that a control can be implemented in a cost-effective manner for the Company to mitigate such material weakness, the Company expects to implement the control.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Companys internal control over financial reporting during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three month 2010 period, the Company repurchased 25,000 shares of its common stock in private transactions based upon the closing stock price on the day of the transactions. The following table summarizes the transactions.
Period |
|
Total |
|
Average |
|
Total Number of |
|
Maximum |
| |
September 1-September 30, 2010 |
|
|
|
|
|
|
|
|
| |
October 1-October 31, 2010 |
|
25,000 |
|
$ |
2.05 |
|
|
|
|
|
November 1-November 30, 2010 |
|
|
|
|
|
|
|
|
| |
Total |
|
25,000 |
|
$ |
2.05 |
|
|
|
|
|
(31.1) Rule 13a-14(a)/Rule 15d-14(a) Certification of Arbie M. Ray, Principal Executive Officer of the Company, filed herewith.
(31.2) Rule 13a-14(a)/Rule 15d-14(a) Certification of Arbie M. Ray, Principal Financial Officer of the Company, filed herewith.
(32) Section 1350 Certification of Arbie M. Ray, Principal Executive Officer and Principal Financial Officer of the Company, filed herewith.
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
OAKRIDGE ENERGY, INC. | |
|
|
(Registrant) | |
|
|
| |
Date: January 14, 2011 |
|
By: |
/s/ Arbie M. Ray |
|
|
Arbie M. Ray, President, Chief | |
|
|
Executive Officer and Chief Financial | |
|
|
Officer of Oakridge Energy, Inc. |