TEXAS VANGUARD OIL CO - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - TEXAS VANGUARD OIL CO	Financial_Report.xls
EX-32.1 - TEXAS VANGUARD OIL CO	ex32-1.htm
EX-31.1 - TEXAS VANGUARD OIL CO	ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended June 30, 2011

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 No. 000-24778

TEXAS VANGUARD OIL COMPANY

(Exact name of registrant as specified in its charter)

Texas		74-2075344
(State or other jurisdiction of		(IRS Employer
incorporation or organization)		Identification No.)

9811 Anderson Mill Rd., Suite 202

Austin, Texas 78750

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (512) 331-6781

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 x No o.

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 or 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 definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

	o Large accelerated filer	o Accelerated filer
	o Non-accelerated filer	x 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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Outstanding at June 30, 2011

1,416,587 shares

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Table of Contents

TEXAS VANGUARD OIL COMPANY

TABLE OF CONTENTS

		Page Number

Part I. Financial Information

Item 1.	Financial Statements	3

	Condensed Balance Sheets - June 30, 2011 and December 31, 2010	3

	Condensed Statements of Earnings -Three and six months ended June 30, 2011 and 2010	4

	Condensed Statements of Cash Flows - Six months ended June 30, 2011 and 2010	5

	Notes to the Condensed Financial Statements	6

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	7

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	7

Item 4.	Controls and Procedures	7

Part II. Other Information

Item 6.	Exhibits	8

Signatures		9

In the opinion of the Registrant, all adjustments (consisting of normal recurring accruals) necessary to a fair statement of the results of the interim periods have been included.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TEXAS VANGUARD OIL COMPANY

Condensed Balance Sheets

	June 30,			December 31,
	2011			2010
	(Unaudited)			(Audited)
Assets
Current assets:
Cash and cash equivalents	$	8,454,827		$	7,621,018
Trade accounts receivable, net of allowance for doubtful accounts of $199,041 and $172,534 in 2011 and 2010, respectively		188,961			155,191
Prepaid expense		173,389			10,277
Prepaid federal income tax		-0-			202,545

Total current assets		8,817,177			7,989,031

Property and equipment, at cost:
Oil and gas properties - successful efforts method of accounting		8,552,561			8,496,841
Office furniture and vehicles		233,035			233,035

		8,785,596			8,729,876
Less accumulated depreciation, depletion and amortization		(4,585,652	)		(4,393,245	)

Total property and equipment, net		4,199,944			4,336,631

Other assets		1,000			1,000

TOTAL ASSETS	$	13,018,121		$	12,326,662

Liabilities and Stockholders' Equity
Current liabilities:
Trade accounts payable	$	454,440		$	436,008
Taxes payable		107,300			36,454
Asset retirement obligation, current portion		69,082			184,800
Notes payable		150,000			150,000

Total current liabilities		780,822			807,262

Deferred federal income tax liability		292,895			292,895
Asset retirement obligation, less current portion		472,796			353,210

Total liabilities		1,546,513			1,453,367

Stockholders' equity:

Common stock, par value $.05; authorized 12,500,000 shares;1,416,587 issued and outstanding in 2011 and 2010, respectively		70,828			70,828
Additional paid-in capital		1,888,528			1,888,528
Accumulated earnings		9,512,252			8,913,939

Total stockholders' equity		11,471,608			10,873,295


TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	13,018,121		$	12,326,662

See accompanying notes to condensed financial statements.

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TEXAS VANGUARD OIL COMPANY

Condensed Statements of Earnings

(Unaudited)

	Three months ended				Six months ended
	June 30,				June 30,
	2011		2010		2011		2010
Revenue:
Operating revenue	$	1,997,370	$	1,706,923	$	3,722,204	$	3,199,086
Other income		11,862		14,985		27,390		31,230

Total revenue		2,009,232		1,721,908		3,749,594		3,230,316

Costs and expenses:
Production cost		1,238,410		933,668		2,283,803		1,888,586
Depreciation, depletion and amortization		109,055		106,384		218,110		212,768
General and administrative		138,406		135,478		291,572		283,350
Impairment in value of oil and gas property		-0-		60,000		-0-		125,000
Interest		567		1,224		1,507		2,519
Doubtful account expense		17,449		8,281		26,507		15,937

Total costs and expenses		1,503,887		1,245,035		2,821,499		2,528,160

Earnings before taxes		505,345		476,873		928,095		702,156

Federal and state taxes:
Provision for federal income tax		167,889		158,770		308,222		230,717
Provision for state margin tax		11,553		9,901		21,560		18,574

Net earnings	$	325,903	$	308,202	$	598,313	$	452,865

Weighted average number of shares outstanding		1,416,587		1,416,587		1,416,587		1,416,587

Basic earnings per share	$	.23	$	.22	$	.42	$	.32
Diluted earnings per share	$	.23	$	.22	$	.42	$	.32

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TEXAS VANGUARD OIL COMPANY

Condensed Statements of Cash Flows

(Unaudited)

	Six months ended
	June 30,
	2011			2010
Net cash provided by operating activities	$	912,078		$	654,900

Cash flows used in investing activities:
Additions to oil and gas properties		(88,269	)		(342,185	)
Purchase of equipment		-0-			(6,493	)
Proceeds from sale of oil and gas properties		10,000			-0-

Net cash used in investing activities		(78,269	)		(348,678	)

Net cash used in financing activities		---			---

Net change in cash and cash equivalents		833,809			306,222

Cash and cash equivalents at beginning of period		7,621,018			7,192,556

Cash and cash equivalents at end of period	$	8,454,827		$	7,498,778

See accompanying notes to condensed financial statements.

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TEXAS VANGUARD OIL COMPANY

Notes to Condensed Financial Statements

(Unaudited)

June 30, 2011

Note 1: Oil and Gas Properties

Texas Vanguard Oil Company (the “Company”) follows the "successful efforts" method of accounting for oil and gas exploration and production operations. Accordingly, costs incurred in the acquisition and exploratory drilling of oil and gas properties are initially capitalized and either subsequently expensed if the properties are determined not to have proved reserves, or reclassified as a proven property if proved reserves are discovered. Costs of drilling development wells are capitalized. Geological, geophysical, carrying and production costs are charged to expense as incurred.

The Company performs a periodic review for impairment of proved properties. The Company determines if impairment has occurred through either adverse changes or as a result of its periodic review for impairment. Upon abandonment of properties, the reserves are deemed fully depleted and any unamortized costs are recorded in the statement of income under impairment expense. Upon the sale of oil and gas reserves in place, costs less accumulated amortization of such property are removed from the accounts and resulting gain or loss on sale is reflected in operations.

Impairment of unproved properties is assessed periodically and any impairment in value is currently charged to expense. Loss is recognized to the extent that such impairment is indicated. When an entire interest in an unproved property is sold, gain or loss is recognized, taking into consideration any recorded impairment.

Depreciation, depletion and amortization of proved oil and gas property costs, including related equipment and facilities, are provided using the units-of-production method.

Note 2: Income Taxes

The Company uses the "asset and liability method" of income tax accounting, which bases the amount of current and future taxes payable on the events recognized in the financial statements and on tax laws existing at the balance sheet date. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes enactment date.

Note 3: Statement of Cash Flows

Cash and cash equivalents as used in the Condensed Statements of Cash Flows include cash in banks and certificates of deposits owned.

Note 4: Recently Issued Accounting Standards

The Company has reviewed the updates issued by the Financial Accounting Standards Board (FASB) during the three-month and six-month periods ended June 30, 2011, and determined that the updates are not applicable to the Company.

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Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition.

The following information is provided in compliance with SEC guidelines to explain financial information shown in the Condensed Financial Statements.

RESULTS OF OPERATIONS

Operating revenues increased by $290,447 (17%) and $523,118 (16%) for the three-month and six-month periods ended June 30, 2011, from the comparable prior year periods primarily as a result of higher oil and gas prices in 2011 as compared to 2010. Production costs increased by $304,742 (33%) and $395,217 (21%) for the three-month and six-month periods ended June 30, 2011, from the comparable prior year periods. Increased production costs for the three-month and six-month periods ended June 30, 2011 as compared to the prior-year periods are largely associated with an increase in workover activity, an increase in overall field expenses, and an increased participation in non-operated properties and the costs associated therewith.

General and administrative expenses increased $2,928 (2%) and $8,222 (3%) for the three-month and six-month periods ended June 30, 2011, as compared to the prior year periods. Interest expense decreased $657 and $1,012 for the three-month and six-month periods ended June 30, 2011, from the comparable 2010 periods. Depreciation, depletion, and amortization increased by $5,342 (3%) for the six-month period ended June 30, 2011, from the comparable prior-year period. Depreciation, depletion and amortization varies from period to period because of changes in reserve estimates, changes in quantities of oil and gas produced, changes in price of oil and gas sold, as well as the acquisition, discovery or sale of producing properties.

LIQUIDITY AND CAPITAL RESOURCES

During the period ended June 30, 2011, the Company's liquidity remained strong enough to meet its short-term cash needs. The sources of liquidity and capital resources are generated from cash on hand, cash provided by operations and from credit available from financial institutions. Working capital at June 30, 2011, has increased to 11.29 to 1 from 9.90 to 1 at December 31, 2010. Management believes that oil and gas property investing activities in 2011 can be financed through cash on hand, cash from operating activities, and bank borrowings. The Company anticipates continued investments in proven oil and gas properties in 2011 when they can be purchased at prices that will provide a short pay back period. If bank credit is not available, the Company may not be able to continue its policy of continued investment in strategic oil and gas properties. Cash flow provided by operations was $912,078 for the six months ended June 30, 2011. The Company used $88,269 to invest in oil and gas properties in the first six months of 2011, compared to $342,185 in the first six months of 2010. During the second quarter ended June 30, 2011, the Company sold one operated oil and gas property for $10,000. The Company sells selected properties when it is more economical to sell rather than produce them.

The worldwide crude oil prices continue to fluctuate in 2011. The Company cannot predict how prices will vary during the remainder of 2011 and what effect they will ultimately have on the Company, but management believes that the Company will be able to generate sufficient cash from operations to service its bank debt and provide for maintaining current production of its oil and gas properties. Inflation is not anticipated to have a significant impact on the Company’s operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company does not engage in hedging activities and does not use commodity futures nor forward contracts in its cash management functions.

Our financial condition, results of operations and capital resources are highly dependent upon the prevailing market prices of, and demand for, oil and natural gas. These commodity prices are subject to wide fluctuations and market uncertainties due to a variety of factors that are beyond our control. We cannot predict future oil and natural gas prices with any degree of certainty. Sustained declines in oil and natural gas prices may adversely affect our financial condition and results of operations, and may also reduce the amount of net oil and natural gas reserves that we can produce economically.

Item 4. Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as of June 30, 2011 (the "Evaluation Date"). Based upon this evaluation, our principal financial and accounting officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the material information required to be included in our Securities and Exchange Commission ("SEC") reports is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms relating to the Company, including, our consolidated subsidiaries, and was made known to them by others within those entities, particularly during the period when this report was being prepared.

In addition, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date.

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PART II. OTHER INFORMATION

Item 6. Exhibits

Exhibits:

31.1	Rule 13a-14(a)/15d-14(a) Certification
32.1	18 U.S.C. 1350 Certification
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	Taxonomy Extension Calculation Linkbase
101.DEF	Taxonomy Extension Definition Linkbase
101.LAB	Taxonomy Extension Label Linkbase
101.PRE	Taxonomy Extension Presentation Linkbase

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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.

	TEXAS VANGUARD OIL COMPANY (Registrant)

Date: August 8, 2011	By:	/s/ William G. Watson
		William G. Watson
		President and (Chief Executive Officer and Chief Financial Officer)

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