GEOI just reported in 10K record revenues and earnings on lower levels of oil sold even though production increased.
See note below - 30 Year record
Still have not seen a news release
DC
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
This discussion and analysis of financial condition and results of operations, and other sections of this report, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, that are based on management's beliefs, assumptions, current expectations, estimates and projections about the oil, natural gas and leonardite industry, the economy and about us. Words such as "may," "will," "expect," "anticipate," "estimate" or "continue," or comparable words are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, our actual results and outcomes may materially differ from what may be expressed or forecasted in our forward-looking statements. Furthermore, we undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
The following discussion should be read in conjunction with our consolidated financial statements and related notes included elsewhere herein. Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to, changes in production volumes; worldwide supply and demand which affects commodity prices for oil; the timing and extent of our success in discovering, acquiring, developing and producing oil, natural gas and leonardite reserves; risks inherent in the drilling and operation of oil and natural gas wells and the mining and processing of leonardite products; future production and development costs; the effect of existing and future laws, governmental regulations and the political and economic climate of the United States; and conditions in the capital markets.
We caution the reader that a number of important factors discussed herein, and in other reports filed with the Securities and Exchange Commission, particularly our Annual Report on Form 10-K for the Fiscal Year Ended December 31, 1999, could affect our actual results and cause actual results to differ materially from those discussed in forward-looking statements.
Results of Operations - Three Months and Nine Months Ended September 30, 2000, compared to Three Months and Nine Months Ended September 30, 1999.
Information concerning our oil and gas operations for the three months and nine months ended September 30, 2000, is set forth in the table below:
Oil and Gas Operations
% Increase % Increase Three Months (Decrease) Nine Months (Decrease) Ended From 1999 Ended From 1999 Sept. 30, 2000 Period Sept. 30, 2000 Period
Oil and gas production sold (BOE) 44,967 (5%) 128,757 (5%)
Average price per BOE $ 27.74 64% $ 26.20 105%
Oil and gas revenue $ 1,247,542 57% $ 3,372,872 95%
Production costs $ 437,549 38% $ 1,257,716 59%
Average production cost per BOE $ 9.73 45% $ 9.77 67%
Oil and gas production sold, expressed in barrels of oil equivalent (BOE), declined 2,136 BOE or 5% and 6,889 BOE, also 5%, for the three- and nine-month periods ended September 30, 2000, compared to the same periods in 1999. These relatively consistent changes in the two periods between 1999 and 2000 reflect the higher sales of the second quarter of 1999 now being absorbed and compared with more quarters in 2000 that we believe more closely follow the normal declines of our wells. As we said in the second quarter 2000, we believe these moderately reduced production levels are a reasonable expectation for the balance of 2000. Production increases have not been a major focus or goal in 2000 as we have concentrated on making substantial improvements to our balance sheet by paying down debt. The average oil price for the third quarter advanced to $27.74, increasing $10.82 or 64% above the same period in 1999. The nine-month period price increased to $26.20, a gain of $13.44 or a 105% increase, which reflects the much lower prices that still existed in first quarter 1999.
Oil and gas revenue increases for the three- and nine-month periods ended September 30, 2000, followed closely the substantial oil price increases and small production declines discussed above, leading the Company to the highest quarterly and nine months oil and gas revenues it has ever had in its 30 year history as a public company.
Oil and gas production costs increased $122,000 or 38% and $464,000 or 59% for the three- and nine-month periods of 2000, respectively, when compared to the same periods in 1999. The increase in the three-month period was primarily due to substantially higher state production taxes that are a fixed percentage of oil and gas revenue, coupled with higher repair maintenance and workover costs as we aggressively endeavor to maintain production of existing wells. The increase in the year 2000 nine- month period was also impacted by these same costs, but to even a greater percentage, due to the inclusion of first quarter 1999 that had substantially lower costs, mitigating those for that year. Production costs expressed on a per equivalent barrel basis were 45% higher for the three-month period and 67% higher for the nine-month period of 2000 when compared to the same periods in 1999. These increases basically reflect the same higher costs discussed above.
Information concerning our leonardite operations for the three months and nine months ended September 30, 2000, is set forth in the table below:
Leonardite Operations
% Increase % Increase Three Months (Decrease) Nine Months (Decrease) Ended From 1999 Ended From 1999 Sept. 30, 2000 Period Sept. 30, 2000 Period
Leonardite production sold (tons) 1,823 (26%) 5,503 1%
Average revenue per ton $ 89.06 5% $ 87.41 3%
Leonardite revenue $ 162,350 (22%) $ 480,995 4%
Cost of leonardite sold $ 138,259 (1%) $ 418,522 10%
Average production cost per ton $ 75.84 34% $ 76.05 9%
Leonardite production sold decreased 632 tons or 26% and increased 76 tons or 1%, respectively, for the three- and nine-month periods ended September 30, 2000, compared to the equivalent periods in 1999. During the 2000 third quarter, a merger of one of our customers reduced its purchases for a time but it has since resumed its normal level of leonardite purchases. We believe the demand for the product remains the same; however, railcar shortages in the 2000 third quarter also delayed our ability to ship all of the orders placed during that quarter. That situation has improved since the end of the quarter, too.
Leonardite revenue decreased $45,000 or 22% and increased $19,000 or 4%, respectively, for the three- and nine-month periods ended September 30, 2000, compared to the same period in 1999. The change in revenue in the three-month period was primarily due to the reasons set forth above. Average revenue per ton for the three months ended September 30, 2000, was up 5% and up 3% for the nine-month period. This was due to the slight increase in special product sales during the third quarter, where we enjoy a larger profit margin. Our basic product has lower processing costs and selling prices, and the profit margin is lower in order to remain competitive.
Cost of leonardite sold was lower for the three-month period ended September 30, 2000, and increased for the nine-month period compared to the same periods in 1999. Average per ton production costs increased 34% and 9%, respectively, for the three- and nine-month periods ended September 30, 2000, compared to the same periods in 1999. The nine-month increase is related primarily to the increase in costs and the three-month increase to the lower volume sold and shipped as discussed above.
Consolidated Analysis
Total operating revenues increased $405,000 or 40% and $1,662,000 or 76%, respectively, for the three- and nine-month periods ended September 30, 2000, compared to the same periods in 1999. These increases were due to the higher oil prices previously discussed. Total operating expenses increased $174,000 or 26% and $651,000 or 36% for the three- and nine-month periods of 2000, respectively, compared to the same periods in 1999. These increases were primarily due to increased oil and gas expenses discussed above. Operating income increased to $560,000 and $1,370,000, respectively, for the three- and nine-month periods ended September 30, 2000, compared to an operating income of $328,000 and $359,000 for the same periods in 1999.
After provisions for the non-operating expenses and income taxes, the result of consolidated operations yielded a net income of $484,000 or $.12 per share and $1,165,000 or $.29 per share for the three- and nine- month periods ended September 30, 2000, compared to a net income of $271,000 or $.07 per share and $241,000 or $.06 per share for the same periods in 1999.
Liquidity and Capital Resources
At September 30, 2000, we had working capital of $837,000 compared to working capital of $639,000 at December 31, 1999. Our current ratio was 1.94 to 1 at September 30, 2000, compared to 1.59 to 1 at year-end 1999.
Net cash provided by operating activities was $1,379,000 for the nine months ended September 30, 2000, compared to $664,000 for the same period in 1999. Cash was utilized to make payments of $472,000 for additions to property, plant and equipment, $885,000 for payments on long- term debt and $104,000 for stock repurchases. The $885,000 payment for debt reduction consisted of regularly scheduled payments of $87,000, a prepayment of $263,000 to pay off our 1995 Oil and Gas Loan and $535,000 of prepayments on our existing line-of-credit. Our existing line-of-credit expires at year-end 2000, but we have had discussions with our bank and expect to replace it with another line-of-credit with similar terms. During the remainder of 2000, we may make additional debt prepayments on our existing line-of-credit before it matures into a term loan.
We believe our cash requirements can be met by cash flows from operations and, if necessary, borrowings on our existing line-of-credit. Future cash requirements might also be provided by possible forward sales of oil reserves or additional debt or equity financing. |
