Attached files
| file | filename |
|---|---|
| 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 September 30, 2011
or
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 September 30, 2011
1,416,587 shares
TEXAS VANGUARD OIL COMPANY
TABLE OF CONTENTS
|
Page
Number
|
||
| Part I. Financial Information |
|
|
| Item 1 - Financial Statements | Condensed Balance Sheets - September 30, 2011 and December 31, 2010 | 3 |
| Condensed Statements of Earnings - Three and nine months ended September 30, 2011 and 2010 | 4 | |
| Condensed Statements of Cash Flows - Nine months ended September 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.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TEXAS VANGUARD OIL COMPANY
Condensed Balance Sheets
| Assets | ||||||||
|
September 30, 2011
|
December 31, 2010
|
|||||||
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(Unaudited)
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(Audited)
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|||||||
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Current assets:
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||||||||
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Cash and cash equivalents
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$ | 8,493,054 | $ | 7,621,018 | ||||
|
Trade accounts receivable, net of allowance for doubtful accounts
of $183,298 and $172,534 in 2011 and 2010, respectively
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203,480 | 155,191 | ||||||
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Prepaid expense
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68,236 | 10,277 | ||||||
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Prepaid federal income tax
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-0- | 202,545 | ||||||
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Total current assets
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8,764,770 | 7,989,031 | ||||||
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Property and equipment, at cost:
|
||||||||
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Oil and gas properties - successful efforts method of accounting
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8,856,187 | 8,496,841 | ||||||
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Office furniture and vehicles
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233,035 | 233,035 | ||||||
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9,089,222 | 8,729,876 | ||||||
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Less accumulated depreciation, depletion and amortization
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(4,694,707 | ) | (4,393,245 | ) | ||||
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Total property and equipment
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4,394,515 | 4,336,631 | ||||||
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Other assets
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1,000 | 1,000 | ||||||
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TOTAL ASSETS
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$ | 13,160,285 | $ | 12,326,662 | ||||
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Liabilities and Stockholders' Equity
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||||||||
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Current liabilities:
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||||||||
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Trade accounts payable
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$ | 250,619 | $ | 436,008 | ||||
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Taxes payable
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102,165 | 36,454 | ||||||
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Asset retirement obligation, current portion
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99,968 | 184,800 | ||||||
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Notes payable
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150,000 | 150,000 | ||||||
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Total current liabilities
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602,752 | 807,262 | ||||||
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Deferred federal income tax liability
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292,895 | 292,895 | ||||||
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Asset retirement obligation, less current portion
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443,715 | 353,210 | ||||||
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Total liabilities
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1,339,362 | 1,453,367 | ||||||
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Stockholders' equity:
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||||||||
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Common stock, par value $.05; authorized 12,500,000 shares;
1,416,587 issued and outstanding in 2011 and 2010, respectively
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70,828 | 70,828 | ||||||
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Additional paid-in capital
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1,888,528 | 1,888,528 | ||||||
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Accumulated earnings
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9,861,567 | 8,913,939 | ||||||
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Total stockholders' equity
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11,820,923 | 10,873,295 | ||||||
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 13,160,285 | $ | 12,326,662 | ||||
See accompanying notes to condensed financial statements.
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Earnings
(Unaudited)
|
Three months ended
|
Nine months ended | |||||||||||||||
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September 30,
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September 30,
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|||||||||||||||
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2011
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2010
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2011
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2010
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Revenue:
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Operating revenue
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$ | 1,710,700 | 1,594,190 | 5,432,904 | 4,793,276 | |||||||||||
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Other income
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13,604 | 11,257 | 40,994 | 42,487 | ||||||||||||
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Total revenue
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1,724,304 | 1,605,447 | 5,473,898 | 4,835,763 | ||||||||||||
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Costs and expenses:
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||||||||||||||||
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Production cost
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958,033 | 984,193 | 3,241,836 | 2,872,778 | ||||||||||||
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Depreciation, depletion and amortization
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109,055 | 106,384 | 327,165 | 319,151 | ||||||||||||
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General and administrative
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132,776 | 124,115 | 424,348 | 407,466 | ||||||||||||
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Impairment of oil and gas property
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-0- | -0- | -0- | 125,000 | ||||||||||||
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Interest
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1,003 | 929 | 2,510 | 3,448 | ||||||||||||
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Doubtful account expense
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(15,743 | ) | 15,564 | 10,764 | 31,501 | |||||||||||
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Total costs and expenses
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1,185,124 | 1,231,185 | 4,006,623 | 3,759,344 | ||||||||||||
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Earnings before taxes
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539,180 | 374,262 | 1,467,275 | 1,076,419 | ||||||||||||
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Federal and state taxes:
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||||||||||||||||
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Provision for federal income tax
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179,950 | 124,111 | 488,172 | 354,828 | ||||||||||||
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Provision for state margin tax
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9,915 | 9,231 | 31,475 | 27,806 | ||||||||||||
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Net earnings
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$ | 349,315 | 240,920 | 947,628 | 693,785 | |||||||||||
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Weighted average number of shares outstanding
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1,416,587 | 1,416,587 | 1,416,587 | 1,416,587 | ||||||||||||
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Basic earnings per share
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.25 | .17 | .67 | .49 | ||||||||||||
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Diluted earning per share
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.25 | .17 | .67 | .49 | ||||||||||||
TEXAS VANGUARD OIL COMPANY
Condensed Statements of Cash Flows
(Unaudited)
|
Nine months ended
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||||||||
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September 30,
|
||||||||
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2011
|
2010
|
|||||||
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Net cash provided by operating activities
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$ | 1,253,932 | $ | 1,254,176 | ||||
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Cash flows used in investing activities:
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||||||||
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Additions to oil and gas properties
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(391,896 | ) | (780,476 | ) | ||||
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Purchase of equipment
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-0- | (6,493 | ) | |||||
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Proceeds from sale of oil and gas properties
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10,000 | -0- | ||||||
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Net cash used in investing activities
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(381,896 | ) | (786,969 | ) | ||||
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Net cash used in financing activities
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--- | --- | ||||||
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Net change in cash and cash equivalents
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872,036 | 467,207 | ||||||
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Cash and cash equivalents at beginning of period
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7,621,018 | 7,192,556 | ||||||
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Cash and cash equivalents at end of period
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$ | 8,493,054 | $ | 7,659,763 | ||||
See accompanying notes to condensed financial statements.
TEXAS VANGUARD OIL COMPANY
Notes to Condensed Financial Statements
(Unaudited)
September 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 nine-month periods ended September 30, 2011, and determined that the updates are not applicable to the Company.
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 $116,510 (7%) and $639,628 (13%) for the three-month and nine-month periods ended September 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 decreased by $26,160 (3%) for the three-month period ended September 30, 2011 and increased $369,058 (13%) for the nine-month period ended September 30, 2011 as compared to the prior year periods. Increased production costs for the nine-month period ended September 30, 2011 as compared to the prior-year period is 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 $8,661 (7%) and $16,882 (4%) for the three-month and nine-month periods ended September 30, 2011 as compared to the prior year periods. Interest expense decreased $938 for the nine-month period ended September 30, 2011 from the comparable 2010 period. Depreciation, depletion, and amortization increased by $8,014 (3%) for the nine-month period ended September 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 September 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 September 30, 2011, has increased to 14.54 to 1 from 9.90 to 1 at December 31, 2010. The Company continued its policy of making strategic investments in producing oil and gas properties in the same or similar fields to properties already operated by the Company, which are primarily financed with short term notes payable and cash from operations. Cash flow from operations was $1,253,932 for the nine months ended September 30, 2011. The Company used $391,896 to invest in oil and gas properties in the first nine months of 2011 as compared to $780,476 in the first nine months of 2010.
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.
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 September 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.
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 |
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: November 7, 2011
|
By:
|
/s/ William G. Watson | |
| William G. Watson | |||
| President and Principal Financial and Accounting Officer | |||