UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
     
ž   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 2007
     
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: 0-8877
CREDO PETROLEUM CORPORATION
 
(Exact name of registrant as specified in its charter)
     
Colorado   84-0772991
     
(State or other jurisdiction of incorporation or organization)   (IRS Employer Identification No.)
     
1801 Broadway, Suite 900, Denver, Colorado   80202
     
(Address of principal executive offices)   (Zip Code)
303-297-2200
 
(Registrant’s telephone number, including area code)
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  ž  No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. (See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Act.)
Large accelerated filer  o  Accelerated filer  ž  Non-accelerated filer  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o  No  ž
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, net of treasury stock, as of the latest practicable date.
         
Date   Class   Outstanding
 
June 11, 2007   Common stock, $.10 par value   9,262,000
 
 

 

 

 

 

CREDO PETROLEUM CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q For the Period Ended April 30, 2007
TABLE OF CONTENTS
 
             
        Page No.
 
           
 
  PART I — FINANCIAL INFORMATION        
 
           
  Financial Statements        
 
  Consolidated Balance Sheets As of April 30, 2007 (Unaudited) and October 31, 2006     3  
 
  Consolidated Statements of Operations For the Three and Six Months Ended April 30, 2007 and 2006 (Unaudited)     4  
 
  Consolidated Statement of Stockholders’ Equity and Comprehensive Income (Loss) For the Six Months Ended April 30, 2007 (Unaudited)     5  
 
  Consolidated Statements of Cash Flows For the Six Months Ended April 30, 2007 and 2006 (Unaudited)     6  
 
  Notes to Consolidated Financial Statements (Unaudited)     7  
  Management’s Discussion and Analysis of Financial Condition and Results of Operations     11  
  Quantitative and Qualitative Disclosures About Market Risk     19  
  Controls and Procedures     19  
 
           
 
  PART II — OTHER INFORMATION        
 
           
  Legal Proceedings     20  
  Risk Factors     20  
  Unregistered Sales of Equity Securities and Use of Proceeds     20  
  Defaults Upon Senior Securities     20  
  Submission of Matters to a Vote of Security Holders     20  
  Other Information     21  
  Exhibits     21  
Signatures     22  
  Certification of CEO Pursuant to Section 302
  Certification of CFO Pursuant to Section 302
  Certification of CEO and CFO Pursuant to Section 906
The terms “CREDO”, “Company”, “we”, “our”, and “us” refer to CREDO Petroleum Corporation and its subsidiaries unless the context suggests otherwise.
 

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Table of Contents

PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CREDO PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
                 
    April 30,     October 31,  
    2007     2006  
    (Unaudited)          
ASSETS
               
Current Assets:
               
Cash and cash equivalents
  $ 5,274,000     $ 4,577,000  
Short-term investments
    6,017,000       5,624,000  
Receivables:
               
Accrued oil and gas sales
    2,148,000       1,963,000  
Trade
    585,000       777,000  
Derivative Assets
    —       897,000  
Other current assets
    255,000       71,000  
 
           
Total current assets
    14,279,000       13,909,000  
 
           
 
               
Long-term assets:
               
Oil and gas properties, at cost, using full cost method:
               
Unevaluated oil and gas properties
    8,025,000       7,060,000  
Evaluated oil and gas properties
    46,856,000       43,588,000  
Less: accumulated depreciation, depletion and amortization of oil and gas properties
    (20,401,000 )     (18,556,000 )
 
           
Net oil and gas properties, at cost, using full cost method
    34,480,000       32,092,000  
 
           
Exclusive license agreement, net of amortization of $466,000 in 2007 and $431,000 in 2006
    233,000       268,000  
Compressor and tubular inventory to be used in development
    1,346,000       1,293,000  
Other (net)
    259,000       197,000  
 
           
Total assets
  $ 50,597,000     $ 47,759,000  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
 
               
Current Liabilities:
               
Accounts payable
  $ 1,059,000     $ 1,581,000  
Revenue distribution payable
    1,094,000       1,273,000  
Other accrued liabilities
    664,000       808,000  
Income taxes payable
    287,000       174,000  
 
           
Total current liabilities
    3,104,000       3,836,000  
 
               
Long Term Liabilities:
               
Deferred income taxes, net
    8,873,000       8,039,000  
Exclusive license obligation, less current obligations of $70,000 in 2007 and 2006
    163,000       163,000  
Asset retirement obligation
    984,000       954,000  
 
           
Total liabilities
    13,124,000       12,992,000  
 
           
 
               
Commitments
               
 
               
Stockholders’ Equity:
               
Preferred stock, no par value, 5,000,000 shares authorized, none issued
    —       —  
Common stock, $.10 par value, 20,000,000 shares authorized, 9,510,000 shares issued in 2007 and in 2006
    951,000       951,000  
Capital in excess of par value
    14,909,000       14,794,000  
Treasury stock at cost, 248,000 shares in 2007 and 249,000 in 2006
    —       —  
Accumulated other comprehensive income (loss)
    (105,000 )     650,000  
Retained earnings
    21,718,000       18,372,000  
 
           
Total stockholders’ equity
    37,473,000       34,767,000  
 
           
Total liabilities and stockholders’ equity
  $ 50,597,000     $ 47,759,000  
 
           
The accompanying notes are an integral part of these consolidated financial statements.

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Table of Contents

 

CREDO PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
                                 
    Six Months Ended     Three Months Ended  
    April 30,     April 30,  
    2007     2006     2007     2006  
 
                               
REVENUES:
                               
Oil and gas sales
  $ 8,493,000     $ 7,843,000     $ 4,685,000     $ 3,723,000  
Investment income and other
    453,000       443,000       206,000       198,000  
 
                       
 
    8,946,000       8,286,000       4,891,000       3,921,000  
 
                       
 
                               
COSTS AND EXPENSES:
                               
Oil and gas production
    1,709,000       1,743,000       796,000       739,000  
Depreciation, depletion and amortization
    1,900,000       1,629,000       942,000       891,000  
General and administrative
    644,000       579,000       366,000       319,000  
Interest
    13,000       18,000       7,000       9,000  
 
                       
 
    4,266,000       3,969,000       2,111,000       1,958,000  
 
                       
 
                               
INCOME BEFORE INCOME TAXES
    4,680,000       4,317,000       2,780,000       1,963,000  
 
                               
INCOME TAXES
    (1,334,000 )     (1,230,000 )     (798,000 )     (571,000 )
 
                       
 
                               
NET INCOME
  $ 3,346,000     $ 3,087,000     $ 1,982,000     $ 1,392,000  
 
                       
 
                               
EARNINGS PER SHARE OF COMMON STOCK BASIC
  $ .36     $ .34     $ .21     $ .15