UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
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| ž |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended July 31, 2005
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| o |
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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)
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| Colorado |
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84-0772991 |
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| (State or other jurisdiction of
incorporation or organization) |
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(IRS Employer Identification No.) |
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| 1801 Broadway, Suite 900 |
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| Denver, Colorado |
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80202 |
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| (Address of principal executive
offices) |
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(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 an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes o
No ž
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.
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| Date |
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Class |
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Outstanding |
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| September 9, 2005 |
|
Common stock, $.10 par value |
|
6,076,696 |
CREDO PETROLEUM CORPORATION AND SUBSIDIARIES
Quarterly Report on Form 10-Q For the Period Ended July 31,
2005
TABLE OF CONTENTS
The terms “CREDO”, “Company”, “we”, “our”, and “us”
refer to CREDO Petroleum Corporation and its subsidiaries unless the
context suggests otherwise.
2
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CREDO PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
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July 31, |
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October 31, |
|
| |
|
2005 |
|
|
2004 |
|
| |
|
(Unaudited) |
|
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|
ASSETS
|
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|
|
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|
|
|
|
CURRENT ASSETS:
|
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|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$ |
892,000 |
|
|
$ |
518,000 |
|
|
Short term investments
|
|
|
5,512,000 |
|
|
|
6,371,000 |
|
|
Receivables:
|
|
|
|
|
|
|
|
|
|
Accrued oil and gas sales
|
|
|
2,810,000 |
|
|
|
2,051,000 |
|
|
Trade
|
|
|
356,000 |
|
|
|
1,019,000 |
|
|
Other current assets
|
|
|
1,260,000 |
|
|
|
58,000 |
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|
|
|
|
|
|
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|
Total current assets
|
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|
10,830,000 |
|
|
|
10,017,000 |
|
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|
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Oil and gas properties, at cost, using full cost method:
|
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|
|
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|
|
|
|
Evaluated oil and gas properties
|
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|
34,004,000 |
|
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|
30,072,000 |
|
|
Unevaluated oil and gas properties
|
|
|
3,731,000 |
|
|
|
2,174,000 |
|
|
Less: accumulated depreciation, depletion and amortization of
oil and gas properties
|
|
|
(14,232,000 |
) |
|
|
(12,737,000 |
) |
|
|
|
|
|
|
|
|
|
Net oil and gas properties, at cost, using full cost method
|
|
|
23,503,000 |
|
|
|
19,509,000 |
|
|
|
|
|
|
|
|
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Exclusive license agreement, net of amortization of $344,000 in
2005 and $291,000 in 2004
|
|
|
355,000 |
|
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|
408,000 |
|
|
Other, net
|
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|
745,000 |
|
|
|
1,042,000 |
|
|
|
|
|
|
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|
$ |
35,433,000 |
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$ |
30,976,000 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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CURRENT LIABILITIES:
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Accounts payable and accrued liabilities
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|
$ |
2,996,000 |
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$ |
4,394,000 |
|
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Income taxes payable
|
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|
144,000 |
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|
12,000 |
|
|
|
|
|
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|
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Total current liabilities
|
|
|
3,140,000 |
|
|
|
4,406,000 |
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|
|
|
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|
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LONG-TERM LIABILITIES:
|
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|
|
|
|
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Deferred income taxes, net
|
|
|
6,021,000 |
|
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|
4,605,000 |
|
|
Exclusive license obligation, less current obligations of
$58,000
|
|
|
297,000 |
|
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|
297,000 |
|
|
Asset retirement obligation
|
|
|
862,000 |
|
|
|
748,000 |
|
|
|
|
|
|
|
|
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Total liabilities
|
|
|
10,320,000 |
|
|
|
10,056,000 |
|
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COMMITMENTS
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STOCKHOLDERS’ EQUITY:
|
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Preferred stock, no par value, 5,000,000 shares authorized, none
issued
|
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— |
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|
— |
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|
Common stock, $.10 par value, 20,000,000 shares authorized,
6,340,000 shares issued in 2005 and 2004
|
|
|
634,000 |
|
|
|
634,000 |
|
|
Capital in excess of par value
|
|
|
12,577,000 |
|
|
|
12,463,000 |
|
|
Treasury stock, at cost, 279,000 shares in 2005 and 303,000 in
2004
|
|
|
(275,000 |
) |
|
|
(452,000 |
) |
|
Accumulated other comprehensive loss
|
|
|
(36,000 |
) |
|
|
(437,000 |
) |
|
Retained earnings, net of $6,272,000 related to 20% stock
dividend in 2003
|
|
|
12,213,000 |
|
|
|
8,712,000 |
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity
|
|
|
25,113,000 |
|
|
|
20,920,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
35,433,000 |
|
|
$ |
30,976,000 |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
3
CREDO PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
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Nine Months Ended |
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|
Three Months Ended |
|
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|
July
31, |
|
|
July
31, |
|
| |
|
2005 |
|
|
2004 |
|
|
2005 |
|
|
2004 |
|
|
REVENUES:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales
|
|
$ |
8,785,000 |
|
|
$ |
6,932,000 |
|
|
$ |
3,396,000 |
|
|
$ |
2,226,000 |
|
|
Operating
|
|
|
487,000 |
|
|
|
444,000 |
|
|
|
164,000 |
|
|
|
152,000 |
|
|
Investment and other income
|
|
|
201,000 |
|
|
|
186,000 |
|
|
|
105,000 |
|
|
|
61,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,473,000 |
|
|
|
7,562,000 |
|
|
|
3,665,000 |
|
|
|
2,439,000 |
|
|
|
|
|
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|
|
|
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|
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COSTS AND EXPENSES:
|
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|
|
|
|
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|
|
|
|
|
|
|
|
|
Oil and gas production
|
|
|
1,920,000 |
|
|
|
1,464,000 |
|
|
|
790,000 |
|
|
|
532,000 |
|
|
Depreciation, depletion and amortization
|
|
|
1,610,000 |
|
|
|
1,227,000 |
|
|
|
568,000 |
|
|
|
436,000 |
|
|
General and administrative
|
|
|
1,052,000 |
|
|
|
1,011,000 |
|
|
|
337,000 |
|
|
|
344,000 |
|
|
Interest
|
|
|
28,000 |
|
|
|
30,000 |
|
|
|
9,000 |
|
|
|
7,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,610,000 |
|
|
|
3,732,000 |
|
|
|
1,704,000 |
|
|
|
1,319,000 |
|
|
|
|
|
|
|
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|
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|
INCOME BEFORE INCOME TAXES
|
|
|
4,863,000 |
|
|
|
3,830,000 |
|
|
|
1,961,000 |
|
|
|
1,120,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
INCOME TAXES
|
|
|
(1,362,000 |
) |
|
|
(1,073,000 |
) |
|
|
(549,000 |
) |
|
|
(314,000 |
) |
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
NET INCOME
|
|
$ |
3,501,000 |
|
|
$ |
2,757,000 |
|
|
$ |
1,412,000 |
|
|
$ |
806,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
|
|
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|
EARNINGS PER SHARE OF COMMON STOCK — BASIC
|
|
$ |
.58 |
|
|
$ |
.46 |
|
|
$ |
.23 |
|
|
$ |
.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
EARNINGS PER SHARE OF COMMON STOCK — DILUTED
|
|
$ |
.56 |
|
|
$ |
.45 |
|
|
$ |
.22 |
|
|
$ |
.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
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|
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|
|
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|
Weighted average number of shares of Common Stock and dilutive
securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
6,046,000 |
|
|
|
6,020,000 |
|
|
|
6,058,000 |
|
|
|
6,038,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
6,221,000 |
|
|
|
6,186,000 |
|
|
|
6,226,000 |
|
|
|
6,222,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
4
CREDO PETROLEUM CORPORATION AND SUBSIDIARIES
Statement of Stockholders’ Equity and Comprehensive Income
(Unaudited)
For the Nine Months Ended July 31, 2005
| |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
| |
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|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
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|
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Capital In |
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
|
Total |
| |
|
Common
Stock |
|
Excess Of |
|
Treasury |
|
Comprehensive |
|
Comprehensive |
|
Retained |
|
Stockholders’ |
| |
|
Shares |
|
Amount |
|
Par Value |
|
Stock |
|
Loss |
|
Income |
|
Earnings |
|
Equity |
| |
|
Balance, October 31, 2004
|
|
|
6,340,000 |
|
|
$ |
634,000 |
|
|
$ |
12,463,000 |
|
|
$ |
(452,000 |
) |
|
$ |
(437,000 |
) |
|
|
|
|
|
$ |
8,712,000 |
|
|
$ |
20,920,000 |
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
3,501,000 |
|
|
|
3,501,000 |
|
|
|
3,501,000 |
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of derivatives, net of tax
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
401,000 |
|
|
|
401,000 |
|
|
|
— |
|
|
|
401,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
3,902,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury stock
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,000 |
) |
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
(8,000 |
) |
|
Exercise of common stock options
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
185,000 |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
185,000 |
|
|
Tax benefit from the exercise of common stock options
|
|
|
— |
|
|
|
— |
|
|
|
114,000 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
— |
|
|
|
114,000 |
|
| |
|
|
|
|
|
|
| |
|
Balance, July 31, 2005
|
|
|
6,340,000 |
|
|
$ |
634,000 |
|
|
$ |
12,577,000 |
|
|
$ |
(275,000 |
) |
|
$ |
(36,000 |
) |
|
|
|
|
|
$ |
12,213,000 |
|
|
$ |
25,113,000 |
|
| |
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated
financial statements.
5
CREDO PETROLEUM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
| |
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended |
|
| |
|
July
31, |
|
| |
|
2005 |
|
|
2004 |
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
3,501,000 |
|
|
$ |
2,757,000 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation, depletion and amortization
|
|
|
1,610,000 |
|
|
|
1,227,000 |
|
|
Deferred income taxes
|
|
|
1,250,000 |
|
|
|
931,000 |
|
|
Other
|
|
|
76,000 |
|
|
|
— |
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Proceeds from short term investments
|
|
|
2,500,000 |
|
|
|
509,000 |
|
|
Purchase of short term investments
|
|
|
(1,641,000 |
) |
|
|
(1,849,000 |
) |
|
Accrued oil and gas sales
|
|
|
(759,000 |
) |
|
|
(319,000 |
) |
|
Trade receivables
|
|
|
663,000 |
|
|
|
(339,000 |
) |
|
Other current assets
|
|
|
(1,138,000 |
) |
|
|
(59,000 |
) |
|
Accounts payable and accrued liabilities
|
|
|
(853,000 |
) |
|
|
682,000 |
|
|
Income taxes payable
|
|
|
132,000 |
|
|
|
(10,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
|
|
5,341,000 |
|
|
|
3,530,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Additions to oil and gas properties
|
|
|
(5,064,000 |
) |
|
|
(3,980,000 |
) |
|
Proceeds from sale of oil and gas properties
|
|
|
118,000 |
|
|
|
— |
|
|
Changes in other long-term assets
|
|
|
(198,000 |
) |
|
|
(388,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN INVESTING ACTIVITIES
|
|
|
(5,144,000 |
) |
|
|
(4,368,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options (24,000 options in 2005
and 78,000 options in 2004)
|
|
|
185,000 |
|
|
|
291,000 |
|
|
Purchase of treasury stock (500 shares in 2005 and 2,000 shares
in 2004)
|
|
|
(8,000 |
) |
|
|
(39,000 |
< |