SECURITIES AND EXCHANGE COMMISSION Washington,
D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For Quarter Ended January 31, 2004
Commission File Number 0-8877
CREDO PETROLEUM CORPORATION
Colorado 84-0772991
(State of Incorporation) (IRS Employer Identification)
1801 Broadway, Suite 900 80202
Denver, Colorado (Zip Code)
(Address of principal executive office)
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303-297-2200 (Telephone Number)
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 X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, net of treasury stock, as of February 29, 2004: Common stock, $.10
par value - 4,012,121 Preferred stock, no par value - None issued
CREDO PETROLEUM CORPORATION
Index to Form 10-QSB
For Quarter Ended January 31, 2004
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets As of January 31, 2004 (Unaudited) and October
31, 2003
Consolidated Statements of Earnings and Changes in Retained Earnings (Unaudited)
For the Three Month Periods Ended January 31, 2004 and 2003
Consolidated Statements of Cash Flows (Unaudited) For the Three Month Periods
Ended
January 31, 2004 and 2003
Management's Discussion and Analysis of Financial Condition and Results of
Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31.1 Certification by Chief Executive Officer under
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification by Chief Financial Officer under
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification by Chief Executive Officer and Chief Financial Officer
under Section 906 of the Sarbanes-Oxley Act (18 U.S.C. Section 1350)
(b) Reports on Form 8-K
On January 7, 2004 CREDO Petroleum Corporation filed a current report on Form
8-K reporting under Item 9 pursuant to Item 12 that we had issued a press
release announcing our fiscal 2003 financial results.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with U. S. generally accepted accounting principles for
interim financial information and with the instructions for Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by U. S. generally accepted accounting
principles for complete financial statements. In the opinion of management, the
consolidated financial statements contain all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of the
company's results for the periods presented. These consolidated financial
statements should be read in conjunction with the company's Form 10-KSB for the
fiscal year ended October 31, 2003.
CREDO PETROLEUM CORPORATION
Consolidated Balance Sheets
A S S E T S
January 31, October 31,
2004 2003
------------ ------------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 2,444,000 $ 1,885,000
Short term investments 5,535,000 4,778,000
Receivables:
Trade 467,000 410,000
Accrued oil and gas sales 1,684,000 1,256,000
Other 31,000 234,000
------------ ------------
Total current assets 10,161,000 8,563,000
------------ ------------
OIL AND GAS PROPERTIES, net, at cost,
using full cost method:
Unevaluated 2,081,000 2,075,000
Evaluated 12,494,000 11,986,000
------------ ------------
Net oil and gas properties 14,575,000 14,061,000
------------ ------------
EXCLUSIVE LICENSE AGREEMENT, net of
amortization of $239,000 in 2004
and $221,000 in 2003 460,000 478,000
OTHER, net 166,000 470,000
------------ ------------
$ 25,362,000 $ 23,572,000
============ ============
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 2,115,000 $ 1,776,000
Income taxes payable 277,000 210,000
------------ ------------
Total current liabilities 2,392,000 1,986,000
------------ ------------
DEFERRED INCOME TAXES, net 3,720,000 3,358,000
EXCLUSIVE LICENSE OBLIGATION, less current
obligations of $53,000 355,000 355,000
ASSET RETIREMENT OBLIGATION 264,000 238,000
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock, without par value,
5,000,000 shares authorized, none issued - -
Common stock, $.10 par value,
20,000,000 shares authorized,
4,334,000 shares issued in 2004 and 2003 433,000 433,000
Capital in excess of par value 12,664,000 12,664,000
Retained earnings, net of $6,277,000
related to 20% stock dividend in 2003 6,227,000 5,062,000
Other comprehensive income (loss) (183,000) 180,000
Treasury stock, at cost, 322,000 shares
in 2004 and 378,000 shares in 2003 (510,000) (704,000)
------------ ------------
Total stockholders' equity 18,631,000 17,635,000
------------ ------------
$ 25,362,000 $ 23,572,000
============ ============
See accompanying notes.
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CREDO PETROLEUM CORPORATION
Consolidated Statements of Earnings And Changes in
Retained Earnings - Unaudited
Three Months Ended
January 31
2004 2003
----------- -----------
REVENUES:
Oil and gas sales $ 2,605,000 $ 1,589,000
Operating 137,000 126,000
Investment income and other 108,000 76,000
----------- -----------
2,850,000 1,791,000
----------- -----------
COSTS AND EXPENSES:
Oil and gas production 460,000 327,000
Depreciation, depletion and amortization 429,000 321,000
General and administrative 331,000 278,000
Interest 12,000 13,000
----------- -----------
1,232,000 939,000
----------- -----------
INCOME BEFORE
INCOME TAXES AND ACCOUNTING CHANGE 1,618,000 852,000
INCOME TAXES (453,000) (239,000)
----------- -----------
INCOME BEFORE ACCOUNTING
CHANGE 1,165,000 613,000
CUMULATIVE EFFECT ON PRIOR
YEARS OF SFAS 143-ACCOUNTING
FOR ASSET RETIREMENT
OBLIGATIONS (NET OF
TAXES OF $28,000) - 72,000
----------- -----------
NET INCOME 1,165,000 685,000
RETAINED EARNINGS,
BEGINNING OF PERIOD 5,062,000 8,209,000
----------- -----------
RETAINED EARNINGS,
END OF PERIOD $ 6,227,000 $ 8,894,000
=========== ===========
BASIC INCOME PER SHARE BEFORE ACCOUNTING CHANGE $ .29 $ .15
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE - .02
------ ------
BASIC NET INCOME PER SHARE $ .29 $ .17
====== ======
DILUTED INCOME PER SHARE BEFORE ACCOUNTING CHANGE $ .28 $ .15
CUMULATIVE EFFECT OF A CHANGE IN
ACCOUNTING PRINCIPLE - .02
------ ------
DILUTED NET INCOME PER SHARE $ .28 $ .17
====== ======
See accompanying notes.
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CREDO PETROLEUM CORPORATION
Consolidated Statements of Cash Flows - Unaudited
Three Months Ended
January 31
2004 2003
----------- -----------
OPERATING ACTIVITIES:
Net income $ 1,165,000 $ 685,000
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 429,000 321,000
Deferred income taxes 362,000 79,000
Cumulative effect of change in
accounting principle - (72,000)
Other - 2,000
Changes in operating assets and liabilities:
Proceeds from short term investments 176,000 724,000
Purchase of short term investments (933,000) (880,000)
Trade receivables (57,000) (119,000)
Accrued oil and gas sales (428,000) (200,000)
Other (160,000) 20,000
Accounts payable and accrued costs
and expenses 485,000 516,000
Income tax payable 67,000 181,000
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,106,000 1,257,000
----------- -----------
INVESTING ACTIVITIES:
Additions to oil and gas properties, net (881,000) (1,291,000)
Proceeds from sale of oil and gas properties 102,000 -
Changes in other long-term assets 38,000 7,000
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (741,000) (1,284,000)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options
(58,500 options in 2004) 233,000 -
Purchase of treasury stock
(2,000 shares in 2004 and 100 shares in 2003) (39,000) (1,000)
----------- -----------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 194,000 (1,000)
----------- -----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 559,000 (28,000)
CASH AND CASH EQUIVALENTS:
Beginning of Period 1,885,000 1,324,000
----------- -----------
End of Period $ 2,444,000 $ 1,296,000
=========== ===========
Supplemental Cash Flow Information:
Cash paid (refunds received) for income taxes $ 25,000 $ -
=========== ===========
See accompanying notes.
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CREDO PETROLEUM CORPORATION
Management's Discussion and Analysis of Financial
Condition
and Results of Operations January 31, 2004
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2004, working capital was $7,769,000, compared with $6,577,000
at October 31, 2003. Net cash provided by operating activities for the first
three months of 2004 and 2003 was $1,106,000 and $1,257,000, respectively and
comprises primarily net income, depreciation, depletion and amortization
("DD&A"), deferred income taxes, reduced by net increases in
short-term investments, and increases in accrued oil and gas sales in each of
the two periods. For 2004, such amounts are $1,165,000, $429,000, $362,000,
$(757,000), and $(428,000), respectively. For 2003, such amounts are $685,000,
$321,000, 79,000, $(156,000), and $(200,000), respectively. In the first quarter
2004 and 2003, cash used in investing activities was $741,000 and $1,284,000,
respectively, and was used primarily to fund oil and gas exploration and
development expenditure, including Calliope, totaling $881,000 and $1,291,000,
respectively.
The average return on CREDO's investments during the first three months was
3% in 2004 and 2% in 2003. At January 31, approximately 70% of the investments
were directly invested in mutual funds and brokerage accounts managed by
professional money managers. Remaining investments are in managed partnerships
that use various strategies to minimize their correlation to stock market
movements. Most of the investments are highly liquid, and the company believes
they represent a responsible approach to cash management. In the company's
opinion, the greatest investment risk is the potential for negative market
impact from unexpected, major adverse news, such as the September 11th terrorist
attacks.
Existing working capital and anticipated cash flow are expected to be
sufficient to fund 2004 operations. Because earnings are anticipated to be
reinvested in operations, cash dividends are not expected to be paid in the
foreseeable future. Commitments for future capital expenditures were not
material at January 31, 2004. The company has no defined benefit plans and no
obligations for post retirement employee benefits.
PRODUCT PRICES AND PRODUCTION
Although product prices are key to the company's ability to operate
profitably and to budget capital expenditures, they are beyond the company's
control and are difficult to predict. Since 1991, the company has periodically
hedged natural gas prices by forward selling a portion of its estimated
production in the NYMEX futures market. This is generally done when (i) the
price relationship (the "basis") between the futures markets and the
cash markets where the company sells its gas is stable within historical ranges,
and (ii) in the company's opinion, the current price is adequate to insure
reasonable returns at a time when downside price risks appear to be substantial.
The company closes its hedges by purchasing offsetting "long"
positions in the futures market at then prevailing prices. Accordingly, the gain
or loss on the hedge position will depend on futures prices at the time
offsetting "long" positions are purchased. Hedging gains and losses
are included in revenues from oil and gas sales. The company believes its most
significant hedging risk is that expected correlations in price movements as
discussed above do not occur, and thus, that gains or losses in one market are
not fully offset by opposite moves in the other market.
The company recognizes all derivatives on the balance sheet at fair value at
the end of each period. Changes in the fair value of a cash flow hedge are
recorded in Other Comprehensive Income on the Consolidated Balance Sheets and
then are reclassified into the Consolidated Statement of Earnings as the
underlying hedged item affects earnings. Amounts reclassified into earnings
related to natural gas hedges are included in oil and gas sales.
The company realized hedging gains of $80,000 and $111,000 for the quarters
ended January 31, 2004 and 2003, respectively. At January 31, 2004 the company
has recorded in other comprehensive income net deferred losses of approximately
$264,000 ($183,000 net of tax) related to natural gas hedging transactions.
Subsequent to first quarter-end, hedges for the months of February and March
2004 were closed and an $88,000 loss was incurred. The company currently has
open hedge positions totaling 700 MMcfg covering the months of April through
October 2004 at an average NYMEX price of $4.82 per Mcf. This hedge represents
approximately 65% of the company's estimated gas production for those months.
During the quarter ended January 31, 2004 the company entered into a bank
hedging line of credit facility with a maximum threshold amount of $2,000,000.
At January 31, 2004, approximately 25% of the company's open natural gas hedge
positions were covered by this agreement.
The following table sets forth the components of Comprehensive Income for
each of the periods presented:
Three Months Ended
January 31,
2004 2003
----------- -----------
Net Income $ 1,165,000 $ 685,000
Other comprehensive income (loss),
net of tax:
Change in fair value of futures
contracts used for natural gas hedging (363,000) (150,000)
----------- -----------
Comprehensive income $ 802,000 $ 535,000
=========== ===========
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Oil and gas sales volume and price comparisons for the indicated periods are
set forth below. Price realizations include the sales price and hedging gains
and losses.
Three Months Three Months Percent Percent
Ended January 31, 2004 Ended January 31, 2003 Volume Price
---------------------- ----------------------
Product Volume Price Volume Price Change Change
------- ------- ------- ------- ------- ------ ------
Gas (Mcf) 458,000 $ 5.03(1) 313,000 $ 4.31(2) + 46% + 17%
Oil (bbls) 10,000 $29.95 9,000 $26.25 + 11% + 14%
____________________________
(1) Includes $0.18 Mcf hedging gain.
(2) Includes $0.36 Mcf hedging gain.
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The company's business focuses on two core projects--natural gas drilling
along the shelf of the Northern Anadarko Basin of Oklahoma and application of
its patented Calliope Gas Recovery System. The company believes that, in
combination, these two projects provide an excellent (and possibly unique)
balance for achieving its goal of adding long-lived gas reserves and production
at reasonable costs and risks.
Anadarko Shelf Drilling Program. At the beginning of fiscal 2004, the company
had 11 wells on its drilling schedule. However, the tight supply of drilling
rigs has caused most of the wells to be delayed longer than anticipated. During
the first quarter, the company drilled two wells in Oklahoma with working
interests ranging up to 50%. Both wells appear to be productive and are awaiting
pipeline connection and completion for production. A third well will be drilled
in April and the remaining wells will be drilled consecutively beginning in May.
The Bobby-John #1-10 was completed on the company's 17,000 gross acre Sand
Creek Prospect located in Ellis County, Oklahoma. Electric log data indicates
that the 7,850-foot well encountered the same Morrow sand that is producing in
the company's Deanna #1-15 located approximately one-half mile to the south. The
Deanna has been an excellent well for the area, and the company expects the
Bobby-John to have similar production characteristics. The company is the
operator and owns an approximate 50% working interest.
Approximately 15 miles to the north, the Owens #1-21 well has been drilled on
the company's 2,560 gross acre Buffalo Creek prospect in Harper County,
Oklahoma. Drilling data and electric logs indicate that this 6,900-foot well
will be productive and it is currently awaiting completion for pipeline
connection. The Owens is currently classified as a "tight hole"
meaning the other information on the well is not being released for proprietary
business reasons. The company owns a 31% working interest.
Calliope Gas Recovery Technology. The company owns the exclusive right to a
patented technology known as the Calliope Gas Recovery System. Calliope can
achieve substantially lower flowing bottom hole pressure than conventional
production methods because it does not rely on reservoir pressure to lift
liquids. In many gas wells, lower bottom hole pressure translates into recovery
of substantial additional gas reserves.
During the first quarter, the company installed its Calliope Gas Recovery
System on two 8,200-foot wells located in Oklahoma. Both wells represent a very
rigorous test for Calliope in terms of the challenge of reviving dead wells that
have reservoir damage, including damage from the "parting shot" of a
previous operator. Calliope has been installed on both wells and the company is
currently performing reservoir treatment procedures designed to mitigate the
reservoir damage. Calliope facilitates such treatments in low pressure
reservoirs because it can lift the fluids used in such treatments back out of
the wellbore and thereby keep from loading-up the well. If successful, these
installations should expand the envelope for Calliope applications. The company
owns an approximate 80% working interest in the wells and is the operator. The
company is in various stages of preparing to install Calliope on three
additional wells in Oklahoma.
STOCK DIVIDEND
On March 19, 2003, the company declared a 20% stock dividend to shareholders
of record on April 2, 2003. On April 23, 2003, the company issued 656,000 shares
of common stock in conjunction with this dividend. Accordingly, the fair value
(based on the quoted market price as adjusted) of the additional shares issued
of $6,277,000 was charged to retained earnings and credited to common stock and
capital in excess of par value. Cash payments were made to shareholders in lieu
of fractional shares. The basic and diluted weighted average number of shares
outstanding and net income per share information for all prior reporting periods
have been restated to reflect the effects of the stock dividend.
CHANGE IN ACCOUNTING PRINCIPLE
In June 2001, the Financial Accounting Standards Board issued SFAS No. 143,
"Accounting for Asset Retirement Obligations" that requires entities
to record the fair value of a liability for an asset retirement obligation in
the period in which it is incurred and a corresponding increase in the carrying
amount of the related long-lived asset. The company adopted SFAS No. 143 on
November 1, 2002 and recorded an asset and related liability of $179,000 (using
a 5% discount rate) and a cumulative effect on change in accounting principle on
prior years of $72,000 (net of taxes of $28,000). For the three month periods
ended January 31, 2004 and 2003, the company recognized $3,000 and $2,000,
respectively, of accretion expense on the liability.
STOCK-BASED COMPENSATION
In December 2002, the Financial Accounting Standards Board issued SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure,
an amendment of SFAS No. 123." Among other provisions, the statement amends
the disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation." Under current accounting rules the company elected to
account for its stock-based employee compensation under the intrinsic value
method established by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees."
If compensation expense had been determined in accordance with the provisions
of SFAS No. 123, the company's net income and per share amounts would have been
reported as follows:
Three Months Ended January 31,
2004 2003
------------- -------------
Net Income as reported $ 1,165,000 $ 685,000
Pro forma stock compensation expense,
net of tax (71,000) (12,000)
----------- -----------
Pro forma net income $ 1,094,000 $ 673,000
=========== ===========
Basic net income per share:
As reported $ 0.29 $ 0.17
======= =======
Pro forma $ 0.27 $ 0.17
======= =======
Diluted net income per share:
As reported $ 0.28 $ 0.17
======= =======
Pro forma $ 0.27 $ 0.17
======= =======
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INCOME TAXES
The company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS 109),
which requires the asset and liability method of accounting for deferred income
taxes. Deferred tax assets and liabilities are determined based on the temporary
differences between the financial statement and tax basis of assets and
liabilities. Deferred tax assets or liabilities at the end of each period are
determined using the tax rate in effect at that time.
The total future deferred income tax liability under SFAS 109 is extremely
complicated for any oil company to estimate due in part to the long-lived nature
of depleting oil and gas reserves and variables such as product prices.
Accordingly, the liability is subject to continual recalculation, revision of
the numerous estimates required, and may change significantly in the event of
such things as major acquisitions, divestitures, product price changes, changes
in reserve estimates, changes in reserve lives, and changes in tax rates or tax
laws.
RESULTS OF OPERATIONS
Three Months Ended January 31, 2004 Compared to Three Months Ended January
31, 2003
For the three months ended January 31, 2004, net income rose 70% to
$1,165,000 compared to $685,000 last year. Higher net income resulted primarily
from a 41% increase in production volumes and a 15% increase in product prices.
Total revenues rose 60% to $2,850,000 compared to $1,791,000 last year. Oil
and gas sales rose 64% to $2,605,000 compared to $1,589,000 last year. Net
wellhead natural gas prices rose 17% to $5.03 per Mcf compared to $4.31 last
year. Net wellhead prices for oil rose 14% to $29.95 per barrel compared to
$26.25 last year. Natural gas production rose 46% to 458,000 Mcf compared to
313,000 Mcf last year and oil production rose 10% to 10,000 bbls compared to
9,000 bbls last year. The effect of these higher volumes and prices was to
increase oil and gas sales by $1,016,000. Operating income increased 9% due to
an increase in drilling and production overhead income from new operated wells.
Investment income and other rose to $108,000 compared to $76,000 last year due
to improved performance from the company's investments.
Total costs and expenses increased 31% to $1,232,000 in the first three
months of fiscal 2004 compared to $939,000 last year. Oil and gas production
expenses rose 41%, or $133,000, due primarily to increased production taxes
resulting from increased production volumes and prices. Depreciation, depletion
and amortization increased 34% primarily due to increased production and an
increase in the amortizable full cost pool base. General and administrative
expenses increased 19% due to increases in salaries and wages, consulting fees
relating to increased regulatory requirements as well as inflationary pressures.
Interest expense primarily relates to the accrual of interest on the exclusive
license agreement obligation. Income taxes were provided at 28% in both 2004 and
2003.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Accounting for Oil and Gas Property Costs. As more fully discussed in Note 1
to the consolidated financial statements included with the company's Form 10-KSB
for the fiscal year ended October 31, 2003, the company (i) follows the full
cost method of accounting for the costs of its oil and gas properties, (ii)
amortizes such costs using the units of production method, and
(iii) applies a quarterly full cost ceiling test. Adverse changes in conditions
(primarily gas price declines) could result in permanent write-downs in the
carrying value of oil and gas properties as well as non-cash charges to
operations, but would not affect cash flows.
Estimates of Proved Oil and Gas Reserves. An independent petroleum engineer
annually estimates approximately 60% of the company's proved reserves. The
company estimates the remainder. Reserve engineering is a subjective process
that is dependent upon the quality of available data and the interpretation
thereof. In addition, subsequent physical and economic factors such as the
results of drilling, testing, production and product prices may justify revision
of such estimates. Therefore, actual quantities, production timing, and the
value of reserves may differ substantially from estimates. A reduction in proved
reserves would result in an increase in depreciation, depletion and amortization
("DD&A") expense. A large reduction in proved reserve quantities
or values could result in a permanent write-down in the carrying value of oil
and gas properties as discussed in Accounting for Oil and Gas Property Costs
above.
Estimates of Asset Retirement Obligations. In accordance with SFAS No 143,
the company makes estimates of future costs and the timing thereof in connection
with recording its future obligations to plug and abandon wells. Estimated
abandonment dates will be revised in the future based on changes to related
economic lives, which vary with product prices and production costs. Estimated
plugging costs may also be adjusted to reflect changing industry experience.
Increases in operating costs and decreases in product prices would increase the
estimated amount of the obligation and increase DD&A expense. Cash flows
would not be affected until costs to plug and abandon were actually incurred.
CONTROLS AND PROCEDURES
Within 90 days prior to the filing date of this report, the company carried
out an evaluation, under the supervision and with the participation of the
company's Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of its "disclosure controls and
procedures" pursuant to Securities Exchange Act Rule 13a-14(c). Disclosure
controls and procedures are controls and procedures that are designed to ensure
that information required to be disclosed by the company in reports filed or
submitted under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the Securities and Exchange Commission's
rules and forms. Based upon that evaluation, the company's Chief Executive
Officer and Chief Financial Officer concluded that the company's disclosure
controls and procedures are effective for these purposes as of the date of the
evaluation.
There have been no significant changes in the company's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
FORWARD-LOOKING STATEMENTS
Certain information included in this quarterly report and other materials
filed by the company with the Commission contain forward-looking statements
relating to the company's operations and the oil and gas industry. Such
forward-looking statements are based on management's current projections and
estimates and are identified by words such as "expects,"
"intends," "plans," "projects,"
"anticipates," "believes," "estimates" and similar
words. These statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual results may differ materially from what is expressed or
forecasted in such forward-looking statements. Among many factors that could
cause actual results to differ materially are: (i) natural gas and crude oil
price fluctuations, (ii) the company's ability to acquire oil and gas properties
that meet its objectives and to identify prospects for drilling, and (iii)
potential delays or failure to achieve expected production from existing and
future exploration and development projects. In addition, such forward-looking
statements may be affected by general domestic and international economic and
political conditions.
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.
Date: March 15, 2004
By: /s/ James T. Huffman
-----------------------------
James T. Huffman
President and Chief Executive Officer
(Principal Executive Officer)
By: /s/ James P. Garrett, Jr.
-----------------------------
James P. Garrett, Jr.
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
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Exhibit 31.1
CERTIFICATION PURSUANT TO RULE 15D-14 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James T. Huffman, Chief Executive Officer of CREDO Petroleum Corporation,
certify that:
1. I have reviewed this quarterly report on Form 10-QSB of CREDO Petroleum
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as
of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e) for the Registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the Registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c) Disclosed in this report any change in the Registrant's internal control
over financial reporting that occurred during the Registrant's most recent
fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
Registrant's auditors and the audit committee of Registrant's Board of
Directors:
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal control over
financial reporting.
Date: March 15, 2004
/s/ James T. Huffman
-----------------------------
James T. Huffman
Chief Executive Officer
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Exhibit 31.2
CERTIFICATION PURSUANT TO RULE 15D-14 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, James P. Garrett, Jr., Vice President and Chief Financial Officer of CREDO
Petroleum Corporation, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of CREDO Petroleum
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the Registrant as
of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e) for the Registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the Registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the Registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
c) Disclosed in this report any change in the Registrant's internal control
over financial reporting that occurred during the Registrant's most recent
fiscal quarter (the Registrant's fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to materially
affect, the Registrant's internal control over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
Registrant's auditors and the audit committee of Registrant's Board of
Directors:
a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the Registrant's ability to record, process,
summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal control over
financial reporting.
Date: March 15, 2004
/s/ James P. Garrett, Jr.
-----------------------------
James P. Garrett, Jr.
Vice President and Chief Financial Officer
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Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of CREDO Petroleum Corporation (the
"Company") on Form 10-QSB for the period ending January 31, 2004 as
filed with the Securities and Exchange on the date hereof (the
"Report"), we, James T. Huffman and James P. Garrett, Jr., President
and Chief Executive Officer, and Vice President and Chief Financial Officer,
respectively, of the Company, certify, pursuant to 18 U.S.C., SS 1350, as
adopted pursuant to SS 906 of the Sarbanes-Oxley Act of 2002, that to our
knowledge:
1. The Report fully complies with the requirements of
Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
March 15, 2004
/s/ James T. Huffman
-----------------------------
James T. Huffman
President and Chief Executive Officer
/s/ James P. Garrett, Jr.
----------------------------
James P. Garrett, Jr.
Vice President and Chief Financial Officer
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End
of Filing
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