R
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QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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£
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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DELAWARE
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06-0842255
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(State
or other jurisdiction of incorporation or organization)
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(I.R.S.
Employer Identification No.)
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10
Columbus Boulevard, Hartford, Connecticut
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06106
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(Address
of principal executive offices)
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(Zip
Code)
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PAGE
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PART
I — FINANCIAL INFORMATION
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3
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3
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4
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5
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6
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8
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14
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ITEM
4 Controls and
Procedures
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14
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PART
II — OTHER INFORMATION
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ITEM
1 Legal
Proceedings
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15
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ITEM
1A Risk
Factors
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15
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17
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ITEM
6 Exhibits
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17
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18
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19
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19
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20
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September
30,
2008
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JUNE 30,
2008
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|||||||
(UNAUDITED)
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(NOTE)
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|||||||
ASSETS
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||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
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$ | 35,945,887 | $ | 34,615,228 | ||||
Accounts
receivable — Trade (net of allowance for doubtful accounts of $89,091 and
$99,344 at September 30, 2008 and June 30, 2008,
respectively)
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5,796,469 | 8,357,839 | ||||||
Accounts
receivable — working interest partners
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— | 112,330 | ||||||
Marketable
securities
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1,253,018 | 1,708,222 | ||||||
Inventories
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869,212 | 1,260,189 | ||||||
Other
assets
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325,733 | 404,160 | ||||||
Total
current assets
|
44,190,319 | 46,457,968 | ||||||
Deferred
income taxes
|
5,786,883 | 6,368,665 | ||||||
Property
and equipment, net:
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||||||||
Oil
and gas properties (successful efforts method)
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118,384,591 | 138,556,513 | ||||||
Land,
buildings and equipment
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2,890,888 | 3,346,368 | ||||||
Field
equipment
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888,377 | 1,040,281 | ||||||
122,163,856 | 142,943,162 | |||||||
Less
accumulated depletion, depreciation and amortization
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(101,058,571 | ) | (114,495,875 | ) | ||||
Net
property and equipment
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21,105,285 | 28,447,287 | ||||||
Goodwill
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4,020,706 | 4,020,706 | ||||||
Total
assets
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$ | 75,103,193 | $ | 85,294,626 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
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||||||||
Current
liabilities:
|
||||||||
Accounts
payable
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$ | 1,885,091 | $ | 2,929,445 | ||||
Accounts
payable-working interest partners
|
207,566 | — | ||||||
Accrued
liabilities
|
1,740,211 | 1,891,194 | ||||||
Income
taxes payable
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4,408,596 | 3,857,766 | ||||||
Total
current liabilities
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8,241,464 | 8,678,405 | ||||||
Long
term liabilities:
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||||||||
Deferred
income taxes
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2,254,784 | 2,507,712 | ||||||
Other
long term liabilities
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52,137 | 48,998 | ||||||
Asset
retirement obligations
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9,198,850 | 11,596,084 | ||||||
Total
long term liabilities
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11,505,771 | 14,152,794 | ||||||
Stockholders’
equity:
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||||||||
Common
stock, par value $.01 per share:
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||||||||
Authorized
200,000,000 shares, outstanding 41,500,325
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415,001 | 415,001 | ||||||
Capital
in excess of par value
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73,216,143 | 73,216,143 | ||||||
Accumulated
deficit
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(21,349,683 | ) | (22,857,494 | ) | ||||
Accumulated
other comprehensive income
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3,074,497 | 11,689,777 | ||||||
Total
stockholders’ equity
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55,355,958 | 62,463,427 | ||||||
Total
liabilities and stockholders’ equity
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$ | 75,103,193 | $ | 85,294,626 |
THREE MONTHS ENDED
September
30,
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||||||||
2008
|
2007
|
|||||||
REVENUES:
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||||||||
Oil
sales
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$ | 5,645,587 | $ | 4,732,820 | ||||
Gas
sales
|
4,309,072 | 3,989,184 | ||||||
Other
production related revenues
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484,025 | 599,929 | ||||||
Total
revenues
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10,438,684 | 9,321,933 | ||||||
COSTS
AND EXPENSES:
|
||||||||
Production
costs
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2,986,862 | 2,098,026 | ||||||
Exploration
and dry hole costs
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723,400 | 2,013,474 | ||||||
Salaries
and employee benefits
|
466,192 | 444,509 | ||||||
Depletion,
depreciation and amortization
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2,500,950 | 4,408,364 | ||||||
Auditing,
accounting and legal services
|
267,470 | 237,051 | ||||||
Accretion
expense
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158,415 | 170,208 | ||||||
Shareholder
communications
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90,579 | 47,066 | ||||||
Gain
on sale of field equipment
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(3,506 | ) | (9,653 | ) | ||||
Other
administrative expenses
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769,069 | 869,913 | ||||||
Total
costs and expenses
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7,959,431 | 10,278,958 | ||||||
Operating
income (loss)
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2,479,253 | (957,025 | ) | |||||
Interest
income
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628,169 | 489,217 | ||||||
Income
(loss) before income taxes
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3,107,422 | (467,808 | ) | |||||
Income
tax provision
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(1,599,611 | ) | (6,638 | ) | ||||
NET
INCOME (LOSS)
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$ | 1,507,811 | $ | (474,446 | ) | |||
Average
number of shares outstanding
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||||||||
Basic
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41,500,325 | 41,500,325 | ||||||
Diluted
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41,511,775 | 41,500,325 | ||||||
NET
INCOME (LOSS) PER SHARE (BASIC AND DILUTED)
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$ | 0.04 | $ | (0.01 | ) |
THREE MONTHS ENDED
September
30,
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||||||||
2008
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2007
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|||||||
OPERATING
ACTIVITIES:
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||||||||
Net income
(loss)
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$ | 1,507,811 | $ | (474,446 | ) | |||
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
||||||||
Gain
from sale of field equipment
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(3,506 | ) | (9,653 | ) | ||||
Depletion,
depreciation and amortization
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2,500,950 | 4,408,364 | ||||||
Accretion
expense
|
158,415 | 170,208 | ||||||
Deferred
income taxes
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(630,666 | ) | (7,890 | ) | ||||
Exploration
and dry hole costs
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515,595 | 2,013,474 | ||||||
Increase
(decrease) in operating assets and liabilities:
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||||||||
Accounts
receivable
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1,569,513 | (1,433,939 | ) | |||||
Other
assets
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78,430 | 88,106 | ||||||
Inventories
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224,530 | 5,329 | ||||||
Accounts
payable and accrued liabilities
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12,994 | (3,182,900 | ) | |||||
Income
taxes payable
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1,192,182 | (589,618 | ) | |||||
Net
cash provided by operating activities
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7,126,248 | 987,035 | ||||||
INVESTING
ACTIVITIES:
|
||||||||
Proceeds
from sale of field equipment
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3,506 | 9,653 | ||||||
Additions
to property and equipment
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(171,238 | ) | (1,386,371 | ) | ||||
Oil
and gas exploration activities
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(515,595 | ) | (2,013,474 | ) | ||||
Marketable
securities matured
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455,204 | 737,769 | ||||||
Marketable
securities purchased
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— | (250,747 | ) | |||||
Net
cash used in investing activities
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(228,123 | ) | (2,903,170 | ) | ||||
FINANCING
ACTIVITIES:
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||||||||
Net
cash used in financing activities
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— | — | ||||||
Effect
of exchange rate changes on cash and cash equivalents
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(5,567,466 | ) | 1,430,886 | |||||
Net increase
(decrease) in cash and cash equivalents
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1,330,659 | (485,249 | ) | |||||
Cash
and cash equivalents at beginning of period
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34,615,228 | 28,470,448 | ||||||
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
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$ | 35,945,887 | $ | 27,985,199 | ||||
Cash
Payments:
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||||||||
Income
taxes
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1,038,095 | 615,388 | ||||||
Supplemental
Schedule of Noncash Investing and Financing
Activities:
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||||||||
Revision
to estimate of asset retirement obligations
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(995,621 | ) | — | |||||
Write
off of expired license
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252,276 | — | ||||||
Accounts
payable related to property and equipment
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1,346,046 | 872,847 | ||||||
THREE
MONTHS ENDED
SEPTEMBER 30,
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||||||||||||
2008
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2007
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ACCUMULATED OTHER COMPREHENSIVE
INCOME
|
||||||||||
Balance
at June 30, 2008
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$ | 11,689,777 | ||||||||||
Net income
(loss)
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$ | 1,507,811 | $ | (474,446 | ) | |||||||
Foreign
currency translation adjustments
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(8,615,280 | ) | 2,305,487 | (8,615,280 | ) | |||||||
Total
comprehensive (loss) income
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$ | (7,107,469 | ) | $ | 1,831,041 | |||||||
Balance
at September 30, 2008
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$ | 3,074,497 |
THREE MONTHS ENDED
September 30,
|
||||||||
2008
|
2007
|
|||||||
Revenues:
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||||||||
MPC
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$ | 91 | $ | 59 | ||||
MPAL
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10,348 | 9,263 | ||||||
Total
consolidated revenues
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$ | 10,439 | $ | 9,322 | ||||
Net income
(loss):
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||||||||
MPC
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$ | (615 | ) | $ | (489 | ) | ||
MPAL
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2,123 | 15 | ||||||
Consolidated
net income (loss)
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$ | 1,508 | $ | (474 | ) |
Balance
at July 1, 2008
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$ | 11,596,084 | ||
Liabilities
incurred
|
— | |||
Liabilities
settled
|
— | |||
Accretion
expense
|
158,415 | |||
Revisions
to estimate
|
(995,621 | ) | ||
Exchange
effect
|
(1,560,028 | ) | ||
Balance
at September 30, 2008
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$ | 9,198,850 |
At September 30, 2008
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At June 30, 2008
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|||||||||||||||
Nondepletable capitalized
costs
|
A.$ |
US.$
|
A.$ |
US.$
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||||||||||||
PEL
106 – Cooper Basin (1) (2)
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$ | 1,929,470 | $ | 1,584,288 | $ | 1,929,470 | $ | 1,855,186 | ||||||||
Weald/Wessex
Basin U.K. (1)
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578,686 | 475,159 | 571,955 | 549,935 | ||||||||||||
Exploration
permits and licenses – Australia and U.K. (3)
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— | 4,173,473 | — | 4,425,749 | ||||||||||||
Total
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$ | 6,232,920 | $ | 6,830,870 |
(1)
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Capitalized
exploratory well costs pending the start of
production.
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(2)
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These
costs were capitalized during the year ended June 30, 2006 and remain
capitalized because the related well has sufficient quantity of reserves
to justify its completion as a producing well. Efforts are currently being
made to market the gas from this
well.
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(3)
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The
Company evaluates exploration permits and licenses annually or whenever
events or changes in circumstances indicate that the carrying value may be
impaired. The Company estimates the value of these assets based upon
drilling activity, estimated cash flow and
commitments.
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PAYMENTS DUE BY PERIOD
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||||||||||||||||||||
CONTRACTUAL OBLIGATIONS
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TOTAL
|
LESS THAN
1 YEAR
|
1-3
YEARS
|
3-5
YEARS
|
MORE
THAN
5
YEARS
|
|||||||||||||||
Operating
Lease Obligations
|
$ | 173 | $ | 173 | $ | — | $ | — | $ | — | ||||||||||
Purchase
Obligations (1)
|
6,965 | 6,965 | — | — | — | |||||||||||||||
Asset
Retirement Obligations (2)
|
13,077 | — | 241 | 2,299 | 10,537 | |||||||||||||||
Total
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$ | 20,215 | $ | 7,138 | $ | 241 | $ | 2,299 | $ | 10,537 |
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______________
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(1)
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Represents
firm commitments for exploration and capital expenditures. The Company is
committed to these expenditures, however some may be farmed out to third
parties. Exploration contingent expenditures of $22,848,000 which are not
legally binding have been excluded from the table above and based on
exploration decisions would be due as follows: $0 (less than 1 year),
$22,827,000 (1-3 years), $21,000 (3-5
years).
|
(2)
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During
the three month period ended September 30, 2008, the Company decreased the
Mereenie asset retirement obligation by a net amount of $995,000 due to a
change in cost estimates and expected restoration date from 2009 to 2014
(see Note 6 to the Financial Statements). It was originally
estimated that this liability would be retired at the end of the contract,
but due to potential supply obligations this has been extended to 2014.
The amounts above represent the undiscounted
liability.
|
THREE MONTHS ENDED
September
30,
|
||||||||||||||||
2008
|
2007
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$ Variance
|
% Variance
|
|||||||||||||
Oil
sales
|
$ | 5,645,587 | $ | 4,732,820 | $ | 912,767 | 19 | % | ||||||||
Gas
sales
|
4,309,072 | 3,989,184 | 319,888 | 8 | % | |||||||||||
Other
production related revenues
|
484,025 | 599,929 | (115,904 | ) | (19 | %) |
THREE MONTHS ENDED SEPTEMBER 30,
|
||||||||||||||||||||||||
2008
SALES
|
2007 SALES
|
|||||||||||||||||||||||
BBLS
|
AVERAGE
PRICE
A.$ PER BBL
|
BBLS
|
AVERAGE
PRICE
A.$ PER BBL
|
%
Variance BBLS
|
%
Variance
A.$ PER BBL
|
|||||||||||||||||||
Australia:
|
||||||||||||||||||||||||
Mereenie
field
|
23,274 | 143.22 | 25,034 | 89.56 | (7 | %) | 60 | % | ||||||||||||||||
Cooper
Basin
|
1,191 | 150.92 | 2,033 | 93.27 | (41 | %) | 62 | % | ||||||||||||||||
Nockatunga
project
|
17,176 | 127.80 | 34,837 | 78.23 | (51 | %) | 63 | % | ||||||||||||||||
Total
|
41,641 | 137.12 | 61,904 | 83.33 | (33 | %) | 65 | % |
THREE MONTHS ENDED SEPTEMBER 30,
|
||||||||||||||||||||||||
2008 SALES
|
2007 SALES
|
|||||||||||||||||||||||
AVERAGE
PRICE
|
AVERAGE
PRICE
|
%
Variance BCF
|
%
Variance
A.$ PER MCF
|
|||||||||||||||||||||
BCF
|
A.$ PER MCF
|
BCF
|
A.$ PER
MCF
|
|||||||||||||||||||||
Australia:
Palm Valley
|
.306 | 2.24 | .345 | 2.21 | (11 | %) | 1 | % | ||||||||||||||||
Australia:
Mereenie
|
1.041 | 3.43 | 1.079 | 3.49 | (4 | %) | (1 | %) | ||||||||||||||||
Total
|
1.347 | 3.15 | 1.424 | 3.17 | (5 | %) | (1 | %) |
THREE MONTHS ENDED
September 30,
|
||||||||||||||||
2008
|
2007
|
$Variance
|
% Variance
|
|||||||||||||
Production
costs
|
$ | 2,986,862 | $ | 2,098,026 | $ | 888,836 | 42 | % | ||||||||
Exploration
and dry hole costs
|
723,400 | 2,013,474 | (1,290,074 | ) | (64 | %) | ||||||||||
Depletion,
depreciation and amortization
|
2,500,950 | 4,408,364 | (1,907,414 | ) | (43 | %) |
•
|
worldwide
and domestic supplies of oil and gas;
|
|
•
|
changes
in the supply and demand for such fuels;
|
|
•
|
political
conditions in oil, natural gas, and other fuel-producing and
fuel-consuming areas;
|
|
•
|
the
extent of Australian domestic oil and gas production and importation of
such fuels and substitute fuels in Australian and other relevant
markets;
|
|
•
|
weather
conditions, including effects on prices and supplies in worldwide energy
markets because of recent hurricanes in the United
States;
|
|
•
|
the
competitive position of each such fuel as a source of energy as compared
to other energy sources; and
|
|
•
|
the
effect of governmental regulation on the production, transportation, and
sale of oil, natural gas, and other
fuels.
|
Period
|
Total Number of
Shares
Purchased
|
Average Price
Paid
per
Share
|
Total Number of
Shares Purchased
as Part of Publicly
Announced Plan(
1)
|
Maximum
Number
of
Shares that May
Yet Be Purchased
Under Plan
|
||||||||||||
July
1-31, 2008
|
0 | 0 | 0 | 319,150 | ||||||||||||
August
1-31, 2008
|
0 | 0 | 0 | 319,150 | ||||||||||||
September
1-30, 2008
|
0 | 0 | 0 | 319,150 |
(1)
|
The Company through its stock
repurchase plan may purchase up to one million shares of its common stock
in the open market. Through September 30, 2008, the Company had purchased
680,850 of its shares at an average price of $1.01 per share or a total
cost of approximately $686,000, all of which shares have been
cancelled.
|
31.
|
Rule 13a-14(a)
Certifications.
|
32.
|
Section 1350
Certifications.
|