UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2001
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-5507
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MAGELLAN PETROLEUM CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 06-0842255
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State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
149 Durham Road, Madison, Connecticut 06443
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 245-7664
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common stock, par value $.01 per share Boston Stock Exchange
Pacific Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act
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(Title of Class)
Common stock, par value $.01 per share NASDAQ SmallCap Market
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.
|X| Yes |_| No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. |X|
The aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant was $22,917,000 at September 20, 2001.
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Common stock, par value $.01 per share, 24,624,376 shares outstanding
as of September 20, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement related to the Annual Meeting of
Stockholders for the fiscal year ended June 30, 2001, are incorporated by
reference in Part III of this Form 10-K to the extent stated herein.
TABLE OF CONTENTS
Page
PART I
Item 1. Business 4
Item 2. Properties 15
Item 3. Legal Proceedings 21
Item 4. Submission of Matters to a Vote of Security Holders 23
PART II
Item 5. Market for the Company's Common Stock and Related
Stockholder Matters 24
Item 6. Selected Consolidated Financial Information 25
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations 26
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 34
Item 8. Financial Statements and Supplementary Data 35
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 70
PART III
Item 10. Directors and Executive Officers of the Company 70
Item 11. Executive Compensation 70
Item 12. Security Ownership of Certain Beneficial Owners and Management 70
Item 13. Certain Relationships and Related Transactions 70
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 71
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Unless otherwise indicated, all dollar figures set forth herein are in United
States currency. Amounts expressed in Australian currency are indicated as
"A.$00". The exchange rate at September 20, 2001 was approximately A.$1.00
equaled U.S. $ .49.
PART I
Item 1. Business
Magellan Petroleum Corporation (the Company or MPC) is engaged,
directly and indirectly, through its majority-owned subsidiary, in the sale of
oil and gas and the exploration for and development of oil and gas reserves. At
June 30, 2001, MPC's principal asset was a 51.3% equity interest in its
subsidiary, Magellan Petroleum Australia Limited (MPAL), which has one class of
stock that is publicly held and traded in Australia.
MPAL's major assets are two petroleum production leases covering the
Mereenie oil and gas field (35% working interest) and one petroleum production
lease covering the Palm Valley gas field (50.8% working interest). Both fields
are located in the Amadeus Basin in the Northern Territory of Australia. Santos
Ltd., a publicly owned Australian company, owns a 48% interest in the Palm
Valley field, a 65% interest in the Mereenie field and 18.2% of MPAL's
outstanding stock. Origin Energy Limited, a publicly owned Australian company,
owned 17.1% of MPAL's outstanding stock at June 30, 2001.
MPC has a direct 2.67% carried interest in the Kotaneelee gas field in
the Yukon Territory of Canada which had not provided MPC any substantial revenue
until recently. During May 2001, the working interest partners in the field
began making payments on behalf of the carried interest owners including MPC.
See Item 3 - Legal Proceedings.
The following chart illustrates the various relationships between MPC
and the various companies discussed above.
The following is a tabular presentation of the omitted material:
MPC - MPAL RELATIONSHIPS CHART
MPC owns 51.3% of MPAL.
MPAL owns 50.8% of the Palm Valley Field, Australia.
MPAL owns 35% of the Mereenie Field, Australia.
Origin Energy Limited owns 17.1% of MPAL.
SANTOS owns 18.2% of MPAL.
SANTOS owns 48% of the Palm Valley Field, Australia.
SANTOS owns 65% of the Mereenie Field, Australia.
(a) General Development of Business.
-------------------------------
Operational Developments Since the Beginning
of the Last Fiscal Year.
---------------------------------------------
AUSTRALIA
Mereenie
MPAL (35%) and Santos (65%), the operator, (together known as the
Mereenie Producers) own the Mereenie field which is located in the Amadeus Basin
of the Northern Territory. MPAL's share of the Mereenie field proved developed
oil reserves was approximately 522,000 barrels at June 30, 2001.
During 2001, MPAL's share of oil sales was 170,000 barrels and 3.5
billion cubic feet (bcf) of gas sold which is subject to net overriding
royalties aggregating 3.0625% and the statutory government royalty of 10%. The
oil is transported by means of a 167 mile eight-inch oil pipeline from the field
to an industrial park near Alice Springs. Most of the oil is then shipped south
approximately 950 miles by rail and road to a refinery in the Adelaide area. The
cost of transporting the oil to the refinery is being borne by the producers.
The Mereenie Producers are providing Mereenie gas in the Northern Territory to
the Power and Water Authority (PAWA) and Gasgo Pty. Ltd., a company PAWA wholly
owns, for use in Darwin and other Northern Territory centers. See "Gas Supply
Contracts" below.
Palm Valley
MPAL has a 50.8% interest in and is the operator of the Palm Valley gas
field which is also located in the Amadeus Basin of the Northern Territory.
Santos, the operator of the Mereenie field, owns a 48% interest in Palm Valley
which provides gas to meet the Alice Springs and Darwin supply contracts with
PAWA. See "Gas Supply Contracts" below. During fiscal 2001, MPAL's share of gas
sales was 3.2 bcf which is subject to a 10% statutory government royalty and net
overriding royalties aggregating 4.2548%. As of June 30, 2001, the remaining
estimated proved reserves at Palm Valley were reduced by approximately 46% to
reflect the inability of the field to deliver the amount of gas that has been
contracted. Under the terms of the sales contract, PAWA is obligated to pay for
the capital costs of maintaining production levels to meet the annual contract
volumes. For more than four years, PAWA has been on notice that additional
drilling would be necessary to meet the contract supply requirements. PAWA still
has the matter under consideration.
Gas Supply Contracts
In 1983, the Palm Valley Producers (MPAL and Santos) commenced the sale
of gas to Alice Springs under a 1981 agreement. In 1985, the Palm Valley
Producers and Mereenie Producers signed agreements for the sale of gas to PAWA
for use in PAWA's Darwin generating station and at a number of other generating
stations in the Northern Territory. The gas is being delivered via the 922 mile
Amadeus Basin to Darwin gas pipeline which was built by an Australian
consortium. Since 1985, there have been several additional contracts for the
sale of Mereenie gas. The following is a summary of MPAL's interest in the Palm
Valley and the Mereenie gas supply contracts:
Maximum contract Percentage of
(balance/after contract Contract
royalties) completed Period
(bcf)
Palm Valley:
Alice Springs (1981) 1.53 90 1983-2003
Darwin (1985) 21.54 63 1987-2009
-----
23.07
Mereenie:
Darwin (1985) 7.06 59 1987-2009
Darwin (1999) 17.64 12 1999-2009
Darwin (2001) 3.51 4 2001-2008
Other .87 - Various
-------
29.08
-------
Total 52.15
=====
Under the 1985 contracts, there is a difference in price between Palm
Valley gas and most of the Mereenie gas for the first 20 years of the 25 year
contracts which takes into account the additional cost to the pipeline
consortium to build a spur line to the Mereenie field and increase the size of
the pipeline from Palm Valley to Mataranka.
Dingo Gas Field
MPAL has a 34.3% interest in the Dingo gas field which is held under
Retention License 2 and is subject to renewal in 2003. The Dingo gas field,
which is located in the Amadeus Basin in the Northern Territory, has
approximately 25 bcf of presently proved and recoverable reserves based on four
delineation wells. MPAL's share of potential production from these permit areas
is subject to a 10% statutory government royalty and overriding royalties
aggregating 2.5043%.
Browse Basin
During the fiscal year 1999, MPAL and its partners were granted
exploration permits WA-281-P, WA-282-P and WA-283-P in the Browse Basin offshore
Western Australia. MPAL's share (17.5%) of the remaining work obligations for
the three permits total $5,503,000 at June 30, 2001 and are as follows:
$1,947,000 for the year 2002, $1,286,000 for 2003, $2,216,000 for 2004 and
$54,000 for 2005. A well is scheduled to be drilled in permits WA-281-P and
WA-283-P during the last quarter of the calendar year 2001.
During fiscal year 2000, MPAL was granted exploration blocks WA-287-P
and WA-288-P in the Eastern Browse Basin. During fiscal 2001, MPAL applied for a
permit over area WA-311-P which is adjacent to WA-288-P and the permit was
granted on September 3, 2001. MPAL's share (100%) of the work obligations of the
three permits total $9,553,000 and are as follows: $469,000 for the fiscal year
2002, $3,623,000 for 2003, $307,000 for 2004, $5,103,000 for 2005 and $51,000
for 2006. The expenditures for the year 2002 are obligatory and are
discretionary for the years 2003-2006.
Carnarvon Basin
During fiscal year 1999, MPAL was awarded permit WA-291-P, offshore
Western Australia in the Carnarvon Basin. MPAL's share (100%) of the remaining
work obligations of the permit total $3,717,000 at June 30, 2001 and are as
follows: $26,000 for the fiscal year 2002, $3,573,000 for 2003, $92,000 for 2004
and $26,000 for 2005. The expenditures for the years 2002-2003 are obligatory
and are discretionary for the years 2004-2005.
Maryborough Basin
MPAL holds a 98% interest in exploration permit ATP 613P, in the
Maryborough Basin in Queensland, Australia. MPAL (100%) also has an application
pending for permit ATP 674P which is adjacent to ATP 613P. MPAL is seeking
partners to drill a well to test the gas potential of the block in exchange for
an interest in the permit. MPAL's share of work obligations total $1,378,000 for
both permits and are as follows: $357,000 for the fiscal year 2002, $434,000 for
2003, $102,000 for 2004, $102,000 for 2005 and $383,000 for 2006.
Cooper Basin
During fiscal year 1999, MPAL (50%) and its partner Beach Petroleum NL
were successful in bidding for two exploration blocks in South Australia's
Cooper Basin. The formal grant of the permits is pending. MPAL's share of the
work obligations will total $2,629,000 and are as follows: $918,000 for the
fiscal year 2003, $561,000 for 2004, $409,000 for 2005, $332,000 for 2006 and
$409,000 for 2007.
During fiscal year 2001, MPAL (50%) and its partner Beach Petroleum NL
were also successful in bidding for two additional exploration blocks in the
Cooper Basin. The formal grant of the permits is pending. MPAL's share of the
work obligations will total $1,775,000 and are as follows: $523,000 for the
fiscal year 2003, $39,000 for 2004, $511,000 for 2005, $166,000 for 2006 and
$536,000 for 2007.
Rowley Basin
During fiscal year 2001, MPAL acquired a 37.5% working interest in each
of exploration permits WA-306-P and WA-307-P in the Rowley Sub-basin of the
offshore Canning Basin adjacent to the Browse Basin. Antrim Energy, a Canadian
company, is the operator of the joint venture. MPAL's share of the work
obligations will total $1,455,000 and are as follows: $843,000 for the fiscal
year 2002, $230,000 for 2003, and $382,000 for 2004.
NEW ZEALAND
During fiscal year 2001, MPAL earned a 7.5% interest in permit PEP
38256 in the Canterbury Basin of New Zealand by funding part of the cost of
drilling the Ealing-1 exploration well which was plugged and abandoned. The cost
of approximately $336,000 is included in exploratory and dry hole costs. MPAL's
share of the work obligations will total $2,000 through fiscal year 2003.
UNITED KINGDOM
During fiscal year 2001, MPAL acquired a 30% interest in two licenses
in southern England. The two licenses; PEDL 098 in the Isle of Wight and PEDL
099 in the Portsdown area of Hampshire, were each granted for a period of six
years. MPAL's share of the work obligations will total $595,000 and are as
follows: $13,000 for the fiscal year 2002, $17,000 for 2003, $10,000 for 2004,
$4,000 for 2005 and $551,000 for 2006.
UNITED STATES
Baca County, Colorado
MPAL holds leases in Baca County, Colorado, in which an exploration
company plans to fund and drill two wells during late September 2001. MPAL will
retain an 18 3/4% interest in the leases, unless it elects to participate in the
completion of the wells for production, in which case it would retain a 25%
interest.
CANADA
MPC owns a 2.67% carried interest in a lease (31,885 gross acres, 850
net acres) in the southeast Yukon Territory, Canada, which includes the
Kotaneelee gas field. Anderson Oil & Gas, Inc., is the operator of this
partially developed field which is connected to a major pipeline system. During
the month of June 2001, average production from the field was approximately 41.8
million cubic feet per day.
Production at Kotaneelee commenced in February 1991. According to
government reports, total production in bcf from the Kotaneelee gas field for
the calendar years 1991 through 2000 has totaled 164.1 bcf as follows: 1991 -
8.1, 1992 - 18.0, 1993 -17.5, 1994 - 16.7, 1995 - 15.7, 1996 - 15.2, 1997 -
14.4, 1998 - 16.0, 1999 - 22.3 and 2000 - 20.2.
On January 19, 2001, MPC's carried interest account in the Kotaneelee
gas field reached undisputed payout status. During the 4th quarter of the
fiscal year 2001, MPC began accruing its share of Kotaneelee net proceeds as
income. See Item 3 - Legal Proceedings for a discussion of litigation relating
to the Kotaneelee field which may affect the status of the carried interest
and the amount of the carried interest account.
(b) Financial Information about Industry Segments.
---------------------------------------------
Since the Company is engaged in only one industry, namely, oil
and gas exploration, development, production and sale, this item is not
applicable to the Company.
(c) (1) Narrative Description of the Business.
-------------------------------------
MPC was incorporated in 1957 under the laws of Panama and was
reorganized under the laws of Delaware in 1967. MPC is directly engaged in the
exploration for, and the development and production and sale of oil and gas
reserves in Canada, and indirectly through its subsidiary MPAL in Australia, New
Zealand, the United Kingdom and United States.
(i) Principal Products.
------------------
MPAL has an interest in the Palm Valley gas field and in the
Mereenie oil and gas field. See Item 1(a) - Australia - for a discussion of the
oil and gas production from the Mereenie and Palm Valley fields. MPC has a
direct 2.67% carried interest in the Kotaneelee gas field in Canada.
(ii) Status of Product or Segment.
----------------------------
See Item 1(a) - Australia - for a discussion of the current
and future operations of the Mereenie and Palm Valley fields in Australia. See
Item 3. Legal Proceedings for a discussion of MPC's interest in the Kotaneelee
field in Canada.
(iii) Raw Materials.
-------------
Not applicable.
(iv) Patents, Licenses, Franchises and Concessions Held.
--------------------------------------------------
MPAL has interests directly and indirectly in the following permits.
Permit holders are generally required to carry out agreed work and expenditure
programs.
Permit Expiration Date Location
------ --------------- --------
Petroleum Lease No. 4
and No.5 (Mereenie)
November 2002 Northern Territory
Petroleum Lease No. 3
(Palm Valley)
November 2003 Northern Territory
Retention License 2 (Dingo) October 2003 Northern Territory
ATP 613P (Maryborough) March 2003 Queensland
ATP 674P (Maryborough) Application pending Queensland
WA-291-P (Carnarvon Basin) August 2005 Offshore Western Australia
WA-281-P (Browse Basin) February 2005 Offshore Western Australia
WA-282-P (Browse Basin) August 2004 Offshore Western Australia
WA-283-P (Browse Basin) February 2005 Offshore Western Australia
WA-287-P (Browse Basin) February 2005 Offshore Western Australia
WA-288-P (Browse Basin) February 2005 Offshore Western Australia
WA-311-P (Bonaparte Basin) September 2007 Offshore Western Australia
WA-306-P (Rowley Basin) July 2006 Offshore Western Australia
WA-307-P (Rowley Basin) August 2006 Offshore Western Australia
CO98I (Cooper Basin) 2007 South Australia
CO98J (Cooper Basin) 2007 South Australia
CO2000-C (Cooper Basin) 2007 South Australia
CO2000-S (Cooper Basin) 2007 South Australia
PEP 38256 (Canterbury Basin) August 22,2002 New Zealand
PEDL 098 (Weald/Wessex Basins) September 7,2006 United Kingdom
PEDL 098 (Weald/Wessex Basins) September 7,2006 United Kingdom
Baca County 2002 United States
Leases issued by the Northern Territory are subject to the Petroleum
(Prospecting and Mining) Act of the Northern Territory. Lessees have the
exclusive right to produce petroleum from the land subject to a lease upon
payment of a rental and a royalty at the rate of 10% of the wellhead value of
the petroleum produced. Rental payments may be offset against the royalty paid.
The term of a lease is 21 years, and leases may be renewed for successive terms
of 25 years each.
Since 1992, there has been an ongoing controversy regarding the
Aborigines and the ownership of their traditional lands. There has been
legislation aimed at resolving this controversy. The Company does not believe
that this issue will have a material adverse impact on MPAL's properties.
(v) Seasonality of Business.
-----------------------
Although the Company's business is not seasonal, the demand
for oil and especially gas is subject to fluctuations in the Australian weather.
(vi) Working Capital Items.
---------------------
See Item 7 - Liquidity and Capital Resources for a discussion
of this information.
(vii) Customers.
---------
Although the majority of MPAL's producing oil and gas
properties are located in a relatively remote area in central Australia (See
Item 1 - Business and Item 2 - Properties), the completion in January 1987 of
the Amadeus Basin to Darwin gas pipeline has provided access to and expanded the
potential market for MPAL's gas production.
Natural Gas Production
MPAL's principal customer and the most likely major customer
for future gas sales is PAWA, a governmental authority of the Northern Territory
Government, which also has substantial regulatory authority over MPAL's oil and
gas operations. The loss of PAWA as a customer would have a material adverse
effect on MPAL's business.
Oil Production
There is presently a small local market for the Mereenie crude
oil in the Alice Springs area. Most of the crude oil production is being shipped
and sold to a refinery in Adelaide.
(viii) Backlog.
-------
Not applicable.
(ix) Renegotiation of Profits or Termination of Contracts or
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Subcontracts at the Election of the Government.
----------------------------------------------
Not applicable.
(x) Competitive Conditions in the Business.
--------------------------------------
The exploration for and production of oil and gas are highly
competitive operations. The ability to exploit a discovery of oil or gas is
dependent upon such considerations as the ability to finance development costs,
the availability of equipment, and the possibility of engineering and
construction delays and difficulties. The Company also must compete with major
oil and gas companies which have substantially greater resources than the
Company.
Furthermore, competitive conditions may be substantially
affected by various forms of energy legislation which have been or may be
proposed in Australia, Canada and the United States. However, it is not possible
to predict the nature of any such legislation which may ultimately be adopted or
its effects upon the future operations of the Company.
At the present time, the Company's principal income producing
operations are in Australia and for this reason, current competitive conditions
in Australia are material to the Company's future. Currently, most indigenous
crude oil is consumed within Australia. In addition, imports of crude oil are
made by refiners and others to meet the overall demand in Australia. The Palm
Valley Producers and the Mereenie Producers are developing and separately
marketing the production from each field. Because of the relatively remote
location of the Amadeus Basin and the inherent nature of the market for gas, it
would be impractical for each working interest partner to attempt to market its
respective share of production from each field.
(xi) Research and Development.
------------------------
Not applicable.
(xii) Environmental Regulation.
------------------------
The Company is subject to the environmental laws and
regulations of the jurisdictions in which it carries on its business, and
existing or future laws and regulations could have a significant impact on the
exploration for and development of natural resources by the Company. However, to
date, the Company has not been required to spend any material amounts for
environmental control facilities. The federal and state governments in Australia
strictly monitor compliance with these laws but compliance therewith has not had
any adverse impact on the Company's operations or its financial resources.
At June 30, 2001, the Company had accrued $953,000 for future site
restoration costs for the Mereenie, Palm Valley and Dingo fields. The balance of
the estimated liability was $2,539,000 at June 30, 2001 which will be accrued
over the remaining life of the related reserves based on units of production.
(xiii) Number of Persons Employed by Company.
-------------------------------------
At June 30, 2001, MPC had one part-time employee in the United
States and MPAL had 32 employees in Australia. MPC relies to a great extent on
consultants for legal, accounting, administrative and geological services.
(d) Financial Information About Foreign and Domestic
Operations and Export Sales.
(1) Financial Information Relating to Foreign and
---------------------------------------------
Domestic Operations.
--------------------
See Note 12 to the Consolidated Financial Statements.
(2) Risks Attendant to Foreign Operations.
--------------------------------------
Most of the properties in which the Company has
interests are located outside the United States and are
subject to certain risks involved in the ownership and development of such
foreign property interests. These risks include but are not limited to those of:
nationalization; expropriation; confiscatory taxation; changes in foreign
exchange controls; currency revaluations; price controls or excessive royalties;
export sales restrictions; limitations on the transfer of interests in
exploration licenses; and other laws and regulations which may adversely affect
the Company's properties, such as those providing for conservation, proration,
curtailment, cessation, or other limitations of controls on the production of or
exploration for hydrocarbons. Thus, an investment in the Company represents a
speculation with risks in addition to those inherent in domestic petroleum
exploratory ventures.
(3) Data Which are Not Indicative of Current or Future
Operations.
-----------------------------------------------------
MPAL and its co-venturer in the Mereenie field have
been negotiating with PAWA and other parties to sell production out of the
field's uncommitted gas reserves. A new gas supply contract for the uncommitted
reserves in the Mereenie field could increase revenue from gas sales in the
future.
Item 2. Properties.
------- -----------
(a) MPC has interests in properties in Australia through its 51.3%
equity interest in MPAL which holds interests in the Northern Territory,
Queensland, South Australia and Western Australia. MPAL also has interests in
New Zealand, the United Kingdom and the United States. In Canada, MPC has a
direct interest in one lease. For additional information regarding the Company's
properties, See Item 1 - Business.
(b) (1) The information regarding reserves, costs of oil and gas
activities, capitalized costs, discounted future net cash flows and results of
operations is contained in Item 8 - Financial Statements and Supplementary Data.
The following graphic presentation has been omitted, but the following is a
description of the omitted material:
AUSTRALIAN MAP WITH MPAL PROJECTS SHOWN
The following graphic presentation has been omitted, but the following
is a description of the omitted material:
AMADEUS BASIN PROJECTS MAP
The map indicates the location of the Amadeus Basin interests in the
Northern Territory of Australia. The following items are identified:
Palm Valley Gas Field
Mereenie Oil & Gas Field
Dingo Gas Field
Palm Valley - Alice Springs Gas Pipeline
Palm Valley - Darwin Gas Pipeline
Mereenie Spur Gas Pipeline
The following graphic presentation has been omitted, but the following
is a description of the omitted material:
CANADIAN PROPERTY INTERESTS MAP
The map indicates the location of the Kotaneelee Gas Field in the Yukon
Territories of Canada. The map identifies the following items:
Kotaneelee Gas Field
Pointed Mountain Gas Field
Beaver River Gas Field
(2) Reserves reported to other agencies.
-----------------------------------
None
(3) Production.
-----------
The average sales price per unit of production for
the following fiscal years are as follows:
June 30,
2001 2000 1999
---------------------------------------
Australia:
Gas (per mcf) A.$ 2.53 A.$ 2.51 A.$ 2.32
Crude oil (per bbl) A.$ 54.64 A.$ 39.14 A.$ 20.20
The average production cost per unit of production
for the following fiscal years has been impacted by transportation costs on
Mereenie oil in Australia. During fiscal 1999 and 2001, the cost of remedial
work on various wells in the Mereenie field and lower production levels
increased production costs.
June 30,
2001 2000 1999
---------------------------------------
Australia:
Gas (per mcf) A.$ .43 A.$ .46 A.$ .33
Crude oil (per bbl) A.$ 21.24 A.$ 17.91 A.$ 19.35
(4) Productive Wells and Acreage.
-----------------------------
Productive wells and acreage at June 30, 2001:
Productive Wells
----------------
Oil Gas Developed Acreage
--- --- -----------------
Gross Net Gross Net Gross Acres Net Acres
----- --- ----- --- ----------- ---------
Australia 25.0 8.8 16.0 6.37 72,025 30,001
Canada - - - - 3,350 89
------- ------ ------- ------ ------- ---------
25.0 8.8 16.0 6.37 75,375 30,090
==== === ==== ==== ====== ======
(5) Undeveloped Acreage.
--------------------
The Company's undeveloped acreage (except as
indicated below) is set forth in the table below:
GROSS AND NET ACREAGE AS OF JUNE 30, 2001
(i) MPAL has interests in the following properties (before
royalties). MPC has an interest in these properties through its 51.3% interest
in MPAL.
MPAL The Company
Net Interest Net Interest
Gross Acres Acres % Acres %
-------------------------------------------------------------------------
Australia
Northern Territory:
Amadeus Basin:
Mereenie (OL4&5)(1) 69,407 24,292 35.00 12,462 17.95
Palm Valley (OL3)(2) 151,905 77,130 50.78 39,568 26.05
Dingo (RL2) 115,596 39,696 34.34 20,364 17.62
--------- --------- ----------
Total Amadeus Basin 336,908 141,118 72,394
--------- --------- ----------
Queensland:
Maryborough Basin (ATP 613P) 342,836 335,979 98.00 172,357 50.27
Maryborough Basin (ATP 674P) 1,942,161 1,942,161 100.00 996,329 51.30
--------- --------- -------
2,284,997 2,278,140 1,168,686
--------- --------- ---------
South Australia:
Cooper Basin (CO98I&J) 1,621,802 810,902 50.00 415,993 25.65
Cooper Basin (CO2000C&J) 1,058,395 529,198 50.00 271,478 25.65
--------- ------- -------
2,680,197 1,340,100 687,471
--------- --------- -------
Western Australia:
Browse WA-281-P 1,145,092 200,391 17.50 102,801 8.98
Browse WA-282-P 1,467,921 256,886 17.50 131,783 8.98
Browse WA-283-P 1,059,136 185,349 17.50 95,084 8.98
Carnarvon WA-291-P 2,205,710 2,205,710 100.00 1,131,529 51.30
Browse WA-287-P 515,736 515,736 100.00 264,573 51.30
Browse WA-288-P 513,266 513,266 100.00 263,305 51.30
Canning WA-306/307 1,986,621 744,983 37.50 382,176 19.24
--------- ------- -------
Total Western Australia 8,893,482 4,622,321 2,371,251
--------- --------- ---------
United Kingdom
PEDL098/099 96,083 28,825 30.00 14,787 15.39
------ ------ ------
New Zealand
PEP 38256 1,372,332 102,925 7.50 52,801 3.85
--------- ------- ------
United States
Baca Country, Colorado 18,525 3,473 18.75 1,782 9.62
---------- --------- ---------
Total MPAL 15,682,524 8,516,902 4,369,172
---------- --------- ---------
Properties held directly by MPC:
Canada
Yukon and Northwest Territories:
Carried interest(3) 31,885 850 2.67
---------- ----------
Total 15,714,409 4,370,022
========== =========
----------------------------
(1) Includes 41,644 gross developed acres and 14,575 net acres.
(2) Includes 30,381 gross developed acres and 15,426 net acres.
(3) Includes 3,350 gross developed acres and 89 net acres.
(6) Drilling activity.
-----------------
Productive and dry net wells drilled during the
following years (data concerning Canada is insignificant):
Australia/New Zealand
-----------------------------------------
Year ended Exploration Development
June 30, Productive Dry Productive Dry
--------------------------------------------------------------------------------
2001 - .12 - -
2000 - - .70 -
1999 - .15 .70 -
Americas
-----------------------------------------
Year ended Exploration Development
June 30, Productive Dry Productive Dry
--------------------------------------------------------------------------------
2001 - - - -
2000 - - - -
1999 .20 .19 - -
(7) Present Activities.
------------------
There are no wells being drilled at the present time.
(8) Delivery Commitments.
--------------------
See discussion under Item 1 concerning the Palm
Valley and Mereenie fields.
Item 3. Legal Proceedings.
------- ------------------
Kotaneelee Gas Field
--------------------
MPC's 2.67% carried interest in the Kotaneelee gas field is held in
trust by Canada Southern Petroleum Ltd. (Canada Southern) which has a 30%
carried interest in the field. Canada Southern and MPC (the Plaintiffs) believe
that the working interest owners in the Kotaneelee gas field had not adequately
pursued the attainment of contracts for the sale of Kotaneelee gas.
In October 1989 and March 1990, Canada Southern filed statements of
claim in the Court of Queens Bench of Alberta, Judicial District of Calgary,
Canada, against the working interest partners in the Kotaneelee gas field.
MPC was subsequently added as a Plaintiff in the action. The named defendants
were Amoco Canada Petroleum Corporation, Ltd., Dome Petroleum Limited
(now Amoco Canada Resources Ltd.), and Amoco Production Company (collectively
the "Amoco Dome Group"), Columbia Gas Development of Canada Ltd., Mobil Oil
Canada Ltd. ("Mobil") and Esso Resource of Canada Ltd. (collectively the
Defendants).
The Plaintiffs claim that the Defendants breached a contractual
obligation and a fiduciary duty owed to the Plaintiffs to market gas from the
Kotaneelee gas field when it was possible. The Plaintiffs assert that marketing
the Kotaneelee gas was possible in 1984 and that the Defendants deliberately
failed to do so. The Plaintiffs seek monetary damages and the forfeiture of the
Kotaneelee gas field. The Plaintiffs presented evidence at trial that the
monetary damages sustained by the Plaintiffs were approximately Cdn.$110 million
(MPC share-U.S.$5.8 million).
In addition, the Plaintiffs claimed that the Plaintiffs' carried
interest account should be reduced because of the negligent operation of the
field and improper charges to the carried interest account by the Defendants.
The charges, the Plaintiffs claim, were inappropriately charged to the field's
carried interest account. The effect of an increased carried interest account is
to extend the period before payout begins to the carried interest account
owners.
On September 14, 2001, the trial court rendered its decision. The court
ruled that:
(a) Although the defendants had an affirmative contractual obligation
(but not a fiduciary obligation) to market the gas from the Kotaneelee gas field
when it was possible to do so, the defendants had not breached their contractual
obligation.
(b) The defendants made improper charges to the carried interest
account in the amount of approximately U.S.$3.4 million in connection with the
repair and rebuilding of the field's dehydration facilities.
(c) Defendant Amoco Canada was not entitled to make gas processing fee
charges to the carried interest account. The Company estimates that Magellan's
share of charges made to date is approximately $1.3 million.
The Court made no ruling on the issue of taxable costs of the
litigation, saying only that "Costs may be spoken to if and when necessary". The
trial court's decision may be appealed by either the plaintiffs or defendants.
Therefore, the final outcome remains uncertain.
On January 19, 2001, MPC's carried interest account in the Kotaneelee
gas field reached undisputed payout status. During the 4th quarter of the fiscal
year 2001, the Company began accruing its share of Kotaneelee net proceeds as
income. The amount due of $441,000 from the working interest partners is
included in accounts receivable. These funds are currently being held in escrow
pending the completion of a surety being given to the working interest partners.
However, MPC believes that the court's decision should eliminate the need for
any surety.
Prior to the Kotaneelee field reaching undisputed payout status, the
operator of the Kotaneelee field had been reporting and depositing in escrow
its share of the disputed amount of MPC's share of net revenues. Based on the
reported data, MPC believes the total amount due MPC through April 30, 2001
production (including interest) was approximately $1.3 million. The disputed
amount, which has not been included in income, represent gas processing fees
claimed by the working interest partners.
The trial was lengthy, complicated and costly to all parties. The Court
has very broad discretion as to whether to award costs and disbursements and as
to the calculation of the amount to be awarded. Accordingly, MPC is unable to
determine whether costs will be assessed against MPC or in what amount. However,
since the costs incurred by the Defendants have been substantial, and since the
Court has broad discretion in the awarding of costs, an award to the Defendants
potentially could be material. Costs may be assessed jointly and severally
against nonprevailing parties. MPC has not agreed to share any costs that might
be assessed against Canada Southern and would seek to be indemnified by Canada
Southern for any such costs.
MPC believes that the outcome of the Kotaneelee litigation is not
reasonably likely to have a material adverse effect on MPC's future consolidated
financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
------- ---------------------------------------------------
None.
Executive Officers of the Registrant
------------------------------------
The following information with respect to the executive officers of the
Company is furnished pursuant to Instruction 3 to Item 401(b) of Regulation S-K.
Length of Service Other Positions Held
Name Age Office Held as an Officer with Company
---- --- ----------- ------------- ------------
James R. Joyce 60 President and Chief President since 1993 Director
Financial Officer
Hedley Howard 59 General Manager - MPAL Since 1999 Director
All officers of MPC are elected annually by the Board of Directors and
serve at the pleasure of the Board of Directors.
MPC is not aware of any arrangements or understandings between any of
the individuals named above and any other person pursuant to which any
individual named above was selected as an officer.
PART II
Item 5. Market for the Company's Common Stock and Related Stockholder
Matters.
(a) Principal Market
----------------
The principal markets for MPC's common stock are the Pacific Exchange,
Inc. symbol [MPC] and the NASDAQ SmallCap market symbol [MPET]. The stock is
also traded on the Boston Stock Exchange. The quarterly high and low prices and
the number of shares traded on the most active market, NASDAQ, during the
calendar quarterly periods indicated were as follows:
2001 1st Qtr. 2nd Qtr. 3rd Qtr.* 4th Qtr.
---- -------- -------- --------- --------
High.................. 1.19 1.65 1.10
Low................... .81 .76 .91
Number of shares traded 2,081,855 2,745,248 1,018,362
2000 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
---- -------- -------- -------- --------
High.................. 1.97 1.50 1.38 1.28
Low................... 1.16 1.11 .97 .72
Number of shares traded 5,558,966 3,394,720 3,274,059 5,142,813
1999 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
---- -------- -------- -------- --------
High.................. 1.81 2.50 2.81 1.97
Low................... 1.27 1.19 1.63 1.16
Number of shares traded 2,272,566 3,985,679 3,196,791 4,323,884
---------------------------------
* Through September 20, 2001, on which date the closing price was $.94.
(b) Approximate Number of Holders of Common Stock at September 20, 2001
-------------------------------------------------------------------
Title of Class Number of Record Holders
-------------- ------------------------
Common stock, par
value $.01 per share 8,700
-----
(c) Frequency and Amount of Dividends
---------------------------------
MPC has never paid a cash dividend on its common stock.
(d) Recent Sales of Unregistered Securities
--- ---------------------------------------
None.
Item 6. Selected Consolidated Financial Information.
------- --------------------------------------------
The following table sets forth selected data (in thousands) and other
operating information of the Company. The selected consolidated financial data
in the table are derived from the consolidated financial statements of the
Company. This data should be read in conjunction with the consolidated financial
statements, related notes and other financial information included herein.
Year ended June 30,
------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Financial Data $ $ $ $ $
Operating revenues 14,008 16,330 13,398 15,235 19,936
====== ====== ====== ====== ======
Total revenues 14,900 17,147 14,115 15,340 20,758
====== ====== ====== ====== ======
Net income 1,072 1,490 945 1,037 694
===== ===== === ===== ===
Net income per share (basic and diluted) .04 .06 .04 .04 .03
=== === === === ===
Working capital 15,398 15,046 12,772 13,452 14,219
====== ====== ====== ====== ======
Cash provided by operating activities 3,044 6,149 4,993 6,737 11,181
===== ===== ===== ===== ======
Property and equipment (net) 16,482 21,741 26,725 23,019 28,623
====== ====== ====== ====== ======
Total assets 37,498 43,976 44,234 39,779 46,230
====== ====== ====== ====== ======
Long-term liabilities 3,982 5,190 6,910 6,512 7,738
===== ===== ===== ===== =====
Minority interests 12,701 14,696 15,318 13,123 16,147
====== ====== ====== ====== ======
Stockholders' equity:
Capital 43,426 43,838 43,838 43,782 43,659
Accumulated deficit (15,843) (16,914) (18,405) (19,350) (20,387)
Accumulated other comprehensive loss (10,410) (7,827) (5,699) (7,013) (3,729)
-------- --------- --------- --------- ---------
Total stockholders' equity 17,173 19,097 19,734 17,419 19,543
====== ====== ====== ====== ======
Exchange rate A.$=U.S. at end of period .51 .60 .67 .62 .75
=== === === ==== ===
Common stock outstanding shares 24,698 25,108 25,108 24,982 24,851
====== ====== ====== ====== ======
Book value per share .70 .76 .79 .70 .78
=== === === === ===
Quoted market value per share 1.07 1.28 2.50 2.28 2.38
==== ==== ==== ==== ====
Operating Data
Annual production (Net of royalties)
Gas (bcf) 5.6 6.0 5.9 5.8 5.7
=== === === === ===
Oil (bbls)(In thousands)(net of royalties) 148 172 205 248 307
=== === === === ===
Standard measure of discounted future cash
flow relating to proved oil and gas
reserves.(approximately 49% attributable to
minority interests) 33,000 44,000 53,000 48,000 68,000
====== ====== ====== ====== ======
Item 7. Management's Discussion and Analysis of Financial Condition
------- -----------------------------------------------------------
and Results of Operations.
--------------------------
(1) Liquidity and Capital Resources
-------------------------------
Consolidated
------------
At June 30, 2001, the Company on a consolidated basis had approximately
$14.6 million of cash and cash equivalents and marketable securities.
A summary of the major changes in cash and cash equivalents during the
period is as follows:
Cash and cash equivalents at beginning of period $13,891,000
Cash provided by operations 3,044,000
Dividends to MPAL minority shareholders (593,000)
Net additions to property and equipment (2,346,000)
Effect of exchange rate changes (2,044,000)
Marketable securities which matured 1,251,000
Repurchases of common stock (411,000)
------------
Cash and cash equivalents at end of period $12,792,000
===========
As to MPC (unconsolidated)
--------------------------
At June 30, 2001, MPC, on an unconsolidated basis, had working capital
of approximately $2.4 million. MPC's current cash position, its annual MPAL
dividend and the anticipated revenue from the Kotaneelee field should be
adequate to meet its current cash requirements. MPC has in the past invested and
may in the future invest substantial portions of its cash to maintain its
majority interest in its subsidiary, MPAL. During fiscal 2001, MPC purchased
74,000 shares of MPAL's stock at a cost of approximately $79,000.
During fiscal 2001, MPC received a dividend from MPAL of $621,000 which
was added to MPC's working capital.
On December 8, 2000, MPC announced a stock repurchase plan to purchase
up to one million shares of its common stock in the open market. At June 30,
2001, MPC had purchased 410,000 of its shares at a cost of approximately
$411,000.
As to MPAL
----------
At June 30, 2001, MPAL had working capital of approximately $13
million. MPAL has budgeted approximately $4.5 million for specific exploration
projects in the fiscal year 2002 as compared to the $2.3 million expended during
fiscal 2001. However, the total amount to be expended may vary depending on when
various projects reach the drilling phase. The current composition of MPAL's oil
and gas reserves are such that MPAL's future revenues in the long term are
expected to be derived from the sale of gas in Australia. MPAL's current
contracts for the sale of Palm Valley and Mereenie gas will expire during fiscal
year 2009. Unless MPAL is able to obtain additional contracts for its remaining
gas reserves or be successful in its current exploration program, its revenues
will be materially reduced after 2009.
The following is a summary of MPAL's required and contingent
commitments for exploration expenditures for the five year period ending June
30, 2006. The contingent amounts will be dependent on such factors as the
results of the current program to evaluate the exploration permits, drilling
results and MPAL's financial position.
Fiscal Year Required Expenditures Contingent Expenditures Total
----------- --------------------- ----------------------- -----
2002 $2,971,000 $ - $ 2,971,000
2003 2,175,000 8,431,000 10,606,000
2004 1,145,000 2,666,000 3,811,000
2005 924,000 5,566,000 6,490,000
2006 - 1,100,000 1,100,000
---------- --------- ---------
Total $7,215,000 $17,763,000 $24,978,000
========== =========== ===========
MPAL expects to fund its exploration costs through its cash and cash
equivalents, cash flow from Australian operations and any balance remaining from
its available A.$10 million bank line of credit. MPAL also expects that it will
seek partners to share the above exploration costs. If MPAL's efforts to find
partners is unsuccessful, it may be unable or unwilling to complete the
exploration program for some of its properties.
(2) Results of Operations
---------------------
2001 vs. 2000
-------------
The components of consolidated net income for the fiscal years 2001 and
2000 were as follows:
Year ended June 30,
-------------------
2001 2000
---- ----
MPC unconsolidated pretax loss $ (220,599) $ (709,939)
MPC income tax expense (108,888) (113,989)
Share of MPAL pretax income 1,897,096 2,347,857
Share of MPAL income taxes (495,845) (33,525)
------------ ------------
Consolidated net income $ 1,071,764 $ 1,490,404
=========== ===========
Net income per share (basic and diluted) $.04 $.06
==== ====
Revenues
--------
Oil sales in 2001 remained essentially the same as 2000. Oil sales in
Australia in 2001 amounted to $4,639,000 as compared to $4,637,000 in 2000
because of a 40% increase in oil prices which was partially offset by a 14%
decrease in the number of units produced and the 14% Australian foreign exchange
decrease discussed below. Oil unit sales (before deducting royalties) in barrels
(bbls) and the average price per barrel sold during the periods indicated were
as follows:
Fiscal 2001 Sales Fiscal 2000 Sales
----------------- -----------------
Average Price Average Price
Bbls per bbl Bbls per bbl
---- ------- ---- -------
Australia - Mereenie 170,037 A.$54.64 198,272 A.$39.14
Gas sales decreased 19% in fiscal 2001. Gas sales decreased from
$10,510,000 in 2000 to $8,537,000 in 2001 primarily because of the 10% decrease
in the volume of gas sold and the 14% Australian foreign exchange decrease
discussed below which was partially offset by a 1% increase in the average price
of gas sold. The decrease in the volume of gas sold is primarily the result of a
customer discontinuing its operations. Gas sales in 2001 include $392,000 of gas
sales from the Kotaneelee field for the production period January 19, 2001
through April 30, 2001. The volumes in billion cubic feet (bcf) (before
deducting royalties) and the average price of gas per thousand cubic feet (mcf)
sold in Australia during the periods indicated were as follows:
Fiscal 2001 Sales Fiscal 2000 Sales
----------------- -----------------
Average Price Average Price
Bcf per mcf bcf per mcf
--- ------- --- -------
Australia: (A.$) (A.$)
Palm Valley
Alice Springs contract 0.970 3.12 0.922 2.97
Darwin contract 2.251 2.07 2.216 2.02
Mereenie
Darwin contract 3.025 2.56 2.497 2.33
Other 0.461 3.29 1.817 3.13
----- -----
Total 6.707 7.452
===== =====
Other production income decreased 30% to $833,000 in 2001 from
$1,184,000 in 2000. Other production income includes royalties and MPAL's share
of gas pipeline tariffs. In addition, MPAL, as a Palm Valley producer, had been
receiving an additional share of revenues from the Mereenie field which ended in
August 2000.
Interest income in 2001 increased 9%. Interest income in 2001 amounted
to $891,000 as compared to $817,000 in 2000. Although more funds were available
for investment and interest rates were higher, the increase was partially offset
by the 14% decrease in the Australian foreign exchange rate discussed below.
Costs and Expenses
------------------
Production costs decreased 22% in 2001 to $3,492,000 from $4,492,000 in
2000 primarily because of the 14% decrease in the Australian foreign exchange
rate discussed below. The decrease in costs also relates primarily to the
Mereenie field where substantial remedial work was performed in 2000.
Exploratory and dry hole costs totaled $1,624,000 during 2001 compared
to $2,089,000 in 2000. The 2001 costs relate primarily to the work being
performed on MPAL's offshore Australian properties. The cost ($336,000) of the
Ealing-1 exploration well in New Zealand, which was a dry hole, is also included
in 2001. The 2000 costs also relate primarily to the work being performed on
MPAL's offshore Western Australian properties. The costs (in thousands) for MPC
and MPAL were as follows:
2001 2000
---- ----
Location MPAL MPC Total MPAL MPC Total
-------- ---- --- ----- ---- --- -----
United States/Belize $ 2 - $ 2 $ 32 $ 124 $ 156
Australia/New Zealand 1,622 - 1,622 1,933 - 1,933
------- ------- ------- ------ ---------- -------
$1,624 - $1,624 $1,965 $ 124 $2,089
====== ======= ====== ====== ====== ======
Salaries and employee benefits decreased 5% to $1,694,000 in 2001 from
$1,780,000 in 2000 primarily because of the 14% Australian foreign exchange
decrease discussed below.
Depreciation, depletion and amortization decreased 5% in 2001 to
$3,474,000 from $3,670,000 in 2000. The decrease in depreciation, depletion and
amortization is primarily the result of the 14% Australian foreign exchange
decrease discussed below. The decrease was partially offset by a 25% net
decrease in reserves used to calculate the 2001 depletion rate. As of June 30,
2001, the remaining estimated proved reserves at Palm Valley were reduced by
approximately 46% to reflect the inability of the field to deliver the amount of
gas that has been contracted. In addition, the estimated capital costs for
additional drilling and capital improvements at the Mereenie field also
increased approximately 40% from $6.8 million to $9.4 million. The amount of
depletion per unit of production is expected to remain at the 2001 level in
future years.
Auditing, accounting and legal expenses decreased 22% from $323,000 in
2000 to $252,000 in 2001 primarily because of the 14% Australian foreign
exchange rate decrease discussed below.
Shareholder communications costs decreased 10% to $172,000 in 2001
compared to $191,000 in 2000 primarily because of the 14% Australian foreign
exchange rate decrease discussed below.
Other administrative expenses decreased 1% from $721,000 in 2000 to
$717,000 in 2001 primarily because of the 14% Australian foreign exchange rate
decrease discussed below. The decrease was offset by a reduction in the amount
of overhead that MPAL, as operator, was able to charge its partners during 2001.
Income Taxes
------------
Income tax expense increased from $180,000 in 2000 to $1,075,000 in
2001. The effective income tax rate for 2001 was 32% compared to 5% in 2000. The
components of income tax expense (benefit) in thousands were as follows:
2001 2000
---- ----
Pretax consolidated income $ 3,476 $ 3,879
MPC's losses not recognized 221 710
Permanent differences (471) (1,534)
--------- ---------
Book taxable income $ 3,226 $ 3,055
======== ========
Australian tax rate 34% 36%
=== ===
Australian income tax provision $ 1,097 $ 1,100
Tax (benefit) attributable to reconciliation of
year end deferred tax liability (131) (1,034)
-------- --------
MPAL Australian tax 966 66
MPC Income tax 109 114
------- -------
Consolidated income tax provision $ 1,075 $ 180
======= ========
MPC's 2001 income tax represents the 25% Canadian withholding tax on
its Kotaneelee net proceeds. MPC's 2000 income tax represents the 15% Australian
withholding tax on the dividend it received from MPAL. The 2000 income tax
provision also reflects the effect of permanent tax benefits ($552,000). In
addition, Australia enacted corporate tax rate reductions for 2001 (36% to 34%)
and for 2002 (34% to 30%) which reduced the provision by $131,000 in 2001 and
$656,000 in 2000. The utilization of prior year losses ($378,000) not previously
taken into account also reduced the provision.
Exchange Effect
---------------
The value of the Australian dollar relative to the U.S. dollar
decreased to $.5104 at June 30, 2001 compared to $.5968 at June 30, 2000. This
resulted in a $2,817,000 charge to accumulated translation adjustments for
fiscal 2001. The 14% decrease in the value of the Australian dollar decreased
the reported asset and liability amounts in the balance sheet at June 30, 2001
from the June 30, 2000 amounts. The annual average exchange rate used to
translate MPAL's operations in Australia for fiscal 2001 was $.5379, which is a
14% decrease compared to the $.6289 rate for the comparable 2000 period.
2000 vs. 1999
-------------
The components of consolidated net income for the fiscal years 2000 and
1999 were as follows:
Year ended June 30,
-------------------
2000 1999
----------- -----------
MPC unconsolidated pretax loss $ (709,939) $ (688,814)
MPC income tax expense (113,989) (105,370)
Share of MPAL pretax income 2,347,857 1,659,185
Share of MPAL income (taxes) benefit (33,525) 80,211
----------- ----------
Consolidated net income $ 1,490,404 $ 945,212
=========== ==========
Net income per share (basic and diluted) $.06 $.04
==== ====
Revenues
--------
Oil sales increased 80% in fiscal 2000. Oil sales in Australia
increased in 2000 to $4,637,000 from $2,573,000 in 1999 because of a 94%
increase in oil prices which was partially offset by a 16% decrease in the
number of units produced. Oil unit sales (before deducting royalties) in barrels
(bbls) and the average price per barrel sold during the periods indicated were
as follows:
Fiscal 2000 Sales Fiscal 1999 Sales
----------------- -----------------
Average Price Average Price
Bbls per bbl Bbls per bbl
---- ------- ---- -------
Australia - Mereenie 198,272 A.$39.14 235,808 A.$20.20
Gas sales in Australia increased 9% in fiscal 2000. Gas sales increased from
$9,640,000 in 1999 to $10,510,000 in 2000 because of the 4% increase in the
volume of gas sold and an 8% increase in prices. The volumes in billion cubic
feet (bcf) (before deducting royalties) and the average price of gas per
thousand cubic feet (mcf) sold during the periods indicated were as follows:
Fiscal 2000 Sales Fiscal 1999 Sales
----------------- -----------------
Average Price Average Price
Bcf per mcf bcf per mcf
--- ------- --- -------
Australia: (A.$) (A.$)
Palm Valley
Alice Springs contract 0.922 2.97 1.232 2.95
Darwin contract 2.216 2.02 2.507 2.02
Mereenie
Darwin contract 2.497 2.33 2.289 2.08
Other 1.817 3.13 1.138 2.77
----- -----
Total 7.452 7.166
===== =====
Other production income decreased to $1,184,000 in 2000 compared to
$1,185,000 in 1999. Other production income includes royalties and MPAL's share
of gas pipeline tariffs.
Interest income increased 14% to $817,000 in 2000 from $717,000 in 1999
because additional funds were available for investment and interest rates were
higher.
Costs and Expenses
------------------
Production costs increased 3% to $4,492,000 in 2000 from $4,372,000 in
1999. The costs relate primarily to the Mereenie field where substantial
remedial work is being performed.
Exploratory and dry hole costs totaled $2,089,000 during 2000 compared
to $2,059,000 in 1999. The 2000 costs relate primarily to the work being
performed on MPAL's offshore Western Australian properties. The costs in 1999
related primarily to the Springbok-1 well offshore Western Australia which was
plugged and abandoned during the first quarter and the Belize project which was
written off in the third quarter of the fiscal year. The costs (in thousands)
for MPC and MPAL were as follows:
2000 1999
---- ----
Location MPAL MPC Total MPAL MPC Total
-------- ---- --- ----- ---- --- -----
United States/Belize $ 32 $ 124 $ 156 $ 361 $ 50 $ 411
Australia 1,933 - 1,933 1,648 - 1,648
------ ---------- ------- ------- --------- -------
$1,965 $ 124 $2,089 $2,009 $ 50 $2,059
====== ====== ====== ====== ====== ======
Salaries and employee benefits increased 37% to $1,780,000 in 2000 from
$1,297,000 in 1999. Compensation costs increased approximately $397,000 in
Australia. During August 1999, MPAL's General Manager retired and received the
balance of his unpaid salary under his employment contract which included his
salary for the period July-December 2000. In addition, there was an increase in
staff compensation levels. Effective January 1, 2000, the President of MPC
became a paid employee instead of a consultant and this resulted in an increase
of $86,000. This arrangement resulted in a corresponding reduction in accounting
and administrative expenses.
Depreciation, depletion and amortization increased 56% in 2000 to
$3,670,000 from $2,357,000 in 1999. The operator of the Mereenie field has
implemented an extensive program for additional drilling and capital
improvements. The estimated cost of these expenditures (MPAL share $8 million)
increased the amount of depletion by approximately $763,000 in the 2000 period.
In addition, there was a 14% net decrease in reserves used to calculate the
depletion rate during the 2000 period.
Auditing, accounting and legal expenses decreased 37% from $510,000 in
1999 to $323,000 in 2000. Effective January 1, 2000, the President of MPC became
a paid employee instead of a consultant which reduced the amount of auditing,
accounting and legal expenses. In addition, 1999 includes expenses related in
part to legal and tax advice sought in connection with an unsuccessful bid to
acquire certain oil and gas properties in Australia.
Shareholder communications costs increased 3% to $191,000 in 2000
compared to $185,000 in 1999.
Other administrative expenses decreased 6% from $765,000 in 1999 to
$721,000 in 2000. Consulting and travel expenses decreased during 2000.
Income Taxes
------------
Income tax expense increased from a credit of $52,000 in 1999 to an
expense of $180,000 in 2000. The effective income tax rate for 2000 was 5%
compared to (2%) in 1999. The components of income tax expense (benefit) between
MPC and MPAL were as follows:
2000 1999
MPC $114,000 $105,000
MPAL 66,000 (157,000)
-------- ---------
Consolidated income tax (benefit) $180,000 $(52,000)
======== =========
MPC's income tax represents the 15% Australian withholding tax on the
dividend it received from MPAL. Income tax benefit in 1999 was due to the effect
of permanent tax benefits ($452,000) under Australian tax law and the
utilization of prior year losses ($879,000) not previously taken into account.
The 2000 income tax provision also reflects the effect of permanent tax benefits
($552,000). In addition, Australia has enacted corporate tax rate reductions for
the fiscal year ending June 30, 2001 (36% to 34%) and for the fiscal year ending
June 30, 2002 (34% to 30%) which reduced the provision by $656,000. The
utilization of prior year losses ($378,000) not previously taken into account
also reduced the provision.
Exchange Effect
---------------
The value of the Australian dollar relative to the U.S. dollar
decreased to $.5986 at June 30, 2000 compared to $.6675 at June 30, 1999. This
resulted in a $2,128,000 charge to accumulated translation adjustments for
fiscal 2000. The 11% decrease in the value of the Australian dollar decreased
the reported asset and liability amounts in the balance sheet at June 30, 2000
from the June 30, 1999 amounts. The annual average exchange rates of $.63 used
to translate MPAL's operations in Australia for fiscal 2000 and fiscal 1999 were
approximately the same.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
-------- ---------------------------------------------------------
The Company does not have any significant exposure to market risk,
other than as previously discussed regarding foreign currency risk, as the only
market risk sensitive instruments are its investments in marketable securities.
At June 30, 2001, the carrying value of such investments was approximately $14.6
million, which approximates the fair value of the securities. Since the Company
expects to hold the investments to maturity, the maturity value should be
realized.
Item 8. Financial Statements and Supplementary Data.
------- --------------------------------------------
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Magellan Petroleum Corporation
We have audited the accompanying consolidated balance sheets of Magellan
Petroleum Corporation as of June 30, 2001 and 2000 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for each of
the three years in the period ended June 30, 2001. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Magellan Petroleum Corporation at June 30, 2001 and 2000, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended June 30, 2001, in conformity with accounting principles generally
accepted in the United States.
/s/ Ernst & Young LLP
Stamford, Connecticut
September 14, 2001
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30,
--------
2001 2000
---- ----
ASSETS
------
Current assets:
Cash and cash equivalents $12,792,191 $13,890,834
Accounts receivable 4,580,809 4,011,475
Marketable securities 846,063 1,581,730
Inventories 537,138 289,743
Other assets 283,372 265,462
----------- -----------
Total current assets 19,039,573 20,039,244
----------- -----------
Marketable securities 961,514 1,476,449
Property and equipment:
Oil and gas properties (successful efforts method) 37,723,278 42,766,638
Land, buildings and equipment 1,590,322 1,763,272
Field equipment 1,054,060 1,236,097
----------- -----------
40,367,660 45,766,007
Less accumulated depletion, depreciation and amortization (23,885,240) (24,025,493)
------------ ------------
Net property and equipment 16,482,420 21,740,514
----------- -----------
Other assets 1,014,578 719,510
----------- -----------
Total assets $37,498,085 $43,975,717
=========== ===========
LIABILITIES, MINORITY INTERESTS
-------------------------------
AND STOCKHOLDERS' EQUITY
------------------------
Current liabilities:
Accounts payable $ 1,907,672 $ 3,024,604
Accrued liabilities 741,972 751,399
Income taxes payable 991,571 1,216,995
------------ ------------
Total current liabilities 3,641,215 4,992,998
------------ ------------
Long term liabilities:
Deferred income taxes 3,029,180 4,255,096
Reserve for future site restoration costs 953,210 934,790
------------ ------------
Total long term liabilities 3,982,390 5,189,886
------------ ------------
Minority interests 12,701,000 14,696,267
Commitments (Note 2) - -
Stockholders' equity:
Common stock, par value $.01 per share:
Authorized 200,000,000 and 50,000,000 shares
Outstanding 24,698,226 and 25,108,226 shares 246,982 251,082
Capital in excess of par value 43,179,475 43,586,606
----------- -----------
Total capital 43,426,457 43,837,688
Accumulated deficit (15,842,656) (16,914,420)
Accumulated other comprehensive loss (10,410,321) (7,826,702)
------------ ------------
Total Stockholders' equity 17,173,480 19,096,566
----------- -----------
Total liabilities, minority interests and stockholders' equity $37,498,085 $43,975,717
=========== ===========
See accompanying notes.
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Years ended June 30,
---------------------------------------------
2001 2000 1999
Revenues:
Oil sales $ 4,638,782 $ 4,636,595 $ 2,572,966
Gas sales 8,537,064 10,509,600 9,639,657
Other production related revenues 832,516 1,183,570 1,185,020
Interest income 891,489 817,066 717,118
---------- ---------- ----------
14,899,851 17,146,831 14,114,761
---------- ---------- ----------
Costs and expenses:
Production costs 3,492,045 4,492,443 4,372,253
Exploratory and dry hole costs 1,623,914 2,088,871 2,058,977
Salaries and employee benefits 1,693,998 1,780,076 1,297,036
Depletion, depreciation and amortization 3,473,758 3,670,417 2,356,582
Auditing, accounting and legal services 251,567 323,353 509,891
Shareholder communications 171,710 191,057 184,721
Other administrative expenses 716,777 721,255 764,503
---------- ---------- ----------
11,423,769 13,267,472 11,543,963
---------- ---------- ----------
Income before income taxes and minority interests 3,476,082 3,879,359 2,570,798
Income tax provision (benefit) 1,075,091 179,520 (52,211)
---------- ---------- -----------
Income before minority interests 2,400,991 3,699,839 2,623,009
Minority interests 1,329,227 2,209,435 1,677,797
----------- ----------- -----------
Net income $ 1,071,764 $ 1,490,404 $ 945,212
=========== =========== ===========
Average number of shares:
Basic 24,979,572 25,108,226 25,040,300
========== ========== ==========
Diluted 24,979,572 25,227,519 25,040,300
========== ========== ==========
Per share, based on average number of shares
outstanding during the period:
Net income (basic and diluted) $.04 $.06 $.04
==== ==== ====
See accompanying notes.
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY
Three years ended June 30, 2001
Accumulated Total
Capital in other comprehensive
Number Common excess of Accumulated comprehensive income
of shares stock par value deficit Loss Total (loss)
---------- ------- ---------- ------------ ----------- ---------- -----------
July 1, 1998 24,982,495 $249,825 $43,532,238 $(19,350,036) $(7,012,939) $17,419,088
Net income - - - 945,212 - 945,212 $ 945,212
Foreign currency
translation
adjustments - - - - 1,313,871 1,313,871 1,313,871
---------
Total
comprehensive
income - - - - - - $2,259,083
==========
Exercise of stock
options 125,731 1,257 54,368 - - 55,625
---------- ------- ---------- ------------ ----------- ----------
June 30, 1999 25,108,226 251,082 43,586,606 (18,404,824) (5,699,068) 19,733,796
---------- ------- ---------- ------------ ----------- ----------
Net income - - - 1,490,404 - 1,490,404 $1,490,404
Foreign currency
translation
adjustments - - - - (2,127,634) (2,127,634) (2,127,634)
-----------
Total
comprehensive
loss - - - - - - $ (637,230)
---------- ------- ---------- ------------ ----------- ---------- ===========
June 30, 2000 25,108,226 251,082 43,586,606 (16,914,420) (7,826,702) 19,096,566
---------- ------- ---------- ------------ ----------- ----------
Net income - - - 1,071,764 - 1,071,764 $1,071,764
Foreign currency
translation
adjustments - - - - (2,816,765) (2,816,765) (2,816,765)
Unrealized gain on
available-for-sale
securities - - - - 233,146 233,146 233,146
---------
Total
comprehensive
loss - - - - - - $(1,511,855)
============
Repurchases of
common stock (410,000) (4,100) (407,131) - - (411,231)
----------- ----------- ------------ ------------- ------------ ------------
- -
June 30, 2001 24,698,226 $ 246,982 $ 43,179,475 $(15,842,656) $(10,410,321) $17,173,480
========== ========== ============ ============= ============= ===========
See accompanying notes.
MAGELLAN PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended June 30,
--------------------
2001 2000 1999
---- ---- ----
Operating Activities:
Net income $ 1,071,764 $ 1,490,404 $ 945,212
Adjustments to reconcile net income to
net cash provided by operating activities:
Exploratory and dry hole costs - 70,634 420,748
Depletion, depreciation and amortization 3,473,758 3,670,417 2,356,582
Deferred income taxes (609,897) (1,805,306) 206,141
Minority interests 1,329,227 2,209,435 1,677,797
Increase (decrease) in operating assets and liabilities:
Accounts receivable (1,153,637) (1,888,247) 24,676
Other assets (182,457) 87,695 (330,742)
Inventories (307,681) (33,385) 14,367
Accounts payable and accrued liabilities (660,252) 1,250,716 (442,159)
Income taxes payable (72,437) 1,096,845 120,150
Reserve for future site restoration costs 156,069 - -
---------- ---------- ----------
Net cash provided by operating activities 3,044,457 6,149,208 4,992,772
---------- ---------- ----------
Investing Activities:
Additions to property and equipment (2,345,577) (2,512,483) (4,679,109)
Marketable securities matured (purchased) 1,250,602 (955,751) 364,957
Repurchases of common stock (411,231) - -
----------- ----------- -----------
Net cash used in investing activities (1,506,206) (3,468,234) (4,314,152)
----------- ----------- -----------
Financing Activities:
Dividends to MPAL minority shareholders (593,034) (730,709) (686,567)
Exercise of stock options - - 55,625
----------- ------------ -----------
Net cash used in financing activities (593,034) (730,709) (630,942)
----------- ----------- -----------
Effect of exchange rate changes on cash
and cash equivalents (2,043,860) (1,440,130) 896,724
----------- ----------- ----------
Net increase (decrease) in cash and cash
equivalents 1,098,643 510,135 944,402
Cash and cash equivalents at beginning of year 13,890,834 13,380,699 12,436,297
---------- ---------- ----------
Cash and cash equivalents at end of year $12,792,191 $13,890,834 $13,380,699
=========== =========== ===========
See accompanying notes.
MAGELLAN PETROLEUM CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2001
1. Summary of significant accounting policies
------------------------------------------
Principles of consolidation
---------------------------
The accompanying consolidated financial statements include the accounts
of Magellan Petroleum Corporation (MPC) and its majority owned subsidiary,
Magellan Petroleum Australia Limited (MPAL), hereafter referred to collectively
as the Company. At June 30, 2001 and 2000, MPC owned a 51.3% and 51.2% interest
in MPAL, respectively. During fiscal 2001, MPC increased its interest in MPAL by
purchasing an additional 74,000 MPAL shares for approximately $79,000. All
intercompany transactions have been eliminated.
Revenue Recognition
-------------------
The Company recognizes oil and gas revenue from its interests in
producing wells as oil and gas is produced and sold from those wells. Oil and
gas sold is not significantly different from the Company's share of production.
Revenues from the purchase, sale and transportation of natural gas are
recognized upon completion of the sale and when transported volumes are
delivered.
Oil and Gas Properties
----------------------
Oil and gas properties are located in Australia, New Zealand, Canada,
the United Kingdom and the United Stated. The Company follows the successful
efforts method of accounting for its oil and gas operations. Under this method,
the costs of successful wells, development dry holes and productive leases are
capitalized and amortized on a units-of-production basis over the life of the
related reserves. Cost centers for amortization purposes are determined on a
field-by-field basis. Estimated future abandonment and site restoration costs,
net of anticipated salvage values, are accrued based on units of production.
Unproved properties with significant acquisition costs are periodically assessed
for impairment in value, with any impairment charged to expense. The successful
efforts method also imposes limitations on the carrying or book value of proved
oil and gas properties. This method requires an impairment provision or noncash
charge against earnings for any period in which their carrying value exceeds the
standardized measure of undiscounted future net cash flows from proved oil and
gas reserves based on prices received for oil and gas production as of the end
of that period or a subsequent date prior to publication of financial results
for the period.
1. Summary of significant accounting policies (Cont'd)
---------------------------------------------------
Exploratory drilling costs are initially capitalized pending
determination of proved reserves but are charged to expense if no proved
reserves are found. Other exploration costs, including geological and
geophysical expenses, leasehold expiration costs and delay rentals, are expensed
as incurred.
Use of Estimates
----------------
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ
from those estimates.
Land, buildings and equipment and field equipment
-------------------------------------------------
Land, buildings and equipment and field equipment are carried at cost.
Depreciation and amortization are provided on a straight-line basis over their
estimated useful lives. The estimated useful lives are: buildings - 40 years,
equipment and field equipment - 3 to 15 years.
Inventories
-----------
Inventories consist of crude oil in various stages of transit to the
point of sale and are valued at the lower of cost (determined on an average cost
basis) or market.
Foreign currency translations
-----------------------------
The accounts of MPAL, whose functional currency is the Australian
dollar, are translated into U.S. dollars in accordance with Statement of
Financial Accounting Standards No. 52. The translation adjustment is included as
a component of stockholders' equity and comprehensive income (loss), whereas
gain or loss on foreign currency transactions, which is usually immaterial, is
included in the determination of income. All assets and liabilities are
translated at the rates in effect at the balance sheet dates. Revenues,
expenses, gains and losses are translated using a quarterly weighted average
exchange rate for the period. At June 30, 2001 and 2000, the Australian dollar
was equivalent to U.S.$.51 and $.60, respectively. The annual average exchange
rate used to translate MPAL's operations in Australia for the fiscal years 2001,
2000 and 1999 was $.53, $.63 and $.63, respectively.
1. Summary of significant accounting policies (Cont'd)
---------------------------------------------------
Accounting for income taxes
---------------------------
The Company follows FASB Statement 109, the liability method in
accounting for income taxes. Under this method, deferred tax assets and
liabilities are determined based on differences between the financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse.
Cash and cash equivalents
-------------------------
The Company considers all highly liquid short term investments with
maturities of three months or less at the date of acquisition to be cash
equivalents. Cash and cash equivalents are carried at cost which approximates
market value. The components of cash and cash equivalents are as follows:
June 30,
--------
2001 2000
---- ----
Cash $ 17,269 $ 140,732
U.S. marketable securities 842,172 -
Australian money market accounts 11,932,750 13,750,102
and short-term commercial paper ----------- -----------
$12,792,191 $13,890,834
=========== ===========
Marketable securities
---------------------
At June 30, 2001 and 2000, MPC had the following marketable securities
which are expected to be held until maturity:
Amortized
June 30, 2001 Par value Maturity Date Cost Fair value
------------- --------- ------------- ---- ----------
Short-term securities
---------------------
Federal Home Loan Bank Note $ 350,000 Jul. 9, 2001 $ 343,327 $ 343,697
State of Connecticut Bond 500,000 Dec.15, 2001 502,736 507,475
----------- ----------- ------------
$ 850,000 $ 846,063 $ 851,172
========== ========== ==========
Long-term securities
State of Connecticut Bond $ 550,000 Jan. 15, 2003 $ 553,374 $ 558,707
State of Connecticut Bond 400,000 Jul.1, 2003 408,140 408,784
----------- ----------- ------------
Total long-term $ 950,000 $ 961,514 $ 967,491
========== ========== ==========
1. Summary of significant accounting policies (Cont'd)
---------------------------------------------------
Marketable securities (Cont'd)
------------------------------
Amortized
June 30, 2000 Par value Maturity Date Cost Fair value
------------- --------- ------------- ---- ----------
Short-term securities
---------------------
Federal National Mortgage Association $ 164,000 Jul. 7, 2000 $ 160,139 $ 163,512
Federal National Mortgage Association 200,000 Aug. 2, 2000 196,296 198,818
Federal National Mortgage Association 300,000 Sep. 5, 2000 294,317 296,371
Federal National Mortgage Association 200,000 Oct. 6, 2000 195,978 196,450
Federal National Mortgage Association 400,000 Feb. 16, 2001 400,000 396,148
New Britain Connecticut Bond 335,000 May 1, 2001 335,000 330,407
----------- ----------- ------------
Total short-term $ 1,599,000 $ 1,581,730 $ 1,581,706
=========== =========== ===========
Long-term securities
State of Connecticut Bond $ 550,000 Jan. 15, 2003 $ 555,558 $ 532,285
State of Connecticut Bond 400,000 Jul.1, 2003 412,210 388,528
State of Connecticut Bond 500,000 Dec.15, 2001 508,681 500,450
---------- ---------- ----------
Total long-term $1,450,000 $1,476,449 $1,421,263
========== ========== ==========
Unrealized Gain on Available-for-Sale Securities
------------------------------------------------
During August 1999, MPC sold its interest in the Tapia Canyon,
California heavy oil project for its approximate cost of $101,000 and received
shares of stock in the purchaser. During late December 2000, the purchaser
became a public company (Sefton Resources, Inc) which is listed on the London
Stock Exchange. At June 30, 2001, MPC owned approximately 3.3% of Sefton
Resources, Inc. with a fair market value of $326,480 and a cost of $93,334 which
is included in other assets. The $233,146 has been recorded as unrealized gain
on available-for-sale securities. The shares of Sefton Resources, Inc. are
restricted and cannot be sold before December 2001.
Earnings per share
------------------
Earnings per common share is based upon the weighted average number of
common and common equivalent shares outstanding during the period. The only
reconciling item in the calculation of diluted EPS is the dilutive effect of
stock options which was computed using the treasury stock method. The Company's
basic and diluted calculations of EPS are the same in 2001 and 1999 because the
exercise of options is not assumed in calculating diluted EPS, as the result
would be anti-dilutive. The exercise price of the outstanding stock options
exceeded the average market price of the common stock during the years 2001 and
1999.
1. Summary of significant accounting policies (Cont'd)
---------------------------------------------------
Financial instruments
---------------------
The carrying value for cash and cash equivalents, accounts receivable,
marketable securities and accounts payable approximates fair value based on
anticipated cash flows and current market conditions.
Segment Disclosure
------------------
FASB Statement No. 131 requires the disclosure of certain financial
data based on an entity's operating segments. The Company's two operating
segments are MPC and MPAL. Condensed financial statements of these segments are
included in Notes 3 and 4 and additional segment data are included in Note 11.
Comprehensive Income (loss)
---------------------------
Total comprehensive income (loss) during the three years ended June 30,
2001 was as follows:
2001 2000 1999 Accumulated
---- ---- ---- -----------
Net income $ 1,071,764 $ 1,490,404 $ 945,212 $ -
Foreign currency translation
adjustments (2,816,765) (2,127,634) 1,313,871 (10,643,467)
Unrealized gain on
available-for-sale securities 233,146 - - 233,146
----------- ----------- ----------- -------------
Total comprehensive income (loss) $(1,511,855) $ (637,230) $ 2,259,083 $ (10,410,321)
============ ============ =========== ==============
Reclassifications
-----------------
Certain amounts in the prior year balance sheet have been reclassified
to conform to the presentation in the current period.
2. Oil and gas properties
----------------------
(a) Australia
Mereenie
--------
MPAL (35%) and Santos (65%) the operator (the Mereenie Producers) own
the Mereenie field which is located in the Amadeus Basin of the Northern
Territory. MPAL's share of the Mereenie field proved developed oil reserves was
approximately 522,000 barrels at June 30, 2001.
.
During 2001, MPAL's share of oil sales was 170,000 barrels and 3.5
billion cubic feet (bcf) of gas sold which is subject to net overriding
royalties aggregating 3.0625% and the statutory government royalty of 10%. The
oil is transported by means of a 167 mile eight-inch oil pipeline from the field
to an industrial park near Alice Springs. Most of the oil is then shipped south
approximately 950 miles by rail and road to a refinery in the Adelaide area. The
cost of transporting the oil to the refinery is being borne by the producers.
The Mereenie Producers are providing Mereenie gas in the Northern Territory to
the Power and Water Authority (PAWA) and Gasgo Pty. Ltd., a company PAWA wholly
owns, for use in Darwin and other Northern Territory centers. See "Gas Supply
Contracts" below.
Palm Valley
-----------
MPAL has a 50.8% interest in and is the operator of the Palm Valley gas
field which is also located in the Amadeus Basin of the Northern Territory.
Santos, the operator of the Mereenie field, owns a 48% interest in Palm Valley
which provides gas to meet the Alice Springs and Darwin supply contracts with
PAWA. See "Gas Supply Contracts" below. During fiscal 2001, MPAL's share of gas
sales was 3.2 bcf which is subject to a 10% statutory government royalty and net
overriding royalties aggregating 4.2548%. As of June 30, 2001, the remaining
estimated proved reserves at Palm Valley were reduced by approximately 46% to
reflect the inability of the field to deliver the amount of gas that has been
contracted. Under the terms of the sales contract, PAWA is obligated to pay for
the capital costs of maintaining production levels to meet the annual contract
volumes. For more than four years, PAWA has been on notice that additional
drilling would be necessary to meet the contract supply requirements. PAWA still
has the matter under consideration.
Gas Supply Contracts
--------------------
The following is a summary of MPAL's interest in the Palm Valley and the
Mereenie gas supply contracts in billion cubic feet:
Maximum contract Percentage of
(balance/after royalties) contract completed Contract Period
Palm Valley:
Alice Springs (1981) 1.53 90 1983-2003
Darwin (1985) 21.54 63 1987-2009
-----
23.07
Mereenie:
Darwin (1985) 7.06 59 1987-2009
Darwin (1999) 17.64 12 1999-2009
Darwin (2001) 3.51 4 2001-2008
Other .87 - Various
-----
29.08
-----
Total 52.15
=====
Under the 1985 contracts, there is a difference in price between Palm
Valley gas and most of the Mereenie gas for the first 20 years of the 25 year
contracts which takes into account the additional cost to the pipeline
consortium to build a spur line to the Mereenie field and increase the size of
the pipeline from Palm Valley to Mataranka.
At June 30, 2001, MPAL had accrued $953,000 for future site restoration
costs for the Mereenie, Palm Valley and Dingo fields. The balance of the
estimated liability was $2,539,000 at June 30, 2001 which will be accrued over
the remaining life of the related reserves based on units of production.
Dingo Gas Field
---------------
MPAL has a 34.3% interest in the Dingo gas field which is held under
Retention License 2 and is subject to renewal in 2003. The Dingo gas field,
which is located in the Amadeus Basin in the Northern Territory, has
approximately 25 bcf of presently proved and recoverable reserves based on four
delineation wells. Dingo 2 and Dingo 3 wells are estimated to have the capacity
of producing a combined rate of 5 mmcfd per day. MPAL's share of potential
production from these permit areas is subject to a 10% statutory government
royalty and overriding royalties aggregating 2.5043%.
Browse Basin
------------
During the fiscal year 1999, MPAL and its partners were granted
exploration permits WA-281-P, WA-282-P and WA-283-P in the Browse Basin offshore
Western Australia. MPAL's share (17.5%) of the remaining work obligations for
the three permits total $5,503,000 at June 30, 2001 and are as follows:
$1,947,000 for the year 2002, $1,286,000 for 2003, $2,216,000 for 2004 and
$54,000 for 2005. A well is scheduled to be drilled in permits WA-281-P and
WA283-P during the last quarter of the calendar year 2001.
During fiscal year 2000, MPAL was granted exploration blocks WA-287-P
and WA-288-P in the Eastern Browse Basin. During fiscal 2001, MPAL applied for a
permit over area WA-311-P which is adjacent to WA-288-P and the permit was
granted on September 3, 2001. MPAL's share (100%) of the work obligations of the
three permits total $9,553,000 and are as follows: $469,000 for fiscal year
2002, $3,623,000 for the 2003, $307,000 for 2004, $5,103,000 for 2005 and
$51,000 for 2006. The expenditures for the year 2002 are obligatory and
discretionary for the years 2003-2006.
2. Oil and gas properties (Cont'd)
-------------------------------
Carnarvon Basin
---------------
During fiscal year 1999, MPAL was awarded permit WA-291-P, offshore
Western Australia in the Carnarvon Basin. MPAL's share (100%) of the remaining
work obligations of the permit total $3,717,000 at June 30, 2001 and are as
follows: $26,000 for the fiscal year 2002, $3,573,000 for 2003, $92,000 for 2004
and $26,000 for 2005. The expenditures for the years 2002-2003 are obligatory
and are discretionary for the years 2004-2005.
Maryborough Basin
-----------------
MPAL holds a 98% interest in exploration permit ATP 613P, in the
Maryborough Basin in Queensland, Australia. MPAL (100%) also has an application
pending for permit ATP674P which is adjacent to ATP613P. MPAL is seeking
partners to drill a well to test the gas potential of the block in exchange for
an interest in the permit. MPAL's share of work obligations total $1378,000 for
both permits and are as follows: $357,000 for the fiscal year 2002, $434,000 for
2003, $102,000 for 2004, $102,000 for 2005 and $383,000 for 2006.
Cooper Basin
------------
During fiscal year 1999, MPAL (50%) and its partner Beach Petroleum NL
were successful in bidding for two exploration blocks in South Australia's
Cooper Basin. The formal grant of the permits is pending. MPAL's share of the
work obligations will total $2,629,000 and are as follows: $918,000 for the
fiscal year 2003, $561,000 for 2004, $409,000 for 2005, $332,000 for 2006 and
$409,000 for 2007.
During fiscal year 2001, MPAL (50%) and its partner Beach Petroleum NL
were also successful in bidding for two additional exploration blocks in the
Cooper Basin. The formal grant of the permits is pending. MPAL's share of the
work obligations will total $1,775,000 and are as follows: $523,000 for the
fiscal year 2003, $39,000 for 2004, $511,000 for 2005, $166,000 for 2006 and
$536,000 for 2007.
Rowley Basin
------------
During fiscal year 2001, MPAL acquired a 37.5% working interest in each
of exploration permits WA-306-P and WA-307-P in the Rowley Sub-basin of the
offshore Canning Basin adjacent to the Browse Basin. Antrim Energy, a Canadian
company, is the operator of the joint venture. MPAL's share of the work
obligations will total
2. Oil and gas properties (Cont'd)
-------------------------------
$1,455,000 and are as follows: $843,000 for the fiscal year 2002, $230,000 for
2003, and $382,000 for 2004.
(b) New Zealand
-----------
During fiscal year 2001, MPAL earned a 7.5% interest in permit PEP
38256 in the Canterbury Basin of New Zealand by funding part of the cost of
drilling the Ealing-1 exploration well which was plugged and abandoned. The cost
of approximately $336,000 is included in exploratory and dry hole costs. MPAL's
share of the work obligations will total $2,000 through fiscal year 2003.
(c) United Kingdom
--------------
During fiscal year 2001, MPAL acquired a 30% interest in two licenses
in southern England. The two licenses; PEDL 098 in the Isle of Wight and PEDL
099 in the Portsdown area of Hampshire, were each granted for a period of six
years. MPAL's share of the work obligations will total $595,000 and are as
follows: $13,000 for the fiscal year 2002, $17,000 for 2003, $10,000 for 2004,
$4,000 for 2005 and $551,000 for 2006.
(d) Canada
------
MPC has a 2.67% carried interest in the Kotaneelee gas field in the
Yukon Territory which has been on production since February 1991 with two
producing wells. For financial statement purposes in fiscal 1987 and 1988, MPC
wrote down its costs relating to the Kotaneelee field to a nominal value because
of the uncertainty as to the date when sales of Kotaneelee gas might begin and
the immateriality of the carrying value of the investment. Since October 1989,
the field has been the subject of litigation, because the carried interest
owners (including MPC) believe the working interest parties had not adequately
pursued the attainment of contracts for the sale of Kotaneelee gas. A decision
in the litigation was rendered on September 14, 2001. The decision of the trial
court was generally favorable to the Company. However, the issue of court costs
has not yet been decided and any of the parties has the right to appeal the
decision. Therefore, the final outcome remains uncertain.
On January 19, 2001, the Company's carried interest account in the
Kotaneelee gas field reached undisputed payout status. During the 4th quarter of
the fiscal year 2001, the Company began accruing its share of Kotaneelee net
proceeds as income. The amount due of $441,000 from the working interest
partners is included in accounts receivable. These funds are currently being
held in escrow pending the completion of a
2. Oil and gas properties (Cont'd)
-------------------------------
surety being given to the working interest partners. However, the court's
decision should eliminate the need for any surety.
Prior to the Kotaneelee field reaching undisputed payout status, the
operator of the Kotaneelee field had been reporting and depositing in escrow
its share of the disputed amount of MPC's share of net revenues. Based on the
reported data, the Company believes the total amount due MPC through April 30,
2001 production (including interest) was approximately $1.3 million. The
disputed amount, which have not been included in income, represent gas
processing fees claimed by the working interest partners. The trial court
ruled in favor of the Company on this issue.
(e) United States
-------------
Baca County, Colorado
---------------------
MPAL holds leases in Baca County, Colorado, in which an exploration
company plans to fund and drill two wells beginning September 2001. MPAL will
retain an 18 3/4% interest in the leases, unless it elects to participate in the
completion of the wells for production, in which case it would retain a 25%
interest.
Stephens County, Texas
----------------------
During fiscal 1999, MPC participated (20%) in the drilling of the
Puckett No. 1 well. During late June 1999, MPC also participated (21.4%) in the
drilling of the Smith No. 1 well. During the fiscal year 2000, the $119,000 cost
of both wells was written off because the project was deemed to be uneconomic.
(f) Belize
------
Southern Offshore Block PSA
---------------------------
During July 2000, MPC (3%) and MPAL (20%) withdrew from the joint
venture which was formed to explore the Southern Offshore Blocks in Belize,
Central America. Most of the costs related to this project had been written off
in prior years except for $33,000 written off in fiscal 2000.
2. Oil and gas properties (Cont'd)
-------------------------------
(g) Exploratory and dry hole costs
The 2001 costs relate primarily to the work being performed on MPAL's
offshore Australian properties. The cost ($336,000) of the Ealing-1 exploration
well in New Zealand, which was a dry hole, is also included in 2001. The 2000
costs also relate primarily to the work being performed on MPAL's offshore
Western Australian properties. The costs in 1999 related primarily to the
Springbok-1 well offshore Western Australia which was plugged and abandoned and
the Belize project which was written off. The costs (in thousands) for MPC and
MPAL by location were as follows:
2001 MPC MPAL Total
--------------------- --- ---- -----
U.S. / Belize $ - $ 2 $ 2
Australia/New Zealand - 1,622 1,622
--- ----- -----
Total $ - $ 1,624 $ 1,624
=== ======= =======
2000
---------------------
U.S. / Belize $ 124 $ 32 $ 156
Australia - 1,933 1,933
----- ----- -----
Total $ 124 $ 1,965 $ 2,089
===== ======= =======
1999
---------------------
U.S. / Belize $ 50 $ 361 $ 411
Australia - 1,648 1,648
----- ---- -----
Total $ 50 $ 2,009 $2,059
====== ==== ======
Commitments
-----------
The following is a summary of MPAL's required and contingent
commitments for exploration expenditures in thousands for the five year period
ending June 30, 2006. The contingent amounts will be dependent on such factors
as the results of the current program to evaluate the exploration permits,
drilling results and MPAL's financial position.
Fiscal Year Required Expenditures Contingent Expenditures Total
2002 $2,971 $ - $ 2,971
2003 2,175 8,431 10,606
2004 1,145 2,666 3,811
2005 924 5,566 6,490
2006 - 1,100 1,100
------- -------- --------
Total $7,215 $17,763 $24,978
====== ======= =======
MPAL expects to fund its exploration costs through its cash and cash
equivalents, cash flow from Australian operations and any balance remaining from
its available A.$10 million bank line of credit. MPAL also expects that it will
find partners to share the above exploration costs. If MPAL's efforts to find
partners is unsuccessful, it may be unable or unwilling to complete the
exploration program for some of its properties.
3. MPC condensed financial statements
----------------------------------
The following are unconsolidated condensed balance sheets and
statements of income and cash flows of MPC (in thousands).
Magellan Petroleum Corporation
Condensed Balance Sheets
June 30,
--------
2001 2000
---- ----
Assets
Current assets $ 2,485 $ 2,044
Other assets 1,276 1,476
Oil and gas properties - net - 100
Investment in MPAL 13,536 15,495
-------- --------
Total assets $17,297 $19,115
======= =======
Liabilities And Stockholders' Equity
Current liabilities $ 124 $ 18
------- -------
Stockholders' equity:
Capital 43,426 43,838
Accumulated deficit (15,843) (16,914)
Accumulated other comprehensive loss (10,410) (7,827)
--------- ----------
Total stockholders' equity 17,173 19,097
-------- --------
Total liabilities and stockholders' equity $17,297 $19,115
======= =======
Magellan Petroleum Corporation
Condensed Statements Of Income
Years ended June 30,
--------------------
2001 2000 1999
---- ---- ----
Revenues $ 564 $ 220 $ 190
Costs and expenses 785 930 (879)
------ ------ -------
Loss before income taxes (221) (710) (689)
Income tax provision 109 114 105
------ ------ ------
Loss before equity in MPAL (330) (824) (794)
Equity in MPAL net income 1,402 2,314 1,739
------- ------- -------
Net income $ 1,072 $ 1,490 $ 945
======= ======= =======
3. MPC condensed financial statements (Cont'd)
-------------------------------------------
Magellan Petroleum Corporation
Condensed Statements Of Cash Flows
Years ended June 30,
--------------------
2001 2000 1999
---- ---- ----
Operating Activities:
Net income $ 1,072 $ 1,490 $ 945
Adjustments to reconcile net income
to net cash used in operating activities:
Abandonments - 71 47
Equity in MPAL net income (1,402) (2,314) (1,739)
Change in operating assets and liabilities:
Accounts receivable and other assets (366) (6) (37)
Accounts payable and accrued liabilities 106 (52) (27)
-------- -------- --------
Net cash used in operating activities (590) (811) (811)
-------- -------- --------
Investing Activities:
Additions to property and equipment 7 - (92)
Marketable securities (purchased) sold 1,250 (956) 365
Purchase of MPAL shares (79) (110) (112)
Repurchases of common stock (411) - -
-------- -------- --------
Net cash provided by (used in) investing activities
(767) (1,066) 161
-------- -------- --------
Financing Activities:
Dividends from MPAL 621 760 705
Exercise of stock options - - 56
-------- -------- --------
Net cash provided by financing activities 621 760 761
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents: 798 (1,117) 111
Cash and cash equivalents at beginning of year 82 1,199 1,088
--------- -------- --------
Cash and cash equivalents at end of year $ 880 $ 82 $1,199
========= ======== ========
4. MPAL transactions and condensed financial statements
----------------------------------------------------
The following are the condensed consolidated balance sheets and
consolidated statements of income of MPAL (in thousands). At June 30, 2001,
Santos Ltd. held 18.2% of MPAL and Origin Energy Limited held 17.1% with the
balance of 13.4% held by approximately 1,900 shareholders in Australia.
4. MPAL transactions and condensed financial statements (Cont'd)
-------------------------------------------------------------
The condensed consolidated financial statements have been prepared in
accordance with U.S. generally accepted accounting principles and include all of
MPAL's subsidiaries.
Magellan Petroleum Australia Limited
Condensed Consolidated Balance Sheets
June 30,
--------
2001 2000
---- ----
Assets
Current assets $16,566 $17,995
Other assets 688 720
Oil and gas properties - net 15,485 20,510
Land, building and equipment - net 757 928
------- -------
Total assets $33,496 $40,153
======= =======
Liabilities And Stockholders' Equity
Current liabilities $ 3,517 $ 4,975
-------- --------
Long term liabilities 4,077 5,285
-------- --------
Stockholders' equity:
Capital 34,408 34,408
Retained earnings 11,440 9,923
Accumulated other comprehensive loss (19,946) (14,438)
--------- ---------
25,902 29,893
-------- --------
Total liabilities and stockholders' equity $33,496 $40,153
======= =======
4. MPAL transactions and condensed financial statements (Cont'd)
-------------------------------------------------------------
Magellan Petroleum Australia Limited
Condensed Consolidated Statements of Income
Years ended June 30,
--------------------
2001 2000 1999
---- ---- ----
Revenues $14,336 $16,927 $13,925
Costs and expenses 10,639 12,337 10,666
------- -------- --------
Income before income taxes 3,697 4,590 3,259
Income tax provision (benefit) 966 66 (158)
--------- -------- --------
Net income $ 2,731 $ 4,524 $ 3,417
======== ======== ========
Magellan and Minority Equity in MPAL
Magellan equity interest in MPAL:
Magellan equity in net income $ 1,402 $ 2,314 $ 1,739
======== ======== ========
Minority equity interest in MPAL:
Minority interest in net income $ 1,329 $ 2,210 $ 1,678
Other comprehensive income (loss) (2,682) (2,023) 1,203
Other (49) (77) -
Dividends paid (593) (731) (687)
--------- ---------- ---------
Total minority interest increase (decrease) $ (1,995) $ (621) $ 2,194
========= ========== ========
5. Capital and stock options
-------------------------
MPC's certificate of incorporation provides that any matter to be voted
upon must be approved not only by a majority of the shares voted, but also by a
majority of the stockholders casting votes present in person or by proxy and
entitled to vote thereon.
On December 8, 2000, MPC announced a stock repurchase plan to purchase
up to one million shares of its common stock in the open market. At June 30,
2001, MPC had purchased 410,000 of its shares at a cost of approximately
$411,000.
5. Capital and stock options (cont'd)
----------------------------------
On October 5, 1989, MPC adopted a Stock Option Plan covering one
million shares of its common stock. The plan provided for options to be granted
at a price of not less than fair value on the date of grant and for a term of
not greater than ten years. On December 3, 1997, the Board of Directors approved
a new stock option plan for an additional one million shares with similar terms.
At June 30, 2001, 784,333 of the stock options outstanding were vested
and exercisable. During fiscal 1999, options to purchase 50,000 shares were
repriced from $2.75 to $1.57, the fair market value on the date of repricing. In
addition, options to purchase 175,000 shares of common stock were exercised in a
cashless exchange which resulted in the issuance of 75,731 shares during fiscal
1999. During fiscal 2000, options to purchase 235,000 shares were granted with
1/3rd of the shares being vested at the end of each year after the grant.
Following is a summary of option transactions for the three years ended June 30,
2001:
Expiration Number of
Options outstanding Dates shares Exercise Prices ($)
------------------- ----- --------- -------------------
June 30, 1998 275,000 .8125 - 2.75
Granted Oct. 2003 146,000 1.57
Exercised (225,000) .8125
---------
June 30, 1999 196,000 1.57
Granted Feb. 2005 745,000 1.28
-------
June 30, 2000 941,000 1.28-1.57
Expired (20,000) 1.57
--------
June 30, 2001 921,000 ($1.34 weighted average)
=======
Summary of Options Outstanding at June 30, 2001
-----------------------------------------------
Granted 1997 Sep. 2001 50,000 1.57
Granted 1999 Oct. 2003 126,000 1.57
Granted 2000 Feb. 2005 745,000 1.28
-------
Total 921,000
=======
Options reserved for future grants 255,000
=======
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" (APB No. 25) and related
interpretations in accounting for its stock options because the alternative fair
value accounting provided under FASB Statement No. 123, "Accounting for Stock
Based Compensation," requires use of option valuation models that were not
developed for use in valuing stock options. Under APB No. 25, because the
exercise price of the Company's stock options equals
5. Capital and stock options (Cont'd)
----------------------------------
the market price of the underlying stock on the date of grant, no compensation
expense is recognized.
Upon exercise of options, the excess of the proceeds over the par value
of the shares issued is credited to capital in excess of par value. No charges
have been made against income in accounting for options during the three year
period ended June 30, 2001.
Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its stock options under the fair value method of that Statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model.
Option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. The assumptions used
in the 2001 and 2000 valuation model were: risk free interest rate - 6.65%,
expected life - 5 years, expected volatility - .419, expected dividend - 0. The
assumptions used in the 1999 valuation model were: risk free interest rate -
4.45%, expected life - 5 years, expected volatility - 1.0, expected dividend -0.
Because the Company's stock options have characteristics significantly different
from those of traded options, and because changes in the subjective input
assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its stock options.
For the purpose of pro forma disclosures, the estimated fair value of
the stock options is generally expensed in the year of grant since most of the
options are vested and immediately exercisable. The Company's pro forma
information follows:
Amount Per Share
------ ---------
Net income as reported - June 30, 1999 $ 945,000 $ .04
Stock option expense (200,000) (.01)
---------- -------
Pro forma net income - June 30, 1999 $ 745,000 $ .03
========= ======
Net income as reported - June 30, 2000 $1,490,000 $ .06
Stock option expense (336,000) (.01)
---------- -------
Pro forma net income - June 30, 2000 $1,154,000 $ .05
========== ======
Net income as reported - June 30, 2001 $1,072,000 $ .04
Stock option expense (69,000) -
----------- -------
Pro forma net income - June 30, 2001 $1,003,000 $ .04
=========== =======
6. Income taxes
------------
(a) Components of pretax income (loss) by geographic area (in thousands)
--------------------------------------------------------------------
are as follows:
---------------
Years ended June 30,
--------------------
2001 2000 1999
---- ---- ----
United States $(247) $(686) $(743)
Foreign 3,723 4,565 3,314
------ ------ ------
Total $3,476 $3,879 $2,571
====== ====== ======
(b) Reconciliation of the provision for income taxes (in thousands)
---------------------------------------------------------------
computed at the Australian statutory rate to the reported provision for
-----------------------------------------------------------------------
income taxes is as follows:
---------------------------
Years ended June 30,
--------------------
2001 2000 1999
---- ---- ----
Pretax consolidated income $3,476 $3,879 $2,571
MPC's losses not recognized 221 710 689
Permanent differences (471) (1,534) (1,256)
------ -------- --------
Book taxable income - Australia $3,226 $3,055 $2,004
====== ====== ======
Australian tax rate 34 % 36 % 36 %
==== ==== ====
Australian income tax $ 1,097 $ 1,100 $ 722
Tax (benefit) attributable to reconciliation of
year end deferred tax liability (131) (1,034) (879)
------ ------- ------
MPAL Australian tax (benefit) 966 66 (157)
MPC income tax 109 114 105
------ ------- -------
Consolidated income tax (benefit) $ 1,075 $ 180 $ (52)
======= ======= ========
Current income tax provision $ 1,682 $ 1,343 $ 225
Deferred income tax (benefit) (607) (1,163) (277)
-------- --------- ---------
Consolidated income tax provision (benefit) $ 1,075 $ 180 $ (52)
======= ======== =========
Effective tax rate 32 % 5 % (2 %)
==== === =====
The amounts of $3,029,000 and $4,255,000 in deferred income tax
liability at June 30, 2001 and June 30, 2000, respectively, relate primarily to
the deduction of acquisition and development costs which are capitalized for
financial statement purposes. The 2001 credit of $131,000 represents the tax
benefit of the reduction in the Australian income tax rate. The 2000 credit of
$1,034,000 represents the tax benefit of $378,000 of prior years' losses
previously not taken into account and the tax benefit of $656,000 from the
reduction in the Australian income tax rate. The 1999 credit of $879,000
represent the tax benefit of prior years' losses previously not taken into
account.
6. Income taxes (Cont'd)
---------------------
(c) United States
--- -------------
At June 30, 2001, the Company had approximately $15,184,000 and
$2,604,000 of net operating loss carry forwards for federal and state income tax
purposes, respectively, which are scheduled to expire periodically between the
years 2002 and 2021. Of this amount, MPC has federal loss carry forwards that
expire as follows: $912,000 in 2002, $209,000 in 2003, $915,000 in 2004,
$570,000 in 2005, $865,000 in 2007, $2,055,000 in 2008 and $408,000 in 2020.
MPAL's U.S. subsidiary has federal loss carry forwards that expire as follows:
$220,000 in 2005, $2,392,000 in 2006, $1,669,000 in 2010, $1,764,000 in 2011,
$2,855,000 in 2012, $229,000 in 2013, $96,000 in 2019 and $25,000 in 2021. The
Company also has approximately $603,000 of foreign tax credit carryovers, which
are scheduled to expire periodically between the years 2002 and 2006. MPC's
state loss carry forwards expire periodically between the years 2002 and 2006.
For financial reporting purposes, a valuation allowance has been recognized to
offset the deferred tax assets related to those carry forwards and other
deductible temporary differences. Significant components of the Company's
deferred tax assets were as follows:
June 30, June 30,
2001 2000
---- ----
Net operating losses $3,741,000 $3,889,000
Foreign tax credits 603,000 743,000
Interest 214,000 214,000
------- -------
Total deferred tax assets 4,558,000 4,846,000
Valuation allowance (4,558,000) (4,846,000)
----------- -----------
Net deferred tax assets $ - $ -
=========== ===========
7. Bank loan
---------
MPAL has a A.$10 million line of credit with an Australian bank at the
bank's prime rate of interest (5.2% at June 30, 2001, and 6.2% at June 30, 2000)
plus .5%. The line of credit, which is renewed annually, is unsecured and
expires December 31, 2001. In addition, there is an annual fee of A.$30,000
payable with respect to the line of credit. At June 30, 2001 and 2000, the line
of credit was not being utilized.
8. Related party and other transactions
------------------------------------
G&O'D INC, a firm that provides accounting and administrative services,
office facilities and support staff to MPC, was paid $38,900, $138,953 and
$235,028 in fees for fiscal years 2001, 2000 and 1999 respectively. James R.
Joyce, the President and Chief Financial Officer, is the owner of G&O'D INC.
Effective January 1, 2000, Mr. Joyce became a paid officer of MPC and received
an annual salary of $150,000 ($155,000 for 2001). Mr. Timothy L. Largay, a
director of the Company is a member of the law firm of Murtha Cullina LLP, which
firm was paid fees of $33,054, $29,943 and $44,860 for fiscal years 2001, 2000
and 1999 respectively. In addition, Mr. Benjamin W. Heath, a director until
December 2000, has overriding royalty interests which were granted between 1957
and 1968 on certain of the Company's oil and gas properties prior to any
discoveries. The following gross royalty amounts represent payments by all of
the owners of the fields, not just the Company's share. The payments to Mr.
Heath with respect to these royalties in fiscal 2000 were $47,270 and $44,469 in
fiscal 1999.
9. Leases
------
At June 30, 2001, future minimum rental payments applicable to MPAL's
noncancelable operating (office) lease were as follows:
Fiscal Year Amount
----------- ------
2002 $ 84,000
2003 99,000
2004 104,000
--------
Total $287,000
========
The information regarding the rental expense for all operating leases
is included in Note 13.
10. Pension Plan
MPAL maintains a defined benefit pension plan and contributes to the
plan at rates which (based on actuarial determination) are sufficient to meet
the cost of employees' retirement benefits. No employee contributions are
required. MPAL is committed to make up any shortfall in the plan's assets to
meet payments to employees as they become due. Plan participants are entitled to
defined benefits on normal retirement, death or disability.
The following table sets forth the actuarial present value of benefit
obligations and funded status for the MPAL pension plan:
June 30,
2001 2000
Change in Benefit Obligation
Benefit obligation at beginning of year $2,281,366 $2,834,084
Service cost 156,846 194,154
Interest cost 114,610 125,634
Actuarial gains and losses 79,053 285,652
Benefits paid (4,977) (784,168)
Taxes on contributions (25,474) (33,506)
Expenses (43,263) (40,303)
Foreign currency effect (330,277) (300,181)
----------- -------------
Benefit obligation at end of year $2,227,884 $2,281,366
========== ==========
Change in Plan Assets
Fair value of plan assets at beginning of year $2,812,230 $3,498,661
Actual return on plan assets 118,536 371,209
Contributions by employer 163,387 170,907
Benefits paid (4,977) (784,164)
Foreign currency effect (407,132) (370,570)
Other (expenses) (68,737) (73,809)
------------- -------------
Fair value of plan assets at end of year $2,613,307 $2,812,230
========== ==========
Reconciliation of Funded Status
Funded Status $ 385,422 $ 530,864
Unamortized transition asset (68,115) (106,195)
Unamortized loss 370,791 294,842
------------ ------------
Prepaid benefit costs $ 688,098 $ 719,511
=========== ===========
10. Pension Plan (Cont'd)
---------------------
The net pension expense for the MPAL pension plan was as follows:
Years ended June 30,
--------------------
2001 2000 1999
---- ---- ----
Service cost $156,846 $194,154 $207,386
Interest cost 114,610 125,634 137,739
Actual return on plan assets (158,893) (167,133) (209,038)
Net amortization and deferred items (22,705) (26,549) (29,694)
--------- -------- --------
Net pension cost $ 89,858 $126,106 $106,393
========= ======== ========
Plan contributions by MPAL $172,000 $180,000 $220,000
======== ======== ========
Significant assumptions used in determining pension cost and the
related obligations were as follows:
2001 2000 1999
---- ---- ----
Assumed discount rate 5.5% 6.0% 6.0%
Rate of increase in future compensation levels 4.0% 4.5% 4.5%
Expected long term rate of return on plan assets 6.0% 6.5% 6.0%
Australian exchange rate $.51 $.60 $.67
11. Segment information
-------------------
The Company has two reportable segments, MPC and its majority owned
subsidiary, MPAL. Although each company is in the same business, MPAL is also a
publicly held company with its shares traded on the Australian Stock Exchange.
MPAL issues separate audited consolidated financial statements and operates
independently of MPC.
Segment information (in thousands) for the Company's two operating
segments is as follows:
Years ended June 30,
--------------------
2001 2000 1999
---- ---- ----
Revenues:
MPC $ 1,185 $ 980 $ 895
MPAL 14,336 16,927 13,925
Elimination of intersegment dividend (621) (760) (705)
--------- ----------- -----------
Total consolidated revenues $14,900 $17,147 $14,115
======= ======= =======
11. Segment information (Cont'd)
----------------------------
Years ended June 30,
--------------------
2001 2000 1999
---- ---- ----
Interest income:
MPC $ 171 $ 174 $ 183
MPAL 720 643 534
----------- ----------- -----------
Total consolidated $ 891 $ 817 $ 717
========== ========== ==========
Net income (loss):
MPC $ 291 $ (64) $ (89)
MPAL 1,402 2,314 1,739
Elimination of intersegment dividend (621) (760) (705)
------------ ------------ ------------
Consolidated net income $ 1,072 $ 1,490 $ 945
========== ========== ==========
Assets:
MPC $ 17,297 $ 19,115 $ 19,804
MPAL 33,496 40,153 41,130
Equity elimination (13,295) (15,292) (15,788)
---------- ---------- ----------
Total consolidated assets $ 37,498 $ 43,976 $ 45,146
======== ======== ========
Other significant items:
Depletion, depreciation and amortization:
MPC $ - $ - $ -
MPAL 3,474 3,670 2,357
--------- --------- ---------
Total consolidated $ 3,474 $ 3,670 $ 2,357
======== ======== ========
Exploratory and dry hole costs:
MPC $ - $ 124 $ 50
MPAL 1,624 1,965 2,009
--------- --------- ---------
Total consolidated $ 1,624 $ 2,089 $ 2,059
======== ======== ========
Income tax expense (benefit):
MPC $ 109 $ 114 $ 105
MPAL 966 66 (157)
--------- ---------- ------------
Total consolidated $ 1,075 $ 180 $ (52)
======== ========= ==========
12. Geographic information
--- ----------------------
As of each of the stated dates, the Company's revenue, operating
income, net income or loss and identifiable assets (in thousands) were
geographically attributable as follows:
Years ended June 30,
--------------------
2001 2000 1999
---- ---- ----
Revenue:
Australia $14,336 $16,927 $13,924
United States 172 177 191
Canada 392 43 -
-------- ------- --------
$14,900 $17,147 $14,115
======= ======= =======
Operating income (loss):
Australia/New Zealand $ 3,029 $ 4,038 $ 3,144
Belize (7) (80) (351)
United States 365 94 (46)
-------- -------- ---------
3,387 4,052 2,747
Corporate overhead and interest,
net of other income (expense) 89 (173) (176)
-------- --------- --------
Consolidated operating income before
income taxes and minority interests $ 3,476 $ 3,879 $ 2,571
======== ======== ========
Net income (loss):
Australia $ 1,419 $ 2,332 $ 1,945
Belize (4) (42) (178)
United States (343) (800) (822)
-------- -------- ---------
$ 1,072 $ 1,490 $ 945
======== ======== =========
Identifiable assets:
Australia $33,498 $40,152 $41,130
United States - 100 169
------- -------- -------
33,498 40,252 41,299
Corporate assets 4,000 3,724 3,847
------- ------- -------
$37,498 $43,976 $45,146
======= ======= =======
Substantially all of MPAL's gas sales were to the Power and Water
Authority (PAWA) of the Northern Territory of Australia (NTA). Most of MPAL's
crude oil production was sold to the Mobil Port Stanvac Refinery near Adelaide.
13. Other financial information
---------------------------
Years ended June 30,
--------------------
2001 2000 1999
---- ---- ----
Costs and expenses - Other
Consultants $ 84,569 $ 91,524 $ 160,684
Directors' fees and expense 166,862 210,449 200,373
Insurance 163,666 166,004 189,765
Interest expense 16,531 19,093 19,259
Rent 183,780 193,098 167,947
Taxes 174,333 195,305 158,925
Travel 129,118 97,110 145,046
Other (net of overhead reimbursements) (202,082) (251,328) (277,496)
------------- ------------- -------------
$ 716,777 $ 721,255 $ 764,503
=========== =========== ===========
Royalty payments $ 1,326,455 $ 1,508,146 $ 1,224,149
========== ========== ==========
Interest payments $ 16,531 $ 19,093 $ 19,259
========== ========== ===========
Income tax payments $1,752,371 $ 239,750 $ 105,370
========== =========== ===========
14. Selected quarterly financial data (unaudited)
---------------------------------------------
The following is a summary (in thousands) except for per share amounts
of the quarterly results of operations for the years ended June 30, 2001 and
2000: See Management's Discussion and Analysis of Financial Condition and
Results of Operations.
2001 QTR 1 QTR 2 QTR 3 QTR 4
---- ----- ----- ----- -----
($) ($) ($) ($)
Total revenues 3,868 3,823 3,529 3,680
Costs and expenses (2,460) (3,574) (2,092) (3,298)
Income tax (provision) benefit (478) (114) (489) 6
Minority interests (538) (157) (527) (107)
------ ------ ------- --------
Net income (loss) 392 (22) 421 281
===== ====== ======= ========
Per share (basic & diluted) .01 - .02 .01
=== == === ===
Average number of shares outstanding 25,108 25,091 24,967 24,772
====== ====== ====== ======
2000 QTR 1 QTR 2 QTR 3 QTR 4
----
($) ($) ($) ($)
Total revenues 3,630 4,622 4,282 4,614
Costs and expenses (2,931) (4,209) (2,700) (3,428)
Income tax (provision) benefit (228) 531 (491) 8
Minority interests (328) (615) (594) (673)
------- ------ ------ ------
Net income (loss) 143 329 497 521
====== ===== ====== ======
Per share (basic & diluted) .01 .01 .02 .02
=== === === ===
Average number of shares outstanding 25,209 25,209 25,209 25,209
====== ====== ====== ======
MAGELLAN PETROLEUM CORPORATION
SUPPLEMENTARY OIL AND GAS INFORMATION
(unaudited)
June 30, 2001
The consolidated data presented herein include estimates which should
not be construed as being exact and verifiable quantities. The reserves may or
may not be recovered, and if recovered, the cash flows there from, and the costs
related thereto, could be more or less than the amounts used in estimating
future net cash flows. Moreover, estimates of proved reserves may increase or
decrease as a result of future operations and economic conditions, and any
production from these properties may commence earlier or later than anticipated.
Estimated net quantities of proved developed and proved oil and gas reserves:
-----------------------------------------------------------------------------
Natural Gas Oil
----------- ---
(Bcf) (1,000 Bbls)
-------------------- ------------
Proved Reserves: Australia Canada Australia
---------------- --------- ------ ---------
(*) (**)
June 30, 1998 85.167 - 915
Revision of previous estimates .011 - 20
Extensions and discoveries 1.258 - -
Production (5.898) - (205)
------- -----
June 30, 1999 80.538 - 730
Revision of previous estimates (3.902) - (62)
Extensions and discoveries - - -
Production (6.047) - (172)
------- -----
June 30, 2000 70.589 - 496
Revision of previous estimates (16.788) .724 175
Extensions and discoveries 3.963 - -
Production (5.595) (.137) (148)
------- ------ -----
June 30, 2001 52.169 .587 523
====== ====== ======
Proved Developed Reserves:
June 30, 1998 85.167 - 915
====== ===== ===
June 30, 1999 80.538 - 730
====== ===== ===
June 30, 2000 70.589 - 496
====== ===== ===
June 30, 2001 52.169 .587 496
====== ===== ===
-------------------
(*) The amount of proved reserves applicable to the Palm Valley and Mereenie
fields only reflects the amount of gas committed to specific contracts.
Approximately 48.7% of reserves are attributable to minority interests at
June 30, 2001 (48.8% for 2000 and 49.1% for 1999).
(**) On January 19, 2001, MPC's carried interest account in the Kotaneelee
reached undisputed payout status.
Costs of oil and gas activities (in thousands):
-----------------------------------------------
Australia/New Zealand
---------------------
Exploration Development
Fiscal Year Costs Costs
----------- ------ -----
2001 $ 1,622 $ 2,266
2000 2,001 2,080
1999 1,648 3,757
Americas
--------
Exploration Acquisition
Fiscal Year Costs Costs
----------- ------ -----
2001 $ 2 $ -
2000 17 -
1999 81 -
Capitalized costs subject to depletion, depreciation and amortization (DD&A) (in
--------------------------------------------------------------------------------
thousands):
-----------
June 30, 2001
-------------
Australia Americas Total
--------- -------- -----
Costs subject to DD&A $40,367 $ - $40,367
Costs not subject to DD&A - - -
Less accumulated DD&A (23,885) - (23,885)
--------- -------- ---------
Net capitalized costs $16,482 $ - $16,482
======= ======= =======
June 30, 2000
-------------
Australia Americas Total
--------- -------- -----
Costs subject to DD&A $ 45,666 $ - $ 45,666
Costs not subject to DD&A - 100 100
Less accumulated DD&A (24,025) - (24,025)
--------- -------- ---------
Net capitalized costs $ 21,641 $ 100 $ 21,741
======== ===== ========
Discounted future net cash flows:
---------------------------------
The following is the standardized measure of discounted (at 10%) future
net cash flows (in thousands) relating to proved oil and gas reserves during the
three years ended June 30, 2001. For the fiscal years 2000 and 1999, Australia
was the only cost center with proved reserves. At June 30, 2001, approximately
48.7% (48.8% for 2000 and 49.1% for 1999) of the reserves and the respective
discounted future net cash flows are attributable to minority interests.
Australia
---------
2001 2000 1999
---- ---- ----
Future cash inflows $90,984 $120,385 $144,116
Future production costs (15,339) (16,696) (17,917)
Future development costs (9,421) (7,896) -
Future income tax expense (17,740) (26,482) (42,288)
-------- -------- ----------
Future net cash flows 48,484 69,311 83,911
10% annual discount for estimating timing of cash flows (16,837) (25,261) (30,590)
-------- -------- ----------
Standardized measures of discounted future net cash flows $ 31,647 $ 44,050 $ 53,321
======== ======== ========
Canada
------
2001 2000 1999
---- ---- ----
Future cash inflows $1,831 None None
Future production costs (444)
Future development costs (40)
Future income tax expense (337)
-----
Future net cash flows 1,010
10% annual discount for estimating timing of cash flows (134)
-----
Standardized measures of discounted future net cash flows $ 876
=====
Total
-----
2001 2000 1999
---- ---- ----
Future cash inflows $92,815 $120,385 $144,116
Future production costs (15,783) (16,696) (17,917)
Future development costs (9,461) (7,896) -
Future income tax expense (18,077) (26,482) (42,288)
-------- -------- ----------
Future net cash flows 49,494 69,311 83,911
10% annual discount for estimating timing of cash flows (16,971) (25,261) (30,590)
-------- -------- ----------
Standardized measures of discounted future net cash flows $ 32,523 $ 44,050 $ 53,321
======== ======== ========
The following are the principal sources of changes in the above
standardized measure of discounted future net cash flows (in thousands):
2001 2000 1999
---- ---- ----
Net change in prices and production costs $ 725 $ 1,123 $ 952
Extensions and discoveries 4,895 - 1,123
Revision of previous quantity estimates (9,997) 929 (62)
Changes in estimated future development costs (3,968) (8,831) -
Sales and transfers of oil and gas produced (7,254) (7,990) (6,033)
Previously estimated development cost incurred during the period 2,266 - 893
Accretion of discount 4,134 4,372 3,966
Net change in income taxes 3,028 6,344 386
Net change in exchange rate (5,356) (5,218) 3,844
------- ------- --------
$(11,527) $(9,271) $ 5,069
========= ======== =======
Additional information regarding discounted future net cash flows:
------------------------------------------------------------------
Australia
Reserves - Natural Gas
----------------------
Future net cash flows from net proved gas reserves in Australia were
based on MPAL's share of reserves in the Palm Valley and Mereenie fields which
have been limited to the quantities of gas committed to specific contracts.
Reserves and Costs - Oil
------------------------
At June 30, 2001, future net cash flows from the net proved oil
reserves in Australia were calculated by the Company. Estimated future
production and development costs were based on current costs and rates for each
of the three years ended at June 30, 2001. All of the crude oil reserves are
developed reserves. Undeveloped proved reserves have not been estimated since
there are only tentative plans to drill additional wells.
Income taxes
------------
Future Australian income tax expense applicable to the future net cash
flows has been reduced by the tax effect of approximately A.$13,892,000,
A.$13,248,000, and A.$13,081,000 in unrecouped capital expenditures at June 30,
2001, 2000 and 1999, respectively. The tax rate in computing Australian future
income tax expense was 30% for the fiscal year 2001 and 34% for 2000 and 1999.
Canada
------
For financial statements purposes in fiscal 1987 and 1988, MPC wrote
down its costs relating to the Kotaneelee gas field to a nominal value because
of the uncertainty as to the date when sales of Kotaneelee gas might begin and
the immateriality of the carrying value of the investment. On January 19, 2001,
MPC's carried interest account in the Kotaneelee gas field reached undisputed
payout status. During the 4th quarter of the fiscal year 2001, MPC began
accruing its share of Kotaneelee net proceeds as income.
Reserves and Costs
------------------
Future net cash flows from net proved gas reserves in Canada were based
on MPC's share of reserves in the Kotaneelee gas field which was prepared by
independent petroleum consultants, Paddock Lindstrom & Associates Ltd., Calgary,
Canada. The estimates were based on the selling price of gas Can. $4.70 at June
30, 2001 and estimated future production and development costs at June 30, 2001.
Results of Operations
---------------------
The following are the Company's results of operations (in thousands)
for the oil and gas producing activities during the three years ended June 30,
2001:
Americas Australia/New Zealand
-------- ---------------------
2001 2000 1999 2001 2000 1999
Revenues:
Oil sales $ - $ 2 $ 7 $4,639 $4,634 $ 2,566
Gas sales 392 43 - 8,144 10,466 9,640
Other production income - - - 835 1,225 1,180
-------- -------- --------- ------ ------ -------
Total revenues 392 45 7 13,618 16,325 13,386
-------- -------- --------- ------ ------ -------
Costs:
Production costs 2 2 14 3,490 4,490 4,358
Depletion, exploratory and dry
hole costs 2 88 410 4,973 5,264 3,905
----- ------ -------- ----- ----- -------
Total costs 4 90 424 8,463 9,754 8,263
----- ------ -------- ----- ----- -------
Income (loss) before taxes and
minority interest 388 (45) (417) 5,155 6,571 5,123
Income tax provision* (133) - - (1,753) (2,365) (1,844)
----- ------ -------- ------- ------- -------
Income before minority interests 255 (46) (417) 3,402 4,206 3,279
Minority interests** 1 17 177 (1,657) (2,054) (1,610)
----- ------ -------- ------- ------- --------
Net income (loss) from operations $ 256 $ (62) $ (240) $ 1,745 $ 2,154 $ 1,669
====== ======== ======= ======= ======= =======
Depletion per unit of production - - - A.$5.33 A.$4.27 A.$2.73
====== ======== ======= ======= ======= =======
* Income tax provision 34% in 2001,36 % in 2000 and 36% in 1999.
**Minority interests 48.7% in 2001, 48.8 % in 2000 and 49.1% in 1999.
Item 9. Changes in and Disagreements with Accountants on
------- ------------------------------------------------
Accounting and Financial Disclosure.
------------------------------------
None.
PART III
For information concerning Item 10 - Directors and Executive Officers
of the Company, Item 11 - Executive Compensation, Item 12 - Security Ownership
of Certain Beneficial Owners and Management and Item 13 - Certain Relationships
and Related Transactions, see the Proxy Statement of Magellan Petroleum
Corporation relative to the Annual Meeting of Stockholders for the fiscal year
ended June 30, 2001, to be filed with the Securities and Exchange Commission,
which information is incorporated herein by reference. For information
concerning the Executive Officers of the Company, see Part I.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
-------- ---------------------------------------------------------------
(a) (1) Financial Statements.
--------------------
The financial statements listed below and included
under Item 8 are filed as part of this report.
Page
reference
Report of Independent Auditors 35
Consolidated balance sheets as of June 30, 2001 and 2000 36
Consolidated statements of income for each of the three years
in the period ended June 30, 2001 37
Consolidated statements of changes in stockholders' equity for each
of the three years in the period ended June 30, 2001 38
Consolidated statements of cash flows for each of the three years
in the period ended June 30, 2001 39
Notes to consolidated financial statements 40-64
Supplementary oil and gas information (unaudited) 65-69
(2) Financial Statement Schedules.
-----------------------------
All schedules have been omitted since the required
information is not present or not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the consolidated financial statements and the notes thereto.
(b) Reports on Form 8-K.
-------------------
On May 24, 2001, the Company filed a Current Report on Form
8-K to report that the Kotaneelee gas field in Canada reached undisputed payout
status on January 19, 2001.
(c) Exhibits.
--------
The following exhibits are filed as part of this report:
Item Number
-----------
2. Plan of acquisition, reorganization, arrangement,
--------------------------------------------------
liquidation or succession.
--------------------------
None.
3. Articles of Incorporation and By-Laws.
-------------------------------------
(a) Restated Certificate of Incorporation as filed on
May 4, 1987 with the State of Delaware and Amendment
of Article Twelfth as filed on February 12, 1988 with
the State of Delaware filed as exhibit 4(b) to Form
S-8 Registration Statement, filed on January 14,
1999, are incorporated herein by reference.
(b) Copy of the By-Laws, as amended filed as exhibit
4(c) to Form S-8 Registration Statement, filed on
January 14, 1999 is incorporated herein by reference.
4. Instruments defining the rights of security holders,
-----------------------------------------------------
including indentures.
---------------------
None.
9. Voting Trust Agreement.
----------------------
None.
10. Material contracts.
-------------------
(a) Petroleum Lease No. 4 dated November 18, 1981
granted by the Northern Territory of Australia to
United Canso Oil & Gas Co. (N.T.) Pty Ltd. filed as
Exhibit 10(a) to Annual Report on Form 10-K for the
year ended June 30, 1999 is incorporated herein by
reference.
(b) Petroleum Lease No. 5 dated November 18, 1981
granted by the Northern Territory of Australia to
Magellan Petroleum (N.T.) Pty. Ltd. filed as
Exhibit 10(b) to Annual Report on Form 10-K for the
year ended June 30, 1999 is incorporated herein by
reference.
(c) Gas Sales Agreement between The Palm Valley
Producers and The Northern Territory Electricity
Commission dated November 11, 1981 filed as Exhibit
10(c) to Annual Report on Form 10-K for the year
ended June 30, 1999 is incorporated herein by
reference.
.
(d) Palm Valley Petroleum Lease (OL3) dated November
9, 1982 filed as Exhibit 10(d) to Annual Report on
Form 10-K for the year ended June 30, 1999 is
incorporated herein by reference.
(e) Agreements relating to Kotaneelee.
(1) Copy of Agreement dated May 28, 1959
between the Company et al and Home Oil Company
Limited et al and Signal Oil and Gas Company
filed as Exhibit 10(e) to Annual Report on
Form 10-K for the year ended June 30, 1999 is
incorporated herein by reference.
.
(2) Copies of Supplementary Documents to May
28, 1959 Agreement (see (e)(1) above), dated
June 24, 1959, consisting of Guarantee by Home
Oil Company Limited and Pipeline Promotion
Agreement filed as Exhibit 10(e) to Annual
Report on Form 10-K for the year ended June
30, 1999 is incorporated herein by reference.
.
(3) Copy of Modification to Agreement dated
May 28, 1959 (see (e)(1) above), made as of
January 31, 1961. Filed as Exhibit 10(e) to
Annual Report on Form 10-K for the year ended
June 30, 1999 is incorporated herein by
reference.
.
(4) Copy of Letter Agreement dated February 1,
1977 between the Company and Columbia Gas
Development of Canada, Ltd. for operation of
the Kotaneelee gas field filed as Exhibit
10(e) to Annual Report on Form 10-K for the
year ended June 30, 1999 is incorporated
herein by reference.
.
(f) Palm Valley Operating Agreement dated April 2,
1985 between Magellan Petroleum (N.T.) Pty. Ltd.,
C. D. Resources Pty. Ltd., Farmout Drillers N.L.,
Canso Resources Limited, International Oil
Proprietary, Pancontinental Petroleum Limited,
I.E.D.C. Australia Pty. Ltd., Southern Alloys
Ventures Pty. Limited and Amadeus Oil N.L. filed as
Exhibit 10(f) to Annual Report on Form 10-K for the
year ended June 30, 1999 is incorporated herein by
reference.
(g)Mereenie Operating Agreement dated April 27,
1984 between Magellan Petroleum (N.T.) Pty., United
Oil & Gas Co. (N.T.) Pty. Ltd., Canso Resources
Limited, Oilmin (N.T.) Pty. Ltd., Krewliff
Investments Pty. Ltd., Transoil (N.T.) Pty. Ltd. and
Farmout Drillers NL and Amendment of October 3, 1984
to the above agreement filed as Exhibit 10(g) to
Annual Report on Form 10-K for the year ended June
30, 1999 is incorporated herein by reference.
(h) Palm Valley Gas Purchase Agreement dated June
28, 1985 between Magellan Petroleum (N.T.) Pty.
Ltd., C.D. Resources Pty. Ltd., Farmout Drillers
N.L., Canso Resources Limited, International Oil
Proprietary, Pancontinental Petroleum Limited, IEDC
Australia Pty Limited, Amadeus Oil N.L., Southern
Alloy Venture Pty. Limited and Gasgo Pty. Limited.
Also included are the Guarantee of the Northern
Territory of Australia dated June 28, 1985 and
Certification letter dated June 28, 1985 that the
Guarantee is binding. All of the above were filed
as Exhibit 10(h) to Annual Report on Form 10-K for
the year ended June 30, 1999 and are incorporated
herein by reference.
(i) Mereenie Gas Purchase Agreement dated June
28, 1985 between Magellan Petroleum (N.T.) Pty.
Ltd., United Oil & Gas Co. (N.T.) Pty. Ltd., Canso
Resources Limited, Moonie Oil N.L., Petromin No
Liability, Transoil No Liability, Farmout Drillers
N.L., Gasgo Pty. Limited, The Moonie Oil Company
Limited, Magellan Petroleum Australia Limited and
Flinders Petroleum N.L. Also included is the
Guarantee of the Northern Territory of Australia
dated June 28, 1985. All of the above were filed as
Exhibit 10(i) to Annual Report on Form 10-K for the
year ended June 30, 1999 and are incorporated herein
by reference.
.
(j) Agreements dated June 28, 1985 relating to
Amadeus Basin -Darwin Pipeline which include Deed of
Trust Amadeus Gas Trust, Undertaking by the Northern
Territory Electric Commission and Undertaking from
the Northern Territory Gas Pty Ltd. filed as Exhibit
10(j) to Annual Report on Form 10-K for the year
ended June 30, 1999 is incorporated herein by
reference.
(k) Agreement between the Mereenie Producers and the
Palm Valley Producers dated June 28, 1985 filed as
Exhibit 10(k) to Annual Report on Form 10-K for the
year ended June 30, 1999 is incorporated herein by
reference.
.
(l) Form of Agreement pursuant to Article SIXTEENTH
of the Company's Certificate of Incorporation and the
applicable By-Law to indemnify the Company's
directors and officers filed as Exhibit 10(l) to
Annual Report on Form 10-K for the year ended June
30, 1999 is incorporated herein by reference.
.
(m) 1998 Stock Option Plan, filed as exhibit 4(a) to
Form S-8 Registration Statement on January 14, 1999,
is incorporated filed as Exhibit 10(m) to Annual
Report on Form 10-K for the year ended June 30, 1999
is incorporated herein by reference.
(n) Employment Agreement between James R. Joyce
and Magellan Petroleum Corporation dated
January 1, 2000 is filed herein.
11. Statement re computation of per share earnings.
-----------------------------------------------
Not applicable.
12. Statement re computation of ratios.
-----------------------------------
None.
13. Annual report to security holders, Form 10-Q or
-----------------------------------------------
quarterly report to security holders.
-------------------------------------
Not applicable.
16. Letter re change in certifying accountant.
-----------------------------------------
None.
18. Letter re change in accounting principles.
------------------------------------------
None.
21. Subsidiaries of the registrant.
------------------------------
Filed herein.
22. Published report regarding matters submitted to vote
----------------------------------------------------
of security holders.
-------------------
Not applicable.
23. Consent of experts and counsel.
------------------------------
1 Consent of Ernst & Young LLP filed herein
2 Consent of Paddock Lindstrom & Associates, Ltd.
filed herein.
24. Power of attorney.
-----------------
None.
99. Additional Exhibits.
-------------------
None.
(d) Financial Statement Schedules.
-----------------------------
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MAGELLAN PETROLEUM CORPORATION
(Registrant)
/s/ James R. Joyce
----------------------------------------
James R. Joyce, President
Dated: September 21, 2001
------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ Donald V. Basso /s/ James R. Joyce
---------------------------------- -------------------------------------------
Donald V. Basso James R. Joyce
Director Director, President and Chief Executive
Officer, Chief Financial and Accounting
Officer
Dated: September 21, 2001 Dated: September 21, 2001
-------------------------- ------------------
/s/ Hedley Howard /s/ Walter McCann
----------------------------------- -------------------------------------------
Hedley Howard Walter McCann
Director Director
Dated: September 21, 2001 Dated: September 21, 2001
-------------------------- ------------------------------------
/s/ Timothy L. Largay /s/ Ronald P. Pettirossi
---------------------------------- -------------------------------------------
Timothy L. Largay Ronald P. Pettirossi
Director Director
Dated: September 21, 2001 Dated: September 21, 2001
-------------------------- ------------------------------------
INDEX TO EXHIBITS
10. (n) Employment Agreement between James R. Joyce and
Magellan Petroleum Corporation dated January 1, 2000.
21. Subsidiaries of the Registrant.
23. 1 Consent of Independent Auditors.
2 Paddock Lindstrom & Associates, Ltd.