CKX

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended June 30, 2001, for Calcasieu Real Estate & Oil Co., Inc. (Note: The request metadata referenced "CKX Lands, Inc.", but the filing text identifies the registrant as Calcasieu Real Estate & Oil Co., Inc.). The company operates primarily in oil and gas production, timber, and agriculture. As of June 30, 2001, 1,955,044 shares of common stock were issued and outstanding.

Key Financial Metrics

Revenue Breakdown (Six Months 2001): Oil and gas income ($687,558), Timber income ($62,960), and Agricultural income ($71,024).

Material Changes vs. Prior Period

• Profit Decline: Net income for the six months ended June 30, 2001, decreased by 32.9% compared to the same period in 2000. Second-quarter net income dropped 46.8% year-over-year.
• Revenue Drivers: The decline is primarily attributed to reduced production from the North English Bayou Field due to depletion and lower timber income due to the timing of cuttings.
• Expense Increases: While most expenses decreased, General and Administrative (G&A) expenses rose 49.4% (from $100,948 to $150,777). Approximately 71.8% of this increase ($35,777) was due to legal expenses defending mineral ownership on a specific property.
• Liquidity: Cash and cash equivalents increased by $463,570 to $1.41 million, driven by operating cash flows and the maturity of securities available for sale ($491,833).

Outlook, Risks, and Management Commentary

• New Discoveries: In July 2001, three new oil and gas discoveries were completed in Beauregard, Calcasieu, and Cameron Parishes. The company holds a small royalty interest and expects income to begin in the third and fourth quarters of 2001. However, management states projected income is unknown and will not immediately offset depletion in the North English Bayou Field.
• Acquisitions: In July 2001, the company purchased 320 acres of timberland for $228,910. Minerals were reserved by sellers, and no mineral activity is currently present on the property.
• Liquidity Outlook: Management believes current revenues are sufficient to meet existing and anticipated future needs and does not anticipate incurring material additional liabilities.
• Risks: Primary risks include the depletion of existing oil fields and the timing of timber harvests affecting revenue recognition.

Investor Verification Checklist

• Verify the extent of depletion in the North English Bayou Field and its impact on future production volumes.
• Confirm the royalty interest percentage and expected production start dates for the three new wells discovered in July 2001.
• Review the status of the legal proceedings regarding mineral ownership that drove the 49.4% increase in G&A expenses.
• Assess the yield and growth potential of the newly acquired 320 acres of timberland.
• Monitor the maturity schedule of securities available for sale, which contributed significantly to cash flow in the current period.