Business Context and Reporting Period
MEXCO ENERGY CORP, a Colorado corporation, filed this Form 10-Q for the quarterly period ended June 30, 1996. The company is engaged in oil and gas exploration and production, primarily operating in the Lazy JL Field in Garza County, Texas. The financial statements are unaudited but include all normal recurring adjustments.
Key Financial Metrics
| Metric | Q2 1996 | Q2 1995 |
|---|---|---|
| Total Revenues | $197,410 | $122,651 |
| Net Income | $69,800 | $45,445 |
| Net Income Per Share | $0.05 | $0.04 |
| Net Cash from Operations | $173,471 | $110,655 |
| Cash and Equivalents (End of Period) | $250,458 | $162,218 |
| Total Assets | $2,819,377 | N/A |
| Total Liabilities | $204,432 | N/A |
| Capital Expenditures | ($95,125) | ($169,411) |
Margins: Net income margin for the quarter was approximately 35.4% ($69,800 / $197,410). The filing does not explicitly state gross margin percentages, though production costs were $70,856 against gross revenues of $267,014.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased by $74,759 (61%) compared to the same quarter in 1995. Gross revenues from oil and gas production rose $95,290 (55%).
- Price Increases: Average oil prices rose to $20.77 per barrel from $18.26, and gas prices increased to $2.12 per MCF from $1.23.
- Expense Increases: Production costs increased 37% due to lease operating expenses from new properties. Depreciation, depletion, and amortization (DD&A) rose 39% to $70,245. General and administrative costs increased 37% to $35,160.
- Profitability: Net income increased 54% to $69,800, driven by higher production volumes and commodity prices.
- Working Capital: Working capital decreased by $34,053 compared to March 31, 1996, primarily due to drilling activities and property purchases.
Outlook, Commentary, and Risks
Management Commentary: The company attributes revenue growth to increased numbers of wells, acquisitions, and higher commodity prices. During the quarter, the company participated in drilling one well in the Lazy JL Field. In June 1996, the company purchased an additional 2.5% working interest in the Lazy JL Field, and in July 1996, acquired a 30% working interest in adjacent non-producing leases.
Liquidity: Cash and cash equivalents increased by $78,346 during the quarter, reflecting strong operating cash flows ($173,471) which exceeded capital expenditures ($95,125).
Risks and Contingencies: The filing notes that management cannot specifically identify the effects of inflation on operations. The company's operations are concentrated in the Lazy JL Field, implying geographic and asset concentration risk. No specific legal contingencies or unusual items were disclosed in the text provided.
Investor Verification Checklist
- Verify the specific acreage and well count associated with the June and July 1996 acquisitions to assess future production potential.
- Confirm the status of the one well drilled during the quarter (Lazy JL Field) and its expected contribution to production.
- Review the composition of the $95,125 in capital expenditures to distinguish between maintenance and expansion drilling.
- Monitor the trend of working capital, which decreased in the quarter despite strong cash flow, to ensure liquidity remains sufficient for ongoing operations.
- Validate the weighted average shares outstanding (1,423,229) against the balance sheet equity section to confirm no dilution occurred during the period.