Business Context and Reporting Period
Company: Mexco Energy Corp (Colorado Corporation)
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Quarter and nine months ended December 31, 1995
Business Overview: The company is engaged in oil and gas production, utilizing the full cost method for accounting. Operations include drilling, completion, and plugging of wells in Texas counties including Hockley, Andrews, Garza, Haskell, and Stonewall.
Key Financial Metrics
| Metric (Nine Months Ended Dec 31, 1995) | Value |
|---|---|
| Gross Revenues (Oil & Gas) | $524,133 |
| Net Income | $98,000 |
| Net Income Per Share | $0.07 |
| Net Cash Provided by Operations | $215,360 |
| Capital Expenditures | ($479,800) |
| Cash and Cash Equivalents (Ending) | $458,034 |
| Total Assets | $2,504,574 |
| Total Liabilities | $62,035 |
| Working Capital | $524,924 |
Note: No long-term debt is reported on the balance sheet. The company has an accumulated deficit of $244,504.
Material Changes vs. Prior Period
- Revenue Growth: Gross revenues from oil and gas production increased 43% ($157,547) for the nine-month period compared to the prior year, driven by increased production from new wells.
- Profitability: Net income for the nine months ended Dec 31, 1995, was $98,000, a significant improvement from $40,552 in the same period of 1994. The company turned a quarterly loss of $476 in Q3 1994 into a profit of $31,502 in Q3 1995.
- Cost Increases: Production costs rose 29% ($45,790) and Depreciation, Depletion, and Amortization (DD&A) increased 20% ($30,238) due to the addition of new properties.
- Liquidity: Working capital increased 130% to $524,924. Cash balances grew by $237,060, primarily due to a private placement of stock.
Guidance, Outlook, and Management Commentary
Capital Raising: On July 28, 1995, the company completed a private placement of 250,000 shares of restricted common stock for total proceeds of $500,000. This financing was a primary driver for the increase in cash and working capital.
Operational Activity:
- Acquisitions: Purchased royalty and leasehold interests in Hockley County and mineral interests in Andrews County for $56,352.
- Drilling: Prepaid $56,375 for the drilling and completion of a well in Garza County (0.275 working interest).
- Divestitures: Sold one well in Stonewall County for $1,500 and plugged/abandoned nine wells in Haskell County.
Risks and Contingencies:
- Management states that results for the three and nine-month periods are not necessarily indicative of full-year results.
- The filing does not specifically identify the effects of inflation on operations.
- Accounts receivable increased due to plugging expenses charged to working interest owners at period end.
Investor Verification Checklist
- Production Volumes: Verify the specific volume increases in oil and gas production that drove the 43% revenue growth.
- Well Economics: Assess the expected return on the $56,375 prepaid drilling costs in Garza County and the $56,352 acquisition costs.
- Capital Needs: Determine if the $500,000 raised in the private placement is sufficient to fund future capital expenditures, given the $479,800 spent in the first nine months.
- Receivables Quality: Review the collectability of the increased accounts receivable related to plugging expenses charged to third-party working interest owners.
- Share Dilution: Note the increase in outstanding shares from 1,173,229 (prior year average) to 1,423,229 (current period), impacting per-share metrics.