Business Context and Reporting Period
Company: Calcasieu Real Estate & Oil Co., Inc. (Note: Input metadata referenced "CKX LANDS, INC." but the filing text identifies the registrant as Calcasieu Real Estate & Oil Co., Inc.)
Reporting Period: Fiscal year ended December 31, 1996.
Business Overview: The Company is a Louisiana-based entity incorporated in 1930, primarily engaged in the ownership and preservation of real estate, mineral interests, and timberlands. Operations are concentrated in southwestern and central Louisiana. The Company generates income through oil and gas royalties/working interests, agricultural leasing, and timber sales. It employs five part-time personnel and has no union contracts or pension plans.
Key Financial Metrics
| Metric | 1996 | 1995 | 1994 |
|---|---|---|---|
| Total Revenues | $672,294 | $812,137 | $378,982 |
| Net Income | $805,090 | $348,781 | $108,104 |
| Earnings Per Share (Diluted) | $0.40 | $0.17 | $0.05 |
| Operating Cash Flow | $170,451 | $681,826 | ($1,903) |
| Total Assets | $3,445,721 | $3,018,542 | $2,587,082 |
| Long-Term Debt | $0 | $93,108 (Current) | $95,000 |
| Cash and Equivalents | $313,463 | $289,180 | $36,544 |
Segment Performance (1996): Oil and gas properties generated $453,862 in revenue; Timber properties generated $114,741; Agricultural properties generated $67,437.
Material Changes vs. Prior Period
- Profitability Surge: Net income increased 131% to $805,090 in 1996 compared to $348,781 in 1995. This was primarily driven by a one-time realized gain of approximately $751,417 from the sale of CM Bank stock.
- Revenue Decline: Total revenues decreased 17% to $672,294 from $812,137 in 1995. This decline was largely due to a significant drop in timber income (from $466,757 in 1995 to $114,741 in 1996).
- Oil and Gas Operations: While production volumes decreased (Gas down 25%, Oil down 25%), average sales prices increased significantly (Gas up 55% to $2.81/MCF; Oil up 20% to $20.16/Bbl). Income from mineral leases and bonuses increased 536%.
- Debt Elimination: The Company paid off its remaining long-term debt of $93,108 in April 1996, resulting in zero long-term debt on the balance sheet.
- Exploration Costs: The Company incurred no dry hole costs in 1996, compared to $2,843 in 1995 and $68,657 in 1994.
Guidance, Outlook, and Risks
- Outlook: Management believes current revenues are sufficient to meet capital needs. Future long-term trends depend on the ability to find new production to replace the depletion of existing mineral reserves.
- Legal Contingency: The Company is a party to a lawsuit to recover disputed royalties. No estimate can be made regarding the timing or amount of potential recovery.
- Customer Concentration: The Company relies heavily on a few customers. In 1996, Riceland Petroleum Company (29%), Woodlawn (23%), and Coastal (15%) accounted for 67% of total revenues.
- Liquidity: The Company maintains cash balances in a single financial institution, with amounts exceeding FDIC insurance limits ($100,000).
- Market Liquidity: Trading in the Company's common stock is described as "limited and sporadic" with no readily established market value.
Investor Verification Checklist
- One-Time Gains: Verify the sustainability of earnings by excluding the $751,417 gain on the sale of CM Bank stock, which inflated 1996 net income.
- Timber Volatility: Assess the impact of the sharp decline in timber revenue (down ~75% from 1995) on future cash flow projections.
- Reserve Depletion: Confirm the status of oil and gas reserves, as the Company notes it cannot compute discounted future cash flows due to lack of reserve data for acquired interests.
- Customer Dependency: Evaluate the risk associated with the top three customers representing two-thirds of total revenue.
- Legal Exposure: Monitor the status of the disputed royalty lawsuit for potential material impact.