SPINDLETOP OIL & GAS CO. Results of Operations
WARNING CONCERNING FORWARD LOOKING STATEMENTS
The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report.
This Report on Form 10-Q may contain forward-looking statements within the meaning of the federal securities laws, principally, but not only, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations." We caution investors that any forward-looking statements in this report, or which management may make orally or in writing from time to time, are based on management's beliefs and on assumptions made by, and information currently available to, management. When used, the words "anticipate," "believe," "expect," "intend," "may," "might," "plan," "estimate," "project," "should," "will," "result" and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties, and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties, and factors, that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated, or projected. We caution you that while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.
Some of the risks and uncertainties that may cause our actual results,
performance, or achievements to differ materially from those expressed or
implied by forward-looking statements include, among others, the factors listed
and described at Item 1A "Risk Factors" in the Company's Annual Report on Form
10-K, which investors should review. There have been changes to the risk factors
previously described in the Company's Form 10-K. for the fiscal year ended
The COVID-19 pandemic and the measures being taken to address and limit the spread of the virus adversely affected the economies and financial markets of the world, resulting in an economic downturn beginning in early 2020 that negatively impacted global demand and prices for crude oil and condensate, natural gas liquids (NGLs) and natural gas. The effects of COVID-19 mitigation efforts, including the wide availability of vaccines, combined with the waning intensity of the pandemic, have resulted in increased demand and prices for crude oil and condensate. In the first nine months of 2021, demand and prices for crude oil and condensate returned to near pre-pandemic levels. Uncertainty related to variants of the COVID-19 virus may cause a fluctuation in demand and prices for crude oil and condensate for the remainder of 2021 and beyond.
In early 2021, the members of the
Other uncertainties regarding the global economic and financial environment could lead to an extended national or global economic recession. A slowdown in economic activity caused by a recession would likely reduce national and worldwide demand for oil and natural gas and result in lower commodity prices for long periods of time. Costs of exploration, development and production have not yet adjusted to current economic conditions, or in proportion to the significant reduction in product prices. Prolonged, substantial decreases in oil and natural gas prices would likely have a material adverse effect on the Company's business, financial condition, and results of operations, and could further limit the Company's access to liquidity and credit and could hinder its ability to satisfy its capital requirements.
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--------------------------------------------------------------------------------In the past several years, capital and credit markets have experienced volatility and disruption. Given the levels of market volatility and disruption, the availability of funds from those markets may diminish substantially. Further, arising from concerns about the stability of financial markets generally and the solvency of borrowers specifically, the cost of accessing the credit markets has increased as many lenders have raised interest rates, enacted tighter lending standards, or altogether ceased to provide funding to borrowers.
Due to these potential capital and credit market conditions, the Company cannot be certain that funding will be available in amounts or on terms acceptable to the Company. The Company is evaluating whether current cash balances and cash flow from operations alone would be sufficient to provide working capital to fully fund the Company's operations. Accordingly, the Company is evaluating alternatives, such as joint ventures with third parties, or sales of interest in one or more of its properties. Such transactions, if undertaken, could result in a reduction in the Company's operating interests or require the Company to relinquish the right to operate the property. There can be no assurance that any such transactions can be completed or that such transactions will satisfy the Company's operating capital requirements. If the Company is not successful in obtaining sufficient funding or completing an alternative transaction on a timely basis on terms acceptable to the Company, the Company would be required to curtail its expenditures or restructure its operations, and the Company would be unable to continue its exploration, drilling, and recompletion program, any of which would have a material adverse effect on its business, financial condition, and results of operations.
There could be adverse legislation which if passed, would significantly curtail our ability to attract investors and raise capital. Proposed changes in the Federal income tax laws which would eliminate or reduce the percentage depletion deduction and the deduction for intangible drilling and development costs for small independent producers, will significantly reduce the investment capital available to those in the industry as well as our Company. Lengthening the time to expense seismic costs will also have an adverse effect on our ability to explore and find new reserves.
Other factors that may affect the demand for oil and natural gas, and therefore impact our results, include technological improvements in energy efficiency; seasonal weather patterns; increased competitiveness of, or government policy support for, alternative energy sources; changes in technology that alter fuel choices, such as technological advances in energy storage that make wind and solar more competitive for power generation; changes in consumer preferences for our products, including consumer demand for alternative fueled or electric transportation or alternatives to plastic products; and broad-based changes in personal income levels.
Commodity prices and margins also vary depending on a number of factors affecting supply. For example, increased supply from the development of new oil and gas supply sources and technologies to enhance recovery from existing sources tend to reduce commodity prices to the extent such supply increases are not offset by commensurate growth in demand.
Other sections of this report may also include suggested factors that could
adversely affect our business and financial performance. Moreover, we operate in
a very competitive and rapidly changing environment. New risks may emerge from
time to time, and it is not possible for management to predict all such matters;
nor can we assess the impact of all such matters on our business or the extent
to which any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking statements. Given
these uncertainties, investors should not place undue reliance on
forward-looking statements as a prediction of actual results. Investors should
also refer to our quarterly reports on Form 10-Q for future periods and current
reports on Form 8-K as we file them with the
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--------------------------------------------------------------------------------Results of Operations
Nine months ended
Oil and gas revenues for the first nine months of 2021 were
Oil sales for the first nine months of 2021 were approximately
Average oil prices received were
Natural gas revenue for the first nine months of 2021 was
Average gross natural gas prices received were
In general, revenues from oil and gas producing operations experienced a
significant increase for the nine months ended 2021 compared to the same period
in 2020. These increases result in part from increased oil and gas prices, as
well as production increases. A significant number of both operated wells and
non-operated wells were shut-in due to historic low oil and gas prices and most
of these wells were returned to production and producing as of
Revenues from lease operations were
Revenues from gas gathering, compression and equipment rental for the first nine
months of 2021 were
Real estate revenue was approximately
Interest income was
Other revenues for the first nine months of 2021 were
Lease operating expenses in the first nine months of 2021 were
Production taxes, gathering and marketing expenses in the first nine months of
2021 were approximately
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Pipeline and rental expenses for the first nine months of 2021 were
Real estate expenses in the first nine months of 2021 were approximately
.
Depreciation, depletion, and amortization expenses for first nine months of 2021
were
Asset Retirement Obligation ("ARO") expense for the first nine months of 2021
was approximately
General and administrative expenses for the first nine months of 2021 were
approximately
Three months ended
Oil and natural gas revenues for the three months ended
Oil sales for the third quarter of 2021 were approximately
Average oil prices received were approximately
Natural gas revenues for the third quarter of 2021 were
Average gross natural gas prices received were approximately
In general, revenues from oil and gas producing operations experienced a
significant increase for the nine months ended 2021 compared to the same period
in 2020. In addition, the third quarter results from operations also experienced
a significant increase over the same period in 2020. These increases result in
part from increased oil and gas prices, as well as production increases. A
significant number of both operated wells and non-operated wells were shut-in
due to historic low oil and gas prices and most of these wells were returned to
production and producing as of
Revenues from lease operations for the third quarter of 2021 were approximately
Revenues from gas gathering, compression and equipment rental for the third
quarter of 2021 were approximately
Real estate revenue was approximately
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Interest income for the third quarter of 2021 was approximately
Other revenues for the third quarter of 2021 were approximately
Lease operating expenses for both operated and non-operated wells in the third
quarter of 2021 were
Production taxes, gathering, transportation and marketing expenses for the third
quarter of 2021 were approximately
Pipeline and rental expenses for the third quarter of 2021 were
Real estate expenses during the third quarter 2021 were approximately
Depreciation, depletion, and amortization expenses for third quarter of 2021 was
Asset Retirement Obligation ("ARO") expense for the third quarter of 2021 was
approximately
General and administrative expenses for the third quarter of 2021 were
Financial Condition and Liquidity
The Company's operating capital needs, as well as its capital spending program are generally funded from cash flow generated by operations. Because future cash flow is subject to several variables, such as the level of production and the sales price of oil and natural gas, the Company can provide no assurance that its operations will provide cash sufficient to maintain current levels of capital spending. Accordingly, the Company may be required to seek additional financing from third parties to fund its exploration and development programs.
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