Quarterly Report (10-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022

 

or

 

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

Commission File No. 000-18774

 

SPINDLETOP OIL & GAS CO.

(Exact name of registrant as specified in its charter)

 

Texas	75-2063001
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)
12850 Spurling Rd., Suite 200, Dallas, TX	75230
(Address of principal executive offices)	(Zip Code)
[phone]
(Registrant's telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	SPND	OTC Markets - Pink

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [ X ]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [ X ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding twelve months (or for such shorter period that the registrant was required to submit and post such files). Yes [ X ] No [ ]

 

 

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

 

Large accelerated filer  [    ]	Accelerated filer                   [    ]
Non-accelerated filer    [    ]	Smaller reporting company   [ X ]
	Emerging growth company   []

  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. Yes [ ] No [ X ]

 

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

 

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

 

Indicate the number of shares outstanding of each of the issuer's classes of common, as of the latest practicable date.

 

Common Stock, $0.01 par value	6,755,318
(Class)	(Outstanding at May 23, 2022)

 

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None

 

 

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SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES
FORM 10-Q
For the quarter ended March 31, 2022
Index to Consolidated Financial Statements and Schedules
Part I – Financial Information:				Page
	Item 1. – Financial Statements
		Consolidated Balance Sheets
			March 31, 2022 (Unaudited) and December 31, 2021	4 - 5
		Consolidated Statements of Operations (Unaudited)
			Three Months Ended March 31, 2022 and 2021	6
		Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)		7
			Three Months Ended March 31, 2022 and
			Three Months Ended March 31, 2021
		Consolidated Statements of Cash Flow (Unaudited)
			Three Months Ended March 31, 2022 and Three Months Ended March 31, 2021	8
		Notes to Consolidated Financial Statements		9
	Item 2. – Management’s Discussion and Analysis of Financial
			Condition and Results of Operations	10
	Item 4. – Controls and Procedures			14
Part II – Other Information:
	Item 5. – Other Information			14
	Item 6. – Exhibits			15

 

 

 

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Part I - Financial Information

 

Item 1. - Financial Statements

 

SPINDLETOP OIL & GAS Co. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

			March 31,				December 31,
			2022				2021
			(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents		$	8,718,000			$	10,673,000
Restricted cash			370,000				370,000
Accounts receivable, related parties			564,000				—
Accounts receivable			3,567,000				3,104,000
Prepaid Expenses			—				—
Intercompany			—				—
Income tax receivable			389,000				450,000
Total Current Assets			13,608,000				14,597,000
Property and Equipment - at cost
Oil and gas properties (full cost method)			25,757,000				26,305,000
Rental equipment			412,000				412,000
Gas gathering system			115,000				115,000
Other property and equipment			395,000				317,000
			26,679,000				27,149,000
Accumulated depreciation and amortization			(26,127,000	)			(26,127,000	)
Total Property and Equipment			552,000				1,022,000
Real Estate Property - at cost
Land			688,000				688,000
Commercial office building			1,624,000				1,624,000
Accumulated depreciation			(1,118,000	)			(1,102,000	)
Total Real Estate Property			1,194,000				1,210,000
Other Assets
Deferred Income Tax Asset			271,000				311,000
Other long-term investments			11,600,000				8,941,000
Other			4,000				4,000
Total Other Assets			11,875,000				9,256,000
Total Assets		$	27,229,000			$	26,085,000
The accompanying notes are an integral part of these statements.

 

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SPINDLETOP OIL & GAS Co. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		March 31,				December 31,
		2022				2021
		(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued liabilities		$	8,113,000			$	7,601,000
Total Current Liabilities			8,113,000				7,601,000
Noncurrent Liabilities
Asset retirement obligation			2,048,000				1,925,000
Total Noncurrent Liabilities			2,048,000				1,925,000
Total Liabilities			10,161,000				9,526,000
Shareholders' Equity
Common stock, $.01 par value, 100,000,000 shares authorized; 7,677,471 shares issued and 6,755,318 outstanding at March 31, 2022 and at December 31, 2021.			77,000				77,000
Additional paid-in capital			943,000				943,000
Treasury stock, at cost			(1,874,000	)			(1,874,000	)
Retained earnings			17,922,000				17,413,000
Total Shareholders' Equity			17,068,000				16,559,000
Total Liabilities and Shareholders' Equity		$	27,229,000			$	26,085,000
The accompanying notes are an integral part of these statements.

 

 

 

 

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SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

		Three Months Ended ,
		March 31 ,				March 31 ,
		2022				2021
Revenues
Oil and gas revenues		$	1,672,000			$	894,000
Revenue from lease operations			44,000				57,000
Gas gathering, compression, equipment rental			18,000				34,000
Real estate rental income			53,000				59,000
Interest Income			25,000				46,000
Other			12,000				9,000
Total Revenues			1,824,000				1,099,000
Expenses
Lease operations			244,000				123,000
Production taxes, gathering and marketing			181,000				129,000
Pipeline and rental operations			2,000				3,000
Real estate operations			38,000				32,000
Depreciation and amortization			17,000				119,000
ARO accretion expense			143,000				35,000
General and administrative			590,000				537,000
Total Expenses			1,215,000				978,000
Income Before Income Tax			609,000				121,000
Current income tax provision			60,000				17,000
Deferred income tax provision			40,000				7,000
Total income tax provision			100,000				24,000
Net Income		$	509,000			$	97,000
Earnings per Share of Common Stock
Basic and diluted		$	0.08			$	0.01
Weighted Average Shares Outstanding
Basic and diluted			6,755,318				6,755,318
The accompanying notes are an integral part of these statements.

 

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SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

For the Three Months Ended March 31, 2022 and March 31, 2021

(Unaudited)

 

		Common Stock Shares				Common Stock Amount				Additional Paid-In Capital				Treasury Stock Shares				Treasury Stock Amount				Retained Earnings
Balance December 31, 2021			7,677,471			$	77,000			$	943,000				922,153			($	1,874,000	)		$	17,413,000
Net Income			—				—				—				—				—				509,000
Balance March 31, 2022			7,677,471				77,000				943,000				922,153				(1,874,000	)			17,922,000
Balance December 31, 2020			7,677,471			$	77,000			$	943,000				922,153			($	1,874,000	)		$	16,376,000
Net Income			—				—				—				—				—				97,000
Balance March 31, 2021			7,677,471				77,000				943,000				922,153				(1,874,000	)			16,473,000
The accompanying notes are an integral part of these statements.

 

 

 

 

 

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SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

		Three Months Ended
		March 31,				March 31,
		2022				2021
Cash Flows from Operating Activities
Net Income		$	509,000			$	97,000
Reconciliation of net Income to net cash
provided by operating activities
Depreciation and amortization			17,000				119,000
Accretion of asset retirement obligation			143,000				35,000
Changes in accounts receivable, related party			(564,000	)			—
Changes in accounts receivable			(463,000	)			(182,000	)
Changes in income tax receivable			61,000				17,000
Changes in accounts payable and accrued liabilities			512,000				249,000
Changes in deferred Income tax asset			40,000				—
Changes in other assets			—				7,000
Net cash provided for operating activities			255,000				342,000
Cash Flows from Investing Activities
Capitalized acquisition, exploration and development			527,000				(11,000	)
Purchase of other property and equipment			(77,000	)			—
Changes in other long-term investments			(2,659,000	)			(41,000	)
Capitalized tenant improvements and broker fees			(1,000	)			(5,000	)
Net cash (used) for investing activities			(2,210,000	)			(57,000	)
Cash Flows from Financing Activities
Changes in notes payable			—				403,000
Net cash used for financing activities			—				403,000
Increase (Decrease) in cash, cash equivalents, and restricted cash			(1,955,000	)			688,000
Cash, cash equivalents, and restricted cash at beginning of period			11,043,000				7,775,000
Cash, cash equivalents, and restricted cash at end of period		$	9,088,000			$	8,463,000
The accompanying notes are an integral part of these statements.

 

 

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SPINDLETOP OIL & GAS CO. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

1. BASIS OF PRESENTATION AND ORGANIZATION

 

The accompanying financial statements are presented in accordance with the requirements of Form 10-Q and consequently do not include all of the disclosures normally required by generally accepted accounting principles or those normally made in the Company's annual Form 10-K filing. Accordingly, the reader of this Form 10-Q may wish to refer to the Company's Form 10-K for the year ended December 31, 2021, for further information.

 

The consolidated financial statements presented herein include the accounts of Spindletop Oil & Gas Co., a Texas corporation ("the Company") and its wholly owned subsidiaries, Prairie Pipeline Co., a Texas corporation and Spindletop Drilling Company, a Texas corporation. All significant inter-company transactions and accounts have been eliminated.

 

In the opinion of management, the accompanying unaudited interim financial statements contain all material adjustments, consisting only of normal recurring adjustments necessary to present fairly the financial condition, the results of operations and changes in cash flows of the Company and its consolidated subsidiaries for the interim periods presented. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with generally accepted accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations.

 

 

2. CONTINGENCIES

 

On July 23, 2020, a subsidiary of the Company received notice of a lawsuit filed in Louisiana against the Company’s subsidiary and numerous other oil and gas companies alleging a pollution claim for properties operated by the defendants in Louisiana, and the Company’s subsidiary filed an answer. The Plaintiffs filed a First Supplemental and Amending Petition for Damages on January 21, 2021. The litigation is currently in the discovery phase. Management has regular litigation reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of contingencies for litigation. The Company will continue to defend its subsidiary vigorously in this matter.

 

 

Subsequent Events

 

The Company has evaluated subsequent events through May 23, 2022, the date on which the financial statements were available to be issued.

 

Effective January 1, 2022, the Company sold its interest in two operated natural gas wells and two shut-in wells along with its associated leasehold acreage located in Hood County, Texas, to Giant NRG Co., LP, a related entity. The terms of the transaction are no less favorable than could be obtained from unaffiliated third parties and have been approved by a majority of our Board of Directors.

 

 

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Item 2. - Management's Discussion and Analysis of Financial Condition and

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 December 31, 2021 (the “Form 10-K”), including significant global economic and pandemic factors occurring during the first quarter of 2021 and continuing into the second quarter of 2021 which are described in the following two paragraphs.

 

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. During 2021, the demand and prices for crude oil and condensate returned to pre-pandemic levels, but uncertainty related to COVID-19 may continue to cause a fluctuation in demand and prices for crude oil and condensate. The continuing COVID-19 pandemic, related economic repercussions, and any future outbreak of any other highly infectious or contagious diseases may negatively affect the Company, our financial condition, results of operations, and cash flows. However, the duration and extent of the impact of the COVID-19 pandemic on the Company and our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, is uncertain and depends on various factors that we cannot predict or quantify, including: the severity and duration of the pandemic; governmental, business and other actions in response to the pandemic; the impact of the pandemic on economic activity; the response of the overall economy and the financial markets; the demand for oil and natural gas, which may be reduced on a prolonged or permanent basis due to a structural shift in the global economy or in connection with a global recession or depression; any impairment in the value of the Company’s assets which could be recorded as a result of a weaker economic conditions or commodity prices. There are no comparable recent events that provide guidance as to the effect the COVID-19 pandemic may have, and as a result, the ultimate impact of the pandemic is highly long-term uncertain and subject to change.

 

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Rising inflation and other uncertainties regarding the global economy, financial environment, and global conflict 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. 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.

 

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.

 

A negative shift in some of the public’s attitudes toward the oil and natural gas industry could adversely affect the Company’s ability to raise debt and equity capital. Certain segments of the investment community have developed negative sentiments about investing in the oil and natural gas industry. Equity returns in the sector versus other industry sectors from 2020 and the first three quarters of 2021 led to lower oil and natural gas representation in certain key equity market indices. In addition, some investors, including investment advisors and certain wealth funds, pension funds, university endowments and family foundations, have stated policies to disinvest in the oil and natural gas sector based on their social and environmental considerations. Certain other stakeholders have also pressured commercial and investment banks to halt financing oil and natural gas production and related infrastructure projects. Such developments, including environmental, social and governance (“ESG”) activism and initiatives aimed at limiting climate change and reducing air pollution, could result in downward pressure on the stock prices of oil and natural gas companies. The Company’s stock price could be adversely affected by these developments. This may also potentially result in a reduction of available capital funding for potential development projects, impacting the Company’s future financial results.

 

The Company faces various risks associated with increased negative attitudes toward oil and natural gas exploration and development activities. Opposition to oil and natural gas drilling and development activities has been growing globally and is expanding in the United States. Companies in the oil and natural gas industry are often the target of efforts from both individuals and nongovernmental organizations regarding safety, human rights, climate change, environmental matters, sustainability, and business practices. Anti-development groups are working to reduce access to federal and state government lands and delay or cancel certain operations such as drilling and development along with other activities. Opposition to oil and natural gas activities could materially and adversely impact the Company’s ability to operate our business and raise capital.

 

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.

 

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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 SEC, and to other materials we may furnish to the public from time to time through Forms 8-K or otherwise.

 

Results of Operations

 

Three months ended March 31, 2022 compared to the three months ended March 31, 2021

 

Oil and gas revenues for the first quarter of 2022 were $1,672,000, as compared to $894,000 for the same period in 2021, an increase of approximately $778,000 or 87.0%.

 

Oil sales for the first three months of 2022 were approximately $865,000 compared to approximately $422,000 in the first quarter of 2021, an increase of approximately $443,000 or 105.0%. Of this net increase in oil sales, volumes for the first quarter of 2022 were approximately 11,300 bbls, compared to approximately 8,600 bbls during the first quarter of 2021, an increase of approximately 2,700 bbls, or 31.4%.

 

Average oil prices received were $71.34 per bbl in the first quarter of 2022 compared to $49.34 per bbl in the first three months of 2021, an increase of approximately $22.00 per bbl or 44.6%.

 

Natural gas revenues for the first three months of 2022 were $807,000 compared to $472,000 for the same period in 2021, an increase of $335,000 or 70.97%. Natural gas sales volumes for the first quarter of 2022 were approximately 142,000 mcf compared to approximately 190,000 mcf during the first quarter of 2021, a decrease of approximately 48,000 mcf or 25.3%.

 

Average natural gas prices received were $5.67 per mcf in the first quarter of 2022 as compared to $3.07 per mcf in the first quarter of 2021, an increase of approximately $2.60 per mcf or 84.7%.

 

Revenues from lease operations was $44,000 in the first quarter of 2022 compared to $57,000 in the first quarter of 2021, a decrease of approximately $13,000 or 22.8%. Revenues from lease operations are derived from field supervision charged to operated leases along with operator overhead charges to operated leases.

 

Revenues from gas gathering, compression and equipment rental for the first quarter of 2022 was $18,000 compared to $34,000 in the first quarter of 2021, a decrease of approximately $16,000, or 47.1%. This was due primarily to the decrease in natural gas volume sold through PPC.

 

Real estate income was approximately $53,000 during the first quarter of 2022 compared to $59,000 for the first three months of 2021, a decrease of approximately $6,000, or 10.2%.

 

Interest income was approximately $25,000 during the first quarter of 2022, compared to approximately $46,000 during the same period in 2021, a decrease of approximately $21,000 or 45.7%. Interest income is derived from investments in both short-term and long-term certificates of deposit as well as money market accounts at banks. Some long-term certificates of deposit matured during 2021 and re-invested at lower interest rates offered by banks. 

 

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Other revenues for the first three months of 2022 were approximately $12,000 as compared to $9,000 for the same period in 2021, an increase of approximately $3,000, or 33.3%.

 

Lease operating expenses in the first quarter of 2022 were $244,000 as compared to $123,000 in the first quarter of 2021, a net increase of approximately $121,000, or 98.4%.  Of this net increase, approximately $6,000 is due to net decreases in operating expenses billed by third-party operators on non-operated properties. Approximately $127,000 of overall net increases in operating expenses are related to

various operated properties.

 

Production taxes, gathering and marketing expenses in the first quarter of 2022 were approximately $181,000 as compared to $129,000 for the first quarter of 2021, an increase of approximately $52,000 or 40.3% directly related to the increase in oil and gas revenues.

 

 

Pipeline and rental expenses for the first quarter of 2022 were approximately $2,000 compared to approximately $3,000 for the same period in 2021, decrease of $1,000 or 33.3%.

 

Real estate expenses in the first quarter of 2022 were approximately $38,000 compared to $32,000 during the same period in 2021, an increase of approximately $6,000 or 18.8%.

 

Depreciation, depletion, and amortization expense for the first quarter of 2022 was $31,000 as compared to $119,000 for the first quarter of 2021, a decrease of $88,000, or 74.0%. The Company re-evaluated its proved oil and gas reserve quantities as of December 31, 2021. This re-evaluated reserve base was reduced for oil and gas reserves that were produced or sold during the quarter and adjusted for newly acquired reserves or for changes in estimated production curves and future price assumptions.

 

Asset Retirement Obligation (“ARO”) expense for the first three months of 2022 was approximately $143,000 as compared to approximately $35,000 for the same period in 2021, an increase of $108,000, or 308.6%. The ARO expense is calculated to be the discounted present value of the estimated future cost to plug and abandon the Company’s producing wells.

 

General and administrative expenses for the first quarter of 2022 were approximately $590,000 as compared to approximately $537,000 for the first quarter of 2021, an increase of approximately $53,000 or 9.9%.

 

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 a number of 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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Item 4. - Controls and Procedures

 

(a) As of the end of the period covered by this report, Spindletop Oil & Gas Co. carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Principal Executive Officer and Principal Financial and Accounting Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-15 and 15d-15. Based upon the evaluation, the Company's Principal Executive Officer and Principal Financial and Accounting Officer concluded that the Company's disclosure controls and procedures were effective as of the end of the period covered by the report.

 

(b) There have been no changes in the Company's internal controls over financial reporting during the quarter ended March 31, 2022, that have materially affected, or are reasonably likely to materially affect the Company's internal controls over financial reporting.

 

 

Part II - Other Information

 

Item 5. – Other Information

 

 

West Texas

 

Effective March 4, 2022, the Company sold its interest in an operated oil well along with its associated leasehold acreage, in Martin County, Texas. The Company is pursuing Section 1031, Like-Kind Exchange treatment for the proceeds from this transaction and has not calculated the income tax implication of the divestiture.

 

Effective January 1, 2022, the Company sold its interest in two operated natural gas wells and two shut-in wells along with its associated leasehold acreage located in Hood County, Texas, to Giant NRG Co., LP, a related entity. The terms of the transaction are no less favorable than could be obtained from unaffiliated third parties and have been approved by a majority of our Board of Directors.

 

 

 

 

 

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Item 6. - Exhibits

 

The following exhibits are filed herewith or incorporated by reference as indicated.

 

Exhibit Designation		Exhibit Description
3.1 (a)		Amended Articles of Incorporation of Spindletop Oil & Gas Co. (Incorporated by reference to Exhibit 3.1 to the General Form for Registration of Securities on Form 10, filed with the Commission on August 14, 1990)
3.2		Bylaws of Spindletop Oil & Gas Co. (Incorporated by reference to Exhibit 3.2 to the General Form for Registration of Securities on Form 10, filed with the Commission on August 14, 1990)
31.1 *		Certification pursuant to Rules 13a-14 and 15d under the Securities Exchange Act of 1934.
31.2 *		Certification pursuant to Rules 13a-14 and 15d under the Securities Exchange Act of 1934
32.1 *		Certification pursuant to 18 U.S.C. Section 1350

 

____________________________

* filed herewith

 

 

 

 

 

 

 

 

 

 

 

 

 

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Signatures

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

	SPINDLETOP OIL & GAS CO.
	(Registrant)
Date: May 23, 2022	By:/s/ Chris G. Mazzini
	Chris G. Mazzini
	President, Principal Executive Officer
Date: May 23, 2022	By:/s/ Michelle H. Mazzini
	Michelle H. Mazzini
	Vice President, Secretary
Date: May 23, 2022	By:/s/ Robert E. Corbin
	Robert E. Corbin
	Principal Financial Officer and
	Accounting Manger