New Concept Energy, Inc. (AMEX:GBR), ( the “Company” or “NCE”) a
Dallas-based oil and gas company, today reported a net loss for the
three months ended March 31, 2012 of $1.3 million or $(0.65) per
share, compared to net income of $97,000 or $0.05 per share for the
three months ended March 31, 2011.
During the past few years the exploration, development and
production of natural gas has resulted in an oversupply of natural
gas which has resulted in a substantial reduction in the market
price. Management of the Company believes that this oversupply will
last for some time and does not anticipate an increase in the price
we can receive in the market place. In April 2012 the Company
entered into an agreement to fix the price it receives for the sale
of its gas. For the five years ended April 2017, the Company will
receive $4.53 per MCF. While the lock-in price is approximately 40%
higher than the current price paid to the company when applying the
new price using the formula mandated by the accounting rules, which
includes a 10% present value factor, the result is a reduction of
$912,000 in the accounting value of the Company’s recorded
interests in its oil and gas properties. This accounting reduction
in value has been reflected in the financial statements of the
company as of March 31, 2012.
For the three months ended March 31, 2012, the Company recorded
oil and gas revenues of $290,000 as compared to $280,000 for the
comparable period of 2011. The changes in oil & gas revenue
were due to an increase of approximately $70,000 due to new oil
wells that were drilled in late 2011 and a decrease of
approximately $60,000 due to lower prices being received for the
sale of our natural gas.
The Company recorded revenues of $674,000 for the three months
ended March 31, 2012 from its retirement property compared to
$729,000 for the comparable period in 2011. The decrease was due
almost entirely to a reduction in the number of residents in the
facility.
For the three months ended March 31, 2012, the Company recorded
oil and gas operating expenses of $471,000 as compared to $335,000
for the comparable period of 2011. The increase was principally due
to an increase in depletion expense. The marked decrease in the
market price being paid for natural gas resulted in a modification
in the valuation the company placed on its gas reserves which
impacted the anticipated production life of its wells. This led to
an acceleration of the depletion expense being recorded.
For the three months ended March 31, 2012, operating expenses
and lease expense at the retirement property were $597,000 as
compared to $581,000 for the comparable period in 2011. The
increase was due to an increase in the lease payment being recorded
on the property of $40,000 offset by a general reduction in
operating costs.
For the three months ended March 31, 2012, corporate general
& administrative expenses were $159,000 as compared to $124,000
for the comparable period in 2011. The increase is primarily due to
legal fees incurred by the company to defend itself against certain
lawsuits.
For the three months ended March 31, 2012, interest income was
$0 as compared to $119,000 for the comparable period in 2011. In
December 2011 the Company became concerned about the collectability
of a certain note receivable and determined that the note and any
accrued interest be fully reserved. The company continues to accrue
interest but provides a full reserve should it be unable to
collect.
For the three months ended March 31, 2012, the Company recorded
interest expense of $62,000 as compared to $31,000 for the
comparable period in 2011. The increase is due to additional
interest due on financing obtained in late 2011. The proceeds were
used to drill wells.
NEW CONCEPT ENERGY, INC. AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATION
(unaudited) (amounts in thousands, except per share
data) For the Three Months Ended March 31,
2012 2011 Revenue Oil and gas operations, net
of royalties $ 290 $ 280 Real estate operations 674
729 964 1,009
Operating expenses Oil and gas operations 471 335
Real estate operations 366 390 Lease expense 231 191 Corporate
general and administrative 159 124 Accretion of asset retirement
obligation 34 32 Impairment of natural gas and oil properties
912 - 2,173 1,072
Operating earnings (loss) (1,209 ) (63 )
Other
income (expense) Interest income - 119 Interest expense (62 )
(31 ) Gain on sale of assets, net - - Other income (expense), net
4 72 Income/(Expense) (58 )
160 Net income (loss) applicable to
common shares $ (1,267 ) $ 97 Net income (loss) per
common share-basic and diluted $ (0.65 ) $ 0.05
Weighted average common and equivalent shares outstanding - basic
1,947 1,947
NEW CONCEPT ENERGY, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited) (amounts
in thousands) March 31, December 31,
2012 2011 Assets Current assets
Cash and cash equivalents
$
123 $ 109 Accounts receivable from oil and gas sales 167 167 Other
current assets 26 20
Total current assets
316 296
Oil and natural gas properties
(full cost accounting method) Proved developed and undeveloped
oil and gas properties, net of depletion 10,057 11,141
Property and equipment, net of depreciation Land, buildings and
equipment - oil and gas operations 1,467 1,486
Other
156 150 Total property and equipment 1,623 1,636
Other assets 423 377
Total
assets
$
12,419 $ 13,450
NEW CONCEPT ENERGY, INC.
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED
(unaudited) (amounts in thousands, except share
amounts) March 31, December 31,
2012 2011 Liabilities and stockholders'
equity Current liabilities Accounts payable -
trade $ 358 $ 422 Accrued expenses 421 417
Total current liabilities 779 839
Long-term
debt Notes payable 2,309 2,249 Payable - related parties 894
691 Asset retirement obligation 2,735 2,702 Other long-term
liabilities 491 491
Total
liabilities 7,208 6,972
Stockholders' equity
Preferred stock, Series B 1 1 Common stock, $.01 par value;
authorized, 100,000,000 shares; issued and outstanding, 1,946,935
shares at March 31, 2012 and December 31, 2011 20 20 Additional
paid-in capital 58,838 58,838 Accumulated deficit (53,648 )
(52,381 ) 5,211 6,478
Total liabilities & equity $ 12,419 $
13,450
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