TREK ....Oil/gas co. earned .42 cents for 2004. Stock currently trading at bargain level of $2 per share.
Form 10KSB/A for TREK RESOURCES INC
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15-Apr-2005
Annual Report
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Our Results of Operations
Comparison of the Year Ended September 30, 2003 and 2004
Net income for the fiscal year ended September 30, 2004 was $2,087,000, or $0.42 per diluted share, compared to net income of $1,327,000, or $0.27 per diluted share for the prior year. Our results of operations for fiscal 2004 were favorably impacted by higher oil and natural gas prices, lower interest expense and an absence of hedging losses. Offsetting those effects were:
* Lower oil and natural gas volumes
* Higher lease operating expenses
* Higher production taxes
* Higher depletion costs
* Higher general and administrative costs
Revenues
Oil and natural gas sales were up $800,000 to $8.9 million in fiscal 2004, compared to $8.1 million in fiscal 2003. This difference reflects a $1.2 million increase due to higher average prices for both oil and natural gas, offset by a $400,000 decrease due to oil and natural gas volumes. Weighted average annual prices were $36.11 per Bbl of oil and $5.29 per Mcf of natural gas during fiscal 2004, compared to $29.64 per Bbl and $4.87 per Mcf in 2003.
We sold 137 MBbls of oil during fiscal 2004, versus 139 MBbls in the prior fiscal year. Corresponding natural gas sales were 742 MMcf in fiscal 2004 and 812 MMcf in fiscal 2003. The decrease in oil and natural gas sales volume was substantially due to the natural production decline of our oil and natural gas reserves.
Costs and Expenses
Our lease operating expenses for the year ended September 30, 2004 amounted to $3.98 million, a $180,000 increase from the $3.8 million of expenses incurred during fiscal 2003. This increase in direct lease operating expense is also primarily the result of higher production taxes as well as higher utility bills on our large production units. Operating expenses per Boe, excluding major repairs and workovers, were $11.90 during fiscal 2004, compared to $10.56 in 2003.
Our general and administrative expenses for the year ending September 30, 2004 were $1,080,000, a $137,000 increase from the $943,000 million of expenses incurred during fiscal 2003. This increase primarily resulted from an increase in franchise tax expense.
Depreciation, depletion, and amortization totaled $1.3 million for the year ended September 30, 2004, an increase of $170,000 from the corresponding expense amount reported during fiscal 2003. Our increase in depreciation, depletion, and amortization resulted from higher capital additions to our depletable asset pool, as well as an increase in the estimated future development costs which support our current reserve value.
In September 2001, the Board of Directors approved the re-pricing of the exercise price of certain stock option grants to $1.10 (as adjusted to take into account over 10:1 reverse stock split in February 2003) per option for employees and executive officers effective October 1, 2001. Our financial statements reflect a restatement of the stock option prices to reflect the reverse split. These options, until exercised or forfeited, are subject to variable accounting at each reporting period. Compensation cost of $39,000 was recorded in fiscal 2004 to reflect the market value of our common stock price at September 30, 2004 ($1.98) exceeding the exercise price of the re-priced options ($1.10). No compensation cost was recorded at September 30, 2003 since the market price per option was less than the exercise price.
Other Income and Expenses
We incurred $426,000 of interest expense during the fiscal year ended September 30, 2004, a decrease of $79,000 from the $505,000 of interest expended during fiscal 2003. The decrease stems from a lower outstanding principal balance under our credit facility. We had outstanding borrowings of $7.9 million under our credit facility as of September 30, 2004, compared to $8.8 million as of September 30, 2003.
Other income during fiscal 2004 also improved due to the absence of net derivative losses of $216,000 as well as other extraordinary expenses that appeared in fiscal 2003 related to a proposed sale of the Company at that time. In fiscal 2004, the Company had no outstanding derivatives.
Rogue
