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The difTerences between the June 30, 1986 reserves and the December 31, 1986 reserves which <br />amounted to 82,904 barrels and 161,748 MCF have been discussed in the reports on Form l0-Q as of <br />September 30, 1986 and December 31, 1986. In summary, the differences are accounted for by <br />production and revisions in previous estimates. In addition, the net present value of these reserves, which <br />decreased by 53.5 million during the six months ended December 31, 1986, has been affected by <br />production, revisions of previous estimates, and lower prices for oil and gas at December 31, 1986 <br />compared to June 30, 1986. <br />K. Prior Sales of Properties <br />Prior to the Board of Directors' decision to sell substantially all of the Company's oil and gas properties, <br />the Company sold a portion of its oil and gas properties to Victoria on January 26, 1987 for 897,000. The <br />portion of properties sold consists of certain undeveloped acreage, acreage with shut-in production (the <br />Saticoy prospect) and acreage with a producing well in which the Company has an interest after payout of <br />drilling, completion and operating costs (the East Adon prospect). On January I5, 1987 the Company sold its <br />West Virginia producing properties to the operator of those properties, Robert B. Hicks, for 512,500. <br />L. Pro Forma Effect of Sale <br />The oil and gas properties being sold represent substantially all of the assets of the Company. Pro Forma <br />Financial Statements are presented on the following pages. <br />IS <br />