________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For Quarter Ended July 31, 2002
Commission File Number 0-8877
CREDO PETROLEUM CORPORATION
Colorado 84-0772991
(State of Incorporation) (IRS Employer Identification)
1801 Broadway, Suite 900 80202
Denver, Colorado (Zip Code)
(Address of principal executive office)
303-297-2200
(Telephone Number)
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 registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, net of treasury stock, as of
August 31, 2002: Common stock, $.10 par value - 3,285,000
Preferred stock, no par value - None issued
________________________________________________________________
CREDO PETROLEUM CORPORATION
Index to Form 10-QSB
For Quarter Ended July 31, 2002
________________________________________________________________
PART I - FINANCIAL INFORMATION
Consolidated Balance Sheets
As of July 31, 2002 (Unaudited) and October 31, 2001
Consolidated Statements of Operations and Changes in Retained
Earnings (Unaudited)
For the Nine and Three Month Periods Ended July 31, 2002
and 2001
Consolidated Statements of Cash Flows (Unaudited)
For the Nine Month Periods Ended July 31, 2002 and 2001
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Certifications
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification by Chief Executive Officer under
Section 906 of the Sarbanes-Oxley Act
(18 U.S.C. Section 1350)
99.2 Certification by Chief Financial Officer under
Section 906 of the Sarbanes-Oxley Act
(18 U.S.C. Section 1350)
(b) Reports on Form 8-K
No current reports on Form 8-K were filed during the
reporting quarter.
____________________________________________
The accompanying unaudited consolidated financial statements have
been prepared in accordance with U. S. generally accepted
accounting principles for interim financial information and with
the instructions for Form 10-QSB and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and
footnotes required by U. S. generally accepted accounting
principles for complete financial statements. In the opinion of
management, the consolidated financial statements contain all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of the company's results for
the periods presented. These consolidated financial statements
should be read in conjunction with the company's Form 10-KSB for
the fiscal year ended October 31, 2001.
CREDO PETROLEUM CORPORATION
Consolidated Balance Sheets
A S S E T S
July 31, October 31,
2002 2001
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 1,479,000 $ 819,000
Short term investments 5,604,000 5,283,000
Receivables:
Trade 430,000 317,000
Accrued oil and gas sales 541,000 367,000
Other 384,000 241,000
----------- -----------
8,438,000 7,027,000
----------- -----------
OIL AND GAS PROPERTIES, net, at cost,
full cost method:
Unevaluated 2,021,000 1,549,000
Evaluated 7,320,000 7,120,000
----------- -----------
9,341,000 8,669,000
----------- -----------
EXCLUSIVE LICENSE AGREEMENT, net of
amortization of $134,000 in 2002
and $82,000 in 2001 566,000 618,000
----------- -----------
OTHER, net 170,000 156,000
----------- -----------
$18,515,000 $16,470,000
=========== ===========
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES:
Accounts payable $ 1,610,000 $ 1,126,000
Income taxes payable 74,000 110,000
----------- -----------
1,684,000 1,236,000
----------- -----------
DEFERRED INCOME TAXES 2,157,000 1,935,000
----------- -----------
EXCLUSIVE LICENSE OBLIGATION, less current
portion of $44,000 456,000 456,000
----------- -----------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock, without par value,
5,000,000 shares authorized,
none issued - -
Common stock, $.10 par value,
20,000,000 shares authorized,
3,678,000 shares issued 367,000 367,000
Capital in excess of par value 6,453,000 6,453,000
Retained earnings 7,835,000 6,927,000
Other comprehensive income 281,000 14,000
Treasury stock, at cost, 393,000 shares
in 2002 and 502,000 shares in 2001 (718,000) (918,000)
----------- -----------
14,218,000 12,843,000
----------- -----------
$18,515,000 $16,470,000
=========== ===========
See accompanying notes.
CREDO PETROLEUM CORPORATION
Consolidated Statements of Operations And Changes in
Retained Earnings - Unaudited
Nine Months Nine Months Quarter Quarter
Ended Ended Ended Ended
July 31 July 31 July 31 July 31
2002 2001 2002 2001
---------- ---------- ---------- ----------
REVENUES:
Oil and gas sales $3,519,000 $4,029,000 $1,342,000 $1,319,000
Operating 365,000 336,000 123,000 113,000
Investment income
and other 91,000 118,000 17,000 9,000
---------- ---------- ---------- ----------
3,975,000 4,483,000 1,482,000 1,441,000
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Oil and gas production 987,000 879,000 329,000 280,000
Depreciation, depletion
and amortization 911,000 590,000 353,000 226,000
General and
administrative 742,000 641,000 257,000 205,000
Interest 38,000 40,000 13,000 14,000
---------- ---------- ---------- ----------
2,678,000 2,150,000 952,000 725,000
---------- ---------- ---------- ----------
INCOME BEFORE
INCOME TAXES 1,297,000 2,333,000 530,000 716,000
INCOME TAXES (389,000) (700,000) (159,000) (215,000)
---------- ---------- ---------- ----------
NET INCOME 908,000 1,633,000 371,000 501,000
RETAINED EARNINGS,
BEGINNING OF PERIOD 6,927,000 4,925,000 7,464,000 6,057,000
---------- ---------- ---------- ----------
RETAINED EARNINGS,
END OF PERIOD $7,835,000 $6,558,000 $7,835,000 $6,558,000
========== ========== ========== ==========
BASIC NET INCOME
PER SHARE $ .28 $ .53 $ .11 $ .16
====== ====== ====== ======
DILUTED NET INCOME
PER SHARE $ .28 $ .50 $ .11 $ .15
====== ====== ====== ======
See accompanying notes.
CREDO PETROLEUM CORPORATION
Consolidated Statements of Cash Flows - Unaudited
Nine Months Ended
July 31,
-------------------------
2002 2001
----------- -----------
OPERATING ACTIVITIES:
Net income $ 908,000 $ 1,633,000
Adjustments to reconcile net income
to net cash provided
by operating activities:
Depreciation, depletion and amortization 911,000 590,000
Deferred income taxes 222,000 394,000
Changes in operating assets and liabilities:
Proceeds from short term investments 3,965,000 3,109,000
Purchase of short term investments (4,286,000) (3,548,000)
Trade receivables (113,000) (290,000)
Accrued oil and gas sales (174,000) (57,000)
Other 124,000 22,000
Accounts payable 484,000 269,000
Income tax payable (36,000) (58,000)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,005,000 2,064,000
----------- -----------
INVESTING ACTIVITIES:
Oil and gas properties, net (1,490,000) (2,087,000)
Changes in other long-term assets (55,000) (88,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (1,545,000) (2,175,000)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from exercise of stock options
(114,000 options in 2002 and 137,000 in 2001) 230,000 271,000
Purchase of treasury stock
(5,000 shares in 2002 and 6,000 in 2001) (30,000) (30,000)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 200,000 241,000
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 660,000 130,000
CASH AND CASH EQUIVALENTS:
Beginning of Period 819,000 484,000
----------- -----------
End of Period $ 1,479,000 $ 614,000
=========== ===========
See accompanying notes.
CREDO PETROLEUM CORPORATION
Management's Discussion and Analysis of Financial
Condition and Results of Operations
July 31, 2002
LIQUIDITY AND CAPITAL RESOURCES
The company's working capital and cash flow represent a
significant capital resource and source of liquidity. At July
31, 2002, working capital was $6,754,000, compared to $5,791,000
at October 31, 2001. Cash flow from operating activities before
working capital changes totaled $2,041,000 for the nine months,
compared to $2,617,000 from the same period last year.
Existing working capital and anticipated cash flow are
expected to be sufficient to fund fiscal 2002 operations.
However, if the company were to make one or more major
acquisition during the coming year, bank borrowing, issuance of
additional stock, or other forms of debt financing would be
considered. Because earnings are anticipated to be reinvested in
operations, cash dividends are not expected to be paid in the
foreseeable future.
Pending deployment into oil and gas assets, cash is
primarily invested with money managers who specialize in
short-term timing of mutual funds. The average return on the
company's portfolio was 2% for the nine months of fiscal 2002
compared to 3% in the same period last year. Relatively low
investment returns in 2001 and 2002 compared to prior years are
primarily due to market conditions that have limited investment
opportunities for the market timers which manage the bulk of the
company's investments. Management considers the potential for
adverse impact from major unexpected events, such as September
11th, to be the major significant risk to most investment
strategies.
Commitments for future capital expenditures were not
material at July 31, 2002. The timing of most capital
expenditures for exploration and development is relatively
discretionary. Therefore, the company can plan expenditures to
coincide with available funds in order to minimize business
risks.
PRODUCT PRICES, PRODUCTION AND OPERATIONS
Numerous uncertainties exist in the oil and gas exploration
and production industry which are beyond the company's ability to
predict with reasonable accuracy.
Gas price decontrol, the advent of an active spot market for
natural gas, changes in supply and demand for natural gas, and
weather patterns cause prices received by the company to be
subject to significant fluctuations. Gas prices generally
accelerate in peak demand periods such as the winter months and
subside during lower demand periods.
Significant world events and OPEC's production and pricing
policies influence OPEC and worldwide supply and demand and
prices for crude oil and petroleum products.
Although product prices are key to the company's ability to
operate profitably and to budget capital expenditures, they are
beyond the company's control and are difficult to predict. The
company periodically hedges the price of its oil and gas
production when the potential for significant downward price
movement is anticipated. Hedging transactions take the form of
forward, or "short", selling in the NYMEX futures market, and are
closed by purchasing offsetting "long" positions. Such hedges,
which are accounted for as cash flow hedges, do not exceed
anticipated production volumes, are expected to have reasonable
correlation between price movements in the futures market and the
cash markets where the company's production is located, and are
authorized by the company's Board of Directors. Hedges are
expected to be closed and gains or losses recognized for
financial reporting purposes as related production occurs.
However, hedges may be closed earlier if the anticipated downward
price movement occurs or if the company believes that the
potential for such movement has abated. Such hedges may also be
reinstated if the potential for such movement re-occurs or if
management concludes that it has misjudged information used to
make its decisions. All other futures transactions are accounted
for as speculative transactions and gains and losses are
immediately recognized.
The company's most recent natural gas hedge data for months
subsequent to third quarter-end shows 280 MMcfg hedged for the
months of December 2002 through February 2003. This hedge is at
an average NYMEX (Henry Hub, Louisiana delivery point) price of
$4.19 per Mcf, and represents approximately 83% of the company's
total estimated gas production for those three months.
Subsequent to third quarter-end, hedges covering the months of
August through November 2002 were closed and a gain of $204,000,
or $0.47 per Mcf, was realized. The company hedges only its
Oklahoma production where the "basis" for its pipeline index
prices is generally $.15 to $.30 below the Henry Hub.
The company recognizes all derivatives on the balance sheet
at fair value at the end of each period. Changes in the fair
value of a cash flow hedge are recorded in Other Comprehensive
Income on the Consolidated Balance Sheets and then are
reclassified into the Consolidated Statement of Earnings as the
underlying hedged item affects earnings. Amounts reclassified
into earnings related to natural gas hedges are included in oil
and gas sales. At July 31, 2002, net deferred gains of
approximately $401,000 ($281,000 net of tax) related to natural
gas hedging transactions were accumulated in Other Comprehensive
Income of which $94,000 were realized and $307,000 were
unrealized.
The following table sets forth the components of
Comprehensive Income for each of the periods presented:
Nine Months Ended Three Months Ended
July 31, July 31,
2002 2001 2002 2001
---------- ---------- ---------- ----------
Net Income $ 908,000 $1,633,000 $ 371,000 $ 501,000
Other comprehensive income,
net of tax:
Change in fair value
of derivatives 267,000 19,000 386,000 (42,000)
---------- ---------- ---------- ----------
Comprehensive income $1,175,000 $1,652,000 $ 757,000 $ 459,000
========== ========== ========== ==========
Oil and gas sales volume and price comparisons for the
indicated periods are set forth below.
Nine Months Nine Months Percent Percent
Ended July 31, 2002 Ended July 31, 2001 Volume Price
------------------- -------------------
Product Volume Price Volume Price Change Change
------- ------ ----- ------ ----- ------ ------
Gas (Mcf) 1,002,500 $ 2.94(1) 565,800 $ 5.46(3) +77% -46%
Oil (bbls) 27,700 $20.54 34,500 $27.25 -20% -25%
Three Months Three Months Percent Percent
Ended July 31, 2002 Ended July 31, 2001 Volume Price
------------------- -------------------
Product Volume Price Volume Price Change Change
------- ------ ----- ------ ----- ------ ------
Gas (Mcf) 382,200 $ 2.92(2) 219,900 $ 4.63(4) +74% -37%
Oil (bbls) 9,800 $23.27 11,700 $25.75 -17% -10%
_____________________________
(1) Includes $.35 Mcf hedging gain.
(2) Includes $.05 Mcf hedging gain.
(3) Includes $.52 Mcf hedging gain.
(4) Includes $1.02 Mcf hedging gain.
The company's growth strategy focuses on two core
projects--drilling along the Anadarko Shelf of Oklahoma and
application of its patented Calliope gas recovery technology.
Anadarko Shelf Drilling Program. The 74% increase in third
quarter natural gas production resulted from new wells drilled
late in fiscal 2001 and during fiscal 2002. The primary
contributors were the previously reported Glendena #1-5 and
Redfearn #1-33 wells which contributed approximately 36% of
nine-month production and accounted for 82% of the nine-month
production increase. The wells contributed approximately 39% of
third quarter production and accounted for 91% of the third
quarter production increase. CREDO is operator of the wells and
owns a 40% working interest.
The company's drilling program in 2002 centers on its
2,900-acre Sand Creek Prospect and its 2,300-acre Two Springs
Prospect, both located in Harper and Ellis Counties, Oklahoma.
Drilling targets the Morrow and Chester sands from 7,400 to 7,600
feet.
To date, five wells have been drilled and completed on the
prospects. A sixth well was a dry hole. Two new wells are
scheduled to commence in September and additional wells are
anticipated on both prospects. The company owns interests
ranging from 29% to 40% in the seven wells.
Of the five completed wells, three are producing and two are
awaiting pipeline connection. The previously announced
Glendena #1-5, Redfearn #1-33 and Wills #1-3 wells are currently
producing at a combined daily rate of 5.25 MMcfg (million cubic
feet of gas) with minimal water and condensate. The Glendena and
Redfearn wells contain exceptional reservoir quality for the area
and are delivering gas at higher than normal rates.
Production from the previously reported Easterwood #1-28 and
Weiszbrod #1-34 wells was delayed approximately three months
during broad-scale negotiations with pipeline companies to move
additional gas out of the area. The company's drilling in the
area created pipeline capacity problems which required expansion
considerations and protracted negotiations. The negotiations
were finalized in early September and pipelines to the wells are
expected to be completed by September 30th.
The Easterwood #1-28 well has not been perforated or tested
pending pipeline connection. The company owns a 40% interest in
the well and is the operator. The well is expected to be
connected to the pipeline in late September and will be
immediately completed for production.
The Weiszbrod #1-34 well, previous reported as a "tight
hole", encountered two Morrow sands totaling 17 feet. After
fracture stimulation, the well was tested flowing 1.3 MMcfg per
day. The company owns 33% of the well which is the fourth
consecutive successful well on the Sand Creek Prospect. It is
also expected to be connected to the pipeline in late September.
During September, the Hudson #1 well will be drilled on the
Sand Creek Prospect approximately one mile north of the Weiszbrod
well and the Emet #1 well will be drilled on the Two Springs
Prospect approximately one mile east of the Wills well. Both
wells will test the Morrow and Chester sands from 7,400 to
7,600 feet. The company owns 35% of the Emet well and 40% of the
Hudson well and will be the operator of both wells.
In another area of Ellis County located about 13 miles
southeast of the Easterwood well, the company has completed the
second producing well on its 640-acre Thurmond Prospect. This
8,800-foot well unexpectedly cut a fault in the Morrow formation
that eliminated several of the objective sands. It was completed
from 10 feet of remaining productive Morrow sands. After
fracture stimulation, the well was placed on production flowing
at a daily rate of 300 Mcf. As expected, the initial production
rate was modest, however, the well has been producing with no
production decline indicating that it may be connected by the
fault to a larger reservoir. The company owns 37% of the well
and is the operator.
A number of additional wells are likely to be drilled as the
company delineates its Sand Creek and Two Springs Prospects. In
addition, the company has a number of other properties and
drilling prospects in northwest Oklahoma and it is constantly
generating new drilling prospects in the area.
Calliope Gas Recovery Technology. The company owns the
exclusive right to a patented technology known as the Calliope
Gas Recovery System. Calliope can achieve substantially lower
flowing bottom hole pressure than conventional production methods
because it does not rely on reservoir pressure to lift liquids.
In many gas wells, lower bottom hole pressure translates into
recovery of substantial additional gas reserves.
The company's field applications have proven Calliope to be
low risk, cost effective and repeatable over a wide range of
depths (down to 18,600 feet) and applications, including the most
rigorous scenario of completely dead wells. Excluding prototype
applications, Calliope is currently installed on five
company-owned wells, four of which were dead and scheduled to be
plugged and abandoned. Combined daily production for those wells
has ranged between 1.1 and 1.3 MMcfg and their remaining economic
lives are estimated to range from seven to 20 years. Calliope
wells have had a major positive impact on the company's
production and reserves.
The company expects to install two new Calliope systems in
the next few months. The 18,400-foot Green Estate #1 well
located in Beckham County, Oklahoma produced 28.8 Bcfg and has
been dead for over a year. This well will provide a rigorous
test for Calliope in terms of both extreme depth and the
challenge of reviving a dead well. A second well, the Horn #1,
produced 12.9 Bcfg and has also been dead for over a year. This
12,400-foot well is located in Grady County, Oklahoma. The
company will own approximately 70% of both wells and will be the
operator. A third Calliope well has recently been purchased and
negotiations are in progress on several additional wells.
Stronger natural gas prices have made it more difficult for
the company to purchase viable wells for application of our
Calliope system. That has made it necessary for the company to
consider other strategies to install Calliope systems on more
wells. These strategies include joint venturing with larger
companies that own wells considered to be Calliope candidates,
licensing, or providing Calliope for a fee. To implement these
strategies, the company is preparing a highly sophisticated
multimedia presentation about Calliope.
Production of the multimedia project was significantly
delayed because, after starting the project, the company decided
to change production companies. Despite the false start, the
company is very pleased with the project. Sophisticated
animation of Calliope's underground operations is the most
complex part of the project, and that work is nearing completion.
The company expects the entire presentation to be completed in
four to eight weeks.
The company has proven that Calliope will add .5 billion to
2.0 billion cubic feet of gas reserves to many dead and
uneconomic wells. Its goal is to install Calliope on more wells,
and a first class marketing presentation is expected to provide
significant support to marketing the technology to outside
partners.
INCOME TAXES
The company accounts for income taxes in accordance with
Statement of Financial Accounting Standards No. 109, Accounting
for Income Taxes (SFAS 109), which requires the asset and
liability method of accounting for deferred income taxes.
Deferred tax assets and liabilities are determined based on the
temporary differences between the financial statement and tax
basis of assets and liabilities. Deferred tax assets or
liabilities at the end of each period are determined using the
tax rate in effect at that time.
The total future deferred income tax liability under SFAS
109 is extremely complicated for any oil company to estimate due
in part to the long-lived nature of depleting oil and gas
reserves and variables such as product prices. Accordingly, the
liability is subject to continual recalculation, revision of the
numerous estimates required, and may change significantly in the
event of such things as major acquisitions, divestitures, product
price changes, changes in reserve estimates, changes in reserve
lives, and changes in tax rates or tax laws.
RESULTS OF OPERATIONS
Nine Months Ended July 31, 2002 Compared to Nine Months Ended
July 1, 2001
For the nine months ended July 31, 2002, net income fell 44%
to $908,000 compared to $1,633,000 last year. Although
successful drilling boosted natural gas production by 77%, lower
net income resulted primarily from sharply lower net wellhead
prices (natural gas down by 48% and oil down by 25%).
Total revenues fell 11% to $3,975,000 for the nine months
ended July 31, 2002 compared to $4,483,000 last year. Oil and
gas sales decreased $510,000, or 13%, to $3,519,000. Refer to
the table and discussion on page 7 for details of oil and gas
prices and volumes for the applicable periods. Total gas price
realizations fell 46% to $2.94 per Mcf compared to $5.46 last
year. Hedging transactions increased 2002 price realizations by
$.35 per Mcf, or 14%, compared to $.52 per Mcf, or 11%, last
year. Net wellhead prices for gas decreased 48% to $2.59 per Mcf
compared to $4.94 last year. Net wellhead prices for oil
decreased 25% to $20.54 per barrel compared to $27.25 last year.
The net effect of these price changes, including hedging
transactions, was to decrease oil and gas sales $1,502,000. Gas
volumes increased 77% and oil volumes decreased 20%. The net
effect of volume changes was to increase oil and gas sales by
$992,000. Operating income increased $29,000, or 9%, due to
drilling overhead income. As discussed on page 6, investment
income fell 23% to $91,000 compared to $118,000 last year due
primarily to market conditions during the nine months of fiscal
2002 that limited investment opportunities for the market timers
which manage the bulk of the company's investments.
Total costs and expenses rose 25% to $2,678,000 for the nine
months of fiscal 2002 compared to $2,150,000 last year. Oil and
gas production expenses rose 12%, or $108,000, due to two major
well workovers that cost approximately $84,000. Depreciation,
depletion and amortization increased 54% primarily due to a net
increase in production volume between the periods. General and
administrative expenses increased $101,000, or 16%, due to
inflationary pressures and additional staffing. Interest expense
relates to the accrual of interest on the exclusive license
agreement obligation. Income taxes were provided at 30% in both
periods.
Quarter Ended July 31, 2002 Compared to Quarter Ended July 31,
2001
Net income for the quarter ended July 31, 2002 fell 26% to
$371,000 compared to $501,000 for the same quarter last year.
Although the 74% increase in natural gas production more than
offset lower price realizations, lower net income resulted
primarily from the increased production being encumbered by
depletion and lease operating expenses.
Total revenues rose 3% to $1,482,000 in the third quarter of
2002 compared to $1,441,000 for the same quarter last year. Oil
and gas sales increased 2% to $1,342,000 compared to $1,319,000
last year. Refer to the table and discussion on page 7 for
details of oil and gas prices and volumes for the applicable
periods. Total gas price realizations fell 37% to $2.92 per Mcf
compared to $4.63 last year. Hedging transactions increased
third quarter price realizations $.05 per Mcf, or 2%, compared to
$1.02 per Mcf, or 28%, last year. Net wellhead prices for gas
fell 20% to $2.87 per Mcf compared to $3.61 last year. Net
wellhead prices for oil fell 10% to $23.27 per barrel compared to
$25.75 last year. The net effect of these price changes and
hedging transactions was to decrease oil and gas sales $398,000.
Gas volumes increased 74% and oil volumes decreased 17%. The net
effect of volume changes was to increase oil and gas sales
$421,000. Operating income increased $10,000, or 9%, due to
drilling overhead income. Investment income increased to $17,000
in the third quarter of 2002 compared to $9,000 last year.
Total costs and expenses increased 31% to $952,000 in the
third quarter of 2002 compared to $725,000 last year. Oil and
gas production expenses rose 17%, or $49,000 due to costs
associated with timing of repairs. Depreciation, depletion and
amortization increased 56% primarily due to a net increase in
production volumes between the periods. General and
administrative expenses increased $52,000, or 25%, due to
inflationary pressures and additional staffing. Interest expense
relates to the accrual of interest on the exclusive license
agreement obligation, due annually. Income taxes were provided
at 30% in both periods.
FORWARD-LOOKING STATEMENTS
Certain information included in this quarterly report and
other materials filed by the company with the Commission contain
forward-looking statements relating to the company's operations
and the oil and gas industry. Such forward-looking statements
are based on management's current projections and estimates and
are identified by words such as "expects," "intends," "plans,"
"projects," "anticipates," "believes," "estimates" and similar
words. These statements are not guarantees of future performance
and involve certain risks, uncertainties and assumptions that are
difficult to predict. Therefore, actual results may differ
materially from what is expressed or forecasted in such
forward-looking statements. Among many factors that could cause
actual results to differ materially are: (i) natural gas and
crude oil price fluctuations, (ii) the company's ability to
acquire oil and gas properties that meet its objectives and to
identify prospects for drilling, and (iii) potential delays or
failure to achieve expected production from existing and future
exploration and development projects. In addition, such
forward-looking statements may be affected by general domestic
and international economic and political conditions.
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.
Date: September 11, 2002 By: /s/ James T. Huffman
---------------------------
James T. Huffman
President and
Chief Executive Officer
By: /s/ John A. Alsko
---------------------------
John A. Alsko
Vice President and
Chief Financial Officer
CERTIFICATION UNDER SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATIONS
I, James T. Huffman, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of CREDO
Petroleum Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
[Items 4, 5 and 6 omitted pursuant to the transition provisions
of Release No. 34-46427.]
Date: September 11, 2002 By: /s/ James T. Huffman
----------------------------
James T. Huffman
President and
Chief Executive Officer
I, John A. Alsko, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of CREDO
Petroleum Corporation;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for,
the periods presented in this quarterly report;
[Items 4, 5 and 6 omitted pursuant to the transition provisions
of Release No. 34-46427.]
Date: September 11, 2002 By: /s/ John A. Alsko
---------------------------
John A. Alsko
Vice President and
Chief Financial Officer