Index Options
Nasdaq
Cboe
Brooklyn Nets
TradingView
Wall Street JournalFinancial Report Articles: Overview and Analysis
Financial Report Articles: Overview and Analysis
The financial report highlights key events and developments, such as the issuance of preferred stock, changes in retained earnings, and adjustments to oil and gas reserves. The report also mentions dispositions, promissory notes, and modifications to existing loans. Overall, the report provides a comprehensive overview of the company’s financial position and performance.
Overview
Norris Industries, Inc. is an oil and gas company focused on acquiring and developing crude oil and natural gas properties in Texas. As of March 1, 2024, the company had estimated net proved reserves of 20 Mbbl of oil and 70 MMcf of natural gas, totaling 32 Mbbl of oil equivalent. This is down 22 Mbbl from the prior year due to production issues from well workovers.
The company’s long-term objective is to improve existing fields and pursue additional reserves and production opportunities through buyouts, joint ventures, and capital partners. Norris Industries plans to focus on smaller oil and gas properties in Texas and improve production from its Bend Arch Lion joint venture leases. The company ultimately aims to obtain leases with development potential in the Permian Basin.
Results of Operations
| Financial Metric | 2024 | 2023 | Change |
|---|---|---|---|
| Revenues | $329,610 | $526,447 | -37% |
| Lease Operating Expenses | $530,369 | $655,029 | -19% |
| General & Administrative Expenses | $200,787 | $192,294 | 4% |
| Depletion & Accretion Expenses | $114,827 | $67,727 | 70% |
| Interest Expense | $126,962 | $116,377 | 9% |
| Net Loss | $(643,335) | $(504,980) | 28% |
Revenues fell 37% in 2024 primarily due to lower oil and gas prices and production volumes. Lease operating expenses declined 19% due to lower production activity. General and admin expenses were flat with management implementing cost controls.
Depletion and accretion expense rose 70% mainly from reduced estimated reserves. Interest expense increased 9% because of additional related party debt. These factors contributed to a 28% rise in net loss for the year.
Liquidity and Capital Resources
- Cash balance on February 29, 2024 was $54,217
- Operating activities used $397,514 of cash compared to $287,838 in 2023
- No cash used for investing activities
- $300,000 cash provided by financing from related party loans
The company will need additional financing for operations and acquisitions beyond its $600,000 credit line. The majority shareholder has provided funding in the past but is not legally obligated to do so going forward.
The financial statements have been prepared on a going concern basis. However, declining revenues, global conflicts, and economic uncertainty raise doubt about the company’s ability to continue operations.
Off-Balance Sheet Arrangements
As of February 29, 2024, the company had no off-balance sheet arrangements.
Critical Accounting Policies
Key estimates include the valuation of accounts receivable, depletion and accretion expenses, and oil and gas reserves. Global conflicts and economic factors have increased uncertainty around these estimates. Initiatives are in place to mitigate supply chain and commodity pricing risk.
The company follows the full cost method of accounting for oil and gas properties. Costs related to acquisition, exploration, and development are capitalized while dispositions result in a reduction of capitalized costs. Depletion and depreciation of proved properties uses units-of-production based on proved reserve estimates. Costs subject to depletion include estimated future development costs.
Unamortized costs are limited to the estimated discounted future net revenues of proved properties plus the lower of cost or fair value of unproved properties. Costs exceeding this limitation are charged as impairment expense, per the full cost ceiling test rules. Pre-acquisition costs directly tied to specific properties are capitalized when acquisition is probable.