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barrels of oil-equivalent (boe)54 on January 1, 1993, and on June
4, 1994.
During the period 1988 through 1993, True Oil’s revenues
declined from a high of $25.8 million in 1990 to a low of $17.6
million in 1993. In addition, operating margins declined from
44.2 percent of revenues in 1990 to 35.8 percent of revenues in
1993. These declines can be attributed to increased competition
within the industry and to True Oil’s unsuccessful attempts to
find new reserves. True Oil spent over $300 million on
intangible drilling costs from 1972 through 1998; approximately
58 percent of those costs related to nonproductive wells.
True Oil’s ordinary income also declined from a high of
approximately $12.2 million in 1990 to a loss of $4.7 million in
1993. For the period 1988 through 1993, True Oil sustained net
losses only in 1992 and 1993. In those 2 years, True Oil
deducted extraordinary exploration costs of approximately $23
million on an unsuccessful venture in Honduras.
For the 6 months ending June 30, 1994, True Oil’s revenues
decreased sharply from approximately $11.3 million (for 6 months
ending June 30, 1993) to $7.5 million. Likewise, net income was
lower than for the same 6-month period in 1993.
54Barrels of oil-equivalent takes into account both oil and
gas reserves. Gas is converted to boe units either based on a
heating ratio (usually 6,000 cubic feet of gas to a barrel of
oil) or on a current price ratio (about 9,000 to 1 in the 1993-94
period).
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