TXCO RESOURCES INC. (TXCO) filed Quarterly Report for the period ended 2009-09-30.
TXCO Resources is an independent oil and gas enterprise with interests in the Maverick Basin the onshore Gulf Coast region the Marfa Basin of Texas and the Midcontinent region of western Oklahoma. It has a consistent record of long-term growth in its proved oil and gas reserves leasehold acreage position production and cash flow through its established exploration and development programs. TXCO's business strategy is to build shareholder value by acquiring undeveloped mineral interests and internally developing a multi-year drilling inventory through the use of advanced technologies such as 3-D seismic and horizontal drilling. It accounts for its oil and gas operations under the successful efforts method of accounting. Txco Resources Inc. has a market cap of $8.5 million; its shares were traded at around $0.241 with and P/S ratio of 0.1.
Highlight of Business Operations:
At September 30, 2009, we had a working capital deficiency of $311.7 million, including liabilities subject to compromise. We had $66.1 million in pre-petition trade payables at September 30, 2009, all of which is 150 days or more past due. Pre-petition trade payables will be addressed in a Plan of Reorganization for the Company. Our inability to reach accommodations with our vendors regarding the timing of payment in light of our limited liquidity resulted in liens filed against our properties and withdrawal of trade credit by certain vendors, which in turn limits our ability to conduct operations on properties. While we examined alternatives to improve our liquidity and cash resources, our inability to improve our liquidity and cash resources has caused us to experience continued material adverse business consequences and resulted in the bankruptcy filing.
Unproven properties are subject to possible impairment if there is not a plan to develop the pool of assets in the next 12-month period. Given the complexities associated with oil and natural gas reserve estimates and the history of price volatility in the oil and natural gas markets, events may arise that would require us to record an impairment of the recorded book values associated with oil and natural gas properties. For the nine-months ended September 30, 2009, we recognized impairments of $89.0 million, compared to $1.1 million in the comparable period of 2008. The increase in impairment is due to the significant decrease in commodity prices from the comparative prior period, combined with our inability to fund our capital expenditures (causing us to reevaluate our various drilling projects), and the loss of proved undeveloped reserves on those portions of leases that expired due to lack of drilling activity. Of the $89.0 million, $50.8 million relates to wells in progress that we may be unable to complete due to our liquidity issues. There can be no assurance that additional impairments will not be recognized either in the next quarter or future quarters, which will require us to further evaluate our oil and natural gas properties.
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