Credo Petroleum Corp - Current report filing (8-K)
September 08 2008 - 5:16PM
Edgar (US Regulatory)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of
earliest event reported):
September 8, 2008
CREDO
Petroleum Corporation
(Exact
name of registrant as specified in its charter)
Colorado
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0-8877
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84-0772991
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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1801 Broadway, Suite 900 Denver, Colorado
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80202
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(Address
of principal executive offices)
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(Zip
Code)
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Registrants telephone number, including area
code:
(303) 297-2200
Check the appropriate box below if the Form 8-K
filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions (see General Instruction A.2.
below):
o
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
o
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240-14a-12)
o
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR 240.14d-2(b))
o
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR 240.13e-4(c))
Item 4.02 Non-Reliance
on Previously Issued Financial Statements or a Related Audit Report or
Completed Interim Review
(a) On September 2, 2008, in
connection with preparing its quarterly report for third quarter 2008,
management of CREDO Petroleum Corporation (the company) and the Audit
Committee of its Board of Directors determined that the contemporaneous formal
documentation it had historically prepared to support its initial hedge
designations in connection with the companys natural gas hedging program does
not meet the technical requirements to qualify for cash flow hedge accounting
treatment in accordance with SFAS 133.
The primary reason for this determination was that the formal hedge
documentation lacks specificity of the hedged items and therefore, the cash
flow designations failed to meet hedge documentation requirements for cash flow
hedge accounting treatment.
Consequently, the unrealized gain or loss should have been recorded in
the consolidated statements of operations as a component of income before
income taxes. Under the cash flow
accounting treatment used by the
company, the fair values of the hedge contracts was recognized in the
consolidated balance sheets with the resulting unrealized gain or loss, net of
income taxes, recorded initially in accumulated other comprehensive income and
later reclassified through earnings when the hedged production affected
earnings.
The company will restate its consolidated
financial statements for fiscal years ended October 31, 2005, 2006,
2007 and the first and second quarters of fiscal year ending October 31, 2008. There is no effect in any period on overall
cash flows, EBITDA, total assets, total liabilities or total stockholders
equity. The cumulative effect on all
periods of the restatement and the correction to the third quarter of 2008 was
to reduce net income by $182,000 and diluted income per share by $.03. For the three years ended October 31,
2007, the cumulative effect of the restatement was to increase net income by
$756,000 and to increase diluted income per share by $.08. For the nine months ended July 31, 2008,
the cumulative effect of the restatement and the correction to third quarter
2008 income was to reduce net income by $938,000 and to reduce diluted income
per share by $.11. The restatement did
not have any impact on any of the Companys financial covenants under its line
of credit. The primary financial
statement items impacted by this restatement are as follows:
2
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Unrealized Hedges Included
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Revenues
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in Income, Net of Tax
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Net Income
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Diluted Income per share
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Period
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As reported
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As restated
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As reported
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As restated
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As reported
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As restated
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As reported
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As restated
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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(unaudited)
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(amounts in thousands, except for per share amounts)
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Fiscal year 2005
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$
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13,289
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$
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14,008
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$
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0
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$
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131
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$
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5,022
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$
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5,153
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$
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0.54
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$
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0.55
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Fiscal year 2006
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16,491
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16,757
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0
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956
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5,880
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6,836
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0.62
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0.72
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Fiscal year 2007
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16,993
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15,084
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0
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(331
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)
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6,091
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5,760
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0.65
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0.61
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Total Prior Years
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46,773
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45,849
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0
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756
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16,993
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17,749
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1.81
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1.88
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Fiscal year 2008:
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Quarter 1
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4,575
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3,728
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0
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(228
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)
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1,801
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1,573
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0.19
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0.17
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Quarter 2
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5,028
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5,023
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0
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(2,866
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)
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1,986
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(880
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)
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0.21
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(0.09
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)
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Fiscal year 2008 Quarter 3: original cash flow hedge accounting
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3,819
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0
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1,187
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0.12
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Revised hedge accounting consistent with the restated financial statements
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5,695
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2,156
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3,343
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0.34
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Total fiscal year 2008
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13,422
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14,446
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0
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(938
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)
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4,974
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4,036
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0.52
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0.42
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Total All Periods
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$
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60,195
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$
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60,295
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$
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0
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$
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(182
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)
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$
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21,967
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$
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21,785
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$
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2.33
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$
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2.30
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Discussions and Future Filings
The matters disclosed in this Form 8-K
have been discussed by the companys chief financial officer and the chairman
of its audit committee with representatives of Hein & Associates LLP,
the registered independent accounting firm that audited or reviewed the
financial statements to be restated. The
company intends to file the required amended Form 10-K for its fiscal year
ended October 31, 2007 and the amended Form 10-Qs for the first and
second quarters of its fiscal year ending October 31, 2008 as soon as
possible. The company intends to file Form 12b-25
requesting a five calendar day extension of time to file its Form 10-Q for
its third quarter ended July 31, 2008, but there can be no assurance that
the Form 10-Q will be filed within the extension period.
Item 8.01
Other Events
On September 9, 2008, the company will
issue a press release regarding the matters in this Form 8-K.
3
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 hereunto duly authorized.
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CREDO PETROLEUM
CORPORATION
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(Registrant)
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Date: September 8,
2008
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By:
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/s/ Alford B. Neely
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Alford B. Neely
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Vice President &
CFO
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