SEC Company Response from HALLADOR ENERGY CO (HNRG) (CIK 0000788965) (HNRG) — Mar 9, 2007
HALLADOR ENERGY CO (HNRG) (CIK 0000788965)
Date: March 9, 2007 · CIK: 0000788965 · Accession: 0000788965-07-000007
AI Filing Summary & Sentiment
Reasoning
Referenced dates: February 22, 2007, January 25, 2007
Letter
United States Securities and Exchange Commission Form 10-QSB for the quarter ended June 30, 2006 Form 10-QSB for the quarter ended September 30, 2006 Form 8-K/A (amendment No. 1) filed October 16, 2006 File No. 0-14731
Dear Mr. Hiller:
This letter is in response to your letter dated February 22, 2007. The information below corresponds to your numbered comments in your letter.
Form 10-KSB for the year ended December 31, 2006
Financial Statements
1.
Along with the corrections you plan to make, please include a tabular disclosure reconciling the as previously reported to restated amounts, and include explanations as to the reasons for the adjustments.
OUR RESPONSE
Once all of the comments are resolved, we will comply.
Form 10-QSB for the quarter ended September 30, 2006
Financial Statements
Note 5 - Sunrise Coal Acquisition, page 10
Securities and Exchange Commission
March 9,
Page
2.
We will not repeat in its entirety your comment #2, but it deals with whether or not the IPL coal contract is a derivative.
OUR RESPONSE
There is no active economic "spot market" in our area. Substantially all of the coal in our market is sold under contract with terms ranging from one to six years. By our area, we mean the location of the Sunrise mine located in western Indiana. In order for Sunrise to sell in the "spot" market, Sunrise would be required to transport coal approximately 100 miles to the Ohio river. Our estimate of transportation and handling costs would be in excess of $10 per ton. Our coal price with IPL is $25 per ton.
It is our understanding that the FASB staff are of the opinion that conversion costs greater than 10% imply that assets are not readily convertible to cash. This assessment should be performed only at inception of a contract. The estimated $10 per ton for transportation and handling costs clearly exceeds the 10% threshold.
Sunrise's Carlisle coal contract with IPL, a copy of which is being mailed, does not provide nor permit net settlement.
3.
We will not repeat in its entirety your comment #3, but it deals with the proposed settlement provisions allowing IPL to reduce the amounts it will pay for coal.
OUR RESPONSE
What follows is background information listing the dates that the two coal contracts were executed.
The Howesville contract was executed in April 2005 and first sales from the Howesville mine occurred in late November 2005. In December 2005, management of Sunrise became concerned with certain "roof conditions" with implications for miners' safety. In addition, other concerns such as water seepage and "rolling seams" were encountered. Consequently, Sunrise management concluded for safety reasons to close the mine in June 2006. IPL was notified that Sunrise would not be able to honor the April 2005 contract and claimed "force majeure." IPL did not agree with the force majeure claim. Sunrise is still negotiating with IPL and no final agreement has occurred. As previously mentioned, our September 30, 2006 balance sheet reflects an estimated liability of $4 million pertaining to this matter. Upon a final agreement with IPL, Sunrise will be legally released from the Howesville contract.
In January 2006, a separate contract was entered into with IPL to sell coal from Surnise's Carlisle mine, located about 20 miles from the Howesville mine, which as mentioned above, was closed in June 2006.
Securities and Exchange Commission
March 9,
Page
Your comment asked if there is any correlation with the quantities to be delivered under the original agreement (we presume you are referring to the April 2005 Howesville contract) with the Carlisle contract entered into June 2006 and the answer to your question is "there is no correlation."
In addition, we are assuming that neither of the two contracts (Howesville or Carlisle) meet the definition of a derivative as explained above in our response to your comment #2.
Note 6 - Investment in Savoy, page 11
4.
We will not repeat in its entirety your comment #4, but it deals with the sale of stock to Yorktown in December 2005 and our purchase of a 32% interest in Savoy.
OUR RESPONSE
Hallador's stock trades about 51,000 shares for a whole year, or an average of 200 shares per day. There are times when we will go two or three months without a single trade. In our case, stock value is not always the correct indicator of fair value. With a stock that trades as thinly as ours, we have seen our market cap flucuate as much as 100% in one day on volume of less than 5,000 shares. At the time of the Savoy transaction our outstanding shares were about seven million.
Although we are still of the opinion that our accounting is proper, we will relent and comply with your comment.
As noted in your comment, we will comply (and have complied) with provisions of paragraph 19(h) of APB 18.
Form 8-K/A Filed October 16, 2006
Financial Statements - Sunrise Coal LLC
Note 6 - Subsequent Events, page 13
5.
We will not repeat in its entirety your comment #5, but it deals with the closing of the Howesville mine.
OUR RESPONSE
Please read our response to your comment #3 above.
Securities and Exchange Commission
March 9,
Page
We will include the wording we made in response to your comment #3 above in Note 6 and on page 20 of the Form 8-K/A.
Pro Forma Financial Statements, page 21
6.
We will not repeat in its entirety your comment #6, but it deals with the pro forma adjustments and discontinued operations.
OUR RESPONSE
We will comply and make such adjustments.
Engineering Comments
Form 10-QSB for quarter ended September 30, 2006
MD&A, page
1.
We will not repeat in its entirety your comment #1, but it deals with $10.9 million in used equipment transferred from the Howesville mine to the Carlisle mine and deals with our response to your comment #13.
OUR RESPONSE
Our response to your comment #13 in our letter dated January 25, 2007, we said we would add a paragraph which includes the following sentence, "Since this is a new mine basically all the mining equipment is new." We will delete such statement, as it does not materially add to disclosure. The $10.8 million was the net book value of the equipment at the time of transferring such equipment from the Howesville mine to the Carlisle mine. We will revise the disclosure to reflect the $10.8 million was valued at historical costs.
Your remaining comments deal with coal reserves and will be responded to in a separate cover by the end of March. We talked to Tracie Towner last week and asked for a time extension of March 16th for the accounting issues and March 30 for the reserve and engineering issues. We appreciate being given the time extensions.
Yours truly,
/S/Victor P. Stabio
President and CEO
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Unassociated Document
Hallador
Petroleum Company
1660
Lincoln
Street, Suite 2700
Denver,
CO
80264
303/839-5504
-
phone
303/832-3013
-
fax
March
09,
2007
Mr.
Karl
Hiller
Branch
Chief
United
States
Securities
and
Exchange Commission
Washington,
DC
20549-7010
Re:
Hallador Petroleum Company:
Form
10-KSB for the
year ended December 31, 2005
Form
10-QSB for the
quarter ended June 30, 2006
Form
10-QSB for the
quarter ended September 30, 2006
Form
8-K/A
(amendment No. 1) filed October 16, 2006
File
No. 0-14731
Dear
Mr.
Hiller:
This
letter is in
response to your letter dated February 22, 2007. The information below
corresponds to your numbered comments in your letter.
Form
10-KSB for
the year ended December 31, 2006
Financial
Statements
1.
Along
with
the corrections you plan to make, please include a tabular disclosure
reconciling the as previously reported to restated amounts, and
include
explanations as to the reasons for the
adjustments.
OUR
RESPONSE
Once
all of the
comments are resolved, we will comply.
Form
10-QSB for
the quarter ended September 30, 2006
Financial
Statements
Note
5 - Sunrise
Coal Acquisition, page 10
Securities
and
Exchange Commission
March
9,
2007
Page
2
2.
We
will not
repeat in its entirety your comment #2, but it deals with whether
or not
the IPL coal contract is a
derivative.
OUR
RESPONSE
There
is no active
economic "spot market" in our area. Substantially all of the coal in our
market
is sold under contract with terms ranging from one to six years. By our area,
we
mean the location of the Sunrise mine located in western Indiana. In order
for
Sunrise to sell in the "spot" market, Sunrise would be required to transport
coal approximately 100 miles to the Ohio river. Our estimate of transportation
and handling costs would be in excess of $10 per ton. Our coal price with
IPL is
$25 per ton.
It
is our understanding that the FASB staff are of the opinion that conversion
costs greater than 10% imply that assets are not readily convertible to cash.
This assessment should be performed only at inception of a contract. The
estimated $10 per ton for transportation and handling costs clearly exceeds
the
10% threshold.
Sunrise's
Carlisle
coal contract with IPL, a copy of which is being mailed, does not provide
nor
permit net settlement.
3.
We
will not
repeat in its entirety your comment #3, but it deals with the proposed
settlement provisions allowing IPL to reduce the amounts it will
pay for
coal.
OUR
RESPONSE
What
follows is
background information listing the dates that the two coal contracts were
executed.
The
Howesville
contract was executed in April 2005 and first sales from the Howesville mine
occurred in late November 2005. In December 2005, management of Sunrise became
concerned with certain "roof conditions" with implications for miners' safety.
In addition, other concerns such as water seepage and "rolling seams" were
encountered. Consequently, Sunrise management concluded for safety reasons
to
close the mine in June 2006. IPL was notified that Sunrise would not be able
to
honor the April 2005 contract and claimed "force majeure." IPL did not agree
with the force majeure claim. Sunrise is still negotiating with IPL and no
final
agreement has occurred. As previously mentioned, our September 30, 2006 balance
sheet reflects an estimated liability of $4 million pertaining to this matter.
Upon a final agreement with IPL, Sunrise will be legally released from the
Howesville contract.
In
January 2006, a separate contract was entered into with IPL to sell coal
from
Surnise's Carlisle mine, located about 20 miles from the Howesville mine,
which
as mentioned above, was closed in June 2006.
Securities
and
Exchange Commission
March
9,
2007
Page
3
Your
comment asked
if there is any correlation with the quantities to be delivered under the
original agreement (we presume you are referring to the April 2005 Howesville
contract) with the Carlisle contract entered into June 2006 and the answer
to
your question is "there is no correlation."
In
addition, we are assuming that neither of the two contracts (Howesville or
Carlisle) meet the definition of a derivative as explained above in our response
to your comment #2.
Note
6 -
Investment in Savoy, page 11
4.
We
will not
repeat in its entirety your comment #4, but it deals with the sale
of
stock to Yorktown in December 2005 and our purchase of a 32% interest
in
Savoy.
OUR
RESPONSE
Hallador's
stock
trades about 51,000 shares for a whole year, or an average of 200 shares
per
day. There are times when we will go two or three months without a single
trade.
In our case, stock value is not always the correct indicator of fair value.
With
a stock that trades as thinly as ours, we have seen our market cap flucuate
as
much as 100% in one day on volume of less than 5,000 shares. At the time
of the
Savoy transaction our outstanding shares were about seven million.
Although
we are
still of the opinion that our accounting is proper, we will relent and comply
with your comment.
As
noted in your comment, we will comply (and have complied) with provisions
of
paragraph 19(h) of APB 18.
Form
8-K/A Filed
October 16, 2006
Financial
Statements - Sunrise Coal LLC
Note
6 -
Subsequent Events, page 13
5.
We
will not
repeat in its entirety your comment #5, but it deals with the closing
of
the Howesville mine.
OUR
RESPONSE
Please
read our
response to your comment #3 above.
Securities
and
Exchange Commission
March
9,
2007
Page
4
We
will include the wording we made in response to your comment #3 above in
Note 6
and on page 20 of the Form 8-K/A.
Pro
Forma
Financial Statements, page 21
6.
We
will not
repeat in its entirety your comment #6, but it deals with the pro
forma
adjustments and discontinued
operations.
OUR
RESPONSE
We
will comply and make such adjustments.
Engineering
Comments
Form
10-QSB for
quarter ended September 30, 2006
MD&A,
page
15
1.
We
will not
repeat in its entirety your comment #1, but it deals with $10.9
million in
used equipment transferred from the Howesville mine to the Carlisle
mine
and deals with our response to your comment
#13.
OUR
RESPONSE
Our
response to
your comment #13 in our letter dated January 25, 2007, we said we would add
a
paragraph which includes the following sentence, "Since this is a new mine
basically all the mining equipment is new." We will delete such statement,
as it
does not materially add to disclosure. The $10.8 million was the net book
value
of the equipment at the time of transferring such equipment from the Howesville
mine to the Carlisle mine. We will revise the disclosure to reflect the $10.8
million was valued at historical costs.
Your
remaining
comments deal with coal reserves and will be responded to in a separate cover
by
the end of March. We talked to Tracie Towner last week and asked for a time
extension of March 16th for the accounting issues and March 30 for the reserve
and engineering issues. We appreciate being given the time
extensions.
Yours
truly,
/S/Victor
P.
Stabio
President
and
CEO