Spindletop posts modest profit from gas and investments; G&A, DD&A, OTC downgrade raise risks

Spindletop Oil & Gas Co. (OTCMKTS: SPND) - concise operating and income-statement snapshot from the Form 10‑Q for the quarter ended June 30, 2025.

Quick summary:
The company turned a small six‑month profit ($80,000) driven by stronger natural gas pricing and investment income, improved operating cash flow, and a large investment portfolio - but earnings are pressured by high general & administrative costs and sharply higher depletion/amortization after a reserve re‑evaluation. Management bought back stock, continues modest drilling activity via non‑operated interests, and faces limited market liquidity after an OTC market downgrade and pending litigation in Louisiana.

Key points & statistics
- Total revenues (six months ended 6/30/2025): $2,235,000 vs $2,137,000 (2024).
- Oil & gas revenues (six months): $1,928,000 vs $1,855,000 (+$73,000, +3.9%).
- Natural gas revenue (six months): $941,000 vs $641,000 (+46.8%); avg price $3.20/mcf vs $2.42/mcf (+32.2%); volumes 293,800 mcf vs 265,000 mcf (+10.9%).
- Oil sales (six months): $987,000 vs $1,214,000 (‑18.7%); avg oil price $66.64/bbl vs $77.16/bbl (‑13.6%); volumes 13,500 bbls vs 14,250 bbls (‑5.3%).
- Total expenses (six months): $2,544,000 vs $2,728,000 (improvement).
- Depreciation, depletion & amortization (six months): $188,000 vs $81,000 (+132.1%); Q2 DD&A $142,000 vs $43,000 (+230.2%).
- General & administrative (six months): $1,413,000 vs $1,240,000 (+14.0%).
- Net income (six months): $80,000 vs net loss $(62,000) prior year. EPS (basic & diluted) six months: $0.01 vs $(0.01).
- Cash, cash equivalents and restricted cash at 6/30/2025: $7,436,000 (beginning balance $6,742,000). Cash & cash equivalents on balance sheet: $7,166,000. Other long‑term investments: $15,550,000 (down from $16,575,000).
- Net cash provided by operating activities (six months): $338,000 vs $422,000 prior year.
- Investing activities produced net cash $707,000 (driven by a $1,025,000 change in other long‑term investments).
- Financing: repurchased 141,573 shares on 6/10/2025 for $351,101.04 ($2.48/share); treasury stock balance $2,270,000. Outstanding shares at Aug 19, 2025: 6,598,370.

Positive aspects of the income statement & position
- Revenue growth overall (six‑month +4.6% total revenues) and a strong natural gas performance (price and volume gains).
- Returned to net income for the six months ($80,000) after a prior‑year loss - EPS positive for the period ($0.01).
- Significant cash and low apparent debt on the balance sheet; large portfolio of other long‑term investments (~$15.55M) supports liquidity and generated meaningful interest income ($420,000 six months).
- Operating expense reductions: lease operating expenses fell materially (six months $587,000 vs $929,000) driven by plugging activity - improving margins on produced volumes.

Negative aspects / red flags
- High and rising G&A: $1.413M for six months is large relative to revenue (over 60% of total revenues), pressuring operating margins.
- Substantially higher DD&A after reserve re‑evaluation is accelerating non‑cash charges (six‑month DD&A up 132%; Q2 DD&A up 230%), reducing reported operating income even if cash flows remain stable.
- Operating loss remains at the segment level (Loss from operations six months $(309,000)), offset by investment/interest income - a reminder operating cash generation is limited relative to corporate overhead.
- Market liquidity and investor access impaired: downgraded to OTC Pink Limited effective July 1, 2025 (OTC warning and Yield symbol) - likely to reduce trading liquidity and investor pool.
- Legal exposure: new pollution lawsuit in LaFourche Parish, LA (filed Dec 11, 2024) is in early stages; prior litigation dismissal (Feb 20, 2025) was favorable but litigation risk remains.
- Share repurchase used $351k in cash; treasury stock increased materially - reduces cash cushion and may limit flexibility if commodity prices or activity weaken.

Operations & corporate actions
- Non‑operated drilling in Oklahoma: Fort 22.27‑H completed and flowing back (2.34375% WI); Reutlinger 22‑27‑1H spud and awaiting completion (2.34375% WI).
- No material ARO accretion in 2025 (vs $100k in prior year) but ARO remains a significant balance ($4.314M noncurrent liability).
- Management asserts disclosure controls effective and is evaluating financing alternatives if cash flow insufficient for capital program (JV or asset sales noted).

Bottom line - what to watch next
- Monitor commodity prices (oil and gas) and realized volumes - natural gas tailwind helped results; falling oil prices/volumes could reverse gains.
- Watch G&A trends and whether management reduces overhead or justifies the high fixed costs relative to revenue.
- Follow reserve updates and consequent DD&A guidance - further reserve revisions could cause more non‑cash charges.
- Liquidity/marketability risk from OTC Pink Limited downgrade; trading volume and access to capital may be constrained. Cash position (~$7.4M) and investments (~$15.6M) provide a buffer, but capital needs for drilling or legal exposure could require external financing.
- Legal developments in LaFourche Parish and any future ARO adjustments could affect contingent liabilities and reported results.

Bottom-line verdict: Spindletop (OTCMKTS: SPND) shows modest improvement to profitability driven by higher gas prices and investment income, with strong liquidity from investments - but earnings are squeezed by high G&A and much larger DD&A after reserve re‑valuation, and the company faces trading‑liquidity and legal risks that investors should monitor closely.