Exhibit 99.1
NEWS RELEASE
PATINA PRODUCTION RISES 45%
DENVER, COLORADO – OCTOBER 29, 2003 – PATINA OIL & GAS CORPORATION (NYSE:POG) today reported third quarter results. Revenues jumped 92% from the prior year period to $99.2 million as cash flow from operations before changes in working capital reached $67.7 million, an 82% increase. Net income increased 79% to $25.0 million or $0.74 per share ($0.70 fully diluted). The dramatic increases were primarily driven by rapid production growth and higher realized prices.
Production in the quarter grew to 274.5 MMcfe a day, 45% above the prior year level. Production was comprised of 15,777 barrels of oil and 179.9 MMcf of gas per day. The growth was achieved principally through a combination of ongoing Wattenberg development and the contribution of the Mid Continent properties. As the Cordillera purchase closed on October 1st, its production was not reflected in the third quarter. Including Cordillera, production currently approximates 310 MMcfe a day.
Wellhead prices, after adjustment for hedging, averaged $3.87 per Mcfe in the period, a 34% increase. The average reflected realized prices of $25.45 per barrel and $3.68 per Mcf. Hedging reduced realizations by $3.95 per barrel and $0.59 per Mcf in the quarter. Lease operating expenses rose to $14.4 million and averaged $0.57 per Mcfe. The rise was due to the combination of increased production and higher unit operating costs resulting from an increased proportion of oil production, which involves substantially higher field costs. Oil represented 34% of production in the quarter versus 27% a year earlier. With rising gas production in Wattenberg, the Mid Continent gas properties and the impact of the $244.5 million Cordillera acquisition, the proportion of gas production should begin to rise in the fourth quarter. Production taxes increased $4.4 million, in line with higher prices and production. Depletion and depreciation expense increased $7.9 million due to higher production. General and administrative expenses increased $1.8 million, largely due to acquisitions. Interest expense increased $1.2 million due to borrowings incurred in those acquisitions. Given the 13% rise in Patina’s share price during the quarter, the deferred compensation adjustment, a non-cash expense based on the value of stock held in the deferred compensation plan, rose sharply to $6.0 million. The income tax provision more than doubled as a result of rising earnings and the current 38% tax rate. A 35% rate was utilized through December 31, 2002 due to Section 29 tax credits.
During the quarter, $45.0 million of capital was spent. In Wattenberg, development expenditures totaled $19.9 million for the drilling or deepening of 20 wells, performing 84 Codell refracs, 14 Codell trifracs and four recompletions. A further $16.7 million was spent to drill or deepen 35 wells and perform two recompletions in the Mid Continent and $8.3 million was spent on the development of other properties. In September, the Company exchanged its interest in the Antelope Arch project for additional Wattenberg interests.
At September 30, 2003, bank debt totaled $220.0 million. On October 1st, borrowings increased to $456.0 million as a result of the Cordillera acquisition. To reduce exposure to floating rates, the Company simultaneously entered into swaps to lock in fixed rates on almost half its debt. Effective November 1st, the LIBOR rate on $100.0 million was fixed for one year at 1.26% and the rate on $100.0 million was fixed at 1.83% for two years. The Company is currently paying LIBOR plus 145 basis points or an average of 3.0% on its borrowings.
Commenting, Thomas J. Edelman, the Company’s Chairman, said, “We were delighted with third quarter results and the progress made during the period. Wattenberg development continues to yield exceptional results. While still in the early stages of evaluating a trifrac program there, we are very encouraged. In the Mid Continent, frac technology and gathering system enhancements on the Bravo properties have allowed their development results to substantially exceed expectations. In the Cordillera purchase, we added significantly to our asset base in areas adjacent to the Bravo properties and established a third core area in the San Juan Basin. Based on identified projects, we expect to recommend a roughly $200.0 million development budget for 2004 and to increase production as a result by 17%—20%. With an exceptional inventory of high return development projects, a significant hedge position and current commodity prices, we anticipate reporting record results in the final quarter of 2003 and throughout 2004.”
The Company plans to host a conference call on Thursday, October 30, 2003 beginning at 2:00 p.m. (EST) to discuss these results. To participate in the call, please dial (800) 289-0437. A replay of the call will also be available for thirty days beginning on October 31st by dialing (888) 203-1112. The access code for the replay is 773306.
This release contains certain forward-looking statements within the meaning of the Federal securities laws. Such statements are based on management’s current expectations, estimates and projections, which are subject to a wide range of uncertainties and business risks. Factors that could cause actual results to differ from those anticipated are discussed in the Company’s periodic filings with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2002.
Patina is an independent oil company engaged in the acquisition, development, exploitation and production of oil and natural gas primarily in Colorado’s Wattenberg Field, the Mid Continent region of southern Oklahoma and the Texas Panhandle, and the San Juan Basin.
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Contact: | David J. Kornder Executive Vice President Chief Financial Officer (303) 389-3600 dkornder@patinaoil.com |
PATINA OIL & GAS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||
% Change | 2003 | 2002 | % Change | 2003 | 2002 | ||||||||||||||||
Revenues | |||||||||||||||||||||
Oil and gas sales | $ | 97,848 | $ | 50,309 | $ | 278,329 | $ | 149,265 | |||||||||||||
Deferred compensation asset gain (loss) | 407 | (762 | ) | 1,141 | (1,297 | ) | |||||||||||||||
Other | 925 | 2,099 | 2,094 | 6,257 | |||||||||||||||||
| 92 | % | 99,180 | 51,646 | 83 | % | 281,564 | 154,225 | ||||||||||||||
Expenses | |||||||||||||||||||||
Lease operating expenses | 14,420 | 6,397 | 39,066 | 20,133 | |||||||||||||||||
Production taxes | 7,155 | 2,715 | 20,047 | 7,649 | |||||||||||||||||
Exploration | 618 | 1,006 | 2,788 | 1,353 | |||||||||||||||||
Gross margin | 85 | % | 76,987 | 41,528 | 76 | % | 219,663 | 125,090 | |||||||||||||
General and administrative | 4,355 | 2,506 | 13,037 | 8,552 | |||||||||||||||||
Interest and other | 1,742 | 525 | 5,843 | 1,775 | |||||||||||||||||
Deferred compensation adjustment | 5,966 | 348 | 15,885 | 6,417 | |||||||||||||||||
Depletion, depreciation and amortization | 24,571 | 16,625 | 68,928 | 47,590 | |||||||||||||||||
Pre-tax income | 87 | % | 40,353 | 21,524 | 91 | % | 115,970 | 60,756 | |||||||||||||
Provision for income taxes | |||||||||||||||||||||
Current | 5,750 | 2,014 | 16,526 | 6,322 | |||||||||||||||||
Deferred | 9,584 | 5,537 | 27,543 | 14,997 | |||||||||||||||||
| 15,334 | 7,551 | 44,069 | 21,319 | ||||||||||||||||||
Net income before cumulative effect of change in accounting principle | 79 | % | $ | 25,019 | $ | 13,973 | 82 | % | $ | 71,901 | $ | 39,437 | |||||||||
Cumulative effect of change in accounting principle | — | — | (2,613 | ) | — | ||||||||||||||||
Net income | 79 | % | $ | 25,019 | $ | 13,973 | 76 | % | $ | 69,288 | $ | 39,437 | |||||||||
Net income per share before cumulative effect of change in accounting principle | |||||||||||||||||||||
Basic | 76 | % | $ | 0.74 | $ | 0.42 | 75 | % | $ | 2.12 | $ | 1.21 | |||||||||
Diluted | 75 | % | $ | 0.70 | $ | 0.40 | 77 | % | $ | 2.02 | $ | 1.14 | |||||||||
Net income per share | |||||||||||||||||||||
Basic | 76 | % | $ | 0.74 | $ | 0.42 | 69 | % | $ | 2.04 | $ | 1.21 | |||||||||
Diluted | 75 | % | $ | 0.70 | $ | 0.40 | 71 | % | $ | 1.95 | $ | 1.14 | |||||||||
Weighted average shares outstanding | |||||||||||||||||||||
Basic | 33,907 | 33,136 | 34,003 | 32,750 | |||||||||||||||||
Diluted | 35,686 | 34,849 | 35,557 | 34,409 | |||||||||||||||||
PATINA OIL & GAS CORPORATION
SUMMARY BALANCE SHEET, OPERATIONAL AND CASH FLOW DATA
(in thousands, except price data)
| Summary Balance Sheet | September 30, 2003 | September 30, 2002 | ||||||||||||||||||||
Total assets | 91 | % | $ | 869,142 | $ | 456,072 | ||||||||||||||||
Total debt | 547 | % | $ | 220,000 | $ | 34,000 | ||||||||||||||||
Stockholders’ equity | 17 | % | $ | 325,443 | $ | 278,118 | ||||||||||||||||
% Change | Three Months Ended September 30, | % | Nine Months Ended September 30, | |||||||||||||||||||
| Summary Operational Data | 2003 | 2002 | 2003 | 2002 | ||||||||||||||||||
Oil production (Bbl per day) | 83 | % | 15,777 | 8,644 | 81 | % | 15,118 | 8,370 | ||||||||||||||
Gas production (Mcf per day) | 31 | % | 179,880 | 137,359 | 28 | % | 169,628 | 132,091 | ||||||||||||||
Total production (Mcfe per day) | 45 | % | 274,541 | 189,221 | 43 | % | 260,333 | 182,311 | ||||||||||||||
Average oil price (per Bbl) | 3 | % | $ | 25.45 | $ | 24.69 | 6 | % | $ | 25.88 | $ | 24.33 | ||||||||||
Average gas price (per Mcf) | 51 | % | $ | 3.68 | $ | 2.43 | 42 | % | $ | 3.70 | $ | 2.60 | ||||||||||
Average price per Mcfe | 34 | % | $ | 3.87 | $ | 2.89 | 31 | % | $ | 3.92 | $ | 3.00 | ||||||||||
Summary Cash Flow | ||||||||||||||||||||||
Net income | 79 | % | $ | 25,019 | $ | 13,973 | 76 | % | $ | 69,288 | $ | 39,437 | ||||||||||
Cumulative effect of change in accounting principle | — | — | 2,613 | — | ||||||||||||||||||
Depletion, depreciation and amortization | 24,571 | 16,625 | 68,928 | 47,590 | ||||||||||||||||||
Deferred compensation adjustments | 5,559 | 1,110 | 14,744 | 7,714 | ||||||||||||||||||
Exploration and other | 752 | 1,005 | 3,190 | 1,423 | ||||||||||||||||||
Stock option tax benefit | 2,203 | 25 | 6,860 | 3,496 | ||||||||||||||||||
Reversal of hedging impairment, net | — | (1,119 | ) | — | (3,459 | ) | ||||||||||||||||
Deferred tax provision | 9,584 | 5,537 | 27,543 | 14,997 | ||||||||||||||||||
Cash flow before changes in working capital (1) | 82 | % | 67,688 | 37,156 | 74 | % | $ | 193,166 | $ | 111,198 | ||||||||||||
Changes in working capital | 5,196 | 6,761 | (6,617 | ) | (6,340 | ) | ||||||||||||||||
Cash flow provided by operations | 66 | % | $ | 72,884 | $ | 43,917 | 78 | % | $ | 186,549 | $ | 104,858 | ||||||||||
Adjusted weighted average shares outstanding-diluted (2) | 37,045 | 36,143 | 36,905 | 35,722 | ||||||||||||||||||
Reconciliation of Net income per share to Net income | ||||||||||||||||||||||
Net income | $ | 25,019 | $ | 13,973 | $ | 69,288 | $ | 39,437 | ||||||||||||||
Deferred compensation adjustments | 5,559 | 1,110 | 14,744 | 7,714 | ||||||||||||||||||
Provision for income taxes at 38% in 2003 and 35% in 2002 | (2,112 | ) | (389 | ) | (5,603 | ) | (2,700 | ) | ||||||||||||||
Non-cash deferred compensation adjustments, net of tax | $ | 3,447 | $ | 722 | $ | 9,141 | $ | 5,014 | ||||||||||||||
Net income excluding deferred compensation adjustments | 94 | % | 28,466 | 14,695 | 76 | % | 78,429 | 44,451 | ||||||||||||||
Adjusted weighted average shares outstanding (2) | ||||||||||||||||||||||
Basic | 35,266 | 34,430 | 35,351 | 34,063 | ||||||||||||||||||
Diluted | 37,045 | 36,143 | 36,905 | 35,722 | ||||||||||||||||||
Net income per share before deferred compensation | ||||||||||||||||||||||
Basic | 89 | % | $ | 0.81 | $ | 0.43 | 70 | % | $ | 2.22 | $ | 1.30 | ||||||||||
Diluted | 89 | % | $ | 0.77 | $ | 0.41 | 71 | % | $ | 2.13 | $ | 1.24 | ||||||||||
(1) Management believes that the non-GAAP measure of cash flow before changes in working capital is useful information to investors because it is widely used by professional analysts and sophisticated investors in valuing oil and gas companies. Many other investors use research reports of these analysts in making investment decisions.
(2) Includes shares held in treasury for deferred compensation as follows:
Weighted Average Shares Outstanding—Basic | 33,907 | 33,136 | 34,003 | 32,750 | ||||||
Weighted Average Shares Held in Deferred Compensation Plan | 1,359 | 1,294 | 1,348 | 1,313 | ||||||
Adjusted Weighted Average Shares Outstanding—Basic | 35,266 | 34,430 | 35,351 | 34,063 | ||||||
Weighted Average Shares Outstanding—Diluted | 35,686 | 34,849 | 35,557 | 34,409 | ||||||
Weighted Average Shares Held in Deferred Compensation Plan | 1,359 | 1,294 | 1,348 | 1,313 | ||||||
Adjusted Weighted Average Shares Outstanding—Diluted | 37,045 | 36,143 | 36,905 | 35,722 | ||||||
(3) Management believes that the non-GAAP measure of net income per share before deferred compensation adjustments is useful information to investors due to the nature of the required accounting for shares of the Company’s common stock held in the deferred compensation plan. Under EITF 97-14, “Accounting for Deferred Compensation Arrangements Where Amounts Earned are Held in a Rabbi Trust and Invested,” shares of the Company’s common stock in the trust are treated as treasury stock and reported at historical cost. However, the liability to plan participants related to the shares held in the trust is reported at fair value. As a result, an increase in the value of the Company’s common stock results in a charge to earnings, whereas a decrease in the value of the Company’s common stock results in an increase to earnings. In addition, as the shares of the Company’s common stock in the trust are treated as treasury stock, generally accepted accounting principles require the shares to be excluded from the calculation of basic weighted average shares outstanding and, if dilutive, excluded from diluted weighted average shares outstanding. Based on conversations with investors, management believes that net income per share before deferred compensation adjustments is an important indicator for its investors of the Company’s performance.
