Patina Oil & Gas (POG) 8-K Results of Operations and Financial Condition

Exhibit 99.1

NEWS RELEASE

PATINA NET INCOME RISES 66%

DENVER, COLORADO – OCTOBER 27, 2004 – PATINA OIL & GAS CORPORATION (NYSE:POG) today reported results for the third quarter of 2004. Production rose 19% from the prior year period. Revenues climbed 39% to $138.0 million as net income increased 66% to $41.4 million. Net income per share jumped 59% to $0.59 ($0.54 fully diluted). Cash flow from operations, before changes in working capital, rose 32% to $89.0 million. The increases were due to continuing production growth, higher realized prices and the benefit of an acquisition made in late 2003. The results were achieved despite $42.5 million ($26.3 million after-tax) of hedging losses during the quarter which sharply limited the benefit of high commodity prices.

Production in the quarter averaged 325.6 MMcfe a day, comprised of 18,004 barrels of oil and 217.6 MMcf of gas. Volume growth was achieved primarily through development drilling, refracs and the contribution of certain Mid Continent and San Juan properties acquired in October 2003. Wellhead prices after hedging averaged $4.55 per Mcfe, 18% above the prior year period. Realized prices averaged $26.90 per barrel and $4.58 per Mcf, increases of 6% and 24%, respectively. Hedging reduced average prices by $15.72 per barrel and $0.82 per Mcf or $1.42 per Mcfe in the quarter.

Development expenditures of $67.3 million in the period were funded with 76% of internal cash flow. In Wattenberg, development projects continued to yield outstanding results. Approximately $29.9 million was spent in the Field to drill or deepen 29 wells, execute 33 Niobrara completions, and perform 81 Codell refracs and trifracs as well as two recompletions. In the Mid Continent, an additional $26.9 million was spent to drill 63 wells and perform six recompletions and two refracs. A further $4.1 million was spent to drill two wells and perform four recompletes in the San Juan and $6.4 million was spent to drill or deepen 25 wells and perform 17 recompletions in the Central division. On October 1^st, the Company acquired approximately 17 Bcfe of proved reserves in the Wattenberg Field for $15.4 million and 3 Bcfe of proved reserves in Kansas for $2.4 million. Based on recent drilling and recompletion results, the Company indicated that it has increased its 2004 development budget by $20 million to a total of $230 million.

Updating certain recently released operational information, the Company indicated that substantial progress had been made in the Texas Panhandle just in the last ten days. The recently drilled Byers 2306, the initial test on the 10,000 acre Billy Rose block, is flowing approximately 1 MMcf a day from its second primary target zone at approximately 12,350 feet. Commercial production from a slightly deeper zone had been previously established. It is believed the two zones would produce at a combined rate of 1.5 MMcfe a day (900 Mcfe net) if commingled. However, current plans are to test a third zone. Three miles away, just to the south of the Billy Rose block, production has been established by the Company in the Hefley 1-13 from a shallow Granite Wash zone at approximately 5,600 feet. The well is producing 170 barrels of oil and 400 Mcf of gas a day or 1.4 MMcfe (1.1 MMcfe net). Based on these results, the Company expects to begin both a shallow (5,000’ - 8,000’) and an intermediate depth (12,000’ - 13,000’) Granite Wash development program across the Billy Rose block before year-end. Finally, the Company announced that it had spud its initial well on 20 acre spacing in the Buffalo Wallow field. The well is being drilled on an exception location basis. Down-spacing of the overall field has been applied for and a ruling is expected within 60 days.

Since year-end, $95.0 million of bank debt has been repaid. The repayments were made despite a $25.7 million increase in margin deposits related to hedging. A total of $35.6 million of margin deposits were held by counterparties at quarter-end. At September 30^th, outstanding debt stood at $321.0 million and stockholders’ equity totaled $321.5 million. Reported equity reflected the deduction of $187.8 million in Accumulated Other Comprehensive Income related to the after-tax value of outstanding hedges. Based on current commodity prices and exclusive of any significant acquisitions or equity repurchases, debt should approximate $300.0 million at year-end and the Company would be virtually debt free within 15 months.

Commenting, Thomas J. Edelman, Patina’s Chairman said, “We remain exceptionally pleased with the Company’s operational and financial results. We continue to aggressively pursue further development in Wattenberg, where additional reserve potential has been identified in the course of the past six months through refinement of completion techniques and the recent focus on the Niobrara formation. Drilling in the Mid Continent, primarily to the Granite Wash, has also yielded exceptional returns. Recent results there suggest the potential for substantial reserve additions through down-spacing, exploitation of our growing acreage position and further consolidation. In summary, our large inventory of high return development projects, the ongoing refinement of our operational and technical expertise, particularly in the Mid Continent, and some of the highest margins in our history lead us to believe the Company will report outstanding results for the remainder of 2004 and into 2005.”

The Company plans to host a conference call on Thursday, October 28, 2004, beginning at 2:00 p.m. (EDT) to discuss third quarter results. To participate, please dial (800) 406-5345. A replay of the call will be available beginning Friday, October 29, 2004 for a period of 30 days. The replay can be accessed by dialing (888) 203-1112 and giving the access code 828090.

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, 2003.

Patina is an independent energy 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 western Oklahoma and the Texas Panhandle, and the San Juan Basin in New Mexico.

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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		2004			2003		% Change		2004		2003
Revenues
Oil and gas sales			$	136,280		$	97,848			$	392,052	$	278,329
Deferred compensation asset gain				131			407				1,353		1,141
Gain on sale of oil and gas properties				554			—				7,938		—
Other				1,050			925				3,001		2,094
	39	%		138,015			99,180	44	%		404,344		281,564
Expenses
Lease operating expenses				17,681			14,420				50,970		39,066
Production taxes				12,597			7,155				34,354		20,047
Exploration				671			618				1,309		2,788
Gross margin	39	%		107,066			76,987	45	%		317,711		219,663
General and administrative				6,281			4,355				17,504		13,037
Interest and other				3,076			1,742				9,366		5,843
Deferred compensation adjustment				(498	)		5,966				12,959		15,885
Depletion, depreciation and amortization				31,365			24,571				90,874		68,928
Pre-tax income	66	%		66,842			40,353	61	%		187,008		115,970
Provision for income taxes
Current				9,525			5,750				26,649		16,526
Deferred				15,875			9,584				44,414		27,543
				25,400			15,334				71,063		44,069
Net income before cumulative effect of change in accounting principle	66	%	$	41,442		$	25,019	61	%	$	115,945	$	71,901
Cumulative effect of change in accounting principle				—			—				—		(2,613	)
Net income	66	%	$	41,442		$	25,019	67	%	$	115,945	$	69,288
Net income per share before cumulative effect of change in accounting principle
Basic	59	%	$	0.59		$	0.37	56	%	$	1.65	$	1.06
Diluted	54	%	$	0.54		$	0.35	57	%	$	1.58	$	1.01
Net income per share
Basic	59	%	$	0.59		$	0.37	62	%	$	1.65	$	1.02
Diluted	54	%	$	0.54		$	0.35	63	%	$	1.58	$	0.97
Weighted average shares outstanding
Basic				70,606			67,814				70,098		68,006
Diluted				76,037			71,372				73,228		71,114

PATINA OIL & GAS CORPORATION

SUMMARY BALANCE SHEET, OPERATIONAL AND CASH FLOW DATA

(in thousands, except price data)

Summary Balance Sheet			September 30, 2004		September 30, 2003
Total assets	57	%	$	1,368,311	$	869,142
Total debt	46	%	$	321,000	$	220,000
Stockholders’ equity	-1	%	$	321,519	$	325,443

			Three Months Ended September 30,								Nine Months Ended September 30,
Summary Operational Data	% Change		2004			2003			% Change		2004			2003
Oil production (Bbl per day)	14	%		18,004			15,777		18	%		17,839			15,118
Gas production (Mcf per day)	21	%		217,582			179,880		25	%		211,332			169,628
Total production (Mcfe per day)	19	%		325,606			274,541		22	%		318,369			260,333
Average oil price (per Bbl)	6	%	$	26.90		$	25.45		3	%	$	26.61		$	25.88
Average gas price (per Mcf)	24	%	$	4.58		$	3.68		22	%	$	4.52		$	3.70
Average price per Mcfe	18	%	$	4.55		$	3.87		15	%	$	4.49		$	3.92
Summary Cash Flow
Net income	66	%	$	41,442		$	25,019		67	%	$	115,945		$	69,288
Cumulative effect of change in accounting principle				—			—					—			2,613
Depletion, depreciation and amortization				31,365			24,571					90,874			68,928
Deferred compensation adjustments				(629	)		5,559					11,606			14,744
Gain on sale of oil and gas properties				(554	)		—					(7,938	)		—
Exploration and other				1,340			752					2,814			3,190
Stock option tax benefit				180			2,203					10,111			6,860
Deferred tax provision				15,875			9,584					44,414			27,543
Cash flow before changes in working capital (1)	32	%		89,019			67,688		39	%		267,826			193,166
Changes in working capital				25,128			5,196					(5,041	)		(6,617	)
Cash flow provided by operations	57	%	$	114,147		$	72,884		41	%	$	262,785		$	186,549
Adjusted weighted average shares outstanding-diluted (2)				76,037			74,090					75,426			73,810
Reconciliation of Net income per share to Net income per share before deferred compensation adjustments
Net income			$	41,442		$	25,019				$	115,945		$	69,288
Deferred compensation adjustments				(629	)		5,559					11,606			14,744
Provision for income taxes at 38%				239			(2,112	)				(4,410	)		(5,603	)
Non-cash deferred compensation adjustments, net of tax			$	(390	)	$	3,447				$	7,196		$	9,141
Net income before deferred compensation adjustments	44	%		41,052			28,466		57	%		123,141			78,429
Adjusted weighted average shares outstanding (2)
Basic				72,704			70,532					72,296			70,702
Diluted				76,037			74,090					75,426			73,810
Net income per share before deferred compensation adjustments (3)
Basic	40	%	$	0.56		$	0.40		54	%	$	1.70		$	1.11
Diluted	41	%	$	0.54		$	0.38		54	%	$	1.63		$	1.06
(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. Cash flow before changes in working capital is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flow provided by operations or net income, each as defined under GAAP. Cash flow before changes in working capital should also not be considered as being comparable to any similarly titled measures of other companies. (2) Includes shares held in treasury for deferred compensation as follows:
Weighted Average Shares Outstanding - Basic				70,606			67,814					70,098			68,006
Weighted Average Shares Held in Deferred Compensation Plan				2,098			2,718					2,198			2,696
Adjusted Weighted Average Shares Outstanding - Basic				72,704			70,532					72,296			70,702
Weighted Average Shares Outstanding - Diluted				76,037			71,372					73,228			71,114
Weighted Average Shares Held in Deferred Compensation Plan				—			2,718					2,198			2,696
Adjusted Weighted Average Shares Outstanding - Diluted				76,037			74,090					75,426			73,810

(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 anti-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.