Exhibit 99 | ||||||||
For Immediate Release | Contact information: | |||||||
Thursday, May 15, 2003 | Roberto R. Thomae, CFO | |||||||
(210) 496-5300/bthomae@txco.com | ||||||||
NEWS RELEASE | ||||||||
The Exploration Company Reports Strong First-Quarter Results | ||||||||
New Records Set for Revenues And Cash Flow | ||||||||
Production Remains Strong | ||||||||
SAN ANTONIO - May 15, 2003 - The Exploration Company (Nasdaq Smallcap™: TXCO) | ||||||||
Net cash flow provided in operating activities was $6.3 million, an improvement of $7.9 million from the negative $1.6 million reported for the 2002 first quarter. TXCO spent $6.2 million for its drilling and completion work, and $4.2 million for leasehold acquisitions. TXCO ended the quarter with $8.5 million outstanding under its $25 million Revolving Credit Facility, and drew another $3.5 million subsequent to the end of the quarter. Interest of 4.25% is payable monthly. | ||||||||
Production during 2003's first quarter was 172,996 barrels of oil equivalent (BOE), up 37% compared to the corresponding 2002 period. Oil represented about 47% of TXCO's first-quarter 2003 output versus 14% in 2002. The Company exited the first quarter producing 2,157 BOE per day. At April 30, 2003, net daily production was 2,817 BOE, up 30% from the first-quarter 2003 exit rate. TXCO exited 2002 producing 2,300 BOE per day. | ||||||||
Production Rises with Drilling | ||||||||
The Company drilled 24 wells during the quarter. Eleven were brought on line, bringing TXCO's total producing well count to approximately 290 (240 net wells). Six wells were awaiting completion and four others were being evaluated. Those 10 wells should be connected to production facilities during the second quarter. Two wells were drilling and one well was temporarily abandoned pending sidetrack work at March 31. Currently, six rigs are drilling ahead on TXCO acreage. First-quarter drilling activities are summarized in TXCO's April 26, 2003, news release and March 31, 2003, Form 10-Q. TXCO and its partner, Blue Star Oil and Gas, Ltd., began drilling the Taylor 1-132 at the end of March, targeting the deep Jurassic interval. The well is drilling ahead at a depth of approximately 7,000 feet as of the date of this release. The well has a proposed 90- to 120-day drilling schedule and is permitted to a depth of 18,500 feet. | ||||||||
TXCO's board of directors approved a change in the Company's 2003 drilling program, increasing the annual budget to $33.1 million, a 21% increase. | ||||||||
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Quarterly production equaled 172,996 BOE, or 1.038 billion cubic feet of natural gas equivalent, 37% higher than first-quarter 2002. Significant to TXCO's first-quarter results is the amount of oil it is producing. TXCO's quarterly oil output stood at 81,109 barrels, a 356% increase, due primarily to increased production from the Company's Comanche lease wells and the Pena Creek Field acquired in May 2002. Gas production declined as production from new wells did not completely offset existing wells' normal decreases. TXCO received an average of $31.45 per barrel of oil produced, and $6.04 per thousand cubic feet (Mcf), compared to $18.21 and $2.30, respectively, received in 2002. Commodity prices averaged $5.67 Mcf equivalent, 136% above the year-earlier average. Gross margin per BOE (oil and gas revenues, less lease operating costs, production taxes and G&A) was $21.18 or 338% higher than the $4.82 per BOE reported in 2002. | ||||||||
Other Financial News | ||||||||
TXCO adopted a new accounting standard related to future well abandonments, Statement of Financial Accounting Standards No. 143, "Accounting for Asset Retirement Obligations," which had no material impact on quarterly income. The Company does not believe SFAS 143 correctly reflects its long-term asset position, believing instead the use of depletion and depreciation as a preferred methodology for accounting for its long-lived assets. | ||||||||
Management's Comments | ||||||||
James E. Sigmon, TXCO president and CEO, said: "The success we had in the first quarter has placed TXCO on track for a promising year. There is no slowing us down as we diligently and methodically tap the huge potential of the Maverick Basin. Our multi-play, multi-pay strategy is working and our ambitious 2003 drilling program continues to show excellent results. We really benefited from not entering into any additional financial transactions with our production. Debt-to-assets ratio is a healthy 18%. Our cash provided from operations-to-interest coverage ratio is 57 to 1, one of the best in the industry for any company with debt. These excellent production numbers, coupled with commodity prices that we hope will remain strong as the economy improves, provide us with an excellent platform to meet our internal expectations." | ||||||||
About The Exploration Company | ||||||||
The Exploration Company is an independent oil and gas enterprise with interests primarily in the Maverick Basin in Southwest Texas. Its long-term business strategy is to acquire undeveloped mineral interests and internally develop a multi-year drilling inventory. The Company accounts for its oil and gas operations under the successful efforts method of accounting and trades its common stock on the Nasdaq Stock Market(sm) under the symbol "TXCO." | ||||||||
Statements in this press release which are not historical, including statements regarding TXCO's | ||||||||
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gas reserves, the price for which such reserves can be sold, environmental concerns affecting the drilling of oil and natural gas wells, as well as general market conditions, competition and pricing. More information about potential factors that could affect the Company's operating and financial results is included in TXCO's annual report on Form 10-K for the year ended December 31, 2002, and its Form 10-Q for the quarter ended March 31, 2003. These and all previously filed documents are on file at the Securities and Exchange Commission and can be viewed on TXCO's website at www.txco.com. Copies are available without charge upon request from the Company. | ||
(Financial Information and Selected Operational Tables Follow) | ||
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THE EXPLORATION COMPANY | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(UNAUDITED) | ||||||
March 31, | December 31, | |||||
Assets | ||||||
Current Assets: | ||||||
Cash | $ 2,693,560 | $ 2,333,688 | ||||
Accounts receivable, net | 6,475,113 | 5,118,270 | ||||
Prepaid expenses | 804,375 | 503,176 | ||||
Total Current Assets | 9,973,048 | 7,955,134 | ||||
Property and Equipment,net - successful efforts | 49,145,266 | 39,327,867 | ||||
Other Assets: | ||||||
Deferred tax asset | 5,232,718 | 5,232,718 | ||||
Other assets | 515,904 | 520,600 | ||||
Total Other Assets | 5,748,622 | 5,753,318 | ||||
| $64,866,936 | $53,036,319 | ||||
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THE EXPLORATION COMPANY | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||
(UNAUDITED) | |||||||
March 31, | December 31, | ||||||
Liabilities and Stockholders' Equity | |||||||
Current Liabilities: | |||||||
Accounts payable, trade | $7,018,267 | $ 3,684,550 | |||||
Other payables and accrued liabilities | 4,912,275 | 3,187,174 | |||||
Undistributed revenue | 2,038,953 | 1,894,144 | |||||
Current portion of long-term debt | 1,615,937 | 1,073,773 | |||||
Total Current Liabilities | 15,585,432 | 9,839,641 | |||||
Long-term Liabilities: | |||||||
Long-term debt, net of current portion | 10,133,020 | 6,143,458 | |||||
Asset retirement obligation | 1,369,400 | - | |||||
Minority Interest in Consolidated Subsidiaries | 84,175 | 82,846 | |||||
Stockholders' Equity: | |||||||
Preferred stock, authorized 10,000,000 shares | |||||||
Common stock, par value $.01 per share; authorized |
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Additional paid-in capital | 58,216,504 | 58,216,504 | |||||
Accumulated deficit | (20,476,683 | ) | (21,201,218 | ) | |||
Less treasury stock, at cost, 99,800 shares | (246,007 | ) | (246,007 | ) | |||
Total Stockholders' Equity | 37,694,909 | 36,970,374 | |||||
Total Liabilities and Stockholders' Equity | $64,866,936 | $53,036,319 | |||||
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THE EXPLORATION COMPANY | |||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
(UNAUDITED) | |||||
Three Months | Three Months | ||||
March 31, 2003 | March 31, 2002 | ||||
Revenues | |||||
Oil and gas sales | $5,882,716 | $1,818,778 | |||
Gas gathering operations | 3,208,385 | - | |||
Other operating income | (3,228 | ) | 90,583 | ||
9,087,873 | 1,909,361 | ||||
Costs and Expenses | |||||
Lease operations | 1,074,349 | 683,275 | |||
Production taxes | 368,404 | 125,480 | |||
Exploration expenses | 375,031 | 295,190 | |||
Impairment and abandonments | 339,075 | 363,700 | |||
Gas gathering operations | 3,597,236 | - | |||
Depreciation, depletion and amortization | 1,673,319 | 782,202 | |||
General and administrative | 776,106 | 402,019 | |||
Total costs and expenses | 8,203,520 | 2,651,866 | |||
Income (Loss) from Operations | 884,353 | (742,505 | ) | ||
Other Income (Expense) | |||||
Interest income | 4,605 | 5,666 | |||
Interest expense | (110,842 | ) | (34,851 | ) | |
(106,237 | ) | (29,185 | ) | ||
Income (loss) before income taxes, minority interest | |||||
and cumulative effect of change in accounting principle | 778,116 | (771,690 | ) | ||
Minority interest in income of subsidiaries | 20,419 | (19,536 | ) | ||
Income (loss) before income taxes and cumulative effect of change in | |||||
accounting principle | 798,535 | (791,226 | ) | ||
Income tax benefit | - | 75,000 | |||
Cumulative effect of change in accounting principle, net of tax | (74,000 | ) | - | ||
Net Income (Loss) | $ 724,535 | $ (716,226 | ) | ||
Earnings (Loss) Per Share | |||||
Basic: | |||||
Earnings (loss) before cumulative effect of change in | |||||
accounting principle | $ 0.04 | $ (0.04 | ) | ||
Cumulative effect of change in accounting principle | - | - | |||
Net Earnings (loss) per share | $ 0.04 | $ (0.04 | ) | ||
Diluted: | |||||
Earnings (loss) before cumulative effect of change in | |||||
accounting principle | $ 0.04 | $ (0.04 | ) | ||
Cumulative effect of change in accounting principle | - | - | |||
Net Earnings (loss) per share | $ 0.04 | $ (0.04 | ) | ||
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THE EXPLORATION COMPANY | ||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
(UNAUDITED) | ||||||||||
Three Months | Three Months | |||||||||
March 31, 2003 | March 31, 2002 | |||||||||
Operating Activities | ||||||||||
Net income (loss) | $ 724,535 | $ (716,226 | ) | |||||||
Adjustments to reconcile net income to net cash | ||||||||||
Depreciation, depletion and amortization | 1,673,319 | 782,202 | ||||||||
Impairment and abandonments | 339,075 | 363,700 | ||||||||
Minority interest in income of subsidiaries | (20,419 | ) | 19,536 | |||||||
Cumulative effect of change in accounting principle | 74,000 | - | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Receivables | (1,356,843 | ) | 574,706 | |||||||
Prepaid expenses and other | (296,797 | ) | (79,321 | ) | ||||||
Accounts payable and accrued expenses | 5,203,627 | (2,511,764 | ) | |||||||
Net cash provided (used) in operating activities | 6,340,497 | (1,567,167 | ) | |||||||
Investing Activities | ||||||||||
Development and purchases |
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Purchase of other equipment | (128,271 | ) | (2,500 | ) | ||||||
Distributions to minority interests | 21,748 | (22,779 | ) | |||||||
Net cash (used) in investing activities | (10,512,352 | ) | (2,268,629 | ) | ||||||
Financing Activities | ||||||||||
Proceeds from debt obligations | 2,700,000 | 2,800,000 | ||||||||
Proceeds from installment obligations | 2,644,671 | - | ||||||||
Deferred financing fees | - | (48,437 | ) | |||||||
Payments on debt obligations | (812,944 | ) | (102,342 | ) | ||||||
Net cash provided in financing activities | 4,531,727 | 2,649,221 | ||||||||
Change in Cash and Equivalents | 359,872 | (1,186,575 | ) | |||||||
Cash and equivalents at beginning of period | 2,333,688 | 2,019,164 | ||||||||
Cash and Equivalents at End of Period | $ 2,693,560 | $ 832,589 | ||||||||
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THE EXPLORATION COMPANY | ||||||
Quarter Ended | ||||||
March 31, 2003 | March 31, 2002 | |||||
Net cash provided (used) in operating activities | $6,340,497 | $(1,567,167 | ) | |||
Debt to asset ratio | 18.1 | % | 13.6 | % | ||
Production | ||||||
Oil: | ||||||
Production, in barrels | 81,109 | 17,773 | ||||
Average sales price per barrel | $ 31.45 | $ 18.21 | ||||
Natural Gas: | ||||||
Production, in Mcf | 551,319 | 650,868 | ||||
Average sales price per Mcf | $ 6.04 | $ 2.30 | ||||
Equivalent Basis: | ||||||
Production in Boe | 172,996 | 126,251 | ||||
Average sales price per Boe | $ 34.01 | $ 14.41 | ||||
Production in Mcfe | 1,037,973 | 757,506 | ||||
Average sales price per Mcfe | $ 5.67 | $ 2.40 | ||||
Selected Operating Data | ||||||
Production volume - oil properties | 76,722 | 11,751 | ||||
Lifting costs-oil (Incl Prod & Sev Tax) | $629,278 | $ 192,864 | ||||
Lifting costs per Barrel | $ 8.20 | $ 16.41 | ||||
Production volume - gas properties | 549,231 | 648,787 | ||||
Lifting costs-gas (Incl Prod & Sev Tax) | $839,009 | $570,954 | ||||
Lifting costs per Mcf | $ 1.53 | $ 1.14 | ||||
Production volume excluding coalbed methane (CBM) properties | 540,542 | 641,775 | ||||
Lifting costs excluding CBM activities | $738,689 | $429,963 | ||||
Lifting costs per Mcf excluding CBM activities | $ 1.37 | $ 0.67 | ||||
Depletion cost per Boe | $ 9.67 | $ 6.20 | ||||
Depletion cost per Mcfe | $ 1.57 | $ 0.98 | ||||
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