Exhibit 99.1 | ||||||
For Immediate Release | Contact Information | |||||
Monday, November 8, 2004 | Investors: Roberto R. Thomae | |||||
(210) 496-5300 ext. 214, bthomae@txco.com | ||||||
Media: Paul Hart | ||||||
(210) 496-5300 ext. 264, pdhart@txco.com | ||||||
NEWS RELEASE | ||||||
The Exploration Company Reports Earnings; | ||||||
SAN ANTONIO -- Nov. 8, 2004 - The Exploration Company (Nasdaq:TXCO) today reported improved financial results for the third quarter and first nine months of 2004. | ||||||
TXCO's net income in the third quarter was $599,820, substantially above the $58,466 reported by the Company for the third quarter of 2003. On a per-share basis, earnings rose to $0.021 from a fractional $0.003 in the prior-year period. Adjusted for a one-time, non-cash compensation charge of $237,333 for changes on a stock option and warrant, earnings per share on a pro forma basis would have been $0.029 per share for the quarter. All per-share amounts are on a fully diluted basis. Income from operations was $1.3 million, more than triple the $437,465 reported in the third quarter of 2003. Total quarterly revenues rose to a record $15.3 million, 63 percent higher than the $9.4 million reported for the year-earlier quarter. At Sept. 30, the Company's assets were a record $106 million, up 26 percent from $84.2 million at Sept. 30, 2003. | ||||||
For the first nine months of 2004, TXCO's net income was $1.0 million, a 31 percent increase from $792,589 recorded in the same period of 2003. On a per-share basis year to date, earnings rose to $0.040 from $0.038 a year earlier. Adjusted for the same, one-time charge that impacted the quarter, earnings per share on a pro forma basis would have been $0.049 per share. The Company's revenues were a record $41.3 million, a 46 percent increase from $28.4 million for January-September 2003. Income from operations for this year's first nine months was approximately $3.3 million, more than double the $1.5 million of the 2003 period. | ||||||
Gas production, commodity prices and gas gathering revenues were higher than in the year-earlier periods, offset partially by lower oil production. Exploration, lease operating and gas gathering expenses were higher while impairment and abandonment expenses declined. The Company exited the third quarter of 2004 producing 17.4 million cubic feet of gas equivalent per day (MMcfed), which further increased 14.4 percent to 19.9 MMcfed at Oct. 31. | ||||||
- More - | ||||||
For the first nine months of this year, net cash provided by operating activities was a record $15.4 million, compared with $11.3 million for the comparable 2003 period. Ebitdax -- earnings before income taxes, interest, depreciation, depletion, amortization, impairment, abandonment and exploration expense |
Management's Perspective |
"We had an excellent third quarter," said P. Mark Stark, vice president, treasurer and CFO. "We are particularly encouraged by these strong financial results in light of the new capital structure put in place just over a year ago during the third quarter of 2003. |
"With our comparatively low debt, efficient cost structure and the upside potential in the ratio swap hedging agreement we recently put in place, TXCO should be able to take full financial advantage of our growing production and reserves," Stark added. "Further affirming our production and reserve growth was the significant increase in the borrowing base of the Company's senior credit facility. Coupled with the hedges put in place in early October, our borrowing base has now risen to $20.75 million from $12.3 million. We were hopeful to get this increase finalized prior to the end of the third quarter but it took longer than we anticipated. This will certainly make our balance sheet look better going forward." |
About The Exploration Company |
The Exploration Company is an independent oil and gas enterprise with interests primarily in the Maverick Basin of Southwest Texas. Headquartered in San Antonio, TXCO is celebrating its 25th anniversary. The Company has a consistent record of long-term growth in its proved oil and gas reserves, leasehold acreage position, production and cash flow through its established exploration and development programs. Its business strategy is to build shareholder value by acquiring undeveloped mineral interests and internally develop a multi-year drilling inventory through the use of advanced technologies, such as 3-D seismic and horizontal drilling. 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 under the symbol "TXCO." |
Forward-Looking Statements |
Statements in this press release which are not historical, including statements regarding TXCO's or management's intentions, hopes, beliefs, expectations, representations, projections, estimations, plans or predictions of the future, are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include those relating to budget plans, interest rates, capital expenditures, ongoing access to additional capital, production levels, drilling plans, equipment availability, including the timing, number, type of and cost of wells to be drilled, completed, re-entered, placed on production, planned projects and expected responses, establishment and evaluation of reserves, continuing overall success and the future exercise of seismic or lease options. It is important to note that actual results may differ materially from the results predicted in any such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the costs of exploring and developing new oil and natural 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 Dec. 31, 2003, and its Form 10-Q for the quarter and year-to-date period ended June 30, 2004. 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. |
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(Financial Information and Selected Operational Tables Follow) |
The following tables should be read in conjunction with the Company's latest audited consolidated financial statements and notes thereto, as reported in its Form 10-K for the year ended Dec. 31, 2003. | ||||||
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THE EXPLORATION COMPANY | ||||||
CONDENSEDCONSOLIDATED BALANCE SHEETS | ||||||
(UNAUDITED) | ||||||
September 30, | December 31, | |||||
Assets | ||||||
Current Assets | ||||||
Cash and equivalents | $ 4,841,420 | $ 6,180,560 | ||||
Accounts receivable, net | 6,733,357 | 4,837,965 | ||||
Prepaid expenses | 1,518,055 | 718,853 | ||||
Total Current Assets | 13,092,832 | 11,737,378 | ||||
Property and Equipment,net - successful efforts |
| 66,155,827 | ||||
Other Assets | ||||||
Deferred tax asset | 5,232,718 | 5,232,718 | ||||
Other assets | 1,102,242 | 1,080,290 | ||||
Total Other Assets | 6,334,960 | 6,313,008 | ||||
| $105,987,670 | $84,206,213 | ||||
THE EXPLORATION COMPANY | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(UNAUDITED) | ||||||||
September 30, | December 31, | |||||||
Liabilities and Stockholders' Equity | ||||||||
Current Liabilities | ||||||||
Accounts payable, trade | $ 13,237,844 | $ 8,186,705 | ||||||
Other payables and accrued liabilities | 4,903,512 | 3,709,016 | ||||||
Undistributed revenue | 1,298,208 | 416,399 | ||||||
Current portion of long-term debt | 1,604,340 | 1,752,286 | ||||||
Total Current Liabilities | 21,043,904 | 14,064,406 | ||||||
Long-term Liabilities | ||||||||
Long-term debt, net of current portion | 8,561,276 | 15,425,598 | ||||||
Redeemable preferred stock, Series B |
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Accrued dividends - preferred stock | 177,729 | 57,732 | ||||||
Asset retirement obligation | 1,648,600 | 1,537,600 | ||||||
Total Long-Term Liabilities | 21,153,661 | 27,156,265 | ||||||
Minority Interest in Consolidated Subsidiaries | - | 193,441 | ||||||
Stockholders' Equity | ||||||||
Preferred stock, Series A; authorized 10,000,000 shares |
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Common stock, par value $.01 per share; authorized |
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Additional paid-in capital | 83,874,670 | 63,976,021 | ||||||
Accumulated deficit | (20,119,296 | ) | (21,160,341 | ) | ||||
Less treasury stock, at cost, 99,800 shares | (246,007 | ) | (246,007 | ) | ||||
Total Stockholders' Equity | 63,790,105 | 42,792,101 | ||||||
Total Liabilities and Stockholders' Equity | $105,987,670 | $84,206,213 | ||||||
THE EXPLORATION COMPANY | ||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
(UNAUDITED) | ||||||||
Three Months | Three Months | |||||||
September 30, 2004 | September 30, 2003 | |||||||
Revenues | ||||||||
Oil and gas sales | $ 7,846,365 | $6,027,088 | ||||||
Gas gathering operations | 7,464,545 | 3,364,162 | ||||||
Other operating income | 6,120 | 2,631 | ||||||
Total Revenues | 15,317,030 | 9,393,881 | ||||||
Costs and Expenses | ||||||||
Lease operations | 1,242,615 | 1,158,760 | ||||||
Production taxes | 446,183 | 348,225 | ||||||
Exploration expenses | 696,430 | 292,928 | ||||||
Impairment and abandonments | 579,968 | 641,725 | ||||||
Gas gathering operations | 7,030,025 | 3,309,515 | ||||||
Depreciation, depletion and amortization | 2,562,483 | 2,214,530 | ||||||
General and administrative | 1,429,527 | 990,733 | ||||||
Total Costs and Expenses | 13,987,231 | 8,956,416 | ||||||
Income from Operations | 1,329,799 | 437,465 | ||||||
Other Income (Expense) | ||||||||
Interest income | 8,313 | 10,754 | ||||||
Interest expense | (679,010 | ) | (403,296 | ) | ||||
Loan fee amortization | (9,486 | ) | (4,401 | ) | ||||
Total Other Income (Expense) | (680,183 | ) | (396,943 | ) | ||||
Income before income taxes and minority interest | 649,616 | 40,522 | ||||||
Minority interest in income of subsidiaries | (3,094 | ) | 17,944 | |||||
Income before income taxes | 646,522 | 58,466 | ||||||
(46,702 | ) | - | ||||||
Net Income | $ 599,820 | $ 58,466 | ||||||
Earnings Per Share | ||||||||
Basic earnings per share | $0.022 | $0.003 | ||||||
Diluted earnings per share | $0.021 | $0.003 | ||||||
THE EXPLORATION COMPANY | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||
(UNAUDITED) | |||||||||
Nine Months | Nine Months | ||||||||
September 30, 2004 | September 30, 2003 | ||||||||
Revenues | |||||||||
Oil and gas sales | $20,957,990 | $18,484,022 | |||||||
Gas gathering operations | 20,340,020 | 9,863,948 | |||||||
Other operating income | 10,926 | 2,553 | |||||||
Total Revenues | 41,308,936 | 28,350,523 | |||||||
Costs and Expenses | |||||||||
Lease operations | 3,918,242 | 3,211,075 | |||||||
Production taxes | 1,288,423 | 1,151,498 | |||||||
Exploration expenses | 1,446,212 | 1,294,529 | |||||||
Impairment and abandonments | 1,613,768 | 1,517,875 | |||||||
Gas gathering operations | 18,964,695 | 10,324,076 | |||||||
Depreciation, depletion and amortization | 7,334,923 | 6,708,998 | |||||||
General and administrative | 3,462,188 | 2,621,636 | |||||||
Total Costs and Expenses | 38,028,451 | 26,829,687 | |||||||
Income from Operations | 3,280,485 | 1,520,836 | |||||||
Other Income (Expense) | |||||||||
Interest income | 27,724 | 21,314 | |||||||
Interest expense | (2,136,913 | ) | (666,576 | ) | |||||
Loan fee amortization | (68,437 | ) | (13,203 | ) | |||||
Total Other Income (Expense) | (2,177,626 | ) | (658,465 | ) | |||||
Income before income taxes, minority interest and |
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Minority interest in income of subsidiaries | 34,889 | 54,218 | |||||||
Income before income taxes and cumulative effect of change |
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Income tax expense | (96,702 | ) | (50,000 | ) | |||||
Cumulative effect of change in accounting principle, net of tax | - | (74,000 | ) | ||||||
Net Income | $ 1,041,046 | $ 792,589 | |||||||
Earnings Per Share | |||||||||
Basic earnings before cumulative effect of change |
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Cumulative effect of change in accounting principle | - | (0.004 | ) | ||||||
Basic earnings per share | $0.041 | $0.039 | |||||||
Diluted earnings before cumulative effect of change |
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Cumulative effect of change in accounting principle | - | (0.003 | ) | ||||||
Diluted earnings per share | $0.040 | $0.038 | |||||||
THE EXPLORATION COMPANY | |||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||
(UNAUDITED) | |||||||||||
Nine Months | Nine Months | ||||||||||
September 30, 2004 | September 30, 2003 | ||||||||||
Operating Activities | |||||||||||
Net income | $1,041,046 | $ 792,589 | |||||||||
Adjustments to reconcile net income to | |||||||||||
Depreciation, depletion and amortization | 7,334,923 | 6,708,998 | |||||||||
Impairment and abandonments | 1,613,768 | 1,517,875 | |||||||||
Minority interest in income of subsidiaries | (34,889 | ) | (54,218 | ) | |||||||
Cumulative effect of change in accounting principle | - | 74,000 | |||||||||
Non-cash compensation expense on stock options and warrants | 237,333 | - | |||||||||
Non-cash interest expense and accretion of liability |
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Net cash provided by operating activities, |
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Changes in operating assets and liabilities: | |||||||||||
Receivables | (1,895,392 | ) | (1,498,444 | ) | |||||||
Prepaid expenses and other | (799,202 | ) | (507,187 | ) | |||||||
Accounts payable and accrued expenses | 7,127,440 | 3,966,382 | |||||||||
Net cash provided by operating activities | 15,375,749 | 11,255,589 | |||||||||
Investing Activities | |||||||||||
Development and purchases of oil and gas properties | (27,807,179 | ) | (27,781,230 | ) | |||||||
Purchase of other equipment | (220,890 | ) | (354,122 | ) | |||||||
Net changes in minority interests | (158,552 | ) | 77,865 | ||||||||
Net cash used by investing activities | (28,186,621 | ) | (28,057,487 | ) | |||||||
Financing Activities | |||||||||||
Issuance of redeemable preferred stock, net of offering costs | - | 9,170,632 | |||||||||
Proceeds from issuance of common stock, net of expenses | 18,484,000 | 5,819,679 | |||||||||
Proceeds from long-term debt obligations | 116,739 | 5,997,078 | |||||||||
Payments on long-term debt obligations | (7,129,007 | ) | (1,063,280 | ) | |||||||
Net cash provided by financing activities | 11,471,732 | 19,924,109 | |||||||||
Change in Cash and Equivalents | (1,339,140 | ) | 3,122,211 | ||||||||
Cash and equivalents at beginning of period | 6,180,560 | 2,333,688 | |||||||||
Cash and Equivalents at End of Period | $4,841,420 | $ 5,455,899 | |||||||||
THE EXPLORATION COMPANY | |||||||||
Three Months Ended | Nine Months Ended | ||||||||
Sept. 30, 2004 | Sept. 30, 2003 | Sept. 30, 2004 | Sept. 30, 2003 | ||||||
Net cash provided in operating activities | $ | 10,148,094 | $ | (50,574 | ) | $ | 15,375,749 | $ | 11,255,589 |
Ebitdax * | 5,165,586 | 3,604,592 | 13,710,277 | 11,096,456 | |||||
Ebitda * | 4,469,156 | 3,311,664 | 12,264,065 | 9,801,927 | |||||
Debt to asset ratio | 24.7% | 35.2% | 24.7% | 35.2% | |||||
Production | |||||||||
Oil: | |||||||||
Production, in barrels | 81,602 | 125,778 | 228,751 | 347,951 | |||||
Average sales price per barrel | $ | 40.61 | $ | 27.83 | $ | 35.84 | $ | 28.18 | |
Natural Gas: | |||||||||
Production, in Mcf | 806,895 | 475,331 | 2,228,471 | 1,522,452 | |||||
Average sales price per Mcf | $ | 5.62 | $ | 5.32 | $ | 5.73 | $ | 5.70 | |
Equivalent Basis: | |||||||||
Production in Boe | 216,085 | 205,000 | 600,163 | 601,693 | |||||
Average sales price per Boe | $ | 36.31 | $ | 29.40 | $ | 34.92 | $ | 30.72 | |
Production in Mcfe | 1,296,507 | 1,229,999 | 3,600,977 | 3,610,158 | |||||
Average sales price per Mcfe | $ | 6.05 | $ | 4.90 | $ | 5.82 | $ | 5.12 | |
Other Operating Data | |||||||||
Total lifting costs | $ | 1,688,798 | $ | 1,506,985 | $ | 5,206,665 | $ | 4,362,573 | |
Lifting costs per Mcfe | $ | 1.30 | $ | 1.23 | $ | 1.45 | $ | 1.21 | |
Production volume - oil properties - barrels | 74,829 | 124,969 | 211,289 | 340,138 | |||||
Lifting costs-oil (Incl Prod & Sev Tax) | $ | 798,847 | $ | 892,006 | $ | 2,615,178 | $ | 2,544,460 | |
Lifting costs per Barrel | $ | 10.68 | $ | 7.14 | $ | 12.38 | $ | 7.48 | |
Production volume - gas properties - Mcf | 793,433 | 473,287 | 2,201,677 | 1,515,055 | |||||
Lifting costs-gas (Incl Prod & Sev Tax) | $ | 889,951 | $ | 582,115 | $ | 2,591,487 | $ | 1,818,114 | |
Lifting costs per Mcf | $ | 1.12 | $ | 1.23 | $ | 1.18 | $ | 1.20 | |
Production volume excluding CBM properties - Mcf | 788,093 | 464,948 | 2,183,225 | 1,490,922 | |||||
Lifting costs excluding CBM activities | $ | 742,427 | $ | 430,412 | $ | 2,232,511 | $ | 1,455,297 | |
Lifting costs per Mcf excluding CBM activities | $ | 0.94 | $ | 0.93 | $ | 1.02 | $ | 0.98 | |
Depletion cost per Boe | $ | 11.58 | $ | 10.54 | $ | 11.94 | $ | 10.90 | |
Depletion cost per Mcfe | $ | 1.93 | $ | 1.76 | $ | 1.99 | $ | 1.82 | |
* Please see TXCO's Web site at www.txco.com for a reconciliation of these non-GAAP financial measures. |