EXHIBIT 99.1
For Information
---------------
Mark A. Hellerstein
Robert T. Hanley
303-861-8140
ST. MARY REPORTS EARNINGS FOR THIRD QUARTER 2004
DENVER, November 3, 2004 - St. Mary Land & Exploration Company (NYSE: SM)
today announced its earnings for the third quarter 2004 of $22.6 million or
$0.71 per diluted share. Third quarter 2003 earnings were $13.8 million or $0.41
per diluted share. Per share results reflect a $16.8 million increase in oil and
gas revenue in the period, together with a decrease in basic weighted average
shares outstanding from 35.8 million shares in the third quarter 2003 to 33.2
million shares in the third quarter 2004. The decrease in the number of shares
results from the repurchase in early February 2004 of the 3.4 million shares
issued to Flying J Oil & Gas Inc. and Big West Oil & Gas Inc. in January
2003 and the repurchase under St. Mary's stock repurchase program of a total of
489,300 shares in the third quarter of 2004, partially offset by shares issued
from option exercises.
Revenues for the third quarter of 2004 were $108.9 million compared to $91.0
million for the third quarter of 2003. Third quarter discretionary cash flow(1)
increased from $51.8 million in the third quarter of 2003 to $71.6 million in
the third quarter of 2004. Net cash provided by operating activities decreased
from $60.2 million in the third quarter of 2003 to $57.3 million in the third
quarter of 2004.
Earnings for the first nine months of 2004 were $65.9 million or $2.05 per
diluted share, compared to $70.9 million or $2.08 per diluted share for the
first nine months of 2003. Revenues for the first nine months of 2004 were
$307.1 million compared to $295.9 million for the same period in 2003.
Discretionary cash flow increased from $169.0 million in the first nine months
of 2003 to $192.3 million in the first nine months of 2004. Net cash provided by
operating activities increased from $150.9 million in the first nine months of
2003 to $157.1 million in the first nine months of 2004.
Daily oil and gas production during the third quarter 2004 averaged 206.5
million cubic feet of gas equivalent (MMCFE), down from 209.4 MMCFE in the
comparable 2003 period. Average prices realized during the quarter were $5.29
per MCF and $33.87 per barrel, 17% and 28% higher, respectively, than the
realized prices in the third quarter of 2003.
The Company also announced that it has increased its 2004 exploration and
development expenditures budget to $225 million from $205 million and revised
its 2004 acquisitions budget to $67 million from $100 million. The increase in
the exploration and development budget is due to general cost increases and
increased drilling activity in the Mid-Continent, Rocky Mountain, ArkLaTex and
Gulf Coast regions, partially offset by less drilling expenditures than
previously anticipated in the Permian Basin region and the Hanging Woman Basin
coalbed methane project. The revised acquisitions budget includes two
acquisitions that will close in 2004. These acquisitions were previously
announced by the Company on October 20, 2004.
Mark Hellerstein, Chairman, President and CEO, commented, "We are pleased with
the progress of our drilling programs. Several discoveries we made this quarter
provided a five percent production increase over the second quarter. Our large
prospect inventory, which includes identified locations to be drilled over the
next several years, along with acquisitions, is expected to provide continued
production growth."
The Company's current forecasts for the fourth quarter and the full year 2004
are shown below.
4th Quarter Year
----------- ----
Oil and gas production 18.5 - 19.5 BCFE 74.0 - 75.0 BCFE
Lease operating expenses,
including production taxes and
transportation $1.45 - $1.50/MCFE $1.28 - $1.33/MCFE
General and administrative exp. $0.28 - $0.34/MCFE $0.29 - $0.34/MCFE
Depreciation, depletion & amort. $1.25 - $1.30/MCFE $1.14 - $1.20/MCFE
Operational updates for the third quarter 2004 were provided in the Company's
October 20, 2004 press release.
As previously announced, the St. Mary third quarter earnings teleconference call
is scheduled for November 4, 2004 at 8:00 am (MST). The call participation
number is 888-424-5231. A digital recording of the conference call will be
available two hours after the completion of the call, 24 hours per day through
November 14 at 800-642-1687, conference number 1430014. International
participants can dial 706-634-6088 to take part in the conference call, and can
access a replay of the call at 706-645-9291, conference number 1430014. In
addition the call will be broadcast live at St. Mary's website at
www.stmaryland.com and this earnings press release and financial highlights
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attachment will be available before the call at www.stmaryland.com under
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"News--Press Releases." An audio recording of the conference call will be
available at that site through November 30.
This release contains forward looking statements within the meaning of
securities laws, including forecasts and projections for future periods. The
words "will," "believe," "anticipate," "intend," "estimate," "forecast" and
"expect" and similar expressions are intended to identify forward looking
statements. These statements involve known and unknown risks, which may cause
St. Mary's actual results to differ materially from results expressed or implied
by the forward looking statements. These risks include such factors as the
2
volatility and level of oil and natural gas prices, unexpected drilling
conditions and results, the risks of various exploration strategies, production
rates and reserve replacement, the imprecise nature of oil and gas reserve
estimates, drilling and operating service availability, uncertainties in cash
flow, the financial strength of hedge contract counterparties, the availability
of economically attractive exploration and development and property acquisition
opportunities and any necessary financing, expected acquisition benefits, the
pending nature of certain reported acquisition transactions and the ability to
complete the transactions, competition, litigation, environmental matters, the
potential impact of government regulations, and other such matters discussed in
the "Risk Factors" section of St. Mary's 2003 Annual Report on Form 10-K filed
with the SEC. Although St. Mary may from time to time voluntarily update its
prior forward looking statements, it disclaims any commitment to do so except as
required by securities laws.
(1)Discretionary cash flow is computed as net income plus depreciation,
depletion, amortization, impairments, deferred taxes, exploration
expense, stock-based compensation expense, and changes in the net
profits interest bonus plan liability, less the cumulative effect of
change in accounting principle and unrealized derivative gain. See the
attached financial highlights for a reconciliation of discretionary
cash flow to net cash provided by operating activities, a presentation
of other cash flow information, and a statement indicating why
management believes the presentation of the non-GAAP measure of
discretionary cash flow provides useful information to investors.
PR-04-16
3
ST. MARY LAND & EXPLORATION COMPANY
FINANCIAL HIGHLIGHTS
September 30, 2004
(Unaudited)
PRODUCTION DATA Three Months Ended Nine Months Ended
- --------------- September 30, Percent September 30, Percent
------------------------ -------------------------
2004 2003 Change 2004 2003 Change
------------------------ -------------------------
Average realized price, net of hedging:
Gas (per Mcf) $ 5.29 $ 4.53 17% $ 5.30 $ 4.98 6%
Oil (per Bbl) $ 33.87 $ 26.39 28% $ 31.04 $ 27.01 15%
Production:
Gas (MMcf) 11,531 12,378 -7% 34,214 37,696 -9%
Oil (MBbls) 1,245 1,147 9% 3,547 3,352 6%
MMCFE (6:1) 19,000 19,262 -1% 55,494 57,808 -4%
Daily production:
Gas (Mcf per day) 125,342 134,547 -7% 124,870 138,082 -10%
Oil (Bbls per day) 13,530 12,470 9% 12,944 12,278 5%
MCFE per day (6:1) 206,523 209,366 -1% 202,533 211,750 -4%
Margin analysis per MCFE:
Average realized price, net of hedging $ 5.43 $ 4.49 21% $ 5.25 $ 4.81 9%
Oil and gas production costs 1.27 1.25 2% 1.26 1.18 7%
General and administrative costs 0.29 0.25 16% 0.30 0.27 11%
------------------------ -------------------------
Operating margin $ 3.87 $ 2.99 30% $ 3.69 $ 3.36 10%
------------------------ -------------------------
Depletion, depreciation & amortization $ 1.13 $ 1.08 5% $ 1.13 $ 1.06 7%
INCOME STATEMENT
- ----------------
(In thousands, except per share amounts) Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
2004 2003 2004 2003
------------------------ -------------------------
Operating revenues:
Oil and gas production $ 103,191 $ 86,414 $ 291,245 $ 278,236
Gain (loss) on sale of proved properties 738 (343) 2,514 (221)
Marketed gas revenue 3,798 3,911 11,095 11,019
Other 1,196 1,017 2,285 6,873
------------------------ -------------------------
108,923 90,999 307,139 295,907
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Operating expenses:
Oil and gas production 24,163 23,914 69,279 68,304
Depletion, depreciation, amortization
and abandonment liability accretion 21,470 20,765 62,769 61,251
Exploration 8,871 9,906 20,071 20,332
Impairment of proved properties - - 494 -
Abandonment and impairment of unproved properties 744 2,300 2,632 4,003
General and administrative 5,472 4,803 16,459 15,629
Change in net profits interest bonus plan liability 7,527 709 14,012 2,406
Marketed gas system operating expense 3,493 3,584 10,214 10,041
Other 680 707 2,242 1,202
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72,420 66,688 198,172 183,168
------------------------ -------------------------
Income from operations 36,503 24,311 108,967 112,739
Interest income 93 73 479 647
Interest expense (1,471) (1,833) (4,524) (6,416)
------------------------ -------------------------
Income before income tax expense and accounting change 35,125 22,551 104,922 106,970
Income tax expense - current 2,098 4,039 15,519 25,893
Income tax expense - deferred 10,462 4,726 23,553 15,612
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Income before accounting change 22,565 13,786 65,850 65,465
Cumulative effect from change in accounting principle - - - 5,435
------------------------ -------------------------
Net income $ 22,565 $ 13,786 $ 65,850 $ 70,900
======================== =========================
Basic weighted average shares outstanding 28,545 31,529 28,982 31,126
Diluted weighted average shares outstanding 33,186 35,828 33,486 35,426
Basic earnings per common share:
Income before accounting change $ 0.79 $ 0.44 $ 2.27 $ 2.11
Cumulative effect of accounting change - - - 0.17
------------------------ -------------------------
Basic net income per common share $ 0.79 $ 0.44 $ 2.27 $ 2.28
======================== =========================
Diluted earnings per common share:
Income before accounting change $ 0.71 $ 0.41 $ 2.05 $ 1.93
Cumulative effect of accounting change - - - 0.15
------------------------ -------------------------
Diluted net income per common share $ 0.71 $ 0.41 $ 2.05 $ 2.08
======================== =========================
BALANCE SHEET
- -------------
(In thousands) September 30, Dec 31,
2004 2003
------------------------
Working capital $ 2,362 $ 3,101
Long-term debt $ 99,767 $110,696
Stockholders' equity $ 434,321 $390,653
Shares outstanding - permanent equity 28,302 28,242
Shares outstanding - temporary equity - 3,381
Note receivable from Flying J (contra-equity) $ - $ 71,594
PROVEN RESERVES
- ---------------
December 31,
-----------------------
2003 2002
-----------------------
Oil (MBbls) 47,787 36,119
Gas (MMcf) 307,024 274,172
---------- ---------
MMCFE (6:1) 593,744 490,887
========== =========
CASH FLOW
- ---------
(In thousands)
Reconciliation of Discretionary Cash Flow to Net Cash
Provided by Operating Activities:
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- ------------------------
2004 2003 2004 2003
----------------------- ------------------------
Discretionary Cash Flow (1) $ 71,588 $ 51,845 $ 192,300 $ 169,048
(Gain) loss on sale of proved properties (738) 343 (2,514) 221
Exploration exp, excluding exploratory dry hole exp (7,577) (3,528) (17,541) (13,171)
Other (910) (670) (3,498) (1,488)
Changes in working capital (5,050) 12,160 ( 11,615) (3,696)
---------- --------- ---------- ----------
Net Cash Provided by Operating Activities $ 57,313 $ 60,150 $ 157,132 $ 150,914
========== ========= ========== ===========
Net Cash Used in Investing Activities $ (46,763) (33,030) $(109,053) $ (153,648)
========== ========= ========== ===========
Net Cash Used in Financing Activities $ (62,993) (30,853) $ (38,218) $ (1,306)
========== ========= ========== ===========
(1)Discretionary cash flow is computed as net income plus depreciation,
depletion, amortization, impairments, deferred taxes, exploration expense,
stock-based compensation expense, and changes in the net profits interest
bonus plan liability, less the cumulative effect of change in accounting
principle and unrealized derivative loss. The non-GAAP measure of
discretionary cash flow is presented since management believes that it
provides useful additional information to investors for analysis of St.
Mary's ability to internally generate funds for exploration, development and
acquisitions. In addition, discretionary cash flow is widely used by
professional research analysts and others in the valuation, comparison and
investment recommendations of companies in the oil and gas exploration and
production industry, and many investors use the published research of
industry research analysts in making investment decisions. Discretionary
cash flow should not be considered in isolation or as a substitute for net
income, income from operations, net cash provided by operating activities or
other income, profitability, cash flow or liquidity measures prepared under
GAAP. Since discretionary cash flow excludes some, but not all, items that
affect net income and net cash provided by operating activities and may vary
among companies, the discretionary cash flow amounts presented may not be
comparable to similarly titled measures of other companies.