Wednesday February 28, 4:22 pm Eastern Time
Press Release
Key Production Reports Fourth Quarter Earnings of $.77 Per Share
Annual Earnings Increase 298% to $2.23 Per Share
DENVER--(BUSINESS WIRE)--Feb. 28, 2001--Key Production Company, Inc. (NYSE: KP -
news) today reported that strong oil and gas prices fueled significantly
improved financial results for 2000. Earnings increased four fold to $2.23 per
diluted share on net income of $28 million versus 1999 earnings of $.56 per
share and net income of $6.8 million. During the fourth quarter of 2000, Key's
earnings totaled $10 million, or $.77 per share, up from $3.7 million, or $.30
per share, in the same three-month period of 1999.
Chairman and Chief Executive Officer, F. H. (Mick) Merelli commented that:
"Without question, the improvement in oil and gas prices greatly aided
achievement of Key's best financial results ever. However, the continuation of
our long-term track record of consistent profitable growth should not be
overlooked. For the seventh consecutive year, we grew our proved reserves and
production, and we continued to more than replace production with drilling."
Other measures of Key's financial and operational progress in 2000 include:
o Discretionary cash flow, which is cash flow from operations before changes
in working capital, totaled $77.9 million, or $6.21 per share, up from
$39.2 million, or $3.24 per share, in 1999;
o In the fourth quarter of 2000, discretionary cash flow climbed to $25.3
million, or $1.95 per share, from $14.2 million, or $1.17 per share, in the
prior year period;
o Year-end 2000 proved reserves grew 14 percent to 154 billion cubic feet
(Bcf) equivalent (64 percent gas and 99.5 percent proved developed);
o Reserve replacement from all sources was 183 percent and 122 percent
excluding acquisitions;
o Annual production volumes increased 3 percent to 23.1 Bcfe;
o Debt was reduced by $16 million to $44 million and the ratio of debt to
total capitalization improved to 24 percent;
o Outlays for exploration and development were $60.5 million versus $32.5
million in 1999.
Key's average realized oil price in 2000 improved to $28.92 per barrel from
$17.58 in 1999. In the fourth quarter of 2000, we averaged $30.58 per barrel
versus $23.29 a year earlier. Our 2000 gas production was sold at an average
price of $3.87 per thousand cubic feet (Mcf), including a $5.50 per Mcf
realization in the fourth quarter. In 1999, our average annual gas price was
$2.19 per Mcf, with a fourth quarter realization of $2.47. Key did not use any
commodity price hedging arrangements during 1999 or 2000, which allowed us to
fully participate in the market driven increase in worldwide oil and North
American natural gas prices. We remain unhedged.
Accounting standards and securities laws require that certain supplemental oil
and gas information be reported on reports filed with the Securities and
Exchange Commission. When Key files its 2000 Form 10-K later this year, we
anticipate that the present value discounted at 10 percent of the estimated
future net cash flows before income taxes from year-end 2000 proved reserves
will be $638 million. The prescribed methodology for this calculation results in
average realized wellhead prices of $10.45 per Mcf of gas and $24.17 per barrel
of oil.
Capitalized costs incurred for oil and gas activities during 2000 totaled $88.1
million, including $60.5 million of exploration and development expenditures and
$27.6 million for acquisitions. Of the costs recorded for acquisitions, $6.7
million is the result of the step-up to the book basis of the assets acquired in
the tax-free, stock-for-stock merger with Columbus Energy Corp. on December 29,
2000.
Apart from the 14.1 Bcfe of proved reserves that were added from acquisitions,
28.1 Bcfe were added through drilling and positive revisions. Key participated
in drilling 105 wells during 2000, with an overall success rate of 78 percent.
On a net basis, 25.9 of 40.0 wells drilled were successful. Drilling efforts
were concentrated in the Mid-Continent region, principally the Anadarko Basin,
and the Mississippi Salt Basin.
2001 Production Volume Outlook
The production and sale of oil and gas involves many complex processes that are
subject to numerous uncertainties, including reservoir risk, mechanical failure,
market conditions, transportation issues, human error, adverse weather
conditions, and other factors. Nonetheless, we currently estimate that our 2001
equivalent production volumes will increase by 13-19 percent. We estimate that
our net gas production will range from 45-47 million cubic feet per day and net
oil output will approximate 4,500-4,700 barrels per day.
The above production estimates are predicated on estimated exploration and
development expenditures of $65-70 million, a portion of which is contingent on
successful exploratory wells. Key cautions that future capital expenditures are
subject to all the risks and uncertainties normally incident to the exploration
for and development of oil and gas. These risks include, but are not limited to,
geologic and reservoir risk, price volatility, inflation, lack of availability
of equipment and services, environmental risks, drilling risks, regulatory
changes, and the uncertainty of estimating reserves and future production rates.
Our production forecast is also based on many other assumptions, such as well
performance and success rates for wells that have not been drilled yet.
Therefore, we can give no assurance that our future production will be as
estimated.
Conference Call
Management will conduct a conference call to further review 2000 financial
results and 2001 operational plans on Thursday, March 1 at 9:00 am Mountain
Time. Interested parties may access the call by dialing (800) 881-5262 and
requesting the Key Production Company teleconference. A recording of the call
will be available two hours after its completion through March 8, 2001. To
access the replay, call (800) 642-1687 and enter the conference-id 14031.
KEY PRODUCTION COMPANY, INC.
SUMMARY FINANCIAL INFORMATION
(Unaudited)
For the Three Months For the Twelve Months
Ended December 31, Ended December 31,
2000 1999 2000 1999
SUMMARY OF OPERATIONS ---- ---- ---- ----
(In thousands, except
per share data)
Revenues:
Gas sales $18,907 $9,340 $53,656 $30,779
Oil sales 12,168 8,729 44,379 24,177
Plant product 139 330 1,333 842
Other 175 142 452 460
------ ------ ------- --------
31,389 18,541 99,820 56,258
------ ------ ------- --------
Operating expenses:
Depreciation, depletion
and amortization 10,023 8,463 35,204 28,672
Lease operating 2,727 2,559 10,965 8,951
Production taxes 1,224 212 3,526 2,623
General and administrative 1,145 725 3,324 2,550
------ ------ ------- --------
15,119 11,959 53,019 42,796
------ ------ ------- --------
Operating income 16,270 6,582 46,801 13,462
------ ------ ------- --------
Financing costs:
Interest expense 973 1,070 4,311 4,081
Capitalized interest (518) (389) (1,712) (1,397)
Interest income (100) (53) (234) (197)
------ ------ ------- --------
355 628 2,365 2,487
------ ------ ------- --------
Income before income taxes 15,915 5,954 44,436 10,975
Provision for income taxes 5,888 2,263 16,441 4,171
------ ------ ------- --------
Net income $10,027 $3,691 $27,995 $6,804
======= ====== ======= ========
Basic earnings per share $ .80 $ .32 $ 2.32 $ .59
======= ====== ======= ========
Diluted earnings per share $ .77 $ .30 $ 2.23 $ .56
======= ====== ======= ========
Weighted average
basic shares 12,494 11,568 12,075 11,537
======= ====== ======= ========
Weighted average diluted
shares 12,992 12,129 12,537 12,111
======= ====== ======= ========
KEY PRODUCTION COMPANY, INC.
SUMMARY FINANCIAL INFORMATION
(Unaudited)
For the Three Months For the Twelve Months
Ended December 31, Ended December 31,
2000 1999 2000 1999
---- ---- ---- ----
PRODUCTION AND PRICING DATA
Natural gas production:
Million cubic feet 3,441 3,777 13,855 14,070
Average daily volumes,
million cubic feet per day 37.4 41.1 37.9 38.5
Average price per thousand
cubic feet $5.50 $2.47 $3.87 $2.19
Oil production:
Barrels 397,900 374,700 1,534,400 1,375,100
Average daily
volumes, barrels per day 4,325 4,073 4,192 3,767
Average price per barrel $30.58 $23.29 $28.92 $17.58
NET CASH PROVIDED BY
OPERATING ACTIVITIES
(In thousands)
Net income $10,027 $3,691 $27,995 $6,804
Depreciation, depletion
and amortization 10,023 8,463 35,204 28,672
Deferred taxes and other
income tax benefit 5,252 2,025 14,664 3,732
------ ------ ------- --------
25,302 14,179 77,863 39,208
Changes in operating assets
and liabilities (2,902) 1,635 (6,951) (3,748)
------ ------ ------- --------
Net cash provided by
operating
activities $22,400 $15,814 $70,912 $35,460
======= ====== ======= ========
CAPITALIZED COSTS INCURRED (1)
(In thousands)
Exploration and development $20,054 $8,949 $60,547 $32,470
Acquisitions 27,450 193 27,571 1,986
Property sales (76) (167) (341) (2,114)
BALANCE SHEET DATA December 31, December 31,
(In thousands) 2000 1999
---- ----
Total debt $ 44,000 $ 60,000
Shareholders' equity $ 138,087 $ 76,873
Common shares outstanding 13,921 11,587
Gas Oil Equivalent
(in MMcf) (in MBbls) (in Bcfe)
--------- ---------- ---------
2000 PROVED RESERVES (1)
Beginning of year 79,351 9,220 134.7
Revisions of previous estimates 3,822 (205) 2.6
Extensions, discoveries
and other additions 19,488 1,011 25.6
Purchases of reserves 9,408 784 14.1
Production (13,855) (1,534) (23.1)
-------- ------- ------
End of year 98,214 9,276 153.9
======== ======= ======
Proved developed reserves 97,564 9,268 153.2
======== ======= ======
The following table summarizes the average year-end prices used to estimate
reserves in accordance with SEC guidelines, and the resulting pre-tax PV10.
2000 1999 Change
---- ---- ------
Natural gas (per mcf) $ 10.45 $ 2.16 $ 8.29
Oil (per barrel) $ 24.17 $ 23.68 $ .49
Pre-tax PV10 ($ millions) $ 638.4 $ 185.2 $ 453.2
2000 PROVED RESERVES BY REGION
Gas Oil Equivalent
Region (Bcf) (MMBbls) (Bcfe)
- ------ ----- ------ ----
Mid-Continent 59.1 3.1 77.6
Gulf Coast 20.4 2.4 35.0
Western 18.7 3.8 41.3
---- ---- ----
Total 98.2 9.3 153.9
---- ---- ----
(1) Proved reserves and cost incurred data are preliminary disclosures and
subject to change. For more detail and final numbers refer to our Annual
Report on Form 10-K for the year ended December 31, 2000.
This news release may contain projections and other forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. Any such projections or statements reflect the Company's
current views with respect to future events and financial performance. No
assurances can be given, however, that these events will occur or that such
projections will be achieved and actual results could differ materially from
those projected. A discussion of important factors that could cause actual
results to differ materially from those projected is included in the Company's
periodic reports filed with the Securities and Exchange Commission.
Contact:
Key Production Company, Inc., Denver
Paul Korus, 303/295-3995