INFINITY INC. NEWS RELEASE
For immediate release on Friday, November 14, 2003
For additional information from Infinity, Inc., please contact:
Stanton E. Ross, President/CEO - (620) 431-6200
WWW.INFINITY-RES.COM
- --------------------
INFINITY REPORTS 96% INCREASE IN GROSS PROFIT FOR 2003'S THIRD QUARTER;
THIRD QUARTER PRODUCTION RISES 89%
DENVER and CHANUTE, Kan. - PR Newswire - November 14, 2003 - Infinity, Inc.
(NASDAQ: IFNY) today announced its results for the three months and nine months
ended September 30, 2003. Financial and operational tables for the quarter and
first nine months follow this commentary.
THREE AND NINE MONTH RESULTS
Infinity reported revenue of $5.2 million for the quarter ended September 30,
2003, an 86% increase over $2.8 million in the prior year. Gross profit for the
third quarter was $2.8 million, compared to $1.2 million reported in the prior
year. Operating income was $0.7 million compared to an operating loss of $0.3
million for the prior year. Net loss and diluted loss per share for the third
quarter of 2003 were $4.5 million and $0.55, which included amortization of
non-cash loan costs of $4.2 million. For the previous year, net loss and diluted
loss per share were $0.3 million and $0.04, respectively.
Nine month revenue was $13.8 million, up 84% over the $7.5 million reported in
2002. Gross profit was $6.9 million, or 131% higher than 2002's $3.0 million.
Operating profit of $1.0 million is a $2.2 million improvement over 2002's
operating loss of $1.2 million.
OPERATIONS
Oilfield service revenues for the first nine months of the year are $8.6
million, up 45% compared to last year. Three years ago, operators took large,
five-year lease tracts in the Cherokee and Forest City Basins and are actively
drilling in the fields. As the largest oilfield service provider in the area, we
expect to benefit in the future from our customers' desire to maintain
production volumes by developing their undrilled acreage.
Production for the quarter was 340 million cubic feet equivalent (Mmcfe), an
increase of 89% over the 180 Mmcfe produced in the third quarter of 2002.
Year-to-date production was 1,167 Mmcfe, 69% higher than the 690 Mmcfe produced
during 2002's corresponding period.
The Company is currently drilling at Pipeline and is spudding the 11-3 today.
The Company has drilled and set casing on the Pipeline 11-2 and Pipeline State
36-3 wells. These three wells are field extension wells and have been classified
as PUD locations based on 160 acre spacing. After this well, the 13-12 will be
drilled to evaluate the infill potential of the field. As part of the
recompletion effort, the Company perforated and swabbed the upper Almond sand in
the 13-2, which resulted in a small show of gas. The Company is currently lining
up frac crews to sequentially stimulate four new wells and one recompletion.
Pending frac schedules, equipment availability, flow line installation and
production test results, we expect most, if not all these
wells to be hooked into sales lines by the end of the fourth quarter. The
Company also continues to evaluate joint ventures and refine its engineering and
geological understanding of all its assets.
During 2003, production, oil and gas prices, operating expenses and development
expenditures for the Company's Labarge and Pipeline projects have varied from
those estimated in its 2002 reserve reports, and additional geological,
geophysical, and engineering data has been analyzed. Production at Labarge
continues to be uneconomic. The Company believes that this is due to downhole
operational issues at the 5 completed wells. The Company is negotiating with an
industry service provider to assist in the development of Labarge, and
anticipates that the 10 existing wells at Labarge will be completed or
recompleted in the next several weeks. Depending on whether and when the
contractual arrangements are completed, and on the timing and results of
completion and recompletion efforts, the Company's year-end reserve estimates at
Labarge may well be substantially less than 2002 reserves.
Although operations at Pipeline continue to be profitable, production has not
met management's expectations. If additional external financing is available,
the Company expects to complete 3 additional wells at Pipeline during the fourth
quarter, although there is no assurance that production rates from those wells
will exceed production from the existing wells. Therefore, the Company could
experience a substantial year-end reduction of reserves at Pipeline. Taken
together, and depending on the results of the Company's efforts over the next
few months, total year-end reserve estimate reductions could potentially be
material.
CAPITAL AND LIQUIDITY
Infinity ended the third quarter 2003 with a cash balance of $1.3 million and a
working capital balance of $0.2 million. During the quarter, Infinity entered
into a $25 million Secured Revolving Borrowing Base Credit Facility with US Bank
National Association. The Company has borrowed $5.5 million under this facility,
the maximum amount currently available. A portion of the proceeds from this
borrowing was issued to pay short term notes. The US Bank facility carries a
lower interest rate than the notes held previously and was an integral part of
the Company's focus on strengthening its balance sheet.
MANAGEMENT'S COMMENTS Stanton E. Ross, Infinity President and Chief Executive
Officer, said: "Infinity delivered excellent operational results for the
quarter. We are steadfast in our resolve to grow Infinity's oil and gas
production base and deliver top-tier oil service solutions to our customers. We
expect our hard work in 2003 will pay off with continued revenue growth,
production and profit in 2004."
ABOUT INFINITY, INC.
Infinity, Inc., headquartered in Chanute, Kansas, is an independent energy
company engaged in the exploration, development, production, operation and
acquisition of unconventional natural gas properties. The Company's current
operations are principally focused on the development and expansion of its
Pipeline and Labarge coalbed methane projects, which are located in the Greater
Green River Basin in southwestern Wyoming and northwestern Colorado. In
addition, Infinity owns Consolidated Oil Well Services, Inc., an oilfield
services company based in Chanute, Kansas. The Company's common stock is listed
on The NASDAQ National Market under the symbol "IFNY."
This press release includes statements that may constitute forward-looking
statements, usually containing the words "believe, estimate, project, expect" or
similar expressions. These statements are made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements inherently involve risks and uncertainties that could
cause actual results to differ materially from the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, the results of drilling, the availability of third-party financing
and other contractual arrangements at the times and on the terms anticipated,
fluctuations in the prices of oil and gas, uncertainties inherent in estimating
quantities of oil and gas reserves and projecting future rates of production and
timing of development activities, competition, operating risks, acquisition
risks, liquidity and capital requirements, the effects of governmental
regulation, adverse changes in the market for the company's oil and gas
production, continued acceptance of the company's oil field services in their
marketplace, dependence upon third-party vendors and other risks detailed in the
company's periodic reports and filings with the Securities and Exchange
Commission. By making these forward-looking statements, the company undertakes
no obligation to update these statements for revisions or changes after the date
of this call.
INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
Sept.30, 2003 Dec. 31, 2002
-------- -------------
Current Assets (Unaudited)
Cash $ 1,336,536 $ 867,017
Accounts receivable, less allowance for doubtful
accounts of $25,000 1,889,890 1,493,224
Inventories 381,810 340,217
Prepaid expenses and other 260,867 278,510
Derivative instruments 858,335 ---
------------- ------------
Total current assets 4,727,438 2,978,968
Oil and gas properties, using full cost accounting net
of accumulated depreciation, depletion and amortization
Subject to amortization 20,120,384 19,107,427
Not subject to amortization 17,634,409 13,176,850
Property and equipment, at cost, less accumulated
depreciation and impairment 10,450,435 10,315,068
Intangible assets, at cost, less accumulated amortization 4,815,639 5,299,881
Notes receivable, less current portion 1,584,938 1,597,053
Other assets, net 134,855 655,022
------------- ------------
Total assets $ 59,468,098 $ 53,130,269
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt 1,849,339 2,227,195
Accounts payable 1,167,702 2,875,900
Accrued expenses 1,463,062 969,526
------------- ------------
Total current liabilities 4,480,103 6,072,621
Long-term liabilities
Asset retirement obligations 460,226 ---
8% subordinated convertible notes payable 2,868,000 4,243,000
7% subordinated convertible notes payable 10,830,000 12,540,000
Long-term debt, related party 3,000,000 3,000,000
Long-term debt, less current portion 9,711,299 4,464,156
------------- ------------
Total liabilities 31,349,628 30,319,777
------------- ------------
Stockholders' equity
Common stock, par value $.0001, authorized 300,000,000
shares, issued and outstanding 8,183,046 shares;
7,558,462 shares 818 756
Additional paid-in-capital 32,614,147 22,870,449
Accumulated other comprehensive gain (loss) 858,335 (77,301)
(Accumulated deficit)/retained earnings (5,354,830) 16,588
------------- ------------
Total stockholders' equity 28,118,470 22,810,492
------------- ------------
Total liabilities and stockholders' equity $ 59,468,098 $ 53,130,269
============= ============
INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended September 30,
2003 2002
---- ----
Revenues
Oil and gas service operations $ 3,678,867 $ 2,398,449
Oil and gas sales 1,562,639 418,552
------------- -----------
Total revenues 5,241,506 2,817,001
------------- -----------
Cost of sales
Oil and gas service operations 1,823,966 1,251,743
Oil and gas production expenses 489,785 373,297
Oil and gas production taxes 163,444 28,774
------------- -----------
Total cost of sales 2,477,195 1,653,814
------------- -----------
Gross profit 2,764,311 1,163,187
------------- -----------
General and administrative expense 1,239,062 1,226,994
Depreciation, depletion and amortization expense 869,558 271,375
------------- -----------
Total other operating expenses 2,108,620 1,498,369
------------- -----------
Operating income (loss) 655,691 (335,182)
------------- -----------
Other income (expense)
Interest & other income 35,961 59,982
Amortization of non-cash loan costs (4,230,469) ---
Amortization of cash loan costs ( 410,883) ---
Interest expense ( 552,114) (202,388)
Loss on sales of assets ( 23,392) ---
------------- -----------
Total other income (expense) (5,180,897) (142,406)
------------- -----------
Net loss before income taxes (4,525,206) (477,588)
Income tax benefit --- 184,000
------------- -----------
Net loss $ (4,525,206) $ (293,588)
------------- -----------
Net loss per common share $ (0.55) $ (0.04)
------------- -----------
Net loss per diluted common share $ (0.55) $ (0.04)
------------- -----------
Weighted average diluted shares outstanding 8,178,003 7,431,146
INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended September 30,
--------------------------
2003 2002
---- ----
Revenues
Oil and gas service operations $ 8,552,827 $ 5,901,636
Oil and gas sales 5,296,729 1,622,274
------------- ------------
Total revenues 13,849,556 7,523,910
------------- ------------
Cost of sales
Oil and gas service operations 4,556,122 3,258,101
Oil and gas production expenses 1,783,065 1,127,504
Oil and gas production taxes 589,793 144,118
------------- ------------
Total cost of sales 6,928,980 4,529,723
------------- ------------
Gross profit 6,920,576 2,994,187
------------- ------------
General and administrative expense 4,028,375 3,231,830
Depreciation, depletion and amortization expense 1,928,250 930,770
------------- ------------
Total other operating expenses 5,956,625 4,162,600
------------- ------------
Operating income (loss) 963,951 (1,168,413)
------------- ------------
Other income (expense)
Interest income & other income 114,737 65,723
Amortization of non-cash loan costs ( 4,825,913) ( 36,195)
Amortization of cash loan costs ( 476,356) ( 4,474)
Interest expense ( 1,120,751) ( 517,093)
Gain (loss) on sales of assets ( 27,086) 7,998
------------- ------------
Total other (expense) ( 6,335,369) (484,041)
------------- ------------
Net loss before income taxes ( 5,371,418) (1,652,454)
Income tax benefit --- 636,000
------------- ------------
Net loss $ (5,371,418) $(1,016,454)
------------- ------------
Net loss per common share $ (0.67) $ (0.14)
------------- ------------
Net loss per diluted common share $ (0.67) $ (0.14)
------------- ------------
Weighted average diluted shares outstanding 7,998,635 7,103,359
INFINITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30,
2003 2002
Cash flows from operating activities
Net loss $ (5,371,418) $ (1,016,454)
Adjustments to reconcile net loss to net cash
provided by/(used in) operating activities
Depreciation, depletion and amortization 1,928,250 930,770
Amortization of loan costs included in
interest expense 5,302,269 40,669
Deferred income taxes --- (636,000)
(Gain)/Loss on sale of assets 27,086 (7,998)
(Increase) decrease in operating assets
Accounts receivable ( 396,666) (66,294)
Inventories ( 41,593) (14,496)
Prepaid expenses ( 29,852) (101,159)
Increase (decrease) in operating liabilities
Accounts payable (1,444,817) (1,269,528)
Accrued expenses 666,788 450,002
-------------- -------------
Net cash provided by/(used in) operating activities 640,047 (1,690,488)
-------------- -------------
Cash flows from investing activities
Proceeds from sale of marketable securities --- 750,000
Investment in marketable securities --- (675,616)
Investment in oil and gas properties (3,551,079) (10,027,540)
Investment in other assets and intangibles ( 685,545) (1,043,275)
Purchase of property and equipment ( 447,746) (1,311,654)
Proceeds from sale of oil and gas properties --- 180,000
Proceeds from sale of property and equipment 44,211 160,000
Payment on Notes Receivable 11,218 3,529
-------------- -------------
Net cash used in investing activities (4,628,941) (11,964,556)
-------------- -------------
Cash flows from financing activities
Proceeds from notes payable 11,452,861 2,397,499
Sale of subordinated notes --- 12,540,000
Increase in borrowings on long-term debt --- 3,821,117
Proceeds from issuance of common stock 820,482 1,663,489
Repayment of long-term debt (7,814,930) (6,139,586)
-------------- -------------
Net cash provided by financing activities 4,458,413 14,282,519
-------------- -------------
Net increase/(decrease) in cash 469,519 627,475
Cash, beginning of period 867,017 665,898
-------------- -------------
Cash, end of period $ 1,336,536 $ 1,293,373
============== =============
Oil Field Service Statistics
Quarters ended September 30,
($ in millions before cash discounts)
2003 2002 CHANGE
---------------- --------------- ---------------
JOB TYPE JOBS REVENUE JOBS REVENUE JOBS REVENUE
Cementing 536 $1.3 324 $0.8 212 $0.5
Acidizing 256 $0.4 210 $0.3 46 $0.1
Fracturing 374 $2.1 211 $1.2 163 $0.8
Infinity-Wyoming
Production Statistics
Pipeline Labarge Total
Volumes in 000's: 2003 2002 2003 2002 2003 2002
- ----------------- ---- ---- ---- ---- ---- ----
Oil Sales Volumes (bls) 14.2 5.7 0.0 0.2 14.2 5.8
Gas Sales Volumes (mcf) 246.6 125.0 8.1 19.5 254.7 144.8
MCF Equivalents 332.1 158.9 8.1 20.6 340.0 179.7
Values in 000's:
- ----------------
Oil Revenue $421.8 $168.3 $0.0 $0.0 $421.8 $168.3
Gas Revenue $1,104.6 $226.7 $36.2 $23.6 $1,140.8 $250.2
Production Expense $178.4 $124.4 $126.1 $137.0 $318.1 $281.0
Production Taxes $160.0 $25.6 $3.5 $3.2 $163.4 $28.7
Transportation Expense $159.1 $82.3 $4.2 $7.3 $163.4 $89.7
Per MCF Equivalent:
- -------------------
Revenue $4.60 $2.49 $4.46 $1.14 $4.60 $2.33
Production Expense $0.54 $0.78 $15.53 $6.65 $0.94 $1.56
Production Taxes $0.48 $0.16 $0.43 $0.15 $0.48 $0.15
Transportation Expense $0.48 $0.52 $0.52 $0.36 $0.48 $0.50
Oil Field Service Statistics
Nine Months Ended September 30,
($ in millions before cash discounts)
2003 2002 CHANGE
----------------- -------------- ---------------
JOB TYPE JOBS REVENUE JOBS REVENUE JOBS REVENUE
Cementing 1,223 $3.1 679 $1.8 544 $1.3
Acidizing 702 $1.0 600 $0.8 102 $0.2
Fracturing 820 $4.8 670 $3.4 150 $1.4
Infinity-Wyoming
Production Statistics
Pipeline Labarge Total
Volumes in 000'S: 2003 2002 2003 2002 2003 2002
- ----------------- ---- ---- ---- ---- ---- ----
Oil Sales Volumes (bls) 47.1 34.0 0.1 0.2 47.2 34.2
Gas Sales Volumes (mcf) 861.4 459.8 22.2 24.1 883.6 484.9
MCF Equivalent 1,144.1 664.0 22.9 25.2 1,166.6 690.0
Values in 000'S:
- ----------------
Oil Revenue $1,437.4 $657.2 $2.7 $0.0 $1,440.1 $657.2
Gas Revenue $3,760.3 $747.8 $96.3 $32.8 $3,856.6 $780.6
Production Expense $453.3 $378.3 $691.8 $277.4 $1,169.6 $714.3
Production Taxes $579.1 $138.4 $10.7 $4.6 $589.8 $143.0
Transportation Expense $604.4 $200.6 $8.3 $8.6 $612.6 $209.2
Per MCF Equivalent:
- -------------------
Revenue $4.54 $2.12 $4.33 $1.30 $4.54 $2.08
Production Expense $0.40 $0.57 $30.27 $10.99 $1.00 $1.04
Production Taxes $0.51 $0.21 $0.47 $0.18 $0.51 $0.21
Transportation Expense $0.53 $0.30 $0.36 $0.34 $0.53 $0.30