EXHIBIT 99.2
[INFINITY LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE
FOR ADDITIONAL INFORMATION FROM INFINITY, INC., PLEASE CONTACT:
STANTON E. ROSS, PRESIDENT/CEO
(620) 431-6200
JAMES W. DEAN, VICE PRESIDENT, STRATEGIC & CORPORATE DEVELOPMENT
(720) 932-7800
www.infinity-res.com
- --------------------
INFINITY, INC. ANNOUNCES 2003 PROVED RESERVES AND
PROVIDES UPDATE ON E&P OPERATIONS
DENVER and CHANUTE, Kan. - (PR Newswire) - March 29, 2004 - Infinity, Inc.
(NASDAQ: IFNY) today announced its year-end 2003 proved reserve data and
provided certain updates on its exploration and production ("E&P") operations.
RESERVE ANALYSIS
Infinity's 2003 oil and gas reserve report was prepared by Netherland, Sewell &
Associates, Inc. (NSAI), one of the world's leading independent reservoir
engineering firms. During 2003, production, oil and gas prices, operating
expenses and development expenditures for the Company's Labarge Field
("Labarge") and Wamsutter Arch Pipeline Field ("Pipeline") projects have varied
from those estimated in its 2002 reserve report, and additional geological,
geophysical, and engineering data has been analyzed. Production at Labarge
continues to be uneconomic. As a result, in its 2003 reserve report the Company
re-characterized as non-proved reserves approximately 90 billion cubic feet
equivalent (Bcfe) of 2002 proved reserves. The Company previously disclosed that
estimated proved oil and gas reserves could be materially reduced.
Nearly half (approximately 44 Bcfe) of the revision relates to Labarge, where
all proved reserves from last year's reserve report, net of 2003 production,
were reclassified as non-proved reserves. The primary reason for the Labarge
revision was a lack of economic production during 2003 and thus far in 2004. The
Company's management believes this was due to: (i) downhole operational issues
with the original producing wells; (ii) delays in the completion or recompletion
of existing wells from the schedule previously anticipated; and (iii) the
deferral of the drilling of new wells. These factors have resulted in
insufficient rates of production to date to cover the fixed costs at Labarge. In
a separate analysis prepared by NSAI, the firm independently estimated Labarge
contains resource potential in excess of 250 Bcfe on approximately 65% of the
Company's prospective leasehold and option acreage, based upon 160-acre spacing.
1
[INFINITY LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE
Slightly more than half of the revision (approximately 47 Bcfe) relates to the
producing Pipeline Field, which field comprises nearly all of the 2003 estimate
of proved reserves (a small amount of proved undeveloped reserves for 2003 are
also estimated at the Company's Sand Wash Basin prospect). The revision at
Pipeline is primarily due to: (i) drilling and production results and
engineering and geological interpretation during 2003 which essentially
"dis-proved" a number of well locations previously classified in 2002 as proved
well locations; (ii) less than expected production from a number of producing
wells during 2003; (iii) a lack of workover or enhancement work at any of the
producing wells in 2003 or to date in 2004; and (iv) operational delays. In
addition, based on additional production data, operating experience and
analytical work, the Company's management believes that Pipeline is not a
"blanket" coalbed methane field as previously thought, but is more likely a
conventional sand reservoir of oil and gas with nearby coals that may be
"charging" the sands. NSAI concurs with this view. The re-characterization of
the project as a conventional sand play necessarily increases the development
risk for the field and resulted in additional revisions. In addition, the
ongoing resolution of operating issues and delays in availability of capital
delayed Infinity's development plans in 2003 and contributed to reduced
production and the resulting reserve revisions.
Infinity's management continues to perform additional engineering and geological
interpretation work and rigorous analysis of its production results on a
well-by-well basis to establish what steps should be taken to improve well
performance.
Proved Reserves
Total Proved Oil, Bbl Gas, Mcf Total, Mcfe PV-10 (1)
- -----------------------------------------------------------------------------
Jan. 1, 2003 182,700 95,790,200 96,886,400 $84,010,206
Production (57,654) (1,080,456) (1,426,380) (2,912,096)
Additions 66,102 3,175,927 3,572,539 9,004,500
Revisions 1,990 (90,374,776) (90,362,836) (67,157,510)
---------- ------------ ------------ ------------
Jan. 1, 2004 193,138 7,510,895 8,669,723 $22,945,100
========== ============ ============ ============
Proved Developed 124,968 4,724,523 5,474,331 $16,383,600
========== ============ ============ ============
(1) The present value of estimated future net revenues to be generated from the
production of proved reserves, net of estimated production and ad valorem taxes,
future capital costs and operating expenses, using prices and costs in effect as
of the date indicated, without giving effect to federal or state income taxes.
The estimated future net revenues are discounted at an annual rate of 10% to
determine their "present value." The present value reflects the effect of time
on the present value of the revenue stream. PV-10 should not be construed as
being representative of the fair market value of the properties.
2
[INFINITY LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE
OPERATIONS UPDATE
Greater Green River Basin - Wamsutter Arch Pipeline Field
At Pipeline, Infinity has completed six wells in 2004 that were drilled in late
2003. Since January 2004, net production has increased 30%, from approximately
2,500 Mcfe (thousand cubic feet equivalent) per day to approximately 3,300 Mcfe
per day currently. A small part of the increase in net production can be
attributed to an acquisition, announced on March 2, 2004, of additional
interests in two wells in close proximity to existing production at Pipeline.
The acquisition added approximately 75 Mcfe per day of net production, greater
than 2 Bcfe of proved reserves (an estimate derived from, but not included in,
the reserve report data prepared by NSAI as of December 31, 2003) and 960 gross
(460 net) undeveloped acres. Adding the acquired proved reserves to the
NSAI-estimated proved reserve quantities for the Company at December 31, 2003,
would total approximately 11 Bcfe. During February 2004, the Company elected not
to extend the farmout on approximately 7,700 unearned acres at Pipeline that is
outside the area that Infinity's management believes is within the geologically
defined conventional sand play. The extension of the farmout would have required
additional payments of approximately $1 million.
The Company is in the process of identifying wells that could be candidates for
workovers, "refracs" and other enhancement operations in an effort to optimize
production in the field. In addition, the Company plans to drill two to five
wells during 2004. The enhancement of existing wells and drilling of new wells
in 2004 is subject to market conditions, operating and regulatory restrictions,
and drilling rig and capital availability.
Greater Green River Basin - Labarge Field
In December 2003, Infinity entered into an agreement with Schlumberger Oilfield
Services and Red Oak Capital Management LLC to develop Labarge. The agreement
provides for the completion or recompletion of five to ten of the existing well
bores at the Thompson and Riley Ridge pilot areas and the anticipated drilling
of ten new wells in 2004, and the anticipated drilling of twenty wells in each
of the years 2005 through 2008. Based on the success of the initial completion
program, and after each yearly development phase, the project would be evaluated
for continuation on a yearly basis. Using Schlumberger's technology, the Company
as operator has commenced initial completion attempts in certain zones in one
well and recompleted certain zones in two wells at Labarge and results to date
have been inconclusive. The two recompleted
3
[INFINITY LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE
wells are presently producing, with an additional one to three wells anticipated
to be brought into production during the second quarter of 2004.
Infinity's management believes that the development process is in an early stage
and plans to continue working with Schlumberger to optimize the completion and
recompletion techniques for potential future use on a wider scope at Labarge.
Due to ongoing regulatory restrictions in the Labarge area, slower than
anticipated work thus far in 2004, and ongoing evaluation of the early results
of joint operations, Infinity's management believes up to five or six of the ten
wells initially contemplated for drilling in 2004 may be drilled this year,
subject to drilling rig availability.
Nicaragua
The Company renegotiated a number of key terms and conditions of the exploration
contract covering the approximate 1,400,000-acre concession area offshore
Nicaragua, including an extension of the exploration period from six to eight
years with four sub-phases, and is awaiting final approvals by the Nicaraguan
government. Upon approval, the initial capital cost during the first twelve
months would be approximately $800,000, with an additional $1,600,000 during the
second twelve months to cover the costs of environmental studies, geological and
geophysical analysis, acquisition of seismic data and other operational
expenses.
Exploration offshore Nicaragua will focus on Eocene and Cretaceous carbonate
reservoirs and Infinity's management and consultants believe (i) numerous
analogies can be made between the Infinity concession block and production from
fractured Cretaceous carbonates in Mexico, Venezuela and Guatemala, and (ii) the
presence of Cretaceous source rocks onshore Honduras and Nicaragua can be
projected into the offshore Caribbean Shelf.
Fort Worth Basin / Barnett Shale
As announced on March 23, 2004, the Company has signed a letter of intent (LOI)
to acquire 25,000 gross acres in the Fort Worth Basin in north Texas. Infinity
will have an initial 90% working interest in and will operate the acreage. The
Company's management believes the acreage offers prospective drilling and
production opportunities targeting the prolific Barnett Shale. The transaction
is subject to due diligence and completion of a definitive agreement and related
documents. The LOI initially contemplates, at Infinity's option, the drilling of
four horizontal test wells, including three targeting the Barnett Shale.
4
[INFINITY LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE
Stanton E. Ross, Infinity President and CEO said: "The potential Fort Worth
Basin acquisition would provide the Company with opportunities for year-round
drilling in a new geographic area, where there is an ample supply of drilling
and related oilfield services, and nearby gathering and processing
infrastructure. Unlike our Rocky Mountain projects, in which we are attempting
to establish or develop new producing fields, the Barnett Shale has produced a
prodigious amount of gas over the past few years, attracting a large number of
industry participants and capital."
Sand Wash Basin
The Company currently has 160,000 gross acres under lease in the north and south
Sand Wash Basin, including 60,000 gross acres under leases which are due to
expire in 2004 primarily in the southern portion. During 2004, the Company has
elected not to renew the expiring leases for this acreage, based upon the
results of technical work performed in 2003 on this expiring acreage and a
desire to allocate capital away from holding these leases and towards other,
potentially more attractive growth projects. The Company plans to retain the
acreage which its management believes to be most prospective in the Sand Wash
Basin, including the targeted area of the initial pilot drilling program. The
Company's management expects to commence a pilot drilling program during 2004 or
2005 subject to market conditions, operating restrictions, and drilling rig and
capital availability. The Company is seeking to add a farmout partner to the
project prior to commencing the pilot drilling program.
Piceance Basin
The Company currently has 20,000 gross acres under lease in the northeastern
corner of the Piceance Basin. Infinity is required to drill and complete five
wells by November 20, 2005. Infinity's management believes the acreage is highly
prospective based upon estimates of the characteristics of the coal underlying
the acreage, including coal thickness. The Company currently plans to drill the
five pilot wells before November 20, 2005. The Company is seeking to add a
farmout partner to the project prior to commencing the pilot drilling program.
FINANCIAL IMPACT
Concurrent with the proved reserve revisions and the 2004 decision to relinquish
certain acreage at Pipeline and Sand Wash, Infinity recorded a non-cash ceiling
writedown of oil and gas properties of approximately $3.0 million in the quarter
and year ended December 31, 2003.
5
[INFINITY LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE
MANAGEMENT'S COMMENTS
Expanding upon Infinity's reserves and E&P operations, Ross said: "We are very
pleased to be working with Netherland, Sewell & Associates, Inc. NSAI is one of
the world's leading independent engineering firms, with a client base of
prominent public Rocky Mountain and coalbed methane producers. NSAI has
conducted its annual review and neither the Company nor NSAI currently expects
additional reserve revisions. A portion of the 2003 proved reserve revision is
due to less than anticipated production performance, a lack of production
enhancement efforts to date, an emerging understanding of reservoir
characteristics and other operational, financial and regulatory factors at
Pipeline. Another significant portion of the revision is due to delayed timing
of well completion and recompletions, drilling of new wells and, consequently,
delays in field-wide development at Labarge. We expect to continue to make
progress on all of these issues in 2004."
Ross continued: "Our current expectation for the first quarter of 2004 for E&P
operations is that both production and revenues will equal or exceed levels
achieved in the fourth quarter of 2003. We anticipate providing E&P guidance
with respect to the second quarter and balance of 2004 during upcoming
operations updates."
Ross concluded: "The ceiling writedown is also due in part to recent economic
decisions we made as to where we best allocate our future growth capital. As we
disclosed in our most recent operational update and news releases, our E&P group
is growing production in the Rocky Mountains and taking steps to add exploratory
acreage in new prospect areas, such as the Fort Worth Basin and Nicaragua, which
may potentially hold significant future reserves and production for the Company.
In addition, these areas provide us the ability to work on a year round basis
towards the goals of growing production and reserves, while our Rocky Mountain
operations are otherwise restricted during a large portion of the year.
Although, these new areas are very promising, in our view, and ultimately may
take precedence in the timing of and/or amount of capital allocated, we will
continue to focus our efforts and capital in our core areas of production and
development in the Rocky Mountains."
ABOUT INFINITY, INC.
Infinity, Inc., through its wholly-owned subsidiary Infinity Oil & Gas of
Wyoming, Inc., is an independent energy company engaged in the exploration,
development, production, operation and acquisition of natural gas and oil
properties. The Company's current operations are principally focused on the
6
[INFINITY LOGO]
NEWS RELEASE
FOR IMMEDIATE RELEASE
development and expansion of its producing Wamsutter Arch (Pipeline) project and
emerging Labarge coal bed methane project, which are located in the Greater
Green River Basin in southwestern Wyoming. Infinity Oil & Gas of Wyoming also
holds exploration and development rights in the Sand Wash and Piceance Basins of
northwest Colorado. Infinity, Inc. also provides oilfield services through its
wholly-owned subsidiary, Consolidated Oil Well Services, Inc., based in Chanute,
Kansas, with operations focused primarily in the Mid-Continent region. The
Company's common stock is listed on The NASDAQ National Market under the symbol
"IFNY."
FORWARD-LOOKING STATEMENTS
This press release includes statements that may constitute "forward-looking"
statements, usually containing the words "believe," "estimate," "project,"
"expect," "plan," "should" 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, operating problems, the results of
drilling, the availability of drilling rigs, the availability of third party
financing at the times and on the terms anticipated, the completion of
transactions and transaction documents 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, uncertainties inherent in
projecting future rates of production and timing of development activities,
operating risks, liquidity and capital requirements, whether government
approvals are received at the times and on the terms anticipated, the effects of
governmental regulation, adverse changes in the market for the Company's oil and
gas production, continued acceptance of the Company's oilfield services in the
marketplace, dependence upon third-party vendors, and other risks detailed in
the Company's periodic report filings with the Securities and Exchange
Commission. You can find the Company's filings with the Securities and Exchange
Commission at www.infinity-res.com or at www.sec.gov. By making these
forward-looking statements, the Company undertakes no obligation to update these
statements for revisions or changes after the date of this release.
# # #
7