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EXHIBIT 99.1
ENCORE ACQUISITION COMPANY ANNOUNCES SECOND QUARTER RESULTS
Fort Worth, Texas- July 29, 2003-Encore Acquisition Company ("Encore") (NYSE:
EAC) today reported
<Table>
<Caption>
Three Months Ended June 30,
-----------------------------
2003 2002 Increase
------------ ------------ ------------
(unaudited)
$ in millions (except per share amounts)
Net income $ 14.2 $ 9.1 56%
Diluted earnings per share $ 0.47 $ 0.30 57%
Revenues $ 51.2 $ 37.8 36%
Cash flow from operations $ 25.4 $ 20.3 25%
Development Capital $ 22.8 $ 20.5 11%
Daily production volumes (boe) 21,398 19,427 10%
</Table>
Net income for the quarter ended June 30, 2003 increased 56% to $14.2 million,
or $0.47 per diluted share, on revenues of $51.2 million compared to net income
of $9.1 million, or $0.30 per diluted share, on revenues of $37.8 million for
the same quarter in 2002.
Encore's reported production volumes in the second quarter of 2003 increased 10%
to 21,398 barrels of oil equivalent ("boe") per day compared with 2002 second
quarter volumes of 19,427 boe per day. The increase is due to the Company's
development programs in the Cedar Creek Anticline ("CCA") and the Permian Basin,
and to a lesser extent, the Paradox Basin acquisition which was completed in the
third quarter of 2002. As anticipated, reported production compared to first
quarter 2003 volumes are lower by 2.7%, primarily because of the increase in the
Company's net profits interest payment due to high oil prices and the flush
production from a few large wells the Company completed in late 2002 and early
2003.
During the second quarter 2003, the Company realized an average oil price of
$25.19 per barrel, up 14% or $3.03 per barrel compared to the same quarter last
year. Natural gas price realizations for the current quarter were up as well to
$5.30 per thousand cubic feet ("mcf") or 75% compared to $3.02 per mcf for the
same period in 2002. The Company's price per boe in the second quarter of 2003
was down $1.74 per boe to $26.32 from $28.06 in the first quarter of 2003.
Lease operating expenses were lower than expected at $4.69 per boe for the
second quarter, reflecting higher than anticipated production and lower than
anticipated maintenance costs in the CCA. General and administrative costs for
the second quarter increased to $1.20 per boe from $0.78 per boe for the same
quarter last year due to an overall increase in staffing levels and higher
accounting, legal and professional services related the Company's recent shelf
registration and acquisitions. The depletion, depreciation and amortization
("DD&A") rate was $3.96 per boe for the second quarter compared with $4.96 per
boe for the same period last year. The decrease is primarily attributable to
increased year-end reserves at December 31, 2002, and the adoption of Statement
of Financial Accounting Standards No. 143 "Accounting for Asset Retirement
Obligations" in the first quarter of 2003.
Jon S. Brumley, President, commented "with a strong balance sheet, high margins,
an inventory of conventional development opportunities, and the high-pressure
air injection project, our future looks bright and we are well positioned to
increase shareholder value".
Encore invested $22.8 million of capital during the second quarter 2003,
resulting in ten (5.6 net) vertical wells, six (5.4 net) horizontal wells, six
(4.3 net) re-entry wells and seven (6.3 net) service/injection wells. The
Company is currently maintaining a six-rig program, five in CCA and one in the
Permian Basin. In addition, there are currently two non-operated rigs running in
the North Louisiana properties.
The Company's long-term debt at June 30, 2003 was $150.0 million as compared to
$158.0 million at the end of March 31, 2003.
OUTLOOK FOR THIRD QUARTER
As announced previously, the Company agreed in late June to acquire $52.2
million of interests in Northern Louisiana from a group of private sellers. The
properties are located in the Elm Grove Field in Bossier Parish, Louisiana. The
closing date is expected to be July 31, 2003, effective June 1, 2003, and will
be funded with bank financing under the Company's existing credit line and
available cash. The non-operated working interests range from 2% to 38% across
1,800 net acres in 15 sections.
Current net production from the interests average 7,200 mcf per day, and as
previously noted, there is a two-rig drilling program underway.
Production in the third quarter, which assumes two months of production volume
from the North Louisiana acquisition, is expected to increase to approximately
21,900 boe per day.
Encore continued to increase its commodity hedge position for both oil and
natural gas and has included the Company's latest positions in an attached
schedule.
Lease operating expenses are expected to be $4.77 per boe. General and
administrative costs are anticipated to be approximately $1.20 per boe and DD&A
should be approximately $4.05 per boe.
Capital expenditures for the third quarter are expected to be approximately
$78.2 million, which includes $52.2 million for the North Louisiana acquisition
and $26.0 million for ongoing development programs, including $2.0 million for
North Louisiana.
Encore expects to have borrowings under its credit facility of approximately
$45.0 million at the end of the third quarter due to closing the North Louisiana
acquisition. The Company anticipates an effective tax rate of approximately 37%,
with 93% deferred.
CONFERENCE CALL
Encore will host a conference call and web cast at 9:00 a.m. CDT on July 30,
2003. The conference call can be accessed by dialing 800.289.0572 and supplying
the title "Encore Acquisition Company Second Quarter Conference Call" and the
web cast can be accessed via http://www.encoreacq.com. The replay by telephone
will be available on the Web site or by dialing 719.457.0820 and using pass code
437452. The telephone replay will be available through August 7, 2003.
Organized in 1998, Encore is a growing independent energy company engaged in the
acquisition, development and exploitation of North American oil and natural gas
reserves. Encore's oil and natural gas reserves are located in the Williston
Basin of Montana and North Dakota, the Permian Basin of Texas and New Mexico,
the Anadarko Basin of Oklahoma, the Powder River Basin of Montana and the
Paradox Basin of Utah.
This press release includes forward-looking statements. Forward-looking
statements give our current expectations or forecasts of future events based on
assumptions and estimations that management believes are reasonable given
currently available information. Forward-looking statements in this press
release relate to, among other things, the following: expected capital
expenditures and the focus of the Company's capital program; anticipated prices
for oil and natural gas; projected revenues, lease operating expenses, general
and administrative expenses and DD&A ; the closing of the North Louisiana
transaction; the source of funds for the transaction; anticipated production;
expected hedging positions; projected borrowings under the Company's credit
facility; and our effective tax rate. However, the assumptions of management and
the future performance of Encore are both subject to a wide range of business
risks and uncertainties and there is no assurance that these statements and
projections will be met. Factors that could affect Encore's business include,
but are not limited to: diversion of management's attention from existing
operations while pursuing acquisitions; difficulties integrating acquisitions;
complications resulting from increasing the scope and geographic diversity of
our operations ;inaccuracies in the assessment of reserves and daily and annual
production with respect to acquisitions; inaccuracies in our assumptions
regarding the expected revenues, lease operating expenses, production taxes and
other items of income and expense related to acquisitions; the amount, nature
and timing of capital expenditures; drilling of wells; timing and amount of
future production of oil and natural gas; operating hazards; operating costs and
other expenses and marketing of oil and natural gas. Actual results could differ
materially from those presented in the forward-looking statements. Encore
undertakes no obligation to publicly update or revise any forward-looking
statements. Further information on risks and uncertainties is available in
Encore's filings with the Securities and Exchange Commission, which are
incorporated by this reference as though fully set forth herein.
Contacts:
Morris B. Smith
Executive Vice President and CFO
817-339-0908
Rani M. Wainwright
Assistant Treasurer
817-339-0919
(ALL DATA IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
STATEMENT OF OPERATIONS DATA: (UNAUDITED) (UNAUDITED)
Revenues $ 51,243 $ 37,807 $ 107,030 $ 70,104
Operating expenses:
Lease operations 9,140 6,567 18,093 13,384
Production, ad valorem and severance taxes 5,095 3,546 11,264 6,559
General and administrative 2,340 1,384 4,790 2,877
Non-cash stock based compensation 150 -- 295 --
Depletion, depreciation and amortization 7,703 8,773 15,486 17,332
Derivative fair value gain (576) (26) (1,836) (679)
Other operating expense 712 612(1) 882 751(1)
---------- ---------- ---------- ----------
Total operating expenses 24,564 20,856 48,974 40,224
---------- ---------- ---------- ----------
Operating income 26,679 16,951 58,056 29,880
Interest and other (4,000) (2,232) (8,124) (3,694)
---------- ---------- ---------- ----------
Income before income taxes 22,679 14,719 49,932 26,186
Provision for income taxes - current (591) (30) (1,358) (460)
Provision for income taxes - deferred (7,855) (5,563) (17,226) (9,490)
---------- ---------- ---------- ----------
Net income before cumulative effect of accounting change 14,233 9,126 31,348 16,236
Cumulative effect of accounting change, net of taxes -- -- 863 --
---------- ---------- ---------- ----------
Net income $ 14,233 $ 9,126 $ 32,211 $ 16,236
========== ========== ========== ==========
Net income before cumulative effect of accounting
change per common share:
Basic $ 0.47 $ 0.30 $ 1.04 $ 0.54
Diluted 0.47 0.30 1.04 0.54
Net income per common share:
Basic $ 0.47 $ 0.30 $ 1.07 $ 0.54
Diluted 0.47 0.30 1.06 0.54
Weighted average number of common shares outstanding:
Basic 30,089 30,030 30,063 30,030
Diluted 30,284 30,184 30,253 30,118
CONDENSED STATEMENT OF CASH FLOWS:
Operating activities
Net income $ 32,211 $ 16,236
Non-cash and other items 34,853 25,838
Changes in operating assets and liabilities (15,914) (4,558)
---------- ----------
Net cash provided by operating activities 51,150 37,516
Net cash used in investing activities (46,159) (100,421)
Financing activities
Exercise of stock options 777 --
Net proceeds (payments) on debt (16,000) 70,893
Debt issuance costs -- (5,686)
---------- ----------
Net cash provided by (used in) financing activities (15,223) 65,207
Increase (decrease) in cash and cash equivalents (10,232) 2,302
Cash and cash equivalents, beginning of period 13,057 115
---------- ----------
Cash and cash equivalents, end of period $ 2,825 $ 2,417
========== ==========
</Table>
<Table>
<Caption>
JUNE 30, DECEMBER 31,
2003 2002
------------ ------------
CONDENSED BALANCE SHEET: (UNAUDITED)
Total assets $ 581,921 $ 549,896
------------ ------------
Liabilities $ 102,678 $ 87,630
Long-term debt 150,000 166,000
Equity 329,243 296,266
------------ ------------
Total liabilities and equity $ 581,921 $ 549,896
============ ============
Working capital (2) $ 5,459 $ 12,489
</Table>
(1) In accordance with the provisions of Statement of Financial Accounting
Standards No. 145 the extraordinary loss from early extinguishment of debt of
$174,000, net of tax, for the three and six months ended June 30, 2002 has been
reclassified to operating income.
(2) Working capital is defined as current assets minus current liabilities.
<Table>
<Caption>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
SELECTED FINANCIAL DATA:
PRODUCTION:
Oil Volumes (MBbls) 1,616 1,430 3,281 2,824
Gas Volumes (MMcf) 1,989 2,027 3,922 4,185
Combined Volumes(MBOE) 1,947 1,768 3,935 3,522
DAILY PRODUCTION:
Oil Volumes (Bbls) 17,755 15,714 18,130 15,602
Gas Volumes (Mcf) 21,858 22,275 21,667 23,128
Combined Volumes(BOE) 21,398 19,427 21,741 19,456
AVERAGE PRICES:
Oil ($/Bbl) $ 25.19 $ 22.16 $ 26.55 $ 20.67
Gas ($/Mcf) 5.30 3.02 5.07 2.80
Combined Volumes ($/BOE) 26.32 21.39 27.20 19.91
AVERAGE COSTS ($/BOE):
Lease operations expense $ 4.69 $ 3.71 $ 4.60 $ 3.80
Production, ad valorem and severance tax 2.62 2.01 2.86 1.86
G&A (excluding non-cash stock based compensation) 1.20 0.78 1.22 0.82
DD&A 3.96 4.96 3.94 4.92
</Table>
COMMODITY DERIVATIVE SUMMARY AS OF JULY 15, 2003
OIL HEDGES
<Table>
<Caption>
DAILY FLOOR DAILY CAP DAILY SWAP
FLOOR VOLUME PRICE CAP VOLUME PRICE SWAP VOLUME PRICE
PERIOD (Bbls) (per Bbl) (Bbls) (per Bbl) (Bbls) (per Bbl)
-------------- ------------------- ------------- ------------- ------------- ------------- ----------
July - Dec 2003 9,500 $ 21.05 7,000 $ 27.14 -- $ --
Jan - June 2004 8,500 21.41 5,500 28.39 -- --
July - Dec 2004 4,500 21.44 3,000 28.52 -- --
</Table>
NATURAL GAS HEDGES
<Table>
<Caption>
DAILY FLOOR DAILY CAP DAILY SWAP
FLOOR VOLUME PRICE CAP VOLUME PRICE SWAP VOLUME PRICE
PERIOD (Mcf) (per Mcf) (Mcf) (per Mcf) (Mcf) (per Mcf)
-------------- ------------------- ------------- ------------- ------------- ------------- ---------
July - Dec 2003 7,500 $ 3.17 2,500 $ 6.83 2,500 $ 3.69
Aug - Dec 2003 -- -- -- -- 5,000 5.51
2004 15,000 4.02 7,500 6.03 5,000 5.16
2005 -- -- -- -- 5,000 4.78
</Table>