EXHIBIT 99.1
ENCORE ACQUISITION COMPANY ANNOUNCES 56 PERCENT INCREASE IN QUARTERLY EARNINGS;
APPROVES 2004 CAPITAL BUDGET
Fort Worth, Texas- November 3, 2003-Encore Acquisition Company ("Encore") (NYSE:
EAC) today reported third quarter results:
<Table>
<Caption>
THREE MONTHS ENDED SEPTEMBER 30,
2003 2002 INCREASE
------------ ------------ ------------
(unaudited)
$ in millions (except per share and production amounts)
Net income $ 15.8 $ 10.1 56%
Diluted earnings per share $ 0.52 $ 0.33 58%
Revenues $ 55.7 $ 43.5 28%
Cash flow from operations $ 43.7 $ 19.0 130%
Development capital $ 25.5 $ 17.2 48%
Acquisition capital $ 52.6 $ 17.4 202%
Daily production volumes (boe) 22,663 20,435 11%
</Table>
Net income totaled $15.8 million or $0.52 per diluted share, a 56% increase over
last year's quarter. Oil and natural gas revenues achieved $55.7 million during
the quarter and cash flow from operations rose to $43.7 million, increases of
28% and 130%, respectively, from the same period last year. Third quarter
results reflected a 16% increase in average realized prices received on a boe
basis.
During the third quarter of 2003, Encore's average daily production reported
increased to 22,663 boe per day, an increase of 11% over the same period in
2002. The company's growth in production, which is currently 81% oil, was
achieved with the Company's continued development success at both the Cedar
Creek Anticline ("CCA") and the Permian Basin along with successful acquisitions
in the Elm Grove Field (August 2003) and the Paradox Basin (September 2002).
Also contributing to the increase in production was the decline in the Company's
net profits interest payment during the third quarter of 2003 due to the
development capital incurred in the CCA's Pennel unit.
Realized prices adjusted for hedging, averaged $26.52 per barrel and $4.60 per
Mcf during the third quarter 2003, increases of 10% and 46%, respectively, from
the prior year third quarter. On a combined basis, prices increased 16% during
the third quarter of 2003 to $26.73 per boe from $23.14 per boe for the same
period last year.
Lease operating expenses ("LOE") were $4.70 per boe for the third quarter of
2003, lower than anticipated due to decreased maintenance costs and higher
production. General and administrative ("G&A") expenses during the third quarter
of 2003 were $0.96 per boe, an increase of $0.12 from the same period last year
primarily due to an increase in staffing requirements and increased outside
consulting services used in the evaluation of potential acquisitions.
Depreciation, depletion and amortization ("DD&A") was $4.06 per boe during the
three months ended September 30, 2003, compared to $4.80 per boe for the same
period last year. The decrease is attributable to the Company's adoption of
Statement of Financial Accounting Standards No. 143 "Accounting for Asset
Retirement Obligations" in the first quarter of 2003 and the increase in the
Company's reserves at year-end December 31, 2002. Interest expense during the
third quarter of 2003 decreased 3% to $4.0 million from $4.1 million in the same
period last year due to average interest rates partially offset by an increase
in debt balances.
During the third quarter 2003, the Company invested $52.5 million for the Elm
Grove acquisition in Northern Louisiana. Currently two non-operated rigs are
running in this area and are expected to continue through the end of the year.
In addition to the acquisition, the Company invested $25.5 million in its
development and exploitation program, which resulted in 18 (11.9 net) vertical
wells, six (5.4 net) horizontal wells, ten (9.2 net) re-entry wells and five
(5.0 net) service/injection wells.
At September 30, 2003, the Company's long-term debt was $181.0 million, of which
$31.0 million represents debt under the Company's credit facility. The increase
of $31.0 million from June 30, 2003 is attributable to the acquisition of the
Elm Grove properties. As previously mentioned the acquisition price of the Elm
Grove properties was $52.5 million, resulting in approximately 41% of the
purchase price funded by the Company's cash flow from operations. Since quarter
end, debt has been reduced further by $3.0 million. In October 2003, the credit
facility's borrowing base was increased to $270.0 million from $220.0 million
effective December 1, 2003.
Jonny Brumley, President, commented "we had an exceptional quarter and are very
pleased. We continue to generate high returns through our development program,
and we are excited about the high-pressure air injection program that will start
up in Little Beaver during the fourth quarter of this year. The Company's stable
production and strong balance sheet will enable us to implement our strategy of
growing through development drilling, acquisitions, and tertiary projects. The
balance sheet continues to be strong as our cash flow has allowed us to reduce
our debt position since the Elm Grove acquisition".
FOURTH QUARTER AND YEAR-END OUTLOOK
The following table represents the Company's estimated fourth quarter 2003 and
year-end 2003 results:
<Table>
<Caption>
FOURTH QUARTER YEAR-END
2003 2003
-------------- --------------
LOE/($/BOE) $ 4.79 $ 4.67
G&A ($/BOE) $ 1.15 $ 1.13
DD&A/($/BOE) $ 4.20 $ 4.04
Development capital (in millions) $ 25.5 $ 97.2
Daily production volumes (boe) 22,651 22,203
</Table>
Encore continued its commodity hedge program for both oil and natural gas and
has included the Company's latest positions in an attached schedule.
During the fourth quarter 2003, Encore will initiate Little Beaver phase one,
which is the second Encore area to have a high-pressure air injection project
("HPAI") on the CCA. Capital investments for the Little Beaver phase one are
expected to be approximately $17.4 million.
At December 31, 2003, the Company anticipates borrowings under the credit
facility to be approximately $31.0 million and an effective tax rate of 38%,
with 93% deferred.
The Board of Directors has approved a $140.0 million capital budget for 2004.
Included in the 2004 capital budget is $104.8 million for development and
leasehold, $34.3 million for HPAI, and $0.9 million for other Property, Plant,
and Equipment.
CONFERENCE CALL
Encore will host a conference call and web cast at 9:00 a.m. CST on November 4,
2003. The conference call can be accessed by dialing 800.289.0468 and supplying
the title "Encore Acquisition Company Third 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
687530. The telephone replay will be available through November 12, 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, the Paradox
Basin of Utah and the North Louisiana Salt Basin of Louisiana.
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; 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;
inaccuracies in our assumptions regarding the expected revenues, lease operating
expenses, production taxes and other items of income and expense; 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 NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
STATEMENT OF OPERATIONS DATA: (UNAUDITED) (UNAUDITED)
Revenues
Oil $ 44,538 $ 37,127 $ 131,674 $ 95,496
Natural gas 11,186 6,375 31,080 18,110
---------- ---------- ---------- ----------
Total revenues 55,724 43,502 162,754 113,606
Operating expenses:
Lease operations 9,795 8,358 27,888 21,742
Production, ad valorem and severance taxes 5,449 4,521 16,713 11,080
General and administrative (excluding non-cash stock based comp) 2,006 1,585 6,796 4,462
Non-cash stock based compensation 165 -- 460 --
Depletion, depreciation and amortization 8,471 9,033 23,957 26,365
Derivative fair value (gain) loss 18 (232) (1,818) (911)
Other operating 1,031 448 1,913 1,198
---------- ---------- ---------- ----------
Total operating expenses 26,935 23,713 75,909 63,936
---------- ---------- ---------- ----------
Operating income 28,789 19,789 86,845 49,670
Interest and other (3,934) (4,157) (12,058) (7,851)
---------- ---------- ---------- ----------
Income before income taxes and cumulative effect 24,855 15,632 74,787 41,819
Current income tax benefit (provision) (289) 1,610 (1,647) 1,150
Deferred income tax provision (8,798) (7,129) (26,024) (16,620)
---------- ---------- ---------- ----------
Net income before cumulative effect 15,768 10,113 47,116 26,349
Cumulative effect of accounting change, net of taxes -- -- 863 --
---------- ---------- ---------- ----------
Net income $ 15,768 $ 10,113 $ 47,979 $ 26,349(a)
========== ========== ========== ==========
Net income before cumulative effect of accounting change per common
share:
Basic $ 0.52 $ 0.34 $ 1.57 $ 0.88
Diluted 0.52 0.33 1.56 0.87
Net income per common share:
Basic $ 0.52 $ 0.34 $ 1.60 $ 0.88
Diluted 0.52 0.33 1.58 0.87
Weighted average number of common shares outstanding:
Basic 30,103 30,030 30,071 30,030
Diluted 30,332 30,208 30,274 30,148
CONDENSED STATEMENT OF CASH FLOWS:
Net income $ 47,979 $ 26,349
Adjustments to reconcile net income to net cash provided by operating
activities:
Non-cash and other items 54,208 41,679
Changes in operating assets and liabilities (7,381) (11,526)
---------- ----------
Net cash provided by operating activities 94,806 56,502
Net cash used in investing activities (123,862) (135,125)
Financing activities
Exercise of stock options 1,652 51
Net proceeds from debt 15,000 86,893
Payments for debt issuance costs -- (5,884)
---------- ----------
Net cash provided by financing activities 16,652 81,060
---------- ----------
Increase (decrease) in cash and cash equivalents (12,404) 2,437
Cash and cash equivalents, beginning of period 13,057 115
---------- ----------
Cash and cash equivalents, end of period $ 653 $ 2,552
========== ==========
</Table>
<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
2003 2002
------------ ------------
CONDENSED BALANCE SHEET: (UNAUDITED)
Total assets $ 644,745 $ 549,896
============ ============
Liabilities $ 114,395 $ 87,630
Long-term debt 181,000 166,000
Equity 349,350 296,266
------------ ------------
Total liabilities and equity $ 644,745 $ 549,896
============ ============
Working capital (b) $ 1,696 $ 12,489
</Table>
(a) In accordance with the provisions of Statement of Financial Accounting
Standards No. 145 the extraordinary loss from early extinguishment of debt of
$174,000, net of tax, for the nine months ended September 30, 2002 has been
reclassified to operating income.
(b) Working capital is defined as current assets minus current liabilities.
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------- --------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
SELECTED FINANCIAL DATA:
PRODUCTION:
Oil Volumes (MBbls) 1,679 1,544 4,961 4,369
Gas Volumes (MMcf) 2,433 2,016 6,355 6,201
Combined Volumes(MBOE) 2,085 1,880 6,020 5,403
DAILY PRODUCTION:
Oil Volumes (Bbls) 18,255 16,783 18,172 16,004
Gas Volumes (Mcf) 26,447 21,913 23,278 22,714
Combined Volumes(BOE) 22,663 20,435 22,052 19,789
AVERAGE PRICES:
Oil ($/Bbl) $ 26.52 $ 24.05 $ 26.54 $ 21.86
Gas ($/Mcf) 4.60 3.16 4.89 2.92
Combined Volumes ($/BOE) 26.73 23.14 27.04 21.03
AVERAGE COSTS ($/BOE):
Lease operations expense $ 4.70 $ 4.45 $ 4.63 $ 4.02
Production, ad valorem and severance tax 2.61 2.40 2.78 2.05
G&A (excluding non-cash stock based compensation) 0.96 0.84 1.13 0.83
DD&A 4.06 4.80 3.98 4.88
</Table>
ENCORE ACQUISITION COMPANY
DERIVATIVE SUMMARY AS OF SEPTEMBER 30, 2003
OIL HEDGES
<Table>
<Caption>
AVERAGE AVERAGE AVERAGE
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)
- ----------------------- ------------ ------------ ------------ ------------ ------------ ------------
Oct - Dec 2003 (a) 9,500 $ 21.05 7,000 $ 27.14 -- $ --
Jan - June 2004 (b) 11,000 22.16 7,000 29.06 500 26.48
July - Dec 2004 (b) 7,000 22.36 5,000 28.33 500 26.48
Jan - Dec 2005 -- -- -- -- 1,000 25.12
Jan - Dec 2006 -- -- -- -- 2,000 25.03
Jan - Dec 2007 -- -- -- -- 2,000 25.11
</Table>
(a) For calendar 2003, Encore has a short put outstanding
for 500 bpd at $17/bbl, which is not reflected in the
above amounts.
(b) For calendar 2004, the company has outstanding
floating to fixed swaps of certain market indices
which are not considered hedges for accounting
purposes. Prices in the table above are exclusive of
any effect of these instruments.
NATURAL GAS HEDGES
<Table>
<Caption>
AVERAGE AVERAGE AVERAGE
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)
- -------------- ------------ ------------ ------------ ------------ ------------ ------------
Oct - Dec 2003 7,500 $ 3.17 2,500 $ 6.83 7,500 $ 4.80
2004 15,000 4.01 7,500 6.02 5,000 5.01
2005 -- -- -- -- 5,000 4.63
</Table>