Exhibit 99 The Exploration Company Reports 2002 Financial Results SAN ANTONIO--(BUSINESS WIRE)--March 6, 2003--The Exploration Company (Nasdaq:TXCO) today announced financial results for the year ended Dec. 31, 2002. Total revenues were $18.9 million, a 38% increase from $13.8 million reported in 2001. The company reported a net loss of $310,970 or $0.016 per share. In the prior year, TXCO reported a net loss of $50,283 or $0.003 per share. EBITDA (earnings before interest, taxes, depreciation, depletion, amortization and exploration expense) was $9.22 million, $0.48 per share, an increase from $8.99 million, $0.52 per share, in 2001. The fractional net loss for 2002 was due primarily to higher depletion rates caused by revisions to previous estimates of oil and gas reserves as reported by Netherland, Sewell & Associates Inc., independent reservoir engineers. Total assets at year end were $53.0 million, a 78% increase from $29.8 million at year end 2001. All share amounts are on a fully diluted basis. The Company achieved reserve replacement of 255%. TXCO's year end reserves rose 85% to a record 23.5 billion cubic feet equivalent (Bcfe), up from 12.7 Bcfe at year end 2001. Production in 2002 totaled 4.37 Bcfe, a 47% increase from the 2.97 Bcfe produced in 2001. Average realized product prices for the year fell to $3.67 per thousand cubic feet equivalent (Mcfe), an 18.3% decline from $4.49 per Mcfe in 2001. Management's Perspective "Overall, the year just passed sets a firm foundation for continued accelerated growth in 2003," said James E. Sigmon, TXCO President and CEO. "We are prospect rich and have started this year with a drilling program that targets a record 93 wells, exploiting our expanding resource base. Our solid financial structure, strong cash flows and low debt, create excellent upside potential for the company. All in all, together with the strong commodity price environment we're seeing today and with our partner, Blue Star, rigging up now to start drilling on our Deep Jurassic project, I believe 2003 will be the milestone year we have anticipated." Sigmon highlighted a growing list of company achievements further confirming his confidence in TXCO's continued success: -- Drilled 29 new oil and gas producing wells in five separate plays -- Expanded gas gathering pipeline system from 10 miles to more than 80 miles -- Expanded core Maverick Basin lease block from 372,000 acres to 480,000 acres -- Grew Maverick Basin 3-D seismic database from 310 square miles to over 450 square miles -- Continued strong cash flows from operations About The Exploration Company The Exploration Company is an independent oil and gas enterprise with interests primarily in the Maverick Basin in Southwest Texas. Its long-term business strategy is to acquire undeveloped mineral interests and internally develop a multi-year drilling inventory. The Company accounts for its oil and gas operations under the successful efforts method of accounting and trades its common stock on the Nasdaq Stock Market(sm) under the symbol "TXCO." Statements in this press release which are not historical, including statements regarding TXCO's or management's intentions, hopes, beliefs, expectations, representations, projections, estimations, plans or predictions of the future, are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include those relating to production, cash flow, CAPEX, drilling plans, including the timing, number and cost of wells to be drilled, CBM projects or waterflood projects and expected response. It is important to note that actual results may differ materially from the results predicted in any such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the costs of exploring and developing new oil and natural gas reserves, the price for which such reserves can be sold, environmental concerns affecting the drilling of oil and natural gas wells, as well as general market conditions, competition and pricing. More information about potential factors that could affect the company's operating and financial results is included in TXCO's annual report on Form 10-K for the year ended Dec. 31, 2001 and its Form 10-Q for the quarters ended March 31, June 30 and Sept. 30, 2002. These and all previously filed documents are on file at the Securities and Exchange Commission and can be viewed on TXCO's Web site at www.txco.com. Copies are available without charge, upon request from the Company. THE EXPLORATION COMPANY Consolidated Balance Sheets December 31, 2002 and 2001 Unaudited 2002 2001 ----------- ----------- Assets Current Assets: Cash and equivalents $ 2,333,688 $ 2,019,164 Accounts receivable: Joint interest owners 744,395 472,146 Oil and gas production 4,373,875 1,470,497 Prepaid expenses and other 503,176 273,603 ------------ ------------ Total current assets 7,955,134 4,235,410 Property and Equipment, net - successful efforts method of accounting for oil and gas properties 39,327,867 19,893,740 Other Assets: Deferred tax asset 5,232,718 5,232,718 Other 520,600 481,564 ----------- ----------- Total other assets 5,753,318 5,714,282 ----------- ----------- Total Assets $53,036,319 $29,843,432 =========== =========== THE EXPLORATION COMPANY Consolidated Balance Sheets December 31, 2002 and 2001 Unaudited 2002 2001 ------------ ------------ Liabilities And Stockholders' Equity Current Liabilities: Accounts payable and accrued expenses $ 6,871,724 $ 4,122,669 Due to joint interest owners 1,894,144 1,368,785 Current portion of long-term debt 1,073,773 298,410 ------------ ------------ Total current liabilities 9,839,641 5,789,864 Long-term debt, net of current portion 6,143,458 563,767 Minority interest in consolidated subsidiaries 82,846 433,105 Stockholders' Equity: Preferred stock; authorized 10,000,000 shares, issued and outstanding zero shares -- -- Common stock, par value $0.01 per share; authorized 50,000,000 shares; issued 20,109,516 and 17,496,849 shares, outstanding 20,009,716 and 17,397,049 201,095 174,968 Additional paid-in capital 58,216,504 44,017,983 Accumulated deficit (21,201,218) (20,890,248) Less treasury stock, at cost, 99,800 shares (246,007) (246,007) ------------ ------------ Total stockholders' equity 36,970,374 23,056,696 ------------ ------------ Total Liabilities and Stockholders' Equity $ 53,036,319 $ 29,843,432 ============ ============ THE EXPLORATION COMPANY Consolidated Statements of Operations Years Ended December 31, 2002, 2001 and 2000 Unaudited 2002 2001 2000 ----------- ----------- ----------- Revenues Oil and gas sales $16,049,798 $13,350,699 $13,841,138 Pipeline operations 2,596,955 -- -- Other operating income 311,611 408,221 520,219 ----------- ----------- ----------- 18,958,364 13,758,920 14,361,357 Costs and Expenses Lease operations 4,238,921 2,406,688 1,157,291 Production taxes 973,078 959,143 990,789 Exploration expenses 1,567,098 2,986,036 3,056,466 Impairment and abandonments 1,246,495 2,652,705 3,126,715 Pipeline operations 2,467,554 -- -- Depreciation, depletion and amortization 6,500,625 3,201,517 2,711,605 General and administrative 2,025,440 1,481,284 1,501,645 ----------- ----------- ----------- Total costs and expenses 19,019,211 13,687,373 12,544,511 ----------- ----------- ----------- Income (loss) from operations (60,847) 71,547 1,816,846 Other Income (Expense) Interest income 46,663 188,061 232,386 Interest expense (273,213) (128,373) (179,036) Loan fee amortization (14,507) -- (12,000) ----------- ------------ ----------- (241,057) 59,688 41,350 ----------- ----------- ----------- Income before income taxes and minority interest (301,904) 131,235 1,858,196 Minority interest in income of subsidiaries (84,066) (106,518) (238,061) ----------- ----------- ----------- Income before income taxes (385,970) 24,717 1,620,135 Income tax (expense) benefit, net 75,000 (75,000) 5,141,800 ----------- ----------- ----------- Net Income (Loss) $ (310,970) $ (50,283) $ 6,761,935 =========== =========== =========== Earnings (Loss) Per Share Basic $ (0.016) $ (.003) $ 0.39 Diluted $ (0.016) $ (.003) $ 0.39 Weighted average number of common shares outstanding: Basic 19,080,847 17,441,242 17,242,326 Diluted 19,080,847 17,441,242 17,343,957 THE EXPLORATION COMPANY Consolidated Statements of Stockholders' Equity Years Ended December 31, 2002, 2001 and 2000 Unaudited Common Stock ---------------------- Additional Paid-in Shares Amount Capital ------------ --------- ------------ Balance at December 31, 1999 15,938,516 $159,385 $40,651,444 Issuance of common stock for cash, net of expenses of $189,752 1,333,333 13,333 2,796,914 Issuance of common stock in exchange for oil and gas properties 150,000 1,500 439,125 Common stock warrants exercised 50,000 500 99,500 Net income for the year -- -- -- ------------ --------- ------------ Balance at December 31, 2000 17,471,849 174,718 43,986,983 Common stock options exercised 25,000 250 31,000 Purchases of treasury stock, at cost -- -- -- Net loss for the year -- -- -- ------------ --------- ------------ Balance at December 31, 2001 17,496,849 174,968 44,017,983 Common stock options exercised 113,000 1,130 171,625 Issuance of common stock for cash, net of expenses of $946,112 2,499,667 24,997 14,026,896 Net loss for the year -- -- -- ------------ --------- ------------ Balance at December 31, 2002 20,109,516 $201,095 $58,216,504 =========== ======== =========== Accumulated Treasury Deficit Stock Total ------------- ---------- ------------ Balance at December 31, 1999 $(27,601,900) $ -- $13,208,929 Issuance of common stock for cash, net of expenses of $189,752 -- -- 2,810,247 Issuance of common stock in exchange for oil and gas properties -- -- 440,625 Common stock warrants exercised -- -- 100,000 Net income for the year 6,761,935 -- 6,761,935 ------------ ---------- ----------- Balance at December 31, 2000 (20,839,965) -- 23,321,736 Common stock options exercised -- -- 31,250 Purchases of treasury stock, at cost -- (246,007) (246,007) Net loss for the year (50,283) -- (50,283) ------------ ---------- ----------- Balance at December 31, 2001 (20,890,248) (246,007) 23,056,696 Common stock options exercised -- -- 172,755 Issuance of common stock for cash, net of expenses of $946,112 -- -- 14,051,893 Net loss for the year (310,970) -- (310,970) ------------- ---------- ------------ Balance at December 31, 2002 $(21,201,218) $(246,007) $36,970,374 ============= ========== ============ THE EXPLORATION COMPANY Consolidated Statements of Cash Flows Years December 31, 2002, 2001 and 2000 Unaudited 2002 2001 2000 ------------ ------------ ----------- Operating Activities Net income (loss) $ (310,970) $ (50,283) $ 6,761,935 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes -- -- (5,232,718) Depreciation, depletion and amortization 6,500,625 3,201,517 2,711,605 Impairments and abandonments 1,246,495 2,652,705 3,126,715 Minority interest in income of subsidiaries 84,066 106,518 238,061 Changes in operating assets and liabilities: Receivables (3,175,627) 1,462,023 (1,465,530) Prepaid expenses and other (229,573) (46,687) (104,441) Accounts payable and accrued expenses 3,274,414 1,238,229 494,211 ------------ ------------ ----------- Net cash provided by operating activities 7,389,430 8,564,022 6,529,838 Investing Activities Purchases of property and equipment (27,381,247) (13,675,327) (6,447,962) Proceeds from sale of oil and gas properties 200,000 2,005,133 -- Changes in minority interests (434,325) (108,902) -- Other changes (39,036) (116,007) 8,843 ------------ ------------ ----------- Net cash (used) by investing activities (27,654,608) (11,895,103) (6,439,119) Financing Activities Proceeds from long-term debt 7,439,915 153,231 1,173,642 Payments on long-term debt (1,084,861) (486,244) (1,658,386) Issuances of common stock, net of expenses 14,224,648 31,250 2,910,247 Purchases of treasury stock -- (246,007) -- ------------ ------------ ----------- Net cash provided (used) by financing activities 20,579,702 (547,770) 2,425,503 ------------ ------------ ----------- Change in Cash and Equivalents 314,524 (3,878,851) 2,516,222 Cash and Equivalents at Beginning of Year 2,019,164 5,898,015 3,381,793 ------------ ------------ ----------- Cash and Equivalents at End of Year $ 2,333,688 $ 2,019,164 $ 5,898,015 ============= ============ =========== Supplemental Disclosures: Cash paid for interest $ 273,213 $ 128,373 $ 179,036 Cash paid for income taxes -- 75,000 62,497 Common stock issued for leasehold acquisition -- -- 440,625 THE EXPLORATION COMPANY Selected Operating Data Year Ended Dec. 31, 2002 Dec. 31, 2001 --------------- -------------- EBITDA $9,215,968 $8,993,348 Net cash provided in operating activities $7,389,430 $8,564,022 Debt to asset ratio 13.6% 2.9% Production Oil: Production, in barrels 314,000 50,000 Average sales price per barrel $24.56 $23.55 Natural Gas: Production, in Mcf 2,487,000 2,673,000 Average sales price per Mcf $3.35 $4.56 Equivalent Basis: Production in Boe 728,500 495,500 Average sales price per Boe $22.03 $26.94 Production in Mcfe 4,371,000 2,973,000 Average sales price per Mcfe $3.67 $4.49 Average cost of production, per Boe (Incl Prod & Sev Tax) $7.15 $6.79 Average cost of production, per Boe excluding CBM activities $6.40 $5.93 Average cost of production, per Mcfe (Incl Prod & Sev Tax) $1.19 $1.13 Average cost of production, per Mcfe excluding CBM activities $1.07 $0.99 Depletion cost per Boe $8.36 $6.14 Depletion cost per Mcfe $1.39 $1.02 Reserves Oil, barrels 1,479,000 294,000 Natural gas, Mcf 14,675,000 10,976,000 Natural gas equivalent, Mcfe 23,549,000 12,740,000 CONTACT: The Exploration Company, San Antonio Roberto R. Thomae, 210/496-5300 bthomae@txco.com