Exhibit 99.2
The Exploration Company Reports 2003 Earnings
SAN ANTONIO--(BUSINESS WIRE)--March 5, 2004--The Exploration
Company (Nasdaq:TXCO) today reported earnings and financial results
for the year ended Dec. 31, 2003.
The Company reported net income for 2003 of $40,877, or $0.002 per
share, compared with a loss of $310,970 or ($0.016) per share for
2002. All per-share amounts are on a diluted basis. Total 2003
revenues rose to $39.5 million, more than double 2002 revenues. TXCO's
2003 oil and gas sales increased by more than 50 percent from the
prior year, primarily due to a 45 percent increase in oil production
and higher realized commodity prices, partially offset by a 15 percent
decrease in gas production. The Company's average realized product
prices were $5.05 per thousand cubic feet equivalent (Mcfe), a 38
percent increase from $3.67 per Mcfe in 2002. Annual revenues from the
Company's gas gathering operations were also sharply higher, reaching
$15.1 million versus $2.6 million in 2002. The five-fold increase
reflects the first full year of operation since the pipeline's
acquisition in mid-2002, higher throughput volumes of third-party gas
and higher realized gas prices. Total assets rose to a record $84.2
million at year-end 2003, a 59 percent increase over the prior year.
Cash flow, or net cash provided by operating activities, rose to a
record $15.2 million, a 105 percent increase from $7.4 million in
2002. Ebitda -- earnings before income taxes, interest expense,
depreciation, depletion, amortization, impairment and abandonment
expense -- reached $12.6 million, or $0.59 per share, a 66 percent
increase from $7.6 million, or $0.40 per share, in 2002. See the
accompanying table for a reconciliation of GAAP and non-GAAP measures
utilized in calculating Ebitda.
TXCO achieved a 186 percent drillbit reserve replacement rate, in
2003. The Company's 2003 year-end proved oil and gas reserves rose 21
percent to a record 28.4 billion cubic feet equivalent (Bcfe), up from
23.5 Bcfe in 2002, as reported by Netherland, Sewell & Associates,
Inc., its independent reservoir engineers. Overall oil and gas
production in 2003 totaled 4.83 Bcfe, an 11 percent increase from 4.37
Bcfe produced in 2002.
Subsequent to Dec. 31, 2003, several European investors elected to
exercise their warrants for the purchase of 1.238 million shares of
TXCO common stock at $3.00 per share, netting the Company $3.5 million
after expenses. Upon exercise of the warrants, TXCO's issued and
outstanding common shares increased to approximately 23.38 million
shares, compared to 22.14 million shares at year-end 2003.
Management's Perspective
"Our prospects continue to be very bright as we mark another
record-setting year," said President and CEO James E. Sigmon. "The
Company had a successful 2003, drilling a record number of wells, and
our ambitious exploration and development program continues in 2004.
Although we did not have the full measure of success we anticipated in
2003, the information gained from last year's drilling program will be
very beneficial as this year's drilling program gets under way. Our
expanding Georgetown horizontal gas play and the imminent completion
attempt of our deep Jurassic wildcat well are only the beginning of an
exciting new year for our shareholders. We continue to enjoy a solid
financial structure, with record cash flows, growing reserves and
conservative debt levels compared to our peers, allowing us to
actively pursue the potential we see in the Maverick Basin's multiple
pay opportunities."
Sigmon highlighted an expansive list of Company achievements in
2003, confirming his confidence in TXCO's expanded opportunities and
continued success:
-- Drilled or participated in 80 oil and gas wells in seven
separate plays
-- Attained a four-year, 46 percent compounded annual asset growth
rate
-- Attained record cash flows from operations, extending a five
year growth trend
-- Grew Maverick Basin 3-D seismic database from 455 to over 720
square miles
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 build shareholder value by acquiring
undeveloped mineral interests and internally develop a multi-year
drilling inventory through the use of advanced technologies, such as
3-D seismic and horizontal drilling. 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 under the
symbol "TXCO."
Forward-Looking Statements
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 expected establishment of reserves, drilling
plans, including the timing, category, number, depth, cost and/or
success of wells to be drilled, expected geological formations or the
availability of specific services or technologies. 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 December 31,
2002, and its Form 10-Q for the quarter and year-to-date period ended
Sept. 30, 2003. This and all previously filed documents are on file at
the Securities and Exchange Commission and can be viewed on TXCO's
website at www.txco.com. Copies are available without charge, upon
request from the Company.
(Financial Information and Selected Operational Tables Follow)
THE EXPLORATION COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31
-------------------------
2003 2002
- -------------------------------------------------------
Assets
Current Assets
Cash and equivalents $6,180,560 $2,333,688
Accounts receivable:
Joint interest owners 564,116 744,395
Oil and gas production 4,273,849 4,373,875
Prepaid expenses and
other 718,853 503,176
-------------------------
Total Current Assets 11,737,378 7,955,134
Property and Equipment, net
- successful efforts
method of accounting for
oil and gas properties 66,155,827 39,327,867
Other Assets
Deferred tax asset 5,232,718 5,232,718
Other assets 1,080,290 520,600
-------------------------
Total Other Assets 6,313,008 5,753,318
-------------------------
Total Assets $84,206,213 $53,036,319
=========================
THE EXPLORATION COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31
-------------------------
2003 2002
- -------------------------------------------------------
Liabilities And
Stockholders' Equity
Current Liabilities
Accounts payable, trade $8,186,705 $3,695,160
Other payables and
accrued liabilities 3,709,016 3,176,564
Undistributed revenue 416,399 1,894,144
Current portion of
long-term debt 1,752,286 1,073,773
-------------------------
Total Current
Liabilities 14,064,406 9,839,641
Long-Term Liabilities
Long-term debt, net of
current portion 15,425,598 6,143,458
Redeemable preferred
stock, Series B
(redemption value -
$16 million) 10,135,335 --
Accrued dividends -
preferred stock 57,732 --
Asset retirement
obligation 1,537,600 --
-------------------------
Total Long-Term
Liabilities 27,156,265 6,143,458
Minority Interest in
Consolidated Subsidiaries 193,441 82,846
Stockholders' Equity
Preferred Stock, Series
A; authorized 10,000,000
shares, issued and
outstanding -0- shares
Common stock, par value
$0.01 per share; authorized
50,000,000 shares, issued
22,242,849 and 20,109,516
shares, and outstanding
22,143,049 and 20,009,716 222,428 201,095
Additional paid-in
capital 63,976,021 58,216,504
Accumulated deficit (21,160,341) (21,201,218)
Less treasury stock, at
cost, 99,800 shares (246,007) (246,007)
-------------------------
Total Stockholders'
Equity 42,792,101 36,970,374
-------------------------
Total Liabilities And
Stockholders' Equity $84,206,213 $53,036,319
=========================
THE EXPLORATION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Years Ended December 31
-------------------------------------
2003 2002 2001
- --------------------------------------------------------------------
Revenues
Oil and gas sales $24,390,767 $16,049,798 $13,350,699
Gas gathering operations 15,145,154 2,596,955 --
Other operating income 9,281 311,611 408,221
-------------------------------------
Total Revenues 39,545,202 18,958,364 13,758,920
Costs and Expenses
Lease operations 4,408,205 4,081,162 2,406,688
Production taxes 1,501,041 973,078 959,143
Exploration expenses 2,187,216 1,567,098 2,986,036
Impairment and abandonments 2,522,548 1,246,495 2,652,705
Gas gathering operations 15,136,279 2,625,313 --
Depreciation, depletion and
amortization 8,627,678 6,500,625 3,201,517
General and administrative 3,716,439 2,025,440 1,481,284
-------------------------------------
Total Costs and Expenses 38,099,406 19,019,211 13,687,373
-------------------------------------
Income (loss) from operations 1,445,796 (60,847) 71,547
Other Income (Expense)
Interest income 26,626 46,663 188,061
Interest expense (1,365,233) (273,213) (128,373)
Loan fee amortization (17,604) (14,507) --
-------------------------------------
Total Other Income
(Expense) (1,356,211) (241,057) 59,688
-------------------------------------
Income (loss) before income
taxes, minority interest and
cumulative effect of change
in accounting principle 89,585 (301,904) 131,235
Minority interest in income
of subsidiaries 75,292 (84,066) (106,518)
-------------------------------------
Income (loss) before income
taxes and cumulative effect
of change in accounting
principle 164,877 (385,970) 24,717
Income tax (expense) benefit,
net (50,000) 75,000 (75,000)
Cumulative effect of change
in accounting principle, net
of tax (74,000) -- --
-------------------------------------
Net Income (Loss) $40,877 $(310,970) $(50,283)
=====================================
Earnings (Loss) Per Share:
Basic earnings before
cumulative effect of change
in accounting principle $ 0.006 $ (0.016) $ (0.003)
Cumulative effect of change
in accounting principle (0.004) -- --
-------------------------------------
Basic Earnings Per Share $0.002 $(0.016) $(0.003)
=====================================
Diluted earnings before
cumulative effect of change
in accounting principle $ 0.005 $ (0.016) (0.003)
Cumulative effect of change
in accounting principle (0.003) -- --
-------------------------------------
Diluted Earnings Per
Share $0.002 $(0.016) $(0.003)
=====================================
Weighted average number of
common shares outstanding:
Basic 20,781,223 19,080,847 17,441,242
Diluted 21,295,257 19,080,847 17,441,242
THE EXPLORATION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2003, 2002, 2001 AND 2000
(UNAUDITED)
Common Stock Additional
---------------------- Paid-in
Shares Amount Capital
- ----------------------------------------------------------
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 - 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
Issuance of common
stock - net of expenses
of $400,959 2,133,333 21,333 5,741,641
Other adjustments -- -- 17,876
Net income for the
year -- -- --
-----------------------------------
Balance at December
31, 2003 22,242,849 $222,428 $63,976,021
===================================
Accumulated Treasury
Deficit Stock Total
-----------------------------------
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 - 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
Issuance of common
stock - net of
expenses of $400,959 -- -- 5,762,974
Other adjustments -- -- 17,876
Net income for the
year 40,877 -- 40,877
-----------------------------------
Balance at December
31, 2003 $(21,160,341) $(246,007) $42,792,101
===================================
THE EXPLORATION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Years Ended December 31
---------------------------------------
2003 2002 2001
- ----------------------------------------------------------------------
Operating Activities
Net income (loss) $40,877 $(310,970) $(50,283)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation, depletion
and amortization 8,627,678 6,500,625 3,201,517
Impairments and
abandonments 2,522,548 1,246,495 2,652,705
Minority interest in
(income) loss of
subsidiaries (75,292) 84,066 106,518
Cumulative effect of
change in accounting
principle 74,000 -- --
Non-cash interest
expense and accretion
of liability - redeemable
preferred stock 677,002 -- --
Changes in operating assets
and liabilities:
Receivables 280,305 (3,175,627) 1,462,023
Prepaid expenses and
other (215,677) (229,573) (46,687)
Accounts payable and
accrued expenses 3,226,251 3,274,414 1,238,229
---------------------------------------
Net cash provided by
operating activities 15,157,692 7,389,430 8,564,022
Investing Activities
Development and purchases
of oil and gas properties (36,071,216) (27,381,247) (13,675,327)
Purchase of other
equipment (396,925) -- --
Proceeds from sale of oil
and gas properties -- 200,000 2,005,133
Changes in minority
interests 185,886 (434,325) (108,902)
Other changes -- (39,036) (116,007)
---------------------------------------
Net cash (used) by
investing activities (36,282,255) (27,654,608) (11,895,103)
Financing Activities
Proceeds from issuance of
redeemable preferred
stock, net of offering costs 9,229,931 -- --
Proceeds from long-term
debt obligations 11,190,530 7,439,915 153,231
Payments on long-term
debt obligations (1,229,876) (1,084,861) (486,244)
Proceeds from common
stock transactions, net
of expenses 5,780,850 14,224,648 31,250
Purchases of treasury
stock -- -- (246,007)
-------------------------------------
Net cash provided (used) by
financing activities 24,971,435 20,579,702 (547,770)
-------------------------------------
Change in Cash and
Equivalents 3,846,872 314,524 (3,878,851)
Cash and Equivalents at
Beginning of Year 2,333,688 2,019,164 5,898,015
-------------------------------------
Cash and Equivalents at End
of Year $6,180,560 $2,333,688 $2,019,164
=====================================
Supplemental Disclosures:
Cash paid for interest $1,200,230 $273,213 $128,373
Cash paid for income
taxes -- -- 75,000
THE EXPLORATION COMPANY
SELECTED OPERATING DATA
Year Ended Dec. 31,
-----------------------
2003 2002
-----------------------
Net cash provided by
operating activities $15,157,692 $7,389,430
Debt to asset ratio 34.3% 13.6%
Production
Oil:
Production, in barrels 454,000 314,000
Average sales price per
barrel $28.30 $24.56
Natural Gas:
Production, in Mcf 2,108,000 2,487,000
Average sales price per
Mcf $5.48 $3.35
Equivalent Basis:
Production in Boe 805,400 728,500
Average sales price per
Boe $30.28 $22.03
Production in Mcfe 4,832,300 4,371,000
Average sales price per
Mcfe $5.05 $3.67
Selected Operating Data
Production volume - oil
properties in barrels 441,700 295,500
Lifting costs-oil (Incl Prod
& Sev Tax) $3,350,700 $2,679,500
Lifting costs per barrel $7.59 $9.07
Production volume - gas
properties in Mcf 2,096,600 2,474,500
Lifting costs-gas (Incl Prod
& Sev Tax) $2,558,600 $2,374,700
Lifting costs per Mcf $1.22 $0.96
Production volume-gas properties,
excluding CBM 2,063,500 2,442,100
Lifting costs - gas
(Incl. Prod. & Sev. Tax),
excluding CBM $2,103,200 $1,775,400
Lifting costs per Mcf
excluding CBM activities $1.02 $0.73
Depletion cost per Boe $10.45 $8.36
Depletion cost per Mcfe $1.74 $1.39
Reconciliation of GAAP and Non-GAAP Measures
Ebitda represents net income before income taxes, interest expense,
depreciation, depletion, amortization, impairment and abandonment expense. We
believe Ebitda provides a more complete analysis of TXCO's operating performance
and debt servicing ability relative to other companies, and of our ability to
fund capital expenditure and working capital requirements. This measure is
widely used by investors and rating agencies. Ebitda, with certain negotiated
adjustments, is referenced in TXCO's financial covenants and required in
reporting under our credit facility. Ebitda is not a measure of financial
performance under GAAP. Accordingly, it should not be considered as a substitute
for net income, income from operations, or cash flow provided by operating
activities prepared in accordance with GAAP.
($ in thousands) 2003 2002
------ ------
Net cash provided by
operating activities $15,158 $7,389
Current taxes 50 (75)
Impairment &
abandonments 2,523 1,246
Interest, net 1,356 241
Changes in assets
and liabilities (6,489) (1,199)
------ ------
Ebitda 12,598 7,602
Less:
Impairment and
abandonments 2,523 1,246
Interest, net 1,356 241
Income taxes 50 (75)
DD&A 8,628 6,501
------ ------
Net Income $41 $(311)
====== ======
CONTACT: The Exploration Company, San Antonio
Investors:
Roberto R. Thomae, 210-496-5300, ext. 214
bthomae@txco.com
or
Media:
Paul Hart, 210-496-5300, ext. 264
pdhart@txco.com