Exhibit 99
The Exploration Company Reports Record Annual Revenues and
Earnings, Higher Reserves for 2005
SAN ANTONIO--(BUSINESS WIRE)--March 8, 2006--The Exploration Company
(Nasdaq:TXCO) today reported record revenues and earnings, plus higher reserves,
for the year ended Dec. 31, 2005. Highlights include:
-- Record annual net income.
-- Record corporate revenues.
-- Higher operating income.
-- Record stockholder equity.
-- Continuing proved reserve growth.
Despite the sale of properties incorporating approximately 20 percent of
TXCO's production to EnCana Oil & Gas (USA) Inc., effective Sept. 1, 2005, total
annual revenues rose to a record $67.0 million, a 16 percent rise from $57.7
million in 2004. Net income was $13.7 million, or $0.48 per share, up from $2.8
million, or $0.10 per share, for the prior year. All per-share amounts are on a
diluted basis. TXCO realized a $24.5 million pre-tax gain from the EnCana sale,
a primary factor in the income improvement. At year end, total assets were
$109.5 million, compared with $114.2 million at year-end 2004, reflecting the
September transaction.
Net cash provided by operating activities was $6.3 million, compared with
$16.4 million in 2004, reflecting higher taxes and increased current asset
balances resulting from gains on the asset sale and losses on derivatives in
2005. The Company used sale proceeds to redeem preferred stock, retire debt on
its revolving credit facility, pay off remaining obligations from an asset
exchange agreement signed in early 2005 for Maverick Basin acreage, and
terminate certain natural gas derivative contracts. Ebitda -- earnings before
income taxes, interest expense, depreciation, depletion, amortization,
impairment and abandonment expense -- was a record $21.3 million, or $0.74 per
share, an 18 percent increase from $18.1 million, or $0.67 per share, in 2004.
Ebitdax -- Ebitda plus exploration expense -- also set a record, rising to $24.6
million, or $0.85 per share, up 20 percent from $20.6 million, or $0.76 per
share, a year earlier. See the Company's Web site at www.txco.com for a
reconciliation of non-GAAP financial measures.
Oil and gas sales rose 28 percent from the prior year to $38.5 million from
$30.2 million. Gas gathering revenues climbed to $28.4 million from $27.5
million in 2004. Commodity price realizations in 2005 were $7.65 per thousand
cubic feet for natural gas and $54.21 per barrel for crude oil. TXCO
stockholders' equity rose to $83.3 million, a 27 percent increase from $65.7
million at year-end 2004.
Continuing Reserve Growth
TXCO continued its long-term trend of annual growth in proved reserves with
a 4 percent increase from year-end 2004 despite the EnCana asset sale. Net
proved reserves at the end of 2005 were 39.4 billion cubic feet equivalent of
natural gas (Bcfe), up 1.5 Bcfe from 37.9 Bcfe at year-end 2004. Combined with
the year's production of 4.6 Bcfe and reserve sale of 1.4 Bcfe, gross reserve
additions in 2005 were 7.5 Bcfe. TXCO had a 161 percent all-source reserve
replacement rate for the year. Estimated, pre-tax future net cash flows
discounted at 10 percent (PV-10) for proved reserves at year-end 2005 were
$110.6 million, up 37 percent from 2004, based on adjusted commodity prices of
$57.75 per barrel for crude oil and $7.775 per million Btu for natural gas.
The Company's reserve life index rose to 8.6 years, up from 7.7 years at
the end of 2004 and its reserve mix consists of 75 percent oil and 25 percent
gas. Approximately 47 percent of TXCO's oil and gas reserves are proved
developed. Since year-end 2000, the Company's proved reserves have increased 600
percent. All reserve estimates were prepared by the independent engineering
firms of DeGolyer and MacNaughton and William Cobb & Associates in accordance
with SEC and Financial Accounting Standards Board requirements.
In 2006, TXCO plans to drill 14 locations that are considered proved
undeveloped and another 43 wells targeting new reserve additions. Approximately
75 percent of this year's drilling program will focus on oil-prone reserves and
25 percent will target gas.
Management's Perspective
"TXCO saw historic, positive changes in 2005 that greatly improved our
financial condition as we begin an active drilling program for 2006," said
President and CEO James E. Sigmon. "Our agreement with EnCana monetized just a
portion of the value in our Maverick Basin acreage position and allowed us to
recapitalize and deleverage our balance sheet. We entered 2006 with higher
capital availability, both in cash and in our existing credit facility, and we
retain a large inventory of attractive drilling targets across our core area. I
believe we will see continuing growth in production, reserves, profitability and
shareholder value.
"In particular, we have the opportunity to accelerate development of our
successful Glen Rose Porosity play. Meanwhile, the partnership with EnCana
offers the potential to more rapidly develop the resource-play potential of
multiple zones in the Maverick Basin. Later this year, we will begin work on our
exciting new Marfa Basin lease block in West Texas, which is prospective for the
Barnett and Woodford shales," Sigmon added.
About The Exploration Company
The Exploration Company is an independent oil and gas enterprise with
interests primarily in the Maverick Basin of Southwest Texas. The Company has a
consistent record of long-term growth in its proved oil and gas reserves,
leasehold acreage position, production and cash flow through its established
exploration and development programs. Its business strategy is to build
shareholder value by acquiring undeveloped mineral interests and internally
developing 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 Capital Market under the symbol
"TXCO."
Forward-Looking Statements
Statements in this press release that 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 oil and gas prices, capital expenditures,
production levels, drilling plans, including the timing, number and cost of
wells to be drilled, projects and expected response, and establishment of
reserves. 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, 2004, and its Form 10-Q for the quarter and year-to-date period ended Sept.
30, 2005. 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
(in thousands) 2005 2004
- ----------------------------------------------------------------------
Assets
Current Assets
Cash and equivalents $6,083 $3,118
Accounts receivable:
Joint interest owners 2,834 1,737
Oil and gas sales 6,510 7,249
Prepaid expenses and other 1,620 800
Accrued derivative asset - current - 134
--------- ---------
Total Current Assets 17,047 13,038
Property and Equipment, net - successful efforts
method of accounting for oil and gas properties 84,467 94,836
Other Assets
Deferred tax asset 7,242 5,233
Other assets 780 1,130
--------- ---------
Total Other Assets 8,022 6,363
--------- ---------
Total Assets $109,536 $114,237
========= =========
THE EXPLORATION COMPANY
Condensed Consolidated Balance Sheets
(Unaudited)
December 31
(in thousands) 2005 2004
- ----------------------------------------------------------------------
Liabilities And Stockholders' Equity
Current Liabilities
Accounts payable, trade $10,003 $10,340
Undistributed revenue 2,479 1,062
Current income taxes payable 4,952 15
Other payables and accrued liabilities 4,297 5,435
Derivative settlements payable 151 49
Accrued derivative obligation - short-term 2,084 -
Long-term debt, current portion 262 1,666
--------- ---------
Total Current Liabilities 24,228 18,567
Long-Term Liabilities
Long-term debt, net of current portion 1 17,099
Accrued derivative obligation - long-term 461 -
Redeemable preferred stock, Series B
(redemption value - $16 million) - 10,991
Accrued dividends - preferred stock - 218
Asset retirement obligation 1,565 1,680
--------- ---------
Total Long-Term Liabilities 2,027 29,988
Stockholders' Equity
Preferred stock; authorized 10,000,000 shares,
Series A, -0- shares issued and outstanding
Series B, -0- and 16,000 shares issued and
outstanding - -
Common stock, par value $0.01 per share;
authorized 50,000,000 shares, issued
29,479,697 and 28,110,363 shares, and
outstanding 29,379,897 and 28,010,563 295 281
Additional paid-in capital 89,680 84,010
Accumulated deficit (4,622) (18,363)
Accumulated other comprehensive loss, net of
tax (1,826) -
Less treasury stock, at cost, 99,800 shares (246) (246)
--------- ---------
Total Stockholders' Equity 83,281 65,682
--------- ---------
Total Liabilities and Stockholders' Equity $109,536 $114,237
========= =========
THE EXPLORATION COMPANY
Condensed Consolidated Statements of Operations
(Unaudited)
Years Ended December 31
(in thousands, except per share data) 2005 2004 2003
- ----------------------------------------------------------------------
Revenues
Oil and gas sales $38,533 $30,181 $24,391
Gas gathering operations 28,430 27,536 15,145
Other operating income 37 18 9
-------- -------- --------
Total Revenues 67,000 57,735 39,545
Costs and Expenses
Lease operations 6,470 5,460 4,408
Production taxes 2,180 1,588 1,501
Exploration expenses 3,266 2,449 2,187
Impairment and abandonments 1,406 2,355 2,523
Gas gathering operations 28,312 25,292 15,136
Depreciation, depletion and amortization 12,597 9,851 8,628
General and administrative 5,439 4,853 3,716
-------- -------- --------
Total Costs and Expenses 59,670 51,848 38,099
-------- -------- --------
Income (loss) from operations 7,330 5,887 1,446
Other Income (Expense)
Interest income 89 32 27
Interest expense (2,920) (2,909) (1,365)
Loan fee amortization (132) (83) (18)
Derivative mark-to-market loss (2,128) (19) -
Derivative settlements loss (9,115) - -
Gain on sale of assets 24,540 - -
-------- -------- --------
Total Other Income (Expense) 10,334 (2,979) (1,356)
-------- -------- --------
Income before income taxes, minority
interest and cumulative effect of change
in accounting principle 17,664 2,908 90
Minority interest in income of subsidiaries - 35 75
-------- -------- --------
Income before income taxes and cumulative
effect of change in accounting principle 17,664 2,943 165
Income tax expense 3,923 146 50
Cumulative effect of change in accounting
principle, net of tax - - 74
-------- -------- --------
Net Income $13,741 $2,797 $41
======== ======== ========
Earnings Per Share:
Basic earnings before cumulative effect
of change in accounting principle $0.48 $0.11 $0.01
Cumulative effect of change in accounting
principle - - (0.01)
-------- -------- --------
Basic Earnings Per Share $0.48 $0.11 $0.00
======== ======== ========
Diluted earnings before cumulative effect
of change in accounting principle $0.48 $0.10 $0.01
Cumulative effect of change in accounting
principle - - (0.01)
-------- -------- --------
Diluted Earnings Per Share $0.48 $0.10 $0.00
======== ======== ========
Weighted average number of common shares outstanding:
Basic 28,444 26,066 20,781
Diluted 28,885 26,971 21,295
THE EXPLORATION COMPANY
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
Additional
Common Stock Paid-in Accumulated
(in thousands) Shares Amount Capital Deficit
- ----------------------------------------------------------------------
Balance at December 31, 2002 20,110 $201 $58,216 $(21,201)
Issuance of common stock
- net of expenses of
$401 2,133 21 5,742 -
Other adjustments - - 18 -
Net income for the year - - - 41
------- ------ ---------- -----------
Balance at December 31, 2003 22,243 222 63,976 (21,160)
Issuance of common stock
- net of expenses of
$1,237 5,867 59 19,797 -
Non-cash compensation - - 237 -
Net income for the year - - - 2,797
------- ------ ---------- -----------
Balance at December 31, 2004 28,110 281 84,010 (18,363)
Common stock options &
warrants exercised 912 9 2,907 -
Issuance of common stock
- net of expenses of $ -0- 458 5 2,763 -
Net income for the year - - - 13,741
Other comprehensive income
(loss):
Net deferred hedge losses - - - -
Tax benefits of net hedge
losses - - - -
------- ------ ---------- -----------
Balance at December 31, 2005 29,480 $295 $89,680 $(4,622)
======= ====== ========== ===========
Accumulated
Other
Comprehen- Treasury
(in thousands) sive Loss Stock Total
- ----------------------------------------------------------------------
Balance at December 31, 2002 - $(246) $36,970
Issuance of common stock
- net of expenses of
$401 - - 5,763
Other adjustments - - 18
Net income for the year - - 41
----------- -------- --------
Balance at December 31, 2003 - (246) 42,792
Issuance of common stock
- net of expenses of
$1,237 - - 19,856
Non-cash compensation - - 237
Net income for the year - - 2,797
----------- -------- --------
Balance at December 31, 2004 - (246) 65,682
Common stock options &
warrants exercised - - 2,916
Issuance of common stock
- net of expenses of $ -0- - - 2,768
Net income for the year - - 13,741
Other comprehensive income (loss):
Net deferred hedge losses (2,881) - (2,881)
Tax benefits of net hedge losses 1,055 - 1,055
----------- -------- --------
Balance at December 31, 2005 $(1,826) $(246) $83,281
=========== ======== ========
THE EXPLORATION COMPANY
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Years Ended December 31
(in thousands) 2005 2004 2003
- ----------------------------------------------------------------------
Operating Activities
Net income $13,741 $2,797 $41
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation, depletion and
amortization 12,597 9,851 8,628
Impairments and abandonments 1,406 2,354 2,523
Minority interest in income of
subsidiaries - (35) (75)
Gain on sale of assets (24,540) - -
Deferred income taxes (928) - -
Cumulative effect of change in
accounting principle - - 74
Non-cash interest expense and
accretion of liability
- redeemable preferred stock 684 1,016 677
Non-cash compensation expense - 237 -
Non-cash derivative mark-to market
(gain) loss (228) (134) -
Changes in operating assets and
liabilities:
Receivables (984) (4,147) 280
Prepaid expenses and other (469) (81) (216)
Accounts payable and accrued
expenses 4,981 4,589 3,226
-------- -------- --------
Net cash provided by operating activities 6,260 16,447 15,158
Investing Activities
Development and purchases of oil and gas
properties (52,440) (39,335) (36,071)
Purchase of other equipment (37) (224) (397)
Proceeds from sale of oil and gas
properties 78,002 - -
Changes in minority interests - (159) 186
-------- -------- --------
Net cash provided (used) by investing
activities 25,525 (39,718) (36,282)
Financing Activities
Proceeds from common stock transactions,
net of expenses 5,683 18,620 5,781
Proceeds from issuance of redeemable
preferred stock, net of offering costs - - 9,230
Proceeds from long-term debt obligations 15,001 19,099 15,844
Payments on long-term debt obligations (32,099) (17,295) (5,000)
Payments on installment obligations (1,761) (593) (1,230)
Proceeds from installment obligations 356 377 346
Redemption of preferred stock (16,000) - -
-------- -------- --------
Net cash provided (used) by financing
activities (28,820) 20,208 24,971
-------- -------- --------
Change in Cash and Equivalents 2,965 (3,063) 3,847
Cash and Equivalents at Beginning of Year 3,118 6,181 2,334
-------- -------- --------
Cash and Equivalents at End of Year $6,083 $3,118 $6,181
======== ======== ========
Supplemental Disclosures:
Cash paid for interest $3,224 $3,011 $1,200
Cash paid for income taxes 158 - -
THE EXPLORATION COMPANY
SELECTED OPERATING DATA
Year Ended December 31,
($'s in thousands, except average prices) 2005 2004
----------- -----------
Net cash provided in operating activities $ 6,260 $ 16,447
Ebitdax (a) 24,599 20,577
Ebitda (a) 21,333 18,128
Debt to asset ratio 0.2% 30.4%
Sales
Oil:
Sales, in thousands of barrels (MBbl) 397 321
Average sales price per barrel $ 54.21 $ 38.72
Natural Gas:
Sales, in MMcf 2,222 2,975
Average sales price per Mcf $ 7.65 $ 5.96
Equivalent Basis:
Sales in MBOE 768 817
Average sales price per BOE $ 50.20 $ 36.94
Sales in MMcfe 4,605 4,903
Average sales price per Mcfe $ 8.37 $ 6.16
Other Operating Data
Total lifting costs $ 8,650 $ 7,049
Lifting costs per Mcfe $ 1.88 $ 1.44
Total lifting costs excluding Pena
Creek waterflood $ 6,523 $ 5,350
Lifting costs per Mcfe excluding Pena
Creek waterflood $ 1.57 $ 1.22
Sales volume - oil properties - MBbl 375 298
Lifting costs-oil (Incl Prod & Sev Tax) $ 4,803 $ 3,651
Lifting costs per Barrel $ 12.82 $ 12.27
Sales volume - gas properties - Mcf 2,080 2,911
Lifting costs-gas (Incl Prod & Sev Tax) $ 3,847 $ 3,398
Lifting costs per Mcf $ 1.85 $ 1.17
Depletion cost per BOE $ 16.14 $ 11.80
Depletion cost per Mcfe $ 2.69 $ 1.97
(a) Please see TXCO's Web site at www.txco.com for a reconciliation of these
non-GAAP financial measures.
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