3TEC Energy Corporation Reports Record Fourth Quarter and Year 2000 Financial and Operating Results.Business Editors & Energy Writers HOUSTON--(BUSINESS WIRE)--March 19, 2001 3TEC Energy Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :TTEN TTEN Thermoanaerobacter Tengcongensis ) announced today record financial and operating results for the fourth quarter and full year ended December December: see month. 31, 2000. Year Ended December 31, 2000 Results 3TEC Energy Corporation ("3TEC" or the "Company") reported net income for the year ended December 31, 2000 of $30.2 million ($2.28 per fully-diluted share) compared to a net loss of $4.0 million ($1.14 per fully-diluted share) for the prior year. For the year ended December 31, 2000, 3TEC reported cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses of $58.3 million ($4.21 per fully-diluted share) compared to $4.6 million ($1.29 per fully-diluted share) in 1999. Total revenue increased 373% to $104.8 million in 2000, compared to $22.2 million in 1999. During 2000, 3TEC produced 17.8 Bcf of gas and 1,139 Mbbls of oil for an average daily production of 48.7 Mmcf of gas and 3,120 bbls of oil. These volumes represent an increase of 275% and 114%, respectively, over 1999. On a gas equivalent basis, 3TEC produced 24.6 Bcfe in 2000, an increase of 210% over 1999. The year-to-year increases were due to production from property acquisitions and development drilling. The Company exited 2000 producing 80 Mmcfe per day, up 45% from its 1999 exit. The price received on gas sold for the year ended December 31, 2000 was $4.12 per Mcf, compared to $2.18 per Mcf received in 1999. Oil prices in 2000 were $25.11 per barrel barrel: see English units of measurement. , compared to the $16.88 per barrel received in 1999. The 2000 price includes the effect of 3TEC's oil production hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. , which had a net $1.88 per barrel downward adjustment. The primary reasons for the improved results were increased production volumes, higher product prices and lower per Mcfe costs for lease operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. , general and administrative expense and interest expense. Fourth Quarter 2000 Results 3TEC reported net income for the fourth quarter of 2000 of $14.4 million ($.79 per fully-diluted share) compared to a net loss of $0.4 million ($.09 per fully-diluted share) for the prior year period. For the quarter ended December 31, 2000, 3TEC reported cash flow from operations of $21.5 million ($1.17 per fully-diluted share) compared to $3.4 million ($0.70 per fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share) in the same period in 1999. Total revenue increased 311% to $37.8 million in the fourth quarter of 2000, compared to $9.2 million in the fourth quarter of 1999. During the fourth quarter of 2000, 3TEC produced 5.5 Bcf of gas and 272 Mbbls of oil. These volumes represent an increase of 180% and 64%, respectively, over the comparable period. On a gas equivalent basis, 3TEC produced 7.1 Bcfe in the fourth quarter of 2000, an increase of 141% over the fourth quarter of 1999. The period-to-period increases were due to production from property acquisitions and development drilling. The price received on gas sold in the fourth quarter of 2000 was $5.37 per Mcf, compared to $2.42 per Mcf received in the fourth quarter of 1999. Oil prices in the fourth quarter of 2000 were $26.48 per barrel, compared to $21.81 per barrel received in the fourth quarter of 1999. The 2000 price includes the effect of 3TEC's oil production hedging, which had a net $2.01 per barrel downward adjustment. This oil price swap for approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 69% of the Company's daily production concluded at the end of October October: see month. 2000 and 3TEC is unhedged at this time for all of its future oil and gas production. The primary reasons for the Company's improved operating results were the combined effects of a stronger hydrocarbon hydrocarbon (hī'drōkär`bən), any organic compound composed solely of the elements hydrogen and carbon. The hydrocarbons differ both in the total number of carbon and hydrogen atoms in their molecules and in the proportion of hydrogen price environment and higher average daily production volumes. Quarter-to-quarter for 2000, the average equivalent price realized in the fourth quarter was up $0.95 per Mcfe. On a per Mcfe basis, costs also rose during the fourth quarter. Lease operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. held steady at $0.56/mcfe, but production taxes increased to $0.32/mcfe from $0.26/mcfe in the previous quarter. The increase in production taxes is directly due to the higher commodity prices realized in the fourth quarter. General and administrative expenses rose as expected to $0.24 from $0.22 in the previous quarter. Average daily production for the quarter grew to 77.4 Mmcfe as compared to 67.9 Mmcfe for the third quarter. 3TEC's bank debt at December 31, 2000 was $63 million and its borrowing base under its existing credit facility has been increased to $175 million, effective March 12, 2001. Total Debt (both senior and convertible subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. )-to-Cap was 34% at December 31, 2000. Operational Update 3TEC participated in the drilling of 22 wells in the fourth quarter, 16 of which have been completed as producers and six were waiting on either pipeline hook-up hook-up Noun the linking of broadcasting equipment or stations to transmit a special programme or completion rigs at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. . During 2000, 3TEC participated in the drilling of 66 wells, all of which have been successfully completed. During the first quarter to date, 3TEC has participated in the drilling of 18 wells. Currently six have been completed as producers, six are in various stages of completion operations and six are still drilling. In 2000, the Company acquired 104 Bcfe at a weighted average price per Mcfe of $0.82. In January January: see month. 2001, 3TEC closed the Classic Resources Inc. acquisition, which added an additional 47 Bcfe of proven reserves. Management Comments Floyd Floyd is a variant spelling of the Welsh name Lloyd, which means grey, and may refer to: Places
2001 Outlook During 2001, 3TEC will seek to exit each quarter with period-over-period daily production increases based on its existing inventory of development and exploitation Exploitation See also Opportunism. Barnum, P. T. (1810–1891) circus impressario famous for his saying, “Never give a sucker an even break.” [Am. Hist. drilling. The Company's target for the first quarter is an exit rate of 85 Mmcfe per day, increasing to 92 Mmcfe per day by the end of the second quarter in 2001. This second quarter target exit rate includes the divestment divestment to strip one's investment from an entity. of certain non-strategic properties that is expected to be completed before June June: see month. 30. During this same period, the Company will attempt to achieve additional cost efficiencies and maximize In a graphical environment, to enlarge a window to the full size of the screen. See Win Maximize windows. operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. by attempting to reduce LOE LOE Ley Orgánica de Educación (Spanish) LOE Level Of Effort LOE Limited Objective Experiment LOE Letter of Explanation LOE Language Other than English. (before production taxes) and G&A per Mcfe to $0.45 and $0.23, respectively. 3TEC's targets for LOE (before production taxes) and G&A per Mcfe for the second half of 2001 are $0.35 and $0.22, respectively. While none of 3TEC's production is currently hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. , it will continually con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. evaluate the use of derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. based on market dynamics and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. the capital structure of the Company should a major acquisition be realized. The following table presents expected daily production in Mmcfe and expected expenses per Mcfe for the first and second quarters of 2001:
First Quarter Second Quarter
------------- --------------
Production 82 - 85 90 - 93
Lease Operating Expenses $0.52 - .54 $0.45 - .48
Production Taxes $0.38 - .40 $0.27 - .30
Gathering $0.10 - .11 $0.10 - .11
General and Administrative $0.24 - .25 $0.23 - .24
Interest $0.23 - .24 $0.18 - .19
DD&A $0.93 - .95 $0.94 - .96
The Company will continue to deploy capital by funding exploratory and developmental drilling from cash flow and acquisitions from cash flow and debt (if needed). For 2001, 3TEC has budgeted its capital expenditure program for drilling to be approximately $63 million, with a 79% developmental and 21% exploratory mix. It is possible 3TEC could add to its capital expenditure program if favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. attractive additional drilling opportunities develop. With the acquisition of Classic Resources Inc. on January 30, 2001, bank debt was $122 million and is expected to be $99 million by the end of the first quarter. With the Company's borrowing base at $175 million, 3TEC has the capacity to make additional acquisitions for cash that should favorably fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. add to shareholder value. For 2000, 3TEC recorded a current tax payable equal to 55% of its full year provision for income taxes. The current tax payable is expected to be between 55% and 60% of 3TEC's total income tax provision for 2001. This higher cash tax provision is due to higher oil and gas prices and certain expenses such as intangible drilling costs intangible drilling costs Expenses incurred while exploring for gas, geothermal, or oil reserves. These items may be expensed in the year incurred, or they may be capitalized and deducted throughout a period of years. and net operating losses Net operating losses Losses that a firm can take advantage of to reduce taxes. from prior periods that are not large enough to offset the cash tax liability. 3TEC's total income tax rate is expected to be between 36% and 38% in 2001. 3TEC has scheduled a conference call for Tuesday Tuesday: see week. , March 20, 2001 at 11:00 A.M. Eastern Standard Time to review these operating results and other current activities. Interested parties may listen to the conference call live at 3TEC's website at www.3tecenergy.com. For those unable to participate on March 20, a replay will be available through March 31, 2001 by dialing 888/273-9885, passcode 577346. A replay of the conference call will also be available on the 3TEC website for 60 days following the call. 3TEC Energy Corporation is engaged in the acquisition, development, production and exploration of oil and natural gas, with properties geographically ge·o·graph·ic also ge·o·graph·i·cal adj. 1. Of or relating to geography. 2. Concerning the topography of a specific region. ge concentrated in East Texas and the Gulf Coast region. 3TEC also owns significant properties in the Permian and San Juan basins The San Juan Basin is a drainage basin and geologic structural basin in the Four Corners region of the Southwestern United States; its main portion covers around 4,600 square miles, encompassing much of northwestern New Mexico, northeastern Arizona, and parts of Colorado and Utah. and in the Mid-Continent region. The information contained in this press release may contain projections, estimates and other forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those included in the forward-looking statements include the timing and extent of changes in commodity prices for oil and gas, environmental risks, drilling, producing and operating risks Operating risk The inherent or fundamental risk of a firm, without regard to financial risk. The risk that is created by operating leverage. Also called business risk. , including the risk that significant properties do not achieve projected results, risks related to exploration and development including risks relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the lack of economic drilling prospects, the inability of the Company to achieve expected efficiencies in controlling expenses, uncertainties about the estimates of reserves, government regulation, competition and the ability of the Company to meet its stated business goals.
3TEC Energy Corporation
Summary Consolidated Statements of Operations
(in thousands, except per share data)
Unaudited
For the Three Months For the Year
Ended Dec. 31, Ended Dec. 31,
2000 1999 2000 1999
-------------------- --------------
Revenues
Oil and gas sales and
plant income $37,209 $8,760 $103,210 $20,088
Gain on sale of properties 458 165 800 1,048
Other 109 264 813 1,020
------- ------ -------- -------
Total Revenues 37,776 9,189 104,823 22,156
------- ------ -------- -------
Costs and Expenses
Production
Lease Operations 4,021 1,827 15,326 6,315
Production, severance
and ad valorem tax 2,245 780 6,692 1,337
Gathering, transportation
and other 817 99 2,223 136
Geological and geophysical 464 90 666 472
Dryhole 0 170 29 625
General and administrative 1,675 1,418 6,141 4,122
Interest 1,602 1,465 7,556 3,205
Depreciation, depletion
and amortization 6,663 2,644 19,779 6,691
Impairment 0 790 0 2,478
Stock Compensation 0 0 0 730
Severance and compensation
plan payments 0 340 0 918
------- ------ -------- -------
Total Costs and Expenses 17,487 9,623 58,412 27,029
------- ------ -------- -------
Income (Loss) Before Income Tax
Expense (Benefit) and Minority
Interest 20,289 (434) 46,411 (4,873)
Minority Interest 116 42 305 2
Income Tax Expense
(Benefit) - Current 5,625 0 7,961 0
Income Tax Expense
(Benefit) - Deferred 0 (200) 6,481 (1,443)
------- ------ -------- -------
Total Income Tax
Expense (Benefit) 5,625 (200) 14,442 (1,443)
Net Income (Loss) 14,548 (276) 31,664 (3,432)
------- ------ -------- -------
Dividends to Preferred
Stockholders (142) (146) (1,488) (574)
------- ------ -------- -------
Net Income (Loss)
Available to Common
Stockholders $14,406 ($422) $30,177 ($4,006)
======= ====== ======= =======
Net Income (Loss) Per
Common Share - Basic $0.99 ($0.09) $2.91 ($1.14)
Net Income (Loss) Per
Common Share - Diluted $0.79 ($0.09) $2.28 ($1.14)
Weighted Average Common
Shares Outstanding
Basic 14,492 4,940 10,383 3,520
Diluted 18,577 4,940 13,895 3,520
3TEC Energy Corporation
Summary Consolidated Balance Sheets
(dollars in thousands)
Dec. 31, Dec. 31,
2000 1999
(unaudited) (audited)
---------------------
Assets
Current Assets $35,964 $15,771
Property, Plant and
Equipment, Net 216,138 131,774
Other Assets 2,662 1,699
-------- --------
Total Assets $254,764 $149,244
-------- --------
Liabilities and Stockholders' Equity
Current Liabilities $20,723 $8,770
Long Term Debt 63,000 87,500
Subordinated Convertible Notes 13,224 13,224
Deferred Income Taxes 6,771 291
Other Liabilities 58 258
Minority Interest 1,394 1,089
Stockholders' Equity 149,594 38,112
-------- --------
Total Liabilities and
Stockholders' Equity $254,764 $149,244
-------- --------
Selected Operating Data For the Three Months For the Year
(Unaudited) Ended Dec. 31, Ended Dec. 31,
2000 1999 2000 1999
-------------------- ---------------
Oil Production (Mbbls) 272 166 1,139 532
Gas Production (Mmcf) 5,491 1,960 17,764 4,737
Gas Equivalents (Mmcfe) 7,124 2,955 24,596 7,928
Average Oil Price Per Barrel
(includes effect of hedging) $26.48 $21.81 $25.11 $16.88
Average Gas Price Per Mcf
(includes effect of hedging) $5.37 $2.42 $4.12 $2.18
Average Oil Price Per Barrel
(without effect of hedging) $28.49 $21.81 $26.99 $16.88
Average Gas Price Per Mcf
(without effect of hedging) $5.37 $2.44 $4.12 $2.21
Cash Flow From Operations
(Basic) - M$ (1) $21,461 $3,435 $58,262 $4,550
Cash Flow From Operations -
Per Share (Diluted) (2) $1.17 $0.70 $4.21 $1.29
EBITDAX - M$ $28,560 $4,560 $73,641 $7,550
EBITDAX - Per Share (Diluted) $1.54 $0.92 $5.30 $2.14
Margin Analysis ($ Mcfe):
Average Equivalent Sales
Price 5.15 2.83 4.14 2.44
Lease Operating Expenses 0.56 0.62 0.62 0.80
Production, Severance and
Ad Valorem Taxes 0.32 0.26 0.27 0.17
Gathering, Transportation
and Other 0.11 0.03 0.09 0.02
General and Administrative
Expense 0.24 0.48 0.25 0.52
Operating Margin 3.92 1.44 2.90 0.93
(1) Cash Flow From Operations is equal to total revenue less gain
on sale of properties net of cash taxes, lease operating
expense, production, severance and ad valorem tax, gathering,
general and administrative expense, interest on long term debt
and cash income taxes.
(2) Cash Flow From Operations plus interest from the subordinated
convertible notes net of cash taxes.
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