3TEC Energy Corporation Reports Record Second Quarter 2001 Financial and Operating Results.Business/Energy Editors HOUSTON--(BUSINESS WIRE)--Aug. 7, 2001 3TEC Energy Corporation (Nasdaq:TTEN TTEN Thermoanaerobacter Tengcongensis ) announced today record financial and operating results for the quarter and six months ended June June: see month. 30, 2001. Second Quarter 2001 Results 3TEC Energy Corporation ("3TEC" or the "Company") reported net income for the second quarter of 2001 of $14.6 million ($0.78 per fully-diluted share) compared to net income of $4.6 million ($0.50 per fully-diluted share) for the prior year period. Excluding nonrecurring Non`re`cur´ring a. 1. Nonrecurrent; as, the costs of a layoff are considered as a nonrecurring expense s>. gains on property sales, net income was $10.4 million or $0.56 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. For the quarter ended June 30, 2001, 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 $23.3 million ($1.23 per fully-diluted share) compared to $12.1 million ($1.19 per fully diluted share) in the same period in 2000. Total revenue increased 98% to $43.8 million in the second quarter of 2001, compared to $22.1 million in the second quarter of 2000. During the second quarter of 2001, 3TEC produced 6.3 Bcf of gas and 272 Mbbls of oil for an average daily production rate of 69.4 Mmcf of gas and 2,989 bbls of oil or a combined 87 Mmcfe per day. These volumes represent an increase of 56% and a decrease of 7%, respectively, over the comparable year ago period. On a gas equivalent basis, 3TEC produced 7.9 Bcfe in the second quarter of 2001, an increase of 37% over the second quarter of 2000. The period-to-period increases were due to production from property acquisitions and development drilling. The price received on gas sold in the second quarter of 2001 was $4.62 per Mcf, compared to $3.49 per Mcf received in the second quarter of 2000. Oil prices in the second quarter of 2001 were $25.90 per barrel barrel: see English units of measurement. , compared to $26.24 per barrel received in the second quarter of 2000. 3TEC is unhedged at this time for all of its future oil and gas production. The primary reasons for the improved operating results were the combined effects of a stronger natural gas price environment and higher average daily production volumes. Comparing the second quarter of 2001 to the first quarter of 2001, the average equivalent price realized in the second quarter was down $1.95 per Mcfe. On a per Mcfe basis, costs also rose during the second 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. increased slightly to $0.60/mcfe from $0.59/mcfe while production taxes decreased to $0.30/mcfe from $0.43/mcfe. The decrease in production taxes is directly due to the lower gas prices realized in the second quarter. General and administrative expenses increased to $0.23/mcfe from $0.21/mcfe in the previous quarter. Average daily production for the second quarter grew to 87.3 Mmcfe as compared to 82.5 Mmcfe in the first quarter. 3TEC's bank debt at June 30, 2001 was $89 million. 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 36% at June 30, 2001. First Half 2001 Results 3TEC reported net income for the six months ended June 30, 2001 of $32.9 million ($1.76 per fully-diluted share) compared to $7.4 million ($0.87 per fully-diluted share) for the prior year period. For the six months ended June 30, 2001, 3TEC reported cash flow from operations before changes in working capital of $54.7 million ($2.88 per fully-diluted share) compared to $20.8 million ($2.14 per fully-diluted share) in the same period in 2000. Total revenue increased 134% to $92.9 million in the first half of 2001, compared to $39.7 million in the first six months of 2000. During the first six months of 2001, 3TEC produced 11.9 Bcf of gas and 572 Mbbls of oil. On a gas equivalent basis, 3TEC produced 15.4 Bcfe in the first half of 2001, an increase of 37% over the first six months of 2000. Average daily production for 2001 grew to 84.9 Mmcfe as compared to 61.7 Mmcfe the prior year. The increases were primarily due to production from property acquisitions and development drilling. The price received on gas sold in the six months ended June 30, 2001 was $5.81 per Mcf, compared to $3.04 per Mcf received in the six months ended June 30, 2000. Oil prices in the first six months of 2001 were $26.59 per barrel, compared to the $24.89 per barrel received in the first six months of 2000. The primary reasons for the improved results were increased production volumes, higher product prices and lower per Mcfe costs for lease operating expenses and general and administrative expense. Operational Update 3TEC participated in the drilling of 19 wells in the second quarter, 13 of which had been completed as producers and six were waiting on pipeline hook-up hook-up Noun the linking of broadcasting equipment or stations to transmit a special programme or completion rigs at quarter-end. Since June 30, 2001, two of those wells have been completed as producers. During the third quarter to date, 3TEC has participated in the drilling of 12 wells. Currently three are in various stages of completion operations and nine are still drilling. During July July: see month. , 3TEC completed its previously announced non-core property divestment divestment to strip one's investment from an entity. program. The Company sold 38 Bcfe of reserves for $39.2 million. These properties were 66% oil, primarily non-operated, located in the Permian basin The Permian Basin is a sedimentary basin largely contained in the western part of the U.S. state of Texas. It reaches from just south of Lubbock, Texas, to just south of Midland & Odessa, extending westward into the southeastern part of the adjacent state of New Mexico. and Mid-Continent region, and had average lease operating expenses of over $1.20 per mcfe. Management Comments Floyd Floyd is a variant spelling of the Welsh name Lloyd, which means grey, and may refer to: Places
tr.v. im·ped·ed, im·ped·ing, im·pedes To retard or obstruct the progress of. See Synonyms at hinder1. [Latin imped our growth longer term. We continue to believe 3TEC's prospects for the future growth in shareholder value are excellent given our ability to make acquisitions as a result of a very strong financial position and our exploratory drilling inventory that will be tested in the second half of this year. Better rig availability could allow us to still meet our objective of drilling over 100 wells in 2001, even though the timing was not as we planned." 2001 Outlook The following table presents expected daily production in Mmcfe and expected expenses per Mcfe for the third and fourth quarters of 2001. Certain unit expenses were modestly increased as a result of slightly lower production growth driven by the volume guidance.
Third Quarter Fourth Quarter
------------- --------------
Production 75 - 80 85 - 90
Lease Operating Expenses $0.57 - .59 $0.55 - .57
Production Taxes $0.22 - .24 $0.22 - .24
Gathering $0.13 - .14 $0.13 - .14
General and Administrative $0.27 - .28 $0.25 - .26
Interest $0.22 - .23 $0.18 - .19
DD&A $0.98 - 1.00 $1.02 - 1.04
The Company will continue to deploy capital by funding exploratory and developmental drilling from cash flow and funding acquisitions from cash flow, property divestitures and debt (if needed). For 2001, 3TEC has budgeted its capital expenditure program for drilling to be approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $63 million, with a 79% developmental and 21% exploratory mix. It is possible 3TEC could add to its capital expenditure program if additional attractive drilling opportunities develop or if drilling rig availability improves. 3TEC has scheduled a conference call for Tuesday Tuesday: see week. , Aug. 7, 2001 at 11:00 a.m. Eastern Daylight For other uses, see Daylight (disambiguation). Daylight or the light of day is the combination of all direct and indirect sunlight outdoors during the daytime (and perhaps twilight). Time to review these operating results and other current activities. Interested parties may listen to the conference call live at 3TEC's Web site at www.3tecenergy.com. For those unable to participate on Aug. 7, a tape replay will be available through Aug. 31, 2001 by calling 800/475-6701, passcode 597941. A replay of the conference call will also be available on the 3TEC Web site for 30 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 San Juan basin 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 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 Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
---------------- ----------------
Revenues
Oil and gas sales
and plant income $36,750 $21,968 $85,614 $39,260
Gain on sale of
properties 6,749 18 6,836 27
Other 327 144 453 452
---------------- ----------------
Total Revenues 43,826 22,130 92,903 39,739
---------------- ---------------
Costs and Expenses
Lease operations 4,786 4,338 9,143 7,822
Production taxes 2,343 1,409 5,519 2,819
Gathering, transportation
and other 1,068 378 1,927 755
Geological and geophysical 154 86 369 163
Dry hole 0 17 0 29
General and administrative 1,807 1,585 3,349 3,065
Interest 1,893 2,185 4,074 4,269
Depletion, depreciation and
amortization 7,746 4,627 14,547 8,547
------- ------- ------- -------
Total Costs and Expenses 19,797 14,625 38,928 27,469
------- ------- ------- -------
Income (Loss) Before Income
Tax Expense (Benefit) and
Minority Interest 24,029 7,505 53,975 12,270
Minority Interest 118 60 301 102
Income Tax Expense (Benefit) 9,131 2,531 20,446 4,137
---------------- ---------------
Net Income (Loss) 14,780 4,914 33,228 8,031
---------------- ---------------
Dividends to Preferred
Stockholders (184) (323) (375) (583)
---------------- ---------------
Net Income (Loss) Available
to Common Stockholders $14,596 $4,591 $32,853 $7,448
================ ===============
Net Income (Loss) Per Common
Share - Basic $1.00 $0.71 $2.25 $1.20
Net Income (Loss) Per Common
Share - Diluted $0.78 $0.50 $1.76 $0.87
Weighted Average Common Shares
Outstanding
Basic 14,627 6,429 14,612 6,221
Diluted 19,172 10,161 19,123 9,724
3TEC Energy Corporation
Summary Consolidated Balance Sheets
(dollars in thousands)
June 30, Dec. 31,
2001 2000
(unaudited) (audited)
-------- --------
Assets
Current Assets $35,045 $35,964
Property, Plant and
Equipment, Net 320,034 216,138
Other Assets 3,045 2,662
-------- --------
Total Assets $358,124 $254,764
-------- --------
Liabilities and Stockholders'
Equity
Current Liabilities $23,671 $20,723
Long Term Debt 89,000 63,000
Subordinated Convertible
Notes 13,074 13,224
Deferred Income Taxes 47,839 6,770
Other Liabilities -- 58
Minority Interest 1,694 1,394
Stockholders' Equity 182,846 149,595
-------- --------
Total Liabilities and
Stockholders' Equity $358,124 $254,764
-------- --------
Summary Consolidated Cash Flows
(dollars in thousands)
Unaudited
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
------------------- -------------------
Net Income $14,780 $4,914 $33,228 $8,030
Depreciation, depletion
and amortization 7,556 4,627 14,195 8,547
Amortization of debt
issue costs 190 -- 352 --
Dry hole costs -- 17 -- 29
Gain on sale of properties (6,749) (18) (6,836) (26)
Deferred income taxes 7,399 2,532 13,502 4,137
Minority interest 118 60 301 103
------------------- -------------------
Cash Flow From Operations
Before Working Capital
Changes $23,294 $12,132 $54,742 $20,820
------------------- -------------------
3TEC Energy Corporation
Selected Operating Data (Unaudited)
For the For the
Three Months Six Months
Ended June 30, Ended June 30,
2001 2000 2001 2000
------- ------- ------- -------
Oil Production (Mbbls) 272 291 572 599
Gas Production (Mmcf) 6,312 4,052 11,935 7,631
Gas Equivalents (Mmcfe) 7,944 5,798 15,367 11,225
Average Oil Price Per Barrel
(includes effect of hedging) $25.90 $25.19 $26.59 $24.89
Average Gas Price Per Mcf
(includes effect of hedging) $4.62 $3.46 $5.81 $3.04
Average Oil Price Per Barrel
(without effect of hedging) $25.90 $26.24 $26.59 $25.57
Average Gas Price Per Mcf
(without effect of hedging) $4.62 $3.49 $5.81 $3.06
Cash Flow From Operations -
M$ $23,294 $12,132 $54,742 $20,820
Cash Flow From Operations -
Per Share (Diluted) (1) $1.23 $1.19 $2.89 $2.14
EBITDAX - M$ $27,073 $14,402 $66,129 $25,251
EBITDAX - Per Share (Diluted) $1.41 $1.42 $3.46 $2.60
Margin Analysis ($ Mcfe):
Average Equivalent Sales
Price 4.56 3.68 5.50 3.39
Lease Operating Expenses 0.60 0.75 0.59 0.70
Production Taxes 0.30 0.24 0.36 0.25
Gathering, Transportation
and Other 0.13 0.07 0.13 0.07
General and Administrative
Expense 0.23 0.27 0.22 0.27
Operating Margin 3.30 2.35 4.20 2.10
(1) Cash Flow From Operations plus interest from the subordinated
convertible notes.
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