Belco Oil & Gas Corp. Announces Record Year-End Proved Reserves; Also Fourth Quarter and 2000 Results; Other.Business Editors NEW YORK--(BUSINESS WIRE)--March 1, 2001 Company reports reserve replacement rate of 233% and 13% increase in proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. to 726 Bcfe. Belco Oil & Gas Corp. (NYSE NYSE See: New York Stock Exchange :BOG bog, very old lake without inlet or outlet that becomes acid and is gradually overgrown with a characteristic vegetation (see swamp). Peat moss, or sphagnum, grows around the edge of the open water of a bog (peat is obtained from old bogs) and out on the surface. ) today announced its results for the fourth quarter and calendar year 2000. 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. 2000 PROVED RESERVES The Company's year-end 2000 estimated proved reserves were 726.3 billion cubic feet equivalent (Bcfe) consisting of 381.3 billion cubic feet (Bcf) of natural gas and 57.5 million barrels of oil. This quantity represents an increase of 13% or 86 Bcfe, over the prior year-end reported quantities, after producing 64.4 Bcfe during 2000. The current year-end reported quantities represent a reserve life index of approximately 11.3 years and a reserve replacement rate of 233%. Approximately 65% of the year-end 2000 reserves were classified as proved developed compared to 75% at year-end 1999. Belco replaced its reserves at an all-in all-in adj (BRIT) (also adv) [charge] → todo incluido all-in adj, adv (Brit) [charge] → tout compris finding and development cost of $1.17 per thousand cubic feet equivalent (Mcfe) in 2000. Application of SEC mandated higher year-end 2000 prices had a pronounced impact on the PV10 value of estimated future net revenues before income taxes which increased by more than 250%, to $2.3 billion, when compared to the prior year-end PV10 value of $635 million. Year-end 2000 prices used in arriving at the PV10 value were $25.50 per barrel of oil and $9.53 per thousand cubic feet (Mcf) of gas (net to the Company) compared to $23.79 per barrel of oil and $2.14 per Mcf of gas at year-end 1999. Using lower projected realized oil and gas prices of $23.70 per barrel ($25.00 NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). ) and $4.77 per Mcf of gas ($5.00 NYMEX) applied to year-end 2000 estimated reserve quantities would result in a year-end 2000 PV10% of $1.2 billion. FOURTH QUARTER Fourth quarter 2000 oil and gas related revenues (hedged) increased 34% to $50.5 million from $37.7 million for the comparable period in 1999. Fourth quarter operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. , before working capital changes, was $19.7 million, or $0.57 per basic common share (after preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) ) as compared to $0.57 in the prior year comparable period. Fourth quarter 2000 average daily production was 167 million cubic feet equivalent (MMcfe MMcfe Millions of Cubic Feet Equivalent (Per Day; gas exploration) ) compared to 170 MMcfe average daily production for the fourth quarter of 1999. The modestly lower production rate compared to the comparable period in 1999 was primarily caused by the absence of 7.0 MMcfe in daily production related to the sale of North Texas properties in August 2000 and weather related production and deliverability problems during the last two months of calendar year 2000 in the Company's Rocky Mountain core area. The daily production rate at year-end was approximately 171 MMcfe. Fourth quarter 2000 CPRM CPRM Content Protection for Recordable Media CPRM Companhia de Pesquisa de Recursos Minerais CPRM Common Property Resource Management CPRM Communist Party of the Republic of Moldova CPRM Commodity Price Risk Management CPRM Country Portfolio Review Mission activities reduced reported revenues by $37.7 million representing cash settlements paid on both hedge and non-hedge transactions. In the prior year fourth quarter, similar CPRM activities reduced revenues by $7.5 million when commodity prices were significantly lower. 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. were essentially flat when compared to the prior year fourth quarter while production taxes increased substantially due to higher oil and gas prices. Costs and expenses for the fourth quarter of 2000 include $20.3 million in non-cash mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. related to the change in fair value of commodity 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. recorded in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with current accounting rules. In the prior year comparable period, the Company recorded a non-cash mark-to-market gain of $11.1 million when commodity prices were well below year-end 2000 levels. Fourth quarter 2000 net loss per basic common share was $0.36 compared to a net income of $0.29 per basic common share in the 1999 fourth quarter. Excluding the non-cash mark-to-market CPRM amounts, fourth quarter net income per basic common share would have been $0.05 and $0.06 for the years 2000 and 1999, respectively. REVISION OF PRIOR PERIOD REPORTED RESULTS The Company maintains a diverse CPRM portfolio which includes both hedge and non-hedge derivative instruments Derivative instruments Contracts such as options and futures whose price is derived from the price of an underlying financial asset. . As required under current accounting rules, the Company has marked its portfolios of non-hedge instruments to market each calendar quarter-end over the last five years and recorded the effect in its financial statements. Hedge instruments were not subject to the "mark-to-market" criteria. In connection with the audit of our year-end financial statements, we determined that the accounting for a limited number CPRM contracts should be revised. These contracts, which were extendable swaps, were included in our non-hedge portfolio until the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created or exercise of the extension option and were subsequently redesignated as hedge contracts. However, the accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. mark-to-market losses on these contracts through the date of the redesignation were excluded from the quarter-end mark-to-market calculation subsequent to their redesignation as hedge contracts. The effect of this was to understate un·der·state v. un·der·stat·ed, un·der·stat·ing, un·der·states v.tr. 1. To state with less completeness or truth than seems warranted by the facts. 2. the mark-to-market loss and net loss at June June: see month. 30, 2000 by $10.6 million and to decrease the net loss at September September: see month. 30, 2000 by $2.4 million as the previously accrued losses settled in the related production month. The net loss for the quarter ended June 30, 2000 includes approximately $1.2 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc prior quarters where the impact was not material. The effect of this revision is to accrue To increase; to augment; to come to by way of increase; to be added as an increase, profit, or damage. Acquired; falling due; made or executed; matured; occurred; received; vested; was created; was incurred. certain non-cash mark-to-market losses at the time the CPRM contracts were redesignated as hedge contracts. The change has no impact on cash flow or on the previously reported total mark-to-market liability associated with our combined hedge and non-hedge CPRM portfolio. 2000 RESULTS For the full year 2000, oil and gas revenues (hedged) increased 40% to $199.4 million compared to $141.9 million for 1999. Operating cash flow, before working capital changes, for 2000 was $86.8 million, or $2.57 per basic common share (after preferred dividends), an 18% increase over the year 1999 amounts of $75.5 million and $2.17 per basic common share, respectively. Year 2000 daily equivalent production increased 6% from 165.4 MMcfe in 1999 to 175.9 MMcfe in 2000. Due to escalating commodity prices throughout the year 2000, the Company was required by current accounting rules to record non-cash mark-to-market unrealized losses totaling $103.6 million compared to losses of $34.1 million recorded for the year 1999. Net loss per basic common share (after payment of preferred dividends) was $1.71 compared to a reported loss of $0.49 for 1999. Excluding the non-cash mark-to-market CPRM losses, full year 2000 net income per basic common share (after payment of preferred dividends) would have been $0.43, a 105% increase over the $0.21 calculated for the year 1999. Average basic common shares outstanding were 31.5 and 31.6 million shares for 2000 and 1999, respectively. 2001 The Company's financial forecast estimates and capital budget for the year 2001 reported in a press release dated January 23, 2001 remain unchanged. OTHER Preferred Dividends As previously reported, Belco's credit facility and the indentures governing gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. its subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". restrict the payment of dividends. As a result of recording substantial unrealized non-cash mark-to-market losses required by existing accounting rules, dividends on Belco's preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. may be limited or prohibited pro·hib·it tr.v. pro·hib·it·ed, pro·hib·it·ing, pro·hib·its 1. To forbid by authority: Smoking is prohibited in most theaters. See Synonyms at forbid. 2. by the restriction contained in Belco's 10-1/2% bond indenture Bond indenture Contract that sets forth the promises of a bond issuer and the rights of investors. bond indenture See indenture. . Payment of the declared March 2001 dividend on Belco's preferred stock will be permitted. Subsequent dividends will be contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent the sale of equity interests or sufficient net income to restore dividend payment capacity under the indenture An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. . At the present time, Belco management does not estimate that first quarter 2001 net income, as defined in the 10-1/2% bond indenture, will be sufficient to restore this dividend payment capacity. Management is examining alternatives with respect to such restrictions. Georgetown Update Belco reported on January 9, 2001 that it participated in a new Georgetown formation discovery well in Washington County, Texas Washington County is known for the Convention of 1836 where the signing of the Texas Declaration of Independence took place. Thus, forming the Republic of Texas. Washington county is located in the U.S. state of Texas. As of 2000, the population was 30,373. , the Ricks #1-H, which commenced production at an initial rate of approximately 40,000 MCFD MCFD Ministry of Children and Family Development (British Columbia, Canada) MCFD thousand cubic feet per day MCFD million cubic feet per day MCFD Malta College of Family Doctors MCFD Multiple Coagulation Factor Deficiency (22.6% net revenue interest). Belco subsequently participated in a second Georgetown discovery, the Carl #1-H, which commenced production on January 31, 2001 at an initial rate of approximately 24,000 MCFD (23.8% net revenue interest). In addition, Belco's third Georgetown test, the Schulte #2-H, is presently drilling and has encountered what appears to be encouraging shows of natural gas (35.3% net revenue interest). Belco expects the Schulte #2-H to be placed on production by mid March. Productive Georgetown wells are likely to be characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by high initial production rates though they tend to have relatively short reserve lives. The new Georgetown play is potentially very significant to Belco, as the Company holds an extensive acreage position in the area from its original Austin Chalk production. Based upon the initial successes of the Georgetown play, Belco expects to increase the drilling activity in this highly prospective area. Robert A. Belfer, Belco's Chairman and Chief Executive Officer, commented, "Recent successful drilling in the Georgetown formation combined with our overall drilling plans in 2001 could have a significant positive impact on the Company's future cash flow and reserve growth." Belco Oil & Gas Corp. is an independent energy company engaged in the exploration, development, acquisition and production of natural gas and oil. This press release includes forward looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The 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. provided in this press release are based on management's examination of historical operating trends. Belco cautions that its future oil and natural gas production, revenues and expenses are subject to all of the risks and uncertainties normally incident to the exploration for and development and production and sale of oil and gas. These risks include, but are not limited to, price volatility, inflation or lack of availability of goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. , environmental risks, drilling risks, regulatory changes, the uncertainty inherent in estimating future oil and gas production or reserves, and other risks as outlined below. Additional risks are included in Belco's 1999 Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. as filed with the Securities and Exchange Commission.
BELCO OIL & GAS CORP.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
------------------ ---------------
2000 1999 2000 1999
---- ---- ---- ----
REVENUES:
Oil and gas sales, net
of hedging activities $50,546 $37,716 $199,387 $141,932
Non-Hedge Commodity
Price Risk Management
Activities:
- cash settlements (a) (11,215) (2,320) (33,953) (2,442)
Interest and other 237 459 951 1,134
-------- -------- -------- ---------
Net revenues 39,568 35,855 166,385 140,624
COSTS AND EXPENSES:
Oil and gas
operating expenses 7,863 7,692 33,290 29,854
Production taxes 3,540 2,328 14,464 9,314
Depreciation, depletion
and amortization 15,055 13,923 56,721 54,182
General and administrative 1,887 1,289 6,538 4,940
Interest expenses 6,621 4,833 25,253 21,021
Impairment on
Equity Securities - 450 - 450
Non-cash change in fair
value of derivatives 20,310 (11,131) 103,610 34,094
------ ------- ------- --------
Total costs and expenses 55,276 19,384 239,876 153,855
------ ------- ------- --------
INCOME (LOSS) BEFORE
INCOME TAXES (15,708) 16,471 (73,491) (13,231)
PROVISION (BENEFIT)
FOR INCOME TAXES (5,498) 5,765 (25,722) (4,631)
-------- ------- -------- --------
NET INCOME (LOSS) $(10,210) $10,706 $(47,769) $(8,600)
PREFERRED STOCK DIVIDENDS (1,330) (1,679) (6,022) (6,884)
-------- ------- -------- --------
NET INCOME (LOSS)
APPLICABLE TO
COMMON STOCK $(11,540) $9,027 $(53,791) $(15,484)
======== ======= ======== =========
NET INCOME (LOSS) PER
SHARE OF COMMON STOCK,
Basic and fully diluted $(0.36) $0.29 $(1.71) $(0.49)
======= ===== ======= =======
AVERAGE NUMBER OF COMMON SHARES
USED IN COMPUTATION,
Basic and fully diluted 32,083 31,378 31,469 31,642
====== ====== ====== ======
--------------------------------
(a) Includes cash premiums received and settlements.
The following table sets forth certain operations data of the Company for the periods presented:
Three Months Ended Year Ended
December 31, December 31,
------------------- -----------------
2000 1999 2000 1999
---- ---- ---- ----
Oil and Gas Sales,
Net of Hedging Activities
($'s in 000's) 50,546 $37,716 $199,387 $141,932
Weighted Average
Sales Prices:
Oil (per Bbl)
- Unhedged $30.66 $22.81 $29.23 $17.49
- Hedged settlements (7.63) (3.35) (4.62) (1.76)
------ ------ ------ ------
Net realized $23.03 $19.46 $24.61 $19.25
Gas (per Mcf)
- Unhedged $4.97 $2.24 $3.50 $1.99
- Hedged settlements (1.99) (0.22) (0.98) (0.08)
------ ------ ------ ------
Net realized $2.98 $2.02 $2.52 $1.91
Net Production Data:
Oil (MBbl) 927 843 3,922 3,439
Gas (MMcf) 9,798 10,584 40,847 39,737
Gas equivalent
(MMcfe) 15,360 15,642 64,379 60,371
Daily production
(MMcfe) 167 170 176 165
Operations Data per Mcfe:
Oil and gas sales
revenues (Unhedged) $5.02 $2.74 $4.00 $2.31
Hedged and non-hedge
cash settlements (2.46) (0.48) (1.43) --
Oil and gas
operating expenses (0.51) (0.49) (0.52) (0.49)
Production taxes (0.23) (0.15) (0.22) (0.16)
General and
administrative (0.12) (0.08) (0.10) (0.08)
Depreciation, depletion
and amortization (0.98) (0.89) (0.88) (0.90)
------ ------ ------ ------
Pre-tax operating
profit (1) $0.72 $0.65 $0.85 $0.68
===== ===== ===== =====
Operating cash
flow (1) $1.70 $1.54 $1.73 $1.58
===== ===== ===== =====
-----------------------------
(1) Excludes non-cash mark-to-market commodity price risk management
activities, non-cash impairments, interest income and interest
expense.
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