Contango Announces Third Quarter Results.Energy Editors/Business Editors HOUSTON--(BUSINESS WIRE)--May 13, 2003 Contango Contango When the futures price is above the expected future spot price. Consequently, the price will decline to the spot price before the delivery date. Notes: This is the opposite of backwardation. Oil & Gas Company (AMEX AMEX See: American Stock Exchange :MCF MCF malignant catarrhal fever. ) reported a net loss attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to common stock for the three months ended March 31, 2003 of $1.9 million, or $0.21 per basic and 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, compared to net income attributable to common stock for the three months ended March 31, 2002 of $1.1 million, or $0.10 per basic share and $0.09 per diluted share. Natural gas and oil sales for the three months ended March 31, 2003 were $10.1 million. After reflecting a loss of $5.2 million from 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. activities, total revenues for the three months ended March 31, 2003 were $4.8 million. Natural gas and oil sales for the three months ended March 31, 2002 were $5.9 million. After reflecting a gain of $90,789 from hedging activities, total revenues for the three months ended March 31, 2002 were $6.0 million. EBITDAX Earnings Before Interest, Taxes, Depreciation, Depletion, Amortization, and Exploration Expenses - EBITDAX An indicator of a company's financial performance calculated as: (earnings before interest, income taxes, depreciation, depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able and amortization, impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. expense and expensed exploration expenditures) was $3.0 million for the three months ended March 31, 2003, down from EBITDAX for the three months ended March 31, 2002 of $4.9 million. The Company reported a net loss attributable to common stock for the nine months ended March 31, 2003 of $6.1 million, or $0.68 per basic and diluted share, compared to net income attributable to common stock for the nine months ended March 31, 2002 of $4.8 million, or $0.42 per basic share and $0.37 per diluted share. Natural gas and oil sales for the nine months ended March 31, 2003 were $24.8 million. After reflecting a loss of $5.4 million from hedging activities, total revenues for the nine months ended March 31, 2003 were $19.4 million. Natural gas and oil sales for the nine months ended March 31, 2002 were $15.9 million. After reflecting a gain of $4.1 million from hedging activities, total revenues for the nine months ended March 31, 2002 were $20.1 million. EBITDAX for the nine months ended March 31, 2003 was $13.8 million, down from EBITDAX for the nine months ended March 31, 2002 of $16.6 million. Kenneth R Peak, Contango's chairman and chief executive officer, said, "Our third quarter was a major disappointment. Natural gas prices averaged $6.84 per Mcf, but our $5.2 million of hedging losses ($3.95 per Mcf) in combination with $3.6 million in expensed seismic and other exploration costs resulted in a $1.9 million loss for the quarter. Our experience with hedging has been mixed. For the nine months ended March 31, 2002, we reported a gain of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $4.1 million from hedging, versus our $5.4 million loss for the nine months ended March 31, 2003. Given our view that natural gas prices are likely to continue to stay strong, together with the potential for significant hedging losses when NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). natural gas prices can spike A burst of extra voltage in a power line that lasts only a few nanoseconds. See power surge, power swell, sag and surge suppression. (jargon) spike - To defeat a selection mechanism by introducing a (sometimes temporary) device that forces a specific result. $5.00 in just two days as they did in late February February: see month. , our current policy is to hedge only through the purchase of puts. "In the nine months of this fiscal year, we have expensed nearly $15.0 million in 3-D seismic and related reprocessing Reprocessing may refer to:
Golfo de Mexico Atlantic, Atlantic Ocean - the 2nd largest ocean; separates North and South America on the west from Europe and Africa on the east blocks and 1.4 million acres of onshore on·shore adj. 1. Moving or directed toward the shore: an onshore wind. 2. Located on the shore: an onshore beacon; an onshore patrol. adv. 3-D seismic, matched-up with a sophisticated seismic reprocessing center and the geological ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. and geophysical ge·o·phys·ics n. (used with a sing. verb) The physics of the earth and its environment, including the physics of fields such as meteorology, oceanography, and seismology. staff to exploit this significant 3-D seismic data base. Contango has the exploration resources available to it of a much larger company, yet will continue to operate with only four employees. Our seismic acquisition expenses are now largely behind us, and I believe all the pieces are in place for us to continue our successful exploration strategy of value creation via the exploration drill bit. "In late 2002, we participated in a 3-D seismic shoot near our existing south Texas production. Based on this data, we have drilled seven successful wells in nine attempts and have another two wells scheduled for drilling. We are now shooting a second 3-D seismic shoot also nearby our STEP production and will begin evaluating the data from this second 3-D shoot later this summer. "Our current production is averaging about 16.0 MMcf and 300 barrels of oil per day, and at today's level of natural gas and crude oil prices, our monthly EBITDAX will be in the $2.0 million per month range. Assuming prices continue at today's levels, we expect to be able to maintain our monthly EBITDAX at this $2 million level through calendar year end 2003. Our bank debt stands at $20.2 million, and we have unused borrowing capacity of $4.0 million." Mr. Peak continued, "Our farm-out partners have recently drilled three successful wells in the offshore Gulf of Mexico, and we expect production to begin this summer. Based on anticipated production rates and current prices, we expect to earn our back-in working interest in the January January: see month. to March 2004 time frame. Our anticipated monthly cash flow from our back-in working interest is estimated to be in the $400,000 - $500,000 per month range. We expect our partners will begin drilling two more of our offshore prospects in the summer/fall time frame. "The PV(10) of our proved developed producing reserves at March 31 2003, including the first three of our onshore discoveries but none of our three recent offshore discoveries, was $72.6 million. The prices used in this calculation were $5.04 per Mmbtu for natural gas and $31.04 per barrel barrel: see English units of measurement. of oil, in each case prior to adjustments for basis and transportation. Our reserves are 90% natural gas." Contango is a Houston-based, independent natural gas and oil company. The Company explores, develops, produces and acquires natural gas and oil properties primarily onshore in the Gulf Coast and offshore in the Gulf of Mexico. Contango also own a 10% partnership interest in a proposed LNG LNG (liquefied natural gas): see under natural gas. terminal in Freeport, Texas Freeport is a city in Brazoria County, Texas within the Houston–Sugar Land–Baytown Metropolitan Area and is situated in Southeast Texas. As of the 2000 U.S. Census, the city population was 12,708 and is about sixteen miles away from Angleton. . Additional information can be found on our web page at www.mcfx.biz biz n. Informal Business. biz Noun Informal business Noun 1. . This news release contains 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 the Securities Litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. Reform Act. The statements reflect the Company's current views with respect to future events that involve risks and uncertainties including uncertainties related to successful negotiations with other parties, oil and gas exploration risks, price volatility Volatility 1. A statistical measure of the tendency of a market or security to rise or fall sharply within a period of time. 2. A variable in option pricing formulas that denotes the extent to which the return of the underlying asset will fluctuate between now and the , production levels, closing of transactions, capital availability, operational and other risks, uncertainties and factors described from time to time in the Company's publicly available SEC reports. In light of these risks and uncertainties, the forward-looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. events described in this release might not occur.
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ -------------------------
2003 2002 2003 2002
------------ ----------- ------------ ------------
REVENUES:
Natural gas and
oil sales $10,061,351 $5,919,715 $24,793,109 $15,908,607
Gain (loss) from
hedging
activities (5,230,672) 90,789 (5,416,998) 4,145,216
------------ ----------- ------------ ------------
Total revenues 4,830,679 6,010,504 19,376,111 20,053,823
------------ ----------- ------------ ------------
EXPENSES:
Operating expenses 1,448,367 833,874 4,179,166 2,525,620
Exploration
expenses 3,588,654 - 15,496,798 2,522,836
Depreciation,
depletion and
amortization 1,942,144 2,931,618 6,518,654 6,044,823
General and
administrative
expenses 391,483 525,235 1,464,576 1,331,146
------------ ----------- ------------ ------------
Total expenses 7,370,648 4,290,727 27,659,194 12,424,425
------------ ----------- ------------ ------------
INCOME (LOSS) FROM
OPERATIONS (2,539,969) 1,719,777 (8,283,083) 7,629,398
Interest expense (177,860) (87,882) (531,763) (97,244)
Interest income 6,498 34,222 27,663 169,156
Gain on sale of
assets and other - 254,619 36,150 373,539
------------ ----------- ------------ ------------
INCOME (LOSS)
BEFORE INCOME
TAXES (2,711,331) 1,920,736 (8,751,033) 8,074,849
Benefit
(provision) for
income taxes 948,966 (669,905) 3,061,216 (2,826,063)
------------ ----------- ------------ ------------
NET INCOME (LOSS) (1,762,365) 1,250,831 (5,689,817) 5,248,786
Preferred stock
dividends 150,000 150,000 450,000 450,000
------------ ----------- ------------ ------------
NET INCOME (LOSS)
ATTRIBUTABLE
TO COMMON STOCK $(1,912,365) $1,100,831 $(6,139,817) $4,798,786
============ =========== ============ ============
NET INCOME (LOSS)
PER SHARE:
Basic $(0.21) $0.10 $(0.68) $0.42
============ =========== ============ ============
Diluted $(0.21) $0.09 $(0.68) $0.37
============ =========== ============ ============
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic 9,158,755 11,427,532 9,080,392 11,477,836
============ =========== ============ ============
Diluted 9,158,755 14,319,063 9,080,392 14,301,024
============ =========== ============ ============
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
PRODUCTION, PRICES, OPERATING EXPENSES, EBITDAX AND OTHER
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------- -------------------------
2003 2002 2003 2002
----------- ----------- ------------ ------------
Production:
Natural gas
(thousand cubic
feet) 1,322,400 2,119,569 4,642,314 5,137,800
Oil and condensate
(barrels) 30,744 57,616 107,389 136,200
Total (thousand
cubic feet
equivalent) 1,506,864 2,465,265 5,286,648 5,955,000
Natural gas
(thousand cubic
feet per day) 14,693 23,551 16,943 18,820
Oil and condensate
(barrels per day) 342 640 392 499
Total (thousand
cubic feet
equivalent per
day) 16,745 27,391 19,295 21,814
Average sales price:
Natural gas (per
thousand cubic
feet) $6.84 $2.53 $4.69 $2.70
Oil and condensate
(per barrel) $33.22 $18.30 $27.96 $20.55
Total (per thousand
cubic feet
equivalent) $6.67 $2.65 $4.69 $2.78
Operating expenses
(per thousand
cubic feet
equivalent):
Production and
severance taxes $0.48 $0.18 $0.33 $0.19
Lease operating
expense (before
taxes) 0.48 0.16 0.46 0.23
----------- ----------- ------------ ------------
Total operating
expenses $0.96 $0.34 $0.79 $0.42
Other expenses (per
thousand cubic
feet equivalent):
Depreciation,
depletion and
amortization of
natural gas and oil
properties $1.25 $1.18 $1.21 $1.00
General and
administrative
expense $0.26 $0.21 $0.28 $0.22
EBITDAX (1) $2,990,829 $4,906,014 $13,768,519 $16,570,596
(1) EBITDAX represents earnings before interest, income taxes,
depreciation, exploration expenditures, including gain (loss) from
hedging activities. We have reported EBITDAX because we believe
EBITDAX is a measure commonly reported and widely used by
investors as an indicator of a company's operating performance and
ability to incur and service debt. We believe EBITDAX assists
investors in comparing a company's performance on a consistent
basis without regard to depreciation, depletion and amortization,
impairment of natural gas and oil properties and exploration
expenses, which can vary significantly depending upon accounting
methods. EBITDAX is not a calculation based on the U.S. generally
accepted accounting principles and should not be considered an
alternative to net income (loss) in measuring our performance or
used as an exclusive measure of cash flow because it does not
consider the impact of working capital growth, capital
expenditures, debt principal reductions and other sources and uses
of cash, which are disclosed in our statements of cash flows.
Investors should carefully consider the specific items included in
our computation of EBITDAX. While we have disclosed our EBITDAX to
permit a more complete comparative analysis of our operating
performance and debt servicing ability relative to other
companies, investors should be cautioned that EBITDAX as reported
by us may not be comparable in all instances to EBITDAX as
reported by other companies. EBITDAX amounts may not fully be
available for management's discretionary use, due to requirements
to conserve funds for capital expenditures, debt service,
preferred stock dividends and other commitments.
A reconciliation of EBITDAX to income (loss) from operations for
the periods indicated is presented below.
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------- ---------------------------
2003 2002 2003 2002
------------ ------------ ------------- -------------
Income (loss)
from
operations $(2,539,969) $1,719,777 $(8,283,083) $7,629,398
Depreciation,
depletion and
amortization 1,942,144 2,931,618 6,518,654 6,044,823
Exploration
expenses 3,588,654 - 15,496,798 2,522,836
Gain on sale of
assets and
other - 254,619 36,150 373,539
------------ ------------ ------------- -------------
EBITDAX $2,990,829 $4,906,014 $13,768,519 $16,570,596
============ ============ ============= =============
CONTANGO OIL & GAS COMPANY AND SUBSIDIARIES
COMMODITY DERIVATIVE CONTRACTS
The following table provides our pricing and notional volumes on
open commodity derivative contracts as of May 12, 2003.
Strike
Contract Description Term Price (1) Quantity (1)
-------------------------- ---------------- ---------- --------------
Natural gas puts owned 06/2003 - 10/2003 $4.50 10,000/day
Natural gas puts owned 11/2003 - 12/2003 $4.00 10,000/day
Natural gas calls sold 06/2003 - 07/2003 $5.25 5,000/day
Natural gas calls sold 06/2003 - 07/2003 $5.50 3,000/day
Natural gas calls sold 08/2003 - 10/2003 $6.00 8,000/day
(1) Prices and quantities per MMbtu.
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