Credo Reports Third Quarter and Nine-Month Results for 2002; Natural Gas Production Increases 77% But Net Income Declines Due to Sharply Lower Gas Prices.Business Editors DENVER--(BUSINESS WIRE)--Sept. 12, 2002 CREDO Petroleum Corporation (Nasdaq:CRED) reported that natural gas production volumes surged 74% in the third quarter of fiscal 2002 and 77% for the nine months ended July 31, 2002. "Successful drilling in northwestern Oklahoma Northwestern Oklahoma is the geographical region of the state of Oklahoma which includes the Oklahoma Panhandle, stretching to an eastern extent along Interstate 35, and its southern extent along the Canadian River to Noble County. has resulted in very significant production gains this year," said James T. Huffman, President. "Three new wells are currently producing on our Sand Creek Sand Creek, Colorado, site of a massacre (1864) of Cheyenne by Col. John M. Chivington and his Colorado Volunteers. The Cheyennes, led by their chief, Black Kettle, had offered to make peace and, at the suggestion of military personnel, had encamped at Sand Creek and Two Springs Prospects. In addition, two wells are awaiting pipeline connection and two wells will be drilled this month. A separate press release made today updates the company's activities related to its drilling program and its Calliope calliope, in music calliope, in music, an instrument also called steam organ or steam piano in which steam is forced through a series of whistles controlled by a keyboard. Gas Recovery technology." For the nine months ended July 31, 2002, net income was $908,000 on revenue of $3,975,000 compared to $1,633,000 on revenue of $4,483,000 last year. On a per 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 basis, net income was $.28 compared to $.50 last year. Cash flow from operating activities (before working capital changes) was $2,041,000 compared to $2,617,000 last year. For the third quarter ended July 31, 2002, net income was $371,000, or $.11 per diluted share, compared to $501,000, or $.15 per diluted share last year. "Product prices and hedging realizations have a more direct effect on the company's bottom line than production which is encumbered Encumbered A property owned by one party on which a second party reserves the right to make a valid claim, e.g., a bank's holding of a home mortgage encumbers property. by 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 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. ," Huffman said. "Our nine-month financial results are lagging Lagging Strategy used by a firm to stall payments, normally in response to exchange rate projections. last year because the positive financial effect of increased production has been more than offset by lower price realizations." PRODUCTION VOLUMES SURGE ON SUCCESSFUL DRILLING Wells drilled in the first nine months boosted total production 51% to a record high 1.2 Bcfge (billion cubic feet of gas-equivalent) compared to 773 MMcfge (million cubic feet of gas-equivalent) last year. Natural gas production surged 77% to a record 1.0 Bcfg compared to 566 MMcfg last year while crude oil sales fell 20% to 27,700 barrels compared to 34,500 barrels last year. Third quarter production volumes rose 52% to 441 MMcfge compared to 290 MMcfge last year. Natural gas production rose 74% to 382 MMcfg while crude oil sales fell 16%. PRODUCT PRICES SHARPLY LOWER Net wellhead well·head n. 1. The source of a well or stream. 2. A principal source; a fountainhead. 3. The structure built over a well. wellhead Noun 1. natural gas prices for the nine months ended July 31, 2002, fell 48% to $2.59 per Mcf compared to $4.94 last year. Hedging transactions added $.35 per Mcf to 2002 natural gas price realizations compared to $.52 last year. As a result, total natural gas price realizations were $2.94 per Mcf compared to $5.46 last year. Wellhead oil prices fell 25% to $20.54 per barrel compared to $27.25 last year. For the quarter ended July 31, 2002, net wellhead natural gas prices fell 20% to $2.87 per Mcf compared to $3.61 last year. Hedging transactions added $.05 per Mcf to 2002 natural gas price realizations compared to $1.02 last year. As a result, total natural gas price realizations were $2.92 per Mcf compared to $4.63 last year. Wellhead oil prices fell 10% to $23.27 per barrel compared to $25.75 last year. HEDGING AND NATURAL GAS PRICE OUTLOOK The company's most recent natural gas hedge data for months subsequent to third quarter-end shows 280 MMcfg hedged for the months of December 2002 through February 2003. This hedge is at an average NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). (Henry Hub Henry Hub is the pricing point for natural gas futures contracts traded on the New York Mercantile Exchange (NYMEX). It is a point on the natural gas pipeline system in Erath, Louisiana. It is owned by Sabine Pipe Line LLC. , Louisiana Louisiana (ləwē'zēăn`ə, l  ē'–), state in the S central United States. It is bounded by Mississippi, with the Mississippi R. delivery point) price of $4.19 per Mcf, and
represents approximately 83% of the company's total estimated gas
production for those three months. Subsequent to third quarter-end,
hedges covering the months of August through November 2002 were closed
and a gain of $204,000, or $0.47 per Mcf, was realized. The company
hedges only its Oklahoma production where the "basis" for its
pipeline index prices is generally $.15 to $.30 below the Henry Hub."The fundamentals for natural gas appear to be improving, making us more bullish Bullish Word used to describe an investor's attitude. Bullish refers to an optimistic outlook, while bearish means a pessimistic outlook. bullish on prices for 2003," Huffman said. "Reported production data and summer storage injections indicate that natural gas demand has increased up to 3% over last year while supply has fallen 4% to 6%. This supply-demand imbalance imbalance /im·bal·ance/ (im-bal´ans) 1. lack of balance, such as between two opposing muscles or between electrolytes in the body. 2. dysequilibrium (2). together with normal winter temperatures would be very bullish for natural gas prices, despite current high storage levels due to gas left over from last winter." STRONG FINANCIAL CONDITION PROVIDES SOLID FOUNDATION FOR GROWTH At July 31, 2002, working capital was $6,754,000, up 17% from October 31, 2001 fiscal year-end Fiscal Year-End The completion of a one-year, or 12-month, accounting period. Notes: The reason that a company's fiscal year often differs from the calendar year and does not close on Dec 31, is due to the nature of company's needs. . Total assets were $18,515,000 including cash and short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. investments of $7,083,000. Stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. was $14,218,000. The company's only long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. obligation is a $456,000 exclusive license obligation that is payable over eight years. MANAGEMENT COMMENT ON THE COMPANY'S OUTLOOK "We continue to be very pleased with our two core projects -- natural gas drilling in northwestern Oklahoma and application of our patented Calliope Gas Recovery System," Huffman said. "Successful drilling has caused our production to surge. The convergence of our increased production with anticipated higher gas prices causes us to be very optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op about 2003." For a more detailed discussion of current operations, refer to the company's Form 10-QSB for the fiscal quarter ended July 31, 2002 and its Form 10-KSB for fiscal year ended October 31, 2001. CREDO Petroleum Corporation is a publicly traded independent energy company headquartered in Denver, Colorado. The company is engaged in the exploration for and the acquisition, development and marketing of natural gas and crude oil in the Mid-Continent and Rocky Mountain regions The Rocky Mountain Region is a floristic region within the Holarctic Kingdom in western North America (Canada and the United States) delineated by Armen Takhtajan and Robert F. Thorne. . The company's stock is traded on the NASDAQ System under the symbol "CRED" and is quoted daily in the "NASDAQ Small-Cap Small-cap A stock with a small capitalization, meaning a total equity value of less than $500 million. small-cap 1. Of or relating to the common stock of a relatively small firm having little equity and few shares of common stock Issues" section of The Wall Street Journal. This press release includes certain statements that may be deemed to be "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, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. All statements included in this press release, other than statements of historical facts, address matters that the company reasonably expects, believes or anticipates will or may occur in the future. Such statements are subject to various assumptions, risks and uncertainties, many of which are beyond the control of the company. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those described in the forward-looking statements.
CREDO PETROLEUM CORPORATION
FINANCIAL HIGHLIGHTS
Nine Months Nine Months Quarter Quarter
Ended Ended Ended Ended
Condensed Operating July 31, July 31, July 31, July 31,
Information (Unaudited) 2002 2001 2002 2001
----------- ----------- ----------- -----------
Revenue:
Oil and Gas Sales $ 3,519,000 $ 4,029,000 $ 1,342,000 $ 1,319,000
Operating 365,000 336,000 123,000 113,000
Investment Income
and Other 91,000 118,000 17,000 9,000
----------- ----------- ----------- -----------
3,975,000 4,483,000 1,482,000 1,441,000
----------- ----------- ----------- -----------
Expenses:
Oil and Gas Production 987,000 879,000 329,000 280,000
Depreciation, Depletion
and Amortization 911,000 590,000 353,000 226,000
General and
Administrative 742,000 641,000 257,000 205,000
Interest 38,000 40,000 13,000 14,000
----------- ----------- ----------- -----------
2,678,000 2,150,000 952,000 725,000
----------- ----------- ----------- -----------
Income Before
Income Taxes 1,297,000 2,333,000 530,000 716,000
Income Taxes (389,000) (700,000) (159,000) (215,000)
----------- ----------- ----------- -----------
Net Income $ 908,000 $ 1,633,000 $ 371,000 $ 501,000
=========== =========== =========== ===========
Basic Net Income
Per Share $ .28 $ .53 $ .11 $ .16
=========== =========== =========== ===========
Diluted Net Income
Per Share $ .28 $ .50 $ .11 $ .15
=========== =========== =========== ===========
Condensed Balance Sheet Information July 31, October 31,
2002 2001
------------- ------------
(Unaudited)
Cash and Short-Term Investments $ 7,083,000 $ 6,102,000
Other Current Assets 1,355,000 925,000
Oil and Gas Properties, Net 9,341,000 8,669,000
Exclusive License Agreement, Net 566,000 618,000
Other Assets 170,000 156,000
-------------- ------------
$ 18,515,000 $ 16,470,000
============== ============
Current Liabilities $ 1,684,000 $ 1,236,000
Deferred Income Taxes 2,157,000 1,935,000
Exclusive License Agreement Obligation 456,000 456,000
Stockholders' Equity 14,218,000 12,843,000
-------------- ------------
$ 18,515,000 $ 16,470,000
============== ============
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