Forcenergy Announces 1997 Results.MIAMI--(BUSINESS WIRE)--March 2, 1998--Production Increase of 89% Reserve Replacement Ratio of 235% Cash Flow Increase of 101% Revenue Increase of 104% Financial Results Forcenergy Inc (NYSE NYSE See: New York Stock Exchange :FEN Fen (fŭn), river, 375 mi (604 km) long, rising in the Wutai Mts. and flowing southwest, through a narrow valley, to the Huang He, Shanxi prov., N central China; navigable for small junks only in its lower course. ) reported record recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. net income of $28.0 million, or $1.15 per share-diluted for the year ended December December: see month. 31, 1997, exclusive of a non-cash 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. of oil and gas assets, compared with net income of $11.3 million, or $.57 per share-diluted for the 1996 year. Net income for the fourth quarter of 1997 was $9.1 million, or $.35 per share-diluted, exclusive of the impairment provision, compared to earnings of $5.1 million, or $.23 per share-diluted for the 1996 quarter. Recognized in the fourth quarter of 1997 was a $162.8 million after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. non-cash impairment of oil and gas assets under the full cost accounting rules mandated by the Securities and Exchange Commission. The net loss for 1997, inclusive of inclusive of prep. Taking into consideration or account; including. the impairment provision, was $134.8 million, or $5.51 per share-diluted for the year, and $153.7 million, or $5.90 per share-diluted for the fourth quarter. Weighted average shares outstanding, on a 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. basis, increased to 24,436,370 for the year ended December 31, 1997 compared to 19,672,361 shares outstanding for the year ended December 31, 1996. Weighted average shares outstanding for the fourth quarter 1997 increased to 26,048,860 compared with 22,280,477 average shares outstanding in the fourth quarter of 1996. Revenues for the year 1997 were a record $284.1 million, an increase of 104% over the prior year. Revenues for the fourth quarter of 1997 were $85.5 million, an increase of 92% over the 1996 quarter. Discretionary cash flow Discretionary cash flow Cash flow that is available after the funding of all positive net present value (NPV) capital investment projects; it is available for paying cash dividends, repurchasing common stock, retiring debt, and so on. for 1997 increased to $155.5 million, or $6.35 per share-diluted for the year, and $46.6 million, or $1.79 per share-diluted for the fourth quarter, increases of 101% and 79% over the $77.3 million, or $3.95 per share, and $26.0 million, or $1.17 per share, respectively, reported for the comparable 1996 periods. Included in the fourth quarter 1997 results and results for the year was a $162.8 million ($200 million pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta ) non-cash impairment of oil and gas assets under the "ceiling test" provisions of the full cost accounting rules for oil and gas companies. Under these rules mandated by the Securities and Exchange Commission, to the extent the carrying cost Noun 1. carrying cost - the opportunity cost of unproductive assets; the expense incurred by ownership carrying charge opportunity cost - cost in terms of foregoing alternatives of the Company's oil and gas assets associated with its proved reserve base exceeds the discounted present value of its 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. , that difference must be recognized as an additional charge to depletion/depreciation expense in that quarter. Because of the steep decline in oil and gas prices 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. 1997, the Company's capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. cost exceeded the discounted present value of its proven reserves resulting in the impairment. The pre-tax impairment can be attributed to the following: (1) $90 million attributable to the general reduction in present value caused by the year end decline in commodity prices; (2) $70 million related to the Company's investment in Alaska Alaska (əlă`skə), largest in area of the United States but third smallest (exceeding only Vermont and Wyoming) in population, occupying the northwest extremity of the North American continent, separated from the coterminous United States due to the decline in oil prices; (3) an approximate $30 million impairment of the Company's various international investments, principally related to unsuccessful exploration efforts in Gabon Gabon (gäbôN`), officially Gabonese Republic, republic (2005 est. pop. 1,389,000), 103,346 sq mi (267,667 sq km), W central Africa. It borders on the Atlantic Ocean in the west, on Equatorial Guinea and Cameroon in the north, and on Congo , Africa; and (4) the writedown writedown A reduction in the value of an asset carried on a firm's financial statements. For example, the firm's accountants, believing the inventory is overvalued, may decide to take a writedown by reducing inventory valuation. of approximately $10 million in recorded cost associated with the recognition of deferred taxes on various corporate acquisitions consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. in the last three years. Impairment of the investment in Alaska was caused primarily by prices declining in the Cook Inlet Cook Inlet Inlet, Gulf of Alaska in the northern Pacific Ocean. Bounded by the Kenai Peninsula on the east, it extends northeast for 220 mi (350 km), narrowing from 80 to 9 mi (129 to 14 km). Anchorage is situated near its head. area to a greater degree than in the Gulf of Mexico Noun 1. Gulf of Mexico - an arm of the Atlantic to the south of the United States and to the east of Mexico 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 and lower 48 states, thereby artificially reducing the economic life of the properties which then resulted in an approximate 11 million barrel negative revision to proven reserves. Operating Results Numerous operating improvements were realized during 1997. Production for the full year increased to a record average of 22,500 barrels of oil and 158,200 MCF MCF malignant catarrhal fever. of natural gas per day. Fourth quarter production averaged 24,800 barrels and 184,300 MCF per day. On an equivalent basis, these averages represent increases of 89% and 76% over those for the comparable 1996 periods. The average cost per barrel equivalent for the Company's 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. and Gulf of Mexico production was reduced 11% in 1997, to an average rate of $3.63 per barrel, through increased production and operating improvements. The addition of the higher-cost, non-operated Cook Inlet production at the beginning of 1997 increased the company's overall 1997 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. to $4.33 per barrel equivalent, a 6% increase over the 1996 average. Reserve Replacement The Company attained at·tain v. at·tained, at·tain·ing, at·tains v.tr. 1. To gain as an objective; achieve: attain a diploma by hard work. 2. a 235% overall reserve replacement rate in 1997, 134% through acquisitions and 101% from drilling and revisions. This was the seventh year in a row that the Company has achieved more than 100% reserve replacement. Total proved reserves, on a barrel equivalent basis, increased approximately 25%, despite the 11 million-barrel downward revision in the Cook Inlet, Alaska reserves that resulted from the previously mentioned price-related artificial reduction in the estimated economic life of the fields. Each of the Company's operating divisions showed significant growth in reserve volume; the Gulf of Mexico increased 31.5%, onshore 51.5% and in Alaska 33.4%, absent the negative price-related revision. Despite the strong volume growth, the present value of proven reserves for each division declined by 38%, 17% and 69%, respectively, due to the decline in commodity prices. Finding and development cost from all sources for 1997 was $11.69 per equivalent barrel. These costs were higher than normal due to: (1) a significant investment in unproved lease and seismic costs related to exploratory prospects to be drilled in the Gulf of Mexico, Alaska and Gabon in future years; (2) the downward revisions in the Alaskan reserves; (3) the effect of the unsuccessful international drilling costs in Gabon, and (4) the exponential 1. (mathematics) exponential - A function which raises some given constant (the "base") to the power of its argument. I.e. f x = b^x If no base is specified, e, the base of natural logarthims, is assumed. 2. increase in drilling rig and other service costs experienced in the Gulf of Mexico. Excluding the effects of the negative revision to the Alaskan reserves, the finding and development cost for 1997, from all sources, was $9.26 per equivalent barrel. Domestic finding and development cost from all sources for 1997, excluding the Alaskan price-related revisions, was $8.87 per equivalent barrel. Stig STIG Steam-Injected Gas Turbine STIG Security Technical Implementation Guide STIG Space Technology Interdependency Group STIG Security Technical Implementation Guidelines Wennerstrom, President and Chief Executive Officer, commented, "Forcenergy had another successful year for reserve replacement, production and cash flow growth. The company's finding and development costs for 1997, however, did not measure up to our expectations. The 1997 finding and development costs were under upward pressure all year because of the higher drilling and service costs in the Gulf of Mexico and then were significantly and adversely impacted by the required year end price-related reduction in Alaskan oil reserves Oil reserves refer to portions of oil in place that are claimed to be recoverable under economic constraints. Oil in the ground is not a "reserve" unless it is claimed to be economically recoverable, since as the oil is extracted, the cost of recovery increases incrementally . We remain fully committed (Law) committed to prison for trial, in distinction from being detained for examination. See also: Fully to the Cook Inlet area. We are proceeding on all current exploration and development projects as well as undertaking significant new 3-D seismic surveys and other actions which are continuing our exploitation of the existing asset base as well as preparing the Company for future exploration. Our belief that efforts focused in the Cook Inlet will result in substantial reserve additions has not changed. In fact, as a result of our 3-D seismic studies, further geologic 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. work and formation of a viable development scheme, we recognized approximately nine million barrels of net proven reserves at our Redoubt re·doubt n. 1. A small, often temporary defensive fortification. 2. A reinforcing earthwork or breastwork within a permanent rampart. 3. A protected place of refuge or defense. Shoal prospect in 1997. Another goal in Alaska is to reduce operating costs operating costs npl → gastos mpl operacionales on a per unit basis, which we have already been successful in doing on our operated properties. Mr. Wennerstrom continued, "In the Gulf of Mexico we are addressing increased finding and development costs through a diligent dil·i·gent adj. Marked by persevering, painstaking effort. See Synonyms at busy. [Middle English, from Old French, from Latin d review of all cost components and a drilling program that will emphasize lower-costs. Overall drilling costs should be reduced significantly by switching the majority of our 1998 projects to platform drilling rigs; available at approximately one-half the day-rate cost of jack-up rigs. We will continue to exploit our large Gulf of Mexico asset base through a balanced program of development, exploitation and exploration projects. "Internationally, we drilled two non-commercial A non-commercial enterprise is work that values other considerations above and beyond that of making a profit. It differs from a non-profit enterprise in that seeking a profit is a part of their business, just not the main part. wells offshore Gabon, West Africa West Africa A region of western Africa between the Sahara Desert and the Gulf of Guinea. It was largely controlled by colonial powers until the 20th century. West African adj. & n. . However, we are encouraged by recent near-by discoveries and anxiously await AWAIT, crim. law. Seems to signify what is now understood by lying in wait, or way-laying. the 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. evaluation of a large-scale large-scale adj. 1. Large in scope or extent. 2. Drawn or made large to show detail. large-scale Adjective 1. wide-ranging or extensive 2. proprietary 3-D seismic survey that was acquired in late 1997 over a portion of our 50% owned Gryphon Marin Mar·in , John 1870-1953. American painter noted for his semiabstract watercolors, including Brooklyn Bridge. concession. In Australia, we made a small discovery during 1997 and will participate in development opportunities and several exploratory prospects with significant reserve potential. Our international strategy of exposing a small portion of each year's capital budget to high-risk high-risk adjective Referring to an ↑ risk of suffering from a particular condition Infectious disease Referring to an ↑ risk for exposure to blood-borne pathogens, which occurs with blood bank technicians, dental professionals, dialysis unit , high-reward projects will not change." Forcenergy is an independent oil and gas company engaged in the exploration, acquisition, development, exploitation and production of oil and natural gas. -0- Certain statements in this news release regarding future expectations and plans for future activities may be regarded as "forward looking statements" 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. They are subject to various risks, such as financial market conditions, operating hazards, drilling risks, and the inherent uncertainties in interpreting engineering data relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc underground accumulation of oil and natural gas, as well as other risks discussed in detail in the Company's SEC filings, including the Annual Report and 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. for the year ended December 31, 1996. Actual results may vary materially. (tables to follow) -0-
Summary Financial and Operating Information
Three Months Ended Year Ended
December 31, December 31,
1997 1996 % Change 1997 1996 % Change
FINANCIAL
SUMMARY
(in thousands,
except per
share data)
Revenues $ 85,524 $ 44,589 92% $ 284,185 $ 139,381 104%
Net Income
(Loss) (153,703)(1) 5,107 N/M (134,818)(1) 11,278 N/M
Net Income
(Loss) per
share-diluted ($ 5.90) .23 N/M (5.51) .57 N/M
Diluted
weighted
average
common
shares 26,049 22,280 17% 24,436 19,672 24%
SUMMARY
OPERATING DATA
(in thousands,
except pricing
data)
Production:
Liquids
(Mbbls) 2,285 1,167 96% 8,210 4,006 105%
Natural
Gas (MMcf) 16,951 10,455 62% 57,737 32,738 76%
Total MBOE 5,110 2,910 76% 17,833 9,462 89%
Average
realized
sales prices:
Liquids
(per Bbl) $ 16.62 $ 17.59 (6)% $ 17.34 $ 16.93 2%
Natural Gas
(per Mcf) 2.76 2.27 22% 2.41 2.16 12%
(1) Includes a $162.8 million (after-tax) impairment provision
pursuant to the ceiling-test requirements under full cost accounting
guidelines.
RESERVE RECONCILIATION
Oil Gas Equivalent Reserve
(MBBL) (MMCF) (MBOE) Replacement
January 1, 1997 54,659 256,913 97,478
Acquisitions 12,444 69,044 23,951 134%
Drilling (215) 110,281 18,165 102%
Revisions (381) 736 (258) (1)%
Production (8,210) (57,736) (17,833)
January 1, 1998 58,297 379,238 121,503 25%
RESERVE REPLACEMENT -- BY REGION (MBOE)
_________________________________________________
Gulf of Mexico Onshore Alaska Total
Acquisition 8,180 14,425 1,346 23,951
Drilling 18,165 -- -- 18,165
Revisions 2,478 (693) (2,043)(1) (258)
28,823 13,732 (697) 41,858
(1) Reflects the approximate 11 million-barrel negative revision
offset by the addition of approximately 9 million barrels related to
the Redoubt Shoal Prospect.
FORCENERGY INC
STATEMENTS OF OPERATIONS
For the Year Ended December 31,
1997 1996
(in thousands, except per
share amounts)
Revenues:
Oil and gas sales $ 281,690 $ 138,698
Other 2,495 683
284,185 139,381
Expenses:
Lease operating 77,174 38,786
Depletion, depreciation
and amortization 113,347 58,464
Impairment 200,000 --
Production taxes 4,791 3,454
General and administrative 15,244 7,971
410,556 108,675
Income from operations (126,371) 30,706
Interest and other income
(loss) 3,354 650
Interest expense, net of
amounts capitalized (32,422) (13,367)
Income (loss) before
income taxes (155,439) 17,989
Income tax (provision)
benefit 20,621 (6,711)
Net income (loss) $(134,818) $ 11,278
Net income (loss) per
share:
Basic $ (5.83) $ .60
Diluted $ (5.51) $ .57
Weighted average shares
outstanding:
Basic 23,142 18,934
Diluted 24,436 19,672
FORCENERGY INC
STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
1997 1996
(in thousands)
Cash flows from operating
activities:
Net income (loss) $(134,818) $ 11,278
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Equity in earnings of affiliate (1,510) --
Depletion, depreciation
and amortization 113,347 58,464
Impairment 200,000 --
Deferred income taxes (20,621) 6,612
Deferred interest -- 2,107
Other 1,287 (210)
(Decrease) increase in accounts
receivable 496 (14,091)
Increase in other current assets (18,597) (3,674)
(Decrease) increase in accounts
payable 18,900 (4,859)
Increase in other accrued
liabilities 6,212 8,547
299,514 53,950
Net cash provided by operating
activities 164,696 65,228
Cash flows from investing
activities:
Acquisitions of oil and
gas properties (119,503) (152,478)
Capital expenditures (274,304) (130,269)
Dividends received from
affiliate 900 --
Sale of surety bonds 4,426 2,151
Proceeds from sale of assets -- 1,072
Increase in other assets 457 (340)
Net cash used in investing
activities (388,024) (279,864)
Cash flows from financing
activities:
Borrowings under senior
credit facility 287,144 5,877
Repayments under senior
credit facility (253,512)
Issuance of long-term
debt, net 193,414 169,114
Issuance of common
stock, net 2,661 46,318
Net cash provided by
financing activities 229,707 221,309
Net increase in cash 6,379 6,673
Cash at beginning of period 9,669 2,996
Cash at end of period $ 16,048 $ 9,669
FORCENERGY INC
BALANCE SHEETS
December 31,
1997 1996
(in thousands)
ASSETS:
Current Assets:
Cash $ 16,048 $ 9,669
Accounts receivable, net 43,502 29,416
Other current assets 30,231 10,673
Total current assets 89,781 49,758
Investment in surety bonds,
at cost -- 3,926
Property, plant and
equipment, at cost, full cost
method, net of accumulated
depletion, depreciation
and amortization 713,983 523,711
Other assets 20,466 8,530
$ 824,230 $ 585,925
LIABILITIES AND STOCKHOLDERS'
EQUITY:
Current Liabilities:
Accounts payable $ 32,666 $ 8,643
Other accrued liabilities 70,009 34,370
Total current liabilities 102,675 43,013
Long-term debt 506,564 272,932
Deferred income taxes -- 21,044
Stockholders' Equity:
Preferred stock, $.01 par
value; 5,000,000 shares
authorized; none issued or
outstanding -- --
Common stock, $.01 par value;
50,000,000 shares authorized;
25,504,617 and 22,578,118
issued and outstanding at
December 31, 1997 and
1996, respectively 256 226
Capital in excess of par
value 346,875 246,032
Retained earnings (deficit) (132,140) 2,678
Total stockholders' equity 214,991 248,936
$ 824,230 $ 585,925
CONTACT: Forcenergy Inc J. Russell Porter E. Joseph Grady 305/856-8500 |
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