-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K4RktRXY2dRW3XN6Zhw1D/qfMVy9GKclYITQrFMI1Tkhet5T9dwATc8nAsLxWQ9r 6L+vgcbU0xxqwVi9L8XLaw== 0000950134-03-010693.txt : 20030730 0000950134-03-010693.hdr.sgml : 20030730 20030730092310 ACCESSION NUMBER: 0000950134-03-010693 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030729 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030730 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENCORE ACQUISITION CO CENTRAL INDEX KEY: 0001125057 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 752759650 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-16295 FILM NUMBER: 03810089 BUSINESS ADDRESS: STREET 1: 777 MAIN STREET, SUITE 1400 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8178779955 8-K 1 d07803e8vk.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 29, 2003 ENCORE ACQUISITION COMPANY (Exact name of registrant as specified in its charter) Commission File No. 001-16295 Delaware 75-2759650 - -------------------------------- ----------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 777 Main Street, Suite 1400, Ft. Worth, Texas 76102 ------------------------------------------------------------ -------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (817) 877-9955 Item 7. Financial Statements and Exhibits. (c) Exhibits. 99.1 Press Release dated July 29, 2003. Item 12. Disclosure of Results of Operations and Financial Condition. On July 29, 2003, Encore Acquisition Company, a Delaware corporation, issued a press release announcing second quarter 2003 results. A copy of the press release is filed as Exhibit 99.1 and is incorporated herein by reference. The information hereunder shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be incorporated by reference into a filing under the Securities Act of 1933, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ENCORE ACQUISITION COMPANY Date: July 29, 2003 By: /s/ Morris B. Smith ------------------------------------ Morris B. Smith Chief Financial Officer, Treasurer, Executive Vice President and Principal Financial Officer 3 Index to Exhibits
Exhibit No. Description - ------- ----------- 99.1 Press Release dated July 29, 2003.
EX-99.1 3 d07803exv99w1.txt PRESS RELEASE DATED JULY 29, 2003 . . . EXHIBIT 99.1 ENCORE ACQUISITION COMPANY ANNOUNCES SECOND QUARTER RESULTS Fort Worth, Texas- July 29, 2003-Encore Acquisition Company ("Encore") (NYSE: EAC) today reported
Three Months Ended June 30, ----------------------------- 2003 2002 Increase ------------ ------------ ------------ (unaudited) $ in millions (except per share amounts) Net income $ 14.2 $ 9.1 56% Diluted earnings per share $ 0.47 $ 0.30 57% Revenues $ 51.2 $ 37.8 36% Cash flow from operations $ 25.4 $ 20.3 25% Development Capital $ 22.8 $ 20.5 11% Daily production volumes (boe) 21,398 19,427 10%
Net income for the quarter ended June 30, 2003 increased 56% to $14.2 million, or $0.47 per diluted share, on revenues of $51.2 million compared to net income of $9.1 million, or $0.30 per diluted share, on revenues of $37.8 million for the same quarter in 2002. Encore's reported production volumes in the second quarter of 2003 increased 10% to 21,398 barrels of oil equivalent ("boe") per day compared with 2002 second quarter volumes of 19,427 boe per day. The increase is due to the Company's development programs in the Cedar Creek Anticline ("CCA") and the Permian Basin, and to a lesser extent, the Paradox Basin acquisition which was completed in the third quarter of 2002. As anticipated, reported production compared to first quarter 2003 volumes are lower by 2.7%, primarily because of the increase in the Company's net profits interest payment due to high oil prices and the flush production from a few large wells the Company completed in late 2002 and early 2003. During the second quarter 2003, the Company realized an average oil price of $25.19 per barrel, up 14% or $3.03 per barrel compared to the same quarter last year. Natural gas price realizations for the current quarter were up as well to $5.30 per thousand cubic feet ("mcf") or 75% compared to $3.02 per mcf for the same period in 2002. The Company's price per boe in the second quarter of 2003 was down $1.74 per boe to $26.32 from $28.06 in the first quarter of 2003. Lease operating expenses were lower than expected at $4.69 per boe for the second quarter, reflecting higher than anticipated production and lower than anticipated maintenance costs in the CCA. General and administrative costs for the second quarter increased to $1.20 per boe from $0.78 per boe for the same quarter last year due to an overall increase in staffing levels and higher accounting, legal and professional services related the Company's recent shelf registration and acquisitions. The depletion, depreciation and amortization ("DD&A") rate was $3.96 per boe for the second quarter compared with $4.96 per boe for the same period last year. The decrease is primarily attributable to increased year-end reserves at December 31, 2002, and the adoption of Statement of Financial Accounting Standards No. 143 "Accounting for Asset Retirement Obligations" in the first quarter of 2003. Jon S. Brumley, President, commented "with a strong balance sheet, high margins, an inventory of conventional development opportunities, and the high-pressure air injection project, our future looks bright and we are well positioned to increase shareholder value". Encore invested $22.8 million of capital during the second quarter 2003, resulting in ten (5.6 net) vertical wells, six (5.4 net) horizontal wells, six (4.3 net) re-entry wells and seven (6.3 net) service/injection wells. The Company is currently maintaining a six-rig program, five in CCA and one in the Permian Basin. In addition, there are currently two non-operated rigs running in the North Louisiana properties. The Company's long-term debt at June 30, 2003 was $150.0 million as compared to $158.0 million at the end of March 31, 2003. OUTLOOK FOR THIRD QUARTER As announced previously, the Company agreed in late June to acquire $52.2 million of interests in Northern Louisiana from a group of private sellers. The properties are located in the Elm Grove Field in Bossier Parish, Louisiana. The closing date is expected to be July 31, 2003, effective June 1, 2003, and will be funded with bank financing under the Company's existing credit line and available cash. The non-operated working interests range from 2% to 38% across 1,800 net acres in 15 sections. Current net production from the interests average 7,200 mcf per day, and as previously noted, there is a two-rig drilling program underway. Production in the third quarter, which assumes two months of production volume from the North Louisiana acquisition, is expected to increase to approximately 21,900 boe per day. Encore continued to increase its commodity hedge position for both oil and natural gas and has included the Company's latest positions in an attached schedule. Lease operating expenses are expected to be $4.77 per boe. General and administrative costs are anticipated to be approximately $1.20 per boe and DD&A should be approximately $4.05 per boe. Capital expenditures for the third quarter are expected to be approximately $78.2 million, which includes $52.2 million for the North Louisiana acquisition and $26.0 million for ongoing development programs, including $2.0 million for North Louisiana. Encore expects to have borrowings under its credit facility of approximately $45.0 million at the end of the third quarter due to closing the North Louisiana acquisition. The Company anticipates an effective tax rate of approximately 37%, with 93% deferred. CONFERENCE CALL Encore will host a conference call and web cast at 9:00 a.m. CDT on July 30, 2003. The conference call can be accessed by dialing 800.289.0572 and supplying the title "Encore Acquisition Company Second Quarter Conference Call" and the web cast can be accessed via http://www.encoreacq.com. The replay by telephone will be available on the Web site or by dialing 719.457.0820 and using pass code 437452. The telephone replay will be available through August 7, 2003. Organized in 1998, Encore is a growing independent energy company engaged in the acquisition, development and exploitation of North American oil and natural gas reserves. Encore's oil and natural gas reserves are located in the Williston Basin of Montana and North Dakota, the Permian Basin of Texas and New Mexico, the Anadarko Basin of Oklahoma, the Powder River Basin of Montana and the Paradox Basin of Utah. This press release includes forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events based on assumptions and estimations that management believes are reasonable given currently available information. Forward-looking statements in this press release relate to, among other things, the following: expected capital expenditures and the focus of the Company's capital program; anticipated prices for oil and natural gas; projected revenues, lease operating expenses, general and administrative expenses and DD&A ; the closing of the North Louisiana transaction; the source of funds for the transaction; anticipated production; expected hedging positions; projected borrowings under the Company's credit facility; and our effective tax rate. However, the assumptions of management and the future performance of Encore are both subject to a wide range of business risks and uncertainties and there is no assurance that these statements and projections will be met. Factors that could affect Encore's business include, but are not limited to: diversion of management's attention from existing operations while pursuing acquisitions; difficulties integrating acquisitions; complications resulting from increasing the scope and geographic diversity of our operations ;inaccuracies in the assessment of reserves and daily and annual production with respect to acquisitions; inaccuracies in our assumptions regarding the expected revenues, lease operating expenses, production taxes and other items of income and expense related to acquisitions; the amount, nature and timing of capital expenditures; drilling of wells; timing and amount of future production of oil and natural gas; operating hazards; operating costs and other expenses and marketing of oil and natural gas. Actual results could differ materially from those presented in the forward-looking statements. Encore undertakes no obligation to publicly update or revise any forward-looking statements. Further information on risks and uncertainties is available in Encore's filings with the Securities and Exchange Commission, which are incorporated by this reference as though fully set forth herein. Contacts: Morris B. Smith Executive Vice President and CFO 817-339-0908 Rani M. Wainwright Assistant Treasurer 817-339-0919 (ALL DATA IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- -------------------------- 2003 2002 2003 2002 ---------- ---------- ---------- ---------- STATEMENT OF OPERATIONS DATA: (UNAUDITED) (UNAUDITED) Revenues $ 51,243 $ 37,807 $ 107,030 $ 70,104 Operating expenses: Lease operations 9,140 6,567 18,093 13,384 Production, ad valorem and severance taxes 5,095 3,546 11,264 6,559 General and administrative 2,340 1,384 4,790 2,877 Non-cash stock based compensation 150 -- 295 -- Depletion, depreciation and amortization 7,703 8,773 15,486 17,332 Derivative fair value gain (576) (26) (1,836) (679) Other operating expense 712 612(1) 882 751(1) ---------- ---------- ---------- ---------- Total operating expenses 24,564 20,856 48,974 40,224 ---------- ---------- ---------- ---------- Operating income 26,679 16,951 58,056 29,880 Interest and other (4,000) (2,232) (8,124) (3,694) ---------- ---------- ---------- ---------- Income before income taxes 22,679 14,719 49,932 26,186 Provision for income taxes - current (591) (30) (1,358) (460) Provision for income taxes - deferred (7,855) (5,563) (17,226) (9,490) ---------- ---------- ---------- ---------- Net income before cumulative effect of accounting change 14,233 9,126 31,348 16,236 Cumulative effect of accounting change, net of taxes -- -- 863 -- ---------- ---------- ---------- ---------- Net income $ 14,233 $ 9,126 $ 32,211 $ 16,236 ========== ========== ========== ========== Net income before cumulative effect of accounting change per common share: Basic $ 0.47 $ 0.30 $ 1.04 $ 0.54 Diluted 0.47 0.30 1.04 0.54 Net income per common share: Basic $ 0.47 $ 0.30 $ 1.07 $ 0.54 Diluted 0.47 0.30 1.06 0.54 Weighted average number of common shares outstanding: Basic 30,089 30,030 30,063 30,030 Diluted 30,284 30,184 30,253 30,118 CONDENSED STATEMENT OF CASH FLOWS: Operating activities Net income $ 32,211 $ 16,236 Non-cash and other items 34,853 25,838 Changes in operating assets and liabilities (15,914) (4,558) ---------- ---------- Net cash provided by operating activities 51,150 37,516 Net cash used in investing activities (46,159) (100,421) Financing activities Exercise of stock options 777 -- Net proceeds (payments) on debt (16,000) 70,893 Debt issuance costs -- (5,686) ---------- ---------- Net cash provided by (used in) financing activities (15,223) 65,207 Increase (decrease) in cash and cash equivalents (10,232) 2,302 Cash and cash equivalents, beginning of period 13,057 115 ---------- ---------- Cash and cash equivalents, end of period $ 2,825 $ 2,417 ========== ==========
JUNE 30, DECEMBER 31, 2003 2002 ------------ ------------ CONDENSED BALANCE SHEET: (UNAUDITED) Total assets $ 581,921 $ 549,896 ------------ ------------ Liabilities $ 102,678 $ 87,630 Long-term debt 150,000 166,000 Equity 329,243 296,266 ------------ ------------ Total liabilities and equity $ 581,921 $ 549,896 ============ ============ Working capital (2) $ 5,459 $ 12,489
(1) In accordance with the provisions of Statement of Financial Accounting Standards No. 145 the extraordinary loss from early extinguishment of debt of $174,000, net of tax, for the three and six months ended June 30, 2002 has been reclassified to operating income. (2) Working capital is defined as current assets minus current liabilities.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ----------------------------- ----------------------------- 2003 2002 2003 2002 ------------- ------------- ------------- ------------- SELECTED FINANCIAL DATA: PRODUCTION: Oil Volumes (MBbls) 1,616 1,430 3,281 2,824 Gas Volumes (MMcf) 1,989 2,027 3,922 4,185 Combined Volumes(MBOE) 1,947 1,768 3,935 3,522 DAILY PRODUCTION: Oil Volumes (Bbls) 17,755 15,714 18,130 15,602 Gas Volumes (Mcf) 21,858 22,275 21,667 23,128 Combined Volumes(BOE) 21,398 19,427 21,741 19,456 AVERAGE PRICES: Oil ($/Bbl) $ 25.19 $ 22.16 $ 26.55 $ 20.67 Gas ($/Mcf) 5.30 3.02 5.07 2.80 Combined Volumes ($/BOE) 26.32 21.39 27.20 19.91 AVERAGE COSTS ($/BOE): Lease operations expense $ 4.69 $ 3.71 $ 4.60 $ 3.80 Production, ad valorem and severance tax 2.62 2.01 2.86 1.86 G&A (excluding non-cash stock based compensation) 1.20 0.78 1.22 0.82 DD&A 3.96 4.96 3.94 4.92
COMMODITY DERIVATIVE SUMMARY AS OF JULY 15, 2003 OIL HEDGES
DAILY FLOOR DAILY CAP DAILY SWAP FLOOR VOLUME PRICE CAP VOLUME PRICE SWAP VOLUME PRICE PERIOD (Bbls) (per Bbl) (Bbls) (per Bbl) (Bbls) (per Bbl) -------------- ------------------- ------------- ------------- ------------- ------------- ---------- July - Dec 2003 9,500 $ 21.05 7,000 $ 27.14 -- $ -- Jan - June 2004 8,500 21.41 5,500 28.39 -- -- July - Dec 2004 4,500 21.44 3,000 28.52 -- --
NATURAL GAS HEDGES
DAILY FLOOR DAILY CAP DAILY SWAP FLOOR VOLUME PRICE CAP VOLUME PRICE SWAP VOLUME PRICE PERIOD (Mcf) (per Mcf) (Mcf) (per Mcf) (Mcf) (per Mcf) -------------- ------------------- ------------- ------------- ------------- ------------- --------- July - Dec 2003 7,500 $ 3.17 2,500 $ 6.83 2,500 $ 3.69 Aug - Dec 2003 -- -- -- -- 5,000 5.51 2004 15,000 4.02 7,500 6.03 5,000 5.16 2005 -- -- -- -- 5,000 4.78
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