-----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, RkgtVTIHkpe/YLqmSc7ZnO/Ey8akZ7ucGOIpV9fiBzTEgb60nKA1xIvJgKFrWPXr 0gAFMF0yNHu9YHk9ybLf+w== 0000950134-03-014362.txt : 20031104 0000950134-03-014362.hdr.sgml : 20031104 20031104100303 ACCESSION NUMBER: 0000950134-03-014362 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20031103 ITEM INFORMATION: ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20031104 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: 03974685 BUSINESS ADDRESS: STREET 1: 777 MAIN STREET, SUITE 1400 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8178779955 8-K 1 d10167e8vk.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): November 3, 2003 ENCORE ACQUISITION COMPANY (Exact name of registrant as specified in its charter) DELAWARE 001-16295 75-2759650 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 777 MAIN STREET, SUITE 1400, FORT 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 November 3, 2003 ITEM 12. DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On November 3, 2003, Encore Acquisition Company, a Delaware corporation, issued a press release announcing third quarter 2003 results and the 2004 capital budget. A copy of the press release is filed as Exhibit 99.1 and is incorporated herein by reference. The information contained 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 SIGNATURE 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 hereunto duly authorized. Date: November 3, 2003 ENCORE ACQUISITION COMPANY By: /s/Robert C. Reeves ----------------------------------------- Robert C. Reeves Vice President, Controller, and Principal Accounting Officer 3 EX-99.1 3 d10167exv99w1.txt PRESS RELEASE EXHIBIT 99.1 ENCORE ACQUISITION COMPANY ANNOUNCES 56 PERCENT INCREASE IN QUARTERLY EARNINGS; APPROVES 2004 CAPITAL BUDGET Fort Worth, Texas- November 3, 2003-Encore Acquisition Company ("Encore") (NYSE: EAC) today reported third quarter results:
THREE MONTHS ENDED SEPTEMBER 30, 2003 2002 INCREASE ------------ ------------ ------------ (unaudited) $ in millions (except per share and production amounts) Net income $ 15.8 $ 10.1 56% Diluted earnings per share $ 0.52 $ 0.33 58% Revenues $ 55.7 $ 43.5 28% Cash flow from operations $ 43.7 $ 19.0 130% Development capital $ 25.5 $ 17.2 48% Acquisition capital $ 52.6 $ 17.4 202% Daily production volumes (boe) 22,663 20,435 11%
Net income totaled $15.8 million or $0.52 per diluted share, a 56% increase over last year's quarter. Oil and natural gas revenues achieved $55.7 million during the quarter and cash flow from operations rose to $43.7 million, increases of 28% and 130%, respectively, from the same period last year. Third quarter results reflected a 16% increase in average realized prices received on a boe basis. During the third quarter of 2003, Encore's average daily production reported increased to 22,663 boe per day, an increase of 11% over the same period in 2002. The company's growth in production, which is currently 81% oil, was achieved with the Company's continued development success at both the Cedar Creek Anticline ("CCA") and the Permian Basin along with successful acquisitions in the Elm Grove Field (August 2003) and the Paradox Basin (September 2002). Also contributing to the increase in production was the decline in the Company's net profits interest payment during the third quarter of 2003 due to the development capital incurred in the CCA's Pennel unit. Realized prices adjusted for hedging, averaged $26.52 per barrel and $4.60 per Mcf during the third quarter 2003, increases of 10% and 46%, respectively, from the prior year third quarter. On a combined basis, prices increased 16% during the third quarter of 2003 to $26.73 per boe from $23.14 per boe for the same period last year. Lease operating expenses ("LOE") were $4.70 per boe for the third quarter of 2003, lower than anticipated due to decreased maintenance costs and higher production. General and administrative ("G&A") expenses during the third quarter of 2003 were $0.96 per boe, an increase of $0.12 from the same period last year primarily due to an increase in staffing requirements and increased outside consulting services used in the evaluation of potential acquisitions. Depreciation, depletion and amortization ("DD&A") was $4.06 per boe during the three months ended September 30, 2003, compared to $4.80 per boe for the same period last year. The decrease is attributable to the Company's adoption of Statement of Financial Accounting Standards No. 143 "Accounting for Asset Retirement Obligations" in the first quarter of 2003 and the increase in the Company's reserves at year-end December 31, 2002. Interest expense during the third quarter of 2003 decreased 3% to $4.0 million from $4.1 million in the same period last year due to average interest rates partially offset by an increase in debt balances. During the third quarter 2003, the Company invested $52.5 million for the Elm Grove acquisition in Northern Louisiana. Currently two non-operated rigs are running in this area and are expected to continue through the end of the year. In addition to the acquisition, the Company invested $25.5 million in its development and exploitation program, which resulted in 18 (11.9 net) vertical wells, six (5.4 net) horizontal wells, ten (9.2 net) re-entry wells and five (5.0 net) service/injection wells. At September 30, 2003, the Company's long-term debt was $181.0 million, of which $31.0 million represents debt under the Company's credit facility. The increase of $31.0 million from June 30, 2003 is attributable to the acquisition of the Elm Grove properties. As previously mentioned the acquisition price of the Elm Grove properties was $52.5 million, resulting in approximately 41% of the purchase price funded by the Company's cash flow from operations. Since quarter end, debt has been reduced further by $3.0 million. In October 2003, the credit facility's borrowing base was increased to $270.0 million from $220.0 million effective December 1, 2003. Jonny Brumley, President, commented "we had an exceptional quarter and are very pleased. We continue to generate high returns through our development program, and we are excited about the high-pressure air injection program that will start up in Little Beaver during the fourth quarter of this year. The Company's stable production and strong balance sheet will enable us to implement our strategy of growing through development drilling, acquisitions, and tertiary projects. The balance sheet continues to be strong as our cash flow has allowed us to reduce our debt position since the Elm Grove acquisition". FOURTH QUARTER AND YEAR-END OUTLOOK The following table represents the Company's estimated fourth quarter 2003 and year-end 2003 results:
FOURTH QUARTER YEAR-END 2003 2003 -------------- -------------- LOE/($/BOE) $ 4.79 $ 4.67 G&A ($/BOE) $ 1.15 $ 1.13 DD&A/($/BOE) $ 4.20 $ 4.04 Development capital (in millions) $ 25.5 $ 97.2 Daily production volumes (boe) 22,651 22,203
Encore continued its commodity hedge program for both oil and natural gas and has included the Company's latest positions in an attached schedule. During the fourth quarter 2003, Encore will initiate Little Beaver phase one, which is the second Encore area to have a high-pressure air injection project ("HPAI") on the CCA. Capital investments for the Little Beaver phase one are expected to be approximately $17.4 million. At December 31, 2003, the Company anticipates borrowings under the credit facility to be approximately $31.0 million and an effective tax rate of 38%, with 93% deferred. The Board of Directors has approved a $140.0 million capital budget for 2004. Included in the 2004 capital budget is $104.8 million for development and leasehold, $34.3 million for HPAI, and $0.9 million for other Property, Plant, and Equipment. CONFERENCE CALL Encore will host a conference call and web cast at 9:00 a.m. CST on November 4, 2003. The conference call can be accessed by dialing 800.289.0468 and supplying the title "Encore Acquisition Company Third 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 687530. The telephone replay will be available through November 12, 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, the Paradox Basin of Utah and the North Louisiana Salt Basin of Louisiana. 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; 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; inaccuracies in our assumptions regarding the expected revenues, lease operating expenses, production taxes and other items of income and expense; 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 NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------------- ------------------------- 2003 2002 2003 2002 ---------- ---------- ---------- ---------- STATEMENT OF OPERATIONS DATA: (UNAUDITED) (UNAUDITED) Revenues Oil $ 44,538 $ 37,127 $ 131,674 $ 95,496 Natural gas 11,186 6,375 31,080 18,110 ---------- ---------- ---------- ---------- Total revenues 55,724 43,502 162,754 113,606 Operating expenses: Lease operations 9,795 8,358 27,888 21,742 Production, ad valorem and severance taxes 5,449 4,521 16,713 11,080 General and administrative (excluding non-cash stock based comp) 2,006 1,585 6,796 4,462 Non-cash stock based compensation 165 -- 460 -- Depletion, depreciation and amortization 8,471 9,033 23,957 26,365 Derivative fair value (gain) loss 18 (232) (1,818) (911) Other operating 1,031 448 1,913 1,198 ---------- ---------- ---------- ---------- Total operating expenses 26,935 23,713 75,909 63,936 ---------- ---------- ---------- ---------- Operating income 28,789 19,789 86,845 49,670 Interest and other (3,934) (4,157) (12,058) (7,851) ---------- ---------- ---------- ---------- Income before income taxes and cumulative effect 24,855 15,632 74,787 41,819 Current income tax benefit (provision) (289) 1,610 (1,647) 1,150 Deferred income tax provision (8,798) (7,129) (26,024) (16,620) ---------- ---------- ---------- ---------- Net income before cumulative effect 15,768 10,113 47,116 26,349 Cumulative effect of accounting change, net of taxes -- -- 863 -- ---------- ---------- ---------- ---------- Net income $ 15,768 $ 10,113 $ 47,979 $ 26,349(a) ========== ========== ========== ========== Net income before cumulative effect of accounting change per common share: Basic $ 0.52 $ 0.34 $ 1.57 $ 0.88 Diluted 0.52 0.33 1.56 0.87 Net income per common share: Basic $ 0.52 $ 0.34 $ 1.60 $ 0.88 Diluted 0.52 0.33 1.58 0.87 Weighted average number of common shares outstanding: Basic 30,103 30,030 30,071 30,030 Diluted 30,332 30,208 30,274 30,148 CONDENSED STATEMENT OF CASH FLOWS: Net income $ 47,979 $ 26,349 Adjustments to reconcile net income to net cash provided by operating activities: Non-cash and other items 54,208 41,679 Changes in operating assets and liabilities (7,381) (11,526) ---------- ---------- Net cash provided by operating activities 94,806 56,502 Net cash used in investing activities (123,862) (135,125) Financing activities Exercise of stock options 1,652 51 Net proceeds from debt 15,000 86,893 Payments for debt issuance costs -- (5,884) ---------- ---------- Net cash provided by financing activities 16,652 81,060 ---------- ---------- Increase (decrease) in cash and cash equivalents (12,404) 2,437 Cash and cash equivalents, beginning of period 13,057 115 ---------- ---------- Cash and cash equivalents, end of period $ 653 $ 2,552 ========== ==========
SEPTEMBER 30, DECEMBER 31, 2003 2002 ------------ ------------ CONDENSED BALANCE SHEET: (UNAUDITED) Total assets $ 644,745 $ 549,896 ============ ============ Liabilities $ 114,395 $ 87,630 Long-term debt 181,000 166,000 Equity 349,350 296,266 ------------ ------------ Total liabilities and equity $ 644,745 $ 549,896 ============ ============ Working capital (b) $ 1,696 $ 12,489
(a) In accordance with the provisions of Statement of Financial Accounting Standards No. 145 the extraordinary loss from early extinguishment of debt of $174,000, net of tax, for the nine months ended September 30, 2002 has been reclassified to operating income. (b) Working capital is defined as current assets minus current liabilities.
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- -------------------------- 2003 2002 2003 2002 ---------- ---------- ---------- ---------- SELECTED FINANCIAL DATA: PRODUCTION: Oil Volumes (MBbls) 1,679 1,544 4,961 4,369 Gas Volumes (MMcf) 2,433 2,016 6,355 6,201 Combined Volumes(MBOE) 2,085 1,880 6,020 5,403 DAILY PRODUCTION: Oil Volumes (Bbls) 18,255 16,783 18,172 16,004 Gas Volumes (Mcf) 26,447 21,913 23,278 22,714 Combined Volumes(BOE) 22,663 20,435 22,052 19,789 AVERAGE PRICES: Oil ($/Bbl) $ 26.52 $ 24.05 $ 26.54 $ 21.86 Gas ($/Mcf) 4.60 3.16 4.89 2.92 Combined Volumes ($/BOE) 26.73 23.14 27.04 21.03 AVERAGE COSTS ($/BOE): Lease operations expense $ 4.70 $ 4.45 $ 4.63 $ 4.02 Production, ad valorem and severance tax 2.61 2.40 2.78 2.05 G&A (excluding non-cash stock based compensation) 0.96 0.84 1.13 0.83 DD&A 4.06 4.80 3.98 4.88
ENCORE ACQUISITION COMPANY DERIVATIVE SUMMARY AS OF SEPTEMBER 30, 2003 OIL HEDGES
AVERAGE AVERAGE AVERAGE 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) - ----------------------- ------------ ------------ ------------ ------------ ------------ ------------ Oct - Dec 2003 (a) 9,500 $ 21.05 7,000 $ 27.14 -- $ -- Jan - June 2004 (b) 11,000 22.16 7,000 29.06 500 26.48 July - Dec 2004 (b) 7,000 22.36 5,000 28.33 500 26.48 Jan - Dec 2005 -- -- -- -- 1,000 25.12 Jan - Dec 2006 -- -- -- -- 2,000 25.03 Jan - Dec 2007 -- -- -- -- 2,000 25.11
(a) For calendar 2003, Encore has a short put outstanding for 500 bpd at $17/bbl, which is not reflected in the above amounts. (b) For calendar 2004, the company has outstanding floating to fixed swaps of certain market indices which are not considered hedges for accounting purposes. Prices in the table above are exclusive of any effect of these instruments. NATURAL GAS HEDGES
AVERAGE AVERAGE AVERAGE 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) - -------------- ------------ ------------ ------------ ------------ ------------ ------------ Oct - Dec 2003 7,500 $ 3.17 2,500 $ 6.83 7,500 $ 4.80 2004 15,000 4.01 7,500 6.02 5,000 5.01 2005 -- -- -- -- 5,000 4.63
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