EX-99 2 exh991.htm TXCO NOV 8 EARNINGS PRESS RELEASES TXCO Press Release
   

Exhibit 99.1
 

 
     

For Immediate Release

 

Contact Information

Monday, November 8, 2004

 

Investors: Roberto R. Thomae
   

  (210) 496-5300 ext. 214, bthomae@txco.com
   

Media: Paul Hart
   

  (210) 496-5300 ext. 264, pdhart@txco.com
     

NEWS RELEASE
 

The Exploration Company Reports Earnings;
Cash Flows, Revenues, Assets Set Records
 

          SAN ANTONIO -- Nov. 8, 2004 - The Exploration Company (Nasdaq:TXCO) today reported improved financial results for the third quarter and first nine months of 2004.

 

          TXCO's net income in the third quarter was $599,820, substantially above the $58,466 reported by the Company for the third quarter of 2003. On a per-share basis, earnings rose to $0.021 from a fractional $0.003 in the prior-year period. Adjusted for a one-time, non-cash compensation charge of $237,333 for changes on a stock option and warrant, earnings per share on a pro forma basis would have been $0.029 per share for the quarter. All per-share amounts are on a fully diluted basis. Income from operations was $1.3 million, more than triple the $437,465 reported in the third quarter of 2003. Total quarterly revenues rose to a record $15.3 million, 63 percent higher than the $9.4 million reported for the year-earlier quarter. At Sept. 30, the Company's assets were a record $106 million, up 26 percent from $84.2 million at Sept. 30, 2003.
 

          For the first nine months of 2004, TXCO's net income was $1.0 million, a 31 percent increase from $792,589 recorded in the same period of 2003. On a per-share basis year to date, earnings rose to $0.040 from $0.038 a year earlier. Adjusted for the same, one-time charge that impacted the quarter, earnings per share on a pro forma basis would have been $0.049 per share. The Company's revenues were a record $41.3 million, a 46 percent increase from $28.4 million for January-September 2003. Income from operations for this year's first nine months was approximately $3.3 million, more than double the $1.5 million of the 2003 period.
 

          Gas production, commodity prices and gas gathering revenues were higher than in the year-earlier periods, offset partially by lower oil production. Exploration, lease operating and gas gathering expenses were higher while impairment and abandonment expenses declined. The Company exited the third quarter of 2004 producing 17.4 million cubic feet of gas equivalent per day (MMcfed), which further increased 14.4 percent to 19.9 MMcfed at Oct. 31.
 
 
 
 
 
 

- More -
 

 

          For the first nine months of this year, net cash provided by operating activities was a record $15.4 million, compared with $11.3 million for the comparable 2003 period. Ebitdax -- earnings before income taxes, interest, depreciation, depletion, amortization, impairment, abandonment and exploration expense
-- was $13.7 million in the nine-month period this year, a 24 percent increase from $11.1 million a year earlier. Ebitda -- Ebitdax less exploration expense -- rose 25 percent to $12.3 million from $9.8 million in January-September 2003. See the Company's Web site at www.txco.com for a reconciliation of non-GAAP financial measures.
 

Management's Perspective

          "We had an excellent third quarter," said P. Mark Stark, vice president, treasurer and CFO. "We are particularly encouraged by these strong financial results in light of the new capital structure put in place just over a year ago during the third quarter of 2003.
 

          "With our comparatively low debt, efficient cost structure and the upside potential in the ratio swap hedging agreement we recently put in place, TXCO should be able to take full financial advantage of our growing production and reserves," Stark added. "Further affirming our production and reserve growth was the significant increase in the borrowing base of the Company's senior credit facility. Coupled with the hedges put in place in early October, our borrowing base has now risen to $20.75 million from $12.3 million. We were hopeful to get this increase finalized prior to the end of the third quarter but it took longer than we anticipated. This will certainly make our balance sheet look better going forward."
 

About The Exploration Company

          The Exploration Company is an independent oil and gas enterprise with interests primarily in the Maverick Basin of Southwest Texas. Headquartered in San Antonio, TXCO is celebrating its 25th anniversary. The Company has a consistent record of long-term growth in its proved oil and gas reserves, leasehold acreage position, production and cash flow through its established exploration and development programs. Its business strategy is to build shareholder value by acquiring undeveloped mineral interests and internally develop a multi-year drilling inventory through the use of advanced technologies, such as 3-D seismic and horizontal drilling. The Company accounts for its oil and gas operations under the successful efforts method of accounting and trades its common stock on the Nasdaq Stock Market under the symbol "TXCO."
 

Forward-Looking Statements

          Statements in this press release which are not historical, including statements regarding TXCO's or management's intentions, hopes, beliefs, expectations, representations, projections, estimations, plans or predictions of the future, are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements include those relating to budget plans, interest rates, capital expenditures, ongoing access to additional capital, production levels, drilling plans, equipment availability, including the timing, number, type of and cost of wells to be drilled, completed, re-entered, placed on production, planned projects and expected responses, establishment and evaluation of reserves, continuing overall success and the future exercise of seismic or lease options. It is important to note that actual results may differ materially from the results predicted in any such forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the costs of exploring and developing new oil and natural gas reserves, the price for which such reserves can be sold, environmental concerns affecting the drilling of oil and natural gas wells, as well as general market conditions, competition and pricing. More information about potential factors that could affect the Company's operating and financial results is included in TXCO's annual report on Form 10-K for the year ended Dec. 31, 2003, and its Form 10-Q for the quarter and year-to-date period ended June 30, 2004. These and all previously filed documents are on file at the Securities and Exchange Commission and can be viewed on TXCO's website at www.txco.com. Copies are available without charge upon request from the Company.
 

    

(Financial Information and Selected Operational Tables Follow)
 

 

The following tables should be read in conjunction with the Company's latest audited consolidated financial statements and notes thereto, as reported in its Form 10-K for the year ended Dec. 31, 2003.

     
 

THE EXPLORATION COMPANY

CONDENSEDCONSOLIDATED BALANCE SHEETS

(UNAUDITED)
         
   

September 30,
2004

  

December 31,
2003

           

Assets

          
           

Current Assets

          

   Cash and equivalents

  

$    4,841,420

  

$  6,180,560

  

   Accounts receivable, net

  

6,733,357

  

4,837,965

  

   Prepaid expenses

  

1,518,055

  

718,853

  

      Total Current Assets

  

13,092,832

  

11,737,378

  
           

Property and Equipment, net - successful efforts
   method of accounting for oil and gas properties

  


86,559,878

  

66,155,827

  
           

Other Assets

          

   Deferred tax asset

  

5,232,718

  

5,232,718

  

   Other assets

  

1,102,242

  

1,080,290

  

      Total Other Assets

  

6,334,960

  

6,313,008

  

           

   

  

$105,987,670

  

$84,206,213

  

           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           

 

 
 
 

THE EXPLORATION COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)
           
   

September 30,
2004

  

December 31,
2003

  

           

Liabilities and Stockholders' Equity

          
           

Current Liabilities

          

   Accounts payable, trade

 

$  13,237,844

  

$  8,186,705

  

   Other payables and accrued liabilities

  

4,903,512

  

3,709,016

  

   Undistributed revenue

 

1,298,208

  

416,399

  

   Current portion of long-term debt

  

1,604,340

  

1,752,286

  

      Total Current Liabilities

  

21,043,904

  

14,064,406

  
           

Long-term Liabilities

          

   Long-term debt, net of current portion

  

8,561,276

  

15,425,598

  

   Redeemable preferred stock, Series B
      (redemption value - $16 million)

  


10,766,056

  


10,135,335

  

   Accrued dividends - preferred stock

  

177,729

  

57,732

  

   Asset retirement obligation

  

1,648,600

  

1,537,600

  

      Total Long-Term Liabilities

  

21,153,661

  

27,156,265

  
           

Minority Interest in Consolidated Subsidiaries

  

-     

  

193,441

  
           

Stockholders' Equity

          

   Preferred stock, Series A; authorized 10,000,000 shares
      issued and outstanding -0- shares

  


-     

  


-     

  

   Common stock, par value $.01 per share; authorized
      50,000,000 shares; issued 28,073,863 and 22,242,849 shares,
      outstanding 27,974,063 and 22,143,049 shares

 



280,738

  



222,428

  

   Additional paid-in capital

  

83,874,670

  

63,976,021

  

   Accumulated deficit

  

(20,119,296

)

(21,160,341

)

   Less treasury stock, at cost, 99,800 shares

  

(246,007

)

(246,007

)

         Total Stockholders' Equity

  

63,790,105

  

42,792,101

  

           

      Total Liabilities and Stockholders' Equity

  

$105,987,670

  

$84,206,213

  

           
           
           
           
           
           
           

 

 

 
 
 

THE EXPLORATION COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)
 

Three Months
Ended

Three Months  
Ended        

  
   

September 30, 2004

September 30, 2003

  

           

Revenues

          

   Oil and gas sales

  

$  7,846,365

  

$6,027,088

  

   Gas gathering operations

  

7,464,545

  

3,364,162

  

   Other operating income

  

6,120

  

2,631

  

      Total Revenues

  

15,317,030

  

9,393,881

  
           

Costs and Expenses

          

   Lease operations

  

1,242,615

  

1,158,760

  

   Production taxes

  

446,183

  

348,225

  

   Exploration expenses

  

696,430

  

292,928

  

   Impairment and abandonments

  

579,968

  

641,725

  

   Gas gathering operations

  

7,030,025

  

3,309,515

  

   Depreciation, depletion and amortization

  

2,562,483

  

2,214,530

  

   General and administrative

  

1,429,527

  

990,733

  

      Total Costs and Expenses

  

13,987,231

  

8,956,416

  

           

Income from Operations

  

1,329,799

  

437,465

  
           

Other Income (Expense)

          

   Interest income

  

8,313

  

10,754

  

   Interest expense

  

(679,010

)

(403,296

)

   Loan fee amortization

  

(9,486

)

(4,401

)

      Total Other Income (Expense)

  

(680,183

)

(396,943

)

           

Income before income taxes and minority interest

  

649,616

  

40,522

  
           

Minority interest in income of subsidiaries

  

(3,094

)

17,944

  

           

Income before income taxes

 

646,522

  

58,466

  
           

Income tax expense

  

(46,702

)

-     

  

           

Net Income

 

$     599,820

  

$     58,466

  

           

Earnings Per Share

          
           

        Basic earnings per share

  

$0.022

  

$0.003

  

           

        Diluted earnings per share

  

$0.021

  

$0.003

  

           
           
 
 
 

 
 
 

THE EXPLORATION COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)
 

Nine Months
Ended

  

Nine Months   
Ended       

  
   

September 30, 2004

  

September 30, 2003

  

           

Revenues

          

   Oil and gas sales

  

$20,957,990

  

$18,484,022

  

   Gas gathering operations

  

20,340,020

  

9,863,948

  

   Other operating income

  

10,926

  

2,553

  

      Total Revenues

  

41,308,936

  

28,350,523

  
           

Costs and Expenses

          

   Lease operations

  

3,918,242

  

3,211,075

  

   Production taxes

  

1,288,423

  

1,151,498

  

   Exploration expenses

  

1,446,212

  

1,294,529

  

   Impairment and abandonments

  

1,613,768

  

1,517,875

  

   Gas gathering operations

  

18,964,695

  

10,324,076

  

   Depreciation, depletion and amortization

  

7,334,923

  

6,708,998

  

   General and administrative

  

3,462,188

  

2,621,636

  

      Total Costs and Expenses

  

38,028,451

  

26,829,687

  

           

Income from Operations

  

3,280,485

  

1,520,836

  
           

Other Income (Expense)

          

   Interest income

  

27,724

  

21,314

  

   Interest expense

  

(2,136,913

)

(666,576

)

   Loan fee amortization

  

(68,437

)

(13,203

)

      Total Other Income (Expense)

  

(2,177,626

)

(658,465

)

           

Income before income taxes, minority interest and
   cumulative effect of change in accounting principle

  


1,102,859

  


862,371

  
           

Minority interest in income of subsidiaries

  

34,889

  

54,218

  

           

Income before income taxes and cumulative effect of change
   in accounting principle

  


1,137,748

  


916,589

  

Income tax expense

 

(96,702

)

(50,000

)

Cumulative effect of change in accounting principle, net of tax

  

-     

  

(74,000

)

           

Net Income

 

$  1,041,046

  

$    792,589

  

           

Earnings Per Share

          
           

     Basic earnings before cumulative effect of change
         in accounting principle

  


$0.041

  


$0.043

  

     Cumulative effect of change in accounting principle

  

-     

  

(0.004

)

        Basic earnings per share

  

$0.041

  

$0.039

  

           

     Diluted earnings before cumulative effect of change
         in accounting principle

  


$0.040

  


$0.041

  

     Cumulative effect of change in accounting principle

  

-     

  

(0.003

)

        Diluted earnings per share

  

$0.040

  

$0.038

  

 

 

 
 
 

THE EXPLORATION COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)
   

Nine Months
Ended

  

Nine Months
Ended
   

September 30, 2004

  

September 30, 2003

           

Operating Activities

          

Net income

 

$1,041,046

  

$    792,589

  

Adjustments to reconcile net income to
   net cash provided by operating activities:

          

   Depreciation, depletion and amortization

  

7,334,923

  

6,708,998

  

   Impairment and abandonments

  

1,613,768

  

1,517,875

  

   Minority interest in income of subsidiaries

  

(34,889

)

(54,218

)

   Cumulative effect of change in accounting principle

  

-     

  

74,000

  

   Non-cash compensation expense on stock options and warrants

  

237,333

  

-     

  

   Non-cash interest expense and accretion of liability
       - redeemable preferred stock

  


750,722

  


255,594

  

           Net cash provided by operating activities,
               before changes in operating assets and liabilities

  


10,942,903

  


9,294,838

  
           

Changes in operating assets and liabilities:

          

   Receivables

  

(1,895,392

)

(1,498,444

)

   Prepaid expenses and other

  

(799,202

)

(507,187

)

   Accounts payable and accrued expenses

  

7,127,440

  

3,966,382

  

Net cash provided by operating activities

  

15,375,749

  

11,255,589

  
           

Investing Activities

          

   Development and purchases of oil and gas properties

  

(27,807,179

)

(27,781,230

)

   Purchase of other equipment

  

(220,890

)

(354,122

)

   Net changes in minority interests

  

(158,552

)

77,865

  

Net cash used by investing activities

  

(28,186,621

)

(28,057,487

)
           

Financing Activities

          

   Issuance of redeemable preferred stock, net of offering costs

  

-     

  

9,170,632

  

   Proceeds from issuance of common stock, net of expenses

  

18,484,000

  

5,819,679

  

   Proceeds from long-term debt obligations

  

116,739

  

5,997,078

  

   Payments on long-term debt obligations

  

(7,129,007

)

(1,063,280

)

Net cash provided by financing activities

  

11,471,732

  

19,924,109

  

           

Change in Cash and Equivalents

  

(1,339,140

)

3,122,211

  
           

Cash and equivalents at beginning of period

  

6,180,560

  

2,333,688

  

           

Cash and Equivalents at End of Period

  

$4,841,420

  

$ 5,455,899

  

           
 

 

 
 
 

THE EXPLORATION COMPANY
SELECTED OPERATING DATA
 

Three Months Ended

Nine Months Ended

Sept. 30, 2004

Sept. 30, 2003

Sept. 30, 2004

Sept. 30, 2003

Net cash provided in operating activities

$

10,148,094

$

(50,574

)

$

15,375,749

$

11,255,589

Ebitdax *

5,165,586

3,604,592

13,710,277

11,096,456

Ebitda *

4,469,156

3,311,664

12,264,065

9,801,927

Debt to asset ratio

24.7%

35.2%

24.7%

35.2%

Production

Oil:

   Production, in barrels

81,602

125,778

228,751

347,951

   Average sales price per barrel

$

40.61

$

27.83

$

35.84

$

28.18

Natural Gas:

   Production, in Mcf

806,895

475,331

2,228,471

1,522,452

   Average sales price per Mcf

$

5.62

$

5.32

$

5.73

$

5.70

Equivalent Basis:

   Production in Boe

216,085

205,000

600,163

601,693

   Average sales price per Boe

$

36.31

$

29.40

$

34.92

$

30.72

   Production in Mcfe

1,296,507

1,229,999

3,600,977

3,610,158

   Average sales price per Mcfe

$

6.05

$

4.90

$

5.82

$

5.12

Other Operating Data

   Total lifting costs

$

1,688,798

$

1,506,985

$

5,206,665

$

4,362,573

   Lifting costs per Mcfe

$

1.30

$

1.23

$

1.45

$

1.21

   Production volume - oil properties - barrels

74,829

124,969

211,289

340,138

   Lifting costs-oil (Incl Prod & Sev Tax)

$

798,847

$

892,006

$

2,615,178

$

2,544,460

   Lifting costs per Barrel

$

10.68

$

7.14

$

12.38

$

7.48

   Production volume - gas properties - Mcf

793,433

473,287

2,201,677

1,515,055

   Lifting costs-gas (Incl Prod & Sev Tax)

$

889,951

$

582,115

$

2,591,487

$

1,818,114

   Lifting costs per Mcf

$

1.12

$

1.23

$

1.18

$

1.20

   Production volume excluding CBM properties - Mcf

788,093

464,948

2,183,225

1,490,922

   Lifting costs excluding CBM activities

$

742,427

$

430,412

$

2,232,511

$

1,455,297

   Lifting costs per Mcf excluding CBM activities

$

0.94

$

0.93

$

1.02

$

0.98

   Depletion cost per Boe

$

11.58

$

10.54

$

11.94

$

10.90

   Depletion cost per Mcfe

$

1.93

$

1.76

$

1.99

$

1.82

* Please see TXCO's Web site at www.txco.com for a reconciliation of these non-GAAP financial measures.