EX-99.1 2 ex991.htm TXCO'S SECOND-QUARTER 2008 EARNINGS RELEASE ex991.htm

Exhibit 99.1
TXCO's logo

For Immediate Release
Contact Information
Wednesday, August 6, 2008
Investors: Roberto R. Thomae
 
(210) 496-5300 ext. 214, bthomae@txco.com
 
Media: Paul Hart
 
(210) 496-5300 ext. 264, pdhart@txco.com

TXCO Resources Reports Record Results and Earnings
SAN ANTONIO -- August 6, 2008 -- TXCO Resources Inc. (Nasdaq:TXCO) today reported financial results for the quarter and half ended June 30, 2008. Highlights include record:
·  
Cash flow metrics;
·  
Net and operating income;
·  
Oil and gas sales;
·  
Total assets.

Second Quarter
TXCO's net income attributable to common stock for the second quarter was $8.7 million, equal to $0.24 per share, in contrast to a $1.3 million loss, or $0.04 per share, for second-quarter 2007, and 166 percent above first-quarter 2008 net income of $3.3 million, or $0.09 per share. All per-share amounts are on a diluted basis. Quarterly operating income rose to a record $17.3 million from the $914,000 reported for the year-earlier period and, sequentially, a 163 percent increase from $6.6 million in the first quarter.

Net cash provided by operating activities for the quarter was a record $33.8 million, sharply above the $6.5 million in the year-earlier quarter and net cash used of $9.9 million in first-quarter 2008. Ebitdax -- earnings before income taxes, interest, depreciation, depletion, amortization, impairment, abandonment and exploration expense -- rose to a record $34.2 million, triple the $11.3 million in the prior-year quarter and 73 percent above the first quarter's $19.8 million. Ebitda -- Ebitdax less exploration expense -- was $33.6 million, compared to $11.0 million in the 2007 period and a 75 percent increase over the first quarter.

The Company's total revenues rose to a record $48.7 million, more than double the $22.3 million reported for second-quarter 2007 and 51 percent higher than the $32.3 million in revenues for first-quarter 2008.  Oil and gas sales revenues increased sharply due to higher volumes and higher realized prices. Gas gathering revenues also increased.

First Half
For the January-June 2008 period, net income available to common stockholders was a record $12.0 million, equal to $0.34 per share. In the year-earlier period, the Company reported a $3.2 million loss, or $0.10 per share. Operating income for the half rose to a record $23.9 million from a $1.7 million operating loss for the 2007 first half. Revenues were a record $81.0 million, up 141 percent from $33.6 million for the earlier period as oil and gas sales rose sharply. Gas gathering revenues rose by 34 percent. Assets at June 30 stood at a record $424.9 million, 20 percent above the $354.6 million reported at year-end 2007.

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Operating cash flow for the six months was $23.9 million, more than triple the $7.5 million reported in the year-earlier period. Ebitdax rose to $54.0 million from $16.0 million for the 2007 first half, while Ebitda also increased sharply to $52.8 million from $15.4 million.

Midyear Reserves
At June 30, TXCO's net proved reserves were estimated at 90.9 Bcfe before the third-quarter sale of approximately 3.7 Bcfe of proved reserves on 15 non-core properties located in South Texas and the Gulf of Mexico. First half oil and gas sales were 4.8 Bcfe. The Company's proved reserves were 54 percent crude oil and 46 percent natural gas, while approximately 59 percent of TXCO's oil and gas reserves were classified as proved developed. The Company's proved reserves at year-end 2007 were estimated at 91.8 Bcfe.

Midyear proved reserve numbers are based on internal estimates prepared in accordance with Securities and Exchange Commission and Financial Accounting Standards Board requirements.

Management Perspective
"TXCO's growth continued during the first half of 2008 as our higher oil and gas sales were accompanied by record commodity prices," said CEO James E. Sigmon. "Moreover our lifting costs declined further, enhancing cash margins. In fact, our cash margins in the second quarter reached 57 percent, compared to 42 percent in the first quarter. With our improved margins and a growing inventory of drill-ready projects, we foresee an excellent second half in 2008," he added. "Although worldwide oil and gas prices have declined in recent weeks, they remain at historic highs."

Conference Call
TXCO has scheduled a conference call for 10 a.m. CDT (11 a.m. EDT) Thursday, August 7, to discuss financial results and current operations. The call will be broadcast live via the Company Web site at http://www.txco.com/concall.html or by telephone at (877) 387-9209 in the U.S. and Canada and (706) 643-3820 for international callers. Passcode is 56389675. A replay will be available through Saturday, August 9, at (800) 642-1687 (U.S./Canada) and (706) 645-9291 (international), same passcode, and for 30 days at http://www.txco.com/concall.html.

Also, the Company will present at EnerCom's 13th Oil & Gas Conference, set for August 10-14 in Denver. TXCO is scheduled to present at 1:55 p.m. MDT (2:55 p.m. CDT) Monday, August 11. A webcast will be available via the Internet on TXCO's web site, http://www.txco.com/presentation.html, and the conference web site, www.theoilandgasconference.com.

About TXCO Resources
TXCO Resources is an independent oil and gas enterprise with interests in the Maverick Basin, the Gulf Coast region and the Marfa Basin of Texas, and the Midcontinent region of western Oklahoma. It 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. TXCO's business strategy is to build shareholder value by acquiring undeveloped mineral interests and internally developing a multi-year drilling inventory through the use of advanced technologies, such as 3-D seismic and horizontal drilling. It accounts for its oil and gas operations under the successful efforts method of accounting and trades its common stock on Nasdaq's Global Select Market under the symbol "TXCO."


-- More --

 
2
 


Forward-Looking Statements
Statements in this press release that 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 and drilling plans, capital expenditures, production levels, the timing, number and cost of wells to be drilled, new projects and expected results, and establishment of reserves. 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. TXCO undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. 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 December 31, 2007, and Form 10-Q for the quarter ended March 31, 2008. This and all previously filed documents are on file at the Securities and Exchange Commission and can be viewed on TXCO's Web site at www.txco.com. Copies are available without charge, upon request from the Company.


(Financial Information and Selected Operational Tables Follow)


 
3
 


TXCO RESOURCES INC.
Condensed Consolidated Balance Sheets
(Unaudited)
 
($ in thousands)
June 30,
2008  
  
December 31,
2007      
  
Assets
            
             
Current Assets
            
Cash and equivalents
  
$4,569
    
$9,831
  
Accounts receivable, net
  
37,829
    
17,952
  
Federal income tax receivable
  
4,974
    
4,974
  
Prepaid expenses and other
  
2,085
    
2,989
  
Accrued derivative asset - current
  
163
    
-
  
Total Current Assets
  
49,620
    
35,746
  
             
Property and Equipment, net - successful efforts
       method of accounting for oil and gas properties
  
370,245
    
314,941
  
             
Other Assets
            
Deferred financing fees
  
3,449
    
2,613
  
Other assets
  
1,469
    
1,307
  
Accrued derivative asset - non-current
  
163
    
-
  
Total Other Assets
  
5,081
    
3,920
  
             
Total Assets
  
$424,946
    
$354,607
  

 
4
 

TXCO RESOURCES INC.
Condensed Consolidated Balance Sheets
(Unaudited)
 
($ in thousands)
June 30,
2008  
  
December 31,
2007      
  
Liabilities and Stockholders' Equity
            
             
Current Liabilities
            
Accounts payable and accrued liabilities
  
$45,257
    
$51,261
  
Undistributed revenue
  
4,691
    
2,401
  
Notes payable
  
322
    
399
  
Derivative settlements payable
  
1,500
    
475
  
Preferred dividends payable
  
1,420
    
397
  
Accrued derivative obligation - short-term
  
18,407
    
4,725
  
Total Current Liabilities
  
71,597
    
59,658
  
             
Long-Term Liabilities
            
Long-term debt
  
117,000
    
100,000
  
Deferred income taxes
  
6,586
    
12,007
  
Accrued derivative obligation - long-term
  
20,708
    
3,993
  
Asset retirement obligation
  
8,336
    
4,233
  
Total Long-Term Liabilities
  
152,630
    
120,233
  
             
Stockholders' Equity
            
     Preferred stock, authorized 10,000,000 shares;
          Series A & B, -0- shares issued and outstanding
          Series C, -0- and 55,000 shares issued and outstanding
          Series D, 55,000 and -0- shares issued and outstanding
          Series E, 20,000 and -0- shares issued and outstanding
  
1
    
1
  
     Common stock, par value $.01 per share; authorized
          100,000,000 shares; issued 35,590,580 and 34,269,038 shares,
          outstanding 35,423,727 and 34,150,619 shares
  
356
    
343
  
Additional paid-in capital
  
211,415
    
177,030
  
Retained earnings
  
15,539
    
3,561
  
Accumulated other comprehensive loss, net of tax
  
(25,601
)
  
(5,754
)
Less treasury stock, at cost, 166,853 and 118,419 shares
  
(991
)
  
(465
)
Total Stockholders' Equity
  
200,719
    
174,716
  
             
Total Liabilities and Stockholders' Equity
  
$424,946
    
$354,607
  

 
5
 

TXCO RESOURCES INC.
Condensed Consolidated Statements Of Operations
(Unaudited)
   
Three Months
 Ended
  
Three Months
  Ended
(in thousands, except earnings per share data)
  
June 30, 2008
  
June 30, 2007   
Revenues
            
   Oil and gas sales
  
$43,257
    
$19,136
  
   Gas gathering operations
  
4,352
    
3,152
  
   Other operating income
  
1,093
    
48
  
      Total Revenues
  
48,702
    
22,336
  
             
Costs and Expenses
            
   Lease operations
  
4,203
    
4,238
  
   Drilling operations
  
574
    
-
  
   Production taxes
  
2,378
    
1,103
  
   Exploration expenses
  
566
    
279
  
   Impairment and abandonments
  
379
    
696
  
   Gas gathering operations
  
4,394
    
3,356
  
   Depreciation, depletion and amortization
  
15,013
    
8,669
  
   General and administrative
  
3,873
    
3,081
  
      Total Costs and Expenses
  
31,380
    
21,422
  
             
Income from Operations
  
17,322
    
914
  
             
Other Income (Expense)
            
   Interest expense
  
(1,999
)
  
(2,863
)
   Interest income
  
25
    
77
  
   Loan fee amortization
  
(297
)
  
(159
)
      Total Other Income (Expense)
  
(2,271
)
  
(2,945
)
             
Income (loss) before income taxes
  
15,051
    
(2,031
)
Income tax (benefit) expense -- current
  
-
    
16
  
                                                  deferred
  
4,922
    
(733
)
             
Net Income (Loss)
  
10,129
    
(1,314
)
   Preferred dividends
  
1,420
    
-
  
Net Income (Loss) Available to Common Stockholders
  
$8,709
    
$(1,314
)
             
Earnings (Loss) Per Share
            
        Basic
  
$0.25
    
$(0.04
)
        Diluted
  
$0.24
    
$(0.04
)


 
6
 

TXCO RESOURCES INC.
Condensed Consolidated Statements Of Operations
(Unaudited)
   
Six Months
 Ended
  
Six Months
  Ended
(in thousands, except earnings per share data)
  
June 30, 2008
  
June 30, 2007   
Revenues
            
   Oil and gas sales
  
$71,904
    
$27,861
  
   Gas gathering operations
  
7,577
    
5,646
  
   Other operating income
  
1,547
    
49
  
      Total Revenues
  
81,028
    
33,556
  
             
Costs and Expenses
            
   Lease operations
  
8,435
    
6,898
  
   Drilling operations
  
1,006
    
-
  
   Production taxes
  
3,862
    
1,597
  
   Exploration expenses
  
1,210
    
654
  
   Impairment and abandonments
  
634
    
1,382
  
   Gas gathering operations
  
7,781
    
6,237
  
   Depreciation, depletion and amortization
  
26,287
    
13,585
  
   General and administrative
  
7,905
    
4,885
  
      Total Costs and Expenses
  
57,120
    
35,238
  
             
Income (Loss) from Operations
  
23,908
    
(1,682
)
             
Other Income (Expense)
            
   Interest expense
  
(4,233
)
  
(3,140
)
   Interest income
  
97
    
103
  
   Loan fee amortization
  
(587
)
  
(169
)
      Total Other Income (Expense)
  
(4,723
)
  
(3,206
)
             
Income (loss) before income taxes
  
19,185
    
(4,888
)
Income tax (benefit) expense -- current
  
-
    
(5,250
)
                                                  deferred
  
4,803
    
3,568
  
             
Net Income (Loss)
  
14,382
    
(3,206
)
   Preferred dividends
  
2,404
    
-
  
Net Income (Loss) Available to Common Stockholders
  
$11,978
    
$(3,206
)
             
Earnings (Loss) Per Share
            
        Basic
  
$0.35
    
$(0.10
)
        Diluted
  
$0.34
    
$(0.10
)

 
7
 

TXCO RESOURCES INC.
Condensed Consolidated Statements Of Cash Flows
(Unaudited)
 

(in thousands, except earnings per share data)
  
Six Months
 Ended
June 30, 2008
  
Six Months
  Ended
June 30, 2007   
Operating Activities
            
Net income (loss)
  
$14,382
    
$(3,206
)
Adjustments to reconcile net income (loss) to
   net cash (used) provided by operating activities:
            
   Depreciation, depletion and amortization
  
26,874
    
13,754
  
   Impairment, abandonments and dry hole costs
  
634
    
1,836
  
   Deferred tax expense
  
4,803
    
3,568
  
   Excess tax benefits from stock-based compensation
  
(1,453
)
  
-
  
   Non-cash compensation expense
  
1,928
    
571
  
   Non-cash change in components of OCI
  
-
    
1,524
  
Changes in operating assets and liabilities:
            
   Receivables
  
(19,877
)
  
(5,897
)
   Prepaid expenses and other
  
(681
)
  
(4,752
)
   Accounts payable and accrued expenses
  
(2,664
)
  
5,615
  
   Current income taxes receivable
  
(25
)
  
(5,527
)
Net cash provided by operating activities
  
23,921
    
7,486
  
             
Investing Activities
            
   Development and purchases of oil and gas properties
  
(73,072
)
  
(37,291
)
   Purchase of other equipment
  
(1,166
)
  
(2,554
)
   Purchase of subsidiary
  
-
    
(95,994
)
Net cash used by investing activities
  
(74,238
)
  
(135,839
)
             
Financing Activities
            
   Proceeds from bank credit facility
  
28,000
    
154,100
  
   Payments on bank credit facility
  
(11,000
)
  
(22,851
)
   Proceeds from installment and other obligations
  
190
    
119
  
   Payments on installment and other obligations
  
(267
)
  
(260
)
   Issuance of preferred stock, net of expenses
  
32,377
    
-
  
   Purchase of lower call option
  
(11,617
)
  
-
  
   Proceeds from sale of upper call option
  
9,356
    
-
  
   Payment of preferred stock dividends
  
(1,381
)
  
-
  
   Cost of shares retired upon option exercises
  
(2,414
)
  
-
  
   Excess tax benefits from stock-based compensation
  
1,453
    
-
  
   Proceeds from exercise of stock options
  
850
    
-
  
   Proceeds from issuance of common stock, net of expenses
  
33
    
407
  
   Purchase of treasury shares
  
(525
)
  
(219
)
Net cash provided by financing activities
  
45,055
    
131,296
  
Change in Cash and Equivalents
  
(5,262
)
  
2,943
  
Cash and equivalents at beginning of period
  
9,831
    
3,882
  
Cash and Equivalents at End of Period
  
$4,569
    
$6,825
  

 
8
 


TXCO RESOURCES INC.
SELECTED OPERATING DATA
 
 
                    Three Months Ended                     
  
         Six Months Ended        
($'s in thousands, except average prices)
Mar. 31, 2008
June 30, 2008
June 30, 2007
  
June 30, 2008
June 30, 2007
               
Net cash provided (used) in
   operating activities
$
(9,851)
$
33,772
$
6,486
  
$
23,921
$
7,486
                       
Average common shares outstanding for
   diluted earnings per share
  
35,265
  
40,247
  
33,496
    
35,393
  
33,242
                       
Ebitdax  *
  
19,801
  
34,167
  
11,284
    
53,967
  
16,034
                       
Ebitda  *
  
19,156
  
33,601
  
11,006
    
52,757
  
15,380
                       
Current ratio
  
1.05
  
0.69
  
1.66
    
0.69
  
1.66
Debt to asset ratio
  
28.9%
  
27.6%
  
44.5%
    
27.6%
  
44.5%
                       
Sales
                      
Oil:
                      
   Sales, in mBbl
  
247
  
308
  
241
    
555
  
392
   Average realized sales price per barrel,
$
97.33
$
122.76
$
61.58
  
$
111.44
$
59.03
       excluding hedging impact of:
$
(5.84)
$
(10.87)
$
(0.39)
  
$
(8.64)
$
(1.76)
                       
Natural Gas:
                      
   Sales, in mmcf
  
665
  
813
  
644
    
1,478
  
865
   Average realized sales price per mcf,
$
9.07
$
11.05
$
7.44
  
$
10.16
$
7.39
       excluding hedging impact of:
$
0
$
(0.24)
$
(0.59)
  
$
(0.14)
$
(1.76)
                       
Equivalent Basis:
                      
   Sales in mBOE
  
358
  
444
  
348
    
802
  
536
   Average realized sales price per BOE,
$
84.25
$
105.51
$
56.35
  
$
95.92
$
55.08
       excluding hedging impact of:
$
(4.04)
  
(8.00)
$
(1.37)
  
$
(6.23)
$
(3.13)
                       
   Sales in mmcfe
  
2,148
  
2,662
  
2,088
    
4,810
  
3,218
   Average realized sales price per mcfe,
$
14.04
$
17.59
$
9.39
  
$
15.99
$
9.18
       excluding hedging impact of:
$
(0.67)
$
(1.34)
$
(0.23)
  
$
(1.04)
$
(0.52)
                       
Other Operating Data
                      
   Total lifting costs
$
5,716
$
6,581
$
5,347
  
$
12,297
$
8,463
   Total lifting costs per BOE
$
15.96
$
14.84
$
15.36
  
$
15.34
$
15.78
   Total lifting costs per mcfe
$
2.66
$
2.47
$
2.56
  
$
2.56
$
2.63
                       
   Sales volume -oil properties -mBbl
  
237
  
298
  
229
    
535
  
378
   Oil prop. lifting costs-oil (Incl Prod &
        Sev Tax)
$
4,223
$
5,940
$
4,192
  
$
10,163
$
6,708
   Oil prop. lifting costs per barrel
$
17.80
$
19.93
$
14.08
  
$
18.98
$
17.73
                       
   Glen Rose Porosity sales volume -mBbl
  
153
  
226
  
162
    
379
  
285
   Glen Rose Porosity lifting costs per barrel
$
10.02
$
12.35
$
9.12
  
$
11.41
$
10.61
                       
   Sales volume -gas properties -mmcf
  
619
  
709
  
605
    
1,327
  
814
   Gas prop. lifting costs-gas (Incl Prod &
         Sev Tax)
$
1,493
$
2,030
$
1,990
  
$
3,523
$
2,534
   Gas prop. lifting costs per mcf
$
2.41
$
2.86
$
3.29
  
$
2.65
$
3.11
                       
   Total depletion cost per BOE
$
31.31
$
33.69
$
24.62
  
$
32.63
$
25.02
   Total depletion cost per mcfe
$
5.22
$
5.62
$
4.10
  
$
5.44
$
4.17
* Please see the last page of this press release for a reconciliation of these non-GAAP financial measures.

 
9
 


TXCO RESOURCES INC.
EBITDA and EBITDAX RECONCILIATION TO
NET INCOME AND NET CASH PROVIDED
PERIODS INDICATED
 
($ Thousands)
    
1Q08
2Q08
YTD
  
1Q07
2Q07
YTD
Net cash provided (used) by
                  
  operating activities per CF Stmt
    
(9,851)
     33,772
     23,921
  
       1,000
       6,486
       7,486
                   
Change in operating assets and liabilities
  
   (25,391)
       2,145
   (23,247)
  
    (8,669)
    (1,893)
  (10,562)
                   
Operating CF before change in operating
                
  assets & liabilities
    
15,541
     31,627
     47,168
  
       9,670
       8,379
     18,049
                   
Deferred income taxes
    
          119
     (4,922)
     (4,803)
  
    (4,301)
          733
    (3,568)
Cash portion of net interest expense
    
       2,163
       1,973
       4,136
  
          251
       2,786
       3,037
Excess tax benefit from
  stock-based compensation
       1,453
               -
       1,453
  
               -
 -
               -
Derivative settlements loss
    
               -
               -
               -
  
       1,143
          381
       1,524
Income tax
    
        (119)
       4,922
       4,803
  
       (965)
       (717)
    (1,682)
Exploration costs
    
          644
          566
       1,210
  
          375
          278
          654
Dry hole costs
    
-
               -
               -
  
       (280)
       (175)
       (455)
Change in components of other
                  
comprehensive income
    
-
               -
               -
  
    (1,143)
       (381)
    (1,524)
                   
Ebitdax
    
     19,801
     34,167
     53,967
  
       4,750
     11,284
     16,034
                   
Less: Exploration costs
    
          644
          566
       1,210
  
          375
          278
          654
                   
Ebitda
    
     19,156
     33,601
     52,757
  
       4,375
     11,006
     15,380
                   
Less:
                  
Income tax expense
    
        (119)
       4,922
       4,803
  
       (965)
       (717)
    (1,682)
Impairment & abandonments
    
          255
          379
          634
  
          686
          696
       1,382
Derivative Loss
    
               -
               -
               -
  
       1,143
          381
       1,524
Interest, net
    
2,163
       1,973
       4,136
  
          251
       2,786
       3,037
Non cash compensation
    
       1,041
          887
       1,928
  
          226
          345
          571
DD&A
    
     11,565
     15,310
     26,874
  
       4,926
       8,829
     13,755
                   
Net Income (Loss)
    
       4,252
     10,129
     14,382
  
    (1,892)
    (1,314)
    (3,206)
                   
EBITDAX is earnings before income taxes, interest, depreciation, depletion, amortization, impairment, abandonment and exploration expense. EBITDA equals EBITDAX less exploration expense. We believe EBITDA and EBITDAX provide a more complete analysis of TXCO's operating performance and debt servicing ability relative to other companies, and of our ability to fund capital expenditure and working capital requirements.
 
These measures are widely used by investors and rating agencies. EBITDA, with certain negotiated adjustments, is referenced in TXCO's financial covenants and required in reporting under our credit facility. EBITDA and EBITDAX are not measures of financial performance under GAAP. Accordingly, they should not be considered as substitutes for net income, income from operations, or cash flow provided by operating activities prepared in accordance with GAAP.
 
Columns / rows may not foot / cross-foot due to rounding.



 
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