EX-99.1 2 exh991.htm TXCO'S 03/16/09 EARNINGS PRESS RELEASE exh991.htm
 
 
Exhibit 99.1
TXCO logo

For Immediate Release
Contact Information
Monday, March 16, 2009
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 2008 Results

SAN ANTONIO -- March 16, 2009 -- TXCO Resources Inc. (Nasdaq:TXCO) today provided financial and operating results for the year and quarter ended December 31, 2008, and filed its annual report on Form 10-K with the Securities and Exchange Commission.

Sharp declines in crude oil and natural gas prices in late 2008 significantly reduced TXCO's revenues, net income and cash flow, continuing into first-quarter 2009. For 2008, revenues rose to $143.7 million from $93.9 million in 2007, while crude oil and natural gas sales totaled $127.6 million, up from $81.8 million in the prior year. Year-end 2008 assets stood at $486.9 million, up from $354.6 million at the end of 2007.

Operating income was $19.6 million, compared with $10.4 million in 2007. The Company reported a net loss attributable to common stock of $0.47 million, equal to $0.01 per share, compared with net income of $0.94 million, or $0.03 per share, in the prior year.

Net cash provided by operating activities rose to $100.6 million from $69.4 million in 2007. Ebitda -- earnings before income taxes, interest expense, depreciation, depletion, amortization, impairment and abandonment expense -- was $89.6 million, or $2.59 per share, compared with $52.9 million, or $1.52 per share a year earlier. Ebitdax -- Ebitda plus exploration expense -- was $92.4 million, or $2.67 per share, compared with $54.2 million, or $1.56 per share. All per-share amounts are on a diluted basis. See the accompanying table for a reconciliation of these non-GAAP financial measures.

Impairment expense was sharply higher, reflecting suspension of TXCO's San Miguel oil sands pilot projects and the commodity price declines. Depreciation, depletion and amortization expense also rose due to full-year inclusion of Output Exploration costs (TXCO acquired Output in April 2007), plus higher finding costs, depletion rates and costs related to new wells placed on production during 2008.

Fourth-Quarter Results
For the fourth quarter of 2008, TXCO had a net loss attributable to common stock of $18.0 million, or $0.51 per share, compared with net income of $1.8 million, $0.05 per share, in the 2007 quarter. Revenues for the three months were $21.0 million, compared with $32.1 million a year earlier. Oil and gas sales were $18.4 million, compared with $28.9 million for fourth-quarter 2007.

Liquidity Issues/Going Concern  
           The financial statements reported in TXCO's Form 10-K for the 2008 fiscal year contain a "going concern" qualification in the opinion of the Company's independent auditors, Akin, Doherty, Klein & Feuge P.C. The auditors have included in their opinion an explanatory paragraph indicating that TXCO's working capital deficiency, non-compliance with its current ratio debt covenant under its bank credit facilities, and violation of a provision in its certificates of designations for its Series D and Series E preferred stock giving the holders of the preferred stock the right to demand redemption of such stock, raise substantial doubt about TXCO's ability to continue as a going concern.
 
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           During 2008, TXCO engaged in the largest capital expenditure program in its history. Costs incurred in the development and purchase of oil and gas properties increased from $117 million in 2007 to $182 million in 2008. While pursuing its drilling program, costs to drill escalated throughout the summer followed by an unprecedented collapse in commodity prices. The time lag between incurring drilling costs and the resulting increase in revenues from new production, combined with deteriorating economic conditions, have created severe cash flow constraints for TXCO.  

           As a result, TXCO has recently experienced substantial difficulties in meeting short-term cash needs, particularly its vendor commitments. TXCO reported $49.7 million in trade payables at year-end 2008, of which approximately $4.1 million are currently 60 days or more past due. TXCO's failure to reach accommodations with these vendors could result in the filing of liens or the withdrawal of trade credit, and could limit its ability to conduct operations on Company properties.

As announced previously, TXCO determined in preparing its 2008 financial statements that it was in violation of the current ratio covenant of its bank credit facilities. As a result of this default, its lenders may, among other things, declare all or any part of the unpaid principal and accrued interest under its bank credit facilities immediately due and payable. Consequently in accordance with GAAP, $153.0 million in long-term debt was reclassified as a current liability. TXCO's lenders currently are not permitting it to make additional borrowings under its bank credit facilities. If TXCO's lenders demanded repayment and TXCO failed to repay the amounts due under the bank credit facilities, the lenders could exercise their remedies under the bank credit facilities, including foreclosing on substantially all TXCO's assets, which TXCO pledged as collateral to secure its obligations under the bank credit facilities. These circumstances could require TXCO to seek relief through a filing under the U.S. Bankruptcy Code. TXCO is in discussions with its lenders regarding a waiver of the current ratio covenant and other arrangements through which the lenders would refrain from exercising their rights under the bank credit facilities as a result of the default. However, there can be no assurance that TXCO will be able to obtain such a waiver or obtain other relief from its lenders.

           Under the terms of TXCO's certificates of designations for its Series D and Series E preferred stock, the default under the bank credit facilities results in the holders of the Series D and Series E preferred stock having a right to demand redemption of their preferred stock. Consequently $66.9 million, representing the stated value of the preferred stock at December 31, 2008, was reclassified as a current liability. However under the terms of the certificates of designations, TXCO's obligation to pay the redemption price of any preferred stock demanded to be redeemed is suspended until the earlier of (a) October 31, 2012, or (b) the date that all of TXCO's obligations under the bank facilities have been satisfied.

           As a result of the $153.0 million in long-term debt and $66.9 million in preferred stock being reclassified to current liabilities and the outstanding trade payables of $49.7 million, TXCO reported a working capital deficiency of $256.9 million at year-end 2008. TXCO's ability to continue as a going concern will depend on its ability to generate additional sources of capital in the near future, of which there can be no assurance.

Substantially all of the Company's assets are pledged, and extreme volatility in energy prices and a deteriorating global economy, have significantly hindered its ability to raise debt and equity capital. Management is pursuing options to improve liquidity by implementing several cost-reduction measures, including staff reductions and shutting down certain operations.  

           As previously announced, TXCO retained Goldman, Sachs & Co. to perform a strategic alternatives review. This review is designed to enhance stockholder value, which may include sale of certain assets, issuance of stock, additional debt or other securities, or a merger or sale of the Company. No formal decisions have been made and no agreements have been reached at this time. There can be no assurance that any particular alternative will be pursued or that any transaction will occur, or on what terms. TXCO does not expect to disclose developments from this review unless its board of directors approves a definitive transaction.

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Proved Reserves
TXCO's estimated net proved reserves at year-end 2008 stood at 81.7 bcfe, a 10.1 bcfe decrease from 91.8 bcfe at year-end 2007. Production during 2008 totaled 9.2 bcfe, with the remaining 0.9 bcfe decline attributable to the sharp commodity price decline, plus the third-quarter 2008 sale of 15 non-core properties, largely offset by new reserves added by drilling.

Estimated, pre-tax future net cash flows discounted at 10 percent (PV-10) for proved reserves at year-end 2008 were $137.5 million, based on adjusted commodity prices of $41.25 per barrel for crude oil and $5.245 per mmBtu for natural gas. A year earlier, TXCO's 2007 PV-10 of $373 million was based on adjusted commodity prices of $92.75 per barrel and $6.445 per mmBtu, respectively. See the accompanying table for a reconciliation of this non-GAAP financial measure. The Company's reserve life index was 8.9 years, compared with 11.5 years at year-end 2007. Its reserve mix was 56 percent oil and 44 percent gas, of which approximately 53 percent was proved developed.

In late 2008, the SEC issued new regulations for disclosing the quantity and value of proved reserves, effective December 31, 2009. A key change in the SEC's modernizing of its regulations allows exploration and production companies to use average commodity prices throughout the year to calculate the value of proved reserves versus the current method of year-end prices.

Using these new pricing guidelines, TXCO's total proved reserves at December 31, 2008, would have been 88.5 bcfe valued at a pre-tax PV-10 of $415.3 million. These values are based on average 2008 benchmark NYMEX prices of $98.79 per barrel for oil and $8.59 per mmBtu for gas. No reconciliation has been made of this non-GAAP measure as the standardized measure has not been computed under the new rules.

These reserve estimates were prepared by the independent engineering firms of DeGolyer and MacNaughton and William M. Cobb & Associates Inc. in accordance with SEC and Financial Accounting Standards Board requirements.

Operations Update
TXCO has significantly reduced drilling in light of current commodity prices and liquidity constraints. It is moving ahead with a limited drilling program, focused on high-impact projects, particularly the Maverick Basin's Pearsall and Eagle Ford shale gas resource plays. It currently has two rigs operating.

In tests following a multi-stage fracture stimulation, the Briscoe Catarina West 1H (50 percent working interest through completion) flowed at rates as high as 6 mmcfde from the Eagle Ford with a high liquids content. On the Pearsall play, a multi-stage frac is under way on the San Pedro Ranch 2 (50% WI through completion) following mechanical delays. Targeting the Georgetown formation, the Burr C 7-231XH (50% WI) flowed at rates as high at 1.9 mmcfe with high liquids content in tests.

Management Perspective
"TXCO's leasehold assets have excellent prospects but currently we face extraordinary challenges following the unprecedented collapse in oil and gas prices that occurred late last year," said Chairman and CEO James E. Sigmon. "We are moving ahead, within current financial constraints, to drill the Eagle Ford, Pearsall, Georgetown and other highly prospective plays. We're taking aggressive and prudent actions to re-set financial obligations of the Company and to our stakeholders. We also are continuing our strategic alternatives review. Our goal continues to be converting the extensive potential of our large acreage position with multiple plays into stockholder value."

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Conference Call
TXCO has scheduled a conference call to update investors on recent events for 9 a.m. CDT (10 a.m. EDT), Thursday, March 19, 2009. The call will be broadcast live via the Company's Web site at http://www.txco.com/concall.html, and by telephone at (877) 387-9209 (U.S./Canada) and (706) 643-3820 (international), passcode 86336244. A replay will be available through Friday, March 20, 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.

About TXCO Resources
TXCO Resources is an independent oil and gas enterprise with interests in the Maverick Basin, the onshore Gulf Coast region and the Marfa Basin of Texas, and the Midcontinent region of western Oklahoma. TXCO's business strategy is to build stockholder 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." Additional information, including recent regulatory filings and investor presentations, is available at the Company's Web site, www.txco.com.

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 estimated financial results, bank credit and working capital availability, expected prices, production volumes, well test results, reserve levels and number of drilling locations expected, drilling plans, including the timing, category, number, depth, cost and/or success of wells to be drilled, expected geological formations or the availability of specific services, equipment or technologies. 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, our ability to obtain capital on reasonable terms, or at all, to fund our working capital or other needs; the adequacy of our liquidity and our ability to meet our cash commitments, working capital needs, and lender and vendor obligations and our commitments to pay dividends on our preferred stock; general market conditions; adverse capital and credit market conditions; uncertainty about the effectiveness of the U.S. Government's plan to stabilize financial markets; the impairment of financial institutions; results of our strategic alternatives review; vendor relations; the costs and accidental risks inherent in exploring and developing new oil and natural gas reserves; the price for which such reserves and production can be sold; fluctuation in prices of oil and natural gas; the uncertainties inherent in estimating quantities of proved reserves and cash flows; competition; actions by third-party co-owners in properties in which we also own an interest; acquisitions of properties and businesses; operating hazards; environmental concerns affecting the drilling of oil and natural gas wells; impairment of oil and gas properties due to depletion or other causes; dependence on key personnel, the outcome of litigation; and hedging decisions, including whether or not to hedge. 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 TXCO's operating and financial results is included in TXCO's annual report on Form 10-K for the year ended December 31, 2008. This report 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 from TXCO without charge.


(Financial Information and Selected Operational Tables Follow)
 
4
 


TXCO RESOURCES INC.
(Unaudited)
       
   
December 31
  
(in thousands)
  
2008
  
2007
  
Assets
          
           
Current Assets
          
Cash and equivalents
  
$12,236
  
$9,831
  
Accounts receivable:
          
   Joint interest owners
  
13,833
  
4,167
  
   Oil and natural gas sales
  
6,808
  
13,785
  
   Federal income tax
  
-
  
4,974
  
   Derivative settlements
  
1,586
  
-
  
Accrued derivative asset
  
5,916
  
-
  
Prepaid expenses and other
  
4,470
  
2,989
  
Total Current Assets
  
44,849
  
35,746
  
           
Property and Equipment, net - successful efforts
method of accounting for oil and natural gas properties
  
433,126
  
314,941
  
           
Other Assets
          
Deferred financing fees
  
2,950
  
2,613
  
Other assets
  
1,143
  
1,307
  
Accrued derivative asset
  
4,782
  
-
  
Total Other Assets
  
8,875
  
3,920
  
           
Total Assets
  
$486,850
  
$354,607
  


 
5
 


TXCO RESOURCES INC.
Condensed Consolidated Balance Sheets
(Unaudited)
       
   
December 31
  
(in thousands, except shares and per share amounts)
  
2008
  
2007
  
Liabilities And Stockholders' Equity
          
           
Current Liabilities
          
Accounts payable, trade
  
$49,661
  
$11,345
  
Other payables and accrued liabilities
  
25,114
  
39,916
  
Undistributed revenue
  
3,262
  
2,401
  
Notes payable
  
1,518
  
399
  
Bank debt
  
153,000
  
-
  
Redeemable preferred stock
  
66,909
  
-
  
Derivative settlements payable
  
-
  
475
  
Preferred dividends payable
  
-
  
397
  
Accrued derivative obligation
  
2,324
  
4,725
  
Total Current Liabilities
  
301,788
  
59,658
  
           
Long-Term Liabilities
          
Long-term debt, net of current portion
  
-
  
100,000
  
Deferred income taxes
  
19,602
  
12,007
  
Accrued derivative obligation
  
1,162
  
3,993
  
Asset retirement obligation
  
8,569
  
4,233
  
Total Long-Term Liabilities
  
29,333
  
120,233
  
           
Commitments and Contingencies
  
-
  
-
  
           
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, 56,909 and -0- shares issued and outstanding;
Series E, 20,000 and -0- shares issued and outstanding
  
-
  
1
  
Common stock, par value $0.01 per share; authorized
100,000,000 shares, issued 37,420,953 and 34,269,038 shares, and
outstanding 37,254,100 and 34,150,619
  
374
  
343
  
Additional paid-in capital
  
148,534
  
177,030
  
Retained earnings
  
3,088
  
3,561
  
Accumulated other comprehensive income (loss) net of tax
  
4,759
  
(5,754
)
Less treasury stock, at cost, 166,853 shares and 118,419 shares
  
(1,026
)
(465
)
Total Stockholders' Equity
  
155,729
  
174,716
  
           
Total Liabilities and Stockholders' Equity 
  
$486,850
  
$354,607
  


 
6
 


TXCO RESOURCES INC.
Condensed Consolidated Statements of Operations
(Unaudited)
   
Years Ended December 31
  
(in thousands, except earnings per share data)
  
2008
  
2007
  
2006
  
Revenues
              
Oil and natural gas sales
  
$127,551
  
$81,753
  
$56,520
  
Gas gathering operations
  
14,155
  
11,958
  
15,853
  
Other operating income
  
2,030
  
195
  
45
  
Total Revenues
  
143,736
  
93,906
  
72,418
  
               
Costs and Expenses
              
Lease operations
  
18,939
  
14,105
  
7,248
  
Drilling operations
  
1,058
  
-
  
-
  
Production taxes
  
6,572
  
4,672
  
2,551
  
Exploration expenses
  
2,825
  
1,222
  
2,968
  
Impairment and abandonments
  
13,931
  
1,983
  
1,722
  
Gas gathering operations
  
14,615
  
13,257
  
16,255
  
Depreciation, depletion and amortization
  
52,434
  
36,202
  
23,840
  
General and administrative
  
13,788
  
12,058
  
7,298
  
Total Costs and Expenses
  
124,162
  
83,499
  
61,882
  
               
Income from Operations
  
19,574
  
10,407
  
10,536
  
               
Other Income (Expense)
              
Interest expense
  
(8,997
)
(9,686
)
(269
)
Interest income
  
187
  
329
  
550
  
(Loss) gain on sale of assets
  
(1,016
)
 1
  
(8
)
Loan fee amortization
  
(1,198
)
 (554
)
(216
)
Derivative mark-to-market gain
  
-
  
- 
  
1,995
  
Derivative settlements loss
  
-
  
- 
  
(2,686
)
Total Other Income (Expense), Net
  
(11,024
)
(9,910
)
(634
)
               
Income before income taxes
  
8,550
  
497
  
9,902
  
Income tax expense (benefit) --
current
  
488
  
(5,301
)
1,232
  
 
deferred
  
2,180
  
4,458
  
1,429
  
Net Income
  
5,882
  
1,340
  
7,241
  
Preferred dividends
  
6,355
  
397
  
-
  
Net Income (Loss) Available to Common Stockholders
  
$  (473
)
$943
  
$7,241
  
               
Earnings (Loss) Per Share:
              
Basic
  
$(0.01
)
$0.03
  
$0.23
  
Diluted
  
$(0.01
)
$0.03
  
$0.22
  
Weighted average number of common shares outstanding:
              
Basic
  
34,635
  
33,422
  
31,916
  
Diluted
  
34,635
  
34,740
  
33,247
  

 
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TXCO RESOURCES INC.
(Unaudited)
   
Years Ended December 31
  
(in thousands)
  
2008
  
2007
  
2006
  
Operating Activities:
              
Net income
  
$5,882
  
$1,340
  
$7,241
  
Adjustments to reconcile net income to net cash provided by operating activities:
    
Depreciation, depletion and amortization
  
53,631
  
36,756
  
24,056
  
Impairments, abandonments and dry hole costs
  
13,931
  
2,436
  
1,722
  
Loss (gain) on sale of assets
  
1,016
  
(1
)
8
  
Deferred tax expense
  
2,180
  
4,458
  
1,560
  
Excess tax benefits from stock-based compensation
  
(1,453
)
-
  
-
  
Non-cash compensation expense
  
3,626
  
2,824
  
1,207
  
Non-cash derivative mark-to market (gain)
  
-
  
-
  
(1,995
)
Non-cash change in components of Other Comprehensive Income
  
-
  
1,524
  
806
  
Changes in operating assets and liabilities:
              
Receivables
  
(4,275
)
(8,820
)
213
  
Prepaid expenses and other
  
(2,852
)
(6,027
)
747
  
Accounts payable and accrued expenses
  
23,898
  
35,590
  
(2,342
)
Current income taxes receivable (payable)
  
4,977
  
(688
)
(8,499
)
Net cash provided by operating activities
  
100,561
  
69,392
  
24,724
  
Investing Activities:
              
Development and purchases of oil and natural gas properties
  
(181,565
)
(117,311
)
(52,927
)
Purchase of subsidiary
  
-
  
(95,994
)
-
  
Purchase of other equipment
  
(3,164
)
(3,105
)
(6,941
)
Proceeds from sale of assets
  
7,383
  
6,001
  
23
  
Net cash used by investing activities
  
(177,346
)
(210,409
)
(59,845
)
Financing Activities:
              
Proceeds from bank credit facility
  
75,700
  
168,500
  
13,450
  
Payments on bank credit facility
  
(21,700
)
(70,851
)
(11,100
)
Payments on installment and other obligations
  
(599
)
(577
)
(489
)
Proceeds from installment and other obligations
  
717
  
710
  
494
  
Issuance of preferred stock, net of expenses
  
32,233
  
52,777
  
-
  
Purchase of lower call option
  
(11,617
)
(21,569
)
-
  
Proceeds from sale of upper call option
  
9,357
  
17,852
  
-
  
Payment of preferred stock dividends
  
(4,262
)
-
  
-
  
Proceeds from issuance of common stock, net of expenses
  
33
  
145
  
29,956
  
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
  
198
  
609
  
Purchase of treasury shares
  
(561
)
(219
)
-
  
Net cash provided by financing activities
  
79,190
  
146,966
  
32,920
  
               
Change in Cash and Equivalents
  
2,405
  
5,949
  
(2,201
)
  Cash and Equivalents at Beginning of Year
  
9,831
  
3,882
  
6,083
  
Cash and Equivalents at End of Year
  
$12,236
  
$9,831
  
$3,882
  
Supplemental Disclosures:
              
Cash paid for interest
  
$10,850
  
$7,855
  
$213
  
Cash paid for income taxes
  
132
  
415
  
10,581
  

 
8
 


TXCO RESOURCES INC.
SELECTED QUARTERLY FINANCIAL INFORMATION
SELECTED FINANCIAL INFORMATION - BALANCE SHEET
               
         
2008
  
2007
           
4TH
  
4TH
 
(in thousands)
      
QUARTER
  
QUARTER
                 
 
Current Assets
      
$          44,849
  
$         35,746
                 
 
Property and Equipment - Net
    
433,126
  
314,941
                 
 
Other Assets
      
             8,875
  
              3,920
                 
 
Total Assets
      
$       486,850
  
$       354,607
                 
 
Current Liabilities
      
$       301,788
  
$         59,658
                 
 
Long-Term Liabilities
    
29,333
  
           120,233
 
Stockholders' Equity
    
           155,729
  
         174,716
                 
 
Total Liabilities and Stockholders' Equity
  
$       486,850
  
$      354,607


 
9
 


TXCO RESOURCES INC.
SELECTED QUARTERLY FINANCIAL INFORMATION
SELECTED FINANCIAL INFORMATION - INCOME STATEMENT
               
2008
  
2007
               
4TH
  
4TH
(in thousands, except per share data)
            
QUARTER
  
QUARTER
                     
Revenues
                  
 
Oil and gas natural sales
          
$             18,404
  
$       28,880
 
Gas gathering operations
        
2,205
  
           3,086
 
Other
            
                    416
  
              111
Total Revenues
          
21,025
  
           32,077
                     
Costs and Expenses
                
 
Lease operations
          
5,561
  
             4,071
 
Drilling operations
          
(53)
    
 
Production taxes
          
727
  
           1,657
 
Exploration expenses
        
1,338
  
300
 
Impairments and abandonments
      
12,812
  
1,693
 
Gas gathering operations
        
2,615
  
3,587
 
Depreciation, depletion and amortization
      
13,367
  
10,985
 
General and administrative
        
                 2,973
  
           4,062
Total Costs and Expenses
        
               39,340
  
         26,355
                   
Income (loss) from Operations
            
(18,315)
  
5,722
                 
Other Income (Expense)
                
 
Interest income
          
45
  
91
 
Interest expense
          
(2,495)
  
(3,319)
 
Loan fee amortization
        
(305)
  
(210)
 
Derivative mark-to-market gain
      
-
  
-
 
Derivative settlements (loss)
      
-
  
-
 
Gain on sale of assets
        
                 (234)
  
                  1
Total Other Income (Expense)
        
              (2,989)
  
        (3,437)
                     
Income (loss) before income tax
          
(21,304)
  
2,285
 
Income tax (benefit) expense
            
             (5,790)
  
        118
                     
Net Income (Loss)
          
            (15,514)
  
       2,167
     Preferred dividends
          
                 2,531
  
              397
                 
Net Income (Loss) Available to Common Stockholders
        
$          (18,045)
  
$      1,770


 
10
 


TXCO RESOURCES INC.
SELECTED QUARTERLY FINANCIAL INFORMATION
SELECTED FINANCIAL INFORMATION - INCOME STATEMENT (continued)
               
2008
  
2007
               
4TH
  
4TH
 
(in thousands, except per share data)
            
QUARTER
  
QUARTER
                   
EBITDA*
            
$               8,778
  
$       20,039
                     
EBITDAX*
            
$             10,116
  
$       20,339
                     
Earnings per share -- Reported
              
 
Basic
            
$              (0.51)
  
 $        0.05
 
Diluted
            
$              (0.51)
  
 $        0.05
                     
EBITDA per share
                
 
Basic
            
$                 0.25
  
 $          0.60
 
Diluted
            
$                 0.25
  
 $          0.57
                     
EBITDAX per share
                
 
Basic
            
$                 0.28
  
 $          0.61
 
Diluted
            
$                 0.28
  
 $          0.58
                     
Weighted average number of common shares outstanding
        
 
Basic
            
35,694
  
         33,619
 
Diluted
            
35,694
  
         34,984
                     
Sales volumes - Oil and Natural Gas
              
 
Natural Gas (MMcf)
          
238
  
              607
 
Oil (MBbl)
          
                 284
  
              295
 
Equivalent (MMcfe)
        
              1,942
  
           2,376
                 
* Please see the last page of this press release for a reconciliation of these non-GAAP financial measures.

 
11
 


TXCO RESOURCES INC.
SELECTED QUARTERLY FINANCIAL INFORMATION
SELECTED FINANCIAL INFORMATION - CASH FLOWS
                   
               
2008
  
2007
             
4TH
  
4TH
(in thousands)
            
QUARTER
  
QUARTER
                     
Net income (loss)
            
$       (15,514)
  
 $        2,167
                     
Adjustments to reconcile net income to
            
 
net cash provided by operating activities:
            
 
Depreciation, depletion and amortization
      
13,672
  
11,194
 
Impairments, abandonments and dry hole costs
      
12,812
  
1,693
 
Loss (gain) on sale of assets
        
234
  
(1)
 
Deferred tax (benefit) expense
        
(6,198)
  
119
 
Non-cash change in components of other comprehensive income
    
-
  
-
 
Non-cash compensation expense
      
913
  
1,640
 
Non-cash derivative mark-to-market (gain) loss
    
-
  
-
 
Changes in operating assets and liabilities
    
31,589
  
                  25,244
                     
Net cash provided by operating activities
      
$         37,508
  
$       42,056
                     
Capital Expenditures
          
$         53,685
  
$       49,170




 
12
 


TXCO RESOURCES INC.
SELECTED OPERATING DATA
 
         Three Months Ended          
  
Year Ended
  
($'s in thousands, except average prices)
 9/30/08 
 12/31/08 
 12/31/07 
  
 12/31/08 
 12/31/07 
  
               
Net cash provided (used) in operating activities
$39,132
$37,508
$42,056
  
$100,561
$69,392
  
Average common shares outstanding for
   diluted earnings per share
35,553
35,694
34,984
  
34,635
35,715
  
Ebitdax  *
$28,306
$10,116
$20,339
  
$92,390
$54,162
  
Ebitda  *
$28,030
$8,778
$20,039
  
$89,564
$52,939
  
               
Current ratio
0.74
0.55
0.60
  
0.55
0.60
  
Debt to asset ratio
27.9%
31.7%
28.3%
  
31.7%
28.3%
  
               
Sales
              
Oil:
              
   Sales, in mBbl
293
284
295
  
1,132
974
  
   Average realized sales price per barrel,
       excluding hedging impact of:
$112.92
-9.86
$54.05
+6.89
$86.72
-4.51
  
$97.43
-5.06
$71.11
-1.64
  
               
Natural Gas:
              
   Sales, in mmcf
705
238
607
  
2,422
2,125
  
   Average realized sales price per mcf,
        excluding hedging impact of:
$10.37
-0.36
$3.98
+0.63
$7.60
+0.05
  
$9.61
-0.12
$7.26
-0.64
  
               
Equivalent Basis:
              
   Sales in mBOE
410
324
396
  
1,536
1,328
  
   Average realized sales price per BOE,
        excluding hedging impact of:
$98.40
-7.66
$50.35
+6.52
$76.21
-3.29
  
$86.98
-3.92
$63.77
-2.23
  
               
   Sales in mmcfe
2,462
1,942
2,376
  
9,214
7,971
  
   Average realized sales price per mcfe,
       excluding hedging impact of:
$16.40
-1.28
$8.39
+1.09
$12.70
-0.55
  
$14.50
-0.66
$10.63
-0.37
  
               
Other Operating Data
              
   Total lifting costs
$7,010
$5,919
$5,520
  
$25,378
$18,558
  
   Total lifting costs per BOE
$17.08
$18.29
$13.94
  
$16.52
$13.97
  
   Total lifting costs per mcfe
$2.85
$3.05
$2.32
  
$2.75
$2.33
  
               
   Sales volume -oil properties -mBbl
286
273
286
  
1,094
955
  
   Oil prop. lifting costs-oil (Including
         Production & Severance Tax)
$4,995
$4,962
$4,208
  
$19,754
$13,742
  
   Oil prop. lifting costs per barrel
$17.47
$18.20
$14.72
  
$18.06
$14.39
  
               
   Glen Rose Porosity sales volume -mBbl
218
215
213
  
812
705
  
   Glen Rose Porosity lifting costs per barrel
$9.61
$8.65
$8.58
  
$10.20
$8.99
  
               
   Sales volume -- natural gas properties -mmcf
634
275
530
  
2,238
2,048
  
   Natural gas prop. lifting costs-gas (Including
         Production & Severance Tax)
$1,646
$1,234
$730
  
$6,027
$2,354
  
   Natural gas prop. lifting costs per mcf
$2.60
$4.48
$1.38
  
$2.69
$1.15
  
               
   Total depletion cost per BOE
$31.37
$40.56
$30.73
  
$33.96
$27.06
  
   Total depletion cost per mcfe
$5.23
$6.76
$5.12
  
$5.66
$4.50
  
* Please see the last page of this press release for a reconciliation of these non-GAAP financial measures.

 
13
 


TXCO Resources Inc.
EBITDA And EBITDAX Reconciliation To Net Income
And Net Cash Provided For The  Periods Indicated
 
Fourth Quarter of
  
Full Year
($ Thousands)
2008
2007
  
2008
2007
Net cash provided by operating activities per CF Stmt
   37,508
      42,056
  
       100,561
 69,392
Change in operating assets and liabilities
  31,589
      25,245
  
         21,748
 20,056
Operating CF before change in operating
 assets & liabilities
     5,919
     16,811
  
       78,813
 49,337
           
Deferred income taxes
     6,198
        (119)
  
         (2,180)
(4,458)
Cash portion of net interest expense
       2,450
        3,228
  
           8,810
        9,357
Excess tax benefit from stock-based compensation
                  -
-
  
           1,453
 -
Derivative settlements loss
                  -
               -
  
                 -
        1,524
Income tax
      (5,790)
           119
  
           2,668
        (843)
Exploration costs
       1,339
           300
  
           2,825
        1,222
Dry hole costs
-
               -
  
                 -
        (454)
Change in components of other comprehensive income
 -
               -
  
                 -
     (1,524)
           
Ebitdax
     10,116
      20,339
  
         92,390
      54,162
           
Less: Exploration costs
       1,339
           300
  
           2,825
        1,222
           
Ebitda
       8,778
      20,039
  
         89,564
      52,939
           
Less:
          
Loss (Gain) on sale of assets
          234
            (1)
  
           1,016
            (1)
Income tax expense
      (5,790)
           119
  
           2,668
        (843)
Impairment & abandonments
     12,812
        1,693
  
         13,931
        1,983
Derivative Loss (Gain)
                  -
               -
  
                 -
       1,524
Interest, net
       2,450
        3,228
  
           8,810
        9,357
Non cash compensation
          913
       1,639
  
           3,626
        2,824
DD&A
     13,672
      11,194
  
         53,631
      36,756
           
Net Income (Loss)
    (15,514)
        2,167
  
           5,882
        1,340
           
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 may not foot due to rounding.


 
14
 


TXCO Resources Inc.
Detail of PV-10 and Reconciliation to Standardized Measure at December 31
(Unaudited)
($ in thousands)
2008
2007
PV-10 Value of Estimated Future Net Revenues
  $  137,461 
$  373,028 
Present value of estimated income tax benefit
 -- 
63,058 
     Standardized measure
$  137,461 
$  309,970 

PV-10 Value is considered a non-GAAP financial measure as defined in Item 10(e) of Regulation S-K. Therefore, we are including the disclosures required by Item 10(e) of Regulation S-K with respect to PV-10 Value. These disclosures include the following reconciliation to the most directly comparable GAAP financial measure ("standardized measure"), and discussion of how management uses the measure and why it is useful to investors.

·
it presents the discounted future net cash flows attributable to our proved reserves before corporate future income taxes, and
·
it is a useful measure for evaluating the relative monetary significance of our oil and natural gas properties.
Further, investors may utilize the measure as a basis for comparison of the relative size and value of our reserves to other companies. We use this measure when assessing the potential return on investment related to our oil and natural gas properties. The PV-10 Value and the standardized measure of discounted future net cash flows are not intended to represent the current market value of our estimated oil and natural gas reserves.



 
15