-----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, WDH7JhOYsEJ6AGloevvRwNgsyYQz4ZVPmPHa+XnurBaWoxVP2RxHeDhDGpdCmDFP IY45+4hzeI5Pa5GN2JChSA== 0001157523-04-002217.txt : 20040310 0001157523-04-002217.hdr.sgml : 20040310 20040310111055 ACCESSION NUMBER: 0001157523-04-002217 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040304 ITEM INFORMATION: ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20040310 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EXPLORATION CO OF DELAWARE INC CENTRAL INDEX KEY: 0000313395 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 840793089 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-09120 FILM NUMBER: 04659175 BUSINESS ADDRESS: STREET 1: 500 N LOOP 1604 EAST STREET 2: SUITE 250 CITY: SAN ANTONIO STATE: TX ZIP: 78232 BUSINESS PHONE: 2104965300 MAIL ADDRESS: STREET 1: 500 N LOOP 1604 E STREET 2: SUITE 250 CITY: SAN ANTONIO STATE: TX ZIP: 78232 FORMER COMPANY: FORMER CONFORMED NAME: EXPLORATION CO DATE OF NAME CHANGE: 19920703 8-K 1 a4589759.txt THE EXPLORATION COMPANY 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) March 04, 2004 THE EXPLORATION COMPANY OF DELAWARE, INC. (Exact name of registrant as specified in its charter) Delaware 0-9120 84-0793089 (State of (Commission File (IRS Employer incorporation) Number) Identification No.) 500 North Loop 1604 East, Suite 250 San Antonio, Texas 78232 (Address of principal executive offices) (Zip Code) (210) 496-5300 (Registrant's telephone number, including area code) Item 9: Regulation FD Disclosure The following exhibit is furnished herewith: Exhibit Number Description - ------- --------------------------------------------------------------------- 99.1 Press Release dated March 4, 2004, entitled "The Exploration Company Finances Completion of Taylor Well; Signs Letter of Intent for Maverick Basin Acreage" 99.2 Press Release dated March 5, 2004, entitled "The Exploration Company Reports 2003 Earnings" Item 12: Results of Operations and Financial Condition The March 5, 2004 press release, attached as Exhibit 99.2, reported the Registrant's financial and other results for the year ended December 31, 2003. The press release contained a discussion of Ebitda, defined as earnings before income taxes, interest expense, depreciation, depletion, amortization, impairment and abandonment. Ebitda is a "non-GAAP financial measure" as defined in Item 10 of Regulation S-K of the Securities Exchange Act of 1934, as amended. The Company discussed Ebitda for the years ended December 31, 2003 and 2002. The required disclosures were provided in the press release, with reconciliation to both "Net Income" and "Net Cash Provided in Operating Activities". The information contained in this report under Items 9 and 12, including the exhibits, is intended to be furnished and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall such information be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended. 2 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 10, 2004 THE EXPLORATION COMPANY OF DELAWARE, INC. /s/ P. Mark Stark P. Mark Stark Chief Financial Officer (Principal Accounting and Financial Officer) 3 EXHIBIT INDEX Exhibit Number Description - ------- ------------------------------------------------------------------- 99.1 Press Release dated March 4, 2004, entitled "The Exploration Company Finances Completion of Taylor Well; Signs Letter of Intent for Maverick Basin Acreage" 99.2 Press Release dated March 5, 2004, entitled "The Exploration Company Reports 2003 Earnings" 4 EX-99.1 3 a4589759ex991.txt PRESS RELEASE Exhibit 99.1 The Exploration Company Finances Completion of Taylor Well; Signs Letter of Intent for Maverick Basin Acreage SAN ANTONIO--(BUSINESS WIRE)--March 4, 2004--The Exploration Company (Nasdaq:TXCO) today announced it has financed completion of the Taylor 132-1 Jurassic wildcat and an associated 640-acre drilling unit. Separately, TXCO has signed a letter of intent to acquire an interest in leases totaling 12,200 acres in Maverick County, Texas. Kayne Anderson Energy Fund II L.P., Los Angeles, has agreed to pay 48.75 percent of the Taylor well's completion costs in exchange for a 34.125 percent net profit interest in the well. Payment for Kayne Anderson's interest will be collected from dividends payable to Kayne Anderson on TXCO's Series B Redeemable Preferred Stock that Kayne Anderson acquired in August 2003. Kayne Anderson's net profits account will be credited with revenue from the sale of 34.125 percent of the oil and gas sold from the well, less proportionate charges for royalties and lease operating expenses. TXCO retains a 40.625 percent working interest in the well while paying only 31.25 percent of the anticipated completion costs. TXCO's partner, Horizontal Co. of Wichita Falls, Texas, retains a 22.75 percent working interest while paying 17.5 percent of the anticipated completion costs. The Company's other partner, A.L.S. Oil and Gas Ltd., also of Wichita Falls, retains a 2.5 percent working interest. TXCO estimates completion costs will be under $1 million. "We are pleased to have arranged this financing with Kayne Anderson," said President and CEO James E. Sigmon. "We have increased our exposure to this exciting prospect from a 15.625 percent net carried interest under our original arrangement with Blue Star Oil & Gas Ltd. of Dallas to more than a 40 percent net working interest while exposing the Company to an estimated $350,000 or less in completion costs." Perforating and testing of the well -- the first in the Maverick Basin to penetrate the Jurassic -- is under way today. TXCO assumed operatorship of the well from its partner, Blue Star, in February and announced plans to test the upper Jurassic at 14,942 to 15,140 feet and 15,292 to 15,400 feet. Blue Star earlier had tested the Jurassic at lower intervals and found non-commercial quantities of rich, 1,200 MMbtu natural gas. Blue Star relinquished its interest in the well but remains a partner with TXCO and its partners in a 50,000-acre tract below the Sligo formation. Blue Star has announced its intention to drill a second Jurassic well based on information obtained from the Taylor well. Separately, TXCO announced it has signed a letter of intent with J. Charles Hollimon Ltd. of San Antonio to acquire a 50 to 75 percent working interest in a 12,200-acre prospect area located just south of TXCO's 480,000-acre Maverick Basin lease block. Terms were not announced. TXCO anticipates closing in mid March. A 3-D seismic survey of the prospect has been acquired and will be interpreted to locate prospective drilling locations. About The Exploration Company The Exploration Company is an independent oil and gas enterprise with interests primarily in the Maverick Basin in Southwest Texas. Its long-term 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 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 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, 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, 2002, and its Form 10-Q for the quarter and year-to-date period ended Sept. 30, 2003. 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. CONTACT: The Exploration Company, San Antonio Investors: Roberto R. Thomae, 210-496-5300, ext. 214 bthomae@txco.com or Media: Paul Hart, 210-496-5300, ext. 264 pdhart@txco.com EX-99.2 4 a4589759ex992.txt PRESS RELEASE Exhibit 99.2 The Exploration Company Reports 2003 Earnings SAN ANTONIO--(BUSINESS WIRE)--March 5, 2004--The Exploration Company (Nasdaq:TXCO) today reported earnings and financial results for the year ended Dec. 31, 2003. The Company reported net income for 2003 of $40,877, or $0.002 per share, compared with a loss of $310,970 or ($0.016) per share for 2002. All per-share amounts are on a diluted basis. Total 2003 revenues rose to $39.5 million, more than double 2002 revenues. TXCO's 2003 oil and gas sales increased by more than 50 percent from the prior year, primarily due to a 45 percent increase in oil production and higher realized commodity prices, partially offset by a 15 percent decrease in gas production. The Company's average realized product prices were $5.05 per thousand cubic feet equivalent (Mcfe), a 38 percent increase from $3.67 per Mcfe in 2002. Annual revenues from the Company's gas gathering operations were also sharply higher, reaching $15.1 million versus $2.6 million in 2002. The five-fold increase reflects the first full year of operation since the pipeline's acquisition in mid-2002, higher throughput volumes of third-party gas and higher realized gas prices. Total assets rose to a record $84.2 million at year-end 2003, a 59 percent increase over the prior year. Cash flow, or net cash provided by operating activities, rose to a record $15.2 million, a 105 percent increase from $7.4 million in 2002. Ebitda -- earnings before income taxes, interest expense, depreciation, depletion, amortization, impairment and abandonment expense -- reached $12.6 million, or $0.59 per share, a 66 percent increase from $7.6 million, or $0.40 per share, in 2002. See the accompanying table for a reconciliation of GAAP and non-GAAP measures utilized in calculating Ebitda. TXCO achieved a 186 percent drillbit reserve replacement rate, in 2003. The Company's 2003 year-end proved oil and gas reserves rose 21 percent to a record 28.4 billion cubic feet equivalent (Bcfe), up from 23.5 Bcfe in 2002, as reported by Netherland, Sewell & Associates, Inc., its independent reservoir engineers. Overall oil and gas production in 2003 totaled 4.83 Bcfe, an 11 percent increase from 4.37 Bcfe produced in 2002. Subsequent to Dec. 31, 2003, several European investors elected to exercise their warrants for the purchase of 1.238 million shares of TXCO common stock at $3.00 per share, netting the Company $3.5 million after expenses. Upon exercise of the warrants, TXCO's issued and outstanding common shares increased to approximately 23.38 million shares, compared to 22.14 million shares at year-end 2003. Management's Perspective "Our prospects continue to be very bright as we mark another record-setting year," said President and CEO James E. Sigmon. "The Company had a successful 2003, drilling a record number of wells, and our ambitious exploration and development program continues in 2004. Although we did not have the full measure of success we anticipated in 2003, the information gained from last year's drilling program will be very beneficial as this year's drilling program gets under way. Our expanding Georgetown horizontal gas play and the imminent completion attempt of our deep Jurassic wildcat well are only the beginning of an exciting new year for our shareholders. We continue to enjoy a solid financial structure, with record cash flows, growing reserves and conservative debt levels compared to our peers, allowing us to actively pursue the potential we see in the Maverick Basin's multiple pay opportunities." Sigmon highlighted an expansive list of Company achievements in 2003, confirming his confidence in TXCO's expanded opportunities and continued success: -- Drilled or participated in 80 oil and gas wells in seven separate plays -- Attained a four-year, 46 percent compounded annual asset growth rate -- Attained record cash flows from operations, extending a five year growth trend -- Grew Maverick Basin 3-D seismic database from 455 to over 720 square miles About The Exploration Company The Exploration Company is an independent oil and gas enterprise with interests primarily in the Maverick Basin in Southwest Texas. Its long-term 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 expected establishment of reserves, 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 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, 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 December 31, 2002, and its Form 10-Q for the quarter and year-to-date period ended Sept. 30, 2003. This 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 EXPLORATION COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) December 31 ------------------------- 2003 2002 - ------------------------------------------------------- Assets Current Assets Cash and equivalents $6,180,560 $2,333,688 Accounts receivable: Joint interest owners 564,116 744,395 Oil and gas production 4,273,849 4,373,875 Prepaid expenses and other 718,853 503,176 ------------------------- Total Current Assets 11,737,378 7,955,134 Property and Equipment, net - successful efforts method of accounting for oil and gas properties 66,155,827 39,327,867 Other Assets Deferred tax asset 5,232,718 5,232,718 Other assets 1,080,290 520,600 ------------------------- Total Other Assets 6,313,008 5,753,318 ------------------------- Total Assets $84,206,213 $53,036,319 ========================= THE EXPLORATION COMPANY CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) December 31 ------------------------- 2003 2002 - ------------------------------------------------------- Liabilities And Stockholders' Equity Current Liabilities Accounts payable, trade $8,186,705 $3,695,160 Other payables and accrued liabilities 3,709,016 3,176,564 Undistributed revenue 416,399 1,894,144 Current portion of long-term debt 1,752,286 1,073,773 ------------------------- Total Current Liabilities 14,064,406 9,839,641 Long-Term Liabilities Long-term debt, net of current portion 15,425,598 6,143,458 Redeemable preferred stock, Series B (redemption value - $16 million) 10,135,335 -- Accrued dividends - preferred stock 57,732 -- Asset retirement obligation 1,537,600 -- ------------------------- Total Long-Term Liabilities 27,156,265 6,143,458 Minority Interest in Consolidated Subsidiaries 193,441 82,846 Stockholders' Equity Preferred Stock, Series A; authorized 10,000,000 shares, issued and outstanding -0- shares Common stock, par value $0.01 per share; authorized 50,000,000 shares, issued 22,242,849 and 20,109,516 shares, and outstanding 22,143,049 and 20,009,716 222,428 201,095 Additional paid-in capital 63,976,021 58,216,504 Accumulated deficit (21,160,341) (21,201,218) Less treasury stock, at cost, 99,800 shares (246,007) (246,007) ------------------------- Total Stockholders' Equity 42,792,101 36,970,374 ------------------------- Total Liabilities And Stockholders' Equity $84,206,213 $53,036,319 ========================= THE EXPLORATION COMPANY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) Years Ended December 31 ------------------------------------- 2003 2002 2001 - -------------------------------------------------------------------- Revenues Oil and gas sales $24,390,767 $16,049,798 $13,350,699 Gas gathering operations 15,145,154 2,596,955 -- Other operating income 9,281 311,611 408,221 ------------------------------------- Total Revenues 39,545,202 18,958,364 13,758,920 Costs and Expenses Lease operations 4,408,205 4,081,162 2,406,688 Production taxes 1,501,041 973,078 959,143 Exploration expenses 2,187,216 1,567,098 2,986,036 Impairment and abandonments 2,522,548 1,246,495 2,652,705 Gas gathering operations 15,136,279 2,625,313 -- Depreciation, depletion and amortization 8,627,678 6,500,625 3,201,517 General and administrative 3,716,439 2,025,440 1,481,284 ------------------------------------- Total Costs and Expenses 38,099,406 19,019,211 13,687,373 ------------------------------------- Income (loss) from operations 1,445,796 (60,847) 71,547 Other Income (Expense) Interest income 26,626 46,663 188,061 Interest expense (1,365,233) (273,213) (128,373) Loan fee amortization (17,604) (14,507) -- ------------------------------------- Total Other Income (Expense) (1,356,211) (241,057) 59,688 ------------------------------------- Income (loss) before income taxes, minority interest and cumulative effect of change in accounting principle 89,585 (301,904) 131,235 Minority interest in income of subsidiaries 75,292 (84,066) (106,518) ------------------------------------- Income (loss) before income taxes and cumulative effect of change in accounting principle 164,877 (385,970) 24,717 Income tax (expense) benefit, net (50,000) 75,000 (75,000) Cumulative effect of change in accounting principle, net of tax (74,000) -- -- ------------------------------------- Net Income (Loss) $40,877 $(310,970) $(50,283) ===================================== Earnings (Loss) Per Share: Basic earnings before cumulative effect of change in accounting principle $ 0.006 $ (0.016) $ (0.003) Cumulative effect of change in accounting principle (0.004) -- -- ------------------------------------- Basic Earnings Per Share $0.002 $(0.016) $(0.003) ===================================== Diluted earnings before cumulative effect of change in accounting principle $ 0.005 $ (0.016) (0.003) Cumulative effect of change in accounting principle (0.003) -- -- ------------------------------------- Diluted Earnings Per Share $0.002 $(0.016) $(0.003) ===================================== Weighted average number of common shares outstanding: Basic 20,781,223 19,080,847 17,441,242 Diluted 21,295,257 19,080,847 17,441,242 THE EXPLORATION COMPANY CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2003, 2002, 2001 AND 2000 (UNAUDITED) Common Stock Additional ---------------------- Paid-in Shares Amount Capital - ---------------------------------------------------------- Balance at December 31, 2000 17,471,849 $174,718 $43,986,983 Common stock options exercised 25,000 250 31,000 Purchases of treasury stock, at cost -- -- -- Net loss for the year -- -- -- ----------------------------------- Balance at December 31, 2001 17,496,849 174,968 44,017,983 Common stock options exercised 113,000 1,130 171,625 Issuance of common stock - net of expenses of $946,112 2,499,667 24,997 14,026,896 Net loss for the year -- -- -- ----------------------------------- Balance at December 31, 2002 20,109,516 201,095 58,216,504 Issuance of common stock - net of expenses of $400,959 2,133,333 21,333 5,741,641 Other adjustments -- -- 17,876 Net income for the year -- -- -- ----------------------------------- Balance at December 31, 2003 22,242,849 $222,428 $63,976,021 =================================== Accumulated Treasury Deficit Stock Total ----------------------------------- Balance at December 31, 2000 $(20,839,965) $-- $23,321,736 Common stock options exercised -- -- 31,250 Purchases of treasury stock, at cost -- (246,007) (246,007) Net loss for the year (50,283) -- (50,283) ----------------------------------- Balance at December 31, 2001 (20,890,248) (246,007) 23,056,696 Common stock options exercised -- -- 172,755 Issuance of common stock - net of expenses of $946,112 -- -- 14,051,893 Net loss for the year (310,970) -- (310,970) ----------------------------------- Balance at December 31, 2002 (21,201,218) (246,007) 36,970,374 Issuance of common stock - net of expenses of $400,959 -- -- 5,762,974 Other adjustments -- -- 17,876 Net income for the year 40,877 -- 40,877 ----------------------------------- Balance at December 31, 2003 $(21,160,341) $(246,007) $42,792,101 =================================== THE EXPLORATION COMPANY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Years Ended December 31 --------------------------------------- 2003 2002 2001 - ---------------------------------------------------------------------- Operating Activities Net income (loss) $40,877 $(310,970) $(50,283) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization 8,627,678 6,500,625 3,201,517 Impairments and abandonments 2,522,548 1,246,495 2,652,705 Minority interest in (income) loss of subsidiaries (75,292) 84,066 106,518 Cumulative effect of change in accounting principle 74,000 -- -- Non-cash interest expense and accretion of liability - redeemable preferred stock 677,002 -- -- Changes in operating assets and liabilities: Receivables 280,305 (3,175,627) 1,462,023 Prepaid expenses and other (215,677) (229,573) (46,687) Accounts payable and accrued expenses 3,226,251 3,274,414 1,238,229 --------------------------------------- Net cash provided by operating activities 15,157,692 7,389,430 8,564,022 Investing Activities Development and purchases of oil and gas properties (36,071,216) (27,381,247) (13,675,327) Purchase of other equipment (396,925) -- -- Proceeds from sale of oil and gas properties -- 200,000 2,005,133 Changes in minority interests 185,886 (434,325) (108,902) Other changes -- (39,036) (116,007) --------------------------------------- Net cash (used) by investing activities (36,282,255) (27,654,608) (11,895,103) Financing Activities Proceeds from issuance of redeemable preferred stock, net of offering costs 9,229,931 -- -- Proceeds from long-term debt obligations 11,190,530 7,439,915 153,231 Payments on long-term debt obligations (1,229,876) (1,084,861) (486,244) Proceeds from common stock transactions, net of expenses 5,780,850 14,224,648 31,250 Purchases of treasury stock -- -- (246,007) ------------------------------------- Net cash provided (used) by financing activities 24,971,435 20,579,702 (547,770) ------------------------------------- Change in Cash and Equivalents 3,846,872 314,524 (3,878,851) Cash and Equivalents at Beginning of Year 2,333,688 2,019,164 5,898,015 ------------------------------------- Cash and Equivalents at End of Year $6,180,560 $2,333,688 $2,019,164 ===================================== Supplemental Disclosures: Cash paid for interest $1,200,230 $273,213 $128,373 Cash paid for income taxes -- -- 75,000 THE EXPLORATION COMPANY SELECTED OPERATING DATA Year Ended Dec. 31, ----------------------- 2003 2002 ----------------------- Net cash provided by operating activities $15,157,692 $7,389,430 Debt to asset ratio 34.3% 13.6% Production Oil: Production, in barrels 454,000 314,000 Average sales price per barrel $28.30 $24.56 Natural Gas: Production, in Mcf 2,108,000 2,487,000 Average sales price per Mcf $5.48 $3.35 Equivalent Basis: Production in Boe 805,400 728,500 Average sales price per Boe $30.28 $22.03 Production in Mcfe 4,832,300 4,371,000 Average sales price per Mcfe $5.05 $3.67 Selected Operating Data Production volume - oil properties in barrels 441,700 295,500 Lifting costs-oil (Incl Prod & Sev Tax) $3,350,700 $2,679,500 Lifting costs per barrel $7.59 $9.07 Production volume - gas properties in Mcf 2,096,600 2,474,500 Lifting costs-gas (Incl Prod & Sev Tax) $2,558,600 $2,374,700 Lifting costs per Mcf $1.22 $0.96 Production volume-gas properties, excluding CBM 2,063,500 2,442,100 Lifting costs - gas (Incl. Prod. & Sev. Tax), excluding CBM $2,103,200 $1,775,400 Lifting costs per Mcf excluding CBM activities $1.02 $0.73 Depletion cost per Boe $10.45 $8.36 Depletion cost per Mcfe $1.74 $1.39 Reconciliation of GAAP and Non-GAAP Measures Ebitda represents net income before income taxes, interest expense, depreciation, depletion, amortization, impairment and abandonment expense. We believe Ebitda provides a more complete analysis of TXCO's operating performance and debt servicing ability relative to other companies, and of our ability to fund capital expenditure and working capital requirements. This measure is widely used by investors and rating agencies. Ebitda, with certain negotiated adjustments, is referenced in TXCO's financial covenants and required in reporting under our credit facility. Ebitda is not a measure of financial performance under GAAP. Accordingly, it should not be considered as a substitute for net income, income from operations, or cash flow provided by operating activities prepared in accordance with GAAP. ($ in thousands) 2003 2002 ------ ------ Net cash provided by operating activities $15,158 $7,389 Current taxes 50 (75) Impairment & abandonments 2,523 1,246 Interest, net 1,356 241 Changes in assets and liabilities (6,489) (1,199) ------ ------ Ebitda 12,598 7,602 Less: Impairment and abandonments 2,523 1,246 Interest, net 1,356 241 Income taxes 50 (75) DD&A 8,628 6,501 ------ ------ Net Income $41 $(311) ====== ====== CONTACT: The Exploration Company, San Antonio Investors: Roberto R. Thomae, 210-496-5300, ext. 214 bthomae@txco.com or Media: Paul Hart, 210-496-5300, ext. 264 pdhart@txco.com -----END PRIVACY-ENHANCED MESSAGE-----