Tuesday, August 12, 2003 11:07:32 AM
Mission Resources Updates Drilling Progress, Announces Second Quarter Earnings and Guidance for Third-Quarter and Total Year 2003 and Updates Hedging Position
HOUSTON--(BUSINESS WIRE)--Aug. 12, 2003--Mission Resources Corporation (NASDAQ:MSSN) today announced further details regarding its 2003 drilling program, a Permian Basin capital update, second quarter earnings and certain financial guidance for the third quarter and full year 2003. Also, an updated table of current hedges is being provided that includes recently executed gas collars for 2005.
"We are very pleased with the initial results of our 2003 drilling program and the ongoing development activities in the Permian Basin," said Robert L. Cavnar, Mission's chairman, president and chief executive officer. "Our internal estimates indicate that our program has successfully replaced production during the first half of 2003, and we expect our 2004 production levels to significantly increase as a result of these first wells. We are continuing to execute our drilling program as well as continuing our efforts to further strengthen Mission's balance sheet."
Drilling Program Update: We have drilled seven wells of our thirteen well 2003 drilling program (one additional well was completed since June 30). Listed below is an update on the five successful projects:
-- Completion operations have started at the previously announced
discovery well in the Marg howei sand in South Louisiana. In
addition to finding pay in the Marg howei sand, the well is
also successful in the Camerina sand. This well is being
completed as a dual zone completion with anticipated gross
production rates of 5 - 15 million cubic feet of gas per day
("MMcf/d"). The Company expects this work to be completed by
early September 2003 with first production immediately
thereafter. Mission holds a 68% working interest in the
Camerina zone and a 77% working interest in the Marg howei
zone.
-- The Mission Resources JL&S #145 in the West Lake Verret Field,
St. Martin Parish, Louisiana, was completed in the "H4" Sand
for a gross production rate of 1.4 million cubic feet
equivalent per day ("Mmcfe/d") at 780 psi flowing tubing
pressure. Mission is the operator of this well and holds a
100% working interest.
-- At the Fontenot #1 in the Reddell Field, Evangeline Parish,
Louisiana, the Lower Wilcox formation tested gas at a gross
rate of 1.1 MMcf/d with 420 psi flowing tubing pressure and is
expected to improve with continued production. The Upper
Wilcox formation tested at a gross rate of .5 MMcf/d with 405
psi flowing tubing pressure. Based on pressure transient
analysis, the Upper Wilcox formation appears to be skin
damaged in the near wellbore region and a stimulation
procedure scheduled for mid-August 2003 should increase gross
production to approximately 2 - 5 MMcf/d. Mission holds a 15%
working interest in this field.
-- The Cabs 2-29 in Beckham County, Oklahoma, is currently
producing at a gross rate of 1.4 MMcfe/d. Mission holds a 10%
working interest in this well.
-- As discussed in our June 30th press release, we drilled the
Eugene Island 284 D-1, an exploratory well located in Federal
waters of the Gulf of Mexico, to a total measured depth of
5,671 feet. The primary objective, the 3500 Stray Sand, flow
tested gas and will be developed with directional wells having
anticipated gross production rates of 7 - 12 Mmcf/d per well.
The operator, Forest Oil Corporation, plans to set a platform
later this year and drill up to five additional development
wells with production scheduled for late first quarter 2004.
Mission holds a 7% working interest in this field.
Mission Resources is currently participating in drilling two exploratory wells in Texas. At the Unit Petroleum Bluntzer #1 well in Goliad County, intermediate casing has been set to 9,800 feet. This well, in which Mission holds a 20% working interest, will be drilled to a total depth of 16,500 feet to test Lower Wilcox objectives. In Hidalgo County, Mission holds a 30% working interest in the United Resources Blackstone #1 well that is currently drilling at 11,000 feet. This well is scheduled to drill to 18,500 feet to test Middle Vicksburg objectives. Both of these wells are anticipated to be at total depth within 30 to 45 days.
We are currently building location at our Davis #1 well in the Backridge Field, Cameron Parish, Louisiana, for a 15,000 foot test of the Abbeville 2 Sand objective scheduled to spud in early September 2003. Mission plans to hold an approximately 60% working interest at the casing point. In the Offshore Region, we expect to participate in drilling two wells in South Marsh Island Block 142, Federal Offshore Gulf of Mexico, starting in late August or early September 2003. Mission holds a 31% working interest in this block. Additionally, at the West Lake Verret Field we are permitting the JL&S #146 well in which Mission holds a 100% working interest. This well is anticipated to target shallow oil zones in our on-going development of this field.
Permian Basin Capital Update: In the Permian Basin, we are very encouraged with the results of two development drilling programs. In Yoakum County, Texas, Mission holds a 36% working interest in the Brahaney Unit. A ten-well infill program has recently been completed resulting in an average initial gross production rate of approximately 50 barrels of oil per day ("Bo/d") per well. In Ector County, Texas, Mission holds a 25% total net revenue interest in the TXL North Unit, which is currently being down-spaced to 10 acres. The average initial gross production rate for the 15 wells drilled to date is approximately 60 Bo/d per well.
Net Earnings: The Company reported a net loss for the second quarter 2003 of $2.9 million or $0.13 per share - diluted compared to a net loss of $6.0 million or $0.25 per share - diluted in the second quarter of 2002. The second quarter ended June 30, 2002 included a $2.7 million loss on the sale of Mission's Ecuador properties and a $2.9 million loss on hedge ineffectiveness.
Net income for the six months ended June 30, 2003 was $7.7 million or $0.33 per share - diluted compared to a net loss of $15.4 million or $0.65 per share - diluted for the same period of 2002. The 2003 period includes a $22.4 million ($14.5 million after tax) non-cash gain related to the purchase in March of $97.6 million of our 10 7/8% notes at a discount to par, and a $1.7 million loss, net of taxes, due to the cumulative effect of change in accounting principle attributable to SFAS No. 143, Accounting for Asset Retirement Obligations.
Production and Revenue: Production for the second quarter of 2003 averaged 10.3 thousand equivalent oil barrels per day ("Mboe/d") and was below the 2002 level of 16.4 Mboe/d. This decrease reflects the asset sales closed in the last half of 2002 and the first quarter of 2003. Second quarter production consisted of 6.2 thousand Bo/d and 24.3 Mmcf/d. The average realized oil price, including the effect of hedges, for the second quarter of 2003 was $25.81 per barrel, an increase of 14% over the $22.60 per barrel realized oil price in the same quarter of 2002. The average realized gas price, including the effect of hedges, in the second quarter of 2003 was $4.42 per Mcf, a 36% increase over the average gas price of $3.25 per Mcf realized in the same quarter of 2002. Oil and gas revenues for the second quarter of 2003 were $24.4 million compared to $31.9 million in the second quarter of 2002.
Earnings before Interest, Taxes and Non-Cash Items and Discretionary Cash Flow: Earnings before interest, taxes and non-cash items for the second quarter of 2003 totaled $10.9 million when compared to the same measure for the second quarter of 2002 of $15.6 million. Discretionary cash flow for the second quarter 2003 totaled $5.0 million compared to $8.6 million in the second quarter of 2002. See the attached schedule for a reconciliation of net income to earnings before interest, taxes and non-cash items and of net cash provided by operating activities to discretionary cash flow.
Hedging Update: Recently Mission entered into gas collars for 1,000 MMBtu per day for the calendar year of 2005 with a floor price of $4.25 per MMBtu and an average ceiling price of $5.28 per MMBtu. See the attached schedule for a detailed list of all current hedges.
Outlook for Third Quarter 2003: Guidance on performance for the third quarter of 2003 follows below:
Estimated Daily Production Daily Average
------------------------------- ---------------------
Crude Oil (Barrels) 5,700 - 6,200
Natural Gas (Mmcf) 23 - 27
Total (Mmcfe) 58 - 63
Total (Boe) 9,700 - 10,500
------------------------------- ---------------------
Operating expenses Per Mcfe Per Boe
------------------------------- --------------------- ----------------
Lease operating expense $1.45 - $1.55 $8.70 - $9.30
Taxes other than income $0.35 - $0.40 $2.10 - $2.40
Depreciation, depletion and
amortization $1.55 - $1.65 $9.30 - $9.90
General and administrative $0.40 - $0.45 $2.40 - $2.70
Cash Interest expense (a) $5.8 - $6.1 million
Federal income tax rate 35 percent, all
deferred
------------------------------- --------------------- ----------------
(a) Excludes noncash interest expense of approximately $700,000
Outlook for Full Year 2003: Guidance on performance for the full year of 2003 is as follows:
Estimated Daily Production Daily Average
------------------------------- ---------------------
Crude Oil (Barrels) 5,800 - 6,100
Natural Gas (Mmcf) 25 - 30
Total (Mmcfe) 60 - 65
Total (Boe) 10,000 - 10,800
------------------------------- ---------------------
Operating expenses Per Mcfe Per Boe
------------------------------- --------------------- ----------------
Lease operating expense $1.45 - $1.55 $8.70 - $9.30
Taxes other than income $0.37 - $0.42 $2.22 - $2.52
Depreciation, depletion and
amortization $1.55 - $1.65 $9.30 - $9.90
General and administrative $0.43 - $0.48 $2.58 - $2.88
Cash Interest expense (b) $23 - $25 million
Federal income tax rate 35 percent, all
deferred
------------------------------- --------------------- ----------------
(b) Excludes noncash interest expense of approximately $1.8 million.
Conference Call Information: Mission will hold its quarterly conference call to discuss second quarter 2003 results on Tuesday, August 12, 2003 at 10:00 a.m. Central Time. To participate, dial 877/894-9681 a few minutes before the call begins. Please reference Mission Resources, conference ID 1685418. The call will also be broadcast live over the Internet from our website at www.mrcorp.com. A replay of the conference call will be available approximately two hours after the end of the call. It will be available until Tuesday, August 26, 2003. To access the replay, dial 800/642-1687 and reference conference ID 1685418. In addition, the call will also be archived on the Company's website.
About Mission Resources: Mission Resources Corporation is a Houston-based independent exploration and production company that drills for, acquires, develops, and produces natural gas and crude oil in East Texas, the Permian Basin of West Texas, along the Texas and Louisiana Gulf Coast and in the Gulf of Mexico.
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are our estimate of the sufficiency of our existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, the uncertainties involved in estimating quantities of proved oil and natural gas reserves, in prospect development and property acquisitions and in projecting future rates of production, the timing of development expenditures and drilling of wells, and the operating hazards attendant to the oil and gas business. In particular, careful consideration should be given to cautionary statements made in the various reports the Company has filed with the Securities and Exchange Commission. Mission undertakes no duty to update or revise these forward-looking statements.
MISSION RESOURCES
STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
REVENUES:
Oil revenues $ 14,662 $ 20,451 $ 28,963 $ 39,008
Gas revenues 9,776 11,458 21,212 21,240
Gain on extinguishment of
debt - - 22,375 -
Interest and other income
(expense) 187 (3,643) 722 (9,682)
-------- -------- -------- --------
24,625 28,266 73,272 50,566
-------- -------- -------- --------
COSTS AND EXPENSES:
Lease operating expense 8,364 11,185 17,254 24,349
Taxes other than income 2,152 2,796 4,845 4,729
Transportation costs 102 61 192 138
Asset retirement obligation
accretion expense 343 - 688 -
Loss on asset sales - 2,719 - 2,719
Depreciation, depletion and
amortization 8,904 10,924 17,926 22,199
General and administrative
expenses 2,860 2,433 5,432 5,002
Interest expense 6,432 7,369 12,459 15,055
-------- -------- -------- --------
29,157 37,487 58,796 74,191
-------- -------- -------- --------
INCOME (LOSS) BEFORE TAXES AND
CHANGE IN ACCTG METHOD (4,532) (9,221) 14,476 (23,625)
Income tax expense (benefit)
Current - - 75 -
Deferred (1,586) (3,228) 4,992 (8,269)
-------- -------- -------- --------
(1,586) (3,228) 5,067 (8,269)
-------- -------- -------- --------
INCOME (LOSS) BEFORE CHANGE IN
ACCOUNTING METHOD $ (2,946) $ (5,993) $ 9,409 $(15,356)
-------- -------- -------- --------
Cumulative effect of a change
in accounting method, net of
deferred tax - - (1,736) -
NET INCOME (LOSS) $ (2,946) $ (5,993) $ 7,673 $(15,356)
======== ======== ======== ========
Earnings (loss) per share
before change in acctg
method ($0.13) ($0.25) $0.40 ($0.65)
Earnings (loss) per share
before change in acctg
method - diluted (1) ($0.13) ($0.25) $0.40 ($0.65)
Earnings (loss) per share ($0.13) ($0.25) $0.33 ($0.65)
Earnings (loss) per share -
diluted (1) ($0.13) ($0.25) $0.33 ($0.65)
Weighted avg. common shares
outstanding 23,508 23,586 23,508 23,586
Weighted avg. common shares
outstanding - diluted 23,508 23,586 23,594 23,586
Discretionary cash flow (2) $ 5,014 $ 8,603 $ 10,620 $ 13,000
Earnings before interest,
taxes and non-cash items (3) $ 10,939 $ 15,592 $ 22,758 $ 26,452
(1) Due to a potential antidilutive effect in loss periods, weighted
average common shares outstanding were used for periods with a
loss.
(2) Discretionary cash flows consists of net income excluding non-cash
items. Non-cash items include depreciation, depletion and
amortization, compensation expense related to stock options, gain
(loss) due to hedge ineffectiveness (FAS 133), gain (loss) on
interest rate swap, amortization of debt issue costs, amortization
of bond premium, gain on extinguishment of debt, asset retirement
accretion expense, receivable write-offs, loss on asset sales,
cumulative effect of a change in accounting method and deferred
taxes.
(3) Earnings before interest, taxes and non-cash items consist of
earnings before interest expense, taxes, and non-cash items
detailed in footnote (2).
MISSION RESOURCES
SUMMARY OPERATING INFORMATION
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
AVERAGE SALES PRICE, INCLUDING
THE EFFECT OF HEDGES:
Oil and condensate ($/Bbl) $ 25.81 $ 22.60 $ 25.43 $ 20.58
Gas ($/Mcf) $ 4.42 $ 3.25 $ 4.72 $ 2.96
Equivalent ($/Boe) $ 26.08 $ 21.37 $ 26.58 $ 19.50
AVERAGE SALES PRICE, EXCLUDING
THE EFFECT OF HEDGES:
Oil and condensate ($/Bbl) $ 28.60 $ 22.67 $ 29.74 $ 20.38
Gas ($/Mcf) $ 5.33 $ 3.25 $ 5.78 $ 2.79
Equivalent ($/Boe) $ 29.91 $ 21.42 $ 31.71 $ 18.98
AVERAGE DAILY PRODUCTION:
Oil and condensate (Bbls) 6,242 9,945 6,293 10,470
Gas (Mcf) 24,297 38,791 24,834 39,580
Equivalent (Boe) 10,292 16,410 10,432 17,067
Equivalent (Mcfe) 61,749 98,461 62,592 102,400
TOTAL PRODUCTION:
Oil and condensate (MBbls) 568 905 1,139 1,895
Gas (MMcf) 2,211 3,530 4,495 7,164
Equivalent (MBoe) 937 1,493 1,888 3,089
Equivalent (MMcfe) 5,619 8,960 11,329 18,534
OPERATING COSTS PER BOE:
Lease operating expense $ 8.93 $ 7.49 $ 9.14 $ 7.88
Taxes other than income $ 2.30 $ 1.87 $ 2.57 $ 1.53
General and administrative
expenses $ 3.05 $ 1.63 $ 2.88 $ 1.62
Depreciation, depletion, and
amortization (1) $ 9.35 $ 7.21 $ 9.35 $ 7.06
(1) Depreciation of furniture and fixtures and amortization of
intangibles is excluded.
MISSION RESOURCES
CONDENSED BALANCE SHEETS
(Amounts in thousands)
June 30, December 31,
2003 2002
----------- -----------
ASSETS:
Current assets $ 33,194 $ 32,426
Property, plant and equipment, net 336,809 300,719
Leasehold, furniture and equipment, net 2,599 2,096
Other assets 7,503 7,163
----------- -----------
$ 380,105 $ 342,404
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 41,340 $ 31,474
Long-term debt 207,426 225,000
Unamortized premium on issuance of
$125,000 bonds 1,289 1,431
Deferred tax liability 19,471 16,946
Other long-term liabilities, excluding
current portion 1,438 2,176
Asset retirement obligation, excluding
current portion 38,969 -
Stockholders' equity 77,213 69,572
Other comprehensive income (loss), net
of taxes (7,041) (4,195)
----------- -----------
$ 380,105 $ 342,404
=========== ===========
MISSION RESOURCES
CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Six Months Ended June 30,
------------------------
2003 2002
----------- -----------
OPERATING ACTIVITIES:
Net income (loss) $ 7,673 $ (15,356)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities 2,947 25,637
Net changes in operating assets and
liabilities (508) (12,264)
----------- -----------
Net cash provided by (used in) operating
activities 10,112 (1,983)
INVESTING ACTIVITIES:
Acquisition of oil and gas properties (453) (209)
Capital expenditures (14,858) (11,535)
Leasehold, furniture and equipment (783) (92)
Proceeds from sales of properties 3,170 10,563
----------- -----------
Net cash provided by (used in) investing
activities (12,924) (1,273)
FINANCING ACTIVITIES:
Proceeds from borrowings 80,000 21,000
Repurchase of notes (71,700) -
Payments of long term debt - (16,500)
Credit facility costs (4,420) (62)
----------- -----------
Net cash provided by financing activities 3,880 4,438
----------- -----------
Net increase in cash and cash equivalents 1,068 1,182
Cash and cash equivalents at beginning of
period 11,347 603
----------- -----------
Cash and cash equivalents at end of period $ 12,415 $ 1,785
=========== ===========
MISSION RESOURCES
NON-GAAP DISCLOSURE RECONCILIATION
(Amounts in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 4,616 $ 2,153 $ 10,112 $ (1,983)
Change in assets and
liabilities 398 3,731 508 12,264
Loss on asset sales - 2,719 - 2,719
-------- -------- -------- --------
DISCRETIONARY CASH FLOW (a) $ 5,014 $ 8,603 $ 10,620 $ 13,000
-------- -------- -------- --------
NET INCOME (LOSS) $ (2,946) $ (5,993) $ 7,673 $(15,356)
Interest expense (1) 5,925 6,989 12,063 13,452
Gain on interest rate
swap (1) - (295) (520) 255
Amort. of deferred
financing costs and bond
prem. (1) 507 675 916 1,348
Income tax expense
(benefit) (1,586) (3,228) 5,067 (8,269)
Depreciation, depletion and
amortization 8,904 10,924 17,926 22,199
Gain on extinguishment of
debt - - (22,375) -
Cumulative effect of a chg.
in acct. method, net of
tax - - 1,736 -
Asset retirement accretion
expense 343 - 688 -
Receivable write-offs (3) - 851 - 851
Loss on asset sales - 2,719 - 2,719
Amortization of stock
options (2) - 7 - 102
Loss (gain) due to hedge
ineffectiveness (3) (208) 2,943 (416) 9,151
-------- -------- -------- --------
EARNINGS BEFORE INTEREST,
TAXES AND NON-CASH ITEMS (a) $ 10,939 $ 15,592 $ 22,758 $ 26,452
-------- -------- -------- --------
NET INCOME (LOSS) $ (2,946) $ (5,993) $ 7,673 $(15,356)
Gain on extinguishment of
debt, net of tax - - (14,544) -
Cumulative effect of a chg.
in acct. method, net of
tax - - 1,736 -
-------- -------- -------- --------
NET LOSS BEFORE GAIN AND
CUMULATIVE CHANGE (b) $ (2,946) $ (5,993) $ (5,135) $(15,356)
-------- -------- -------- --------
(1) Included in interest expense
(2) Included in general and administrative expenses
(3) Included in interest and other income (expense)
(a) NOTE - Management believes that earnings before interest, taxes
and non-cash items and discretionary cash flow are relevant and
useful information, which are commonly used by analysts, investors
and other interested parties in the oil and gas industry.
Accordingly, we are disclosing this information to permit a more
comprehensive analysis of our operating performance and liquidity,
and as an additional measure of Mission's ability to meet its
future requirements for debt service, capital expenditures and
working capital. Earnings before interest, taxes and non-cash
items and discretionary cash flow should not be considered in
isolation or as a substitute for net income, cash flow provided by
operating activities or other income or cash flow data prepared in
accordance with generally accepted accounting principles ("GAAP")
or as a measure of our profitability or liquidity. Earnings before
interest, taxes and non-cash items and discretionary cash flow
exclude components that are significant in understanding and
assessing our results of operations and cash flows. In addition,
earnings before interest, taxes and non-cash items and
discretionary cash flow are not terms defined by GAAP and, as a
result, our measures of earnings before interest, taxes and non-
cash items and discretionary cash flow might not be comparable to
similarly titled measures used by other companies.
(b) NOTE - Management believes net loss before gain on extinguishment
of debt and cumulative effect of a change in accounting method is
relevant and useful information. We believe it gives a clearer
picture of the company's performance excluding material
non-recurring transactions. Accordingly, we are disclosing this
information to permit a more comprehensive analysis of our
operating performance. Net loss before gain on extinguishment of
debt and cumulative effect of a change in accounting method should
not be considered in isolation or as a substitute for net income
prepared in accordance with GAAP.
MISSION RESOURCES
HEDGE SCHEDULE
OIL GAS
Third Quarter 2003 Third Quarter 2003
3,000 bbls a day in a swap of 10,000 mmbtu a day in a collar of
$23.95 $3 to $4.10
500 bbls a day in a swap of 5,000 mmbtu a day in a collar of
$23.94 $3.56 to $4.11
Fourth Quarter 2003 Fourth Quarter 2003
3,000 bbls a day in a swap of 10,000 mmbtu a day in a collar of
$23.59 $3.00 to $4.65
500 bbls a day in a swap of 5,000 mmbtu a day in a collar of
$23.58 $3.73 to $4.32
--------------------------------------
First Quarter 2004 First Quarter 2004
2,500 bbl a day in a swap of 5,000 mmbtu a day in a collar of
$25.24 $3.90 to $5.25
3,000 mmbtu a day in a collar of
$4.50 to $5.61
Second Quarter 2004 Second Quarter 2004
2,500 bbl a day in a swap of 5,000 mmbtu a day in a collar of
$24.67 $3.70 to $4.08
Third Quarter 2004 Third Quarter 2004
2,500 bbl a day in a swap of 5,000 mmbtu a day in a collar of
$24.30 $3.70 to $4.04
Fourth Quarter 2004 Fourth Quarter 2004
2,500 bbl a day in a swap of 5,000 mmbtu a day in a collar of
$23.97 $3.85 to $4.23
--------------------------------------
First Quarter 2005
1,000 mmbtu a day in a collar of
$4.25 to $6.32
Second Quarter 2005
1,000 mmbtu a day in a collar of
$4.25 to $4.92
Third Quarter 2005
1,000 mmbtu a day in a collar of
$4.25 to $4.72
Fourth Quarter 2005
1,000 mmbtu a day in a collar of
$4.25 to $5.14
CONTACT: Mission Resources Corporation, Houston
Ann Kaesermann, 713-495-3100
investors@mrcorp.com
SOURCE: Mission Resources Corporation
HOUSTON--(BUSINESS WIRE)--Aug. 12, 2003--Mission Resources Corporation (NASDAQ:MSSN) today announced further details regarding its 2003 drilling program, a Permian Basin capital update, second quarter earnings and certain financial guidance for the third quarter and full year 2003. Also, an updated table of current hedges is being provided that includes recently executed gas collars for 2005.
"We are very pleased with the initial results of our 2003 drilling program and the ongoing development activities in the Permian Basin," said Robert L. Cavnar, Mission's chairman, president and chief executive officer. "Our internal estimates indicate that our program has successfully replaced production during the first half of 2003, and we expect our 2004 production levels to significantly increase as a result of these first wells. We are continuing to execute our drilling program as well as continuing our efforts to further strengthen Mission's balance sheet."
Drilling Program Update: We have drilled seven wells of our thirteen well 2003 drilling program (one additional well was completed since June 30). Listed below is an update on the five successful projects:
-- Completion operations have started at the previously announced
discovery well in the Marg howei sand in South Louisiana. In
addition to finding pay in the Marg howei sand, the well is
also successful in the Camerina sand. This well is being
completed as a dual zone completion with anticipated gross
production rates of 5 - 15 million cubic feet of gas per day
("MMcf/d"). The Company expects this work to be completed by
early September 2003 with first production immediately
thereafter. Mission holds a 68% working interest in the
Camerina zone and a 77% working interest in the Marg howei
zone.
-- The Mission Resources JL&S #145 in the West Lake Verret Field,
St. Martin Parish, Louisiana, was completed in the "H4" Sand
for a gross production rate of 1.4 million cubic feet
equivalent per day ("Mmcfe/d") at 780 psi flowing tubing
pressure. Mission is the operator of this well and holds a
100% working interest.
-- At the Fontenot #1 in the Reddell Field, Evangeline Parish,
Louisiana, the Lower Wilcox formation tested gas at a gross
rate of 1.1 MMcf/d with 420 psi flowing tubing pressure and is
expected to improve with continued production. The Upper
Wilcox formation tested at a gross rate of .5 MMcf/d with 405
psi flowing tubing pressure. Based on pressure transient
analysis, the Upper Wilcox formation appears to be skin
damaged in the near wellbore region and a stimulation
procedure scheduled for mid-August 2003 should increase gross
production to approximately 2 - 5 MMcf/d. Mission holds a 15%
working interest in this field.
-- The Cabs 2-29 in Beckham County, Oklahoma, is currently
producing at a gross rate of 1.4 MMcfe/d. Mission holds a 10%
working interest in this well.
-- As discussed in our June 30th press release, we drilled the
Eugene Island 284 D-1, an exploratory well located in Federal
waters of the Gulf of Mexico, to a total measured depth of
5,671 feet. The primary objective, the 3500 Stray Sand, flow
tested gas and will be developed with directional wells having
anticipated gross production rates of 7 - 12 Mmcf/d per well.
The operator, Forest Oil Corporation, plans to set a platform
later this year and drill up to five additional development
wells with production scheduled for late first quarter 2004.
Mission holds a 7% working interest in this field.
Mission Resources is currently participating in drilling two exploratory wells in Texas. At the Unit Petroleum Bluntzer #1 well in Goliad County, intermediate casing has been set to 9,800 feet. This well, in which Mission holds a 20% working interest, will be drilled to a total depth of 16,500 feet to test Lower Wilcox objectives. In Hidalgo County, Mission holds a 30% working interest in the United Resources Blackstone #1 well that is currently drilling at 11,000 feet. This well is scheduled to drill to 18,500 feet to test Middle Vicksburg objectives. Both of these wells are anticipated to be at total depth within 30 to 45 days.
We are currently building location at our Davis #1 well in the Backridge Field, Cameron Parish, Louisiana, for a 15,000 foot test of the Abbeville 2 Sand objective scheduled to spud in early September 2003. Mission plans to hold an approximately 60% working interest at the casing point. In the Offshore Region, we expect to participate in drilling two wells in South Marsh Island Block 142, Federal Offshore Gulf of Mexico, starting in late August or early September 2003. Mission holds a 31% working interest in this block. Additionally, at the West Lake Verret Field we are permitting the JL&S #146 well in which Mission holds a 100% working interest. This well is anticipated to target shallow oil zones in our on-going development of this field.
Permian Basin Capital Update: In the Permian Basin, we are very encouraged with the results of two development drilling programs. In Yoakum County, Texas, Mission holds a 36% working interest in the Brahaney Unit. A ten-well infill program has recently been completed resulting in an average initial gross production rate of approximately 50 barrels of oil per day ("Bo/d") per well. In Ector County, Texas, Mission holds a 25% total net revenue interest in the TXL North Unit, which is currently being down-spaced to 10 acres. The average initial gross production rate for the 15 wells drilled to date is approximately 60 Bo/d per well.
Net Earnings: The Company reported a net loss for the second quarter 2003 of $2.9 million or $0.13 per share - diluted compared to a net loss of $6.0 million or $0.25 per share - diluted in the second quarter of 2002. The second quarter ended June 30, 2002 included a $2.7 million loss on the sale of Mission's Ecuador properties and a $2.9 million loss on hedge ineffectiveness.
Net income for the six months ended June 30, 2003 was $7.7 million or $0.33 per share - diluted compared to a net loss of $15.4 million or $0.65 per share - diluted for the same period of 2002. The 2003 period includes a $22.4 million ($14.5 million after tax) non-cash gain related to the purchase in March of $97.6 million of our 10 7/8% notes at a discount to par, and a $1.7 million loss, net of taxes, due to the cumulative effect of change in accounting principle attributable to SFAS No. 143, Accounting for Asset Retirement Obligations.
Production and Revenue: Production for the second quarter of 2003 averaged 10.3 thousand equivalent oil barrels per day ("Mboe/d") and was below the 2002 level of 16.4 Mboe/d. This decrease reflects the asset sales closed in the last half of 2002 and the first quarter of 2003. Second quarter production consisted of 6.2 thousand Bo/d and 24.3 Mmcf/d. The average realized oil price, including the effect of hedges, for the second quarter of 2003 was $25.81 per barrel, an increase of 14% over the $22.60 per barrel realized oil price in the same quarter of 2002. The average realized gas price, including the effect of hedges, in the second quarter of 2003 was $4.42 per Mcf, a 36% increase over the average gas price of $3.25 per Mcf realized in the same quarter of 2002. Oil and gas revenues for the second quarter of 2003 were $24.4 million compared to $31.9 million in the second quarter of 2002.
Earnings before Interest, Taxes and Non-Cash Items and Discretionary Cash Flow: Earnings before interest, taxes and non-cash items for the second quarter of 2003 totaled $10.9 million when compared to the same measure for the second quarter of 2002 of $15.6 million. Discretionary cash flow for the second quarter 2003 totaled $5.0 million compared to $8.6 million in the second quarter of 2002. See the attached schedule for a reconciliation of net income to earnings before interest, taxes and non-cash items and of net cash provided by operating activities to discretionary cash flow.
Hedging Update: Recently Mission entered into gas collars for 1,000 MMBtu per day for the calendar year of 2005 with a floor price of $4.25 per MMBtu and an average ceiling price of $5.28 per MMBtu. See the attached schedule for a detailed list of all current hedges.
Outlook for Third Quarter 2003: Guidance on performance for the third quarter of 2003 follows below:
Estimated Daily Production Daily Average
------------------------------- ---------------------
Crude Oil (Barrels) 5,700 - 6,200
Natural Gas (Mmcf) 23 - 27
Total (Mmcfe) 58 - 63
Total (Boe) 9,700 - 10,500
------------------------------- ---------------------
Operating expenses Per Mcfe Per Boe
------------------------------- --------------------- ----------------
Lease operating expense $1.45 - $1.55 $8.70 - $9.30
Taxes other than income $0.35 - $0.40 $2.10 - $2.40
Depreciation, depletion and
amortization $1.55 - $1.65 $9.30 - $9.90
General and administrative $0.40 - $0.45 $2.40 - $2.70
Cash Interest expense (a) $5.8 - $6.1 million
Federal income tax rate 35 percent, all
deferred
------------------------------- --------------------- ----------------
(a) Excludes noncash interest expense of approximately $700,000
Outlook for Full Year 2003: Guidance on performance for the full year of 2003 is as follows:
Estimated Daily Production Daily Average
------------------------------- ---------------------
Crude Oil (Barrels) 5,800 - 6,100
Natural Gas (Mmcf) 25 - 30
Total (Mmcfe) 60 - 65
Total (Boe) 10,000 - 10,800
------------------------------- ---------------------
Operating expenses Per Mcfe Per Boe
------------------------------- --------------------- ----------------
Lease operating expense $1.45 - $1.55 $8.70 - $9.30
Taxes other than income $0.37 - $0.42 $2.22 - $2.52
Depreciation, depletion and
amortization $1.55 - $1.65 $9.30 - $9.90
General and administrative $0.43 - $0.48 $2.58 - $2.88
Cash Interest expense (b) $23 - $25 million
Federal income tax rate 35 percent, all
deferred
------------------------------- --------------------- ----------------
(b) Excludes noncash interest expense of approximately $1.8 million.
Conference Call Information: Mission will hold its quarterly conference call to discuss second quarter 2003 results on Tuesday, August 12, 2003 at 10:00 a.m. Central Time. To participate, dial 877/894-9681 a few minutes before the call begins. Please reference Mission Resources, conference ID 1685418. The call will also be broadcast live over the Internet from our website at www.mrcorp.com. A replay of the conference call will be available approximately two hours after the end of the call. It will be available until Tuesday, August 26, 2003. To access the replay, dial 800/642-1687 and reference conference ID 1685418. In addition, the call will also be archived on the Company's website.
About Mission Resources: Mission Resources Corporation is a Houston-based independent exploration and production company that drills for, acquires, develops, and produces natural gas and crude oil in East Texas, the Permian Basin of West Texas, along the Texas and Louisiana Gulf Coast and in the Gulf of Mexico.
This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are our estimate of the sufficiency of our existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, the uncertainties involved in estimating quantities of proved oil and natural gas reserves, in prospect development and property acquisitions and in projecting future rates of production, the timing of development expenditures and drilling of wells, and the operating hazards attendant to the oil and gas business. In particular, careful consideration should be given to cautionary statements made in the various reports the Company has filed with the Securities and Exchange Commission. Mission undertakes no duty to update or revise these forward-looking statements.
MISSION RESOURCES
STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
REVENUES:
Oil revenues $ 14,662 $ 20,451 $ 28,963 $ 39,008
Gas revenues 9,776 11,458 21,212 21,240
Gain on extinguishment of
debt - - 22,375 -
Interest and other income
(expense) 187 (3,643) 722 (9,682)
-------- -------- -------- --------
24,625 28,266 73,272 50,566
-------- -------- -------- --------
COSTS AND EXPENSES:
Lease operating expense 8,364 11,185 17,254 24,349
Taxes other than income 2,152 2,796 4,845 4,729
Transportation costs 102 61 192 138
Asset retirement obligation
accretion expense 343 - 688 -
Loss on asset sales - 2,719 - 2,719
Depreciation, depletion and
amortization 8,904 10,924 17,926 22,199
General and administrative
expenses 2,860 2,433 5,432 5,002
Interest expense 6,432 7,369 12,459 15,055
-------- -------- -------- --------
29,157 37,487 58,796 74,191
-------- -------- -------- --------
INCOME (LOSS) BEFORE TAXES AND
CHANGE IN ACCTG METHOD (4,532) (9,221) 14,476 (23,625)
Income tax expense (benefit)
Current - - 75 -
Deferred (1,586) (3,228) 4,992 (8,269)
-------- -------- -------- --------
(1,586) (3,228) 5,067 (8,269)
-------- -------- -------- --------
INCOME (LOSS) BEFORE CHANGE IN
ACCOUNTING METHOD $ (2,946) $ (5,993) $ 9,409 $(15,356)
-------- -------- -------- --------
Cumulative effect of a change
in accounting method, net of
deferred tax - - (1,736) -
NET INCOME (LOSS) $ (2,946) $ (5,993) $ 7,673 $(15,356)
======== ======== ======== ========
Earnings (loss) per share
before change in acctg
method ($0.13) ($0.25) $0.40 ($0.65)
Earnings (loss) per share
before change in acctg
method - diluted (1) ($0.13) ($0.25) $0.40 ($0.65)
Earnings (loss) per share ($0.13) ($0.25) $0.33 ($0.65)
Earnings (loss) per share -
diluted (1) ($0.13) ($0.25) $0.33 ($0.65)
Weighted avg. common shares
outstanding 23,508 23,586 23,508 23,586
Weighted avg. common shares
outstanding - diluted 23,508 23,586 23,594 23,586
Discretionary cash flow (2) $ 5,014 $ 8,603 $ 10,620 $ 13,000
Earnings before interest,
taxes and non-cash items (3) $ 10,939 $ 15,592 $ 22,758 $ 26,452
(1) Due to a potential antidilutive effect in loss periods, weighted
average common shares outstanding were used for periods with a
loss.
(2) Discretionary cash flows consists of net income excluding non-cash
items. Non-cash items include depreciation, depletion and
amortization, compensation expense related to stock options, gain
(loss) due to hedge ineffectiveness (FAS 133), gain (loss) on
interest rate swap, amortization of debt issue costs, amortization
of bond premium, gain on extinguishment of debt, asset retirement
accretion expense, receivable write-offs, loss on asset sales,
cumulative effect of a change in accounting method and deferred
taxes.
(3) Earnings before interest, taxes and non-cash items consist of
earnings before interest expense, taxes, and non-cash items
detailed in footnote (2).
MISSION RESOURCES
SUMMARY OPERATING INFORMATION
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
AVERAGE SALES PRICE, INCLUDING
THE EFFECT OF HEDGES:
Oil and condensate ($/Bbl) $ 25.81 $ 22.60 $ 25.43 $ 20.58
Gas ($/Mcf) $ 4.42 $ 3.25 $ 4.72 $ 2.96
Equivalent ($/Boe) $ 26.08 $ 21.37 $ 26.58 $ 19.50
AVERAGE SALES PRICE, EXCLUDING
THE EFFECT OF HEDGES:
Oil and condensate ($/Bbl) $ 28.60 $ 22.67 $ 29.74 $ 20.38
Gas ($/Mcf) $ 5.33 $ 3.25 $ 5.78 $ 2.79
Equivalent ($/Boe) $ 29.91 $ 21.42 $ 31.71 $ 18.98
AVERAGE DAILY PRODUCTION:
Oil and condensate (Bbls) 6,242 9,945 6,293 10,470
Gas (Mcf) 24,297 38,791 24,834 39,580
Equivalent (Boe) 10,292 16,410 10,432 17,067
Equivalent (Mcfe) 61,749 98,461 62,592 102,400
TOTAL PRODUCTION:
Oil and condensate (MBbls) 568 905 1,139 1,895
Gas (MMcf) 2,211 3,530 4,495 7,164
Equivalent (MBoe) 937 1,493 1,888 3,089
Equivalent (MMcfe) 5,619 8,960 11,329 18,534
OPERATING COSTS PER BOE:
Lease operating expense $ 8.93 $ 7.49 $ 9.14 $ 7.88
Taxes other than income $ 2.30 $ 1.87 $ 2.57 $ 1.53
General and administrative
expenses $ 3.05 $ 1.63 $ 2.88 $ 1.62
Depreciation, depletion, and
amortization (1) $ 9.35 $ 7.21 $ 9.35 $ 7.06
(1) Depreciation of furniture and fixtures and amortization of
intangibles is excluded.
MISSION RESOURCES
CONDENSED BALANCE SHEETS
(Amounts in thousands)
June 30, December 31,
2003 2002
----------- -----------
ASSETS:
Current assets $ 33,194 $ 32,426
Property, plant and equipment, net 336,809 300,719
Leasehold, furniture and equipment, net 2,599 2,096
Other assets 7,503 7,163
----------- -----------
$ 380,105 $ 342,404
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 41,340 $ 31,474
Long-term debt 207,426 225,000
Unamortized premium on issuance of
$125,000 bonds 1,289 1,431
Deferred tax liability 19,471 16,946
Other long-term liabilities, excluding
current portion 1,438 2,176
Asset retirement obligation, excluding
current portion 38,969 -
Stockholders' equity 77,213 69,572
Other comprehensive income (loss), net
of taxes (7,041) (4,195)
----------- -----------
$ 380,105 $ 342,404
=========== ===========
MISSION RESOURCES
CONDENSED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Six Months Ended June 30,
------------------------
2003 2002
----------- -----------
OPERATING ACTIVITIES:
Net income (loss) $ 7,673 $ (15,356)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities 2,947 25,637
Net changes in operating assets and
liabilities (508) (12,264)
----------- -----------
Net cash provided by (used in) operating
activities 10,112 (1,983)
INVESTING ACTIVITIES:
Acquisition of oil and gas properties (453) (209)
Capital expenditures (14,858) (11,535)
Leasehold, furniture and equipment (783) (92)
Proceeds from sales of properties 3,170 10,563
----------- -----------
Net cash provided by (used in) investing
activities (12,924) (1,273)
FINANCING ACTIVITIES:
Proceeds from borrowings 80,000 21,000
Repurchase of notes (71,700) -
Payments of long term debt - (16,500)
Credit facility costs (4,420) (62)
----------- -----------
Net cash provided by financing activities 3,880 4,438
----------- -----------
Net increase in cash and cash equivalents 1,068 1,182
Cash and cash equivalents at beginning of
period 11,347 603
----------- -----------
Cash and cash equivalents at end of period $ 12,415 $ 1,785
=========== ===========
MISSION RESOURCES
NON-GAAP DISCLOSURE RECONCILIATION
(Amounts in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2003 2002 2003 2002
-------- -------- -------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ 4,616 $ 2,153 $ 10,112 $ (1,983)
Change in assets and
liabilities 398 3,731 508 12,264
Loss on asset sales - 2,719 - 2,719
-------- -------- -------- --------
DISCRETIONARY CASH FLOW (a) $ 5,014 $ 8,603 $ 10,620 $ 13,000
-------- -------- -------- --------
NET INCOME (LOSS) $ (2,946) $ (5,993) $ 7,673 $(15,356)
Interest expense (1) 5,925 6,989 12,063 13,452
Gain on interest rate
swap (1) - (295) (520) 255
Amort. of deferred
financing costs and bond
prem. (1) 507 675 916 1,348
Income tax expense
(benefit) (1,586) (3,228) 5,067 (8,269)
Depreciation, depletion and
amortization 8,904 10,924 17,926 22,199
Gain on extinguishment of
debt - - (22,375) -
Cumulative effect of a chg.
in acct. method, net of
tax - - 1,736 -
Asset retirement accretion
expense 343 - 688 -
Receivable write-offs (3) - 851 - 851
Loss on asset sales - 2,719 - 2,719
Amortization of stock
options (2) - 7 - 102
Loss (gain) due to hedge
ineffectiveness (3) (208) 2,943 (416) 9,151
-------- -------- -------- --------
EARNINGS BEFORE INTEREST,
TAXES AND NON-CASH ITEMS (a) $ 10,939 $ 15,592 $ 22,758 $ 26,452
-------- -------- -------- --------
NET INCOME (LOSS) $ (2,946) $ (5,993) $ 7,673 $(15,356)
Gain on extinguishment of
debt, net of tax - - (14,544) -
Cumulative effect of a chg.
in acct. method, net of
tax - - 1,736 -
-------- -------- -------- --------
NET LOSS BEFORE GAIN AND
CUMULATIVE CHANGE (b) $ (2,946) $ (5,993) $ (5,135) $(15,356)
-------- -------- -------- --------
(1) Included in interest expense
(2) Included in general and administrative expenses
(3) Included in interest and other income (expense)
(a) NOTE - Management believes that earnings before interest, taxes
and non-cash items and discretionary cash flow are relevant and
useful information, which are commonly used by analysts, investors
and other interested parties in the oil and gas industry.
Accordingly, we are disclosing this information to permit a more
comprehensive analysis of our operating performance and liquidity,
and as an additional measure of Mission's ability to meet its
future requirements for debt service, capital expenditures and
working capital. Earnings before interest, taxes and non-cash
items and discretionary cash flow should not be considered in
isolation or as a substitute for net income, cash flow provided by
operating activities or other income or cash flow data prepared in
accordance with generally accepted accounting principles ("GAAP")
or as a measure of our profitability or liquidity. Earnings before
interest, taxes and non-cash items and discretionary cash flow
exclude components that are significant in understanding and
assessing our results of operations and cash flows. In addition,
earnings before interest, taxes and non-cash items and
discretionary cash flow are not terms defined by GAAP and, as a
result, our measures of earnings before interest, taxes and non-
cash items and discretionary cash flow might not be comparable to
similarly titled measures used by other companies.
(b) NOTE - Management believes net loss before gain on extinguishment
of debt and cumulative effect of a change in accounting method is
relevant and useful information. We believe it gives a clearer
picture of the company's performance excluding material
non-recurring transactions. Accordingly, we are disclosing this
information to permit a more comprehensive analysis of our
operating performance. Net loss before gain on extinguishment of
debt and cumulative effect of a change in accounting method should
not be considered in isolation or as a substitute for net income
prepared in accordance with GAAP.
MISSION RESOURCES
HEDGE SCHEDULE
OIL GAS
Third Quarter 2003 Third Quarter 2003
3,000 bbls a day in a swap of 10,000 mmbtu a day in a collar of
$23.95 $3 to $4.10
500 bbls a day in a swap of 5,000 mmbtu a day in a collar of
$23.94 $3.56 to $4.11
Fourth Quarter 2003 Fourth Quarter 2003
3,000 bbls a day in a swap of 10,000 mmbtu a day in a collar of
$23.59 $3.00 to $4.65
500 bbls a day in a swap of 5,000 mmbtu a day in a collar of
$23.58 $3.73 to $4.32
--------------------------------------
First Quarter 2004 First Quarter 2004
2,500 bbl a day in a swap of 5,000 mmbtu a day in a collar of
$25.24 $3.90 to $5.25
3,000 mmbtu a day in a collar of
$4.50 to $5.61
Second Quarter 2004 Second Quarter 2004
2,500 bbl a day in a swap of 5,000 mmbtu a day in a collar of
$24.67 $3.70 to $4.08
Third Quarter 2004 Third Quarter 2004
2,500 bbl a day in a swap of 5,000 mmbtu a day in a collar of
$24.30 $3.70 to $4.04
Fourth Quarter 2004 Fourth Quarter 2004
2,500 bbl a day in a swap of 5,000 mmbtu a day in a collar of
$23.97 $3.85 to $4.23
--------------------------------------
First Quarter 2005
1,000 mmbtu a day in a collar of
$4.25 to $6.32
Second Quarter 2005
1,000 mmbtu a day in a collar of
$4.25 to $4.92
Third Quarter 2005
1,000 mmbtu a day in a collar of
$4.25 to $4.72
Fourth Quarter 2005
1,000 mmbtu a day in a collar of
$4.25 to $5.14
CONTACT: Mission Resources Corporation, Houston
Ann Kaesermann, 713-495-3100
investors@mrcorp.com
SOURCE: Mission Resources Corporation
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