HOUSTON, Jan. 24 /PRNewswire-FirstCall/ -- Ocean Energy, Inc. (NYSE: OEI)
announced today that growth in production volumes and higher commodity prices
during the first half of 2001 contributed to the best annual financial
performance in its history. The company reported 2001 net income of
$278 million or $1.55 per diluted share, excluding special items, compared to
2000 net income of $228 million or $1.31 per diluted share, excluding special
items.
Fourth quarter net income for the period was $23 million or $0.13 per
diluted share, excluding special items. This compares to net income of
$80 million or $0.46 per diluted share, excluding special items, for the
fourth quarter of 2000.
"Ocean Energy had an excellent year from both an operational and financial
perspective, with significant exploration success and double-digit annual
production growth. In addition, Ocean has continued to generate one of the
industry's highest reserve replacement rates and one of the lowest drill-bit
finding and development costs," said James T. Hackett, chairman, president and
chief executive officer. "While the second half of 2001 reflected the
negative impact of lower commodity prices, we enter 2002 confident that we can
retain a strong internal growth profile even in a period of reduced capital
expenditures."
Discretionary cash flow (income from continuing operations before DD&A,
impairments, deferred taxes and other non-cash operating activities) for the
full year was $824 million for 2001 compared to $698 million in 2000.
Discretionary cash flow per diluted share for the same period was
$4.62 compared to $3.99 for the previous year. For the fourth quarter,
discretionary cash flow was $132 million, compared to $209 million in 2000.
Discretionary cash flow per diluted share for the period totaled $0.73
compared to $1.19 in the prior fourth quarter.
Total production for the year was 54 million barrels of oil equivalent
(BOE). Average daily production for the year was 443 million cubic feet of
natural gas and 75 thousand barrels of oil, or 149 thousand BOE per day.
Average daily production for the fourth quarter was 405 million cubic feet of
gas and 77 thousand barrels of oil, or 145 thousand BOE per day. These
production rates represent a ten percent and four percent increase,
respectively, over the comparable year and quarter in 2000.
Significant results include:
-- Replaced annual production with a three-fold increase in new reserves -
- Ocean ended the year with a 387 percent reserve replacement rate and
a finding and development cost of $5.52 per BOE. Excluding
acquisitions, reserve replacement and finding and development costs
were 308 percent and $5.11 per BOE, respectively. Three-year average
total finding and development costs are $5.08 per barrel of oil
equivalent.
-- Increased production volumes by 10 percent -- Higher production volumes
were primarily attributable to increased exploration and exploitation
success from Ocean's Gulf of Mexico shelf properties and the Zafiro
field in Equatorial Guinea as well as contributions from two niche
acquisitions that boosted onshore production in Texas and Louisiana.
-- Growing presence in the deepwater Gulf of Mexico -- Ocean now ranks
among the top ten companies in terms of leasehold in this prolific
worldwide oil and gas basin with interests in approximately 1.7 million
gross acres covering approximately 300 blocks. During the year, the
company participated in the drilling of 29 deepwater exploratory and
development wells. Three discoveries, Magnolia in Garden Banks Block
783, Zia in Mississippi Canyon Block 496, and Red Hawk in Garden Banks
Block 877, have now been deemed commercial for future development. In
2002, Ocean plans to drill seven to ten deepwater exploratory wells
from its Gulf of Mexico prospect inventory. In addition, production
will begin from the deepwater Nansen field in the first quarter and
from the neighboring Boomvang field in the East Breaks complex in the
second quarter of 2002.
-- Strengthened international position -- Ocean increased its asset base
with the addition of interests in two deepwater blocks offshore Brazil
-- Block BM-C-15 and Block BM-S-22 -- and acquisition of interests in
offshore Block 10 in Angola adjacent to Block 24, where the company is
currently conducting exploration activities. The company also made a
significant discovery on its East Zeit concession located offshore
Egypt in the Gulf of Suez that almost doubled estimated proved reserves
from the field.
The following is a reconciliation of net income excluding special items to
net income:
Three Months Ended Year Ended
December 31, December 31,
2001 2000 2001 2000
(Amounts in Thousands Except Per Share Data)
Net Income (Excluding
Special Items) $ 22,523 $ 79,907 $277,755 $228,373
Net Income (Excluding
Special Items) per
Diluted Share 0.13 0.46 1.55 1.31
Effect of Special
Items, Net of Income Tax:
Extraordinary Loss
on Early Extinguishment
of Debt (1,373) --- (3,973) ---
Impairment of Oil and
Gas Properties --- (13,043) --- (13,043)
Merger and Integration
Costs --- --- --- (2,127)
(1,373) (13,043) (3,973) (15,170)
Net Income $ 21,150 $ 66,864 $273,782 $213,203
Net Income per Diluted
Share $ 0.12 $ 0.38 $ 1.53 $ 1.22
Guidance on Year 2002 Estimates
The tables following this narrative set forth the Company's current
estimates of its operating statistics for the first quarter of 2002 and full
year ending December 31, 2002. These estimates are based on the Company's
historical operating performance and trends, estimates of oil and gas reserves
as of December 31, 2001 and the Company's planned capital and operating budget
for 2002.
2002 Estimated Production (A)
First Quarter Full Year
Gas Production 35.5 Bcf 157 Bcf
Gas Price Differentials (B) $ (0.10) - (0.20) $ (0.10) - (0.20)
Oil and NGL Production 7.1 MMBbls 32.9 MMBbls
Oil Price Differentials (B) $ (4.00) - (5.00) $ (4.00) - (5.00)
Daily Production 145 MBOE 162 MBOE
(A) These estimates represent the approximate mid-point of the range of
the Company's estimates of the above information. Actual results
may differ materially from these estimates.
(B) For purposes of the 2002 estimates, the Company has assumed price
differentials due to location, quality and other factors, excluding
the effects of derivative financial instruments. Gas price
differentials are stated as premiums (discounts) from Henry Hub
pricing and oil price differentials are stated as premiums
(discounts) from NYMEX pricing.
Oil and gas prices have fluctuated significantly in recent years in
response to numerous economic, political and environmental factors, and the
Company expects that commodity prices will continue to fluctuate significantly
in the future. Changes in commodity prices could significantly affect the
Company's expected operating results. In addition to directly affecting
revenues, price changes can affect expected production because production
estimates necessarily assume that oil and gas can profitably be produced at
the assumed pricing levels. In addition to the above pricing assumptions, the
2002 estimates were prepared assuming that demand, curtailment, producibility
and general market conditions for the Company's oil and gas for 2002 will be
substantially similar to those experienced during the year ended
December 31, 2001. No material assumptions concerning acquisition or
divestment activities are included.
For purposes of the 2002 estimates, a $1.00 per Bbl change in the annual
average price of oil and a $0.10 per Mcf change in the annual average price of
natural gas will result in changes in the Company's estimated annual net
income of $15 million ($0.08 per diluted share) and $8 million ($0.05 per
diluted share), respectively, in each case including a $1 million change in
annual production taxes.
From time to time, the Company has utilized and expects to continue to
utilize derivative financial instruments with respect to a portion of its oil
and gas production to achieve a more predictable cash flow by reducing its
exposure to price fluctuations. Certain of these derivative financial
instruments have been designated and have qualified as cash flow hedges. The
Company utilizes additional financial instruments that have not been
designated as cash flow hedges even though they do protect the Company from
changes in commodity prices. These additional financial instruments are marked
to market quarterly with the resulting changes in fair value recorded in
revenues and are not expected to have a material effect on the Company's
financial results for the year.
The Company has in place collars for oil and gas for the period January
through December 2002 at contracted volumes of 15 MBbl of crude oil per day
with a floor of $23.00 per Bbl and a weighted average ceiling of $28.03 per
Bbl and 140 MMcf of gas per day with a weighted average floor price of
$2.82 per Mcf and a weighted average ceiling price of $4.07 per Mcf. In
addition, a related trust has a swap agreement covering 13.5 MMcf of gas per
day at a price of $4.12 per Mcf for 2002 and additional amounts at various
prices through 2005. Although the Company is not a party to this financial
instrument, under Statement of Financial Accounting Standards No. 133
("SFAS 133"), Accounting for Derivative Instruments and Hedging Activities the
Company is required to account for this swap as an embedded derivative
financial instrument and include its effects in the Company's results of
operations. The Company has also entered into two crude oil basis swap
contracts to fix the sales price differential between WTI and Brent. The
contracts, which extend through May 2002 and relate to 20 MBbl per day,
provide that the Company receives/pays a net settlement equal to the spread
between WTI and Brent, less $1.29 per Bbl. Depending upon various
circumstances, the Company may periodically enter into additional derivative
financial instruments that would hedge expected crude oil and natural gas
production.
The Company has entered into interest rate swap agreements to hedge the
fair value of its 7 5/8% senior notes due July 2005 and its 77/8% senior notes
due August 2003. Under the terms of the agreements, the counterparties pay
the Company a weighted average fixed annual rate of 7.74 percent on the
notional amounts and the Company pays the counterparties a variable annual
rate equal to the six-month LIBOR rate plus a weighted average rate of
2.73 percent. These swap agreements have been designated as fair value hedges
pursuant to SFAS No. 133 and remain in effect through the maturity dates of
the related notes.
2002 Estimates of Operating Costs (A)
First Quarter Full Year
Operating costs/BOE:
Lease operating expense,
excluding production taxes $ 5.00 $ 5.00
Production taxes 0.60 0.60
General and administrative
expense 0.60 0.60
Interest expense 1.30 1.30
Depreciation, depletion
and amortization 6.50 6.50
$ 14.00 $ 14.00
Effective tax rate 44% to 48% 44% to 48%
(75% - 80% deferred)
Preferred dividends $0.8 million $3.3 million
Common dividends (B) $0.04 per share $0.16 per share
(A) These estimates represent the approximate mid-point of the range of
the Company's estimates of the above information. Actual results may
differ materially from these estimates.
(B) The declaration of common stock dividends is discretionary and will
be subject to determination by the Company's Board of Directors.
2002 Estimated Capital Expenditures
Gulf of Mexico International U.S. Onshore Total
$300 to $250 to $50 to $600 to
$350 million $275 million $75 million $700 million
Approximately 45 percent to 55 percent of the capital spending program is
estimated to be spent for exploratory projects. The spending will be funded
out of Ocean's discretionary cash flow based on anticipated commodity prices,
and is subject to change if market conditions shift or new opportunities are
identified.
The Company capitalizes interest expense and certain employee-related
costs that are directly attributable to oil and gas operations. The estimated
capital expenditures for 2002 include forecasted capitalized interest of
$40 million and forecasted capitalized employee-related costs of $60 million.
Defined Terms
Natural gas is stated in billion cubic feet ("Bcf"), million cubic feet
("MMcf"), or thousand cubic feet ("Mcf"). Oil, condensate and natural gas
liquids ("NGL") are stated in millions of barrels ("MMBbls") or thousand
barrels ("MBbls"). MBOE and BOE represent one thousand barrels and one barrel
of oil equivalent, respectively, with six Mcf of gas converted to one barrel
of oil equivalent.
Ocean Energy, Inc.
Condensed Consolidated Statements of Operations
(Amounts in Thousands Except Per Share Data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2001 2000 2001 2000
Revenues $ 217,348 $ 312,436 $1,255,466 $1,073,554
Costs of Operations:
Operating expenses 72,377 67,310 307,104 256,882
Depreciation,
depletion and
amortization 85,518 81,465 350,805 311,383
Impairment of oil
and gas properties --- 20,066 --- 20,066
General and
administrative 8,089 7,360 30,582 28,663
165,984 176,201 688,491 616,994
Operating Profit 51,364 136,235 566,975 456,560
Other (Income) Expense:
Interest expense 14,319 17,215 62,707 75,065
Merger and integration
costs --- --- --- 3,273
Interest income and
other 632 1,878 309 132
Income Before Income
Taxes 36,413 117,142 503,959 378,090
Income Tax Expense 13,890 50,278 226,204 164,887
Income Before
Extraordinary Loss 22,523 66,864 277,755 213,203
Extraordinary Loss,
Net of Income Taxes 1,373 --- 3,973 ---
Net Income 21,150 66,864 273,782 213,203
Preferred Stock
Dividends 813 813 3,250 3,250
Net Income
Available to Common
Stockholders $ 20,337 $ 66,051 $ 270,532 $ 209,953
Basic Earnings Per
Common Share:
Income Before
Extraordinary Loss $ 0.13 $ 0.39 $ 1.61 $ 1.26
Extraordinary Loss,
Net of Income Taxes (0.01) --- (0.02) ---
Net Income to
Common Stockholders $ 0.12 $ 0.39 $ 1.59 $ 1.26
Diluted Earnings Per
Common Share:
Income Before
Extraordinary Loss $ 0.13 $ 0.38 $ 1.55 $ 1.22
Extraordinary Loss,
Net of Income Taxes (0.01) --- (0.02) ---
Net Income $ 0.12 $ 0.38 $ 1.53 $ 1.22
Cash Dividends Declared
Per Common Share $ 0.04 $ 0.04 $ 0.16 $ 0.04
Weighted Average Number
of Common Shares
Outstanding:
Basic 171,433 167,372 170,178 167,144
Diluted 179,347 175,278 178,416 174,749
Ocean Energy, Inc.
Condensed Consolidated Balance Sheets
(Amounts in Thousands)
(Unaudited)
December 31, December 31,
2001 2000
Assets:
Current Assets $ 254,728 $ 324,554
Property, Plant and
Equipment, Net 3,149,286 2,367,950
Other Assets 65,164 197,896
Total Assets $3,469,178 $2,890,400
Liabilities and Stockholders' Equity:
Current Liabilities $ 375,294 $ 393,857
Long-Term Debt 1,282,981 1,032,564
Other Noncurrent
Liabilities 338,467 311,291
Stockholders' Equity 1,472,436 1,152,688
Total Liabilities and
Stockholders' Equity $3,469,178 $2,890,400
Ocean Energy, Inc.
Condensed Consolidated Statements of Cash Flows
(Amounts in Thousands)
(Unaudited)
Year Ended
December 31,
2001 2000
Operating Activities:
Net income $ 273,782 $ 213,203
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation, depletion and
amortization 350,805 311,383
Deferred income taxes 179,146 142,746
Extraordinary loss, net of taxes 3,973 ---
Impairment of oil and gas properties --- 20,066
Other 16,579 6,912
Changes in operating assets and
liabilities, net of acquisitions 36,517 (108,604)
Net Cash Provided By Operating Activities 860,802 585,706
Investing Activities:
Capital expenditures (876,946) (577,518)
Acquisition costs, net of cash acquired (236,199) (5,598)
Proceeds from sales of property, plant
and equipment 63,791 86,043
Other --- (9,295)
Net Cash Used In Investing Activities (1,049,354) (506,368)
Financing Activities:
Net proceeds from (payments on) borrowings 193,890 (252,879)
Proceeds from exercise of common stock
options 36,225 21,355
Dividends paid (30,453) (3,250)
Purchase of treasury stock (6,671) (32,217)
Premiums paid on debt buy back (4,984) ---
Increase in deferred revenue --- 74,947
Proceeds from conveyance of Section 29
credit properties --- 69,644
Other (2,488) 1,212
Net Cash Provided by (Used In)
Financing Activities 185,519 (121,188)
Decrease in Cash and Cash Equivalents (3,033) (41,850)
Cash and Cash Equivalents at Beginning
of Period 23,039 64,889
Cash and Cash Equivalents at End of
Period $ 20,006 $ 23,039
Ocean Energy, Inc.
Operational Information
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
2001 2000 2001 2000
Financial Data
(Dollars in Thousands):
Operating Profit:
Oil and Gas Operations $ 60,869 $145,177 $604,020 $491,630
Corporate $ (9,505) $ (8,942) $(37,045) $(35,070)
Depreciation, Depletion
and Amortization:
Oil and Gas Operations $ 84,102 $ 79,883 $344,342 $304,976
Corporate $ 1,416 $ 1,582 $ 6,463 $ 6,407
Operations Data:
Wells Drilled:
Gross 76 46 315 287
Net 23 22 129 155
Success Rate 84% 91% 87% 80%
Net Daily Natural Gas
Production (Mcf):
Domestic 383,014 389,324 416,265 373,560
Cote d'Ivoire 14,758 17,954 18,943 23,365
Other International 6,924 10,374 7,590 9,641
Total 404,696 417,652 442,798 406,566
Average Natural Gas Prices ($ per Mcf) (*):
Domestic $ 2.30 $ 5.30 $ 4.26 $ 3.95
Cote d'Ivoire $ 2.51 $ 2.67 $ 2.47 $ 2.28
Other International $ 3.10 $ 4.53 $ 4.32 $ 3.86
Weighted Average $ 2.32 $ 5.17 $ 4.18 $ 3.85
Average Natural Gas
Prices Including the
Impact of Financial
Derivatives ($ per Mcf) $ 2.62 $ 4.49 $ 4.33 $ 3.54
Net Daily Oil and NGL
Production (Bbl):
Domestic 27,480 25,814 27,864 27,254
Equatorial Guinea 31,588 27,329 30,442 22,798
Cote d'Ivoire 3,197 3,397 3,194 3,849
Egypt 9,713 7,986 8,557 8,820
Other International 5,403 5,304 5,285 4,906
Total 77,381 69,830 75,342 67,627
Average Oil and NGL Prices
($ per Bbl) (*):
Domestic $ 17.49 $ 26.74 $ 22.70 $ 25.85
Equatorial Guinea $ 16.86 $ 25.13 $ 21.17 $ 26.06
Cote d'Ivoire $ 18.52 $ 20.34 $ 22.00 $ 24.15
Egypt $ 17.64 $ 25.38 $ 22.18 $ 26.61
Other International $ 13.67 $ 22.69 $ 15.40 $ 20.14
Weighted Average $ 17.03 $ 25.34 $ 21.48 $ 25.51
Average Oil Prices
Including the Impact of
Financial Derivatives
($ per Bbl) $ 16.85 $ 21.76 $ 20.23 $ 22.11
(*) All price information excludes the impact of financial
derivatives, unless otherwise stated.
A conference call and webcast is scheduled for tomorrow at 9:00 a.m.
Central/ 10:00 a.m. Eastern to discuss the fourth quarter and full year
financial and operational results and first quarter and full year 2002
guidance. To join the call from the United States, dial 1-888-381-5770. From
international locations, dial 1-630-395-0122. The call passcode is OEI and
the call leader is James Hackett. For the webcast, log on to the Ocean Energy
Web site at http://www.oceanenergy.com and click on the event link from either the
homepage or investor relations section of the site.
Ocean Energy, Inc. is an independent energy company engaged in the
exploration, development, production, and acquisition of crude oil and natural
gas. North American operations are focused in the shelf and deepwater areas
of the Gulf of Mexico, the Rocky Mountains, Permian Basin, Arklatex, Anadarko,
East Texas and the Gulf Coast regions. Internationally, Ocean holds a leading
position among U.S. independents in West Africa with oil and gas activities in
Equatorial Guinea, Angola and Cote d'Ivoire. The company also conducts
operations in Egypt, the Russian Republic of Tatarstan, Brazil, Pakistan, and
Indonesia.
Certain statements in this news release regarding future expectations,
plans for acquisitions, dispositions, and oil and gas reserves, exploration,
development, production and pricing may be regarded as "forward-looking
statements" within the meaning of the Securities Litigation Reform Act. They
are subject to various risks, such as operating hazards, drilling risks, the
inherent uncertainties in interpreting engineering data relating to
underground accumulations of oil and gas, as well as other risks discussed in
detail in the Company's periodic reports and other documents filed with the
SEC. Actual results may vary materially.
SOURCE Ocean Energy, Inc.
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Related links:
http://www.oceanenergy.com
Company News On-Call:
http://www.prnewswire.com/comp/913463.html
CONTACT:
financial, Bruce Busmire, +1-713-265-6161, or
media, Janice Aston White, +1-713-265-6164, both of Ocean Energy,
Inc.
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