HOUSTON, March 15 /PRNewswire/ -- KCS Energy, Inc. (NYSE: KCS) today
announced financial and operating results for the fourth quarter and year
ended December 31, 2000.
Commenting on the Company's performance during the year, KCS President and
Chief Executive Officer James W. Christmas said, "The combination of
significantly improved commodity prices, higher working interest production
from a successful drilling program and additional cost reductions enabled the
Company to report record results, consummate its plan of reorganization and
emerge from Chapter 11 last month with trade creditors being paid in full,
debt having been reduced from a peak of $425 million to $215 million and
shareholders retaining all of their stock. In addition, the Company currently
has over $50 million of cash on hand. Not only has KCS emerged from Chapter
11, but it has also significantly strengthened its balance sheet and
reestablished the financial flexibility to enable it to capitalize on
opportunities and grow profitably."
Financial Highlights
($ thousands except per share)
3 mos. 2000 3 mos. 1999
Revenue $62,936 $ 35,300
Operating Income $36,760 $ 10,985
Income Before
Reorganization Items $15,216 (a) $1,283
Net Income $10,459 (a)(b) $1,283
Earnings Per Share $0.36 (a)(b) $0.04
12 mos. 2000 12 mos. 1999
Revenue $ 191,989 $ 138,618
Operating Income $98,315 $43,643
Income Before
Reorganization Items $56,956 (a) $4,340
Net Income $41,523 (a)(b) $4,340
Earnings Per Share $1.42 (a)(b) $0.15
(a) Includes additional non-recurring interest charges of $12.5 million,
or $0.43 per share for the quarter and $4.2 million, or $0.14 per
share for the year in connection with the consensual plan of
reorganization.
(b) Includes reorganization items of $4.8 million, or $0.16 per share for
the quarter and $15.4 million or $0.53 per share for the year.
For the year ended December 31, 2000, income before reorganization items
increased 12 fold to $57.0 million compared to $4.3 million in 1999. After
deducting $15.4 million of reorganization items ($6.1 million of which was the
non-cash write-off of deferred debt issuance costs), net income in 2000 was a
record $41.5 million, or $1.42 per share, compared to $4.3 million, or $0.15
per share in the prior year. A 68% increase in average realized prices
combined with lower lease operating and general and administrative expenses
and 7% higher working interest production were partially offset by lower
production from the Company's Volumetric Production Payment ("VPP") program
and $4.2 million of additional interest on interest expense noted above.
EBITDAR (earnings before interest, taxes, DD&A and reorganization items)
increased 53% to $148.9 million, also a record, compared to $97.2 million in
1999.
Income before reorganization items for the quarter ended December 31, 2000
increased nearly 11 fold to $15.2 million compared to $1.3 million in the
prior year's quarter. After deducting $4.8 million of reorganization items,
net income for the quarter was $10.5 million, or $0.36 per share, compared to
$1.3 million, or $0.04 per share, for the quarter ended December 31, 1999.
The significant improvement in earnings during the three months ended December
31, 2000 was achieved even though the quarter included a full year of interest
expense on the Company's senior subordinated notes and interest on interest
related to past due payments on the Company's senior notes and senior
subordinated notes, totaling $15.3 million. No such amounts were expensed
during the first three quarters of 2000 in accordance with AICPA Statement of
Position 90-7, but were expensed in the fourth quarter because the Company's
consensual plan of reorganization, agreed to in December, included provisions
for the payment of these amounts. The 2000 results reflect significantly
higher oil and gas prices, combined with higher working interest production,
partially offset by lower VPP production and higher interest expense. While
KCS' working interest production increased 9% during the fourth quarter, total
production decreased 4% to 13.2 BCFE, primarily due to the expiration of
certain VPPs and limited capital committed to the VPP program during 2000.
VPP production accounted for 23% of production in the fourth quarter and full
year ended December 31, 2000, compared with 33% and 39% in the prior year
quarter and full year, respectively. EBITDAR for the quarter was a record
$50.1 million, increasing 99% compared to $25.1 million for the same period in
1999.
Reorganization
As previously reported, on February 20, 2001, the Company consummated its
plan of reorganization ("Plan"), which was overwhelmingly approved by
creditors and stockholders, and emerged from bankruptcy.
As a part of the Plan, the Company sold a production payment to an
affiliate of Enron North America Corp. covering approximately 43.1 BCFE
(38.3 BCF of gas and 797,000 barrels of oil) of proved reserves for net
proceeds of approximately $176 million. The reserves will be delivered in
accordance with an agreed schedule over five years, with approximately 37% of
the total delivered in 2001 and 26% delivered in 2002.
Funds from this production payment together with net proceeds of
$28.8 million from the issuance of convertible preferred stock were used to
repay the Company's two bank credit facilities in full, pay past due interest
on the senior and senior subordinated notes and repay $60 million of senior
notes. Trade creditors were paid in full and shareholders retained 100% of
their common stock, subject to dilution for conversion of the new preferred
stock.
As a result, KCS has reduced its total debt from a peak of $425 million in
early 1999 to $215 million today ($90 million of 11% senior notes due 2003 and
$125 million of 8 7/8% senior subordinated notes due 2006). In addition, the
Company has in excess of $50 million cash on hand. "KCS is in a much stronger
financial position today, with greater financial flexibility and the cash flow
and available cash to not only carry out its capital program, but also to fund
potential acquisitions or to repurchase a portion of its outstanding notes,"
Christmas said.
Operations Review
Successful Drilling Program -- Increased Working Interest Production
Working interest production for the full year increased 7% to 38.6 billion
cubic feet gas equivalent (BCFE) compared to 1999. However, VPP production
declined from 22.8 BCFE to 11.9 BCFE as a result of the expiration of certain
VPPs and limited capital investment in this program during 2000. The increase
in working interest production was attributable to strong drilling results in
the third and fourth quarters.
Predominately through the drillbit, the Company replaced 100% (38.7 BCFE)
of working interest production and additionally developed 28.9 BCFE of proved
non-producing reserves, with a $56.8 million capital program (including
$4.2 million of capitalized general and administrative costs and capitalized
interest and excluding VPPs). The Company also spent $6.5 million on other
property and equipment, primarily the Michigan Hartland plant.
KCS drilled 92 gross (46.5 net) wells in 2000, up from 75 net wells in
1999. Of the 92 wells drilled, 73 were successful for a success rate of 79%.
"The year 2000 drilling program was one of the best in the Company's
history," stated William N. Hahne, Senior Vice President and Chief Operating
Officer. "Capital expended in the second half of the year brought over 30,000
thousand cubic feet equivalent per day (MCFEPD) of net new production on line.
Some of the many significant 2000 projects included:
Mid-Continent Region
In the Mid-Continent Division, KCS explores in the Arklatex, Anadarko,
Arkoma and Permian basins. During 2000, the Company drilled 62 gross
(35.9 net) wells in this region with a 90% success ratio. Five wells were
drilled in the West Arcadia & Ada Fields in Bienville Parish, in north
Louisiana, which are now producing over 45,000 MCFEPD gross and 10,500 MCFEPD
net. Three additional stepout wells were drilled in the West Shugart Field
(92% KCS Working Interest (W.I.)) in Eddy County, New Mexico. The field,
which was discovered in late 1998, is currently producing over 1,500 barrels
of oil per day (BOPD) and 2,300 MCFPD gas. Eighteen development wells were
drilled in the Sawyer Canyon Field in Sutton County, Texas. These (nearly
100% KCS W.I.) wells are currently producing over 5,000 MCFEPD. In addition,
KCS installed the Hartland Amine plant (100% KCS W.I.) in Livingston County,
Michigan, and tied in 4 wells which are currently producing 7,400 MCFEPD.
Gulf Coast Division
During 2000, KCS drilled 30 gross (10.6 net) wells in the Onshore Gulf of
Mexico region. This is an increase in activity from 16 wells in 1999 and 8
wells in 1998. Notably, the Company completed the Kathleen Jackson #1 well in
the Austin Field, Goliad County, Texas which is currently producing at 7,500
MCFEPD (100% KCS W.I.). The Company also completed the Mozingo #1 well
(30% KCS W.I.) in the North Clara Field, Wayne County, Mississippi. This well
found 119' of pay by log calculation and has been completed in the lowest 20'
of interval and is producing at 1,500 MCFPD and 750 barrels of condensate per
day.
VPP Program
The Company significantly curtailed its VPP program in 2000 as it focused
its capital on the drilling program, debt retirement and building cash
reserves in order to expedite its exit from bankruptcy. Accordingly, the 2000
VPP program was limited to the acquisition of 2.5 BCF of gas reserves for
$5.8 million. The Company expects to return to a more normal level of capital
commitment to this important program in 2001."
At December 31, 2000, the Company's proved reserves were 265.5 BCFE and
the associated pre-tax present value of estimated future net revenues
discounted at 10% (PV-10) was $1.1 billion based on benchmark prices of $9.53
for natural gas and $23.75 for oil. Utilizing prices more representative of
the current NYMEX prices for gas and oil would result in a PV-10 of
approximately $530 million.
"In 2001, we expect to return to a more normal balance of investments
including drilling, acquisitions and VPPs. The initial capital budget for
2001 has been set at approximately $80 million," Hahne said.
Hedging
In 2000, KCS's revenues were reduced by $10.6 million, or $0.21 per MCFE,
primarily as a result of fixed price commodity swap agreements which were put
in place several years ago by the predecessor owner of Medallion Resources.
At December 31, 2000, remaining swaps in place covered approximately
10.4 million MMBTU at $2.055 for the years 2001 through 2005. These swaps
were terminated at a cost of $28 million in February in connection with the
Enron VPP discussed below. In addition, the Company had other swaps and
collars in place covering approximately 3.9 million MMBTU of gas production in
the first three quarters of 2001 at a weighted average price of approximately
$4.81 per MMBTU, 95% of which relate to the first quarter.
On January 1, 2001 the Company adopted Statement of Financial Accounting
Standard No. 133 "Accounting for Derivative Instruments and Hedging
Activities." Upon adoption of this new accounting standard, the Company
elected not to designate its existing derivatives as hedges. Accordingly, on
January 1, 2001, the Company recorded a liability of $43.8 million
representing the fair market value of its derivative instruments on that date
and a loss from the cumulative effect of a change in accounting principle of
$28.5 million.
Outlook for 2001
Working interest production is currently expected to be 37-40 BCFE in
2001, while VPP production is expected to be 4-7 BCFE, reflecting the
expiration of certain VPPs. Approximately 15.7 BCFE of the production is
committed to the Enron VPP and will be reflected as amortization of deferred
revenue at the weighted average net discounted price of approximately $4.05
per MCFE.
With the elimination of the old Medallion hedge discussed above, the
Company has derivative products covering only 3.9 million MMBTU of its 2001
production at an average price of $4.81 per MMBTU, 95% of which relates to the
first quarter. Unhedged gas prices for the Company's production typically
average $0.04 to $0.08 per MCF below NYMEX prices and unhedged oil prices
typically average $0.20 to $0.30 per barrel above WTI field postings. Lease
operating expenses and general and administrative expenses in the aggregate
are expected to be within 3-5% of the year 2000 actuals. Interest expense
will be substantially lower in 2001, reflecting the repayment of all bank debt
and $60 million of senior notes on February 20, 2001 as discussed above.
KCS is an independent energy company engaged in the acquisition,
exploration and production of natural gas and crude oil with operations in the
Mid-Continent and Gulf Coast regions. The Company also purchases reserves
(priority rights to future delivery of oil and gas) through its Volumetric
Production Payment program. For more information on KCS Energy, Inc., please
visit the Company's web site at http://www.kcsenergy.com .
To receive KCS' latest news and other corporate developments via fax at no
cost, please call 1-800-PRO-INFO. Use company code KCS. See also
http://www.frbinc.com .
This press release contains forward-looking statements that involve a
number of risks and uncertainties. Among the important factors that could
cause actual results to differ materially from those indicated by such
forward-looking statements are delays and difficulties in developing currently
owned properties, the failure of exploratory drilling to result in commercial
wells, delays due to the limited availability of drilling equipment and
personnel, fluctuations in oil and gas prices, general economic conditions and
the risk factors detailed from time to time in the Company's periodic reports
and registration statements filed with the Securities and Exchange Commission.
KCS Energy, Inc.
Condensed Income Statements
Three Months Ended Twelve Months Ended
(Amounts in Thousands December 31, December 31,
Except Per Share Data) 2000 1999 2000 1999
Oil and gas revenue $63,239 $35,865 $190,511 $134,124
Other revenue, net (303) (565) 1,478 4,494
Total revenue 62,936 35,300 191,989 138,618
Operating costs and expenses
Lease operating expenses 6,393 6,099 24,767 26,624
Transportation and
marketing * 811 774 3,034 2,127
Production taxes 2,279 1,037 6,605 3,524
General and
administrative expenses 3,062 2,534 8,817 9,847
Restructuring costs - 1,886 - 1,886
Depreciation, depletion
and amortization 13,631 11,985 50,451 50,967
Total operating costs and
expenses 26,176 24,315 93,674 94,975
Operating income 36,760 10,985 98,315 43,643
Interest and other income,
net (336) 257 101 702
Interest expense
(contractual interest for
the 2000 periods was $8,840
and $36,220 respectively) (21,208) (9,959) (41,460) (40,005)
Income before reorganization
items and income taxes 15,216 1,283 56,956 4,340
Reorganization items (4,757) - (15,433) -
Income before income taxes 10,459 1,283 41,523 4,340
Federal and state income
taxes - - - -
Net income $10,459 $1,283 $41,523 $4,340
Basic and diluted income per
share of common stock $0.36 $0.04 $1.42 $0.15
Weighted average shares of
common stock outstanding
(diluted) 29,315 29,268 29,305 29,288
* The Company adopted EITF No. 00-10 effective October 1, 2000. Prior
to adoption, these costs had been netted against oil and gas revenue.
KCS Energy, Inc.
Condensed Balance Sheets
December 31, December 31,
(Thousands of Dollars) 2000 1999
Assets
Cash $39,994 $10,584
Other current assets 51,651 29,512
Property, plant and equipment, net 254,900 236,967
Deferred charges and other assets 790 7,869
Total assets $347,335 $284,932
Liabilities and stockholders' (deficit)
equity
Accounts payable and accrued liabilities $42,415 $24,602
Accrued interest on public debt - 26,444
Short-term debt 76,705 381,819
Deferred credits and other liabilities 1,359 1,910
Liabilities subject to compromise:
Trade payables 1,978 -
Public debt 275,000 -
Accrued interest on public debt 58,198 -
Stockholders' (deficit) equity (108,320) (149,843)
Total liabilities and stockholders'
(deficit) equity $347,335 $284,932
Condensed Statements of Cash Flow
Twelve Months Ended
December 31,
2000 1999
Net income $41,523 $4,340
DD&A 50,451 50,967
Other non-cash charges and credits, net 1,640 2,862
Reorganization items 15,433 -
109,047 58,169
Net changes in assets and liabilities 28,261 13,294
Net cash provided by operating activities
before reorganization items 137,308 71,463
Reorganization items (net of non-cash items) (9,301) -
Net cash provided by operating activities 128,007 71,463
Cash flow from investing activities:
Investment in oil and gas properties (62,598) (60,000)
Proceeds from sale of oil and gas properties 694 27,718
Other capital expenditures, net (6,480) 840
Net cash used in investing activities (68,384) (31,442)
Cash flow from financing activities:
Net decrease in debt (30,122) (28,605)
Other financing activities (91) (1,708)
Cash flow used by financing activities (30,213) (30,313)
Increase in cash and cash equivalents $29,410 $9,708
EBITDAR * $148,867 $97,198
* Earnings before interest, taxes, DD&A, and reorganization items.
EBITDAR is not a measure of financial performance or liquidity under
generally accepted accounting principles and should not be considered
in isolation.
KCS Energy, Inc.
Supplemental Data
Three Months Ended Twelve Months Ended
December 31, December 31,
2000 1999 2000 1999
Production data:
Natural gas (MMcf) 10,856 11,582 41,089 50,471
Oil (Mbbl) 309 319 1,306 1,286
Liquids (Mbbl) 75 37 264 122
Summary (MMcfe):
Working Interest 10,101 9,244 38,642 36,133
VPP 3,051 4,473 11,866 22,786
Total 13,152 13,717 50,508 58,919
Other data:
Average realized prices *
Gas (per Mcf) $5.11 $2.39 $3.69 $2.18
Oil (per bbl) $28.67 $21.46 $ 27.35 $ 16.04
Liquids (per bbl) $15.14 $15.00 $ 13.31 $ 11.25
Total (per Mcfe) $4.98 $2.56 $3.77 $2.24
*Includes the effects of hedging.
SOURCE KCS Energy, Inc.
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Related links:
http://www.kcsenergy.com
CONTACT:
James W. Christmas, President and CEO of KCS
Energy, Inc., 713-877-8006; or General, Marilynn Meek, or Media,
Dave Closs, both of The Financial Relations Board, 212-661-8030
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