HOUSTON, March 19 /PRNewswire-FirstCall/ -- KCS Energy, Inc. (NYSE: KCS)
today announced financial and operating results for the fourth quarter and
year ended December 31, 2001.
Commenting on the Company's performance during the year, KCS President and
Chief Executive Officer James W. Christmas said, "our successful drilling
program combined with strong natural gas prices during the first half of the
year and the sale of a production payment at a period of peak natural gas
prices resulted in our second straight year of record earnings. We drilled
106 gross wells with an 87% success rate and replaced 191% of our net
production.
"A highlight of 2001 was the Company's emergence from Chapter 11 in
February, financed in part with the sale of a 43.1 Bcfe production payment (to
be delivered over 60 months) for net cash proceeds of $175 million. We also
sold $30 million of convertible preferred stock, 48% of which has already been
converted. These transactions allowed the Company to significantly reduce
debt and pay creditors in full, thereby enabling shareholders to retain their
stock. In so doing, the Company was able to more than cut its total debt in
half to $205 million at the end of 2001."
Financial Highlights
($ thousands except per share)
12 mos. 2001 12 mos. 2000
Revenue $ 191,991 $ 191,989
Operating Income $ 80,648 $ 98,315
Net Income $ 65,579 $ 41,523
Basic Earnings Per Share $ 2.02 $ 1.42
Diluted Earnings Per Share $ 1.69 $ 1.42
4th Qtr. 2001 4th Qtr. 2000
Revenue $ 30,778 $ 62,936
Operating Income $ 276 $ 36,760
Net Income $ (3,628) $ 10,459
Basic Earnings Per Share $ (0.11) $ 0.36
Diluted Earnings Per Share $ (0.11) $ 0.36
Total revenue was $192 million in both 2001 and 2000. In 2001, the impact
of higher natural gas prices, increased working interest production and higher
other revenue was offset by lower production from the VPP Program and lower
oil prices. Operating income in 2001 was negatively impacted by higher
non-cash depletion, depreciation and amortization (DD&A) expense, non-cash
stock compensation expense, Enron bad debt expense and higher lease operating
expenses associated with the start-up of a gas processing plant in Michigan.
However, with the completion of the Company's reorganization and significant
debt repayments, interest expense was cut in half and reorganization expenses
were significantly lower, resulting in record net income of $65.6 million,
compared to $41.5 million in 2000.
For the three months ended December 31, 2001, KCS had a net loss of
$3.6 million compared to net income of $10.5 million for the same period a
year ago. The 2001quarter reflects significantly lower natural gas prices and
a $3.7 million reserve against receivables due from an Enron affiliate.
Operating Highlights
For the year 2001, KCS produced 42.0 billion cubic feet of gas equivalent
(Bcfe) of working interest production and 4.5 Bcfe of VPP production compared
to 38.6 Bcfe of working interest (WI) production and 11.9 Bcfe of VPP
production in 2000. The 9% increase in working interest production was
attributable to successful drilling, particularly in the West Ada and Sawyer
Canyon fields, and the acquisition of the West Mission Valley Field in south
Texas. Of the total production for 2001, 15.7 Bcfe was committed to meet the
scheduled deliveries under the production payment, leaving 30.8 Bcfe of net
production. Through the end of 2001, KCS had retired 37% of the total delivery
obligation under the production payment.
KCS drilled 106 gross (42.6 net) wells in 2001, compared to 96 gross
(47.0 net) in 2000 and 75 gross (38.3 net) in 1999. Of the 106 wells drilled
in 2001, 92 wells, or 87%, were successful.
Proved reserves at December 31, 2001 were 230 Bcfe. Through the drilling
program and the acquisition of West Mission Valley field, 58.8 Bcfe of new
reserves were added, representing 191% of production, net of volumes delivered
under the production payment. During the year KCS sold reserves of 48.4 Bcfe
including the 43.1 Bcfe production payment. Reserve revisions were a negative
15.1 Bcfe, which includes downward revisions of approximately 28 Bcfe
associated with price declines and positive revisions of approximately 13 Bcfe
from performance.
Recent drilling activity includes:
Three successful wells in the Mid-Continent Division during the fourth
quarter of 2001, including the Fabian 5-45 (KCS WI=7%), which is
producing at 2,735 thousand cubic feet per day (Mcfpd) and 133 barrels
of oil per day, the Montague 27-1 (KCS WI=25%), which is producing at
1,500 Mcfpd and the Brandt 2-20 (KCS WI=29%), which tested at
1,900 Mcfpd and is currently producing at 1,000 Mcfpd.
Continued drilling in Goliad County, south Texas, where the Rouden #1
well was completed at an initial rate of 5,200 Mcfpd (KCS WI=37.5%).
Discovery of significant new reservoirs in the offshore Eugene Island 251
#5 well (KCS WI=8%) which should commence production this summer after
platform installation.
The commencement, in January 2002, of a drilling and work over program in
the Company's 100% owned Elm Grove field in north Louisiana. Completion
operations are still underway and production has already been increased
by 2,700 Mcfpd. Additional activity will continue throughout the year.
Drilling of the 'La Playa' prospect in March 2002 in the Mustang Island
area of south Texas. Total depth of 11,960 feet was reached and five
apparently productive pay zones were logged. Because of down-hole
conditions a log was not obtained on the deeper, primary objective,
although pipe was run successfully to total depth. Operations are
underway to log the deeper zone and complete the well.
The Company invested $85.2 million in 2001 on oil and gas capital
projects. A capital budget of $40-$55 million is projected for 2002.
Commenting on the impact of the projected capital program, William N. Hahne,
Executive Vice President and Chief Operating Officer said, "even with the
reduced capital program, it is our intent to replace working interest
production, and at the same time, continue to build our prospect inventory for
the future."
Outlook for 2002
Working interest production is currently expected to be 39-43 Bcfe in
2002, while VPP production is expected to be 2-3 Bcfe. Approximately
11.2 Bcfe of the total production is scheduled to be delivered under the
production payment sold in 2001, and will be reflected as non-cash
amortization of deferred revenue at the weighted average net discounted price
received of approximately $4.05 per Mcfe.
The Company also has outstanding hedge instruments covering 0.9 Bcf of
natural gas at a price of $3.05, and 45,500 barrels of crude oil at a price of
$24.50 per barrel for the second quarter of 2002. In addition to the above
hedges, the Company has outstanding floor price guarantees and conditional
swaps with Enron North America Corp. covering 5.2 Bcf of January through
October 2002 natural gas. However, this Enron Corp. subsidiary is currently
in bankruptcy and has not performed under these contracts to date. Unhedged
gas prices per Mcf for the Company's production is typically minus $0.05 to
flat to NYMEX prices and unhedged oil prices typically average $1.75 to $2.00
per barrel below NYMEX prices.
Oil and gas revenue will be reduced by non-cash amortization of
$6.8 million of losses on derivative instruments, which were terminated in
February 2001 but are required to be reported over the original term of the
instruments.
Current estimates for lease operating expenses are $25-$29 million,
general and administrative expenses $8-$9 million and interest expense
$18-$20 million.
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. For more information on KCS Energy,
Inc., please visit the Company's web site at http://www.kcsenergy.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) 2001 2000 2001 2000
Oil and gas revenue $30,453 $63,239 $174,434 $190,511
Other revenue, net 325 (303) 17,557 1,478
Total revenue 30,778 62,936 191,991 191,989
Operating costs and expenses
Lease operating expenses 6,697 7,204 30,456 27,801
Production taxes 1,566 2,279 8,195 6,605
General and administrative
expenses 1,866 2,662 8,885 8,417
Stock compensation 796 - 1,419 -
Bad debt expense 4,074 400 4,074 400
Depreciation, depletion
and amortization 15,503 13,631 58,314 50,451
Total operating costs and
expenses 30,502 26,176 111,343 93,674
Operating Income 276 36,760 80,648 98,315
Interest and other income 109 (336) 1,319 101
Interest expense (contractual
interest for the 2000 periods
was $8,840 and $36,220
respectively) (4,723) (21,208) (21,799) (41,460)
Income (loss) before
reorganization items and
income taxes (4,338) 15,216 60,168 56,956
Reorganization items - (4,757) (2,948) (15,433)
Income (loss) before income
taxes (4,338) 10,459 57,220 41,523
Federal and state income taxes 710 - 8,359 -
Net income (loss) (3,628) 10,459 65,579 41,523
Accretion and dividends
on preferred stock 303 - (1,761) -
Income (loss) available for
common stockholders $(3,931) $10,459 $63,818 $41,523
Earnings (loss) per share of
common stock
Basic $(0.11) $0.36 $2.02 $1.42
Diluted $(0.11) $0.36 $1.69 $1.42
Average shares outstanding for
computation of earnings
per share
Basic 34,508 29,266 31,668 29,266
Diluted 34,508 29,315 38,828 29,305
KCS Energy, Inc.
Condensed Balance Sheets
December 31, December 31,
(Thousands of Dollars) 2001 2000
Assets
Cash $22,927 $39,994
Trade accounts receivable, net 20,342 45,954
Other current assets 6,718 5,697
Property, plant and equipment, net 278,677 254,900
Deferred charges and other assets 18,062 790
Total assets $346,726 $347,335
Liabilities and stockholders' (deficit) equity
Accounts payable and accrued liabilities $53,040 $42,415
Short-term debt - 76,705
Deferred revenue 111,880 -
Deferred credits and other liabilities 877 1,359
Liabilities subject to compromise:
Trade payables - 1,978
Public debt - 275,000
Accrued interest on public debt - 58,198
Long term debt 204,800 -
Preferred stock 15,589 -
Stockholders' (deficit) equity (39,460) (108,320)
Total liabilities and stockholders'
(deficit) equity $346,726 $347,335
Condensed Statements of Cash Flow
Twelve Months Ended
December 31,
2001 2000
Net income $65,579 $41,523
DD&A 58,314 50,451
Amortization of deferred revenue (63,089) -
Other non-cash charges and credits, net 4,986 1,640
Reorganization items 2,948 15,433
68,738 109,047
Net changes in assets and liabilities 117,629 28,261
Net cash provided by operating activities
before reorganization items 186,367 137,308
Reorganization items (net of non-cash items) (2,948) (9,301)
Net cash provided by operating activities 183,419 128,007
Cash flow from investing activities:
Investment in oil and gas properties (85,033) (62,598)
Proceeds from sale of oil and gas properties 5,100 694
Other capital expenditures, net (2,159) (6,480)
Net cash used in investing activities (82,092) (68,384)
Cash flow from financing activities:
Net decrease in debt (146,905) (30,122)
Issuance of convertible preferred stock, net 28,412 -
Other financing activities 99 (91)
Cash flow used by financing activities (118,394) (30,213)
Increase (decrease) in cash and cash
equivalents $(17,067) $29,410
KCS Energy, Inc.
Supplemental Data
Three Months Ended Twelve Months Ended
December 31, December 31,
2001 2000 2001 2000
Production data:
Natural gas (MMcf) 8,581 10,856 36,873 41,089
Oil (Mbbl) 296 309 1,230 1,306
Liquids (Mbbl) 98 75 373 264
Summary (MMcfe):
Working Interest 9,958 10,101 41,966 38,642
VPP 987 3,051 4,525 11,866
Total 10,945 13,152 46,491 50,508
Other data:
Average realized prices *
Gas (per Mcf) $2.88 $5.11 $3.90 $3.69
Oil (per bbl) $15.86 $28.67 $20.67 $27.35
Liquids (per bbl) $10.87 $15.14 $13.74 $13.31
Total (per Mcfe) $2.78 $4.98 $3.75 $3.77
* 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, +1-713-877-8006; or General Info, Marilynn Meek,
+1-212-445-8451, or Peter Selzberg, +1-212-445-8457, or Media,
Judith Sylk-Siegel, +1-212-445-8431, all of The Financial
Relations Board
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