Income Before Effect of Change in Accounting for Derivatives Exceeds
$52 Million
HOUSTON, May 8 /PRNewswire/ -- KCS Energy, Inc. (NYSE: KCS) today
announced financial and operating results for the three months ended March 31,
2001.
Commenting on the Company's performance during the first quarter of 2001,
KCS Energy President and Chief Executive Officer James W. Christmas said, "the
first quarter of 2001 was highlighted by two significant milestones; emergence
from Chapter 11 and record quarterly earnings and cash flow. Not only did KCS
survive Chapter 11, we paid all trade creditors in full, significantly reduced
debt, increased our cash balances and emerged a much stronger company poised
for future growth, with shareholders retaining all of their stock. We also
issued $30 million in convertible preferred stock and repurchased the old
Medallion $2.055 per MMBTU gas hedges covering 10.1 million MMBTU through
August 2005 for $28 million. We are excited about the future and can now
focus our attention on the oil and gas business without all of the
distractions posed by the Chapter 11 proceedings."
Financial Highlights
($ thousands except per share)
3 mos. 2001 3 mos. 2000
Revenue $90,512 $36,683
Operating Income $61,900 $14,236
Income Before Reorganization Items $54,964 $7,451
Income (Loss) Before Accounting Change $52,552 $(647)
Net Income (Loss) $24,101 $(647)
Basic Earnings (Loss) Per Share $0.81 * $(0.02)
Diluted Earnings (Loss) Per Share $0.71 * $(0.02)
* Earnings per share before effect of accounting change was $1.77
($1.55 diluted).
For the three months ended March 31, 2001, income before reorganization
items increased 638% to $55.0 million compared to $7.5 million for the same
period a year ago. This increase was attributable to a 170% increase in
average realized natural gas prices, a 15% increase in working interest
production and higher other revenue, partially offset by lower production from
the Company's Volumetric Production Payment ("VPP") acquisition program and
higher operating expenses. Other revenue includes $7.0 million from the sale
of emission reduction credits and $7.7 million of non-cash gains on derivative
instruments. Reorganization items for the 2001 three-month period were $2.4
million compared to $8.1 million ($6.1 million of which was the non-cash
write-off of deferred debt issuance costs) for the same period in 2000.
Income before the cumulative effect of an accounting change was $52.6 million
or $1.77 ($1.55 diluted) per share compared to a loss of $0.6 million or $.02
per share for the 2000 three-month period. The cumulative effect, net of tax,
of an accounting change associated with the adoption of SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities" was $28.5
million, resulting in net income for the three months ended March 31, 2001 of
a record $24.1 million, compared to a loss of $0.6 million for the 2000
period. Cash flow from operating activities before non-cash charges and
credits and reorganization items for the three months ended March 31, 2001
increased 94% to a record $39.9 million or $1.35 ($1.18 diluted) per share,
compared to $20.6 million for the same period a year ago.
Recent drilling success yields higher production levels
The Company had record working interest oil and gas production in the
first quarter. Working interest volumes surged 15% higher from the same
quarter last year and were 10% higher than the fourth quarter of 2000. These
production increases were the result of the aggressive drilling program in
2000 and a full quarter of operations at the Hartland gas plant in Michigan.
Production from the Company's VPP program was down 2.3 billion cubic feet
equivalent (BCFE) from last year's quarter (1.9 BCF from the fourth quarter of
2000) as a result of curtailment of investment in that program during 1999 and
2000.
"In the second half of 2000 we accelerated our drilling of new prospects
and focused on drilling proved undeveloped locations in anticipation of higher
prices," stated William N. Hahne, Senior Vice President and Chief Operating
Officer.
In the first quarter of 2001, the Company continued a similar drilling
program in the Mid-Continent and Gulf Coast regions, drilling 23 new wells, of
which 19 were successful, two were non-commercial and two are still being
evaluated. Significant first quarter drilling activities include:
-- Nine Sawyer Canyon Field wells in Sutton County, Texas. This completes
a twenty-seven well development program, which began in the second
quarter of 2000. These Canyon sand wells are currently producing at a
combined rate of 7,400 thousand cubic feet per day (MCFPD) net. At a
$5.00 per MMBTU gas price, these wells would generate approximately
$1.2 million per month.
-- The Tami #1 well in the Potato Hills Field, Latimer County, Oklahoma in
which KCS owns a 49% working interest (WI). This well is currently
producing at 7,000 MCFPD.
-- The La Huerta 32-1Y well (KCS WI = 45%) in Lea County, New Mexico which
is producing from Morrow sands at 4,800 MCFPD.
-- The St. Martin Land Co. #1 in the Catahoula Field, St. Martin Parish,
Louisiana which is producing from the Bol Mex formation at 19,000 MCFPD
and 573 BCPD. KCS has a 10% WI and operates this well.
The first quarter of 2001 marked the first full quarter of operations at
the new 100% owned Hartland gas plant in Michigan. Since start-up of the
plant on November 28th, 2000, over 1.1 BCFE of gas, oil and natural gas
liquids have been sold. The plant is now processing 7,200 MCFPD of gas and
500 barrels of oil and natural gas liquids sales per day, which is 15% more
than the original design capacity. Construction on a flowline to connect one
additional well has begun. The well is scheduled to initiate production
during the third quarter.
Despite these positive operational results, the Company expects to report
4% to 7% lower working interest production in the second quarter as initial
flush production from the 2000 drilling program declines. Scheduled VPP
production should be essentially flat in the second quarter.
Lease Operating Expenses (LOE) were higher in the first quarter as higher
ad valorem taxes and startup costs associated with the Hartland plant
increased expenses. The Company anticipates LOE to decline in the second
quarter compared to the first quarter.
Outlook for 2001
Working interest production is currently expected to be 38-41 BCFE in 2001
(up from the March 15, 2001 outlook), while VPP production is expected to be
4-7 BCFE, reflecting the expiration of certain VPPs. Approximately 15.7 BCFE
of the production for the year (4.3 BCFE for the second quarter) 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.
The Company currently has derivative instruments covering 1,780,000 MMBTU
of its remaining 2001 production, 180,000 MMBTU in the form of swaps at a
price of $5.04 per MMBTU and 1,600,000 MMBTU covered by collars with a
weighted average floor price of $4.41 per MMBTU and a weighted average ceiling
price of $7.11 per MMBTU. 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 4-7% (up from the March 15, 2001 outlook)
of the year 2000 actuals. Interest expense will be substantially lower in
2001, reflecting the repayment of all bank debt and $70.2 million of senior
notes.
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
(Amounts in Thousands March 31,
Except Per Share Data) 2001 2000
Oil and gas revenue $74,476 $36,243
Other revenue, net 16,036 440
Total revenue 90,512 36,683
Operating costs and expenses
Lease operating expenses 9,223 6,522
Production taxes 3,064 1,209
General and administrative expenses 2,753 2,094
Depreciation, depletion and amortization 13,572 12,622
Total operating costs and expenses 28,612 22,447
Operating income 61,900 14,236
Interest and other income, net 389 -
Interest expense (contractual interest for
the 2000 period was $9,217) (7,325) (6,785)
Income before reorganization items and
income taxes 54,964 7,451
Reorganization items (2,412) (8,098)
Income (loss) before income taxes 52,552 (647)
Federal and state income taxes - -
Income (loss) before accounting change 52,552 (647)
Cumulative effect of accounting change,
net of tax (28,451) -
Net income (loss) 24,101 (647)
Preferred stock dividend (163) -
Income (loss) available for common
stockholders $23,938 $(647)
Basic earnings (loss) per share of common
stock
Income (loss) before cumulative effect
of accounting change $1.77 $(0.02)
Cumulative effect of accounting change (0.96) -
Net income (loss) $0.81 $(0.02)
Diluted earnings (loss) per share of
common stock
Income (loss) before cumulative effect
of accounting change $1.55 $(0.02)
Cumulative effect of accounting change 0.84 -
Net income (loss) $0.71 $(0.02)
Average shares outstanding for
computation of earnings per share
Basic 29,549 29,267
Diluted 33,957 29,267
KCS Energy, Inc.
Condensed Balance Sheets
March 31, December 31,
(Thousands of Dollars) 2001 2000
Assets
Cash $44,665 $39,994
Other current assets 38,409 51,651
Property, plant and equipment, net 256,322 254,900
Deferred charges and other assets 16,374 790
Total assets $355,770 $347,335
Liabilities and stockholders'
(deficit) equity
Accounts payable and accrued liabilities $38,716 $42,415
Accrued interest on public debt 4,122 -
Short-term debt - 76,705
Deferred credits and other liabilities 163,493 1,359
Public Debt 204,800 -
Liabilities subject to compromise:
Trade payables - 1,978
Public debt - 275,000
Accrued interest on public debt - 58,198
Convertible preferred stock 30,163 -
Stockholders' (deficit) equity (85,524) (108,320)
Total liabilities and stockholders'
(deficit) equity $355,770 $347,335
Condensed Statements of Cash Flow
Three Months Ended
March 31,
2001 2000
Net income (loss) $24,101 $(647)
DD&A 13,572 12,622
Other non-cash charges and credits, net (148) 539
Reorganization items 2,412 8,098
39,937 20,612
Proceeds from Enron production payment 175,367 -
Changes in accrued interest payable (54,132) -
Other operating activities (20,761) 6,051
Net cash provided by operating activities
before reorganization items 140,411 26,663
Reorganization items (net of non-cash items) (2,412) (1,966)
Net cash provided by operating activities 137,999 24,697
Cash flow from investing activities:
Investment in oil and gas properties (14,422) (12,563)
Other capital expenditures, net (572) (140)
Net cash used in investing activities (14,994) (12,703)
Cash flow from financing activities:
Repayments of debt (146,905) (7,500)
Issuance of convertible preferred stock,
net 28,512 -
Other financing activities 59 (1,306)
Cash flow used by financing activities (118,334) (8,806)
Increase in cash and cash equivalents $4,671 $3,188
KCS Energy, Inc.
Supplemental Data
Three Months Ended
March 31,
2001 2000
Production data: *
Natural gas (MMcf) 9,548 10,733
Oil (Mbbl) 331 333
Liquids (Mbbl) 83 35
Summary (MMcfe):
Working Interest 10,869 9,452
VPP 1,161 3,496
Total 12,030 12,948
Average realized prices: *
Gas (per Mcf) $6.83 $2.53
Oil (per bbl) $23.54 $25.84
Liquids (per bbl) $17.83 $15.17
Total (per Mcfe) $6.19 $2.80
* Includes 3,242 MMcfe dedicated to the Enron Production Payment, and its
effect on average realized prices.
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; General, Marilynn Meek, or Media,
Dave Closs, of The Financial Relations Board, 212-661-8030
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