CARPINTERIA, Calif., May 13 /PRNewswire/ -- Venoco, Inc.
(Bloomberg ticker: 552338Z US) today reported a net loss for the first quarter
2005 of $6.8 million compared to net income of $5.8 million for the first
quarter 2004. The first quarter 2005 net loss includes the net after-tax
effects of a $26.1 million (pre-tax) unrealized loss on certain commodity
derivative contracts that do not qualify for hedge accounting in accordance
with SFAS 133. Excluding this charge, Venoco would have had net income of
$9.0 million for the first quarter of 2005. This compares to net income of
$6.0 million in the first quarter of 2004 excluding the after-tax effects of
the $0.4 million (pre-tax) unrealized commodity derivative loss for first
quarter 2004. Please see the end of this release for a reconciliation of net
income (loss) to net income before unrealized commodity derivative losses (a
non-GAAP measure).
The unrealized commodity derivative losses result from mark-to-market
adjustment applicable to certain commodity derivative contracts not currently
eligible for hedge accounting treatment. Changing oil prices affect the
market value of our fixed price commodity derivative contracts, and as a
result we expect there will continue to be significant volatility in our
reported earnings.
Earnings before interest, taxes, depletion, depreciation and amortization
(EBITDA) for the first quarter of 2005 was $(1.8) million as compared with
$14.7 million in first quarter 2004. These EBITDA figures include the pre-tax
impact of first quarter realized commodity derivative losses of $3.0 million
in 2005 and $2.4 million in 2004. They also include the impact of the above
mentioned first quarter unrealized commodity derivative losses of
$26.1 million in 2005 and $0.4 million in 2004. Excluding the impact of the
realized and unrealized commodity derivative losses, Venoco's first quarter
2005 EBITDA would have been $27.4 million, up 57% from first quarter 2004
EBITDA of $17.5 million. Please see the end of this release for a
reconciliation of EBITDA and EBITDA before the pre-tax impact of realized and
unrealized commodity derivative losses, to net income.
"We have benefited not only from the strong current prices for oil and
natural gas but fundamentally from the consistent increases in our oil and
natural gas production rates. Average net production has increased each
quarter since changes in our senior management and subsequent implementation
of our aggressive development and exploitation program in June of 2004. The
average net production which was 10,182 barrels of oil equivalent per day
(BOE/D) in the second quarter of 2004 has steadily increased to 12,857 BOE/D
in the first quarter of 2005," stated Tim Marquez, CEO and chairman of the
board.
In the first quarter of 2005 Venoco drilled seven new wells to total depth
and recompleted eighteen additional wells. These exploitation and development
projects include two offshore oil wells that were drilled to total depth, and
one that was recompleted. In the Sockeye Field, we drilled one well and
recompleted another well. One of the wells had an initial production rate over
1,150 BOE/D and the other's gross production is approximately 250 BOE/D. In
the South Ellwood Field, we drilled an exploration well that tested wet in the
deepest penetrated intervals and is being recompleted to test the primary test
objective. Onshore, Venoco drilled five new wells in the Sacramento Basin in
the quarter. Four were brought on production and the other was waiting on a
gas pipeline connection. The Company also recompleted seventeen wells in the
Sacramento Basin in the quarter. Collectively the new wells and recompletions
in the Sacramento Basin have added 2,500 MCF/D to our average net production.
The Company's average net production increased from 11,306 BOE/D in the
first quarter of 2004 to 12,857 BOE/D in the first quarter of 2005. First
quarter 2005 average net production includes 547 BOE/D from the Big Mineral
Creek Field which was sold for $45 million with the closing occurring on
March 31, 2005. The closing was done through a qualified intermediary in
order to allow the sale to be eligible for a tax free exchange pursuant to
section 1031 of the Internal Revenue Code. Accordingly, no gain has been
recognized and no tax on the sale has been recorded during the period. "We
expect second quarter 2005 average net production to be approximately 12,500
BOE per day, only slightly down from the first quarter despite the loss of
production from the Big Mineral Creek field," noted Mr. Marquez. He
continued, "We anticipate 2005 average net production in the range of 13,000
BOE/D to 14,000 BOE/D without any additional acquisitions. Acquisitions are
an integral part of our strategy and would add to our 2005 production. We
believe Venoco will continue to achieve consistent growth in average net
production throughout 2005 and following years."
About the Company
Venoco is an independent energy company primarily engaged in the
acquisition, exploitation and development of oil and natural gas properties in
California. It has regional headquarters in Carpinteria, California and
corporate headquarters in Denver, Colorado. Venoco operates three offshore
platforms in the Santa Barbara Channel, has nonworking interests in three
others, and also operates two onshore properties in Southern California and
approximately 130 natural gas wells in Northern California.
Conference Call & Webcast
The Company's first quarter 2005 earnings and operational review
conference call will begin at 12:00 p.m. Eastern (9:00 a.m. Pacific) on
Friday, May 13, 2005. You may participate by calling 1-(800) 374-2482 and
using Conference ID# 6233227. Information on accessing the recorded call will
be available on the Investor Information page of the Company's website
http://www.venocoinc.com.
Statements made in this news release, including those relating to future
growth and performance, drilling inventory, economic returns, development
opportunities, production growth targets, cash flow, reserve base, and future
results of operation and financial condition are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. These statements are based on
assumptions and estimates that management believes are reasonable based on
currently available information; however, management's assumptions and the
Company's future performance are both subject to a wide range of business
risks and uncertainties and there is no assurance that these goals and
projections can or will be met. Any number of factors could cause actual
results to differ materially from those in the forward-looking statements,
including, but not limited to, ability to acquire properties that meet our
objectives, the timing and extent of changes in oil and gas prices, changes in
underlying demand for oil and gas, the timing and results of drilling
activity, the availability of and cost of obtaining drilling equipment and
technical personnel, delays in completing production, treatment and
transportation facilities, higher than expected production costs and other
expenses, pipeline curtailments by third-parties and failure to close pending
acquisitions. Further information on risks and uncertainties is available in
the Company's filings with the Securities and Exchange Commission, which are
incorporated by this reference as though fully set forth herein.
Oil and Gas Production and Prices
Three Months Ended March 31 (1)
2005 2004 Increase
(Decrease)
Sales Volume
Natural Gas (Mcf) 1,885,576 1,355,983 39%
Oil (Bbls) 842,845 802,918 5%
BOE 1,157,108 1,028,915 12%
Daily Average Sales Volume
Natural Gas (Mcf/d) 20,951 14,901 41%
Oil (Bbls/d) 9,365 8,823 6%
BOE/d 12,857 11,307 14%
Oil Price per Barrel
Average NYMEX spot price $49.84 $35.15 42%
Differential to NYMEX spot
price $(13.52) $(5.96) 127%
Realized commodity derivative
losses $(3.55) $(2.38) 49%
Net realized price per barrel $32.77 $26.81 22%
Natural Gas Price per Mcf
Average NYMEX spot price $6.48 $5.73 13%
Differential to NYMEX
spot price $(0.42) $(0.28) 50%
Realized commodity derivative
losses $(0.01) $(0.33) (97)%
Net realized price per Mcf $6.05 $5.12 18%
Average Sales Price per BOE $33.73 $27.67 22%
(1) Production in 2005 includes Marquez Energy, LLC which was acquired
March 21, 2005. Inclusion is due to the application of requirements
for reporting combined financial statements for companies under
common control.
First Quarter 2005 and 2004 Financial Information
VENOCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
($ thousands, unaudited)
March 31, December 31,
2005 (1) 2004 (1)
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $5,024 $54,715
Accounts receivable 23,280 17,755
Inventories 1,105 1,079
Income tax receivable 2,670 3,906
Commodity derivatives 677 5,300
Notes receivable - officer -- 1,420
Prepaid expenses and other current assets 4,650 3,640
Total current assets 37,406 87,815
CASH RESTRICTED FOR INVESTMENT IN OIL AND
NATURAL GAS PROPERTIES 44,619 --
PROPERTY AND EQUIPMENT, net 163,465 198,563
OTHER ASSETS 8,786 12,504
TOTAL ASSETS $254,276 $298,882
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $21,137 $19,385
Undistributed revenue payable 4,540 4,774
Current maturities of long term debt 121 127
Commodity derivatives 20,713 1,520
Minority interest purchase accrued 109 5,316
Total current liabilities 46,620 31,122
LONG-TERM DEBT 171,934 163,542
DEFERRED INCOME TAXES 18,463 32,208
ASSET RETIREMENT OBLIGATIONS 23,122 23,184
COMMODITY DERIVATIVES 12,266 --
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock and additional paid in capital 17,883 31,576
Retained earnings (deficit) (26,449) 15,327
Accumulated other comprehensive income (loss) (9,563) 1,923
Total stockholders' equity (deficit) (18,129) 48,826
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $254,276 $298,882
(1) On March 21, 2005 the Company completed the acquisition of Marquez
Energy, majority-owned and controlled by Timothy Marquez, the
Company's CEO and sole shareholder. Due to the common control
aspects of the transaction, the financial statements of Marquez
Energy have been combined with the consolidated financial statements
of the Company and its subsidiaries in a manner similar to a
pooling-of-interests, since the date that common control was
achieved. Therefore, the Company's financial statements since
July 12, 2004 were restated to include Marquez Energy's financial
results.
VENOCO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ thousands, unaudited)
Three Months Ended March 31 2005 2004
REVENUES:
Oil and gas sales $42,038 $30,825
Commodity derivative losses (1) (29,160) (2,762)
Other 727 669
Total revenues 13,605 28,732
EXPENSES:
Oil and natural gas production 11,930 11,231
Transportation expense 328 378
Depletion, depreciation, amortization and
impairment 5,653 4,021
Accretion of abandonment liability 442 360
General and administrative 3,116 2,435
Amortization of deferred loan costs 345 69
Interest, net 3,497 328
Total expenses 25,311 18,822
Income (loss) before income taxes (11,706) 9,910
Income tax provision (benefit) (4,930) 4,131
Net income (loss) (6,776) 5,779
Preferred stock dividends -- (2,116)
Net income applicable to common equity $(6,776) $3,663
(1) Commodity derivative losses include realized and unrealized losses
on derivative contracts of $3.0 million and $26.1 million,
respectively for the first quarter of 2005 and $2.4 million and
$0.4 million, respectively for the first quarter of 2004.
Unrealized commodity derivative losses reflect the change in fair
value of financial instruments not qualifying for hedge accounting
under SFAS No. 133
The Company discloses net income before unrealized commodity derivative
losses, a non-GAAP financial measure, because management believes net income
before unrealized commodity derivative gains and losses (i) provides a better
comparison of operating trends and performance related results, (ii) is
comparable to certain performance analysis methods of securities analysts ,
and (iii) eliminates the impact of fluctuations in mark-to-market values from
unrealized commodity derivatives for which the Company cannot estimate the
timing or amount . The following reconciles net income (loss) to net income
before unrealized commodity derivative losses for the three months ended
March 31:
2005 2004
(unaudited)
Net income (loss) $(6,776) $5,779
Plus: Unrealized commodity derivative losses 26,148 408
Less: Income tax benefit on unrealized
commodity derivative losses (10,366) (162)
Net income before unrealized commodity
derivative losses $9,006 $6,025
EBITDA, a non-GAAP financial measure, excludes certain items that
management believes affect the Company's comparison of operating results. The
Company discloses EBITDA because (i) the Company uses EBITDA to evaluate
operating trends and performance related results (ii) the Company uses EBITDA
to compare its performance to other oil and gas producing companies, and (iii)
EBITDA is comparable to certain performance analysis methods of securities
analysts. The Company's measures of EBITDA and EBITDA before pre-tax hedging
losses is not comparable to the Company's other financial measures. The
following reconciles net income (loss) to EBITDA and EBITDA before the pre-tax
effects of realized and unrealized commodity derivative losses for the three
months ended March 31:
2005 2004
(unaudited)
Net income (loss) $(6,776) $5,779
Plus: Interest, net 3,497 328
Income taxes (4,930) 4,131
D.D.&A. 5,653 4,021
Accretion of abandonment liability 442 360
Amortization of deferred loan costs 345 69
EBITDA (1,769) 14,688
Plus: Pre-tax realized commodity derivative
losses 3,012 2,354
Pre-tax unrealized commodity derivative
losses 26,148 408
EBITDA before pre-tax commodity derivative
losses $27,391 $17,450
Open Derivative Positions as of May 10, 2005
Crude Oil
Type of Basis Quantity Strike Price Term
Contract (Bbl/d) ($/Bbl)
Collar NYMEX 4,471 $38.00 - $47.10 Jan 1, 05 - Dec 31, 05
Collar NYMEX 1,000 $38.00 - $47.50 Jan 1, 05 - Dec 31, 05
Put NYMEX 2,000 $36.00 Floor Jan 1, 05 - Dec 31, 05
Put NYMEX 2,000 $38.70 Floor Jan 1, 05 - Dec 31, 05
Swap NYMEX 1,000 $42.70 Fixed Jan 1, 06 - Dec 31, 06
Collar NYMEX 2,000 $40.00 - $51.00 Jan 1, 06 - Dec 31, 06
Collar NYMEX 1,000 $40.00 - $51.05 Jan 1, 06 - Dec 31, 06
Collar NYMEX 1,000 $40.00 - $57.75 Jan 1, 06 - Dec 31, 06
Put NYMEX 1,000 $40.00 Floor Jan 1, 06 - Dec 31, 06
Put NYMEX 1,000 $42.90 Floor Jan 1, 06 - Dec 31, 06
Collar NYMEX 2,000 $40.00 - $65.80 Jan 1, 07 - Dec 31, 07
Collar NYMEX 1,000 $40.00 - $67.50 Jan 1, 07 - Dec 31, 07
Natural Gas
Type of Basis Quantity Strike Price Term
Contract (MMBtu/d) ($/Mcf)
Physical
Sale SoCal 2,000 $4.85 Floor(1) Apr 1, 05 - Sep 30, 06
Put NYMEX 5,000 $5.80 Floor Jan 1, 05 - Dec 31, 05
Basis
Swap PG&E Citygate 5,000 $(0.150)(2) Jan 1, 05 - Dec 31, 05
Put PG&E Citygate 5,000 $6.00 Floor Jan 1, 05 - Dec 31, 05
Swap PG&E Citygate 4,000 $6.765 Fixed Apr 1, 05 - Dec 31, 05
Swap NYMEX 2,000 $6.71 Fixed Jan 1, 06 - Dec 31, 06
Collar NYMEX 4,000 $6.00 - $8.50 Jan 1, 06 - Dec 31, 06
Basis
Swap PG&E Citygate 6,000 $(0.035)(3) Jan 1, 06 - Dec 31, 06
Put PG&E Citygate 6,000 $6.00 Floor Jan 1, 06 - Dec 31, 06
Collar PG&E Citygate 3,000 $7.00 - $9.45 Jan 1, 06 - Dec 31, 06
Collar NYMEX 6,000 $6.00 - $8.40 Jan 1, 07 - Dec 31, 07
(1) The price of this contract is the monthly NGI SoCal Border Index
less $0.10 per MMBtu, with a floor of $4.85.
(2) This basis swap locks the $5.80 NYMEX put into a $5.65 floor with a
PG&E Citygate location for 2005.
(3) This basis swap locks the $6.71 NYMEX swap into a $6.675 PG&E
Citygate location swap and the $6.00-$8.50 collar into a
$5.965-$8.465 collar with a PG&E Citygate location for 2006.
This release can be found at http://www.venocoinc.com
SOURCE Venoco, Inc.
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Related links:
http://www.venocoinc.com
CONTACT:
Mike Edwards, VP of Venoco, Inc., direct,
+1-805-745-2123, or cell, +1-805-455-9658
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