HOUSTON, May 15 /PRNewswire-FirstCall/ -- KCS Energy, Inc. (NYSE: KCS)
today announced financial and operating results for the first quarter ended
March 31, 2002.
Commenting on the first quarter's results, KCS President and Chief
Executive Officer James W. Christmas said, "KCS, along with the entire
industry, was negatively impacted by significantly lower natural gas and oil
prices during the first quarter of 2002, especially when compared to the
prices experienced during the first quarter of last year. While we cannot
control market prices for oil and gas, we did continue to focus our efforts on
things we can control. Cash operating expenses were down 33%, reflecting our
commitment to running an efficient organization, and interest expense was down
34% reflecting our commitment to debt reduction. In addition, the Company has
entered into agreements to sell non-core properties for $26.8 million, the
proceeds of which will be used primarily to repay senior debt. The recent
rebound in energy prices, coupled with our reduced cost levels, will result in
higher cash flow and earnings in the second quarter.
Financial Highlights
($ thousands except per share)
3 mos. 2002 3 mos. 2001
Revenue $ 28,824 $ 72,709
Operating Income $ 3,346 $ 44,097
Net Income (Loss) $ (818) $ 40,980
Diluted Earnings (Loss) Per Share $ (0.03) $ 1.21
Total revenue was $28.8 million for the three months ended March 31, 2002
compared to $72.7 million for the same period a year ago. Oil and gas revenue
decreased $27.3 million primarily due to a 42% decline in average realized
natural gas prices and a 29% decline in average realized oil and liquids
prices. Oil and gas production declined 1.7 Bcfe to 10.3 Bcfe for the three
months ended March 31, 2002. The decrease in production rates is largely
attributable to the decline from high initial production rates as a result of
the accelerated drilling programs in the Sonora and West Ada fields which were
designed to capture high first quarter 2001 prices, the sale of certain oil
and gas properties and the scheduled decrease in VPP deliveries. Other
revenue was down $16.6 million, largely due to non-recurring revenue of
$7.7 million related to derivative instruments and $7.0 million from the sale
of emission reduction credits in the first quarter of 2001. Cash operating
expenses (lease operating, production taxes and general and administrative
expenses) were $10.0 million for the three months ended March 31, 2002
compared to $15.0 million for the same period in 2001. Non-cash expenses,
primarily depreciation, depletion and amortization ("DD&A"), increased to
$15.2 million in the 2002 period compared to $13.6 million in 2001 primarily
due to a higher DD&A rate resulting from the dramatic decline in natural gas
prices and a higher depletable base. Interest expense was $4.8 million in the
2002 period compared to $7.3 million. The 2001 three-month period also
included $2.4 million of reorganization expenses. Net loss was $0.8 million,
or $0.03 per share, compared to net income of $41.0 million, or $1.21 per
diluted share last year.
Non-core Property Sales and Operating Highlights
The Company has signed three agreements to sell non-core properties for
$26.8 million. The properties, which include over 300 wells in five states,
had estimated reserves as of the January 1, 2002 effective date of 20.9 Bcfe
and produce approximately 12 Mmcfepd. Closing is expected within the next 30
days subject to satisfactory completion of the buyer's due diligence. The
Company is continuing to market additional non-core properties.
KCS drilled 19 wells in the first quarter, of which 14 were successful.
Recent drilling activity includes:
* The Dot Cobb #1 well, Dolan Field, in Live Oak County, south Texas
(KCS WI = 37.5%) is producing at 2,200 Mcfpd. This is the second well
in this field drilled in the last six months.
* The Cinco Ranch #1 in Fort Bend County, south Texas (KCS WI = 16.2%) is
on production at approximately 2,600 Mcfpd and 16 Bopd.
* The Mustang Island 938 #1 (La Playa Prospect) in south Texas
(KCS WI = 20%) is being tested from the lowest of six potential pay
zones at a rate of 1,700 Mcfpd.
* The Butzer #2 (KCS WI = 13%) in Latimer County, Oklahoma is producing at
2,100 Mcfpd with 5,300 psi flowing pressure.
* The Napper #3 in Lincoln Parish, north Louisiana (KCS WI = 13.5%) is
currently flowing to sales at a combined rate of 4,650 Mcfpd and 37 Bopd
from two zones. An offset well is planned in which KCS will have a
higher working interest.
The Company's production volumes averaged 115.0 Mmcfepd in the first
quarter, down 4.2 Mmcfepd from the fourth quarter of 2001. Production volumes
were lower because of: 1) property sales which accounted for approximately
2.0 Mmcfepd (Dragon Tail, Frost field & Montana/North Dakota sales package);
2) scheduled VPP delivery reductions of approximately 1.0 Mmcfepd; and
3) production curtailments of approximately 2.6 Mmcfepd. The Company
experienced pipeline curtailments in various offshore fields, the Catahoula
field in south Louisiana and the Provident City field in south Texas. In the
first quarter the Company also experienced declines in some Mid-Continent
non-operated fields, but these declines were offset by production from new
operated wells.
Outlook for 2002
Based on the recent property divestiture agreements and first quarter
results, the outlook for 2002 is amended as follows (these projections do not
include any additional divestitures):
Previous Forecast Current Forecast
Production (Bcfe)
WI 39-43 36-40
VPP 2-3 2-3
Total 41-46 38-43
Production payment obligation (11.2) (11.2)
LOE ($ millions) 25-29 22-25
G&A ($ millions) 8-9 8-9
Interest Expense ($ millions) 18-20 17-19
Property Sales ($ millions) 25-50 27-50
As of May 14, 2002, the Company had outstanding hedge instruments fixing
0.9 Bcf of natural gas at a price of $3.05 per Mmbtu for the second quarter of
2002, 0.9 Bcf at $3.70 for the third quarter and 0.9 Bcf at $3.95 for the
fourth quarter of 2002. The Company also hedged 45,500 barrels of crude oil
at a price of $24.50 per barrel for the second quarter of 2002. In addition,
the Company has outstanding conditional hedges and floor price guarantees with
Enron North America Corp. covering 4.28 Bcf of natural gas for the period
April to October 2002. Since Enron is in bankruptcy the Company cannot
ascertain whether these instruments are of any value. All of KCS' hedges are
NYMEX based and not adjusted for geographic location.
KCS is an independent energy company engaged in the acquisition,
exploration, development 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 .
The following abbreviations are utilized herein:
Bcf Billion cubic feet of gas
Bcfe Billion cubic feet of gas equivalent
Bopd Barrels of oil or condensate per day
LOE Lease operating expenses
Mcfpd Thousand cubic feet of gas per day
Mcfepd Thousand cubic feet of gas equivalent per day
Mmcfepd Million cubic feet of gas equivalent per day
VPP Volumetric production payment
WI Working interest
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) 2002 2001
Oil and gas revenue $29,357 $56,673
Other revenue, net (533) 16,036
Total revenue 28,824 72,709
Operating costs and expenses
Lease operating expenses 6,536 9,223
Production taxes 1,323 3,064
General and administrative expenses 2,127 2,682
Stock compensation 316 71
Depreciation, depletion and amortization 15,176 13,572
Total operating costs and expenses 25,478 28,612
Operating income 3,346 44,097
Interest and other income, net 70 389
Interest expense (4,830) (7,325)
Income (loss) before reorganization
items and income taxes (1,414) 37,161
Reorganization items -- (2,412)
Income (loss) before income taxes (1,414) 34,749
Federal and state income (taxes) benefit 596 6,231
Net income (loss) (818) 40,980
Dividends and accretion of issuance
costs on preferred stock (253) (163)
Income (loss) available for common stockholders $(1,071) $40,817
Earnings (loss) per share of common stock:
Basic $(0.03) $1.38
Diluted (0.03) 1.21
Average shares outstanding for
computation of earnings per share
Basic 34,986 29,549
Diluted 34,986 33,957
KCS Energy, Inc.
Condensed Balance Sheets
March 31, December 31,
(Thousands in Dollars) 2002 2001
Assets
Cash $506 $22,927
Other current assets 30,999 27,060
Property, plant and equipment, net 278,798 278,677
Deferred taxes and other assets 17,876 18,062
Total assets $328,179 $346,726
Liabilities and stockholders' (deficit) equity
Accounts payable and accrued liabilities $40,061 $43,951
Accrued interest on public debt 4,039 9,089
Senior notes (current) 72,546 --
Deferred revenue and other liabilities 99,575 112,757
Long-term debt 135,800 204,800
Convertible preferred stock 14,918 15,589
Stockholders' (deficit) equity (38,760) (39,460)
Total liabilities and stockholders'
(deficit) equity $328,179 $346,726
Condensed Statements of Cash Flow
Three Months Ended
March 31,
2002 2001
Net income (loss) $(818) $40,980
DD&A 15,176 13,572
Amortization of deferred revenue (13,002) (12,935)
Other non-cash charges and credits, net 955 (4,092)
Reorganization items -- 2,412
2,311 39,937
Proceeds from Production Payment sold -- 175,367
Change in accrued interest payable (5,050) (54,132)
Other operating activities, net (7,931) (20,761)
Net cash (used in) provided by operating
activities before reorganization items (10,670) 140,411
Reorganization items -- (2,412)
Net cash (used in) provided
by operating activities (10,670) 137,999
Cash flow from investing activities:
Investment in oil and gas properties, net (15,243) (14,422)
Other capital expenditures (54) (572)
Net cash used in investing activities (15,297) (14,994)
Cash flow from financing activities:
Proceeds from borrowings 10,800 --
Repayments of debt (7,254) (146,905)
Issuance of convertible preferred stock, net -- 28,512
Other financing activities -- 59
Cash flow provided by (used in) financing
activities 3,546 (118,334)
Increase (decrease) in cash
and cash equivalents $(22,421) $4,671
KCS Energy, Inc.
Supplemental Data
Three Months Ended
March 31,
2002 2001
Production data:*
Natural gas (MMcf) 8,312 9,548
Oil (Mbbl) 269 331
Liquids (Mbbl) 71 83
Summary (MMcfe):
Working Interest 9,469 10,869
VPP 879 1,161
Total 10,348 12,030
Average realized prices:*
Gas (per Mcf) $2.88 $4.97
Oil (per bbl) $17.70 $23.54
Liquids (per bbl) $9.03 $17.83
Total (per Mcfe) $2.84 $4.71
* Includes 3,234 and 3,242 MMcfe for 2002 and 2001 respectively, dedicated
to the Production Payment sold in February 2001 and its effect on
average realized prices.
SOURCE KCS Energy, Inc.
 back to top
Related links:
http://www.kcsenergy.com
CONTACT:
James W. Christmas, President and CEO of KCS
Energy, Inc., +1-713-877-8006; or Marilynn Meek - General Info,
+1-212-445-8451, Peter Seltzberg, +1-212-445-8457, or Judith
Sylk-Siegel - Media, +1-212-445-8431, all of The Financial
Relations Board
|
