HOUSTON, Aug. 2 /PRNewswire/ -- KCS Energy, Inc. (NYSE: KCS) today
announced financial and operating results for the second quarter and six
months ended June 30, 2001.
Commenting on the Company's performance, KCS President and Chief Executive
Officer James W. Christmas said, "We are pleased to report that working
interest production increased for the seventh time in the last eight quarters
and was 15% higher than last year's second quarter. This increase, coupled
with an 18% improvement in average realized prices, more than offset the
scheduled reduction in volumes from the Company's VPP program. In fact, the
quarter was the second best in the Company's history, with net income of
$20.5 million, a 38% increase over last year's quarter."
Financial Highlights
($ thousands except per share)
3 mos. 2001 3 mos.2000
Revenue $51,065 $ 45,388
Operating Income $24,968 $ 22,517
Income Before Reorganization Items $20,726 $ 16,100
Net Income $20,546 $ 14,837
Basic Earnings Per Share $0.68 $0.51
Diluted Earnings Per Share $0.51 $0.51
6 mos. 2001 6 mos. 2000
Revenue $ 141,577 $82,071
Operating Income $86,868 $36,753
Income Before Reorganization Items $75,690 $23,551
Income Before Accounting Change $73,098 $14,190
Net Income $44,647 $14,190
Basic Earnings Per Share $1.49 $0.48
Diluted Earnings Per Share $1.20 $0.48
Net income for the three months ended June 30, 2001 increased 38% to
$20.5 million, or $0.68 ($0.51 diluted) per share, compared to $14.8 million,
or $0.51 per share (basic and diluted), for the same period last year. This
increase was attributable to an 18% increase in average realized prices, a
15% increase in working interest production, lower reorganization expenses and
lower interest expense, partially offset by lower production from the
Company's Volumetric Production Payment ("VPP") program and higher operating
expenses.
For the six months ended June 30, 2001, income before reorganization items
increased 221% to $75.7 million, compared to $23.6 million for the prior
year's period. This increase was attributable to a 64% increase in average
realized prices, a 15% increase in working interest production and higher
other revenue, partially offset by lower production from the Company's VPP
program and higher operating expenses. Other revenue for the six months
includes $7.0 million from the sale of emission reduction credits and
$7.7 million of non-cash gains on derivative instruments. Reorganization
items were $2.6 million compared to $9.4 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
$73.1 million, or $2.44 ($1.97 diluted) per share, compared to $14.2 million,
or $0.48 per share (basic and diluted) for the 2000 six-month period. The
cumulative effect, net of tax, of an accounting change associated with the
January 1, 2001 adoption of SFAS No. 133 "Accounting for Derivative
Instruments and Hedging Activities" was $28.5 million, resulting in net income
for the six months of $44.6 million, compared to $14.2 million for the 2000
period.
Continued Drilling Success and South Texas Acquisition Highlight
Operations
Second quarter production increased 2% from first quarter levels as the
Company produced 121 million cubic feet equivalent per day (MMCFEPD) working
interest (WI) and 14 MMCFEPD VPP volumes. The Company had previously
estimated working interest production would decline 4-7%, however, drilling
success in the second quarter and one month of production from the recent
South Texas acquisition replaced the anticipated declines. More importantly,
working interest production increased 15% from the same quarter last year.
As previously announced the Company closed on the acquisition and assumed
operations of the West Mission Valley Field in Victoria County, Texas for
$24.7 million effective June 1, 2001, adding 19.7 billion cubic feet
equivalent (BCFE) of proved reserves, 10,000 leasehold acres and several
drilling prospects.
The Company continued to pursue an aggressive drilling program in the
second quarter with the drilling of 32 new wells. This brings the total wells
drilled in 2001 to 55 compared to 29 wells at mid-year 2000. Of the second
quarter wells, 28 were successful for a success rate of 87.5%. Significant
second quarter wells include:
-- The Reddy #1 (KCS WI = 37%) was drilled as a step-out well in Calhoun
Field, Ouachita Parish, in North Louisiana. This completion tested at
3,700 MCFPD and 60 barrels of condensate per day, with initial sales
beginning on May 18th. An additional well is planned for the third
quarter of 2001.
-- The Company participated in 14 shallow Eagle Sand wells in the Battle
Creek Field in Central Montana (KCS WI = 7-45%). Ten wells have
completed and tested, with the other four awaiting completion. Sales
are expected to commence in September with the completion of pipeline
construction.
-- The Robinson #1 (KCS WI = 25%) was drilled to a deeper Wilcox reservoir
in Goliad County, Texas and placed on production during June. A second
well to develop the field and test additional sands is currently
drilling.
-- In addition, the Price #1 (KCS WI= 10%) was drilled as a Wildcat in
Jones County, Mississippi to a depth of 16,462 feet. A completion rig
has been moved on location to begin testing the first of numerous
potential pay zones in the Cotton Valley and Hosston Sands.
Commenting on KCS's capital investment program, William N. Hahne, Senior
Vice President and Chief Operating Officer said, "The continuation of our base
drilling program, complemented by the South Texas acquisition illustrates the
type of activity we plan to pursue. With this acquisition we have a true focus
on a very defined South Texas gas trend which will provide future growth
opportunities. We expect over half of our 2001 Gulf Coast drilling activity
to be in this area."
Other developments
As previously announced, the Company opened a data room to third parties
with respect to the sale of Rocky Mountain properties. Bids for the
properties have been received and are under review, with an expected closing
before the end of the third quarter.
Since entering into the Enron VPP in February 2001, KCS has delivered
approximately 7.5 BCFE through June 30, 2001, representing 17.5% of the total
commitment.
On June 21, 2001, the Texas Supreme Court affirmed the decision of Fifth
Circuit Court of Appeals at Dallas, Texas in favor of the Company in the Jesus
Yzaguirre royalty lawsuit. The royalty owners have since filed a motion for
rehearing.
Outlook for 2001
Working interest production is currently expected to be between 41-44 BCFE
for the full year. VPP Production is expected to be 4-7 BCFE. Approximately
15.7 BCFE of the production for the year (4.2 BCFE for the third 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.
In addition to the Enron VPP, the Company has hedged a portion of its
production for the remainder of 2001. The Company has locked in the price for
July natural gas production of $4.36 per million British thermal units (MMBTU)
for 540,000 MMBTU; for August and September the Company has 30,000 MMBTU per
month locked in at $5.04 per MMBTU and 200,000 MMBTU per month with a
guaranteed floor price of $4.50 and a cap price of $7.90. The Company also
has oil price swaps in place at $28.15 for 92,000 barrels, or 500 barrels per
day for the period July 1 through December 31, 2001.
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 Six Months Ended
(Amounts in Thousands June 30, June 30,
Except Per Share Data) 2001 2000 2001 2000
Oil and gas revenue $50,588 $44,240 $125,064 $80,483
Other revenue, net 477 1,148 16,513 1,588
Total revenue 51,065 45,388 141,577 82,071
Operating costs and expenses
Lease operating expenses 7,730 7,078 16,953 13,600
Production taxes 2,002 1,537 5,066 2,746
General and administrative
expenses 2,458 1,722 5,211 3,816
Depreciation, depletion and
amortization 13,907 12,534 27,479 25,156
Total operating costs and
expenses 26,097 22,871 54,709 45,318
Operating income 24,968 22,517 86,868 36,753
Interest and other income, net 629 352 1,018 352
Interest expense (contractual
interest for the 2000
periods was $9,132 and
$18,350 respectively) (4,871) (6,769) (12,196) (13,554)
Income before reorganization
items and income taxes 20,726 16,100 75,690 23,551
Reorganization items (180) (1,263) (2,592) (9,361)
Income before income taxes 20,546 14,837 73,098 14,190
Federal and state income taxes - - - -
Income before accounting change 20,546 14,837 73,098 14,190
Cumulative effect of accounting
change, net of tax - - (28,451) -
Net income 20,546 14,837 44,647 14,190
Preferred stock dividend (330) - (493) -
Income available for common
stockholders $20,216 $14,837 $44,154 $14,190
Basic earnings per share of
common stock
Income before cumulative effect
of accounting change $0.68 $0.51 $2.44 $0.48
Cumulative effect of accounting
change - - (0.96) -
Net income $0.68 $0.51 $1.49 $0.48
Diluted earnings per share of
common stock
Income before cumulative effect
of accounting change $0.51 $0.51 $1.97 $0.48
Cumulative effect of accounting
change - - (0.77) -
Net income $0.51 $0.51 $1.20 $0.48
Average shares outstanding for
computation of earnings per
share
Basic 29,910 29,266 29,729 29,266
Diluted 40,211 29,273 37,147 29,290
KCS Energy, Inc.
Condensed Balance Sheets
June 30, December 31,
(Thousands of Dollars) 2001 2000
Assets
Cash $31,077 $39,994
Other current assets 41,025 51,651
Property, plant and equipment, net 280,980 254,900
Deferred charges and other assets 16,412 790
Total assets $369,494 $347,335
Liabilities and stockholders' deficit
Accounts payable and accrued
liabilities $43,640 $42,415
Accrued interest on public debt 9,090 -
Short-term debt - 76,705
Deferred credits and other liabilities 145,723 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 26,485 -
Stockholders' (deficit) equity (60,244) (108,320)
Total liabilities and stockholders'
deficit $369,494 $347,335
Condensed Statements of Cash Flow
Six Months Ended
June 30,
2001 2000
Net income $44,647 $14,190
DD&A 27,479 25,156
Other non-cash charges credits, net (17,575) 1,097
Reorganization items 2,592 9,361
57,143 49,804
Proceeds from Enron production payment 175,399 -
Changes in accrued interest payable (49,108) 8,250
Other operating activities (17,814) 2,805
Net cash provided by operating
activities before reorganization
items 165,620 60,859
Reorganization items (net of non-cash
items) (2,592) (3,229)
Net cash provided by operating
activities 163,028 57,630
Cash flow from investing activities:
Investment in oil and gas properties (52,530) (31,421)
Proceeds from sale of oil and gas
properties - 143
Other capital expenditures, net (1,029) (158)
Net cash used in investing activities (53,559) (31,436)
Cash flow from financing activities:
Repayments of debt (146,905) (14,813)
Issuance of convertible preferred
stock, net 28,444 -
Other financing activities 75 (1,317)
Cash flow provided by (used by)
financing activities (118,386) (16,130)
Increase in cash and cash equivalents $(8,917) $10,064
KCS Energy, Inc.
Supplemental Data
Three Months Ended
June 30,
2001 2000
Production data: *
Natural gas (MMcf) 9,788 10,336
Oil (Mbbl) 315 340
Liquids (Mbbl) 94 47
Summary (MMcfe):
Working Interest 10,972 9,568
VPP 1,272 3,079
Total 12,244 12,647
Average realized prices *
Gas (per Mcf) $4.35 $3.37
Oil (per bbl) $21.20 $25.80
Liquids (per bbl) $14.47 $14.17
Total (per Mcfe) $4.13 $3.50
* Includes 4,240 and 7,582 MMcfe for the three and six months ended
June 30, 2001, respectively, dedicated to the Enron Production Payment
and its effect on average
realized prices.
KCS Energy, Inc.
Supplemental Data
Six Months Ended
June 30,
2001 2000
Production data: *
Natural gas (MMcf) 19,336 21,069
Oil (Mbbl) 646 673
Liquids (Mbbl) 177 82
Summary (MMcfe):
Working Interest 21,841 19,020
VPP 2,433 6,575
Total 24,274 25,595
Average realized prices *
Gas (per Mcf) $5.57 $2.94
Oil (per bbl) $22.39 $25.81
Liquids (per bbl) $16.03 $14.50
Total (per Mcfe) $5.15 $3.14
* Includes 4,240 and 7,582 MMcfe for the three and six months ended
June 30, 2001, respectively, 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., +1-713-877-8006; or General Info, Marilynn Meek,
+1-212-445-8451, Media, Dave Closs, +1-212-445-8443, or Analysts,
Beth Lewis, +1-617-369-9242, all of The Financial Relations Board
BSMG Worldwide
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