Cost-reduction Initiatives Combined With Improving
Commodity Prices Result in Quarterly Profit
HOUSTON, Aug. 4 /PRNewswire/ -- KCS Energy, Inc. (NYSE: KCS) today
announced financial and operating results for the three and six months ended
June 30, 1999.
Financial Highlights
($ thousands except per share)
3 mos. 1999 3 mos. 1998
Revenue $33,355 $ 33,663
Operating Income (Loss) $10,034 $(51,158) *
Net Income (Loss) $219 $(38,877) *
Earnings (Loss) Per Share $0.01 $(1.32) *
6 mos. 1999 6 mos. 1998
Revenue $66,360 $64,972
Operating Income (Loss) $17,980 $(43,602) *
Net Loss $(1,699) $(39,017) *
Loss Per Share $(0.06) $(1.32) *
* 1998 periods include a $57.6 million pretax ($37.5 million after-tax),
or $1.27 per share, non-cash ceiling writedown of oil and gas assets.
Commenting on the Company's second quarter 1999 performance, KCS President
and Chief Executive Officer James W. Christmas said, "In the second quarter,
the Company made solid progress in achieving our business and financial goals.
We substantially reduced costs, sold non-core properties reducing bank debt by
$23.3 million, continued a solid investment program and finished the quarter
with $15.9 million in cash while staying current on trade payables."
KCS Energy reported operating income of $10.0 million for the second
quarter of 1999, compared to an operating loss of $51.2 million for the
comparable 1998 period. Net income for the quarter was $0.2 million, or $0.01
per share, compared to a net loss of $38.9 million, or $1.32 per share, for
the same period in 1998. The current year net income reflects lower operating
expenses as a result of the Company's cost-reduction initiatives and the
recent strengthening of oil and gas commodity prices. Even ignoring the
effect of the ceiling writedown in 1998, operating income increased 55% over
last year's quarter. Without the effect of the non-cash ceiling writedown,
for the quarter ended June 30, 1998 operating income would have been $6.4
million and net loss would have been $1.4 million, or $0.05 per share. EBITDA
(earnings before interest, taxes and DD&A) was $23.7 million for the second
quarter of 1999, compared to $22.1 million in the same period last year, while
cash flow before changes in working capital was $14.3 million, or $0.49 per
share compared to $13.4 million, or $0.46 per share.
Cost-saving measures, previously announced, which included the closing of
the New Jersey corporate office, personnel reductions in the Rocky Mountain
area, and other cost reduction initiatives positively impacted the second
quarter results. Cash operating expenses in the second quarter, including
G&A, lease operating expenses and severance taxes were reduced by
approximately $0.6 million per month, or 15% below the second quarter of 1998
and 10% below the first quarter of 1999.
For the six-month period of 1999, net loss was $1.7 million, or $0.06 per
share, compared to a net loss of $39.0 million, or $1.32 per share for the
1998 comparable period. The 1999 loss reflects the depressed oil and gas
commodity prices during the first quarter of the year and increased interest
costs which more than offset the effect of higher production and lower
operating expenses. EBITDA for the six-month period was $45.8 million,
compared to $42.6 million in 1998, while cash flow before changes in working
capital was $27.1 million, or $0.93 per share compared to $26.7 million, or
$0.91 per share.
Operations Update
William N. Hahne, KCS Senior Vice President and Chief Operating Officer,
noted, "With a reduced capital budget designed to increase cash available for
debt reduction, the Company participated in drilling 11 wells in the second
quarter. Year to date, the Company has drilled 19 wells of which 12 have been
successful. Notably, during the second quarter, the Company drilled the Gas
#1 in Kiowa County, Oklahoma, with a 94% working interest, completing the well
in the Springer Formation at an initial rate of 4.0 million cubic feet of gas
per day (MMcfpd). Three other zones which tested productive are behind pipe
and will be produced after the Springer."
The Company participated in the Edwards 2-19 well, also in Kiowa County,
Oklahoma, with a 25% working interest. This well initially tested at rates as
high as 9.6 MMcfpd and is currently producing into the sales line at 1.5
MMcfpd. An offset well is currently drilling. KCS also participated in a
three-well package in the Roche Ranch field in South Texas at a 40% working
interest, drilling two successful Frio wells which are producing at a combined
rate of 1.2 MMcfpd.
In addition, KCS purchased a 100% working interest in four completed
Niagaran Reef wells in Livingston County, Michigan. The Company is currently
negotiating with a third-party operator the installation of a small amine
plant to process the gas and expects first production of 7.0 MMcfpd in early
2000. KCS also completed two acquisitions with an existing Volumetric
Production Payment (VPP) partner totaling $7.8 million.
During the first half of 1999, KCS has expended approximately one-third of
its estimated $60 million capital budget. Currently there are five rigs
drilling and the Company expects to participate in the drilling of 30-40 wells
during the second half of the year.
Property Sales
"We successfully completed sales transactions in the first half of the
year with gross sales proceeds of $24.5 million, including the monetization of
one VPP for $21.9 million. The VPP properties had an SEC PV10 value of $25.6
million at December 31, 1998 and yielded $3.2 million of cash flow to KCS
through the effective date of sale. The Company completed 11 other
transactions totaling $2.6 million on properties which had an SEC PV10 value
of $0.5 million at December 31, 1998.
The Company is continuing its sale of non-core properties and is ahead of
schedule on its sales goals set earlier in the year. The divestiture of these
higher-cost, scattered properties will allow a clearer, more efficient focus
on the Company's core areas," Mr. Hahne said.
Forbearance Agreements
As previously announced July 29, 1999, KCS entered into new forbearance
agreements on each of its revolving bank credit agreements which provide that
the lenders will refrain from exercising any rights and remedies not
heretofore exercised until October 5, 1999. The lenders have also rescinded
their declaration that all amounts outstanding under the credit agreements are
immediately due and payable and effectively waived the default rate of
interest. Under the terms of the agreements, the Company has committed to
make monthly principal payments of $2.5 million commencing July 31, 1999 and
to dedicate a portion of the proceeds from the sale of any of the Company's
oil and gas properties to principal payments. The agreements also preclude
the Company from making interest payments on its senior and subordinated
notes. The Company did not make the July 15, 1999 interest payments totaling
$13.8 million on its senior and subordinated notes.
Restructuring
KCS continues to work with its financial advisors, Houlihan Lokey Howard &
Zuken, to pursue a restructuring transaction that would result in a
significantly deleveraged balance sheet and enable the Company to pursue
growth opportunities.
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 (VPP) program. 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 Six Months Ended
(Amounts in Thousands June 30, June 30,
Except Per Share Data) 1999 1998 1999 1998
Oil and gas revenue $31,334 $32,157 $63,676 $61,863
Other revenue, net 2,021 1,506 2,684 3,109
Total revenue 33,355 33,663 66,360 64,972
Operating costs and expenses
Lease operating expenses 6,644 7,642 13,625 14,918
Production taxes 812 1,008 1,577 2,058
General and administrative 2,422 2,993 5,630 5,592
Depreciation, depletion
and amortization 13,443 15,547 27,548 28,375
Writedown of oil and
gas properties -- 57,631 -- 57,631
Total operating costs
and expenses 23,321 84,821 48,380 108,574
Operating income (loss) 10,034 (51,158) 17,980 (43,602)
Interest and other
income, net 181 101 222 199
Interest expense (9,996) (8,925) (19,901) (16,802)
Income (loss) before
income taxes 219 (59,982) (1,699) (60,205)
Federal and state income
taxes (benefit) -- (21,105) -- (21,188)
Net income (loss) $219 $(38,877) $(1,699) $(39,017)
Basic and diluted
earnings (loss)
per share of common
stock $ 0.01 $(1.32) $(0.06) $(1.32)
Weighted average
shares outstanding 29,268 29,480 29,259 29,461
KCS Energy, Inc.
Condensed Balance Sheets
June 30, December 31,
(Thousands of Dollars) 1999 1998
Assets
Cash $15,934 $876
Other current assets 31,329 42,198
Property, plant and equipment, net 229,070 256,492
Deferred charges and other assets 8,603 9,312
Total assets $284,936 $308,878
Liabilities and
stockholders' equity
Current liabilities $36,606 $49,851
Short-term debt 401,390 135,700
Deferred credits and
other liabilities 2,825 2,896
Long-term debt -- 274,635
Stockholders' equity (155,885) (154,204)
Total liabilities and
stockholders' equity $284,936 $308,878
Condensed Statements of Cash Flow
Six Months Ended
June 30,
1999 1998
Net loss $(1,699) $(39,017)
DD&A 27,548 28,375
Writedown of oil and gas properties -- 57,631
Other 1,246 (20,315)
27,095 26,674
Net changes in assets and liabilities (1,637) (7,659)
Net cash provided by operating activities 25,458 19,015
Cash flow from investing activities:
Investment in oil and gas properties (21,596) (117,494)
Net proceeds from sale of oil and
gas properties 21,432 4,815
Investment in other property,
plant and equipment 5 (2,101)
Net cash used in investing activities (159) (114,780)
Cash flow provided by (used in)
financing activities (10,241) 97,190
Net increase in cash and cash equivalents $15,058 $1,425
EBITDA * $45,750 $42,603
* Earnings before interest, taxes and DD&A. EBITDA is not a measure of
financial performance or liquidity under generally accepted accounting
principles and should not be considered in isolation.
KCS Energy, Inc.
Supplemental Data
Three Months Ended Six Months Ended
June 30, June 30,
1999 1998 1999 1998
Production data:
Gas (MMcf) 12,760 12,312 27,502 23,637
Oil (Mbbl) 306 489 668 857
Liquids (Mbbl) 27 35 52 56
Total production (MMcfe) 14,755 15,453 31,819 29,112
Other data:
Average sales prices
Gas (per Mcf) $2.08 $2.17 $2.00 $2.17
Oil (per bbl) 14.91 10.82 12.22 11.86
Liquids (per bbl) 9.60 5.48 9.20 6.77
Total (per Mcfe) 2.12 2.08 2.00 2.13
SOURCE KCS Energy, Inc.
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Related links:
http://www.frbinc.com
CONTACT:
Kathryn M. Kinnamon, VP, Treasurer & Acting
CFO of KCS Energy, 713-877-8006; General Info, Marianne Stewart,
Media, Claudine Cornelis, 212-661-8030, or Analyst, Beth Lewis,
617-342-7003, all of The Financial Relations Board
NOTE TO EDITORS: 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
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