Higher Natural Gas and Oil Prices Contribute to Strong Results
HOUSTON, Aug. 10 /PRNewswire/ -- KCS Energy, Inc. (NYSE: KCS) today
announced financial and operating results for the second quarter and six
months ended June 30, 2000.
Commenting on the Company's performance, KCS President and Chief Executive
Officer James W. Christmas said, "We are pleased to report the highest
quarterly net income and cash flow in the Company's history. The Company
benefited not only from strong market prices for its natural gas and oil
production, but also from the successful implementation of its cost-reduction
and property rationalization programs. In addition, we've continued to carry
out our capital program while reducing bank debt and increasing cash. We have
paid down $58 million in bank debt since April 1999 and increased our cash
balances to $20.6 million as of June 30, 2000. With the continued
strengthening of natural gas and oil prices in the third quarter, we expect
this trend to continue."
Financial Highlights
($ thousands except per share)
3 mos. 2000 3 mos. 1999
Revenue $44,624 $ 33,355
Operating Income $22,517 $ 10,034
Income Before
Reorganization Items $16,100 $219
Net Income $14,837 $219
Earnings Per Share $0.51 $0.01
6 mos. 2000 6 mos. 1999
Revenue $80,631 $66,360
Operating Income $36,753 $17,980
Income (Loss) Before
Reorganization Items $23,551 $(1,699)
Net Income (Loss) $14,190 $(1,699)
Earnings (Loss) Per Share $0.48 $(0.06)
Income before reorganization items for the quarter ended June 30, 2000 was
$16.1 million compared to $0.2 million in the prior year's second quarter.
After deducting $1.3 million of reorganization items, net income for the
quarter was a record $14.8 million, or $0.51 per share, compared to
$0.2 million, or $0.01 per share, for the quarter ended June 30, 1999.
EBITDAR (earnings before interest, taxes, DD&A and reorganization items) for
the current quarter was $35.4 million, also a record, increasing 50% compared
to $23.7 million for the same period a year ago. These record results reflect
higher oil and gas prices, combined with significantly lower operating and
administrative expenses and lower interest expense, partially offset by lower
production from the Company's Volumetric Production Payment ("VPP") program.
In the second quarter of 2000, KCS revenues were reduced by $1.4 million
from its hedging program. This was primarily associated with fixed price
hedges on 9,600 million BTU (MMBTU) per day at $2.055 which were put in place
several years ago by the predecessor owner of Medallion Resources. During the
second quarter, the Company put in place several cost free collars covering a
total of 33,000 MMBTU per day for the period July 1, 2000 through March 31,
2001. These collars ensure that the Company will receive a minimum floor
price for the hedged production in return for certain price ceilings. Under
the terms of these collars, the floors range from $2.70 per MMBTU to $3.53 per
MMBTU and the price ceilings range from $4.00 per MMBTU to a maximum of $5.50
per MMBTU.
For the six months ended June 30, 2000, income before reorganization items
was $23.6 million compared to a loss of $1.7 million in the prior year six-
month period. After deducting $9.4 million of reorganization items
($6.1 million of which was the non-cash write-off of deferred debt issuance
costs), net income for the six months ended June 30, 2000 was $14.2 million,
or $0.48 per share. EBITDAR increased 36% to $62.3 million for the first half
of 2000 compared to $45.7 million for the same period last year.
Improved oil and gas prices, in addition to their favorable impact on
current earnings and cash flow, have also had a very beneficial impact on the
value of the Company's oil and gas reserves. At June 30, 2000, the SEC PV-10
of oil and gas reserves was $526 million, compared to $293 million at December
31, 1999.
Operations Summary
In the second quarter, the Company continued to utilize a portion of
available cash flow for drilling and investment opportunities in the Mid-
Continent and Onshore Gulf Coast regions and to a lesser extent in its VPP
program.
Approximately one half of the capital spent year to date was in the Mid-
Continent region where the Company has continued its strategy of drilling
lower risk step-out and extension wells. Fifteen of the eighteen wells
drilled in the region in 2000 have been successful with the most significant
area of drilling being the Mount Lebanon Field. The Company had previously
announced the successful completion of the Willamette #1 well (33% KCS working
interest) which tested at a combined rate of over 10,000 thousand cubic feet
per day (MCFPD) on initial tests from two zones. This well is still producing
7,000 MCFPD and the Company has continued its development of the field with
the drilling of the LA Minerals #31-1 well (38% KCS working interest). This
northwest offset to the Willamette well encountered 21 feet of productive
Hosston sand and will be tested and on production within the next month.
In the onshore Gulf Coast region, the Company has been pursuing higher
potential exploration tests. In the first half of the year, ten wells have
been drilled with a success rate of 60%. Since the end of the second quarter,
the Company has drilled the Kathleen Jackson #1 well in the Austin Field which
found 52 feet of net Wilcox formation. Completion operations are underway on
this 100% working interest well.
In the second quarter, one additional VPP was purchased for $4.3 million
with incremental volumes to be produced beginning in September 2000. Since
this most recent VPP purchase of natural gas reserves, gas prices have
increased 30% for the period of time KCS will receive its production.
William N. Hahne, Senior Vice President and Chief Operating Officer said
"Production volumes for the second quarter exceeded our expectations as
drilling results partially offset the scheduled declines in VPP production.
VPP volumes in the third quarter are anticipated to be approximately 10,000
MCFPD lower than in the second quarter as a portion of scheduled production is
being deferred into the first half of 2001."
Chapter 11 Cases
As previously announced, KCS is currently in default under its bank credit
facilities and its senior and senior subordinated notes, and has been pursuing
a financial restructuring transaction which would significantly strengthen its
balance sheet. On January 5, 2000, three holders of senior notes filed an
involuntary petition for relief against KCS Energy, Inc. (the parent company
only) under Chapter 11 of the Bankruptcy Code in the U. S. Bankruptcy Court in
Wilmington, Delaware (the "Bankruptcy Court"). On January 18, the Bankruptcy
Court entered an order for relief under Chapter 11 of the Bankruptcy Code with
respect to KCS Energy, Inc. Also on January 18, 2000, each of KCS Energy
Inc.'s subsidiaries filed voluntary petitions under Chapter 11 of the
Bankruptcy Code with the Bankruptcy Court.
On April 20, 2000, KCS reported that the restructuring agreement entered
into in December 1999 with holders of more than two-thirds in amount of the
senior subordinated notes and holders of a majority in amount of the senior
notes was terminated by the noteholders. On May 4, 2000, the Company's
exclusive period for filing a plan of reorganization was terminated by the
Bankruptcy Court. Since then, both the statutory creditors' committee in the
Company's Chapter 11 cases and the Company have filed proposed plans of
reorganization with the Bankruptcy Court. The Bankruptcy Court has scheduled
a Disclosure Statement hearing for August 31, 2000 regarding these two
proposed plans. In the meantime, the Company is continuing negotiations with
the creditors committee and with holders of its senior and senior subordinated
notes and others with the goal of achieving a consensual plan that will enable
a timely conclusion of the Chapter 11 cases.
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) 2000 1999 2000 1999
Oil and gas revenue $ 43,476 $ 31,334 $ 79,043 $ 63,676
Other revenue, net 1,148 2,021 1,588 2,684
Total revenue 44,624 33,355 80,631 66,360
Operating costs and expenses
Lease operating expenses 6,314 6,644 12,160 13,625
Production taxes 1,537 812 2,746 1,577
General and administrative
expenses 1,722 2,422 3,816 5,630
Depreciation, depletion
and amortization 12,534 13,443 25,156 27,548
Total operating costs
and expenses 22,107 23,321 43,878 48,380
Operating income 22,517 10,034 36,753 17,980
Interest and other income,
net 352 181 352 222
Interest expense
(contractual interest for
the 2000 periods was
$9,132 and $18,350
respectively) (6,769) (9,996) (13,554) (19,901)
Income (loss) before
reorganiztion items
and income taxes 16,100 219 23,551 (1,699)
Reorganiztion items (1,263) - (9,361) -
Income (loss) before
income taxes 14,837 219 14,190 (1,699)
Federal and state income
taxes - - - -
Net income (loss) $ 14,837 $ 219 $ 14,190 $ (1,699)
Basic and diluted income
(loss) per share of
common stock $ 0.51 $ 0.01 $ 0.48 $ (0.06)
Weighted average shares of
common stock outstanding 29,273 29,268 29,290 29,259
KCS Energy, Inc.
Condensed Balance Sheets
June 30, December 31,
(Thousands of Dollars) 2000 1999
Assets
Cash $20,648 $10,584
Other current assets 33,451 29,512
Property, plant and equipment, net 243,247 236,967
Deferred charges and other assets 2,205 7,869
Total assets $299,551 $284,932
Liabilities and stockholders' deficit
Accounts payable and accrued liabilities $29,491 $24,602
Accrued interest on public debt - 26,444
Short-term debt 92,038 381,819
Deferred credits and other liabilities 1,963 1,910
Liabilities subject to compromise:
Trade payables 2,018 -
Public debt 275,000 -
Accrued interest on public debt 34,694 -
Stockholders' (deficit) equity (135,653) (149,843)
Total liabilities and stockholders' deficit $299,551 $284,932
Condensed Statements of Cash Flow
Six Months Ended
June 30,
2000 1999
Net income (loss) $14,190 $(1,699)
DD&A 25,156 27,548
Other non-cash charges and credits, net 1,097 1,246
Reorganiztion items 9,361 -
49,804 27,095
Net changes in assets and liabilities 11,055 (1,637)
Net cash provided by operating activities
before reorganization items 60,859 25,458
Reorganization items (net of non-cash items) (3,229) -
Net cash provided by operating activities 57,630 25,458
Cash flow from investing activities:
Investment in oil and gas properties (31,421) (21,596)
Proceeds from sale of oil and gas properties 143 21,432
Other capital expenditures, net (158) 5
Net cash used in investing activities (31,436) (159)
Cash flow from financing activities:
Net increase (decrease) in debt (14,813) (8,989)
Other financing activities (1,317) (1,252)
Cash flow provided by (used by)
financing activities (16,130) (10,241)
Increase in cash and cash equivalents $10,064 $15,058
EBITDAR * $62,261 $45,750
* Earnings before interest, taxes, DD&A, and reorganiztion items.
EBITDAR 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,
2000 1999 2000 1999
Production data:
Natural gas (MMcf) 10,336 12,760 21,069 27,502
Oil (Mbbl) 340 306 673 668
Liquids (Mbbl) 47 27 82 52
Total production (MMcfe) 12,647 14,755 25,595 31,819
Other data:
Average sales prices
Gas (per Mcf) $3.30 $2.08 $2.87 $2.00
Oil (per bbl) $25.80 $14.91 $25.81 $12.22
Liquids (per bbl) $14.17 $9.60 $14.50 $9.20
Total (per Mcfe) $3.44 $2.12 $3.09 $2.00
SOURCE KCS Energy, Inc.
 back to top
Related links:
http://www.kcsenergy.com
CONTACT:
James W. Christmas, President and CEO of KCS
Energy, 713-877-8006; or General Info, Marilynn Meek,
212-661-8030, Analysts, Beth Lewis, 617-369-9240, or Media, Dave
Closs of The Financial Relations Board, 212-661-8030
|
