HOUSTON, Oct. 23 /PRNewswire/ -- Ocean Energy (NYSE: OEI) announced today
third quarter net income of $48 million or $0.27 per diluted share on revenues
of $279 million. This compares to net income of $58 million or $0.33 per
diluted share on revenues of $268 million for the third quarter a year ago.
"The third quarter results were marked by production growth of 15 percent
and continued success from our large-impact exploratory drilling program,
offsetting lower natural gas prices," said James T. Hackett, chairman,
president and chief executive officer. "At this point, we are on track to
achieve a reserve replacement rate for 2001 in excess of 300 percent. This
achievement is due primarily to several major discoveries in the deepwater
Gulf of Mexico and in Egypt, which will help to more than double reserve
replacement from the drill bit."
Average daily production for the quarter was approximately 151 thousand
barrels of oil equivalent as compared to 131 thousand barrels during the same
period in 2000. The increase is primarily attributable to higher production
from the Zafiro field in Equatorial Guinea, exploitation activities on Gulf of
Mexico shelf properties as well as two earlier acquisitions in 2001 of onshore
producing properties in Texas and Louisiana. While production increased on a
year-over-year basis, it declined three percent compared to the second
quarter, primarily due to the timing of international crude oil liftings and
previously announced assets sales.
Discretionary cash flow for the third quarter was approximately
$165 million, compared to $185 million for the same period in 2000.
Discretionary cash flow per diluted share for the third quarter was $0.92
compared to $1.04 for the same period in 2000.
Highlights for the quarter include:
Continued drilling in the deepwater Gulf of Mexico - Ocean continues to
conduct one of the industry's most active and successful deepwater drilling
programs in the Gulf of Mexico.
The Red Hawk well in Garden Banks Block 877 was drilled to 23,500 feet in
5,300 feet of water, encountering more than 135 feet of gas and gas condensate
pay in two pay zones. A successful up-dip appraisal sidetrack to the
discovery also encountered 175 feet of gas and gas condensate. At this time,
reserve estimates are in the range of 300 to 500 billion cubic feet of gas.
The company plans to drill an appraisal well south of the discovery to further
evaluate the extent of the field where Ocean holds a 50 percent working
interest.
In addition, Ocean continues to conduct appraisal drilling on several Gulf
of Mexico discoveries. These include the Zia discovery in Mississippi Canyon
Block 496, where Ocean is the operator and holds a 65 percent working
interest; the Magnolia discovery in Garden Banks 783 where a third appraisal
well is underway and OEI holds a 25 percent working interest; and the Trident
discovery in the Alaminos Canyon Block 903 where the company holds a
12.75 percent working interest.
Installation of the world's first truss spar for the Nansen field is
continuing with the spar already moored in place awaiting installation of the
topsides equipment, and initial production is anticipated from that field in
the East Breaks area by late 2001. Ocean holds a 50 percent working interest
in the Nansen field. Ocean also holds a 20 percent interest in the nearby
Boomvang field where the spar is en route from Finland and initial production
is scheduled to come on-line during the first quarter of 2002.
A significant discovery at East Zeit offshore Egypt - An exploratory well
that was drilled offshore Gulf of Suez was placed on production on
October 15, 2001. Drilled to a total depth of 16,300 feet, the well
encountered approximately 745 feet of oil pay from three separate zones.
Further development drilling is planned for 2002. It is estimated that the
discovery could yield another 40 to 80 million gross barrels, a significant
addition to the approximately 87 million barrels of oil produced to date from
the area.
Successful completion of debt offering - During the quarter, the company
completed the sale of $350 million of its 7 1/4 percent Senior Notes due 2011,
a portion of which was used to repay amounts outstanding under the company's
revolving credit facility. The remaining proceeds will be utilized on
November 2, 2001 to redeem Ocean's 8 5/8 percent and 9 3/4 percent Senior
Subordinated Notes, due 2005 and 2006, respectively.
Guidance update - In conjunction with the release of its third quarter
earnings, Ocean will file today a Form 8-K to provide updated guidance as to
the company's anticipated performance for the fourth quarter and full-year
ending December 31, 2001. A copy of the guidance language to be contained in
the Form 8-K is attached.
A conference call and webcast is scheduled for today at 8:30 a.m. Central/
9:30 a.m. Eastern to discuss the third quarter performance, fourth quarter and
full-year 2001 guidance. To join the call from the United States, dial
1-800-621-8495. From international locations, join the call by dialing
1-415-228-4580. The call passcode is OEI and the call leader is James Hackett.
For the webcast, log on to the Ocean Energy Web site at http://www.oceanenergy.com
and click on the event link from either the homepage or investor relations
section of the site.
Ocean Energy, Inc. is an independent energy company engaged in the
exploration, development, production, and acquisition of crude oil and natural
gas. North American operations are focused in the shelf and deepwater areas
of the Gulf of Mexico, the Rocky Mountains, Permian Basin, Arklatex, Anadarko,
East Texas and the Gulf Coast regions. Internationally, Ocean holds a leading
position among U.S. independents in West Africa with oil and gas activities in
Equatorial Guinea, Angola and Cote d'Ivoire. The company also conducts
operations in Egypt, the Russian Republic of Tatarstan, Brazil, Pakistan, and
Indonesia.
Certain statements in this news release regarding future expectations,
plans for acquisitions, dispositions, and oil and gas reserves, exploration,
development, production and pricing may be regarded as "forward-looking
statements" within the meaning of the Securities Litigation Reform Act. They
are subject to various risks, such as operating hazards, drilling risks, the
inherent uncertainties in interpreting engineering data relating to
underground accumulations of oil and gas, as well as other risks discussed in
detail in the Company's SEC filings, including the Annual Report on Form 10-K
for the year ended December 31, 2000. Actual results may vary materially.
Ocean Energy, Inc.
Condensed Consolidated Statements of Operations
(Amounts in Thousands Except Per Share Data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Revenues $279,021 $267,836 $1,038,118 $761,118
Costs of Operations:
Operating expenses 81,607 64,077 234,727 189,572
Depreciation, depletion
and amortization 89,285 76,886 265,287 229,918
General and administrative 7,986 6,231 22,492 21,303
178,878 147,194 522,506 440,793
Operating Profit 100,143 120,642 515,612 320,325
Other (Income) Expense:
Interest expense 14,262 19,756 48,389 57,850
Merger and integration costs --- --- --- 3,273
Interest income and other (1,129) (915) (323) (1,747)
Income Before Income Taxes 87,010 101,801 467,546 260,949
Income Tax Expense 39,167 43,932 212,313 114,609
Net Income Before
Extraordinary Item 47,843 57,869 255,233 146,340
Extraordinary Loss, Net
of Income Taxes --- --- 2,600 ---
Net Income 47,843 57,869 252,633 146,340
Preferred Stock Dividends 813 813 2,438 2,438
Net Income Available to
Common Stockholders $47,030 $57,056 $250,195 $143,902
Basic Earnings Per
Common Share:
Income Before
Extraordinary Loss $0.28 $0.34 $1.49 $0.86
Net Income to Common
Stockholders $0.28 $0.34 $1.47 $0.86
Diluted Earnings Per
Common Share:
Income Before
Extraordinary Loss $0.27 $0.33 $1.43 $0.83
Net Income $0.27 $0.33 $1.42 $0.83
Cash Dividends Declared per
Common Share $0.04 $--- $0.12 $---
Weighted Average Number
of Common Shares Outstanding:
Basic 170,918 167,125 169,750 167,061
Diluted 179,145 177,035 178,143 176,448
Ocean Energy, Inc.
Condensed Consolidated Balance Sheets
(Amounts in Thousands)
(Unaudited)
September 30, December 31,
2001 2000
Assets:
Current Assets $454,935 $324,554
Property, Plant and Equipment, Net 2,998,825 2,367,950
Other Assets 69,223 197,896
Total Assets $3,522,983 $2,890,400
Liabilities and Stockholders' Equity:
Current Liabilities $416,025 $393,857
Long-Term Debt 1,337,517 1,032,564
Other Noncurrent Liabilities 324,840 311,291
Stockholders' Equity 1,444,601 1,152,688
Total Liabilities and
Stockholders' Equity $3,522,983 $2,890,400
Ocean Energy, Inc.
Condensed Consolidated Statements of Cash Flows
(Amounts in Thousands)
(Unaudited)
Nine Months Ended
September 30,
2001 2000
Operating Activities:
Net income $252,633 $146,340
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation, depletion and amortization 265,287 229,918
Deferred income taxes 158,392 99,833
Extraordinary loss, net of taxes 2,600 ---
Other 13,778 9,678
Changes in operating assets and
liabilities, net of acquisitions (37,461) (85,621)
Net Cash Provided by Operating Activities 655,229 400,148
Investing Activities:
Capital expenditures (637,092) (413,349)
Acquisition costs, net of cash acquired (236,240) (3,036)
Proceeds from sales of property,
plant and equipment 59,044 86,125
Other --- (2,327)
Net Cash Used in Investing Activities (814,288) (332,587)
Financing Activities:
Net proceeds from (payments on) borrowings 281,122 (247,912)
Proceeds from exercise of common
stock options 33,553 20,600
Dividends paid (21,957) (1,625)
Premiums paid on debt buy back (3,167) ---
Purchase of treasury stock (6,671) (23,401)
Increase in deferred revenue --- 74,947
Proceeds from conveyances of Section 29
credit properties --- 69,644
Other (2,275) 1,212
Net Cash Provided by (Used in)
Financing Activities 280,605 (106,535)
Increase (Decrease) in Cash and
Cash Equivalents 121,546 (38,974)
Cash and Cash Equivalents at
Beginning of Period 23,039 64,889
Cash and Cash Equivalents at End of Period $144,585 $25,915
Ocean Energy, Inc.
Operational Information
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Financial Data (Dollars
in Thousands):
Operating Profit (Loss):
Oil and Gas Operations $109,499 $128,533 $543,151 $346,453
Corporate (9,356) (7,891) (27,539) (26,128)
Depreciation, Depletion
and Amortization:
Oil and Gas Operations 87,915 75,226 260,240 225,093
Corporate 1,370 1,660 5,047 4,825
Operations Data:
Wells Drilled:
Gross 76 99 239 234
Net 42 64 106 133
Success Rate 88% 79% 87% 79%
Operations Data:
Net Daily Natural
Gas Production (MMcf):
Domestic 435 386 428 368
Cote d'Ivoire 20 14 20 25
Other International 9 9 8 10
Total 464 409 456 403
Average Natural Gas Prices
($ per Mcf) (*):
Domestic $2.78 $4.27 $4.85 $3.47
Cote d'Ivoire $2.52 $2.02 $2.46 $2.19
Other International $4.08 $3.92 $4.68 $3.62
Weighted Average $2.79 $4.18 $4.74 $3.39
Average Natural Gas Prices
Including the Impact of
Financial Derivatives
($ per Mcf) $3.07 $3.82 $4.84 $3.21
Net Daily Oil and NGL
Production (MBbl):
Domestic 29 25 28 28
Equatorial Guinea 30 21 30 21
Cote d'Ivoire 2 3 3 4
Egypt 8 9 8 9
Other International 5 5 6 5
Total 74 63 75 67
Average Oil and NGL
Prices ($ per Bbl) (*):
Domestic $22.97 $26.20 $24.43 $25.57
Equatorial Guinea $21.75 $25.75 $22.70 $26.46
Cote d'Ivoire $22.16 $28.53 $23.17 $25.23
Egypt $23.28 $27.60 $24.00 $26.97
Other International $14.35 $22.68 $15.99 $19.19
Weighted Average $21.84 $26.11 $23.04 $25.57
Average Oil and NGL Prices
Including the Impact of
Financial Derivatives
($ per Bbl) $21.72 $21.30 $21.41 $22.23
(*) All price information excludes impact of financial derivatives,
unless otherwise stated.
Updated Guidance on Year 2001 Estimates
The tables following this narrative set forth the Company's current
estimates of its operating statistics for the fourth quarter of 2001 and full
year ending December 31, 2001. These estimates are based on the Company's
historical operating performance and trends, estimates of oil and gas reserves
as of December 31, 2000 and the Company's planned capital and operating budget
for 2001. The 2001 estimates listed below differ from the full year estimates
in the Company's August 3, 2001 Form 8-K resulting from revisions to
production and operating costs per BOE due to actual results year-to-date.
2001 Estimated Production (A)
Fourth Quarter Full Year
Gas Production 41 Bcf 165 Bcf
Gas Price Differentials (B) $(0.10) - (0.20) $(0.10) - (0.20)
Oil and NGL Production 6.9 MMBbls 27.3 MMBbls
Oil Price Differentials (B) $(4.00) - (5.00) $(4.00) - (5.00)
Daily Production 150 MBOE 150 MBOE
(A) These estimates represent the approximate mid-point of the range of
the Company's estimates of the above information. Actual results may
differ materially from these estimates.
(B) For purposes of the 2001 estimates, the Company has assumed price
differentials due to location, quality and other factors, excluding
the effects of derivative financial instruments. Gas price
differentials are stated as premiums (discounts) from Henry Hub
pricing and oil price differentials are stated as premiums
(discounts) from NYMEX pricing.
Oil and gas prices have fluctuated significantly in recent years in
response to numerous economic, political and environmental factors, and the
Company expects that commodity prices will continue to fluctuate significantly
in the future. Changes in commodity prices could significantly affect the
Company's expected operating results. In addition to directly affecting
revenues, price changes can affect expected production because production
estimates necessarily assume that oil and gas can profitably be produced at
the assumed pricing levels. In addition to the above pricing assumptions, the
2001 estimates were prepared assuming that demand, curtailment, producibility
and general market conditions for the Company's oil and gas for 2001 will be
substantially similar to those experienced during the year ended
December 31, 2000 and first nine months of 2001. No material assumptions
concerning acquisitions or divestments activities are included unless the
transactions have been completed.
For purposes of the 2001 estimates, a $1.00 per Bbl change in the annual
average price of oil and a $0.10 per Mcf change in the annual average price of
natural gas will result in changes in the Company's estimated annual net
income of $13 million ($0.07 per diluted share) and $8 million ($0.04 per
diluted share), respectively, in each case including a $1 million change in
annual production taxes.
From time to time, the Company has utilized and expects to continue to
utilize derivative financial instruments with respect to a portion of its oil
and gas production to achieve a more predictable cash flow by reducing its
exposure to price fluctuations. Certain of these derivative financial
instruments have been designated and have qualified as cash flow hedges. The
Company utilizes additional financial instruments which have not been
designated as cash flow hedges even though they do protect the Company from
changes in commodity prices. These additional financial instruments are
marked to market quarterly with the resulting changes in fair value recorded
in revenues and are not expected to have a material effect on the Company's
financial results for the year.
The Company currently has in place put options for the remainder of 2001
that place an annual floor price of $25.00 per Bbl on 20 MBbl of oil per day,
an annual floor price of $4.00 per Mcf on 100 MMcf of natural gas per day, and
an annual floor price of $5.00 per Mcf on 100 MMcf of natural gas per day.
The Company has also entered into two crude oil basis swap contracts to fix
the sales price differential between WTI and Brent. The contracts, which
extend through May 2002 and relate to 10 MBbl per day each, provide that the
Company receives a net settlement of WTI less Brent less $1.29 per Bbl. The
Company also has in place collars for oil and gas for the period January
through December 2002 at contracted volumes of 15 MBbl of crude oil per day
with a floor of $23.00 and a weighted average ceiling of $28.03 and 100 MMcf
of gas per day with a floor of $2.75 and a ceiling of $4.10. In addition, a
related trust has a swap agreement covering 14.5 MMcf of gas per day at a
price of $4.77 per Mcf for the remainder of 2001 and additional amounts at
various prices through 2005. Although the Company is not a party to this
financial instrument, under SFAS 133 the Company is required to account for
this swap as an embedded derivative financial instrument and include its
effects in the Company's results of operations. Depending upon various
circumstances, the Company may periodically enter into additional derivative
financial instruments that would hedge expected crude oil and natural gas
production.
The Company has entered into interest rate swap agreements to hedge the
fair value of certain of the Company's fixed rate debt. Under the terms of
the agreements, the counterparties pay the Company a weighted average fixed
annual rate of 7.74 percent on the notional amounts and the Company pays the
counterparties a variable annual rate equal to the six-month LIBOR rate plus a
weighted average rate of 2.73 percent. These swap agreements have been
designated as fair value hedges pursuant to SFAS No. 133 and remain in effect
through the maturity dates of the related notes.
2001 Estimates of Operating Costs (A)
Fourth Quarter Full Year
Operating costs/BOE:
Lease operating expense, excluding
production taxes $5.00 $4.80
Production taxes 0.65 0.90
General and administrative expense 0.55 0.55
Interest expense 1.20 1.20
Depreciation, depletion and amortization 6.50 6.45
$13.90 $13.90
Effective tax rate 44% to 48% 44% to 48%
(75% deferred)
Preferred dividends $0.8 million $3.3 million
Common dividends (B) $0.04 per share $0.16 per share
(A) These estimates represent the approximate mid-point of the range of
the Company's estimates of the above information. Actual results may
differ materially from these estimates.
(B) The declaration of common stock dividends is discretionary and will
be subject to determination by the Company's Board of Directors.
2001 Estimated Capital Expenditures
Gulf of Mexico International U.S. Onshore
$430 to $450 million $210 to $225 million $460 to $475 million
Approximately 35 percent to 45 percent of the capital spending program is
estimated to be spent for exploratory projects. The spending will be funded
out of Ocean's discretionary cash flow based on anticipated commodity prices,
and is subject to change if market conditions shift or new opportunities are
identified.
2002 Estimates - Ocean has not completed its formal budgeting process for
the year 2002. However, if the timing and production levels of new projects
(particularly the start of production from the Nansen and Boomvang fields)
occur as anticipated, the Company expects to grow annual production over 2001
volumes in the 10 - 15 percent range during 2002. Estimates of 2002 capital
expenditures to meet these production estimates are anticipated to be
$700 - $900 million, assuming current commodity prices.
Defined Terms
Natural gas is stated in billion cubic feet ("Bcf"), million cubic feet
("MMcf"), or thousand cubic feet ("Mcf"). Oil, condensate and natural gas
liquids ("NGL") are stated in millions of barrels ("MMbbls") or thousand
barrels ("MBbls"). MBOE and BOE represent one thousand barrels and one barrel
of oil equivalent, respectively, with six Mcf of gas converted to one barrel
of oil equivalent.
SOURCE Ocean Energy, Inc.
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Related links:
http://www.oceanenergy.com
Company News On-Call:
http://www.prnewswire.com/comp/913463.html
CONTACT:
financial, Bruce Busmire, +1-713-265-6161, or
media, Janice Aston White, +1-713-265-6164, both of Ocean Energy,
Inc.
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