Recent Drilling Success Will Enhance 4th Quarter Production
HOUSTON, Nov. 8 /PRNewswire/ -- KCS Energy, Inc. (NYSE: KCS) today
announced financial and operating results for the third quarter and nine
months ended September 30, 2001.
Commenting on the Company's performance, KCS President and Chief Executive
Officer James W. Christmas said, "We are pleased that we were able to report
$10.3 million in net income for our third quarter. This was achieved in the
face of dramatically lower natural gas and oil prices and higher non-cash
depreciation, depletion and amortization expense, all of which adversely
affected our results. We are also pleased to report that we have surpassed
our record full year earnings results for 2000 in the first nine months of
2001. Further, our recent drilling successes bode well for the future."
Financial Highlights
($ thousands except per share)
3 mos. 2001 3 mos. 2000
Revenue $41,493 $46,982
Operating Income $15,361 $24,802
Net Income $10,317 $16,874
Basic Earnings Per Share $0.31 $0.58
Diluted Earnings Per Share $0.26 $0.58
9 mos. 2001 9 mos. 2000
Revenue $183,070 $129,053
Operating Income $102,229 $61,555
Net Income $54,964 $31,064
Basic Earnings Per Share $1.77 $1.06
Diluted Earnings Per Share $1.44 $1.06
Net income for the three months ended September 30, 2001 was
$10.3 million, or $0.31 ($0.26 diluted) per share, compared to $16.9 million,
or $0.58 per share (basic and diluted), for the same period last year.
Working interest production increased 7% from the same three-month period last
year. Despite industry wide increases in costs of oil field products and
services, lease operating expenses are down 3% from last year and are 12%
lower than the second quarter of 2001. These improvements, coupled with lower
interest and reorganization expenses were more than offset in the third
quarter by lower average natural gas and oil prices, lower scheduled
production from the Company's Volumetric Production Payment ("VPP") program
and higher non-cash depreciation, depletion and amortization expense.
For the nine months ended September 30, 2001, income before reorganization
items was $86.4 million, compared to $41.7 million for the prior year's
period. This increase was attributable to a 37% increase in average realized
prices, a 12% increase in working interest production, higher other revenue
and lower interest expense, partially offset by lower scheduled production
from the Company's VPP program and higher operating expenses. Other revenue
for the nine months includes $8.2 million from the sale of emission reduction
credits and $7.7 million of non-cash gains on derivative instruments.
Reorganization expenses were $2.9 million compared to $10.7 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 $83.4 million, or $2.69 ($2.18 diluted) per share,
compared to $31.1 million, or $1.06 per share (basic and diluted) for the 2000
nine-month period. Net income for the nine months was a record $55.0 million,
compared to $31.1 million for the 2000 period.
Gulf Coast drilling success will enhance fourth quarter production.
KCS participated in fifteen gross wells in the Gulf Coast region during
the third quarter of 2001 with an 87% success ratio. Updates on some of the
more significant wells include:
-- Price #1, Jones County, Mississippi (KCS Working Interest (WI) = 10%)
was completed in September and is maintaining a production rate of
800 barrels per day (BPD) of oil and 1.6 million cubic feet per day
(MMCFPD) of natural gas with minimal pressure decline. An
extensional well, the Board of Education 16-1, is drilling below
14,000 feet and should be completed before the end of the year.
-- Williams #1, Jones County, Mississippi (KCS WI = 25%) has been
perforated and acidized and will be placed on production shortly.
-- An exploratory well in Dewitt County, Texas (KCS WI = 20%) tested at
1.5 MMCFPD and 268 BPD of condensate and is awaiting pipeline
connection.
-- Robinson #1, Goliad County, Texas (KCS WI = 25%) tested successfully
in a series of four Wilcox sands and is commingled in three zones
producing at 7.8 MMCFPD and 157 BPD of condensate.
-- Danforth #1, Goliad County, Texas (KCS WI = 25%) was brought on line
at 2.4 MMCFPD.
-- Hoffman Ranch #1, Goliad County, Texas (KCS WI = 37.5%) has tested
two zones at a combined rate of 7.4 MMCFPD. These zones are being
commingled and will be connected to sales shortly.
-- An exploratory well in Live Oak County, Texas (KCS WI = 37.5%) tested
at 6.7 MMCFPD and 39 BPD of condensate at 4,623 psi flowing casing
pressure, but is currently curtailed at 1.0 MMCFPD pending
installation of an amine facility.
Except for the Price #1, none of these wells contributed substantial
amounts of production in the third quarter, but all should be on production in
the fourth quarter.
In the Mid-Continent region KCS participated in fifteen wells in the third
quarter, all of which were successful. Five wells were in the Sawyer Canyon,
Sutton County, Texas area and seven wells were in the Battle Creek Field,
Montana. KCS also drilled one extensional well (KCS WI = 37%) in the West
Shugart Field, Eddy County, New Mexico that tested at a full allowable rate of
230 BPD of oil. In the fourth quarter, the Company will curtail drilling of
approximately twenty wells to conserve cash and take advantage of lower
drilling costs anticipated in the future.
As previously announced, the Company opened a data room with respect to
the sale of the Rocky Mountain properties. Two of the five sale packages are
being divested bringing in $2.5 million in the third quarter and $3.75 million
in the fourth quarter. Acceptable bids were received for the other three
Rocky Mountain packages but the sales were not concluded as commodity prices
declined dramatically in the third quarter. It is KCS' intent to re-offer
those properties in 2002 as prices recover.
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 4-5 BCFE. Approximately
15.7 BCFE of the production for the year (4.0 BCFE for the fourth 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 prices of
fourth quarter natural gas production at an average of $2.97 per million
British thermal units (MMBTU) for 1.36 million MMBTU.
Outlook for 2002
Production net of the Enron VPP is currently expected to be up about
15-20% from the 2001 level. Working interest production for 2002 is currently
expected to be 41-46 BCFE and VPP production is expected to be 3-5 BCFE. The
Enron VPP share of production will decline 4.5 BCFE to approximately
11.2 BCFE, increasing the Company's share by the same amount. The production
committed to the Enron VPP will be reflected as amortization of deferred
revenue at the weighted average net discounted price of approximately $4.05
per MCFE.
As the result of cost cutting measures implemented in 2001 and the
divestiture of some higher cost fields, 2002 lease operating expenses are
expected to be down approximately 7% below the current estimate for 2001.
General and administrative expenses are expected to be flat with 2001.
In addition to the Enron VPP, the Company has utilized various types of
derivatives including swaps, floors and collars to establish some level of
price certainty for a portion of its natural gas production. Based on NYMEX
prices as of November 7, 2001, the Company would realize an average price of
$3.49 per MMBTU for 6.08 million MMBTU of 2002 production from these hedges.
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 Nine Months Ended
(Amounts in Thousands September 30, September 30,
Except Per Share Data) 2001 2000 2001 2000
Oil and gas revenue $40,774 $46,789 $165,838 $127,272
Other revenue, net 719 193 17,232 1,781
Total revenue 41,493 46,982 183,070 129,053
Operating costs and expenses
Lease operating expenses 6,806 6,997 23,759 20,597
Production taxes 1,563 1,580 6,629 4,326
General and
administrative expenses 2,431 1,939 7,642 5,755
Depreciation, depletion
and amortization 15,332 11,664 42,811 36,820
Total operating costs and
expenses 26,132 22,180 80,841 67,498
Operating income 15,361 24,802 102,229 61,555
Interest and other income,
net 192 85 1,210 437
Interest expense
(contractual interest for the
2000 periods was $9,030 and
$27,380 respectively) (4,880) (6,698) (17,076) (20,252)
Income before reorganization
items and income taxes 10,673 18,189 86,363 41,740
Reorganization items (356) (1,315) (2,948) (10,676)
Income before income taxes 10,317 16,874 83,415 31,064
Federal and state income
taxes - - - -
Income before accounting change 10,317 16,874 83,415 31,064
Cumulative effect of
accounting change - - (28,451) -
Net income 10,317 16,874 54,964 31,064
Preferred stock dividend (248) - (741) -
Income available for common
stockholders $10,069 $16,874 $54,223 $31,064
Basic earnings per share of
common stock
Income before cumulative
effect of accounting change $0.31 $0.58 $2.69 $1.06
Cumulative effect of
accounting change - - (0.93) -
Net income $0.31 $0.58 $1.77 $1.06
Diluted earnings per share
of common stock
Income before cumulative
effect of accounting change $0.26 $0.58 $2.18 $1.06
Cumulative effect of
accounting change - - (0.74) -
Net income $0.26 $0.58 $1.44 $1.06
Average shares outstanding
for computation of earnings
per share
Basic 32,636 29,266 30,711 29,266
Diluted 40,188 29,326 38,248 29,302
KCS Energy, Inc.
Condensed Balance Sheets
September 30, December 31,
(Thousands of Dollars) 2001 2000
Assets
Cash $25,157 $39,994
Other current assets 37,155 51,651
Property, plant and equipment, net 282,884 254,900
Deferred charges and other assets 16,724 790
Total assets $361,920 $347,335
Liabilities and stockholders' deficit
Accounts payable and accrued liabilities $44,623 $42,415
Accrued interest on public debt 4,122 -
Short-term debt - 76,705
Deferred credits and other liabilities 128,687 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 17,876 -
Stockholders' (deficit) equity (38,188) (108,320)
Total liabilities and stockholders' deficit $361,920 $347,335
Condensed Statements of Cash Flow
Nine Months Ended
September 30,
2001 2000
Net income $54,964 $31,064
DD&A 42,811 36,820
Enron VPP deferred revenue amortization (47,152) -
Other non-cash charges and credits, net 12,786 1,665
Reorganization items 2,948 10,676
66,357 80,225
Proceeds from Enron production payment 175,399 -
Changes in accrued interest payable (54,076) 12,375
Other operating activities (10,538) 3,982
Net cash provided by operating activities
before reorganization items 177,142 96,582
Reorganization items (net of non-cash items) (2,948) (4,544)
Net cash provided by operating activities 174,194 92,038
Cash flow from investing activities:
Investment in oil and gas properties (71,723) (52,978)
Proceeds from sale of oil and gas properties 2,127 629
Other capital expenditures, net (1,199) (199)
Net cash used in investing activities (70,795) (52,548)
Cash flow from financing activities:
Net increase (decrease) in debt (146,905) (22,460)
Issuance of convertible preferred stock 28,413 -
Other financing activities 256 (1,325)
Cash flow provided by (used by)
financing activities (118,236) (23,785)
Increase in cash and cash equivalents $(14,837) $15,705
KCS Energy, Inc.
Supplemental Data
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
Production data:
Natural gas (MMcf) 8,956 9,164 28,292 30,233
Oil (Mbbl) 288 324 934 997
Liquids (Mbbl) 98 107 275 189
Summary (MMcfe):
Working Interest 10,167 9,524 32,008 28,541
VPP 1,105 2,237 3,538 8,815
Total 11,272 11,761 35,546 37,356
Other data:
Average sales prices
Gas (per Mcf) $3.72 $3.94 $4.99 $3.24
Oil (per bbl) $21.77 $29.27 $22.20 $26.94
Liquids (per bbl) $12.46 $11.13 $14.76 $12.58
Total (per Mcfe) $3.62 $3.98 $4.67 $3.41
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; General Info, Marilynn Meek,
+1-212-445-8451, Media, Judith Sylk-Siegel, +1-212-445-8431, or
Analysts, Beth Lewis, +1-617-369-9242, all of FRB Weber Shandwick
|
