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| Costilla Reports Termination of Pioneer Transaction; Results of 4th Quarter, Year-End 1998 Reported |
MIDLAND, Texas, April 16 /PRNewswire/ -- Costilla Energy, Inc. (Nasdaq: COSE) reported today that the previously announced purchase and sale agreement with Pioneer Natural Resources Company (NYSE: PXD; Toronto) has been terminated, but that the parties are continuing discussions related to another transaction. The Company also reported results for the quarter and the year ended December 31, 1998. In the recently filed Form 10-K for the fiscal year ended December 31, 1998, it was disclosed that the Company will be required to begin a program of asset dispositions in order to meet mandatory repayment requirements under its bank credit facility. In addition, the Company's capital expenditures for the remainder of 1999 will be extremely limited in order to deal with required debt payments and a substantial working capital deficit. The combination of required repayments under the credit facility, uncertainty with respect to future asset sales and the Company's working capital deficit have caused the Company's independent accountants to add an explanatory paragraph to the Auditor's Report accompanying the Company's December 31, 1998 financial statements expressing doubt about the Company's ability to continue as a going concern. For the fourth quarter ended December 31, 1998, Costilla reported negative cash flow(1) of $300,000, or $0.03 per share. The Company recorded a net loss applicable to common equity of $77.7 million, $7.67 per share, that included a non-cash charge of approximately $59.7 million ($5.88 per share) as a result of the impairment of oil and gas properties. The impairment, determined in accordance with SFAS No.121, Impairment of Long-lived Assets, is primarily due to low commodity prices that reduced the value of oil and gas reserves at year-end. A portion of the impairment was attributable to the properties that were sold to Ballard Petroleum LLC subsequent to year-end. The results of the fourth quarter of 1998 compare with cash flow of $5.7 million, or $0.56 per share, and a net loss applicable to common equity of $36.3 million, or $3.54 per share, which included a non-cash charge for an impairment of $28.2 million ($2.75 per share) for the three months ended December 31, 1997. Adjusted EBITDA(2) was $4.5 million for the quarter ended December 31, 1998, compared with $9.5 million for the quarter ended December 31, 1997. For the year ended December 31, 1998, Costilla posted cash flow of $6.3 million, or $0.63 per share, $0.51 on an assumed diluted basis, with a net loss applicable to common equity of $102.6 million, or $10.24 per share, after the effect of the non-cash impairment in the fourth quarter of $59.7 million. These results compare with 1997 cash flow of $26.8 million, $2.58 per share, and a net loss applicable to common equity of $36.5 million, or $3.51 per share, which included the fourth quarter impairment previously mentioned. Adjusted EBITDA for 1998 was $25.1 million, 1.3 times interest expense, compared with $38.1 million, or 3.1 times interest expense, for the year ended December 31, 1997. The Company reported cash of $5.3 million at December 31, 1998. Costilla produced approximately 7.3 Billion cubic feet of natural gas equivalent (Bcfe), for the quarter ended December 31, 1998, an average of approximately 79.7 million cubic feet of gas equivalent (Mmcfe) per day, about 65% of which was natural gas and 35% crude oil. These volumes included daily production of approximately seven Mmcfe per day from properties that were sold in late November and approximately six Mmcfe per day from the Ballard properties that were sold with an effective date of December 31, 1998. Production for the comparable three months of 1997 was 6.6 Bcfe after adjustments and gas imbalances from prior reporting periods. For the year ended December 31, 1998, Costilla's total production was approximately 28.8 Bcfe, up 4% from 27.7 Bcfe produced in 1997. "In spite of our Company's strong production levels, commodity prices severely impeded our financial performance in the fourth quarter and throughout 1998," said Mike Grella, president and CEO of Costilla Energy. "Our hedging activities continued to prove helpful in mitigating the impact of low prices, but could not fully offset the serious price declines that our industry experienced." During the quarter ended December 31, 1998, Costilla realized an average net price of $1.95 per thousand cubic feet of natural gas (Mcf), including $0.10 per Mcf from hedging, 26% lower than $2.65, net of a $0.03 per Mcf hedging cost, received for the fourth quarter of 1997. The Company sold oil during the fourth quarter of 1998 at an average net price per barrel of $10.94, which included $1.11 per barrel from hedging, compared with $16.91, net of a hedging cost of $0.10 per barrel, in the fourth quarter of 1997 -- a net price drop of 35%. On a year-to-year comparison, the Company's average net gas price fell by more than 10% to $2.05 in 1998, including $0.11 per Mcf from hedging, from $2.29, net of hedge cost of $0.02, in 1997. Average net oil prices dropped 19% year-to-year, to $14.31 per barrel in 1998, which included $3.27 per barrel from hedging, from $17.77 per barrel in 1997, net of the hedge cost of $0.40 per barrel. Oil and gas revenues for the fourth quarter of 1998 totaled approximately $13.9 million, including about $921,000 derived from the commodity price hedges, compared to $18.1 million for the fourth quarter ended December 31, 1997, which were net of $140,000 in hedging costs. Oil and gas revenues for the year ended December 31, 1998 totaled about $62.8 million, including $8.2 million from hedging. Oil and gas revenues in 1997 totaled approximately $72.3 million, net of $1.2 million of hedging costs. Costilla's lease operating expense (LOE) was cut by 38% on a per unit basis to $0.84 cents per Mcfe for the quarter ended December 31, 1998, from $1.36 per Mcfe in the fourth quarter of 1997. For the year, the Company's LOE dropped 12% to $0.95 cents per Mcfe in 1998, from $1.08 per Mcfe in 1997. The reductions were primarily related to the Company's intensive cost reduction initiatives and an increase in the relative proportion of natural gas production which is characterized by lower unit lifting costs. Costilla's proved reserves at December 31, 1998 were estimated at 177.0 Bcfe, (80% attributable to gas, 20% to crude oil) with an SEC present value at 10% (PV-10) of $119.7 million based on year-end average pricing of $1.72 per Mcf of gas and $9.30 per barrel of oil. Using commodity prices that were in effect at December 31, 1997, Costilla's proved reserves at December 31, 1998 would have been approximately 197.2 Bcfe with a PV-10 of approximately $166.5 million. "While on paper our reserves lost significant present value due in large part to low year-end commodity prices, the volumes of gas and oil remain available for future extraction as commodity prices recover," said Grella. "We are particularly pleased with our Company's success in replacing reserves through the drill bit." As a result of successful exploration efforts in 1998, Costilla added 47.9 Bcfe to its proved reserves achieving a 166% rate of reserve replacement through extensions and discoveries alone. The Company's preliminary estimate for average daily production in the first quarter of 1999 is approximately 74 Mmcfe per day, which includes new production that has nearly replaced the fourth quarter volumes from properties sold during or following the quarter as indicated earlier. Costilla Energy, Inc. is an independent energy company actively engaged in the exploration, acquisition and development of oil and gas properties, with operations primarily in the Permian Basin of Texas and New Mexico, the Gulf Coast region of South Texas, and the Rocky Mountains. Headquartered in Midland, Texas, the Company and its predecessors have been in business since 1988. The Company's common stock is traded on the Nasdaq National Market under the symbol COSE. Additional information about Costilla is available on the Internet at http://www.costillaenergy.com. (1) Cash flow is the net loss for the period, plus deferred taxes, depreciation, depletion and amortization, impairment of oil and gas properties, exploration and abandonments, other non-cash items, and extraordinary items. (2) Adjusted EBITDA is earnings before income taxes, interest, depreciation, depletion and amortization, impairment of oil and gas properties, exploration and abandonments, other non-cash items and extraordinary items. Certain statements in this news release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance, or achievements of Costilla Energy, Inc. to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: the volatility of oil and gas prices; the Company's ability to replace its oil and gas reserves; the availability of capital resources; the reliance upon estimates of proved reserves; operating hazards and uninsured risks; competition; government regulation; and the ability of the Company to implement its business strategy. Additional information is available in the Company's filings with the Securities and Exchange Commission, which are incorporated by this reference as though fully set forth herein. COSTILLA ENERGY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Three months ended Twelve months ended December 31, December 31, 1998 1997 1998 1997 Revenues: Oil and gas sales $ 13,961 $ 18,069 $ 62,785 $ 72,300 Interest and other 41 89 551 940 Other (71) 3,230 267 3,261 13,931 21,388 63,603 76,501 Expenses: Oil and gas production 6,158 8,992 27,366 30,029 General and administrative 3,909 2,865 11,766 8,407 Exploration and abandonments 5,387 2,840 12,723 6,588 Depreciation, depletion and amortization 10,550 10,650 32,447 26,409 Impairment of oil and gas properties 59,678 28,189 59,678 28,189 Interest 4,975 4,122 19,597 12,979 90,657 57,658 163,577 112,601 Income (loss) before federal income taxes and extraordinary item (76,726) (36,270) (99,974) (36,100) Provision for federal income taxes Current --- --- --- 62 Deferred --- --- --- 90 Income (loss) before extraordinary item (76,726) (36,270) (99,974) (36,252) Extraordinary loss resulting from early extinguishment of debt --- --- (299) (219) Net loss $ (76,726) $ (36,270) $ (100,273) $ (36,471) Cumulative preferred stock dividend $ 1,000 $ --- $ 2,307 $ --- Loss before extraordinary item applicable to common equity $ (77,726) $ (36,270) $ (102,281) $ (36,252) Net loss applicable to common equity $ (77,726) $ (36,270) $ (102,580) $ (36,471) Loss per share: Loss before extraordinary item$ (7.67) $ (3.54) $ (10.21) $ (3.49) Extraordinary loss resulting from early extinguishment of debt --- --- (0.03) (0.02) Net loss $ (7.67) $ (3.54) $ (10.24) $ (3.51) Weighted average shares outstanding 10,137 10,260 10,015 10,383 COSTILLA ENERGY, INC. SUMMARY FINANCIAL AND OTHER DATA (in thousands, except per share data) Three months ended Twelve months ended December 31, December 31, 1998 1997 1998 1997 Production Oil (MBBLS) 428 574 1,938 2,175 Gas (MMCF) 4,764 3,153 17,140 14,698 MBOE 1,222 1,100 4,795 4,625 MMCFE 7,332 6,597 28,768 27,748 Average Net Sales Price Oil (per BBL) $ 10.94 $ 16.91 $ 14.31 $ 17.77 Gas (per MCF) $ 1.95 $ 2.65 $ 2.05 $ 2.29 Revenues Oil $ 4,681 $ 9,700 $ 27,730 $ 38,651 Gas $ 9,280 $ 8,369 $ 35,055 $ 33,649 Net loss $ (77,726) $ (36,270) $ (102,580) $ (36,471) Per share - basic (A) $ (7.67) $ 3.54 $ (10.24) $ (3.51) Cash Flow (B) $ (298) $ 5,713 $ 6,323 $ 26,750 Per share - basic $ (0.03) $ 0.56 $ 0.63 $ 2.58 Per share - diluted as if preferred stock converted --- --- $ 0.51 --- Adjusted EBITDA (C) $ 4,520 $ 9,532 $ 25,126 $ 38,065 Adjusted EBITDA/Interest 0.9x 2.4x 1.3x 3.1x Weighted average shares - basic 10,137 10,260 10,015 10,383 Weighted average shares - as if preferred stock converted 14,173 --- 12,359 --- (A) Earnings per share - diluted will not be presented in GAAP financial statements since an assumed conversion of the preferred stock would be anti-dilutive to the net loss reported. (B) Net loss plus deferred taxes, depreciation, depletion and amortization, impairment of oil and gas properties, exploration and abandonments, other non-cash items, and extraordinary items. Not presented if anti-dilutive. (C) Net loss plus income taxes, interest, depreciation, depletion and amortization, impairment of oil and gas properties, exploration and abandonments, other non-cash items, and extraordinary items. COSTILLA ENERGY, INC. SUMMARY CONSOLIDATED BALANCE SHEETS (in thousands) December 31, December 31, 1998 1997 ASSETS Current assets: Cash $ 5,251 $ 3,615 Other current assets 12,041 15,465 Total current assets 17,292 19,080 Net property, plant and equipment, at cost 185,553 167,940 Other assets 8,109 7,068 Total $ 210,954 $ 194,088 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities $ 75,626 $ 30,591 Long-term debt, less current maturities 181,780 163,087 Other noncurrent liabilities --- --- Stockholders' equity (deficit) (46,452) 410 Total Liabilities and Stockholders' Equity (Deficit) $ 210,954 $ 194,088SOURCE Costilla Energy, Inc.
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