HOUSTON, May 9 /PRNewswire-FirstCall/ -- The Houston Exploration
Company (NYSE:THX) today reported first quarter 2007 net income of
$9.9 million, or $0.35 per diluted share. This compares with net
income of $29.8 million, or $1.02 per diluted share, reported in
the first quarter 2006. Excluding certain items described below and
in the attached schedules, the company's adjusted net income for
the first quarter 2007 was $21.9 million, or $0.77 per diluted
share, versus $0.92 per diluted share in the first quarter 2006.
Cash from operations before changes in operating assets and
liabilities totaled $93.2 million for the first quarter 2007
compared to $124.3 million reported in the first quarter 2006. The
comparability of the company's first quarter 2007 results to those
of the first quarter 2006 was significantly impacted by the sale of
substantially all of the company's Gulf of Mexico assets during
2006. Adjusted net income and cash from operations before changes
in operating assets and liabilities are non-GAAP financial measures
that are defined and reconciled to GAAP measures in the attached
schedules. First Quarter 2007 Results - Consolidated Production and
Prices. Production for the first quarter 2007 totaled 19.5 billion
cubic feet of natural gas equivalent (Bcfe), or 216 million cubic
feet of natural gas equivalent per day (MMcfe/d), down from 28.1
Bcfe, or 312 MMcfe/d, in the first quarter 2006. This 31 percent
decline was primarily due to the sale of substantially all of the
company's Gulf of Mexico assets during 2006. The company's average
unhedged natural gas price for the first quarter 2007 was $6.24 per
thousand cubic feet (Mcf) compared to $7.63 per Mcf for the first
quarter 2006. The company's average realized natural gas price for
the first quarter 2007 was $6.23 per Mcf compared to $5.84 per Mcf
reported during the first quarter 2006. The company's average crude
oil and natural gas liquids price was $41.13 per barrel for the
first quarter 2007 compared to $58.77 per barrel reported during
the first three months of 2006. Revenues and Expenses. Revenues for
the first quarter 2007 totaled $103.8 million compared to $177.6
million during the first quarter 2006, reflecting the above noted
declines in both production and prices. Total revenues for the
first quarter 2007 included $18.7 million of net losses associated
with the company's natural gas hedging activities compared to $41.9
million of net losses in the first quarter 2006. Substantially all
of the current period net losses of $18.7 million resulted from
changes in the fair value of the company's hedge portfolio, all of
which is being accounted for using mark-to-market accounting. The
company's lease operating, severance tax and transportation
expenses for the first quarter 2007 totaled $0.89 per thousand
cubic feet of natural gas equivalent (Mcfe) versus $1.05 per Mcfe
reported in the first quarter 2006. Depreciation, depletion and
amortization and asset retirement accretion expenses for the first
quarter 2007 were $2.99 per Mcfe compared to $3.03 per Mcfe in the
first quarter 2006. Net general and administrative expenses for the
first quarter 2007 were $0.52 per Mcfe compared to $0.31 per Mcfe
in the prior year's first quarter. First Quarter 2007 Results -
Onshore Production and Prices. The company's onshore production
increased by 7 percent during the first quarter 2007, to 19.4 Bcfe,
or 216 MMcfe/d, compared to 18.2 Bcfe, or 202 MMcfe/d, during the
first quarter 2006. The company's average unhedged natural gas
price for its onshore production was $6.21 per Mcf in the first
quarter 2007, a decline of 16 percent from $7.35 per Mcf reported
in the first quarter 2006. Revenues and Expenses. The 16 percent
decline in the company's average unhedged natural gas price more
than offset the 7 percent increase in onshore production, resulting
in a 10 percent decline in onshore oil and gas revenues during the
first quarter 2007, to $121.8 million, from $134.7 million in the
first quarter 2006. Onshore lease operating, severance tax and
transportation expenses during the first quarter 2007 totaled $0.88
per Mcfe compared to $0.94 per Mcfe reported in the first quarter
2006. Pending Merger with Forest Oil Corporation On January 7,
2007, Houston Exploration announced that it had entered into a
definitive agreement to merge with Forest Oil Corporation, under
which Forest will acquire all of the outstanding shares of Houston
Exploration for a combination of cash and Forest common stock. The
merger is subject to customary terms and conditions, including the
approval of stockholders of both Houston Exploration and Forest.
The special meetings for both companies' stockholders are scheduled
for June 5, 2007, to consider and vote on matters associated with
the merger. Houston Exploration stockholders of record as of the
close of business on April 30, 2007, the record date for its
special meeting, are entitled to notice of, and to vote at, the
special meeting. Please read the definitive joint proxy
statement/prospectus dated May 1, 2007, and any other relevant
documents filed with the SEC, as well as any amendments or
supplements to those documents, to obtain important information
about Houston Exploration, Forest and the pending merger. If the
merger is approved by the stockholders of both Houston Exploration
and Forest, it is expected that the transaction would be completed
in June 2007. On May 2, 2007, at the request of Forest and in
connection with the pending merger, Houston Exploration commenced a
tender offer and consent solicitation with respect to its $175
million of 7 percent senior subordinated notes due 2013. Assuming
all holders tender their notes and consent to the supplemental
indenture, Houston Exploration expects to pay, immediately prior to
the closing of the merger, approximately $183 million to fund the
purchase price and consent payment with cash on hand and borrowings
under its revolving credit facility. Consummation of the tender
offer is subject to the satisfaction or waiver of all conditions to
completion of the merger and the execution of the supplemental
indenture. Nothing herein shall be construed as an offer to
purchase, a solicitation of an offer to purchase, or a solicitation
to consent with respect to any notes. The offer is being made
solely pursuant to the offer to purchase, which sets forth the
complete terms and conditions of the tender offer and consent
solicitation. Guidance In light of the company's pending merger
with Forest, Houston Exploration will no longer issue guidance.
Accordingly, previous estimates of future financial or operational
performance should be considered obsolete. In addition, as a result
of the pending merger, Houston Exploration will not host a
conference call or webcast regarding its first quarter 2007
results. About The Houston Exploration Company The Houston
Exploration Company is an independent natural gas and crude oil
producer engaged in the development, exploitation, exploration and
acquisition of natural gas and crude oil properties. The company's
operations are focused in South Texas, the Arkoma Basin, East
Texas, and the Rocky Mountains. For more information, visit the
company's Web site at http://www.houstonexploration.com/ .
Additional Information and Where to Find It Houston Exploration and
Forest have filed a definitive joint proxy statement/prospectus
dated May 1, 2007, and other materials relating to their pending
merger with the SEC. The definitive joint proxy
statement/prospectus was mailed to stockholders of record of
Houston Exploration and Forest as of the close of business on April
30, 2007. Investors and security holders are urged to read the
definitive joint proxy statement/prospectus and any other relevant
documents filed with the SEC, as well as any amendments or
supplements to those documents, before making any voting or
investment decision with respect to the proposed transaction,
because they contain important information about Houston
Exploration, Forest and the proposed transaction. Investors and
security holders may obtain these documents free of charge at the
SEC's Web site at http://www.sec.gov/ . In addition, the documents
filed with the SEC by Houston Exploration may be obtained free of
charge from the Houston Exploration Web site at
http://www.houstonexploration.com/ . The documents filed with the
SEC by Forest may be obtained free of charge from Forest's Web site
at http://www.forestoil.com/ . In addition, a free copy of the
definitive joint proxy statement/prospectus may be obtained from
Houston Exploration at 1100 Louisiana Street, Suite 2000, Houston,
Texas 77002, or from Georgeson Inc., the information agent, by
calling (866) 783-6553. Houston Exploration, Forest and their
respective directors and executive officers may be considered
participants in the solicitation of proxies in connection with the
proposed transaction. Information about the participants and their
direct and indirect interests in the solicitation is set forth in
the joint proxy statement/prospectus. Forward-looking Statements
This news release and oral statements regarding the subjects of
this release contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934 and the Private Securities
Litigation Reform Act. All statements other than statements of
historical fact included in this news release are forward- looking
statements and reflect Houston Exploration's current expectations
and are based on current available information and numerous
assumptions. Although Houston Exploration believes that the
expectations reflected in such forward- looking statements are
reasonable, it can give no assurance that such expectations will
prove to have been correct. Factors that could cause actual results
to vary materially from those targeted, expected or implied are
more fully discussed in the company's filings with the SEC,
including the Annual Report on Form 10-K for the year ended
December 31, 2006, as amended, and in the joint proxy
statement/prospectus dated May 1, 2007, with respect to its pending
merger with Forest. Houston Exploration assumes no responsibility
to update any of the information referenced in this news release.
Contact: The Houston Exploration Company Melissa R. Aurelio
713-830-6887 The Houston Exploration Company Consolidated Financial
Information Three Months Ended March 31, 2007 2006 Unaudited Income
Statement Data: (in thousands, except per share data) Revenues
Natural gas revenues $111,074 $198,505 Oil revenues 11,270 20,453
Gain (loss) on settled derivatives (51) (46,525) Unrealized gain
(loss) on derivatives (18,670) 4,586 Other 208 585 Total revenues
103,831 177,604 Operating Expenses Lease operating 13,174 21,812
Severance tax 1,843 4,752 Transportation 2,362 2,771 Asset
retirement accretion 1,082 1,327 Depreciation, depletion and
amortization 57,089 83,761 General and administrative, net 10,145
8,606 Total operating expenses 85,695 123,029 Income from
Operations 18,136 54,575 Other (income) expense (542) --- Interest
expense 3,767 10,376 Capitalized interest (662) (1,655) Interest
expense, net 3,105 8,721 Income before taxes 15,573 45,854
Provision for income tax Current 1,741 4,558 Deferred 3,887 11,524
Total provision for taxes 5,628 16,082 Net Income $9,945 $29,772
Earnings per Share Net income per share - Basic $0.36 $1.03 Net
income per share - Diluted $0.35 $1.02 Weighted average shares -
Basic 27,945 29,042 Weighted average shares - Diluted 28,415 29,310
March 31, December 31, 2007 2006 Unaudited Balance Sheet Data: (in
thousands, except debt-to-capitalization) Assets Cash and
equivalents $29,487 $53,950 Accounts receivable 76,664 86,416
Derivative financial instruments 2,494 --- Inventories 4,786 2,900
Deferred tax asset 19,811 10,244 Prepayments and other 5,506 8,370
Total current assets 138,748 161,880 Natural gas and oil
properties, full-cost method Unevaluated properties 34,880 28,317
Properties subject to amortization 3,605,097 3,478,878 Other
property and equipment 15,211 15,101 3,655,188 3,522,296 Less:
Accumulated depreciation, depletion and amortization 1,988,032
1,930,964 1,667,156 1,591,332 Other assets 16,368 18,514 Total
Assets $1,822,272 $1,771,726 Liabilities Accounts payable and
accrued expenses $144,190 $151,482 Derivative financial instruments
27,698 10,151 Total current liabilities 171,888 161,633 Long-term
debt and notes 175,000 175,000 Deferred federal income taxes
377,912 363,322 Derivative financial instruments 14,165 17,247
Asset retirement obligation 77,314 72,782 Other non-current
liabilities 21,243 17,138 Total Liabilities 837,522 807,122
Stockholders' Equity Common stock 282 281 Additional paid-in
capital 260,115 253,922 Retained earnings 740,765 731,150
Accumulated other comprehensive income (loss) (16,412) (20,749)
Total Stockholders' Equity 984,750 964,604 Total Liabilities and
Stockholders' Equity $1,822,272 $1,771,726 Total
Debt-to-Capitalization 15.1% 15.4% Three Months Ended March 31,
2007 2006 Unaudited Cash Flow Data: (in thousands) Operating
Activities Net income $9,945 $29,772 Adjustments to reconcile net
income to net cash provided by operating activities: Depreciation,
depletion and amortization 57,089 83,761 Deferred income tax
expense 3,887 11,524 Unrealized (gain) loss on derivatives 18,670
(4,586) Asset retirement accretion 1,082 1,327 Other non-cash
adjustments 2,504 2,517 Changes in operating assets and liabilities
13,375 (2,194) Net cash provided by operating activities 106,552
122,121 Investing Activities Investment in property and equipment
(134,789) (128,391) Deposit paid for property acquisition ---
(2,200) Dispositions and other --- 189,371 Net cash provided by
(used in) investing activities (134,789) 58,780 Financing
Activities Net borrowings (repayments) of long-term debt ---
(173,000) Proceeds and tax benefits from issuance of common stock
from exercise of stock options 3,774 3,658 Net cash provided by
(used in) financing activities 3,774 (169,342) Increase (decrease)
in cash $(24,463) $11,559 Cash at beginning of period 53,950 7,979
Cash at end of period $29,487 $19,538 Unaudited Non-GAAP Financial
Measures: Adjusted net income and adjusted net income per diluted
share are non-GAAP financial measures consisting of net income and
net income per diluted share, as the case may be, after the
adjustments noted in the table below. We believe that adjusted net
income and adjusted net income per diluted share are useful to
analysts and investors because they are more reflective of our
operating performance and improve period-to-period comparability.
Adjusted net income and adjusted net income per diluted share
should not be considered a substitute for net income and net income
per diluted share in accordance with GAAP. The table below
reconciles net income to adjusted net income and net income per
diluted share to adjusted net income per diluted share. Cash from
operations before changes in operating assets and liabilities is a
non-GAAP financial measure consisting of net cash provided by
operating activities before changes in operating assets and
liabilities. Cash from operations before changes in operating
assets and liabilities is presented because management believes it
is a useful adjunct to net cash provided by operating activities
under GAAP. Cash from operations before changes in operating assets
and liabilities is widely accepted as a financial indicator of an
oil and gas company's ability to generate cash which may be used to
fund exploration and development activities and to service debt.
Cash from operations before changes in operating assets and
liabilities should not be considered an alternative to net income
or net cash provided by operating activities in accordance with
GAAP. The table below reconciles cash from operations before
changes in operating assets and liabilities to net cash provided by
operating activities. EBITDA is a non-GAAP financial measure
consisting of net income before interest expense, income tax
expense (benefit), depreciation, depletion and amortization, and,
if applicable, any non-cash writedown in the carrying value of
natural gas and oil properties. EBITDA is presented as a
supplemental financial measurement in the evaluation of our
business. We believe that EBITDA provides additional information
regarding our ability to meet our future debt service, capital
expenditures and working capital requirements. EBITDA is widely
used by investors, bankers and rating agencies to value, compare
and rate companies. EBITDA should not be considered as a substitute
for net income, income from operations, or net cash provided by
operating activities prepared in accordance with GAAP. EBITDA is
reconciled to net income in the table below. Three Months Ended
March 31, 2007 2006 Reconciliation of Non-GAAP Measures: (in
thousands, except per share amounts) Net Income $9,945 $29,772
Adjustments: Unrealized (gain) loss on derivatives, net of tax
11,930 (2,963) Adjusted Net Income $21,875 $26,809 Net Income per
Diluted Share $0.35 $1.02 Adjustments: Unrealized (gain) loss on
derivatives, net of tax 0.42 (0.10) Adjusted Net Income per Diluted
Share $0.77 $0.92 Cash from Operations Before Changes in Operating
Assets and Liabilities $93,177 $124,315 Plus: Changes in operating
assets and liabilities 13,375 (2,194) Net Cash Provided by
Operating Activities $106,552 $122,121 EBITDA $76,849 $139,663
Less: Interest, net 3,105 8,721 Income tax expense 5,628 16,082
Asset retirement accretion 1,082 1,327 Depreciation, depletion and
amortization 57,089 83,761 Net Income $9,945 $29,772 Note: Totals
may not foot due to rounding. The Houston Exploration Company
Additional Information Three Months Ended March 31, 2007 Onshore
Offshore (1) Total Production Natural gas (MMcf) 17,797 12 17,809
Oil (2) (Mbbls) 273 1 274 Equivalent (MMcfe) 19,435 18 19,453 Daily
Equivalent (MMcfe/d) 216 0 216 Average Sales Price Natural gas -
unhedged ($/Mcf) $6.21 $N/A $6.24 Natural gas - realized (3)
($/Mcf) N/A N/A 6.23 Oil - unhedged (2) ($/Bbl) 41.14 N/A 41.13 Oil
- realized (2) ($/Bbl) N/A N/A 41.13 Revenues (in thousands)
Natural gas revenues $110,571 $503 $111,074 Oil revenues (2) 11,230
40 11,270 Gain (loss) on settled derivatives N/A N/A (51)
Unrealized gain (loss) on derivatives N/A N/A (18,670) Other N/A
N/A 208 Total revenues $103,831 Operating Expenses (in thousands)
Lease operating $12,791 $383 $13,174 Severance tax 1,843 --- 1,843
Transportation 2,549 (187) 2,362 Asset retirement accretion 1,077 5
1,082 Depreciation, depletion and amortization N/A N/A 57,089
General and administrative, net N/A N/A 10,145 Total operating
expenses $85,695 Income from Operations per Unit ($/Mcfe) Total
revenues N/A N/A $5.34 Lease operating (0.66) N/A (0.68) Severance
tax (0.09) N/A (0.09) Transportation (0.13) N/A (0.12) Asset
retirement accretion (0.06) N/A (0.06) Depreciation, depletion and
amortization N/A N/A (2.93) General and administrative, net N/A N/A
(0.52) Income from operations per unit $0.94 Oil and Gas Capital
Expenditures (in thousands) Exploration, development and leasehold
$122,241 $1,775 $124,016 Acquisitions 286 ---- 286 Subtotal 122,527
1,775 124,302 Capitalized interest and G&A --- --- 5,030 Total
$122,527 $1,775 $129,332 Three Months Ended March 31, 2006 Onshore
Offshore Total Production Natural gas (MMcf) 17,816 8,207 26,023
Oil (2) (Mbbls) 67 281 348 Equivalent (MMcfe) 18,218 9,893 28,111
Daily Equivalent (MMcfe/d) 202 110 312 Average Sales Price Natural
gas - unhedged ($/Mcf) $7.35 $8.24 $7.63 Natural gas - realized (3)
($/Mcf) N/A N/A 5.84 Oil - unhedged (2) ($/Bbl) 56.63 59.28 58.77
Oil - realized (2) ($/Bbl) N/A N/A 58.77 Revenues (in thousands)
Natural gas revenues $130,875 $67,630 $198,505 Oil revenues (2)
3,794 16,659 20,453 Gain (loss) on settled derivatives N/A N/A
(46,525) Unrealized gain (loss) on derivatives N/A N/A 4,586 Other
N/A N/A 585 Total revenues $177,604 Operating Expenses (in
thousands) Lease operating $10,177 $11,635 $21,812 Severance tax
4,717 35 4,752 Transportation 2,274 497 2,771 Asset retirement
accretion 479 848 1,327 Depreciation, depletion and amortization
N/A N/A 83,761 General and administrative, net N/A N/A 8,606 Total
operating expenses $123,029 Income from Operations per Unit
($/Mcfe) Total revenues N/A N/A $6.32 Lease operating (0.56) (1.18)
(0.78) Severance tax (0.26) (0.00) (0.17) Transportation (0.12)
(0.05) (0.10) Asset retirement accretion (0.03) (0.09) (0.05)
Depreciation, depletion and amortization N/A N/A (2.98) General and
administrative, net N/A N/A (0.31) Income from operations per unit
$1.93 Oil and Gas Capital Expenditures (in thousands) Exploration,
development and leasehold $92,512 $25,463 $117,975 Acquisitions
(1,891) --- (1,891) Subtotal 90,621 25,463 116,084 Capitalized
interest and G&A --- --- 6,849 Total $90,621 $25,463 $122,933
(1) Substantially all of the company's offshore assets were sold
during the first half of 2006. (2) Also includes natural gas
liquids. (3) Realized natural gas prices include the effects of
gains and losses on contracts settled and unwound during the
period, and do not include unrealized gains and losses recognized
pursuant to SFAS 133. Note: Totals may not foot due to rounding.
DATASOURCE: The Houston Exploration Company CONTACT: Melissa R.
Aurelio of The Houston Exploration Company, +1-713-830-6887, or Web
site: http://www.houstonexploration.com/ http://www.forestoil.com/
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