Venoco, Inc. Announces First Quarter 2005 Results CARPINTERIA,
Calif., May 13 /PRNewswire/ -- Venoco, Inc. (Bloomberg ticker:
552338Z US) today reported a net loss for the first quarter 2005 of
$6.8 million compared to net income of $5.8 million for the first
quarter 2004. The first quarter 2005 net loss includes the net
after-tax effects of a $26.1 million (pre-tax) unrealized loss on
certain commodity derivative contracts that do not qualify for
hedge accounting in accordance with SFAS 133. Excluding this
charge, Venoco would have had net income of $9.0 million for the
first quarter of 2005. This compares to net income of $6.0 million
in the first quarter of 2004 excluding the after-tax effects of the
$0.4 million (pre-tax) unrealized commodity derivative loss for
first quarter 2004. Please see the end of this release for a
reconciliation of net income (loss) to net income before unrealized
commodity derivative losses (a non-GAAP measure). The unrealized
commodity derivative losses result from mark-to-market adjustment
applicable to certain commodity derivative contracts not currently
eligible for hedge accounting treatment. Changing oil prices affect
the market value of our fixed price commodity derivative contracts,
and as a result we expect there will continue to be significant
volatility in our reported earnings. Earnings before interest,
taxes, depletion, depreciation and amortization (EBITDA) for the
first quarter of 2005 was $(1.8) million as compared with $14.7
million in first quarter 2004. These EBITDA figures include the
pre-tax impact of first quarter realized commodity derivative
losses of $3.0 million in 2005 and $2.4 million in 2004. They also
include the impact of the above mentioned first quarter unrealized
commodity derivative losses of $26.1 million in 2005 and $0.4
million in 2004. Excluding the impact of the realized and
unrealized commodity derivative losses, Venoco's first quarter 2005
EBITDA would have been $27.4 million, up 57% from first quarter
2004 EBITDA of $17.5 million. Please see the end of this release
for a reconciliation of EBITDA and EBITDA before the pre-tax impact
of realized and unrealized commodity derivative losses, to net
income. "We have benefited not only from the strong current prices
for oil and natural gas but fundamentally from the consistent
increases in our oil and natural gas production rates. Average net
production has increased each quarter since changes in our senior
management and subsequent implementation of our aggressive
development and exploitation program in June of 2004. The average
net production which was 10,182 barrels of oil equivalent per day
(BOE/D) in the second quarter of 2004 has steadily increased to
12,857 BOE/D in the first quarter of 2005," stated Tim Marquez, CEO
and chairman of the board. In the first quarter of 2005 Venoco
drilled seven new wells to total depth and recompleted eighteen
additional wells. These exploitation and development projects
include two offshore oil wells that were drilled to total depth,
and one that was recompleted. In the Sockeye Field, we drilled one
well and recompleted another well. One of the wells had an initial
production rate over 1,150 BOE/D and the other's gross production
is approximately 250 BOE/D. In the South Ellwood Field, we drilled
an exploration well that tested wet in the deepest penetrated
intervals and is being recompleted to test the primary test
objective. Onshore, Venoco drilled five new wells in the Sacramento
Basin in the quarter. Four were brought on production and the other
was waiting on a gas pipeline connection. The Company also
recompleted seventeen wells in the Sacramento Basin in the quarter.
Collectively the new wells and recompletions in the Sacramento
Basin have added 2,500 MCF/D to our average net production. The
Company's average net production increased from 11,306 BOE/D in the
first quarter of 2004 to 12,857 BOE/D in the first quarter of 2005.
First quarter 2005 average net production includes 547 BOE/D from
the Big Mineral Creek Field which was sold for $45 million with the
closing occurring on March 31, 2005. The closing was done through a
qualified intermediary in order to allow the sale to be eligible
for a tax free exchange pursuant to section 1031 of the Internal
Revenue Code. Accordingly, no gain has been recognized and no tax
on the sale has been recorded during the period. "We expect second
quarter 2005 average net production to be approximately 12,500 BOE
per day, only slightly down from the first quarter despite the loss
of production from the Big Mineral Creek field," noted Mr. Marquez.
He continued, "We anticipate 2005 average net production in the
range of 13,000 BOE/D to 14,000 BOE/D without any additional
acquisitions. Acquisitions are an integral part of our strategy and
would add to our 2005 production. We believe Venoco will continue
to achieve consistent growth in average net production throughout
2005 and following years." About the Company Venoco is an
independent energy company primarily engaged in the acquisition,
exploitation and development of oil and natural gas properties in
California. It has regional headquarters in Carpinteria, California
and corporate headquarters in Denver, Colorado. Venoco operates
three offshore platforms in the Santa Barbara Channel, has
nonworking interests in three others, and also operates two onshore
properties in Southern California and approximately 130 natural gas
wells in Northern California. Conference Call & Webcast The
Company's first quarter 2005 earnings and operational review
conference call will begin at 12:00 p.m. Eastern (9:00 a.m.
Pacific) on Friday, May 13, 2005. You may participate by calling
1-(800) 374-2482 and using Conference ID# 6233227. Information on
accessing the recorded call will be available on the Investor
Information page of the Company's website
http://www.venocoinc.com/. Statements made in this news release,
including those relating to future growth and performance, drilling
inventory, economic returns, development opportunities, production
growth targets, cash flow, reserve base, and future results of
operation and financial condition are forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These
statements are based on assumptions and estimates that management
believes are reasonable based on currently available information;
however, management's assumptions and the Company's future
performance are both subject to a wide range of business risks and
uncertainties and there is no assurance that these goals and
projections can or will be met. Any number of factors could cause
actual results to differ materially from those in the
forward-looking statements, including, but not limited to, ability
to acquire properties that meet our objectives, the timing and
extent of changes in oil and gas prices, changes in underlying
demand for oil and gas, the timing and results of drilling
activity, the availability of and cost of obtaining drilling
equipment and technical personnel, delays in completing production,
treatment and transportation facilities, higher than expected
production costs and other expenses, pipeline curtailments by
third-parties and failure to close pending acquisitions. Further
information on risks and uncertainties 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. Oil and Gas Production and Prices Three Months Ended March
31 (1) 2005 2004 Increase (Decrease) Sales Volume Natural Gas (Mcf)
1,885,576 1,355,983 39% Oil (Bbls) 842,845 802,918 5% BOE 1,157,108
1,028,915 12% Daily Average Sales Volume Natural Gas (Mcf/d) 20,951
14,901 41% Oil (Bbls/d) 9,365 8,823 6% BOE/d 12,857 11,307 14% Oil
Price per Barrel Average NYMEX spot price $49.84 $35.15 42%
Differential to NYMEX spot price $(13.52) $(5.96) 127% Realized
commodity derivative losses $(3.55) $(2.38) 49% Net realized price
per barrel $32.77 $26.81 22% Natural Gas Price per Mcf Average
NYMEX spot price $6.48 $5.73 13% Differential to NYMEX spot price
$(0.42) $(0.28) 50% Realized commodity derivative losses $(0.01)
$(0.33) (97)% Net realized price per Mcf $6.05 $5.12 18% Average
Sales Price per BOE $33.73 $27.67 22% (1) Production in 2005
includes Marquez Energy, LLC which was acquired March 21, 2005.
Inclusion is due to the application of requirements for reporting
combined financial statements for companies under common control.
First Quarter 2005 and 2004 Financial Information VENOCO, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS ($ thousands, unaudited)
March 31, December 31, 2005 (1) 2004 (1) ASSETS: CURRENT ASSETS:
Cash and cash equivalents $5,024 $54,715 Accounts receivable 23,280
17,755 Inventories 1,105 1,079 Income tax receivable 2,670 3,906
Commodity derivatives 677 5,300 Notes receivable - officer -- 1,420
Prepaid expenses and other current assets 4,650 3,640 Total current
assets 37,406 87,815 CASH RESTRICTED FOR INVESTMENT IN OIL AND
NATURAL GAS PROPERTIES 44,619 -- PROPERTY AND EQUIPMENT, net
163,465 198,563 OTHER ASSETS 8,786 12,504 TOTAL ASSETS $254,276
$298,882 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT): CURRENT
LIABILITIES: Accounts payable and accrued liabilities $21,137
$19,385 Undistributed revenue payable 4,540 4,774 Current
maturities of long term debt 121 127 Commodity derivatives 20,713
1,520 Minority interest purchase accrued 109 5,316 Total current
liabilities 46,620 31,122 LONG-TERM DEBT 171,934 163,542 DEFERRED
INCOME TAXES 18,463 32,208 ASSET RETIREMENT OBLIGATIONS 23,122
23,184 COMMODITY DERIVATIVES 12,266 -- COMMITMENTS AND
CONTINGENCIES STOCKHOLDERS' EQUITY (DEFICIT): Common stock and
additional paid in capital 17,883 31,576 Retained earnings
(deficit) (26,449) 15,327 Accumulated other comprehensive income
(loss) (9,563) 1,923 Total stockholders' equity (deficit) (18,129)
48,826 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
$254,276 $298,882 (1) On March 21, 2005 the Company completed the
acquisition of Marquez Energy, majority-owned and controlled by
Timothy Marquez, the Company's CEO and sole shareholder. Due to the
common control aspects of the transaction, the financial statements
of Marquez Energy have been combined with the consolidated
financial statements of the Company and its subsidiaries in a
manner similar to a pooling-of-interests, since the date that
common control was achieved. Therefore, the Company's financial
statements since July 12, 2004 were restated to include Marquez
Energy's financial results. VENOCO, INC. CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS ($ thousands, unaudited) Three Months
Ended March 31 2005 2004 REVENUES: Oil and gas sales $42,038
$30,825 Commodity derivative losses (1) (29,160) (2,762) Other 727
669 Total revenues 13,605 28,732 EXPENSES: Oil and natural gas
production 11,930 11,231 Transportation expense 328 378 Depletion,
depreciation, amortization and impairment 5,653 4,021 Accretion of
abandonment liability 442 360 General and administrative 3,116
2,435 Amortization of deferred loan costs 345 69 Interest, net
3,497 328 Total expenses 25,311 18,822 Income (loss) before income
taxes (11,706) 9,910 Income tax provision (benefit) (4,930) 4,131
Net income (loss) (6,776) 5,779 Preferred stock dividends --
(2,116) Net income applicable to common equity $(6,776) $3,663 (1)
Commodity derivative losses include realized and unrealized losses
on derivative contracts of $3.0 million and $26.1 million,
respectively for the first quarter of 2005 and $2.4 million and
$0.4 million, respectively for the first quarter of 2004.
Unrealized commodity derivative losses reflect the change in fair
value of financial instruments not qualifying for hedge accounting
under SFAS No. 133 The Company discloses net income before
unrealized commodity derivative losses, a non-GAAP financial
measure, because management believes net income before unrealized
commodity derivative gains and losses (i) provides a better
comparison of operating trends and performance related results,
(ii) is comparable to certain performance analysis methods of
securities analysts , and (iii) eliminates the impact of
fluctuations in mark-to-market values from unrealized commodity
derivatives for which the Company cannot estimate the timing or
amount . The following reconciles net income (loss) to net income
before unrealized commodity derivative losses for the three months
ended March 31: 2005 2004 (unaudited) Net income (loss) $(6,776)
$5,779 Plus: Unrealized commodity derivative losses 26,148 408
Less: Income tax benefit on unrealized commodity derivative losses
(10,366) (162) Net income before unrealized commodity derivative
losses $9,006 $6,025 EBITDA, a non-GAAP financial measure, excludes
certain items that management believes affect the Company's
comparison of operating results. The Company discloses EBITDA
because (i) the Company uses EBITDA to evaluate operating trends
and performance related results (ii) the Company uses EBITDA to
compare its performance to other oil and gas producing companies,
and (iii) EBITDA is comparable to certain performance analysis
methods of securities analysts. The Company's measures of EBITDA
and EBITDA before pre-tax hedging losses is not comparable to the
Company's other financial measures. The following reconciles net
income (loss) to EBITDA and EBITDA before the pre-tax effects of
realized and unrealized commodity derivative losses for the three
months ended March 31: 2005 2004 (unaudited) Net income (loss)
$(6,776) $5,779 Plus: Interest, net 3,497 328 Income taxes (4,930)
4,131 D.D.&A. 5,653 4,021 Accretion of abandonment liability
442 360 Amortization of deferred loan costs 345 69 EBITDA (1,769)
14,688 Plus: Pre-tax realized commodity derivative losses 3,012
2,354 Pre-tax unrealized commodity derivative losses 26,148 408
EBITDA before pre-tax commodity derivative losses $27,391 $17,450
Open Derivative Positions as of May 10, 2005 Crude Oil Type of
Basis Quantity Strike Price Term Contract (Bbl/d) ($/Bbl) Collar
NYMEX 4,471 $38.00 - $47.10 Jan 1, 05 - Dec 31, 05 Collar NYMEX
1,000 $38.00 - $47.50 Jan 1, 05 - Dec 31, 05 Put NYMEX 2,000 $36.00
Floor Jan 1, 05 - Dec 31, 05 Put NYMEX 2,000 $38.70 Floor Jan 1, 05
- Dec 31, 05 Swap NYMEX 1,000 $42.70 Fixed Jan 1, 06 - Dec 31, 06
Collar NYMEX 2,000 $40.00 - $51.00 Jan 1, 06 - Dec 31, 06 Collar
NYMEX 1,000 $40.00 - $51.05 Jan 1, 06 - Dec 31, 06 Collar NYMEX
1,000 $40.00 - $57.75 Jan 1, 06 - Dec 31, 06 Put NYMEX 1,000 $40.00
Floor Jan 1, 06 - Dec 31, 06 Put NYMEX 1,000 $42.90 Floor Jan 1, 06
- Dec 31, 06 Collar NYMEX 2,000 $40.00 - $65.80 Jan 1, 07 - Dec 31,
07 Collar NYMEX 1,000 $40.00 - $67.50 Jan 1, 07 - Dec 31, 07
Natural Gas Type of Basis Quantity Strike Price Term Contract
(MMBtu/d) ($/Mcf) Physical Sale SoCal 2,000 $4.85 Floor(1) Apr 1,
05 - Sep 30, 06 Put NYMEX 5,000 $5.80 Floor Jan 1, 05 - Dec 31, 05
Basis Swap PG&E Citygate 5,000 $(0.150)(2) Jan 1, 05 - Dec 31,
05 Put PG&E Citygate 5,000 $6.00 Floor Jan 1, 05 - Dec 31, 05
Swap PG&E Citygate 4,000 $6.765 Fixed Apr 1, 05 - Dec 31, 05
Swap NYMEX 2,000 $6.71 Fixed Jan 1, 06 - Dec 31, 06 Collar NYMEX
4,000 $6.00 - $8.50 Jan 1, 06 - Dec 31, 06 Basis Swap PG&E
Citygate 6,000 $(0.035)(3) Jan 1, 06 - Dec 31, 06 Put PG&E
Citygate 6,000 $6.00 Floor Jan 1, 06 - Dec 31, 06 Collar PG&E
Citygate 3,000 $7.00 - $9.45 Jan 1, 06 - Dec 31, 06 Collar NYMEX
6,000 $6.00 - $8.40 Jan 1, 07 - Dec 31, 07 (1) The price of this
contract is the monthly NGI SoCal Border Index less $0.10 per
MMBtu, with a floor of $4.85. (2) This basis swap locks the $5.80
NYMEX put into a $5.65 floor with a PG&E Citygate location for
2005. (3) This basis swap locks the $6.71 NYMEX swap into a $6.675
PG&E Citygate location swap and the $6.00-$8.50 collar into a
$5.965-$8.465 collar with a PG&E Citygate location for 2006.
This release can be found at http://www.venocoinc.com/ DATASOURCE:
Venoco, Inc. CONTACT: Mike Edwards, VP of Venoco, Inc., direct,
+1-805-745-2123, or cell, +1-805-455-9658 Web site:
http://www.venocoinc.com/
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