CARPINTERIA, Calif., Nov. 17 /PRNewswire/ -- Venoco, Inc.
(Bloomberg ticker: 552338Z US) (Thomson ticker: **VEN) today
reported a net loss of $1.8 million for the third quarter of 2005
compared to net income of $6.9 million for the third quarter of
2004. The net loss for the third quarter of 2005 includes the
effect of a $16.2 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 had net income of $8.0 million for the third quarter of
2005. This compares to net income of $7.5 million in the third
quarter of 2004 excluding the effects of the $0.9 million (pre-tax)
unrealized commodity derivative loss for that quarter. Please see
the end of this release for a reconciliation of net income (loss)
to net income before unrealized commodity derivative loss (a
non-GAAP measure). Venoco's earnings before interest, taxes,
depletion, depreciation and amortization (EBITDA) for the third
quarter of 2005 was $6.4 million, as compared with $16.6 million of
EBITDA in third quarter 2004. These EBITDA figures include the
pre-tax impact of third quarter realized commodity derivative
losses of $8.3 million in 2005 and $5.0 million in 2004. They also
include the impact of the above mentioned third quarter unrealized
commodity derivative losses of $16.2 million in 2005 and $0.9
million in 2004. Excluding the impact of the realized and
unrealized commodity derivative losses, Venoco's third quarter 2005
EBITDA was $30.9 million, up 38% from third quarter 2004 EBITDA of
$22.4 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.
The unrealized commodity derivative losses described above result
from mark-to-market adjustments applicable to certain commodity
derivative contracts not currently eligible for hedge accounting
treatment. Changing oil and natural gas prices affect the market
value of Venoco's fixed price commodity derivative contracts, and
as a result the Company expects that there will continue to be
significant volatility in its reported earnings. For the nine
months ended September 30, 2005 Venoco reported net income of $0.1
million as compared with $18.3 million in the first nine months of
2004. Net income for the first nine months of 2005 includes the
effects of $44.2 million (pre-tax) in unrealized losses on certain
commodity derivative contracts that do not qualify for hedge
accounting under SFAS 133. Excluding this charge, Venoco had net
income of $26.8 million for the first nine months of 2005. This
compares to net income of $19.3 million in the first nine months of
2004 excluding the effects of a $1.7 million (pre-tax) unrealized
commodity derivative loss for first nine months of 2004. Please see
the reconciliation of net income to net income before unrealized
commodity derivative losses (a non-GAAP measure) at the end of this
release. Venoco's EBITDA for the nine months ended September 30,
2005 was $27.4 million as compared with $44.9 million of EBITDA in
the first nine months of 2004. These figures include the pre-tax
impact of realized commodity derivative losses of $15.4 million in
the first nine months of 2005 and $11.1 million in the same period
in 2004. They also include the impact of unrealized commodity
derivative losses of $44.2 million in the first nine months of 2005
and $1.7 million in the same period in 2004. Excluding the impact
of the realized and unrealized commodity derivative losses,
Venoco's EBITDA in the first nine months of 2005 was $87.1 million,
up 51% from $57.6 million in the first nine months of 2004.
Venoco's average net production for the first nine months of 2005
was 11,565 barrels of oil equivalent per day ("BOE/d"), up 6% from
10,898 BOE/d in the same period in 2004. Due to delays in
implementing several projects, mechanical problems encountered at a
well in the South Ellwood field and some periods of limited
production capacity due to well and platform maintenance, average
net production in the third quarter of 2005 declined 7% to 10,444
BOE/d compared to 11,201 BOE/d in the third quarter of 2004. These
operational issues have been resolved and the trend of increasing
production has resumed. Venoco expects production for both the
fourth quarter and 2005 as a whole to average 11,000 to 12,000
BOE/d, and anticipates an exit rate for the year in the 12,000 to
13,000 BOE/d range. In the third quarter of 2005 Venoco drilled six
new wells to total depth and reworked or recompleted eight
additional wells. In the fourth quarter the Company expects to
drill twelve additional wells and to rework or recomplete eighteen
wells. The majority of the drilling activity in 2005 has been in
the Sacramento Basin area. The Company's well activity in that area
has resulted in net production there increasing by approximately
50%, or 651 BOE/d, in the first nine months of 2005 compared to the
same period in 2004, not including production attributable to the
acquisition of Marquez Energy in March. In terms of dollars
invested, most of the Company's 2005 capital expenditures have
related to offshore projects, mainly the implementation and
expansion of two waterfloods that are expected to lead to future
production increases. Capital expenditures in the third quarter
included $18.9 million on drilling and rework activity, $6.4
million on facilities and $2.5 million on exploration projects. The
Company also spent a total of $10.7 million to complete three
acquisitions that closed in the third quarter of 2005. In the first
nine months of 2005 Venoco spent $41.6 million on drilling and
rework activities, $12.9 million on facilities and $4.0 million on
exploration projects. During the period, the Company drilled
sixteen new onshore wells to total depth and recompleted
thirty-five additional onshore wells. Offshore, it drilled four
wells to total depth and recompleted three wells. In addition, it
spent a total of $25.3 on acquisitions during the period. The
Company expects that its exploration, exploitation and
development-related capital expenditures for 2005 as a whole will
be between $70 and $80 million. About the Company Venoco is an
independent energy company primarily engaged in the acquisition,
exploration, 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 over 100
natural gas wells in Northern California. Conference Call &
Webcast Venoco's third quarter 2005 earnings and operational review
conference call will begin at 4:00 p.m. Eastern (2:00 p.m.
Mountain, 1:00 p.m. Pacific) on Thursday, November 17, 2005.
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, capital
expenditures, 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 the Company's 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 mechanical failures and other problems
affecting production. 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 Nine Months Ended September 30,(1)
September 30,(1) 2005 2004 Increase 2005 2004 Increase (Decrease)
(Decrease) Production Volume Natural Gas (Mcf/d) 1,920,544
1,507,948 27% 5,652,442 4,080,963 38% Oil (Bbls/d) 640,711 779,243
(18)% 2,215,192 2,305,960 (4)% BOE 960,802 1,030,567 (7)% 3,157,266
2,986,121 6% Daily Average Production Volume Natural Gas (Mcf/d)
20,875 16,391 27% 20,705 14,894 39% Oil (Bbls/d) 6,964 8,470 (18)%
8,114 8,416 (4)% BOE/d 10,444 11,201 (7)% 11,565 10,898 6% Oil
Price per Barrel Produced (in dollars) Realized price before
hedging loss $52.50 $36.78 43% $44.09 $33.32 32% Realized hedging
loss (13.13) (6.27) 109% (6.85) (4.53) 51% Net realized $39.37
$30.51 29% $37.24 $28.79 29% Natural Gas Price per Mcf (in dollars)
Realized price before hedging gain (loss) $7.27 $5.52 32% $6.58
$5.56 18% Realized hedging gain (loss) .07 (.06) 217% (.04) (.16)
(75)% Net realized $7.20 $5.46 32% $6.54 $5.40 21% Average Sales
Price per BOE $40.42 $30.49 33% $37.34 $29.83 27% Third Quarter
2005 and 2004 Financial Information VENOCO, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS ($ thousands, unaudited) September 30,
December 31, 2005 (1) 2004 (1) ASSETS: CURRENT ASSETS: Cash and
cash equivalents $13,023 $54,715 Accounts receivable 26,449 17,755
Inventories 1,784 1,079 Income tax receivable -- 3,906 Commodity
derivatives 3,680 5,300 Notes receivable - officer -- 1,420 Prepaid
expenses and other current assets 7,025 3,640 Total current assets
51,961 87,815 PROPERTY AND EQUIPMENT, net 209,251 198,563 OTHER
ASSETS 7,995 12,504 TOTAL ASSETS $269,207 $298,882 LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT): CURRENT LIABILITIES: Accounts
payable and accrued liabilities $33,164 $19,385 Undistributed
revenue payable 4,492 4,774 Income tax payable 4,853 -- Current
maturities of long term debt 124 127 Commodity derivatives 39,603
1,520 Repurchase of common stock -- 5,316 Total current liabilities
82,236 31,122 LONG-TERM DEBT 158,942 163,542 DEFERRED INCOME TAXES
1,000 32,208 ASSET RETIREMENT OBLIGATIONS 24,540 23,184 COMMODITY
DERIVATIVES 21,874 -- Total liabilities 288,592 250,056 COMMITMENTS
AND CONTINGENCIES MINORITY INTEREST -- 387 STOCKHOLDERS' EQUITY
(DEFICIT): Common stock and additional paid in capital 21,384
31,412 Retained earnings (accumulated deficit) (19,766) 15,104
Accumulated other comprehensive income (loss) (21,003) 1,923 Total
stockholders' equity (deficit) (19,385) 48,439 TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT) $269,207 $298,882 (1) On March
21, 2005 the Company completed the acquisition of Marquez Energy,
majority-owned and controlled by Timothy Marquez, the Company's CEO
and beneficial owner of 100% of its shares. Due to the common
control aspects of the transaction, the financial statements of
Marquez Energy have been combined with the consolidated financial
statements of the Company and its subsidiaries in a manner similar
to a pooling-of-interests from the date common control was
achieved. Therefore, the Company's financial statements since July
12, 2004 were restated to include Marquez Energy's financial
results. VENOCO, INC CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
($ thousands, unaudited) Three Months Ended Nine Months Ended
September 30, September 30, 2005 2004 2005 2004 REVENUES: Oil and
natural gas sales $47,278 $36,844 $134,668 $99,761 Commodity
derivative losses (realized) (8,287) (4,968) (15,442) (11,076)
Commodity derivative losses (unrealized) (1) (16,242) (851)
(44,241) (1,692) Other 776 1,953 2,867 4.134 Total revenues 23,525
32,978 77,852 91,127 EXPENSES: Oil and natural gas production
13,748 12,583 38,030 35,298 Transportation expense 464 783 1,680
2,222 Depletion, depreciation, amortization and impairment 5,634
3,611 15,127 10,992 Accretion of abandonment liability 293 373
1,311 1,093 General and administrative, net of amounts capitalized
2,955 2,957 10,654 8,697 Amortization of deferred loan costs 320
103 1,341 233 Interest, net 3,361 443 10,181 1,076 Total expenses
26,775 20,853 78,324 59,611 Income (loss) before income taxes
(3,250) 12,125 (472) 31,516 Income tax provision (benefit) (1,417)
5,143 (643) 13,227 Income (loss) before minority interest (1,833)
6,982 171 18,289 Minority interest -- 36 42 36 Net income (loss)
(1,833) 6,946 129 18,253 Preferred stock dividends -- (2,116) --
(6,348) Net income (loss) applicable to common equity $(1,833)
$4,830 $129 $11,905 (1) Unrealized commodity derivative losses
reflect the change in fair value of financial instruments not
qualifying for hedge accounting under SFAS No. 133 GAAP
Reconciliations 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 to net income before unrealized
commodity derivative losses for the three and nine months ended
September 30: Three Months Ended Nine Months Ended September 30,
September 30, 2005 2004 2005 2004 Net Income (loss) $(1,833) $6,946
$129 $18,253 Plus: Unrealized commodity derivative losses 16,242
851 44,241 1,692 Less: Income tax benefit on unrealized commodity
derivative losses 6,438 337 17,538 671 Net income before unrealized
commodity derivative losses $7,971 $7,463 $26,832 $19,274 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 and nine months ended September 30: Three
Months Ended Nine Months Ended September 30, September 30, 2005
2004 2005 2004 Net Income $(1,833) $6,946 $129 $18,253 Plus:
Interest, net 3,361 443 10,181 1,076 Income taxes (benefit) (1,417)
5,143 (643) 13,227 D.D.&A 5,634 3,611 15,127 10,992 Accretion
of abandonment liability 293 373 1,311 1,093 Amortization of
deferred loan costs 320 103 1,341 233 EBITDA 6,358 16,619 27,446
44,874 Plus: Pre-tax realized commodity derivative losses 8,287
4,968 15,442 11,076 Pre-tax unrealized commodity derivative losses
16,242 851 44,241 1,692 EBITDA before pre-tax commodity derivative
losses $30,887 $22,438 $87,129 $57,642 Open Derivative Positions as
of November 11, 2005 Crude Oil Agreements -- The Company has
entered into option, swap and collar agreements to receive average
minimum and maximum New York Mercantile Exchange (NYMEX) West Texas
Intermediate (WTI) prices as summarized below. Location and quality
differentials attributable to the Company's properties are not
included in the following prices. The agreements provide for
monthly settlement based on the differential between the agreement
price and the actual NYMEX crude oil price. Minimum Maximum
Barrels/day Avg. Barrels/day Avg. Prices Prices Crude oil hedges at
November 11, 2005 for production: October 1 - December 31, 2005
9,471 $37.73 5,471 $47.17 January 1 - December 31, 2006 8,500
$45.34 5,000 $53.56 January 1 - December 31, 2007 4,313 $43.96
4,313 $68.99 January 1 - December 31, 2008 2,946 $52.00 2,946
$75.00 January 1 - June 30, 2009 2,170 $50.00 2,170 $75.00 Natural
Gas Agreements -- The Company has entered into option, swap and
collar agreements to receive average minimum and maximum PG&E
Citygate prices as follows: Minimum Maximum MMBtu/Day Avg.
MMBtu/Day Avg. Prices Prices Natural gas hedges at November 11,
2005 for production: October 1 - December 31, 2005 14,000 $6.09
4,000 $6.77 January 1 - December 31, 2006 21,000 $7.06 15,000
$11.04 January 1 - December 31, 2007 6,000 $6.00 6,000 $8.40 This
release can be found at http://www.venocoinc.com/ DATASOURCE:
Venoco, Inc. CONTACT: Mike Edwards, VP of Venoco, Inc.,
+1-805-745-2123, or cell, +1-805-455-9658 Web site:
http://www.venocoinc.com/
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