EARNINGS / Union Pacific Resources reports 1st 3 months Results
FORT WORTH, Texas, April 27 /CNW/ -- Union Pacific Resources Group
Inc. (NYSE: UPR) today announced this year's first quarter average daily
volumes from producing properties increased 27 percent over the first quarter
of 1997 to 2.05 billion cubic feet equivalent per day (Bcfed). Volumes were
especially strong because production associated with the acquisition of Norcen
Energy Resources, Ltd. (Norcen) was included for the month of March. Also
contributing to the volume growth was the Company's Austin Chalk business
unit, which had a record quarter, producing 594 Mmcfed, a 2.5 percent increase
over the first quarter of 1997.
"Despite a tremendous amount of uncertainty related to commodity prices
and costs of services, we were still able to profitably grow the Company's
volumes in the first quarter," said Jack L. Messman, UPR's Chairman and CEO.
"UPR's success in the first quarter is directly related to the ability of our
people to adapt to the changing conditions in our industry."
UPR continued its growth through the drill bit by operating, on average,
49 drilling rigs per day. Norcen operated, on average, 23 rigs in March.
In addition to the 2.5 percent production increase in the Austin Chalk,
several other business units experienced significant production increases. The
Gulf Onshore/Offshore volumes were up 28 percent year over year on volumes of
150 million cubic feet equivalent per day (Mmcfed) of natural gas, while East
Texas volumes were up 20 percent to 203 Mmcfed year over year. South
Texas/Plains/Canada volumes increased 14 percent year over year with volumes
equaling 216 Mmcfed.
Compared to the first quarter of 1997, discretionary cash flow decreased
17 percent to $265 million ($1.07 per share), while total revenues decreased
7 percent to $499 million. Discretionary cash flow contributed by Norcen was
$20 million in March. Net income decreased to $31 million ($0.13 per share).
Lower commodity prices combined with purchase accounting and interest on the
debt from the Norcen acquisition were the primary reasons for the lower
earnings. Price realizations averaged $1.96 per thousand cubic feet equivalent
(Mcfe) of natural gas in the quarter, representing a 23 percent decrease from
first quarter of 1997 prices, which equaled $2.55 per Mcfe. Purchase
accounting for the Norcen acquisition caused an increase in depreciation,
depletion and amortization (DD&A) expense of $20 million. Interest expense for
the quarter rose to $39 million from $11 million for the same period last
year.
The Austin Chalk business unit experienced volume growth due to the
completion of several new significant wells in the Deep Giddings area. The
Cobb #1 well in Washington County, Texas, was completed in February and is
producing at a sustained rate of approximately 50 Mmcfd. Additionally, the
Goldberg #1 in Austin County, Texas, was completed in March and is producing
at a rate of 23 Mmcfd. UPR has a 93 percent working interest in the Cobb well
and a 100 percent working interest in the Goldberg well. Currently, in the
Deep Giddings area, UPR is producing 170 Mmcfd on a net basis and the Masters
Creek area of the Chalk is producing 130 Mmcfed net. For the first quarter,
the Masters Creek volumes represent an increase of nearly 400 percent over
first quarter 1997.
In the Land Grant business unit, the Phosphoria 42-H well was completed in
the Brady field. It is currently producing 1,500 barrels of oil per day (BOPD)
and 10.5 million cubic feet per day (Mmcfd) of natural gas without
stimulation. The gas is flowing to the newly constructed Brady Sweetening
Plant, which began service in the first quarter. This plant will allow the
Brady field, which has recycled gas for the past 25 years to stimulate oil
production, to begin producing natural gas for sale.
OUTLOOK
The primary focus for the second quarter will be the implementation of a
deleveraging program, which is being initiated to strengthen the Company's
balance sheet.
"Our plan is to work quickly to reduce our debt level in order to achieve
a strong investment grade credit rating by the end of the year," Messman
noted. "We currently plan to accomplish this through a combination of reduced
spending and asset sales. We have reduced the combined 1998 capital budget of
UPR and Norcen by approximately $800 million to $1.3 billion. Spending for the
combined companies last year was approximately $2.5 billion, which includes
approximately $700 million for producing property and asset purchases. The
revised spending plans will reduce our rig count and our volumes from
drilling, however, UPR still anticipates increasing its volumes by 6 percent
to 8 percent after contemplated asset sales on a combined company, pro forma
basis.
Union Pacific Resources is one of the nation's largest independent oil and
gas exploration and production companies. Based in Fort Worth, Texas, UPR has
been the #1 domestic driller for the past 6 years and is the #1 gas producer
in the state of Texas.
This press release, other than historical financial information, contains
forward looking statements that involve risks and uncertainties including
planned deleveraging and drilling activities, expected production efforts and
volumes and budgeted capital expenditures and other risks and uncertainties
detailed in the Company's SEC reports, including the report on Form 10-K for
the year ended December 31, 1997. Actual results may vary materially.
Union Pacific Resources Group Inc.
Statements of Income
For the Period Ended March 31
(Dollars in Millions, Except Per Share Figures)
1998 (A) 1997
Operating revenues:
Oil and gas operations:
Producing properties $362.0 $370.0
Gathering, processing and
marketing 96.2 124.7
Other oil and gas revenues 0.7 4.6
Total oil and gas operations 458.9 499.3
Minerals 40.1 32.4
Total operating revenues 499.0 531.7 (7%)
Operating expenses:
Production 93.3 73.1
Exploration 56.1 42.8
Gathering, processing
and marketing 59.9 76.6
Minerals 0.7 1.3
Depreciation, depletion
and amortization 191.1 133.0
General and administrative 20.6 18.5
Total operating expenses 421.7 345.3 22%
Operating income 77.3 186.4 (59%)
Other income (expense)-net 1.4 (3.0)
Interest expense (39.2) (10.7)
Income before income taxes 39.5 172.7
Income taxes (8.3) (55.5)
Net income $31.2 $117.2 (73%)
Discretionary cash flow $265.1 $321.1
Basic earnings per share $0.13 $0.47
Diluted earnings per share $0.13 $0.47
Discretionary cash flow
per share(B) $1.07 $1.28
Average shares outstanding
(millions) basic 247.6 250.1
Average shares outstanding
(millions) diluted 248.2 251.0
(A) The quarterly results only include Norcen's results for the month of
March.
(B) Discretionary cash flow for any period means the sum of net income;
depreciation, depletion and amortization; exploration expenses; and
deferred taxes.
Union Pacific Resources Group Inc.
Operating Statistics
Norcen
For the Period Ended March
1998 1997 1998 (A)
Producing properties
average daily production:
Natural Gas:
United States (MMcfd) 1,133.4 1,102.3 108.5
Canada (MMcfd) 134.1 15.9 326.1
Other International (MMcfd) 3.7 --- 10.8
Total (MMcfd) 1,271.2 1,118.2 14% 445.4
Natural Gas Liquids:
United State(MBbld) 28.4 29.0 ---
Canada (MBbld) 3.0 1.8 3.2
Total (MBbld) 31.4 30.8 3.2
Crude Oil:
United State(MBbld) 61.8 47.6 5.4
Canada (MBbld) 17.8 1.7 46.6
Other International (MBbld) 19.0 2.1 52.2
Total (MBbld) 98.6 51.4 92% 104.2
Total production (MMcfed) 2,051.6 1,611.9 27% 1,089.1
Producing Properties average sales prices:
Natural Gas:
United States (per Mcf) $2.04 $2.41 $2.31
Canada (per Mcf) 1.42 2.86 1.46
Other International (per Mcf) 1.12 --- 1.12
Total (per Mcf) 1.97 2.41 (18%) 1.66
Natural Gas Liquids:
United State(per Bbl) $9.76 $13.47 ---
Canada (per Bbl) 5.01 9.03 $7.22
Total (per Bbl) 9.30 13.20 (30%) 7.22
Crude Oil:
United State(per Bbl) $14.58 $19.51 $13.98
Canada (per Bbl) 9.26 21.41 8.64
Other International (per Bbl) 7.83 18.00 7.44
Total (per Bbl) 12.32 19.51 (37%) 8.32
Total sales price (MMcfed) $1.96 $2.55 (23%) $1.50
Total Company average costs:
Production costs (per Mcfe) $0.51 $0.50 $0.39
DD&A (per Mcfe) 0.93 0.80 1.32
General and administrative
cost (per Mcfe) 0.10 0.11 ---
Debt as a percent of total
capitalization 74.1% 33.0% ---
(A) Represents Norcen production and prices for the month of March, 1998.
Union Pacific Resources Group Inc.
Statements of Cash Flows
For the Period Ended March 31
(Dollars in Millions)
1998 (A) 1997
Cash provided by operations:
Net income $31.2 $117.2
Depreciation, depletion and amortization 191.1 133
Exploration expenses 56.1 42.8
Deferred taxes (13.3) 28.1
Discretionary cash flow 265.1 321.1 (17%)
Working capital changes and other 30.3 101.1
Cash provided by operations 295.4 422.2 (30%)
Cash used by investing activities:
Capital expenditures and
exploratory expenditures (487.1) (284) 72%
Acquisition of companies (2623.2) ---
Proceeds from sales of assets 6 1.3
Other investing activities-net 6.4 (0.9)
Cash used by investing activities (3097.9) (283.6)
Financing activities:
Dividends paid (12.4) (12.5)
Debt financing 2816.1 ---
Debt repaid --- (99.6)
Purchase of treasury stock (21.6) (0.8)
Other financings - net (4.4) 55.6
Cash provided (used) by financing activities 2777.7 (57.3)
Net change in cash ($24.8) $81.3
(A) The quarterly results only include Norcen's results for the month of
March.
Union Pacific Resources Group Inc.
Statements of Financial Position
As of March 31
(Dollars in Millions)
1998 1997
Assets:
Current assets $ 788.7 $ 537.7
Properties - net 8,881.2 3,072.8
Other assets 400.0 84.8
Total $10,069.9 $3,695.3
Liabilities and shareholders' equity:
Other current liabilities $ 708.8 $ 621.5
Debt due within one year 350.0 ---
Debt due after one year 4,708.7 571.3
Deferred income taxes 2,063.4 462.8
Other liabilities 474.0 415.7
Shareholders' equity 1,765.0 1,624.0
Total $10,069.9 $3,695.3
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