MEXP releases earnings...
Thursday August 12, 6:58 pm Eastern Time
Company Press Release
SOURCE: Miller Exploration Company
Miller Exploration Company Announces Second
Quarter Financial and Operational Results
TRAVERSE CITY, Mich., Aug. 12 /PRNewswire/ -- Miller Exploration Company (Nasdaq: MEXP - news; the
``Company' or ``Miller') today announced financial and operational results for the second quarter ended June 30,
1999.
Second quarter financial results
Oil and natural gas revenues for the three months ended June 30, 1999 decreased 14% to $4.8million from $5.6
million for the same period in 1998. The revenues for the three months ended June 30, 1999 and 1998 include
$(64,000) and $92,000 of hedging gains (losses), respectively. Despite an 18% increase in natural gas production
volumes for the Mississippi Salt Basin properties, total gas production for the three months ended June 30, 1999
declined 17% to 1,876 Mmcf from 2,258 Mmcf for the same period in 1998. The decrease is primarily
attributable to the sale of gas producing properties in Texas and Louisiana (March 1, 1999 effective date) and in
Michigan (June 1, 1999 effective date). Average natural gas prices decreased 5% to $2.09 per Mcf for the three
months ended June 30, 1999 from $2.21 per Mcf in the same period in 1998. Absent natural gas hedging gains
(losses) of $(76,000) and $92,000 for the three months ended June 30, 1999 and 1998, respectively, average gas
prices would have declined only 2%. Oil production for the Mississippi properties increased 43% and total oil
production volumes during the three months ended June 30, 1999 increased 17% to 63 Mbbls from 54 Mbbls for
the same period in 1998. The decrease in non-Mississippi oil production is attributable to the sale of oil
producing properties in Texas and Louisiana (March 1, 1999 effective date). Average oil prices increased 23% to
$14.25 per barrel (including a $12,000 hedging gain) during the three months ended June 30, 1999 from $11.59
per barrel in the same period in 1998.
Lease operating expenses and production taxes for the three months ended June 30, 1999 decreased 41% to $0.4
million from $0.8 million for the same period in 1998. Lease operating expenses and production taxes decreased
due to the combined results of improved efficiencies at Company operated well sites in the Mississippi Salt Basin
and as a result of the sale of certain non-strategic producing properties in Texas, Louisiana, and Michigan.
Depreciation, depletion and amortization (``DD&A') expense for the three months ended June 30, 1999 increased
13% to $3.5 million from $3.1 million for the same period in 1998. This increase was due to the combined results
of a reduction in the amount of costs subject to DD&A, due to the non-cash cost ceiling write down at December
31, 1998, the sale of producing oil and gas properties discussed above and an increase in the depletion rate. The
higher depletion rate was primarily the result of decreased proved oil and gas reserves attributable to the sale of
producing oil and gas properties discussed above.
General and administrative expense for the three months ended June 30, 1999 increased 18% to $0.9 million from
$0.8 million for the same period in 1998, primarily as a result of increases in legal and professional fees and
costs associated with the Company's initial Annual Meeting.
Interest expense for the three months ended June 30, 1999 increased 211% to $1.0 million from $0.3 million in the
same period in 1998, as a result of increased debt levels in 1999 for substantial exploration and development
activities in the Mississippi Salt Basin area, and an increased interest rate in the second quarter of 1999 under the
Company's amended credit facility.
Net loss for the three months ended June 30, 1999 was $(0.6) million compared to net income of $0.6million for
the same period in 1998, as a result of the factors described above.
Operational Activity
Mississippi Salt Basin
The Company anticipates drilling a total of 4 gross wells in the third and fourth quarters in the Mississippi Salt
Basin. All remaining Mississippi Salt Basin drillsites in 1999 have been generated from 3-D seismic.
The Campbell #1 well, (Centerville Dome, Jones County, MS) is expected to begin drilling September 15, 1999
to a total depth of 18,000'. The project is intended to test both the Hosston and Cotton Valley at a structurally
favorable location. The Langston #1, (Kola Dome, Covington County, MS) is scheduled to spud in October 1999
and be drilled to a depth of 17,300' to test the primary objective of the Hosston.
In the fourth quarter the Company expects to begin drilling operations on an exploratory well on the north side of
Midway Dome to a depth of 18,500' which was developed from a 50-square mile 3-D survey. This test will be
significantly updip to the Allar #3 which had numerous sands and shows of gas in the Hosston formation. Also, as
a result of the 36-square mile 3-D survey that was completed on Richmond Dome, (Covington County, MS), the
Company plans to spud a exploratory test in the fourth quarter to a depth of approximately 17,000' which has
multiple pay potential.
The Company's drilling experience as an operator on the wells that were drilled based on 3-D seismic analysis
have resulted in the prospective formations being encountered as projected and/or the wells being drilled at or
below their anticipated expenditures. The Company anticipates these encouraging trends to apply to other domes
in the area.
The Company has completed the Allar #6 (Midway Dome, Lamar County, MS) which was a development well
offsetting the Patterson #1. The Allar #6 well is producing to sales at a rate of 2,000 MCFD and 22 BOPD with a
flowing tubing pressure of approximately 1600 psig. The Allar #6 is the fourth producing well on Midway Dome.
The Patterson #1, Allar #2 and Allar #1 are the other producing wells on the dome and are currently producing at
5,600 MCFD, 9,100 MCFD and 6,600 MCFD, respectively. The re-perforating that was completed earlier this
year continues to show its contribution. Current gross production from the field (4 wells) is 23,300 MCFD and
298 BOPD.
The Company continues to pursue options to eliminate the water problems in the Horne #1 (Centerville Dome,
Jones County, MS) and the Atlas #1 (Monticello Dome, Lawrence County, MS). Both wells experienced poor
primary cement jobs in the shallow formations of the Eutaw, Lower Tuscaloosa and Paluxy.
The Company's current net production is approximately 26,000 MCFD, with the vast majority being produced in
the Mississippi Salt Basin. The Company has numerous undrilled 3-D locations on producing and non-producing
domes and a gross leasehold position of 65,000 acres (40,000 net acres).
Michigan Basin
Miller completed its pipeline plant, and facilities for the Heffelfinger #1-25 on June 27th, 1999. Gas sales will
commence with the installation of Michigan Gas Utilities metering station in approximately two weeks with an
initial rate of 2,000 -- 3,000 MCFD.
The Company completed two property sales in the Michigan Basin for combined sale price of $5.5 million. The
reserves sold represent the sale of 100% the Company's Antrim Shale reserves and 53% of the Hefflefinger #1-25
well. The purchase price for the non-strategic Antrim Shale properties represented approximately 70 times
current monthly cash flow.
Blackfeet Indian Reservation
The Company is currently drilling the Osprey #1, which was spud on August 6, 1999 and is currently drilling
toward a total depth of 5,900'. This well which will test the Virgelle formation in the Triangle Zone is being
drilled on the basis of 2-D seismic data. The Company will also be involved as a 50% partner in the Merlin #1
and the Swanson #1, which will be drilled following the completion of the Osprey #1.
Capitalization
The Company has made all scheduled principal and interest payments under its Amended Credit Facility with
Bank of Montreal. Additional principal payments of $1 million each were required on the first day of September
and October. These payments were made on August 4 concurrent with the closing of the Antrim Shale sale. The
outstanding balance under the Company's credit facility is currently $26 million.
The Company continues to consider refinancing its senior debt with other sources or reconstituting its existing
lending relationship. A number of alternatives, including an equity infusion, are currently under review. The
Board of Directors has authorized a committee of the Board to review all debt and equity proposals giving
consideration to its present liquidity, the significant number of exploratory opportunities not included in the
Company's current capital expenditure budget, and the desire to solidify a long-term lending relationship.
The currently approved capex budget for 1999 is $10.6 million. The Company believes that it has additional
desirable 3-D prospects in the Mississippi Salt Basin which are not included in the existing budget. The identified
exploratory efforts in Mississippi and the Blackfeet Disturbed Belt Project in Montana could be expanded
significantly with additional capital.
Miller is an independent oil and gas exploration and production company with established exploration efforts
concentrated primarily in four regions: the Mississippi Salt Basin, the onshore Gulf Coast region of Texas and
Louisiana, the Blackfeet Indian Reservation of Northwest Montana and the Michigan Basin. Miller emphasizes the
use of 3-Dseismic data analysis and imaging, as well as other emerging technologies, to explore for and develop
oil and natural gas in its core exploration areas. Miller is the successor to the independent oil and natural gas
exploration and production business first established in Michigan by members of the Miller family in 1925.
Miller's common shares trade on the NASDAQ under the symbol MEXP.
Except for the historical herein, the matters discussed in this press release are opinions, forward looking
statements, assumptions, and estimates that are subject to a wide range of risks, uncertainties, and there is no
assurance that our goals, estimates and expectations will be realized. Any number of important factors could
cause actual results to differ materially from those in the forward looking statements, including but not limited to
the volatility of oil and gas prices and changes in oil and gas drilling and acquisition programs, operating risks,
production rates, reserve replacement, reserve estimates, the effect of our hedging activities, the actions of our
customers and competitors, government regulations, changes in general economic conditions, and the state of
domestic capital markets and uncertainties detailed from time to time in the Company's prospectus as filed
February4, 1998 with the Securities and Exchange Commission.
Miller Exploration will host a conference call at 10:30 a.m. EDT on Friday, August 13, 1999. To participate in
the call please dial 1-800-491-3423, participant code 583615.
MILLER EXPLORATION COMPANY
Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
Revenues
Natural Gas Sales $ 3,912 $ 4,987 $ 8,031 $ 8,562
Crude Oil and
Condensate Sales 898 626 1,614 1,079
Other operating
revenues 150 114 294 322
Total Operating
Revenues 4,960 5,727 9,939 9,963
Operating Expenses
Lease Operating Expenses
& Production Taxes 448 760 1,051 1,407
Depreciation, Depletion
and Amortization, 530 3,117 6,922 5,618
General & Administrative 923 784 1,800 1,833
Total Operating Expenses 4,901 4,661 9,773 8,858
Operating Income 59 1,066 166 1,105
Interest Expense (1,013) (326) (1,607) (562)
Income (Loss)
Before Income taxes (954) 740 (1,441) 543
Income Tax Provision (378) 139 (576) 5,522
Net Income (Loss) $ (576) $ 601 $ (865) $ (4,979)
Earnings (Loss) Per Share
Basic $(0.05) 0.05 $ (0.07) $ (0.51)
Diluted (0.05) 0.05 (0.07) (0.51)
Shares Basic 12,619 12,493 12,586 9,791
Shares Diluted 12,619 12,676 12,586 9,791
Gas Production (Mmcf) 1,876 2,258 3,931 4,093
Oil Production (Mbo) 63 54 140 89
Equivalent
Production (Mmcfe) 2,254 2,582 4,771 4,627
Unit Price Gas $ 2.09 $ 2.21 $ 2.04 $ 2.09
Unit Price Oil $14.25 $ 11.59 $ 11.53 $ 12.12
Unit Price Mcfe $2.13 $2.17 $2.02 $2.08
Average Costs ($ per Mcfe)
Lease operating expenses
& Production taxes $ 0.20 $ 0.29 $ 0.22 $ 0.30
Depletion, Depreciation
and Amortization $ 1.57 $ 1.21 $ 1.45 $ 1.21
General
and Administrative $ 0.41 $ 0.30 $ 0.38 $ 0.40
EBITDA $3,589 $ 4,183 $ 7,088 $ 6,723
Cash Flow $2,846 $ 3,913 $ 6,062 $ 6,273
Cash Flow/Share Basic $0.23 $0.31 $0.48 $0.64
Cash Flow/Share Diluted $0.23 $0.31 $0.48 $0.64
SOURCE: Miller Exploration Company |
