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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: The Ox who wrote (53671)	10/28/1999 12:53:00 PM
From: The Ox	Read Replies (1) \| Respond to of 95453

Key Reports 88 Percent Increase in Third- Quarter Earnings to $.15 Per Share; Cash Flow from Operations Doubles; Production Increases 18 Percent DENVER--(BUSINESS WIRE)--Oct. 28, 1999--Key Production Company, Inc. (NYSE: KP) today reported third quarter net income of $1.8 million, or earnings per share of $.15. Net income in the third quarter of 1998 was $.9 million, with earnings per share of $.08. Cash flow from operations before changes in operating assets and liabilities totaled $11.0 million, more than double the $5.4 million generated in the third quarter of 1998. The increase in earnings and cash flow resulted from an 18 percent increase in production volumes and significantly higher oil and gas prices. Key's realized oil price increased 73 percent to $19.65 per barrel, while its gas price rose 33 percent to $2.52 per thousand cubic feet (Mcf). "Beyond the financial benefits stemming from higher energy prices, our focus on adding high-margin proved reserves through drilling and acquisitions continues to have a positive impact on production volume growth and cash flow," said Monroe W. Robertson, president and chief operating officer. "Moreover, our ability to increase drilling activity during a time of renewed strength in oil and gas prices confirms the economic attractiveness of Key's core acreage positions and our organizational capability to generate new drilling ideas," he added. Key's production of oil and gas averaged 60.1 million cubic feet equivalent (MMcfe) per day in the latest quarter compared to output of 50.8 MMcfe per day in the prior-year period. Gas volumes increased 6 percent to 37.2 million cubic feet (MMcf) per day compared to 35.2 MMcf in the third quarter of 1998. Oil output averaged a record 3,820 barrels per day, up 47 percent from 2,591 barrels per day in 1998's third quarter. Production from new wells drilled in western Oklahoma and the Sacramento Basin of California contributed the bulk of the incremental gas volumes. In addition, initiation of sales from two new well completions in the Mississippi Salt Basin helped boost the company's total average daily gas production to over 40 MMcf during September 1999. The 1,229 barrels per day increase in Key's third-quarter 1999 oil volumes includes approximately 760 barrels per day of output associated with the acquisition of producing properties at year-end 1998. The remainder of the increase is primarily the result of the company's ongoing investments in the Hardeman Basin of north-central Texas and initial production from Key's new wells in Mississippi. During September 1999, net oil volumes approximated 4,000 barrels per day. Lease operating expense averaged $.44/Mcf during the latest three-month period, a $.05/Mcfe improvement from $.49/Mcf in 1998's third quarter. Mirroring the rise in oil and gas prices, production taxes increased to $.18/Mcf from $.12/Mcf. General and administrative expense equated to $.11/Mcf compared to $.09/Mcf during the third quarter of 1998. The depletion rate used to compute Key's third-quarter 1999 depreciation, depletion and amortization (DD&A) expense was 51.9 percent, up from a rate of 42.5 percent during last year's third quarter. Key uses the future gross revenue method to calculate DD&A expense. For purposes of the calculation, future gross revenue is computed using a trailing 12-month average price. If the trailing 12-month average price is lower than the price the company received for its oil and gas production during the quarter, the increase in DD&A expense will be greater than the increase in revenue for the period. This was the case during the third quarter of 1999. Year to date, the company has participated in drilling 76 wells, with an overall success rate of 80 percent. Twenty-seven of the 31 wells drilled during the third quarter were successful. Drilling efforts continue to be concentrated in the Mid-Continent region, California, Mississippi, and south Louisiana. Of the 37 wells drilled in the Mid-Continent region by Key this year, 32 have been completed or are in the process of being completed. Nine successful wells have been drilled in each of the company's California and Gulf Coast regions out of 13 and 12 attempts, respectively. Through the first nine months of the year, Key's exploration and development expenditures totaled $24.6 million, including outlays of $8.8 million during the third quarter. While continuing with its overall low- to moderate-risk drilling program, Key is also accelerating its higher risk (and higher potential) exploratory drilling efforts. In the Mississippi Salt Basin, two new wells around separate salt domes are already underway. In the next few months, Key expects that drilling will commence at three more locations and several others thereafter. The company also plans to drill exploratory wells on potentially high-impact prospects in south Louisiana, the Sacramento Basin, and in Wyoming. At September 30, 1999, long-term debt was $65.0 million and the company's debt to capitalization ratio was 47.1 percent. Long-term debt was unchanged from June 30, 1999. This news release may contain projections and other forward-looking statements within the meaning of federal securities laws. Any such projections or statements reflect the company's current views with respect to future events and financial performance. No assurances can be given, however, that these events will occur or that such projections will be achieved and actual results could differ materially from those projected. A discussion of important factors that could cause actual results to differ materially from those projected is included in the company's periodic reports filed with the Securities and Exchange Commission. Key is an independent natural gas and crude oil exploration and production company with operations in the Anadarko Basin of Oklahoma, the Rocky Mountains, the Sacramento Basin of northern California, the Hardeman Basin of north-central Texas and the Gulf Coast of Texas, Louisiana and Mississippi. The company's shares are traded on the New York Stock Exchange.