Miller Exploration Company Announces 3rd Quarter 1999
Financial And Operational Results
Updated 7:27 PM ET November 9, 1999
HOUSTON, Nov. 9 /PRNewswire/ -- Miller Exploration Company (NASDAQ:MEXP) (the "Company" or "Miller") announced today financial results for the third quarter ended September 30, 1999, closure on an amendment to its credit facility with its senior lender, closure of a joint venture agreement with Remington Oil and Gas Corporation (NASDAQ:ROIL), operational activity and other matters.
Third Quarter Financial Results
Oil and natural gas revenues for the three months ended September 30, 1999 decreased 3% to $5.4 million from $5.6 million for the same period in 1998. Revenues for the three months ended September 30, 1999 and 1998 include $(328,000) and $329,000 of hedging gains (losses), respectively. Natural gas production increased 12% for the Mississippi Salt Basin properties however, total gas production for the three months ended September 30, 1999 declined 23% to 1,805 Mmcf from 2,349 Mmcf for the same period in 1998. The decrease in total natural gas production is primarily attributable to the sale of non- strategic gas producing properties in Texas, Louisiana and Michigan that occurred in previous quarters of 1999. Average natural gas prices increased 18% to $2.44 per Mcf for the three months ended September 30, 1999 from $2.06 per Mcf in the same period in 1998. Oil production for the Mississippi properties decreased 7%, total oil production volumes during the three months ended September 30, 1999 decreased 18% to 60,000 from 73,000 Bbls for the same period in 1998. The decrease in non-Mississippi oil production is attributable to the sale of non-strategic oil producing properties in Texas and Louisiana. Average oil prices increased 63% to $17.35 per barrel during the three months ended September 30, 1999 from $10.62 per barrel in the same period in 1998.
Lease operating expenses and production taxes for the three months ended September 30, 1999 decreased 68% to $0.3 million from $0.9 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 properties in Texas, Louisiana, and Michigan. Overall unit production costs currently average $.13/Mcfe produced.
Depreciation, depletion and amortization ("DD&A") expense for the three months ended September 30, 1999 increased 25% to $4.5 million from $3.6 million for the same period in 1998. This increase was the result of 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 non-strategic producing oil and gas properties discussed above.
General and administrative expense for the three months ended September 30, 1999 decreased 18% to $0.6 million from $0.8 million for the same period in 1998, primarily as a result of a cost reduction plan implemented in May 1999.
Interest expense for the three months ended September 30, 1999 increased 91% to $1.0 million from $0.5 million in the same period in 1998, as a result of increased debt levels in 1999 compared to the same period in 1998 and due to significantly increased interest rates.
Net loss for the three months ended September 30, 1999 was $(0.5) million compared to net income of $0.1 million for the same period in 1998, as a result of the factors described above.
Cash flow for the three months ended September 30, 1999 and 1998 was $3.9 million or $.31 per basic share and $3.7 million or $.29 per basic share, respectively. As of September 30, 1999 the Company has outstanding oil and natural gas hedge contracts totaling 1.5 Bcfe covering periods through March 2000 and ranging in price from $2.63 to $3.02 per Mmbtu or equivalent.
The Company's net daily production is approximately 26.2 Mmcfed.
Operational Results
Mississippi Salt Basin
The Campbell #1 (Centerville Dome, Jones County, MS) is drilling ahead at 13,142 feet in the Paluxy Formation. The well is on budget and it is anticipated total depth of 18,150 feet should be reached in the Cotton Valley in late December. The well will test the primary objective in the Hosston, but will also test the deeper Cotton Valley objective. MEXP holds an approximate 17.2% working interest in this prospect. Miller currently operates and has a 50% working interest in the Ellzey well on Centerville Dome which currently produces 750 Bopd and 1.5 Mmcfd. The Horne #1, also located on Centerville Dome, is currently testing approximately 160 Bopd from the Eutaw Formation. MEXP holds an approximate 45.0% working interest in this well.
Miller has prepared location and intends to begin drilling on the Langston #1 on (Kola Dome, Covington County, MS) within the next 7-10 days. The Company holds approximately 17.7% working interest in this property, which is expected to test the Rodessa, Sligo with the Hosston formation at 17,600 feet as the primary objective.
The Company is preparing location and expects to spud the Lott #1 on (Richmond Dome, Covington County, MS) within the next 30 days. The Lott #1 will test the Eutaw, Rodessa, Sligo with the Hosston formation at 18,100 feet as the primary objective. Miller has a working interest of 25% in the well.
All three of the above wells that are to be drilled have been developed on 3-D seismic. Company CEO, Kelly Miller stated, "We are pleased with the current level of activity, the quality of 3-D data supporting the multiple objective prospects. We are in a fortunate position to be able to expand and expedite our exposure to significant reserves in an area of proven production. Our most recent joint venture with Remington Oil, together with that of Key Production and others has put us in a position to accelerate our exploration plan and to take advantage of the significant benefit that our 3-D seismic is intended to provide."
The Blackfeet Project
Miller has participated in (3) wells on the K2 Energy-Miller Indian Mineral Development Act (IMDA) and Exploration Agreement and has requested additional testing and pressure information from the operator. The well and test information Miller has received to date did not give Miller the information necessary to evaluate sizing of facilities or the merits of a pipeline. Upon the completion of the test phase, the future viability of the wells can be determined. The Company has also received verbal approval on the Miller Exploration-IMDA to extend its drilling commitment to July 1, 2000 from the Land Board of the Tribal Business Council. It is anticipated Miller will receive final approval from the Tribal Council in the near future. Miller is currently in various stages of design toward the drilling of (4) wells on the reservation.
Other Matters
Joint Venture Agreement
On October 29, 1999, the Company finalized its joint venture arrangement with Remington Oil and Gas Corporation ("Remington") covering multiple salt domes in the Mississippi Salt Basin. The terms of the joint venture arrangement provide an up front cash payment to the Company with the opportunity to participate in the drilling of five prospects in the Company's Mississippi Salt Basin Project. Remington will earn a position in undeveloped acreage ranging from 14% to 40% working interest in the prospects by paying a disproportionate share of drilling costs in the five-well program. Remington and Miller will also be reviewing the merits of a 3-D survey in the Dry Creek Dome, wherein Remington will have the option to earn 50% of the undeveloped acreage at the Company's Dry Creek Dome by paying the first $900,000 of a 3-D seismic shoot.
Amended Credit Facility
On October 29, 1999 the Company and its senior lender Bank of Montreal entered into a Third Amendment to the Credit Facility. The terms of the Third Amendment are disclosed in the 3rd Quarter Form 10-Q to be filed November 10, 1999 with the Securities and Exchange Commission.
Personnel
The Company announced today the resignation effective November 16, 1999, of Bill Baumgartner, Executive Vice President and member of the board of directors. Mr. Baumgartner is leaving for personal reasons and will be pursuing a career in Denver. Mr. Baumgartner stated, "I have been offered a significant opportunity in the Denver area with a well respected E & P Company. Leaving Miller has been one of the most difficult decisions I have made in my 20 years in the industry and 15 years with the Miller family. I can not thank the Miller family, the board of directors and management of the Company enough for the support, challenges and opportunities presented to me throughout my tenure at the Company. I am going to miss everyone involved and I am anxious to watch the Company as it takes advantage of some tremendous 3-D prospects." Kelly Miller stated, "The Company greatly appreciates Bill's many contributions over the years and wishes him well in his future endeavors. Deanna Cannon, CPA, (VP Finance) had previously assumed a number of the administrative and financial functions and had already been working very closely with Bill. Deanna and Curt Yeiter, CPA (Controller and Treasurer) will be assuming the majority of Bill's duties. The extensive public accounting and analytical backgrounds of these two individuals will provide for a smooth transition without interruption to the Company's business plans."
Miller is an independent oil and gas exploration and production company with established exploration efforts concentrated primarily in two regions: the Mississippi Salt Basin and the Blackfeet Indian Reservation of Northwest Montana. Miller emphasizes the use of 3-D seismic 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 items 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 more fully described in the Company's Annual Report on Form 10-K for the year ended December 31, 1998 as filed with the Securities and Exchange Commission.
Miller Exploration will host a conference call at 10 a.m. E.S.T. on Wednesday, November 10, 1999. To participate in the call, please dial 800-553-2720, conference ID #620994 and ask for Miller Exploration 3rd quarter earnings.
MILLER EXPLORATION COMPANY
Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited) For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
REVENUES
Natural Gas Sales $4,403 $4,833 $12,434 $13,395
Crude Oil and Condensate Sales 1,041 775 2,655 1,854
Other Operating Revenues 101 250 395 572
Total Operating Revenues 5,545 5,858 15,484 15,821
OPERATING EXPENSES
Lease Operating Expenses & Production
Taxes 288 907 1,338 2,314
Depreciation, Depletion and
Amortization 4,460 3,596 11,383 9,214
General & Administrative 626 763 2,426 2,596
Total Operating
Expenses 5,374 5,266 15,147 14,124
OPERATING INCOME 171 592 337 1,697
INTEREST EXPENSE (998) (522) (2,605) (1,084)
INCOME (LOSS) BEFORE INCOME TAXES (827) 70 (2,268) 613
INCOME TAX PROVISION (CREDIT) (281) (30) (857) 5,492
NET INCOME (LOSS) $(546) $100 $(1,411) $(4,879)
Earnings Per Share
Basic $(0.04) 0.01 $(0.11) $(0.46)
Diluted (0.04) 0.01 (0.11) (0.46)
Shares Basic 12,679 12,493 12,617 10,702
Shares Diluted 12,679 12,602 12,617 10,702
Gas Production (Mmcf) 1,805 2,349 5,736 6,442
Oil Production (Mbo) 60 73 200 162
Equivalent Production (Mmcfe) 2,165 2,787 6,936 7,414
Unit Price Gas $2.44 $2.06 $2.17 $2.08
Unit Price Oil $17.35 $10.62 $13.28 $11.44
Unit Price Mcfe $2.51 $2.01 $2.17 $2.06
Average Costs ($ per Mcfe)
Lease Operating Expenses & Production
Taxes $0.13 $0.33 $0.19 $0.31
Depletion, Depreciation and
Amortization $2.06 $1.29 $1.64 $1.24
General and Administrative $0.29 $0.27 $0.35 $0.35
EBITDA $4,631 $4,188 $11,720 $10,911
Cash Flow $3,875 $3,666 $9,760 $9,827
Cash Flow/Share Basic $0.31 $0.29 $0.77 $0.92
Cash Flow/Share Diluted $0.31 $0.29 $0.77 $0.92
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