EARNINGS / Lower Prices Impact Pogo's Second Quarter; Continued
Success Seen In Gulf Of Mexico, Thailand; "Excellent"
1999 - 2000 Production Levels Expected; Quarterly
Dividend Declared
NYSE SYMBOL: PPP
JULY 28, 1998
HOUSTON, TEXAS--Pogo Producing Company (NYSE:PPP) reported a net
loss of ($2,668,000), or ($0.07) per share, for the second quarter
of 1998, compared to net income of $9,174,000 or $0.27 per share,
for the second quarter of 1997.
Paul G. Van Wagenen, Pogo's chairman and chief executive, said,
"Significantly lower crude oil prices received during the second
quarter accounted for the loss."
Second quarter 1998 revenues totaled $52,663,000, compared to
revenues of $76,740,000 recorded during the same period of 1997.
Discretionary cash flow for the second quarter of 1998 was
$26,858,000, contrasted with $43,913,000 for the second quarter a
year ago.
The net loss for the first half of 1998 was ($2,484,000), or
($0.07) per share, compared to net income of $21,992,000 or $0.66
per share, recorded in the first six months of 1997. Revenues in
the first half of 1998 totaled $113,393,000, contrasted with
$138,054,000 a year earlier. Discretionary cash flow was
$59,886,000 in the first six months of 1998, compared to
$90,154,000 for the first half of 1997.
Pogo declared a dividend of $0.03 (three cents) per share of
common stock to be paid August 28, 1998, to shareholders of record
as of August 14, 1998.
Mr. Van Wagenen said, "It is worth noting that Pogo achieved
record breaking production rates in 1997 and still ended the year
with its highest proven hydrocarbon reserves ever. We expect
excellent production levels in the second half of 1999 and in 2000
based on Pogo's 1998 $230 million capital and exploration program,
the most active in many years. Exploration and development
activity will continue aggressively in the Gulf of Thailand, the
offshore Gulf of Mexico, the onshore Gulf Coast area, as well as
the Permian Basin of West Texas and New Mexico. Evaluation and
purchase of producing properties at the right price are also an
important component of increasing Pogo's oil and gas reserves base
at the lowest possible cost."
Total liquid hydrocarbon sales, including oil, condensate and
plant products, averaged 18,369 barrels per day in the second
quarter of 1998, compared to an average of 20,997 barrels per day
in the second quarter of 1997. For the first half of 1998,
however, liquids sales averaged 19,375 barrels per day, up from
18,122 barrels per day for the first half of 1997. Natural gas
volumes averaged 165.5 million cubic feet per day (mmcf/d) in the
second quarter and 176.6 mmcf/d per day in the first half of 1998,
compared to an average of 216.8 mmcf/d in the second quarter and
173.5 mmcf/d in the first half of 1997.
Crude and condensate prices for the second quarter fell sharply to
an average of $13.38 per barrel, down significantly from last
year's second quarter average price of $18.35 per barrel. Oil
prices in the first half of this year have averaged $13.81 per
barrel, down from an average of $20.14 per barrel realized in the
first half of 1997. Natural gas prices have declined less
dramatically in that same period, averaging $2.07 Mcf (thousand
cubic feet) in the second quarter, and $2.08 per Mcf for the first
half of 1998, compared to realizations of $2.14 per Mcf in the
second quarter, and $2.34 per Mcf in the first half of last year.
The Western (Permian Basin) Division
Pogo and its industry partners have now drilled 360 successful
Permian Basin wells, principally located in southeastern New
Mexico, in a project Pogo began in the fourth quarter of 1989. The
play has an outstanding success rate of over 95 percent. Seven
wells were drilled and all of them were successfully completed
during the second quarter of 1998, giving Pogo 17 producers out of
18 wells drilled to date in 1998. Pogo plans 25 more Permian Basin
wells during the rest of this year.
The Offshore Gulf of Mexico
Pogo's Offshore Division participated in five exploratory wells
during the first half of 1998. Four of these wells discovered new
reserves. One offshore well is currently drilling and at least six
more wells are planned in 1998.
The Ship Shoal Block 331 No. A-4 well, drilled in the second
quarter, tested two zones at a combined rate of 8.34 mmcf/d and
will start production in August, 1998, from existing production
facilities. Pogo is the operator and has a 35 percent working
interest ownership.
The Viosca Knoll Block 780 No. 4 well, Viosca Knoll Block 780 No.
4st well, and Viosca Knoll Block 824 No. 1 well found hydrocarbon
bearing zones which will be developed from the Spirit platform
located on Viosca Knoll Block 780. These wells will begin
production in early 2000. Pogo's working interest in this project
is 7.36 percent.
Recompletion work on wells at the North Lighthouse Point Field has
increased production from less than 1 mmcf/d, to a rate of 5
mmcf/d plus 300 barrels of oil per day. Production is currently
constrained by pipeline capacity, but sales are expected to
increase to approximately 8 mmcf/d and 600 barrels per day after
installation of a larger pipeline next quarter. Pogo is the
operator and holds a 50 percent working interest ownership.
Fabrication of Pogo's Main Pass Block 226 production platform has
reached completion and will soon be installed, with first
production expected in September, 1998. Pogo's working interest is
50 percent.
Construction of the Viosca Knoll Block 823 production facility has
begun, with installation anticipated for October, 1999, and first
production early in 2000. Pogo has a 10.8 percent working interest
ownership in this, the fourth largest fixed-leg platform in the
world. It is the Company's first deep-water endeavor.
Construction is also proceeding on Pogo's second deep-water
success, Garden Banks Block 367. Fabrication of subsea production
equipment has begun with installation anticipated in the second
quarter of 1999. Pogo has a 25 percent working interest ownership
in this block.
The Onshore (Gulf Coast) Division
The Company's Onshore Division has drilled six wells so far this
year (five of which were successful) and has at least 17 more
wells planned for the year.
At the Buhler Perkins Prospect in Calcasieu Parish, Louisiana,
Pogo and its industry partners have brought in two second quarter
Hackberry discoveries, the 20-1 well which tested at 1.5 mmcf/d
and the Palvest No. 1 well which also tested at 1.5 mmcf/d. Pogo
holds 23 to 33 percent working interests in the Buhler Perkins
area.
The Neumin Production No. 1 well at the Vinton Prospect (Calcasieu
Parish, Louisiana) was drilled and logged 90 net feet of oil and
gas sands. Pogo owns a 34 percent working interest in this well.
The Lopeno Field in Zapata County, Texas continues to grow, with
two new second quarter wells, the Guerra 5-A well and the Ramirez
No. 6 well, discovering new reserves for the field.
The Gulf of Thailand
-- Tantawan Field
The Tantawan Field, which began producing in February, 1997,
continues to produce from four platforms at an average gross daily
rate of over 7,400 barrels of crude oil and condensate, and 90
million cubic feet of natural gas per day. A fifth platform, the
"E" platform, is presently expected to be on production at
approximately mid-year 1999, and further Tantawan platforms will
be set as and when more successful exploration and development
drilling is completed. An in-fill well program at Tantawan has now
begun and will continue at least into the fourth quarter. At that
time, the rig will move to the Benchamas area to begin delineation
and development operations there.
-- Benchamas and Maliwan Fields
Mr. Van Wagenen said, "Exploratory and appraisal drilling is
proceeding extremely well at the other fields discovered in the
Gulf of Thailand, and development will continue at a steady pace."
Pogo and its joint venture partners have successfully drilled and
tested various other discoveries on the large Thailand concession.
A 30-year production license covers approximately 102,000 acres of
the Benchamas Field, where 22 successful wells have already been
drilled. Operations are now underway for the Benchamas field to
begin producing from the first two Benchamas platforms late in the
summer of 1999.
Discovery wells were reported earlier on the new 91,000 acre
Maliwan structure on Block B8/32, and a 30-year production license
was awarded by the Thailand government in 1997. Pogo and its
partners expect to resume exploratory and appraisal drilling on
Maliwan perhaps as soon as this fall, after initial exploratory
drilling is done at the newest prospect, Jarmjuree.
-- The Jarmjuree Prospect
Beginning in September, at least three, and perhaps as many as
five, consecutive wildcat wells will be drilled on the Jarmjuree
exploration area. This area covers over 200,000 acres adjacent to
the Company's other Gulf of Thailand fields.
Arch Petroleum Merger Being Finalized
In May, 1998, Pogo and Arch Petroleum Inc. (NASDAQ:ARCH) entered
into a definitive agreement to merge in a tax-free stock for stock
transaction by which Arch will become a wholly owned subsidiary of
Pogo. This merger is expected to become final in August, 1998.
/T/
A summary of unaudited financial results follow, stated in thousands,
except per share amounts:
Three Months Ended Six Months Ended
June 30, June 30,
1998 1997 1998 1997
------ ------ ------ ------
(Unaudited) (Unaudited)
Natural gas
Prices per Mcf $ 2.07 $ 2.14 $ 2.08 $ 2.34
Production,
Mcf per day 165,475 216,841 176,618 173,508
Crude Oil and Condensate
Prices per barrel $ 13.38 $ 18.35 $ 13.81 $ 20.14
Production,
barrels per day 16,451 16,457 16,277 15,187
Liquids production,
barrels per day 18,369 20,997 19,375 18,122
Revenues $ 52,663 $ 76,740 $113,393 $138,054
Net income (loss) $ (2,668) $ 9,174 $ (2,484) 21,992
Earnings (loss) per share:
Basic $ (0.07) $ 0.27 $ (0.07) $ 0.66
Diluted $ (0.07) $ 0.26 $ (0.07) $ 0.62
Discretionary
Cash Flow(a) $ 26,858 $ 43,913 $ 59,886 $ 90,154
Weighted average number
of common stock and
potential common stock
outstanding
Basic 37,560 33,369 36,353 33,359
Diluted 37,560 38,039 36,353 38,051
(a) Discretionary cash flow is net cash provided by operating
activities before changes in operating assets and liabilities and
exploration expenses.
/T/
Pogo Producing Company explores for, develops and produces oil and
natural gas. Headquartered in Houston, Pogo owns interests in 100
federal and state lease blocks offshore from Louisiana and Texas
in the Gulf of Mexico. Pogo also owns approximately 212,000 gross
leasehold acres in major oil and gas provinces onshore in the
United States and approximately 734,000 gross concession acres in
the Kingdom of Thailand. After the Pogo/Arch merger, Pogo will own
approximately 378,000 gross onshore leasehold acres in the U.S.,
approximately 142,000 gross acres in Canada, in addition to the
aforementioned Gulf of Mexico and Thailand acreage.
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