Party Time, This is not an endorsement, but here is a small independent who IMO is sitting upon a couple of pretty "stout" prospects, one in the Gulf of Mexico, the other in west Texas.
Now their management may or may not be capable of turning a profit when cash flow comes in but if you like to take an occasional small cap"flyer" this might be of interest to you....
Company Press Release
SOURCE: Titan Exploration, Inc.
Titan Exploration Announces Major Offshore Discovery, Record Production Levels, 1998 Results
MIDLAND, Texas, March 16 /PRNewswire/ -- Titan Exploration, Inc. (Nasdaq: TEXP - news) announced that based on volumetric estimates of zones penetrated in its offshore Gulf of Mexico Vermilion Block 253 discovery well, its independent consultants attributed 340 billion cubic feet of gas equivalents (''Bcfe'') of potentially recoverable reserves to the discovery. Titan is the operator and owns a 38.42% net revenue interest in the block. In addition, the Company's oil and gas production during 1998 was a record 41.7 Bcfe, an increase of 24.9% (8.3 Bcfe) over 1997 production levels of 33.4 Bcfe.
Proved Oil and Gas Reserves
The net present value of the Company's proved reserves based on Securities and Exchange Commission regulations (''SEC PV10'') at December 31, 1998, was $242.2 million as compared to the SEC PV10 value of $435.1 million at December 31, 1997. This 44.3% decrease in SEC PV10 value is primarily attributable to the decrease in commodity price levels realized for the Company's proved reserves as of December 31, 1998. Average realized prices for the Company's proved reserves as of December 31, 1998 were $9.49 per barrel (''Bbl'') of oil and $1.57 per thousand cubic feet of natural gas (''Mcfg''), compared to average realized prices for the Company's proved reserves as of December 31, 1997 of $16.11 per Bbl and $1.83 per Mcfg (reductions of 41.1% and 14.2% respectively). This significant deterioration in prices reduced both the economic life of the company's wells and its volumes of economically recoverable oil and gas reserves.
As of December 31, 1998, the Company's estimated total proved reserves were 23.0 million barrels of oil (''Mmbo'') and 332.0 billion cubic feet of gas (''Bcfg''), or 470.0 Bcfe. As of December 31, 1997, the comparable volumes were 30.3 Mmbo and 345.4 Bcfg respectively (527.0 Bcfe), or reductions of 7.3 Mmbo and 13.4 Bcfg (57.0 Bcfe) respectively. This decrease is primarily due to oil and gas wells reaching an earlier economic limit as a result of the lower commodity prices. The Company maintains that the reserves lost due to lower commodity prices are still in the ground and higher commodity price levels should allow the Company to recover those lost reserves. In addition, no proved reserves attributable to the Company's Vermilion Block 253 discovery were included in the Company's 1998 proved reserves. Should the development of the Vermilion Block 253 discovery prove successful, the Company's proved reserve additions, attributable to this discovery, during 1999 could be as high as 131 Bcfe.
Natural gas represents approximately 71% of total proved reserves and the Company operates approximately 83% of the SEC PV10 value of its properties.
1998 Full Year Results
Oil and gas production during 1998 was a record 41.7 Bcfe, an increase of 24.9% (8.3 Bcfe) over 1997 production levels of 33.4 Bcfe. On a daily average basis, the Company produced 114.2 million cubic feet of gas equivalents (''Mmcfe'') per day during 1998 as compared to 91.5 Mmcfe per day during 1997. The production increase was primarily attributable to production associated with the 1997 acquisitions closed in December 1997, partially offset by loss of production attributable to unanticipated influx of water in one of the Company's west Texas wells. Earnings before interest, taxes, exploration and abandonment costs and non-cash charges (''EBITDAX'') for the year was $31.6 million ($0.81 per share), a decrease of 32.5% ($15.2 million) from the record 1997 level of $46.8 million ($1.38 per share). The decrease was primarily attributable to significantly decreased commodity price levels and increased general and administrative (''G&A'') and production expense (''LOE'') levels attributable primarily to the acquisitions closed in December 1997. Assuming average 1997 commodity price levels, 1998 EBITDAX would have been approximately $49.7 million.
The Company reported a net loss of $47.2 million ($1.22 per share) on total revenues of $72.9 million for 1998 as compared to a net loss of $33.5 million ($0.99 per share) on total revenues of $73.8 million in 1997. The 1998 results were primarily affected by the above mentioned significantly decreased commodity price levels and; (a) increased LOE of $10.8 million due primarily to the high LOE levels of the 1997 acquisitions, (b) increased G&A of $3.8 million, reflecting a full years effect of increased staffing as a result of the Company's growth in 1997, (c) increase in exploration and abandonment costs of $14.5 million, primarily attributable to the Company's non-cash impairment of its Webb County, Texas prospect as a result of below- expectation drilling results, (d) increased DD&A expense of $7.1 million due to the higher per unit costs of the 1997 acquisitions coupled with a decrease in total proved reserves, (e) increase in interest expense of $7.1 million primarily as a result of funding debt associated with the 1997 acquisitions and the Company's 1998 capital expenditures and treasury stock purchases, and (f) a lower than statutory rate of federal income tax benefit resulting from the recording of a $14.0 million valuation allowance related to the Company's deferred tax assets, in the fourth quarter of 1998.
Earnings in 1998 and 1997 were also adversely affected by non-cash impairment charges. For 1998, the Company recognized impairment charges totaling $25.7 million, resulting from lost reserves associated with depressed commodity price levels, below expectation developmental drilling results and downhole mechanical problems with certain properties. In 1997, the Company recognized impairment charges totaling $69.0 million resulting primarily from significantly depressed commodity prices.
Fourth Quarter 1998 Results
In the fourth quarter of 1998 the Company produced 9.9 Bcfe, a .8 Bcfe increase over production of 9.1 Bcfe for the comparable 1997 period. On a daily average basis, the Company produced 107.7 Mmcfe per day during the fourth quarter of 1998 as compared to 98.6 Mmcfe per day during the fourth quarter of 1997. The production increase was primarily attributable to production associated with the 1997 acquisitions closed in December 1997, partially offset by loss of production attributable to unanticipated influx of water in one of the Company's west Texas wells.
EBITDAX for the fourth quarter ended December 31, 1998 was $7.2 million ($0.19 per share), a decrease of 51.4% ($7.6 million) from the record fourth quarter 1997 level of $14.8 million ($.44 per share). The decrease was primarily attributable to significantly decreased commodity price levels and increased LOE levels attributable primarily to the acquisitions closed in December 1997. Assuming average 1997 commodity price levels, 1998 EBITDAX would have been approximately $14.7 million. A net loss of $31.6 million ($0.83 per share) on total revenues of $15.7 million was recorded for the quarter ended December 31, 1998. This compares with a net loss of $40.0 million ($1.18 per share) on total revenues of $21.7 million for the quarter ended December 31, 1997. The effect of increased production on total revenues was more than offset by the significant decrease in commodity prices ($.80 per Mcfe) compared to those realized in 1997. The increase in 1998 production, assuming 1997 prices, would have resulted in additional revenues to the Company of $2.0 million while the decrease in prices reduced actual revenues by $8.0 million. The decrease in the fourth quarter 1998 net loss as compared to the comparable period in 1997, despite a reduction in total revenues due to significantly reduced commodity price levels, is primarily due to (a) a smaller impairment in the fourth quarter of 1998 ($12.5 million) as compared to the 1997 fourth quarter impairment ($69.0 million), (b) an increased level of exploration and abandonment costs ($11.5 million) in the fourth quarter of 1998, due principally to the abandonment of the Company's Webb County acreage, as compared to the 1997 fourth quarter level of exploration and abandonment costs ($1.7 million) and (c) a lower than statutory rate of federal income tax benefit resulting from the recording of a $14.0 million valuation allowance related to the Company's deferred tax assets, in the fourth quarter of 1998.
Operational Highlights
Offshore
The Company previously announced that the OCS-G 17912 Well No. 1 on Vermilion Block 253 has been drilled to a true vertical depth of 11,270 feet, and preliminary log calculations indicated approximately 900 feet (true vertical depth) of oil and gas pay had been encountered in sixteen sands. The Company believes this to be a significant discovery. The Company's engineering consultants have preliminarily attributed, based on volumetric estimates of zones penetrated in the discovery well, approximately 340 Bcfe of recoverable reserves to the discovery, of which the Company's net interest is approximately 131 Bcfe. The Company is the operator of the block and has a 50% working interest in the well. Jack Hightower, the Company's Chairman and CEO said, ''This discovery may well be one of the larger recent discoveries on the shelf. Although we are very excited about these shows and the potential of this discovery, production testing and additional drilling is necessary before we can more accurately determine the effect on future cash flows and reserves.'' The Company anticipates, barring unforeseen problems, that initial production from this discovery is possible during the latter part of 1999. The Company currently plans to commence drilling a second well on the block during the second quarter of 1999.
The Vermilion Block 252 F-4 well was drilled by the Company to a depth of 9,975 feet and completed the well as a dual flowing well from a gas condensate zone at approximately 8,600 feet and an oil bearing zone at approximately 9,025 feet. The well produces approximately 600 Bbls of condensate per day and 500 Mcfg per day[BW1]. The oil zone is awaiting pipeline construction to an adjacent platform and production from this zone is expected to commence during the third quarter of 1999. The Company is the operator of the block and owns a 41.25% working interest.
West Texas
The Company has entered into an exploitation joint venture with the Permian Gas Business Unit of Mobil Exploration & Producing U.S. Inc. (MEPUS). The new venture, named Paragon, will conduct a proprietary 3-D seismic program covering approximately 600 square miles in two phases of 300 square miles each in Culberson and Reeves counties in the Permian Basin of West Texas.
The venture has acquired approximately 370,000 acres of leasehold interests to date. Titan owns a 50% working interest in the acreage and was substantially carried in the acquisition of this leasehold position. Additionally, MEPUS will pay 100% of the costs to acquire the Phase I seismic program and, if the parties elect to acquire the Phase II seismic program, MEPUS will pay approximately 75% of the costs to acquire this additional 300 miles. Titan will pay 25% of the costs of the Phase II seismic program and will own, along with MEPUS, the proprietary 3-D seismic data over the entire 600 square miles. The costs of all wells drilled and subsequent acreage acquired will be shared equally by MEPUS and Titan. Once Titan has recovered its share of costs paid, MEPUS will share in Titan's revenue until such time as it has recovered its share of all costs. Subsequently, MEPUS and Titan will share all costs and production equally.
To date, approximately 200 miles of the Phase I seismic program has been acquired. Based upon the results of the initial phase, the parties may commit to the Phase II seismic program which will cover the remaining 300 square miles. It is anticipated that the acquisition of all 600 square miles of seismic data will be completed by mid-2000. Upon completion, the program should represent one of the largest proprietary contiguous 3-D seismic acquisition programs conducted within the onshore lower 48 states. Successful prospect development is expected to result in drilling activity beginning late in the first half of 1999 and continue as quality prospects are identified.
The C.B. Fasken No. 3 was completed in the fourth quarter of 1998 as a horizontal well in the Devonian formation at approximately 11,500 feet in the Magutex Field in Andrews County, Texas and is currently producing approximately 270 Bbls of oil and 125 Mcfg per day. Provided the well continues to perform at these rates and with improved oil prices, the Company plans three additional horizontal lateral wells on the western flank of this field. Additionally, the Company commenced a pilot water injection program into the Devonian formation to verify waterflood recovery possibilities, which, if successful, could add as much as 8 Mmbo to the Company's proved reserves. Titan is the operator and owns a 99% working interest in this well.
The Company recently completed the H.H. Johnson No. 1 and the Cleveland No. 1 in the MiVida Cherry Canyon Field in Reeves County, Texas. The Company believes there are four Cherry Canyon sand intervals to be exploited through additional drilling in the field. Current production from the H.H. Johnson No. 1 is approximately 450 Mcfg per day from one of the four sand intervals of interest. The Cleveland No. 1 is currently producing approximately 2.8 Mmcfg per day from two different sand intervals not being produced in the H.H. Johnson well. The Company operates both wells and its working interest varies from 68% to 100% over its MiVida leases. A total of four wells to further develop the Cherry Canyon Field should be commenced during the first half of 1999. If these wells are successful, the Company currently plans to drill up to five additional MiVida Cherry Canyon Field wells during 1999.
Also in West Texas, in the Dollarhide East Field, the Company has recently reworked three existing wellbores to initiate waterflood recovery from the field. The work is an extension to the south from the successful Devonian waterflood occurring in the East Dollarhide Devonian Unit. A fourth well is expected to be converted to injection and response is expected in late 1999.
Austin County, Texas
The Eller No. 1 has been completed as a gas discovery well and is currently producing approximately 2.3 Mmcfg per day net to the Company's interest. Titan owns a 33% working interest in this non-operated, dual horizontal, deep, downdip, overpressured Austin Chalk completion.
Following completion of the Eller, Titan participated with a 9%, non-operated working interest in the Rains Trust No. 1 well, an east offset to the Eller. The Rains Trust No. 1 was completed as a single lateral well and placed on production at the beginning of March 1999. The well is currently producing approximately 39 Mmcfg per day on a 33/64 choke with a flowing tubing pressure of 3,250 pounds per square inch.
Titan is participating with a 22% non-operated working interest in the Dierking No. 1 currently drilling as a direct east offset to the Rains Trust No. 1 discussed above. This well is planned to have dual opposing horizontal laterals. If the well is successful, production should commence during the second quarter of 1999.
Titan is participating with a 41% non-operated interest in the Titan No. 1 currently drilling approximately 2 miles to the southwest of the Eller. A second lateral is being drilled at an approximate 60-degree angle to the first lateral. If this well is successful, production should commence during the second quarter of 1999.
Should the Company's Austin County drilling continue to be successful, the Company plans to drill as many as three additional Austin County wells during 1999.
Webb County, Texas
Titan drilled and abandoned the Jalapeno No. 1 in Webb County, Texas as a dry hole. This exploratory wildcat was a test in one of five prospect areas located on the Company's approximately 200,000 acres in Webb County. The Company's first Webb County exploratory test, the Habanero No. 1, is currently producing approximately 155 Mcfg per day. Given the results of its first two exploratory tests, the Company has impaired its Webb County acreage and likely will not drill any additional Webb County exploratory wells during 1999.
Disposition of Assets
In the fourth quarter of 1998, the Company approved a plan to dispose of non-strategic assets, including its Gulf of Mexico, Gulf Coast and certain Permian Basin assets. The Company's reason to dispose of these assets varied depending on the portfolio of assets being considered. The disposition will allow the Company to (a) realize full value for certain assets whose value is not fully reflected in the public valuation of the Company, (b) redeploy capital to potentially higher return projects or acquisitions, (c) invest in projects that will accelerate cash flow to the Company, (d) eliminate certain administrative costs and (e) reduce the Company's debt obligations. The Company will not ultimately sell assets for which adequate consideration is not offered. Subject to an adequate offer, the Company expects to dispose of these assets by the end of the third quarter of 1999.
As a result of its 1999 planned dispositions, the Company expects that its G&A in 1999, assuming no significant acquisitions, will be reduced on a absolute and per unit basis. The full effect of the G&A reductions may not be visible until the third quarter of 1999.
Outlook for 1999
Pending improved commodity price levels, the Company plans on beginning 1999 with a conservative capital-spending program. During the year, spending levels will decrease or increase depending on the success of the Company's development activities in Vermilion Block 253, Austin County and the MiVida Cherry Canyon Field. Additional drilling success in Paragon and MiVida may provide increased cash flows for a more aggressive capital plan. Details regarding the Company's 1999 Capital Budget will be announced shortly. |
