OKLAHOMA CITY, Aug. 15, 2001 (PRIMEZONE) -- Canaan Energy Corporation ("Canaan") (Nasdaq:KNAN) today announced financial results for the three and six month periods ended June 30, 2001.
RESULTS FOR THE THREE MONTHS ENDED JUNE 30, 2001
For the three months ended June 30, 2001, Canaan reported net earnings of $1.5 million, or $0.30 per share, on total revenues of $7.3 million. This compares with net earnings of $1.4 million, or $0.39 per share, on total revenues of $3.2 million for the three months ended June 30, 2000. Net earnings adjusted for consistent tax treatment, as more fully discussed below, would have been $0.9 million, or $0.24 per share for the three months ended June 30, 2000. Earnings for the second quarter of 2001 compared to these adjusted second quarter 2000 earnings would result in a $0.6 million or 66% increase.
In October 2000, Canaan completed the acquisition of eight affiliated limited partnerships ("Partnerships"), Indian Oil Company ("Indian"), a privately held oil and gas company based in Oklahoma City, Oklahoma, and Canaan Securities, Inc. ("CSI"), an unaffiliated broker/dealer, which owned an interest in the Partnerships. The acquisition of the Partnerships was accounted for as a reorganization of entities under common control in a manner similar to a pooling of interests, and the acquisitions of Indian and CSI were accounted for as purchases. Accordingly, the results of operations of the Partnerships have been included with Canaan's results for the first half of both 2001 and 2000. The results of operations of Indian and CSI have been included with Canaan's results only for the first half of 2001.
Revenues for the second quarter of 2001 increased 129% versus the second quarter of 2000, principally due to higher oil and gas prices, and to production increases as a result of the acquisition of Indian. The effect of increased revenues was partly offset by higher operating costs and additional general and administrative expenses attributable to a significant increase in Canaan's professional staff in anticipation of future growth in drilling and acquisition activities. Management believes that general and administrative expenses per unit of production will decline in future periods as the Company increases its production. Increased interest expense from bank debt assumed with the Indian acquisition further offset increases in revenues. Income tax expense increased $897,000 to $914,000 for the three months ended June 30, 2001 as compared to $17,000 for the same period of 2000. As previously discussed, results of operations for the Partnerships have been included for the entire three months ended June 30, 2000. However, any income tax liability associated with the operations of the Partnerships did not arise until the actual consummation of the transactions in October 2000. Had the transactions been completed on January 1, 2000, approximately $524,000 of additional income tax expense would have been recognized for the three month period ended June 30, 2000, resulting in net earnings of approximately $0.9 million or $0.24 per share.
Cash flows from operating activities before working capital changes increased 100% for the three months ended June 30, 2001 to $4.0 million versus $2.0 million for the three months ended June 30, 2000, principally due to higher oil and gas prices and increased production. EBITDA for the three months ended June 30, 2001 was $4.8 million compared to $2.2 million for the same period of 2000, a 117% increase.
RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2001
For the six months ended June 30, 2001, Canaan reported net earnings of $5.2 million, or $1.06 per share, on total revenues of $18.8 million. This compares with net earnings of $2.5 million, or $0.70 per share, on total revenues of $6.3 million for the six months ended June 30, 2000. Net earnings adjusted for consistent tax treatment, as more fully discussed below, would have been $1.6 million, or $0.44 per share for the six months ended June 30, 2000. Earnings for the first half of 2001 compared to these adjusted earnings for the first half of 2000 would result in a $3.6 million or 229% increase.
Revenues for the first half of 2001 increased 196% versus the first half of 2000, principally due to higher oil and gas prices, and to production increases as a result of the acquisition of Indian. The effect of increased revenues was partly offset by higher operating costs and additional general and administrative expenses attributable to a significant increase in Canaan's professional staff in anticipation of future growth in drilling and acquisition activities. Management believes that general and administrative expenses per unit of production will decline in future periods as the Company increases its production. Increased interest expense from bank debt assumed with the Indian acquisition further offset increases in revenues. Income tax expense increased to $3.2 million for the six months ended June 30, 2001 as compared to $26,000 for the same period of 2000. As previously discussed, results of operations for the Partnerships have been included for the entire six months ended June 30, 2000. However, any income tax liability associated with the operations of the Partnerships did not arise until the actual consummation of the transactions in October 2000. Had the transactions been completed on January 1, 2000, approximately $941,000 of additional income tax expense would have been recognized for the six month period ended June 30, 2000, resulting in net earnings of approximately $1.6 million or $0.44 per share.
Cash flows from operating activities before working capital changes increased 164% for the six months ended June 30, 2001 to $9.9 million versus $3.7 million for the six months ended June 30, 2000, principally due to higher oil and gas prices and increased production. EBITDA for the six months ended June 30, 2001 was $13.3 million compared to $4.1 million for the same period of 2000, a 225% increase.
MANAGEMENT COMMENT
Leo Woodard, Chairman and CEO of Canaan, commented, "Canaan's cash flow remains strong in the face of recently declining commodity prices, and should allow us to continue to internally finance our forecasted drilling expenditures for the remainder of 2001. The June 2001 increase in our bank credit line from $40 million to $45 million, along with a strong working capital position, provides us with the resources to pursue additional opportunities as they arise."
Canaan Energy Corporation is an independent oil and gas exploration and production company headquartered in Oklahoma City, Oklahoma. Canaan trades on the Nasdaq NMS under the symbol KNAN.
Forward-Looking Statement
This press release includes certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the company expects, believes or anticipates will or may occur in the future are forward-looking statements. They include statements regarding the company's drilling plans and objectives, related exploration and development costs, number and location of planned wells, reserve estimates and values, statements regarding the quality of the company's properties and potential reserve and production levels. These statements are based on certain assumptions and analysis made by the company in the light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes appropriate in the circumstances, including the assumption that there will be no material change in the operating environment for the company's properties and that there will be no material acquisitions or divestitures. Such statements are subject to a number of risks, including but not limited to commodity price risks, drilling and production risks, risks related to weather and unforeseen events, governmental regulatory risks and other risks, many of which are beyond the control of the company. Reference is made to the company's reports filed with the Securities and Exchange Commission for a more detailed disclosure of the risks. For all of these reasons, actual results or developments may differ materially from those projected in the forward-looking statements. The company assumes no obligation to update the forward-looking statements to reflect events or circumstances occurring after the date of the statement.
Following are selected financial and operating data for the three and six month periods ended June 30, 2001 and 2000 (in thousands, except per share data and as noted):
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
(unaudited) (unaudited)
Revenues:
Oil and natural gas sales $ 7,348 $ 3,211 $ 18,769 $ 6,332
Costs and expenses:
Lease operating 1,185 463 2,283 893
Production taxes 444 257 1,272 519
Depreciation, depletion
and amortization 1,673 594 3,398 1,217
General and
administrative expenses 1,066 324 2,146 881
Interest expense 704 174 1,534 331
--------- --------- --------- ---------
Total costs and expenses 5,072 1,812 10,633 3,841
--------- --------- --------- ---------
Other income,
principally interest 107 25 234 55
--------- --------- --------- ---------
Earnings before
income taxes 2,383 1,424 8,370 2,546
Income taxes 914 17 3,170 26
--------- --------- --------- ---------
Net earnings $ 1,469 $ 1,407 $ 5,200 $ 2,520
========= ========= ========= =========
Earnings per share:
Basic $ 0.30 $ 0.39 $ 1.06 $ 0.70
Diluted $ 0.30 $ 0.39 $ 1.05 $ 0.70
Weighted average
shares outstanding:
Basic 4,916,315 3,621,219 4,916,315 3,621,219
Diluted 4,977,251 3,621,219 4,959,652 3,621,219
Three Months Six Months Ended
Ended June 30, June 30,
------------------------------------------
2001 2000 2001 2000
--------- --------- --------- ---------
(unaudited) (unaudited)
Cash flows from operating
activities before working
capital changes $ 4,007 $2002 $ 9,866 $ 3,732
Cash flows from
operating activities 6,477 1,357 9,881 2,916
Cash flows from
investing activities (4,042) 772 (6,168) 399
Cash flows from
financing activities -- (1,668) -- (3,344)
EBITDA* 4,760 2,192 13,302 4,094
*EBITDA is defined as income or loss before interest, income taxes,
depreciation, depletion and amortization and impairment.
Oil production (MBbls) 46 29 89 75
Natural gas
production (MMcf) 1,560 897 3,245 1,784
Gas equivalent
production (MMcfe) 1,836 1,069 3,781 2,236
Average oil price (per Bbl)
before hedging contract
settlements $ 28.14 $ 26.16 $ 27.67 $ 24.04
Adjustment for hedging
contract settlements -- (5.70) -- (4.33)
--------- --------- --------- ---------
Average oil price (per Bbl) $ 28.14 $ 20.46 $ 27.67 $ 19.71
Average gas price (per Mcf)
before hedging
contract settlements $ 4.14 $ 3.28 $ 5.53 $ 2.82
Adjustment for hedging
contract settlements (0.27) (0.37) (0.52) (0.16)
--------- --------- --------- ---------
Average gas price (per Mcf) $ 3.87 $ 2.91 $ 5.01 $ 2.66
Average gas equivalent
price (per Mcfe) before
hedging contract
settlements $ 4.23 $ 3.45 $ 5.40 $ 3.06
Adjustment for hedging
contract settlements (0.23) (0.47) (0.44) (0.25)
--------- --------- --------- ---------
Average gas equivalent
price (per Mcfe) $ 4.00 $ 2.98 $ 4.96 $ 2.81
Operating Costs (per Mcfe):
Lease operating expense $ 0.65 $ 0.43 $ 0.60 $0.40
Production taxes 0.24 0.24 0.34 0.23
General and
administrative expense 0.58 0.30 0.57 0.39
Depreciation, depletion
and amortization -
oil & gas properties 0.89 0.56 0.88 0.54
Following is selected balance sheet information as of June 30, 2001
and December 31, 2000:
June 30, December 31,
2001 2000
-------- --------
ASSETS (unaudited)
Cash and cash equivalents $ 10,194 $ 6,482
Other current assets 7,993 7,671
-------- --------
Total current assets
18,187 14,153
-------- --------
Property and equipment, net 74,203 71,432
Other assets 155 188
-------- --------
Total assets $ 92,545 $ 85,773
======== ========
LIABILITIES and STOCKHOLDERS' EQUITY
Current liabilities 5,301 4,964
Long-term debt 33,964 33,964
Deferred income tax liability 11,749 10,514
Stockholders' equity 41,531 36,331
-------- --------
Total liabilities and
stockholders' equity $ 92,545 $ 85,773
======== ========
MBbls - thousand barrels
Mcf - thousand cubic feet
Mcfe - thousand cubic feet equivalent
MMcf - million cubic feet
MMcfe - million cubic feet equivalent