OKLAHOMA CITY, May 15, 2002 (PRIMEZONE) -- Canaan Energy Corporation ("Canaan") (Nasdaq:KNAN) today announced financial results for the three months ended March 31, 2002.
Sharply lower gas prices and nonrecurring general and administrative expenses combined to result in a first quarter loss of $0.6 million, or $0.15 per share, on total revenues of $4.6 million. These results compared with net earnings of $3.7 million, or $0.76 per share, on total revenues of $11.4 million for the three months ended March 31, 2001.
Revenues for the first quarter of 2002 decreased 60% versus the first quarter of 2001, primarily due to a 63% decrease in natural gas prices. Production measured on a gas equivalent basis declined 4%, due in part to severe weather in February 2002 that curtailed a portion of the Company's production. Net earnings were further reduced by the recognition of a $561,000 contract fulfillment obligation to a former officer of the Company who was terminated in March 2002. As previously announced in April 2002, the Company has entered into an agreement to merge with Chesapeake Energy Corporation for $18 per share in cash. The Company incurred charges of $150,000 to an investment banking firm for representation and financial advice relating to this transaction during the first quarter of 2002. Production taxes were down in the first quarter of 2002 compared to the first quarter of 2001 by $562,000 or 68% as a result of lower oil and gas sales. Interest expense decreased by $326,000 or 39% as a result of lower interest rates.
Income taxes were a $0.4 million benefit for the three months ended March 31, 2002 as compared to a $2.3 million expense for the same period of 2001. The effective tax rates were comparable for the two periods.
Cash flows from operating activities before working capital changes decreased 88% for the three months ended March 31, 2002 to $0.7 million versus $5.9 million for the three months ended March 31, 2001, due to lower earnings as previously discussed. EBITDA for the three months ended March 31, 2002 was $1.2 million compared to $8.5 million for the same period of 2001, an 87% decrease.
Management Comment
Leo Woodard, Chairman and CEO of Canaan, commented: "The most significant event of 2002 for Canaan shareholders has without question been the agreement to merge with Chesapeake Energy Corporation. This transaction, which delivers $18 per share in cash to our shareholders, will provide the investment return we intended for our former limited partners when they exchanged their limited partnership units for Canaan stock in October 2000, and maximizes value for all shareholders."
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 month periods ended March 31, 2002 and 2001 (in thousands, except per share data and as noted):
Three Months Ended
March 31,
-----------------------
2002 2001
--------- ----------
(unaudited)
Revenues:
Oil and natural gas sales $ 4,605 $ 11,421
Costs and expenses:
Lease operating 1,158 1,098
Production taxes 266 828
Depreciation, depletion and amortization 1,689 1,725
General and administrative expenses 2,046 1,080
Interest expense 504 830
--------- ----------
Total costs and expenses 5,663 5,561
Other income, principally interest 18 126
--------- ----------
Earnings before income taxes (1,040) 5,987
Income tax expense (benefit) (395) 2,256
--------- ----------
Net earnings (loss) $ (645) $ 3,731
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Earnings per share:
Basic $ (0.15) $ 0.76
Diluted $ (0.15) $ 0.76
Weighted average shares outstanding:
Basic 4,353,646 4,916,315
Diluted 4,353,646 4,930,655
Three Months Ended
March 31,
-----------------------
2002 2001
--------- ----------
(unaudited)
Cash flows from operating activities
before working capital changes $701 $5,859
Cash flows from operating activities 698 3,404
Cash flows used in investing activities (1,408) (2,127)
Cash flows from financing activities 500 ---
EBITDA* 1,153 8,542
* EBITDA is defined as income or loss before interest, income
taxes, depreciation, depletion and amortization and impairment.
Oil production (MBbls) 43 43
Natural gas production (MMcf) 1,609 1,685
Gas equivalent production (MMcfe) 1,866 1,944
Average oil price (per Bbl) before
hedging contract settlements $ 20.65 $ 25.37
Adjustment for hedging
contract settlements -- --
--------- ----------
Average oil price (per Bbl) $ 20.65 $ 25.37
Average gas price (per Mcf) before
hedging contract settlements $ 2.26 $ 6.81
Adjustment for hedging
contract settlements .01 (0.74)
--------- ----------
Average gas price (per Mcf) $ 2.27 $ 6.07
Average gas equivalent price
(per Mcfe) before hedging
contract settlements $ 2.43 $ 6.47
Adjustment for hedging
contract settlements -- (0.64)
--------- ----------
Average gas equivalent
price (per Mcfe) $ 2.43 $ 5.83
Operating Costs (per Mcfe):
Lease operating expense $ 0.62 $ 0.56
Production taxes 0.14 0.43
General and administrative expense 1.10 0.56
Depreciation, depletion and
amortization - oil & gas properties 0.89 0.87
Following is selected balance sheet information as of March 31,
2002 and December 31, 2001:
March 31, December 31,
2002 2001
------- -------
(unaudited)
ASSETS
Cash and cash equivalents $ 2,370 $ 2,580
Other current assets 6,274 6,340
------- -------
Total current assets 8,644 8,920
------- -------
Property and equipment, net 66,171 66,452
Other assets 128 148
------- -------
Total assets $74,943 $75,520
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LIABILITIES and
STOCKHOLDERS' EQUITY
Current liabilities $ 4,098 $ 4,966
Long-term debt 42,765 42,265
Fair value of derivative
instruments 1,073 --
Other long-term liabilities 436 --
Deferred income tax liability 7,179 7,587
Stockholders' equity 19,392 20,702
------- -------
Total liabilities and
stockholders' equity $74,943 $75,520
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MBbls - thousand barrels
Mcf - thousand cubic feet
Mcfe - thousand cubic feet equivalent
MMcf - million cubic feet
MMcfe - million cubic feet equivalent