OKLAHOMA CITY, Nov. 13, 2001 (PRIMEZONE) -- Canaan Energy Corporation ("Canaan") (Nasdaq:KNAN) today announced financial results for the three and nine month periods ended September 30, 2001.
RESULTS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
Lower gas prices and nonrecurring general and administrative expenses combined to result in a third quarter loss of $0.3 million, or $0.07 per share, on total revenues of $4.5 million. This compares with net earnings of $1.5 million, or $0.42 per share, on total revenues of $3.6 million for the three months ended September 30, 2000. Net earnings adjusted for consistent tax treatment, as more fully discussed below, would have been $0.9 million, or $0.26 per share for the three months ended September 30, 2000. Earnings for the third quarter of 2001 compared to these adjusted third quarter 2000 earnings would result in a $1.2 million or 133% decrease.
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 nine months of both 2001 and 2000. The results of operations of Indian and CSI have been included with Canaan's results only for the first nine months of 2001.
Revenues for the third quarter of 2001 increased 26% versus the third quarter of 2000, principally due to production increases as a result of the acquisition of Indian, and offset by a decrease in natural gas prices. The effect of increased revenues was negated 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. General and administrative expenses for the period also contained approximately $0.4 million in nonrecurring charges. 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 taxes were a $197,000 benefit for the three months ended September 30, 2001 as compared to a $6,000 expense for the same period of 2000. As previously discussed, results of operations for the Partnerships have been included for the entire three months ended September 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 $570,000 of additional income tax expense would have been recognized for the three month period ended September 30, 2000, resulting in net earnings of approximately $0.9 million or $0.26 per share.
Cash flows from operating activities before working capital changes increased 70% for the three months ended September 30, 2001 to $3.7 million versus $2.2 million for the three months ended September 30, 2000, principally due to increased production from the Indian acquisition and $1.1 million in income tax refunds, which were offset by lower gas prices. EBITDA for the three months ended September 30, 2001 was $1.7 million compared to $2.4 million for the same period of 2000, a 29% decrease. Lower gas prices and increased general and administrative expenses, including the nonrecurring portion, as previously discussed, were the primary contributors to the decrease.
RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
For the nine months ended September 30, 2001, Canaan reported net earnings of $4.9 million, or $0.99 per share, on total revenues of $23.3 million. This compares with net earnings of $4.0 million, or $1.11 per share, on total revenues of $9.9 million for the nine months ended September 30, 2000. Net earnings adjusted for consistent tax treatment, as more fully discussed below, would have been $2.5 million, or $0.70 per share for the nine months ended September 30, 2000. Earnings for the first nine months of 2001 compared to these adjusted earnings for the first nine months of 2000 would result in a $2.4 million or 93% increase.
Revenues for the first nine months of 2001 increased 135% versus the first nine months 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. General and administrative expenses for the period contained approximately $0.4 million in nonrecurring charges. 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 $3.0 million for the nine months ended September 30, 2001 as compared to $32,000 for the same period of 2000. As previously discussed, results of operations for the Partnerships have been included for the entire nine months ended September 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 $1.5 million of additional income tax expense would have been recognized for the nine month period ended September 30, 2000, resulting in net earnings of approximately $2.5 million or $0.70 per share.
Cash flows from operating activities before working capital changes increased 130% for the nine months ended September 30, 2001 to $13.6 million versus $5.9 million for the nine months ended September 30, 2000, principally due to higher oil and gas prices and increased production from the Indian acquisition and from $1.1 million in income tax refunds. EBITDA for the nine months ended September 30, 2001 was $15.0 million compared to $6.4 million for the same period of 2000, a 132% increase.
MANAGEMENT COMMENT
Leo Woodard, Chairman and CEO of Canaan, commented, "Canaan's estimated 2001 drilling expenditures have been revised upward from $11.5 million to $14.8 million, further underscoring our commitment to the Company's business plan. Our working capital position remains near its historical high for 2001, and should allow us to internally finance our forecasted drilling expenditures for the remainder of the year. This strong working capital position coupled with our available bank credit provides us with a means to take advantage of the growth opportunities arising in the current energy environment."
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 nine month periods ended September 30, 2001 and 2000 (in thousands, except per share data and as noted):
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
---------- ---------- ---------- ----------
(unaudited) (unaudited)
Revenues:
Oil and natural
gas sales $ 4,493 $ 3,561 $ 23,262 $ 9,893
Costs and expenses:
Lease operating 1,079 410 3,363 1,303
Production taxes 255 310 1,527 829
Depreciation,
depletion
and amortization 1,638 657 5,035 1,874
General and
administrative
expenses 1,556 507 3,701 1,387
Interest expense 594 189 2,128 520
---------- ---------- ---------- ----------
Total costs
and expenses 5,122 2,073 15,754 5,913
---------- ---------- ---------- ----------
Other income,
principally
interest 82 27 316 81
Earnings before
income taxes (547) 1,515 7,824 4,061
Income taxes (197) 6 2,973 32
---------- ---------- ---------- ----------
Net earnings $ (350) $ 1,509 $ 4,851 $ 4,029
========== ========== ========== ==========
Earnings per
share:
Basic $ (0.07) $ 0.42 $ 0.99 $ 1.11
Diluted $ (0.07) $ 0.42 $ 0.98 $ 1.11
Weighted average
shares
outstanding:
Basic 4,916,183 3,621,219 4,916,315 3,621,219
Diluted 4,916,183 3,621,219 4,958,228 3,621,219
Three Months Ended Nine Months Ended
September 30, September 30,
2001 2000 2001 2000
------- ------- -------- -------
(unaudited) (unaudited)
Cash flows from
operating activities
before working
capital changes $ 3,712 $ 2,180 $ 13,579 $ 5,913
Cash flows from
operating activities 1,382 2,305 11,264 5,221
Cash flows from
investing activities (4,906) (397) (11,075) 2
Cash flows from
financing activities (17) (544) (17) (3,888)
EBITDA(a) 1,685 2,361 14,987 6,455
Oil production (MBbls) 44 31 133 96
Natural gas
production (MMcf) 1,516 890 4,761 2,674
Gas equivalent
production (MMcfe) 1,781 1,074 5,562 3,249
Average oil price
(per Bbl) before
hedging contract
settlements $ 24.76 $ 29.45 $ 26.71 $ 29.00
Adjustment for hedging
contract settlements -- (8.01) -- (5.98)
------- ------- -------- -------
Average oil price
(per Bbl) $ 24.76 $ 21.44 $ 26.71 $ 23.02
Average gas price
(per Mcf) before
hedging contract
settlements $ 2.24 $ 4.22 $ 4.49 $ 3.28
Adjustment for hedging
contract settlements -- (0.96) (0.35) (0.41)
------- ------- -------- -------
Average gas price
(per Mcf) $ 2.24 $ 3.26 $ 4.14 $ 2.87
Average gas equivalent
price (per Mcfe) before
hedging contract
settlements $ 2.52 $ 4.34 $ 4.48 $ 3.56
Adjustment for hedging
contract settlements -- (1.02) (0.30) (0.51)
------- ------- -------- -------
Average gas equivalent
price (per Mcfe) $ 2.52 $ 3.32 $ 4.18 $ 3.05
Operating Costs (per Mcfe):
Lease operating expense $ 0.61 $ 0.38 $ 0.60 $ 0.40
Production taxes 0.14 0.29 0.27 0.26
General and
administrative expense 0.87 0.47 0.67 0.43
Depreciation, depletion
and amortization -
oil & gas properties 0.90 0.61 0.89 0.57
(a) EBITDA is defined as income or loss before interest, income
taxes, depreciation, depletion and amortization and impairment.
Following is selected balance sheet information as of September 30,
2001 and December 31, 2000:
September 30, December 31,
2001 2000
------- -------
(unaudited)
ASSETS
Cash and cash equivalents $ 6,653 $ 6,482
Other current assets 7,940 7,671
------- -------
Total current assets 14,593 14,153
------- -------
Property and equipment, net 77,472 71,432
Other assets 139 188
------- -------
Total assets $92,204 $85,773
======= =======
LIABILITIES and
STOCKHOLDERS' EQUITY
Current liabilities 2,919 4,964
Long-term debt 33,964 33,964
Deferred income tax liability 14,157 10,514
Stockholders' equity 41,164 36,331
------- -------
Total liabilities and
stockholders' equity $92,204 $85,773
======= =======
MBbls - thousand barrels
Mcf - thousand cubic feet
Mcfe - thousand cubic feet equivalent
MMcf - million cubic feet
MMcfe - million cubic feet equivalent