HOUSTON, May 4 /PRNewswire-FirstCall/ -- The Houston Exploration
Company (NYSE:THX) today reported first quarter 2006 net income of
$29.8 million, or $1.02 per diluted share. This compares with $33.4
million of net income, or $1.16 per diluted share, reported in the
first quarter 2005. Cash from operations before changes in
operating assets and liabilities (a non-GAAP measure that is
defined and reconciled in the table below) totaled $124.3 million
for the quarter compared with $125.1 million reported in the first
quarter 2005. First quarter 2006 daily production averaged 312
million cubic feet of natural gas equivalent per day (MMcfe/d),
compared with 2005's first quarter average rate of 331 MMcfe/d. The
overall 6 percent decline was primarily due to offshore volumes
that have yet to be returned to production after last fall's
hurricanes. However, the company's onshore production increased by
8 percent in the first quarter to an average of 202 MMcfe/d. The
company's average unhedged natural gas sales price for the first
quarter 2006 was $7.63 per thousand cubic feet (Mcf), compared to
$5.99 per Mcf in the first quarter 2005, an increase of 27 percent.
The company's average realized natural gas price for the first
quarter 2006 was $5.84 per Mcf, up from $5.48 per Mcf reported
during the first quarter 2005. Crude oil prices averaged $58.77 per
barrel for the year's first quarter compared with $42.17 per barrel
reported during the comparable 2005 period, an increase of 39
percent. Revenues for the first quarter totaled $177.6 million,
compared to $165.7 million during the first three months of 2005.
First quarter 2006 revenues included $41.9 million in net losses
associated with the company's hedging activities. These losses were
comprised of the following: * $46.5 million of net realized losses
associated with the settlement of hedge contracts; and * $4.6
million of net unrealized gains resulting primarily from that
portion of the company's hedge portfolio that was required to be
marked-to-market during the quarter. These non-cash gains were
partially offset by non-cash losses associated with hedge related
production shortfalls that were deferred from the fourth quarter
2005 and other items. Lease operating, severance tax and
transportation expenses for the first quarter 2006 totaled $1.10
per thousand cubic feet of natural gas equivalent (Mcfe) versus the
$0.71 per Mcfe reported in the first quarter 2005. Depreciation,
depletion and amortization and asset retirement accretion expenses
for the quarter totaled $3.03 per Mcfe compared to $2.41 per Mcfe
in the first quarter 2005. First quarter 2006 net general and
administrative expenses were $0.31 per Mcfe compared to $0.37 per
Mcfe in the prior year period. "We achieved solid performance from
our onshore assets during the first quarter, and by leveraging our
operating expertise we should be well positioned to capitalize on a
number of opportunities with this portfolio in the future," stated
William G. Hargett, chairman, president and chief executive
officer. "As we move forward with our restructuring, we intend to
maintain a balanced approach to capital allocation that includes
returning capital to shareholders, investing in the company's
continued growth, and preserving our financial flexibility. This
approach has rewarded our shareholders both past and present, and
we believe this strategy should create additional value long into
the future." Strategic Update * The company continues to further
its restructuring efforts to become a pure onshore operator, as
highlighted by the recent announcements to sell substantially all
of its Gulf of Mexico assets. * The company sold the Texas portion
of its Gulf of Mexico assets, which included 58.5 billion cubic
feet of natural gas equivalent (Bcfe) of estimated proved reserves,
for $220 million, prior to adjustments. This transaction closed on
March 31, 2006. * The company entered into an agreement to sell the
Louisiana portion of its Gulf of Mexico assets, which includes
186.1 Bcfe of estimated proved reserves, for $590 million, prior to
adjustments. This transaction is expected to close on May 31, 2006.
* On April 25, 2006, the company completed a tactical acquisition
of proved reserves in East Texas totaling 16.2 Bcfe for a gross
purchase price of $22 million ($1.36 per Mcfe). Production from
these assets is currently 2.4 MMcfe per day, net. * The company
announced its estimated 2006 capital spending program of $521
million, which includes $443 million in the onshore region. The
company's estimated 2006 production is 91 Bcfe, which includes a 9
percent increase for onshore production to 75 Bcfe. 2006 Guidance
Houston Exploration has prepared the following table to assist with
understanding the company's estimated financial results and
near-term performance based on current expectations. The offshore
figures reflect the sale of the Texas portion of the Gulf of Mexico
assets on March 31, 2006, and assume the sale of the Louisiana
portion of the Gulf of Mexico assets on May 31, 2006. Note that
these figures are estimates and do not include additional capital
spending for potential acquisitions. Various factors that could
materially impact the results are noted below in the
forward-looking statements of this release. Full-Year 2006 Guidance
Offshore Onshore Total Capital Spending (MM$) E&D $ 53 $ 421 $
474 Acquisition(s) --- 22 22 Subtotal $ 53 $ 443 $ 496 Capitalized
Interest, G&A and other 25 Total $ 521 Production Total (Bcfe)
16 75 91 Percent hedged n/a n/a 81% (A) (A) Assumes unwinding
80,000 MMBtu/d for the period June - Dec. 2006 following the Gulf
of Mexico asset sale. Average daily (MMcfe/d) 44 205 249 2006 Exit
rate (MMcfe/d) n/a 225 225 2006 Exit rate, percent hedged 13% (B)
(B) Based on existing 2007 hedge portfolio of 30,000 MMBtu/d. Unit
Costs ($/Mcfe) Lease operating expense 1.04 0.58 0.66 Severance tax
n/a 0.27 0.23 Transportation 0.04 0.14 0.12 DD&A and ARO n/a
n/a 2.96 General and administrative, net n/a n/a 0.35 Interest
expense, net n/a n/a 0.30 Second Quarter 2006 Guidance Offshore
Onshore Total Capital Spending (MM$) E&D $ 6 $ 105 $ 111
Acquisition(s) --- 22 22 Subtotal $ 6 $ 127 $ 133 Capitalized
Interest, G&A and other 6 Total $ 139 Production Total (Bcfe) 7
18 25 Percent hedged n/a n/a 81% (C) (C) Assumes unwinding 80,000
MMBtu/d for the month of June 2006 following the Gulf of Mexico
asset sale. Average daily (MMcfe/d) 75 202 277 Unit Costs ($/Mcfe)
Lease operating expense 1.00 0.56 0.67 Severance tax n/a 0.27 0.20
Transportation 0.03 0.15 0.12 DD&A and ARO n/a n/a 2.98 General
and administrative, net n/a n/a 0.31 Interest expense, net n/a n/a
0.26 The company will hold a conference call on Thursday, May 4, at
10:00 a.m. Central Time to further review the quarter's financial
and operational results. To access the call, dial (800) 230-1093
prior to the start and provide the confirmation code 825828. In
addition, a listen-only webcast of the call can be accessed at
http://www.houstonexploration.com/ . A replay of the call and an
archive of the webcast will both be available for one week
beginning at approximately 12:00 p.m. Central Time on May 4. Dial
(800) 475-6701 and provide the confirmation code 825828, or access
the company's Web site for either of these services. About Houston
Exploration: The Houston Exploration Company is an independent
natural gas and crude oil producer engaged in the development,
exploitation, exploration and acquisition of natural gas and crude
oil properties. The company's operations are focused in South
Texas, the Gulf of Mexico, the Arkoma Basin, East Texas, and the
Rocky Mountains. For more information, visit the company's Web site
at http://www.houstonexploration.com/ . Forward-looking statements:
This news release and oral statements regarding the subjects of
this release contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, Section 21E of the
Securities Exchange Act of 1934 and the Private Securities
Litigation Reform Act. All statements other than statements of
historical fact included in this press release are forward- looking
statements and reflect the company's current expectations and are
based on current available information and numerous assumptions.
Important factors that could cause actual results to materially
differ from the company's current expectations include, among
others, the business outlook, commodity prices, the risks
associated with the consummation and successful integration of
acquisitions, the impact of hurricanes, the risk of future
writedowns, the impact of hedging activities, the accuracy of
estimates of reserves and production rates, production and spending
requirements, the inability to meet substantial capital
requirements, the ability to complete the announced divestiture of
the company's remaining offshore assets and effect qualified
like-kind exchange transactions to maximize tax efficiencies, the
impact of onshore asset concentration, the market and other factors
for stock repurchases, the constraints imposed by the company's
outstanding indebtedness, the relatively short production life of
the company's reserves, reserve replacement risks, drilling risks
and results, the competitive nature of the industry, and other
risks and factors inherent in the exploration for and production of
natural gas and crude oil discussed in the company's filings with
the Securities and Exchange Commission, including the company's
annual report on Form 10-K for the year ended December 31, 2005.
The company assumes no responsibility to update any of the
information referenced in this news release. Contact: The Houston
Exploration Company Melissa R. Aurelio 713-830-6887 The Houston
Exploration Company Three Months Ended March 31, 2006 2005
Unaudited Income Statement Data: (in thousands, except per share
data) Revenues Natural gas revenues $198,505 $163,969 Oil revenues
20,453 17,120 Gain (loss) on settled derivatives (46,525) (14,175)
Unrealized gain (loss) on settled derivatives 4,586 (1,424) Other
585 230 Total revenues 177,604 165,720 Operating expenses Lease
operating 21,812 15,368 Severance tax 6,159 2,934 Transportation
2,771 2,766 Asset retirement accretion 1,327 1,325 Depreciation,
depletion and amortization 83,761 70,603 General and
administrative, net 8,606 11,123 Total operating expenses 124,436
104,119 Income from operations 53,168 61,601 Other (income) and
expense (1,407) 1,454 Interest expense 10,376 5,424 Capitalized
interest (1,655) (1,990) Interest expense, net 8,721 3,434 Income
before taxes 45,854 56,713 Provision for income tax Current 4,558
7,704 Deferred 11,524 15,571 Total provision for taxes 16,082
23,275 Net income $ 29,772 $ 33,438 Earnings per share Basic $ 1.03
$ 1.17 Diluted $ 1.02 $ 1.16 Weighted average shares 29,042 28,499
Weighted average shares - diluted 29,310 28,871 Three Months Ended
March 31, 2006 2005 Operating Data: Production Natural gas (MMcf)
Onshore 17,816 16,680 Offshore 8,207 10,677 Total 26,023 27,357 Oil
(MBbls) Onshore 67 23 Offshore 281 383 Total 348 406 Total
Equivalent (MMcfe) Onshore 18,218 16,818 Offshore 9,893 12,975
Total 28,111 29,793 Average daily production (MMcfe/d) Onshore 202
187 Offshore 110 144 Total 312 331 Average sales price Natural gas
- unhedged ($/Mcf) $ 7.63 $ 5.99 Natural gas - realized ($/Mcf) (D)
5.84 5.48 Oil - unhedged ($/Bbl) 58.77 42.17 Oil - realized ($/Bbl)
(D) 58.77 42.17 (D) Realized prices include the effects of gains
and losses on contracts settled during the period, and do not
include unrealized gains and losses recognized pursuant to SFAS
133. Three Months Ended March 31, 2006 2005 Operating Margin per
Unit ($/Mcfe) Total revenues $ 6.32 $ 5.56 Lease operating (0.78)
(0.52) Severance tax (0.22) (0.10) Transportation (0.10) (0.09)
Asset retirement accretion (0.05) (0.04) Depreciation, depletion
and amortization (2.98) (2.37) General and administrative, net
(0.31) (0.37) Total operating margin $ 1.88 $ 2.07 March 31,
December 31, 2006 2005 Unaudited Balance Sheet Data: (in thousands,
except debt-to-capitalization) Assets Cash and equivalents $ 19,538
$ 7,979 Accounts receivable 115,012 146,020 Inventories 3,407 2,726
Deferred tax asset 38,952 145,922 Prepayments and other 16,500
19,709 Total current assets 193,409 322,356 Natural gas and oil
properties, full-cost method Unevaluated properties 82,337 107,146
Properties subject to amortization 3,483,903 3,556,755 Other
property and equipment 13,031 12,971 3,579,271 3,676,872 Less:
Accumulated depreciation, depletion and amortization 1,742,138
1,658,532 1,837,133 2,018,340 Other non-current assets 19,624
20,928 Total assets $2,050,166 $2,361,624 Liabilities Accounts
payable and accrued expenses $ 132,234 $ 177,159 Derivative
financial instruments 103,080 352,457 Asset retirement obligation
6,967 7,265 Total current liabilities 242,281 536,881 Long-term
debt and notes 424,000 597,000 Deferred federal income taxes
339,190 341,302 Derivative financial instruments 46,370 65,201
Asset retirement obligation 85,009 112,406 Other non-current
liabilities 13,943 15,696 Total liabilities 1,150,793 1,668,486
Stockholders' Equity Common stock 291 289 Additional paid-in
capital 303,391 297,218 Retained earnings 693,139 663,367
Accumulated other comprehensive income (97,448) (267,736) Total
stockholders' equity 899,373 693,138 Total liabilities and
stockholders' equity $2,050,166 $2,361,624 March 31, Dec. 31, 2006
2005 Additional Unaudited Information: Total debt-to-capitalization
32.0% 46.3% Three Months Ended March 31, 2006 2005 Unaudited Cash
Flow Data: (in thousands) Operating Activities Net income $ 29,772
$ 33,438 Adjustments to reconcile net income to net cash provided
by operating activities: Deferred income tax expense 11,524 15,571
Depreciation, depletion and amortization 83,761 70,603 Unrealized
(gain) loss on derivative instruments (4,586) 1,424 Other non-cash
adjustments 3,844 4,061 Changes in operating assets and liabilities
(2,194) 8,262 Net cash provided by operating activities 122,121
133,359 Investing Activities Investment in property and equipment
(130,591) (131,138) Dispositions and other 189,371 150 Net cash
provided by (used in) investing activities 58,780 (130,988)
Financing Activities Net repayments of long-term borrowings
(173,000) (15,000) Proceeds and tax benefits from issuance of
common stock from exercise of stock options 3,658 7,812 Net cash
provided by (used in) financing activities (169,342) (7,188)
Increase (decrease) in cash $ 11,559 $ (4,817) Cash at beginning of
period 7,979 18,577 Cash at end of period $ 19,538 $ 13,760
Unaudited Non-GAAP Financial Measures: Cash from operations
represents net cash provided by operating activities before changes
in operating assets and liabilities. Cash from operations is
presented because management believes it is a useful adjunct to net
cash provided by operating activities under accounting principles
generally accepted in the United States (GAAP). Cash from
operations is widely accepted as a financial indicator of an oil
and gas company's ability to generate cash which is used to
internally fund exploration and development activities and to
service debt. Cash from operations is not a measure of financial
performance under GAAP and should not be considered an alternative
to net income. The table below reconciles cash from operations to
net cash provided by operating activities as disclosed on the
statement of cash flows. Three Months Ended March 31,
Reconciliation of Non-GAAP Measures: 2006 2005 (in thousands) Cash
from operations before changes in operating assets and liabilities
$124,315 $125,097 Plus: changes in operating assets and liabilities
(2,194) 8,262 Net cash provided by operating activities $122,121
$133,359 DATASOURCE: The Houston Exploration Company CONTACT:
Melissa R. Aurelio of The Houston Exploration Company,
+1-713-830-6887, or Web site: http://www.houstonexploration.com/
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