OKLAHOMA CITY, March 27, 2001 (PRIMEZONE) -- Canaan Energy Corporation ("Canaan") (Nasdaq:KNAN) today announced financial results for the year and three months ended December 31, 2000.
Results for the Year Ended December 31, 2000
For the year ended December 31, 2000, Canaan reported net earnings of $2.0 million, or $0.52 per share, on total revenues of $18.0 million. This compares with net earnings of $3.6 million, or $1.01 per share, on total revenues of $10.9 million for the year ended December 31, 1999.
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 entire 1999 and 2000 periods. The results of operations of Indian and CSI have only been included for November and December 2000.
Revenues for 2000 increased 65% over 1999, principally due to higher oil and gas prices, and to increases in production as a result of the acquisition of Indian. Net earnings for 2000 decreased by 45% from 1999, primarily due to one-time charges relating to the acquisitions for recognition of deferred income taxes and transaction costs. The Partnerships had not previously recorded income taxes in their respective financial statements, since they were not tax paying entities, and any tax liabilities were the responsibility of the individual partners. Upon acquisition of the Partnerships, a deferred tax liability was determined based on the differences between financial statement carrying values and the income tax bases of assets and liabilities assumed from the Partnerships by Canaan. The primary differences between financial statement carrying values and income tax bases are the treatment of intangible drilling costs and nonproductive well costs. This catch-up deferred tax expense totaled $3.3 million and was included in income tax expense in the fourth quarter of 2000. Partially offsetting this deferred tax expense is the pre-acquisition income included in Canaan's results that was not subject to income tax. Additionally, Canaan incurred $1.3 million in nonrecurring transaction costs related to the partnership acquisitions, including the related public registration of Canaan's common stock. These transaction costs were expensed in the fourth quarter of 2000. Net earnings excluding the aforementioned items were $4.7 million, or $1.22 per share, for the year ended December 31, 2000, which was 135% higher than reported earnings per share.
Cash flows from operating activities before working capital changes increased 29% for the year 2000 to $8.1 million versus $6.3 million for the year 1999, principally due to higher oil and gas prices and increased production, somewhat offset by the payment of transaction costs relating to the acquisitions and the related public registration of Canaan's common stock.
Results for the Three Months Ended December 31, 2000
For the three months ended December 31, 2000, Canaan reported a net loss of $2.0 million, or $(0.44) per share, on total revenues of $8.1 million. This compares with net earnings of $1.7 million, or $0.47 per share, on total revenues of $3.5 million for the three months ended December 31, 1999. Revenues for the three month period increased 129% over the comparable period of 1999, due primarily to higher oil and gas prices, and to increases in production as a result of the acquisition of Indian. Expenses for the three months ended December 31, 2000 included one-time charges of $3.3 million for deferred income taxes and $1.3 million in transaction costs as described in the 2000 annual financial results above. The offsetting effect of the Partnerships' pre-acquisition net income not subject to income tax was much smaller for the three months as the transaction occurred in October 2000. Canaan's operations excluding these nonrecurring charges resulted in net earnings of $2.2 million, or $0.47 per share, for the three months ended December 31, 2000, which was 207% higher than reported earnings per share.
Cash flows from operating activities before working capital changes increased 10% for the three months ended December 31, 2000 to $2.1 million versus $1.9 million for the comparable period of 1999, principally due to higher oil and gas prices and increased production, somewhat offset by the payment of transaction costs relating to the acquisitions and the related public registration of Canaan's common stock.
Management Comment
Leo E. Woodard, Chairman and CEO of Canaan, commented, "We are pleased with our progress since becoming a public company in October, 2000. The members of our executive management group average more than 23 years of experience in the industry. We have assembled a capable staff of professionals that possesses a high degree of expertise in both the exploitation and acquisition areas, positioning Canaan for solid growth in the future. Canaan plans a continued emphasis on the development and acquisition of long-lived, primarily natural gas reserves."
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 years and quarters ended December 31, 2000 and 1999 (in thousands, except per share data and as noted):
Years Ended Three Months Ended
December 31, December 31,
2000 1999 2000 1999
--------- --------- --------- ---------
Revenues:
Oil and natural
gas sales $ 17,992 $ 10,915 $ 8,099 $ 3,533
Costs and expenses:
Lease operating 2,089 1,565 786 443
Production taxes 1,458 835 629 298
Depreciation &
amortization 2,891 2,594 1,017 234
Merger costs 1,351 - 1,351 -
General and
administrative 2,858 1,886 1,470 754
Interest expense 1,260 497 740 150
--------- --------- --------- ---------
Total expenses 11,907 7,377 5,993 1,879
--------- --------- --------- ---------
Other income,
principally interest 163 132 81 38
--------- --------- --------- ---------
Earnings before
income taxes 6,248 3,670 2,187 1,692
Income taxes 4,228 26 4,196 (19)
--------- --------- --------- ---------
Net earnings $ 2,020 $ 3,644 $ (2,009) $ 1,711
========= ========= ========= =========
Net earnings per share:
Basic $ 0.52 $ 1.01 $ (0.44) $ 0.47
Diluted 0.52 1.01 (0.44) 0.47
Weighted average
shares outstanding:
Basic 3,872,566 3,621,219 4,618,412 3,621,219
Diluted 3,872,982 3,621,219 4,618,412 3,621,219
--------- --------- --------- ---------
Years Ended Three Months Ended
December 31, December 31,
2000 1999 2000 1999
--------- --------- --------- ---------
Cash flows from
operating activities
before working
capital changes $ 8,056 $ 6,260 $ 2,143 $ 1,948
Cash flows from
operating activities 7,068 5,862 1,846 2,284
Cash flows from
investing activities 202 (6,893) 200 (568)
Cash flows from
financing activities (2,283) (1,413) 1,605 (1,838)
Years Ended Three Months Ended
December 31, December 31,
2000 1999 2000 1999
--------- --------- --------- ---------
Oil production (MBbls) 143 154 47 38
Natural gas
production (MMcf) 4,137 3,717 1,463 875
Gas equivalent
production (MMcfe) 4,996 4,639 1,747 1,101
Average oil price
(per Bbl) before hedging
contract settlements $ 29.38 $ 17.72 $ 30.16 $ 25.00
Adjustment for hedging
contract settlements (5.94) - (5.90) -
--------- --------- --------- ---------
Average oil price
(per Bbl) $ 23.44 $ 17.72 $ 24.26 $ 25.00
========= ========= ========= =========
Average gas price
(per Mcf) before hedging
contract settlements $ 3.93 $ 2.16 $ 5.17 $ 3.69
Adjustment for hedging
contract settlements (0.42) - (0.46) -
--------- --------- --------- ---------
Average gas price
(per Mcf) $ 3.51 $ 2.16 $ 4.71 $ 3.69
========= ========= ========= =========
Average gas equivalent
price (per Mcfe) before
hedging contract
settlements $ 4.09 $ 2.32 $ 5.15 $ 3.79
Adjustment for hedging
contract settlements (0.51) - (0.54) -
--------- --------- --------- ---------
Average gas equivalent
price (per Mcfe) $ 3.58 $ 2.32 $ 4.61 $ 3.79
========= ========= ========= =========
2000 1999
--------- ---------
ASSETS
Cash and cash equivalents $ 6,482 $ 1,495
Other current assets 7,671 2,601
--------- ---------
Total current assets 14,153 4,096
Property and equipment, net 71,432 20,935
Note receivable - 5,438
Other assets 188 259
--------- ---------
Total assets $ 85,773 $ 30,728
========= =========
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities 4,964 1,498
Long-term debt 33,964 7,112
Deferred income tax liability 10,514 130
Stockholders' equity 36,331 21,988
--------- ---------
Total liabilities &
stockholders' equity $ 85,773 $ 30,728
========= =========
MBbls - thousand barrels
Mcf - thousand cubic feet
Mcfe - thousand cubic feet equivalent
MMcf - million cubic feet
MMcfe - million cubic feet equivalent