Exhibit 99.1
For Information
---------------
Mark A. Hellerstein
Robert T. Hanley
303-861-8140
ST. MARY REPORTS RECORD RESULTS FOR YEAR 2003
DENVER, February 26, 2004 - St. Mary Land & Exploration Company (NYSE: SM)
today reported record earnings of $95.6 million or $2.80 per diluted share for
the year ended December 31, 2003. Year 2002 earnings were $27.6 million or $0.97
per diluted share. Revenues for 2003 were $393.9 million compared to $196.4
million for 2002. St. Mary's discretionary cash flow(1) increased 95% from
$118.8 million in 2002 to $232.1 million in 2003.
Oil and gas production for 2003 was a record 76.9 billion cubic feet of gas
equivalent (BCFE), a 40% increase over 2002. The average realized price per MCFE
increased $1.38 to $4.75 in 2003, a 41% increase from the average price realized
in 2002. Estimated oil and gas reserves as of December 31, 2003 increased 21% to
594 BCFE from 491 BCFE at year-end 2002. Proved developed reserves are 89% of
total proved reserves.
Earnings for the fourth quarter were $24.7 million or $0.72 per diluted share
compared to $7.0 million or $0.24 per diluted share for the fourth quarter of
2002. Revenues for the fourth quarter of 2003 were $98.4 million compared to
$52.1 million for the same period in 2002. Discretionary cash flow(1) for the
fourth quarter increased 74% from the same period in 2002 to $63.0 million.
Average daily oil and gas production during the fourth quarter 2003 totaled
207.6 MMCFE, up 32% from 156.8 MMCFE in the comparable 2002 period. Average
prices realized during the quarter were $4.59 per Mcf and $26.85 per barrel,
which were 35% and 3% higher, respectively, than the realized prices in the
fourth quarter of 2002.
During the fourth quarter of 2003 the Company realized net proceeds totaling
$21.7 million and recognized pre-income tax gains totaling $7.5 million from the
sales of certain property interests in its Permian Basin and Rocky Mountain
regions.
Mark Hellerstein, Chairman, President and CEO, commented, "Our record earnings
reflect a 40% increase in production, high commodity prices, and moderate
increases in operating costs in 2003. We increased our estimated oil and gas
reserves 21%, while the proved undeveloped portion of our reserves decreased
from 12% to 11%. We replaced 293% of our production at an all-inclusive finding
cost of $1.05 per MCFE. Our balance sheet remains strong, and we enter 2004 on a
positive note. Our organic drilling budget is up 12% to $173 million over year
2003 expenditures, with significant continuing activity in Northeast Mayfield in
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Oklahoma and in the Bakken play in the Williston Basin, where we believe we have
significant running room into 2005 and possibly beyond. We have advanced the
Hanging Woman Basin coalbed methane project to the development stage and expect
production to begin next year. For the first time, we will be receiving 3-D
seismic data over our entire 25,000-acre fee lands in St. Mary Parish,
Louisiana. This was the legacy asset of the Company for decades that has
produced 200 million barrels of oil and 3.5 TCF of gas. Our interest is large
and additional development of the property has the potential to be very
significant."
The Company's previously announced forecast for the first quarter and the full
year of 2004 remains unchanged and is as follows:
1st Quarter Year
------------- -------
Production 18 - 20 BCFE 78 - 82 BCFE
Lease operating expenses,
including production taxes and
transportation $1.15 - $1.25/MCFE $1.15 - $1.25/MCFE
General and administrative exp. $0.35 - $0.40/MCFE $0.32 - $0.37/MCFE
Depreciation, depletion & amort. $1.05 - $1.10/MCFE $1.10 - $1.20/MCFE
In 2004, St. Mary's weighted average shares outstanding will reflect 31,623,241
common shares outstanding at December 31, 2003 less the Company's repurchase of
3,380,818 of those shares on February 9, 2004 from Flying J Oil & Gas Inc.
and Big West Oil & Gas Inc., as previously announced in the Company's
February 9, 2004 press release. If there are no significant share issuances
during the remainder of 2004, on a weighted average basis the first quarter of
2004 will reflect approximately 1,900,000 less shares outstanding and the year
2004 will reflect approximately 3,100,000 less shares outstanding as compared to
year-end 2003. The attached financial highlights include a table showing the
impact of this transaction to our balance sheet on a pro-forma basis as of
December 31, 2003.
As previously announced, the St. Mary year-end 2003 earnings teleconference call
is scheduled for February 27 at 8:00 am (MST). The call participation number is
888-424-5231. A digital recording of the conference call will be available two
hours after the completion of the call, 24 hours per day through March 12 at
800-642-1687, conference number 4951539. International participants can dial
706-634-6088 to take part in the conference call and can access a replay of the
call at 706-645-9291, conference number 4951539. In addition, the call will be
broadcast live online and can be accessed by going directly to St. Mary's
website home page at www.stmaryland.com. An audio recording of the conference
call will be available at that site through March 12.
This release contains forward looking statements within the meaning of
securities laws, including forecasts and projections for future periods. The
words "will," "believe," "anticipate," "intend," "estimate," "forecast" and
"expect" and similar expressions are intended to identify forward looking
statements. These statements involve known and unknown risks, which may cause
St. Mary's actual results to differ materially from results expressed or implied
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by the forward looking statements. These risks include such factors as the
volatility and level of oil and natural gas prices, unexpected drilling
conditions and results, production rates and reserve replacement, reserve
estimates, drilling and operating service availability and uncertainties in cash
flow, the financial strength of hedge contract counterparties, the availability
of attractive exploration and development and property acquisition opportunities
and any necessary financing, expected acquisition benefits, competition,
litigation, environmental matters, the potential impact of government
regulations, and other such matters discussed in the "Risk Factors" section of
St. Mary's 2002 Annual Report on Form 10-K filed with the SEC and the 2003
Annual Report on Form 10-K expected to be filed with the SEC on or about
February 27, 2004. Although St. Mary may from time to time voluntarily update
its prior forward looking statements, it disclaims any commitment to do so
except as required by securities laws.
(1) Discretionary cash flow is computed as net income plus
depreciation, depletion, amortization, impairments, deferred
taxes, exploration expense and non cash mark-to-market adjustments
related to compensation plans, less the cumulative effect of
change in accounting principle and unrealized derivative gain. See
the attached financial highlights for a reconciliation of
discretionary cash flow to net cash provided by operating
activities, a presentation of other cash flow information, and a
statement indicating why management believes the presentation of
the non-GAAP measure of discretionary cash flow provides useful
information to investors.
PR-04-04
###
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ST. MARY LAND & EXPLORATION COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2003
(Unaudited)
PRODUCTION DATA Three Months Ended Year Ended
- --------------- December 31, Percent December 31, Percent
---------------------------- ----------------------------
2003 2002 Change 2003 2002 Change
---------------------------- ----------------------------
Average realized price:
Gas (per Mcf) $ 4.59 $ 3.39 35% $ 4.89 $ 3.00 63%
Oil (per Bbl) $ 26.85 $ 26.06 3% $ 26.96 $ 25.34 6%
Production:
Gas (MMcf) 11,966 9,880 21% 49,663 38,164 30%
Oil (MBbls) 1,189 758 57% 4,541 2,815 61%
MMCFE (6:1) 19,101 14,430 32% 76,909 55,055 40%
Daily production:
Gas (Mcf per day) 130,066 107,393 21% 136,062 104,558 30%
Oil (Bbls per day) 12,925 8,242 57% 12,441 7,713 61%
MCFE per day (6:1) 207,617 156,846 32% 210,709 150,836 40%
Margin analysis per MCFE:
Net realized price $ 4.55 $ 3.69 23% $ 4.75 $ 3.37 41%
Oil and gas production costs 1.06 0.89 19% 1.15 0.92 25%
General and administrative costs 0.39 0.26 50% 0.33 0.26 27%
---------------------------- ----------------------------
Operating margin $ 3.10 $ 2.54 22% $ 3.27 $ 2.19 49%
---------------------------- ----------------------------
Depletion, depreciation & amortization $ 1.08 $ 1.06 2% $ 1.07 $ 0.99 8%
INCOME STATEMENT
- ----------------
(In thousands, except per share amounts) Three Months Ended Year Ended
December 31, December 31,
---------------------------- ----------------------------
2003 2002 2003 2002
---------------------------- ----------------------------
Revenues:
Oil and gas production $ 86,878 $ 53,259 $ 365,114 $ 185,670
Gas marketing revenue 2,419 1,589 13,438 8,399
Gain (loss) on sale of proved properties 7,499 (2,543) 7,278 (2,633)
Derivative gain - - - 3,188
Other 1,589 (235) 8,104 1,770
---------------------------- ----------------------------
98,385 52,070 393,934 196,394
---------------------------- ----------------------------
Operating expenses:
Oil and gas production costs 20,205 12,886 88,509 50,839
Depletion, depreciation, amortization
and abandonment liability accretion 20,709 15,263 81,960 54,432
Exploration 5,985 4,069 26,653 19,501
Impairment and abandonment (22) 540 3,981 2,446
General and administrative 7,480 3,755 25,179 14,299
Derivative loss 668 1,406 310 -
Gas marketing expenses 2,188 1,351 12,229 7,982
Minority interest and other 600 300 1,802 1,206
---------------------------- ----------------------------
57,813 39,570 240,623 150,705
---------------------------- ----------------------------
Income from operations 40,572 12,500 153,311 45,689
Interest income 70 190 717 758
Interest expense (1,542) (1,288) (7,958) (3,868)
---------------------------- ----------------------------
Income before income tax expense 39,100 11,402 146,070 42,579
Income tax expense (benefit)- current 6,345 67 32,238 569
Income tax expense - deferred 8,080 4,356 23,692 14,450
---------------------------- ----------------------------
Income from continuing operations 24,675 6,979 90,140 27,560
Cumulative effect from change
in accounting principle - - 5,435 -
---------------------------- ----------------------------
Net income $ 24,675 $ 6,979 $ 95,575 $ 27,560
============================ ============================
Basic weighted avg shares outstanding 31,552 27,940 31,233 27,856
Diluted weighted avg shares outstanding 35,858 28,608 35,535 28,391
Basic earnings per common share:
Income from continuing operations $ 0.78 $ 0.25 $ 2.89 $ 0.99
Cumulative effect of accounting change - - 0.17 -
---------------------------- ----------------------------
Basic net income per common share $ 0.78 $ 0.25 $ 3.06 $ 0.99
============================ ============================
Diluted earnings per common share:
Income from continuing operations $ 0.72 $ 0.24 $ 2.65 $ 0.97
Cumulative effect of accounting change - - 0.15 -
---------------------------- ----------------------------
Diluted net income per common share $ 0.72 $ 0.24 $ 2.80 $ 0.97
============================ ============================
BALANCE SHEET
- -------------
(In thousands) Dec 31, Dec 31,
2003 2002
----------------------------
Working capital $ 3,101 $ 2,050
Long-term debt $ 110,696 $ 113,601
Stockholders' equity $ 390,653 $ 299,513
Shares outstanding - permanent equity 28,242 27,973
Shares outstanding - temporary equity 3,381 -
Note receivable from Flying J (contra-equity)$ 71,594 $ -
PROVEN RESERVES
- --------------- Dec 31, Dec 31,
2003 2002
--------- ----------
Oil (MBbls) 47,787 36,119
Gas (MMcf) 307,024 274,172
--------- ----------
MMCFE (6:1) 593,744 490,887
========= ==========
CASH FLOW
- ---------
(In thousands)
Reconciliation of Discretionary Cash Flow to Net Cash
Provided by Operating Activities:
Three Months Ended Year Ended
December 31, December 31,
---------------------------- -----------------------------
2003 2002 2003 2002
---------------------------- -----------------------------
Discretionary Cash Flow (1) $ 63,005 $ 36,175 $ 232,053 $ 118,762
(Gain) loss on property sales (7,499) 1,707 (7,278) 1,797
Exploration exp, excluding exploratory dry hole exp (5,000) (3,685) (18,171) (11,824)
Minority interest & other 3,576 2,084 2,088 40
Changes in working capital (677) (724) (4,373) 32,934
--------- ---------- ---------- ----------
Net Cash Provided by Operating Activities $ 53,405 $ 35,557 $ 204,319 $ 141,709
========= ========== ========== ==========
Net Cash Used in Investing Activities $(43,291) $ (87,073) $(196,939) $(180,931)
========= ========== ========== ==========
Net Cash Provided by (Used in) Financing Activities $ (2,401) $ 13,600 $ (3,707) $ 46,260
========= ========== ========== ==========
(1)Discretionary cash flow is computed as net income plus depreciation,
depletion, amortization, impairments, deferred taxes, exploration expense,
and non-cash mark-to-market adjustments related to compensation plans less
the change in accounting principle and unrealized derivative loss. The
non-GAAP measure of discretionary cash flow is presented since management
believes that it provides useful additional information to investors for
analysis of St. Mary's ability to internally generate funds for exploration,
development and acquisitions. In addition, discretionary cash flow is widely
used by professional research analysts and others in the valuation,
comparison and investment recommendations of companies in the oil and gas
exploration and production industry, and many investors use the published
research of industry research analysts in making investment decisions.
Discretionary cash flow should not be considered in isolation or as a
substitute for net income, income from operations, net cash provided by
operating activities or other income, profitability, cash flow or liquidity
measures prepared under GAAP. Since discretionary cash flow excludes some,
but not all, items that affect net income and net cash provided by operating
activities and may vary among companies, the discretionary cash flow amounts
presented may not be comparable to similarly titled measures of other
companies.
PRO FORMA BALANCE SHEET IMPACT OF FLYING J SHARE REPURCHASE
- -----------------------------------------------------------
(In thousands, except per share amounts)
On February 9, 2004, the Company repurchased from Flying J 3,380,818
restricted shares of common stock for a total of $91.0 million. These shares
were originally issued by St. Mary to Flying J on January 29, 2003, in
connection with St. Mary's acquisition of oil and gas properties. In
addition to issuing the shares in the acquisition, St. Mary loaned Flying J
$71.6 million. Flying J used the proceeds to repay their outstanding loan
balance of $71.6 million. Accrued interest, which has not been recorded by
the Company for financial reporting purposes due to the non-recourse nature
of the loan, was forgiven. The net $19.4 million cash outlay was funded from
the Company's existing cash balances and borrowings under its bank credit
facility.
The following table shows the unaudited pro forma effects on the summarized
consolidated balance sheet had the transaction occurred on December 31,
2003. The table assumes that the Company would have borrowed the necessary
cash payment from its existing credit facility.
Unaudited
Pro Forma
December 31, Pro forma December 31,
2003 Adjustments 2003
---------- ----------- ------------
Condensed balance sheet:
Current assets $ 107,923 $ 107,923
Property and equipment, net 611,287 611,287
Other noncurrent assets 16,644 16,644
---------- ------------
Total Assets $ 735,854 $ 735,854
========== ============
Current liabilities $ 104,822 $ 104,822
Debt, including senior debt 110,696 19,406 130,102
Other noncurrent liabilities,
including minority interest 129,683 129,683
---------- ------------
Total Liabilities 345,201 364,607
Restricted stock held by Flying J 71,594 (71,594) -
Note receivable from Flying J (71,594) 71,594 -
---------- ------------
Total Temporary Equity - -
Total Equity 390,653 (19,406) 371,247
---------- ------------
Total Liabilities and Stockholders' Equity $ 735,854 $ 735,854
========== ============
Selected share and per share information:
Total common shares outstanding 31,623 (3,381) 28,242
========== ============
Net book value per share $ 12.35 $ 13.15
========== ============