Fourth Quarter Results
For the fourth quarter of 2003, the Company had net income of approximately $.3 million applicable to common shareholders, or $.02 per diluted share, compared to a $6.3 million net loss applicable to common shareholders, or ($.50) per diluted share, for the same quarter in 2002. Revenues for the quarter ended 2003 were approximately $3.5 million compared to $2.4 million for the same quarter in 2002. The fourth quarter 2002 results included a $5.2 million full cost ceiling impairment charge.
Year End Results
For the year ended December 31, 2003, the Company had net income of approximately $.5 million applicable to common shareholders, or $.04 per diluted share, compared to a $7.3 million net loss applicable to common shareholders, or ($.59) per diluted share, for the same period in 2002. Favorable commodity prices, success achieved in the Company's 2003 drilling and development programs and lower operating costs were the primary reasons for the increase in net income. As noted, the results for 2002 were impacted by a fourth quarter full cost ceiling impairment charge of $5.2 million. Revenues for the year ended 2003 were approximately $12.9 million compared to $9.6 million for the prior year.
For the twelve months ended December 31, 2003, net cash flows provided by operating activities were approximately $6.0 million compared to approximately $3.0 million for the same period ended 2002.
Production volumes for the year ended December 31, 2003 were approximately 1.9 billion cubic feet (Bcf) of natural gas and 128.8 thousand barrels (MBbl) of oil compared to 2002 production of 2.3 Bcf of natural gas and 124.7 MBbl of crude oil. Average daily production was approximately 7.2 million cubic feet equivalent (MMcfe/d) of natural gas compared to 8.2 MMcfe/d of natural gas in 2002, a 12% decrease. At year-end 2003, the average net daily production was approximately 7.8 MMcfe/d of natural gas compared to 7.5 MMcfe/d of natural gas at year-end 2002, an increase from 2002 of four percent.
Total proved reserve volumes at December 31, 2003 were 22.4 Bcf of natural gas and 1.3 million barrels (MMBbl) of oil, or 30.2 Bcfe of natural gas as compared to December 31, 2002 proved reserve volumes of 14.7 Bcf of natural gas and 0.6 MMBbl of oil, or 18.3 Bcfe of natural gas. Total proved reserves increased 11.9 Bcfe of natural gas, or approximately 65%. The key reserve additions at year-end 2003 occurred in the West Edmond Hunton Lime Unit ("WEHLU") in Oklahoma (10.4 Bcfe), the Broussard Field in Louisiana (2.3 Bcfe) and South Central Kansas (2.0 Bcfe). At year-end 2003, approximately 84% of the Company's total proved reserves were classified as proved developed. The total proved reserve mix at year-end 2003 was 74% natural gas and 26% oil. Our 2003 reserve estimates were prepared by Netherland, Sewell & Associates, a third party independent engineering firm.
David Wilkins, President and CEO, stated: "We are very pleased with the results of our efforts in 2003. The Company returned to a profitable status in the second quarter followed by profits in both the third and fourth quarters. Our December 31, 2003 proved reserves reflected a 65% increase over year-end 2002 levels as a result of our focus on efforts to further develop the existing asset base of the Company. Although our annual production in 2003 was lower than that of 2002, our net daily production at the end of 2003 was 4% higher than the rate at the end of 2002. At year-end 2003, only two of the nine completed wells in our South Central Kansas drilling program were producing. However, three wells went on-line in the first quarter of 2004 and the remaining four wells will be hooked up early in the second quarter of 2004. We are very excited about the success of the Failla #1 in the Broussard Field, which commenced sales at the end of the third quarter 2003. This well is producing in excess of 20 MMcfe of natural gas equivalent per day and reached well payout in January 2004, at which point, our working interest increased from 4.8% to approximately 10%. Currently, preparations are underway to commence drilling an offset well to the Failla #1 in the second quarter of 2004. The workover and drilling results at WEHLU were very positive and proved to be instrumental in the reserve additions for the year. Additional drilling and workover activity are planned in WEHLU throughout 2004."
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