In the second quarter of 2004, Toreador posted operating income of $1.3 million versus an operating loss of $299,000 for the second quarter of 2003. Second-quarter 2004 revenues were $5.1 million, a 42% gain over second-quarter 2003 revenues of $3.6 million.
Cash flow from operating activities before changes in working capital increased in the second quarter of 2004 to $1.8 million from $(10.5) million in the first quarter of 2004.
Second-quarter 2004 production included three months of higher oil production from Toreador's five 100%-owned French fields where an extensive workover program was completed in the first quarter of 2004. The well workovers and steady production from the Charmottes-109 development well bring current daily production in France to about 1,200 barrels of oil per day (BOPD) and companywide daily production to approximately 1,900 barrels of oil equivalent (BOE).
Toreador also reports a significant expense reduction in the second quarter of 2004 compared with the first quarter of the year. Second-quarter 2004 lease operating expenses of $9.74 per barrel declined 27% from lease operating expenses of $13.27 per barrel in the first quarter of 2004 due to the completion of Toreador's extensive workover program in France.
Similarly, second-quarter 2004 general and administrative expenses of $7.68 per barrel decreased 20% from first-quarter 2004 G&A expenses per barrel of $9.66, which included costs associated with the company's January 2004 U.S. royalty and mineral sale.
"We are pleased with second-quarter 2004 results. They are indicative that Toreador's growth strategy is becoming a reality. We are moving ahead with an aggressive program of successful development drilling and additional well workovers primarily in France to meet our production goals. In addition, we have lowered operating expenses to a more reasonable level, with a focus on additional lower per-barrel costs in the future," said G. Thomas Graves III, President and Chief Executive Officer of Toreador.
In the second quarter of 2004, Toreador's oil and gas production was 155,092 BOE, down from 227,675 BOE in the year-ago quarter. The decrease was primarily due to the U.S. asset sale in January 2004.
Toreador's average realized oil price in the second quarter of 2004 climbed 31% to $32.03 per barrel from $24.42 per barrel in the year-ago quarter. The average realized gas price in the second quarter of 2004 was $5.78 per thousand cubic feet (Mcf), a 15% increase over the average realized gas price of $5.01 per Mcf in the second quarter of 2003.
Toreador reports its six-month 2004 income applicable to common shares was $23.0 million, or earnings per diluted share of $1.91, compared with income applicable to common shares of $1.1 million, or earnings per diluted share of $0.12, for the first six months of 2003.
For the first six months of 2004, Toreador posted operating income of $686,000 versus operating income of $529,000 for the year-ago period. Six-month 2004 revenues were $9.0 million, compared with six-month 2003 revenues of $8.0 million.
The improvement was primarily due to the $18.0 million net gain on the sale of Toreador's U.S. mineral and royalty portfolio recorded in the first quarter of 2004. A $4.8 million gain for foreign currency exchange transactions booked in the first quarter and higher commodity prices also contributed to increased six-month 2004 results.
For the first six months of 2004, Toreador's oil and gas production was 300,321 BOE, down from 475,438 BOE for the year-ago quarter. The decrease was primarily due to the U.S. asset sale in January 2004.
Toreador's average realized oil price for the first six months of 2004 rose 13% to $30.74 per barrel from $27.16 per barrel for the year-ago period. The average realized gas price for the first six months of 2004 was $5.77 per Mcf versus $5.43 per Mcf for the same period a year ago.
Toreador's 100%-owned Charmottes-109 horizontal development well in France, which the company reported in June was shut in as an oil producer awaiting completion, currently is producing about 150 BOPD to 200 BOPD. The well's production, which is constrained by the capacity of existing production facilities, began at this rate in late June and continued through July.
The company is targeting October for the completion of expanded French production facilities, which include increased storage capacity, improved water disposal capabilities and additional flow lines. After the facilities are completed, Toreador anticipates the Charmottes-109 well's sustainable production capacity will range from 400 BOPD to 500 BOPD.
As a follow-up to the success of the Charmottes-109, Toreador expects to drill two additional horizontal wells in the fourth quarter about two miles west of the Charmottes-109 well. If successful, the wells would add proved reserves in the western portion of the field. LaRoche Petroleum Consultants, Ltd., Toreador's independent petroleum engineering firm, attributed no proved reserves to this portion of the field in its December 31, 2003, reserve report.
Toreador has additional development activities scheduled for 2004 in its Neocomian Field complex in France. The planned program includes the drilling of six additional workovers to restore production, as well as three recompletions and the drilling of three sidetracks and up to three deviated wells.
The company continues to believe that production from its 100%-owned wells in the Paris Basin, if they are successfully drilled and completed, should more than replace the 675 barrels of production-per-day lost as a result of the sale of its domestic mineral and royalty portfolio in early 2004.
Toreador expects earnings per diluted share for the second half of 2004 will be $0.32 to $0.40 and earnings per diluted share for the full-year 2004 will range from $2.26 to $2.36. The company estimates revenues will range from $12.0 million to $14.0 million for the second half of the year and from $21.0 million to $23.0 million for the full-year 2004. The company estimates second-half 2004 operating income will be $3.7 million to $4.3 million and $4.4 million to $5.5 million for the full-year 2004. These forecasted results are based on an estimated daily production range of 1,800 BOE to 2,200 BOE and an average estimated realized commodity price of $34.00 to $36.00 per BOE for the second half of 2004. These projections are based on assumptions and anticipated results that are subject to numerous uncertainties.
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