PANACO Releases 3rd Quarter Earnings

PANACO, Inc. announced discretionary cash flows of $4.8 million, or $0.20 per share for the third quarter of 2001, despite recent decreases in both oil and natural gas prices. Excluding non-cash property and deferred tax asset impairments, the Company also announced a net loss of $4.0 million, or $0.17 per share, for the third quarter of 2001, compared to net income of $2.5 million, or $0.10 per share in the third quarter of 2000. For the first nine months of 2001 the Company has realized discretionary cash flows of $32.8 million, or $1.35 per share, an increase over last year's $30.0 million, or $1.24 per share. Excluding non-cash impairments of properties and deferred tax assets, the Company's net income year-to-date in 2001 totaled $4.0 million, or $0.17 per share. During 2000, comparable net income totaled $7.0 million, or $0.29 per share.

During the third quarter of 2001 the Company recorded a non-cash impairment of deferred tax asset of $22.9 million primarily as a result of decreases in oil and natural gas prices. Due to these substantial declines, the Company's forward projections of future taxable income, from existing proved reserves only, do not generate sufficient taxable income to utilize its net operating loss carry-forward (NOL), resulting in the impairment of the asset. The status of the NOL has not changed. Should events such as the Company adding new reserves or increasing commodity prices occur, the value of the tax asset may be recognized again in future periods.

Including the non-cash impairments, the net loss for the third quarter of 2001 totaled $26.6 million, or $1.10 per share and the net loss for the first nine months of 2001 totaled $25.7 million, or $1.06 per share.

PANACO also announced that it has extended its credit facility with Foothill Capital, a Wells Fargo subsidiary for an additional two years. The new agreement provides for a $40 million facility, with a current borrowing base of $40 million. By amending the facility the Company was able to improve the cost and terms of the facility while still enjoying the flexibility of the current credit facility and continuing its successful relationship with Foothill. The improved terms will immediately add to the bottom line with lower interest pricing and administrative fees and contributes to the Company's initiatives to control and reduce costs. At September 30 the Company had availability of $12.7 million and believes that the $40 million facility provides ample liquidity for its ongoing operations and capital expenditures.

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