Spinnaker Exploration Says Production Increase Driven By Record Oil Volume

Spinnaker Exploration Company (NYSE: SKE) reported first quarter 2005 production of 11.8 billion cubic feet of gas equivalent ("Bcfe"), up 15% from the first quarter of 2004 and 7% sequentially. The Company had record first quarter revenues of $78.3 million, increases of 31% from $59.8 million in the same period in 2004 and 12% sequentially. First quarter 2005 earnings of $11.3 million, or $0.32 per diluted share, were impacted by a $7.7 million pre-tax non-cash impairment of unproved international oil and gas properties. Excluding this impairment charge, first quarter 2005 adjusted earnings were $16.3 million, or $0.47 per diluted share, compared to first quarter 2004 earnings of $13.7 million, or $0.40 per diluted share. Cash from operations, defined as cash from operating activities before changes in operating assets and liabilities, was a first quarter record of $69.0 million, up 33% from first quarter 2004 cash from operations of $51.8 million. Excluding the impairment charge, first quarter 2005 adjusted income from operations was $25.3 million compared to first quarter 2004 income from operations of $21.6 million.

Total first quarter 2005 production of 11.8 Bcfe exceeded the Company's guidance by 8% and included approximately 6.7 billion cubic feet of gas ("Bcf"), 693,000 barrels of oil and 6,668,000 gallons of natural gas liquids. Spinnaker had record oil production in the first quarter of 2005, an increase of 109% from the first quarter of 2004 and 49% on a sequential basis. The increase in oil production was primarily due to the ramp-up in production at the Company's deepwater project at Green Canyon 338/339/382 ("Front Runner"). The Company's net current producing capacity is approximately 140 million cubic feet of gas equivalent ("MMcfe") per day.

The average natural gas price, before the effects of hedging activities, increased approximately 13% to $6.36 per Mcf, and the average oil price, before the effects of hedging activities, increased approximately 34% to $46.76 per barrel in the first quarter of 2005 compared to the first quarter of 2004. The total average realized equivalent price, after the effects of hedging activities, increased 17% to $6.76 per Mcfe in the first quarter of 2005 compared to the same period in 2004.

Exploration


    Since March 4, 2005, Spinnaker has participated in three successful
exploratory wells in four attempts.  A summary of exploratory activity
follows:



                                Working   Net Revenue
                                Interest   Interest
    Well                          (WI)       (NRI)         Operator
    High Island 163 #2             70%        58%          Spinnaker
    High Island  47 #A-1 ST        67%        56%          Spinnaker
    Mississippi Canyon 734 #2
     (Thunder Hawk)                25%        22%          Murphy

The unsuccessful well is the Tari #1 located in OPL 256 offshore Nigeria. Spinnaker owns a 12.5% contract right to OPL 256, subject to approval of various government agencies and authorities in Nigeria. The Company will participate in drilling at least two more wildcats on OPL 256, one of which should commence in the second half of 2005. Spinnaker will treat its Nigerian interest as a separate "pool" for accounting purposes and has recognized a pre-tax charge of $7.7 million ($5.0 million after-tax) related to the well.

Spinnaker has participated in 107 successful wells in 180 attempts since inception (59% gross/61% net).

Current Operations

The Company is currently involved in seven rig operations. Four are exploratory and three are completions. Four of the operations are located on the shelf and three are located in deep water. Spinnaker is operating four of the current rig operations.

Spinnaker has entered into a rig contract designed to accommodate two to three deepwater wells using the GlobalSantaFe Arctic I semi-submersible. The rig will be utilized to drill Spinnaker-owned deepwater inventory in the Gulf of Mexico.

Various activities are ongoing in several field areas in which the Company owns interests. The following summary information updates the Company's progress on many of these projects:

Front Runner/Front Runner South/Quatrain Field Development

(Green Canyon 338/339/382)

Current gross production from the first three completions at Front Runner is approximately 30,000 barrels of oil equivalent per day (BOEPD.) Currently, risers are being run in preparation for completion of the Front Runner A-2 and A-4 wells.

Spinnaker owns a 25% WI and 22% NRI (or 25% NRI if eligible for royalty suspension) in the Front Runner project.

    Eastern Gulf of Mexico

    Spiderman Development (DeSoto Canyon 620/621)

The Spiderman development is progressing. Engineering and construction activities are ongoing in all phases of the development. The Company anticipates first production during 2007. It is anticipated that a third field well will commence during the next 60 days.

Spinnaker owns an 18% WI and 16% NRI (or 18% NRI if eligible for royalty suspension) in the Spiderman field.

San Jacinto Development (DeSoto Canyon 618/619)

The San Jacinto development plan has been approved. The field will be jointly developed with Spiderman via subsea tieback to the Independence Hub production facility. A third well could be drilled prior to installation of the floating production facility.

Spinnaker owns a 27% WI and 23% NRI (or 27% NRI if eligible for royalty suspension) in the San Jacinto field.

Seventeen Hands Development (Mississippi Canyon 299)

A completion rig has been mobilized to the Seventeen Hands well. The well is being completed and the subsea tree installed. The flowline and umbilical will be installed and production is expected to commence in the fourth quarter of 2005.

    Spinnaker owns a 25% WI and 22% NRI in the Seventeen Hands project.

    Thunder Hawk (Mississippi Canyon 734)

The MC 734 #2 well is currently drilling to explore and delineate the western portion of the discovery and to test the deeper portion of the prospective Miocene section. As previously announced, the well has encountered in excess of 500 feet of high quality Miocene pay. The second productive sand is currently being cored at 23,780 feet, after which the well will be drilled to sufficient depth for protective casing to be set. Following that operation, the well will be drilled to approximately 28,200 feet to test the deeper section. Several development options are currently being considered for the field. No reserves have yet been booked for the Thunder Hawk field.

Spinnaker owns a 25% WI and 22% NRI (or 25% NRI if eligible for royalty suspension) in the Thunder Hawk discovery.

High Island 47

The HI 47 #A-1 well was successfully sidetracked and encountered multiple productive Miocene sands. The well is currently being completed. Since the well was drilled from an existing platform, production will commence as soon as completion operations conclude. First production is expected in the second quarter of 2005.

    Spinnaker owns a 67% WI and 56% NRI in the field.

    High Island 163

Gas was discovered in the Miocene section in the HI 163 #2 well. The well was completed and a caisson over-driven. The well will be tied-back to a nearby host facility. First production is anticipated in the third quarter of 2005.

    Spinnaker owns a 70% WI and 58% NRI in the field.

    Bases Loaded Prospect (Galveston 210)

An exploratory well is currently being drilled at GA 210 #2 to test a fault block adjacent to the productive GA 210 #1 well. Flowline installation has been complicated by high soil strengths, resulting in a delay of approximately 45 days. First production is still anticipated in the second quarter of 2005.

Spinnaker operates the GA 210 #1 with a 67% WI and 56% NRI in the block and the GA 210 #2 with a 33% WI and 28% NRI.

OCS Sale 194 and 197

Spinnaker participated in a total of 20 apparent high bids (AHB) at the combined OCS Sale 194 and 197 held in New Orleans on March 16, 2005. Nineteen of the AHB were located in the deepwater and one on the shelf. A total of six bids have been awarded, all in the deepwater. Of Spinnaker's total AHB, 16 were in Mississippi Canyon, including six in the Thunderhorse/Thunder Hawk and Blind Faith mini-basins.

Guidance


    The following table reflects the Company's current guidance for the second
quarter and full-year 2005.



                                     Actual         Guidance     Guidance
                                     Q1 2005         Q2 2005    Year 2005

    Income Statement Parameters:
    Avg Daily Production (MMcfe/day)    131             135       137-151
    % Gas and Natural Gas Liquids       65%             63%           64%

    Avg Daily Hedged Gas Volumes
     (Bbtus/day) - Swaps               20.0            10.0          10.8
    Avg Price - Swaps                 $7.76           $6.40         $7.03

    Avg Daily Hedged Gas Volumes
     (Bbtus/day) - Collars              ---             ---           ---
    Avg Ceiling Price - Collars         ---             ---           ---
    Avg Floor Price- Collars            ---             ---           ---

    Avg Daily Hedged Oil Volumes
     (MBbls/day) - Swaps                1.0             1.0           1.0
    Avg Price - Swaps                $42.12          $40.78        $40.34

    Avg Daily Hedged Oil Volumes
     (MBbls/day) - Collars              3.0             3.0           3.0
    Avg Ceiling Price - Collars      $44.73          $44.73        $44.73
    Avg Floor Price- Collars         $38.67          $38.67        $38.67

    General and Administrative
     (in millions)                     $4.1            $4.1         $16.5
    Interest Expense (in millions)     $1.4            $1.6          $6.8
    Impairment of Unproved
     Properties (in millions)          $7.7            $0.5          $8.2
    Accretion Expense (in millions)    $0.7            $1.0          $3.7
    Avg Cash Income Tax Rate             0%              0%            1%
    Avg Accrual Income Tax Rate       35.3%           35.3%         35.3%

    Weighted Average Shares
     Outstanding - Diluted (in
     millions)                         34.9            35.3          35.5

    Avg LOE, Workover & Severance
     Taxes / Mcfe                     $0.56           $0.57         $0.60
    Avg DD&A / Mcfe                   $3.51           $3.65         $3.65

    Spending Parameters:
    Shelf Wells Drilled:
      Gross Wells                         2               3            15
      Net Wells                         1.3             1.0           5.0

    Deepwater Wells Drilled:
      Gross Wells                         1               1             9
      Net Wells                         0.3             0.1           2.2

    Total Wells Drilled:
      Gross Wells                         3               4            24
      Net Wells                         1.6             1.1           7.2

    Capital Expenditures (in
     millions):                         $91            $115          $280
      Leasehold Acquisition             $15             $19           $45
      Exploration                       $48             $78          $190
      Development                       $28             $18           $45

Guidance for the differential on gas pricing is $0.40 per Mcfe for the second quarter of 2005, which relates to basis differentials and gas processing. The differential on oil pricing is $4.25 per barrel for the second quarter of 2005, which relates to basis differentials and quality adjustments.

Spinnaker Exploration Company is an independent energy company engaged in the exploration, development and production of oil and gas in the U.S. Gulf of Mexico and West Africa.

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