Houston Exploration Announces Second Quarter 2005 Results

The Houston Exploration Company (NYSE: THX) reported second quarter 2005 net income of $43.8 million, or $1.51 per fully diluted share. In comparison, the company reported second quarter 2004 net income of $45.4 million, or $1.47 per fully diluted share one year ago. Second quarter revenues totaled $175.8 million, up 2 percent from the $172.8 million reported during the corresponding 2004 quarter. Cash from operations before changes in operating assets and liabilities totaled $133.7 million, 5 percent higher than 2004's second quarter of $127.5 million.

Second quarter 2005 daily production averaged 328 million cubic feet of natural gas equivalent per day (MMcfe/d), compared with 2004's second quarter average rate of 351 MMcfe/d. Quarter-over-quarter production declined by 7 percent, primarily due to favorable production anomalies during the second quarter 2004 and because of delays with rig arrivals for several 2005 projects in the Gulf of Mexico. The majority of the necessary rigs in the Gulf of Mexico are now on hand and drilling has commenced.

Houston Exploration realized an average natural gas sales price for the second quarter 2005 of $6.60 per thousand cubic feet (Mcf), yielding an average realization of $5.71 per Mcf after hedging. This compares to a natural gas sales price of $5.85 per Mcf, and a net price after hedging of $5.39 per Mcf during the second quarter 2004. Second quarter 2005 crude oil prices averaged $46.32 per barrel, 38 percent higher than the $33.63 per barrel reported during the second quarter 2004.

Second quarter 2005 lifting costs, which are comprised of lease operating, transportation and severance tax expenses, were $0.89 per Mcfe versus the $0.61 per Mcfe reported during the second quarter 2004. Depreciation, depletion and amortization and asset retirement accretion expenses for the second quarter 2005 were $2.45 per Mcfe compared to $2.14 per Mcfe in the second quarter 2004. Second quarter 2005 net general and administrative expenses were $0.21 per Mcfe versus the $0.31 per Mcfe reported for 2004's second quarter.

Natural gas continues to be the primary resource that the company produces, accounting for 92 percent of total production. More than 70 percent of the company's estimated equivalent production has been hedged for the remainder of 2005. A detailed hedge table, which explains the company's positions by transaction from 2005 through 2008, is available on the company's Web site.

    Recent Highlights:
     *  During 2005's first half Houston Exploration drilled 159 wells at an
        overall success rate of 82 percent.  For the second quarter 2005,
        79 wells were drilled at a success rate of 87 percent.
     *  Offshore, to date, the company has recognized a 100-percent success
        rate with its Gulf of Mexico deep-shelf drilling program,
        participating in three exploration wells and one development well.
        The net amount of pay in these wells ranges from 80 feet to more than
        150 feet, each exceeding the company's pre-drill expectations.  The
        company's average working interest in these wells ranges from
        19 percent to 36 percent.
     *  Onshore, the company has strengthened its drilling efforts and is
        currently running 14 rigs, of which six are in South Texas, three are
        in Arkansas, three are in the Rocky Mountains, and two are in East
        Texas.
     *  In Arkoma, the company continued to report solid rates, with second
        quarter 2005 net production averaging 41 MMcfe per day.
     *  In the Rockies, seven wells were drilled in Utah's Uinta Basin during
        the second quarter 2005, all of which were successful.  When including
        these wells with other existing and expected production, the company
        anticipates a 2005 exit rate for the Uinta Basin of 10 MMcfe per day.
     *  In Eastern Colorado, the company recently recognized its first
        production from wells drilled in the DJ Basin.  In addition, the
        company has identified more than 200 locations here based on the
        company's proprietary 3-D seismic data which was acquired earlier this
        year.  The company currently plans to run at least one rig in Colorado
        for the remainder of the year.
     *  After completing the evaluation of some newly acquired assets in East
        Texas, the company has increased its drilling program from 12 wells to
        22 wells for 2005.
     *  From a financial perspective, the company remains conservatively
        financed, closing the quarter with a debt-to-capitalization ratio of
        approximately 30 percent.

"As we wind up the first half of 2005 we can see multiple successes within each of our core operating areas," commented William G. Hargett, chairman, president and chief executive officer. "This business is both challenging and exciting for us every day. For the remainder of the year we will pursue various growth opportunities, such as increasing our drilling in Texas and the Gulf of Mexico, further assessing the Rockies play, and remaining in the hunt for assets to acquire," he added.

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