EEX Corporation reported first quarter 2002 net income of approximately $2.7 million, or $0.06 per share, compared to a net loss of $7.8 million, or ($0.19) per share for the first quarter of 2001.
The current quarter's results include $2.7 million in net income generated from the Mudi Field in the Tuban Block in Indonesia, a discontinued operation under newly-adopted Statement of Financial Accounting Standards No. 144. These assets were sold on April 26, 2002. Excluding this income, EEX's continuing operations were break-even during the first quarter 2002.
The income statements for 2001 and 2002 have been restated in accordance with the new accounting standard to eliminate the impact of the discontinued Indonesian operation. Revenues for the first quarter 2002 were $41 million, compared to $46 million for the same quarter last year. Lower revenues primarily reflect lower prices offset by higher gas production from Onshore U.S. operations.
Expenses for the first quarter 2002 were $31 million, compared to $47 million for the same period in 2001. Lower expenses resulted primarily from decreased exploration expense. The first quarter of 2001 contained approximately $14 million in costs associated with stacking of the Arctic I rig and recognition of the net costs associated with the assignment of the Arctic I contract through May 2001. In addition, taxes, other than income, were lower due to lower gas prices.
Onshore U.S. production for the first quarter of 2002 averaged 126 million cubic feet of gas equivalent (MMcfe) per day, a 4% increase from the first quarter of 2001. Average production for the month of March was approximately 129 MMcfe per day. The drilling success rate for the quarter was 100% with five successful development wells producing to sales and one exploration well waiting on a pipeline. At Dinn Ranch, two wells were tied to sales and, as of the end of the quarter, are producing with a combined flow rate of 34 MMcfe (9 MMcfe net to EEX) per day. Two additional Dinn Ranch development wells are completing and a third well is drilling. EEX signed a gas sales contract that includes installation of additional processing capacity to increase the field's gross sales capability from 40 MMcfe to 80 MMcfe per day by early in the third quarter. EEX's working interest ranges from 35% to 50% in the field.
At the end of the first quarter, EEX's debt to capital ratio, as defined in our bank agreement, was 74%, exceeding the permitted ratio. Net debt (less $109 million of cash) to total capitalization was 67%. The Company has reached agreement on the terms of a new credit agreement with its agent banks. The terms are currently being circulated among the participating banks for their approval. Once approved, implementation of this new credit agreement will be subject to negotiation and execution of definitive agreements.
Tom Hamilton, chairman and president, chief executive officer, said, "We continue to be very pleased with the results of our Onshore business. In the Gulf of Mexico, the Devil's Island well is expected to finish drilling in May. We are continuing to work on a new bank agreement. We hope to complete this work during the second quarter."
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