Toreador Takes Action to Turn Co Around after Turbulent Year
Toreador announced fourth quarter and full year 2008 financial results. Mr. Craig McKenzie, CEO of Toreador, said, "2008 was a volatile year for the oil and gas industry and a difficult year for Toreador as turbulence in the financial markets spread to the wider economy. Commodity prices, including oil, were hit very hard as slowing economies affected demand while costs continued to increase."
Added McKenzie, "Coming on board in early 2009 as part of a settlement with one of Toreador's largest shareholders, I can look back at last year and see that Toreador struggled for direction while being burdened by significant debt, lower production, delays and burgeoning costs and overhead. Initiatives were in half-measures and never truly addressed the underlying problems affecting performance."
"Toreador's fourth quarter and full-year financial results reflect the business challenges the Company faced during the year, but there are a number of positive elements in our portfolio of assets that give us optimism for turning the company around. Through the implementation of our new corporate platform, announced in late February, we are taking aggressive action to refocus the Company's operations, target minimum capital commitments, reduce costs and significantly reduce debt. Through these steps we believe we can stabilize Toreador's operational and financial performance and position the Company for future success," McKenzie concluded.
Fourth quarter 2008 revenues decreased to $10.8 million from $12.5 million in the same period last year, primarily due to a 14.5% decrease in the average price received for oil and natural gas sales. For the quarter ended December 31, 2008, Toreador reported earnings before interest, taxes, depreciation, amortization, and exploration expense (EBITDAX, a non-GAAP measure*) of $4.3 million compared to EBITDAX* of $5.7 million for the same period last year.
Toreador recorded an operating loss in the fourth quarter of 2008 of $31.8 million, compared to an operating loss of $22.3 million in the same period last year. Non-cash expenses in the fourth quarter of 2008 include an impairment charge of $29.5 million of which $25.6 million is applicable to the renegotiated sales price of the South Akcakoca Sub-Basin assets to Petrol Ofisi, an impairment charge on our remaining 10% interest in the Bati Eskakali well, drilled in 2007, due to insufficient progress being made to develop the area and a plan of development will not be prepared by the operator, in the foreseeable future, depreciation, depletion and amortization of $3.2 million and $399 thousand of stock compensation expense which is included in general and administrative expense.
Lease operating expense in the three months ended December 31, 2008 was $4.1 million. Exploration expense in the fourth quarter of 2008 was $2.9 million and general and administrative expense net of stock compensation expense was $2.4 million.
For the three months ended December 31, 2008, the company reported a loss available to common shares of $38.5 million, or $1.93 per diluted share, compared to a loss available to common shares of $19.9 million in the fourth quarter of 2007, or $1.03 per diluted share.
Diluted weighted average shares outstanding in the fourth quarter of 2008 were 20.0 million, compared to 19.2 million diluted weighted average shares outstanding in the fourth quarter of 2007.
For full year 2008, revenues increased to $62.4 million compared to $41.7 million for the same period last year primarily due to oil price increases in France and increased natural gas volumes in offshore Turkey due to having a full year of production during 2008 as compared to 2007. In the twelve months ended December 31, 2008, EBITDAX* was $30.7 million, compared to $20.7 million for the twelve months of 2007. An operating loss of $96.4 million was recorded in 2008 compared to a $57.4 million operating loss in 2007. Non-cash operating expenses recorded in 2008 included an impairment of $85.2 million; depreciation, depletion and amortization of $33.1 million; and stock compensation, which is included in general and administrative expense of $2.4 million.
Lease operating expense for the year ended December 31, 2008 was $17.2 million; exploration expenses in 2008 were $5.8 million and general and administrative expense, net of stock compensation expense, was $13.1 million.
For the twelve months ended December 31, 2008, a loss available to common shares of $108.6 million was recorded, or $5.48 per diluted share, compared to a loss available to common shares of $74.6 million, or $4.07 per diluted share for the twelve months of 2007.
At year-end 2008, estimated proved reserves were approximately 7.6 million barrels of oil equivalent (MMBOE), compared to 13.2 MMBOE at December 31, 2007. At December 31, 2007 the price used for evaluating our oil reserves was $95.72 per barrel as compared to the December 31, 2008 price of $34.29 per barrel. This 65% decrease in oil price had a severe impact on the economic life of our wells, but also on the discounted present value at 10% and the standardized measure of proved reserves. This downward revision, which primarily affected our French oil reserves, was due to the following factors (i) decrease in economic life due to change in economics caused a net decrease of 1,682 thousand barrels of oil (MBbl); (ii) removing twelve proved undeveloped locations caused a net decrease of 1,889 MBbl; (iii) negative reserve revisions resulted in a decrease in reserves of 405 MBbl; (iv) fourteen wells were shut-in resulting in a decrease of 401 MBbl; (v) three drilled locations in prior years resulted in one producing well which was non-commercial at December 31, 2008 causing a net decrease of 280 MBbl; (vi) one well was lost during workover operations causing a net decrease of 37 MBbl; and (vii) 2008 production of 805 MBOE. In Hungary, we secured a gas contract and were able to restore the reserves lost in 2007, this resulted in an increase of 159 MBOE and in Romania due to the poor performance of the field resulted in a decrease of 54 MBbl. In Turkey, we had downward revisions of 390 MBbl. which was due to a decrease in the economic life of the proved developed wells.
Toreador's core operations are in France and Hungary and the Company plans to build on these in 2009. In Hungary, exploration is the key focus and drilling in this country is now underway with an exploratory well, Balotaszallas-E-1 ("THL Ba-E-1"), which was spudded on February 6, 2009. This is a deep Kiskunhalas well in the Tompa Block, which has gas reserves potential. The well is being drilled in an updip location to evaluate a deep gas play that was first identified by two wells drilled in the late 1980s by OKGT (the former Hungarian state oil company) and the U.S. Geological Survey.
The wells produced gas in drill stem tests from a conglomerate encountered below 3,200 meters depth in the northwestern corner of the Tompa block. The terms of the joint venture for drilling the THL Ba-E-1 well are for the partner to drill, case and test a well projected to cost up to $21 million in return for a 75% interest in the Tompa block. Toreador is being carried for the first well and retains a 25% working interest in the block. We estimate that the well will reach total depth in April 2009.
In France, the Paris Basin will remain the Company's core asset with current production of approximately 1,000 net barrels per day coming from low-decline, long-life assets. A comprehensive portfolio review of our fields and 461,000 net acres held pursuant to licenses (100% owned and operated) is now underway. The results of the study will be launched as part of the 3-year strategic plan.
As previously announced and as part of the new corporate platform the Company plans to completely exit Turkey this year. On March 3, 2009 the Company completed the sale of a 26.75% interest in the South Akcakoca Sub-Basin ("SASB") project and associated licenses located in the Black Sea to Petrol Ofisi for $55 million. In addition, the Company has retained a financial advisory firm to manage an open bid process to sell its remaining 10% interest in the SASB, in addition to its onshore Cendere field and 2.929 million net acres in exploration licenses that are currently held (as of January 1, 2009) and licenses covering 1.085 million net acres that are pending approvals. A development well, located in the Cendere Field, is currently being drilled and results should be known by the end of March 2009.
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