Toreador Reports 2Q05 Results & Updates Operational Activities
Toreador Resources Corporation (Nasdaq: TRGL) announced financial and operating results for the second quarter of 2005. Highlights include:
- Record operating income, up 35% from the same period in 2004
- Record revenues of $7.2 million, up over 40% from second quarter 2004 results
- Record discretionary cash provided by operating income (a non-GAAP measure reconciled below) of $3.1 million, a 29% increase from the same period in 2004
For the second quarter of 2005, Toreador reported income applicable to common shares of $1.8 million, or $0.12 per diluted share, compared with $1.2 million, or earnings per diluted share of $0.11, for the second quarter of 2004. Operating income was $1.7 million in the second quarter of 2005, up 35% from $1.3 million for the same period in 2004. Second quarter 2005 revenues were $7.2 million, which represent a 40% increase when compared with $5.1 million for the second quarter of 2004. The increase was primarily due to higher realized oil and natural gas prices. Toreador's discretionary cash provided by operating income (a non-GAAP measure reconciled below) grew to $3.1 million, which was a 29% increase from the same period in 2004.
Second quarter 2005 lease operating expenses were $2.1 million compared to $1.5 million in the second quarter of 2004. Lease operating expenses were higher in the second quarter primarily as a result of renovation work completed at the company's Neocomian field complex in France. General and administrative costs for the second quarter of $1.9 million were up 56% from $1.2 million during the second quarter of 2004. This increase was due in part to additional personnel required to support Toreador's responsibilities as operator of our Western Black Sea program in Turkey. Accounting and legal costs were up significantly as the company recognized additional costs related to annual reporting for 2004 as it implemented new procedures for Sarbanes-Oxley compliance.
"While the second quarter of 2005 produced record operating performance," said G. Thomas Graves III, President and Chief Executive Officer of Toreador, "at the present time, we expect to report improved results in the third quarter. Oil production in France has increased by approximately 600 barrels per day from our Charmottes field beginning early in the third quarter. In addition, commodity prices are currently well above the average prices received during the second quarter." In the second quarter of 2005, Toreador's oil and gas production was 154,000 barrels of oil equivalent (BOE) compared to 155,000 BOE in the year-ago quarter.
Toreador's average realized oil price in the second quarter of 2005 climbed to $47.31 per barrel from $32.03 per barrel in the year-ago quarter. This represents a 48% increase over the same period last year. The average realized gas price in the second quarter of 2005 was $6.69 per thousand cubic feet (Mcf), a 16% increase over the average realized gas price of $5.78 per Mcf in the second quarter of 2004.
Toreador reports its six-month 2005 income applicable to common shares was $2.8 million, or earnings per diluted share of $0.20, compared with income applicable to common shares of $23.0 million, or earnings per diluted share of $1.95, for the first six months of 2004. The six-month 2004 earnings per diluted share of $1.95 included a gain on the sale of the company's U.S. mineral and royalty portfolio of $18 million along with a foreign currency exchange gain of $4.9 million.
For the first six months of 2005, Toreador posted operating income of $2.9 million versus operating income of $627,000 for the year-ago period. Six-month 2005 revenues were $13.6 million, compared with six-month 2004 revenues of $9.0 million.
For the first six months of 2005, Toreador's oil and gas production was 303,000 BOE compared to 300,000 BOE for the year-ago period. Toreador's average realized oil price for the first six months of 2005 rose 48% to $45.42 per barrel from $30.74 per barrel for the year-ago period. The average realized gas price for the first six months of 2005 was $6.44 per Mcf versus $5.77 per Mcf for the same period a year ago.
Explanation and Reconciliation of Non-GAAP Financial Measures
Discretionary cash provided by operating income is presented because of its acceptance as an indicator of an oil and gas exploration and production company's ability to internally fund exploration and development activities and to service or incur additional debt. Discretionary cash provided by operating income should not be considered in isolation or as a substitute for operating income prepared in accordance with generally accepted accounting principles. The table below reconciles discretionary cash provided by operating income with operating income as derived from the company's financial information.
In thousands Three Months Six Months Ended Ended June 30 June 30 --------------- --------------- 2005 2004 2005 2004 ------- ------- ------- ------- Discretionary cash provided by operating income $3,069 $2,376 $5,559 $2,793 Deduct: Exploration and acquisition (431) (324) (805) (552) Depreciation, depletion, and amortization (950) (798) (1,867) (1,614) ------- ------- ------- ------- Operating income $1,688 $1,254 $2,887 $627 ======= ======= ======= =======
Turkey -- Offshore
Drilling and logging operations on the Ayazli #2 well in the company's South Akcakoca Sub-Basin project ("SASB") were successfully completed on July 29, 24 days after spudding. The well was drilled to a measured depth of 1213 meters. Toreador and its partners, TPAO and Stratic Energy Corporation, have run casing and are now making preparations to commence testing operations on the Ayazli #2 well.
During drilling of the Ayazli #2, gas shows were recorded on the mud log over multiple intervals between 725 meters and 1175 meters. Electric logs indicate the presence of gas in potentially 6 intervals between 725 meters and 1175 meters. Toreador has identified approximately 64 meters of potential gas producing sands in the well. This analysis is based solely on information derived from the mud and electric logs.
For reference, the Ayazli #1 well tested approximately 16 meters of gas pay in three zones at an aggregate rate of 15 million cubic feet of gas per day.
The Ayazli #2 well was directionally drilled to a bottom-hole location approximately 380 meters southwest of the Ayazli #1 well. Following the completion of testing on the Ayazli #2 well, the Ayazli #3 well will be tested. This procedure should be completed by mid-August. Drilling of the Ayazli #3 well was completed on June 30, 2005.
Following the completion of testing of the Ayazli #2 and #3 wells, the jackup rig Prometeu will move to the Cayagzi #1 location. The Cayagzi #1 well, the fourth of eight wells planned for 2005, will be a vertical well drilled to a planned total depth of 1100m. Cayagzi #1 is located 3.1 kilometers (1.93 miles) south southeast of the Akkaya #1 well where Toreador tested at a rate of 7.6 million cubic feet of gas per day in May of this year.
Toreador is also negotiating a contract for a second rig, most likely a semisubmersible, capable of drilling in the Akcakoca formations where water depths of slightly more than 300 feet are beyond the capabilities of the available jackup rig.
The Turkish lift barge and supporting spread now deployed in the SASB is being replaced by equipment capable of operating in rough seas and marginal weather conditions. The existing spread was logging as much as 50% down time due to weather and after delays and weather related incidents incurred during the installation of the first Guardian II production sleeve at the Akkaya #1 location the decision was made to mobilize a larger capacity, all-weather lift barge that is rated to withstand similar weather conditions in the future and that can be used to lay the offshore pipeline. The new barge is currently moving from Italy to the Ayazli location to begin installation of the production sleeve following the testing of the Ayazli #2 & 3 wells. After installation the new barge will move back to the Akkaya #1 for remedial operations related to the caisson and production sleeve. The operational changes are not expected to cause any delay in achieving first production in the second half of 2006. Toreador is operator and holds a 36.75% working interest in this acreage.
Toreador is in the process of gathering geological and geophysical data in its 844,000-acre Thrace Black Sea permit. A 50% interest was farmed out to HEMA Endustri A.S. ("HEMA") in June, the terms of which call for HEMA to pay 100% of the first $1.5 million of the geophysical and exploration costs on this acreage. Toreador is operator and will own the remaining 50% working interest in this permit.
Turkey -- Onshore
In the onshore Sinop area northeast of Ankara on the Black Sea coast, Toreador is evaluating reprocessed seismic in order to determine if and where a well might be drilled. An attempt to re-enter and establish production from the Boyabat-2 well in June 2005 was unsuccessful. Toreador operates and holds a 100% working interest in six Sinop permits which cover approximately 720,000 acres.
The Calgan permit area continues to be evaluated. Following completion of evaluation Toreador is planning to commence drilling operations by the end of the third quarter 2005.
In the Charmottes Field in the Paris Basin, Toreador has completed testing on the Charmottes-108H and 110H horizontal wells. The 108H well has been equipped for production pumping at regulated rates. The 110H well tested at 630 BOPD on a 1-inch choke. Production began in late July at a restricted rate while the formation was being cleared of drilling fluids. Once free of excess fluids the wells will be produced at a maximum combined 600 BOPD rate until they are connected to Toreador's recently expanded permanent production facilities, which will occur after receiving French regulatory approval. Toreador expects unrestricted production to commence prior to the end of 2005.
Construction is underway on a drilling pad located on the southeast flank of the Charmottes field that will accommodate six wells. Initially, Toreador intends to drill at least one vertical well from the pad in the second half of 2005 to exploit reserves now classified as "probable" in the Triassic-age Donnmarie formation. The company plans to drill two new horizontal wells from the pad in late 2005 or early 2006.
During the second half of 2005, Toreador is slated to drill at least four exploratory wells on its 183,000-acre Courtenay permit. The company has completed a surface geochemical study that has provided supplemental geophysical and subsurface data enabling Toreador to identify four well locations. Toreador estimates the cost of each Courtenay well will be $250,000 - 300,000. The initial objective on the Courtenay permit will be the Neocomian formation that produces in the company's four field Neocomian Field Complex. These four fields have cumulatively produced over 30 million barrels of oil and are the longest sustained production in the Paris Basin. At a depth of approximately 1,800 to 2,000 feet, initial Neocomian production ranges from 150-200 BOPD.
Toreador is operator and owns a 100% working interest in the Charmottes, Neocomian and Courtenay permits.
The Company completed testing the third well re-entered in Phase I of rehabilitation operations on the Fauresti Block during June. The Fauresti-187 tested at 1.3 MMcf per day with 11 barrels of condensate and 33 barrels of water on a 1/2-inch choke. The second well re-entered and re-completed, the Fauresti-184, tested at 1.75 MMcf of gas per day with 10 barrels of condensate and 59 barrels of water on a 1/2-inch choke. During preliminary testing, the Fauresti-184 had flow rates as high as 2.6 MMcf per day with no choke.
The rig is currently on the Fauresti-179, the first well re-entered during Phase I. The Fauresti-179 was unable to test the Dogger Formation successfully due to communication with the underlying aquifer behind casing. Operations are now underway to perforate the Sarmatian Formation before moving the rig to the Fauresti-198 for the fourth well re-entry.
The company anticipates re-entering three additional wells and drilling up to two new development wells on the permit this year.
Toreador also intends to re-enter a well on the Viperesti Permit
and will continue to gather geological and geophysical information, as
well as reprocess existing seismic data, on both the Viperesti and
Moinesti Permits. Toreador is operator of and has a 100% working
interest in these Romanian concessions.
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