Evergreen Resources Increases Proven Reserves 21% to 1.5 Tcfe; Company Reports New Hedges and Q4 2003 Charge of $2 Million
February 11 2004 - 5:01PM
PR Newswire (US)
Evergreen Resources Increases Proven Reserves 21% to 1.5 Tcfe;
Company Reports New Hedges and Q4 2003 Charge of $2 Million DENVER,
Feb. 11 /PRNewswire-FirstCall/ -- EVERGREEN RESOURCES, INC.
increased its proven reserves 21% during 2003 to an estimated 1.495
trillion cubic feet of natural gas equivalent (Tcfe) as of December
31, 2003, up from 1.239 trillion cubic feet (Tcf) at year-end 2002.
Evergreen added 302 billion cubic feet equivalent (Bcfe) of gas
reserves and produced 46.3 Bcfe during 2003 for a net reserve
increase of 256 Bcfe. The reserve increase is due primarily to
Evergreen's successful Raton Basin drilling program, which
accounted for 199 Bcfe of reserve additions. The remaining 103 Bcfe
of reserve additions came primarily through the acquisition of
Carbon Energy Corp. Evergreen replaced 653% of its 2003 production
at an all-sources cost of 81 cents per thousand cubic feet of gas
equivalent (Mcfe). This all-sources cost includes the costs of
drilling and completion operations, gas collection facilities,
acquisitions and exploration. Excluding acquisitions and
exploration costs, the company replaced 431% of its 2003 production
at a cost of approximately 50 cents per Mcfe. Excluding gas
collection facility expenses, finding and development costs were
approximately 32 cents per Mcfe. Of the year-end 2003 total
estimated reserves, 62% were classified as proved developed and the
remaining 38% as proved undeveloped. The year-end 2003 reserve
estimate was based on a total of 1,957 gross wells, including 555
classified as proved undeveloped locations. The year-end reserve
estimate included insignificant revisions. Independent petroleum
engineering consultants Netherland Sewell & Associates, Inc.
("NSAI") audited 100% ofthe Raton Basin well locations and prepared
the year-end reserve estimate for the Piceance/Uintah and Canadian
properties. Natural gas in the southern Colorado portion of the
Raton Basin constitutes 93% of Evergreen's net proven reserves.
Evergreen estimates that it has approximately 1,000 additional coal
bed methane wells to drill in the Raton Basin, including 468 proved
undeveloped locations. The balance of the company's year-end 2003
reserve total is comprised of natural gas and natural gas liquids
associated with the acquired Piceance/Uintah and Canadian
properties. The Piceance/Uintah properties had net proven reserves
of approximately 65 Bcfe, 51% of which are classified as proved
developed, while the acquired properties in south-central Alberta,
Canada contain an estimated 37 Bcfe of net proven reserves, 72% of
which are proved developed. Also of note, the name Carbon Energy
Canada has been changed to Evergreen Resources Canada, Ltd. and
continues to be a wholly owned subsidiary of Evergreen Resources,
Inc. The present value of estimated future net revenues from
Evergreen's proven reserves, discounted at 10%, was $2.713 billion
as of December 31, 2003, using an unescalated average net gas price
of $5.49 per thousand cubic feet (Mcf), based on guidelines
established by the Securities and Exchange Commission. This
compared to a PV10 of $1.635 billion at year-end 2002, which used
an unescalated gas price of $4.22 per Mcf. President and CEO Mark
S. Sexton commented, "Our developmentactivity in the Raton Basin
continues to generate predictable growth in our reserves and
production each year. Overall, since the Raton Basin went on line
in early 1995, we have increased our reserves at a compound annual
rate of 44%. We have discovered that both accelerated production
and additional reserves can be achieved in the Raton Basin through
increased-density drilling, and we are now drilling a fifth and
sixth well per square-mile section rather than four wells. We
estimate that our current wellsite inventory from the Raton Basin's
Raton and Vermejo coal formations is probably about 1,000 wells.
"With the addition of our exploratory CBM project in the Forest
City Basin of eastern Kansas, as well as the acquired Carbon Energy
properties, we plan to drill more than 400 wells in 2004. That
would be more than twice the level of our most active year." Fourth
Quarter 2003 Production Net gas sales in the fourth quarter totaled
12.8 Bcfe, or an average of 139.4 million cubic feet of gas
equivalent (MMcfe) per day, which is up 23% from the 10.5 Bcf total
and 113.8 MMcf-per-day average in the corresponding 2002 period.
Fourth quarter average net gas sales were up 9% from the third
quarter of 2003, during which net gas sales averaged 127.7 MMcf per
day. The sequential increase in gas sales was primarily the result
of new production from acquired properties. Evergreen has now
increased its daily net sales for 35 consecutive quarters. Fourth
quarter results brought total net production in 2003 to 46.3 Bcf
compared to 39 Bcf in 2002, representing a 19% year-over-year
increase. Hedging Activity Evergreen has entered into several new
financial commodity-swap agreements for the period between January
1, 2004 and October 31, 2004. Thenew hedging agreements bring the
average weighted net sales price for the company's 2004 hedges to
$4.67 per Mcf. After consideration of fuel costs and basis
differential, this average hedged price equates to a NYMEX price in
excess of $5.00 per Mcf. The following summarizes Evergreen's
hedging position for each quarter of 2004: Q1 Q2 Q3 Q4 Average
Daily Hedged Volumes 129 MMcf 123 MMcf 123 MMcf 80 MMcf Percent of
Total Estimated Sales 78% 68% 64% 39% Net Realized Hedged Price
$4.79 $4.66 $4.66 $4.54 Fourth Quarter 2003 Charge to Earnings As
previously reported in filings with the Securities and Exchange
Commission, Evergreenwas named as a defendant in a class action
lawsuit filed in the Denver District Court on December 26, 2002.
The plaintiffs are royalty owners and overriding royalty owners who
alleged that they were underpaid royalties and sought to recover
damages and declaratory and injunctive relief. Due to a preliminary
settlement between the parties, Evergreen is taking an after-tax
charge to earnings of $2.0 million or 5 cents per diluted share in
the fourth quarter of 2003. This total includes the settlement,
legal fees and other associated costs. The court recently approved
the preliminary settlement agreement. Final approval may come in
April 2004. Evergreen Resources is an independent energy company
engaged primarily in the exploration, development,production,
operation and acquisition of unconventional natural gas properties.
Evergreen is one of the leading developers of coal bed methane
reserves in the United States. Evergreen's current operations are
principally focused on developing and expanding its coal bed
methane project located in the Raton Basin in southern Colorado.
Evergreen has also begun coal bed methane projects in Alaska and in
the Forest City Basin of eastern Kansas and holds conventional oil
and gas producing property interests in the Piceance Basin of
western Colorado, the Uintah Basin of eastern Utah, and in the
Western Sedimentary Basin in south-central Alberta, Canada. This
press release contains forward-looking statements within the
meaning of federal securities laws, including statements regarding,
among other things, the company's growth strategies; anticipated
trends in the company's business and its future results of
operations; market conditions in the oil and gas industry; the
ability of the company to make and integrate acquisitions; and the
impact of government regulations. These forward-looking statements
are based largely on the company's expectations and are subject to
a number of risks and uncertainties, many of which are beyond the
company's control. Actual results could differ materially from
those implied by these forward-looking statements as a result of,
among other things, a decline in natural gas production, a decline
in natural gas prices, incorrect estimations of required capital
expenditures, increases in the cost of drilling, completion and gas
collection, an increase in the cost of production and operations,
an inability to meet projections, and/or changes in general
economic conditions. In light of these and other risks and
uncertainties of which the company may be unaware or which the
company currently deems immaterial, there can be no assurance that
actual results will be as projected in the forward-looking
statements. These and other risks and uncertainties are described
in more detail in the company's most recent Annual Report on Form
10-K filed with the Securities and Exchange Commission.
http://www.evergreengas.com/ DATASOURCE: Evergreen Resources, Inc.
CONTACT: John B. Kelso, Director of Investor Relations of Evergreen
Resources, Inc., +1-303-298-8100 Web site:
http://www.evergreengas.com/
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