HKN, Inc. (NYSE Amex: HKN) ("HKN") today reported its interim
financial results for the three and nine months ended September 30,
2009. HKN reported net losses of $615 thousand and $1.9 million,
respectively, during the three and nine months ended September 30,
2009 as compared to a net loss of $3.3 million and net income of
$193 thousand for the respective prior year periods.
Focus on Efficient Operations and Capital Structure
-- During 2009, our oil and gas revenue has been comprised of
approximately 82% from oil sales and 18% from natural gas sales. During
the nine months ended September 30, 2009, oil prices decreased 53% from an
average of $114.48 per barrel in the prior year period to $53.72 per barrel
in 2009. Prices realized for natural gas sales decreased 63%, averaging
$10.82 per mcf in 2008 compared to $4.02 per mcf during 2009.
-- Our oil and gas operating expense decreased 38%, decreasing from
approximately $3.5 million during third quarter 2008 to $2.2 million during
third quarter 2009 due primarily to lower operating costs at our Main Pass
35 field, lower production taxes, as well as certain hurricane repair costs
which were incurred during third quarter 2008.
-- General and administrative expenses decreased 33% from $1.2 million
for the third quarter 2008 to $834 thousand for the third quarter 2009
primarily due to overall lower salary and personnel costs along with
decreased rent and consultant fees.
-- In spite of the challenging commodity pricing markets, we continue to
be in a financially-stable position. During the nine months ended September
30, 2009, we had positive cash flow from our operations. We have no debt
outstanding, and we have a cash balance of approximately $11.3 million at
September 30, 2009.
-- We used approximately $2.4 million during the 2009 period for capital
projects. The majority of these capital expenditures were used for
upgrades and improvements at our Main Pass 35 facility as well as the
completion of two producing wells at our Creole field which increased both
our reserves and production from this field.
-- We deployed cash of $1 million to redeem 10,000 shares of our Series M
Preferred, for which the cash dividend rate increased from 8% to 10%, and
$1.7 million to repurchase shares of our common stock during the first nine
months of 2009.
Upgrades and Improvements at Main Pass 35 Facilities
During 2009, we have focused on enhancing the value of our Main
Pass 35 field, which is located offshore Louisiana in the Gulf of
Mexico, by performing various process and structural upgrades and
improvements to the facility and its equipment. We believe our Main
Pass 35 asset has unique characteristics such as low-decline oil
production, behind-pipe development potential as well as
third-party oil, gas and water processing and handling services for
neighboring fields in the area. We continue to focus on enhancing
this asset by improving operational efficiencies, reducing
maintenance costs and reducing the third-party dependency of our
Main Pass 35 asset.
HKN's operating results for the three and nine months ended
September 30, 2009 and 2008 are as follows (in thousands, except
for share and per share amounts)
Three Months Ended
------------------------
September 30,
------------------------
2009 2008
----------- -----------
(unaudited) (unaudited)
Oil Revenues $ 2,369 $ 4,113
Gas Revenues $ 280 $ 1,839
Trade Losses $ - $ (849)
Fees, Interest and Other Revenues $ 450 $ 503
Oil and Gas Operating Expenses $ 2,169 $ 3,478
General and Administrative Expenses $ 834 $ 1,245
Provision for Doubtful Accounts $ (49) $ -
Operating Margin (Non-GAAP; see reconciliation
below) $ 145 $ 883
Depreciation, Depletion, Amortization and
Accretion $ 752 $ 1,190
Net Loss $ (615) $ (3,266)
Net Loss Attributed to Noncontrolling Interests $ 160 $ 62
Net Loss Attributed to HKN, Inc. $ (455) $ (3,204)
Net Loss Attributed to Common Stock $ (528) $ (3,276)
Basic and Diluted Net Loss per Common Share $ (0.05) $ (0.34)
Basic and Diluted Weighted Average Common Shares
Outstanding 9,639,077 9,638,039
Nine Months Ended
------------------------
September 30,
------------------------
2009 2008
----------- -----------
(unaudited) (unaudited)
Oil Revenues $ 6,108 $ 13,238
Gas Revenues $ 1,344 $ 5,967
Trade Losses $ - $ (2,270)
Fees, Interest and Other Revenues $ 1,769 $ 2,023
Oil and Gas Operating Expenses $ 5,981 $ 8,554
General and Administrative Expenses $ 2,023 $ 3,491
Provision for Doubtful Accounts $ 222 $ -
Operating Margin (Non-GAAP; see reconciliation
below) $ 995 $ 6,913
Depreciation, Depletion, Amortization and
Accretion $ 2,736 $ 3,680
Net Income (Loss) $ (1,891) $ 193
Net Loss Attributed to Noncontrolling Interests $ 160 $ 75
Net Income (Loss) Attributed to HKN, Inc. $ (1,731) $ 268
Net Income (Loss) Attributed to Common Stock $ (2,086) $ 33
Basic and Diluted Net Income (Loss) per Common
Share $ (0.23) $ 0.00
Basic and Diluted Weighted Average Common Shares
Outstanding 9,165,322 9,684,609
Balance Sheet Summary (in thousands)
September 30, December 31,
------------- -------------
2009 2008
------------- -------------
(unaudited)
Current Ratio (1) 3.91 to 1 5.77 to 1
Working Capital (2) $ 10,535 $ 16,102
Cash and Marketable Securities $ 11,291 $ 15,219
Total Debt $ - $ -
Total Stockholders' Equity $ 62,932 $ 59,904
Total Liabilities to Equity 0.16 to 1 0.15 to 1
(1) Current ratio is calculated as current assets divided by current
liabilities.
(2) Working capital is the difference between current assets and current
liabilities.
NON-GAAP FINANCIAL MEASURE
Reconciliation of Operating Margin to Net Income (Loss) (in thousands)
Three Months Ended
September 30,
--------------------------
2009 2008
------------ ------------
(unaudited) (unaudited)
Net Loss - GAAP $ (615) $ (3,266)
Depreciation, Depletion, and Amortization 752 1,190
Interest Expense and Other Losses (Gains) (42) 5
Equity in Losses (Earnings) of Spitfire 50 (97)
Impairment of Investment in Spitfire - 2,787
Income Tax Expense - 264
------------ ------------
Operating Margin $ 145 $ 883
============ ============
Nine Months Ended
September 30,
------------ ------------
2009 2008
------------ ------------
(unaudited) (unaudited)
Net Income (Loss) - GAAP $ (1,891) $ 193
Depreciation, Depletion, and Amortization 2,736 3,680
Interest Expense and Other Losses 17 50
Equity in Losses (Earnings) of Spitfire 173 (68)
Impairment of Investment in Spitfire - 2,787
Income Tax Expense (Benefit) (40) 271
------------ ------------
Operating Margin $ 995 $ 6,913
============ ============
Management believes the presentation of this non-GAAP financial
measure, in connection with the results for the three and nine
months ended September 30, 2009 and 2008, provides useful
information to investors regarding our results of operations.
Management also believes that this non-GAAP financial measure
provides a picture of our results that is comparable among
reporting periods and provides factors that influenced performance
during the period under the report. This non-GAAP financial measure
should be considered in addition to, and not as a substitute for,
financial measures prepared in accordance with GAAP.
HKN, Inc. is an independent energy company engaged in the
development and production of crude oil, natural gas and coalbed
methane assets and in the active management of energy-based
investments. Additional information may be found at the HKN Web
site, www.hkninc.com. Please e-mail all investor inquiries to
HKNinquiries@ctaintegrated.com.
Certain statements in this announcement and inferences derived
therefrom may be regarded as "forward-looking statements" within
the meaning of the Securities Exchange Act of 1934, as amended.
These forward-looking statements are based on the opinions and
estimates of management at the time the statements are made.
Management's current view and plans, however, are subject to
numerous known and unknown risks, uncertainties and other factors
that may cause the actual results, performance, timing or
achievements of HKN to be materially different from any results,
performance, timing or achievements expressed or implied by such
forward-looking statements. The various uncertainties, variables,
and other risks include those discussed in detail in the Company's
SEC filings, including the Annual Report on Form 10-K filed on
February 18, 2009. HKN undertakes no duty to update or revise any
forward-looking statements. Actual results may vary materially.
For Further Information Contact: Investor Relations Email: Email
Contact www.hkninc.com
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