|HKN Announces Over 100% Increase in Profitability in First Quarter 2008
|Dallas, Texas – May 6, 2008 – HKN, Inc. (AMEX: HKN) (”HKN”) today reported its interim financial results for the three months ended March 31, 2008. HKN reported net income of $1.1 million during the first three months of 2008 as compared to $433 thousand in the first three months of 2007. Significant financial highlights for the three months ended March 31, 2008 as compared to the prior year period for HKN and its investments include the following:
Consistent with our strategy to deploy assets into energy-based opportunities, we:
• Held approximately $15.5 million outstanding of average notional value in exchange-traded written positions in our energy trading portfolio.
• Deployed capital expenditures of $519 thousand for development drilling on new interests (the RC Roberson #1 well) in the NW Speaks field in South Texas, completion costs on the successful Boquillas #1 well also in South Texas as well as other projects.
Consistent with our focus to improve our financial condition and optimize the value of our assets through collective expectations and objectives, we:
• Improved our current ratio (defined as current assets divided by current liabilities) to 5.81 to 1.00 at March 31, 2008 as compared to 5.48 to 1.00 at December 31, 2007.
• Held no debt outstanding during the three months ended March 31, 2008.
• Increased our profitable operations resulting in net income of $1.1 million.
• Decreased depreciation, depletion and amortization rates per unit as a result of increased proved reserve volumes.
• Reaped a 53% increase in our crude oil revenue compared to prior year period due to increased commodity prices mitigating slight production decreases from our Lake Raccourci and Raymondville fields.
• Held our general and administrative expenses flat in an increasing-cost environment.
• Repurchased approximately 75 thousand common shares in the market.
Financial and Operational Disappointments:
• Fair value of our investment in Global Energy Development plc (“Global”) shares decreased in value to approximately $15.6 million due to Global’s lower share price on the London AIM Market exchange.
• Non-operated natural gas production declined 36% compared to first quarter 2007 due to lower than anticipated partner generated well workover and drilling activity.
HKN’s operating results for the three months ended March 31, 2008 and 2007 are as follows
(in thousands except for share and per share amounts)
Balance Sheet Summary (in thousands)
(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 (in thousands)
Management believes the presentation of this non-GAAP financial measure, in connection with the results for the three months ended March 31, 2008 and 2007, 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 investments in energy industry securities traded on both domestic and international securities exchanges. 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 19, 2008. HKN undertakes no duty to update or revise any forward-looking statements. Actual results may vary materially.