RELEASE: November 5, 2009
HKN Announces Continued Positive
Cash Flow from Operations
with Decreased Operating
and Overhead Costs
Dallas, Texas – November 5, 2009 – 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.
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)
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 (Loss)
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