SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 7, 2004
---------------
CREDO Petroleum Corporation
________________________________________________________________
(Exact name of registrant as specified in its charter)
Colorado 0-8877 84-0772991
________________________________________________________________
(State or other jurisdiction Commission IRS Employer
of incorporation) File Number Identification No.
1801 Broadway, Suite 900 Denver, Colorado 80202
________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (303) 297-2200
________________________________________________________________
Item 12. Results of Operations and Financial Condition.
CREDO Petroleum Corporation Press Release dated
January 7, 2004, entitled
"CREDO Reports Record Fiscal 2003 Earnings of
$0.78 Per Share Financial and Operational Results
Rise to New Record"
________________________________________________________________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CREDO PETROLEUM CORPORATION
(Registrant)
Date: January 8, 2004 By: /s/ James P. Garrett, Jr.
-------------------------
James P. Garrett, Jr.
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
NEWS RELEASE
FOR IMMEDIATE RELEASE Contact: James P. Garrett, Jr.
Vice President & CFO
www.credopetroleum.com
CREDO REPORTS RECORD FISCAL 2003 EARNINGS OF $0.78 PER SHARE
Financial and Operational Results Rise to New Records
DENVER, COLORADO, January 7, 2004--CREDO Petroleum Corporation
(NASDAQ: CRED) today reported record results for its fiscal year
ended October 31, 2003. Net income jumped 144% to $3,130,000 on
higher gas prices and record production. This compares to net
income of $1,282,000 last year. On a per diluted share basis,
net income was $.78 compared to $.32 last year. Revenue rose 58%
to $8,491,000 compared to $5,358,000 last year. Cash flow from
operating activities (before changes in operating assets and
liabilities) jumped 89% to $5,413,000.
Fiscal 2003 net income includes $.02 per share related to a
one-time credit for the cumulative effect of adopting Financial
Accounting Standards Board Statement No. 143, Accounting for
Asset Retirement Obligations.
Fourth quarter net income surged to $1,146,000 compared to
$374,000 last year. On a per diluted share basis, net income was
$.28 compared to $.11 last year.
James T. Huffman, President said, "In 2003, we established
significant new records in virtually every operational and
financial category, highlighted by a 22% return on equity. New
drilling propelled production growth while Calliope drove reserve
growth. As 2003 demonstrates, that combination, together with
good product prices, can produce excellent results."
PRODUCTION VOLUMES SET ANOTHER RECORD
On the heels of last year's 43% increase, total production
volumes rose another 9% in fiscal 2003 to a record 1.66 Bcfge
(billion cubic feet of gas-equivalent) compared to 1.52 Bcfge
last year. Natural gas production rose 12% to a record 1.45 Bcfg
compared to 1.30 Bcfg last year. Crude oil and condensate sales
fell 5% to 35,000 barrels.
Fourth quarter production surged 48% to 516 MMcfge (million cubic
feet of gas equivalent) compared to 350 MMcfge last year, as new
wells came on line.
OPERATIONAL RESULTS SET NEW RECORDS
Capital spending increased 124% to $5,520,000, by far the highest
level in company history. As a result, reserve additions and
production replacement rose to significant new records.
Proved reserves jumped 41% to a sixth consecutive annual record.
At year-end 2003, proved reserves totaled 16.1 Bcfge. Virtually
all reserves were classified in the proved developed category.
The company typically does not add reserves for offset drilling
locations or Calliope candidate wells. Natural gas accounted for
86% of reserve volumes.
The undiscounted value of reserves was $45,165,000 at year-end,
and the discounted value (at 10%) was $28,024,000. Average
wellhead prices used to calculate reserve values were $3.99 per
Mcf and $28.64 per barrel.
The company added 6.3 Bcfge of new reserves, replacing 377% of
its 2003 production. The per unit finding cost was $0.86 per
Mcfge (thousand cubic feet of gas equivalent), or $5.15 per
barrel of oil equivalent. This year's finding cost is 22% lower
than last year and 10% under the company's three-year average
finding cost. Historically, the company's finding costs have
ranked in the best quartile of U.S. oil and gas companies.
"Driving down finding cost was a very significant achievement
because tight supply and increased demand are rapidly increasing
the price of field services," Huffman said. "This demonstrates
how Calliope's low risk and modest cost balanced the higher risk
and cost of our drilling program to yield an excellent overall
result."
Net income per unit of production increased 125% to $1.89 per
Mcfge, or $11.32 per BOE. This compares to $0.84 per Mcf, or
$5.06 per BOE. Last year John S. Herold, Inc. ranked the company
14th among U.S. oil and gas companies based on net income per
unit of production.
PRODUCT PRICES RISE SHARPLY;
ESTIMATED FISCAL 2004 PRODUCTION PARTIALLY HEDGED
Total natural gas price realizations for fiscal 2003 rose 50% to
$4.50 per Mcf compared to $3.00 last year. Hedging transactions
reduced gas price realizations by $.07 per Mcf in 2003 compared
to adding $.39 last year. Net wellhead natural gas prices were
$4.57 per Mcf compared to $2.61 last year. Wellhead oil prices
rose 26% to $27.68 per barrel compared to $22.01 last year.
For the fourth quarter, total natural gas price realizations rose
58% to $5.02 per Mcf compared to $3.18 last year. Hedging
transactions increased gas price realizations by $.14 per Mcf in
the fourth quarter compared to $.51 last year. Wellhead oil
prices rose 5% to $27.88 per barrel.
In 2003, hedging transactions resulted in a $66,000 after tax
loss compared to a $369,000 gain last year. For the first
quarter of fiscal 2004 (November through January), hedging
transactions resulted in a $60,000 after tax gain.
The company currently has open hedge positions totaling 1.0 Bcfg
covering the months of February through October 2004 at an
average NYMEX price of $4.92 per Mcf. This hedge represents
approximately 85% of the company's estimated production for the
months of February and March and 55% to 60% of such production
for April through October 2004. Average gas prices in the
company's market areas are expected to be 15% to 17% below NYMEX
prices due to basis differentials and transportation costs.
STRONG FINANCIAL CONDITION CONTINUES TO PROVIDE
A SOLID FOUNDATION FOR GROWTH
At October 31, 2003, working capital was $6,577,000. Total
assets were $23,572,000 including cash and short-term investments
of $6,663,000. Stockholders' equity was a record $17,635,000.
The company's only long-term debt is a $355,000 exclusive license
obligation that is payable over six years.
DRILLING AND CALLIOPE OPERATIONS MAKE EXCELLENT PROGRESS
CREDO's business focuses on two core projects--natural gas
drilling along the shelf of the Northern Anadarko Basin of
Oklahoma and application of its patented Calliope Gas Recovery
System. The company believes that, in combination, these two
projects provide an excellent (and possibly unique) balance for
achieving its goal of adding long-lived gas reserves and
production at reasonable costs and risks.
Drilling Activities. During 2003, the company drilled 21 wells
in Oklahoma with working interests ranging up to 60%. Eighteen
(18) of the wells were completed as producers. Drilling was
concentrated in Ellis and Harper Counties on the company's
17,000 gross acre Sand Creek Prospect and its 6,000 gross acre
Two Springs Prospect where 18 wells were drilled. The wells
targeted the Morrow and Chester formations between 7,000 and
9,000 feet. A promising well was also drilled on the Traxler
Prospect located in Beaver County, Oklahoma. Both the Sand Creek
and Two Springs properties have ample room for additional wells
to be drilled and the company believes that more excellent wells
are likely.
Calliope Gas Recovery System. During 2003, the company installed
Calliope on six dead or uneconomic wells with 100% success.
Included in those wells was an 18,400-foot well which has
recently produced over 600 Mcfg per day after being dead for
three years. This well extended Calliope's depth record by
5,600 feet, or 43%. The company is in various stages of
preparing to install new Calliope systems on four additional
wells in Oklahoma.
MANAGEMENT COMMENT
"This was a superb year for our company because both core
projects produced excellent results during a period of strong
product prices," Huffman said. "We added significant value to
our company in 2003. Because these two core projects are
repeatable and scalable, we are confident that CREDO will
continue to produce superior long-term results."
* * * * *
CREDO Petroleum Corporation is a publicly traded independent
energy company headquartered in Denver, Colorado. The company is
engaged in the exploration for and the acquisition, development
and marketing of natural gas and crude oil in the Mid-Continent
and Rocky Mountain regions. The company's stock is traded on the
NASDAQ System under the symbol "CRED" and is quoted daily in the
"NASDAQ Small-Cap Issues" section of The Wall Street Journal.
This press release includes certain statements that may be deemed
to be "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
All statements included in this press release, other than
statements of historical facts, address matters that the company
reasonably expects, believes or anticipates will or may occur in
the future. Such statements are subject to various assumptions,
risks and uncertainties, many of which are beyond the control of
the company. Investors are cautioned that any such statements
are not guarantees of future performance and that actual results
or developments may differ materially from those described in the
forward-looking statements.
CREDO PETROLEUM CORPORATION
FINANCIAL HIGHLIGHTS
Year Ended Year Ended
Condensed Operating October 31, October 31,
Information 2003 2002
------------ ------------
Revenue:
Oil and Gas Sales $ 7,494,000 $ 4,698,000
Operating 536,000 488,000
Investment Income and Other 461,000 172,000
------------ ------------
8,491,000 5,358,000
------------ ------------
Expenses:
Oil and Gas Production 1,608,000 1,291,000
Depreciation, Depletion and
Amortization 1,333,000 1,202,000
General and Administrative 1,257,000 1,060,000
Interest 46,000 49,000
------------ ------------
4,244,000 3,602,000
------------ ------------
Income Before Income Taxes 4,247,000 1,756,000
Income Taxes (1,189,000) (474,000)
Cumulative Effect of Change in
Accounting Principle 72,000 -
------------ ------------
Net Income $ 3,130,000 $ 1,282,000
============ ============
Basic Income per Share Before
Accounting Change $ .77 $ .33
Cumulative Effect of Change
in Accounting Principle .02 -
------ ------
Basic Income Per Share $ .79 $ .33
====== ======
Diluted Income per Share Before
Accounting Change $ .76 $ .32
Cumulative Effect of Change
in Accounting Principle .02 -
------ ------
Diluted Income Per Share $ .78 $ .32
====== ======
Condensed Balance Sheet
Information October 31, 2003 October 31, 2002
---------------- ----------------
Cash and Short-Term Investments $ 6,663,000 $ 6,910,000
Other Current Assets 1,900,000 1,502,000
Oil and Gas Properties, Net 14,061,000 9,677,000
Exclusive License Agreement, Net 478,000 548,000
Other Assets 470,000 174,000
------------ ------------
$ 23,572,000 $ 18,811,000
============ ============
Current Liabilities $ 1,986,000 $ 1,782,000
Deferred Income Taxes 3,358,000 2,314,000
Exclusive License Agreement
Obligation 355,000 408,000
Asset Retirement Obligations 238,000 -
Stockholders' Equity 17,635,000 14,307,000
------------ ------------
$ 23,572,000 $ 18,811,000
============ ============