Dallas, TX - December 17, 2004 - HKN, Inc. (AMEX: HEC) announced that Perupetro S.A. ("Perupetro"), the national oil company of Peru, has approved for signature a new license contract between Perupetro and Global Energy Development PLC ("Global"), Harken's 85% owned subsidiary, for the Exploration and Exploitation of Hydrocarbons in the Block 95 Area located in the Maraņon Basin of Northeastern Peru.
This approval represents a required statutory step towards the signing of Global's first contract in Peru. The company anticipates that the contract will be signed by Global and Perupetro and subsequently become effective by the end of the first quarter of 2005.
The approval follows a 2001 Technical Evaluation Agreement which Global entered into with Perupetro. Global conducted an extensive study of the Block 95 Area that included the reprocessing of seismic data and evaluation of previous well data.
The Bretaņa field, located in the Block 95 Area, was identified in the early 1970s. In 1974 the Bretaņa # 1 well tested 18 degree API gravity oil at rates of approximately 800 barrels of oil per day.
It is anticipated that when signed, the contract will assign Global exclusive exploration and production rights to approximately 1,255,000 acres and that Global will own a 100% working interest in the contract subject only to an initial 5% royalty. The size of the royalty is to be determined by future production levels. The contract duration is currently set at approximately seven years for the initial exploration phases and 23 years for the exploitation phase.
Commenting on the forthcoming Peruvian contract, Stephen C. Voss, Managing Director for Global Energy Development PLC, said, "We are delighted to announce this significant step towards signing our first exploration and exploitation contract in the country of Peru. Block 95 is a portion of the original Area III that the company evaluated over the last three years under the TEA, and identified a number of opportunities including the Bretaņa oilfield. We believe the Bretaņa oilfield is a development drilling opportunity, based on data provided by independent engineers. In addition, the company considers the remaining contract acreage to offer exploration opportunities. Global looks forward to completing the signing procedure and commencing operations on this exciting area."
HKN, Inc. is engaged in oil and gas exploration, development and production operations both domestically and internationally through its various subsidiaries. Additional information may be found at the Harken Energy Web site, www.harkenenergy.com, or by calling Bevo Beaven or Bill Conboy at CTA Public Relations at (303) 665-4200.
This announcement may contain forward-looking statements
as defined by the Securities and Exchange Commission. Harken,
however, believes that it is important to provide this operations
update and communicate its future expectations to its stockholders.
The forward-looking statements in this announcement such as
"potential", "accelerate" and "growth" reflect the current
view of management with regard to future events and are subject
to numerous known and unknown risks, uncertainties and other
factors that may cause the actual results, performance, timing
or achievements of Harken to be materially different from
any results, performance, timing or achievements expressed
or implied by such forward-looking statements. These risks,
uncertainties and other factors include, among others, the
risks described in Harken's filings with the Securities and
Exchange Commission including the Annual Report on Form 10-K
for the fiscal year ended December 31, 2003 filed on March
26, 2004 and its Form 10-Q for the quarter and nine months
ended September 30, 2004 filed on November 5, 2004. Statements
regarding future production are subject to all of the risk
and uncertainties normally associated with exploration, development
and production of oil and gas. These risks include, without
limitation, variability in the price received for oil and
gas production, lack of availability of oil field goods and
services, environmental risks, drilling and production risk,
risk related to offshore operations, and regulatory changes.
Investors are cautioned that any such statements are not guarantees
of future performance and that actual results or developments
may differ materially from those projected in the forward-looking
statements. Although Harken believes that the expectations
reflected in the forward-looking statements of this announcement
are reasonable, it can give no assurance that such expectations
will prove to be correct or that unforeseen developments will
not occur. Harken undertakes no duty to update or revise any
forward-looking statements.
###
Harken
Energy Announces Successful Re-completion, Commencement of
Production From Tilodiran #1 on Rio Verde Contract in Colombia
New Well tested at 800 Barrels of
Oil per Day
Dallas, TX - December 14, 2004 - HKN, Inc.
(AMEX: HEC) announced that its 85% owned subsidiary, Global
Energy Development PLC ("Global"), has successfully re-completed
and commenced production from the Tilodiran # 1 well located
on the 75,000 acre Rio Verde Exploration and Production Contract
in Colombia (the "Rio Verde Contract").
This commencement of production following the signing of the Rio Verde Contract in September represents the shortest interval in Global's history between contract signing and first production. Global now holds four contracts in Colombia from which production is being achieved.
Global tested Tilodiran # 1 at a rate of 800 (gross) barrels of oil per day of 20 degree API gravity oil. Global owns a 100% working interest in the Tilodiran # 1 well.
Commenting on
Tilodiran # 1 and the Rio Verde Contract, Stephen C. Voss,
Global's Managing Director said, "The Rio Verde Contract is
proving to be a significant addition to the company's portfolio.
Tilodiran # 1 has quickly supplemented our existing production
and we are now turning our attention to another existing well
on the contract acreage, the Macarenas # 1. In addition to
having an immediate positive effect on cash flow, the contract
offers additional development opportunities around the Tilodiran
# 1 and Macarenas # 1 wells along with significant upside
exploration potential on the rest of the acreage."
Harken separately announced today positive test results and
initial production from Global's development well, Estero
# 5, located in the adjoining Palo Blanco field within Colombia's
Llanos Basin.
HKN, Inc. is engaged in oil and gas exploration, development and production operations both domestically and internationally through its various subsidiaries. Additional information may be found at the Harken Energy Web site, www.harkenenergy.com, or by calling Bevo Beaven or Bill Conboy at CTA Public Relations at (303) 665-4200.
This announcement may contain forward-looking statements
as defined by the Securities and Exchange Commission. Harken,
however, believes that it is important to provide this operations
update and communicate its future expectations to its stockholders.
The forward-looking statements in this announcement such as
“potential”, “accelerate” and “growth”
reflect the current view of management with regard to future
events and are subject to numerous known and unknown risks,
uncertainties and other factors that may cause the actual
results, performance, timing or achievements of Harken to
be materially different from any results, performance, timing
or achievements expressed or implied by such forward-looking
statements. These risks, uncertainties and other factors include,
among others, the risks described in Harken’s filings
with the Securities and Exchange Commission including the
Annual Report on Form 10-K for the fiscal year ended December
31, 2003 filed on March 26, 2004 and its Form 10-Q for the
quarter and nine months ended September 30, 2004 filed on
November 5, 2004. Statements regarding future production are
subject to all of the risk and uncertainties normally associated
with exploration, development and production of oil and gas.
These risks include, without limitation, variability in the
price received for oil and gas production, lack of availability
of oil field goods and services, environmental risks, drilling
and production risk, risk related to offshore operations,
and regulatory changes. Investors are cautioned that any such
statements are not guarantees of future performance and that
actual results or developments may differ materially from
those projected in the forward-looking statements. Although
Harken believes that the expectations reflected in the forward-looking
statements of this announcement are reasonable, it can give
no assurance that such expectations will prove to be correct
or that unforeseen developments will not occur. Harken undertakes
no duty to update or revise any forward-looking statements.
###
Harken
Energy Subsidiary Places Estero # 5 Well on Production
Further Production Added to the
Palo Blanco Field
Dallas, TX - December 14, 2004 - HKN, Inc.
(AMEX: HEC) announced that its 85% owned subsidiary, Global
Energy Development PLC ("Global"), has completed testing its
development well, Estero 5, located in the Palo Blanco field
within Colombia's Llanos Basin, and placed the well on production.
Global perforated and tested the Traditional Ubaque and Upper
Massive Ubaque formations of Estero # 5. The combined test
resulted in a rate of 200 barrels of oil per day of 15.6 degree
API gravity oil.
Estero # 5, in which Global owns a 100% working interest,
brings to five the number of wells currently producing within
the Palo Blanco field where Global has now established three
producing reservoirs.
Commenting on the Estero # 5 well and Palo Blanco field, Stephen
C. Voss, Global's Managing Director said, "From the success
of the Estero # 5 well, we believe that substantial additional
reserves exist in the Palo Blanco field and we have identified
additional locations to be drilled. The combined activity
on our Palo Blanco and Rio Verde acreage comprises the most
active drilling and completion program in Global's history."
Harken also announced separately today Global's successful
re-completion and commencement of production from the Tilodiran
# 1 well within Global's 75,000 acre Rio Verde Exploration
and Production Contract in Colombia.
HKN, Inc. is engaged in oil and gas exploration,
development and production operations both domestically and
internationally through its various subsidiaries. Additional
information may be found at the Harken Energy Web site, www.harkenenergy.com,
or by calling Bevo Beaven or Bill Conboy at CTA Public Relations
at (303) 665-4200.
This announcement may contain forward-looking statements
as defined by the Securities and Exchange Commission. Harken,
however, believes that it is important to provide this operations
update and communicate its future expectations to its stockholders.
The forward-looking statements in this announcement such as
“potential”, “accelerate” and “growth”
reflect the current view of management with regard to future
events and are subject to numerous known and unknown risks,
uncertainties and other factors that may cause the actual
results, performance, timing or achievements of Harken to
be materially different from any results, performance, timing
or achievements expressed or implied by such forward-looking
statements. These risks, uncertainties and other factors include,
among others, the risks described in Harken’s filings
with the Securities and Exchange Commission including the
Annual Report on Form 10-K for the fiscal year ended December
31, 2003 filed on March 26, 2004 and its Form 10-Q for the
quarter and nine months ended September 30, 2004 filed on
November 5, 2004. Statements regarding future production are
subject to all of the risk and uncertainties normally associated
with exploration, development and production of oil and gas.
These risks include, without limitation, variability in the
price received for oil and gas production, lack of availability
of oil field goods and services, environmental risks, drilling
and production risk, risk related to offshore operations,
and regulatory changes. Investors are cautioned that any such
statements are not guarantees of future performance and that
actual results or developments may differ materially from
those projected in the forward-looking statements. Although
Harken believes that the expectations reflected in the forward-looking
statements of this announcement are reasonable, it can give
no assurance that such expectations will prove to be correct
or that unforeseen developments will not occur. Harken undertakes
no duty to update or revise any forward-looking statements.
###
HARKEN
ENERGY PROVIDES DOMESTIC OPERATIONS UPDATE
Dallas, TX – November 10, 2004 – HKN, Inc. (AMEX: HEC) has released updated production figures,
well completion status and increased 2004 expected capital
expenditures for its domestic oil and gas operations, which
are located primarily along the onshore and offshore Texas
and Louisiana Gulf Coast. Harken’s domestic operations
are managed by its wholly owned subsidiary, Gulf Energy Management
Company (“GEM”).
Currently, GEM’s net domestic production rate is at approximately 9 million cubic feet equivalent per day. Harken is committed to the continuing development of its domestic operations and has increased its 2004 budgeted capital expenditures by $3 million to approximately $12 million, to grow its Gulf Coast operations. The following field data updates the status of GEM’s domestic operations through the end of October.
Lapeyrouse
Field. Terrebonne Parish – Louisiana
GEM has participated in an active field redevelopment program
that has included an interest in 6 successful wells in the
Lapeyrouse field since the fourth quarter of 2003. GEM holds
an average non-operated working interest of 10% in each of
the six wells that are together producing at a combined gross
rate of 24 million cubic feet equivalent per day, for a net
production to GEM of approximately 1.6 million cubic feet
equivalent per day. Two additional wells have been proposed
and approved for drilling as soon as rigs become available.
Both are projected to have a total depth of about 15,000’
TVD.
Main Pass,
Plaquemines Parish – Louisiana
GEM sustained minor damage to its offshore facility from Hurricane
Ivan in September 2004 interrupting its Main Pass 35 operations.
Repairs are now essentially complete, and production from
Main Pass 35 has now fully resumed. GEM holds an average 90%
working interest in the Main Pass field. GEM continues its
geological and geophysical study, utilizing the recently acquired
license to 21 square miles of 3D seismic data covering the
area held by production leases.
Raymondville, Willacy and Kenedy Counties –
Texas
GEM is continuing to participate in an aggressive workover
and recompletion program at Raymondville to bring on new reservoir
production. This program has included 15 recompletions to
date this year, of which 14 have been successful. GEM has
an average 27% non-operated working interest in this field.
Lake Raccourci
Field, Lafourche Parish – Louisiana
As of October 2004, the Lake Raccourci field production rate,
which had doubled during the first quarter of 2004, is now
at approximately 8.5 million cubic feet per day, gross. GEM
holds a 40% operated working interest in each of its Lake
Raccourci wells. GEM is presently evaluating prospects in
the field using its 60-square mile reprocessed 3D seismic
database.
New 3D
Seismic Licenses Acquired – Louisiana
GEM has acquired a license covering approximately 155 square
miles of 3D seismic data in three different surveys across
south Louisiana. The largest database is in Terrebonne Parish
and includes approximately 70 square miles. Approximately
56 square miles is in Cameron Parish, and approximately 29
square miles in Iberville Parish. A number of leads have developed
in this continuing study. The process of cataloging and prioritizing
is underway.
New Mineral
Interest Acquired – Texas and Louisiana
GEM has acquired mineral interest in 6 drill-ready prospects
in Texas and Louisiana. These prospects are generally multi-well
opportunities, exploitation in nature with an exploration
component. The first two of these wells, in the South Beach
and Branville Bay Fields, as described below, have been drilled
and logged.
South
Beach Field, Chambers County – Texas
GEM has a non-operated working interest of 9.375% in this
area. The initial well was drilled to a true vertical depth
of 10,750 feet. The well was logged productive in two sands.
The well has been completed in the lower sand. Based on nearby
wells in the same sand, GEM expects initial production to
be about 7 million gross cubic feet of natural gas and about
300 gross barrels per day of condensate. First sales are expected
in late November or early December 2004.
Branville
Bay Field, Plaquemines Parish – Louisiana
GEM has a non-operated working interest of 12.5% in this area.
The initial well was drilled to a total depth of 7,400 feet.
This well also logged productive in two sands. The well was
completed as a dual with total expected gross production of
about 500 Bbls per day oil. The first sales of production
are expected in December 2004.
“We are pleased with the results from our domestic operations through the first ten months of 2004. Our two new successful wells have the potential to increase our current daily production by approximately 10%. Also, we are confident that further analysis of our existing and newly acquired 3-D seismic data will allow us to identify new prospects,” said Jim Denny, President of Gulf Energy Management Company, a wholly owned subsidiary of HKN, Inc.. “Since our last update we added four new prospects to complement our existing domestic portfolio and accelerate production growth. We remain strongly committed to our 2004 goal to add production and to generate increased sales of oil and gas from our domestic assets at reasonable finding costs.”
HKN, Inc. is engaged in oil and gas exploration, development and production operations both domestically and internationally through its various subsidiaries. Additional information may be found at the Harken Energy Web site, www.harkenenergy.com, or by calling Bevo Beaven or Bill Conboy at CTA Public Relations at (303) 665-4200.
This announcement may contain forward-looking statements
as defined by the Securities and Exchange Commission. Harken,
however, believes that it is important to provide this operations
update and communicate its future expectations to its stockholders.
The forward-looking statements in this announcement such as
“potential”, “accelerate” and “growth”
reflect the current view of management with regard to future
events and are subject to numerous known and unknown risks,
uncertainties and other factors that may cause the actual
results, performance, timing or achievements of Harken to
be materially different from any results, performance, timing
or achievements expressed or implied by such forward-looking
statements. These risks, uncertainties and other factors include,
among others, the risks described in Harken’s filings
with the Securities and Exchange Commission including the
Annual Report on Form 10-K for the fiscal year ended December
31, 2003 filed on March 26, 2004 and its Form 10-Q for the
quarter and nine months ended September 30, 2004 filed on
November 5, 2004. Statements regarding future production are
subject to all of the risk and uncertainties normally associated
with exploration, development and production of oil and gas.
These risks include, without limitation, variability in the
price received for oil and gas production, lack of availability
of oil field goods and services, environmental risks, drilling
and production risk, risk related to offshore operations,
and regulatory changes. Investors are cautioned that any such
statements are not guarantees of future performance and that
actual results or developments may differ materially from
those projected in the forward-looking statements. Although
Harken believes that the expectations reflected in the forward-looking
statements of this announcement are reasonable, it can give
no assurance that such expectations will prove to be correct
or that unforeseen developments will not occur. Harken undertakes
no duty to update or revise any forward-looking statements.
###
Harken
Energy Reports $4.5 Million Operating Margin in the Third
Quarter 2004
Dallas, Texas - November 8, 2004 - HKN, Inc.
(AMEX: HEC) reports quarterly financial results for the period
ended September 30, 2004. As summarized below, even with the
dampening effects from the temporary shut-in of offshore oil
and gas wells during a substantial portion of September 2004
due to the severe storms from Hurricane Ivan in the Gulf Coast
of Louisiana, total oil and gas revenues in the third quarter
of 2004 increased to $8.3 million, an increase of 12% over
the third quarter of 2003. Non-GAAP Operating Margin increased
to $4.5 million in the third quarter of 2004, representing
48% growth over the same period in the prior year, and 21%
improvement as compared to the second quarter of 2004.
In the first nine months of 2004, Harken generated $11.7 million in Operating Margin (non-GAAP; see reconciliation), a 61% increase over the comparable period in 2003, due largely to increased oil and gas prices, increased operating efficiencies, and an 15% decrease in general and administrative expenses as compared to the prior year period.
Operations Summary
During the third quarter of 2004, Harken’s domestic subsidiary, Gulf Energy Management Company (“GEM”), increased oil and gas revenues as compared to the prior year period due in part to increased oil and gas prices as well as success in GEM’s continued development drilling program. The increase in oil and gas revenues was dampened due to Hurricane Ivan which passed through the Louisiana Gulf Coast in September 2004 shutting-down offshore oil and gas wells and facilities for a large portion of the month. GEM’s production volumes in September 2004 from the Lake Raccourci field and Main Pass 35 field and facility were substantially reduced due to the severe storms. Overall damage to the wells and facilities was minimal, and GEM’s domestic oil and gas production has fully resumed in October 2004.
During the first
nine months of 2004, oil revenues from Harken’s Middle
America subsidiary, Global Energy Development (“Global”),
increased 44%, compared to the prior year period due to increased
oil prices and crude oil production. As previously announced,
in September 2004, Global signed a new Exploration and Production
Contract with the National Hydrocarbons Agency of the Republic
of Colombia for the Rio Verde area, located in the central
Llanos Region. The contract assigns Global exclusive exploration
and production rights to 75,000 acres located approximately
40 kilometers north of Global’s Palo Blanco complex.
Balance
Sheet Summary
Harken continued to improve its Working Capital by
over 237% since year-end 2003 to approximately $27 million
at September 30, 2004. Over the past twelve months, Harken’s
balance sheet has remained strong as detailed below:
Current ratio is calculated as current assets divided by current liabilities
Working capital / (deficit) in the difference between current assets and current liabilities
Chairman’s Comment:
Alan G. Quasha, Harken’s Chairman, stated, “The Company’s main focus and measurement of performance this year has been to grow our operating cash flow. Despite the adverse impact of Hurricane Ivan in September 2004, we managed to grow our operating margin, due in large part to favorable oil and gas prices. Nevertheless, we believe we are heading in the right direction, are accelerating our developmental drilling both domestically and in South America and are excited about our drilling prospects.”
Mr. Quasha continued,
“I would again like to address the Global Warrant liability
and caution against placing too much emphasis on the non-cash
accounting gain of $1.1 million for the change in the value
of the liability in the third quarter 2004. This gain stems
from the decline in Global’s common share price during
the third quarter, which we hope is temporary. We expect the
fundamental value of Global to continue to increase. Because
of accounting rules regarding derivatives, an increase in
the common share price of Global will result in a reported
loss to Harken, and as has happened in the third quarter 2004,
a decline in Global’s common share price will result
in a reported gain.”
More information
is available in HKN, Inc.’s Form 10-Q
for the period ended September 30, 2004 which may be accessed
through the Company’s website at www.harkenenergy.com.
NON-GAAP FINANCIAL MEASURE
Reconciliation of Operating Margin to Net Income
Management believes
the presentation of this non-GAAP financial measure, in connection
with the results for the three and nine months ended September
30, 2004, provides useful information to investors regarding
the Company’s results of operations. Management also
believes that this non-GAAP financial measure allows investors
to better evaluate on-going business performance and the 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.
Management believes the presentation of this non-GAAP financial measure, in connection with the results for the three and nine months ended September 30, 2004, provides useful information to investors regarding the Company’s results of operations. Management also believes that this non-GAAP financial measure allows investors to better evaluate on-going business performance and the 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.
Certain statements in this news release including phrases
such as “in our view”, “we believe”, “we
consider”, “we expect,” “we anticipate”
and “we hope” relating to Harken’s revenue,
profit, dividends, cash flow, securities held by Harken and
earnings expectations; statements regarding future expectations
and plans for oil and gas exploration, development and production;
and statements regarding commodity pricing expectations may
be regarded as “forward looking statements” within
the meaning of the Securities Litigation Reform Act. These
forward-looking statements reflect the current view of management
with regard to its plans and expectations and other future
events. 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 Harken 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 for the fiscal year ended December
31, 2003 filed on March 26, 2004 and its Form 10-Q for the
quarter ended June 30, 2004 filed on August 12, 2004. Although
Harken believes that the expectations reflected in the forward-looking
statements of this announcement are reasonable, it can give
no assurance that such expectations will prove to be correct
or that unforeseen developments will not occur. Harken undertakes
no duty to update or revise any forward-looking statements.
Actual results may vary materially.
HARKEN
ENERGY SUBSIDIARY ACQUIRES NEW 85,000 ACRE EXPLORATION AND
PRODUCTION CONTRACT FOR THE LOS HATOS AREA IN COLOMBIA
New Area Adjoins the Established Palo Blanco Field
Dallas, TX - November 4, 2004 - HKN, Inc.
(AMEX: HEC) announced its 85% owned subsidiary, Global Energy
Development PLC (“Global”), signed a new Exploration
and Production Contract with the National Hydrocarbons Agency
of the Republic of Colombia for the Los Hatos area, located
in the central Llanos region.
Global will own 100% of the contract subject only to an initial
8% royalty payable to the Colombian Ministry of Energy. The
final size of the royalty is to be determined by future production
levels. The contract duration is approximately six years for
the exploration phase and 24 years for the exploitation phase.
The contract grants Global exclusive exploration and production
rights to 85,000 acres which adjoin the established, producing
Palo Blanco field. Terms of the contract require Global during
phase 1 to drill one exploratory well. The time period for
phase 1 is 16 months.
If Global elects to enter phase 2 of the contract, Global
must drill either one well or acquire 50 kilometers of 2D
seismic. Phases 3, 4 and 5, also optional, require one exploratory
well to be drilled per phase. Phases 2, 3, 4 and 5 have a
time period of 12 months each.
“We are very excited to have signed this new contract,”
said Stephen C. Voss, Managing Director of Global. “The
Los Hatos acreage is contiguous with our existing Alcaravan
acreage allowing the company the opportunity to potentially
expand the established Palo Blanco Field to the south. The
Los Hatos contract supplements our current active drilling
program in Palo Blanco where previous drilling activity has
indicated that additional reserves may exist in or near the
field.
“We plan to pursue the drilling of at least one exploratory
well in the new contract area, to be located south of our
Cajaro # 1 well which was drilled during 2003 and is now producing
high quality oil. Should this exploratory well be successful,
we believe additional drilling locations, reserves and production
could be added to our expanding Palo Blanco complex area.
At December 31, 2003, Harken listed proved reserves of approximately
1.8 million net barrels related to its interest in the Palo
Blanco field.
“We believe the Los Hatos contract, together with our
recently signed Rio Verde contract provides Harken with considerable
opportunities going forward.”
HKN, Inc. is engaged in oil and gas exploration,
development and production operations both domestically and
internationally through its various subsidiaries. Additional
information may be found at the Harken Energy Web site,
www.harkenenergy.com , or by calling Bevo Beaven or Bill
Conboy at CTA Public Relations at (303) 665-4200.
This announcement may contain forward-looking statements as defined by the Securities and Exchange Commission. Harken, however, believes that it is important to provide this operations update and communicate its future expectations to its stockholders. The forward-looking statements in this announcement reflect the current view of management with regard to future events and are subject to numerous known and unknown risks, uncertainties and other factors that may cause the actual results, performance, timing or achievements of Harken to be materially different from any results, performance, timing or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, the risks described in Harken’s filings with the Securities and Exchange Commission including the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed on March 26, 2004 and its Form 10-Q for the quarter ended June 30, 2004 filed on August 12, 2004. Statements regarding future production are subject to all of the risk and uncertainties normally associated with exploration, development and production of oil and gas. These risks include, without limitation, variability in the price received for oil and gas production, lack of availability of oil field goods and services, environmental risks, drilling and production risk, risk related to offshore operations, and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Although Harken believes that the expectations reflected in the forward-looking statements of this announcement are reasonable, it can give no assurance that such expectations will prove to be correct or that unforeseen developments will not occur. Harken undertakes no duty to update or revise any forward-looking statements.
Harken
Energy Reports Reduction In Outstanding Preferred Stock
Dallas, Texas - November 3, 2004 - HKN, Inc.
(AMEX: HEC) reports today that it has reduced its outstanding
Series G1 Convertible Preferred Stock (the “Series G1
Preferred”) and its Series G2 Convertible Preferred
Stock (the “Series G2 Preferred”), by entering
into agreements with the holders of the Series G1 and Series
G2 Preferred to convert their shares of preferred stock for
common stock. To repurchase approximately 96% of the outstanding
Series G1 and Series G2 Preferred with an aggregate liquidation
value of $30,617,700, Harken will issue 2,805,483 shares of
common stock.
Certain statements in this news release including phrases relating to Harken’s revenue, profit, dividends, cash flow, securities held by Harken and earnings expectations; statements regarding future expectations and plans for oil and gas exploration, development and production; and statements regarding commodity pricing expectations may be regarded as “forward looking statements” within the meaning of the Securities Litigation Reform Act. These forward-looking statements reflect the current view of management with regard to its plans and expectations and other future events. 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 Harken 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 for the fiscal year ended December 31, 2003 filed on March 26, 2004 and its Form 10-Q for the quarter and six months ended June 30, 2004 filed on August 12, 2004. Although Harken believes that the expectations reflected in the forward-looking statements of this announcement are reasonable, it can give no assurance that such expectations will prove to be correct or that unforeseen developments will not occur. Harken undertakes no duty to update or revise any forward-looking statements. Actual results may vary materially.
HARKEN
ENERGY SUBSIDIARY COMMENCES RIG MOBILIZATION TO THE TILODIRAN
# 1 WELL ON NEWLY ACQUIRED RIO VERDE ACREAGE IN COLOMBIA
Dallas, TX - October 26, 2004 - HKN, Inc.
(AMEX: HEC) through its 85% owned subsidiary, Global Energy
Development PLC, announces that it has commenced rig mobilization
to the Tilodiran # 1 well on its 75,000 acre Rio Verde Exploration
and Production Contract in Colombia.
Among other obligations, terms of the Rio Verde contract require
Harken to re-complete and equip for production two existing
wells located on the Rio Verde acreage, the Tilodiran # 1
and the Macarenas # 1. These wells, drilled in 1986 and 1993
respectively, tested productive. The Tilodiran # 1 was drill
stem tested at a rate of 258 barrels in five hours of 18 degree
to 23 degree API gravity oil. The Macarenas # 1 was drill
stem tested at a rate of 320 barrels per day of 33 degree
API gravity oil.
Harken expects that re-completion operations on the Tilodiran
# 1 will require 40 days to equip the well for continuous
production. Harken anticipates that following start-up of
production on the Tilodiran # 1, the same rig will be mobilized
to the Macarenas # 1 for similar re-completion operations.
Global owns a 100% working interest in both the Tilodiran
# 1 and Macarenas # 1 wells.
“The commencement of operations on the Rio Verde contract is ahead of our original expectations,” said Stephen C. Voss, Global’s Managing Director. “The Company only signed the contract in mid-September and we believe production will be starting by December of this year. This is the shortest interval between contract signing and first production in Global’s history. Besides these recompletions, which are the initial focus of our efforts during the remainder of 2004, we’re also extremely excited about additional development around the Tilodiran # 1 and Macarenas # 1 wells as well as the exploration opportunities located on the remaining Rio Verde contract acreage.”
HKN, Inc. is engaged in oil and gas exploration, development and production operations both domestically and internationally through its various subsidiaries. Additional information may be found at the Harken Energy Web site, http://www.harkenenergy.com, or by calling Bevo Beaven or Bill Conboy at CTA Public Relations at (303) 665-4200.
This announcement may contain forward-looking statements as defined by the Securities and Exchange Commission. Harken, however, believes that it is important to provide this operations update and communicate its future expectations to its stockholders. The forward-looking statements in this announcement reflect the current view of management with regard to future events and are subject to numerous known and unknown risks, uncertainties and other factors that may cause the actual results, performance, timing or achievements of Harken to be materially different from any results, performance, timing or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, the risks described in Harken’s filings with the Securities and Exchange Commission including the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed on March 26, 2004 and its Form 10-Q for the quarter ended June 30, 2004 filed on August 12, 2004. Statements regarding future production are subject to all of the risk and uncertainties normally associated with exploration, development and production of oil and gas. These risks include, without limitation, variability in the price received for oil and gas production, lack of availability of oil field goods and services, environmental risks, drilling and production risk, risk related to offshore operations, and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Although Harken believes that the expectations reflected in the forward-looking statements of this announcement are reasonable, it can give no assurance that such expectations will prove to be correct or that unforeseen developments will not occur. Harken undertakes no duty to update or revise any forward-looking statements.
###
HARKEN
ENERGY SUBSIDIARY COMMENCES DRILLING ESTERO # 5 WELL IN COLOMBIA
Dallas, TX – October 7, 2004 -- HKN, Inc.
(AMEX: HEC) through its 85% owned subsidiary, Global Energy
Development PLC, provides the following update on drilling
activity in Colombia, South America:
Drilling operations have commenced on the Estero #5 well,
located in the Llanos basin of Colombia, South America. The
Estero #5 is a development well in the Palo Blanco field.
The well is expected to take up to 35 days to drill and an
additional 15 days to complete, should drilling results be
favorable. The Estero #5 well has a projected drilling depth
of approximately 9,000 feet and will target the
Traditional Ubaque, Massive Ubaque and Mirador formations.
The Estero #5 well is the first of approximately nine wells
currently scheduled to be drilled and or completed within
the next 12 months in Global’s Palo Blanco field and
Global’s new Rio Verde Contract acreage.
HKN, Inc. is engaged
in oil and gas exploration, development and production operations
both domestically and internationally through its various
subsidiaries. Additional information may be found at the Harken
Energy Web site, http://www.harkenenergy.com,
or by calling Bevo Beaven or Bill Conboy at CTA Public Relations
at (303) 665-4200.
This announcement may contain forward-looking statements as defined by the Securities and Exchange Commission. Harken, however, believes that it is important to provide this operations update and communicate its future expectations to its stockholders. The forward-looking statements in this announcement reflect the current view of management with regard to future events and are subject to numerous known and unknown risks, uncertainties and other factors that may cause the actual results, performance, timing or achievements of Harken to be materially different from any results, performance, timing or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, the risks described in Harken’s filings with the Securities and Exchange Commission including the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed on March 26, 2004 and its Form 10-Q for the quarter ended June 30, 2004 filed on August 12, 2004. Statements regarding future production are subject to all of the risk and uncertainties normally associated with exploration, development and production of oil and gas. These risks include, without limitation, variability in the price received for oil and gas production, lack of availability of oil field goods and services, environmental risks, drilling and production risk, risk related to offshore operations, and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Although Harken believes that the expectations reflected in the forward-looking statements of this announcement are reasonable, it can give no assurance that such expectations will prove to be correct or that unforeseen developments will not occur. Harken undertakes no duty to update or revise any forward-looking statements.
HKN, Inc. Announces Stock Repurchase Plan
Dallas, TX – September 16, 2004 -- HKN, Inc.
(AMEX: HEC) today announced that its Board of Directors has
authorized a stock repurchase program allowing the Company
to buy back up to two million shares of its common stock.
All repurchases will be made from time to time in the open
market when opportunities to do so at favorable prices present
themselves in compliance with all applicable laws and regulations
including the Securities and Exchange Commission rules.
Alan G. Quasha, the Company’s Chairman stated, “Our
decision to institute a buyback program expresses our confidence
in the Company’s ability to deliver positive cash flow
and maintain a strong balance sheet. We believe that purchasing
the Company’s shares is an appropriate use of capital
and underscores our commitment to the best interests of our
shareholders.”
HKN, Inc. is engaged in oil and gas exploration, development and production operations both domestically and internationally through its various subsidiaries. Additional information may be found at the Harken Energy Web site, www.harkenenergy.com, or by calling Bevo Beaven or Bill Conboy at CTA Public Relations at (303) 665-4200.
This announcement may contain forward-looking statements as defined by the Securities and Exchange Commission. Harken, however, believes that it is important to provide this operations update and communicate its future expectations to its stockholders. The forward-looking statements in this announcement reflect the current view of management with regard to future events and are subject to numerous known and unknown risks, uncertainties and other factors that may cause the actual results, performance, timing or achievements of Harken to be materially different from any results, performance, timing or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, the risks described in Harken’s filings with the Securities and Exchange Commission including the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed on March 26, 2004 and its Form 10-Q for the quarter and six months ended June 30, 2004 filed on August 12, 2004. Statements regarding future production are subject to all of the risk and uncertainties normally associated with exploration, development and production of oil and gas. These risks include, without limitation, variability in the price received for oil and gas production, lack of availability of oil field goods and services, environmental risks, drilling and production risk, risk related to offshore operations, and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Although Harken believes that the expectations reflected in the forward-looking statements of this announcement are reasonable, it can give no assurance that such expectations will prove to be correct or that unforeseen developments will not occur. Harken undertakes no duty to update or revise any forward-looking statements.
Harken's
Global Energy Subsidiary Signs Exploration and Production
Contract for 75,000 Additional Acres in Colombia
Contract includes two existing wells; recompletions
will be initiated before year-end
Dallas, TX – September 15, 2004 – HKN, Inc. (AMEX: HEC) today reported that its 85.62% owned
subsidiary, Global Energy Development PLC, (“Global”)
has signed an Exploration and Production Contract with the
National Hydrocarbons Agency of the Republic of Colombia for
the Rio Verde area, located in the central Llanos region.
The contract assigns Global exclusive exploration and production
rights to 75,000 acres located approximately 40 kilometers
north of Global’s Palo Blanco complex.
Global will own 100% of the contract subject only to an additional
10.5% percent royalty, this payment being divided between
the Colombian Ministry of Energy and others. The size of the
royalty payable to the Colombian Ministry of Energy is determined
by future production levels. The contract duration is approximately
six years for the exploration phase and 24 years for the exploitation
phase. Terms of the contract require Global during Phase 1
to equip for production two existing wells located on the
Rio Verde acreage, the Tilodiran #1 and the Macarenas #1.
These wells, drilled in 1986 and 1993 respectively, tested
productive.
The Tilodiran #1 was drill stem tested at a rate of 258 barrels
in five hours of 18 degree to 23 degree API gravity oil. The
Macarenas #1 was drill stem tested at a rate of 320 barrels
per day of 33 degree API gravity oil. Also during Phase 1
of the contract, Global is required to reprocess 300 kilometers
of existing seismic and acquire 50 kilometers of new 2D seismic.
The time period for Phase 1 is 20 months.
If Global elects to enter Phase 2 of the contract, the company
must drill one exploration well and acquire a further 25 kilometers
of 2D seismic. Phases 3, 4 and 5, also optional, require one
exploratory well to be drilled per phase. Phases 2, 3, 4 and
5 have a time period of 12 months each.
Commenting on the Rio Verde contract, Stephen C. Voss, Managing
Director for Global Energy Development PLC, said, “We
are very pleased that Global is one of the first companies
to sign a new contract with the newly formed state-owned National
Hydrocarbons Agency. This new contract provides the company
with further reserves, near-term production growth opportunities
and significant upside exploration potential in an area in
which we have many years of operating experience.
“The recompletions of the Tilodiran #1 and the Macarenas
#1 are of special interest and will be the focus of our initial
efforts during the remainder of 2004. We hope to install subsurface
pumps and surface processing equipment for both wells and
bring them on production as soon as operationally possible.
In addition, we are excited about additional development around
the Tilodiran #1 and Macarenas #1 wells and the exploration
opportunities located on the remaining Rio Verde contract
acreage.”
HKN, Inc. is engaged in oil and gas exploration, development and production operations both domestically and internationally through its various subsidiaries. Additional information may be found at the Harken Energy Web site, www.harkenenergy.com, or by calling Bevo Beaven or Bill Conboy at CTA Public Relations at (303) 665-4200.
This announcement may contain forward-looking statements as defined by the Securities and Exchange Commission. Harken, however, believes that it is important to provide this operations update and communicate its future expectations to its stockholders. The forward-looking statements in this announcement reflect the current view of management with regard to future events and are subject to numerous known and unknown risks, uncertainties and other factors that may cause the actual results, performance, timing or achievements of Harken to be materially different from any results, performance, timing or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, the risks described in Harken’s filings with the Securities and Exchange Commission including the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed on March 26, 2004 and its Form 10-Q for the quarter and six months ended June 30, 2004 filed on August 12, 2004. Statements regarding future production are subject to all of the risk and uncertainties normally associated with exploration, development and production of oil and gas. These risks include, without limitation, variability in the price received for oil and gas production, lack of availability of oil field goods and services, environmental risks, drilling and production risk, risk related to offshore operations, and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Although Harken believes that the expectations reflected in the forward-looking statements of this announcement are reasonable, it can give no assurance that such expectations will prove to be correct or that unforeseen developments will not occur. Harken undertakes no duty to update or revise any forward-looking statements.
Harken
Announces New Venture to Capitalize on Energy Deregulation
in Eastern Europe
Dallas, TX - September 13, 2004 -- HKN, Inc.
(AMEX: HEC) is pleased to announce that it has made an investment
in International Business Associates, Ltd. (IBA), a privately
held company that will focus primarily on opportunities created
by the recent deregulation of the energy markets in Eastern
Europe. IBA’s planned transactions will consist primarily
of physical purchases of natural gas, use of pipeline capacity,
fuel management and available storage. IBA intends to capitalize
upon the skills, knowledge and relationships that IBA’s
principals have developed through their five year presence
in Hungary, the Ukraine and Russia.
Harken, through a wholly owned subsidiary, will invest $12.5
million of cash in IBA in exchange for redeemable preferred
stock and warrants to purchase 48% of the common stock of
IBA. In addition, Harken will have majority control on the
board of directors of IBA.
In commenting on this investment, Alan G. Quasha, the Chairman
of Harken said, “The market opportunity in Eastern Europe,
in general, and Hungary, specifically is quite significant.
This investment will complement our existing international
activities and enable us to gain access and participate in
certain aspects of the midstream natural gas business in Eastern
Europe and the United States. We believe IBA will over time
prove to be a key contributor to Harken’s development
as an independent international oil and gas company.”
IBA will be led by John Kean, Jr., who will serve as IBA’s
Chairman, President and Chief Executive, and Stanley J. Brownell,
who will serve as IBA’s Chief Operating Officer. Both
principals have been intimately involved in energy deregulation
in Eastern Europe.
Continuing, Mr. Quasha stated, “The reasons for our
optimism include:
• IBA’s team has a proven strategy and track record
with strong ties to market participants, including their combined
forty years of experience in the U.S. natural gas industry;
• IBA has the potential to become an important player
in the Eastern Europe region, and we would expect the cash
flow from IBA’s operations to become significant to
Harken;
• IBA’s team has knowledge and contacts in the
Eastern Europe natural gas markets;
• IBA is being capitalized to build its business without
the need for significant leverage;
• We have been and remain interested in international
exploration and production opportunities, and this venture
could present us with important insights, relationships and
opportunities in the Eastern Europe region; and
• The expertise and experience of moving and trading
energy commodity products in the U.S. and abroad is becoming
increasingly important in maximizing value in very volatile
global energy markets.”
HKN, Inc. is engaged in oil and gas exploration, development and production operations both domestically and internationally through its various subsidiaries. Additional information may be found at the Harken Energy Web site, www.harkenenergy.com, or by calling Bevo Beaven or Bill Conboy at CTA Public Relations at (303) 665-4200.
This announcement may contain forward-looking statements as defined by the Securities and Exchange Commission. Harken, however, believes that it is important to provide this operations update and communicate its future expectations to its stockholders. The forward-looking statements in this announcement reflect the current view of management with regard to future events and are subject to numerous known and unknown risks, uncertainties and other factors that may cause the actual results, performance, timing or achievements of Harken to be materially different from any results, performance, timing or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, the risks described in Harken’s filings with the Securities and Exchange Commission including the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed on March 26, 2004 and its Form 10-Q for the quarter and six months ended June 30, 2004 filed on August 12, 2004. Statements regarding future production are subject to all of the risk and uncertainties normally associated with exploration, development and production of oil and gas. These risks include, without limitation, variability in the price received for oil and gas production, lack of availability of oil field goods and services, environmental risks, drilling and production risk, risk related to offshore operations, and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Although Harken believes that the expectations reflected in the forward-looking statements of this announcement are reasonable, it can give no assurance that such expectations will prove to be correct or that unforeseen developments will not occur. Harken undertakes no duty to update or revise any forward-looking statements.
Harken
Energy Provides Domestic Operations Update
Houston, TX – August 23, 2004 – HKN, Inc. (AMEX: HEC) has released updated production figures
and well completion status for its domestic oil and gas operations,
which are located primarily along the onshore and offshore
Texas and Louisiana Gulf Coast.
Currently, Harken’s net domestic production rate is approximately 9.2 million cubic feet equivalent per day. Harken is committed to the continuing development of its domestic operations in 2004 and has budgeted approximately $9 million to grow its Gulf Coast operations in 2004. The following field data updates the status of Harken’s domestic drilling projects through the middle of August.
Lapeyrouse
Field – Louisiana
Harken has participated in an active field redevelopment
program that has included an interest in 5 successful wells
since the fourth quarter of 2003. Harken holds an average
working interest of 10% in the five wells that are together
producing at a combined gross rate of 25 million cubic feet
equivalent per day, for a net production to Harken of approximately
1.9 million cubic feet equivalent per day.
A sixth development well, in which Harken has a 10% working
interest, is currently being drilled at a measured depth of
about 11,400 ft. Total depth is planned to be 12,600 ft measured
depth.
Additional drilling is planned for the remainder of this year.
Main Pass
– Louisiana
Harken is utilizing its increased permit capacity
to generate additional third party processing fees at its
offshore platform. This platform currently serves a number
of wells and operators in the field.
A license to 21 square miles of 3D seismic data has been recently
acquired, covering Harken’s currently producing leases.
Reprocessing and interpretation are underway.
Raymondville,
Willacy and Kenedy Counties – Texas
Yturria #3-29, in which Harken has a 27% non-operated
working interest, was drilled to a measured depth of 9,622
feet. The well was subsequently plugged and abandoned as a
dry hole.
Harken is continuing to participate in an aggressive workover
and recompletion program to bring on new reservoir production.
This program has included 13 recompletions to date this year,
of which 12 have been successful.
Lake Raccourci
Field – Louisiana
As of August 15, 2004, the Lake Raccourci field production
rate, which had doubled during the first quarter of 2004,
is holding at approximately 9.3 million cubic feet per day,
gross. Harken holds a 40% operated working interest in each
of its Lake Raccourci wells.
Harken is presently evaluating prospects in the field using its 60-square mile reprocessed 3D seismic database.
New 3D
Seismic Licenses Acquired – Louisiana
Harken has acquired a license covering approximately
155 square miles of 3D seismic data in three (3) different
surveys across south Louisiana. The largest database is in
Terrebonne Parish and includes approximately 70 square miles.
Approximately 56 square miles is in Cameron Parish, and approximately
29 square miles in Iberville Parish.
“We are pleased with the results from our domestic operations through the first half of 2004, and we are confident that further analysis of our 3-D seismic data will allow us to identify additional new prospects in these fields,” said Jim Denny, President of Gulf Energy Development Company, a subsidiary of HKN, Inc.. “We continue to be pleased with the performance of our domestic development plan, especially in south Louisiana. We are particularly happy to have acquired license to significant additional 3D seismic data in strategic geological trends, where we have been successful. This should assure longevity and quality in our prospect portfolio.’ Mr. Denny continued, “Our goal for 2004 is to continue to add production and to generate increased sales of oil and gas from our domestic assets at reasonable finding costs.”
HKN, Inc. is engaged in oil and gas exploration, development and production operations both domestically and internationally through its various subsidiaries. Additional information may be found at the Harken Energy Web site, www.harkenenergy.com, or by calling Bevo Beaven or Bill Conboy at CTA Public Relations at (303) 665-4200.
This announcement may contain forward-looking statements as defined by the Securities and Exchange Commission. Harken, however, believes that it is important to provide this operations update and communicate its future expectations to its stockholders. The forward-looking statements in this announcement reflect the current view of management with regard to future events and are subject to numerous known and unknown risks, uncertainties and other factors that may cause the actual results, performance, timing or achievements of Harken to be materially different from any results, performance, timing or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and other factors include, among others, the risks described in Harken’s filings with the Securities and Exchange Commission including the Annual Report on Form 10-K for the fiscal year ended December 31, 2003 filed on March 26, 2004 and its Form 10-Q for the quarter and six months ended June 30, 2004 filed on August 12, 2004. Statements regarding future production are subject to all of the risk and uncertainties normally associated with exploration, development and production of oil and gas. These risks include, without limitation, variability in the price received for oil and gas production, lack of availability of oil field goods and services, environmental risks, drilling and production risk, risk related to offshore operations, and regulatory changes. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Although Harken believes that the expectations reflected in the forward-looking statements of this announcement are reasonable, it can give no assurance that such expectations will prove to be correct or that unforeseen developments will not occur. Harken undertakes no duty to update or revise any forward-looking statements.
Harken
Energy Reports 24% Increase in Revenue and Substantial
Increase in Operating Margin
Houston, TX – August 12, 2004 – HKN, Inc. (AMEX: HEC) reports quarterly financial results
for the period ended June 30, 2004. As summarized below, total
revenues in the second quarter of 2004 increased to $8.1 million,
an increase of 24% over the second quarter of 2003, due to
increased international production and higher oil and gas
prices. Non-GAAP Operating Margin increased to $3.9 million
in the second quarter of 2004, representing 140% growth over
the same period in the prior year, and 21% improvement as
compared to the first quarter 2004.
In the first six months of 2004, Harken generated $7.1 million in Operating Margin (non-GAAP; see reconciliation), a 71% increase over the comparable period in 2003, due largely to increased oil and gas prices, increased operating efficiencies, and a 26% decrease in general and administrative expenses as compared to the prior year period.
Production Summary
Harken continued to experience overall success in the 2004 domestic and international drilling program. Harken began 2004 with net domestic oil and gas production volumes of approximately 6,900,000 cubic feet equivalent per day, and Harken ended June 2004 producing approximately 8,800,000 net cubic feet equivalent per day. During the first six months of 2004, Harken has continued to build back its domestic oil and gas production volumes following the December 2003 sale of certain Texas Panhandle properties. During the first six months of 2004, sales of net domestic oil and gas volumes averaged over 8,500,000 cubic feet equivalent per day. At June 30, 2004, Harken had expended approximately $6.2 million of its $18 million 2004 capital expenditure budget.
During the first six months of 2004, Harken’s Middle America subsidiary, Global Energy Development, produced approximately 235,000 gross barrels of oil. Harken’s Middle America oil volumes and revenues increased 16% and 46%, respectively, in the first six months of 2004 compared to the prior year period due to increased oil prices and crude oil production.
Balance Sheet Summary
As the ratios below show, Harken continued to improve its Working Capital by over 160% since year-end 2003 to approximately $21 million at June 30, 2004. Harken reduced its debt by 43% during the six months ended June 30, 2004, ended the period with over $18 million in cash less debt. Harken’s balance sheet ratios, as compared to June 30, 2003 and December 31, 2003, have continued to strengthen each quarter as detailed below:
Accounting Treatment of Global Warrants
During the second quarter of 2004, there was a dramatic increase in Global’s common share price from approximately 50 UK pence at March 31, 2004 to 145 UK pence at June 30, 2004, following Global’s announcement of year-end results and the successful drilling results of the Estero #4 well. Global’s shares are traded on the Alternative Investment Market of the London Stock Exchange. Correspondingly, as measured by Global’s listed shares, the fair value of the Global Warrants held by Outside Parties, issued in 2002, increased $12.4 million to approximately $13.1 million at June 30, 2004. The warrants are accounted for as a derivative liability in accordance with SFAS No. 133. The fair value of the warrants is calculated by an outside third party firm and is based on the underlying market price of the Global common stock. Although Harken owns 85% of Global and has seen its market value as reflected in the market capitalization increase from $25 million to $80 million, Harken recorded a loss related to the change in fair value of the Global Warrants of $12.4 million during the three month period ended June 30, 2004. Although not allowed as an offset by GAAP, Harken holds warrants, issued in 2002, to purchase 6,487,481 of Global shares at 60 UK pence per share. The estimated fair market value of these warrants at June 30, 2004 was approximately $10.3 million, as calculated by a third-party firm. Because Global is a consolidated subsidiary, these warrants held by Harken are not reflected in the consolidated financial statements.
Alan G. Quasha, Harken’s Chairman, stated, “To clarify the accounting treatment of the Global Warrants held by Outside Parties, which paradoxically causes Harken to report large losses when the market value of its subsidiary, Global, substantially increases, requires an explanation of today’s accounting rules. Specifically, as Global’s performance has improved substantially, the market perception of its value and future has appropriately also improved dramatically. Thus, in the second quarter of 2004, Global’s stock price tripled on the London AIM market. Hence, the fair value of the Global Warrants held by Outside Parties has increased, and the non-cash market loss based on the value of the Global stock underlying these warrants needs to be recognized. In judging Harken’s results and values, however, investors ought to be aware of all the facts surrounding this recognized loss. What’s missing in this case is the other side of the equation. Specifically, Harken owns warrants to purchase Global shares at a slightly higher exercise price. Both the calculated value of these warrants, approximately $10.3 million at June 30, 2004, as well as the market value of Harken’s ownership in Global have also correspondingly increased in value. Global’s market capitalization significantly increased during the second quarter of 2004. Under current accounting guidelines, Harken cannot recognize the fair value of the warrants it holds in its majority-owned consolidated subsidiary on its balance sheet. It is our hope and belief that Global’s performance will continue to increase significantly and will be recognized in the public markets, and, I believe, will be good for Harken shareholders. But until the warrants are exercised, in the positive case for Harken that the market value of Global rises substantially more, accounting rules will require that Harken report additional substantial losses.”
Mr. Quasha continued, “Accounting treatment of warrants aside, we believe that the second quarter of 2004 was an excellent quarter. First, in our view, the quarter continues to demonstrate the cash flow potential of our core assets, our success both domestically and internationally in our drilling programs, and the impact of a positive pricing environment. Harken’s Board of Directors considers the increase in Operating Margin which has grown substantially compared to the prior year period, to be our main focus and measure of performance. Secondly, we believe that the potential of the Palo Blanco field in Colombia is beginning to be more widely recognized, and we hope that the tripling of Global’s stock price is the beginning of investors’ realizing the potential which exists there. We view the developments in Global as very good news for Harken shareholders.”
More information
is available in HKN, Inc.’s Form 10-Q
for the period ended June 30, 2004 which may be accessed through
the Company’s website at www.harkenenergy.com.
NON-GAAP FINANCIAL MEASURE
Reconciliation of Operating Margin to Net Income
Management believes the presentation of this non-GAAP financial measure, in connection with the results for the three and six months ended June 30, 2004, provides useful information to investors regarding the Company’s results of operations. Management also believes that this non-GAAP financial measure allows investors to better evaluate on-going business performance and the 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.
Certain statements in this news release including phrases such as “in our view”, “we believe”, “we consider”, “we expect,” “we anticipate” and “we hope” relating to Harken’s revenue, profit, dividends, cash flow, securities held by Harken and earnings expectations; statements regarding future expectations and plans for oil and gas exploration, development and production; and statements regarding commodity pricing expectations may be regarded as “forward looking statements” within the meaning of the Securities Litigation Reform Act. These forward-looking statements reflect the current view of management with regard to its plans and expectations and other future events. 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 Harken 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 for the fiscal year ended December 31, 2003 filed on March 26, 2004 and its Form 10-Q for the quarter ended June 30, 2004 filed on August 12, 2004. Although Harken believes that the expectations reflected in the forward-looking statements of this announcement are reasonable, it can give no assurance that such expectations will prove to be correct or that unforeseen developments will not occur. Harken undertakes no duty to update or revise any forward-looking statements. Actual results may vary materially.
Harken
Energy Provides Domestic Operations Update
Houston, TX – July 6, 2004 – HKN, Inc.
(AMEX: HEC) has released updated production figures and well
completion status for its domestic oil and gas operations,
which are located primarily along the onshore and offshore
Texas and Louisiana Gulf Coast.
Harken’s net domestic production rate rose to 9,189 thousand cubic feet equivalent (Mcfe) per day. Harken is committed to the continuing development of its domestic operations in 2004 and has budgeted approximately $9 million to grow its Gulf Coast operations in 2004. The following field data updates the status of Harken’s domestic drilling projects through the end of June.
Lapeyrouse
Field – Louisiana
Thomas Cenac #1, in which Harken has a 28% working interest
and is the operator, is back on production at a gross rate
of approximately 800 Mcf per day.
Harken holds various working interests between 6% and 10%
in three other wells that are together producing at a combined
gross rate of 17,100 Mcf p