Harken Reports 45% Increase in Operating Margin in 2004 DALLAS,
Texas, March 16 /PRNewswire-FirstCall/ -- Harken Energy Corporation
("Harken") (AMEX:HEC) today reported financial results for the year
ended December 31, 2004. In 2004, Harken continued in its efforts
to improve its capital structure while focusing on developing its
oil and gas assets and improving cash flow from operations. As
summarized below, Harken ended 2004 with approximately $28.6
million in Cash, outstanding Debt of $8.6 million, and positive
Working Capital of approximately $21.8 million, a 272% increase
over the prior year. Balance Sheet Summary: Year Ended December 31,
(Thousands of dollars) 2003 2004 Current ratio (1) 1.88 to 1 2.54
to 1 Working capital (2) $7,886 $21,844 Cash $12,173 $28,632 Total
debt $7,360 $8,578 Total cash less debt $4,813 $20,054
Stockholders' equity $52,761 $56,326 Total debt to equity 0.14 to 1
0.15 to 1 (1) Current ratio is calculated as current assets divided
by current liabilities (2) Working capital in the difference
between current assets and current liabilities Additionally, in
2004 Harken generated almost $13 million in Operating Margin,
(non-GAAP; see reconciliation below) an increase of approximately
45% from 2003 results. Operating Results: Year Ended December 31,
2003 2004 Total Revenues $27,290,000 $29,995,000 Oil and Gas
Operating Expenses 9,469,000 7,964,000 General and Administrative
Expenses 9,210,000 9,222,000 Operating Margin (Non-GAAP; see
Reconciliation below) 8,611,000 12,809,000 Depreciation and
Amortization 8,941,000 10,713,000 Accretion Expense 460,000 388,000
Increase in Global Warrant Liability 7,000 (A) 14,207,000
Litigation and contingent liability settlements, net 1,125,000 --
Interest Expense and Other, net 3,394,000 414,000 Gains from
Repurchases / Exchanges of Convertible Notes 5,525,000 155,000
(Loss)/Gain on Investment (488,000) 990,000 Income Tax (Expense) /
Benefit 184,000 (579,000) Minority Interest of Subsidiary (89,000)
(323,000) Loss Before Cumulative Effect of Change in Accounting
Principle (184,000) (12,670,000) Cumulative Effect of Change in
Accounting Principle (813,000) -- Net Loss $(997,000) $(12,670,000)
Accrual of Dividends Related to Preferred Stock (3,676,000)
(2,884,000) Exchange of Preferred Stock -- (1,123,000) Payment of
Preferred Stock Dividend Liability In Common Stock 6,805,000
3,492,000 Net Income (Loss) Attributed to Common Stock $2,132,000
$(13,185,000) Basic Net Income (Loss) per Common Share 0.02 (0.07)
Basic Weighted Average Shares Outstanding 112,694,654 201,702,235
Diluted Net Income (Loss) per Common Share (0.03) (0.07) Diluted
Weighted Average Share Outstanding 112,790,327 201,702,235 Note (A)
-- During 2004, there was a dramatic increase in Harken's 85% owned
subsidiary's, Global Energy Development PLC ("Global"), common
share price from approximately 50 UK pence at December 31, 2003 to
153 UK pence at December 31, 2004. Global's shares are traded on
the Alternative Investment Market of the London Stock Exchange.
Correspondingly, the fair value of the Global Warrants held by
Outside Parties, issued in 2002, increased $14 million to
approximately $15 million at December 31, 2004. The warrants are
accounted for as a derivative liability in accordance with SFAS No.
133 which requires the warrant liability to be adjusted to
estimated fair value each period with any changes in value
reflected in earnings. 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
approximately 85% of Global and has seen its market value as
reflected in Global's market capitalization increase from $25
million to over $80 million in 2004, Harken recorded an unrealized
loss related to the change in fair value of the Global Warrants of
$14 million during the year ended December 31, 2004. 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 December 31, 2004 was approximately $11.8 million, as
calculated by a third-party firm. Because Global is a consolidated
subsidiary, the increased value of these warrants held by Harken is
not reflected in the consolidated financial statements. 2004
Operations: During 2004, Harken's revenues were positively affected
by rising commodity prices for natural gas and crude oil. These
increases more than offset our oil and gas production declines in
2004. Although Harken's 2004 consolidated net natural gas
production declined 16% to 1.8 Bcf and crude oil net production
declined 14% to 546,000 Bbls compared to 2003, our total revenues
and other increased 10% to approximately $30 million from
approximately $27 million in 2003. The decrease in Harken's
domestic subsidiary's, Gulf Energy Management Company ("GEM"), oil
and gas production in 2004 compared to the prior year was due to
the December 2003 sale of the majority of GEM's Texas panhandle
properties and due to Hurricane Ivan which passed through the
Louisiana Gulf Coast in September 2004. Weather related shut downs
of Gulf Coast properties required extensive efforts and time to
bring back on production. By late fourth quarter 2004, the majority
of all of our Gulf Coast properties had resumed normal production.
The majority of GEM's oil and gas production is located along the
Gulf of Mexico. Global's oil revenues increased in 2004 despite a
7% decrease in production volumes due in part to declines in
producing wells but due mainly to our decision to workover certain
wells that reduced oil production during the workover process. Oil
production from newly drilled and completed wells drilled during
2004 is expected to help reverse this decline in 2005. In September
2004, Harken invested $12.5 million in a start-up energy company,
IBA, which was formed to focus primarily on opportunities created
by the recent deregulation of the energy markets in Eastern Europe.
It is anticipated that IBA will engage in trading gas futures
contracts, principally in Hungary as well as in the United States.
IBA had minimal trading operations in 2004. In exchange for
Harken's $12.5 million cash investment, Harken received 12,500
shares of nonvoting preferred stock along with warrants to purchase
48% of IBA's common stock for a nominal amount. Harken currently
holds three of the five IBA Board of Directors positions. Harken's
preferred stock investment represents almost 100% of IBA's initial
working capital as of December 31, 2004. In accordance with
generally accepted accounting principles, Harken has consolidated
the assets, liabilities and results of operations of IBA as of
December 31, 2004 and for the period from September 10, the closing
date of the transaction, through December 31, 2004. IBA's net loss
included in the Consolidated Results of Operations for the period
ended December 31, 2004 was approximately $1 million. 2005 Outlook:
During 2005, Harken is concentrating on the development and growth
of its oil and gas assets and energy-based growth opportunities. In
February 2005, Harken's Board of Directors approved the 2005
capital expenditure program of approximately $34 million. Of the
2005 capital expenditure budget, approximately $16 million is
related to GEM and approximately $18 million is related to Global's
planned capital expenditures. Harken expects to fund these capital
expenditures through available cash on hand and through projected
cash flow from operations in 2005. Chairman's Comment: Alan G.
Quasha, Harken's Chairman, stated, "In 2004, higher oil and natural
gas prices allowed us to improve our cash flow from operations.
Thus, for the first time in a while, Harken was able to spend money
towards rebuilding its reserves and reversing its production
declines. The success we achieved with the approximately $18
million we spent in 2004 should accomplish this reversal and has
given our Board of Directors the confidence to almost double our
drilling budget to $34 million in 2005." More information is
available in Harken Energy Corporation's Form 10-K for the period
ended December 31, 2004 which may be accessed through the Company's
website at http://www.harkenenergy.com/. NON-GAAP FINANCIAL MEASURE
Reconciliation of Operating Margin to Net Income (Loss) Year Ended
December 31, 2003 2004 Net Loss (GAAP) $(997,000) $(12,670,000)
Cumulative Effect of Change in Accounting Principle 813,000 --
Minority Interest in Earning of Subsidiary 89,000 323,000 Income
tax Expense (Benefit) (184,000) 579,000 (Gain) / Loss on Sale of
Investment 488,000 (990,000) Gain on Extinguishment of Debt
(5,525,000) (155,000) Loss from Increase in Global Warrant
Liability 7,000 14,207,000 Litigation and contingent liability
settlements, net 1,125,000 -- Interest Expense and Other, net
3,394,000 414,000 Accretion Expense 460,000 388,000 Depreciation
and Amortization 8,941,000 10,713,000 Operating Margin $8,611,000
$12,809,000 Management believes the presentation of this non-GAAP
financial measure, in connection with the results for the year
ended December 31, 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,
2004 filed on March 16, 2005. 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. Contact: Bevo Beaven, Vice President Bill Conboy,
Senior Account Executive CTA Public Relations 303-665-4200
DATASOURCE: Harken Energy Corporation CONTACT: Bevo Beaven, Vice
President, or Bill Conboy, Senior Account Executive, both of CTA
Public Relations, +1-303-665-4200, for Harken Energy Corporation
Web site: http://www.harkenenergy.com/
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