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): March 11, 2004
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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 Releases dated
March 11, 2004, entitled
"CREDO Reports Record First Quarter Earnings
of $0.28 per Share"
________________________________________________________________
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: March 12, 2004 By: /s/ James P. Garrett, Jr.
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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 FIRST QUARTER EARNINGS OF $0.28 PER SHARE
Natural Gas Production Surges 46% as Gas Prices Increase
DENVER, COLORADO, March 11, 2004 - CREDO Petroleum Corporation
(NASDAQ: CRED) today reported record financial and operating
results for its first fiscal quarter ended January 31, 2004. Net
income surged 70% to a record $1,165,000 on record production and
higher gas prices. This compares to net income of $685,000 last
year. On a per diluted share basis, net income was $.28 compared
to $.17 last year. Revenue rose 59% to $2,850,000 compared to
$1,791,000 last year. Cash flow from operating activities
(before changes in operating assets and liabilities) increased
93% to $1,956,000 compared to $1,015,000 last year.
Fiscal 2003 net income included $.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.
James T. Huffman, President, said, "Successful drilling and
Calliope applications boosted production 41% in the first
quarter. This production increase comes after an 8% increase
last year and a 77% increase in 2002. We are making every
reasonable effort to maintain our record production levels during
this very positive period for natural gas prices."
PRODUCTION VOLUMES SET ANOTHER RECORD
On the heels of last year's record, total production volumes
jumped another 41% in the first quarter to 518 MMcfge (million
cubic feet of gas-equivalent). This compares to 368 MMcfge last
year. Natural gas production surged 46% to 458 MMcfg compared to
313 MMcfg last year while crude oil sales increased 10% to 10,000
barrels.
PRODUCT PRICES INCREASE
ESTIMATED FISCAL 2004 PRODUCTION PARTIALLY HEDGED
Net wellhead natural gas prices rose 23% to $4.85 per Mcf
compared to $3.95 last year. Hedging transactions added $.18 per
Mcf to first quarter gas price realizations compared to $.36 last
year. As a result, total natural gas price realizations were
$5.03 per Mcf compared to $4.31 last year. Wellhead oil prices
rose 14% to $29.95 per barrel compared to $26.25 last year.
The company currently has open hedge positions totaling 700 MMcfg
covering the months of April through October 2004 at an average
NYMEX price of $4.82 per Mcf. This hedge represents
approximately 65% of the company's estimated gas production for
those months. Fiscal 2004 hedges covering the months of
November 2003 through March 2004 have expired and were closed at
approximately breakeven. 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 January 31, 2004, working capital was $7,769,000, up 18% from
fiscal year-end. Total assets were $25,362,000 including cash
and short-term investments of $7,979,000. Stockholders' equity
was $18,631,000. The company's only long-term debt is a $355,000
exclusive license obligation that is payable over six years.
DRILLING AND CALLIOPE OPERATIONS
CONTINUE TO YIELD GOOD RESULTS
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. At the beginning of the year, the company
had 11 wells on its drilling schedule. However, the tight supply
of drilling rigs has caused most of the wells to be delayed
longer than anticipated. During the first quarter, the company
drilled two wells in Oklahoma with working interests ranging up
to 50%. Both wells appear to be productive and are awaiting
pipeline connection and completion for production. A third well
will be drilled in April and the remaining wells will be drilled
consecutively beginning in May.
The Bobby-John #1-10 was completed on the company's 17,000 gross
acre Sand Creek Prospect located in Ellis County, Oklahoma.
Electric log data indicates that the 7,850-foot well encountered
the same Morrow sand that is producing in the company's Deanna
#1-15 located approximately one-half mile to the south. The
Deanna has been an excellent well for the area, and the company
expects the Bobby-John to have similar production
characteristics. CREDO is the operator and owns an approximate
50% working interest.
Approximately 15 miles to the north, the Owens #1-21 well has
been drilled on the company's 2,560 gross acre Buffalo Creek
prospect in Harper County, Oklahoma. Drilling data and electric
logs indicate that this 6,900-foot well will be productive and it
is currently awaiting completion for pipeline connection. The
Owens is currently classified as a "tight hole" meaning the other
information on the well is not being released for proprietary
business reasons. CREDO owns a 31% working interest.
Calliope Gas Recovery System. During the first quarter, the
company installed its Calliope Gas Recovery System on two
8,200-foot wells located in Oklahoma. Both wells represent a
very rigorous test for Calliope in terms of the challenge of
reviving dead wells that have reservoir damage, including damage
from the "parting shot" of a previous operator. Calliope has
been installed on both wells and the company is currently
performing reservoir treatment procedures designed to mitigate
the reservoir damage. Calliope facilitates such treatments in
low pressure reservoirs because it can lift the fluids used in
such treatments back out of the wellbore and thereby keep from
loading-up the well. If successful, these installations should
expand the envelope for Calliope applications. The company owns
an approximate 80% working interest in the wells and is the
operator. The company is in various stages of preparing to
install Calliope on three additional wells in Oklahoma.
MANAGEMENT COMMENT
Huffman further stated, "The first quarter provided a good start
to fiscal 2004 with excellent production gains and strong energy
prices. We expect to sustain our growth during 2004, and to
build on our track record of superior performance."
* * * * *
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.
For 2004, cash flow from operating activities (before changes in
operating assets and liabilities) consists of net income of
$1,165,000, DD&A of $429,000, and deferred income taxes of
$362,000. For 2003, such cash flow consists of net income of
$685,000, DD&A of $321,000, deferred income taxes of $79,000, and
net of other credits of $70,000.
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
Quarter Ended Quarter Ended
Condensed Operating January 31, January 31,
Information 2004 2003
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Revenue:
Oil and Gas Sales $ 2,605,000 $ 1,589,000
Operating 137,000 126,000
Investment Income and Other 108,000 76,000
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2,850,000 1,791,000
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Expenses:
Oil and Gas Production 460,000 327,000
Depreciation, Depletion and
Amortization 429,000 321,000
General and Administrative 331,000 278,000
Interest 12,000 13,000
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1,232,000 939,000
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Income Before Income Taxes 1,618,000 852,000
Income Taxes (453,000) (239,000)
Cumulative Effect of Change
in Accounting Principle - 72,000
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Net Income $ 1,165,000 $ 685,000
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Basic Income per Share
Before Accounting Change $ .29 $ .15
Cumulative Effect of Change
in Accounting Principle - .02
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Basic Income Per Share $ .29 $ .17
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Diluted Income per Share
Before Accounting Change $ .28 $ .15
Cumulative Effect of Change
in Accounting Principle - .02
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Diluted Income Per Share $ .28 $ .17
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Condensed Balance Sheet Information January 31, 2004 October 31, 2003
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Cash and Short-Term Investments $ 7,979,000 $ 6,663,000
Other Current Assets 2,182,000 1,900,000
Oil and Gas Properties, Net 14,575,000 14,061,000
Exclusive License Agreement, Net 460,000 478,000
Other Assets 166,000 470,000
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$25,362,000 $23,572,000
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Current Liabilities $ 2,392,000 $ 1,986,000
Deferred Income Taxes 3,720,000 3,358,000
Exclusive License Agreement Obligation 355,000 355,000
Asset Retirement Obligations 264,000 238,000
Stockholders' Equity 18,631,000 17,635,000
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$25,362,000 $23,572,000
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