SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 11, 2005
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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
January 11, 2005, entitled
"CREDO Reports Record Fiscal 2004 Earnings of
$0.59 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: January 11, 2005 By: /s/ James P. Garrett, Jr.
-------------------------
James P. Garrett, Jr.
Vice President and Chief
Financial Officer
(Principal Financial and
Accounting Officer)
NEWS RELEASE
FOR IMMEDIATE RELEASE Contact: James P. Garrett, Jr.
Vice President & CFO
www.credopetroleum.com
CREDO REPORTS RECORD FISCAL 2004 EARNINGS OF $0.59 PER SHARE
Financial and Operational Results Set New Records
DENVER, COLORADO, January 11, 2005-CREDO Petroleum Corporation
(NASDAQ: CRED) today reported record results for its fiscal year
ended October 31, 2004. Net income rose 17% to $3,650,000 on
record production. This compares to net income of
$3,130,000 last year. On a per diluted share basis, net income
was $.59 compared to $.52 last year. Revenue rose 21% to
$10,314,000 compared to $8,491,000 last year. Cash flow from
operating activities (before changes in operating assets and
liabilities) jumped 28% to $6,927,000.
Prior year net income includes $.01 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, "In 2004, we again established
significant new records in virtually every operational and
financial category, highlighted by a 21% return on equity without
using leverage. More importantly, our 2004 performance extends a
significant track record of superior performance that has gained
CREDO recognition as one of America's best and fastest growing
small companies as well as an outstanding performer among U.S.
oil and gas companies (Forbes Magazine, Fortune Small Business
Magazine, John S. Herold, Inc.)."
Fourth quarter net income fell to $893,000 compared to $1,146,000
last year. On a per diluted share basis, net income was $.14
compared to $.18 last year. Fourth quarter results fell below
last year primarily because hedging reduced natural gas price
realizations by $.53 versus adding $.64 in the same period last
year, an after tax swing of $379,000.
PRODUCTION VOLUMES SET FOURTH CONSECUTIVE ANNUAL RECORD
Production rose 18% in fiscal 2004 to a record 1.96 Bcfe (billion
cubic feet of gas-equivalent) compared to 1.66 Bcfe last year.
Natural gas production rose 18% to a record 1.71 Bcfg compared to
1.45 Bcfg last year. Crude oil and condensate sales rose 18% to
41,000 barrels.
Fourth quarter production fell 7% to 481 MMcfe (million cubic
feet of gas equivalent) compared to 516 MMcfge last year due to
the timing of new wells coming on production near the end of last
year.
CAPITAL SPENDING AND RESERVES SET NEW RECORDS
Capital spending increased 30% to $7,089,000, by far the highest
level in company history. As a result, both reserves and
production rose to new records.
Proved reserves rose 10% to 17.7 Bcfe for an eleventh consecutive
annual record. Approximately 93% of total proved reserves are
classified in the developed category. The company generally
includes only minimal proved undeveloped reserves for offset
drilling locations and Calliope candidate wells. Natural gas
accounted for 86% of reserve volume.
The undiscounted value of reserves was $77,612,000 at year-end,
and the discounted value (at 10%) was $44,551,000. Average
wellhead prices used to calculate reserve values were $5.84 per
Mcf and $50.43 per barrel.
The company added 3.6 Bcfe of new reserves, replacing 183% of its
2004 production. Per unit finding cost was $1.98 per Mcfge
(thousand cubic feet of gas equivalent). The company's finding
costs have historically ranked in the best quartile of U.S. oil
and gas companies. For the three years ending in 2003, CREDO's
finding and development cost was the 14th lowest among U.S. oil
and gas companies according to John S. Herold, Inc.
Net income per unit of production was $1.87 per Mcfe, or $11.19
per BOE. This compares to $1.89 per Mcf, or $11.32 per BOE, last
year when John S. Herold, Inc. ranked CREDO 10th among all oil
and gas companies worldwide. Herold has ranked the company in
the top 15 worldwide oil and gas companies on this performance
measure in each of the last three years.
PRODUCT PRICES REMAIN STRONG;
ESTIMATED FISCAL 2005 PRODUCTION PARTIALLY HEDGED
Total natural gas price realizations for fiscal 2004 rose 2% to
$4.60 per Mcf compared to $4.50 last year. Hedging transactions
reduced gas price realizations by $.42 per Mcf in 2004 compared
to $.07 last year. Net wellhead natural gas prices were $5.02
per Mcf compared to $4.57 last year. Wellhead oil prices rose
32% to $36.57 per barrel compared to $27.68 last year.
For the fourth quarter, total natural gas price realizations fell
4% to $4.64 per Mcf compared to $4.82 last year. Hedging
transactions reduced gas price realizations by $.53 per Mcf in
the fourth quarter compared to an increase of $.64 last year.
Wellhead oil prices rose 87% to $52.15 per barrel.
The company currently has open hedge positions totaling 380 MMcf
covering the months of February through June 2005. The hedges
represent about one-third of the company's estimated equivalent
gas production for the period. Of the February and March hedges,
75% are collars with a $6.12 floor and a $7.95 ceiling and the
remainder are short positions at $6.51. Of the April through
June hedges, 80% are collars with a $5.50 floor and a $6.75
ceiling and the remainder are short positions at $6.38. All
prices are NYMEX basis. Hedges for the months of November
through January have been closed at a loss of $180,000 (after
tax). 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.
Huffman further stated, "Since natural gas prices are the single
most important driver of our financial results, we believe it is
prudent to manage prices using periodic hedging. Unfortunately,
hedging was the weakest area of our 2004 performance, as we left
$516,000 (after tax) on the table. Nevertheless, over the long
term, we believe that hedging has benefited the company and its
shareholders."
STRONG FINANCIAL CONDITION CONTINUES TO PROVIDE
A SOLID FOUNDATION FOR GROWTH
At October 31, 2004, working capital was $5,611,000. Total
assets were $30,976,000 including cash and short-term investments
of $6,889,000. Stockholders' equity was a record $20,920,000.
The company's only long-term debt is a $297,000 exclusive license
obligation that is payable over five years.
MANAGEMENT COMMENT
"CREDO's two core projects-Calliope Gas Recovery System and
Northern Anadarko Basin drilling-continued to provide excellent
reserve and production growth as well as superb financial
results," Huffman said. "Our 2004 performance added to what has
become a significant track record of superior performance both in
the oil and gas industry and among all small companies. CREDO
has creative people and projects that are both proven and
repeatable. We are confident that focusing on fundamentals with
a long-term view will continue to produce excellent results."
* * * * *
CREDO Petroleum Corporation is a publicly traded independent
energy company headquartered in Denver, Colorado. The company is
engaged in the exploration for and the acquisition, development
and marketing of natural gas and crude oil in the Mid-Continent
and Rocky Mountain regions. The company's stock is traded on the
NASDAQ System under the symbol "CRED" and is quoted daily in the
"NASDAQ Small-Cap Issues" section of The Wall Street Journal.
For 2004, cash flow from operating activities (before changes in
operating assets and liabilities) consists of net income of
$3,650,000, DD&A of $1,757,000, deferred income taxes of
$1,496,000. and other of $24,000. For 2003, such cash flow
consists of net income of $3,130,000, DD&A of 1,333,000, deferred
income taxes of $1,016,000, and net of other credits of $66,000.
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
Year Ended Year Ended
Condensed Operating October 31, October 31,
Information 2004 2003
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Revenue:
Oil and Gas Sales $ 9,367,000 $ 7,494,000
Operating 604,000 536,000
Investment Income and Other 343,000 461,000
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10,314,000 8,491,000
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Expenses:
Oil and Gas Production 2,065,000 1,608,000
Depreciation, Depletion and
Amortization 1,757,000 1,333,000
General and Administrative 1,383,000 1,257,000
Interest 39,000 46,000
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5,244,000 4,244,000
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Income Before Income Taxes 5,070,000 4,247,000
Income Taxes (1,420,000) (1,189,000)
Cumulative Effect of Change in
Accounting Principle - 72,000
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Net Income $ 3,650,000 $ 3,130,000
=========== ===========
Basic Income per Share
Before Accounting Change $ .61 $ .52
Cumulative Effect of Change in
Accounting Principle - .01
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Basic Income Per Share $ .61 $ .53
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Diluted Income per Share
Before Accounting Change $ .59 $ .51
Cumulative Effect of Change
in Accounting Principle - .01
------ ------
Diluted Income Per Share $ .59 $ .52
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Condensed Balance Sheet
Information October 31, 2004 October 31, 2003
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Cash and Short-Term Investments $ 6,889,000 $ 6,663,000
Other Current Assets 3,128,000 1,900,000
Oil and Gas Properties, Net 19,509,000 14,061,000
Exclusive License Agreement, Net 408,000 478,000
Other Assets 1,042,000 470,000
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$30,976,000 $23,572,000
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Current Liabilities $ 4,406,000 $ 1,986,000
Deferred Income Taxes 4,605,000 3,358,000
Exclusive License Agreement
Obligation 297,000 355,00
Asset Retirement Obligations 748,000 238,000
Stockholders' Equity 20,920,000 17,635,000
----------- -----------
$30,976,000 $23,572,000
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