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Houston Exploration to Revise 2Q, 3Q Statements by $60M

Houston Exploration to Revise 2Q, 3Q Statements by $60M

Houston Exploration Co. said last week it would revise its second and third quarter cash flow statements by $60 million because it misclassified a component of an asset exchange with KeySpan Corp. in June. KeySpan, which completed selling all of its stock in the company last Wednesday, completed a $449 million share transfer exchange last May that reduced its ownership from 55% to 24% (see NGI, May 31).

The Houston-based exploration and production (E&P) company said the changes in the consolidated cash flow statements for the quarters ended June 30 and Sept. 30 are offsetting and will not have any impact on previously reported net cash provided by operating activities, total cash flows, net income or shareholder equity.

In the exchange earlier this year, Houston Exploration redeemed and canceled 10.8 million shares of its common stock owned by KeySpan. The E&P company then gave KeySpan all the stock of Seneca-Upshur Petroleum Inc., to which Houston Exploration had contributed all of its Appalachian Basin assets and $389 million cash.

Houston Exploration said the $60 million was misclassified as a cash item, and was included in consolidated statements of cash flow, representing the value of its Appalachian Basin assets. The $389 million in cash will remain on the consolidated cash flow statement.

KeySpan announced Wednesday that it had completed its sale of 6.6 million shares of common stock in Houston Exploration through Morgan Stanley at a price of $56.25/share. The sales generated proceeds to KeySpan of $369 milion, and KeySpan no longer has any ownership interest in Houston Exporation, which it founded in the 1980s.

KeySpan CEO Robert B. Catell said in a statement that the transaction was "consistent with our strategy to monetize our non-core assets and focus on growing our core business."

Houston Exploration's core areas of operations are in South Texas, the shallow waters of the Gulf of Mexico, the Arkoma Basin, and the Rocky Mountains. As of the end of 2003, the company's net proved reserves were 755 Bcfe, of which approximately 94% are natural gas. About 68% of the reserves were classified as proved developed.

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