<PAGE>
Exhibit 99.1
CROSS TIMBERS OIL ANNOUNCES RECORD CASH FLOW
AND GAS PRODUCTION FOR THIRD QUARTER
FORT WORTH, TX (October 25, 2000) - Cross Timbers Oil Company (NYSE-XTO)
today announced record third quarter cash flow from operations, before changes
in operating assets and liabilities and exploration expense, of $94 million or
$1.35 per share. Cash flow increased 136% from third quarter 1999 cash flow of
$39.8 million or 54 cents per share. Third quarter gas production averaged a
record 342 million cubic feet per day, an 18% increase from third quarter 1999
daily production of 289 million cubic feet. Long-term debt decreased $64
million during the third quarter to $928 million at September 30, 2000.
Earnings available to common stock for the quarter, before change in
derivative fair value, non-cash stock incentive compensation and loss on asset
sales, were $41.2 million, or 59 cents per share. Earnings for the quarter were
$31.4 million after recording after-tax charges of $5.6 million for loss in the
fair value of certain derivatives related to the Company's hedging activities,
$3.8 million in non-cash stock incentive compensation and $400,000 for losses on
asset sales. In the third quarter of 1999, the Company reported earnings
available to common stock, before after-tax gains on asset sales, of $8.3
million, or 11 cents per share.
Total revenues for the quarter were $160.5 million, a 68% increase over
third quarter 1999 revenues of $95.3 million. Operating income for the quarter
was $68.9 million, a 108% increase from third quarter 1999 operating income of
$33.1 million.
"We are exceptionally pleased with the results of this quarter," stated Bob
R. Simpson, Chairman and Chief Executive Officer. "We have seen strong internal
production growth this year as a result of our intensive development programs in
East Texas, San Juan Basin and Arkoma. This, in conjunction with
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Page 2 - Cross Timbers Oil Announces Record Cash Flow and Gas Production for
Third Quarter
strong commodity markets, provided record cash flow in the third quarter which
reduced debt $64 million - about $5 million per week.
"Cross Timbers is committed to a stronger balance sheet while continuing to
grow production," Simpson continued.
"Our development program continues to exceed expectations and define a
future of continued year-to-year volume growth," added Steffen E. Palko, Vice
Chairman and President.
Third quarter gas production averaged 342 million cubic feet per day, an
18% increase from third quarter 1999 daily production of 289 million cubic feet.
Natural gas liquids production for the quarter averaged 4,608 barrels per day, a
24% increase from the prior year quarter production of 3,730 barrels per day.
Third quarter oil production averaged 12,650 barrels per day, a 4% decline from
the prior year quarter. Increased gas and natural gas liquids production is
primarily attributable to the Company's development activity and 1999 property
acquisitions, partially offset by property sales. Decreased oil production is
primarily related to property sales, partially offset by acquisitions and
development.
The average gas price for the quarter was $3.68 per thousand cubic feet
(Mcf), a 59% increase from the third quarter 1999 average price of $2.32 per
Mcf. The third quarter average oil price increased 56% to $30.03 per barrel
from last year's third quarter average price of $19.28 per barrel. Natural gas
liquids prices averaged $19.63 per barrel for the quarter, a 44% increase from
the 1999 quarter average price of $13.64 per barrel.
For the first nine months of 2000, cash flow from operations was $207.4
million or $2.95 per share, a 153% increase from $81.9 million or $1.18 per
share for the 1999 period. The Company reported earnings available to common
stock of $65.4 million, or 93 cents per share, compared with earnings of $39.3
million or 57 cents per share for the same 1999 period. Excluding after-tax,
non-cash stock incentive compensation and gains and losses on asset sales and
the fair value of certain derivatives
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Page 3 - Cross Timbers Oil Announces Record Cash Flow and Gas Production for
Third Quarter
related to the Company's hedging activities, earnings were $72.8 million or
$1.04 per share for the first nine months of 2000, compared with earnings of
$2.6 million or 4 cents per share for the first nine months of 1999. Total
revenues for the first nine months of 2000 were $395.5 million, a 72% increase
from revenues of $230.3 million for the same 1999 period. Year-to-date operating
income was $129.2 million, a 130% increase from $56.1 million for the first nine
months of 1999.
Operational Outlook for Fourth Quarter
The following fourth quarter estimates have been prepared based on current
expectations for production, expenses, debt and other parameters resulting from
activity planned under the Company's year 2000 capital budget. These statements
are forward-looking, as described in the paragraph at the bottom of page 5 of
this release, and actual results may differ materially. These statements do not
reflect the potential impact of changes in derivative fair value, stock
incentive compensation, acquisitions or divestitures that may be completed, nor
unforeseen events that may occur after the date of this release.
Production
Fourth quarter 2000 gas production is expected to continue to grow as a
result of the Company's highly successful development program, including the
Bossier Trend area of East Texas. Natural gas production is expected to average
between 345 million cubic feet of gas per day (Mmcfd) and 348 Mmcfd for the
quarter.
Fourth quarter oil production should average between 12,500 and 13,000 Bbls
per day. Natural gas liquids production for the quarter is expected to be at
daily rates between 4,000 and 4,500 Bbls.
Pricing Differentials
Based on current market conditions, fourth quarter natural gas
differentials are expected to be $0.25 to $0.35 below the NYMEX Henry Hub index,
before taking into consideration hedging activities. Natural gas hedging
activities are fully described in the Company's Form 10-Q filing as of June 30,
2000
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Page 4 - Cross Timbers Oil Announces Record Cash Flow and Gas Production for
Third Quarter
and have not changed materially. Crude oil prices should be about $2.00 below
the average NYMEX West Texas Intermediate (WTI) price. Natural gas liquids
prices are expected to approximate 60% of the average NYMEX WTI price.
Gas Gathering and Processing
Gas gathering and processing revenue less related expenses is expected to
approximate $500,000 for the fourth quarter.
Expenses
The following table presents expected expenses per Mcf equivalent
production for the fourth quarter:
Production................................ $0.52 - $0.56
Taxes, transportation and other........... 0.35 - 0.45
Exploration............................... 0.01 - 0.05
Depreciation, depletion and amortization.. 0.78 - 0.82
General and administrative................ 0.15 - 0.19
Interest.................................. 0.48 - 0.52
Income Tax
Cross Timbers may become a cash taxpayer during the fourth quarter. The
Company expects 80% to 100% of its federal income taxes to be deferred during
the fourth quarter.
Capital Structure
Based upon current commodity market forward prices, debt at year-end 2000
is expected to be between $870 and $880 million.
Shares Outstanding
Basic shares outstanding for the fourth quarter 2000 are expected to
average about 71 million. Fully diluted shares outstanding are expected to
average between 74 and 76 million.
* * *
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Page 5 - Cross Timbers Oil Announces Record Cash Flow and Gas Production for
Third Quarter
Cross Timbers Oil Company is a premier domestic natural gas producer
engaged in the acquisition, exploitation and development of quality, long-lived
oil and gas properties. The Company, whose predecessor companies were
established in 1986, completed its initial public offering in May 1993. Its
properties are concentrated in Texas, Oklahoma, Kansas, New Mexico, Arkansas,
Wyoming and Alaska.
Contact: John M. O'Rear Gary D. Simpson
Vice President & Treasurer Director of Investor Relations
Cross Timbers Oil Company Cross Timbers Oil Company
817/870-2800 817/870-2800
Conference Call and Investor Presentations
The Company's third quarter 2000 earnings and operational review conference call
will be broadcast live via Internet webcast at 4:00 P.M. ET (3:00 P.M. CT) on
Wednesday, October 25, 2000. The webcast can be accessed on the Company's
website at www.crosstimbers.com.
--------------------
Cross Timbers plans to participate in investor conferences. The Company will
post a schedule of these conferences. Presentation materials will be posted to
the website on the date of the conferences.
Statements made in this press release, including those relating to future
production, pricing differentials, profits, operating costs and other expenses,
income taxes, capital structure, shares outstanding, reserves, cash flow and
development activities, are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. These statements are based on assumptions and estimates
that management believes are reasonable based on currently available
information; however, management's assumptions and the Company's future
performance are both subject to a wide range of business risks and uncertainties
and there is no assurance that these goals and projections can or will be met.
Any number of factors could cause actual results to differ materially from those
in the forward-looking statements, including, but not limited to, the timing and
extent of changes in oil and gas prices, changes in underlying demand for oil
and gas, the timing and results of drilling activity, the availability of
drilling equipment, changes in interest rates, higher than expected production
costs and other expenses and the timing of receipts from the sale of oil and
gas. Further information on risks and uncertainties is available in the
Company's filings with the Securities and Exchange Commission, which are
incorporated by this reference as though fully set forth herein.
(table follows)
<PAGE>
<TABLE>
<CAPTION>
CROSS TIMBERS OIL COMPANY Three Months Ended Nine Months Ended
(in thousands, except production, per share and per unit data) September 30, September 30,
----------------------------- ---------------------------
(Unaudited) 2000 1999 2000 1999
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Consolidated Statements of Operations
----------------------------------------------------------------
REVENUES
Oil and condensate............................................. $ 34,946 $ 23,273 $ 93,163 $ 58,413
Gas and natural gas liquids.................................... 124,137 66,344 293,819 161,556
Gas gathering, processing and marketing........................ 2,031 1,763 7,263 4,791
Other.......................................................... (595) (a) 3,946 (b) 1,250 (a) 5,531 (b)
-------- -------- -------- --------
Total Revenues................................................ 160,519 95,326 395,495 230,291
-------- -------- -------- --------
EXPENSES
Production..................................................... 21,128 19,484 62,226 56,282
Taxes, transportation and other................................ 15,993 8,634 39,641 23,971
Exploration (c)................................................ 49 275 751 804
Depreciation, depletion and amortization....................... 31,562 28,300 94,748 77,630
Gas gathering and processing................................... 2,261 2,213 6,688 6,429
General and administrative (d)................................. 12,082 3,298 26,849 9,058
Loss in derivative fair value (e).............................. 8,545 - 35,369 -
-------- -------- -------- --------
Total Expenses................................................ 91,620 62,204 266,272 174,174
-------- -------- -------- --------
OPERATING INCOME................................................ 68,899 33,122 129,223 56,117
-------- -------- -------- --------
OTHER INCOME (EXPENSE)
Gain on significant property divestitures...................... - 235 (f) 18,979 40,566 (f)
Gain (loss) on investment in equity securities................. (112) (g) 2,391 (h) 13,279 (8,939 (h)
Interest expense, net.......................................... (20,593) (16,440) (60,255) (45,223)
-------- -------- -------- --------
Total Other Income (Expense).................................. (20,705) (13,814) (27,997) 4,282
-------- -------- -------- --------
INCOME BEFORE INCOME TAX
AND MINORITY INTEREST.......................................... 48,194 19,308 101,226 60,399
-------- -------- -------- --------
INCOME TAX
Current........................................................ 9 8 300 (6)
Deferred....................................................... 16,377 6,430 34,104 20,395
-------- -------- -------- --------
Total Income Tax Expense...................................... 16,386 6,438 34,404 20,389
-------- -------- -------- --------
MINORITY INTEREST IN
NET (INCOME) LOSS OF CONSOLIDATED SUBSIDIARIES................. - 645 (59) 645
-------- -------- -------- --------
NET INCOME...................................................... 31,808 13,515 66,763 40,655
Preferred Stock Dividends...................................... (442) (444) (1,332) (1,334)
-------- -------- -------- --------
EARNINGS AVAILABLE TO COMMON STOCK.............................. $ 31,366 $ 13,071 $ 65,431 $ 39,321
======== ======== ======== ========
EARNINGS PER COMMON SHARE
Basic.......................................................... $ 0.45 $ 0.18 $ 0.93 $ 0.57
======== ======== ======== ========
Diluted........................................................ $ 0.43 $ 0.17 $ 0.89 $ 0.56
======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING...................... 69,518 73,371 70,289 69,210
======== ======== ======== ========
Consolidated Statement of Cash Flows Data
-----------------------------------------
Cash Flow from Operations, before changes in operating
assets and liabilities and exploration expense................ $ 94,029 $ 39,843 $207,439 $ 81,874
======== ======== ======== ========
Average Daily Production
----------------------------------------------------------------
OIL (Bbls)..................................................... 12,650 13,120 12,971 14,265
GAS (Mcf)...................................................... 342,005 288,636 336,439 272,930
NATURAL GAS LIQUIDS (Bbls)..................................... 4,608 3,730 4,399 3,378
Average Sales Prices
----------------------------------------------------------------
OIL (per Bbl).................................................. $ 30.03 $ 19.28 $ 26.21 $ 15.00
GAS (per Mcf).................................................. $ 3.68 $ 2.32 $ 2.95 $ 2.04
NATURAL GAS LIQUIDS (per Bbl).................................. $ 19.63 $ 13.64 $ 18.50 $ 10.49
</TABLE>
(continued)
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet Data September 30, 2000 December 31, 1999
------------------------------------------ ------------------ -----------------
<S> <C> <C>
Total Assets............................. $1,494,411 $1,477,081
========== ==========
Long-term Debt........................... $ 928,000 $ 991,100
========== ==========
Total Stockholders' Equity............... $ 318,925 $ 277,817
========== ==========
</TABLE>
______________________
(a) The three-month 2000 period includes a $500,000 loss on sale of property and
the nine-month 2000 period includes a $2.1 million gain on sale of property.
(b) The three-month 1999 period includes a $4.7 million gain on sale of property
and the nine-month 1999 period includes a $6.2 million gain on sale of
property.
(c) Primarily includes geological and geophysical costs related to the Company's
exploration program.
(d) Includes non-cash stock incentive compensation of $5.8 million in the three-
month 2000 period and $10.2 million in the nine-month 2000 period. Stock
incentive compensation was not significant in the 1999 periods.
(e) Reflects the non-cash change in fair value of derivative financial
instruments not providing effective hedges.
(f) Reflects the gain from sale of Hugoton Royalty Trust in its initial public
offering in April 1999 and pursuant to exercise of options under an employee
benefit plan in July 1999.
(g) The three-month 2000 period includes a realized loss of $200,000 and a
decrease in unrealized loss of $100,000. The nine-month 2000 period includes
a realized loss of $26.8 million, a decrease in unrealized loss of $41.5
million and interest expense of $1.4 million related to these investments.
(h) The three-month 1999 period includes a decrease in unrealized loss of $3.3
million, realized gain of $500,000 and interest expense of $1.4 million
related to these investments. The nine-month 1999 period includes a realized
loss of $22.5 million, a decrease in unrealized loss of $35.9 million and
interest expense of $4.5 million related to these investments.
###
