Venoco, Inc. Announces First Quarter 2005 Results

Venoco, Inc. Announces First Quarter 2005 Results 


CARPINTERIA, Calif., May 13  /PRNewswire/ -- Venoco, Inc. (Bloomberg ticker:
552338Z US) today reported a net loss for the first quarter 2005 of $6.8
million compared to net income of $5.8 million for the first quarter 2004.  The
first quarter 2005 net loss includes the net after-tax effects of a $26.1
million (pre-tax) unrealized loss on certain commodity derivative contracts
that do not qualify for hedge accounting in accordance with SFAS 133. 
Excluding this charge, Venoco would have had net income of $9.0 million for the
first quarter of 2005.  This compares to net income of $6.0 million in the
first quarter of 2004 excluding the after-tax effects of the $0.4 million
(pre-tax) unrealized commodity derivative loss for first quarter 2004.  Please
see the end of this release for a reconciliation of net income (loss) to net
income before unrealized commodity derivative losses (a non-GAAP measure).

The unrealized commodity derivative losses result from mark-to-market
adjustment applicable to certain commodity derivative contracts not currently
eligible for hedge accounting treatment.  Changing oil prices affect the market
value of our fixed price commodity derivative contracts, and as a result we
expect there will continue to be significant volatility in our reported
earnings.

Earnings before interest, taxes, depletion, depreciation and amortization
(EBITDA) for the first quarter of 2005 was $(1.8) million as compared with
$14.7 million in first quarter 2004.  These EBITDA figures include the pre-tax
impact of  first quarter realized commodity derivative losses of $3.0 million
in 2005 and $2.4 million in 2004.  They also include the impact of the above
mentioned first quarter unrealized commodity derivative losses of $26.1 million
in 2005 and $0.4 million in 2004.  Excluding the impact of the realized and
unrealized commodity derivative losses, Venoco's first quarter 2005 EBITDA
would have been $27.4 million, up 57% from first quarter 2004 EBITDA of $17.5
million.  Please see the end of this release for a reconciliation of EBITDA and
EBITDA before the pre-tax impact of realized and unrealized commodity
derivative losses, to net income.

"We have benefited not only from the strong current prices for oil and natural
gas but fundamentally from the consistent increases in our oil and natural gas
production rates.  Average net production has increased each quarter since
changes in our senior management and subsequent implementation of our
aggressive development and exploitation program in June of 2004.  The average
net production which was 10,182 barrels of oil equivalent per day (BOE/D) in
the second quarter of 2004 has steadily increased to 12,857 BOE/D in the first
quarter of 2005," stated Tim Marquez, CEO and chairman of the board.

In the first quarter of 2005 Venoco drilled seven new wells to total depth and
recompleted eighteen additional wells.  These exploitation and development
projects include two offshore oil wells that were drilled to total depth, and
one that was recompleted.  In the Sockeye Field, we drilled one well and
recompleted another well. One of the wells had an initial production rate over
1,150 BOE/D and the other's gross production is approximately 250 BOE/D.  In
the South Ellwood Field, we drilled an exploration well that tested wet in the
deepest penetrated intervals and is being recompleted to test the primary test
objective.  Onshore, Venoco drilled five new wells in the Sacramento Basin in
the quarter.  Four were brought on production and the other was waiting on a
gas pipeline connection.  The Company also recompleted seventeen wells in the
Sacramento Basin in the quarter.  Collectively the new wells and recompletions
in the Sacramento Basin have added 2,500 MCF/D to our average net production.

The Company's average net production increased from 11,306 BOE/D in the first
quarter of 2004 to 12,857 BOE/D in the first quarter of 2005.  First quarter
2005 average net production includes 547 BOE/D from the Big Mineral Creek Field
which was sold for $45 million with the closing occurring on March 31, 2005. 
The closing was done through a qualified intermediary in order to allow the
sale to be eligible for a tax free exchange pursuant to section 1031 of the
Internal Revenue Code.  Accordingly, no gain has been recognized and no tax on
the sale has been recorded during the period.  "We expect second quarter 2005
average net production to be approximately 12,500 BOE per day, only slightly
down from the first quarter despite the loss of production from the Big Mineral
Creek field," noted Mr. Marquez.  He continued, "We anticipate 2005 average net
production in the range of 13,000 BOE/D to 14,000 BOE/D without any additional
acquisitions.  Acquisitions are an integral part of our strategy and would add
to our 2005 production. We believe Venoco will continue to achieve consistent
growth in average net production throughout 2005 and following years."

About the Company

Venoco is an independent energy company primarily engaged in the acquisition,
exploitation and development of oil and natural gas properties in California. 
It has regional headquarters in Carpinteria, California and corporate
headquarters in Denver, Colorado.  Venoco operates three offshore platforms in
the Santa Barbara Channel, has nonworking interests in three others, and also
operates two onshore properties in Southern California and approximately 130
natural gas wells in Northern California.

Conference Call & Webcast

The Company's first quarter 2005 earnings and operational review conference
call will begin at 12:00 p.m. Eastern (9:00 a.m. Pacific) on Friday, May 13,
2005.  You may participate by calling 1-[phone] and using Conference ID#
6233227.  Information on accessing the recorded call will be available on the
Investor Information page of the Company's website http://www.venocoinc.com/.

Statements made in this news release, including those relating to future growth
and performance, drilling inventory, economic returns, development
opportunities, production growth targets, cash flow, reserve base, and future
results of operation and financial condition 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, ability to acquire properties that meet our objectives, 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
and cost of obtaining drilling equipment and technical personnel, delays in
completing production, treatment and transportation facilities, higher than
expected production costs and other expenses, pipeline curtailments by
third-parties and failure to close pending acquisitions. 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.

  Oil and Gas Production and Prices

                                      Three Months Ended March 31 (1)
                                  2005            2004           Increase
                                                                (Decrease)
  Sales Volume
  Natural Gas (Mcf)             1,885,576       1,355,983           39%
  Oil (Bbls)                      842,845         802,918            5%
  BOE                           1,157,108       1,028,915           12%
  Daily Average Sales Volume
  Natural Gas (Mcf/d)              20,951          14,901           41%
  Oil (Bbls/d)                      9,365           8,823            6%
  BOE/d                            12,857          11,307           14%
  Oil Price per Barrel
  Average NYMEX spot price         $49.84          $35.15           42%
  Differential to NYMEX spot
  price                           $(13.52)         $(5.96)         127%
  Realized commodity derivative
  losses                           $(3.55)         $(2.38)          49%
  Net realized price per barrel    $32.77          $26.81           22%
  Natural Gas Price per Mcf
  Average NYMEX spot price          $6.48           $5.73           13%
  Differential to NYMEX
  spot price                       $(0.42)         $(0.28)          50%
  Realized commodity derivative
  losses                           $(0.01)         $(0.33)         (97)%
  Net realized price per Mcf        $6.05           $5.12           18%
  Average Sales Price per BOE      $33.73          $27.67           22%

   (1)  Production in 2005 includes Marquez Energy, LLC which was acquired
        March 21, 2005.  Inclusion is due to the application of requirements
        for reporting combined financial statements for companies under
        common control.



  First Quarter 2005 and 2004 Financial Information

                               VENOCO, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                         ($ thousands, unaudited)

                                                 March 31,     December 31,
                                                  2005 (1)        2004 (1)
  ASSETS:
  CURRENT ASSETS:
    Cash and cash equivalents                      $5,024        $54,715
    Accounts receivable                            23,280         17,755
    Inventories                                     1,105          1,079
    Income tax receivable                           2,670          3,906
    Commodity derivatives                             677          5,300
    Notes receivable - officer                         --          1,420
    Prepaid expenses and other current assets       4,650          3,640
          Total current assets                     37,406         87,815
  CASH RESTRICTED FOR INVESTMENT IN OIL AND
  NATURAL GAS PROPERTIES                           44,619             --
  PROPERTY AND EQUIPMENT, net                     163,465        198,563
  OTHER ASSETS                                      8,786         12,504

          TOTAL ASSETS                           $254,276       $298,882

  LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT):
  CURRENT LIABILITIES:
    Accounts payable and accrued liabilities      $21,137        $19,385
    Undistributed revenue payable                   4,540          4,774
    Current maturities of long term debt              121            127
    Commodity derivatives                          20,713          1,520
    Minority interest purchase accrued                109          5,316
          Total current liabilities                46,620         31,122
  LONG-TERM DEBT                                  171,934        163,542
  DEFERRED INCOME TAXES                            18,463         32,208
  ASSET RETIREMENT OBLIGATIONS                     23,122         23,184
  COMMODITY DERIVATIVES                            12,266             --
  COMMITMENTS AND CONTINGENCIES
  STOCKHOLDERS' EQUITY (DEFICIT):
    Common stock and additional paid in capital    17,883         31,576
    Retained earnings (deficit)                   (26,449)        15,327
    Accumulated other comprehensive income (loss)  (9,563)         1,923
          Total stockholders' equity (deficit)    (18,129)        48,826

          TOTAL LIABILITIES AND STOCKHOLDERS'
          EQUITY (DEFICIT)                       $254,276       $298,882

   (1)  On March 21, 2005 the Company completed the acquisition of Marquez
        Energy, majority-owned and controlled by Timothy Marquez, the
        Company's CEO and sole shareholder.  Due to the common control
        aspects of the transaction, the financial statements of Marquez
        Energy have been combined with the consolidated financial statements
        of the Company and its subsidiaries in a manner similar to a
        pooling-of-interests, since the date that common control was
        achieved.  Therefore, the Company's financial statements since
        July 12, 2004 were restated to include Marquez Energy's financial
        results.



                               VENOCO, INC.
             CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                         ($ thousands, unaudited)

  Three Months Ended March 31                       2005           2004

  REVENUES:
    Oil and gas sales                             $42,038        $30,825
    Commodity derivative losses (1)               (29,160)        (2,762)
    Other                                             727            669
      Total revenues                               13,605         28,732
  EXPENSES:
    Oil and natural gas production                 11,930         11,231
    Transportation expense                            328            378
    Depletion, depreciation, amortization and
    impairment                                      5,653          4,021
    Accretion of abandonment liability                442            360
    General and administrative                      3,116          2,435
    Amortization of deferred loan costs               345             69
    Interest, net                                   3,497            328
      Total expenses                               25,311         18,822
    Income (loss) before income taxes             (11,706)         9,910
    Income tax provision (benefit)                 (4,930)         4,131
    Net income (loss)                              (6,776)         5,779

  Preferred stock dividends                            --         (2,116)
  Net income applicable to common equity          $(6,776)        $3,663

   (1)  Commodity derivative losses include realized and unrealized losses
        on derivative contracts of $3.0      million and $26.1 million,
        respectively for the first quarter of 2005 and $2.4 million and
        $0.4 million, respectively for the first quarter of 2004.
        Unrealized commodity derivative losses reflect the change in fair
        value of financial instruments not qualifying for hedge accounting
        under SFAS No. 133





The Company discloses net income before unrealized commodity derivative losses,
a non-GAAP financial measure, because management believes net income before
unrealized commodity derivative gains and losses (i) provides a better
comparison of operating trends and performance related results,  (ii) is
comparable to certain performance analysis methods of securities analysts , and
(iii) eliminates the impact of fluctuations in mark-to-market values from
unrealized commodity derivatives for which the Company cannot estimate the
timing or amount .  The following reconciles net income (loss) to net income
before unrealized commodity derivative losses for the three months ended March
31:

                                                    2005           2004
                                                        (unaudited)
  Net income (loss)                               $(6,776)        $5,779
     Plus: Unrealized commodity derivative losses  26,148            408
  Less: Income tax benefit on unrealized
  commodity derivative losses                     (10,366)          (162)
     Net income before unrealized commodity
     derivative losses                             $9,006         $6,025





EBITDA, a non-GAAP financial measure, excludes certain items that management
believes affect the Company's comparison of operating results.  The Company
discloses EBITDA because (i) the Company uses EBITDA to evaluate operating
trends and performance related results (ii) the Company uses EBITDA to compare
its performance to other oil and gas producing companies, and (iii) EBITDA is
comparable to certain performance analysis methods of securities analysts.  The
Company's measures of EBITDA and EBITDA before pre-tax hedging losses is not
comparable to the Company's other financial measures.  The following reconciles
net income (loss) to EBITDA and EBITDA before the pre-tax effects of realized
and unrealized commodity derivative losses for the three months ended March 31:

                                                    2005           2004
                                                        (unaudited)
  Net income (loss)                               $(6,776)        $5,779
  Plus: Interest, net                               3,497            328
        Income taxes                               (4,930)         4,131
        D.D.&A.                                     5,653          4,021
        Accretion of abandonment liability            442            360
        Amortization of deferred loan costs           345             69
  EBITDA                                           (1,769)        14,688
  Plus: Pre-tax realized commodity derivative
        losses                                      3,012          2,354
        Pre-tax unrealized commodity derivative
        losses                                     26,148            408
  EBITDA before pre-tax commodity derivative
  losses                                          $27,391        $17,450



  Open Derivative Positions as of May 10, 2005

  Crude Oil

  Type of    Basis   Quantity     Strike Price              Term
  Contract           (Bbl/d)        ($/Bbl)

  Collar     NYMEX     4,471    $38.00 - $47.10     Jan 1, 05 - Dec 31, 05
  Collar     NYMEX     1,000    $38.00 - $47.50     Jan 1, 05 - Dec 31, 05
  Put        NYMEX     2,000     $36.00 Floor       Jan 1, 05 - Dec 31, 05
  Put        NYMEX     2,000     $38.70 Floor       Jan 1, 05 - Dec 31, 05
  Swap       NYMEX     1,000     $42.70 Fixed       Jan 1, 06 - Dec 31, 06
  Collar     NYMEX     2,000    $40.00 - $51.00     Jan 1, 06 - Dec 31, 06
  Collar     NYMEX     1,000    $40.00 - $51.05     Jan 1, 06 - Dec 31, 06
  Collar     NYMEX     1,000    $40.00 - $57.75     Jan 1, 06 - Dec 31, 06
  Put        NYMEX     1,000     $40.00 Floor       Jan 1, 06 - Dec 31, 06
  Put        NYMEX     1,000     $42.90 Floor       Jan 1, 06 - Dec 31, 06
  Collar     NYMEX     2,000    $40.00 - $65.80     Jan 1, 07 - Dec 31, 07
  Collar     NYMEX     1,000    $40.00 - $67.50     Jan 1, 07 - Dec 31, 07



  Natural Gas

  Type of      Basis     Quantity   Strike Price             Term
  Contract              (MMBtu/d)     ($/Mcf)

  Physical
  Sale        SoCal       2,000   $4.85 Floor(1)    Apr 1, 05 - Sep 30, 06
  Put         NYMEX       5,000    $5.80 Floor      Jan 1, 05 - Dec 31, 05
  Basis
   Swap   PG&E Citygate   5,000    $(0.150)(2)      Jan 1, 05 - Dec 31, 05
  Put     PG&E Citygate   5,000    $6.00 Floor      Jan 1, 05 - Dec 31, 05
  Swap    PG&E Citygate   4,000    $6.765 Fixed     Apr 1, 05 - Dec 31, 05
  Swap        NYMEX       2,000    $6.71 Fixed      Jan 1, 06 - Dec 31, 06
  Collar      NYMEX       4,000   $6.00 - $8.50     Jan 1, 06 - Dec 31, 06
  Basis
   Swap   PG&E Citygate   6,000    $(0.035)(3)      Jan 1, 06 - Dec 31, 06
  Put     PG&E Citygate   6,000    $6.00 Floor      Jan 1, 06 - Dec 31, 06
  Collar  PG&E Citygate   3,000   $7.00 - $9.45     Jan 1, 06 - Dec 31, 06
  Collar      NYMEX       6,000   $6.00 - $8.40     Jan 1, 07 - Dec 31, 07

   (1)  The price of this contract is the monthly NGI SoCal Border Index
        less $0.10 per MMBtu, with a floor of $4.85.

   (2)  This basis swap locks the $5.80 NYMEX put into a $5.65 floor with a
        PG&E Citygate location for 2005.

   (3)  This basis swap locks the $6.71 NYMEX swap into a $6.675 PG&E
        Citygate location swap and the $6.00-$8.50 collar into a
        $5.965-$8.465 collar with a PG&E Citygate location for 2006.



  This release can be found at http://www.venocoinc.com/

DATASOURCE: Venoco, Inc.



CONTACT:  Mike Edwards, VP of Venoco, Inc., direct, [phone], or

cell, [phone]



Web site:  http://www.venocoinc.com/ 

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