Vintage Petroleum Reports Second Quarter Results, 17 Percent Increase in Production; 2005 Targets Increased

Share Name	Share Symbol	Market	Type
Vintage Pete	NYSE:VPI	NYSE	Ordinary Share

Vintage Pete (NYSE:VPI)
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Vintage Petroleum, Inc. (NYSE:VPI) today announced net income of $57.7 million, or $0.86 per diluted share, in the second quarter of 2005, a 66 percent increase over income from continuing operations of $34.7 million, or $0.53 per diluted share, in the same quarter last year. This substantial increase was driven by a 17 percent increase in production from continuing operations and significantly higher oil and gas prices. Net income for the second quarter of 2004 was $37.4 million, or $0.57 per diluted share, including income from discontinued operations of $2.7 million, or $0.04 per diluted share. Cash flow, a non-GAAP measure, was $107.1 million for the second quarter of 2005, up 58 percent from cash flow of $67.7 million in the second quarter of 2004. See the attached table for reconciliations of these non-GAAP financial measures to the corresponding GAAP amounts of cash provided by operating activities of $82.3 million for the second quarter of 2005 and $57.8 million for the same quarter in 2004. Production Up 17 Percent Total production from continuing operations for the quarter of 6.9 million barrels of oil equivalent (BOE) was 17 percent above the comparable 5.9 million BOE in the second quarter of 2004. This increase was driven by a 26 percent increase in oil production with Argentina, Yemen and the U.S. each contributing to this growth. The oil increase was slightly offset by a four percent decline in gas production from continuing operations as a result of reduced market demand in Bolivia compared to the prior-year quarter. Argentina oil production, before the impact of changes in inventories, in the second quarter of 2005 averaged 33,318 net barrels of oil per day (BOPD), an increase of 24 percent over the 26,978 net BOPD produced in the comparable quarter of 2004. The increase over the prior year's quarter is primarily a result of additional production resulting from the company's drilling and workover programs and the company's acquisition of properties in the San Jorge basin during September 2004. In addition, the prior year's quarter was negatively impacted by a labor strike reducing second quarter 2004 reported production by an estimated 2,200 BOPD. Oil production in Yemen made its initial contribution in the second quarter of 2004 at 1,186 net BOPD and almost quadrupled to average 4,294 net BOPD during the second quarter of 2005, before the impact of changes in inventories. All of the An Nagyah field production during the second quarter was trucked to a nearby facility for processing and transporting to an export terminal. An 18-mile (28 km) pipeline to the processing facility was completed and became operational in early July. As a result the company expects production to increase to approximately 10,000 gross BOPD (5,200 net) by the middle of the third quarter. U.S. oil production also showed a strong increase during the second quarter of 2005 rising 13 percent over the prior year's second quarter to average 18,967 net BOPD, driven by the December 2004 acquisition of producing properties in the Gulf Coast area of Alabama and 2005 exploitation successes. Partially offsetting these increases, the company estimates the second quarter of 2005 was reduced by 400 net BOPD as a result of certain wells shut-in for part of the quarter due to damage from heavy rains and mudslides in California earlier in the year. These shut-in wells have now been returned to production. Total net gas production from continuing operations was down four percent from the prior year's second quarter. U.S. and Argentina net gas production was up slightly during the second quarter of 2005; however, the anticipated lower sales volumes into Brazil caused Bolivia gas production to decrease 32 percent leading to the overall decline in total net gas production. In addition, the company estimates that U.S. gas production for the second quarter of 2005 was reduced by 66 MMCF of gas as a result of the heavy rains and mudslides in California. Commodity Prices and Revenues Including the impact of derivative financial instruments accounted for as hedges, the company's realized price for oil from continuing operations increased 26 percent to an average of $36.48 per barrel in the second quarter of 2005, compared with last year's second quarter average price of $29.04 per barrel. The company's realized price for gas, including the impact of hedges, increased 27 percent to $4.92 per Mcf compared to $3.88 per Mcf in the second quarter of 2004. As a result of the increases in production and oil and gas prices, oil and gas revenues increased 48 percent to $238.3 million for the second quarter of 2005 from $160.6 million in the same quarter of 2004. Costs and Expenses Production costs from continuing operations totaled $6.38 per BOE in the second quarter of 2005, which is eight percent higher than the $5.90 per BOE for the previous year's quarter. During the second quarter of 2005, the company incurred approximately $2.2 million, or $0.32 per BOE, to repair mudslide damage on its properties in Ventura County, California caused by heavy rains early in the year. The company expects to spend an additional $2.5 million during the third quarter of 2005 bringing the total expected cost in 2005 for the mudslide repairs to $8.2 million. Second quarter export taxes in Argentina increased from $6.7 million in 2004 to $16.3 million in 2005 primarily as a result of the increased export tax rates announced in August 2004 and higher oil prices. Production, transportation and storage costs combined with production, ad valorem and export taxes (total lease operating expense) increased to $10.60 per BOE in the second quarter of 2005 from $8.44 per BOE in the year-earlier quarter, primarily attributable to increased production taxes and Argentina export taxes. Exploration costs of $7.4 million for the second quarter of 2005 consisted of $3.7 million of seismic, geological and geophysical costs, and $3.7 million of dry hole costs, primarily in Yemen. This compares to exploration expense for the second quarter of 2004 of $7.3 million, comprised of $1.7 million of seismic, geological and geophysical costs, $4.4 million of dry hole costs, primarily in Italy, and $1.2 million of leasehold impairments. Six Months Results Net income for the six months ended June 30, 2005, was $89.6 million, or $1.33 per diluted share, compared to net income of $56.5 million, or $0.87 per diluted share, for the six months ended June 30, 2004. Income from continuing operations of $78.9 million, or $1.17 per diluted share, compares to $53.1 million, or $0.82 per diluted share for the six months ended June 30, 2004. The company was required to account for certain oil price swap agreements using mark-to-market accounting during January and February 2005. As a result, the company recorded $41.0 million of derivative losses during the first quarter of 2005. As of June 30, 2005, $12.9 million of these losses had been realized and $28.1 million remained unrealized. Net income for the six months ended June 30, 2005, was reduced by $17.2 million ($28.1 million pre-tax), or $0.26 per diluted share, related to these unrealized losses. As these oil price swap agreements are settled in future periods, the company will report higher oil revenues in those future periods than would have been reported had the unrealized losses not been recognized in the first quarter of 2005. As of March 1, 2005, the company resumed hedge accounting for all of its derivative financial instruments. Cash flow, a non-GAAP measure, was $210.1 million for the six months ended June 30, 2005, up 58 percent compared to $132.9 million for the six months ended June 30, 2004, reflecting the increase in production and oil and gas prices from the six months ended 2004 levels. See the attached table for reconciliations of these non-GAAP financial measures to the corresponding GAAP amounts of cash provided by operating activities of $185.3 million for the six months ended June 30, 2005, and $142.2 million for the six months ended June 30, 2004. 2005 Targets Updated As a result of the continued strong price environment and positive results from its development drilling programs in the U.S. and Yemen, the company is increasing its capital budget and production targets for 2005. The company's 2005 capital budget has been increased 14 percent from $250 million to $285 million with the increases primarily allocated to the U.S. and Yemen development drilling programs. The company is increasing its production target for 2005 from the previously announced 26.8 million BOE to 27.3 million BOE. The increase is due to positive results from its U.S. development drilling and workover programs, production performance of its wells in Yemen and an acceleration or expansion of various development drilling programs in the U.S. and Yemen as evidenced by the increased capital budget. Due to strong oil and gas prices experienced during the first half of 2005 and the strength of the forward price curve, the company has increased its average NYMEX price assumptions for 2005 to $55.00 per barrel of oil and $7.00 per MMBtu of gas versus the previous assumptions of $50.00 per barrel and $6.50 per MMBtu. During the second quarter of 2005, the company experienced an improvement in the contract differentials in Argentina from those witnessed at year-end 2004 and earlier in 2005. Indications early in the third quarter are that this improvement has been sustained. Accordingly, the company has adjusted its expected net realized prices for oil production as a percent of NYMEX prices during 2005 to be 74 percent versus the previous target of 71 percent. After considering the impact of the increases in targeted production, assumed NYMEX oil and gas prices, realized price assumptions and the other assumptions enumerated in the accompanying table, "Vintage Petroleum, Inc. and Subsidiaries, Revised 2005 Targets," the company is increasing its target for 2005 cash flow (as defined in the attached table) by 23 percent to $435 million, which is $81 million higher than the previous target of $354 million. Similarly the revised target for 2005 EBITDAX has been raised by 21 percent, or $100 million, to $586 million from the previous target of $486 million. Vintage to Webcast Second-Quarter 2005 Conference Call The company's second-quarter 2005 teleconference call to review second quarter results will be broadcast live on a listen-only basis over the internet on Thursday, August 4 at 3 p.m. Central Time. Interested parties may access the webcast by visiting the Vintage Petroleum, Inc. website at www.vintagepetroleum.com and selecting the microphone icon, or at www.fulldisclosure.com and typing VPI in the ticker search box and selecting "Go". The teleconference may be accessed by dialing 800-362-0574 and providing the call identifier "Vintage" to the operator. The webcast and the accompanying slide presentation will be available for replay at the company's website. An audio replay will be available until August 9, 2005, by dialing 402-530-9315. Forward-Looking Statements This release includes certain statements that may be deemed to be "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. All statements in this release, other than statements of historical facts, that address estimates of future production, operating costs, capital spending, EBITDAX, cash flow, NYMEX prices of oil and gas and company realizations, the impact of oil and gas hedging activities, and events or developments that the company expects or believes are forward-looking statements. Although the company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forward-looking statements include oil and gas prices, exploitation and exploration successes, actions taken and to be taken by Argentina as a result of its political and economic conditions and changes in the estimated impact on the company, as well as continued availability of capital and financing, and general economic, market or business conditions as well as other risk factors described from time to time in the company's filings with the SEC. The company assumes no obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise. Vintage Petroleum, Inc. is an independent energy company engaged in the acquisition, exploitation, exploration, and development of oil and gas properties and the marketing of natural gas and crude oil. Company headquarters are in Tulsa, Oklahoma, and its common shares are traded on the New York Stock Exchange under the symbol VPI. For additional information, visit the company website at www.vintagepetroleum.com -0- *T VINTAGE PETROLEUM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------- 2005 2004 2005 2004 --------- --------- --------- --------- REVENUES: Oil, condensate and NGL sales $186,089 $117,507 $351,646 $230,938 Gas sales 52,166 43,058 102,052 78,126 Sulfur sales 994 242 1,732 715 Gas marketing 16,124 17,462 34,702 32,234 --------- --------- --------- --------- Total revenues 255,373 178,269 490,132 342,013 --------- --------- --------- --------- COSTS AND EXPENSES: Production costs 43,836 34,806 87,195 70,165 Transportation and storage costs 4,300 2,741 8,529 5,061 Production and ad valorem taxes 8,332 5,519 15,216 10,825 Export taxes 16,332 6,706 29,668 12,912 Exploration costs 7,429 7,329 17,755 8,565 Gas marketing 15,124 16,480 32,666 30,551 General and administrative 16,821 16,791 34,171 34,856 Depreciation, depletion and amortization 34,353 21,881 67,750 45,967 Impairment of proved oil and gas properties - - - 3,915 Accretion 1,792 1,629 3,539 3,247 Other operating (income) expense 1,912 1,213 2,929 (3,604) --------- --------- --------- -------- Total costs and expenses 150,231 115,095 299,418 222,460 --------- --------- --------- --------- OPERATING INCOME 105,142 63,174 190,714 119,553 --------- --------- --------- --------- NON-OPERATING (INCOME) EXPENSE: Interest expense 11,600 12,674 23,155 26,695 Loss on early extinguishment of debt - - - 9,903 Losses on derivative transactions 2,728 440 43,444 444 (Gain) loss on disposition of assets (16) 4 (16) (55) Foreign currency exchange (gain) loss 1,069 (1,969) 2,335 (826) Other non-operating income (726) (162) (1,157) (173) --------- --------- --------- -------- Net non-operating expense 14,655 10,987 67,761 35,988 --------- --------- --------- --------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 90,487 52,187 122,953 83,565 --------- --------- --------- --------- INCOME TAX PROVISION: Current 24,182 16,269 38,586 28,413 Deferred 8,587 1,216 5,467 2,089 --------- --------- --------- -------- Total income tax provision 32,769 17,485 44,053 30,502 --------- --------- --------- --------- INCOME FROM CONTINUING OPERATIONS 57,718 34,702 78,900 53,063 INCOME FROM DISCONTINUED OPERATIONS - 2,707 10,743 3,481 --------- --------- --------- --------- NET INCOME $ 57,718 $ 37,409 $ 89,643 $ 56,544 ========= ========= ========= ========= *T -0- *T VINTAGE PETROLEUM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Continued) (In thousands, except per share amounts) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------- ----------------- 2005 2004 2005 2004 ---------- -------- --------- ------- BASIC INCOME PER SHARE: Income from continuing operations $0.86 $0.54 $1.19 $0.83 Income from discontinued operations - 0.04 0.16 0.05 ---------- -------- --------- ------- Net income $0.86 $0.58 $1.35 $0.88 ========== ======== ========= ======= DILUTED INCOME PER SHARE: Income from continuing operations $0.86 $0.53 $1.17 $0.82 Income from discontinued operations - 0.04 0.16 0.05 ---------- -------- --------- ------- Net income $0.86 $0.57 $1.33 $0.87 ========== ======== ========= ======= Weighted average common shares outstanding: Basic 66,799 64,741 66,471 64,535 Diluted 67,472 65,487 67,182 65,258 *T -0- *T VINTAGE PETROLEUM, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands, except shares and per share amounts) (Unaudited) ASSETS June 30, December 31, 2005 2004 ----------- ------------ CURRENT ASSETS: Cash and cash equivalents $ 155,804 $ 124,221 Accounts receivable - Oil and gas sales 127,098 107,870 Joint operations 11,854 12,479 Income taxes receivable 39,460 31,571 Deferred income taxes 22,639 15,364 Prepaids and other current assets 17,758 23,648 ----------- ------------ Total current assets 374,613 315,153 ----------- ------------ PROPERTY, PLANT AND EQUIPMENT, at cost: Oil and gas properties, successful efforts method 2,289,876 2,163,176 Oil and gas gathering systems and plants 23,926 23,926 Other 33,313 31,932 ----------- ------------ 2,347,115 2,219,034 Less accumulated depreciation, depletion and amortization 1,009,816 942,656 ----------- ------------ Total property, plant and equipment, net 1,337,299 1,276,378 ----------- ------------ DEFERRED INCOME TAXES 10,959 13,200 ----------- ------------ OTHER ASSETS, net 50,513 40,161 ----------- ------------ $1,773,384 $1,644,892 =========== ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Revenue payable $ 28,154 $ 33,740 Accounts payable - trade 55,925 50,775 Current income taxes payable 18,954 23,565 Derivative financial instruments payable 80,966 27,672 Other payables and accrued liabilities 74,401 73,748 ----------- ------------ Total current liabilities 258,400 209,500 ----------- ------------ LONG-TERM DEBT 549,952 549,949 ----------- ------------ DEFERRED INCOME TAXES 77,646 80,383 ----------- ------------ LONG-TERM LIABILITY FOR ASSET RETIREMENT OBLIGATIONS 92,008 90,707 ----------- ------------ OTHER LONG-TERM LIABILITIES 39,195 30,675 ----------- ------------ STOCKHOLDERS' EQUITY: Preferred stock, $0.01 par, 5,000,000 shares authorized, zero shares issued and outstanding - - Common stock, $0.005 par, 160,000,000 shares authorized, 67,514,467 and 66,541,984 shares issued and 66,977,600 and 66,012,252 outstanding, respectively 338 333 Capital in excess of par value 380,782 361,120 Retained earnings 425,352 342,707 Accumulated other comprehensive loss (40,083) (13,088) ----------- ----------- 766,389 691,072 Less treasury stock, at cost, 536,867 and 529,732 shares, respectively 4,319 4,319 Less unamortized cost of non-vested stock awards 5,887 3,075 ----------- ------------ Total stockholders' equity 756,183 683,678 ----------- ------------ $1,773,384 $1,644,892 =========== ============ *T -0- *T VINTAGE PETROLEUM, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Six Months Ended June 30, ------------------- 2005 2004 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 89,643 $ 56,544 Adjustments to reconcile net income to cash provided by operating activities - Income from discontinued operations, net of tax (10,743) (3,481) Depreciation, depletion and amortization 67,750 45,967 Impairment of proved oil and gas properties - 3,915 Accretion 3,539 3,247 Dry hole costs, impairments of unproved oil and gas properties and other 12,010 5,684 Provision for deferred income taxes 5,467 2,089 Foreign currency exchange (gain) loss 2,335 (826) Gain on dispositions of assets (16) (55) Loss on early extinguishment of debt - 9,903 Stock compensation 3,130 5,938 Losses on derivative transactions 43,444 444 Other non-cash items included in net income 613 647 Increase in receivables (18,928) (16,675) Increase (decrease) in payables and accrued liabilities (10,618) 1,744 Other working capital changes (2,296) 4,708 ---------- --------- Cash provided by continuing operations 185,330 119,793 Cash provided by discontinued operations - 22,415 ---------- --------- Cash provided by operating activities 185,330 142,208 ---------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures - Oil and gas properties (132,743) (95,744) Gathering systems and other (1,440) (1,430) Payments on non-hedge derivative transactions (12,841) - Other (8,266) (913) ---------- --------- Cash used by investing activities - continuing operations (155,290) (98,087) Cash used by investing activities - discontinued operations - (16,123) ---------- --------- Cash used by investing activities (155,290) (114,210) ---------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 8,565 4,029 Purchase of treasury stock - (129) Redemption of 9 3/4% Senior Subordinated Notes due 2009 - (157,313) Advance on revolving credit facility and other borrowings 45,000 294,000 Payments on revolving credit facility and other borrowings (45,000) (144,900) Dividends paid (6,626) (5,798) Other 106 (3,052) ---------- --------- Cash provided (used) by financing activities 2,045 (13,163) ---------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (502) 634 ---------- --------- NET INCREASE IN CASH AND CASH EQUIVALENTS 31,583 15,469 CASH AND CASH EQUIVALENTS, beginning of period 124,221 32,264 ---------- --------- CASH AND CASH EQUIVALENTS, end of period $155,804 $ 47,733 ========== ========= *T -0- *T VINTAGE PETROLEUM, INC. AND SUBSIDIARIES SUMMARY OPERATING DATA (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------- ----------------- 2005 2004 2005 2004 ---------- -------- --------- ------- PRODUCTION: Oil (MBbls) - U.S. (b) 1,727 1,532 3,191 3,045 Argentina (a)(c) 3,017 2,434 6,101 4,875 Bolivia (a) 15 21 30 41 Yemen (a) 342 59 703 59 Continuing operations 5,101 4,046 10,025 8,020 Canada - 215 - 450 Total 5,101 4,261 10,025 8,470 Gas (MMcf) - U.S. (b) 7,141 7,125 14,824 13,365 Argentina (c) 2,228 2,147 4,381 4,179 Bolivia 1,236 1,829 2,567 3,548 Continuing operations 10,605 11,101 21,772 21,092 Canada - 3,868 - 7,806 Total 10,605 14,969 21,772 28,898 MBOE from continuing operations 6,869 5,896 13,654 11,535 Total MBOE 6,869 6,756 13,654 13,286 (a) Oil production (in MBbls) before the impact of changes in inventories: Three Months Ended Six Months Ended June 30, June 30, ------------------- ----------------- 2005 2004 2005 2004 --------- --------- --------- ------- Argentina 3,032 2,455 5,856 4,931 Bolivia 14 22 27 43 Yemen 391 108 735 109 (b) U.S. production for the three months and six months ended June 30, 2005, is estimated to have been reduced as a result of mudslides in Ventura County, California by 36 MBbls of oil and 66 MMcf of gas, or 47 MBOE, and 228 MBbls of oil and 304 MMcf of gas, or 279 MBOE, respectively (c) Argentina production for the three months and six months ended June 30, 2004, is estimated to have been reduced as the result of a labor strike by 200 MBbls of oil and 165 MMcf of gas, or 228 MBOE and 365 MBbls of oil and 300 MMcf of gas, or 415 MBOE, respectively. MBbls - thousand barrels MMcf - million cubic feet MBOE - thousand barrels of oil equivalent *T -0- *T VINTAGE PETROLEUM, INC. AND SUBSIDIARIES SUMMARY OPERATING DATA (Continued) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------- ----------------- 2005 2004 2005 2004 ---------- -------- --------- ------- Average Sales Price (including impact of hedges): Oil (per Bbl) - U.S. $38.36 $27.12 $36.82 $27.53 Argentina 33.83 30.29 32.67 29.62 Bolivia 22.62 24.67 22.87 24.26 Yemen 51.02 29.15 48.57 29.15 Continuing operations 36.48 29.04 35.08 28.80 Canada - 28.80 - 28.30 Gas (per Mcf) - U.S. $6.68 $5.45 $6.32 $5.24 Argentina 0.96 0.66 0.86 0.58 Bolivia 1.87 1.54 1.78 1.62 Continuing operations 4.92 3.88 4.69 3.70 Canada - 5.02 - 4.85 Average Sales Price (excluding impact of hedges): Oil (per Bbl) - U.S. $45.55 $34.54 $44.07 $33.54 Argentina 33.83 30.29 32.67 29.62 Bolivia 22.62 24.67 22.87 24.26 Yemen 51.02 29.15 48.57 29.15 Continuing operations 38.91 31.85 37.39 31.08 Canada - 33.94 - 32.29 Gas (per Mcf) - U.S. $6.80 $5.52 $6.29 $5.28 Argentina 0.96 0.66 0.86 0.58 Bolivia 1.87 1.54 1.78 1.62 Continuing operations 5.00 3.92 4.67 3.72 Canada - 5.02 - 4.85 *T -0- *T VINTAGE PETROLEUM, INC. AND SUBSIDIARIES REVISED 2005 TARGETS Previous Revised 2005 2005 Targets Targets(c) ---------- ---------- Oil production (MMBbls): U.S. 6.0 6.3 Argentina 12.3(e) 12.3(e) Bolivia 0.1 0.1 Yemen 1.4 1.6 Total 19.8 20.3 Gas Production (Bcf): U.S. 28.3 28.4 Argentina 8.5 8.5 Bolivia 5.0 5.0 Total 41.8 41.9 Total MMBOE 26.8 27.3 Assumed NYMEX(a) prices: Oil $50.00 $55.00 Gas $6.50 $7.00 Net realized price (before impact of hedging) as a percent of NYMEX(a) - Total Company: Oil 71% 74% Gas 68% 70% DD&A per BOE (oil and gas only) $4.85 $5.00 G&A per BOE $2.45 $2.40 Production, transportation and storage costs per BOE $7.25 $7.25 Production, ad valorem and export taxes per BOE 3.05 3.55 ---------- ---------- Total LOE per BOE $10.30 $10.80 Non-Acquisition Capital Spending Budget (in millions) $250 $285 Cash Flow (before all exploration expenses, working capital changes and current taxes associated with property sales) (in millions) (d) $354 $435 EBITDAX (in millions)(b)(d) $486 $586 MMBbls - million barrels Bcf - billion cubic feet MMBOE - million barrels of oil equivalent (a) NYMEX Oil - Average of the daily settlement price per barrel for the near-month contract for light crude oil as quoted on the New York Mercantile Exchange. Gas - Average of the settlement price per MMBtu for the last three trading days for the applicable contract month for natural gas as quoted on the New York Mercantile Exchange. (b) EBITDAX: Earnings before interest, taxes, DD&A, impairments, exploration expenses, cumulative effect of change in accounting principle, loss on early extinguishment of debt, gains/losses on property sales and other non-cash items. (c) Targets do not reflect any future acquisitions or dispositions of assets. Targets reflect the impact of existing hedges. See "2005 Targets Updated" and "Forward-Looking Statements" elsewhere in the release. (d) The targets for non-GAAP financial measures are not reconciled to the most directly comparable GAAP financial measure as the company does not establish targets for such GAAP financial measures. (e) Includes sales volumes of 400,000 barrels for an expected decrease in oil inventories. *T -0- *T VINTAGE PETROLEUM, INC. AND SUBSIDIARIES COMMODITY DERIVATIVE STATUS OIL PRICE SWAPS NYMEX Reference Price Quarter Ending Barrels $ Per Bbl ------------------------------------- ------------ ------------------- September 30, 2005 1,269,600 35.57 December 31, 2005 1,269,600 34.88 March 31, 2006 427,500 37.39 June 30, 2006 432,250 36.80 September 30, 2006 437,000 36.32 December 31, 2006 437,000 35.93 March 31, 2007 189,000 34.26 June 30, 2007 63,700 39.66 September 30, 2007 64,400 39.38 December 31, 2007 64,400 39.10 GAS PRICE SWAPS NYMEX Reference Price Quarter Ending MMBtu $ Per MMBtu ----------------------------------- ---------------- ---------------- September 30, 2005 1,186,800 6.17 December 31, 2005 1,186,800 6.37 March 31, 2006 243,000 6.47 June 30, 2006 245,700 6.47 September 30, 2006 248,400 6.47 December 31, 2006 248,400 6.47 March 31, 2007 225,000 6.00 June 30, 2007 227,500 6.00 September 30, 2007 230,000 6.00 December 31, 2007 230,000 6.00 GAS PRICE COLLARS MMBtu For NYMEX Floor NYMEX Cap July to December Reference Price Reference Price 2005 $ Per MMBtu $ Per MMBtu ------------------------ -------------------- -------------------- 920,000 6.00 6.80 1,840,000 6.00 8.02 920,000 6.00 8.73 1,840,000 6.00 9.21 *T VINTAGE PETROLEUM, INC. AND SUBSIDIARIES NON-GAAP FINANCIAL MEASURES Cash flow, a non-GAAP measure, represents cash provided by operating activities before the impact of discontinued operations, changes in working capital items related to operating activities, all exploration costs and further adjusted for payments on derivative transactions no longer qualifying for hedge accounting which are reflected as investing activities under GAAP. This non-GAAP measure is presented because management believes it is a useful adjunct to cash provided by operating activities under accounting principles generally accepted in the United States (GAAP). This non-GAAP cash flow measure is widely accepted as a financial indicator of an oil and gas company's ability to generate cash which is used to internally fund exploration and development activities and to service debt and is comparable to targets established by the company. This non-GAAP measure is not a measure of financial performance under GAAP and should not be considered as an alternative to cash provided (used) by operating, investing, or financing activities as an indicator of cash flows, or as a measure of liquidity. EBITDAX is also presented below because of its wide acceptance by the investment community as a financial indicator of a company's ability to internally fund exploration and development activities and to service or incur debt. Management also views the non-GAAP measure of EBITDAX as a useful tool for comparison of the company's financial indicator with those of peer companies and is comparable to targets established by the company. EBITDAX should not be considered as an alternative to net income or cash provided by operating activities, as defined by GAAP. The following table reconciles cash provided by operating activities to cash flow and EBITDAX (in thousands): -0- *T Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------- 2005 2004 2005 2004 --------- -------- --------- --------- Cash provided by operating activities (GAAP measure) $82,337 $57,758 $185,330 $142,208 Adjustments to remove the impact of: Cash provided by discontinued operations - (12,402) - (22,415) Changes in working capital items related to operating activities 29,570 20,646 31,842 10,223 Exploration geological and geophysical costs 3,685 1,681 5,745 2,881 Payments on derivative transactions included in investing activities (8,492) - (12,841) - --------- -------- --------- --------- Cash flow (non-GAAP measure) 107,100 67,683 210,076 132,897 Current taxes 24,182 16,269 38,586 28,413 Interest expense 11,600 12,674 23,155 26,695 --------- -------- --------- --------- EBITDAX (non-GAAP measure) $142,882 $96,626 $271,817 $188,005 ========= ======== ========= ========= *T

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