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1999 Annual Report
■ ABOUT THE REPORT
The people of Cross Timbers Oil Company live and work in the vast
expanse of America. From the icy waters of Alaska’s Cook Inlet to
the piney woods of East Texas, our folks are part and parcel of the
daily routines of life in these communities. We drive the country
roads. We watch local football.
We do business at the corner stores.
Yet, with the hectic pace of life, we rarely have a minute to pause
and look around at our world. In so doing, the seemingly ordinary
might reveal itself as something extraordinary.
Our goal was to take that “pause” for you in photographs. We
hoped to capture those little slices of life which reveal the underly-
ing essence of our neighborhoods. What we expose is a compelling
collection of diverse landscapes, interesting cultures and colorful
characters who live and work alongside us.
■ ON THE COVER
Atop White Rock Mountain in the Ozark National Forest, an adventurer
surveys the rolling terrain of Arkansas.
At the close of 1999, we reflect on the year’s many challenges, relish
the substance of our accomplishments and stand ready to enter
another world of opportunity – the gas-rich Arkoma Basin.
Like the bold explorer with a vision, we have staked our claim to
more than 600,000 acres. With excitement, anticipation and sea-
soned confidence, we prepare for the intensity of work and fresh
challenges ahead.
■ COMPANY PROFILE
Cross Timbers Oil Company, established in 1986, is engaged in the
acquisition and development of quality, long-lived producing oil
and gas properties and exploration for oil and gas. Since going
public in 1993, proved oil and gas reserves have grown at an annual
compound rate of 38% to more than two trillion cubic feet of gas
equivalent. Cross Timbers operates more than 85% of its properties,
which are concentrated in Texas, Arkansas, Oklahoma, Kansas, New
Mexico, Wyoming, and Alaska. The Company completed its initial
public offering in May 1993 and is listed on the New York Stock
Exchange under the symbol “XTO.” It also created the Cross
Timbers Royalty Trust (“CRT” traded on the NYSE) and the
Hugoton Royalty Trust (“HGT” traded on the NYSE) which went
public in 1992 and 1999, respectively.
In thousands except production, per share and per unit data 1999 1998 1997
FinancialTotal revenues $ 341,295 $ 249,486 $ 198,272Income (loss) before income tax and minority interest $ 70,605(a) $ (105,570)(b) $ 39,201Earnings (loss) available to common stock $ 44,964(a) $ (71,498)(b) $ 23,905Per common share (c)
Basic $ 0.96 $ (1.65) $ 0.60Diluted $ 0.95 $ (1.65) $ 0.59
Operating cash flow (d) $ 132,683 $ 78,480 $ 89,979Operating cash flow per share (c) $ 2.83 $ 1.81 $ 2.26Total assets $ 1,477,081 $ 1,207,005(e) $ 788,455Long-term debt
Senior $ 684,100 $ 615,000 $ 239,000Subordinated notes and other $ 307,000 $ 305,411(e) $ 300,000
Total stockholders’ equity $ 277,817 $ 201,474(e) $ 170,243Common shares outstanding at year-end (c) 48,890 44,727 39,450
ProductionDaily production
Oil (Bbls) 14,006 12,598 10,905Gas (Mcf) 288,000 229,717 135,855Natural gas liquids (Bbls) 3,631 3,347 220Mcfe 393,826 325,390 202,609
Average priceOil (per Bbl) $ 16.94 $ 12.21 $ 18.90Gas (per Mcf) $ 2.13 $ 2.07 $ 2.20Natural gas liquids (per Bbl) $ 11.80 $ 00007.62 $ 9.66
Proved ReservesOil (Bbls) 61,603 54,510 47,854Gas (Mcf) 1,545,623 1,209,224 815,775Natural gas liquids (Bbls) 17,902 17,174 13,810Mcfe 2,022,653 1,639,331 1,185,759
(a) Includes effect of a $40.6 million pre-tax gain on sale of Hugoton Royalty Trust units.
(b) Includes effect of a $93.7 million pre-tax net loss on investment in equity securities and a $2 million pre-tax, non-cash impairment charge.
(c) Adjusted for the three-for-two stock splits effected on March 19, 1997 and February 25, 1998.
(d) Cash provided by operating activities before changes in operating assets and liabilities and exploration expense.
(e) As restated. See Note 16 to Consolidated Financial Statements.
1
Cr o s s Tim b e r s O i l C om p a n yF I N A N C I A L H I G H L I G H T S
GlossaryBbls Barrels (of oil or NGLs)Bcf Billion cubic feet (of gas)Bcfe Billion cubic feet equivalentBOE Barrels of oil equivalentBOPD Barrels of oil per dayE&P Exploration & productionMcf Thousand cubic feet (of gas)Mcfe Thousand cubic feet equivalentMMcf Million cubic feet (of gas)MMcfe Million cubic feet equivalentNGLs Natural gas liquidsTcf Trillion cubic feet (of gas)Tcfe Trillion cubic feet equivalent
One barrel of oil is the energy equivalent
of six Mcf of natural gas.0
$50
$100
$150
$200
$250
$300
$350
Total Revenues(in millions)
0
500
1,000
2,500
1,500
2,000
Proved Reserves(in Bcfe)
0
$30
$60
$90
$120
$150
Operating Cash Flow(in millions)
0
50
150
300
400
100
250
200
350
Daily Production(in MMcfe)
“The pendulum swings...” and it swung decisively to
the upside in 1999, for both the industry and Cross
Timbers. Despite three mild winters in a row, both oil and
gas prices approached new highs in the first quarter of
2000. During this time, Cross Timbers progressed notably,
positioning itself among the top U.S. independents. Our
achievements during 1999 were impressive:
Proved oil and gas reserves at year-end 1999 were
2.02 Tcfe, up 23% from the 1.64 Tcfe at year-end
1998. This translates to 41 Mcfe per share.
Record production, attributable to our successful
development drilling and property acquisitions,
jumped 21% to 144 Bcfe.
Acquisition of nearly 500 Bcfe in the highly
regarded Arkoma Basin established a new core
operations area for the Company.
Cash flow from operations reached an annualized
rate of $203 million, or $4.15 per share, during the
fourth quarter.
Unit cash margin averaged a strong $1.03 per Mcfe
during 1999 and an impressive $1.42 per Mcfe in
the fourth quarter, both multiples of our five-year
average drill bit replacement cost of $.40.
Debt per Mcfe was reduced to $.49 from $.56
in 1998.
The Company added 852 Bcfe (before reserve sales)
at a cost of $.70 per Mcfe.
With a 15% production growth for 2000 already
“built-in” through our Arkoma Basin acquisitions, our pri-
mary focus shifts to efficiently developing the vast potential
of the quality properties we’ve acquired over the past two
years. Our acquisitions in East Texas, the San Juan Basin
and the Arkoma Basin have nearly tripled production and
reserves as well as related development opportunities.
Our stated goals for 2000 are to generate $4.00 per
share in cash flow, have proved reserves of 40 Mcfe per
share and have debt of $.40 to $.45 per Mcfe by year-end
2000. Obviously, the amount of cash flow is dependent on
commodity prices, but we expect to internally generate
between $320 million and $340 million, including asset
sales. About $100 million to $120 million will be used to
fund the development program, while $111 million was
used on March 31 to purchase the minority interest in
Arkoma Basin properties held by Lehman Brothers
Holdings, Inc. The remaining $100 million to $130
million will be used to reduce existing debt and to
repurchase our common stock.
ACQUISITIONS
Much of our production growth in recent years has been
fueled by the steady accumulation of high-quality properties,
and 1999 was no exception. In two transactions, we
acquired 455 Bcfe of proved reserves, net of sales, in the
highly promising Arkoma Basin of Arkansas and Oklahoma,
as well as a gas gathering and marketing company, compres-
sion and gathering assets and undeveloped acreage. The
Arkoma properties are 99% gas, creating a new core area
for Cross Timbers and adding about 120 MMcf in daily
gas production.
The Arkoma Basin is generating considerable excite-
ment among our experienced staff of engineers and
geologists. Early studies of the multiple sandstone plays and
producing horizons indicate this area will yield a multi-year
project inventory and may well exceed our usual 50%
improvement on reserves acquired. We have already identi-
fied 180 well locations and 200 workover opportunities,
which include 50 compression projects, 70 pumping units
and 80 recompletions.
The Arkoma acquisitions, valued at $466 million, were
achieved with Lehman as a financial partner. Cross Timbers
purchased Lehman’s interest in the first acquisition in
September 1999 and the second interest on March 31
of this year.
2
Cr o s s Tim b e r s O i l C om p a n yT O O U R S H A R E H O L D E R S
PROPERTY SALES
In 1999, Cross Timbers conducted a comprehensive
review of its producing property portfolio. As a result, we
sold $258 million of producing properties in several trans-
actions. Proceeds from these sales were used for debt reduc-
tion and to partially fund the acquisition of gas-producing
properties in the Arkoma Basin.
Hugoton Royalty Trust. In May, Cross Timbers com-
pleted the Hugoton Royalty Trust offering. By selling an
interest in properties that our development efforts have
already increased in value, we were able to “monetize” our
success and to fund acquisition opportunities with even
greater upside potential. To form the trust, we conveyed an
80% net profits interest in our properties in the Hugoton
area of Oklahoma and Kansas, the Anadarko Basin in
Oklahoma and the Green River Basin in Wyoming. We
sold 17,004,000 of 40,000,000 total units in a public offer-
ing at $9.50 per unit. This sale generated net proceeds of
$149 million. Importantly, we still effectively own 66% of
the original property base subsequent to the offering.
Other Property Sales. Other property sales during
1999 generated $109 million in proceeds. These sales
occurred in multiple transactions and focused primarily on
non-operated producing properties in Texas, New Mexico,
Oklahoma and Wyoming. Through this process, we were
able to reduce the Company’s well count by 30%, while
reducing the reserves by only 7%. The large number of
wells sold increased our efficiency, while the relatively small
proportion of reserves sold is testimony to the quality and
concentration of our remaining reserves.
On March 31, 2000, Cross Timbers sold properties
located primarily in southeast New Mexico and West Texas
for $68.3 million. Daily production from the combined
sales totals 13.1 MMcf and 560 barrels of oil. The proceeds
were used to partially fund the purchase of Lehman’s
minority interest in the Arkoma properties.
DEVELOPMENT
We executed the most aggressive development pro-
gram in our history in 1999. Cross Timbers delivered on
516 projects, including drilling 116 wells (101 gas, 15 oil),
completing 400 workovers and replacing 237% of produc-
tion at a cost of only $.28 per Mcfe. These results are
directly attributable to our well-established formula for
success: purchase quality, established reserves with the right
characteristics for further development, perform detailed
studies and apply the latest engineering, geologic and
geophysical technology to increase production, reserves and
cash flow.
Our 1999 activities focused on our East Texas and San
Juan properties. In both of these areas, field studies indi-
cate that reserve additions could exceed 100% of acquired
reserves in the next couple of years.
Since acquisition of our East Texas properties in 1998,
we have drilled 41 wells and completed 153 workovers in
the area. As a result, in the past 18 months we have
increased reserves by 88% and daily production by 38%.
Our remaining exploitation inventory consists of 150
development wells and 300 recompletions.
Development emphasized the Travis Peak and Cotton
Valley formations underlying the Willow Springs and
Freestone fields. Additionally, in the Freestone Field we are
involved in an active Bossier Sandstone development play.
In both fields we have utilized innovative completion and
low-cost fracture techniques that allow recompletion of pay
intervals beneath existing producing intervals – a signifi-
cant technical achievement. By using these new techniques,
completing all producing horizons and commingling
production, we are adding still more upside to these high-
quality properties.
In the San Juan Basin, we have drilled 31 wells and
completed 220 workovers since acquisition. As a result, we
have increased daily operated production by 46% and
reserves by 62% and still have 200 well locations and 250
workovers remaining in our development inventory.
In 1999, we increased daily operated production in the
San Juan Basin by 27% – topping the 15% increase in
1998 – by drilling 18 wells and successfully developing
deeper Dakota, Burro Canyon, Paradox and Morrison forma-
tions. We completed 130 workovers and revamped field
compression by installing 74 wellhead compressors. We
will continue to install wellhead compression to further
reduce line pressure. In 2000, we plan to drill 42 wells and
complete 100 workovers in the San Juan Basin.
Cr o s s Tim b e r s O i l C om p a n y
3
OUTLOOK
The historical link between oil and gas prices and E&P
equity price performance was shattered this past year.
While operations of a majority of independent producers
are once again prospering, E&P share prices are just now
beginning to recover.
Despite the market’s current tendency to discount
industry improvements, we are committed to achieving a
stock price that better recognizes our underlying value.
More than 80% of our reserves and daily production are
related to natural gas. With the 12-month natural gas
price strip around $3.00 per Mcf even as we near the end of
another mild winter, North American natural gas funda-
mentals appear bullish for 2000 and beyond. As a result,
we should generate at least $80 million to $100 million in
cash flow above the capital requirements of our develop-
ment program. This will position us to meet our debt per
Mcfe goals and to continue to do what we do best – buy
high-quality oil and gas properties and improve them by
more than 50%.
We can’t predict or control the “swing of the
pendulum.” We can, however, concentrate on the funda-
mentals of being a low-cost finder and producer of energy,
especially gas. We also can emphasize shareholder value,
and with our strategic steps this year, expect that solid
value will be recognized in the marketplace.
We hope you share the excitement of our bright
prospects for 2000 and beyond. As always, we appreciate
your continued support.
Bob R. Simpson
Chairman and Chief Executive Officer
Steffen E. Palko
Vice Chairman and President
March 31, 2000
FINANCIAL RESULTS
For 1999, the Company reported earnings to common
shareholders of $45 million, or $.96 per share, compared
with a loss of $71.5 million or $1.65 per share in 1998.
Earnings for 1999 included a $26.8 million after-tax gain
from the sale of the Hugoton Royalty Trust units, a $4.2
million after-tax gain on the sale of properties, and an
$800,000 after-tax loss on investment in equity securities.
The 1998 loss includes a $61.9 million after-tax loss related
to the Company’s investment in equity securities, as well as
an after-tax impairment write-off of producing properties of
$1.3 million. Excluding gains and losses from investments
and from sales of trust units and other property, earnings
for 1999 were $14.8 million or $.32 per share. Excluding
losses from investments and impairment write-off, the
Company would have reported a loss of $8.3 million or
$.19 per share in 1998.
Total revenues for 1999 were $341.3 million, a 37%
increase from revenues of $249.5 million for 1998. Cash
flow from operations before changes in operating assets and
liabilities and exploration expense for the year was $132.7
million, or $2.83 per share, compared to $78.5 million or
$1.81 per share for 1998.
SHARE REPURCHASE PROGRAM
In February of 2000, the Board of Directors authorized
the repurchase of up to 2.5 million shares of the Company’s
common stock, or about 5% of the 48.9 million shares out-
standing at year-end. The shares will be bought from time
to time in open-market or negotiated transactions.
The Board’s action recognized the extraordinary value
represented by the current price of Cross Timbers stock,
which is trading at a substantial discount from our historic
multiples of four to seven times cash flow and well below
our underlying value. The buy-back plan continues
management’s long-standing strategy of opportunistically
repurchasing its common stock to create additional value
per share.
4
Cr o s s Tim b e r s O i l C om p a n y
5
6
At the turn of the 1800s, the rich natural resources of the Alaskan frontier brought Russian fur traders acrossthe Bering Strait. With their families and their religion,these bold pioneers carved a life out of the wild KenaiPeninsula. They hunted the woods and fished the cold
waters. They trapped and tradedpelts. They dreamed of fortunes.
Two centuries later, pioneers stillmake the journey to this northern frontier. They comewith their families and culture. Only now, the “hunt” is for the natural resources lying deep below the surface –great reservoirs of hydrocarbons.
This Russian Orthodox Church, a gentle reminder of a past culture,anchors the center of old Kenai.
Major Producing Areas
Since the Company’s founding in 1986 and initial
public offering in 1993, the domestic energy industry has
experienced – alternately enduring and enjoying – wide
swings in commodity prices. Through it all, Cross
Timbers has pressed forward to emerge as a leader in the
exploration and production sector. One of the reasons is a
steadfast commitment to a proven operational strategy:
Employ talented professionals, both in the office
and in the field;
Make quality acquisitions of long-lived reserves;
Reduce field operating costs while increasing
production volumes;
Focus development spending on the most favorably
priced commodity, oil or gas;
Do the analytical homework, both intensively
and creatively;
Deploy the most current technological advancements
for finding, developing and producing more reserves
from existing properties.
These tenets on which the Company was built have
provided a sound foundation for growth. From a team of
less than a dozen in 1986, personnel has grown to over 600
strong. Operations have expanded from a handful of wells
in West Texas and Oklahoma to more than 7,000 wells in
five core operating areas in the Lower 48, as well as off-
shore Alaska. Proved reserves, starting at zero, have grown
to two Tcfe. In so doing, we have positioned the Company
to profit from the future preeminence of natural gas by
building one of the most impressive domestic reserve bases
of any independent.
From an operational perspective, a simple goal has
remained resolute throughout these challenging periods:
“Work hard to enhance reserves, improve
production and profitability and, consequently, increase
our shareholders’ value.”
Our efforts in 1999 yielded another successful chapter
in the story of Cross Timbers’ focused and disciplined
strategy.
ACQUISITIONS
The Company has
purchased about $1
billion of strategic, gas-
producing properties
since December 1997,
including $466 million in Arkoma Basin properties this
past year. It now has a presence in every premier onshore
gas-producing basin in the United States. Cross Timbers’
challenge now is to efficiently develop this extensive
inventory and to achieve or beat the Company’s historic
50% addition to reserves on acquired properties.
Arkoma Basin
The Arkoma Basin, stretching across Arkansas and
eastern Oklahoma, is well known for its shallow decline
rates, multiple formations and complex geology – attrib-
utes that long attracted Cross Timbers to the region. Our
bold move into this basin was accomplished in two major
deals that made Cross Timbers the largest gas producer in
the state of Arkansas.
7
Cr o s s Tim b e r s O i l C om p a n yO P E R A T I O N S R E V I E W
Fontenelle Area
San Juan Basin
Hugoton Area
Major CountyArkoma Basin
Permian BasinEast Texas
Basin
On thousands of uninhabited acres rising above the valleys, an old way of life continues to exist. Shepherdstend to thousands of sheep that graze the vast governmentlands. These men roam the mountains for months at atime with only their dogs and caravan wagons.
Yet below them lies a wealthof natural gas. This gas feeds a
web of pipelines that stretches to the West Coast, providing energy for modern life.
A solitary sheepherder rises to a new day.
8
The first acquisition was completed in June 1999,
when the Company purchased the common stock of Spring
Holding Company, a private oil and gas firm in Tulsa,
Oklahoma, for cash and Cross Timbers common stock
totaling $85 million. Lehman Brothers Holdings, Inc.
contributed $42.5 million in cash for a 50% interest in
Spring. In mid-September, Cross Timbers acquired
Lehman’s interest for $44.3 million, funded through the
sale of non-strategic properties.
The acquisition was 99% gas and gave Cross Timbers
proved reserves of 264 Bcfe, with proved developed
reserves accounting for 82% of total proved reserves.
Based on first quarter 1999 daily production of 66 MMcfe,
the reserve-to-production index was 11 years – fulfilling
the Company’s criteria for acquiring long-lived reserves.
The properties included about 1,400 producing wells
located on 340,000 net acres. The deal also included
non-producing assets such as compression equipment,
gathering systems and undeveloped acreage.
In September, Cross Timbers again teamed with
Lehman to acquire $231 million worth of Arkoma proper-
ties from Ocean Energy, Inc. As in the Spring transaction,
Lehman granted Cross Timbers
an opportunity to acquire its
50% equity interest at a
later date.
Engineers estimate proved
reserves at acquisition of 220
Bcfe with daily production of
55 MMcfe from 1,140 wells.
Like the Spring acquisition,
these Arkoma properties are
99% gas and have a reserve-to-
production index of 11 years.
As a result of these Arkoma Basin acquisitions, Cross
Timbers added an estimated 480 Bcfe (455 net of sales) in
reserves with daily production of about 120 MMcfe. More
than 86% of the value of the reserves acquired is operated,
and production expense, before severance and property
taxes, is just $.22 per Mcfe. The Company now has inter-
ests in more than 2,500 (1,100 operated) Arkoma wells on
435,000 net acres.
DEVELOPMENT
Cross Timbers spent about $94.4 million for explo-
ration and development activities in 1999, replacing a
remarkable 237% of its
production through
development at a cost
of $.28 per Mcfe. This
compares to a five-year
average drill bit reserve
replacement of 189%
at a cost of $.40 per
Mcfe. This is an enviable achievement that places Cross
Timbers at the forefront of its peers.
Improved oil and gas prices have spurred new
enthusiasm in the oil patch, and Cross Timbers was no
exception to the upturn in field activity. We executed our
most aggressive development plan to date, participating in
the drilling of 116 wells and completing more than 400
workovers. Our primary focus was on gas projects, with
about 90% of the completed wells targeting natural gas.
Oil project development accelerated late in the year as oil
prices reached levels not seen since 1990.
Natural gas drilling con-
centrated in East Texas
(31 wells), the Arkoma Basin
of Arkansas and eastern
Oklahoma (26 wells), the San
Juan Basin of New Mexico
(19 wells), the Major County
area of northwestern
Oklahoma (13 wells), and the
Fontenelle Unit located in
Wyoming (7 wells). We
placed greatest emphasis on
our core properties in East Texas and the San Juan Basin
with more than 65% of capital deployed to these gas-rich
regions. In addition, more than two-thirds of our
workover activities were focused in East Texas and the
San Juan Basin.
9
Cr o s s Tim b e r s O i l C om p a n y
Summary of Proved Reserves by AreaSEC Assumptions – December 31, 1999
(in thousands)Proved Reserves Discounted
Natural Gas Present Value beforeLiquids Income Tax of
Area Oil (Bbls) Gas (Mcf) (Bbls) Proved ReservesPermian Basin 38,738 99,681 – $ 393,602 22.3%Arkoma Basin 4 433,083 – 346,064 19.6%East Texas 2,575 401,617 – 337,434 19.1%Hugoton (a) 2,819 333,503 – 269,754 15.3%San Juan Basin 1,315 259,031 17,902 257,426 14.6%Alaska 14,001 – – 126,309 7.1%Other 2,151 18,708 – 35,347 2.0%Total 61,603 1,545,623 17,902 $1,765,936 100.0%(a) Includes Cross Timbers’ ownership in the Hugoton Royalty Trust and the
related underlying properties.
Although the West Texas territory was wrought withdust storms and danger, bold pioneers battled their wayacross the land to set down roots for the future. Theyworked to build homesteads and towns while the stage-
coaches and railroads followed.For their pioneering efforts, a
legacy of wealth was granted totheir descendants. Though the land of the PermianBasin is rugged and unforgiving, beneath it lies a bonanza of oil and gas.
Ila Trout, Postmaster of Tokio, Texas, has seen decades of letters come and go through the doors of her post office.
10
Development of oil reserves again focused on the
University Block 9 Field and the Prentice Northeast Unit,
both located in the Permian Basin of West Texas. Six wells
were successfully drilled in the University Block 9 Field.
Three of these were horizontal sidetracks that continued
the horizontal program begun in 1998. In the Prentice
Northeast Unit we drilled nine wells, several of which
were delineation wells that set up future drilling prospects.
Meanwhile, development of the prolific Middle Ground
Shoal Field located in Alaska’s Cook Inlet was initiated in
1999 with six workovers and the refurbishment of drilling
rigs on both platforms in preparation for continued devel-
opment in 2000.
During 1999, Cross Timbers focused its exploration
efforts on prospect generation in areas where it already has
a presence. Successful wildcats were drilled on the Fort
Chaffee prospect located in the Arkoma Basin of Arkansas
and the Cowboy prospect located in McClain County,
Oklahoma. These successful test wells will fuel additional
drilling in 2000.
Our 2000 capital budget of $100 million to $120
million encompasses acquisition, exploration and develop-
ment plans. Cross Timbers expects to drill or participate
in the drilling of 180 wells and plans to implement more
than 400 workover and recompletion activities. Our
development program will again focus on gas, with 70%
of capital allocated for these projects. Any acquisitions are
expected to be additive in nature – limited to small
purchases in areas where we already have a foothold.
The excellent results from the 1999 program reveal
the quality of our exploration and development portfolio,
which is the best in our 14-year history. We can attribute
this to strategic acquisitions that place Cross Timbers in
major gas basins with multiple producing horizons allow-
ing our extensive technical expertise to be brought to bear
in a target-rich environment. The Arkoma Basin acquisi-
tions are the most recent in a string of astute acquisitions
that have transformed Cross Timbers into one of the top
U.S. E&P independents. The results of this strategy will
become more apparent during the next 12 months as the
Arkoma acquisitions drive future development with
additional high-quality projects.
East Texas Basin
The East Texas Basin, one of the nation’s premier gas
basins, has a history of production from multiple intervals
ranging from 7,000 to 12,000 feet. Our holdings are con-
centrated in eight major fields including Willow Springs,
Opelika, Logansport, Freestone, Whelan, Tri-Cities, North
Lansing and Bald Prairie.
Since assuming operations in May 1998, we have
drilled 41 wells and completed 153 workovers. Daily pro-
duction has increased 38% to 110 MMcfe from 80 MMcfe
while reserves, including
55 Bcfe produced since
acquisition, have
increased 88% to 472
Bcfe from 251 Bcfe. We
still have 150 well loca-
tions and more than 300
workovers identified for
future development. During 1999, Cross Timbers spent
about $43 million on 31 development wells and 100
workovers with an average rate of return exceeding 60%.
Most of Cross Timbers’ East Texas production comes
from the Travis Peak Formation, which has multiple
sandstone reservoirs distributed throughout a thickness of
about 2,000 feet. Because of its prolific production rates,
multi-pay complexity and depth, the Travis Peak
Formation has generally been the primary target in the
East Texas Basin for the past 25 years. Cross Timbers’
initial development focus also centered on the Travis Peak
and, while this play has been and will continue to be
successful, we have identified significant potential in the
remaining formations. In fact, we drilled 16 wells target-
ing overlooked potential in the Bossier and Cotton Valley
formations in 1999.
Willow Springs Field. This Gregg County field has
been the proving ground for the vast potential of the entire
basin. As a result of our development efforts, production
has tripled to 27 MMcf per day (net 22 MMcf). A substan-
tial portion of the increase is due to adding production
from the Cotton Valley Sandstones to the established Travis
Peak production.
In 1998, we performed several workovers that proved
the production potential of the Upper Cotton Valley, an
interval with a thickness of about 1,000 feet containing
numerous sandstones. As a result, in 1999 we set in
11
Cr o s s Tim b e r s O i l C om p a n y
12
The farthest extent of the Red River brought paddleboatsinto the woods of eastern Texas in the mid-1800s. Withthem came the commerce that built port towns. Folksharvested raw goods and resources – from timber to cottonto sugar cane – to send packing back downstream on boatsheaded for the bustlingcities of the East Coast.
These historic hubs,with their unique culture, live in quieter times today.Yet the land around them is still rich with a commoditythat flows east: natural gas.
Blessed with a relaxed pace of life, two men of Jeffersonstrum their tune on a fine spring afternoon.
motion a program to increase production by adding pay
from the Upper Cotton Valley Sandstones to existing
producing wells. Previous operators in the area imple-
mented high-cost stimulation techniques with poor results,
which resulted in underdeveloped Cotton Valley reservoirs.
Cross Timbers unlocked the potential of these “stringers”
by designing a more economic completion process.
A fracture stimulation using water instead of
costly gels to carry proppant was successfully
implemented with excellent results. This
new stimulation process resulted in higher
production rates with cost savings of about
70% – $75,000 versus $250,000. Import-
antly, this technique can be utilized beyond
the boundary of the Willow Springs Field,
creating exciting upside potential in
other areas.
The 1999 drilling efforts yielded 11
Willow Springs Field wells with average initial producing
rates of two MMcfe per day and reserves of two Bcfe per
well. This development drilling further delineated and
extended the field boundaries to the south and west. In
addition, pressure tests indicate very little drainage from
40-acre development wells, creating additional drilling
opportunities on tighter spacing. The Company plans to
drill 12 wells and to perform 13 workovers and recomple-
tions in this area in 2000.
Freestone Field. Located in Freestone County, Texas,
this field produces from the Cotton Valley and Bossier
sandstones and the Travis Peak and Pettit formations.
However, at the time of acquisition, development was
focused in the Travis Peak Formation, with 35 of 40 wells
completed exclusively in that formation.
During 1999 our focus shifted to new development
targets in the deeper Cotton Valley and Bossier sandstones.
We drilled four wells, completing them in both zones.
Daily rates averaged more than four MMcfe per well, with
reserves of 3.2 Bcfe each, far exceeding expectations. An
intensive field study reveals there is more to come.
The Company holds more than 17,000 acres (10,000
net) with Bossier Sandstone potential and has identified up
to 100 potential well locations. Furthermore, very few of
the deep Freestone wells have been completed to the
Cotton Valley Sandstones, leaving much of the interval
untapped. And the development of the deepest formation,
the Cotton Valley Limestone, has been limited to the
northern third of the field. Substantial
development opportunity for this limestone
remains throughout the acreage.
We plan to capitalize on these numerous
reservoir opportunities by drilling wells with
multiple completions. In fact, commingling
production from the Cotton Valley
Sandstones, Cotton Valley Limestones and
Bossier Sandstones, in conjunction with
utilizing less costly water fracture versus
conventional fracturing techniques, has
already generated phenomenal results. Previous operators
completed these three zones separately, attaining daily
rates of 1 to 1.5 MMcfe per zone. In contrast, we com-
bined all zones at initial completion with daily rates
exceeding four MMcfe. By completing deeper pay zones
in the beginning and utilizing more cost-efficient develop-
ment techniques, the present value of these Freestone Field
wells will be significantly increased.
The development results for 1999 reveal the success of
our proven process. As a whole, daily field production
more than doubled since acquisition, increasing from eight
MMcfe to around 20 MMcfe at year end. We plan during
2000 to drill 15 wells and to complete 12 workovers,
making Freestone one of our most active
development areas.
Other Fields. Cross Timbers enjoys additional
upsides in all its East Texas fields. We believe previous
operators of the Opelika and Tri-Cities fields bypassed
reserves in the Cotton Valley Sandstones, while the Travis
Peak and Rodessa formations have many numerous multi-
zone development prospects. The Whelan, North Lansing,
and Logansport fields also provide opportunities for field
extensions and infill drilling. In total, the Company plans
to drill 40 wells and perform more than 120 workovers in
these areas during 2000.
13
Cr o s s Tim b e r s O i l C om p a n y
14
In the mid-1800s, adventurous cowboys rode hundredsof miles with thousands of cattle to get to the Kansasrailheads and payday. Over the decades, towns of tradepopulated by bold, colorful characters sprang up allalong this famous trail.
Today, the same entrepreneurial spirit is alive in the heartland ofAmerica. Farmers, merchants and
oilmen alike strike out on a daily journey to serve theirpassions and earn a dream.
In western Oklahoma, 83-year-old Bob Klemme is on a mission to markthe Chisholm Trail – every mile from South Texas to Kansas.
San Juan Basin
Cross Timbers’ acquire-and-exploit strategy is strongly
exemplified in the San Juan Basin properties it purchased
in late 1997. The existing wells had long produced from
multiple intervals and the region’s complex geology pro-
vided a well-established arena for upside potential. Also,
like East Texas, the San Juan Basin is laden with producing
horizons bypassed by previous operators. Regulatory
changes in recent years, allowing increased development
through reduced spacing and commingling, have
multiplied our prospects in this gas-rich region.
An impressive snapshot of our San Juan potential –
both realized and unrealized – is illustrated by our devel-
opment progress. At acquisition, we identified 37 well
locations and 29 workover projects on our operated proper-
ties. We have since drilled 31 wells and completed more
than 200 workovers, with a remaining inventory of 150
identified well locations and 250 workover opportunities.
Production on the operated properties has increased 46%
while reserves have increased 62%.
In 1999, we drilled 19 wells and completed 130
workovers, employing only $9 million in capital. This
generated an average rate of return exceeding 100%.
Development again focused on lowering producing
pressures with the installation of 74 wellhead compressors,
bringing total compressor installations to more than 150.
These installations have resulted in increased daily produc-
tion rates averaging more than 100 Mcf per well. Drilling
focused on the Ute Dome Field in both the Paradox and
Dakota formations along with Fruitland Coal development
in the northwestern portion of the basin.
The 2000 development budget for the San Juan Basin
includes 48 recompletions, 50 wellhead compressor instal-
lations and 42 development wells. This is about 15% of
our planned development spending for the year.
Ute Dome Field. During 1999, the Company
successfully utilized reprocessed 3-D seismic in the Ute
Dome Field to clarify structural mapping and to identify
isolated, undrained fault blocks. Using these studies, we
drilled three wells to the Paradox Formation and four wells
to the Dakota Formation. As a result of this development,
daily production has almost tripled, increasing to 14.5
MMcf from five MMcf at acquisition.
The Paradox Formation wells are producing at rates
exceeding three MMcf per day with estimated reserves of
3.5 Bcf per well. The Paradox Formation was initially
developed on 640-acre spacing; however, field studies and
these recent results indicate the need for tighter spacing to
adequately recover remaining reserves. The Company will
pursue changing the spacing rules to allow for additional
Paradox drilling in 2000.
Cross Timbers drilled four Dakota wells targeting
structural highs identified in our seismic
studies. We drilled these wells
through the deeper Burro
Canyon and Morrison sand-
stones. Two of the four wells
encountered prolific produc-
tion from these deeper
sandstones. Since the
majority of the original wells
in the field were not drilled
deep enough to test the Burro
Canyon and Morrison sand-
stones, there is significant
upside potential for additional
development. The other two
wells were economically completed in the
main Dakota sandstone intervals.
Development plans for 2000 include
shooting additional areas of the field with
3-D seismic and drilling eight wells with
the Dakota, Burro Canyon and Morrison
formations as targets.
Fruitland Coal. Development activities in the
Fruitland Coal focused on the northwestern portion of the
basin where we drilled eight wells during 1999. Our
successful program increased daily Fruitland Coal gas
production to more than seven MMcf from about two
MMcf at acquisition. The Fruitland Coal Formation is
only 1,500 feet deep here, and therefore, highly economic
– costing $190,000 to drill and complete a well with
average reserves of about 1.4 Bcf. This equates to a
development cost of just $.14 per Mcfe.
15
Dakota Burro Canyon Entrada
350
400
450
500
550
600
650
700
750
800
Mill
isec
on
ds
Ute IndiansA-#25
•
•
•
•
•
•
•
•
•
•
Cr o s s Tim b e r s O i l C om p a n y
After processing the 3-D seismic survey overUte Dome Field, severalsubtle fault traps werediscovered in theCretaceous-age DakotaFormation. Three wellswere drilled in 1999 targeting these traps, all being successful.
Ute Dome Field
16
In past times, the mesa landscape was home to only cac-tus, creatures and a few brave souls. Now communities
dot the countryside and the townsfolk are involved in theenergy business which fuels vibrant growth.
Tucked into the San Juan Basin,thousands of gas wells quietly coexist
with the cities, the wildlife and theenvironment. All the while, natural gas flows from deep
within the earth, filling the pipelines which supply ourgrowing demands for energy.
In the cold Farmington morning, brothers walk thedirt road toward their school bus.
Two successful wells were drilled in the State Line area
where producing rates often exceed two MMcf per day. In
addition, six wells were drilled in the Fulcher-Kutz area
surrounding Farmington, New
Mexico. Several of these wells were
successful trend extension tests that set
up additional drilling opportunities
for the future. A reduction in well
spacing from 320 acres to 160 acres
also is under discussion with regulato-
ry agencies, providing further oppor-
tunity. We expect to drill 15 wells to the Fruitland Coal
Formation during 2000.
Arkoma Basin
The Company secured a stronghold in the Arkoma
Basin, by acquiring, net of sales, 455 Bcfe of high-quality
reserves and interests in 2,500 wells. We have long pur-
sued a significant position in the Arkoma, a multi-pay and
geologically complex basin stretching from central
Arkansas into eastern Oklahoma. This premier basin is
well known for its shallow rates of production decline,
multiple productive intervals and heavily faulted, complex
geology. These attributes perfectly match our comprehen-
sive approach to exploitation and development. With this
sizable acquisition, we now control more than 40% of the
Arkansas Arkoma Basin production, making us the largest
producer in the state.
In the last half of the year, we drilled 10 wells that
proved geologic concepts that will drive future develop-
ment. Thus, we have already identified more than 200
prospective workover opportunities and 180 well locations.
In 2000, the budget provides for drilling 45 of these wells
and completing 75 workovers.
The properties can be separated into three distinct
areas with unique geologic and producing characteristics:
the Oklahoma Cromwell/Atoka Trend, the Arkansas
Fairway Trend and the Arkansas Overthrust Trend.
Oklahoma Cromwell/Atoka Trend. This area is
located in eastern Oklahoma, with the majority of our
ownership in the Ashland and Northwest Reams fields. It
was originally developed in the 1970s targeting the
Cromwell Sandstones with subsequent drilling focusing on
the shallower Atokan-age sandstone.
Our development program in the Ashland Field has
continued to target the Morrowan-age Cromwell
Sandstones and Atokan-age sandstones, using reprocessed
2-D seismic lines to pinpoint the
optimum position for new wells. The
work paid off as the two wells that
have been completed are testing at
daily rates exceeding 2.5 MMcf. Also
the Company has a sizable acreage
position in the South Pine Hollow
Field, which only has one well pro-
ducing from the Cromwell Sandstones. An exploration
well is currently being drilled to define the possible limits
of this Cromwell production.
In total, the Company plans to drill six wells in the
Oklahoma Cromwell/Atoka Trend during 2000. Four will
be infill development wells to exploit trapped reserves, and
two exploratory wells will test portions of our extensive
acreage position.
Arkansas Fairway Trend. This area is home to the
majority of the Company’s Arkoma acreage. Production
here is predominantly
controlled by
faults that cre-
ate pockets of
isolated reserves
trapped in mul-
tiple sandstones
at depths rang-
ing from 2,500
to 7,500 feet in
the Atokan-age
and Morrowan-age formations. The
Company is utilizing electrical imaging
logs to define these sandstone trends while
reprocessing seismic data for better
fault-plane definition.
Three multi-zone development wells
were drilled during 1999 with initial daily
production rates averaging 2.5 MMcf and reserves of 1.80
Bcf per well. So far, more than 120 locations have been
identified for development drilling with 24 planned in
2000. Moving forward, we expect our joint geologic and
engineering studies to reveal a bounty of untouched fault
blocks, setting up additional development drilling.
17
Cr o s s Tim b e r s O i l C om p a n y
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
•
•
•
•
•
•
•
•
Dunn#4
ClinePile#4
ClinePile#3
Areci SS Freiburg Dunn "C" SD Orr
Dep
th
L. Hale SD
Aetna Field, located in theheart of the ArkomaBasin, produces fromAtokan-age throughMorrowan-age sediments.Each identified fault blockcreates separate reser-voirs that remainundrained until penetratedby a new well.
Aetna Field
The endless flatlands of Kansas provide the source forthe region’s wealth – fertile soils and hydrocarbon-rich
reservoirs. With so much to gainfor the economy and their families,
farmers and pumpers work hand in hand.Tractors plow across the same lands where thousands
of gas wells produce from the giant Hugoton area.
The spirited farmer works his land in preparation for spring planting.
18
19
Drilling in Major and Woodward counties focused on
further development of the Chester and Osage formations.
A successful trend extension well, the Stanford No. 3-2,
was completed in Major County with daily production of
20 barrels of oil and 1.1 MMcf. This well led to plans for
two additional wells during 2000. In the Quinlan area,
the Company completed highly economic development
wells that extended
the boundaries of
the trend. The
Company possesses
a large acreage
position in this area
and plans to drill
six wells to further
develop the Chester
Formation during 2000.
Fontenelle Unit development in 1999 focused
primarily on additional 80-acre infill drilling. However,
two successful step-out wells also were completed,
confirming our trend extension theories and creating
future upside opportunities. Unit production remains
above 30 MMcf per day. Plans for 2000 include five wells
along with five workovers and recompletions.
As for the Hugoton area, development during 2000
will focus on further delineation of the Council Grove and
Towanda formations. A well to test the deeper Chester
and St. Louis formations also is on the sched-
ule. The Company expects to drill a
total of three wells in this area during
the year.
Alaskan Cook Inlet
In October 1998, Cross
Timbers acquired two state leas-
es in the Cook Inlet, two operated
production platforms and an inter-
est in production pipelines and onshore
processing facilities. The platforms,
located in 70 feet of water, contain
29 producing wells in the
Middle Ground Shoal Field
along with 12 water injection wells. Oil production is
derived from multiple intervals in the Tyonek Formation
This area is ripe for exploration opportunities. During
1999, the Company participated in the Fort No. 1-23
well, which tested at daily rates exceeding 2.5 MMcf from
the Orr and Hale sandstones. This well was located on a
portion of Fort Chaffee, an inactive military base, which
has been off-limits to drilling until now. The Company
and its partners have the rights to develop a 12,300-acre
federal unit within the Fort’s
boundaries, with Cross Timbers
having a 49.3% interest.
Importantly, the success of this
first well extends the southern
edge of the Fairway Trend onto
the Fort Chaffee acreage. Three
additional wells are expected to be
drilled in 2000 to further test the
possibilities on the acreage block.
Arkansas Overthrust Trend. This area is located to
the south of the Fairway Trend. It is characterized by mul-
tiple thrust faults that create isolated reservoirs. Structural
definition is therefore key to successful development in this
area. Our ongoing process of interpreting seismic studies
and evaluating fault-planes through the use of electrical
imaging logs will provide a more complete stratigraphic
picture to realize the best exploitation opportunities.
We have already seen early success.
The Company drilled five wells during 1999 with
average daily production of 1.6 MMcf. One of the wells,
the Glen Jones No. 3-20, which is completed in the
Nichols Sandstone, recently tested at daily rates exceeding
four MMcf, showing the high-rate potential for the area.
The Company holds a substantial acreage position in this
trend and more than 40 well locations have already been
identified. Fourteen wells are scheduled for drilling
during 2000.
Hugoton Royalty Trust Properties
Development on the Hugoton Royalty Trust proper-
ties during 1999 included completing 68 workovers and
drilling 25 new wells. Thirteen wells were drilled in
Major and Woodward counties of northwest Oklahoma.
Seven wells were drilled in the Fontenelle Unit in the
Green River Basin of Wyoming, and five wells were com-
pleted in the Hugoton area of Oklahoma and Kansas.
Cr o s s Tim b e r s O i l C om p a n y
UpperAtoka
ThrustedMiddleAtoka
Lower AtokaMorrow
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
•
•
•
•
•
•
•
•
•
•
•
Pennsylvanian
Mississippian
Basham Nichols Turner BorumTop Middle Atoka
Dep
th
1 mileScale
Gragg Field is in theoverthrust portion ofthe Arkoma Basin,located in SebastianCounty, Arkansas.Tectonic forcescaused sediments inthe subsurface to fault.This resulted in thethrusted Middle Atokainterval as illustratedwith multiple isolatedreservoirs.
Cook Inlet
Gragg Field
1999 program was no different, with each of the three new
sidetracks averaging 136 BOPD. These “legs” extend
approximately 1,500 feet laterally, cost $350,000 and
develop 119,000 BOE. This equates to a development cost
of $2.94 per barrel ($.49 per Mcfe).
In addition, the Company drilled three vertical
Devonian wells in the eastern portion of the field during
1999. These wells were set-up by the highly successful
CE-C6 well, which was completed in 1998 at initial daily
production rates exceeding 1,000 barrels of oil. The three
vertical Devonian wells drilled during 1999 were
completed with average daily production rates of about
160 barrels of oil.
Since the Devonian Formation is the deepest produc-
ing formation in this field, any well drilled to this horizon
penetrates the shallower Pennsylvanian and Wolfcamp
formations. Consequently, each well has excellent recom-
pletion opportunities in these upside zones. The Company
has focused specifically on recompletions targeting reser-
voirs in the Pennsylvanian Formation, which are then
commingled with the reservoirs in the
Devonian Formation. During 1999, six
wells were successfully recompleted to the
Pennsylvanian Formation with produc-
tion rates averaging 40 BOPD.
Development plans for 2000 include
drilling 12 vertical wells and five
horizontal sidetracks and performing six
recompletions in this field.
Prentice Northeast Unit. This unit
also posted exciting development results
during 1999. The West Texas unit is
located in Terry and Yoakum counties and
produces from the Glorieta and Clear
Fork formations at depths of 6,800 and
7,700 feet, respectively. Drilling in this unit was suspend-
ed during 1998 due to low oil prices; however, as oil prices
recovered in 1999, we recommenced activity, drilling nine
wells with exceptional results. As a result, we continue to
expand infill development upsides in this mature field.
20
between 7,300 and 10,000 feet. Production is currently
3,950 BOPD (3,456 net) with reserves pegged at 14
million barrels of oil.
Last year, the Company began preparing the field for
future expansion of secondary recovery operations.
Historically, secondary recovery operations have been
highly successful on the East Flank of the field. During
1999, the Company embarked on a study to analyze the
potential of a full-scale West Flank waterflood program
and to evaluate the East Flank for optimization and
potential expansion of the current program. This included
utilizing a 3-D visualization model to better define the
complex geology of the field and to clearly identify addi-
tional drilling opportunities.
As a result of our studies, we plan to expand the West
Flank waterflood during 2000 by drilling two wells and
converting three wells to water injection. In addition, a
new well will be drilled on the East Flank in an area that
has not been adequately flooded. If successful, more East
Flank wells will be required to drain the new-found
reserves. Development costs for 1999 are
estimated at $12 million, which include
upgrading onshore facilities and refurbish-
ing the drilling rigs on both platforms.
The Company expects to begin develop-
ment activities in April of this year.
Permian Basin
University Block 9 Field. Located in
Andrews County, Texas, this field received
renewed interest during 1999 as oil prices
rebounded. The multi-pay field, which
produces from the Devonian,
Pennsylvanian and Wolfcamp formations,
was aggressively developed during the last
half of the year.
The Company continued the highly successful hori-
zontal sidetrack program it began in 1997, along with
additional Devonian development in the eastern portion of
the field. Through the end of 1998, nine horizontal
sidetracks targeting the Devonian Formation had been
completed. Each sidetrack averaged 140 BOPD. The
Cr o s s Tim b e r s O i l C om p a n y
University Block 9 FieldHorizontal sidetracks have been used toextend the life of wells. The UniversityAU No. 8 was producing 27 BOPD priorto being sidetracked. After a 1,021-footlateral was drilled, the well produced at332 BOPD and is currently producing270 BOPD.
AU 8
AU 8H
AU 5
To p : T h i r t y o n eF o r m a t i o n
Proved Oil & Gas ReservesDecember 31, 1999(in thousands)
Natural Gas Oil Gas Liquids
(Bbls) (Mcf) (Bbls) McfeProved developed 48,010 1,225,014 13,781 1,595,760 Proved undeveloped 13,593 320,609 4,121 426,893 Total proved 61,603 1,545,623 17,902 2,022,653 Estimated future net cash flows,
before income tax $3,269,443 Present value before income tax $1,765,936
Changes in Proved Reserves(in thousands)
Natural Gas Oil Gas Liquids
(Bbls) (Mcf) (Bbls) McfeDecember 31, 1998 54,510 1,209,224 17,174 1,639,328 Revisions 10,792 60,011 1,838 135,791 Extensions and discoveries 3,003 166,669 3,357 204,829 Production (5,112) (105,120) (1,325) (143,742)Purchases in place 2,790 494,666 20 511,526 Sales in place (4,380) (279,827) (3,162) (325,079)December 31, 1999 61,603 1,545,623 17,902 2,022,653
Based on SEC assumptions
Since acquiring the unit in 1994, the Company has
successfully drilled 82 ten-acre infill wells. In the eastern
portion of the field, high oil-cuts in
the Upper Clear Fork encourage con-
tinuous expansion of our program. A
deeper section, the Basal Clear Fork,
was encountered in many of the new
wells and has proven productive. For
the northern portion of the unit, infill
wells have yielded oil-cuts in the
80-100% range, indicating the need for further secondary
recovery optimization. Thus, additional infill wells will
tap more untouched reserves.
In 2000, the Company intends to drill 10 ten-acre
infill wells. An additional 40 sites have been mapped for
future development.
RESERVES & PRODUCTION
Cross Timbers’ aggressive acquisition and development
program resulted in record operating results and impres-
sive reserve growth during 1999. The major stimulus
came when management took advantage of a unique
opportunity to purchase 480 Bcfe of gas properties, prior
to property sales in the Arkoma Basin, creating a new core
area for the Company.
Estimated proved oil and gas reserves at year-end 1999
were 2.022 Tcfe, up 23% from 1.639 Tcfe at year-end
1998. This translates to 41 Mcfe for each share of the
Company’s common stock. After deducting reserve sales of
325 Bcfe, the Company replaced 527 Bcfe or 367% of
1999 production at a cost of $.70 per Mcfe. Through the
drill bit, we replaced 237% of production at a cost of $.28
per Mcfe. For the past five years Cross Timbers has
replaced 470% of its production at a finding cost of just
$.68 per Mcfe. We believe this outstanding record places
the Company among the best in the industry for finding
cost and production replacement statistics.
During 1999, the Company produced 5.1 million bar-
rels of oil, 1.3 million barrels of natural gas liquids and
105.1 Bcf of natural gas. Daily oil and NGLs production
averaged 17,637 barrels, up 11% over the 15,945 barrels
per day during 1998. Daily gas production averaged
288.0 MMcf, up 25% from the 229.7 MMcf in 1998. The
1999 exit rate for daily production is 332.7 MMcf of natu-
ral gas and 17,620 barrels of oil and NGLs.
Oil prices, at an average of $12.21 per barrel for 1998,
rose to an average of $16.94 for 1999, reflecting OPEC’s
efforts to reduce over-production by
its members as well as a general
reduction in U.S. inventories. The
average gas price for 1999 was $2.13
per Mcf, up 3% from the 1998 aver-
age of $2.07. The NGLs price per
barrel averaged $11.80, up 55% from
the 1998 average sales price of $7.62.
As of December 31, 1999, estimated
future net cash flows before income tax
were $3.27 billion based on realized
prices of $24.17 per barrel of oil and
$2.20 per Mcf of gas. The present value
before income tax, discounted at 10%,
was $1.77 billion, compared to the year-
end 1998 level of $909 million. The
realized prices at year-end 1998 were
$9.92 per barrel of oil and $2.00 per
Mcf of gas.
21
Cr o s s Tim b e r s O i l C om p a n y
0
500
1,000
2,500
1,500
2,000
Proved Reservesby Category(in Bcfe)
Oil NGL Gas
In thousands except production, per share and per unit data 1999 1998 1997 1996 1995
Consolidated Statement of Operations and Cash Flows Data (a)
Revenues:Oil and condensate $ 86,604 $ 56,164 $075,223 $ 75,013 $060,349Gas and natural gas liquids 239,056 182,587 110,104 73,402 40,543Gas gathering, processing and marketing 10,644 9,438 9,851 12,032 7,091Other 4,991 1,297 3,094 ,888 3,362
Total revenues $ 341,295 $ 249,486 $198,272 $161,335 $111,345
Earnings (loss) available to common stock $ 44,964(b) $ (71,498)(c) $023,905 $019,790 $ (10,538)(d)
Per common share (e)Basic $ 0.96 $ (1.65) $0000.60 $ 0.50 $00 (0.28)Diluted $ 0.95 $ (1.65) $0000.59 $ 0.48 $00 (0.28)
Weighted average common shares outstanding (e) 46,818 43,396 39,773 39,913 38,072
Dividends declared per common share (e) $ 0.04 $ 0.16 $0000.15 $0000.13 $0000.13
Operating cash flow (f) $ 132,683 $ 78,480 $089,979 $068,263 $040,439
Year-end Consolidated Balance Sheet Data (a) Restated (g)
Property and equipment, net $1,339,080 $1,050,422 $723,836 $450,561 $364,474Total assets 1,477,081 1,207,005 788,455 523,070 402,675Long-term debt 991,100 920,411 539,000 314,757 238,475Stockholders’ equity 277,817 201,474 170,243 142,668 130,700
Operating Data (a)
Average daily production:Oil (Bbls) 14,006 12,598 10,905 9,584 9,677Gas (Mcf) 288,000 229,717 135,855 101,845 78,408Natural gas liquids (Bbls) 3,631 3,347 220 – –Mcfe 393,826 325,390 202,609 159,349 136,470
Average sales price:Oil (per Bbl) $16.94 $12.21 $18.90 $21.38 $17.09Gas (per Mcf) $02.13 $02.07 $02.20 $01.97 $01.42Natural gas liquids (per Bbl) $11.80 $07.62 $09.66 – –
Production expense (per Mcfe) $00.53 $00.53 $00.59 $00.67 $00.71
Taxes, transportation and other (per Mcfe) $00.23 $00.25 $00.22 $00.20 $00.17
Proved reserves:Oil (Bbls) 61,603 54,510 47,854 42,440 39,988Gas (Mcf) 1,545,623 1,209,224 815,775 540,538 358,070Natural gas liquids (Bbls) 17,902 17,174 13,810 – –Mcfe 2,022,653 1,639,331 1,185,759 795,178 597,998
(a) Significant producing property acquisitions in each of the years presented affect the comparability of year-to-year financial and operating data.
(b) Includes effect of a $40.6 million pre-tax gain on sale of Hugoton Royalty Trust units.
(c) Includes effect of a $93.7 million pre-tax net loss on investment in equity securities and a $2 million pre-tax, non-cash impairment charge.
(d) Includes effect of a $20.3 million pre-tax, non-cash impairment charge recorded upon adoption of Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.
(e) Adjusted for the three-for-two stock splits effected on March 19, 1997 and February 25, 1998.
(f) Defined as cash provided by operating activities before changes in operating assets and liabilities and exploration expense.
(g) Reflects restatement for a change in accounting for the acquisition of oil-producing properties in the Cook Inlet of Alaska from affiliates of Shell Oil Company. See Note 16 to Consolidated Financial Statements.
22
Cr o s s Tim b e r s O i l C om p a n yS E L E C T E D F I N A N C I A L D A T A
