Mission Resources Announces Increased Earnings for the Fourth Quarter

Mission Resources Announces Increased Earnings for the Fourth Quarter and Full-Year 2004; Provides Drilling Update and Guidance for the First Quarter 2005

    Business Editors/Energy Editors

    HOUSTON--(BUSINESS WIRE)--March 8, 2005--Mission Resources Corporation (Nasdaq:MSSN) today reported financial and operational results for the fourth quarter and full-year 2004.

--	Fourth quarter 2004 discretionary cash flow increased 99% over fourth quarter 2003 to $15.4 million, and full-year 2004 discretionary cash flow increased 157% over full-year 2003 to $58.5 million.
--	Fourth quarter net income improved to $2.8 million or $0.06 per share - diluted, compared to a loss of ($1.5) million in last year's fourth quarter or ($0.06) per share - diluted, and full-year 2004 net income was $2.9 million compared to $2.4 million for the full-year 2003.
--	Fourth quarter 2004 average daily production was 63.3 million cubic feet of gas equivalent ("Mmcfe"), and full-year 2004 average daily production was 65.8 Mmcfe.
--	Proved reserves increased 27%, through additions and acquisitions, to 226 billion cubic feet equivalent ("Bcfe").
--	Mission had a combined 97% success rate for development and exploratory wells completed in 2004.
--	Debt decreased $28 million driving cash interest costs down approximately $6 million as compared to 2003.

    "We made significant progress in 2004 towards achieving our strategic goals," said Robert L. Cavnar, Chairman, President and Chief Executive Officer. "Our major accomplishments of the year include a 27% increase in proved reserves, a 97% drilling success rate and a meaningful reduction in our debt. In addition, over the past year we have developed several dozen prospects in our core areas, and we believe that our success in early 2005 validates our approach towards opportunity selection and risk mitigation. In order to take advantage of our strong menu of internal exploration and development opportunities, we have set a capital expenditure budget for 2005 of $71 million. In addition, we have the financial flexibility to continue with our two-prong approach of growth through the drill bit and the acquisition of desirable assets."
    Year End Reserves: Our year-end reserves of 226 Bcfe included 36.1 Bcfe of extensions/discoveries and 40.0 Bcfe of acquisitions. Property sales accounted for 3.9 Bcfe and revisions were 0.1 Bcfe. The major extensions/discoveries were in the Permian area primarily in the Jalmat, TXL and Waddell fields. Other fields with material extensions/discoveries were W. Lake Verret, Backridge, and San Migual fields in the Gulf Coast area.
    Capital Expenditures: In 2004, Mission's capital expenditures (excluding acquisitions of $41.5 million) totaled $46.6 million, approximately 38% higher than 2003 levels. 2004 expenditures consisted of the following: $31.4 million for development, $8.6 million for exploration, $5.4 million for seismic data, land and related items, and $1.2 million for corporate assets. For the full-year 2004, we successfully completed 66 development wells, of which 55 were located in the Permian area, seven were located in the Gulf Coast area, three were located in the Offshore area and one was located in Oklahoma. We had one successful and one unsuccessful exploratory well drilled in 2004, and at year-end, we had three exploratory wells and three development wells in progress. The wells in progress at year-end are discussed in more detail below.

    Update of Exploratory Wells in Progress at Year-End:

    -- The Fritz Weise #1, our Lower Wilcox Lions field discovery
    well, located in Goliad County, Texas, which had been
    producing at a pipeline restricted gross rate of 2 million
    cubic feet ("Mmcf") per day, has now been connected into a
    newly constructed 8-inch pipeline and is flowing at a gross
    daily production rate of 11.3 Mmcf. Mission is the operator
    and holds a 35% working interest in this well and in 1,865
    acres of leasehold covering this field.

    -- The Iles # 1 located in Jefferson County, Texas was drilled to
    11,515 feet and found approximately 60 feet of apparent pay in
    two Yegua sands in the interval from 10,400 feet to 10,700
    feet. We are evaluating completion options and are awaiting
    wetlands and other regulatory permits. Mission holds a 70%
    working interest in this prospect and is the operator.

    -- Production casing has been set to 15,913 feet at the Dehnert
    #1 located in Goliad County, Texas, the first of several
    scheduled wells offsetting our Fritz Weise #1 Lower Wilcox
    discovery. Sixty-seven net feet of pay was found in the Corona
    Sand, and we estimate that this well is capable of producing
    at rates similar to the Fritz Weise #1 well. Mission holds a
    35% working interest and will be the operator after
    completion.

    Update of Development Wells in Progress at Year-End:

    -- The Fontenot #1, a development well located in Reddell field,
    Evangeline Parish, Louisiana, has been perforated in the
    Wilcox formation in the interval from 12,254 feet to 12,794
    feet, and completion operations continue. Mission holds a
    14.3% working interest in this well.

    -- The High Island Block 553 #A9 was drilled to a total depth of
    12,350 feet and completed from 20 net feet of pay in the Basal
    Nebraskan formation from 11,560 to 11,630 feet. After
    gradually bringing the well online, it is producing at 10.5
    Mmcf gross per day and 600 barrels gross of condensate per
    day. Mission holds a 36% working interest in this well and is
    the operator of the block.

    -- The TXL North Unit #942 located in Ector County, Texas has
    been drilled to a total depth of 5,600 feet and production
    casing has been set for a completion in the Clearfork Tubb
    formation. Average gross production rates from these types of
    wells are 300 Mcf equivalent per day ("Mcfe/d"). Mission holds
    a 20% working interest and a 25% net revenue interest.

    Update of Current Drilling Activity:

    -- We are currently drilling two additional wells and preparing
    to drill a third well at our Lions Wilcox field: the Fritz
    Weise #2 is drilling at 9,500 feet and the Buckner Foundation
    #1 is drilling at 3,100 feet. In addition, we are moving in
    rotary tools at the Simmons #1 and expect to begin drilling
    operations this week. Mission is the operator and holds a 35%
    working interest in these wells.

    -- At High Island Block 553 we are drilling at 5,000 feet at the
    OCS-G 6237 #4, a "5500 Foot Sand" development well. Mission
    holds a 36% working interest in this block.

    -- We are drilling below 10,300 feet at the Ledoux #1 located in
    Vermilion Parish, Louisiana, a planned 12,500 foot development
    well offsetting the Leblanc #1, which has produced 4.5 Bcfe
    from the Marg howei age "Henry Sand." Mission holds a 77%
    working interest and is the operator of the well.

    -- We are planning to mobilize a drilling rig to the Jalmat field
    located in Lea County, New Mexico, during the first half of
    March where we expect to drill three new in-fill wells in the
    Yates / 7-Rivers formations. Total depth for each well is
    planned to be 4,000 feet. Mission is the operator and holds a
    95% working interest in these wells.

    -- Three additional wells have been drilled at West Lake Verret
    field located in St. Martin Parish, Louisiana. The JL&S #153
    was drilled to a total depth of 7,740 feet and has been
    completed with a gross production rate of 920 Mcfe/d. The JL&S
    #150 was plugged and abandoned as a dry hole after reaching a
    total depth of 6,030 feet. The SMPSB #61, drilled to 1,725
    feet, has been completed with a current gross production rate
    of 250 Mcfe/d. Mission is the operator of these wells and
    holds a 100% working interest.

    -- At the Reddell field located in Evangeline Parish, Louisiana,
    the Coriel #2 well has been drilled to a total depth of 11,432
    feet and production casing has been set. In addition to this
    well, the Pardee O1 has spud and is drilling at 8,556 feet.
    The expected total depth of this well is 11,550 feet. These
    wells will test the Upper Wilcox formations in this field.
    Mission holds a 14.3% working interest in these wells.

    -- During the second quarter, two additional Lower Wilcox
    prospects are scheduled to be drilled in DeWitt County, Texas.
    Our working interest in these projects is 50% to 70%.

    -- Additionally, we plan to continue our development program in
    the TXL North Unit by drilling at least 12 wells in this field
    during 2005.

    Update of Workover / Recompletion Activity:

    -- In the West Lake Verret field, we have completed the workover
    / recompletion of seven wells to various reservoirs between
    3,000 and 13,400 feet. Six of these wells were successful for
    a combined gross initial production rate of 4.3 Mmcfe per day.
    We are currently completing an eighth well and anticipate
    turning it to production in the second week of March. In
    addition to these eight wells, Mission has identified an
    additional eight wells for a similar workover program. Mission
    is the operator of this field and holds a 100% working
    interest.

    -- In the Jalmat field, we have completed a recompletion /
    refracture program to the Yates / 7-Rivers formations on
    eleven wells. We have put on production six of these wells for
    a combined gross production rate of approximately 850 Mcfe/d.
    The remainder of the wells are being prepared for production.
    Mission anticipates a total of 18 wells will be
    recompleted/fractured in this program by the end of the first
    quarter 2005. Mission is the operator of this field and holds
    a 95% working interest.

    As discussed in our December 9, 2004 press release, our $71 million 2005 capital budget is anticipated to be allocated as follows: 45% to the Gulf Coast area, 20% to the Gulf of Mexico area, 17% to the Permian Basin area and 18% to land, seismic and other items. The exploratory portion will increase to approximately 28% of the total budget. Mission does not budget for acquisitions.
    Net Income: Mission reported net income for the fourth quarter of 2004 of $2.8 million or $0.06 per share - diluted compared to a net loss of ($1.5) million or ($0.06) per share - diluted in the fourth quarter of 2003. Increased commodity prices and a 35% reduction in interest expense resulted in the improvement in quarterly earnings.
    Net income for the year ended December 31, 2004 was $2.9 million, or $0.07 per share - diluted, compared to net income of $2.4 million, or $0.10 per share - diluted for the year ended December 31, 2003. Fewer weighted average shares outstanding in 2003 account for the higher net income per share - diluted amount with a lower net income amount for 2003. Absent the gains and losses on debt extinguishment and the 2004 non-cash compensation expense for issuance of stock options, net income (loss) (excluding cumulative effect of a change in accounting method) for the years ended December 31, 2004 and 2003 were $7.2 million and ($11.2) million, respectively. Increased commodity prices and gas volumes along with lower lease operating expenses and interest expense were the primary reasons for the significant full-year 2004 increase in net income.
    "While our fourth quarter production was impacted somewhat by the tightening of rig availability and delays in pipeline construction, full-year production reflects a 5% year-over-year increase in daily production rates. A more comparative analysis is the approximately 28% year-over-year increase in daily production rates, adjusted for property sales," said Richard W. Piacenti, Mission's Executive Vice President and Chief Financial Officer. "We plan to increase our production levels in the second quarter as we complete the fourth quarter projects and begin using our $71 million capital budget for 2005. We will continue to split any cash flow in excess of our $71 million capital expenditure budget between debt repayment and additional capital spending."
    Discretionary Cash Flow and Earnings before Interest, Taxes and Non-Cash Items: Discretionary cash flow for the fourth quarter of 2004 totaled $15.4 million compared to $7.7 million in the fourth quarter of 2003. Earnings before interest, taxes and other non-cash items ("adjusted EBITDA") for the fourth quarter of 2004 totaled $19.2 million compared to the same measure for the fourth quarter of 2003 of $13.6 million. (See the attached schedule for a reconciliation of net income (loss) to adjusted EBITDA and of net cash provided by operating activities, of $12.2 million and ($2.1) million for the fourth quarters of 2004 and 2003, respectively, to discretionary cash flow.)
    Full-year 2004 discretionary cash flow was $58.5 million as compared to full-year 2003 discretionary cash flow of $22.8 million. Adjusted EBITDA for 2004 was $77.0 million compared to adjusted EBITDA of $47.0 million in 2003. (See the attached schedule for a reconciliation of net cash provided by operating activities, of $58.7 million and $18.9 million for 2004 and 2003, respectively, to discretionary cash flow and of net income to adjusted EBITDA.)
    Production & Revenue: Production for the fourth quarter of 2004 averaged 63.3 Mmcfe per day and averaged 63.0 Mmcfe per day for the fourth quarter of 2003. The average realized oil price, including the effect of hedges, for the fourth quarter of 2004 was $31.98 per barrel, a 28% increase over the $24.99 per barrel realized oil price in the same quarter of 2003. The average realized gas price, including the effect of hedges, in the fourth quarter of 2004 was $6.16 per Mcf, a 38% increase over the average gas price of $4.48 per Mcf realized in the same quarter of 2003.
    Production for the full-year 2004 averaged 65.8 Mmcfe per day and averaged 62.7 Mmcfe per day for 2003. The average realized oil price, including the effect of hedges, for the full-year of 2004 was $30.15 per barrel, a 20% increase over the $25.22 per barrel realized oil price in 2003. The average realized gas price, including the effect of hedges, for 2004 was $5.56 per Mcf, a 24% increase over the average gas price of $4.50 per Mcf realized in 2003.
    Lease Operating Expenses: Lease operating expenses for the fourth quarter, on a per unit basis, were $1.34 per Mcfe compared to $1.24 per Mcfe in the fourth quarter of 2003. To take advantage of the near-record high commodity prices, we are performing additional workovers that are now economically attractive and we are also experiencing an overall increase in the cost of oil field services. We expect these trends to continue in 2005.
    Lease operating expenses for the full-year of 2004, on a per unit basis, were $1.21 per Mcfe compared to $1.43 per Mcfe in 2003, a decrease of 15%. While lease operating expenses have increased in recent months, we have incorporated cost-saving techniques and replaced high-operating cost properties with low-cost gas properties.
    Outlook: Guidance on performance for the first quarter and full-year of 2005 is as follows. G&A is higher in the first quarter of 2005 as a result of Sarbanes-Oxley compliance. For the full-year, G&A costs should decline.

---------------------------------------------------------------------- First Quarter 2005 Full-Year 2005 ---------------------------------------------------------------------- Estimated Daily Production Daily Average Daily Average ---------------------------------------------------------------------- Crude Oil (Barrels) 4,400 - 4,700 4,500 - 4,800 ---------------------------------------------------------------------- Natural Gas (Mmcf) 31 - 36 43 - 48 ---------------------------------------------------------------------- Total (Mmcfe) 60 - 63 71 - 76 ----------------------------------------------------------------------

---------------------------------------------------------------------- Operating expenses Per Mcfe Per Mcfe ---------------------------------------------------------------------- Lease operating expense $1.40 - $1.50 $1.18 - $1.28 ---------------------------------------------------------------------- Taxes other than income $0.47 - $0.52 $0.40 - $0.45 ---------------------------------------------------------------------- Depreciation, depletion and amortization $1.75 - $1.85 $1.75 - $1.85 ---------------------------------------------------------------------- General and administrative $0.62 - $0.67 $0.50 - $0.55 ---------------------------------------------------------------------- Cash Interest Expense (1) $3.6 - $4.1 million $15 - $17 million ---------------------------------------------------------------------- Income Tax Rate 37.5%, 1.5% 37.5%, 1.5% deferred deferred ----------------------------------------------------------------------

---------------------------------------------------------------------- Adjusted EBITDA $17 million $98 million (2) ---------------------------------------------------------------------- Discretionary Cash Flow $13 million $82 million (2) ----------------------------------------------------------------------

(1) Excludes non-cash interest expense of approximately $400,000 and $1.5 million for the first quarter of 2005 and the full-year 2005, respectively.

(2) Adjusted EBITDA and Discretionary Cash Flow guidance is based on the following assumptions for the first quarter and full-year of 2005 (i) $40.00/$6.00 NYMEX prices with an oil differential of ($1.29) and gas differential of ($0.03), (ii) all production and expense numbers use mid-point of guidance disclosed and (iii) 50% of discretionary cash flow above capital expenditures of $71 million used to reduce debt. (See the attached schedule for a reconciliation of net income (loss) to adjusted EBITDA and of net cash provided by operating activities to discretionary cash flow.)

    Hedge Update: A complete list of all hedges is attached and includes our recent additional oil and gas collars.
    Conference Call Information: Mission will hold its quarterly conference call to discuss fourth quarter and full year 2004 results on Tuesday, March 8, 2005 at 10:00 a.m. Central Time. To participate, dial 877-894-9681 a few minutes before the call begins. Please reference Mission Resources, conference ID 4346345. The call will also be broadcast live over the Internet from the Company's web site at www.mrcorp.com. A replay of the conference call will be available approximately two hours after the end of the call until Tuesday, March 22, 2005. To access the replay, dial 800-642-1687 and reference conference ID 4346345. In addition, the web cast will also be archived on the Company's web site.
    About Mission Resources: Mission Resources Corporation is a Houston-based independent exploration and production company that drills for, acquires, develops and produces natural gas and crude oil primarily in the Permian Basin (in West Texas and Southeastern New Mexico), along the Texas and Louisiana Gulf Coast and in both the state and federal waters of the Gulf of Mexico.
    This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are our estimate of the sufficiency of our existing capital sources, our ability to raise additional capital to fund cash requirements for future operations, the uncertainties involved in estimating quantities of proved oil and natural gas reserves, in prospect development and property acquisitions and in projecting future rates of production, the timing of development expenditures and drilling of wells, and the operating hazards attendant to the oil and gas business. In particular, careful consideration should be given to cautionary statements made in the various reports the Company has filed with the Securities and Exchange Commission. Mission undertakes no duty to update or revise these forward-looking statements.

    - Tables to Follow -

MISSION RESOURCES STATEMENTS OF OPERATIONS (Amounts in thousands, except per share amounts)

Three Months Ended Twelve Months Ended December 31, December 31, ------------------- ------------------- 2004 2003 2004 2003 --------- --------- --------- --------- REVENUES: Oil revenues $13,175 $11,572 $49,657 $52,914 Gas revenues 20,631 13,539 79,050 46,443 Gain (loss) on extinguishment of debt - 1,101 (2,606) 23,476 Interest and other income (expense) 220 249 (461) 1,141 --------- --------- --------- ---------

34,026 26,461 125,640 123,974 --------- --------- --------- ---------

COSTS AND EXPENSES: Lease operating expense 7,777 7,165 29,060 32,728 Taxes other than income 2,566 1,300 9,400 8,251 Transportation costs 182 27 346 349 Asset retirement obligation accretion expense 386 225 1,202 1,263 Depreciation, depletion and amortization 10,282 10,538 44,229 38,501 General and administrative expenses 4,087 2,843 16,871 10,856 Interest expense 4,220 6,537 19,818 25,565 --------- --------- --------- ---------

29,500 28,635 120,926 117,513 --------- --------- --------- ---------

INCOME (LOSS) BEFORE TAXES AND CHANGE IN ACCTG METHOD 4,526 (2,174) 4,714 6,461

Income tax expense (benefit) Current (46) 1 297 276 Deferred 1,745 (672) 1,468 2,082 --------- --------- --------- ---------

1,699 (671) 1,765 2,358 --------- --------- --------- ---------

INCOME (LOSS) BEFORE CHANGE IN ACCOUNTING METHOD $2,827 $(1,503) $2,949 $4,103 --------- --------- --------- ---------

Cumulative effect of a change in accounting method, net of deferred tax - - - (1,736)

NET INCOME (LOSS) $2,827 $(1,503) $2,949 $2,367 ========= ========= ========= =========

Earnings per share before change in acctg method $0.07 ($0.06) $0.08 $0.17 Earnings per share before change in acctg method - diluted (1) $0.06 ($0.06) $0.07 $0.17 Earnings per share $0.07 ($0.06) $0.08 $0.10 Earnings per share - diluted $0.06 ($0.06) $0.07 $0.10

Weighted avg. common shares outstanding 41,115 24,251 38,529 23,696 Weighted avg. common shares outstanding - diluted (1) 43,506 24,251 40,456 24,737

Discretionary cash flow (2) $15,395 $7,727 $58,502 $22,785

Adjusted EBITDA (3) $19,209 $13,641 $76,969 $46,986

(1) Due to a potential antidilutive effect in loss periods, weighted average common shares outstanding were used for periods with a loss.

(2) Discretionary cash flows consists of net income excluding non- cash items. Non-cash items include depreciation depletion and amortization, gain (loss) due to hedge ineffectiveness (FAS 133), gain (loss) on interest rate swap, amortization of debt issue costs, amortization of bond premium, gain (loss) on extinguishment of debt, asset retirement accretion expense, receivable write-offs, cumulative effect of a change in accounting method, equity interest in earnings of White Shoal Pipeline, compensation expense - stock options and deferred taxes.

(3) Adjusted EBITDA consists of earnings before interest expense, taxes, and non-cash items detailed in footnote (2)

MISSION RESOURCES SUMMARY OPERATING INFORMATION

Three Months Ended Twelve Months Ended December 31, December 31, ------------------- ------------------- 2004 2003 2004 2003 --------- --------- --------- --------- AVERAGE SALES PRICE, INCLUDING THE EFFECT OF HEDGES: Oil ($/Bbl) $31.98 $24.99 $30.15 $25.22 Gas ($/Mcf) $6.16 $4.48 $5.56 $4.50 Equivalent ($/Boe) $34.82 $25.97 $32.05 $26.03 Equivalent ($/Mcfe) $5.81 $4.33 $5.34 $4.34

AVERAGE SALES PRICE, EXCLUDING THE EFFECT OF HEDGES: Oil ($/Bbl) $45.89 $30.27 $39.88 $29.69 Gas ($/Mcf) $6.79 $4.52 $5.89 $5.12 Equivalent ($/Boe) $42.92 $28.63 $37.19 $30.16 Equivalent ($/Mcfe) $7.16 $4.77 $6.20 $5.03

AVERAGE DAILY PRODUCTION: Oil (Bbls) 4,478 5,033 4,500 5,748 Gas (Mcf) 36,424 32,837 38,836 28,258 Equivalent (Boe) 10,549 10,506 10,973 10,458 Equivalent (Mcfe) 63,292 63,035 65,836 62,746

TOTAL PRODUCTION: Oil (MBbls) 412 463 1,647 2,098 Gas (MMcf) 3,351 3,021 14,214 10,314 Equivalent (MBoe) 971 967 4,016 3,817 Equivalent (MMcfe) 5,823 5,799 24,096 22,902

OPERATING COSTS PER MCFE: Lease operating expense $1.34 $1.24 $1.21 $1.43 Taxes other than income $0.44 $0.22 $0.39 $0.36 General and administrative expenses $0.70 $0.49 $0.70 $0.47 General and administrative expenses (1) $0.70 $0.49 $0.53 $0.47 Depreciation, depletion, and amortization (2) $1.73 $1.79 $1.80 $1.65

(1) Excludes compensation expense on stock options. (2) Excludes depreciation of furniture and fixtures.

MISSION RESOURCES CONDENSED BALANCE SHEETS (Amounts in thousands)

December 31, December 31, 2004 2003 --------------- ------------- ASSETS: Current assets $28,786 $47,454 Property, plant and equipment, net 337,927 302,128 Leasehold, furniture and equipment, net 2,779 2,340 Other assets 8,411 5,404 --------------- -------------

$377,903 $357,326 =============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities $39,047 $31,177 Term loan facility 25,000 80,000 Revolving credit facility 15,000 - Senior 9 7/8% notes due 2011 130,000 - Senior subordinated 10 7/8% notes due 2007 - 117,426 Unamortized premium on senior subordinated notes - 1,070 Deferred tax liability 20,003 20,346 Other long-term liabilities, excluding current portion 1,482 210 Asset retirement obligation, excluding current portion 35,366 32,157 Stockholders' equity 119,938 80,647 Other comprehensive income (loss), net of taxes (7,933) (5,707) --------------- -------------

$377,903 $357,326 =============== =============

MISSION RESOURCES CONDENSED STATEMENTS OF CASH FLOWS (Amounts in thousands)

Twelve Months Ended December 31, ----------------------------- 2004 2003 -------------- -------------- OPERATING ACTIVITIES: Net income $2,949 $2,367 Adjustments to reconcile net income to net cash provided by operating activities 55,553 20,494 Net changes in operating assets and liabilities 176 (3,972) -------------- --------------

Net cash provided by operating activities 58,678 18,889

INVESTING ACTIVITIES: Acquisition of oil and gas properties (41,488) (1,570) Capital expenditures (45,420) (32,893) Leasehold, furniture and equipment (1,205) (930) Proceeds from sales of properties 13,030 28,090 Distribution from White Shoal Pipeline 178 - Proceeds on disposal of non-operating assets - 850 -------------- --------------

Net cash used in investing activities (74,905) (6,453)

FINANCING ACTIVITIES: Proceeds from borrowings 201,500 80,000 Repayment of senior subordinated notes & credit facilities (200,511) (71,700) Stock issuance costs, net of proceeds 1,463 4 Financing costs (7,361) (4,976) Restricted cash held for investments 24,877 (24,877) -------------- --------------

Net cash provided by financing activities 19,968 (21,549)

Net increase in cash and cash equivalents 3,741 (9,113) Cash and cash equivalents at beginning of period 2,234 11,347 -------------- --------------

Cash and cash equivalents at end of period $5,975 $2,234 ============== ==============

MISSION RESOURCES NON-GAAP DISCLOSURE RECONCILIATION (Amounts in thousands)

Three Months Ended Twelve Months Ended December 31, December 31, --------------------------------------- 2004 2003 2004 2003 --------- --------- --------- ---------

NET CASH PROVIDED BY OPERATING ACTIVITIES $12,228 $(2,111) $58,678 $18,889 Change in assets and liabilities 3,167 9,914 (176) 3,972 Loss on disposal of non- operating assets - (76) - (76) --------- --------- --------- --------- DISCRETIONARY CASH FLOW (a) $15,395 $7,727 $58,502 $22,785 --------- --------- --------- ---------

NET INCOME (LOSS) $2,827 $(1,503) $2,949 $2,367 Interest expense (1) 3,860 5,913 18,170 23,925 Gain on interest rate swap (1) - - - (520) Amort. of deferred financing costs and bond prem. (1) 360 624 1,648 2,160 Income tax expense (benefit) 1,699 (671) 1,765 2,358 Depreciation, depletion and amortization 10,282 10,538 44,229 38,501 Loss (gain) on extinguishment of debt - (1,101) 2,606 (23,476) Loss on asset retirement obligation settlement - 18 - 18 Earnings - White Shoal Pipeline (2) (7) (20) (53) (361) Cumulative effect of a chg. in acct. method, net of tax - - - 1,736 Asset retirement accretion expense 386 225 1,202 1,263 Receivable write-offs (2) 42 - 441 - Loss (gain) due to hedge ineffectiveness (2) (240) (382) (108) (985) Compensation expense - stock options (3) - - 4,120 - --------- --------- --------- --------- ADJUSTED EBITDA (a) $19,209 $13,641 $76,969 $46,986 --------- --------- --------- ---------

NET INCOME (LOSS) $2,827 $(1,503) $2,949 $2,367 Loss (gain) on extinguishment of debt, net of tax - (716) 1,630 (15,259) Compensation expense - stock options - - 2,577 - Cumulative effect of a chg. in acct. method, net of tax - - - 1,736

------------------- --------- --------- NET INCOME (LOSS) BEFORE LOSS (GAIN), COMPENSATION EXPENSE AND CUMULATIVE CHANGE (b) $2,827 $(2,219) $7,156 $(11,156) ========= ========= ========= =========

(1) Included in interest expense

(2) Included in interest and other income (expense)

(3) Included in general and administrative expenses

(a) NOTE - Management believes that adjusted EBITDA and discretionary cash flow are relevant and useful information which are commonly used by analysts, investors and other interested parties in the oil and gas industry. Accordingly, we are disclosing this information to permit a more comprehensive analysis of our operating performance and liquidity, and as an additional measure of Mission's ability to meet its future requirements for debt service, capital expenditures and working capital. Adjusted EBITDA and discretionary cash flow should not be considered in isolation or as a substitute for net income, cash flow provided by operating activities or other income or cash flow data prepared in accordance with generally accepted accounting principles ("GAAP") or as a measure of our profitability or liquidity. Adjusted EBITDA and discretionary cash flow exclude components that are significant in understanding and assessing our results of operations and cash flows. In addition, adjusted EBITDA and discretionary cash flow are not terms defined by GAAP and, as a result, our measures of adjusted EBITDA and discretionary cash flow might not be comparable to similarly titled measures used by other companies.

(b) NOTE - Management believes net income (loss) before gain (loss) on extinguishment of debt, compensation expense and cumulative effect of a change in accounting method is relevant and useful information. We believe it gives a clearer picture of the Company's performance excluding material non-recurring transactions. Accordingly, we are disclosing this information to permit a more comprehensive analysis of our operating performance. Net loss before gain (loss) on extinguishment of debt, compensation expense and cumulative effect of a change in accounting method should not be considered in isolation or as a substitute for net income prepared in accordance with GAAP.

MISSION RESOURCES NON-GAAP DISCLOSURE RECONCILIATION (Amounts in millions)

Guidance Guidance Q1 Annual 2005 2005 -------------- --------------

NET CASH PROVIDED BY OPERATING ACTIVITIES (see Note A) $21.0 $88.0 Change in assets and liabilities (8.0) (6.0) -------------- -------------- DISCRETIONARY CASH FLOW (see Note B) $13.0 $82.0 -------------- --------------

NET INCOME (see Note A) $1.5 $20.0 Interest expense (1) 4.0 $16.0 Amort. of deferred financing costs and bond prem. (1) 0.5 $1.5 Income tax expense (benefit) 1.0 12.5 Depreciation, depletion and amortization 10.0 48.0 -------------- -------------- ADJUSTED EBITDA (see Note B) $17.0 $98.0 -------------- --------------

(1) Included in interest expense

NOTE A - For this purpose, net cash provided by operating activities and net income have been calculated using only information contained in public guidance provided by the company. There may be material cash or non-cash items which affect net cash provided by operating activities and net income that have been excluded from guidance and this calculation.

NOTE B - Management believes that adjusted EBITDA and discretionary cash flow are relevant and useful information which are commonly used by analysts, investors and other interested parties in the oil and gas industry. Accordingly, we are disclosing this information to permit a more comprehensive analysis of our operating performance and liquidity, and as an additional measure of Mission's ability to meet its future requirements for debt service, capital expenditures and working capital. Adjusted EBITDA and discretionary cash flow should not be considered in isolation or as a substitute for net income, cash flow provided by operating activities or other income or cash flow data prepared in accordance with generally accepted accounting principles ("GAAP") or as a measure of our profitability or liquidity. Adjusted EBITDA and discretionary cash flow exclude components that are significant in understanding and assessing our results of operations and cash flows. In addition, adjusted EBITDA and discretionary cash flow are not terms defined by GAAP and, as a result, our measures of adjusted EBITDA and discretionary cash flow might not be comparable to similarly titled measures used by other companies.

MISSION RESOURCES Hedge Positions

OIL (BBL/D) GAS (MMBTU/D)

First Quarter 2005 First Quarter 2005 Volume Swap Floor Ceiling Volume Swap Floor Ceiling -------- -------- -------- ------- -------- -------- -------- ------- 1,000 26.50 29.51 5,000 5.00 10.10 500 27.50 29.25 3,500 5.50 12.85 500 28.07 32.47 3,000 4.75 7.25 500 35.00 43.15 2,000 5.00 10.50 -------- ---------------- 1,000 4.75 6.60 2,500 28.71 32.78 1,000 4.25 6.32 ======== ================ -------- ---------------- 15,500 5.00 9.75 ======== ================ Second Quarter 2005 Second Quarter 2005 1,000 26.00 28.86 3,500 5.50 8.15 500 27.00 28.65 3,000 4.50 5.62 500 35.00 40.90 2,000 5.00 6.85 500 48.70 55.10 1,000 5.00 6.00 -------- ---------------- 1,000 4.50 5.15 2,500 32.54 36.47 1,000 4.25 4.92 ======== ================ 2,500 5.50 8.12 -------- ---------------- 14,000 5.02 6.82 ======== ================ Third Quarter 2005 1,000 26.00 27.81 Third Quarter 2005 500 26.50 28.08 3,500 5.50 8.05 500 34.00 40.45 3,000 4.50 5.62 500 47.80 54.40 2,000 5.00 6.85 -------- ---------------- 1,000 5.00 5.95 2,500 32.06 35.71 1,000 4.50 5.19 ======== ================ 1,000 4.25 4.72 2,500 5.50 8.55 -------- ---------------- 14,000 5.02 6.86 ======== ================ Fourth Quarter 2005 1,000 26.00 27.09 Fourth Quarter 2005 500 26.00 27.80 3,500 5.50 9.01 500 33.00 40.60 3,000 4.50 6.01 500 46.65 53.30 2,000 5.00 7.50 -------- ---------------- 1,000 5.00 6.42 2,500 31.53 35.18 1,000 4.50 5.62 ======== ================ 1,000 4.25 5.14 2,500 5.76 9.15 -------- ---------------- 14,000 5.06 7.47 ======== ================ ---------------------------------------------------------------------- First Quarter 2006 Volume Swap Floor Ceiling -------- -------- -------- ------- First Quarter 2006 500 32.00 40.15 Volume Swap Floor Ceiling 500 30.00 60.60 -------- -------- -------- ------- 250 26.46 30.90 2,000 5.00 8.00 500 45.48 52.50 2,500 6.00 10.25 -------- ---------------- 3,000 6.26 10.05 1,750 34.49 48.20 -------- ---------------- ======== ================ 7,500 5.84 9.57 ======== ================

Second Quarter 2006 500 32.00 39.15 Second Quarter 2006 500 30.00 58.30 2,500 5.50 7.13 250 26.29 30.75 3,000 5.50 7.68 500 44.40 51.20 -------- ---------------- -------- ---------------- 5,500 5.50 7.43 1,750 34.16 46.86 ======== ================ ======== ================

Third Quarter 2006 500 31.00 39.35 500 30.00 56.30 Third Quarter 2006 250 26.24 30.51 2,500 5.50 7.15 500 43.40 50.35 3,000 5.50 7.60 -------- ---------------- -------- ---------------- 1,750 33.58 46.07 5,500 5.50 7.40 ======== ================ ======== ================

Fourth Quarter 2006 500 31.00 38.80 500 30.00 54.65 Fourth Quarter 2006 250 26.03 30.15 2,500 6.00 7.08 500 42.65 49.25 3,000 5.50 9.18 -------- ---------------- -------- ---------------- 1,750 33.33 45.08 5,500 5.73 8.23 ======== ================ ======== ================

--30--JV/ho*

CONTACT: Mission Resources Corporation, Houston Ann Kaesermann, 713-495-3100 investors@mrcorp.com

KEYWORD: TEXAS INDUSTRY KEYWORD: OIL/GAS ENERGY EARNINGS CONFERENCE CALLS SOURCE: Mission Resources Corporation

Copyright Business Wire 2005