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National Energy Group, Inc. Reports Fiscal 2005 Second Quarter Results

Posted on: Wednesday, 10 August 2005, 15:01 CDT

DALLAS, Aug. 10 /PRNewswire-FirstCall/ -- National Energy Group, Inc. (BULLETIN BOARD: NEGI) today announces results for the second quarter ended June 30, 2005.

Results of Operations

On September 12, 2001 as provided in the Company's Joint Plan of Reorganization, the Company contributed all its operating assets and oil and gas properties excluding cash of $4.3 million to NEG Holding LLC in exchange for an initial 50% membership interest (the "LLC Contribution"). Following the LLC Contribution, the Company no longer directly owns oil and gas properties and will only recognize income from accretion of the preferred investment and fees attributable to the management and operation of NEG Holding LLC's oil and gas properties. The income from accretion of the preferred investment and management fees amounted to $10.6 million and $3.2 million, respectively, for the quarter ended June 30, 2005. The income from accretion of the preferred investment and management fees amounted to $20.4 million and $6.5 million, respectively for the six months ended June 30, 2005.

For the Three Months Ended June 30, 2005

Net income of $4.8 million was recognized for the three months ended June 30, 2005, compared with net income of $3.2 million for the comparable 2004 period.

Total revenues increased $2.7 million (24.3%) to $13.8 million for the second quarter of 2005 from $11.1 million for the second quarter of 2004.

The Company had no oil and natural gas production during the second quarter of 2005 or 2004 due to the LLC Contribution.

For the Six Months Ended June 30, 2005

Net income of $9.1 million was recognized for the six months ended June 30, 2005 compared with net income of $6.2 million for the comparable 2004 period.

Total revenues increased $5.3 million (24.4%) to $27.0 million for the six months ended June 30, 2005 from $21.7 million for the comparable 2004 period.

Oil and Gas Operations

NEG Holding LLC conducts its oil and gas operations through its affiliate, NEG Operating LLC. The Company manages all of these oil and gas operations pursuant to a management agreement with NEG Operating LLC. The Company also manages the assets of TransTexas Gas Corporation and Panaco, Inc.

Subsequent Events

On July 8, 2005 we announced that we received an offer from AREP, the holder of 50.1% of our outstanding shares, regarding a transaction pursuant to which our existing shareholders, other than AREP, would receive $3.00 in cash for each share of our common stock held by them. In the event of such transaction, AREP and its subsidiaries would own 100% of our stock. On July 11, 2005, our Board of Directors formed a special committee to be chaired by one of our independent directors, which was charged with evaluating and recommending a response to the AREP offer.

National Energy Group, Inc. (BULLETIN BOARD: NEGI) is a Dallas, Texas based company.

This press release may contain projections and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Any such projections or statements reflect the Company's current views with respect to future events and financial performance. No assurances can be given, however, that these events will occur or that such projections will be achieved and actual results could differ materially from those projected. A discussion of important factors that could cause actual results to differ materially from those projected is included in the Company's periodic reports filed with the Securities and Exchange Commission.

National Energy Group, Inc. Summary Financial Results (In thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 2005 2004 2005 2004 Results of Operations Data: Revenues: Accretion of Investment in NEG Holding LLC $10,550 $8,219 $20,444 $16,124 Management fee 3,246 2,861 6,520 5,479 Interest income and other, net 18 8 28 13 Total revenue 13,814 11,088 26,992 21,616 Costs and expenses: Salaries and wages 1,875 1,705 3,945 3,217 Insurance 198 253 381 477 Rent and utilities 217 173 398 346 Other general and administrative expenses 616 618 1,238 1,141 Interest expense 3,485 3,485 6,970 6,970 Total costs and expenses 6,391 6,234 12,932 12,151 Income before income taxes 7,423 4,854 14,060 9,465 Income tax expense (2,598) (1,699) (4,921) (3,313) Net income to common shareholders $4,825 $3,155 $9,139 $6,152 Cash Flow Data: Cash flow from operations (A) $(3,637) $(4,023) $(7,402) $(7,825) Per share data: Net income per common share, basic and diluted $.43 $.28 $.82 $.55 Cash flow from operations (A) $(.32) $(.36) $(.66) $(.69) Shares used in per share computations: Earnings per share, basic and diluted 11,191 11,191 11,191 11,191 Cash flow per share, basic and diluted 11,191 11,191 11,191 11,191 National Energy Group, Inc. Condensed Balance Sheet (In thousands) June 30, December 31, 2005 2004 Assets Cash, cash equivalents and marketable Securities $4,149 $2,488 Other current assets 1,409 2,582 Investment in NEG Holding LLC 100,254 87,800 Deferred tax asset 14,320 19,242 Total assets $120,132 $112,112 Liabilities and Stockholders' Equity (Deficit): Current liabilities $2,771 $2,871 Senior notes due to affiliate 148,637 148,637 Deferred gain on senior note redemption 2,717 3,737 Stockholders' deficit (33,993) (43,133) Total liabilities and stockholders' equity (deficit) $120,132 $112,112 (A) Cash flow from operations is shown before changes in working capital accounts.

National Energy Group, Inc.

CONTACT: Bob G. Alexander, Philip D. Devlin or Randall D. Cooley, all ofNational Energy Group, Inc., +1-214-692-9211, or fax, +1-214-692-5055

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

Source: PRNewswire-FirstCall

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