Exhibit 99.1
| | |
| | | Contact: |
| | | Robert M. Snell, Vice President, |
| | | Chief Financial Officer |
| | | and Secretary |
| | | (713) 759-1770 |
Spinnaker Exploration Company Announces Outstanding Second Quarter Financial and
Operating Results
HOUSTON, Texas, August 1, 2005/PRNewswire–FirstCall/ — Spinnaker Exploration Company (NYSE: SKE) today announced second quarter financial and operating results. Outlined below are the highlights:
| | • | | Second quarter earnings were $23.2 million, or $0.66 per diluted share. Earnings were primarily driven by higher production volumes and lower DD&A coupled with higher commodity prices. Second quarter 2005 adjusted earnings were $23.7 million, or $0.68 per share, excluding non-recurring items. |
| | • | | Record quarterly revenues and cash from operations were $92.0 million and $79.5 million, respectively. Revenues and cash from operations were driven by higher production volumes and commodity prices. |
| | • | | Production of 13.0 billion cubic feet equivalent (Bcfe) exceeded the Company’s guidance for the quarter. Production grew 10% from the first quarter’s 11.8 Bcfe. Spinnaker reiterated its existing 2005 production guidance. |
| | • | | The Company’s mid-year reserve report prepared by Ryder Scott reflected reserve additions of 91.4 Bcfe, which after production of 24.8 Bcfe in the first half of 2005 resulted in reserves of 373.3 Bcfe at June 30, 2005; up 22% from year-end 2004. For the first six months of the year, the Company replaced 369% of production, resulting in an 8% decline in per unit DD&A from the first quarter of 2005. |
| | • | | The Company has had three new discoveries since May 3, 2005, “Q” (Mississippi Canyon 961), “Batters Box” (Galveston Island 210) and “Fast Ball” (West Cameron 295), and had one dry hole. Year-to-date, the Company has drilled six successful wells in seven attempts in its 2005 Gulf of Mexico drilling program. |
| | • | | On July 21, 2005, the Company closed a $75.0 million sale and leaseback of its 25% undivided interest in the Front Runner Spar. The lease has a 12-year term and an effective interest rate of 6.4%. |
| | • | | The Company also announced that it was increasing its capital expenditure budget to $310 million from $280 million. |
Second quarter 2005 earnings were $23.2 million, or $0.66 per diluted share, compared to second quarter 2004 earnings of $17.6 million, or $0.51 per diluted share. The Company had record second quarter revenues of $92.0 million, up 15% from $79.8 million in the second quarter of 2004 and 17% on a sequential basis. Record second quarter cash from operations, defined as cash from operating activities before changes in operating assets and liabilities, was $79.5 million, up 16% from $68.8 million in the second quarter of 2004 and 16% on a sequential basis. See the discussion below for further explanation and reconciliation of non-GAAP financial measures. The Company recognized an additional pre-tax impairment charge of $0.7 million ($0.5 million after-tax) for well costs incurred in the second quarter related to the previously announced unsuccessful Tari #1 well located in OPL Block 256 offshore Nigeria.
Total second quarter 2005 production of 13.0 Bcfe included approximately 7.0 Bcf of natural gas, 849,000 barrels of oil and 148,000 barrels of natural gas liquids. Spinnaker had record oil production in the second quarter of 2005, an increase of 46% from the second quarter of 2004 and 23% on a sequential basis. The increase in oil production was primarily due to the continued ramp-up in production at the Company’s deepwater project at Green Canyon 338/339/382 (“Front Runner”). The Company’s total net current producing capacity is approximately 143 million cubic feet of gas equivalent (“MMcfe”) per day.
Spinnaker’s average natural gas price, before the effects of hedging activities, increased approximately 11% to $7.00 per Mcf, and the average oil price, before the effects of hedging activities, increased approximately 34% to $48.92 per barrel in the second quarter of 2005 compared to the second quarter of 2004. The total average realized equivalent price, after the effects of hedging activities, increased 19% to $7.03 per Mcfe in the second quarter of 2005 compared to the second quarter of 2004.
Oil and Gas Reserves
The Company’s outside reserve engineers, Ryder Scott Company, L.P., estimated proved oil and gas reserves to be 373.3 Bcfe at June 30, 2005, up 22% from reserves of 306.7 Bcfe at December 31, 2004. As a result of the increase in reserves, per unit DD&A decreased to $3.24 per Mcfe from $3.51 per Mcfe in the prior quarter. The reserve total is comprised of 182.8 Bcf of natural gas, 28.6 million barrels of oil and 3.2 million barrels of natural gas liquids. Proved reserve additions in the first half of 2005 were 91.4 Bcfe. The present value of future net cash flows (before income taxes) discounted at 10% and using prices in effect on June 30 is estimated to be slightly more than $1.6 billion.
Exploration
Since May 3, 2005, Spinnaker has participated in three successful exploratory wells in four attempts. A summary of exploratory activity follows:
| | | | | | | | |
Well
| | Working
Interest
(WI)
| | | Net Revenue
Interest (NRI)
| | | Operator
|
Mississippi Canyon 961 (“Q”) | | 50 | % | | 44 | % | | Spinnaker |
Galveston 210 #2 (“Batters Box”) | | 33 | % | | 28 | % | | Spinnaker |
West Cameron 295 #2 (“Fast Ball”) | | 21 | % | | 17 | % | | Spinnaker |
The West Cameron 295 #2 well reached total depth in July and thus is not reflected in the June 30 reserve estimates. Spinnaker has participated in 110 successful wells in 184 attempts since inception (60% gross/61% net).
Current Operations
The Company is currently involved in seven rig operations. Four are exploratory, one is development and two are completions. Five of the operations are located on the shelf and two are located in deep water. Six of the seven rig operations are Spinnaker-operated.
Various activities are ongoing in several field areas in which the Company owns interests. The following summary information updates the Company’s progress on many of these projects:
Deep Water
Front Runner/Front Runner South/Quatrain Field Development
(Green Canyon 338/339/382)
Current gross production from the first four completions at Front Runner is approximately 43,000 barrels of oil equivalent per day. The Front Runner #A-4 well is currently being completed.
Spinnaker owns a 25% WI and 22% NRI (or 25% NRI if eligible for royalty suspension) in the Front Runner project.
Spiderman Development (DeSoto Canyon 620/621)
The Spiderman development is progressing. Engineering and construction activities are ongoing in all phases of the development. The field will be developed via subsea tieback to Independence Hub, a floating production facility located in Mississippi Canyon 920. The Company anticipates first production during 2007. The third well commenced drilling in May but was temporarily abandoned due to loop currents. Drilling is expected to continue in September.
Spinnaker owns an 18% WI and 16% NRI (or 18% NRI if eligible for royalty suspension) in the Spiderman field.
San Jacinto Development (DeSoto Canyon 618/619)
The San Jacinto development is progressing on the same schedule as Spiderman. The field will be jointly developed with Spiderman via subsea tieback to the Independence Hub production
facility. The two temporarily abandoned wells will be completed in the second quarter of 2006. First production will coincide with the Spiderman development in 2007. A third well could be drilled prior to installation of the floating production facility.
Spinnaker owns a 27% WI and 23% NRI (or 27% NRI if eligible for royalty suspension) in the San Jacinto field.
“Q” Discovery (Mississippi Canyon 961)
As previously announced, Spinnaker made and confirmed a significant gas discovery in its MC 961 #1 and MC 961 #1 sidetrack wells, respectively. The discovery will be developed via subsea tieback to the Independence Hub. Development plans are underway.
Spinnaker owns a 50% WI and 44% NRI (or 50% NRI if eligible for royalty suspension) in the Q Field.
Seventeen Hands Development (Mississippi Canyon 299)
The Seventeen Hands well has been completed and the subsea tree installed. The flowline and umbilical will be installed and production is expected to commence in the fourth quarter of 2005.
Spinnaker owns a 25% WI and 22% NRI in the Seventeen Hands project.
Thunder Hawk (Mississippi Canyon 734)
The MC 734 #2 well was suspended in June due to the persistent occurrence of loop currents at the well site. Prior to suspension, the well had encountered in excess of 500 feet true vertical thickness of oil pay in two high quality Miocene sands. The well was drilled to a total depth of 23,765 feet at the time that operations were suspended. The well will be re-entered in the fourth quarter of this year to test the deep section of the Thunder Hawk field. Spinnaker and its partners are continuing to investigate several development options for the field.
Spinnaker owns a 25% WI and 22% NRI (or 25% NRI if eligible for royalty suspension) in the Thunder Hawk discovery.
Shelf
High Island 47
The HI 47 #A-1 well commenced production in mid-May and is currently producing 12.5 MMcf/D.
Spinnaker owns a 67% WI and 56% NRI in the field.
High Island 163
A caisson deck is currently being installed at the High Island 163 #2 location. A flowline will be laid to a nearby host facility. First production is anticipated in the fourth quarter of 2005.
Spinnaker owns a 70% WI and 58% NRI in the field.
Bases Loaded Field (Galveston 210)
The GA 210 #1 well commenced production in early June. The well is currently producing at a rate of 17 MMcfe/D. The GA 210 #2 prospect was successfully drilled and completed in a fault block adjacent to the productive GA 210 #1 well. The GA 210 #2 well penetrated 97 feet of high quality pay with porosity averaging greater than 30% in a Lower Marg A Sand. Final hook-up has commenced on the well. Downstream restrictions will necessitate an alternate flow route for the #2 well. A second flowline will be laid to a separate downstream market. First production for the #2 well is anticipated in the fourth quarter of this year.
Spinnaker operates the GA 210 #1 well with a 67% WI and 56 % NRI and the GA 210 #2 well with a 33% WI and 28% NRI.
Fast Ball Field (West Cameron 295)
A potentially sizeable shelf discovery has been made in West Cameron 295. The WC 295 #2 well found 150 feet of net pay in a lower Miocene sand. Completion operations have begun. Upon completion, a single-well caisson will be over-driven. The well will be tied back to a nearby host facility. First production is expected to commence in the fourth quarter of this year.
Spinnaker operates the well with 21% WI and 17% NRI (or 20% NRI if eligible for royalty suspension).
Alex Deep (Brazos A-19)
The Brazos A-19 well was shut-in in late June by the operator due to gas quality issues. It is anticipated that the well will remain shut-in until the first half of 2006 while treatment facilities are being designed and constructed. The A-19 well has produced approximately 104 Bcfe to date and was producing at the rate of 60 MMcfgd when the shut-in occurred. Additional plans for drilling are being considered by the operator. The shut-in of this field has been factored into guidance for the remainder of 2005.
Spinnaker owns a 15% WI in the well and block.
Guidance
The following table reflects the Company’s current guidance for the third quarter and full-year 2005. The guidance for the third quarter considers in excess of 0.5 Bcfe for storm-related shut-ins and another 0.5 Bcfe for the shut-in at Brazos A-19. For the year, production is expected to be negatively impacted approximately 2 Bcfe because of these issues and storm-related delays in bringing new production on-line.
| | | | | | | | | | | | |
| | | Actual
Q2 2005
| | | Guidance Q3 2005
| | | Guidance
Year 2005
| |
Income Statement Parameters: | | | | | | | | | | | | |
Avg Daily Production (MMcfe/day) | | | 143 | | | | 139 | | | | 137-151 | |
% Gas and Natural Gas Liquids | | | 61 | % | | | 56 | % | | | 60 | % |
| | | |
Avg Daily Hedged Gas Volumes (Bbtus/day) – Swaps | | | 10.0 | | | | 10.0 | | | | 10.8 | |
Avg Price – Swaps | | $ | 6.40 | | | $ | 6.40 | | | $ | 7.03 | |
| | | |
Avg Daily Hedged Gas Volumes (Bbtus/day) – Collars | | | — | | | | — | | | | — | |
Avg Ceiling Price - Collars | | | — | | | | — | | | | — | |
Avg Floor Price - Collars | | | — | | | | — | | | | — | |
| | | |
Avg Daily Hedged Oil Volumes (MBbls/day) – Swaps | | | 1.0 | | | | 1.0 | | | | 1.0 | |
Avg Price – Swaps | | $ | 40.78 | | | $ | 39.69 | | | $ | 40.34 | |
| | | |
Avg Daily Hedged Oil Volumes (MBbls/day) – Collars | | | 3.0 | | | | 3.0 | | | | 3.0 | |
Avg Ceiling Price - Collars | | $ | 44.73 | | | $ | 44.73 | | | $ | 44.73 | |
Avg Floor Price - Collars | | $ | 38.67 | | | $ | 38.67 | | | $ | 38.67 | |
| | | |
General and Administrative (in millions) | | $ | 4.3 | | | $ | 4.3 | | | $ | 17.1 | |
Interest Expense (in millions) | | $ | 1.5 | | | $ | 2.0 | | | $ | 7.0 | |
Accretion Expense (in millions) | | $ | 0.9 | | | $ | 1.0 | | | $ | 3.6 | |
Avg Cash Income Tax Rate | | | 0 | % | | | 0 | % | | | 1 | % |
Avg Accrual Income Tax Rate | | | 35.3 | % | | | 35.3 | % | | | 35.3 | % |
| | | |
Weighted Average Shares Outstanding – Diluted (in millions) | | | 35.0 | | | | 35.5 | | | | 35.5 | |
| | | |
Avg LOE, Workover & Severance Taxes / Mcfe | | $ | 0.58 | | | $ | 0.60 | | | $ | 0.59 | |
Avg DD&A / Mcfe | | $ | 3.24 | | | $ | 3.35 | | | $ | 3.37 | |
| | | |
Spending Parameters: | | | | | | | | | | | | |
Shelf Wells Drilled: | | | | | | | | | | | | |
Gross Wells | | | 2 | | | | 3 | | | | 14 | |
Net Wells | | | 0.7 | | | | 1.4 | | | | 6.1 | |
| | | |
Deepwater Wells Drilled: | | | | | | | | | | | | |
Gross Wells | | | 2 | | | | 1 | | | | 7 | |
Net Wells | | | 0.6 | | | | 0.8 | | | | 2.2 | |
| | | |
Total Wells Drilled: | | | | | | | | | | | | |
Gross Wells | | | 4 | | | | 4 | | | | 21 | |
Net Wells | | | 1.3 | | | | 2.2 | | | | 8.35 | |
| | | |
Capital Expenditures (in millions): | | $ | 84 | | | $ | 68 | | | $ | 310 | |
Leasehold Acquisition | | $ | 22 | | | $ | 4 | | | $ | 45 | |
Exploration | | $ | 38 | | | $ | 49 | | | $ | 190 | |
Development | | $ | 24 | | | $ | 15 | | | $ | 75 | |
Guidance for the differential on gas pricing is $0.40 per Mcfe for the third quarter of 2005, which relates to basis differentials and gas processing. The differential on oil pricing is $4.25 per barrel for the third quarter of 2005, which relates to basis differentials and quality adjustments.
Spinnaker Exploration Company is an independent energy company engaged in the exploration, development and production of oil and gas in the U.S. Gulf of Mexico and West Africa. For further information about the Company, please visit:www.spinnakerexploration.com.
The Company’s second quarter 2005 earnings conference call will be broadcast live via the Internet on Tuesday, August 2 at 10:00 a.m. Central Time to discuss these results.
Certain statements in this press release are forward-looking and are based upon Spinnaker’s current belief as to the outcome and timing of future events that are subject to numerous uncertainties. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein include the timing and extent of changes in oil and gas prices, operating risks and other risk factors as described in Spinnaker’s Annual Report on Form 10-K for the year ended December 31, 2004 and its other filings with the Securities and Exchange Commission. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, Spinnaker’s actual results and plans could differ materially from those expressed in the forward-looking statements. The forward-looking statements in this press release are made only as of the date hereof, and Spinnaker undertakes no obligation to update such forward-looking statements.
SPINNAKER EXPLORATION COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30,
| | | Six Months Ended June 30,
| |
| | | 2005
| | | 2004
| | | 2005
| | | 2004
| |
REVENUES | | $ | 91,970 | | | $ | 79,824 | | | $ | 170,293 | | | $ | 139,615 | |
EXPENSES: | | | | | | | | | | | | | | | | |
Lease operating expenses | | | 7,496 | | | | 6,530 | | | | 14,143 | | | | 11,243 | |
Depreciation, depletion and amortization – oil and gas properties | | | 42,194 | | | | 40,403 | | | | 83,631 | | | | 69,404 | |
Depreciation and amortization – other | | | 316 | | | | 350 | | | | 584 | | | | 696 | |
Impairment of international oil and gas properties | | | 735 | | | | — | | | | 8,478 | | | | — | |
Accretion expense | | | 929 | | | | 538 | | | | 1,611 | | | | 1,254 | |
Gain on settlement of asset retirement obligations | | | (13 | ) | | | — | | | | (128 | ) | | | (126 | ) |
General and administrative | | | 4,272 | | | | 4,227 | | | | 8,354 | | | | 7,725 | |
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Total expenses | | | 55,929 | | | | 52,048 | | | | 116,673 | | | | 90,196 | |
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INCOME FROM OPERATIONS | | | 36,041 | | | | 27,776 | | | | 53,620 | | | | 49,419 | |
| | | | |
OTHER INCOME (EXPENSE): | | | | | | | | | | | | | | | | |
Interest income | | | 100 | | | | 36 | | | | 197 | | | | 68 | |
Interest expense, net | | | (277 | ) | | | (304 | ) | | | (548 | ) | | | (515 | ) |
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Total other income (expense) | | | (177 | ) | | | (268 | ) | | | (351 | ) | | | (447 | ) |
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INCOME BEFORE INCOME TAXES | | | 35,864 | | | | 27,508 | | | | 53,269 | | | | 48,972 | |
Income tax expense | | | 12,660 | | | | 9,903 | | | | 18,804 | | | | 17,630 | |
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NET INCOME | | $ | 23,204 | | | $ | 17,605 | | | $ | 34,465 | | | $ | 31,342 | |
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NET INCOME PER COMMON SHARE: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.68 | | | $ | 0.52 | | | $ | 1.01 | | | $ | 0.93 | |
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Diluted | | $ | 0.66 | | | $ | 0.51 | | | $ | 0.99 | | | $ | 0.90 | |
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING: | | | | | | | | | | | | | | | | |
Basic | | | 34,036 | | | | 33,719 | | | | 33,989 | | | | 33,633 | |
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Diluted | | | 34,954 | | | | 34,779 | | | | 34,935 | | | | 34,708 | |
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SPINNAKER EXPLORATION COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
| | | | | | | | |
| | | As of June 30,
2005
| | | As of December 31,
2004
| |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 7,798 | | | $ | 21,830 | |
Accounts receivable | | | 62,289 | | | | 48,785 | |
Hedging assets | | | — | | | | 2,829 | |
Deferred tax assets | | | 41,953 | | | | — | |
Other | | | 7,752 | | | | 3,467 | |
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Total current assets | | | 119,792 | | | | 76,911 | |
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Property and equipment | | | 1,778,277 | | | | 1,602,752 | |
Less – Accumulated depreciation, depletion, and amortization | | | (634,308 | ) | | | (541,615 | ) |
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Total property and equipment | | | 1,143,969 | | | | 1,061,137 | |
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Other assets | | | 1,148 | | | | 12,883 | |
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Total assets | | $ | 1,264,909 | | | $ | 1,150,931 | |
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Liabilities and Equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 30,479 | | | $ | 34,692 | |
Accrued liabilities and other | | | 62,202 | | | | 47,264 | |
Hedging liabilities | | | 11,848 | | | | 1,628 | |
Asset retirement obligations, current portion | | | 10,471 | | | | 6,841 | |
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Total current liabilities | | | 115,004 | | | | 90,425 | |
| | |
Long-term debt | | | 105,000 | | | | 105,000 | |
Asset retirement obligations | | | 37,460 | | | | 33,644 | |
Deferred income taxes | | | 163,402 | | | | 107,776 | |
| | |
Equity | | | 844,043 | | | | 814,086 | |
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Total liabilities and equity | | $ | 1,264,909 | | | $ | 1,150,931 | |
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SPINNAKER EXPLORATION COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| | | | | | | | |
| | | Six Months Ended June 30,
| |
| | | 2005
| | | 2004
| |
Cash flows from operating activities: | | | | | | | | |
Net income | | $ | 34,465 | | | $ | 31,342 | |
Effects of non-cash operating activities | | | 114,018 | | | | 89,273 | |
Change in operating assets and liabilities | | | (18,693 | ) | | | (18,138 | ) |
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Net cash provided by operating activities | | | 129,790 | | | | 102,477 | |
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Cash flows from investing activities: | | | | | | | | |
Oil and gas properties | | | (145,266 | ) | | | (150,974 | ) |
Purchases of other property and equipment | | | (478 | ) | | | (123 | ) |
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Net cash used in investing activities | | | (145,744 | ) | | | (151,097 | ) |
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Cash flows from financing activities: | | | | | | | | |
Proceeds from borrowings | | | 13,500 | | | | 43,000 | |
Payments on borrowings | | | (13,500 | ) | | | — | |
Debt issue costs | | | — | | | | (101 | ) |
Proceeds from exercise of stock options | | | 1,922 | | | | 6,433 | |
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Net cash provided by financing activities | | | 1,922 | | | | 49,332 | |
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Net increase (decrease) in cash and cash equivalents | | | (14,032 | ) | | | 712 | |
Cash and cash equivalents, beginning of year | | | 21,830 | | | | 15,315 | |
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Cash and cash equivalents, end of period | | $ | 7,798 | | | $ | 16,027 | |
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SPINNAKER EXPLORATION COMPANY
SUMMARY STATISTICS
(In thousands, except per share/unit amounts)
(Unaudited)
| | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended
June 30,
| | | Six Months Ended June 30,
| | | Three Months Ended March 31,
| |
| | | 2005
| | | 2004
| | | 2005
| | | 2004
| | | 2005
| |
Production: | | | | | | | | | | | | | | | | | | | | |
Natural gas (MMcf) | | | 7,041 | | | | 9,463 | | | | 13,743 | | | | 17,279 | | | | 6,702 | |
Oil and condensate (MBbls) | | | 849 | | | | 582 | | | | 1,542 | | | | 914 | | | | 693 | |
Natural gas liquids (MBbls) | | | 148 | | | | 109 | | | | 307 | | | | 190 | | | | 159 | |
Total (MMcfe) | | | 13,023 | | | | 13,611 | | | | 24,834 | | | | 23,906 | | | | 11,811 | |
| | | | | |
Average daily production: | | | | | | | | | | | | | | | | | | | | |
Natural gas (MMcf) | | | 77 | | | | 104 | | | | 76 | | | | 95 | | | | 75 | |
Oil and condensate (MBbls) | | | 9.3 | | | | 6.4 | | | | 8.5 | | | | 5.0 | | | | 7.7 | |
Natural gas liquids (MBbls) | | | 1.6 | | | | 1.2 | | | | 1.7 | | | | 1.1 | | | | 1.8 | |
Total (MMcfe) | | | 143 | | | | 150 | | | | 137 | | | | 132 | | | | 131 | |
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Revenues: | | | | | | | | | | | | | | | | | | | | |
Natural gas | | $ | 49,283 | | | $ | 59,737 | | | $ | 91,900 | | | $ | 103,935 | | | $ | 42,617 | |
Oil and condensate | | | 41,523 | | | | 21,311 | | | | 73,914 | | | | 32,858 | | | | 32,391 | |
Natural gas liquids | | | 4,487 | | | | 2,420 | | | | 8,769 | | | | 4,444 | | | | 4,282 | |
Net hedging income (loss) | | | (3,719 | ) | | | (3,285 | ) | | | (3,126 | ) | | | (1,546 | ) | | | 593 | |
Other | | | 396 | | | | (359 | ) | | | (1,164 | ) | | | (76 | ) | | | (1,560 | ) |
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Total | | $ | 91,970 | | | $ | 79,824 | | | $ | 170,293 | | | $ | 139,615 | | | $ | 78,323 | |
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Natural gas revenues from production (per Mcf) | | $ | 7.00 | | | $ | 6.31 | | | $ | 6.69 | | | $ | 6.02 | | | $ | 6.36 | |
Effects of hedging activities (per Mcf) | | | (0.04 | ) | | | (0.34 | ) | | | 0.17 | | | | (0.09 | ) | | | 0.40 | |
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Average realized price (per Mcf) | | $ | 6.96 | | | $ | 5.97 | | | $ | 6.86 | | | $ | 5.93 | | | $ | 6.76 | |
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Oil and condensate revenues from production (per Bbl) | | $ | 48.92 | | | $ | 36.61 | | | $ | 47.95 | | | $ | 35.95 | | | $ | 46.76 | |
Effects of hedging activities (per Bbl) | | | (4.03 | ) | | | — | | | | (3.58 | ) | | | — | | | | (3.03 | ) |
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Average realized price (per Bbl) | | $ | 44.89 | | | $ | 36.61 | | | $ | 44.37 | | | $ | 35.95 | | | $ | 43.73 | |
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Natural gas liquids from production (per Bbl) | | $ | 30.24 | | | $ | 22.26 | | | $ | 28.56 | | | $ | 23.52 | | | $ | 26.88 | |
Effects of hedging activities (per Bbl) | | | — | | | | — | | | | — | | | | — | | | | — | |
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Average realized price (per Bbl) | | $ | 30.24 | | | $ | 22.26 | | | $ | 28.56 | | | $ | 23.52 | | | $ | 26.88 | |
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Total revenues from production (per Mcfe) | | $ | 7.32 | | | $ | 6.13 | | | $ | 7.03 | | | $ | 5.91 | | | $ | 6.71 | |
Effects of hedging activities (per Mcfe) | | | (0.29 | ) | | | (0.24 | ) | | | (0.13 | ) | | | (0.07 | ) | | | 0.05 | |
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Total average realized price (per Mcfe) | | $ | 7.03 | | | $ | 5.89 | | | $ | 6.90 | | | $ | 5.84 | | | $ | 6.76 | |
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Expenses (per Mcfe): | | | | | | | | | | | | | | | | | | | | |
Lease operating expenses | | $ | 0.58 | | | $ | 0.48 | | | $ | 0.57 | | | $ | 0.47 | | | $ | 0.56 | |
Depreciation, depletion and amortization – natural gas and oil properties | | $ | 3.24 | | | $ | 2.97 | | | $ | 3.37 | | | $ | 2.90 | | | $ | 3.51 | |
Non-GAAP Financial Measures
Adjusted Earnings
Adjusted Earnings, which is a non-GAAP financial measure, excludes certain items that management believes affect the comparability of operating results. In this release, the Company is disclosing adjusted earnings as a useful adjunct to GAAP net income to evaluate the Company’s operational ends and performance relative to other oil and gas producing companies.
Items excluded generally are one-time items, or items whose timing or amount cannot be reasonably estimated. Accordingly, any guidance provided by the Company generally excludes information regarding these types of items.
The following reconciles GAAP net income to adjusted earnings (in thousands, except per share amounts):
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| | | Three Months Ended
June 30,
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| | | 2005
| | 2004
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| | | (Unaudited) |
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Net income | | $ | 23,204 | | $ | 17,605 |
Adjustment, net of tax: Impairment of international oil and gas properties | | | 476 | | | — |
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Adjusted earnings | | | 23,680 | | | 17,605 |
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Adjusted earnings per share – diluted | | $ | 0.68 | | $ | 0.51 |
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Cash from Operations
Cash from operations is a non-GAAP financial measure and is presented because of its acceptance as an indicator of the ability of an oil and gas exploration and production company to internally fund exploration and development activities. This measure should not be considered as an alternative to net cash provided by operating activities as defined by GAAP. Management believes cash from operations is a better liquidity indicator for oil and gas producers because the adjustments made to net cash provided by operating activities for changes in operating assets and liabilities eliminates fluctuations primarily related to the timing of cash receipts and disbursements, which can vary from period-to-period because of conditions the Company cannot control and results in attributing cash flow to operations of the period that provided the cash flow.
Management uses cash from operations not only for measuring the Company’s cash flow and liquidity, but also in evaluating the Company against other oil and gas producing companies. The following reconciles net cash provided by operating activities, the GAAP cash flow measure, to cash from operations (in thousands):
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| | | Three Months Ended
June 30,
|
| | | 2005
| | 2004
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| | | (Unaudited) |
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Net cash provided by operating activities | | $ | 67,295 | | $ | 55,010 |
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Changes in operating assets and liabilities | | | 12,161 | | | 13,801 |
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Cash from operations | | $ | 79,456 | | $ | 68,811 |
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