ENCORE ACQUISITION CO - FORM 8-K - EX-99.1 - January 25, 2010

Attached files

file filename
8-K - FORM 8-K - ENCORE ACQUISITION COd70774e8vk.htm
EX-23.1 - EX-23.1 - ENCORE ACQUISITION COd70774exv23w1.htm
EX-23.2 - EX-23.2 - ENCORE ACQUISITION COd70774exv23w2.htm
EX-99.3 - EX-99.3 - ENCORE ACQUISITION COd70774exv99w3.htm
EX-99.2 - EX-99.2 - ENCORE ACQUISITION COd70774exv99w2.htm
Exhibit 99.1
ENCORE ACQUISITION COMPANY
ITEM 6. SELECTED FINANCIAL DATA
     The selected financial data shown below as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007, and 2006 (collectively, the “Recast Financial Statements”) was derived from our recast audited consolidated financial statements. The selected historical financial data shown below as of December 31, 2006, 2005, and 2004 and for the years ended December 31, 2005 and 2004 was derived from recast unaudited consolidated financial statements. The following recast selected financial and operating data should be read in conjunction with our recast “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Recast Financial Statements included as Exhibits 99.2 and 99.3, respectively, to this Current Report on Form 8-K.
                                         
    Year Ended December 31, (a)  
    2008     2007     2006     2005     2004  
    (in thousands, except per share and per unit amounts)  
Consolidated Statements of Operations Data:
                                        
Revenues (b):
                                        
Oil
   $ 897,443     $ 562,817     $ 346,974     $ 307,959     $ 220,649  
Natural gas
     227,479       150,107       146,325       149,365       77,884  
Marketing (c)
     10,496       42,021       147,563       —       —  
 
                              
Total revenues
     1,135,418       754,945       640,862       457,324       298,533  
 
                              
 
                                        
Expenses:
                                        
Production:
                                        
Lease operating (d)
     175,115       143,426       98,194       69,744       47,807  
Production, ad valorem, and severance taxes
     110,644       74,585       49,780       45,601       30,313  
Depletion, depreciation, and amortization
     228,252       183,980       113,463       85,627       48,522  
Impairment of long-lived assets (e)
     59,526       —       —       —       —  
Exploration
     39,207       27,726       30,519       14,443       3,935  
General and administrative (d)
     48,421       39,124       23,194       17,268       12,059  
Marketing (c)
     9,570       40,549       148,571       —       —  
Derivative fair value loss (gain) (f)
     (346,236 )     112,483       (24,388 )     5,290       5,011  
Loss on early redemption of debt (g)
     —       —       —       19,477       —  
Provision for doubtful accounts
     1,984       5,816       1,970       231       —  
Other operating
     12,975       17,066       8,053       9,254       5,028  
 
                              
Total expenses
     339,458       644,755       449,356       266,935       152,675  
 
                              
 
                                        
Operating income
     795,960       110,190       191,506       190,389       145,858  
 
                              
 
                                        
Other income (expenses):
                                        
Interest
     (73,173 )     (88,704 )     (45,131 )     (34,055 )     (23,459 )
Other
     3,898       2,667       1,429       1,039       240  
 
                              
Total other expenses
     (69,275 )     (86,037 )     (43,702 )     (33,016 )     (23,219 )
 
                              
 
                                        
Income before income taxes
     726,685       24,153       147,804       157,373       122,639  
Income tax provision
     (241,621 )     (14,476 )     (55,406 )     (53,948 )     (40,492 )
 
                              
Consolidated net income
     485,064       9,677       92,398       103,425       82,147  
Less: net loss (income) attributable to noncontrolling interest
     (54,252 )     7,478       —       —       —  
 
                              
Net income attributable to EAC stockholders
   $ 430,812     $ 17,155     $ 92,398     $ 103,425     $ 82,147  
 
                              
 
                                        
Net income per common share:
                                        
Basic
   $ 8.10     $ 0.32     $ 1.75     $ 2.10     $ 1.73 (h)
Diluted
   $ 8.01     $ 0.31     $ 1.74     $ 2.07     $ 1.71 (h)
 
                                        
Weighted average common shares outstanding:
                                        
Basic
     52,270       53,170       51,865       48,682       47,090 (h)
Diluted
     52,866       53,629       52,356       49,303       47,522 (h)
 
                                        
Total Production Volumes:
                                        
Oil (Bbls)
     10,050       9,545       7,335       6,871       6,679  
Natural gas (Mcf)
     26,374       23,963       23,456       21,059       14,089  
Combined (BOE)
     14,446       13,539       11,244       10,381       9,027  
Average Realized Prices:
                                        
Oil ($/Bbl)
   $ 89.30     $ 58.96     $ 47.30     $ 44.82     $ 33.04  
Natural gas ($/Mcf)
     8.63       6.26       6.24       7.09       5.53  
Combined ($/BOE)
     77.87       52.66       43.87       44.05       33.07  
Average Costs per BOE:
                                        
Lease operating (d)
   $ 12.12     $ 10.59     $ 8.73     $ 6.72     $ 5.30  
Production, ad valorem, and severance taxes
     7.66       5.51       4.43       4.39       3.36  
Depletion, depreciation, and amortization
     15.80       13.59       10.09       8.25       5.38  
Impairment of long-lived assets (e)
     4.12       —       —       —       —  
Exploration
     2.71       2.05       2.71       1.39       0.44  
General and administrative (d)
     3.35       2.89       2.06       1.67       1.33  
Derivative fair value loss (gain) (f)
     (23.97 )     8.31       (2.17 )     0.51       0.56  
Provision for doubtful accounts
     0.14       0.43       0.18       0.02       —  
Other operating
     0.90       1.26       0.72       0.89       0.56  
Marketing, net of revenues (c)
     (0.06 )     (0.11 )     0.09       —       —  
 
                                        
Consolidated Statements of Cash Flows Data:
                                        
Cash provided by (used in):
                                        
Operating activities
   $ 663,237     $ 319,707     $ 297,333     $ 292,269     $ 171,821  
Investing activities
     (728,346 )     (929,556 )     (397,430 )     (573,560 )     (433,470 )
Financing activities
     65,444       610,790       99,206       281,842       262,321  

1

 

ENCORE ACQUISITION COMPANY
                                         
    As of December 31, (a)
    2008   2007   2006   2005   2004
    (in thousands)
Proved Reserves:
                                        
Oil (Bbls)
     134,452       188,587       153,434       148,387       134,048  
Natural gas (Mcf)
     307,520       256,447       306,764       283,865       234,030  
Combined (BOE)
     185,705       231,328       204,561       195,698       173,053  
Consolidated Balance Sheets Data:
                                        
Working capital
   $ 188,678     $ (16,220 )   $ (40,745 )   $ (56,838 )   $ (15,566 )
Total assets
     3,633,195       2,784,561       2,006,900       1,705,705       1,123,400  
Long-term debt
     1,319,811       1,120,236       661,696       673,189       379,000  
Equity
     1,483,248       1,070,689       816,865       546,781       473,575  
 
(a)   We acquired certain oil and natural gas properties and related assets in the Big Horn and Williston Basins in March 2007 and April 2007, respectively. We also acquired Crusader Energy Corporation in October 2005 and Cortez Oil & Gas, Inc. in April 2004. The operating results of these acquisitions are included with ours from the date of acquisition forward. We disposed of certain oil and natural gas properties and related assets in the Mid-Continent in June 2007. The operating results of this disposition are included with ours through the date of disposition.
 
(b)   For 2008, 2007, 2006, 2005, and 2004, we reduced oil and natural gas revenues for net profits interests owned by others by $56.5 million, $32.5 million, $23.4 million, $21.2 million, and $12.6 million, respectively.
 
(c)   In 2006, we began purchasing third-party oil Bbls from a counterparty other than to whom the Bbls were sold for aggregation and sale with our own equity production in various markets. These purchases assisted us in marketing our production by decreasing our dependence on individual markets. These activities allowed us to aggregate larger volumes, facilitated our efforts to maximize the prices we received for production, provided for a greater allocation of future pipeline capacity in the event of curtailments, and enabled us to reach other markets. In 2007, we discontinued purchasing oil from third party companies as market conditions changed and pipeline space was gained. Implementing this change allowed us to focus on the marketing of our own oil production, leveraging newly gained pipeline space, and delivering oil to various newly developed markets in an effort to maximize the value of the oil at the wellhead. In March 2007, ENP acquired a natural gas pipeline as part of the Big Horn Basin asset acquisition. Natural gas volumes are purchased from numerous gas producers at the inlet to the pipeline and resold downstream to various local and off-system markets. Marketing expenses include pipeline tariffs, storage, truck facility fees, and tank bottom costs used to support the sale of equity crude, the revenues of which are included in our oil revenues instead of marketing revenues.
 
(d)   On January 1, 2006, we adopted new guidance issued by the FASB in the “Compensation — Stock Compensation” topic of the FASC. Due to the adoption, non-cash equity-based compensation expense for 2005 and 2004 has been reclassified to allocate the amount to the same respective income statement lines as the respective employees’ cash compensation. This resulted in increases in LOE of $1.3 million and $0.7 million during 2005 and 2004, respectively, increases in general and administrative expense of $2.6 million and $1.1 million during 2005 and 2004, respectively.
 
(e)   During 2008, circumstances indicated that the carrying amounts of certain oil and natural gas properties, primarily four wells in the Tuscaloosa Marine Shale, may not be recoverable. We compared the assets’ carrying amounts to the undiscounted expected future net cash flows, which indicated a need for an impairment charge. We then compared the net carrying amounts of the impaired assets to their estimated fair value, which resulted in a write-down of the value of proved oil and natural gas properties of $59.5 million. Fair value was determined using estimates of future production volumes and estimates of future prices we might receive for these volumes, discounted to a present value.
 
(f)   During July 2006, we elected to discontinue hedge accounting prospectively for all of our remaining commodity derivative contracts which were previously accounted for as hedges. From that point forward, mark-to-market gains or losses on commodity derivative contracts are recorded in “Derivative fair value loss (gain)” while in periods prior to that point, only the ineffective portions of commodity derivative contracts which were designated as hedges were recorded in “Derivative fair value loss (gain).”
 
(g)   In 2005, we recorded a $19.5 million loss on early redemption of debt related to the redemption premium and the expensing of unamortized debt issuance costs of our 8 3/8% Senior Subordinated Notes due 2012. We redeemed all $150 million of such notes with proceeds received from the issuance of $300 million of our 6.0% Senior Subordinated Notes due 2015.
 
(h)   Adjusted for the effects of the 3-for-2 stock split in July 2005.

2