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8-K - FORM 8-K - Escalera Resources Co. | c13829e8vk.htm |
Exhibit 99.1
Double Eagle Petroleum Company
1675 Broadway, Suite 2200 Denver, Colorado, 80202 · 1-303-794-8445 · Fax: 1-303-794-8451
1675 Broadway, Suite 2200 Denver, Colorado, 80202 · 1-303-794-8445 · Fax: 1-303-794-8451
Colorado FOR RELEASE AT 6:00 AM EASTERN DAYLIGHT TIME
Date: March 8, 2011
Date: March 8, 2011
Double Eagle Petroleum Reports Full-Year 2010 Results and Amendment to Credit Facility
Denver, Colorado Double Eagle Petroleum Co. (NASDAQ: DBLE) reported today its financial results
for the year ended December 31, 2010. Net income attributable to common stock increased 171% to
$1,780,000, or $0.16 per share for 2010 as compared to a net loss of $(2,514,000), or $(0.25) per
share for 2009. The Companys net income attributable to common stock was net of dividends paid on
the Companys outstanding Series A Preferred Stock of $3,723,000 for both 2010 and 2009. The
increase in 2010 includes the proceeds received from a settlement of a lawsuit related to the
recovery of natural gas produced by its interest in the Madden Deep Unit with an after-tax impact
of $2,422,000 or $0.22 per share.
Clean earnings, a non-U.S. GAAP metric, totaled $19,608,000 for 2010, or $1.76 per share, as
compared to $26,231,000, or $2.63 per share for 2009. Clean earnings excludes the effects on net
income of non-cash charges, including depreciation, depletion and amortization expense (DD&A),
unrealized gains/losses related to the Companys economic hedges, as well as share-based
compensation expense. Clean earnings also excludes the impact of income taxes, as the Company does
not expect to pay income tax in the foreseeable future due to its net operating loss carryforwards.
Clean earnings was lower in the 2010 period primarily because the Company realized a 15% decrease
in its natural gas price in 2010 and experienced an increase in production costs. Please see the
table of this release for the reconciliation of Clean Earnings to US GAAP.
Production
Total natural gas and crude oil production decreased 2% to 9.2 Bcfe in 2010 as compared to 2009.
This decrease was largely due to lower production volumes at the Catalina Unit and Mesa Units. The
decrease in production volume at the Catalina Unit to 5.4 Bcf from 5.9 Bcf was largely the result
of the natural production decline of wells within this field, as well as the continuation of the
Companys well enhancement program, which requires the affected wells to be off-line temporarily
while the wells are worked over. The Company performed well workovers on approximately 30 of its
wells in 2010. The Company did experience a favorable change in production volumes at its
non-operated properties in the Atlantic Rim, as the operator of these units added additional
compressor capacity at the Doty Mountain Unit and performed fracture stimulation on numerous
wells in 2010. In addition, the Company completed a purchase of additional working interest in the
Catalina, Sun Dog and Doty Mountain Units in the third quarter of
2010.
Revenue
Production-related revenue totaled $44,475,000 for 2010, as compared to $52,080,000 for 2009. The
production-related revenue included gains of $5,316,000 and $3,503,000 for 2010 and 2009
respectively, for the settlement of certain derivative instruments, which are not accounted for as
cash flow hedges. Production-related revenue for 2010 includes revenue from the additional
Atlantic Rim working interest for the period July 21 through December 31, 2010.
The decline in production-related revenue was driven by a decline in the Companys realized natural
gas price as compared to 2009. The Company realized a natural gas price of $4.12 per Mcf in 2010
as compared to $4.85 in 2009. The Companys realized gas price includes the impact of realized
gains/losses on its derivative instruments. The Company has a hedging program in place in order to
reduce its volatility and exposure to oil and gas production cash-flow risk caused by fluctuating
commodity prices. Excluding the realized gains/losses on hedges, the Companys average realized
gas price was $3.67 for 2010 and $2.85 for 2009. The Company has historically entered into forward
sales contracts, collars and fixed price swaps to hedge its equity production. All of the
contracts the Company enters into are at no up-front cost to the Company. Subsequent to December
31, 2010, the Company was able to layer on one additional derivative contract for 2012 and two
contracts for 2013. The table below summarizes the current outstanding derivatives:
Remaining | ||||||||||||||
Contractual | Daily | Price | ||||||||||||
Type of Contract | Volume | Production | Term | Price | Index (1) | |||||||||
Fixed Price Swap |
2,920,000 | 8,000 | 01/11-12/11 | $7.07 | CIG | |||||||||
Costless Collar |
1,060,000 | 5,000 | 08/09-07/11 | $4.50 floor | NYMEX | |||||||||
$7.90 ceiling | ||||||||||||||
Costless Collar |
1,670,000 | 5,000 | 12/09-11/11 | $4.50 floor | NYMEX | |||||||||
$9.00 ceiling | ||||||||||||||
Fixed Price Swap |
3,660,000 | 10,000 | 01/12-12/12 | $5.05 | NYMEX | |||||||||
Fixed Price Swap |
2,190,000 | 6,000 | 01/13-12/13 | $5.16 | NYMEX | |||||||||
Costless Collar |
2,190,000 | 6,000 | 01/13-12/13 | $5.00 floor | NYMEX | |||||||||
$5.35 ceiling | ||||||||||||||
Total |
13,690,000 | |||||||||||||
(1) | CIG refers to the Colorado Interstate Gas price as quoted on the first day of each month. NYMEX
refers to quoted prices on the New York Mercantile Exchange. |
Production costs
Double Eagles production costs for 2010 increased 28% to $1.06 per Mcfe as compared to $0.83 per
Mcfe primarily due to the aforementioned workover program in the Catalina Unit, coupled with higher
transportation costs at the Sun Dog and Doty Mountain Units.
Capital Spending
In 2010, the Company invested $21,518,000, net to its interest, into capital projects primarily at
its core properties in the Atlantic Rim and Pinedale Anticline. The capital spending included the
Companys purchase of additional working interest from a third party in the Catalina, Sun Dog and
Doty Mountain Units for a total purchase price of approximately $8,417,000. It also included approximately
$5,398,000 for the drilling and completion of 16 new wells in the Mesa Units. The Company also
increased its Niobrara formation holdings for a total cost of $1,043,000.
Credit Facility
Effective March 7, 2011, the Company amended its credit facility to add a third lender to the
facility and to increase the borrowing availability on its $75 million facility from $55 million to
$60 million. The Company added U.S. Bank to its lending group, which also includes Bank of
Oklahoma (lead) and Key Bank. The rates and covenants under the amended credit agreement are
consistent with the prior credit agreement, except that the facility no longer includes a 4.5%
floor interest rate. After a repayment of $2,000,000 during the fourth quarter of 2010, the
Company had a total of $32,000,000 outstanding on its credit facility at December 31, 2010.
Richard Dole, Chairman, President and CEO of Double Eagle remarked, Our conservative capital
spending programs in both 2010 and 2009 has allowed us to maintain a strong financial position as
we move into 2011. This coupled with the increase in the borrowing availability on our credit
facility gives us the flexibility we needs as we embark on our 2011 development and exploration
program, which includes drilling up to 20 CBM wells in the Catalina Unit, participating in
approximately 16 new wells in the Mesa Units and drilling one or more Niobrara science wells in
2011. We are also actively pursuing strategic asset and company acquisitions to enhance and
diversify our portfolio. 2011 is shaping up to be an exciting year for the Company.
Please refer to the Companys Form 10-K filed with the Securities Exchange Commission on March 8,
2011 for a more detailed discussion of the Companys results.
Earnings Conference Call
Double Eagle will host a conference call to discuss results today, Tuesday, March 8, 2010 at 11:00
a.m. Eastern Daylight Time (9 a.m. Mountain). Those wanting to listen and participate in the Q&A
portion can call (800) 434-1335 and use conference code 737398#.
A replay of this conference call will be available for one week by calling (800) 704-9804 and using
pass code * then 737398#.
SUMMARY STATEMENT OF OPERATIONS
(In thousands, except share and per share data)
(In thousands, except share and per share data)
Year Ended | ||||||||
December 31, | December 31, | |||||||
2010 | 2009 | |||||||
Revenues |
||||||||
Oil and gas sales |
$ | 33,610 | $ | 42,398 | ||||
Transportation revenue |
5,549 | 6,179 | ||||||
Price risk management activities |
11,512 | (4,295 | ) | |||||
Proceeds from Madden Deep settlement |
3,841 | | ||||||
Other income, net |
472 | 509 | ||||||
Total revenues |
54,984 | 44,791 | ||||||
Expenses |
||||||||
Lease operating expenses |
9,708 | 7,754 | ||||||
Production taxes |
4,563 | 3,652 | ||||||
Pipeline operating expenses |
4,152 | 3,701 | ||||||
Exploration expenses including
dry holes |
163 | 103 | ||||||
Impairment and abandonment
of equipment and properties |
1,583 | 417 | ||||||
Total Expenses |
20,169 | 15,627 | ||||||
Gross Margin Percentage |
63.3 | % | 65.1 | % | ||||
General and administrative |
5,976 | 6,718 | ||||||
Depreciation, depletion and
amortization |
18,574 | 18,562 | ||||||
Other income (expense), net |
(1,538 | ) | (1,773 | ) | ||||
Pre-tax income |
8,727 | 2,111 | ||||||
Provision for deferred taxes |
(3,224 | ) | (902 | ) | ||||
NET INCOME |
5,503 | 1,209 | ||||||
Preferred stock requirements |
(3,723 | ) | (3,723 | ) | ||||
NET INCOME (LOSS) attributable
to common stock |
$ | 1,780 | $ | (2,514 | ) | |||
Net income (loss) per common share: |
||||||||
Basic |
$ | 0.16 | $ | (0.25 | ) | |||
Diluted |
$ | 0.16 | $ | (0.25 | ) | |||
Weighted average
shares outstanding: |
||||||||
Basic |
11,123,131 | 9,955,582 | ||||||
Diluted |
11,123,131 | 9,955,582 | ||||||
SELECTED BALANCE SHEET DATA
(In thousands)
(In thousands)
December 31, | December 31, | |||||||||||
2010 | 2009 | % Change | ||||||||||
Total assets |
$ | 152,517 | $ | 150,494 | 1 | % | ||||||
Outstanding balance on credit facility |
32,000 | 34,000 | -6 | % | ||||||||
Total stockholders equity |
52,705 | 46,724 | 13 | % |
SELECTED CASH FLOW DATA
(In thousands)
(In thousands)
Year ended | ||||||||||||
December 31, | December 31, | |||||||||||
2010 | 2009 | % Change | ||||||||||
Net cash provided by
operating activities |
$ | 25,044 | $ | 22,062 | 14 | % | ||||||
Net cash used in
investing activities |
(21,858 | ) | (21,461 | ) | 2 | % | ||||||
Net cash provided by
financing activities |
(6,263 | ) | 5,081 | -223 | % |
SELECTED OPERATIONAL DATA
Year ended | ||||||||||||
December 31, | December 31, | |||||||||||
2010 | 2009 | % Change | ||||||||||
Total production (Mcfe) |
9,159,017 | 9,335,924 | -2 | % | ||||||||
Average price realized per Mcfe |
$ | 4.25 | $ | 4.92 | -14 | % |
Use of Non-GAAP Financial Measures
The Company believes that the supplemental presentation of Clean Earnings shown below provides a
meaningful non-GAAP financial measure to help management and investors understand and compare
operating results and business trends among different reporting periods on a consistent basis,
independently of regularly reported non-cash charges. The measure also excludes the impact of
income taxes as the Company does not expect to pay taxes in the near future due to its net
operating loss carryforwards. The Companys management also uses such pro forma measures in its
planning and development of target operating models, and to enhance its understanding of ongoing
operations. Readers are cautioned not to view the non-GAAP pro forma results as superior to or an
alternative to GAAP results or as being comparable to results reported or forecasted by other
companies. Readers should refer to the reconciliation of GAAP results with the pro forma results
for the year ended December 31, 2010 and 2009, respectively, contained below.
Reconciliation of GAAP Results to Pro Forma Results
(In thousands, except per share data)
(In thousands, except per share data)
December 31, | December 31, | |||||||
2010 | 2009 | |||||||
Results | Results | |||||||
Net Income (loss) as reported
under US GAAP (1) |
$ | 1,780 | $ | (2,514 | ) | |||
Add back non-cash items: |
||||||||
Provision for income taxes |
$ | 3,224 | 902 | |||||
Depreciation, depletion, amortization and accretion expense |
18,714 | 18,693 | ||||||
Non-cash loss (gain) on price risk management (2) |
(6,196 | ) | 7,798 | |||||
Share-based compensation expense |
956 | 1,484 | ||||||
Impairments & abandonments |
1,583 | 417 | ||||||
Other non-cash items |
(454 | ) | (549 | ) | ||||
Clean Earnings (1) |
$ | 19,608 | $ | 26,231 | ||||
Clearn Earnings per Share |
$ | 1.76 | $ | 2.63 |
(1) | Both Net Income under U.S. GAAP and Clean Earnings for the 2010 period include $3,841 of
proceeds from the settlement of the Madden Deep litigation, which is considered to be a
non-recurring item. |
|
(2) | Loss (gain) on price risk management is an unrealized loss (gain) from the Companys
mark-to-market derivative instruments, resulting from recording the instrument at fair value at
each period end. Cash is received upon settlement of the contract. This cash settlement is also
recorded within the price risk management activities line on the statement of operations. |
About Double Eagle
Double Eagle Petroleum Co. explores for, develops, and sells natural gas and crude oil, with
natural gas constituting more than 95% of its production and reserves. The Company currently has
development activities and opportunities in its Atlantic Rim coal bed methane and in the Pinedale
Anticline in Wyoming. Exploration potential exists in its 73,000 net Niobrara acreage.
# # #
This release contains forward-looking statements regarding Double Eagles future plans and expected
performance based on assumptions the Company believes to be reasonable. A number of risks and
uncertainties could cause actual results to differ materially from these statements, including,
without limitation, the success rate of exploration efforts and the timeliness of development
activities, fluctuations in oil and gas prices, and other risk factors described from time to time
in the Companys reports filed with the SEC. In addition, the Company operates in an industry
sector where securities values are highly volatile and may be influenced by economic, environmental
and other factors beyond the Companys control. Double Eagle undertakes no obligation to publicly
update these forward-looking statements, whether as a result of new information, future events or
otherwise.
Company Contact:
John Campbell, IR
(303) 794-8445
www.dble.com
John Campbell, IR
(303) 794-8445
www.dble.com