OilVoice - Edge Petroleum Announces Results for Second Quarter of 2009

Edge Petroleum Announces Results for Second Quarter of 2009

Tuesday, August 18, 2009

Edge Petroleum Corporation has reported financial and operating results for the second quarter of 2009 as follows:

• Production for the second quarter of 2009 was 3.0 Bcfe, averaging 32.9 MMcfe per day.
• For the quarter ended June 30, 2009, we recorded cash settlements paid by our counterparties on our derivative contracts totaling $8.0 million pre-tax. We also recorded a non-cash net unrealized pre-tax derivative loss of $7.9 million, which represents the change in the fair value of our derivative contracts between March 31, 2009 and June 30, 2009. These resulted in a net pre-tax derivative gain of approximately $0.1 million included in total revenue for the quarter ended June 30, 2009.
• Our second quarter 2009 net loss to common stockholders was $9.4 million, or $0.40 basic and diluted loss per share.
• On July 10, 2009 we repaid $7.5 million of our outstanding principal balance due to the lenders of our Fourth Amended and Restated Credit Agreement dated as of January 30, 2007 (as amended, the "Revolving Facility"). We have also continued to make monthly interest payments and on July 31, 2009 we entered into Amendment No. 8 which provided for a change in the maturity date of the Revolving Facility from July 31, 2009 to August 31, 2009. Primarily due to the uncertainty surrounding the significant payments originally due June 30, 2009 under our Revolving Facility and which are now due on August 31, 2009, our independent auditors modified their opinion on our 2008 consolidated financial statements to include a going concern explanatory paragraph.
• Second quarter operating activity included a number of successful work-overs and recompletions in southeast and south Texas. The Bingle #1 (Edge Operated, W.I. 91%) was fracture stimulated and is currently flowing to sales at a rate of approximately 1.0 MMcfe per day. This well was completed in the Cook Mountain sand at approximately 9,800 feet and had been shut-in for over a year. The Chapman Ranch #23 (Edge Operated, W.I. 88%), which was previously shut-in, was cleaned out and returned to sales producing approximately 0.8 MMcfe per day from the Howell Hight sand at about 12,800 feet. The non-operated Cross #2 (Edge W.I. 25%) was recompleted to a Frio sand at about 7,000 feet and was put to sales at a rate of approximately 1.1 MMcfe per day. In the Flores/Bloomberg Field, a composite bridge plug was drilled out of the Bloomberg #68 (Edge Operated, W.I. 32.5%) to commingle the completed zones in the two stage completion and increased the rate from approximately 2 MMcfe per day to over 3.5 MMcfe per day. Also, in south Texas, the acquisition phase of the 120 square mile El Sauz 3-D seismic project (Edge W.I. 50%) was completed on May 31, 2009. The processing phase is currently underway with a final processed data set expected in late August 2009.

Second quarter production for 2009 was 3.0 Bcfe as compared to 4.3 Bcfe for the same period in 2008. Normal production declines, asset sales completed during early 2008 and decreased capital re-investment in replacing production as compared to historical levels contributed to our overall production decline in 2009. We have been operating under a severely limited reinvestment program as we attempt to preserve capital while we have been engaged in our financial and strategic alternatives evaluation process.

We reported an increase in total revenue for the second quarter and year to date periods of 2009 compared to the same periods in 2008. Total revenue for the three and six months ended June 30, 2009 was $11.8 million and $35.8 million compared to negative revenue of $(7.5) million in the second quarter of 2008 and revenue of $10.1 million in the first half of 2008. Falling commodity prices in the first half of 2009 resulted in net realized cash gains on derivatives for the second quarter of 2009 and year to date period ended June 30, 2009 of $8.0 million and $13.9 million, respectively. These gains partially offset the losses experienced from our physical commodity sales and unrealized derivative activity. In the same periods of 2008 we reported $14.6 million and $18.6 million, respectively, in net realized cash losses for derivatives.

Oil and gas operating expenses for the three months ended June 30, 2009 totaled approximately $3.8 million compared to approximately $3.9 million for the same period in 2008. Depletion costs for the second quarter of 2009 totaled approximately $7.3 million and averaged $2.43 per Mcfe compared to approximately $21.2 million and an average of $4.99 per Mcfe for the second quarter of 2008. At March 31, 2009 we recorded a non-cash full-cost ceiling test impairment on our oil and natural gas properties of approximately $78.3 million which lowered the second quarter depletion rate by approximately $0.70 per Mcfe. We were not required to record a full-cost ceiling test impairment at June 30, 2009 due to the increase in crude oil prices since March 31, 2009. General and administrative ("G&A") costs, which include share-based compensation costs and bad debt expense, for the second quarter of 2009 were approximately $4.9 million, 5% lower than the comparable prior year period, primarily because of lower salary and benefit costs due to a reduced staff partially offset by the high costs of our ongoing financial and strategic alternatives process.

Second quarter 2009 net loss to common stockholders was approximately $9.4 million or $0.40 basic and diluted loss per share. The same period a year ago we reported a net loss to common stockholders of approximately $29.9 million, or $1.04 basic and diluted loss per share. First half of 2009 net loss to common stockholders was approximately $86.3 million or $3.13 basic and diluted loss per share. The same period a year ago we reported a net loss to common stockholders of approximately $48.1 million, or $1.68 basic and diluted loss per share.

For the three months ended June 30, 2009, net cash flow provided by operating activities was approximately $10.0 million and net cash flow provided by operating activities before working capital changes was approximately $7.0 million. For the three months ended June 30, 2008, net cash flow provided by operating activities was approximately $32.1 million and net cash flow provided by operating activities before working capital changes was approximately $20.9 million. For the six months ended June 30, 2009, net cash flow provided by operating activities was approximately $19.8 million and net cash flow provided by operating activities before working capital changes was approximately $14.4 million. For the six months ended June 30, 2008, net cash flow provided by operating activities was approximately $53.4 million and net cash flow provided by operating activities before working capital changes was approximately $49.3 million. See the attached schedule for a reconciliation of net cash flow provided by operating activities to net cash flow provided by operating activities before working capital changes.

Debt at June 30, 2009 was $234.0 million as compared to $239.0 million at December 31, 2008. Debt at June 30, 2009 and December 31, 2008 is presented as current due to changes in our maturity date as a result of our entering into the Amended Consent and Amendment No. 5 dated May 15, 2009, Amendment No. 6 dated May 29, 2009, Amendment No. 7 dated June 30, 2009 and Amendment No. 8 dated July 31, 2009 in connection with the borrowing base deficiency created by the January 2009 redetermination of our borrowing base.