Brigham Exploration Company today announced its financial results for the second quarter and six months ended June 30, 2008.
SECOND QUARTER 2008 RESULTS
Revenues from the sale of oil and natural gas including hedge settlements but excluding unrealized mark-to-market hedging gains and losses for the second quarter 2008 were up 4% to $35.5 million when compared to that in the second quarter 2007. Higher commodity prices increased revenues by $15.7 million, while lower production volumes and hedging losses decreased revenues by $11.1 million and $3.4 million, respectively. Our average net daily production for the second quarter 2008 was 30.2 MMcfe per day, which was within the previously provided production guidance range.
Our average realized price for natural gas in the second quarter 2008 was $11.03 per Mcf, which includes a $0.90 per Mcf loss associated with the settlement of our natural gas derivative contracts. This compares to an average realized price in the second quarter 2007 of $7.80 which includes an immaterial gain on the settlement of our natural gas derivative contracts. During the second quarter 2008, our average realized price for oil was $109.71 per barrel, which includes a $12.51 per barrel loss due to the settlement of our oil derivative contracts. This compares to an average realized price in the second quarter 2007 of $62.25, which includes a negligible effect from the settlement of our oil derivative contracts.
Our second quarter 2008 production costs, which include operating and maintenance (O&M) expenses, expensed workovers, ad valorem taxes and production taxes, were $1.47 per Mcfe compared to $0.93 per Mcfe in the second quarter 2007. This increase was primarily driven by a $0.40 per Mcfe increase in production taxes, which was a result of our recording production tax credits on our Vicksburg and Mills Ranch wells in the second quarter 2007 rather than deferring recording credits until receipt of regulatory approval. Our O&M expense also increased on a per unit basis due to the natural decline of production volumes from our wells.
Our second quarter 2008 general and administrative (G&A) expense was 14% higher than in the second quarter of last year. G&A costs increased primarily because of higher compensation expense and higher audit and tax fees.
Our depletion expense for the second quarter 2008 was $12.4 million, compared to $16.6 million in the second quarter 2007. Our lower production volumes decreased depletion expense by $5.8 million, while our higher depletion rate increased depletion expense by $1.6 million.
Our net interest expense for the second quarter 2008 was $0.2 million lower than in the second quarter 2007. This decrease was primarily due to our lower weighted average interest rate and higher amount of capitalized interest. Our weighted average debt outstanding for the second quarter 2008 was $205.5 million, compared to $201.2 million for the comparable period last year.
Our deferred income tax expense for the second quarter 2008 was $0.9 million, compared to $1.9 million in the second quarter of last year. This decrease was primarily due to lower income for the period.
Our reported net income for the second quarter 2008 was $1.5 million ($0.03 per diluted share), versus $2.3 million ($0.05 per diluted share) for the same period last year. Our after-tax earnings in the second quarter 2008 excluding the effect of our unrealized mark-to-market hedging losses were $8.1 million ($0.17 per diluted share), while our after-tax earnings in the second quarter 2007 excluding unrealized mark-to-market hedging gains and our ceiling test impairment were $5.1 million ($0.11 per diluted share). After-tax earnings excluding the above items is a non-GAAP measure and a reconciliation of GAAP net income to after-tax earnings excluding the above items is included in our accompanying financial tables found later in this release.
For the second quarter 2008, we spent $43.1 million on oil and gas capital expenditures, which represents an increase of 48% from that in the second quarter 2007 and a 5% decrease from that in the first quarter 2008.
FIRST SIX MONTHS 2008 RESULTS
Revenues from the sale of oil and natural gas including hedge settlements but excluding unrealized mark-to-market hedging gains and losses for the first six months of 2008 were up 3% to $66.0 million when compared to that in the corresponding period last year. Revenues increased $23.7 million due to a 55% increase in our average natural gas equivalent price compared to that in the first six months of 2007, while lower production volumes reduced revenues by $17.1 million. Oil and natural gas derivative hedging settlements decreased revenues by $4.8 million. Average daily production for the first six months 2008 was 31.2 MMcfe per day.
Our average realized price for natural gas during the first six months of 2008 was $9.99 per Mcf, which includes a $0.30 per Mcf loss associated with the settlement of our natural gas derivative contracts. This compares to an average realized price in the first six months of 2007 of $7.78 per Mcf, which includes a $0.20 per Mcf gain due to the settlement of our natural gas derivative contracts. Our average realized price for oil for the first half of 2008 was $100.53 per barrel, which includes an $8.93 per barrel loss due to the settlement of oil derivative contracts. This compares to an average realized price in the first six months of 2007 of $58.91, which includes a $0.47 per barrel gain due to the settlement of oil derivative contracts.
Our per unit production costs for the first six months of 2008 increased $0.65 per Mcfe when compared to that in the same period last year. Production taxes increased $0.41 per Mcfe due to a $2.3 million decrease in production tax abatements in the first six months of 2008 versus the first six months of 2007. Workover expense was $0.18 per Mcfe higher in the first six months 2008 as a result of two unexpected workovers during the first quarter 2008.
Our G&A expense for the first six months of 2008 was 16% higher than that in the first six months of last year. G&A costs increased primarily because of higher compensation expense and higher audit and tax fees.
Our depletion expense for the first six months of 2008 was $24.8 million compared to $30.6 million in the first six months of last year. Lower production volumes decreased depletion expense by $8.8 million, while our higher depletion rate increased depletion expense by $3.1 million.
Our net interest expense for the first six months of 2008 decreased by $0.2 million, or 3%, from the comparable period last year. This decrease was primarily due to our lower weighted average interest rate and higher amount of capitalized interest. Our weighted average debt outstanding for the first six months of 2008 was $194.2 million versus $191.5 million for the comparable period last year.
Our deferred income tax expense for the first six months of 2008 was $1.9 million, compared to $2.9 million in the first six months of last year. This decrease was primarily due to lower income for the period.
Our reported net income for the first six months of 2008 was $3.0 million ($0.07 per diluted share) versus net income of $4.2 million ($0.09 per diluted share) for the same period last year. Our after-tax earnings for the first six months of 2008 excluding the effect of our unrealized mark-to-market hedging losses, a non-GAAP financial measure, were $12.9 million ($0.28 per diluted share) and our after tax earnings for the first six months of 2007 excluding unrealized mark-to-market hedging losses and our ceiling test impairment were $9.9 million ($0.22 per diluted share). A reconciliation of the first six months 2008 GAAP net income to earnings without the effect of the above items is included in our accompanying financial tables found later in this release.
Through June 30, 2008, we spent $62.7 million on drilling capital expenditures and $88.6 million in total oil and gas capital expenditures.
Gene Shepherd, Brigham's Chief Financial Officer, commented, "With the benefit of the very strong commodity prices that we experienced during the quarter, our pre-hedge revenue was near our all time record. Further, we are pleased that we have been able to keep our costs in check, with the combination of our second quarter LOE and G&A expense having declined by 8% sequentially and 8% versus that in the prior year's quarter."
Gene Shepherd continued, "Our fourth quarter production forecast is positively impacted by our four new Southern Louisiana wells, which have yet to impact our production volumes, and our growing number of Williston Basin oil completions. In addition to our Williston Basin acreage and drilling investments creating significant net asset value for our shareholders, they are generating a growing wedge of relatively shallow decline rate oil production. Our oil production, benefiting from the favorable crude oil pricing fundamentals, generated roughly 75% more revenue than a Mcf equivalent of our gas production during the second quarter 2008."