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Crimson Exploration announces third quarter 2012 financial results

Friday, November 9, 2012
  • The Company reported a net loss of $3.8 million, or ($0.09) per basic share, for the third quarter of 2012 compared to net income of $0.5 million, or $0.01 per basic share, for the third quarter of 2011.
  • The weighted average field sales price in the third quarter of 2012 (before the effects of realized gains/losses on our commodity price hedges) was $8.13 per Mcfe compared to an average field sales price of $6.50 for the third quarter of 2011.

Crimson Exploration Inc. (NasdaqGM:CXPO) today announced financial results for the third quarter and first nine months of 2012 and provides operational update.

Highlights

  • Revenue of $30.8 million and adjusted EBITDAX of $21.6 million for the quarter
  • Increased total liquids production to 3,255 barrels per day, a 49% volume increase over the prior year quarter
  • Achieved crude oil and natural gas liquids production ratio of 50.4% for the quarter

Management Commentary

Allan D. Keel, President and Chief Executive Officer, commented, “Our focus on targeting oil and liquid-rich assets in the Woodbine formation in Madison and Grimes Counties, Texas and the Eagle Ford Shale formation in South Texas yielded exceptional operating results during the third quarter of 2012. During the quarter, the Company increased crude oil and natural gas liquids production 49% over the prior year quarter and achieved a crude oil and natural gas liquids production ratio above 50 percent for the first time in Company history. Our strategy for 2013 will be to continue to concentrate on the development of these areas where we have a multi-year inventory of high quality targets.”

Summary Financial Results

The Company reported a net loss of $3.8 million, or ($0.09) per basic share, for the third quarter of 2012 compared to net income of $0.5 million, or $0.01 per basic share, for the third quarter of 2011. Special non-cash items impacting the third quarter of 2012 were an unrealized pre-tax charge of $4.6 million related to the mark-to-market valuation requirement on our commodity price hedges and a $0.9 million leasehold impairment charge. In the third quarter of 2011, we recognized a $2.3 million lease operating expense credit for accrual estimates, an unrealized pre-tax gain of $4.2 million related to the mark-to-market valuation requirement on commodity price hedges and a $4.8 million leasehold impairment charge. Exclusive of these special cash and non-cash items, the net loss for the third quarter of 2012 would have been $0.3 million, compared to a net loss of $0.6 million in 2011. Adjusted EBITDAX, as defined below, was $21.6 million in the third quarter of 2012 compared to Adjusted EBITDAX for the prior year quarter of $22.4 million.

Revenues for the third quarter of 2012 were $30.8 million compared to revenues of $28.9 million in the third quarter of 2011. Revenue for the quarter increased as a result of our shift to oil and liquids-rich weighted projects over the last twelve months. Partially offsetting the benefits of this increased oil revenue were a decline in natural gas production and lower realized natural gas and natural gas liquids prices.

Production for the third quarter of 2012 was approximately 3.6 Bcfe, or 38,759 Mcfe per day, compared to production of 4.2 Bcfe, or 45,160 Mcfe per day, in the third quarter of 2011, and at the mid-point of management’s guidance of 37,000 – 40,000 Mcfe per day. Though we experienced a decrease in equivalent quarterly production, crude oil and natural gas liquids production was 50.4% of total production for the third quarter of 2012, up from 29% in the third quarter of 2011. This marks the first quarter in which Crimson’s crude oil and natural gas liquids production has exceeded a ratio greater than 50 percent. Since 2011, Crimson has achieved its goal of a balanced production profile by targeting its extensive liquids-rich inventory of projects in the East Texas Woodbine formation and South Texas Eagle Ford Shale.

The weighted average field sales price in the third quarter of 2012 (before the effects of realized gains/losses on our commodity price hedges) was $8.13 per Mcfe compared to an average field sales price of $6.50 for the third quarter of 2011. The weighted average realized sales price in the third quarter of 2012 (including the effects of realized gains/losses on our commodity price hedges) was $8.63 per Mcfe compared to a weighted average realized sales price of $6.96 per Mcfe for the third quarter of 2011. During the third quarter, realized prices increased period over period due to a more balanced product mix.

Direct lease operating expenses for the third quarter of 2012 were $3.3 million, or $0.93 per Mcfe, compared to $0.9 million, or $0.22 per Mcfe, in the third quarter of 2011. Lease operating expenses in the third quarter of 2011 reflected a change in accrual estimates which lowered lease operating expenses by $2.3 million. Exclusive of this adjustment, quarter over quarter lease operating expenses would be comparable.

Production and ad valorem tax expenses for the third quarter of 2012 were $1.8 million, or $0.51 per Mcfe, compared to $1.6 million, or $0.39 per Mcfe, for the third quarter of 2011, a slight increase primarily due to higher revenues in 2012.

Depreciation, depletion and amortization (“DD&A”) expense for the third quarter of 2012 was $14.3 million, or $4.00 per Mcfe, compared to $13.4 million, or $3.24 per Mcfe, for the third quarter of 2011. DD&A expense increased period over period due to the higher rate associated with drilling higher cost, and higher-margin crude oil wells, offset in part by lower natural gas production.

General and administrative expense in the third quarter of 2012 was $4.7 million, or $1.32 per Mcfe, compared to $4.5 million, or $1.08 per Mcfe, in the third quarter of 2011. General and administrative expenses, exclusive of non-cash stock option expense recognized in each quarter, was $4.1 million for the third quarter of 2012 and $4.0 million for third quarter of 2011.

Capital expenditures for the third quarter of 2012 were $14.1 million, consisting of drilling and completion operations in the Woodbine formation and the successful sidetrack of the Catherine Henderson A-6 well in Liberty County, Texas. Year to date, Crimson has invested approximately $74.4 million in its capital program which is currently forecasted to total approximately $80.0 million for the 2012 year.

Borrowing Base & Liquidity

On October 30, 2012, Crimson’s borrowing base under its $400 million senior secured revolving credit agreement (the “Senior Credit Agreement”) was reaffirmed by its bank group at $100 million. The next borrowing base redetermination under the Senior Credit Agreement is scheduled for May 1, 2013. As of September 30, 2012, Crimson had $71.1 million outstanding, with availability of $28.9 million, under the Senior Credit Agreement.

Hedging Activity

In early October, Crimson added the following crude oil and natural gas derivative contracts to its existing hedge position as part of its continued effort to mitigate risks associated with commodity price fluctuations:

Crude Oil Volume/Month Price/Unit
Brent
Jan 2013-Dec 2013 Swap 9,000 Bbls $109.13
Jan 2014-Dec 2014 Swap 7,500 Bbls $102.10
Natural Gas Volume/Month Price/Unit
Henry Hub
Jan 2013-Dec 2014 Collar 42,500 Mmbtu $3.75-$4.60
Jan 2013-Dec 2014 Collar 42,500 Mmbtu $3.50-$5.00

Selected Financial and Operating Data

The following table reflects certain comparative financial and operating data for the three and nine month periods ended September 30, 2012 and 2011:

Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 % 2012 2011 %
Total Volumes Sold:
Crude oil (barrels) 228,895 98,523 132 584,713 282,774 107
Natural gas liquids (barrels) 70,607 102,595 -31 215,663 324,670 -34
Natural gas (Mcf) 1,768,778 2,948,021 -40 5,933,989 9,234,785 -36
Natural gas equivalents (Mcfe) 3,565,790 4,154,729 -14 10,736,245 12,879,449 -17
Daily Sales Volumes:
Crude oil (barrels) 2,488 1,071 132 2,134 1,036 106
Natural gas liquids (barrels) 767 1,115 -31 787 1,189 -34
Natural gas (Mcf) 19,226 32,044 -40 21,657 33,827 -36
Natural gas equivalents (Mcfe) 38,759 45,160 -14 39,183 47,177 -17
Average sales prices (before hedging):
Oil $ 95.82 $ 96.21 0 $ 102.45 $ 100.59 2
NGLs 31.05 52.74 -41 36.56 48.28 -24
Gas 2.75 4.11 -33 2.44 4.04 -40
Mcfe 8.13 6.50 25 7.66 6.32 21
Average sales price (after hedging):
Oil $ 97.27 $ 89.99 8 $ 103.75 $ 90.95 14
NGLs 31.05 51.66 -40 36.56 47.65 -23
Gas 3.57 5.00 -29 3.27 4.87 -33
Mcfe 8.63 6.96 24 8.19 6.69 22
Selected Costs ($ per Mcfe):
Lease operating expenses $ 0.93 $ 0.22 323 $ 1.08 $ 0.75 44
Production and ad valorem taxes $ 0.51 $ 0.39 31 $ 0.07 $ 0.42 -83
Depreciation and depletion expense $ 4.00 $ 3.24 24 $ 4.04 $ 3.21 26
General and administrative expense (cash) $ 1.14 $ 0.95 20 $ 1.14 $ 0.87 31
Interest expense $ 1.81 $ 1.46 24 $ 1.76 $ 1.48 19
Adjusted EBITDAX (1) $ 21,579,942 $ 22,435,395 -4 $ 63,505,201 $ 59,922,258 6
Capital expenditures
Property acquisition – proved $ -
$ 241 $ -
$ 940,586
Leasehold acquisitions 1,267,001 5,217,469 5,258,214 7,691,567
Exploratory 43,967 (395,354 ) 9,793,303 5,625,125
Development 12,760,004 12,769,690 59,288,195 47,253,309
Other 5,693 -
25,410 5,416
$ 14,076,665 $ 17,592,046 $ 74,365,122 $ 61,516,003
Weighted Average Shares Outstanding
Basic 44,208,471 45,121,172 44,106,956 45,084,200
Diluted 44,208,471 45,166,566 44,106,956 45,084,200

(1) Adjusted EBITDAX is a non-GAAP financial measure. See below for a reconciliation to net income (loss).

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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