HOUSTON, March 13, 2008 (PRIME NEWSWIRE) -- Edge Petroleum Corporation (Nasdaq:EPEX) (Nasdaq:EPEXP) today reported financial results for the fourth quarter and full year of 2007. Revenue and production for the full year 2007 were a record high at $160.9 million and 24.1 Bcfe, respectively. Highlights included:
* For the year ended December 31, 2007, average production was 66.1 MMcfe per day as compared to 47.3 MMcfe per day for the comparable period in 2006, an increase of 40% and an annual record for the Company. * For the year, Edge reported record production of 24.1 Bcfe and a reserve replacement ratio of 362% from a combination of acquisition and operational activities, ending the year at 163.5 Bcfe. * 2007 results were impacted by our mark-to-market derivative contracts. A non-cash net unrealized pre-tax derivative loss of $9.5 million and $17.5 million are included in total revenue for the three months and year ended December 31, 2007, respectively. In the same periods of 2006, we reported a non-cash net unrealized pre-tax derivative loss of $2.7 million and a gain of $5.0 million, respectively. * We completed the largest acquisition in our history during January 2007, fully integrating it into our business over the course of the year.
John W. Elias, Edge's Chairman, President and CEO, commenting on Edge's strategic assessment process noted, "as previously announced, we have retained a financial advisor to assist our Board of Directors with an assessment of strategic alternatives. We are working quickly towards exploring the potential merger or sale of Edge. The Board will consider our options and determine the course of action that is in the best interest of our stockholders. We are working diligently to explore this alternative. A decision on any particular course of action has not been made and there can be no assurance that our Board of Directors will authorize any transaction. While that process is continuing, we intend to operate Edge in a manner designed to capture the most value possible for our shareholders."
Commenting on recent operations, Elias further noted, "so far this year, we have logged eight wells with eight apparent successes. Two of these wells were in southeast New Mexico and the remaining six wells were in south Texas. Production for January averaged approximately 61 MMcfe per day. Later this month, we expect to complete the sale of a group of non-core properties, representing about 4.7 Bcfe of proved reserves and a current producing rate of about 2.3 MMcfe per day for approximately $17.9 million. We are continuing to review the possible divestiture of a few more, small non-core assets."
Production for the three month and annual periods ended December 31, 2007 was 5.8 Bcfe, an average of 63.0 MMcfe per day, and 24.1 Bcfe, an average of 66.1 MMcfe per day, respectively. This compares to fourth quarter 2006 production of 4.0 Bcfe, or 43.5 MMcfe per day, and annual 2006 production of 17.3 Bcfe, or 47.3 MMcfe per day, respectively. Our average realized price was $6.20 per Mcfe for the three months ended December 31, 2007 compared to $6.23 per Mcfe in the same prior year period. For the year ended December 31, 2007, our average realized price was $6.67 per Mcfe compared to $7.52 per Mcfe in the same prior year period.
As a result of record production, we reported an increase in revenue for the annual period of 2007 compared to the same period in 2006. Revenue for the three months ended December 31, 2007 was $35.9 million compared to $24.9 million in the fourth quarter of 2006. For the year ended December 31, 2007, revenue was $160.9 million compared to $129.7 million for the same period in 2006, an increase of 24%.
Oil and gas operating expenses for the three months and year ended December 31, 2007 totaled $5.1 million and $17.1 million, respectively, compared to $2.3 million and $9.1 million for the same periods in 2006. Depletion costs for the fourth quarter of 2007 totaled $28.0 million and averaged $4.83 per Mcfe compared to $11.6 million and an average of $2.90 per Mcfe for the fourth quarter of 2006. For the year ended December 31, 2007, depletion costs totaled $90.8 million, or an average of $3.77 per Mcfe, compared to $60.5 million or an average of $3.51 per Mcfe, for the same period in 2006. General and administrative (G&A) costs, which include compensation costs and bad debt expense, for the fourth quarter of 2007 were $3.3 million, comparable to the prior year period. For the year ended December 31, 2007, G&A costs, including compensation costs and bad debt expense, totaled $17.5 million, 27% higher than the comparable 2006 period. This increase in G&A expense was primarily the result of increased staffing levels, as well as increases in rent expense for our corporate office expansion and professional service fees, offset by decreased costs for our Board of Directors and franchise taxes. On a production equivalent basis, G&A, excluding compensation costs and bad debt expense, for the year ended December 31, 2007 averaged $0.60 per Mcfe compared to $0.68 per Mcfe in the previous year.
Below is a recap of net income (loss) available to common stockholders and pro forma net income (loss) excluding the impact of unrealized derivative activity and the non-cash impairment on our oil and natural gas properties:
Three Months Ended Year Ended
December 31, December 31,
-------- -------- -------- --------
2007 2006 2007 2006
-------- -------- -------- --------
(in thousands)
Net income (loss) available
to common stockholders $ (6,370) $ 2,932 $ (1,005) $(41,261)
Add:
Unrealized derivative (gain)
loss(1) 9,547 2,724 17,516 (5,031)
Impairment of oil and natural
gas properties(2) -- -- -- 96,942
Tax impact (3,341) (953) (6,131) (32,169)
-------- -------- -------- --------
Net adjustments 6,206 1,771 11,385 59,742
-------- -------- -------- --------
Pro forma net income (loss)
available to common
stockholders(3) $ (164) $ 4,703 $ 10,380 $ 18,481
======== ======== ======== ========
(1) This information is provided because management believes
exclusion of the impact of the Company's unrealized derivatives
not accounted for as cash flow hedges (tax adjusted) will help
investors compare results between periods and identify operating
trends that could otherwise be masked by these items and to
highlight the impact that commodity price volatility may have on
our results.
(2) This information is provided because management believes
exclusion of the impairment of oil and natural gas properties
will help investors compare results between periods and identify
operating trends that could otherwise be masked by the impact of
the impairment.
(3) Pro forma net income (loss) available to common stockholders is
not a measure of financial performance prepared in accordance
with accounting principles generally accepted in the United
States of America ("GAAP"), and should not be considered in
isolation or as an alternative to net income (loss) available to
common stockholders. In addition, since pro forma net income
(loss) available to common stockholders is not a term defined by
GAAP, it might not be comparable to similarly titled measures
used by other companies.
Fourth quarter 2007 net loss available to common stockholders was $6.4 million or $0.22 basic and diluted loss per share. The same period a year ago we reported net income available to common stockholders of $2.9 million, or $0.17 basic and $0.16 diluted earnings per share. Excluding unrealized derivative losses, pro forma net loss available to common stockholders for the three months ended December 31, 2007 was $0.2 million, or $0.01 basic and diluted loss per share. For the fourth quarter of 2006, pro forma net income available to common stockholders, excluding unrealized derivative losses, was $4.7 million, or $0.27 basic and $0.26 diluted earnings per share.
Net loss available to common stockholders for the year ended December 31, 2007 was $1.0 million, or basic and diluted loss per share of $0.04 as compared to a net loss available to common stockholders for the same period in 2006 of $41.3 million or $2.38 basic and diluted loss per share. Excluding the impairment of oil and natural gas properties (in 2006) and the unrealized derivative gains and losses, pro forma net income available for common stockholders for the year ended December 31, 2007 decreased 44% totaling $10.4 million, or basic earnings per share of $0.38 and diluted earnings per share of $0.37, compared to pro forma net income available to common stockholders of $18.5 million or $1.06 basic and $1.04 diluted earnings per share for the year ended December 31, 2006.
Basic weighted average shares outstanding increased to approximately 27.6 million for the year ended December 31, 2007 from 17.4 million in the comparable 2006 period. The increase in shares outstanding was due primarily to the public offering of common stock which we completed in January 2007. At December 31, 2007, 28,544,160 shares of common stock and 2,875,000 shares of preferred stock (which were also sold in a public offering in January 2007) were outstanding.
For the year ended December 31, 2007, net cash flow provided by operating activities was $122.9 million and net cash flow provided by operating activities before working capital changes was $124.9 million. Net cash flow provided by operating activities and net cash flow provided by operating activities before working capital changes for the year ended December 31, 2006 were $97.4 million and $93.1 million, respectively. 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 December 31, 2007 was $260.0 million as compared to $240.0 million at September 30, 2007 and $129.0 million at December 31, 2006. The ratio of debt to total capital at December 31, 2007 was 37.4%. We significantly increased our credit facility and outstanding debt in conjunction with the large acquisition which closed on January 31, 2007. On January 30, 2007, we entered into a new credit facility, the borrowing base of which is currently $300 million.
Michael G. Long, Edge's Executive Vice President and CFO, commented on the financial results noting, "Our reported financial results were in line with our recently announced expectations for the quarter and full year. The volatility in commodity prices, particularly for oil, continues to have a major impact on our reported earnings as a result of mark-to-market accounting which we follow. Our unrealized derivative losses caused a non-cash pre-tax loss of $9.5 million for the fourth quarter and $17.5 million for the full year. Since year-end, we have repaid $10 million in long term debt, reducing our outstanding balance to $250 million and we expect further reductions before quarter-end. Our financial condition is solid and we expect to generate cash flow in excess of capital expenditures as we progress through the strategic assessment process."
In the normal course of business we enter into derivative contracts, including commodity price collars, swaps and floors to seek to hedge or mitigate our exposure to commodity price movements. As a result of changes to our forecasted 2008 production since we entered into certain derivatives, and the impact of certain asset divestitures, both of which have reduced expected production as compared to that expected at the time we entered into the price-risk management transactions, we currently have approximately 110% and 150% of our anticipated 2008 natural gas and crude oil production, respectively, covered by derivative contracts. This overhedged position exposes us to greater risk of commodity price increases because we will not have the physical production cash inflows to offset any potential losses incurred on the portion of the contracts that are overhedged. However, this overhedged position is mitigated, in part, by the fact that we have substantial natural gas liquids production, none of which is covered by any derivative contacts. Our outstanding contracts for 2008 and 2009 are shown below.
2008 & 2009 DERIVATIVES
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Volumes Price
Transaction per Day Floor Price Cap Term
--------------- ------------ ------- --------- ---------------
Costless Collar 10,000 MMBtu $ 7.50 $ 9.00 Jan-08 Dec-08
Costless Collar 10,000 MMBtu $ 7.50 $ 9.02 Jan-08 Dec-08
Costless Collar 20,000 MMBtu $ 7.50 $ 9.00 Jan-08 Dec-08
Costless Collar 10,000 MMBtu $ 7.75 $ 10.00 Jan-09 Dec-09
Costless Collar 10,000 MMBtu $ 7.75 $ 10.08 Jan-09 Dec-09
Costless Swap 1,500 Bbl $ 66.00 $ 66.00 Jan-08 Dec-08
Costless Collar 300 Bbl $ 70.00 $ 93.55 Jan-09 Dec-09
All natural gas prices are settled monthly at NYMEX Natural Gas and
crude oil prices are settled at West Texas Intermediate Light Sweet
Crude Oil.
Edge will discuss operations and financial results with any interested parties during its conference call at 1:00 p.m. CDT on Thursday, March 13, 2008. Interested parties may participate by dialing 877-627-6585 (ID# 1798491). The call will also be webcast and can be accessed by logging onto the web at http://investor.shareholder.com/media/eventdetail.cfm?mediaid=30021&c=EPEX&mediakey=C6F549771A8554D3CA8682A3952EFBD2&e=0. If you are unable to participate during the live webcast, the call will be archived at www.edgepet.com on the Investor Relations page of the site.
Edge Petroleum Corporation is a Houston-based independent energy company that focuses its exploration, production and marketing activities in selected onshore basins of the United States. Edge common stock and preferred stock are listed on the NASDAQ Global Select Market under the symbols "EPEX" and "EPEXP," respectively.
The Edge Petroleum Corporation logo is available at http://www.primenewswire.com/newsroom/prs/?pkgid=3537
Statements regarding any evaluation, review, assessment or process, any transaction, including the timing or effects thereof, shareholder value, change in or continuation of current business plan, cash flow, financial condition, forecasted production, derivatives and effects thereof, reserves, estimated volumes, as well as any other statements that are not historical facts in this release are forward-looking statements that involve certain risks, uncertainties and assumptions, many of which are beyond Edge's ability to control or estimate, and are subject to material changes. Such risks, uncertainties and assumptions include, but are not limited to, results of the Board's evaluation, any process or transaction, market conditions, availability of financing, Board and stockholder approvals, actions by third parties, Edge's financial and operational results, the availability or terms of any alternative or transaction, uncertainties, costs and delays relating to transactions, prices for oil and gas (including natural gas liquids), drilling and operating risks, risks related to exploration and development, uncertainties about the estimates of reserves, and other factors detailed in the Risk Factors and other sections of Edge's most recent Form 10-K, Forms 10-Q and other filings with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.
EDGE PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
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Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
OIL AND NATURAL GAS REVENUE:
Oil and natural gas sales $ 46,193 $ 25,693 $174,838 $120,014
Gain (loss) on hedging and
derivatives (10,262) (762) (13,938) 9,730
-------- -------- -------- --------
Total revenue 35,931 24,931 160,900 129,744
-------- -------- -------- --------
OPERATING EXPENSES:
Oil and natural gas operating
expenses 5,125 2,256 17,078 9,122
Severance and ad valorem
taxes 3,167 2,030 13,118 9,135
Depletion, depreciation,
amortization and accretion 28,297 11,763 91,718 61,080
Impairment of oil and natural
gas properties -- -- -- 96,942
General and administrative
expenses 3,295 3,315 17,494 13,788
-------- -------- -------- --------
Total operating expenses 39,884 19,364 139,408 190,067
-------- -------- -------- --------
OPERATING INCOME (LOSS) (3,953) 5,567 21,492 (60,323)
OTHER INCOME AND EXPENSE:
Interest expense, net of
amounts capitalized (2,698) (483) (10,589) (2,500)
Amortization of deferred loan
costs (239) (41) (977) (165)
Interest and other income 91 46 379 152
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME
TAX PROVISION (6,799) 5,089 10,305 (62,836)
INCOME TAX (EXPENSE) BENEFIT 2,496 (2,157) (3,733) 21,575
-------- -------- -------- --------
NET INCOME (LOSS) (4,303) 2,932 6,572 (41,261)
Preferred stock dividends (2,067) -- (7,577) --
-------- -------- -------- --------
NET INCOME (LOSS) AVAILABLE TO
COMMON STOCKHOLDERS $ (6,370) $ 2,932 $ (1,005) $(41,261)
======== ======== ======== ========
BASIC EARNINGS (LOSS) PER
SHARE(1) $ (0.22) $ 0.17 $ (0.04) $ (2.38)
======== ======== ======== ========
DILUTED EARNINGS (LOSS) PER
SHARE(1) $ (0.22) $ 0.16 $ (0.04) $ (2.38)
======== ======== ======== ========
BASIC WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 28,541 17,438 27,613 17,368
======== ======== ======== ========
DILUTED WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 28,541 17,814 27,613 17,368
======== ======== ======== ========
Production:
Gas - MMcf 3,913 3,282 17,536 13,850
Natural gas liquids (NGL) -
MBbls 204 36 637 222
Oil - MBbls 110 84 460 345
Gas Equivalent - MMcfe 5,799 4,004 24,118 17,251
Realized Product Prices:
Gas - $ per Mcf(2)(3) $ 6.71 $ 5.87 $ 6.80 $ 7.36
NGL - $ per Bbl $ 49.79 $ 31.54 $ 40.00 $ 25.52
Oil - $ per Bbl(2)(4) $ (4.68) $ 53.86 $ 35.21 $ 64.10
Gas Equivalent - $ per Mcfe $ 6.20 $ 6.23 $ 6.67 $ 7.52
Notes:
(1) In the calculation of diluted loss per share for the three and 12
months ended December 31, 2007, the 8.7 million shares of common
stock resulting from an assumed conversion of the Company's 5.75%
Series A cumulative convertible perpetual preferred stock were
excluded because the conversion would be anti-dilutive. In
addition, 149,568 and 252,853 equivalent shares of the Company's
restricted stock units and common stock options were also
excluded for the calculation of loss per share for the three and
12 month periods ended December 31, 2007, respectively, because
the conversion would be anti-dilutive. For the 12 month period
ended December 31, 2006, 429,567 equivalent shares of the
Company's restricted stock units and common stock options were
excluded for the calculation of loss per share because the
conversion would be anti-dilutive.
(2) Includes the effect of derivative transactions.
(3) The average realized price, excluding unrealized derivative
losses related to our natural gas collars, was $6.92 per Mcf for
both the three and 12 month periods ended December 31, 2007. The
average realized price, excluding unrealized derivative gains or
losses related to our natural gas collars, was $6.61 per Mcf and
$7.02 per Mcf for the three and 12 month periods ended December
31, 2006, respectively.
(4) The average realized price, excluding unrealized derivative
losses related to our oil swaps/collars, was $75.00 per barrel
and $68.83 per barrel for the three and 12 month periods ended
December 31, 2007. The average realized price, excluding
unrealized derivative gains or losses related to our oil
swaps/collars, was $57.35 per barrel and $63.10 per barrel for
the three and 12 month periods ended December 31, 2006.
EDGE PETROLEUM CORPORATION
Non-GAAP Disclosure Reconciliations
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I. Net Cash Flow Provided by Operating Activities
Year Ended
December 31,
---------------------
2007 2006
---------- ----------
Net cash flow provided by operating
activities $ 122,869 $ 97,409
Changes in working capital accounts 2,030 (4,333)
---------- ----------
Net cash flow provided by operations
before working capital changes $ 124,899 $ 93,076
========= ==========
Note: Management believes that net cash flow provided by operating
activities before working capital changes is relevant and
useful information that is commonly used by analysts, investors
and other interested parties in the oil and gas industry as a
financial indicator of an oil and gas company's ability to
generate cash used to internally fund exploration and
development activities and to service debt. Net cash flow
provided by operating activities before working capital changes
is not a measure of financial performance prepared in
accordance with accounting principles generally accepted in the
United States of America ("GAAP") and should not be considered
in isolation or as an alternative to net cash flow provided by
operating activities. In addition, since net cash flow
provided by operating activities before working capital changes
is not a term defined by GAAP, it might not be comparable to
similarly titled measures used by other companies.
II. Reserve Replacement Ratio
Year Ended
December 31,
--------------------
2007 2006
--------------------
(Bcfe)
Beginning Proved Reserves 102.1 102.8
Production (24.1) (17.3)
Purchase of Oil and Natural Gas
Properties 121.6 14.0
Extensions and Discoveries 35.8 12.2
Revisions to Previous Estimates (70.1) (9.5)
Sales of Oil and Natural Gas Properties (1.8) (0.1)
-------- --------
Ending Proved Reserves 163.5 102.1
======== ========
% Proved Developed (ending reserves) 77% 77%
======== ========
Reserve Replacement Ratio 362% 97%
======== ========
Note: Management believes that the reserve replacement ratio is
relevant and useful information that is commonly used by
analysts, investors and other interested parties in the oil and
gas industry as a means of evaluating the operational
performance and to a greater extent the prospects of entities
engaged in the production and sale of depleting natural
resources. This measure is often used as a metric to evaluate
an entity's historical track record of replacing the reserves
that it produced. The reserve replacement ratio is calculated
by summing the total proved reserves added (acquisition and
divestitures, extension and discoveries, and revisions) over
the period and dividing that sum by production in the same
period. The reported reserve replacement ratio is not
necessarily indicative of future trends.