HOUSTON, Aug. 9, 2007 (PRIME NEWSWIRE) -- Edge Petroleum Corporation (Nasdaq:EPEX) today reported financial results for the second quarter of 2007. Production was a record high for the second quarter of 2007 at 6.4 Bcfe. Highlights included:
-- Second quarter production was 6.4 Bcfe as compared to 4.5 Bcfe for
the same period in 2006, an increase of 42%. Sequentially,
production was up 11% as compared to the first quarter of 2007.
Average production for the second quarter of 2007 was 70.0 Mcfe
per day as compared to 49.2 Mcfe per day for the comparable period
in 2006, a new record for the Company.
-- Second quarter oil and natural gas sales were $47.4 million as
compared to $31.2 million for the same period in 2006 and $39.2
million for the first quarter of 2007. The average price,
excluding unrealized derivative activity, received per Mcfe this
quarter was $7.48 compared to $7.33 a year ago.
-- Second quarter 2007 results were impacted by our mark-to-market
derivative contracts. A non-cash net unrealized pre-tax derivative
gain of $6.3 million is included in total revenue for the
three-months ended June 30, 2007. In the same period of 2006, we
reported a non-cash net unrealized pre-tax derivative gain of $1.0
million. This impact raised the average realized price received
per Mcfe from $7.48 to $8.46, as compared to a lesser increase per
Mcfe from $7.33 to $7.57 for the same period a year ago.
-- Second quarter 2007 pro forma net income was $4.5 million as
compared to $5.1 million for the second quarter of 2006. Pro
forma net income, which excludes unrealized derivative activity,
is a non-GAAP measure and is reconciled to GAAP net income in the
table below.
As a result of higher average realized prices on an Mcfe basis and higher production from properties acquired at year-end 2006 and January 2007, and the result from our recent drilling activities, we reported a 59% increase in total revenue for the second quarter of 2007 compared to the same period in 2006. Revenue, including derivative activity, for the three months ended June 30, 2007 was $53.9 million compared to $33.9 million in the second quarter of 2006.
Oil and natural gas operating expenses for the three months ended June 30, 2007 totaled $4.0 million, compared to $2.3 million for the same period in 2006. Depletion costs for the second quarter of 2007 totaled $20.9 million and averaged $3.27 per Mcfe compared to $16.3 million and an average of $3.65 per Mcfe for the second quarter of 2006. General and administrative (G&A) costs, which include non-cash compensation costs, for the second quarter of 2007, were $5.1 million or 51% higher than the comparable prior year period total of $3.3 million. This increase in G&A expense was primarily the result of increased staffing levels and higher professional fees. On a production equivalent basis, G&A, excluding non-cash compensation costs, for the three months ended June 30, 2007 averaged $0.67 per Mcfe compared to $0.70 per Mcfe in the same period of 2006.
Below is a reconciliation of pro forma net income, excluding the impact of unrealized derivative activity, to net income:
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
2007 2006 2007 2006
-------- -------- -------- --------
Net income available to
common stockholders $ 8,554 $ 5,795 $ 1,405 $ 12,687
Add:
Unrealized derivative
(gain) loss (6,281) (1,037) 11,462 (2,817)
Tax impact 2,198 363 (4,011) 986
-------- -------- -------- --------
Net adjustments (4,083) (674) 7,451 (1,831)
-------- -------- -------- --------
Pro forma net income (1) $ 4,471 $ 5,121 $ 8,856 $ 10,856
======== ======== ======== ========
(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.
Second quarter 2007 net income was $8.6 million, or $0.30 basic and $0.28 diluted earnings per share, as compared to net income of $5.8 million, or $0.33 basic and $0.32 diluted earnings per share, in the same period a year ago. Pro forma net income for the three months ended June 30, 2007 was $4.5 million or basic and diluted earnings per share of $0.16, compared to pro forma net income of $5.1 million, or $0.29 basic and $0.28 diluted earnings per share for the same period in 2006.
Net income for the first half of 2007 was $1.4 million, or basic and diluted earnings per share of $0.05, as compared to the same period a year ago of $12.7 million, or basic earnings per share of $0.73 and diluted earnings per share of $0.70. Pro forma net income for the first half of 2007 totaled $8.9 million, or basic and diluted earnings per share of $0.33, compared to pro forma net income for the first half of 2006 of $10.9 million or basic earnings per share of $0.63 and diluted earnings per share of $0.60.
At June 30, 2007, 28.5 million shares of common stock and 2.9 million shares of 5.75% Series A cumulative convertible perpetual preferred stock were outstanding. Each share of preferred stock is convertible into approximately 3.0193 shares of Edge's common stock based upon an initial conversion price of $16.56 per common share and is callable by Edge after January 20, 2010 if the common stock closing sales price is 130% of the conversion price for a certain period of time.
Net cash flow provided by operating activities for the second quarter of 2007 was $50.5 million as compared to $21.3 million for the same 2006 period. Net cash flow provided by operating activities before working capital changes for the second quarter of 2007 was $33.1 million compared to $24.7 million for the same period in 2006. For the first half of 2007, net cash flow provided by operating activities was $65.4 million and net cash flow provided by operating activities before working capital changes was $61.7 million. Net cash flow provided by operating activities and net cash flow provided by operating activities before working capital changes for the first half of 2006 was $46.4 million and $49.8 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 June 30, 2007 was $230.0 million as compared to $105.0 million at June 30, 2006 and $240.0 million at March 31, 2007. The debt-to-capital ratio at June 30, 2007 was 34.6%. We significantly increased our credit facility and outstanding debt in conjunction with the recent Smith 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 $320 million.
Michael G. Long, Edge's Executive Vice President and Chief Financial Officer, commenting on the quarterly results indicated, "Our financial results were in line with our expectations for the quarter. We reduced our debt moderately during the quarter and, at the same time, accelerated our capital program. We are now beginning to see the impact of our growing drilling program on production volumes and that impact should start to flow through into our financial results in our upcoming quarters. Production for the third quarter is expected to be up, sequentially, 5% to 10%. Our hedging decisions are paying off for us in the current commodity price environment and, as a result, we are pressing ahead with our capital program."
In the normal course of business we enter into hedging transactions, including commodity price collars, swaps and floors to mitigate our exposure to commodity price movements, but not for trading or speculative purposes. As of the first quarter of 2006, we do not apply cash flow hedge accounting treatment to any of our contracts. Price- risk management transactions for the remainder of 2007 through 2009 are shown below.
2007 - 2009 DERIVATIVES
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Transaction Volumes Price Price Term
per Day Floor Cap
----------- ------------- ------ ------ -----------------
Costless
Collar 10,000 MMBtu $ 7.00 $ 9.00 Feb-07 Dec-07
Costless
Collar 15,000 MMBtu $ 7.02 $ 9.00 Feb-07 Dec-07
Costless
Collar 15,000 MMBtu $ 7.00 $ 9.00 Feb-07 Dec-07
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 400 Bbl $70.00 $87.50 Jan-07 Dec-07
Costless
Swap 600 Bbl $66.00 $66.00 Jan-07 Dec-07
Costless
Swap 1,500 Bbl $66.00 $66.00 Jan-08 Dec-08
All natural gas prices are settled monthly against the NYMEX Natural
Gas futures contracts and crude oil prices are settled against the
NYMEX Crude Oil futures contracts for West Texas Intermediate Light
Sweet Crude Oil.
Edge's guidance for its operating activities and selected financial measures is shown below.
3rd Qtr 2007 Full Year 2007
------------ --------------
Wells Spud 20 - 30 70 - 80
Production, Bcfe 6.7 - 7.1 26 - 27
Cash Operating Costs,
$Mcfe (1) $2.25 - $2.50 $2.25 - $2.50
(1) Cash operating costs are lease operating expenses, production
and ad valorem taxes, net interest and dividend expense and G&A
expense.
Edge will host a conference call to discuss operations and second quarter financial results on August 10, 2007 at 9:30 a.m. Central. Interested parties may participate by dialing 800-819-9193. The call will also be webcast and can be accessed by logging onto the web at http://investor.shareholder.com/media/eventdetail.cfm?mediaid=26906&c=EPEX&mediakey=AF3EE3767C2269BDEA252C802FD34E33&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's common stock and preferred stock are listed on the NASDAQ Global Select Market under the symbols "EPEX" and "EPEXP," respectively.
Statements regarding production volumes, hedging levels, all guidance and forecasts for the third quarter and full year 2007 and full year 2008, increased production, future and continuing growth, production rates, prices, including future oil and gas prices, price risk management and other statements that are not historical facts, contain predictions, estimates and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although the Company believes that its expectations are based on reasonable assumptions, it can give no assurance that its goals will be achieved. Important factors that could cause actual results to differ materially from those included in the forward-looking statements include the timing and extent of changes in commodity prices for oil and gas, the need to develop and replace reserves, environmental risks, drilling and operating risks, risks related to exploration and development, uncertainties about the estimates of reserves, competition, increased costs and delays attributable to oilfield services and equipment, government regulation, effects and risks of acquisitions, and the ability of the Company to meet its stated business goals and other risks described under "Risk Factors" and elsewhere in the Company's most recent Annual Report on Form 10-K and other filings with the SEC.
EDGE PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
---------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2007 2006 2007 2006
--------------------------------------------
OIL AND NATURAL GAS (in thousands,
REVENUE except per share amounts and prices)
Oil and natural gas
sales $ 47,386 $ 31,199 $ 86,600 $ 64,094
Gain (loss) on
derivatives 6,516 2,679 (9,815) 4,778
--------- --------- --------- ---------
Total revenue 53,902 33,878 76,785 68,872
--------- --------- --------- ---------
OPERATING EXPENSES:
Oil and natural gas
operating expenses 4,048 2,260 7,428 4,449
Severance and ad
valorem taxes 3,885 2,236 6,196 4,825
Depletion, depreciation,
amortization and
accretion 21,064 16,545 39,606 32,338
General and administrative
expense 5,053 3,348 9,448 6,472
Bad debt expense 482 -- 482 --
--------- --------- --------- ---------
Total operating expenses 34,532 24,389 63,160 48,084
--------- --------- --------- ---------
OPERATING INCOME 19,370 9,489 13,625 20,788
OTHER INCOME AND EXPENSE:
Interest income 122 32 179 70
Interest expense, net
of amounts capitalized (2,928) (545) (5,690) (1,213)
Amortization of deferred
loan costs (243) (41) (496) (83)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 16,321 8,935 7,618 19,562
INCOME TAX EXPENSE (5,704) (3,140) (2,769) (6,875)
--------- --------- --------- ---------
NET INCOME 10,617 5,795 4,849 12,687
Preferred Stock Dividends (2,063) -- (3,444) --
--------- --------- --------- ---------
NET INCOME AVAILABLE TO
COMMON STOCKHOLDERS $ 8,554 $ 5,795 $ 1,405 $ 12,687
========= ========= ========= =========
BASIC EARNINGS PER SHARE $ 0.30 $ 0.33 $ 0.05 $ 0.73
========= ========= ========= =========
DILUTED EARNINGS PER
SHARE $ 0.28 $ 0.32 $ 0.05 $ 0.70
========= ========= ========= =========
PREFERRED STOCK DIVIDENDS
PER BASIC SHARE $ 0.07 $ -- $ 0.13 $ --
========= ========= ========= =========
BASIC WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 28,470 17,372 26,679 17,306
========= ========= ========= =========
DILUTED WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 37,509 18,105 27,015 18,043
========= ========= ========= =========
Production:
Gas - MMcf 4,793 3,578 9,258 7,007
Natural gas liquids
(NGL) - MBbls 147 65 246 126
Oil - MBbls 115 85 226 172
Gas Equivalent - MMcfe 6,370 4,478 12,091 8,792
Realized Product Prices:
Gas - $ per Mcf (1)(2) $ 8.97 $ 7.45 $ 6.30 $ 7.92
NGL - $ per Bbl $ 37.07 $ 23.14 $ 32.69 $ 21.90
Oil - $ per Bbl (1)(3) $ 46.96 $ 67.74 $ 45.81 $ 62.23
Gas Equivalent -
$ per Mcfe $ 8.46 $ 7.57 $ 6.35 $ 7.83
Notes:
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(1) Includes the effect of derivative transactions.
(2) The average realized price, excluding unrealized derivative gains
and losses related to our natural gas collars, was $7.26 per Mcfe
and $7.09 per Mcfe for the three and six month periods ended June
30, 2007, respectively. The average realized price, excluding
unrealized derivative gains and losses related to our natural gas
collars, was $7.14 per Mcfe and $7.47 per Mcfe for the three- and
six-month periods ended June 30, 2006, respectively.
(3) The average realized price, excluding unrealized derivative gains
and losses related to our oil collars, was $63.58 per barrel and
$64.33 per barrel for the three and six month periods ended June
30, 2007. The average realized price, excluding unrealized
derivative gains and losses related to our oil collars, was $68.65
per barrel and $64.02 per barrel for the three- and six-month
periods ended June 30, 2006.
EDGE PETROLEUM CORPORATION
Non-GAAP Disclosure Reconciliation
---------------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2007 2006 2007 2006
--------------------------------------------
(in thousands)
Net cash flow provided by
operating activities $ 50,533 $ 21,304 $ 65,440 $ 46,370
Changes in working capital
accounts (17,438) 3,355 (3,725) 3,378
--------- --------- --------- ---------
Net cash flow provided by
operations before working
capital changes $ 33,095 $ 24,659 $ 61,715 $ 49,748
========= ========= ========= =========
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.