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Crimson Exploration Announces Third Quarter 2008 Financial Results

November 13, 2008

Crimson Exploration Inc. (OTCBB:CXPO) today announced financial results for the third quarter 2008.

Highlights

— Record quarterly revenue of $53.8 million

— Record quarterly production of 5.0 Bcfe

— Daily production for the third quarter of 2008 averaged 54,126 Mcfed, up 8% over the 2007 quarter

Summary Financial Results – Third Quarter 2008

The Company reported income before income taxes for the third quarter of 2008 of $78.7 million, compared to income before income taxes of $9.9 million for the third quarter of 2007. Positively impacting the third quarter results for 2008 was an $88.9 million non-cash unrealized gain recorded to reflect the mark-to-market exposure on our commodity price and interest rate hedge instruments as required by SFAS 133 “Accounting for Derivative Instruments and Hedging Activities”. Negatively impacting the third quarter results for 2008 was a $25.8 million non-cash impairment expense related to our Madisonville Field. Recorded in the third quarter 2007 was a $0.6 million non-cash unrealized gain related to the mark-to-market exposure. Exclusive of the effects of the mark-to-market exposure, and the impairment expense, income before taxes for the third quarter of 2008 would have been $15.6 million, compared to income before taxes of $9.3 million in 2007. Net income for the third quarter of 2008 was $50.2 million compared to $6.2 million for the third quarter of 2007.

Net cash flow from operations for the third quarter of 2008, which consists of net cash provided by operating activities, adjusted for the period change in certain working capital and other cash flow items, was $96.9 million, a 111% increase over the $46.0 million reported for the 2007 quarter. The increase in cash flow was attributable to the South Texas properties acquired from Smith Production Inc. (the “Smith Acquisition”) in May 2008 and higher commodity prices, offset in part by increased interest expense and general and administrative costs related to the increase in debt and infrastructure growth.

Revenues for the third quarter of 2008 were $53.8 million, a 42% increase compared to revenue of $38.0 million in the prior year quarter. The increase in revenues was attributable to new production from the Smith Acquisition in May 2008 and higher oil and gas price realizations.

Production for the third quarter of 2008 was 5.0 Bcfe of natural gas equivalents, or 54,126 Mcfe per day, compared with production of 4.6 Bcfe, or 50,320 Mcfe per day, in the 2007 quarter. The increase in production for the quarter was attributable to the Smith Acquisition and to production increases resulting from our drilling program, offset by approximately 364,000 mcfe of deferred production related to shut-ins surrounding Hurricanes Gustav and Ike and the shut-in during the quarter of two wells in Liberty County due to sand encroachment that will be mitigated during the fourth quarter.

Average prices realized in the third quarter of 2008 (including the effects of realized gains/losses on our commodity price hedges) were $92.54 per barrel, $9.68 per Mcf, $63.49 per barrel and $10.67 per Mcfe for oil, natural gas, natural gas liquids and natural gas equivalents, respectively. For the third quarter of 2007, average prices realized were $66.47 per barrel, $7.60 per Mcf, $45.17 per barrel and $8.18 per Mcfe for oil, natural gas, natural gas liquids and natural gas equivalents, respectively.

Lease operating expenses for the third quarter of 2008 were $10.5 million compared to $6.6 million in the prior year quarter, an increase primarily due to the additional properties acquired from Smith Production, higher production taxes on higher prices and volumes, and increased expense workovers. On a per Mcfe produced basis, lease operating expenses were $2.10 per Mcfe for the third quarter 2008, compared to $1.42 per Mcfe for the third quarter 2007. Exploration expenses were $0.7 million for the third quarter of 2008 compared to $0.9 million for the prior year quarter. DD&A expense for the third quarter of 2008 was $13.0 million, or $2.61 per Mcfe, compared to $11.7 million, or $2.52 per Mcfe, in the prior year quarter. Included in our operational expenses for the third quarter of 2008 is a $25.8 million non-cash impairment expense related to our Madisonville Field in central Texas.

General and administrative expenses were $7.6 million in the third quarter of 2008, or $1.52 per Mcfe, compared to $3.8 million, or $0.82 per Mcfe, in the prior year quarter. The increase in total expense over the prior year was primarily due to higher infrastructure costs associated with the expansion of our technical and support teams after the STGC Acquisition and a $2.2 million accrual estimated for the nine month period ended September 30, pursuant to the final adoption of amendments to the annual bonus plan by the Board of Directors during the quarter. Exclusive of non-cash stock compensation expense, cash general and administrative expenses were $1.24 per Mcfe for the third quarter of 2008 and $0.56 per Mcfe for the third quarter of 2007.

Other income was $83.0 million for the third quarter of 2008 compared to other expense of $5.7 million in the prior year quarter. The major change in these quarterly amounts was the non-cash unrealized gain of $88.9 million in 2008 related to the mark to market exposure on our derivative instruments, compared to a non-cash unrealized gain of $0.6 million in 2007.

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, 2008 and 2007:

 Three Months Ended September 30, ---------------------------- 2008        2007      % ----------- ----------- ---- Total Volumes Sold: Crude oil (barrels)                       123,080     129,824  -5% Natural gas (Mcf)                       3,494,392   3,196,683   9% Natural gas liquids (barrels)             124,460     108,969  14% Natural gas equivalents (Mcfe)          4,979,632   4,629,441   8%  Daily Sales Volumes(Mcfe):                     54,126      50,320   8%  Daily Sales Volumes (Mcfe) by Area: LA Onshore                                  5,271       7,708 -32% TX Onshore                                 32,687      31,733   3% Colorado                                      589         703 -16% Other                                          43          31  39% Non-Operated                               15,536      10,145  53% ----------- ----------- Total Sales Volumes                      54,126      50,320   8% ----------- -----------  Average field prices Oil                                   $    120.88 $     73.97  63% Gas                                   $     10.32 $      6.24  65% NGLs                                  $     63.49 $     45.17  41% Mcfe                                $     11.81 $      7.45  59% Average realized sales price(after hedging): Oil                                   $     92.54 $     66.47  41% Gas                                   $      9.68 $      7.60  27% NGLs                                  $     63.49 $     45.17  41% Mcfe                                $     10.67 $      8.18  30%  Selected Costs ($ per Mcfe): Lease operating expenses              $      2.10 $      1.42  48% Depreciation and depletion expense    $      2.61 $      2.52   4% General and administrative expense    $      1.52 $      0.82  86% Interest                              $      1.11 $      1.30 -14%  Net cash flow from operations             $30,457,654 $22,452,069  36%  EBITDAX                                   $37,130,809 $28,838,220  29%  Capital expenditures Property acquisition - proved         $ 4,357,236 $  (326,662) Property acquisition - unproved                --          -- Exploratory                               556,898          -- Development                            15,808,588   6,232,710 Unproved Leases                        21,856,695   7,337,880 Other                                     128,784     510,362 ----------- ----------- $42,708,201 $13,754,290 ----------- -----------  Nine Months Ended September 30, ------------------------------ 2008         2007      % ------------ ------------ ---- Total Volumes Sold: Crude oil (barrels)                      385,458      261,117  48% Natural gas (Mcf)                      9,752,667    6,032,848  62% Natural gas liquids (barrels)            422,107      143,875 193% Natural gas equivalents (Mcfe)        14,598,057    8,462,800  72%  Daily Sales Volumes(Mcfe):                    53,278       30,999  72%  Daily Sales Volumes (Mcfe) by Area: LA Onshore                                 6,683        5,663  18% TX Onshore                                29,992       19,964  50% Colorado                                     927          688  35% Other                                         34           41 -17% Non-Operated                              15,642        4,643 237% ------------ ------------ Total Sales Volumes                     53,278       30,999  72% ------------ ------------  Average field prices Oil                                 $     112.98 $      67.38  68% Gas                                 $       9.83 $       6.84  44% NGLs                                $      58.49 $      44.71  31% Mcfe                              $      11.24 $       7.71  46% Average realized sales price(after hedging): Oil                                 $      88.60 $      64.21  38% Gas                                 $       9.44 $       7.59  24% NGLs                                $      58.49 $      44.71  31% Mcfe                              $      10.34 $       8.15  27%  Selected Costs ($ per Mcfe): Lease operating expenses            $       2.04 $       1.61  27% Depreciation and depletion expense  $       2.44 $       2.44   0% General and administrative expense  $       1.22 $       1.04  18% Interest                            $       1.09 $       1.11  -2%  Net cash flow from operations           $ 89,300,585 $ 39,533,476 126%  EBITDAX                                 $108,575,588 $ 50,117,353 117%  Capital expenditures Property acquisition - proved       $ 58,031,525 $226,548,676 Property acquisition - unproved               --   28,584,129 Exploratory                              973,359    5,668,313 Development                           49,524,827   16,801,314 Unproved Leases                       31,656,397    9,815,973 Other                                    422,570    1,295,353 ------------ ------------ $140,608,678 $288,713,758 ------------ ------------ 

 CRIMSON EXPLORATION INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)  Three Months Ended        Nine Months Ended September 30,             September 30, ------------------------ ------------------------- 2008        2007         2008         2007 ------------ ----------- ------------ ------------  OPERATING REVENUES Oil, gas and natural gas liquids sales   $ 53,117,543 $37,852,687 $150,912,081 $ 68,980,733 Operating overhead and other income         634,248     155,963      889,142      231,942 ------------ ----------- ------------ ------------ Total operating revenues     53,751,791  38,008,650  151,801,223   69,212,675 ------------ ----------- ------------ ------------  OPERATING EXPENSES Lease operating expenses          10,473,547   6,565,045   29,717,744   13,590,821 Exploration expenses             707,101     867,582    1,291,421    1,520,025 Depreciation, depletion and amortization      13,000,361  11,666,837   35,582,867   20,685,730 Impairment of oil and gas properties        25,798,755          --   25,798,755           -- Asset retirement obligations          496,923     131,970    1,032,705      315,521 General and administrative     7,591,344   3,786,110   17,819,461    8,771,256 Gain on sale of assets                    --    (681,224) (15,271,712)    (682,874) ------------ ----------- ------------ ------------ Total operating expenses     58,068,031  22,336,320   95,971,241   44,200,479 ------------ ----------- ------------ ------------  INCOME(LOSS) FROM OPERATIONS          (4,316,240) 15,672,330   55,829,982   25,012,196 ------------ ----------- ------------ ------------  OTHER INCOME (EXPENSE) Interest expense   (5,540,319) (6,001,759) (15,871,096)  (9,425,199) Other financing cost                (339,480)   (351,388)  (1,174,013)  (1,001,452) Unrealized gain (loss) on derivative instruments       88,901,338     618,264    1,664,541     (258,576) ------------ ----------- ------------ ------------ Total other income (expense)    83,021,539  (5,734,883) (15,380,568) (10,685,227) ------------ ----------- ------------ ------------  INCOME BEFORE INCOME TAXES        78,705,299   9,937,447   40,449,414   14,326,969  INCOME TAX EXPENSE  (28,461,407) (3,783,592) (15,104,519)  (5,480,356) ------------ ----------- ------------ ------------  NET INCOME           50,243,892   6,153,855   25,344,895    8,846,613  DIVIDENDS ON PREFERRED STOCK (Paid 2008 -- $84,295; 2007 -- $662,706)           (1,083,328) (1,665,843)  (3,164,111)  (3,423,543) ------------ ----------- ------------ ------------  NET INCOME AVAILABLE TO COMMON SHAREHOLDERS      $ 49,160,564 $ 4,488,012 $ 22,180,784 $  5,423,070 ============ =========== ============ ============  NET INCOME PER SHARE BASIC            $       9.19 $      0.93 $       4.25 $       1.33 ============ =========== ============ ============ DILUTED          $       4.87 $      0.63 $       2.46 $       0.95 ============ =========== ============ ============  WEIGHTED AVERAGE SHARES OUTSTANDING BASIC               5,351,146   4,827,731    5,225,113    4,073,852 ============ =========== ============ ============ DILUTED            10,317,629   9,745,276   10,289,138    9,334,913 ============ =========== ============ ============ 

 CRIMSON EXPLORATION INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)  September 30, December 31, 2008          2007 ------------- ------------- ASSETS ---------------------------------------- Cash                                     $  10,405,204 $   4,882,511 Current derivatives                          1,932,459       198,708 Other current assets                        29,857,767    31,400,346 Property and equipment, net                417,976,787   356,488,602 Non-current derivatives                      2,167,796            -- ------------- ------------- Noncurrent assets                            5,367,732     5,964,907 ------------- -------------  Total Assets                             $ 467,707,745 $ 398,935,074 ============= =============  LIABILITIES AND STOCKHOLDERS' EQUITY ---------------------------------------- Other current liabilities                $  62,357,712 $  46,175,286 Current derivatives                          5,083,663     2,703,959 Other non-current liabilities              287,756,527   267,655,729 Non-current derivatives                     12,604,321    12,747,019 Total stockholders' equity                  99,905,522    69,653,081 ------------- -------------  Total Liabilities & Stockholders' Equity $ 467,707,745 $ 398,935,074 ============= ============= 

Non-GAAP Financial Measures

Crimson also presents earnings before interest, taxes, depreciation, amortization and exploration expenses (“EBITDAX”) and net cash flow from operations, which consists of net cash, provided by operating activities plus the period change in certain working capital and other cash flow items. Exploration expenses include geological and geophysical costs, lease rental costs and dry hole costs expensed under the successful efforts method of accounting, but capitalized under the alternative full cost accounting rules. Management uses these measures to assess the company’s ability to generate cash to fund operations, exploration and development activities. Management interprets trends in these measures in a similar manner as trends in operations, cash flow and liquidity. Neither EBITDAX, nor net cash flows from operations, should be considered as alternatives to net income (loss), income from operations or net cash provided by operational activities as defined by GAAP. The following is a reconciliation of net cash provided by operating activities to net cash flow from operations and EBITDAX:

 Three Months Ended           Nine Months Ended September 30,               September 30, --------------------------- --------------------------- 2008          2007          2008          2007 ------------- ------------- ------------- -------------  Net cash provided by operating activities   $ 34,453,400  $ 38,303,478  $ 96,908,891  $ 45,997,639 Changes in working capital Accounts receivable  (10,030,326)      396,782    (1,986,366)   20,749,231 Prepaid expenses        170,080       159,502       201,562       247,071 Accounts payable and accrued expenses      5,864,500   (16,407,693)   (5,823,502)  (27,460,462) ------------- ------------- ------------- -------------  Net cash flow from operations     30,457,654    22,452,069    89,300,585    39,533,479  Interest expense and other financing       5,616,937     6,039,129    16,211,553     9,606,827 Asset retirement obligation        519,515            --     1,007,562        23,652 Exploration expenses          707,101       867,582     1,291,421     1,520,025 Other             (170,398)     (520,560)      764,467      (566,630) ------------- ------------- ------------- -------------  EBITDAX       $ 37,130,809  $ 28,838,220  $108,575,588  $ 50,117,353 ============= ============= ============= ============= 

Outlook

The Company is providing the following guidance for the fourth quarter of 2008. Ranges for lease operating expenses, depletion and cash general and administrative expenses are based on the midpoint of production guidance.

 Production                                50,000 - 54,000 Mcfe per day  Lease operating expenses, including production taxes                         $2.00 - $2.10 per Mcfe  Depletion, depreciation and amortization  $2.50 - $2.70 per Mcfe  Cash general and administrative costs     $0.95 - $1.15 per Mcfe 

Teleconference Call

Crimson management will hold a conference call to discuss the information described in this press release on Monday, November 17, 2008 at 10:00 a.m. CST. Those interested in participating may do so by calling the following phone number: (800) 723-6575, (International (785) 830-1997) and entering the following participation code 2543544. A replay of the call will be available from Monday, November 17, 2008 at 1:00 p.m. CST through Monday, November 24, 2008 at 1:00 p.m. CST by dialing toll free (888) 203-1112, (International (719) 457-0820) and asking for replay ID code 2543544.

Crimson Exploration is an independent oil and gas company based in Houston, Texas, with producing assets primarily focused in South Texas, the Texas Gulf Coast and South Louisiana.

Additional information on Crimson Exploration Inc. is available on the Company’s website at http://crimsonexploration.com.

This press release includes “forward-looking statements” as defined by the Securities and Exchange Commission (“SEC”). Such statements include those concerning Crimson’s strategic plans, expectations and objectives for future operations. All statements included in this press release that address activities, events or developments that Crimson expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions Crimson made based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond Crimson’s control. Statements regarding future production, revenue, costs and cash flow are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, inflation or lack of availability of goods and services, environmental risks, drilling risks and regulatory changes and the potential lack of capital resources. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Please refer to our filings with the SEC, including our Form 10-K for the year ended December 31, 2007, for a further discussion of these risks.




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