- Full-Year Operating Cash Flow up 32%
- Full-Year Production up 11%
- Quarterly Production Record of 22,674 BOE/d
- Pro Forma Reserve Replacement of 161%
-- Operating cash flow of $212 million, up 32% from $161 million in 2007. -- Production of 7.9 million barrels of oil equivalent (MMBOE) for the year or 21,674 BOE per day (BOE/d), up 11% from 7.1 MMBOE or 19,535 BOE/d for 2007. -- Proved Reserves of 97.5 MMBOE as of December 31, 2008. Pro forma for the sale of the Hastings Complex in early February 2009, Proved Reserves were 89.8 MMBOE (a 13% increase from December 31, 2007 pro forma reserves). -- Adjusted EBITDA of $300 million, up 43% from $210 million for 2007. -- Adjusted Earnings of $55 million, up 176% from $20 million for 2007.
The company reported a net loss of
Adjusted Earnings were
"Our operating teams have remained focused on efficiently developing and producing our assets," said
Fourth Quarter
Production in the fourth quarter of 2008 reached an all-time high of 22,674 BOE/d, an increase of 3.3% over the third quarter of 2008 of 21,949 BOE/d and a 13% increase over the fourth quarter of 2007 of 20,100 BOE/d.
The following table details the company's quarterly daily production by region (BOE/d):
Region 4Q 2007 3Q 2008 4Q 2008 Sacramento Basin 7,887 9,363 9,668 Southern California 8,273 8,606 8,903 Texas (and other) 3,940 3,980 4,103 Total 20,100 21,949 22,674 ====== ====== ====== Total excluding Hastings 17,578 19,551 20,110 ====== ====== ======
Adjusted Earnings were
Adjusted EBITDA was
Full Cost Ceiling Write-down
Based on year-end 2008 commodity prices, the company recorded a non-cash, full-cost ceiling write-down of
Hastings Sale
The company closed the sale of its Hastings Complex in
Reserves Review
Total proved oil and gas reserves as of
Price related revisions between year-end 2007 and year-end 2008 reduced reserves by 11.0 MMBOE, while performance related revisions added 5.0 MMBOE, for net negative revisions of 6.0 MMBOE.
The pre-tax PV-10 of the company's reserves using year-end SEC pricing of
Pro forma for the early
Capital Investment 2008
Venoco's 2008 capital expenditures for development and other spending on its properties (including amounts accrued at year end) was
In 2008 the company spent
"We have been very pleased with our
In
In
"We scaled back our planned 2009 capital expenditures dramatically from 2008 levels, but we expect to maintain the company's production flat pro forma for the sale of Hastings," Mr. Marquez commented.
Liquidity
In connection with the sale of the Hastings Complex, Venoco proactively requested a re-determination of the borrowing base under its revolving credit facility. As a result, the borrowing base under the facility was reduced to
Venoco has reduced its debt position from
"We have been very deliberate in managing the positive impact of the Hastings sale on our financial position. As a result of our lower net debt position, we have no looming maturities and we benefit from approximately
2009 Guidance
The following summarizes the company's 2009 guidance:
-- Production: 19,000 BOE/d -- Capital Budget: $150 million -- Lease Operating Expenses: $15.00 per BOE -- G&A Expenses (excluding stock-based compensation): $4.50 per BOE -- DD&A: $12.00 per BOE
Earnings Conference Call
Venoco will host a conference call to discuss results today,
A replay of the conference call will be available for one week by calling (888) 286-8010 or, for international callers, (617) 801-6888, and using passcode 51550711. The replay will also be available on the Venoco website for 30 days.
Annual Stockholders Meeting
The location for the Annual Stockholders meeting on
About the Company
Venoco is an independent energy company primarily engaged in the acquisition, exploitation and development of oil and natural gas properties in
Forward-looking Statements
Statements made in this news release relating to Venoco's future production and expenses, and all other statements except statements of historical fact, are 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. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management's assumptions and the company's future performance are both subject to a wide range of business risks and uncertainties and there is no assurance that these goals and projections can or will be met. Any number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, the timing and extent of changes in oil and gas prices, the timing and results of drilling and other development activities, the availability and cost of obtaining drilling equipment and technical personnel, risks associated with the availability of acceptable transportation arrangements and the possibility of unanticipated operational problems, delays in completing production, treatment and transportation facilities, higher than expected production costs and other expenses, and pipeline curtailments by third parties. All forward-looking statements are made only as of the date hereof and the company undertakes no obligation to update any such statement. Further information on risks and uncertainties that may affect the Company's operations and financial performance, and the forward-looking statements made herein, is available in the company's filings with the Securities and Exchange Commission, which are incorporated by this reference as though fully set forth herein.
OIL AND NATURAL GAS PRODUCTION AND PRICES Quarter Ended Quarter Ended UNAUDITED 9/30/08 12/31/08 % Change 12/31/07 12/31/08 % Change Production Volume: Oil (MBbls) (1) 1,036 1,096 6% 1,021 1,096 7% Natural Gas (MMcf) 5,900 5,940 1% 4,969 5,940 20% MBOE 2,019 2,086 3% 1,849 2,086 13% Daily Average Production Volume: Oil (Bbls/d) 11,261 11,913 6% 11,098 11,913 7% Natural Gas (Mcf/d) 64,130 64,565 1% 54,011 64,565 20% BOE/d 21,949 22,674 3% 20,100 22,674 13% Oil Price per Barrel Produced (in dollars): Realized price before hedging $109.08 $48.36 -56% $81.64 $48.36 -41% Realized hedging gain (loss) (32.08) 3.83 112% (14.10) 3.83 127% Net realized price $77.00 $52.19 -32% $67.54 $52.19 -23% Natural Gas Price per Mcf (in dollars): Realized price before hedging $8.92 $5.76 -35% $6.74 $5.76 -15% Realized hedging gain (loss) (0.15) 0.51 440% 0.16 0.51 219% Net realized price $8.77 $6.27 -29% $6.90 $6.27 -9% Average Sale Price per BOE (2) $63.53 $45.91 -28% $55.45 $45.91 -17% Expense per BOE: Lease operating expenses (3) $17.89 $19.21 7% $18.34 $19.21 5% Production and property taxes (3) $3.12 $0.89 -71% $3.24 $0.89 -73% Transportation expenses $0.82 $0.78 -5% $0.88 $0.78 -11% Depreciation, depletion and amortization $16.31 $19.38 19% $15.84 $19.38 22% General and administrative (4) $5.07 $5.58 10% $3.85 $5.58 45% Interest expense $6.59 $6.23 -5% $8.39 $6.23 -26% (1) Amount shown are oil production volumes for offshore properties and sales volumes for onshore properties (differences between onshore production and sales volumes are minimal). Revenue accruals are adjusted for actual sales volumes since offshore oil inventories can vary significantly from month to month based on the timing of barge deliveries, oil in tank and pipeline inventories, and oil pipeline sales nominations. (2) Amounts shown are based on oil and natural gas sales, net of inventory changes, realized commodity derivative gains (losses), and amortization of commodity derivative premiums, divided by sales volumes. (3) Lease operating expense and property and production taxes are combined to comprise oil and natural gas production expenses on the consolidated statements of operations. (4) Net of amounts capitalized. Year Ended UNAUDITED 12/31/07 12/31/08 % Change Production Volume: Oil (MBbls) (1) 3,981 4,091 3% Natural Gas (MMcf) 18,895 23,050 22% MBOE 7,130 7,933 11% Daily Average Production Volume: Oil (Bbls/d) 10,907 11,178 3% Natural Gas (Mcf/d) 51,767 62,978 22% BOE/d 19,535 21,674 11% Oil Price per Barrel Produced (in dollars): Realized price before hedging $64.06 $89.69 40% Realized hedging gain (loss) (4.35) (20.71) -376% Net realized price $59.71 $68.98 16% Natural Gas Price per Mcf (in dollars): Realized price before hedging $6.61 $8.21 24% Realized hedging gain (loss) 0.23 0.08 -65% Net realized price $6.84 $8.29 21% Average Sale Price per BOE (2) $50.24 $58.56 17% Expense per BOE: Lease operating expenses (3) $15.05 $16.86 12% Production and property taxes (3) $1.69 $1.98 17% Transportation expenses $0.85 $0.75 -12% Depreciation, depletion and amortization $13.86 $16.95 22% General and administrative (4) $4.46 $5.43 22% Interest expense $8.43 $6.81 -19% CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Quarter Ended Quarter Ended UNAUDITED ($in thousands) 9/30/08 12/31/08 12/31/07 12/31/08 REVENUES: Oil and natural gas sales $158,041 $94,079 $114,116 $94,079 Other 1,112 791 776 791 Total revenues 159,153 94,870 114,892 94,870 EXPENSES: Oil and natural gas production 42,418 41,939 39,902 41,939 Transportation expense 1,655 1,624 1,636 1,624 Depletion, depreciation and amortization 32,931 40,436 29,280 40,436 Impairment - 641,000 - 641,000 Accretion of asset retirement obligation 1,044 1,138 1,402 1,138 General and administrative 10,235 11,635 7,112 11,635 Total expenses 88,283 737,772 79,332 737,772 Income from operations 70,870 (642,902) 35,560 (642,902) FINANCING COSTS AND OTHER: Interest expense 13,305 12,986 15,520 12,986 Interest rate derivative realized (gains) losses 3,371 3,136 (193) 3,136 Interest rate derivative unrealized (gains) losses (626) 10,623 8,815 10,623 Amortization of deferred loan costs 735 721 986 721 Loss on extinguishment of debt - - - - Commodity derivative realized (gains) losses 34,095 (28,768) 13,595 (28,768) Commodity derivative unrealized (gains) losses and amortization of derivative premiums (337,147) (224,356) 93,002 (224,356) Total financing costs and other (286,267) (225,658) 131,725 (225,658) Income (loss) before taxes 357,137 (417,244) (96,165) (417,244) Income tax provision (benefit) 136,200 (3,200) (35,800) (3,200) Net income (loss) $220,937 $(414,044) $(60,365) $(414,044) Year Ended UNAUDITED ($in thousands) 12/31/07 12/31/08 REVENUES: Oil and natural gas sales $373,155 $555,917 Other 3,355 3,603 Total revenues 376,510 559,520 EXPENSES: Oil and natural gas production 119,321 149,504 Transportation expense 6,061 5,958 Depletion, depreciation and amortization 98,814 134,483 Impairment - 641,000 Accretion of asset retirement obligation 3,914 4,203 General and administrative 31,770 43,101 Total expenses 259,880 978,249 Income from operations 116,630 (418,729) FINANCING COSTS AND OTHER: Interest expense 60,115 54,049 Interest rate derivative realized (gains) losses (135) 10,231 Interest rate derivative unrealized (gains) losses 17,312 10,336 Amortization of deferred loan costs 4,197 3,344 Loss on extinguishment of debt 12,063 - Commodity derivative realized (gains) losses 13,041 61,446 Commodity derivative unrealized (gains) losses and amortization of derivative premiums 129,609 (178,203) Total financing costs and other 236,202 (38,797) Income (loss) before taxes (119,572) (379,932) Income tax provision (benefit) (46,200) 11,200 Net income (loss) $(73,372) $(391,132) CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION UNAUDITED ($in thousands) 12/31/2007 12/31/2008 ASSETS Cash and cash equivalents $9,735 $191 Accounts receivable 55,597 41,306 Inventories 10,377 12,361 Prepaid expenses and other current assets 4,391 4,314 Income tax receivable 6,725 546 Deferred income taxes 21,967 - Commodity derivatives 7,780 57,247 Total current assets 116,572 115,965 Net property, plant and equipment 1,131,032 702,734 Total other assets 17,881 45,555 TOTAL ASSETS $1,265,485 $864,254 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued liabilities $82,094 $75,400 Undistributed revenue payable 11,298 8,277 Interest payable 6,839 5,325 Current maturities of long-term debt 3,449 2,598 Commodity and interest derivatives 68,756 21,284 Total current liabilities 172,436 112,884 LONG-TERM DEBT 691,896 797,670 DEFERRED INCOME TAXES 16,607 - COMMODITY AND INTEREST DERIVATIVES 87,224 9,363 ASSET RETIREMENT OBLIGATIONS 51,720 79,504 Total liabilities 1,019,883 999,421 Total stockholders' equity 245,602 (135,167) TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,265,485 $864,254
GAAP RECONCILIATIONS
In addition to net income (loss) determined in accordance with GAAP, we have provided in this release our Adjusted Earnings and Adjusted EBITDA for recent periods. Both Adjusted Earnings and Adjusted EBITDA are non-GAAP financial measures that we use as supplemental measures of our performance.
We define Adjusted Earnings as net income (loss) before (i) the after-tax effects of unrealized commodity and interest rate derivative gains and losses, (ii) loss on the extinguishment of debt in 2007, (iii) costs associated with the cancellation of the MLP offering in 2008, and (iv) the non-cash, full-cost ceiling test impairment in the fourth quarter of 2008. We believe that Adjusted Earnings facilitates comparisons to earnings forecasts prepared by stock analysts and other third parties. Such forecasts generally exclude the effects of items that are difficult to predict or to measure in advance and are not directly related to our ongoing operations. Adjusted Earnings should not be considered a substitute for net income (loss) as reported in accordance with GAAP.
We define Adjusted EBITDA as net income (loss) before (i) net interest expense and realized interest rate derivative (gains) or losses, (ii) loss on extinguishment of debt, (iii) income tax provision (benefit), (iv) depreciation, depletion and amortization, (v) amortization of deferred loan costs, (vi) the cumulative effect of change in accounting principle, (vii) unrealized gains and losses on derivative instruments, (viii) non-cash expenses relating to the amortization of derivative premiums, (ix) non-cash expenses relating to share-based payments under FAS 123R, and (x) the non-cash, full-cost ceiling test impairment in the fourth quarter of 2008. Because the use of Adjusted EBITDA facilitates comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning and analysis purposes, in assessing acquisition opportunities and in determining how potential external financing sources are likely to evaluate our business.
We present Adjusted Earnings and Adjusted EBITDA because we consider them to be important supplemental measures of our performance. Neither Adjusted Earnings nor Adjusted EBITDA is a measurement of our financial performance under GAAP and neither should be considered as an alternative to net income (loss), operating income or any other performance measure derived in accordance with GAAP, as an alternative to cash flow from operating activities or as a measure of our liquidity. You should not assume that the Adjusted Earnings or Adjusted EBITDA amounts shown are comparable to similarly named measures disclosed by other companies.
UNAUDITED Quarter Ended Year Ended ($in thousands) 12/31/2007 9/30/2008 12/31/2008 12/31/2007 12/31/2008 Adjusted Earnings Reconciliation Net Income $(60,365) $220,937 $(414,044) $(73,372) $(391,132) Plus: Unrealized commodity (gains) losses 91,351 (338,773) (225,457) 122,779 (184,459) Unrealized interest rate derivative (gains) losses 8,816 (626) 10,623 17,312 10,336 Write-off of MLP offering costs - - (50) - 2,690 Early Extinguishment of debt - - - 12,063 - Ceiling test Impairment - - 641,000 - 641,000 Tax effects (36,468) 129,435 (6,741) (58,788) (23,185) Adjusted Earnings $3,334 $10,973 $5,331 $19,994 $55,250 UNAUDITED Quarter Ended Year Ended, ($in thousands) 12/31/2007 9/30/2008 12/31/2008 2007 2008 EBITDA Reconciliations: Net income $(60,365) $220,937 $(414,044) $(73,372)$(391,132) Plus: Interest expense 15,520 13,305 12,986 60,115 54,049 Interest rate derivative (gains) losses - realized (193) 3,371 3,136 (135) 10,231 Income taxes (35,800) 136,200 (3,200) (46,200) 11,200 DD&A 29,280 32,931 40,436 98,814 134,483 Impairment - - 641,000 - 641,000 Amortization of deferred loan costs 986 735 721 4,197 3,344 Loss on extinguishment of debt - - - 12,063 - Share-based payments 190 710 970 3,278 3,064 Amortization of derivative premiums and other comprehensive loss 3,986 2,046 1,505 11,546 7,694 Unrealized commodity derivative (gains) losses 91,350 (338,773) (225,457) 122,779 (184,459) Unrealized interest rate derivative (gains) losses 8,815 (626) 10,623 17,312 10,336 Adjusted EBITDA $53,769 $70,836 $68,676 $210,397 $299,810
We also provide per BOE G&A expenses excluding costs associated with the terminated MLP offering and non-cash FAS 123R charges. We believe that these non-GAAP measures are useful in that the items excluded do not represent cash expenses directly related to our ongoing operations. These non-GAAP measures should not be viewed as an alternative to per BOE G&A expenses as determined in accordance with GAAP.
UNAUDITED ($in thousands, Quarter Ended Year Ended except per BOE 12/31/ 9/30/ 12/31/ 12/31/ 12/31/ 12/31/ amounts) 2007 2008 2008 2007 2008 2008 G&A per BOE Reconciliation Excl. Excluding SFAS SFAS 123R 123R and MLP G&A Expense $7,112 $10,235 $11,635 $31,770 $43,101 $43,101 Less: SFAS 123R Expense (80) (550) (710) (2,978) (2,384) (2,384) MLP Write Off - - (50) - - (2,690) G&A Expense Excluding SFAS 123R / MLP 7,032 9,685 10,875 28,792 40,717 38,027 MBOE 1,849 2,019 2,086 7,130 7,933 7,933 G&A Expense per BOE Excluding SFAS 123R / MLP $3.80 $4.80 $5.21 $4.04 $5.13 $4.79
Reconciliation of PV-10 to Standardized Measure
The present value of future net cash flows (PV-10 value) is a non-GAAP measure because it excludes income tax effects. Management believes that before-tax cash flow amounts are useful for evaluative purposes since future income taxes, which are affected by a company's unique tax position and strategies, can make after-tax amounts less comparable. We derive PV-10 value based on the present value of estimated future revenues to be generated from the production of proved reserves, net of estimated production and future development costs and future plugging and abandonment costs, using prices and costs as of the date of estimate without future escalation, without giving effect to hedging activities, non-property related expenses such as general and administrative expenses, debt service and depreciation, depletion, amortization and impairment and income taxes, and discounted using an annual discount rate of 10%. Management also believes that the PV-10 based on the NYMEX 5-year strip pricing is useful for evaluative purposes since the use of a strip price provides a measure based on current market perception.
The following table reconciles the standardized measure of future net cash flows to PV-10 value (in thousands):
UNAUDITED ($in thousands) 12/31/2008 Standardized measure of discounted future net cash flows $610,096 Add: Present value of future income tax discounted at 10% 6,585 PV-10 at year end SEC prices 616,681 Add: Effect of five year NYMEX strip at December 31, 2008 997,319 PV-10 at five-year NYMEX strip at December 31, 2008 $1,614,000
SOURCE Venoco, Inc.