- 1Q '09 vs 1Q '08 Pro Forma Production up 13%

- Net Income $25 million; Adjusted Earnings $6.5 million

- Focus on Improving Margins Delivers Strong Results; Lease Operating Expenses Decrease to $11.78/BOE

- Hastings Complex Sold for $201 Million

DENVER, May 7 /PRNewswire-FirstCall/ -- Venoco, Inc. (NYSE: VQ) today reported financial and operational results for the first quarter of 2009. Highlights include the following:

    --  Production of 1.96 million barrels of oil equivalent (MMBOE) for the
        first quarter or 21,728 BOE per day (BOE/d).  Pro forma for the sale of
        the Hastings Complex, production was 20,818 BOE/d in the first quarter
        of 2009, up 13% from 18,380 BOE/d in the first quarter of 2008 and up 4%
        from 20,103 BOE/d in the fourth quarter of 2008.
    --  Net Income of $25 million - up from a loss of $25 million in the first
        quarter of 2008 and up from the fourth quarter loss of $414 million.

-- Lease operating expenses of $11.78 per BOE - down 39% from $19.21 per BOE in the fourth quarter 2008, and down 20% from $14.68 per BOE in the first quarter of 2008.

The company reported net income of $25 million for the quarter on oil and gas revenues of $57 million and realized commodity derivative gains of $31 million. Adjusted EBITDA was $53 million in the first quarter, down 23% from $69 million in the fourth quarter of 2008 and down 31% from $77 million in the first quarter of 2008. Adjusted EBITDA includes $10 million in the first quarter of 2009 and $22 million in the fourth quarter of 2008 of realized gains resulting from the restructuring of derivative instruments in those periods.

Adjusted Earnings were $6.5 million, up from $5.3 million for the fourth quarter of 2008 and down from $16.5 million in the first quarter of 2008. Adjusted Earnings adjusts the net income of $25 million in the first quarter of 2009, the net loss of $414 million in fourth quarter of 2008 and the net loss of $25 million in the first quarter of 2008 for, among other things, the effects of unrealized commodity and interest derivatives gains / losses in the quarters and a ceiling test impairment in the fourth quarter of 2008. Please see the end of this release for definitions of Adjusted Earnings and Adjusted EBITDA and a reconciliation of those measures to net income (loss).

"By shedding our Hastings property, with its high unit operating costs, and working to reduce overall costs in our remaining assets, we've been able to lower our costs substantially. Also, our technical staff and operations teams have been focused on efficiency improvement projects, incremental production projects and / or cost reduction projects," said Tim Marquez, Venoco's Chairman and CEO. "This is a great start to the year - we are ahead of annual guidance on production and we are under guidance on lease operating expenses, G&A expense and DD&A. We realize it's early in the year, so we remain cautious and are not adjusting our annual guidance at this time."

Production

Production in the first quarter of 2009 included 33 days of production from the Hastings Complex prior to the sale of the complex to Denbury Resources. For the balance of the quarter, only volumes related to the retained 2% overriding royalty are included in the company's production volumes. First quarter 2009 production was up 3% from first quarter 2008; excluding Hastings, production increased 13% over the first quarter of 2008. Production was down in the first quarter of 2009 compared to the fourth quarter of 2008; excluding Hastings, production was up 4% quarter-to-quarter.

The following table details the company's quarterly daily production by region (BOE/d):


                                          Three Months Ended
                                                                     Full-year
                                                                        2009
     Region                       3/31/08     12/31/08     3/31/09    Guidance

    Sacramento Basin                9,099        9,668      10,208
    Southern California             7,908        8,903       8,865
    Texas (and other)               4,019        4,103       2,655
                                    -----        -----       -----
         Total                     21,026       22,674      21,728     19,000
                                   ======       ======      ======     ======

         Total excluding Hastings  18,380       20,103      20,818
                                   ======       ======      ======

Capital Investment

Total costs incurred for the company's E&P operations, including drilling, completion, acquisition, seismic, leasehold, capitalized G&A costs and asset retirement obligations, were $53 million for first quarter, including $37 million for drilling and rework activities, $4 million for facilities and $2 million for acquisitions in its core areas.

The company spent $35 million or 67% of its development and other capital expenditures in the Sacramento Basin. Drilling in the Basin was reduced to a three-rig program by mid-February. The company spud 24 wells and completed 57 workovers / recompletions in the Basin in first quarter.

"We reduced our Sac Basin drilling program from six rigs at the beginning of the year to three rigs currently. We have also increased our workover activity compared to 2008. We expect our capital outlays in the Basin to be lower in subsequent quarters as a result of the reduction in drilling rigs," Mr. Marquez said. "The drilling program in the Sac Basin has been very successful over the years and we see ample opportunity in coming years. While we are constantly working to improve efficiencies, we expect the wells we are drilling to have a greater than 20% risked rate-of-return at the current NYMEX strip."

"A substantial portion of our efforts in the Basin this year are focused on our workover program," Mr. Marquez said. "We are very pleased with the pace and performance of these very economic workovers and recompletions."

The company spent $9 million or 18% of its first quarter 2009 capital expenditures in Southern California, focused on further infill development drilling in the West Montalvo field and substantial facility upgrades to improve offshore processing and operating efficiency. The company completed two wells in January that were spud in December of 2008. Startup of drilling activity on Platform Gail in the Sockeye field began late in the quarter for a dual completion well that will produce from the Monterey and inject water to enhance the sweep of the waterflood. Furthermore, in Southern California the South Ellwood crude oil sales contract is up for renewal at the end of the third quarter. The company's current discount to NYMEX is approximately $20.00 per barrel, which is expected to improve.

"We've had good success with our drilling efforts at West Montalvo and saw production in the quarter reach its highest level in 30-years. There is more upside in this field which we will continue to pursue throughout 2009," said Mr. Marquez.

In Texas, the company had minimal capital expenditures in the quarter, but has a well scheduled to spud in the second quarter.

Lease Operating Expenses

Venoco's first quarter 2009 lease operating expenses declined 39% to $11.78 per BOE from $19.21 per BOE in the fourth quarter 2008 and 20% from $14.68 per BOE in the first quarter 2008. The unit operating cost decrease in the quarter was due to increased production from the Sacramento Basin (which has lower operating costs), realized cost savings from vendors and service providers and the sale of the Hastings Complex (one of the company's highest operating cost fields). Pro forma for the sale of Hastings, lease operating expenses were $11.43/BOE in the first quarter 2009, $12.24/BOE in the first quarter of 2008 and $16.11/BOE in the fourth quarter of 2008.

Costs and Expenses



                                Three Months Ended
                                                             Full-year 2009
                        3/31/08     12/31/08   3/31/09          Guidance
    Lease Operating
     Expenses            $14.68       $19.21    $11.78           $15.00
    Production/
     Property Taxes       $2.05        $0.89     $1.88        $0.75 - $1.85
    DD&A Expense         $16.33       $19.38    $11.60           $12.00
    G&A Expense (1)       $4.38        $5.21     $3.87            $4.50
    Interest Expense (2)  $8.37        $8.07     $8.10            $9.20
                          -----        -----     -----            -----
         Total           $45.81       $52.76    $37.23       $41.45 - $42.55
                         ======       ======    ======       ===============


    (1)  Net of amounts capitalized and excluding stock-based compensation and
         MLP write off costs. See the end of this release for a reconciliation
         of G&A per BOE.
    (2)  Includes interest expense, realized (gain) loss on interest rate swap
         and amortization of deferred loan costs.

"We had a solid quarter with good performance throughout the company on multiple levels from production to expenses. The results in the Sacramento Basin and at our West Montalvo field were excellent and have set us up well for meeting or possibly exceeding annual guidance," Mr. Marquez explained.

Earnings Conference Call

Venoco will host a conference call to discuss results today, Thursday, May 7, 2009 at 11:00 a.m. Eastern time (9 a.m. Mountain). The conference call will be webcast and those wanting to listen may do so by using a link on the Investor Relations page of the company's website at http://www.venocoinc.com. Those wanting to participate in the Q & A portion can call (866) 788-0538 and use conference code 53678901. International participants can call (857) 350-1676 and use the same conference code.

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 62038808. The replay will also be available on the Venoco website for 30 days.

Annual Stockholders Meeting

The company's annual stockholders meeting will be held on Wednesday, May 20, 2009 at the Sheraton Hotel, 1550 Court Place, Denver, Colorado beginning at 7:30 a.m. Mountain time.

About the Company

Venoco is an independent energy company primarily engaged in the acquisition, exploitation and development of oil and natural gas properties in California and Texas. Venoco operates three offshore platforms in the Santa Barbara Channel, has non-operated interests in three other platforms, operates four onshore properties in Southern California, has extensive operations in Northern California's Sacramento Basin and operates thirteen fields in Texas.

Forward-looking Statements

Statements made in this news release relating to Venoco's future production, expenses, rates of return on development projects 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      12/31/2008  3/31/2009  Change  3/31/2008  3/31/2009  Change

     Production
      Volume:
     Oil (MBbls)(1)     1,096       934     -15%       984       934       -5%
     Natural Gas
      (MMcf)            5,940     6,129       3%     5,576     6,129       10%
     MBOE               2,086     1,956      -6%     1,913     1,956        2%
     Daily Average
      Production
      Volume:
     Oil (Bbls/d)      11,913    10,378     -13%    10,813    10,378       -4%
     Natural Gas
      (Mcf/d)          64,565    68,100       5%    61,275    68,100       11%
     BOE/d             22,674    21,728      -4%    21,026    21,728        3%
     Oil Price per
      Barrel
      Produced
      (in dollars):
     Realized price
      before hedging   $48.36    $34.40     -29%    $90.84    $34.40      -62%
     Realized
      hedging gain
      (loss)             3.83      9.58     150%    (18.49)     9.58     -152%
     Net realized
      price            $52.19    $43.98     -16%    $72.35    $43.98      -39%
     Natural Gas
      Price per Mcf
      (in dollars):
     Realized price
      before hedging    $5.76     $4.41     -23%     $7.88     $4.41      -44%
     Realized hedging
      gain (loss)        0.51      1.87     267%     (0.01)     1.87         -
     Net realized
      price             $6.27     $6.28       0%     $7.87     $6.28      -20%
     Average Sale
      Price per BOE
      (in dollars)(2)  $45.91    $37.62     -18%    $59.21    $37.62      -36%
     Expense per BOE
      (in dollars):
     Lease operating
      expenses(3)      $19.21    $11.78     -39%    $14.68    $11.78      -20%
     Production and
      property taxes(3) $0.89     $1.88     111%     $2.05     $1.88       -8%
     Transportation
      expenses          $0.78     $0.53     -32%     $0.68     $0.53      -22%
     Depreciation,
      depletion and
      amortization     $19.38    $11.60     -40%    $16.33    $11.60      -29%
     General and
      administrative(4) $5.58     $4.09     -27%     $4.74     $4.09      -14%
     Interest expense   $6.23     $5.71      -8%     $7.63     $5.71      -25%


    (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
    condensed consolidated statements of operations.
    (4)  Net of amounts capitalized.


                   CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

                                      Quarter Ended         Quarter Ended
    UNAUDITED ($in thousands)     12/31/2008  3/31/2009  3/31/2008  3/31/2009
    REVENUES:
    Oil and natural gas sales        $94,079    $57,431   $136,665    $57,431
    Other                                791        885        785        885
    Total revenues                    94,870     58,316    137,450     58,316
    EXPENSES:
    Oil and natural gas
     production                       41,939     26,726     32,009     26,726
    Transportation expense             1,624      1,046      1,297      1,046
    Depletion, depreciation and
     amortization                     40,436     22,683     31,246     22,683
    Impairment                       641,000          -          -          -
    Accretion of asset
     retirement obligation             1,138      1,357        993      1,357
    General and administrative        11,635      7,998      9,066      7,998
    Total expenses                   737,772     59,810     74,611     59,810

    Income from operations          (642,902)    (1,494)    62,839     (1,494)
    FINANCING COSTS AND OTHER:
    Interest expense                  12,986     11,178     14,589     11,178
    Interest rate derivative
     realized (gains) losses           3,136      3,940        417      3,940
    Interest rate derivative
     unrealized (gains) losses        10,623     (2,993)    13,554     (2,993)
    Amortization of deferred
     loan costs                          721        735        999        735

    Commodity derivative
     realized (gains) losses         (28,768)   (30,785)    18,263    (30,785)

    Commodity derivative
     unrealized (gains) losses
     and amortization of
     derivative premiums            (224,356)   (17,774)    56,373    (17,774)

    Total financing costs
     and other                      (225,658)   (35,699)   104,195    (35,699)

    Income (loss) before taxes      (417,244)    34,205    (41,356)    34,205

    Income tax provision
     (benefit)                        (3,200)     9,000    (15,900)     9,000

    Net income (loss)              $(414,044)   $25,205   $(25,456)   $25,205
    Weighted average common
     shares outstanding:
     (in thousands)
      Basic                           50,697     50,702     50,227     50,702
      Diluted                         50,697     50,702     50,227     50,702


                 CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION

    UNAUDITED ($in thousands)                  12/31/2008         3/31/2009
    ASSETS
      Cash and cash equivalents                      $191           $15,020
      Accounts receivable                          41,306            31,541
      Inventories                                  12,361             4,211
      Prepaid expenses and other current
       assets                                       4,314             3,856
      Income tax receivable                           546                 -
      Commodity derivatives                        57,247            73,105
      Total current assets                        115,965           127,733
      Net property, plant and equipment           702,734           543,220
      Total other assets                           45,555            59,161
    TOTAL ASSETS                                 $864,254          $730,114
    LIABILITIES AND STOCKHOLDERS' EQUITY
      Accounts payable and accrued
       liabilities                                $75,400           $40,607
      Undistributed revenue payable                 8,277             9,017
      Interest payable                              5,325             7,384
      Income taxes payable                              -             8,304
      Current maturities of long-term debt          2,598             4,521
      Commodity and interest derivatives           21,284            24,204
      Total current liabilities                   112,884            94,037
    LONG-TERM DEBT                                797,670           660,194
    COMMODITY AND INTEREST DERIVATIVES              9,363             4,853
    ASSET RETIREMENT OBLIGATIONS                   79,504            79,028
      Total liabilities                           999,421           838,112

      Total stockholders' equity                 (135,167)         (107,998)
    TOTAL LIABILITIES AND STOCKHOLDERS'
     EQUITY                                      $864,254          $730,114


                              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 the items listed in the Adjusted Earnings reconciliation set forth in the table below. 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.

We define Adjusted EBITDA as net income (loss) before the items listed in the Adjusted EBITDA reconciliation set forth in the table below. 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.


                                                     Quarter Ended
    UNAUDITED ($in thousands)              3/31/2008   12/31/2008   3/31/2009
    Adjusted Earnings Reconciliation
     Net Income                            $(25,456)    $(414,044)   $25,205
     Plus:
     Unrealized commodity (gains) losses     54,609      (225,457)   (22,389)
     Unrealized interest rate
      derivative (gains) losses              13,554        10,623     (2,993)

     Write-off of MLP offering costs              -           (50)         -
     Ceiling test impairment                      -       641,000          -
     Tax effects                            (26,206)       (6,741)     6,678
     Adjusted Earnings                      $16,501        $5,331     $6,501


                                                    Quarter Ended
    UNAUDITED ($in thousands)              3/31/2008   12/31/2008   3/31/2009
    Adjusted EBITDA Reconciliations:
    Net income                              $(25,456)  $(414,044)    $25,205
    Plus: Interest expense                    14,589      12,986      11,178
    Interest rate derivative (gains)
     losses - realized                           417       3,136       3,940
    Income taxes                             (15,900)     (3,200)      9,000
    DD&A                                      31,246      40,436      22,683

    Impairment                                     -     641,000           -
    Amortization of deferred loan costs          999         721         735
    Share-based payments                         787         970         550
    Amortization of derivative premiums
     and other comprehensive loss              2,057       1,505       5,238
    Unrealized commodity derivative
     (gains) losses                           54,609    (225,457)    (22,389)
    Unrealized interest rate derivative
     (gains) losses                           13,554      10,623      (2,993)
    Adjusted EBITDA                          $76,902     $68,676     $53,147

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.


                                                    Quarter Ended
    UNAUDITED ($in thousands,
     except per BOE amounts)               3/31/2008  12/31/2008   3/31/2009
    G&A per BOE Reconciliation
     G&A Expense                              $9,066     $11,635      $7,998
     Less:

     SFAS 123R Expense                          (687)       (710)       (420)

     MLP Write Off                                -          (50)          -
     G&A Expense Excluding SFAS
      123R / MLP                               8,379      10,875       7,578
     MBOE                                      1,913       2,086       1,956
    G&A Expense per BOE Excluding
     SFAS 123R / MLP                           $4.38       $5.21       $3.87

SOURCE Venoco, Inc.