- 1Q '09 vs 1Q '08 Pro Forma Production up 13%
- Net Income
- Focus on Improving Margins Delivers Strong Results; Lease Operating Expenses Decrease to
- Hastings Complex Sold for
-- 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
Adjusted Earnings were
"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
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
The company spent
"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
"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
Lease Operating Expenses
Venoco's first quarter 2009 lease operating expenses declined 39% to
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
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 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
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, 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.