Brigham Exploration Reports Second Quarter 2008 Results and Provides Third and Fourth Quarter 2008 Forecasts
SOURCE:
Brigham Exploration
2008-07-29 17:43:00
Brigham Exploration Reports Second Quarter 2008 Results and Provides Third and Fourth Quarter 2008 Forecasts
AUSTIN, TX–(EMWNews – July 29, 2008) – Brigham Exploration Company (
announced its financial results for the second quarter and six months ended
June 30, 2008.
SECOND QUARTER 2008 RESULTS
Revenues from the sale of oil and natural gas including hedge settlements
but excluding unrealized mark-to-market hedging gains and losses for the
second quarter 2008 were up 4% to $35.5 million when compared to that in
the second quarter 2007. Higher commodity prices increased revenues by
$15.7 million, while lower production volumes and hedging losses decreased
revenues by $11.1 million and $3.4 million, respectively. Our average net
daily production for the second quarter 2008 was 30.2 MMcfe per day, which
was within the previously provided production guidance range.
Our average realized price for natural gas in the second quarter 2008 was
$11.03 per Mcf, which includes a $0.90 per Mcf loss associated with the
settlement of our natural gas derivative contracts. This compares to an
average realized price in the second quarter 2007 of $7.80 which includes
an immaterial gain on the settlement of our natural gas derivative
contracts. During the second quarter 2008, our average realized price for
oil was $109.71 per barrel, which includes a $12.51 per barrel loss due to
the settlement of our oil derivative contracts. This compares to an
average realized price in the second quarter 2007 of $62.25, which includes
a negligible effect from the settlement of our oil derivative contracts.
Our second quarter 2008 production costs, which include operating and
maintenance (O&M) expenses, expensed workovers, ad valorem taxes and
production taxes, were $1.47 per Mcfe compared to $0.93 per Mcfe in the
second quarter 2007. This increase was primarily driven by a $0.40 per
Mcfe increase in production taxes, which was a result of our recording
production tax credits on our Vicksburg and Mills Ranch wells in the second
quarter 2007 rather than deferring recording credits until receipt of
regulatory approval. Our O&M expense also increased on a per unit basis
due to the natural decline of production volumes from our wells.
Our second quarter 2008 general and administrative (G&A) expense was 14%
higher than in the second quarter of last year. G&A costs increased
primarily because of higher compensation expense and higher audit and tax
fees.
Our depletion expense for the second quarter 2008 was $12.4 million,
compared to $16.6 million in the second quarter 2007. Our lower production
volumes decreased depletion expense by $5.8 million, while our higher
depletion rate increased depletion expense by $1.6 million.
Our net interest expense for the second quarter 2008 was $0.2 million lower
than in the second quarter 2007. This decrease was primarily due to our
lower weighted average interest rate and higher amount of capitalized
interest. Our weighted average debt outstanding for the second quarter
2008 was $205.5 million, compared to $201.2 million for the comparable
period last year.
Our deferred income tax expense for the second quarter 2008 was $0.9
million, compared to $1.9 million in the second quarter of last year. This
decrease was primarily due to lower income for the period.
Our reported net income for the second quarter 2008 was $1.5 million ($0.03
per diluted share), versus $2.3 million ($0.05 per diluted share) for the
same period last year. Our after-tax earnings in the second quarter 2008
excluding the effect of our unrealized
mark-to-market hedging losses were $8.1 million ($0.17 per diluted share),
while our after-tax earnings in the second quarter 2007 excluding
unrealized
mark-to-market hedging gains and our ceiling test impairment were $5.1
million ($0.11 per diluted share). After-tax earnings excluding the above
items is a non-GAAP measure and a reconciliation of GAAP net income to
after-tax earnings excluding the above items is included in our
accompanying financial tables found later in this release.
For the second quarter 2008, we spent $43.1 million on oil and gas capital
expenditures, which represents an increase of 48% from that in the second
quarter 2007 and a 5% decrease from that in the first quarter 2008. Oil
and gas capital expenditures for the second quarter 2008 and 2007 were:
Three months ended June 30,
-------------------------
2008 2007
------------ ------------
(in thousands)
Drilling $ 31,489 $ 23,550
Net land and G&G 8,196 2,488
Capitalized costs 3,389 3,140
Capitalized FAS 143 ARO 71 21
------------ ------------
Total oil and gas capital expenditures $ 43,145 $ 29,199
============ ============
FIRST SIX MONTHS 2008 RESULTS
Revenues from the sale of oil and natural gas including hedge settlements
but excluding unrealized mark-to-market hedging gains and losses for the
first six months of 2008 were up 3% to $66.0 million when compared to that
in the corresponding period last year. Revenues increased $23.7 million
due to a 55% increase in our average natural gas equivalent price compared
to that in the first six months of 2007, while lower production volumes
reduced revenues by $17.1 million. Oil and natural gas derivative hedging
settlements decreased revenues by $4.8 million. Average daily production
for the first six months 2008 was 31.2 MMcfe per day.
Our average realized price for natural gas during the first six months of
2008 was $9.99 per Mcf, which includes a $0.30 per Mcf loss associated with
the settlement of our natural gas derivative contracts. This compares to
an average realized price in the first six months of 2007 of $7.78 per Mcf,
which includes a $0.20 per Mcf gain due to the settlement of our natural
gas derivative contracts. Our average realized price for oil for the first
half of 2008 was $100.53 per barrel, which includes an $8.93 per barrel
loss due to the settlement of oil derivative contracts. This compares to
an average realized price in the first six months of 2007 of $58.91, which
includes a $0.47 per barrel gain due to the settlement of oil derivative
contracts.
Our per unit production costs for the first six months of 2008 increased
$0.65 per Mcfe when compared to that in the same period last year.
Production taxes increased $0.41 per Mcfe due to a $2.3 million decrease in
production tax abatements in the first six months of 2008 versus the first
six months of 2007. Workover expense was $0.18 per Mcfe higher in the
first six months 2008 as a result of two unexpected workovers during the
first quarter 2008.
Our G&A expense for the first six months of 2008 was 16% higher than that
in the first six months of last year. G&A costs increased primarily
because of higher compensation expense and higher audit and tax fees.
Our depletion expense for the first six months of 2008 was $24.8 million
compared to $30.6 million in the first six months of last year. Lower
production volumes decreased depletion expense by $8.8 million, while our
higher depletion rate increased depletion expense by $3.1 million.
Our net interest expense for the first six months of 2008 decreased by $0.2
million, or 3%, from the comparable period last year. This decrease was
primarily due to our lower weighted average interest rate and higher amount
of capitalized interest. Our weighted average debt outstanding for the
first six months of 2008 was $194.2 million versus $191.5 million for the
comparable period last year.
Our deferred income tax expense for the first six months of 2008 was $1.9
million, compared to $2.9 million in the first six months of last year.
This decrease was primarily due to lower income for the period.
Our reported net income for the first six months of 2008 was $3.0 million
($0.07 per diluted share) versus net income of $4.2 million ($0.09 per
diluted share) for the same period last year. Our after-tax earnings for
the first six months of 2008 excluding the effect of our unrealized
mark-to-market hedging losses, a non-GAAP financial measure, were $12.9
million ($0.28 per diluted share) and our after tax earnings for the first
six months of 2007 excluding unrealized
mark-to-market hedging losses and our ceiling test impairment were $9.9
million ($0.22 per diluted share). A reconciliation of the first six
months 2008 GAAP net income to earnings without the effect of the above
items is included in our accompanying financial tables found later in this
release.
Through June 30, 2008, we spent $62.7 million on drilling capital
expenditures and $88.6 million in total oil and gas capital expenditures.
Oil and gas capital expenditures for the first six months of 2008 and 2007
were:
Six months ended June 30,
-------------------------
2008 2007
------------ ------------
(in thousands)
Drilling $ 62,689 $ 52,227
Net land and G&G 19,029 5,424
Capitalized costs 6,799 5,948
Capitalized FAS 143 ARO 132 228
------------ ------------
Total oil and gas capital expenditures $ 88,649 $ 63,827
============ ============
THIRD AND FOURTH QUARTER 2008 FORECASTS
The following forecasts and estimates of our third and fourth quarter 2008
production volumes are
forward-looking statements subject to the risks and uncertainties
identified in the
“Forward-Looking Statements Disclosure” at the end of this release. We
currently expect our third quarter 2008 production volumes to average
between 30 MMcfe per day and 34 MMcfe per day. We expect our fourth
quarter 2008 production volumes to average between 35 MMcfe per day and 44
MMcfe per day.
For the third quarter 2008, lease operating expenses are projected to be
$1.01 per Mcfe based on the mid-point of our production guidance,
production taxes are projected to be approximately 4.1% to 4.4% of
pre-hedge oil and natural gas revenues, and general and administrative
expenses are projected to be $2.6 million ($0.96 to $0.85 per Mcfe).
MANAGEMENT COMMENTS
Gene Shepherd, Brigham’s Chief Financial Officer, commented, “With the
benefit of the very strong commodity prices that we experienced during the
quarter, our pre-hedge revenue was near our all time record. Further, we
are pleased that we have been able to keep our costs in check, with the
combination of our second quarter LOE and G&A expense having declined by 8%
sequentially and 8% versus that in the prior year’s quarter.”
Gene Shepherd continued, “Our fourth quarter production forecast is
positively impacted by our four new Southern Louisiana wells, which have
yet to impact our production volumes, and our growing number of Williston
Basin oil completions. In addition to our Williston Basin acreage and
drilling investments creating significant net asset value for our
shareholders, they are generating a growing wedge of relatively shallow
decline rate oil production. Our oil production, benefiting from the
favorable crude oil pricing fundamentals, generated roughly 75% more
revenue than a Mcf equivalent of our gas production during the second
quarter 2008.”
CONFERENCE CALL INFORMATION
Our management will host a conference call to discuss operational and
financial results for the second quarter 2008 with investors, analysts and
other interested parties on Wednesday, July 30, at 10:00 a.m. Eastern Time.
To participate in the call, participants within the U.S. please dial
888-713-4216 and participants outside the U.S. please dial 617-213-4868.
The participant passcode for the call is 37619931. Participants may
pre-register for the call at
https://www.theconferencingservice.com/prereg/key.process?key=P38KY6HDG.
Pre-registrants will be issued a pin number to use when dialing into the
live call which will provide quick access to the conference. A telephone
recording of the conference call will be available approximately two hours
after the call is completed through 12:00 p.m. Eastern Time on Saturday,
August 30, 2008. To access the recording, domestic callers dial
888-286-8010 and international callers dial 617-801-6888. The passcode for
the conference call playback is 74623551. In addition, a live and archived
web cast of the conference call will be available over the Internet at
either www.bexp3d.com or www.streetevents.com.
A copy of this press release and other financial and statistical
information about the periods covered by this press release and conference
call will be available on our website. To access the press release: go to
www.bexp3d.com and click on News Releases. The file with a copy of the
press release is named Brigham Exploration Reports Second Quarter 2008
Results and is dated Tuesday, July 29, 2008. To access the other financial
and statistical information that will be covered by this conference call,
go to www.bexp3d.com and click on Event Calendar. The file with the other
financial and statistical information is named Financial and Statistical
Information for the Second Quarter 2008 Conference Call and is dated
Tuesday, July 29, 2008.
ABOUT BRIGHAM EXPLORATION
Brigham Exploration Company is a leading independent exploration and
production company that applies 3-D seismic imaging and other advanced
technologies to systematically explore for and develop onshore domestic oil
and natural gas reserves. For more information about Brigham Exploration,
please visit our website at www.bexp3d.com or contact Investor Relations at
512-427-3444.
FORWARD-LOOKING STATEMENTS DISCLOSURE
Except for the historical information contained herein, the matters
discussed in this news release are forward-looking statements within the
meaning of the federal securities laws. Important factors that could cause
our actual results to differ materially from those contained in the
forward-looking statements include our growth strategies, our ability to
successfully and economically explore for and develop oil and gas
resources, anticipated trends in our business‚ our liquidity and ability to
finance our exploration and development activities‚ market conditions in
the oil and gas industry‚ our ability to make and integrate acquisitions,
the impact of governmental regulation and other risks more fully described
in the company’s filings with the Securities and Exchange Commission.
Forward-looking statements are typically identified by use of terms such as
“may,” “will,” “expect,” “anticipate,” “estimate” and similar words,
although some forward-looking statements may be expressed differently. All
forward-looking statements contained in this release, including any
forecasts and estimates, are based on management’s outlook only as of the
date of this release, and we undertake no obligation to update or revise
these forward-looking statements, whether as a result of subsequent
developments or otherwise.
BRIGHAM EXPLORATION COMPANY
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data) (unaudited)
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Revenues:
Oil and natural gas sales $ 38,871 $ 34,283 $ 69,381 $ 62,769
Hedging settlements (3,357) 6 (3,419) 1,430
-------- -------- -------- --------
35,514 34,289 65,962 64,199
Unrealized hedging gains/ losses (10,550) 2,258 (15,944) (2,658)
-------- -------- -------- --------
24,964 36,547 50,018 61,541
Other revenue 62 29 79 56
-------- -------- -------- --------
Total revenue 25,026 36,576 50,097 61,597
Costs and expenses:
Lease operating 2,548 3,325 5,534 5,894
Production taxes 1,441 551 2,724 622
General and administrative 2,596 2,281 5,189 4,459
Depletion of oil and natural gas
properties 12,405 16,612 24,848 30,571
Impairment of oil and gas
properties - 6,505 - 6,505
Depreciation and amortization 158 158 305 321
Accretion of discount on asset
retirement obligations 89 94 180 211
-------- -------- -------- --------
19,237 29,526 38,780 48,583
-------- -------- -------- --------
Operating income 5,789 7,050 11,317 13,014
-------- -------- -------- --------
Other income (expense):
Interest expense, net (3,482) (3,678) (6,901) (7,095)
Interest income 39 134 114 265
Other income (expense) 96 712 403 902
-------- -------- -------- --------
(3,347) (2,832) (6,384) (5,928)
-------- -------- -------- --------
Income before income taxes 2,442 4,218 4,933 7,086
-------- -------- -------- --------
Income tax expense:
Current -- -- -- --
Deferred (925) (1,908) (1,889) (2,903)
-------- -------- -------- --------
(925) (1,908) (1,889) (2,903)
-------- -------- -------- --------
Net income $ 1,517 $ 2,310 $ 3,044 $ 4,183
======== ======== ======== ========
Net income per share available to
common stockholders:
Basic $ 0.03 $ 0.05 $ 0.07 $ 0.09
======== ======== ======== ========
Diluted $ 0.03 $ 0.05 $ 0.07 $ 0.09
======== ======== ======== ========
Weighted average shares
outstanding:
Basic 45,332 45,080 45,296 45,067
======== ======== ======== ========
Diluted 46,444 45,455 46,171 45,478
======== ======== ======== ========
BRIGHAM EXPLORATION COMPANY
PRODUCTION, SALES PRICES AND OTHER FINANCIAL DATA
(unaudited)
Three months ended Six months ended
June 30, June 30,
---------------- ----------------
2008 2007 2008 2007
------- ------- ------- -------
Average net daily production:
Natural gas (MMcf) 21.6 38.4 23.0 35.8
Oil (Bbls) 1,422 1,308 1,360 1,330
Equivalent natural gas (MMcfe)
(6:1) 30.2 46.3 31.2 43.8
Total net production:
Natural gas (MMcf) 1,947 3,457 4,139 6,439
Oil (MBbls) 128 118 245 239
Equivalent natural gas (MMcfe)
(6:1) 2,715 4,163 5,609 7,875
% Natural gas 72% 83% 74% 82%
Sales price:
Natural gas ($/Mcf) $ 11.93 $ 7.80 $ 10.29 $ 7.58
Oil ($/Bbl) 122.22 62.25 109.46 58.44
Equivalent natural gas ($/Mcfe)
(6:1) 14.32 8.24 12.37 7.97
Sales price including derivative
settlement gains (losses):
Natural gas ($/Mcf) $ 11.03 $ 7.80 $ 9.99 $ 7.78
Oil ($/Bbl) 109.71 62.25 100.53 58.91
Equivalent natural gas ($/Mcfe)
(6:1) 13.08 8.24 11.76 8.15
Sales price including derivative
settlement gains (losses) and
unrealized gains (losses):
Natural gas ($/Mcf) $ 7.61 $ 8.49 $ 7.14 $ 7.44
Oil ($/Bbl) 79.25 61.05 83.64 56.85
Equivalent natural gas ($/Mcfe)
(6:1) 9.19 8.78 8.92 7.81
SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2008 2007
------------- -------------
Assets: (unaudited)
Current assets $ 40,688 $ 32,505
Oil and natural gas properties, net (full
cost method) 574,008 510,207
Other property and equipment, net 1,082 1,034
Other non-current assets 5,171 4,682
------------- -------------
Total assets $ 620,949 $ 548,428
============= =============
Liabilities and stockholders' equity:
Current liabilities $ 67,860 $ 41,718
Senior notes 158,611 158,492
Senior credit facility 48,600 10,000
Mandatorily redeemable preferred stock,
Series A 10,101 10,101
Deferred income tax liability 43,554 41,625
Other taxes payable 2,162 2,162
Other non-current liabilities 6,188 5,303
------------- -------------
Total liabilities $ 337,076 $ 269,401
Stockholders' equity 283,873 279,027
------------- -------------
Total liabilities and stockholders'
equity $ 620,949 $ 548,428
============= =============
BRIGHAM EXPLORATION COMPANY
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Cash flows from operating activities:
Net income $ 1,517 $ 2,310 $ 3,044 $ 4,183
Depletion, depreciation and
amortization 12,563 16,770 25,153 30,892
Impairment of oil and gas
properties - 6,505 - 6,505
Accretion of discount on ARO 89 94 180 211
Amortization of deferred loan fees
and debt issuance costs 273 247 528 461
Non-cash stock compensation 404 417 818 838
Market value adjustments for
derivatives instruments 10,550 (2,258) 15,944 2,658
Deferred income tax expense 925 1,908 1,889 2,903
Other noncash items 32 -- 4 --
Changes in operating assets and
liabilities (11,648) 5,699 (4,520) (1,375)
-------- -------- -------- --------
Cash flows provided by operating
activities $ 14,705 $ 31,692 $ 43,040 $ 47,276
Cash flows used by investing
activities (39,678) (25,268) (84,712) (73,490)
Cash flows (used) provided by
financing activities 29,820 (1,292) 38,822 34,197
-------- -------- -------- --------
Net increase (decrease) in cash
and cash equivalents $ 4,847 $ 5,132 $ (2,850) $ 7,983
======== ======== ======== ========
SUMMARY PER MCFE DATA
(unaudited)
Three months Six months ended
ended June 30, June 30,
---------------- ----------------
2008 2007 2008 2007
------- ------- ------- -------
Revenues:
Oil and natural gas sales $ 14.32 $ 8.24 $ 12.37 $ 7.97
Hedge settlements (1.24) 0.00 (0.61) 0.18
Unrealized hedge gains (losses) (3.88) 0.54 (2.84) (0.34)
Other revenue 0.02 0.01 0.01 0.01
------- ------- ------- -------
$ 9.22 $ 8.79 $ 8.93 $ 7.82
------- ------- ------- -------
Costs and expenses:
Lease operating 0.94 0.80 0.99 0.75
Production taxes 0.53 0.13 0.49 0.08
General and administrative 0.96 0.55 0.93 0.57
Depletion of natural gas and oil
properties 4.57 3.99 4.43 3.88
Impairment of oil and gas properties 0.00 1.56 0.00 0.83
Depreciation and amortization 0.06 0.04 0.05 0.04
Accretion of discount on ARO 0.03 0.02 0.03 0.03
------- ------- ------- -------
$ 7.09 $ 7.09 $ 6.92 $ 6.18
------- ------- ------- -------
Operating income $ 2.13 $ 1.70 $ 2.01 $ 1.64
------- ------- ------- -------
Interest expense, net of interest
income (a) (1.27) (0.85) (1.21) (0.87)
Other income (expense) 0.04 0.17 0.07 0.11
------- ------- ------- -------
Adjusted income $ 0.90 $ 1.02 $ 0.87 $ 0.88
======= ======= ======= =======
(a) Calculated as interest expense minus interest income divided by
production for period.
BRIGHAM EXPLORATION COMPANY
RECONCILIATION OF GAAP NET INCOME TO EARNINGS WITHOUT THE EFFECT OF CERTAIN
ITEMS
(in thousands)
Three months ended Six months ended
June 30, June 30,
------------------ ------------------
2008 2007 2008 2007
-------- -------- -------- --------
Net income (loss) as reported $ 1,517 $ 2,310 $ 3,044 $ 4,183
Unrealized derivative (gains)
losses 10,550 (2,258) 15,944 2,658
Impairment of oil and natural
gas properties - 6,505 - 6,505
Tax impact (3,996) (1,491) (6,105) (3,449)
-------- -------- -------- --------
Earnings without the effect of
certain items $ 8,071 $ 5,066 $ 12,883 $ 9,897
======== ======== ======== ========
Earnings without the effect of certain items represent net income excluding
both unrealized gains and losses on derivative contracts and our non-cash
impairment change in our oil and gas properties. Management believes that
exclusion of both of these items will help enhance comparability of
operating results between periods.
SUMMARY OF COMMODITY PRICE HEDGES OUTSTANDING AS OF JULY 29, 2008
(unaudited)
2008 2009
----------------- -------------------------
Q3 Q4 Q1 Q2 Q3
-------- -------- -------- -------- -------
Natural Gas Costless Collars:
Daily volumes MMBtu/d 12,283 7,391 6,778 4,615 4,565
Floor $/MMBtu $ 7.42 $ 8.51 $ 8.75 $ 7.54 $ 7.54
Cap $/MMBtu $ 9.95 $ 10.81 $ 11.09 $ 10.23 $ 10.23
Natural Gas Three Way
Costless Collars:
Daily volumes MMBtu/d -- 1,630 1,667 -- --
Floor $/MMBtu $ -- $ 8.00 $ 8.00 $ -- $ --
Written Put $/MMBtu $ -- $ 5.50 $ 5.50 $ -- $ --
Cap $/MMBtu $ -- $ 10.35 $ 10.35 $ -- $ --
Oil Costless Collars:
Daily volumes Bbls/d 533 446 333 99 --
Floor $/Bbl $ 74.92 $ 73.44 $ 79.15 $ 62.00 $ --
Cap $/Bbl $ 100.07 $ 98.82 $ 108.53 $ 81.75 $ --
Hedged volumes and prices reflected in this table represent average
contract amounts for the quarterly periods presented; natural gas hedge
prices and crude oil hedge contract prices are based on NYMEX pricing.
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