Highlights from Brigham's performance for the first quarter include:
FIRST QUARTER 2004 RESULTS
Average daily production volumes for the first quarter 2004 were 33.9 MMcfe/d and were 9% higher when compared with production volumes in last year's first quarter and 15% higher than production volumes in the fourth quarter 2003. Revenue from the sale of oil and natural gas for the first quarter increased 15% despite a 10% decrease in our pre-hedge sales price. Increased production volumes resulted in a $2.4 million increase in revenues, and a decline in losses on the settlement of derivative contracts resulted in an additional $2.6 increase in revenues. These increases were partially offset by a $2.8 million decrease in revenues due to lower commodity prices.
An increase in workover activity, ad valorem taxes and the number of producing wells in the first quarter 2004 led to a 45% increase in lease operating expenses. Lease operating expenses, on a per unit basis, for the first quarter 2004 increased $0.11 per Mcfe to $0.46. Increases in compressor rental and maintenance expense and fees paid for overhead represented approximately $0.03 per Mcfe of the increase, while the increase in workover costs and ad valorem taxes represented $0.08 of the increase. A decrease in the average pre-hedge sales price that we received for oil and natural gas in the first quarter 2004 resulted in an 8% decline in our total production tax expense and $0.05 per Mcfe decline on a per unit basis.
General and administrative expenses for the first quarter 2004 were up 7% when compared to general and administrative expenses for the first quarter last year. A decrease in the percentage of our total general and administrative costs that we capitalized in the first quarter 2004 and an increase in employee compensation expenses, corporate insurance costs and franchise taxes were the primary reasons for the increase in general and administrative expenses. General and administrative expenses on a per unit basis decreased 2% in the first quarter 2004 to $0.40 per Mcfe.
Depletion expense for the first quarter 2004 was $4.9 million ($1.60 per Mcfe) compared to $4.1 million ($1.46 per Mcfe) in the first quarter last year. An increase in our depletion rate accounted for 55% of this increase while an increase in production accounted for 45% of the increase. Operating income for the first quarter 2004 was $8.2 million and grew 11% when compared to operating income in the first quarter last year.
A decline in our weighted average debt balances outstanding under both our senior credit facility and our senior subordinated notes, combined with a decrease in the interest rate that we paid on those borrowings, were the primary reasons for the $500,000 or 39% decrease in interest expenses for the first quarter 2004. Interest expenses for the first quarter 2004 were $782,000 and $0.26 per Mcfe on a per unit basis, compared to $1.3 million and $0.46 in 2003.
We reported net income available to common stockholders of $5.1 million ($0.13 per diluted share) in the first quarter 2004 versus a net income of $5.5 million ($0.20 per diluted share) for the prior year period. Net income in the current quarter was reduced by a $2.5 million provision for deferred income taxes. There was no income tax provision incurred in last year's first quarter.
Our capital expenditures for the first quarter 2004 increased 111%. Net capital expenditures for the first quarter of 2004 and 2003 were:
($'s in millions) Three Months Ended March 31, 2004 2003 Drilling $12.6 $5.2 Net land and G&G 2.8 1.3 Capitalized costs 1.6 1.7 Proceeds from the sale of assets (0.0) (0.2) Net capital expenditures $17.0 $8.0
SECOND QUARTER 2004 FORECAST
We currently expect second quarter 2004 production volumes to average between 34 and 36 MMcfe/d (70% natural gas). For the second quarter 2004, lease operating expenses are projected to be $0.45 per Mcfe, production taxes are projected to be approximately 5.5% of pre-hedge oil and natural gas revenues, and general and administrative expenses are projected to be $1.2 million ($0.37 to $0.39 per Mcfe).
Based on these production and cost estimates, assumed average NYMEX prices of $5.80 per MMBtu for natural gas and $38.00 per barrel for oil, and taking into account current derivative contracts outstanding, we forecast that our revenue will be between $16.9 and $18 million and operating income will be between $8.2 and $8.9 million for the second quarter 2004.
Gene Shepherd, Brigham's Chief Financial Officer, commented, "We are very pleased with our first quarter operating performance. Revenues and operating income were all up substantially, due to the strong production growth that resulted from the acceleration in our drilling activity beginning in late 2003 and the continued strong commodity prices. Going forward, we expect continued growth in our production volumes, driven by the 74% increase in our year-over- year drilling budget. Combining this anticipated production growth with strong commodity prices should generate substantial value appreciation for our shareholders over the coming quarters."
Shepherd further added, "Given high commodity prices and our improved revenue realizations, our operating profit per Mcfe expanded to $4.37, relative to $3.69 in 2003 and $2.45 in 2002. We believe that this illustrates the opportunity we are seizing to compound value for our shareholders through our accelerated drilling program in this window of high commodity prices."
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