For the first quarter of 2005, the Company reported a $35.1 million expense for the change in fair value of derivatives, $31.5 million of which was a non-cash charge to record the Company's derivative positions at their fair value on March 31, 2005. Rising oil and gas prices had a material negative impact on the fair value of the Company's commodity derivatives, most of which were assumed in connection with the acquisition of Southwest Royalties, Inc., in May 2004.
Exploration costs for the first quarter of 2005 were $12.1 million, as compared to $6.6 million for the same period in 2004. As previously announced, exploration costs for the current quarter included a pre-tax charge of $7.2 million related to the abandonment of the Catherine Destefano #1 well in Robertson County, Texas.
Oil and gas sales for the first quarter of 2005 increased $25.2 million (69%) to $61.5 million from $36.3 million in the 2004 quarter. Higher oil and gas prices resulted in $13.9 million of the increase, and higher oil and gas production accounted for the remaining $11.3 million. Average realized oil prices in the first quarter of 2005 increased 41% from $34.04 to $47.83 per barrel while gas prices increased 20% from $5.17 to $6.22 per Mcf. Oil production for the first quarter of 2005 increased 65% to 619,000 barrels, or 6,878 barrels per day, from 375,000 barrels, or 4,121 barrels per day. Gas production increased 14% to 4.8 Bcf, or 52,900 Mcf per day, from 4.2 Bcf, or 45,901 Mcf per day in 2004. Incremental production from the Southwest Royalties acquisition and from recently completed wells in Louisiana accounted for most of the increase in production.
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