Revenue for the third quarter 2005 rose 24% from $74.1 million in the third quarter last year, while net income available to common stockholders declined 25% from the third quarter 2004 figure of $8.7 million. Earnings per diluted share also declined from $0.25 in the same quarter last year. The Company said that the decline in net income and earnings per share was principally due to the impact of the tropical weather in the quarter, in particular Hurricanes Katrina and Rita, which not only affected revenue but also resulted in higher expenses, as detailed below.
Richard A. Bachmann, EPL's Chairman and CEO, commented, "The third quarter was a challenging one for EPL. In July and August, we were continuing to set new highs for the Company, producing over 30,000 barrels of oil equivalent per day for the first time in the Company's history. In the aftermath of Hurricane Katrina, we found an entirely new set of challenges in front of us, not the least of which was temporarily relocating our headquarters to Houston and opening an office in Baton Rouge. Hurricane Rita then delivered another punch to the Gulf of Mexico oil and gas infrastructure. We are still working with pipeline operators and other midstream companies to restore our production across a wide area of the Gulf, as many of the areas not damaged by Katrina were later hit by Rita. The good news is that we continue to make progress in that effort, and as of this week we have ramped production to over 20,500 Boe per day, or almost 70% of our pre-Katrina level."
Cash flow from operating activities in the third quarter of 2005 totaled $109.1 million, a 94% increase compared to $56.2 million in the third quarter last year. Discretionary cash flow, which is cash flow from operating activities before changes in working capital and exploration expense, was $62.8 million in the most recent quarter, compared to $51.5 million in the same period last year.
Total expenses for the third quarter of 2005 were 38% higher than in the third quarter of 2004, due in part to the tropical weather-related increase in lease operating expense and higher per unit depreciation, depletion, and amortization. The Company also had higher exploration expenses as a result of unsuccessful exploratory wells and approximately $9 million of impairments taken in the quarter.
Production in the third quarter 2005 averaged 19,292 barrels of oil equivalent ("Boe") per day, composed of 75.9 million cubic feet of natural gas and 6,642 barrels of oil per day. Oil production in the quarter was 25% lower than in the third quarter of 2004, and natural gas production was down 12% from the third quarter last year, reflecting the impact of tropical weather in the third quarter of 2005. On a Boe basis, production in the most recent quarter was 17% lower than the same quarter last year.
Price realizations for oil in the quarter averaged $49.55 per barrel, an increase of 44% from $34.41 in the third quarter last year. Natural gas price realizations rose 53% to $8.84 per thousand cubic feet from $5.79 in the same quarter a year ago. All prices are stated net of the impact of hedging. EPL maintains a complete schedule of its hedging positions on its website, www.eplweb.com, in the Investor Relations section.
For the nine months ended September 30, 2005, revenue totaled $295.7 million and net income available to common stockholders was $44.0 million, compared to figures of $212.7 million and $29.1 million, respectively, for the first nine months of 2004. Cash flow from operations was $253.7 million for the first nine months of 2005, rising from $124.9 million in the same period a year ago, and discretionary cash flow was $210.3 million, compared to the figure of $146.3 million for the first nine months of 2004.
Exploration and development expenditures in the most recent quarter were $84.2 million, bringing the year to date total to $251.5 million. Total debt stood at $225.0 million at quarter-end, while cash stood at $51.0 million and debt to capitalization was 39%. The Company also said that it had $75 million in unused borrowing capacity under its current bank facility.
With regard to physical damage to EPL's facilities from tropical weather, the Company expects its insurance to cover all damages in excess of a combined deductible of approximately $2.2 million for the various storms in the quarter. Under its business interruption insurance coverage, EPL is accruing recoveries on three properties, the East Bay field, South Timbalier 26 and South Marsh Island 109, beginning in the fourth quarter and continuing until production from those fields is fully restored, subject to policy limits.
In recent exploratory operations, EPL has had two discoveries onshore and four dry holes offshore. The dry holes offshore were at West Cameron 455 #1 (50% working interest), West Delta 52 #1 (100% working interest), West Cameron 98 #3 (25% working interest), and High Island 19 #1 (50% working interest). For the year to date, EPL has 14 discoveries in 23 wells offshore and 12 discoveries in 16 wells onshore, for an overall exploratory success rate of 67%. The Company currently has exploratory operations underway at three locations offshore, at Eugene Island 4 #1, South Pass 29 #1, and South Timbalier 42 #1.
At the Western Gulf of Mexico Lease Sale in August, EPL was the high bidder on all four leases on which it submitted bids. None of the four leases have been awarded to date.
The Company also added that production is currently over 20,500 Boe per day, with slightly more than 9,000 Boe per day remaining shut in as a result of Hurricanes Katrina and Rita. EPL said it expects production levels to continue to rise as repairs are completed to third party pipelines and onshore processing facilities.
Bachmann continued, "I want to thank all our employees who have worked so diligently for the Company and its shareholders, especially when many are facing significant personal challenges of their own in being displaced from their homes and in some cases their families. While the tropical weather this year will prevent us from reaching some of the goals we set for growth in 2005, that growth is now deferred into 2006."
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