Total revenues for the quarter increased by 93% to $25.2 million, versus $13.0 million for the prior year period. Revenues for the quarter increased by 46% sequentially over the third quarter of 2005. Average net oil and gas prices received in the quarter, including realized gains and losses on the effective portion of oil and gas derivatives, were $10.57 per Mcf of gas and $29.91 per barrel of oil.
Total revenues for the year increased by 52% to $68.3 million versus $45.0 million for the prior year period. Average net oil and gas prices received for the year were $8.56 per Mcf of gas and $35.87 per barrel of oil, including realized gains and losses on the effective portion of oil and gas derivatives.
The average prices received for the Company's natural gas do not include the realized losses on its ineffective gas derivatives.
Operating income, defined as revenues minus operating expenses, increased by 98% to a record $9.3 million in the quarter, compared to $4.7 million in the prior year period.
Operating income increased by 3% to $13.1 million for the year, compared to $12.7 million for the prior year period.
Net income was $8.6 million, or $0.35 per basic share, in the quarter, compared to $9.2 million, or $0.45 per basic share, in the prior year period. After giving effect to a largely non-cash loss on derivatives not qualifying for hedge accounting of $37.7 million, the Company reported a net loss of $17.5 million ($0.75 per basic share) for the year, compared to net income of $18.5 million, or $0.95 per basic share in the prior year period, which included a non-cash gain on derivatives of $2.3 million.
Earnings before interest, taxes, DD&A and exploration ("EBITDAX"), was approximately $10.0 million for the quarter, compared to $8.0 million in the prior year period. EBITDAX for the year was $35.8 million, compared to $29.2 million in the prior year period (see accompanying table for a reconciliation of EBITDAX, a non-GAAP measure, to net cash provided by operating activities).
Discretionary cash flow, defined as net cash provided by operating activities before changes in working capital, increased to $8.5 million in the quarter, compared to $7.9 million in the prior year period. Discretionary cash flow increased to $32.2 million for the year, compared to $26.9 million in the prior year period. Net cash provided by operating activities was $45.6 million for the year, compared to $41.0 million for the prior year period.
Net production volumes in the quarter increased by approximately 27% to 2.64 billion cubic feet equivalent ("Bcfe"), or approximately 29,000 Mcfe per day, versus 2.08 Bcfe, or approximately 23,000 Mcfe per day, in the prior year period. The Company estimates that approximately 4,000 Mcfe per day of its South Louisiana production was shut-in during the fourth quarter as a result of Hurricanes Katrina and Rita. As previously reported, the Company has restored approximately 90% of its pre-hurricane volumes in South Louisiana, with the remaining pre-hurricane production volumes being temporarily shut-in primarily awaiting completion of repairs to third party processing facilities.
Approximately 55% of net production volumes for the quarter came from Cotton Valley Trend wells in East Texas and North Louisiana, versus approximately 15% of net production volumes for the prior year period. Cotton Valley Trend gross volumes averaged approximately 24,200 Mcfe per day from an average of 33 wells producing for the quarter, or approximately 730 Mcfe per day, per well. The Company's net Cotton Valley Trend production volumes averaged approximately 16,000 Mcfe per day from a net average 30 wells producing for the quarter, or approximately 530 Mcfe per day, per well.
Net production volumes for the year increased by approximately 13% to 6,237,000 Mcf of gas and 408,000 barrels of oil, or 8.69 Bcfe, versus 4,818,000 Mcf of gas and 475,000 barrels of oil, or 7.67 Bcfe, in 2004. Yearly production volumes in 2005 were negatively impacted from the effects of Hurricanes Katrina and Rita.
The Company drilled 64 wells in 2005 with a 97% success rate. The Company had a 100% success rate on its Cotton Valley Trend wells.
Capital expenditures for the quarter and year totaled $58.1 million and $164.6 million respectively, compared to $18.7 million and $47.5 million in the prior year's quarter and year respectively. Approximately 86% of the capital expenditures in the quarter were associated with wells drilled in the Cotton Valley Trend.
For the year 2006, the Company has preliminarily budgeted total capital expenditures of approximately $195.0 million, of which approximately 85%, or $169.0 million, is expected to be focused on the relatively low risk development drilling program in the Cotton Valley Trend of East Texas and North Louisiana, with the remainder of $26.0 million to be spent on the Company's existing properties and new exploration programs. The Company expects to finance its 2006 capital expenditures through a combination of cash flow from operations, borrowings under its existing bank credit facility and remaining proceeds from a December 2005 Series B Convertible Preferred Stock offering.
Total proved reserves grew by 71% to 173 Bcfe at year end 2005, versus 101 Bcfe at year end 2004. The Company replaced approximately 1,088% of its 2005 production with proved reserve additions, all of which were associated with its drilling and development activities during the year. At year end 2005, the Company's proved reserve life, or R/P ratio, was approximately 20 years. The proved reserves were approximately 83% natural gas, 39% developed and had a pretax present value at year end, discounted at 10%, of approximately $587 million using non-escalated year end pricing. One hundred percent of the Company's proved reserves at year end were audited by the Company's independent reservoir engineers.
Cotton Valley Trend
Drilling. The Company completed and added to production 18 Cotton Valley Trend wells during the quarter. Through March 14, 2006, the Company had drilled and logged a total of 88 wells, with a 100% success rate, with 78 currently producing and 10 being completed. The Company currently has 8 drilling rigs under contract with a 9th rig anticipated in November.
Acreage. The Company currently has 129,000 gross acres, 80,000 net acres in the Cotton Valley Trend, which has the potential for over 1,900 locations and over 1.2 trillion cubic feet of probable and possible natural gas reserves. The Company continues to seek additional opportunities to expand its inventory in resource plays similar to the Cotton Valley Trend.
The Company has drilled and logged its Gueymard No. 1 well, its initial test well at the St. Gabriel field in Iberville and Ascension Parishes, which has encountered approximately 60 feet of apparent pay. The Company is currently completing the well and will release test information upon receipt.
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