Revenues from oil and gas sales in the first quarter of 2006 were $322.0 million, compared to $137.4 million in the same period of 2005. First-quarter 2006 cash flow from operations totaled $227.1 million versus $101.1 million in the same period of 2005(1).
The increases in revenues, earnings and cash flow are due to higher production and prices.
First-quarter 2006 oil and gas production averaged 460.1 million cubic feet equivalent per day (MMcfe/d), a 91 percent increase over the 240.4 MMcfe/d in the same period a year earlier. Gas production rose 84 percent to 361.3 million cubic feet per day and oil volumes increased 122 percent to 16,464 barrels per day.
The increase in production is attributable to the addition of Magnum Hunter operations in June 2005 and continued positive drilling results. Partially offsetting these gains were hurricane-related disruptions (18 MMcfe/d) and property divestitures (13 MMcfe/d).
First-quarter 2006 gas prices increased 20 percent to $7.19 thousand cubic feet (Mcf) and oil rose 26 percent to $59.57 per barrel.
First quarter of 2006 includes a $15.6 million pre-tax gain on derivative instruments associated with swaps and collars assumed as part of the Magnum Hunter acquisition which do not qualify for hedge accounting. First-quarter 2006 payments on these derivative instruments totaled $7.4 million.
First-quarter 2006 exploration and development (E&D) expenditures totaled $273.2 million, up from $92.7 million in the first quarter of 2005. In the first quarter of 2006, we participated in drilling 170 gross (108.8 net) wells, with an overall success rate of 89 percent. We expect full-year 2006 exploration and development expenditures to approximate $1 billion.
The following statements provide a summary of production and certain expense projections for the full-year 2006.
Non-operated Gulf of Mexico production of 16 MMcfe/d was shut in at end of the first quarter of 2006 because of hurricane damage. The majority of this output is expected to be restored by the end of the second quarter of 2006. Based on planned capital spending, resumption of Gulf of Mexico volumes and numerous other factors related to production forecasts, full-year 2006 volumes are expected to range from 475-495 MMcfe/d.
Expenses for 2006 are expected to fall within the following ranges summarized below: Expenses ($/Mcfe): Production expense $0.95 - $1.05 Transportation expense 0.11 - 0.14 Depreciation, depletion and amortization 2.20 - 2.25 General and administrative expense 0.25 - 0.28 Production taxes (% of oil and gas revenue) 6.5% - 7.5%
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