Net income available to common stockholders was $14.8 million for the first quarter of 2006 compared to $19.5 million for the first quarter of 2005. Net income per diluted share for the first quarter 2006 was $0.37 compared to $0.51 per diluted share in the same quarter a year ago. Revenue for the first quarter of 2006 rose to $110.1 million, a 13% increase over first quarter 2005 revenues of $97.5 million. Discretionary cash flow, which is cash flow from operating activities before changes in working capital and exploration expenses, rose to $92.9 million, up 32% from $70.2 million in the first quarter last year. (See reconciliation of discretionary cash flow schedule in the tables.) Cash flow from operating activities in the first quarter of 2006 was $63.9 million compared with $69.4 million in the same quarter a year ago.
The first quarter of 2006 benefited from record oil prices and strong natural gas prices, and included $12.7 million in claims accrued under the Company's business interruption insurance coverage. These benefits were reduced by lower production volumes due to hurricane related shut ins; increased exploration expenses associated with an expanded capital expenditure program; and higher depreciation, depletion, and amortization (DD&A) expenses. The Company said DD&A per Boe, which increased in the first quarter from prior periods, is expected to trend downward in the coming quarters.
Production for the first quarter of 2006 averaged 22,991 Boe per day, up 24% from 18,583 Boe per day in the fourth quarter of 2005, but down 12% from 26,007 Boe per day in the first quarter of 2005. Natural gas production in the first quarter of 2006 averaged 94.8 million cubic feet (Mmcf) per day, a 16% rise from 82.0 Mmcf per day in the fourth quarter of 2005. Oil production in the most recent quarter averaged 7,185 barrels per day, a 46% rise from the average of 4,916 Boe per day in the fourth quarter of last year. First quarter 2006 production volumes were down compared to the first quarter of 2005 due to the impact of hurricane related shut ins but were up significantly from the fourth quarter of 2005 as new wells came on line and production continued to be restored following completion of repairs to third-party pipelines and processing facilities. The Company said production is currently averaging over 29,000 Boe per day.
Richard A. Bachmann, EPL's Chairman and CEO, commented, "We are pleased to get off to a strong start in 2006. The 24% increase in first quarter production from fourth quarter 2005 is a strong showing following the production disruptions related to last year's storm season. Now that the majority of the third-party infrastructure repairs that limited our production have been completed and new production has been added, we have essentially returned to pre-storm volume levels. By the end of May, we should be above last year's record production high of 30,000 Boe per day. We believe that our first quarter results and the positive indications we are seeing for the second quarter are just the start to what should be a great year for us."
Oil price realizations for the first quarter of 2006 averaged $59.16 per barrel, a 30% increase from $45.68 per barrel in the same period a year ago. Natural gas price realizations in the quarter averaged $8.30 per thousand cubic feet (Mcf), increasing 27% from $6.52 per Mcf in the first quarter of 2005. All commodity prices are stated net of hedging impact. The Company maintains a complete and regularly updated schedule of hedging positions under "Hedging" in the Investor Relations section of the Company's web site, www.eplweb.com.
During the quarter, the Company said capital expenditures for exploration and development activities totaled $92.5 million. The Company also said that the projected 2006 capital budget of $360.0 million will be executed with internally generated funds. As of March 31, 2006 total debt stood at $225.0 million, and the Company's debt to total capitalization ratio was 35%.
At the March 2006 Central Gulf of Mexico Lease Sale, EPL was the high bidder on 11 of 18 blocks on which the Company submitted bids. The successful bids represent approximately 52,500 gross acres, including two deepwater tracts as well as nine other areas on the Gulf of Mexico Shelf. EPL's share of the lease bonuses for the successful high bids totaled $7.9 million. To date, seven of the high bid blocks have been awarded, including the two deepwater leases.
Shelf and Onshore
During the first quarter, the Company announced discoveries on four Shelf properties including the East Cameron 268 #1, South Timbalier 23 #CC-4st, West Cameron 3 #1, and West Cameron 176 #13. EPL owns a 50% working interest in the East Cameron 268 #1, 27% in South Timbalier 23 #CC-4, and 25% working interest in each of the other two wells. All of these wells had moderate reserve potential, and production from each well is expected by the end of the year. In addition to restoring wells shut in by the storms, five wells from discoveries in prior years commenced production at East Cameron 111, Eugene Island 141, North Padre Island 913, and South Marsh Island 192 since January 1, 2006.
In the first quarter, the Louisiana State Lease 15016 #1 well testing the Denali prospect in South Pass 26 was determined to be non-commercial. The Company recognized dry hole expense of $7.5 million in the first quarter of 2006 in connection with the well. While there is a possibility for future tests of deeper horizons in the area, none are planned for 2006. In addition, the Company announced the well at Grand Isle 66 did not encounter hydrocarbons. This moderate potential well, operated by Walter Oil and Gas Corporation in which EPL held a 50% working interest, was drilled to a total depth of 16,150 feet. The Company also announced that the non-operated high potential, high risk well at West Cameron 202, in which EPL held a 25% working interest, is being plugged and abandoned after it was drilled to a total depth of 15,876 feet, the point at which hole conditions prevented the well from being drilled deeper to test the higher potential targets. For the year to date, the Company has drilled six discoveries out of nine exploratory tests. The Company plans to drill at least 14 additional exploratory wells on the Shelf in the balance of 2006, with four of those wells having high reserve potential.
Onshore in south Louisiana, the Company recently drilled a successful exploratory test in the Little Lake area in which it has 50% working interest, which should be on line late in the second quarter of 2006. EPL plans to commence drilling a deep, high risk, high potential exploratory test, the Lakeside Prospect, in Cameron Parish in mid to late May. At least one additional onshore deep exploratory test is planned for later in the year.
In February, the Company announced its entry into the deepwater Gulf of Mexico with an agreement to acquire a 25% working interest in 23 undeveloped leases with 13 identified prospects from Noble Energy, Inc. The first well, Mississippi Canyon Block 204 #1, called Redrock, was drilled to a total measured depth of 23,365 feet and encountered its intended objectives. While the resource estimation is still ongoing, high quality pay was encountered in one objective as expected. The quality and extent of a second objective is still under evaluation, and further appraisal work on this discovery will continue this year and into 2007. The second well, called Raton, which is at Mississippi Canyon 248, is currently drilling to a total measured depth of 20,000 feet and has multiple targets.
The Company is currently drilling two exploratory wells: the deepwater Mississippi Canyon 248 #1 and South Timbalier 42 #2. In addition, the Company said today that it has recently brought on line the South Timbalier 41 #B-2 well, a 2006 development well. The well, in which the Company owns a 60% working interest, is currently producing approximately 70 Mmcf and 1,200 barrels of condensate per day on a gross basis, and is EPL's highest rate well.
Richard A. Bachmann continued, "Based on the operational pace we have established early in the year, we believe we are well positioned to meet our production goal to increase our annual production by 25% to 35%. With our entry into deepwater and our continued focus on the Shelf and onshore south Louisiana, we believe this will be one of our most exciting exploratory drilling programs."
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