The company reported slightly lower revenues for the quarter ended September 30, 2006, even though gas production increased 8% to 1,741 MCF per day from 1,609 MCF per day for the prior year three-month period. This was due to a 19% decrease in the average gas prices received for the current quarter to a price of $6.08 per MMBTU versus $7.26 per MMBTU for the quarter ended September 30, 2005.
Net income before interest, depletion, depreciation and taxes decreased 34% to $670,000, or $0.09 per diluted share, compared to $896,000, or $0.13 per diluted share for the prior three-month period.
The decrease in company earnings resulted primarily from an increase in our general and administrative expenses of about 117% due substantially to increased audit and accounting fees of approximately $133,000 (required to remain in compliance with the Sarbanes-Oxley Act), and non-cash charges of approximately $55,000, partially as a result of recognition of additional share-based compensation expense, and the amortization of deferred compensation related to the initiation of an investor relations service of $113,000 settled in shares of our common stock. The shares were issued in a prior period and expensed as services are provided. Recognition of share-based compensation expense was the result of the company's implementation of FAS 123® during the quarter. Another factor for the decreased earnings was the fact that the depletion, depreciation and amortization expense increased approximately $226,000 for the three months ended September 30, 2006. This increase of 89% was the result of using the approximate same depletion rate as fiscal 2006, but applying it to a larger full-cost pool that resulted in the higher total depletion taken.
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