Fiscal 2006 was the fourth consecutive record setting year for the Company. Net income for fiscal 2006 was $10,574,219 or $1.25 per share as compared to net income for 2005 of $10,484,786 or $1.24 per share. Total revenues for 2006 were $37,485,680 as compared to $33,598,175 for 2005. The Company continues to record strong growth in cash flow from operations with an increase of 38% to $23,736,931, or $2.80 per share, in 2006. Capital expenditures increased 53% to $22,624,040 during fiscal 2006. The Company participated in the drilling of 118 wells in 2006. Capital expenditures are expected to continue to increase in 2007 due to the Company participating in an increasing number of horizontally drilled wells, which are considerably more expensive to drill, increased completion costs especially new and more complicated fracturing techniques, continuing to increase our average ownership interest in new wells drilled and generally higher oil field cost.
PRODUCTION FOR FISCAL 2006
Panhandle's net production for fiscal 2006 increased to 4,881,976 MCFE as compared to 4,620,712 MCFE in fiscal 2005. Net production by quarter in fiscal 2006 was: 1,196,923; 1,173,313; 1,134,814; and 1,376,926 MCFE for the first through the fourth quarters, respectively. The average MCFE sales price in 2006 was $7.38 as compared to $6.54 in 2005.
Ben D. Hare, Co-President and COO stated:
"The growth in production in 2006 is the early result of strategic changes made in Panhandle's operations in mid-2006, coupled with an increase in 2006 capital expenditures.
These strategy changes and the increased level of capital expenditures will continue into fiscal 2007 and are expected to yield improved production and reserve volumes in fiscal 2007 and beyond. One of the strategy changes was the decision to actively participate in drilling horizontal Woodford formation wells in southeastern Oklahoma. To date, we have approved 22 wells for drilling, six of which have been successfully completed as gas producers, the remaining 16 are either drilling, testing or scheduled to be drilled. Also, in early FY 2007 we have reached total depth of 25,220' on the Mills Ranch 1-96 in Wheeler County, Texas. The well is currently testing the Hunton formation, which according to the operator, has over 300 feet of apparent pay."
Michael C. Coffman, Co-President and CFO stated:
"Fiscal 2006 financial results were negatively impacted by recording a non-cash flow impairment provision on certain of its oil and gas properties of $3,010,000 as compared to an impairment provision of $232,000 in 2005. The 2006 impairment provision was principally the result of one field in which the more recent wells drilled, and especially the last well drilled, did not yield anticipated production or reserve volumes. Also, the decline in natural gas prices in the latter part of fiscal 2006 caused the natural gas prices used in the impairment calculation to be substantially lower than the prices used in the 2005 impairment calculation, which results in a lower fair value calculation. In spite of the impairment charge, the Company was able to have a very successful year and we expect our aggressive drilling program which will continue through 2007 and beyond, will produce increased production and reserves."
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