For the full year of 2006, Pogo's net income was $446,171,000, or $7.74 per share, on revenues of $1,745,031,000, compared to the full year of 2005 when net income was $750,703,000, or $12.43 per share, on revenues of $1,225,699,000.
Discretionary cash flow in the fourth quarter and for the full year of 2006 was $182,061,000 and $727,785,000, respectively, compared to discretionary cash flow of $253,615,000 in the fourth quarter and $837,497,000 in the full year of 2005. Net cash provided by operating activities during the fourth quarter and full year of 2006 was $133,100,000 and $651,875,000, respectively, compared to $206,597,000 and $845,537,000 for the same time periods in 2005.
2007 CAPITAL SPENDING, EXPLORATION BUDGET SET AT $720 MILLION
Pogo's Board of Directors approved a Capital and Exploration Budget for 2007 of $720 million today, covering Pogo's activities worldwide, including the drilling of some 370 gross wells. Pogo's total 2006 spending, including acquisitions as well as capital and exploration spending was approximately $1,730,000,000. Net of all of Pogo's 2006 acquisition expenses, including the acquisition of Latigo Petroleum, Pogo expended approximately $944,000,000 during 2006.
OIL AND GAS RESERVES REACH ALL-TIME HIGH
During 2006, including all acquisitions and dispositions, Pogo replaced an estimated 194% of its 2006 production of 183 bcfe. Obviously, reserves replacement results were impacted greatly by the sale of approximately 143 bcfe of proven reserves in the Gulf of Mexico, and acquisitions of an estimated 282 bcfe of net reserves largely resulting from Pogo's 2006 acquisition of Latigo Petroleum and Latigo's properties in the Permian Basin and the Texas panhandle. Through the drill bit alone, Pogo replaced 118% of its 2006 production. Pogo's year-end 2006 estimated equivalent proven oil and natural gas reserves, as calculated by Pogo's independent engineering consultants, rose to a record total of 2.213 trillion cubic feet equivalent (tcfe), some 706 bcfe of which is in Canada. Thus, Pogo grew its 2006 year- end reserves, company-wide, by 8%, which marks Pogo's fifteenth consecutive year of positive reserves growth. Pogo replaced 180% of its Canadian production with 2006 drilling and acquisitions. Beyond replacing 2006 production in Canada, Pogo's Canadian proven reserves grew 7% during 2006 from 657 bcfe to 706 bcfe at year end.
Pogo's 2006 reserves replacement costs from all sources was $3.48 per mcfe. Reserves replacement costs due to acquisitions in 2006 averaged $2.79 per mcfe. Reserves replacement by the drill bit alone in 2006 cost Pogo an average of $4.39 per mcfe.
2006 DRILLING RATE RISES
The year 2006 marked the busiest drilling year in Pogo's history, with 488 total gross wells drilled, up almost one-third, or 32%, from 2005, the company's previous record year as measured by drilling activity. Some 432, or 89%, of Pogo's 488 wells drilled in 2006 were successfully completed as producers.
Operations on Pogo's Canadian properties accounted for 152 successful completions out of 163 total wells drilled last year, a 93% success rate, as the company's Canadian year-end production exit rate touched 30,000 equivalent barrels per day.
FOURTH QUARTER OIL PRICES AND PRODUCTION VOLUMES FLAT, NATURAL GAS VOLUMES RISE WHILE PRICES SINK
Pogo's company-wide fourth quarter production of liquid hydrocarbons, including crude oil, condensate and plant products, averaged 35,647 barrels per day (bpd), almost identical to 35,685 bpd produced in the same quarter of 2005. Pogo's average crude oil and condensate prices received in the fourth quarter were $51.84 per barrel, down slightly from $52.68 per barrel in the same quarter in 2005. For the full year of 2006, Pogo averaged liquid hydrocarbon production of 36,924 bpd, up from 29,897 bpd produced in 2005.
Pogo's fourth quarter natural gas production was 292.3 million cubic feet per day (mmcf/d) up 10% from 265.1 mmcf/d in the same quarter of 2005. Natural gas prices averaged only $6.06/mcf, down 39% from $9.99/mcf received in the fourth quarter of 2005. Full year 2006 natural gas production rose 12% to 279.6 mmcf/d, up from 250.2 mmcf/d in 2005.
Pogo drilled 57 fourth quarter wells in the Permian Basin and Texas panhandle areas, completing 54 of them as producers. The 100% Pogo-owned Cypress 34 Fed No. 1 tested 585 bpd and 1.9 mmcf/d from the Bone Spring formation at a vertical depth of 7,950 feet subsurface. As many as six more wells are now available to be drilled in this excellent play in Eddy County, New Mexico.
One of the three successful fourth quarter Wheeler field wells in Wheeler County, Texas, was the 64%-owned Luker No. 1-02 well, which tested the Granite Wash/Atoka Wash horizons at a rate of 120 bpd and 3.4 mmcf/d. Many more locations are available in the fine Wheeler field.
Five successful fourth quarter wells in Ochiltree County, Texas, at 100%- owned Courson Ranch, included the Courson Ranch 158 No. 10, which tested the Mississippian horizon at a rate of 175 bpd and 0.8 mmcf/d. Many additional drilling locations on the ranch await the drill bit.
Seven of ten fourth quarter wells drilled in the Madden field in the Wind River Basin in central Wyoming were successfully completed as producers. Scores of Madden wells are budgeted for 2007.
In Canada, Pogo's highly prospective and potentially large Tay River prospect well in southern Alberta was spudded on January 28, 2007. It should reach its anticipated total depth near the middle of this year.
The first northern Taranaki Basin exploratory well to be drilled on Pogo's one million acre exploration license area in offshore New Zealand waters is expected to spud by August of this year. Pogo and its partners are eager to test the first of their 3-D seismic-based New Zealand prospects.
Pogo Producing Company explores for, develops and produces oil and natural gas. Headquartered in Houston, Pogo owns approximately 4,800,000 gross leasehold acres in major oil and gas provinces in North America, 6,354,000 acres in New Zealand and 1,480,000 acres in Vietnam.
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