Credo Reports 20% Drop in Q1 Earnings

Credo Petroleum Corp. on Tuesday reported its financial results for the quarter ended January 31, 2007.

For the first fiscal quarter ended January 31, 2007, Credo generated net income available to shareholders of $1,364,000. The financial benefit of a 21% increase in production was more than offset by significantly lower natural gas prices. For first quarter, NYMEX prices were 42% lower than last year -- $7.10 per Mcf versus $12.16 in the aftermath of Hurricane Katrina. Credo's first quarter natural gas price realizations were only 26% lower than last year due to hedging transactions.

Net income declined 20% to $1,364,000 compared to $1,695,000 last year. On a per diluted share basis, net income was $.15 compared to $.18 last year. Revenue fell to $4,055,000 for the first quarter of 2007 compared to $4,365,000 last year. Earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA") declined to $2,864,000 compared to $3,101,000 last year.

James T. Huffman, President, said, "The fundamentals of our business improved during the first quarter, as highlighted by a 21% increase in production to a new record. Nevertheless, our financial results for the period are below last year due to sharply lower natural gas prices. Fortunately, our first quarter natural gas price realizations were buttressed by hedging gains."


Successful drilling boosted production 21% to a new first quarter record, following production growth of 13% last year. First quarter 2007 production was 600 MMcfe (million cubic feet of gas equivalent) compared to 494 MMcfe last year. Natural gas production rose 21% to a first quarter record of 528 MMcf compared to 437 MMcf last year. Oil production rose 25% to 11,900 barrels compared to 9,500 barrels last year. Natural gas accounted for 88% of the company's first quarter 2007 production.


Capital spending for the first quarter totaled $3,061,000 compared to $3,221,000 last year. This level of capital spending enables Credo to continue to increase its production, while simultaneously setting the stage for significant production and reserve growth through new projects.


Net wellhead natural gas prices for the first quarter fell 40% to $5.28 per Mcf compared to $8.80 last year. Hedging transactions increased wellhead prices $.75 per Mcf. By comparison, hedging transactions reduced wellhead prices $.61 per Mcf last year. As a result, Credo's total natural gas price realizations fell only 26% to $6.03 per Mcf compared to $8.19 last year. Wellhead oil prices fell 8% to $52.06 per barrel compared to $56.94 last year. There were no oil hedging transactions.

Hedge positions for production months after first quarter end totaled 1.99 Bcf (billion cubic feet of gas) covering the production months of February 2007 though March 2008. These hedges are intended to cover between 60% and 75% of the company's current production base without taking into consideration estimates of new production from future operations. The average monthly hedge price (NYMEX basis) ranges from $7.76 in the summer to $9.47 in the winter, with a weighted average price for the period hedged of $8.55.

Hedges include contracts indexed to the NYMEX (83%) and to Panhandle Eastern Pipeline Company for Texas, Oklahoma mainline (17%). For comparative purposes, hedges indexed to Panhandle Eastern Pipeline Company are expressed on a NYMEX basis. For hedges indexed to Panhandle Eastern Pipeline Company, the individual month price (basis) differentials between the NYMEX and Panhandle Eastern Pipeline Company range from minus $1.16 to minus $0.90.



At January 31, 2007, working capital was $9,451,000, a 19% increase over last year. Total assets were $48,709,000 including cash and short-term investments of $9,191,000. Stockholders' equity was a record $35,917,000. The company's only long-term debt is $163,000 related to an exclusive license obligation.

Credo Petroleum Corporation is a publicly traded independent energy company headquartered in Denver, Colorado. The company is engaged in the exploration for and the acquisition, development and marketing of natural gas and crude oil in the Mid-Continent and Rocky Mountain regions, as well as Texas, Kansas and Louisiana.

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