Net income was $3.7 million for the first quarter of 2007 compared to $14.8 million for the first quarter of 2006. Net income per diluted share for the first quarter 2007 was $0.09 compared to $0.37 per diluted share in the same quarter a year ago. Revenue for the first quarter of 2007 was $108.5 million, essentially flat with first quarter 2006 revenues of $109.2 million. Discretionary cash flow, which is cash flow from operating activities before changes in working capital and exploration expenses, was $71.2 million versus $92.9 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 2007 was $113.8 million compared with $63.9 million in the same quarter a year ago.
The first quarter of 2007 benefited from a 13% increase in production volumes versus the first quarter of 2006. Benefits were also realized in the quarter from the settlement of insurance claims related to Hurricanes Katrina and Rita. Insurance collections in the first quarter of 2007 were $92.9 million, compared to $58.3 million of insurance receivables recorded at the end of year 2006. The benefits of increased production and gains resulting from insurance collections were reduced by decreased commodity prices and increased expenses, primarily attributable to $8.8 million of legal and financial advisory fees related to the exploration of strategic alternatives and the recently concluded equity self-tender offer and related tender offer for the Company's senior notes due 2010. Lease operating expenses were also higher than the same period a year ago, mainly due to additional expenses associated with production from new field discoveries, non-routine workover expenses, costs associated with pipeline repairs at its East Bay field, and hurricane related inspections not covered by insurance.
Production for the first quarter of 2007 averaged 25,982 barrels of oil equivalent (Boe) per day, up 13% from 22,991 Boe per day in the first quarter of 2006. Natural gas production in the first quarter of 2007 averaged 100.4 million cubic feet (Mmcf) per day, a 6% rise from 94.8 Mmcf per day in the first quarter of 2006. Oil production in the most recent quarter averaged 9,244 barrels per day, a 29% rise from the average of 7,185 barrels per day in the first quarter of last year. First quarter 2007 production volumes were up compared to the first quarter of 2006 due to new wells that came on line and essentially all production being restored following the disruptions related to the 2005 storm season.
Oil price realizations for the first quarter of 2007 averaged $53.31 per barrel, a 10% decrease from $59.16 per barrel in the same period a year ago. First quarter natural gas price realizations averaged $7.09 per thousand cubic feet (Mcf), decreasing 15% from $8.30 per Mcf in the first quarter of 2006. 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, capital expenditures for exploration and development activities totaled $103.2 million. As of March 31, 2007, the Company had cash on hand of $33.9 million, total debt of $315.0 million, and a debt to total capitalization ratio of 45%, and a net debt to total capitalization ratio of 41%.
Completion of Concurrent Tenders and Financing
On March 12, 2007, the Company announced the conclusion of its strategic alternatives process. The Company stated that the Board, with advice from the Company's financial advisors and management, determined to continue with the execution of the Company's strategic plan, augmented by an equity self-tender offer and related financing transactions and the divestment of selected properties. In late April, EPL privately placed $450 million of Senior Unsecured Notes at par and secured a new revolving credit facility. Proceeds were used to fund the purchase of 8,700,000 shares at $23.00 per share in its equity self-tender offer, the repurchase of approximately 96% of its senior notes due 2010, and the repayment of its then existing revolving credit facility. The Company stated it is actively marketing selected non-strategic properties for divestiture to reduce its post tender offer debt, with an expected close in the third quarter of 2007. Additionally, based on its increased financial leverage, the Company has initiated a comprehensive hedging program designed to mitigate commodity price risk.
Richard A. Bachmann, EPL's Chairman and CEO, commented, "We are very excited to have the corporate actions initiated in mid-March behind us, with only the asset divesture remaining to be wrapped up sometime in the third quarter of this year. I'm pleased to report that through all of the turmoil of the last two years, we have maintained the staff that brought us our previous successes. We can now turn our full attention to our core business, with renewed focus and determination to create value for our shareholders."
Recent Shelf Discovery
The Company also on Thursday announced a recent discovery on the Shelf, the West Cameron 252 #1 well. The moderate risk, moderate potential well, drilled to a total depth of 8,299 feet, encountered high quality natural gas pay in a single interval. The well is currently anticipated to initiate production in 2008, with an option to accelerate first production currently under evaluation. EPL, the operator, holds a 75% working interest in the well and Mariner Energy, Inc. holds the remaining 25%.
The Company has one moderate risk, high potential exploratory well underway, called Longhorn, located onshore in Terrebonne Parish in South Louisiana. One additional onshore exploratory well, the moderate risk, moderate potential Goldfish prospect located in Jefferson Parish in south Louisiana, is expected to spud in the second quarter.
The Company is currently drilling a moderate risk, moderate potential well located on the Shelf in West Cameron 312. For the remainder of the second quarter, exploration activity on the Shelf will focus within the South Timbalier (ST) area where the Company has historically had a strong track record of successes. Operations will include the planned spud of two wells, a moderate risk, high potential prospect, called Cap Rock, located in 60% EPL owned ST 41 and a moderate risk, moderate potential prospect, called Chimney Rock, located in 100% EPL owned ST 26. Additionally, EPL expects first production from the 100% EPL owned ST 46 discovery area in mid-second quarter from the recently completed #4 acceleration well.
Founded in 1998, EPL is an independent oil and natural gas exploration and production company based in New Orleans, Louisiana. The Company's operations are focused along the U. S. Gulf Coast, both onshore in south Louisiana and offshore in the Gulf of Mexico.
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