Last year's third quarter results included the sale of the Company's south Louisiana and offshore properties, which generated a large gain, resulting in $189 million of net income, or $1.96 per share, $86.7 million of cash flow from operations and $21.5 million of discretionary cash flow. This year's third quarter includes a $2.9 million, net of tax, charge for impairment. Removing the results of asset sales and impairments in both quarters, the comparative results for net income is $38.4 million, or $0.40 per share for 2007, versus $45.3 million, or $0.47 per share for 2006, with the cash flow comparisons remaining unchanged.
Realized pricing between the comparative third quarters was essentially flat for both oil and natural gas. While oil has strengthened recently, third quarter prices fell within the Company's collared range. For natural gas, where weaker pricing has persisted, the Company realized $28.9 million from its hedge position for the quarter and $59.6 million year-to-date.
Equivalent production for the quarter totaled 21.9 Bcfe, up 14.7 percent over last year's pro forma comparison level of 19.1 Bcfe. The actual reported figure for last year was 23.0 Bcfe, which included production from the divested south Louisiana and offshore properties. "Equivalent production for the third quarter remained solidly within our guidance," stated Dinges. "We returned to our pre-asset sale daily production levels at the end of September as we predicted; however, along with other industry players, we shut in Rocky Mountain production when prices fell below economic levels for October."
Operating expenses between quarters grew five percent, but are up less than one percent in total when the impairment is removed from the comparison. The only changes from guidance for the quarter were increased direct operations expense due primarily to lease maintenance activity and slightly higher DD&A.
For the first nine months of 2007, the Company reported net income of $125.4 million, or $1.29 per share, cash flow from operations of $328.6 million and discretionary cash flow of $341 million. This compares to $289 million, or $2.98 per share, $356.1 million and $251 million, respectively. Removing the impairment and the gain on the sale, the nine- month comparison for net income is $120.6 million, or $1.24 per share for 2007 versus $145.2 million, or $1.50 per share for 2006. Primarily driving this result is lower absolute oil production between periods, due to the 2006 asset sale.
"Through the nine months ended September 30, 2007, we have been actively drilling (359 gross wells, up 19 percent), acquiring acreage and aggressively developing our portfolio," commented Dinges. "Right now, we have a 22 percent net debt to adjusted capitalization ratio and expect to borrow additional dollars to jump start 2008 with extensive fourth quarter activity in east Texas," Dinges added. Capital investment should approach $600 million for 2007.
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