Stone Energy Corporation announced first quarter 2008 net income of $62.2 million, or $2.22 per share, on oil and gas revenue of $203.2 million, compared to net income of $10.5 million, or $0.38 per share, on oil and gas revenue of $173.3 million in the first quarter of 2007. Discretionary cash flow totaled $150.3 million during the first quarter of 2008, compared to $102.1 million during the first quarter of 2007. Please see "Non-GAAP Financial Measure" and the accompanying financial statements for a reconciliation of discretionary cash flow, a non-GAAP financial measure, to net cash flow provided by operating activities. All per share amounts are on a diluted basis.
Daily production during the first quarter of 2008 averaged 185 million cubic feet of gas equivalent (MMcfe) per day, or 21% less than the average daily production of 238 MMcfe per day in the comparable period of 2007. The decrease was primarily the result of the sale of substantially all of the Rocky Mountain Region properties in June 2007, which contributed 41 MMcfe per day in the first quarter of 2007, and the divestiture of non-core Gulf of Mexico properties in the first quarter of 2008. For the month of April, production averaged over 200 MMcfe per day as volumes from two exploitation wells at Ewing Bank 305 added approximately 20 MMcfe per day.
Prices realized during the first quarter of 2008 averaged $95.72 per barrel of oil and $8.82 per thousand cubic feet (Mcf) of natural gas, or 49% higher on a gas equivalent basis as compared to the first quarter of 2007 average realized prices of $56.65 per barrel of oil and $6.95 per Mcf of natural gas. All unit pricing amounts include the cash settlement of effective hedging contracts. Hedging transactions increased the average realized price of natural gas by $0.09 per Mcf in the first quarter of 2008 and 2007. Hedging transactions decreased the average realized price of oil by $4.06 per barrel in the first quarter of 2008, compared to an increase of $0.66 per barrel in the first quarter of 2007.
Lease operating expenses during the first quarter of 2008 totaled $30.3 million, or $1.80 per thousand cubic feet of gas equivalent (Mcfe), compared to $51.1 million, or $2.39 per Mcfe, for the comparable quarter in 2007. The decrease in lease operating expenses is a result of operating efficiencies, the reduction of major maintenance expense, and the sale of substantially all of the Rocky Mountain Region properties in June 2007. In addition, the first quarter of 2007 included the drilling of a $9.9 million expensed replacement well.
Depreciation, depletion and amortization (DD&A) on oil and gas properties for the first quarter of 2008 totaled $62.7 million, or $3.73 per Mcfe, compared to $77.8 million, or $3.64 per Mcfe, for the first quarter of 2007.
Salaries, general and administrative (SG&A) expenses for the first quarter of 2008 were $10.3 million, or $0.61 per Mcfe, compared to $8.2 million, or $0.39 per Mcfe, in the first quarter of 2007. The increase in SG&A is primarily due to additional compensation expense associated with restricted stock issuances and higher legal and consulting fees.
Capital expenditures before capitalized SG&A and interest during the first quarter of 2008 totaled $68.6 million, excluding $21.7 million of lease and acquisition costs. Additionally, $5.1 million of SG&A expenses and $4.0 million of interest were capitalized during the quarter.
There were no borrowings outstanding at March 31, 2008 under our bank credit facility. Stone had letters of credit totaling $52.8 million, resulting in $122.2 million of available borrowings, at March 31, 2008. The borrowing base under the credit facility is re-determined periodically based on the bank group's evaluation of our proved oil and gas reserves.
Estimates for Stone's future production volumes are based on assumptions of capital expenditure levels and the assumption that market demand and prices for oil and gas will continue at levels that allow for economic production of these products. The production, transportation and marketing of oil and gas are subject to disruption due to transportation and processing availability, mechanical failure, human error, hurricanes, and numerous other factors. Stone's estimates are based on certain other assumptions, such as well performance, which may vary significantly from those assumed. Lease operating expenses, which include major maintenance costs, vary in response to changes in prices of services and materials used in the operation of our properties and the amount of maintenance activity required. Estimates of DD&A rates can vary according to reserve additions, capital expenditures, future development costs, and other factors. Therefore, we can give no assurance that our future production volumes, lease operating expenses or DD&A rate will be as estimated.
The following 2008 guidance does not account for any adjustments from the pending merger with Bois d'Arc. Stone intends to adjust its 2008 guidance following the closing of the merger.
Capital Expenditure Budget. The current 2008 capital expenditure budget is approximately $395 million, which excludes acquisitions, capitalized interest and G&A, and abandonment expenditures. Stone expects to spend approximately 60% of the 2008 capital budget on its Gulf of Mexico (GOM) exploitation program and facilities, and an estimated 40% on exploration and business development activities including deep water, shelf and onshore exploration drilling, GOM lease sale expenditures, onshore drilling and lease acquisition including Appalachia, seismic and reprocessing expenditures, and drilling activity in Bohai Bay, China. In addition, Stone expects to spend approximately $25 million on normal abandonment projects.
Production. For the second quarter of 2008, Stone expects net daily production to average between 195-210 MMcfe. Stone expects full year 2008 average daily production to be in the range of 175-200 MMcfe per day.
Lease Operating Expenses. Stone expects lease operating costs, excluding production taxes, to range between $140-$155 million for 2008 based upon current operating conditions and budgeted maintenance activities.
Depreciation, Depletion & Amortization. Stone expects its DD&A rate to range between $3.60-$3.90 per Mcfe during 2008.
Salaries, General & Administrative Expenses. Stone expects its SG&A expenses (excluding incentive compensation expense) to range between $36-$40 million during 2008.
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