Pacific Energy Resources Ltd. has announced the release of its operating and financial results for the second quarter of 2008 and the filing of these results with the TSX.
Production from continuing operations (after giving effect for recently closed divestitures) was 617,000 barrels of oil equivalent for the quarter or 6,780 BOE per day, up 16% from the first quarter of 2008. The realized price of oil per barrel, before hedging losses, was $120 in the second quarter of 2008 compared to $93 in the first quarter of 2008. Oil revenue per barrel, after hedging losses, was $105 in the second quarter of 2008 compared to $89 in the first quarter of 2008. Revenue from continuing operations jumped 32% from the prior quarter to a record $69.7 million, prior to hedging losses of $15.5 million.
Comparisons of current results to the comparable period in 2007 are not as meaningful given the significant acquisition of the Alaska properties in August 2007.
Lease operating expense ("LOE") per barrel of $40 for the second quarter of 2008 was down 11% from the first quarter of 2008 mainly due to the increased production from Platform Eureka in the Beta Field, California.
Net loss for the second quarter of 2008 from continuing operations was $24.9 million, compared to a restated $40.3 million loss from continuing operations for the first quarter of 2008 (before the first quarter's $48.4 million accelerated non-cash expensing of deferred financing costs and accretion of unamortized discount discussed below).
Adjusted EBITDA from continuing operations was $8.4 million, up significantly from $0.4 million for the first quarter of 2008. Please see the end of this release for a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss.
Darren Katic, President of Pacific Energy, stated, "We are pleased with achieving the increased production and lower per-barrel operating costs. We are also pleased to have completed the divestiture of the onshore California resulting in a significant pay down of outstanding debt moving towards our goal of a 20 to 25% reduction by year end 2008. Looking ahead, we now have clear visibility on our Phase 2 production target of a further increase of 1,000 barrels per day from the Beta Field by the end of September 2008. This forecasted increase in production will further drive down operating cost per barrel and drive revenue and EBITDA higher."
Average daily production from continuing operations for the second quarter of 2008 was 6,780 barrels of oil per day, with 2,475 BOE from our California offshore operations and 4,305 BOE from our Alaska assets.
Beta Field averaged 2,475 BOE per day for the quarter including the added production from Platform Eureka which was returned to production on April 17, 2008, which platform contributed an average of 634 BOE per day for the quarter ended June 30, 2008. Eureka achieved its Phase 1 production target of 1,000 BOE per day on June 27, 2008. Phase 2 targets a further increase of 1,000 BOE per day, which is expected to be reached by the end of September 2008. Beta's July 2008 production averaged approximately 2,900 BOE per day.
Operated Assets: Development drilling on our operated assets is expected to begin in the second quarter of 2009, this is a delay of approximately six months due to rig availability and weather-related logistics with the drilling season. Development will begin with drilling of proved undeveloped reserve ("PUD") locations off platform Osprey in the Redoubt Shoal field.
Non-Operated Assets: Our joint redevelopment plan in Alaska with our partner Chevron is ongoing. Development drilling is expected to begin in the first quarter of 2009, beginning with PUD drilling off platform Steelhead in the MacArthur River field.
LEASE OPERATING EXPENSES AND GENERAL & ADMINISTRATIVE COSTS
Lease operating expenses from continuing operations increased on a company- wide basis by 3% from the first quarter of 2008 but decreased 11% on a per barrel basis. LOE per barrel for the second quarter 2008 was $40.
LOE for the Beta Field increased 11% from the first quarter of 2008, but decreased 19% on a per barrel basis from the first quarter of 2008 reflecting the benefit of higher production. LOE per barrel was $33 in the second quarter of 2008.
LOE for our operated and non-operated assets in Alaska remained unchanged from the first quarter of 2008, but decreased 6% on a per barrel basis from the first quarter of 2008. LOE per barrel was $44 in the second quarter of 2008.
General and administrative expenses of $2.7 million decreased 35% from the first quarter of 2008 reflecting the absence of a first quarter $0.9 million transition services fee for the Alaska properties acquired in August 2007 and a $0.7 million increased allocation to lease operating expense.
Capital expenditures for development and other spending was approximately $11 million for the quarter ended June 30, 2008 and $21 million for the year to date. The current capital budget anticipates $45 million activity in the second half of the year and extending to completion of the projects in the first part of 2009, depending in part on cash available to fund such programs.
The Company's exploration efforts are focused on the Corsair prospect in the Cook Inlet Alaska which it plans on drilling beginning in the second quarter of 2009. The Company has been granted an extension by the State of Alaska until September 29, 2008 to show evidence of a heavy lift vessel, a necessary requirement to maintain the leases in good standing. The vessel will be used to transport a jack up rig to the Cook Inlet for the 2009 drilling season. The Corsair prospect may contain as much as 500 Bcf of gas and 100 million barrels of oil. Pacific Energy currently has 100% working interest in the prospect. It is the intention of the Company to farm out a large portion of the project to fund the exploration drilling.
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