Meridian has announced its third quarter 2008 financial and operational results. A summary of the quarter's results are:
Net income to common shareholders for the third quarter of 2008 was $699 thousand or $0.01 per diluted common share, compared to net income of $750 thousand, or $0.01 per diluted common share for the third quarter of 2007. The variance between the two periods was due primarily to hurricane related expenses of $1.5 million; approximately one month of shut-in production in south Louisiana (estimated at 550 to 600 Mmcfe) caused by the back-to-back storms in the Gulf of Mexico; and expenses related to employee retention payments, offset by improved commodity prices and lower depletion and depreciation. Excluding the hurricane related expenses, the Company's net income would have been approximately $1.6 million, or $0.02 per share.
Production volumes for the third quarter of 2008 totaled 3.1 billion cubic feet of gas equivalent ("Bcfe''), or an average of 33.3 million cubic feet of natural gas equivalent per day ("Mmcfe/d'') compared to 4.2 Bcfe or 45.4 Mmcfe per day for the third quarter of 2007. The variance in production volumes between the two periods is due in large part to the impact of hurricanes Gustav and Ike which struck south Louisiana and the upper Texas coast. These storms forced the Company to temporarily shut-in production in its core operating areas. The Company sustained some physical damage from the storms, but more importantly, experienced delays in bringing production back on-line in several of its operating areas due primarily to lack of access to the fields and being shut-in by third party pipelines and processing facilities. The amount of delayed production for the third quarter related to the storms was estimated to be between 550 and 600 Mmcfe.
Oil and Gas Revenues
Oil and gas revenues (which include oil and gas hedging activities) for the third quarter of 2008 totaled $36.8 million, compared to $33.7 million for the third quarter of 2007, an increase of $3.1 million, or 9%. The variance between the two periods for oil and gas revenues was due primarily to the increases in realized commodity prices, partially offset by the reduced level of production referenced above. Natural gas prices increased between the periods from $6.77 per Mcf in the third quarter of 2007 to $9.67 per Mcf for the same period in 2008. Crude oil prices increased from $69.92 per barrel in the third quarter of 2007 to $99.42 per barrel in the same period in 2008. Oil and gas revenues for the first nine months of 2008 were $122 million, up by $8.2 million, or 7% compared to the same period last year.
Lease Operating Expenses
Lease operating expenses for the third quarter of 2008 were $5.9 million, down by $1.1 million compared to $7.0 million for the third quarter of 2007. Third quarter 2008 expenses decreased primarily due to lower insurance costs and a decrease in workovers. Lease operating expenses for the first nine months of 2008 were down by $2.6 million, or 12% compared to the same period last year due primarily to decreased workovers, lower insurance costs, the sale of properties and fewer maintenance related activities.
Depletion and Depreciation
Depletion and depreciation for the third quarter of 2008 was $15.9 million down $1.7 million, or 10%, compared to $17.6 million for the third quarter of 2007. On a per Mcfe basis, depletion and depreciation for the third quarter was $5.19 per Mcfe compared to $4.21 per Mcfe for the third quarter of 2007. The difference between the two periods is due primarily to increased capital costs and lower production. Sequentially, depreciation and depletion expense was also down compared with the second quarter of 2008.
General and Administrative Expenses
General and administrative expenses for the third quarter of 2008 were $5.9 million compared to $4.1 million for the third quarter of 2007. The increase in general and administrative expenses between the periods was primarily due to expenses associated with a former employee's contract settlement, as well as the cost of a non-executive employee retention incentive plan. Sequentially, general and administrative expenses were up slightly compared to the second quarter of 2008 of $5.2 million.
Discretionary Cash Flow
Discretionary cash flow for the third quarter of 2008 was $19.9 million, compared to $20.2 million for the third quarter of 2007. Discretionary cash flow for the first nine months was $66.0 million, down by $5.2 million compared to the same period in 2007. Sequentially, discretionary cash flow was down slightly compared to $20.9 million for the second quarter of 2008.
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