Baseline Oil & Gas has announced its results for the third quarter of 2008. Net production for the quarter was 668 Mmcfe, of which 55% was crude oil and condensate and 45% was natural gas. Average daily net production for the third quarter was 7.3 Mmcfepd, comprised of 671 bopd and 3.2 Mmcfpd.
Operations from Baseline's Blessing Field contributed 54% of first quarter volumes, with the Eliasville Field contributing the remaining 46%. Oil and gas revenue, before the effect of hedging activities, totaled $10.7 million for the quarter.
The Company's third quarter average realized oil price was $117.80 per barrel, while its average realized natural gas price was $11.59 per mcf, each before the effects of hedging. This resulted in a combined pre-hedging realized price of $16.05 per mcfe. Cash settlements paid to counterparties under various hedging contracts totaled $2.4 million for the quarter, for a reduction of $3.59 per mcfe in net realized price.
Total direct field-level cash operating expenses for the third quarter were $2.9 million, or $4.40 per mcfe. This figure included lease operating expense of $2.0 million ($2.95 per mcfe) and severance and ad valorem taxes of $0.7 million. General and administrative expenses for the quarter totaled $1.4 million ($2.07 per mcfe), the cash portion of which was approximately $1.2 million.
Interest expenses for the period were $5.3 million, of which $4.0 million represented interest accrued on the Company's Senior Secured Notes due 2012 and its Senior Subordinated Convertible Secured Notes due 2013 (with these latter Notes converted to equity during the third quarter). Depreciation, depletion and amortization expense was $1.5 million for the quarter. Capital expenditures for drilling, workovers, and equipment totaled $5.5 million for the period.
EBITDA, a non-GAAP financial measure was $4.2 million for the third quarter, down from $5.1 million during the second quarter of 2008. This drop was due primarily to a hurricane-related interruption of normal operations during the quarter.
Specifically, Baseline's production from the Blessing Field, Matagorda County, Texas, was either shut-in or curtailed for approximately ten days during September 2008 as a result of the third party natural gas sales line serving the field being temporarily off-line as a result of Hurricane Ike. None of the Company's production facilities sustained any physical damage attributable to the storm.
The third quarter was an unusually busy period for Baseline, as it included a change of majority ownership control, the conversion of the Company's subordinated bonds to equity, the restructuring of its senior bonds (which closed in October) and the continued execution of the 2008 drilling and workover capital program -- all against a backdrop of unusual commodity price volatility.
The Company's management continues to be encouraged by development results, and is in the process of planning Baseline's 2009 development activity level in tandem with an assessment of the Company's optimal future strategic course.
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