Carrizo Oil & Gas reported the Company's financial results for the first quarter of 2009, which included the following highlights:
Results for the First Quarter 2009
Production volumes during the three months ended March 31, 2009 were a record 8.26 Bcfe, 30 percent higher than the first quarter of 2008 and 14% higher than fourth quarter 2008. The increase was largely due to new production contributions from the Barnett Shale wells. Revenues for the three months ended March 31, 2009 were $30.7 million, as compared to $53.6 million during the quarter ended March 31, 2008. The decrease in revenues was primarily driven by lower realized natural gas prices, partially offset by increased production. Excluding the effect from settled hedges, Carrizo's average gas sales price decreased 55 percent to $3.63 per Mcf compared to $8.06 per Mcf for the first quarter of 2008 and the average oil sales price decreased 59 percent to $39.38 per barrel compared to $96.10 per barrel for the first quarter of 2008. Realized prices, including the effect of settled hedges, are presented in the table below.
For the quarter ended March 31, 2009, the Company reported adjusted net income of $13.1 million, or $0.43 and $0.42 per basic and diluted share, respectively, excluding a net $161.4 million non-cash, after-tax charge, comprised of a non-cash impairment of oil and natural gas properties of $163.9 million, stock compensation expense of $2.2 million, and $0.1 million of bad debt expense, that was partially offset by a marked-to-market unrealized gain of $4.8 million on derivatives. The Company reported a net loss of $148.3 million, or $(4.80) per basic and diluted share, for the quarter ended March 31, 2009, as compared to net loss of $5.3 million, or $(0.18) per basic and diluted share, for the same quarter during 2008.
EBITDA (earnings before interest, income tax, depreciation, amortization expenses, impairment of oil and natural gas properties and certain other items) during the first quarter of 2009 was $41.0 million, or $1.33 and $1.32 per basic and diluted share, respectively, as compared to $38.4 million, or $1.32 and $1.30 per basic and diluted share, respectively, during the first quarter of 2008.
Lease operating expenses (excluding production taxes and transportation costs) were $6.1 million (or $0.74 per Mcfe) during the three months ended March 31, 2009 as compared to $4.9 million (or $0.77 per Mcfe) for the first quarter of 2008. The increase is largely attributable to the increased production and well count.
Transportation costs were $3.3 million (or $0.40 per Mcfe) during the three months ended March 31, 2009 as compared to $2.3 million (or $0.36 per Mcfe) for the first quarter of 2008.
Production taxes were a net benefit of $1.3 million, comprised of $0.6 million in production tax expenses on the production for the quarter and offset by a $1.9 million severance tax refund on certain wells that qualified for a tight-gas sands tax credit for prior production periods.
Depreciation, depletion and amortization expenses ("DD&A") were $16.5 million during the three months ended March 31, 2009 ($2.00 per Mcfe) as compared to $14.1 million ($2.22 per Mcfe) during the first quarter of 2008. The increase in DD&A expense was due primarily to increased production partially offset by a lower depletion rate primarily attributable to the fourth quarter 2009 ceiling test impairment.
General and administrative expenses ("G&A") decreased to $4.3 million during the three months ended March 31, 2009 from $5.1 million during the same quarter of 2008 primarily due to the absence of a 2008 annual cash bonus. Alternatively, the Company issued common stock, in lieu of cash, to pay 2008 discretionary bonuses to non-executive employees, discussed below.
Non-cash, stock-based compensation expense was $3.4 million ($2.2 million after tax) for the three months ended March 31, 2009 compared to $1.5 million ($0.9 million after tax) for the same period in 2008. The increase was due primarily to the issuance of common stock, in lieu of cash, to pay 2008 discretionary bonuses to non-executive employees.
The significant decline in oil and natural gas prices, indicated by average prices of $3.17 per Mcf for natural gas and $51.76 per Bbl for oil on May 6, 2009, caused the discounted present value (discounted at 10 percent) of future net cash flows from proved oil and gas reserves to fall below the net book basis of the Company's proved oil and gas properties. This resulted in a non-cash ceiling test write-down at the end of the first quarter of 2009 of $252.2 million ($163.9 million after tax).
A $30.1 million net gain on derivatives was recorded for the first quarter of 2009 comprised of $7.5 million ($4.8 million after tax) for the unrealized marked-to-market, non-cash gain on oil and natural gas derivatives and a $22.6 million gain for settled oil and natural gas derivatives.
Interest expense and capitalized interest for the three months ended March 31, 2009 were $9.1 million and $(5.0) million, respectively, as compared to $6.5 million and $(3.7) million for the same period in 2008. The three months ended March 31, 2009 includes approximately $3.0 million in non-cash interest expense associated with the debt discount on the Company's senior convertible notes as prescribed by APB 14-1. The increases are also attributable in part to higher debt balances due to the issuance of the senior convertible notes subsequent to the three months ended March 31, 2008, and partially offset by lower interest rates in the first quarter of 2009.
S.P. "Chip" Johnson IV, Carrizo's President and Chief Executive Officer, commented, "Production and operating results for the first quarter were in-line with our expectations as we are maintaining tight spending controls on all of our activities in this low commodity price environment. Although the significant financial impact of the current, low commodity prices are reflected in our results, we are pleased to be able to maintain profitability and look forward to the market returning to healthier pricing levels in the future. With a very high percentage of our 2009 production hedged at prices well above the current market, Carrizo should be able to generate sufficient cash flow to maintain our announced capital spending program. The highlights for this quarter included the increase in our borrowing base to $290 million and the drilling and logging of our first Marcellus well, the Cowfer #1, located in Centre County, PA. We are currently evaluating the logs and rock data collected to design the fracture stimulation. This well represents the initial phase of our vertical well Marcellus program designed to evaluate the prospectivity of our extensive land position. In the Barnett Shale, we have three rigs running in Tarrant County, including one on the University of Texas at Arlington campus and one drilling in the town of Pantego."
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