Double Eagle Petroleum Reports 2010 Results

Double Eagle Petroleum reported its financial results for the year ended December 31, 2010. Net income attributable to common stock increased 171% to $1,780,000, or $0.16 per share for 2010 as compared to a net loss of $(2,514,000), or $(0.25) per share for 2009. The Company's net income attributable to common stock was net of dividends paid on the Company's outstanding Series A Preferred Stock of $3,723,000 for both 2010 and 2009. The increase in 2010 includes the proceeds received from a settlement of a lawsuit related to the recovery of natural gas produced by its interest in the Madden Deep Unit with an after-tax impact of $2,422,000 or $0.22 per share.

Clean earnings, a non-U.S. GAAP metric, totaled $19,608,000 for 2010, or $1.76 per share, as compared to $26,231,000, or $2.63 per share for 2009. Clean earnings excludes the effects on net income of non-cash charges, including depreciation, depletion and amortization expense ("DD&A"), unrealized gains/losses related to the Company's economic hedges, as well as share-based compensation expense. Clean earnings also excludes the impact of income taxes, as the Company does not expect to pay income tax in the foreseeable future due to its net operating loss carryforwards. Clean earnings was lower in the 2010 period primarily because the Company realized a 15% decrease in its natural gas price in 2010 and experienced an increase in production costs. Please see the table of this release for the reconciliation of Clean Earnings to US GAAP.

Production

Total natural gas and crude oil production decreased 2% to 9.2 Bcfe in 2010 as compared to 2009. This decrease was largely due to lower production volumes at the Catalina Unit and Mesa Units. The decrease in production volume at the Catalina Unit to 5.4 Bcf from 5.9 Bcf was largely the result of the natural production decline of wells within this field, as well as the continuation of the Company's well enhancement program, which requires the affected wells to be off-line temporarily while the wells are worked over. The Company performed well workovers on approximately 30 of its wells in 2010. The Company did experience a favorable change in production volumes at its non-operated properties in the Atlantic Rim, as the operator of these units added additional compressor capacity at the Doty Mountain Unit and performed fracture stimulation on numerous wells in 2010. In addition, the Company completed a purchase of additional working interest in the Catalina, Sun Dog and Doty Mountain Units in the third quarter of 2010.

Revenue

Production-related revenue totaled $44,475,000 for 2010, as compared to $52,080,000 for 2009. The production-related revenue included gains of $5,316,000 and $3,503,000 for 2010 and 2009 respectively, for the settlement of certain derivative instruments, which are not accounted for as cash flow hedges. Production-related revenue for 2010 includes revenue from the additional Atlantic Rim working interest for the period July 21 through December 31, 2010.

The decline in production-related revenue was driven by a decline in the Company's realized natural gas price as compared to 2009. The Company realized a natural gas price of $4.12 per Mcf in 2010 as compared to $4.85 in 2009. The Company's realized gas price includes the impact of realized gains/losses on its derivative instruments. The Company has a hedging program in place in order to reduce its volatility and exposure to oil and gas production cash-flow risk caused by fluctuating commodity prices. Excluding the realized gains/losses on hedges, the Company's average realized gas price was $3.67 for 2010 and $2.85 for 2009. The Company has historically entered into forward sales contracts, collars and fixed price swaps to hedge its equity production. All of the contracts the Company enters into are at no up-front cost to the Company. Subsequent to December 31, 2010, the Company was able to layer on one additional derivative contract for 2012 and two contracts for 2013.

Production costs

Double Eagle's production costs for 2010 increased 28% to $1.06 per Mcfe as compared to $0.83 per Mcfe primarily due to the aforementioned workover program in the Catalina Unit, coupled with higher transportation costs at the Sun Dog and Doty Mountain Units.

Capital Spending

In 2010, the Company invested $21,518,000, net to its interest, into capital projects primarily at its core properties in the Atlantic Rim and Pinedale Anticline. The capital spending included the Company's purchase of additional working interest from a third party in the Catalina, Sun Dog and Doty Mountain Units for a total purchase price of approximately $8,417,000. It also included approximately $5,398,000 for the drilling and completion of 16 new wells in the Mesa Units. The Company also increased its Niobrara formation holdings for a total cost of $1,043,000.

Credit Facility

Effective March 7, 2011, the Company amended its credit facility to add a third lender to the facility and to increase the borrowing availability on its $75 million facility from $55 million to $60 million. The Company added U.S. Bank to its lending group, which also includes Bank of Oklahoma (lead) and Key Bank. The rates and covenants under the amended credit agreement are consistent with the prior credit agreement, except that the facility no longer includes a 4.5% floor interest rate. After a repayment of $2,000,000 during the fourth quarter of 2010, the Company had a total of $32,000,000 outstanding on its credit facility at December 31, 2010.

Richard Dole, Chairman, President and CEO of Double Eagle remarked, "Our conservative capital spending programs in both 2010 and 2009 has allowed us to maintain a strong financial position as we move into 2011. This coupled with the increase in the borrowing availability on our credit facility gives us the flexibility we needs as we embark on our 2011 development and exploration program, which includes drilling up to 20 CBM wells in the Catalina Unit, participating in approximately 16 new wells in the Mesa Units and drilling one or more Niobrara science wells in 2011. We are also actively pursuing strategic asset and company acquisitions to enhance and diversify our portfolio. 2011 is shaping up to be an exciting year for the Company."