Dune Notes Higher Production Results for Q2
Dune Energy, Inc. has announced financial and operating results for the second quarter, ended June 30, 2008, as summarized below:
Revenue and Production
Revenue for the second quarter totaled $51.5 million from continuing operations as compared with revenue of $11 million for the second quarter of 2007. The Barnett Shale properties were classified as a discontinued
operation, and will be discussed separately. Production volumes for the second quarter totaled 263 Mbbls of oil and 1.6 Bcf of natural gas, or 3.2 Bcfe, as compared with 94 Mbbls of oil and 0.62 Bcf of natural gas, or 1.18
Bcfe for the second quarter of 2007. Second quarter of 2008 average sales price per barrel of oil was $118.87 and $12.43 per Mcf for natural gas, versus $64.77 per barrel and $7.88 per Mcf, respectively in the second
quarter of 2007. The primary reasons behind the increase in revenue were higher volumes in 2008 versus 2007, primarily associated with our major acquisition in May of 2007, along with higher commodity prices.
Costs and Expenses
For the second quarter of 2008, field level LOE was $5.24 million or $1.63/Mcfe. Severance and Ad Valorem taxes were $4.02 million or $1.26/Mcfe. Transportation and gathering was $390,000 or $0.12/Mcfe and
workover expense was $1.64 million or $0.51/Mcfe. Total expenses were $11.29 million or $3.52/Mcfe. In the first quarter of 2008, field level LOE was $2.20/Mcfe, while severance and Ad Valorem taxes were $1.01/Mcfe, and transportation and gathering expense was $0.17/Mcfe, while workover expense was $0.67/Mcfe. Total operating expenses were $12.0 million or $4.06/Mcfe.
Second quarter operating costs were 13% below the levels of the first quarter on an Mcfe basis. These operating cost improvements are reflective of the Company's ongoing efforts at streamlining field operations.
DD&A expense was $15.1 million for the second quarter of 2008 while cash G&A expense totaled $3.9 million. Stock based compensation was $1.3 million in the quarter. Interest and financing expense was $8.8 million for
the second quarter. The Company expects that cash G&A and interest and financing expenses will remain at or near these levels for the remainder of 2008. DD&A is expected to increase quarterly with increased production.
Discontinued Operations - Barnett Shale
The Company signed a Purchase and Sale Agreement to dispose of our Barnett Shale properties in Denton and Wise Counties, Texas for $41.5 million. The effective date of the sale is May 1, 2008 with a closing
anticipated during the third quarter of 2008. The Company recognized a non-cash $40.9 million writedown of these assets to reflect fair value. As detailed in prior releases, Dune has decided to focus its exploration and
development activities in its higher margin Gulf Coast operations.
Results of Operations
The Company reported a $33.1 million loss for the second quarter of 2008 compared to a loss of $22.2 million for the second quarter of 2007. However, operating income for the quarter improved to $19.6 million, compared with an $8.3 million loss in the second quarter of 2007. Included in the results for the second quarter of 2008 was $24.8 million of realized and unrealized losses associated with hedging activities. Of this amount,
$3.7 million was realized during the quarter. In addition, there was a $5.3 million income tax benefit recorded during the second quarter of 2008.
Preferred stock dividends, paid in the form of a PIK (payment in kind), totaled $6.0 million in the second quarter 2008. The reset of the conversion price of the Company's Preferred Stock, from $3.00 to $1.75, was treated as a dividend to holders of the Preferred Shares. This resulted in a $68 million non-cash charge. Net loss per share, both basic and fully diluted for the quarter was $1.24, based on 86.9 million weighted average common shares outstanding.
EBITDAX (Earnings Before Interest, Taxes, Depreciation, Amortization and Exploration) is a supplemental performance gauge and not a GAAP measure. However, when viewed over time, it does provide an indication of
directional liquidity and debt service capability while filtering out the effects of non-cash charges. In this respect, Dune has continued to demonstrate sustained improvement as EBITDAX totaled $52.1 million for the first half of 2008, of which approximately $32.9 million or 63% was attributable to the second quarter. This represented an increase of $11.7 million or 55% over the first quarter of the year and almost equaled the $33.1 million reached during the last six months of 2007. While higher commodity prices contributed significantly to these results, improving operating efficiency also added to the improvement.
Production for the quarter, including the Barnett Shale properties, was 40 Mmcfe/day, in line with previously provided guidance. The Company anticipates a slight dip in production in the third quarter to between 35
and 37 Mmcfe/day as a result of the sale of the Barnett Shale properties. Management anticipates fourth quarter production will ramp up to between 40 and 44 Mmcfe/day based on planned drilling and workover activity. Dune
anticipates a capital program of between $45 and $50 million in the second half of the year. This will allow for drilling and completing 3-4 new wells at Garden Island Bay along with numerous workovers and recompletions in several other fields. At both our Chocolate Bayou Field in Brazoria County, Texas and Bayou Couba Field in St. Charles Parish, Louisiana, Dune is working with its partners in order to commence drilling late in the
James A. Watt, Dune's President and Chief Executive Officer stated, "Our operating results for the quarter were positive. Our cost structure is improving, and our focus will now center on developing the numerous high
potential opportunities for deeper drilling within our existing Gulf Coast fields."
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