Double Eagle Shines in 1Q10
Double Eagle reported its financial results for the first quarter ended March 31, 2010. First quarter highlights include:
- Earnings of $5,178,000 or $0.47 per share;
- Clean Earnings* of $3,081,000 or $0.28 per share; and
- Cash flows from operations of $9,692,000.
(*)Please see last table for reconciliation to U.S. GAAP.
The Company reported net income attributable to common shareholders of $5,178,000, or $0.47 per share for the first quarter of 2010, as compared to $76,000, or $0.01 per share for the first quarter of 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 $931,000 for each of 2010 and 2009. Net income attributable to common stock in the first quarter of 2010 also included a pre-tax unrealized non-cash gain of $8,045,000 relating to economic hedges, which are recorded at fair value at each period end. Based on the March 31, 2010 future pricing, all of the Company's derivative instruments were in an asset position at March 31, 2010 and provided a significant source of revenue for the first quarter of 2010.
First quarter 2010 Clean Earnings, a non-U.S. GAAP metric, totaled $3,081,000 or $0.28 per share, as compared to $5,525,000, or $0.60 per share for the quarter ended March 31, 2009. Clean Earnings excludes the effects 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 stock-based compensation expense. Clean Earnings includes the impact of income taxes of $2,271,000 for the quarter ended March 31, 2010, although the Company does not expect to pay income taxes due to its unused operating loss carryforwards.
The Company continues to maintain a solid balance sheet, and its working capital balance increased to $5,850,000 from $(4,067,000) at December 31, 2009. The Company reduced its borrowings on its credit facility by $3,000,000 during the quarter ended March 31, 2010, bringing the Company's outstanding credit facility balance to $31,000,000. The Company currently has a $75 million credit facility, with $45 million of total committed borrowing availability. The Company's cash flow from operations totaled $9,692,000 during the first quarter of 2010, primarily derived from cash earnings from operations.
Total natural gas and crude oil production decreased 2% to 2.2 Bcfe for the quarter ended March 31, 2010. The production decline is the result of lower production volumes at the Mesa Units and at the Catalina Unit. The decrease at the Catalina Unit was the result of the continuation of our well-enhancement program, which began in the third quarter of 2009. This program requires the affected wells to be off-line temporarily while the wells are worked-over. In addition, in March 2010, the Company began reconfiguring several of its compressor units in an effort to maximize well performance by reducing suction pressure at the well head. This is ultimately expected to increase the production output from each well. The Company did experience a favorable increase in production during the first quarter of 2010 at our non-operated properties within the Atlantic Rim. The increase was primarily due to the additional compression capacity added at the Doty Mountain Unit in the first quarter of 2010 and increased production from well stimulations in the Sun Dog Unit.
Production-related revenue totaled $12,313,000 for the quarter ended March 31, 2010, as compared to $15,013,000 in the comparable period. The production-related revenue included a loss of $(223,000) and a gain of $2,926,000 on the settlement of certain derivative instruments, which are not accounted for as cash flow hedges, for the quarters ended March 31, 2010 and 2009, respectively. The decrease in production-related revenue was primarily driven by a decline in our realized gas prices between the two periods. The average natural gas price the Company realized in the first quarter 2010 decreased 20% to $4.70 per Mcf, as compared to $5.90 per Mcf in the first quarter of 2009.
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