Texas
|
76-0415919
|
|||
(State
or other jurisdiction of
|
(IRS
Employer Identification No.)
|
|||
incorporation
or organization)
|
1000
Louisiana Street,
Suite 1500, Houston, TX
|
77002
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer [ ]
|
Accelerated
filer [X]
|
Non-accelerated
filer [ ]
|
PART
I. FINANCIAL INFORMATION
|
PAGE
|
||
Item
1.
|
|||
As
of September 30, 2007 (Unaudited) and December 31,
2006
|
2
|
||
Consolidated
Statements of Income
(Unaudited)
|
|||
For
the three and nine month periods ended September 30, 2007 and
2006
|
3
|
||
Consolidated
Statements of Cash Flows
(Unaudited)
|
|||
For
the nine month periods ended September 30, 2007 and 2006
|
4
|
||
Notes
to Consolidated Financial Statements
(Unaudited)
|
5
|
||
Item
2.
|
13
|
||
Item
4.
|
24
|
||
PART
II. OTHER INFORMATION
|
|||
25
|
|||
26
|
September
30,
|
December
31,
|
|||||||
ASSETS
|
2007
|
2006
|
||||||
(Restated)
|
||||||||
(Unaudited)
|
||||||||
(In
thousands, except per share
amount)
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash
equivalents
|
$ | 4,576 | $ | 5,408 | ||||
Accounts
receivable, trade (net of
allowance for doubtful accounts of $1,395 and
$1,639
|
||||||||
at
September 30, 2007 and December
31, 2006, respectively)
|
29,391 | 25,871 | ||||||
Advances
to
operators
|
2,757 | 2,107 | ||||||
Fair
value of derivative financial
instruments
|
2,848 | 5,737 | ||||||
Other
current
assets
|
4,894 | 1,934 | ||||||
Total
current
assets
|
44,466 | 41,057 | ||||||
PROPERTY
AND EQUIPMENT, net
full-cost method of accounting for oil
|
||||||||
and
natural gas properties
(including unevaluated costs of properties of $117,398
and
|
||||||||
$95,136
at September 30, 2007 and
December 31, 2006, respectively)
|
567,152 | 445,447 | ||||||
DEFERRED
FINANCING COSTS,
NET
|
6,244 | 4,817 | ||||||
INVESTMENT
IN PINNACLE GAS
RESOURCES, INC.
|
11,941 | 2,771 | ||||||
OTHER
ASSETS
|
824 | 703 | ||||||
TOTAL
ASSETS
|
$ | 630,627 | $ | 494,795 | ||||
LIABILITIES
AND SHAREHOLDERS'
EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable,
trade
|
$ | 29,069 | $ | 32,570 | ||||
Accrued
liabilities
|
22,464 | 20,885 | ||||||
Advances
for joint
operations
|
2,063 | 1,100 | ||||||
Current
maturities of long-term
debt
|
2,253 | 1,508 | ||||||
Other
current
liabilities
|
2,258 | 2,008 | ||||||
Total
current
liabilities
|
58,107 | 58,071 | ||||||
LONG-TERM
DEBT, NET OF CURRENT
MATURITIES
|
218,813 | 187,250 | ||||||
ASSET
RETIREMENT
OBLIGATION
|
5,370 | 3,625 | ||||||
FAIR
VALUE OF DERIVATIVE FINANCIAL
INSTRUMENTS
|
851 | - | ||||||
DEFERRED
INCOME
TAXES
|
43,004 | 32,738 | ||||||
DEFERRED
CREDITS
|
724 | 837 | ||||||
COMMITMENTS
AND
CONTINGENCIES
|
- | - | ||||||
SHAREHOLDERS'
EQUITY:
|
||||||||
Common
stock, par value $0.01
(40,000 shares authorized with 27,979 and
|
||||||||
25,981
issued and outstanding at
September 30, 2007 and
|
||||||||
December
31, 2006,
respectively)
|
280 | 260 | ||||||
Additional
paid-in
capital
|
246,008 | 168,469 | ||||||
Retained
earnings
|
59,700 | 49,875 | ||||||
Accumulated
other comprehensive
income, net of tax
|
5,991 | - | ||||||
Unearned
compensation - restricted
stock
|
(8,221 | ) | (6,330 | ) | ||||
Total
shareholders'
equity
|
303,758 | 212,274 | ||||||
TOTAL
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
$ | 630,627 | $ | 494,795 | ||||
Three
Months
Ended
|
Nine
Months
Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(Restated)
|
(Restated)
|
|||||||||||||||
(In
thousands, except per share
amounts)
|
||||||||||||||||
OIL
AND NATURAL GAS
REVENUES
|
$ | 30,305 | $ | 20,333 | $ | 85,808 | $ | 58,727 | ||||||||
COSTS
AND
EXPENSES:
|
||||||||||||||||
Oil
and natural gas operating
expenses (exclusive of depreciation, depletion
|
||||||||||||||||
and
amortization shown
separately below)
|
6,940 | 3,893 | 17,203 | 10,980 | ||||||||||||
Depreciation,
depletion and
amortization
|
10,190 | 7,594 | 29,033 | 21,630 | ||||||||||||
General
and administrative
(inclusive of stock-based compensation expense of
|
||||||||||||||||
$1,058
and $810 for the three
months ended September 30, 2007 and 2006,
|
||||||||||||||||
respectively,
and $3,050 and
$1,999 for the nine months ended
|
||||||||||||||||
September
30, 2007 and 2006,
respectively)
|
4,360 | 3,118 | 13,577 | 10,469 | ||||||||||||
Accretion
expense related to asset
retirement obligations
|
89 | 79 | 265 | 237 | ||||||||||||
TOTAL
COSTS AND
EXPENSES
|
21,579 | 14,684 | 60,078 | 43,316 | ||||||||||||
OPERATING
INCOME
|
8,726 | 5,649 | 25,730 | 15,411 | ||||||||||||
OTHER
INCOME AND
EXPENSES:
|
||||||||||||||||
Gain
on derivatives,
net
|
1,917 | 3,684 | 286 | 12,087 | ||||||||||||
Equity
in income of Pinnacle Gas
Resources, Inc.
|
- | - | - | 35 | ||||||||||||
Other
income and expenses,
net
|
6 | 29 | 262 | 202 | ||||||||||||
Loss
on early extinguishment of
debt
|
- | (12 | ) | - | (294 | ) | ||||||||||
Interest
income
|
131 | 199 | 585 | 843 | ||||||||||||
Interest
expense
|
(7,018 | ) | (4,883 | ) | (19,701 | ) | (13,752 | ) | ||||||||
Capitalized
interest
|
2,921 | 2,740 | 8,326 | 7,234 | ||||||||||||
INCOME
BEFORE INCOME
TAXES
|
6,683 | 7,406 | 15,488 | 21,766 | ||||||||||||
INCOME
TAXES
|
(2,450 | ) | (2,655 | ) | (5,663 | ) | (7,793 | ) | ||||||||
NET
INCOME
|
$ | 4,233 | $ | 4,751 | $ | 9,825 | $ | 13,973 | ||||||||
BASIC
EARNINGS PER COMMON
SHARE
|
$ | 0.16 | $ | 0.19 | $ | 0.38 | $ | 0.57 | ||||||||
DILUTED
EARNINGS PER COMMON
SHARE
|
$ | 0.16 | $ | 0.18 | $ | 0.37 | $ | 0.55 | ||||||||
WEIGHTED
AVERAGE COMMON SHARES
OUTSTANDING:
|
||||||||||||||||
BASIC
|
26,142 | 25,254 | 25,836 | 24,549 | ||||||||||||
DILUTED
|
26,982 | 25,987 | 26,668 | 25,272 | ||||||||||||
For
the
Nine
|
||||||||
Months
Ended
|
||||||||
September
30,
|
||||||||
2007
|
2006
|
|||||||
(Restated)
|
||||||||
(In
thousands)
|
||||||||
CASH
FLOWS FROM OPERATING
ACTIVITIES:
|
||||||||
Net
income
|
$ | 9,825 | $ | 13,973 | ||||
Adjustment
to reconcile net income
to net cash provided by operating activities-
|
||||||||
Depreciation,
depletion and
amortization
|
29,033 | 21,630 | ||||||
Fair
value loss (gain) of
derivative financial instruments
|
5,311 | (7,734 | ) | |||||
Accretion
of discounts on asset
retirement obligations and debt
|
265 | 237 | ||||||
Stock-based
compensation
|
3,050 | 1,999 | ||||||
Provision
for allowance for
doutbful accounts
|
(243 | ) | - | |||||
Loss
on extinguishment of
debt
|
- | 294 | ||||||
Equity
in income of Pinnacle Gas
Resources, Inc.
|
- | (35 | ) | |||||
Deferred
income
taxes
|
5,290 | 7,503 | ||||||
Other
|
1,169 | 1,129 | ||||||
Changes
in operating assets and
liabilities
|
||||||||
Accounts
receivable
|
(3,276 | ) | (3,766 | ) | ||||
Other
assets
|
(2,514 | ) | 1,705 | |||||
Accounts
payable
|
1,897 | (778 | ) | |||||
Accrued
liabilities
|
(308 | ) | 1,087 | |||||
Net
cash provided by operating
activities
|
49,499 | 37,244 | ||||||
CASH
FLOWS FROM INVESTING
ACTIVITIES:
|
||||||||
Capital
expenditures
|
(150,514 | ) | (146,196 | ) | ||||
Change
in capital expenditure
accrual
|
(3,484 | ) | 1,376 | |||||
Proceeds
from the sale of
properties
|
1,405 | 33,604 | ||||||
Advances
to
operators
|
963 | (1,454 | ) | |||||
Advances
for joint
operations
|
(651 | ) | (1,894 | ) | ||||
Other
|
64 | (342 | ) | |||||
Net
cash used in investing
activities
|
(152,217 | ) | (114,906 | ) | ||||
CASH
FLOWS FROM FINANCING
ACTIVITIES:
|
||||||||
Proceeds
from debt issuance and
borrowings
|
129,000 | 53,000 | ||||||
Debt
repayments
|
(96,693 | ) | (36,159 | ) | ||||
Common
stock offering, net of
costs
|
72,003 | 33,593 | ||||||
Stock
options
exercised
|
790 | 585 | ||||||
Deferred
loan costs and
other
|
(3,214 | ) | (676 | ) | ||||
Net
cash provided by financing
activities
|
101,886 | 50,343 | ||||||
NET
DECREASE IN CASH AND CASH
EQUIVALENTS
|
(832 | ) | (27,319 | ) | ||||
CASH
AND CASH EQUIVALENTS,
beginning of period
|
5,408 | 28,725 | ||||||
CASH
AND CASH EQUIVALENTS, end of
period
|
$ | 4,576 | $ | 1,406 | ||||
CASH
PAID FOR INTEREST (NET OF
AMOUNTS CAPITALIZED)
|
$ | 9,867 | $ | 5,381 | ||||
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September
30,
|
Ended
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
millions)
|
||||||||||||||||
Stock
Option
Expense
|
$ | 0.1 | $ | 0.2 | $ | 0.3 | $ | 0.4 | ||||||||
Restricted
Stock
Expense
|
1.0 | 0.6 | 2.8 | 1.6 | ||||||||||||
Total
Stock-Based Compensation
Expense
|
$ | 1.1 | $ | 0.8 | $ | 3.1 | $ | 2.0 | ||||||||
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September
30,
|
Ended
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Chevron/Texaco
|
- | 11 | % | - | 12 | % | ||||||||||
Reichmann
Petroleum
|
- | - | - | 11 | % | |||||||||||
Cokinos
Natural Gas
Company
|
17 | % | - | 10 | % | - | ||||||||||
Houston
Pipeline
Co.
|
14 | % | - | 13 | % | - | ||||||||||
Crosstex
Energy
Services
|
15 | % | - | 15 | % | - | ||||||||||
Energy
Transfer
|
16 | % | 10 | % | 12 | % | - | |||||||||
Partner
Energy
Services
|
- | 10 | % | - | - | |||||||||||
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September
30,
|
Ended
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(Restated)
|
(Restated)
|
|||||||||||||||
(In
thousands,
except
|
||||||||||||||||
per
share
amounts)
|
||||||||||||||||
Net
income
|
$ | 4,233 | $ | 4,751 | $ | 9,825 | $ | 13,973 | ||||||||
Average
common shares
outstanding
|
||||||||||||||||
Weighted
average common shares
outstanding
|
26,142 | 25,254 | 25,836 | 24,549 | ||||||||||||
Stock
options and
warrants
|
840 | 733 | 832 | 723 | ||||||||||||
Diluted
weighted average common
shares outstanding
|
26,982 | 25,987 | 26,668 | 25,272 | ||||||||||||
Earnings
per common
share
|
||||||||||||||||
Basic
|
$ | 0.16 | $ | 0.19 | $ | 0.38 | $ | 0.57 | ||||||||
Diluted
|
$ | 0.16 | $ | 0.18 | $ | 0.37 | $ | 0.55 | ||||||||
Three
Months
Ended
|
Nine
Months
Ended
|
|||||||||||||||
September
30,
2007
|
September
30,
2007
|
|||||||||||||||
As
|
As
|
As
|
As
|
|||||||||||||
Reported
|
Restated
|
Reported
|
Restated
|
|||||||||||||
(In
thousands, except per share
amounts)
|
||||||||||||||||
Gain
on derivatives,
net
|
$ | 3,676 | $ | 1,917 | $ | 2,045 | $ | 286 | ||||||||
Income
taxes
|
3,066 | 2,450 | 6,279 | 5,663 | ||||||||||||
Net
income
|
5,376 | 4,233 | 10,968 | 9,825 | ||||||||||||
Basic
earnings per
share
|
$ | 0.21 | $ | 0.16 | $ | 0.42 | $ | 0.38 | ||||||||
Diluted
earnings per
share
|
0.20 | 0.16 | 0.41 | 0.37 | ||||||||||||
Total
current
assets
|
$ | 44,035 | $ | 44,466 | ||||||||||||
Total
assets
|
630,012 | 630,627 | ||||||||||||||
Total
current
liabilities
|
56,876 | 58,107 | ||||||||||||||
Total shareholders' equity | 304,901 | 303,758 | ||||||||||||||
Total
liabilities and
shareholders' equity
|
630,012 | 630,627 | ||||||||||||||
3.
|
LONG-TERM
DEBT:
|
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
(In
thousands)
|
||||||||
Second
Lien Credit
Facility
|
$ | 221,063 | $ | 147,750 | ||||
Senior
Secured Revolving Credit
Facility
|
- | 41,000 | ||||||
Other
|
3 | 8 | ||||||
221,066 | 188,758 | |||||||
Current
maturities
|
(2,253 | ) | (1,508 | ) | ||||
$ | 218,813 | $ | 187,250 | |||||
4.
|
INVESTMENT
IN PINNACLE GAS RESOURCES, INC.:
|
5.
|
INCOME
TAXES:
|
6.
|
COMMITMENTS
AND CONTINGENCIES:
|
7.
|
SHAREHOLDERS’
EQUITY:
|
8.
|
DERIVATIVE
INSTRUMENTS:
|
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September
30,
|
Ended
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(Restated)
|
(Restated)
|
|||||||||||||||
(In
millions)
|
||||||||||||||||
Realized
gains:
|
||||||||||||||||
Natural
gas and oil
derivatives
|
$ | 2.8 | $ | 1.1 | $ | 5.4 | $ | 3.6 | ||||||||
Interest
rate
swaps
|
- | 0.4 | 0.2 | 0.7 | ||||||||||||
2.8 | 1.5 | 5.6 | 4.3 | |||||||||||||
Unrealized
gains
(losses):
|
||||||||||||||||
Natural
gas and oil
derivatives
|
$ | 1.0 | $ | 2.9 | $ | (3.5 | ) | $ | 7.5 | |||||||
Interest
rate
swaps
|
(1.9 | ) | (0.7 | ) | (1.8 | ) | 0.3 | |||||||||
(0.9 | ) | 2.2 | (5.3 | ) | 7.8 | |||||||||||
Gain
on derivatives,
net
|
$ | 1.9 | $ | 3.7 | $ | 0.3 | $ | 12.1 | ||||||||
Natural
Gas
|
Natural
Gas
|
|||||||||||||||||||
Swaps
|
Collars
|
|||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||
Quarter
|
MMbtu
|
Fixed
Price(1)
|
MMBtu
|
Floor
Price(1)
|
Ceiling
Price(1)
|
|||||||||||||||
Fourth
Quarter
2007
|
828,000 | $ | 7.44 | 644,000 | $ | 7.24 | $ | 8.84 | ||||||||||||
First
Quarter
2008
|
273,000 | 7.94 | 1,456,000 | 7.49 | 9.26 | |||||||||||||||
Second
Quarter
2008
|
273,000 | 7.94 | 1,092,000 | 7.23 | 8.97 | |||||||||||||||
Third
Quarter
2008
|
276,000 | 7.94 | 920,000 | 7.22 | 8.97 | |||||||||||||||
Fourth
Quarter
2008
|
276,000 | 7.94 | 1,103,000 | 7.18 | 8.83 | |||||||||||||||
First
Quarter
2009
|
- | - | 1,080,000 | 7.09 | 8.81 | |||||||||||||||
Second
Quarter
2009
|
- | - | 1,092,000 | 7.09 | 8.81 | |||||||||||||||
Third
Quarter
2009
|
- | - | 1,104,000 | 7.09 | 8.81 | |||||||||||||||
Fourth
Quarter
2009
|
- | - | 1,104,000 | 7.09 | 8.81 | |||||||||||||||
Oil
Collars
|
||||||||||||
Average
|
Average
|
|||||||||||
Quarter
|
Bbls
|
Floor
Price(2)
|
Ceiling
Price (2)
|
|||||||||
Fourth
Quarter
2007
|
27,600 | $ | 70.00 | $ | 75.90 | |||||||
First
Quarter
2008
|
18,200 | 70.00 | 76.20 | |||||||||
Second
Quarter
2008
|
9,100 | 70.00 | 76.75 | |||||||||
Third
Quarter
2008
|
9,200 | 70.00 | 76.75 | |||||||||
Fourth
Quarter
2008
|
9,200 | 70.00 | 76.75 | |||||||||
(1)
|
Based
on Houston Ship Channel spot
prices.
|
(2)
|
Based
on West Texas intermediate index
prices.
|
Notional
|
Fixed
|
|||||||
Quarter
|
Amount
|
LIBOR
Rate
|
||||||
Fourth
Quarter
2007
|
$ | 221,063 | 5.25 | % | ||||
First
Quarter
2008
|
220,500 | 5.32 | % | |||||
Second
Quarter
2008
|
219,938 | 5.32 | % | |||||
Third
Quarter
2008
|
219,375 | 5.31 | % | |||||
Fourth
Quarter
2008
|
218,813 | 5.31 | % | |||||
·
|
We
plan to continue with the 2007 drilling program to drill 53 gross
wells in
the Barnett Shale area, ten gross wells in the Gulf Coast area,
25 to 30
gross wells in our Camp Hill field (which includes approximately
14
service wells) and five wells in other areas. In the Barnett
Shale, we plan to utilize two drillings rigs in SE Tarrant County,
Texas
through the third quarter 2008 with each rig scheduled to drill
one
horizontal well each month. Our other two drilling rigs will be
dedicated to drilling horizontal wells in Tarrant, Denton and Parker
counties. We expect to spend between $145 million and $165
million on our 2007 drilling program. The actual number of
wells drilled will vary depending upon various factors, including
the
availability and cost of drilling rigs, land and industry partner
issues,
our cash flow, success of drilling programs, weather delays and
other
factors. If we drill the number of wells we have budgeted for
2007, depreciation, depletion and amortization, oil and natural
gas
operating expenses and production are expected to increase over
levels
incurred in 2006. Our ability to drill this number of wells is
heavily dependent upon the timely access to oilfield services,
particularly drilling rigs.
|
·
|
We
expect to continue our efforts to grow production. Our
estimated daily production for the month of October 2007 was approximately
53 Mcfe/day.
|
·
|
We
plan to continue the development of other new drilling programs
in the Floyd Shale in Mississippi, the Fayetteville Shale in Arkansas
and
the North Sea. We fracture stimulated our horizontal well in
the Floyd Shale and are swabbing back frac fluid currently. We
are assessing development plans for the Huntington discovery in
Block
22-14b in the North Sea. An appraisal well was spud on August
30, 2007 with expected drilling and testing time of approximately
five
months. As a result of our recent experience in the North Sea,
we currently expect that we will seek to significantly expand our
expenditures in that area over the next several years. We may
seek project financing or other financing alternatives for the
development
of the North Sea assets.
|
·
|
We
expect to hedge production to decrease commodity price
fluctuations. At September 30, 2007, we had hedged
approximately 11,521,000 MMBtus of natural gas production through
2009 and
73,300 Bbls of oil production through
2008.
|
·
|
During
2007, we experienced unexpected delays in the development of the
Camp Hill
field. Our 2007 drilling program in the Camp Hill field has
been delayed primarily due to the unavailability of the rig we
use to
drill in the field. However, we recently received a firm
commitment from our drilling contractor to drill exclusively for
us for
the remainder of 2007 and through February 2008. We believe
that we are on track to drill 27 to 30 wells in 2007 (including
14 service
wells). We also experienced operational and administrative
problems with our steam injection process. The steam generators
expected to be used were not available due to delays in repair
work and/or
permit issues. We injected steam in the Camp Hill field through
one of our generators until it encountered operational damage in
January
2007. We expect to receive a replacement generator in December
2007 and to commence steam injection as soon thereafter as
possible. Our other two generators have not been available for
injection due to unexpected permitting issues and the need for
repair
work. We currently expect that these two generators will
be ready to inject steam by the end of March 2008 with respect
to one
generator and by the end of June 2008, with respect to the
other. We recently received the permits for these two
generators to recommence injection. Although these permits will
only allow us to inject steam at 64% of the rate that we had anticipated,
based upon the rate under the prior permits for these same generators,
we
expect to continue to appeal to the regulatory authorities to reinstate
the 100 % rate of generation allowed under the original
permits. Even if we are unsuccessful in increasing the
generation rates under our permits, our proved reserve volumes
for the
Camp Hill field are not expected to decrease as a result. A
lower generation rate assumption (incorporated into our internal
September
30, 2007 proved reserve estimate), however, does extend the productive
life of the field by approximately 33% with a corresponding 19%,
or $31.2
million, reduction in the present value of the estimated future
net
revenues discounted at 10% per annum attributable to these proved
reserves. Prospectively, we expect to continue to use the lower
generation rate assumption in our proved reserve estimates, unless
and
until such time that we are successful in increasing the generation
rates
in our permits.
|
2007
Period
|
||||||||||||||||
Three
Months
Ended
|
Compared
to 2006
Period
|
|||||||||||||||
September
30,
|
Increase
|
%
Increase
|
||||||||||||||
2007
|
2006
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Production
volumes
|
||||||||||||||||
Oil
and condensate
(MBbls)
|
59 | 69 | (10 | ) | (14 | )% | ||||||||||
Natural
gas
(MMcf)
|
4,080 | 2,443 | 1,637 | 67 | % | |||||||||||
Average
sales
prices
|
||||||||||||||||
Oil
and condensate (per
Bbl)
|
$ | 75.40 | $ | 68.46 | $ | 6.94 | 10 | % | ||||||||
Natural
gas (per
Mcf)
|
6.33 | 6.39 | (0.06 | ) | (1 | )% | ||||||||||
Operating
revenues (In
thousands)
|
||||||||||||||||
Oil
and
condensate
|
$ | 4,457 | $ | 4,716 | $ | (259 | ) | (5 | )% | |||||||
Natural
gas
|
25,848 | 15,617 | 10,231 | 66 | % | |||||||||||
Total
Operating
Revenues
|
$ | 30,305 | $ | 20,333 | $ | 9,972 | 49 | % | ||||||||
2007
Period
|
||||||||||||||||
Nine
Months
Ended
|
Compared
to 2006
Period
|
|||||||||||||||
September
30,
|
Increase
|
%
Increase
|
||||||||||||||
2007
|
2006
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Production
volumes
|
||||||||||||||||
Oil
and condensate
(MBbls)
|
182 | 179 | 3 | 2 | % | |||||||||||
Natural
gas
(MMcf)
|
10,753 | 6,976 | 3,777 | 54 | % | |||||||||||
Average
sales
prices
|
||||||||||||||||
Oil
and condensate (per
Bbl)
|
$ | 65.22 | $ | 65.54 | $ | (0.32 | ) | (1 | )% | |||||||
Natural
gas (per
Mcf)
|
6.88 | 6.74 | 0.14 | 2 | % | |||||||||||
Operating
revenues (In
thousands)
|
||||||||||||||||
Oil
and
condensate
|
$ | 11,881 | $ | 11,734 | $ | 147 | 1 | % | ||||||||
Natural
gas
|
73,927 | 46,993 | 26,934 | 57 | % | |||||||||||
Total
Operating
Revenues
|
$ | 85,808 | $ | 58,727 | $ | 27,081 | 46 | % | ||||||||
·
|
Cash
on hand and cash generated by operations. Cash flows from
operations are highly dependent on commodity prices and market conditions
for oil and gas field services. We hedge a portion of our
production to reduce the downside risk of declining natural gas
prices.
|
·
|
Available
draws on the Senior Credit Facility. During the third quarter
of 2007, we requested a borrowing base re-determination for the Senior
Credit Facility and in September of 2007, the borrowing base availability
increased from $74.8 million to $117.0 million. At November 1,
2007, cash available under the Senior Credit Facility was $105.0
million. The next borrowing base redetermination is scheduled
for December 2007.
|
·
|
Other
debt and equity offerings. As situations or conditions arise,
we may issue debt or equity instruments to supplement our cash
flows.
|
·
|
Asset
sales. In order to fund our drilling program, we may consider
the sale of certain properties or assets no longer deemed core to
our
future growth.
|
Three
months
ended
|
Nine
months
ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Oil
positions settled
(Bbls)
|
18,300 | 27,600 | 18,300 | 63,800 | ||||||||||||
Natural
gas positions settled
(MMBtu)
|
1,898,000 | 1,163,000 | 5,332,000 | 3,520,000 | ||||||||||||
Realized
gain ($ millions)
(1)
|
$ | 2.8 | $ | 1.1 | $ | 5.4 | $ | 3.6 | ||||||||
Unrealized
gain/(loss) ($
millions) (1)
|
$ | 1.0 | $ | 2.9 | $ | (3.5 | ) | $ | 7.5 | |||||||
Natural
Gas
|
Natural
Gas
|
|||||||||||||||||||
Swaps
|
Collars
|
|||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||
Quarter
|
MMbtu
|
Fixed
Price(1)
|
MMBtu
|
Floor
Price(1)
|
Ceiling
Price(1)
|
|||||||||||||||
Fourth
Quarter
2007
|
828,000 | $ | 7.44 | 644,000 | $ | 7.24 | $ | 8.84 | ||||||||||||
First
Quarter
2008
|
273,000 | 7.94 | 1,456,000 | 7.49 | 9.26 | |||||||||||||||
Second
Quarter
2008
|
273,000 | 7.94 | 1,092,000 | 7.23 | 8.97 | |||||||||||||||
Third
Quarter
2008
|
276,000 | 7.94 | 920,000 | 7.22 | 8.97 | |||||||||||||||
Fourth
Quarter
2008
|
276,000 | 7.94 | 1,103,000 | 7.18 | 8.83 | |||||||||||||||
First
Quarter
2009
|
- | - | 1,080,000 | 7.09 | 8.81 | |||||||||||||||
Second
Quarter
2009
|
- | - | 1,092,000 | 7.09 | 8.81 | |||||||||||||||
Third
Quarter
2009
|
- | - | 1,104,000 | 7.09 | 8.81 | |||||||||||||||
Fourth
Quarter
2009
|
- | - | 1,104,000 | 7.09 | 8.81 | |||||||||||||||
Oil
Collars
|
||||||||||||
Average
|
Average
|
|||||||||||
Quarter
|
Bbls
|
Floor
Price(2)
|
Ceiling
Price (2)
|
|||||||||
Fourth
Quarter
2007
|
27,600 | $ | 70.00 | $ | 75.90 | |||||||
First
Quarter
2008
|
18,200 | 70.00 | 76.20 | |||||||||
Second
Quarter
2008
|
9,100 | 70.00 | 76.75 | |||||||||
Third
Quarter
2008
|
9,200 | 70.00 | 76.75 | |||||||||
Fourth
Quarter
2008
|
9,200 | 70.00 | 76.75 | |||||||||
(1)
|
Based
on Houston Ship Channel spot
prices.
|
(2)
|
Based
on West Texas intermediate index
prices.
|
Exhibit
Number
|
Description
|
|
†2.1
|
—
|
Combination
Agreement by and among the Company, Carrizo Production, Inc., Encinitas
Partners Ltd., La Rosa Partners Ltd., Carrizo Partners Ltd., Paul B.
Loyd, Jr., Steven A. Webster, S.P. Johnson IV, Douglas A.P. Hamilton
and
Frank A. Wojtek dated as of September 6, 1997 (incorporated herein by
reference to Exhibit 2.1 to the Company’s Registration Statement on
Form S-1 (Registration No. 333-29187)).
|
†3.1
|
—
|
Amended
and Restated Articles of Incorporation of the Company (incorporated
herein
by reference to Exhibit 3.1 to the Company’s Annual Report on Form
10-K for the year ended December 31, 1997).
|
†3.2
|
—
|
Amended
and Restated Bylaws of the Company, as amended by Amendment No. 1
(incorporated herein by reference to Exhibit 3.2 to the Company’s
Registration Statement on Form 8-A (Registration No. 000-22915) Amendment
No. 2 (incorporated herein by reference to Exhibit 3.2 to the Company’s
Current Report on Form 8-K dated December 15, 1999) and Amendment
No. 3
(incorporated herein by reference to Exhibit 3.1 to the Company’s Current
Report on Form 8-K dated February 20, 2002).
|
†10.1
|
—
|
Second
Amendment effective as of September 11, 2007 to Credit Agreement
dated as
of May 25, 2006 among the Company, as Borrower, Certain Subsidiaries
of
Borrower, as Guarantors, JPMorgan Chase Bank, National Association,
as
Administrative Agent and Lender, and Guaranty Bank as Lender (incorporated
herein by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on September 11, 2007).
|
†10.2
|
—
|
Form
of Securities Purchase Agreement between the Company and the purchasers
named therein (incorporated herein by reference to Exhibit 10.1 to
the
Company’s Current Report on Form 8-K filed on September 12,
2007).
|
31.1
|
—
|
|
31.2
|
—
|
|
32.1
|
—
|
|
32.2
|
—
|
†
|
Incorporated
herein by reference as indicated.
|
Carrizo
Oil & Gas, Inc.
|
|
(Registrant)
|
|
Date: January
31, 2008
|
By: /s/S.
P. Johnson,
IV
|
President
and Chief Executive Officer
|
|
(Principal
Executive Officer)
|
|
Date: January
31, 2008
|
By: /s/Paul
F.
Boling
|
Chief
Financial Officer
|
|
(Principal
Financial and Accounting Officer)
|