Texas
|
76-0415919
|
|||
(State
or other jurisdiction of
|
(IRS
Employer Identification No.)
|
|||
incorporation
or organization)
|
1000 Louisiana Street,
Suite 1500, Houston, TX
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77002
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer [X]
|
Accelerated
filer []
|
Non-accelerated
filer [ ]
|
Smaller
reporting company [ ]
|
(Do
not check if a
smaller
reporting company)
|
PART
I. FINANCIAL INFORMATION
|
PAGE
|
||
Item
1.
|
|||
As
of June 30, 2008 (Unaudited) and December 31, 2007
|
2
|
||
Consolidated Statements of Operations
(Unaudited)
|
|||
For
the three and six-month periods ended June 30, 2008 and
2007
|
3
|
||
Consolidated Statements of Cash Flows
(Unaudited)
|
|||
For
the six-month periods ended June 30, 2008 and 2007
|
4
|
||
Notes to Consolidated Financial Statements
(Unaudited)
|
5
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||
Item
2.
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15
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||
Item
3.
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24
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||
Item
4.
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25
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||
PART
II. OTHER INFORMATION
|
|||
26
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|||
28
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June
30,
|
December
31,
|
|||||||
ASSETS
|
2008
|
2007
|
||||||
(Unaudited)
|
||||||||
(In
thousands, except share amount)
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ | 12,045 | $ | 8,026 | ||||
Accounts
receivable, trade (net of allowance for doubtful accounts of $1,264 and
$1,430
|
||||||||
at
June 30, 2008 and December 31, 2007, respectively)
|
40,221 | 26,411 | ||||||
Advances
to operators
|
169 | 1,113 | ||||||
Fair
value of derivative financial instruments
|
- | 1,829 | ||||||
Prepayments
and deposits
|
1,242 | 3,913 | ||||||
Deferred
income taxes
|
15,005 | 324 | ||||||
Total
current assets
|
68,682 | 41,616 | ||||||
PROPERTY
AND EQUIPMENT, net full-cost method of accounting for oil
|
||||||||
and
natural gas properties (including unevaluated costs of properties of
$299,709 and
|
||||||||
$124,373
at June 30, 2008 and December 31, 2007, respectively)
|
937,079 | 646,810 | ||||||
DEFERRED
FINANCING COSTS, NET
|
9,075 | 5,921 | ||||||
INVESTMENTS
|
10,738 | 11,071 | ||||||
OTHER
ASSETS
|
3,039 | 3,245 | ||||||
TOTAL
ASSETS
|
$ | 1,028,613 | $ | 708,663 | ||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable, trade
|
$
|
40,169 | $ | 49,700 | ||||
Accrued
liabilities
|
41,187 | 36,091 | ||||||
Advances
for joint operations
|
372 | 872 | ||||||
Current
maturities of long-term debt
|
- | 2,251 | ||||||
Fair
value of derivative financial instruments
|
42,870 | 2,755 | ||||||
Total
current liabilities
|
124,598 | 91,669 | ||||||
LONG-TERM
DEBT, NET OF CURRENT MATURITIES
|
389,750 | 252,250 | ||||||
ASSET
RETIREMENT OBLIGATION
|
6,700 | 5,869 | ||||||
FAIR
VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS
|
26,926 | 1,050 | ||||||
DEFERRED
INCOME TAXES
|
50,727 | 46,321 | ||||||
DEFERRED
CREDITS
|
717 | 783 | ||||||
COMMITMENTS
AND CONTINGENCIES
|
- | - | ||||||
SHAREHOLDERS'
EQUITY:
|
||||||||
Common
stock, par value $0.01 (90,000 shares authorized; 30,788
and
|
||||||||
28,009
issued and outstanding at June 30, 2008 and
|
||||||||
December
31, 2007, respectively)
|
309 | 280 | ||||||
Additional
paid-in capital
|
377,579 | 239,672 | ||||||
Retained
earnings
|
47,426 | 65,344 | ||||||
Accumulated
other comprehensive income, net of tax
|
3,881 | 5,425 | ||||||
Total
shareholders' equity
|
429,195 | 310,721 | ||||||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ | 1,028,613 | $ | 708,663 | ||||
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(In
thousands except per share amounts)
|
||||||||||||||||
OIL
AND NATURAL GAS REVENUES
|
$ | 67,388 | $ | 32,891 | $ | 120,948 | $ | 55,503 | ||||||||
COSTS
AND EXPENSES:
|
||||||||||||||||
Oil
and natural gas operating expenses (exclusive of depreciation,
depletion
|
||||||||||||||||
and
amortization shown separately below)
|
9,229 | 5,560 | 17,620 | 10,263 | ||||||||||||
Third
party gas purchases
|
2,596 | - | 2,596 | - | ||||||||||||
Depreciation,
depletion and amortization
|
13,865 | 10,805 | 27,952 | 18,843 | ||||||||||||
General
and administrative (inclusive of stock-based compensation expense
of
|
||||||||||||||||
$1,508
and $1,013 for the three months ended June 30, 2008 and 2007,
respectively,
|
||||||||||||||||
and
$2,988 and $1,992 for the six months ended June 30, 2008 and 2007,
respectively)
|
5,580 | 4,339 | 12,099 | 9,217 | ||||||||||||
Accretion
expense related to asset retirement obligations
|
57 | 88 | 115 | 176 | ||||||||||||
TOTAL
COSTS AND EXPENSES
|
31,327 | 20,792 | 60,382 | 38,499 | ||||||||||||
OPERATING
INCOME
|
36,061 | 12,099 | 60,566 | 17,004 | ||||||||||||
OTHER
INCOME AND EXPENSES:
|
||||||||||||||||
Net
gain (loss) on derivatives (Note 7)
|
(48,227 | ) | 4,080 | (78,043 | ) | (1,631 | ) | |||||||||
Other
income (expenses), net
|
(20 | ) | 140 | 49 | 256 | |||||||||||
Loss
on early extinguishment of debt
|
(5,705 | ) | - | (5,705 | ) | - | ||||||||||
Interest
income
|
60 | 110 | 208 | 454 | ||||||||||||
Interest
expense
|
(4,942 | ) | (6,529 | ) | (11,397 | ) | (12,683 | ) | ||||||||
Capitalized
interest
|
3,627 | 2,719 | 7,345 | 5,405 | ||||||||||||
INCOME
(LOSS) BEFORE INCOME TAXES
|
(19,146 | ) | 12,619 | (26,977 | ) | 8,805 | ||||||||||
INCOME
TAX (EXPENSE) BENEFIT (Note 4)
|
6,524 | (4,482 | ) | 9,059 | (3,213 | ) | ||||||||||
NET
INCOME (LOSS)
|
$ | (12,622 | ) | $ | 8,137 | $ | (17,918 | ) | $ | 5,592 | ||||||
OTHER
COMPREHENSIVE INCOME (LOSS):
|
||||||||||||||||
Increase
(decrease) in market value of investment in Pinnacle Gas Resources,
Inc.
|
1,653 | 10,390 | (1,544 | ) | 10,390 | |||||||||||
COMPREHENSIVE
INCOME (LOSS)
|
$ | (10,969 | ) | $ | 18,527 | $ | (19,462 | ) | $ | 15,982 | ||||||
BASIC
EARNINGS (LOSS) PER COMMON SHARE
|
$ | (0.42 | ) | $ | 0.32 | $ | (0.61 | ) | $ | 0.21 | ||||||
DILUTED
EARNINGS (LOSS) PER COMMON SHARE
|
$ | (0.42 | ) | $ | 0.31 | $ | (0.61 | ) | $ | 0.21 | ||||||
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING:
|
||||||||||||||||
BASIC
|
30,296 | 25,702 | 29,548 | 25,680 | ||||||||||||
DILUTED
|
30,296 | 26,553 | 29,548 | 26,508 | ||||||||||||
For
the Six
|
||||||||
Months
Ended
|
||||||||
June
30,
|
||||||||
2008
|
2007
|
|||||||
(In
thousands)
|
||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
income (loss)
|
$ | (17,918 | ) | $ | 5,592 | |||
Adjustment
to reconcile net income (loss) to net cash provided by operating
activities-
|
||||||||
Depreciation,
depletion and amortization
|
27,952 | 18,843 | ||||||
Fair
value loss of derivative financial instruments
|
67,821 | 4,383 | ||||||
Accretion
of discounts on asset retirement obligations and debt
|
115 | 176 | ||||||
Stock-based
compensation
|
2,988 | 1,992 | ||||||
Provision
for allowance for doutbful accounts
|
(166 | ) | (275 | ) | ||||
Deferred
income taxes
|
(9,442 | ) | 3,011 | |||||
Loss
on extenguishment of debt
|
4,601 | - | ||||||
Other
|
12 | (163 | ) | |||||
Changes
in operating assets and liabilities
|
||||||||
Accounts
receivable
|
(13,644 | ) | (7,224 | ) | ||||
Other
assets
|
1,593 | 563 | ||||||
Accounts
payable
|
2,776 | 8,399 | ||||||
Accrued
liabilities
|
2,340 | (724 | ) | |||||
Net
cash provided by operating activities
|
69,028 | 34,573 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Capital
expenditures
|
(315,549 | ) | (98,281 | ) | ||||
Change
in capital expenditure accrual
|
(8,794 | ) | (1,855 | ) | ||||
Proceeds
from the sale of properties
|
19 | 1,405 | ||||||
Advances
to operators
|
944 | 880 | ||||||
Advances
for joint operations
|
(500 | ) | 2,604 | |||||
Other
|
(2,712 | ) | 88 | |||||
Net
cash used in investing activities
|
(326,592 | ) | (95,159 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Net
proceeds from debt issuance and borrowings
|
515,750 | 107,000 | ||||||
Debt
repayments
|
(380,501 | ) | (42,129 | ) | ||||
Proceeds
from common stock offering, net of offering costs
|
135,158 | - | ||||||
Proceeds
from stock options exercised
|
137 | 777 | ||||||
Deferred
loan costs and other
|
(8,961 | ) | (2,967 | ) | ||||
Net
cash provided by financing activities
|
261,583 | 62,681 | ||||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
4,019 | 2,095 | ||||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
8,026 | 5,408 | ||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ | 12,045 | $ | 7,503 | ||||
CASH
PAID FOR INTEREST (NET OF AMOUNTS CAPITALIZED)
|
$ | 1,759 | $ | 6,204 | ||||
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(In
millions)
|
||||||||||||||||
Stock
Option Expense
|
$ | 0.1 | $ | 0.1 | $ | 0.2 | $ | 0.2 | ||||||||
Restricted
Stock Expense
|
1.4 | 0.9 | 2.8 | 1.8 | ||||||||||||
Total
Stock-Based Compensation Expense
|
$ | 1.5 | $ | 1.0 | $ | 3.0 | $ | 2.0 | ||||||||
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Cokinos
Natural Gas Company
|
11 | % | 11 | % | 10 | % | - | |||||||||
Houston
Pipeline Co.
|
- | - | 10 | % | 13 | % | ||||||||||
Crosstex
Energy Services, Ltd.
|
10 | % | 19 | % | 11 | % | 16 | % | ||||||||
DTE
Energy Trading, Inc.
|
38 | % | - | 36 | % | - | ||||||||||
Energy
Transfer Partners, L.P.
|
- | 15 | % | - | 10 | % | ||||||||||
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(In
thousands, except
|
||||||||||||||||
per
share amounts)
|
||||||||||||||||
Net
income (loss)
|
$ | (12,622 | ) | $ | 8,137 | $ | (17,918 | ) | $ | 5,592 | ||||||
Average
common shares outstanding
|
||||||||||||||||
Weighted
average common shares outstanding
|
30,296 | 25,702 | 29,548 | 25,680 | ||||||||||||
Stock
options and warrants
|
- | 851 | - | 828 | ||||||||||||
Diluted
weighted average common shares outstanding
|
30,296 | 26,553 | 29,548 | 26,508 | ||||||||||||
Earnings
(loss) per common share
|
||||||||||||||||
Basic
|
$ | (0.42 | ) | $ | 0.32 | $ | (0.61 | ) | $ | 0.22 | ||||||
Diluted
|
$ | (0.42 | ) | $ | 0.31 | $ | (0.61 | ) | $ | 0.21 | ||||||
2.
|
LONG-TERM
DEBT
|
June
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
(In
thousands)
|
||||||||
Convertible
Senior Notes
|
$ | 373,750 | $ | - | ||||
Second
Lien Credit Facility
|
- | 220,500 | ||||||
Senior
Secured Revolving Credit Facility
|
16,000 | 34,000 | ||||||
Other
|
- | 1 | ||||||
389,750 | 254,501 | |||||||
Current
maturities
|
- | (2,251 | ) | |||||
$ | 389,750 | $ | 252,250 | |||||
3.
|
INVESTMENTS
|
June
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
(In
thousands)
|
||||||||
Pinnacle
Gas Resources, Inc.
|
$ | 8,720 | $ | 11,071 | ||||
Oxane
Materials, Inc.
|
2,018 | - | ||||||
$ | 10,738 | $ | 11,071 | |||||
4.
|
INCOME
TAXES
|
5.
|
COMMITMENTS
AND CONTINGENCIES
|
6.
|
SHAREHOLDERS’
EQUITY
|
2008
|
2007
|
|||||||
(In
thousands)
|
||||||||
Shares
outstanding at January 1
|
28,009 | 25,981 | ||||||
Equity
offering
|
2,588 | - | ||||||
Restricted
stock issued, net of forfeitures
|
173 | 104 | ||||||
Employee
stock options exercised
|
23 | 82 | ||||||
Common
stock repurchased and retired for tax withholding
obligation
|
(5 | ) | (3 | ) | ||||
Shares
outstanding at June 30
|
30,788 | 26,164 | ||||||
7.
|
DERIVATIVE
INSTRUMENTS
|
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
(In
millions)
|
||||||||||||||||
Realized
gains (losses):
|
||||||||||||||||
Natural
gas and oil derivatives
|
$ | (5.2 | ) | $ | 0.3 | $ | (5.7 | ) | $ | 2.6 | ||||||
Interest
rate swaps - Second Lien Debt Outstanding
|
(1.0 | ) | 0.1 | (1.2 | ) | 0.2 | ||||||||||
Loss
on interest rate swap settlement related to
|
||||||||||||||||
Second
Lien Credit Facility(1)
|
(3.3 | ) | - | (3.3 | ) | - | ||||||||||
(9.5 | ) | 0.4 | (10.2 | ) | 2.8 | |||||||||||
Unrealized
gains (losses):
|
||||||||||||||||
Natural
gas and oil derivatives
|
(43.7 | ) | 3.5 | (70.6 | ) | (4.5 | ) | |||||||||
Interest
rate swaps
|
5.0 | 0.2 | 2.8 | 0.1 | ||||||||||||
(38.7 | ) | 3.7 | (67.8 | ) | (4.4 | ) | ||||||||||
Net
gain (loss) on derivatives
|
$ | (48.2 | ) | $ | 4.1 | $ | (78.0 | ) | $ | (1.6 | ) | |||||
(1)
|
In
May 2008, the Company repaid its outstanding borrowings under the Second
Lien Facility and terminated the facility. In connection with
the termination of the facility, the Company settled its interest rate
swaps and realized a $3.3 million loss on the remaining positions covering
the period from May 28, 2008 to December 31, 2008.
|
Natural
Gas
|
Natural
Gas
|
|||||||||||||||||||
Swaps
|
Collars
|
|||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||
Quarter
|
MMbtu
|
Fixed
Price(1)
|
MMBtu
|
Floor
Price(1)
|
Ceiling
Price(1)
|
|||||||||||||||
Third
Quarter 2008
|
276,000 | $ | 7.94 | 3,036,000 | $ | 7.13 | $ | 8.82 | ||||||||||||
Fourth
Quarter 2008
|
276,000 | 7.94 | 3,036,000 | 7.13 | 8.82 | |||||||||||||||
First
Quarter 2009
|
- | - | 2,520,000 | 7.37 | 9.10 | |||||||||||||||
Second
Quarter 2009
|
- | - | 2,548,000 | 7.12 | 8.85 | |||||||||||||||
Third
Quarter 2009
|
- | - | 2,576,000 | 7.16 | 8.88 | |||||||||||||||
Fourth
Quarter 2009
|
- | - | 2,576,000 | 7.17 | 8.90 | |||||||||||||||
First
Quarter 2010
|
- | - | 1,620,000 | 7.92 | 9.63 | |||||||||||||||
Second
Quarter 2010
|
- | - | 1,638,000 | 7.18 | 8.89 | |||||||||||||||
Third
Quarter 2010
|
- | - | 1,656,000 | 7.35 | 9.06 | |||||||||||||||
Fourth
Quarter 2010
|
- | - | 1,656,000 | 7.45 | 9.16 | |||||||||||||||
First
Quarter 2011
|
- | - | 450,000 | 9.70 | 11.70 | |||||||||||||||
Second
Quarter 2011
|
- | - | 455,000 | 8.25 | 10.25 | |||||||||||||||
Third
Quarter 2011
|
- | - | 460,000 | 8.65 | 10.65 | |||||||||||||||
Fourth
Quarter 2011
|
- | - | 460,000 | 8.85 | 10.85 | |||||||||||||||
First
Quarter 2012
|
- | - | 455,000 | 9.55 | 11.55 | |||||||||||||||
Second
Quarter 2012
|
- | - | 455,000 | 8.35 | 10.35 | |||||||||||||||
Oil
Collars
|
||||||||||||
Average
|
Average
|
|||||||||||
Quarter
|
Bbls
|
Floor
Price(2)
|
Ceiling
Price (2)
|
|||||||||
Third
Quarter 2008
|
18,400 | $ | 100.38 | $ | 113.75 | |||||||
Fourth
Quarter 2008
|
18,400 | 100.85 | 114.23 | |||||||||
First
Quarter 2009
|
9,000 | 131.65 | 151.65 | |||||||||
Second
Quarter 2009
|
9,100 | 131.40 | 151.40 | |||||||||
Third
Quarter 2009
|
9,200 | 130.85 | 150.85 | |||||||||
Fourth
Quarter 2009
|
9,200 | 130.35 | 150.35 | |||||||||
8.
|
FAIR
VALUE MEASUREMENTS
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Assets:
|
||||||||||||||||
Investment
in Pinnacle Gas Resources, Inc.
|
$ | 8,720 | $ | - | $ | - | $ | 8,720 | ||||||||
Liabilities:
|
||||||||||||||||
Oil
and natural gas derivatives
|
- | (69,796 | ) | - | (69,796 | ) | ||||||||||
Total
|
$ | 8,720 | $ | (69,796 | ) | $ | - | $ | (61,076 | ) | ||||||
·
|
In the
last half of 2008 we currently plan to drill 37 gross wells (36.6 net) in
the Barnett Shale area, ten gross wells (3.7 net) in the Gulf Coast area,
26 gross wells (26.0 net) in our Camp Hill field (which includes
approximately seven service wells), one gross (0.2 net) U.K. North Sea
appraisal well and 28 gross wells (14.2 net) in other
areas. 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 2008, depreciation, depletion and
amortization, oil and natural gas operating expenses and production are
expected to increase over levels incurred in 2007. Our ability
to drill this number of wells is heavily dependent upon the timely access
to oilfield services, particularly drilling
rigs.
|
·
|
We
plan to continue the development of the Barnett Shale. During
the second quarter of 2008, we added two Company operated rigs in the
Barnett Shale, bringing our total operated rigs to six: four in
Southeast Tarrant County, one in Denton County and one in Parker
County. We currently have 39 gross wells awaiting completion or
pipeline connections. We expect to bring these wells online in
the next six months.
|
·
|
We
plan to continue the development of other new drilling programs in the
Marcellus Shale in the Northeastern United States, the U.K. North Sea, the
Floyd Shale in Mississippi and the Fayetteville Shale in
Arkansas.
|
·
|
We
expect to continue to hedge production to decrease our exposure to
reductions in natural gas and oil prices. At June 30, 2008, we
had hedged approximately 26,149,000 MMBtus of natural gas production
through 2012 and 73,300 Bbls of oil production through
2009.
|
2008
Period
|
||||||||||||||||
Three
Months Ended
|
Compared
to 2007 Period
|
|||||||||||||||
June
30,
|
Increase
|
%
Increase
|
||||||||||||||
2008
|
2007
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Production
volumes
|
||||||||||||||||
Oil
and condensate (MBbls)
|
48 | 63 | (15 | ) | (24 | )% | ||||||||||
Natural
gas (MMcf)
|
5,817 | 3,827 | 1,990 | 52 | % | |||||||||||
Average
sales prices
|
||||||||||||||||
Oil
and condensate (per Bbl)
|
$ | 122.95 | $ | 64.25 | $ | 58.70 | 91 | % | ||||||||
Natural
gas (per Mcf)
|
10.12 | 7.54 | 2.58 | 34 | % | |||||||||||
Operating
revenues (In thousands)
|
||||||||||||||||
Oil
and condensate
|
$ | 5,843 | $ | 4,041 | $ | 1,802 | 45 | % | ||||||||
Natural
gas
|
58,865 | 28,850 | 30,015 | 104 | % | |||||||||||
Other
|
2,680 | - | 2,680 | N/A | ||||||||||||
Total
Operating Revenues
|
$ | 67,388 | $ | 32,891 | $ | 34,497 | 105 | % | ||||||||
2008
Period
|
||||||||||||||||
Six
Months Ended
|
Compared
to 2007 Period
|
|||||||||||||||
June
30,
|
Increase
|
%
Increase
|
||||||||||||||
2008
|
2007
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Production
volumes
|
||||||||||||||||
Oil
and condensate (MBbls)
|
101 | 123 | (22 | ) | (18 | )% | ||||||||||
Natural
gas (MMcf)
|
11,831 | 6,672 | 5,159 | 77 | % | |||||||||||
Average
sales prices
|
||||||||||||||||
Oil
and condensate (per Bbl)
|
$ | 108.79 | $ | 60.33 | $ | 48.46 | 80 | % | ||||||||
Natural
gas (per Mcf)
|
9.07 | 7.21 | 1.86 | 26 | % | |||||||||||
Operating
revenues (In thousands)
|
||||||||||||||||
Oil
and condensate
|
$ | 10,938 | $ | 7,424 | $ | 3,514 | 47 | % | ||||||||
Natural
gas
|
107,330 | 48,079 | 59,251 | 123 | % | |||||||||||
Other
|
2,680 | - | 2,680 | N/A | ||||||||||||
Total
Operating Revenues
|
$ | 120,948 | $ | 55,503 | $ | 65,445 | 118 | % | ||||||||
·
|
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 and oil
prices.
|
·
|
Available
borrowings under the Senior Credit Facility. In June 2008, the
borrowing base availability under the Senior Credit Facility increased to
$165.0 million. At August 6, 2008, $106 million was available
for borrowing under the Senior Credit Facility. The next
borrowing base redetermination is currently scheduled for November 2008 at
which time we currently expect our borrowing base to increase by an as yet
undetermined amount.
|
·
|
Other
debt and equity offerings. In February 2008, we received $135.2
million of net proceeds from an underwritten public offering of 2,587,500
shares of our common stock priced at $54.50 per share. In May
2008, we received $365.3 million of net proceeds from the issuance of the
Senior Convertible Notes. As situations or conditions arise, we
may issue debt, equity or other instruments to supplement our cash
flows.
|
·
|
Asset
sales. In order to fund our drilling program, we may consider
the sale of certain properties or assets no longer deemed core to our
future growth.
|
·
|
Project
financing in certain limited
circumstances.
|
Three
Months Ended
|
Six
Months Ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
Oil
positions settled (Bbls)
|
9,100 | - | 27,300 | - | ||||||||||||
Natural
gas positions settled (MMBtu)
|
3,458,000 | 1,547,000 | 7,590,000 | 3,434,000 | ||||||||||||
Realized
gain/(loss) ($ millions) (1)
|
$ | (5.2 | ) | $ | 0.3 | $ | (5.7 | ) | $ | 2.6 | ||||||
Unrealized
gain/(loss) ($ millions) (1)
|
$ | (43.7 | ) | $ | 3.5 | $ | (70.6 | ) | $ | (4.5 | ) | |||||
Natural
Gas
|
Natural
Gas
|
|||||||||||||||||||
Swaps
|
Collars
|
|||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||
Quarter
|
MMbtu
|
Fixed
Price(1)
|
MMBtu
|
Floor
Price(1)
|
Ceiling
Price(1)
|
|||||||||||||||
Third
Quarter 2008
|
276,000 | $ | 7.94 | 3,036,000 | $ | 7.13 | $ | 8.82 | ||||||||||||
Fourth
Quarter 2008
|
276,000 | 7.94 | 3,036,000 | 7.13 | 8.82 | |||||||||||||||
First
Quarter 2009
|
- | - | 2,520,000 | 7.37 | 9.10 | |||||||||||||||
Second
Quarter 2009
|
- | - | 2,548,000 | 7.12 | 8.85 | |||||||||||||||
Third
Quarter 2009
|
- | - | 2,576,000 | 7.16 | 8.88 | |||||||||||||||
Fourth
Quarter 2009
|
- | - | 2,576,000 | 7.17 | 8.90 | |||||||||||||||
First
Quarter 2010
|
- | - | 1,620,000 | 7.92 | 9.63 | |||||||||||||||
Second
Quarter 2010
|
- | - | 1,638,000 | 7.18 | 8.89 | |||||||||||||||
Third
Quarter 2010
|
- | - | 1,656,000 | 7.35 | 9.06 | |||||||||||||||
Fourth
Quarter 2010
|
- | - | 1,656,000 | 7.45 | 9.16 | |||||||||||||||
First
Quarter 2011
|
- | - | 450,000 | 9.70 | 11.70 | |||||||||||||||
Second
Quarter 2011
|
- | - | 455,000 | 8.25 | 10.25 | |||||||||||||||
Third
Quarter 2011
|
- | - | 460,000 | 8.65 | 10.65 | |||||||||||||||
Fourth
Quarter 2011
|
- | - | 460,000 | 8.85 | 10.85 | |||||||||||||||
First
Quarter 2012
|
- | - | 455,000 | 9.55 | 11.55 | |||||||||||||||
Second
Quarter 2012
|
- | - | 455,000 | 8.35 | 10.35 | |||||||||||||||
Oil
Collars
|
||||||||||||
Average
|
Average
|
|||||||||||
Quarter
|
Bbls
|
Floor
Price(2)
|
Ceiling
Price (2)
|
|||||||||
Third
Quarter 2008
|
18,400 | $ | 100.38 | $ | 113.75 | |||||||
Fourth
Quarter 2008
|
18,400 | 100.85 | 114.23 | |||||||||
First
Quarter 2009
|
9,000 | 131.65 | 151.65 | |||||||||
Second
Quarter 2009
|
9,100 | 131.40 | 151.40 | |||||||||
Third
Quarter 2009
|
9,200 | 130.85 | 150.85 | |||||||||
Fourth
Quarter 2009
|
9,200 | 130.35 | 150.35 | |||||||||
(1)
|
Based
on Houston Ship Channel and Waha spot
prices.
|
(2)
|
Based
on West Texas intermediate index
prices.
|
(c)
Total Number of
|
(d)
Maximum Number
|
|||||||||||||||
Shares
Purchased as
|
(or
Appropriate Dollar
|
|||||||||||||||
(a)
Total Number
|
Part
of Publicly
|
Value)
of Shares that May
|
||||||||||||||
of
Shares
|
(b)
Average Price
|
Announced
Plans or
|
Yet
Be Purchased Under
|
|||||||||||||
Period
|
Purchased(1)
|
Paid
Per Share
|
Programs
|
the
Plan or Programs
|
||||||||||||
April
2008
|
272 | $ | 64.81 | - | - | |||||||||||
May
2008
|
4,120 | 66.47 | - | - | ||||||||||||
June
2008
|
- | - | - | - | ||||||||||||
Total
|
4,392 | $ | 66.37 | - | - | |||||||||||
|
(1) The
4,392 shares related to the surrender of shares of common stock to satisfy
tax withholding obligations in connection with the vesting of restricted
stock issued to employees under our long-term incentive
plan.
|
Exhibit
Number
|
Description
|
|
†3.1
|
—
|
Articles
of Amendment to the Amended and Restated Articles of Incorporation of the
Company (incorporated herein by reference to Exhibit 3.1 to the Company’s
Current Report on Form 8-K filed on June 25, 2008).
|
†4.1
|
—
|
Indenture
among Carrizo Oil & Gas, Inc., the subsidiaries named therein and
Wells Fargo Bank, National Association, as trustee, dated May 28,
2008 (incorporated herein by reference to Exhibit 4.1 to the Company’s
Current Report on Form 8-K filed on May 28, 2008).
|
†4.2
|
—
|
First
Supplemental Indenture dated May 28, 2008 between Carrizo Oil &
Gas, Inc. and Wells Fargo Bank, National Association, as trustee
(incorporated herein by reference to Exhibit 4.2 to the Company’s Current
Report on Form 8-K filed on May 28, 2008).
|
†10.1
|
—
|
Fourth
Amendment to Credit Agreement, dated as of May 20, 2008, by and among
Carrizo Oil & Gas, Inc. and certain subsidiaries thereof, the Lenders
party thereto and JPMorgan Chase Bank, N.A., as Administrative Agent
(incorporated herein by reference to Exhibit 10.1 to the Company’s Current
Report on Form 8-K filed on May 22, 2008).
|
†10.2
|
—
|
Termination and Release Agreement dated May 28,
2008 among Carrizo Oil & Gas, Inc., as Borrower, the Guarantors party
thereto, Credit Suisse, as Administrative Agent and Collateral Agent, and
the other Lenders party thereto (incorporated herein by reference to
Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on June 3,
2008).
|
†10.3
|
—
|
Fifth Amendment dated June 11, 2008 to Credit
Agreement dated as of May 25, 2006 among Carrizo Oil & Gas, Inc., as
Borrower, Certain Subsidiaries of Borrower, as Guarantors, JPMorgan Chase
Bank, N.A., as Administrative Agent and the Lenders party thereto
(incorporated herein by reference to Exhibit 10.1 to the Company’s
Current Report on Form 8-K filed on July 11, 2008).
|
†10.4
|
—
|
Sixth Amendment dated July 7, 2008 to Credit
Agreement dated as of May 25, 2006 among Carrizo Oil & Gas, Inc., as
Borrower, Certain Subsidiaries of Borrower, as Guarantors, JPMorgan Chase
Bank, N.A., as Administrative Agent and the Lenders party thereto
(incorporated herein by reference to Exhibit 10.2 to the Company’s
Current Report on Form 8-K filed on July 11, 2008).
|
31.1
|
—
|
|
31.2
|
—
|
|
32.1
|
—
|
|
32.2
|
—
|
†
|
Incorporated
herein by reference as indicated.
|
Carrizo
Oil & Gas, Inc.
|
|
(Registrant)
|
|
Date: August
8, 2008
|
By: /s/S. P. Johnson,
IV
|
President
and Chief Executive Officer
|
|
(Principal
Executive Officer)
|
|
Date: August
8, 2008
|
By: /s/Paul F.
Boling
|
Chief
Financial Officer
|
|
(Principal
Financial and Accounting Officer)
|