Delta Petroleum Corporation Announces Third Quarter Operating Results
Wednesday November 8, 8:30 am ET
Revenue Increases 65% From Prior-Year Quarter to $48.4 Million
DENVER, Nov. 8 /PRNewswire-FirstCall/ -- Delta Petroleum Corporation (Nasdaq: DPTR - News), an independent energy exploration and development company ("Delta" or "the Company"), today reported operating results for the third quarter and first nine months of 2006.
RESULTS OF OPERATIONS
For the quarter ended September 30, 2006, the Company reported total revenue of $48.4 million, an increase of 65% from the prior-year quarter, primarily reflecting an 18% increase in production from continuing operations and a 453% increase in drilling and trucking revenue as a result of an expansion in the DHS Drilling Company rig fleet. The Company incurred a net loss of $7.1 million, or $(0.13) per fully diluted share, and EBITDAX (a non-GAAP measure defined below) of $19.0 million during the most recent quarter. These results compare with revenue of $29.4 million, a net loss of $2.2 million, or $(0.05) per fully diluted share, and EBITDAX of $15.4 million in the third quarter of 2005. Oil and gas revenue increased 10% to $31.9 million (vs. $28.9 million in the prior-year period) on higher production volumes and higher realized oil prices, partially offset by lower realized gas prices.
The Company's third quarter 2006 operating results include an unrealized gain of $3.0 million on derivative instruments resulting from oil and gas hedging programs, a $6.1 million gain (net of tax) on the sale of certain non-strategic East Texas properties, and abnormally high depletion costs. The depletion rate increase is partially due to multi-stage completion projects in the Howard Ranch field in which the majority of well costs are being depleted over zones that have recently been determined to be uneconomic. In addition, a developmental dry hole in the South Angleton field, which was drilled in 2005, added $3.0 million to the depletion pool. Also during the quarter, the Company incurred $11.0 million in impairment expenses, approximately $10.0 million of which were related to the Company's Washington County, Colorado properties. Lower Rocky Mountain natural gas prices were primarily responsible for the impairment charges.
During the most recent quarter, average realized oil prices approximated $68.11 per barrel for onshore production, versus $60.45 in the comparable prior-year quarter. Realized natural gas prices fell to an average of $5.78 per million cubic feet (Mmcf), versus $8.24 during the third quarter of 2005.
For the nine months ended September 30, 2006, net income increased 165% to $10.9 million, or $0.21 per fully diluted share, compared with net income of $4.1 million, or $0.10 per fully diluted share, in the corresponding period of the previous year. EBITDAX increased to $59.0 million in the first nine months of 2006, versus $44.3 million in the nine months ended September 30, 2005. Oil and gas revenue increased 37% to $97.6 million (vs. $71.2 million), while contract drilling and trucking revenue increased to $40.2 million, compared with $7.6 million in the prior-year period.
PRODUCTION AND COST INFORMATION
Total production in the most recent quarter increased 8.7% to approximately 4.02 Bcfe, compared with 3.70 Bcfe in the prior-year quarter. Production volumes, average prices received and costs per equivalent Mcfe for the three months ended September 30, 2006 and 2005 are provided below:
Three Months Ended September 30,
2006 2005
Onshore Offshore Onshore Offshore
Production - Continuing
Operations:
Oil (MBbl) 282 39 183 36
Gas (MMcf) 1,910 -- 1,952 --
Production - Discontinued
Operations:
Oil (MBbl) 14 -- 31 --
Gas (MMcf) 92 -- 243 --
Average Price - Continuing
Operations:
Oil (per barrel) $68.11 $58.04 $60.45 $49.93
Gas (per Mcf) $5.78 $-- $8.24 $--
Costs per Mcfe
Hedge effect $(0.18) $-- $(0.82) $--
Lease operating expense $1.47 $4.28 $1.00 $6.05
Production taxes $0.46 $0.06 $0.69 $(0.59)
Transportation costs $0.13 $-- $0.15 $--
Depletion expense $4.95 $1.25 $2.61 $0.85
Total production for the nine months ended September 30, 2006 increased by 9.0% to 12.39 Bcfe, versus 11.37 Bcfe during the first nine months of 2005. Production volumes, average prices received and costs per equivalent Mcfe for the nine months ended September 30, 2006 and 2005 are provided below:
Nine Months Ended September 30,
2006 2005
Onshore Offshore Onshore Offshore
Production - Continuing
Operations:
Oil (MBbl) 863 124 549 117
Gas (MMcf) 5,759 -- 5,693 --
Production - Discontinued
Operations:
Oil (MBbl) 67 -- 133 --
Gas (MMcf) 307 -- 881 --
Average Price - Continuing
Operations:
Oil (per barrel) $65.54 $55.21 $52.95 $40.12
Gas (per Mcf) $6.07 $-- $6.58 $--
Costs per Mcfe
Hedge effect $(0.48) $-- $(0.33) $--
Lease operating expense $1.31 $4.14 $1.03 $4.78
Production taxes $0.49 $0.05 $0.50 $0.06
Transportation costs $0.12 $-- $0.09 $--
Depletion expense $3.90 $0.95 $2.03 $0.81
OPERATIONS UPDATE - NEW DRILLING VENTURES
The Company released an operations update on October 31, 2006. Since that date several events have occurred and are described below.
Paradox Basin, CO and UT, 70% WI -- The Company is encouraged with the completion results from the first frac stage of the Greentown State 36-11, but additional completions are necessary to determine the ultimate recovery and drainage area of the reservoir. The Company has arranged for nine frac dates between now and year-end to complete three Paradox Basin wells and is permitting additional drilling locations.
Central Utah Hingeline Project, UT, 65% WI -- The Company is now drilling the Joseph Federal #1, which is projected to reach total depth in December. The Company is currently acquiring additional seismic data on two structural features to be drilled in 2007.
Columbia River Basin, WA -- Completion activities continue on the Anderville Farms 1-6, and the Anderson 11-5 is currently drilling and should reach total depth by year-end.
OPERATIONS UPDATE -- DEVELOPMENT PROJECTS
Newton Field, SE Gulf Coast, TX, 100% WI -- The Company is proceeding with completion activities at the James Gray #1, which is currently producing approximately 3 Mmcfe per day in the lower Wilcox formation. The James Gray #2 will begin completion operations within the next few weeks, and the James Gray #3 will be spud this week. The James Gray #3 is a third delineation well on this northern structural feature.
The George Wood #1, which tested a separate structural feature northwest of the Newton Field, has been drilled and logged. The well has been suspended pending further testing and may be re-entered at a later date.
Vega Unit, Piceance Basin, CO, 100% WI -- The Collbran Valley Gas System ("CVGS") pipeline is operational and transporting gas. First sales to the CVGS from the Company are expected to begin within two weeks. A second drilling rig, DHS rig #4, has been added to the development program.
Midway Loop Area, SE Gulf Coast, TX, ~ 10% - 55% WI -- The Company has re-entered the BP America Delta #1 (55% WI) to re-drill the southern lateral. In addition, the Company is drilling the Simmons A70 2H (50% WI), which is a direct west offset to the Best Kenneson Willsource #1.
PRODUCTION GUIDANCE
Production for the fourth quarter is expected to range between 4.0 Bcfe and 4.5 Bcfe. The variance is related to the timing of initial sales from a number of areas, including CVGS, between now and the end of December. Production for the first quarter of 2007 is projected to range between 4.8 Bcfe and 5.3 Bcfe.
OTHER BUSINESS
DHS Drilling Company -- During the third quarter of 2006, the drilling rigs owned by DHS Drilling Company operated at a utilization rate of 94% and recorded 1,238 rig-days of revenue generation (compared to 471 rig-days during the comparable prior-year quarter).
Divestitures -- Tristone Capital has been engaged to advise and assist the Company in the sale of a package of non-core producing properties located in Texas and New Mexico. Tristone expects to open a data room in Houston in December 2006 and to receive final bids by the end of January 2007. The Company continues to evaluate its other non-core assets for additional divestitures.
INVESTOR CONFERENCE CALL
Delta Petroleum Corporation will hold a conference call at 12:00 noon EST on Wednesday, November 8, 2006, to discuss its operating results for the quarter and nine months ended September 30, 2006, and the outlook for the balance of 2006.
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