Brigham Exploration Reports Q2 1999 Financial Results and Provides Operational Update
AUSTIN, Texas--(BUSINESS WIRE)--Aug. 3, 1999--Brigham
Exploration Company (Nasdaq:BEXP) today announced its financial
results for the quarter ended June 30, 1999.
Average net daily production volumes for the second quarter 1999
were 17.2 MMcfe, a decrease of 19% from the second quarter 1998 and
roughly flat compared with first quarter 1999 production.
Natural gas and oil sales for the second quarter 1999 were $3.6
million compared to $4.0 million for the same period last year, an 11%
decrease as higher average equivalent sales prices in the current year
period partially offset lower year-over-year production. Earnings
before interest, taxes, depreciation, depletion and amortization
(EBITDA) decreased 12% to $1.9 million in the second quarter 1999 from
$2.2 million in the second quarter 1998, while operating cash flow for
the second quarter 1999 was $660,000 ($0.05 per diluted share), a
decrease from $945,000 ($0.08 per diluted share) for the same period
in 1998. The Company reported a net loss of $2.8 million ($0.20 per
diluted share) before giving effect to a $12.2 million ($0.85 per
diluted share) non-cash loss on the sale of properties for the second
quarter 1999 compared to a net loss of $627,000 ($0.05 per diluted
share) for the prior year period.
In connection with the Company's late June 1999 property
divestitures, Brigham recorded a $12.2 million non-cash loss on the
sale of properties to recognize the difference between the $17.1
million sales price received and the $28.9 million deemed cost basis
attributed to the divested properties that was calculated in
accordance with the rules of the full-cost method of accounting for
oil and gas properties. While the application of the full-cost method
of accounting resulted in this non-cash charge to earnings, the
Company's cumulative capital investments in these properties, net of
operating cash flow received, were less than the proceeds it received
in the divestitures.
33% INCREASE IN CURRENT DAILY PRODUCTION RATE
Brigham estimates its current net daily production rate to be 19
MMcfe of natural gas, which represents a 10% increase over the
Company's 17.2 MMcfe per day average production rate during the second
quarter 1999. Excluding net volumes attributable to reserves sold by
Brigham in its June 1999 property divestitures, the Company's average
net daily second quarter 1999 production would have been 14.2 MMcfe
per day. As a result, Brigham's estimated current net daily production
represents 33% growth over its adjusted second quarter 1999 volumes.
This increase is primarily attributable to the successful completion
of wells drilled during the first half of 1999 along with successful
recompletion and workovers performed by the Company on certain
producing wells.
Bud Brigham, the Company's Chairman, CEO and President, stated,
"I am pleased with our Company's significant accomplishments during
the first half of 1999 and look forward to building upon and
capitalizing on these efforts through our second half drilling
program. We completed a number of initiatives established at the
outset of 1999 to improve our Company's capital resources, the most
recent of which was our June 1999 property sales and the associated
increased bank borrowing availability created from these divestitures.
Our Company's current net production volumes have increased 33% from
the second quarter 1999 on a comparable basis by adjusting for our
recent property divestitures, due primarily to our profitable 1999
drilling, despite lower levels of drilling activity than we would have
preferred. We expect this production growth to become more apparent in
the third quarter, as will our corporate cost reduction initiatives."
Bud Brigham further indicated, "We believe our accomplishments
thus far in 1999 are indicative of the quality and potential impact of
our prospect inventory, and that we are well positioned to capitalize
on some remarkable and high potential drilling opportunities in the
second half of this year. For example, we plan to spud several wells
in the amplitude-related Frio play in South Texas where our Company
and other operators have experienced significant recent drilling
success. The first well, planned to spud in August, will test an
amplitude-related prospect that is analogous to that of two nearby
wells in the same 3-D program that have each averaged over 30 MMcfe
per day during the first ten months of production. If our well proves
to be equally productive, it alone would increase our Company's net
production volumes and revenue by more than 50%. Therefore, we are
very excited about our drilling program planned for the balance of
1999, and we are eager to report the progress of these wells during
the next few months."
SECOND QUARTER 1999 RESULTS
Brigham's net equivalent production volumes in the second quarter
1999 totaled 1.5 Bcfe as compared with volumes of 1.9 Bcfe in the
second quarter 1998. Net natural gas production in the second quarter
1999 was 1.0 Bcf, a 17% decrease over the same period in 1998, while
net oil production in the current year quarter was 90 MBbls, a 23%
decrease from the prior year quarter. The decrease in net production
volumes was primarily due to the natural decline of existing producing
wells coupled with the Company's disappointing fourth quarter 1998
drilling results. In addition, Brigham's previously reported
successful 1999 drilling completions, recompletions and workovers did
not meaningfully impact production volumes until late in the second
quarter, and will therefore fully impact the Company's third quarter
production volumes. Natural gas comprised 65% of Brigham's equivalent
second quarter 1999 production volumes as compared with 63% for the
prior year period.
Partially offsetting the decrease in year-over-year production
volumes, the Company's average realized natural gas and oil equivalent
sales price increased 11% in the second quarter 1999 as compared to
the average realized sales price in the prior year quarter, primarily
attributable to improved market prices for crude oil. Brigham's
average natural gas sales price for the second quarter 1999 was $2.07
per Mcf compared to $2.09 per Mcf in the second quarter 1998 (a 1%
decrease), while the Company's average oil sales price for the second
quarter 1999 was $16.24 per Bbl compared to $12.17 per Bbl in the
prior year period (a 33% increase). Natural gas hedging gains of
$8,425, or $0.01 per Mcf, contributed slightly to the Company's
average realized natural gas sales prices during the second quarter
1999.
Operating expenses decreased 8% in the second quarter 1999 from
those incurred during the prior year quarter, primarily due to the
combined impacts of (i) a 22% reduction in net general and
administrative expenses ($891,000 vs. $1.1 million), (ii) 18% lower
production taxes and (iii) lower non-cash depletion and stock
compensation amortization expenses, partially offset by (iv) a 10%
increase in lease operating expenses. Net interest expense increased
to $3.0 million in the second quarter 1999 from $1.4 million in the
prior year period as a result of increased borrowings and higher
effective interest rates. The Company noted that net interest expense
reported for the second quarter 1999 of $3.0 million consisted of (i)
$1.3 million of cash interest expenses, (ii) $1.8 million of non-cash
interest expenses related to the payment of interest on its senior
subordinated notes through the issuance of additional notes in lieu of
cash and the amortization of deferred financing costs and debt
discounts, and (iii) $70,000 of interest income.
Capital costs incurred during the second quarter 1999 totaled
$2.8 million, including $1.1 million for drilling, $168,000 for
acreage leasing, $627,000 for seismic activities (principally
processing of data acquired during 1998 and the payment of acquisition
obligations incurred prior to 1999), and $973,000 for capitalized
overhead costs. Offsetting these capital costs incurred, Brigham
received $17.1 million before adjustment for transaction costs from
the sales of interests in producing and non-producing oil and natural
gas properties located within two non-operated fields in its Anadarko
Basin province. These property sales closed on June 25, 1999.
As a result of the Company's June 1999 property divestitures,
Brigham generated approximately $8 million of additional borrowing
capacity from its revolving credit facility. As previously disclosed,
Brigham intends to utilize its increased bank borrowing availability,
coupled with cash flow and a portion of the approximate $2 million
remaining for drilling under its Duke project financing, to fund the
drilling of thirteen wells planned to spud during the third quarter
and to fund operations and working capital requirements.
OPERATIONAL UPDATE
During the first half of 1999, Brigham spud 11 gross and 3.4 net
wells, representing an average working interest of 31%. Of these
wells, the Company has completed seven gross (2.5 net) wells and
plugged 3 gross (0.9 net) wells, resulting in drilling success rates
of 70% on a gross basis and 73% on a net basis. All of the wells spud
by the Company during the first half of 1999 targeted natural gas
prospects concentrated in Brigham's 3-D projects in its Anadarko Basin
and Gulf Coast core exploration provinces. The Company had three
significant completions during the first half of 1999, of which the
first began producing to sales in late May 1999 resulting in a partial
contribution to Brigham's second quarter production volumes. All three
wells should have a significant impact on the Company's third quarter
production volumes. These three natural gas wells include two Lower
Morrow producers in the Anadarko Basin and one Lower Frio producer in
the Gulf Coast province, each of which enhances offset locations or
analogous prospects, several of which will be drilled in the second
half of 1999. These three completions, in which Brigham retains an
average 65% working interest, are currently producing at a combined
gross daily rate of 16 MMcfe, or 9.8 MMcfe per day net to Brigham's
revenue interest.
Brigham spud 2 gross and 0.2 net wells during the second quarter
of 1999, representing an average working interest of 12%. One of the
Company's second quarter wells, in which Brigham has a 21% working
interest, has been completed in the Granite Wash formation at 4,200
feet in Beckham County, Okla., in the Anadarko Basin. This well is
currently testing and is expected to begin producing to sales at an
estimated rate of 50 Bbls of oil per day by mid-August. The other well
spud by the Company during the second quarter is currently drilling.
Consistent with the Company's current focus to direct substantially
all of its resources toward the drilling of its existing prospect
inventory, Brigham did not acquire any new 3-D seismic data during the
second quarter.
With the recently achieved increased borrowing availability from
its revolving credit facility, Brigham plans to spud thirteen gross
(5.8 net) wells in the third quarter, of which the Company will
operate ten. The Company's planned third quarter wells target
primarily natural gas prospects in its Anadarko Basin and onshore Gulf
Coast core provinces within trends where Brigham has experienced
recent 3-D based exploration success, including the Morrow, Hunton and
Springer trends in the Anadarko Basin and the Lower Frio and Vicksburg
trends in the Gulf Coast. These wells provide the Company with
estimated net unrisked reserve potential of approximately 70 billion
cubic feet of equivalent (Bcfe) natural gas. Net of the recently
completed property divestitures, Brigham had estimated net total
proved reserves at June 1, 1999, of 71 Bcfe.
CONFERENCE CALL INFORMATION
Brigham management will host a conference call to discuss the
Company's financial and operational results for the second quarter
1999 with investors, analysts and other interested parties on
Wednesday, August 4th, at 9:00 a.m. Central time. To participate in
the call, please dial 800/633-8414 and ask for the Brigham Exploration
conference call (conference identification number 12766156). A
recording of the conference call will be available to interested
parties approximately one hour after the call is completed through
5:00 p.m. Central time on Thursday, August 5th. To access the
recording, please dial 800/633-8284 and enter 12766156 as the
conference playback identification number.
ABOUT BRIGHAM EXPLORATION
Brigham Exploration Company is an independent exploration and
production company that applies 3-D seismic imaging and other advanced
technologies to systematically explore and develop onshore domestic
natural gas and oil provinces. For more information about Brigham
Exploration, please visit the Company's Web site at www.bexp3d.com or
contact Investor Relations at 512/427-3444.
FORWARD-LOOKING STATEMENTS DISCLOSURE
Except for the historical information contained herein, the
matters discussed in this news release are forward-looking statements
that are based upon current expectations. Important factors that could
cause actual results to differ materially from those in the
forward-looking statements include risks inherent in exploratory
drilling activities, the timing and extent of changes in commodity
prices, unforeseen engineering and mechanical or technological
difficulties in drilling wells, availability of drilling rigs, land
issues, federal and state regulatory developments and other risks more
fully described in the company's filings with the Securities and
Exchange Commission.
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