Credo Petroleum Reports Financial Results for the Quarter and Nine Months Ended July 31, 2009.Third Quarter 2009 Profit Driven by New Oil Discoveries Third Quarter Oil Production Increases 165% DENVER -- Credo Credo A Latin word which means "a set of fundamental beliefs or a guiding principle.” For a company, a credo is like a mission statement. Notes: For example, Sam Walton, founder of Wal-Mart, established the "Three Basic Beliefs” as his company's credo. Petroleum Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :CRED) today reported financial results for the quarter and nine months ended July 31, 2009. For the third quarter, net income was $353,000, or $.03 per basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to $3,343,000, or $.34 per diluted share last year. Production increased 6% compared to last year, however, substantially lower price realizations for both oil and natural gas caused revenue to fall 50%, leading to the decrease in quarterly earnings. Third quarter revenue fell to $2,837,000 compared to $5,646,000 last year. For the first year in Credo's history, during 2009 oil revenue has exceeded natural gas revenue. Oil production volumes increased 165% for the third quarter and 113% for the nine months compared to the same periods last year. The increase was driven by a change in the company's product focus several years ago which led to increased spending for oil driven plays in Kansas and Oklahoma. Credo has also made a major commitment to purchasing acreage in the Williston Basin horizontal Bakken play where drilling has commenced on its first well. In addition, Credo's production revenues are benefiting from oil's significant price advantage to natural gas which was more than 20 to 1 at third quarter-end compared to the Btu equivalency equivalency the combining power of an electrolyte. See also equivalent. of 6 to 1. The company's production would have increased 83% and 24%, for the third quarter and nine months, respectively, if oil were converted to natural gas based on the wellhead well·head n. 1. The source of a well or stream. 2. A principal source; a fountainhead. 3. The structure built over a well. wellhead Noun 1. prices actually received. For the first nine months of 2009, Credo reported a net loss of $14,248,000, or $1.38 per basic share. The loss resulted from a $15,038,000 non-cash, after tax reduction in the book carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of oil and gas properties and long lived assets. The write-downs were necessitated by the collapse of oil and natural gas prices during 2009. For the same period last year, net income was $4,036,000 or $0.42 per diluted share. Lower product prices caused revenue to fall 49% to $7,298,000 for the first nine months compared to $14,321,000 last year. During 2009, Credo recorded write-downs in book asset values because accounting rules require "point in time" valuation of oil and gas reserves on the last day of the quarter using spot market prices in effect on that date. That price is not necessarily reflective Refers to light hitting an opaque surface such as a printed page or mirror and bouncing back. See reflective media and reflective LCD. of the contract prices Credo received for its oil and gas, or the prices that Credo expects to receive in the future. The write-downs were purely non-cash financial statement adjustments and do not impact future cash flows or oil and gas reserve quantities. OIL PRODUCTION SETS NEW RECORD; TOTAL THIRD QUARTER PRODUCTION INCREASES 6%; BALANCE BETWEEN OIL AND NATURAL GAS PRODUCTION CONTINUES TO IMPROVE Recent discoveries resulted in oil production setting new records for both the first nine months and the third quarter. Oil production increased 165% for the third quarter and 113% for the first nine months. On a volume-equivalent basis, oil provided 42% of total production quantities in the third quarter compared to 17% last year. However, oil's price advantage over natural gas resulted in oil providing 71% of total production revenues compared to only 29% last year. Importantly, the company has achieved its goal of fully offsetting the production decline that occurred when it postponed drilling last year and early in 2009 due to historically high costs. For the third quarter 2009, oil production rose 165% to 35,500 barrels compared to 13,400 barrels last year. Third quarter natural gas production fell 26% to 293 MMcf compared to 396 MMcf last year. Increased oil production, denominated in equivalent Mcfs, more than offset the decline in natural gas production. As a result, total production increased 6% to 506 MMcfe compared to 476 MMcf last year. Total production would have increased 83% if oil were converted to natural gas based on the wellhead prices actually received by the company during the periods. For the nine months ended July 31, 2009, oil production rose 113% to 90,500 barrels compared to 42,500 barrels last year. Natural gas production fell 23% to 940 MMcf compared to 1,221 MMcf last year. Increased oil production, denominated in equivalent Mcfs, more than offset the decline in natural gas production. As a result, total production increased to 1,483 MMcfe compared to 1,476 MMcf last year. If oil were converted to natural gas based on the wellhead prices actually received by the company during the periods, total production would have increased 24%. THIRD QUARTER OIL PRICES FALL 54%; NATURAL GAS PRICES FALL 73% BEFORE HEDGING GAINS Net wellhead natural gas prices for the third quarter fell 73% to $2.75 per Mcf compared to $10.09 last year. Realized hedging transactions increased wellhead prices $2.33 per Mcf this year compared to a $3.13 loss per Mcf last year. As a result, the company's total natural gas price realizations fell 27% to $5.08 per Mcf compared to $6.96 last year. Wellhead oil prices fell 54% to $56.98 per barrel compared to $122.91 last year. There were no oil hedging transactions in 2009 or 2008. For the first nine months of 2009, net wellhead natural gas prices fell 59% to $3.36 per Mcf compared to $8.19 last year. Realized hedging transactions increased wellhead prices $3.14 per Mcf this year compared to a $0.32 loss last year. As a result, the company's total natural gas price realizations fell 17% to $6.50 per Mcf compared to $7.87 last year. Wellhead oil prices fell 55% to $45.77 per barrel compared to $101.66 last year. There were no oil hedging transactions in either year. At July 31, 2009, open hedging derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. contracts covered 150,000 MMbtus at NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). prices averaging $8.31, and covered production months from August 2009 through October 2009. Subsequent to July 31, 2009, the August and September contracts expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. and the company realized hedging gains of $512,000 on those contracts. Hedging derivative contracts are estimated to be approximately 50% of the company's estimated monthly production. All open hedge contracts are indexed to the NYMEX. Average prices in the company's primary market are currently 9% below NYMEX prices due to basis differentials and transportation costs. STRONG FINANCIAL CONDITION CONTINUES TO PROVIDE A SOLID FOUNDATION FOR GROWTH Capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. for oil and gas drilling activities and property acquisitions through July 31, 2009 totaled $11,299,000, including $1,923,000 paid to purchase acreage in the North Dakota North Dakota, state in the N central United States. It is bordered by Minnesota, across the Red River of the North (E), South Dakota (S), Montana (W), and the Canadian provinces of Saskatchewan and Manitoba (N). portion of the horizontal Bakken oil play. In addition, $4,400,000 was paid to purchase all of the underlying patents related to the Calliope calliope, in music calliope, in music, an instrument also called steam organ or steam piano in which steam is forced through a series of whistles controlled by a keyboard. Gas Recovery System. Credo previously owned an exclusive license to the Calliope patents and the related technology. However, it purchased the underlying patents in order to establish absolute control over the technology and to eliminate future costs for individual well licenses. The acquisition also covered a series of exciting new patents, known as Tractor tractor, in agriculture, vehicle used to pull such equipment as plows, cultivators, and mowers; to power stationary devices such as saws and winches; and to push snowplows and earth-moving implements. Seal, that is specifically designed to remove liquids from shallow wells more efficiently than existing technologies. If perfected, this new technology will be an excellent complement to Calliope's focus on deeper wells. At July 31, 2009, working capital was $14,846,000, including cash and short-term investments of $14,177,000. At third quarter-end, the company had no long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. . MANAGEMENT COMMENT James T. Huffman, Credo's Chief Executive Officer commented, "In the third quarter, Credo delivered profitability and solid financial results despite the collapse in both oil and natural gas prices. We are very pleased with the significant acreage positions that Credo has assembled in several exciting oil drilling plays. We are also pleased with the early results from our transition to oil-focused drilling. The timing of that strategy change has proven to be very opportunistic opportunistic /op·por·tu·nis·tic/ (op?er-tldbomacn-is´tik) 1. denoting a microorganism which does not ordinarily cause disease but becomes pathogenic under certain circumstances. 2. as is evidenced by the significant price advantage that oil currently enjoys over natural gas. "We are particularly proud that new oil production has now more than offset the production decline caused by our decision last year to postpone post·pone tr.v. post·poned, post·pon·ing, post·pones 1. To delay until a future time; put off. See Synonyms at defer1. 2. To place after in importance; subordinate. drilling due to historically high costs. That decision has been validated val·i·date tr.v. val·i·dat·ed, val·i·dat·ing, val·i·dates 1. To declare or make legally valid. 2. To mark with an indication of official sanction. 3. by the dramatically improved drilling environment. "We are seeing a significant increase in interest in our patented Calliope gas recovery technology. Calliope's low finding and operating costs operating costs npl → gastos mpl operacionales become increasingly attractive to companies when natural gas prices do not justify drilling or other high cost operations. "Credo is well positioned for the future with a clean balance sheet Clean Balance Sheet Refers to a company whose balance sheet has very little or no debt. Notes: A company is told to "clean up" its balance sheet if they are exposed to large amounts of debt. , a strong financial position, and an excellent inventory of oil weighted drilling prospects. In particular, we are very excited about the future for our newest oil drilling project in the Williston Basin horizontal Bakken oil drilling play. The Bakken is the number one oil resource play in the U.S. and drilling is exploding in the area where we have acquired leasehold An estate, interest, in real property held under a rental agreement by which the owner gives another the right to occupy or use land for a period of time. leasehold n. interests over the last year. We believe Credo's acreage holds very significant resource potential, and we are pleased to have drilling underway on our first well." Credo Petroleum Corporation is a publicly traded independent energy company headquartered in Denver, Colorado. The company is engaged in the exploration for and the acquisition, development and marketing of natural gas and crude oil in the Mid-Continent and Rocky Mountain regions The Rocky Mountain Region is a floristic region within the Holarctic Kingdom in western North America (Canada and the United States) delineated by Armen Takhtajan and Robert F. Thorne. , as well as Texas, Kansas and Louisiana. The company's stock is traded on the NASDAQ System under the symbol "CRED" and is quoted daily in the "NASDAQ Global Market" section of The Wall Street Journal. This press release includes certain statements that may be deemed to be "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of Section 27A of the Securities Act of 1933, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and Section 21E of the Securities Exchange Act of 1934, as amended. All statements included in this press release, other than statements of historical facts, address matters that the company reasonably expects, believes or anticipates will or may occur in the future. Such statements are subject to various assumptions, risks and uncertainties, many of which are beyond the control of the company. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those described in the forward-looking statements. Investors are encouraged to read the "Forward-Looking Statements" and "Risk Factors" sections included in the company's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for more information. Although the company may from time to time voluntarily update its prior forward looking statements, it disclaims any commitment to do so except as required by securities laws. [TABLE OMITTED] [TABLE OMITTED] |
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