Crimson Exploration Announces First Quarter 2009 Financial and Operational Results.HOUSTON -- Crimson Exploration Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :CXPO) today announced financial and operational results for the first quarter 2009. First Quarter 2009 Summary Results * Production of 4.3 Bcfe, or approximately 47,900 Mcfepd * Revenue of $30.7 million * Net Income of $5.0 million * EBITDAX Earnings Before Interest, Taxes, Depreciation, Depletion, Amortization, and Exploration Expenses - EBITDAX An indicator of a company's financial performance calculated as: of $18.5 million Summary Financial Results The Company reported net income of $5.0 million, or $0.46 per 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, for the first quarter of 2009 compared to net income of $0.7 million, or ($0.07) per diluted share, for the first quarter of 2008. Positively impacting the first quarter results for 2009 was a $9.6 million pre-tax unrealized gain Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. , compared to a $28.5 million pre-tax charge in the first quarter of 2008, recorded to reflect the unrealized mark-to-market benefit, and exposure, respectively, on our commodity price and interest rate hedge instruments. Net cash flow from operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses for the first quarter of 2009, which consists of net cash provided by operating activities, including the period change in certain working capital and other cash flow items, was $12.7 million, compared with $27.6 million reported for the 2008 quarter. The decrease in cash flow resulted primarily from the reduction in revenues, accounts payable and accrued liabilities Accrued liabilities are liabilities which have occurred, but have not been paid or logged under accounts payable during an accounting period; in other words, obligations for goods and services provided to a company for which invoices have not yet been received. associated with reduced drilling activity during 2009. Revenues for the first quarter of 2009 were $30.7 million compared to revenues of $45.0 million in the prior year quarter, a decline resulting from an approximate 10 percent decrease in production and an approximate 25 percent decline in realized commodity prices. Production for the first quarter of 2009 was 4.3 Bcfe, or approximately 47,900 Mcfe per day, compared to production of 4.8 Bcfe, or approximately 52,600 Mcfe per day, in the first quarter of 2008. The decrease in production for the quarter was primarily due to natural field decline and lower production enhancing capital expenditure activity in 2009. Average prices realized in the first quarter of 2009 (including the effects of realized gains/losses on our commodity price hedges) were $77.18 per barrel, $6.71 per Mcf, $22.51 per barrel and $7.08 per Mcfe for oil, natural gas, natural gas liquids and natural gas equivalents, respectively. For the first quarter of 2008, average prices realized were $78.62 per barrel, $8.39 per Mcf, $57.18 per barrel and $9.39 per Mcfe for oil, natural gas, natural gas liquids and natural gas equivalents, respectively. Lease operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the first quarter of 2009 were $5.5 million, compared to $4.4 million in the first quarter of 2008. On a per Mcfe produced basis, direct lease operating expenses were $1.27 per Mcfe for the first quarter of 2009, compared to $0.92 per Mcfe for the first quarter of 2008, an increase related to the lower production. Production and ad valorem tax Ad Valorem Tax A tax based on the assessed value of real estate or personal property. In other words ad valorem taxes can be property tax or even duty on imported items. Property ad valorem taxes are the major source of revenues for state and municipal governments. expenses for the first quarter of 2009 were $2.5 million, or $0.57 per Mcfe, compared to $4.3 million, or $0.90 per Mcfe, for the first quarter of 2008. The decrease in production and ad valorem taxes was due to lower production and realized prices in 2009. Depreciation, Depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able and Amortization ("DD&A") expense for the first quarter of 2009 was $13.9 million, or $3.21 per Mcfe, compared to $11.3 million, or $2.36 per Mcfe, for the first quarter of 2008. This increase was due to a higher DD&A rate resulting from asset acquisitions and capital expenditures during the 2008 high-cost environment. General and Administrative Expenses ("G&A") were $5.2 million for the first quarter of 2009 compared to $4.7 million for the first quarter of 2008. Included in G&A expense is a non-cash stock expense of $1.0 million ($0.22 per Mcfe) and $1.2 million ($0.26 per Mcfe) for the first quarters ended 2009 and 2008, respectively. G&A expenses increased primarily due to office space added in September 2008 to accommodate our expanded infrastructure. Exclusive of the non-cash stock option expense recognized pursuant to SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123R, cash general and administrative expenses were $0.99 per Mcfe and $0.73 per Mcfe for the first quarter of 2009 and 2008, respectively. Liquidity and Capital Resources Effective April 1, 2009, the borrowing base under our senior secured revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility (the "Senior Credit Agreement") was affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. by our bank group at $172.5 million, down from $200.0 million. The borrowing base will be further reduced to $170.0 million effective May 1, 2009 and further reduced by $5.0 million on the first day of each subsequent month, beginning June 1, 2009, until the next scheduled borrowing base redetermination Noun 1. redetermination - determining again determination, finding - the act of determining the properties of something, usually by research or calculation; "the determination of molecular structures" date on October 1, 2009. As of March 31, 2009, we had an outstanding loan balance of $156.5 million under our Senior Credit Agreement. Despite this reduction in borrowing base, we had availability of $16.0 million under the new $172.5 million borrowing base. On May 13, 2009, we entered into a second amendment to our second lien A Second lien financing is a form of financing secured on a second ranking basis by (more or less) the same security, which secures the first ranking financing. The first lien lenders and the second lien lenders agree that, in the event of a security enforcement or bankruptcy, the credit agreement dated May 8, 2007 with our lenders, including an affiliate of OCM OCM Oracle Certified Master (database administrator certification) OCM Organization for Competitive Markets OCM Onondaga Cortland Madison (counties in New York) OCM Olympic Council of Malaysia GW Holdings, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control , our majority stockholder. This second amendment amends AMENDS. A satisfaction, given by a wrong doer to the party injured for a wrong committed. 1 Lilly's Reg. 81. 2. By statute 24 Geo. II. c. 44, in England, and by similar statutes in some of the United States, justices of the peace, upon being notified of an the second lien credit agreement by, among other things, (i) modifying the leverage and PV-10 ratios that we are required to maintain during the term of the agreement, (ii) increasing the applicable margin for loans, (iii) setting a minimum LIBO Rate, and (iv) including certain fee acreage in calculations of our borrowing base after we have granted a lien lien, claim or charge held by one party, on property owned by a second party, as security for payment of some debt, obligation, or duty owed by that second party. on such fee acreage. As previously noted in our fourth quarter 2008 earnings release, we have lowered our capital expenditure budget for 2009 dramatically to allow us to carry out our operating plan for 2009 through internally generated cash flow while reducing debt to levels within our borrowing base. Hedging Activity On May 8, 2009, in an effort to achieve more predictable cash flows and to reduce exposure to commodity price fluctuations, we entered into the following derivative agreements: Natural Gas < < < < < < < < < Volume/Month Price/Unit Jan 2010 < < < < < < < < < Swap 80,000 Mmbtu $6.34 Feb 2010 < < < < < < < < < Swap 65,000 Mmbtu $6.36 Mar 2010 < < < < < < < < < Swap 50,000 Mmbtu $6.31 Apr 2010 < < < < < < < < < Swap 36,000 Mmbtu $6.11 May 2010 < < < < < < < < < Swap 23,000 Mmbtu $6.15 Jun 2010 < < < < < < < < < Swap 21,000 Mmbtu $6.23 Cost Reduction Initiative In mid-April, we took difficult steps to reduce our general and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. on a permanent basis. We reduced the size of our employee base in our Houston headquarters by approximately twenty percent, mostly administrative support functions, and have initiated other cost reduction measures that will be phased in over the latter half of 2009 that will result in estimated future savings of approximately $4.0 million, on an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. basis. Drilling Activity As previously disclosed, we have limited our capital expenditure activity and intend to focus on our East Texas and Liberty County properties for the remainder of 2009. While we will continue to build our inventory of exploitation and exploration opportunities in our South Texas and Texas Gulf Coast assets, we anticipate deferring major capital allocation for drilling activities for these areas until drilling costs decline, commodity prices rebound rebound (rē´bownd), n/v 1. a recovery from illness. n 2. an outbreak of fresh reflex activity after withdrawal of a stimulus rebound adjective and/or the ability to access the capital markets improves. We recorded capital expenditures of $10.9 million for the first quarter of 2009, the vast majority of which were costs related to projects that commenced in the fourth quarter of 2008 and were completed in late December through February. Liberty County, TX The Liberty Farms #2ST (55.7% WI), located in the Willis Marsh Field targeting the Cook Mountain formation, was successfully completed and commenced production at a gross initial rate of 2,500 Mcfepd. The Swilley #2ST (69.1% WI), located in the Cottonwood cottonwood: see willow. cottonwood Any of several fast-growing North American trees of the genus Populus. Members of the willow family, cottonwoods have heart-shaped, toothed leaves and cottony seeds. The dangling leaves clatter in the wind. North Field targeting the Cook Mountain formation, was completed and began producing at a gross initial rate of 2,700 Mcfepd, up from the pre-sidetrack curtailed rate of 2,100 Mcfepd. Also in Liberty County we participated in the Kerr-McGee #4 (38.8% WI) with Ballard Exploration. In the first quarter of 2009 this well reached its true vertical depth of 15,000' but failed to locate the Cook Mountain formation. This well's status remains temporarily suspended sus·pend v. sus·pend·ed, sus·pend·ing, sus·pends v.tr. 1. To bar for a period from a privilege, office, or position, usually as a punishment: suspend a student from school. pending further review of other completion alternatives. Weld County, CO In Weld County we participated in two non-operated wells located in the Wattenberg Field with Noble Energy. Both wells, the Owens K21-30D (24.9% WI) and the Zabka K 21-31 (24.9%), targeted the Codell and Niobrara formations at approximately 7,500 feet. Gross initial peak production was recorded at 834 Mcfepd and 946 Mcfepd for the Owens K21-30D and the Zabka K 21-31, respectively. Selected Financial and Operating Data The following table reflects certain comparative financial and operating data for the three month periods ending March 31, 2009 and 2008: [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] Non-GAAP Financial Measures Crimson also presents earnings before interest, taxes, depreciation, amortization and exploration expenses ("EBITDAX") and net cash flow from operations, which consists of net cash provided by operating activities including the period change in certain working capital and other cash flow items. Both measures presented exclude gain or loss on the sale of assets. Exploration expenses include geological and geophysical ge·o·phys·ics n. (used with a sing. verb) The physics of the earth and its environment, including the physics of fields such as meteorology, oceanography, and seismology. costs, lease rental costs and dry hole costs expensed under the successful efforts method of accounting, but capitalized under the alternative full cost accounting rules. Management uses these measures to assess our ability to generate cash to fund operations, exploration and development activities. Management interprets trends in these measures in a similar manner as trends in operations, cash flow and liquidity. Neither EBITDAX, nor net cash flows from operations, should be considered as alternatives to net income (loss), income from operations or net cash provided by operating activities as defined by GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). . The following is a reconciliation of net cash provided by operating activities to net cash flow from operations and EBITDAX: [TABLE OMITTED] Updated Guidance for 2009 The Company is providing the following updated guidance for the second calendar quarter of 2009. We will continue to provide quarterly guidance only for 2009 due to the uncertain level of capital expenditures for the year due to lower prices, limited capital availability and our strategy to reduce debt. Figures for lease operating expenses, production and ad valorem taxes, cash general and administrative expenses and DD&A are based on the midpoint mid·point n. 1. Mathematics The point of a line segment or curvilinear arc that divides it into two parts of the same length. 2. A position midway between two extremes. of the production guidance range. [TABLE OMITTED] Teleconference Call Crimson management will hold a conference call to discuss the information described in this press release on Tuesday, May 19, 2009 at 9:30 a.m. CDT CDT abbr. Central Daylight Time CDT Central Daylight Time CDT n abbr (US) (= Central Daylight Time) → hora de verano del centro; (BRIT . Those interested in participating may do so by calling the following phone number: 1-877-795-3647, (International 1-719-325-4815) and entering the following participation code 3559394. A replay of the call will be available from Tuesday, May 19, 2009 at 1:00 p.m. CDT through Tuesday, May 26, 2009 at 1:00 p.m. CDT by dialing toll free 1-888-203-1112, (International 1-719-457-0820) and asking for replay ID code 3559394. Crimson Exploration is an independent oil and gas company based in Houston, Texas “Houston” redirects here. For other uses, see Houston (disambiguation). Houston (pronounced /'hjuːstən/) is the largest city in the state of Texas and the , with producing assets primarily focused in South Texas, the Texas Gulf Coast and South Louisiana. Additional information on Crimson Exploration Inc. is available on the Company's website at http://crimsonexploration.com. This press release includes "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. " as defined by the Securities and Exchange Commission ("SEC"). Such statements include those concerning Crimson's strategic plans, expectations and objectives for future operations. All statements included in this press release that address activities, events or developments that Crimson expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements are based on certain assumptions Crimson made based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond Crimson's control. Statements regarding future production, revenue, costs and cash flow are subject to all of the risks and uncertainties normally incident to the exploration for and development and production of oil and gas. These risks include, but are not limited to, inflation or lack of availability of goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. , environmental risks, drilling risks and regulatory changes and the potential lack of capital resources. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in the forward-looking statements. Please refer to our filings with the SEC, including our 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 the year ended December 31, 2008, for a further discussion of these risks. |
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