Energen Benefits from Higher Commodity Prices, Production.Earnings Guidance for 2008-2009 Reaffirmed BIRMINGHAM Birmingham, cities, United States Birmingham (bûr`mĭnghăm') 1 City (1990 pop. 265,968), seat of Jefferson co., N central Ala., in the Jones Valley near the southern end of the Appalachian system; founded and inc. , Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. . -- Energen Based in Birmingham, Alabama, Energen Corporation is a diversified energy company with an oil and gas acquisition and development company and a natural gas utility. Corporation (NYSE NYSE See: New York Stock Exchange :EGN EGN External Gateway Network (WorldCom) EGN East Gate News EGN European Games Network ) today announced that its oil and gas exploration and production unit continues to benefit from higher realized sales prices and increased production; Energen Resources Corporation's net income for the three months ended June 30, 2008, grew more than 5 percent year-over-year. Energen's utility operations, however, saw its net income drop due largely to issues related to the timing of rate recovery and to reduced customer usage. As a result, Energen earned $66.9 million, or 93 cents 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, in the second quarter of 2008, down slightly from $67.9 million, or 94 cents per diluted share, in the same period a year ago. Energen today also reaffirmed its 2008 and 2009 earnings guidance (assumes natural gas and oil prices applicable to its unhedged production of $10 per thousand cubic feet and $100 per barrel, respectively) and said that, as work continues on its first three test wells, Energen Resources has increased its net shale shale, sedimentary rock formed by the consolidation of mud or clay, having the property of splitting into thin layers parallel to its bedding planes. Shale tends to be fissile, i.e., it tends to split along planar surfaces between the layers of stratified rock. acreage position in Alabama Alabama, indigenous people of North America Alabama (ăləbăm`ə), indigenous people of North America whose language belongs to the Muskogean branch of the Hokan-Siouan linguistic stock (see Native American languages). to 327,000 acres. "Our oil and gas exploration and production company continues to perform well in 2008," said James McManus, Energen's chairman and chief executive officer. "Energen Resources' aggregate realized sales price for its natural gas, oil and natural gas liquids (NGL NGL - A dialect of IGL. ) production increased 10 percent in the 2nd quarter over the same period a year ago; and our 2nd quarter production was up almost 1 billion cubic feet (Bcf) equivalent, year-over-year, primarily in the San Juan Basin The San Juan Basin is a drainage basin and geologic structural basin in the Four Corners region of the Southwestern United States; its main portion covers around 4,600 square miles, encompassing much of northwestern New Mexico, northeastern Arizona, and parts of Colorado and Utah. where we are benefiting from new drilling and continued development of Fruitland Coal properties. "While the timing issues at our utility should settle out by the end of the rate year, reduced usage remains a concern. Nevertheless, we believe Energen is on a path leading to its 7th consecutive year of record earnings in 2008," McManus said. Energen's earnings guidance range for 2008 is $4.30-$4.70 per diluted share and, for 2009, is $5.15-$5.55 per diluted share. ALABAMA SHALES UPDATE Energen Resources and Chesapeake Energy Chesapeake Energy (NYSE: CHK) is a producer of natural gas in the United States and according to their 3Q 2007 report, is the largest independent producer, third overall (including majors) and the most active driller of new wells in the US. Corporation have drilled their first two test wells in Alabama to total depth (approximately 10,500 and 12,500 feet). Both are located in Bibb County Bibb County is the name of several counties in the United States:
n. 1. Nautical A bracket on the mast of a ship to support the trestletrees. 2. A bibcock. [Alteration of bib.] ). Target shale formations are the Conasauga and Chattanooga. "Energen Resources and Chesapeake are learning a lot about the formations and concepts we are looking at in Alabama right now," McManus said, "but work remains before we can know with any certainty whether one or more of these formations and concepts will be economically viable. "We have encountered gas in each well drilled and are now working on proper completion techniques to help determine whether the gas from Alabama shale formations in this area can be produced economically," McManus added. SECOND QUARTER RESULTS For the three months ended June 30, 2008, Energen's net income totaled $66.9 million, or 93 cents per diluted share, and compares with second quarter 2007 net income of $67.9 million, or 94 cents per diluted share. Energen Resources Corporation Energen Resources Corporation is the largest subsidiary of Energen Corporation, a diversified energy company headquartered in Birmingham, Alabama. It is a growing oil and gas acquisition and development company that has approximately 1. Energen Resources' net income in the second quarter of 2008 totaled $70.6 million and compared with $66.9 million in the same period last year. This 5.5 percent increase largely reflects higher average realized sales prices for Energen Resources' natural gas, oil and natural gas liquids (NGL) production as well as a 4 percent rise in production. Negatively influencing Energen Resources' net income were increased lease operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. (LOE LOE Ley Orgánica de Educación (Spanish) LOE Level Of Effort LOE Limited Objective Experiment LOE Letter of Explanation LOE Language Other than English. ), 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, exploration expense and general and administrative (G&A) expense as well as a higher effective tax rate due to reduced tax benefit under Section 199. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] Per-unit LOE in the second quarter of 2008 increased 15 percent from the same period a year ago to $2.52 per thousand cubic feet (Mcf) equivalent. This increase primarily was due to a 54 percent rise in per-unit production taxes resulting from increased commodity prices. DD&A expense per unit in the second quarter of 2008 increased 15 percent over the same period last year to $1.25 per Mcf equivalent (Mcfe) largely due to higher development costs. Exploration expense in the current-year second quarter increased $2.8 million over the same period a year ago largely due to mechanical difficulties encountered while drilling an exploratory well in the San Juan Basin. Second quarter net G&A expense in 2008 rose $2.5 million over the same period in 2007 largely due to increased net salaries and benefits expense as the Company appropriately accrues anticipated obligations under its performance-based incentive compensation plan. Alabama Gas Corporation Energen's natural gas utility, Alabama Gas Corporation (Alagasco), reported a net loss of $3.1 million in the second quarter of 2008 as compared with net income of $1.4 million in the same period a year ago. This $4.5 million deficit year-over-year largely reflects timing differences associated with rate recovery under Alagasco's rate-setting mechanism and a decline in customer usage, partially offset by the utility's ability to earn on a higher level of equity. YTD See Year-to-date. YTD See year to date (YTD). 2008 RESULTS For the six months ended June 30, 2008, Energen's net income totaled $183.6 million, or $2.55 per diluted share, up from $171.8 million, or $2.38 per diluted share, in the first half of 2007. Included in current-year net income is a $6.4 million gain from Energen Resources' sale of Permian Basin The Permian Basin is a sedimentary basin largely contained in the western part of the U.S. state of Texas. It reaches from just south of Lubbock, Texas, to just south of Midland & Odessa, extending westward into the southeastern part of the adjacent state of New Mexico. properties in the first quarter. Energen Resources Corporation Energen Resources' net income for the year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. 2008 totaled $143.1 million and compared with $130.1 million in the same period last year. This 10 percent increase largely reflects higher average realized sales prices, a 3 percent rise in production and a one-time gain from the sale of Permian Basin properties in the first quarter, partially offset by higher LOE and DD&A expense as well as a higher effective tax rate due to a reduced tax benefit under Section 199.
[TABLE OMITTED]
Production, YTD Comparison > > >
> > >
Commodity > > YTD2008 >
YTD2007
Change
Natural Gas (Bcf) > > 32.8 >
31.2
5%
Oil (MBbl) > > 1,950 >
1,873
4%
NGL (MMgal) > > 34.9 >
38.0
(8)%
Total (Bcfe) > > 49.5 >
47.9
3%
[TABLE OMITTED]
Production increases in the San Juan Basin in the current year-to-date are largely due to new drilling and continued development of Fruitland Coal properties. Per-unit LOE in the first six months of 2008 increased 19 percent from the same period a year ago to $2.48 per Mcfe. This increase largely was due to a 45 percent rise in per-unit production taxes resulting from increased commodity prices and to increased compression, increased workover expense, weather-related road maintenance, and increased environmental compliance expense. DD&A expense per unit in the year-to-date 2008 increased 13 percent over the same period last year to $1.23 per Mcfe largely due to higher development costs. Alabama Gas Corporation Alagasco reported net income of $40.6 million in the first half of 2008 as compared with net income of $41.7 million in the same period a year ago. This $1.1 million deficit year-over-year largely reflects the utility earning on a higher level of equity and lower operations and maintenance expense, more than offset by reduced customer usage and timing differences associated with rate recovery. TRAILING 12-MONTHS' RESULTS For the 12 months ended June 30, 2008, Energen's net income totaled $321 million, or $4.46 per diluted share, and compared with $308.3 million, or $4.26 per diluted share, for the same period a year ago. The prior-year period included a $34.5 million, or 48 cents per diluted share, gain from the sale of one-half of its acreage position in Alabama shales to Chesapeake Energy Corporation, and a $6.7 million, or 9 cents per diluted share, gain from the settlement of its Enron Enron A U.S. energy-trading and utilities company that housed one of the biggest accounting frauds in history. Enron's executives employed accounting practices that falsely inflated the company's revenues, which, at the height of the scandal, made the firm become the seventh bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most claim. The current-year period includes a one-time, $6.4 million, or 9 cents per diluted share, gain from the sale of Permian Basin properties in the first quarter of 2008. Energen Resources Corporation Energen Resources' net income for the current-year trailing 12 months totaled $286.2 million as compared with $267.5 million in the same period a year ago. The prior-year period included $41.2 million of one-time gains associated with the sale of one-half of its acreage position in Alabama shales and the settlement of its Enron bankruptcy claim, and the current-year period includes a $6.4 million gain from the sale of Permian Basin properties. Energen Resources benefited in the current 12-months' period from increased average realized sales prices and higher production, partially offset by increased LOE and DD&A. [TABLE OMITTED] [TABLE OMITTED] Per-unit LOE totaled $2.24 per Mcfe in the 12 months ending June 30, 2008, up 11 percent from $2.01 per Mcfe in the same period a year ago; this increase largely was due to higher production taxes, additional compression and a general rise in field service costs. DD&A expense per unit in the 12 months ended June 30, 2008, increased 13 percent over the same period last year from $1.06 per Mcfe to $1.20 per Mcfe, largely due to higher development costs. Alabama Gas Corporation Alagasco generated net income in the 12 months ended June 30, 2008, of $35.7 million as compared with $42.2 million in the same period a year ago. 2008 EARNINGS GUIDANCE RANGE 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. Energen today reiterated its earnings guidance for 2008, which was raised last month in response to the Company's raising its assumed prices for unhedged production for the remainder of the year. Energen's current annual guidance for 2008 is a range of $4.30 - $4.70 per diluted share. Key assumptions in Energen's 2008 earnings guidance are: * Year-to-date results; * A hedge position that covers approximately 75 percent of estimated production for the remainder of the year; * Assumed prices for unhedged natural gas, oil and NGL production of $10 per Mcf, $100 per barrel and $1.30 per gallon gallon: see English units of measurement. , respectively; * Annual production of 101 Bcfe; * 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. of approximately $430 million, including approximately $360 million by Energen Resources and $70 million by Alagasco; the additional capital at Energen Resources largely reflects additional drilling in the San Juan Basin, shale lease acquisition, accelerated drilling in the North Louisiana/East Texas area, and generally rising costs. * An average DD&A rate at ERC (database) ERC - An extended entity-relationship model. of $1.27 per Mcfe; * LOE at ERC, including production taxes, of $2.45 per Mcfe; * General and administrative expense at ERC of 55 cents per Mcfe; * Alagasco's earning an estimated 12.6 percent on average equity of approximately $311 million; * Average diluted shares outstanding of 72.1 million. 2008 Hedge Position Summary Energen Resources' hedge position for the last six months of 2008 is as follows: [TABLE OMITTED] Energen Resources' natural gas and oil hedge positions by type for the last six months of 2008 are as follows: [TABLE OMITTED] Average realized oil and gas prices for Energen Resources' production associated with NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). contracts as well as for unhedged production will reflect the impact of basis differentials. Average realized NGL prices will be net of transportation and fractionation fractionation /frac·tion·a·tion/ (frak?shun-a´shun) 1. in radiology, division of the total dose of radiation into small doses administered at intervals. 2. fees. For production associated with basin-specific contracts, Energen Resources will receive the contracted hedge price. Energen typically hedges basis differentials where applicable. In the tables above, the basin-specific contract prices were converted for comparability purposes to a NYMEX-equivalent price by adding to them Energen Resources' assumed basis differentials. Earnings Sensitivities to Commodity Price Changes Given Energen Resources' hedge position and using the price assumptions given above for the Company's unhedged production, changes in commodity prices over the remainder of the year are estimated to have the following impact on Energen's 2008 earnings: * Every 10-cent change in the average NYMEX price of gas from $10 represents an estimated net income impact of approximately $295,000 (0.4 cents per diluted share). * Every $1.00 change in the average NYMEX price of oil from $100 per barrel represents an estimated net income impact of approximately $230,000 (0.3 cents per diluted share). * Every 1-cent change in the average price of liquids from $1.30 per gallon represents an estimated net income impact of approximately $45,000 (0.1 cents per diluted share). Price-related events such as substantial basis differential changes could cause earnings sensitivities to be materially different from those outlined above. 2009 EARNINGS GUIDANCE RANGE AFFIRMED Energen today also reiterated its earnings guidance for 2009, which was raised last month in response to the Company's raising its assumed prices for unhedged production. Energen's current annual guidance for 2009 is a range of $5.15 - $5.55 per diluted share. Energen management noted that work will begin soon on a formal 2009 budget and that, based on changing market conditions, the budget could differ from the current model upon which guidance is based. Key assumptions in Energen's 2009 earnings guidance are: * Existing hedge position covering approximately 61 percent of estimated 2009 production; * Assumed prices for unhedged natural gas, oil and NGL production of $10 per Mcf, $100 per barrel and $1.30 per gallon, respectively; * Annual production of 108 Bcfe; * Capital spending of $340 million, including approximately $270 million by Energen Resources and $70 million by Alagasco; * An average DD&A rate at Energen Resources of $1.37 per Mcfe; * LOE at Energen Resources, including production taxes, of $2.45 per Mcfe; * General and administrative expense at Energen Resources of 55 cents per Mcfe; * Alagasco's earning within its allowed range of return on average equity of approximately $324 million; and * Average diluted shares outstanding of 72.3 million. 2009 Hedge Position Summary Energen Resources' 2009 hedge position by commodity is as follows: [TABLE OMITTED] Energen Resources' 2009 natural gas and oil hedge positions by hedge type are as follows: [TABLE OMITTED] Average realized oil and gas prices for Energen Resources' production associated with NYMEX contracts as well as for unhedged production will reflect the impact of basis differentials. Average realized NGL prices will be net of transportation and fractionation fees. For production associated with basin-specific contracts, Energen Resources will receive the contracted hedge price. Energen typically hedges basis differentials where applicable. In the tables above, the basin-specific contract prices were converted for comparability purposes to a NYMEX-equivalent price by adding to them Energen Resources' assumed basis differentials. Earnings Sensitivities to Commodity Price Changes Given Energen Resources' current hedge position for 2009 and using the price assumptions given above for the Company's unhedged production, changes in commodity prices are estimated to have the following impact on Energen's 2009 earnings: * Every 10-cent change in the average NYMEX price of gas from $10 represents an estimated net income impact of approximately $1.2 million (1.7 cents per diluted share). * Every $1.00 change in the average NYMEX price of oil from $100 per barrel represents an estimated net income impact of approximately $1.2 million (1.7 cents per diluted share). * Every 1-cent change in the average price of liquids from $1.30 per gallon represents an estimated net income impact of approximately $115,000 (0.2 cents per diluted share). Price-related events such as substantial basis differential changes could cause earnings sensitivities to be materially different from those outlined above. Energen's earnings guidance does not include potential benefits from property acquisitions, Alabama shales exploration or stock repurchases Stock repurchase A firm's repurchase of outstanding shares of its common stock. , nor does the guidance make any assumption related to the potential impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. unproved 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. related to Alabama shales (currently approximately $40 million). Energen Corporation is a diversified diversified (di·verˑ·s energy holding company with headquarters in Birmingham, AL. Its two lines of business are the acquisition, development and exploration of domestic, onshore on·shore adj. 1. Moving or directed toward the shore: an onshore wind. 2. Located on the shore: an onshore beacon; an onshore patrol. adv. natural gas, oil and NGL reserves and natural gas distribution in central and north Alabama North Alabama is a region of the U.S. state of Alabama, generally thought to include these 12 counties: Cherokee, Colbert, DeKalb, Franklin, Jackson, Lauderdale, Lawrence, Limestone, Madison, Marshall, Morgan, and Winston, with a combined population of 953,247, or 20. . Energen Resources has approximately 3.6 Tcfe of proved, probable and possible reserves in the San Juan San Juan, city, Argentina San Juan (săn wän, Span. sän hwän), city (1991 pop. 353,476), capital of San Juan prov., W Argentina. It is a commercial and industrial center in an agricultural region. , Permian and Black Warrior Black Warrior, river, United States Black Warrior, navigable river, 178 mi (286 km) long, rising in N central Ala. and flowing generally SW to the Tombigbee River. basins. Alabama Gas Corporation is the largest distributor of natural gas in Alabama. More information is available at http://www.energen.com. This release contains statements expressing expectations of future plans, objectives and performance that constitute 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. made pursuant to the Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provision of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Except as otherwise disclosed, the Company's forward-looking statements do not reflect the impact of possible or pending acquisitions, divestitures or restructurings. We undertake no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise. All statements based on future expectations rather than on historical facts are forward-looking statements that are dependent on certain events, risks and uncertainties that could cause actual results to differ materially from those anticipated. In addition, the Company cannot guarantee the absence of errors in input data, calculations and formulas used in its estimates, assumptions and forecasts. A more complete discussion of risks and uncertainties that could affect future results of Energen and its subsidiaries is included in the Company's periodic reports filed with the Securities and Exchange Commission. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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