Energen Raises Earnings Guidance for 2004 and 2005; 2nd Quarter 2004 Results Better than Expected.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 reported second quarter 2004 earnings of $22.3 million, or $0.61 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. Earnings for the quarter exceeded internal expectations and the First Call consensus estimate. The Company also announced that it is raising its earnings guidance for 2004 and 2005. Given solid year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. results, Energen increased its 2004 earnings guidance 5 cents to a range of $3.25-$3.35 per diluted share. Even though remaining estimated production is heavily hedged hedge n. 1. A row of closely planted shrubs or low-growing trees forming a fence or boundary. 2. A line of people or objects forming a barrier: a hedge of spectators along the sidewalk. , the current market outlook for commodity prices in the last six months of 2004 is significantly above Energen's assumed prices for unhedged volumes, thereby leaving room for upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside earnings potential from prices received for that production. The Company also raised its 2005 earnings guidance to a range of $3.80-$4.00 per diluted share; this 10-cents per diluted share increase reflects the estimated impact of recent natural gas and oil hedges on the production of 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. , its oil and gas acquisition and development subsidiary. Energen's 2005 guidance assumes that prices applicable to Energen Resources' unhedged production in 2005 will average $5.25 per thousand cubic feet (Mcf) for gas, $28.00 per barrel barrel: see English units of measurement. for oil, and 46.7 cents per gallon gallon: see English units of measurement. for natural gas liquids (NGL NGL - A dialect of IGL. ). The current pricing outlook for natural gas, oil and NGL in 2005 is significantly higher than Energen's assumed prices; for example, at $6.00 per Mcf for gas, $35.00 per barrel for oil, and 55 cents per gallon for NGL, Energen's earnings could exceed $4.30 per diluted share. The Company's 2004 and 2005 guidance assumes the successful close on August 2, 2004, of Energen Resources' planned purchase of 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. coalbed methane Coalbed methane is a form of natural gas extracted from coal beds. In recent decades it has become an important source of energy in United States, Canada, and other countries. properties; also included in 2005 guidance is approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 7 cents per diluted share for an assumed $200 million acquisition in late 2005. RESULTS OF SECOND QUARTER 2004 Energen's 2004 second quarter net income of $22.3 million, or $0.61 per diluted share, compared with prior-year second quarter net income of $23.3 million, or $0.66 per diluted share. Income from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. for the current-year period was minimal as compared with a loss of $1.1 million, or 3 cents per diluted share, in the same period a year ago. Energen Resources Energen Resources' second quarter 2004 income from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the totaled $21.8 million and compared with income from continuing operations of $22.6 million in the same period last year. The impact of increased commodity prices in the current-year quarter was more than offset by 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. ), decreased production and increased administrative expense. The Company's average realized sales prices for its production was as follows:
Price per Unit
Commodity ----------------------------- Percent Change
2Q 2004 2Q 2003
------------------------- -------------- -------------- --------------
Natural Gas (Mcf) $ 4.76 $ 4.24 12.3
------------------------- ------------- ------------- --------------
Oil (Barrel) $ 26.52 $ 25.65 3.4
------------------------- ------------- ------------- --------------
NGL (Gallon) $ 0.42 $ 0.35 20
------------------------- ------------- ------------- --------------
Note: Average realized sales prices reflect the impact of all hedges,
basis differentials and NGL transportation and fractionation
fees; they are not NYMEX-equivalent prices.
Energen Resources' production from continuing operations in the second quarter of 2004 totaled 21.1 billion cubic feet equivalent (Bcfe), reflecting a 3 percent decrease in production from continuing operations from the prior-year second quarter. The break-down of production by commodity is as follows:
Production
Commodity ----------------------------- Percent Change
2Q 2004 2Q 2003
------------------------- -------------- -------------- --------------
Natural Gas (Mcf) 13,754 14,248 (3.5)
------------------------- -------------- -------------- --------------
Oil (MBbl) 831 850 (2.2)
------------------------- -------------- -------------- --------------
NGL (MMgal) 16.9 17.2 (1.7)
------------------------- -------------- -------------- --------------
Energen Resources' per-unit LOE in the current-year second quarter increased 31 percent to $1.27 per Mcf equivalent (Mcfe) due to increased workover and maintenance expenses, increased ad valorem taxes 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. and additional compression compression, external stress applied to an object or substance, tending to cause a decrease in volume (see pressure). Gases can be compressed easily, solids and liquids to a very small degree if at all. ; production taxes also increased as a result of higher commodity prices. DD&A expense from oil and gas activities declined 3 percent from the same period last year to 88 cents per Mcfe. Alagasco Alabama Gas Corporation (Alagasco) is the largest natural gas utility in north and central Alabama that provides energy to 460,000 homes and businesses. Its history dates back more than 150 years and has operating divisions in Anniston, Birmingham, Gadsden, Montgomery, Opelika, Alagasco's natural gas distribution operations earned net income in the second quarter of 2004 of $0.6 million as compared with $2.1 million in the same period last year. This decline in earnings is related to fluctuations in the timing of rate relief under the utility's rate-setting mechanism. RESULTS OF YEAR-TO-DATE 2004 Energen's 2004 year-to-date net income of $82.5 million, or $2.25 per diluted share, compared with net income for the first six months of 2003 of $77.9 million, or $2.21 per diluted share. Discontinued operations generated a minimal loss of $10,000 in the current year-to-date period as compared with income from discontinued operations of $146,000 in the same period a year ago. Energen Resources Energen Resources' year-to-date income from continuing operations increased approximately 6 percent to $45.0 million from $42.3 million in the same period last year. The impact of increased commodity prices more than offset the impact of higher LOE and administrative expense. The Company's average realized sales prices for its production were as follows:
Price per Unit
Commodity ----------------------------- Percent Change
Jan-Jun 2004 Jan-Jun 2003
------------------------- -------------- -------------- --------------
Natural Gas (Mcf) $ 4.76 $ 4.31 10.4
------------------------- ------------- ------------- --------------
Oil (Barrel) $ 26.83 $ 25.81 4.0
------------------------- ------------- ------------- --------------
NGL (Gallon) $ 0.41 $ 0.38 7.9
------------------------- ------------- ------------- --------------
Note: Average realized sales prices reflect the impact of all hedges,
basis differentials and NGL transportation and fractionation
fees; they are not NYMEX-equivalent prices.
Energen Resources' production from continuing operations in the first six months of 2004 totaled 42.3 Bcfe, virtually unchanged from production from continuing operations in the first half of the prior-year. The break-down of production by commodity is as follows:
Production
Commodity ----------------------------- Percent Change
Jan-Jun 2004 Jan-Jun 2003
------------------------- -------------- -------------- --------------
Natural Gas (Mcf) 27,491 27,515 (0.1)
------------------------- -------------- -------------- --------------
Oil (MBbl) 1,704 1,701 0.2
------------------------- -------------- -------------- --------------
NGL (MMgal) 32.2 32.9 (2.1)
------------------------- -------------- -------------- --------------
Energen Resources' per-unit LOE in the current year-to-date period increased 17 percent to $1.25 per Mcfe due to increased workover and maintenance expenses, increased ad valorem taxes and additional compression; production taxes also increased as a result of higher commodity prices. DD&A expense from oil and gas activities declined 3 percent from the same period last year to 88 cents per Mcfe. Alagasco Alagasco's natural gas distribution operations earned net income in the first six months of 2004 of $36.9 million as compared with $35.6 million in the same period last year. This increase in earnings largely reflects the utility's ability to earn on a higher level of equity representing investment in utility plant. RESULTS OF 12 MONTHS ENDING JUNE June: see month. 30 For the 12 months ended June 30, 2004, Energen's net income totaled $115.2 million, or $3.16 per diluted share, as compared with $97.1 million, or $2.78 per diluted share, in the same period a year ago. Income from continuing operations totaled $114.9 million, or $3.16 per diluted share. This compared with income from continuing operations in the comparable period a year ago of $96.4 million, or $2.76 per diluted share. Prior-period results included a $1.7 million, or 5 cents per diluted share, non-cash benefit from the Company's previous hedge position with Enron Corporation Enron Corporation, U.S. company that in 2001 became the largest bankruptcy and stock collapse in U.S. history up to that time. The company was formed in 1985 when InterNorth purchased Houston Natural Gas to create the country's longest natural-gas pipeline network. and $2.6 million, or 7 cents per diluted share, of nonconventional fuels tax credits. The ability to generate new credits ended at the end of 2002. Energen Resources Increased commodity prices and production generated for Energen Resources a 26 percent increase in income from continuing operations for the trailing 12-months' period as compared with the comparable period a year ago. Income from continuing operations in the current-year period totaled $81.3 million and compared with prior-year results of $64.7 million. The prior-period results included the non-cash benefit associated with the Company's previous hedge position with 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 and the nonconventional fuels tax credits. The Company's average realized sales prices for its production were as follows:
Price per Unit
Commodity ----------------------------- Percent Change
Jul 03-Jun 04 Jul 02-Jun 03
------------------------- -------------- -------------- --------------
Natural Gas (Mcf) $ 4.48 $ 3.89 15.2
------------------------- ------------- ------------- --------------
Oil (Barrel) $ 26.07 $ 25.37 2.8
------------------------- ------------- ------------- --------------
NGL (Gallon) $ 0.40 $ 0.36 11.1
------------------------- ------------- ------------- --------------
Note: Average realized sales prices reflect the impact of all hedges,
basis differentials and NGL transportation and fractionation
fees; they are not NYMEX-equivalent prices.
Energen Resources' production from continuing operations for the trailing 12-months' period totaled 85.3 Bcfe as compared with 81.7 Bcfe in the same period a year ago. The break-down of production by commodity is as follows:
Production
Commodity ----------------------------- Percent Change
Jul 03-Jun 04 Jul 03-Jun 04
------------------------- -------------- --------------
Natural Gas (Mcf) 55,409 51,204 8.2
------------------------- -------------- -------------- --------------
Oil (MBbl) 3,415 3,375 1.2
------------------------- -------------- -------------- --------------
NGL (MMgal) 65.9 71.6 (8.0)
------------------------- -------------- -------------- --------------
Energen Resources' per-unit LOE in the current trailing 12-months' period increased 13 percent to $1.21 per Mcfe. DD&A expense from oil and gas activities of 89 cents per Mcfe was basically unchanged from the 90 cents per Mcfe in same period last year. Alagasco For the 12 months ending June 30, 2004, Alagasco earned net income of $34.3 million as compared with $31.6 million in the comparable period last year. This increase in earnings largely reflects the utility's ability to earn on a higher level of equity representing investment in utility plant. 2004 EARNINGS GUIDANCE Energen's management has increased its 2004 earnings guidance to a range of $3.25-$3.35 per diluted share. This compares with previous guidance of $3.20-$3.30 per diluted share. Energen's budgeted prices for unhedged natural gas, oil and NGL production for the remainder of the year are $5.00 per Mcf (excepting July July: see month. , for which the actual NYMEX See New York Mercantile Exchange. NYMEX See New York Mercantile Exchange (NYM). price was $6.14 per Mcf), $27.00 per barrel and 45 cents per gallon, respectively. For the remaining six months of 2004, Energen Resources' hedge position is as follows: Estimated Commodity Volumes Production % Hedged NYMEX-equiv. price ----------- ----------- ----------------- --------- ------------------ Natural Gas 24 Bcf 28 Bcf 86% $4.97 per Mcf ----------- ----------- ----------------- --------- ------------------ Oil 1.4 MMBbl 1.7 MMBbl 83% $29.46 per barrel ----------- ----------- ----------------- --------- ------------------ NGL 18.6 MMgal 38 MMgal 49% $0.412 per gallon ----------- ----------- ----------------- --------- ------------------ For the remaining six months of 2004, Energen Resources' natural gas hedge position by hedge type is as follows:
Assumed Basis Price/Mcf
Hedge Type Volumes (Bcf) Difference(a) (NYMEX equiv)
----------------------- ------------- ---------------- ---------------
NYMEX Hedges 10.2 -- $5.04
----------------------- ------------- ---------------- ---------------
$4.05 floor/
NYMEX Collars 1.2 -- $4.44 ceiling
----------------------- ------------- ---------------- ---------------
San Juan Basin-specific 9.7 $0.79 $4.85
----------------------- ------------- ---------------- ---------------
Permian Basin-specific 2.9 $0.35 $5.38
----------------------- ------------- ---------------- ---------------
(a) Assumed basis differentials have been used to calculate
NYMEX-equivalent prices for August through December; actual basis
differentials were used for July.
For the remaining six months of 2004, Energen Resources' oil hedge position by hedge type is as follows:
Assumed Sour Oil Price/Barrel
Hedge Type Volumes (MBbl) Difference(a) (NYMEX equiv)
-------------------- ---------------- ---------------- ---------------
NYMEX Hedges 728 -- $28.44
-------------------- ---------------- ---------------- ---------------
Sour Oil (WTS) 706 $2.80 $30.50
-------------------- ---------------- ---------------- ---------------
(a) Assumed sour oil differential has been used to calculate the
NYMEX-equivalent price.
Realized prices for Energen Resources' production associated with NYMEX contracts and collars as well as for unhedged production will reflect the impact of basis differentials. For production associated with basin-specific contracts, Energen Resources will receive the contracted hedge price, regardless of basis differentials. 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. Realized NGL prices will reflect 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. Energen Resources' production in 2004 is estimated to total 86 Bcfe, including 55 Bcf of natural gas, 3.4 MMBbl of oil, and 70 MMgal of NGL. Other key assumptions in Energen's 2004 guidance, which takes into account year-to-date results, include: --Average diluted shares outstanding of 36,630,000. --Alagasco's utility operations earning a return on equity at the end of the year of some 13.2 percent on average equity of approximately $265 million (The utility's rate-setting mechanism provides the opportunity for the utility to earn a return on average equity at the end of its rate year, September September: see month. 30, between 13.15 percent and 13.65 percent). --A DD&A rate from oil and gas activities of approximately 91 cents per Mcfe and LOE (including production taxes) of approximately $1.26 per Mcfe. Earnings Sensitivities to Commodity Price Changes The largest influences on Energen's financial results typically are the commodity prices applicable to the company's unhedged production. Given Energen Resources' year-to-date performance, hedge position for the remainder of 2004, and assumed prices for its unhedged production as well as the actual NYMEX price of gas for July, Energen's earnings' sensitivities to commodity price changes for the remainder of the year are as follows: Relative to the Company's remaining unhedged volumes: --Every 10-cent change in the average NYMEX price of gas from $5.00 per Mcf is estimated to have a net income impact of approximately $105,000 (0.3 cents per diluted share). --Every $1 change in the average NYMEX price of oil from $27.00 per barrel is estimated to have a net income impact of approximately $170,000 (0.5 cents per diluted share). --Every 1-cent change in average price of NGL from 45 cents per gallon is estimated to have a net income impact of approximately $90,000 (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. Earnings Guidance and Hedge Position by Quarter Energen estimates that, on a quarterly basis for the remainder of 2004, its earnings will range from $0.30-$0.35 per diluted share in the 3rd quarter and from $0.70-$0.75 cents per diluted share in the 4th quarter. Approximately 6.2 Bcfe of hedges applicable to production over the remainder of the year do not qualify as cash flow hedges A cash flow hedge is a hedge of the exposure to the variability of cash flow that
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 133, and the mark-to-market Mark-to-market Adjustment of the book value or collateral value of a security to reflect current market value. treatment of these hedges could affect quarterly results (annual earnings would not be affected). Diluted average shares outstanding are estimated to be 36.7 million in the third and fourth quarters. The following tables reflect Energen's quarterly production estimates, hedge positions, pricing assumptions for unhedged production and earnings sensitivities to 10-cent per Mcf, $1.00 per barrel and 1-cent per gallon changes in the assumed prices for unhedged natural gas, oil and NGL production, respectively, in the quarter.
3rd Quarter 2004
----------------
Natural Gas Oil NGL
------------------ ---------------- ------------------
Production 13.7 Bcf 845 MBbl 18 MMgal
(estimated)
------------------ ---------------- ------------------
Hedge
position (%) 87% 86% 51%
------------------ ---------------- ------------------
Average hedge $4.94/Mcf(a)(b) $29.48/barrel(a) $0.41/gallon
price
------------------ ---------------- ------------------
Assumed Price
(unhedged $5.38/Mcf(a)(b)(c) $27.00/barrel(a) $0.45/gallon
production)
------------------ ---------------- ------------------
Earnings Per 10 cents/Mcf Per $1/barrel Per 1 cent/gallon
sensitivities: Change from Change from Change From
Assumed Price Assumed Price Assumed Price
Net income $32,000 $60,000 $40,000
EPS (diluted) 0.1 cents 0.2 cents 0.1 cents
------------------ ---------------- ------------------
(a) NYMEX equivalent
(b) Incorporates known gas basis differentials for July
(c) For August and September; July actual was $6.14/Mcf
4th Quarter 2004
----------------
Natural Gas Oil NGL
------------------- ---------------- -----------------
Production 14.3 Bcf 880 MBbl 20 MMgal
(estimated)
------------------- ---------------- -----------------
Hedge
position (%) 85% 80% 47%
------------------- ---------------- -----------------
Average hedge $5.01/Mcf(a) $29.43/barrel(a) $0.41/gallon
price
------------------- ---------------- -----------------
Assumed Price
(unhedged $5.00/Mcf(a) $27.00/barrel(a) $0.45/gallon
production)
------------------- ---------------- -----------------
Earnings Per 10 cents/Mcf Per $1/barrel Per 1 cent/gallon
sensitivities: Change from Change from Change From
Assumed Price Assumed Price Assumed Price
Net income $73,000 $110,000 $50,000
EPS (diluted) 0.2 cents 0.3 cents 0.1 cents
------------------- ---------------- -----------------
(a) NYMEX equivalent
2005 EARNINGS GUIDANCE With the planned closing on August 2, 2004, of the $273 million acquisition of San Juan Basin coalbed methane properties, much of the uncertainty related to Energen's 2005 earnings has been removed. In addition, the Company has increased its hedge position in recent weeks (as previously reported) to help solidify so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. the earnings outlook for the year. As a result, Energen has raised its 2005 earnings guidance to a range of $3.80-$4.00 per diluted share. The Company's plans call for a $200 million acquisition to occur late in the year, and an estimated 7 cents per diluted share is attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to this unidentified acquisition. The Company's guidance for 2005 earnings assumes that prices applicable to Energen's unhedged production in 2005 will average $5.25 per Mcf for gas, $28.00 per barrel for oil, and 46.7 cents per gallon for NGL. Energen Resources' hedge position for 2005 is as follows:
NYMEX-
equiv.
Commodity Volumes Estimated Production % Hedged price
--------- ------- ----------------------- ---------------- -----------
Natural 35.4 60.8 58.0 $5.70
Gas Bcf Bcf(a) Bcf(a)(b) 58%(a) 61%(a)(b) per Mcf
--------- ------- ---------- ------------ ------ --------- -----------
2.3 $33.25
Oil MMBbl 3.5 MMBbl 65% per barrel
--------- ------- ----------------------- ---------------- -----------
30.2 79 78 $0.485
NGL MMgal MMgal(a) MMgal(a)(b) 38%(a) 40%(a)(b) per gallon
--------- ------- ---------- ------------ ------ --------- -----------
(a) With unidentified 4th quarter 2005 acquisition
(b) Without unidentified 4th quarter 2005 acquisition
Energen Resources' 2005 natural gas hedge position by hedge type is as follows:
Assumed Basis Price/Mcf
Hedge Type Volumes (Bcf) Difference(a) (NYMEX equiv)
----------------------- ------------- ---------------- ---------------
NYMEX Hedges 16.4 -- $5.98
----------------------- ------------- ---------------- ---------------
San Juan Basin-specific 15.5 $0.80 $5.33
----------------------- ------------- ---------------- ---------------
Permian Basin-specific 1.8 $0.35 $5.96
----------------------- ------------- ---------------- ---------------
SNG-LA Basin-specific 1.6 $0.04 $6.13
----------------------- ------------- ---------------- ---------------
(a) Assumed basis differentials have been used to calculate
NYMEX-equivalent prices.
Energen Resources' 2005 oil hedge position by hedge type is as follows:
Assumed Sour Oil Price/Barrel
Hedge Type Volumes (MBbl) Difference(a) (NYMEX equiv)
-------------------- ---------------- ---------------- ---------------
NYMEX Hedges 535 -- $ 31.20
-------------------- ---------------- --------------- --------------
Sour Oil (WTS) 1,723 $ 2.90 $ 33.89
-------------------- ---------------- --------------- --------------
(a) Assumed sour oil differential has been used to calculate the
NYMEX-equivalent price.
Realized prices for Energen Resources' production associated with NYMEX contracts as well as for unhedged production will reflect the negative impact of basis differentials. For production associated with basin-specific contracts, Energen Resources will receive the contracted hedge price, regardless of basis differentials. 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. Realized NGL prices will reflect transportation and fractionation fees. Earnings Sensitivities to Commodity Price Changes The largest influences on Energen's financial results typically are the commodity prices applicable to the company's unhedged production. Given Energen Resources' current hedge position for 2005 and assuming prices (as outlined above) for its unhedged production (excluding volumes from unidentified acquisitions), Energen's earnings' sensitivities to commodity price changes are as follows: Relative to the company's unhedged volumes in 2005 (excluding production from unidentified acquisitions): --Every 10-cent change in the average NYMEX price of gas from $5.25 per Mcf is estimated to have a net income impact of approximately $1,100,000 (3 cents per diluted share). --Every $1.00 change in the average NYMEX price of oil from $28.00 per barrel is estimated to have a net income impact of approximately $950,000 (2.5 cents per diluted share). --Every 1-cent change in average price of NGL from 46.7 cents per gallon is estimated to have a net income impact of approximately $165,000 (0.4 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. Total production for 2005 is estimated to be 93 Bcfe, including approximately 3 Bcfe attributable to an unidentified acquisition in the fourth quarter of 2005. Other key assumptions used in developing Energen's 2005 earnings guidance include: --Average diluted shares outstanding of 36,850,000. --Alagasco's earning a return on average equity of 13.15-13.65 percent on average equity of approximately $270 million. --A DD&A rate at Energen Resources of approximately 95 cents per Mcfe and LOE (including production taxes) of approximately $1.30 per Mcfe. --Capital spending at Energen Resources of approximately $205 million for property acquisitions and related development, and approximately $75 million for development of existing properties (including 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. coalbed methane properties scheduled to close on August 2, 2004); and 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. at Alagasco of approximately $55 million. Energen Corporation is a diversified diversified (di·verˑ·s energy holding company with headquarters in Birmingham, Alabama Birmingham (pronounced [ˈbɝmɪŋˌhæm]) is the largest city in the U.S. state of Alabama and is the county seat of Jefferson County. . Its two lines of business are the acquisition and development of natural gas, oil and natural gas liquids 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. in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. 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. . Additional information on Energen is available at www.energen.com. 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. This release contains statements expressing expectations of future plans, objectives and performance that constitute forward-looking statements 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 dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). , 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 discussion of risks and uncertainties, which could affect future results of Energen and its subsidiaries, is included in the Company's periodic reports filed with the Securities and Exchange Commission.
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the 3 months ending June 30, 2004 and 2003
2nd Quarter
------------------
(in thousands, except per share data) 2004 2003 Change
-------- -------- -------
Operating Revenues
Oil and gas operations $ 95,433 $ 89,782 $ 5,651
Natural gas distribution 92,744 94,248 (1,504)
-------- -------- -------
Total operating revenues 188,177 184,030 4,147
-------- -------- -------
Operating Expenses
Cost of gas 40,291 42,107 (1,816)
Operations & maintenance 56,244 47,711 8,533
DD&A 28,927 29,535 (608)
Taxes, other than income taxes 16,047 14,165 1,882
Accretion expense 532 466 66
-------- -------- -------
Total operating expenses 142,041 133,984 8,057
-------- -------- -------
Operating Income 46,136 50,046 (3,910)
-------- -------- -------
Other Income (Expense)
Interest expense (10,694) (10,734) 40
Other income 633 1,999 (1,366)
Other expense (670) (2,263) 1,593
-------- -------- -------
Total other expense (10,731) (10,998) 267
-------- -------- -------
Income Before Income Taxes 35,405 39,048 (3,643)
Income tax expense 13,137 14,589 (1,452)
-------- -------- -------
Income from Continuing Operations 22,268 24,459 (2,191)
-------- -------- -------
Discontinued Operations, Net of Taxes
Income from discontinued operations 2 149 (147)
Gain (loss) on disposal - (1,261) 1,261
-------- -------- -------
Income (Loss) from Discontinued
Operations 2 (1,112) 1,114
-------- -------- -------
Net Income $ 22,270 $ 23,347 $(1,077)
======== ======== =======
Diluted Earnings Per Share
Continuing operations $ 0.61 $ 0.69 $ (0.08)
Discontinued operations - (0.03) 0.03
-------- -------- -------
Net Income $ 0.61 $ 0.66 $ (0.05)
======== ======== =======
Basic Earnings Per Share
Continuing operations $ 0.61 $ 0.70 $ (0.09)
Discontinued operations - (0.03) 0.03
-------- -------- -------
Net Income $ 0.61 $ 0.67 $ (0.06)
======== ======== =======
Diluted Avg. Common Shares Outstanding 36,625 35,349 1,276
======== ======== =======
Basic Avg. Common Shares Outstanding 36,230 35,000 1,230
======== ======== =======
Dividends Per Share $ 0.185 $ 0.18 $ 0.005
======== ======== =======
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the 6 months ending June 30, 2004 and 2003
Year-to-date
------------------
(in thousands, except per share data) 2004 2003 Change
-------- -------- --------
Operating Revenues
Oil and gas operations $191,660 $178,301 $ 13,359
Natural gas distribution 347,946 315,387 32,559
-------- -------- --------
Total operating revenues 539,606 493,688 45,918
-------- -------- --------
Operating Expenses
Cost of gas 179,029 154,079 24,950
Operations & maintenance 109,391 98,528 10,863
DD&A 57,663 58,270 (607)
Taxes, other than income taxes 40,325 35,685 4,640
Accretion expense 1,022 960 62
-------- -------- --------
Total operating expenses 387,430 347,522 39,908
-------- -------- --------
Operating Income 152,176 146,166 6,010
-------- -------- --------
Other Income (Expense)
Interest expense (21,012) (21,556) 544
Other income 1,495 5,119 (3,624)
Other expense (1,695) (5,352) 3,657
-------- -------- --------
Total other expense (21,212) (21,789) 577
-------- -------- --------
Income Before Income Taxes 130,964 124,377 6,587
Income tax expense 48,499 46,595 1,904
-------- -------- --------
Income from Continuing Operations 82,465 77,782 4,683
-------- -------- --------
Discontinued Operations, Net of Taxes
Income from discontinued operations 3 822 (819)
Gain (loss) on disposal (13) (676) 663
-------- -------- --------
Income (Loss) from Discontinued
Operations (10) 146 (156)
-------- -------- --------
Net Income $ 82,455 $ 77,928 $ 4,527
======== ======== ========
Diluted Earnings Per Share
Continuing operations $ 2.25 $ 2.21 $ 0.04
Discontinued operations - - -
-------- -------- --------
Net Income $ 2.25 $ 2.21 $ 0.04
======== ======== ========
Basic Earnings Per Share
Continuing operations $ 2.28 $ 2.23 $ 0.05
Discontinued operations - - -
-------- -------- --------
Net Income $ 2.28 $ 2.23 $ 0.05
======== ======== ========
Diluted Avg. Common Shares Outstanding 36,600 35,193 1,407
======== ======== ========
Basic Avg. Common Shares Outstanding 36,202 34,868 1,334
======== ======== ========
Dividends Per Share $ 0.37 $ 0.36 $ 0.01
======== ======== ========
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the 12 months ending June 30, 2004 and 2003
Trailing 12 Months
------------------
(in thousands, except per share data) 2004 2003 Change
-------- -------- --------
Operating Revenues
Oil and gas operations $366,481 $315,397 $ 51,084
Natural gas distribution 521,658 467,585 54,073
-------- -------- --------
Total operating revenues 888,139 782,982 105,157
-------- -------- --------
Operating Expenses
Cost of gas 258,773 217,748 41,025
Operations & maintenance 219,082 200,292 18,790
DD&A 116,251 110,834 5,417
Taxes, other than income taxes 68,183 58,221 9,962
Accretion expense 1,952 1,928 24
-------- -------- --------
Total operating expenses 664,241 589,023 75,218
-------- -------- --------
Operating Income 223,898 193,959 29,939
-------- -------- --------
Other Income (Expense)
Interest expense (41,718) (43,427) 1,709
Other income 5,120 14,057 (8,937)
Other expense (6,320) (13,853) 7,533
-------- -------- --------
Total other expense (42,918) (43,223) 305
-------- -------- --------
Income Before Income Taxes 180,980 150,736 30,244
Income tax expense 66,032 54,369 11,663
-------- -------- --------
Income from Continuing Operations 114,948 96,367 18,581
-------- -------- --------
Discontinued Operations, Net of Taxes
Income from discontinued operations 154 1,215 (1,061)
Gain (loss) on disposal 79 (439) 518
-------- -------- --------
Income (Loss) from Discontinued
Operations 233 776 (543)
-------- -------- --------
Net Income $115,181 $ 97,143 $ 18,038
======== ======== ========
Diluted Earnings Per Share
Continuing operations $ 3.16 $ 2.76 $ 0.40
Discontinued operations - 0.02 (0.02)
-------- -------- --------
Net Income $ 3.16 $ 2.78 $ 0.38
======== ======== ========
Basic Earnings Per Share
Continuing operations $ 3.19 $ 2.78 $ 0.41
Discontinued operations - 0.02 (0.02)
-------- -------- --------
Net Income $ 3.19 $ 2.80 $ 0.39
======== ======== ========
Diluted Avg. Common Shares Outstanding 36,407 34,948 1,459
======== ======== ========
Basic Avg. Common Shares Outstanding 36,059 34,672 1,387
======== ======== ========
Dividends Per Share $ 0.74 $ 0.72 $ 0.02
======== ======== ========
SELECTED BUSINESS SEGMENT DATA (UNAUDITED)
For the 3 months ending June 30, 2004 and 2003
2nd Quarter
------------------
(in thousands, except sales price data) 2004 2003 Change
-------- -------- --------
Oil and Gas Operations
Operating revenues
Natural gas $ 65,408 $ 60,438 $ 4,970
Oil 22,026 21,803 223
Natural gas liquids 7,135 5,975 1,160
Other 864 1,566 (702)
-------- -------- --------
Total $ 95,433 $ 89,782 $ 5,651
-------- -------- --------
Production volumes from continuing
operations
Natural gas (MMcf) 13,754 14,248 (494)
Oil (MBbl) 831 850 (19)
Natural gas liquids (MBbl) 402 410 (8)
Production volumes from continuing ops.
(MMcfe) 21,149 21,807 (658)
Total sales volume (MMcfe) 21,149 21,959 (810)
Average sales price from continuing ops.
Natural gas (Mcf) $ 4.76 $ 4.24 $ 0.52
Oil (barrel) $ 26.52 $ 25.65 $ 0.87
Natural gas liquids (barrel) $ 17.75 $ 14.58 $ 3.17
Other data
Lease operating expense (LOE)
LOE and other $ 18,445 $ 14,529 $ 3,916
Production taxes 8,463 6,710 1,753
-------- -------- --------
Total $ 26,908 $ 21,239 $ 5,669
-------- -------- --------
DD&A $ 19,069 $ 20,313 $ (1,244)
Capital expenditures $ 49,964 $ 27,191 $ 22,773
Exploration expense $ 52 $ 38 $ 14
Operating income $ 41,747 $ 43,515 $ (1,768)
======== ======== ========
Natural Gas Distribution
Operating revenues
Residential $ 56,644 $ 59,446 $ (2,802)
Commercial and industrial - small 24,575 24,773 (198)
Transportation 9,102 8,667 435
Other 2,423 1,362 1,061
-------- -------- --------
Total $ 92,744 $ 94,248 $ (1,504)
-------- -------- --------
Gas delivery volumes (MMcf)
Residential 3,760 3,857 (97)
Commercial 2,227 2,129 98
Transportation 13,183 13,785 (602)
-------- -------- --------
Total 19,170 19,771 (601)
-------- -------- --------
Other data
Depreciation and amortization $ 9,858 $ 9,222 $ 636
Capital expenditures $ 16,410 $ 14,996 $ 1,414
Operating income $ 4,575 $ 6,988 $ (2,413)
======== ======== ========
SELECTED BUSINESS SEGMENT DATA (UNAUDITED)
For the 6 months ending June 30, 2004 and 2003
Year-to-date
------------------
(in thousands, except sales price data) 2004 2003 Change
-------- -------- --------
Oil and Gas Operations
Operating revenues
Natural gas $130,884 $118,534 $ 12,350
Oil 45,713 43,906 1,807
Natural gas liquids 13,155 12,651 504
Other 1,908 3,210 (1,302)
-------- -------- --------
Total $191,660 $178,301 $ 13,359
-------- -------- --------
Production volume from continuing
operations
Natural gas (MMcf) 27,491 27,515 (24)
Oil (MBbl) 1,704 1,701 3
Natural gas liquids (MBbl) 766 784 (18)
Production volumes from continuing ops.
(MMcfe) 42,310 42,427 (117)
Total sales volume (MMcfe) 42,310 43,154 (844)
Average sales price from continuing ops.
Natural gas (Mcf) $ 4.76 $ 4.31 $ 0.45
Oil (barrel) $ 26.83 $ 25.81 $ 1.02
Natural gas liquids (barrel) $ 17.18 $ 16.13 $ 1.05
Other data
Lease operating expense (LOE)
LOE and other $ 36,275 $ 31,342 $ 4,933
Production taxes 16,711 13,957 2,754
-------- -------- --------
Total $ 52,986 $ 45,299 $ 7,687
-------- -------- --------
DD&A $ 38,195 $ 40,123 $ (1,928)
Capital expenditures $ 71,408 $ 81,022 $ (9,614)
Exploration expense $ 100 $ 178 $ (78)
Operating income $ 85,880 $ 82,690 $ 3,190
======== ======== ========
Natural Gas Distribution
Operating revenues
Residential $233,304 $213,385 $ 19,919
Commercial and industrial - small 89,176 79,712 9,464
Transportation 20,477 19,798 679
Other 4,989 2,492 2,497
-------- -------- --------
Total $347,946 $315,387 $ 32,559
-------- -------- --------
Gas delivery volumes (MMcf)
Residential 18,869 19,917 (1,048)
Commercial 8,275 8,373 (98)
Transportation 27,781 28,178 (397)
-------- -------- --------
Total 54,925 56,468 (1,543)
-------- -------- --------
Other data
Depreciation and amortization $ 19,468 $ 18,147 $ 1,321
Capital expenditures $ 30,221 $ 28,987 $ 1,240
Operating income $ 66,589 $ 64,188 $ 2,401
======== ======== ========
SELECTED BUSINESS SEGMENT DATA (UNAUDITED)
For the 12 months ending June 30, 2004 and 2003
Trailing 12 Months
------------------
(in thousands, except sales price data) 2004 2003 Change
-------- -------- --------
Oil and Gas Operations
Operating revenues
Natural gas $247,999 $199,049 $ 48,950
Oil 89,007 85,616 3,391
Natural gas liquids 26,394 25,464 930
Other 3,081 5,268 (2,187)
-------- -------- --------
Total $366,481 $315,397 $ 51,084
-------- -------- --------
Production volumes from continuing
operations
Natural gas (MMcf) 55,409 51,204 4,205
Oil (MBbl) 3,415 3,375 40
Natural gas liquids (MBbl) 1,568 1,705 (137)
Production volumes from continuing ops.
(MMcfe) 85,305 81,684 3,621
Total sales volume (MMcfe) 85,313 83,943 1,370
Average sales price from continuing ops.
Natural gas (Mcf) $ 4.48 $ 3.89 $ 0.59
Oil (barrel) $ 26.07 $ 25.37 $ 0.70
Natural gas liquids (barrel) $ 16.83 $ 14.93 $ 1.90
Other data
Lease operating expense (LOE)
LOE and other $ 72,853 $ 63,445 $ 9,408
Production taxes 30,485 24,153 6,332
-------- -------- --------
Total $103,338 $ 87,598 $ 15,740
-------- -------- --------
DD&A $ 77,759 $ 75,548 $ 2,211
Capital expenditures $153,724 $170,299 $(16,575)
Exploration expense $ 975 $ 1,833 $ (858)
Operating income $156,781 $129,415 $ 27,366
======== ======== ========
Natural Gas Distribution
Operating revenues
Residential $340,857 $306,986 $ 33,871
Commercial and industrial - small 136,103 117,622 18,481
Transportation 38,929 38,091 838
Other 5,769 4,886 883
-------- -------- --------
Total $521,658 $467,585 $ 54,073
-------- -------- --------
Gas delivery volumes (MMcf)
Residential 26,200 28,177 (1,977)
Commercial 12,466 12,648 (182)
Transportation 55,225 58,222 (2,997)
-------- -------- --------
Total 93,891 99,047 (5,156)
-------- -------- --------
Other data
Depreciation and amortization $ 38,492 $ 35,286 $ 3,206
Capital expenditures $ 59,143 $ 64,628 $ (5,485)
Operating income $ 69,249 $ 66,026 $ 3,223
======== ======== ========
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