Oil & Gas Business Drives Energen's Record Earnings in 2006.Energen Reaffirms 2007 Guidance BIRMINGHAM, Ala ALA aminolevulinic acid. Ala alanine. ala (a´lah) pl. a´lae [L.] a winglike process. . -- Energen 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 acquisition and development business again led the diversified energy company in 2006 in realizing its fifth consecutive year of record earnings. Summary of Key Developments:
-- Energen's 2006 earnings increased 59 percent to $3.73 per diluted
share.
-- Energen Resources Corporation, the Company's oil and gas
subsidiary, reported record production of 95.6 billion cubic
feet equivalent (Bcfe).
-- Energen Resources realized higher average revenues per unit of
production on the strength of its excellent hedge position.
-- Energen Resources recognized a net gain of 47 cents per diluted
share from the October sale of one-half interest in its Alabama
shale lease position to Chesapeake Energy Corporation.
-- During 2006, Energen repurchased 2.2 million shares of Company
stock.
-- The diversified energy company's fourth quarter earnings increased
68 percent to $1.31 per diluted share.
-- Oil, gas and natural gas liquids (NGL) production increased 5
percent to 24 Bcfe.
-- A decline in average natural gas revenues per unit of
production was offset by increases in average revenues per unit
of oil and NGL production and a reduction in price-driven
production taxes.
-- Energen Resources recognized a net gain of 47 cents per diluted
share from the October sale of one-half interest in its Alabama
shale lease position to Chesapeake Energy Company.
-- Energen reaffirmed its 2007 earnings guidance range of $3.80 to
$4.20 per diluted share.
-- Adjustments to previously disclosed assumptions included
updated DD&A rate based on lower year-end commodity prices used
to establish 2006 year-end proved reserves.
-- Even when 2007 strip prices fell to $7 per thousand cubic feet
equivalent (Mcfe) for gas and $55 per barrel for oil, Energen's
estimated 2007 earnings still fell within the Company's
earnings guidance range.
Management Comments "A company's results can be measured in many ways, and I'm very pleased that in 2006 Energen achieved tremendous success by almost any yardstick," said Mike Warren
"Energen's fifth consecutive year of record earnings translated into significant success for our shareholders, as Energen's common stock generated a total shareholder return in 2006 of more than 30 percent," Warren said. "Energen Resources' production of 95.6 Bcfe of natural gas, oil and natural gas liquids was a new record for us; at the same time, our oil and gas development activities resulted in proved reserve additions that more than replaced this record production. "Meanwhile, our hedging strategy continued to minimize the earnings impact of commodity price volatility and contributed to a 22 percent increase over last year in average revenues per unit of production. The sale of one-half interest in Energen Resources' Alabama 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. lease position to Chesapeake not only generated a sizable siz·a·ble also size·a·ble adj. Of considerable size; fairly large. siz  a·ble·ness n. net gain for our Company but also positioned Energen Resources to pursue
the exploration of Alabama shales with Chesapeake in a way that
significantly minimizes our risk while leaving plenty of upside
potential Upside potentialThe amount by which analysts or investors expect the price of a security may increase. upside potential The potential price or gain that may be expected in a security or in a security average, generally stated as the dollar ," Warren added. "During 2006, Energen Resources announced its significant inventory of probable and possible reserves that we believe will help generate organic production growth in 2008 and 2009. Energen Resources also acquired Dominion dominion, power to rule, or that which is subject to rule. Before 1949 the term was used officially to describe the self-governing countries of the Commonwealth of Nations—e.g., Canada, Australia, or India. Resources' interest in attractive properties 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 have existing operations in the over-pressured Fruitland Coal. "As we identified opportunities and began to make capital allocation decisions Capital allocation decision Allocation of invested funds between risk-free assets and the risky portfolio. for Energen's growing cash flows over our five-year planning horizon Planning horizon The length of time a model or investor or plan projects into the future. , the Company's Board of Directors gave us the ability to include stock buyback Stock buyback A corporation's purchase of its own outstanding stock, usually in order to raise the company's earnings per share. stock buyback See buyback. as one of those options by increasing the number of shares available for repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. to just over 11 million. To date, we have repurchased approximately 2.2 million shares at an average price of $39.08 per share." With respect to 2007, Energen President James McManus said: "There is some uncertainty in the commodity markets right now given high domestic inventories of natural gas and oil and a generally warmer-than-normal winter weather. At Energen, we continue to see mid- and long-term supply-and-demand fundamentals in place that support renewed strengthening of natural gas and oil prices. "In spite of the recent commodity price volatility," McManus said, "we are maintaining the underlying price assumptions for our unhedged volumes in our 2007 earnings guidance at $8 per Mcf for gas and $60 per barrel for oil. "We have adjusted our DD&A numbers for 2007 to reflect the relatively low commodity prices at the end of December. The year-end 2006 prices resulted in a slight downward year-end reserve revision and increased our estimated DD&A rate for 2007 from $1.08 per Mcfe to $1.12 per Mcfe. "All in all, we believe we are well-positioned for continued earnings growth in 2007. "As we have discussed previously, Energen Resources continues to pursue additions to its acreage position in Alabama shales," McManus said. "At the end of last week, our net lease position was just over 126,000 acres. We continue to be excited by the shale potential we see in Alabama and plan to continue our leasing activities." 2006 Results For the 12 months ending December 31, 2006, Energen's net income totaled $273.6 million, or $3.73 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. Energen's 2006 earnings surpassed the record earnings previously set in 2005 of $173 million, or $2.35 per diluted share. The year-to-year increase in diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of (EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. ) of 59 percent was due largely to three factors: 1) Energen Resources' attractive hedge position contributed to a 22 percent increase in average revenues per unit of production. 2) Energen Resources' sale of one-half interest in its acreage position in Alabama shales resulted in a gain of 47 cents per diluted share. 3) Energen Resources' production increased 5 percent to 95.6 Bcfe. 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' 2006 net income totaled $237.6 million and compared with net income of $135.3 million in 2005. 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. in both periods was immaterial Not essential or necessary; not important or pertinent; not decisive; of no substantial consequence; without weight; of no material significance. immaterial adj. . Average Revenues Per Unit of Production, 2006 vs 2005 Commodity < < 2006 Revenues < 2005 Revenues % Change Natural Gas < < $6.96/Mcf < $5.99/Mcf 16% Oil < < $49.79/barrel < $35.18/barrel 42% NGL < < $0.66/gallon < $0.55/gallon 20% Production, 2006 vs 2005 Commodity < < 2006 Production < 2005 Production % Change Natural Gas < < 62.8 Bcf < 61.0 Bcf 3% Oil < < 3,644.7 MBbl < 3,315.8 MBbl 10% NGL < < 76.3 MMgal < 70.5 MMgal 8% Per-unit LOE LOE Ley Orgánica de Educación (Spanish) LOE Level Of Effort LOE Limited Objective Experiment LOE Letter of Explanation LOE Language Other than English. in 2006 totaled $1.93 per Mcfe. This 12 percent increase year-to-year largely was due to a general rise in field service costs, increased repairs and work-over expenses, and the December 2005 acquisition 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; these increases were partially offset by lower production taxes. DD&A expense in 2006 increased 4 percent per unit to $1 per Mcfe largely due to the December 2005 acquisition of Permian Basin oil properties. Alabama Gas Corporation Alagasco's 2006 net income of $37.3 million approximated 2005 net income of $37 million. Fourth Quarter Results For the three months ending December 31, 2006, Energen's net income totaled $95.1 million, or $1.31 per diluted share. In 2005, consolidated net income totaled $57.3 million, or 78 cents per diluted share and included a non-cash gain of $11.4 million, or 15 cents per diluted share, associated with the reversal of previously recognized, non-cash mark-to-market losses on open hedge contracts at September 30, 2005. Income from discontinued operations in both periods was immaterial. Energen Resources Energen Resources' net income totaled $87.6 million in the fourth quarter of 2006 and compared with $51.3 million in the same period last year. The increase in fourth quarter net income was due largely to the following factors: * Oil, gas and NGL NGL - A dialect of IGL. production increased 5 percent to 24 Bcfe. * A decline in average natural gas revenues per unit of production was offset by increases in average revenues per unit of oil and NGL production and a reduction in price-driven production taxes. * Energen Resources recognized a net gain of $34.5 million, or 47 cents per diluted share, from the October sale of one-half interest in its Alabama shale lease position to 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. Company. * Energen Resources recognized a net gain of $6.7 million, or 9 cents per diluted share, from the sale of its Enron bankruptcy settlement claim. Revenues per unit of production for Energen Resources' aggregate natural gas, oil and NGL production decreased 3.5 percent over the same period last year. Average Revenues Per Unit of Production, 4(th) Quarter, 2006 vs 2005 Commodity < < 4Q2006 Revenues < 4Q2005 Revenues % Change Natural Gas < < $6.75/Mcf < $7.81/Mcf (14)% Oil < < $49.89/barrel < $39.43/barrel 27% NGL < < $0.63/gallon < $0.55/gallon 15% Total fourth quarter 2006 production increased 5 percent to 24 Bcfe. Production, 4th Quarter, 2006 vs 2005 Commodity < < 4Q2006 Production < 4Q2005 Production % Change Natural Gas < < 15.8 Bcf < 15.2 Bcf 4% Oil < < 908.3 MBbl < 836.1 MBbl 9% NGL < < 19.3 MMgal. < 18.1 MMgal. 7% Per-unit LOE in the fourth quarter of 2006 decreased 6 percent to $1.88 per Mcfe. Lower per-unit production taxes more than offset a general rise in field service costs, increased repairs and work-over expenses, and the December 2005 property acquisition. Per-unit DD&A expense in the fourth quarter of 2006 increased 11 percent to $1.07 per Mcfe primarily due to the impact on reserves of lower commodity prices at year-end relative to the same time last year. Alabama Gas Corporation Alagasco's natural gas distribution operations reported net income of $8.1 million in the fourth quarter of 2006 as compared with $5.7 million in the same period a year ago; this increase primarily reflects timing of Alagasco's rate-setting mechanism. 2007 Earnings Guidance 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 reaffirmed its 2007 earnings guidance range of $3.80 to $4.20 per diluted share. Adjustments to previously disclosed assumptions included updated DD&A rates based on lower year-end 2006 commodity prices. Key assumptions in Energen's 2007 budget are: * Existing hedge position covering approximately 70 percent of estimated 2007 production * Assumed prices for unhedged natural gas, oil and NGL production of $8 per Mcf, $60 per barrel and 78 cents per gallon, respectively * Production of 95 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 $334 million, including $274 million by Energen Resources and $60 million by Alagasco * An average DD&A rate at Energen Resources of $1.12 per Mcfe * Per-unit LOE at Energen Resources, including production taxes, of $2.14 per Mcfe * Alagasco's earning within its allowed range of return on average equity of approximately $300 million * Average diluted shares outstanding of 72.4 million 2007 Hedge Position Energen Resources' 2007 hedge position by commodity is as follows: [TABLE OMITTED] Energen Resources' 2007 natural gas hedge position by hedge type is as follows: [TABLE OMITTED] Energen Resources' 2007 oil hedge position by hedge type is as follows: [TABLE OMITTED] Average oil and gas revenues per unit of production 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 NGL revenue per unit of production 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' current hedge position for 2007 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 2007 earnings: * Every 10-cent change in the average NYMEX price of gas from $8.00 represents an estimated net income impact of approximately $0.9 million (1.2 cents per diluted share). * Every $1.00 change in the average NYMEX price of oil from $60.00 per barrel represents an estimated net income impact of approximately $515,000 (0.7 cents per diluted share). * Every 1-cent change in the average price of liquids from $0.78 per gallon represents an estimated net income impact of approximately $105,000 (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. 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. Energen Corporation is a diversified energy holding company with headquarters in Birmingham, AL. Its two lines of business are the acquisition and development 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 1.7 Tcfe of proved reserves proved reserves The quantity of minerals expected to be recoverable under current economic and operating conditions. The amount of proved reserves is important in valuing the stock of a company with significant holdings in natural resources. 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 and in the North Louisiana/East Texas area. More information is available at www.energen.com. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
|
||||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion