HOUSTON, March 16, 2009 (GLOBE NEWSWIRE) -- Edge Petroleum Corporation (Nasdaq:EPEX) (Nasdaq:EPEXP) today reported financial results for the fourth quarter and full year of 2008 as follows:
* Production for the fourth quarter of 2008 was 3.5 Bcfe, averaging 38.0 MMcfe per day. Production for the full year 2008 totaled 17.2 Bcfe, averaging 46.9 MMcfe per day. * For the year ended December 31, 2008, we recorded cash settlements paid to our counterparties on our derivative contracts totaling $28.7 million pre-tax. Partially offsetting this loss was a non- cash net unrealized pre-tax derivative gain of $27.7 million, which represents the change in the fair value of our derivative contracts between December 31, 2007 and December 31, 2008. These resulted in a net pre-tax derivative loss of approximately $1.0 million included in total revenue for the year ended December 31, 2008. * We recorded impairments of our oil and natural gas properties of $129.5 million ($84.2 million, net of tax) and $233.3 million ($215.8 million, net of tax) in the third and fourth quarters of 2008, respectively. * Our fourth quarter and full year 2008 net loss to common stockholders was $249.2 million, or $8.71 basic and diluted loss per share and $339.4 million, or $11.89 basic and diluted loss per share, respectively. These losses reflect the impact of the impairments of our oil and natural gas properties that we recorded at September 30 and December 31, 2008 and a valuation allowance of approximately $110 million associated with our net deferred tax assets. * Our borrowing base redetermination was completed in January 2009, resulting in a $114 million deficiency, of which we repaid $5 million in February 2009. In connection with the deficiency, on March 16, 2009, we entered into an amended Consent and Amendment No. 4 to our Revolving Facility (the "Amended Consent") which provides, among other things, that (i) we will make a $25 million payment on May 31, 2009 with all remaining principal, fees and interest amounts under our Revolving Facility to be due and payable on June 30, 2009 (and which eliminates the six $19 million deficiency payments that were originally contemplated), and (ii) that it will be an event of default if, among other things, by May 15, 2009 we have not either obtained a commitment sufficient to pay all of our obligations under the Revolving Facility or otherwise entered into a sale, merger or other business combination agreement that would result in the repayment of all of our obligations under the Revolving Facility on or before June 30, 2009. Primarily due to the uncertainty surrounding the significant payments due June 30, 2009 under our Revolving Facility, our independent auditors have modified their opinion on our 2008 consolidated financial statements to include a going concern explanatory paragraph.
A summary of our fourth quarter and year-to-date results is shown below:
Fourth Year Ended
Quarter December 31,
2008 2008
---------------------
Production, Bcfe 3.5 17.2
Percent Gas 70% 70%
Operating Costs Structure, $ per Mcfe
-------------------------------------
Oil and Gas Operating Expenses $1.27 $0.98
Severance and Ad Valorem Taxes $0.45 $0.56
G&A 1 $0.44 $0.89
Depletion $4.95 $5.08
1 Assumes exclusion of non-cash share-based compensation costs for
restricted stock amortization.
Fourth quarter production for 2008 was 3.5 Bcfe as compared to 5.8 Bcfe for the same period in 2007. Normal production declines, asset sales completed during early 2008 and decreased capital re-investment in replacing production as compared to historical levels contributed to our overall production decline in 2008. To a lesser extent, Hurricane Ike struck in mid-September 2008, causing some wells to be shut-in during the third and fourth quarters of 2008, which resulted in additional production declines for all commodities. We have been operating under a reduced reinvestment program while we have been engaged in our financial and strategic alternatives evaluation process. During 2008, we drilled only 27 gross wells as compared to 50 gross wells in the comparable prior-year period.
We reported an increase in total revenue for the fourth quarter period of 2008 compared to the same period in 2007 and we reported a decrease in total revenue for the annual period of 2008 compared to the same period in 2007. Total revenue for the three months ended December 31, 2008 was $42.0 million compared to $35.9 million in the fourth quarter of 2007, an increase of 17%. For the year ended December 31, 2008, total revenue was $158.8 million compared to $160.9 million for the same period in 2007, a decrease of 1%. Although commodity prices were very high during the second and third quarters of 2008, prices in the fourth quarter of 2008 decreased significantly, which lead to unrealized gains in our year-end derivative valuations and the impairments of our oil and natural gas properties.
Oil and gas operating expenses for the three months and year ended December 31, 2008 totaled $4.4 million and $16.9 million, respectively, compared to $5.1 million and $17.1 million for the same periods in 2007. Depletion costs for the fourth quarter of 2008 totaled $17.3 million and averaged $4.95 per Mcfe compared to $28.0 million and an average of $4.83 per Mcfe for the fourth quarter of 2007. For the year ended December 31, 2008, depletion costs totaled $87.2 million, or an average of $5.08 per Mcfe, compared to $90.8 million or an average of $3.77 per Mcfe, for the same period in 2007. At December 31 and September 30, 2008 we recorded non-cash full-cost ceiling test impairments on our oil and natural gas properties in the amounts of $233.3 million ($215.8 million net of tax) and $129.5 million ($84.2 million net of tax), respectively. These write-downs were the result of declines in commodity prices and negative revisions in our proved reserve quantities at year-end 2007 and during 2008. General and administrative ("G&A") costs, which include share-based compensation costs and bad debt expense, for the fourth quarter of 2008 were $1.2 million that we received, 64% lower than the comparable prior year period, primarily because of the net $1.2 million settlement related to the termination of the proposed merger with Chaparral Energy, Inc. and the departure of several employees during 2008 which reduced salary and benefit costs. For the year ended December 31, 2008, G&A costs, including share-based compensation costs and bad debt expense, totaled $16.8 million, 4% lower than the comparable 2007 period.
Fourth quarter 2008 net loss to common stockholders was $249.2 million or $8.71 basic and diluted loss per share. The same period a year ago we reported a net loss to common stockholders of $6.4 million, or $0.22 basic and diluted loss per share. Net loss to common stockholders for the year ended December 31, 2008 was $339.4 million, or basic and diluted loss per share of $11.89 as compared to a net loss to common stockholders for the same period in 2007 of $1.0 million or $0.04 basic and diluted loss per share. Basic weighted average shares outstanding increased to approximately 28.7 million for the year ended December 31, 2008 from 27.6 million in the comparable 2007 period. The increase in shares outstanding was due primarily to the vesting of restricted stock units during 2008.
For the year ended December 31, 2008, net cash flow provided by operating activities was $82.7 million and net cash flow provided by operating activities before working capital changes was $78.6 million. For the year ended December 31, 2007, net cash flow provided by operating activities was $122.9 million and net cash flow provided by operating activities before working capital changes was $124.9 million. See the attached schedule for a reconciliation of net cash flow provided by operating activities to net cash flow provided by operating activities before working capital changes.
Debt at December 31, 2008 was $239.0 million as compared to $260.0 million at December 31, 2007. Debt at December 31, 2008 is presented as current as compared to long term at December 31, 2007. This is due to changes in our maturity date as a result of our entering into the Amended Consent in connection with the borrowing base deficiency of $114 million created by the recent redetermination of our borrowing base.
In the normal course of business we enter into derivative contracts, including commodity price collars, swaps and floors, to seek to hedge or mitigate our exposure to commodity price movements. Our derivative contracts for 2009 are shown in the table below.
2009 DERIVATIVES
Transaction Volumes Price Price Term
per Day Floor (1) Cap (1)
Natural Gas
Costless Collar 10,000 MMBtu $ 7.75 $ 10.00 Jan-09 Dec-09
Costless Collar 10,000 MMBtu $ 7.75 $ 10.08 Jan-09 Dec-09
Crude Oil
Costless Collar 300 Bbl $ 70.00 $ 93.55 Jan-09 Dec-09
----------------
(1) All natural gas prices are settled monthly at NYMEX Natural Gas
Index and crude oil prices are settled at West Texas
Intermediate Light Sweet Crude Oil Index.
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Edge Petroleum Corporation is a Houston-based independent energy company that focuses its exploration, production and marketing activities in selected onshore basins of the United States. Edge common stock and preferred stock are listed on The NASDAQ Global Select Market under the symbols "EPEX" and "EPEXP," respectively.
The Edge Petroleum Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3537
Statements that are not historical facts in this release, including but not limited to, statements relating to our ability to continue as a going concern or to comply with the terms of the Amended Consent, are forward-looking statements that involve certain risks, uncertainties and assumptions, many of which are beyond Edge's ability to control or estimate, and are subject to material changes. Such risks, uncertainties and assumptions include, but are not limited to, results of the Board's evaluation, any process or transaction, market conditions, availability of financing, Board and stockholder approvals, actions by third parties, Edge's financial and operational results, the availability or terms of any alternative or transaction, uncertainties, costs and delays relating to transactions, prices for oil and natural gas (including natural gas liquids), drilling and operating risks, risks related to exploration and development, uncertainties about the estimates of reserves, and other factors detailed in the Risk Factors and other sections of Edge's most recent Form 10-K, Forms 10-Q and other filings with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.
EDGE PETROLEUM CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
--------------------------------------------------------------------
Three Months Ended Year Ended
December 31, December 31,
-------------------- --------------------
2008 2007 2008 2007
--------- --------- --------- ---------
OIL AND NATURAL GAS
REVENUE:
Oil and natural gas
sales $ 20,542 $ 46,193 $ 159,754 $ 174,838
Gain (loss) on
derivatives 21,475 (10,262) (977) (13,938)
--------- --------- --------- ---------
Total revenue 42,017 35,931 158,777 160,900
--------- --------- --------- ---------
OPERATING EXPENSES:
Oil and natural gas
operating expenses 4,437 5,125 16,889 17,078
Severance and ad valorem
taxes 1,551 3,167 9,687 13,118
Depletion,
depreciation,
amortization and
accretion 17,574 28,297 88,341 91,718
Impairment of oil and
natural gas properties 233,331 -- 362,851 --
General and
administrative
expenses 1,184 3,295 16,776 17,494
--------- --------- --------- ---------
Total operating
expenses 258,077 39,884 494,544 139,408
--------- --------- --------- ---------
OPERATING INCOME (LOSS) (216,060) (3,953) (335,767) 21,492
OTHER INCOME AND EXPENSE:
Interest expense, net of
amounts capitalized (2,464) (2,698) (11,787) (10,589)
Amortization of
deferred loan costs (686) (239) (1,403) (977)
Interest and other
income 32 91 289 379
--------- --------- --------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES (219,178) (6,799) (348,668) 10,305
INCOME TAX (EXPENSE)
BENEFIT (29,700) 2,496 15,778 (3,733)
--------- --------- --------- ---------
NET INCOME (LOSS) (248,878) (4,303) (332,890) 6,572
Preferred stock dividends (345) (2,067) (6,544) (7,577)
--------- --------- --------- ---------
STOCKHOLDERS $(249,223) $ (6,370) $(339,434) $ (1,005)
========= ========= ========= =========
BASIC LOSS PER SHARE (1) $ (8.71) $ (0.22) $ (11.89) $ (0.04)
========= ========= ========= =========
DILUTED LOSS PER SHARE
(1) $ (8.71) $ (0.22) $ (11.89) $ (0.04)
========= ========= ========= =========
BASIC WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 28,817 28,541 28,682 27,613
========= ========= ========= =========
DILUTED WEIGHTED AVERAGE
NUMBER OF COMMON SHARES
OUTSTANDING 28,817 28,541 28,682 27,613
========= ========= ========= =========
Production:
Gas - MMcf 2,455 3,913 12,059 17,536
Natural gas liquids (NGL)
- MBbls 110 204 559 637
Oil - MBbls 64 110 294 460
Gas Equivalent - MMcfe 3,498 5,799 17,176 24,118
Realized Product
Prices:
Gas - $ per Mcf (2)(3) $ 11.13 $ 6.71 $ 8.62 $ 6.80
NGL - $ per Bbl $ 22.18 $ 49.79 $ 48.83 $ 40.00
Oil - $ per Bbl (2)(4) $ 192.46 $ (4.68) $ 93.86 $ 35.21
Gas Equivalent - $ per
Mcfe (5) $ 12.01 $ 6.20 $ 9.24 $ 6.67
Notes:
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(1) In the calculation of diluted loss per share for the three and
12 months ended December 31, 2008 and 2007, the 8.7 million
shares of common stock resulting from an assumed conversion of
the Company's 5.75% Series A cumulative convertible perpetual
preferred stock were excluded because the conversion would be
anti-dilutive. In addition, 31,106 and 24,718 equivalent shares
of the Company's restricted stock units and common stock options
were also excluded for the calculation of loss per share for the
three and 12 month periods ended December 31, 2008, respectively,
because the conversion would be anti-dilutive. In addition,
149,568 and 252,853 equivalent shares of the Company's restricted
stock units and common stock options were also excluded for the
calculation of loss per share for the three and 12 month periods
ended December 31, 2007, respectively, because the conversion
would be anti-dilutive.
(2) Includes the effect of derivative transactions.
(3) The average realized price, excluding unrealized derivative gains
or losses related to our natural gas contracts, was $6.72 per Mcf
and $7.73 per Mcf for the three and 12 month periods ended
December 31, 2008, respectively. The average realized price,
excluding unrealized derivative losses related to our natural gas
derivative contracts, was $6.92 per Mcf for both the three and 12
month periods ended December 31, 2007.
(4) The average realized price, excluding unrealized derivative gains
or losses related to our oil derivative contracts, was $59.03 per
barrel and $36.03 per barrel for the three and 12 month periods
ended December 31, 2008. The average realized price, excluding
unrealized derivative losses related to our oil derivative
contracts, was $75.00 per barrel and $68.83 per barrel for the
three and 12 month periods ended December 31, 2007.
(5) The average realized price, excluding unrealized derivative gains
and losses related to our derivative contracts, was $6.49 per
Mcfe and $7.63 per Mcfe for the three and 12 month periods ended
December 31, 2008, respectively. The average realized price,
excluding unrealized derivative gains and losses related to our
derivative contracts, was $7.84 per Mcfe and $7.40 per Mcfe for
the three and 12 month periods ended December 31, 2007,
respectively.
EDGE PETROLEUM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
--------------------------------------------------------------------
December 31,
2008 2007
------------------------
(in thousands)
ASSETS
TOTAL CURRENT ASSETS $ 48,710 $ 53,984
PROPERTY AND EQUIPMENT, Net - full cost
method of accounting for oil and natural
gas properties 307,059 717,290
OTHER ASSETS 1,828 3,231
---------- ----------
TOTAL ASSETS $ 357,597 $ 774,505
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
TOTAL CURRENT LIABILITIES $ 251,991 $ 51,722
OTHER NON-CURRENT LIABILITIES 8,118 28,007
LONG-TERM DEBT -- 260,000
---------- ----------
260,109 339,729
TOTAL LIABILITIES
TOTAL STOCKHOLDERS' EQUITY 97,488 434,776
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 357,597 $ 774,505
========== ==========
EDGE PETROLEUM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Year Ended
December 31,
--------------------
2008 2007
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES: (in thousands)
Net income (loss) $(332,890) $ 6,572
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Unrealized (gain) loss on the fair value
of derivatives (27,735) 17,516
Loss on property 34 --
Depletion, depreciation, amortization and
accretion 88,341 91,718
Impairment of oil and natural gas
properties 362,851 --
Gain on ARO settlement (83) --
Amortization of deferred loan costs 1,403 977
Deferred income taxes (15,513) 3,947
Share-based compensation cost 2,146 3,912
Bad debt expense 90 257
Net effect of changes in operating assets
and liabilities 4,091 (2,030)
--------- ---------
Net cash provided by operating activities 82,735 122,869
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Oil and natural gas property and equipment
additions (60,157) (142,393)
Drilling advances (560) 462
Proceeds from the sale of oil and natural
gas properties 19,203 1,302
Acquisition of assets in January 2007 -- (375,197)
Overhedge derivative settlements (10,643) --
--------- ---------
Net cash used in investing activities (52,157) (515,826)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from long-term debt -- 275,000
Repayments on long-term debt (21,000) (144,000)
Preferred dividends paid (8,266) (5,855)
Net proceeds of stock offerings -- 276,568
Deferred loan costs -- (3,674)
--------- ---------
Net cash provided by (used in) financing
activities (29,266) 398,039
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,312 5,082
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 7,163 2,081
--------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 8,475 $ 7,163
========= =========
EDGE PETROLEUM CORPORATION
Non-GAAP Disclosure Reconciliation
I. Net Cash Flow Provided by Operating Activities
Year Ended
December 31,
------------------
2008 2007
-------- --------
Net cash flow provided by operating activities $ 82,735 $122,869
Changes in working capital accounts (4,091) 2,030
-------- --------
Net cash flow provided by operations before
working capital changes $ 78,644 $124,899
======== ========
Note: Management believes that net cash flow provided by operating
activities before working capital changes is relevant and
useful information that is commonly used by analysts, investors
and other interested parties in the oil and gas industry as a
financial indicator of an oil and gas company's ability to
generate cash used to internally fund exploration and
development activities and to service debt. Net cash flow
provided by operating activities before working capital changes
is not a measure of financial performance prepared in
accordance with accounting principles generally accepted in the
United States of America ("GAAP") and should not be considered
in isolation or as an alternative to net cash flow provided
by operating activities. In addition, since net cash flow
provided by operating activities before working capital changes
is not a term defined by GAAP, it might not be comparable to
similarly titled measures used by other companies.