(Source: Business Wire)
Energen Corporation (NYSE: EGN) reported today that consolidated net
income in the third quarter of 2009 totaled $47.1 million, or $0.65 per
diluted share, as compared with $73.1 million, or $1.01 per diluted
share, in the third quarter of 2008. Included in current-year third
quarter results is a one-time gain of $3.1 million, or $0.04 per diluted
share, generated by the sale of a small, non-operated Permian Basin
property by Energen Resources Corporation, the company's oil and gas
exploration and production subsidiary.
3Q09 vs 3Q08: Energen Resources' substantial hedge position, 12
percent increase in production and 25 percent decrease in per-unit lease
operating expense (LOE) helped offset the negative impact of
significantly lower oil and gas prices, higher depreciation, depletion
and amortization (DD&A) expense and a greater net earnings loss at
Alagasco, the company's natural gas utility.
More than 70 percent of Energen Resources' third quarter 2009 production
was hedged at above-market prices. As a result, the company was able to
protect its earnings and cash flows from the full impact of the
significant decline in the price of natural gas, oil and natural gas
liquids (NGL). For the three months ended September 30, 2009, Energen
Resources' average realized sales price declined 23 percent
year-over-year; without hedges, Energen Resources' average realized
sales prices would have declined some 56 percent.
2010 EARNINGS GUIDANCE INITIATED
With more than 57 percent of its estimated 2010 production hedged at
above-market prices, Energen is well-positioned to generate earnings and
cash flow growth in 2010. Energen's initial earnings guidance range of
$4.00-$4.40 per diluted share suggests the potential for double-digit
earnings growth in 2010.
Energen's earnings outlook assumes that commodity prices applicable to
its unhedged production will average $5.50 per thousand cubic feet (Mcf)
for natural gas, $75 per barrel for oil and 81 cents per gallon for NGL.
Total production in 2010 is estimated to increase approximately 3
percent to 114 billion cubic feet (Bcf) equivalent.
Energen has hedges in place in 2010 for 63 percent of its estimated
natural gas production of 70 Bcf at an average NYMEX-equivalent price of
$8.48 per Mcf as well as for 63 percent of its estimated oil production
of 5.5 million barrels (MMBbl) at an average NYMEX-equivalent price of
$85.42 per barrel. NGL production currently is unhedged.
Consolidated after-tax cash flows also are estimated to increase in 2010
and range from $623 million to $652 million. At Energen Resources, 2010
after-tax cash flows are estimated to range from $545 million to $574
million. These funds will be used to finance Energen Resources'
identified capital spending of approximately $310 million. Together with
an estimated $30 million of cash available at year-end 2009, Energen
Resources is expected to have available for discretionary investment
some $265 million to $294 million. Excess cash flows may be used to fund
property acquisitions and other opportunities that may arise and/or pay
down debt.
Capital spending at Energen Resources in 2010 is estimated to be
approximately $310 million. This amount includes some $290 million for
the development of existing properties and $15 million for exploration,
including the drilling of a Conasauga shale well in Alabama.
Approximately 75 percent of Energen Resources' 2010 estimated capital
for existing properties' development will be invested in the Permian
Basin in Texas, which is home to 98 percent of the company's estimated
proved oil reserves. Activities in the Permian Basin in 2010 will focus
on waterflood expansion, development of the Fuhrman-Mascho Field and
drilling "Wolfberry" wells.
Alagasco's capital spending in 2010 is estimated to total $80 million,
with some $50 million invested in normal system needs and $30 million in
technology-related and other projects.
Work continues on Energen's 2010 budget, which is expected to be
approved by the company's Board of Directors in early December; based on
changing market conditions, the budget could differ from the current
model upon which guidance is based.
For more information on Energen's 2010 earnings guidance, see pages 9-11.
2009 EARNINGS GUIDANCE RANGE INCREASED AND NARROWED
Energen today increased and narrowed its 2009 earnings guidance range to
$3.45-$3.65 per diluted share (prior guidance was $3.10-$3.50 per
diluted share). This guidance assumes that commodity prices applicable
to the company's unhedged natural gas volumes for the open months of
November and December will average approximately $5.50 per Mcf for gas
(NYMEX); oil and NGL prices for October-December are estimated to
average some $78.75 per barrel of oil (NYMEX) and $1.02 per gallon,
respectively.
Production in 2009 is now estimated to total 111 billion cubic feet
(Bcf) equivalent, reflecting an 8 percent increase from 2008.
Approximately 75 percent of the company's estimated fourth quarter
production of 28 Bcf equivalent (Bcfe) is hedged; as a result, earnings
and cash flows are not materially sensitive to commodity price changes.
Capital spending at Energen Resources in 2009 is now estimated to be
$450 million, including $190 million for property acquisitions and $245
million in property development in 2009; this increase from earlier
estimates reflects, in part, accelerated development of its
Fuhrman-Mascho Field along with waterflood expansion in the Permian
Basin in the last half of 2009.
CHATTANOOGA WELL NEARS COMPLETION STAGE
Energen Resources expects to begin completion of its Chattanooga shale
well within the week. The 1,500-foot horizontal leg of the Cain 6-6 #1
is at a vertical depth of approximately 7,800 feet. The company plans to
perform a three-stage nitrogen frac. Well results may be several weeks
away. The Cain well is located in Tuscaloosa County, southwest of the
city of Tuscaloosa.
In the event this well is unsuccessful, the company would expect to
record a loss of approximately 17 cents per diluted share in the fourth
quarter of 2009 associated with well costs and the non-cash write-off of
capitalized unproved leasehold.
THIRD QUARTER 2009 RESULTS
For the three months ended September 30, 2009, Energen's net income
totaled $47.1 million, or $0.65 per diluted share, and compares with
third quarter 2008 net income of $73.1 million, or $1.01 per diluted
share. Included in the current-year third quarter results for Energen
and Energen Resources is a one-time gain of $3.1 million, or $0.04 per
diluted share, from the sale of a small, non-operated Permian Basin
property.
Energen Resources Corporation
Energen Resources generated third quarter net income of $59.0 million in
2009 as compared with $79.6 million in the same period last year. The
independent producers' substantial hedge position, 12 percent increase
in production and 25 percent decrease in per-unit LOE helped offset the
negative impact of significantly lower oil and gas prices and higher
DD&A expense.
Average Realized Sales Prices, Third Quarter Comparison
Commodity 3Q09 3Q08 Change
Natural Gas (per Mcf) $ 6.10 $ 8.42 (28)%
Oil (per barrel) $64.03 $78.08 (18)%
NGL (per gallon) $ 0.88 $ 1.03 (15)%
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Production, Third Quarter Comparison
Commodity 3Q09 3Q08 Change
Natural Gas (Bcf) 18.9 17.3 9%
Oil (MBbl) 1,253 1,055 19%
NGL (MMgal) 20.0 17.8 12%
Total (Bcfe) 29.3 26.1 12%
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Production By Area (Bcfe), Third Quarter Comparison
Area 3Q09 3Q08 Change
San Juan Basin 14.3 12.7 13 %
Permian Basin 9.2 7.4 24 %
Black Warrior Basin 3.6 3.5 3 %
N. LA/E. TX/Other 2.1 2.5 (16)%
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The year-over-year production increase in the Permian basin in the third
quarter of 2009 largely reflects the acquisition of Range Resources'
interests in the Fuhrman-Mascho Field as well as pay adds and workovers.
Increases in the San Juan Basin largely reflect new well development and
better-than-expected performance in some of the Fruitland Coal wells in
the San Juan Basin.
Total per-unit LOE in the third quarter of 2009 declined 25 percent from
the prior-year third quarter to $1.86 per Mcf equivalent (Mcfe). Base
LOE and marketing and transportation expenses totaled $1.55 per Mcfe,
reflecting a decline of approximately 8 percent largely due to lower ad
valorem taxes and lower field service costs. The biggest decline in
per-unit LOE came from commodity price-driven production taxes, which
fell 61 percent on a per-unit basis.
DD&A expense per unit in the third quarter of 2009 increased 25 percent
over the same period last year to $1.63 per Mcfe largely due to higher
development costs and lower year-end 2008 reserve prices.
Per-unit net G&A expense in the third quarter of 2009 increased 51
percent over the same period in 2008 to 53 cents per Mcfe largely due to
increased benefits related to the company's performance-based
compensation plans and increased litigation reserves.
Alabama Gas Corporation
Energen's natural gas utility reported a net loss of $10.7 million in
the third quarter of 2009 as compared with a net loss of $5.8 million in
the third quarter of 2008. In the current-year quarter, Alagasco
recognized a $0.9 million after-tax reduction in revenues designed to
keep the utility earning within its allowed range of return on average
equity at the end of the 2009 rate year. The major reasons for the
decrease in third quarter earnings, however, were non-recurring items in
the prior-year third quarter. These items included a $1.8 million
after-tax benefit from having maintained its expenses below the
inflation-based cost control measurement feature of its rate-setting
mechanism; in addition, Alagasco used its Enhanced Stability Reserve
(ESR) in the third quarter of 2008 to help compensate for industrial and
commercial load loss during the rate year. The ESR draw was $2.5 million
after tax.
YEAR-TO-DATE RESULTS
For the nine months ended September 30, 2009, Energen's net income
totaled $197.7 million, or $2.75 per diluted share. This compares with
net income of $256.6 million, or $3.56 per diluted share, in the first
nine months of 2008. Included in the 2009 year-to-date results of
Energen and Energen Resources is a one-time gain of $3.1 million, or
$0.04 per diluted share, generated by the sale of a small, non-operated
Permian Basin property; prior-period results included a $6.4 million, or
$0.09 cents per diluted share, gain from a Permian Basin property sale.
Energen Resources Corporation
Energen Resources' year-to-date net income totaled $161.0 million in
2009 as compared with $222.6 million in the first nine months of 2008.
Energen Resources' substantial hedge position, 10 percent increase in
production and 23 percent decrease in per-unit LOE helped offset the
negative impact of significantly lower oil and gas prices and higher
DD&A expense.
Average Realized Sales Prices, Year-to-Date Comparison
Commodity YTD09 YTD08 Change
Natural Gas (per Mcf) $ 6.30 $ 8.22 (23)%
Oil (per barrel) $59.19 $73.69 (20)%
NGL (per gallon) $ 0.86 $ 1.06 (19)%
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Production, Year-to-Date Comparison
Commodity YTD09 YTD08 Change
Natural Gas (Bcf) 54.5 50.1 9%
Oil (MBbl) 3,456 3,005 15%
NGL (MMgal) 55.9 52.7 6%
Total (Bcfe) 83.3 75.6 10%
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Production By Area (Bcfe), Year-to-Date Comparison
Area YTD09 YTD08 Change
San Juan Basin 41.3 37.2 11 %
Permian Basin 24.9 21.2 17 %
Black Warrior Basin 10.8 10.5 3 %
N. LA/E. TX/Other 6.3 6.8 (7)%
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The year-over-year production increase in the Permian Basin largely
reflects the cumulative effect of accelerated drilling in 2007 and 2008,
the Fuhrman-Mascho acquisition and current-year pay adds and workovers.
Increased production in the San Juan Basin largely reflects the
cumulative effect of accelerated drilling in 2007 and 2008 as well as
better-than-expected performance in the current year from some of the
Fruitland Coal wells.
Total per-unit LOE in the first nine months of 2009 declined
approximately 23 percent from the same period a year ago to $1.91 per
Mcfe. Base LOE and marketing and transportation expenses fell
approximately 5 percent in response to lower field service costs. The
biggest decline in per-unit LOE came from commodity price-driven
production taxes, which fell 63 percent on a per-unit basis.
DD&A expense per unit in year-to-date 2009 increased 26 percent over the
same period last year to $1.58 per Mcfe largely due to higher
development costs and lower year-end 2008 reserve prices.
Per-unit net G&A expense in year-to-date 2009 declined 2 percent over
the same period in 2008 to 45 cents per Mcfe.
Alabama Gas Corporation
Energen's natural gas utility generated net income of $37.6 million in
the first nine months of 2009 as compared with $34.8 million in the same
period in 2008. This increase primarily was due to the utility's earning
on a higher level of equity.
TRAILING 12-MONTHS RESULTS
For the 12 months ended September 30, 2009, Energen's net income totaled
$263.0 million, or $3.66 per diluted share, and compared with $336.0
million, or $4.66 per diluted share, for the same period a year ago.
Included in the 2009 year-to-date results of Energen and Energen
Resources is a one-time gain of $3.1 million, or $0.04 per diluted
share, generated by the sale of a small, non-operated Permian Basin
property; prior-period results included a $6.4 million, or $0.09 cents
per diluted share, gain from a Permian Basin property sale.
Energen Resources Corporation
Energen Resources' net income for the trailing 12 months totaled $221.0
million as compared with $296.5 million in the same period a year ago.
Average Realized Sales Prices, T12M Comparison
Commodity 2009 2008 Change
Natural Gas (per Mcf) $ 6.50 $ 8.09 (20)%
Oil (per barrel) $60.48 $73.14 (17)%
NGL (per gallon) $ 0.82 $ 1.04 (21)%
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Production, T12M Comparison
Commodity 2009 2008 Change
Natural Gas (Bcf) 72.0 66.6 8%
Oil (MBbl) 4,565 3,986 15%
NGL (MMgal) 73.9 72.3 2%
Total (Bcfe) 110.0 100.9 9%
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Per-unit LOE totaled $1.89 per Mcfe in the 12 months ending September
30, 2009, reflecting a decrease of 20 percent from $2.36 per Mcfe in the
12 months ended September 30, 2008; this decrease largely was due to a
66 percent decline in commodity price-driven production taxes.
DD&A expense per unit in the 12 months ended September 30, 2009,
increased 27 percent over the same period last year to $1.58 per Mcfe
largely due to higher development costs and a price-driven, downward
revision of year-end 2008 proved reserves.
Per-unit net G&A expense in the trailing 12-months period declined 15
percent over the same period in 2008 to 41 cents per Mcfe largely due to
lower benefits related to the company's performance-based compensation
plans.
Alabama Gas Corporation
Alagasco generated net income in the 12 months ended September 30, 2009,
of $43.0 million as compared with $40.4 million in the same period a
year ago and largely reflects the utility earning within its allowed
range of return on a higher level of equity. Alagasco's return on
average equity for the rate year ended September 30, 2009, was 13.3
percent on 13-month average equity of $323.4 million.
2010 EARNINGS GUIDANCE INITIATED
Energen today initiated earnings guidance for 2010 with a range of
$4.00-$4.40 per diluted share. Key assumptions included in the guidance
include:
A hedge position that covers approximately 57 percent of estimated
production;
Annual production of approximately 114 Bcfe;
Capital spending of $390 million, including approximately $310 million
by Energen Resources (ERC) and $80 million by Alagasco;
An average DD&A rate at ERC of $1.83 per Mcfe;
LOE, including production taxes, at ERC of $2.21 per Mcfe (base LOE
and marketing and transportation costs of $1.74 per Mcfe);
General and administrative expense at ERC of 47 cents per Mcfe;
Alagasco's earning within its allowed range of return on estimated
average equity of $330 million;
Average diluted shares outstanding of 72.0 million.
Energen's earnings guidance does not include potential benefits from
unidentified property acquisitions, Alabama shales exploration or stock
repurchases. The guidance also makes no assumption related to the
potential impairment of $41 million of capitalized unproved leasehold
related to Alabama shales.
2010 Hedge Position Summary
Energen Resources' hedge position for 2010 is as follows:
Commodity Hedge Volumes Est. Production Hedge % NYMEXe Price
Natural Gas 44.4 Bcf 70.0 Bcf 63% $8.48/Mcf
Oil 3.5 MMBbl 5.5 MMBbl 63% $85.42/barrel
NGL ? 74.8 MMgal ? ?
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Energen Resources' natural gas and oil hedge positions by hedge type for
2010 are as follows:
Exception caught in main.
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.
Energen Resources' estimated 2010 production and hedge position by
region and commodity are shown below.
Exception caught in main.
SENSITIVITY OF EARNINGS, CASH FLOWS TO COMMODITY PRICES CHANGES
Given Energen Resources' current hedge position for 2010 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 2010 earnings and cash flows:
Every 10-cent change in the average NYMEX price of gas from $5.50
represents an estimated net income impact of approximately $1.1
million (1.5 cents per diluted share).
Every $1.00 change in the average NYMEX price of oil from $75 per
barrel represents an estimated net income impact of approximately $1.1
million (1.5 cents per diluted share).
Every 1-cent change in the average price of liquids from $0.81 per
gallon represents an estimated net income impact of approximately $0.4
million (0.6 cent 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 INCREASED
Energen today raised and narrowed its 2009 earnings guidance range to
$3.45-$3.65 per diluted share.
