Texas
|
76-0415919
|
|||
(State
or other jurisdiction of
|
(IRS
Employer Identification No.)
|
|||
incorporation
or organization)
|
1000
Louisiana Street, Suite 1500, Houston, TX
|
77002
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer [ ]
|
Accelerated
filer [X]
|
Non-accelerated
filer [ ]
|
PART
I. FINANCIAL INFORMATION
|
PAGE
|
||
Item
1.
|
|||
As
of September 30, 2007 (Unaudited) and December 31,
2006
|
2
|
||
Consolidated
Statements of Income
(Unaudited)
|
|||
For
the three and nine month periods ended September 30, 2007 and
2006
|
3
|
||
Consolidated
Statements of Cash Flows
(Unaudited)
|
|||
For
the nine month periods ended September 30, 2007 and 2006
|
4
|
||
Notes
to Consolidated Financial Statements
(Unaudited)
|
5
|
||
Item
2.
|
13
|
||
Item
3.
|
24
|
||
Item
4.
|
25
|
||
26
|
|||
28
|
September
30,
|
December
31,
|
|||||||
ASSETS
|
2007
|
2006
|
||||||
(Unaudited)
|
||||||||
(In
thousands, except per share amount)
|
||||||||
CURRENT
ASSETS:
|
||||||||
Cash
and cash equivalents
|
$ |
4,576
|
$ |
5,408
|
||||
Accounts
receivable, trade (net of allowance for doubtful accounts of $1,395
and
$1,639
|
||||||||
at
September 30, 2007 and December 31, 2006, respectively)
|
29,391
|
25,871
|
||||||
Advances
to operators
|
2,757
|
2,107
|
||||||
Fair
value of derivative financial instruments
|
2,848
|
5,737
|
||||||
Other
current assets
|
4,463
|
1,934
|
||||||
Total
current assets
|
44,035
|
41,057
|
||||||
PROPERTY
AND EQUIPMENT, net full-cost method of accounting for oil
|
||||||||
and
natural gas properties (including unevaluated costs of properties
of
$117,398 and
|
||||||||
$95,136
at September 30, 2007 and December 31, 2006, respectively)
|
567,152
|
445,447
|
||||||
DEFERRED
FINANCING COSTS, NET
|
6,244
|
4,817
|
||||||
INVESTMENT
IN PINNACLE GAS RESOURCES, INC.
|
11,941
|
2,771
|
||||||
OTHER
ASSETS
|
640
|
703
|
||||||
TOTAL
ASSETS
|
$ |
630,012
|
$ |
494,795
|
||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
CURRENT
LIABILITIES:
|
||||||||
Accounts
payable, trade
|
$ |
29,069
|
$ |
32,570
|
||||
Accrued
liabilities
|
22,464
|
20,885
|
||||||
Advances
for joint operations
|
2,063
|
1,100
|
||||||
Current
maturities of long-term debt
|
2,253
|
1,508
|
||||||
Other
current liabilities
|
1,027
|
2,008
|
||||||
Total
current liabilities
|
56,876
|
58,071
|
||||||
LONG-TERM
DEBT, NET OF CURRENT MATURITIES
|
218,813
|
187,250
|
||||||
ASSET
RETIREMENT OBLIGATION
|
5,370
|
3,625
|
||||||
FAIR
VALUE OF DERIVATIVE FINANCIAL INSTRUMENTS
|
324
|
-
|
||||||
DEFERRED
INCOME TAXES
|
43,004
|
32,738
|
||||||
DEFERRED
CREDITS
|
724
|
837
|
||||||
COMMITMENTS
AND CONTINGENCIES
|
-
|
-
|
||||||
SHAREHOLDERS'
EQUITY:
|
||||||||
Common
stock, par value $0.01 (40,000 shares authorized with 27,979
and
|
||||||||
25,981
issued and outstanding at September 30, 2007 and
|
||||||||
December
31, 2006, respectively)
|
280
|
260
|
||||||
Additional
paid-in capital
|
246,008
|
168,469
|
||||||
Retained
earnings
|
60,843
|
49,875
|
||||||
Accumulated
other comprehensive income, net of tax
|
5,991
|
-
|
||||||
Unearned
compensation - restricted stock
|
(8,221 | ) | (6,330 | ) | ||||
Total
shareholders' equity
|
304,901
|
212,274
|
||||||
TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ |
630,012
|
$ |
494,795
|
||||
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands, except per share amounts)
|
||||||||||||||||
OIL
AND NATURAL GAS REVENUES
|
$ |
30,305
|
$ |
20,333
|
$ |
85,808
|
$ |
58,727
|
||||||||
COSTS
AND EXPENSES:
|
||||||||||||||||
Oil
and natural gas operating expenses (exclusive of depreciation,
depletion
|
||||||||||||||||
and
amortization shown separately below)
|
6,940
|
3,893
|
17,203
|
10,980
|
||||||||||||
Depreciation,
depletion and amortization
|
10,190
|
7,594
|
29,033
|
21,630
|
||||||||||||
General
and administrative (inclusive of stock-based compensation expense
of
|
||||||||||||||||
$1,058
and $810 for the three months ended September 30, 2007 and
2006,
|
||||||||||||||||
respectively,
and $3,050 and $1,999 for the nine months ended
|
||||||||||||||||
September
30, 2007 and 2006, respectively)
|
4,360
|
3,118
|
13,577
|
10,469
|
||||||||||||
Accretion
expense related to asset retirement obligations
|
89
|
79
|
265
|
237
|
||||||||||||
TOTAL
COSTS AND EXPENSES
|
21,579
|
14,684
|
60,078
|
43,316
|
||||||||||||
OPERATING
INCOME
|
8,726
|
5,649
|
25,730
|
15,411
|
||||||||||||
OTHER
INCOME AND EXPENSES:
|
||||||||||||||||
Gain
on derivatives, net
|
3,676
|
3,684
|
2,045
|
12,087
|
||||||||||||
Equity
in income of Pinnacle Gas Resources, Inc.
|
-
|
-
|
-
|
35
|
||||||||||||
Other
income and expenses, net
|
6
|
29
|
262
|
202
|
||||||||||||
Loss
on early extinguishment of debt
|
-
|
(12 | ) |
-
|
(294 | ) | ||||||||||
Interest
income
|
131
|
199
|
585
|
843
|
||||||||||||
Interest
expense
|
(7,018 | ) | (4,883 | ) | (19,701 | ) | (13,752 | ) | ||||||||
Capitalized
interest
|
2,921
|
2,740
|
8,326
|
7,234
|
||||||||||||
INCOME
BEFORE INCOME TAXES
|
8,442
|
7,406
|
17,247
|
21,766
|
||||||||||||
INCOME
TAXES
|
(3,066 | ) | (2,655 | ) | (6,279 | ) | (7,793 | ) | ||||||||
NET
INCOME
|
$ |
5,376
|
$ |
4,751
|
$ |
10,968
|
$ |
13,973
|
||||||||
BASIC
EARNINGS PER COMMON SHARE
|
$ |
0.21
|
$ |
0.19
|
$ |
0.42
|
$ |
0.57
|
||||||||
DILUTED
EARNINGS PER COMMON SHARE
|
$ |
0.20
|
$ |
0.18
|
$ |
0.41
|
$ |
0.55
|
||||||||
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING:
|
||||||||||||||||
BASIC
|
26,142
|
25,254
|
25,836
|
24,549
|
||||||||||||
DILUTED
|
26,982
|
25,987
|
26,668
|
25,272
|
||||||||||||
For
the Nine
|
||||||||
Months
Ended
|
||||||||
September
30,
|
||||||||
2007
|
2006
|
|||||||
(In
thousands)
|
||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
income
|
$ |
10,968
|
$ |
13,973
|
||||
Adjustment
to reconcile net income to net cash provided by operating
activities-
|
||||||||
Depreciation,
depletion and amortization
|
29,033
|
21,630
|
||||||
Fair
value loss (gain) of derivative financial instruments
|
3,552
|
(7,734 | ) | |||||
Accretion
of discounts on asset retirement obligations and debt
|
265
|
237
|
||||||
Stock-based
compensation
|
3,050
|
1,999
|
||||||
Provision
for allowance for doutbful accounts
|
(243 | ) |
-
|
|||||
Loss
on extinguishment of debt
|
-
|
294
|
||||||
Equity
in income of Pinnacle Gas Resources, Inc.
|
-
|
(35 | ) | |||||
Deferred
income taxes
|
5,906
|
7,503
|
||||||
Other
|
1,169
|
1,129
|
||||||
Changes
in operating assets and liabilities
|
||||||||
Accounts
receivable
|
(3,276 | ) | (3,766 | ) | ||||
Other
assets
|
(2,514 | ) |
1,705
|
|||||
Accounts
payable
|
1,897
|
(778 | ) | |||||
Accrued
liabilities
|
(308 | ) |
1,087
|
|||||
Net
cash provided by operating activities
|
49,499
|
37,244
|
||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Capital
expenditures
|
(150,514 | ) | (146,196 | ) | ||||
Change
in capital expenditure accrual
|
(3,484 | ) |
1,376
|
|||||
Proceeds
from the sale of properties
|
1,405
|
33,604
|
||||||
Advances
to operators
|
963
|
(1,454 | ) | |||||
Advances
for joint operations
|
(651 | ) | (1,894 | ) | ||||
Other
|
64
|
(342 | ) | |||||
Net
cash used in investing activities
|
(152,217 | ) | (114,906 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds
from debt issuance and borrowings
|
129,000
|
53,000
|
||||||
Debt
repayments
|
(96,693 | ) | (36,159 | ) | ||||
Common
stock offering, net of costs
|
72,003
|
33,593
|
||||||
Stock
options exercised
|
790
|
585
|
||||||
Deferred
loan costs and other
|
(3,214 | ) | (676 | ) | ||||
Net
cash provided by financing activities
|
101,886
|
50,343
|
||||||
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
(832 | ) | (27,319 | ) | ||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
5,408
|
28,725
|
||||||
CASH
AND CASH EQUIVALENTS, end of period
|
$ |
4,576
|
$ |
1,406
|
||||
CASH
PAID FOR INTEREST (NET OF AMOUNTS CAPITALIZED)
|
$ |
9,867
|
$ |
5,381
|
||||
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
millions)
|
||||||||||||||||
Stock
Option Expense
|
$ |
0.1
|
$ |
0.2
|
$ |
0.3
|
$ |
0.4
|
||||||||
Restricted
Stock Expense
|
1.0
|
0.6
|
2.8
|
1.6
|
||||||||||||
Total
Stock-Based Compensation Expense
|
$ |
1.1
|
$ |
0.8
|
$ |
3.1
|
$ |
2.0
|
||||||||
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Chevron/Texaco
|
-
|
11 | % |
-
|
12 | % | ||||||||||
Reichmann
Petroleum
|
-
|
-
|
-
|
11 | % | |||||||||||
Cokinos
Natural Gas Company
|
17 | % |
-
|
10 | % |
-
|
||||||||||
Houston
Pipeline Co.
|
14 | % |
-
|
13 | % |
-
|
||||||||||
Crosstex
Energy Services
|
15 | % |
-
|
15 | % |
-
|
||||||||||
Energy
Transfer
|
16 | % | 10 | % | 12 | % |
-
|
|||||||||
Partner
Energy Services
|
-
|
10 | % |
-
|
-
|
|||||||||||
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
thousands, except
|
||||||||||||||||
per
share amounts)
|
||||||||||||||||
Net
income
|
$ |
5,376
|
$ |
4,751
|
$ |
10,968
|
$ |
13,973
|
||||||||
Average
common shares outstanding
|
||||||||||||||||
Weighted
average common shares outstanding
|
26,142
|
25,254
|
25,836
|
24,549
|
||||||||||||
Stock
options and warrants
|
840
|
733
|
832
|
723
|
||||||||||||
Diluted
weighted average common shares outstanding
|
26,982
|
25,987
|
26,668
|
25,272
|
||||||||||||
Earnings
per common share
|
||||||||||||||||
Basic
|
$ |
0.21
|
$ |
0.19
|
$ |
0.42
|
$ |
0.57
|
||||||||
Diluted
|
$ |
0.20
|
$ |
0.18
|
$ |
0.41
|
$ |
0.55
|
||||||||
September
30,
|
December
31,
|
|||||||
2007
|
2006
|
|||||||
(In
thousands)
|
||||||||
Second
Lien Credit Facility
|
$ |
221,063
|
$ |
147,750
|
||||
Senior
Secured Revolving Credit Facility
|
-
|
41,000
|
||||||
Other
|
3
|
8
|
||||||
221,066
|
188,758
|
|||||||
Current
maturities
|
(2,253 | ) | (1,508 | ) | ||||
$ |
218,813
|
$ |
187,250
|
|||||
3.
|
INVESTMENT
IN PINNACLE GAS RESOURCES,
INC.:
|
4.
|
INCOME
TAXES:
|
5.
|
COMMITMENTS
AND CONTINGENCIES:
|
6.
|
SHAREHOLDERS’
EQUITY:
|
7.
|
DERIVATIVE
INSTRUMENTS:
|
Three
Months
|
Nine
Months
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
(In
millions)
|
||||||||||||||||
Realized
gains:
|
||||||||||||||||
Natural
gas and oil derivatives
|
$ |
2.8
|
$ |
1.1
|
$ |
5.4
|
$ |
3.6
|
||||||||
Interest
rate swaps
|
-
|
0.4
|
0.2
|
0.7
|
||||||||||||
2.8
|
1.5
|
5.6
|
4.3
|
|||||||||||||
Unrealized
gains (losses):
|
||||||||||||||||
Natural
gas and oil derivatives
|
$ |
1.0
|
$ |
2.9
|
$ | (3.5 | ) | $ |
7.5
|
|||||||
Interest
rate swaps
|
(0.1 | ) | (0.7 | ) |
-
|
0.3
|
||||||||||
0.9
|
2.2
|
(3.5 | ) |
7.8
|
||||||||||||
Gain
on derivatives, net
|
$ |
3.7
|
$ |
3.7
|
$ |
2.1
|
$ |
12.1
|
||||||||
Natural
Gas
|
Natural
Gas
|
|||||||||||||||||||
Swaps
|
Collars
|
|||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||
Quarter
|
MMbtu
|
Fixed
Price(1)
|
MMBtu
|
Floor
Price(1)
|
Ceiling
Price(1)
|
|||||||||||||||
Fourth
Quarter 2007
|
828,000
|
$ |
7.44
|
644,000
|
$ |
7.24
|
$ |
8.84
|
||||||||||||
First
Quarter 2008
|
273,000
|
7.94
|
1,456,000
|
7.49
|
9.26
|
|||||||||||||||
Second
Quarter 2008
|
273,000
|
7.94
|
1,092,000
|
7.23
|
8.97
|
|||||||||||||||
Third
Quarter 2008
|
276,000
|
7.94
|
920,000
|
7.22
|
8.97
|
|||||||||||||||
Fourth
Quarter 2008
|
276,000
|
7.94
|
1,103,000
|
7.18
|
8.83
|
|||||||||||||||
First
Quarter 2009
|
-
|
-
|
1,080,000
|
7.09
|
8.81
|
|||||||||||||||
Second
Quarter 2009
|
-
|
-
|
1,092,000
|
7.09
|
8.81
|
|||||||||||||||
Third
Quarter 2009
|
-
|
-
|
1,104,000
|
7.09
|
8.81
|
|||||||||||||||
Fourth
Quarter 2009
|
-
|
-
|
1,104,000
|
7.09
|
8.81
|
|||||||||||||||
Oil
Collars
|
||||||||||||
Average
|
Average
|
|||||||||||
Quarter
|
Bbls
|
Floor
Price(2)
|
Ceiling
Price (2)
|
|||||||||
Fourth
Quarter 2007
|
27,600
|
$ |
70.00
|
$ |
75.90
|
|||||||
First
Quarter 2008
|
18,200
|
70.00
|
76.20
|
|||||||||
Second
Quarter 2008
|
9,100
|
70.00
|
76.75
|
|||||||||
Third
Quarter 2008
|
9,200
|
70.00
|
76.75
|
|||||||||
Fourth
Quarter 2008
|
9,200
|
70.00
|
76.75
|
|||||||||
(1)
|
Based
on Houston Ship Channel spot
prices.
|
(2)
|
Based
on West Texas intermediate index
prices.
|
Notional
|
Fixed
|
|||||||
Quarter
|
Amount
|
LIBOR
Rate
|
||||||
Fourth
Quarter 2007
|
$ |
221,063
|
5.25 | % | ||||
First
Quarter 2008
|
220,500
|
5.32 | % | |||||
Second
Quarter 2008
|
219,938
|
5.32 | % | |||||
Third
Quarter 2008
|
219,375
|
5.31 | % | |||||
Fourth
Quarter 2008
|
218,813
|
5.31 | % | |||||
·
|
We
plan to continue with the 2007 drilling program to drill
53 gross wells in
the Barnett Shale area, ten gross wells in the Gulf Coast
area, 25 to 30
gross wells in our Camp Hill field (which includes approximately
14
service wells) and five wells in other areas. In the Barnett
Shale, we plan to utilize two drillings rigs in SE Tarrant
County, Texas
through the third quarter 2008 with each rig scheduled
to drill one
horizontal well each month. Our other two drilling rigs will be
dedicated to drilling horizontal wells in Tarrant, Denton
and Parker
counties. We expect to spend between $145 million and $165
million on our 2007 drilling program. The actual number of
wells drilled will vary depending upon various factors,
including the
availability and cost of drilling rigs, land and industry
partner issues,
our cash flow, success of drilling programs, weather delays
and other
factors. If we drill the number of wells we have budgeted for
2007, depreciation, depletion and amortization, oil and
natural gas
operating expenses and production are expected to increase
over levels
incurred in 2006. Our ability to drill this number of wells is
heavily dependent upon the timely access to oilfield services,
particularly drilling rigs.
|
·
|
We
expect to continue our efforts to grow production. Our
estimated daily production for the month of October 2007
was approximately
53 Mcfe/day.
|
·
|
We
plan to continue the development of other new drilling programs
in the Floyd Shale in Mississippi, the Fayetteville Shale
in Arkansas and
the North Sea. We fracture stimulated our horizontal well in
the Floyd Shale and are swabbing back frac fluid currently. We
are assessing development plans for the Huntington discovery
in Block
22-14b in the North Sea. An appraisal well was spud on August
30, 2007 with expected drilling and testing time of approximately
five
months. As a result of our recent experience in the North Sea,
we currently expect that we will seek to significantly
expand our
expenditures in that area over the next several years. We may
seek project financing or other financing alternatives
for the development
of the North Sea assets.
|
·
|
We
expect to hedge production to decrease commodity price
fluctuations. At September 30, 2007, we had hedged
approximately 11,521,000 MMBtus of natural gas production
through 2009 and
73,300 Bbls of oil production through
2008.
|
·
|
During
2007, we experienced unexpected delays in the development
of the Camp Hill
field. Our 2007 drilling program in the Camp Hill field has
been delayed primarily due to the unavailability of the
rig we use to
drill in the field. However, we recently received a firm
commitment from our drilling contractor to drill exclusively
for us for
the remainder of 2007 and through February 2008. We believe
that we are on track to drill 27 to 30 wells in 2007
(including 14 service
wells). We also experienced operational and administrative
problems with our steam injection process. The steam generators
expected to be used were not available due to delays
in repair work and/or
permit issues. We injected steam in the Camp Hill field through
one of our generators until it encountered operational
damage in January
2007. We expect to receive a replacement generator in December
2007 and to commence steam injection as soon thereafter
as
possible. Our other two generators have not been available for
injection due to unexpected permitting issues and the
need for repair
work. We currently expect that these two generators will
be ready to inject steam by the end of March 2008 with
respect to one
generator and by the end of June 2008, with respect to
the
other. We recently received the permits for these two
generators to recommence injection. Although these permits will
only allow us to inject steam at 64% of the rate that
we had anticipated,
based upon the rate under the prior permits for these
same generators, we
expect to continue to appeal to the regulatory authorities
to reinstate
the 100 % rate of generation allowed under the original
permits. Even if we are unsuccessful in increasing the
generation rates under our permits, our proved reserve
volumes for the
Camp Hill field are not expected to decrease as a result. A
lower generation rate assumption (incorporated into our
internal September
30, 2007 proved reserve estimate), however, does extend
the productive
life of the field by approximately 33% with a corresponding
19%, or $31.2
million, reduction in the present value of the estimated
future net
revenues discounted at 10% per annum attributable to
these proved
reserves. Prospectively, we expect to continue to use the lower
generation rate assumption in our proved reserve estimates,
unless and
until such time that we are successful in increasing
the generation rates
in our permits.
|
2007
Period
|
||||||||||||||||
Three
Months Ended
|
Compared
to 2006 Period
|
|||||||||||||||
September
30,
|
Increase
|
%
Increase
|
||||||||||||||
2007
|
2006
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Production
volumes
|
||||||||||||||||
Oil
and condensate (MBbls)
|
59
|
69
|
(10 | ) | (14 | )% | ||||||||||
Natural
gas (MMcf)
|
4,080
|
2,443
|
1,637
|
67 | % | |||||||||||
Average
sales prices
|
||||||||||||||||
Oil
and condensate (per Bbl)
|
$ |
75.40
|
$ |
68.46
|
$ |
6.94
|
10 | % | ||||||||
Natural
gas (per Mcf)
|
6.33
|
6.39
|
(0.06 | ) | (1 | )% | ||||||||||
Operating
revenues (In thousands)
|
||||||||||||||||
Oil
and condensate
|
$ |
4,457
|
$ |
4,716
|
$ | (259 | ) | (5 | )% | |||||||
Natural
gas
|
25,848
|
15,617
|
10,231
|
66 | % | |||||||||||
Total
Operating Revenues
|
$ |
30,305
|
$ |
20,333
|
$ |
9,972
|
49 | % | ||||||||
2007
Period
|
||||||||||||||||
Nine
Months Ended
|
Compared
to 2006 Period
|
|||||||||||||||
September
30,
|
Increase
|
%
Increase
|
||||||||||||||
2007
|
2006
|
(Decrease)
|
(Decrease)
|
|||||||||||||
Production
volumes
|
||||||||||||||||
Oil
and condensate (MBbls)
|
182
|
179
|
3
|
2 | % | |||||||||||
Natural
gas (MMcf)
|
10,753
|
6,976
|
3,777
|
54 | % | |||||||||||
Average
sales prices
|
||||||||||||||||
Oil
and condensate (per Bbl)
|
$ |
65.22
|
$ |
65.54
|
$ | (0.32 | ) | (1 | )% | |||||||
Natural
gas (per Mcf)
|
6.88
|
6.74
|
0.14
|
2 | % | |||||||||||
Operating
revenues (In thousands)
|
||||||||||||||||
Oil
and condensate
|
$ |
11,881
|
$ |
11,734
|
$ |
147
|
1 | % | ||||||||
Natural
gas
|
73,927
|
46,993
|
26,934
|
57 | % | |||||||||||
Total
Operating Revenues
|
$ |
85,808
|
$ |
58,727
|
$ |
27,081
|
46 | % | ||||||||
·
|
Cash
on hand and cash generated by operations. Cash flows from
operations are highly dependent on commodity prices and
market conditions
for oil and gas field services. We hedge a portion of our
production to reduce the downside risk of declining natural
gas
prices.
|
·
|
Available
draws on the Senior Credit Facility. During the third quarter
of 2007, we requested a borrowing base re-determination
for the Senior
Credit Facility and in September of 2007, the borrowing
base availability
increased from $74.8 million to $117.0 million. At November 1,
2007, cash available under the Senior Credit Facility
was $105.0
million. The next borrowing base redetermination is scheduled
for December 2007.
|
·
|
Other
debt and equity offerings. As situations or conditions arise,
we may issue debt or equity instruments to supplement
our cash
flows.
|
·
|
Asset
sales. In order to fund our drilling program, we may consider
the sale of certain properties or assets no longer deemed
core to our
future growth.
|
Three
months ended
|
Nine
months ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Oil
positions settled (Bbls)
|
18,300
|
27,600
|
18,300
|
63,800
|
||||||||||||
Natural
gas positions settled (MMBtu)
|
1,898,000
|
1,163,000
|
5,332,000
|
3,520,000
|
||||||||||||
Realized
gain ($ millions) (1)
|
$ |
2.8
|
$ |
1.1
|
$ |
5.4
|
$ |
3.6
|
||||||||
Unrealized
gain/(loss) ($ millions) (1)
|
$ |
1.0
|
$ |
2.9
|
$ | (3.5 | ) | $ |
7.5
|
|||||||
Natural
Gas
|
Natural
Gas
|
|||||||||||||||||||
Swaps
|
Collars
|
|||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||
Quarter
|
MMbtu
|
Fixed
Price(1)
|
MMBtu
|
Floor
Price(1)
|
Ceiling
Price(1)
|
|||||||||||||||
Fourth
Quarter 2007
|
828,000
|
$ |
7.44
|
644,000
|
$ |
7.24
|
$ |
8.84
|
||||||||||||
First
Quarter 2008
|
273,000
|
7.94
|
1,456,000
|
7.49
|
9.26
|
|||||||||||||||
Second
Quarter 2008
|
273,000
|
7.94
|
1,092,000
|
7.23
|
8.97
|
|||||||||||||||
Third
Quarter 2008
|
276,000
|
7.94
|
920,000
|
7.22
|
8.97
|
|||||||||||||||
Fourth
Quarter 2008
|
276,000
|
7.94
|
1,103,000
|
7.18
|
8.83
|
|||||||||||||||
First
Quarter 2009
|
-
|
-
|
1,080,000
|
7.09
|
8.81
|
|||||||||||||||
Second
Quarter 2009
|
-
|
-
|
1,092,000
|
7.09
|
8.81
|
|||||||||||||||
Third
Quarter 2009
|
-
|
-
|
1,104,000
|
7.09
|
8.81
|
|||||||||||||||
Fourth
Quarter 2009
|
-
|
-
|
1,104,000
|
7.09
|
8.81
|
|||||||||||||||
Oil
Collars
|
||||||||||||
Average
|
Average
|
|||||||||||
Quarter
|
Bbls
|
Floor
Price(2)
|
Ceiling
Price (2)
|
|||||||||
Fourth
Quarter 2007
|
27,600
|
$ |
70.00
|
$ |
75.90
|
|||||||
First
Quarter 2008
|
18,200
|
70.00
|
76.20
|
|||||||||
Second
Quarter 2008
|
9,100
|
70.00
|
76.75
|
|||||||||
Third
Quarter 2008
|
9,200
|
70.00
|
76.75
|
|||||||||
Fourth
Quarter 2008
|
9,200
|
70.00
|
76.75
|
|||||||||
(1)
|
Based
on Houston Ship Channel spot
prices.
|
(2)
|
Based
on West Texas intermediate index
prices.
|
(c)
Total Number of
|
(d)
Maximum Number
|
|||||||||||||||
Shares
Purchased as
|
(or
Appropriate Dollar
|
|||||||||||||||
(a)
Total Number
|
Part
of Publicly
|
Value)
of Shares that May
|
||||||||||||||
of
Shares
|
(b)
Average Price
|
Announced
Plans or
|
Yet
Be Purchased Under
|
|||||||||||||
Period
|
Purchased(1)
|
Paid
Per Share
|
Programs
|
the
Plan or Programs
|
||||||||||||
July
2007
|
221
|
$ |
38.81
|
-
|
-
|
|||||||||||
August
2007
|
662
|
41.62
|
-
|
-
|
||||||||||||
September
2007
|
-
|
-
|
-
|
-
|
||||||||||||
Total
|
883
|
$ |
40.92
|
-
|
-
|
|||||||||||
|
(1) The
883 shares related to the surrender of shares of common
stock to satisfy
tax withholding obligations in connection with the vesting
of restricted
stock issued to employees under our long-term incentive
plan.
|
Exhibit
Number
|
Description
|
|
†2.1
|
—
|
Combination
Agreement by and among the Company, Carrizo Production,
Inc., Encinitas
Partners Ltd., La Rosa Partners Ltd., Carrizo Partners
Ltd., Paul B.
Loyd, Jr., Steven A. Webster, S.P. Johnson IV, Douglas
A.P. Hamilton and
Frank A. Wojtek dated as of September 6, 1997 (incorporated
herein by
reference to Exhibit 2.1 to the Company’s Registration Statement on
Form S-1 (Registration No.
333-29187)).
|
†3.1
|
—
|
Amended
and Restated Articles of Incorporation of the Company
(incorporated herein
by reference to Exhibit 3.1 to the Company’s Annual Report on Form
10-K for the year ended December 31, 1997).
|
†3.2
|
—
|
Amended
and Restated Bylaws of the Company, as amended by Amendment
No. 1
(incorporated herein by reference to Exhibit 3.2 to
the Company’s
Registration Statement on Form 8-A (Registration No.
000-22915) Amendment
No. 2 (incorporated herein by reference to Exhibit
3.2 to the Company’s
Current Report on Form 8-K dated December 15, 1999)
and Amendment No. 3
(incorporated herein by reference to Exhibit 3.1 to
the Company’s Current
Report on Form 8-K dated February 20, 2002).
|
†10.1
|
—
|
Second
Amendment effective as of September 11, 2007 to Credit
Agreement dated as
of May 25, 2006 among the Company, as Borrower, Certain
Subsidiaries of
Borrower, as Guarantors, JPMorgan Chase Bank, National
Association, as
Administrative Agent and Lender, and Guaranty Bank
as Lender (incorporated
herein by reference to Exhibit 10.1 to the Company’s Current Report on
Form 8-K filed on September 11, 2007).
|
†10.2
|
—
|
Form
of Securities Purchase Agreement between the Company
and the purchasers
named therein (incorporated herein by reference to
Exhibit 10.1 to the
Company’s Current Report on Form 8-K filed on September 12,
2007).
|
31.1
|
—
|
|
31.2
|
—
|
|
32.1
|
—
|
|
32.2
|
—
|
†
|
Incorporated
herein by reference as indicated.
|
Carrizo
Oil & Gas, Inc.
|
|
(Registrant)
|
|
Date: November
9, 2007
|
By: /s/S.
P. Johnson, IV
|
President
and Chief Executive Officer
|
|
(Principal
Executive Officer)
|
|
Date: November
9, 2007
|
By: /s/Paul
F. Boling
|
Chief
Financial Officer
|
|
(Principal
Financial and Accounting Officer)
|