Increased Oil Production Continues to
Drive Significant Improvement in Financial Results
Second Quarter Oil Production Increased
67% and Exceeded 1,000 BOE Per Day
Second Quarter Adjusted Net Income
Increased 36% and EBITDA Increased 62%
Credo Petroleum Corporation (Nasdaq:CRED), an oil and gas
exploration and production company with significant assets in the
North Dakota Bakken and Three Forks, Kansas, Nebraska, the Texas
Panhandle and Oklahoma, today reported financial results for the
quarter and six months ended April 30, 2012.
Significantly higher oil production volumes continued to drive
improved financial performance in the second quarter and six months
ended April 30, 2012. The following table shows the changes in
certain financial and operational categories for the second quarter
and six months ended April 30, 2012 compared to the same periods
last year.
|
2nd Quarter |
Six Months |
Revenue |
+ 44% |
+ 60% |
Operating Income |
+ 60% |
+ 83% |
EBITDA |
+ 62% |
+ 76% |
Net Income |
+ 342% |
+ 393% |
Adjusted Net Income |
+ 36% |
+ 54% |
Total Production (BOE) |
+ 30% |
+ 33% |
Oil Production (BO) |
+ 67% |
+ 82% |
Operating income increased to $1,993,000 compared to $1,243,000
in the second quarter last year on revenue of $5,860,000 compared
to $4,068,000 second quarter last year. Increased production
volumes accounted for 116% of the revenue increase while the
decrease in price accounted for a 16% decline in
revenue.
For the first half, operating income increased to $3,931,000
compared to $2,147,000 last year on revenue of
$11,681,000 compared to $7,318,000 last year. Increased
production volumes accounted for 103% of the revenue increase while
the decrease in price accounted for a 3% decline in revenue.
EBITDA (a non-GAAP measure; see reconciliation below) for the
second quarter of 2012 increased to $3,736,000 compared to
$2,309,000 second quarter last year. Net income was
$1,128,000, or $.11 per diluted share, compared to $255,000,
or $.03 per diluted share second quarter last year. Adjusted
net income (a non-GAAP measure; see reconciliation below) increased
to $1,237,000, or $.12 per share, compared to $907,000, or
$.09 per share second quarter last year.
For the first half, EBITDA increased to $7,528,000 compared to
$4,269,000 last year. Net income was $2,090,000, or $.21 per
diluted share, compared to $424,000, or $.04 per diluted share,
last year. Adjusted net income increased to $2,528,000, or $.25 per
share, compared to $1,638,000, or $.16 per share last
year.
DRILLING SUCCESS DRIVES SIGNIFICANT
INCREASES IN
BOTH OIL PRODUCTION AND TOTAL
PRODUCTION
The Company's oil-focused drilling success yielded a 67%
increase in second quarter oil production compared to last year,
and an 82% increase for the first half of fiscal 2012. Natural
gas drilling was suspended in 2009 because of low natural gas
prices. As a result, mostly normal declines reduced gas
production about 7% in the first half of fiscal 2012. The
following table shows that the Company's comparative production mix
shifted solidly in favor of oil.
|
Three Months Ended |
Six Months Ended |
|
April 30 |
April 30 |
Production Mix |
2012 |
2011 |
2012 |
2011 |
Crude Oil |
61% |
47% |
61% |
45% |
Natural Gas |
39% |
53% |
39% |
55% |
Total production volumes increased 30% in the second quarter to
90,800 BOE, or 1,009 BOE per day, (barrels of oil equivalent based
on six Mcf of gas to one barrel of oil) compared to last
year. This represents the first time that the Company's total
quarterly production has exceeded 1,000 BOE per day. For the
six months, total production increased 33% to 181,900 BOE, or
1,000 BOE per day.
The following table shows comparative production volume
percentages by region and highlights the shift occurring in the
Company's production mix to crude oil in North Dakota, Kansas and
Nebraska and away from natural gas in Oklahoma.
|
Three Months Ended |
Six Months Ended |
|
April 30 |
April 30 |
Production by Region |
2012 |
2011 |
2012 |
2011 |
North Dakota Bakken and Three Forks |
20% |
14% |
20% |
12% |
Kansas and Nebraska Lansing Kansas
City |
20% |
17% |
21% |
17% |
Texas Panhandle Tonkawa and Cleveland |
11% |
11% |
10% |
10% |
Other (primarily Oklahoma natural gas) |
49% |
58% |
49% |
61% |
Michael D. Davis, interim Chief Executive Officer, stated, "We
achieved the important 1,000 BOE per day milestone in the
second quarter as we continued to aggressively drill in the Bakken
and Three Forks, Kansas and Nebraska, and the Texas
Panhandle. Our second quarter production would have been even
greater except for some completion delays in the Bakken because one
of our operators is now drilling several wells from one pad prior
to moving in completion equipment for multiple well
completions. This is a cost saving measure which we believe
justifies the correlated production delays."
The following table shows comparative revenue percentages by
region and highlights the Company's shift away from natural gas
production in Oklahoma in favor of oil production primarily in
North Dakota, Kansas and Nebraska.
|
Three Months Ended |
Six Months Ended |
|
April 30 |
April 30 |
Revenue by Region |
2012 |
2011 |
2012 |
2011 |
North Dakota Bakken and Three Forks |
27% |
21% |
27% |
19% |
Kansas and Nebraska Lansing Kansas
City |
30% |
27% |
31% |
26% |
Texas Panhandle Tonkawa and Cleveland |
8% |
9% |
8% |
7% |
Other (primarily Oklahoma natural gas) |
35% |
43% |
34% |
48% |
WELLHEAD PRICES MIXED
Second quarter wellhead oil prices increased slightly to $94.29
compared to $93.07 last year. Natural gas prices fell 33% to
$2.96 compared to $4.44 last year. For the quarter ended
April 30, 2012, the Company had realized crude oil
hedging losses of $200,000 compared to $114,000 last
year. Second quarter oil hedges had the effect of reducing oil
price realizations by $3.60 per barrel to $90.69. Last year,
oil hedges reduced second quarter price realizations by $3.47 per
barrel to $89.60.
Wellhead oil prices for the six months ended
April 30, 2012 increased 6% to $92.30 compared to $86.97
last year. Natural gas prices fell 24% to $3.35 compared to
$4.39 last year. For the six months, the Company had
realized crude oil hedging losses of $244,000 compared to
$78,000 last year. The six month oil hedges had the effect of
reducing oil price realizations by $2.19 per barrel to
$90.11. Last year, oil hedges decreased the six month
price realizations by $1.28 per barrel to $85.69.
At April 30, 2012, the Company held short swap hedge positions
on 6,000 barrels of oil per month for the production months of May
2012 through December 2012, at prices ranging from $91.95 to
$92.56. The hedge is expected to cover approximately 15% to
25% of estimated production for the hedged period. Unrealized
hedging losses declined significantly for both reporting periods to
$158,000 for the three months ended April 30, 2012 and $639,000 for
the six months then ended, compared to $836,000 and $1,577,000,
respectively, last year. The unrealized losses are a non-cash
charge calculated at a point in time by applying oil prices as of
period end to open hedging contract volumes. Actual realized
gains or losses on the hedges are determined based on oil prices at
the time each month's hedge contract expires.
RECORD CAPITAL EXPENDITURES
TO BE PARTIALLY FINANCED BY BANK
BORROWING
Capital expenditures are expected to almost double in fiscal
2012 to a record $35.0 million, of which approximately 95% is
earmarked for new drilling. Ninety five (95) gross (39.7 net)
oil wells are currently scheduled to be drilled in fiscal 2012,
representing a 99% increase in net wells over last year. Costs
incurred through second quarter-end totaled approximately $17.8
million. Financing is required to fund a portion of fiscal
2012 capital expenditures. The current borrowing base under
the Company's $25 million credit facility is $9.3 million. To
date, $6.0 million has been drawn-down with an interest rate of
about 3%. Subject to lender approval, the credit facility
provides for increases in the borrowing base as the Company pledges
additional collateral. Due to Bakken completion delays as
discussed above, the Company expects its 2012 borrowing needs to be
toward the upper end of the previously announced $7 million to
$12 million range.
MANAGEMENT COMMENT
Davis continued, "We are continuing to achieve our transitional
goals and milestones which is generating a significant positive
bottom line impact. New completion procedures by a Bakken
operator have delayed the start of production on some
wells. However, those wells are expected to come on line in
the third quarter and, together with our recently announced new
field discoveries in Kansas and Nebraska, are expected to
significantly boost second half production."
About Credo Petroleum
Credo Petroleum Corporation is an independent oil and gas
exploration and production company based in Denver,
Colorado. The Company has significant operations in the
Williston Basin of North Dakota, Kansas, Nebraska, the Anadarko
Basin of the Texas Panhandle and northwest Oklahoma, and in
southern Oklahoma. Credo uses advanced technologies to
systematically explore for oil and gas and, through its patented
Calliope Gas Recovery System, to recover stranded reserves from
depleted gas reservoirs. For more information, please visit
our website at www.credopetroleum.com or contact us at
303-297-2200.
* * * * *
Supplemental Non-GAAP Financial
Measures
EBITDA
The Company uses this non‑GAAP operating performance measure
primarily to compare its performance with other companies in the
industry that make a similar disclosure. The Company believes
that this performance measure may also be useful to investors for
the same purpose. Investors should not consider this measure
in isolation or as a substitute for operating income or any other
measure for determining the Company's operating performance that is
calculated in accordance with GAAP. In addition, because
EBITDA is not a GAAP measure, it may not necessarily be comparable
to similarly titled measures employed by other companies. A
reconciliation of Net Income to EBITDA (as used by the Company) is
set forth below.
|
Three Months Ended |
Six Months Ended |
|
April 30, |
April 30, |
|
2012 |
2011 |
2012 |
2011 |
|
|
|
|
|
Net Income as reported |
$ 1,128,000 |
$ 255,000 |
$ 2,090,000 |
$ 424,000 |
Add Back: |
|
|
|
|
Income Tax Expense |
508,000 |
71,000 |
961,000 |
127,000 |
Depreciation, Depletion and Amortization
Expense |
1,942,000 |
1,147,000 |
3,838,000 |
2,141,000 |
Unrealized Derivative Losses |
158,000 |
836,000 |
639,000 |
1,577,000 |
|
|
|
|
|
EBITDA |
$ 3,736,000 |
$ 2,309,000 |
$ 7,528,000 |
$ 4,269,000 |
Adjusted Net Income
The following table provides information that the Company
believes may be useful to investors that follow the practice of
some industry analysts who adjust reported company earnings to
match realizations to production settlement months and make other
adjustments to exclude certain non-cash items. The following
table provides a reconciliation of Net Income to non-GAAP Adjusted
Net Income (as used by the Company).
|
Three Months Ended |
Six Months Ended |
|
April 30, |
April 30, |
|
2012 |
2011 |
2012 |
2011 |
|
|
|
|
|
Net Income as reported |
$ 1,128,000 |
$ 255,000 |
$ 2,090,000 |
$ 424,000 |
|
|
|
|
|
Adjustments for certain non-cash items: |
|
|
|
|
Unrealized mark-to-market loss on
commodity derivatives |
$ 158,000 |
$ 836,000 |
$ 639,000 |
$ 1,577,000 |
Tax impact |
$ (49,000) |
$ (184,000) |
$ (201,000) |
$ (363,000) |
|
|
|
|
|
Adjusted Net Income |
$ 1,237,000 |
$ 907,000 |
$ 2,528,000 |
$ 1,638,000 |
|
|
|
|
|
Adjusted Diluted Earnings per Share |
$ .12 |
$ .09 |
$ .25 |
$ .16 |
* * * * *
This press release includes certain statements that may be
deemed to be "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. All statements included in this press release, other
than statements of historical facts, address matters that the
Company reasonably expects, believes or anticipates will or may
occur in the future. Such statements are subject to various
assumptions, risks and uncertainties, many of which are beyond the
control of the Company. Investors are cautioned that any such
statements are not guarantees of future performance and that actual
results or developments may differ materially from those described
in the forward-looking statements. Investors are encouraged to
read the "Forward-Looking Statements" and "Risk Factors" sections
included in the Company's Annual Report on Form 10-K/A for more
information. Although the Company may from time to time
voluntarily update its prior forward looking statements, it
disclaims any commitment to do so except as required by securities
laws.
|
|
|
|
|
CREDO PETROLEUM
CORPORATION |
FINANCIAL
HIGHLIGHTS |
|
|
|
|
|
Condensed Operating
Information |
|
|
|
|
|
|
|
|
|
|
Six Months Ended |
Three Months Ended |
|
April 30, |
April 30, |
|
2012 |
2011 |
2012 |
2011 |
REVENUES: |
|
|
|
|
Oil sales |
$ 10,261,000 |
$ 5,320,000 |
$ 5,230,000 |
$ 3,085,000 |
Natural gas sales |
1,420,000 |
1,998,000 |
630,000 |
983,000 |
|
11,681,000 |
7,318,000 |
5,860,000 |
4,068,000 |
COSTS AND EXPENSES: |
|
|
|
|
Oil and natural gas production |
2,227,000 |
1,834,000 |
1,005,000 |
967,000 |
Depreciation, depletion and
amortization |
3,838,000 |
2,141,000 |
1,942,000 |
1,147,000 |
General and administrative |
1,685,000 |
1,196,000 |
920,000 |
711,000 |
|
7,750,000 |
5,171,000 |
3,867,000 |
2,825,000 |
|
|
|
|
|
Income from Operations |
3,931,000 |
2,147,000 |
1,993,000 |
1,243,000 |
|
|
|
|
|
Other Income and (Expense) |
|
|
|
|
Realized and unrealized (losses) from
derivative contracts |
(883,000) |
(1,655,000) |
(358,000) |
(950,000) |
Investment and other income |
3,000 |
59,000 |
1,000 |
33,000 |
|
(880,000) |
(1,596,000) |
(357,000) |
(917,000) |
|
|
|
|
|
INCOME BEFORE INCOME TAXES |
3,051,000 |
551,000 |
1,636,000 |
326,000 |
|
|
|
|
|
INCOME TAXES |
(961,000) |
(127,000) |
(508,000) |
(71,000) |
|
|
|
|
|
NET INCOME |
$ 2,090,000 |
$ 424,000 |
$ 1,128,000 |
$ 255,000 |
|
|
|
|
|
Earnings per share - basic |
$ .21 |
$ .04 |
$ .11 |
$.03 |
|
|
|
|
|
Earnings per share - diluted |
$ .21 |
$ .04 |
$ .11 |
$.03 |
|
|
|
|
|
Weighted average number of shares
of |
|
|
|
|
Common Stock and dilutive
securities: |
|
|
|
|
Basic |
10,041,000 |
10,042,000 |
10,041,000 |
10,041,000 |
|
|
|
|
|
Diluted |
10,085,000 |
10,078,000 |
10,087,000 |
10,089,000 |
|
|
CREDO PETROLEUM
CORPORATION |
FINANCIAL
HIGHLIGHTS |
|
|
|
Condensed Balance Sheet
Information |
April 30, 2012 |
October 31, 2011 |
Cash and Short-Term Investments |
$ 5,051,000 |
$ 4,800,000 |
Other Current Assets |
6,314,000 |
4,271,000 |
Oil and Natural Gas Properties, Net |
63,645,000 |
49,851,000 |
Intangible Assets, Net |
2,924,000 |
3,142,000 |
Other Assets |
1,474,000 |
1,857,000 |
|
|
|
|
$ 79,408,000 |
$ 63,921,000 |
|
|
|
Current Liabilities |
$ 18,754,000 |
$ 8,248,000 |
Long-term Debt |
2,000,000 |
-- |
Deferred Income Taxes |
5,485,000 |
4,524,000 |
Asset Retirement Obligations |
1,159,000 |
1,213,000 |
Stockholders' Equity |
52,010,000 |
49,936,000 |
|
|
|
|
$ 79,408,000 |
$ 63,921,000 |
CONTACT: Michael D. Davis
Chief Operating Officer
and CEO (Interim)
or
Alford B. Neely
Chief Financial Officer
303-297-2200
Website: www.credopetroleum.com
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