AUSTIN, Texas, Aug. 2 /PRNewswire-FirstCall/ -- Brigham Exploration
Company (Nasdaq: BEXP) today announced its financial results for the second
quarter and six months ended June 30, 2005.
SECOND QUARTER 2005 RESULTS
Average daily production volumes for the second quarter 2005 were down 14%
to 29.5 MMcfe/d, when compared to last year. The decrease in production is
primarily due to natural decline of existing production and the lack of
significant wells reaching total depth and coming on line during the quarter
to materially contribute to production.
Our revenues from the sale of oil and natural gas for the second quarter
2005 were up slightly when compared to the same period last year. An
improvement in the sales price we received for the sale of our oil and natural
gas combined with a decrease in losses from the settlement of derivative
contracts were the primary reasons for the increase in our revenue. These
increases were partially offset by a decrease in revenue due to lower
production volumes.
Our production cost, which includes costs for operating and maintaining
(O&M expense) our producing wells, expensed workovers, ad valorem taxes and
production taxes were down 20% when compared to the first quarter last year.
Our production costs for the second quarter 2005 includes a reduction for
costs related to workovers performed and reported as workover expense in the
first quarter 2005 and insurance reimbursements. Brigham made the
reclassification of these workover costs to capital costs instead of expense,
after further information regarding the nature of these costs became
available. Excluding the reclassification and insurance reimbursements, our
production costs for the second quarter 2005 were 4% lower than the second
quarter last year. A $529,000 decrease in our second quarter 2005 production
taxes due to lower production volumes and the receipt of severance tax refunds
on six wells, were the primary reasons for the decrease in our production
costs. The decrease in production taxes was partially offset by a 36%
increase in O&M expenses, 25% increase in costs for expensed workovers and a
29% increase in ad valorem taxes. Approximately 61% of the increase in O&M
expenses was related to new wells that were not producing during the second
quarter last year, while the increase in ad valorem taxes was the result of
higher oil and natural gas prices in 2004. On a unit basis, our second
quarter 2005 production costs, excluding the reclassification and insurance
reimbursements were $0.09 per Mcfe higher than the second quarter last year.
General and administrative expenses for the second quarter 2005 were up 9%
when compared to the second quarter last year. This increase was primarily
due to increase in fees paid to outside consultants and our independent public
accountants for work related to Section 404 of Sarbanes-Oxley and increases in
costs for contract employees, employee training, corporate insurance and
travel. Due to these higher costs, combined with lower production for the
quarter, our second quarter 2005 general and administrative expenses on a unit
basis increased 26% to $0.49 per Mcfe.
Depletion expense for the second quarter 2005 was $7.2 million ($2.71 per
Mcfe) compared to $5.5 million ($1.79 per Mcfe) in the second quarter last
year. An increase in our depletion rate resulted in a $2.4 million increase
in our second quarter 2005 depletion expense. This increase was partially
offset by a decrease of $764,000 due to lower production. Operating income
for the second quarter 2005 was $8 million, which was 9% lower than operating
income in the second quarter of 2004.
Our net interest expense for the second quarter 2005 was 10% lower than
last year. This decline was primarily due to a $234,000 increase in the
amount of interest that we capitalized during the second quarter 2005. This
increase in capitalized interest more than offset an increase in our total
interest for the second quarter 2005. The primary factor that led to the
increase in our total interest for the second quarter 2005 was an increase in
amount of borrowings outstanding under our senior credit facility and an
increase in the rate that we paid on those borrowing due to an increase in the
Eurodollar rate. Our weighted average debt outstanding for the second quarter
2005 was $74.9 million compared to $62.7 million last year.
Our reported net income for the second quarter was $4.8 million ($0.11 per
diluted share) compared to net income of $5.1 million ($0.13 per diluted
share) in the second quarter last year.
Our net capital expenditures for oil and natural gas activities in the
second quarter 2005 were $35.1 million. Net capital expenditures for the
second quarter 2005 and 2004 were:
Three Months Ended June 30,
2005 2004
(in thousands)
Drilling $ 27,781 $ 18,697
Net land and G&G 5,432 2,404
Capitalized costs 1,780 1,574
Capitalized FAS 143 ARO 134 234
Total capital expenditures $ 35,127 $ 22,909
FIRST SIX MONTHS 2005 RESULTS
Average daily production volumes for the first six months of 2005 were
down 13% to 29.8 MMcfe/d, when compared to last year. The decrease in
production is primarily due to natural decline of existing production and the
lack of significant wells reaching total depth and coming on line during the
first two quarters to materially contribute to production.
Our revenues from the sale of oil and natural gas for the first six months
of 2005 were slightly higher than our revenues last year. The primary reasons
for this increase were an improvement in the sales price we received for oil
and natural gas and a decrease in losses from the settlement of derivative
contracts. These increases were partially offset by a decrease in revenue due
to lower production volumes.
Our production costs for the first six months of 2005 were up 7%, to
$4.8 million, when compared to last year. A $764,000 increase in O&M expenses
and $158,000 in ad valorem taxes were the primary reasons for the increase in
our production costs. Approximately 64% of the increase in O&M expenses was
related to new producing wells that were not producing during the first six
months of last year, while the increase in ad valorem taxes was due to higher
oil and natural gas prices in 2004. These increases were partially offset by
decreases in our workover expenses and production taxes. The decrease in our
production taxes was due lower production volumes and the receipt of severance
tax refunds on six wells. On a unit basis, our production costs for the first
six months of 2005 were $0.16 per Mcfe higher than they were last year. A
$0.19 per Mcfe increase in our O&M expenses and a $0.04 increase in our ad
valorem tax expense were the primary reasons for the increase in our unit
production costs. These increases were partially offset by a $0.07 per Mcfe
decrease in our unit production taxes for the first six months of 2005.
General and administrative expenses for the first half of 2005 were down
by 1% when compared to the first half of last year. This decrease was
primarily due to decreases in employee compensation expense, office rent,
financial reporting expenses and legal fees. Counter to these lower costs,
lower production volumes during the first six months of 2005 led to a 15%
increase our general and administrative expenses on a unit basis.
Depletion expense for the first six months of 2005 was $13.7 million
($2.55 per Mcfe) compared to $10.6 million ($1.73 per Mcfe) in the first six
months last year. An increase in our depletion rate resulted in a
$4.4 million increase to our depletion expense for the first six months of
2005. This increase was partially offset by a decrease of $1.4 million due to
lower production. The increase in our depletion rate was primarily the result
of increased costs of reserve additions during the first six months of 2005.
Operating income for the first half of 2005 was $14 million and 17% lower when
compared to operating income from the first six months of 2004.
Our net interest expense for the first six months of 2005 was 8% lower
than last year. This decline was primarily due to a $278,000 increase in the
amount of interest that we capitalized during the period. The increase in the
amount of interest we capitalized more than offset an increase in our total
interest for the first six months of 2005. The primary factor that led to the
increase in our total interest for the first six months of 2005 was an
increase in the average amount we borrowed under our senior credit facility
and an increase in the rate that we paid on those borrowings due to an
increase in the Eurodollar rate. Our weighted average debt outstanding for
the first six months of 2005 was $68.2 million compared to $58.7 million last
year.
Our reported net income for the first six months of 2005 was $7.9 million
($0.18 per diluted share) versus net income of $10.1 million ($0.25 per
diluted share) for the same period last year.
Our year to date thru June 30, 2005 net capital expenditures for oil and
natural gas activities were $59 million. Net capital expenditures for the
first six months of 2005 and 2004 were:
Six Months Ended June 30,
2005 2004
(in thousands)
Drilling $ 45,238 $ 31,262
Net land and G&G 10,246 5,221
Capitalized costs 3,381 3,161
Capitalized FAS 143 ARO 160 335
Total capital expenditures $59,025 $39,979
THIRD QUARTER 2005 FORECAST
The following forecasts and estimates of our third quarter 2005 results
are forward looking statements subject to the risks and uncertainties
identified in the "Forward Looking Statements Disclosure" at the end of this
release.
We currently expect our third quarter 2005 production volumes to average
between 31 MMcfe/d and 37 MMcfe/d (76% natural gas). For the third quarter
2005, lease operating expenses are projected to be $0.65 per Mcfe based on the
mid-point of our production guidance, production taxes are projected to be
approximately 5.4% of pre-hedge oil and natural gas revenues, and general and
administrative expenses are projected to be $1.4 million ($0.50 to $0.42 per
Mcfe).
Based on these production and cost estimates, assumed average NYMEX prices
of $7.59 per MMbtu for natural gas and $61.33 per barrel for oil, and taking
into account current derivative contracts outstanding, we forecast that our
third quarter 2005 revenue will be between $22.4 and $26.7 million and
operating income will be between $10 and $12.6 million.
Gene Shepherd, Brigham's Chief Financial Officer, commented, "We are
obviously disappointed in our second quarter production volumes and the impact
that the delays in getting wells hooked up to production has had on our second
quarter financial performance. However, and as indicated by our operational
press release last week, production volumes for the month of July have been
positively impacted by some of the recent wells we have brought on line.
Furthermore, we have a number of new wells, most notably the State Tract #254
and the Mills Ranch #2-98, that we believe will be contributing to our third
quarter volumes."
Shepherd further added, "Obviously, with the lower level of production
achieved in the first two quarters, achieving our 2005 production guidance
that we issued at the beginning of the year becomes much more difficult. Once
we have a better understanding of the impact that several of these key wells
will have on our production volumes, we plan to update our 2005 full year
production guidance."
ABOUT BRIGHAM EXPLORATION
Brigham Exploration Company is an independent exploration and production
company that applies 3-D seismic imaging and other advanced technologies to
systematically explore and develop onshore domestic natural gas and oil
provinces. For more information about Brigham Exploration, please visit our
website at http://www.bexp3d.com or contact Investor Relations at 512-427-3444.
CONFERENCE CALL INFORMATION
Our management will host a conference call to discuss its operational and
financial results for the second quarter 2005 with investors, analysts and
other interested parties on Wednesday, August 3, 2005, at 10:00 a.m. eastern
time. To participate in the call, participants within the U.S. please dial
800.573.4840 and participants outside the U.S. please dial 617.224.4326. The
participant passcode for the call is 95832803. A telephone recording of the
conference call will be available to interested parties approximately two
hours after the call is completed through 12:00 p.m. eastern time on
Friday, September 2, 2005. To access the recording, domestic callers dial
888-286-8010 and international callers dial 617-801-6888. The passcode for
the conference call playback is 14829998. In addition, a live and archived web
cast of the conference call will be available over the Internet at either
http://www.bexp3d.com or http://www.streetevents.com . A copy of this press release and
other financial and statistical information about the periods covered by this
press release and by the conference call that will take place on
August 3, 2005, will be available on our website. To access the press
release: go to http://www.bexp3d.com and click on News Releases. The file with a
copy of the press release is named Brigham Exploration Reports Second Quarter
Results and Provides Third Quarter Forecast and is dated August 2, 2005. To
access the other financial and statistical information that will be covered by
the conference call that will take place on August 3, 2005, go to
http://www.bexp3d.com and click on Event Calendar. The file with the other financial
and statistical information is named Financial and Statistical Information for
the Second Quarter 2005 Conference Call and is dated August 3, 2005.
FORWARD LOOKING STATEMENTS DISCLOSURE
Except for the historical information contained herein, the matters
discussed in this news release are forward looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 that are based
upon current expectations Important factors that could cause actual results to
differ materially from those in the forward looking statements include risks
inherent in exploratory drilling activities, the timing and extent of changes
in commodity prices, unforeseen engineering and mechanical or technological
difficulties in drilling wells, availability of drilling rigs, land issues,
federal and state regulatory developments and other risks more fully described
in the company's filings with the Securities and Exchange Commission. All
forward looking statements contained in this release, including any forecasts
and estimates, are based on management's outlook only as of the date of this
release, and we undertake no obligation to update or revise these forward
looking statements, whether as a result of subsequent developments or
otherwise.
BRIGHAM EXPLORATION COMPANY
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data) (unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Revenues:
Oil and natural gas
sales $18,434 $17,916 $35,137 $34,735
Other 56 41 99 42
$18,490 $17,957 $35,236 $34,777
Costs and expenses:
Lease operating 1,390 1,305 3,608 2,714
Production taxes 366 896 1,168 1,759
General and
administrative 1,304 1,199 2,402 2,419
Depletion of oil and
natural gas properties 7,206 5,524 13,659 10,648
Depreciation and
amortization 178 184 360 365
Accretion of discount
on ARO 43 40 82 77
$10,487 $9,148 $21,279 $17,982
Operating income $8,003 $8,809 $13,957 $16,795
Interest expense, net (766) (854) (1,507) (1,636)
Interest income 52 15 91 29
Other income (expense) (a) 177 (118) (354) 9
Income before income
taxes $7,466 $7,852 $12,187 $15,197
Deferred income tax
expense (2,656) (2,714) (4,329) (5,134)
Net income (loss) $4,810 $5,138 $7,858 $10,063
Net income (loss) to
common per share:
Basic $0.11 $0.13 $0.19 $0.26
Diluted $0.11 $0.13 $0.18 $0.25
Wt. Avg. common shares
outstanding:
Basic 42,189 39,287 42,144 39,261
Diluted 43,206 40,391 43,162 40,354
(a) Includes non-cash
gain (loss) related
to changes in the
fair market value
of our derivative
contracts: $140 $(187) $(466) $(60)
BRIGHAM EXPLORATION COMPANY
PRODUCTION, SALES PRICES AND OTHER FINANCIAL DATA
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Average net daily
production:
Natural gas (MMcf) 22.7 25.0 22.4 24.1
Oil (Bbls) 1,145 1,566 1,226 1,669
Equivalent natural gas
(MMcfe) (6:1) 29.5 34.4 29.8 34.1
Total net production:
Natural gas (MMcf) 2,041 2,246 4,035 4,339
Oil (MBbls) 103 141 221 300
Equivalent natural gas
(MMcfe) (6:1) 2,659 3,092 5,359 6,142
% Natural gas 77% 73% 75% 71%
Sales prices (Before
hedging):
Natural gas ($/Mcf) $6.73 $6.19 $6.27 $6.00
Oil ($/Bbl) 51.56 37.81 49.84 35.79
Equivalent natural gas
($/Mcfe) (6:1) 7.16 6.22 6.77 5.99
Realized prices (Post
hedging):
Natural gas ($/Mcf) (a) $6.62 $5.90 $6.21 $5.80
Oil ($/Bbl) (a) 47.83 33.05 45.65 31.88
Equivalent natural gas
($/Mcfe) (6:1) (a) 6.93 5.79 6.56 5.66
(a) Includes the effects
of hedging gains
(losses) of:
Natural gas
($/Mcf) $(0.11) $(0.29) $(0.06) $(0.20)
Oil ($/Bbl) (3.73) (4.76) (4.19) (3.91)
SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30, December 31,
2005 2004
Assets: (unaudited)
Current assets $20,710 $20,994
Oil and natural gas properties, net
(full cost method) 307,345 261,979
Other property and equipment, net 1,048 1,209
Other non-current assets 2,716 2,125
Total assets $331,819 $286,307
Liabilities and stockholders' equity:
Current liabilities $38,558 $40,494
Senior credit facility 44,400 21,000
Senior subordinated notes 30,000 20,000
Mandatorily redeemable preferred stock,
Series A 9,901 9,520
Deferred income tax liability 13,291 9,031
Other non-current liabilities 3,200 2,986
Total liabilities $139,350 $103,031
Stockholders' equity 192,469 183,276
Total liabilities and stockholders'
equity $331,819 $286,307
BRIGHAM EXPLORATION COMPANY
SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands) (unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Cash flows from operating
activities:
Net income $4,810 $5,138 $7,858 $10,063
Depletion, depreciation and
amortization 7,384 5,708 14,019 11,013
Accretion of discount on ARO 43 40 82 77
Interest paid through issuance of
add'l redeemable preferred stock 193 179 381 354
Amortization of deferred loan fees 127 191 253 383
Market value adjustments
for derivatives
instruments (140) 187 466 60
Deferred income tax
expense 2,656 2,714 4,329 5,134
Other noncash items 47 --- 59 ---
Changes in operating assets and
liabilities 6,837 2,599 754 (1,734)
Cash flows provided by
operating activities $21,957 $16,756 $28,201 $25,350
Cash flows used by
investing activities (36,169) (21,050) (56,813) (38,107)
Cash flows (used)
provided by financing
activities 15,996 7,746 32,756 18,089
Net increase (decrease) in cash
and cash equivalents $1,784 $3,452 $4,144 $5,332
SUMMARY PER MCFE DATA
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
Revenues:
Oil and natural gas sales $6.93 $5.79 $6.56 $5.66
Other revenue 0.02 0.01 0.02 0.01
$6.95 $5.80 $6.58 $5.67
Costs and expenses:
Lease operating 0.52 0.42 0.67 0.44
Production taxes 0.14 0.29 0.22 0.29
General and administrative 0.49 0.39 0.45 0.39
Depletion of natural gas and
oil properties 2.71 1.79 2.55 1.73
Depreciation and amortization 0.07 0.06 0.07 0.06
Accretion of discount on ARO 0.02 0.01 0.02 0.01
$3.95 $2.96 $3.98 $2.92
Operating income $3.00 $2.84 $2.60 $2.75
Interest expense, net of
interest income (a) (0.27) (0.27) (0.26) (0.26)
Other income (expense) (b) 0.01 0.02 0.02 0.01
Adjusted income $2.74 $2.59 $2.36 $2.50
(a) Calculated as interest expense minus interest income divided by
production for period.
(b) Excludes non-cash gains/(losses) arising from hedge accounting for
certain of our oil and natural gas hedges.
BRIGHAM EXPLORATION COMPANY
SUMMARY OF COMMODITY PRICE HEDGES OUTSTANDING AS OF AUGUST 2, 2005
(unaudited)
We use derivative instruments to manage risks associated with natural gas
and crude oil price volatility. Derivative instruments that meet the hedge
criteria in SFAS No. 133 are designated as cash-flow hedges. Derivative
instruments that do not meet the hedge criteria in SFAS No. 133 are not
designated as hedges. We used derivative instruments designated as cash-flow
hedges to mitigate the risk of variability in cash flows from oil and natural
gas sales due to changes in market prices.
Cash-Flow Hedges
Our cash-flow hedges consisted of fixed-price swaps and costless collars
(purchased put options and written call options). The fixed-price swap
agreements are used to fix the prices of anticipated future oil and natural
gas production. The costless collars are used to establish floor and ceiling
prices on anticipated future oil and natural gas production. There were no
net premiums received when we entered into these option agreements.
Derivatives Not Designated as Hedges
Our derivative positions included option contracts that are not designated
as hedges. These positions were entered into to offset the cost of other
option positions that are designated as hedges.
The following table summarizes our commodity related derivative contracts
outstanding at August 2, 2005. The volumes and prices reflected in the table
represent average daily contract amounts for the quarterly periods presented
and the corresponding NYMEX reference price.
Hedge 2005 2006
Strategy Q3 Q4 Q1 Q2 Q3 Q4
Natural Gas
Costless Collars:
Daily volumes
MMBtu/d 1,957 652 --- --- --- ---
Floor (Purchased put)
$/MMBtu Cash flow $5.45 $5.45 --- --- --- ---
Cap (Written call)
$/MMBtu Cash flow $8.00 $8.00 --- --- --- ---
Natural Gas Three-way
Structures:
Daily volumes
MMBtu/d 5,217 4,348 4,000 1,978 1,957 652
Floor (Purchased put)
$/MMBtu Cash flow $6.38 $7.04 $7.48 $7.50 $7.50 $7.50
Cap (Written call)
$/MMBtu Cash flow $7.41 $8.58 $9.35 $9.15 $9.15 $9.15
Written put
$/MMBtu Undesignated $5.28 $5.76 $6.08 $6.25 $6.25 $6.25
Crude Oil Costless
Collars:
Daily volumes Bbls/d --- --- --- 181 --- ---
Floor (Purchased put)
$/Bbl Cash flow --- --- --- $54.80 --- ---
Cap (Written call)
$/Bbl Cash flow --- --- --- $75.00 --- ---
Crude Oil Three-way
Structures:
Daily volumes Bbls/d 359 359 200 --- --- ---
Floor (Purchased put)
$/Bbl Cash flow $44.36 $44.36 $48.00 --- --- ---
Cap (Written call)
$/Bbl Cash flow $57.20 $57.20 $60.70 --- --- ---
Written put
$/Bbl Undesignated $34.36 $34.36 $38.00 --- --- ---
Contact: John Turner, Director of Finance & Business Development
(512) 427-3300
SOURCE Brigham Exploration Company
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Related links:
http://www.bexp3d.com
http://www.streetevents.com
CONTACT:
John Turner, Director of Finance & Business
Development of Brigham Exploration Company, +1-512-427-3300
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