Double Eagle Petroleum's CEO Discusses Q3 2012 Results - Earnings Call Transcript
November 9, 2012 9:49 PM ET
Double Eagle Petroleum Co. (DBLE)
Q3 2012 Earnings Call
November 8, 2012 11:00 am ET
Richard Dole – Chairman, CEO and President
Kurtis S. Hooley – Senior Vice President and Chief Operating Officer
Ashley Jenkins – Vice President and Chief Financial Officer
Kim Pacanovsky – Mcnicoll, Lewis, & Vlak
Welcome to the Double Eagle Petroleum’s Third Quarter 2012 Financial and Operations Results Conference Call. At this time, all participants are in a listen-only mode. (Operator Instructions) As a reminder, this conference call is being recorded.
I would now like to turn the conference call over to your host for today Richard Dole, Chairman, President, and CEO. Richard, please go ahead.
Thank you very much. Good morning everyone. I would like to welcome you to our call to discuss the financial results for the third quarter, and give you a brief update of the current activity at Double Eagle. Joining me today is Kurtis Hooley, Chief Operating Officer, and Ashley Jenkins, Chief Financial Officer.
The financial results that we continue to experience, which Ashley will discuss in more detail, reflects the same challenges our peers are experiencing continuing low natural gas prices. We continue to protect our revenues with the successful hedging program, but there is currently limited upside in the market.
We do have positive news though as we continue to increase our production up 5% for the quarter versus last year is do primarily to a 16% increase in our operated Catalina unit production as a result of the 2011 drilling program. We successfully up spaced the wells from 80 acre spacing to 160 acre spacing and are seeing the highest per well average production of any of the prior drilling blocks.
The company currently is completing and testing the Niobrara appraisal well in the Catalina unit. Two deep gas formations and three of the lower Niobrara benches have been fracture stimulated. The Niobrara completions are currently on flow back and are being evaluated. The company currently plans to start the completion of three additional Upper Niobrara stages during the fourth quarter of 2012.
We continue to see increased success from Niobrara activities to the South and West of the company's 70,000 gross acres in the Greater Green River Basin by companies such as Shell, Quicksilver, Samson and Entek. There is increased activity near the various areas where we hold an additional 28,000 gross acres by companies such as Noble, Sirk and Encana. We expect to de-risk some of our current land holdings through third-party activity.
Also, the major oil and gas company with which we have a non-binding form out is completing the development plan and continues with their preparation for seismic to be shot next year for the 2cf target at the Main Fork Unit.
And to provide some more details on the financials, I'll turn it over to Ashley.
Thank you, Rich. Before we continue, I would like to remind everyone that all statements made during our conference call that are not statements of historical facts, constitute forward-looking statements and are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995.
Our actual results could vary materially from those contained in the forward-looking statements. The factors that could cause the actual results to differ materially from those in the forward-looking statements are described in our Forms 10-K and 10-Q, other periodic filings with the SEC and our press release.
In looking at the year-to-date third quarter results, for the nine months ended September 30, 2012 we reported a net loss attributable to common stock of $10.1 million or $0.89 per share compared to net income of $3.1 million or $0.28 per share. The 2012 results include non-cash loss related to the change in fair value of our economic hedges of $8.1 million versus non-cash gain of $5 million in the same prior year period. We did realize a cash gain from our hedges in 2012 of $10.2 million.
Our revenue from oil and gas sales at spot prices plus all realized gains and losses on our hedges for the nine months ended September 30, 2012 is $27.9 million compared to $34 million in the prior year period. This $6.1 million change is a result in the decline in our realized natural gas price, which includes the cash settlements from hedges and decreased from $4.75 for the nine months ended September 30, 2011 to $3.49 in the current period. This decline in our realized price is attributed to 40% decrease in the Colorado Interstate Gas market price offset by the hedges in place in each respective year. This was also partially offset by an increase in production of 8% year-over-year.
As in the prior quarter, our press release issued this morning included our clean earnings which is an analysis of pro forma cash flow earnings. As shown in the table, adding back to GAAP net income, the effective non-cash items of stock option expense, DD&A and deducting the unrealized gain and loss from our hedging instruments to before tax clean earnings attributable to common stock for the nine months ended September 30, 2012 was $10.4 million or $0.92 per share compared to $16.6 million or $1.49 per share for the nine months ended September 30, 2011.
Our general and administrative expenses increased over prior year due to the non-cash stock option expense related to the 2011 Long Term Incentive Plan grant. Despite the lower gas prices, we were able to realize cash flows from operations of $13.6 million for the nine months ended September 30, 2012 which shows the strength of our low-cost properties as well as our hedging program.
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