Credo Petroleum Corporation (NASDAQ: CRED), an oil and gas
exploration and production company with significant assets in
Central Kansas, Oklahoma and the Williston Basin, today reported
financial results for the quarter ended
January 31, 2010.
For the first quarter, net income was $639,000, or $.06 per
diluted share, compared to a net loss of $9,891,000, or $.95 per
diluted share last year. The energy price collapse in the first
half of last year caused a non-cash asset write-down resulting in
the prior year loss. Excluding the effects of the write down, last
year’s net income was $208,000 or $.02 per basic and diluted share.
First quarter revenue increased 49% to $3,142,000 compared to
$2,108,000 last year.
For the last several years the company has focused on building
momentum in oil plays. As a result, oil production increased 41%
compared to last year and revenues from oil production increased
177%. The increase was driven by the Company’s Central Kansas oil
drilling project where state of the art 3-D seismic is facilitating
a success rate of almost 50%. Credo’s production revenues also
benefited from oil’s significant price advantage over natural gas
which was more than 14 to 1 at first quarter-end compared to the
energy equivalency of 6 to 1.
FIRST QUARTER OIL PRICES GAIN
96%;NATURAL GAS PRICE REALIZATIONS FALL 23%
Realized natural gas prices for the first quarter fell 23% to
$5.12 per Mcf compared to $6.65 last year. Hedging
transactions resulted in a $.03 per Mcf reduction to the first
quarter wellhead price of $5.15 compared to a $2.55 increase to the
$4.10 wellhead price last year. Net wellhead oil prices increased
99% to $73.21 per barrel compared to $36.87 last year.
At January 31, 2010 the company held open natural gas derivative
contracts for 250,000 net MMBtus at NYMEX basis prices ranging from
$5.22 to $7.27 and covering the production months of February 2010
through December 2010. At January 31, 2010 the company also held
natural gas basis differential contracts on 440,000 MMBtus on
Panhandle Eastern Pipeline at $0.47 covering the production months
of February 2010 through December 2010. Average prices
received in the company’s primary market have historically been 15%
to 17% below NYMEX prices due to basis differentials and
transportation costs compared to the current differential of about
2%. Differentials are affected by regional weather, gas storage and
other economic factors.
OIL PRODUCTION ACCOUNTS FOR
55%OF TOTAL PRODUCTION REVENUE
First quarter oil production increased 41% on an energy
equivalency basis and accounted for 55% of total production
revenues compared to 30% last year. Natural gas production fell 24%
compared to last year primarily because the company is focused on
oil drilling and has not drilled any gas wells in almost a year and
a half. On a price equivalent basis, total production increased
18%, with increased oil production more than offsetting the decline
in gas production. On an energy equivalent basis, total production
declined 10%.
STRONG FINANCIAL CONDITION
CONTINUES TO PROVIDEA SOLID FOUNDATION FOR GROWTH
The company’s balance sheet and financial condition continue to
be very strong with ample cash and no debt. In addition, the
company expects operating cash flow to remain strong in 2010. This
provides the company great flexibility to increase capital spending
as opportunities arise. At January 31, 2010, total assets were
$52,537,000 and working capital was $13,667,000, including cash and
short-term investments of $12,702,000. For the three months, cash
flow from operations was $1,312,000 compared to $1,281,000 last
year.
MANAGEMENT COMMENT
Marlis E. Smith, Jr., Credo’s Chief Executive Officer commented,
“Credo delivered profitability and solid financial results for the
first quarter of 2010, despite continued depressed natural gas
prices. We are pleased to see that our focus on drilling for oil is
yielding positive results. The 50% success rate of our Central
Kansas drilling project drove this quarter’s substantial oil
production increase, resulting in oil revenue exceeding natural gas
revenue for the fourth consecutive quarter.
“In addition to our success in Central Kansas, Credo has made a
major commitment in the Williston Basin horizontal Bakken play. We
are particularly excited with the results of our first horizontal
Bakken well which flowed 1,474 barrels of oil equivalent, over
a 24-hour period. Credo owns interests in about 50 Bakken spacing
units in the heart of the play and our second well is scheduled for
drilling this Spring. Petro-Hunt is the operator of both wells and
Credo holds 10% and 18.75% working interests,
respectively.
“Credo owns an exceptional inventory of oil-weighted drilling
prospects located in two of the premier U.S. oil drilling plays –
central Kansas and the horizontal Bakken/Three Forks. We have
successfully built excellent momentum in Kansas and we expect to do
the same in the Bakken. We believe that oil will continue to enjoy
a significant price advantage over natural gas and that the Kansas
and Bakken plays will make a significant contribution to increasing
our production and reserves.”
About Credo Petroleum
Credo Petroleum Corporation is an independent exploration,
development and production company based in Denver, Colorado. The
company has significant operations in the Williston Basin of North
Dakota, central Kansas, the Anadarko Basin of North Texas 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.
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 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
CORPORATIONFINANCIAL HIGHLIGHTS
Condensed Operating
Information
Three Months Ended
January 31,
2010 2009 REVENUES:
Oil sales
$1,724,000 $622,000 Natural gas sales
1,418,000 1,486,000
3,142,000 2,108,000 EXPENSES: Oil
and natural gas production
856,000 886,000 Depreciation,
depletion and amortization
865,000 1,336,000
Impairment of oil and gas
properties and long lived assets
- 16,623,000 General and administrative
542,000 868,000
2,263,000 19,713,000 Income
(Loss) from Operations
879,000
(17,605,000) Other Income and (Expense)
Realized and unrealized gains
(losses) from derivative contracts
(14,000) 1,466,000 Investment and other income (loss)
(1,000) (142,000)
(15,000) 1,324,000
INCOME(LOSS) BEFORE INCOME
TAXES
864,000 (16,281,000) INCOME TAXES
(225,000) 6,390,000
NET INCOME (LOSS)
$639,000
$(9,891,000) Earnings (loss) per share - basic
$.06 $ (.95) Earnings
(loss) per share - diluted
$.06 $
(.95)
Weighted average number of shares
of Common Stock and dilutive securities:
Basic
10,204,000 10,386,000
Diluted
10,251,000 10,386,000
CREDO PETROLEUM
CORPORATIONFINANCIAL HIGHLIGHTS
Condensed Balance Sheet
Information
January 31,
2010
October 31, 2009
Cash and Short-Term Investments
$12,702,000 $12,983,000
Other Current Assets
3,199,000 3,016,000 Oil and Natural Gas
Properties, Net
30,455,000 30,279,000 Intangible Assets, Net
3,904,000 4,013,000 Other Assets
2,277,000 2,261,000
$52,537,000 $52,552,000
Current Liabilities
$2,234,000 $2,457,000
Deferred Income Taxes
2,762,000 2,537,000 Asset Retirement
Obligations
1,505,000 1,502,000 Stockholders’ Equity
46,036,000 46,056,000
$52,537,000 $52,552,000
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