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Energen Reports 1st Quarter Results
For Immediate Release: Wednesday, April 26, 2006 2006 Earnings Guidance Revised with New Price Assumptions BIRMINGHAM, AL - Energen Corporation (NYSE: EGN) announced today that its strong earnings growth in the first quarter of 2006 was driven largely by the impact of higher commodity prices on its oil and gas acquisition and development company, Energen Resources Corporation. Energen also initiated earnings guidance for 2007 in a range of $3.80-$4.20 per diluted share and adjusted its earnings guidance downward slightly for 2006 primarily due to relatively lower natural gas commodity prices. The new earnings guidance range for 2006 is $3.10-$3.30 per diluted share. Consolidated earnings for the quarter ended March 31, 2006, totaled $87.5 million, or $1.18 per diluted share; this compared with net income of $59 million, or 80 cents per diluted share, in the first quarter of 2005. In the prior year, first quarter net income included a non-cash loss of $9.4 million, or 13 cents per diluted shared, associated with the timing of mark-to-market derivatives. The increase in quarterly earnings largely was due to a 55 percent increase in per-unit revenues from the natural gas, oil and natural gas liquids (NGL) production of Energen Resources. As commodity prices rose through 2005, Energen was able to enter into hedges for some of its 2006 production at prices well-above those in place for 2005. In addition, the higher commodity prices benefited Energen Resources' unhedged production. High natural gas prices were not welcome at the Company's natural gas utility, Alabama Gas Corporation (Alagasco), which experienced a 4 percent decline in earnings in the first quarter of 2006. "Because of high natural gas prices this winter, our customers' bills increased significantly; this led to energy conservation and, thus, less-than-anticipated gas sales, primarily to our core, residential customers," said Energen President James T. McManus in remarks earlier today at Energen's Annual Meeting of Shareholders. "All in all, 2006 is off to a great start," said Mike Warren, chairman and chief executive officer of Energen. "As announced at Energen's Annual Meeting today, we have retooled our underlying commodity price assumptions for the balance of 2006 and, in conjunction with first quarter actual results, made some adjustments to our 2006 earnings guidance. "While our new range of $3.10 to $3.30 per diluted share is slightly below our previous guidance of $3.25-$3.60 per diluted share, it represents a tighter range and still suggests impressive EPS growth from 2005 to 2006 of 32 to 40 percent," Warren added. "In addition, the potential for continued growth at Energen is underscored by our earnings outlook for 2007," he said. "We are pleased to be initiating guidance for 2007 with an earnings range of $3.80-$4.20 per diluted share." FIRST QUARTER 2006 RESULTS First quarter 2006 earnings per diluted share increased 27 percent after adjusting for a timing-related loss in the prior-year first quarter. Consolidated earnings for the first three months of 2006 totaled $87.5 million, or $1.18 per diluted share, and compared with net income of $59 million, or 80 cents per diluted share, in the first quarter of 2005. In the prior year, first quarter net income included a non-cash loss of $9.4 million, or 13 cents per diluted shared, associated with the timing of mark-to-market derivatives. Discontinued operations at Energen Resources generated a loss of $7,000 and income of $104,000 in the current- and prior-year first quarters, respectively. Energen Resources Corporation Energen Resources' first quarter 2006 income from continuing operations totaled $49.8 million as compared with net income of $19.5 million in the same period a year ago. In the prior year, first quarter net income included a non-cash loss of $9.4 million associated with the timing of mark-to-market derivatives. Revenues per unit of production for Energen Resources' natural gas, oil and NGL production increased approximately 55 percent to $7.23 per thousand cubic feet (Mcf) equivalent. Relative to the first quarter in 2005, the Company's per-unit revenues from its natural gas production increased 65 percent in the first quarter of 2006 to $7.57 per Mcf; per-unit oil production revenues rose 43 percent to $45.94 per barrel; and per-unit NGL production revenues increased 14 percent to 58 cents per gallon. In addition to higher prices, Energen Resources benefited from higher production volumes. Production in the first quarter of 2006 increased 6 percent to 23.2 billion cubic feet equivalent (Bcfe). Oil production increased 12 percent largely due to the acquisition of Permian Basin oil properties in December 2005. NGL and natural gas production also increased period-over-period at 5 percent and 4 percent, respectively. These increases largely were due to continued development activities in the San Juan Basin and accelerated maintenance of existing wells due to mild winter weather in New Mexico and southern Colorado. Per-unit lease operating expense (LOE) for the first three months of 2006 increased 34 percent over the same period last year to $2.02 per Mcf equivalent (Mcfe). This increase was due to a 19 percent rise in price-related production taxes, accelerated maintenance expenses in the San Juan Basin, generally higher field services costs and the December 2005 acquisition of Permian Basin oil properties. Depreciation, depletion and amortization (DD&A) expense in the first quarter of 2006 increased 5 cents per unit to 99 cents per Mcfe and was due largely to the December 2005 acquisition of Permian Basin oil properties. Alabama Gas Corporation Alagasco's natural gas distribution operations earned net income of $37.4 million as compared with $39 million in the prior-year first quarter. This 4 percent decline reflected a decrease in usage driven by the high price of natural gas supplies and was partially offset by the utility's ability to earn on a higher level of equity representing investment in utility plant. For the 12 months ended March 31, 2006, Energen's net income totaled $201.5 million, or $2.73 per diluted share. This compared with $126.3 million, or $1.72 per diluted share, in the same period a year ago. Income from discontinued operations totaled $14,000 and $229,000 in the 12 months ending March 31, 2006 and 2005, respectively. Energen Resources' income from continuing operations in the trailing 12-months period totaled $165.5 million and compared with $90.2 million in the same period last year. Relative to the same period a year ago, the Company's per-unit revenues from its natural gas production increased 40 percent to $6.71 per Mcf; per-unit oil production revenues rose 30 percent to $38.80 per barrel; and per-unit NGL production revenues increased 17 percent to 56 cents per gallon. In addition to higher commodity prices, Energen Resources benefited from higher production volumes. Production in the 12 months ended March 31, 2006, totaled 92.4 Bcf, reflecting a 4.7 percent increase over the same period a year ago. Alabama Gas Corporation Alagasco's natural gas distribution operations earned net income of $35.3 million in the 12 months ended March 31, 2006. This compared with net income of $36.5 million in the same period last year. 2006 EARNINGS OUTLOOK REVISED Energen's revised earnings guidance for 2006 is $3.10 to $3.30 per diluted share. The primary change in Energen's assumptions for 2006 was related to commodity prices applicable to Energen Resources' unhedged production. "Natural gas makes up about two-thirds of our estimated annual production. And almost two-thirds of our estimated natural gas production for the remainder of the year is hedged," said President McManus at today's Annual Meeting of Shareholders. "Natural gas prices have been on something of a roller-coaster ride. The post-hurricane highs in excess of $14 per thousand cubic feet gave way to more moderate pricing in the $6.50 to $7 range in the face of a generally warm winter," McManus said. "Recently, they have risen to the $9 range for the balance of the year. "Clearly, things like the coming hurricane season, the possibility of a hot summer or early winter, and the continuing volatility of oil prices will influence natural gas prices," he added. "Our prior earnings guidance for 2006 was based, in part, on natural gas prices applicable to our unhedged production of $10 per Mcf. While this may still turn out to be realistic, the natural gas price moderation over the last several months has prompted us to rerun our 2006 earnings model with a price estimate for the remainder of the year that averages $9 per Mcf (NYMEX)," McManus said. "Oil prices, on the other hand, have continued to rise," he noted. "Even though some 75 percent of our estimated oil production for the rest of the year is hedged, we have incorporated into our new guidance an assumed oil price of $70 per barrel NYMEX applicable to our unhedged volumes for the remainder of the year - that's up from our prior assumption of $58 per barrel." Energen's revised guidance also includes a slightly lower price for Energen Resources' unhedged NGL production of 86.3 cents per gallon. Some 44 percent of estimated liquids production for the remainder of the year is already hedged. "Other changes reflected in our 2006 earnings guidance include higher basis differentials and the expectation that Alagasco will earn below its allowed range of return on equity given the conservation response to high natural gas prices during the past winter," McManus said. |
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