CASPER, Wyo., Nov. 7 /PRNewswire-FirstCall/ -- Double Eagle
Petroleum Co. (NASDAQ:DBLE) today reported that revenues for the
nine months ended September 30, 2007 were $11,812,000 compared to
$12,808,000 for the nine months ended September 30, 2006. Net loss
attributable to common stock for the nine month period ended
September 30, 2007, was $5,941,000, or $.65 per share, compared to
net income of $1,444,000, or $.17 per share, in the first nine
months of 2006. Net cash flow from operating activities for the
first nine months of 2007 was $544,000, as compared with $7,361,000
in 2006. Production volumes for the nine month period ended
September 30, 2007 increased 5% to 8,368 Mcfe per day from 7,962
Mcfe per day in the first nine months of 2006. Average prices
received for the production were down 13% to $5.05 per Mcfe in the
first nine months of 2007 compared to $5.78 per Mcfe in the first
nine months of 2006. An "Mcfe" is a thousand cubic feet equivalent,
with oil volumes converted to gas at one barrel of oil equal to
6,000 cubic feet of gas. The net loss, prior to the $879,000
dividend to preferred stockholders, for the first nine months of
2007 was $5,062,000, compared to net income for the same period in
2006 of $1,444,000, and resulted from $3,721,000 of net loss (net
of deferred income tax benefit of $1,871,000) attributable to write
offs of dry holes and exploration expenses and $1,414,000 of net
loss (net of deferred income tax benefit of $710,000) attributable
to impairments of existing producing properties, offset slightly by
$73,000 of net income from ongoing operations (see Reconciliation
of Non-GAAP Financial Measure in table below). Net cash provided by
operating activities in the nine months ended September 30, 2007
decreased to $544,000 compared to $7,361,000 in the same period in
2006. The decrease was largely due to normal changes in the
components of current assets and current liabilities, specifically,
a $3.9 million decrease in accounts payable and a $3 million
decrease in accrued liabilities, coupled with smaller offsetting
changes to the other components. The write offs of exploratory
properties consist of $752,000 ($500,000 net of deferred tax
benefit) for the Straight Flush 17-1 in Nevada, $4,388,000
($2,920,000 net of deferred tax benefit) for the Cow Creek Unit
Deep #2 in Wyoming and $452,000 ($301,000 net of deferred tax
benefit) for other exploration-related costs. In Nevada, V. F.
Neuhaus drilled the Straight Flush #17-1 well in Huntington Valley,
Elko County, Nevada to a depth of 7,496 feet. No commercial
deposits of oil and gas were identified and the well was plugged.
In accordance with FASB's Interpretation No. 36, the costs incurred
after the balance sheet date must be charged to expense in the
period following the balance sheet date, or, in this case, the
fourth quarter of 2007. Thus, there will be an additional expense
for the Straight Flush 17-1 well for dry hole costs, estimated at
approximately $900,000, recognized in the fourth quarter of 2007.
At Cow Creek Unit Deep #2, Double Eagle still anticipates drilling
this well to the deeper Tensleep and, possibly, Madison Formations
in 2008. However, since the Company has no current significant
activity in the well and has finished drilling to its current
depth, 9,922 feet, in June 2006, it is writing off the related
exploratory drilling costs, in accordance with FASB Staff Position
FAS 19-1, Accounting for Suspended Well Costs. The impairments of
producing properties, all located in Wyoming, consist of $1,275,000
($849,000 net of deferred tax benefit) for the Mad #1, $693,000
($461,000 net of deferred tax benefit) for the State 1-36, $65,000
($43,000 net of deferred tax benefit) for the Crooked Canyon State
11-16 and $91,000 ($61,000 net of deferred tax benefit) for leases
impaired in a prior quarter. The Mad #1 produced at an initial rate
of over 500 Mcfed but has declined to minimal current production.
Double Eagle intends to production test the Haystack Mountain
Formation above the current zone in the Mad #1, but, if it is
determined that it is not capable of commercial production, the Mad
#1 will be used as a water injection well. Thus, the Mad #1 has
been written down to the value of a water injection well. State
1-36 and Crooked Canyon State 11-16 have both been written down to
estimated salvage value. The decrease in net income from ongoing
operations to $73,000 (see Reconciliation of Non-GAAP Financial
Measure in table below) in the nine months ended September 30,
2007, compared to $1,444,000 in the nine months ended September
2006, results from the lower revenues discussed above and a
$1,628,000 increase in production costs, somewhat offset by normal
fluctuations in other accounts. The increase in production costs
comes largely from increased lease operating and workover expenses
($870,000) due to the severe winter weather and related operational
issues at the Cow Creek field, from gas purchase expense ($200,000)
for volumes used to fulfill our fixed delivery contracts, largely
in the first quarter, and from transportation costs and lease
operating expense ($704,000) for the three properties that are new
to our production stream since the first half of 2006 (i.e., Madden
Deep, Doty Mountain and Sun Dog Units). Revenues for the quarter
ended September 30, 2007 decreased 9% to $3,779,000 compared to
$4,163,000 for the quarter ended September 30, 2006. Net loss
attributable to common stock was $5,671,000, or $.62 per share,
compared to net income of $341,000, or $.04 per share, in the third
quarter of 2006. Production volumes for the quarter ended September
30, 2007 increased 1% to 8,329 Mcfe per day from 8,247 Mcfe per day
in the same quarter of 2006. Although production volumes were
relatively level overall, there are two important points to note.
For the Mesa Units in the Pinedale Anticline, Questar, the
operator, shut in production, which included approximately 1.1
MMcfd of Double Eagle's production beginning August 1, 2007, due to
low natural gas prices. The Company has been notified that the
wells are shut in at least through November 2007. However, we were
able to add enough production in other locations to offset the shut
in production at Pinedale. The additional production in the third
quarter of 2007, compared to third quarter of 2006, comes largely
from the Sun Dog Unit in the Atlantic Rim, the Madden Deep Unit in
the Wind River Basin and new production added since the end of the
third quarter of 2006 in the Pinedale Anticline that is not
included in the gas that has been shut in. During the third quarter
of 2007, the average CIG spot price decreased 47% when compared to
the third quarter of 2006. Average prices received by Double Eagle
for its production were down 11% to $4.79 per Mcfe in the third
quarter of 2007 compared to $5.38 per Mcfe in the third quarter of
2006. The Company had 84% of its third quarter 2007 volumes sold
forward under firm delivery contracts at an average price of $5.87
per Mcf. As of November 1, 2007, 7 MMcfd of volumes is committed to
firm delivery contracts at fixed prices averaging $5.84 per Mcf,
with two year terms (the first expiring in May 2009). Revenues
declined $369,000 for the third quarter of 2007 compared to the
same period in 2006, with the additional impact to net income
coming largely from the write offs and impairments discussed above.
The increase in production costs of $160,000, or 19%, comes largely
from increased transportation and lease operating expenses due to
the two properties that are new to our production stream since the
third quarter of 2006 (i.e., Madden Deep and Sun Dog Units).
G&A increased $247,000, or 29%, due largely to higher Board
compensation and higher stock option expense, somewhat offset by a
reduction of external financial consulting fees and professional
fees. Double Eagle, on August 6, 2007, began construction and
drilling of its planned 33 additional development wells in the Cow
Creek Field which will become part of the Catalina Coal Bed Natural
Gas Unit. Three drilling rigs have been working on this project. At
November 1, 2007, 22 wells had been drilled and cased. To the
extent they are capable of commercial production, the 33 wells
scheduled for this year are expected to be selling gas around the
end of the year. If the 33 new wells perform like the existing 14
Cow Creek wells, they would begin production at about 200 Mcfd per
well and work up to 400-450 Mcfd after about 18 months. There is no
assurance this will occur. After all of the additional 33 wells are
drilled, Double Eagle will have an overall working interest of
73.84% in the entire participating area that encompasses the
resulting 47 wells, including both its original 14 Cow Creek wells
and the 33 newly drilled wells. Also within the Atlantic Rim,
Anadarko is in the process of drilling 69 additional CBM
development wells in which Double Eagle will have approximately
8.4% working interest within the Sun Dog Unit. The 69 wells are
expected to be completed by the end of February 2008. Double
Eagle's net revenue interest in Sun Dog is 7.35%. Anadarko drilled
22 additional CBM wells in the Doty Mountain Unit of the Atlantic
Rim, in which Double Eagle holds a 20.55% working interest, in 2006
and finished hooking up those wells in 2007, bringing the total
producing wells in Doty Mountain to 46. The Doty Mountain Unit is
currently producing 2.2 MMcfd gross. Double Eagle's net revenue
interest in Doty Mountain is 17.98%. At Pinedale, Questar has
informed us that it expects to drill 34 additional wells in which
Double Eagle will have approximately 7% average working interest (1
well in Mesa Unit A, 14 wells in Mesa Unit B and 19 wells in Mesa
Unit C). The current plan is to drill 18 of the wells through the
winter of 2007-2008, with hookups beginning about April 2008, and
the other 16 wells in the summer of 2008. Double Eagle expects to
spend over $14 million on these lower risk development wells.
Questar is currently considering five-acre spacing. It has drilled
four wells on five-acre spacing on lands in which Double Eagle has
an interest and is extremely encouraged with the level of
depletion. If all the Questar Pinedale acreage is developed on
five-acre spacing, of which there is no assurance, Double Eagle
would be involved in over 300 additional development wells. At
South Fillmore, GMT Exploration Company LLC has drilled the SJ Fee
11-9 well that is a mile to the northwest of our PH State 16-1
well. Double Eagle has 50% working interest in this new SJ Fee 11-9
well before payout and 30% after payout. The well reached a total
depth of 8,646 feet, logs were evaluated and production casing was
run. The Mesaverde had several sands that appear to be gas
saturated, and the coals appear to be well developed. The well has
been completed with perforations at a depth of 8,192 to 8,196 feet.
Testing was completed with a flow rate of 1,635 Mcf per day, 107
barrels of oil per day and no water. The transportation line is
currently being constructed and gas sales are expected by December
1, 2007. The Company's PH State 16-1 well is in the same field as
the SJ 11-9 well and initially tested at a flow rate of
approximately 900 Mcfd and 60 barrels of oil. The Company is
currently evaluating the project and has plans to continue
developing the area, including potentially drilling or
participating in the drilling of additional wells. At Christmas
Meadows, the Table Top Unit, as originally formed, was dissolved,
and, having met the governmental permitting obligation for the Unit
test, the timeframe has been extended for drilling the newly formed
Main Fork Unit until at least April 2009. The Company has further
evaluated the structure and is working on plans to propose to its
partners either to drill or farmout drilling to the deeper Nugget
Sandstone. Double Eagle anticipates re-entering this hole in
mid-2008 after the winter weather has cleared from this
high-elevation location. Additionally, the Board of Directors
declared a cash dividend on its 9.25% Series A Cumulative Preferred
Stock ("Series A Preferred Stock") in the amount of $0.578125 per
share, payable on December 31, 2007 to shareholders of record as of
December 21, 2007. The Series A Preferred Stock was issued on July
5, 2007 and trades on the NASDAQ Global Select Market under the
symbol "DBLEP." Stephen H. Hollis, CEO of Double Eagle Petroleum,
commented: "With $11.8 million of cash on hand and unused
availability on our bank credit line of $35 million, together with
approximately 8.4 MMcfe of daily production, in my opinion, Double
Eagle is in the best financial shape that I have seen in my tenure.
The loss this quarter reflects a lack of success in exploratory
projects that we drilled while we were waiting for the final Record
of Decision on the Environmental Impact Statement at the Atlantic
Rim. Now that we are approved for development on this project, we
have five years of lower risk development drilling to get done and
the Company has the financial where with all to get it done. The
program is going very quickly and we expect to have thirty three
new wells at Catalina Unit before the end of the year. Combined
with the wells that Anadarko is drilling and the development wells
at the Pinedale Anticline, our daily production should change
significantly." SUMMARY STATEMENT OF OPERATIONS (In thousands,
except share and per share data) Three months ended Nine months
ended September 30, September 30, September 30, September 30, 2007
2006 2007 2006 Revenues Oil and gas sales $3,779 $4,163 $11,812
$12,808 Transportation revenue 242 272 675 272 Other income, net 62
17 203 53 Total revenues 4,083 4,452 12,690 13,133 Expenses Lease
operating expenses 1,009 849 4,160 2,532 Production taxes 470 509
1,471 1,527 Exploration expenses including dry holes 5,314 406
5,592 512 Impairment of equipment and properties 2,033 - 2,124 -
Total Expenses 8,826 1,764 13,347 4,571 Gross Margin Percentage NA
60.4% NA 65.2% General and administrative 1,105 848 2,880 2,806
Depreciation, depletion and amortization and accretion of 1,349
1,304 4,094 3,468 Other expense (income), net (180) 12 (25) 67
Pre-tax income (7,017) 524 (7,606) 2,221 Provision for deferred
taxes 2,225 (183) 2,544 (777) NET INCOME (LOSS) (4,792) 341 (5,062)
1,444 Preferred stock requirements (879) - (879) - NET INCOME
(LOSS) attributable to common stock $(5,671) $341 $(5,941) $1,444
Net income per common share: Basic $(0.62) $0.04 $(0.65) $0.17
Diluted $(0.62) $0.04 $(0.65) $0.17 Weighted average shares
outstanding: Basic 9,148,105 8,639,604 9,103,339 8,629,860 Diluted
9,148,105 8,666,900 9,103,339 8,660,696 SELECTED BALANCE SHEET DATA
(In thousands) September 30, December 31, 2007 2006 % Change Total
assets $84,535 $64,406 31.3% Total long-term debt - 13,221 -100.0%
Total stockholders' equity 75,462 33,042 128.4% SELECTED CASH FLOW
DATA (In thousands) September 30, September 30, 2007 2006 % Change
Net cash provided by operating activities $544 $7,361 -92.6%
SELECTED OPERATIONAL DATA Three months ended Nine months ended
September 30, September 30, September 30, September 30, 2007 2006
2007 2006 Total production (mcfe) 766,285 758,690 2,284,425
2,173,645 Average price per mcfe $4.93 $5.49 $5.17 $5.89
RECONCILIATION OF NON-GAAP FINANCIAL MEASURE Nine Months Ended
September 30, 2007 Net income from ongoing operations $73 Less:
Write offs of exploration expenses including dry holes (5,592)
Plus: Related deferred tax benefit 1,871 Less: Impairments of
equipment and properties (2,124) Plus: Related deferred tax benefit
710 Net income (loss) $(5,062) The table above shows our
reconciliation of Net income from ongoing operations to our Net
income (loss) as reported in our Consolidated Statement of
Operations for the nine months ended September 30, 2007. The
Company is providing the disclosure of net income from ongoing
operations for the nine months ended September 30, 2007 before
impairments and exploration expense (of which there was none in the
comparable 2006 period), and then explaining the changes within
those captions separately, to enable the reader to better compare
operations for the 2007 and 2006 nine month periods. About Double
Eagle Founded in 1972, Double Eagle Petroleum Co. explores for,
develops, and sells natural gas and crude oil, with natural gas
constituting more than 95% of its production and reserves. The
Company's current development activities are in its Atlantic Rim
coal bed methane play and in the Pinedale Anticline in Wyoming. Its
current exploration activities involve projects in southwestern
Wyoming, Nevada and other Rocky Mountain states. This release may
contain forward-looking statements regarding Double Eagle Petroleum
Co.'s future and expected performance based on assumptions that the
Company believes are reasonable. No assurances can be given that
these statements will prove to be accurate. A number of risks and
uncertainties could cause actual results to differ materially from
these statements, including, without limitation, decreases in
prices for natural gas and crude oil, unexpected decreases in gas
and oil production, the timeliness, costs and results of
development and exploration activities, unanticipated delays and
costs resulting from regulatory compliance, and other risk factors
described from time to time in the Company's Forms 10-K and 10-Q
and other reports filed with the Securities and Exchange
Commission. Double Eagle undertakes no obligation to publicly
update these forward-looking statements, whether as a result of new
information, future events or otherwise. Company Contact: John
Campbell (303) 794-8445 http://www.dble.us/ DATASOURCE: Double
Eagle Petroleum Co. CONTACT: John Campbell of Double Eagle
Petroleum Co., +1-303-794-8445 Web site: http://www.dble.us/
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