þ
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
o
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
NEVADA
(State or other jurisdiction of
|
94-1667468
(I.R.S. Employer
|
|
incorporation or organization)
|
Identification Number)
|
Yes
þ
|
No
o
|
Yes
o
|
No
þ
|
Large accelerated filer
þ
|
Accelerated filer
o
|
Non-accelerated filer
o
|
Smaller reporting company
o
|
(Do not check if a smaller reporting company)
|
Yes
o
|
No
þ
|
Page
|
|||
PART I. Financial Information
|
|||
Item 1. Financial Statements (Unaudited):
|
|||
Consolidated Balance Sheets -
June 30, 2009 and December 31, 2008
|
|
4
|
|
Consolidated Statements of Operations -
Three Months and Six Months ended June 30, 2009 and 2008
|
5
|
||
Consolidated Statement of Stockholders' Equity and Comprehensive Income (Loss) -
Six Months ended June 30, 2009
|
6
|
||
Consolidated Statements of Cash Flows -
Six Months ended June 30, 2009 and 2008
|
7
|
||
Notes to Consolidated Financial Statements
|
8
|
||
Report of Independent Registered Public Accounting Firm
|
18
|
||
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
|
19
|
||
Item 3. Quantitative and Qualitative Disclosure About Market Risk
|
23
|
||
Item 4. Controls and Procedures
|
24
|
||
PART II. Other Information | |||
Item 4. Submission of Matters to a Vote of Security Holders
|
24
|
||
Item 6. Exhibits
|
25
|
||
Fourth Amendment to the Lease Agreement dated May 8, 2009 between the Company and
Stonebriar I Office Partners, Ltd. |
|||
Awareness Letter of Ernst & Young LLP
|
|||
Section 302 Certification of the Chief Executive Officer
|
|||
Section 302 Certification of the Chief Financial Officer
|
|||
Certification for the Chief Executive Officer as required by Section 906
|
|||
Certification for the Chief Financial Officer as required by Section 906
|
June 30,
|
December 31,
|
|||||||
2009
|
2008
|
|||||||
ASSETS
|
||||||||
(In thousands)
|
||||||||
Cash and Cash Equivalents
|
$
|
3,970
|
$
|
6,281
|
||||
Accounts Receivable:
|
||||||||
Oil and gas sales
|
23,615
|
34,401
|
||||||
Joint interest operations
|
4,852
|
7,876
|
||||||
Marketable Securities
|
36,099
|
48,868
|
||||||
Derivative Financial Instruments
|
11,922
|
13,974
|
||||||
Deferred Income Tax Asset
|
10,196
|
4,995
|
||||||
Other Current Assets
|
14,287
|
13,633
|
||||||
Total current assets
|
104,941
|
130,028
|
||||||
Property and Equipment:
|
||||||||
Unevaluated oil and gas properties
|
117,719
|
116,489
|
||||||
Oil and gas properties, successful efforts method
|
2,134,042
|
1,960,544
|
||||||
Other property and equipment
|
6,153
|
6,162
|
||||||
Accumulated depreciation, depletion and amortization
|
(736,336
|
)
|
(638,480
|
)
|
||||
Net property and equipment
|
1,521,578
|
1,444,715
|
||||||
Other Assets
|
2,748
|
3,147
|
||||||
$
|
1,629,267
|
$
|
1,577,890
|
|||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Accounts Payable
|
$
|
65,479
|
$
|
99,460
|
||||
Accrued Expenses
|
14,801
|
14,995
|
||||||
Total current liabilities
|
80,280
|
114,455
|
||||||
Long-term Debt
|
315,000
|
210,000
|
||||||
Deferred Income Taxes Payable
|
182,975
|
185,870
|
||||||
Reserve for Future Abandonment Costs
|
5,830
|
5,480
|
||||||
Total liabilities
|
584,085
|
515,805
|
||||||
Commitments and Contingencies
|
||||||||
Stockholders' Equity:
|
||||||||
Common stock – $0.50 par, 75,000,000 shares authorized, 46,620,445 and 46,442,595
shares outstanding at June 30, 2009 and December 31, 2008, respectively
|
23,310
|
23,221
|
||||||
Additional paid-in capital
|
425,648
|
415,875
|
||||||
Retained earnings
|
596,774
|
613,906
|
||||||
Accumulated other comprehensive income (loss)
|
(550
|
)
|
9,083
|
|||||
Total stockholders' equity
|
1,045,182
|
1,062,085
|
||||||
$
|
1,629,267
|
$
|
1,577,890
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands, except per share amounts)
|
||||||||||||||||
Revenues:
|
||||||||||||||||
Oil and gas sales
|
$
|
64,875
|
$
|
172,022
|
$
|
133,226
|
$
|
299,743
|
||||||||
Gain on sale of assets
|
—
|
21,444
|
—
|
21,204
|
||||||||||||
Operating expenses:
|
||||||||||||||||
Oil and gas operating
|
17,485
|
23,362
|
34,444
|
44,564
|
||||||||||||
Exploration
|
131
|
—
|
144
|
2,238
|
||||||||||||
Depreciation, depletion and amortization
|
50,796
|
44,422
|
98,068
|
85,927
|
||||||||||||
General and administrative, net
|
9,051
|
6,922
|
18,870
|
13,086
|
||||||||||||
Total operating expenses
|
77,463
|
74,706
|
151,526
|
145,815
|
||||||||||||
Operating income (loss) from continuing operations
|
(12,588
|
)
|
118,760
|
(18,300
|
)
|
175,132
|
||||||||||
Other income (expenses):
|
||||||||||||||||
Interest income
|
10
|
205
|
32
|
366
|
||||||||||||
Other income
|
29
|
36
|
92
|
58
|
||||||||||||
Interest expense
|
(2,901
|
)
|
(8,546
|
)
|
(5,063
|
)
|
(18,497
|
)
|
||||||||
Total other income (expenses)
|
(2,862
|
)
|
(8,305
|
)
|
(4,939
|
)
|
(18,073
|
)
|
||||||||
Income (loss) from continuing operations before
income taxes |
(15,450
|
)
|
110,455
|
(23,239
|
)
|
157,059
|
||||||||||
Benefit from (provision for) income taxes
|
3,975
|
(40,027
|
)
|
6,107
|
(57,229
|
)
|
||||||||||
Income (loss) from continuing operations
|
(11,475
|
)
|
70,428
|
(17,132
|
)
|
99,830
|
||||||||||
Income from discontinued operations after income taxes
and minority interest |
—
|
12,199
|
—
|
23,892
|
||||||||||||
Net income (loss)
|
$
|
(11,475
|
)
|
$
|
82,627
|
$
|
(17,132
|
)
|
$
|
123,722
|
||||||
Basic net income (loss) per share:
|
||||||||||||||||
Continuing operations
|
$
|
(0.26
|
)
|
$
|
1.55
|
$
|
(0.38
|
)
|
$
|
2.19
|
||||||
Discontinued operations
|
—
|
0.27
|
—
|
0.52
|
||||||||||||
$
|
(0.26
|
)
|
$
|
1.82
|
$
|
(0.38
|
)
|
$
|
2.71
|
|||||||
Diluted net income (loss) per share:
|
||||||||||||||||
Continuing operations
|
$
|
(0.26
|
)
|
$
|
1.53
|
$
|
(0.38
|
)
|
$
|
2.17
|
||||||
Discontinued operations
|
—
|
0.27
|
—
|
0.52
|
||||||||||||
$
|
(0.26
|
)
|
$
|
1.80
|
$
|
(0.38
|
)
|
$
|
2.69
|
|||||||
Weighted average shares outstanding:
|
||||||||||||||||
Basic
|
45,000
|
44,287
|
44,971
|
44,296
|
||||||||||||
Diluted
|
45,000
|
44,661
|
44,971
|
44,677
|
Common
Stock
(Shares)
|
Common
Stock –
Par Value
|
Additional
Paid-in
Capital
|
Retained
Earnings
|
Accumulated Other Comprehensive Income (Loss)
|
Total
|
||||||||||||||||||
(In thousands)
|
|||||||||||||||||||||||
Balance at January 1, 2009
|
$
|
46,442
|
$
|
23,221
|
$
|
415,875
|
$
|
613,906
|
$
|
9,083
|
$
|
1,062,085
|
|||||||||||
Exercise of stock options
and warrants
|
83
|
41
|
1,410
|
—
|
—
|
1,451
|
|||||||||||||||||
Stock-based compensation
|
95
|
48
|
7,439
|
—
|
—
|
7,487
|
|||||||||||||||||
Tax benefit from stock-based compensation
|
—
|
—
|
924
|
—
|
—
|
924
|
|||||||||||||||||
Net loss
|
—
|
—
|
—
|
(17,132
|
)
|
—
|
(17,132
|
)
|
|||||||||||||||
Unrealized hedging loss, net
of income taxes |
—
|
—
|
—
|
—
|
(1,334
|
)
|
(1,334
|
)
|
|||||||||||||||
Unrealized loss on marketable
securities, net of income taxes |
—
|
—
|
—
|
—
|
(8,299
|
)
|
(8,299
|
)
|
|||||||||||||||
Total comprehensive loss
|
(26,765
|
)
|
|||||||||||||||||||||
Balance at June 30, 2009
|
$
|
46,620
|
$
|
23,310
|
$
|
425,648
|
$
|
596,774
|
$
|
(550
|
)
|
$
|
1,045,182
|
Six Months Ended
|
||||||||
June 30,
|
||||||||
2009
|
2008
|
|||||||
(In thousands)
|
||||||||
CASH FLOWS FROM CONTINUING OPERATIONS:
|
||||||||
Cash Flows From Operating Activities:
|
||||||||
Net income (loss)
|
$
|
(17,132
|
)
|
$
|
123,722
|
|||
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
||||||||
Income from discontinued operations
|
—
|
(23,892
|
)
|
|||||
Deferred income taxes
|
(1,984
|
)
|
52,504
|
|||||
Dry hole costs and lease impairments
|
—
|
2,238
|
||||||
Depreciation, depletion and amortization
|
98,068
|
85,927
|
||||||
Gain on sales of assets
|
—
|
(21,204
|
)
|
|||||
Debt issuance cost amortization
|
405
|
405
|
||||||
Stock-based compensation
|
7,487
|
5,716
|
||||||
Excess tax benefit from stock-based compensation
|
(924
|
)
|
(8,632
|
)
|
||||
Loss from derivatives
|
—
|
359
|
||||||
(Increase) decrease in accounts receivable
|
13,810
|
(25,316
|
)
|
|||||
(Increase) decrease in other current assets
|
(654
|
)
|
(1,175
|
)
|
||||
Increase (decrease) in accounts payable and accrued expenses
|
(29,631
|
)
|
10,078
|
|||||
Net cash provided by operating activities from continuing operations
|
69,445
|
200,730
|
||||||
Cash Flows From Investing Activities:
|
||||||||
Capital expenditures
|
(179,125
|
)
|
(143,281
|
)
|
||||
Proceeds from asset sales
|
—
|
113,801
|
||||||
Net cash used for investing activities from continuing operations
|
(179,125
|
)
|
(29,480
|
)
|
||||
Cash Flows From Financing Activities:
|
||||||||
Borrowings
|
105,000
|
10,000
|
||||||
Principal payments on debt
|
—
|
(195,000
|
)
|
|||||
Proceeds from issuance of common stock
|
1,451
|
8,278
|
||||||
Excess tax benefit from stock-based compensation
|
924
|
8,632
|
||||||
Debt issuance costs
|
(6
|
)
|
(16
|
)
|
||||
Net cash provided by (used for) financing activities from continuing operations
|
107,369
|
(168,106
|
)
|
|||||
Net cash from (used for) continuing operations
|
(2,311
|
)
|
3,144
|
|||||
CASH FLOWS FROM DISCONTINUED OPERATIONS:
|
||||||||
Net cash provided by operating activities
|
—
|
180,143
|
||||||
Net cash used for investing activities
|
—
|
(117,013
|
)
|
|||||
Net cash used for financing activities
|
—
|
(63,130
|
)
|
|||||
Net cash provided by discontinued operations
|
—
|
—
|
||||||
Net increase (decrease) in cash and cash equivalents
|
(2,311
|
)
|
3,144
|
|||||
Cash and cash equivalents, beginning of period
|
6,281
|
5,565
|
||||||
Cash and cash equivalents, end of period
|
$
|
3,970
|
$
|
8,709
|
Three Months
Ended June 30, 2008 |
Six Months
Ended June 30, 2008 |
||||||||
(In thousands)
|
|||||||||
Oil and gas sales
|
$
|
147,990
|
$
|
261,256
|
|||||
Total operating expenses
|
(87,039
|
)
|
(141,126
|
)
|
|||||
Operating income from discontinued operations
|
60,951
|
120,130
|
|||||||
Other income (expense)
|
(745
|
)
|
(1,890
|
)
|
|||||
Provision for income taxes
|
(27,715
|
)
|
(54,586
|
)
|
|||||
Minority interest in earnings
|
(20,292
|
)
|
(39,762
|
)
|
|||||
Income from discontinued operations
|
$
|
12,199
|
$
|
23,892
|
Six Months Ended
|
||||||||
June 30,
|
||||||||
2009
|
2008
|
|||||||
(In thousands)
|
||||||||
Beginning asset retirement obligations
|
$
|
5,480
|
$
|
7,512
|
||||
Accretion expense
|
153
|
227
|
||||||
New wells placed on production and changes in estimates
|
222
|
313
|
||||||
Liabilities settled and properties sold
|
(25
|
)
|
(497
|
)
|
||||
Future abandonment liability — end of period
|
$
|
5,830
|
$
|
7,555
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||||
2009
|
2008
|
2009
|
2008
|
||||||||||||
Tax at statutory rate
|
35.0%
|
35.0%
|
35.0%
|
35.0%
|
|||||||||||
Tax effect of:
|
|||||||||||||||
Nondeductible stock-based compensation
|
(8.6%
|
)
|
0.4%
|
(8.1%
|
)
|
0.9%
|
|||||||||
State income taxes, net of federal benefit
|
0.6%
|
0.7%
|
0.4%
|
0.8%
|
|||||||||||
Other
|
(1.3%
|
)
|
0.1%
|
(1.0%
|
)
|
(0.3%
|
)
|
||||||||
Effective tax rate
|
25.7%
|
36.2%
|
26.3%
|
36.4%
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Current provision (benefit)
|
$
|
(2,712
|
)
|
$
|
2,754
|
$
|
(4,123
|
)
|
$
|
4,725
|
||||||
Deferred provision (benefit)
|
(1,263
|
)
|
37,273
|
(1,984
|
)
|
52,504
|
||||||||||
Provision for (benefit from) income taxes
|
$
|
(3,975
|
)
|
$
|
40,027
|
$
|
(6,107
|
)
|
$
|
57,229
|
Carrying
Value Measured at Fair Value as of June 30, 2009 |
Level 1
|
Level 2
|
Level 3
|
||||||||||
(In thousands)
|
|||||||||||||
Items measured at fair value on a recurring basis:
|
|||||||||||||
Cash equivalents – money market funds
|
$
|
3,970
|
$
|
3,970
|
$
|
—
|
$
|
—
|
|||||
Marketable securities
|
36,099
|
—
|
36,099
|
—
|
|||||||||
Derivative financial instruments – natural gas price swaps
|
11,922
|
—
|
—
|
11,922
|
|||||||||
Total assets
|
$
|
51,991
|
$
|
3,970
|
$
|
36,099
|
$
|
11,922
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Balance, beginning of period
|
$
|
18,369
|
$
|
17,658
|
$
|
13,974
|
$
|
—
|
||||||||
Settlements
|
(7,114
|
)
|
4,025
|
(13,026
|
)
|
4,269
|
||||||||||
Hedge Ineffectiveness
|
—
|
359
|
—
|
359
|
||||||||||||
Total realized or unrealized gains (losses):
|
||||||||||||||||
Realized and unrealized gains (losses) included in earnings
|
7,114
|
(4,384
|
)
|
13,026
|
(4,628
|
)
|
||||||||||
Unrealized gains (losses) included in other comprehensive income
|
(6,447
|
)
|
22,422
|
(2,052
|
)
|
40,080
|
||||||||||
Balance, end of period
|
$
|
11,922
|
$
|
40,080
|
$
|
11,922
|
$
|
40,080
|
Three Months Ended June 30,
|
||||||||||||||||||||||||
2009
|
2008
|
|||||||||||||||||||||||
Per
|
Per
|
|||||||||||||||||||||||
Income
|
Shares
|
Share
|
Income
|
Shares
|
Share
|
|||||||||||||||||||
(In thousands, except per share amounts)
|
||||||||||||||||||||||||
Income (Loss) From Continuing Operations
|
$
|
(11,475
|
)
|
$
|
70,428
|
|||||||||||||||||||
Income (Loss) Allocable to Unvested Stock Grants
|
—
|
(1,975
|
)
|
|||||||||||||||||||||
Basic Income (Loss) From Continuing Operations Attributable to Common Stock
|
$
|
(11,475
|
)
|
45,000
|
$
|
(0.26
|
)
|
$
|
68,453
|
44,287
|
$
|
1.55
|
||||||||||||
Effect of Dilutive Securities:
|
||||||||||||||||||||||||
Stock Options
|
—
|
—
|
—
|
374
|
||||||||||||||||||||
Diluted Income (Loss) From Continuing Operations Attributable to Common Stock
|
$
|
(11,475
|
)
|
45,000
|
$
|
(0.26
|
)
|
$
|
68,453
|
44,661
|
$
|
1.53
|
||||||||||||
Income from Discontinued Operations
|
$
|
12,199
|
||||||||||||||||||||||
Income Allocable to Unvested Stock Grants
|
(342
|
)
|
||||||||||||||||||||||
Basic Income from Discontinued Operations
Attributable to Common Stock |
$
|
11,857
|
44,287
|
$
|
0.27
|
|||||||||||||||||||
Effect of Dilutive Securities:
|
||||||||||||||||||||||||
Stock Options
|
—
|
374
|
||||||||||||||||||||||
Diluted Income from Discontinued Operations Attributable to Common Stock
|
$
|
11,857
|
44,661
|
$
|
0.27
|
|||||||||||||||||||
Six Months Ended June 30,
|
||||||||||||||||||||||||
2009
|
2008
|
|||||||||||||||||||||||
Per
|
Per
|
|||||||||||||||||||||||
Income
|
Shares
|
Share
|
Income
|
Shares
|
Share
|
|||||||||||||||||||
(In thousands, except per share amounts)
|
||||||||||||||||||||||||
Income (Loss) From Continuing Operations
|
$
|
(17,132
|
)
|
$
|
99,830
|
|||||||||||||||||||
Income (Loss) Allocable to Unvested Stock Grants
|
—
|
(2,803
|
)
|
|||||||||||||||||||||
Basic Income (Loss) From Continuing Operations Attributable to Common Stock
|
$
|
(17,132
|
)
|
44,971
|
$
|
(0.38
|
)
|
$
|
97,027
|
44,296
|
$
|
2.19
|
||||||||||||
Effect of Dilutive Securities:
|
||||||||||||||||||||||||
Stock Options
|
—
|
—
|
—
|
381
|
||||||||||||||||||||
Diluted Income (Loss) From Continuing Operations Attributable to Common Stock
|
$
|
(17,132
|
)
|
44,971
|
$
|
(0.38
|
)
|
$
|
97,027
|
44,677
|
$
|
2.17
|
||||||||||||
Income from Discontinued Operations
|
$
|
23,892
|
||||||||||||||||||||||
Income Allocable to Unvested Stock Grants
|
(671
|
)
|
||||||||||||||||||||||
Basic Income from Discontinued Operations
Attributable to Common Stock |
$
|
23,221
|
44,296
|
$
|
0.52
|
|||||||||||||||||||
Effect of Dilutive Securities:
|
||||||||||||||||||||||||
Stock Options
|
—
|
381
|
||||||||||||||||||||||
Diluted Income from Discontinued Operations Attributable to Common Stock
|
$
|
23,221
|
44,677
|
$
|
0.52
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Unvested restricted stock
|
1,545
|
1,278
|
1,524
|
1,280
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands except per share data)
|
||||||||||||||||
Weighted average anti-dilutive stock options
|
481
|
22
|
508
|
21
|
||||||||||||
Weighted average exercise price
|
$
|
24.61
|
$
|
54.36
|
$
|
25.65
|
$
|
43.97
|
Six Months Ended
June 30,
|
||||||||
2009
|
2008
|
|||||||
(In thousands)
|
||||||||
Cash Payments:
|
||||||||
Interest payments
|
$
|
7,681
|
$
|
18,274
|
||||
Income tax payments
|
$
|
148
|
$
|
2,644
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands)
|
||||||||||||||||
Income (loss) from continuing operations
|
$
|
(11,475
|
)
|
$
|
70,428
|
$
|
(17,132
|
)
|
$
|
99,830
|
||||||
Other comprehensive income (loss):
|
||||||||||||||||
Unrealized hedging losses, net of income tax expense of
$2,257, $7,722, $718 and $13,902 |
(4,191
|
)
|
(14,341
|
)
|
(1,334
|
)
|
(25,819
|
)
|
||||||||
Unrealized gain (loss) on marketable securities, net of
income tax expense (benefit) of ($7,262), —, $4,469 and — |
13,486
|
—
|
(8,299
|
)
|
—
|
|||||||||||
Total from continuing operations
|
(2,180
|
)
|
56,087
|
(26,765
|
)
|
74,011
|
||||||||||
Income from discontinued operations after income taxes
and minority interest |
—
|
12,199
|
—
|
23,892
|
||||||||||||
Total comprehensive income (loss)
|
$
|
(2,180
|
)
|
$
|
68,286
|
$
|
(26,765
|
)
|
$
|
97,903
|
Three Months Ended June 30, 2009
|
Six Months Ended June 30, 2009
|
|||||||||||||||||||||||
Natural Gas
Price Swap Agreements |
Marketable Securities
|
Accumulated
Other Comprehensive Income (Loss) |
Natural Gas
Price Swap Agreement |
Marketable Securities
|
Accumulated
Other Comprehensive Income (Loss) |
|||||||||||||||||||
(In thousands)
|
||||||||||||||||||||||||
Balance – Beginning of Period
|
$
|
11,940
|
$
|
(21,785
|
)
|
$
|
(9,845
|
)
|
$
|
9,083
|
$
|
—
|
$
|
9,083
|
||||||||||
Changes in value
|
2,923
|
13,486
|
16,409
|
11,692
|
(8,299
|
)
|
3,393
|
|||||||||||||||||
Reclassification to earnings
|
(7,114
|
)
|
—
|
(7,114
|
)
|
(13,026
|
)
|
—
|
(13,026
|
)
|
||||||||||||||
Balance – End of Period
|
$
|
7,749
|
$
|
(8,299
|
)
|
$
|
(550
|
)
|
$
|
7,749
|
$
|
(8,299
|
)
|
$
|
(550
|
)
|
(In thousands)
|
||||
Revolving Bank Credit Facility
|
$
|
140,000
|
||
6⅞% Senior Notes due 2012
|
175,000
|
|||
$
|
315,000
|
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(In thousands, except per unit amounts)
|
||||||||||||||||
Net Production Data:
|
||||||||||||||||
Natural Gas (Mmcf)
|
14,108
|
13,682
|
26,901
|
26,812
|
||||||||||||
Oil (Mbbls)
|
205
|
268
|
421
|
511
|
||||||||||||
Natural Gas equivalent (Mmcfe)
|
15,337
|
15,292
|
29,425
|
29,878
|
||||||||||||
Revenues:
|
||||||||||||||||
Natural Gas sales
|
$
|
47,679
|
$
|
148,180
|
$
|
102,557
|
$
|
256,373
|
||||||||
Hedging gains (losses)
|
7,114
|
(4,384
|
)
|
13,026
|
(4,628
|
)
|
||||||||||
Total natural gas sales including hedging
|
54,793
|
143,796
|
115,583
|
251,745
|
||||||||||||
Oil sales
|
10,082
|
28,226
|
17,643
|
47,998
|
||||||||||||
Total oil and gas sales
|
$
|
64,875
|
$
|
172,022
|
$
|
133,226
|
$
|
299,743
|
||||||||
Expenses:
|
||||||||||||||||
Oil and gas operating expenses
(1)
|
$
|
17,485
|
$
|
23,362
|
$
|
34,444
|
$
|
44,564
|
||||||||
Exploration expense
|
$
|
131
|
$
|
—
|
$
|
144
|
$
|
2,238
|
||||||||
Depreciation, depletion and amortization
|
$
|
50,796
|
$
|
44,422
|
$
|
98,068
|
$
|
85,927
|
||||||||
Average Sales Price:
|
||||||||||||||||
Natural gas (per Mcf)
|
$
|
3.38
|
$
|
10.83
|
$
|
3.81
|
$
|
9.56
|
||||||||
Natural gas including hedging (per Mcf)
|
$
|
3.88
|
$
|
10.51
|
$
|
4.30
|
$
|
9.39
|
||||||||
Oil (per Bbl)
|
$
|
49.24
|
$
|
105.16
|
$
|
41.95
|
$
|
93.92
|
||||||||
Average equivalent (Mcfe)
|
$
|
3.77
|
$
|
11.54
|
$
|
4.08
|
$
|
10.19
|
||||||||
Average equivalent including hedging (Mcfe)
|
$
|
4.23
|
$
|
11.25
|
$
|
4.53
|
$
|
10.03
|
||||||||
Expenses ($ per Mcfe):
|
||||||||||||||||
Oil and gas operating
(1)
|
$
|
1.14
|
$
|
1.53
|
$
|
1.17
|
$
|
1.49
|
||||||||
Depreciation, depletion and amortization
(2)
|
$
|
3.30
|
$
|
2.89
|
$
|
3.32
|
$
|
2.87
|
Six months ended June 30,
|
||||||||
2009
|
2008
|
|||||||
(In thousands)
|
||||||||
Leasehold costs
|
$
|
7,602
|
$
|
21,474
|
||||
Development drilling
|
91,749
|
110,369
|
||||||
Exploratory drilling
|
68,394
|
2,708
|
||||||
Other development
|
6,786
|
11,302
|
||||||
174,531
|
145,853
|
|||||||
Other
|
50
|
491
|
||||||
$
|
174,581
|
$
|
146,344
|
ITEM 4:
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
(a)
|
Our annual meeting of stockholders was held in Frisco, Texas at 10:00 a.m., local time, on May 19, 2009.
|
(b)
|
Proxies for the meeting were solicited pursuant to Regulation 14 under the Securities Exchange Act of 1934, as amended. There was no solicitation in opposition to the nominees listed in the proxy statement for election as Class C directors and such nominees were elected.
|
(c)
|
Out of a total 46,457,595 shares of our common stock outstanding and entitled to vote, 44,713,856 shares were present at the meeting in person or by proxy, representing approximately 96% of the outstanding shares. Matters voted upon at the meeting were as follows:
|
|
(i)
|
Two Class C directors were reelected to our board of directors. The vote tabulation was as follows:
|
Nominee
|
For
|
Withheld
|
||
Roland O. Burns
|
41,949,863
|
2,763,993
|
||
David K. Lockett
|
42,129,817
|
2,584,039
|
Class A Directors
|
Class B Directors
|
|
Cecil E. Martin
|
M. Jay Allison
|
|
Nancy E. Underwood
|
David W. Sledge
|
|
(ii)
|
The proposal to adopt the 2009 Long-term Incentive Plan was approved by a vote of 26,002,264 shares for, 16,356,103 shares against and 22,370 shares abstaining.
|
(iii)
|
The proposal to amend our Restated Articles of Incorporation to increase the amount of the authorized capital stock from 55,000,000 shares to 80,000,000 shares, including an increase to the number of authorized shares of common stock from 50,000,000 shares to 75,000,000 shares, was approved by a vote of 42,104,662 shares for, 2,584,135 shares against and
25,054 shares abstaining.
|
(iv)
|
The appointment of Ernst & Young LLP as our independent registered public accounting firm for 2009 was ratified by a vote of 44,626,689 shares for, 55,117 shares against and 32,049 shares abstaining.
|
ITEM 6:
|
EXHIBITS
|
Exhibit No.
|
Description
|
|
10.2*
|
Fourth Amendment to the Lease Agreement dated May 8, 2009 between the Company and Stonebriar I Office
Partners, Ltd. |
|
15.1*
|
Awareness Letter of Ernst & Young LLP.
|
|
31.1*
|
Section 302 Certification of the Chief Executive Officer.
|
|
31.2*
|
Section 302 Certification of the Chief Financial Officer.
|
|
32.1†
|
Certification for the Chief Executive Officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2†
|
Certification for the Chief Financial Officer as required by Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
* Filed herewith.
† Furnished herewith.
|
COMSTOCK RESOURCES, INC.
|
||||
Date:
August 4
, 2009
|
/s/ M. JAY ALLISON
|
|||
M. Jay Allison
, Chairman, President and Chief
|
||||
Executive Officer (Principal Executive Officer)
|
||||
Date:
August 4
, 2009
|
/s/ ROLAND O. BURNS
|
|||
Roland O. Burns
, Senior Vice President,
|
||||
Chief Financial Officer, Secretary, and Treasurer
(Principal Financial and Accounting Officer)
|
1.
|
I have reviewed this June 30, 2009 Form 10-Q of Comstock Resources, Inc.;
|
|||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|||
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
|
|||
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
|
|||
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|||
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ M. JAY ALLISON
|
||||
President and Chief Executive Officer
|
1.
|
I have reviewed this June 30, 2009 Form 10-Q of Comstock Resources, Inc.;
|
|||
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|||
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|||
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this
report is being prepared;
|
|||
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
|
|||
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|||
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control
over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
/s/ ROLAND O. BURNS
|
||||
Sr. Vice President and Chief Financial Officer
|
||||
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
||||
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
||||
/s/ M. JAY ALLISON
|
|||||
M. Jay Allison
|
|||||
Chief Executive Officer
|
|||||
August 4
, 2009
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
||||
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
||||
/s/ ROLAND O. BURNS
|
|||||
Roland O. Burns
|
|||||
Chief Financial Officer
|
|||||
August 4
, 2009
|