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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

 

 

FORM 8–K

 

CURRENT REPORT

 

PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

 

 

Date of Report (Date of Earliest Event Reported):  November 11, 2011 (November 10, 2011)

 

CRIMSON EXPLORATION INC.

(Exact Name of Registrant as Specified in Charter)

 

 

Delaware

(State or Other Jurisdiction of Incorporation)

001-12108

(Commission File Number)

20-3037840

(IRS Employer Identification No.)

 

 

717 Texas Ave., Suite 2900, Houston Texas 77002

(Address of Principal Executive Offices)

 

(713) 236-7400

(Registrant’s telephone number, including area code)

 

_____________________________________________________________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

 

[]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 14d-2(b))

[]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

 

 

 

 

 


 

Item 7.01  Regulation FD Disclosure

 

As previously disclosed, Crimson Exploration Inc.   held an earnings conference call on November 10, 2011 to discuss financial and operational results for the third quarter ended September 30, 2011.  A copy of the transcript of the earnings conference call is attached as Exhibit 99.1 to this Current Report on Form 8-K.

 

In accordance with General Instruction B.2 of Form 8-K, the transcript shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information and Exhibit be deemed incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act of 1934, each as amended, except as shall be expressly set forth by specific reference in such a filing.

 

Item 9.01  Financial Statements and Exhibits.

 

 

(d)

Exhibits

 

Exhibit Number

Description

99.1

Transcript of Earnings Conference Call dated November 10, 2011 (furnished herewith)

 

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

CRIMSON EXPLORATION INC.

 

 

 

Date:

November 11, 2011

/s/ E. Joseph Grady

 

 

E. Joseph Grady

 

 

Senior Vice President and Chief Financial Officer

 

 

 

 

 

 

Exhibit Index

 

Exhibit Number

Description

99.1

Transcript of Earnings Conference Call dated November 10, 2011 (furnished herewith)

 

 

 

 

 

 

EXHIBIT 99.1

 

CRIMSON EXPLORATION INC

Moderator: Joe Grady

11-10-11/9:30 am CT

Confirmation # 4153260

Page 1

 

 

 

 

 

 

 

 

CRIMSON EXPLORATION INC

 

 

Moderator: Joe Grady

 

November 10, 2011

 

9:30 am CT

 

 

 

Operator:  Good day and welcome to the Crimson Exploration Third Quarter 2011 Financial Results conference call. As a reminder, today’s conference is being recorded.

 

 

At this time, I would like to turn the call over to Chief Financial Officer, Mr. Joe Grady. Please go ahead.

 

Joe Grady:  Thank you and welcome everybody to the Third Quarter Crimson Exploration Earnings Call.

 

On the agenda today, I will start out with a review of the financial results for the quarter. Allan Keel, our President and CEO, will then give you an overview of our operations, and then we will open it up for a Q&A session.

 

 

But before we get started, I need to go through the forward-looking statements qualifier. I want to remind everyone that the earnings release and the discussion that will be had here today contain forward-looking statements as defined by the Securities & Exchange Commission that include comments concerning Crimson’s strategic plans, expectations, and objectives for future operations.

 

 

 

 

 

CRIMSON EXPLORATION INC

Moderator: Joe Grady

11-10-11/9:30 am CT

Confirmation # 4153260

Page 2

 

 

Such statements are based on assumptions we believe to be appropriate under the circumstances, however those statements are just estimates and not guarantees of future performance or results and therefore should be considered in that context.

 

 

Starting with the financial results, on a net income basis, net income was a half a million dollars for the quarter compared to a net loss of $3.8 million in the third quarter of last year. Excluding unrealized mark to market hedging gains and charges in the 2011 and 2010 quarters respectively, a non-cash impairment expense on our unproved lease costs during 2011, net income for the third quarter would have been $800,000 compared to a net loss of $2.4 million for the 2010 quarter. This improvement resulted from an approximate 23% increase in production, lower operating costs partly offset by slightly lower realized prices.

 

 

Earnings per share per basic share was 1 cent for the third quarter compared to a net loss per share of 10 cents for the prior year quarter. Exclusive of the previously mentioned unrealized mark to market results in the impairment, our net income per basic share would have been 2 cents per share for the third quarter of ’11 compared to a net loss of 6 cents per share for the 2010 quarter. Basic shares outstanding during the two quarters were 45.1 million for 2011 and 38.8 million in the third quarter of 2010.

 

 

On a cash flow basis for the third quarter of ’11, adjusted EBITDAX as we defined it in our release was $22.5 million compared to the prior year quarter of $15.5 million or a 45% increase. Cash flow, which is adjusted EBITDAX les interest expense, was $16.4 million or 36 cents a share and a 41% increase over cash flow of $9.7 million or 25 cents per basic share in the third quarter of 2010.

 

 

On production, production for the current quarter averaged $45.2 million a day, which was within our guidance of $45 million to $49 million and up 23% over the third quarter of 2010. Recent


 

 

 

 

 

 

CRIMSON EXPLORATION INC

Moderator: Joe Grady

11-10-11/9:30 am CT

Confirmation # 4153260

Page 3

 

 

                successes in Liberty County and our Eagle Ford acreage also led to a 21% increase in oil and liquids production to 2186 barrels of oil and liquids per day.

 

As we mentioned in our release, we project fourth quarter production to range from 39 to 43 million a day, which is slightly lower than the third quarter, due to a strategic shift in our CAPEX program to oil and liquids (later) projects that typically produce a lower equivalent basis and that’s based on the 6:1 volumetric ratio than the cash projects drilled over the last year and a half.

 

On a total for the year basis and assuming the guidance we have for the fourth quarter, we still project on a year-to-year basis an increase of 30%.

 

 

And one thing I will mention on the shift from gas to oil, even though on a volumetric basis, the new production that we derived from the new oil wells is lower than what we typical have from gas. The revenue per unit generated by that production is almost five times that we get from gas. So even though production going forward may be - we might not experience the same growth rates we have in the past from a cash flow standpoint. It should be dramatically improved. We are currently working on our 2012 budget, so it’s premature at this point to give any further guidance or indications on what 2012 production might be.

 

 

On sales prices, while the third quarter field prices for oil and liquids were higher than the prior year quarter, natural gas pricing was down and hedges that we had in 2011 were less profitable than what we had in 2010. Therefore, on a realized basis, i.e. including the results of hedges settled in the quarter, the weighted average price was $6.96 per Mcfe versus $7.21 per Mcfe in the prior year quarter.

 

 

On hedging for the remainder of 2011, we have approximately 61% of our forecasted gas production hedged at an average floor of $5.95 and approximately 45% of our forecasted oil production at an average floor of $76.33.

 

 

 

 

 

 

CRIMSON EXPLORATION INC

Moderator: Joe Grady

11-10-11/9:30 am CT

Confirmation # 4153260

Page 4

 

 

Moving to the expense side, directly lease operating costs in the third quarter were $900,000 or 22 cents per Mcfe compared to $3.6 million or $1.06 per Mcfe in the third quarter last year. As we described in our Q, we recorded in the third quarter this year a $2.3 million reduction in direct operating expenses associated with a change in the way we estimate our liability for LOE at the end of a particular balance sheet day.

 

 

And in doing that, we made that change in the third quarter of this year and determined that our liability at that point was $2.3 million higher than it needs to be, so we took that difference as a credit to expense in the third quarter. If you include that adjustment, direct LOE was approximately $3.3 million compared to that $3.6 million in the prior year quarter. For the fourth quarter, we’ve provided guidance of $3.3 million to $3.6 million for the fourth quarter of ’11, a slight increase over the unadjusted amount for the current quarter as we bring new wells on stream.

 

 

On G&A for the third quarter of 2011, we incurred $4.6 million compared to $4.5 million in the prior year quarter. Exclusive of non-cash stock option expense, cash G&A was $4.1 million or 99 cents per Mcfe compared to $4 million or $1.20 per Mcfe for the prior year quarter. As you noticed in our release, the guidance on fourth quarter cash G&A is $3.9 million to $4.2 million.

 

 

On CAPEX, we spent a little over $17 million in the third quarter, again that’s a year to date spend of $61.5 million. As we previously reported, we raised our estimated total CAPEX for 2011 by 30% to a total of $78 million to accelerate drilling on our Eagle Ford oil projects. And Allan will give you a little bit of insight as to where we are on that in a little bit. We expect fourth quarter CAPEX to be funded through cash flow from operations and temporary draws on our revolver.

 

 

As I mentioned we are currently working on our 2012 budget, so I don’t have any guidance to give you as to how much we might spend in 2012. However, I can tell you that at a minimum, we

 

 

 

 

 

 

CRIMSON EXPLORATION INC

Moderator: Joe Grady

11-10-11/9:30 am CT

Confirmation # 4153260

Page 5

          

 

                expect to be active all year in the Eagle Ford and the Woodbine plays and we do stay committed to staying within our cash flow.

 

 

And that concludes the financial review and now I will turn it over to Allan for an operations update.

 

Allan Keel:  Thanks Joe and good morning everyone and thanks for joining us this morning and to hear you know what we’ve done in the third quarter and what our plans are going forward.

 

 

As a result of some activity - you know continued activity in the field; we’re not going to provide a full operational update this morning because sometime in the next few weeks we will come out with a full operational report and save that update until the end. But until then, I will give you a brief update on our major projects.

 

 

In the third quarter, we continued to experience success in our program. Off of the success of our initial Eagle Ford oil well down in Karnes County, as you will recall, we increased our CAPEX budget by 30% to continue drilling down in Karnes County for the remainder of this year into the fourth quarter and into 2012.

 

 

Substantially all of ou


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