EX-99.1 2 be4907ex991.txt EXHIBIT 99.1 Exhibit 99.1 BRIGHAM EXPLORATION REPORTS YEAR END RESULTS INCLUDING RECORD 2005 FINANCIAL RESULTS AUSTIN, Texas, Feb. 21 /PRNewswire-FirstCall/ -- Brigham Exploration Company (Nasdaq: BEXP) today announced its financial results for the fiscal year and quarter ended December 31, 2005 and its year-end reserve numbers. Highlights from our performance from the fourth quarter of 2005 and full year 2005 include: * 20% growth in fourth quarter production to 40.8 MMcfe per day over fourth quarter 2004 production; * 42% growth in operating income to $46.8 million over operating income in 2004 of $32.8 million; * 40% growth in net income to $27.4 million over net income of net income of $19.7; and, * Reserve additions, net of revisions, for 2005 replaced 200% of our 2005 production. YEAR-END 2005 RESULTS Average net daily production volumes for 2005 were 33.1 MMcfe compared to 34.1 MMcfe in 2004. Revenues from the sale of oil and natural gas, net of hedging, for 2005 grew 35% to $96.8 million compared to $71.7 million in 2004. A $2.25 per Mcfe increase in the sales price we received for oil and natural gas combined with a decrease in hedging losses increased our revenue from the sale of oil and natural gas by $27.2 million and $520,000, respectively. These increases were partially offset by a $2.6 million decrease in revenue due to lower production. Our average realized prices for 2005 were $51.95 per barrel for oil and $7.97 per Mcf for natural gas, compared to $35.17 for oil and $5.84 for natural gas in 2004. Our average realized price for 2005 includes losses from the cash settlement of hedging transactions of $2.78 per barrel for oil and $0.32 per Mcf for natural gas compared to $4.96 for oil and $0.21 for natural gas in 2004. Our production costs, which includes costs for operating and maintaining (O&M expense) our producing wells, ad valorem taxes and production taxes, were up 13% in 2005 and on a unit basis were up 17%. Approximately 44% or $480,000 of the increase in our 2005 O&M expenses was related to new wells that began producing during 2005. Increases in costs for compressor rental and maintenance, saltwater disposal, overhead fees, contract labor, equipment rental, pumping services, water treating and miscellaneous operating expenses were the primary reasons for the remainder of the increase in our 2005 O&M expenses. Higher commodity prices resulted in a 35% increase in our ad valorem taxes and an 8% increase in our production taxes. Our 2005 production tax expense includes a $1.6 million production tax credit related to severance tax refunds received during the year on 16 wells. The higher production costs were partially offset by a decrease in workover expense. Our general and administrative expenses increased by $141,000 or 3% from 2004 to 2005. General and administrative expenses for 2005 included a $147,000 increase in employee compensation and benefit expense and $447,000 of bad debt expense to account for the potential non-payment of a receivable. Additional items that led to higher general and administrative expenses for the 2005 were increases in contract and professional fees and corporate insurance. Partially offsetting these increases were a decline in legal and office rent expense. Due to these higher costs combined with lower production, our general and administrative expenses on a unit basis increased 5% in 2005 to $0.46 per Mcfe. Depletion of oil and natural gas properties for 2005 was $33.3 million ($2.79 per Mcfe) compared to $23.8 million ($1.94 per Mcfe) in 2004. Approximately $10.2 million of the increase in our depletion expense for 2005 was due to an increase in our depletion rate. This increase in depletion expense was partially offset by a $733,000 decrease in depletion expense due to lower production volumes. Our 2005 depletion rate increased as a result of the higher cost of proved reserves additions in 2005 than has been the case in prior years. Our net interest expense for 2005 was $4 million. The 27% increase in interest expenses was primarily due to an increase in our weighted average debt outstanding for 2005 combined with a higher interest rate that we paid on those outstanding borrowings due to an increase in Libor. Our weighted average debt outstanding for 2005 and 2004 was $80.2 million and $56.4 million, respectively. We recorded deferred income tax expense of $15 million in 2005 compared to deferred income tax expense of $10.9 million in 2004. Net income for 2005 was $27.4 million ($0.63 diluted earnings per share) compared to net income of $19.7 million ($0.47 diluted earnings per share) in 2004. Our capital expenditures for oil and natural gas activities for 2005 were 36% higher than 2004. Our capital expenditures for oil and natural gas activities in 2005 and 2004 were: Twelve Months Ended December 31, --------------------------- 2005 2004 ------------ ------------ (in thousands) Drilling $ 90,873 $$ 68,205 Land and seismic 19,641 12,993 Capitalized costs 6,789 5,714 Capitalized FAS 143 ARO 1,324 513 Total capital expenditures $ 118,627 $ 87,425 FOURTH QUARTER 2005 RESULTS Our net daily production volumes for the fourth quarter 2005 were 40.8 MMcfe, up 20% when compared to our volumes in last year's fourth quarter. Revenues from the sale of oil and natural gas for the fourth quarter 2005 were up 85% when compared to the fourth quarter last year. A $3.64 per Mcfe increase in the average sales price we received from the sale of our oil and natural gas and the increase in our fourth quarter 2005 production volumes increased our fourth 2005 revenue by $13.6 million and $4 million, respectively. These increases were partially offset by a $783,000 decrease in revenues due to an increase in losses associated with the cash settlement of hedges. Our average realized prices for the fourth quarter 2005 were $57.71 per barrel for oil and $10.02 per Mcf for natural gas, compared to $41.19 for oil and $6.30 for natural gas in 2004. Our average realized prices for the fourth quarter 2005 include losses from the cash settlement of cash flow hedging transactions of $0.95 per barrel for oil and $0.71 per Mcf for natural gas compared to $6.65 for oil and $0.26 for natural gas in 2004. Our production costs for the fourth quarter 2005 were 39% higher and on a unit basis were 16% higher than our production costs in the fourth quarter last year. Our O&M expenses for the fourth quarter 2005 were up 9% when compared to the fourth quarter last year. O&M expenses associated with new wells that were not producing in last year's fourth quarter were $234,000 and were the primary reason for this increase. Higher commodity prices resulted in a 29% increase in our ad valorem taxes and a 115% increase in our production taxes. Our production tax expense for the fourth quarter 2005 includes a $552,000 production tax credit related to severance tax refunds received during the quarter on four wells. Our general and administrative expenses for the fourth quarter 2005 increased by $145,000 or 9% when compared to our general and administrative expenses in the fourth quarter of last year. General and administrative expenses for the fourth quarter 2005 included a $67,000 increase in employee compensation and benefit expense and $447,000 of bad debt expense to account for the potential non-payment of a receivable. Due to an increase in production volumes, our general and administrative expenses on a unit basis decreased 9% when compared to last year's fourth quarter, to $0.49 per Mcfe. Our depletion expense for the fourth quarter 2005 was $11.7 million ($3.17 per Mcfe) compared to $7.3 million ($2.39 per Mcfe) in the fourth quarter last year. An increase in our fourth quarter 2005 depletion rate represented 67% of this change, while higher production volumes represented the remaining 33% of the increase in our depletion expense. Our depletion rate increased as a result of the higher cost of proved reserves additions than has been the case in prior periods. Our net interest expense for the fourth quarter of 2005 was $1.3 million compared to $636,000 in the fourth quarter of 2004. The $699,000 increase in our net interest expense was primarily due to an increase in the amounts borrowed under both our senior and subordinated credit agreements combined with an increase in the interest rate that we paid on those borrowings due to an increase in Libor. Our weighted average debt outstanding for the fourth quarter 2005 was $91.9 million compared to $53.6 million last year. We recorded deferred income tax expenses of $6.5 million in the fourth quarter of this year, compared deferred income tax expenses of $3.7 million in the fourth quarter last year. We reported net income of $11.9 million ($0.26 per diluted share) for the fourth quarter 2005 versus net income of $5.1 million ($0.12 per diluted share) for the prior year period. Our capital expenditures for oil and natural gas activities for the fourth quarter 2005 were up 46% when compared to last year's fourth quarter. Our net capital expenditures for oil and natural gas activities in the fourth quarter of 2005 and 2004 were: Three Months Ended December 31, --------------------------- 2005 2004 ------------ ------------ (in thousands) Drilling $ 24,701 $$ 19,496 Land and seismic 6,887 2,278 Capitalized costs 1,211 1,261 Capitalized FAS 143 ARO 1,080 120 Total capital expenditures $ 33,879 $ 23,155 FULL YEAR 2006 AND FIRST QUARTER 2006 FORECAST The following forecasts and estimates of our full year 2006 production volumes and first quarter 2006 results are forward looking statements subject to the risks and uncertainties identified in the "Forward Looking Statements Disclosure" at the end of this release. In addition to providing guidance for the first quarter 2006, we have elected to provide full year production guidance for 2006. We currently expect to grow production volumes in 2006 by 10% to 25% relative to our 2005 production. This would result in average daily production of between 36.4 and 41.4 MMcfe per day (79% natural gas) for 2006. We currently expect first quarter 2006 production volumes to average between 35 and 37 MMcfe per day (79% natural gas). For the first quarter 2006, lease operating expenses are projected to be $0.65 per Mcfe, production taxes are projected to be approximately 5.5% of pre-hedge oil and natural gas revenues, and general and administrative expenses are projected to be $1.3 million ($0.42 to $0.40 per Mcfe). Based on these production and cost estimates and assuming average NYMEX prices of $9.04 per MMBtu for natural gas and $63.00 per barrel for oil, and taking into account our current outstanding derivative contracts, we forecast that our first quarter revenue will be between $27.4 and $29 million and operating income will be between $12.2 and $13.1 million. MANAGEMENT COMMENTS Gene Shepherd, Brigham's Chief Financial Officer, commented, "Our strong sequential production growth in the fourth quarter of 27% to 40.8 Mmcfe per day was the confirmation of the strong drilling results that we had announced in the second and third quarters of 2005. Furthermore, as we exit 2005 at record production levels, we are also encouraged by the success we have had in controlling our costs, with only moderate increases in operating and overhead costs. The combination of strong commodity prices, production growth and our ability to control our costs in a difficult cost environment all contributed to record revenue and operating income. Furthermore, we exited 2005 with one of the strongest balance sheets that we have had in the company's history. The company's strong underlying financial performance and its strong balance sheet should allow it to continue to benefit from Brigham's large and growing inventory of exploration and development prospects in this outstanding commodity price environment." 2005 PROVED RESERVES Our estimated net proved reserves volumes at December 31, 2005 totaled 133.2 Bcfe. Our estimated net proved developed reserves at December 31, 2005 totaled 68.1 Bcfe and our net proved undeveloped reserves totaled 65.1 Bcfe. During 2005, we added approximately 23.8 Bcfe in total proved reserves in our Texas Gulf Coast, Anadarko Basin and West Texas 3-D seismic projects and replaced 200% of the 11.9 Bcfe of reserves volumes we produced during the year. Our 2005 reserves additions included 20.1 Bcfe of extensions, discoveries and other additions and 4.4 Bcfe of purchases of reserves in place which were partially offset by 0.7 Bcfe of revisions to prior estimates. Approximately 85% of our year-end 2005 reserve volumes were natural gas. At year-end 2005, the standardized measure and the pre-tax present value ("Pre-tax PV-10% Value") of our estimated proved reserves were $396.3 million and $519.8 million, respectively. This compares to $239.7 million and $294.5 million at the end of 2004. For 2005, these measures were calculated using a West Texas Intermediate Sweet price of $61.04 per barrel and a Henry Hub natural gas price of $9.44 per MMBtu versus last year which used a West Texas Intermediate Sweet price of $ 43.46 per barrel and a Henry Hub natural gas price of $6.19 per MMBtu. Equivalent Reserves (MMcfe) ---------- 2005 Beginning Reserves 121,291 Extensions, discoveries & other additions 20,059 Revisions of prior estimates (661) Purchase of reserves in place 4,444 Production (11,913) 2005 Ending Reserves 133,220 MANAGEMENT COMMENTS Bud Brigham, Brigham's CEO and President, commented, "During 2005, approximately 52% of our drilling capital was spent on development drilling, which went very well, as evidenced by our substantial ramp up in production during the fourth quarter. Proved undeveloped wells received approximately 29% of our drilling capital, and these are wells that were already in our reserve report. Despite this, we replaced roughly 200% of our production during the year." Bud Brigham further stated, "Our most significant exploration discovery in 2005 was the Bouldin Lake Lower Frio Field, which was confirmed with the drilling of the Grisham #1 late in the year. We are commencing the first of two 2006 development wells capitalizing on this discovery, and with success we could have at least one additional well to drill. In prior years, our first year proved reserves have only recognized a portion of the reserves that moved to the proved category in subsequent years. Similarly, we believe that our 2005 Lower Frio field discoveries, at Bouldin Lake and Appling Deep Southwest, provide us with substantial probable and possible reserves that could become proved in subsequent years." CONFERENCE CALL INFORMATION Brigham management will host a conference call to discuss its operational and financial results for the fourth quarter and full year 2005 with investors, analysts and other interested parties on Wednesday, February 22nd, at 9:00 a.m. Central time. To participate in the call, participants within the U.S. please dial 800-510-0219 and participants outside the U.S. please dial 617-614-3451. The participant passcode for the call is 39617510. A telephone recording of the conference call will be available to interested parties approximately two hours after the call is completed through 11:59 p.m. Central time on Wednesday, March 22nd. To access the recording, domestic callers dial 888-286-8010 and international callers dial 617-801-6888. The passcode for the conference call playback is 21483731. In addition, a live and archived web cast of the conference call will be available over the Internet at either http://www.bexp3d.com or http://www.streetevents.com. A copy of this press release and other financial and statistical information about the periods covered by this press release and by the conference call that will take place on Wednesday, February 22nd, 2006, will be available on our website. To access the press release, go to http://www.bexp3d.com and click on News Releases. The file with a copy of the press release is named Brigham Exploration Reports Year End Results Including Record 2005 Financial Results and is dated February 21st, 2006. To access the other financial and statistical information that will be covered by the conference call that will take place on February 22nd, 2006, go to http://www.bexp3d.com and click on Event Calendar. The file with the other financial and statistical information is named Financial and Statistical Information for the Fourth Quarter 2005 Conference Call and is dated February 22nd, 2006. ABOUT BRIGHAM EXPLORATION Brigham Exploration Company is an independent exploration and production company that applies 3-D seismic imaging and other advanced technologies to systematically explore and develop onshore domestic natural gas and oil provinces. For more information about Brigham Exploration, please visit our website at http://www.bexp3d.com or contact Investor Relations at 512-427- 3444. FORWARD LOOKING STATEMENTS DISCLOSURE Except for the historical information contained herein, the matters discussed in this news release are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based upon current expectations. Important factors that could cause actual results to differ materially from those in the forward looking statements include risks inherent in exploratory drilling activities, the timing and extent of changes in commodity prices, unforeseen engineering and mechanical or technological difficulties in drilling wells, availability of drilling rigs, land issues, federal and state regulatory developments and other risks more fully described in the company's filings with the Securities and Exchange Commission. All forward looking statements contained in this release, including any forecasts and estimates, are based on management's outlook only as of the date of this release, and we undertake no obligation to update or revise these forward looking statements, whether as a result of subsequent developments or otherwise. Contact: John Turner Director - Director of Finance & Business Development (512) 427-3300 BRIGHAM EXPLORATION COMPANY SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Three Months Ended Year Ended December 31, December 31, ---------------------------- ---------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ (unaudited) Revenues: Oil and natural gas sales $ 36,494 $ 19,738 $ 96,820 $ 71,713 Other 84 446 220 515 $ 36,578 $ 20,184 $ 97,040 $ 72,228 Costs and expenses: Lease operating 2,012 1,811 7,161 6,173 Production taxes 1,444 673 3,353 3,107 General and administrative 1,814 1,669 5,533 5,392 Depletion of oil and natural gas properties 11,656 7,336 33,268 23,844 Depreciation and amortization 219 178 762 722 Accretion of discount on ARO 54 42 180 159 $ 17,199 $ 11,709 $ 50,257 $ 39,397 Operating income $ 19,379 $ 8,475 $ 46,783 $ 32,831 Interest expense, net (1,335) (636) (3,980) (3,144) Interest income 92 29 245 84 Other income (expense) (a) 275 901 (576) 742 Income before income taxes $ 18,411 $ 8,769 $ 42,472 $ 30,513 Income tax expense (6,512) (3,673) (15,037) (10,863) Net income $ 11,899 $ 5,096 $ 27,435 $ 19,650 Net income per share: Basic $ 0.27 $ 0.12 $ 0.65 $ 0.49 Diluted $ 0.26 $ 0.12 $ 0.63 $ 0.47 Wt. avg. common shares outstanding: Basic 43,389 42,005 42,481 40,445 Diluted 45,233 43,151 43,728 41,616 (a) Includes non-cash gains/(losses) related to our derivative contracts: $ 181 $ 852 $ (814) $ 625
BRIGHAM EXPLORATION COMPANY PRODUCTION, SALES PRICES AND OTHER FINANCIAL DATA
Three Months Ended Year Ended December 31, December 31, ---------------------------- ---------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ (unaudited) Avg. net daily production: Natural gas (MMcf) 32.7 25.8 25.6 24.5 Oil (Bbls) 1,344 1,375 1,250 1,590 Equivalent natural gas (MMcfe) (6:1) 40.8 34.1 33.1 34.1 Total net production: Natural gas (MMcf) 2,945 2,325 9,213 8,830 Oil (MBbls) 121 124 450 573 Equivalent natural gas (MMcfe) (6:1) 3,673 3,067 11,913 12,265 % Natural gas 80% 76% 77% 72% Sales prices (Before hedging): Natural gas ($/Mcf) $ 10.73 $ 6.56 $ 8.29 $ 6.05 Oil ($/Bbl) 58.66 47.84 54.73 40.13 Equivalent natural gas ($/Mcfe) (6:1) 10.54 6.90 8.48 6.23 Realized prices (Post hedging): Natural gas ($/Mcf) (a) $ 10.02 $ 6.30 $ 7.97 $ 5.84 Oil ($/Bbl) (a) 57.71 41.19 51.95 35.17 Equivalent natural gas ($/Mcfe) (6:1) (a) 9.94 6.44 8.13 5.85 (a) Includes the effects of hedging gains (losses) of: Natural gas ($/Mcf) $ (0.71) $ (0.26) $ (0.32) $ (0.21) Oil ($/Bbl) (0.95) (6.65) (2.78) (4.96)
SUMMARY CONSOLIDATED BALANCE SHEETS (in thousands) December 31, --------------------------- 2005 2004 ------------ ------------ Assets: Current assets $ 28,325 $ 20,994 Oil and natural gas properties, net (using full cost method) 347,329 261,979 Other property and equipment, net 1,027 1,209 Other non-current assets 3,746 2,125 Total assets $ 380,427 $ 286,307 Liabilities and stockholders' equity: Current liabilities $ 37,467 $ 40,494 Senior credit facility 33,100 21,000 Senior subordinated notes 30,000 20,000 Series A preferred stock, mandatorily redeemable 10,101 9,520 Deferred income taxes 23,563 9,031 Other non-current liabilities 4,556 2,986 Total liabilities $ 138,787 $ 103,031 Stockholders' equity 241,640 183,276 Total liabilities and stockholders' equity $ 380,427 $ 286,307 BRIGHAM EXPLORATION COMPANY SUMMARY CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Three Months Ended Year Ended December 31, December 31, --------------------------- --------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ (unaudited) Cash flows from operating activities: Net income $ 11,899 $ 5,096 $ 27,435 $ 19,650 Depletion, depreciation and amortization 11,875 7,514 34,030 24,566 Accretion of discount on ARO 54 42 180 159 Interest paid through issuance of additional redeemable preferred stock - 188 581 726 Amortization of deferred loan fees 118 192 491 766 Market value adjustments for derivatives instruments (181) (852) 814 (625) Provision for doubtful accounts 456 - 456 - Deferred income tax expense 6,512 3,673 15,037 10,863 Other non-cash items 31 - 134 - Changes in working capital and other items (6,447) 3,023 (14,779) 276 Cash flows provided by operating activities $ 24,317 $ 18,876 $ 64,379 $ 56,381 Cash flows used by investing activities (29,935) (23,162) (113,220) (84,645) Cash flows (used) provided by financing activities 3,720 (2,384) 50,535 24,766 Net increase (decrease) in cash and cash equivalents $ (1,898) $ (6,670) $ 1,694 $ (3,498)
SUMMARY PER MCFE DATA (unaudited)
Three Months Ended Year Ended December 31, December 31, --------------------------- --------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Revenues: Natural gas and oil sales $ 9.94 $ 6.44 $ 8.13 $ 5.85 Other revenue 0.02 0.15 0.02 0.04 $ 9.96 $ 6.59 $ 8.15 $ 5.89 Costs and expenses: Lease operating 0.55 0.59 0.60 0.50 Production taxes 0.39 0.22 0.28 0.25 General and administrative 0.49 0.54 0.46 0.44 Depletion of natural gas and oil properties 3.17 2.39 2.79 1.94 Depreciation and amortization 0.06 0.06 0.06 0.06 Accretion of discount on ARO 0.01 0.01 0.02 0.01 $ 4.67 $ 3.81 $ 4.21 $ 3.20 Operating income $ 5.29 $ 2.78 $ 3.94 $ 2.69 Interest expense, net (a) (0.34) (0.20) (0.31) (0.25) Other income (expense) (b) 0.03 0.02 0.02 0.01 Adjusted income $ 4.98 $ 2.60 $ 3.65 $ 2.45
(a) Calculated as interest expense minus interest income divided by production for period. (b) Excludes non-cash gains/(losses) arising from hedge accounting for certain of our oil and natural gas hedges. BRIGHAM EXPLORATION COMPANY SUMMARY OF COMMODITY PRICE HEDGES OUTSTANDING AS OF FEBRUARY 21, 2006 (unaudited)
FY 2006 Hedge ------------------------------------------------- FY 2007 Strategy Q1 Q2 Q3 Q4 Q1 ------------ ---------- ---------- ---------- ---------- ---------- Natural Gas Collars: Daily volumes MMBtu/d - 8,242 6,848 7,935 8,333 Floor (Purchased put) $/MMBtu Cash flow - $ 8.000 $ 8.000 $ 8.000 $ 8.000 Cap (Written call) $/MMBtu Cash flow - $ 15.894 $ 15.950 $ 20.854 $ 23.512 Natural Gas Three Way Costless Collars: Daily volumes MMBtu/d 6,667 4,286 4,239 1,413 - Floor (Purchased put) $/MMBtu Cash flow $ 8.490 $ 8.040 $ 8.040 $ 8.040 - Cap (Written call) $/MMBtu Cash flow $ 10.840 $ 9.590 $ 9.590 $ 9.590 - Written put $/MMBtu Undesignated $ 7.050 $ 6.650 $ 6.650 $ 6.650 - Oil Collars: Daily volumes Bbls/d 83 412 228 293 267 Floor (Purchased put) $/Bbl Cash flow $ 62.00 $ 52.11 $ 50.00 $ 50.00 $ 50.00 Cap (Written call) $/Bbl Cash flow $ 74.50 $ 75.34 $ 75.60 $ 77.50 $ 78.25 Oil Three Way Costless Collars: Daily volumes Bbls/d 200 82 163 - - Floor (Purchased put) $/Bbl Cash flow $ 48.00 $ 63.00 $ 63.00 - - Cap (Written call) $/Bbl Cash flow $ 60.70 $ 75.25 $ 75.65 - - Written put $/Bbl Undesignated $ 38.00 $ 48.00 $ 48.00 - -
Note: Hedged volumes and prices reflected in this table represent average contract amounts for the quarterly periods presented; natural gas hedge prices and oil hedge contract prices are based on NYMEX pricing. SOURCE Brigham Exploration Company -0- 02/21/2006 /CONTACT: John Turner, Director - Director of Finance & Business Development of Brigham Exploration Company, +1-512-427-3300/ /Web site: http://www.bexp3d.com / (BEXP)