Higher commodity prices and higher production both contributed to Energen Corp.'s strong financial performance in the second quarter when it recorded net income and income from continuing operations totaling $37.6 million, or 51 cents per diluted share, compared to $22.3 million, or 30 cents per diluted share in the second quarter of 2004.
Included in the 2005 numbers is a non-cash, after-tax gain of $2.7 million, or 4 cents per diluted share, related to the timing of mark-to-market derivatives. The same period a year ago showed and included a net loss of $0.8 million, or 1 cent per diluted share, due to other events.
The Birmingham, AL-based firm affirmed its 2005 earnings guidance range of $2.23-$2.33 per diluted share and increased its 2006 earnings guidance to $2.85-$3.15 per diluted share. The prior 2006 guidance range was $2.70-$2.90 per diluted share. Included in the 2005 guidance is an estimated 1.6 cents per diluted share from an unidentified acquisition of $200 million budgeted to occur in the fourth quarter, the company said.
The 2005 earnings guidance is based on estimated increases in commodity prices for the unhedged portion of its production. While about 80% of its production for the remainder of 2005 is hedged at about $5.95/Mcf, Energen estimated the unhedged portion would bring in $7.50/Mcf for gas from August through December and 71/cents/gallon for NGLs July through December.
For 2006 the company has about 45% of its production hedged at $7.17/Mcf. It has 37% of NGLs hedged at 56/cents/gallon.
The bulk of the corporate income came from its Energen Resources division which racked up 2Q income from continuing operations of $36.4 million and compared with prior-year results of $21.8 million. Its Alagasco natural gas distribution operations earned net income of $1.1 million in the second quarter of 2005 as compared with net income of $0.6 million in the same period last year.
Second quarter production from continuing operations rose 8.5% from the same period last year to total 22.9 Bcfe. Natural gas production and NGL production each increased approximately 10% to 15.2 Bcf and 18.6 million gallons (MMgal), respectively, primarily due to the company's August 2004 acquisition of coalbed methane properties in the San Juan Basin. Energen's oil production increased 2% to 848,000 barrels.
The company's average sales price for its natural gas production increased 31% to $6.22/Mcf in 2Q 2005 as compared with the same period a year ago. The average sales price of NGL production increased 24% to 52 cents per gallon. Average sales prices reflect the impact of all hedges, including mark-to-market derivatives, and basis differentials and are not NYMEX-equivalent prices.
Energen Resources' overall production for 2005 is estimated to total 93.7 Bcfe, including 1.8 Bcfe associated with a budgeted, fourth quarter property acquisition.
"We are very pleased with the progress of our two lines of business in 2005," said Energen's CEO Mike Warren. "Not only is Energen benefiting from the fundamental strengths of its successful business plans, but continued commodity price strength further enhances our earnings growth potential."
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