form8k.htm
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): February 18, 2010
(February 16, 2010)
CRIMSON
EXPLORATION INC.
(Exact
Name of Registrant as Specified in Charter)
|
Delaware
(State
or Other Jurisdiction of Incorporation)
|
000-21644
(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
2.02 Results of Operations and Financial Condition.
On February 16, 2010, Crimson
Exploration Inc. issued a press release announcing results of production and
drilling activity during the year and quarter ended December 31, 2009 and
year-end 2009 reserves, together with other selected fourth quarter and year-end
financial data. The press release is included in this report as Exhibit
99.1.
The information contained in Exhibit
99.1 is incorporated herein by reference. The information in this Current Report
is being furnished and shall not be deemed “filed” for the purposes of Section
18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to
the liabilities of that Section. The information in this Current Report shall
not be incorporated by reference into any registration statement or other
document pursuant to the Securities Act of 1933, as amended.
Item
9.01Financial Statements and
Exhibits.
|
Exhibit
Number
|
Description
|
|
99.1
|
Press
Release dated February 16, 2010
|
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:
|
February
18, 2010
|
/s/
E. Joseph Grady
|
|
|
|
E.
Joseph Grady
|
|
|
|
Senior
Vice President and Chief Financial
Officer
|
Exhibit
Index
|
Exhibit
Number
|
Description
|
|
99.1
|
Press
Release dated February 16, 2010
|
EXHIBIT
99.1
Crimson Exploration Inc Announces
Fourth Quarter 2009 Production Results, Year-End Reserves, and 2010 Operational
Guidance - Houston, TX – (BUSINESS WIRE) – February 16, 2010 -
Crimson Exploration Inc. (NasdaqGM: CXPO) today announced
production results and drilling activity for the fourth quarter of 2009,
year-end 2009 reserves and guidance for 2010 production and capital
expenditures.
Production
Update
Crimson
produced an estimated 3.2 Bcfe of natural gas equivalents, or approximately
34,800 Mcfe per day, during the fourth quarter 2009, compared with 4.6 Bcfe, or
50,300 Mcfe per day, produced during the fourth quarter of 2008. For the year
ended 2009, Crimson produced an estimated 14.9 Bcfe of natural gas equivalents,
or approximately 40,900 Mcfe per day, compared with 19.2 Bcfe, or 52,600 Mcfe
per day, produced in 2008. New production resulting from a very limited drilling
program in 2009 was not sufficient to offset normal field decline in our
existing production. Fourth quarter 2009 production was also negatively impacted
by approximately 1,500 Mcfe per day by a retroactive dispute settlement related
to royalty payments on certain lease use gas and a retroactive adjustment to
production previously recognized from certain non-operated conventional
properties. Average production associated with the December 29, 2009 divestiture
of certain non-core Louisiana assets was approximately 2,200 Mcfe per day for
the fourth quarter of 2009 compared to approximately 4,900 Mcfe per day for the
fourth quarter 2008.
As a
result of the divestiture of our south Louisiana assets at the end of 2009, and
with new production from our 2010 drilling program not expected to commence
until the latter part of the first quarter, forecasted production for the first
quarter of 2010 is expected to average between 30,000 and 32,000 Mcfe per day.
As we proceed with our drilling program during 2010, we anticipate production to
increase ratably during the year, resulting in an average rate of between 35,000
and 39,000 Mcfe per day for the year.
Year-End
Proved Reserves
The
following table summarizes Crimson’s total proved reserves as of December 31,
2009:
|
|
|
|
|
|
|
|
|
Net
Reserves
|
|
Present
Worth
|
|
|
|
Oil
|
|
NGL
|
|
Gas
|
|
Discounted
|
|
Category
|
|
(Barrels)
|
|
(Barrels)
|
|
(MCF)
|
|
at
10% ($)
|
|
Developed
|
|
1,274,262
|
|
1,976,757
|
|
49,075,274
|
|
140,539,100
|
|
Undeveloped
|
|
689,862
|
|
663,956
|
|
20,784,320
|
|
35,883,600
|
|
Total
Proved
|
|
1,964,124
|
|
2,640,713
|
|
69,859,594
|
|
176,422,700
|
Proved
reserves at December 31, 2009, as estimated by Netherland, Sewell, and
Associates, Inc., our independent reservoir engineering firm in accordance with
new reserve reporting guidelines mandated by the Securities & Exchange
Commission (“SEC”), were 97.5 Bcfe, with a PV-10 value of approximately $176.4
million. Our year-end proved reserves do not include the 7.6
Bcfe
of proved
reserves attributed (as of September 30, 2009) to our south Louisiana assets
sold on December 29, 2009. Year-end commodity prices used in
calculating the present value of our reserves are based on the 12-month
unweighted arithmetic average of the first-day-of-the-month price for the period
January through December 2009. For oil and NGL volumes, the average West Texas
Intermediate posted price of $57.65 per barrel is adjusted by field area for
quality, transportation fees, and regional price differentials. For gas volumes,
the average Henry Hub spot price of $3.87 per MMBTU is adjusted by field area
for energy content, transportation fees and regional price differentials. All
prices are held constant throughout the lives of the properties. Year-end proved
reserves were 88% natural gas and natural gas liquids and 70% proved
developed.
The
changes in the SEC’s reserve reporting guidelines at December 31, 2009 makes it
difficult to fully understand the year over year change from December 31, 2008;
therefore, we have included for comparative purposes, the following table
summarizing Crimson’s estimated December 31, 2009 proved reserves calculated
using the former SEC price rules.
|
|
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Net
Reserves
|
|
Present
Worth
|
|
|
|
Oil
|
|
NGL
|
|
Gas
|
|
Discounted
|
|
Category
|
|
(Barrels)
|
|
(Barrels)
|
|
(MCF)
|
|
at
10% ($)
|
|
Developed
|
|
1,366,652
|
|
2,094,742
|
|
54,620,626
|
|
226,862,149
|
|
Undeveloped
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711,664
|
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664,284
|
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30,988,689
|
|
78,131,188
|
|
Total
Proved
|
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2,078,316
|
|
2,759,026
|
|
85,609,315
|
|
304,993,337
|
Proved
reserves at December 31, 2009 utilizing former SEC guideline pricing for oil and
natural gas were 114.6 Bcfe, with a PV-10 value of approximately $305.0 million
based on year-end 2009 prices, held flat. Commodity prices that would have been
used in calculating the present value of our reserves under the old SEC rules
are based on posted spot prices as of December 31, 2009. For oil and NGL
volumes, the average West Texas Intermediate spot price of $79.36 per barrel is
adjusted by field area for quality, transportation fees, and regional price
differentials. For gas volumes, the average Henry Hub spot price of $5.79 per
MMBTU is adjusted by field area for energy content, transportation fees and
regional price differentials.
We have
also included the following table that reflects industry market pricing
perceptions in the calculation of our year-end 2009 reserves utilizing NYMEX
futures contract strip pricing:
|
|
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Net
Reserves
|
|
Present
Worth
|
|
|
|
Oil
|
|
NGL
|
|
Gas
|
|
Discounted
|
|
Category
|
|
(Barrels)
|
|
(Barrels)
|
|
(MCF)
|
|
at
10% ($)
|
|
Developed
|
|
1,389,421
|
|
2,123,409
|
|
56,023,329
|
|
250,779,902
|
|
Undeveloped
|
|
717,034
|
|
664,359
|
|
31,486,160
|
|
94,885,070
|
|
Total
Proved
|
|
2,106,455
|
|
2,787,768
|
|
87,509,489
|
|
345,664,972
|
Proved
reserves at December 31, 2009 utilizing year-end NYMEX futures contract strip
pricing for oil and natural gas were 116.9 Bcfe, with a PV-10 value of
approximately $345.7 million. Commodity prices used in calculating the present
value of our reserves are based on the NYMEX closing prices, as of December 31,
2009, for the 2011 and 2012 contract years. The
average
natural gas contract prices per MMBTU for 2010, 2011, and 2012 were $5.79,
$6.34, and $6.53, respectively. The average crude oil contract prices per
barrel for 2010, 2011, and 2012 were $73.88, $77.15, and $87.83,
respectively. The average prices for 2012 were applied in subsequent years
(resulting in three years of market estimated escalating commodity prices
followed by flat prices for the remainder of the life of the reserves).
Unrealized mark to market gain or loss that existed in our financial commodity
price hedge contracts was not considered in any of the estimates of PV-10 value
at year-end.
Capital
Expenditures
Capital
expenditures for the fourth quarter of 2009 were approximately $5.3 million,
with approximately 80% of the expenditures related to our East Texas resource
play. For the full year ended 2009, capital expenditures were $21.4 million
compared to $207.2 million in 2008 ($118.0 million, excluding producing property
acquisitions and undeveloped leasehold acquisition costs). This significant
decrease in expenditures was primarily due to the reduction in our 2009 capital
program to focus on reducing debt during that environment of low commodity
prices and limited capital availability.
The
significant improvement in our financial flexibility resulting from our recent
equity offering positions us to pursue a 2010 capital program that will allow us
to expand development of the potential in our East Texas and South Texas
resource plays, in addition to increasing reserves, production and cash flow
from our conventional assets. Our planned capital program for 2010 includes
drilling seven Haynesville/Mid-Bossier Shale wells in East Texas, four wells
targeting the Yegua/Cook Mountain formations in Southeast Texas and one Eagle
Ford Shale well in South Texas. We have forecasted our 2010 capital expenditures
to be approximately $50-$56 million compared to the $21.4 million spent in 2009.
Our planned strategy for 2010 is to keep our capital expenditures closely
aligned with internally generated cash flow from operations.
Divestiture
of Non-Core South Louisiana Assets
On
December 28, 2009 we closed on a definitive agreement to sell non-core operated
and non-operated working interests in various producing wells, related
production equipment and associated acreage primarily in Cameron, Calcasieu and
Jefferson Davis parishes in southwest Louisiana for an aggregate contract price
of $7.8 million, with net proceeds of approximately $7.3 million after
normal purchase price adjustments. The loss on sale recognized related to
the divestiture of these assets was approximately $6.8 million. The assets
included substantially all of our southwest Louisiana properties, representing
approximately 7.6 Bcfe of proved reserves at September 30, 2009 and average
daily production of approximately 3,100 Mcfe per day for the year ended
December 31, 2009, or approximately 7.5% of our total daily production for such
period. The sale of these assets represents a strategic exit from all operations
in south Louisiana and removes approximately $5.3 million of our total recorded
asset retirement obligation at December 31, 2009.
Drilling
Activity
East Texas – Haynesville
Shale and Mid-Bossier Shale
During
the fourth quarter of 2009, Crimson announced the successful completion of the
company’s first well in East Texas; the Kardell #1H which recorded the highest
24-hour gas rate reported to date in the entire Haynesville Shale play (30.7
Mcfe per day). Since that time the well has produced almost 1 Bcf of natural gas
in the first 90 days of production. The Kardell well brought significant
attention to San Augustine County as a potential new “Core Area” of the
play. We have recently executed a one-year rig contract for our planned
drilling activity in East Texas. The first of five planned operated wells during
2010 is expected to spud in early March. Crimson has approximately
12,000 net acres in San Augustine and Sabine counties that it considers highly
prospective in the Haynesville Shale, Mid-Bossier Shale and James Lime
formations.
South Texas- Eagle Ford
Shale
Crimson
also commenced drilling in the fourth quarter of 2009 a 14,300’ pilot well to
test the Edwards and Eagle Ford Shale potential at its NW Pawnee prospect in Bee
County, Texas. In January, the Dubose #1 was completed as a vertical well in the
Eagle Ford shale between 13,100 and 13,225 feet. The well flowed 600 Mcf
per day at 2,400 psi flowing tubing pressure on an 8/64” choke after a small
fracture stimulation. The well is currently shut-in due to limited
production facilities. Crimson is encouraged by the results from the
Dubose #1 and the potential of a future Eagle Ford horizontal well,
which we currently have planned for the second half of 2010. Crimson has
approximately 2,800 gross acres under lease around the Dubose #1
well.
Southeast Texas - Liberty
County
Crimson
recently executed a multi-well drilling contract for its 2010 Liberty County
drilling program where it has a total of four consecutive wells planned for the
year. The first well, the Schwarz # 1 ST
commenced operations during the first week of February 2010 targeting the Cook
Mountain objective between 14,500’ and 15,500’.
Crimson
Exploration is a Houston, TX-based independent energy company engaged in the
acquisition, development, exploitation and production of crude oil and natural
gas, primarily in the onshore Gulf Coast regions of the United States. At
present, the Company owns and operates conventional properties in Texas,
Louisiana, Colorado and Mississippi, approximately 12,000 net acres in the
highly prospective Haynesville Shale, Mid-Bossier, and James Lime formations in
San Augustine and Sabine counties in East Texas, a prospective Eagle Ford
acreage position in South Texas and production and acreage in the Denver
Julesburg Basin of Colorado.
Additional
information on Crimson Exploration Inc. is available on the Company's website at
http://crimsonexploration.com.
This
press release includes “forward-looking statements” as defined by the Securities
and Exchange Commission (“SEC”). Such statements include those
concerning Crimson’s strategic plans, expectations and objectives for future
operations. All statements included in this press release that
address activities, events or developments that Crimson expects, believes or
anticipates will or may occur in the future are forward-looking
statements. These statements are based on certain assumptions Crimson
made based on
its
experience and perception of historical trends, current conditions, expected
future developments and other factors it believes are appropriate under the
circumstances. Such statements are subject to a number of
assumptions, risks and uncertainties, many of which are beyond Crimson’s
control. Statements regarding future production, revenue and cash
flow are subject to all of the risks and uncertainties normally incident to the
exploration for and development and production of oil and gas. These
risks include, but are not limited to, commodity price changes, inflation or
lack of availability of goods and services, environmental risks, drilling risks
and regulatory changes and the potential lack of capital
resources. Investors are cautioned that any such statements are not
guarantees of future performance and that actual results or developments may
differ materially from those projected in the forward-looking
statements. Please refer to our filings with the SEC, including our
Form 10-K for the year ended December 31, 2008 and our 424B4 prospectus, for a
further discussion of these risks.
Contact: Crimson
Exploration Inc., Houston, TX
E. Joseph Grady,
713-236-7400
Source: Crimson
Exploration Inc.