Delaware
(State
or other jurisdiction
of
incorporation or organization)
|
41-0518430
(I.R.S.
Employer Identification No.)
|
1776
Lincoln Street, Suite 700, Denver, Colorado
(Address
of principal executive offices)
|
80203
(Zip
Code)
|
Title
of each class
|
Name
of each exchange on which registered
|
|
Common
stock, $.01 par value
|
New
York Stock Exchange
|
Large
accelerated filer þ
|
Accelerated
filer o
|
Non-accelerated
filer o (Do
not check if a smaller reporting company)
|
Smaller
reporting company o
|
TABLE OF CONTENTS
|
||
ITEM
|
PAGE
|
|
PART
I
|
||
ITEMS
1. and 2.
|
BUSINESS
and
PROPERTIES
|
1
|
General
|
1
|
|
Strategy
|
1
|
|
Significant Developments in
2009
|
1
|
|
Outlook for
2010
|
4
|
|
Assets
|
4
|
|
Reserves
|
9
|
|
Production
|
13
|
|
Productive
Wells
|
14
|
|
Drilling
Activity
|
14
|
|
Acreage
|
15
|
|
Delivery
Commitments
|
15
|
|
Major
Customers
|
16
|
|
Employees and Office
Space
|
16
|
|
Title to
Properties
|
16
|
|
Seasonality
|
16
|
|
Competition
|
16
|
|
Government
Regulations
|
17
|
|
Cautionary Information about
Forward-Looking Statements
|
18
|
|
Available
Information
|
20
|
|
Glossary of Oil and Natural Gas
Terms
|
21
|
|
ITEM
1A.
|
RISK
FACTORS
|
26
|
ITEM
1B.
|
UNRESOLVED
STAFF
COMMENTS
|
39
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
39
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
39
|
ITEM
4A.
|
EXECUTIVE
OFFICERS OF THE
REGISTRANT
|
39
|
PART
II
|
||
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY,
RELATED
STOCKHOLDER MATTERS AND ISSUER
PURCHASES
OF EQUITY
SECURITIES
|
43
|
ITEM
6.
|
SELECTED
FINANCIAL
DATA
|
48
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
|
50
|
Overview of the
Company
|
50
|
|
Financial Results of Operations
and Additional Comparative Data
|
58
|
|
Comparison of Financial Results
and Trends between
2009 and
2008
|
62
|
|
Comparison of Financial Results
and Trends between
2008 and
2007
|
66
|
|
Overview of Liquidity and
Capital
Resources
|
68
|
|
Critical Accounting Policies
and
Estimates
|
79
|
|
Other Liquidity and Capital
Resources
Information
|
82
|
|
Accounting
Matters
|
82
|
|
Environmental
|
82
|
|
Climate Change | 83 |
TABLE OF CONTENTS
|
||
(Continued)
|
||
ITEM
|
PAGE
|
|
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT
MARKET
RISK (included with the content of ITEM
7)
|
85
|
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
85
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON
ACCOUNTING AND FINANCIAL
DISCLOSURE
|
85
|
ITEM
9A.
|
CONTROLS
AND
PROCEDURES
|
85
|
ITEM
9B.
|
OTHER
INFORMATION
|
88
|
PART
III
|
||
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE
|
88
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
88
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
AND MANAGEMENT AND RELATED
STOCKHOLDER
MATTERS
|
88
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS,
AND
DIRECTOR
INDEPENDENCE
|
88
|
ITEM
14.
|
PRINCIPAL
ACCOUNTANT FEES AND
SERVICES
|
89
|
PART
IV
|
||
ITEM
15.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
89
|
·
|
Acquire
significant leasehold positions in new and emerging resource
plays
|
·
|
Leverage
our core competencies in drilling and completions, as well as
acquisitions
|
·
|
Exploit
our legacy assets and optimize our asset base through divestitures of
non-core assets when appropriate
|
·
|
Maintain
a strong balance sheet while funding the growth of the
enterprise.
|
·
|
Broad Economic
Downturn. Beginning in the latter part of 2008 and
continuing into the first half of 2009 the global economy experienced a
significant downturn related primarily to concerns over the U.S. financial
system. The impact of the downturn spread quickly and affected
a wide range of industries. There were two significant
ramifications to the exploration and production industry. The
first was that capital markets were essentially frozen at the beginning of
2009. Equity, debt, and credit markets were shut
down. We were able to weather this initial shock as a result of
our strong liquidity position and relatively limited capital
commitments. The second impact to the industry was that fear of
global recession and the associated negative impact on energy demand
resulted in a significant decline in oil and gas prices. We
significantly scaled back our operating activity in response to these
price decreases. Our hedging program helped moderate the price
fluctuations that we experienced, particularly in the first half of
2009. After the first quarter of 2009, the broader economy
began to stabilize. The public markets for debt and equity
opened up and banks began to be
|
less
restrictive with credit. We were able to renew our credit
facility in April of 2009. The outlook for commodity prices
also began to improve. The rapid decrease in activity across
the exploration and production industry led many oilfield service
companies to cut their prices to the benefit of ourselves and our peers as
the year progressed. As industry conditions improved throughout
the year, drilling activity increased in many parts of the
country.
|
·
|
Advancement of Resource Play
Potential. From late 2007 through 2009, we established
meaningful positions in several new potential resource plays, principally
the Eagle Ford shale, Haynesville shale, and the Marcellus
shale. Over the past year we worked to advance our
understanding of these plays and move them closer to development
mode. The greatest progress was made in our Eagle Ford shale
program in South Texas. We successfully tested seven wells
across our operated acreage position during the second half of
2009. The early results from this program suggest wells at the
southern end of our acreage will produce drier gas while wells drilled
further north will produce higher BTU-content gas and
condensate. We are currently booking only the parallel offsets
to producing wells as proved undeveloped locations. As a
result, meaningful potential exists to grow proved reserves on our
operated acreage because of our planned drilling activity for
2010. On our joint venture acreage in Dimmitt County, Texas, we
believe these wells will produce even higher amounts of condensate and oil
compared to our operated position. In the Haynesville shale
program in the ArkLaTex region, a number of successful wells were drilled
around our acreage position in Shelby and San Augustine counties in East
Texas in 2009. The 3D seismic shoot of our acreage was recently
received, and we have begun our horizontal drilling in the
play. In our Marcellus shale program in north central
Pennsylvania, we drilled and completed our first two horizontal wells
during 2009. Initial indications from the well tests were
encouraging. We are in the process of constructing the
gathering system that will connect these two wells, as well as future
wells, to the sales pipeline.
|
·
|
Volatility in Commodity
Prices. Prices in 2009 were generally more stable than
in 2008. However the exploration and production sector still
experienced significant volatility in the prices for crude oil and natural
gas. Our operations and financial condition are significantly
impacted by these prices. The spot price for NYMEX crude oil in
2009 ranged from a high of $81.04 per barrel in October to a low of $33.98
per barrel in February. The average spot price for oil during
the year was $61.99 per barrel. The volatility in crude oil
prices in early 2009 was driven by concern regarding global demand for
oil. A volatile U.S. dollar was also a contributing factor in
crude price volatility as the spot price of oil reacted to the relative
weakening or strengthening of the U.S.
dollar.
|
·
|
Decrease in Year-End Proved
Reserve Estimates. Our estimated proved reserves
decreased 11 percent to 772.2 BCFE at December 31, 2009, from
865.5 BCFE at December 31, 2008. We
added 109.6 BCFE from our drilling program during the year, with our
emerging resource play in the Eagle Ford shale in the Maverick Basin in
South Texas contributing a significant portion of those
additions. Our programs targeting the Woodford shale in eastern
Oklahoma and the Bakken/Three Forks formations in the North Dakota portion
of the Williston Basin also added meaningful additions in
2009. We sold 44.2 BCFE of proved reserves during the year,
with roughly 90 percent of those relating to the divestiture of our
coalbed methane project at Hanging Woman Basin along the border of Montana
and Wyoming. The balance of the divested properties sold in
2009 related to non-strategic assets spread across our
company.
|
·
|
Impairment of Proved
Properties. We recognized pre-tax non-cash impairments
of proved properties in the amount of $174.8 million in 2009 compared with
$302.2 million of proved property impairments in 2008. A
significant decrease in commodity prices, including differentials, during
the first quarter of 2009 caused the majority of the non-cash
impairment. The largest portion of the impairment in 2009 was
$97.3 million related to assets located in the Mid-Continent region which
were significantly impacted by both low natural gas prices and wider than
normal differentials at the end of the first quarter. The
ArkLaTex region was impacted by a $20.4 million impairment related to
downward pricing and engineering revisions. We incurred a $14.0
million impairment of proved properties related to the write-down of
certain assets located in the Gulf of Mexico for which we are
relinquishing our ownership interests to satisfy our abandonment
obligations.
|
·
|
Abandonment and Impairment of
Unproved Properties. During the year, we abandoned or
impaired $45.4 million related to unproved properties. The
largest specific components of the 2009 impairment and abandonment related
to the Floyd Shale acreage located in Mississippi and acreage in
Oklahoma. The remaining write-offs were related to acreage
we
believe we will not keep based on our current capital allocation plans or
related to acreage that we do not believe will be
prospective.
|
·
|
Divestiture of Non-Strategic
Properties. In 2009 we undertook an effort to sell a
number of non-strategic properties in order to optimize our
portfolio. The objective of these divestitures is to dispose of
properties with limited future drilling potential while generating cash
that can be used in the testing and development of our resource
plays. During 2009 we sold roughly 44.2 BCFE of reserves, the
vast majority of which related to our coalbed methane program in Hanging
Woman Basin. We received $39.9 million in proceeds from
the sales we closed in 2009. Subsequent to year end, we closed
on a portion of our previously disclosed sale of non-strategic oil and gas
properties in the Rocky Mountain region. The Wyoming
sub-package was sold to Legacy Reserves Operating LP. The cash
received at closing was $118.7 million before commission costs. The
final sales price is subject to normal post-closing adjustments and is
expected to be finalized by the end of second quarter of
2010. Additionally, subsequent to year-end, we also entered
into agreements to sell the
|
remaining
non-core properties from our Rocky Mountain divestiture package in North
Dakota for $137 million to Sequel Energy Partners LP, as well as some
other minor properties for approximately $6 million. We expect
these divestitures to close by the end of the first quarter of
2010. In total, these divestitures represent 71 BCFE of proved
reserves.
|
ArkLaTex
|
Mid-
Continent
|
South
Texas & Gulf Coast
|
Permian
|
Rocky
Mountain
|
Total(1)
(2)
|
|||||||||||||
2009
Proved Reserves
|
||||||||||||||||||
Oil
(MMBbl)
|
0.4 | 1.1 | 1.4 | 14.2 | 36.7 | 53.8 | ||||||||||||
Gas
(Bcf)
|
117.8 | 216.7 | 44.9 | 30.1 | 40.0 | 449.5 | ||||||||||||
Equivalents
(BCFE)
|
120.0 | 223.5 | 53.2 | 115.2 | 260.3 | 772.2 | ||||||||||||
Relative
percentage
|
15% | 29% | 7% | 15% | 34% | 100% | ||||||||||||
Proved
Developed %
|
65% | 83% | 53% | 83% | 93% | 82% | ||||||||||||
PV-10
Values (in millions)
|
||||||||||||||||||
Proved
Developed
|
$ | 92.1 | $ | 266.3 | $ | 50.5 | $ | 295.5 | $ | 548.7 | $ | 1,253.1 | ||||||
Proved
Undeveloped (3)
|
0.1 | (7.4 | ) | (2.0 | ) | 34.9 | 5.4 | 31.0 | ||||||||||
Total
Proved
|
$ | 92.2 | $ | 258.9 | $ | 48.5 | $ | 330.4 | $ | 554.1 | $ | 1,284.1 | ||||||
Relative
percentage
|
7% | 20% | 4% | 26% | 43% | 100% | ||||||||||||
2009
Production
|
||||||||||||||||||
Oil
(MMBbl)
|
0.1 | 0.3 | 0.4 | 1.8 | 3.7 | 6.3 | ||||||||||||
Gas
(Bcf)
|
14.2 | 34.4 | 7.2 | 4.1 | 11.2 | 71.1 | ||||||||||||
Equivalent
(BCFE)
|
14.9 | 36.0 | 9.7 | 15.2 | 33.3 | 109.1 | ||||||||||||
Avg.
Daily Equivalents
(MMCFE/d)
|
40.8 | 98.7 | 26.6 | 41.5 | 91.2 | 298.8 | ||||||||||||
Relative
percentage
|
14% | 33% | 9% | 14% | 30% | 100% | ||||||||||||
(1)
|
Totals
may not add due to rounding.
|
(2)
|
Included
in the total are approximately 71 BCFE related to non-core properties that
we have either divested or entered into agreements to divest subsequent to
December 31, 2009.
|
(3)
|
St.
Mary will record proved undeveloped locations with a negative PV-10 value
if we have intent to drill the well provided it generates positive net
undiscounted cash flow and meets our economic criteria based on our
corporate price call.
|
As
of December 31,
|
|||||||||
Reserves
data:
|
2009
|
2008
|
2007
|
||||||
Proved
developed
|
|||||||||
Oil
(MMBbl)
|
48.1 | 47.1 | 68.3 | ||||||
Gas
(Bcf)
|
342.0 | 433.2 | 426.6 | ||||||
BCFE
|
630.3 | 715.8 | 836.3 | ||||||
Proved
undeveloped
|
|||||||||
Oil
(MMBbl)
|
5.7 | 4.3 | 10.5 | ||||||
Gas
(Bcf)
|
107.5 | 124.2 | 186.9 | ||||||
BCFE
|
141.9 | 149.7 | 250.2 | ||||||
Total
Proved
|
|||||||||
Oil
(MMBbl)
|
53.8 | 51.4 | 78.8 | ||||||
Gas
(Bcf)
|
449.5 | 557.4 | 613.5 | ||||||
BCFE
|
772.2 | 865.5 | 1,086.5 | ||||||
Proved
developed reserves %
|
82% | 83% | 77% | ||||||
Proved
undeveloped reserves %
|
18% | 17% | 23% | ||||||
Reserve
Value info (in thousands)
|
|||||||||
Proved
developed PV-10
|
$ | 1,253,056 | $ | 1,214,380 | $ | 3,300,213 | |||
Proved
undeveloped PV-10
|
31,029 | 51,005 | 560,974 | ||||||
Total
proved PV-10 value
|
$ | 1,284,085 | $ | 1,265,385 | $ | 3,861,187 | |||
Standardized
measure of discounted future cash flows
|
1,015,967 | 1,059,069 | 2,706,914 | ||||||
Reserve
replacement – drilling and acquisitions, excluding
revisions
|
100% | 174% | 211% | ||||||
All
in – including sales of reserves
|
14% | (93)% | 248% | ||||||
All
in – excluding sales of reserves
|
55% | (39)% | 249% | ||||||
Reserve
life (years) (1)
|
7.1 | 7.6 | 10.1 | ||||||
(1)
|
Reserve
life represents the estimated proved reserves at the dates indicated
divided by actual production for the preceding 12-month
period
|
As
of December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Standardized
measure of discounted future net cash flows
|
$ | 1,015,967 | $ | 1,059,069 | $ | 2,706,914 | |||
Add:
10 percent annual discount, net of income taxes
|
732,997 | 724,840 | 2,321,983 | ||||||
Add:
future income taxes
|
515,953 | 419,544 | 2,316,637 | ||||||
Undiscounted
future net cash flows
|
$ | 2,264,917 | $ | 2,203,453 | $ | 7,345,534 | |||
Less:
10 percent annual discount without tax effect
|
(980,832 | ) | (938,068 | ) | (3,484,347 | ) | |||
PV-10
value
|
$ | 1,284,085 | $ | 1,265,385 | $ | 3,861,187 |
As
of December 31, 2009
|
|||
Reserves
data:
|
|||
Proved
developed
|
|||
Oil
(MMBbl)
|
53.0 | ||
Gas
(Bcf)
|
382.9 | ||
BCFE
|
700.8 | ||
Proved
undeveloped
|
|||
Oil
(MMBbl)
|
8.8 | ||
Gas
(Bcf)
|
143.9 | ||
BCFE
|
196.4 | ||
Total
Proved
|
|||
Oil
(MMBbl)
|
61.8 | ||
Gas
(Bcf)
|
526.8 | ||
BCFE
|
897.2 | ||
Proved
developed reserves
|
78% | ||
Proved
undeveloped reserves
|
22% | ||
Reserve
Value info (in thousands)
|
|||
Proved
developed PV-10
|
$ | 2,207,906 | |
Proved
undeveloped PV-10
|
235,805 | ||
Total
proved PV-10 value
|
$ | 2,443,711 |
Years
Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
Net
production
|
|||||||||
Oil
(MMBbl)
|
6.3 | 6.6 | 6.9 | ||||||
Gas
(Bcf)
|
71.1 | 74.9 | 66.1 | ||||||
BCFE
|
109.1 | 114.6 | 107.5 | ||||||
Average
net daily production
|
|||||||||
Oil
(MBbl)
|
17.3 | 18.1 | 18.9 | ||||||
Gas
(MMcf)
|
194.8 | 204.7 | 181.0 | ||||||
MMCFE
|
298.8 | 313.1 | 294.5 | ||||||
Average
realized sales price, excluding the effects of hedging
|
|||||||||
Oil
(per Bbl)
|
$ | 54.40 | $ | 92.99 | $ | 67.56 | |||
Gas
(per Mcf)
|
$ | 3.82 | $ | 8.60 | $ | 6.74 | |||
Per
MCFE
|
$ | 5.65 | $ | 10.99 | $ | 8.48 | |||
Average
realized sales price, including the effects of hedging
|
|||||||||
Oil
(per Bbl)
|
$ | 56.74 | $ | 75.59 | $ | 62.60 | |||
Gas
(per Mcf)
|
$ | 5.59 | $ | 8.79 | $ | 7.63 | |||
Per
MCFE
|
$ | 6.94 | $ | 10.11 | $ | 8.71 | |||
Production
costs per MCFE
|
|||||||||
Lease
operating expense
|
$ | 1.33 | $ | 1.46 | $ | 1.31 | |||
Transportation
expense
|
$ | 0.19 | $ | 0.19 | $ | 0.14 | |||
Production
taxes
|
$ | 0.37 | $ | 0.71 | $ | 0.58 |
Years
Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
|||||||
Development:
|
||||||||||||
Oil
|
103 | 29.64 | 221 | 81.46 | 164 | 77.91 | ||||||
Gas
|
74 | 18.15 | 559 | 205.18 | 518 | 204.62 | ||||||
Non-productive
|
3 | 1.29 | 25 | 13.70 | 30 | 13.18 | ||||||
180 | 49.08 | 805 | 300.34 | 712 | 295.71 | |||||||
Exploratory:
|
||||||||||||
Oil
|
2 | 0.42 | 2 | 0.40 | 3 | 1.92 | ||||||
Gas
|
18 | 9.05 | 10 | 2.75 | 9 | 4.01 | ||||||
Non-productive
|
5 | 2.88 | 1 | 0.76 | 5 | 2.58 | ||||||
25 | 12.35 | 13 | 3.91 | 17 | 8.51 | |||||||
Farmout
or non-consent
|
3 | - | 7 | - | 1 | - | ||||||
Total(1)
|
208 | 61.43 | 825 | 304.25 | 730 | 304.22 | ||||||
(1)
|
Does
not include one and two gross wells completed on St. Mary’s fee lands
during 2009 and 2008, respectively, in which we only have royalty
interests.
|
Developed
Acres (1)
|
Undeveloped
Acres (2)
|
Total
|
||||||||||
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
|||||||
Arkansas
|
1,394 | 163 | 147 | 60 | 1,541 | 223 | ||||||
Colorado
|
- | - | 940 | 614 | 940 | 614 | ||||||
Kansas
|
- | - | 2,240 | 560 | 2,240 | 560 | ||||||
Louisiana
|
101,516 | 37,483 | 25,120 | 4,905 | 126,636 | 42,388 | ||||||
Mississippi
|
2,360 | 429 | 100,963 | 42,265 | 103,323 | 42,694 | ||||||
Montana
|
59,806 | 40,389 | 343,612 | 236,463 | 403,418 | 276,852 | ||||||
Nevada
|
- | - | 197,945 | 197,945 | 197,945 | 197,945 | ||||||
New
Mexico
|
2,507 | 1,815 | 1,240 | 1,022 | 3,747 | 2,837 | ||||||
North
Dakota
|
127,497 | 87,654 | 216,779 | 121,214 | 344,276 | 208,868 | ||||||
Oklahoma
|
256,577 | 81,184 | 70,483 | 32,917 | 327,060 | 114,101 | ||||||
Pennsylvania
|
- | - | 30,462 | 27,440 | 30,462 | 27,440 | ||||||
Texas
|
221,795 | 106,072 | 544,683 | 260,955 | 766,478 | 367,027 | ||||||
Utah
|
- | - | 2,568 | 561 | 2,568 | 561 | ||||||
Wyoming
|
88,761 | 52,814 | 285,700 | 143,183 | 374,461 | 195,997 | ||||||
862,213 | 408,003 | 1,822,882 | 1,070,104 | 2,685,095 | 1,478,107 | |||||||
Louisiana
Fee Properties
|
10,499 | 10,499 | 14,415 | 14,415 | 24,914 | 24,914 | ||||||
Louisiana
Mineral Servitudes
|
7,426 | 4,217 | 4,769 | 4,407 | 12,195 | 8,624 | ||||||
17,925 | 14,716 | 19,184 | 18,822 | 37,109 | 33,538 | |||||||
Total
(3)
|
880,138 | 422,719 | 1,842,066 | 1,088,926 | 2,722,204 | 1,511,645 | ||||||
(1)
|
Developed
acreage is acreage assigned to producing wells for the spacing unit of the
producing formation. Developed acreage of St. Mary’s properties
that include multiple formations with different well spacing requirements
may be considered undeveloped for certain formations, but have only been
included as developed acreage in the presentation
above.
|
(2)
|
Undeveloped
acreage is lease acreage on which wells have not been drilled or completed
to a point that would permit the production of commercial quantities of
oil and gas, regardless of whether such acreage contains estimated
reserves.
|
(3)
|
Subsequent
to December 31, 2009, St. Mary divested certain non-core properties, which
included leases covering approximately 26,100 and 25,100 developed gross
and net acres, respectively, and 18,600 and 15,000 undeveloped gross and
net acres, respectively. Additionally, we entered into
agreements to divest certain non-core properties, which included leases
covering approximately 80,200 and 44,500 developed gross and net acres,
respectively, and 63,700 and 31,000 undeveloped gross and net acres,
respectively.
|
·
|
The
amount and nature of future capital expenditures and the availability of
liquidity and capital resources to fund capital
expenditures
|
·
|
The
drilling of wells and other exploration and development activities and
plans, as well as possible future
acquisitions
|
·
|
Proved
reserve estimates and the estimates of both future net revenues and the
present value of future net revenues that are included in their
calculation
|
·
|
Future
oil and natural gas production
estimates
|
·
|
Our
outlook on future oil and natural gas prices and service
costs
|
·
|
Cash
flows, anticipated liquidity, and the future repayment of
debt
|
·
|
Business
strategies and other plans and objectives for future operations, including
plans for expansion and growth of operations or to defer capital
investment, and our outlook on our future financial condition or results
of operations
|
·
|
Other
similar matters such as those discussed in the “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” section in
Item 7 of this Form 10-K.
|
·
|
The
volatility and level of realized oil and natural gas
prices
|
·
|
A
contraction in demand for oil and natural gas as a result of adverse
general economic conditions or climate change
initiatives
|
·
|
The
availability of economically attractive exploration, development, and
property acquisition opportunities and any necessary financing, including
any constraints on the availability of opportunities and financing due to
distressed capital and credit market
conditions
|
·
|
Our
ability to replace reserves and sustain
production
|
·
|
Unexpected
drilling conditions and results
|
·
|
Unsuccessful
exploration and development
drilling
|
·
|
The
risks of hedging strategies, including the possibility of realizing lower
prices on oil and natural gas sales as a result of commodity price risk
management activities
|
·
|
The
pending nature of reported divestiture plans for certain non-core oil and
gas properties as well as the ability to complete divestiture
transactions
|
·
|
The
uncertain nature of the expected benefits from acquisitions and
divestitures of oil and natural gas properties, including uncertainties in
evaluating oil and natural gas reserves of acquired properties and
associated potential liabilities, and uncertainties with respect to the
amount of proceeds that may be received from
divestitures
|
·
|
The
imprecise nature of oil and natural gas reserve
estimates
|
·
|
Uncertainties
inherent in projecting future rates of production from drilling activities
and acquisitions
|
·
|
Declines
in the values of our oil and natural gas properties resulting in
impairment charges and write-downs
|
·
|
The
ability of purchasers of production to pay for amounts
purchased
|
·
|
Drilling
and operating service availability
|
·
|
Uncertainties
in cash flow
|
·
|
The
financial strength of hedge contract counterparties and credit facility
participants, and the risk that one or more of these parties may not
satisfy their contractual
commitments
|
·
|
The
negative impact that lower oil and natural gas prices could have on our
ability to borrow and fund capital
expenditures
|
·
|
The
potential effects of increased levels of debt
financing
|
·
|
Our
ability to compete effectively against other independent and major oil and
natural gas companies and
|
·
|
Litigation,
environmental matters, the potential impact of government regulations, and
the use of management estimates.
|
·
|
Global
and domestic supplies of oil and natural gas, and the productive capacity
of the industry as a whole
|
·
|
The
level of consumer demand for oil and natural
gas
|
·
|
Overall
global and domestic economic
conditions
|
·
|
Weather
conditions
|
·
|
The
availability and capacity of transportation or refining facilities in
regional or localized areas that may affect the realized price for oil or
natural gas
|
·
|
The
price and level of foreign imports of crude oil, refined petroleum
products, and liquefied natural gas
|
·
|
The
price and availability of alternative
fuels
|
·
|
Technological
advances affecting energy
consumption
|
·
|
The
ability of the members of the Organization of Petroleum Exporting
Countries to agree to and maintain oil price and production
controls
|
·
|
Political
instability or armed conflict in oil or natural gas producing
regions
|
·
|
Strengthening
and weakening of the U.S dollar relative to other
currencies
|
·
|
Governmental
regulations and taxes.
|
·
|
the
demand for oil and natural gas in the U.S. has declined and may remain at
low levels or further decline if economic conditions remain weak, and
continue to negatively impact our revenues, margins, profitability,
operating cash flows, liquidity and financial
condition
|
·
|
the
tightening of credit or lack of credit availability to our customers could
adversely affect our ability to collect our trade
receivables
|
·
|
our
ability to access the capital markets may be restricted at a time when we
would like, or need, to raise capital for our business, including for
exploration and/or development of our
reserves
|
·
|
our
commodity hedging arrangements could become ineffective if our
counterparties are unable to perform their obligations or seek bankruptcy
protection.
|
·
|
Amount
and timing of actual production
|
·
|
Supply
and demand for oil and natural gas
|
·
|
Curtailments
or increases in consumption by oil purchasers and natural gas
pipelines
|
·
|
Changes
in government regulations or taxes.
|
·
|
Unexpected
drilling conditions
|
·
|
Title
problems
|
·
|
Pressure
or geologic irregularities in
formations
|
·
|
Equipment
failures or accidents
|
·
|
Hurricanes
or other adverse weather conditions
|
·
|
Compliance
with environmental and other governmental
requirements
|
·
|
Shortages
or delays in the availability of or increases in the cost of drilling rigs
and crews, fracture stimulation crews and equipment, chemicals, and
supplies.
|
·
|
Our
production is less than expected
|
·
|
One
or more counterparties to our hedge contracts default on their contractual
obligations
|
·
|
There
is a widening of price differentials between delivery points for our
production and the delivery point assumed in the hedge
arrangement.
|
·
|
Making
it more difficult for us to obtain additional financing in the future for
our operations and potential acquisitions, working capital requirements,
capital expenditures, debt service, or other general corporate
requirements
|
·
|
Requiring
us to dedicate a substantial portion of our cash flows from operations to
the repayment of our debt and the service of interest costs associated
with our debt, rather than to productive
investments
|
·
|
Limiting
our operating flexibility due to financial and other restrictive
covenants, including restrictions on incurring additional debt, making
acquisitions, and paying dividends
|
·
|
Placing
us at a competitive disadvantage compared to our competitors that have
less debt
|
·
|
Making
us more vulnerable in the event of adverse economic or industry conditions
or a downturn in our business.
|
·
|
Changes
in oil or natural gas prices
|
·
|
Variations
in quarterly drilling, recompletions, acquisitions, and operating
results
|
·
|
Changes
in financial estimates by securities
analysts
|
·
|
Changes
in market valuations of comparable
companies
|
·
|
Additions
or departures of key personnel
|
·
|
Future
sales of our common stock
|
·
|
Changes
in the national and global economic
outlook.
|
Name
|
Age
|
Position
|
Anthony
J. Best
|
60 |
Chief
Executive Officer and President
|
Javan
D. Ottoson
|
51 |
Executive
Vice President and Chief Operating Officer
|
A.
Wade Pursell
|
44 |
Executive
Vice President and Chief Financial Officer
|
Mark
D. Mueller
|
45 |
Senior
Vice President and Regional Manager
|
Milam
Randolph Pharo
|
57 |
Senior
Vice President and General Counsel
|
Paul
M. Veatch
|
43 |
Senior
Vice President and Regional Manager
|
Stephen
C. Pugh
|
51 |
Senior
Vice President and Regional Manager
|
Kenneth
J. Knott
|
45 |
Vice
President – Business Development and Land and Assistant
Secretary
|
Gregory
T. Leyendecker
|
52 |
Vice
President and Regional Manager
|
John
R. Monark
|
57 |
Vice
President – Human Resources
|
Lehman
E. Newton, III
|
54 |
Vice
President and Regional Manager
|
David
J. Whitcomb
|
47 |
Vice
President – Marketing
|
Dennis
A. Zubieta
|
43 |
Vice
President – Engineering and Evaluation
|
Mark
T. Solomon
|
41 |
Controller
|
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
Quarter
Ended
|
High
|
Low
|
||||||
December
31, 2009
|
$ | 38.05 | $ | 29.80 | ||||
September
30, 2009
|
33.62 | 17.13 | ||||||
June
30, 2009
|
23.48 | 12.05 | ||||||
March
31, 2009
|
24.60 | 11.21 | ||||||
December
31, 2008
|
$ | 35.81 | $ | 14.76 | ||||
September
30, 2008
|
65.58 | 32.53 | ||||||
June
30, 2008
|
65.00 | 37.73 | ||||||
March
31, 2008
|
39.95 | 31.70 |
(a)
|
(b)
|
(c)
|
||||||||||
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options, warrants,
and rights
|
Weighted-average
exercise price of outstanding options, warrants, and
rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
|||||||||
Equity
compensation plans approved by security holders:
|
||||||||||||
Equity
Incentive Compensation Plan
|
||||||||||||
Stock
options and incentive stock options (1)
|
1,274,920 | $ | 13.31 | - | ||||||||
Restricted
stock (1)
|
408,356 | - | - | |||||||||
Performance
share awards (1)(3)
|
1,145,871 | $ | 32.52 | 1,771,009 | ||||||||
Total
for Equity Incentive Compensation Plan
|
2,829,147 | $ | 22.40 | 1,771,009 | ||||||||
Employee
Stock Purchase Plan (2)
|
- | - | 1,468,275 | |||||||||
Equity
compensation plans not approved by security holders
|
- | - | - | |||||||||
Total
for all plans
|
2,829,147 | $ | 22.40 | 3,239,284 | ||||||||
(1)
|
In
May 2006 the stockholders approved the Equity Plan to authorize the
issuance of restricted stock, restricted stock units, non-qualified stock
options, incentive stock options, stock appreciation rights, and
stock-based awards to key employees, consultants, and members of the Board
of Directors of St. Mary or any affiliate of St. Mary. The
Equity Plan serves as the successor to the St. Mary Land &
Exploration Company Stock Option Plan, the St. Mary Land & Exploration
Company Incentive Stock Option Plan, the St. Mary Land & Exploration
Company Restricted Stock Plan, and the St. Mary Land & Exploration
Company Non-Employee Director Stock Compensation Plan (collectively
referred to as the “Predecessor Plans”). All grants of equity
are now made out of the Equity Plan, and no further grants will be made
under the Predecessor Plans. Each outstanding award under a
Predecessor Plan immediately prior to the effective date of the Equity
Plan continues to be governed solely by the terms and conditions of the
instruments evidencing such grants or issuances. Our Board of
Directors approved amendments to the Equity Plan on
March 26, 2008, and the amended plan was approved by
stockholders at our annual stockholders’ meeting
May 21, 2008. Our Board of Directors approved
additional amendments to the Equity Plan on March 26, 2009, and
the amendments were approved by stockholders at our annual stockholders’
meeting on May 20, 2009. Awards granted in 2009,
2008, and 2007 under the Equity Plan were 1,016,931, 932,767, and 135,138,
respectively.
|
(2)
|
Under
the St. Mary Land & Exploration Company Employee Stock Purchase Plan
(the “ESPP”), eligible employees may purchase shares of our common stock
through payroll deductions of up to 15 percent of their eligible
compensation. The purchase price of the stock is 85 percent of
the lower of the fair market value of the stock on the first or last day
of the six-month offering period, and shares issued under the ESPP through
December 31, 2009, are restricted for a period of 18 months from
the date issued. Effective January 1, 2010, shares
issued under the ESPP will be restricted for a period six months from the
date issued. The ESPP is intended to qualify under Section 423
of the Internal Revenue Code. Shares issued under the ESPP
totaled 86,308, 45,228, and 29,534 in 2009, 2008, and 2007,
respectively.
|
(3)
|
The
PSAs represent the right to receive, upon settlement of the PSAs after the
completion of a three-year performance measurement period, a number of
shares of our common stock that may be from zero to two times the number
of PSAs granted, depending on the extent to which the underlying
performance criteria have been achieved and the extent to which the PSAs
have vested. The performance criteria for the PSAs are based on
a combination of our cumulative Total Shareholder Return (“TSR”) for the
performance period and the relative measure of our TSR compared with the
TSR an index comprised of certain peer companies for the performance
period. The current outstanding PSAs were granted on
August 1, 2009, and 2008, and utilize a three-year performance
measurement period which began on July 1, 2009, and 2008,
respectively. On July 1, 2009, the market value per share of our
common
|
|
stock
was $21.15, and on the date of grant the market value per share of our
common stock was $23.87. On July 1, 2008, the market
value per share of our common stock was $62.51, and on the date of grant
the market value per share of our common stock was $43.11. The
PSAs do not have an exercise price associated with them, but rather the
$32.52 price shown in the above table represents the weighted-average per
share fair value as of December 31, 2009, calculated pursuant to
ASC Topic 718, which is presented in order to provide additional
information regarding the potential dilutive effect of the PSAs as of
December 31, 2009, in view of the share price level at the
beginning of the performance period which will be utilized to compute the
TSR measurements for determination of the number of shares to be issued
upon settlement of the PSAs after completion of the three-year performance
measurement period.
|
PURCHASES
OF EQUITY SECURITIES BY ISSUER AND AFFILIATED PURCHASERS
|
|||||||||
Total
Number of Shares Purchased
(1)(2)(3)(4)
|
Average
Price Paid per Share
|
Total
Number of Shares Purchased as Part of Publicly Announced
Program
|
Maximum
Number of Shares that May Yet be Purchased Under the Program(5)
|
||||||
January
1, 2009 –
March 31, 2009
|
58,688 | $ | 13.60 | -0- | 3,072,184 | ||||
April
1, 2009 -
June 30, 2009
|
341 | $ | 18.69 | -0- | 3,072,184 | ||||
July
1, 2009 -
September 30,
2009
|
412 | $ | 24.86 | -0- | 3,072,184 | ||||
October
1, 2009 -
October 31,
2009
|
30 | $ | 35.36 | -0- | 3,072,184 | ||||
November
1, 2009 -
November 30,
2009
|
86 | $ | 34.10 | -0- | 3,072,184 | ||||
December
1, 2009 -
December 31,
2009
|
21,391 | $ | 35.34 | -0- | 3,072,184 | ||||
Total
October 1, 2009 -
December 31,
2009
|
21,507 | $ | 35.33 | -0- | 3,072,184 | ||||
Total
|
80,948 | $ | 19.45 | -0- | 3,072,184 |
(1)
|
Includes
a total of 6,500 shares purchased by Anthony J. Best, St. Mary’s President
and Chief Executive Officer, in open market transactions that were not
made pursuant to our stock repurchase
program.
|
(2)
|
Includes
a total of 5,000 shares purchased by A. Wade Pursell, St. Mary’s Executive
Vice President and Chief Financial Officer, in open market transactions
that were not made pursuant to our stock repurchase
program.
|
(3)
|
Includes
a total of 10,000 shares purchased by William D.
Sullivan, a Director of St. Mary, in open market transactions
that were not made pursuant to our stock repurchase
program.
|
(4)
|
Includes
59,448 shares withheld (under the terms of grants under the Equity
Incentive Compensation Plan) to offset tax withholding obligations that
occur upon the delivery of outstanding shares underlying restricted stock
units that were not made pursuant to our stock repurchase
program.
|
(5)
|
In
July 2006 our Board of Directors approved an increase in the number of
shares that may be repurchased under the original August 1998
authorization to 6,000,000 as of the effective date of the
resolution. Accordingly, as of the date of this filing, we have
Board authorization to repurchase 3,072,184 shares of common stock on a
prospective basis. The shares may be repurchased from time to
time in open market transactions or privately negotiated transactions,
subject to market conditions and other factors, including certain
provisions of St. Mary’s existing bank credit facility agreement and
compliance with securities laws. Stock repurchases may be
funded with existing cash balances, internal cash flow, and borrowings
under St. Mary’s bank credit facility. The stock repurchase program may be
suspended or discontinued at any
time.
|
The
payment of dividends and stock repurchases are subject to covenants in our
bank credit facility, including the requirement that we maintain certain
levels of stockholders’ equity and the limitation that does not allow our
annual dividend rate to exceed $0.25 per
share.
|
Years
Ended December 31,
|
|||||||||||||||
2009
|
2008
(1)
|
2007(1) | 2006 | 2005 | |||||||||||
(In
thousands, except per share data)
|
|||||||||||||||
Total
operating revenues
|
$ | 832,201 | $ | 1,301,301 | $ | 990,094 | $ | 787,701 | $ | 739,590 | |||||
Net
income (loss)
|
$ | (99,370 | ) | $ | 87,348 | $ | 187,098 | $ | 190,015 | $ | 151,936 | ||||
Net
income (loss) per share:
|
|||||||||||||||
Basic
|
$ | (1.59 | ) | $ | 1.40 | $ | 3.02 | $ | 3.38 | $ | 2.67 | ||||
Diluted
|
$ | (1.59 | ) | $ | 1.38 | $ | 2.90 | $ | 2.94 | $ | 2.33 | ||||
Total
assets at year end
|
$ | 2,360,936 | $ | 2,697,247 | $ | 2,572,942 | $ | 1,899,097 | $ | 1,268,747 | |||||
Long-term
obligations:
|
|||||||||||||||
Line
of credit
|
$ | 188,000 | $ | 300,000 | $ | 285,000 | $ | 334,000 | $ | - | |||||
Senior
convertible notes, net of debt discount
|
$ | 266,902 | $ | 258,713 | $ | 251,070 | $ | 99,980 | $ | 99,885 | |||||
Cash
dividends declared and paid per common share
|
$ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 | $ | 0.10 |
(1)
|
As
Adjusted, see Note 5 to the Consolidated Financial
Statements
|
Supplemental
Selected Financial and Operations Data
|
|||||||||||||||
Years
Ended December 31,
|
|||||||||||||||
2009
|
2008
|
2007
|
2006
|
2005
|
|||||||||||
(In
thousands, except per share data)
|
|||||||||||||||
Balance
Sheet Data
|
|||||||||||||||
Total
working capital (deficit)
|
$ | (87,625 | ) | $ | 15,193 | $ | (92,604 | ) | $ | 22,870 | $ | 4,937 | |||
Total
stockholders’ equity
|
$ | 973,570 | $ | 1,162,509 | $ | 902,574 | $ | 743,374 | $ | 569,320 | |||||
Weighted-average
shares outstanding
|
|||||||||||||||
Basic
|
62,457 | 62,243 | 61,852 | 56,291 | 56,907 | ||||||||||
Diluted
|
62,457 | 63,133 | 64,850 | 65,962 | 66,894 | ||||||||||
Reserves
|
|||||||||||||||
Oil
(MMBbl)
|
53.8 | 51.4 | 78.8 | 74.2 | 62.9 | ||||||||||
Gas
(Mcf)
|
449.5 | 557.4 | 613.5 | 482.5 | 417.1 | ||||||||||
MCFE
|
772.2 | 865.5 | 1,086.5 | 927.6 | 794.5 | ||||||||||
Production
and Operational:
|
|||||||||||||||
Oil
and gas production revenues, including hedging
|
$ | 756,601 | $ | 1,158,304 | $ | 936,577 | $ | 758,913 | $ | 711,005 | |||||
Oil
and gas production expenses
|
$ | 206,800 | $ | 271,355 | $ | 218,208 | $ | 176,590 | $ | 142,873 | |||||
DD&A
|
$ | 304,201 | $ | 314,330 | $ | 227,596 | $ | 154,522 | $ | 132,758 | |||||
General
and administrative
|
$ | 76,036 | $ | 79,503 | $ | 60,149 | $ | 38,873 | $ | 32,756 | |||||
Production
Volumes:
|
|||||||||||||||
Oil
(MMBbl)
|
6.3 | 6.6 | 6.9 | 6.1 | 5.9 | ||||||||||
Gas
(Bcf)
|
71.1 | 74.9 | 66.1 | 56.4 | 51.8 | ||||||||||
BCFE
|
109.1 | 114.6 | 107.5 | 92.8 | 87.4 | ||||||||||
Realized
price – pre hedging:
|
|||||||||||||||
Per
Bbl
|
$ | 54.40 | $ | 92.99 | $ | 67.56 | $ | 59.33 | $ | 53.18 | |||||
Per
Mcf
|
$ | 3.82 | $ | 8.60 | $ | 6.74 | $ | 6.58 | $ | 8.08 | |||||
Realized
price – net of hedging:
|
|||||||||||||||
Per
Bbl
|
$ | 56.74 | $ | 75.59 | $ | 62.60 | $ | 56.60 | $ | 50.93 | |||||
Per
Mcf
|
$ | 5.59 | $ | 8.79 | $ | 7.63 | $ | 7.37 | $ | 7.90 | |||||
Expense
per MCFE:
|
|||||||||||||||
LOE
|
$ | 1.33 | $ | 1.46 | $ | 1.31 | $ | 1.25 | $ | 0.99 | |||||
Transportation
|
$ | 0.19 | $ | 0.19 | $ | 0.14 | $ | 0.12 | $ | 0.09 | |||||
Production
taxes
|
$ | 0.37 | $ | 0.71 | $ | 0.58 | $ | 0.54 | $ | 0.56 | |||||
DD&A
|
$ | 2.79 | $ | 2.74 | $ | 2.12 | $ | 1.67 | $ | 1.52 | |||||
General
and administrative
|
$ | 0.70 | $ | 0.69 | $ | 0.56 | $ | 0.42 | $ | 0.37 | |||||
Cash
Flow:
|
|||||||||||||||
Provided
by operations
|
$ | 436,106 | $ | 679,190 | $ | 632,054 | $ | 467,700 | $ | 409,379 | |||||
Used
in investing
|
$ | (304,092 | ) | $ | (673,754 | ) | $ | (805,134 | ) | $ | (724,719 | ) | $ | (339,779 | ) |
Provided
by (used in) financing
|
$ | (127,496 | ) | $ | (42,815 | ) | $ | 215,126 | $ | 243,558 | $ | (61,093 | ) | ||
·
|
Average
daily gas production of 194.8 MMcf was down five percent from
2008. Average daily oil production of 17.3 MBbl was down four
percent from 2008. Average total equivalent daily production
was 298.8 MMCFE, which was down five percent from
2008.
|
·
|
Estimated
proved reserves of 53.8 MMBbls of oil and 449.5 Bcf of natural gas, or
772.2 BCFE, as of December 31, 2009. This was a decrease of 11
percent from year-end 2008 proved reserves of 865.5 BCFE and reflects
the divestiture of 44.2 BCFE of non-strategic properties, 61.6 BCFE in net
downward performance revisions, and 12.0 BCFE of net positive price
revisions. We had reserve additions from extensions and
discoveries and infill drilling of 109.6
BCFE.
|
·
|
We
recorded a net loss of $99.4 million and diluted loss per share of $1.59
for the year ended December 31, 2009. This compares
with net income of $87.3 million, or $1.38 per diluted share, for the year
ended December 31, 2008.
|
·
|
Cash
flow from operating activities of $436.1 million, a decrease of 36 percent
from 2008.
|
·
|
Costs
incurred for oil and gas producing activities for the year ended
December 31, 2009, were $419.0 million, compared with $857.7
million for the same period in
2008.
|
Reserve
Replacement Percentage
|
Finding
Cost per MCFE
|
|||||||||
Excluding
sales
|
Including
sales
|
Excluding
sales
|
Including
sales
|
|||||||
Drilling,
excluding revisions
|
100% | 60% | $ | 3.44 | $ | 5.77 | ||||
Drilling,
including revisions
|
55% | 14% | $ | 6.29 | $ | 23.91 | ||||
Drilling
and acquisitions, excluding revisions
|
100% | 60% | $ | 3.44 | $ | 5.77 | ||||
Drilling
and acquisitions, including revisions
|
55% | 14% | $ | 6.29 | $ | 23.92 | ||||
Acquisitions
|
N/M | N/M | N/M | N/M | ||||||
All-in
|
55% | 14% | $ | 6.99 | $ | 26.56 |
Reserve
Replacement Percentage
|
Finding
Cost per MCFE
|
|||||||||
Excluding
sales
|
Including
sales
|
Excluding
sales
|
Including
sales
|
|||||||
Drilling,
excluding revisions
|
124% | 92% | $ | 4.27 | $ | 5.77 | ||||
Drilling,
including revisions
|
48% | 16% | $ | 11.07 | $ | 33.90 | ||||
Drilling
and acquisitions, excluding revisions
|
162% | 129% | $ | 3.68 | $ | 4.60 | ||||
Drilling
and acquisitions, including revisions
|
85% | 53% | $ | 6.97 | $ | 11.22 | ||||
Acquisitions
|
37% | 5% | $ | 1.72 | $ | 12.60 | ||||
All-in
|
85% | 53% | $ | 7.79 | $ | 12.53 |
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
Crude Oil (per Bbl):
|
|||||||||
Average
NYMEX WTI spot price
|
$ | 61.99 | $ | 99.92 | $ | 72.23 | |||
Realized
price, before the effects of hedging
|
$ | 54.40 | $ | 92.99 | $ | 67.56 | |||
Net
realized price, including the effects of hedging
|
$ | 56.74 | $ | 75.59 | $ | 62.60 | |||
Natural Gas (per Mcf):
|
|||||||||
Average
NYMEX Henry Hub spot price
|
$ | 3.94 | $ | 8.89 | $ | 6.97 | |||
Realized
price, before the effects of hedging
|
$ | 3.82 | $ | 8.60 | $ | 6.74 | |||
Net
realized price, including the effects of hedging
|
$ | 5.59 | $ | 8.79 | $ | 7.63 |
ArkLaTex
|
Mid-Continent
|
South
Texas & Gulf Coast
|
Permian
|
Rocky
Mountain
|
Total(1)
|
|||||||
2009
Production:
|
||||||||||||
Oil
(MBbl)
|
124 | 274 | 407 | 1,845 | 3,678 | 6,328 | ||||||
Gas
(MMcf)
|
14,167 | 34,380 | 7,255 | 4,075 | 11,229 | 71,106 | ||||||
Equivalent
(MMCFE)
|
14,912 | 36,026 | 9,696 | 15,148 | 33,295 | 109,077 | ||||||
Avg.
Daily Equivalents (MMCFE/per day)
|
40.8 | 98.7 | 26.6 | 41.5 | 91.2 | 298.8 | ||||||
Relative
percentage
|
14% | 33% | 9% | 14% | 30% | 100% | ||||||
For
the Three Months Ended
|
||||||||||||
December
31,
|
September
30,
|
June
30,
|
March
31,
|
|||||||||
2009
|
2009
|
2009
|
2009
|
|||||||||
(In
millions, except production sales data)
|
||||||||||||
Production
(BCFE)
|
26.1 | 26.4 | 28.2 | 28.4 | ||||||||
Oil
and gas production revenue, excluding the effects of
hedging
|
$ | 187.6 | $ | 152.7 | $ | 145.3 | $ | 130.4 | ||||
Realized
oil and gas hedge gain
|
$ | 13.4 | $ | 28.3 | $ | 43.3 | $ | 55.6 | ||||
Gain
(loss) on divestiture activity
|
$ | 22.1 | $ | (11.3 | ) | $ | 1.3 | $ | (0.6 | ) | ||
Lease
operating expense
|
$ | 34.3 | $ | 34.3 | $ | 35.6 | $ | 41.2 | ||||
Transportation
costs
|
$ | 5.2 | $ | 5.3 | $ | 4.6 | $ | 5.5 | ||||
Production
taxes
|
$ | 13.3 | $ | 9.0 | $ | 9.3 | $ | 9.1 | ||||
DD&A
|
$ | 75.1 | $ | 67.0 | $ | 70.4 | $ | 91.7 | ||||
Exploration
|
$ | 13.4 | $ | 15.7 | $ | 19.5 | $ | 13.6 | ||||
Impairment
of proved properties
|
$ | 21.6 | $ | 0.1 | $ | 6.0 | $ | 147.0 | ||||
Abandonment
and impairment of unproved properties
|
$ | 25.2 | $ | 4.8 | $ | 11.6 | $ | 3.9 | ||||
Impairment
of materials inventory
|
$ | 0.8 | $ | 2.1 | $ | 2.7 | $ | 8.6 | ||||
General
and administrative
|
$ | 20.7 | $ | 20.8 | $ | 18.2 | $ | 16.4 | ||||
Bad
debt recovery
|
$ | (5.2 | ) | $ | - | $ | - | $ | - | |||
Change
in Net Profits Plan liability
|
$ | 7.0 | $ | 6.8 | $ | 2.4 | $ | (23.3 | ) | |||
Unrealized
derivative (gain) loss
|
$ | 3.2 | $ | 4.1 | $ | 11.3 | $ | 1.8 | ||||
Net
income (loss)
|
$ | 1.0 | $ | (4.4 | ) | $ | (8.3 | ) | $ | (87.6 | ) | |
Percentage
change from previous quarter:
|
||||||||||||
Production
(BCFE)
|
(1)% | (6)% | (1)% | (5)% | ||||||||
Oil
and gas production revenue, excluding the effects of
hedging
|
23% | 5% | 11% | (32)% | ||||||||
Realized
oil and gas hedge gain
|
(53)% | (35)% | (22)% | 24% | ||||||||
Gain
(loss) on divestiture activity
|
(296)% | (969)% | 317% | (106)% | ||||||||
Lease
operating expense
|
-% | (4)% | (14)% | (14)% | ||||||||
Transportation
costs
|
(2)% | 15% | (16)% | (10)% | ||||||||
Production
taxes
|
48% | (3)% | 2% | (23)% | ||||||||
DD&A
|
12% | (5)% | (23)% | (4)% | ||||||||
Exploration
|
(15)% | (19)% | 43% | (23)% | ||||||||
Impairment
of proved properties
|
21,500% | (98)% | (96)% | (50)% | ||||||||
Abandonment
and impairment of unproved properties
|
425% | (59)% | 197% | (89)% | ||||||||
Impairment
of materials inventory
|
(62)% | (22)% | (69)% | N/A | ||||||||
General
and administrative
|
-% | 14% | 11% | 32% | ||||||||
Bad
debt recovery
|
N/A | N/A | N/A | N/A | ||||||||
Change
in Net Profits Plan liability
|
3% | 183% | (110)% | (71)% | ||||||||
Unrealized
derivative (gain) loss
|
(22)% | (64)% | 528% | (115)% | ||||||||
Net
income (loss)
|
(123)% | (47)% | (91)% | (31)% |
As
of and for the Years Ended December 31,
|
Percent
Change Between
|
||||||||||||
2009
|
2008
|
2007
|
2009/2008 | 2008/2007 | |||||||||
Total proved reserves
|
|||||||||||||
Oil
(MMBbl)
|
53.8 | 51.4 | 78.8 | ||||||||||
Natural
gas (Bcf)
|
449.5 | 557.4 | 613.5 | ||||||||||
BCFE
|
772.2 | 865.5 | 1,086.5 | (11)% | (20)% | ||||||||
Net production volumes
|
|||||||||||||
Oil
(MMBbl)
|
6.3 | 6.6 | 6.9 | ||||||||||
Natural
gas (Bcf)
|
71.1 | 74.9 | 66.1 | ||||||||||
BCFE
|
109.1 | 114.6 | 107.5 | (5)% | 7% | ||||||||
Average daily production
|
|||||||||||||
Oil
(MBbl)
|
17.3 | 18.1 | 18.9 | ||||||||||
Natural
gas (MMcf)
|
194.8 | 204.7 | 181.0 | ||||||||||
MMCFE
|
298.8 | 313.1 | 294.5 | (5)% | 6% | ||||||||
Oil & gas production
revenues
|
|||||||||||||
Oil
production, including hedging
|
$ | 359,075 | $ | 500,062 | $ | 432,375 | |||||||
Gas
production, including hedging
|
397,526 | 658,242 | 504,202 | ||||||||||
Total
|
$ | 756,601 | $ | 1,158,304 | $ | 936,577 | (35)% | 24% | |||||
Oil & gas production
costs
|
|||||||||||||
Lease
operating expenses
|
$ | 145,463 | $ | 167,384 | $ | 140,389 | |||||||
Transportation
costs
|
20,657 | 22,205 | 15,529 | ||||||||||
Production
taxes
|
40,680 | 81,766 | 62,290 | ||||||||||
Total
|
$ | 206,800 | $ | 271,355 | $ | 218,208 | (24)% | 24% | |||||
Average net realized sales price (1)
|
|||||||||||||
Oil
(per Bbl)
|
$ | 56.74 | $ | 75.59 | $ | 62.60 | (25)% | 21% | |||||
Natural
gas (per Mcf)
|
$ | 5.59 | $ | 8.79 | $ | 7.63 | (36)% | 15% | |||||
Per MCFE data
|
|||||||||||||
Average
net realized price (1)
|
$ | 6.94 | $ | 10.11 | $ | 8.71 | (31)% | 16% | |||||
Lease
operating expense
|
(1.33 | ) | (1.46 | ) | (1.31 | ) | (9)% | 11% | |||||
Transportation
costs
|
(0.19 | ) | (0.19 | ) | (0.14 | ) | -% | 36% | |||||
Production
taxes
|
(0.37 | ) | (0.71 | ) | (0.58 | ) | (48)% | 22% | |||||
General
and administrative
|
(0.70 | ) | (0.69 | ) | (0.56 | ) | 1% | 23% | |||||
Operating
profit
|
$ | 4.35 | $ | 7.06 | $ | 6.12 | (38)% | 15% | |||||
Depletion,
depreciation and amortization
|
$ | 2.79 | $ | 2.74 | $ | 2.12 | 2% | 29% |
(1)
|
Includes
the effects of our hedging
activities.
|
As
of and for the Years Ended December 31,
|
Percent
Change Between
|
||||||||||||
2009
|
2008
|
2007
|
2009/2008 | 2008/2007 | |||||||||
Working
capital (deficit)
|
$ | (87,625 | ) | $ | 15,193 | $ | (92,604 | ) | (677)% | 116% | |||
Long-term
debt
|
$ | 454,902 | $ | 558,713 | $ | 536,070 | (19)% | 4% | |||||
Stockholders’
equity
|
$ | 973,570 | $ | 1,162,509 | $ | 902,574 | (16)% | 29% | |||||
Net
income
|
$ | (99,370 | ) | $ | 87,348 | $ | 187,098 | (214)% | (53)% | ||||
Basic
net income per common share
|
$ | (1.59 | ) | $ | 1.40 | $ | 3.02 | (214)% | (54)% | ||||
Diluted
net income per common share
|
$ | (1.59 | ) | $ | 1.38 | $ | 2.90 | (215)% | (52)% | ||||
Basic
weighted-average shares outstanding
|
62,457 | 62,243 | 61,852 | -% | 1% | ||||||||
Diluted
weighted-average shares outstanding
|
62,457 | 63,133 | 64,850 | (1)% | (3)% | ||||||||
Net
cash provided by operating activities
|
$ | 436,106 | $ | 679,190 | $ | 632,054 | (36)% | 7% | |||||
Net
cash used in investing activities
|
$ | (304,092 | ) | $ | (673,754 | ) | $ | (805,134 | ) | (55)% | (16)% | ||
Net
cash provided by (used in) financing activities
|
$ | (127,496 | ) | $ | (42,815 | ) | $ | 215,126 | 198% | (120)% | |||
Change
Between Years
|
||||||
Oil and Gas Production
Revenues:
|
2009
and 2008
|
2008
and 2007
|
||||
Increase
(decrease) in oil and gas production revenues, net of hedging (in
thousands)
|
$ | (401,703 | ) | $ | 221,727 |
Oil
|
||||||
Realized
price change per Bbl, net of hedging
|
$ | (18.85 | ) | $ | 12.99 | |
Realized
price percent change
|
(25)% | 21% | ||||
Production
change (MBbl)
|
(287 | ) | (292 | ) | ||
Production
percentage change
|
(4)% | (4)% | ||||
Natural Gas
|
||||||
Realized
price change per Mcf, net of hedging
|
$ | (3.20 | ) | $ | 1.16 | |
Realized
price percentage change
|
(36)% | 15% | ||||
Production
change (MMcf)
|
(3,804 | ) | 8,849 | |||
Production
percentage change
|
(5)% | 13% |
Years
Ended December 31,
|
||||||
Revenue
|
2009
|
2008
|
2007
|
|||
Oil
|
47% | 43% | 46% | |||
Natural
Gas
|
53% | 57% | 54% | |||
Production
|
||||||
Oil
|
35% | 35% | 39% | |||
Natural
Gas
|
65% | 65% | 61% |
Years
Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
Oil Hedging
|
|||||||||
Percentage
of oil production hedged
|
52% | 61% | 66% | ||||||
Oil
volumes hedged (MBbl)
|
3,306 | 4,022 | 4,565 | ||||||
Increase
(Decrease) in oil revenue
|
$ |
$14.8 million
|
$ |
(115.1
million
|
) | $ |
(34.3
million
|
) | |
Average
realized oil price per Bbl before hedging
|
$ | 54.40 | $ | 92.99 | $ | 67.56 | |||
Average
realized oil price per Bbl after hedging
|
$ | 56.74 | $ | 75.59 | $ | 62.60 | |||
Natural Gas Hedging
|
|||||||||
Percentage
of gas production hedged
|
45% | 46% | 46% | ||||||
Natural
gas volumes hedged (MMBtu)
|
$ |
34.3
million
|
$ |
36.4
million
|
$ |
32.5
million
|
|||
Increase
in gas revenue
|
$ |
125.9
million
|
$ |
14.0
million
|
$ |
58.7
million
|
|||
Average
realized gas price per Mcf before hedging
|
$ | 3.82 | $ | 8.60 | $ | 6.74 | |||
Average
realized price per Mcf after hedging
|
$ | 5.59 | $ | 8.79 | $ | 7.63 |
Years
Ended December 31,
|
|||||||||
Summary of Exploration Expense (in
millions)
|
2009
|
2008
|
2007
|
||||||
Geological
and geophysical expenses
|
$ | 20.2 | $ | 14.2 | $ | 17.0 | |||
Exploratory
dry holes
|
7.8 | 6.8 | 14.4 | ||||||
Overhead
and other expenses
|
34.2 | 39.1 | 27.3 | ||||||
Total
|
$ | 62.2 | $ | 60.1 | $ | 58.7 |
Average
Net Daily Production Added/(Lost)
|
Pre-Hedge
Oil
and Gas Revenue Added (Lost)
|
Production
Costs Increase (Decrease)
|
||||||
(MMCFE)
|
(In
millions)
|
(In
millions)
|
||||||
ArkLaTex
|
(9.9 | ) | $ | (115.0 | ) | $ | (1.1 | ) |
Mid-Continent
|
8.5 | (142.1 | ) | (16.4 | ) | |||
South
Texas & Gulf Coast
|
(12.4 | ) | (97.0 | ) | (13.8 | ) | ||
Permian
|
3.7 | (79.1 | ) | (1.7 | ) | |||
Rocky
Mountain
|
(4.2 | ) | (210.2 | ) | (31.6 | ) | ||
Total
|
(14.3 | ) | $ | (643.4 | ) | $ | (64.6 | ) |
·
|
A
$0.34 decrease in production taxes on a per MCFE basis due to the decrease
in realized prices between periods. We expect production taxes
to trend with commodity prices.
|
·
|
A
$0.11 decrease in recurring lease operating expense on a per MCFE basis is
related to reductions in recurring LOE that stems from the slowdown in
activity in the exploration and production industry, as well as the
broader economy.
|
·
|
A
$0.02 decrease in overall workover LOE on a per MCFE basis is related to a
reduction in the amount of workovers that were performed given the
slowdown in activity in the exploration and production
industry.
|
·
|
Transportation
costs on a per MCFE basis remained flat year over
year.
|
Average
Net Daily Production Added/(Lost)
|
Pre-Hedge
Oil
and Gas Revenue Added
|
Production
Costs Increase
|
||||||
(MMCFE)
|
(In
millions)
|
(In
millions)
|
||||||
ArkLaTex
|
12.8 | $ | 76.1 | $ | 8.3 | |||
Mid-Continent
|
(2.8 | ) | 30.4 | 3.9 | ||||
South
Texas & Gulf Coast
|
10.8 | 75.4 | 17.5 | |||||
Permian
|
8.5 | 85.6 | 11.5 | |||||
Rocky
Mountain
|
(10.7 | ) | 79.8 | 11.9 | ||||
Total
|
18.6 | $ | 347.3 | $ | 53.1 |
·
|
A
$0.05 increase in overall transportation cost on a per MCFE basis was
driven by the addition of Olmos shallow gas assets in the Maverick Basin
that were acquired in the fourth quarter of 2007, as well as wells
completed in 2008 that had higher transportation
costs
|
·
|
A
$0.13 increase in production taxes on a per MCFE basis due to the increase
in realized prices between periods, particularly in the oil-weighted Rocky
Mountain and Permian regions
|
·
|
A
$0.10 increase in recurring lease operating expense on a per MCFE basis
was related to higher costs, particularly in oil-weighted regions, for
items such as fuel and fluid disposal and an increase in the South Texas
& Gulf Coast region due to wells acquired and developed in South Texas
during the fourth quarter of 2007
|
·
|
A
$0.05 overall increase in workover lease operating expense on a per MCFE
basis relating to workover charges in the Mid-Continent and South Texas
& Gulf Coast regions.
|
Amount
of Changes Between
|
Percent
of Change Between
|
|||||||||
2009/2008 | 2008/2007 | 2009/2008 | 2008/2007 | |||||||
Net
Cash Provided By (Used in ) Operating Activities
|
$ | (243,084 | ) | $ | 47,136 | (36)% | 7% | |||
Net
Cash Provided By Investing Activities
|
$ | 369,662 | $ | 131,380 | (55)% | (16)% | ||||
Net
Cash Used In Financing Activities
|
$ | (84,681 | ) | $ | (257,941 | ) | 198% | (120)% |
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Development
costs
|
$ | 223,108 | $ | 587,548 | $ | 592,275 | |||
Exploration
costs
|
154,122 | 92,199 | 111,470 | ||||||
Acquisitions
|
|||||||||
Proved
properties
|
76 | 51,567 | 161,665 | ||||||
Unproved
properties – acquisitions of
proved
properties (1)
|
- | 43,274 | 23,495 | ||||||
Unproved
properties - other
|
41,677 | 83,078 | 38,436 | ||||||
Total,
including asset retirement obligations(2)(3)
|
$ | 418,983 | $ | 857,666 | $ | 927,341 | |||
|
(1)
|
Represents
a portion of the allocated purchase price of unproved properties acquired
as part of the acquisition of proved properties. Refer to Note
3 – Acquisitions, Divestitures, and Assets Held for Sale in Part IV, Item
15 of this report for additional
information.
|
(2)
|
Includes
capitalized interest of $1.9 million, $4.7 million, and $6.7 million for
the years ended December 31 2009, 2008, and 2007,
respectively.
|
(3)
|
Includes
amounts relating to estimated asset retirement obligations of $(805,000),
$15.4 million, and $27.6 million for the years ended December 31 2009,
2008, and 2007, respectively.
|
Pro
forma effect on net cash flow from operations of a ten
percent decrease in average realized sales price:
|
|||||||||
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Oil
|
$ | 29,523 | $ | 27,818 | $ | 25,248 | |||
Natural
Gas
|
11,874 | 37,288 | 29,998 | ||||||
Total
|
$ | 41,397 | $ | 65,106 | $ | 55,246 |
Oil Swaps
|
||||||||
Contract Period
|
Volumes
|
Weighted-
Average
Contract
Price
|
Fair
Value at
December
31, 2009
Asset/(Liability)
|
|||||
(Bbls)
|
(per
Bbl)
|
(in
thousands)
|
||||||
First
quarter 2010
|
468,000 | $ | 69.92 | $ | (4,777 | ) | ||
Second
quarter 2010
|
426,000 | $ | 69.46 | (5,180 | ) | |||
Third
quarter 2010
|
393,000 | $ | 68.77 | (5,513 | ) | |||
Fourth
quarter 2010
|
309,000 | $ | 66.06 | (5,457 | ) | |||
2011
|
1,164,000 | $ | 67.06 | (20,977 | ) | |||
2012
|
1,051,400 | $ | 82.19 | (5,503 | ) | |||
All
oil swap contracts
|
3,811,400 | $ | (47,407 | ) | ||||
Oil Collars
|
|||||||||||
Contract Period
|
NYMEX
WTI
Volumes
|
Weighted-
Average
Floor
Price
|
Weighted-
Average
Ceiling
Price
|
Fair
Value at
December
31, 2009
Asset/(Liability)
|
|||||||
(Bbls)
|
(per
Bbl)
|
(per
Bbl)
|
(in
thousands)
|
||||||||
First
quarter 2010
|
337,500 | $ | 50.00 | $ | 64.91 | $ | (5,264 | ) | |||
Second
quarter 2010
|
341,000 | $ | 50.00 | $ | 64.91 | (6,198 | ) | ||||
Third
quarter 2010
|
344,500 | $ | 50.00 | $ | 64.91 | (6,916 | ) | ||||
Fourth
quarter 2010
|
344,500 | $ | 50.00 | $ | 64.91 | (7,378 | ) | ||||
2011
|
1,236,000 | $ | 50.00 | $ | 63.70 | (29,707 | ) | ||||
All
oil collars
|
2,603,500 | $ | (55,463 | ) | |||||||
Gas Swaps
|
||||||||
Contract Period
|
Volumes
|
Weighted-
Average
Contract
Price
|
Fair
Value at
December
31, 2009
Asset/(Liability)
|
|||||
(MMBtu)
|
(per
MMBtu)
|
(in
thousands)
|
||||||
First
quarter 2010
|
||||||||
IF
ANR OK
|
160,000 | $ | 6.38 | $ | 136 | |||
IF
CIG
|
210,000 | $ | 5.40 | 10 | ||||
IF
EL PASO
|
400,000 | $ | 6.94 | 587 | ||||
IF
HSC
|
2,270,000 | $ | 9.05 | 7,778 | ||||
IF
NGPL
|
460,000 | $ | 5.69 | 82 | ||||
IF
NNG VENTURA
|
380,000 | $ | 5.72 | (60 | ) | |||
IF
PEPL
|
410,000 | $ | 5.27 | (102 | ) | |||
IF
RELIANT
|
1,150,000 | $ | 5.33 | (135 | ) | |||
IF
TETCO STX
|
270,000 | $ | 5.66 | 28 | ||||
NYMEX
Henry Hub
|
990,000 | $ | 7.38 | 1,719 | ||||
Second
quarter 2010
|
||||||||
IF
ANR OK
|
150,000 | $ | 5.31 | (3 | ) | |||
IF
CIG
|
200,000 | $ | 5.16 | 13 | ||||
IF
EL PASO
|
390,000 | $ | 6.00 | 264 | ||||
IF
HSC
|
1,870,000 | $ | 7.80 | 4,297 | ||||
IF
NGPL
|
430,000 | $ | 5.23 | (31 | ) | |||
IF
NNG VENTURA
|
360,000 | $ | 5.71 | 68 | ||||
IF
PEPL
|
170,000 | $ | 5.23 | (9 | ) | |||
IF
RELIANT
|
1,250,000 | $ | 5.10 | (270 | ) | |||
IF
TETCO STX
|
250,000 | $ | 5.64 | 45 | ||||
NYMEX
Henry Hub
|
960,000 | $ | 6.75 | 1,144 | ||||
Third
quarter 2010
|
||||||||
IF
ANR OK
|
70,000 | $ | 5.64 | 6 | ||||
IF
CIG
|
240,000 | $ | 5.38 | 13 | ||||
IF
EL PASO
|
370,000 | $ | 6.33 | 264 | ||||
IF
HSC
|
1,350,000 | $ | 8.03 | 3,119 | ||||
IF
NGPL
|
500,000 | $ | 5.43 | (47 | ) | |||
IF
NNG VENTURA
|
360,000 | $ | 5.89 | 55 | ||||
IF
PEPL
|
230,000 | $ | 5.56 | 7 | ||||
IF
RELIANT
|
1,190,000 | $ | 5.37 | (151 | ) | |||
IF
TETCO STX
|
230,000 | $ | 5.81 | 37 | ||||
NYMEX
Henry Hub
|
960,000 | $ | 6.94 | 1,132 | ||||
Fourth
quarter 2010
|
||||||||
IF
ANR OK
|
140,000 | $ | 5.97 | 4 | ||||
IF
CIG
|
270,000 | $ | 5.87 | 15 | ||||
IF
EL PASO
|
370,000 | $ | 6.43 | 190 | ||||
IF
HSC
|
590,000 | $ | 8.61 | 1,483 | ||||
IF
NGPL
|
430,000 | $ | 5.61 | (124 | ) | |||
IF
NNG VENTURA
|
360,000 | $ | 6.34 | 24 | ||||
IF
PEPL
|
520,000 | $ | 5.92 | 23 | ||||
IF
RELIANT
|
1,350,000 | $ | 5.71 | (219 | ) | |||
IF
TETCO STX
|
180,000 | $ | 6.23 | 33 | ||||
NYMEX
Henry Hub
|
840,000 | $ | 7.52 | 1,083 |
Gas Swaps (continued)
|
||||||||
Contract Period
|
Volumes
|
Weighted-
Average
Contract
Price
|
Fair
Value at
December
31, 2009
Asset/(Liability)
|
|||||
(MMBtu)
|
(per
MMBtu)
|
(in
thousands)
|
||||||
2011
|
||||||||
IF
ANR OK
|
500,000 | $ | 6.10 | 23 | ||||
IF
CIG
|
1,030,000 | $ | 5.96 | 217 | ||||
IF
EL PASO
|
1,780,000 | $ | 6.35 | 510 | ||||
IF
HSC
|
360,000 | $ | 9.01 | 859 | ||||
IF
NGPL
|
1,040,000 | $ | 6.09 | 42 | ||||
IF
NNG VENTURA
|
1,200,000 | $ | 6.36 | 34 | ||||
IF
PEPL
|
1,830,000 | $ | 6.04 | 39 | ||||
IF
RELIANT
|
4,510,000 | $ | 6.13 | 494 | ||||
IF
TETCO STX
|
1,420,000 | $ | 6.51 | 465 | ||||
NYMEX
Henry Hub
|
2,130,000 | $ | 6.72 | 909 | ||||
2012
|
||||||||
IF
ANR OK
|
360,000 | $ | 6.18 | (11 | ) | |||
IF
CIG
|
1,020,000 | $ | 5.77 | (160 | ) | |||
IF
EL PASO
|
850,000 | $ | 6.04 | (139 | ) | |||
IF
NGPL
|
660,000 | $ | 6.34 | 94 | ||||
IF
NNG VENTURA
|
620,000 | $ | 6.51 | (35 | ) | |||
IF
PEPL
|
2,730,000 | $ | 6.25 | 316 | ||||
IF
RELIANT
|
2,440,000 | $ | 6.22 | 9 | ||||
IF
TETCO STX
|
660,000 | $ | 6.30 | (16 | ) | |||
All
gas swap contracts
|
48,420,000 | $ | 26,158 | |||||
Gas Collars
|
|||||||||||
Contract Period
|
Volumes
|
Weighted-
Average
Floor
Price
|
Weighted-
Average
Ceiling
Price
|
Fair
Value at
December
31, 2009
Asset/(Liability)
|
|||||||
(MMBtu)
|
(per
MMBtu)
|
(per
MMBtu)
|
(in
thousands)
|
||||||||
First
quarter 2010
|
|||||||||||
IF
CIG
|
510,000 | $ | 4.85 | $ | 7.08 | $ | 65 | ||||
IF
HSC
|
150,000 | $ | 5.57 | $ | 7.88 | 46 | |||||
IF
PEPL
|
1,230,000 | $ | 5.31 | $ | 7.61 | 302 | |||||
NYMEX
Henry Hub
|
60,000 | $ | 6.00 | $ | 8.38 | 27 | |||||
Second
quarter 2010
|
|||||||||||
IF
CIG
|
510,000 | $ | 4.85 | $ | 7.08 | 177 | |||||
IF
HSC
|
150,000 | $ | 5.57 | $ | 7.88 | 84 | |||||
IF
PEPL
|
1,235,000 | $ | 5.31 | $ | 7.61 | 639 | |||||
NYMEX
Henry Hub
|
60,000 | $ | 6.00 | $ | 8.38 | 49 | |||||
Third
quarter 2010
|
|||||||||||
IF
CIG
|
510,000 | $ | 4.85 | $ | 7.08 | 121 | |||||
IF
HSC
|
150,000 | $ | 5.57 | $ | 7.88 | 72 | |||||
IF
PEPL
|
1,240,000 | $ | 5.31 | $ | 7.61 | 518 | |||||
NYMEX
Henry Hub
|
60,000 | $ | 6.00 | $ | 8.38 | 46 | |||||
Fourth
quarter 2010
|
|||||||||||
IF
CIG
|
510,000 | $ | 4.85 | $ | 7.08 | (23 | ) | ||||
IF
HSC
|
150,000 | $ | 5.57 | $ | 7.88 | 38 | |||||
IF
PEPL
|
1,240,000 | $ | 5.31 | $ | 7.61 | 247 | |||||
NYMEX
Henry Hub
|
60,000 | $ | 6.00 | $ | 8.38 | 28 | |||||
2011
|
|||||||||||
IF
CIG
|
1,800,000 | $ | 5.00 | $ | 6.32 | (360 | ) | ||||
IF
HSC
|
480,000 | $ | 5.57 | $ | 6.77 | (63 | ) | ||||
IF
PEPL
|
4,225,000 | $ | 5.31 | $ | 6.51 | (786 | ) | ||||
NYMEX
Henry Hub
|
120,000 | $ | 6.00 | $ | 7.25 | 15 | |||||
All
gas collars
|
14,450,000 | $ | 1,242 | ||||||||
Natural Gas Liquid Swaps
|
||||||||
Volumes
|
Weighted-
Average
Contract
Price
|
Fair
Value at
December
31, 2009
Asset/(Liability)
|
||||||
(approx.
Bbls)
|
(per
Bbl)
|
(in
thousands)
|
||||||
First
quarter 2010
|
206,000 | $ | 46.73 | $ | (770 | ) | ||
Second
quarter 2010
|
191,000 | $ | 46.28 | (364 | ) | |||
Third
quarter 2010
|
179,000 | $ | 46.20 | (339 | ) | |||
Fourth
quarter 2010
|
169,000 | $ | 46.16 | (424 | ) | |||
2011
|
480,000 | $ | 43.20 | (2,334 | ) | |||
2012
|
214,000 | $ | 43.70 | (1,181 | ) | |||
All
natural gas liquid swaps
|
1,439,000 | $ | (5,412 | ) |
Contractual
Obligations
|
Total
|
Less
than 1 year
|
1-3
years
|
3-5
years
|
More
than 5 years
|
||||||||||
Long-Term
Debt
|
$ | 498.2 | $ | 10.1 | $ | 488.1 | $ | - | $ | - | |||||
Operating
Leases
|
61.1 | 27.8 | 9.7 | 5.3 | 18.3 | ||||||||||
Other
Long-Term Liabilities
|
302.8 | 92.1 | 125.1 | 59.9 | 25.7 | ||||||||||
Total
|
$ | 862.1 | $ | 130.0 | $ | 622.9 | $ | 65.2 | $ | 44.0 |
For
the Years Ended December 31,
|
||||||||
2009
|
2008
|
2007
|
||||||
BCFE
|
BCFE
|
BCFE
|
||||||
Change
|
Change
|
Change
|
||||||
Revisions
resulting from price changes
|
12.0 | (199.7 | ) | 34.5 | ||||
Revisions
resulting from performance
|
(61.6 | ) | (44.5 | ) | 6.4 | |||
Total
|
(49.6 | ) | (244.2 | ) | 40.9 |
For
the Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
BCFE
|
Percentage
|
BCFE
|
Percentage
|
BCFE
|
Percentage
|
|||||||
Change
|
Change
|
Change
|
Change
|
Change
|
Change
|
|||||||
A
10% decrease in pricing
|
(25.1 | ) | (3)% | (120.8 | ) | (14)% | (16.3 | ) | (2)% | |||
A
10% decrease in proved undeveloped reserves
|
(14.2 | ) | (2)% | (15.0 | ) | (2)% | (25.0 | ) | (2)% |
·
|
We are subject to operating
and environmental risks and hazards that could result in substantial
losses.
|
·
|
Our operations are subject to
complex laws and regulations, including environmental regulations that
result in substantial costs and other
risks.
|
·
|
Possible legislation and
regulations related to global warming and climate change could have an
adverse effect on our operations and the demand for oil and natural
gas.
|
(i)
|
Pertain
to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the
Company;
|
(ii)
|
Provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company
are being made only in accordance with authorizations of management and
directors of the Company; and
|
(iii)
|
Provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the Company’s assets that
have a material effect on the financial
statements.
|
/s/ ANTHONY J. BEST
|
/s/ A. WADE PURSELL
|
Anthony
J. Best
|
A.
Wade Pursell
|
President
and Chief Executive Officer
|
Executive
Vice President and Chief Financial Officer
|
February
23, 2010
|
February
23, 2010
|
Report of Independent
Registered Public Accounting Firm
|
F-1
|
Consolidated Balance
Sheets
|
F-2
|
Consolidated Statements of
Operations
|
F-3
|
Consolidated Statements of
Stockholders’ Equity and Comprehensive Income
|
F-4
|
Consolidated Statements of Cash
Flows
|
F-5
|
Notes to Consolidated Financial
Statements
|
F-7
|
Exhibit
Number
|
Description
|
2.1 |
Purchase
and Sale Agreement dated November 1, 2006, among Henry Petroleum LP, Henry
Holding LP, Henry Group, Entre Energy Partners LP, and St. Mary Land &
Exploration Company (filed as Exhibit 2.1 to the registrant’s Current
Report on Form 8-K filed on December 18, 2006, and incorporated herein by
reference)
|
2.2 |
Purchase
and Sale Agreement dated August 2, 2007, among Rockford Energy Partners
II, LLC and St. Mary Land & Exploration Company (filed as Exhibit 2.1
to the registrant’s Current Report on Form 8-K filed on October 5, 2007,
and incorporated herein by reference)
|
2.3 |
Purchase
and Sale Agreement dated December 11, 2007, among St. Mary Land &
Exploration Company, Ralph H. Smith Restated Revocable Trust Dated
8/14/97, Ralph H. Smith Trustee, Kent. J. Harrell, Trustee of the Kent J.
Harrell Revocable Trust Dated January 19, 1995, and Abraxas Operating LLC
(filed as Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed
on February 1, 2008, and incorporated herein by
reference)
|
2.4 |
Ratification
and Joinder Agreement dated January 31, 2008, among St. Mary Land &
Exploration Company, Ralph H. Smith, Kent J. Harrell, Abraxas Operating,
LLC and Abraxas Petroleum Corporation (filed as Exhibit 2.2 to the
registrant’s Current Report on Form 8-K filed on February 1, 2008, and
incorporated herein by reference)
|
2.5* |
Purchase
and Sale Agreement dated December 17, 2009 and effective as of November 1,
2009, between Legacy Reserves Operating LP and St. Mary Land and
Exploration Company
|
2.6* |
Purchase
and Sale Agreement dated January 7, 2010 and effective as of November 1,
2009, between Sequel Energy Partners LP, Bakken Energy Partners, LLC,
Three Forks Energy Partners, LLC and St. Mary Land and Exploration
Company
|
Exhibit
Number
|
Description
|
3.1 |
Restated
Certificate of Incorporation of St. Mary Land & Exploration Company as
amended on May 25, 2005 (filed as Exhibit 3.1 to the registrant’s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 and
incorporated herein by reference)
|
3.2 |
Restated
By-Laws of St. Mary Land & Exploration Company amended as of December
18, 2008 (filed as Exhibit 3.1 to the registrant’s Current Report on Form
8-K filed on December 23, 2008, and incorporated herein by
reference)
|
4.1 |
Shareholder
Rights Plan adopted on July 15, 1999 (filed as Exhibit 4.1 to the
registrant’s Quarterly Report on Form 10-Q/A for the quarter ended June
30, 1999 and incorporated herein by reference)
|
4.2 |
First
Amendment to Shareholders Rights Plan dated March 15, 2002 as adopted by
the Board of Directors on July 19, 2001 (filed as Exhibit 4.2 to the
registrant’s Annual Report on Form 10-K for the year ended December 31,
2001 and incorporated herein by reference)
|
4.3 |
Second
Amendment to Shareholder Rights Plan dated April 24, 2006 (filed as
Exhibit 4.1 to the registrant’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2006 and incorporated herein by
reference)
|
4.4 |
Indenture
related to the 3.50% Senior Convertible Notes due 2027, dated as of April
4, 2007, between St. Mary Land & Exploration Company and Wells Fargo
Bank, National Association, as trustee (including the form of 3.50% Senior
Convertible Note due 2027) (filed as Exhibit 4.1 to the registrant’s
Current Report on Form 8-K filed on April 4, 2007, and incorporated herein
by reference)
|
4.5 |
Registration
Rights Agreement, dated as of April 4, 2007, among St. Mary Land &
Exploration Company and Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Wachovia Capital Markets, LLC, for themselves and as
representatives of the Initial Purchasers (filed Exhibit 4.2 to the
registrant’s Current Report on Form 8-K filed on April 4, 2007, and
incorporated herein by reference)
|
10.1† |
Stock
Option Plan, as Amended on May 22, 2003 (filed as Exhibit 99.1 to the
registrant’s Registration Statement on Form S-8 (Registration No.
333-106438) and incorporated herein by reference)
|
10.2† |
Incentive
Stock Option Plan, as Amended on May 22, 2003 (filed as Exhibit 99.2 to
the registrant’s Registration Statement on Form S-8 (Registration No.
333-106438) and incorporated herein by reference)
|
10.3† |
Cash
Bonus Plan (filed as Exhibit 10.7 to the registrant’s Registration
Statement on Form S-1 (Registration No. 333-53512) and incorporated herein
by reference)
|
10.4† |
Summary
Plan Description/Pension Plan dated December 30, 1994 (filed as Exhibit
10.35 to the registrant’s Annual Report on Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference)
|
10.5† |
Non-qualified
Unfunded Supplemental Retirement Plan, as amended (filed as Exhibit 10.10
to the registrant’s Registration Statement on Form S-1 (Registration No.
333-53512) and incorporated herein by reference)
|
10.6† |
Employee
Stock Purchase Plan (filed as Exhibit 10.50 for the registrant’s Annual
Report on Form 10-K for the year ended December 31, 1997 and incorporated
herein by reference)
|
10.7† |
First
Amendment to Employee Stock Purchase Plan dated February 27, 2001 (filed
as Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001 and incorporated herein by
reference)
|
10.8† |
Second
Amendment to the Employee Stock Purchase Plan dated February 18, 2005
(filed as Exhibit 10.48 to the registrant’s Annual Report on Form 10-K for
the year ended December 31, 2004 and incorporated herein by
reference)
|
10.9† |
Form
of Change of Control Severance Agreements (filed as Exhibit 10.1 to the
registrant’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2001 and incorporated herein by
reference)
|
Exhibit
Number
|
Description
|
10.10† |
Amendment
to Form of Change of Control Severance Agreement (filed as Exhibit 10.9 to
the registrant’s Quarterly Report on Form 10-Q for the quarter ended June
30, 2005 and incorporated herein by reference)
|
10.11 |
Amendment
to an Extension of Office Lease dated as of December 14, 2001 (filed as
Exhibit 10.45 to the registrant’s Annual Report on Form 10-K for the year
ended December 31, 2002 and incorporated herein by
reference)
|
10.12† |
Non-Employee
Director Stock Compensation Plan as adopted on March 27, 2003 (filed as
Exhibit 10.1 to the registrant’s Quarterly Report on Form 10-Q for the
quarter ended June 30, 2003 and incorporated herein by
reference)
|
10.13† |
Restricted
Stock Plan as adopted on April 18, 2004 (filed as Exhibit 10.1 to the
registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2004 and incorporated herein by reference)
|
10.14† |
Amendment
to Restricted Stock Plan, dated December 15, 2005 (filed as Exhibit 10.2
to the registrant’s Current Report on Form 8-K filed on December 19, 2005
and incorporated herein by reference)
|
10.15† |
Form
of Restricted Stock Unit Award Agreement under the Restricted Stock Plan
(filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K
filed on March 15, 2005 and incorporated herein by
reference)
|
10.16 |
Amended
and Restated Credit Agreement dated as of April 7, 2005 among St. Mary
Land & Exploration Company, Wachovia Bank, National Association, as
Administrative Agent, and the lenders party thereto (filed as Exhibit 10.1
to the registrant’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 2005 and incorporated herein by reference)
|
10.17† |
2006
Equity Incentive Compensation Plan (filed on May 17, 2006 as Exhibit 99.1
to the registrant’s Registration Statement on Form S-8 (Registration No.
333-134221) and incorporated herein by reference)
|
10.18† |
Form
of Non-Employee Director Restricted Stock Award Agreement (filed as
Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed on May
18, 2006 and incorporated herein by reference)
|
10.19 |
Guaranty
Agreement by St. Mary Energy Company in favor of Wachovia Bank, National
Association, as Administrative Agent, dated April 7, 2005 (filed as
Exhibit 10.2 to the registrant’s Quarterly Report on Form 10-Q for the
quarter ended March 31, 2005 and incorporated herein by
reference)
|
10.20 |
Guaranty
Agreement by Nance Petroleum Corporation in favor or Wachovia Bank,
National Association, as Administrative Agent, dated April 7, 2005 (filed
as Exhibit 10.3 to the registrant’s quarterly Report on Form 10-Q for the
quarter ended March 31, 2005 and incorporated herein by
reference)
|
10.21 |
Guaranty
Agreement by NPC Inc. in favor of Wachovia Bank, National Association, as
Administrative Agent, dated April 7, 2005 (filed as Exhibit 10.4 to the
registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2005 and incorporated herein by reference)
|
10.22 |
Pledge
and Security Agreement between St. Mary Land & Exploration Company and
Wachovia Bank, National Association, as Administrative Agent, dated April
7, 2005 (filed as Exhibit 10.5 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2005 and incorporated herein by
reference.)
|
10.23 |
Pledge
and Security Agreement between Nance Petroleum Corporation and Wachovia
Bank, National Association, as Administrative Agent, dated April 7, 2005
(filed as Exhibit 10.6 to the registrant’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2005 and incorporated herein by
reference.)
|
Exhibit
Number
|
Description
|
10.24 |
First
Supplement and Amendment to Deed of Trust, Mortgage, Line of Credit,
Assignment, Security Agreement, Fixture Filing and Financing Statement for
the Benefit of Wachovia Bank, National Association, as Administrative
Agent, dated effective as of April 7, 2005 (filed as Exhibit 10.7 to the
registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2005 and incorporated herein by reference)
|
10.25 |
Deed
of Trust – St. Mary Land & Exploration Company to Wachovia Bank,
National Association, as Administrative Agent, dated effective as of April
7, 2005 (filed as Exhibit 10.8 to the registrant’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2005 and incorporated herein by
reference)
|
10.26† |
Net
Profits Interest Bonus Plan, as Amended on December 15, 2005 (filed as
Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on
December 19, 2005 and incorporated herein by reference)
|
10.27† |
Summary
of Charitable Contributions in Honor of Thomas E. Congdon (filed as
Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed on
December 19, 2005 and incorporated herein by reference)
|
10.28† |
Summary
of 2006 Base Salaries for Named Executive Officers (filed as Exhibit 10.5
to the registrant’s Current Report on Form 8-K filed on December 19, 2005
and incorporated herein by reference)
|
10.29† |
Employment
Agreement of A.J. Best dated May 1, 2006 (filed as Exhibit 10.1 to the
registrant’s Current Report on Form 8-K filed on May 4, 2006 and
incorporated herein by reference)
|
10.30*† |
Summary
of Compensation Arrangements for Non-Employee Directors
|
10.31 |
Purchase
Agreement, dated March 29, 2007, among St. Mary Land & Exploration
Company, Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Wachovia Capital Markets, LLC, Bear Stearns & Co.
Inc., BNP Paribas Securities Corp., and UBS Securities LLC (filed as
Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on April
4, 2007, and incorporated herein by reference)
|
10.32 |
First
Amendment to Amended and Restated Credit Agreement, dated March 19, 2007,
among St. Mary Land & Exploration Company, the lenders party thereto,
Wachovia Bank, National Association, as issuing bank and administrative
agent, Wells Fargo Bank, N.A., as syndication agent, and BNP Paribas,
Comerica Bank-Texas and JPMorgan Chase Bank, N.A., as co-documentation
agents (filed as Exhibit 10.2 to the registrant’s Current Report on Form
8-K filed on April 4, 2007, and incorporated herein by
reference)
|
10.33† |
Net
Profits Interest Bonus Plan, As Amended and Restated by the Board of
Directors on July 19, 2007 (filed as Exhibit 10.1 to the registrant’s
Current Report on Form 8-K filed on July 25, 2007, and incorporated herein
by reference)
|
10.34† |
Cash
Bonus Plan as Amended on March 28, 2008 (filed as Exhibit 10.1 to the
registrant’s Current Report on Form 8-K filed on April 3, 2008 and
incorporated herein by reference)
|
10.35 |
Second
Amended and Restated Credit Agreement dated April 10, 2008, among St. Mary
Land & Exploration Company, the lenders party thereto, Wachovia Bank,
National Association, as Administrative Agent, Wells Fargo Bank, N.A., as
syndication agent, and BNP Paribas, Comerica Bank and JPMorgan Chase Bank,
N.A., as co-documentation agents (filed as Exhibit 10.1 to the
registrant’s Quarterly Report on Form 10-Q filed on May 5, 2008 and
incorporated herein by reference)
|
10.36† |
2006
Equity Incentive Compensation Plan as Amended and Restated as of March 28,
2008 (filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K
filed on May 27, 2008 and incorporated herein by
reference)
|
10.37† |
Form
of Performance Share Award Agreement (filed as Exhibit 10.4 to the
registrant’s Quarterly Report on Form 10-Q filed on August 5, 2008 and
incorporated herein by reference)
|
10.38† |
Form
of Performance Share Award Notice (filed as Exhibit 10.5 to the
registrant’s Quarterly Report on Form 10-Q filed on August 5, 2008 and
incorporated herein by reference)
|
Exhibit
Number
|
Description
|
10.39 |
Third
Amended and Restated Credit Agreement dated April 14, 2009 among St. Mary
Land & Exploration Company, Wachovia Bank, National Association, as
Administrative Agent, and the Lenders party thereto (filed as Exhibit 10.1
to the registrant’s Current Report on Form 8-K filed on April 20, 2009,
and incorporated herein by reference)
|
10.40 |
Supplement
and Amendment to Deed of Trust, Mortgage, Line of Credit Mortgage,
Assignment, Security Agreement, Fixture Filing and Financing Statement for
the benefit of Wachovia Bank, National Association, as Administrative
Agent, dated effective as of April 14, 2009 (filed as Exhibit 10.2 to the
registrant’s Current Report on Form 8-K filed on April 20, 2009, and
incorporated herein by reference)
|
10.41 |
Deed
of Trust to Wachovia Bank, National Association, as Administrative Agent,
dated effective as of April 14, 2009 (filed as Exhibit 10.3 to the
registrant’s Current Report on Form 8-K filed on April 20, 2009, and
incorporated herein by reference)
|
10.42† |
Equity
Incentive Compensation Plan as Amended and Restated as of March 26, 2009
(filed as Exhibit 10.1 to the registrant’s Current Report on Form 8-K
filed on May 27, 2009)
|
10.43† |
St.
Mary Land & Exploration Company Form of Performance Share and
Restricted Stock Unit Award Agreement (filed as Exhibit 10.5 to the
registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2009, and incorporated herein by reference)
|
10.44† |
St.
Mary Land & Exploration Company Form of Performance Share and
Restricted Stock Unit Award Notice (filed as Exhibit 10.6 to the
registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30,
2009, and incorporated herein by reference)
|
10.45† |
Third
Amendment to St. Mary Land & Exploration Company Employee Stock
Purchase Plan dated September 23, 2009 (filed as Exhibit 10.3 to the
registrant’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2009, and incorporated herein by reference)
|
10.46*† | Fourth Amendment to St. Mary Land & Exploration Company Employee Stock Purchase Plan dated December 29, 2009 |
21.1* |
Subsidiaries
of Registrant
|
23.1* |
Consent
of Deloitte & Touche LLP
|
23.2* |
Consent
of Ryder Scott Company L.P.
|
23.3* |
Consent
of Netherland, Sewell & Associates, Inc.
|
24.1* |
Power
of Attorney
|
31.1* |
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes – Oxley
Act of 2002
|
31.2* |
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes – Oxley
Act of 2002
|
32.1** |
Certification
pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the
Sarbanes- Oxley Act of 2002
|
99.1* |
Ryder
Scott Audit Letter
|
PART
II. FINANCIAL INFORMATION
|
||||||
ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
||||||
ST.
MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
|
||||||
CONSOLIDATED
BALANCE SHEETS
|
||||||
(In
thousands, except share amounts)
|
||||||
December
31,
|
||||||
2009
|
2008
|
|||||
ASSETS
|
(As
adjusted, Note 5)
|
|||||
Current
assets:
|
||||||
Cash
and cash equivalents
|
$ | 10,649 | $ | 6,131 | ||
Short-term
investments
|
- | 1,002 | ||||
Accounts
receivable, net of allowance for doubtful accounts
|
||||||
of
$- in 2009 and $16,788 in 2008
|
116,136 | 157,690 | ||||
Refundable
income taxes
|
32,773 | 13,161 | ||||
Prepaid
expenses and other
|
14,259 | 22,161 | ||||
Derivative
asset
|
30,295 | 111,649 | ||||
Deferred
income taxes
|
4,934 | - | ||||
Total
current assets
|
209,046 | 311,794 | ||||
Property
and equipment (successful efforts method), at cost:
|
||||||
Land
|
1,371 | 1,350 | ||||
Proved
oil and gas properties
|
2,797,341 | 2,969,722 | ||||
Less
- accumulated depletion, depreciation, and amortization
|
(1,053,518 | ) | (947,207 | ) | ||
Unproved
oil and gas properties, net of impairment allowance
|
||||||
of
$66,570 in 2009 and $42,945 in 2008
|
132,370 | 168,817 | ||||
Wells
in progress
|
65,771 | 90,910 | ||||
Materials
inventory, at lower of cost or market
|
24,467 | 40,455 | ||||
Oil
and gas properties held for sale less accumulated
depletion,
|
||||||
depreciation,
and amortization
|
145,392 | 1,827 | ||||
Other
property and equipment, net of accumulated depreciation
|
||||||
of
$14,550 in 2009 and $13,848 in 2008
|
14,404 | 13,458 | ||||
2,127,598 | 2,339,332 | |||||
Other
noncurrent assets:
|
||||||
Derivative
asset
|
8,251 | 21,541 | ||||
Restricted
cash subject to Section 1031 Exchange
|
- | 14,398 | ||||
Other
noncurrent assets
|
16,041 | 10,182 | ||||
Total
other noncurrent assets
|
24,292 | 46,121 | ||||
Total
Assets
|
$ | 2,360,936 | $ | 2,697,247 | ||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||
Current
liabilities:
|
||||||
Accounts
payable and accrued expenses
|
$ | 236,242 | $ | 254,811 | ||
Derivative
liability
|
53,929 | 501 | ||||
Deposit
associated with oil and gas properties held for sale
|
6,500 | - | ||||
Deferred
income taxes
|
- | 41,289 | ||||
Total
current liabilities
|
296,671 | 296,601 | ||||
Noncurrent
liabilities:
|
||||||
Long-term
credit facility
|
188,000 | 300,000 | ||||
Senior
convertible notes, net of unamortized
|
||||||
discount
of $20,598 in 2009, and $28,787 in 2008
|
266,902 | 258,713 | ||||
Asset
retirement obligation
|
60,289 | 108,755 | ||||
Asset
retirement obligation associated with oil and gas properties held for
sale
|
18,126 | 238 | ||||
Net
Profits Plan liability
|
170,291 | 177,366 | ||||
Deferred
income taxes
|
308,189 | 354,328 | ||||
Derivative
liability
|
65,499 | 27,419 | ||||
Other
noncurrent liabilities
|
13,399 | 11,318 | ||||
Total
noncurrent liabilities
|
1,090,695 | 1,238,137 | ||||
Commitments
and contingencies
|
||||||
Stockholders'
equity:
|
||||||
Common
stock, $0.01 par value: authorized - 200,000,000
shares;
|
||||||
issued: 62,899,122
shares in 2009 and 62,465,572 shares in 2008;
|
||||||
outstanding,
net of treasury shares: 62,772,229 shares in 2009
|
||||||
and
62,288,585 shares in 2008
|
629 | 625 | ||||
Additional
paid-in capital
|
160,516 | 141,283 | ||||
Treasury
stock, at cost: 126,893 shares in 2009 and 176,987 shares in
2008
|
(1,204 | ) | (1,892 | ) | ||
Retained
earnings
|
851,583 | 957,200 | ||||
Accumulated
other comprehensive income (loss)
|
(37,954 | ) | 65,293 | |||
Total
stockholders' equity
|
973,570 | 1,162,509 | ||||
Total
Liabilities and Stockholders' Equity
|
$ | 2,360,936 | $ | 2,697,247 |
ST.
MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
|
|||||||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|||||||||
(In
thousands, except per share amounts)
|
|||||||||
|
|||||||||
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(As
adjusted, Note 5)
|
|||||||||
Operating
revenues and other income:
|
|||||||||
Oil
and gas production revenue
|
$ | 615,953 | $ | 1,259,400 | $ | 912,093 | |||
Realized
oil and gas hedge gain (loss)
|
140,648 | (101,096 | ) | 24,484 | |||||
Marketed
gas system revenue
|
58,459 | 77,350 | 45,149 | ||||||
Gain
(loss) on divestiture activity (Note 3)
|
11,444 | 63,557 | (367 | ) | |||||
Other
revenue
|
5,697 | 2,090 | 8,735 | ||||||
Total
operating revenues and other income
|
832,201 | 1,301,301 | 990,094 | ||||||
Operating
expenses:
|
|||||||||
Oil
and gas production expense
|
206,800 | 271,355 | 218,208 | ||||||
Depletion,
depreciation, amortization,
|
|||||||||
and
asset retirement obligation liability accretion
|
304,201 | 314,330 | 227,596 | ||||||
Exploration
|
62,235 | 60,121 | 58,686 | ||||||
Impairment
of proved properties
|
174,813 | 302,230 | - | ||||||
Abandonment
and impairment of unproved properties
|
45,447 | 39,049 | 4,756 | ||||||
Impairment
of materials inventory
|
14,223 | - | - | ||||||
Impairment
of goodwill
|
- | 9,452 | - | ||||||
General
and administrative
|
76,036 | 79,503 | 60,149 | ||||||
Bad
debt expense (recovery)
|
(5,189 | ) | 16,735 | - | |||||
Change
in Net Profits Plan liability
|
(7,075 | ) | (34,040 | ) | 50,823 | ||||
Marketed
gas system expense
|
57,587 | 72,159 | 42,485 | ||||||
Unrealized
derivative (gain) loss
|
20,469 | (11,209 | ) | 5,458 | |||||
Other
expense
|
13,489 | 10,415 | 2,522 | ||||||
Total
operating expenses
|
963,036 | 1,130,100 | 670,683 | ||||||
Income
(loss) from operations
|
(130,835 | ) | 171,201 | 319,411 | |||||
|
|||||||||
Nonoperating
income (expense):
|
|||||||||
Interest
income
|
227 | 485 | 746 | ||||||
Interest
expense
|
(28,856 | ) | (26,950 | ) | (24,046 | ) | |||
Income
(loss) before income taxes
|
(159,464 | ) | 144,736 | 296,111 | |||||
Income
tax benefit (expense)
|
60,094 | (57,388 | ) | (109,013 | ) | ||||
Net
income (loss)
|
$ | (99,370 | ) | $ | 87,348 | $ | 187,098 | ||
Basic
weighted-average common shares outstanding
|
62,457 | 62,243 | 61,852 | ||||||
Diluted
weighted-average common shares outstanding
|
62,457 | 63,133 | 64,850 | ||||||
Basic
net income (loss) per common share
|
$ | (1.59 | ) | $ | 1.40 | $ | 3.02 | ||
Diluted
net income (loss) per common share
|
$ | (1.59 | ) | $ | 1.38 | $ | 2.90 |
ST.
MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
|
||||||||||||||||||||||
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(LOSS)
|
||||||||||||||||||||||
(In
thousands, except share amounts)
|
||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||
Additional
|
Other
|
Total
|
||||||||||||||||||||
Common
Stock
|
Paid-in
|
Treasury
Stock
|
Retained
|
Comprehensive
|
Stockholders'
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Shares
|
Amount
|
Earnings
|
Income
(Loss)
|
Equity
|
|||||||||||||||
Balances,
December 31, 2006
|
55,251,733 | $ | 553 | $ | 38,940 | (250,000 | ) | $ | (4,272 | ) | $ | 695,224 | $ | 12,929 | $ | 743,374 | ||||||
Comprehensive
income, net of tax:
|
||||||||||||||||||||||
Net
income (As adjusted, Note 5)
|
- | - | - | - | - | 187,098 | - | 187,098 | ||||||||||||||
Change
in derivative instrument fair value
|
- | - | - | - | - | - | (154,497 | ) | (154,497 | ) | ||||||||||||
Reclassification
to earnings
|
- | - | - | - | - | - | (15,470 | ) | (15,470 | ) | ||||||||||||
Minimum
pension liability adjustment
|
- | - | - | - | - | - | 70 | 70 | ||||||||||||||
Total
comprehensive income
|
17,201 | |||||||||||||||||||||
Cash
dividends, $ 0.10 per share
|
- | - | - | - | - | (6,284 | ) | - | (6,284 | ) | ||||||||||||
Treasury
stock purchases
|
- | - | - | (792,216 | ) | (25,957 | ) | - | - | (25,957 | ) | |||||||||||
Issuance
of common stock under Employee
|
||||||||||||||||||||||
Stock
Purchase Plan
|
29,534 | - | 919 | - | - | - | - | 919 | ||||||||||||||
Conversion
of 5.75% Senior Convertible Notes
|
||||||||||||||||||||||
due
2022 to common stock, including income
|
||||||||||||||||||||||
tax
benefit of conversion
|
7,692,295 | 77 | 106,854 | - | - | - | - | 106,931 | ||||||||||||||
Issuance
of common stock upon settlement of
|
||||||||||||||||||||||
RSUs
following expiration of restriction period,
|
||||||||||||||||||||||
net
of shares used for tax withholdings
|
302,370 | 3 | (4,569 | ) | - | - | - | - | (4,566 | ) | ||||||||||||
Sale
of common stock, including income
|
||||||||||||||||||||||
tax
benefit of stock option exercises
|
733,650 | 7 | 19,011 | - | - | - | - | 19,018 | ||||||||||||||
3.50%
Senior Convertible Notes conversion feature
|
- | - | 41,843 | - | - | - | - | 41,843 | ||||||||||||||
Stock-based
compensation expense
|
1,250 | - | 8,915 | 32,504 | 1,180 | - | - | 10,095 | ||||||||||||||
Balances,
December 31, 2007 (As adjusted, Note 5)
|
64,010,832 | $ | 640 | $ | 211,913 | (1,009,712 | ) | $ | (29,049 | ) | $ | 876,038 | $ | (156,968 | ) | $ | 902,574 | |||||
Comprehensive
income, net of tax:
|
||||||||||||||||||||||
Net
income (As adjusted, Note 5)
|
- | - | - | - | - | 87,348 | - | 87,348 | ||||||||||||||
Change
in derivative instrument fair value
|
- | - | - | - | - | - | 177,005 | 177,005 | ||||||||||||||
Reclassification
to earnings
|
- | - | - | - | - | - | 46,463 | 46,463 | ||||||||||||||
Minimum
pension liability adjustment
|
- | - | - | - | - | - | (1,207 | ) | (1,207 | ) | ||||||||||||
Total
comprehensive income
|
309,609 | |||||||||||||||||||||
Cash
dividends, $ 0.10 per share
|
- | - | - | - | - | (6,186 | ) | - | (6,186 | ) | ||||||||||||
Treasury
stock purchases
|
- | - | - | (2,135,600 | ) | (77,150 | ) | - | - | (77,150 | ) | |||||||||||
Retirement
of treasury stock
|
(2,945,212 | ) | (29 | ) | (103,237 | ) | 2,945,212 | 103,266 | - | - | - | |||||||||||
Issuance
of common stock under Employee
|
||||||||||||||||||||||
Stock
Purchase Plan
|
45,228 | - | 1,055 | - | - | - | - | 1,055 | ||||||||||||||
Issuance
of common stock upon settlement of
|
||||||||||||||||||||||
RSUs
following expiration of restriction period,
|
||||||||||||||||||||||
net
of shares used for tax withholdings
|
482,602 | 5 | (6,910 | ) | - | - | - | - | (6,905 | ) | ||||||||||||
Sale
of common stock, including income
|
||||||||||||||||||||||
tax
benefit of stock option exercises
|
868,372 | 9 | 24,691 | - | - | - | - | 24,700 | ||||||||||||||
Stock-based
compensation expense
|
3,750 | - | 13,771 | 23,113 | 1,041 | - | - | 14,812 | ||||||||||||||
Balances,
December 31, 2008 (As adjusted, Note 5)
|
62,465,572 | $ | 625 | $ | 141,283 | (176,987 | ) | $ | (1,892 | ) | $ | 957,200 | $ | 65,293 | $ | 1,162,509 | ||||||
Comprehensive
loss, net of tax:
|
||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | (99,370 | ) | - | (99,370 | ) | ||||||||||||
Change
in derivative instrument fair value
|
- | - | - | - | - | - | (35,977 | ) | (35,977 | ) | ||||||||||||
Reclassification
to earnings
|
- | - | - | - | - | - | (67,344 | ) | (67,344 | ) | ||||||||||||
Minimum
pension liability adjustment
|
- | - | - | - | - | - | 74 | 74 | ||||||||||||||
Total
comprehensive loss
|
(202,617 | ) | ||||||||||||||||||||
Cash
dividends, $ 0.10 per share
|
- | - | - | - | - | (6,247 | ) | - | (6,247 | ) | ||||||||||||
Issuance
of common stock under Employee
|
||||||||||||||||||||||
Stock
Purchase Plan
|
86,308 | 1 | 1,515 | - | - | - | - | 1,516 | ||||||||||||||
Issuance
of common stock upon settlement of
|
||||||||||||||||||||||
RSUs
following expiration of restriction period,
|
||||||||||||||||||||||
net
of shares used for tax withholdings,
|
||||||||||||||||||||||
including
income tax cost of RSUs
|
156,252 | 1 | (1,951 | ) | - | - | - | - | (1,950 | ) | ||||||||||||
Sale
of common stock, including income
|
||||||||||||||||||||||
tax
benefit of stock option exercises
|
189,740 | 2 | 1,592 | - | - | - | - | 1,594 | ||||||||||||||
Stock-based
compensation expense
|
1,250 | - | 18,077 | 50,094 | 688 | - | - | 18,765 | ||||||||||||||
Balances,
December 31, 2009
|
62,899,122 | $ | 629 | $ | 160,516 | (126,893 | ) | $ | (1,204 | ) | $ | 851,583 | $ | (37,954 | ) | $ | 973,570 |
ST.
MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
|
|||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|||||||||
(In
thousands)
|
|||||||||
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(As
adjusted, Note 5)
|
|||||||||
Cash
flows from operating activities:
|
|||||||||
Net
income (loss)
|
$ | (99,370 | ) | $ | 87,348 | $ | 187,098 | ||
Adjustments
to reconcile net income (loss) to net cash
|
|||||||||
provided
by operating activities:
|
|||||||||
(Gain)
loss on divestiture activities
|
(11,444 | ) | (63,557 | ) | 367 | ||||
Depletion,
depreciation, amortization,
|
|||||||||
and
asset retirement obligation liability accretion
|
304,201 | 314,330 | 227,596 | ||||||
Exploratory
dry hole expense
|
7,810 | 6,823 | 14,365 | ||||||
Impairment
of proved properties
|
174,813 | 302,230 | - | ||||||
Abandonment
and impairment of unproved properties
|
45,447 | 39,049 | 4,756 | ||||||
Impairment
of materials inventory
|
14,223 | - | - | ||||||
Impairment
of goodwill
|
- | 9,452 | - | ||||||
Stock-based
compensation expense*
|
18,765 | 14,812 | 10,095 | ||||||
Bad
debt expense (recovery)
|
(5,189 | ) | 16,735 | - | |||||
Change
in Net Profits Plan liability
|
(7,075 | ) | (34,040 | ) | 50,823 | ||||
Unrealized
derivative (gain) loss
|
20,469 | (11,209 | ) | 5,458 | |||||
Loss
related to hurricanes
|
8,301 | 6,980 | - | ||||||
(Gain)
loss on insurance settlement
|
- | 2,296 | (5,243 | ) | |||||
Amortization
of debt discount and deferred financing costs
|
12,213 | 9,344 | 5,413 | ||||||
Deferred
income taxes
|
(39,735 | ) | 38,164 | 91,418 | |||||
Plugging
and abandonment
|
(26,396 | ) | (9,168 | ) | (12,393 | ) | |||
Other
|
3,382 | 3,875 | 1,896 | ||||||
Changes
in current assets and liabilities:
|
|||||||||
Accounts
receivable
|
46,743 | (14,327 | ) | (6,557 | ) | ||||
Refundable
income taxes
|
(19,612 | ) | (12,228 | ) | 6,751 | ||||
Prepaid
expenses and other
|
(6,626 | ) | (1,504 | ) | 19,375 | ||||
Accounts
payable and accrued expenses
|
(4,814 | ) | (12,348 | ) | 40,769 | ||||
Excess
income tax benefit associated with stock awards
|
- | (13,867 | ) | (9,933 | ) | ||||
Net
cash provided by operating activities
|
436,106 | 679,190 | 632,054 | ||||||
Cash
flows from investing activities:
|
|||||||||
Proceeds
from insurance settlement
|
16,789 | - | 5,948 | ||||||
Proceeds
from sale of oil and gas properties
|
39,898 | 178,867 | 495 | ||||||
Capital
expenditures
|
(379,253 | ) | (746,586 | ) | (639,010 | ) | |||
Acquisition
of oil and gas properties
|
(76 | ) | (81,823 | ) | (182,883 | ) | |||
Receipts
from restricted cash
|
14,398 | - | - | ||||||
Deposits
to restricted cash
|
- | (14,398 | ) | - | |||||
Receipts
from short-term investments
|
1,002 | 170 | 1,450 | ||||||
Deposits
to short-term investments
|
- | - | (1,168 | ) | |||||
Other
|
3,150 | (9,984 | ) | 10,034 | |||||
Net
cash used in investing activities
|
(304,092 | ) | (673,754 | ) | (805,134 | ) | |||
Cash
flows from financing activities:
|
|||||||||
Proceeds
from credit facility
|
2,072,500 | 2,571,500 | 822,000 | ||||||
Repayment
of credit facility
|
(2,184,500 | ) | (2,556,500 | ) | (871,000 | ) | |||
Repayment
of short-term note payable
|
- | - | (4,469 | ) | |||||
Debt
issuance costs related to credit facility
|
(11,074 | ) | - | - | |||||
Excess
income tax benefit associated with stock awards
|
- | 13,867 | 9,933 | ||||||
Proceeds
from issuance of senior convertible debt, net of
|
|||||||||
deferred
financing cost
|
- | - | 280,657 | ||||||
Proceeds
from sale of common stock
|
3,110 | 11,888 | 10,007 | ||||||
Repurchase
of common stock
|
- | (77,202 | ) | (25,904 | ) | ||||
Dividends
paid
|
(6,247 | ) | (6,186 | ) | (6,284 | ) | |||
Other
|
(1,285 | ) | (182 | ) | 186 | ||||
Net
cash (used in) provided by financing activities
|
(127,496 | ) | (42,815 | ) | 215,126 | ||||
Net
change in cash and cash equivalents
|
4,518 | (37,379 | ) | 42,046 | |||||
Cash
and cash equivalents at beginning of period
|
6,131 | 43,510 | 1,464 | ||||||
Cash
and cash equivalents at end of period
|
$ | 10,649 | $ | 6,131 | $ | 43,510 | |||
*
Stock-based compensation expense is a component of exploration expense and
general and administrative expense on
|
|||||||||
the
consolidated statements of operations. For the years ended December
31, 2009, 2008, and 2007, respectively,
|
|||||||||
$6.3
million, $5.8 million, and $3.2 million of stock-based compensation
expense was included in exploration expense.
|
|||||||||
For
the years ended December 31, 2009, 2008, and 2007, respectively, $12.5
million, $9.0 million, and $6.9 million of
|
|||||||||
stock-based
compensation expense was included in general and administrative
expense.
|
ST.
MARY LAND & EXPLORATION COMPANY AND SUBSIDIARIES
|
||||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS (Continued)
|
||||||||||
Supplemental
schedule of additional cash flow information and noncash investing and
financing activities:
|
||||||||||
For
the Years Ended December 31
|
||||||||||
2009
|
2008
|
2007
|
||||||||
(In
thousands)
|
||||||||||
Cash
paid for interest
|
$ | 17,884 | $ | 21,976 | $ | 22,816 | ||||
Cash
paid (refunded) for income taxes
|
$ | (9,857 | ) | $ | 17,326 | $ | (1,156 | ) | ||
In
August 2009 and 2008, the Company granted 725,092 and 465,751 Performance
Share Awards to
|
||||||||||
employees
as equity-based compensation pursuant to the Company's Equity Incentive
Compensation
|
||||||||||
Plan. The
total fair value of the issuances equaled $25.8 million and $12.3 million,
respectively.
|
||||||||||
The
Company did not grant any Performance Share Awards in
2007.
|
||||||||||
As
of December 31, 2009, 2008, and 2007, the Company issued
241,745, 428,407, and 102,634
|
||||||||||
restricted
stock units, respectively, to employees as equity-based compensation,
pursuant to the
|
||||||||||
Company's
Equity Incentive Compensation Plan. The total fair value of the
issuances was $5.8 million, $23.4
|
||||||||||
million,
and $3.3 million, respectively.
|
||||||||||
As
of December 31, 2009, 2008, and 2007, $109.0 million, $116.5 million, and
$116.9 million,
|
||||||||||
respectively,
are included as additions to oil and gas properties and accounts payable
and accrued
|
||||||||||
expenses. These
oil and gas property additions are reflected in cash used in investing
activities in the
|
||||||||||
periods
that the payables are settled.
|
||||||||||
For
the years ended December 31, 2009, 2008, and 2007, the Company issued
50,094, 23,113, and 32,504
|
||||||||||
shares,
respectively, of common stock from treasury to its non-employee directors
pursuant to the
|
||||||||||
Company's
Equity Incentive Compensation Plan. The Company recorded compensation
expense related
|
||||||||||
to
these issuances of approximately $688,000, $1,041,000, and $983,500 for
the years ended December 31,
|
||||||||||
2009,
2008, and 2007, respectively.
|
||||||||||
For
the years ended December 31, 2009, 2008 and 2007, the Company converted
215,700, 678,197, and 427,059
|
||||||||||
RSU's
relating to awards granted in previous years. The Company and a
majority of grant participants
|
||||||||||
mutually
agreed to net share settle the awards to cover income and payroll tax
withholding as provided
|
||||||||||
for
in the plan documents and award agreements. As a result, the Company
issued 156,252, 482,602, and
|
||||||||||
302,370
net shares of common stock associated with these grants for the years
ended December 31, 2009, 2008,
|
||||||||||
and
2007, respectively. The remaining 59,448, 195,595, and 124,689,
shares were withheld to satisfy income and
|
||||||||||
payroll
tax withholding obligations that occurred upon the delivery of the
shares underlying those RSU's.
|
||||||||||
In
December 2008 the Company closed a transaction whereby it exchanged
non-core oil and gas properties
|
||||||||||
located
in Coupee Parish, Louisiana fair valued at $30.4 million for an increased
interest in properties
|
||||||||||
located
in Upton and Midland Counties, Texas and $17.6 million in
cash.
|
||||||||||
In
September 2008 the Company hired a new senior executive. Upon
commencement of employment, the
|
||||||||||
Company
issued 15,496 shares of restricted stock awards to the senior executive,
of which half vested
|
||||||||||
on
December 15, 2009 and the remaining half will vest on December 15, 2010,
provided that on such
|
||||||||||
vesting
dates the executive is employed by the Company. The total fair value
of the issuance was
|
||||||||||
$600,005.
|
||||||||||
In
March 2007 the Company called the 5.75% Senior Convertible Notes for
redemption. All of the note
|
||||||||||
holders
elected to convert the 5.75% Senior Convertible Notes to common
stock. As a result, the
|
||||||||||
Company
issued 7,692,295 shares of common stock on March 16, 2007, in exchange for
the $100 million
|
||||||||||
of
5.75% Senior Convertible Notes then outstanding. The conversion was
executed in accordance with
|
||||||||||
the
conversion provisions of the original indenture. Additionally, the
conversion resulted in a $7.0
|
||||||||||
million
decrease in non-current deferred income taxes payable and a corresponding
increase in
|
||||||||||
additional
paid-in capital that resulted from the recognition of the cumulative
excess tax benefit earned
|
||||||||||
by
the Company associated with the contingent interest feature of the
notes.
|
For
the Years Ended December 31,
|
||||||
2009
|
2008
|
2007
|
||||
Dilutive
|
- | 890,189 | 1,441,556 | |||
Anti-dilutive
|
1,152,127 | 330,231 | - |
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands, except per share amounts)
|
|||||||||
Net
income (loss)
|
$ | (99,370 | ) | $ | 87,348 | $ | 187,098 | ||
Adjustments
to net income (loss) for dilution:
|
|||||||||
Add:
interest expense not incurred if 5.75% Senior Convertible Notes
converted
|
- | - | 1,285 | ||||||
Less:
other adjustments
|
- | - | (13 | ) | |||||
Less:
income tax effect of adjustment items
|
- | - | (469 | ) | |||||
Net
income (loss) adjusted for the effect of dilution
|
$ | (99,370 | ) | $ | 87,348 | $ | 187,901 | ||
Basic
weighted-average common shares outstanding
|
62,457 | 62,243 | 61,852 | ||||||
Add:
dilutive effect of stock options, unvested RSUs, and PSAs
|
- | 890 | 1,441 | ||||||
Add:
dilutive effect of 5.75% Senior Convertible Notes using the if-converted
method
|
- | - | 1,557 | ||||||
Add:
dilutive effect of 3.50% Senior Convertible Notes
|
- | - | - | ||||||
Diluted
weighted-average common shares outstanding
|
62,457 | 63,133 | 64,850 | ||||||
Basic
net income (loss) per common share
|
$ | (1.59 | ) | $ | 1.40 | $ | 3.02 | ||
Diluted
net income (loss) per common share
|
$ | (1.59 | ) | $ | 1.38 | $ | 2.90 |
Pension
|
Other
|
||||||||
Derivative
|
Liability
|
Comprehensive
|
|||||||
Instruments
|
Adjustments
|
Income
(Loss)
|
|||||||
(In
thousands)
|
|||||||||
For
the year ended December 31, 2007
|
|||||||||
Before
tax income (loss)
|
$ | (272,655 | ) | $ | 119 | $ | (272,536 | ) | |
Tax
benefit (expense)
|
102,688 | (49 | ) | 102,639 | |||||
After
deferred tax income (loss)
|
$ | (169,967 | ) | $ | 70 | $ | (169,897 | ) | |
For
the year ended December 31, 2008
|
|||||||||
Before
tax income (loss)
|
$ | 358,632 | $ | (1,941 | ) | $ | 356,691 | ||
Tax
benefit (expense)
|
(135,164 | ) | 734 | (134,430 | ) | ||||
After
deferred tax income (loss)
|
$ | 223,468 | $ | (1,207 | ) | $ | 222,261 | ||
For
the year ended December 31, 2009
|
|||||||||
Before
tax income (loss)
|
$ | (165,684 | ) | $ | 119 | $ | (165, 565 | ) | |
Tax
benefit (expense)
|
62,363 | (45 | ) | 62,318 | |||||
After
deferred tax income (loss)
|
$ | (103,321 | ) | $ | 74 | $ | (103,247 | ) |
As
of December 31,
|
||||||
2009
|
2008
|
|||||
(In
thousands)
|
||||||
Accrued
oil and gas sales
|
$ | 80,085 | $ | 84,583 | ||
Due
from joint interest owners
|
29,719 | 56,493 | ||||
Settled
hedge receivable
|
253 | 8,829 | ||||
State
severance tax refunds
|
4,638 | 5,049 | ||||
Other
|
1,441 | 2,736 | ||||
Total
accounts receivable
|
$ | 116,136 | $ | 157,690 |
As
of December 31,
|
||||||
2009
|
2008
|
|||||
(In
thousands)
|
||||||
Accrued
drilling costs
|
$ | 100,960 | $ | 111,397 | ||
Revenue
and severance tax payable
|
33,370 | 42,520 | ||||
Accrued
lease operating expense
|
13,760 | 20,328 | ||||
Accrued
property taxes
|
4,747 | 4,889 | ||||
Accrued
interest
|
3,198 | 2,794 | ||||
Accrued
compensation
|
23,607 | 18,613 | ||||
Trade
payables
|
11,633 | 25,629 | ||||
Plug
and abandonment liability
|
23,665 | 7,281 | ||||
Accrued
marketed gas system expense
|
8,313 | 8,892 | ||||
Settled hedge payable | 1,637 | - | ||||
Other
|
11,352 | 12,468 | ||||
Total
accounts payable and accrued expenses
|
$ | 236,242 | $ | 254,811 |
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Current
income tax (benefit)
|
|||||||||
Federal
|
$ | (21,926 | ) | $ | 17,863 | $ | 15,136 | ||
State
|
1,567 | 1,361 | 2,459 | ||||||
Deferred
income tax expense (benefit)
|
(39,735 | ) | 38,164 | 91,418 | |||||
Total
income tax expense (benefit)
|
$ | (60,094 | ) | $ | 57,388 | $ | 109,013 | ||
Effective
tax rates
|
37.7% | 39.7% | 36.8% |
December
31,
|
||||||
2009
|
2008
|
|||||
(In
thousands)
|
||||||
Deferred
tax liabilities:
|
||||||
Oil
and gas properties
|
$ | 419,585 | $ | 433,536 | ||
Unrealized
derivative asset
|
- | 42,407 | ||||
Interest
on Senior Convertible Notes
|
1,937 | 2,450 | ||||
Other
|
1,378 | 3,635 | ||||
Total
deferred tax liabilities
|
422,900 | 482,028 | ||||
Deferred
tax assets:
|
||||||
Net
Profits Plan liability
|
63,902 | 66,800 | ||||
Unrealized
derivative liability
|
21,107 | 1,072 | ||||
State
tax net operating loss carryforward or carryback
|
10,915 | 7,215 | ||||
Stock
compensation
|
9,647 | 7,291 | ||||
Other
long-term liabilities
|
17,277 | 7,179 | ||||
Total
deferred tax assets
|
122,848 | 89,557 | ||||
Valuation
allowance
|
(3,203 | ) | (3,146 | ) | ||
Net
deferred tax assets
|
119,645 | 86,411 | ||||
Total
net deferred tax liabilities
|
303,255 | 395,617 | ||||
Less:
current deferred income tax liabilities
|
(1,366 | ) | (42,766 | ) | ||
Add:
current deferred income tax assets
|
6,300 | 1,477 | ||||
Non-current
net deferred tax liabilities
|
$ | 308,189 | $ | 354,328 | ||
Current
federal income tax refundable
|
$ | 32,773 | $ | 13,136 | ||
Current
state income tax refundable (payable)
|
$ | (168 | ) | $ | 25 |
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Federal
statutory tax (benefit)
|
$ | (55,812 | ) | $ | 50,526 | $ | 103,555 | ||
Increase
(decrease) in tax resulting from
|
|||||||||
State
tax (benefit) (net of federal benefit)
|
(5,141 | ) | 4,669 | 5,111 | |||||
Goodwill
|
- | 3,308 | - | ||||||
Change
in valuation allowance
|
56 | (409 | ) | 896 | |||||
Statutory
depletion
|
(189 | ) | (294 | ) | (407 | ) | |||
Domestic
production activities deduction
|
- | (275 | ) | (384 | ) | ||||
Other
|
992 | (137 | ) | 242 | |||||
Income
tax expense (benefit) from operations
|
$ | (60,094 | ) | $ | 57,388 | $ | 109,013 |
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007 | |||||||
(In
thousands)
|
|||||||||
Beginning
balance
|
$ | 994 | $ | 957 | $ | 1,112 | |||
Additions
for tax positions of prior years
|
231 | 173 | 233 | ||||||
Reductions
for lapse of statute of limitations
|
(341 | ) | (136 | ) | (388 | ) | |||
Ending
balance
|
$ | 884 | $ | 994 | $ | 957 |
Borrowing
Base Utilization Grid
|
||||
Borrowing
Base Utilization Percentage
|
<25%
|
>25% <50%
|
>50% <75%
|
>75%
|
Eurodollar
Loans
|
2.000%
|
2.250%
|
2.500%
|
2.750%
|
ABR
Loans or Swingline Loans
|
1.000%
|
1.250%
|
1.500%
|
1.750%
|
Commitment
Fee Rate
|
0.500%
|
0.500%
|
0.500%
|
0.500%
|
As
of December 31, 2008
|
||||||
As
Adjusted
|
As
Originally
Reported
|
|||||
(In
thousands)
|
||||||
Proved
oil and gas properties
|
$ | 2,969,722 | $ | 2,967,491 | ||
Senior
Convertible Notes
|
258,713 | 287,500 | ||||
Noncurrent
deferred income taxes
|
354,328 | 358,334 | ||||
Additional
paid-in capital
|
141,283 | 99,440 | ||||
Retained
earnings
|
957,200 | 964,019 |
As
of
December
31, 2009
|
As
of
December
31, 2008
(As
Adjusted)
|
|||||
(In
thousands)
|
||||||
Senior
Convertible Notes
|
$ | 287,500 | $ | 287,500 | ||
Unamortized
debt discount
|
(20,598 | ) | (28,787 | ) | ||
Net
carrying amount of the 3.50% Senior Convertible Notes
|
$ | 266,902 | $ | 258,713 |
For
the Year Ended
December
31, 2008
|
For
the Year Ended
December
31, 2007
|
|||||||||||
As
Adjusted
|
As
Originally
Reported
|
As
Adjusted
|
As
Originally
Reported
|
|||||||||
(In
thousands, except per share amounts)
|
||||||||||||
Interest
expense
|
$ | 26,950 | $ | 20,275 | $ | 24,046 | $ | 19,895 | ||||
Income
tax expense
|
57,388 | 59,858 | 109,013 | 110,550 | ||||||||
Net
income
|
87,348 | 91,553 | 187,098 | 189,712 | ||||||||
Basic
net income per common share
|
$ | 1.40 | $ | 1.47 | $ | 3.02 | $ | 3.07 | ||||
Diluted
net income per common share
|
$ | 1.38 | $ | 1.45 | $ | 2.90 | $ | 2.94 |
Years
Ending December 31,
|
(In
thousands)
|
||
2010
|
$ | 27,779 | |
2011
|
6,438 | ||
2012
|
3,249 | ||
2013
|
2,973 | ||
2014
|
2,367 | ||
Thereafter
|
18,275 | ||
Total
|
$ | 61,081 |
2009
|
2008
|
|||||||||
PSAs
|
Weighted-Average
Grant-Date Fair Value
|
PSAs
|
Weighted-Average
Grant-Date Fair Value
|
|||||||
Non-vested
at beginning of year
|
464,333 | $ | 26.48 | - | $ | - | ||||
Granted
|
725,092 | $ | 35.59 | 465,751 | $ | 26.48 | ||||
Vested(1)
|
(76,781 | ) | $ | 27.20 | - | $ | - | |||
Forfeited
|
(43,554 | ) | $ | 28.62 | (1,418 | ) | $ | 26.48 | ||
Non-vested
at end of year
|
1,069,090 | $ | 32.52 | 464,333 | $ | 26.48 | ||||
(1)
The number of shares vested represents 1/7th
of the August 1, 2008, PSA grant
assuming a one multiplier. The final number of shares vested
may vary
depending
on the ending three-year multiplier, which ranges from zero to
two.
|
For
the Year Ended December 31, 2007
|
||
Risk
free interest rate
|
4.5% | |
Dividend
yield
|
0.3% | |
Volatility
factor of the expected market
|
||
price
of the Company’s common stock
|
32.0% | |
Expected
life of the awards (in years)
|
3 |
2009
|
2008
|
2007
|
|||||||||||||
Stock
Awards and RSUs
|
Weighted-
Average
Grant-Date
Fair
Value
|
Stock
Awards and RSUs
|
Weighted-
Average
Grant-Date
Fair
Value
|
Stock
Awards and RSUs
|
Weighted-
Average
Grant-Date
Fair
Value
|
||||||||||
Non-vested
at beginning of year
|
402,297 | $ | 48.24 | 289,385 | $ | 32.26 | 506,161 | $ | 28.92 | ||||||
Granted
|
241,745 | $ | 23.87 | 443,903 | $ | 53.81 | 102,634 | $ | 32.45 | ||||||
Vested
|
(211,092 | ) | $ | 46.26 | (291,659 | ) | 22.92 | (268,123 | ) | 25.94 | |||||
Forfeited
|
(25,827 | ) | $ | 50.35 | (39,332 | ) | $ | 37.82 | (51,287 | ) | $ | 31.77 | |||
Non-vested
at end of year
|
407,123 | $ | 34.67 | 402,297 | $ | 48.24 | 289,385 | $ | 32.26 |
Weighted
-
|
Aggregate
|
|||||||
Average
|
Intrinsic
|
|||||||
Shares
|
Exercise
Price
|
Value
|
||||||
For
the year ended December 31, 2007
|
||||||||
Outstanding,
start of year
|
3,121,602 | $ | 12.56 | |||||
Granted
|
- | - | ||||||
Exercised
|
(733,650 | ) | $ | 12.38 | ||||
Forfeited
|
(2,452 | ) | $ | 7.34 | ||||
Outstanding,
end of year
|
2,385,500 | $ | 12.62 | $ | 62,007,749 | |||
Vested,
or expected to vest, end of year
|
2,385,500 | $ | 12.62 | $ | 62,007,749 | |||
Exercisable,
end of year
|
2,378,000 | $ | 12.62 | $ | 61,814,737 | |||
For
the year ended December 31, 2008
|
||||||||
Outstanding,
start of year
|
2,385,500 | $ | 12.62 | |||||
Granted
|
- | - | ||||||
Exercised
|
(868,372 | ) | $ | 12.47 | ||||
Forfeited
|
(7,418 | ) | $ | 13.39 | ||||
Outstanding,
end of year
|
1,509,710 | $ | 12.69 | $ | 11,529,600 | |||
Vested,
or expected to vest, end of year
|
1,509,710 | $ | 12.69 | $ | 11,529,600 | |||
Exercisable,
end of year
|
1,509,710 | $ | 12.69 | $ | 11,529,600 | |||
For
the year ended December 31, 2009
|
||||||||
Outstanding,
start of year
|
1,509,710 | $ | 12.69 | |||||
Granted
|
- | - | ||||||
Exercised
|
(189,740 | ) | $ | 8.40 | ||||
Forfeited
|
(45,050 | ) | $ | 13.38 | ||||
Outstanding,
end of year
|
1,274,920 | $ | 13.31 | $ | 26,684,106 | |||
Vested,
or expected to vest, end of year
|
1,274,920 | $ | 13.31 | $ | 26,684,106 | |||
Exercisable,
end of year
|
1,274,920 | $ | 13.31 | $ | 26,684,106 | |||
Options
Outstanding and Exercisable
|
||||||||||||
Number
|
Weighted-
|
|||||||||||
Of
Options
|
Average
|
Weighted-
|
||||||||||
Outstanding
|
Remaining
|
Average
|
||||||||||
Range
of
|
and
|
Contractual
|
Exercise
|
|||||||||
Exercise
Prices
|
Exercisable
|
Life
|
Price
|
|||||||||
$ | 7.97 | - | $ | 10.86 | 192,230 |
2.0
years
|
$ | 10.05 | ||||
11.95 | - | 12.03 | 176,035 |
2.6
years
|
11.99 | |||||||
12.08 | - | 12.08 | 13,080 |
2.4
years
|
12.08 | |||||||
12.50 | - | 12.50 | 143,378 |
3.0
years
|
12.50 | |||||||
12.53 | - | 12.66 | 204,202 |
3.5
years
|
12.58 | |||||||
13.39 | - | 13.39 | 30,593 |
3.8
years
|
13.39 | |||||||
13.65 | - | 13.65 | 126,839 |
3.5
years
|
13.65 | |||||||
14.25 | - | 14.25 | 188,531 |
4.0
years
|
14.25 | |||||||
16.66 | - | 16.66 | 141,400 |
1.0
years
|
16.66 | |||||||
20.87 | - | 20.87 | 58,632 |
5.0
years
|
20.87 | |||||||
Total
|
1,274,920 |
For
the Years Ended December 31,
|
||||||||
2009
|
2008
|
2007
|
||||||
Risk
free interest rate
|
0.3% | 1.2% | 4.1% | |||||
Dividend
yield
|
0.5% | 0.2% | 0.3% | |||||
Volatility
factor of the expected market
|
||||||||
price
of the Company’s common stock
|
95.14% | 81.5% | 27.2% | |||||
Expected
life (in years)
|
0.5 | 0.5 | 0.5 |
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
General
and administrative expense
|
$ | 18,399 | $ | 29,713 | $ | 25,030 | |||
Exploration
expense
|
1,463 | 6,604 | 6,881 | ||||||
Total
|
$ | 19,862 | $ | 36,317 | $ | 31,911 |
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
General
and administrative expense (benefit)
|
$ | (6,572 | ) | $ | (29,672 | ) | $ | 39,866 | |
Exploration
expense (benefit)
|
(503 | ) | (4,368 | ) | 10,957 | ||||
Total
|
$ | (7,075 | ) | $ | (34,040 | ) | $ | 50,823 |
For
the Years Ended December 31,
|
||||||
2009
|
2008
|
|||||
(In
thousands)
|
||||||
Change
in benefit obligations
|
||||||
Projected
benefit obligation at beginning of year
|
$ | 14,786 | $ | 14,744 | ||
Service
cost
|
2,500 | 2,229 | ||||
Interest
cost
|
934 | 889 | ||||
Actuarial
(gain) loss
|
1,275 | (166 | ) | |||
Benefits
paid
|
(945 | ) | (2,910 | ) | ||
Projected
benefit obligation at end of year
|
$ | 18,550 | $ | 14,786 | ||
Change
in plan assets
|
||||||
Fair
value of plan assets at beginning of year
|
$ | 6,552 | $ | 8,755 | ||
Actual
return on plan assets
|
1,466 | (1,782 | ) | |||
Employer
contribution
|
2,028 | 2,489 | ||||
Benefits
paid
|
(945 | ) | (2,910 | ) | ||
Fair
value of plan assets at end of year
|
$ | 9,101 | $ | 6,552 | ||
Funded
status at end of year
|
$ | 9,449 | $ | 8,234 |
As
of December 31,
|
||||||
2009
|
2008
|
|||||
(In
thousands)
|
||||||
Projected
benefit obligation
|
$ | 18,550 | $ | 14,786 | ||
Accumulated
benefit obligation
|
$ | 13,278 | $ | 9,922 | ||
Less:
Fair value of plan assets
|
9,101 | 6,552 | ||||
Underfunded
accumulated benefit obligation
|
$ | 4,177 | $ | 3,370 |
As
of December 31,
|
||||||
2009
|
2008
|
|||||
(In
thousands)
|
||||||
Unrecognized
actuarial losses
|
$ | 4,322 | $ | 4,441 | ||
Unrecognized
prior service costs
|
- | - | ||||
Unrecognized
transition obligation
|
- | - | ||||
Accumulated
other comprehensive income
|
$ | 4,322 | $ | 4,441 |
As
of December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Net
actuarial gain (loss)
|
$ | (239 | ) | $ | (2,181 | ) | $ | (99 | ) |
Less:
Amortization of:
|
|||||||||
Prior
service cost
|
- | - | - | ||||||
Actuarial
gain (loss)
|
(358 | ) | (240 | ) | (218 | ) | |||
Total
other comprehensive income
|
$ | 119 | $ | (1,941 | ) | $ | 119 |
For
the Year Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Components
of net periodic benefit cost
|
|||||||||
Service
cost
|
$ | 2,500 | $ | 2,229 | $ | 1,911 | |||
Interest
cost
|
934 | 889 | 793 | ||||||
Expected
return on plan assets that reduces periodic pension cost
|
(430 | ) | (565 | ) | (540 | ) | |||
Amortization
of prior service cost
|
- | - | - | ||||||
Amortization
of net actuarial loss
|
372 | 248 | 218 | ||||||
Net
periodic benefit cost
|
$ | 3,376 | $ | 2,801 | $ | 2,382 |
As
of December 31,
|
||||||
2009
|
2008
|
2007
|
||||
Projected benefit
obligation
|
||||||
Discount
rate
|
6.1% | 6.6% | 6.1% | |||
Rate
of compensation increase
|
6.2% | 6.2% | 6.2% | |||
Net periodic benefit cost
|
||||||
Discount
rate
|
6.6% | 6.1% | 5.9% | |||
Expected
return on plan assets
|
7.5% | 7.5% | 7.5% | |||
Rate
of compensation increase
|
6.2% | 6.2% | 6.2% |
Target
|
As
of December 31,
|
|||||
Asset
Category
|
2010
|
2009
|
2008
|
|||
Equity
securities
|
60% | 61.3% | 52.0% | |||
Debt
securities
|
40% | 38.7% | 48.0% | |||
Other
|
-% | -% | -% | |||
Total
|
100.0% | 100.0% | 100.0% |
Assets:
|
Level
1
|
Level
2
|
Level
3
|
||||||
(In
thousands)
|
|||||||||
Cash
and Money Market Funds
|
$ | 4 | $ | - | $ | - | |||
Equity
Securities
|
|||||||||
Foreign
Large Blend (1)
|
1,365 | - | - | ||||||
U.S.
Small Blend (2)
|
1,406 | - | - | ||||||
U.S
Large Blend (3)
|
2,802 | - | - | ||||||
Fixed
Income Securities
|
|||||||||
Intermediate
Term Bond (4)
|
3,524 | - | - | ||||||
Total
|
$ | 9,101 | $ | - | $ | - |
(1)
|
International
equities are invested in companies that trade on active exchanges outside
the U.S. and are well diversified among a dozen or more developed
markets. Active and passive strategies are
employed.
|
(2)
|
U.S.
equities are invested in companies that are well diversified by industry
sector and equity style, such as growth and value strategies, that trade
on active exchanges within the U.S. Active and passive
management strategies are employed. At least 80% of this fund
is invested in equity securities of small
companies.
|
(3)
|
U.S.
equities include companies that are well diversified by industry sector
and equity style, such as growth and value strategies, that trade on
active exchanges within the U.S. Active and passive management
strategies are employed. At least 80% of this fund is invested
in equity securities designed to replicate the holdings and weightings of
the stocks listed in the S&P 500
index.
|
(4)
|
Intermediate
term bonds seek total return. At least 80% of this fund is
invested in a diversified portfolio of bonds, which include all types of
securities. It invests primarily in bonds of corporate and
governmental issues located in the U.S. and foreign countries, including
emerging markets all of which trade on active
exchanges.
|
Years
Ended December 31,
|
||||
2010
|
$ | 610 | ||
2011
|
1,286 | |||
2012
|
1,305 | |||
2013
|
2,381 | |||
2014
|
2,840 | |||
2015
through 2019
|
$ | 15,872 |
As
of December 31,
|
||||||
2009
|
2008
|
|||||
(In
thousands)
|
||||||
Beginning
asset retirement obligation
|
$ | 116,274 | $ | 108,284 | ||
Liabilities
incurred
|
2,784 | 11,684 | ||||
Liabilities
settled
|
(28,958 | ) | (24,154 | ) | ||
Accretion
expense
|
8,673 | 7,486 | ||||
Revision
to estimated cash flows
|
3,307 | 12,974 | ||||
Ending
asset retirement obligation
|
$ | 102,080 | $ | 116,274 |
Location
on Consolidated Balance Sheets
|
Fair
Value at December 31, 2009
|
Fair
Value at December 31, 2008
|
||||||
Derivative
assets designated as cash flow hedges:
|
(In
thousands)
|
|||||||
Oil,
natural gas, and NGL commodity
|
Current
assets
|
$ | 30,295 | $ | 111,649 | |||
Oil,
natural gas, and NGL commodity
|
Other
noncurrent assets
|
8,251 | 21,541 | |||||
Total
derivative assets designated as cash flow hedges under ASC Topic
815
|
$ | 38,546 | $ | 133,190 | ||||
Derivative
liabilities designated as cash flow hedges:
|
||||||||
Oil,
natural gas, and NGL commodity
|
Current
liabilities
|
$ | (53,929 | ) | $ | (501 | ) | |
Oil,
natural gas, and NGL commodity
|
Noncurrent
liabilities
|
(65,499 | ) | (27,419 | ) | |||
Total
derivative liabilities designated as cash flow hedges under ASC Topic
815
|
$ | (119,428 | ) | $ | (27,920 | ) |
Derivatives
Qualifying as Cash Flow Hedges
|
For
the Years
Ended
December 31,
|
||||||||||
2009
|
2008
|
2007
|
|||||||||
(In
thousands)
|
|||||||||||
Amount
of (Gain) Loss on Derivatives Recognized in OCI During the Period
(Effective Portion)
|
Commodity
hedges
|
$ | 35,977 | $ | (177,005 | ) | $ | 154,497 | |||
Amount of (Gain) Loss
Reclassified from AOCI to Realized Oil and Gas Hedge Gain (Loss)
(Effective
Portion)
|
Commodity
hedges
|
$ | (67,344 | ) | $ | 46,463 | $ | (15,470 | ) |
Derivatives
Qualifying as Cash Flow Hedges
|
Classification
of (Gain) Loss Recognized in Earnings
|
(Gain)
Loss Recognized in Earnings (Ineffective Portion)
|
||||
For
the Years
Ended
December 31,
|
||||||
2009
|
2008
|
2007
|
||||
(In
thousands)
|
||||||
Commodity
Hedges
|
Unrealized
derivative (gain) loss
|
$ 20,469
|
$(11,209)
|
$ 4,123
|
Derivatives
Not Qualifying as Cash Flow Hedges
|
Classification
of (Gain) Loss Recognized in Earnings
|
(Gain)
Loss Recognized in Earnings (Ineffective Portion)
|
||||
For
the Years
Ended
December 31,
|
||||||
2009
|
2008
|
2007
|
||||
(In
thousands)
|
||||||
Commodity
Hedges
|
Unrealized
derivative (gain) loss
|
$ -
|
$ -
|
$ 1,335
|
·
|
Level
1 – Quoted prices in active markets for identical assets or
liabilities
|
·
|
Level
2 – Quoted prices in active markets for similar assets and liabilities,
quoted prices for identical or similar instruments in markets that are not
active, and model-derived valuations whose inputs are observable or whose
significant value drivers are
observable
|
·
|
Level
3 – Significant inputs to the valuation model are
unobservable
|
Level
1
|
Level
2
|
Level
3
|
|||||||
(In
thousands)
|
|||||||||
Assets:
|
|||||||||
Derivatives(a)
|
$ | - | $ | 38,546 | $ | - | |||
Proved
oil and gas properties(b)
|
$ | - | $ | - | $ | 11,740 | |||
Materials
inventory(b)
|
$ | - | $ | 13,882 | $ | - | |||
Liabilities:
|
|||||||||
Derivatives(a)
|
$ | - | $ | 119,428 | $ | - | |||
Net
Profits Plan(a)
|
$ | - | $ | - | $ | 170,291 |
(a)
|
This
represents a financial asset or liability that is measured at fair value
on a recurring basis.
|
(b)
|
This
represents a nonfinancial asset or liability that is measured at fair
value on a nonrecurring basis effective January 1,
2009.
|
Level
1
|
Level
2
|
Level
3
|
|||||||
(In
thousands)
|
|||||||||
Assets:
|
|||||||||
Derivatives
|
$ | - | $ | 133,190 | $ | - | |||
Liabilities:
|
|||||||||
Derivatives
|
$ | - | $ | 27,920 | $ | - | |||
Net
Profits Plan
|
$ | - | $ | - | $ | 177,366 | |||
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Beginning
balance
|
$ | 177,366 | $ | 211,406 | $ | 160,583 | |||
Net
increase in liability (c)
|
13,511 | 17,421 | 82,734 | ||||||
Net
settlements (c)
(d)
|
(20,586 | ) | (51,461 | ) | (31,911 | ) | |||
Transfers
in (out) of Level 3
|
- | - | - | ||||||
Ending
balance
|
$ | 170,291 | $ | 177,366 | $ | 211,406 | |||
(c)
|
Net
changes in the Net Profits Plan liability are shown in the Change in Net
Profits Plan liability line item of the accompanying consolidated
statements of operations.
|
(d)
|
Settlements
represent cash payments made or accrued for under the Net Profits
Plan.
|
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
Number
of shares repurchased
|
- | 2,135,600 | 792,216 | ||||||
Total
purchase price, including commissions
|
$ | - | $ | 77,149,451 | $ | 25,956,847 | |||
Weighted-average
price, including commissions
|
$ | - | $ | 36.13 | $ | 32.76 | |||
Number
of shares retired
|
- | 2,945,212 | - | ||||||
Remaining
shares authorized to be repurchased
|
3,072,184 | 3,072,184 | 5,207,784 |
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Development
costs
|
$ | 223,108 | $ | 587,548 | $ | 592,275 | |||
Exploration
costs
|
154,122 | 92,199 | 111,470 | ||||||
Acquisitions
|
|||||||||
Proved
properties
|
76 | 51,567 | 161,665 | ||||||
Unproved
properties – acquisitions of
proved
properties (1)
|
- | 43,274 | 23,495 | ||||||
Unproved
properties - other
|
41,677 | 83,078 | 38,436 | ||||||
Total,
including asset retirement obligation(2)(3)
|
$ | 418,983 | $ | 857,666 | $ | 927,341 | |||
(1)
|
Represents
the allocated purchase price of unproved properties acquired as part of
the acquisition of proved properties. Refer to Note 3 –
Acquisitions, Divestitures, and Assets Held for Sale for additional
information.
|
(2)
|
Includes
capitalized interest of $1.9 million, $4.7 million, and $6.7 million for
the years ended December 31, 2009, 2008, and 2007,
respectively.
|
(3)
|
Includes
amounts relating to estimated asset retirement obligations of $(805,000),
$15.4 million, and $27.6 million for the years ended December 31, 2009,
2008, and 2007, respectively.
|
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Beginning
balance on January 1,
|
$ | 9,437 | $ | 42,930 | $ | 22,799 | |||
Additions
to capitalized exploratory well costs pending the determination of proved
reserves
|
34,384 | 9,437 | 29,551 | ||||||
Reclassifications
to wells, facilities, and equipment based on the determination of proved
reserves
|
(7,569 | ) | (36,842 | ) | (9,237 | ) | |||
Capitalized
exploratory well costs charged to expense
|
(1,868 | ) | (6,088 | ) | (183 | ) | |||
Ending
balance at December 31,
|
$ | 34,384 | $ | 9,437 | $ | 42,930 |
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Exploratory
well costs capitalized for one year or less
|
$ | 34,384 | $ | 9,437 | $ | 29,368 | |||
Exploratory
well costs capitalized for more than one year
|
- | - | 13,562 | ||||||
Ending
balance at December 31,
|
$ | 34,384 | $ | 9,437 | $ | 42,930 | |||
Number
of projects with exploratory well costs that have been capitalized more
than a year
|
- | - | 3 | ||||||
For
the Years Ended December 31,
|
||||||||||||
2009
|
2008
|
2007
|
||||||||||
Oil
or
|
Oil
or
|
Oil
or
|
||||||||||
Condensate
|
Gas
|
Condensate
|
Gas
|
Condensate
|
Gas
|
|||||||
(MBbl)
|
(MMcf)
|
(MBbl)
|
(MMcf)
|
(MBbl)
|
(MMcf)
|
|||||||
Total
Proved Reserves
|
||||||||||||
Beginning
of year
|
51,363 | 557,366 | 78,847 | 613,450 | 74,195 | 482,475 | ||||||
Revisions
of previous estimate(a)
|
4,520 | (76,767 | ) | (22,667 | ) | (108,163 | ) | 5,238 | 9,489 | |||
Discoveries
and extensions
|
3,389 | 51,964 | 677 | 41,077 | 1,166 | 28,483 | ||||||
Infill
reserves in an existing proved field
|
1,241 | 29,855 | 5,424 | 92,389 | 4,592 | 69,090 | ||||||
Purchases
of minerals in place
|
- | - | 356 | 26,956 | 567 | 91,374 | ||||||
Sales
of reserves (b)
|
(401 | ) | (41,767 | ) | (4,659 | ) | (33,433 | ) | (4 | ) | (1,400 | ) |
Production
|
(6,328 | ) | (71,106 | ) | (6,615 | ) | (74,910 | ) | (6,907 | ) | (66,061 | ) |
End
of year (c)
|
53,784 | 449,545 | 51,363 | 557,366 | 78,847 | 613,450 | ||||||
Proved
developed reserves
|
||||||||||||
Beginning
of year
|
47,106 | 433,210 | 68,277 | 426,627 | 61,519 | 358,477 | ||||||
End
of year
|
48,045 | 342,044 | 47,106 | 433,210 | 68,277 | 426,627 | ||||||
Proved
undeveloped reserves
|
||||||||||||
Beginning
of year
|
4,257 | 124,156 | 10,570 | 186,823 | 12,676 | 123,998 | ||||||
End
of year
|
5,739 | 107,501 | 4,257 | 124,156 | 10,570 | 186,823 | ||||||
(a)
|
For
the year ended December 31, 2009, of the 49.6 BCFE downward revision of
previous estimate, 12.0 BCFE and (61.6) BCFE relate to price and
performance revisions, respectively. The largest portion of the
performance revision related to producing properties in the Company’s
Wolfberry tight oil program in the Permian Basin in West
Texas. Well performance data collected during 2009 at the
Sweetie Peck and Halff East programs that target the Wolfberry interval
indicate that these assets are underperforming for year-end 2008 decline
forecasts. Accordingly, the Company removed 37 BCFE from proved
reserves in the Permian region, primarily related to the Wolfberry tight
oil program. The Company believes that a significant portion of
these reserves, while not meeting the criteria to be booked as proved
reserves at year-end, are likely to eventually be produced. The
Company also saw a downward performance revision of 12 BCFE related to
certain Cotton Valley assets in our ArkLaTex region. For the
year ended December 31, 2008, of the 244.2 BCFE downward revision of
previous estimate, 199.7 BCFE and 44.5 BCFE relate to price and
performance revisions, respectively. For the year ended
December 31, 2007, of the 40.9 BCFE upward revision of previous estimate,
34.5 BCFE and 6.4 BCFE relate to price and performance revisions,
respectively.
|
(b)
|
The
Company divested of certain non-core assets during 2009, 2008, and
2007. Please refer to Note 3 - Acquisitions, Divestitures, and
Assets Held for Sale for additional
information.
|
(c)
|
For
the years ended December 31, 2009, 2008, and 2007, amounts included
approximately 370, 659, and 316 MMcf respectively, representing the
Company’s net underproduced gas balancing
position.
|
2009
|
2008
|
2007
|
|||||||
Gas
(per Mcf)
|
$ | 3.82 | $ | 4.88 | $ | 7.56 | |||
Oil
(per Bbl)
|
$ | 53.94 | $ | 33.91 | $ | 88.71 |
As
of December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Future
cash inflows
|
$ | 4,620,735 | $ | 4,463,894 | $ | 11,629,679 | |||
Future
production costs
|
(1,968,096 | ) | (1,866,821 | ) | (3,672,857 | ) | |||
Future
development costs
|
(387,722 | ) | (393,620 | ) | (611,288 | ) | |||
Future
income taxes
|
(515,953 | ) | (419,544 | ) | (2,316,637 | ) | |||
Future
net cash flows
|
1,748,964 | 1,783,909 | 5,028,897 | ||||||
10
percent annual discount
|
(732,997 | ) | (724,840 | ) | (2,321,983 | ) | |||
Standardized
measure of discounted future net cash flows
|
$ | 1,015,967 | $ | 1,059,069 | $ | 2,706,914 |
For
the Years Ended December 31,
|
|||||||||
2009
|
2008
|
2007
|
|||||||
(In
thousands)
|
|||||||||
Standard
measure, beginning of year
|
$ | 1,059,069 | $ | 2,706,914 | $ | 1,576,436 | |||
Sales
of oil and gas produced, net of production costs
|
(409,153 | ) | (988,045 | ) | (693,885 | ) | |||
Net
changes in prices and production costs
|
154,008 | (2,033,674 | ) | 1,320,994 | |||||
Extensions,
discoveries and other including infill reserves in an existing proved
field, net of production costs
|
166,666 | 288,162 | 462,952 | ||||||
Purchase
of minerals in place
|
- | 33,215 | 265,285 | ||||||
Development
costs incurred during the year
|
33,742 | 105,031 | 123,630 | ||||||
Changes
in estimated future development costs
|
75,134 | 213,554 | (32,566 | ) | |||||
Revisions
of previous quantity estimates
|
(96,354 | ) | (363,908 | ) | 166,428 | ||||
Accretion
of discount
|
126,538 | 386,118 | 215,745 | ||||||
Sales
of reserves in place
|
(44,823 | ) | (198,514 | ) | (1,915 | ) | |||
Net
change in income taxes
|
(61,801 | ) | 947,955 | (573,259 | ) | ||||
Changes
in timing and other
|
12,941 | (37,739 | ) | (122,931 | ) | ||||
Standardized
measure, end of year
|
$ | 1,015,967 | $ | 1,059,069 | $ | 2,706,914 |
First
|
Second
|
Third
|
Fourth
|
|||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
|||||||||
Year Ended December 31,
2009
|
||||||||||||
Total
operating revenues
|
$ | 199,220 | $ | 205,198 | $ | 185,787 | $ | 241,996 | ||||
Total
operating expenses
|
334,685 | 211,059 | 185,330 | 231,962 | ||||||||
Income
(loss) from operations
|
$ | (135,465 | ) | $ | (5,861 | ) | $ | 457 | $ | 10,034 | ||
Income
(loss) before income taxes
|
$ | (141,539 | ) | $ | (13,419 | ) | $ | (7,018 | ) | $ | 2,512 | |
Net
income (loss)
|
$ | (87,623 | ) | $ | (8,322 | ) | $ | (4,415 | ) | $ | 990 | |
Basic
net income (loss) per common share
|
$ | (1.41 | ) | $ | (0.13 | ) | $ | (0.07 | ) | $ | 0.02 | |
Diluted
net income (loss) per common share
|
$ | (1.41 | ) | $ | (0.13 | ) | $ | (0.07 | ) | $ | 0.02 | |
Dividends
declared per common share
|
$ | 0.05 | $ | - | $ | 0.05 | $ | - | ||||
Year Ended December 31, 2008
(1)
|
||||||||||||
Total
operating revenues
|
$ | 362,102 | $ | 356,942 | $ | 324,088 | $ | 258,169 | ||||
Total
operating expenses
|
204,762 | 298,691 | 179,762 | 446,885 | ||||||||
Income
(loss) from operations
|
$ | 157,340 | $ | 58,251 | $ | 144,326 | $ | (188,716 | ) | |||
Income
(loss) before income taxes
|
$ | 150,844 | $ | 51,067 | $ | 137,539 | $ | (194,714 | ) | |||
Net
income (loss)
|
$ | 94,974 | $ | 32,469 | $ | 86,997 | $ | (127,092 | ) | |||
Basic
net income (loss) per common share
|
$ | 1.51 | $ | 0.53 | $ | 1.40 | $ | (2.04 | ) | |||
Diluted
net income (loss) per common share
|
$ | 1.48 | $ | 0.52 | $ | 1.38 | $ | (2.04 | ) | |||
Dividends
declared per common share
|
$ | 0.05 | $ | - | $ | 0.05 | $ | - | ||||
(1)
|
The
2008 amounts have been adjusted for the application of guidance under ASC
Topic 470.
|
ST. MARY LAND & EXPLORATION
COMPANY
|
|||
(Registrant)
|
|||
Date:
February 23, 2010
|
By:
|
/s/ ANTHONY J. BEST
|
|
Anthony
J. Best
|
|||
President,
Chief Executive Officer,
|
|||
and
Director
|
Signature
|
Title
|
Date
|
||
/s/ ANTHONY J.
BEST
|
President,
Chief Executive Officer,
|
February
23, 2010
|
||
Anthony
J. Best
|
and
Director
|
|||
/s/ A. WADE
PURSELL
|
Executive
Vice President and Chief Financial Officer
|
February
23, 2010
|
||
A.
Wade Pursell
|
||||
/s/ MARK T.
SOLOMON
|
Controller
|
February
23, 2010
|
||
Mark
T. Solomon
|
||||
Signature
|
Title
|
Date
|
||
/s/ WILLIAM D.
SULLIVAN
|
Chairman
of the Board of Directors
|
February
23, 2010
|
||
William
D. Sullivan
|
||||
/s/ BARBARA M.
BAUMANN
|
Director
|
February
23, 2010
|
||
Barbara
M. Baumann
|
||||
/s/ LARRY W.
BICKLE
|
Director
|
February
23, 2010
|
||
Larry
W. Bickle
|
||||
/s/ WILLIAM J.
GARDINER
|
Director
|
February
23, 2010
|
||
William
J. Gardiner
|
||||
/s/ JULIO M.
QUINTANA
|
Director
|
February
23, 2010
|
||
Julio
M. Quintana
|
||||
/s/ JOHN M.
SEIDL
|
Director
|
February
23, 2010
|
||
John.
M. Seidl
|