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CREDO Petroleum Corporation (NASDAQ: CRED) today reported financial
results for the six months and quarter ended April 30, 2008.
For the first six months of 2008, earnings rose 13% to an all-time high.
For the period, net income was $3,787,000 compared to $3,346,000. On a
per diluted share basis, net income was $.40 for the first six months
compared to $.36 last year. Revenue increased 7% to a record $9,603,000
compared to $8,946,000 last year. Earnings before interest, taxes,
depreciation, depletion and amortization (“EBITDA”)
increased 7% to $7,068,000 compared to $6,593,000 last year.
Second quarter’s net income narrowly eclipsed
last year’s and established a new all-time
record. For the period, net income was $1,986,000 compared to $1,982,000
last year. On a per diluted share basis, net income was $.21 for the
second quarter of both years. Revenue increased 3% to a record
$5,028,000 compared to $4,891,000 last year.
OIL PRODUCTION VOLUMES RISE
WHILE NATURAL GAS VOLUMES DECLINE
Oil production increased 16% in the first half of 2008 to a new record
high, on the heels of a 27% increase in the same period last year. For
the first six months, oil production was 29,100 barrels compared to
25,100 barrels last year. Natural gas production fell 19% from last year’s
first half record of 1.02 Bcf (billion cubic feet) to .83 Bcf. Combined
production, denominated in equivalent natural gas units, fell to 1.0
Bcfe compared to 1.17 Bcfe last year. Natural gas accounted for 83% of
the company’s first half 2008 production.
For the second quarter, oil production rose to 13,400 barrels compared
to 13,200 barrels last year. Natural gas production declined 13% to 433
MMcf compared to 495 MMcf last year. Combined production, denominated in
equivalent natural gas units, fell 11% to 513 MMcfe (million cubic feet
of gas equivalent) compared to 574 MMcfe last year.
James T. Huffman, President, stated, “While we
are achieving the vast majority of our goals, we have not yet arrested
the production decline caused by two exceptionally high rate discoveries
which are depleting at a rapid rate. However, we are making progress
with a 10% gas production increase in the second quarter compared to the
first quarter of this year.”
PRODUCT PRICE REALIZATIONS AT STRONG LEVELS
Net wellhead natural gas prices for the first six months climbed 21% to
$7.28 per Mcf compared to $6.03 last year. Hedging transactions
increased wellhead prices by $1.03 per Mcf this year. In comparison,
hedging transactions increased wellhead prices $.96 per Mcf last year.
As a result, CREDO’s total natural gas price
realizations increased to $8.31 per Mcf compared to $6.99 last year.
Wellhead oil prices increased 71% to $91.87 per barrel compared to
$53.73 last year. There were no oil hedging transactions.
For the second quarter, net wellhead natural gas prices rose 23% to
$8.36 per Mcf compared to $6.80 per Mcf last year. Hedging transactions
increased wellhead prices by only $0.01 per Mcf to $8.37 this year. In
comparison, hedging transactions increased wellhead prices $1.19 per Mcf
last year. As a result, total natural gas price realizations increased
5% to $8.37 per Mcf compared to $7.99 last year. Wellhead oil prices
climbed 78% to $98.25 per barrel compared to $55.24 last year.
At April 30, 2008, hedge positions for production months after second
quarter-end totaled 1,660 MMBtu covering the production months of May
2008 through October 2009. In the aggregate, these hedges are intended
to cover the company’s estimated future
production for the applicable months hedged as follows: Spring, Summer
and Fall of 2008 approximately 85%; Winter 2008/2009 approximately 50%;
and Spring, Summer and Fall of 2009 approximately 30%. The monthly hedge
prices (NYMEX basis) range from an average of approximately $8.40 for
the Spring, Summer and Fall months of 2008 and 2009 to an average of
approximately $10.00 for the Winter months of 2008/2009.
All open hedge contracts are indexed to the NYMEX. Average prices in the
company’s primary market are expected to be
15% to 17% below NYMEX prices due to basis differentials and
transportation costs.
Huffman further stated, “Our natural gas
hedges added considerably to the bottom line during the first six months
of this year. While our hedges on future months are below today’s
prices, they only go out about another year and the percentages hedged
fall dramatically after the Fall of this year. In addition, we expect
the domestic market to be well supplied with natural gas going into the
Fall which could put downward pressure on prices.”
STRONG FINANCIAL CONDITION CONTINUES TO PROVIDE
A SOLID FOUNDATION FOR GROWTH
Capital spending for the first half totaled $6,287,000. At April 30,
2008, working capital was $10,569,000. Total assets were $60,321,000
including cash and short-term investments of $13,142,000. Stockholders’
equity was a record $42,038,000. The company’s
long-term debt totals only $85,000 and is related to an exclusive
license obligation.
MANAGEMENT COMMENT
“We are pleased to continue to achieve record
results for both the six months and second quarter,”
Huffman said. “We are working hard to bring
our gas production back to record levels and we have a number of
excellent drilling projects which could quickly accomplish that goal. A
good example is the Kenedy Foundation #1 well on the company’s
Gemini Prospect in South Texas that is currently drilling toward 17,500
feet.”
CREDO Petroleum Corporation is a publicly traded independent energy
company headquartered in Denver, Colorado. The company is engaged in the
exploration for and the acquisition, development and marketing of
natural gas and crude oil in the Mid-Continent and Rocky Mountain
regions. The company’s stock is traded on the
NASDAQ System under the symbol “CRED”
and is quoted daily on the “NASDAQ Global
Market.”
EBITDA is not a GAAP measure of operating performance. The company uses
this non-GAAP performance measure primarily to compare its performance
with other companies in the industry that make a similar disclosure. The
company believes that this performance measure may also be useful to
investors for the same purpose. Investors should not consider this
measure in isolation or as a substitute for operating income or any
other measure for determining the company’s
operating performance that is calculated in accordance with GAAP. In
addition, because EBITDA is not a GAAP measure, it may not necessarily
be comparable to similarly titled measures employed by other companies.
A reconciliation between EBITDA and net income is provided in the table
below:
Six Months Ended April 30,
2008
2007
RECONCILIATION OF EBITDA:
Net Income
$
3,787,000
$
3,346,000
Add Back:
Interest Expense
5,000
13,000
Income Tax Expense
1,525,000
1,334,000
Depreciation, Depletion and Amortization Expense
1,751,000
1,900,000
EBITDA
$
7,068,000
$
6,593,000
This press release includes certain statements that may be deemed to
be “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements included in this press release, other
than statements of historical facts, address matters that the company
reasonably expects, believes or anticipates will or may occur in the
future. Such statements are subject to various assumptions, risks
and uncertainties, many of which are beyond the control of the company.
Investors are cautioned that any such statements are not guarantees
of future performance and that actual results or developments may differ
materially from those described in the forward-looking statements. Investors
are encouraged to read the “Forward-Looking
Statements” and “Risk
Factors” sections included in the company’s
2007 Annual Report on Form 10-K for more information. Although
the company may from time to time voluntarily update its prior
forward-looking statements, it disclaims any commitment to do so
except as required by securities laws.
CREDO PETROLEUM CORPORATION
FINANCIAL HIGHLIGHTS
Six Months Ended
Three Months Ended
April 30,
April 30,
2008
2007
2008
2007
REVENUES:
Oil and gas sales
$9,527,000
$8,493,000
$4,947,000
$4,685,000
Investment income and other
76,000
453,000
81,000
206,000
9,603,000
8,946,000
5,028,000
4,891,000
COSTS AND EXPENSES:
Oil and gas production
1,838,000
1,709,000
986,000
796,000
Depreciation, depletion and amortization
1,751,000
1,900,000
898,000
942,000
General and administrative
697,000
644,000
365,000
366,000
Interest
5,000
13,000
4,000
7,000
4,291,000
4,266,000
2,253,000
2,111,000
INCOME BEFORE INCOME TAXES
5,312,000
4,680,000
2,775,000
2,780,000
INCOME TAXES
(1,525,000
)
(1,334,000
)
(789,000
)
(798,000
)
NET INCOME
$3,787,000
$3,346,000
$1,986,000
$1,982,000
EARNINGS PER SHARE OF COMMON STOCK - BASIC
$.41
$.36
$.22
$.21
EARNINGS PER SHARE OF COMMON STOCK - DILUTED
$.40
$.36
$.21
$.21
Weighted average number of shares of Common Stock and dilutive
securities:
Basic
9,299,000
9,261,000
9,302,000
9,261,000
Diluted
9,363,000
9,395,000
9,368,000
9,395,000
Condensed Balance Sheet Information
April 30, 2008
October 31, 2007
Cash and Short-Term Investments
$13,142,000
$13,668,000
Other Current Assets
4,869,000
2,747,000
Oil and Gas Properties, Net
40,337,000
37,374,000
Exclusive License Agreement, Net
163,000
198,000
Other Assets
1,810,000
1,362,000
$60,321,000
$55,349,000
Current Liabilities
$7,442,000
$3,904,000
Deferred Income Taxes
9,210,000
9,204,000
Derivative Liability due in More Than 1 Year
448,000
-
Exclusive License Agreement Obligation
85,000
85,000
Asset Retirement Obligation
1,098,000
1,106,000
Stockholders' Equity
42,038,000
41,140,000
$60,321,000
$55,349,000