Credo Petroleum Corp. (CRED) filed Quarterly Report for the period ended 2009-07-31.
CREDO PETROLEUM CORP. and its subsidiaries are engaged in oil and gas acquisition exploration development and production activities in the Mid-Continent and Rocky Mountain regions of the United States. Credo Petroleum Corp. has a market cap of $110.5 million; its shares were traded at around $10.69 with a P/E ratio of 18.8 and P/S ratio of 6.4. Credo Petroleum Corp. had an annual average earning growth of 21.8% over the past 5 years.
Highlight of Business Operations:
At July 31, 2009, working capital decreased to $14,846,000 compared to $24,160,000 at October 31, 2008. For the nine months ended July 31, 2009, net cash provided by operating activities was $8,143,000 compared to $9,666,000 for the same period in 2008. Net income decreased $18,284,000 primarily due to impairment losses of $24,653,000, a decrease in revenue of $7,023,000 and increased other costs and expenses of $1,335,000.
For the nine months ended July 31, 2009 and 2008, net cash used in investing activities was $15,753,000 and $8,633,000, respectively. Investing activities primarily included oil and gas exploration and development expenditures, including Calliope, totaling $11,299,000 and $8,414,000 respectively. For the period ended July 31, 2009, the company also purchased the patents underlying the Calliope Technology for $4,400,000.
Calliope Gas Recovery System — We are continuing to actively discuss commercial Calliope terms with several companies. One Calliope license agreement was entered into in third quarter 2009 and an additional agreement is nearing execution. Credo has previously published statistics on its Calliope wells which show finding costs of about $0.50 per Mcf and total costs to deliver gas into the pipeline of about $1.00 per Mcf. The statistics also show that Calliope is very low risk when installed on suitable wells.
For the nine months ended July 31, 2009, oil and gas revenues decreased 49% to $7,298,000 compared to $14,321,000 during the same period last year. As the oil and gas price/volume table on page 17 shows, total gas price realizations, which reflect realized hedging transactions, decreased 17% to $6.50 per Mcf and oil price realizations decreased 55% to $45.77 per barrel. The net effect of these price changes was to decrease oil and gas realizations by $3,681,000 ($7,025,000 without realized hedges). For the nine months ended July 31, 2009, the company’s gas equivalent production was unchanged from the same period last year. The company elected to postpone certain scheduled drilling due to the historically high costs of equipment and field services. That decision came with the consequence that less drilling would cause production declines. Natural gas production has declined 23% but a 113% increase in oil production has offset the gas decline. Investment and other income decreased $184,000, primarily due to market performance and liquidation of the company’s investments, compared to last year.
For the nine months ended July 31, 2009, total costs and expenses, excluding the impairment loss of $24,653,000, increased 21% to $7,846,000 compared to $6,511,000 for the comparable period in 2008. Oil and gas production expenses decreased due primarily to reduced field level expenses. DD&A increased primarily due to an increase in the amortizable cost base before the impairment adjustment. General and administrative expenses increased primarily due to accounting and professional fees and increased salaries and benefits. The effective tax rate was 39.0% and 27.9% for the 2009 and 2008 periods, respectively.
For the three months ended July 31, 2009, total revenues decreased 50% to $2,837,000 compared to $5,646,000 during the same period last year. As the oil and gas price/volume table on page 17 shows, total gas price realizations, which reflect realized hedging transactions, decreased 27% to $5.08 per Mcf and oil price realizations decreased 54% to $56.98 per barrel. The net effect of these price changes was to decrease oil and gas realizations by $894,000 ($2,815,000 without realized hedges). For the three months ended July 31, 2009, the company’s gas equivalent production increased 6%. Investment and other income improved slightly due to improved market performance.
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