DNE Dune Energy Common Stock (New)

HOUSTON, March 26 /PRNewswire-FirstCall/ -- Dune Energy, Inc. (NYSE Amex: DNE) today announced results for the fourth quarter and calendar year 2009.

Revenue and Production

Revenue for the fourth quarter totaled $20.5 million and $64.9 million for the full year 2009.  This compares with $22.1 million and $146.6 million for the fourth quarter and full year 2008, respectively.  Production volumes in the fourth quarter were 180 Mbbls of oil and 1.59 Bcf of natural gas, or 2.7 Bcfe and 9.5 Bcfe for the full year 2009.  This compares with 216 Mbbls of oil and 1.45 Bcf of natural gas, or 2.7 Bcfe for the fourth quarter of 2008, and 11.4 Bcfe for the full year 2008.  In 2009, the average sales price of oil was $58.53 per barrel, and $4.34 per mcf for natural gas, as compared with $99.87 per barrel and $9.62 per mcf, respectively for 2008.  The primary reasons behind the decrease in revenue were lower production and lower average sales prices in 2009 versus 2008.  In 2009, oil production decreased 18% from 2008 levels and gas production declined 15%.  Oil prices declined 41% and gas prices declined 55% in 2009 versus 2008.  

Costs and Expenses

Direct lease operating expenses for the fourth quarter totaled $5.5 million and $21.1 million for calendar 2009.  This compares with $6.6 million and $24.8 million for the fourth quarter and the full year 2008, respectively.  On an Mcfe produced basis this was $2.21 for 2009 and $2.18 for 2008.  In addition to direct operating expenses, total field operating expenses include workovers, ad valorem taxes, production taxes, and transportation.  For 2009 these categories added $10.8 million to operating costs.  Total field operating expense including all categories was $31.9 million for 2009 as compared to $43.5 million for 2008, or $3.35 and $3.82 per Mcfe produced respectively.  Total operating costs were reduced 27% in 2009 versus 2008 while production volumes were down 16%.  

DD&A expense was $14.2 million for the fourth quarter and $35.4 million for 2009.  Cash G&A expense totaled $1.8 million for the fourth quarter and $10.2 million for 2009.  Cash G&A for 2008 was $13.2 million.  The $3.0 million decrease or 23% reflects fewer employees, overall stringent cost controls, and no bonus awards for any employee.  Stock-based compensation was $4.1 million for the full year 2009 and $5.3 million in 2008. Stock-based compensation reflects awards made when the stock price was much higher than current levels.  Interest and financing expense was $9.0 million for the fourth quarter and $35.2 million for 2009 primarily associated with payment of interest on $300 million of Senior Secured Notes and borrowings under our $40 million revolver.  We recorded a $2.9 million pre-tax non-cash impairment charge associated with oil and gas properties in the fourth quarter of 2009.  This non-cash charge was primarily related to one non-core Wyoming property that did not perform as anticipated.  In 2008, the non-cash impairment charge was $125.7 million.  

Earnings

Net loss available to common shareholders totaled $27.2 million for the fourth quarter of 2009, and $95.9 million for the full year 2008.  This compares with a $241.7 million loss in 2008, which included a $125.7 million impairment charge.   Preferred stock dividends were $36.7 million, of which $8.4 million was associated with make whole premiums deemed a Preferred stock dividend.  The Company recorded a loss of $2.8 million on derivatives associated with its hedge position.  This loss consisted of a $9.5 million unrealized loss on changes in mark-to-market valuations offset by a $6.7 million cash gain on settlements of hedges.  Net loss per share both basic and fully diluted for the year was $3.44, based on 27.8 million weighted average shares outstanding post the December 2, 2010, 1 for 5 reverse stock split.

2009 Capital, Year End Reserves and 2010 Budget

Total capital expended in 2009 was $14.0 million.  Capital was severely constrained to stay within cash flow and the various covenants of our credit agreements.

Year end 2009 proved reserves, as prepared by DeGoyler and MacNaughton, were 7.2 million barrels of oil and 62.4 billion cubic feet of gas or 105.5 Bcfe.  This compares to 133.0 Bcfe at year-end 2008.  During 2009 we sold 2.2 Bcfe of non-core reserves, produced 9.5 Bcfe, added 5.5 Bcfe through extensions and discoveries and recorded a 21.3 Bcfe negative revision.  The negative revision was largely due to an 8.3 Bcfe negative performance revision at the Wieting #30 at our Chocolate Bayou Field and a 10.6 Bcfe negative revision of PUD reserves at our North Broussard Field due to new mapping with 3-D seismic.  Proved Developed Producing (PDP) Reserves were 40.9 Bcfe or 38.7% of the total, Proved Developed Non Producing (PDNP) reserves were 31.3 Bcfe or 29.7% of the total and Proved Undeveloped (PUD) reserves were 33.3 Bcfe or 31.6% of the total.  DeGolyer and McNaughton also evaluated probable and possible reserves.  Probable and possible reserves were 6.6 Bcfe and 7.0 Bcfe respectively.  The PV at a 10% discount for the proved reserves was $212.3 million, $15.7 million for the probable reserves and $7.5 million for the possible reserves for a total of $235.5 million.  This value was based on pricing guidelines established by the SEC and FASB.  Oil prices were held constant at $58.05 per barrel of oil and gas prices were held constant at $4.14 per Mcf of gas.  Using NYMEX strip pricing on December 31, 2009 would have resulted in proved reserves of 107.8 Bcfe, probable reserves of 8.5 Bcfe and possible reserves of 7.6 Bcfe.  The PV at a 10% discount of these reserves was $448.1 million for proved reserves, $33.1 million for probable reserves and $21.1 million for possible reserves for a total PV of $502.3 million.

Liquidity and Capital Structure

Liquidity and $40 MM Revolver

As of the end of the quarter we had $15.1 MM in cash and $24 million drawn on our $40 million revolver along with $8.5 million of outstanding letters of credit, thus total liquidity was $22.6 million.  The revolver would have matured on May 15, 2010; however, the Company has signed an amendment to the credit facility extending maturity until March 31, 2011.  The $10 million cash and revolver availability covenant has been removed and replaced with covenants regarding EBITDA, production and capital expenditures.

$300 Million Senior Secured Notes

Since October of 2009, we have been in discussions with holders of our $300 million of 10 ½ % Senior Secured Notes to implement a restructuring of this debt.  Continuing to pay the approximately $32 million per year of interest on these notes precludes the Company's ability to invest in the large number of fully defined upside opportunities within our portfolio.  Interest was paid on the notes before the expiration of the grace period in December of 2009.  We continue discussions with the note holders to reach an equitable agreement for all stakeholders of the Company.

Redeemable Convertible Preferred Stock

At year-end 2009, there were 192,050 shares issued and outstanding of the convertible Preferred stock.  During 2009, 71,547 shares of Preferred stock were converted into 19.2 million common shares including 11.0 million issued to satisfy the make whole premiums.  As of year end there were 39.8 million common shares outstanding.

2010 Capital Program

One of the covenants of our revolver extension is that capital for 2010 is limited to $22 million.  This limitation will cause the Company to defer certain investments where possible and seek industry partners on other projects to limit capital exposure.  This program will be managed to preserve the maximum upside value for all stakeholders, but in certain cases could result in loss of leases and potential loss of reserves.

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FORWARD-LOOKING STATEMENTS: This document includes forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning estimates of expected drilling and development wells and associated costs, statements relating to estimates of, and increases in, production, cash flows and values, statements relating to the continued advancement of Dune Energy, Inc.'s projects and other statements which are not historical facts. When used in this document, the words such as "could," "plan," "estimate," "expect," "intend," "may," "potential," "should," and similar expressions are forward-looking statements. Although Dune Energy, Inc. believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements include the potential that the Company's projects will experience technological and mechanical problems, geological conditions in the reservoir may not result in commercial levels of oil and gas production, changes in product prices and other risks disclosed in Dune's Annual report on Form 10-K filed with the U.S. Securities and Exchange Commission.

SOURCE Dune Energy, Inc.