Penn West Announces 2nd Quarter 2012 Earnings Report

Penn West Petroleum [NYSE: PWE] is pleased to announce its results for the second quarter ended June 30, 2012

The broad deployment of horizontal multi stage fracture technology into primary development, secondary recovery, and exploration gives Penn West one of the largest inventories of low risk, light oil projects in North America. Through active portfolio management, we continue to position the company to drive this asset base forward. We anticipate Canadian crude oil prices strengthening over the next 12 months as slow and steady demand increases are amplified by improvements in North American pipeline infrastructure pushing Canadian crude into closer alignment with world oil pricing.

Capital programs during the first half of 2012 continued the evolution of Penn West into a leading light oil exploration and development company. At the beginning of 2010, less than two percent of production came from horizontal wells while our base vertical wells accounted for 98 percent of our production. We anticipate that by the end of this year, 30 percent of Penn West's production will come from multi stage fracture wells.

HIGHLIGHTS

Average production in the second quarter of 2012 was 163,181 boe (1) per day compared to 156,107 in the second quarter of 2011. During the second quarter of 2012, we completed significant turnaround and maintenance activities which resulted in up to 10,000 boe per day being off-line for portions of the quarter.

We drilled 208 net wells in the first six months of 2012.

Capital expenditures for the second quarter of 2012 net of property dispositions, totalled $310 million compared to $240 million for the second quarter of 2011. Second quarter activities were primarily focused on completions, tie-ins and facilities construction.

Capital expenditures in the first six months of 2012, net of property dispositions, were $648 million compared to $676 million for the first six months of 2011.

Funds flow (2) for the second quarter of 2012 was $272 million ($0.57 per share-basic (2) compared to $396 million ($0.85 per share-basic) reported in the second quarter of 2011 due to reduced commodity price realizations.

Net income for the second quarter of 2012 was $235 million ($0.50 per share-basic) compared to $271 million ($0.58 per share-basic) in the second quarter of 2011.....Read the entire earnings report.

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Abraxas Announces $11 Million Second Quarter Profit Despite Lower Oil Prices

Abraxas Petroleum Corporation (NASDAQ:AXAS) reported financial and operating results for the three and six months ended June 30, 2012 and provided an operational update.

Financial and Operating Results

Including Abraxas' equity interest in Blue Eagle's production, the three months ended June 30, 2012 resulted in:

* Production of 388.7 MBoe (4,272 Boepd), up 12% over Q1 2012, of which 54% was oil or natural gas liquids.

The three months ended June 30, 2012 resulted in:

* Production of 358.5 MBoe (3,940 Boepd), excluding Abraxas' equity interest in Blue Eagle's production, a 10% increase over Q1 2012;

* Revenue of $15.9 million

* EBITDA(a) of $8.9 million

* Discretionary cash flow(a) of $7.1 million

* Net income of $10.9 million, or $0.12 per share

* Adjusted net income(a) of $1.9 million, or $0.02 per share

* Debt Covenant Metrics:

Working Capital 1.09:1.0 (min 1.0:1.0)

Debt to EBITDA 2.85:1.0 (max 4.0:1.0)

Interest Coverage 7.38:1.0 (min 2.5:1.0)

(a) See reconciliation of non GAAP financial measures below.

Net income for the quarter ended June 30, 2012 was $10.9 million, or $0.12 per share, compared to a net income of $8.9 million, or $0.10 per share, for the same period in 2011.

Adjusted net income, excluding certain non-cash items, for the quarter ended June 30, 2012 was $1.9 million or $0.02 per share, compared to adjusted net income, excluding certain non cash items, of $1.0 million or $0.01 per share for the same period in 2011. For the quarters ended June 30, 2012 and 2011, adjusted net income excludes the unrealized gain on derivative contracts of $10.3 million and $8.0 million respectively. Also excluded is a full cost impairment on Canadian assets of $1.3 million for the quarter ended June 30, 2012.

Unrealized gains or losses on derivative contracts are based on "mark to market" valuations which are non cash in nature and may fluctuate drastically period to period. As commodity prices fluctuate, these derivative contracts are valued against current market prices at the end of each reporting period in accordance with Accounting Standards Codification 815, "Derivatives and Hedging," as amended and interpreted, and require Abraxas to record an unrealized gain or loss based on the calculated value difference from the previous period end valuation.

For example, NYMEX oil prices on June 30, 2012 were $84.96 per barrel compared to $103.02 on March 31, 2012......Read the entire earnings report.

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EIA: Low U.S. Injections Reflect Already High Natural Gas Storage Inventories

The increase in U.S. working natural gas inventories nearly half way through the 2012 injection season the period from April through October when most natural gas is stored underground to help meet heating demand during the upcoming winter was the lowest in 12 years. The slow start to the injection season reflects record high inventories at the end of this winter, leaving less space to be filled, and a large increase in natural gas use by the U.S. electric sector for power generation. EIA estimates that, by November, working natural gas inventories will hit a record high, exceeding 3,900 billion cubic feet (Bcf). U.S. dry natural gas production was up almost 7% from January through May of 2012 compared to the same period in 2011, so natural gas injections have not shifted lower due to a downturn in domestic natural gas production.

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The amount of working natural gas in underground storage increased 625 Bcf during April-June 2012, according to EIA's Weekly Natural Gas Storage Report. That is the smallest build since adding 564 Bcf, on a net basis, during the same period in 2000 (see chart above). While the increase in inventories is low, the amount of total gas in underground storage facilities is at a record high for this time of year, after topping 3,000 Bcf for the first time ever during any June month.

Here is the EIA injection and usage charts

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Are Oil Inflation Pains Here to Stay?

Discussing whether oil inflation is here to stay, with Addison Armstrong, Tradition Energy, and Dennis Gartman, The Gartman Letter.

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Crude Oil Pulls Back on Negative Economic Data out of China

Is Gold Close to Confirming a Breakout to All Time Highs

Oil prices have been struggling to sustain the price rally which began about a week ago as the majority of data points continue to point to the slowing of the global economy and thus the view that oil demand growth is also likely to slow (see latest IEA highlights below). Overnight China's oil import data came in at 21.6 million tons (about 5 million barrels) according to the Chinese Customs Agency. This is the lowest level of crude oil imports since December of 2011. One can question the transparency of the various macroeconomic data points out of China but the fact that oil imports are declining is very supportive of the view that the main economic growth engine of the world is actually slowing.

China's July exports of all good increased by just 1% compared to year earlier levels but a significant downturn versus the 11.3% increase in the month of June. In addition industrial output is also slowing as new lending levels dropped significantly in July from 919.8 billion Yuan to 540.1 billion Yuan. Sales to China's number one customer... the EU declined by 16.2% last month while sales to the US declined by 0.6%.....Read Dominik Chirihellas entire article.

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Is Gold Close to Confirming a Breakout to All Time Highs

Is late summer or fall of 2012 going to be remembered for gold making a run to all time highs. Today David Banister gives us his take on where this gold market is headed in the near future......

Back in the fall of 2011 I was warning my subscribers and the public via articles to prepare for a large correction in the price of GOLD. The metal had experienced a primary wave 3 rally from $681 per ounce in the fall of 2008 to the upper $1800’s at the time of my warnings in the fall of 2011. A 34 Fibonacci month rally was sure to be followed by an 8-13 month consolidation period, or what I would term a Primary wave 4 correction pattern.

We have seen GOLD drop at low as the $1520’s during this expected 8-13 month window, but at this time it looks to me like a break over $1630 on a closing basis will put the nail in the wave 4 coffin. I expect GOLD to rally for about 8-13 months into at least June of 2013 and our longstanding target has been in the $2300 per ounce arena in US Dollar terms. Some pundits have much higher targets in the $3,500 per ounce or higher area but I am using my low end targets for reasonable accuracy.

This 5th wave up can be difficult to project because 5th waves in stock or metals markets can be what are called “Extension” waves. This means they can have a potentially much larger percentage movement relative to the prior waves 1 and 3 of the primary bull market since 2001. You can end up with a parabolic move at the end of wave 5, where those $3000 plus targets are possible. I expect the 5th wave to be about 61% of the amplitude of wave 3, which ran from 681 to 1923, or about $1242 per ounce. If we were to apply that math, we come up with $767 per ounce of rally off the wave 4 lows. $1520 plus $767 puts us at $2287 per ounce, or roughly $2300 an ounce low end target.

In summary, crowd behavior is crucial to the next coming movement in GOLD and it could be a sharp rally that catches many off guard, much like the downdraft last fall did the same to the Bulls. Be prepared to go long GOLD once over $1630 per ounce and buy dips along the way up to $2300 into the summer of 2013.

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Do You Agree.... The SP 500 Nearing a Cyclical High

One of our favorite traders to follow is David Banister [make sure to sign up for his calls] and he just sent over this great post on his thoughts on the SP 500 nearing a cyclical high in the coming two weeks of trade. And here's what he is thinking.......

The SP 500 has rallied to a post June 4th high of 1409 this week, about 13 points shy of the Bull Market cycle highs of 1422 earlier this year.

The rally has overlapped along the way, forming a series of “3′s” which are sometimes found in impulsive bullish moves, but usually found at the end of bull cycles whether they be short term or long term cycles.

To wit, the first 11 trading days off the 1267 SP 500 lows saw a 97 point rally, again in only 11 trading days.

The last 34 trading days we have only been able to move up about 44 further points, indicating the rally is getting long in the tooth and a bit tired at that.

So 11 days, 97 points… 34 more days, only 44 further points.

Another 10 trading days would mark a 55 fibonacci trading day cycle, so we should be alert to potential rally highs between August 13th and August 22nd as a window for a top.

A few days ago I discussed we may see a continual sloppy drift up to 1425-1445 ranges, with 1434 a key pivot line to watch.

Although the count doesnt really fit for me, if this rally from the June lows is a 5th and final wave up… then a 5th wave rally to complete a larger cycle often is characterized by a series of 3′s.

To summarize:

The first leg of the rally was a 3 wave rally to 1363, about 97 points in 11 days. We have continued with overlapping 3′s. This final stage of the rally is likely going to be 5 waves or ABCDE in nature to complete the entire cycle up from 1267

That cycle high should come within the Aug 13th-22nd window and in the 1425-1445 ranges.

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Is Natural Gas Hitting Upper Resistance levels

Natural Gas was able to add value again as prices moved back toward the upper resistance level of $3/mmbtu. Weather related demand is continuing to become less of a bullish factor from both the short term temperature forecasts to the tropics. The latest NOAA six to ten day temperature forecast is projecting the smallest area of above normal temperature so far this summer which is certainly not very supportive for Nat Gas prices. The eight to fourteen day forecast is a bit more bullish in that it is projecting a larger area of above normal temperatures. Overall both forecasts will not nearly result in as much Nat Gas related cooling demand as what was experienced during the first half of the summer. The net result net injections will continue to creep higher over the next several weeks.

In addition the tropics are not threatening to Nat Gas production in the Gulf of Mexico as Ernesto is heading into Mexico and the two other tropical weather patterns out in the Atlantic are still low grade tropical weather event and it is much too early to project whether or not they will strengthen into something more impacting. Overall I do see any short term fundamental support for the current level of prices. I would expect that the market will run into difficulty in breaking through the technical resistance level of around $3/mmbtu.

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Today the EIA released their latest STEO report. Following are the main highlights relate to Nat Gas from the report.

EIA expects that natural gas consumption will average 69.8 billion cubic feet per day (Bcf/d) in 2012, an increase of 3.2 Bcf/d (4.8 percent) from 2011. Large gains in electric power use in 2012 will more than offset declines in residential and commercial use. Projected consumption of natural gas in the electric power sector averages 25.4 Bcf/d in 2012, 22 percent higher than in 2011, primarily driven by the improved relative cost advantages of natural gas over coal for power generation in some regions.

Consumption in the electric power sector during 2012 peaks at 31.6 Bcf/d in the third quarter, when electricity demand for air conditioning is highest. As a result of the extreme heat last month, estimated electric power sector natural gas consumption during July 2012 averaged 34.8 Bcf/d, 1.8 Bcf/d higher than projected in last month's Outlook......Read Dominik Chirihella' entire article.

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Gastar Exploration Reports Second Quarter 2012 Results

Gastar Exploration Ltd. (NYSE:GST) today reported financial and operating results for the three and six months ended June 30, 2012. Excluding non cash impairment charges and unrealized hedging gains, adjusted net loss attributable to Gastar's common shareholders was $4.1 million, or $0.06 per diluted share for the second quarter of 2012. Including the effect of a non cash impairment of natural gas and oil properties of $72.7 million and an unrealized hedging gain of $2.8 million, reported net loss for the second quarter of 2012 was $74.0 million, or $1.17 per diluted share.

Excluding the impact of an unrealized natural gas hedging gain of $502,000 and other special items in the second quarter of 2011, adjusted net loss was $377,000, or $0.01 per diluted share for the period. Including the $502,000 gain and other special items, reported net income for second quarter of 2011 was $126,000 or $0.00 per diluted share. (See the accompanying reconciliation of net income (loss) per common share and earnings per diluted share to this non-GAAP financial measure at the end of this news release.)

Our net cash provided by operating activities before working capital changes for the second quarter of 2012 was $5.5 million or $0.09 per share compared to $2.9 million or $0.05 per share for the second quarter of 2011. Our net cash provided by operating activities before working capital changes and adjusted to exclude litigation settlement expense was $9.6 million or $0.15 per share for the first six months of 2012 versus $7.5 million or $0.12 per share for the same period last year. (See the accompanying reconciliation of cash flow before working capital changes and as adjusted for special items to GAAP financial measures at the end of this news release.)

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Natural gas, oil and natural gas liquids (NGLs) revenues increased 31% to $11.1 million in the second quarter of 2012, up from $8.5 million in the second quarter of 2011. The increase was the result of an 87% growth in production volumes partially offset by a 30% decrease in realized commodity prices. Average daily production was 34.8 million cubic feet of natural gas equivalent (MMcfe) per day for the second quarter of 2012, compared to 18.6 MMcfe per day for the same period in 2011.

Liquids revenues (oil, including condensate, and NGLs) represented approximately 40% of our total natural gas, oil and NGLs revenues for the second quarter of 2012 compared to 12% for the second quarter of 2011. Liquids daily production represented approximately 19% of total production for the second quarter of 2012 compared to 16% for the first quarter of 2012 and 4% for the second quarter of 2011. Sequentially, total average daily production in the second quarter increased 18% from first quarter 2012 production of 29.4 MMcfe per day.

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Carrizo Oil & Gas [CRZO] Announces Record Production and Revenue in Second Quarter 2012 Results

Carrizo Oil & Gas, (NASDAQ: CRZO) today announced the Company's record financial results for the second quarter of 2012, which included the following highlights:

Results for the second quarter of 2012

* Record Oil Production of 7,618 Bbls/d, a 28% sequential increase from the first quarter of 2012

* Record Total Production of 2,393 Mboe, or 26,297 Boe/d, (equivalently 14.4 Bcfe, or 157,783 Mcfe/d), a 4% sequential increase from the first quarter of 2012

* Record Oil Revenue of $68.6 million, amounting to 82% of total revenue

* Record Revenue of $83.8 million, or adjusted revenue of $92.0 million, including the impact of realized hedges

* Net Income of $28.5 million, or Adjusted Net Income, (as defined below) of $10.5 million, a sequential decrease of $7.5 million from the first quarter of 2012, due to a 37% increase in DD&A, largely attributable to the April 2012 sale of Barnett Shale properties to Atlas

* EBITDA, (as defined below) of $69.3 million, comparable to the $70.2 million first quarter 2012 record

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Production volumes during the three months ended June 30, 2012 were 2,393 Mboe, an increase of 82 Mboe, or 4%, from first quarter 2012 production of 2,311 Mboe. The 4% sequential increase in production from the first quarter of 2012 to the second quarter of 2012 was due to the contribution of new wells brought on during the quarter. Second quarter production growth would have been substantially higher had it not been impacted by the sale of Barnett Shale production to Atlas Resource Partners, L.P. ("Atlas") on May 1, 2012.

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