The following discussion reflects the revenues and expenses of our retained Canadian Energy Services and our domestic Exploration & Production segments as continuing operations while the revenues and expenses of our exited domestic Energy Services segment are reported as discontinued operations.
Year ended December 31, 2010 versus year ended December 31, 2009 — Total revenues from continuing operations for the year ended December 31, 2010 were $22,741,000 compared to $17,454,000 for the year ended December 31, 2009.
Revenues from Decca’s Energy Services for the year ended December 31, 2010 were $20,058,000 compared to $14,768,000 for the year ended December 31, 2009. This increase reflected a significantly higher level of work in Canada during the 2010 summer months compared to 2009 as well as a substantial increase in new work for Decca’s non-Canadian customers. Decca’s billings for Energy Services in the year ended December 31, 2010 were approximately 16,375 man days at an average billing rate of approximately $1,225 per day.
Revenues from CYMRI’s oil and gas sales for the year ended December 31, 2010 were $2,626,000 compared to $2,613,000 for the year ended December 31, 2009. In the year ended December 31, 2010, revenues from oil production were $2,289,000, reflecting volumes of 30,379 barrels at an average price of $75.34 per barrel, while gas revenues were $337,000, reflecting volumes of 72,540 Mcf at an average price of $4.64 per Mcf. On an overall basis, these amounts reflect a 30% secular increase in average oil and gas prices which was largely offset by a 22% decline in production volumes. The Company believes that continuing declines in CYMRI’s production volumes are likely in the foreseeable future.
Costs of Decca’s Energy Services for the year ended December 31, 2010 were $18,471,000 versus $13,491,000 for the year ended December 31, 2009. This increase in costs of Energy Services was in line with the previously noted increase in Decca’s Energy Services revenues. As a result of competitive pressures, Decca experienced a reduction in the gross margin on its consulting services to approximately 8% of gross revenues in the year ended December 31, 2010 from 9% in the year ended December 31, 2009.
Lease operating expenses (“LOE”), including production taxes, were $1,509,000 for the year ended December 31, 2010 versus $1,804,000 for the year ended December 31, 2009, representing LOE of CYMRI’s oil and gas production operations. This decrease was due to a reduction in certain non-recurring lease operating expenses, primarily in CYMRI’s Burnell Field, between these two periods.
Depreciation, depletion and amortization (“DD&A”) expense for the year ended December 31, 2010 was $528,000 versus $1,120,000 for the year ended December 31, 2009, representing DD&A of CYMRI’s oil and gas properties. This decrease was due to substantially lower depletion rates resulting from positive reserve revisions as well as lower production volumes.
Impairment expense applicable to the goodwill assigned in the Decca acquisition was zero for the year ended December 31, 2010 compared to $1,900,000 for the year ended December 31, 2009. We recognized a non-cash impairment adjustment to the carrying value of the Decca goodwill in the first quarter of 2009 in the amount of $1,900,000, based on then current projections of Decca’s discounted future net cash flows (see Note 3). Impairment expense applicable to oil and gas properties was zero for the year ended December 31, 2010 compared to $907,000 for the year ended December 31, 2009 with the latter amounts reflecting a non-cash “ceiling test” adjustment under the full cost accounting rules, as more fully described in Note 3.
Workover expenses for the year ended December 31, 2010 were $475,000 versus $425,000 for the year ended December 31, 2009, representing workovers on CYMRI’s South Texas oil and gas properties. This relatively small increase was largely experienced in CYMRI’s Kibbe Field.
Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2010 were $1,814,000 compared to $2,076,000 for the year ended December 31, 2009. This decrease reflected a continuing reduction in the level of corporate overhead expenses following the PEI sale in March 2008.
Interest expense for the year ended December 31, 2010 was $790,000 versus $764,000 for the year ended December 31, 2009. This increase was mostly due to higher borrowing costs associated with Decca’s revolving bank credit and factoring agreements (see Note 6).
Gain on debt extinguishment for the year ended December 31, 2010 was $439,000 compared to zero for the year ended December 31, 2009. This increase was due to the forgiveness of a portion of the principal and all of the accrued interest on unsecured notes payable to certain unrelated parties in March 2010 (see Note 6).
Gain on oil and gas derivatives for the year ended December 31, 2010 was $51,000 versus a loss of $184,000 for the year ended December 31, 2009. The current year amount was due to an unrealized gain on the change in fair value of CYMRI’s outstanding oil and gas derivative contracts (see Note 5).
Income taxes attributable to continuing operations were a benefit of $139,700 for the year ended December 31, 2010 compared to a benefit of $1,451,000 for the year ended December 31, 2009. This relative change reflects a benefit rate of 39% in the current period on pre-tax net loss from continuing operations in the amount of $357,000.
Income from discontinued operations, net of income taxes, was zero for the year ended December 31, 2010 compared to a net loss of $25,000 for the year ended December 31, 2009. As further described in Note 4, we sold the capital stock of our domestic Energy Services subsidiary, PEI, to Hamilton in March 2008. The 2008 sales gain was subsequently reduced in March 2009 due to payment of an indemnified loss in the amount of $39,000 resulting in an after-tax net loss of $25,000 for the year ended December 31, 2009.
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