Replies to post #484 on FX Energy (FXEN)

[Investorman]

Hmm..... Must be why FXEN is down big today but it doesn't really seem like that should be enough to panic people.

[Investorman]

FX Energy Reports Third Quarter Loss; Expects Significantly Higher 2009 Revenues

SALT LAKE CITY, UT -- (Marketwire) -- 11/07/08 -- FX Energy, Inc. (NASDAQ: FXEN) today announced financial results for its third quarter ended September 30, 2008.

Earnings for the most recent quarter were $(3.7) million, or $(0.09) per share, versus $166,000, or $0.00 per share, for last year's third quarter.

Total revenues for the third quarter of 2008 dipped very modestly, 3 percent, to $5.1 million, compared to total revenues of $5.2 million during the 2007 third quarter. Exploration expenses were approximately $2.4 million, or almost 200 percent, higher during the third quarter of 2008 compared to the same quarter of 2007. The higher exploration expenses were the primary contributor to the reported loss.


Clay Newton, FX's Vice President Finance, remarked, "The lower results were expected, and we have remarked on this before. As a relatively small oil and gas company with a relatively large and expanding exploration program, this kind of quarterly result is not unusual. Quarterly exploration costs can and will be somewhat variable. However, with a likely increase in gas production and gas prices rising in Poland, we expect 2009 revenues to be much higher. We anticipate that our Roszkow discovery, our largest to date, will substantially raise our revenues next year. This discovery is currently shut-in, pending completion of production facilities. Also, the contractually higher gas prices we are to receive in Poland will boost revenues."




Earnings before interest, taxes, depreciation, amortization, and exploration expense (EBITDAX)(1), a non-GAAP financial measure, during the third quarter of 2008 declined to $2.0 million, compared to $2.5 million for the third quarter of 2007.





Third Quarter Production Down, But 2009 Production to Be Up Significantly



The Company's total net production decreased from 598 Mmcfe during the third quarter of 2007 to 391 Mmcfe during the 2008 quarter. The production decline is due almost entirely to the expected, and previously disclosed, decline at the Company's Wilga well in eastern Poland. The Company's Zaniemysl well was also shut in for 10 days during the quarter in order to obtain new bottom-hole data. This well has come back on line at its previous rate of approximately 2.4 Mmcfd net to the Company. Additionally, and more importantly, new production is expected to be added to the production base in 2009. In particular, the Roszkow well is expected to begin production at a rate of 7.5 Mmcfd net to the Company in early 2009.

Consequently, 2009 production should be well ahead of both 2007 and 2008.




The production decline for the period was almost offset by price increases.

Average oil prices for the company were $104.68 per barrel this year versus $68.74 per barrel last year. The Company has fairly stable oil production in the US of some 18,000 barrels per quarter.




Natural gas prices for the company averaged $7.00 per Mcf, up 30%, for the 2008 third quarter versus the comparable 2007 quarter. All of the Company's gas production is in Poland. The Company's gas production in Poland is sold primarily through long-term gas contracts that are tied to a percentage of Polish wholesale prices. During 2008, there have been two substantial price increases pursuant to these contracts. The Company received a 14% increase in these contracts during the first quarter, and another 11% increase on November 1, 2008.




Nine Month Results



The Company reported earnings of $(9.5) million, or $(0.24) per share, for the first nine months of 2008, compared to $(5.1) million, or $(0.14) per share, for the same period of 2007. The higher loss was largely attributable to increased exploration spending, most of which occurred during the first and third quarters of this year.




Earnings before interest, taxes, depreciation, amortization, and exploration expense (EBITDAX)(1) dropped from just under $5.7 million to just over $5.2 million.




Oil and gas revenues for the 2008 first nine months were slightly higher than those recorded during the same period of 2007. The Company recognized oil and gas revenues of $11.4 million, compared to $11.3 million for the first nine months of 2007. Company-wide revenues for the first nine months of 2008 were $14.5 million, compared to $13.9 million in the first nine months of 2007.




Total oil and gas production was 1,237 Mmcfe during the first nine months of 2008, compared to 1,787 Mmcfe during the first nine months of 2007. As mentioned previously, the decline was attributable to an expected decline in one of the Company's wells in Poland. Natural gas production in Poland was 920 Mmcf during the first nine months of 2008, compared to 1,366 Mmcf during the same period of 2007.




At September 30, 2008, the Company's cash and investments were approximately $16.6 million, including cash and cash equivalents of approximately $11.0 million and other investments of $5.6 million. Working capital was $11.8 million at September 30, 2008 versus $15.3 million at December 31, 2007. Long-term debt was $11.0 million at the end of September 2008.