LGCY » Topics » Year Ended December 31, 2006 Compared to Year Ended December 31, 2005

These excerpts taken from the LGCY 10-K filed Dec 11, 2008.
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 
Legacy’s revenues from the sale of oil were $45.4 million and $18.2 million for the years ended December 31, 2006 and 2005, respectively. Legacy’s revenues from the sale of natural gas were $14.4 million and $7.3 million for the years ended December 31, 2006 and 2005, respectively. The $27.2 million increase in oil revenues reflects an increase in oil production of 395 MBbls (112%) due primarily to Legacy’s purchase of the oil and natural gas


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properties acquired in the March 15, 2006 formation transactions, or the Legacy Formation, the PITCO acquisition and the South Justis, Farmer Field and Kinder Morgan acquisitions while the realized price excluding the effects of hedging increased $9.07 per Bbl. The $7.1 million increase in natural gas revenues reflects an increase in natural gas production of approximately 1,173 MMcf (114%) due primarily to both the Legacy Formation and the PITCO acquisition while the realized price per Mcf excluding the effects of hedging decreased $0.56 per Mcf. Since the Legacy Formation occurred on March 15, 2006, Legacy’s revenues and related volumes for the year ended December 31, 2006 do not reflect the 50 MBbls and 119 MMcf produced by the oil and natural gas properties acquired in that transaction from January 1, 2006 to March 15, 2006. For the year ended December 31, 2006, Legacy recorded $9.3 million of net gains on oil and natural gas swaps comprised of realized losses of $0.3 million from net cash settlements of oil and natural gas swap contracts and net unrealized gains of $9.6 million. Legacy had unrealized net gains from its oil swaps because the fixed price of its oil swap contracts were above the NYMEX index prices at December 31, 2006. As a point of reference, the NYMEX price for light sweet crude oil for the near-month close at December 31, 2006 was $61.05 per Bbl, a price which is less than the average contract prices of Legacy’s outstanding oil swap contracts. Legacy had unrealized net gains from its natural gas swaps because the fixed prices of its natural gas swap contracts were above the NYMEX index prices at December 31, 2006. As a point of reference, the NYMEX price for natural gas for the near-month close at December 31, 2006 was $6.30 per MMbtu, a price which is less than the average contract prices of Legacy’s outstanding natural gas swap contracts. For the year ended December 31, 2005, Legacy recorded $6.2 million of net losses on oil swaps comprised of a realized loss of $3.5 million from net cash settlements of oil swap contracts and a net unrealized loss of $2.6 million. There were no settlements on natural gas swaps during the year ended December 31, 2005. Unrealized gains and losses represent a current period mark-to-market adjustment for commodity derivatives which will be settled in future periods.
 
Legacy’s oil and natural gas production expenses, excluding production and other taxes, increased to $15.9 million ($14.28 per Boe) for the year ended December 31, 2006, from $6.4 ($12.14 per Boe) million for the year ended December 31, 2005. Production expenses increased primarily because of (i) $3.6 million related to the PITCO acquisition, (ii) $3.7 million related to the Legacy Formation, (iii) $2.2 million related to the South Justis, Farmer Field and Kinder Morgan acquisitions and (iv) increased production and increased cost of services and certain operating costs that are directly related to higher commodity prices, particularly the cost of electricity, which powers artificial lift equipment and pumps involved in the production of oil.
 
Legacy’s production and other taxes were $3.7 million and $1.6 million for the years ended December 31, 2006 and 2005, respectively. Production and other taxes increased primarily because of (i) approximately $0.8 million of taxes related to the PITCO Acquisition, (ii) $0.9 million of taxes related to the Legacy Formation and (iii) higher commodity prices in the 2006 period.
 
Legacy’s general and administrative expenses were $3.7 million and $1.4 million for the years ended December 31, 2006 and 2005, respectively. General and administrative expenses increased approximately $2.1 million between periods primarily due to increased employee costs related to business expansion and approximately $250,000 of costs incurred in connection with our private equity offering.
 
Legacy’s depletion, depreciation, amortization and accretion expense, or DD&A, was $18.4 million and $2.3 million for the years ended December 31, 2006 and 2005, respectively, reflecting primarily $7.3 million of DD&A related to the PITCO acquisition, $6.8 million to the Legacy Formation and $1.0 million to recent acquisitions.
 
Impairment expense was $16.1 million for the year ended December 31, 2006 involving 41 separate producing fields, due primarily to the decline in oil and natural gas prices from the dates at which the purchase prices for the PITCO acquisition and the Legacy Formation were allocated among the purchased properties. As a point of reference, the NYMEX closing price for oil was $61.05 per Bbl at December 31, 2006, as compared to $66.63 per Bbl on March 31, 2006 at the time of the Legacy Formation and $66.24 per Bbl on September 30, 2005 at the time of the PITCO acquisition. As a point of reference, the NYMEX closing price for natural gas was $6.30 per MMbtu at December 31, 2006, as compared to $7.21 per MMbtu on March 31, 2006 at the time of the Legacy Formation and $13.92 per MMbtu on September 30, 2005 at the time of the PITCO acquisition.


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Legacy recorded interest income of $129,712 for the year ended December 31, 2006 and $185,308 for the years ended December 31, 2005. The decrease of $55,596 is a result of lower average cash balances for the current period.
 
Interest expense was $6.6 million and $1.6 million for the years ended December 31, 2006 and 2005, respectively, reflecting higher average borrowings and higher average interest rates in the current period. Legacy borrowed $67.5 million to fund the PITCO acquisition and $65.8 million under its new revolving credit facility at the close of the Legacy Formation.
 
Legacy recorded equity in loss of partnership of $317,788 and $495,295 for the years ended December 31, 2006 and 2005, respectively. In both periods, Legacy recorded equity in loss of partnership related to its investment in MBN Management, LLC, which was formed in July, 2005. Legacy did not acquire any interest in MBN Management, LLC as part of the Legacy Formation. Accordingly, such losses will not be incurred in the future.
 
Year
Ended December 31, 2006 Compared to Year Ended
December 31, 2005



 



Legacy’s revenues from the sale of oil were
$45.4 million and $18.2 million for the years ended
December 31, 2006 and 2005, respectively. Legacy’s
revenues from the sale of natural gas were $14.4 million
and $7.3 million for the years ended December 31, 2006
and 2005, respectively. The $27.2 million increase in oil
revenues reflects an increase in oil production of
395 MBbls (112%) due primarily to Legacy’s purchase of
the oil and natural gas





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properties acquired in the March 15, 2006 formation
transactions, or the Legacy Formation, the PITCO acquisition and
the South Justis, Farmer Field and Kinder Morgan acquisitions
while the realized price excluding the effects of hedging
increased $9.07 per Bbl. The $7.1 million increase in
natural gas revenues reflects an increase in natural gas
production of approximately 1,173 MMcf (114%) due primarily
to both the Legacy Formation and the PITCO acquisition while the
realized price per Mcf excluding the effects of hedging
decreased $0.56 per Mcf. Since the Legacy Formation occurred on
March 15, 2006, Legacy’s revenues and related volumes
for the year ended December 31, 2006 do not reflect the
50 MBbls and 119 MMcf produced by the oil and natural
gas properties acquired in that transaction from January 1,
2006 to March 15, 2006. For the year ended
December 31, 2006, Legacy recorded $9.3 million of net
gains on oil and natural gas swaps comprised of realized losses
of $0.3 million from net cash settlements of oil and
natural gas swap contracts and net unrealized gains of
$9.6 million. Legacy had unrealized net gains from its oil
swaps because the fixed price of its oil swap contracts were
above the NYMEX index prices at December 31, 2006. As a
point of reference, the NYMEX price for light sweet crude oil
for the near-month close at December 31, 2006 was $61.05
per Bbl, a price which is less than the average contract prices
of Legacy’s outstanding oil swap contracts. Legacy had
unrealized net gains from its natural gas swaps because the
fixed prices of its natural gas swap contracts were above the
NYMEX index prices at December 31, 2006. As a point of
reference, the NYMEX price for natural gas for the near-month
close at December 31, 2006 was $6.30 per MMbtu, a price
which is less than the average contract prices of Legacy’s
outstanding natural gas swap contracts. For the year ended
December 31, 2005, Legacy recorded $6.2 million of net
losses on oil swaps comprised of a realized loss of
$3.5 million from net cash settlements of oil swap
contracts and a net unrealized loss of $2.6 million. There
were no settlements on natural gas swaps during the year ended
December 31, 2005. Unrealized gains and losses represent a
current period mark-to-market adjustment for commodity
derivatives which will be settled in future periods.


 



Legacy’s oil and natural gas production expenses, excluding
production and other taxes, increased to $15.9 million
($14.28 per Boe) for the year ended December 31, 2006, from
$6.4 ($12.14 per Boe) million for the year ended
December 31, 2005. Production expenses increased primarily
because of (i) $3.6 million related to the PITCO
acquisition, (ii) $3.7 million related to the Legacy
Formation, (iii) $2.2 million related to the South
Justis, Farmer Field and Kinder Morgan acquisitions and
(iv) increased production and increased cost of services
and certain operating costs that are directly related to higher
commodity prices, particularly the cost of electricity, which
powers artificial lift equipment and pumps involved in the
production of oil.


 



Legacy’s production and other taxes were $3.7 million
and $1.6 million for the years ended December 31, 2006
and 2005, respectively. Production and other taxes increased
primarily because of (i) approximately $0.8 million of
taxes related to the PITCO Acquisition,
(ii) $0.9 million of taxes related to the Legacy
Formation and (iii) higher commodity prices in the 2006
period.


 



Legacy’s general and administrative expenses were
$3.7 million and $1.4 million for the years ended
December 31, 2006 and 2005, respectively. General and
administrative expenses increased approximately
$2.1 million between periods primarily due to increased
employee costs related to business expansion and approximately
$250,000 of costs incurred in connection with our private equity
offering.


 



Legacy’s depletion, depreciation, amortization and
accretion expense, or DD&A, was $18.4 million and
$2.3 million for the years ended December 31, 2006 and
2005, respectively, reflecting primarily $7.3 million of
DD&A related to the PITCO acquisition, $6.8 million to
the Legacy Formation and $1.0 million to recent
acquisitions.


 



Impairment expense was $16.1 million for the year ended
December 31, 2006 involving 41 separate producing fields,
due primarily to the decline in oil and natural gas prices from
the dates at which the purchase prices for the PITCO acquisition
and the Legacy Formation were allocated among the purchased
properties. As a point of reference, the NYMEX closing price for
oil was $61.05 per Bbl at December 31, 2006, as compared to
$66.63 per Bbl on March 31, 2006 at the time of the Legacy
Formation and $66.24 per Bbl on September 30, 2005 at the
time of the PITCO acquisition. As a point of reference, the
NYMEX closing price for natural gas was $6.30 per MMbtu at
December 31, 2006, as compared to $7.21 per MMbtu on
March 31, 2006 at the time of the Legacy Formation and
$13.92 per MMbtu on September 30, 2005 at the time of the
PITCO acquisition.





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Legacy recorded interest income of $129,712 for the year ended
December 31, 2006 and $185,308 for the years ended
December 31, 2005. The decrease of $55,596 is a result of
lower average cash balances for the current period.


 



Interest expense was $6.6 million and $1.6 million for
the years ended December 31, 2006 and 2005, respectively,
reflecting higher average borrowings and higher average interest
rates in the current period. Legacy borrowed $67.5 million
to fund the PITCO acquisition and $65.8 million under its
new revolving credit facility at the close of the Legacy
Formation.


 



Legacy recorded equity in loss of partnership of $317,788 and
$495,295 for the years ended December 31, 2006 and 2005,
respectively. In both periods, Legacy recorded equity in loss of
partnership related to its investment in MBN Management, LLC,
which was formed in July, 2005. Legacy did not acquire any
interest in MBN Management, LLC as part of the Legacy Formation.
Accordingly, such losses will not be incurred in the future.


 




This excerpt taken from the LGCY 10-K filed Mar 29, 2007.
Year Ended December 31, 2006 Compared to Year Ended December 31, 2005
 
Legacy’s revenues from the sale of oil were $45.4 million and $18.2 million for the years ended December 31, 2006 and 2005, respectively. Legacy’s revenues from the sale of natural gas were $14.4 million and $7.3 million for the years ended December 31, 2006 and 2005, respectively. The $27.2 million increase in oil revenues reflects an increase in oil production of 395 MBbls (112%) due primarily to Legacy’s purchase of the oil and natural gas properties acquired in the March 15, 2006 formation transactions, or the Legacy Formation, the PITCO acquisition and the South Justis, Farmer Field and Kinder Morgan acquisitions while the realized price excluding the effects of hedging increased $9.07 per Bbl. The $7.1 million increase in natural gas revenues reflects an increase in natural gas production of approximately 1,173 MMcf (114%) due primarily to both the Legacy Formation and the PITCO acquisition while the realized price per Mcf excluding the effects of hedging decreased $0.56 per Mcf. Since the Legacy Formation occurred on March 15, 2006, Legacy’s revenues and related volumes for the year ended December 31, 2006 do not reflect the 50 MBbls and 119 MMcf produced by the oil and natural gas properties acquired in that transaction from January 1, 2006 to March 15, 2006. For the year ended December 31, 2006, Legacy recorded $9.3 million of net gains on oil and natural gas swaps comprised of realized losses of $0.3 million from net cash settlements of oil and natural gas swap contracts and net unrealized gains of $9.6 million. Legacy had unrealized net gains from its oil swaps because the fixed price of its oil swap contracts were above the NYMEX index prices at December 31, 2006. As a point of reference, the NYMEX price for light sweet crude oil for the near-month close at December 31, 2006 was $61.05 per Bbl, a price which is less than the average contract prices of Legacy’s outstanding oil swap contracts. Legacy had unrealized net gains from its natural gas swaps because the fixed prices of its natural gas swap contracts were above the NYMEX index prices at December 31, 2006. As a point of reference, the NYMEX price for natural gas for the near-month close at December 31, 2006 was $6.30 per MMbtu, a price which is less than the average contract prices of Legacy’s outstanding natural gas swap contracts. For the year ended December 31, 2005, Legacy recorded $6.2 million of net losses on oil swaps comprised of a realized loss of $3.5 million from net cash settlements of oil swap contracts and a net unrealized loss of $2.6 million. There were no settlements on natural gas swaps during the year ended December 31, 2005. Unrealized gains and losses represent a current period mark-to-market adjustment for commodity derivatives which will be settled in future periods.
 
Legacy’s oil and natural gas production expenses, excluding production and other taxes, increased to $15.9 million ($14.28 per Boe) for the year ended December 31, 2006, from $6.4 ($12.14 per Boe) million for the year ended December 31, 2005. Production expenses increased primarily because of (i) $3.6 million related to the PITCO acquisition, (ii) $3.7 million related to the Legacy Formation, (iii) $2.2 million related to the South Justis, Farmer Field and Kinder Morgan acquisitions and (iv) increased production and increased cost of


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services and certain operating costs that are directly related to higher commodity prices, particularly the cost of electricity, which powers artificial lift equipment and pumps involved in the production of oil.
 
Legacy’s production and other taxes were $3.7 million and $1.6 million for the years ended December 31, 2006 and 2005, respectively. Production and other taxes increased primarily because of (i) approximately $0.8 million of taxes related to the PITCO Acquisition, (ii) $0.9 million of taxes related to the Legacy Formation and (iii) higher commodity prices in the 2006 period.
 
Legacy’s general and administrative expenses were $3.7 million and $1.4 million for the years ended December 31, 2006 and 2005, respectively. General and administrative expenses increased approximately $2.1 million between periods primarily due to increased employee costs related to business expansion and approximately $250,000 of costs incurred in connection with our private equity offering.
 
Legacy’s depletion, depreciation, amortization and accretion expense, or DD&A, was $18.4 million and $2.3 million for the years ended December 31, 2006 and 2005, respectively, reflecting primarily $7.3 million of DD&A related to the PITCO acquisition, $6.8 million to the Legacy Formation and $1.0 million to recent acquisitions.
 
Impairment expense was $16.1 million for the year ended December 31, 2006 involving 41 separate producing fields, due primarily to the decline in oil and natural gas prices from the dates at which the purchase prices for the PITCO acquisition and the Legacy Formation were allocated among the purchased properties. As a point of reference, the NYMEX closing price for oil was $61.05 per Bbl at December 31, 2006, as compared to $66.63 per Bbl on March 31, 2006 at the time of the Legacy Formation and $66.24 per Bbl on September 30, 2005 at the time of the PITCO acquisition. As a point of reference, the NYMEX closing price for natural gas was $6.30 per MMbtu at December 31, 2006, as compared to $7.21 per MMbtu on March 31, 2006 at the time of the Legacy Formation and $13.92 per MMbtu on September 30, 2005 at the time of the PITCO acquisition.
 
Legacy recorded interest income of $129,712 for the year ended December 31, 2006 and $185,308 for the years ended December 31, 2005. The decrease of $55,596 is a result of lower average cash balances for the current period.
 
Interest expense was $6.6 million and $1.6 million for the years ended December 31, 2006 and 2005, respectively, reflecting higher average borrowings and higher average interest rates in the current period. Legacy borrowed $67.5 million to fund the PITCO acquisition and $65.8 million under its new revolving credit facility at the close of the Legacy Formation.
 
Legacy recorded equity in loss of partnership of $317,788 and $495,295 for the years ended December 31, 2006 and 2005, respectively. In both periods, Legacy recorded equity in loss of partnership related to its investment in MBN Management, LLC, which was formed in July, 2005. Legacy did not acquire any interest in MBN Management, LLC as part of the Legacy Formation. Accordingly, such losses will not be incurred in the future.
 
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