Venoco, Inc. Announces 3rd Quarter 2012 Financial and

Venoco, Inc. Announces 3rd Quarter 2012 Financial and Operational
Results 
Daily Oil Volumes up 20% Compared to 2Q 2012 and up 41% Compared to
3Q 2011; Revenue up 17% Compared to 2Q 2012; Production of 1.6
Million BOE or 17,899 BOE/d 
DENVER, CO -- (Marketwire) -- 11/07/12 --  Venoco, Inc. today
reported financial and operational results for the third quarter of
2012. The company reported a net loss for the quarter of $30 million
on total revenues of $96.7 million.  
Adjusted Earnings, which adjusts for unrealized derivative gains and
losses and certain one-time charges, were $11.5 million for the
quarter, down from $13.3 million in the second quarter of 2012.
Adjusted EBITDA was $55.0 million in the quarter, down from $55.8
million in the second quarter. Adjusted Earnings and Adjusted EBITDA
were positively impacted in the second quarter by the monetization of
certain 2012-2015 oil and natural gas hedges in the amount of $11.0
million. Please see the end of this release for definitions of
Adjusted Earnings and Adjusted EBITDA and a reconciliation of those
measures to net income/loss.  
Highlights for the quarter include the following: 


 
--  Daily oil volumes up 20% in the third quarter compared to the second
    quarter of 2012 and up 41% compared to the third quarter of 2011.
--  Revenue of $96.7 million is up 17% in the third quarter compared to
    the second quarter of 2012.
--  Production of 1.6 million barrels of oil equivalent (MMBOE) for the
    quarter, or 17,899 BOE per day (BOE/d).
--  Adjusted EBITDA of $55.0 million and Adjusted Earnings of $11.5
    million.

  
"We continued to see growth in oil volumes from our Southern California
legacy assets, primarily as a result of drilling at South Ellwood and
West Montalvo. Strong production at South Ellwood is due largely to
the second of the three wells we've drilled there this year, which is
producing at a sustained rate of almost 2,000 gross barrels of oil
per day. Of the other two, the first well is producing at modest
rates, which we believe can be enhanced in 2013 with a different lift
system. The initial completion on the third well was wet, so we are
planning to sidetrack it by year-end," said Ed O'Donnell, Venoco's
CEO.  
Third Quarter Production 
Average daily oil v
olumes were up twenty percent in the third quarter
of 2012 compared to the second quarter of 2012 and up forty-one
percent from the third quarter of 2011. The company's average daily
production of 17,899 BOE/d in the third quarter was up five percent
compared to the second quarter of 2012 and up three percent compared
to the third quarter of 2011. Daily natural gas volumes from the
Sacramento Basin declined eight percent compared to the second
quarter of 2012. The company had no drilling activity in the basin in
the second or third quarters due to continued low natural gas prices. 
"We are very pleased to report that our three largest oil properties
have solid production again this quarter. We completed a scheduled
maintenance shutdown at our Sockeye field during the third quarter,
and while the shutdown reduced volumes produced during the quarter,
the shutdown went smoothly so we were able to minimize the effect on
production," said Mr. O'Donnell.  
The following table details the company's daily production by region
(BOE(1)/d):  


 
                                                                            
                                                                            
Region                                 Quarter Ended       Nine Months Ended
                                -------------------------- -----------------
                                 9/30/11  6/30/12  9/30/12  9/30/11  9/30/12
                                -------- -------- -------- -------- --------
Sacramento Basin                  10,337    9,136    8,394   10,381    9,164
Southern California                6,928    7,944    9,505    7,163    8,306
                                -------- -------- -------- -------- --------
Total                             17,265   17,080   17,899   17,544   17,470
                                ======== ======== ======== ======== ========
(1) Barrel of oil equivalent (BOE) is calculated using the ratio of six Mcf 
 of natural gas to one barrel of crude oil, condensate or natural gas       
 liquids.                                                                   

 
Third Quarter Costs  
Venoco's third quarter 2012 lease operating expenses rose to $13.90
per BOE, up 8% from the second quarter 2012 level of $12.93 per BOE.
Costs in the third quarter of 2012 were slightly higher due primarily
to scheduled maintenance at Platform Gail in the Sockeye field. 
The following table details certain of the company's per BOE metrics
for the indicated quarter: 


 
                                                                            
                                                                            
                                       Quarter Ended       Nine Months Ended
                                -------------------------- -----------------
UNAUDITED (per BOE)              9/30/11  6/30/12  9/30/12  9/30/11  9/30/12
                                -------- -------- -------- -------- --------
Lease Operating Expenses        $  18.06 $  12.93 $  13.90 $  14.90 $  14.09
Property and Production Taxes       1.13     3.41     1.01     1.00     1.79
DD&A Expense                       12.85    13.65    13.50    13.32    13.73
G&A Expense (1)                     4.43     5.15     5.59     4.79     5.37

 
(1) Net of amounts capitalized and excluding stock-based compensation
costs and costs related to the going-private transaction. See the end
of this release for a reconciliation of G&A per BOE. 
Capital Investment Third Quarter 2012 
Venoco's third quarter capital expenditures for exploration,
development and other spending were down thirty-one percent from the
second quarter to $48 million, including $32 million for drilling and
rework activities, $8 million for facilities, and $8 million for
land, seismic and capitalized G&A.  
The company's Southern California legacy fields accounted for $25
million or 52% of its third quarter capital expenditures. At the West
Montalvo field, we completed one well during the third quarter which
was spud in the second quarter, and through the first nine months of
the year, the company has spud four wells and completed six wells
(including two wells spud last year). Net production at West Montalvo
has increased 57% from 1,250 BOE per day in the third quarter of 2011
to 1,960 BOE per day in the third quarter of 2012. At the Sockeye
field, the company had minimal capital investment in the third
quarter and through the first nine months drilled three wells and
performed one recompletion. At the South Ellwood field, the company
completed one well during the quarter. The completed well was wet and
the company plans to return to the well to sidetrack it during the
fourth quarter. The first well the company drilled at South Ellwood
this year averaged 106 gross barrels of oil per day in the third
quarter while the second well averaged slightly over 1,900 gross
barrels of oil per day in the quarter. The compa
ny spud a fourth well
to a "probable" location, which, after setting intermediate casing,
was suspended and is not expected to be completed until after the
fourth quarter. The company has spent $94 million during the first
nine months of the year in Southern California. 
The company had onshore Monterey capital expenditures of $20 million
or 41% of its total third quarter capital expenditures. During the
quarter the company re-completed several wells, installed artificial
lift systems, added processing facilities, completed a water
pipeline, and made significant progress on both oil and natural gas
pipelines in the Sevier field. Through the first nine months of the
year, the company has spud five wells and completed five wells
targeting the onshore Monterey including one spud in 2011 in Sevier.
The company has facilities, recompletions and other well work planned
for the balance of 2012, but does not expect to spud additional wells
in the onshore Monterey.  
In the Sacramento Basin the company had capital expenditures of $3
million in the third quarter. The company did not spud or complete
any wells in the third quarter, but it did spend approximately
$820,000 to perform 33 recompletions. Through the first nine months,
the company has performed a total of 173 recompletions in the Basin
and expects to perform over 200 recompletions for full-year 2012. The
company drilled three wells early in 2012 in the Basin and spud its
fourth and final well of the year in mid-October. 
Closing of Going-Private Transaction 
On October 3, 2012, the company closed the going-private transaction
contemplated by its merger agreement with Timothy Marquez and certain
of his affiliates. As provided under the agreement, the company is
now a wholly owned subsidiary of an affiliate of Mr. Marquez. As part
of the closing, the company entered into a $315 million senior
secured second lien term loan agreement and an amended and restated
$500 million revolving credit facility, with an initial borrowing
base of $175 million and initial commitments of $156 million.  
2012 Guidance 
"With lower capital spending than previously forecast, as well as
with a scheduled maintenance shutdown at South Ellwood in November,
we expect full-year production to be slightly lower than our previous
forecast," said Mr. O'Donnell. "The good news is that we also expect
both LOE and DD&A to be lower than previously forecast." 
The following summarizes the company's full-year 2012 guidance: 


 
--  Production: 17,150 - 17,500 BOE/d
--  Capital Budget: $210 - $220 million
--  Lease Operating Expenses: $14.50 - $15.00 per BOE
--  General & Administrative Expenses: $5.25 - $5.50 per BOE
--  Production & Property Taxes: $1.65 - $1.70 per BOE
--  DD&A: $14.25 - $14.75 per BOE

  
Earnings Conference Call 
Venoco will host a conference call to discuss results today,
Wednesday, November 7, 2012 at 11:00 a.m. Eastern Time (9 a.m.
Mountain). The conference call will be webcast and those wanting to
listen may do so by using a link on the Investor Relations page of
the company's website at http://www.venocoinc.com. Those wanting to
participate in the Q & A portion can call (866) 831-6291 and use
conference code 89943533. International participants can call (617)
213-8860 and use the same conference code. 
A replay of the conference call will be available for one week by
calling (888) 286-8010 or, for international callers, (617) 801-6888,
and using passcode 36403256. The replay will also be available on the
Venoco website for 30 days.  
About the Company 
Venoco is an independent energy company primarily engaged in the
acquisition, exploitation and development of oil and natural gas
properties primarily in California. Venoco operates three offshore
platforms in the Santa Barbara Channel, has non-operated interests in
three other platforms, operates several onshore properties in
Southern California, and has extensive operations in Northern
California's Sacramento Basin. 
Forward-looking Statements 
Statements made in this news release relating to Venoco's future
production, expenses, capital expenditures and development projects,
and all other statements except statements of historical fact, are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. These statements are based on assumptions and estimates that
management believes are reasonable based on currently available
information; however, management's assumptions and the company's
future performance are both subject to a wide range of business risks
and uncertainties and there is no assurance that these goals and
projections can or will be met. Any number of factors could cause
actual results to differ materially from those in the forward-looking
statements, including, but not limited to, the timing and extent of
changes in oil and gas prices, the timing and results of drilling and
other development activities, the availability and cost of obtaining
drilling equipment and technical personnel, risks associated with the
availability of acceptable transportation arrangements and the
possibility of unanticipated operational problems, delays in
completing production, treatment and transportation facilities,
higher than expected production costs and other expenses, and
pipeline curtailments by third parties. The company's activities with
respect to the onshore Monterey Shale and other projects are subject
to numerous operating, geological and other risks and may not be
successful. The company's results in the onshore Monterey Shale will
be subject to greater risks than in areas where it has more data and
drilling and production experience. Results from the company's
onshore Monterey Shale project will depend on, among other things,
its ability to identify productive intervals and drilling and
completion techniques necessary to achieve commercial production from
those intervals. All forward-looking statements are made only as of
the date hereof and the company undertakes no obligation to update
any such statement. Further information on risks and uncertainties
that may affect the Company's operations and financial performance,
and the forward-looking statements made herein, is available in the
company's filings with the Securities and Exchange Commission, which
are incorporated by this reference as though fully set forth herein.  
References to reserve estimates other than proved are by their nature
more uncertain than estimates of proved reserves, and are subject to
substantially greater risk of not actually being realized by the
company. 


 
                                                                            
                                                                            
                  OIL AND NATURAL GAS PRODUCTION AND PRICES                 
                                                                            
                              Quarter Ended             Quarter Ended       
                        ------------------------  ------------------------  
                                             %                         %    
UNAUDITED               6/30/12  9/30/12  Change  9/30/11  9/30/12  Change  
                        -------  -------  ------  -------  -------  ------  
Production Volume:                        
                                  
Oil (MBbls) (1)             692      839      21%     594      839      41% 
Natural Gas (MMcf)        5,174    4,846      -6%   5,966    4,846     -19% 
                        -------  -------  ------  -------  -------  ------  
MBOE                      1,554    1,647       6%   1,588    1,647       4% 
                        =======  =======  ======  =======  =======  ======  
Daily Average                                                               
 Production Volume:                                                         
Oil (Bbls/d)              7,604    9,120      20%   6,457    9,120      41% 
Natural Gas (Mcf/d)      56,857   52,674      -7%  64,848   52,674     -19% 
                        -------  -------  ------  -------  -------  ------  
BOE/d                    17,080   17,899       5%  17,265   17,899       4% 
                        =======  =======  ======  =======  =======  ======  
Oil Price per Barrel                                                        
 Produced (in dollars):                                                     
Realized price before                                                       
 hedging                $100.38  $ 96.20      -4% $ 87.24  $ 96.20      10% 
Realized hedging gain                                                       
 (loss) (2)               (9.56)   (9.68)      1%   (5.01)   (9.68)     93% 
                        -------  -------  ------  -------  -------  ------  
Net realized price      $ 90.82  $ 86.52      -5% $ 82.23  $ 86.52       5% 
                        =======  =======  ======  =======  =======  ======  
Natural Gas Price per                                                       
 Mcf (in dollars):                                                          
Realized price before                                                       
 hedging                $  2.38  $  2.86      20% $  4.18  $  2.86     -32% 
Realized hedging gain                                                       
 (loss) (2)                0.47     0.11     -77%    0.93     0.11     -88% 
                        -------  -------  ------  -------  -------  ------  
Net realized price      $  2.85  $  2.97       4% $  5.11  $  2.97     -42% 
                        =======  =======  ======  =======  =======  ======  
Expense per BOE (in                                                         
 dollars):                                                                  
Lease operating                                                             
 expenses               $ 12.93  $ 13.90       8% $ 18.06  $ 13.90     -23% 
Production and property                                                     
 taxes                  $  3.41  $  1.01     -70% $  1.13  $  1.01     -11% 
Transportation expenses $  0.17  $  0.29      71% $  1.49  $  0.29     -81% 
Depreciation, depletion                                                     
 and amortization       $ 13.65  $ 13.50      -1% $ 12.85  $ 13.50       5% 
General and                                                                 
 administrative (3)     $  6.35  $  7.18      13% $  5.82  $  7.18      23% 
Interest expense        $ 10.22  $ 10.02      -2% $ 10.08  $ 10.02      -1% 
 
                                                
                           Nine Months Ended    
                       ------------------------ 
                                            %   
UNAUDITED              9/30/11  9/30/12  Change 
                       -------  -------  ------ 
Production Volume:                              
Oil (MBbls) (1)          1,821    2,172      19%
Natural Gas (MMcf)      17,812   15,688     -12%
                       -------  -------  ------ 
MBOE                     4,790    4,787       0%
                       =======  =======  ====== 
Daily Average                                   
 Production Volume:                             
Oil (Bbls/d)             6,670    7,927      19%
Natural Gas (Mcf/d)     65,245   57,255     -12%
                       -------  -------  ------ 
BOE/d                   17,544   17,470       0%
                       =======  =======  ====== 
Oil Price per Barrel                            
 Produced (in dollars):                         
Realized price before                           
 hedging               $ 90.06  $ 98.26       9%
Realized hedging gain                           
 (loss) (2)              (3.97)   (8.34)    110%
                       -------  -------  ------ 
Net realized price     $ 86.09  $ 89.92       4%
                       =======  =======  ====== 
Natural Gas Price per                           
 Mcf (in dollars):                              
Realized price before                           
 hedging               $  4.16  $  2.67     -36%
Realized hedging gain                           
 (loss) (2)               0.91     0.40     -56%
                       -------  -------  ------ 
Net realized price     $  5.07  $  3.07     -39%
                       =======  =======  ====== 
Expense per BOE (in                             
 dollars):                                      
Lease operating                                 
 expenses              $ 14.90  $ 14.09      -5%
Production and property                         
 taxes                 $  1.00  $  1.79      79%
Transportation expenses$  1.47  $  1.08     -27%
Depreciation, depletion                         
 and amortization      $ 13.32  $ 13.73       3%
General and                                     
 administrative (3)    $  5.82  $  7.11      22%
Interest expense       $  9.33  $ 10.05       8%
                                                                            
(1) Amounts shown are oil production volumes for offshore properties and    
sales volumes for onshore properties (differences between onshore production
and sales volumes are minimal). Revenue accruals are adjusted for actual    
sales volumes since offshore oil inventories can vary significantly from    
month to month based on pipeline inventories, oil pipeline sales            
nominations, and prior to February 2012, the timing of barge deliveries and 
oil in tanks.                                                               
(2) The realized commodity derivative gain (loss) excludes gains from the   
early settlement of oil and natural gas hedges in the following periods:    
- nine months ended September 30, 2012 excludes gains of $44.3 million for  
natural gas and $7.9 million for oil                                        
- nine months ended September 30, 2011 excludes gain of $2.0 million for oil
(3) Net of amounts capitalized.                                             
                                                                            
                                                                            
                                                                            
                                                                            
              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS               
                                                                            
                    Quarter Ended       Quarter Ended     Nine Months Ended 
                 ------------------  ------------------  ------------------ 
UNAUDITED (In                                                               
 thousands)       6/30/12   9/30/12   9/30/11   9/30/12   9/30/11   9/30/12 
                 --------  --------  --------  --------  --------  -------- 
REVENUES:                                                                   
Oil and natural                                                             
 gas sales       $ 80,936  $ 95,377  $ 77,296  $ 95,377  $241,533  $259,701 
Other               1,563     1,321     1,635     1,321     3,877     4,859 
                 --------  --------  --------  --------  --------  -------- 
Total revenues     82,499    96,698    78,931    96,698   245,410   264,560 
          
       --------  --------  --------  --------  --------  -------- 
EXPENSES:                                                                   
Lease operating                                                             
 expense           20,093    22,899    28,684    22,899    71,360    67,442 
Property and                                                                
 production                                                                 
 taxes              5,302     1,671     1,796     1,671     4,783     8,588 
Transportation                                                              
 expense              257       482     2,367       482     7,023     5,151 
Depletion,                                                                  
 depreciation                                                               
 and                                                                        
 amortization      21,213    22,240    20,406    22,240    63,810    65,707 
Accretion of                                                                
 asset                                                                      
 retirement                                                                 
 obligation         1,450     1,457     1,623     1,457     4,821     4,298 
General and                                                                 
 administrative     9,869    11,822     9,236    11,822    27,889    34,052 
                 --------  --------  --------  --------  --------  -------- 
Total expenses     58,184    60,571    64,112    60,571   179,686   185,238 
                 --------  --------  --------  --------  --------  -------- 
Income from                                                                 
 operations        24,315    36,127    14,819    36,127    65,724    79,322 
FINANCING COSTS                                                             
 AND OTHER:                                                                 
Interest expense   15,880    16,498    16,005    16,498    44,678    48,089 
Interest rate                                                               
 derivative                                                                 
 realized                                                                   
 (gains) losses         -         -         -         -    41,147         - 
Interest rate                                                               
 derivative                                                                 
 unrealized                                                                 
 (gains) losses         -         -         -         -   (40,064)        - 
Amortization of                                                             
 deferred loan                                                              
 costs                585       597       592       597     1,715     1,751 
Loss on                                                                     
 extinguishment                                                             
 of debt                -         -         -         -     1,357         - 
Commodity                                                                   
 derivative                                                                 
 realized                                                                   
 (gains) losses    (6,786)    7,597    (2,571)    7,597   (11,546)  (40,285)
Commodity                                                                   
 derivative                                                                 
 unrealized                                                                 
 (gains) losses                                                             
 and                                                                        
 amortization of                                                            
 derivative                                                                 
 premiums              90    41,492   (36,001)   41,492    (3,455)  113,216 
                 --------  --------  --------  --------  --------  -------- 
Total financing                                                             
 costs and other    9,769    66,184   (21,975)   66,184    33,832   122,771 
                 --------  --------  --------  --------  --------  -------- 
Income (loss)                                                               
 before taxes      14,546   (30,057)   36,794   (30,057)   31,892   (43,449)
Income tax                                                                  
 provision                                                                  
 (benefit)              -         -         -         -         -         - 
                 --------  --------  --------  --------  --------  -------- 
Net income                                                                  
 (loss)          $ 14,546  $(30,057) $ 36,794  $(30,057) $ 31,892  $(43,449)
                 ========  ========  ========  ========  ========  ======== 
                                                                            
Weighted average                                                            
 common shares                                                              
 outstanding:                                                               
  Basic            59,106    59,119    58,738    59,119    57,881    59,045 
  Diluted          59,170    59,119    58,830    59,119    58,038    59,045 
                                                                            
                                                                            
                                                                            
                                                                            
              CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION              
                                                                            
UNAUDITED ($ in thousands)                             12/31/11    9/30/12  
                                                     ----------- -----------
ASSETS                                                                      
  Cash and cash equivalents                          $     8,165 $    18,208
  Accounts receivable                                     30,017      34,194
  Inventories                                              7,411       5,973
  Other current assets                                     4,296       5,179
  Commodity derivatives                                   47,768         526
                                                     ----------- -----------
    Total current assets                                  97,657      64,080
    Net property, plant and equipment                    810,465     901,087
    Total other assets                                    21,622      19,732
                                                     ----------- -----------
TOTAL ASSETS                                         $   929,744 $   984,899
                                                     =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
  Accounts payable and accrued liabilities           $    53,098 $    66,591
  Interest payable                                        21,854      14,849
  Commodity derivatives                                    2,490      26,952
                                                     ----------- -----------
    Total current liabilities                             77,442     108,392
LONG-TERM DEBT                                           686,958     719,524
COMMODITY DERIVATIVES                                        308      27,608
ASSET RETIREMENT OBLIGATIONS                              92,008      93,143
                                                     ----------- -----------
    Total liabilities                                    856,716     948,667
    Total stockholders' equity                            73,028      36,232
            
                                         ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $   929,744 $   984,899
                                                     =========== ===========

 
GAAP RECONCILIATIONS 
Adjusted Earnings and Adjusted EBITDA 
In addition to net income (loss) determined in accordance with GAAP,
we have provided in this release our Adjusted Earnings and Adjusted
EBITDA for recent periods. Both Adjusted Earnings and Adjusted EBITDA
are non-GAAP financial measures that we use as supplemental measures
of our performance.  
We define Adjusted Earnings as net income (loss) before the effects
of the items listed in the table below. We calculate the tax effect
of reconciling items by re-performing our period-end tax calculation
excluding the reconciling items from earnings. The difference between
this calculation and the tax expense/benefit recorded for the period
results in the tax effect disclosed below. We believe that Adjusted
Earnings facilitates comparisons to earnings forecasts prepared by
stock analysts and other third parties. Such forecasts generally
exclude the effects of items that are difficult to predict or to
measure in advance and are not directly related to our ongoing
operations. Adjusted Earnings should not be considered a substitute
for net income (loss) as reported in accordance with GAAP. 
We define Adjusted EBITDA as net income (loss) before the effects of
the items listed in the table below. Because the use of Adjusted
EBITDA facilitates comparisons of our historical operating
performance on a more consistent basis, we use this measure for
business planning and analysis purposes, in assessing acquisition
opportunities and in determining how potential external financing
sources are likely to evaluate our business.  
We present Adjusted Earnings and Adjusted EBITDA because we consider
them to be important supplemental measures of our performance.
Neither Adjusted Earnings nor Adjusted EBITDA is a measurement of our
financial performance under GAAP and neither should be considered as
an alternative to net income (loss), operating income or any other
performance measure derived in accordance with GAAP, as an
alternative to cash flow from operating activities or as a measure of
our liquidity. You should not assume that the Adjusted Earnings or
Adjusted EBITDA amounts shown are comparable to similarly named
measures disclosed by other companies.  


 
                                                                            
                                                                            
                                   Quarter Ended          Nine Months Ended 
                           ----------------------------  ------------------ 
UNAUDITED ($ in thousands)  9/30/11   6/30/12   9/30/12   9/30/11   9/30/12 
                           --------  --------  --------  --------  -------- 
Adjusted Earnings                                                           
 Reconciliation                                                             
Net Income                 $ 36,794  $ 14,546  $(30,057) $ 31,892  $(43,449)
Plus:                                                                       
Unrealized commodity                                                        
 (gains) losses             (37,991)   (2,134)   40,289    (9,425)  101,994 
Unrealized interest rate                                                    
 derivative (gains) losses        -         -         -   (40,064)        - 
Going private related                                                       
 costs                          892       852     1,277       892     4,757 
Loss on extinguishment of                                                   
 debt                             -         -         -     1,357         - 
Settlement of interest                                                      
 rate swap contracts              -         -         -    38,065         - 
Tax effects                       -         -         -         -         - 
                           --------  --------  --------  --------  -------- 
Adjusted Earnings          $   (305) $ 13,264  $ 11,509  $ 22,717  $ 63,302 
                           ========  ========  ========  ========  ======== 
                                                                            
                                                                            
                                                                            
                                                                            
                                   Quarter Ended          Nine Months Ended 
                           ----------------------------  ------------------ 
UNAUDITED ($ in thousands)  9/30/11   6/30/12   9/30/12   9/30/11   9/30/12 
                           --------  --------  --------  --------  -------- 
Adjusted EBITDA                                                             
 Reconciliation                                                             
Net income                 $ 36,794  $ 14,546  $(30,057) $ 31,892  $(43,449)
Interest expense             16,005    15,880    16,498    44,678    48,089 
Interest rate derivative                                                    
 (gains) losses - realized        -         -         -    41,147         - 
DD&A                         20,406    21,213    22,240    63,810    65,707 
Accretion of asset                                                          
 retirement obligation        1,623     1,450     1,457     4,821     4,298 
Amortization of deferred                                                    
 loan costs                     592       585       597     1,715     1,751 
Loss on extinguishment of                                                   
 debt                             -         -         -     1,357         - 
Share-based payments          1,563     1,208     1,497     4,966     4,245 
Going private related                                                       
 costs                          892       852     1,277       892     4,757 
Amortization of derivative                                                  
 premiums                     1,990     2,224     1,203     5,970    11,222 
Unrealized commodity                                                        
 derivative (gains) losses  (37,991)   (2,134)   40,289    (9,425)  101,994 
Unrealized interest rate                                                    
 derivative (gains) losses        -         -         -   (40,064)        - 
                           --------  --------  --------  --------  -------- 
Adjusted EBITDA            $ 41,874  $ 55,824  $ 55,001  $151,759  $198,614 
                           ========  ========  ========  ========  ======== 

 
We also provide per BOE G&A expenses excluding costs associated with
the going-private transaction, and share-based compensation charges.
We believe that these non-GAAP measures are useful in that the items
excluded do not represent cash expenses directly related to our
ongoing operations. These non-GAAP measures should not be viewed as
an alternative to per BOE G&A expenses as determined in accordance
with GAAP.  


 
                                                                            
                                                                            
UNAUDITED ($ in thousands,                                                  
 except per BOE amounts)           Quarter Ended          Nine Months Ended 
                           ----------------------------  ------------------ 
                            9/30/11   6/30/12   9/30/12   9/30/11   9/30/12 
                 
          --------  --------  --------  --------  -------- 
G&A per BOE Reconciliation                                                  
                                                                            
G&A expense                $  9,236  $  9,869  $ 11,822  $ 27,889  $ 34,052 
Less:                                                                       
Share-based compensation                                                    
 expense                     (1,303)   (1,018)   (1,337)   (4,076)   (3,575)
Going private related                                                       
 costs                         (892)     (852)   (1,277)     (892)   (4,757)
                           --------  --------  --------  --------  -------- 
G&A Expense Excluding                                                       
 Share-Based Comp Going                                                     
 Private Costs                7,041     7,999     9,208    22,921    25,720 
MBOE                          1,588     1,554     1,647     4,790     4,787 
                           --------  --------  --------  --------  -------- 
G&A Expense per BOE                                                         
 Excluding Share-Based                                                      
 Comp and Going Private                                                     
 Costs                     $   4.43  $   5.15  $   5.59  $   4.79  $   5.37 
                           ========  ========  ========  ========  ======== 

  
For further information, please contact 
Mike Edwards
Vice President
(303) 626-8320
http://www.venocoinc.com
E-Mail investor@venocoinc.com 
 
 
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