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Crimson Exploration Announces Third Quarter 2012 Financial Results

  Crimson Exploration Announces Third Quarter 2012 Financial Results

Business Wire

HOUSTON -- November 07, 2012

Crimson Exploration Inc. (NasdaqGM:CXPO) today announced financial results for
the third quarter and first nine months of 2012 and provides operational
update.

Highlights

  *Revenue of $30.8million and adjusted EBITDAX of $21.6million for the
    quarter
  *Increased total liquids production to 3,255 barrels per day, a 49% volume
    increase over the prior year quarter
  *Achieved crude oil and natural gas liquids production ratio of 50.4% for
    the quarter

Management Commentary

Allan D. Keel, President and Chief Executive Officer, commented, “Our focus on
targeting oil and liquid-rich assets in the Woodbine formation in Madison and
Grimes Counties, Texas and the Eagle Ford Shale formation in South Texas
yielded exceptional operating results during the third quarter of 2012. During
the quarter, the Company increased crude oil and natural gas liquids
production 49% over the prior year quarter and achieved a crude oil and
natural gas liquids production ratio above 50 percent for the first time in
Company history. Our strategy for 2013 will be to continue to concentrate on
the development of these areas where we have a multi-year inventory of high
quality targets.”

Summary Financial Results

The Company reported a net loss of $3.8million, or ($0.09)per basic share,
for the third quarter of 2012 compared to net income of $0.5million, or $0.01
per basic share, for the third quarter of 2011. Special non-cash items
impacting the third quarter of 2012 were an unrealized pre-tax charge of $4.6
million related to the mark-to-market valuation requirement on our commodity
price hedges and a $0.9million leasehold impairment charge. In the third
quarter of 2011, we recognized a $2.3 million lease operating expense credit
for accrual estimates, an unrealized pre-tax gain of $4.2million related to
the mark-to-market valuation requirement on commodity price hedges and a $4.8
million leasehold impairment charge. Exclusive of these special cash and
non-cash items, the net loss for the third quarter of 2012 would have been
$0.3million, compared to a net loss of $0.6million in 2011. Adjusted
EBITDAX, as defined below, was $21.6million in the third quarter of 2012
compared to Adjusted EBITDAX for the prior year quarter of $22.4 million.

Revenues for the third quarter of 2012 were $30.8million compared to revenues
of $28.9million in the third quarter of 2011. Revenue for the quarter
increased as a result of our shift to oil and liquids-rich weighted projects
over the last twelve months. Partially offsetting the benefits of this
increased oil revenue were a decline in natural gas production and lower
realized natural gas and natural gas liquids prices.

Production for the third quarter of 2012 was approximately 3.6Bcfe, or
38,759Mcfe per day, compared to production of 4.2Bcfe, or 45,160Mcfe per
day, in the third quarter of 2011, and at the mid-point of management’s
guidance of 37,000 – 40,000 Mcfe per day. Though we experienced a decrease in
equivalent quarterly production, crude oil and natural gas liquids production
was 50.4% of total production for the third quarter of 2012, up from 29% in
the third quarter of 2011. This marks the first quarter in which Crimson’s
crude oil and natural gas liquids production has exceeded a ratio greater than
50 percent. Since 2011, Crimson has achieved its goal of a balanced production
profile by targeting its extensive liquids-rich inventory of projects in the
East Texas Woodbine formation and South Texas Eagle Ford Shale.

The weighted average field sales price in the third quarter of 2012 (before
the effects of realized gains/losses on our commodity price hedges) was
$8.13per Mcfe compared to an average field sales price of $6.50for the third
quarter of 2011. The weighted average realized sales price in the third
quarter of 2012 (including the effects of realized gains/losses on our
commodity price hedges) was $8.63per Mcfe compared to a weighted average
realized sales price of $6.96per Mcfe for the third quarter of 2011. During
the third quarter, realized prices increased period over period due to a more
balanced product mix.

Direct lease operating expenses for the third quarter of 2012 were
$3.3million, or $0.93per Mcfe, compared to $0.9million, or $0.22per Mcfe,
in the third quarter of 2011. Lease operating expenses in the third quarter of
2011 reflected a change in accrual estimates which lowered lease operating
expenses by $2.3 million. Exclusive of this adjustment, quarter over quarter
lease operating expenses would be comparable.

Production and ad valorem tax expenses for the third quarter of2012 were
$1.8million, or $0.51 per Mcfe, compared to $1.6million, or $0.39 per Mcfe,
for the third quarter of2011, a slight increase primarily due to higher
revenues in 2012.

Depreciation, depletion and amortization (“DD&A”) expense for the third
quarter of 2012 was $14.3million, or $4.00per Mcfe, compared to
$13.4million, or $3.24 per Mcfe, for the third quarter of 2011. DD&A expense
increased period over period due to the higher rate associated with drilling
higher cost, and higher-margin crude oil wells, offset in part by lower
natural gas production.

General and administrative expense in the third quarter of 2012 was $4.7
million, or $1.32per Mcfe, compared to $4.5million, or $1.08per Mcfe, in
the third quarter of 2011. General and administrative expenses, exclusive of
non-cash stock option expense recognized in each quarter, was $4.1million for
the third quarter of 2012 and $4.0 million for third quarter of 2011.

Capital expenditures for the third quarter of 2012 were $14.1million,
consisting of drilling and completion operations in the Woodbine formation and
the successful sidetrack of the Catherine Henderson A-6 well in Liberty
County, Texas. Year to date, Crimson has invested approximately $74.4 million
in its capital program which is currently forecasted to total approximately
$80.0 million for the 2012 year.

Borrowing Base & Liquidity

On October 30, 2012, Crimson’s borrowing base under its $400 million senior
secured revolving credit agreement (the “Senior Credit Agreement”) was
reaffirmed by its bank group at $100 million. The next borrowing base
redetermination under the Senior Credit Agreement is scheduled for May 1,
2013. As of September30, 2012, Crimson had $71.1million outstanding, with
availability of $28.9million, under the Senior Credit Agreement.

Hedging Activity

In early October, Crimson added the following crude oil and natural gas
derivative contracts to its existing hedge position as part of its continued
effort to mitigate risks associated with commodity price fluctuations:

                                             
      Crude Oil                        Volume/Month     Price/Unit
      Brent
      Jan 2013-Dec 2013     Swap       9,000 Bbls       $109.13
      Jan 2014-Dec 2014     Swap       7,500 Bbls       $102.10
                                                      
      Natural Gas                      Volume/Month     Price/Unit
      Henry Hub
      Jan 2013-Dec 2014     Collar     42,500 Mmbtu     $3.75-$4.60
      Jan 2013-Dec 2014     Collar     42,500 Mmbtu     $3.50-$5.00
                                                        

Selected Financial and Operating Data

The following table reflects certain comparative financial and operating data
for the three and nine month periods ended September30,2012 and 2011:

                                                                                      
                       Three Months Ended                          Nine Months Ended
                       September 30,                              September 30,                     
                       2012             2011           %           2012               2011           %
Total Volumes
Sold:
Crude oil              228,895          98,523         132         584,713            282,774        107
(barrels)
Natural gas
liquids                70,607           102,595        -31         215,663            324,670        -34
(barrels)
Natural gas            1,768,778        2,948,021      -40         5,933,989          9,234,785      -36
(Mcf)
Natural gas
equivalents            3,565,790        4,154,729      -14         10,736,245         12,879,449     -17
(Mcfe)
                                                                                                     
Daily Sales
Volumes:
Crude oil              2,488            1,071          132         2,134              1,036          106
(barrels)
Natural gas
liquids                767              1,115          -31         787                1,189          -34
(barrels)
Natural gas            19,226           32,044         -40         21,657             33,827         -36
(Mcf)
Natural gas
equivalents            38,759           45,160         -14         39,183             47,177         -17
(Mcfe)
                                                                                                     
Average sales
prices (before
hedging):
Oil                  $ 95.82          $ 96.21          0         $ 102.45           $ 100.59         2
NGLs                   31.05            52.74          -41         36.56              48.28          -24
Gas                    2.75             4.11           -33         2.44               4.04           -40
Mcfe                   8.13             6.50           25          7.66               6.32           21
                                                                                                     
Average sales
price (after
hedging):
Oil                  $ 97.27          $ 89.99          8         $ 103.75           $ 90.95          14
NGLs                   31.05            51.66          -40         36.56              47.65          -23
Gas                    3.57             5.00           -29         3.27               4.87           -33
Mcfe                   8.63             6.96           24          8.19               6.69           22
                                                                                                     
Selected Costs
($ per Mcfe):
Lease
operating            $ 0.93           $ 0.22           323       $ 1.08             $ 0.75           44
expenses
Production and
ad valorem           $ 0.51           $ 0.39           31        $ 0.07             $ 0.42           -83
taxes
Depreciation
and depletion        $ 4.00           $ 3.24           24        $ 4.04             $ 3.21           26
expense
General and
administrative       $ 1.14           $ 0.95           20        $ 1.14             $ 0.87           31
expense (cash)
Interest             $ 1.81           $ 1.46           24        $ 1.76             $ 1.48           19
expense
                                                                                                     
                                                                                                     
Adjusted             $ 21,579,942     $ 22,435,395     -4        $ 63,505,201       $ 59,922,258     6
EBITDAX ^(1)
                                                                                                     
Capital
expenditures
Property
acquisition –        $ -              $ 241                      $ -                $ 940,586
proved
Leasehold              1,267,001        5,217,469                  5,258,214          7,691,567
acquisitions
Exploratory            43,967           (395,354   )               9,793,303          5,625,125
Development            12,760,004       12,769,690                 59,288,195         47,253,309
Other                  5,693            -                          25,410             5,416
                     $ 14,076,665     $ 17,592,046               $ 74,365,122       $ 61,516,003
                                                                                                     
Weighted
Average Shares
Outstanding
Basic                  44,208,471       45,121,172                 44,106,956         45,084,200
Diluted                44,208,471       45,166,566                 44,106,956         45,084,200

(1) Adjusted EBITDAX is a non-GAAP financial measure. See below for a
reconciliation to net income (loss).

                                                          
CRIMSON EXPLORATION INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
                                                                  
                                            September 30,         December 31,
                                            2012                  2011
                                            (unaudited)
ASSETS
Accounts receivable                       $ 14,642,466          $ 16,059,667
Current mark to market value of             1,992,532             4,538,897
derivatives
Other current assets                        603,891               473,616
Deferred tax asset (current and             18,624,542            17,297,621
non-current)
Net property and equipment                  426,048,022           396,781,299
Other non-current assets                    1,390,309             1,174,774
                                                                  
TOTAL ASSETS                              $ 463,301,762         $ 436,325,874
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current mark to market value of           $ —                   $ 290,703
derivatives
Other current liabilities                   44,966,908            66,795,433
Long-term debt, net of current              240,948,063           190,041,933
portion
Other non-current liabilities               10,528,815            9,692,107
Total stockholders’ equity                  166,857,976           169,505,698
                                                                  
TOTAL LIABILITIES & STOCKHOLDERS’         $ 463,301,762         $ 436,325,874
EQUITY

                                                                     
CRIMSON EXPLORATION INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)
                                                                                            
                     Three Months Ended                     Nine Months Ended
                     September 30,                          September 30,
                     2012                2011               2012                2011
OPERATING
REVENUES
Crude oil          $ 22,265,178        $ 8,866,235        $ 60,663,558        $ 25,718,944
sales
Natural gas          6,312,901           14,747,982         19,433,566          45,011,246
sales
Natural gas          2,192,377           5,299,854          7,883,922           15,470,606
liquids sales
Total
operating            30,770,456          28,914,071         87,981,046          86,200,796
revenues
                                                                                            
OPERATING
EXPENSES
Lease
operating            3,318,057           912,698            11,558,488          9,600,620
expenses
Production and
ad valorem           1,806,631           1,615,539          726,375             5,454,014
taxes
Exploration
expenses             (186,550    )       573,697            163,041             954,906
(gain)
Depreciation,
depletion and        14,273,884          13,445,305         43,411,828          41,311,873
amortization
Impairment and
abandonment of       850,980             4,810,708          2,333,521           14,220,733
oil & gas
properties
General and          4,722,057           4,473,022          14,019,234          12,700,744
administrative
Gain on sale         -                   -                  (8,900      )       -
of assets
Total
operating            24,785,059          25,830,969         72,203,587          84,242,890
expenses
                                                                                            
INCOME (LOSS)
FROM                 5,985,397           3,083,102          15,777,459          1,957,906
OPERATIONS
                                                                                            
OTHER INCOME
(EXPENSE)
Interest
expense, net         (6,454,526  )       (6,045,543 )       (18,912,514 )       (19,028,127 )
of amount
capitalized
Other income
(expense) and        (106,801    )       (252,611   )       (453,088    )       (1,407,490  )
financing cost
Unrealized
(loss) gain on       (4,564,414  )       4,222,523          (2,052,314  )       2,059,233
derivative
instruments
Total other
income               (11,125,741 )       (2,075,631 )       (21,417,916 )       (18,376,384 )
(expense)
                                                                                            
INCOME (LOSS)
BEFORE INCOME        (5,140,344  )       1,007,471          (5,640,457  )       (16,418,478 )
TAXES
                                                                                            
Income tax
(expense)            1,294,220           (480,871   )       1,306,067           5,572,553
benefit
                                                                                            
NET INCOME         $ (3,846,124  )     $ 526,600          $ (4,334,390  )     $ (10,845,925 )
(LOSS)
                                                                                            

Non-GAAP Financial Measures

EBITDAX represents net income (loss) before interest expense, taxes, and
depreciation, amortization and exploration expenses. Adjusted EBITDAX
represents EBITDAX as further adjusted to reflect the items set forth in the
table below, all of which will be required in determining our compliance with
financial covenants under the credit agreements representing our senior credit
facility and our second lien credit facility.

We have included EBITDAX and Adjusted EBITDAX in this release to provide
investors with a supplemental measure of our operating performance and
information about the calculation of some of the financial covenants that are
contained in our credit agreements. We believe EBITDAX is an important
supplemental measure of operating performance because it eliminates items that
have less bearing on our operating performance and so highlights trends in our
core business that may not otherwise be apparent when relying solely on GAAP
financial measures. We also believe that securities analysts, investors and
other interested parties frequently use EBITDAX in the evaluation of
companies, many of which present EBITDAX when reporting their results.
Adjusted EBITDAX is a material component of the covenants that are imposed on
us by our credit agreements. We are subject to financial covenant ratios that
are calculated by reference to Adjusted EBITDAX. Non-compliance with the
financial covenants contained in these credit agreements could result in a
default, an acceleration in the repayment of amounts outstanding, and a
termination of lending commitments. Our management and external users of our
financial statements, such as investors, commercial banks, research analysts
and others, also use EBITDAX and Adjusted EBITDAX to assess:

  *the financial performance of our assets without regard to financing
    methods, capital structure or historical cost basis;
  *the ability of our assets to generate cash sufficient to pay interest
    costs and support our indebtedness;
  *our operating performance and return on capital as compared to those of
    other companies in our industry, without regard to financing or capital
    structure; and
  *the feasibility of acquisitions and capital expenditure projects and the
    overall rates of return on alternative investment opportunities.

EBITDAX and Adjusted EBITDAX are not presentations made in accordance with
generally accepted accounting principles, or GAAP. As discussed above, we
believe that the presentation of EBITDAX and Adjusted EBITDAX in this release
is appropriate. However, when evaluating our results, you should not consider
EBITDAX and Adjusted EBITDAX in isolation of, or as a substitute for, measures
of our financial performance as determined in accordance with GAAP, such as
net income (loss). EBITDAX and Adjusted EBITDAX have material limitations as
performance measures because they exclude items that are necessary elements of
our costs and operations. Because other companies may calculate EBITDAX and
Adjusted EBITDAX differently than we do, EBITDAX may not be, and Adjusted
EBITDAX as presented in this release is not, comparable to similarly-titled
measures reported by other companies.

The following table reconciles net income to EBITDAX and Adjusted EBITDAX for
the periods presented:

                                                                  
                    Three Months Ended                    Nine Months Ended
                    September 30,                         September 30,
                    2012               2011               2012               2011
                                                                                         
Net income        $ (3,846,124 )     $ 526,600          $ (4,334,390 )     $ (10,845,925 )
(loss)
Interest            6,454,526          6,045,543          18,912,514         19,028,127
expense
Income tax
(benefit)           (1,294,220 )       480,871            (1,306,067 )       (5,572,553  )
expense
Depreciation,
Depletion and       14,273,884         13,445,305         43,411,828         41,311,873
amortization
Exploration         (186,550   )       573,697            163,041            954,906
expense
EBITDAX             15,401,516         21,072,016         56,846,926         44,876,428
                                                                                         
Unrealized
loss (gain)         4,564,414          (4,222,523 )       2,052,314          (2,059,233  )
on derivative
instruments
Non-cash
equity-based        656,231            522,583            1,828,252          1,476,840
compensation
charges
Impairment
and
abandonment         850,980            4,810,708          2,333,521          14,220,733
of oil and
gas
properties
Other income
(expense) and       106,801            252,611            453,088            1,407,490
financing
costs
Gain on sale        -                  -                  (8,900     )       -
of assets
Adjusted          $ 21,579,942       $ 22,435,395       $ 63,505,201       $ 59,922,258
EBITDAX
                                                                                         

Updated Guidance for Fourth Quarter 2012

The Company is providing the following updated guidance for the fourth
calendar quarter of 2012.

Fourth quarter 2012 production      34,000 – 37,000 mcfe per day
                                        
Lease operating expenses ($M)           $4,200 – $4,500
                                        
Production and ad valorem taxes         8% of actual prices
                                        
Cash G&A ($M)                           $4,000 – $4,500
                                        
DD&A rate                               $4.00 – $4.25 per mcfe
                                        

Teleconference Call

Crimson management will hold a conference call to discuss the information
described in this press release on November8, 2012 at 8:30 a.m. CST. Those
interested in participating in the earnings conference call may do so by
calling the following phone number: 888-359-3627, (International 719-325-2484)
and entering the following participation code 7747182. Areplay of the call
will be available from November 8, 2012 at 11:30am CST through November 15,
2012 at 11:30am CST by dialing toll free 888-203-1112, (International
719-457-0820) and asking for replay ID code7747182.

Crimson Exploration is a Houston, TX-based independent energy company engaged
in the exploitation, exploration, development and acquisition of crude oil and
natural gas, primarily in the onshore Gulf Coast regions of the United States.
The Company owns and operates conventional properties in Texas, Louisiana,
Colorado and Mississippi, including approximately 18,500 net acres in Madison
and Grimes Counties in Southeast Texas, approximately 8,200 net acres in the
Eagle Ford Shale in South Texas, approximately 11,000 net acres in the DJ
Basin of Colorado, and approximately 5,700 net acres in the Haynesville Shale
and Mid-Bossier gas plays and James Lime gas/liquids play in East Texas.

Additional information on Crimson Exploration Inc. is available on the
Company's website at http://crimsonexploration.com.

This press release includes “forward-looking statements” as defined by the
Securities and Exchange Commission (“SEC”) and applicable securities laws.
Such statements include those concerning Crimson’s strategic plans,
expectations and objectives for future operations. All statements included in
this press release that address activities, events or developments that
Crimson expects, believes or anticipates will or may occur in the future are
forward-looking statements. These statements are based on certain assumptions
Crimson made based on its experience and perception of historical trends,
current conditions, expected future developments and other factors it believes
are appropriate under the circumstances. Such statements are subject to a
number of assumptions, risks and uncertainties, many of which are beyond
Crimson’s control. Statements regarding future production, revenue, cash flow
operating results, leverage, drilling rigs operating, drilling locations,
funding, derivative transactions, pricing, operating costs and capital
spending, tax rates, and descriptions of our development plans are subject to
all of the risks and uncertainties normally incident to the exploration for
and development and production of oil and gas. These risks include, but are
not limited to, commodity price changes, inflation or lack of availability of
goods and services, environmental risks, the proximity to and capacity of
transportation facilities, the timing of planned capital expenditures,
uncertainties in estimating reserves and forecasting production results,
operating and drilling risks, regulatory changes and the potential lack of
capital resources. All forward-looking statements are based on our forecasts
for our existing operations and do not include the potential impact of any
future acquisitions. Investors are cautioned that any such statements are not
guarantees of future performance and that actual results or developments may
differ materially from those projected in the forward-looking statements.
Please refer to our filings with the SEC, including our Form 10-K for the year
ended December 31, 2011, and subsequent filings for a further discussion of
these risks. Existing and prospective investors are cautioned not to place
undue reliance on forward-looking statements, which speak only as of the date
hereof. We undertake no obligation to publicly update or revise any
forward-looking statements after the date they are made, whether as a result
of new information, future events or otherwise.

Contact:

Crimson Exploration Inc.
E. Joseph Grady, 713-236-7400
Senior Vice President and Chief Financial Officer
or
Josh Wannarka, 713-236-7400
Manager of Investor Relations and FP&A
 
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