The change in revenues for the 2011 quarter and year reflects increased prices realized from oil sales and an increase in production volumes (up 9.5% year over year) partially offset by lower natural gas prices. Revenue benefitted from a favorable pricing trend during the year and the realization of premiums to WTI pricing attributable to LLS and HLS pricing for our oil production. The increase in production reflects accelerated investments in our development and infrastructure upgrade program during the second half of the year. The improvement in net income, discretionary cash flow and EBITDAX was driven by revenue gains and was partially offset by the incurrence of $3.9 million of dry hole costs in 2011. 2011 full year net income also benefitted from a one-time gain of $7.7 million on the retirement of our prior credit facilities and a $4.8 million reduction in net interest expense.
Operational highlights for 2011 included:
- 2 development wells, 9 recompletions and 25 workovers completed;
- 10 new pool discoveries;
- $5.6 million invested in continuing infrastructure upgrade program to de-bottleneck and support increased production;
- 107 gross (104 net) wells in production at December 31, 2011; and,
- 32,185 gross (32,185 net) acres in 12 fields under lease at December 31, 2011.
During 2011, Saratoga drilled two successful development wells, Catina and Roux, plus one exploratory well, the Rio Grande well, which was a dry hole. Saratoga also undertook nine recompletions and twenty-five workovers during the year. Seven of the nine recompletions were successful, with two recompletions not reaching their objectives due to mechanical issues, although the reserves will stay on the books and be accessed through future development drilling.Saratoga invested $5.6 million in infrastructure improvements and additions to support existing production and anticipated increases in production in 2011.