Brad Juneau, the Company’s President and Acting Chief Executive Officer, said, “Our results this quarter were negatively affected primarily by a combination of dry holes at our Eagle and Fang prospects, lower natural gas prices, impairment charges related to our Ship Shoal 263 well and the Eugene Island 24 platform, and an unusual amount of production downtime due to Hurricane Isaac and planned production enhancement work at Dutch and Mary Rose and Vermilion 170. At Dutch and Mary Rose, we installed additional flowlines for three wells and at Vermilion 170 we installed compression on the existing platform. Our reserves as of September 30, 2012 were approximately 195 billion cubic feet of natural gas, 3.1 million barrels of oil, and 5.8 million barrels of natural gas liquids, as estimated by our third party engineers.”

Mr. Juneau continued, “We do not expect to spud any new offshore prospects until midyear 2013 when permits on our existing six prospect inventory are expected to be approved. We intend to drill these prospects with a one rig program as soon as a rig is secured following permit approval. We will continue to participate in the Exaro Energy venture in the Jonah field, the Alta Energy venture in the Kaybob Duverynay play, and we are currently participating with a 25% working interest in a Tuscaloosa Marine Shale well near our existing 24,000 acre lease position. The cost for these onshore wells have largely been paid in advance, with approximately $51.2 million already advanced to the operators to cover our share of the drilling/leasing costs for the next several months.”

Our capital expenditure budget for the final nine months of fiscal year 2013 is approximately $119.9 million, consisting of the following:
  • $22.7 million to pay for costs related to our Ship Shoal 134 (“Eagle”) dry hole. ($19.9 million of this was paid in October and November 2012)
  • $22.7 million to pay for costs related to our South Timbalier 75 (“Fang”) dry hole. ($18.3 million of this was paid in October and November 2012)
  • $4.3 million to pay for remaining leasehold costs and rental payments for the lease blocks bid on at the Central Gulf of Mexico Lease Sale 216/222. (paid in October 2012)
  • $4.3 million to acquire acreage and drill a well in the TMS with Goodrich. (paid in October 2012)
  • $5.3 million to complete laying flowlines and installing compression on our Eugene Island 11 and Vermilion 170 platforms.
  • $20.0 million to drill one wildcat exploration well in the Gulf of Mexico.
  • $33.7 million in Exaro Energy III LLC.
  • $6.9 million in Alta Energy.

Should the Company have exploration success with any of its offshore exploration wells, our capital expenditure budget will be significantly increased. As of November 1, 2012, we had no debt, approximately $96.5 million of cash, and $40.0 million of unused borrowing capacity.

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