During the first quarter of 2009, oil and natural gas prices declined sharply as compared to the prior year period. However, HKN have reduced its controllable costs in order to maintain positive cash flow from operations even during the low commodity pricing environment. During the first quarter 2009, oil prices declined 62% from an average of $97.80 per barrel in the year-ago quarter to $37.40 per barrel in the first quarter of 2009. Prices realized for natural gas sales reduced 52%, averaging $4.32 per mcf in first quarter of 2009 compared to $9 per mcf during year-ago quarter.
— HKN operating expenses per barrel of oil equivalent (boe) declined from $37.64 per boe in year-ago quarter to $29.66 per boe in first quarter of 2009.
— The company’s general and administrative expenses was reduced 54% from $1.2 million for the year-ago quarter to $551 thousand for the first quarter 2009 mainly because of overall lower salary and personnel costs along with decreased rent and consultant expenses.
HKN have no debt outstanding, the company said that it has cash and marketable securities balance of about $14.7 million at March 31, 2009. HKN also expects its operating cash flow and other capital resources, if needed, will adequately fund its planned capital expenditures and other capital uses over the near-term. Due to HKN’s cost-cutting measures, it has budgeted HKN’s 2009 operations to remain cash-flow positive, even at current market pricing.
In January 2009, HKN’s board authorized an amendment to the accessible repurchase plan allowing the company to buyback an additional one million shares of its common stock. During the three months ended March 31, 2009, the company has repurchased 500 thousand shares of its common stock for $1.3 million from a shareholder in a privately negotiated transaction pursuant to HKN’s repurchase program. During the three months ended March 31, 2009, the company has retired about 507 thousand treasury shares. As of March 31, 2009, about 737 thousand shares remained available for repurchase under its repurchase program.
