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Energen Corporation (NYSE:EGN)

Q1 FY08 Earnings Call

April 24, 2008, 11:30 A.M. ET

Executives

Julie S. Ryland - VP, IR

James T. McManus, II - Chairman and CEO

Charles W. Porter, Jr. - VP, CFO and Treasurer

Analysts

Brooke Glenn Mullin - J.P. Morgan

John Freeman - Raymond James

Rebecca Followill - Tudor Pickering & Co. Securities, Inc.

Operator

Good morning. My name is Carie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Energen Quarterly Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions].

Thank you. I would now like to turn the call over to Ms. Julie Ryland.

Julie S. Ryland - Vice President, Investor Relations

Thank you, Carie. Good morning. Welcome to all of you joining us by phone and by Internet. Today's conference call is being held in conjunction with Energen Corporation's announcement yesterday of results of operations for the three months ended March 31st, 2008.

Our prepared remarks will include statements expressing expectations of future plans, objectives, and performance that constitute forward-looking statements made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Except as otherwise disclosed, the company's forward-looking statements do not reflect the impact of possible or pending acquisitions, divestitures, or restructuring. All statements based on future expectations rather than on historical facts are forward-looking statements that are dependent on certain events, risks, and uncertainties that may be outside the company's control and could cause actual results to differ materially from those anticipated.

A discussion of risks and uncertainties that could affect future results of Energen and its subsidiaries is included in the company's periodic reports filed with the Securities and Exchange Commission.

At this time, I will turn the call over to Energen Chairman and Chief Executive Officer, James McManus. James?

James T. McManus, II - Chairman and CEO

Thanks, Julie, and good morning to everyone joining us today. Good results to talk about with you today. Solid first quarter results, including increased production and a gain on the sale of a small Permian Basin oil property. Higher earnings estimates for 2008 and 2009, also higher price assumptions for unhedged volumes, but still plenty of upside potential from commodity prices. An updated report of our probable and possible reserves, which are still at 1.9 trillion cubic feet equivalent, and our total unrisked and risk cost per Mcf equivalent had decreased on those reserves.

Alabama shales update, our acreage position grows to 315,000 net acres, as test well drilling continues. I'll touch on all of these topics in much more detail in a minute, but what I'd like to do is turn it over to Chuck for a review of the financials for the quarter. Chuck?

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

Thanks, James. For the three months ended March 31st, 2008, Energen's net income totaled $116.7 million or $1.62 per diluted share and compared with first quarter 2007 net income of $103.9 million or $1.44 per diluted share. Energen Resources’ net income in the first quarter totaled $72.5 million and compared with $63.2 million in the same period last year. This increase largely reflects the impact of higher average realized sales prices for Energen Resources’ oil and natural gas liquids production, a $6.4 million gain on the sale of 4.4 Bcf equivalent of proved oil reserves in the Permian Basin, and a 3% increase in production to 24.5 Bcf equivalent. Negatively affecting earnings were increased LOE and depletion expenses.

Despite disruption from extreme winter weather in New Mexico, our San Juan Basin production still increased 4% over the same period a year ago, largely due to accelerated coalbed methane drilling. While total volumes in Northwest Louisiana and East Texas are relatively small, non-operated activity drove a 21% increase in production there. Per-unit LOE increased from $1.99 per Mcf equivalent a year ago to $2.44 in the first quarter of 2008. This 23% increase largely reflects a 36% rise in commodity price-driven production taxes, as well as increased compression, increased workover expense, weather-related road maintenance, and increased environmental compliance expense. Other than the higher production taxes, per-unit LOE is in line with our expectations.

Per-unit DD&A expense in the first quarter of 2008 increased 11% over the same period last year to $1.21 per Mcf equivalent. This was largely due to higher development cost relative to our historically low F&D cost and again is in line with our expectations.

With respect to Alagasco, our utility generated net income of $43.7 million in the first quarter of 2008 as compared with $40.3 million in the same period a year ago. This increase primarily was due to the utility's earning on a higher level of equity. A decrease in customer usage was largely offset by the timing of O&M expense.

And that's a brief summary of our first quarter results. So, at this time I'll turn the program back to James.

James T. McManus, II - Chairman and CEO

Thanks, Chuck. We are very pleased with our progress in the first quarter of 2008 and excited about our prospects for the future. That future is looking more and more like one in which natural gas prices may be in the double-digit range and crude oil prices in the triple-digit range. While we remain conservative in our approach, we have raised the price assumptions in our earnings guidance applicable to our unhedged production for the remainder of 2008 and for 2009. These new assumed prices for unhedged natural gas and oil production in both periods were $8.50 per Mcf and $85 per barrel respectively.

Our assumed NGL prices are $2.12 per gallon for the rest of this year and a $1.11 per gallon for 2009. Energen's new guidance for 2008 earnings is $4.15 to $4.55 per diluted share, up $0.20 from the prior range, and we estimate that 2009 earnings stimulated by organic production growth of some 6% to 8% will range from $4.65 to $5.05 per diluted share. Our new prize assumptions are well below current strip pricing and leave the door wide open to commodity price-driven earnings upside.

Based on the estimated sensitivity of our earnings to commodity price changes, data that we routinely incorporate with earnings guidance into which I would refer you in yesterday's news release, it is clear that at current strip prices for the rest of 2008 and for 2009, Energen could easily generate an additional price-driven earnings of $0.35 per diluted share in 2008 and more than $0.75 per diluted share in 2009. These calculations were based on average NYMEX natural gas prices of $11 per Mcf equivalent for the remainder of 2008 and $10.50 per Mcf for 2009, and on average NYMEX oil price of $115 per barrel for the remainder of 2008 and $110 per barrel for 2009.

Our new 2008 guidance captures not only the increase in assumed prices for unhedged production, but also first quarter results that, as Chuck pointed out, included a $6.4 million gain on the sale of 4.4 Bcfe of Permian Basin properties, a 1 Bcf reduction in production largely due to the impact of severe weather in the San Juan and our first quarter property sale, and anticipated declines in customer usage at Alagasco in the fourth quarter of 2008, given the prospect of higher natural gas prices in place for the fourth quarter combined with generally declining usage per customer nationwide. We expect Alagasco's calendar year return will be approximately 12.6%. Other key assumptions details about our hedge position that covers 76% of our estimated production for the remainder of 2008 and detailed earnings sensitivities to changes in commodity prices are all included in our news release and I would encourage you to review this information.

I also want to note that Energen's earnings guidance does not include potential benefits from property acquisitions, Alabama shales exploration or stock repurchases. The guidance also makes no assumption related to the potential impairment of $34 million of capitalized unproved leasehold related to Alabama shales. The reason we have put the number out there related to our unproved leasehold in Alabama shales, as obviously we're beginning to drill this year. And being the transparent company that we are, we want you to know that we have the cost, what the costs are associated with that play that in no way indicates a positive or negative. It simply the fact of what we’ve got capitalized and as we work our way through the year, we’ll find out what we’ve got there.

From a 2009 earnings guidance perspective, yesterday in conjunction with the increase in our assumed prices applicable to unhedged production, we announced a $0.20 increase in our 2009 earnings guidance range. The adjusted earnings guidance range of $4.65 to $5.05 per diluted share also incorporates the company's most recent hedging activity.

Key assumptions in Energen's 2009 earnings guidance include an existing hedge position covering approximately 61% of estimated 2009 production, production target of 108 Bcfe, an average DD&A rate of $1.36 per Mcf, LOE including production taxes of $2.30 per Mcf, G&A of $0.51 per Mcf, and Alagasco earning within its allowed range of return on equity on approximately $323 million of average equity, average diluted shares outstanding of 72.3 million.

As I mentioned earlier, Energen's earnings guidance does not include potential benefits from property acquisitions, Alabama shales, stock repurchases, nor does the guidance make any assumption related to a potential impairment of capitalized unproved leasehold related to Alabama shales. Additional information such as a detailed hedge data and earnings sensitivity again is available for your review in yesterday's news release. We continue to add to our 2010 hedge position, as we capitalize on strengthening oil and gas prices. Energen currently has hedged 36.6 Bcfe… Bcf of our 2010 natural gas production at an average NYMEX-equivalent price of $9.29 per Mcf and 1.7 million barrels of our 2010 oil production at an average NYMEX-equivalent price of $92.38 per barrel. We will continue to look for opportunities to hedge at attractive prices as we seek to protect our earnings and cash flows.

Probable and possible reserves. Energen continues to benefit from the accelerated development of our undeveloped reserve base, and the annual review of our year-end reserves once again supported 1.9 trillion cubic feet of probable and possible reserves in our existing areas of operations. Our current inventory of probable reserves totals an estimated 638 Bcfe equivalent and our possible reserves total some 1.25 Tcf equivalent. This is an encouraging development, given that approximately 125 Bcfe of our reserves were reclassified as proved in 2007. And in addition, these numbers have been adjusted downward to reflect the sale last month of a small Permian Basin oil property with an estimated 65 Bcfe of probable and possible reserves.

So, if you think about it, we really added about 190 Bs to our P2, P3 study because we moved 125 into the proved and we sold 65 with that Permian Basin property. Please remember too that these do not include obviously any reserve potential related to Alabama shales. A complete breakdown of reserves and cost by basin is included in yesterday's news release, but in general the estimated unrisked cost per Mcf is well under $2 per unit, we’ve got $1.23 per Mcfe for probable reserves and $1.01 per Mcfe for possible reserves. And when the company applies its own risking to its unproved inventory, we've got a total risk cost per Mcf estimated at $1.57 per Mcf.

Alabama shales. Last but certainly not least, our acreage position in multiple Alabama shale plays has grown to approximately 315,000 net acres. So, the partnership has 630,000 acres under lease, and drilling activities continue on our first three test wells in Bibb and Greene counties. As you know, we do not plan to disclose results on a well-by-well basis, rather our plans are to work as thoroughly and expeditiously as possible to announce our findings when sufficient data has been gathered. The most likely timetable for a public assessment of results should be during the second half of this year. We remain excited about the potential Alabama shales holds for Energen and are ready to find out what the future holds for this play.

Thank you for your time and attention. And at this point, we will take your questions. For instructions of how to do that, I will turn the call back over to Carie.

Question and Answer

Operator

[Operator Instructions]. Your first question comes from Brooke Glenn Mullin from J.P. Morgan.

Brooke Glenn Mullin - J.P. Morgan

Yes, good morning. Really two questions. One, can you just talk a little bit about your plans for your excess cash flow, particularly in light of the strong commodity prices that you're seeing? And then secondly, it looks like Alagasco's CapEx is going up, can you just let us know what's going on there?

James T. McManus, II - Chairman and CEO

Yes, Glenn. First addressing excess cash flows, as we've talked about, one of the things we would love to do, I believe our capital budget for 2008 at Energen Resources is around $270 million, $290 million. We would love to, based on the results that we have in 2008, try to press forward on that inventory of P2s and P3s and we’ll be evaluating that as we move through the year. So, that obviously would be our highest and best use of capital. Secondarily, we've always got the possibility of considering acquisitions. That market continues to look better, we have been in that market here lately. We've gotten some decent feedback even though we've not been able really to execute on an acquisition. So, we still have that as a source and use of that cash. And as we’ve talked about, obviously if Alabama shale play hits in a big way, that would be a significant user of cash and so we've been willing at this time to be a little bit more equity pick. And then finally, if the... if the stock price were to become very attractive from our perspective, we've still got 9 million shares authorized under our stock buyback in which we could move in to use that excess cash flows to purchase stock. So, that really is kind of how we're thinking about those excess cash flows at this point in time. The utility capital we moved up due to some implementation of some technology. What we are doing, I mean just to give you one example. Over time we're going to go to automated meter reading at the utility and really probably face that function out over the next several years and do that remotely by truck. It really is to try to capture technology efficiencies that reduce cost in the utility and that's why you see that budget moving up.

Brooke Glenn Mullin - J.P. Morgan

Thank you.

James T. McManus, II - Chairman and CEO

Thank you, Glenn.

Operator

Your next question comes from Mike Kim [ph] with Sawtooth Investments.

Unidentified Analyst

Good morning everyone. How are you guys?

James T. McManus, II - Chairman and CEO

Good morning.

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

Good morning.

Unidentified Analyst

If I look at the '09 production numbers, it shows pretty good acceleration in production growth. Is it a simplest thing, the work you're doing on the P2s, P3s is going to start to hit in '09 or some more color you can add [inaudible]?

James T. McManus, II - Chairman and CEO

Mike [ph], you've pretty much got it right. What we did in '07 is we really tried to accelerate our unproved reserves in a significant way. In '08, a lot of the drilling is going to be related to P2s and P3s and that's absolutely right. The work that you do, of course, in the previous year and even the year before that tends to contribute in future years and so and what we're doing, what we did a little bit in '07 and a big part what we're doing in '08 is going to be driving the growth in '09.

Unidentified Analyst

Okay.

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

This is Chuck. The only thing that I would add to that is a lot of the development that we're doing relates to increasing the density of our water flood. And so as the water injection gets in the ground, it will increase our oil production in 2009.

Unidentified Analyst

Okay. And then looking at the volume for this quarter by region, pretty big jump up in the North Louisiana/East Texas’ low base number, but any other color you can add on that?

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

Not a lot other than it was non-operated drilling, not really… we have a fairly... that's the one area of the company that we have a fairly low overall working interest and it was non-operated driven. So, really not a whole lot of the color there.

James T. McManus, II - Chairman and CEO

Yes. I would add one thing, Chuck. I think with the kind of commodity prices that you're seeing, since it is non-operative we're not as much in control of that drilling, Mike [ph], but the companies who are there like El Paso and Conoco and others have certainly started to pick up their activity as you’ve seen this kind of surge in commodity prices.

Unidentified Analyst

Okay. Thank you for your time.

James T. McManus, II - Chairman and CEO

Good to hear from you, Mike [ph].

Operator

Your next question comes from Tim Schneider [ph] with Citigroup.

Unidentified Analyst

Hi, good morning guys. Just a couple of questions. Can you speak to the production declines in Black Warrior and also your NGL volumes were down about 12%?

James T. McManus, II - Chairman and CEO

Yes, let me take, Tim [ph], first the NGLs. That's just a function of what we're producing out in the San Juan. We’ve moved much more towards coalbed methane production out there, it's a drier gas, it doesn’t have as much liquids associated with it. So, it's just a mix of what we are producing out there and give me the other... I missed the other half of that question?

Unidentified Analyst

Black Warrior, it was down 3% I think?

James T. McManus, II - Chairman and CEO

Well, we continue to fund about... I think this year we've got 25 wells or 35 wells planned out there. We continue to fund a number of wells. It's a moderately declining asset base. And Chuck, have you got the decline on that handy?

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

Well, for the whole year, we should produce about 14.1 Bs out there. Last year, I think we produced about 14.8 Bs. We may be a little bit behind in our drilling in the first quarter, but we do expect some decline. It’s a mature area, mature basin, we do try to continue some drilling to moderate that. But it is not a real large growth area.

Unidentified Analyst

Okay. Then moving on, do you have LOE results handy without the impact of the taxes?

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

I'm sorry, could you repeat that question?

James T. McManus, II - Chairman and CEO

I think he said LOE, Chuck. Was that right, Tim [ph]?

Unidentified Analyst

Yes, without the impact of the taxes?

James T. McManus, II - Chairman and CEO

Yes, I think Chuck has got that, if you just give him a second.

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

Yes, I think overall this quarter LOE was around $1.76 versus $1.49 per unit in the prior quarter. So, that was an increase of 18%, it's not that far off from our budget what we had anticipated. Obviously, we were a little bit down in production for the first quarter. So, that skewed the per-unit number up a little bit also.

Unidentified Analyst

Right. And also do have the unhedged oil and NGL realized prices?

James T. McManus, II - Chairman and CEO

The answer is yes, it make take us just a second.

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

Gas prices for the quarter on a net basis were… without hedging were 779 versus 656, that’s net of all the basis differentials. You may recall the NYMEX actually averaged, I think, around $8 plus range in the first quarter. It's only moved up real strongly here recently. Oil prices without any hedging activities were $92.83 for the quarter and NGL prices were $1.26.

Unidentified Analyst

Okay, great. Thank you. Then what’s the timing of the three wells in Alabama? I know you guys won't release production data, I just don’t have an idea.

James T. McManus, II - Chairman and CEO

Yes, Tim [ph] we really haven't talked about the timing in terms of when we're going to talk about results, but these wells can take anywhere from 45 days to a couple of months to drill and then you've got... we've got chores to take, we’ve got chores to analyze, we've got completions to design. So, we really can't give you a good feel for when that is exactly going to occur.

Unidentified Analyst

All right. And then also, how much of your proved reserves are oil, just kind of a percentage breakdown.

James T. McManus, II - Chairman and CEO

Chuck, have you got that?

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

Sure. Total proved reserves, oil is about 25% and gas is about 64%, liquids are... NGLs are the other 10% or 11%.

Unidentified Analyst

Great. Now, you guys do CO2 flooding on your Permian?

James T. McManus, II - Chairman and CEO

We've got one property, Tim [ph], East Penwell that part of that property is under CO2 flood. That's the only CO2 flood active we have.

Unidentified Analyst

Okay, what do you see in terms of cost inflation there?

James T. McManus, II - Chairman and CEO

What do we see in terms of the cost of the CO2?

Unidentified Analyst

Yes.

James T. McManus, II - Chairman and CEO

The CO2 in that particular field is extraordinarily expensive. We inherited a contract that we bought from... we bought First Permian’s properties out and Fina had originally entered into that contract. It was a very long-term contract, which we think will expire and once we've used a certain amount of CO2, it should go off in the next few years. But it was indexed to the price of oil, and you can buy CO2 cheaper than what we are paying in that field, but still with oil prices where they are, it's obviously very economic.

Unidentified Analyst

All right, great. That does it for me. Thank you.

James T. McManus, II - Chairman and CEO

Thank you.

Operator

Your next question comes from John Freeman with Raymond James.

John Freeman - Raymond James

Good afternoon.

James T. McManus, II - Chairman and CEO

Good afternoon, John.

John Freeman - Raymond James

On the LOE, at least in the guidance, what's driving the majority of that decrease relative to what you all came in with at the first quarter, even with production taxes $2.44 versus $2.31 guidance?

James T. McManus, II - Chairman and CEO

The decrease?

John Freeman - Raymond James

Yes. From what you just reported in the first quarter relative to your... what you are assuming in your '08 budget?

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

That would probably be a couple of things. One was the production was a little lower, so that affects the per unit. We also had some compression expenses that were front-end loaded in the first quarter that will not be there, at least not be there to the same extent for the remainder of the year.

John Freeman - Raymond James

Okay. [inaudible] a little color on how we have to treat those compressors, Chuck, or the way we treat them.

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

Yes, well, most of our... most of our compression or other equipment last a long time. In the San Juan area, we've got some wellhead compression that they kind of wear out fairly quickly and so sometimes we capitalize the initial installation of these engines and then thereafter as we replace them, they're expensable items, and so we had a good bit of replacement of those engines during the first quarter.

John Freeman - Raymond James

Okay. And then moving to the San Juan, the kind of severe weather impact that you experienced, is there any chance that that carries over into the second quarter and I just want to verify again that you all weren't impacted at all by the processing facility that went down in that region.

James T. McManus, II - Chairman and CEO

The one that blew up?

John Freeman - Raymond James

Yes.

James T. McManus, II - Chairman and CEO

We were very minor in fact on that, John. We were able to handle that fairly well. Let me say this, we're back on budget in the San Juan in March and we think we're going to be fine for the remainder of the year. But they had probably the worse snowstorm they've had in the last 20 years out there, which keeps you from sort of getting to your facilities and then as the snow melts, it creates a tremendous mud problem. But we think we've got all that built into our guidance and that we're going to be okay.

John Freeman - Raymond James

Okay. And then in your guidance, obviously you provided the NYMEX assumptions, but what differentials are you using on oil and gas?

James T. McManus, II - Chairman and CEO

Yes. I'm going to turn to Chuck for that, I think he has got that.

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

It’s in the release here, John. Let me turn to it real quickly, I think for it’s around $1 for this in the San Juan.

John Freeman - Raymond James

Just the number that was disclosed in some of your hedges, the $1.20.

James T. McManus, II - Chairman and CEO

Yes. It's more that.

Julie S. Ryland - Vice President, Investor Relations

For the last... for the remaining nine months of the year, that differential number we're assuming $1.19 for the open contracts, John.

John Freeman - Raymond James

Okay.

Charles W. Porter - Vice President, CFO and Treasurer

And we have that dropping in 2009 to, let’s say, $1.13 or so.

James T. McManus, II - Chairman and CEO

And he also asked for the oil number.

Julie S. Ryland - Vice President, Investor Relations

For the open contracts and for the rest of '08, John, it’s $5.55 on our Sour Oil.

John Freeman - Raymond James

Okay, thanks. And then lastly on the Alabama shales, I just want to make sure that I’m kind of thinking about this appropriately. So, the first well you drilled, you are awaiting your completion, you’ve spudded the second one like a week ago. And is my understanding correct that in the State of Alabama that once that first well, the Crout [ph] well is completed basically the six-month kind of tight hole time frame that you're dealing with, kind of the clock starts and basically in that you drill as many wells as you can and then once that six-month period is up, you're kind of forced to release results?

James T. McManus, II - Chairman and CEO

Well, John, it's not entirely that way, and it's not entirely clear exactly how the rules work on this. But in general, the logs are not... we did run logs on this well, we're not required to release those logs for six months. If we were to put that well on production, we would not be able to keep production results confidential and our test data would be kept confidential for six months. But once you put a well on production, nothing stays confidential, is that...

John Freeman - Raymond James

Okay. So, yes, that makes sense. Yes, since you logged the well, that would be the first things would come out.

James T. McManus, II - Chairman and CEO

Yes.

John Freeman - Raymond James

It takes months from when you log this.

James T. McManus, II - Chairman and CEO

That log starts to run and there are ways if the Board chooses to or we can extend it. But it’s pretty easy to get a six-month confidentiality.

John Freeman - Raymond James

Okay. So, that's the way it had been. Okay.

James T. McManus, II - Chairman and CEO

And the logs just… you know that the logs that we would have to file even after six months would not be interrupted logs that we project things like gas in place, they just simply be the mud log.

John Freeman - Raymond James

Okay. So, really the most important would be if you did flow test a well or whatever, that to six months from that point would probably be the most… kind of most important data point in terms of clock running?

James T. McManus, II - Chairman and CEO

Yes, and I need to check that. I need to check what the rule is on that particular thing. I do not know that at this time, but I can find that out and we can let you know about that in the next call.

John Freeman - Raymond James

Okay. Thanks. Great quarter, I appreciate it.

James T. McManus, II - Chairman and CEO

Thank you ,John.

Operator

Your next question comes from Becca Followill with Tudor Pickering.

Rebecca Followill - Tudor Pickering & Co. Securities, Inc.

Good morning. Do you guys plan to file additional permits within 2008 to drill in Alabama?

James T. McManus, II - Chairman and CEO

Well, back up, we’ve got… I think the way we are looking at it right now is we’ve got enough filed right now, but we've not made the decision as to when and whether we’ll file more permits even though we're preparing for additional sites.

Rebecca Followill - Tudor Pickering & Co. Securities, Inc.

Okay. And then again you probably won't answer this, but I have to try. The CXG Chattanooga wells in Tennessee, does your acreage extend into Tennessee?

James T. McManus, II - Chairman and CEO

Our acreage does not extend into Tennessee. I will answer some of…

Rebecca Followill - Tudor Pickering & Co. Securities, Inc.

Well, thank you so much. Thanks, guys.

James T. McManus, II - Chairman and CEO

Okay. Thank you, Becca.

Operator

[Operator Instructions]. We have a follow-up from Brooke Glenn Mullin from J.P. Morgan.

Brooke Glenn Mullin - J.P. Morgan

Can you just give us a little bit more color on the unit cost for your probables and possibles going down?

James T. McManus, II - Chairman and CEO

Yes, Brooke, that's a good question. A good bit of that is driven by the fact that one of the reasons we sold the Permian property, it had a good bit of P2 and P3 associated at very, very high cost. And when we continue to look at whether we wanted to go forward with that particular property, we thought better of it and we sold it to somebody else, so that they could take a crack at that, now costs have not dramatically come down. We have seen some flattening, but actually when you pull that one out it was a very high-cost project.

Brooke Glenn Mullin - J.P. Morgan

Thank you.

James T. McManus, II - Chairman and CEO

Chuck, have you got anything to add on that for Brooke?

Charles W. Porter, Jr. - Vice President, CFO and Treasurer

No, that pretty much covers it. The only thing that I would add just to clarify one thing that we said in our press release, you saw nobody or we said… you said in your comment is that the NGL price for 2008 is $1.12, not $2.12. I don't want there to be any confusion on that.

Brooke Glenn Mullin - J.P. Morgan

Okay.

James T. McManus, II - Chairman and CEO

And Brooke as you said, what you are going to do with your cash, that is where we’d love to put it, but we do have some limitations as to how quickly we can accelerate because in some of our areas like the San Juan, we’ve got permitting issues, we’ve got times at the year that we can work. And so we have some limitations there, but we are trying to push that development as fast as we can.

Operator

[Operator Instructions]. There are no further questions at this time. I would now like to hand the call back over to Mr. McManus.

James T. McManus, II - Chairman and CEO

Well, thanks for your questions and interest. We hope to see many of you soon at the American Gas Association Financial Forum in Miami. If you haven't signed up for a one-on-one meeting or for our dinner, please drop by our breakfast table, Monday, May 5th or come see our formal presentation on Tuesday, May 6th. Thank you for your interest and have a great day.

Operator

Thank you for participating in today's Energen quarterly earnings conference call. This call will be available for replay beginning at 12:30 PM Eastern Time today through 11:59 PM Eastern Standard Time on Tuesday, April 29th, 2008. The conference ID number for the replay is 35640029. Again, the conference ID number for the replay is 35640029. The dial-in number for the replay is 800-642-1687 or 706-645-9291. You may now disconnect.

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Source: Energen Corp. Q1 2008 Earnings Call Transcript
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