Energen Reports Strong 2nd Quarter Results; Management Raises 2006 Earnings Guidance, Affirms 2005 Guidance

Business Wire, July 25, 2005

BIRMINGHAM, Ala. -- Energen Corporation (NYSE: EGN) reported today that higher commodity prices and higher production were major contributors to its strong financial performance for the three months ending June 30, 2005. Energen's net income and income from continuing operations totaled $37.6 million, or 51 cents per diluted share, in the second quarter of 2005. Included in these numbers is a non-cash, after-tax gain of $2.7 million, or 4 cents per diluted share, related to the timing of mark-to-market derivatives.

In the second quarter of the prior year, Energen's net income totaled $22.3 million, or 30 cents per diluted share, and included a net loss of $0.8 million, or 1 cent per diluted share, related to the timing of mark-to-market derivatives. Income/(loss) from discontinued operations totaled ($15,000) and $39,000 in the current- and prior-year second quarters, respectively.

"We are very pleased with the progress of our two lines of business in 2005," said Mike Warren, Energen's chairman and chief executive officer. "Not only is Energen benefiting from the fundamental strengths of its successful business plans, but continued commodity price strength further enhances our earnings growth potential.

"In looking ahead to 2006, we have raised the price assumptions applicable to our unhedged oil, gas and natural gas liquids (NGL) production and, as a result, have increased our earnings guidance range for 2006 to $2.85-$3.15 per diluted share." (Prior 2006 guidance range was $2.70-$2.90 per diluted share.)

Energen Resources in the Second Quarter

Energen Resources' second quarter 2005 income from continuing operations totaled $36.4 million and compared with prior-year results of $21.8 million. Included in these numbers is an after-tax gain of $2.7 million and after-tax loss of $0.8 million, respectively, related to the timing of mark-to-market derivatives.

Energen Resources' second quarter 2005 production from continuing operations rose 8.5 percent from the same period last year to total 22.9 billion cubic feet (Bcf) equivalent. Natural gas production and NGL production each increased approximately 10 percent to 15.2 Bcf and 18.6 million gallons (MMgal), respectively, primarily due to the Company's August 2004 acquisition of coalbed methane properties in the San Juan Basin; the Company's oil production increased 2 percent to 848,000 barrels.

The Company's average sales price for its natural gas production increased 31 percent to $6.22 per thousand cubic feet (Mcf) in the second quarter of 2005 as compared with the same period a year ago; the average sales price of oil rose 27 percent to $33.63 per barrel; and the average sales price of NGL production increased 24 percent to 52 cents per gallon. Average sales prices reflect the impact of all hedges, including mark-to-market derivatives, and basis differentials and are not NYMEX-equivalent prices.

Energen Resources' per-unit lease operating expense in the second quarter of 2005 increased 28 percent to $1.63 per Mcf equivalent (Mcfe) due to a 30 percent increase in per-unit production taxes resulting from higher commodity prices and to increased expenses associated with work-overs, environmental compliance, and overall price increases.

Per-unit DD&A expense from oil and gas activities totaled 96 cents per Mcfe in the current-year second quarter, up 9 percent from the same period a year ago primarily due to last year's property acquisition.

Alagasco in the Second Quarter

Alagasco's natural gas distribution operations earned net income of $1.1 million in the second quarter of 2005 as compared with net income of $0.6 million in the same period last year. Earnings in the prior-year period reflected the negative impact of fluctuations in the timing of rate relief.

YEAR-TO-DATE EARNINGS

Higher commodity prices and increased production continued to drive Energen's financial results for the six months ending June 30, 2005. Energen's net income in the 2005 year-to-date period totaled $96.6 million, or $1.31 per diluted share, as compared with $82.5 million, or $1.13 per diluted share, for the 6 months ended June 30, 2004. Income from discontinued operations totaled $90,000 and $63,000 in the current- and prior-year periods, respectively.

Included in these numbers are non-cash, after-tax losses of $4.3 million, or 6 cents per diluted share, in the current year, and $2.1 million, or 3 cents per diluted share, in the prior year. These losses are related to the timing of mark-to-market derivatives, and the current year-to-date loss will reverse by the end of 2005 as the volumes to which the derivatives are associated are produced.

Energen Resources' year-to-date 2005 income from continuing operations totaled $55.9 million and compared with prior-year results of $45.0 million. Included in these numbers are after-tax losses of $4.3 million and $2.1 million, respectively, related to the timing of mark-to-market derivatives.

Energen Resources' production from continuing operations in the current year-to-date period totaled 44.8 Bcf equivalent (Bcfe), an increase of 6 percent from production of 42.3 Bcfe in the same period last year. Natural gas production increased 9 percent to 29.9 Bcf and NGL production increased 7 percent to 34.4 MMgal primarily due to the Company's August 2004 acquisition of coalbed methane properties in the San Juan Basin; the Company's oil production decreased 2 percent to 1.7 million barrels.