St. Mary Reports Results for Third Quarter of 2009

http://www.businesswire.com/news/home/20091102006235/en

* Quarterly Production of 26.4 BCFE within Guidance of 25.5 - 27.0 BCFE
* Costs Largely within or below Guidance for the Quarter
* Adjusted Net Income of $14.7 million or $0.23 per Diluted Share
* Non-cash Charges and Impairments Result in a GAAP Net Loss of ($4.4 Million),
or ($0.07) per Diluted Share
* Borrowing Base Re-determined at $900 Million

DENVER--(Business Wire)--
St. Mary Land & Exploration Company (NYSE: SM) today reports financial results
from the third quarter of 2009. In addition, a new presentation for third
quarter earnings and an operations update has been posted on the home page of
the Company`s website at stmaryland.com. This presentation will be referenced in
the conference call scheduled for 8:00 a.m. Mountain time (10:00 a.m. Eastern
time) on November 3, 2009. The detailed information for the earnings call can be
found below.

MANAGEMENT COMMENTARY

Tony Best, CEO and President, remarked, "St. Mary posted another solid quarter
in 2009. We achieved our production target for the quarter and our cost
performance was within or below guidance. We have maintained the strength of our
balance sheet and continue to invest within cash flow. The Company is executing
very well on the business plan we set out for ourselves this year. We are in a
great position both operationally and financially to focus on the successes we
are seeing in our growing inventory of resource plays."

THIRD QUARTER 2009 RESULTS

St. Mary posted a net loss for the third quarter of 2009 of ($4.4 million), a
loss of ($0.07) per diluted share. This compares to net income of $87 million,
or $1.38 per diluted share, for the same period in 2008. Adjusted net income for
the quarter, which adjusts for significant non-recurring or unusual non-cash
items, was $14.7 million, or $0.23 per diluted share, versus $75.5 million, or
$1.20 per diluted share, for the third quarter of 2008. A summary of the
adjustments made to arrive at adjusted net income (loss) is presented in the
table below.

For the Three Months Ended September 30,
2009 2008*
Weighted-average diluted share count (in millions) 62.5 63.1

$ in Per Diluted $ in Per Diluted
millions Share millions Share
Reported net income (loss) ($4.4 ) ($0.07 ) $ 87.0 $ 1.38

After-tax adjustments, assuming effective tax rate for
respective period
Change in Net Profits Plan liability $ 4.3 $ 0.07 ($22.1 ) ($0.35 )
Unrealized derivative (gain) loss 2.6 0.04 (2.8 ) (0.04 )
Loss on divestiture activities 7.1 0.11 3.2 0.05
Loss on insurance settlement - - 0.4 0.01
Bad debt expense associated with SemGroup, L.P. - - 4.2 0.07
Loss related to hurricanes 0.7 0.01 4.4 0.07
Impairment of proved properties 0.1 0.00 0.4 0.01
Abandonment & impairment of unproved properties 3.0 0.05 0.8 0.01
Impairment of materials inventory 1.3 0.02 - -

Adjusted net income (loss) $ 14.7 $ 0.23 $ 75.5 $ 1.20

NOTE: Totals may not add due to rounding

* On January 1, 2009, the Company adopted FASB ASC Topic 470-20, "Debt with
Conversion and Other Options" ("ASC Topic 470") which required retrospective
application. As result, prior period balances presented have been adjusted to
reflect the period-specific effects of applying ASC Topic 470.

Discretionary cash flow decreased to $99.9 million for the third quarter of 2009
from $195.8 million in the same period last year. Net cash provided by operating
activities decreased to $111.3 million for the third quarter of 2009 from $252.3
million in the same period in 2008. A major driver of the decrease year over
year in each of these metrics was the significant decrease in oil and natural
gas prices between those periods which is described in more detail below.

Adjusted net income and discretionary cash flow are non-GAAP financial measures
- please refer to the respective reconciliation in the accompanying Financial
Highlights section at the end of this release.

St. Mary reported quarterly production of 26.4 BCFE for the third quarter of
2009, which was within the guidance range of 25.5 to 27.0 BCFE. Production for
the same period last year was 27.7 BCFE, which included 0.8 BCFE of production
from assets that were later disposed of in 2008. Sequentially, production in the
third quarter of 2009 was down from the preceding quarter as a result of lower
levels of capital investment in prior quarters and Management`s stated objective
to invest within cash flow this year.

Revenues for the quarter were $185.8 million compared to $324.1 million for the
same period in 2008. In the third quarter of 2009, the Company`s average
equivalent price per MCFE, net of hedging, was $6.86 per MCFE, which is a
decrease of 38% from the $11.01 per MCFE realized in the comparable period in
2008. Average realized prices, excluding hedging activities, were $3.37 per Mcf
of natural gas and $61.93 per barrel of oil during the quarter. These prices
were 66% and 45% lower, respectively, than those in the third quarter of 2008.
Average realized prices, inclusive of hedging activities, were $4.95 per Mcf of
natural gas and $62.65 per barrel of oil in the third quarter of 2009, which is
a decrease of 48% and 25%, respectively, from the same period a year ago.

Lease operating expense of $1.30 per MCFE in the third quarter of 2009 was below
the Company`s guidance of $1.35 to $1.40 per MCFE. This represents a 17%
decrease from the $1.57 per MCFE in the comparable period last year.
Sequentially, lease operating expense increased 3% or $0.04 per MCFE in the
third quarter of 2009 from the second quarter. In absolute terms, the Company`s
lease operating expense was moderately down $1.3 million on a sequential basis.

Transportation expense of $0.20 per MCFE in the third quarter of 2009 was within
the guidance range of $0.15 to $0.20 per MCFE. The reported per unit expense was
a decrease from $0.24 per MCFE for the comparative period in 2008.
Transportation expense was up $0.04 per MCFE from the second quarter of 2009.

Significant commodity price decreases over the past year for both oil and
natural gas resulted in year over year declines in production taxes, both on a
per MCFE basis and in absolute dollars. Between the third quarters of 2009 and
2008, production taxes on a per MCFE basis decreased 58% from $0.81 to $0.34.
Sequentially, production taxes remained essentially flat with the preceding
quarter. The Company`s results for the third quarter were below the guidance
range of $0.38 to $0.43 per MCFE provided for the quarter.

Total general and administrative expense for the third quarter of 2009 was $0.79
per MCFE, representing a 9% decrease from the $0.87 per MCFE recognized in the
comparable quarter a year ago. The decrease year over year relates primarily to
smaller payments to participants in the legacy Net Profits Plan, which was
affected by lower commodity prices realized in the third quarter of 2009. The
guidance range for total G&A expense for the quarter was $0.64 to $0.71 per
MCFE. The variance from guidance is largely the result of higher cash NPP
payments as a result of higher commodity prices and lower operating costs than
had been assumed by the Company. Additionally, the exploration allocation
percentages for compensation were reduced to reflect current job functions by
the company`s technical staff. This resulted in a higher amount of expense being
retained in general and administrative expense.

Depletion and depreciation expense was $2.54 per MCFE in the third quarter of
2009, which was within the Company`s guidance range of $2.40 to $2.60 per MCFE.
DD&A in the comparable period of 2008 was $2.61 per MCFE. Sequentially, DD&A in
the third quarter of 2009 was essentially flat with the preceding quarter.

During the quarter, St. Mary recognized a loss on divestiture activities of
$11.3 MM. This loss was largely related to our Atlantic Rim CBM properties in
the Rocky Mountain regions. The properties were part of the Rocky Mountain
natural gas package that was marketed earlier this year and remain unsold. As a
result they were re-characterized from assets held for sale to assets held and
used, and the Company recorded a loss on divestiture activities.

St. Mary recognized $4.8 million before income taxes in non-cash impairments for
unproved properties in the third quarter of 2009, compared to $1.2 million in
the same period in 2008. The largest portion of the unproved property
impairments is related to lease expirations of non-core leasehold in the
Mid-Continent and ArkLaTex regions. The Company also recognized an impairment of
materials inventory for $2.1 million related to the write-down of equipment and
materials based on updated pricing.

Exploration expense of $15.7 million was recognized in the third quarter of
2009, compared to $10.7 million in the same period in 2008. The increase year
over year reflects higher levels of geological and geophysical spending,
including seismic and increased technical staff, primarily in our Eagle Ford and
Haynesville resource plays.

In the third quarter of 2009, St. Mary recognized a pre-tax non-cash charge of
$6.8 million as a result of the increase in the Net Profits Plan liability,
compared to a benefit of $34.9 million in the third quarter of 2008. This
periodic expense is a reflection of change in the liability during the
respective periods. This liability is a significant management estimate and is
highly sensitive to a number of assumptions including future commodity prices,
production rates, and operating costs. The last pool created under this legacy
compensation plan was in 2007.

FINANCIAL POSITION AND LIQUIDITY

As of September 30, 2009, St. Mary had total long-term debt of $499.8 million.
The long-term credit facility was down $40 million from June 30, 2009, to $235.0
million and the balance on the 3.50% Senior Convertible Notes was $264.8
million, net of debt discount. The credit facility matures in July of 2012 and
the Senior Convertible Notes cannot be put to the Company until April of 2012.
The Company`s debt-to-book capitalization ratio was 33% as of the end of the
quarter.

The borrowing base for the long-term credit facility was reaffirmed by St.
Mary`s bank group on September 29, 2009, and remains unchanged at an amount of
$900 million. The Company has a commitment amount of $678 million from the 12
banks that comprise our bank group. As of October 27, 2009, St. Mary had $215.0
million drawn on the revolver and had $462.4 million in unused borrowing
capacity.

EARNINGS CALL INFORMATION

The Company has scheduled a teleconference to discuss the third quarter results
on November 3, 2009, at 8:00 a.m. Mountain time (10:00 a.m. Eastern time). The
call participation number is 888-811-1227. An audio replay of the call will be
available approximately two hours after the call at 800-642-1687, conference
number 31930252. International participants can dial 706-679-9922 to take part
in the conference call and can access a replay of the call at 706-645-9291,
conference number 31930252. Replays can be accessed through November 10, 2009.

In addition, the call will be webcast live and can be accessed at St. Mary`s
website at stmaryland.com. An audio recording of the conference call will be
available at that site through November 10, 2009.

A presentation to be referred to during the earnings call will be available on
the home page of St. Mary`s website at stmaryland.com prior to the earnings
call.

INFORMATION ABOUT FORWARD LOOKING STATEMENTS

This release contains forward looking statements within the meaning of
securities laws, including forecasts and projections. The words "will,"
"believe," "budget," "anticipate," "plan," "intend," "estimate," "forecast," and
"expect" and similar expressions are intended to identify forward looking
statements. These statements involve known and unknown risks, which may cause
St. Mary`s actual results to differ materially from results expressed or implied
by the forward looking statements. These risks include such factors as the
volatility and level of oil and natural gas prices, the uncertain nature of the
expected benefits from the acquisition and divestiture of oil and gas
properties, the pending nature of reported divestiture plans for certain
non-core oil and gas properties as well as the ability to complete divestiture
transactions and the uncertain nature of the amount of proceeds that may be
received from divestitures, uncertainties inherent in projecting future rates of
production from drilling activities and acquisitions, the ability of purchasers
of production to pay for those sales, the availability of debt and equity
financing, the ability of the banks in the Company`s credit facility to fund
requested borrowings, the ability of hedge counterparties to settle hedges in
favor of the Company, the imprecise nature of estimating oil and gas reserves,
the availability of additional economically attractive exploration, development,
and property acquisition opportunities for future growth and any necessary
financings, unexpected drilling conditions and results, unsuccessful exploration
and development drilling, drilling and operating service availability, the risks
associated with the Company`s hedging strategy, and other such matters discussed
in the "Risk Factors" section of St. Mary`s 2008 Annual Report on Form 10-K and
subsequent quarterly reports filed on Form 10-Q. Although St. Mary may from time
to time voluntarily update its prior forward looking statements, it disclaims
any commitment to do so except as required by securities laws.

ABOUT THE COMPANY

St. Mary Land & Exploration Company is an independent energy company engaged in
the exploration, exploitation, development, acquisition, and production of
natural gas and crude oil. St. Mary routinely posts important information about
the Company on its website. For more information about St. Mary, please visit
its website at stmaryland.com.

ST. MARY LAND & EXPLORATION COMPANY
FINANCIAL HIGHLIGHTS
September 30, 2009

Production Data For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2009 2008 Percent 2009 2008 Percent
Change Change

Average realized sales price, before hedging:
Oil (per Bbl) $ 61.93 $ 111.97 -45 % $ 49.82 $ 108.04 -54 %
Gas (per Mcf) 3.37 9.96 -66 % 3.49 9.78 -64 %

Average realized sales price, net of hedging:
Oil (per Bbl) $ 62.65 $ 83.30 -25 % $ 54.32 $ 82.61 -34 %
Gas (per Mcf) 4.95 9.51 -48 % 5.44 9.39 -42 %

Production:
Oil (MMBbls) 1.5 1.6 -3 % 4.8 4.9 -2 %
Gas (Bcf) 17.2 18.2 -5 % 54.1 55.2 -2 %
BCFE (6:1) 26.4 27.7 -5 % 83.0 84.6 -2 %

Daily production:
Oil (MBbls per day) 16.6 17.2 -3 % 17.6 17.9 -1 %
Gas (MMcf per day) 187.1 198.0 -5 % 198.0 201.6 -2 %
MMCFE per day (6:1) 286.7 301.2 -5 % 303.8 308.8 -2 %

Margin analysis per MCFE:
Average realized sales price, before hedging $ 5.79 $ 12.94 -55 % $ 5.16 $ 12.63 -59 %

Average realized sales price, net of hedging 6.86 11.01 -38 % 6.70 10.91 -39 %
Lease operating expense 1.30 1.57 -17 % 1.34 1.41 -5 %
Transportation 0.20 0.24 -17 % 0.19 0.19 0 %
Production taxes 0.34 0.81 -58 % 0.33 0.83 -60 %
General and administrative 0.79 0.87 -9 % 0.67 0.79 -15 %
Operating margin $ 4.23 $ 7.52 -44 % $ 4.17 $ 7.69 -46 %
Depletion, depreciation, amortization, and
asset retirement obligation liability accretion $ 2.54 $ 2.61 -3 % $ 2.76 $ 2.59 7 %

NOTE: On January 1, 2009, new authoritative accounting guidance under FASB ASC
Topic 470-20, "Debt with Conversion and Other Options" ("ASC Topic 470")
required retrospective application. As a result, prior period balances presented
have been adjusted to reflect the period-specific effects of applying ASC Topic
470.

Consolidated Statements of Operations
(In thousands, except per share amounts) For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
(As adjusted) (As adjusted)
Operating revenues and other income:
Oil and gas production revenue $ 152,651 $ 358,508 $ 428,347 $ 1,068,901
Realized oil and gas hedge gain (loss) 28,331 (53,491 ) 127,230 (145,837 )
Gain (loss) on divestiture activity (11,277 ) (4,992 ) (10,632 ) 54,063
Marketed gas system and other operating revenue 16,082 24,063 45,260 66,005
Total operating revenues and other income 185,787 324,088 590,205 1,043,132

Operating expenses:
Oil and gas production expense 48,634 72,724 153,928 205,825
Depletion, depreciation, amortization,
and asset retirement obligation liability accretion 66,958 72,362 229,061 219,070
Exploration 15,733 10,669 48,821 42,378
Impairment of proved properties 91 564 153,183 10,130
Abandonment and impairment of unproved properties 4,761 1,231 20,294 4,295
Impairment of materials inventory 2,114 - 13,449 -
General and administrative 20,790 24,145 55,349 67,149
Bad debt expense - 6,650 - 16,592
Change in Net Profits Plan liability 6,804 (34,867 ) (14,038 ) 46,901
Marketed gas system expense 14,360 22,960 41,352 60,918
Unrealized derivative (gain) loss 4,117 (4,429 ) 17,251 802
Other expense 968 7,753 12,424 9,155
Total operating expenses 185,330 179,762 731,074 683,215

Income (loss) from operations 457 144,326 (140,869 ) 359,917

Nonoperating income (expense):
Interest income 90 239 217 395
Interest expense (7,565 ) (7,026 ) (21,324 ) (20,862 )

Income (loss) before income taxes (7,018 ) 137,539 (161,976 ) 339,450
Income tax benefit (expense) 2,603 (50,542 ) 61,616 (125,010 )

Net income (loss) $ (4,415 ) $ 86,997 $ (100,360 ) $ 214,440

Basic weighted-average common shares outstanding 62,505 62,187 62,420 62,254

Diluted weighted-average common shares outstanding 62,505 63,078 62,420 63,327

Basic net income (loss) per common share $ (0.07 ) $ 1.40 $ (1.61 ) $ 3.44

Diluted net income (loss) per common share $ (0.07 ) $ 1.38 $ (1.61 ) $ 3.39

Consolidated Balance Sheets
(In thousands, except share amounts) September 30, December 31,
ASSETS 2009 2008
(As adjusted)
Current assets:
Cash and cash equivalents $ 20,517 $ 6,131
Short-term investments - 1,002
Accounts receivable, net of allowance for doubtful accounts
of $16,919 in 2009 and $16,788 in 2008 98,709 157,690
Refundable income taxes 2,821 13,161
Prepaid expenses and other 16,802 22,161
Accrued derivative asset 41,428 111,649
Total current assets 180,277 311,794

Property and equipment (successful efforts method), at cost:
Land 1,371 1,350
Proved oil and gas properties 2,804,559 2,969,722
Less - accumulated depletion, depreciation, and amortization (1,063,232 ) (947,207 )
Unproved oil and gas properties, net of impairment allowance
of $51,511 in 2009 and $42,945 in 2008 147,825 168,817
Wells in progress 56,958 90,910
Materials inventory, at lower of cost or market 30,411 40,455
Oil and gas properties held for sale less accumulated depletion,
depreciation, and amortization 148,937 1,827
Other property and equipment, net of accumulated depreciation
of $16,617 in 2009 and $13,848 in 2008 14,516 13,458
2,141,345 2,339,332

Other noncurrent assets:
Accrued derivative asset 4,614 21,541
Restricted cash subject to Section 1031 Exchange - 14,398
Other noncurrent assets 17,523 10,182
Total other noncurrent assets 22,137 46,121

Total Assets $ 2,343,759 $ 2,697,247

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses $ 215,363 $ 254,811
Accrued derivative liability 25,370 501
Deferred income taxes 8,424 41,289
Total current liabilities 249,157 296,601

Noncurrent liabilities:
Long-term credit facility 235,000 300,000
Senior convertible notes, net of unamortized
discount of $22,716 in 2009, and $28,787 in 2008 264,784 258,713
Asset retirement obligation 68,682 108,755
Asset retirement obligation associated with oil and gas properties held for sale 23,711 238
Net Profits Plan liability 163,328 177,366
Deferred income taxes 285,042 354,328
Accrued derivative liability 46,315 27,419
Other noncurrent liabilities 11,623 11,318
Total noncurrent liabilities 1,098,485 1,238,137

Commitments and contingencies

Stockholders' equity:
Common stock, $0.01 par value: authorized - 200,000,000 shares;
issued: 62,638,839 shares in 2009 and 62,465,572 shares in 2008;
outstanding, net of treasury shares: 62,511,946 shares in 2009
and 62,288,585 shares in 2008 626 625
Additional paid-in capital 151,620 141,283
Treasury stock, at cost: 126,893 shares in 2009 and 176,987 shares in 2008 (1,230 ) (1,892 )
Retained earnings 850,593 957,200
Accumulated other comprehensive income (loss) (5,492 ) 65,293
Total stockholders' equity 996,117 1,162,509

Total Liabilities and Stockholders' Equity $ 2,343,759 $ 2,697,247

Consolidated Statements of Cash Flows
(In thousands) For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
Cash flows from operating activities: (As adjusted) (As adjusted)
Reconciliation of net income (loss) to net cash provided
by operating activities:
Net income (loss) $ (4,415 ) $ 86,997 $ (100,360 ) $ 214,440
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
(Gain) loss on divestiture activities 11,277 4,992 10,632 (54,063 )
Depletion, depreciation, amortization,
and asset retirement obligation liability accretion 66,958 72,362 229,061 219,070
Exploratory dry hole (benefit) expense 182 (23 ) 4,849 6,583
Impairment of proved properties 91 564 153,183 10,130
Abandonment and impairment of unproved properties 4,761 1,231 20,294 4,295
Impairment of materials inventory 2,114 - 13,449 -
Stock-based compensation expense* 5,469 3,420 12,978 10,477
Bad debt expense - 6,650 - 16,592
Change in Net Profits Plan liability 6,804 (34,867 ) (14,038 ) 46,901
Unrealized derivative (gain) loss 4,117 (4,429 ) 17,251 802
Loss related to hurricanes 1,153 6,980 8,273 6,980
Loss on insurance settlement - 640 - 1,600
Amortization of debt discount and deferred financing costs 3,219 2,336 8,922 6,942
Deferred income taxes (5,934 ) 44,618 (69,082 ) 99,380
Plugging and abandonment (9,755 ) (308 ) (12,110 ) (1,355 )
Other (187 ) (4,379 ) 1,432 (3,416 )
Changes in current assets and liabilities:
Accounts receivable 9,695 32,399 58,844 (39,455 )
Refundable income taxes (2,821 ) 5,271 10,340 (3,650 )
Prepaid expenses and other (1,569 ) 8,599 (8,660 ) 2,029
Accounts payable and accrued expenses 20,132 19,913 7,794 34,763
Excess income tax benefit from the exercise of stock options - (716 ) - (10,281 )
Net cash provided by operating activities 111,291 252,250 353,052 568,764

Cash flows from investing activities:
Proceeds from insurance settlement 15,336 - 15,336 -
Proceeds from sale of oil and gas properties 56 606 1,137 155,203
Capital expenditures (76,640 ) (165,489 ) (292,466 ) (495,155 )
Acquisition of oil and gas properties (14 ) (20,506 ) (58 ) (83,433 )
Receipts from restricted cash - - 14,398 -
Deposits to restricted cash - 25,266 - -
Receipts from (deposits to) short-term investments - (12 ) 1,002 161
Other - 3 - (9,984 )
Net cash used in investing activities (61,262 ) (160,132 ) (260,651 ) (433,208 )

Cash flows from financing activities:
Proceeds from credit facility 132,500 194,000 1,898,500 832,000
Repayment of credit facility (172,500 ) (319,000 ) (1,963,500 ) (947,000 )
Debt issuance costs related to credit facility (14 ) - (11,074 ) -
Excess income tax benefit from the exercise of stock options - 716 - 10,281
Proceeds from sale of common stock 113 643 1,179 11,327
Repurchase of common stock - - - (77,202 )
Dividends paid - - (3,120 ) (3,076 )
Net cash used in financing activities (39,901 ) (123,641 ) (78,015 ) (173,670 )

Net change in cash and cash equivalents 10,128 (31,523 ) 14,386 (38,114 )
Cash and cash equivalents at beginning of period 10,389 36,919 6,131 43,510
Cash and cash equivalents at end of period $ 20,517 $ 5,396 $ 20,517 $ 5,396

* Stock-based compensation expense is a component of exploration expense and
general and administrative expense on the consolidated statements of operations.
For the three months ended September 30, 2009, and 2008, respectively,
approximately $1.5 million and $1.6 million of stock based compensation was
included in exploration expense. For the nine months ended September 30, 2009,
and 2008, respectively, approximately $4.4 million and $3.8 million of
stock-based compensation expense was included in exploration expense. For the
three months ended September 30, 2009, and 2008, respectively, approximately
$4.0 million and $1.8 million of stock-based compensation was included in
general and administrative expense. For the nine months ended September 30,
2009, and 2008, respectively approximately $8.6 million and $6.7 million of
stock-based compensation expense was included in general and administrative
expense.

Adjusted Net Income
(In thousands, except per share data)

Reconciliation of Net Income (Loss) (GAAP) For the Three Months For the Nine Months
to Adjusted Net Income (Non-GAAP): Ended September 30, Ended September 30,
2009 2008 2009 2008
(As adjusted) (As adjusted)

Reported Net Income (Loss) (GAAP) $ (4,415 ) $ 86,997 $ (100,360 ) $ 214,440

Adjustments:
Change in Net Profits Plan liability 6,804 (34,867 ) (14,038 ) 46,901
Unrealized derivative (gain) loss 4,117 (4,429 ) 17,251 802
(Gain) loss on divestiture activities 11,277 4,992 10,632 (54,063 )
Bad debt expense associated with Sem Group, L.P. - 6,692 - 16,640
Loss related to hurricanes (1) 1,153 6,980 8,273 6,980
Loss on insurance settlement - 640 - 1,600
Tax adjustment at effective rate for period (8,661 ) 7,347 (8,414 ) (6,946 )

Adjusted Net Income (Loss), before impairment adjustments 10,275 74,352 (86,656 ) 226,354

Non-cash impairments:
Impairment of proved properties 91 564 153,183 10,130
Abandonment and impairment of unproved properties 4,761 1,231 20,294 4,295
Impairment of materials inventory 2,114 - 13,449 -
Tax adjustment for impairments at effective rate for period (2,584 ) (660 ) (71,107 ) (5,312 )
Adjusted Net Income, non-recurring items
& non-cash impairments (Non-GAAP) (2) $ 14,657 $ 75,487 $ 29,163 $ 235,467

Adjusted Net Income Per Share (Non-GAAP)
Basic $ 0.23 $ 1.21 $ 0.47 $ 3.78
Diluted $ 0.23 $ 1.20 $ 0.47 $ 3.72

Average Number of Shares Outstanding
Basic 62,505 62,187 62,420 62,254
Diluted 62,505 63,078 62,420 63,327

(1) The loss related to hurricanes is included within line item other expense on
the consolidated statements of operations.

(2) Adjusted net income is calculated as net income (loss) adjusted for
significant non-cash and non-recurring items. Non-cash charges and adjustments
include change in the Net Profits Plan liability, unrealized derivative (gain)
loss, impairment of proved properties, abandonment and impairment of unproved
properties, and impairment of materials inventory. Non-recurring items include
(gain) loss on divestiture activities, loss related to hurricanes, loss on
insurance settlement, and bad debt expense associated with Sem Group, L.P. The
non-GAAP measure of adjusted net income is presented because management believes
it provides useful additional information to investors for analysis of St.
Mary`s fundamental business on a recurring basis. In addition, management
believes that adjusted net income is widely used by professional research
analysts and others in the valuation, comparison, and investment recommendations
of companies in the oil and gas exploration and production industry, and many
investors use the published research of industry research analysts in making
investment decisions. Adjusted net income should not be considered in isolation
or as a substitute for net income, income from operations, cash provided by
operating activities or other income, profitability, cash flow, or liquidity
measures prepared under GAAP. Since adjusted net income excludes some, but not
all, items that affect net income and may vary among companies, the adjusted net
income amounts presented may not be comparable to similarly titled measures of
other companies.

Discretionary Cash Flow
(In thousands)

Reconciliation of Net Cash Provided by Operating Activities For the Three Months For the Nine Months
(GAAP) to Discretionary Cash Flow (Non-GAAP): Ended September 30, Ended September 30,
2009 2008 2009 2008
(As adjusted) (As adjusted)
Net cash provided by operating activities (GAAP) $ 111,291 $ 252,250 $ 353,052 $ 568,764

Changes in current assets and liabilities (25,437 ) (65,466 ) (68,318 ) 16,594

Exploration 15,733 10,669 48,821 42,378
Less: Exploratory dry hole benefit (expense) (182 ) 23 (4,849 ) (6,583 )
Less: Stock-based compensation expense included in exploration (1,533 ) (1,665 ) (4,397 ) (3,807 )

Discretionary cash flow (Non-GAAP) (3) $ 99,872 $ 195,811 $ 324,309 $ 617,346

(3) Beginning in the third quarter of 2009 the Company changed its definition of
discretionary cash flow. Prior periods have been conformed to the current
definition and the change in the definition did not result in a material
variance to results under the prior definition. Discretionary cash flow is
computed as net cash provided by operating activities adjusted for changes in
current assets and liabilities and exploration benefit (expense), less
exploratory dry hole expense, and stock-based compensation expense included in
exploration. The non-GAAP measure of discretionary cash flow is presented
because management believes that it provides useful additional information to
investors for analysis of St. Mary's ability to internally generate funds for
exploration, development, and acquisitions. In addition, discretionary cash flow
is widely used by professional research analysts and others in the valuation,
comparison, and investment recommendations of companies in the oil and gas
exploration and production industry, and many investors use the published
research of industry research analysts in making investment decisions.
Discretionary cash flow should not be considered in isolation or as a substitute
for net income, income from operations, net cash provided by operating
activities or other income, profitability, cash flow, or liquidity measures
prepared under GAAP. Since discretionary cash flow excludes some, but not all
items that affect net income and net cash provided by operating activities and
may vary among companies, the discretionary cash flow amounts presented may not
be comparable to similarly titled measures of other companies. See the
consolidated statements of cash flows herein for more detailed cash flow
information.

St. Mary Land & Exploration Company
Brent A. Collins, 303-861-8140

Copyright Business Wire 2009