ST. MARY LAND & EXPLORATION COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2007
(Unaudited)
Production Data	For the Three Months									For the Years
	Ended December 31,									Ended December 31,
	2007				2006			Percent Change		2007				2006			Percent Change
Average realized sales price, before hedging:
Oil (per Bbl)	$	84.63			$	52.39		62%		$	67.56			$	59.33		14%
Gas (per Mcf)	$	7.07			$	6.25		13%		$	6.74			$	6.58		2%
Average realized sales price, net of hedging:
Oil (per Bbl)	$	69.99			$	51.57		36%		$	62.60			$	56.60		11%
Gas (per Mcf)	$	7.80			$	7.20		8%		$	7.63			$	7.37		4%
Production:
Oil (MMBbls)		1.7				1.6		6%			6.9				6.1		14%
Gas (Bcf)		18.3				15.5		19%			66.1				56.4		17%
BCFE (6:1)		28.5				25.1		14%			107.5				92.8		16%
Daily production:
Oil (MBbls per day)		18.5				17.4		6%			18.9				16.6		14%
Gas (MMcf per day)		199.1				168.0		19%			181.0				154.7		17%
MMCFE per day (6:1)		310.2				272.5		14%			294.5				254.2		16%
Margin analysis per MCFE:
Average realized sales price, before hedging	$	9.59			$	7.20		33%		$	8.48			$	7.88		8%
Average realized price, net of hedging	$	9.18			$	7.73		19%		$	8.71			$	8.18		6%
Lease operating expense and transportation		1.45				1.36		7%			1.45				1.37		6%
Production taxes		0.67				0.51		31%			0.58				0.54		7%
General and administrative		0.53				0.32		66%			0.56				0.42		33%
Operating margin	$	6.53			$	5.54		18%		$	6.12			$	5.85		5%
Depletion, depreciation, amortization, and
asset retirement obligation liability accretion	$	2.27			$	1.77		28%		$	2.12			$	1.67		27%
Information on Reserves and Costs Incurred
Proved oil and gas reserve quantities:
	For the Year									For the Year
	Ended December 31, 2007									Ended December 31, 2006
	Oil or Condensate				Gas					Oil or Condensate				Gas
Developed and undeveloped:
Beginning of year		74,195				482,475					62,903				417,075
Revisions of previous estimate		5,238				9,489					524				10,946
Discoveries and extensions		1,166				28,483					857				36,723
Infill reserves in an existing proved field		4,592				69,090					4,131				49,107
Purchases of minerals in place		567				91,374					11,857				28,030
Sales of reserves		(4	)			(1,400	)				(20	)			(2,958	)
Production		(6,907	)			(66,061	)				(6,057	)			(56,448	)
End of year		78,847				613,450					74,195				482,475
Proved developed reserves as of the end of the year		68,277				426,627					61,519				358,477
Costs incurred in oil and gas producing activities:
	For the Years Ended December 31,
	2007				2006
Development costs	$	591,013			$	367,546
Exploration		111,470				126,220
Acquisitions:
Proved		161,665				238,400
Unproved		23,495				44,472
Leasing activity		38,436				28,816
Total	$	926,079			$	805,454

 

4

ST. MARY LAND & EXPLORATION COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2007
(Unaudited)
Consolidated Statements of Operations
(In thousands, except per share amounts)	For the Three Months							For the Years
	Ended December 31,							Ended December 31,
	2007				2006			2007				2006
Operating revenues:
Oil and gas production revenue	$	273,736			$	180,556		$	912,093			$	730,737
Realized oil and gas hedge gain (loss)		(11,676	)			13,368			24,484				28,176
Marketed gas system revenue		13,909				8,149			45,149				20,936
Gain (loss) on sale of proved properties		(367	)			(323	)		(367	)			6,910
Other revenue		(355	)			942			8,735				942
Total operating revenues		275,247				202,692			990,094				787,701
Operating expenses:
Oil and gas production expense		60,590				47,100			218,208				176,590
Depletion, depreciation, amortization,
and asset retirement obligation liability accretion		64,919				44,404			227,596				154,522
Exploration* (4)		16,030				16,017			58,686				51,889
Impairment of proved properties		-				684			-				7,232
Abandonment and impairment of unproved properties		870				933			4,756				4,301
General and administrative* (4)		15,187				7,933			60,149				38,873
Change in Net Profits Plan liability		43,875				6,389			50,823				23,759
Marketed gas system expense		13,031				5,545			42,485				18,526
Unrealized derivative loss		3,234				1,765			5,458				7,094
Other expense		946				2,649			2,522				2,649
Total operating expenses		218,682				133,419			670,683				485,435
Income from operations		56,565				69,273			319,411				302,266
Nonoperating income (expense):
Interest income		134				122			746				1,576
Interest expense		(6,010	)			(3,423	)		(19,895	)			(8,521	)
Income before income taxes		50,689				65,972			300,262				295,321
Income tax expense		(17,815	)			(22,440	)		(110,550	)			(105,306	)
Net income	$	32,874			$	43,532		$	189,712			$	190,015
Basic weighted-average common shares outstanding		63,300				55,480			61,852				56,291
Diluted weighted-average common shares outstanding		64,635				64,886			64,850				65,962
Basic net income per common share	$	0.52			$	0.78		$	3.07			$	3.38
Diluted net income per common share	$	0.51			$	0.69		$	2.94			$	2.94
*  As explained in Note 4 below, due to a change in circumstances the Company adjusted its accounting classification of Net Profits Plan distributions to terminated employees. As a result, distributions to individuals that are no longer employed by the Company from the Net Profits Plan have been fully allocated to general and administrative expense during 2007. Pro forma general and administrative expense (in thousands) reflecting this reclassification is $12,891, $16,266, and $15,805 for the three month periods ended March 31, 2007, June 30, 2007, and September 30, 2007, respectively. Pro forma exploration expense (in thousands) reflecting this reclassification is $19,020, $11,074, and $12,562 for the three months ended March 31, 2007, June 30, 2007, and September 30, 2007, respectively.

 

5

ST. MARY LAND & EXPLORATION COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2007
(Unaudited)
Consolidated Balance Sheets
(In thousands, except share amounts)	December 31,			December 31,
ASSETS	2007			2006
Current assets:
Cash and cash equivalents	$	43,510		$	1,464
Short-term investments		1,173			1,450
Accounts receivable		159,149			142,721
Refundable income taxes		933			7,684
Prepaid expenses and other		14,129			17,485
Accrued derivative asset		17,836			56,136
Deferred income taxes		33,211			-
Total current assets		269,941			226,940
Property and equipment (successful efforts method), at cost:
Proved oil and gas properties		2,721,229			2,063,911
Less - accumulated depletion, depreciation, and amortization		(804,785	)		(630,051	)
Unproved oil and gas properties, net of impairment allowance
of $10,319 in 2007 and $9,425 in 2006		134,386			100,118
Wells in progress		137,417			97,498
Oil and gas properties held for sale less accumulated depletion,
depreciation, and amortization		76,921			-
Other property and equipment, net of accumulated depreciation
of $11,549 in 2007 and $9,740 in 2006		9,230			6,988
		2,274,398			1,638,464
Noncurrent assets:
Goodwill		9,452			9,452
Accrued derivative asset		5,483			16,939
Other noncurrent assets		12,406			7,302
Total noncurrent assets		27,341			33,693
Total Assets	$	2,571,680		$	1,899,097
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	254,918		$	171,834
Short-term note payable		-			4,469
Accrued derivative liability		97,627			13,100
Deferred income taxes		-			14,667
Deposit associated with oil and gas properties held for sale		10,000			-
Total current liabilities		362,545			204,070
Noncurrent liabilities:
Long-term credit facility		285,000			334,000
Senior convertible notes		287,500			99,980
Asset retirement obligation		96,432			77,242
Asset retirement obligation associated with oil and gas properties held for sale		8,744			-
Net Profits Plan liability		211,406			160,583
Deferred income taxes		257,603			224,518
Accrued derivative liability		190,262			46,432
Other noncurrent liabilities		8,843			8,898
Total noncurrent liabilities		1,345,790			951,653
Stockholders' equity:
Common stock, $0.01 par value: authorized - 200,000,000 shares;
issued:  64,010,832 shares in 2007 and 55,251,733 shares in 2006;
outstanding, net of treasury shares:  63,001,120 shares in 2007
and 55,001,733 shares in 2006		640			553
Additional paid-in capital		170,070			38,940
Treasury stock, at cost:  1,009,712 shares in 2007 and 250,000 shares in 2006		(29,049	)		(4,272	)
Retained earnings		878,652			695,224
Accumulated other comprehensive income (loss)		(156,968	)		12,929
Total stockholders' equity		863,345			743,374
Total Liabilities and Stockholders' Equity	$	2,571,680		$	1,899,097

 

6

ST. MARY LAND & EXPLORATION COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2007
(Unaudited)
Consolidated Statements of Cash Flows
(In thousands)	For the Three Months						For the Years
	Ended December 31,						Ended December 31,
	2007			2006			2007			2006
Reconciliation of net income to net cash provided
by operating activities:
Net income	$	32,874		$	43,532		$	189,712		$	190,015
Adjustments to reconcile net income to net cash		-			-
provided by operating activities:		-			-
(Gain) loss on insurance settlement		1,097			-			(5,243	)		-
(Gain) loss on sale of proved properties		367			323			367			(6,910	)
Depletion, depreciation, amortization,		-			-
and asset retirement obligation liability accretion		64,919			44,404			227,596			154,522
Exploratory dry hole expense		1,651			6,158			14,365			10,191
Impairment of proved properties		-			7,232			-			7,232
Abandonment and impairment of unproved properties		870			(5,614	)		4,756			4,301
Unrealized derivative loss		3,234			1,765			5,458			7,094
Change in Net Profits Plan liability		43,875			6,389			50,823			23,759
Stock-based compensation expense*		1,489			2,443			10,095			11,422
Deferred income taxes		13,666			10,220			92,955			74,832
Other		(5,329	)		(2,877	)		(10,497	)		(2,479	)
Changes in current assets and liabilities:		-			-
Accounts receivable		(6,349	)		(8,334	)		(6,557	)		22,476
Refundable income taxes		2,164			21,495			6,751			-
Prepaid expenses and other		(8,660	)		(2,838	)		19,375			(17,886	)
Accounts payable and accrued expenses		13,217			26,827			40,769			5,215
Income tax benefit from the exercise of stock options		(2,275	)		(974	)		(9,933	)		(16,084	)
Net cash provided by operating activities		156,810			150,151			630,792			467,700
Cash flows from investing activities:
Proceeds from insurance settlement		(1,116	)		-			5,948			-
Proceeds from sale of oil and gas properties		171			(323	)		495			860
Capital expenditures		(137,637	)		(161,079	)		(637,748	)		(455,056	)
Acquisition of oil and gas properties		(150,233	)		(260,706	)		(182,883	)		(270,639	)
Deposits for acquisition of oil and gas assets		15,310			-			-			-
Deposits to short-term investments available-for-sale		(15	)		-			(1,168	)		-
Receipts from short-term investments available-for-sale		-			25			1,450			25
Other		10,005			12			10,034			91
Net cash used in investing activities		(263,515	)		(422,071	)		(803,872	)		(724,719	)
Cash flows from financing activities:
Proceeds from credit facility		268,086			597,137			822,000			935,137
Repayment of credit facility		(138,086	)		(329,137	)		(871,000	)		(601,137	)
Repayment of short-term note payable		-			-			(4,469	)		-
Proceeds from short-term note payable		-			4,469			-			4,469
Income tax benefit from the exercise of stock options		2,275			974			9,933			16,084
Proceeds from issuance of convertible debt, net of deferred financing costs		(7	)		-			280,657			-
Proceeds from sale of common stock		3,665			1,670			10,007			17,716
Repurchase of common stock		-			-			(25,904	)		(123,108	)
Dividends paid		(3,144	)		(2,745	)		(6,284	)		(5,603	)
Other		186			-			186			-
Net cash provided by financing activities		132,975			272,368			215,126			243,558
Net change in cash and cash equivalents		26,270			448			42,046			(13,461	)
Cash and cash equivalents at beginning of period		17,240			1,016			1,464			14,925
Cash and cash equivalents at end of period	$	43,510		$	1,464		$	43,510		$	1,464
*  Stock-based compensation expense is a component of General and administrative and Exploration on the Consolidated Statements of Operations. For the years ended December 31, 2007, and 2006, $6.9 million and $8.3 million, respectively, of stock-based compensation expense is included in the general and administrative expense and $3.2 million and $3.1 million, respectively, of stock-based compensation expense is included in exploration expense. For the three months ended December 31, 2007, and 2006, $889,000 and $1.8 million, respectively, of stock-based compensation expense is included in general and administrative expense and $600,000 and $656,000, respecteively, is included in exploration expense.

 

7

ST. MARY LAND & EXPLORATION COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2007
(Unaudited)
Adjusted Net Income
(In thousands, except per share data)
Reconciliation of Net Income (GAAP)	For the Three Months							For the Years
to Adjusted Net Income (Non-GAAP):	Ended December 31,							Ended December 31,
	2007				2006			2007				2006
Reported Net Income (GAAP)	$	32,874			$	43,532		$	189,712			$	190,015
Change in Net Profits Plan liability		43,875				6,389			50,823				23,759
Unrealized derivative loss		3,234				1,765			5,458				7,094
(Gain) loss on sale of proved properties		367				323			367				(6,910	)
(Gain) loss on insurance settlement (1)		1,097				-			(5,243	)			-
Total of Adjustments		48,573				8,477			51,405				23,943
Expense from tax effect on adjustments		(17,071	)			(2,883	)		(18,926	)			(8,538	)
Adjusted Net Income (Non-GAAP) (2)	$	64,376			$	49,126		$	222,191			$	205,420
Adjusted Net Income Per Share (Non-GAAP)
Basic	$	1.02			$	0.89		$	3.59			$	3.65
Diluted	$	1.00			$	0.77		$	3.44			$	3.18
Average Number of Shares Outstanding
Basic		63,300				55,480			61,852				56,291
Diluted		64,635				64,886			64,850				65,962
(1)    Included within line item Other revenue on the Consolidated Statements of Operations.
(2)   Adjusted net income is calculated as net income adjusted for significant non-cash and non-recurring items. Examples of non-cash charges include non-cash changes in the Net Profits Plan liability and unrealized derivative gains and losses. Examples of non-recurring items include gains or losses from sales of properties and insurance settlements. 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, profitablility, 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.

 

8

ST. MARY LAND & EXPLORATION COMPANY
FINANCIAL HIGHLIGHTS
December 31, 2007
(Unaudited)
Discretionary Cash Flow
(In thousands)
Reconciliation of Net Cash Provided by Operating		For the Three Months									For the Years
Activities (GAAP) to Discretionary Cash Flow (Non-GAAP):		Ended December 31,									Ended December 31,
		2007			2006						2007			2006
Net cash provided by operating activities (GAAP)		$	156,810		$	150,151					$	630,792		$	467,700
Gain (loss) on insurance settlement			(1,097	)		-						5,243			-
Gain (loss) on sale of proved properties			(367	)		(323	)					(367	)		6,910
Exploration (4)			16,030			16,017						58,686			51,889
Less:  Exploratory dry hole expense			(1,651	)		(6,158	)					(14,365	)		(10,191	)
Less:  Stock-based compensation expense included in Exploration			(599	)		-						(3,215	)		-
Other			5,329			2,877						10,497			2,476
Changes in current assets and liabilities			1,903			(36,176	)					(50,405	)		6,279
Discretionary cash flow (Non-GAAP) (3)		$	176,358		$	126,388					$	636,866		$	525,063
Revised Quarterly Discretionary Cash Flow
(In thousands)
Revised reconciliation of Net Cash Provided by Operating		For the Three Months Ended
Activities (GAAP) to Discretionary Cash Flow (Non-GAAP)		March 31,			June 30,			September 30,
		2007			2007			2007
Net cash provided by operating activities (GAAP)		$	126,075		$	156,246		$	191,661
Gain on insurance settlement			-			6,325			15
Gain on sale of proved properties			-			-			-
Exploration  (4)			19,020			11,074			12,562
Less:  Exploratory dry hole expense			(9,569	)		(1,651	)		(1,494	)
Less:  Stock-based compensation expense included in Exploration			(1,004	)		(886	)		(726	)
Other			125			2,571			2,472
Changes in current assets and liabilities			6,835			(13,562	)		(45,581	)
Discretionary cash flow (Non-GAAP) (3)		$	141,482		$	160,117		$	158,909
(3)   Discretionary cash flow is computed as net income plus depreciation, depletion, amortization, asset retirement obligation liability accretion, impairments, deferred taxes, exploration expense, stock-based compensation expense, and non-cash changes in the Net Profits Plan liability less the effect of unrealized derivative (gain) loss. The non-GAAP measure of discretionary cash flow is presented since 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.
4)    As a result of a change in circumstances, a greater portion of distributions from the Net Profits Plan have been classified as general and and administrative expense than in prior years.  This is a result of a greater portion of payments being made to individuals that are no longer employed by the Company.  In 2007, only those distributions related to individuals that are currently employed and are involved with the Company's exploration efforts are classified as exploration expense.  As time has progressed, less of the distribution relates to prospective exploration efforts as more of the distributions are made to employees that have terminated employment and thereby do not provide any exploration support.  Therefore, the quarterly financial information presented in the above tables reflects the recording of current distributions under the Net Profits Plan for terminated employees as being fully allocated entirely to general and administrative expense since there is no longer any functional link to geologic  and geophysical or exploration related work by those terminated individuals.