Exhibit 99.1
 
 For Information
Brent A. Collins
303-861-8140

FOR IMMEDIATE RELEASE


ST. MARY REPORTS RESULTS FOR FIRST QUARTER OF 2010

·  
Company reports net income of $126.2 million, or $1.96 per diluted share

·  
Quarterly production of 286 MMCFE/d exceeds guidance of 255 – 278 MMCFE/d

·  
Majority of guided costs within or below guidance

·  
Adjusted net income per diluted share of $0.45


DENVER, May 3, 2010 – St. Mary Land & Exploration Company (NYSE: SM) today reports financial results from the first quarter of 2010.  In addition, a new presentation for the first quarter earnings and operational update will be posted on the Company’s website at stmaryland.com.  This presentation will be referenced during the conference call scheduled for 8:00 a.m. Mountain time (10:00 a.m. Eastern time) on May 4, 2010.  Information for the earnings call can be found below.


FIRST QUARTER 2010 RESULTS

St. Mary posted net income for the first quarter of 2010 of $126.2 million, or $1.96 per diluted share, which includes a gain from the Company’s divestitures of non-core Rocky Mountain assets that were closed during the quarter.  This compares to a net loss of ($87.6 million), or ($1.41) per diluted share, for the same period in 2009.  Adjusted net income for the quarter was $28.9 million, or $0.45 per diluted share, versus an adjusted net loss of ($448 thousand), or ($0.01) per diluted share, for the first quarter of 2009.  Adjusted net income excludes certain items that the Company believes affect the comparability of operating results.  Items excluded generally are one-time items or are items whose timing and/or amount cannot be reasonably estimated.  A summary of the adjustments made to arrive at adjusted net income (loss) is presented in the table below.
 
 
   
For the Three Months Ended March 31,
  
   
2010
    
2009
  
Weighted-average diluted share count (in millions)
           64.4             62.3  
   
$ in millions
    
Per Diluted Share
    
$ in millions
    
Per Diluted Share
  
Reported Net Income (Loss)
   $ 126.2     $ 1.96     $ (87.6 )   $ (1.41 )
Adjustments net of tax:
                                
Change in Net Profits Plan liability
   $ ( 17.1 )   $ (0.27 )   $ (14.4 )   $ (0.23 )
Unrealized derivative (gain) loss
   $ (4.9 )   $ (0.08 )   $ 1.1     $ 0.02  
(Gain) loss on divestiture activity
   $ (75.9 )   $ (1.18 )   $ 0.4     $ 0.01  
Loss related to hurricanes
     -       -     $ 1.3     $ 0.02  
                                 
Adjusted Net Income (Loss), before impairments
   $ 28.3     $ 0.44     $ (99.2 )   $ (1.59 )
                                 
Non-cash impairments net of tax:
                                
Impairment of proved properties
     -       -     $ 91.0     $ 1.46  
Abandonment & impairment of unproved properties
   $ 0.6     $ 0.01     $ 2.4     $ 0.04  
Impairment of materials inventory
     -       -     $ 5.3     $ 0.09  
                                 
Adjusted Net Income (Loss)
   $ 28.9     $ 0.45     $ (0.4 )   $ (0.01 )
                                 
NOTE:  Totals may not add due to rounding
                                


Operating cash flow increased to $133.2 million for the first quarter of 2010 from $106.6 million in the same period last year.  Net cash provided by operating activities increased to $153.9 million for the first quarter of 2010 from $125.2 million in the same period in 2009.

Adjusted net income and operating 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 for additional information about these measures.
 
 
St. Mary reported quarterly production of 285.8 MMCFE/d, which was above the guidance range of 255 to 278 MMCFE/d.  In spite of closing two significant divestitures earlier than scheduled, strong production performance in the Mid-Continent and South Texas & Gulf Coast regions allowed the Company to exceed production guidance for the quarter.

Revenues and other income for the quarter were $360.1 million compared to $199.2 million for the same period in 2009.  For the first quarter of 2010, the average equivalent price per MCFE, net of hedging, was $8.38 per MCFE, which is an increase of 28% from the $6.56 per MCFE realized in the comparable period in 2009.  Average realized prices, excluding hedging activities, were $6.15 per Mcf and $72.73 per barrel during the quarter.  These prices were 54% and 111% higher, respectively, than those in the first quarter of 2009.  Average realized prices, inclusive of hedging activities, were $6.84 per Mcf and $66.96 per barrel in the first quarter of 2010, which is an increase of 11% and 52%, respectively, from the same period a year ago.  The Company reports its gas volumes on a “wet gas” basis, meaning that revenue dollars associated with natural gas liquids (NGLs) are reported within our natural gas revenues.  Included in revenues in the first quarter of 2010 is a pre-tax gain of $121.0 million from divestiture activity.  St. Mary closed on sales of non-core properties in North Dakota and Wyoming during the quarter and the proceeds from the divestitures will be used to fund a portion of the 2010 capital program.

Lease operating expense (LOE) of $1.17 per MCFE in the first quarter of 2010 was below the Company’s guidance of $1.40 to $1.45 per MCFE.  Cost increases that the Company had anticipated did not materialize to the extent assumed in the provided guidance.  Lease operating expense for the quarter represents a 19% decrease from the $1.45 per MCFE in the comparable period last year.  Sequentially, LOE declined 11% or $0.14 per MCFE in the first quarter of 2010 from the preceding quarter.

Transportation expense of $0.16 per MCFE in the first quarter of 2010 was below guidance of $0.18 to $0.23 per MCFE.  The reported per unit expense was a decrease from $0.19 per MCFE for the comparable period in 2009.    Sequentially, transportation expense was down $0.04 per MCFE from the fourth quarter of 2009.

Commodity price increases over the past year for both oil and natural gas resulted in year over year and sequential increases in production taxes, both on a per MCFE basis and in absolute dollars.   Between the first quarters of 2009 and 2010, production taxes on a per MCFE basis increased 72% from $0.32 to $0.55.  Production taxes also increased sequentially from $0.51 per MCFE in the fourth quarter of 2009 to $0.55 per MCFE in the first quarter of 2010.  The Company’s realized production tax rate for the first quarter was at the provided guidance of 7% of pre-hedge oil and natural gas revenue.

 
 
 
 
Total general and administrative (G&A) expense for the first quarter of 2010 was $0.91 per MCFE, which was within the guidance range provided by the Company.  Cash G&A expense was $0.49 per MCFE for the quarter, compared to a guidance range of $0.47 to $0.50 per MCFE.  Non-cash G&A for the first quarter was $0.15 per MCFE versus a guidance range of $0.15 to $0.17 per MCFE.  G&A related to cash payments from the Company’s legacy Net Profits Plan (NPP) program was $0.27 per MCFE in the quarter compared to a guidance range of $0.22 to $0.24 per MCFE.  Impacts from divestiture activity and higher net realized prices caused payments from the program to be higher than anticipated.  The year over year and sequential increase in G&A on a per MCFE basis is a result of larger NPP payments resulting from higher commodity prices.
 
Depletion and depreciation expense (DD&A) decreased to $3.02 per MCFE in the first quarter of 2010, which was within the Company’s guidance range of $2.95 to $3.15 per MCFE.  DD&A in the comparable period of 2009 was $3.23 per MCFE.  Sequentially, DD&A increased 5% from $2.88 per MCFE in the fourth quarter of 2009.  The Company’s DD&A rate is impacted by changes in the estimated volumes of proved reserves and changes to the cost basis of its proved properties, including the impact of impairments.

In the first quarter of 2010, St. Mary recognized a pre-tax non-cash benefit of $27.3 million as a result of a decrease in the NPP liability. The decrease in NPP liability was primarily related to the divestitures which closed in the first quarter of 2010.  The NPP liability is a significant management estimate that 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 March 31, 2010, St. Mary had total long-term debt of $269.0 million, which was comprised entirely of the Company’s 3.50% Senior Convertible Notes, net of debt discount.  The Company’s debt-to-book capitalization ratio was 19% as of the end of the quarter.

St. Mary currently has no outstanding borrowing under its long-term credit facility.  The borrowing base for the credit facility was reaffirmed by St. Mary’s bank group on March 17, 2010, and remains unchanged at an amount of $900 million.  The Company has a commitment amount of $678 million from the Company’s bank group.  St. Mary is in compliance with all the covenants associated with this facility.


EARNINGS CALL INFORMATION

The Company has scheduled a teleconference to discuss the first quarter results on May 4, 2010 at 8:00 a.m. Mountain time (10:00 a.m. Eastern time).  The call participation number is 800-299-8538 and the participant passcode is 78566360.  An audio replay of the call will be available approximately two hours after the call at 888-286-8010, with passcode 86555679.  International participants can dial 617-786-2902 to take part in the conference call, using passcode 78566360 and can access a replay of the call at 617-801-6888, using passcode 86555679.  Replays can be accessed through May 18, 2010.

In addition, the call will be webcast live and can be accessed at St. Mary’s web site at stmaryland.com.  An audio recording of the conference call will be available at that site through May 18, 2010.
 

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, 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 2009 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
  
March 31, 2010
  
                   
                   
Guidance Comparison
  
For the Three Months
        
   
Ended March 31, 2010
      
   
Actual
    
Guidance Range
        
                   
Oil and gas production (MMCFE per day)
     285.8       255 - 278        
                       
Lease operating expense (per MCFE)
   $ 1.17     $ 1.40 - $1.45        
Transportation expense (per MCFE)
   $ 0.16     $ 0.18 - $0.23        
Production taxes, as a percentage of pre-hedge revenue
     7 %     7 %      
                       
General and administrative - cash
   $ 0.49     $ 0.47 - $0.50        
General and administrative - cash related to Net Profits Plan
   $ 0.27     $ 0.22 - $0.24        
General and administrative - non-cash
   $ 0.15     $ 0.15 - $0.17        
General and administrative - TOTAL
   $ 0.91     $ 0.84 - $0.91        
                       
Depreciation, depletion, and amortization
   $ 3.02     $ 2.95 - $3.15        
                       
                       
                       
Production Data
  
For the Three Months
      
   
Ended March 31,
      
      2010       2009    
Percent Change
  
                       
Average realized sales price, before hedging:
                      
Oil (per Bbl)
   $ 72.73     $ 34.40       111 %
Gas (per Mcf)
     6.15       4.00       54 %
                         
Average realized sales price, net of hedging:
                        
Oil (per Bbl)
   $ 66.96       44.16       52 %
Gas (per Mcf)
     6.84       6.14       11 %
                         
Production:
                        
Oil (MMBbls)
     1.5       1.6       -7 %
Gas (Bcf)
     16.6       18.5       -11 %
BCFE (6:1)
     25.7       28.4       -9 %
                         
Daily production:
                        
Oil (MBbls per day)
     17.0       18.2       -7 %
Gas (MMcf per day)
     184.1       205.7       -11 %
MMCFE per day (6:1)
     285.8       315.0       -9 %
                         
Margin analysis per MCFE:
                        
Average realized sales price, before hedging
   $ 8.28     $ 4.60       80 %
                         
Average realized sales price, net of hedging
     8.38       6.56       28 %
Lease operating expense
     1.17       1.45       -19 %
Transportation
     0.16       0.19       -16 %
Production taxes
     0.55       0.32       72 %
General and administrative
     0.91       0.57       60 %
Operating margin
   $ 5.59     $ 4.03       39 %
Depletion, depreciation, amortization, and
                        
asset retirement obligation liability accretion
   $ 3.02     $ 3.23       -7 %
 
 
 
 

Consolidated Statements of Operations
            
(In thousands, except per share amounts)
  
For the Three Months
  
 
  
Ended March 31,
  
   
2010
    
2009
  
Operating revenues and other income:
            
Oil and gas production revenue
   $ 212,887     $ 130,417  
Realized oil and gas hedge gain
     2,595       55,620  
Gain (loss) on divestiture activity
     120,978       (599 )
Marketed gas system and other operating revenue
     23,675       13,782  
Total operating revenues and other income
     360,135       199,220  
                 
Operating expenses:
                
Oil and gas production expense
     48,340       55,829  
Depletion, depreciation, amortization,
                
and asset retirement obligation liability accretion
     77,765       91,712  
Exploration
     13,898       13,598  
Impairment of proved properties
     -       147,049  
Abandonment and impairment of unproved properties
     904       3,902  
Impairment of materials inventory
     -       8,616  
General and administrative
     23,486       16,399  
Change in Net Profits Plan liability
     (27,272 )     (23,291 )
Marketed gas system expense
     22,046       13,383  
Unrealized derivative (gain) loss
     (7,735 )     1,846  
Other expense
     952       5,642  
Total operating expenses
     152,384       334,685  
                 
Income (loss) from operations
     207,751       (135,465 )
 
                
Nonoperating income (expense):
                
Interest income
     129       22  
Interest expense
     (6,787 )     (6,096 )
                 
Income (loss) before income taxes
     201,093       (141,539 )
Income tax benefit (expense)
     (74,915 )     53,916  
                 
Net income (loss)
   $ 126,178     $ (87,623 )
                 
Basic weighted-average common shares outstanding
     62,792       62,335  
                 
Diluted weighted-average common shares outstanding
     64,377       62,335  
                 
Basic net income (loss) per common share
   $ 2.01     $ (1.41 )
                 
Diluted net income (loss) per common share
   $ 1.96     $ (1.41 )
 
 
 
 

Consolidated Balance Sheets
            
(In thousands, except share amounts)
  
March 31,
    
December 31,
  
ASSETS
  
2010
    
2009
  
             
Current assets:
            
Cash and cash equivalents
   $ 40,424     $ 10,649  
Accounts receivable
     129,302       116,136  
Refundable income taxes
     19,770       32,773  
Prepaid expenses and other
     9,772       14,259  
Derivative asset
     58,364       30,295  
Deferred income taxes
     -       4,934  
Total current assets
     257,632       209,046  
                 
Property and equipment (successful efforts method), at cost:
                
Land
     1,371       1,371  
Proved oil and gas properties
     2,889,235       2,797,341  
Less - accumulated depletion, depreciation, and amortization
     (1,116,733 )     (1,053,518 )
Unproved oil and gas properties, net of impairment allowance
                
of $63,390 in 2010 and $66,570 in 2009
     137,192       132,370  
Wells in progress
     89,676       65,771  
Materials inventory, at lower of cost or market
     25,094       24,467  
Oil and gas properties held for sale less accumulated depletion,
                
depreciation, and amortization
     15,578       145,392  
Other property and equipment, net of accumulated depreciation
                
of $15,430 in 2010 and $14,550 in 2009
     14,979       14,404  
      2,056,392       2,127,598  
                 
Other noncurrent assets:
                
Derivative asset
     23,695       8,251  
Restricted cash subject to Section 1031 Exchange
     36,160       -  
Other noncurrent assets
     14,435       16,041  
Total other noncurrent assets
     74,290       24,292  
                 
Total Assets
   $ 2,388,314     $ 2,360,936  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
          
                 
Current liabilities:
                
Accounts payable and accrued expenses
   $ 271,986     $ 236,242  
Derivative liability
     57,682       53,929  
Deposit associated with oil and gas properties held for sale
     -       6,500  
Deferred income taxes
     2,631       -  
Total current liabilities
     332,299       296,671  
                 
Noncurrent liabilities:
                
Long-term credit facility
     -       188,000  
Senior convertible notes, net of unamortized
                
discount of $18,480 in 2010, and $20,598 in 2009
     269,020       266,902  
Asset retirement obligation
     61,002       60,289  
Asset retirement obligation associated with oil and gas properties held for sale
     4,245       18,126  
Net Profits Plan liability
     143,019       170,291  
Deferred income taxes
     384,292       308,189  
Derivative liability
     46,823       65,499  
Other noncurrent liabilities
     14,023       13,399  
Total noncurrent liabilities
     922,424       1,090,695  
                 
Commitments and contingencies
                
                 
Stockholders' equity:
                
Common stock, $0.01 par value: authorized  - 200,000,000 shares;
               
issued:  62,950,794 shares in 2010 and 62,899,122 shares in 2009;
                
outstanding, net of treasury shares: 62,823,901 shares in 2010
                
and 62,772,229 shares in 2009
     630       629  
Additional paid-in capital                          
     165,715       160,516  
Treasury stock, at cost:  126,893 shares in 2010 and 2009
     (1,179 )     (1,204 )
Retained earnings
     974,620       851,583  
Accumulated other comprehensive loss
     (6,195 )     (37,954 )
Total stockholders' equity
     1,133,591       973,570  
                 
Total Liabilities and Stockholders' Equity
   $ 2,388,314     $ 2,360,936  
 
 
 

Consolidated Statements of Cash Flows
            
(In thousands)
  
For the Three Months
  
   
Ended March 31,
  
   
2010
    
2009
  
Cash flows from operating activities:
            
             
Net income (loss)
   $ 126,178     $ (87,623 )
Adjustments to reconcile net income (loss) to net cash
                
provided by operating activities:
                
(Gain) loss on divestiture activity
     (120,978 )     599  
Depletion, depreciation, amortization,
                
and asset retirement obligation liability accretion
     77,765       91,712  
Exploratory dry hole expense
     163       94  
Impairment of proved properties
     -       147,049  
Abandonment and impairment of unproved properties
     904       3,902  
Impairment of materials inventory
     -       8,616  
Stock-based compensation expense*
     5,603       3,776  
Change in Net Profits Plan liability
     (27,272 )     (23,291 )
Unrealized derivative (gain) loss
     (7,735 )     1,846  
Loss related to hurricanes
     -       2,093  
Amortization of debt discount and deferred financing costs
     3,291       2,092  
Deferred income taxes
     64,608       (55,390 )
Plugging and abandonment
     (2,234 )     (2,018 )
Other
     949       1,189  
Changes in current assets and liabilities:
                
Accounts receivable
     (13,244 )     43,703  
Refundable income taxes
     13,003       13,161  
Prepaid expenses and other
     1,489       (5,414 )
Accounts payable and accrued expenses
     31,402       (20,921 )
Net cash provided by operating activities
     153,892       125,175  
                 
Cash flows from investing activities:
                
Proceeds from sale of oil and gas properties
     239,247       1,063  
Capital expenditures
     (132,445 )     (133,625 )
Acquisition of oil and gas properties
     -       (53 )
Deposits to restricted cash
     (36,160 )     -  
Receipts from restricted cash
     -       4,348  
Other
     (6,500 )     -  
Net cash provided by (used in) investing activities
     64,142       (128,267 )
                 
Cash flows from financing activities:
                
Proceeds from credit facility
     177,559       1,190,000  
Repayment of credit facility
     (365,559 )     (1,191,000 )
Proceeds from sale of common stock
     268       172  
Other
     (527 )     -  
Net cash used in financing activities
     (188,259 )     (828 )
                 
Net change in cash and cash equivalents
     29,775       (3,920 )
Cash and cash equivalents at beginning of period
     10,649       6,131  
Cash and cash equivalents at end of period
   $ 40,424     $ 2,211  
                 
* 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 March 31, 2010, and 2009, respectively,
          
approximately $1.8 million and $1.6 million of stock-based compensation expense was included in exploration expense.
  
For the three months ended March 31, 2010, and 2009, respectively, approximately $3.8 million and $2.2 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
  
to Adjusted Net Income (Non-GAAP):
  
Ended March 31,
  
   
2010
    
2009
  
             
             
Reported Net Income (Loss) (GAAP)
   $ 126,178     $ (87,623 )
                 
Adjustments net of tax: (1)
                
Change in Net Profits Plan liability
     (17,112 )     (14,419 )
Unrealized derivative (gain) loss
     (4,853 )     1,143  
(Gain) loss on divestiture activity
     (75,909 )     371  
Loss related to hurricanes (2)
     -       1,296  
                 
Adjusted Net Income (Loss), before impairment adjustments
     28,304       (99,232 )
                 
Non-cash impairments net of tax:
                
Impairment of proved properties
     -       91,034  
Abandonment and impairment of unproved properties
     567       2,416  
Impairment of materials inventory
     -       5,334  
Adjusted Net Income (Loss), non-recurring items
                
& non-cash impairments (Non-GAAP) (3)
   $ 28,871     $ (448 )
                 
Adjusted Net Income (Loss) Per Share (Non-GAAP)
                
Basic
   $ 0.46     $ (0.01 )
Diluted
   $ 0.45     $ (0.01 )
                 
Average Number of Shares Outstanding
                
Basic
     62,792       62,335  
Diluted
     64,377       62,335  
                 
                 
(1) Adjustments are shown net of tax using the effective income tax rate; calculated by dividing the income tax benefit
          
(expense) by income (loss) before income taxes as stated on the consolidated statement of operations. Effective income tax
          
rates for the three months ended March 31, 2010 and 2009, were 37.3% and 38.1% respectively.
        
         
(2) The loss related to hurricanes is included within line item other expense on the consolidated statements of operations.
          
           
(3) Adjusted net income excludes certain items that the Company believes affect the comparability of operating results. Items
          
excluded generally are one-time items or are items whose timing and/or amount cannot be reasonably estimated. These items
          
include non-cash charges and adjustments such as the change in the Net Profits Plan liability, unrealized derivative (gain) loss,
          
impairment of proved properties, abandonment and impairment of unproved properties, impairment of materials inventory,
          
(gain) loss on divestiture activity, and loss related to hurricanes. 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.
          



Operating Cash Flow
            
(In thousands)
            
             
Reconciliation of Net Cash Provided by Operating Activities
  
For the Three Months
  
(GAAP) to Operating Cash Flow (Non-GAAP):
  
Ended March 31,
  
   
2010
    
2009
  
             
Net cash provided by operating activities (GAAP)
   $ 153,892     $ 125,175  
                 
Changes in current assets and liabilities
     (32,650 )     (30,529 )
                 
Exploration
     13,898       13,598  
      Less:  Exploratory dry hole expense
     (163 )     (94 )
      Less:  Stock-based compensation expense included in exploration
     (1,754 )     (1,555 )
                 
Operating cash flow (Non-GAAP) (4)
   $ 133,223     $ 106,595  
                 
                 
(4) Beginning in the third quarter of 2009 the Company changed its definition of operating 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
        
definiton. Operating cash flow is computed as net cash provided by operating activities adjusted for changes in current
          
assets and liabilities and exploration, less exploratory dry hole expense, and stock-based compensation expense included in
          
exploration. The non-GAAP measure of operating 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, acquisitions, and to service debt. In addition, operating 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. Operating 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 operating 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 operating 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.