Teton Energy Corporation Announces Fourth Quarter and Year End 2007 Financial and Operating Results

DENVER, March 13 /PRNewswire-FirstCall/ -- Teton Energy Corporation ("Teton" or "the Company") AMEX: TEC today announced that for the year ended December 31, 2007, net income was $2.4 million, or fully diluted earnings of $0.13 per share of common stock, compared to a loss for 2006 of $5.7 million, or a fully diluted loss of $0.44 per share of common stock. Net income for the year ended December 31, 2007 includes the effect of a gain of $17.4 million from the sale of 50 percent of the Company's interest in the Piceance Basin or a 12.5 percent working interest in 6,314 gross acres.

For the year ended December 31, 2007, operating revenues from oil and gas sales increased 55 percent from 2006 to $6.3 million and operating cash flow from oil and gas activities (defined as oil and gas sales less lease operating expense, transportation expense and production taxes) increased 52 percent to $4.5 million.

For the fourth quarter of 2007, net income was $12.4 million, or fully diluted earnings of $0.76 per share of common stock, compared to a loss of $2.1 million, or a fully diluted loss of $0.14 per share of common stock, for the same period in 2006. Net income in the fourth quarter of 2007 includes the effect of the gain from the sale of a portion of the Company's Piceance assets.

For the fourth quarter of 2007, operating revenues from oil and gas sales increased 110 percent from the fourth quarter of 2006 to $2.7 million and operating cash flow from oil and gas activities increased 95 percent to $2.0 million.

Operating Expense Details. Oil and gas operating expenses, including lease operating expense, transportation expense and production taxes, for the full year 2007 collectively increased 65 percent due to a significant increase in volumes, but most importantly, decreased one percent on a per thousand cubic feet equivalent ("Mcfe") basis to $1.44 per Mcfe due largely to lower transportation costs. Transportation costs per Mcfe were significantly lower overall due to the fact that we own or have an interest in the transportation assets that service our project areas in the eastern D-J Basin where volumes are increasing, offsetting higher costs in the Piceance Basin where volumes increased 44 percent even with the asset sale.

The Company's gross margin (oil and gas revenues, including realized gains on commodity hedging positions, less oil and gas operating expenses) in 2007 increased 15 percent on a per Mcfe basis to $4.62 from $4.01 in 2006.

Exploration expense in 2007 increased 312 percent (148 percent on a per Mcfe basis) and relates largely to delay rentals and geological and geophysical expenses incurred in the eastern D-J and Williston Basins. The Company uses 3D seismic data to locate potential drilling sites in each basin.

General and administrative expense in 2007 increased 26 percent due largely to an increase in compensation expense and consulting and related services. Compensation expense increased due to an increase in staffing and an increase in non-cash stock-based compensation expense as a result of meeting performance milestones associated with long-term incentive plans. Consulting and related services expense increased due to related expenses associated with initial SOX compliance in 2007, oil and gas accounting services, investor relations, compensation benchmarking reports and study, and financial and legal services related to acquisitions, financings and the divesture of a portion of the Company's Piceance assets.

Depreciation, depletion and accretion expense in 2007 increased 119 percent, largely due to increased volumes.

Operations Highlights. Operational highlights during 2007 include the following:

    -- Net proved reserves increased 99 percent to 14.1 billion cubic feet
       equivalent ("Bcfe") at December 31, 2007 as compared to 7.1 Bcfe at
       December 31, 2006.
    -- Oil and gas sales volumes increased 66 percent to 1,227 million cubic
       feet equivalent ("MMcfe") at an average realized wellhead price of
       $6.06 after realized hedging results ($5.10 per Mcfe pre-hedging) in
       2007 from oil and gas sales volumes of 737 MMcfe at an average realized
       wellhead price of $5.46 per Mcfe in 2006.
    -- Year-end production increased 79 percent to 4.3 MMcfe per day for
       December 2007 compared to 2.4 MMcfe per day for December 2006.
    -- The Company acquired 721,257 gross acres (558,753 net) in 2007, a
       200 percent increase from year end 2006.
    -- The Company participated in the drilling and completion of 106 gross
       producing wells (22.0 net) in 2007 as compared to 20 gross producing
       wells (5.0 net) in 2006.
    -- Total gross producing wells increased to 132 (44.5 net) at December 31,
       2007 as compared to 20 gross producing wells (5.0 net) at December 31,
       2006.
    -- The Company sold half of its 25 percent working interest in the
       Piceance Basin non-operated properties for $36.7 million in cash, after
       post-closing adjustments, plus oil and gas properties and related
       production valued at $4.7 million, after post-closing adjustments, for
       a gain on sale of assets totaling $17.4 million.

Other Financial Highlights. Other financial highlights for the year ended December 31, 2007 include the following:

    -- The Company completed a capital expenditure program totaling
       $35.6 million in 2007 as compared to $20.4 million in 2006.
    -- The Company raised $8.3 million after fees and expenses by issuing 8%
       senior subordinated convertible notes and warrants to purchase
       3.6 million shares of our common stock with a cashless exercise
       provision.
    -- The Company raised $4.5 million after fees and expenses by issuing
       964,060 shares of common stock and warrants to purchase an additional
       337,421 shares of common stock.
    -- Basic weighted-average common shares outstanding and fully diluted
       weighted average common shares outstanding were 16,545,000 and
       18,061,000 respectively for 2007 compared to 13,093,000 for both
       categories in 2006.

Capital Expenditures. Capital expenditures for 2007 totaled $35.6 million and consisted of exploration and production and lease acquisition activities in the following areas: (i) $27.4 million in the Piceance Basin; (ii) $5.5 million in the D-J Basin; (iii) $1.7 million in the Williston Basin; and (iv) $1.0 million in the Big Horn Basin. Capital expenditures for 2008 are expected to be approximately $36 million excluding acquisitions and the cost of four planned wells in the Big Horn Basin.

Price Risk Management. Teton manages its overall exposure to commodity price fluctuations through the use of various hedging contracts for some of its production. The duration of various hedging contracts depends on the Company's view of market conditions, available contract prices and operating strategy. The use of such contracts is intended to limit the risk of fluctuating cash flows. As of December 31, 2007, Teton had hedging contracts in effect for approximately 31 percent of its then-current daily net production (increased to approximately 78 percent when the Company added 2,000 MMBtus per day of production hedges via costless collars at February 1, 2008).

Balance Sheet. At December 31, 2007, Teton had total assets of $78.3 million, cash and cash equivalents in short-term investments of $24.6 million, total long-term debt outstanding of $8 million and a long term debt to capitalization ratio of 16 percent.

CEO comments. Karl Arleth, President and Chief Executive Officer, commented, "Teton Energy experienced a very active and productive year in 2007 as we realized double digit growth in revenues, production and reserves. We also increased our acreage leasehold by over 200 percent and now have an interest in over one million gross acres. We have also furthered our goal of operatorship by acquiring positions in four new operated areas, including three areas in the D-J Basin and a position in the Big Horn Basin of Wyoming. We look forward to 2008 as we work to economically grow production and reserves and increase value for all of our stakeholders."

Earnings conference call. Teton invites you to participate in its fourth quarter and year-end 2007 earnings conference call today March 13, 2008 at 9:30 a.m. (Mountain Time) by dialing (877) 407-9210 (Toll Free) or (201) 689-8049 (International). Please dial in five to ten minutes before the start of the call. A replay of the conference call will be available through midnight, March 22, 2008 by dialing (877) 660-6853 (Toll Free) or (201) 612-7415 (International), pass code 277864 and account #286. Both numbers are needed for the replay. The live conference call may also be accessed on the Internet by logging onto Teton's Web site at http://www.teton-energy.com. Select Investor Relations, then the Webcasts and Presentations option on the menu. Log on at least ten minutes prior to the start of the call to register, download and install any necessary audio software. An audio replay of the call will also be available on the web site for approximately 60 days following the live webcast.

    Financial Results:
    (In thousands except per share amounts)

                                          Quarter Ended        Year Ended
                                           December 31,        December 31,
                                          2007      2006      2007      2006
    Operating revenues:
      Oil and gas sales                  $2,748    $1,309    $6,253    $4,022
      Gain on sale of oil and gas
       properties                        17,441         -    17,441         -
    Total Operating Revenues             20,189     1,309    23,694     4,022

    Operating expenses:
      Lease operating expense               402         3       705       325
      Transportation expense                162       189       652       493
      Production taxes                      158        79       412       251
      Exploration expense                 1,109       194     1,847       448
      General and administrative          3,156     2,765     8,981     7,148
      Deprecation, depletion and
       accretion expense                  1,190       671     3,832     1,749
          Total operating expenses        6,177     3,901    16,429    10,414

      Operating income (loss)            14,012    (2,592)    7,265    (6,392)

    Other income (expense):
      Realized gain on oil and gas
       derivative contracts                 399         -     1,181         -
      Unrealized (loss) gain on oil
       and gas derivative contracts        (786)      403      (857)      403
      Gain (loss) on derivative contract
       liabilities                           70         -    (2,624)        -
      Interest income                       344        63       425       293
      Interest expense                   (1,664)      (12)   (3,013)      (28)
          Total other income (expense)   (1,637)      454    (4,888)      668

    Net income (loss)                   $12,375   $(2,138)   $2,377   $(5,724)

    Basic income (loss) per common share  $0.77    $(0.14)    $0.14    $(0.44)

    Fully diluted income (loss) per
     common share                         $0.76    $(0.14)    $0.13    $(0.44)



    Condensed Consolidated Balance Sheet:
    (Dollars in thousands)
                                                              December 31,
                                                            2007        2006
    Assets:
    Cash and cash equivalents                             $24,616      $4,325
    Other current assets                                    4,385       1,955
    Total current assets                                   29,001       6,280
    Net property and equipment                             49,139      34,772
    Other non-current assets                                  159         192
    Total assets                                          $78,299     $41,244

    Liabilities and Stockholders' Equity:
    Current liabilities                                   $20,742      $7,399
    Long-term debt                                          8,000           -
    Other long-term liabilities                               529          78
    Total liabilities                                      29,271       7,477
    Total stockholders' equity                             49,028      33,767
    Total liabilities and stockholders' equity            $78,299     $41,244



    Operating Results:
                                               Quarter            Year
                                         Ended December 31, Ended December 31,
                                             2007     2006    2007     2006
    Net production volumes (Mcfed)          3,811    2,826   3,362    2,020
    Realized price (pre hedging)($/Mcfe)   $ 7.84   $ 5.03  $ 5.10   $ 5.46
    Realized price (net of hedging)($/Mcfe)$ 8.98   $ 5.03  $ 6.06   $ 5.46
    Lease operating expense ($/Mcfe)       $ 1.15   $ 0.01  $ 0.57   $ 0.44
    Transportation expense ($/Mcfe)        $ 0.46   $ 0.73  $ 0.53   $ 0.67
    Production taxes ($/Mcfe)              $ 0.45   $ 0.30  $ 0.34   $ 0.34
    Gross margin ($/Mcfe) (1)              $ 6.92   $ 3.99  $ 4.62   $ 4.01
    Exploration expense ($/Mcfe) (2)       $ 3.16   $ 0.75  $ 1.51   $ 0.61

    (1) Gross margin is realized price (net of hedging) less lease operating
        expense, transportation expense and production taxes.
    (2) Includes delay rentals, geological and geophysical.

Company Description. Teton Energy Corporation is an independent oil and gas exploration and production company focused on the acquisition, exploration and development of North American properties. The Company's current operations are concentrated in the prolific Rocky Mountain region of the U.S. Teton has leasehold interests in the eastern Denver-Julesburg Basin in Colorado, Kansas and Nebraska, the Piceance Basin in western Colorado, the Williston Basin in North Dakota and the Big Horn Basin in Wyoming. Teton is headquartered in Denver, Colorado and is publicly traded on the American Stock Exchange under the ticker symbol "TEC". For more information about Teton, please visit the Company's website at http://www.teton-energy.com.

Forward-Looking Statements. This news release may contain certain forward-looking statements, including declarations regarding Teton's and its subsidiaries' expectations, intentions, strategies and beliefs regarding the future within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements contained herein are based upon information available to Teton's management as at the date hereof and actual results may vary based upon future events, both within and without the control of Teton's management, including risks and uncertainties that could cause actual results to differ materially including, among other things, the impact that additional acquisitions may have on Teton and its capital structure, exploration results, market conditions, oil and gas price volatility, uncertainties inherent in oil and gas production operations and estimating reserves, unexpected future capital expenditures, competition, governmental regulations, and other factors discussed in the Company's Annual Report on Form 10-K for the year ended December 31, 2006, filed with the Securities and Exchange Commission. Teton's disclosure reports are on file at the Securities and Exchange Commission and can be viewed on Teton's website at http://www.teton-energy.com. Copies are available without charge upon request from the Company.

     Investor contact:
     Ron Wirth
     Director of Investor Relations
     & Administration
     303-565-4600 X124
     rwirth@teton-energy.com