Adjusted EBITDA was $53 million in the first quarter 2009, down by 23%, compared with $69 million in the fourth quarter of 2008 and down 31% from $77 million in the first quarter of 2008. Adjusted EBITDA comprises of $10 million in the first quarter of 2009 and $22 million in the fourth quarter of 2008 of realized gains resulting from the restructuring of derivative instruments in those periods.

Adjusted earnings were $6.5 million compared with $5.3 million for the fourth quarter of 2008 and $16.5 million in the first quarter of 2008. Adjusted earnings adjusts the net income of $25 million in the first quarter of 2009, the net loss of $414 million in fourth quarter of 2008 and the net loss of $25 million in the first quarter of 2008 for, among other things, the effects of unrealized commodity and interest derivatives gains / losses in the quarters and a ceiling test impairment in the fourth quarter of 2008.

By shedding our Hastings property, with its high unit operating costs, and working to reduce overall costs in our remaining assets, we’ve been able to lower our costs substantially. Also, our technical staff and operations teams have been focused on efficiency improvement projects, incremental production projects and / or cost reduction projects, said Tim Marquez, Venoco’s chairman and chief executive officer. This is a great start to the year – we are ahead of annual guidance on production and we are under guidance on lease operating expenses, G&A expense and DD&A. We realize it’s early in the year, so we remain cautious and are not adjusting our annual guidance at this time.

Production

Production in the first quarter of 2009 comprised 33 days of production from the Hastings complex prior to the sale of the complex to Denbury Resources. For the balance of the quarter, only volumes related to the retained 2% overriding royalty are incorporated in the company’s production volumes. First quarter 2009 production was up 3% compared with first quarter 2008; excluding Hastings, production increased 13% over the first quarter of 2008. Production was down in the first quarter of 2009 compared with the fourth quarter of 2008; excluding Hastings, production was up 4% quarter-to-quarter.

Total costs incurred for the company’s E&P operations, together with drilling, completion, acquisition, seismic, leasehold, capitalized G&A costs and asset retirement obligations, were $53 million for first quarter, including $37 million for drilling and rework activities, $4 million for facilities and $2 million for acquisitions in its core areas.

Venoco has invested $35 million or 67% of its development and other capital expenditures in the Sacramento basin. Drilling in the basin was decreased to a three-rig program by mid-February 2009. Venoco has spud 24 wells and completed 57 workovers / recompletions in the basin in first quarter of 2009.

We reduced our Sac Basin drilling program from six rigs at the beginning of the year to three rigs currently. We have also increased our workover activity compared to 2008. We expect our capital outlays in the Basin to be lower in subsequent quarters as a result of the reduction in drilling rigs, Marquez said. The drilling program in the Sac Basin has been very successful over the years and we see ample opportunity in coming years. While we are constantly working to improve efficiencies, we expect the wells we are drilling to have a greater than 20% risked rate-of-return at the current NYMEX strip.

A substantial portion of our efforts in the Basin this year are focused on our workover program, Marquez said. We are very pleased with the pace and performance of these very economic workovers and recompletions.

The company has invested $9 million or 18% of its first quarter 2009 capital expenditures in Southern California, focused on further infill development drilling in the West Montalvo field and substantial facility upgrades to improve offshore processing and operating efficiency. Venoco has completed two wells in January 2009 that were spud in December 2008. Startup of drilling activity on platform Gail in the Sockeye field began late in the quarter for a dual completion well that will produce from the Monterey and inject water to enhance the sweep of the waterflood. Furthermore, in Southern California the South Ellwood crude oil sales contract is up for renewal at the end of the third quarter. The company’s current discount to NYMEX is about $20 per barrel, which is expected to improve.

We’ve had good success with our drilling efforts at West Montalvo and saw production in the quarter reach its highest level in 30-years. There is more upside in this field which we will continue to pursue throughout 2009, said Marquez.

In Texas, Venoco had minimal capital expenditures in first quarter of 2009, but has a well planned to spud in the second quarter of 2009.

Lease Operating Expenses

Venoco’s first quarter 2009 lease operating expenses was down by 39% to $11.78 per BOE from $19.21 per BOE in the fourth quarter 2008 and 20% from $14.68 per BOE in the first quarter 2008. The unit operating cost decrease in the quarter was because of increased production from the Sacramento basin (which has lower operating costs), realized cost savings from vendors and service providers and the sale of the Hastings complex (one of the company’s highest operating cost fields). Pro forma for the sale of Hastings, lease operating expenses were $11.43/BOE in the first quarter 2009, $12.24/BOE in the first quarter of 2008 and $16.11/BOE in the fourth quarter of 2008.

We had a solid quarter with good performance throughout the company on multiple levels from production to expenses. The results in the Sacramento Basin and at our West Montalvo field were excellent and have set us up well for meeting or possibly exceeding annual guidance, Marquez explained.