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Press release from GlobeNewswire (a Nasdaq OMX company)

Coastal Energy Announces Second Quarter 2013 Financial Results & Operations Update

Monday, August 12, 2013

Coastal Energy Announces Second Quarter 2013 Financial Results & Operations Update

13:05 EDT Monday, August 12, 2013

HOUSTON, Aug. 12, 2013 (GLOBE NEWSWIRE) -- Coastal Energy Company (the "Company" or "Coastal Energy") (TSX:CEN) (AIM:CEO), an independent exploration and production company with assets in Southeast Asia, announces the financial results for the three and six months ended June 30, 2013. The functional and reporting currency of the Company is the United States dollar.

Q2 2013 Financial Highlights

  • The Company reported Q2 total production of 23,843 boe/d, up 10% from year ago levels of 21,713 boe/d. Offshore production totaled 21,095 bbl/d, a 9% increase from year ago levels of 20,778 bbl/d. Offshore production was affected by mechanical downtime on two horizontal wells at Bua Ban North due to problems with a new completion technology. One of these wells has since been repaired and is performing in line with expectations. Onshore production was 2,748 boe/d, up 16% from 2,362 boe/d in the same period last year due to stronger natural gas demand in Thailand.
  • EBITDAX for Q2 2013 was $83.3 million, a 36% decline from the $130.2 million recorded in Q2 2012. The decrease in EBITDAX was driven entirely by the timing of crude oil sales, as the Company recorded an increase in crude oil inventory of 526,017 bbl during the second quarter, the revenue from which will be recognized in the third quarter.
  • Cash flow from operations per fully diluted share was $0.82, a decrease from the year ago level of $1.18, also driven by crude oil sales timing and the inventory build.
  • After normalizing revenue to a production basis, rather than based on lifting volumes, Q2 2013 revenue would have been $188.6 million, a 3% increase over year ago levels, driven by a 9% increase in production volumes and offset by a 5% decline in commodity pricing.

Operations Update

The Company has completed repair work on the first of two horizontal wells at Bua Ban North that experienced issues with the "swelling packer" completion. The repair work on the second well will be completed with a hydraulic workover unit later in August. The Company also drilled two additional water injection wells at Bua Ban North B for pressure maintenance in two separate fault blocks. The Manta drilling rig is currently being mobilized to Malaysia to begin the work program at the Kapal field.

The Company has begun to build on the success of its pilot hydraulic fracturing program which was completed in the first quarter. A total of five wells at Bua Ban Main have been sidetracked and the new wellbores have been designed to optimize fracture completion results. The frac equipment is expected to arrive in mid-August and the first frac well is expected to be onstream by early September.

Offshore production averaged 20,290 bbl/d for the month of July. Offshore production was affected by 3 days of downtime at the Bua Ban North B platform in July to bring the newly drilled water injectors onstream. Onshore production for July averaged 2,012 boe/d, lower than previous months due to normal seasonal maintenance at the Nam Phong plant, bringing total Company production to 22,302 boe/d for the month.

Randy Bartley, President & CEO of Coastal Energy commented:

"The first half of 2013 has met us with both continued success along with some operational headwinds. Total Company production for the second quarter increased 10% year over year, but offshore production has been affected by some operational and mechanical issues. Our previously expected offshore production ramp up has been further delayed by damage that was sustained to the two Mobile Offshore Production Units ("MOPUs") which were scheduled to be placed in service by the beginning of the third quarter. This has delayed initial production in Malaysia and the start-up of Songkhla H production in the Gulf of Thailand by approximately one quarter. Onshore production remains strong and has grown 16% year over year, and we expect onshore production levels to remain elevated.

"During the second quarter the Company re-initiated its Normal Course Issuer Bid to repurchase up to 5% of the Company's outstanding shares. Management believes that this is an effective and accretive use of free cash flow at current market prices. The Company has already repurchased 259,800 shares at an average price of C$15.30.

"Although the Company has encountered some operational challenges in the first half of 2013, these have largely been resolved and we expect continued growth as we continue to develop and explore our asset base."

The following financial statements for the Company are abbreviated versions. The Company's complete financial statements for the three and six months ended June 30, 2013 with the notes thereto and the related Management Discussion and Analysis can be found either on Coastal's website at www.CoastalEnergy.com or on SEDAR at www.sedar.com. All amounts are in US$ thousands, except share and per share amounts.

         
  Three months ended Six months ended
  June 30, June 30,
   2013   2012   2013   2012 
         
Revenues and Other Income        
Oil sales  136,904  194,639  363,704  383,718
Royalties  (14,037)  (20,514)  (40,347)  (40,757)
Oil sales, net of royalties  122,867  174,125  323,357  342,961
Reimbursement of expenses under Malaysia risk service contract  4,486  --  6,771  --
Other income (Note 12)  (1,015)  9,778  (754)  (393)
   126,338  183,903  329,374  342,568
         
Expenses        
Production  35,601  41,164  78,534  77,374
Malaysia risk service contract  4,486  --   6,771  -- 
Depreciation and depletion (Note 7)  13,878  18,590  37,183  38,634
Net profits interest (Note 13)  (7)  869  1,919  869
General and administrative  8,269  7,057  16,050  15,384
Exploration (Note 6)  13,230  286  13,230  286
Debt financing fees  1,045  351  1,573  632
Finance  132  195  1,347  1,201
(Gain) loss on property, plant and equipment  15  --   (4)  -- 
   76,649  68,512  156,603  134,380
         
Net income before income taxes, share of earnings from Apico LLC  49,689  115,391  172,771  208,188
         
Share of earnings from Apico LLC (Note 8)  5,391  5,497  10,609  9,504
         
         
Net income before income taxes  55,080  120,888  183,380  217,692
         
Income taxes (Note 15)        
Current  (2,062)  45,289  43,003  81,897
Deferred  37,185  32,095  67,424  43,798
   35,123  77,384  110,427  125,695
         
Net income and comprehensive income  19,957  43,504  72,953  91,997
         
Net income and total comprehensive income attributable to:        
Shareholders of Coastal Energy  18,905  42,150  70,984  90,285
Non-controlling interest  1,052  1,354  1,969  1,712
   19,957  43,504  72,953  91,997
         
Net income per share:        
Basic (Note 14)  0.17  0.37  0.62  0.79
Diluted (Note 14)  0.16  0.36  0.61  0.76
         
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
         
     
  June 30  December 31, 
As at 2013 2012
   $   $ 
     
Assets    
Current Assets    
Cash  39,022  63,897
Restricted cash (Note 4)  6,442  6,452
Accounts receivable (Note 5)  33,897  56,848
Derivative asset (Note 11)  84  132
Crude oil inventory  21,754  15,611
Marine fuel inventory 5,682 5,245
Prepaids and other current assets  3,969  628
Total current assets  110,850  148,813
     
Non-Current Assets    
Exploration and evaluation assets (Note 6)  66,849  118,350
Property, plant and equipment (Note 7)  711,503  560,493
Investment in Apico LLC (Note 8)  65,806  60,266
Deposits and other assets  6,265  6,271
Total non-current assets  850,423  745,380
Total Assets  961,273  894,193
     
Liabilities    
Current Liabilities    
Accounts payable and accrued liabilities (Note 9)  139,799  217,757
Current portion of long-term debt (Note 11)  22  34
Current portion of derivative liabilities (Note 11)  181  1,372
Total current liabilities  140,002  219,163
     
Non-Current Liabilities    
Long-term debt (Note 11)  95,933  95,066
Non-current portion of derivative liabilities (Note 11)  14  502
Derivative liability - warrants (Note 10)  2,396  3,784
Deferred tax liabilities  165,847  98,423
Decommissioning liabilities  45,599  46,726
Total non-current liabilities  309,789  244,501
     
Shareholders' Equity (Note 14)    
Common shares  215,141  213,260
Contributed surplus  22,292  18,940
Warrants    
Retained earnings  264,807  193,877
Total Shareholders' Equity  502,240  426,077
Non-controlling interest  9,242  4,452
Total equity  511,482  430,529
Total liabilities and equity  961,273  894,193
     
Commitments and contingencies (Note 17)
     
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
     
         
  Three months ended Six months ended
  June 30, June 30,
   2013   2012   2013   2012 
Operating activities        
Net income  19,957  43,504  72,953  91,997
Adjustments:        
Share of earnings from Apico LLC  (5,391)  (5,497)  (10,609)  (9,504)
Unrealized gain on derivative instruments  (1,414)  (15,892)  (1,631)  (11,885)
Depletion and depreciation  13,878  18,590  37,183  38,634
Finance expense  132  195  1,347  1,201
Amortisation of debt financing fees  339  351  867  632
Share-based compensation  1,383  1,645  3,867  4,636
Deferred income taxes  37,185  32,095  67,424  43,798
Unrealized foreign exchange (gain) loss  616  (158)  (404)  (66)
Gains (losses) on disposal of
property, plant and equipment
 15  --  (4)  --
Exploration expense  13,230  286  13,230  286
Income taxes paid  (71,733)  (129)  (78,717)  (129)
Interest received  8  1  35  3
Interest paid  (1,043)  (531)  (2,161)  (1,252)
Dividends received from Apico LLC  2,729  --  5,069  --
   9,891  74,460  108,449  158,351
Change in non-cash working capital:        
Accounts receivable  111,813  4,306  22,951  (11,231)
Inventory  (13,490)  3,584  (6,580)  (1,892)
Prepaids and other current assets  (2,412)  (710)  (3,341)  38
Accounts payable and accrued liabilities  (7,628)  11,124  (14,565)  (8,233)
Current income taxes payable  (2,062)  45,160  43,003  81,768
Cash flow provided by operating activities  96,112  137,924  149,917  218,801
         
Financing Activities        
Issuance of common shares, net of issuance costs  --  1,034  1,288  2,026
Cash settlement of restricted stock units  --  --  (156)  --
Repurchase of shares  --  (15,033)  --  (15,033)
Borrowings under long-term debt  --  --  15,000  --
Repayment of long-term debt  --  --  (15,000)  (30,000)
Loan arrangement fees  (12)  (222)  (12)  (968)
Distributions to non-controlling interest  (1,326)  (1,792)  (2,619)  (1,792)
Contributions from non-controlling interest  3,451  --  5,440  --
Cash flow provided by (used in) financing activities  2,113  (16,013)  3,941  (45,767)
         
Investing Activities        
Decrease in restricted cash  42  18  10  22,054
Expenditure on property, plant and equipment  (80,997)  (45,698)  (176,969)  (90,927)
Acquisition of increased ownership interest in Apico LLC  --  --  --  (9,250)
Proceeds from disposal of property, plant and equipment  --  --  533  --
Deposits and other assets  --  131  --  131
Cash flow used in investing activities  (80,955)  (45,549)  (176,426)  (77,992)
         
Effect of exchange rate changes on cash  (1,797)  (616)  (2,307)  (1,391)
         
(Decrease) increase in cash  15,473  75,746  (24,875)  93,651
Cash - Beginning of period  23,549  40,900  63,897  22,995
Cash - End of period  39,022  116,646  39,022  116,646
         
The accompanying notes are an integral part of these condensed interim consolidated financial statements.

Randy Bartley, President and Chief Executive Officer of the Company and a member of the Society of Petroleum Engineering and Jerry Moon, Vice President, Technical & Business Development, a member of the American Association of Petroleum Geologists, a Licensed Professional Geoscientist and a Certified Petroleum Geologist in the state of Texas, have reviewed the contents of this announcement.

Additional information, including the Company's complete competent person's report may be found on the Company's website at www.CoastalEnergy.com or may be found in documents filed on SEDAR at www.sedar.com.

This statement contains 'forward-looking statements' as defined by the applicable securities legislation. Statements relating to current and future drilling results, existence and recoverability of potential hydrocarbon reserves, production amounts or revenues, forward capital expenditures, operation costs, oil and gas price forecasts and similar matters are based on current data and information and should be viewed as forward-looking statements. Such statements are not guarantees of future results and are subject to risks and uncertainties beyond Coastal Energy's control. Actual results may differ substantially from the forward-looking statements.

CONTACT: Enquiries:
Coastal Energy Company
Email: investor@CoastalEnergy.com
+1 (713) 877-6793
Strand Hanson Limited (Nominated Adviser)
Rory Murphy / Andrew Emmott
+44 (0) 20 7409 3494
Macquarie Capital (Europe) Limited (Broker)
Steve Baldwin/Andrew Jones
+44 (0) 20 3037 2000
FirstEnergy Capital LLP (Broker)
Hugh Sanderson / Travis Inlow
+44 (0) 20 7448 0200
Buchanan
Tim Thompson / Ben Romney
+44 (0) 20 7466 5000

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