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Press release from GlobeNewswire (a Nasdaq OMX company)

Coastal Energy Announces Third Quarter 2013 Financial Results & Operations Update

Monday, November 11, 2013

Coastal Energy Announces Third Quarter 2013 Financial Results & Operations Update

05:45 EST Monday, November 11, 2013

HOUSTON, Nov. 11, 2013 (GLOBE NEWSWIRE) -- Coastal Energy Company (the "Company" or "Coastal Energy") (TSX:CEN) (LSE:CEO), an independent exploration and production company with assets in Southeast Asia, announces the financial results for the three and nine months ended September 30, 2013. The functional and reporting currency of the Company is the United States dollar.

Q3 2013 Financial Highlights

  • The Company's offshore production increased to 20,388 bbl/d in the third quarter from 19,626 bbl/d in the same period last year due to increases from further development drilling at Bua Ban North as well as the inclusion of production at Bua Ban South. Total Company production increased slightly to 21,832 boe/d from 21,798 boe/d in the same quarter last year as onshore gas production declined to 1,444 boe/d from 2,172 boe/d due to extended seasonal maintenance at the Nam Phong power plant. Total Company production for the nine-month period increased slightly to 22,942 boe/d from 22,093 boe/d in the same period last year due to further development drilling.
     
  • EBITDAX for Q3 2013 was $134.6 million, 18% higher than the $114.6 million recorded in Q3 2012 due to higher production and lifting volumes. The Company's inventory levels decreased by 77,437 barrels in Q3 2013 whereas 121,445 barrels were added to inventory during Q3 2012. The Company's EBITDAX for the nine-month period is in line with 2012 levels despite a modest decline in realized crude pricing due to higher production and lifting volumes.
     
  • After normalizing revenue to a production basis, rather than based on lifting volumes, Q3 2013 revenue would have been $193.8 million, a 6% increase year on year, driven by a 4% increase in production volumes and a 2% decline in commodity pricing.

Operations Update

The Company has completed two development wells at the Kapal field in Malaysia and is currently drilling a third. The Mobile Offshore Production Unit (MOPU) refurbishment has been completed and the MOPU is expected to arrive on location later this month. First oil production at Kapal is expected shortly thereafter.

Following the completion of drilling at the Kapal field, the Manta drilling rig will mobilize to the Meranti field offshore Malaysia and begin appraisal & development drilling there.

Four of five wells at Bua Ban Main have undergone hydraulic fracturing stimulation. The first two wells (BB01 ST1 and BB04 ST1) tested the Eocene sands. The third and fourth wells (BB07 ST1 and BB09 ST1) are testing the Eocene and the Lower Oligocene. The BB07 ST1 and the BB09 ST1 are still cleaning up with increasing oil cuts. The fifth well (BB02 ST1) will be drilled horizontally into the Eocene. BB01 ST1 and BB04 ST1 are flowing mostly water at low rates with slight amounts of oil.

The Songkhla A18, the eastern side of the basin, is also being hydraulically fractured to test the viability of fracturing the Eocene reservoir on the eastern side of the basin.

Following the completion of the frac activities and workovers at Bua Ban Main, the Vickburg rig will have completed its contract and will be released. Approval of the EIA application for eleven exploration wells is expected in the coming weeks. Following this Coastal will submit the application for the Bua Ban development area, which we expect to be approved near the end of the first quarter. Once these are in place, a second rig will likely be contracted in order to maintain a balance between exploration and production.

A successful exploration well was drilled on Block L15/43 onshore Thailand (Coastal 39.0% working interest). The Sinphuhorm East 1 flowed at a restricted rate of 51 MMCF/D from the same horizon that is productive at Sinphuhorm field. The well proves the field extends beyond the current production license into the L15/43 exploration acreage surrounding the Sinphuhorm field. The well did not encounter a gas water contact.

Randy Bartley, President & CEO of Coastal Energy commented:

"The Company continued to make progress in the third quarter of 2013. The first wells at the Kapal field were drilled and we expect first production in Malaysia very shortly. Offshore Thailand production increased slightly from year ago levels and we expect gains to offshore production once the development drilling program at Bua Ban North resumes.

"Regarding our frac progam, the original Bua Ban South frac wells continue to perform in line with expectations after ten months of production. In our latest campaign at Bua Ban Main, the first two wells, which fracced much deeper into the Eocene, have been disappointing. However, the early results of the third and fourth wells in the Eocene and Lower Oligocene sandstone are encouraging. We are still early on the learning curve and are applying multiple fracture technologies to the various prospective reservoirs in the Bua Ban and Songkhla Main fields in order to determine the optimum method for producing these reservoirs. There is a significant amount of oil in place in these tighter reservoirs and we continue to be excited about the application of fracture technology in the Songkhla Basin.

"Onshore, we are very pleased with our second discovery drilled using the 3D seismic data acquired in 2011 and expect to continue to grow our onshore business. Onshore production was lower than previous levels due to increased maintenance at the Nam Phong power plant. However, year-to-date onshore production is still well above 2012 levels.

"We plan to move the rig to the Meranti field in Malaysia following completion of the work at Kapal, which will serve to increase production in Malaysia in late 2013 to early 2014."

The following financial statements for the Company are abbreviated versions. The Company's complete financial statements for the three and nine months ended September 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 Nine months ended
  September 30, September 30,
   2013   2012   2013   2012 
         
Revenues and Other Income        
Oil sales  201,762  170,894  565,466  554,612
Royalties  (22,632)  (18,305)  (62,979)  (59,062)
Oil sales, net of royalties  179,130  152,589  502,487  495,550
Reimbursement of expenses under Malaysia risk service contract  30,967  --  37,738  --
Other income (Note 12)  (1,361)  (5,122)  (2,115)  (5,515)
   208,736  147,467  538,110  490,035
         
Expenses        
Production  38,448  32,718  116,982  110,092
Malaysia risk service contract  30,967  --   37,738  -- 
Depreciation and depletion (Note 7)  17,298  14,778  54,481  53,412
Net profits interest (Note 13)  --   39  1,919  908
General and administrative  11,358  9,125  27,408  24,509
Exploration (Note 6)  665  7,191  13,895  7,477
Debt financing fees  4,228  501  5,801  1,133
Finance  2,579  1,940  3,926  3,141
Gain on property, plant and equipment  --   (252)  (4)  (252)
   105,543  66,040  262,146  200,420
         
Net income before income taxes, share of        
earnings from Apico LLC  103,193  81,427  275,964  289,615
         
Share of earnings from Apico LLC (Note 8)  2,798  4,537  13,407  14,041
Net income before income taxes  105,991  85,964  289,371  303,656
         
Income taxes (Note 15)        
Current  32,774  42,135  75,777  124,032
Deferred  21,378  2,778  88,802  46,576
   54,152  44,913  164,579  170,608
         
Net income and comprehensive income  51,839  41,051  124,792  133,048
         
Net income and total comprehensive income attributable to:        
Shareholders of Coastal Energy  50,720  40,100  121,704  130,385
Non-controlling interest  1,119  951  3,088  2,663
   51,839  41,051  124,792  133,048
         
Net income per share:        
Basic (Note 14)  0.45  0.35  1.07  1.15
Diluted (Note 14)  0.44  0.34  1.04  1.10
         
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
         
  September 30  December 31, 
As at 2013 2012
   $   $ 
     
Assets    
Current Assets    
Cash  66,213  63,897
Restricted cash (Note 4)  4,434  6,452
Accounts receivable (Note 5)  66,889  56,848
Derivative asset (Note 11)  101  132
Crude oil inventory  23,494  15,611
Marine fuel inventory 4,951 5,245
Prepaids and other current assets  2,297  628
Total current assets  168,379  148,813
     
Non-Current Assets    
Exploration and evaluation assets (Note 6)  69,545  118,350
Property, plant and equipment (Note 7)  790,987  560,493
Investment in Apico LLC (Note 8)  64,900  60,266
Deposits and other assets  6,265  6,271
Total non-current assets  931,697  745,380
Total Assets  1,100,076  894,193
     
Liabilities    
Current Liabilities    
Accounts payable and accrued liabilities (Note 9)  190,725  217,757
Current portion of long-term debt (Note 11)  37  34
Current portion of derivative liabilities (Note 11)  1,662  1,372
Total current liabilities  192,424  219,163
     
Non-Current Liabilities    
Long-term debt (Note 11)  110,800  95,066
Non-current portion of derivative liabilities (Note 11)  515  502
Derivative liability - warrants (Note 10)  3,468  3,784
Deferred tax liabilities  187,225  98,423
Decommissioning liabilities  43,955  46,726
Total non-current liabilities  345,963  244,501
     
Shareholders' Equity (Note 14)    
Common shares  214,754  213,260
Contributed surplus  24,215  18,940
Retained earnings  310,068  193,877
Total Shareholders' Equity  549,037  426,077
Non-controlling interest  12,652  4,452
Total equity  561,689  430,529
Total liabilities and equity  1,100,076  894,193
     
Commitments and contingencies (Note 17)    
     
The accompanying notes are an integral part of these condensed interim consolidated financial statements.
     
  Three months ended Nine months ended
  September 30, September 30,
   2013   2012   2013   2012 
Operating activities        
Net income  51,839  41,051  124,792  133,048
Adjustments:        
Share of earnings from Apico LLC  (2,798)  (4,537)  (13,407)  (14,041)
Unrealized loss (gain) on derivative instruments  1,965  362  334  (11,523)
Depletion and depreciation  17,298  14,778  54,481  53,412
Finance expense  2,579  1,940  3,926  3,141
Amortisation of debt financing fees  4,079  147  4,946  779
Share-based compensation  5,453  5,531  9,320  10,167
Deferred income taxes  21,378  2,778  88,802  46,576
Unrealized foreign exchange loss (gain)  826  17  422  (49)
Gains on disposal of property, plant and equipment  --  (252)  (4)  (252)
Exploration expense  665  7,191  13,895  7,477
Income taxes paid  (21,880)  (63,527)  (100,597)  (63,656)
Interest received  133  2  168  5
Interest paid  (1,140)  (318)  (3,301)  (1,570)
Dividends received from Apico LLC  3,704  9,943  8,773  9,943
   84,101  15,106  192,550  173,457
Change in non-cash working capital:        
Accounts receivable  (32,992)  (49,066)  (10,041)  (60,297)
Inventory  (1,009)  (1,325)  (7,589)  (3,217)
Prepaids and other current assets  1,672  106  (1,669)  144
Accounts payable and accrued liabilities  18,925  6,348  4,360  (1,885)
Current income taxes payable  18,931  45,520  61,934  127,288
Cash flow provided by operating activities  89,628  16,689  239,545  235,490
         
Financing Activities        
Issuance of common shares, net of issuance costs  317  727  1,605  2,753
Cash settlement of restricted stock units  (6,275)  --  (156)  --
Repurchase of shares  --  (3,712)  (6,275)  (18,745)
Borrowings under long-term debt  15,000  50,000  30,000  50,000
Repayment of long-term debt  --  --  (15,000)  (30,000)
Loan arrangement fees  (4,200)  (2,915)  (4,212)  (3,883)
Distributions to non-controlling interest  (1,335)  (1,074)  (3,954)  (2,866)
Contributions from non-controlling interest  3,626  --  9,066  --
Cash flow provided by (used in) financing activities  7,133  43,026  11,074  (2,741)
         
Investing Activities        
Decrease in restricted cash  2,008  (20)  2,018  22,034
Expenditure on property, plant and equipment  (70,953)  (140,551)  (247,922)  (231,478)
Acquisition of increased ownership interest in Apico LLC  --  --  --  (9,250)
Proceeds from disposal of property, plant and equipment  --  352  533  352
Deposits and other assets - Payments  --  (6,000)  --  (6,000)
Deposits and other assets - Refunds  --  --  --  131
Cash flow used in investing activities  (68,945)  (146,219)  (245,371)  (224,211)
         
Effect of exchange rate changes on cash  (625)  (875)  (2,932)  (2,266)
         
Increase (decrease) in cash  27,191  (87,379)  2,316  6,272
Cash - Beginning of period  39,022  116,646  63,897  22,995
Cash - End of period  66,213  29,267  66,213  29,267
         
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: 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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