Coastal Energy Announces Third Quarter 2013 Financial Results & Operations Update

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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

Source:Coastal Energy Company