HOUSTON, May 15, 2014 /PRNewswire/ -- Sabine Oil & Gas LLC ("Sabine" or the "Company") today reported its first quarter 2014 financial and operation results.
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Key First Quarter Results:
- Increased average daily production by 32% to 185 MMcfe/d in the first quarter of 2014, from 140 MMcfe/d in the same period of 2013, (excluding the effects of the North Texas property divesture in late 2013, the average daily production in the first quarter of 2014 increased by 58% from 117/MMcfe/d compared to the same period in 2013 on a pro forma basis). Oil production increased by 67% to 4,656 Bbl/d over the same period in 2013.
- Oil and natural gas liquids (collectively, "liquids") production volumes comprised 50% of revenues and 34% of total production.
- Liquids revenues and production for the quarter increased by 59% and 57%, respectively over the same period in 2013.
- Adjusted EBITDA for the first quarter of 2014 was $77.5 million, representing a 33% increase over the same period in 2013.
- In East Texas, completed two Cotton Valley horizontal wells which had an average IP30 of over 5.3 MMcfe/d, with 20% liquids.
- Also in East Texas, completed four wells in the Haynesville Shale covered under a joint development agreement (the "JDA") which averaged an IP30 of over 9.5 MMcf/d .The remaining four of the fifteen wells covered under the JDA are currently flowing back with encouraging results.
- In the Eagle Ford Shale, completed five wells (two pads) in the Sugarkane block in southern DeWitt County, with an average rate per well of over 1,760 BOEPD for a 30-day period ("IP30"), with 19% oil and 58% liquids.
- Also in the Eagle Ford Shale, completed six wells in the Shiner Area in northern DeWitt County and southern Lavaca County, which averaged an IP30 of over 1,000 BOEPD, with 36% oil and 70% liquids.
- Added approximately 8,100 net acres in our Shiner Area in the Eagle Ford through grassroots leasing, resulting in a first quarter Eagle Ford position of approximately 40,400 net acres.
- In North Texas, completed four Granite Wash wells which reached an average 24-hour production rate of over 1,300 BOEPD, with 64% oil and 75% liquids.
- The Company closed the acquisition of certain oil and natural gas properties in North Texas for $20.4 million, net of purchase price adjustments.
Commenting on the quarter's results Sabine's Chief Executive Officer David Sambrooks noted: "The quarter was right in line with our expectations as we continued to deliver highly economic wells. We completed 21 wells in the first quarter, which we expect to be our highest quarterly completion count this year, as compared to 9 completions in the fourth quarter of 2013. Our first quarter wells achieved an overall average IP24 hours rate of 1,510 BOEPD (50% liquids), and for the wells that had a 30 day production period, our IP 30 was 1,240 BOEPD (45% liquids). Although our low completion count in the fourth quarter of 2013 resulted in about a 6% decline in production in the first quarter of 2014 compared to the fourth quarter of 2013, our high first quarter completion count is forecast to drive significant production growth in the second and third quarters of 2014. As we have previously stated, production growth will be lumpy given our rig count and the types of wells we are drilling.However, the first quarter provided a solid foundation for production and cashflow growth for the year. We are reaffirming our full year guidance based on our first quarter well results."
Sabine and Forest Oil Corporation Combination Transaction
For information regarding the previously announced combination of Sabine and Forest Oil Corporation ("Forest"), please refer to the joint press release issued by Sabine and Forest dated May 6, 2014 and other documents filed with the SEC.
Results of the First Quarter 2014
Production volumes during the three months ended March 31, 2014 were 16.6 Bcfe, an increase of 4.03 Bcfe or approximately 32% from first quarter 2013 production. The increase in production is primarily due to an increase in production in South Texas through an active and successful development program in this region. These increases were partially offset by the December 2013 sale of our interests in certain oil and natural gas properties in the Texas Panhandle and surrounding Oklahoma area.
Revenues from production of oil, natural gas liquids and natural gas increased from $67.5 million in the first quarter of 2013 to $112.3 million in the first quarter of 2014, an increase of 66%. This increase of $44.8 million was a result of an increase in production of 32%, coupled with an increase in average prices per Mcfe of 26%.
During the first quarter of 2014, the Company's realized average price for natural gas including hedges was $4.65 per Mcf, or $0.43 per Mcf lower than the Company's unhedged realized average price of $5.08 per Mcf. The Company's realized average price of oil including hedges was $89.78 per Bbl, or $3.58 per Bbl lower than the Company's unhedged realized average price of $93.36 per Bbl. In the first quarter of 2014, our hedged volumes were approximately 86% and 82% of both our natural gas and oil volumes, respectively. The Company realized a loss on settlements of such derivative instruments for the first quarter of 2014 of $7.3 million. In the first quarter of 2013, our hedged volumes were approximately 94% and 61% of our natural gas and oil volumes, respectively, which resulted in a realized gain on settlements of such derivative instruments of $14.8 million.
Lease operating expenses increased from $9.6 million in the first quarter of 2013 to $11.3 million in the first quarter of 2014, an increase of 17%. The increase in lease operating expense of $1.6 million is primarily due to an increase in production in South Texas partially offset by the December 2013 sale of our interests in certain oil and natural gas properties in the Texas Panhandle and surrounding Oklahoma area. Lease operating expenses decreased from $0.77 per Mcfe in the first quarter of 2013 to $0.68 per Mcfe in the first quarter of 2014. The decrease of $0.09 per Mcfe is primarily due to higher production volumes associated with increased completion activity in the last twelve months.
Marketing, gathering, transportation and other expenses decreased from $4.5 million in the first quarter of 2013 to $4.4 million in the first quarter of 2014. Marketing, gathering, transportation and other expenses decreased on a per unit basis from $0.36 per Mcfe in the first quarter of 2013 to $0.26 per Mcfe in the first quarter of 2014. The per unit basis decrease is primarily due to our increasing oil volumes associated with our development activities in North Texas and South Texas regions, which are not subject to gathering and transportation charges, as well as a reduction in fees on a per unit of production basis attributable to volumes from our 2013 and 2014 completions in East Texas.
Production and ad valorem taxes increased from $3.5 million in the first quarter of 2013 to $5.6 million in the first quarter of 2014, an increase of 60%. Production and ad valorem taxes increased on a per unit basis from $0.28 per Mcfe in the first quarter of 2013 to $0.34 per Mcfe in the first quarter of 2014. The increase is primarily related to increased production in our South Texas region which is incurring higher production taxes on oil and natural gas liquids production, which was offset by a slight decrease in our North Texas production due to the December 2013 sale of our interests in certain oil and natural gas properties in the Texas Panhandle and surrounding Oklahoma area. The Company also expects to experience continued variability in its production taxes as a result of timing of approval for high cost gas tax exemptions. Production taxes as a percentage of oil and natural gas revenues were 5% for the both the first quarter of 2014 and 2013.
General and administrative expenses increased from $6.2 million in the first quarter of 2013 to $6.4 million in the first quarter of 2014, an increase of $0.2 million, or 4%, primarily as a result of higher overhead associated with our growing business and additional professional service fees paid in 2013 compared to the previous period. These increases were partially offset by decreased due diligence work from the first quarter of 2013 due to the December 2012 acquisitions. General and administrative expenses decreased from $0.49 per Mcfe in the first quarter of 2013 to $0.38 per Mcfe in the first quarter of 2014 reflecting efficiencies gained due to increased production without a proportionate increase in general and administrative expenses.
DD&A increased from $26.2 million in the first quarter of 2013 to $39.9 million in the first quarter of 2014, an increase of $13.7 million. Depletion, depreciation, and amortization increased from $2.08 per Mcfe in the first quarter of 2013 to $2.40 per Mcfe in the first quarter of 2014, or an increase of 15%. Increase in the DD&A rate is primarily driven by reductions to proved reserves due to the sale of certain oil and natural gas properties in North Texas during the fourth quarter of 2013.
Interest expense increased from $23.3 million in the first quarter of 2013 to $25.8 million in the first quarter of 2014, an increase of $2.5 million, or 11%, primarily as a result of lower capitalized interest. We capitalized $1.9 million and $3.9 million of interest expense for the three months ended March 31, 2014 and 2013, respectively.
The Company recognized a loss on derivative contracts of $14.8 million and $34.4 million for the first quarter of 2014 and 2013, respectively. The amount of future gain or loss recognized on derivative instruments is dependent upon future commodity prices.
Debt/Liquidity
As of March 31, 2014, our borrowing base under our First Lien Credit Facility was $620 million, and we had an outstanding balance of approximately $354.1 million, net of cash on hand. As of April 2, 2014, our borrowing base has been re-determined and increased from $620 million to $700 million. After giving the effect to our re-determined borrowing base, we were able to incur approximately $345 million of secured indebtedness under our First Credit Facility. As of May 15, 2014, the Company has drawn an additional $74 million and had an outstanding balance of $429 million.
Hedging
For the remainder of 2014 (April-December), the Company has NYMEX hedges in place for the calendar year of 2014 on approximately 135,000 MMbtu/d of its projected natural gas production, at a weighted average price of $4.27/ MMbtu, and 4,000 Bbl/day of oil production at a weighted average price of $92.18/bbl. For the calendar year of 2015, the Company has hedge contracts in place for 115,000 MMbtu/d of its projected natural gas production at a weighted average price of $4.18/MMbtu, and 4,375 Bbl/day of oil production at a weighted average price of $90.38/Bbl.
Sabine Oil & Gas LLC is an independent energy company engaged in the acquisition, production, exploration and development of onshore oil and natural gas properties in the United States. Our current operations are principally located in the Cotton Valley and Haynesville Shale in East Texas, the Eagle Ford Shale in South Texas, and the Granite Wash in the Texas Panhandle.
This press release includes "forward-looking statements." All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These statements include, but are not limited to forward-looking statements about plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company's drilling program, production, hedging activities, capital expenditure levels and other guidance. These statements are based on certain assumptions made by the Company based on management's experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These risks include, but are not limited to, commodity price volatility, inflation, lack of availability of drilling and production equipment and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating natural gas and oil reserves and in projecting future rates of production, cash flow, access to capital and the timing of development expenditures. For a detailed list of the Company's risk factors, please consult the Company's Annual Report, subsequent quarterly reports and other press releases posted at www.sabineoil.com.
Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.
Sabine Oil & Gas LLC | ||||
Operational and Financial Statistics (unaudited) | ||||
Three Months Ended | ||||
March 31, | ||||
2014 | 2013 | |||
Oil, NGL and natural gas sales by product (in thousands): | ||||
Oil | $39,123 | $23,519 | ||
NGL | 17,077 | 11,934 | ||
Natural gas | 56,106 | 32,070 | ||
Total | $ 112,306 | $ 67,523 | ||
Production data: | ||||
Oil (MBbl) | 419.06 | 250.67 | ||
NGL (MBbl) | 508.34 | 340.92 | ||
Natural gas (Bcf) | 11.05 | 9.03 | ||
Combined (Bcfe)(1) | 16.61 | 12.58 | ||
Average prices before effects of economic hedges (2): | ||||
Oil (per Bbl) | $93.36 | $93.83 | ||
NGL (per Bbl) | $33.59 | $35.00 | ||
Natural gas (per Mcf) | $5.08 | $3.55 | ||
Combined (per Mcfe)(1) | $6.76 | $5.37 | ||
Average realized prices after effects of economic hedges (2): | ||||
Oil (per Bbl) | $89.78 | $90.87 | ||
NGL (per Bbl) | $33.59 | $35.00 | ||
Natural gas (per Mcf) | $4.65 | $5.27 | ||
Combined (per Mcfe)(1) | $6.39 | $6.54 | ||
Average costs (per Mcfe)(1): | ||||
Lease operating | $0.68 | $0.77 | ||
Workover | $0.01 | $0.02 | ||
Marketing, gathering, transportation and other | $0.26 | $0.36 | ||
Production and ad valorem taxes | $0.34 | $0.28 | ||
General and administrative | $0.38 | $0.49 | ||
Depletion, depreciation and amortization | $2.40 | $2.08 | ||
(1) | Oil production was converted at six Mcf per Bbl to calculate combined production and per Mcfe amounts. |
(2) | Average prices shown in the table reflect prices both before and after the effects of our realized commodity hedging transactions. Our calculation of such effects includes realized gains or losses on cash settlements for commodity derivatives. |
Sabine Oil & Gas LLC | |||||
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) | |||||
Three Months Ended March 31, | |||||
2014 | 2013 | ||||
(in thousands) | |||||
Revenues | |||||
Oil, natural gas liquids and natural gas sales | $ 112,306 | $ 67,523 | |||
Other | 411 | 173 | |||
Total revenues | 112,717 | 67,696 | |||
Operating expenses | |||||
Lease operating | 11,270 | 9,635 | |||
Workover | 186 | 230 | |||
Marketing, gathering, transportation and other | 4,386 | 4,477 | |||
Production and ad valorem taxes | 5,592 | 3,491 | |||
General and administrative | 6,390 | 6,165 | |||
Depletion, depreciation and amortization | 39,925 | 26,172 | |||
Accretion | 217 | 209 | |||
Total operating expenses | 67,966 | 50,379 | |||
Other income (expenses) | |||||
Interest expense | (25,827) | (23,318) | |||
Loss on derivative instruments | (22,126) | (19,585) | |||
Other income | 1,516 | 11 | |||
Total other expenses | (46,437) | (42,892) | |||
Net loss | $ (1,686) | $(25,575) | |||
Sabine Oil & Gas LLC | ||||
ADJUSTED EBITDA (unaudited) | ||||
Three Months Ended | ||||
March 31, | ||||
2014 | 2013 | |||
(in thousands) | ||||
Net loss applicable to controlling interests | $ (1,686) | $(25,575) | ||
Reconciliation to derive Adjusted EBITDA (1): | ||||
Interest, net of capitalized interest | 25,827 | 23,318 | ||
Depletion, depreciation and amortization | 39,925 | 26,172 | ||
Other | (1,501) | 1 | ||
Amortization of deferred rent | (27) | (133) | ||
Accretion | 217 | 209 | ||
Loss on derivative instruments | 20,941 | 34,691 | ||
Option premium amortization | (6,156) | (289) | ||
Adjusted EBITDA (1) | $ 77,540 | $ 58,394 | ||
Pro forma adjustments (2) | 1,455 | (9,883) | ||
Adjusted Pro forma EBITDA (1) (2) | $ 78,995 | $ 48,511 | ||
1. | Adjusted EBITDA and Adjusted Pro Forma EBITDA are non-GAAP financial measures. We use Adjusted EBITDA and Adjusted Pro Forma EBITDA as supplemental financial measures. These measures are calculated in a manner consistent with the indenture governing our 2017 Notes and our senior secured revolving credit facility as net income (loss) before interest, taxes, depreciation and amortization, as further adjusted to include other adjustments, such as impairment, accretion expense, non-cash hedge gains or losses and other non-cash charges and pro forma adjustments for acquisitions and divestitures that may not be comparable to similarly titled measures, employed by other companies. Adjusted EBITDA and Adjusted Pro Forma EBITDA should not be considered in isolation or as a substitute for operating income, net income or loss, cash flows provided by operating, investing and financing activities, or other income or cash flow statement data prepared in accordance with GAAP. Adjusted EBITDA and Adjusted Pro Forma EBITDA provide no information regarding a company's capital structure, borrowings, interest costs, capital expenditures, and working capital movement or tax position. Adjusted EBITDA and Adjusted Pro Forma EBITDA do not represent funds available for discretionary use because those funds are required for debt service, capital expenditures, working capital, and other commitments and obligations. However, our management team believes that these measures are useful to an investor in evaluating our company because these measures: |
- | are widely used by investors in the natural gas and oil industry to measure a company's operating performance without regard to items excluded from the calculation of such term, which can vary substantially from company to company depending upon accounting methods and book value of assets, capital structure and the method by which assets were acquired, among other factors; |
- | help investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating structure; and |
- | are used by our management team for various purposes, including strategic planning and forecasting. Adjusted EBITDA is also the basis for covenants under the indenture governing our 2017 Notes regulating future debt issuance and restricted payments and pursuant to maintenance covenants under our senior secured revolving credit facility. |
2. | Pro forma adjustments reflect the impact of net revenues and expenses of our recent acquisitions and divestment as they have occurred as of the beginning of the fiscal year of acquisitions or divesture. |
Sabine Oil & Gas LLC | |||||
Selected Balance Sheet Data (unaudited) | |||||
March 31, | December 31, | ||||
2014 | 2013 | ||||
(in thousands) | |||||
Assets: | |||||
Total current assets | $ 84,198 | $ 93,921 | |||
Total property plant and equipment, net | 1,527,971 | 1,380,042 | |||
Other non-current assets | 200,427 | 204,756 | |||
Total assets | $ 1,812,596 | $ 1,678,719 | |||
Liabilities and member's capital: | |||||
Total current liabilities | $ 245,060 | $ 209,327 | |||
Credit facility | 355,000 | 250,000 | |||
Term loan | 645,683 | 645,272 | |||
Senior notes | 348,197 | 348,040 | |||
Other non-current liabilities | 19,332 | 25,070 | |||
Total Liabilities | 1,613,272 | 1,477,709 | |||
Member's capital | 199,324 | 201,010 | |||
Total Liabilities and member's capital | $ 1,812,596 | $ 1,678,719 | |||
Selected Cash Flow Data (unaudited) | |||||
Three months Ended March 31, | |||||
2014 | 2013 | ||||
(in thousands) | |||||
Net cash provided by operating activities | $ 51,652 | $ 22,197 | |||
Net cash used in investing activities | (166,371) | (53,887) | |||
Net cash provided by financing activities | 103,789 | 49,753 | |||
Net (decrease) increase in cash and cash equivalents | (10,930) | 18,063 | |||
Cash and cash equivalents, beginning of period | 11,821 | 6,193 | |||
Cash and cash equivalents, end of period | $ 891 | $ 24,256 | |||
SOURCE Sabine Oil & Gas LLC
