TRAVERSE CITY, Mich., Aug. 11 /PRNewswire-FirstCall/ -- Aurora Oil & Gas Corporation today reported revenues of $7.9 million for the quarter ended June 30, 2008, representing an 8% increase from the same period in 2007. The net loss for the quarter totaled $0.7 million or ($0.01) per basic and diluted share, as compared to a net gain of $0.2 million or $0.00 per basic and diluted share in 2007.
Financial Review
Oil and natural gas production revenues totaled nearly $6.8 million on sales of 763 million cubic feet of natural gas equivalent (Mmcfe) for the quarter, representing a marginal increase over the second quarter of 2007. Production revenues recognized for the quarter were reduced by $1.9 million related to realized losses on financial hedges, as well as an additional $0.1 million in unrealized losses on financial hedges from hedge ineffectiveness.
Expenses totaled $8.5 million, a 22% increase from the same quarter in 2007. The primary driver of the change was a 25% increase in production and lease operating expenses ("LOE"). The $0.6 million increase in LOE was the result of addressing recent production declines via a comprehensive well enhancement program. General and administrative expenses dropped $0.2 million from the prior year, a result of reduced employee levels and reduced consulting services. This was offset by a $0.7 million increase in interest expense from higher utilization of debt.
Additional detail on the financial results can be found in the Company's Form 10-Q filed August 11, 2008. This form can be retrieved from the Securities and Exchange Commission or via the Company website at http://www.auroraogc.com/SEC_Filings.htm . Selected historical financial data is provided for reference below.
Drilling Activities
During the second quarter of 2008, drilling activities were reduced as a result of limited capital availability and continued corporate restructuring efforts. Nine (1 net) wells were drilled by Aurora and its partners, concentrated in the Indiana and Texas properties. A summary of the Company's well inventory at June 30, 2008 is as follows:
Well Status as of June 30, 2008 Antrim Operated Antrim Non-Operated Gross Net Gross Net Producing 176 167.14 391 93.96 Waiting on Hook-Up 1 1.00 5 1.00 Res. Assessment 1 0.97 17 3.45 Total 178 169.11 413 98.41 Well Status as of June 30, 2008 New Albany Operated New Albany Non-Operated Gross Net Gross Net Producing 6 6.00 25 1.25 Waiting on Hook-Up 0 0.00 0 0.00 Res. Assessment 1 0.49 7 1.95 Total 7 6.49 32 3.20 Well Status as of June 30, 2008 Other Total Gross Net Gross Net Producing 31 15.93 629 284.28 Waiting on Hook-Up 1 0.72 7 2.72 Res. Assessment 11 3.99 37 10.85 Total 43 20.64 673 297.85 Production Activities
Total company production during the second quarter of 2008 averaged 8,380 Mcfe per day, a slight improvement over the previous year, which averaged 8,363 Mcfe per day for the same quarter. This was, however, a decline from the first quarter of 2008, as detailed in the summary below:
Estimated Production by Play/Trend (net mcfe) Q2 2008 Q1 2008 Total Daily Average Total Daily Average Antrim Shale 704,369 7,740 740,841 8,141 New Albany Shale 22,258 245 38,552 424 Other 35,953 395 45,096 495 Total 762,580 8,380 824,489 9,060 Operated 492,496 5,412 536,947 5,900 Non-operated 270,084 2,968 287,542 3,160 Total 762,580 8,380 824,489 9,060
Aurora operations personnel and external consultants have performed extensive analysis on the Company's producing properties to determine probable cause for what management believes to be unnecessary declines in production over the previous 9 months. It has been determined that a number of improvements can be made to the production system, including optimized compression, improved downhole configurations, selective workovers and refrac's, and routine maintenance items - all of which should reduce unscheduled outages and one-time expenditures, as well as providing consistent levels of production.
During the second quarter, a well enhancement program was initiated to methodically address these improvements. As a result of this program, production declines appear to have stopped, though during the second quarter, production was disrupted and lease operating expenses increased substantially. This enhancement program is expected to continue during the third and fourth quarter, which may continue to challenge production and significantly increase lease operating expenses in the second half of 2008.
John E. McDevitt, President and Chief Operating Officer stated, "Our production challenges are something which we are addressing as part of our turnaround efforts. We are putting the appropriate expertise in place via consulting arrangements, new hires, and reorganization of personnel. Our first forays into a remediation campaign are encouraging, however it will be a slow march as we work to get back on track. This process may take in excess of 12 months to solve our challenges in their entirety."
Update on Acreage
The Company's acreage has decreased slightly from March 31, 2008. Following is a summary of the Company's acreage inventory on June 30, 2008.
Acreage by Play/Trend June 30, 2008 Gross Net Michigan Antrim shale 307,400 153,138 Indiana Antrim shale 15,837 15,837 New Albany shale 844,370 445,685 Woodford shale 36,802 32,753 Other 87,450 65,874 Total 1,291,859 713,287
The potential sale of Woodford shale acreage in Oklahoma is ongoing, as the counterparty has requested a 45-day extension to its exclusive right to purchase the property. In exchange for the extension this party has provided a $2 million non-refundable payment and has also effectively increased the total purchase price by $1 million to $11.5 million. The new agreement expiration date is September 15, 2008.
Update on Capital Restructuring
On June 12, 2008 (but as of June 2, 2008), the Company completed negotiations with BNP Paribas and its syndicate of associated lenders ("Lenders") and executed a wavier and forbearance agreement. In exchange for interest rate increases and other non-financial concessions, the Lenders waived any defaults or events of default resulting from the non-compliance with any covenants on March 31, 2008. In addition, the Lenders agreed to forbear any further actions, including any payment of borrowing base deficiency until after August 15, 2008. Further details on the terms of the waiver and forbearance agreements can be found in the Company's Form 8-K exhibits, filed on June 12, 2008.
The Company has continued its efforts to address its non-compliance by working with its existing lenders and establishing relationships with new lending institutions. Though several term sheets have been signed and due diligence has been underway, the Company has not been able to secure new financing and continues to negotiate with its Lenders to pursue a collaborative solution.
In addition, on August 11, 2008, management determined that the Company failed to meet certain financial and non-financial covenants required by its loan agreements for the quarter ended June 30, 2008. Management has requested the Lenders permanently waive the Company's failure to observe or perform the required covenants for the second quarter, as well as requesting the Lenders to extend the forbearance agreements and standstill period for an additional period of time.
Since the Company has yet to reach an agreement with the Lenders and the Lenders have the right to demand repayment after the current standstill period ending August 15, 2008, the entire outstanding debt under the senior secured and second lien term facilities has been reclassified as a current liability on the Company's June 30, 2008 balance sheet. We continue negotiations with various financial institutions and our existing lenders to restructure our debt obligations. There can be no assurance that we will be able to obtain a waiver, extend the forbearance and standstill agreements, or restructure our current indebtedness within an adequate period of time.
John E. McDevitt, President and Chief Operating Officer commented, "It is disappointing that we have not yet been able to successfully refinance the Company's debt. We are not alone, however, in these difficult credit markets as we are familiar with firms much larger than Aurora which have also experienced challenges in refinancing efforts. In the meantime, we continue to have open dialogue with our lending partners while working to methodically address our various operational and financial concerns. In the meantime, our developed and undeveloped assets continue to provide cash flow and future opportunity for the Company."
Annual Shareholder Meeting
As noted in the Definitive Proxy Statements recently mailed to appropriate shareholders of record, the Company has scheduled its annual shareholder meeting for August 29, 2008, to be held in Traverse City, Michigan.
Definitive Proxy Statements (Form DEF 14A) can also be accessed via the Company website at http://www.auroraogc.com/SEC_Filings.htm .
Selected Financial Data
The following tables set forth Aurora's financial information as of and for each of the periods indicated. You should review this information together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes included in Aurora's Form 10-Q for the quarter ended June 30, 2008 and/or the consolidated financial statements and related notes included in Aurora's Form 10-K/A for the year ended December 31, 2007.
For 3 months ended Statement of Operations Data June 30, 2008 June 30, 2007 Revenues: Oil and natural gas sales $6,795,093 $6,602,429 Pipeline transportation and marketing 333,182 157,664 Field service and sales 590,509 60,084 Interest and other 141,621 461,245 Total revenues 7,860,405 7,281,422 Expenses: Production taxes 402,763 303,871 Production and lease operating expense 2,758,478 2,200,807 Pipeline and processing operating expense 176,218 64,382 Field services expense 458,550 45,824 General and administrative expense 1,802,347 1,973,358 Oil and natural gas depletion and amortization 928,233 776,595 Other assets depreciation and amortization 230,321 573,498 Interest expense 1,763,293 1,068,871 Taxes (refunds), other 26,046 25,129 Total expenses 8,546,249 7,032,335 Gain (Loss) before minority interest (685,844) 249,087 Minority interest in income of subsidiaries (17,044) (19,610) Net Income (Loss) $(702,888) $229,477 Net loss per common share-basic and diluted $(0.01) $0.00 Weighted average common shares outstanding - basic 103,683,887 101,650,665 For 6 months ended Cash Flow Data June 30, 2008 June 30, 2007 Cash provided by operating activities $5,356,852 $5,411,775 Cash used in investing activities (9,020,137) (32,016,909) Cash provided by financing activities 13,505,580 25,590,236 As of June 30, As of December 31, Balance Sheet Data 2008 2007 Cash and cash equivalents $12,267,973 $2,425,678 Other current assets 5,865,668 8,901,774 Oil and natural gas properties, net (using full cost accounting) 214,824,413 209,818,344 Other property and equipment, net 9,997,503 10,365,599 Other assets 22,949,859 23,160,273 Total assets $265,905,416 $254,671,668 Current liabilities $ 140,179,469 $ 8,580,990 Long-term liabilities, net of current maturities 21,901,905 113,835,028 Minority interest in net assets of subsidiaries 143,536 112,661 Shareholders' equity 103,680,506 132,142,989 Total liabilities and shareholders' equity $265,905,416 $254,671,668 About Aurora Oil & Gas Corporation
Aurora Oil & Gas Corporation is an independent energy company focused on unconventional natural gas exploration, acquisition, development and production with its primary operations in the Antrim shale of Michigan, the New Albany shale of Indiana and Kentucky, and the Woodford shale of Oklahoma.
Cautionary Note on Forward-Looking Statements
Statements regarding future events, occurrences, circumstances, activities, performance, outcomes, beliefs and results, including future revenues and production, restructuring of existing credit facilities, ability to receive a waiver, forbearance and/or amendment to loan agreement, the procurement of new credit facilities, anticipated capital availability, anticipated capital expenditures, ability to remediate production shortfalls, drilling results, and plans for future growth through acquisition, drilling or production are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe that the forward-looking statements described are based on reasonable assumptions, we can give no assurance that they will prove accurate. Important factors that could cause our actual results to differ materially from those included in the forward-looking statements include the timing and extent of changes in commodity prices for oil and gas, drilling and operating risks, the availability of drilling rigs, changes in laws or government regulations, unforeseen engineering and mechanical or technological difficulties in drilling the wells, operating hazards, weather-related delays, the loss of existing credit facilities, availability of capital, and other risks more fully described in our filings with the Securities and Exchange Commission. All forward-looking statements contained in this release, including any forecasts and estimates, are based on management's outlook only as of the date of this release and we undertake no obligation to update or revise these forward-looking statements, whether as a result of subsequent developments or otherwise.
Contact: Aurora Oil & Gas Corporation Jeffrey W. Deneau, Investor Relations (231) 941-0073 http://www.auroraogc.com/
