Venoco, Inc. Announces 2nd Quarter 2015 Financial and Operational Results
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E-mailDENVER, CO -- (Marketwired) -- 08/20/15 -- Venoco, Inc. ("Venoco" or the "Company") today reported financial and operational results for the second quarter of 2015. The Company reported a net loss of $119.8 million for the quarter on total revenues of $19.9 million.
Adjusted losses, which adjusts for unrealized derivative gains and losses, and the recognition of an impairment of oil and gas properties, as well as certain other items, were $5.3 million for the quarter, compared to a $10.8 million loss in the first quarter of 2015. Adjusted EBITDA was $ 26.0 million in the second quarter of 2015, compared to $13.5 million in the first quarter. Please see the end of this release for definitions of Adjusted Earnings and Adjusted EBITDA and a reconciliation of those measures to net income/loss.
Highlights include the following:
- Production of 416,000 barrels of oil equivalent (MBOE) for the quarter, or 4,554 BOE per day (BOE/d).
- Lease operating expenses were $13.2 million for the quarter, down from $14.9 million during the first quarter of 2015 and $15.6 million during the second quarter of 2014, pro forma for asset sales.
"Although our production overall for the second quarter was materially impacted by the May 19 shut down of the South Ellwood field due to a third-party pipeline failure, production from our other assets remains strong. Production from our producing wells actually increased quarter over quarter without the support of any recent development projects. In addition, I am pleased to report that we remain vigilant on cost reduction and continued a trend of operating expense reductions quarter over quarter. This is quite impressive given that a significant portion of our expenses are fixed," said Mark DePuy, Venoco's CEO.
Second Quarter Production
Production in the second quarter of 2015 was 4,554 BOE/d compared to 6,016 BOE/d in the first quarter of 2015. Second quarter production was down 24% compared to the first quarter of 2015, primarily as a result of cessation of production on Platform Holly at the South Ellwood field following the May 19th, 2015 rupture of the common carrier pipeline that transports oil from the field. The pipeline is operated and owned by Plains All American Pipeline, L.P. ("Plains"). The company estimates that the pipeline rupture resulted in the loss of approximately 1,200-1,500 BOE/d for the quarter.
"Production was off to a very strong start for the year prior to the events in May," stated Mark DePuy, Venoco's CEO. "While it is disappointing that Platform Holly remains shut-in, looking across the portfolio, we're tracking above plan at many of our other fields, especially at Platform Gail. Between the pipeline failure and low commodities prices, we're faced with as stiff a headwind as I can recall," Mr. DePuy continued. "But we're resilient and sharply focused on managing the factors within our control. We maintain a strong hedging portfolio, and I am optimistic we can continue to control costs. Together, these will go a long way towards managing our liquidity and bottom-line."
"I am further encouraged that we've been able to achieve these milestones while maintaining outstanding operational commitment to the environment," Mr. DePuy added. "The events in May highlight the importance of operating safely, and I'm reminded that we're routinely recognized by local jurisdictions and the state of California for our commitment to the community, safety and the environment. It is a testament to the hard work, dedication, and professionalism of a great many employees that we continue in that tradition."
The following table details the Company's daily production by region (BOE(1)/d):
Quarter Ended Six Months Ended
------------------------------ --------------------
Region 6/30/14 3/31/15 6/30/15 6/30/14 6/30/15
------------------------------------------------------- --------------------
Southern California
(Excl. W. Montalvo) 6,447 6,016 4,554 6,382 5,285
West Montalvo (2) 1,460 - - 1,459 -
------------------------------------------------------- --------------------
Total 7,907 6,016 4,554 7,841 5,285
======================================================= ====================
(1) Barrel of oil equivalent (BOE) is calculated using the ratio of six Mcf
of natural gas to one barrel of crude oil, condensate or natural gas
liquids.
(2) Relates to production from the West Montalvo asset which was sold in
October, 2014.
Second Quarter Costs
Venoco's second quarter 2015 lease operating expenses of $31.75 per BOE were up compared to $27.55 per BOE in the first quarter of 2015, and $25.26 per BOE in the second quarter of 2014. Pro forma for the West Montalvo field sale, lease operating expenses were $26.55 per BOE in the second quarter of 2014.
Venoco's G&A costs, excluding non-cash share-based compensation, were $18.05 per BOE in the second quarter of 2015 compared to $12.24 per BOE in the first quarter of 2015 and $8.33 per BOE in the second quarter of 2014. When further adjusted to also exclude restructuring costs and production contributions from the West Montalvo field, second quarter 2015 G&A costs were $14.24 per BOE, compared to $8.68 per BOE in the first quarter of 2015, and $10.22 per BOE in the second quarter of 2014.
The following table details the Company's operating costs on a per BOE basis (BOE/d):
Quarter Ended Six Months Ended
------------------------------ --------------------
UNAUDITED (per BOE) 6/30/14 3/31/15 6/30/15 6/30/14 6/30/15
------------------------------------------------------- --------------------
Lease Operating Expenses $ 25.26 $ 27.55 $ 31.75 $ 26.53 $ 29.40
Property and Production
Taxes 3.15 3.93 4.87 2.82 4.35
DD&A Expense 16.38 16.27 17.39 16.19 16.78
G&A Expense (1) 8.33 12.24 18.05 9.85 14.77
Adjusted G&A Expense (2) 10.22 8.68 14.24 12.10 11.10
(1) Net of amounts capitalized and excluding non-cash share-based
compensation costs. See the end of this release for a reconciliation of G&A
per BOE.
(2) Net of amounts capitalized and excluding (i) non-cash share-based
compensation costs, (ii) restructuring costs, and (iii) production
contributions from sold assets. See the end of this release for a
reconciliation of G&A per BOE.
Capital Investment Second Quarter 2015
Venoco's second quarter capital expenditures for exploration, development and other spending were $4.5 million, including $0.9 million on drilling and rework, which was primarily in preparation for an impending Sockeye development drilling program off Platform Gail, $0.6 million for facilities, and the remaining $3.0 million for land, seismic and capitalized G&A.
In the second quarter of 2015, the Company spent $3.7 million or 84% of its capital expenditures on its Southern California legacy fields, primarily on operational improvements, regulatory, health, safety and environmental compliance and progressing other long lead-time projects.
The Company also incurred onshore Monterey capital expenditures of $0.7 million or 16% of its total second quarter capital expenditures, primarily for land and capitalized G&A.
The Company began a drilling program at its Sockeye field in July of 2015, which is expected to continue into the fourth quarter of the year.
"After a fairly quiet start to the year, we've ramped up activity levels, in particular at our Sockeye field, where we recently spud the first well in a two-well program," Mr. DePuy commented. "This well was drilled into a zone we understand quite well and where we already have significant data. As expected, we've seen some excellent hydrocarbon shows, and we're encouraged it will be completed as a solid producer."
"The second well in our program targets the same producing reservoir but in a less developed section of the field," Mr. DePuy continued. "If successful, it could not only add new reserves but significantly improve our development drilling inventory."
About the Company
Venoco is an independent energy company primarily engaged in the acquisition, exploitation and development of oil and natural gas properties primarily in California. Venoco operates three offshore platforms in the Santa Barbara Channel, has non-operated interests in three other platforms and operates several onshore properties in Southern California.
Forward-looking Statements
Statements made in this news release relating to Venoco's future capital expenditures and development projects, anticipated results from new wells, future cost savings, and all other statements except statements of historical fact, are forward-looking statements. These statements are based on assumptions and estimates that management believes are reasonable based on currently available information; however, management's assumptions and the company's future performance are both subject to a wide range of business risks and uncertainties and there is no assurance that these goals and projections can or will be met. Any number of factors could cause actual results to differ materially from those in the forward-looking statements, including, but not limited to, the timing and extent of changes in oil and gas prices, the timing and results of drilling and other development activities, the availability and cost of obtaining drilling equipment and technical personnel, risks associated with the availability of acceptable transportation arrangements and the possibility of unanticipated operational problems, delays in completing production, treatment and transportation facilities, higher than expected production costs and other expenses, pipeline curtailments by third parties, and a potential inability to complete transactions as anticipated. The company's projects are subject to numerous operating, geological and other risks and may not be successful. All forward-looking statements are made only as of the date hereof and the company undertakes no obligation to update any such statement. Further information on risks and uncertainties that may affect the company's operations and financial performance, and the forward-looking statements made herein, is available in the company's filings with the Securities and Exchange Commission, which are incorporated by this reference as though fully set forth herein.
OIL AND NATURAL GAS PRODUCTION AND PRICES
Quarter Ended Quarter Ended
----------------------------------------------------------
% %
UNAUDITED 3/31/15 6/30/15 Change 6/30/14 6/30/15 Change
----------------------------------------------------------------------------
Production
Volume:
Oil (MBbls) (1) 515 396 -23% 681 396 -42%
Natural Gas
(MMcf) 160 118 -26% 231 118 -49%
----------------------------------------------------------
MBOE 542 416 -23% 720 416 -42%
==========================================================
Daily Average
Production
Volume:
Oil (Bbls/d) 5,718 4,337 -24% 7,484 4,337 -42%
Natural Gas
(Mcf/d) 1,785 1,303 -27% 2,538 1,303 -49%
----------------------------------------------------------
BOE/d 6,016 4,554 -24% 7,907 4,554 -42%
==========================================================
Oil Price per
Barrel Produced
(in dollars):
Realized price
before hedging $ 38.17 $ 49.50 30% $ 95.63 $ 49.50 -48%
Realized hedging
gain (loss) 28.86 68.76 138% (6.65) 68.76 -1134%
----------------------------------------------------------
Net realized
price $ 67.03 $ 118.26 76% $ 88.98 $ 118.26 33%
==========================================================
Natural Gas Price
per Mcf (in
dollars):
Realized price
before hedging $ 3.18 $ 3.04 -4% $ 5.35 $ 3.04 -43%
Realized hedging
gain (loss) - - 0% - - 0%
----------------------------------------------------------
Net realized
price $ 3.18 $ 3.04 -4% $ 5.35 $ 3.04 -43%
==========================================================
Expense per BOE
(in dollars):
Lease operating
expenses $ 27.55 $ 31.75 15% $ 25.26 $ 31.75 26%
Production and
property taxes $ 3.93 $ 4.87 24% $ 3.15 $ 4.87 55%
Transportation
expenses $ 0.09 $ 0.11 22% $ 0.07 $ 0.11 57%
Depreciation,
depletion and
amortization $ 16.27 $ 17.39 7% $ 16.38 $ 17.39 6%
General and
administrative
(2) $ 12.31 $ 16.92 37% $ 12.49 $ 16.92 35%
Interest expense $ 21.05 $ 47.90 128% $ 18.54 $ 47.90 158%
Six Months Ended
------------------------------
%
UNAUDITED 6/30/14 6/30/15 Change
-----------------------------------------------
Production
Volume:
Oil (MBbls) (1) 1,336 911 -32%
Natural Gas
(MMcf) 500 278 -44%
------------------------------
MBOE 1,419 957 -33%
==============================
Daily Average
Production
Volume:
Oil (Bbls/d) 7,381 5,028 -32%
Natural Gas
(Mcf/d) 2,762 1,544 -44%
------------------------------
BOE/d 7,841 5,285 -33%
==============================
Oil Price per
Barrel Produced
(in dollars):
Realized price
before hedging $ 95.10 $ 43.09 -55%
Realized hedging
gain (loss) (6.03) 46.21 -866%
------------------------------
Net realized
price $ 89.07 $ 89.30 0%
==============================
Natural Gas Price
per Mcf (in
dollars):
Realized price
before hedging $ 5.73 $ 3.12 -46%
Realized hedging
gain (loss) - - 0%
------------------------------
Net realized
price $ 5.73 $ 3.12 -46%
==============================
Expense per BOE
(in dollars):
Lease operating
expenses $ 26.53 $ 29.40 11%
Production and
property taxes $ 2.82 $ 4.35 54%
Transportation
expenses $ 0.07 $ 0.10 43%
Depreciation,
depletion and
amortization $ 16.19 $ 16.78 4%
General and
administrative
(2) $ 12.44 $ 14.32 15%
Interest expense $ 18.53 $ 32.75 77%
(1) Amounts shown are oil production volumes for offshore properties and
sales volumes for onshore properties (differences between onshore
production and sales volumes are minimal). Revenue accruals are adjusted
for actual sales volumes since offshore oil inventories can vary
significantly from month to month based on pipeline inventories, oil
pipeline sales nominations.
(2) Net of amounts capitalized.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended Quarter Ended Six Months Ended
------------------------------------------------------------
UNAUDITED (In
thousands) 3/31/15 6/30/15 6/30/14 6/30/15 6/30/14 6/30/15
----------------------------------------------------------------------------
REVENUES:
Oil and natural
gas sales $19,749 $ 19,317 $66,563 $ 19,317 $129,101 $ 39,066
Other 669 553 476 553 935 1,222
-----------------------------------------------------------
Total revenues 20,418 19,870 67,039 19,870 130,036 40,288
-----------------------------------------------------------
EXPENSES:
Lease operating
expense 14,932 13,206 18,185 13,206 37,653 28,138
Property and
production
taxes 2,132 2,027 2,270 2,027 4,006 4,159
Transportation
expense 47 46 49 46 106 93
Depletion,
depreciation
and
amortization 8,821 7,234 11,794 7,234 22,970 16,055
Impairment - 146,030 817 146,030 817 146,030
Accretion of
asset
retirement
obligation 497 514 556 514 1,223 1,011
General and
administrative 6,670 7,037 8,990 7,037 17,652 13,707
-----------------------------------------------------------
Total expenses 33,099 176,094 42,661 176,094 84,427 209,193
-----------------------------------------------------------
Income from (12,68
operations 1) (156,224) 24,378 (156,224) 45,609 (168,905)
FINANCING COSTS
AND OTHER:
Interest expense 11,411 19,926 13,351 19,926 26,291 31,337
Amortization of
deferred loan
costs 607 1,480 863 1,480 1,696 2,087
Loss (gain) on
extinguishment
of debt - (67,515) - (67,515) - (67,515)
Commodity
derivative
realized (14,86
(gains) losses 5) (27,228) 4,530 (27,228) 8,055 (42,093)
Commodity
derivative
unrealized
(gains) losses
and
amortization of
derivative
premiums 1,960 36,933 14,380 36,933 8,760 38,893
-----------------------------------------------------------
Total financing
costs and other (887) (36,404) 33,124 (36,404) 44,802 (37,291)
-----------------------------------------------------------
Income (loss) (11,79
before taxes 4) (119,820) (8,746) (119,820) 807 (131,614)
Income tax
provision
(benefit) - - - - - -
-----------------------------------------------------------
Net income (11,79
(loss) $ 4) $(119,820) $(8,746) $(119,820) $ 807 $(131,614)
===========================================================
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
UNAUDITED ($ in thousands) 12/31/14 6/30/15
----------------------------------------------------------------------------
ASSETS
Cash and cash equivalents $ 15,455 $ 114,009
Restricted Funds - 79,595
Accounts receivable 14,912 9,039
Inventories 3,370 3,299
Other current assets 4,715 2,272
Commodity derivatives 48,298 30,545
-----------------------------
Total current assets 86,750 238,759
Net property, plant and equipment 488,514 334,885
Total other assets 40,990 25,245
-----------------------------
TOTAL ASSETS $ 616,254 $ 598,889
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 20,535 $ 15,019
Interest payable 17,329 15,926
Share based compensation 2,236 176
-----------------------------
Total current liabilities 40,100 31,121
LONG-TERM DEBT 565,000 685,346
ASSET RETIREMENT OBLIGATIONS 30,351 33,150
SHARE BASED COMPENSATION 648 235
-----------------------------
Total liabilities 636,099 749,852
Total stockholders' equity (19,845) (150,963)
-----------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 616,254 $ 598,889
=============================
GAAP RECONCILIATIONS
Adjusted Earnings and Adjusted EBITDA
In addition to net income (loss) determined in accordance with GAAP, we have provided in this release our Adjusted Earnings and Adjusted EBITDA for recent periods. Both Adjusted Earnings and Adjusted EBITDA are non-GAAP financial measures that we use as supplemental measures of our performance.
We define Adjusted Earnings as net income (loss) before the effects of the items listed in the table below. We calculate the tax effect of reconciling items by re-performing our period-end tax calculation excluding the reconciling items from earnings. The difference between this calculation and the tax expense/benefit recorded for the period results in the tax effect disclosed below. We believe that Adjusted Earnings facilitates comparisons to earnings forecasts prepared by stock analysts and other third parties. Such forecasts generally exclude the effects of items that are difficult to predict or to measure in advance and are not directly related to our ongoing operations.
We define Adjusted EBITDA as net income (loss) before the effects of the items listed in the table below. Because the use of Adjusted EBITDA facilitates comparisons of our historical operating performance on a more consistent basis, we use this measure for business planning and analysis purposes, in assessing acquisition opportunities and in determining how potential external financing sources are likely to evaluate our business.
We present Adjusted Earnings and Adjusted EBITDA because we consider them to be important supplemental measures of our performance. Neither Adjusted Earnings nor Adjusted EBITDA is a measurement of our financial performance under GAAP and neither should be considered as an alternative to net income (loss), operating income or any other performance measure derived in accordance with GAAP, as an alternative to cash flow from operating activities or as a measure of our liquidity. You should not assume that the Adjusted Earnings or Adjusted EBITDA amounts shown are comparable to similarly named measures disclosed by other companies.
Quarter Ended Six Months Ended
---------------------------------------------------------
UNAUDITED ($ in
thousands) 6/30/14 3/31/15 6/30/15 6/30/14 6/30/15
----------------------------------------------------------------------------
Adjusted Earnings
Reconciliation
Net Income $ (8,746) $(11,794) $ (119,820) $ 807 $ (131,614)
Plus:
Unrealized
commodity (gains)
losses 13,176 1,044 36,017 6,352 37,062
Impairment - - 146,030 - 146,030
Loss (gain) on
extinguishment of
debt - - (67,515) - (67,515)
Tax effects - - - - -
---------------------------------------------------------
Adjusted Earnings $ 4,430 $(10,750) $ (5,288) $ 7,159 $ (16,037)
=========================================================
Quarter Ended Six Months Ended
----------------------------------------------------
UNAUDITED ($ in
thousands) 6/30/14 3/31/15 6/30/15 6/30/14 6/30/15
----------------------------------------------------------------------------
Adjusted EBITDA
Reconciliation
Net income $ (8,746) $ (11,794) $(119,820) $ 807 $(131,614)
Interest expense 13,351 11,411 19,926 26,291 31,337
DD&A 11,794 8,821 7,234 22,970 16,055
Impairment 817 - 146,030 817 146,030
Accretion of asset
retirement obligation 556 497 514 1,223 1,011
Amortization of
deferred loan costs 863 607 1,480 1,696 2,087
Loss (gain) on
extinguishment of debt - - (67,515) - (67,515)
Non-cash share-based
compensation expense 16 60 (362) 910 (302)
Restructuring Costs - 1,930 1,585 - 3,515
One-time severance
costs 3,024 - - 3,024 -
Amortization of
derivative premiums 1,204 915 916 2,408 1,831
Unrealized commodity
derivative (gains)
losses 13,176 1,044 36,017 6,352 37,062
----------------------------------------------------
Adjusted EBITDA $ 36,055 $ 13,491 $ 26,005 $ 66,498 $ 39,497
====================================================
We also provide per BOE G&A expenses excluding the items set forth in the table below. We believe that these non-GAAP measures are useful in that the items excluded do not represent cash expenses directly related to our ongoing operations. These non-GAAP measures should not be viewed as an alternative to per BOE G&A expenses as determined in accordance with GAAP.
----------------------------------------------------------------------------
UNAUDITED ($ in thousands,
except per BOE amounts) Quarter Ended Six Months Ended
----------------------------------------------------------------------------
6/30/14 3/31/15 6/30/15 6/30/14 6/30/15
--------------------------------------------
G&A per BOE Reconciliation
G&A expense $ 8,990 $ 6,670 $ 7,037 $17,652 $13,707
Less:
Non-cash share-based
compensation expense 35 (38) 470 (650) 432
One-Time Severance Costs (3,024) - - (3,024) -
--------------------------------------------
G&A Expense Excluding Share-
Based Comp and Severance Costs 6,001 6,632 7,507 13,978 14,139
MBOE 720 542 416 1,419 957
--------------------------------------------
G&A Expense per BOE Excluding
Share-Based Comp and Severance
Costs $ 8.33 $ 12.24 $ 18.05 $ 9.85 $ 14.77
============================================
MBOE excluding production from
sold assets 587 542 416 1,155 957
--------------------------------------------
G&A Expense per BOE Excluding
Non-Cash Share-Based Comp
-Excluding Production from
Sold Assets $ 10.22 $ 12.24 $ 18.05 $ 12.10 $ 14.77
============================================
G&A Expense Excluding Share-
Based Comp and Severance Costs 6,001 6,632 7,507 13,978 14,139
Less:
Restructuring Costs - (1,930) (1,585) - (3,515)
--------------------------------------------
G&A Expense Excluding Share-
Based Comp and Severance Costs
and Restructuring Costs 6,001 4,702 5,922 13,978 10,624
MBOE excluding production from
sold assets 587 542 416 1,155 957
--------------------------------------------
G&A Expense per BOE Excluding
Non-Cash Share-Based Comp and
Restructuring Costs-Excluding
Production from Sold Assets $ 10.22 $ 8.68 $ 14.24 $ 12.10 $ 11.10
============================================
For further information, please contact: Zach ShulmanInvestor Relations(303) 583-1637Email contactEmail contact
Source: Venoco, Inc.
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