DENVER, Nov. 6, 2013 /PRNewswire/ -- Double Eagle
Petroleum Co. (NASDAQ: DBLE) today reported its financial
and operating results for the third quarter ended September 30, 2013. The Company had a net
loss attributable to common stock of $2,782,000, or $0.25 per share for the third quarter of 2013 as
compared to a net loss of $4,498,000,
or $0.40 per share for the third
quarter of 2012.
Clean earnings, a non GAAP measure, totaled $2,665,000, or $0.23 per share, for the third quarter of 2013,
as compared to $3,843,000 or
$0.34 per share for the same
prior-year period. Clean earnings excludes the effects on net
income (loss) of non-cash charges, consisting of depreciation,
depletion and amortization expense, unrealized gains and losses
related to the Company's economic hedges, impairment charges and
stock-based compensation expense. Clean earnings also
excludes the impact of income taxes, as the Company does not expect
to pay income tax in the foreseeable future due to its net
operating loss carryforwards. Please see the table at the end
of this release for the reconciliation of clean earnings to GAAP
income (loss).
The Company's third quarter results were impacted by the
following:
Pricing.
The Company benefited from a 6%
increase in its average realized natural gas price, increasing to
$3.83 per Mcfe in the third quarter
of 2013 from $3.60 per Mcfe in the
comparable 2012 period.
Production.
Production totaled 2.3 Bcfe
for the quarter ended September 30,
2013, representing an 11% decrease from the comparable 2012
period. Production was flat as compared to the quarter ended
June 30, 2013.
The Company experienced a 16% decrease in its average daily net
production at the Catalina Unit as compared to third quarter of
2012, which is primarily the result of a series of equipment
challenges that occurred over the past year, including a compressor
failure and unscheduled maintenance on several injection
pumps. Coalbed methane gas wells are susceptible to water
saturation when wells are offline, and the Company's operations
team has been focused on recovering lost production. As a
result of these efforts, the Company realized an 8% increase in
average daily net production as compared to the second quarter of
2013. The decrease in total production volumes was partially
offset by increased ownership in the Catalina and Spy Glass Hill
units, as a result of the Company's purchase of additional working
interests in the fourth quarter of 2012.
The Company also completed a workover program in the third
quarter of 2013, which focused on opening-up the Almond formation
in 12 existing Catalina wells. The workover program was
successful and the affected wells were brought back online in
October 2013.
Non-cash gain/loss on derivative instruments.
The Company had an unrealized non-cash loss from its derivatives of
$1,120,000 in the third quarter of
2013, resulting from the change in the fair value of its commodity
contracts and interest rate swap at September 30, 2013. This compared to an
unrealized non-cash loss of $5,219,000 in the third quarter of
2012.
Hedging Activity
The Company continues to benefit from its hedging program, and
it realized prices above the prevailing market prices in both the
third quarter of 2013 and 2012. Excluding the impact of its
commodity hedges which settled during the quarter, the Company's
per Mcf realized natural gas price was $3.08 and $2.33 for
the quarters ended September 30, 2013
and 2012, respectively. The Company has historically entered
into forward sales contracts, collars and fixed price swaps to
manage the price risk associated with its natural gas
production. All of the contracts the Company enters into are
at no up-front cost to the Company. The table below
summarizes the Company's current open derivative contracts as of
September 30, 2013.
|
|
Remaining
|
|
|
|
|
|
|
Contractual
|
|
|
|
|
Type of
Contract
|
|
Volume
(Mcf)
|
|
Term
|
|
Price (1)
|
|
|
|
|
|
|
|
Fixed Price
Swap
|
|
552,000
|
|
01/13-12/13
|
|
$5.16
|
Costless
Collar
|
|
552,000
|
|
01/13-12/13
|
|
$5.00 floor
$5.35 ceiling
|
Costless
Collar
|
|
540,000
|
|
01/13-12/13
|
|
$3.25 floor
$4.00 ceiling
|
Fixed Price
Swap
|
|
1,825,000
|
|
01/14-12/14
|
|
$4.27
|
Fixed Price
Swap
|
|
1,800,000
|
|
01/14-12/14
|
|
$4.20
|
Costless
Collar
|
|
1,800,000
|
|
01/14-12/14
|
|
$4.00 floor
$4.50 ceiling
|
|
|
|
|
|
|
|
Fixed Price
Swap
|
|
3,000,000
|
|
01/15-12/15
|
|
$4.28
|
|
|
|
|
|
|
|
Total
|
|
10,069,000
|
|
|
|
|
|
|
(1)
|
All contracts are
indexed to the New York Mercantile Exchange
|
Liquidity and Capital Investment
The Company had $47,450,000
outstanding on its credit facility as of September 30, 2013, with an average interest rate
of 3.3%. The Company generated cash flow from operations of
$3,528,000 and $10,283,000 for the three and nine months ended
September 30, 2013. The Company
expects that the cash generated from operations for the full-year
2013 to fully fund the Company's 2013 capital spending
program. The 2013 capital spending program included the
aforementioned well workover program in the Catalina Unit, as well
as participation in 27 new wells in the Spyglass Hill Unit and the
final 13 wells in the Mesa "B" participating area on the Pinedale
Anticline.
The operator of the Spy Glass Hill unit has completed the 27
wells, however, the new wells are expected to have a limited impact
on production in the fourth quarter of 2013 due to incomplete
infrastructure and water management challenges. Eleven of the
13 new Mesa "B" wells were producing at September 30, 2013.
New Independent Board of Director Appointments
On October 30, 2013, the Company's
Board of Directors appointed Taylor
Simonton and John Schaeffer
as independent directors.
Mr. Simonton spent 35 years at PricewaterhouseCoopers LLP
("PwC"), including 23 years as an audit partner in the firm's
Accounting and Business Advisory Services practice before retiring
in 2001. During his career at PwC, he served as the
engagement partner on the audits of several energy companies,
including Total Petroleum (North
America) Ltd., Hanover Petroleum Corporation, Amoco Colombia
S.A. and Calvin Exploration, Inc. Mr. Simonton currently
serves as the audit committee chair of Zynex, Inc., and also serves
as lead director and audit committee chair of Keating Capital,
Inc. From 2005 to May 2013, Mr.
Simonton served as a director of Red Robin Gourmet Burgers, Inc.,
where he was audit committee chairman from 2005 to 2009. He
also previously served on the board of directors of Fischer Imaging
Corporation from 2003 to 2007. Mr. Simonton is a director,
past chairman and past president of the Colorado Chapter of the
National Association of Corporate Directors ("NACD") and is a NACD
Board Leadership Fellow. Mr. Simonton received his B.S. in
Accounting from the University of
Tennessee and is a Certified Public Accountant. Mr.
Simonton will serve as the Company's Audit Committee chairman and
also on the Nominating and Governance Committee.
Mr. Schaeffer served as Managing Director and head of the Oil
and Gas Group at GE Energy Financial Services, a unit of General
Electric Company. He developed the unit's investment
strategies upon joining GE Energy Financial Services in 1993, and
managed the unit's activities. Prior to joining GE Energy
Financial Services, Mr. Schaeffer spent 12 years with Chemical
Bank, New York where he was
involved in oil and gas finance both domestically and
internationally. Mr. Schaeffer spent his early career with
Conoco Inc. He holds a B.S. in Petroleum and Natural Gas
Engineering from the Pennsylvania State University. He has
been Chairman of the New York Section of the Society of Petroleum
Engineers of AIME and has served on that group's National Economics
and Evaluations Committee. Mr. Schaeffer will serve on the
Audit Committee and the Nominating and Governance
Committee.
Form 10-Q and Earnings Conference Call
Please refer to the Company's Form 10-Q, which will be filed
with the Securities and Exchange Commission on November 7, 2013, for a more detailed discussion
of the Company's results.
Double Eagle will host a conference call to discuss results on
Thursday, November 7, 2013 at
11:00 a.m. Eastern Time (9 a.m. Mountain). Those wanting to listen
and participate in the Q&A portion can call (800) 434-1335 and
use conference code 457366#.
A replay of this conference call will be available for one week
by calling (800) 704-9804 and using pass code * then 457366#.
SUMMARY STATEMENT
OF OPERATIONS
|
(In thousands, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
Three months
ended
|
|
Nine months
ended
|
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
September
30,
|
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
Oil and gas
sales
|
|
$
7,599
|
|
$
6,498
|
|
$
23,634
|
|
$
17,742
|
Transportation
revenue
|
|
914
|
|
1,276
|
|
2,751
|
|
3,763
|
Price risk management
activities
|
|
630
|
|
(1,827)
|
|
1,264
|
|
2,705
|
Other income,
net
|
|
(2)
|
|
(46)
|
|
506
|
|
(23)
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
9,141
|
|
5,901
|
|
28,155
|
|
24,187
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Lease operating
expenses
|
|
3,150
|
|
2,766
|
|
9,346
|
|
8,682
|
Production
taxes
|
|
886
|
|
783
|
|
2,851
|
|
1,921
|
Pipeline operating
expenses
|
|
1,238
|
|
1,184
|
|
3,950
|
|
3,633
|
Exploration expenses
including dry
holes
|
|
52
|
|
62
|
|
122
|
|
638
|
Impairment of
properties and surrendered leases
|
(36)
|
|
21
|
|
1,500
|
|
330
|
|
|
|
|
|
|
|
|
|
Total
expenses
|
|
5,290
|
|
4,816
|
|
17,769
|
|
15,204
|
|
|
|
|
|
|
|
|
|
Gross Margin
Percentage
|
|
42.1%
|
|
18.4%
|
|
36.9%
|
|
37.1%
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
983
|
|
1,513
|
|
3,946
|
|
4,736
|
Depreciation, depletion
and amortization
expense
|
|
5,178
|
|
4,779
|
|
15,631
|
|
14,186
|
Other expense,
net
|
|
488
|
|
516
|
|
943
|
|
1,369
|
|
|
|
|
|
|
|
|
|
Pre-tax
loss
|
|
(2,798)
|
|
(5,723)
|
|
(10,134)
|
|
(11,308)
|
|
|
|
|
|
|
|
|
|
Benefit for deferred
taxes
|
|
946
|
|
2,155
|
|
3,467
|
|
4,043
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
(1,852)
|
|
(3,568)
|
|
(6,667)
|
|
(7,265)
|
|
|
|
|
|
|
|
|
|
Preferred stock
requirements
|
|
930
|
|
930
|
|
2,792
|
|
2,792
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to common stock
|
|
$
(2,782)
|
|
$
(4,498)
|
|
$
(9,459)
|
|
$
(10,057)
|
|
|
|
|
|
|
|
|
|
Net loss per
common share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
(0.25)
|
|
$
(0.40)
|
|
$
(0.84)
|
|
$
(0.89)
|
Diluted
|
|
$
(0.25)
|
|
$
(0.40)
|
|
$
(0.84)
|
|
$
(0.89)
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
11,341,277
|
|
11,255,229
|
|
11,324,653
|
|
11,240,945
|
Diluted
|
|
11,341,277
|
|
11,255,229
|
|
11,324,653
|
|
11,240,945
|
|
|
|
|
|
|
|
|
|
SELECTED BALANCE
SHEET DATA
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
December
31,
|
|
|
|
|
|
2013
|
|
2012
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
143,675
|
|
$
158,810
|
|
-10%
|
|
|
|
|
|
|
|
|
|
|
Balance outstanding
on credit facility
|
47,450
|
|
47,450
|
|
0%
|
|
|
|
|
|
|
|
|
|
|
Total stockholders'
equity
|
34,560
|
|
43,470
|
|
-20%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED CASH FLOW
DATA
|
|
|
(In
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30,
|
|
|
|
|
|
2013
|
|
2012
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
$
10,283
|
|
$
13,630
|
|
-25%
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities
|
(7,736)
|
|
(20,554)
|
|
-62%
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing
activities
|
(2,813)
|
|
1,384
|
|
303%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED
OPERATIONAL DATA
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30,
|
|
|
|
|
|
2013
|
|
2012
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
Total production
(Mcfe)
|
2,262,711
|
|
2,545,755
|
|
-11%
|
|
|
|
|
|
|
|
|
|
|
Average price
realized per Mcfe
|
$
4.09
|
|
$
3.80
|
|
8%
|
|
|
|
|
|
|
|
|
|
Use of Non-GAAP Financial Measures
The Company believes that the presentation of "clean earnings"
below provides a meaningful non-GAAP financial measure to help
management and investors understand and compare operating results
and business trends among different reporting periods on a
consistent basis, independent of regularly reported non-cash
charges. The measure also excludes the impact of income taxes
because the Company does not expect to pay taxes in the near future
due to its net operating loss carryforwards. The Company's
management also uses clean earnings in its planning and development
of target operating models and to enhance its understanding of
ongoing operations. Readers should not view clean earnings as
superior to or an alternative to GAAP results or as being
comparable to results reported or forecasted by other companies.
Readers should refer to the reconciliation of GAAP net income with
clean earnings for the three and six months ended September 30, 2013 and 2012, respectively,
contained below.
Reconciliation of
Net Income to Clean Earnings
|
(In thousands, except
per share data)
|
|
|
|
|
|
|
|
|
|
Three Months
Ended September 30,
|
|
Nine Months
Ended September 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
|
|
|
|
|
|
|
Net Income as
reported
|
$ (2,782)
|
|
$ (4,498)
|
|
$ (9,459)
|
|
$ (10,057)
|
Add back non-cash
items:
|
|
|
|
|
|
|
|
Provision
(benefit) for income taxes
|
(946)
|
|
(2,155)
|
|
(3,467)
|
|
(4,043)
|
Depreciation,
depletion, amortization and accretion expense
|
5,244
|
|
4,829
|
|
15,822
|
|
14,328
|
Non-cash gain on
derivatives (1)
|
1,120
|
|
5,219
|
|
3,071
|
|
8,082
|
Share-based
compensation expense
|
54
|
|
414
|
|
570
|
|
1,234
|
Impairments,
abandonments and dry hole costs
|
(36)
|
|
26
|
|
1,500
|
|
792
|
Other non-cash
items
|
2
|
|
7
|
|
12
|
|
16
|
Clean
Earnings
|
$
2,656
|
|
$
3,842
|
|
$
8,049
|
|
$
10,352
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clean Earnings per
Share
|
$
0.23
|
|
$
0.34
|
|
$
0.71
|
|
$
0.92
|
Clean
Earnings per Share - less non-recurring proceeds from contract
termination penalty (2)
|
|
|
|
|
$
0.67
|
|
$
0.92
|
|
|
(1)
|
Non-cash gain on
derivatives is comprised of an unrealized loss (gain) from the
Company's mark-to-market derivative instruments (both commodity
contracts and interest rate swaps), resulting from recording the
instruments at fair value at each period end.
|
(2)
|
During the second
quarter of 2013, the Company received cash proceeds of $500 from a
third party as a penalty for opting-out of farm-out agreement at
the Main Fork Unit.
|
About Double Eagle
Double Eagle Petroleum Co., which is headquartered in
Denver, Colorado, explores,
develops, and sells natural gas and crude oil, with natural gas in
the Rocky Mountain region. The Company currently has development
activities and opportunities in its Atlantic Rim coalbed methane
and in the Pinedale Anticline in Wyoming. Also, exploration
potential exists in its Niobrara
acreage in Wyoming and
Nebraska, which totals over 70,000
net acres.
This release may contain forward-looking statements regarding
Double Eagle Petroleum Co.'s future and expected performance based
on assumptions that the Company believes are reasonable. No
assurances can be given that these statements will prove to be
accurate. A number of risks and uncertainties could cause
actual results to differ materially from these statements,
including, without limitation, decreases in prices for natural gas
and crude oil, unexpected decreases in gas and oil production, the
timeliness, costs and results of development and exploration
activities, unanticipated delays and costs resulting from
regulatory compliance, and other risk factors described from time
to time in the Company's Forms 10-K and 10-Q and other reports
filed with the Securities and Exchange Commission. Double
Eagle undertakes no obligation to publicly update these
forward-looking statements, whether as a result of new information,
future events or otherwise.
Company Contact:
John
Campbell, IR
(303)
794-8445
www.dble.com
SOURCE Double Eagle Petroleum Co.