DENVER, May 15, 2014 /PRNewswire/ -- Escalera
Resources Co. (NASDAQ: ESCR) today reported its financial and
operating results for the first quarter ended March 31, 2014. The Company had a net loss
attributable to common stock of $5,317,000, or $(0.45) per share, for the first quarter of 2014,
as compared to a net loss of $6,107,000, or $(0.54) per share, for the first quarter of
2013.
Clean earnings, a non-GAAP measure, totaled $3,455,000, or $0.29 per share, for the first quarter of 2014,
as compared to $3,366,000, or
$0.30 per share, for the same
prior-year period. Clean earnings excludes the effects on net
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 exclude 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. During the three months ended March 31, 2014, the Company recorded accrued
severance payable to its former chief executive officer of
$691,000, which has also been
excluded for purposes of determining the Company's clean
earnings. Additionally, the Company recorded an impairment of
$675,000 related to a non-operated
property in the Atlantic Rim based on indications that the operator
intends to plug and abandon the property. Please see the
table at the end of this release for the reconciliation of GAAP net
loss to clean earnings.
The Company's first quarter results were impacted by the
following:
Pricing.
The Company benefited from an 11% increase in its average
realized natural gas price, increasing to $4.16 per Mcf in the first quarter of 2014 from
$3.75 per Mcf in the comparable 2013
period.
Production.
Production totaled 2.2 Bcfe for the quarter ended March 31, 2014, representing an 8% decrease from
the comparable 2013 period. Production was flat as compared
to the quarter ended December 31,
2013.
The Company experienced an 8% decrease in its average daily net
production at its operated Catalina Unit as compared to first
quarter of 2013, which is primarily the result of the field's
natural decline curve. On a quarter-over-quarter basis, Catalina's
production changes were consistent with the field's natural decline
curve.
The Company also experienced a decrease in production at its
non-operated core-area properties, the Spyglass Hill and Mesa
Units. Overall production decreased by 10% during the first quarter
of 2014 as compared to the same period in 2013. The operator of the
Spyglass Hill Unit has previously announced its plans to invest in
the unit's water management system in 2014, which is expected to
increase the production from these wells. At the Mesa Units,
decreases were associated with weather issues and normal production
declines.
Non-cash gain/loss on derivative instruments.
The Company recognized an unrealized non-cash loss from its
derivatives of $1,538,000 in the
first quarter of 2014, resulting from the change in the fair value
of its commodity contracts and interest rate swap at March 31, 2014. This compared to an
unrealized non-cash loss of $4,636,000 in the first quarter of 2013.
Hedging Activity
As a result of rising natural gas prices and the settlement of
our hedges during the first quarter of 2014, the Company's realized
a loss of $941,000 from its commodity
derivatives. 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 require no up-front costs to the
Company. The table below summarizes the Company's current
open derivative contracts as of March 31,
2014.
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Remaining
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Contractual
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Type of
Contract
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Volume
(Mcf)
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Term
|
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Price (1)
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|
|
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|
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Fixed Price
Swap
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1,375,000
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|
01/14-12/14
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$4.27
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Fixed Price
Swap
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1,350,000
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01/14-12/14
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$4.20
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Costless
Collar
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1,350,000
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01/14-12/14
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$4.00 floor
$4.50 ceiling
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Fixed Price
Swap
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405,000
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01/14-12/14
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$4.17
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Fixed Price
Swap
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3,000,000
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01/15-12/15
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$4.28
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Fixed Price
Swap
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3,600,000
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01/15-12/15
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$4.15
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Fixed Price
Swap
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1,830,000
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01/16-12/16
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$4.07
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Fixed Price Swap
(2)
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3,660,000
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01/16-12/16
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$4.15
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Total
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16,570,000
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(1) All contracts are
indexed to the New York Mercantile Exchange
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(2) Derivative
contract entered into in April 2014
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Liquidity and Capital Investment
For the three months ended March 31,
2014, the Company generated cash flow from operations of
$2,915,000, as compared to
$2,737,000 during the same period in
2013.
During the first quarter of 2014, the Company completed an
offering of its common stock for gross proceeds of $4,825,000, with net proceeds of $4,158,000. This offering closed on
April 7, 2014.
The Company had $47,950,000
outstanding on its credit facility as of March 31, 2014, with an average interest rate of
3.4%. On April 24, 2014, the
Company's credit facility agreement was amended to reduce the
borrowing base to $48,500,000 with
subsequent monthly borrowing base reductions of $1,000,000 on the first day of each month through
the next borrowing base redetermination date of October 1, 2014 (at which time the borrowing base
will be $42,500,000). The
Company made the first of such repayments on May 1, 2014. The Company is actively seeking a
replacement credit facility, as the current credit facility, as
amended, does not give the Company the flexibility needed to
develop its business. The Company is currently in discussions with
several financial institutions and has so far received one
non-binding indicative terms and conditions sheet from an
international financial institution which would provide for a
credit facility up to $70,000,000, of
which $55,000,000 would be fully
committed. There can be no assurance that the Company will be able
to obtain a replacement credit facility.
The Company expects that cash to be generated from operations
for the full-year 2014 and cash currently on hand will fully fund
the Company's 2014 capital spending program and payments currently
due under the credit facility. The 2014 capital spending
program includes the Company's expected participation in 48 new
wells in the Spyglass Hill Unit.
Form 10-Q and Earnings Conference Call
Please refer to the Company's Form 10-Q, which will be filed
with the Securities and Exchange Commission on May 15, 2014, for a more detailed discussion of
the Company's results.
Escalera Resources Co. will host a conference call to discuss
results on Thursday, May 15, 2014 at
11:00 a.m. Eastern Time (9:00 a.m. Mountain Time). Those wanting to
listen and participate in the Q&A portion can call (800)
434-1335 and use conference code 132784#.
A replay of this conference call will be available for one week
by calling (800) 704-9804 and using pass code "*" then 132784#.
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SUMMARY STATEMENT
OF OPERATIONS
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(In thousands, except
per share data)
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Three months ended
March 31,
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2014
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2013
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Revenues
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Oil and gas
sales
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$
10,566
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$
7,533
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Transportation and
gathernig revenue
|
964
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979
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Price risk management
activities
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(2,516)
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(2,804)
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Other income,
net
|
139
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5
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Total
revenues
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9,153
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5,713
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Expenses
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Lease operating
expenses
|
3,298
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|
2,908
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Production
taxes
|
1,234
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942
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Pipeline operating
expenses
|
1,195
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1,514
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Impairment and
abandonment of equipment
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|
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and properties
|
675
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1,064
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Exploration expenses
including dry holes
|
34
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24
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Total
Expenses
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6,436
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6,452
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Gross
Margin
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2,717
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(739)
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Gross Margin
Percentage
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29.7%
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-12.9%
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General and
administrative expenses
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2,082
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1,616
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Depreciation,
depletion and amortization
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5,250
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5,222
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Interest expense,
net
|
350
|
|
332
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Pre-tax
loss
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(4,965)
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(7,909)
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Benefit for deferred
income taxes
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579
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2,733
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Net loss
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$
(4,386)
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$
(5,176)
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Preferred stock dividends
|
931
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931
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|
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Net loss
attributable to common stock
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$
(5,317)
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$
(6,107)
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Net loss per
common share:
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Basic
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$
(0.45)
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$
(0.54)
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Diluted
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$
(0.45)
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$
(0.54)
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Weighted average
shares outstanding
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Basic
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11,719,549
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11,305,881
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Diluted
|
11,719,549
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11,305,881
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SELECTED BALANCE
SHEET DATA
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(In
thousands)
|
|
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|
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|
March
31,
|
|
December
31,
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2014
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2013
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%
Change
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Total
assets
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$
131,904
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$
132,400
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0%
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|
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Balance outstanding
on credit facility
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$
47,950
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$
47,450
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1%
|
|
|
|
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Total stockholders'
equity
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$
24,063
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$
27,311
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-12%
|
|
|
|
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|
|
|
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SELECTED CASH FLOW
DATA
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(In
thousands)
|
|
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March
31,
|
|
March
31,
|
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2014
|
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2013
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%
Change
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Net cash provided
by
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operating
activities
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$
2,915
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$
2,737
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7%
|
|
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|
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Net cash used
in
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investing
activities
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$
(1,148)
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$
(2,139)
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-46%
|
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Net cash provided
by
|
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(used in) financing
activities
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$
2,100
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$
(948)
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322%
|
|
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|
|
|
|
|
|
|
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SELECTED
OPERATIONAL DATA
|
|
|
|
|
|
|
|
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|
Three months ended
March 31,
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|
2014
|
|
2013
|
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%
Change
|
|
|
|
|
|
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Total production
(Mcfe)
|
2,217,603
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|
2,401,038
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-8%
|
|
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Average price
realized per Mcfe
|
$
4.34
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$
3.92
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11%
|
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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 net loss to clean
earnings for the three months ended March
31, 2014 and 2013, respectively, contained below.
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Reconciliation of
Net Loss to Clean Earnings
|
(In thousands, except
per share data)
|
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Actual
results
|
|
Three Months
Ended March 31,
|
|
2014
|
|
2013
|
|
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Net loss as
reported
|
$
(4,386)
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|
$
(5,176)
|
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Add back non-cash
items:
|
|
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Deferred tax
benefit
|
(579)
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(2,733)
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Depreciation,
depletion, amortization and accretion expense
|
5,311
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|
5,283
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Non-cash loss on
derivatives (1)
|
1,538
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4,636
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Stock-based
compensation expense
|
205
|
|
282
|
Impairments,
abandonments and dry hole costs
|
675
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|
1,064
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Accrued severance
payable and other non-cash items (2)
|
691
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|
10
|
Clean
Earnings
|
$
3,455
|
|
$
3,366
|
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(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.
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(2)
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During the three
months ended March 31, 2014, the Company recorded accrued severance
payable to its former chief executive officer of $691.
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About Escalera Resources Co.
Escalera Resources Co. ("Escalera") is headquartered in
Denver, CO, with executive offices
in Houston, TX and a regional
office in Casper, WY. Escalera
explores, develops and transports natural gas in the U.S., and is
seeking to own and operate similar assets internationally. This is
accomplished through three distinct operating groups. Escalera owns
and operates various domestic producing assets. Escalera's wholly
owned subsidiary, Eastern Washakie Midstream LLC, owns and operates
a midstream pipeline in Wyoming.
Escalera Resources International Co. LLC seeks to own and operate
both upstream E&P assets and midstream assets located
internationally, with a current focus on Eastern Europe.
This release may contain forward-looking statements regarding
Escalera Resources 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. Escalera
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.escaleraresources.com
SOURCE Escalera Resources Co.