DENVER and HOUSTON, Aug. 14,
2014 /PRNewswire/ -- Escalera Resources Co.
(NASDAQ: ESCR) today reported financial and operating results for
the three and six months ended June
30, 2014. The Company had a net loss attributable to
common stock of $4.0 million, or
$(0.29) per share, for the second
quarter of 2014, as compared to a net loss of $570,000, or $(0.05) per share, for the second quarter of
2013.
For the first six months of 2014 the Company had a net loss
attributable to common stock of $9.3
million, or $(0.72) per share
compared to a net loss of $6.7
million, or $(0.59) per share
for the first six months of 2013.
Clean earnings, a non-GAAP measure, totaled $1.5 million, or $0.11 per share, for the second quarter of 2014,
compared to $3.0 million, or
$0.26 per share, for the same
prior-year period.
Clean earnings for the six months ended June 30, 2014 was $4.1
million, or $0.31 per share as
compared to $5.4 million, or
$0.48 per share for the first six
months of 2013. 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. Please see the table at the end of this
release for the reconciliation of GAAP net loss to clean
earnings.
Clean earnings for the three and six months ended
June 30, 2014 was impacted by the
following:
Pricing
The results for the second quarter of 2014 were impacted by a 3%
decrease in the average realized natural gas price, which decreased
from $3.98 per Mcf in the second
quarter of 2013 to $3.87 per Mcf in
the comparable 2014 period.
Production
Production totaled 2.2 and 4.4 Bcfe for the three and six months
ended June 30, 2014, respectively,
representing a 5% and 6% decrease from the comparable 2013 periods,
respectively.
The Company experienced a 13% increase in its average daily net
production at its operated Catalina Unit compared to second quarter
of 2013. The 2014 results reflect the recovery from equipment
challenges experienced in the second quarter of 2013. The
recovered production was partially offset by normal field
declines. The Company realized a 1% increase for the six
months ended June 30, 2014 as
compared to the prior year.
Production at the Spyglass Hill Unit decreased by 15% during the
second quarter of 2014 compared to the same period in 2013. The
operator is working to increase injection capacity and enhance the
gathering system which should result in an increase in production.
Additionally, the Company plans to participate in the drilling of
up to 48 new wells in the Spyglass Unit in 2014. The operator plans
to complete 23 of these wells by the end of the third quarter of
the year and the remaining 25 wells are scheduled to be drilled in
the fourth quarter. This drilling program will satisfy the minimum
well requirement through August 2015
as set in the federal exploratory agreement.
The decrease in production from the Mesa Units during the three
and six months ended June 30, 2014
was primarily due to normal production decline as drilling in this
field is complete.
General and administrative expenses
The Company's general and administrative expenses increased
$341,000 and $807,000 for the three and six months ended
June 30, 2014 compared to the
comparable 2013 periods. The increased costs were
primarily due to the severance payable to the Company's former
chief executive officer of $691,000,
which was recorded in the first quarter of 2014, and also the
establishment of its Houston
location.
Non-cash gain/loss on derivative instruments
The Company recognized an unrealized non-cash loss from its
derivatives of $258,000 in the second
quarter of 2014, resulting from the change in the fair value of its
commodity contracts and interest rate swap at June 30, 2014. This compared to an
unrealized non-cash gain of $2.7
million in the second quarter of 2013. For the first
six months of 2014 the Company recognized an unrealized non-cash
loss from its derivatives of $1.8
million compared to a net loss of $2.0 million for the first six months of 2013.
Hedging Activity
As a result of rising natural gas prices and the settlement of
our hedges during the three and six months ended June 30, 2014, the Company's realized a loss of
$533,000 and $1.5 million, respectively, 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 June 30, 2014.
Type of
Contract
|
|
Remaining
Contractual
Volume (Mcf)
|
|
Term
|
|
Price
(1)
|
Fixed Price
Swap
|
|
920,000
|
|
01/14-12/14
|
|
$ 4.27
|
|
|
Costless
Collar
|
|
900,000
|
|
01/14-12/14
|
|
$ 4.00
|
|
floor
|
|
|
|
|
|
|
$ 4.50
|
|
ceiling
|
Fixed Price
Swap
|
|
900,000
|
|
01/14-12/14
|
|
$ 4.20
|
|
|
Fixed Price
Swap
|
|
270,000
|
|
01/14-12/14
|
|
$ 4.17
|
|
|
Fixed Price
Swap
|
|
3,000,000
|
|
01/15-12/15
|
|
$ 4.28
|
|
|
Fixed Price
Swap
|
|
3,600,000
|
|
01/15-12/15
|
|
$ 4.15
|
|
|
Fixed Price
Swap
|
|
1,830,000
|
|
01/16-12/16
|
|
$ 4.07
|
|
|
Fixed Price
Swap
|
|
3,660,000
|
|
01/16-12/16
|
|
$ 4.15
|
|
|
Total
|
|
15,080,000
|
|
|
|
|
|
|
|
(1)
|
All contracts are
indexed to the New York Mercantile Exchange
|
Liquidity and Capital Investment
For the six months ended June
30, 2014, the Company generated cash flow from operations of
$6.0 million, compared to
$6.7 million during the same period
in 2013.
The Company had $45.9 million
outstanding on its credit facility as of June 30, 2014, with an average interest rate of
3.5%. The Company has received a non-binding commitment
letter from an international financial institution for an initial
$50 million, borrowing base
credit facility to replace its existing credit facility. The
Company is currently working to finalize the terms for a new
credit facility based on this commitment letter.
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.
Termination of International Joint Venture
In April of this year the Company announced plans to form an
Energy Joint Venture with headquarters in Tirana, Albania. In June, the Company made the
decision to terminate its international efforts in order to focus
its full attention on domestic natural gas production, acquisition
and development, and on its recently announced gas-to-liquids
("GTL") initiative.
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 August 14, 2014, for a more detailed discussion
of the Company's results.
Escalera Resources Co. will host a conference call to discuss
results on Friday, August 15, 2014 at
11:00 a.m. Eastern Time (9:00 a.m. Mountain Time). Those wanting to
listen can call (800) 311-9406 and use conference code 40197#.
A replay of this conference call will be available for one week
by calling (877) 919-4059 and using pass code 63009132.
Other Upcoming Events
The Company will make a corporate presentation at The Oil &
Gas Conference hosted by EnerCom, Inc. The conference is held
in Denver, Co August 17-21, 2014. Charles Chambers, President, CEO & Chairman
will be attending and Adam Fenster,
CFO, will present at 8:00 AM (MT) on
Wednesday, August 20, 2014. The
presentation will be webcast and can be viewed at the Company
website, www.escaleraresources.com.
SUMMARY STATEMENT
OF OPERATIONS
|
(In thousands, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30,
|
|
Six months ended June
30,
|
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
Natural gas and oil
sales
|
|
$
9,320
|
|
$
8,502
|
|
$
19,886
|
|
$
16,035
|
Transportation
revenue
|
|
940
|
|
858
|
|
1,904
|
|
1,837
|
Price risk management
activities, net
|
|
(751)
|
|
3,438
|
|
(3,267)
|
|
634
|
Other income,
net
|
|
47
|
|
503
|
|
186
|
|
508
|
|
|
|
|
|
|
|
|
|
Total
revenues
|
|
9,556
|
|
13,301
|
|
18,709
|
|
19,014
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
Lease operating
expenses
|
|
3,174
|
|
3,288
|
|
6,472
|
|
6,196
|
Production
taxes
|
|
1,130
|
|
1,023
|
|
2,364
|
|
1,965
|
Pipeline operating
expenses
|
|
1,115
|
|
1,198
|
|
2,310
|
|
2,712
|
Exploration expenses
including
|
|
|
|
|
|
|
|
|
dry holes
|
|
22
|
|
46
|
|
56
|
|
70
|
Impairment and
abandonment of
|
|
|
|
|
|
|
|
|
equipment and properties
|
|
405
|
|
472
|
|
1,080
|
|
1,536
|
|
|
|
|
|
|
|
|
|
Total
Expenses
|
|
5,846
|
|
6,027
|
|
12,282
|
|
12,479
|
|
|
|
|
|
|
|
|
|
Gross Margin
Percentage
|
|
38.8%
|
|
54.7%
|
|
34.4%
|
|
34.4%
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
1,688
|
|
1,347
|
|
3,770
|
|
2,963
|
Depreciation,
depletion and
|
|
|
|
|
|
|
|
|
amortization
expense
|
|
4,939
|
|
5,231
|
|
10,189
|
|
10,453
|
Interest expense,
net
|
|
455
|
|
123
|
|
805
|
|
455
|
|
|
|
|
|
|
|
|
|
Pre-tax income
(loss)
|
|
(3,372)
|
|
573
|
|
(8,337)
|
|
(7,336)
|
|
|
|
|
|
|
|
|
|
Benefit (Provision)
for deferred taxes
|
|
289
|
|
(212)
|
|
869
|
|
2,521
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
(3,083)
|
|
361
|
|
(7,468)
|
|
(4,815)
|
|
|
|
|
|
|
|
|
|
Preferred stock
requirements
|
|
931
|
|
931
|
|
1,862
|
|
1,862
|
|
|
|
|
|
|
|
|
|
Net loss
attributable to common stock
|
|
$
(4,014)
|
|
$
(570)
|
|
$
(9,330)
|
|
$
(6,677)
|
|
|
|
|
|
|
|
|
|
Net loss per
common share:
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
$
(0.29)
|
|
$
(0.05)
|
|
$
(0.72)
|
|
$
(0.59)
|
|
|
|
|
|
|
|
|
|
Weighted average
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic and
diluted
|
|
14,081,582
|
|
11,238,697
|
|
12,907,091
|
|
11,233,725
|
SELECTED BALANCE
SHEET DATA
|
(In
thousands)
|
|
|
|
|
|
|
|
June
30,
|
|
December
31,
|
|
|
|
2014
|
|
2013
|
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
$
126,520
|
|
$
132,400
|
|
-4%
|
|
|
|
|
|
|
Balance outstanding
on credit facility
|
45,950
|
|
47,450
|
|
-3%
|
|
|
|
|
|
|
Total stockholders'
equity
|
22,479
|
|
27,311
|
|
-18%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED CASH FLOW
DATA
|
(In
thousands)
|
|
|
|
|
|
|
|
Six months ended
June 30,
|
|
|
|
2014
|
|
2013
|
|
%
Change
|
|
|
|
|
|
|
Net cash provided
by
|
|
|
|
|
|
operating
activities
|
$
6,012
|
|
$
6,755
|
|
-11%
|
|
|
|
|
|
|
Net cash used
in
|
|
|
|
|
|
investing
activities
|
(2,334)
|
|
(5,319)
|
|
-56%
|
|
|
|
|
|
|
Net cash provided by
(used in)
|
|
|
|
|
|
financing
activities
|
752
|
|
(1,883)
|
|
140%
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED
OPERATIONAL DATA
|
|
|
|
|
|
|
|
Three months
ended,
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
2014
|
|
2013
|
|
%
Change
|
|
|
|
|
|
|
Total production
(Mcfe)
|
2,150,977
|
|
2,267,799
|
|
-5%
|
|
|
|
|
|
|
Average price
realized per Mcfe
|
$
4.09
|
|
$
4.21
|
|
-3%
|
|
|
|
|
|
|
|
Six months
ended,
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
2014
|
|
2013
|
|
%
Change
|
|
|
|
|
|
|
Total production
(Mcfe)
|
4,368,580
|
|
4,668,837
|
|
-6%
|
|
|
|
|
|
|
Average price
realized per Mcfe
|
$
4.21
|
|
$
4.06
|
|
4%
|
|
|
|
|
|
|
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 and six months ended June 30, 2014 and 2013, respectively, contained
below.
|
Three Months
Ended June 30,
|
|
Six Months
Ended June 30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
|
Net Income (loss)
attributable to common stock
|
|
|
|
|
|
|
|
to as reported under
US GAAP
|
$
(4,014)
|
|
$
(570)
|
|
$
(9,330)
|
|
$
(6,677)
|
Add back non-cash
items:
|
|
|
|
|
|
|
|
Provision/(benefit) for income taxes
|
(289)
|
|
212
|
|
(869)
|
|
(2,521)
|
Depreciation,
depletion, amortization and accretion expense
|
5,000
|
|
5,295
|
|
10,311
|
|
10,578
|
Non-cash loss (gain)
on derivatives
|
258
|
|
(2,684)
|
|
1,795
|
|
1,952
|
Stock-based
compensation expense
|
178
|
|
234
|
|
383
|
|
516
|
Impairments,
abandonments and dry hole costs
|
405
|
|
472
|
|
1,080
|
|
1,536
|
Other non-cash
items
|
-
|
|
-
|
|
691
|
|
10
|
Clean
Earnings
|
$
1,538
|
|
$
2,958
|
|
$
4,061
|
|
$
5,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Clean Earnings per
Share
|
$
0.11
|
|
$
0.26
|
|
$
0.31
|
|
$
0.48
|
Weighted average
shares outstanding
|
14,082
|
|
11,326
|
|
12,907
|
|
11,316
|
|
|
(1)
|
Non-cash loss (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 six months
ended June 30, 2014, the Company recorded accrued severance payable
to its former chief executive officer of $691.
|
About Escalera Resources Co.
Escalera Resources Co. ("Escalera") is headquartered in
Denver, CO, with executive offices
in Houston, TX and a regional
office is Casper, WY. Escalera
explores, develops and transports natural gas in the U.S. Escalera
is seeking strategic acquisitions of abundant, low cost dry natural
gas assets that are currently undervalued or underutilized; and
identifying alternative ways to enhance the value of its dry
natural gas reserves.
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.