Contango Oil & Gas Company (NYSE MKT:MCF) (“Contango” or the
“Company”) announced today its financial results for the fourth
quarter and year ended December 31, 2017.
Fourth Quarter 2017
Highlights
- Production of 4.8 Bcfe for the quarter (51.8 Mmcfed, 32%
liquids); within guidance, despite late December weather related
shut-ins
- Adjusted EBITDAX of $10.2 million for the quarter
- Brought one Southern Delaware Basin well on production while
spudding two additional wells. So far in 2018 we have
completed one well, are completing another well, and have spud and
reached total depth on another well
- 25% increase in year-end reserves, an increase of 37.5 Bcfe
- 55% increase in SEC PV-10 value of year-end reserves, an
increase of $91.1 million
- Increased commodity price hedge protection to approximately 28%
of forecasted PDP gas production and 69% of forecasted PDP oil
production for 2018, and to 38% of forecasted PDP oil production
for 2019
Summary Fourth Quarter Financial
Results
Net loss for the three months ended December 31,
2017 was $5.6 million, or $(0.23) per basic and diluted share,
compared to a net loss of $16.8 million, or $(0.69) per basic and
diluted share, for the same period last year. Last year’s quarter
was negatively impacted by a commodity price driven impairment
charge of $6.3 million compared to a current quarter impairment
charge of $0.4 million. The impairment charge for the current
quarter was related to the partial impairment of an unused offshore
platform in onshore storage and impairment of our Tuscaloosa Marine
Shale properties, while the impairment for the prior year quarter
was related to non-core undeveloped acreage that we were not likely
to drill prior to expiration. Average weighted shares outstanding
were approximately 24.8 million and 24.6 million for the current
and prior year quarters, respectively.
The Company reported Adjusted EBITDAX, as
defined below, of approximately $10.2 million for the three months
ended December 31, 2017, compared to $8.2 million for the same
period last year. The improvement was attributable to $1.7 million
more in realized proceeds from derivatives and $1.9 million less in
cash G&A costs, offset in part by a $1.6 million decrease in
revenues from lower production.
Revenues for the three months ended December 31,
2017 were approximately $20 million compared to $21.7 million for
the same period last year, a decrease attributable to lower
production during the current quarter and a 4% decrease in natural
gas prices, partially offset by a 20% and 38% increase in crude oil
and natural gas liquids prices, respectively.
As previously reported, production for the
fourth quarter of 2017 was approximately 4.8 Bcfe, or 51.8 Mmcfe
per day, compared to 64.3 Mmcfe per day for the fourth quarter of
2016, and within our previously provided guidance. This
expected decrease in production can be attributed to the addition
of only five new producing wells since the initiation of our
drilling program in the Southern Delaware Basin beginning in late
2016. We also experienced cold weather shut-ins in some of our West
Texas properties during the month of December. Crude oil and
natural gas liquids production during the fourth quarter of 2017
was approximately 2,700 barrels per day, or 31.5% of total
production, compared to approximately 3,080 barrels per day, or
28.8% of total production, in the fourth quarter of 2016, a decline
related to the slower than planned pace of bringing on new
production in our Southern Delaware Basin program. Our first
quarter 2018 production guidance is 50 – 55 Mmcfed, though we
expect to commence production on two new wells in March and
April.
The weighted average equivalent sales price
during the three months ended December 31, 2017 was $4.20 per Mcfe,
compared to $3.66 per Mcfe for the same period last year. As
previously noted, stronger prices for crude oil and natural gas
liquids, and a higher percentage of liquids in the production mix,
contributed to the weighted average increase.
Operating expenses for the three months ended
December 31, 2017 were approximately $7.0 million, or $1.47 per
Mcfe, compared to $6.3 million, or $1.07 per Mcfe, for the same
period last year. Included in operating expenses are lease
operating expenses, transportation and processing costs, workover
expenses and production and ad valorem taxes. Operating expenses
exclusive of production and ad valorem taxes for the three months
ended December 31, 2017 were approximately $6.4 million, or $1.34
per Mcfe, compared to approximately $5.9 million, or $1.00 per
Mcfe, for the same period last year, and below our previously
provided guidance for the quarter. The increase is due to
accruing higher minimum volume charges for an ongoing throughput
deficiency in our Madisonville Field.
DD&A expense for the three months ended
December 31, 2017 was $11.5 million, or $2.42 per Mcfe, compared to
$13.7 million, or $2.32 per Mcfe, for the same period last year, a
decrease primarily attributable to lower production during the
quarter.
Impairment and abandonment expense from oil and
gas properties was $0.9 million for the three months ended December
31, 2017. Of this amount, $0.1 million related to the partial
impairment of an unused offshore platform in onshore storage and
$0.3 million related to revised estimated reserves for our
Tuscaloosa Marine Shale properties. For the same period
last year, impairment and abandonment expense from oil and gas
properties was $6.3 million which related to the impairment of
undeveloped leases in non-core areas.
G&A expenses for the three months ended
December 31, 2017 were $5.5 million, or $1.16 per Mcfe, compared to
$8.0 million, or $1.36 per Mcfe, for the prior year quarter.
G&A expenses for the current and prior year quarters include
$1.5 million and $2.1 million, respectively, in non-cash stock
compensation expense. Other items contributing to the decrease in
G&A costs for the current quarter were lower bonus accruals for
the 2017 performance period and lower insurance and office costs
for the current quarter. For the first quarter of 2018, we have
provided guidance of $4.5 million to $5.0 million for general and
administrative expenses, exclusive of non-cash stock compensation
(“Cash G&A”).
Gain from affiliates for the three months ended
December 31, 2017 was approximately $0.2 million, compared to a
loss from affiliates of $0.3 million for the same period last year,
both associated with our 37% equity interest in Exaro Energy
III.
2018 Capital Program &
Liquidity
Capital costs incurred for the three months
ended December 31, 2017 were approximately $13.6 million, which was
primarily related to our Southern Delaware Basin acreage in Pecos
County, Texas. As previously reported, we have budgeted to
invest approximately $52 million in 2018 to continue to develop
that area with a one rig program. We expect that
program to be funded by internally generated cash flow, proceeds
from non-core asset sales and/or temporary borrowings under our
revolving credit facility. We will continue to monitor commodity
prices, drilling results and service/supply costs during the year,
and if deemed appropriate, may make adjustments to our drilling
strategy for the remainder of the year
As of December 31, 2017, we had approximately
$85.4 million of debt outstanding under our credit facility,
provides for a borrowing base of $115 million through May 1,
2018.
2017 Year End Reserves
As previously disclosed in our March 5, 2018
release on reserves and production, proved reserves at
December 31, 2017, as estimated by William M. Cobb &
Associates, Inc. and Netherland, Sewell & Associates,
Inc., Contango’s independent petroleum engineering firms, in
accordance with reserve reporting guidelines mandated by the
Securities and Exchange Commission (“SEC”), were 189.3 Bcfe, a 25%
increase over our proved reserves as of December 31, 2016,
consisting of 105.1 billion cubic feet of natural gas, 3.4 million
barrels of crude oil, and 4.4 million barrels of natural gas
liquids. As of December 31, 2017, the SEC PV-10 value of our
proved reserves was approximately $257.3 million, compared to
$166.2 million as of December 31, 2016. As of
December 31, 2017, 48% of our proved reserves were natural gas
and 65% were proved developed.
The following table summarizes Contango’s total proved reserves
as of December 31, 2017 (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value |
|
|
OIL |
|
NGL |
|
Gas |
|
Total |
|
Discounted |
Category |
|
(MBbl) |
|
(MBbl) |
|
(Mmcf) |
|
(Mmcfe) |
|
at 10% ($000) |
Developed |
|
3,364 |
|
3,596 |
|
82,133 |
|
123,895 |
|
200,723 |
Undeveloped |
|
7,285 |
|
2,011 |
|
9,586 |
|
65,359 |
|
56,560 |
Total Proved |
|
10,649 |
|
5,607 |
|
91,719 |
|
189,254 |
|
257,283 |
- These estimates do not include net reserves of approximately
30.7 Bcfe (PV-10 of approximately $24.4 million) attributable to
our 37% equity ownership investment in Exaro as of December 31,
2017.
Derivative Instruments
As previously disclosed in our March 5, 2018
operations update, we took advantage of rising commodity prices and
added additional minimum price protection for our forecasted
monthly production volumes and now have the following financial
derivative contracts in place with members of our bank group.
These contracts represent approximately 28% of our currently
forecasted 2018 PDP natural gas production; 69% of our currently
forecasted 2018 PDP crude oil production and 38% of our currently
forecasted 2019 PDP oil production.
Commodity |
Period |
Derivative |
Volume/Month |
Price/Unit |
Natural Gas |
Jan – July 2018 |
Swap |
370,000 MMbtu |
$3.07
(1) |
|
Aug – Oct 2018 |
Swap |
70,000 MMbtu |
$3.07
(1) |
|
Nov – Dec 2018 |
Swap |
320,000 MMbtu |
$3.07
(1) |
|
|
|
|
|
Crude Oil |
Jan - Jun 2018 |
Swap |
20,000 Bbls |
$56.40
(2) |
|
Jul – Oct 2018 |
Collar |
20,000 Bbls |
$52.00
x $56.85 (2) |
|
Nov – Dec
2018 |
Collar |
15,000
Bbls |
$52.00 x $56.85 (2) |
|
Jan – Dec
2018 |
Collar |
2,000
Bbls |
$52.00 x $58.76 (3) |
|
Jan – Jul 2018 |
Collar |
6,000 Bbls |
$58.00
x $68.00 (2) |
|
Nov – Dec
2018 |
Collar |
5,000
Bbls |
$58.00 x $68.00 (2) |
|
Jan – Dec 2019 |
Collar |
7,000 Bbls |
$50.00
x $58.00 (2) |
|
Jan – Dec 2019 |
Collar |
4,000 Bbls |
$52.00
x $59.45 (3) |
- Based on Henry Hub NYMEX natural gas prices
- Based on Argus/LLS oil prices
- Based on West Texas Intermediate oil prices
Selected Financial and Operating Data
The following table reflects certain comparative
financial and operating data for the three and twelve months ended
December 31, 2017 and 2016:
|
|
Three Months Ended |
|
Year ended |
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
2016 |
|
% |
|
2017 |
|
2016 |
|
% |
Offshore Volumes
Sold: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
condensate (Mbbls) |
|
|
21 |
|
|
31 |
|
-32 |
% |
|
|
99 |
|
|
137 |
|
-28 |
% |
Natural
gas (Mmcf) |
|
|
2,571 |
|
|
3,369 |
|
-24 |
% |
|
|
11,189 |
|
|
14,211 |
|
-21 |
% |
Natural
gas liquids (Mbbls) |
|
|
76 |
|
|
97 |
|
-22 |
% |
|
|
330 |
|
|
420 |
|
-21 |
% |
Natural
gas equivalents (Mmcfe) |
|
|
3,154 |
|
|
4,137 |
|
-24 |
% |
|
|
13,762 |
|
|
17,552 |
|
-22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Onshore Volumes
Sold: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
condensate (Mbbls) |
|
|
109 |
|
|
96 |
|
14 |
% |
|
|
419 |
|
|
460 |
|
-9 |
% |
Natural
gas (Mmcf) |
|
|
689 |
|
|
846 |
|
-19 |
% |
|
|
2,721 |
|
|
3,892 |
|
-30 |
% |
Natural
gas liquids (Mbbls) |
|
|
44 |
|
|
60 |
|
-27 |
% |
|
|
187 |
|
|
296 |
|
-37 |
% |
Natural
gas equivalents (Mmcfe) |
|
|
1,610 |
|
|
1,779 |
|
-9 |
% |
|
|
6,361 |
|
|
8,430 |
|
-25 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Volumes
Sold: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
condensate (Mbbls) |
|
|
130 |
|
|
127 |
|
2 |
% |
|
|
518 |
|
|
597 |
|
-13 |
% |
Natural
gas (Mmcf) |
|
|
3,260 |
|
|
4,215 |
|
-23 |
% |
|
|
13,910 |
|
|
18,103 |
|
-23 |
% |
Natural
gas liquids (Mbbls) |
|
|
120 |
|
|
157 |
|
-24 |
% |
|
|
517 |
|
|
716 |
|
-28 |
% |
Natural
gas equivalents (Mmcfe) |
|
|
4,764 |
|
|
5,916 |
|
-19 |
% |
|
|
20,123 |
|
|
25,982 |
|
-23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily Sales
Volumes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
condensate (Mbbls) |
|
|
1.4 |
|
|
1.4 |
|
2 |
% |
|
|
1.4 |
|
|
1.6 |
|
-13 |
% |
Natural
gas (Mmcf) |
|
|
35.4 |
|
|
45.8 |
|
-23 |
% |
|
|
38.1 |
|
|
49.5 |
|
-23 |
% |
Natural
gas liquids (Mbbls) |
|
|
1.3 |
|
|
1.7 |
|
-24 |
% |
|
|
1.4 |
|
|
2.0 |
|
-28 |
% |
Natural
gas equivalents (Mmcfe) |
|
|
51.8 |
|
|
64.3 |
|
-19 |
% |
|
|
55.1 |
|
|
71.0 |
|
-23 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average sales
prices: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
condensate (per Bbl) |
|
$ |
55.30 |
|
$ |
46.08 |
|
20 |
% |
|
$ |
48.90 |
|
$ |
38.52 |
|
27 |
% |
Natural
gas (per Mcf) |
|
$ |
2.87 |
|
$ |
2.98 |
|
-4 |
% |
|
$ |
2.97 |
|
$ |
2.42 |
|
23 |
% |
Natural
gas liquids (per Bbl) |
|
$ |
28.59 |
|
$ |
20.76 |
|
38 |
% |
|
$ |
22.97 |
|
$ |
15.79 |
|
45 |
% |
Total
(per Mcfe) |
|
$ |
4.20 |
|
$ |
3.66 |
|
15 |
% |
|
$ |
3.90 |
|
$ |
3.01 |
|
30 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
2016 |
|
% |
|
2017 |
|
2016 |
|
% |
Offshore Selected Costs
($ per Mcfe) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
operating expenses (1) |
|
$ |
0.61 |
|
$ |
0.66 |
|
-8 |
% |
|
$ |
0.72 |
|
$ |
0.60 |
|
20 |
% |
Production and ad valorem taxes |
|
$ |
0.06 |
|
$ |
0.05 |
|
20 |
% |
|
$ |
0.06 |
|
$ |
0.07 |
|
-14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Onshore Selected Costs
($ per Mcfe) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
operating expenses (1) |
|
$ |
2.78 |
|
$ |
1.77 |
|
57 |
% |
|
$ |
2.32 |
|
$ |
1.81 |
|
28 |
% |
Production and ad valorem taxes |
|
$ |
0.25 |
|
$ |
0.13 |
|
92 |
% |
|
$ |
0.28 |
|
$ |
0.25 |
|
12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Selected Costs
($ per Mcfe) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
operating expenses (1) |
|
$ |
1.34 |
|
$ |
1.00 |
|
34 |
% |
|
$ |
1.22 |
|
$ |
1.00 |
|
22 |
% |
Production and ad valorem taxes |
|
$ |
0.12 |
|
$ |
0.07 |
|
71 |
% |
|
$ |
0.13 |
|
$ |
0.13 |
|
0 |
% |
General
and administrative expense (cash) |
|
$ |
0.83 |
|
$ |
1.00 |
|
-17 |
% |
|
$ |
0.90 |
|
$ |
0.78 |
|
15 |
% |
Interest
expense |
|
$ |
0.27 |
|
$ |
0.13 |
|
108 |
% |
|
$ |
0.20 |
|
$ |
0.15 |
|
33 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDAX (2)
(thousands) |
|
$ |
10,213 |
|
$ |
8,159 |
|
|
|
$ |
35,087 |
|
$ |
30,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares
Outstanding (thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
24,757 |
|
|
24,563 |
|
|
|
|
24,686 |
|
|
21,424 |
|
|
Diluted |
|
|
24,757 |
|
|
24,563 |
|
|
|
|
24,686 |
|
|
21,424 |
|
|
- LOE includes transportation and workover expenses.
- Adjusted EBITDAX is a non-GAAP financial measure. See below for
reconciliation to net loss.
|
|
|
|
|
|
|
CONTANGO OIL & GAS COMPANYCONDENSED CONSOLIDATED
BALANCE SHEETS(in thousands) |
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
2016 |
ASSETS |
|
(unaudited) |
Cash
and cash equivalents |
|
$ |
— |
|
$ |
— |
Accounts receivable, net |
|
|
13,059 |
|
|
16,727 |
Other
current assets |
|
|
2,714 |
|
|
2,327 |
Net
property and equipment |
|
|
345,957 |
|
|
340,382 |
Investment in affiliates and other non-current assets |
|
|
19,723 |
|
|
17,078 |
|
|
|
|
|
|
|
TOTAL ASSETS |
|
$ |
381,453 |
|
$ |
376,514 |
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY |
|
|
|
|
|
|
Accounts payable and
accrued liabilities |
|
|
46,755 |
|
|
55,135 |
Other
current liabilities |
|
|
3,782 |
|
|
7,754 |
Long-term debt |
|
|
85,380 |
|
|
54,354 |
Asset
retirement obligations |
|
|
20,388 |
|
|
22,618 |
Other
non-current liabilities |
|
|
548 |
|
|
248 |
Total
shareholders’ equity |
|
|
224,600 |
|
|
236,405 |
|
|
|
|
|
|
|
TOTAL LIABILITIES &
SHAREHOLDERS’ EQUITY |
|
$ |
381,453 |
|
$ |
376,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONTANGO OIL & GAS COMPANYCONSOLIDATED STATEMENTS
OF OPERATIONS(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
|
(unaudited) |
REVENUES |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
condensate sales |
|
$ |
7,213 |
|
|
$ |
5,842 |
|
|
$ |
25,347 |
|
|
$ |
23,006 |
|
Natural
gas sales |
|
|
9,361 |
|
|
|
12,564 |
|
|
|
41,317 |
|
|
|
43,847 |
|
Natural
gas liquids sales |
|
|
3,441 |
|
|
|
3,257 |
|
|
|
11,881 |
|
|
|
11,330 |
|
Total
revenues |
|
|
20,015 |
|
|
|
21,663 |
|
|
|
78,545 |
|
|
|
78,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses |
|
|
6,980 |
|
|
|
6,329 |
|
|
|
27,183 |
|
|
|
29,111 |
|
Exploration expenses |
|
|
416 |
|
|
|
728 |
|
|
|
1,106 |
|
|
|
1,816 |
|
Depreciation, depletion and amortization |
|
|
11,537 |
|
|
|
13,737 |
|
|
|
47,215 |
|
|
|
63,323 |
|
Impairment and abandonment of oil and gas properties |
|
|
880 |
|
|
|
6,304 |
|
|
|
2,395 |
|
|
|
10,572 |
|
General
and administrative expenses |
|
|
5,513 |
|
|
|
8,030 |
|
|
|
24,161 |
|
|
|
26,802 |
|
Total
expenses |
|
|
25,326 |
|
|
|
35,128 |
|
|
|
102,060 |
|
|
|
131,624 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
Gain
(loss) from investment in affiliates, net of income taxes |
|
|
222 |
|
|
|
(257 |
) |
|
|
2,697 |
|
|
|
1,545 |
|
Gain
(loss) from sale of assets |
|
|
(56 |
) |
|
|
(103 |
) |
|
|
2,280 |
|
|
|
(92 |
) |
Interest
expense |
|
|
(1,278 |
) |
|
|
(757 |
) |
|
|
(4,100 |
) |
|
|
(3,802 |
) |
Gain
(loss) on derivatives, net |
|
|
(1,249 |
) |
|
|
(2,368 |
) |
|
|
3,325 |
|
|
|
(1,632 |
) |
Other
income (expense) |
|
|
1,302 |
|
|
|
38 |
|
|
|
1,275 |
|
|
|
(265 |
) |
Total
other income (expense) |
|
|
(1,059 |
) |
|
|
(3,447 |
) |
|
|
5,477 |
|
|
|
(4,246 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS BEFORE INCOME
TAXES |
|
|
(6,370 |
) |
|
|
(16,912 |
) |
|
|
(18,038 |
) |
|
|
(57,687 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit
(provision) |
|
|
792 |
|
|
|
68 |
|
|
|
395 |
|
|
|
(342 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(5,578 |
) |
|
$ |
(16,844 |
) |
|
$ |
(17,643 |
) |
|
$ |
(58,029 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
EBITDAX represents net income (loss) before
interest expense, taxes, and depreciation, depletion and
amortization, and oil & gas expenses. Adjusted EBITDAX
represents EBITDAX as further adjusted to reflect the items set
forth in the table below, all of which will be required in
determining our compliance with financial covenants under our
credit facility.
We have included EBITDAX and Adjusted EBITDAX in
this release to provide investors with a supplemental measure of
our operating performance and information about the calculation of
some of the financial covenants that are contained in our credit
agreement. We believe EBITDAX is an important supplemental
measure of operating performance because it eliminates items that
have less bearing on our operating performance and so highlights
trends in our core business that may not otherwise be apparent when
relying solely on GAAP financial measures. We also believe
that securities analysts, investors and other interested parties
frequently use EBITDAX in the evaluation of companies, many of
which present EBITDAX when reporting their results. Adjusted
EBITDAX is a material component of the covenants that are imposed
on us by our credit agreement. We are subject to financial
covenant ratios that are calculated by reference to Adjusted
EBITDAX. Non-compliance with the financial covenants
contained in our credit agreement could result in a default, an
acceleration in the repayment of amounts outstanding and a
termination of lending commitments. Our management and
external users of our financial statements, such as investors,
commercial banks, research analysts and others, also use EBITDAX
and Adjusted EBITDAX to assess:
- the financial performance of our assets without regard to
financing methods, capital structure or historical cost basis;
- the ability of our assets to generate cash sufficient to pay
interest costs and support our indebtedness;
- our operating performance and return on capital as compared to
those of other companies in our industry, without regard to
financing or capital structure; and
- the feasibility of acquisitions and capital expenditure
projects and the overall rates of return on alternative investment
opportunities.
EBITDAX and Adjusted EBITDAX are not
presentations made in accordance with generally accepted accounting
principles, or GAAP. As discussed above, we believe that the
presentation of EBITDAX and Adjusted EBITDAX in this release is
appropriate. However, when evaluating our results, you should
not consider EBITDAX and Adjusted EBITDAX in isolation of, or as a
substitute for, measures of our financial performance as determined
in accordance with GAAP, such as net income (loss). EBITDAX
and Adjusted EBITDAX have material limitations as performance
measures because they exclude items that are necessary elements of
our costs and operations. Because other companies may
calculate EBITDAX and Adjusted EBITDAX differently than we do,
EBITDAX may not be, and Adjusted EBITDAX as presented in this
release is not, comparable to similarly-titled measures reported by
other companies.
The following table reconciles net income to
EBITDAX and Adjusted EBITDAX for the periods presented:
|
|
Three Months Ended |
|
Year Ended |
|
|
December 31, |
|
December 31, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
|
|
(in thousands) |
Net
loss |
|
$ |
(5,578 |
) |
|
$ |
(16,844 |
) |
|
$ |
(17,643 |
) |
|
$ |
(58,029 |
) |
Interest
expense |
|
|
1,278 |
|
|
|
757 |
|
|
|
4,100 |
|
|
|
3,802 |
|
Income
tax provision (benefit) |
|
|
(792 |
) |
|
|
(68 |
) |
|
|
(395 |
) |
|
|
342 |
|
Depreciation, depletion and amortization |
|
|
11,537 |
|
|
|
13,737 |
|
|
|
47,215 |
|
|
|
63,323 |
|
Exploration expense |
|
|
416 |
|
|
|
728 |
|
|
|
1,106 |
|
|
|
1,816 |
|
EBITDAX |
|
$ |
6,861 |
|
|
$ |
(1,690 |
) |
|
$ |
34,383 |
|
|
$ |
11,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss (gain) on derivative instruments |
|
$ |
1,593 |
|
|
$ |
1,046 |
|
|
$ |
(2,204 |
) |
|
$ |
3,446 |
|
Non-cash
stock-based compensation charges |
|
|
1,540 |
|
|
|
2,142 |
|
|
|
6,100 |
|
|
|
6,457 |
|
Impairment of oil and gas properties |
|
|
385 |
|
|
|
6,301 |
|
|
|
1,785 |
|
|
|
10,438 |
|
Loss
(gain) on sale of assets and investment in affiliates |
|
|
(166 |
) |
|
|
360 |
|
|
|
(4,977 |
) |
|
|
(1,453 |
) |
Adjusted
EBITDAX |
|
$ |
10,213 |
|
|
$ |
8,159 |
|
|
$ |
35,087 |
|
|
$ |
30,142 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guidance for First Quarter 2018
The Company is providing the following guidance for the first
calendar quarter of 2018.
Production |
|
50,000 - 55,000 Mcfe per day |
|
|
|
LOE
(including transportation and workovers) |
|
$6.4
million - $6.9 million |
|
|
|
Production and ad valorem taxes (% of Revenue) |
|
3.0 - 3.5% |
|
|
|
Cash
G&A |
|
$4.5
million - $5.0 million |
|
|
|
DD&A Rate |
|
$2.30
- $2.55 |
Teleconference Call
Contango management will hold a conference call
to discuss the information described in this press release on
Friday, March 9, 2018 at 9:30am Central Standard Time. Those
interested in participating in the earnings conference call may do
so by calling 1-800-289-0517, (International 1-323-994-2083) and
entering participation code 5264056. A replay of the
call will be available from Friday, March 9, 2018 at 12:30pm CST
through Friday, March 16, 2018 at 12:30pm CDT by clicking here.
Contango Oil & Gas Company is a Houston,
Texas based, independent energy company whose business is to
maximize production from its shallow offshore Gulf of Mexico
properties and onshore properties in Texas and Wyoming, and to use
that cash flow to explore, develop, exploit, produce and acquire
crude oil and natural gas properties in the Texas and Rocky
Mountain regions of the United States. Additional information is
available on the Company's website at http://www.contango.com.
This press release contains forward-looking
statements regarding Contango that are intended to be covered by
the safe harbor "forward-looking statements" provided by the
Private Securities Litigation Reform Act of 1995, based on
Contango’s current expectations and includes statements regarding
acquisitions and divestitures, estimates of future production,
future results of operations, quality and nature of the asset base,
the assumptions upon which estimates are based and other
expectations, beliefs, plans, objectives, assumptions, strategies
or statements about future events or performance (often, but not
always, using words such as "expects", “projects”, "anticipates",
"plans", "estimates", "potential", "possible", "probable", or
"intends", or stating that certain actions, events or results
"may", "will", "should", or "could" be taken, occur or be
achieved). Statements concerning oil and gas reserves also may be
deemed to be forward looking statements in that they reflect
estimates based on certain assumptions that the resources involved
can be economically exploited. Forward-looking statements are based
on current expectations, estimates and projections that involve a
number of risks and uncertainties, which could cause actual results
to differ materially from those, reflected in the statements. These
risks include, but are not limited to: the risks of the oil and gas
industry (for example, operational risks in exploring for,
developing and producing crude oil and natural gas; risks and
uncertainties involving geology of oil and gas deposits; the
uncertainty of reserve estimates; the uncertainty of estimates and
projections relating to future production, costs and expenses;
potential delays or changes in plans with respect to exploration or
development projects or capital expenditures; health, safety and
environmental risks and risks related to weather such as hurricanes
and other natural disasters); uncertainties as to the availability
and cost of financing; fluctuations in oil and gas prices; risks
associated with derivative positions; inability to realize expected
value from acquisitions, inability of our management team to
execute its plans to meet its goals, shortages of drilling
equipment, oil field personnel and services, unavailability of
gathering systems, pipelines and processing facilities and the
possibility that government policies may change or governmental
approvals may be delayed or withheld. Additional information on
these and other factors which could affect Contango’s operations or
financial results are included in Contango’s other reports on file
with the Securities and Exchange Commission. Investors are
cautioned that any forward-looking statements are not guarantees of
future performance and actual results or developments may differ
materially from the projections in the forward-looking statements.
Forward-looking statements are based on the estimates and opinions
of management at the time the statements are made. Contango does
not assume any obligation to update forward-looking statements
should circumstances or management's estimates or opinions change.
Initial production rates are subject to decline over time and
should not be regarded as reflective of sustained production
levels.
|
|
|
Contact: |
|
|
Contango Oil & Gas Company |
|
|
E.
Joseph Grady – 713-236-7400 |
Sergio Castro – 713-236-7400 |
|
Senior Vice President and Chief Financial Officer |
Vice
President and Treasurer |
|
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