HOUSTON, July 13, 2016 /PRNewswire/ -- Lucas Energy,
Inc. (NYSE MKT: LEI) ("Lucas" or
the "Company"), an independent oil and gas company with its
operations in central Texas, today
announced its fourth quarter and fiscal year-end results for the
periods ending March 31, 2016 and the
filing of its Annual Report on Form 10-K on July 13, 2016.
"While the past year was another difficult one for the energy
industry, it afforded our Company with multiple opportunities, with
the most significant being our agreement to acquire the working
interests in certain oil and gas properties in Texas and Oklahoma from Segundo Resources," said
Anthony C. Schnur, Chief Executive
Officer of Lucas Energy. "Also during the year we regained
compliance with the NYSE MKT exchange by restructuring and
extending our existing term loan and completing a 1-for-25 reverse
stock split. Additionally, we entered into several financial
transactions, some of which will be triggered after the close of
the Segundo acquisition.
"We did not realize full production potential in fiscal 2016
because some of our top producing wells were offline at various
times throughout the year. Our production was also
significantly impacted by declines in realized oil prices that
limited our ability to provide sufficient cash flow to the field
level, especially during the fiscal fourth quarter when prices
averaged $31.68, $30.32, and $37.55
per barrel for the months of January, February and March,
respectively. As a result, our average production fell 42%
from the prior year.
"We continue to remain vigilant in controlling our costs." Mr.
Schnur continued. "During the year, we lowered our respective
lease operating expenses and G&A costs by 49% and 25%, this
following our respective fiscal 2015 reductions of 34% and 13% year
over year. We relocated our corporate offices, reducing our
monthly lease payments by about 40%. As we develop acquired
acreage, we expect to materially increase our production and expand
and optimize our asset base. We believe these efforts,
combined with our ongoing cost-cutting initiatives, will stabilize
our cash flow, improve our profitability margins, and ultimately
achieve greater value for our shareholders."
Review and Outlook
The price of a barrel of oil in mid-2014 was over $100; by the end of 2015 it was in the
$30 range and in the first calendar
quarter reached into the twenties. The resulting fallout saw
42 bankruptcies among energy companies in 2015 followed by an
additional 39 in the first five months of 2016. Survival in
our industry has been the primary objective, and we have done so to
date. In fact, we view the current market environment as an
opportunity to expand our footprint and grow the company. The
first-step in our transition from a distressed turnaround concern
to a renewed acquisition-focused, growth-oriented company is the
strategic business combination announced in December of 2015.
This transaction is currently under review by the Securities
Exchange Commission, and the parties anticipate closing, which is
subject to various conditions, to occur during the second quarter
of fiscal 2017.
As previously disclosed, we expect that once the acquisition is
completed, our asset base and daily production will increase
significantly with the addition of the Hunton formation
Mid-continent reserves in Central Oklahoma. We also intend to
redirect our strategic vision with the initial rebranding name
change to "Camber Energy." Camber is a noun, meaning a slightly
convexed, or arched shape, which bears resemblance to the
production curve of the Hunton reserves which exhibit an atypical
inclining rate of production in the first 18 to 24 months, and a
very low decline rate thereafter. We are excited about the
course we have chosen, and we are eager to bring it to a close.
The Company also completed a series of financial transactions
during the year that provided working capital and near-term debt
relief and provided for a capital infusion at the closing of the
acquisition. By working closely with our lender, we
restructured the existing debt on our balance sheet, affording us
the opportunity to continue to operate as well as transact.
Our current capital requirements are augmented through a
convertible loan note facility that we expect to utilize through
closing. Finally, as announced on April 7, 2016, Lucas entered into a series of agreements with
an institutional investor whereby it will receive $10.0 million of equity capital, subject to
meeting certain conditions including the acquisition of the Segundo
assets. This financing was specifically arranged to ensure
our fiscal stability and liquidity as we begin our growth as Camber
Energy.
We intend to drill the acquired acreage, funding permitting, and
have identified 50 Hunton locations where an initial six locations
are under review. That review will assess current drilling
costs, updated production profiles and the availability of
electrical and saltwater disposal facilities. Any
development schedule will be dependent on when we are able to close
the acquisition. Beyond those known locations, we believe
there are opportunities to develop other sands present in the
acreage.
Our existing properties are located in the Eagle Ford Shale
trend, one of the most active plays in the U.S. Drilling
activity around our Eagle Ford assets continues to support an
enhanced view of our position. In addition, leading operators
in the Eagle Ford area have developed drilling and completion
technologies that have significantly reduced production risk and
decreased per well capital costs. While commodity prices have
dropped precipitously, the associated cost to drill and complete
have fallen as well. We continue to review opportunities to
accelerate development of our five million barrels of proved Eagle
Ford and other oil reserves through either direct development or
strategic partnerships.
Our long-term strategy is to grow the Company in three ways:
develop our acquired and existing assets; expand our existing
footprint through bolt-on acquisitions; and continue to pursue
material acquisitions. The prolonged down cycle in oil, or
otherwise referred to as "lower for longer," likely favors a
strategy of focused acquisition in the near term, but we will be
flexible and opportunistic. It is our intent to create an
asset portfolio of increasing production AND expanded drilling
inventory where we can apply technical expertise to the
asset.
With our acquisition of Segundo, we also acquire technical
knowledge of how the impact of dewatering practices improves
production rates, how sophisticated field-wide saltwater disposal
systems and proprietary electrical infrastructure can lower
operating costs, and how this combined process can be applied to
other formations that harbor characteristics similar to the Hunton
formation. Identifying and acquiring properties in areas
analogous to the Hunton will be a key component to the future
growth of the company.
The last several years have been difficult for Lucas, and the fiscal 2016 results bear that
out. However, we are confident in our future direction and
ambitious growth initiative. What we will create with Segundo
and the establishment of Camber is a platform on which to build our
Company, through the acquisition, and development of additional
reserves through and out of this cyclical downturn.
Please refer to our Annual Report on Form 10-K for the year
ended March 31, 2016, at www.sec.gov
for complete financial statements, footnotes relating to such
financial statements, risk factors regarding the Company and a more
detailed discussion of our plan of operations and results of
operations, as well as other matters.
Fiscal 2016 Annual Results
For the twelve months ending March 31,
2016, Lucas reported a
fiscal year net loss of $25.4
million, or a loss of ($17.58)
per share), compared to a net loss of $5.1
million or ($3.78) per share
in the twelve months ending March 31,
2015. Fiscal year 2016 included impairment charges [related
to the full-cost write-down of its oil and gas assets].
Excluding for the impairment charges, the adjusted net loss for
fiscal year 2016 was $4.8 million, or
($2.80 per share compared to a net
loss of $5.1 million, or ($3.78) per share in fiscal 2015.
Total crude oil and natural gas revenues for fiscal 2016 were
$1.0 million compared to $3.0 million for the same period a year ago due
primarily to a 45% drop in crude oil prices and a 42% decrease in
annual production volumes. The decline in crude oil prices
impacted revenues by approximately $1.3
million and the lower production volumes decreased revenues
by another $0.7 million when compared
with the same period last year. The production decline is
primarily attributable to two of the Company's top producing wells
being shut-in for over two months. Capital constraints
prohibited the Company from performing timely workovers on three
other top producing wells, which experienced down times ranging
from between 20 and 256 days. Other factors impacting
production were severe flooding conditions in Texas during the year, significant
interference from offset activity, and the higher front-end
production in the prior reporting period related to workover
drilling and lateral programs.
Lease operating expenses of $0.7
million for the year ended March 31,
2016 decreased $0.7 million,
or 49%, from $1.5 million for the
same period a year ago, principally due to less production related
to reduced drilling activity and workover activity due to limited
funding and the Company's efforts to preserve capital while
maintaining cash flow. General and administrative
expenses (excluding share-based compensation) decreased
approximately $0.8 million or 24% for
fiscal 2016 compared to the prior year despite a one-time expense
of $0.4 million related to
transaction costs associated with the Segundo acquisition.
Last year's expenses included $0.3
million of legal expenses, investment banking fees and other
transaction costs related to strategic initiates that were
subsequently abandoned.
Depreciation, depletion, amortization and accretion (DD&A)
expenses for the 2016 fiscal year decreased $0.7 million, or 43%, from the same period a year
ago, primarily due to a 42% reduction in production volumes by
15,886 barrels of oil equivalent (BOE) to 22,190 BOE. Average
daily production was 61 barrels of oil per day (BOPD) compared to
104 BOPD in fiscal 2015, all of which was produced from the Austin
Chalk formation.
In fiscal 2016, the Company recorded an impairment of
$21.4 million associated with oil and
gas properties primarily due to a significant decline in commodity
prices during the fiscal year, which triggered a full-cost
write-down of these assets. These fields were reduced to the
fair value of approximately $14.0
million using discounted future cash flows.
SELECTED FINANCIAL
DATA
|
|
|
|
Fiscal Year Ending
3/31/2016
|
|
|
|
INCOME STATEMENT
($000s)
|
FYE
2016
|
3/31/2016
|
12/31/2015
|
9/30/2015
|
6/30/2015
|
Net operating
revenues
|
$968
|
$101
|
$184
|
$290
|
$393
|
Operating
expenses
|
|
|
|
|
|
Lease
operating expense
|
741
|
143
|
182
|
253
|
163
|
G&A
|
2,501
|
646
|
676
|
629
|
550
|
Impairment
charge
|
21,391
|
21,391
|
|
|
|
Other
operating expenses
|
1,003
|
165
|
232
|
293
|
313
|
Total operating expense
|
25,636
|
22,345
|
1,090
|
1,175
|
1,026
|
|
|
|
|
|
|
Interest expense
& other
|
(782)
|
(197)
|
(117)
|
(68)
|
(400)
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
(25,450)
|
(22,441)
|
(1,023)
|
(953)
|
(1,033)
|
Provision for
income taxes
|
0
|
0
|
0
|
0
|
0
|
Net loss,
reported
|
($25,450)
|
($22,441)
|
($1,023)
|
($953)
|
($1,033)
|
|
|
|
|
|
|
Fiscal Year Ending
3/31/3015
|
|
|
|
INCOME STATEMENT
($000s)
|
FYE2015
|
3/31/2015
|
12/31/2014
|
9/30/2014
|
6/30/2014
|
Net operating
revenues
|
$3,001
|
$383
|
$683
|
$993
|
$942
|
Operating
expenses
|
|
|
|
|
|
Lease
operating expenses
|
1,458
|
216
|
335
|
453
|
454
|
G&A
|
3,313
|
566
|
748
|
1,139
|
860
|
Other
operating expenses
|
1,832
|
397
|
470
|
501
|
464
|
Total operating expense
|
6,603
|
1,179
|
1,553
|
2,093
|
1,778
|
|
|
|
|
|
|
Interest expense
& other
|
(1,512)
|
(282)
|
(437)
|
(375)
|
(418)
|
|
|
|
|
|
|
Income (loss) before
income taxes
|
(5,112)
|
(1,078)
|
(1,307)
|
(1,475)
|
(1,254)
|
Provision for
Income taxes
|
(14)
|
0
|
0
|
(14)
|
0
|
Net loss,
reported
|
($5,128)
|
($1,078)
|
($1,307)
|
($1,489)
|
($1,254)
|
|
|
|
|
|
|
Fiscal 2016 Reserves
At year-end on March 31, 2016,
Lucas' estimated net proved crude
oil and natural gas reserves were approximately 4.3 million BOE,
down approximately 0.8 million or 16% from 5.1 million BOE at the
end of fiscal 2015. In 2016, Lucas had a downward revision primarily due to
the sale of existing leases of 0.3 million Boe in Karnes County, Texas, the expiration of 0.4
million Boe on existing leases and the transfer of approximately
0.1 million Boe of proved undeveloped reserves to probable
undeveloped reserves.
Using the SEC pricing methodology of an average monthly crude
oil price of $45.22 per Bbl and
natural gas price of $2.39 per
thousand cubic feet for the twelve months ended March 31, 2016, the estimated discounted future
net cash flow (PV-10) before tax expenses for Lucas' proved reserves was approximately
$14.0 million, of which approximately
$12.1 million are proved undeveloped
reserves of which a large portion are located in the Eagle Ford
shale formation. These reserves were determined in accordance
with standard industry practices and SEC regulations by the
licensed independent petroleum engineering firm of Ralph E. Davis
Associates, LLC.
|
|
|
Oil
|
Gas
|
Total
|
PV-10
|
PV-10
/
|
|
(MBbls)
|
(Mmcf)
|
(Mboe)
|
($mm)
|
BOE
|
PDP
|
118
|
0
|
118
|
$1.9
|
$15.94
|
PUD
|
3,724
|
2,512
|
4,143
|
$12.1
|
$2.93
|
Total
|
3,842
|
2,512
|
4,260
|
$14.0
|
$18.87
|
Probable
|
2,092
|
1,344
|
2,316
|
$4.8
|
$2.06
|
Total
2P
|
5,934
|
3,856
|
6,576
|
$18.9
|
$20.93
|
About Lucas Energy, Inc.
Based in Houston, Texas, Lucas
Energy (NYSE MKT: LEI) is a growth-oriented, independent oil and
gas company engaged in the development of crude oil and natural gas
in the Austin Chalk and Eagle Ford formations in South Texas.
For more information, please visit the updated Lucas Energy web
site at www.lucasenergy.com.
Safe Harbor Statement and Disclaimer
This news release includes "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward looking statements give our current
expectations, opinion, belief or forecasts of future events and
performance. A statement identified by the use of forward
looking words including "may," "expects," "projects,"
"anticipates," "plans," "believes," "estimate," "should," and
certain of the other foregoing statements may be deemed
forward-looking statements. Although Lucas believes that the expectations reflected
in such forward-looking statements are reasonable, these statements
involve risks and uncertainties that may cause actual future
activities and results to be materially different from those
suggested or described in this news release. These include
risks inherent in natural gas and oil drilling and production
activities, including risks of fire, explosion, blowouts, pipe
failure, casing collapse, unusual or unexpected formation
pressures, environmental hazards, and other operating and
production risks, which may temporarily or permanently reduce
production or cause initial production or test results to not be
indicative of future well performance or delay the timing of sales
or completion of drilling operations; delays in receipt of drilling
permits; risks with respect to natural gas and oil prices, a
material decline which could cause Lucas to delay or suspend planned drilling
operations or reduce production levels; risks relating to the
availability of capital to fund drilling operations that can be
adversely affected by adverse drilling results, production declines
and declines in natural gas and oil prices; risks relating to
unexpected adverse developments in the status of properties; risks
relating to the absence or delay in receipt of government approvals
or fourth party consents; and other risks described in Lucas's Annual Report on Form 10-K and other
filings with the SEC, available at the SEC's website at
www.sec.gov. Investors are cautioned that any forward-looking
statements are not guarantees of future performance and actual
results or developments may differ materially from those projected.
The forward-looking statements in this press release are made as of
the date hereof. The Company takes no obligation to update or
correct its own forward-looking statements, except as required by
law, or those prepared by third parties that are not paid for by
the Company. The Company's SEC filings are available at
http://www.sec.gov.
Contacts:
|
Carol Coale / Ken
Dennard
|
|
Dennard - Lascar
Associates LLC
|
|
(713)
529-6600
|
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SOURCE Lucas Energy, Inc.