Exploration & Production | Quarterly / Earnings Reports | First Quarter (1Q) Update
EPL Picks Up 21 GoM Leases in 1Q
Email
Print 
Bookmark
EPL Oil & Gas, Inc. reported financial and operational results for the first quarter of 2014.
Highlights:
- 1Q14 EBITDAX at $89.4 million (see EBITDAX reconciliation in the tables)
- 1Q14 net income of $13.3 million ($0.34 per diluted share) and adjusted net income of $11.8 million ($0.30 per diluted share)
- 1Q14 production averaged 20,835 Barrels of oil equivalent per day (Boepd), which was above Company guidance
- Oil dominated drilling program continues, with 14 projects completed this year to date (100% success rate)
1Q14 CapEx and Current Operations
For the first quarter of 2014, costs incurred for development and exploration activities totaled approximately $132.7 million and $2.0 million on seismic purchases. During 2014 to date, the Company has completed 14 major operations, including 8 successful sidetracks and drillwells and 6 successful workovers and well reactivations, with an overall 100% success rate. The Company has continued its active drilling program from the first quarter of 2014, with 6 rigs currently working within its core field areas.
In addition, as previously announced, EPL was the high bidder on 21 shallow Gulf of Mexico (GOM) leases at the Central GOM Lease Sale 231 held during the first quarter of 2014. The 21 high bid lease blocks total $8.2 million and are located within EPL's core areas of operations. The Company also spent approximately $15.0 million for plugging and abandonment and other decommissioning activities performed during first quarter.
Gary C. Hanna, the Company's Chairman, President and CEO, stated, "The results for this past quarter were positive, with total production averaging above our guidance range and lease operating expenses favorably below our guidance range. As we anticipated, our drill program provided good production momentum as we exited the first quarter. Our oil production has ramped up significantly, with our current oil production running 18,500 Bopd, and total production on an equivalent basis at 23,000 Boepd."
Financial Results
For the first quarter of 2014, EBITDAX was $89.4 million and discretionary cash flow was $77.2 million, or $1.97 per diluted share. Cash flow from operating activities in the first quarter of 2014 was $62.9 million, compared to cash flow from operating activities of $78.2 million for the same period a year ago.
For the first quarter of 2014, revenues were $159.5 million compared to $182.3 million for first quarter 2013, mainly attributable to a 9% decrease in average selling prices for our oil and a 6% decrease in our oil production compared to the same period a year ago. During the first two months of the first quarter, EPL experienced significant weather related downtime, which negatively impacted the average oil production for the period. Despite this downtime, oil and gas production for the quarter were on the high end and above the Company's guidance, respectively.
For the first quarter of 2014, net income was $13.3 million, or $0.34 per diluted share, compared to net income of $29.0 million, or $0.73 per diluted share for the first quarter of 2013. The net income for the first quarter of 2014 included $2.2 million of merger related expenses. These expenses resulted from the negotiation and implementation of the merger agreement announced on March 12, 2014 where Energy XXI (Bermuda) Limited (EXXI) will acquire EPL for total consideration of $2.3 billion, including the assumption of debt. Additionally, the first quarter included gains of $4.7 million, primarily attributable to non-cash gains on derivative instruments. Excluding the impact of these items, EPL's first quarter 2014 adjusted net income, a non-GAAP measure, would have been $11.8 million, or $0.30 per diluted share.
Production and Price Realizations
Oil production for first quarter 2014 averaged 16,250 Barrels of oil per day (Bopd), which was on the high end of Company guidance. Natural gas production for first quarter 2014 averaged 27.5 million cubic feet (Mmcf) per day and was above Company's guidance. Price realizations for first quarter 2014, all of which are stated before the impact of derivative instruments, averaged $103.18 per barrel for crude oil and $5.20 per Mcf of natural gas, compared to $111.94 per barrel of crude oil and $3.64 per Mcf of natural gas for the same period a year ago.
Operating Expenses
LOE for the first quarter of 2014 totaled $41.7 million, which was favorably below Company guidance. G&A expenses totaled $10.3 million, including $2.2 million of merger related expenses. G&A excluding merger-related expenses (a non-GAAP measure) would have totaled $8.1 million, which was favorably below Company guidance. Expenses for the quarter included non-cash stock based compensation of $2.4 million.
Liquidity and Capital Resources
As of March 31, 2014, the Company had unrestricted cash on hand of $4.4 million and restricted cash of $6.0 million. During January 2014, EPL completed its acquisition of the EI 258/259 field for $70.4 million, subject to customary adjustments to reflect the September 1, 2013 economic effective date. The acquisition was financed with borrowings under EPL's senior credit facility. In January 2014, EPL's lenders approved a $50 million increase in the Company's borrowing base from $425 million to $475 million. The Company currently has $235 million available under its senior credit facility.