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Lucas Energy Production Impacted by Recent Flooding

Share Print Bookmark    |    Monday,August 17,2015

Lucas Energy, Inc. has announced its financial results for its fiscal 2016 first quarter, the three months ended June 30, 2015, and the filing of its Quarterly Report on Form 10-Q.

Anthony C. Schnur, Chief Executive Officer of the Company said: "Significant flooding in June hampered our production results during the quarter as certain locations had to be shut in.  As a result, our average daily production rate declined by about 30% in the month of June. Today, those wells have returned to full production, and we are currently producing at pre-flood levels in the range of 140 – 150 gross barrels of oil per day. Despite the lost production during the quarter, we reduced our net loss by approximately $220,000 when compared to the same period last year, an improvement of almost 18%. This is a direct result of our success in managing our cost structure, and a reduction in our lease operating costs and general and administrative expenses of 64% and 36%, respectively. Since the end of fiscal 2013, the Company has reduced annual G&A and operating expenses by approximately 64% and 81%, respectively, or nearly $9 million on a combined basis.

Separately, we extended the due date of our senior loan by 30 days, provided that such loan remains in default. Since we reported our fiscal 2015 annual results last month, crude oil prices have plummeted once again below the $50 per barrel mark. However, we are seeing a changing tide in the marketplace with regards to transactions and consolidations, and we are encouraged by recent discussions with third parties who have expressed an interest in potential business combinations and financing alternatives, provided that we have not entered into any definitive agreements or understandings in connection therewith to date. The current commodity price environment may require that we maintain our drilling inventory while seeking to create value through mergers and acquisitions."

Fiscal 2016 First Quarter Results

Total revenues from crude oil and natural gas sales for the quarter ended June 30, 2015 decreased by 58.2% to $0.4 million compared to $0.9 million for the same period a year ago, but rose 2.7% sequentially from the fourth quarter. The year-over-year decline was primarily impacted by a $0.4 million drop in realized crude oil prices and a $0.1 million decrease related to a decline in quarterly production volumes. Production volumes averaged 77 net barrels of oil equivalent (BOE) per day during the three months ended June 30, 2015. The lower production was partially attributable to certain wells that were shut-in for a period of over two months, following severe flooding conditions that impacted most of south and central Texas. Production was also impacted by high decline rates in workover drilling and lateral programs when compared to the same period last year.

Lease operating expenses of $0.2 million for the quarter ended June 30, 2015 decreased $0.3 million, or 64%, from $0.5 million for the same period a year ago, principally due to less production related to reduced flood-related drilling activity and ongoing efforts to improve operating efficiencies and cost reductions. General and administrative expenses decreased approximately $0.3 million or 36% for the quarter ended June 30, 2015 as compared to the prior year's first quarter primarily due to restructured employee responsibilities and improved operating efficiencies.

Other Events During and Subsequent to the Quarter

As we have previously disclosed, we executed a Settlement Agreement with Victory Energy Corporation on June 24, 2015, which terminated our prior proposed business combination. As part of this agreement, we exchanged working interests in certain oil and gas properties and issued Victory approximately 1.1 million shares (or 44,070 shares post-reverse stock split) to satisfy the $600,000 owed to Victory under our Loan Agreement.

On June 25, 2015, we closed the sale (effective June 1, 2015) of 139.04 net acres of oil and gas properties located in Karnes County, Texas, to Earthstone Energy, Inc. which included the sale of all working interest, net lease interest and contractual rights owned by us in the Copeland-Karnes Unit and the Griffin Unit, but not any contractual obligations relating to the associated wellbores or production. The total purchase price paid to us for the purchase was approximately $350,000. Earthstone has also agreed to pay us approximately $54,000 in connection with the terms of a participation agreement covering certain leases and title issues in Karnes County.