Production of 1.6 Million BOE or 17,425 BOE/d Oil Volumes up More Than 4% Compared to 4Q 2011
DENVER, CO, May 01, 2012 (MARKETWIRE via COMTEX) --Venoco, Inc. (NYSE: VQ) today reported financial and operational
results for the first quarter of 2012. The company reported a net
loss for the quarter of $27.9 million on total revenues of $85.4
million.
Adjusted Earnings, which adjusts for unrealized derivative gains and
losses and certain one-time charges, were $38.5 million for the
quarter up from $20.5 million in the fourth quarter of 2011. Adjusted
EBITDA was $87.8 million in the quarter, up from $67.1 million in the
fourth quarter. Please see the end of this release for definitions of
Adjusted Earnings and Adjusted EBITDA and a reconciliation of those
measures to net income/loss.
Highlights include the following:
-- Production of 1.6 million barrels of oil equivalent (MMBOE) for the
quarter, or 17,425 BOE per day (BOE/d).
-- Daily oil volumes up 4.5% in first quarter compared to fourth quarter
2011.
-- Ellwood pipeline completed ahead of schedule and in service at the end
of January. Transportation savings and higher price realization
improve field economics.
-- Adjusted EBITDA of $87.8 million and Adjusted Earnings of $38.5
million which include $41.2 million from monetization of the company's
2012 natural gas hedges.
"We continue to be active in our oily, Southern California legacy
assets, with the added benefit of crude oil prices that surpass WTI,"
said Ed O'Donnell, Venoco's Chief Operating Officer and incoming CEO.
"We're drilling in our three main oil fields and expect to grow oil
volumes this year which will offset the declines we expect in natural
gas production volumes as we limit capital expenditures in the
Sacramento Basin due to substantially lower prevailing natural gas
prices."
First Quarter Production
Production in the first quarter of 2012 of
17,425 BOE/d was down 2% from the fourth quarter of 2011 as well as
down 2% from the first quarter of 2011. Daily average oil volumes,
however, were up 4.5% in the first quarter of 2012 compared to the
fourth quarter of 2011 and revenue, over the same period, increased
about 2.4%. Daily oil volumes in the first quarter at the company's
West Montalvo field are up approximately 10% over the fourth quarter
of 2011 and up over 30% from the first quarter of 2011.
"We are pleased to see our daily oil volumes, as we expected,
beginning to increase this year. This will both offset BOE declines
from our natural gas assets, and allow us to realize the fifty to one
price premium on oil versus natural gas," commented Mr. O'Donnell.
"While we are guiding to rather flat production in 2012 compared with
2011, we expect the increase in our oil to natural gas mix coupled
with higher realized oil prices to result in significant revenue
growth. As we stated at year-end, we believe our production
forecasting from the Sevier field will prove to be conservative. If
that is the case, we would see further increases in our oil volumes
and revenues in 2012," Mr. O'Donnell added.
The following table details the company's daily production by region
(BOE(1)/d):
-----------------------------------------------------------------
-----------
Quarter ended
----------------------------------------------------------------------------
Region 3/31/11 12/31/11 3/31/12
----------------------------------------------------------------------------
Sacramento Basin 10,591 10,635 9,970
----------------------------------------------------------------------------
Southern California 7,224 7,175 7,455
----------------------------------------------------------------------------
Total 17,815 17,810 17,425
-------------------------------------=======================================
(1) Barrel of oil equivalent (BOE) is calculated using the ratio of six Mcf
of natural gas to one barrel of crude oil, condensate or natural gas
liquids.
----------------------------------------------------------------------------
First Quarter Costs
Venoco's first quarter 2012 lease operating expenses of $15.42 per
BOE were up from the fourth quarter and full-year 2011 levels which
were $13.87 and $14.64 per BOE respectively. Costs in the first
quarter were higher due primarily to non-recurring maintenance at
Platforms Gail and Holly and inventory cost of sales related to
emptying the oil tanks at the company's marine terminal.
The following table details certain of the company's per BOE metrics
for the indicated quarter:
Quarter Ended
--------------------------------------------
UNAUDITED (per BOE) 3/31/11 12/31/11 3/31/12
-------------- -------------- --------------
Lease Operating Expenses $ 13.52 $ 13.87 $ 15.42
Production/Property Taxes 0.97 0.97 1.02
DD&A Expense 13.53 13.43 14.03
G&A Expense (1) 5.22 5.46 5.37
(1) Net of amounts capitalized and excluding stock-based compensation
costs and costs related to the going-private transaction. See the end
of this release for a reconciliation of G&A per BOE.
Capital Investment First Quarter 2012
Venoco's first quarter capital
expenditures for exploration, development and other spending were $62
million, including $46 million for drilling and rework activities, $6
million for facilities, and $10 million for land, seismic and
capitalized G&A.
In the Sacramento Basin, the company spent $10 million or 17% of its
first quarter capital expenditures, spudding three wells and
performing 95 recompletions. The company's 2012 budget provides for
total capital expenditures of $32 million in the basin. The budget
contemplates drilling two additional wells and performing a total of
180 recompletions and seven hydraulic fractures, however, in light of
low natural gas prices, the company has curtailed drilling in the
Sacramento Basin.
The company's Southern California legacy fields accounted for $29
million or 47% of its first quarter capital expenditures. Three wells
were spud at the West Montalvo field, all to offshore bottom-hole
locations. The company completed one of those wells in the quarter
along with two other wells that were spud in 2011. Another of those
wells was completed early in the second quarter. At the Sockeye
field, the company spud one well in the quarter. That dual-completion
well targets production from the Monterey shale formation and also
injects into the Upper Topanga waterflood. At the South Ellwood
field, the company spud one well late in the quarter, which was
recently completed and expects to spud a second well this week. Both
wells at South Ellwood target the Monterey shale.
The company's 2012 capital expenditure budget for legacy Southern
California properties is $123 million and includes plans to drill
seven wells at West Montalvo. The company plans to drill three wells
in 2012 at the Sockeye field and four wells at the South Ellwood
field. The company expects production levels from its Southern
California legacy fields to grow 15-20% in 2012 compared with 2011.
The company had onshore Monterey capital expenditures of $22 million
or 35% of its total first quarter capital expenditures. As part of
this activity, the company spud two wells in the first quarter of
2012 in the Sevier field, one of which was completed in the quarter.
The company also recompleted a well it drilled in 2011 in its acreage
in the greater San Joaquin Valley.
The company's 2012 capital expenditure budget for the onshore
Monterey shale development is $100 million, focused on delineation
and production at the Sevier field where the company plans to spud 15
to 20 wells. The company also plans to acquire seismic data at the
Sevier and Salinas fields and to recomplete several wells located in
its greater San Joaquin leasehold.
"We are anxious to see sustained results, but we have had several
good well tests on recent completions. One zone flowed at a peak,
24-hour gross rate of 143 barrels of oil per day. In another well, we
had a peak, 24-hour gross flowback rate of 196 barrels of oil per day
from one zone and 98 barrels of oil per day from a second zone.
Coupled with the recent test results, the fundamental well data --
geology, logs, cores and production testing -- is still very
encouraging," commented Mr. O'Donnell. "We are currently forecasting
minimal production volumes from Sevier on an annualized basis, but we
believe there is a good chance we'll see sustained production before
the end of the year."
The company entered into a new crude oil sales contract on February
1, 2012 for its South Ellwood field concurrent with commencement of
shipping production via the new pipeline. The contract is tied to
Napo prices -- an Ecuadorian, waterborne crude -- that has been
tracking above WTI. Venoco's current price realization for South
Ellwood crude with the new contract compared to the previous contract
is about $10 to $15 per barrel higher.
The balance of the company's crude oil, as of April 1st is sold under
a contract tied to California postings at the Buena Vista field. The
effect of the new contract on price realizations for crude from those
fields in April has been positive by about $20 per barrel. The
company's oil hedging contracts include basis swaps between WTI and
Brent that have reduced the net by approximately $10 per barrel.
2012 Guidance
The following summarizes the company's 2012 guidance:
-- Production: 17,750 - 18,250 BOE/d
-- Capital Budget: $255 million
-- Lease Operating Expenses: $15.00 - $15.50 per BOE
-- General & Administrative Expenses: $5.25 - $5.50 per BOE
-- Production & Property Taxes: $1.00 - $1.10 per BOE
-- DD&A: $15.00 - $15.50 per BOE
Special Committee Process
On January 16, 2012, the company announced
that it had entered into a definitive merger agreement under which
Tim Marquez, Venoco's Chairman and CEO, will, through a wholly owned
affiliate, acquire all of the outstanding shares of Venoco he does
not already own for $12.50 per share in cash. Mr. Marquez is
currently the beneficial owner of approximately 50.3% of Venoco's
common stock.
Completion of the transaction is subject to certain closing
conditions, including procurement of financing. The merger agreement
also contains a non-waivable condition that a majority of the
outstanding shares of Venoco not owned by Mr. Marquez and his
affiliates, or by any director, officer or employee of Venoco or its
subsidiaries, vote in favor of the adoption of the merger agreement.
Shareholders are cautioned that there can be no assurance that the
company will complete the merger.
Earnings Conference Call
Venoco will host a conference call to
discuss results today, Tuesday, May 1, 2012 at 12:00 p.m. Eastern
time (10 a.m. Mountain). The conference call will be webcast and
those wanting to listen may do so by using a link on the Investor
Relations page of the company's website at http://www.venocoinc.com.
Those wanting to participate in the Q & A portion can call (800)
237-9752 and use conference code 50520898. International participants
can call (617) 847-8706 and use the same conference code.
A replay of the conference call will be available for one week by
calling (888) 286-8010 or, for international callers, (617) 801-6888,
and using passcode 40970132. The replay will also be available on the
Venoco website for 30 days.
About the Company
Venoco is an independent energy company primarily
engaged in the acquisition, exploitation and development of oil and
natural gas properties primarily in California. Venoco operates three
offshore platforms in the Santa Barbara Channel, has non-operated
interests in three other platforms, operates three onshore properties
in Southern California, and has extensive operations in Northern
California's Sacramento Basin.
Forward-looking Statements
Statements made in this news release
relating to Venoco's future production, expenses, revenue, price
realizations, oil/gas production mix, reserves, capital expenditures
and development projects, and all other statements except statements
of historical fact, are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. These statements are based on
assumptions and estimates that management believes are reasonable
based on currently available information; however, management's
assumptions and the company's future performance are both subject to
a wide range of business risks and uncertainties and there is no
assurance that these goals and projections can or will be met. Any
number of factors could cause actual results to differ materially
from those in the forward-looking statements, including, but not
limited to, the timing and extent of changes in oil and gas prices,
the timing and results of drilling and other development activities,
the availability and cost of obtaining drilling equipment and
technical personnel, risks associated with the availability of
acceptable transportation arrangements and the possibility of
unanticipated operational problems, delays in completing production,
treatment and transportation facilities, higher than expected
production costs and other expenses, and pipeline curtailments by
third parties. The company's activities with respect to the onshore
Monterey Shale and other projects are subject to numerous operating,
geological and other risks and may not be successful. The company's
results in the onshore Monterey Shale will be subject to greater
risks than in areas where it has more data and drilling and
production experience. Results from the company's onshore Monterey
Shale project will depend on, among other things, its ability to
identify productive intervals and drilling and completion techniques
necessary to achieve commercial production from those intervals. The
closing of the merger agreement with Mr. Marquez is subject to a
number of conditions, including a financing condition and a
non-waivable condition that a majority of the outstanding shares of
Venoco not owned by Mr. Marquez and his affiliates or by any
director, officer or employee of Venoco or its subsidiaries vote in
favor of the adoption of the merger agreement, and those conditions
may not be satisfied. All forward-looking statements are made only as
of the date hereof and the company undertakes no obligation to update
any such statement. Further information on risks and uncertainties
that may affect the Company's operations and financial performance,
and the forward-looking statements made herein, is available in the
company's filings with the Securities and Exchange Commission, which
are incorporated by this reference as though fully set forth herein.
References to reserve estimates other than proved are by their nature
more uncertain than estimates of proved reserves, and are subject to
substantially greater risk of not actually being realized by the
company.
OIL AND NATURAL GAS PRODUCTION AND PRICES
Quarter Ended Quarter Ended
-------------------------- --------------------------
% %
UNAUDITED 12/31/11 3/31/12 Change 3/31/11 3/31/12 Change
-------- -------- ------ -------- -------- ------
Production Volume:
Oil (MBbls) (1) 620 641 3% 608 641 5%
Natural Gas (MMcf) 6,111 5,668 -7% 5,972 5,668 -5%
-------- -------- ------ -------- -------- ------
MBOE 1,639 1,586 -3% 1,603 1,586 -1%
======== ======== ====== ======== ======== ======
Daily Average
Production Volume:
Oil (Bbls/d) 6,739 7,044 5% 6,756 7,044 4%
Natural Gas (Mcf/d) 66,424 62,286 -6% 66,356 62,286 -6%
-------- -------- ------ -------- -------- ------
BOE/d 17,810 17,425 -2% 17,815 17,425 -2%
======== ======== ====== ======== ======== ======
Oil Price per Barrel
Produced (in
dollars):
Realized price
before hedging $ 93.79 $ 98.66 5% $ 86.38 $ 98.66 14%
Realized hedging
gain (loss) (1.35) (5.75) 326% (1.51) (5.75) 281%
-------- -------- ------ -------- -------- ------
Net realized price $ 92.44 $ 92.91 1% $ 84.87 $ 92.91 9%
======== ======== ====== ======== ======== ======
Natural Gas Price
per Mcf (in
dollars):
Realized price
before hedging $ 3.60 $ 2.76 -23% $ 4.03 $ 2.76 -32%
Realized hedging
gain (loss) 1.29 0.63 -51% 1.07 0.63 -41%
-------- -------- ------ -------- -------- ------
Net realized price $ 4.89 $ 3.39 -31% $ 5.10 $ 3.39 -34%
======== ======== ====== ======== ======== ======
Expense per BOE (in
dollars):
Lease operating
expenses $ 13.87 $ 15.42 11% $ 13.52 $ 15.42 14%
Production and
property taxes $ 0.97 $ 1.02 5% $ 0.97 $ 1.02 5%
Transportation
expenses $ 1.42 $ 2.78 96% $ 1.24 $ 2.78 124%
Depreciation,
depletion and
amortization $ 13.43 $ 14.03 4% $ 13.53 $ 14.03 4%
General and
administrative (2) $ 6.89 $ 7.79 13% $ 6.13 $ 7.79 27%
Interest expense $ 10.03 $ 9.91 -1% $ 7.92 $ 9.91 25%
(1) Amounts shown are oil production volumes for offshore properties and
sales volumes for onshore properties (differences between onshore
production and sales volumes are minimal). Revenue accruals are adjusted
for actual sales volumes since offshore oil inventories can vary
significantly from month to month based on pipeline inventories, oil
pipeline sales nominations, and prior to February 2012, the timing of
barge deliveries and oil in tanks.
(2) Net of amounts capitalized.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended
----------------------------
UNAUDITED (In thousands) 3/31/11 12/31/11 3/31/12
-------- -------- --------
REVENUES:
Oil and natural gas sales $ 78,319 $ 81,890 $ 83,388
Other 871 1,478 1,975
-------- -------- --------
Total revenues 79,190 83,368 85,363
-------- -------- --------
EXPENSES:
Lease operating expense 21,676 22,740 24,450
Property and production taxes 1,548 1,593 1,615
Transportation expense 1,986 2,325 4,412
Depletion, depreciation and amortization 21,691 22,007 22,254
Accretion of asset retirement obligation 1,590 1,602 1,391
General and administrative 9,829 11,297 12,361
-------- -------- --------
Total expenses 58,320 61,564 66,483
-------- -------- --------
Income from operations 20,870 21,804 18,880
FINANCING COSTS AND OTHER:
Interest expense 12,697 16,435 15,711
Interest rate derivative realized (gains)
losses 41,147 - -
Interest rate derivative unrealized (gains)
losses (40,064) - -
Amortization of deferred loan costs 531 595 569
Loss on extinguishment of debt 1,357 - -
Commodity derivative realized (gains) losses (5,468) (19,110) (41,096)
Commodity derivative unrealized (gains) losses
and amortization of derivative premiums 34,595 (6,538) 71,634
-------- -------- --------
Total financing costs and other 44,795 (8,618) 46,818
-------- -------- --------
Income (loss) before taxes (23,925) 30,422 (27,938)
Income tax provision (benefit) - - -
-------- -------- --------
Net income (loss) $(23,925) $ 30,422 $(27,938)
======== ======== ========
Weighted average common shares outstanding:
Basic 56,159 58,772 58,910
Diluted 56,159 58,821 58,910
CONDENSED CONSOLIDATED BALANCE SHEET INFORMATION
UNAUDITED ($ in thousands) 12/31/11 3/31/12
--------- ---------
ASSETS
Cash and cash equivalents $ 8,165 $ 23
Accounts receivable 30,017 29,810
Inventories 7,411 6,900
Other current assets 4,296 3,966
Commodity derivatives 47,768 5,398
--------- ---------
Total current assets 97,657 46,097
Net property, plant and equipment 810,465 850,771
Total other assets 21,622 21,393
--------- ---------
TOTAL ASSETS $ 929,744 $ 918,261
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 53,098 $ 46,254
Interest payable 21,854 6,182
Commodity and interest derivatives 2,490 23,714
--------- ---------
Total current liabilities 77,442 76,150
LONG-TERM DEBT 686,958 694,141
COMMODITY AND INTEREST DERIVATIVES 308 6,682
ASSET RETIREMENT OBLIGATIONS 92,008 93,587
--------- ---------
Total liabilities 856,716 870,560
Total stockholders' equity 73,028 47,701
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 929,744 $ 918,261
========= =========
GAAP RECONCILIATIONS
Adjusted Earnings and Adjusted EBITDA
In addition to net income
(loss) determined in accordance with GAAP, we have provided in this
release our Adjusted Earnings and Adjusted EBITDA for recent periods.
Both Adjusted Earnings and Adjusted EBITDA are non-GAAP financial
measures that we use as supplemental measures of our performance.
We define Adjusted Earnings as net income (loss) before the effects
of the items listed in the table below. We calculate the tax effect
of reconciling items by re-performing our period-end tax calculation
excluding the reconciling items from earnings. The difference between
this calculation and the tax expense/benefit recorded for the period
results in the tax effect disclosed below. We believe that Adjusted
Earnings facilitates comparisons to earnings forecasts prepared by
stock analysts and other third parties. Such forecasts generally
exclude the effects of items that are difficult to predict or to
measure in advance and are not directly related to our ongoing
operations. Adjusted Earnings should not be considered a substitute
for net income (loss) as reported in accordance with GAAP.
We define Adjusted EBITDA as net income (loss) before the effects of
the items listed in the table below. Because the use of Adjusted
EBITDA facilitates comparisons of our historical operating
performance on a more consistent basis, we use this measure for
business planning and analysis purposes, in assessing acquisition
opportunities and in determining how potential external financing
sources are likely to evaluate our business.
We present Adjusted Earnings and Adjusted EBITDA because we consider
them to be important supplemental measures of our performance.
Neither Adjusted Earnings nor Adjusted EBITDA is a measurement of our
financial performance under GAAP and neither should be considered as
an alternative to net income (loss), operating income or any other
performance measure derived in accordance with GAAP, as an
alternative to cash flow from operating activities or as a measure of
our liquidity. You should not assume that the Adjusted Earnings or
Adjusted EBITDA amounts shown are comparable to similarly named
measures disclosed by other companies.
Quarter Ended
-------------------------------
UNAUDITED ($ in thousands) 3/31/11 12/31/11 3/31/12
--------- --------- ---------
Adjusted Earnings Reconciliation
Net Income $ (23,925) $ 30,422 $ (27,938)
Plus:
Unrealized commodity (gains) losses 32,605 (10,626) 63,839
Unrealized interest rate derivative (gains)
losses (40,064) - -
Going private related costs - 750 2,628
Loss on extinguishment of debt 1,357 - -
Settlement of interest rate swap contracts 38,065 - -
Tax effects - - -
--------- --------- ---------
Adjusted Earnings $ 8,038 $ 20,546 $ 38,529
========= ========= =========
Quarter Ended
-------------------------------
UNAUDITED ($ in thousands) 3/31/11 12/31/11 3/31/12
--------- --------- ---------
Adjusted EBITDA Reconciliation
Net income $ (23,925) $ 30,422 $ (27,938)
Interest expense 12,697 16,435 15,711
Interest rate derivative (gains) losses -
realized 41,147 - -
Income taxes - - -
DD&A 21,691 22,007 22,254
Accretion of asset retirement obligation 1,590 1,602 1,391
Amortization of deferred loan costs 531 595 569
Loss on extinguishment of debt 1,357 - -
Share-based payments 1,824 1,781 1,540
Going private related costs - 750 2,628
Amortization of derivative premiums 1,990 4,088 7,795
Unrealized commodity derivative (gains)
losses 32,605 (10,626) 63,839
Unrealized interest rate derivative (gains)
losses (40,064) - -
--------- --------- ---------
Adjusted EBITDA $ 51,443 $ 67,054 $ 87,789
========= ========= =========
We also provide per BOE G&A expenses excluding costs associated with
the going-private transaction, and share-based compensation charges.
We believe that these non-GAAP measures are useful in that the items
excluded do not represent cash expenses directly related to our
ongoing operations. These non-GAAP measures should not be viewed as
an alternative to per BOE G&A expenses as determined in accordance
with GAAP.
UNAUDITED ($ in thousands, except per BOE
amounts) Quarter Ended
-------------------------------
G&A per BOE Reconciliation 3/31/11 12/31/11 3/31/12
--------- --------- ---------
G&A expense $ 9,829 $ 11,297 $ 12,361
Less:
Share-based compensation expense (1,454) (1,591) (1,220)
Going private related costs - (750) (2,628)
--------- --------- ---------
G&A Expense Excluding Share-Based Comp
Going Private Costs 8,375 8,956 8,513
MBOE 1,603 1,639 1,586
--------- --------- ---------
G&A Expense per BOE Excluding Share-Based
Comp and Going Private Costs $ 5.22 $ 5.46 $ 5.37
========= ========= =========
PV-10
The present value of future net cash flows (PV-10 value) is a non-GAAP
measure because it excludes income tax effects. Management believes
that before-tax cash flow amounts are useful for evaluative purposes
since future income taxes, which are affected by a company's unique
tax position and strategies, can make after-tax amounts less
comparable. We derive PV-10 value based on the present value of
estimated future revenues to be generated from the production of
proved reserves, net of estimated production and future development
costs and future plugging and abandonment costs, using the arithmetic
twelve-month average of the first of the month prices without giving
effect to hedging activities or future escalation, and costs as of
the date of estimate without future escalation, non-property related
expenses such as general and administrative expenses, debt service
and depreciation, depletion, amortization and impairment and income
taxes, and discounted using an annual discount rate of 10%.
Management also believes that the PV-10 based on the NYMEX 5-year
forward strip pricing is useful for evaluative purposes since the use
of a strip price provides a measure based on current market
perception.
The following table reconciles the standardized measure of future net
cash flows to PV-10 value (in thousands):
UNAUDITED ($ in thousands) 12/31/2011
-----------
Standardized measure of discounted future net cash flows $ 1,364,146
Add: Present value of future income tax discounted at 10% 442,355
-----------
PV-10 at year end SEC prices 1,806,501
-----------
Add: Effect of five year NYMEX strip at December 31, 2011 (43,180)
-----------
PV-10 at five year NYMEX strip at December 31, 2011 $ 1,763,321
===========
For further information, please contact
Mike Edwards
Vice President
(303) 626-8320
http://www.venocoinc.com
E-Mail Email Contact
SOURCE: Venoco, Inc.
http://www.venocoinc.com/
http://www2.marketwire.com/mw/emailprcntct?id=E733D9196E69AB0F
