Coastal Energy Announces Third Quarter 2013 Financial Results & Operations Update

HOUSTON, Nov. 11, 2013 (GLOBE NEWSWIRE) -- Coastal Energy Company (the "Company" or "Coastal Energy") (TSX:CEN) (LSE:CEO), an independent exploration and production company with assets in Southeast Asia, announces the financial results for the three and nine months ended September 30, 2013. The functional and reporting currency of the Company is the United States dollar.


Q3 2013 Financial Highlights

- The Company's offshore production increased to 20,388 bbl/d in the third quarter from 19,626 bbl/d in the same period last year due to increases from further development drilling at Bua Ban North as well as the inclusion of production at Bua Ban South. Total Company production increased slightly to 21,832 boe/d from 21,798 boe/d in the same quarter last year as onshore gas production declined to 1,444 boe/d from 2,172 boe/d due to extended seasonal maintenance at the Nam Phong power plant. Total Company production for the nine-month period increased slightly to 22,942 boe/d from 22,093 boe/d in the same period last year due to further development drilling.

- EBITDAX for Q3 2013 was $134.6 million, 18% higher than the $114.6 million recorded in Q3 2012 due to higher production and lifting volumes. The Company's inventory levels decreased by 77,437 barrels in Q3 2013 whereas 121,445 barrels were added to inventory during Q3 2012. The Company's EBITDAX for the nine-month period is in line with 2012 levels despite a modest decline in realized crude pricing due to higher production and lifting volumes.

- After normalizing revenue to a production basis, rather than based on lifting volumes, Q3 2013 revenue would have been $193.8 million, a 6% increase year on year, driven by a 4% increase in production volumes and a 2% decline in commodity pricing.


Operations Update

The Company has completed two development wells at the Kapal field in Malaysia and is currently drilling a third. The Mobile Offshore Production Unit (MOPU) refurbishment has been completed and the MOPU is expected to arrive on location later this month. First oil production at Kapal is expected shortly thereafter.

Following the completion of drilling at the Kapal field, the Manta drilling rig will mobilize to the Meranti field offshore Malaysia and begin appraisal & development drilling there.

Four of five wells at Bua Ban Main have undergone hydraulic fracturing stimulation. The first two wells (BB01 ST1 and BB04 ST1) tested the Eocene sands. The third and fourth wells (BB07 ST1 and BB09 ST1) are testing the Eocene and the Lower Oligocene. The BB07 ST1 and the BB09 ST1 are still cleaning up with increasing oil cuts. The fifth well (BB02 ST1) will be drilled horizontally into the Eocene. BB01 ST1 and BB04 ST1 are flowing mostly water at low rates with slight amounts of oil.

The Songkhla A18, the eastern side of the basin, is also being hydraulically fractured to test the viability of fracturing the Eocene reservoir on the eastern side of the basin.

Following the completion of the frac activities and workovers at Bua Ban Main, the Vickburg rig will have completed its contract and will be released. Approval of the EIA application for eleven exploration wells is expected in the coming weeks. Following this Coastal will submit the application for the Bua Ban development area, which we expect to be approved near the end of the first quarter. Once these are in place, a second rig will likely be contracted in order to maintain a balance between exploration and production.

A successful exploration well was drilled on Block L15/43 onshore Thailand (Coastal 39.0% working interest). The Sinphuhorm East 1 flowed at a restricted rate of 51 MMCF/D from the same horizon that is productive at Sinphuhorm field. The well proves the field extends beyond the current production license into the L15/43 exploration acreage surrounding the Sinphuhorm field. The well did not encounter a gas water contact.


Randy Bartley, President & CEO of Coastal Energy commented:

"The Company continued to make progress in the third quarter of 2013. The first wells at the Kapal field were drilled and we expect first production in Malaysia very shortly. Offshore Thailand production increased slightly from year ago levels and we expect gains to offshore production once the development drilling program at Bua Ban North resumes.

"Regarding our frac progam, the original Bua Ban South frac wells continue to perform in line with expectations after ten months of production. In our latest campaign at Bua Ban Main, the first two wells, which fracced much deeper into the Eocene, have been disappointing. However, the early results of the third and fourth wells in the Eocene and Lower Oligocene sandstone are encouraging. We are still early on the learning curve and are applying multiple fracture technologies to the various prospective reservoirs in the Bua Ban and Songkhla Main fields in order to determine the optimum method for producing these reservoirs. There is a significant amount of oil in place in these tighter reservoirs and we continue to be excited about the application of fracture technology in the Songkhla Basin.

"Onshore, we are very pleased with our second discovery drilled using the 3D seismic data acquired in 2011 and expect to continue to grow our onshore business. Onshore production was lower than previous levels due to increased maintenance at the Nam Phong power plant. However, year-to-date onshore production is still well above 2012 levels.

"We plan to move the rig to the Meranti field in Malaysia following completion of the work at Kapal, which will serve to increase production in Malaysia in late 2013 to early 2014."

The following financial statements for the Company are abbreviated versions. The Company's complete financial statements for the three and nine months ended September 30, 2013 with the notes thereto and the related Management Discussion and Analysis can be found either on Coastal's website at www.CoastalEnergy.com or on SEDAR at www.sedar.com. All amounts are in US$ thousands, except share and per share amounts.

  	Three months ended 	Nine months ended
  	September 30, 	September 30,
  	 2013  	 2012  	 2013  	 2012 
  	  	  	  	 
Revenues and Other Income 	  	  	  	 
Oil sales 	 201,762 	 170,894 	 565,466 	 554,612
Royalties 	 (22,632) 	 (18,305) 	 (62,979) 	 (59,062)
Oil sales, net of royalties 	 179,130 	 152,589 	 502,487 	 495,550
Reimbursement of expenses under Malaysia risk service contract  30,967  --  37,738  --
Other income (Note 12) 	 (1,361) 	 (5,122) 	 (2,115) 	 (5,515)
  	 208,736 	 147,467 	 538,110 	 490,035
  	  	  	  	 
Expenses 	  	  	  	 
Production 	 38,448 	 32,718 	 116,982 	 110,092
Malaysia risk service contract             30,967    --     37,738    -- 
Depreciation and depletion (Note 7) 	 17,298 	 14,778 	 54,481 	 53,412
Net profits interest (Note 13) 	 --  	 39 	 1,919 	 908
General and administrative 	 11,358 	 9,125 	 27,408 	 24,509
Exploration (Note 6) 	 665 	 7,191 	 13,895 	 7,477
Debt financing fees 	 4,228 	 501 	 5,801 	 1,133
Finance 	 2,579 	 1,940 	 3,926 	 3,141
Gain on property, plant and equipment 	 --  	 (252) 	 (4) 	 (252)
  	 105,543 	 66,040 	 262,146 	 200,420
  	  	  	  	 
Net income before income taxes, share of 	  	  	  	 
earnings from Apico LLC 	 103,193 	 81,427 	 275,964 	 289,615
  	  	  	  	 
Share of earnings from Apico LLC (Note 8) 	 2,798 	 4,537 	 13,407 	 14,041
Net income before income taxes 	 105,991 	 85,964 	 289,371 	 303,656
  	  	  	  	 
Income taxes (Note 15) 	  	  	  	 
Current 	 32,774 	 42,135 	 75,777 	 124,032
Deferred 	 21,378 	 2,778 	 88,802 	 46,576
  	 54,152 	 44,913 	 164,579 	 170,608
  	  	  	  	 
Net income and comprehensive income 	 51,839 	 41,051 	 124,792 	 133,048
  	  	  	  	 
Net income and total comprehensive income attributable to: 	  	  	  	 
Shareholders of Coastal Energy 	 50,720 	 40,100 	 121,704 	 130,385
Non-controlling interest 	 1,119 	 951 	 3,088 	 2,663
  	 51,839 	 41,051 	 124,792 	 133,048
  	  	  	  	 
Net income per share: 	  	  	  	 
Basic (Note 14) 	 0.45 	 0.35 	 1.07 	 1.15
Diluted (Note 14) 	 0.44 	 0.34 	 1.04 	 1.10

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

  	September 30 	 December 31, 
As at 	2013 	2012
  	 $  	 $ 
  	  	 
Assets 	  	 
Current Assets 	  	 
Cash 	 66,213 	 63,897
Restricted cash (Note 4) 	 4,434 	 6,452
Accounts receivable (Note 5) 	 66,889 	 56,848
Derivative asset (Note 11) 	 101 	 132
Crude oil inventory 	 23,494 	 15,611
Marine fuel inventory 	4,951 	5,245
Prepaids and other current assets 	 2,297 	 628
Total current assets 	 168,379 	 148,813
  	  	 
Non-Current Assets 	  	 
Exploration and evaluation assets (Note 6) 	 69,545 	 118,350
Property, plant and equipment (Note 7) 	 790,987 	 560,493
Investment in Apico LLC (Note 8) 	 64,900 	 60,266
Deposits and other assets 	 6,265 	 6,271
Total non-current assets 	 931,697 	 745,380
Total Assets 	 1,100,076 	 894,193

Liabilities 	  	 
Current Liabilities 	  	 
Accounts payable and accrued liabilities (Note 9) 	 190,725 	 217,757
Current portion of long-term debt (Note 11) 	 37 	 34
Current portion of derivative liabilities (Note 11) 	 1,662 	 1,372
Total current liabilities 	 192,424 	 219,163

Non-Current Liabilities 	  	 
Long-term debt (Note 11) 	 110,800 	 95,066
Non-current portion of derivative liabilities (Note 11) 	 515 	 502
Derivative liability - warrants (Note 10) 	 3,468 	 3,784
Deferred tax liabilities 	 187,225 	 98,423
Decommissioning liabilities 	 43,955 	 46,726
Total non-current liabilities 	 345,963 	 244,501

Shareholders' Equity (Note 14) 	  	 
Common shares 	 214,754 	 213,260
Contributed surplus 	 24,215 	 18,940
Retained earnings 	 310,068 	 193,877
Total Shareholders' Equity 	 549,037 	 426,077
Non-controlling interest 	 12,652 	 4,452
Total equity 	 561,689 	 430,529
Total liabilities and equity 	 1,100,076 	 894,193

Commitments and contingencies (Note 17)

The accompanying notes are an integral part of these condensed interim consolidated financial statements.

  	Three months ended 	Nine months ended
  	September 30, 	September 30,
  	 2013  	 2012  	 2013  	 2012 
Operating activities 	  	  	  	 
Net income 	 51,839 	 41,051 	 124,792 	 133,048
Adjustments: 	  	  	  	 
Share of earnings from Apico LLC        (2,798)   (4,537)   (13,407)   (14,041)
Unrealized loss (gain) on derivative instruments   1,965   362   334   (11,523)
Depletion and depreciation               17,298     14,778     54,481     53,412
Finance expense                           2,579 	 1,940 	 3,926 	 3,141
Amortisation of debt financing fees 	 4,079 	 147 	 4,946 	 779
Share-based compensation 	 5,453 	 5,531 	 9,320 	 10,167
Deferred income taxes 	 21,378 	 2,778 	 88,802 	 46,576
Unrealized foreign exchange loss (gain) 	 826 	 17 	 422 	 (49)
Gains on disposal of property, plant and equipment   --   (252)   (4)    (252)
Exploration expense 	 665 	 7,191 	 13,895 	 7,477
Income taxes paid 	 (21,880) 	 (63,527) 	 (100,597) 	 (63,656)
Interest received 	 133 	 2 	 168 	 5
Interest paid 	 (1,140) 	 (318) 	 (3,301) 	 (1,570)
Dividends received from Apico LLC 	 3,704 	 9,943 	 8,773 	 9,943
  	 84,101 	 15,106 	 192,550 	 173,457
Change in non-cash working capital: 	  	  	  	 
Accounts receivable                   (32,992)   (49,066)   (10,041)   (60,297)
Inventory                              (1,009)    (1,325)   (7,589)    (3,217)
Prepaids and other current assets 	 1,672 	 106 	 (1,669) 	 144
Accounts payable and accrued liabilities 	 18,925 	 6,348 	 4,360 	 (1,885)
Current income taxes payable               18,931    45,520    61,934   127,288
Cash flow provided by operating activities  89,628   16,689   239,545   235,490
  	 
Financing Activities 	  	  	  	 
Issuance of common shares, net of issuance costs   317   727   1,605    2,753
Cash settlement of restricted stock units 	 (6,275) 	 -- 	 (156) 	 --
Repurchase of shares 	 -- 	 (3,712) 	 (6,275) 	 (18,745)
Borrowings under long-term debt 	 15,000 	 50,000 	 30,000 	 50,000
Repayment of long-term debt 	 -- 	 -- 	 (15,000) 	 (30,000)
Loan arrangement fees 	 (4,200)    (2,915)    (4,212) 	 (3,883)
Distributions to non-controlling interest 	 (1,335) 	 (1,074) 	 (3,954) 	 (2,866)
Contributions from non-controlling interest 	 3,626 	 -- 	 9,066 	 --
Cash flow provided by (used in) financing activities   7,133   43,026  11,074  (2,741)

Investing Activities 	  	  	  	 
Decrease in restricted cash 	 2,008 	 (20) 	 2,018 	 22,034
Expenditure on property, plant and equipment  (70,953)  (140,551)  (247,922)  (231,478)
Acquisition of increased ownership interest in Apico LLC   --  --  --  (9,250)
Proceeds from disposal of property, plant and equipment  --  352   533   352
Deposits and other assets - Payments                --   (6,000)   --   (6,000)
Deposits and other assets - Refunds                 --      --     --      131
Cash flow used in investing activities  (68,945)  (146,219)  (245,371)  (224,211)

Effect of exchange rate changes on cash 	 (625) 	 (875) 	 (2,932) 	 (2,266)
  	  	  	  	 
Increase (decrease) in cash 	 27,191 	 (87,379) 	 2,316 	 6,272
Cash - Beginning of period 	 39,022 	 116,646 	 63,897 	 22,995
Cash - End of period 	 66,213 	 29,267 	 66,213 	 29,267

The accompanying notes are an integral part of these condensed interim consolidated financial statements.


Randy Bartley, President and Chief Executive Officer of the Company and a member of the Society of Petroleum Engineering and Jerry Moon, Vice President, Technical & Business Development, a member of the American Association of Petroleum Geologists, a Licensed Professional Geoscientist and a Certified Petroleum Geologist in the state of Texas, have reviewed the contents of this announcement.

Additional information, including the Company's complete competent person's report may be found on the Company's website at www.CoastalEnergy.com or may be found in documents filed on SEDAR at www.sedar.com.

This statement contains 'forward-looking statements' as defined by the applicable securities legislation. Statements relating to current and future drilling results, existence and recoverability of potential hydrocarbon reserves, production amounts or revenues, forward capital expenditures, operation costs, oil and gas price forecasts and similar matters are based on current data and information and should be viewed as forward-looking statements. Such statements are not guarantees of future results and are subject to risks and uncertainties beyond Coastal Energy's control. Actual results may differ substantially from the forward-looking statements.



Coastal Energy Company
Email:
+1 (713) 877-6793

Strand Hanson Limited (Nominated Adviser)
Rory Murphy / Andrew Emmott
+44 (0) 20 7409 3494

Macquarie Capital (Europe) Limited (Broker)
Steve Baldwin/Andrew Jones
+44 (0) 20 3037 2000

FirstEnergy Capital LLP (Broker)
Hugh Sanderson / Travis Inlow
+44 (0) 20 7448 0200

Buchanan
Tim Thompson / Ben Romney
+44 (0) 20 7466 5000