Energy XXI Gulf Coast Announces Second Quarter 2018 Financial and Operational Results
August 09, 2018 at 06:45 AM EDT
HOUSTON, Aug. 09, 2018 (GLOBE NEWSWIRE) -- Energy XXI Gulf Coast, Inc. (“EGC” or the “Company”) (NASDAQ: EGC) today reported financial and operational results for the second quarter of 2018.
Second Quarter 2018 Highlights and Recent Key Items:
For the second quarter of 2018, EGC reported a net loss of $34.0 million, or $1.02 loss per diluted share, which included a $26.0 million loss on derivative financial instruments. In the first quarter of 2018, the Company reported a net loss of $33.1 million, or $0.99 loss per diluted share, which included a $12.8 million loss on financial derivative instruments.
Adjusted EBITDA totaled $27.8 million for the second quarter 2018, compared to $13.6 million in the first quarter of 2018.
Adjusted EBITDA is a Non-GAAP financial measure and is described and reconciled to net loss in the attached table under “Reconciliation of Non-GAAP Measures.”
Douglas E. Brooks, President and Chief Executive Officer commented, “Strategically, we continue to advance the previously-announced merger with affiliates of Cox Oil LLC and we are pleased with the progress. Details on the transaction are in our proxy statement, which has been finalized and was distributed earlier this week. In the meantime, our focus is to continue to deliver results and maintain the value of our assets for all EGC stockholders. During the first half of the year we worked diligently to address the Company’s financial and operational challenges, while maintaining our commitment to safety.”
Production and Pricing
When compared with the first quarter of 2018, second quarter higher realized prices were offset by higher production downtime primarily related to continued production equipment maintenance, pipeline shut-ins, third-party operator downtime, EGC facility-related unscheduled downtime, and natural decline. In late July, EGC restored production through the previously-shut in pipeline at West Delta, bringing online the first two development wells of the 2018 drilling program. The Company continues to focus on preventative maintenance and production optimization in order to mitigate future downtime.
Costs and Expenses
Gathering and Transportation (“G&T”) expense for the second quarter of 2018 totaled $3.1 million, or $1.35 per BOE, compared to $2.7 million, or $0.82 per BOE, in second quarter of 2017, and $4.1 million, or $1.69 per BOE, in the first quarter of 2018. EGC did not receive any additional refunds from the Office of Natural Resources Revenue (“ONRR”) during the quarter. The decline in G&T expense in the second quarter of 2018 compared with the prior quarter was primarily due to timing of project spending.
Second quarter 2018 Pipeline Facility Fee expense was $10.5 million, or $4.55 per BOE, compared to $10.5 million, or $3.21 per BOE, in the second quarter of 2017 and $10.5 million, or $4.38 per BOE, in the first quarter of 2018.
General and administrative (“G&A”) expense in the second quarter of 2018 was $15.6 million, or $6.76 per BOE, which includes $4.0 million in transaction fees. During the second quarter of 2017, G&A expense totaled $20.7 million, $6.34 per BOE, which included $2.5 million in severance and separation costs. First quarter 2018 G&A expense totaled $15.1 million, or $6.31 per BOE. G&A includes non-cash compensation costs of $2.9 million, or $1.24 per BOE, in the second quarter 2018 compared with $2.9 million, or $0.89 per BOE, in the second quarter of 2017, and $2.8 million, or $1.15 per BOE, in the first quarter of 2018.
Depreciation, depletion and amortization (“DD&A”) expense was $27.6 million, or $11.96 per BOE, compared to $38.7 million, or $11.84 per BOE, in the second quarter of 2017. First quarter 2018 DD&A was $27.4 million, or $11.44 per BOE.
Accretion of asset retirement obligation was $11.2 million, or $4.86 per BOE, during the second quarter of 2018, compared to $10.0 million, or $3.06 per BOE, in the second quarter of 2017. First quarter 2018 accretion of asset retirement obligation expense was $11.1 million, or $4.64 per BOE.
EGC recorded no income tax expense or benefit during the second quarter 2018 or during prior comparable periods.
Operational Update and Capital Expenditure Program
During the second quarter of 2018, EGC spud and successfully completed two development wells and one rig recompletion. The West Delta 74 C-41 ST01 Cato development well was brought online with initial production averaging approximately 600 BOE per day. The West Delta 73 C-27 ST02 McCloud development well is currently being brought online. After a recompletion in the West Delta field, the rig moved to the South Timbalier field where EGC is currently drilling the South Timbalier 54 G-25 ST01 Koala well, that will be drilled to a total depth of 14,080 feet. EGC has a 100% working interest in all of the wells mentioned above.
Balance Sheet and Liquidity
Merger of Energy XXI Gulf Coast, Inc. and affiliates of Cox Oil LLC (“Cox”)
The closing of the transaction is subject to customary conditions, including obtaining the required vote from EGC’s stockholders. Obtaining financing is not a closing condition under the Cox merger agreement. The special stockholder meeting to vote on the adoption of the Cox merger agreement has been scheduled for September 6, 2018, at 9:00 a.m. Houston time. The transaction is anticipated to close in the third quarter of 2018.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to the pending merger transaction with Cox, as well as to EGC’s financial and operating performance on a stand-alone basis prior to the consummation of the merger or if the merger is not consummated. These statements, including those relating to the intent, beliefs, plans, or expectations of EGC are based upon current expectations and are subject to a number of risks, uncertainties, and assumptions that could cause actual results to differ materially from the projections, anticipated results or other expectations expressed. It is not possible to predict or identify all such factors and the following lists of factors should not be considered a complete statement of all potential risks and uncertainties.
With respect to the pending merger transaction between EGC and Cox, those factors include, but are not limited to: (i) the risk that the transaction may not be completed in the third quarter of 2018 or at all, which may adversely affect EGC’s business and the price of EGC’s stock; (ii) the failure to satisfy the conditions to the consummation of the transaction, including the adoption of the merger agreement by the EGC’s stockholders; (iii) the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement; (iv) the effect of the announcement or pendency of the transaction, as well as the merger agreement’s limitations on EGC’s conduct of business, on EGC’s business relationships, operating results, and business generally; (v) risks that the proposed transaction disrupts EGC’s current plans and operations; (vi) the possibility that competing offers or acquisition proposals for EGC will be made; (vii) risks regarding the failure to obtain the necessary financing to complete the proposed transaction; and (viii) lawsuits related to the pending merger.
With respect to EGC’s financial and operating performance on a stand-alone basis prior to the consummation of the merger or if the merger is not consummated, those factors include, but are not limited to: (i) our ability to maintain sufficient liquidity and/or obtain adequate additional financing necessary to (A) maintain our infrastructure, particularly in light of its maturity, high fixed costs, and required level of maintenance and repairs compared to other GoM Shelf producers, (B) fund our operations and capital expenditures, (C) execute our business plan, develop our proved undeveloped reserves within five years and (D) meet our other obligations, including plugging and abandonment and decommissioning obligations; (ii) disruption of operations and damages due to maintenance or repairs of infrastructure and equipment and our ability to predict or prevent excessive resulting production downtime within our mature field areas; (iii) our future financial condition, results of operations, revenues, expenses and cash flows; (iv) our current or future levels of indebtedness, liquidity, compliance with financial covenants and our ability to continue as a going concern; (v) recent changes in the composition of our board of directors; (vi) our inability to retain and attract key personnel; (vii) our ability to post collateral for current or future bonds or comply with any new regulations or Notices to Lessees and Operators imposed by the Bureau of Ocean Energy Management; (viii) our ability to comply with covenants under the three-year secured credit facility; and (ix) sustained declines in the prices we receive for our oil and natural gas production.
These risks and uncertainties could cause actual results, to differ materially from those described in the forward-looking statements. For a more detailed discussion of risk factors, please see the risk factors discussed in EGC’s periodic reports filed with the SEC. While EGC makes these statements and projections in good faith, EGC assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law.
About the Company
Energy XXI Gulf Coast, Inc. (EGC) is an exploration and production company headquartered in Houston, Texas that is engaged in the development, exploitation and acquisition of oil and natural gas properties in conventional assets in the U.S. Gulf Coast region, both offshore in the Gulf of Mexico and onshore in Louisiana and Texas. To learn more, visit EGC’s website at www.energyxxi.com.
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ENERGY XXI GULF COAST, INC.
ENERGY XXI GULF COAST, INC.
ENERGY XXI GULF COAST, INC.
ENERGY XXI GULF COAST, INC.