DUNE ENERGY INC HOUSTON, Aug. 14, 2014 /PRNewswire/ -- Dune Energy, Inc. (OTCBB: DUNR) today announced results for the second quarter of calendar year 2014.
Revenue and Production
Revenue for the second quarter of 2014 totaled $13.1 million as compared with $16.8 million for the second quarter of 2013. Production volumes in the second quarter were 107 Mbbls of oil and 0.43 Bcf of natural gas, or 179 Mboe. This compares with 135 Mbbls of oil and 0.62 Bcf of natural gas, or 238 Mboe for the second quarter of 2013. In the second quarter of 2014, the average sales price per barrel of oil was $102.45 and $4.93 per Mcf for natural gas, as compared with $104.26 per barrel and $4.40 per Mcf, respectively for the second quarter of 2013. Production decreased 25% in the second quarter of 2014 as compared to the second quarter of 2013. Oil prices decreased 2% and gas prices increased 12% from 2013 levels. During the second quarter of 2014 oil accounted for 60% of the total production volumes on an equivalent basis; however, oil revenue accounted for 84% of the total revenue.
Costs and Expenses
Total lease operating expense was $5.8 million for the second quarter of 2014 as compared to $7.8 million for the second quarter of 2013, or $32.32 and $32.97 per Boe produced, respectively. DD&A expense was $4.0 million for the second quarter of 2014, or $22.36 per Boe. G&A expense totaled $2.7 million for the second quarter of 2014 compared to $3.1 million in the second quarter of 2013. Interest and financing expense increased $0.4 million between quarters amounting to under $2.9 million.
Earnings
Net loss totaled $33.2 million for the second quarter of 2014. This compares with a loss of $1.3 million in 2013. This increase primarily reflects the impact of the $29.4 million impairment of oil and gas properties in the Live Oak and North Broussard fields.
Mid-Year Reserves
Mid-year 2014 proved reserves were as follows:
6/30/14
-------
Reserve Categories Oil Gas Total PV 10%
--- --- ----- -----
Proved (Mbbls) (Mmcf) (Mboe) $ (000's)
------ ------ ----- ----- --------
Developed producing 1,934 12,583 4,031 79,022
Developed
nonproducing 1,386 15,482 3,966 62,812
Undeveloped 2,378 17,809 5,346 122,054
----- ------ ----- -------
Total proved reserves 5,698 45,874 13,343 263,888
Probable
--------
Developed
nonproducing 108 399 175 5,982
Undeveloped 3,409 15,817 6,045 176,552
----- ------ ----- -------
Total probable
reserves 3,517 16,216 6,220 182,534
Possible
--------
Undeveloped 5,495 18,351 8,554 188,883
----- ------ ----- -------
Total possible
reserves 5,495 18,351 8,554 188,883
This compares with year-end 2013 proved reserves which were as follows:
12/31/13
--------
Reserve Categories Oil Gas Total PV 10%
--- --- ----- -----
Proved (Mbbls) (Mmcf) (Mboe) $ (000's)
------ ------ ----- ----- --------
Developed producing 2,171 10,929 3,993 78,518
Developed nonproducing 1,822 14,167 4,183 65,737
Undeveloped 3,170 25,042 7,344 167,401
----- ------ ----- -------
Total proved reserves 7,163 50,138 15,520 311,656
Probable
--------
Developed nonproducing 106 391 171 5,533
Undeveloped 3,144 15,751 5,769 173,724
----- ------ ----- -------
Total probable reserves 3,250 16,142 5,940 179,257
Possible
--------
Undeveloped 4,488 17,242 7,362 202,510
----- ------ ----- -------
Total possible reserves 4,488 17,242 7,362 202,510
Degolyer and MacNaughton, the Company's independent reservoir engineering consultant prepared the mid-year report of reserves, while the year-end reserves were prepared by the Company's reservoir engineering staff.
The primary decrease was related to the removal of PUD reserves at Live Oak, Bateman Lake and North Broussard fields which had been classified as PUD's on the Company books for the maximum allowed time under SEC guidelines of five years. The Company's capital shortage has not allowed drilling these opportunities.
Liquidity and Capital Resources
During the first six months of 2014 compared to the first six months of 2013, net cash flow used in operating activities reflected a decrease of $6.8 million to $4.2 million. This decrease primarily results from a reduction of accounts payable and accrued liabilities of $3.7 million and an increase in prepayments and other assets of $2.7 million.
Our current assets were $15.7 million on June 30, 2014. Cash on hand comprised approximately $6.2 million of this amount. This compared to $3.3 million in cash at December 31, 2013 and $16.2 million at the end of the second quarter of 2013. Accounts payable have decreased from $10.1 million at December 31, 2013 to $7.9 million at June 30, 2014. Accounts payable were $10.4 million at June 30, 2013. This decrease in payables reflects the impact of reduced capital spending in the second quarter of 2014.
Our capital investments and exploration costs year-to-date reflect our limited liquidity in investing in ongoing drilling and facilities upgrade program which amounted to $14.5 million during the first six months of 2014, down from $27.1 million spent during the same period of 2013. The decreased spending reflected efforts to balance our capital program to our liquidity. Drilling operations will be curtailed until the liquidity issues facing the Company are resolved.
Our primary sources of liquidity are cash provided by operating activities, debt financing, sales of non-core properties and access to capital markets. On July 15, 2014, Bank of Montreal notified the Company that Lenders had completed their interim redetermination of the Company's borrowing base. Such notification provided that, effective as of July 1, 2014, the Company's borrowing base will be reduced by $2.5 million, and thereafter will be further reduced by $2.5 million on the first business day of each month (each a "Reduction Date") until October 1, 2014, at which time, the borrowing base will be $37.5 million.
The Total Debt to EBITDAX covenant in our Credit Agreement controls access to the "undrawn" amount of borrowing availability from quarter to quarter and is based on the trailing 12 month total. On June 30, 2014, and thereafter, the ratio of Total Debt to EBITDAX must be less than 4.0 to 1.0. We determined that we did not meet the Total Debt to EBITDAX ratio as of June 30, 2014 as required by the financial covenants in the Credit Agreement, and we have triggered an event of default. Bank of Montreal, at the request of the majority Lenders, may terminate the commitments under the Credit Agreement and cause all of our obligations under the Credit Agreement to immediately become due and payable, upon notice to the Company.
As we are no longer in compliance with the financial covenant of the Credit Agreement, additional borrowings may not permitted, and the outstanding revolver loans may become due and payable upon notice to us by the Bank of Montreal. Absent relief from the Credit Agreement Lenders, the restructuring of a material portion of the Notes or the emergence of a new lender, our ability to meet our obligations in due course is threatened. Management is currently in discussions with all parties and seeking new credit providers or other strategic alternatives in an effort to resolve this liquidity stalemate.
These and other factors raise substantial doubt about our ability to continue as a going concern for the next twelve months. Our liquidity issues may force us to further curtail existing operations, reduce or delay capital expenditures or sell assets to meet our operating and debt service obligations, and we may be forced to take other actions, including a restructuring of our existing indebtedness and capital structure to address our ongoing liquidity issues. Our ability to continue as a going concern is dependent upon our ability to generate sufficient cash flows or other sources of capital sufficient to repay or refinance our indebtedness, continue our operations and fund our long-term capital needs. There can be no assurance that the Company will be able to resolve the default under our Credit Agreement, to engage in a strategic transaction, sell properties or realize enough proceeds from the sale of our properties in order to fund operations or to resolve the Company's liquidity issues.
James A. Watt, President and CEO of the company stated, "Since mid-2013, the Company has been seeking a merger/sale arrangement or alternate financing to continue operations within our asset base. To date these discussions have not resulted in either a merger/sale arrangement or new financing. We are working diligently with our lenders and our financial advisor seeking a near term solution to this liquidity issue."
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FORWARD-LOOKING STATEMENTS: This document includes forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning estimates of expected drilling and development wells and associated costs, statements relating to estimates of, and increases in, production, cash flows and values, statements relating to the continued advancement of Dune Energy, Inc.'s projects and other statements which are not historical facts. When used in this document, the words such as "could," "plan," "estimate," "expect," "intend," "may," "potential," "should," and similar expressions are forward-looking statements. Although Dune Energy, Inc. believes that its expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements include the potential that the Company's projects will experience technological and mechanical problems, geological conditions in the reservoir may not result in commercial levels of oil and gas production, changes in product prices and other risks disclosed in Dune's Annual report on Form 10-K filed with the U.S. Securities and Exchange Commission.
Investor Contact:
Steven J. Craig
Sr. Vice President Investor Relations and Administration
713-229-6300
Dune Energy, Inc.
Consolidated Balance Sheets
(Unaudited)
ASSETS June 30, 2014 December 31, 2013
------------- -----------------
Current assets:
Cash $6,245,851 $3,251,371
Accounts receivable 7,480,009 7,258,425
Current derivative asset - 7,544
Prepayments and other current
assets 1,942,468 1,398,947
Total current assets 15,668,328 11,916,287
---------- ----------
Oil and gas properties, using
successful efforts accounting
-proved 308,257,886 293,745,839
Less accumulated depreciation,
depletion and amortization (98,061,800) (61,927,723)
Net oil and gas properties 210,196,086 231,818,116
----------- -----------
Property and equipment, net of
accumulated depreciation of
$269,087 and $227,207 114,056 152,903
Deferred financing costs, net
of accumulated amortization of
$2,029,023 and $1,586,904 1,517,255 1,835,743
Other assets 3,975,400 3,783,312
5,606,711 5,771,958
--------- ---------
TOTAL ASSETS $231,471,125 $249,506,361
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $7,865,073 $10,139,205
Accrued liabilities 8,846,875 9,895,057
Current derivative liability 375,041 -
Current maturities on long-
term debt 38,366,341 994,895
Total current liabilities 55,453,330 21,029,157
Long-term debt 65,848,608 84,180,940
Other long-term liabilities 21,731,034 21,449,651
Total liabilities 143,032,972 126,659,748
----------- -----------
Commitments and contingecies - -
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par
value, 1,000,000 shares
authorized, 250,000 shares
undesignated, no shares issued
and outstanding - -
Common stock, $.001 par value,
4,200,000,000 shares
authorized, 74,008,952 and
72,644,643 shares issued 74,009 72,645
Treasury stock, at cost
(223,760 and 145,270 shares) (298,154) (223,821)
Additional paid-in capital 179,187,242 177,832,574
Accumulated deficit (90,524,944) (54,834,785)
Total stockholders' equity 88,438,153 122,846,613
---------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $231,471,125 $249,506,361
============ ============
Dune Energy, Inc.
Consolidated Statements of Operations
(Unaudited)
Three months Three months Six months Six months
ended ended ended ended
June 30, 2014 June 30, 2013 June 30, 2014 June 30, 2013
------------- ------------- ------------- -------------
Revenues:
Oil and gas revenues $13,093,311 $16,783,479 $25,082,321 $28,905,142
Other revenues - - - 963,150
Total revenues 13,093,311 16,783,479 25,082,321 29,868,292
---------- ---------- ---------- ----------
Operating expenses:
Lease operating expense and
production taxes 5,786,749 7,848,003 11,300,311 14,709,404
Accretion of asset retirement
obligation 546,684 402,732 1,093,368 805,464
Depletion, depreciation and
amortization 4,002,960 4,793,818 6,804,005 7,961,704
General and administrative
expense 2,657,465 3,129,377 5,308,750 5,717,459
Impairment of oil and gas
properties 29,351,000 - 29,351,000 -
Loss (gain) on settlement of
asset retirement obligation
liabliity 761,464 (22,920) 761,464 -
Total operating expense 43,106,322 16,151,010 54,618,898 29,194,031
---------- ---------- ---------- ----------
Operating income (loss) (30,013,011) 632,469 (29,536,577) 674,261
----------- ------- ----------- -------
Other income (expense):
Other income 10,033 90 10,493 692
Interest expense (2,877,542) (2,484,209) (5,598,474) (4,919,188)
Gain (loss) on derivative
instruments (315,617) 510,288 (565,601) (307,302)
Total other income (expense) (3,183,126) (1,973,831) (6,153,582) (5,225,798)
---------- ---------- ---------- ----------
Net loss $(33,196,137) $(1,341,362) $(35,690,159) $(4,551,537)
============ =========== ============ ===========
Net loss per share:
Basic and diluted $(0.45) $(0.02) $(0.49) $(0.07)
Weighted average shares
outstanding:
Basic and diluted 73,816,311 63,238,696 73,385,130 61,156,848
Dune Energy, Inc.
Consolidated Statements of Cash Flows
(Unaudited)
Six months ended Six months ended
June 30, 2014 June 30, 2013
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(35,690,159) $(4,551,537)
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
Depletion, depreciation and
amortization 6,804,005 7,961,704
Amortization of deferred
financing costs 442,119 396,454
Stock-based compensation 1,356,032 1,288,589
Loss on settlement of asset
retirement obligation
liability 761,464 -
Accretion of asset retirement
obligation 1,093,368 805,464
Impairment of oil and gas
properties 29,351,000 -
Unrealized loss on derivative
instruments 382,585 332,000
Changes in:
Accounts receivable (200,632) (1,693,865)
Prepayments and other assets 1,082,450 3,817,168
Payments made to settle asset
retirement obligations (330,985) (196,314)
Accounts payable and accrued
liabilities (897,110) 2,805,040
NET CASH PROVIDED BY
OPERATING ACTIVITIES 4,154,137 10,964,703
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash investment in proved and
unproved properties (14,512,047) (27,143,528)
Purchase of furniture and
fixtures (3,033) (145,477)
Increase in other assets (192,088) (516,684)
NET CASH USED IN INVESTING
ACTIVITIES (14,707,168) (27,805,689)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common
stock - 20,000,000
Proceeds from short-term
debt 15,000,000 -
Purchase of treasury stock (74,333) -
Common stock issuance costs - (219,513)
Payments on short-term debt (1,254,525) (1,391,607)
Increase in long-term debt
issuance costs (123,631) (105,522)
Payments on long-term debt - (8,000,000)
NET CASH PROVIDED BY
FINANCING ACTIVITIES 13,547,511 10,283,358
---------- ----------
NET CHANGE IN CASH BALANCE 2,994,480 (6,557,628)
Cash balance at beginning of
period 3,251,371 22,793,916
Cash balance at end of period $6,245,851 $16,236,288
========== ===========
SUPPLEMENTAL DISCLOSURES
Interest paid $1,419,189 $1,226,811
Income taxes paid - -
NON-CASH INVESTING AND FINANCIAL DISCLOSURES
Accrued interest converted to
long-term debt $3,667,669 $3,269,464
Prepaid insurance financed
with debt $1,625,971 $ -
Non-cash investment in
proved and unproved
properties in accounts
payable - 1,904,486
SOURCE Dune Energy, Inc.
