DENVER, CO — (Marketwire) — 11/07/12 — Venoco, Inc. today reported financial and operational results for the third quarter of 2012. The company reported a net loss for the quarter of $30 million on total revenues of $96.7 million.
Adjusted Earnings, which adjusts for unrealized derivative gains and losses and certain one-time charges, were $11.5 million for the quarter, down from $13.3 million in the second quarter of 2012. Adjusted EBITDA was $55.0 million in the quarter, down from $55.8 million in the second quarter. Adjusted Earnings and Adjusted EBITDA were positively impacted in the second quarter by the monetization of certain 2012-2015 oil and natural gas hedges in the amount of $11.0 million. 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 for the quarter include the following:
Daily oil volumes up 20% in the third quarter compared to the second quarter of 2012 and up 41% compared to the third quarter of 2011.
Revenue of $96.7 million is up 17% in the third quarter compared to the second quarter of 2012.
Production of 1.6 million barrels of oil equivalent (MMBOE) for the quarter, or 17,899 BOE per day (BOE/d).
Adjusted EBITDA of $55.0 million and Adjusted Earnings of $11.5 million.
“We continued to see growth in oil volumes from our Southern California legacy assets, primarily as a result of drilling at South Ellwood and West Montalvo. Strong production at South Ellwood is due largely to the second of the three wells we–ve drilled there this year, which is producing at a sustained rate of almost 2,000 gross barrels of oil per day. Of the other two, the first well is producing at modest rates, which we believe can be enhanced in 2013 with a different lift system. The initial completion on the third well was wet, so we are planning to sidetrack it by year-end,” said Ed O–Donnell, Venoco–s CEO.
Average daily oil volumes were up twenty percent in the third quarter of 2012 compared to the second quarter of 2012 and up forty-one percent from the third quarter of 2011. The company–s average daily production of 17,899 BOE/d in the third quarter was up five percent compared to the second quarter of 2012 and up three percent compared to the third quarter of 2011. Daily natural gas volumes from the Sacramento Basin declined eight percent compared to the second quarter of 2012. The company had no drilling activity in the basin in the second or third quarters due to continued low natural gas prices.
“We are very pleased to report that our three largest oil properties have solid production again this quarter. We completed a scheduled maintenance shutdown at our Sockeye field during the third quarter, and while the shutdown reduced volumes produced during the quarter, the shutdown went smoothly so we were able to minimize the effect on production,” said Mr. O–Donnell.
The following table details the company–s daily production by region (BOE(1)/d):
Venoco–s third quarter 2012 lease operating expenses rose to $13.90 per BOE, up 8% from the second quarter 2012 level of $12.93 per BOE. Costs in the third quarter of 2012 were slightly higher due primarily to scheduled maintenance at Platform Gail in the Sockeye field.
The following table details certain of the company–s per BOE metrics for the indicated quarter:
(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.
Venoco–s third quarter capital expenditures for exploration, development and other spending were down thirty-one percent from the second quarter to $48 million, including $32 million for drilling and rework activities, $8 million for facilities, and $8 million for land, seismic and capitalized G&A.
The company–s Southern California legacy fields accounted for $25 million or 52% of its third quarter capital expenditures. At the West Montalvo field, we completed one well during the third quarter which was spud in the second quarter, and through the first nine months of the year, the company has spud four wells and completed six wells (including two wells spud last year). Net production at West Montalvo has increased 57% from 1,250 BOE per day in the third quarter of 2011 to 1,960 BOE per day in the third quarter of 2012. At the Sockeye field, the company had minimal capital investment in the third quarter and through the first nine months drilled three wells and performed one recompletion. At the South Ellwood field, the company completed one well during the quarter. The completed well was wet and the company plans to return to the well to sidetrack it during the fourth quarter. The first well the company drilled at South Ellwood this year averaged 106 gross barrels of oil per day in the third quarter while the second well averaged slightly over 1,900 gross barrels of oil per day in the quarter. The company spud a fourth well to a “probable” location, which, after setting intermediate casing, was suspended and is not expected to be completed until after the fourth quarter. The company has spent $94 million during the first nine months of the year in Southern California.
The company had onshore Monterey capital expenditures of $20 million or 41% of its total third quarter capital expenditures. During the quarter the company re-completed several wells, installed artificial lift systems, added processing facilities, completed a water pipeline, and made significant progress on both oil and natural gas pipelines in the Sevier field. Through the first nine months of the year, the company has spud five wells and completed five wells targeting the onshore Monterey including one spud in 2011 in Sevier. The company has facilities, recompletions and other well work planned for the balance of 2012, but does not expect to spud additional wells in the onshore Monterey.
In the Sacramento Basin the company had capital expenditures of $3 million in the third quarter. The company did not spud or complete any wells in the third quarter, but it did spend approximately $820,000 to perform 33 recompletions. Through the first nine months, the company has performed a total of 173 recompletions in the Basin and expects to perform over 200 recompletions for full-year 2012. The company drilled three wells early in 2012 in the Basin and spud its fourth and final well of the year in mid-October.
On October 3, 2012, the company closed the going-private transaction contemplated by its merger agreement with Timothy Marquez and certain of his affiliates. As provided under the agreement, the company is now a wholly owned subsidiary of an affiliate of Mr. Marquez. As part of the closing, the company entered into a $315 million senior secured second lien term loan agreement and an amended and restated $500 million revolving credit facility, with an initial borrowing base of $175 million and initial commitments of $156 million.
“With lower capital spending than previously forecast, as well as with a scheduled maintenance shutdown at South Ellwood in November, we expect full-year production to be slightly lower than our previous forecast,” said Mr. O–Donnell. “The good news is that we also expect both LOE and DD&A to be lower than previously forecast.”
The following summarizes the company–s full-year 2012 guidance:
Production: 17,150 – 17,500 BOE/d
Capital Budget: $210 – $220 million
Lease Operating Expenses: $14.50 – $15.00 per BOE
General & Administrative Expenses: $5.25 – $5.50 per BOE
Production & Property Taxes: $1.65 – $1.70 per BOE
DD&A: $14.25 – $14.75 per BOE
Venoco will host a conference call to discuss results today, Wednesday, November 7, 2012 at 11:00 a.m. Eastern Time (9 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 . Those wanting to participate in the Q & A portion can call (866) 831-6291 and use conference code 89943533. International participants can call (617) 213-8860 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 36403256. The replay will also be available on the Venoco website for 30 days.
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 several onshore properties in Southern California, and has extensive operations in Northern California–s Sacramento Basin.
Statements made in this news release relating to Venoco–s future production, expenses, 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. 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.
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.
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.
For further information, please contact
Mike Edwards
Vice President
(303) 626-8320