Coastal Energy Company First Quarter 2013 Financial Results (6167E)

TIDMCEO

RNS Number : 6167E

Coastal Energy Company

14 May 2013

TSX: CEN May 14, 2013

AIM: CEO

Coastal Energy Announces First Quarter 2013 Financial Results & Operations Update

Coastal Energy Company (the "Company" or "Coastal Energy") (TSX: CEN, AIM: CEO), an independent exploration and production company with assets in Southeast Asia, announces the financial results for the three months ended March 31, 2013. The functional and reporting currency of the Company is the United States dollar.

Q1 2013 Financial Highlights

- The Company reported Q1 total production of 23,163 boe/d, up from year ago levels of 22,773 boe/d. Offshore production totalled 20,460 bbl/d, a slight decrease from year ago levels of 21,031 bbl/d. Offshore production was impacted by several factors, including longer than expected completion times for the hydraulic fracturing program at Bua Ban South, delayed production from two horizontal wells at Bua Ban North due to the initial installation of "swelling packers" designed to reduce water production and the Songkhla A-10 well being down for a majority of the quarter awaiting pump replacement. Onshore production was 2,703 boe/d, up from 1,742 boe/d in the same period last year due to stronger gas demand in Thailand.

- EBITDAX for Q1 2013 was $152.5 million, 19% higher than the $128.4 million recorded in Q1 2012. Revenue and EBITDAX were driven higher by increased lifting volumes. Crude oil inventory was approximately 188,115 barrels at March 31, 2013 the revenue from which will be recognized in the second quarter.

- Operating costs declined 8% year over year on a per barrel basis to $19.90 / bbl as the Company realized the benefits of costs reductions related to the purchase of previously leased production facilities.

- The Company announced successful discoveries at Songkhla A in two exploration wells which were drilled into previously untested fault blocks on the western side of the platform.

Operations Update

The Company recently completed the drilling of one exploration well at the Songkhla M prospect and one appraisal/exploration well in the Bua Ban North and Bua Ban Terrace Area.

Bua Ban Terrace

The Bua Ban Terrace A-01 well was drilled to a depth of 5,900 feet TVDSS. The well penetrated the Miocene interval within the existing Bua Ban North field. The Miocene contained 52 feet of net pay with 26% average porosity, which was thicker than the 40 feet of prognosed pay. The well then penetrated the Lower Oligocene and Eocene intervals on the western side of the fault in the Terrace area and encountered 7 feet of net pay in the Lower Oligocene reservoir with 16% porosity. The Eocene contained 313 feet of net sand with an average porosity of 18.2 %. Very high gas readings persisted throughout drilling of the Eocene sections. Although, the majority of the zones in the Eocene were water-bearing, there were several zones with log indications of high oil saturation levels. These log readings, in conjunction with the pay zone in the Lower Oligocene and high gas readings throughout the Eocene, further confirm oil migration in the Terrace area.

Songkhla M

The Songkhla M-01 well was drilled to a depth of 9,200 feet TVDSS. The well encountered an extensive section of excellent quality Miocene reservoirs which were water bearing. The well also encountered 57 feet of net sand in the Eocene reservoir with pervasive oil shows. The Eocene sand section had average porosity of 11%, which is below the Company's conventional commerciality threshold.

Randy Bartley, President & CEO of Coastal Energy commented:

"Coastal Energy had another successful quarter in the first three months of 2013. The second quarter has also started well with offshore production averaging 22,800 bbl/d and total Company production averaging 25,700 boe/d during the month of April. The Company drilled two successful exploration wells at Songkhla A, making discoveries in two previously untested fault blocks on the western side of the platform.

"The results of both exploration wells yielded positive data points for our exploration portfolio.

"The Bua Ban Terrace well was drilled into the same Terrace fault block as the previously drilled Bua Ban North A-02 well, which penetrated the Lower Oligocene to the south of this location and contains a massive section of high quality, water bearing Lower Oligocene sands. The encounter of Lower Oligocene net pay in this well, combined with the A-02 results, points to a potential stratigraphic trap in the Terrace fault block that is pinched out between the Terrace A-01 well and the Bua Ban North A-02 well.

"At Songkhla M, we encountered oil shows in both the Miocene and Eocene intervals. The Miocene had high levels of oil saturation, providing further confirmation of oil migration in this high potential section on the eastern side of the Songkhla basin. The M prospect is located at the southern limit of our existing legacy 3D survey. However, the 3D survey acquired last year extends much further to the south and a trend of Eocene closures has been identified over a 2000 acre area. Given our success in hydraulically fracturing the Eocene interval with similar characteristics on the western side of the basin we feel that we have identified a significant trend for hydraulic fracture development in the Eocene."

The following financial statements for the Company are abbreviated versions. The Company's complete financial statements for the three months ended March 31, 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.

INCOME STATEMENT

 
 Three Months Ended March 31,                                        2013                2012 
 
 Revenues and Other Income 
   Oil sales                                                      226,800             189,079 
   Royalties                                                     (26,310)            (20,243) 
   Oil sales, net of royalties                                    200,490             168,836 
   Reimbursement of expenses under Malaysia risk                    2,285                   - 
    service contract 
   Other income (Note 12)                                             261            (10,171) 
                                                                  203,036             158,665 
 Expenses 
   Production                                                      42,933              36,210 
   Malaysia risk service contract                                   2,285                   - 
   Depreciation and depletion 
    (Note 7)                                                       23,305              20,044 
   Net profits interest (Note                                       1,926                   - 
    13) 
   General and administrative                                       7,781               8,327 
   Debt financing fees                                                528                 281 
   Finance                                                          1,215               1,006 
   Gains on disposal of property,                                    (19)                   - 
    plant and equipment 
                                                                   79,954              65,868 
 
 Net income before income taxes and 
  share of 
 earnings from Apico LLC                                          123,082              92,797 
 
   Share of earnings from Apico LLC 
    (Note 8)                                                        5,218               4,007 
 Net income before income taxes                                   128,300              96,804 
 
 Income taxes (Note 15) 
   Current                                                         45,065              36,608 
   Deferred                                                        30,239              11,703 
                                                                   75,304              48,311 
 
 Net income and comprehensive income                               52,996              48,493 
 
 Net income and total comprehensive income 
  attributable to: 
   Shareholders of Coastal Energy                                  52,079              48,135 
   Non-controlling interest                                           917                 358 
                                                                   52,996              48,493 
 
 Net income per share: 
 Basic (Note 14)                                                     0.46                0.42 
 Diluted (Note 14)                                                   0.45                0.40 
 
 The accompanying notes are an integral part of these condensed interim consolidated 
  financial statements. 
 
 

BALANCE SHEET

 
 
                                                             March 31      December 
                                                                                31, 
 As at                                                           2013          2012 
                                                                    $             $ 
 
 Assets 
   Current Assets 
       Cash                                                    23,549        63,897 
       Restricted cash (Note 
        4)                                                      6,484         6,452 
       Accounts receivable (Note 
        5)                                                    145,710        56,848 
       Derivative asset (Note 
        11)                                                       131           132 
       Crude oil inventory                                      9,204        15,611 
       Marine fuel inventory                                    4,742         5,245 
       Prepaids and other current assets                        1,557           628