Dune Energy Reports Second Quarter 2013 Financial And Operating Results

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Aug 07, 2013, 09:15 ET

HOUSTON, Aug. 7, 2013 /PRNewswire/ -- Dune Energy, Inc. (OTCBB:DUNR) today announced results for the second quarter of calendar year 2013.

Revenue and Production

Revenue for the second quarter of 2013 totaled $16.8 million as compared with $13.1 million for the second quarter of 2012. Production volumes in the second quarter were 135 Mbbls of oil and 0.62 Bcf of natural gas, or 238 Mboe. This compares with 105 Mbbls of oil and 0.75 Bcf of natural gas, or 230 Mboe for the second quarter of 2012. In the second quarter of 2013, the average sales price per barrel of oil was $104.26 and $4.40 per Mcf for natural gas, as compared with $105.62 per barrel and $2.69 per Mcf, respectively for the second quarter of 2012. Production increased 3% in the second quarter of 2013 as compared to the second quarter of 2012. Oil prices decreased 1% and gas prices increased 64% from 2012 levels. During the second quarter of 2013 oil accounted for 57% 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 $7.8 million for the second quarter of 2013 as compared to $6.7 million for the second quarter of 2012, or $33.12 and $29.10 per Boe produced, respectively. Major increases over the prior year were increases in production taxes due to additional oil production in Louisiana, gas purchases for the gas lift system at Garden Island Bay, and environmental and facilities work at Garden Island Bay. DD&A expense was $4.8 million for the second quarter of 2013, or $20.22 per Boe. G&A expense totaled $3.1 million for the second quarter of 2013 compared to $2.3 million in the second quarter of 2012. Primary increases in G&A are stock based compensation and increased personnel costs and consulting fees. Interest and financing expense did not fluctuate between quarters amounting to under $5.0 million.

Earnings

Net loss totaled $1.3 million for the second quarter of 2013. This compares with income of $0.9 million in 2012.

Liquidity

At the end of the quarter we had $16.2 million in cash and $28 million available under our Credit Facility based on $50 million of availability. The revolver is subject to a mid-year redetermination based on a new reserve report currently being completed that will incorporate activity in the first half of the year. The availability under the revolver is subject to the 4.5 to 1.0 ratio of total debt to trailing 12 months EBITDAX for the second quarter and 4.0 to 1.0 for subsequent quarters. Third and fourth quarter EBITDAX will determine our actual availability under the revolver.

2013 Operations Summary and Capital Program

Production

Second quarter production was up dramatically from first quarter levels reflecting Garden Island Bay and Leeville production post recent increased drilling activity. First quarter production volumes were 162 Mboe while second quarter was 238 Mboe or a 47% increase. On a daily basis, first quarter production was approximately 1,800 Boe/day whereas the second quarter averaged 2,615 Boe/day. July and August should average between 2,250 and 2,450 Boe/day reflecting normal declines; deferred production at the Leeville field due to third party pipeline repairs shutting in the field for approximately 7-10 days; and, reduced third quarter drilling activity resulting from limited rig availability. Additionally, the Heirs of Abraham well at Leeville sanded up and is currently being worked over. This well was making 200-300 Bo/day prior to the recompletion. Dune has a 40% working interest in this well. Assuming a successful completion at the Chocolate Bayou Wieting #31 and no major hurricanes or other disruptions, production should increase again in September. Fourth quarter production should be enhanced assuming success in drilling by the Chocolate Bayou Wieting #31 well, the Live Oak LOPT #13 well and the Garden Island Bay #913 (Epsilon) well. Forecast volumes for the entire third quarter were anticipated at approximately 2,500 Boe/day and fourth quarter at 2,700 Boe/day based on the year-end 2012 reserve report and budget estimates. These forecasts will be updated with the new mid-year D&M reserve report which is currently being completed.

Capital Program

In the first half of the year we spent approximately $29 million primarily in our Leeville and Garden Island Bay fields. All drilling and production costs for the six well development programs at Leeville were concluded in the first half of the year. The SL 20783 #ST2, a 20,500' exploratory test in which Dune has a 20% working interest is to be junked and abandoned due to problems encountered while drilling. We anticipate that our insurance coverage will pay all costs to either permanently or temporarily abandon the well, and drill a new wellbore to 18,929 feet minus a $100,000 deductible amount. The cost of the well prior to encountering downhole problems was approximately $30 million gross or $6 million to Dune's working interest. Assuming the insurance settlement will result in a new well bore, we will drill the remaining 1,500' to test the original prospect. This will probably not occur until late in 2013 or early 2014. At Chocolate Bayou, the Wieting #31 is currently at 11,850' and we are preparing to run 7 5/8" casing. Once casing is run, we will drill the 800 feet needed to test the objective 12,000 S sand section at approximately 12,400 feet. Assuming we encounter a reservoir sand similar to the offsetting Wieting #32, we anticipate gross production volumes of 500 Bo/day and 5 MMcfg/day or up to 500 Boe/day net to Dune's 50% working interest. There are no reserves currently booked to this wellbore. We anticipate drilling the LOPT #13 well in our Live Oak field as soon as final permits are secured. This well will tap proved undeveloped reserves and should produce approximately 1 MMcfg/day plus 50 Bo/day or approximately 175 Boe/day net to our interest. The well will take approximately 30 days to drill once permits are finalized. We anticipate spudding the well in August or September. At Garden Island Bay we are awaiting a rig to spud the SL 214 #913 (Epsilon prospect). The rig is anticipated to come to us by late September to drill this unbooked location. For the fourth quarter of 2013 our drilling program will focus on additional wells at Garden Island Bay, Bateman Lake or our Leeville field. The exact drilling program will be dependent on partner negotiations at the Leeville field.

James A. Watt, President and CEO of the company stated, "Our year-to-date drilling results have resulted in significant new production. Based on current forecasts of third and fourth quarter production and EBITDAX, our liquidity should be sufficient to continue our drilling program at our major fields. Success in the third and fourth quarter drilling programs should result in increased production and EBITDAX which will allow the Company to access the full availability under our revolver in 2014."

Click here for more information: http://www.duneenergy.com/news.html?b=1683&1=1

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, 2013	December 31, 2012
Current assets:
Cash	$ 16,236,288	$ 22,793,916
Accounts receivable	8,306,955	6,723,233
Current derivative asset	451,953	765,992
Prepayments and other current assets	1,343,365	5,160,533
Total current assets	26,338,561	35,443,674
Oil and gas properties, using successful efforts accounting - proved	268,281,667	239,233,653
Less accumulated depreciation, depletion and amortization	(21,749,779)	(13,806,672)
Net oil and gas properties	246,531,888	225,426,981
Property and equipment, net of accumulated depreciation of $186,066 and $256,380	188,871	71,080
Deferred financing costs, net of accumulated amortization of $1,167,515 and $771,061	2,137,521	2,428,453
Noncurrent derivative asset	379,925	397,886
Other assets	3,209,481	2,692,797
	5,915,798	5,590,216
TOTAL ASSETS	$ 278,786,247	$ 266,460,871

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$ 10,389,706	$ 6,987,857
Accrued liabilities	10,568,110	12,529,899
Current maturities on long-term debt (see note 2)	231,935	1,623,541
Total current liabilities	21,189,751	21,141,297
Long-term debt (see note 2)	78,699,326	83,429,862
Other long-term liabilities	14,469,747	13,860,597
Total liabilities	114,358,824	118,431,756
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, 71,907,952 and 59,022,445 shares issued	71,908	59,022
Treasury stock, at cost (63,810 and 1,056 shares)	(121,146)	(1,914)
Additional paid-in capital	176,881,059	155,824,868
Accumulated deficit	(12,404,398)	(7,852,861)
Total stockholders' equity	164,427,423	148,029,115
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 278,786,247	$ 266,460,871

Dune Energy, Inc.
Consolidated Statements of Operations
(Unaudited)



	Three months	Three months	Six months	Six months	Three months ended
	ended	ended	ended	ended	March 31,
	June 30, 2013	June 30, 2012	June 30, 2013	June 30, 2012	2013	2012
Revenues:
Oil and gas revenues	$ 16,783,479	$ 13,106,809	$ 28,905,142	$ 26,501,925	$ 12,121,663	$ 13,395,116
Other revenues	-	-	963,150.00	-	963,150.00	-
Total revenues	16,783,479	13,106,809	29,868,292	26,501,925	13,084,813	13,395,116
Operating expenses:
Lease operating expense and production taxes	7,848,003	6,699,881	14,709,404	12,858,666	6,861,401	6,158,785
Accretion of asset retirement obligation	402,732	365,439	805,464	730,878	402,732	365,439
Depletion, depreciation and amortization	4,793,818	4,986,322	7,961,704	9,271,983	3,167,886	4,285,661
General and administrative expense	3,129,377	2,322,537	5,717,459	5,423,594	2,588,082	3,101,057
Gain (loss) on settlement of asset retirement obligation liabliity	(22,920)	465,024	-	888,946	22,920	423,922
Total operating expense	16,151,010	14,839,203	29,194,031	29,174,067	13,043,021	14,334,864
Operating income (loss)	632,469	(1,732,394)	674,261	(2,672,142)	41,792	(939,748)
Other income (expense):
Other income	90	2,405	692	13,702	602	11,297
Interest expense	(2,484,209)	(2,411,781)	(4,919,188)	(4,781,467)	(2,434,979)	(2,369,686)
Gain (loss) on derivative instruments	510,288	5,020,058	(307,302)	4,727,636	(817,590)	(292,422)
Total other income (expense)	(1,973,831)	2,610,682	(5,225,798)	(40,129)	(3,251,967)	(2,650,811)
Net income (loss)	$ (1,341,362)	$ 878,288	$ (4,551,537)	$ (2,712,271)	$ (3,210,175)	$ (3,590,559)

Net income (loss) per share:
Basic and diluted	$ (0.02)	$ 0.02	$ (0.07)	$ (0.07)	$ (0.05)	$ (0.09)
Weighted average shares outstanding:
Basic and diluted	63,238,696	39,402,243	61,156,848	39,114,285	59,041,035	38,826,328

Dune Energy, Inc.
Consolidated Statements of Cash Flows
(Unaudited)


	Six months ended	Six months ended
	June 30, 2013	June 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (4,551,537)	$ (2,712,271)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depletion, depreciation and amortization	7,961,704	9,271,983
Amortization of deferred financing costs	396,454	364,154
Stock-based compensation	1,288,589	1,028,225
Loss on settlement of asset retirement obligation liability	-	888,946
Accretion of asset retirement obligation	805,464	730,878
Unrealized loss (gain) on derivative instruments	332,000	(3,972,122)
Changes in:
Accounts receivable	(1,693,865)	1,546,048
Prepayments and other assets	3,817,168	1,274,502
Payments made to settle asset retirement obligations	(196,314)	(1,910,086)
Accounts payable and accrued liabilities	2,805,040	6,902,054
NET CASH PROVIDED BY OPERATING ACTIVITIES	10,964,703	13,412,311

CASH FLOWS FROM INVESTING ACTIVITIES
Cash investment in proved and unproved properties	(27,143,528)	(17,721,344)
Decrease in restricted cash	-	17,184
Purchase of furniture and fixtures	(145,477)	(94,487)
Decrease (increase) in other assets	(516,684)	314,969
NET CASH USED IN INVESTING ACTIVITIES	(27,805,689)	(17,483,678)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock	20,000,000	-
Common stock issuance costs	(219,513)	-
Payments on short-term debt	(1,391,607)	(4,333,592)
Increase in long-term debt issuance costs	(105,522)	(96,548)
Payments on long-term debt	(8,000,000)	(3,000,000)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	10,283,358	(7,430,140)

NET CHANGE IN CASH BALANCE	(6,557,628)	(11,501,507)
Cash balance at beginning of period	22,793,916	20,393,672
Cash balance at end of period	$ 16,236,288	$ 8,892,165

SUPPLEMENTAL DISCLOSURES
Interest paid	$ 1,226,811	$ 1,415,771
Income taxes paid	-	-
NON-CASH INVESTING AND FINANCIAL DISCLOSURES
Accrued interest converted to long-term debt	$ 3,269,464	$ 2,822,263
Non-cash investment in proved and unproved properties in accounts payable	1,904,486	1,514,623