Dune Energy Reports Third Quarter 2012 Financial And Operating Results

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Nov 02, 2012, 09:00 ET

HOUSTON, Nov. 2, 2012 /PRNewswire/ -- Dune Energy, Inc. (OTCBB: DUNR) today announced results for the third quarter of calendar year 2012.

Revenue and Production

Revenue for the third quarter of 2012 totaled $13.4 million as compared with $15.1 million for the third quarter of 2011. Production volumes in the third quarter were 107 Mbbls of oil and 0.71 Bcf of natural gas, or 1.36 Bcfe. This compares with 120 Mbbls of oil and 0.68 Bcf of natural gas, or 1.40 Bcfe for the third quarter of 2011. In the third quarter of 2012, the average sales price per barrel of oil was $103.33 and $3.34 per Mcf for natural gas, as compared with $98.93 per barrel and $4.77 per Mcf, respectively for the third quarter of 2011. Production declined 3% in the third quarter of 2012 as compared to the third quarter of 2011. Oil prices increased 4% and gas prices decreased 30% from 2011 levels. During the third quarter of 2012 oil accounted for 47% of the total production volumes on an equivalent basis; however, oil revenue accounted for 82% of the total revenue. Total production for the first three quarters of 2012 was 4.1 Bcfe as compared to 4.5 Bcfe in the first three quarters of 2011. During 2012 Hurricane Isaac and facilities downtime accounted for approximately 0.3 Bcfe of deferred production.

Costs and Expenses

Total lease operating expense was $6.5 million for the third quarter of 2012 as compared to $6.1 million for the third quarter of 2011, or $4.81 and $4.40 per Mcfe produced, respectively. DD&A expense was $0.9 million for the third quarter of 2012 as compared to $5.5 million for the third quarter of 2011, or $0.68 and $3.94 per Mcfe produced, respectively. This reduction in DD&A reflects the impact of the reallocation of costs on the depletable base resulting from the Restructuring and the mid-year reserve additions. G&A expense totaled $2.1 million for the third quarter of 2012 compared to $2.4 million in the third quarter of 2011. Interest and financing expense was $2.4 million in the third quarter compared to $10.1 million in the third quarter of 2011. As part of the restructuring on December 22, 2011, a $40 million term loan was repaid and replaced with a $200 million revolving credit facility under which $36 million was borrowed at September 30, 2012 and $2.0 million in letters of credit were outstanding. The $300 million of Senior Secured Notes were reduced to $3.0 million at year-end 2011 and repaid during the third quarter of 2012. New notes of $49.5 million with a maturity of 2016 were added as part of the restructuring. This amount increased to $53.9 million as of September 30, 2012 due to the notes payment-in-kind feature.

Earnings

Net loss available to common stockholders totaled $1.4 million for the third quarter of 2012. This compares with a $15.6 million loss in 2011. Preferred stock dividends were $5.3 million in the third quarter of 2011. The preferred stock was eliminated as part of the December 22, 2011 restructuring and was converted into $4 million cash and 1.5% of the common shares outstanding on a restructured basis. Consequently, there were no preferred stock dividends in 2012.

Liquidity/Credit Facility

At the end of the quarter we had $5.6 million in cash and $12 million available under our Credit Facility based on $50 million of availability. The $200 million revolving credit facility was amended on September 25, 2012 maintaining availability at $50 million. The EBITDAX to Total Debt Covenant was increased to 5.0 to 1.0 for the quarters ending September 30, 2012 and December 31, 2012. The covenant will return to the 4.0 to 1.0 ratio on March 31, 2013. Without the two quarter covenant relief, we would have been required to reduce our borrowings under the revolver at September 30, 2012 to $29 million from $36 million. Nevertheless, fourth quarter EBITDAX may not be sufficient to permit access to the full amount of credit remaining available under the revolver by year-end. However, the two quarters relief on this covenant allows time to attempt to raise additional capital. We are currently in discussions with our major shareholders regarding raising new capital to fund the ongoing development and exploration opportunities within our portfolio.

2012 Operations Summary and Capital Program

Leeville Field

The first of the recently defined 20 Proved Undeveloped (PUD) locations is currently drilling below 9,000 feet with a target depth of 11,200 feet. The operator intends to drill at least two more of these development locations prior to the end of the year. Dune has a 40% interest in each of these wells. A 20,500 foot exploratory well has been proposed in which Dune would have a 20% working interest. Our net dry hole exposure on this well would be approximately $3.8 million and reserve exposure would be approximately 800 Mboe. This well is anticipated to commence drilling in late November.

Garden Island Bay Field

Dredging is nearly complete for drilling the SL 214 # 918 well (Kappa) and the work over of the SL 214 # 551 well. A rig is anticipated to commence activities in the fourth quarter.

Capital Program

During the first nine months of the year we expended approximately $20.9 million for capital projects including four wells at Garden Island Bay and numerous other projects throughout our field operations. Depending on cash flow and availability under our revolver, we anticipate the capital budget for the full year to be between $26 and $30 million. Primary areas of focus in the final quarter of the year will be the Leeville Field and Garden Island Bay Field.

James A. Watt, President and CEO of the company stated, "We have defined numerous drilling opportunities in both our Leeville and Garden Island Bay fields. Activity has commenced in both fields and depending on success and capital availability is scheduled to continue into the first quarter of 2013."

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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.

Dune Energy, Inc.
Consolidated Balance Sheets
(Unaudited)

	Successor
ASSETS	September 30, 2012	December 31, 2011
Current assets:
Cash	$ 5,628,912	$ 20,393,672
Restricted cash	-	17,184
Accounts receivable	6,850,057	8,107,009
Current derivative asset	221,286	-
Prepayments and other current assets	708,997	2,556,373
Total current assets	13,409,252	31,074,238

Oil and gas properties, using successful efforts accounting - proved	231,119,963	210,199,348
Less accumulated depreciation, depletion and amortization	(10,006,482)	-
Net oil and gas properties	221,113,481	210,199,348

Property and equipment, net of accumulated depreciation of $191,778 and $ -	133,529	230,074
Deferred financing costs, net of accumulated amortization of $574,771 and $19,449	2,624,743	2,915,229
Noncurrent derivative asset	1,109,806	-
Other assets	2,692,706	3,006,564
	6,560,784	6,151,867

TOTAL ASSETS	$ 241,083,517	$ 247,425,453

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$ 5,904,784	$ 6,759,073
Accrued liabilities	10,523,555	10,042,683
Current maturities on long-term debt (see note 3)	-	4,557,857
Total current liabilities	16,428,339	21,359,613

Long-term debt (see note 3)	89,864,064	88,503,991
Other long-term liabilities	12,595,463	12,630,676
Total liabilities	118,887,866	122,494,280

Commitments and contingencies	-	-

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, 39,389,945 and 38,579,630 shares issued	39,390	38,580
Treasury stock, at cost (235 and 235 shares)	(552)	(552)
Additional paid-in capital	126,264,444	124,893,145
Accumulated deficit	(4,107,631)	-
Total stockholders' equity	122,195,651	124,931,173

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 241,083,517	$ 247,425,453

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


	Successor	Predecessor	Successor	Predecessor
	Three months ended	Three months ended	Nine months ended	Nine months ended
	September 30, 2012	September 30, 2011	September 30, 2012	September 30, 2011
Revenues	$ 13,440,370	$ 15,106,459	$ 39,942,295	$ 48,415,854

Operating expenses:
Lease operating expense and production taxes	6,517,031	6,144,112	19,375,697	20,098,475
Accretion of asset retirement obligation	365,439	329,379	1,096,317	988,137
Depletion, depreciation and amortization	926,277	5,517,089	10,198,260	17,062,122
General and administrative expense	2,117,447	2,367,095	7,541,041	6,532,214
Loss on settlement of asset retirement obligation liability	62,148	-	951,094	-
Exploration expense	-	864,011	-	6,047,841
Total operating expense	9,988,342	15,221,686	39,162,409	50,728,789

Operating income (loss)	3,452,028	(115,227)	779,886	(2,312,935)

Other income (expense):
Other income	2,715	4,183	16,417	40,632
Interest expense	(2,419,864)	(10,127,742)	(7,201,331)	(30,171,588)
Gain (loss) on derivative instruments	(2,430,239)	-	2,297,397	-
Total other income (expense)	(4,847,388)	(10,123,559)	(4,887,517)	(30,130,956)

Net loss	(1,395,360)	(10,238,786)	(4,107,631)	(32,443,891)
Preferred stock dividend	-	(5,316,442)	-	(15,293,811)
Net loss available to common shareholders	$ (1,395,360)	$ (15,555,228)	$ (4,107,631)	$ (47,737,702)

Net loss per share:
Basic and diluted	$ (0.04)	$ (31.78)	$ (0.10)	$ (99.11)
Weighted average shares outstanding:
Basic and diluted	39,391,382	489,455	39,207,325	481,642

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

	Successor	Predecessor
	Nine months ended	Nine months ended
	September 30, 2012	September 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (4,107,631)	$ (32,443,891)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depletion, depreciation and amortization	10,198,260	17,062,122
Amortization of deferred financing costs and debt discount	555,322	2,878,924
Stock-based compensation	1,306,197	459,254
Loss on settlement of asset retirement obligation liability	951,094	-
Accretion of asset retirement obligation	1,096,317	988,137
Unrealized gain on derivative instruments	(1,331,092)	-
Changes in:
Accounts receivable	1,256,952	3,111,471
Prepayments and other assets	1,847,376	(1,185,310)
Payments made to settle asset retirement obligations	(2,082,624)	(646,950)
Accounts payable and accrued liabilities	2,192,585	4,414,747
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES	11,882,756	(5,361,496)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment in proved and unproved properties	(19,126,544)	(11,384,325)
Decrease in restricted cash	17,184	15,740,247
Purchase of furniture and fixtures	(95,233)	(92,752)
Decrease in other assets	313,858	545,077
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES	(18,890,735)	4,808,247

CASH FLOWS FROM FINANCING ACTIVITIES
Payments on short-term debt	(4,557,857)	(1,420,917)
Increase in long-term debt issuance costs	(198,924)	-
Payments on long-term debt	(3,000,000)	-
NET CASH USED IN FINANCING ACTIVITIES	(7,756,781)	(1,420,917)

NET CHANGE IN CASH BALANCE	(14,764,760)	(1,974,166)
Cash balance at beginning of period	20,393,672	23,670,192
Cash balance at end of period	$ 5,628,912	$ 21,696,026

SUPPLEMENTAL DISCLOSURES
Interest paid	$ 2,094,165	$ 19,334,652
Income taxes paid	-	-

NON-CASH INVESTING AND FINANCIAL DISCLOSURES
Accrued interest converted to long-term debt	$ 4,360,073	$ -
Non-cash investment in proved and unproved properties in accounts payable	1,794,071	-
Common stock issued for conversion of preferred stock	-	62,288,000
Redeemable convertible preferred stock dividends	-	13,502,000
Accretion of discount on preferred stock	-	1,791,811