Provides Operational Update on its West and East Africa Operations
HOUSTON–(BUSINESS WIRE)–Erin Energy Corporation (“Erin Energy” or the “Company”) (NYSE MKT:ERN) (JSE:ERN) announced today financial and operational results for the quarter ended September 30, 2016. The Company also provided an update on its upstream operations in Africa.
Third Quarter 2016 Highlights:
- Realized revenues of $28.6 million;
- Achieved net average daily production of 6,100 barrels of oil per day (bbls/d);
- Lifted and sold 583,000 net barrels of oil.
Segun Omidele, Chief Executive Officer commented: “In the third quarter, our strategy remained focused on how restructuring our balance sheet and growing our production. We had success in lowering some of our outstanding AP balances and our effort to raise additional capital for our next drilling campaign is progressing well with the expectation that drilling activities will commence soon.”
In Nigeria, the Company continues to make progress in preparation for the next drilling campaign, which is planned to commence later this quarter or early 2017 depending on rig availability. Erin Energy has secured all required permits to drill and the operational planning process is currently being finalized.
A key part of the Company’s planned drilling campaign is the drilling of an additional development well, the Oyo-9 well, located within the central area of the Oyo field in Oil Mining Lease 120, offshore Nigeria. Oyo-9 is planned to be tied-back to the Oyo field production facility via planned new subsea infrastructure. This phase of development, expected to be completed in the second quarter of 2017, will increase field production by approximately 6,000 to 7,000 barrels of oil per day (bopd).
In July 2016, the Oyo-7 well was shut-in as a result of an emergency shut-in of the Oyo field production facility (FPSO). The well was unable to come back online naturally due to high water production and resulted in a temporary loss of approximately 1,400 bopd. The Company attempted an intermittent nitrogen lift gas injection from the facility to attempt to bring the well back on production, which was not fully implemented due to some operational constraints. Erin Energy is now looking at another nitrogen lift attempt and other technical options that can provide continuous lift assistance for well startup.
In Ghana, the Company is conducting geotechnical subsurface studies of existing 2-D seismic data to further high-grade its prospect inventory on the Expanded Shallow Water Tano block. The key activity to high-grading the exploration prospects and firming up drilling locations will be a new 3-D marine seismic acquisition survey. The Company expects to issue a formal invitation to tender to marine seismic vendors shortly. Actual field operations await the resolution of the Ghana-Cote d’Ivoire maritime border dispute arbitration in mid-2017.
In The Gambia, Erin Energy completed an intensive study of existing 2-D data of its offshore A2 and A5 blocks and has continued to mature existing leads whilst awaiting the depth processing of 3-D seismic data recently acquired. The Company expects to have the processed data by the end of 2016.
In Kenya, the Company completed the interpretation of 2-D seismic data acquired on its onshore blocks L1B and L16, and identified a number of potential leads to pursue. Erin Energy continues to mature these leads and is currently designing additional targeted 2-D seismic to be acquired in 2017 on the two onshore blocks to provide a better understanding of the identified leads.
While examining ways to rationalize its exploration assets in Kenya, and focus on its most prospective of the Kenyan assets, Erin Energy has intensified efforts to identify and farm in partners in order to share exploration costs and risks in the ultra-deep water offshore blocks, L-27 and L-28. The Initial Exploration Period for the L-27 and L-28 blocks is set to expire in February 2017.
Erin Energy reported revenue for the third quarter was $28.6 million, compared with $23.2 million for the previous quarter and $28.7 million for the third quarter 2015. In the third quarter, the Company lifted and sold 583,000 net barrels of oil at an average price of $49.07 per barrel, compared to 571,000 net barrels at an average price of $50.20 during the same period 2015.
For the third quarter of 2016, the Company reported a net loss of $23.5 million, or $(0.11) per basic and diluted share, compared to a net loss of $58.7 million, or $(0.28) per basic and diluted share for the same period in 2015.
Average net daily production for the quarter was approximately 6,100 barrels of oil per day, compared to 10,200 net barrels of oil per day for the same period 2015. The period-over-period decline in production is due to a combination of the revised well management policy to prevent excessive gas production, temporary loss of Oyo-7 production and natural production decline.
Erin Energy has continued its efforts to strengthen its balance sheet. These efforts have thus far resulted in a successful restructuring of its term loan facility, modest reductions in its accounts payable balances and extensions to the maturity dates of some of its related-party debt. The Company will continue these efforts to make further progress on its outstanding accounts payable balance using various methods including payment plans and equity payments.
Conference Call and Webcast
The Company will host a conference call on Tuesday, November 15, 2016 at 10:00 a.m. CT (11:00 a.m. ET) to discuss the results and update its current operations. The dial-in number to access the conference call is 1-844-883-3907 in the United States or 1-412-317-9253 internationally. Participants should ask the call operator to be placed on the “Erin Energy Third-Quarter Results Conference Call.”
To access the live audio webcast, please visit the “Investors” section of the Company’s website at www.erinenergy.com.
Erin Energy Corporation is an independent oil and gas exploration and production company focused on energy resources in sub-Saharan Africa. Its asset portfolio consists of 9 licenses across 4 countries covering an area of 40,000 square kilometres (10 million acres), including current production and other exploration projects offshore Nigeria, as well as exploration licenses offshore Ghana, Kenya and Gambia, and onshore Kenya. Erin Energy is headquartered in Houston, Texas, and is listed on the New York and Johannesburg Stock Exchanges under the ticker symbol ERN. More information about Erin Energy can be found at www.erinenergy.com.
This news release contains “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. All statements, other than statements of historical fact, concerning activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Although the Company believes the expectations reflected in these forward-looking statements are reasonable, they involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect.
The Company’s actual results could differ materially from those anticipated or implied in these forward-looking statements due to a variety of factors, including the Company’s ability to successfully finance, drill, produce and/or develop the wells and prospects identified in this release, and risks and other risk factors discussed in the Company’s periodic reports filed with the Securities and Exchange Commission. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. You should not place undue reliance on forward-looking statements, which speak only as of their respective dates. The Company undertakes no duty to update these forward-looking statements.
|ERIN ENERGY CORPORATION|
|CONSOLIDATED STATEMENTS OF OPERATIONS|
|(In thousands, except per share amounts)|
|Three Months Ended September 30,||Nine Months Ended September 30,|
|Crude oil sales, net of royalties||$||28,619||$||28,667||$||56,699||$||28,667|
|Operating costs and expenses:|
|Crude oil inventory (increase) decrease||636||368||534||(9,493||)|
|Depreciation, depletion and amortization||18,925||43,293||38,593||43,536|
|Accretion of asset retirement obligations||472||522||1,385||1,398|
|Loss on settlement of asset retirement obligations||—||779||205||4,233|
|General and administrative expenses||3,596||3,857||10,950||12,789|
|Total operating costs and expenses||50,436||82,090||134,008||119,942|
|Other income (expense):|
|Currency transaction gain||3,282||176||14,610||2,167|
|Total other expense, net||(1,756||)||(5,474||)||(1,807||)||(10,318||)|
|Loss before income taxes||(23,573||)||(58,897||)||(79,116||)||(101,593||)|
|Income tax expense||—||—||—||—|
|Net loss before non-controlling interest||(23,573||)||(58,897||)||(79,116||)||(101,593||)|
|Net loss attributable to non-controlling interest||102||215||662||690|
|Net loss attributable to Erin Energy Corporation||$||(23,471||)||$||(58,682||)||$||(78,454||)||$||(100,903||)|
|Net loss attributable to Erin Energy Corporation per common share:|
|Weighted average common shares outstanding:|
|ERIN ENERGY CORPORATION|
|CONSOLIDATED BALANCE SHEETS|
|(In thousands, except for share and per share amounts)|
|September 30,||December 31,|
|Cash and cash equivalents||$||8,304||$||8,363|
|Accounts receivable – trade||—||1,029|
|Accounts receivable – partners||558||287|
|Accounts receivable – related party||1,844||1,186|
|Accounts receivable – other||44||28|
|Crude oil inventory||4,932||4,789|
|Prepaids and other current assets||1,128||684|
|Total current assets||19,410||25,027|
|Property, plant and equipment:|
|Oil and gas properties (successful efforts method of accounting), net||321,976||368,891|
|Other property, plant and equipment, net||892||1,174|
|Total property, plant and equipment, net||322,868||370,065|
|Other non-current assets||90||67|
|LIABILITIES AND CAPITAL DEFICIENCY|
|Accounts payable and accrued liabilities||$||239,173||$||213,120|
|Accounts payable and accrued liabilities – related party||27,236||30,133|
|Current portion of long-term debt, net||8,141||96,558|
|Total current liabilities||274,550||339,811|
|Long-term notes payable – related party, net||128,987||120,006|
|Term loan facility, net||78,075||—|
|Asset retirement obligations||21,994||20,609|
|Commitments and contingencies (Note 10)|
|Preferred stock $0.001 par value – 50,000,000 shares authorized; none issued and outstanding as of September 30, 2016 and December 31, 2015, respectively||—||—|
|Common stock $0.001 par value – 416,666,667 shares authorized; 212,686,734 and 211,615,773 shares issued as of September 30, 2016 and December 31, 2015, respectively||213||212|
|Additional paid-in capital||792,319||789,615|
|Treasury stock at cost, 90,347 and -0- shares as of September 30, 2016 and December 31, 2015, respectively||(206||)||—|
|Total deficit – Erin Energy Corporation||(162,019||)||(86,064||)|
|Total capital deficiency||(161,238||)||(85,267||)|
|Total liabilities and capital deficiency||$||342,368||$||395,159|
|ERIN ENERGY CORPORATION|
|CONSOLIDATED STATEMENTS OF CASH FLOWS|
|Nine Months Ended September 30,|
|Cash flows from operating activities|
|Net loss, including non-controlling interest||$||(79,116||)||$||(101,593||)|
|Adjustments to reconcile net loss to cash provided by (used in) operating activities:|
|Depreciation, depletion and amortization||38,593||43,536|
|Accretion of asset retirement obligations||1,385||1,398|
|Amortization of debt discount and debt issuance costs||2,640||1,920|
|Loss on settlement of asset retirement obligations||—||4,233|
|Foreign currency transaction gain||(14,610||)||(2,167||)|
|Payments to settle asset retirement obligations||—||(17,220||)|
|Change in operating assets and liabilities:|
|Decrease in accounts receivable||730||390|
|Decrease (increase) in crude oil inventory||534||(9,493||)|
|Decrease (increase) in prepaids and other current assets||(467||)||324|
|Increase in accounts payable and accrued liabilities||54,700||58,126|
|Net cash provided by (used in) operating activities||6,677||(16,148||)|
|Cash flows from investing activities|
|Net cash used in investing activities||(16,475||)||(83,156||)|
Cash flows from financing activities
|Proceeds from exercise of stock options and warrants||364||1,855|
|Payments for treasury stock arising from withholding taxes upon restricted stock vesting||(206||)||—|
|Repayments of term loan facility||(6,492||)||—|
|Proceeds from short-term notes payable||504||—|
|Proceeds from notes payable – related party, net||6,829||63,815|
|Repayment of short-term notes payable||(449||)||—|
|Proceeds from short-term borrowings, net||—||11,303|
|Debt issuance costs||(1,040||)||—|
|Funds released from restricted cash, net||6,061||—|
|Funding from non-controlling interest||—||553|
|Net cash provided by financing activities||5,571||77,526|
|Effect of exchange rate changes on cash and cash equivalents||4,168||836|
|Net decrease in cash and cash equivalents||(59||)||(20,942||)|
|Cash and cash equivalents at beginning of period||8,363||25,143|
|Cash and cash equivalents at end of period||$||8,304||$||4,201|
|Supplemental disclosure of cash flow information|
|Cash paid for:|
|Supplemental disclosure of non-cash investing and financing activities:|
|Issuance of common shares for settlement of liabilities||$||—||$||125|
|Discount on notes payable pursuant to issuance of warrants||$||53||$||4,911|
|Reduction in oil and gas properties arising from settlement of accounts payable and accrued liabilities||$||9,540||$||—|
|Reduction in accounts payable from settlement of Northern Offshore contingency||$||—||$||24,307|