HUGIN NEWS/Pacific Energy Resources Ltd. Announces Results for the Second Quarter of 2008, Restatement of First Quarter 2008 Results and Conference Call
15.08.2008
PACIFIC ENERGY RESOURCES LTD.
111 West Ocean Blvd, Suite 1240
Long Beach, California 90802
Telephone: (562) 628-1526; Fax: (562) 628-1529
Pacific Energy Resources Ltd. Announces Results for the Second
Quarter of 2008, Restatement of First Quarter 2008 Results and
Conference Call
Long Beach, California, August 15, 2008 - Pacific Energy Resources
Ltd. (TSX: PFE) (the "Company") today announced the release of its
operating and financial results for the second quarter of 2008 and
the filing of these results with the TSX.
Production from continuing operations (after giving effect for
recently closed divestitures) was 617,000 barrels of oil equivalent
("BOE") for the quarter or 6,780 BOE per day, up 16% from the first
quarter of 2008. The realized price of oil per barrel, before
hedging losses, was $120 in the second quarter of 2008 compared to
$93 in the first quarter of 2008. Oil revenue per barrel, after
hedging losses, was $105 in the second quarter of 2008 compared to
$89 in the first quarter of 2008. Revenue from continuing operations
jumped 32% from the prior quarter to a record $69.7 million, prior to
hedging losses of $15.5 million.
Comparisons of current results to the comparable period in 2007 are
not as meaningful given the significant acquisition of the Alaska
properties in August 2007.
Lease operating expense ("LOE") per barrel of $40 for the second
quarter of 2008 was down 11% from the first quarter of 2008 mainly
due to the increased production from Platform Eureka in the Beta
Field, California.
Net loss for the second quarter of 2008 from continuing operations
was $24.9 million, compared to a restated $40.3 million loss from
continuing operations for the first quarter of 2008 (before the first
quarter's $48.4 million accelerated non-cash expensing of deferred
financing costs and accretion of unamortized discount discussed
below).
Adjusted EBITDA from continuing operations was $8.4 million, up
significantly from $0.4 million for the first quarter of 2008. Please
see the end of this release for a definition of Adjusted EBITDA and a
reconciliation of Adjusted EBITDA to net loss.
Darren Katic, President of Pacific Energy, states, "We are pleased
with achieving the increased production and lower per-barrel
operating costs. We are also pleased to have completed the
divestiture of the onshore California resulting in a significant pay
down of outstanding debt moving towards our goal of a 20 to 25%
reduction by year end 2008. Looking ahead, we now have clear
visibility on our Phase 2 production target of a further increase of
1,000 barrels per day from the Beta Field by the end of September
2008. This forecasted increase in production will further drive down
operating cost per barrel and drive revenue and EBITDA higher".
RESTATEMENT OF FIRST QUARTER 2008
Pacific Energy Resources Ltd. today is also announcing the filing of
its restated financial results for the first quarter of 2008. Please
refer to the Company's recently posted SEDAR filings for further
disclosure.
As previously disclosed, the Company is in violation of covenants
contained in credit and swap agreements with its lenders. The
covenant violations provide the lenders the right to demand
repayment; however, they have not demanded repayment or waived the
covenant violations. The Company and the lenders are currently
negotiating amendments to the agreements.
The Company has re-examined the accounting treatment in light of the
delay in completing its negotiations with its lenders and now
concludes that the more appropriate accounting treatment is to record
the notes payable and derivative liability balances as current rather
than long term liabilities as of March 31, 2008. Accordingly, it is
necessary to record in the first quarter of 2008 a $48.4 million
expense for the non-cash write-off of deferred financing costs and
non-cash accelerated expense for the accretion of discount, both
required in order to bring the carrying amount of the debt up to its
face value. Formerly, these amounts would have been expensed over the
remaining term of the debt. The acceleration of this expense
eliminated a $5.8 million expense in the second quarter of 2008.
Based on subsequent discussions with its lenders, the Company
continues to believe it will obtain the covenant violation waivers
and that it will obtain satisfactory covenant amendments, although
there is no assurance this will be achieved.
DEBT REDUCTION
The Company's June 30, 2008 debt balance pursuant to its Alaska and
Beta credit agreements is $470 million, reflecting the debt portion
of the funding of acquisitions of the Alaska assets in August 2007
and the Beta Field in March 2007, and the funding of the first stages
of a significant capital expenditure program to develop these assets
to increase production. Interest expense totaled $24.5 million for
the quarter with $7.1 million being non-cash. The Company plans to
reduce the debt amount by 20-25% during 2008. The first part of this
reduction recently occurred, with $45 million of proceeds from the
July 2008 asset sale used to repay a portion of this indebtedness.
In addition, the Company is working towards the establishment of a
surety line to allow it to replace about half of the approximate $100
million in cash it has on deposit for abandonment liability and
performance deposits. If the Company is able to secure a new surety
line, restricted cash freed up as a result thereof would also be used
to repay a portion of this indebtedness.
Increasing production with the resultant increase in cash flow will
also contribute to reducing the Company's leverage ratio. Further
alternatives to reduce the ratio will likely include additional asset
sales and securing third party investors for a portion of the capital
program, which would allow the Company to share in increased
production with lower up-front investment.
PRODUCTION
Average daily production from continuing operations for the second
quarter of 2008 was 6,780 barrels of oil per day, with 2,475 BOE from
our California offshore operations and 4,305 BOE from our Alaska
assets
California
Beta Field averaged 2,475 BOE per day for the quarter including the
added production from Platform Eureka which was returned to
production on April 17, 2008, which platform contributed an average
of 634 BOE per day for the quarter ended June 30, 2008. Eureka
achieved its Phase 1 production target of 1,000 BOE per day on June
27, 2008. Phase 2 targets a further increase of 1,000 BOE per day,
which is expected to be reached by the end of September 2008. Beta's
July 2008 production averaged approximately 2,900 BOE per day.
Alaska
Operated Assets: Development drilling on our operated assets is
expected to begin in the second quarter of 2009, this is a delay of
approximately six months due to rig availability and weather-related
logistics with the drilling season. Development will begin with
drilling of proved undeveloped reserve ("PUD") locations off platform
Osprey in the Redoubt Shoal field.
Non-Operated Assets: Our joint redevelopment plan in Alaska with our
partner Chevron is ongoing. Development drilling is expected to begin
in the first quarter of 2009, beginning with PUD drilling off
platform Steelhead in the MacArthur River field.
LEASE OPERATING EXPENSES AND GENERAL & ADMINISTRATIVE COSTS
Lease operating expenses from continuing operations increased on a
company- wide basis by 3% from the first quarter of 2008
but decreased 11% on a per barrel basis. LOE per barrel for the
second quarter 2008 was $40.
LOE for the Beta Field increased 11% from the first quarter of 2008,
but decreased 19% on a per barrel basis from the first quarter of
2008 reflecting the benefit of higher production. LOE per barrel was
$33 in the second quarter of 2008.
LOE for our operated and non-operated assets in Alaska remained
unchanged from the first quarter of 2008, but decreased 6% on a per
barrel basis from the first quarter of 2008. LOE per barrel was $44
in the second quarter of 2008.
General and administrative expenses of $2.7 million decreased 35%
from the first quarter of 2008 reflecting the absence of a first
quarter $0.9 million transition services fee for the Alaska
properties acquired in August 2007 and a $0.7 million increased
allocation to lease operating expense.
CAPITAL INVESTMENTS
Capital expenditures for development and other spending was
approximately $11 million for the quarter ended June 30, 2008 and $21
million for the year to date. The current capital budget anticipates
$45 million activity in the second half of the year and extending to
completion of the projects in the first part of 2009, depending in
part on cash available to fund such programs.
EXPLORATION
The Company's exploration efforts are focused on the Corsair prospect
in the Cook Inlet Alaska which it plans on drilling beginning in the
second quarter of 2009. The Company has been granted an extension by
the State of Alaska until September 29, 2008 to show evidence of a
heavy lift vessel, a necessary requirement to maintain the leases in
good standing. The vessel will be used to transport a jack up rig to
the Cook Inlet for the 2009 drilling season. The Corsair prospect may
contain as much as 500 Bcf of gas and 100 million barrels of oil.
Pacific Energy currently has 100% working interest in the prospect.
It is the intention of the Company to farm out a large portion of the
project to fund the exploration drilling.
OUTLOOK
PACIFIC ENERGY RESOURCES LTD.
111 West Ocean Blvd, Suite 1240
Long Beach, California 90802
Telephone: (562) 628-1526; Fax: (562) 628-1529
Pacific Energy Resources Ltd. Announces Results for the Second
Quarter of 2008, Restatement of First Quarter 2008 Results and
Conference Call
Long Beach, California, August 15, 2008 - Pacific Energy Resources
Ltd. (TSX: PFE) (the "Company") today announced the release of its
operating and financial results for the second quarter of 2008 and
the filing of these results with the TSX.
Production from continuing operations (after giving effect for
recently closed divestitures) was 617,000 barrels of oil equivalent
("BOE") for the quarter or 6,780 BOE per day, up 16% from the first
quarter of 2008. The realized price of oil per barrel, before
hedging losses, was $120 in the second quarter of 2008 compared to
$93 in the first quarter of 2008. Oil revenue per barrel, after
hedging losses, was $105 in the second quarter of 2008 compared to
$89 in the first quarter of 2008. Revenue from continuing operations
jumped 32% from the prior quarter to a record $69.7 million, prior to
hedging losses of $15.5 million.
Comparisons of current results to the comparable period in 2007 are
not as meaningful given the significant acquisition of the Alaska
properties in August 2007.
Lease operating expense ("LOE") per barrel of $40 for the second
quarter of 2008 was down 11% from the first quarter of 2008 mainly
due to the increased production from Platform Eureka in the Beta
Field, California.
Net loss for the second quarter of 2008 from continuing operations
was $24.9 million, compared to a restated $40.3 million loss from
continuing operations for the first quarter of 2008 (before the first
quarter's $48.4 million accelerated non-cash expensing of deferred
financing costs and accretion of unamortized discount discussed
below).
Adjusted EBITDA from continuing operations was $8.4 million, up
significantly from $0.4 million for the first quarter of 2008. Please
see the end of this release for a definition of Adjusted EBITDA and a
reconciliation of Adjusted EBITDA to net loss.
Darren Katic, President of Pacific Energy, states, "We are pleased
with achieving the increased production and lower per-barrel
operating costs. We are also pleased to have completed the
divestiture of the onshore California resulting in a significant pay
down of outstanding debt moving towards our goal of a 20 to 25%
reduction by year end 2008. Looking ahead, we now have clear
visibility on our Phase 2 production target of a further increase of
1,000 barrels per day from the Beta Field by the end of September
2008. This forecasted increase in production will further drive down
operating cost per barrel and drive revenue and EBITDA higher".
RESTATEMENT OF FIRST QUARTER 2008
Pacific Energy Resources Ltd. today is also announcing the filing of
its restated financial results for the first quarter of 2008. Please
refer to the Company's recently posted SEDAR filings for further
disclosure.
As previously disclosed, the Company is in violation of covenants
contained in credit and swap agreements with its lenders. The
covenant violations provide the lenders the right to demand
repayment; however, they have not demanded repayment or waived the
covenant violations. The Company and the lenders are currently
negotiating amendments to the agreements.
The Company has re-examined the accounting treatment in light of the
delay in completing its negotiations with its lenders and now
concludes that the more appropriate accounting treatment is to record
the notes payable and derivative liability balances as current rather
than long term liabilities as of March 31, 2008. Accordingly, it is
necessary to record in the first quarter of 2008 a $48.4 million
expense for the non-cash write-off of deferred financing costs and
non-cash accelerated expense for the accretion of discount, both
required in order to bring the carrying amount of the debt up to its
face value. Formerly, these amounts would have been expensed over the
remaining term of the debt. The acceleration of this expense
eliminated a $5.8 million expense in the second quarter of 2008.
Based on subsequent discussions with its lenders, the Company
continues to believe it will obtain the covenant violation waivers
and that it will obtain satisfactory covenant amendments, although
there is no assurance this will be achieved.
DEBT REDUCTION
The Company's June 30, 2008 debt balance pursuant to its Alaska and
Beta credit agreements is $470 million, reflecting the debt portion
of the funding of acquisitions of the Alaska assets in August 2007
and the Beta Field in March 2007, and the funding of the first stages
of a significant capital expenditure program to develop these assets
to increase production. Interest expense totaled $24.5 million for
the quarter with $7.1 million being non-cash. The Company plans to
reduce the debt amount by 20-25% during 2008. The first part of this
reduction recently occurred, with $45 million of proceeds from the
July 2008 asset sale used to repay a portion of this indebtedness.
In addition, the Company is working towards the establishment of a
surety line to allow it to replace about half of the approximate $100
million in cash it has on deposit for abandonment liability and
performance deposits. If the Company is able to secure a new surety
line, restricted cash freed up as a result thereof would also be used
to repay a portion of this indebtedness.
Increasing production with the resultant increase in cash flow will
also contribute to reducing the Company's leverage ratio. Further
alternatives to reduce the ratio will likely include additional asset
sales and securing third party investors for a portion of the capital
program, which would allow the Company to share in increased
production with lower up-front investment.
PRODUCTION
Average daily production from continuing operations for the second
quarter of 2008 was 6,780 barrels of oil per day, with 2,475 BOE from
our California offshore operations and 4,305 BOE from our Alaska
assets
California
Beta Field averaged 2,475 BOE per day for the quarter including the
added production from Platform Eureka which was returned to
production on April 17, 2008, which platform contributed an average
of 634 BOE per day for the quarter ended June 30, 2008. Eureka
achieved its Phase 1 production target of 1,000 BOE per day on June
27, 2008. Phase 2 targets a further increase of 1,000 BOE per day,
which is expected to be reached by the end of September 2008. Beta's
July 2008 production averaged approximately 2,900 BOE per day.
Alaska
Operated Assets: Development drilling on our operated assets is
expected to begin in the second quarter of 2009, this is a delay of
approximately six months due to rig availability and weather-related
logistics with the drilling season. Development will begin with
drilling of proved undeveloped reserve ("PUD") locations off platform
Osprey in the Redoubt Shoal field.
Non-Operated Assets: Our joint redevelopment plan in Alaska with our
partner Chevron is ongoing. Development drilling is expected to begin
in the first quarter of 2009, beginning with PUD drilling off
platform Steelhead in the MacArthur River field.
LEASE OPERATING EXPENSES AND GENERAL & ADMINISTRATIVE COSTS
Lease operating expenses from continuing operations increased on a
company- wide basis by 3% from the first quarter of 2008
but decreased 11% on a per barrel basis. LOE per barrel for the
second quarter 2008 was $40.
LOE for the Beta Field increased 11% from the first quarter of 2008,
but decreased 19% on a per barrel basis from the first quarter of
2008 reflecting the benefit of higher production. LOE per barrel was
$33 in the second quarter of 2008.
LOE for our operated and non-operated assets in Alaska remained
unchanged from the first quarter of 2008, but decreased 6% on a per
barrel basis from the first quarter of 2008. LOE per barrel was $44
in the second quarter of 2008.
General and administrative expenses of $2.7 million decreased 35%
from the first quarter of 2008 reflecting the absence of a first
quarter $0.9 million transition services fee for the Alaska
properties acquired in August 2007 and a $0.7 million increased
allocation to lease operating expense.
CAPITAL INVESTMENTS
Capital expenditures for development and other spending was
approximately $11 million for the quarter ended June 30, 2008 and $21
million for the year to date. The current capital budget anticipates
$45 million activity in the second half of the year and extending to
completion of the projects in the first part of 2009, depending in
part on cash available to fund such programs.
EXPLORATION
The Company's exploration efforts are focused on the Corsair prospect
in the Cook Inlet Alaska which it plans on drilling beginning in the
second quarter of 2009. The Company has been granted an extension by
the State of Alaska until September 29, 2008 to show evidence of a
heavy lift vessel, a necessary requirement to maintain the leases in
good standing. The vessel will be used to transport a jack up rig to
the Cook Inlet for the 2009 drilling season. The Corsair prospect may
contain as much as 500 Bcf of gas and 100 million barrels of oil.
Pacific Energy currently has 100% working interest in the prospect.
It is the intention of the Company to farm out a large portion of the
project to fund the exploration drilling.
OUTLOOK
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