SOURCE: Coastal Energy Company

Coastal Energy Company

November 18, 2010 16:20 ET

Coastal Energy Announces Third Quarter 2010 Financial Results

HOUSTON, TX--(Marketwire - November 18, 2010) - Coastal Energy Company (the "Company" or "Coastal Energy") (TSX-V: CEN) (AIM: CEO) announces the financial results for the quarter ended September 30, 2010. The functional and reporting currency of the Company is the United States dollar.

Third Quarter 2010 Highlights

--  Average total Company production of 11,795 boe/d; including average
    offshore production of 10,065 bbl/d
--  EBITDAX of $44.5 million, or $0.39 per fully diluted share; up 49%
    sequentially and over 550% YoY
--  Net income of $9.2 million, or $0.08 per fully diluted share
--  First production from the Bua Ban field in the Gulf of Thailand
--  The closing of a $80MM senior secured revolving credit facility

Operational Highlights

During the third quarter Coastal Energy completed the first development phase of the Bua Ban field in the Gulf of Thailand. The field is online and is producing approximately 4,000 bopd. Exploration results were positive as two of the wells encountered productive sands in the Miocene, a first in the Songkhla basin. Two other wells encountered a significant oil column in the Eocene reservoir, albeit with tight porosity and permeability. The Company is planning a fracture test of these wells in December to attempt to make the Eocene reservoir commercially productive.

Following development drilling at Bua Ban, the Company began appraisal drilling into the Lower Oligocene Wedge and Eocene reservoirs at Songkhla. The first well reached TD in mid-November and encountered thicker than expected pay zones in both the Lower Oligocene and Eocene. Two more appraisal wells are planned in the coming weeks. The Company then plans to begin testing its high impact exploration targets at Bua Ban North.

Randy Bartley, President and CEO of Coastal Energy, commented:

"The third quarter of 2010 was a successful one for Coastal. We delivered record levels of EBITDAX and net income due to higher production volumes from our offshore fields. The completion of the first phase of development was another milestone for the Company. The fourth quarter is off to a successful start with the drilling of a successful appraisal well at Songkhla. We expect further success as we continue to appraise the Oligocene Wedge and Eocene reservoirs over the next month.

"The Company is entering an exciting time with several high impact exploration prospects scheduled for testing over the next several months. As we move forward through the remainder of 2010, we will continue to strive for further success in the exploration and appraisal of our offshore assets."

The Company plans to host a conference call to discuss its Q3 2010 results on Friday, November 19, 2010 at 11:30 AM Eastern time. The dial-in number is 800.281.7970 in the USA or +1.913.312.1414 internationally. The conference ID is 2241640.

The following financial statements for the Company are abbreviated versions. The Company's complete financial statements for the three months and nine months ended September 30, 2010 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.

CONSOLIDATED STATEMENTS OF OPERATIONS, COMPREHENSIVE LOSS AND DEFICIT


                                 Three months ended     Nine months ended
                                    September 30,         September 30,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------

Revenues
   Oil and natural gas             68,688     21,205    160,362     57,422
   Royalties                       (6,828)    (1,430)   (13,632)    (3,851)
   (Loss) gain on derivative
    risk management contracts
    (Note 5)                            -        128        (66)    (1,795)
   Interest income                      1          6          4         22
                                ---------  ---------  ---------  ---------
                                   61,861     19,909    146,668     51,798
                                ---------  ---------  ---------  ---------

Expenses
   Production                      16,329     10,936     34,965     23,788
   General and administrative       4,336      5,029     12,228     11,432
   Foreign exchange loss            2,198        240      2,651      1,637
   Interest (Notes 4 and 5)           367        796      1,064      3,162
   Debt financing fees                 23        323        266      1,249
   Depletion, depreciation and
    accretion                      21,410      5,382     46,316     16,238
   Settlement (Note 3)                  -          -          -      2,366
                                ---------  ---------  ---------  ---------
                                   44,663     22,706     97,490     59,872
                                ---------  ---------  ---------  ---------
Net income (loss) before taxes,
 earnings from significantly
 influenced investee and
 non-controlling interest          17,198     (2,797)    49,178     (8,074)

   Income tax                      10,708          -     29,575          -
                                ---------  ---------  ---------  ---------
Net income (loss) before
 earnings from significantly
 influenced investee and
 non-controlling interest           6,490     (2,797)    19,603     (8,074)

Earnings from significantly
 influenced investee (Note 2)       2,491      2,621      8,223      5,886
                                ---------  ---------  ---------  ---------
Net income (loss) before
 non-controlling interest           8,981       (176)    27,826     (2,188)

Non-controlling interest
 (Note 9)                             247         65        197         65
                                ---------  ---------  ---------  ---------
Loss from continuing operations

Net loss from discontinued
 operations (Note 18)
                                ---------  ---------

Net income (loss) and
 comprehensive income (loss)
 attributable to shareholders       9,228       (111)    28,023     (2,123)
Retained earnings (deficit),
 beginning of period                2,093    (18,599)   (16,702)   (16,587)
                                ---------  ---------  ---------  ---------
Retained earnings (deficit),
 end of period                     11,321    (18,710)    11,321    (18,710)
                                ---------  ---------  ---------  ---------

   Foreign exchange loss
Basic earnings (loss) per share
 (Note 8)                            0.08      (0.00)      0.26      (0.02)
Diluted earnings (loss) per
 share (Note 8)                      0.08      (0.00)      0.25      (0.02)
                                =========  =========  =========  =========


CONSOLIDATED BALANCE SHEETS


                                              September 30,  December 31,
                                                  2010           2009
                                              -------------- -------------

Assets
Current assets
   Cash and cash equivalents                          19,865        21,229
   Restricted cash                                     7,379         3,829
   Accounts receivable                                21,392         6,111
   Derivative asset                                        -            66
   Inventory                                           6,771         5,310
   Prepaids and other current assets                     173           526
                                              -------------- -------------
                                                      55,580        37,071

Investment in and advances to Apico LLC               53,152        55,225
Property, plant and equipment                        311,521       233,014
Deposits and other assets                                296           299
                                              -------------- -------------
Total assets                                         420,549       325,609
                                              ============== =============

Liabilities
Current liabilities
   Accounts payable and accrued liabilities           59,757        31,325
   Deferred income                                         -        23,060
   Income taxes payable                                   31            38
   Amounts due to shareholder                              -         5,164
   Current portion of long-term debt                     134        10,266
                                              -------------- -------------
                                                      59,922        69,853

Long-term debt                                        56,113        24,284
Asset retirement obligations                          10,827         2,809
Future income tax liability                           59,869        27,695
                                              -------------- -------------
Total Liabilities                                    186,731       124,641
                                              -------------- -------------

Commitments and contingencies (Note 12)

Non-controlling interests                              6,170         5,617
                                              -------------- -------------

Shareholders' equity
Share capital                                        200,816       198,121
Contributed surplus                                   15,432        13,779
Warrants                                                  79           153
Retained earnings (deficit)                           11,321       (16,702)
                                              -------------- -------------
Shareholders' equity                                 227,648       195,351
                                              -------------- -------------
Total liabilities, non-controlling interests,
 and shareholders' equity                            420,549       325,609
                                              ============== =============

CONSOLIDATED STATEMENTS OF CASH FLOWS


                                    Three months ended  Nine months ended
                                      September 30,       September 30,
                                    ------------------  ------------------
                                      2010      2009      2010      2009
                                    --------  --------  --------  --------
Operating activities
  Net income (loss) for the period     9,228      (111)   28,023    (2,123)
  Distributions from significantly
   influenced investee                 6,142     2,710    10,296     4,516
  Items not involving cash
    Depletion, depreciation and
     accretion                        21,410     5,382    46,316    16,238
    Impairment                             -         -         -     1,765
    Future income taxes               10,726         -    29,575         -
    Income applicable to
     non-controlling interest           (247)      (65)     (197)      (65)
    Unrealized foreign exchange
     (gain) loss                       1,666       165     2,508       867
    Stock based compensation             720     2,809     3,871     4,955
    Issuance of warrants with notes
     payable                               -         -         -       294
    Earnings from significantly
     influenced investee, net of
     taxes                            (2,491)   (2,621)   (8,223)   (5,886)
    Unrealized loss (gain) on
     derivative instrument                 -      (128)       66     1,668
    (Gain) loss on sale of assets
  Change in non-cash working
   capital                           (41,238)   21,600   (28,496)   25,633
                                    --------  --------  --------  --------
                                       5,916    29,741    83,739    47,862
                                    --------  --------  --------  --------

Investing activities
  Investment in and advances to
   Apico LLC
  Investment in and advances to
   Apico LLC                               -         -         -    (4,516)
  (Increase) decrease in restricted
   cash                               (4,342)     (349)   (3,550)      321
  Purchase of property, plant and
   equipment                         (10,970)  (12,631) (100,834)  (45,979)
  Proceeds from sale of property
   and equipment
  Contributions from
   non-controlling interest partner        -     2,635       750     2,635
  Other                                    -         -        (6)      (86)
                                    --------  --------  --------  --------
                                     (15,312)  (10,345) (103,640)  (47,625)
                                    --------  --------  --------  --------

Financing activities
  Issuance of shares for cash            166       (49)    2,052    15,369
  Borrowings under long-term debt     58,727         -    58,727     1,620
  Transaction costs of obtaining
   credit facility                    (2,521)        -    (2,521)        -
  Repayments of long-term debt       (28,571)   (2,371)  (34,550)  (10,207)
  Borrowings under amounts due to
   shareholder                             -         -         -     1,000
  Repayment of amounts due to
   shareholder                        (3,161)   (1,157)   (5,164)   (2,278)
  Proceeds from issuance of notes
   payable                                 -         -         -    15,000
  Repayments of notes payable              -    (2,949)        -    (7,021)
                                    --------  --------  --------  --------
                                      24,640    (6,526)   18,544    13,483
                                    --------  --------  --------  --------

Net effect of foreign exchange on
 cash held in foreign currencies         (26)       27        (7)       42
                                    --------  --------  --------  --------

Change in cash and cash equivalents   15,218    12,897    (1,364)   13,762
Cash and cash equivalents,
 beginning of period                   4,647     7,299    21,229     6,434
                                    --------  --------  --------  --------
Cash and cash equivalents, end of
 period                               19,865    20,196    19,865    20,196
                                    ========  ========  ========  ========

Cash and cash equivalents consists
 of:
Cash                                  19,865    20,196    19,865    20,196
                                    ========  ========  ========  ========

Randy Bartley, President and Chief Executive Officer of the Company and a member of the Society of Petroleum Engineering and Jerry Moon, Vice President, Technical & Business Development, a member of the American Association of Petroleum Geologists, a Licensed Professional Geoscientist and a Certified Petroleum Geologist in the state of Texas, have reviewed the contents of this announcement.

Additional information, including the Company's complete competent person's report may be found on the Company's website at www.CoastalEnergy.com or may be found in documents filed on SEDAR at www.sedar.com.

This statement contains 'forward-looking statements' as defined by the applicable securities legislation. Statements relating to current and future drilling results, existence and recoverability of potential hydrocarbon reserves, production amounts or revenues, forward capital expenditures, operation costs, oil and gas price forecasts and similar matters are based on current data and information and should be viewed as forward-looking statements. Such statements are not guarantees of future results and are subject to risks and uncertainties beyond Coastal Energy's control. Actual results may differ substantially from the forward-looking statements.

These securities have not been registered under United States Securities Act of 1933 (the "US Securities Act") or the securities laws of any state and may not be offered or sold in the United States or to US persons (as defined in Regulation S under the US Securities Act) unless an exemption from registration is available.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

This news release is not for dissemination in the United States or through United States newswire services

Contact Information

  • Enquiries:

    Coastal Energy Company
    Randy L. Bartley
    Chief Executive Officer
    +1 713 877 6705

    William C. Phelps
    Chief Financial Officer
    +1 713 877 6727
    Email: Email Contact

    Strand Hanson Limited (Nominated Adviser)
    +44 (0) 20 7409 3494
    Rory Murphy
    Paul Cocker

    Stifel Nicolaus Weisel (Broker)
    +44 (0) 20 3205 3615
    Paul Colucci

    Macquarie Capital (Europe) Limited (Broker)
    +44 (0) 20 3037 2000
    Ben Colegrave
    Paul Connolly

    Buchanan Communications
    +44 (0) 20 7466 5000
    Tim Thompson
    Catherine Breen
    Katharine Sutton