SOURCE: FX Energy, Inc.

May 09, 2013 16:00 ET

FX Energy Reports Higher First Quarter Production and Revenues; Earnings Down Due to Non-Cash Charge

SALT LAKE CITY, UT--(Marketwired - May 9, 2013) - FX Energy, Inc. (NASDAQ: FXEN), today announced financial results for its first quarter ended March 31, 2013. The Company reported a first quarter net loss of $11.4 million, or $(0.22) per share. This compares to net income of $14.7 million, or $0.28 per share, for the first quarter of 2012. Included in the Company's quarterly results were noncash foreign exchange losses of $9.1 million in 2013 and gains of $14.5 million in 2012.

Polish Operations Drive Higher Production and Revenues

Total revenues for the first quarter of 2013 were $9.5 million. This was up 11% over the $8.6 million of the 2012 first quarter. Gains in both production and natural gas prices contributed to the increase.

Total net oil and gas production was 1,261 million cubic feet equivalent (Mmcfe) during the first quarter of 2013, a daily average of 14.0 Mmcfe/d. First quarter 2012 production was 1,205 Mmcfe, a daily average of 13.2 Mmcfe/d. Production from our Kromolice-1, Sroda-4, and Kromolice-2, or KSK, wells increased by 256,000 thousand cubic feet of natural gas over 2012 first quarter levels, as first quarter 2012 production at KSK was constrained due to a pipeline bottleneck. In addition, new production at our Winna Gora well combined with the KSK increase to offset production declines at our Zaniemysl and Roszkow wells.

Natural gas prices during the first quarter of 2013 were 19% higher than during the same period of 2012. Natural gas production increased by 6% in the 2013 first quarter. Together, these increases resulted in a 26% increase in natural gas revenues from quarter to quarter. 2013 first quarter natural gas revenues were $8.5 million, compared to $6.8 million during the same quarter of 2012, an increase of $1.7 million. Unlike the U.S., demand for natural gas exceeds domestic Polish supplies and Poland imports most of the natural gas it uses. Thus, natural gas pricing is driven by demand that exceeds domestic supply. FX Energy has consistently cited the different natural gas pricing dynamics of Poland versus those in the U.S. as one of the reasons for the Company's focus on Poland.

The average price received in Poland for the first quarter of 2013 was $7.18 per Mcf, compared to $6.03 per Mcf for the first quarter of 2012. Zloty-denominated gas prices were 13.1% higher in the 2013 first quarter than in the same quarter of 2012. In addition, period-to-period strengthening in the Polish zloty produced a higher U.S. dollar-denominated average price in the first quarter of 2013.

Lower oil prices and production dampened somewhat the effect of higher gas prices and production. Oil revenues of $900,000 in the first quarter of 2013 were 22% lower than $1.2 million during the first quarter of 2012. Oil prices averaged $76.46 per barrel in the first quarter of 2013, compared to $84.97 per barrel in the same quarter of 2012. Currently all of the Company's oil production is in the U.S. This oil is a relatively heavy grade of crude and sells at a discount to the standard WTI price.

New Production Expected in Second Half

Clay Newton, FX's Vice President Finance, remarked: "The Company expects production to begin at its Lisewo-1 and Komorze-3K wells during the second half of 2013. Just as production from new wells and facilities in Poland has boosted recent results, we expect Lisewo-1 and Komorze-3K will provide similar benefits in the second half of this year."

Operating Cash Reflects Higher Exploration Spending; Noncash Charges Continue to Vary

Net cash provided from operating activities was $4.5 million during the 2013 first quarter, down 3% from $4.7 million recorded during the first quarter of 2012. Exploration expenses during the first quarter of 2013 were 115% higher than during the same quarter of 2012. These higher costs were mostly offset by a reduction of year-end 2012 receivables.

The noncash foreign exchange loss of $9.1 million and the foreign exchange gain of $14.5 million for the first quarters of 2013 and 2012, respectively, are included in other income and expense. These figures come primarily from recognition of gains and losses on U.S. dollar-denominated, intercompany loans from FX Energy, Inc., to FX Poland, its wholly owned subsidiary. These are noncash gains and losses and could vary greatly depending upon future exchange rate changes.

Earnings Conference Call Today, Thursday, May 9, 2013, at 4:30 PM EDT (2:30 PM MDT)

The Company will host a conference call and webcast May 9, 2013, to discuss 2013 first quarter results and update operational items at 4:30 p.m. Eastern Daylight Time. Conference call information is as follows: US dial-in-number: 888-427-9411; International dial-in-number: 719-325-2469; Passcode: 8125122. Request: FX Energy, Inc. Conference Call.

The call will also be webcast live and interested parties may access the webcast through FX Energy's homepage at For those who are unable to participate in the live call, a rebroadcast will be available through the Company's website for two weeks beginning one hour after the completion of the call.

About FX Energy

FX Energy is an independent oil and gas exploration and production company with production in the US and Poland. The Company's main exploration and production activity is focused on Poland's Permian Basin where the gas-bearing Rotliegend sandstone is a direct analog to the Southern Gas Basin offshore England. The Company trades on the NASDAQ Global Select Market under the symbol FXEN. Website


This report contains forward-looking statements. Forward-looking statements are not guarantees. For example, exploration, drilling, development, construction, or other projects or operations may be subject to the successful completion of technical work; environmental, governmental or partner approvals; equipment availability; or other things that are or may be beyond the control of the Company. Operations that are anticipated, planned, or scheduled may be changed, delayed, take longer than expected, fail to accomplish intended results, or not take place at all.

In carrying out exploration, it is necessary to identify and evaluate risks and potential rewards. This identification and evaluation is informed by science but remains inherently uncertain. Subsurface features that appear to be possible traps may not exist at all, may be smaller than interpreted, may not contain hydrocarbons, may not contain the quantity or quality estimated, or may have reservoir conditions that do not allow adequate recovery to render a discovery commercial or profitable. Forward-looking statements about the size, potential, or likelihood of discovery respecting exploration targets are certainly not guarantees of discovery, the actual presence or recoverability of hydrocarbons, or the ability to produce in commercial or profitable quantities. Estimates of potential typically do not take into account all the risks of drilling and completion nor do they take into account the fact that hydrocarbon volumes are never 100% recoverable. Such estimates are part of the complex process of trying to measure and evaluate risk and reward in an uncertain industry.

Forward-looking statements are subject to risks and uncertainties outside FX Energy's control. Actual events or results may differ materially from the forward-looking statements. For a discussion of additional contingencies and uncertainties to which information respecting future events is subject, see FX Energy's SEC reports or visit FX Energy's website at

Consolidated Balance Sheets      
(in thousands)      
    March 31,     December 31,  
    2013     2012  
Current assets:                
  Cash and cash equivalents   $ 32,492     $ 33,990  
    Accrued oil and gas sales     4,084       3,447  
    Joint interest and other receivables     687       7,733  
    VAT receivable     1,401       1,136  
  Inventory     200       199  
  Other current assets     614       614  
    Total current assets     39,478       47,119  
Property and equipment, at cost:                
  Oil and gas properties (successful efforts method):                
    Proved     66,131       63,821  
    Unproved     2,237       2,337  
  Other property and equipment     11,072       10,717  
    Gross property and equipment     79,440       76,875  
  Less accumulated depreciation, depletion, and amortization     (20,670 )     (19,786 )
    Net property and equipment     58,770       57,089  
Other assets:                
  Certificates of deposit     382       382  
  Loan fees     1,173       1,364  
    Total other assets     1,555       1,746  
Total assets   $ 99,803     $ 105,954  
Consolidated Balance Sheets
(in thousands, except share data)
    March 31,     December 31,  
    2013     2012  
Current liabilities:                
  Accounts payable   $ 7,265     $ 8,532  
  Accrued liabilities     407       1,192  
  Current portion of long-term debt     7,000       7,000  
    Total current liabilities     14,672       16,724  
Long-term liabilities:                
  Notes payable     33,000       33,000  
  Asset retirement obligation     1,516       1,431  
    Total long-term liabilities     34,516       34,431  
      Total liabilities     49,188       51,155  
Stockholders' equity:                
  Preferred stock, $0.001 par value, 5,000,000 shares authorizedas of March 31, 2013, and December 31, 2012; no sharesOutstanding     --       --  
Common stock, $0.001 par value, 100,000,000 shares authorizedas of March 31, 2013, and December 31, 2012; 53,415,522and 53,246,620 shares issued and outstanding as ofMarch 31, 2013, and December 31, 2012, respectively     53       53  
  Additional paid-in capital     223,896       222,513  
  Cumulative translation adjustment     23,903       18,027  
  Accumulated deficit     (197,237 )     (185,794 )
  Total stockholders' equity     50,615       54,799  
Total liabilities and stockholders' equity   $ 99,803     $ 105,954  
Consolidated Statements of Comprehensive Income   
(in thousands, except per share amounts)   
    For the Three Months Ended  
    March 31,  
    2013     2012  
  Oil and gas sales   $ 9,446     $ 7,923  
  Oilfield services     42       659  
    Total revenues     9,488       8,582  
Operating costs and expenses:                
  Lease operating expenses     876       872  
  Exploration costs     6,371       2,964  
  Oilfield services costs     132       639  
  Depreciation, depletion, and amortization     1,316       926  
  Accretion expense     22       16  
  Stock compensation     689       551  
  General and administrative costs     1,824       1,891  
    Total operating costs and expenses     11,230       7,859  
Operating income (loss)     (1,742 )     723  
Other income (expense):                
  Interest expense     (628 )     (619 )
  Interest and other income     52       84  
  Foreign exchange gain (loss)     (9,125 )     14,492  
    Total other income (expense)     (9,701 )     13,957  
Net income (loss)   $ (11,443 )   $ 14,680  
Basic and diluted net income (loss) per common share   $ (0.22 )   $ 0.28  
Basic weighted average number of shares outstanding                
  52,704       52,221  
Diluted weighted average number of shares outstanding                
  52,704       52,291  
Other comprehensive income (loss):                
  Foreign currency translation adjustment     5,876       (9,567 )
Comprehensive income (loss)   $ (5,567 )   $ 5,113  
Consolidated Statements of Cash Flows   
(in thousands)   
    For the Three Months Ended  
    March 31,  
    2013     2012  
Cash flows from operating activities:                
  Net income (loss)   $ (11,443 )   $ 14,680  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation, depletion, and amortization     1,316       926  
    Accretion expense     22       16  
    Property impairment     207       --  
    Amortization of bank fees     130       127  
    Stock compensation     689       551  
    Foreign exchange (gains) losses     9,110       (14,484 )
    Common stock issued for services     694       666  
  Increase (decrease) from changes in working capital items:                
    Receivables     5,765       2,711  
    Inventory     (1 )     4  
    Other current assets     (14 )     (90 )
    Accounts payable and accrued liabilities     (1,977 )     (455 )
      Net cash provided by operating activities     4,498       4,652  
Cash flows from investing activities:                
  Additions to oil and gas properties     (5,329 )     (5,083 )
  Additions to other property and equipment     (192 )     (178 )
    Net cash used in investing activities     (5,521 )     (5,261 )
Cash flows from financing activities:                
    Net cash provided by financing activities     --       --  
Effect of exchange rate changes on cash     (475 )     861  
Net increase (decrease) in cash     (1,498 )     252  
Cash and cash equivalents at beginning of year     33,990       50,859  
Cash and cash equivalents at end of period   $ 32,492     $ 51,111  

Contact Information

    FX Energy, Inc.
    3006 Highland Drive, Suite 206
    Salt Lake City, Utah 84106
    (801) 486-5555
    Fax (801) 486-5575