SOURCE: FX Energy, Inc.

November 07, 2013 16:00 ET

FX Energy Reports Third Quarter Results

SALT LAKE CITY, UT--(Marketwired - Nov 7, 2013) -  FX Energy, Inc. (NASDAQ: FXEN), today announced net income of $6.5 million, or $0.12 per share, for the quarter ended September 30, 2013. Excluding a noncash foreign currency exchange gain of $11.5 million, the Company would have recorded a third quarter 2013 net loss of $(5.0) million, or $(0.10) per share.

During the third quarter of 2012, the Company reported net income of $2.0 million, or $0.04 per share. Excluding a noncash foreign currency exchange gain of $10.5 million, the Company would have recorded a third quarter 2012 net loss of $(8.5) million, or $(0.16) per share.

Third Quarter Oil and Gas Revenues Slightly Lower, But Production Gains Anticipated for the Fourth Quarter

Oil and gas revenues were $8.0 million during the third quarter of 2013, compared to $9.0 million during the same quarter of 2012. Total revenues were $8.2 million for the 2013 third quarter, compared to $9.6 million for the same quarter in 2012.

Oil and gas prices during the period were stable to slightly higher. Specifically, gas prices during the third quarter of 2013 averaged $7.02 per Mcf, compared to $7.05 per Mcf during the same quarter of 2012. Prices for the company's U.S. oil production increased during the 2013 quarter. Oil prices increased 19% over the year, averaging $88.14 per barrel in the third quarter of 2013, compared to $74.30 per barrel in the same quarter of 2012.

Normal production declines and a temporary shut-in led to the lower revenues. Total net oil and gas production decreased 13% to 1,062 million cubic feet equivalent (Mmcfe) during the third quarter of 2013, compared to 1,217 Mmcfe during the 2012 quarter. Production declines at the Company's Zaniemysl and Roszkow wells in Poland were a significant cause for the reduction. Also, production was curtailed for 2 weeks at the KSK wells in Poland for annual maintenance and testing. The Company's average daily production rate for the 2013 third quarter was 11.5 million cubic feet equivalent (Mmcfe) per day.

Clay Newton, Vice President of Finance, remarked, "Though production declined modestly last quarter, we expect an improved result for the fourth quarter. Production is expected to begin at the Lisewo-1 well at the end of November. With our KSK wells back online, we expect our daily average production to reach approximately 14.0 Mmcfe/day as we exit 2013. Should prices remain stable, total revenues should enjoy a substantial gain."

Nine Month Revenues Reach Record Levels

The Company reported a net loss of $(15.6) million, or $(0.30) per share, for the first nine months of 2013. Excluding noncash foreign currency exchange losses of $1.0 million, the Company would have recorded a net loss for the first nine months of 2013 of $(14.6) million, or $(0.28) per share. This compares to a net loss, adjusted for foreign exchange gains, of $(7.4) million, or $(0.14) per share reported in the first nine months of 2012.

Oil and gas revenues for the 2013 first nine months reached record levels. The Company recognized oil and gas revenues of $25.7 million for the first nine months of 2013, compared to $24.8 million for the same period of 2012. Total revenues for the first nine months of 2013 were $25.9 million, compared to $26.7 million in the first nine months of 2012.

Total production for the first nine months of 2013 was 3.4 billion cubic feet equivalent (Bcfe), compared to 3.5 Bcfe during the first nine months of 2012. Daily production for the first nine months of 2013 was approximately 12.6 Mmcfe/d, compared to approximately 12.8 Mmcfe/d during the first nine months of 2012, a decrease of 2%. Gas prices during the first nine months of 2013 averaged $7.06 per Mcf, compared to $6.64 per Mcf during the same period of 2012, an increase of 6%. Oil prices increased 4% over the year, averaging $80.75 per barrel in the first nine months of 2013, compared to $77.32 per barrel in the same period of 2012.

New Credit Facility Provides Enhanced Liquidity

As announced previously, on July 8, 2013, the Company finalized a new five-year, up to $100 Million Senior Reserve Based Lending Facility with BNP Paribas (Suisse) SA and ING Bank N.V. The initial commitment of the new facility amounts to $65 million, an increase of 18% compared to the Company's previous facility. The Company can seek additional commitments up to $100 million under certain conditions via an embedded "accordion mechanism." Initial proceeds from the new facility were used to repay the Company's previously existing facility. Payment of the credit facility is secured by company assets in Poland.

Enhanced Liquidity Available for Upcoming Capital Program

As of November 7, 2013, the Company was engaged in active drilling operations at its Lisewo-2, Szymanowice-1, and Gorka Duchowna-1 wells. In addition, the Company was nearing completion of production facilities at Lisewo-1, that will serve as a group center for future Lisewo area wells. Construction has begun on satellite production facilities at Komorze-3K, which is expected to begin production in early 2014. The Company is also continuing seismic projects at Block 246 and Tuchola, and has plans to begin drilling a second well in the Tuchola area in the next two to three months.

These exploration and development costs are being funded by the Company's higher revenues, cash balances, and increased availability under the new credit facility. At September 30, 2013, the Company had cash and investments of $19.1 million and working capital of $19.4 million. As of November 7, 2013, the Company had $23.0 million of availability under its new credit facility and total debt outstanding of $42.0 million.

Working Capital Changes Impact Operating Cash; Non-cash Charges Continue to Vary

Net cash provided by operating activities of $2.9 million during the first nine months of 2013, compared to net cash provided by operating activities of $5.8 million during the same period of 2012. The primary driver of the year-to-year decrease was the higher exploration costs in 2013 associated with the Company's Poland operations, along with reductions in current liabilities.

The non-cash foreign exchange loss of $1.0 million and the non-cash foreign exchange gain of $12.0 million for the first nine months of 2013 and 2012, respectively, are included in other income and expense. The gains and losses 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, and other U.S. dollar denominated debt held at the FX Poland level. These are non-cash gains and losses only, and could vary greatly depending upon future exchange rate changes.

Earnings Conference Call Today, Thursday, November 7, 2013 at 4:30 PM. Eastern (2:30 PM. Mountain)

The Company will host a conference call and webcast today to discuss 2013 third quarter and first nine month results and update operational items at 4:30 p.m. Eastern Time. Conference call information is as follows: US dial-in-number: 888-318-7470; International dial-in-number: 719-457-2716; Passcode: 3573216. 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 www.fxenergy.com. For those that 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 U.S. 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 Market under the symbol FXEN. Website www.fxenergy.com.

FORWARD-LOOKING STATEMENTS

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 with respect to exploration targets are certainly not guarantees of discovery or of the actual presence or recoverability of hydrocarbons or of 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 www.fxenergy.com

   
   
FX ENERGY, INC. AND SUBSIDIARIES  
Consolidated Balance Sheets  
(Unaudited)  
(in thousands)  
   
    September 30,     December 31,  
    2013     2012  
ASSETS                
                 
Current assets:                
  Cash and cash equivalents   $ 19,182     $ 33,990  
  Receivables:                
    Accrued oil and gas sales     3,095       3,447  
    Joint interest and other receivables     1,290       7,733  
    VAT receivable     1,180       1,136  
  Inventory     206       199  
  Other current assets     309       614  
    Total current assets     25,262       47,119  
                 
Property and equipment, at cost:                
  Oil and gas properties (successful efforts method):                
    Proved     72,473       63,821  
    Unproved     1,930       2,337  
  Other property and equipment     11,567       10,717  
    Gross property and equipment     85,970       76,875  
  Less accumulated depreciation, depletion, and amortization     (21,997 )     (19,786 )
      Net property and equipment     63,973       57,089  
                 
Other assets:                
  Certificates of deposit     406       382  
  Loan fees     2,366       1,364  
      Total other assets     2,772       1,746  
                 
Total assets   $ 92,007     $ 105,954  
                 
                 
                 

-Continued-

   
FX ENERGY, INC. AND SUBSIDIARIES  
Consolidated Balance Sheets  
(Unaudited)  
(in thousands, except share data)  
-Continued-  
   
    September 30,     December 31,  
    2013     2012  
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
Current liabilities:                
  Accounts payable   $ 5,204     $ 8,532  
  Accrued liabilities     634       1,192  
  Current portion of long-term debt     --       7,000  
    Total current liabilities     5,838       16,724  
                 
Long-term liabilities:                
  Notes payable     42,000       33,000  
  Asset retirement obligation     1,599       1,431  
    Total long-term liabilities     43,599       34,431  
                   
      Total liabilities     49,437       51,155  
                 
Stockholders' equity:                
  Preferred stock, $0.001 par value, 5,000,000 shares authorized as of September 30, 2013, and December 31, 2012; no shares outstanding     --       --  
  Common stock, $0.001 par value, 100,000,000 shares authorized as of September 30, 2013, and December 31, 2012; 53,409,365 and 53,246,620 shares issued and outstanding as of September 30, 2013, and December 31, 2012, respectively     53       53  
  Additional paid-in capital     225,290       222,513  
  Cumulative translation adjustment     18,632       18,027  
  Accumulated deficit     (201,405 )     (185,794 )
  Total stockholders' equity     42,570       54,799  
                 
Total liabilities and stockholders' equity   $ 92,007     $ 105,954  
                 
                 
                 
FX ENERGY, INC. AND SUBSIDIARIES  
Consolidated Statements of Operations and Comprehensive Income (Loss)  
(Unaudited)  
(in thousands, except per share amounts)  
   
    For the three months
ended September 30,
    For the nine months
ended September 30,
 
    2013     2012     2013     2012  
Revenues:                                
  Oil and gas sales   $ 8,034     $ 9,008     $ 25,663     $ 24,816  
  Oilfield services     194       544       256       1,896  
    Total revenues     8,228       9,552       25,919       26,712  
                                 
Operating costs and expenses:                                
  Lease operating expenses     932       862       2,650       2,605  
  Exploration costs     7,158       10,923       17,355       15,874  
  Property impairments     --       2,000       5,633       2,000  
  Loss sale of assets     --       --       --       49  
  Oilfield services costs     164       387       412       1,481  
  Depreciation, depletion, and amortization     1,125       1,006       3,562       2,796  
  Accretion expense     22       16       67       46  
  Stock compensation     701       557       2,083       1,659  
  General and administrative     1,847       1,788       6,451       6,042  
    Total operating costs and expenses     11,949       17,539       38,213       32,552  
                                 
Operating loss     (3,721 )     (7,987 )     (12,294 )     (5,840 )
                                 
Other income (expense):                                
  Interest expense     (1,346 )     (602 )     (2,600 )     (1,862 )
  Interest and other income     17       88       324       259  
  Foreign exchange gain (loss)     11,512       10,490       (1,041 )     11,996  
    Total other income (expense)     10,183       9,976       (3,317 )     10,393  
                                 
Net income (loss)     6,462       1,989       (15,611 )     4,553  
                                 
Other comprehensive income (loss)                                
  Foreign currency translation adjustment     (7,660 )     (6,822 )     605       (8,177 )
Comprehensive loss   $ (1,198 )   $ (4,833 )   $ (15,006 )   $ (3,624 )
                                 
Net income (loss) per common share                                
  Basic   $ 0.12     $ 0.04     $ (0.30 )   $ 0.09  
  Diluted   $ 0.12     $ 0.04     $ (0.30 )   $ 0.09  
Weighted average common shares outstanding                                
  Basic     52,778       52,255       52,748       52,244  
  Dilutive effect of stock options     958       391       -       329  
  Diluted     53,736       52,646       52,748       52,573  
                                 
                                 
                                 
FX ENERGY, INC. AND SUBSIDIARIES  
Consolidated Statements of Cash Flows  
(Unaudited)  
(in thousands)  
   
    For the Nine Months Ended  
    September 30,  
    2013     2012  
Cash flows from operating activities:                
  Net income (loss)   $ (15,611 )   $ 4,553  
  Adjustments to reconcile net loss to net cash provided by (used in) operating activities:                
    Depreciation, depletion, and amortization     3,562       2,796  
    Accretion expense     67       46  
    Amortization of loan fees     1,055       374  
    Stock compensation     2,083       1,659  
    Property impairments     5,633       6,532  
    Loss on sale of assets     --       49  
    Unrealized foreign exchange losses (gains)     1,014       (11,993 )
    Common stock issued for services     694       669  
  Increase (decrease) from changes in working capital items:                
    Receivables     6,595       2,350  
    Inventory     (7 )     2  
    Other current assets     295       (306 )
    Other assets     (25 )     24  
    Accounts payable and accrued liabilities     (2,483 )     (924 )
      Net cash provided by operating activities     2,872       5,831  
                 
Cash flows from investing activities:                
  Additions to oil and gas properties     (16,656 )     (11,836 )
  Additions to other property and equipment     (869 )     (464 )
  Proceeds from sale of assets     --       221  
      Net cash used in investing activities     (17,525 )     (12,079 )
                 
Cash flows from financing activities:                
  Repayment of credit facility     (40,000 )     --  
  Draws from credit facility     42,000       --  
  Payment of loan fees     (2,036 )     --  
      Net cash used in financing activities     (36 )     --  
                 
Effect of exchange-rate changes on cash     (119 )     569  
                 
Net decrease in cash     (14,808 )     (5,679 )
Cash and cash equivalents at beginning of year     33,990       50,859  
                 
Cash and cash equivalents at end of period   $ 19,182     $ 45,180  

Contact Information

  • SCOTT J. DUNCAN
    FX Energy, Inc.
    3006 Highland Drive, Suite 206
    Salt Lake City, Utah 84106
    (801) 486-5555
    Fax (801) 486-5575
    www.fxenergy.com