Coastal Energy Announces Second Quarter 2012 Financial Results & Operations Update

HOUSTON, Aug. 13, 2012 (GLOBE NEWSWIRE) -- Coastal Energy Company (the "Company" or "Coastal Energy") (TSX:CEN) (AIM:CEO), an independent exploration and production company with assets in Thailand, announces the financial results for the three and six months ended June 30, 2012. The functional and reporting currency of the Company is the United States dollar.

Second Quarter 2012 Highlights

- Total Company production increased to 21,713 boe/d in the second quarter from 9,494 boe/d in the same period last year. The Company's offshore production was 19,351 bbl/d, with the increase due to the inclusion of production from both platforms at Bua Ban North. Full production from Bua Ban North came on throughout January and February. Offshore production volumes in the second quarter were impacted by downtime for the replacement of an FSO at Bua Ban North. Onshore production of 2,362 boe/d increased from Q112 levels and year ago levels as natural gas demand continued to recover following the flooding in Thailand in late 2011 and was 3% above Q211 levels.

-  EBITDAX for Q2 2012 was $130.3 million, 230% higher than the $39.5 million recorded in Q2 2011. Revenue and EBITDAX were driven higher by increased oil liftings and commodity prices. Crude oil inventory was approximately 456,418 barrels at June 30, 2012 the revenue from which will be recognized in the third quarter. The Company reduced closing inventory levels by 112,840 barrels (approximately 20%) during Q2.

-  The Company announced successful discoveries in the Miocene and Oligocene reservoirs at Bua Ban South. The discoveries have been appraised and determined to be commercial. The Company purchased production facilities for Bua Ban South and will continue appraisal drilling once they arrive on location later in the third quarter.

-  The Company announced a Normal Course Issuer Bid to repurchase up to 5% of its outstanding shares (5,715,972 shares). To date, the Company has repurchased approximately 1.25 million common shares on the open market.

-  The Company announced that it had been awarded a Small Field Risk Services Contract by PETRONAS for the development of the Kapal, Banang & Meranti cluster of small fields offshore Peninsular Malaysia. Coastal will operate the fields for PETRONAS and will provide upfront development and operational capital. Coastal will recover 100% of its invested capital and will earn a remuneration fee which will be adjusted based on the timely implementation of the agreed field development plan and budget.

-  Following quarter end, the Company released the results of an interim third party reserves evaluation by its reserve auditor, RPS Energy Ltd. Total company 2P reserves increased to 149.1 mmboe from 102.1 mmboe at December 31, 2011

Operations Update

The Company drilled the Songkhla J-01 exploration well to a total depth of 8,600 feet TVD and encountered 168 feet of high quality sand in the Lower Oligocene reservoir with 19% porosity. Oil shows were observed throughout this section of the Lower Oligocene; however, MDT analysis indicates that this wellbore was near the oil water contact in this reservoir. Oil shows were also observed in the pre-tertiary limestone target, but porosity was below commercial levels. 

The rig is being mobilized to Songkhla A for development and appraisal drilling.

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

"The first half of 2012 has been an exceptional six months for Coastal. On top of record levels of production and cash flow, the Company has continued to deliver increases in reserves both through new exploration discoveries and appraisal drilling as well as core analysis on existing assets.

"We have been reinvesting our free cash flow to purchase some of the production facilities we were previously leasing for our offshore operations. This will reduce our fixed operating costs across all fields. The Company also announced an exciting expansion of our operations into Malaysia. This contract with PETRONAS is a low risk way for Coastal to enter a new country and we are very excited for our first new venture outside of Thailand.

"The Songkhla J-01 exploration well has very interesting implications for the basin. This is the farthest north and east that we've seen oil migration in the Songkhla basin to date. The secondary Lower Oligocene target had oil shows and great reservoir characteristics which will require further appraisal drilling to evaluate. We believe there is significant potential in the Lower Oligocene in updip fault blocks to the north and east of the J-01 well; however, these prospects extend beyond the boundaries of our current 3D seismic data. We are going to wait to drill further appraisal wells until we finish the acquisition and processing of additional 3D seismic which is currently underway. While the pre-tertiary target was below commercial thresholds in this particular location, we do not feel that there is any read-through to other pre-tertiary prospects in the basin based upon these results.

"We are moving the rig to Songkhla A to continue development and appraisal drilling to add to our existing production growth. We are also currently bidding on a second rig to begin work in the November 2012 time frame, which would allow our development and exploration programs to continue simultaneously." 

The following financial statements for the Company are abbreviated versions. The Company's complete financial statements for the three and six months ended June 30, 2012 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.
  Three months ended June 30, Six months ended June 30,
   2012   2011   2012   2011 
         
Revenues and Other Income        
Oil sales  194,639  64,628  383,718  137,184
Royalties  (20,514)  (5,018)  (40,757)  (10,863)
Oil sales, net of royalties  174,125  59,610  342,961  126,321
Other income (Note 11)  9,778  (2,027)  (393)  (23,111)
   183,903  57,583  342,568  103,210
         
Expenses        
Production  41,164  17,124  77,374  39,342
Depreciation and depletion (Note 6)  18,590  11,698  38,634  24,984
Net profits interest (Note 12)  869  --   869  -- 
General and administrative  7,057  6,457  15,384  11,720
Exploration (Note 5)  286  931  286  6,484
Debt financing fees  195  31  632  265
Finance  351  1,201  1,201  2,363
   68,512  37,442  134,380  85,158
         
Net income before income taxes, share of        
net income from Apico LLC  115,391  20,141  208,188  18,052
         
Share of net income from Apico LLC (Note 7)  5,497  4,272  9,504  7,528
Net income before income taxes  120,888  24,413  217,692  25,580
         
Income taxes (Note 14)        
Current  45,289  --  81,897  --
Deferred  32,095  12,005  43,798  15,188
   77,384  12,005  125,695  15,188
         
Net income and comprehensive income  43,504  12,408  91,997  10,392
         
Net income and total comprehensive income attributable to:        
Shareholders of Coastal Energy  42,150  11,816  90,285  9,454
Non-controlling interest  1,354  592  1,712  938
   43,504  12,408  91,997  10,392
         
Net income per share:        
Basic (Note 13)  0.37  0.11  0.79  0.08
Diluted (Note 13)  0.36  0.10  0.76  0.08
         
The accompanying notes are an integral part of these condensed interim consolidated financial statements.        
     
As at June 30, 2012 December 31, 2011
   $   $ 
     
Assets    
Current Assets    
Cash  116,646  22,995
Restricted cash (Note 3)  6,393  28,447
Accounts receivable (Note 4)  28,170  16,939
Derivative asset (Note 10)  48  59
Crude oil inventory  12,281  11,304
Marine fuel inventory  3,772  2,857
Prepaids and other current assets  1,056  1,094
Total current assets  168,366  83,695
     
Non-Current Assets    
Exploration and evaluation assets (Note 5)  55,101  31,881
Property, plant and equipment (Note 6)  410,420  355,052
Investment in and advances to Apico LLC (Note 7)  66,452  47,698
Deposits and other assets  274  405
Total non-current assets  532,247  435,036
Total Assets  700,613  518,731
     
Liabilities    
Current Liabilities    
Accounts payable and accrued liabilities (Note 8)  159,218  59,471
Current portion of long-term debt (Note 10)  17  55,662
Current portion of derivative liabilities (Note 10)  3,935  14,557
Derivative liability - Warrants (Note 9)  2,408  2,853
Total current liabilities  165,578  132,543
     
Non-Current Liabilities    
Long-term debt (Note 10)  47,482  22,156
Non-current portion of derivative liabilities (Note 10)  --   1,274
Deferred tax liabilities  113,565  69,767
Decommissioning liabilities  46,124  42,124
Total Non-Current Liabilities  207,171  135,321
     
Shareholders' Equity (Note 13)    
Common shares  211,702  211,554
Contributed surplus  18,804  16,401
Retained earnings  92,156  17,630
Total Shareholders' Equity  322,662  245,585
Non-controlling interest  5,202  5,282
Total equity  327,864  250,867
Total liabilities and equity  700,613  518,731
     
Commitments and contingencies (Note 16)    
     
The accompanying notes are an integral part of these condensed interim consolidated financial statements.    
     
  Three months ended June 30, Six months ended June 30,
   2012   2011   2012   2011 
Operating activities        
Net income  43,504  12,408  91,997  10,392
Adjustments:        
Share of net income from Apico LLC  (5,497)  (4,272)  (9,504)  (7,528)
Unrealized (gain) loss on derivative instruments  (15,892)  (7,674)  (11,885)  10,513
Depletion and depreciation  18,590  11,698  38,634  24,984
Finance expense  195  1,417  1,201  2,363
Amortisation of debt financing fees  351  31  632  265
Share-based compensation  1,645  3,624  4,636  5,746
Deferred income taxes  32,095  12,005  43,798  15,188
Unrealized foreign exchange (gain) loss  (158)  308  (66)  457
Exploration expense  286  931  286  6,484
Income taxes paid  (129)  --  (129)  --
Interest received  1  1  3  2
Interest paid  (531)  (1,982)  (1,252)  (2,294)
Earnings Distributions from Apico LLC  --  1,265  --  2,168
   74,460  29,760  158,351  68,740
Change in non-cash working capital:        
Accounts receivable  4,306  13,128  (11,231)  (1,793)
Inventory  3,584  (5,142)  (1,892)  (4,312)
Prepaids and other current assets  (710)  45  38  480
Accounts payable and accrued liabilities  11,124  (5,223)  (8,233)  890
Current income taxes payable  45,160  --  81,768  --
Cash flow provided by operating activities  137,924  32,568  218,801  64,005
         
Financing Activities        
Issuance of common shares, net of issuance costs  1,034  749  2,026  5,442
Repurchase of shares  (15,033)  --  (15,033)  --
Borrowings under long-term debt  --  --  --  6,275
Repayment of long-term debt  --  --  (30,000)  --
Loan arrangement fees  (222)  (348)  (968)  (348)
Distributions to non-controlling interest  (1,792)  --  (1,792)  (156)
Other  --  (375)  --  (375)
Cash flow (used in) provided by financing activities  (16,013)  26  (45,767)  10,838
         
Investing Activities        
Decrease (increase) in restricted cash  18  (11,036)  22,054  (4,503)
Expenditure on property, plant and equipment  (45,698)  (33,422)  (90,927)  (69,892)
Acquisition of increased ownership interest in Apico LLC  --  --  (9,250)  --
Advances to Apico LLC  --  (1,446)  --  (1,446)
Deposits and other assets  131  40  131  (3)
Cash flow used in investing activities  (45,549)  (45,864)  (77,992)  (75,844)
         
Effect of exchange rate changes on cash  (616)  (456)  (1,391)  (697)
         
Increase (decrease) in cash  75,746  (13,726)  93,651  (1,698)
Cash - Beginning of period  40,900  15,912  22,995  3,884
Cash - End of period  116,646  2,186  116,646  2,186
         
The accompanying notes are an integral part of these condensed interim consolidated financial statements.

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.

The Coastal Energy Company logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=10062
CONTACT: Enquiries:         Coastal Energy Company         Email: investor@CoastalEnergy.com         +1 (713) 877-6793                  Strand Hanson Limited (Nominated Adviser)         Rory Murphy / Paul Cocker / Scott McGregor         +44 (0) 20 7409 3494                  Macquarie Capital (Europe) Limited (Broker)         Paul Connolly / Jeffrey Auld         +44 (0) 20 3037 2000                  FirstEnergy Capital LLP (Broker)         Hugh Sanderson / Travis Inlow         +44 (0) 20 7448 0200                  Buchanan         Tim Thompson / Ben Romney         +44 (0) 20 7466 5000

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