ZaZa Energy Reports 2013 First Quarter Results and Provides Operational Update
May 14th 2013 7:46PM
Updated May 14th 2013 9:00PM
ZaZa Energy Reports 2013 First Quarter Results and Provides Operational Update
- ZaZa reports 33.3% increase in revenues and other income from continuing operations.
- Net loss of $2.9 million compared to a net loss of $117.8 million.
- Joint venture agreement reached with large U.S. independent crude oil and natural gas company to develop ZaZa's Eaglebine assets.
- Successful sale of a portion of the Eagle Ford Moulton properties for a purchase price of $9.2 million.
2013 First Quarter Results
For the quarter ended March 31, 2013, the Company reported total revenues and other income from continuing operations of $2.8 million as compared to $2.1 million reported for the comparable 2012 period. This increase is primarily due to higher oil and gas revenue related to the Boening well in the Sweet Home Prospect, which began test production on February 3, 2013, and the increase in Moulton production for the Crabb Ranch and the Ring Units. This increase was partially offset by the loss of Cotulla revenues as a result of the Hess division of assets.
Operating costs and expenses for the first quarter ended March 31, 2013 were $8.6 million as compared to $43.7 million in the comparable 2012 period. The decrease in operating costs and expenses is primarily attributable to lower general and administrative expenses, which were $6.9 million and $42.2 million for the three months ended March 31, 2013 and March 31, 2012, respectively. This decrease was also due to lower lease operating expenses for the 2013 period, primarily as a result of the exclusion of expenses associated with Cotulla (Hess division of assets) and lower lease operating expenses in the Hackberry/Oakland prospect, partially offset by modest increases related to the Moulton and Sweet Home properties. Additionally, offsetting this decline was a $0.7 million increase in depreciation, depletion and amortization expenses for the comparable periods.
The Company reported an operating loss of $5.9 million for the three months ended March 31, 2013 as compared to an operating loss of $41.6 million for the three months ended March 31, 2012. Net loss from continuing operations was $2.3 million, as compared to a net loss from continuing operations of $115.1 million, for the three months ended March 31, 2013 and March 31, 2012, respectively. The 2013 first quarter included an income tax benefit of $4.7 million as compared to an income tax expense of $33.8 million for the comparable 2012 period. Additionally, the Company reported a loss from discontinued operations, net of income taxes, of $0.6 million for the 2013 first quarter as compared to a loss of $2.7 million for the 2012 first quarter. ZaZa reported a net loss of $2.8 million as compared to a net loss of $117.8 million, or a loss per basic and diluted share of $0.03 and $1.35 for the three months ended March 31, 2013 and 2012, respectively.
Todd A. Brooks, President and Chief Executive Officer, stated, "Our joint venture in the Eaglebine allows us to continue to de-risk our multi-target acreage position and grow our production base while substantially reducing our immediate capital spend requirements. We own attractive acreage in the Eagle Ford, and we will continue to divest portions of our position throughout the year as we focus our resources on the emerging and exciting, multifaceted Eaglebine play. We have aligned ourselves with the right industry players and ZaZa is a stronger company today as a result. As the single largest shareholder, I remain confident in our future and our ability to generate both near- and long-term shareholder returns."
First and Second Quarter 2013 Milestones
Eaglebine Joint Venture. On March 21, 2013, ZaZa entered into a Joint Exploration and Development Agreement with a large U.S. independent crude oil and natural gas company ("JV partner") for the joint development of certain Eaglebine properties located in Walker, Grimes, Madison, Trinity and Montgomery Counties, Texas. Under this agreement, ZaZa and its JV partner will jointly develop up to approximately 100,000 gross acres (approximately 73,000 net acres) that ZaZa currently owns in the Eaglebine trend in these counties. The JV partner will act as the operator and will pay ZaZa certain cash amounts, the drilling and completion costs of certain specified wells, and a portion of the Company's share of any additional seismic or well costs in order to earn their interest in these properties. The joint development will be divided into three phases:
- The first phase was executed on April 2, 2013. In this phase, ZaZa transferred 20,000 net acres, approximately 15,000 of which came from the Company's joint venture with Range Texas Production, LLC, to its JV partner, in exchange for $10.0 million and an obligation of our counterparty to drill and pay 100% of the drilling and completion costs of three wells.
- Within 60 days of completion of the third well under the first phase, the Company's JV partner will have the option to elect to go forward with the second phase of the joint development. If they so elect, ZaZa will transfer an additional 20,000 net acres to the JV partner in exchange for a cash payment of $20.0 million, and the JV partner will be responsible to pay 100% of the drilling and completion costs of an additional three wells, plus an obligation to pay for up to $1.25 million of the Company's share of additional costs for seismic or well costs.
- In the third phase, the same terms and conditions apply, though ZaZa would transfer an additional 15,000 net acres to its JV partner for a cash payment of $20.0 million.
- Moulton Properties Sales. On March 25, 2013, ZaZa announced that it entered into two separate purchase and sale agreements to sell its properties located in Fayette, Gonzalez and Lavaca Counties, Texas, which the Company refers to as its "Moulton" properties. On April 5, 2013, the Company closed one transaction for a purchase price of ~$9.2 million. ZaZa in turn used approximately $4.6 million to pay down its Senior Secured Notes. ZaZa announced today that it is uncertain whether closing of the second transaction will occur. While both parties remain in active discussions and are working towards a successful closing in the near-term, ZaZa is pursuing alternative purchasers for its remaining Moulton interests.
As of March 31, 2013, the Company had $8.0 million in cash and cash equivalents, which excludes restricted cash of $21.6 million. Total cash and cash equivalents as of December 31, 2012 were $34.6 million.
Total long-term debt as of March 31, 2013 was $100.4 million as compared to $96.3 million as of December 31, 2012, a non-cash increase driven by the requirement to record certain debt at fair market value in the first quarter of 2013 without a change to the principal amounts. Less the current portion of long-term debt of $32.2 million and $25.3 million as of March 31, 2013 and December 31, 2012, respectively, total long-term debt as of March 31, 2013 was $68.2 million as compared to $71.0 million as of December 31, 2012.
ZaZa paid down approximately $66.8 million of its obligation on its Senior Secured Notes by December 31, 2012, and with the recent transaction related to the sale of its Moulton properties, which closed in the 2013 second quarter, paid another $4.6 million to reduce the outstanding principal amount of its Senior Secured Notes to approximately $28.6 million. The Company further noted that it received approximately $8.8 million in net proceeds from the sale of part of its Moulton properties, less payments made on its Senior Secured Notes, plus $10.0 million in cash generated from closing Phase I of its Joint Exploration and Development Agreement in the Eaglebine. The net proceeds from these transactions will be used to fund operations and for general working capital. In the absence of additional financing, the sale of its remaining Moulton interests is necessary to fund the Company's 2013 forecasted operations.
Ian H. Fay, ZaZa's Chief Financial Officer added, "Our Company has gone through a series of material transactions, both operational and financial in nature, as we continue to work towards a stronger balance sheet and to maintain strategic optionality. The proceeds from the closing of one of the Eagle Ford transactions and the Eaglebine joint venture, enabled us to further strengthen our financial position. As we stated in our annual earnings call, we took steps to lower our overhead and reduce our G&A expenses. While there will be some severance costs associated with right-sizing our business, we achieved our targeted G&A expense reduction of 35%, which included a 55% reduction in headcount. These reductions will be reflected in our 2nd half of the year results. We remain active in evaluating opportunities to monetize our Eagle Ford assets, focusing on the sale of our remaining Moulton acreage, and look forward to ramping up the evaluation and development of the Eaglebine in the coming months with our JV partner."
Results of Operations
The results of operations include the results of our accounting predecessor, ZaZa LLC, from January 1, 2012 through February 20, 2012, and all of our subsidiaries since February 21, 2012, excluding our French operations, which were sold on December 21, 2012 and is presented as discontinued operations. The discussion below relates to our continuing corporate activities and oil and gas exploration and production operations, and excludes discontinued operations.
The following table presents our production and average prices obtained for our production for the three months ended March 31, 2013 and 2012:
|Three Months Ended March 31,|
The following tables present our production data for the referenced geographic areas for the periods indicated:
|Three Months Ended March 31, 2013|
|Three Months Ended March 31, 2012|
Conference Call and Webcast
ZaZa Energy Corporation (NAS: ZAZA) will be hosting a conference call and webcast to discuss its financial and operating results on May 15, 2013, at 10 a.m. EDT. Interested parties can listen to the call by dialing toll-free at 877-703-6106 and entering pass code 43568296 (International number: 857-244-7305). Interested parties can also participate on the webcast by visiting the ZAZA Energy Corporation website at www.zazaenergy.com. For those who will be unable to participate, a webcast and teleconference replay will be available approximately one hour after the completion of the call (toll-free: 888-286-8010 / International: 617-801-6888 / pass code: 95835890). The live webcast and replay link can be found in the "Investor Relations" section of the ZAZA Energy Corporation website at http://phx.corporate-ir.net/phoenix.zhtml?c=68298&p=irol-IRHome.
About ZaZa Energy Corporation
Headquartered in Houston, Texas, ZaZa Energy Corporation is a publicly-traded exploration and production company with primary assets in the Eagle Ford and Eaglebine resource plays in Texas. More information about the Company may be found at www.zazaenergy.com.
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects," "forecasts" and similar references to future periods. These statements include, but are not limited to, statements about ZaZa's ability to execute on exploration, production and development plans, estimates of reserves, estimates of production, future commodity prices, exchange rates, interest rates, geological and political risks, drilling risks, product demand, transportation restrictions, actual recoveries of insurance proceeds, the ability of ZaZa to obtain additional capital, and other risks and uncertainties described in the Company's filings with the Securities and Exchange Commission. While forward-looking statements are based on our assumptions and analyses that we believe to be reasonable under the circumstances, whether actual results and developments will meet our expectations and predictions depend on a number of risks and uncertainties that could cause our actual results, performance and financial condition to differ materially from our expectations. See "Risk Factors" in our 2012 Form 10-K and 2013 First Quarter Form 10-Q filed with the Securities and Exchange Commission for a discussion of risk factors that affect our business. Any forward-looking statement made by us in this news release speaks only as of the date on which it is made. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future development, or otherwise, except as may be required by law.
Jay Morakis, 212-266-0191
KEYWORDS: United States North America Texas
The article ZaZa Energy Reports 2013 First Quarter Results and Provides Operational Update originally appeared on Fool.com.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.