Erin Energy Announces Third Quarter 2017 Results

Provides Operational Update on its West and East Africa Operations

HOUSTON--()--Erin Energy Corporation (Erin Energy or the Company) (NYSE American:ERN) (JSE:ERN) announced today financial and operational results for the quarter ended September 30, 2017.

Third Quarter Highlights:

  • Crude sales volumes of more than 600,000 net barrels of oil;
  • $33.6 million in revenue;
  • Average daily production of 5,000 net barrels of oil.

“During the third quarter, we produced more than 400,000 net barrels of oil and generated revenues of more than $33 million,” said Femi Ayoade, Chief Executive Officer.

“We completed the drilling phase of Oyo-9, have secured a funding commitment for Miocene exploration in OML 120 and will spud the Miocene exploration well before year-end. We also made further progress in our AP and debt reduction efforts.”

Operational Update

Production volumes for the quarter were approximately 5,000 net barrels of oil compared to approximately 6,100 net barrels in the comparative period 2016. The Company’s crude oil inventory was approximately $1.3 million at September 30, 2017.

The Company exercised the first option in its current drilling contract to drill the Oyo North West (ONW) prospect. The ONW is one of Erin Energy’s drill-ready Miocene exploration prospects. Erin Energy has four drill-ready prospects, which target P50 Prospective Resources of 2.4 billion barrels of oil.

In The Gambia, the Company and its partner, FAR Ltd., an Australian Securities Exchange listed oil and gas company are currently interpreting the recently acquired 3-D seismic data to further mature identified prospects on blocks A2 and A5.

In Ghana, following the recent decision of the Special Chamber of the International Tribunal of the Law of the Sea (ITLOS) in Hamburg concerning the maritime boundary dispute between Ghana and Côte d’Ivoire, the Company is working with the Ghanian Government and its partners to progress the development activities in its Expanded Shallow Water Tano block, offshore Ghana. The 3-D seismic data, which is planned to be acquired during the second quarter of 2018, will be used to improve subsurface definition and optimization of drilling targets.

Financial Summary

Third-quarter 2017 revenues were $33.6 million compared to $28.6 million in the third-quarter 2016.

The Company lifted and sold approximately 600,000 net barrels of oil at an average price of $56.09 per barrel, compared to approximately 583,000 net barrels of oil at an average price of $49.07 per barrel during the comparative period 2016.

In the third-quarter 2017, the Company reported a net loss of $14.1 million, or a loss of $0.07 per basic and diluted share, compared to a net loss of $23.5 million, or a loss of $0.11 per basic and diluted share for the comparative period 2016.

As of September 30, 2017, cash, cash equivalents and restricted cash were approximately $31.9 million.

Conference Call and Webcast Information

The Company will host a conference call on Thursday, November 9, 2017 at 10:00 a.m. CT (11:00 ET) to discuss the results and update its current operations.

The dial-in number to access the conference call is 1-844-883-3907 in the United States or 1-412-317-9253 internationally. Participants should ask the call operator to be placed on the “Erin Energy Results Conference Call.”

For those unable to participate in the Company’s conference call, a replay will be available for audio playback until November 16, 2017. The number to access the conference call replay is 1-877-344-7529 or outside the US 1-412-317-0088. The passcode for the replay is 10113955.

Erin Energy Corporation is an independent oil and gas exploration and production company focused on energy resources in sub-Saharan Africa. Its asset portfolio consists of 5 licenses across 3 countries covering an area of approximately 6,000 square kilometers (~1.5 million acres), including current production and other exploration projects offshore Nigeria, as well as exploration licenses offshore Ghana and The Gambia. Erin Energy is headquartered in Houston, Texas, and is listed on the New York and Johannesburg Stock Exchanges under the ticker symbol ERN.

For more information about Erin Energy or to request a hard copy of the Company’s most recent complete audited financial statements free of charge, please call +1 713 797 2940 or visit www.erinenergy.com.

Forward-Looking Statements

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. All statements, other than statements of historical fact, concerning activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Although the Company believes the expectations reflected in these forward-looking statements are reasonable, they involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect.

The Company’s actual results could differ materially from those anticipated or implied in these forward-looking statements due to a variety of factors, including the Company’s ability to successfully finance, drill, produce and/or develop the wells and prospects identified in this release, and risks and other risk factors discussed in the Company’s periodic reports filed with the Securities and Exchange Commission. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. You should not place undue reliance on forward-looking statements, which speak only as of their respective dates. The Company undertakes no duty to update these forward-looking statements.

Non-GAAP Financial Measures

Adjusted net loss and adjusted net loss per share are supplemental non-GAAP financial measures used by management and external users of the Company's consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines adjusted net loss as net loss excluding certain non-cash and non-recurring items, including non-cash changes in the fair value of assets, non-cash and non-recurring charges. The Company defines adjusted net loss per share as adjusted net loss per common share attributable to Erin Energy Corporation. We believe adjusted net loss and adjusted net loss per share are useful to investors because they provide investors with a more meaningful measure of our profitability before recording certain items for which the timing or amount cannot be reasonably determined. However, these measures are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP. Our computations of adjusted net loss and adjusted net loss per share may not be comparable to other similarly titled measures of other companies. The attached table presents a reconciliation of net loss and net loss per share, the most directly comparable GAAP financial measures, to adjusted net loss and adjusted net loss per share, respectively, for the periods indicated.

ERIN ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
 
  Three Months Ended September 30,   Nine Months Ended September 30,
2017   2016 2017   2016
Revenues:
Crude oil sales, net of royalties $ 33,643   $ 28,619   $ 79,509   $ 56,699  
 
Operating costs and expenses:
Production costs 22,358 24,928 59,548 69,615
Crude oil inventory decrease 4,100 636 4,017 534
Workover expenses 207 (713 ) 7,792
Exploratory expenses 1,313 1,672 3,711 4,934
Depreciation, depletion and amortization 13,059 18,925 50,229 38,593
Accretion of asset retirement obligations 489 472 1,434 1,385
Impairment of oil and gas properties 78,711
Loss on settlement of asset retirement obligations 205
General and administrative expenses 2,354   3,596   9,026   10,950  
Total operating costs and expenses 43,673   50,436   205,963   134,008  
 
Loss on disposal of other property and equipment 149
Gain on sale of oil and gas properties (2,348 )
 
Operating loss (10,030 ) (21,817 ) (124,255 ) (77,309 )
 
Other income (expense):
Currency transaction gain 1,542 3,282 5,027 14,610
Interest expense (5,963 ) (5,038 ) (20,837 ) (16,417 )
Gain (loss) on fair value of derivative liability (22 )   15    
Total other expense, net (4,443 ) (1,756 ) (15,795 ) (1,807 )
 
Loss before income taxes (14,473 ) (23,573 ) (140,050 ) (79,116 )
Income tax expense        
Net loss before non-controlling interest (14,473 ) (23,573 ) (140,050 ) (79,116 )
 
Net loss attributable to non-controlling interest 403   102   908   662  
 
Net loss attributable to Erin Energy Corporation $ (14,070 ) $ (23,471 ) $ (139,142 ) $ (78,454 )
 
Net loss attributable to Erin Energy Corporation per common share:
Basic $ (0.07 ) $ (0.11 ) $ (0.65 ) $ (0.37 )
Diluted $ (0.07 ) $ (0.11 ) $ (0.65 ) $ (0.37 )
Weighted average common shares outstanding:
Basic 213,732 212,524 213,293 212,220
Diluted 213,732 212,524 213,293 212,220
 
ERIN ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except for share and per share amounts)
 
  September 30,
2017
 

December 31,
2016

ASSETS
Current assets:
Cash and cash equivalents $ 18,132 $ 7,177
Restricted cash 13,761 2,600
Accounts receivable - trade 14,691
Accounts receivable - partners 2,232 674
Accounts receivable - related party 2,821 1,956
Accounts receivable - other 5 29
Crude oil inventory 1,333 9,398
Prepaids and other current assets 2,462   872  
Total current assets 55,437   22,706  
 
Property, plant and equipment:
Oil and gas properties (successful efforts method of accounting), net 173,594 265,713
Other property, plant and equipment, net 425   716  
Total property, plant and equipment, net 174,019   266,429  
 
Other non-current assets 35   66  
 
Total assets $ 229,491   $ 289,201  
 
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable and accrued liabilities $ 261,742 $ 244,963
Accounts payable and accrued liabilities - related party 33,388 29,513
Accounts payable - partners 87
Short-term note payable - related party 200
Current portion of long-term debt, net 69,080 12,627
Derivative liability 1,751    
Total current liabilities 366,248   287,103  
 
Long-term notes payable - related party, net 129,821 129,796
Long-term debt, net 68,786 74,446
Asset retirement obligations 23,910   22,476  
 
Total liabilities 588,765   513,821  
 
Commitments and contingencies (Note 9)
 
Capital deficiency:
Preferred stock $0.001 par value - 50,000,000 shares authorized; none issued and outstanding as of September 30, 2017 and December 31, 2016, respectively
Common stock $0.001 par value - 416,666,667 shares authorized; 214,954,229 and 212,622,218 shares outstanding as of September 30, 2017 and December 31, 2016, respectively 215 213
Additional paid-in capital 798,210 792,972
Accumulated deficit (1,157,434 ) (1,018,292 )
Treasury stock at cost, 304,481 and 99,932 shares as of September 30, 2017 and December 31, 2016, respectively (936 ) (228 )
Total deficit - Erin Energy Corporation (359,945 ) (225,335 )
Non-controlling interest 671   715  
Total capital deficiency (359,274 ) (224,620 )
Total liabilities and capital deficiency $ 229,491   $ 289,201  
 
ERIN ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
 
  Nine Months Ended September 30,
2017   2016
Cash flows from operating activities
Net loss, including non-controlling interest $ (140,050 ) $ (79,116 )
 
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation, depletion and amortization 50,229 38,593
Accretion of asset retirement obligations 1,434 1,385
Impairment of oil and gas properties 78,711
Amortization of debt discount and debt issuance costs 3,602 2,640
Unrealized foreign currency transaction gain (2,372 ) (10,442 )
Loss on disposal of other property and equipment 149
Gain on sale of oil and gas properties (2,348 )
Gain on fair value of derivative liability (15 )
Settlement of accounts payable and accrued expenses (6,934 )
Share-based compensation 1,619 2,288
Change in operating assets and liabilities:
Decrease (increase) in accounts receivable (12,144 ) 730
Decrease in crude oil inventory 4,017 534
Increase in prepaids and other current assets (1,466 ) (467 )
Increase in accounts payable and accrued liabilities 40,121   54,700  
Net cash provided by operating activities 14,553   10,845  
 
Cash flows from investing activities
Capital expenditures (41,656 ) (16,475 )
Net cash used in investing activities (41,656 ) (16,475 )
 
Cash flows from financing activities
Proceeds from exercise of stock options and warrants 364
Payments for treasury stock arising from withholding taxes upon restricted stock vesting and exercise of stock options (708 ) (206 )
Proceeds from MCB Finance Facility 63,191
Repayments of MCB Finance Facility (141 )
Repayments of term loan facility (4,668 ) (6,492 )
Proceeds from short-term notes payable 504
Proceeds from short-term notes payable - related party 200
Repayment of short-term notes payable (449 )
Proceeds from notes payable - related party, net 6,829
Debt issuance costs (8,655 ) (1,040 )
Funds restricted for debt service (11,161 )
Funds released from restricted cash   6,061  
Net cash provided by financing activities 38,058   5,571  
 
Net increase in cash and cash equivalents 10,955 (59 )
Cash and cash equivalents at beginning of period 7,177   8,363  
Cash and cash equivalents at end of period $ 18,132   $ 8,304  
 
Supplemental disclosure of cash flow information
Cash paid for:
Interest, net of amounts capitalized $ 7,731 $ 10,090
Supplemental disclosure of non-cash investing and financing activities:
Discount on notes payable pursuant to issuance of warrants $ 1,766 $ 53
Reduction in oil and gas properties arising from settlements of accounts payable and accrued liabilities $ 11,328 $ 9,540
Shares issued from settlement of accounts payable and accrued liabilities $ 3,527 $
Shares issued for services $ 94 $
 
Appendix A
ERIN ENERGY CORPORATION
Adjusted Net Loss and Adjusted Net Loss Per Share
(In thousands, except per share amounts)
(Unaudited)
 
  Three Months Ended   Nine Months Ended
September 30 September 30
  2017     2016   2017     2016
Net loss to Adjusted net loss reconciliation:
Net loss attributable to Erin Energy Corporation $ (14,070) $ (23,471) $ (139,142) $ (78,454)
Add:
Depreciation, depletion and amortization 13,059 18,925 50,229 38,593
Impairment of oil and gas properties       78,711  
Adjusted net loss   (1,011)   (4,546)   (10,202)   (39,861)
 
Net loss per share attributable to Erin Energy Corporation - basic and diluted $ (0.07) $ (0.11) $ (0.65) $ (0.37)
Add: Impact of adjustments $ 0.06 $ 0.09 $ 0.60 $ 0.18
Adjusted net loss per common share attributable to Erin Energy Corporation - Basic and diluted $ (0.01) $ (0.02) $ (0.05) $ (0.19)
 
Weighted-average common shares outstanding:
Basic 213,732 212,524 213,293 212,220
Diluted 213,732 212,524 213,293 212,220

Contacts

Erin Energy Corporation
Lionel McBee, +1-713-797-2960
Director, Investor Relations and Corporate Communications
lionel.mcbee@erinenergy.com

Contacts

Erin Energy Corporation
Lionel McBee, +1-713-797-2960
Director, Investor Relations and Corporate Communications
lionel.mcbee@erinenergy.com