Escalera Resources (NASDAQ:DBLE)
Q2 2014 Earnings Call
August 15, 2014 11:00 am ET
Charles F. Chambers - Chairman of the Board, Chief Executive Officer and President
Adam Fenster - Chief Financial Officer and Principal Accounting Officer
Excuse me, everyone, we now have all of our speakers in conference. [Operator Instructions] There will be no formal question-and-answer form on today's call. I would now like to turn the conference over to Charlie Chambers.
Charles F. Chambers
Thank you. Good morning, everyone. I'm Charlie Chambers, Chairman and CEO of Escalera Resources. And joining me today is our Chief Financial Officer, Adam Fenster. And before we get into any details of our financial results, I would like to share a few thoughts with everyone.
First, everybody in our business knows the challenges we, as a sector, face. Gas prices have been under pressure for several years. There's a very large gas oversupply, which is leading to asset consolidation and portfolio rebalancing. Some firms are jumping into liquids, some are jumping out. Some are simply sitting tight, hoping to weather the storm. The gas to liquid spread is healthy, showing that natural gas has headroom to create value. And finally, that there are still abundant supplies of low cost, cheap natural gas available.
As the leader of your company, I too have concern about our stock price decline. Like many of you, I have a significant -- I have significant equity in this company. I have my own skin in the game. When I came on board April 1, just 4.5 months ago, I have set out to do 3 things: First, assemble an innovative and proven team of experienced professionals, dedicated to the optimization of our current assets, and the aggressive pursuit and prudent development of quality natural gas-related opportunities; two, develop a strategy that would allow Escalera to maximize the value of the natural gas we have and at the same time, acquire more assets by investing in abundant, low cost natural gas, combined with efficient operations to control costs and risks; and three, to execute on our new business plan. We have completed the first 2 -- first of these 3 objectives. The second objective has been achieved, and we will be presenting our updated business plan at EnerCom’s Oil and Gas Conference in Denver next week.
We are ready to begin executing on our new business plan. And let me just say that execution without strategy is reckless, and that strategy without execution is wasteful. We need both strategy and execution, and I believe we have what it will take. Additionally, we have taken certain steps to efficiently manage company resources in the near term. One, we have put a cap on all discretionary spending, and two, we have shuttered all international operations and eliminated the associated overhead.
With that, I'd like to turn it over to Adam for an update on our financial results. Adam?
Thank you, Charlie and good morning, everyone. Before we continue, I'd like to point out that all statements made during this conference call that are not statements of historical fact constitute forward-looking statements, and are made pursuant to the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. Actual results could vary materially from those contained in any forward-looking statements. The factors that could cause the actual results to differ materially from those in the forward-looking statements are described in our filings with the SEC, which include our reports on Forms 10-K and 10-Q, as well as in our press releases.
For the second quarter of 2014, after settlement of hedges, we realized an 8% decrease in revenue from the sale of oil and gas, compared to the same period in 2013. During the quarter, we saw spot prices for CIG gas increase 15%, compared to the same period in 2013. Increases from natural gas spot prices were offset by realized losses from our hedges and by a 5% decrease in production volumes. Including the impact of our hedges, on a per Mcfe basis, we realized the net average price of $4.09 in 2014, compared to $4.21 in 2013. Our Q2 production volume was 2.2 Bcfe, compared with 2.3 Bcfe during the same quarter last year.
Our second quarter 2014 net loss was $4 million, compared to a loss of $570,000 for the same period in 2013. For the quarter, we reported clean earnings of $1.5 million, which represents a 52% decrease, compared to the prior year. This change primarily resulted from the decrease in our realized oil and gas sales, a decrease in other income and net increases in general and administrative expenses. For a definition of clean earnings and the reconciliation of GAAP net loss to clean earnings, please refer to yesterday's press release.
For the 6-month ended June 30, 2014, we realized a 3% decrease in revenue from the sale of oil and gas, compared to the same period in 2013. As with the second quarter change to prior year, this decrease included a year-over-year increase in spot pricing, offset by losses in settlement of our hedges and a decrease in production volumes. On an Mcfe basis, including the impact of our hedges, we realized a net average price of $4.21 in 2014, compared to $4.06 in 2013. Our production for the first 6 months of 2014 was 4.4 Bcfe, compared with 4.7 Bcfe in 2013. Our net loss for the 6 months ended June 30, 2014, was $9.3 million, compared to a loss of $6.7 million for the same period in 2013. For the first 6 months of 2014, we reported clean earnings of $4.1 million versus $5.4 million in the prior year. Changes in our clean earnings were consistent with those described for our Q2 results.
With that, I will turn the call back over to Charlie for closing remarks.
Charles F. Chambers
Thanks, Adam. In closing, you need to know we are focused on executing our strategy. We realize that there is no short-term answer to quickly rebuild our stock price. There are no magic bullets or simple solutions. We have a strategy that we believe is sound, compelling, and when executed properly with focus and discipline, will help Escalera both regain value and create more value. And finally, I encourage everyone to tune in to our presentation at the EnerCom Conference next week, when Adam will be presenting at 8:00 a.m. Mountain Time on Wednesday, August 20. Thanks, everyone.
Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect.
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