FX Energy Reports Record 2012 Production and Revenues; Year End and Fourth-Quarter Results

Marketwired

SALT LAKE CITY, UT--(Marketwire - Mar 14, 2013) - FX Energy, Inc. (NASDAQ: FXEN) today announced financial results for its fourth quarter and full year of 2012. The Company reported net income for the full year 2012 of $4.1 million, or $0.08 per share, compared to a net loss in 2011 of $28.5 million, or $0.57 per share. Included in the Company's yearly results were non-cash foreign exchange gains of $16.3 million for 2012 and non-cash foreign exchange losses of $23.4 million for 2011. The Company's operating loss increased to $10.0 million in 2012 from $3.1 million in 2011. Most of the increased loss is due to the Company's increased seismic and dry hole costs in 2012.

For the fourth quarter of 2012, the Company reported a net loss of $0.4 million, or $0.01 per share, compared to a net loss of $10.1 million, or $0.23 per share, during the same quarter of 2011. Fourth quarter 2012 results were positively impacted by $4.3 million in non-cash foreign exchange gains, while non-cash foreign exchange losses reduced the 2011 fourth quarter by $7.6 million.

Record Oil and Gas Production Leads to Record Revenues

For the full year 2012, the Company reported record oil and gas production of 4,781 million cubic feet of gas equivalent (Mmcfe), or 13.1 million cubic feet of gas equivalent per day (Mmcfed). This compares to 4,399 Mmcfe (12.0 Mmcfed) during 2011, an increase of 9%. The Company's fourth quarter 2012 oil and gas production was 1,270 Mmcfe (13.8 Mmcfed), an increase of 12% from 1,134 Mmcfe (12.3 Mmcfed) during the same quarter of 2011. The production increase was due entirely to production from the Company's KSK wells in Poland.

Clay Newton, FX Energy's Vice President Finance, remarked, "Our 2012 production, in combination with slightly higher natural gas prices in Poland, led to record oil and gas revenues of $34.5 million. This compares to $29.8 million for 2011, an increase of 16%. Total revenues rose 3% from $35.4 million in 2011 to $36.6 million in 2012."

Mr. Newton continued, "This is our third consecutive year of reporting record oil and gas revenues, and total revenues. As we go into 2013, we could see this again, as we have two wells lined up to start producing this year."

The Company's 2012 average price for natural gas in Poland increased 10% from 2011 levels, averaging $6.81 per thousand cubic feet (Mcf). Polish gas tariffs were 21% higher during 2012, but currency fluctuations dampened the impact. Oil prices decreased, with prices averaging $76.87 per barrel for 2012, down 7% from the $83.02 average per barrel price for 2011.

Record Revenues Assist With Significant Increase in Capital Expenditures

The Company's total capital expenditures, which include all exploration and development costs, reached $35.7 million in 2012, compared to $32.5 million in 2011. Not included in the 2012 figure is approximately $20 million expected to be incurred in early 2013 by the Company for wells and seismic which are now underway but were committed for in 2012.

The increased capital expenditures were funded by the Company's higher revenues and cash balances. In the fourth quarter of 2011, the Company drew $40 million under its revolving bank credit facility in view of the unsettled conditions in Europe's financial sector and to ensure the Company would have adequate funds available for its 2012 exploration and development spending.

Fourth Quarter Production Increases and Higher Prices Boost Revenues

Total fourth quarter 2012 production of 1,270 Mmcfe (13.8 Mmcfe/d) was 12% higher than the 1,134 (12.3 Mmcfe/d) Mmcfe in the fourth quarter of 2011. Oil and gas revenues were $9.6 million, 32% higher than the $7.3 million recorded in the fourth quarter of 2011.

The production and revenue increases for the quarter were due in part to increased production from the Company's KSK wells. An increase in U.S. dollar-denominated Polish natural gas price augmented the production increases. The average gas price in Poland during the fourth quarter of 2012 was $7.31 per Mcf compared to $5.95 per Mcf during the fourth quarter of 2011. The increase in U.S. dollar-denominated prices was due primarily to higher natural gas tariffs in Poland.

Exploration Costs Impact Operating Cash

Cash flow used in operating activities increased from $0.1 million during 2011 to $1.2 million in 2012, an increase of $1.1 million. Exploration costs of $23.8 million during 2012 were more than $7.1 million higher than exploration costs incurred during 2011. In addition to the seismic and drilling costs that were expensed in 2012, the Company capitalized $16.6 million in successful exploration wells and production facilities costs during 2012. At December 31, 2012, the Company's cash balance was approximately $34.0 million. Working capital was $30.4 million at December 31, 2012 versus $49.8 million at December 31, 2011. Debt drawn under the Company's revolving credit facility was $40.0 million at the end of 2012, with $7.0 million classified as a short term obligation.

Non-cash Charges Continue to Vary

The non-cash foreign exchange gains of $16.3 million for 2012 and losses of $23.4 million for 2011 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. These are non-cash adjustments only, and could be either losses or gains in the future depending upon future exchange rates.

Earnings Conference Call Today, Thursday, March 14, 2013 at 4:30 P.M. Eastern (2:30 P.M. Mountain)

The Company will host a conference call and webcast today to discuss 2012 full year and fourth quarter results at 4:30 p.m. Eastern Time. The call will also include a discussion of the Company's current operations. Conference call information is as follows: Dial-In-Number: 888-417-8516; International: 719-325-2376; Passcode: 5337432. 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 US and Poland. The Company's main exploration 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 Select Market under the symbol FXEN. Website www.fxenergy.com.

FORWARD-LOOKING STATEMENTS

This press release and the related earnings conference call contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance. 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, including risks and uncertainties as described in the Company's public filings with the SEC. 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. In providing forward-looking statements, the Company is not undertaking any duty or obligation to update these statements publicly as a result of new information, future events or otherwise, except as required by law.

   
FX ENERGY, INC., AND SUBSIDIARIES  
Consolidated Balance Sheets  
As of December 31, 2012 and 2011  
(in thousands)  
   
    2012     2011  
ASSETS                
                 
Current assets:                
  Cash and cash equivalents   $ 33,990     $ 50,859  
  Receivables:                
    Accrued oil and gas sales     3,447       3,446  
    Joint interest and other receivables     7,733       4,768  
    Value-added tax receivable     1,136       389  
  Inventory     199       196  
  Other current assets     614       542  
      Total current assets     47,119       60,200  
                 
Property and equipment, at cost:                
  Oil and gas properties (successful-efforts method):                
    Proved     63,821       49,388  
    Unproved     2,337       3,482  
  Other property and equipment     10,717       9,968  
    Gross property and equipment     76,875       62,838  
  Less accumulated depreciation, depletion and amortization     (19,786 )     (14,942 )
      Net property and equipment     57,089       47,896  
                 
Other assets:                
  Certificates of deposit     382       406  
  Loan fees     1,364       1,722  
      Total other assets     1,746       2,128  
                 
Total assets   $ 105,954     $ 110,224  
                 
   
FX ENERGY, INC., AND SUBSIDIARIES  
Consolidated Balance Sheets  
As of December 31, 2012 and 2011  
(in thousands, except share data)  
-Continued-  
   
    2012     2011  
LIABILITIES AND STOCKHOLDERS' EQUITY                
                 
Current liabilities:                
  Accounts payable   $ 8,532     $ 9,736  
  Accrued liabilities     1,192       677  
  Current portion of long term debt     7,000       --  
    Total current liabilities     16,724       10,413  
                 
Long-term liabilities:                
  Notes payable     33,000       40,000  
  Asset retirement obligation     1,431       1,184  
    Total long-term liabilities     34,431       41,184  
                 
      Total liabilities     51,155       51,597  
                 
Commitments and Contingencies (Note 6)                
                 
Stockholders' equity:                
  Preferred stock, $0.001 par value, 5,000,000 shares authorized as of December 31, 2012 and 2011; no shares outstanding     --       --  
  Common stock, $0.001 par value, 100,000,000 shares authorized as of December 31, 2012 and 2011; 53,246,620 and 52,787,350 shares issued and outstanding as of December 31, 2012 and 2011, respectively     53       53  
  Additional paid-in capital     222,513       219,522  
  Cumulative translation adjustment     18,027       28,964  
  Accumulated deficit     (185,794 )     (189,912 )
      Total stockholders' equity     54,799       58,627  
                 
Total liabilities and stockholders' equity   $ 105,954     $ 110,224  
                 
   
FX ENERGY, INC., AND SUBSIDIARIES  
Consolidated Statements of Operations  
For the years ended December 31, 2012, 2011, and 2010  
(in thousands, except per share amounts)  
   
    2012     2011     2010  
                         
Revenues:                        
  Oil and gas sales   $ 34,461     $ 29,807     $ 22,914  
  Oilfield services     2,137       5,631       2,099  
    Total revenues     36,598       35,438       25,013  
Operating costs and expenses:                        
  Lease operating expenses     3,631       3,834       3,473  
  Exploration costs     23,795       16,618       3,038  
  Impairment of oil and gas properties     2,562       72       564  
  Loss on sale of assets     49       --       --  
  Asset retirement obligation gain     --       (52 )     (264 )
  Oilfield services costs     1,610       4,458       1,550  
  Depreciation, depletion and amortization (DD&A)     4,239       3,397       2,626  
  Accretion expense     63       68       92  
  Stock compensation     2,325       1,744       1,379  
  General and administrative costs (G&A)     8,369       8,396       7,973  
    Total operating costs and expenses     46,643       38,535       20,431  
Operating income (loss)     (10,045 )     (3,097 )     4,582  
                         
Other income (expense):                        
  Interest expense     (2,485 )     (2,167 )     (1,936 )
  Interest and other income     356       188       829  
  Foreign exchange gain (loss)     16,292       (23,448 )     (4,233 )
    Total other income (expense)     14,163       (25,427 )     (5,340 )
                         
Net income (loss)   $ 4,118     $ (28,524 )   $ (758 )
                         
Basic and diluted net income (loss) per common share   $ 0.08     $ (0.57 )   $ (0.02 )
                         
Basic and diluted weighted average number of shares outstanding     52,274       50,262       43,387  
                         
   
FX ENERGY, INC., AND SUBSIDIARIES  
Consolidated Statements of Cash Flows  
For the years ended December 31, 2012, 2011, and 2010  
(in thousands)  
   
    2012     2011     2010  
Cash flows from operating activities:                        
  Net income (loss)   $ 4,118     $ (28,524 )   $ (758 )
  Adjustments to reconcile net loss to net cash used in operating activities:                        
    Depreciation, depletion and amortization     4,239       3,397       2,626  
    Impairment of oil and gas properties     6,979       72       564  
    Accretion expense     63       68       92  
    (Gain) loss on property dispositions     49       44       --  
    Stock compensation     2,325       1,744       1,379  
    Foreign exchange (gains) losses     (16,289 )     23,397       4,238  
    Common stock issued for services (G&A)     666       777       636  
    Asset retirement obligation revisions     408       (52 )     (264 )
    Loan fee amortization     504       554       971  
  Increase (decrease) from changes in working capital items:                        
    Receivables     (2,905 )     (5,241 )     (1,809 )
    Inventory     (2 )     (3 )     (10 )
    Other current assets     (50 )     (253 )     101  
    Other assets     25       --       (143 )
    Accounts payable and accrued liabilities     (1,320 )     3,950       (289 )
    Asset retirement obligations settled     (43 )     (50 )     (85 )
      Net cash provided by (used in) operating activities     (1,233 )     (120 )     7,249  
                         
Cash flows from investing activities:                        
  Additions to oil and gas properties     (15,836 )     (17,300 )     (6,475 )
  Additions to other property and equipment     (735 )     (1,221 )     (1,339 )
  Proceeds from sale of assets     221       35       --  
      Net cash used in investing activities     (16,350 )     (18,486 )     (7,814 )
                         
Cash flows from financing activities:                        
  Proceeds from issuance of common stock, net of offering costs     --       45,041       8,403  
  Proceeds from notes payable, net of deferred loan fees     --       40,000       32,532  
  Payments of notes payable     --       (35,000 )     (25,000 )
  Proceeds from exercise of stock options and warrants     --       801       157  
      Net cash provided by (used in) financing activities     --       50,842       16,092  
                         
Effect of exchange rate changes on cash     714       (1,117 )     (12 )
                         
Net increase (decrease) in cash     (16,869 )     31,119       15,515  
Cash and cash equivalents at beginning of year     50,859       19,740       4,225  
                         
Cash and cash equivalents at end of year   $ 33,990     $ 50,859     $ 19,740  
                         
Contact:
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
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