Sabine Oil & Gas LLC Announces First Quarter 2014 Financial and Operational Results

 Sabine Oil & Gas LLC Announces First Quarter 2014 Financial and Operational
                                   Results

PR Newswire

HOUSTON, May 15, 2014

HOUSTON, May 15, 2014 /PRNewswire/ -- Sabine Oil & Gas LLC ("Sabine" or the
"Company") today reported its first quarter 2014 financial and operation
results.

(Logo: http://photos.prnewswire.com/prnh/20130325/MM83201LOGO)

Key First Quarter Results:

  oIncreased average daily production by 32% to 185 MMcfe/d in the first
    quarter of 2014, from 140 MMcfe/d in the same period of 2013, (excluding
    the effects of the North Texas property divesture in late 2013, the
    average daily production in the first quarter of 2014 increased by 58%
    from 117/MMcfe/d compared to the same period in 2013 on a pro forma
    basis). Oil production increased by 67% to 4,656 Bbl/d over the same
    period in 2013.
  oOil and natural gas liquids (collectively, "liquids") production volumes
    comprised 50% of revenues and 34% of total production.
  oLiquids revenues and production for the quarter increased by 59% and 57%,
    respectively over the same period in 2013.
  oAdjusted EBITDA for the first quarter of 2014 was $77.5 million,
    representing a 33% increase over the same period in 2013.
  oIn East Texas, completed two Cotton Valley horizontal wells which had an
    average IP30 of over 5.3  MMcfe/d, with 20% liquids.
  oAlso in East Texas, completed four wells in the Haynesville Shale covered
    under a joint development agreement (the "JDA") which averaged an IP30 of
    over 9.5 MMcf/d .The remaining four of the fifteen wells covered under the
    JDA are currently flowing back with encouraging results.
  oIn the Eagle Ford Shale, completed five wells (two pads) in the Sugarkane
    block in southern DeWitt County, with an average rate per well of over
    1,760 BOEPD for a 30-day period ("IP30"), with 19% oil and 58% liquids.
  oAlso in the Eagle Ford Shale, completed six wells in the Shiner Area in
    northern DeWitt County and southern Lavaca County, which averaged an IP30
    of over 1,000 BOEPD, with 36% oil and 70% liquids.
  oAdded approximately 8,100 net acres in our Shiner Area in the Eagle Ford
    through grassroots leasing, resulting in a first quarter Eagle Ford
    position of approximately 40,400 net acres.
  oIn North Texas, completed four Granite Wash wells which reached an average
    24-hour production rate of over 1,300 BOEPD, with 64% oil and 75% liquids.
  oThe Company closed the acquisition of certain oil and natural gas
    properties in North Texas for $20.4 million, net of purchase price
    adjustments.

Commenting on the quarter's results Sabine's Chief Executive Officer David
Sambrooks noted: "The quarter was right in line with our expectations as we
continued to deliver highly economic wells. We completed 21 wells in the first
quarter, which we expect to be our highest quarterly completion count this
year, as compared to 9 completions in the fourth quarter of 2013. Our first
quarter wells achieved an overall average IP24 hours rate of 1,510 BOEPD (50%
liquids), and for the wells that had a 30 day production period, our IP 30 was
1,240 BOEPD (45% liquids). Although our low completion count in the fourth
quarter of 2013 resulted in about a 6% decline in production in the first
quarter of 2014 compared to the fourth quarter of 2013, our high first quarter
completion count is forecast to drive significant production growth in the
second and third quarters of 2014. As we have previously stated, production
growth will be lumpy given our rig count and the types of wells we are
drilling.However, the first quarter provided a solid foundation for
production and cashflow growth for the year. We are reaffirming our full year
guidance based on our first quarter well results."

Sabine and Forest Oil Corporation Combination Transaction

For information regarding the previously announced combination of Sabine and
Forest Oil Corporation ("Forest"), please refer to the joint press release
issued by Sabine and Forest dated May 6, 2014 and other documents filed with
the SEC.

Results of the First Quarter 2014

Production volumes during the three months ended March 31, 2014 were 16.6
Bcfe, an increase of 4.03 Bcfe or approximately 32% from first quarter 2013
production. The increase in production is primarily due to an increase in
production in South Texas through an active and successful development program
in this region. These increases were partially offset by the December 2013
sale of our interests in certain oil and natural gas properties in the Texas
Panhandle and surrounding Oklahoma area.

Revenues from production of oil, natural gas liquids and natural gas increased
from $67.5 million in the first quarter of 2013 to $112.3 million in the first
quarter of 2014, an increase of 66%. This increase of $44.8 million was a
result of an increase in production of 32%, coupled with an increase in
average prices per Mcfe of 26%.

During the first quarter of 2014, the Company's realized average price for
natural gas including hedges was $4.65 per Mcf, or $0.43 per Mcf lower than
the Company's unhedged realized average price of $5.08 per Mcf. The Company's
realized average price of oil including hedges was $89.78 per Bbl, or $3.58
per Bbl lower than the Company's unhedged realized average price of $93.36 per
Bbl. In the first quarter of 2014, our hedged volumes were approximately 86%
and 82% of both our natural gas and oil volumes, respectively. The Company
realized a loss on settlements of such derivative instruments for the first
quarter of 2014 of $7.3 million. In the first quarter of 2013, our hedged
volumes were approximately 94% and 61% of our natural gas and oil volumes,
respectively, which resulted in a realized gain on settlements of such
derivative instruments of $14.8 million.

Lease operating expenses increased from $9.6 million in the first quarter of
2013 to $11.3 million in the first quarter of 2014, an increase of 17%. The
increase in lease operating expense of $1.6 million is primarily due to an
increase in production in South Texas partially offset by the December 2013
sale of our interests in certain oil and natural gas properties in the Texas
Panhandle and surrounding Oklahoma area. Lease operating expenses decreased
from $0.77 per Mcfe in the first quarter of 2013 to $0.68 per Mcfe in the
first quarter of 2014. The decrease of $0.09 per Mcfe is primarily due to
higher production volumes associated with increased completion activity in the
last twelve months.

Marketing, gathering, transportation and other expenses decreased from $4.5
million in the first quarter of 2013 to $4.4 million in the first quarter of
2014. Marketing, gathering, transportation and other expenses decreased on a
per unit basis from $0.36 per Mcfe in the first quarter of 2013 to $0.26 per
Mcfe in the first quarter of 2014. The per unit basis decrease is primarily
due to our increasing oil volumes associated with our development activities
in North Texas and South Texas regions, which are not subject to gathering and
transportation charges, as well as a reduction in fees on a per unit of
production basis attributable to volumes from our 2013 and 2014 completions in
East Texas.

Production and ad valorem taxes increased from $3.5 million in the first
quarter of 2013 to $5.6 million in the first quarter of 2014, an increase of
60%. Production and ad valorem taxes increased on a per unit basis from $0.28
per Mcfe in the first quarter of 2013 to $0.34 per Mcfe in the first quarter
of 2014. The increase is primarily related to increased production in our
South Texas region which is incurring higher production taxes on oil and
natural gas liquids production, which was offset by a slight decrease in our
North Texas production due to the December 2013 sale of our interests in
certain oil and natural gas properties in the Texas Panhandle and surrounding
Oklahoma area. The Company also expects to experience continued variability in
its production taxes as a result of timing of approval for high cost gas tax
exemptions. Production taxes as a percentage of oil and natural gas revenues
were 5% for the both the first quarter of 2014 and 2013.

General and administrative expenses increased from $6.2 million in the first
quarter of 2013 to $6.4 million in the first quarter of 2014, an increase of
$0.2 million, or 4%, primarily as a result of higher overhead associated with
our growing business and additional professional service fees paid in 2013
compared to the previous period. These increases were partially offset by
decreased due diligence work from the first quarter of 2013 due to the
December 2012 acquisitions. General and administrative expenses decreased from
$0.49 per Mcfe in the first quarter of 2013 to $0.38 per Mcfe in the first
quarter of 2014 reflecting efficiencies gained due to increased production
without a proportionate increase in general and administrative expenses.

DD&A increased from $26.2 million in the first quarter of 2013 to $39.9
million in the first quarter of 2014, an increase of $13.7 million. Depletion,
depreciation, and amortization increased from $2.08 per Mcfe in the first
quarter of 2013 to $2.40 per Mcfe in the first quarter of 2014, or an increase
of 15%. Increase in the DD&A rate is primarily driven by reductions to proved
reserves due to the sale of certain oil and natural gas properties in North
Texas during the fourth quarter of 2013.

Interest expense increased from $23.3 million in the first quarter of 2013 to
$25.8 million in the first quarter of 2014, an increase of $2.5 million, or
11%, primarily as a result of lower capitalized interest. We capitalized $1.9
million and $3.9 million of interest expense for the three months ended March
31, 2014 and 2013, respectively.

The Company recognized a loss on derivative contracts of $14.8 million and
$34.4 million for the first quarter of 2014 and 2013, respectively. The amount
of future gain or loss recognized on derivative instruments is dependent upon
future commodity prices.

Debt/Liquidity

As of March 31, 2014, our borrowing base under our First Lien Credit Facility
was $620 million, and we had an outstanding balance of approximately $354.1
million, net of cash on hand. As of April 2, 2014, our borrowing base has been
re-determined and increased from $620 million to $700 million. After giving
the effect to our re-determined borrowing base, we were able to incur
approximately $345 million of secured indebtedness under our First Credit
Facility. As of May 15, 2014, the Company has drawn an additional $74 million
and had an outstanding balance of $429 million.

Hedging

For the remainder of 2014 (April-December), the Company has NYMEX hedges in
place for the calendar year of 2014 on approximately 135,000 MMbtu/d of its
projected natural gas production, at a weighted average price of $4.27/ MMbtu,
and 4,000 Bbl/day of oil production at a weighted average price of
$92.18/bbl. For the calendar year of 2015, the Company has hedge contracts in
place for 115,000 MMbtu/d of its projected natural gas production at a
weighted average price of $4.18/MMbtu, and 4,375 Bbl/day of oil production at
a weighted average price of $90.38/Bbl.

Sabine Oil & Gas LLC is an independent energy company engaged in the
acquisition, production, exploration and development of onshore oil and
natural gas properties in the United States. Our current operations are
principally located in the Cotton Valley and Haynesville Shale in East Texas,
the Eagle Ford Shale in South Texas, and the Granite Wash in the Texas
Panhandle.

This press release includes "forward-looking statements." All statements,
other than statements of historical facts, included in this press release that
address activities, events or developments that the Company expects, believes
or anticipates will or may occur in the future are forward-looking statements.
These statements include, but are not limited to forward-looking statements
about plans, strategies, objectives and anticipated financial and operating
results of the Company, including the Company's drilling program, production,
hedging activities, capital expenditure levels and other guidance. These
statements are based on certain assumptions made by the Company based on
management's experience and perception of historical trends, current
conditions, anticipated future developments and other factors believed to be
appropriate. Such statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of the Company, which may
cause actual results to differ materially from those implied or expressed by
the forward-looking statements. These risks include, but are not limited to,
commodity price volatility, inflation, lack of availability of drilling and
production equipment and services, environmental risks, drilling and other
operating risks, regulatory changes, the uncertainty inherent in estimating
natural gas and oil reserves and in projecting future rates of production,
cash flow, access to capital and the timing of development expenditures. For
a detailed list of the Company's risk factors, please consult the Company's
Annual Report, subsequent quarterly reports and other press releases posted at
www.sabineoil.com.

Any forward-looking statement speaks only as of the date on which such
statement is made and the Company undertakes no obligation to correct or
update any forward-looking statement, whether as a result of new information,
future events or otherwise.

Sabine Oil & Gas LLC
Operational and Financial Statistics (unaudited)
                                                           Three Months Ended
                                                           March 31,
                                                           2014       2013
Oil, NGL and natural gas sales by product (in thousands):
Oil                                                        $39,123    $23,519
NGL                                                        17,077     11,934
Natural gas                                                56,106     32,070
Total                                                      $ 112,306  $ 67,523
Production data:
Oil (MBbl)                                                 419.06     250.67
NGL (MBbl)                                                 508.34     340.92
Natural gas (Bcf)                                          11.05      9.03
Combined (Bcfe)(1)                                         16.61      12.58
Average prices before effects of economic hedges (2):
Oil (per Bbl)                                              $93.36     $93.83
NGL (per Bbl)                                              $33.59     $35.00
Natural gas (per Mcf)                                      $5.08      $3.55
Combined (per Mcfe)(1)                                     $6.76      $5.37
Average realized prices after effects of economic hedges
(2):
Oil (per Bbl)                                              $89.78     $90.87
NGL (per Bbl)                                              $33.59     $35.00
Natural gas (per Mcf)                                      $4.65      $5.27
Combined (per Mcfe)(1)                                     $6.39      $6.54
Average costs (per Mcfe)(1):
Lease operating                                           $0.68      $0.77
Workover                                                  $0.01      $0.02
Marketing, gathering, transportation and other             $0.26      $0.36
Production and ad valorem taxes                            $0.34      $0.28
General and administrative                                 $0.38      $0.49
Depletion, depreciation and amortization                   $2.40      $2.08

(1) Oil production was converted at six Mcf per Bbl to calculate combined
    production and per Mcfe amounts.
    Average prices shown in the table reflect prices both before and after the
(2) effects of our realized commodity hedging transactions. Our calculation of
    such effects includes realized gains or losses on cash settlements for
    commodity derivatives.

Sabine Oil & Gas LLC
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
                                                 Three Months Ended March 31,
                                                 2014             2013
                                                 (in thousands)
Revenues
 Oil, natural gas liquids and natural gas sales  $ 112,306        $ 67,523
 Other                                          411              173
Total revenues                                   112,717          67,696
Operating expenses
 Lease operating                                11,270           9,635
 Workover                                       186              230
 Marketing, gathering, transportation and other  4,386            4,477
 Production and ad valorem taxes                 5,592            3,491
 General and administrative                     6,390            6,165
 Depletion, depreciation and amortization        39,925           26,172
 Accretion                                       217              209
Total operating expenses                         67,966           50,379
Other income (expenses)
 Interest expense                                (25,827)         (23,318)
 Loss on derivative instruments                  (22,126)         (19,585)
 Other income                                   1,516            11
Total other expenses                             (46,437)         (42,892)
Net loss                                         $  (1,686)      $(25,575)

Sabine Oil & Gas LLC
ADJUSTED EBITDA (unaudited)
                                               Three Months Ended
                                               March 31,
                                               2014       2013
                                               (in thousands)
Net loss applicable to controlling interests   $ (1,686)  $(25,575)
Reconciliation to derive Adjusted EBITDA (1):
Interest, net of capitalized interest          25,827     23,318
Depletion, depreciation and amortization       39,925     26,172
Other                                          (1,501)    1
Amortization of deferred rent                  (27)       (133)
Accretion                                     217        209
Loss on derivative instruments                 20,941     34,691
Option premium amortization                    (6,156)    (289)
Adjusted EBITDA (1)                            $ 77,540   $ 58,394
Pro forma adjustments (2)                      1,455      (9,883)
Adjusted Pro forma EBITDA (1) (2)              $ 78,995   $ 48,511

   Adjusted EBITDA and Adjusted Pro Forma EBITDA are non-GAAP financial
   measures. We use Adjusted EBITDA and Adjusted Pro Forma EBITDA as
   supplemental financial measures. These measures are calculated in a manner
   consistent with the indenture governing our 2017 Notes and our senior
   secured revolving credit facility as net income (loss) before interest,
   taxes, depreciation and amortization, as further adjusted to include other
   adjustments, such as impairment, accretion expense, non-cash hedge gains or
   losses and other non-cash charges and pro forma adjustments for
   acquisitions and divestitures that may not be comparable to similarly
   titled measures, employed by other companies. Adjusted EBITDA and Adjusted
1. Pro Forma EBITDA should not be considered in isolation or as a substitute
   for operating income, net income or loss, cash flows provided by operating,
   investing and financing activities, or other income or cash flow statement
   data prepared in accordance with GAAP. Adjusted EBITDA and Adjusted Pro
   Forma EBITDA provide no information regarding a company's capital
   structure, borrowings, interest costs, capital expenditures, and working
   capital movement or tax position. Adjusted EBITDA and Adjusted Pro Forma
   EBITDA do not represent funds available for discretionary use because those
   funds are required for debt service, capital expenditures, working capital,
   and other commitments and obligations. However, our management team
   believes that these measures are useful to an investor in evaluating our
   company because these measures:
   are widely used by investors in the natural gas and oil industry to measure
   a company's operating performance without regard to items excluded from the
-  calculation of such term, which can vary substantially from company to
   company depending upon accounting methods and book value of assets, capital
   structure and the method by which assets were acquired, among other
   factors;
   help investors to more meaningfully evaluate and compare the results of our
-  operations from period to period by removing the effect of our capital
   structure from our operating structure; and
   are used by our management team for various purposes, including strategic
   planning and forecasting. Adjusted EBITDA is also the basis for covenants
-  under the indenture governing our 2017 Notes regulating future debt
   issuance and restricted payments and pursuant to maintenance covenants
   under our senior secured revolving credit facility.
   Pro forma adjustments reflect the impact of net revenues and expenses of
2. our recent acquisitions and divestment as they have occurred as of the
   beginning of the fiscal year of acquisitions or divesture.



Sabine Oil & Gas LLC
Selected Balance Sheet Data (unaudited)
                                                 March 31,      December 31,
                                                 2014           2013
                                                 (in thousands)
Assets:
 Total current assets                         $   84,198  $    93,921
 Total property plant and equipment, net      1,527,971      1,380,042
 Other non-current assets                     200,427        204,756
Total assets                                     $ 1,812,596    $ 1,678,719
Liabilities and member's capital:
 Total current liabilities                    $  245,060   $  209,327
 Credit facility                              355,000        250,000
 Term loan                                    645,683        645,272
 Senior notes                                 348,197        348,040
 Other non-current liabilities                19,332         25,070
Total Liabilities                               1,613,272      1,477,709
 Member's capital                             199,324        201,010
Total Liabilities and member's capital           $ 1,812,596    $ 1,678,719
Selected Cash Flow Data (unaudited)
                                                 Three months Ended March 31,
                                                 2014           2013
                                                 (in thousands)
Net cash provided by operating activities        $   51,652   $   22,197
Net cash used in investing activities            (166,371)      (53,887)
Net cash provided by financing activities        103,789        49,753
Net (decrease) increase in cash and cash         (10,930)       18,063
equivalents
Cash and cash equivalents, beginning of period   11,821         6,193
Cash and cash equivalents, end of period         $     891  $   24,256





SOURCE Sabine Oil & Gas LLC

Website: http://www.sabineoil.com
Contact: Shane M. Bayless, Executive Vice President and CFO of Sabine Oil &
Gas LLC, +1-832-242-9600, corporaterelations@sabineoil.com
 
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