NGI The Weekly Gas Market Report / NGI All News Access

Debt-Reprieved Costilla Seeking Options

May 24, 1999
/ Print
| Share More
/ Text Size+

Debt-Reprieved Costilla Seeking Options

Costilla Energy Inc. of Midland, TX, is examining its options after lenders extended until June 1 a $10.2 million mandatory principal payment due a bank credit facility. Petrie Parkman &amp Co. was hired to weigh potential deals.

The credit extension also provides for the sharing of proceeds from the sale of oil and gas properties. Costilla is marketing certain assets to reduce bank debt. Chairman Cadell S. Liedtke, said "We have been working closely with our bankers and we are very encouraged by their cooperation and support. We are also very pleased with the industry's high level of interest in the properties we are marketing."

The company said it expects to announce shortly the execution of purchase and sale agreements for divestiture of its Rocky Mountain properties. "The planned sale of Rocky Mountain properties coupled with our recently announced transaction with Ballard Petroleum LLC will effectively end our activities in the Rockies and allow our team to focus their full attentions where we have been most successful strategically," said Henry G. Musselman, chief operating officer.

With negative first quarter cash flow of $1.5 million, or $0.12 per share, the company recorded a net loss applicable to common equity of $55.9 million, or $4.36 per share. That included an expense of $47.5 million related to termination of a deal to acquire assets from Pioneer Natural Resources.

Costilla production for the quarter ended March 31, 1999 increased 4% over the comparable three months of 1998 to 6.9 Bcfe, an average of 77.1 MMcfe/d, from 6.7 Bcfe, or about 74.4 MMcfe/d. "As intended, the gas component of our production has been steadily rising even with the sale of some gas producing properties during 1998," Musselman said. In the first quarter of 1999, Costilla's gas component of its total production was 69%, compared with 48% in the first quarter of 1998. Gas production in the first quarter increased 39% over the same quarter of last year. Revenues from oil and gas sales for 1Q99 were about $12.8 million, compared to $15.3 million for 1Q98. During the first quarter Costilla realized an average net gas price of $1.89/Mcf, including $0.32/Mcf from hedging, 7% below the $2.03, net of a $0.02/Mcf hedging cost, in first quarter of 1998.

Earlier this month, Costilla began a restructuring and cut overhead by about $225,000/month, or about $675,000 on a projected quarterly basis, as a result of job cuts and other cost savings measures. In April Mike Grella stepped down as president and CEO, and was replaced by Liedtke and Musselman. Also in April, Costilla said the previously announced purchase and sale agreement with Pioneer Natural Resources was off and added asset dispositions were necessary to meet debt repayment requirements. The company also said capital expenditures for the remainder of 1999 would be "extremely limited" in order to meet required debt payments.

Joe Fisher, Houston

©Copyright 1999 Intelligence Press, Inc. All rights reserved. The preceding news report may not be republished or redistributed in whole or in part without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus