SEPARATION AGREEMENT AND GENERAL RELEASE OF CLAIMS
This Separation Agreement and General Release of Claims (this
“Agreement”
) is made by and between Jean-Michel Malek (
“Employee”
) and Erin Energy Corporation (the
“Company”
) effective as of the 31st day of May, 2017 (the
“Effective Date”
).
WITNESSETH
1. Whereas, Employee wishes to resign his employment with the Company, effective as of the Resignation Date; and
2. Whereas, Employee and the Company entered into an employment agreement dated November 16, 2015 (the
“Employment Agreement”
); and
3. Whereas, Employee and the Company desire to further memorialize Employee’s obligations with respect to any trade secrets and/or proprietary and confidential information acquired by Employee during his employment; and
4. Whereas, Employee desires to release any and all claims or causes of action Employee has or may have against the Company Parties (as defined below), including without limitation those that may have arisen during, or as a result of, Employee’s employment or the end of Employee’s employment.
5. Now, therefore, for and in consideration of the mutual covenants and promises hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Employee and the Company hereby agree:
Section 1.
Resignation from Employment
. Employee acknowledges that he has decided to voluntarily resign his employment from the Company effective as of May 31, 2017 (the
“Resignation Date”
). Accordingly, the parties agree that Employee’s last day of employment with the Company will be the Resignation Date.
Section 2.
Severance and Other Benefits
. The Company, in exchange for the promises of Employee contained below, agrees as follows, subject to Employee’s signing and non-revocation of the Supplementary Release:
A.
The Company agrees to pay Employee the total amount of $291,000, consisting of one year’s base salary, less any legally required deductions and withholdings (the
“Severance Amount”
). The Severance Amount will be paid as follows, commencing the first month following the Resignation Date: twelve (12) months at a rate of $24,250.00 per month. This amount shall continue to be paid in semi-monthly installments of $12,125 in accordance with the Company’s customary payroll practices and be subject to any applicable deductions and withholdings.
B.
The Company will accelerate by twelve (12) months the vesting of all outstanding restricted common stock and options exercisable for common stock previously granted to Employee under the Company’s 2009 Equity Incentive Plan (the “Plan”), with all vested options (including accelerated options) remaining exercisable for a period of twelve (12) months following the Resignation Date. Any vested stock options not exercised during such time period and any unvested stock options and restricted shares of common stock not vesting within the acceleration period shall expire and become forfeit in accordance with terms of the granting documents. Exercise of stock options and issuance of restricted stock shall be in accordance with the Plan, the granting documents and applicable Company policies and procedures. Notwithstanding any other provision herein, Employee shall be entitled to receive such Earned Performance Shares as and when he would be entitled to receive such Earned Performance Shares under the terms of clause 3(d) of the Performance Shares Grant Agreement between Employee and the Company.
C.
During the portion, if any, of the twelve-month period following the Resignation Date that Employee elects to continue coverage for Employee and Employee’s eligible dependents under the Company’s group health and dental plans under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
(
“COBRA”
) and/or Sections 601 through 608 of the Employee Retirement Income Security Act of 1974, as amended, the Company shall reimburse Employee on a monthly basis for the premium costs paid by Employee in order to continue such health and/or dental coverage (the
“COBRA Reimbursement”
). The Company shall provide the COBRA Reimbursement within five days after Employee submits documentation to the Company evidencing his monthly payments to elect applicable continuation coverage; provided, however, that Employee must submit such documentation within thirty (30) days of his applicable payments, and provided further that the Company shall have no obligation to make the COBRA Reimbursements described above as of the date that Employee becomes eligible to participate in another entity’s health and/or dental insurance coverage, as applicable (which such eligibility shall be promptly reported by Employee to the Company).
D. The Company shall pay, in accordance with its normal payroll procedures, the base salary payable to Employee under the Employment Agreement accruing prior to the Resignation Date and shall reimburse Employee for all ordinary business expenses in accordance with the Company’s business expense reimbursement policy. Employee shall submit evidence of reimbursable business expenses incurred prior to the Resignation Date within ten business days after the Resignation Date and the Company shall reimburse such business expenses within five business days after receipt of such evidence. In addition, in his final paycheck for service through the Resignation Date, Employee shall receive payment for the value of his actual accrued but unused vacation days.
Section 3.
Prior Rights and Obligations
. Except as provided for in this Agreement, this Agreement extinguishes all rights, if any, which Employee may have, contractual or otherwise, relating to his employment with the Company, including any rights to severance benefits under the Employment Agreement. Employee expressly acknowledges and agrees that his employment will end, or has ended, as of the Resignation Date and that, other than as provided in Sections 2B, he has not vested, and will not vest, in the stock options or restricted stock that he was awarded during his employment and he shall have no further rights with respect to any such stock options or restricted stock.
The Company agrees that, notwithstanding Employee’s resignation and the terms of this Agreement, Employee shall continue to be the beneficiary of any indemnity provisions in the Company’s Certificate of Incorporation or Bylaws.
Section 4.
Release by Employee
. Employee hereby releases and discharges the Company, its affiliates and its subsidiaries and Board of Directors, and their respective predecessors, successors, owners, partners, officers, directors, members, employees, agents, attorneys, benefit plans, administrators and insurers (collectively the
“Company Parties”
), from any and all claims, demands, liabilities and causes of action, whether statutory or common law, including, but not limited to, any claim for salary, benefits, payments, expenses, costs, damages, penalties, compensation, remuneration, contractual entitlements; and all claims or causes of action relating
to any matter occurring on or prior to the date that Employee executes this Agreement, including without limitation any claim arising out of, or relating to: (i) the Age Discrimination in Employment Act of 1967, as amended; (ii) Title VII of the Civil Rights Act of 1964, as amended; (iii) the Civil Rights Act of 1991; (iv) Sections 1981 through 1988 of Title 42 of the United States Code, as amended; (v) the Employee Retirement Income Security Act of 1974, as amended; (vi) the Immigration Reform Control Act, as amended; (vii) the Americans with Disabilities Act of 1990, as amended; (viii) the National Labor Relations Act, as amended; (ix) the Occupational Safety and Health Act, as amended; (x) the Family and Medical Leave Act of 1993, as amended; (xi) any state or federal anti-discrimination and/or anti-retaliation law; (xii) any other local, state or federal law, regulation or ordinance; (xiii) any public policy, contract, tort, or common law claim; (xiv) any allegation for costs, fees, or other expenses including attorneys’ fees incurred in the matters referenced herein; and (xv) any and all claims Employee may have arising as the result of any alleged breach of any contract, incentive compensation plan or agreement, restricted unit agreement, or stock option plan or agreement with any Company Party including, without limitation the Employment Agreement (collectively, the
“Released Claims”
). This Agreement is not intended to indicate that any such claims exist or that, if they do exist, they are meritorious. Rather, Employee is simply agreeing that, in exchange for the consideration recited in Sections 2A through 2D of this Agreement, any and all potential claims of this nature that Employee may have against the Company Parties, regardless of whether they actually exist, are expressly settled, compromised and waived.
Notwithstanding this release of liability, nothing in this Agreement prevents Employee from filing any non-legally waivable claim (including a challenge to the validity of this Agreement) with the Equal Employment Opportunity Commission (“
EEOC
”) or comparable state or local agency or participating in any investigation or proceeding conducted by the EEOC or comparable state or local agency; however, Employee understands and agrees that he is waiving any and all rights to recover any monetary or personal relief or recovery as a result of such EEOC or comparable state or local agency proceeding or subsequent legal actions.
Section 5.
ADEA Rights.
Employee further acknowledges that:
A.
He has been advised in writing by virtue of this Agreement that he has the right to seek legal counsel, and he has sought such counsel, before signing this Agreement.
B.
He has been given twenty-one (21) days within which to consider the waivers included in this Agreement. If Employee chooses to sign the Agreement at any time prior to that date, it is agreed that Employee signs willingly and voluntarily and expressly waives his right to wait the entire twenty-one (21) day period as provided in the law.
C.
Employee has seven (7) days after signing this Agreement to revoke it. This Agreement will not become enforceable until the revocation period has expired. Any notice of revocation of the Agreement is effective only if given to Heidi Wong, Senior Vice President of the Company (at the address of the Company set forth below), in writing by the close of business on the seventh (7
th
) day after Employee’s signing of this Agreement. Employee acknowledges and agrees that if he chooses to revoke his acceptance of this Agreement, or if he does not comply with the provisions of Section 6 below, he will not receive the payments and benefits set forth in Sections 2A through 2D.
D.
Employee is not entitled to receive any payments or benefits under the Employment Agreement as a result of his resignation from employment. Employee agrees that he is receiving, pursuant to this Agreement, consideration greater than anything of value to which he is already entitled.
Section 6.
Supplementary Release.
In the event that Employee executes this Agreement prior to the Resignation Date, Employee agrees that he will execute the supplementary release that is attached to this Agreement (the
“Supplementary Release”
) on the Resignation Date or within two business days thereafter. Employee agrees and understands that he will not be entitled to any of the Severance Amount or other payments and benefits described in Sections 2A through 2D unless he has complied with this requirement.
Section 7.
Opportunity to Consult with Professional Advisors
. Employee expressly acknowledges and agrees that he has had the opportunity to consult with, and has consulted with independent legal, tax and other professional advisors of his choosing with regard to his entry into this Agreement and the consequences thereof. Employee acknowledges and agrees that he enters into this Agreement knowingly and voluntarily with full understanding of the claims released herein and the tax consequences of the payments and benefits to be received by him hereunder.
Section 8.
Proprietary and Confidential Information
. Employee agrees and acknowledges that, during the course of his employment with the Company, he has acquired information regarding the Company’s trade secrets and/or proprietary and confidential information related to the Company’s past, present and anticipated business. Therefore, except as may be required by law, Employee acknowledges that Employee will not, at any time, disclose to others, permit to be disclosed, used, permit to be used, copy or permit to be copied, any trade secrets and/or proprietary and confidential information acquired during his employment with the Company. Such obligations are in addition to those commitments by Employee contained in Sections 5 and 6 of the Employment Agreement, which Employee acknowledges and agrees are enforceable and shall continue in full force and effect.
Section 9.
Amendments
. This Agreement may only be amended in writing signed by Employee and an authorized officer of the Company.
Section 10.
Confidentiality
. Employee agrees that he will not, and that any person acting on Employee’s behalf will not, directly or indirectly, speak about, disclose or in any way, shape or form communicate to anyone, except as permitted in this Section, the terms of this Agreement or the consideration paid under this Agreement. The Company and Employee agree that the above described information may be disclosed only as follows:
A.
to the extent as may be required by law to support the filing of Employee’s income tax returns or any legally required disclosures or legal filings;
B.
to the extent as may be compelled by legal process or required by applicable law;
C.
to the extent necessary to Employee’s legal or financial or tax advisors, but only after such person to whom the disclosure is to be made agrees to maintain the confidentiality of such information and to refrain from making further disclosures or use of such information.
Section 11.
Non-disparagement
. Employee shall not make any unfavorable or unflattering statements about the Company Parties including, but not limited to, comments about the conduct of other employees or members of the Company’s Board of Directors. Employee agrees that he will not disparage, criticize, condemn or impugn the business or personal reputation or character of any Company Party, or any of the actions which are, have been or may be taken by a Company Party with respect to or based upon matters, events, facts or circumstances arising or occurring prior to the date of execution of this Agreement.
Section 12.
Cooperation.
Employee shall cooperate with the Company to the extent reasonably required by the Company in all matters relating to the winding up of his pending work on behalf of the Company and the orderly transfer of any such pending work. Employee agrees to immediately notify the Company, if he is served with legal process to compel him to disclose any information related to his employment with the Company, unless prohibited to do so by law.
Section 13.
Return of Documents and Property
. Employee agrees to deliver at the termination of employment all correspondence, memoranda, notes, records, data, or information, analyses, or other documents and all copies thereof, including information in electronic form, which are related in any manner to the past, present or anticipated business of the Company or its affiliated companies. Employee further agrees to deliver at the termination of employment, any Company property which he may have in his possession or have been given use of during his employment, including without limitation, office keys, key cards, laptop computers, data media and cellular telephones.
Section 14.
Enforcement of Agreement and Release.
Should any provisions of this Agreement be held invalid or wholly or partially unenforceable, such holdings shall not invalidate or void the remainder of this Agreement. Portions held to be invalid or unenforceable shall be revised and reduced in scope as to be valid and enforceable, or if such is not possible, then such portion shall be deemed to have been wholly excluded with the same force and effect as if they had never been included herein.
Section 15.
Notices.
Any notice, request, demand, waiver or consent required or permitted hereunder shall be in writing and shall be given by prepaid registered or certified mail, with return receipt requested, addressed as follows:
For the Company:
1330 Post Oak Blvd., Suite 2250
Houston, Texas 77056
Attn: Chief Executive Officer
With a copy to the Legal Counsel
For the Employee:
Jean-Michel Malek
2732 University Blvd
Houston, TX 77005
The date of any such notice and of such service thereof shall be deemed to be the date of mailing. Each party may change its address for the purpose of notice by giving notice to the other in writing.
Section 16.
Choice of Law.
It is agreed that the laws of Texas shall govern this Agreement and that venue for any claim necessary to enforce the provisions of this Agreement shall be proper in state or federal courts located in Harris County, Texas.
Section 17.
Remedies.
The Parties agree that because damages at law for any breach or nonperformance of this Agreement by Employee, while recoverable, will be inadequate, this Agreement may be enforced in equity by specific performance, injunction, or otherwise. Should any provisions of this Agreement be held to be invalid, such holdings shall not invalidate or void the remainder of this Agreement. Employee shall be entitled to enforce his rights and the Company’s obligations under this Agreement by any and all applicable actions at law or equity.
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IN WITNESS WHEREOF THE PARTIES HAVE EXECUTED THIS AGREEMENT AND RELEASE AS OF THE EFFECTIVE DATE.
EMPLOYEE
By:_______________________________ ______________________
Jean-Michel Malek DATE
THE COMPANY
By:
______________________
Name: Heidi Wong DATE
Title: SVP, Corporate Services
SUPPLEMENTAL RELEASE
Jean-Michel Malek (
“Employee”
), previously signed a Separation Agreement and General Release of Claims (the
“Original Agreement”
) effective May 31, 2017 and hereby enters this Supplemental Release (the
“Supplemental Release”
). In this Supplemental Release, Employee hereby releases the Company Parties from any and all claims arising out of Employee’s employment or termination from employment and all other claims that may have arisen between the time that Employee signed the Original Agreement and the date that Employee signs this Supplemental Release. This Supplemental Release incorporates all of the terms of the Original Agreement (and uses the same defined terms) and, in signing below, Employee expressly acknowledges and agrees as follows:
1.
Employee hereby releases and discharges the Company Parties from any and all Released Claims and all other claims that would have been Released Claims had Employee executed the Original Agreement on the date that Employee executes this Supplemental Release. This Supplemental Release is not intended to indicate that any such claims exist or that, if they do exist, they are meritorious. Rather, Employee is simply agreeing that, in exchange for the consideration recited in Sections 2A through 2D of the Original Agreement, any and all potential claims of this nature that Employee may have against the Company Parties, regardless of whether they actually exist, are expressly settled, compromised and waived.
2. Other than those sums that Employee may be owed pursuant to Sections 2A through 2D of the Original Agreement, Employee has received all sums, compensation, wages, benefits and remuneration that he has been owed, or ever could be owed, by the Company Parties. Employee further represents that, in the course of his employment, he has received all leaves (paid and unpaid) that he was owed by the Company Parties.
IN SIGNING BELOW, EMPLOYEE EXPRESSLY ACKNOWLEDGES AND AGREES THAT HE HAS READ AND UNDERSTOOD THE ORIGINAL AGREEMENT AND THIS SUPPLEMENTAL RELEASE AND EMPLOYEE KNOWINGLY AND VOLUNTARILY AFFIRMS THE STATEMENTS MADE BY HIM, AND THE RELEASES GIVEN BY HIM, IN THE ORIGINAL AGREEMENT.
By:_______________________________ ______________________
Jean-Michel Malek DATE
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (this “
Agreement
”) is executed effective as of June 1, 2017 (the “
Effective Date
”), by and between Erin Energy Corporation, a Delaware corporation (“
Company
”), and Jean-Michel Malek (“
Consultant
”).
R E C I T A L S:
WHEREAS, Consultant previously served as Senior Vice President and General Counsel and Corporate Secretary of Company, and Company desires to engage Consultant to provide various legal and related consulting services; and
WHEREAS, in consideration of such engagement by Company and subject to the terms and conditions of this Agreement, Consultant desires to perform such services for Company as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the sufficiency of which is acknowledged by the parties hereto, Company and Consultant hereby agree as follows:
1.
Duties
. Company hereby retains Consultant effective as of the Effective Date. Consultant shall perform such duties as may be determined and assigned from time to time by the Company’s Chief Executive Officer, including but not limited to offer legal expertise in matters such as employment, securities, governmental compliance and transitional matters. Consultant hereby accepts such engagement by Company and agrees to devote his skills and efforts to the performance of his duties.
2.
Compensation
. As consideration for the services to be rendered by Consultant pursuant hereto, Company shall pay Consultant an amount equal to $8,333 per month, payable on the last business day of each month. Consultant will be responsible for any applicable federal or other taxes on amounts paid to Consultant hereunder.
3.
Term
. The term for providing consulting services hereunder shall commence on the Effective Date and shall continue until May 31, 2018 (the “Term”). This Agreement may be terminated by either party upon 30 days’ written notice. The parties may further extend the Term upon such terms as they may mutually agree.
4.
Expenses; Reimbursement
. Company and Consultant agree that Consultant shall be entitled to reimbursement for any reasonable, documented expenses which are incurred directly or otherwise in connection with the consulting duties hereunder, to the extent such expenses are submitted in accordance with Company’s normal expense reimbursement procedure.
5.
Insurance and Other Benefits
. During the Term, Consultant shall not be entitled to receive medical or dental insurance, or the benefit of other similar health and welfare policies or insurances.
6.
Conflicts of Interest; Compliance With Law
. Consultant covenants and agrees that he will not accept and has not received any payments, gifts or promises and he will not engage in any employment or business enterprises that in any way conflict with his service and the interests of Company or its affiliates. In addition, Consultant agrees to comply with the laws or regulations of any country, including, without limitation, the United States of America, having jurisdiction over Consultant, Company or any of Company’s subsidiaries. Further, Consultant shall not make any payments, loans, gifts or promises or offers of payments, loans or gifts, directly or indirectly, to or for the use or benefit of any official or employee of any government or to any other person if Consultant knows, or has reason to believe, that any part of such payments, loans or gifts, or promise or offer, would violate the laws or regulations of any country, including, without limitation, the United States of America, having jurisdiction over Company or any of Company’s subsidiaries. By signing this Agreement, Consultant acknowledges that Consultant has not made and will not make any payments, loans, gifts, promises of payments, loans or gifts to or for the use or benefit of any official or employee of any government or to any other person which would violate the laws or regulations of any country, including, without limitation, the United States of America, having jurisdiction over Consultant, Company or any of Company’s subsidiaries.
7.
Confidentiality
.
Consultant acknowledges that, in order for the intents and purposes of this Agreement to be accomplished, he will necessarily be obtaining access to certain confidential information concerning the Company and its affairs, including, but not limited to business methods, information systems, financial data and strategic plans which are unique assets of the Company (“Confidential Information”). Consultant agrees not to, either directly or indirectly, in any manner, utilize or disclose to any person, firm, corporation, association or other entity any Confidential Information. The obligations set forth in this paragraph shall survive any termination of this Agreement and Consultant’s relationship with the Company.
8.
Independent Contractor Relationship Between Parties
. Consultant is retained and engaged by Company for the purposes and to the extent set forth in this Agreement, and his relation to Company shall during the Term be that of an independent contractor. Nothing herein shall be construed to constitute Consultant as an employee or agent of Company.
9.
Indemnification
. Company shall indemnify and hold harmless Consultant to the full extent allowed by the DGCL from any expense and all judgments, penalties, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any services hereunder or in his capacity as a consultant as contemplated hereby, except for any judgment, penalty or fine based on and arising out of his gross negligence or willful misconduct.
10.
Entire Agreement
. This Agreement constitutes the entire agreement of the parties hereto relating to the matters contained herein, superseding all prior contracts or agreements, whether oral or written, except as otherwise provided herein.
11.
Non-Waiver
. The failure of either party to exercise any of its rights under this Agreement for a breach thereof shall not be deemed to be a waiver of such rights or a waiver of any subsequent breach.
12.
Notices
. All notices, requests or consents given pursuant to this Agreement shall be in writing delivered by courier, U.S. mail or facsimile to Company’s principal address in Houston, Texas or to Consultant’s address as provided by Consultant, as the case may be, unless otherwise changed by a party by written notice to the other party.
13.
Amendment
. This Agreement may only be amended by a written instrument captioned on its face as an “Amendment” hereto and duly executed by Company and by Consultant
14.
Applicable Law
. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT REGARD TO ITS CONFLICTS OF LAW RULES.
15.
Severability
. If any provision of this Agreement shall be found by a court of competent jurisdiction to be invalid or unenforceable to any extent, such provision shall be enforced to the maximum extent possible and the remainder of this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in multiple counterparts, each of which shall be an original for all purposes, effective as of the Effective Date first above written.
Company:
ERIN ENERGY CORPORATION
By:
Name: Heidi Wong
Title: SVP, Corporate Services
CONSULTANT:
Jean-Michel Malek
News Release
May 18, 2017
Erin Energy Announces Results of Annual Meeting of Shareholders
Highlights changes to the board of directors
HOUSTON, May 18, 2017 - Erin Energy Corporation (“Erin Energy” or the “Company”) (NYSE MKT:ERN) (JSE:ERN) announced today the results of the Company’s Annual Meeting of Shareholders held on May 17, 2017 and changes to its board of directors (Board) and management team.
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Frank C. Ingriselli named Chairman of the Board;
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Mr. Femi Ayoade named CEO and new Director
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Dr. John Rudley and Mahmud Yayale Ahmed were named new Directors;
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Pannell Kerr Forster, P.C. (PKF) re-appointed as the Company’s auditors for 2017.
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The newly-elected Chairman of Erin Energy, Frank Ingriselli, commented:
“
I am honored to be returning to Erin Energy as Chairman and thank John Hofmeister for all his contributions to the Company over his seven years of service. I plan to take a very active role in working with the Erin management team and the Board to efficiently and economically deliver on its development plans. The Company is blessed with world class assets that can deliver value in both the short and long term. I will focus all my efforts on maximizing the value of our portfolio by staying focused on growing production, reserves and thereby significantly growing shareholder value.”
Mr. Frank C. Ingriselli replaces John Hofmeister as the Chairman of the Board Mr. Ingriselli serves as the President and Chief Executive Officer of Blackhawk Energy Ventures Inc., a position he has held since founding the company in 2016, and has more than 36 years of experience in the energy industry with wide ranging oil and natural gas exploration and production company experience in diverse geographies, business climates and political environments. Mr. Ingriselli was the founder in 2011 of PEDEVCO Corp. a NYSE MKT listed company and the founder of Pacific Asia Petroleum Inc. in 2005 (Erin Energy’s predecessor entity).
Mr. Ingriselli began his career at Texaco, Inc. (Texaco) in 1979 and held management positions in Texaco’s Producing-Eastern Hemisphere Department and Middle East/Far East Division and Texaco’s International Exploration Company. While at Texaco, Mr. Ingriselli negotiated a successful foreign oil development investment contract in China in 1983. In 1992, Mr. Ingriselli was named President of Texaco International Operations Inc. and over the next several years directed Texaco's global initiatives in exploration and development.
Mr. Ingriselli graduated from Boston University in 1975 with a Bachelor of Science degree in Business Administration. He also earned a Master of Business Administration degree from New York University in both Finance and International Finance in 1977 and a Juris Doctor degree from Fordham University School of Law in 1979.
Mr. Femi Ayoade, Dr. John Rudley and Mr. Mahmud Yayale Ahmed were elected to fill vacancies resulting from the retirement of Mr. William J. Campbell, Mr. Ira Wayne McConnell and Mr. Segun Omidele. At its meeting, following the Company’s Annual Meeting of Shareholders, the Board elected Mr. Ayoade as Chief Executive Officer of the Company to replace Interim CEO, Jean-Michel Malek.
Mr. Ayoade has served as Vice President of Production Operations for the Company since 2016 and the Managing Director of Erin Petroleum Nigeria Limited since 2013. He has more than 20 years’ experience in oil and gas industry and possess of in depth knowledge on regulatory and political environment of Nigeria and extensive experience on exploration and production operations offshore Nigeria. From 2008 to 2013, he was a Senior Technical Executive at CAMAC Petroleum Limited and Allied Energy Plc Nigeria and from 2006 to 2008, he was a Senior Drilling Engineer at Nigeria Agip Exploration (a subsidiary of ENI). Mr. Ayoade also served as a Senior Petroleum Engineer at Allied Energy Resources Nigeria Limited.
Mr. Ayoade earned a Master of Science in petroleum engineering from the University of Houston and a Higher National Diploma from the Petroleum Training Institute and has had extensive training in drilling, completion and subsea engineering.
Dr. Rudley served as the President of Texas Southern University from February 2008 to July 2016, where he was responsible for instituting substantive and far-reaching changes via administrative, academic, student and outreach initiatives. From June 2007 to February 2008, Dr. Rudley served as the Interim Chancellor for the University of Houston System and the Interim President for the University of Houston. Dr. Rudley has also held administrative positions for Tennessee Board of Regents, the University of Tennessee at Chattanooga and has served as a Senior Technical Advisor at the U.S. Department of Education. In addition to his experience in education, Dr. Rudley held positions at Arthur Andersen / Arlington McRae and Coopers and Lybrand, Certified Public Accountants. Dr. Rudley served on the board of directors and audit committee of AMSouth Bank.
Dr. Rudley is a Certified Public Accountant in Texas, earned a bachelor’s degree in business administration from the University of Toledo and a M.Ed. and Ed.D. from Tennessee State University.
Mr. Ahmed has an extensive history of government service on behalf of the Republic of Nigeria and has served at the highest levels of the Nigerian Government. Mr. Ahmed served as the Secretary to the Government of the Federation of Nigeria, a role that involved serving as Secretary to all Councils and bodies chaired by the President of the Republic, such as the Federal Executive Council and the Council of State. Mr. Ahmed served as the Minister of Defense and as the Head of Civil Service, where he was responsible for instituting fundamental reforms. Mr. Ahmed has served on the board of directors of Industrial and General Insurance since 2014 and assumed the role of chairman of the board of Industrial and General Insurance in 2016.
Mr. Ahmed holds an undergraduate degree in social science with a specialization in government and a master’s degree in public administration with a specialization in public finance from Ahmadu Bello University.
At the meeting, Erin Energy shareholders passed the Company’s proposed resolutions including, appointing PKF as the Company’s auditors for 2017 and approving, on a non-binding advisory basis, the compensation of the Company’s named executive officers as set forth in the Company’s Proxy Statement.
The option that received the greatest number of votes for the frequency to hold an advisory vote to approve the Company's executive compensation was three years. Based on the recommendation of the Board of Directors in the Company’s proxy statement and the voting results with respect to the advisory vote on the frequency of future advisory votes on executive compensation, the Company has decided to hold an advisory vote on executive compensation every three years.
About Erin Energy
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 9 licenses across 4 countries covering an area of 19,000 square kilometres (~5 million acres), including current production and other exploration projects offshore Nigeria, as well as exploration licenses offshore Ghana and The Gambia, and onshore Kenya. 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.
Source: Erin Energy Corporation
Contact:
Lionel McBee, +1 713 797 2960
Director, Investor Relations and Corporate Communications
lionel.mcbee@erinenergy.com
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Erin Energy Corporation
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Q1 2017 Conference Call
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May 11, 2017 at 11:00 a.m. Eastern
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CORPORATE PARTICIPANTS
Lionel McBee
- Director of Investor Relations and Corporate Communications
Jean-Michel Malek
- Interim Chief Executive Officer
Daniel Ogbonna
- Senior Vice President and Chief Financial Officer
John Hofmeister
- Chairman
Carl Scharpf
- Vice President In charge of Exploration
Ojay Uzoh
- Vice President In charge of Asset Development and Production
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PRESENTATION
Operator
Good day, ladies and gentlemen, and welcome to the 2017 First Quarter Results Conference Call for Erin Energy. My name is Andrea, and I will be your operator for today. As a reminder, today's call is being recorded for replay and will be available shortly after the conclusion of today’s call.
At this time, for opening remarks and introductions, I would like to turn the call over to Mr. Lionel McBee, Director of Investor Relations and Corporate Communications.
Lionel McBee
Thank you, Andrea, and thanks to everyone for joining the call today. On behalf of the management team, let me welcome you to today’s results conference call. Joining me on the call today are Jean-Michel Malek, Interim Chief Executive Officer; Daniel Ogbonna, Senior Vice President and Chief Financial Officer; the Chairman of our Board, John Hofmeister; Carl Scharpf, Vice President in charge of Exploration; and Ojay Uzoh, Vice President in charge of Asset Development and Production.
We will conduct the call today in the fire side chat format that we introduced on the last call and will address some of our recent news items as well as hit on the key financial and operational highlights from the first quarter. As always, following the discussion, the guys will be available for your questions.
Just a couple of housekeeping items before we begin. Today’s call is being webcast, and a link is available on the investor page of our website at erinenergy.com. A replay of today's call will be available shortly after the call, and a link to the re-webcast will be available on the Events section, shortly after the conference conclusion.
This conference call will include forward-looking statements, and the risks associated with forward-looking statements have been outlined in our news release announcement issued last evening and in our SEC filings. Following the remarks and discussion, we will turn the call over to conference coordinator and take questions for management.
And with that, I will start by introducing Jean-Michel for some opening comments on recent developments in the company.
Jean-Michel Malek
Thank you, Lionel, and good morning, everyone. In the first quarter of this year we secured the necessary capital and a sixth generation deepwater drilling rig from Pacific Drilling for our planned Oyo field development well. The operational planning process has now reached an advanced stage with expected spud date at the end of July of this year.
This development well, the Oyo-9 well, is projected at 6000 to 7000 barrels of oil to field production. In addition, Oyo-7 is planned to be brought back to production as part of this project by installing a gas lift line for well startup and continuous lift assistance. Total field production is expected to increase to about 12,000 to 13,500 barrels of oil per day with the successful execution of this development program.
As we have stated previously, we also look to extend the contract with Pacific Drilling, depending on availability of funds, to drill one or two Miocene exploration wells on OML 120. We believe our greatest shareholder value creation opportunities are in our Miocene exploration prospects on OMLs 120 and 121.
In relation to this, we are having discussions with our majority shareholder, who have indicated that they are ready and willing to support the company for this Miocene drilling. Also during this quarter we entered into a farm-out agreement with FAR on our offshore blocks in the Gambia, which Carl will discuss in more detail on today's call.
And now, I will turn it over to Daniel.
Daniel Ogbonna
Thank you, Jean-Michel. I would like to review the financial highlights of the first quarter 2017.
For the first quarter, Erin Energy reported revenues of $31.3 million compared to $4.9 million during the first quarter of 2016. In the first quarter, the company lifted and sold approximately 597,000 net barrels of oil at an average price of $52.41 per barrel, compared to approximately 161,000 net barrels of oil at an average price of $30.54 per barrel during the same period in 2016.
We reported a net loss in the first quarter of $26.5 million, or $0.12 per basic and diluted share, compared to a net loss of $32.4 million, or $0.15 per basic and diluted share for the first quarter 2016. Average daily production for the first quarter was approximately 5,500 net barrels of oil per day compared to 1,800 net barrels of oil per day for the comparative period in 2016.
We continue to explore various ways to reduce our operating expenditures, including the rationalization of our assets and footprint across Africa. We are also working with our vendors to negotiate reductions in our accounts payable, which we view as vital in cleaning up our balance sheet.
Lastly, in the first quarter we completed a $100 million debt financing for the development of Oyo field, and now we are focused on various avenues for new capital for exploration of drill-ready prospects in OML 120, 121. As you know, we believe our exploration prospects are key value drivers for the company.
I will now turn it back to Lionel.
Lionel McBee
Thank you Daniel. With that, I'll bring John into the discussion. John, obviously a big thing on investors' minds is that after seven years of service on our board you have chosen along with Wayne and Bill to step down. Perhaps you can give a little color and insight into this decision. And then it would be great if you could hit on what you think we might see in the coming year for the industry.
John Hofmeister
Well, thank you, Lionel. And yes, I’m happy to address what may be a question on some investors’ minds about why the turnover on the board. I would put it simply as it’s a diverse set of reasons why it happens to come together. But it comes together, because in my view, the most orderly transition that the board can make is to make changes at the shareholders’ meeting so that there is time to think about, read about, and contemplate the new proposed board members who will represent the shareholders. And there is time at the shareholder meeting for people who attend to ask questions and be informed, because I think that turnover is a normal part of business.
For me it's quite simple. I have been at this for a very long time. I’m in my 70th year. Seven is different than six, when you put that number in front of your name, and I can feel the difference, tell the difference, and I think I look the difference as well. I didn’t used to have certain wrinkles, and I actually had black hair once upon a time. I’m fortunate to still have hair, so I’m grateful for some things. But it's my time to go.
I discussed it with the major shareholder, majority shareholder and other shareholders along the way. I felt that 2016, early 2017 was a significant time for the company in terms of assuring the new debt financing that would take us to the next level of our growth strategy. And that having been completed, thanks to the good work of our senior leaders and people all over the company, in Africa as well as in here in Houston. That was a major accomplishment, and better to leave on a high note where we have people gainfully employed in the next phase of growth than to leave in a period of perhaps more significant uncertainty. So I agreed with the major shareholder, majority shareholder that I would depart at the AGM. And so, in my case, it’s part of my phasing out of board service as part of my career change overtime.
With respect to Wayne McConnell, and Wayne has authorized me to speak on his behalf, his business, as you know he is a public accountant. He is doing very, very well and has been on a growth trajectory for some years. He has several years of working experience left in which he wants to grow the company even further. And so, he said to me several months ago that he really feels the need to commit himself to the growth of his own company, and that that’s going to take an extraordinary amount of time, and he thinks it's better to find a replacement for him on the board.
And in the case Bill, Bill has been on the board a very long time. He has been through the turmoil in his own private business with respect to the conditions of the industry as an independent driller, and he feels the need to really move on so he can focus on his success in what is a very difficult operating environment in which he really needs to concentrate.
So the three of us, for different reasons, came to a similar conclusion, all of which has been discussed with the majority of shareholder, and frankly, we set to work on looking for new board members. I think we’re proud to present shareholders new individuals, ready to go, committed and signed up for what are the next steps along the way, and I think to prevail on behalf of shareholders over the coming months as we go through what I think will be a very exciting growth period.
The idea of actually talking in real terms about penetrating the Miocene has been something that we’ve been looking forward to certainly for all seven years that I’ve been on the board. And now we're right on the precipice. We can fund ourselves in a short-term with the Oyo-7, Oyo-8, and Oyo-9, which all three together should enable us to bring our payables to a much better position than they currently are and to look after our cash flow as we need to spend money in the future.
We’re still going to be looking for more capital, the new board will be looking for more capital. That’s an essential requirement of any upstream company, but with our asset base, which hasn’t changed a bit as a consequence of any departing board members, our asset base remains first class. I would call it world class. I feel very good about what is in store for shareholders down the road. And so, it’s with that confidence that I feel it’s a good time to step away and start to shift to my next decade of what I intend to do.
So I would like to say thanks to you, the investor community, for your patience, your forbearance, your perseverance, your commitment, because I know that sometimes we’re a difficult company to like. And I've been working for other companies that are sometimes difficult to like, because of various and sundry circumstances of which we share in some of those like any upstream company.
The oil price uncertainty, the volatility of operating conditions, whatever it may be, and the geopolitics of the energy business, all of these things we face, and it's not like we’re producing loaves of bread every morning off the assembly line. We have lots of vagaries in our business, and thank you for your awareness of that and your sustained commitment.
I would also like to thank the management of this company, who I think are doing a fine job, satisfying the expectations of the board. There is always more we could do, there is never enough. But they are committed, dedicated people, and I think executing well. And all the people of this organization, I think we owe a debt of gratitude to them, because they live with the uncertainty that we all live with, and that’s not always easy. And I’d also like to thank my fellow board members, those who are remaining and those who are just joining, assuming the shareholders approve next week.
So that’s kind of a response, Lionel, to your first point. I’d also make just a brief comment on the CEO and thank Jean-Michel for his ongoing superb leadership of the organization in this interim period. We don’t have anything new to report on the next CEO, but when we are ready we will pass along what information we have, but in the meantime I’m very confident that we are well led and will continue to be well led.
So let me stop there, and if people have questions later about how we see the oil price environment or other factors relative to the board, I’m more than happy to take those questions.
Lionel McBee
Okay, thanks, John. Now I would like bring Carl into the discussion to talk about some of our recent developments and the work he and his team have doing on the exploration side of the business. Carl, there are a couple of things I’d like you to talk about. One, it would be great if you could give a little color on our recent farm-out of the Gambia assets to FAR and what it means for the company; and two, we recently added the Oyo Northwest prospect to our presentation. I think touching on the significance of that as well as the exploration potential as a whole on the Nigerian assets would be good.
Carl Scharpf
Thank you, Lionel. The rationale for farming out our position in the Gambia is that it provides us with a secured funding base for an exploration well planned for late 2018. It additionally allows us to recoup much of our investment. FAR also brings its technological experience in the blocks adjacent to ours in the Senegal. We entered into a definitive farm-out agreement with FAR, whereby FAR will acquire 80% interest and operatorship of our two blocks in the Gambia. Erin will retain 20% working interest in both blocks.
Under the terms of farm-out agreement, which is subject to government approval by the Republic of the Gambia, upon receipt of their approval FAR will pay Erin Energy a purchase price of $5.18 million and a carry of up to $8 million of the company’s share of a planned exploration well to be drilled in late 2018. FAR and Erin expect to undertake a 3D seismic reprocessing and interpretation project during 2017 in order to mature our prospects for drilling in late 2018.
Fortunately, FAR recognized the value of this project and the time where lower offshore exploration funding worldwide has been seen. This allows us to focus our resources on other areas like Nigeria exploration. They bring their technical experience in the adjacent block to the north, where they discovered SNE field, which they report as having 2C resources of 641 million barrels of oil on 100% basis un-risked, recoverable. FAR has participated in eight wells drilling offshore Senegal with a 100% success rate to date. Their experience could lead to reduced costs and shorter cycle time first production in the Gambia.
Concerning the exploration potential of our Gambia Blocks, Erin Energy’s blocks are in a rapidly emerging offshore Mauritania-Senegal-Guinea-Bissau Basin in West Africa. They are adjacent and on-trend with FAR’s world-class discovery and offshore in Senegal. We have mapped our new 3D seismic data and identified a large undrilled exploration prospect on trend with these discoveries in Senegal. It is a similar shelf-edge play that’s been identified and targeted in Senegal.
Concerning the exploration potential of Nigeria Blocks, our blocks sit within the highly prolific Niger Delta where over 40 billion barrels of oil have been discovered. We’re flanked by the giant fields, like Bonga, Erha, and Bosi. We’ put together a deep high-value exploration portfolio in the offshore Nigeria Blocks. Years and years of technical work have been put into refining our interpretations.
Four prospects are drill-ready with permits, and a fifth will be added soon. We have high-graded three prospects for drilling: G, Ereng, Oyo Northwest, which Lionel mentioned. It just sits nine kilometers from our existing Oyo field, which is currently producing. We have existing infrastructure on our blocks, which significantly shortens the time to first production upon discovery. Upon success, we have the ability to tie back the initial wells to our existing FPSO, which has spare capacity. This will provide us with valuable information while we appraise the fields for full development.
In March of this year, we announced the execution of a drilling service contract with Pacific Drilling for use of the Pacific Bora drilling rig. We plan to use this rig to drill the Oyo-9 well in Oyo field. Under the contract, the company has the option to drill up to two additional planned exploration wells. We see the significant exploration potential sitting beneath our blocks in offshore Nigeria.
I’d like to turn it back to you now, Lionel.
Lionel McBee
Thanks, Carl. That’s very helpful. And now we will open the lines for your questions. Operator?
QUESTIONS AND ANSWERS
Operator
We will now begin the question-and-answer session. To ask a question, you may press star, then one on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster.
Our first question comes from Steven Green of Ordinance Capital. Please go ahead.
Steven Green
Yes, Lionel, hi. This is Steven Green. You mentioned on your script remarks that the parent company was willing to step in and fund the Miocene or additional commitment from the parent company. Can you just explain that a little further?
Jean-Michel Malek
Hi, Steven. This is Jean-Michel. We’re in discussions with them. As we all are here, and management and the board really strongly believe in the exploration prospects in Nigeria and the Miocene. And we’ve been discussing with them how they can support us for that. I mean the discussions are ongoing, and so the nature of that is still to be worked out. It could be funding, it could be some sort of guarantee. There are a number of different ways to approach that.
So, we’re not that far down the road, but we know they want to support us, and they’ve indicated their willingness, their readiness to do that. In the meantime, we’re also exploring other avenues for funding that. So we’re not totally locked into the major shareholder, but we do think that we’re optimistic.
Steven Green
Right, and can you just talk about the discussions—I know there are ongoing discussions—but about the FPSO and the accounts payable refunding or renegotiations?
Daniel Ogbonna
Right, this is Daniel. As I mentioned earlier, we’re in current discussions with various vendors in terms of trying to reduce our accounts payable, because we believe that’s a vital process in trying to clean up our balance sheet. The conversations with the FPSO owners is still ongoing, but we’re confident that we’re going to reach an eventual conclusion with them shortly.
Steven Green
Okay. Thank you.
Operator
Again, if you have a question, please press star then one. Our next question comes from Ben Gecaj of GMS Partners. Please go ahead.
Ben Gecaj
Yes, good morning. This question is for John Hofmeister. Just wanted to see what his outlook is now with current events for oil prices.
John Hofmeister
I’m going to reach down and get my crystal ball, Ben. Actually I'll be right back with you, but here’s my take. As some of you who have heard me speak publicly on this issue, this whole manmade debacle of the oil price collapse at the end of 2014 had everything to do with the geopolitical relationships between Saudi Arabia, Russia, and Iran, with the absence of the United States in that period as a real player. And the only weapon or the only tool in the Saudi toolkit to try to impress Iran and Russia with its outlook on the future was the production of oil.
And the Saudis could see the surplus, they understood the surplus, and they decided to pile on the surplus, trying to teach some economics to the Russians and to the Iranians. They spent nearly $600 billion of sovereign capital to try to make the point. It frankly didn’t work very well. While the Saudis were degrading their own financial stability, the Russians and Iranians simply allowed theirs to deteriorate simultaneously. So it all proved pretty much nothing.
But what it did is, it set an appetite around the world to get as much cash as you can for as long as you can by producing and continuing to produce, other than the shale folks particularly in the United States, and the global players who look for three- to five-year outlooks on their capital spend.
So what we’ve seen is a dramatic collapse on the shale activities in the United States, which are slowly clawing their way back, and I say slowly, because we’re still under 900 rigs and we were once at 1600 rigs in the US. That’s a big, big difference. Yes, the rigs are more productive now and yes, there are new technologies afoot, which enable more production sooner. But still, we’re still a fraction of the industry we were in the United States.
Meanwhile, the global players, the big guys and the international crowd, have really deferred enormous, hundreds of billions of dollars of capital spending, which is setting up what I consider to be the conditions for a shortage of oil, once we have worked off the surplus. So we’re in the midst of working off the surplus. That’s why we’re seeing oil between, let's say $45 and $55 barrel, up from $26 at the low point.
Working off the surplus is the most important thing that the industry can do right now in order to get a more stable and an even higher price, because frankly, as I talk to independent operators in this country and the US, and as I talk to some of my former peers in the majors, $45, $47 is not a good oil price for the world in which we operate. All those so-called productivity gains that everybody has been bragging about are evaporating because, as the oil drilling returns and as the price rises, guess what, the supply chain is putting their prices back to where they used to be.
And they were surrendering price faster than each other, they were racing to the bottom frankly, just to keep some volume in their factories or in their service commitments, and that’s not a sustainable business. And even as recently as last week, I read an article about the amount of negative cash flow that some of the independents are experiencing in their financials currently at the low-50 price level. So I don’t believe this that people can make money at $50. I think they can make money at $50 if they’re not counting their capital expenditure, and that’s just a personal point of view.
And the prices are going to continue to rise in the independent world of the Permian basin and elsewhere as the shale oil folks try to get back into production. Meanwhile, globally I think prices will rise also as the surplus shrinks and as the demand of the world continues to slowly increase. There’s always a formula out there for when does demand-supply equilibrium actually arrive. And nobody can guess the day on which it happens or the week or the month, but it's a process that over time we know inevitably will, because nothing prevents wells from declining once they’re being produced, and nothing slows down the demand requirement of consumers once they are into the mobility and have the means by which they can afford their own mobility. That’s mobility in the air, on the sea, and certainly on the highway.
And for natural gas, we’re going to continue to see natural gas continue to grow with all the concerns about CO2, and so the consequence will be a sustained demand, healthy demand, in my view, but the question of is it mid ’17, is it late ’17, is it early ’18, mid ’18 on when we reach that equilibrium point, and I don’t think we know that. But when we reach equilibrium and the surpluses turn into first equilibrium and then shortages, because the capital has not been spent for two, three, maybe even four years to increase production, I think then we’ll see prices reach the $70 and $80 level, which then puts everybody in a better position. And we’ll have confidence to put more capital into the future production, in particular the offshore.
But it's still a time of uncertainty. I don’t get too scared when I see $47, $46, $45, because all that does is it just sells more volume, and it moves the equilibrium forward faster as I see it. And I think we get to the $53, $54, $55, it builds a little bit of confidence, people start to dust off their plans, but I think we’ll all be better off when we get past the 60 number and into the 70s and 80s.
And whether that’s this year, I don’t know, but hopefully it’s not later than next year, because that price affects us as well. For our amount of production, we’re a whole lot healthier at 60, 70, 80 than we are at 40 and 50, in terms of our own production. So we pay close attention to that. I hope that responds to your question.
Ben Gecaj
Thank you.
Operator
Again, if you have a question, please press star, then one. And next we have a follow-up question from Steven Green of Ordinance Capital. Please go ahead.
Steven Green
I was wondering, this is, I guess for Lionel or Jean-Michel, when are you ready to start telling your story? It seems like we’re in the precipice of drilling a Miocene field, which has over two billion barrels of oil hopefully and we’re going to have another production well in the next three-to-four months. Is it time to start telling you story or you have to wait till the balance sheet gets cleaned up?
Lionel McBee
We believe that we’re getting to that time now. We have actually just this week been sitting down and starting to plan out the calendar for the rest of the year. I do think that the balance sheet is a key component, but getting out there and ahead of that and getting in front of people, I mean we have a good story to tell. And we’re making progress on those things that need to be cleaned up in order to get out in front and on the road.
Daniel Ogbonna
Hi, Steve. This is Daniel. To add to what Lionel mentioned, if you look at the steps that we put in place as we begin to tell our story, one was first of all, raise the money for the Oyo-9 development, and then the second is then having Oyo-9 development started, and then cleaning up the balance sheet and again, raising capital for the exploration.
I think that storytelling has already started. The planning stages have already begun, and we are now in the execution stage. So I think within the next few quarters you’re going to be seeing more of us on the road telling that story, because we believe now that we can say as we check off some of that playbook items that the story is now being solidified in terms of showing the investors and potential investors that we have a plan and we’re developing and executing on those plans.
Steven Green
Alright. Is there enough float or activity to get institutions involved in the stock I mean?
Jean-Michel Malek
I mean, that will come. Right now, to be honest, no. The volume is low, but as we get out on the road more and as the activity picks up, that will come.
Daniel Ogbonna
So again, this is Daniel. So one of the things that we’re doing, obviously, as you know that our float is only about 14%. One of the goals that we have in terms of our financial outlook is to increase the float, and that would eventually increase the volume, and that will attract institutional investors into the mix. So the plan is obviously and definitely to bring in institutional investors in the longer term.
But as you mentioned, this is done step-by-step. First, we have to deliver on the $100 million and now we’re in the process of delivering the Oyo-9 development well. And once we bring it online, I think that begins to solidify and again point to our execution ability, and that makes the story more interesting. And then you have this overhang of us, the exploration prospect that as you also stated, over two billion barrels of resource equivalent that we want to go after.
So that’s the value driver for the company. But we have to go through this stage to get to this point to be able to make that story more believable. And we believe we are now ready to start telling to that story.
Steven Green
Alright. Thank you.
Operator
Our next question comes from Mike Breard of Hodges Capital. Please go ahead.
Mike Breard
Yes. You mentioned you hope to start drilling in late July. Is that a pretty firm date or does that drilling rig needs some work to become active again? How confident are you in that date?
Jean-Michel Malek
Ojay, you want to take that?
Ojay Uzoh
Yes. Hi, Mike. I think we have a spot window between mid-June and July, I think we got into a point where we think that spot is likely going to be between mid- and end-July. So I think that—I don’t think we are going to exceed end July, because that’s actually the window. So we’re definitely going to be able to [audio disruption] by that time.
Mike Breard
Okay, good. Thank you.
CONCLUSION
Operator
This concludes our question-and-answer session. The conference has also concluded. Thank you for attending today's presentation. You may now disconnect your lines.
Erin Energy Corporation
May 11, 2017 at 11:00 a.m. Eastern
News Release
May 10, 2017
Erin Energy Announces First Quarter 2017 Results
Provides Operational Update on its West and East Africa Operations
HOUSTON, May 10, 2017 – Erin Energy Corporation (Erin Energy or the Company) (NYSE MKT:ERN) (JSE:ERN) announced today financial and operational results for the quarter ended March 31, 2017.
First Quarter Highlights:
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Crude sales volumes of more than 597,000 net barrels of oil, a 271% increase over 1Q 2016;
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$31.3 million in revenue;
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Average daily production of 5,500 net barrels of oil.
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“During the first quarter, we produced approximately 597,000 net barrels of oil and generated revenues of approximately
$31.3 million
,”
said Jean-Michel Malek, Interim Chief Executive Officer
.
“We closed on the capital necessary for this year’s drilling and farmed-out a portion of our assets in The Gambia. As we look ahead, we are excited to kick off our drilling campaign, increase Oyo production, and look to turn to the exploration of the Miocene in Nigeria.”
Operational Update
Production volumes for the quarter were approximately 5,500 net barrels of oil compared to approximately 1,800 net barrels in the comparative period 2016. The Company’s crude oil inventory was approximately $3.9 million at March 31, 2017.
Erin Energy recently announced it has entered into a drilling services contract with Pacific Drilling and secured a sixth generation drillship, the
Pacific Bora.
The Company will drill the Oyo-9 well (Oyo-9) first. The Oyo-9 is a development well, which will be drilled on the Oyo field and will be tied in to the field’s current production facility. The well is expected to add an additional 6,000 to 7,000 barrels of oil per day from the field.
The Company has the option to drill up to two additional wells with the
Pacific Bora.
Subject to capital availability, the Company will use the
Pacific Bora
to drill one to two of its 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 announced in March 2017, it entered into a definitive farm-out agreement with FAR Ltd. (FAR), an Australian Securities Exchange listed oil and gas company. As part of the farm-out agreement, FAR will acquire an 80% interest and operatorship of Erin Energy’s offshore A2 and A5 blocks, with the Company retaining a 20% working interest in both blocks. Under the terms of the farm-out agreement, which is subject to approval by the Government of the Republic of The Gambia, upon receipt of this approval, FAR will pay the Company a purchase price of $5.2 million and will carry $8.0 million of the Company’s share of costs in a planned exploration well to be drilled in late 2018. In addition, if the Company’s share of the exploration well is less than $8.0 million, the balance is to be paid in cash to the Company.
In Kenya, the Company continues to evaluate the prospectivity of identified leads on its onshore blocks and is currently designing an additional, targeted 2-D seismic acquisition on the blocks. Erin Energy has stated that the most prospective of its Kenya assets are its onshore blocks and has focused the majority of its work on these blocks. The Company also announced it would not seek an additional extension of its offshore L-27 and L-28 blocks due to the high costs and risks associated with frontier exploration in the current price and market environments. Erin Energy stated that relinquishment of the two blocks was in the Company’s long-term best interest.
In Ghana, Erin Energy continues to conduct geotechnical subsurface studies of existing 3-D seismic data to further high-grade its prospect inventory on the Expanded Shallow Water Tano block. The Company is also planning a new 3-D marine seismic acquisition survey. The Company expects to issue a formal invitation to tender to marine seismic vendors in the second half of 2017. Actual field operations will take place after the resolution of the Ghana-Cote d’Ivoire maritime border dispute arbitration later this year.
Financial Summary
First-quarter 2017 revenues were $31.3 million, up from $4.9 million in 2016.
For the first quarter 2017, net daily production was approximately 5,500 bopd, compared with 1,800 bopd for the comparative period in 2016. The Company lifted and sold approximately 597,000 net barrels of oil at an average price of $52.41 per barrel, compared to approximately 161,000 net barrels of oil at an average price of $30.54 per barrel.
In the first quarter 2017, the Company reported a net loss of $26.5 million, or a loss of $0.12 per basic and diluted share, compared to a net loss of $32.4 million, or a loss of $0.15 per basic and diluted share for the comparative period 2016.
As of March 31, 2017, cash, cash equivalents and restricted cash were approximately $28.5 million.
Conference Call and Webcast Information
The Company will host a conference call on Thursday, May 11, 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 March 23, 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 10102749.
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 9 licenses across 4 countries covering an area of 19,000 square kilometres (~5 million acres), including current production and other exploration projects offshore Nigeria, as well as exploration licenses offshore Ghana and The Gambia, and onshore Kenya. 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.
Source: Erin Energy Corporation
Contact:
Lionel McBee, +1 713 797 2960
Director, Investor Relations and Corporate Communications
lionel.mcbee@erinenergy.com
ERIN ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
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Three Months Ended March 31,
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2017
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2016
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Revenues:
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Crude oil sales, net of royalties
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$
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31,278
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$
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4,929
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Operating costs and expenses:
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Production costs
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22,555
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22,564
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Crude oil inventory (increase) decrease
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2,948
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(831
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|
)
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Exploratory expenses
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1,596
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2,062
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Depreciation, depletion and amortization
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25,411
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4,812
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Accretion of asset retirement obligations
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468
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452
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Loss on settlement of asset retirement obligations
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—
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205
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General and administrative expenses
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3,392
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3,958
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Total operating costs and expenses
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56,370
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33,222
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Operating loss
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(25,092
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)
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(28,293
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)
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Other income (expense):
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Currency transaction gain
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2,135
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863
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Interest expense
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(3,966
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)
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(5,425
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)
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Total other expense, net
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(1,831
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)
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(4,562
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)
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Loss before income taxes
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(26,923
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)
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(32,855
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)
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Income tax expense
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—
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—
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Net loss before non-controlling interest
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(26,923
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)
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(32,855
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)
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Net loss attributable to non-controlling interest
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417
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444
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Net loss attributable to Erin Energy Corporation
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$
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(26,506
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)
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$
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(32,411
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)
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Net loss attributable to Erin Energy Corporation per common share:
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Basic
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$
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(0.12
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)
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$
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(0.15
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)
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Diluted
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$
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(0.12
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)
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$
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(0.15
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)
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Weighted average common shares outstanding:
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Basic
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212,841
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211,844
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Diluted
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212,841
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211,844
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ERIN ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except for share and per share amounts)
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March 31,
2017
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December 31, 2016
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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8,538
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$
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7,177
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Restricted cash
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20,006
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2,600
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Accounts receivable - trade
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5,153
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—
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Accounts receivable - partners
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1,103
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|
674
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Accounts receivable - related party
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2,354
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1,956
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Accounts receivable - other
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9
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29
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Crude oil inventory
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3,900
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9,398
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Prepaids and other current assets
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2,498
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872
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Total current assets
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43,561
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22,706
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Property, plant and equipment:
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Oil and gas properties (successful efforts method of accounting), net
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243,064
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265,713
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Other property, plant and equipment, net
|
711
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|
716
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Total property, plant and equipment, net
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243,775
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266,429
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Other non-current assets
|
66
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66
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Total assets
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$
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287,402
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$
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289,201
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LIABILITIES AND CAPITAL DEFICIENCY
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Current liabilities:
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Accounts payable and accrued liabilities
|
$
|
247,224
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$
|
244,963
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Accounts payable and accrued liabilities - related party
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31,019
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29,513
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Current portion of long-term debt, net
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41,994
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12,627
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Derivative liability
|
807
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—
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Total current liabilities
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321,044
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287,103
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Long-term notes payable - related party, net
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129,804
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129,796
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Long-term debt, net
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64,444
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74,446
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Asset retirement obligations
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22,944
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22,476
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Total liabilities
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538,236
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513,821
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Commitments and contingencies
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Capital deficiency:
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Preferred stock $0.001 par value - 50,000,000 shares authorized; none issued and outstanding as of March 31, 2017 and December 31, 2016, respectively
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—
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—
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Common stock $0.001 par value - 416,666,667 shares authorized; 213,351,764 and 212,622,218 shares issued as of March 31, 2017 and December 31, 2016, respectively
|
213
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213
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Additional paid-in capital
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793,933
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792,972
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Accumulated deficit
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(1,044,798
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)
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(1,018,292
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)
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Treasury stock at cost, 270,846 and 99,932 shares as of March 31, 2017 and December 31, 2016, respectively
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(877
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)
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(228
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)
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Total deficit - Erin Energy Corporation
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(251,529
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)
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(225,335
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)
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Non-controlling interest
|
695
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|
715
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Total capital deficiency
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(250,834
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)
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(224,620
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)
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Total liabilities and capital deficiency
|
$
|
287,402
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|
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$
|
289,201
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ERIN ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Three Months Ended March 31,
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2017
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|
2016
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Cash flows from operating activities
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Net loss, including non-controlling interest
|
$
|
(26,923
|
|
)
|
|
$
|
(32,855
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|
)
|
|
|
|
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Adjustments to reconcile net loss to cash provided by (used in) operating activities:
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Depreciation, depletion and amortization
|
25,411
|
|
|
|
4,812
|
|
|
|
|
Accretion of asset retirement obligations
|
468
|
|
|
|
452
|
|
|
|
|
Amortization of debt discount and debt issuance costs
|
242
|
|
|
|
878
|
|
|
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Foreign currency transaction gain
|
(2,135
|
|
)
|
|
(863
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|
)
|
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|
Share-based compensation
|
961
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|
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|
888
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Change in operating assets and liabilities:
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Decrease (increase) in accounts receivable
|
(5,563
|
|
)
|
|
782
|
|
|
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|
Decrease (increase) in crude oil inventory
|
2,948
|
|
|
|
(831
|
|
)
|
|
|
Increase in prepaids and other current assets
|
(1,626
|
|
)
|
|
(4,539
|
|
)
|
|
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Increase in accounts payable and accrued liabilities
|
6,889
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|
21,123
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Net cash provided by (used in) operating activities
|
672
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(10,153
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)
|
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Cash flows from investing activities
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Capital expenditures
|
(3,092
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)
|
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(3,554
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)
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Net cash used in investing activities
|
(3,092
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|
)
|
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(3,554
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)
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Cash flows from financing activities
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Proceeds from exercise of stock options and warrants
|
—
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|
145
|
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Payments for treasury stock arising from withholding taxes upon restricted stock vesting and exercise of stock options
|
(649
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)
|
|
(189
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|
)
|
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|
Proceeds from MCB Finance Facility
|
28,237
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|
|
|
—
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Repayments of term loan facility
|
—
|
|
|
|
(5,981
|
|
)
|
|
|
Proceeds from notes payable - related party, net
|
—
|
|
|
|
3,000
|
|
|
|
|
Debt issuance costs
|
(8,197
|
|
)
|
|
—
|
|
|
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|
Funds restricted in relation to the MCB Finance Facility drawdowns
|
(7,406
|
|
)
|
|
—
|
|
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|
Funds restricted for debt service
|
(10,000
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|
)
|
|
8,121
|
|
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Net cash provided by financing activities
|
1,985
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|
|
|
5,096
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|
|
|
|
|
|
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Effect of exchange rate changes on cash and cash equivalents
|
1,796
|
|
|
|
946
|
|
|
|
|
|
|
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Net increase (decrease) in cash and cash equivalents
|
1,361
|
|
|
|
(7,665
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|
)
|
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Cash and cash equivalents at beginning of period
|
7,177
|
|
|
|
8,363
|
|
|
|
|
Cash and cash equivalents at end of period
|
$
|
8,538
|
|
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|
$
|
698
|
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Supplemental disclosure of cash flow information
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Cash paid for:
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Interest, net
|
$
|
4,487
|
|
|
|
$
|
5,280
|
|
|
|
|
Supplemental disclosure of non-cash investing and financing activities:
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Discount on notes payable pursuant to derivative liability
|
$
|
807
|
|
|
|
$
|
—
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