70be40eb450d43a

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-16179

 

EPL Oil & Gas, Inc.  

(Exact name of registrant as specified in its charter)

 

 

 

 

 

 

Delaware

72-1409562

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

 

 

919 Milam Street, Suite 1600, Houston, Texas

77002

(Address of principal executive offices)

(Zip Code)

(713) 228-0711 

Registrant’s telephone number, including area code

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes    No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes     No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

 

 

 

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

 (Do not check if a smaller reporting company)

Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes     No  

As of May 2, 2014, there were 39,219,486 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

 

 

 

 

 


 

 

TABLE OF CONTENTS

 

 

 

Page

 

 

PART I—FINANCIAL INFORMATION

 

 

 

Item 1. Financial Statements:

 

 

 

Condensed Consolidated Balance Sheets (Unaudited) as of March 31, 2014 and December 31, 2013 

 

 

Condensed Consolidated Statements of Operations (Unaudited) for the three months ended March 31, 2014 and 2013 

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited) for the three months ended March 31, 2014 and 2013  

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)  

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations  

18 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk  

25 

 

 

Item 4. Controls and Procedures  

26 

 

 

PART II—OTHER INFORMATION

 

 

 

Item 1. Legal Proceedings  

27 

 

 

Item 1A. Risk Factors  

27 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds  

29 

 

 

Item 3. Defaults Upon Senior Securities  

29 

 

 

Item 4. Mine Safety Disclosures  

29 

 

 

Item 5. Other Information  

29 

 

 

Item 6. Exhibits  

30 

 

 

 

 

 

 

 

 

1

 


 

PART I—FINANCIAL INFORMATION

Item 1.FINANCIAL STATEMENTS.

  EPL OIL & GAS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2014

 

2013

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,448 

 

$

8,812 

Trade accounts receivable - net

 

 

87,484 

 

 

70,707 

Fair value of commodity derivative instruments

 

 

55 

 

 

501 

Deferred tax asset

 

 

7,852 

 

 

8,949 

Prepaid expenses

 

 

4,979 

 

 

6,868 

Total current assets

 

 

104,818 

 

 

95,837 

Property and equipment, at cost under the successful efforts method of accounting

 

 

2,575,959 

 

 

2,355,219 

Less accumulated depreciation, depletion, amortization and impairments

 

 

(664,470)

 

 

(618,788)

Net property and equipment

 

 

1,911,489 

 

 

1,736,431 

Deposit for Nexen Acquisition

 

 

 -

 

 

7,040 

Restricted cash

 

 

6,023 

 

 

6,023 

Fair value of commodity derivative instruments

 

 

160 

 

 

238 

Deferred financing costs - net of accumulated amortization of $6,312 and $5,549 at March 31, 2014 and December 31, 2013, respectively

 

 

9,513 

 

 

10,106 

Other assets

 

 

1,433 

 

 

2,156 

Total assets

 

$

2,033,436 

 

$

1,857,831 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

86,658 

 

$

59,431 

Accrued expenses

 

 

157,883 

 

 

131,125 

Asset retirement obligations

 

 

46,076 

 

 

51,601 

Fair value of commodity derivative instruments

 

 

26,177 

 

 

29,636 

Total current liabilities

 

 

316,794 

 

 

271,793 

Long-term debt

 

 

718,000 

 

 

627,355 

Asset retirement obligations

 

 

223,180 

 

 

203,849 

Deferred tax liabilities

 

 

129,344 

 

 

122,812 

Fair value of commodity derivative instruments

 

 

1,326 

 

 

2,136 

Other

 

 

821 

 

 

673 

Total liabilities

 

 

1,389,465 

 

 

1,228,618 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, par value $0.001 per share. Authorized 1,000,000 shares; no shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively

 

 

 -

 

 

 -

Common stock, par value $0.001 per share. Authorized 75,000,000 shares; shares issued: 41,118,523 and 40,970,137 at March 31, 2014 and December 31, 2013, respectively; shares outstanding: 39,206,958 and 39,097,394 at March 31, 2014 and December 31, 2013, respectively

 

 

41 

 

 

41 

Additional paid-in capital

 

 

521,566 

 

 

519,114 

Treasury stock, at cost, 1,911,565 and 1,872,743 shares at March 31, 2014 and December 31, 2013, respectively

 

 

(32,182)

 

 

(31,157)

Retained earnings

 

 

154,546 

 

 

141,215 

Total stockholders’ equity

 

 

643,971 

 

 

629,213 

Total liabilities and stockholders' equity

 

$

2,033,436 

 

$

1,857,831 

See accompanying notes to condensed consolidated financial statements.

2

 


 

 

 EPL OIL & GAS, INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED) 

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2014

 

2013

Revenue:

 

 

 

 

 

 

Oil and natural gas

 

$

158,470 

 

$

180,984 

Other

 

 

1,021 

 

 

1,365 

Total revenue

 

 

159,491 

 

 

182,349 

Costs and expenses:

 

 

 

 

 

 

Lease operating

 

 

41,734 

 

 

41,579 

Transportation

 

 

900 

 

 

650 

Exploration expenditures and dry hole costs

 

 

4,941 

 

 

1,933 

Depreciation, depletion and amortization

 

 

45,645 

 

 

46,522 

Accretion of liability for asset retirement obligations

 

 

6,997 

 

 

6,032 

General and administrative

 

 

10,287 

 

 

7,092 

Taxes, other than on earnings

 

 

2,472 

 

 

2,860 

Other

 

 

(881)

 

 

2,989 

Total costs and expenses

 

 

112,095 

 

 

109,657 

Income from operations

 

 

47,396 

 

 

72,692 

Other income (expense):

 

 

 

 

 

 

Interest income

 

 

10 

 

 

10 

Interest expense

 

 

(13,304)

 

 

(13,095)

Loss on derivative instruments

 

 

(13,142)

 

 

(13,951)

Total other expense

 

 

(26,436)

 

 

(27,036)

Income before income taxes

 

 

20,960 

 

 

45,656 

Deferred income tax expense

 

 

(7,629)

 

 

(16,619)

Net income

 

 

13,331 

 

 

29,037 

Basic earnings per share

 

$

0.34 

 

$

0.74 

Diluted earnings  per share

 

$

0.34 

 

$

0.73 

Weighted average common shares used in computing earnings per share:

 

 

 

 

 

 

Basic

 

 

38,714 

 

 

38,823 

Diluted

 

 

39,233 

 

 

39,204 

 

See accompanying notes to condensed consolidated financial statements.

 

 

3

 


 

 

 EPL OIL & GAS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2014

 

2013

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

13,331 

 

$

29,037 

Adjustments to reconcile net income to net cash provided by

 

 

 

 

 

 

operating activities:

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

45,645 

 

 

46,522 

Accretion of liability for asset retirement obligations

 

 

6,997 

 

 

6,032 

Change in fair value of derivative instruments

 

 

(3,746)

 

 

7,383 

Non-cash compensation

 

 

2,425 

 

 

1,612 

Deferred income taxes

 

 

7,629 

 

 

16,519 

Amortization of deferred financing costs and discount on debt

 

 

1,408 

 

 

1,318 

Other

 

 

(802)

 

 

2,915 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Trade accounts receivable

 

 

(16,777)

 

 

(6,473)

Prepaid expenses

 

 

1,889 

 

 

1,667 

Other assets

 

 

724 

 

 

210 

Accounts payable and accrued expenses

 

 

19,264 

 

 

(21,361)

Asset retirement obligation settlements

 

 

(15,047)

 

 

(7,139)

Net cash provided by operating activities

 

 

62,940 

 

 

78,242 

Cash flows provided by (used in) investing activities:

 

 

 

 

 

 

Property acquisitions

 

 

(57,934)

 

 

(2,210)

Exploration and development expenditures

 

 

(98,969)

 

 

(63,577)

Other property and equipment additions

 

 

(231)

 

 

(485)

Net cash used in investing activities

 

 

(157,134)

 

 

(66,272)

Cash flows provided by (used in) financing activities:

 

 

 

 

 

 

Proceeds from (repayments of) indebtedness

 

 

90,000 

 

 

(10,000)

Deferred financing costs

 

 

(170)

 

 

(405)

Exercise of stock options

 

 

 -

 

 

239 

Net cash provided by (used in) financing activities

 

 

89,830 

 

 

(10,166)

Net increase (decrease) in cash and cash equivalents

 

 

(4,364)

 

 

1,804 

Cash and cash equivalents at beginning of period

 

 

8,812 

 

 

1,521 

Cash and cash equivalents at end of period

 

$

4,448 

 

$

3,325 

 

See accompanying notes to condensed consolidated financial statements.

 

4

 


 

 EPL OIL & GAS, INC. AND SUBSIDIARIES 

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) Basis of Presentation 

EPL Oil & Gas, Inc. (“we,” “our,” “us,” or “the Company”) was incorporated as a Delaware corporation on January 29, 1998. We are an independent oil and natural gas exploration and production company. Our current operations are concentrated in the U.S. Gulf of Mexico shelf focusing on state and federal waters offshore Louisiana.

The financial information as of March 31, 2014 and for the three-month periods ended March 31, 2014 and March 31, 2013 has not been audited. However, in the opinion of management, all adjustments (which include only normal, recurring adjustments) necessary to present fairly the financial position and results of operations for the periods presented have been included therein. Certain information and footnote disclosures normally in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission. The condensed consolidated balance sheet at December 31, 2013 has been derived from the audited financial statements at that date. These financial statements and footnotes should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2013 (the “2013 Annual Report”). The results of operations and cash flows for the first three months of the year are not necessarily indicative of the results of operations which might be expected for the entire year.

 

Recent Events.  On March 12, 2014, we entered into an Agreement and Plan of Merger  (as amended, the “Merger Agreement”) with Energy XXI (Bermuda) Limited (“EXXI”) and two of its subsidiaries, pursuant to which EXXI will acquire all of our outstanding shares of common stock for total consideration of $2.3 billion, including the assumption of debt (the “Merger”).  Upon the completion of the Merger, we will become an indirect wholly owned subsidiary of EXXI.  The consideration to be received by our stockholders is valued at $39.00 per share of our stock based on the closing price of EXXI’s common stock as of March 11, 2014.  The aggregate consideration will be paid approximately 65 percent in cash and approximately 35 percent in EXXI common shares, based on the closing price of EXXI’s common stock as of March 11, 2014.  Our stockholders will be able to elect to receive, for each share of our stock held, either (i) $39.00 in cash, (ii) 1.669 shares of EXXI common stock, or (iii) $25.35 in cash plus 0.584 shares of EXXI common stock. All elections by stockholders will be subject to proration with respect to the stock and the cash portion so that approximately 65% of the aggregate merger consideration is paid in cash and approximately 35% is paid in shares of EXXI common stock. Upon closing, EXXI shareholders are expected to own approximately 75 percent of the combined company and EPL shareholders are expected to own the remaining 25 percent.

On April 14, 2014, we announced we will hold a special meeting of our stockholders on May 30, 2014 to vote on the proposed Merger.  The Merger is expected to close in the second quarter of 2014 and is subject to shareholder approval by both companies and other customary closing conditions.

(2) Acquisitions and Dispositions

The Nexen Acquisition

On January 15, 2014, we acquired from Nexen Petroleum Offshore U.S.A., Inc. (“Nexen”) a  100% working interest of certain shallow-water central Gulf of Mexico shelf oil and natural gas assets for $70.4 million, subject to customary adjustments to reflect the September 1, 2013, economic effective date (the “Nexen Acquisition”).  The assets we acquired comprise five leases in the Eugene Island 258/259 field (the “EI Interests”).  Estimated proved reserves as of the September 1, 2013 effective date consisted of approximately 2.6 Mmboe of proved developed producing reserves, about 91% of which was oil. 

The Nexen Acquisition was financed with borrowings under our Senior Credit Facility. In January 2014, our lenders approved a $50.0 million increase in our borrowing base under our Senior Credit Facility, increasing our borrowing base to $475.0 million.  See Note 5, “Indebtedness” for more information regarding our Senior Credit Facility.

The following allocation of the purchase price is preliminary and includes estimates.  This preliminary allocation is based on information that was available to management at the time these condensed consolidated financial statements were prepared and takes into account current market conditions and estimated market prices for oil and natural gas.  Management has not yet had the opportunity to complete its assessment of fair values of the assets acquired and liabilities assumed.  In addition, the purchase price could change materially as management finalizes adjustments to purchase price provided for by the purchase and sale agreement.  Accordingly, the allocation may change materially as additional information becomes available and is assessed by management. 

5

 


 

The following table summarizes the estimated values of assets acquired and liabilities assumed and reflects management’s estimate of customary adjustments to purchase price provided for by the purchase and sale agreement of approximately $7.2 million to reflect an economic effective date of September 1, 2013.

 

 

 

 

(In thousands)

September 1, 2013

Oil and natural gas properties

$

81,330 

Asset retirement obligations

 

(18,097)

Net assets acquired

$

63,233 

The West Delta 29 Acquisition

On September 26, 2013, we acquired from W&T Offshore, Inc. (“W&T”) an asset package consisting of certain Gulf of Mexico shelf oil and natural gas interests in the West Delta 29 field (the “WD29 Interests”) for $21.8 million in cash, subject to customary adjustments to reflect an economic effective date of January 1, 2013 (the “WD29 Acquisition”). We estimate that the proved reserves as of the January 1, 2013 economic effective date totaled approximately 0.7 Mmboe, of which 95% were oil and 58% were proved developed reserves. The WD29 Acquisition was funded with a portion of the proceeds from the sale of certain shallow water Gulf of Mexico shelf oil and natural gas interests located within the non-operated Bay Marchand field in a tax-deferred exchange of properties.

The following table summarizes the estimated values of assets acquired and liabilities assumed and reflects management’s estimate of customary adjustments to purchase price provided for by the purchase and sale agreement of approximately $7.1 million to reflect an economic effective date of January 1, 2013.

 

 

 

 

(In thousands)

January 1, 2013

Oil and natural gas properties

$

16,515 

Asset retirement obligations

 

(1,398)

Net assets acquired

$

15,117 

We have accounted for our acquisitions using the purchase method of accounting for business combinations, and therefore we have estimated the fair value of the assets acquired and the liabilities assumed as of their respective acquisition dates. In the estimation of fair value, management uses various valuation methods including (i) comparable company analysis, which estimates the value of the acquired properties based on the implied valuations of other similar operations; (ii) comparable asset transaction analysis, which estimates the value of the acquired operations based upon publicly announced transactions of assets with similar characteristics; (iii) comparable merger transaction analysis, which, much like comparable asset transaction analysis, estimates the value of operations based upon publicly announced transactions with similar characteristics, except that merger analysis analyzes public to public merger transactions rather than solely asset transactions; and (iv) discounted cash flow analysis. The fair value is based on subjective estimates and assumptions, which are inherently subject to significant uncertainties which are beyond our control. These assumptions represent Level 3 inputs, as further discussed in Note 7, “Fair Value Measurements.”

Results of Operations and Pro Forma Information

Revenues and lease operating expenses attributable to acquired interests and properties were as follows:

 

 

 

 

 

 

 

Three Months Ended
March 31, 2014

 

 

(In thousands)

EI Interests:

 

 

 

Revenues

 

$

8,380 

Lease operating expenses

 

$

3,656 

WD29 Interests:

 

 

 

Revenues

 

$

3,232 

Lease operating expenses

 

$

59 

We have determined that the presentation of net income attributable to the acquired interests and properties is impracticable due to the integration of the related operations upon acquisition.  We incurred fees of approximately $0.1 million related to the Nexen Acquisition, which were included in general and administrative expenses in the accompanying condensed consolidated statements of operations for the three months ended March 31, 2014.

6

 


 

The following supplemental pro forma information presents consolidated results of operations as if the Nexen Acquisition and WD29 Acquisition had occurred on January 1, 2013. The supplemental unaudited pro forma information was derived from a) our historical condensed consolidated statements of operations, b) the statements of revenues and direct operating expenses of the EI Interests and c) the statements of revenues and direct operating expenses of the WD29 Interests, which were derived from our historical accounting records.  This information does not purport to be indicative of results of operations that would have occurred had the acquisitions occurred on January 1, 2013, nor is such information indicative of any expected future results of operations.

 

 

 

 

 

 

 

 

 

 

 

Pro Forma

 

 

Three Months Ended March 31,

 

 

2014

 

2013

(in thousands, except per share data)

 

 

Revenue

 

$

160,561 

 

$

199,488 

Net income

 

$

13,372 

 

$

34,129 

Basic earnings per share

 

$

0.34 

 

$

0.87 

Diluted earnings per share

 

$

0.34 

 

$

0.86 

 

(3) Earnings Per Share

The following table sets forth the calculation of basic and diluted weighted average shares outstanding and earnings per share for the indicated periods.

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2014

 

2013

 

 

(in thousands, except per share data)

Income (numerator):

 

 

 

 

 

 

Net income

 

$

13,331 

 

$

29,037 

Net income attributable to participating securities

 

 

(166)

 

 

(290)

Net income attributable to common shares

 

$

13,165 

 

$

28,747 

Weighted average shares (denominator):

 

 

 

 

 

 

Weighted average shares—basic

 

 

38,714 

 

 

38,823 

Dilutive effect of stock options

 

 

519 

 

 

381 

Weighted average shares—diluted

 

 

39,233 

 

 

39,204 

Basic earnings per share

 

$

0.34 

 

$

0.74 

Diluted earnings per share

 

$

0.34 

 

$

0.73 

The following table indicates the number of shares underlying outstanding stock-based awards excluded from the computation of dilutive weighted average shares because their effect was antidilutive for the periods indicated.

 

 

 

 

 

 

 

 

 

 

Three Monthls Ended March 31,

 

 

2014

 

2013

 

 

 

(in thousands)

Weighted average shares

 

 

497 

 

 

167 

 

 

7

 


 

(4) Asset Retirement Obligations

The following table reconciles the beginning and ending aggregate recorded amount of our asset retirement obligations.

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 2014

 

 

 

(in thousands)

Beginning of period total

 

$

255,450 

Accretion expense

 

 

6,997 

Liabilities assumed in acquisitions

 

 

18,097 

Revisions

 

 

3,759 

Liabilities settled

 

 

(15,047)

End of period total

 

 

269,256 

Less: End of period, current portion

 

 

46,076 

End of period, noncurrent portion

 

$

223,180 

 

 

(5) Indebtedness

The following table sets forth our indebtedness.

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2014

 

2013

 

 

(In thousands)

8.25% senior notes issued February 14, 2011 and October 25, 2012, face amount of $510.0 million,  interest rate of 8.25% payable semi-annually, in arrears on  February 15 and August 15 of each year, maturity date February 15, 2018

 

$

498,000 

 

$

497,355 

Senior Credit Facility, interest rate based on base rate or LIBOR plus a floating spread, maturity date October 31, 2016

 

 

220,000 

 

 

130,000 

Total indebtedness

 

 

718,000 

 

 

627,355 

Current portion of indebtedness

 

 

 -

 

 

 -

Noncurrent portion of indebtedness

 

$

718,000 

 

$

627,355 

8.25% Senior Notes

The 8.25% senior notes consist of $510.0 million in aggregate principal amount of our 8.25% senior notes due 2018 (the “8.25% Senior Notes”) issued under an Indenture dated February 14, 2011 (as amended and supplemented, the “2011 Indenture”). The 8.25% Senior Notes bear interest from the date of their issuance at an annual rate of 8.25% with interest due semi-annually, in arrears, on February 15th and August 15th of each year. The 8.25% Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured senior basis initially by each of our existing direct and indirect domestic subsidiaries (other than immaterial subsidiaries). The 8.25% Senior Notes will mature on February 15, 2018.  The effective interest rate on the 8.25% Senior Notes is approximately 9.1%.  For additional information regarding the 8.25% Senior Notes, see Note 7, “Indebtedness,” of our 2013 Annual Report.

On April 7, 2014, EXXI solicited consents (the “Consent Solicitation”) from the holders of our 8.25% Senior Notes to make certain proposed amendments to certain definitions set forth in the 2011 Indenture (the “COC Amendments”). Under the COC Amendments, the Merger will not be treated as a “change of control” for purposes of the 101% change of control put contained in the 2011 Indenture.  The Consent Solicitation was made by EXXI as permitted by the Merger Agreement. The COC Amendments will cease to be operative if the Merger is not consummated or if the consent fee is not paid by EXXI. If the Merger is consummated, EXXI will be obligated to pay an aggregate cash payment equal to $2.50 per $1,000 principal amount of 8.25% Senior Notes for which consents to the COC Amendments are validly delivered and unrevoked to the paying agent for the Consent Solicitation on behalf of the holders who delivered such valid and unrevoked consents to the COC Amendments on or prior to 5:00 p.m. New York City time on April 17, 2014. We have no obligations to pay all or any portion of the consent fee. On April 18, 2014, we entered into a supplemental indenture (the “Supplemental Indenture”) to the 2011 Indenture, by and among us, the guarantors party thereto, and U.S. Bank National Association, as trustee. We entered into the Supplemental Indenture after the receipt of consents from the requisite holders of the 8.25% Senior Notes in accordance with the terms and conditions of the Consent Solicitation.

Senior Credit Facility

On February 14, 2011, we entered into our senior secured credit facility with BMO Capital Markets, as lead arranger, and Bank of Montreal, as administrative agent and a lender, and the other lender parties thereto (as amended and restated, the

8

 


 

“Senior Credit Facility”). Our Senior Credit Facility is a revolving credit facility that can be used for revolving credit loans and letters of credit.  The aggregate commitment under this facility is a maximum of $750.0 million and the maturity date is October 31, 2016. The maximum amount of letters of credit that may be outstanding at any one time is $20.0 million. The amount available under the revolving credit facility is limited by the borrowing base. The borrowing base under our Senior Credit Facility has been determined at the discretion of the lenders, based on the collateral value of our proved reserves and is subject to potential special and regular semi-annual redeterminations.  In January 2014, our lenders approved a $50.0 million increase in our borrowing base to $475.0 million.  As of March 31, 2014 and December 31, 2013, we had borrowings outstanding under the Senior Credit Facility of $220.0 million and $130.0 million, respectively.  For additional information regarding our Senior Credit Facility, see Note 7, “Indebtedness,” of our 2013 Annual Report.

 

(6) Derivative Instruments and Hedging Activities

We enter into derivative instruments to reduce exposure to fluctuations in the price of oil and natural gas for a portion of our production. Our fixed-price swaps fix the sales price for a limited amount of our production and, for the contracted volumes, eliminate our ability to benefit from increases in the sales price of the production. Derivative instruments are carried at their fair value on the condensed consolidated balance sheets as Fair value of commodity derivative instruments and all gains and losses due to changes in fair market value and contract settlements are recorded in Gain (loss) on derivative instruments in Other income (expense) in the condensed consolidated statements of operations. See Note 7 for information regarding fair values of our derivative instruments.

The following tables set forth our derivative instruments outstanding as of March 31, 2014.

Oil Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed-Price Swaps

 

 

Daily Average

 

 

 

Average

 

 

Volume

 

Volume

 

Swap Price

Remaining Contract Term

 

(Bbls)

 

(Bbls)

 

($/Bbl)

April 2014

 

 

15,350 

 

 

460,500 

 

 

94.27 

May 2014

 

 

15,350 

 

 

475,850 

 

 

94.27 

June 2014

 

 

15,350 

 

 

460,500 

 

 

94.27 

July 2014

 

 

14,350 

 

 

444,850 

 

 

93.56 

August 2014

 

 

8,750 

 

 

271,250 

 

 

94.28 

September 2014

 

 

8,750 

 

 

262,500 

 

 

94.28 

October 2014

 

 

8,750 

 

 

271,250 

 

 

94.28 

November 2014

 

 

8,750 

 

 

262,500 

 

 

94.28 

December 2014

 

 

11,700 

 

 

362,700 

 

 

91.90 

2014 Total

 

 

11,898 

 

 

3,271,900 

 

 

93.91 

 

 

 

 

 

 

 

 

 

 

January 2015 - December 2015

 

 

1,500 

 

 

547,500 

 

 

97.70 

 

Gas Contracts

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed-Price Swaps

 

 

Daily Average

 

 

 

Average

 

 

Volume

 

Volume

 

Swap Price

Remaining Contract Term

 

(Mmbtu)

 

(Mmbtu)

 

($/Mmbtu)

April 2014 - December 2014

 

 

5,000 

 

 

1,375,000 

 

 

4.01 

January 2015 - December 2015

 

 

4,300 

 

 

1,569,500 

 

 

4.31 

9

 


 

The following table presents information about the components of loss on derivative instruments.

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31,

 

 

2014

 

2013

 

 

(in thousands)

 

 

 

 

 

 

 

Change in fair market value

 

$

3,746 

 

$

(7,383)

Loss on settlement

 

 

(16,888)

 

 

(6,568)

Total loss on derivative instruments

 

$

(13,142)

 

$

(13,951)

 

 

(7) Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC Topic 820, “Fair Value Measurements and Disclosures,” establishes a fair value hierarchy with three levels based on the reliability of the inputs used to determine fair value. These levels include: Level 1, defined as inputs such as unadjusted quoted prices in active markets for identical assets and liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions.

As of March 31, 2014 and December 31, 2013, we held certain financial assets and liabilities that are required to be measured at fair value on a recurring basis, primarily our commodity derivative instruments. The fair values of derivative instruments were measured using price inputs published by NYMEX and IntercontinentalExchange, Inc., or ICE. These price inputs are quoted prices for assets and liabilities similar to those held by us and meet the definition of Level 2 inputs within the fair value hierarchy.

Our commodity derivative instruments are subject to the terms of agreements with each of our counterparties that provide for the liquidation and settlement of all transactions with that counterparty in the event of default or termination.  Our counterparties under these agreements are participants in our Senior Credit Facility.  Although our derivative instruments are subject to enforceable set-off arrangements, we do not elect to offset amounts reported in our condensed consolidated balance sheet.

The following table presents the fair values of our commodity derivative instruments at their gross amounts and reflects the impact of our set-off arrangements which qualify for net presentation.

 

 

 

 

 

 

 

 

 

 

March 31,

 

December 31,

 

 

2014

 

2013

 

 

(in thousands)

Assets:

 

 

 

 

 

 

Current

 

$

55 

 

$

501 

Noncurrent

 

 

160 

 

 

238 

Total gross fair value

 

 

215 

 

 

739 

Less: counterparty set-off

 

 

(215)

 

 

(739)

Total net fair value

 

 

 -

 

 

 -

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Current

 

$

26,177 

 

$

29,636 

Noncurrent

 

 

1,326 

 

 

2,136 

Total gross fair value

 

 

27,503 

 

 

31,772 

Less: counterparty set-off

 

 

(215)

 

 

(739)

Total net fair value

 

 

27,288 

 

 

31,033 

The carrying values reported in the condensed consolidated balance sheet for cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short term maturities of these instruments. The fair value for the 8.25% Senior Notes is based on quoted prices, which are Level 1 inputs within the fair value hierarchy. The carrying value of the Senior Credit Facility approximates its fair value because the interest rates are variable and reflective of market rates, which are Level 2 inputs within the fair value hierarchy. 

10

 


 

The following table sets forth the carrying values and estimated fair values of our long-term indebtedness.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2014

 

December 31, 2013

 

 

(In thousands)

 

 

 

Carrying Value

 

 

Estimated Fair Value

 

 

Carrying Value

 

 

Estimated Fair Value

8.25% Senior Notes

 

$

498,000 

 

$

552,075 

 

$

497,355 

 

$

546,338 

Senior Credit Facility

 

 

220,000 

 

 

220,000 

 

 

130,000 

 

 

130,000 

Total

 

$

718,000 

 

$

772,075 

 

$

627,355 

 

$

676,338 

We evaluate our capitalized costs of proved oil and natural gas properties for potential impairment when circumstances indicate that the carrying values may not be recoverable. Our assessment of possible impairment of proved oil and natural gas properties is based on our best estimate of future prices, costs and expected net future cash flows by property (generally analogous to a field or lease). An impairment loss is indicated if undiscounted net future cash flows are less than the carrying value of a property. The impairment expense is measured as the shortfall between the net book value of the property and its estimated fair value, which is measured based on the discounted net future cash flows from the property. The inputs used to estimate the fair value of our oil and natural gas properties are based on our estimates of future events, including projections of future oil and natural gas sales prices, amounts of recoverable oil and natural gas reserves, timing of future production,  future costs to develop and produce our oil and natural gas and discount factors. These inputs meet the definition of Level 3 inputs within the fair value hierarchy.  

As addressed in Note 2, “Acquisitions,” we apply fair value concepts in estimating and allocating the fair value of assets acquired and liabilities assumed in acquisitions in accordance with purchase accounting for business combinations. The inputs to the estimated fair values of assets acquired and liabilities assumed are described in Note 2.

(8) Commitments and Contingencies

On March 21, 2014, we were the high bidder on 21 leases at the Central Gulf of Mexico Lease Sale 231. The 21 high bid lease blocks cover a total of 92,030 acres on a gross and net basis and are all located in the shallow Gulf of Mexico within our core area of operations. Our share of the high bids totaled approximately $8.2 million, of which $1.6 million, was paid in March 2014.

We maintain restricted escrow funds in a trust for future abandonment costs at our East Bay property. The trust was originally funded with $15.0 million and, with accumulated interest, increased to $16.7 million at December 31, 2008. We may draw from the trust upon completion of qualifying abandonment activities at our East Bay field. At March 31, 2014, we had $6.0 million remaining in restricted escrow funds for decommissioning work in our East Bay field, which will remain restricted until substantially all required decommissioning in the East Bay field is complete. Amounts on deposit in the trust account are reflected in Restricted cash on our condensed consolidated balance sheets.

We record liabilities when we deliver production that is in excess of our interest in certain properties. In addition to these imbalances, we may, from time to time, be allocated cash sales proceeds in excess of amounts that we estimate are due to us for our interest in production. These allocations may be subject to further review, may require more information to resolve or may be in dispute.

We and our oil and gas joint interest owners are subject to periodic audits of the joint interest accounts for leases in which we participate and/or operate. As a result of these joint interest audits, amounts payable or receivable by us for costs incurred or revenue distributed by the operator or by us on a lease may be adjusted, resulting in adjustments, increases or decreases, to our net costs or revenues and the related cash flows. Such adjustments may be material. When they occur, these adjustments are recorded in the current period, which generally is one or more years after the related cost or revenue was incurred or recognized by the joint account.

On March 19, 2014, an alleged stockholder filed a class action lawsuit on behalf of our stockholders against our Company, our directors, and EXXI, as defendants. The lawsuit is styled Antonio Lopez v. EPL Oil & Gas, Inc., et al., C.A. No. 9460-VCN, in the Court of Chancery of the State of Delaware.  On April 14, 2014, another alleged stockholder filed a class action lawsuit on behalf of our stockholders against our Company, our directors, and EXXI, as defendants. This lawsuit is styled David Lewandoski v. EPL Oil & Gas, Inc., et al., C.A. No. 9533-VCN, in the Court of Chancery of the State of Delaware.  On April 23, 2014, a third alleged stockholder filed a class action lawsuit on behalf of our stockholders against our Company, our directors, and EXXI, as defendants.  This lawsuit is styled Roberta Feinstein v. EPL Oil & Gas, Inc., et al., C.A. No. 9570-VCN, in the Court of Chancery of the State of Delaware. The foregoing lawsuits were consolidated by the Court of Chancery of the State of Delaware on May 5, 2014. The consolidated lawsuit is styled In re EPL Oil & Gas, Inc. Stockholders Litigation, Consol. C.A. No. 9460-VCN and is referred to herein as the “Delaware Action.”  The Lopez complaint, which was amended on April 15, 2014, was deemed the operative complaint in the Delaware Action.

11

 


 

Plaintiffs in the Delaware Action allege a variety of causes of action challenging the Merger, including that (a) our directors have allegedly breached fiduciary duties in connection with the Merger and (b) EXXI has allegedly aided and abetted in these alleged breaches of fiduciary duties. Plaintiffs causes of action are based on allegations that (i) the Merger allegedly provides inadequate consideration to our stockholders for their shares of our common stock; (ii) the Merger Agreement contains contractual terms that will allegedly dissuade other potential acquirers from making competing offers for shares of our common stock; (iii) certain of our officers and directors are allegedly receiving benefits—including (A) an offer for one of our directors to join the EXXI board of directors and (B) the triggering of change-in-control provisions in notes held by our executive officers—that are not equally shared by our stockholders; (iv) EXXI required our officers and directors to agree to vote their shares of our common stock in favor of the Merger; (v) we provided, and EXXI obtained, non-public information that allegedly allowed EXXI to acquire us for inadequate consideration; and (vi) the Registration Statement contains inadequate disclosures regarding the Merger.

Based on these allegations, plaintiffs in the Delaware Action seek to enjoin the defendants from proceeding with or consummating the Merger. To the extent that the Merger is consummated, plaintiffs seek to have the Merger Agreement rescinded. Plaintiffs also seek damages and attorneys’ fees.

To date, the defendants have not yet answered or filed responsive motions to the Delaware Action, other than to oppose plaintiffs’ motion to expedite the proceedings. We cannot predict the outcome of the Delaware Action or any other lawsuits challenging the Merger that might be filed subsequent to the date of the filing of this quarterly report; nor can we predict the amount of time and expense that will be required to resolve the Delaware Action. We intend to vigorously defend the Delaware Action.

We are a defendant in a number of other lawsuits and are involved in governmental and regulatory proceedings, all of which arose in the ordinary course of business, including, but not limited to, personal injury claims, royalty claims, contract claims, and environmental claims, including claims involving assets owned by acquired companies. While the ultimate outcome and impact on us cannot be predicted with certainty, management believes that the resolution of pending proceedings will not have a material adverse effect on our consolidated financial position, results of operations, or cash flows.

(9) Supplemental Condensed Consolidating Financial Information

In connection with issuing the 8.25% Senior Notes described in Note 5, all of our existing direct and indirect domestic subsidiaries (other than immaterial subsidiaries) each of which is 100% owned by EPL Oil & Gas, Inc. (the “Guarantor Subsidiaries”), jointly and severally guaranteed the payment obligations under our 8.25% Senior Notes. The guarantees are full and unconditional, as those terms are used in Rule 3-10 of Regulation S-X, except that a Guarantor Subsidiary can be automatically released and relieved of its obligations under certain customary circumstances contained in the 2011 Indenture.  So long as other applicable provisions of the indenture are adhered to, these customary circumstances include: when a Guarantor Subsidiary is declared “unrestricted” for covenant purposes, when the requirements for legal defeasance or covenant defeasance or to discharge the indenture have been satisfied, or when the Guarantor Subsidiary is sold or sells all of its assets. The following supplemental financial information sets forth, on a consolidating basis, the balance sheets, statements of operations and cash flow information for EPL Oil & Gas, Inc. (Parent Company Only) and for the Guarantor Subsidiaries. We have not presented separate financial statements and other disclosures concerning the Guarantor Subsidiaries, or for any individual Guarantor Subsidiary, because management has determined that such information is not material to investors.

The supplemental condensed consolidating financial information has been prepared pursuant to the rules and regulations for condensed financial information and does not include all disclosures included in annual financial statements. Certain reclassifications were made to conform all of the financial information to the financial presentation on a consolidated basis. The principal eliminating entries eliminate investments in subsidiaries, intercompany balances and intercompany revenues and expenses.

12

 


 

 

Supplemental Condensed Consolidating Balance Sheet

As of March 31, 2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Parent

 

 

 

 

 

 

 

 

Company

 

Guarantor

 

 

 

 

 

 

Only

 

Subsidiaries

 

Eliminations 

 

Consolidated 

 

 

(In thousands)

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,448 

 

$

 -

 

$

 -

 

$

4,448 

Trade accounts receivable - net

 

 

87,349 

 

 

135 

 

 

 -

 

 

87,484 

Intercompany receivables

 

 

34,788 

 

 

 -

 

 

(34,788)

 

 

 -

Fair value of commodity derivative instruments

 

 

55 

 

 

 -

 

 

 -

 

 

55 

Deferred tax asset

 

 

7,852 

 

 

 -

 

 

 -

 

 

7,852 

Prepaid expenses

 

 

4,979 

 

 

 -

 

 

 -

 

 

4,979 

Total current assets

 

 

139,471 

 

 

135 

 

 

(34,788)

 

 

104,818 

Property and equipment

 

 

2,260,701 

 

 

315,258 

 

 

 -

 

 

2,575,959 

Less accumulated depreciation, depletion, amortization and impairments

 

 

(567,498)

 

 

(96,972)

 

 

 -

 

 

(664,470)

Net property and equipment

 

 

1,693,203 

 

 

218,286 

 

 

 -

 

 

1,911,489 

Investment in affiliates

 

 

124,581 

 

 

 -

 

 

(124,581)

 

 

 -

Restricted cash

 

 

6,023 

 

 

 -

 

 

 -

 

 

6,023 

Fair value of commodity derivative instruments

 

 

160 

 

 

 -

 

 

 -

 

 

160 

Deferred financing costs

 

 

9,513 

 

 

 -

 

 

 -

 

 

9,513 

Other assets

 

 

1,343 

 

 

90 

 

 

 -

 

 

1,433 

Total assets

 

$

1,974,294 

 

$

218,511 

 

$

(159,369)

 

$

2,033,436 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

85,960 

 

$

698 

 

$

 -

 

$

86,658 

Intercompany payables

 

 

 -

 

 

34,788 

 

 

(34,788)

 

 

 -

Accrued expenses

 

 

157,868 

 

 

15 

 

 

 -

 

 

157,883 

Asset retirement obligations

 

 

46,076 

 

 

 -

 

 

 -

 

 

46,076 

Fair value of commodity derivative instruments

 

 

26,177 

 

 

 -

 

 

 -

 

 

26,177 

Total current liabilities

 

 

316,081 

 

 

35,501 

 

 

(34,788)

 

 

316,794 

Long-term debt

 

 

718,000 

 

 

 -

 

 

 -

 

 

718,000 

Asset retirement obligations

 

 

178,995 

 

 

44,185 

 

 

 -

 

 

223,180 

Deferred tax liabilities

 

 

115,100 

 

 

14,244 

 

 

 -

 

 

129,344 

Fair value of commodity derivative instruments

 

 

1,326 

 

 

 -

 

 

 -

 

 

1,326 

Other

 

 

821 

 

 

 -

 

 

 -

 

 

821 

Total liabilities

 

 

1,330,323 

 

 

93,930 

 

 

(34,788)

 

 

1,389,465 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Common stock

 

 

41 

 

 

 -

 

 

 -

 

 

41 

Additional paid-in capital

 

 

521,566 

 

 

85,479 

 

 

(85,479)

 

 

521,566 

Treasury stock, at cost

 

 

(32,182)

 

 

 -

 

 

 -

 

 

(32,182)

Retained earnings

 

 

154,546 

 

 

39,102 

 

 

(39,102)

 

 

154,546 

Total stockholders’ equity

 

 

643,971 

 

 

124,581 

 

 

(124,581)

 

 

643,971 

Total liabilities and stockholders' equity

 

$

1,974,294 

 

$

218,511 

 

$

(159,369)

 

$

2,033,436 

 

13

 


 

Supplemental Condensed Consolidating Balance Sheet

As of December 31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Parent

 

 

 

 

 

 

 

 

Company

 

Guarantor

 

 

 

 

 

 

Only

 

Subsidiaries

 

Eliminations 

 

Consolidated 

 

 

(In thousands)

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,812 

 

$

 -

 

$

 -

 

$

8,812 

Trade accounts receivable - net

 

 

70,520 

 

 

187 

 

 

 -

 

 

70,707 

Intercompany receivables

 

 

39,085 

 

 

 -

 

 

(39,085)

 

 

 -

Fair value of commodity derivative instruments

 

 

501 

 

 

 -

 

 

 

 

 

501 

Deferred tax asset

 

 

8,949 

 

 

 -

 

 

 -

 

 

8,949 

Prepaid expenses

 

 

6,868 

 

 

 -

 

 

 

 

 

6,868 

Total current assets

 

 

134,735 

 

 

187 

 

 

(39,085)

 

 

95,837 

Property and equipment

 

 

2,041,689 

 

 

313,530 

 

 

 -

 

 

2,355,219 

Less accumulated depreciation, depletion, amortization and impairments

 

 

(526,736)

 

 

(92,052)

 

 

 -

 

 

(618,788)

Net property and equipment

 

 

1,514,953 

 

 

221,478 

 

 

 -

 

 

1,736,431 

Investment in affiliates

 

 

122,697 

 

 

 -

 

 

(122,697)

 

 

 -

Deposit for Nexen Acquisition

 

 

7,040 

 

 

 -

 

 

 -

 

 

7,040 

Restricted cash

 

 

6,023 

 

 

 -

 

 

 -

 

 

6,023 

Fair value of commodity derivative instruments

 

 

238 

 

 

 -

 

 

 -

 

 

238 

Deferred financing costs

 

 

10,106 

 

 

 -

 

 

 -

 

 

10,106 

Other assets

 

 

2,067 

 

 

89 

 

 

 -

 

 

2,156 

Total assets

 

$

1,797,859 

 

$

221,754 

 

$

(161,782)

 

$

1,857,831 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

58,758 

 

$

673 

 

$

 -

 

$

59,431 

Intercompany payables

 

 

 -

 

 

39,085 

 

 

(39,085)

 

 

 -

Accrued expenses

 

 

131,111 

 

 

14 

 

 

 -

 

 

131,125 

Asset retirement obligations

 

 

51,601 

 

 

 -

 

 

 -

 

 

51,601 

Fair value of commodity derivative instruments

 

 

29,636 

 

 

 -

 

 

 -

 

 

29,636 

Total current liabilities

 

 

271,106 

 

 

39,772 

 

 

(39,085)

 

 

271,793 

Long-term debt

 

 

627,355 

 

 

 -

 

 

 -

 

 

627,355 

Asset retirement obligations

 

 

160,466 

 

 

43,383 

 

 

 -

 

 

203,849 

Deferred tax liabilities

 

 

106,910 

 

 

15,902 

 

 

 -

 

 

122,812 

Fair value of commodity derivative instruments

 

 

2,136 

 

 

 -

 

 

 -

 

 

2,136 

Other

 

 

673 

 

 

 

 

 

 

 

 

673 

Total liabilities

 

 

1,168,646 

 

 

99,057 

 

 

(39,085)

 

 

1,228,618 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

 -

 

 

 -

 

 

 -

 

 

 -

Common stock

 

 

41 

 

 

 -

 

 

 -

 

 

41 

Additional paid-in capital

 

 

519,114 

 

 

85,479 

 

 

(85,479)

 

 

519,114 

Treasury stock

 

 

(31,157)

 

 

 -

 

 

 -

 

 

(31,157)

Retained earnings

 

 

141,215 

 

 

37,218 

 

 

(37,218)

 

 

141,215 

Total stockholders’ equity

 

 

629,213 

 

 

122,697 

 

 

(122,697)

 

 

629,213 

Total liabilities and stockholders' equity

 

$

1,797,859 

 

$

221,754 

 

$

(161,782)

 

$

1,857,831 

 

14

 


 

Supplemental Condensed Consolidating Statement of Operations

Three Months Ended March 31, 2014