Form 8-K EARTHSTONE ENERGY INC For: May 13

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report: May 13, 2015

(Date of earliest event reported)

 

(Exact name of registrant as specified in its charter)

 

 

1400 Woodloch Forest Drive, Suite 300

The Woodlands, Texas 77380

(Address of principal executive offices) (Zip Code)

(281) 298-4246

(Registrant’s telephone number, including area code)

(Former name or former address, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

 

 

---

 

Item 2.02 Results of Operations and Financial Condition.

 

On May 14, 2015, Earthstone Energy, Inc. (the “Registrant”) issued a press release announcing its financial results for the quarter ended March 31, 2015. A copy of the press release is furnished herewith as Exhibit 99.1.

 

The information in this Current Report on Form 8-K furnished pursuant to Item 2.02, including Exhibit 99.1, shall not be deemed to be

“filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liability under that section, and they shall not be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 7.01 Regulation FD Disclosure.

 

On May 13, 2015, the Registrant issued a press release announcing conference call details related to its financial results for the quarter ended March 31, 2015. A copy of the press release is furnished herewith as Exhibit 99.2.

 

The information in this Current Report on Form 8-K furnished pursuant to Item 7.01, including Exhibit 99.2, shall not be deemed to be “filed” for the purposes of Section 18 of the Exchange Act of 1934, or otherwise subject to liability under that section, and they shall not be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing. By filing this Current Report on Form 8-K and furnishing this information pursuant to Item 7.01, the Registrant makes no admission as to the materiality of any information in this Current Report on Form 8-K, including Exhibit 99.2 that is required to be disclosed solely by Regulation FD.

 

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

The following exhibits are furnished with this Current Report on Form 8-K:

 

 

 

 

---

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

---

 

EXHIBIT INDEX

 

 

 

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

 

Earthstone Energy, Inc. Reports First Quarter 2015
Financial and Operating Results

 

Record Quarterly Production of 3,849 Boepd

Houston, Texas, May 14, 2015 – Earthstone Energy, Inc. (NYSE MKT: ESTE) (“Earthstone” or the “Company”), today announced financial and operating results for the three month period ended March 31, 2015 and provided an operations update.

 

 

First Quarter 2015 Highlights

(1)See “Reconciliation of Non-GAAP Financials Measures” section below.

 

 

Selected Financial and Operational Data

The below tables provide selected financial and operational data for the three months ended March 31, 2015 and 2014.

---

 

 

Operations Update

During the first quarter of 2015, we produced 3,849 barrels of oil equivalent per day, a 71% increase from the first quarter of 2014 and a 39% increase from the fourth quarter of 2014.  Production consisted of 60% oil, 27% natural gas, and 13% natural gas liquids.  We are currently running one rig in our operated Eagle Ford/Austin Chalk development program and have begun working through our frac inventory, which as of March 31, 2015, consisted of 17 gross wells.

Operated Eagle Ford – Fayette, Gonzales, and Karnes Counties, Texas

In late March 2015, we resumed completion operations that we had suspended in November 2014 due to low commodity prices.  We anticipate that the three-well Richards North Unit and the two-well Murphy North Unit will come online in the second quarter of 2015.  These wells are currently flowing back.  We further plan to complete at least two wells in each of our Rumley Unit and Hope Unit, with first production expected in the second quarter of 2015.  We will complete the remaining

---

wells during the third and fourth quarters of 2015.  We own an average working interest of 45% in these wells.  Current completion costs per stage have declined 35% to 40% relative to similarly designed frac stages from November 2014.  

During the first quarter of 2015, we drilled two gross Eagle Ford wells in our Flatonia Townsite Unit, with first production expected in September 2015.  We anticipate drilling the two-well Eagle Ford Boggs Unit located in Karnes County, Texas, this summer, with first production expected early in the fourth quarter of 2015.  We own a 50% working interest in the Flatonia Townsite Unit and a 66% working interest in the Boggs Unit.

Operated Upper Austin Chalk – Fayette County, Texas

We are currently drilling the Reeves 1H well (first production expected in June 2015) and will subsequently drill the Viven 1H well (first production expected in July 2015).  After these two wells are drilled, the rig will then move to the two-well Boggs Unit (Eagle Ford) in Karnes County, Texas, and then return to Fayette County, Texas, to drill the South Greene well (first production expected in September 2015).  Drilling the Upper Austin Chalk formation provides good economics and will hold large acreage positions, ranging from approximately 900 acres to 1,500 acres, which will allow for future Eagle Ford development.  We own approximately a 47% to 50% working interest in these three Upper Austin Chalk wells.

Non-Operated Eagle Ford – La Salle County, Texas

We participated in four gross Eagle Ford wells drilled by Lewis Energy in 2014, three of which came online in late December 2014.  We participated in nine gross wells drilled by BHP in 2014, all of which came online between February and April 2015.  We own a 10% working interest in each of these 13 wells.

Non-Operated Bakken/Three Forks

As of March 31, 2015, we were participating in the drilling or completion of 54 gross (1.3 net) wells, 39 of which had initial operations in 2014.

 

---

 

Management Comments

 

Frank A. Lodzinski, President and Chief Executive Officer of Earthstone Energy, Inc., commented, “Commodity prices in the first quarter were very challenging, but we have benefited from a significant reduction in drilling and completion costs. In particular, completion costs are down 35% to 40%.  These savings have resulted in our field level economics remaining very competitive.  We are also focused on reducing operating and G&A costs on a per unit basis.  Recent improvements in the price of oil and the resumption of completion operations will result in increased future production, revenues, and cash flows. As such, we are reaffirming our 2015 full year guidance. We have experienced these significant price downturns before and are confident that we will continue our growth and acquire additional assets. We continue to actively pursue corporate M&A and asset acquisition opportunities, including ground floor leasing if attractive at current prices.”

 

 

Guidance Reaffirmed

 

We reaffirm our 2015 full year guidance that was previously announced on March 9, 2015.

 

Although our general plan is to develop our acreage with a continuous one rig program throughout 2015 and 2016, our current capital budget and guidance shown below is based on i) the resumption of completion operations in late March and ii) resumption of drilling operations in April with a one rig drilling program through the summer of 2015.  Our land budget is intended to maintain and expand our acreage position, but it does not reflect additional meaningful acquisitions.  We will continue to evaluate drilling and completion operations, prevailing prices, and costs. Accordingly, our budget is subject to change.

 

 

---

 

 

 

Note: Guidance is forward-looking information that is subject to a number of risks and uncertainties, many of which are beyond the Company’s control. See “Forward-Looking Statements” section below.

 

 

Liquidity

 

We are currently involved in our spring redetermination process related to our borrowing base.  As of today, our borrowing base is $80.0 million, with $11.2 million of outstanding indebtedness and $0.3 million of outstanding letters of credit.  With $68.5 million of availability under our borrowing base and $59.7 million of cash as of March 31, 2015, our liquidity totals $128.2 million.

 

 

Hedging Update

 

With the recent improvement in the price of oil, we have added hedges and will likely continue to do so.  In March and April 2015, we entered into WTI swaps hedging 25,000 barrels a month at an average price of $58.60 per barrel from May 2015 through March 2016; 20,000 barrels a month at an average price of $59.40 per barrel from April 2016 through June 2016; and 10,000 barrels a month at an average price of $60.80 per barrel from July 2016 through December 2016.  When combined with 2015 hedges executed during 2014, we have hedged a total of 292,000 barrels of 2015 production at an average price of $69.41 per barrel and 195,000 barrels of 2016 production at an average price of $59.65 per barrel.

 

 

Divestiture of Louisiana Assets

 

On April 6, 2015, we closed the sale of our north Louisiana properties for $3.5 million to an undisclosed buyer.  The sale included 25 producing wells primarily located in Caddo and DeSoto Parishes.  

 

 

About Earthstone Energy, Inc.

 

Earthstone Energy, Inc. is a growth-oriented independent oil and gas exploration and production company engaged in the development and acquisition of oil and gas reserves through an

---

active and diversified program that includes the acquisition, drilling and development of undeveloped leases, and purchases of reserves and exploration activities, with its current primary assets located in the Eagle Ford trend of south Texas and in the Williston Basin of North Dakota and Montana. Earthstone is traded on NYSE MKT under the symbol “ESTE.” Information on Earthstone can be found at www.earthstoneenergy.com. Our corporate headquarters is located in The Woodlands, Texas. We also have an operating office in Denver, Colorado.

 

FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not strictly historical statements constitute forward-looking statements and may often, but not always, be identified by the use of such words such as “expects,” “believes,” “intends,” “anticipates,” “plans,” “estimates,” “potential,” “possible,” or “probable” or statements that certain actions, events or results “may,” “will,” “should,” or “could” be taken, occur or be achieved. The forward-looking statements include statements about future operations, expansion of production and development acreage, increased cash flow, earnings and assets and access to capital. Forward-looking statements are based on current expectations and assumptions and analyses made by Earthstone and its management in light of experience and perception of historical trends, current conditions and expected future developments, as well as other factors appropriate under the circumstances. However, whether actual results and developments will conform to expectations is subject to a number of material risks and uncertainties, including but not limited to: the risks of the oil and gas industry (for example, the recent rapid, significant decline in oil prices and operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits); the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future oil and gas prices, production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather; inability of management to execute its plans to meet its goals; unavailability of gathering systems, pipelines and processing facilities; and the possibility that government policies may change. Earthstone’s annual report on Form 10-K for the year ended December 31, 2014, quarterly reports on Form 10-Q, recent current reports on Form 8-K, and other SEC filings discuss some of the important risk factors identified that may affect Earthstone’s business, results of operations, and financial condition. Earthstone undertakes no obligation to revise or update publicly any forward-looking statements except as required by law.

 

 

 

Contact:

Neil K. Cohen

Vice President, Finance, and Treasurer

Earthstone Energy, Inc.

1400 Woodloch Forest Drive, Suite 300

The Woodlands, TX 77380

281-298-4246

 

 

 

---

EARTHSTONE ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited) 

 

 

---

EARTHSTONE ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

---

EARTHSTONE ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

---

Earthstone Energy, Inc.
Reconciliation of Non-GAAP Financial Measures
Unaudited

Adjusted EBITDAX

Adjusted EBITDAX is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors, commercial banks and others, to assess our operating performance compared to that of other companies in our industry, without regard to financing methods, capital structure or historical costs basis.  It is also used to assess our ability to incur and service debt and fund capital expenditures.  We define “Adjusted EBITDAX” as net income (loss) plus (1) (gain) loss on sale of assets; (2) accretion; (3) impairment expense; (4) depletion, depreciation, and amortization; (5) exploration expense; (6) interest expense; (7) interest income; (8) unrealized (gain) loss on derivatives; and (9) income tax expense (benefit).

 

Our Adjusted EBITDAX should not be considered an alternative to net income (loss), operating income (loss), cash flow provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with the generally accepted accounting principles (“GAAP”).  Our Adjusted EBITDAX may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDAX in the same manner.

 

The following table provides a reconciliation of net income to Adjusted EBITDAX for the periods indicated (in thousands):

 

 

 

 

 

Exhibit 99.2

 

 

FOR IMMEDIATE RELEASE

 

Earthstone Energy, Inc. Announces First Quarter 2015 Conference Call for Monday, May 18, 2015 at 11:00 a.m. Eastern

 

Houston, Texas, May 13, 2015 – Earthstone Energy, Inc. (NYSE MKT: ESTE) (“Earthstone” or the “Company”), announced today that its management will host a conference call on
Monday, May 18, 2015, at 11:00 a.m. Eastern (10:00 a.m. Central) to discuss the Company’s operations and financial results for the first quarter of 2015 and its outlook for 2015. Prepared remarks by Frank A. Lodzinski, President and Chief Executive Officer, and Robert J. Anderson, Executive Vice President, Corporate Development and Engineering, will be followed by a question and answer session.

Investors and analysts are invited to participate in the call by dialing 877-407-8035 for domestic calls or 201-689-8035 for international calls, in both cases asking for the Earthstone conference call.

A replay of the call will be available on the Company’s website and by telephone until 11:59 p.m. Eastern (10:59 p.m. Central), June 1, 2015. The number for the replay is 877-660-6853 for domestic calls or 201-612-7415 for international calls, using Conference ID: 13610292.

 

About Earthstone Energy, Inc.

 

Earthstone Energy, Inc. is a growth-oriented independent oil and gas exploration and production company engaged in the development and acquisition of oil and gas reserves through an active and diversified program that includes the acquisition, drilling and development of undeveloped leases, and purchases of reserves and exploration activities, with its current primary assets located in the Eagle Ford trend of south Texas and in the Williston Basin of North Dakota and Montana. Earthstone is traded on NYSE MKT under the symbol “ESTE.” Information on Earthstone can be found at www.earthstoneenergy.com. Our corporate headquarters is located in The Woodlands, Texas. We also have an operating office in Denver, Colorado.

 

 

 

Contact:

Neil K. Cohen

Vice President, Finance, and Treasurer

Earthstone Energy, Inc.

1400 Woodloch Forest Drive, Suite 300

The Woodlands, TX 77380

281-298-4246

 

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• 420 with CNW — Study Enumerates Therapeutic Effects, Quality of Life Benefits of Medical Cannabis
• USCB Financial Holdings, Inc. Reports Diluted EPS of $0.23 for Q1 2024 and Announces Adoption of New 500,000 Share Repurchase Program
• Phillips Edison & Company Reports First Quarter 2024 Results and Affirms Full Year Earnings Guidance