Earthstone Energy, Inc. Reports Second Quarter 2015 Financial Results
Quarterly Production of 4,517 Boepd
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E-mailTHE WOODLANDS, TX -- (Marketwired) -- 08/13/15 -- Earthstone Energy, Inc. (NYSE MKT: ESTE) ("Earthstone" or the "Company"), today announced financial results for the three month period ended June 30, 2015.
Second Quarter 2015 Highlights
- Average daily production of 4,517 Boepd, a 17% increase from the first quarter of 2015 and a 94% increase from the second quarter of 2014
- Total revenue of $16.7 million, which excludes any effects from hedges
- Reduced LOE and G&A on a per-unit basis of 18% and 19%, respectively, compared to the first quarter of 2015
- Adjusted EBITDAX(1) of $8.7 million
- Acquired 970 gross acres for Eagle Ford development and two Austin Chalk wells in southern Gonzales County. Completed the acquisition of 404 offsetting gross acres in Karnes County. These positions will provide for a total of 17 gross Eagle Ford wells, with drilling expected to begin in the fourth quarter of 2015 and continued development in 2016
- Acquired additional acreage in existing Bakken/Three Forks producing units in McKenzie County, North Dakota, for $1.4 million
- Divested North Louisiana properties for $3.5 million
(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 June 30, 2015, March 31, 2015, and June 30, 2014.
($000s except where noted) Three Months Ended
----------------------------------
June 30, March 31, June 30,
2015 2015 2014
---------- ---------- ----------
Total Revenue 16,733 11,320 12,145
Realized Hedge Settlements Gain (Loss) 943 1,494 (549)
Adjusted Revenue (including realized
hedge settlements) 17,676 12,814 11,596
Net (Loss) Income (748) (1,114) 1,530
(Loss) Earnings Per Share (Diluted) (0.05) (0.08) 0.17
Adjusted EBITDAX(1) 8,660 5,359 6,866
Production:
Oil (MBbls) 230 208 86
Gas (MMcf) 739 558 566
NGL (MBbls) 58 45 31
Total (MBOE) 411 346 211
Total daily production (BOEPD) 4,517 3,849 2,325
Average prices:
Oil ($/Bbl) 52.94 43.44 99.08
Gas ($/Mcf) 2.68 2.74 4.58
NGL ($/Bbl) 14.01 14.85 30.50
Total ($/Boe) 36.39 32.45 57.00
Adjusted for realized derivatives
settlements:
Oil ($/Bbl) 57.04 49.29 94.41
Gas ($/Mcf) 2.68 3.24 4.32
NGL ($/Bbl) 14.01 14.85 30.50
Total ($/Boe) 38.69 36.76 54.00
(1) See "Reconciliation of Non-GAAP Financials Measures" section below.
Acquisitions and Divestitures
In June 2015, the Company acquired a 50% operated interest in two gross Austin Chalk wells which hold approximately 970 gross acres in Gonzales County, Texas. The acreage, acquired for Eagle Ford development, is 100% held-by-production, with current gross production of approximately 44 barrels of oil equivalent per day (100% oil). The property was acquired from an unaffiliated party and purchased jointly with a private company that will participate in development with a 50% non-operated interest. The newly acquired acreage is adjacent to our existing 404 gross acres located in Karnes County, Texas, and will allow for 13 gross Eagle Ford wells to be drilled with an average lateral length of approximately 6,000 feet. These two properties straddle the Gonzales-Karnes County line. Pending certain acreage trades, the Karnes County acreage (in which we have a 33% operated working interest) will allow for four gross wells with an average lateral length of approximately 6,900 feet. We intend to develop both areas using 500 foot spacing between wells. Current plans include drilling two gross wells on each property in the fourth quarter of 2015, with continued development in 2016.
In June 2015, the Company acquired additional acreage in existing Bakken/Three Forks producing units primarily located in the Banks Field of McKenzie County, North Dakota, for $1.4 million. The acquisition included 164 net acres which will allow us to increase our working interest in 41 producing wells and 21 wells that are drilling or in the process of completing.
In April 2015, the Company divested all of its properties located in North Louisiana for $3.5 million. The sale included 25 producing wells that were primarily located in DeSoto and Caddo Parishes.
Management Comments
Frank A. Lodzinski, President and Chief Executive Officer of Earthstone Energy, Inc., commented, "While commodity prices remain challenging 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 competitive. Our strong operating and cost control capabilities and ability to consistently drill within budget are positive factors in this industry downturn. We are also focused on reducing operating and G&A costs on a per unit basis. Our operating and G&A costs decreased approximately 18% and 19%, respectively, between the first quarter and second quarter of 2015. Our cost improvements have allowed us to expand our activity with only a slight increase in our capital budget, resulting in continued growth into 2016. In the absence of protracted prices at current levels or further price declines, it is our intent to continue to run one rig consistently across existing and newly acquired acreage. We intend to continue to maintain our existing acreage in Fayette and Gonzales Counties and preserve future development potential in the Eagle Ford and other zones through economic drilling. In addition to expanding our acreage position, we are actively pursuing meaningful and attractive corporate M&A and asset acquisition opportunities. While relatively small, our acquisition and divestiture activities in the second quarter illustrate our direction, and we are working to expand such activities. We have sold certain assets with limited current production and future upside and redeployed proceeds into assets with current production and greater upside. Finally, we have experienced these significant price downturns before and are confident that we will continue our growth and acquire additional assets at attractive prices."
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, 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." Our corporate headquarters is located in The Woodlands, Texas. Additional information on Earthstone can be found at www.earthstoneenergy.com.
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 Securities and Exchange Commission 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.
EARTHSTONE ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
----------------- -----------------
ASSETS 2015 2014
----------------- -----------------
Current assets: (In thousands, except share amounts)
Cash and cash equivalents $ 44,870 $ 100,447
Accounts receivable:
Oil, natural gas, and natural
gas liquids revenues 15,010 14,016
Joint interest billings and
other 3,903 9,417
Prepaid expenses and other current
assets 1,176 1,578
Current derivative assets 600 3,569
----------------- -----------------
Total current assets 65,559 129,027
----------------- -----------------
Oil and gas properties, successful
efforts method:
Proved properties 349,589 317,006
Unproved properties 81,704 76,791
----------------- -----------------
Total oil and gas properties 431,293 393,797
----------------- -----------------
Accumulated depreciation, depletion,
and amortization (103,551) (97,920)
----------------- -----------------
Net oil and gas properties 327,742 295,877
Other noncurrent assets:
Goodwill 22,992 22,992
Office and other equipment, less
accumulated depreciation of $733
and $474 at June 30, 2015 and
December 31, 2014 2,130 2,109
Land 101 101
Other noncurrent assets 1,252 1,282
----------------- -----------------
TOTAL ASSETS $ 419,776 $ 451,388
================= =================
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 21,806 $ 28,753
Accrued expenses 9,120 20,529
Revenues and royalties payable 14,421 17,364
Advances 13,810 21,398
Asset retirement obligations 350 408
Current derivative liability 15 --
----------------- -----------------
Total current liabilities 59,522 88,452
Noncurrent liabilities:
Long-term debt 11,191 11,191
Asset retirement obligations 5,653 5,670
Deferred tax liability 28,387 29,258
Noncurrent derivative liabilities 97 --
Other noncurrent liabilities 260 289
----------------- -----------------
Total noncurrent liabilities 45,588 46,408
----------------- -----------------
Total liabilities 105,110 134,860
----------------- -----------------
Commitments and Contingencies (Note
10)
Equity:
Preferred stock, $0.001 par value,
20,000,000 shares authorized; none
issuedor outstanding -- --
Common stock, $0.001 par value,
100,000,000 shares authorized;
13,835,128 shares issued and
outstanding at June 30, 2015 and
December 31, 2014 14 14
Additional paid-in capital 358,086 358,086
Accumulated deficit (42,974) (41,112)
Treasury stock, 15,414 shares at
June 30, 2015 and December 31, 2014 (460) (460)
----------------- -----------------
Total equity 314,666 316,528
----------------- -----------------
TOTAL LIABILITIES AND EQUITY $ 419,776 $ 451,388
================= =================
EARTHSTONE ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June Six months ended June
30, 30,
------------------------ ------------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
REVENUES (In thousands, except share and per share amounts)
Oil, natural gas, and
natural gas liquids
revenues:
Oil $ 12,163 $ 8,508 $ 21,201 $ 16,376
Natural gas 1,982 2,593 3,512 5,346
Natural gas liquids 813 958 1,487 1,914
----------- ----------- ----------- -----------
Total oil, natural
gas, and natural
gas liquids
revenues 14,958 12,059 26,200 23,636
Gathering income 95 86 173 195
Gain on sales of oil
and gas properties,
net 1,680 -- 1,680 --
----------- ----------- ----------- -----------
Total revenues 16,733 12,145 28,053 23,831
----------- ----------- ----------- -----------
OPERATING COSTS AND
EXPENSES
Production costs:
Lease operating
expense 4,239 2,376 8,613 4,674
Severance taxes 746 509 1,376 998
Re-engineering and
workovers 167 121 286 319
Exploration expense 142 -- 142 --
Depreciation,
depletion, and
amortization 8,674 4,383 14,598 7,763
General and
administrative
expense 2,484 1,802 5,055 3,214
----------- ----------- ----------- -----------
Total operating
costs and expenses 16,452 9,191 30,070 16,968
----------- ----------- ----------- -----------
Income (loss) from
operations 281 2,954 (2,017) 6,863
OTHER INCOME (EXPENSE)
Interest expense, net (169) (152) (338) (297)
Net loss on derivative
contracts (1,318) (1,275) (644) (2,303)
Other income, net 163 3 257 7
----------- ----------- ----------- -----------
Total other income
(expense) (1,324) (1,424) (725) (2,593)
----------- ----------- ----------- -----------
(Loss) income before
income taxes (1,043) 1,530 (2,742) 4,270
Income tax benefit (295) -- (880) --
----------- ----------- ----------- -----------
Net (loss) income $ (748) $ 1,530 $ (1,862) $ 4,270
=========== =========== =========== ===========
Net (loss) income per
common share:
Basic $ (0.05) $ 0.17 $ (0.13) $ 0.47
Diluted $ (0.05) $ 0.17 $ (0.13) $ 0.47
Weighted average common
shares outstanding:
Basic 13,835,128 9,124,452 13,835,128 9,124,452
Diluted 13,835,128 9,124,452 13,835,128 9,124,452
EARTHSTONE ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
--------------------------
2015 2014
------------ ------------
Cash flows from operating activities: (In thousands)
Net (loss) income $ (1,862) $ 4,270
Adjustments to reconcile net (loss) income to
net cash (used in) provided by operating
activities:
Depreciation, depletion, and amortization 14,598 7,763
Unrealized loss on derivative contracts 3,081 1,214
Accretion of asset retirement obligations 282 151
Deferred income taxes (871) --
Amortization of deferred financing costs 130 76
Settlement of asset retirement obligations (46) (31)
Gain on sale of assets (1,680) --
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 4,397 (5,129)
Decrease (increase) in prepaid expenses and
other 427 (450)
(Decrease) increase in accounts payable and
accrued expenses (18,356) 5,453
(Decrease) increase in revenue and royalties
payable (2,895) 7,382
(Decrease) increase in advances (7,566) 15,441
------------ ------------
Net cash (used in) provided by operating
activities (10,361) 36,140
------------ ------------
Cash flows from investing activities:
Acquisitions of oil and gas property (5,430) --
Additions to oil and gas property and
equipment (42,888) (29,197)
Additions to other property and equipment (279) (229)
Proceeds from sales of oil and gas properties 3,506 --
------------ ------------
Net cash used in investing activities (45,091) (29,426)
------------ ------------
Cash flows from financing activities:
Deferred financing costs (125) (102)
------------ ------------
Net cash used in financing activities (125) (102)
------------ ------------
Net (decrease) increase in cash and cash
equivalents (55,577) 6,612
Cash and cash equivalents at beginning of period 100,447 25,423
------------ ------------
Cash and cash equivalents at end of period $ 44,870 $ 32,035
============ ============
Supplemental disclosure of cash flow information
Cash paid for:
Interest $ 175 $ 221
Non-cash investing and financing activities:
Asset retirement obligations $ 91 $ 29
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) depletion, depreciation, and amortization; (4) exploration expense; (5) interest expense; (6) interest income; (7) unrealized (gain) loss on derivatives; and (8) 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):
Three Months Ended
----------------------------------------------
June 30, 2015 March 31, 2015 June 30, 2014
-------------- -------------- --------------
Net income (loss) $ (748) $ (1,114) $ 1,530
(Gain) / loss on sale of
assets (1,680) - -
Accretion 137 145 77
Depletion, depreciation, and
amortization 8,674 5,924 4,383
Exploration expense 142 - -
Interest expense 182 185 152
Interest income (13) (16) -
Unrealized (gain) loss on
derivative contracts 2,261 820 725
Income tax expense (benefit) (295) (585) -
-------------- -------------- --------------
Adjusted EBITDAX $ 8,660 $ 5,359 $ 6,867
============== ============== ==============
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
Source: Earthstone Energy, Inc.
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