Emerald Oil, Inc. (NYSE MKT: EOX) (“Emerald” or the “Company”) today announced financial and operational results for the quarter ended September 30, 2014 and established production and CAPEX guidance for 2015.
Highlights
- Production of 351,755 BOE during the third quarter of 2014, an average of approximately 3,855 BOEPD, an increase of 3% compared to the second quarter of 2014 and 104% compared to the third quarter of 2013;
- EBITDA of $26.2 million; Adjusted EBITDA of $15.3 million for the third quarter of 2014;
- Net income attributable to common shareholders of $13.7 million or $0.21 per share (basic) for the third quarter of 2014 and adjusted net income attributable to common shareholders of of $5.3 million or $0.08 per share (basic) for the third quarter of 2014;
- LOE costs during the third quarter of 2014 of approximately $12.70 per BOE;
Production
For the third quarter of 2014, Emerald’s total production volumes on a BOE basis increased 104% compared to the third quarter of 2013. Production increased due to the addition of 5.69 net wells and the acquisition of 18.5 net operated Bakken/Three Forks wells during the third quarter of 2014. Emerald missed third quarter 2014 production guidance by 8% because of North Dakota mandated road shut downs due to heavy rains during the months of August and September. This resulted in completion scheduling delays, artificial lift installation deferrals and shut-ins of producing wells. The previously scheduled third quarter completion jobs will be completed during the fourth quarter of 2014 as well as scheduled artificial lift installations. Due to the temporary downtime associated with the artificial lift installations, Emerald is reducing its fourth quarter of 2014 average production guidance by approximately 6.5% to 4,300 BOEPD and exit rate guidance to 4,600 BOEPD. We elected to swap out electric submersible pumps to install rod pumps on multiple wells in Q3 and Q4 2014 in order to drive lifting costs down in 2015. Emerald realized an $82.61 average price per Bbl of oil (including settled derivatives) in the third quarter of 2014 compared to a $95.32 average price per Bbl of oil during the third quarter of 2013. For detailed well performance data see Emerald’s corporate presentation (available on its website, www.emeraldoil.com).
| Quarter Ended September 30, | ||||||
| 2014 | 2013 | |||||
| Sales Volume (Total) | ||||||
| Oil (Bbls) | 338,352 | 164,570 | ||||
| Gas (Mcf) | 80,417 | 48,648 | ||||
| Sales volumes (Boe) | 351,755 | 172,678 | ||||
| Average Daily Sales | ||||||
| Oil (Bbls) | 3,708 | 1,803 | ||||
| Gas (Mcf) | 881 | 533 | ||||
| Sales volumes (Boe) | 3,855 | 1,892 | ||||
| Average Sales Prices | ||||||
| Oil, Net of Settled Derivatives (Bbls) | $ | 82.61 | $ | 95.32 | ||
| Gas (Mcf) | 5.73 | 7.48 | ||||
| Barrel of Oil Equivalent with Settled Derivatives (Boe) | $ | 80.78 | $ | 92.96 | ||
Financial Results
Revenues from sales of oil and natural gas for the third quarter of 2014 were $28.7 million compared to $17.3 million for the same period in 2013. The increase is primarily due to higher production as a result of the Company’s well completions and its acquisition of certain properties in its Low Rider project area. Crude oil revenue accounted for approximately 98% of oil and gas sales recorded during the third quarter 2014.
Lease operating expenses for the third quarter of 2014 were $4.5 million, or $12.70 per BOE. Emerald also incurred non-recurring workover expenses associated with recently acquired properties of $2.5 million, or $7.10 per BOE. Workovers were focused on repairing rod pumps and artificial lift on recently acquired wells. Maintenance was required to restart wells due to the state mandated weather related road closures during the months of August and September which caused multiple days of shut-ins to existing producing wells. Weather related shut-ins should diminish in the first quarter of 2015 once the midstream gathering installation is complete because the company will be less reliant on trucks to transport oil and liquids. Emerald expects the construction of both the Low Rider core electrical and midstream system to be complete by February 1, 2015.
General and administrative expenses for the third quarter of 2014 were $5.5 million compared to $6.2 million in the third quarter 2013. G&A decreased 28% from the second quarter of 2014. Share-based compensation expenses are included in the employee compensation and related expenses, totaling $2.8 million in the third quarter of 2014 compared to $4.2 million in the third quarter of 2013. The decrease in G&A expense is attributed to realized and ongoing corporate and operational expense reductions targeting increased EBITDA margins.
Adjusted EBITDA was $15.3 million for the third quarter of 2014, compared to $10.1 million for the same period in 2013, reflecting a 52% increase. Adjusted Net Income was $5.3 million for the third quarter of 2014. Adjusted EBITDA and Adjusted Net Income are non-GAAP financial measures. For additional information please refer to the reconciliation of these measures at the end of this news release.
2015 Development Plan
Emerald based its 2015 development plan upon a range of commodity price forecasts due to recent volatility in the price of oil. The initial 2015 production and CAPEX guidance is based upon a more conservative 2.25 rig program that assumes moving to a two-rig program in the late first quarter of 2015. Management will make a definitive decision whether or not the company will continue drilling with 3 rigs or move to a 2.25 rig program in the first quarter of 2015. Under a revised 2.25 rig program for 2015, the company will focus the majority of its development activies on holding undeveloped acreage in McKenzie County, ND and will reduce infill drilling activity in order to accelerate the HBP (Held by Production) process for all of Emerald’s leasehold. This 2.25 rig drilling program will hold approximately 85% of Emerald’s undeveloped acreage by the end of 2015 and 100% by the second quarter of 2016. If realized oil prices (net of Bakken differentials) and the forward oil curve rebound, then Emerald has the flexibility to maintain its current three-rig operated program and hold all undeveloped acreage by the end of 2015. Both the 2.25 and three-rig operated drilling programs sequences are provided below.
2015 Production and CAPEX Guidance
Assumes Emerald’s currently anticipated 2.25 rig program for 2015.
| Boe/d Range | |||||||
| Low End | High End | ||||||
| 1Q 2015 Average | 4,500 | 4,800 | |||||
| 2Q 2015 Average | 5,400 | 5,700 | |||||
| 3Q 2015 Average | 5,800 | 6,250 | |||||
| 4Q 2015 Average | 6,000 | 6,400 | |||||
| 2015 Average | 5,425 | 5,800 | |||||
| Year over year average production growth | 50 | % | 60 | % | |||
| 2015 Exit Rate | 6,200 | 6,600 | |||||
| Year over year average Exit Rate growth | 35 | % | 43 | % | |||
| 2015 Capital Expenditures Range ($mm) | |||||||
| Low End | High End | ||||||
| 2015 Drilling and Completion Budget | $ | 210.0 | $ | 240.0 | |||
| 2015 Land Budget | $ | 5.0 | $ | 20.0 | |||
| Net Operated Well Count | 22.1 | 25.2 | |||||
Credit Facility Update
The Company and its lending syndicate are currently in the final stages of completing the semi-annual borrowing base redetermination of its revolving credit facility. Emerald expects the borrowing base to increase by $50 million to $250 million upon completion of the current redetermination. Emerald and its lenders expect this process to be finalized in the coming weeks. The Company will announce the borrowing base increase upon completion. Emerald expects the next borrowing base redetermination will take place in March 2015.
Management Comments
McAndrew Rudisill the Chief Executive Officer of Emerald stated “Emerald is well positioned to weather the current oil price environment. Despite the recent drop in the price of oil, our borrowing base is pending to increase upon completion of the current redetermination. Based upon our currently planned 2.25 rig program in 2015, Emerald is fully financed to fund our entire 2015 capital expenditure program without requiring access to debt or equity capital markets. Our borrowing base is going to continue to grow as we add new reserves in currently undeveloped drilling spacing units. Our 2015 development efforts are focused on HBPing our entire McKenzie County, ND position. We expect to drive both LOE and differentials down further through improved midstream infrastructure solutions across all of our leasehold. Our midstream and electrical infrastructure is progressing on schedule and will be complete in February 2015. We are prepared for further volatility in the oil markets and have retained the optionality to maintain the current 3 rig development plans if the opportunity presents. I am pleased to note that our first 90 stage coil tubing completion job in the Pronghorn Sand on Lloyd Christmas 4 resulted in a 24 hour initial production rate of 1337 BOE/d and an average 30 day production rate of 696 BOE/d.”
Hedging Activity
The following table reflects open commodity swap contracts as of September 30, 2014, the associated volumes and the corresponding weighted average NYMEX reference price:
| Settlement Period | Oil (Bbls) | Fixed Price Range |
|||
| Oil Swaps | |||||
| October 1, 2014 – December 31, 2014 | 29,468 | $ | 90.00 – 93.00 | ||
| October 1, 2014 – December 31, 2014 | 21,600 | 93.01 – 96.00 | |||
| October 1, 2014 – December 31, 2014 | 251,985 | 96.01 – 99.00 | |||
| October 1, 2014 – December 31, 2014 | 82,612 | 99.01 – 102.00 | |||
| 2014 Total/Average | 385,665 | $ | 97.16 | ||
| January 1, 2015 – April 30, 2015 | 18,876 | $ | 90.00 – 93.00 | ||
| January 1, 2015 – April 30, 2015 | 93,100 | 93.01 – 96.00 | |||
| January 1, 2015 – April 30, 2015 | 341,251 | 96.01 – 99.00 | |||
| 2015 Total/Average | 453,227 | $ | 96.24 | ||
On October 3, 2014, the Company partially settled outstanding NYMEX West Texas Intermediate oil derivative swap contracts on a total of 396,000 barrels of oil, resulting in an estimated cash settlement of $3,499,880.
Conference Call
Emerald will host a conference call on Tuesday, November 4, 2014 at 10:00 a.m. Eastern Time (8:00 a.m. Mountain Time) to discuss financial and operational results for the quarter and year end.
| Emerald Oil, Inc. 3Q2014 Financial and Operational Results Conference Call | ||
| Date: | Tuesday, November 4, 2014 | |
| Time: | 10:00 a.m. Eastern Time | |
| 9:00 a.m. Central Time | ||
| 8:00 a.m. Mountain Time | ||
| 7:00 a.m. Pacific Time | ||
| Webcast: | Live and rebroadcast over the Internet at the Emerald Oil website | |
| Website: | http://www.emeraldoil.com/ | |
| Telephone Dial-In: | 877-407-8831 (toll-free) and 201-493-6736 (international) | |
| Telephone Replay: | Available through Tuesday, November 11, 2014 | |
| 877-660-6853 (toll-free) and 201-612-7415 (international) | ||
| Passcode: 413333 | ||
About Emerald
Emerald is an independent exploration and production operator that is focused on acquiring acreage and developing wells in the Williston Basin of North Dakota and Montana, targeting the Bakken and Three Forks shale oil formations and Pronghorn sand oil formation. Emerald is based in Denver, Colorado. More information about Emerald can be found at www.emeraldoil.com.
