Lonestar Resources, Ltd. March 2015 Quarterly Report
FORT WORTH, Texas, April 30, 2015 /PRNewswire/ -- Lonestar Resources, Ltd. (ASX:LNR, OTCQX: LNREF) is pleased to provide an update on its financial and operational results for the three months ended March 31, 2015 (1Q15).
First Quarter Highlights
- Lonestar Resources registered a 46% increase in net oil and gas production to 5,547 BOEPD in 1Q15, vs. 3,800 BOEPD in 1Q14, 83% of which was crude oil and NGL's. The Company's Eagle Ford Shale properties recorded a 55% increase in net oil and gas production to 4,827 BOEPD in the first quarter of 2015.
- Net Revenues From Ordinary Activities increased 14% to US$29.1 million for 1Q15, vs. 1Q14 revenues of $25.6 million. This increase was achieved despite a 51% decrease in average West Texas Intermediate prices.
- EBITDAX rose 14% to $21.7 million for 1Q15 vs. $19.1 million for 1Q14, as increased production and incremental revenues from crude oil hedges more than offset a 53% decrease in its average wellhead price.
- Excluding a $3.8 million unrealized loss on commodity derivatives and a non-recurring $0.7 million loss on sale of oil and gas properties, Lonestar would have reported Net Income of $3.7 million for 1Q15 vs. Net Income of $7.2 million reported for 1Q14.
- The Company's Borrowing Base on its Senior Secured Revolving Credit Facility has been re-affirmed at $150 million, $89 million of which was undrawn at March 31, 2015.
- Lonestar is pleased to announce that it has reached definitive agreements to acquire leasehold associated with approximately 6,122 gross / 4,047 net mineral acres in La Salle County, Texas. Lonestar's independent engineering consultant estimates that Proved net reserves associated with these properties are 2.7 million barrels of liquids and 11.0 billion cubic feet of natural gas, or 4.5 million barrels of oil equivalent (MMBOE). More importantly, Lonestar estimates that Proved and Probable net reserves associated with the transactions are 6.4 million barrels of liquids and 26.3 billion cubic feet of natural gas, or 10.8 MMBOE.
With the first quarter under its belt, Lonestar reiterates its previous 2015 guidance. Based on a price range or $50 to $60 per barrel for West Texas Intermediate and the expectation for the Company to drill 15 gross wells in 2015, Lonestar currently forecasts production levels to average between 5,700 and 6,100 BOE per day, which yields EBITDAX guidance of $84 to $95 million for 2015.
Management's Discussion and Analysis
Lonestar Resources, Ltd. is pleased to announce its operational and unaudited financial results for the quarter ended March 31, 2015.
Lonestar Resources, Ltd. ("Lonestar" or the "Company") is listed on the Australian Securities Exchange (ASX) and the OTCQX in the United States, and is headquartered in Fort Worth, Texas. Lonestar Resources is focused on the acquisition, development and production of unconventional resources in the United States. Alongside optimizing cash flows from its Conventional assets, Lonestar is focusing its attention and capital to continuing its growth strategy in the crude oil window of the Eagle Ford Shale. Lonestar currently operates 100% of its 34,180 net acres in the Eagle Ford, and continues to expand its leasehold. Lonestar believes it is capitalized to fund the development of its existing Eagle Ford Shale drilling inventory though internal means. Lonestar is also engaged in an early-stage project in the Bakken Petroleum System, where it has assembled a 52,559 acre leasehold (34,163 net acres) and tested light oil from the Bakken, Three Forks and Lower Lodgepole formations.
FIRST QUARTER 2015 HIGHLIGHTS
- Lonestar is pleased to announce that it has reached definitive agreements to acquire leasehold associated with approximately 6,122 gross / 4,047 net mineral acres in La Salle County, Texas. Lonestar's independent engineering consultants estimates that Proved net reserves associated with these properties are 2.7 million barrels of liquids and 11.0 billion cubic feet of natural gas, or 4.5 million barrels of oil equivalent (MMBOE). More importantly, Lonestar's independent engineering consultants estimate that Proved and Probable net reserves associated with the purchase are 6.4 million barrels of liquids and 26.3 billion cubic feet of natural gas, or 10.8 MMBOE. The addition of this leasehold adds 32 gross / 20 net horizontal Eagle Ford Shale drilling locations to Lonestar's drilling inventory. At year-end 2014, Lonestar held interests in 143 engineered Eagle Ford Shale drilling locations. This acreage is in two blocks and is in different parts of La Salle County, Texas:
- Greater Burns Ranch- Lonestar has added 1,720 gross / 1,225 net acres, in the Greater Burns Ranch area of northern La Salle County. This acquisition represents the third bolt-on deal closed since Lonestar established a footprint on the Burns Ranch when it acquired interests from Clayton Williams Energy, Inc. in March, 2014. Lonestar expended $2.1 million to acquire all of the working interests it did not previously own in 960 gross / 480 net acres, which holds 9 gross / 4 net Eagle Ford drilling locations with lateral lengths of 8,000 feet, and acquired interests in 760 gross / 745 net acres in offsetting acreage which may hold as many as 4 additional Eagle Ford drilling locations. The purchase also adds net production of 33 barrels of oil equivalent per day (BOEPD) from 5 Austin Chalk wells, which hold all of the leasehold by production. Lonestar's independent engineering consultants estimate that Proved net reserves associated with the purchase are 0.5 million barrels of liquids and 0.6 billion cubic feet of natural gas, or 0.6 million barrels of oil equivalent (MMBOE). Lonestar's independent engineering consultant estimates that Proved and Probable net reserves associated with the purchase are 1.3 million barrels of liquids and 1.6 billion cubic feet of natural gas, or 1.6 MMBOE.
- "Horned Frog"- Lonestar has executed a farm-in agreement via which we will acquire working interests in 4,402 gross / 2,822 net acres in west central La Salle County. This acreage, which is in a contiguous block, affords Lonestar the potential to drill a minimum of 19 gross / 12 net horizontal wells with lateral lengths of approximately 8,000 feet. The agreement calls for Lonestar to drill two wells in 2015 to hold this leasehold. Lonestar's independent engineering consultant estimates that Proved net reserves associated with the farm-in are 2.1 million barrels of liquids and 10.4 billion cubic feet of natural gas, or 3.9 MMBOE. Lonestar independent engineering consultant estimates that Proved and Probable net reserves associated with the farm-in are 5.1 million barrels of liquids and 24.7 billion cubic feet of natural gas, or 9.2 MMBOE. Additional reserves upside lies in the 1,580 net unleased net mineral acres on the block. Lonestar believes that it is in an excellent position to acquire these working interests associated with this tract, which would increase these reserves estimates by approximately 50%.
- Lonestar's senior lending group, led by Wells Fargo, re-affirmed the borrowing base on our Senior Secured Credit Facility at $150 million., $89 million of which was undrawn at March 31, 2015.
- Lonestar's net production for the first quarter of 2015 rose 46% to 5,547 BOE per day. First quarter 2015 volumes were comprised of 4,043 barrels of oil per day, 542 barrels of NGL's per day, and 5,770 Mcf of natural gas per day. First quarter production was comprised of 83% crude oil and natural gas liquids, and 17% natural gas.
- In the first quarter of 2015, Lonestar generated Discretionary Cash Flow of $15.5 million, a 30% decrease over first quarter 2014 Discretionary Cash Flow of $21.1 million.
- As has been our practice since inception, crude oil hedging has been a key element to providing visibility to its cash flow streams and associated liquidity in the current crude oil price environment. Currently, the Company has West Texas Intermediate (WTI) swaps covering 2,359 barrels of oil per day for the remainder of 2015 at an average strike price of $87.33 per barrel and WTI swaps covering 2,276 barrels of oil per day for calendar 2016 at an average strike price of $77.15 per barrel. The Company has also entered into three-way collars covering 1,000 bopd in 2017.
EAGLE FORD SHALE TREND- WESTERN REGION
- Asherton- Asherton- In central Dimmit County, no new wells were completed during the quarter. However, Lonestar continues to make progress in decreasing operating costs at Asherton, achieving a 16% reduction in cash costs and a 5% reduction in unit costs compared to 4Q14. In 1Q15, Lease Operating Expenses were $0.2 million, or $6.56 per BOE, compared to $0.3 million, or $6.91 per BOE in 4Q14. The Asherton leasehold is Held by Production, and Lonestar has not planned drilling activity here in 2015.
- Beall Ranch- In Dimmit and La Salle Counties, no new wells were completed during the quarter. However, Lonestar continues to make progress in reducing operating costs at Beall Ranch, achieving a 14% reduction in absolute dollar cash costs compared to 4Q14. In 1Q15, Lease Operating Expenses were $1.1 million, or $7.07 per BOE, compared to $1.2 million, or $6.82 per BOE in 4Q14. Lonestar has permitted 3 short laterals at Beall Ranch, and plans to commence drilling operations in May, 2015. While drilling activity is lower than in past years, the Company is actively evaluating methods for improving the productivity of its existing producers. These efforts include: conversion of wells to gas lift, pilot tests of innovative paraffin treatments, and perhaps more importantly, decentralization of the field's gas gathering and compression systems, which we anticipate will reduce system pressures, and improve well productivity and improve well uptime.
- Burns Ranch Area- In La Salle County, Lonestar has completed the Gerke #1H-3H with an average perforated interval of 4,380 feet and began flowback in early February. These wells were drilled and completed at an average cost of $5.0 million, which included substantial costs associated with drilling a pilot hole and obtaining extensive advanced formation characterization logs. The Gerke wells, which were pad-drilled and zipper fracked with an average proppant concentration of 1,610 pounds per foot, tested at a per-well average of 448 bopd and 497 Mcfgpd, or 562 BOEPD on a processed three-stream basis on a 17/64" choke. The three wells registered average Max-30 production rates of 322 bopd and 271 Mcfgpd, or 384 BOEPD, on a 20/64" choke. Also during the first quarter of 2015, Lonestar drilled the Burns Ranch Eagle Ford Unit A #1H-3H wells. These wells had an average total measured depth of 16,617' and became the longest laterals drilled by Lonestar in the Western Region to-date. The three Burns Ranch Eagle Ford Unit A wells were recently completed with an average perforated interval of 8,000' and each was fracture stimulated with 32 stages. Completed well costs for these wells are expected to be within their AFE, and are scheduled to commence flowback in May, 2015.
- Horned Frog- In La Salle County, Lonestar is planning to spud two 8,000' laterals as part of its farm-in on this acreage, which was announced today. As part of its review of this area in partnership with the Company's independent engineers, Lonestar believes that it can materially improve on the results generated by many of the offset operators. Lonestar's experience indicates this improvement will come from more precise geo-steering and higher levels of proppant concentration in its fracture stimulations. In fact, superior performance in these categories has demonstrated to increase average estimated ultimate recoveries substantially in offset wells. The Company anticipates commencing drilling operations on the property in July, 2015. Preliminary AFE's for these two wells are $6.3 million per well. On this schedule, first production would be expected in September, 2015.
EAGLE FORD SHALE TREND- CENTRAL REGION
- Pirate Area- In southwest Wilson County, no new wells were completed during the quarter. However, Lonestar continues to make progress in reducing operating costs at Pirate, achieving a 31% reduction in cash costs and a 8% reduction in unit costs compared to 4Q14. In 1Q15, Lease Operating Expenses were $0.3 million, or $6.97 per BOE, compared to $0.5 million, or $7.56 per BOE in 4Q14. Lonestar currently plans to drill two 7,500-foot laterals in the Pirate Area during the second half of 2015.
- Southern Gonzales County- Production on the Harvey Johnson #1H-3H continues to outperform the type curves in the Company's third-party reserve report, with individual gross well production from the three wells averaging 407 BOEPD in March, 2015, their 4th month of production. After encouraging results from the Harvey Johnson #1H-3H, Lonestar executed an additional farm-in agreement, and commenced drilling its next three-well pad adjacent to the Harvey Johnson #1H-3H. Lonestar has completed the drilling phase of operations on the Harvey Johnson #4H-6H and the three wells achieved an average total depth of 15,400' in an average of 10.5 days compared to its AFE of 16 days. These wells are expected to have an average perforated interval of 5,650' and are AFE'd at $5.3 million. Based on our ability to reduce drilling days and on projected costs for pressure pumping, Lonestar is highly confident that it will be able to complete these wells at costs that are materially below original AFE. Fracture stimulations for the Harvey Johnson #4-6H wells are expected to commence in May, 2015, with first production expected by July, 2015.
EAGLE FORD SHALE TREND- EASTERN REGION
- Brazos & Robertson Counties- In Brazos and Robertson Counties, no new wells were completed during the quarter. Lonestar currently plans to drill two 8,000-foot laterals in Brazos County in late 2015. These wells are currently scheduled to be drilled on its Wildcat property near Carter Lake, offsetting acreage where Apache has recently placed an estimated 10 wells into production, and has an additional 20 permits filed to drill offsetting wells with the Texas Railroad Commission.
BAKKEN-THREE FORKS TREND
- Poplar West, Montana- Based on its geological analysis, core evaluation, and production testing, the Poplar West project area is prospective for the entire unconventional resource "Bakken Petroleum System", which includes the Basal Lodgepole, Upper Bakken Shale, Middle Bakken, Lower Bakken Shale and the Third and Fourth Benches of the Three Forks formations. Further, Poplar West is highly prospective for the Amsden, Charles, Heath, Mission Canyon and Nisku formations. After processing and interpreting its 105 square miles of 3-D seismic data covering the Poplar West project area, Lonestar and its partners have identified 39 Charles prospects (conventional) and 41 Nisku prospects (conventional) and a total of 340 drilling locations in the Non-conventional Bakken Petroleum System. In May, 2015, Lonestar will submit its final application for the establishment of the Stone Turtle Indian Exploratory unit to the Bureau of Land Management (BLM) and Bureau of Indian Affairs (BIA), which it has downsized to cover 44,050 gross acres and expects to receive approval imminently. As currently contemplated, formation of the unit would establish a 5-year primary term on all leasehold in the unit, in exchange for drilling activity. Lonestar believes it has strong support for future development from all governmental regulatory agencies including the BIA, BLM and the Fort Peck Tribe. Lonestar and its partners have commenced a process that may lead the Company and its partners to farm-out a portion of their interest in Poplar West.
2015 DRILLING AND COMPLETION PLANS
Lonestar currently intends to run a one-rig program in 2015, with a goal of closely matching its drilling capital expenditures with cash flow from operations. In January, Lonestar set a budget of drilling 16 Eagle Ford Shale wells during 2015 at a projected cost of between $74 and $83 million, net to the Company. To date, well costs have met or been below AFE. In the first quarter, Lonestar was able to reduce average total well costs by 20% versus 4Q14 levels, and continues to make progress towards additional reductions. The schedule below reflects the 16 wells Lonestar currently plans to drill and complete in 2015, 16 of which will be turned to production during the calendar year, with 3 wells which were drilled and completed in 2014 being fracked in early 2015, while 2 wells it expects to drill and complete in late 2015 are not expected to be fracked and turned to production until early 2016.
- 1Q15- The Company has fracked 3 wells (Gerke #1H, #2H, #3H) in La Salle County and turned to production mid 1Q15. Lonestar has drilled three 8,000' laterals in La Salle County, and fracture stimulated them in 2Q15.
- 2Q15- The company has fracked 3 wells in La Salle County and expects to begin flowback in May 2015. Following execution of a second farm-in, Lonestar has drilled 3 wells in Southern Gonzales County near its recent Harvey Johnson wells. Lonestar reached total depth on these 3 wells and anticipates commencing fracture stimulation operations during 2Q15.
- 3Q15- Lonestar currently plans to drill and complete 3 wells on its Beall Ranch property. The Company also currently plans to drill two 8,000' laterals as part of its Horned Frog farm-in in La Salle County.
- 4Q15- Lonestar currently plans to drill two 7,500' laterals in Wilson County near the Pirate K1H and L3H wells drilled in 2014. The company also currently plans to drill two 8,000' laterals in Brazos County, most likely on its Wildcat area, where the Eagle Ford lies at a TVD of 9,500 feet.
Lonestar has minimal drilling commitments in 2015, providing flexibility to defer any of its budgeted wells in favor of wells that it drills in conjunction with attractive farm-ins, such as the Horned Frog agreement announced today.
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SOURCE Lonestar Resources, Ltd.
Source: PR Newswire
(April 30, 2015 - 4:12 PM EDT)
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