Lonestar Resources, Ltd. Releases Quarterly Report For June 2015
FORT WORTH, Texas, July 29, 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 June 30, 2015 (2Q15).
Second Quarter Highlights
- Lonestar Resources registered a 61% increase in net oil and gas production to 5,804 BOEPD in 2Q15, vs. 3,613 BOEPD in 2Q14, 83% of which was crude oil and NGL's. The Company's Eagle Ford Shale properties recorded a 70% increase in net oil and gas production to 5,113 BOEPD over 2Q14. Lonestar's 2Q15 sales volumes also represented a 5% sequential increase over 1Q15 production levels.
- Net Revenues From Ordinary Activities increased 25% to US$30.9 million for 2Q15, vs. 2Q14 revenues of $24.7 million. This increase was achieved despite a 44% decrease in average West Texas Intermediate prices.
- EBITDAX rose 32% to $22.1 million for 2Q15 vs. $16.7 million for 2Q14, as increased production volumes and incremental revenues from crude oil hedges more than offset a 45% decrease in its average wellhead price.
- Excluding a $14.9 million unrealized loss on commodity derivatives, Lonestar would have reported Net Income of $6.5 million for 2Q15 vs. a net loss of $0.9 million in 2Q14.
- The Company has closed a new $500 million Senior Secured Revolving Credit Facility. The initial borrowing base has been set at $180 million, a 20% increase over its prior level of $150 million. At June 30, 2015, $104 million was undrawn, proforma the new facility.
- Lonestar continues to build production momentum, with volumes exceeding 6,100 BOEPD in June and July, and expects to post sequential growth of the rest of 2015
- Lonestar's new Joint Development Agreement with IOG Capital provides the Company with incremental financial capacity to fund and develop additional farm-in opportunities such as Horned Frog, where our initial wells are on-track and under budget thus far.
- With the second quarter under its belt, Lonestar reiterates its previous 2015 guidance. Based on a WTI price range of $50 to $60 per barrel 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 BOEPD, yielding 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 June 30, 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 34,360 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.
SECOND QUARTER 2015 HIGHLIGHTS
Lonestar continues to make strides towards its core goal of expanding its resource base during the current downturn in commodity prices. Lonestar's preference is to use its flexible drilling schedule to gain access to additional leasehold and reserves in proven areas via farm-in, supplemented by primary term leases. This strategy allows Lonestar to grow its asset base without straining its liquidity, as the Company continues to retain its borrowing base liquidity in anticipation of a growing number of distressed sales as the effects of a downturn in commodity prices are amplified.
- Year-to-date, Lonestar has used its flexible drilling program and a small amount of its borrowing base to capture high quality leasehold in its focus areas in the Eagle Ford Shale play. To date, 6 of its 16 drilling slots have been diverted away from originally budgeted drilling operations in favor of new farm-in opportunities in La Salle, Gonzales and Wilson Counties. These farm-ins have garnered an additional 2,800 net acres in the Company's Western and Central Regions of the Eagle Ford Shale play. Lonestar has also spent another $2.0 million on tuck-in acquisitions to bolster these positions by another 2,000 net acres, in most cases, increasing the Company's interest in leases in which it already owned an interest. The Company is encouraged by the volume of opportunities currently under review which could result in additional farm-in and/or tuck-in acquisitions.
- On July 27, 2015, Lonestar closed a new $100 million drilling joint venture with IOG Capital, L.P., an investment partnership led by industry veteran Marc Rowland and partnered with Fortress Investment Group, who has $69.9 billion in assets under management and Metalmark Capital, a private equity firm which is currently investing its latest fund with $2.5 billion. As a group, IOG Capital has committed capital of $700 million. The joint venture calls for IOG Capital to participate as a non-operated working interest partner in Lonestar's drilling program, and at Lonestar's option, on a promoted basis. This off-balance sheet financing provides Lonestar with the ability to pursue more acreage-adding and reserve-adding deals with the drillbit, while allowing it to maintain its balance sheet discipline.
- On July 28, 2015, Lonestar closed a new $500 million Senior Secured Revolving Credit Facility led by Citibank, N.A.. The initial borrowing base has been set at $180 million, a 20% increase over its prior level of $150 million. At June 30, 2015, $76 million was outstanding on the facility leaving $104 million available, on a proforma basis. The new revolving credit facility offers several positive features, including: an extension in the maturity from March, 2018 to October, 2018; a 0.25% reduction in interest rate spreads; the capacity to hedge higher levels of oil and gas production; and the addition of three prominent banks, BBVA Compass, Comerica Bank, and Barclays Bank.
- Lonestar generated sequential production growth of 5% over first quarter 2015 results . The Company's net production for the second quarter of 2015 also represented a 61% increase over 2Q14 levels, rising to 5,804 BOE per day. Second quarter 2015 volumes were comprised of 4,175 barrels of oil per day, 644 barrels of NGL's per day, and 5,909 Mcf of natural gas per day. Second quarter 2015 production was comprised of 83% crude oil and natural gas liquids, and 17% natural gas.
- In the second quarter of 2015, Lonestar generated EBITDAX of $22.1 million, a 32% increase over 2Q14 EBITDAX of $16.7 million. A 61% increase in oil and gas production and a strong hedge position more than offset a 45% decrease in wellhead price realizations. EBITDAX also advanced over 1Q15 levels, in line with the Company's sequential production growth.
- As has been our practice since inception, crude oil hedging has been a key element to providing visibility to cash flow streams and associated liquidity in the current crude oil price environment. Currently, the Company has West Texas Intermediate (WTI) swaps covering 2,593 barrels of oil per day for the remainder of 2015 at an average strike price of $82.58 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- In central Dimmit County, no new wells were completed during the quarter. However, production rates from the 4 producing wells continued to outperform the third-party engineering projections. The Asherton leasehold is Held by Production, and Lonestar does not plan drilling activity here in 2015.
- Beall Ranch- In Dimmit County, Lonestar has drilled and completed the Beall Ranch #26H-#28H. These wells were drilled to an average total depth of 11,500 feet in an average of 10 days, compared to the AFE of 13 days. These wells are short laterals, possessing an average perforated interval of 3,200. The wells were AFE'd at $3.4 million, which appears highly achievable based drilling time and field costs associated with the fracture stimulation. Fracture stimulation was completed in early July with flowback operations under way. The wells were pad drilled and zipper-fracked with an average proppant concentration of 1,654 pounds per foot. The wells have been producing hydrocarbons for 11 days, and to date, the 3 wells tested at a per-well average rate of 386 bopd and 322 Mcfgpd, or 460 BOEPD on a processed three-stream basis on a 18/64" choke.
- Burns Ranch Area- In northern La Salle County, Lonestar drilled and completed the Burns Ranch Eagle Ford Unit A #1H-3H with an average perforated interval of 8,000 feet. The three new wells, which were pad-drilled and zipper fracked with an average proppant concentration of 1,570 pounds per foot, tested at a per-well average of 594 bopd and 396 Mcfgpd, or 685 BOEPD on a processed three-stream basis on a 23/64" choke. The 3 wells registered average Max-30 production rates of 486 bopd and 405 Mcfgpd, or 580 BOEPD, on a 22/64" choke. Recent rates, achieved in the wells' 85th day of production, were still averaging 518 BOEPD per well.
- Horned Frog- In La Salle County, Lonestar has completed the drilling phase of its 2 commitment wells on its recently-acquired La Salle County acreage. The Horned Frog A #1H was drilled to a total depth of 18,725' in 17 days, which included 4 days associated with a pilot hole, which was drilled to obtain advanced rock properties data which the Company will use in fracture stimulation design and geo-targeting. The Company's second well, the Horned Frog B #1H was drilled to a total depth of 18,265' in 11.5 days, versus a pre-drill AFE of 17 days. Casing has been cemented in place on both wells, which are expected to have average perforated lateral lengths of 8,000'. Fracture stimulation is scheduled for early August with production expected by September, 2015. These wells, which are AFE'd at $6.2 million, exclusive of pilot hole costs, are on-track to come in at or under budget. Lonestar continues to pursue additional leasehold opportunities in the vicinity of its Horned Frog leasehold position. Since last report, Lonestar has entered into primary term leases totaling an additional 775 net acres within its Horned Frog acreage position. The Company spent less than $1.0 million on lease bonuses to acquire these additional tracts. Lonestar's current net leasehold stands at 4,402 gross / 3,614 net acres at Horned Frog. Lonestar continues to evaluate a number of additional opportunities to grow its leasehold and reserves position in the vicinity of its Horned Frog acreage.
EAGLE FORD SHALE TREND- CENTRAL REGION
- Pirate Area- In southwest Wilson County, no new wells were completed during the quarter. However, Lonestar has permitted the Pirate #M1 and Pirate #N1 wells and has constructed the pads for these locations. Lonestar currently plans to drill these two wells to a measured depth of approximately 16,800 feet. Accordingly, Lonestar plans for these two wells to have 8,000-foot perforated intervals. Lonestar has a 100% working interest and an average 76.4% net revenue interest in these two wells, which are expected to spud in August. The Pirate #N1 well is being drilled on leasehold which Lonestar was able to obtain via a farm-in of 197 gross / 197 net acres which are contiguous to the Company's Pirate leasehold position, a transaction that was completed during the second quarter of 2015 in exchange for an overriding royalty interest.
- Southern Gonzales County- In Gonzales County, Lonestar has drilled and completed the Harvey Johnson #4H-6H with an average perforated interval of 5,700 feet. The Harvey Johnson wells were pad-drilled and zipper-fracked with an average proppant concentration of 1,626 pounds per foot and commenced flowback operations mid-June. These wells tested at a per-well average of 691 bopd and 385 Mcfgpd, or 779 BOEPD on a processed three-stream basis on a 22/64" choke. The 3 new wells registered average Max-30 production rates of 536 bopd and 225 Mcfgpd, or 587 BOEPD, on a 21/64" choke. Meanwhile, the Harvey Johnson #1H-3H wells continue to outperform their third-party type curve, in part due to being re-energized by the fracs on our offset wells. Lonestar is actively evaluating additional leasehold opportunities in the area.
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 submitted 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 has commenced a process that may lead the Company 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 second 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 fracked 3 wells (Gerke #1H, #2H, #3H) in La Salle County and turned to production mid 1Q15.
- 2Q15- The company fracked 3 wells in on the Burns Ranch (93.3% WI) in La Salle County and began flowback in May 2015. Following execution of a second farm-in, Lonestar drilled 3 wells (50% WI) in Southern Gonzales County near its Harvey Johnson wells. Lonestar completed fracture stimulation operations on these 3 wells in June 2015 and began flowback in mid-June 2015.
- 3Q15- The Company completed 3 short laterals at Beall Ranch (97.7% WI) (#26H, #27H, #28H) and fracture stimulated these wells in July. The wells are currently in flowback. The Company has concluded the drilling and completion of two 8,000' laterals as part of its Horned Frog farm-in in La Salle County. These wells are on the schedule to be fracked in August and are anticipated to commence production in September.
- 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 may drill in conjunction with attractive farm-ins.
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SOURCE Lonestar Resources, Ltd.
Source: PR Newswire
(July 29, 2015 - 4:00 PM EDT)
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