Lonestar Resources, Ltd. Releases Quarterly Report For September 2015
FORT WORTH, Texas, Oct. 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 September 30, 2015 (3Q15).
Third Quarter Highlights
- Lonestar Resources set a new production record, reporting a 42% increase in net oil and gas production to 6,614 BOEPD in 3Q15, vs. 4,669 BOEPD in 3Q14. Lonestar's 3Q15 sales volumes also represented a 14% sequential increase over 2Q15 production levels. In the third quarter, 83% of the Company's production was crude oil and NGL's.
- The Company's Eagle Ford Shale properties registered a 51% increase in net oil and gas production over 3Q14 results, to 5,969 BOEPD, which was 17% sequential growth.
- EBITDAX was $21.7 million for 3Q15 vs. $23.4 million for 3Q14, as increased production volumes and incremental revenues from crude oil hedges largely offset a 52% decrease in West Texas Intermediate oil prices. EBITDAX dropped just 2% against 2Q15 results as production growth largely offset a $12 per barrel drop in WTI. EBITDAX further benefited from the Company's ability to reduce LOE per BOE 18% sequentially.
- Lonestar reported Net Income of $7.4 million for 3Q15 vs. a Net Income of $19.1 million in 3Q14. Excluding a $10.7 million unrealized gain on commodity derivative and the associated non-cash expense, Lonestar would have reported Net Income of $0.5 million for 3Q15, equating to $0.04 per share
- At September 30, 2015, $79 million was outstanding on the facility, leaving $101 million undrawn and available. The lead agent of its Senior Secured lender group has recommended that the borrowing base be reaffirmed at $180 million. Lonestar expects official confirmation within the next two weeks.
- Lonestar continues to build production momentum, with the Company's volumes exceeding 7,500 BOEPD in October, setting the stage for another production record in the fourth quarter of 2015.
- With the third quarter under its belt, Lonestar updates its previous 2015 guidance. Production from its Eagle Ford Shale properties is outperforming expectations. Based on a 2015 WTI price range of $50 to $60 per barrel and the expectation for the Company to drill 15 gross wells in 2015, Lonestar has increased the low end of its guidance and now forecasts production will average between 6,100 and 6,300 BOEPD, yielding EBITDAX guidance of $84 to $90 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 September 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. While optimizing cash flows from its Conventional assets, Lonestar is focusing its attention and capital to continuing its growth strategy in the Eagle Ford Shale. Lonestar currently operates 100% of its 35,487 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 through 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.
THIRD 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 during 2015, Lonestar has sought to use the softening price environment to cost effectively expand its Eagle Ford leasehold and resource position in areas where it has demonstrated excellence with the drillbit. In an effort to conserve its liquidity to pursue larger scale transactions in late 2015 and early 2016, Lonestar has limited its acquisition activity to farm-ins and smaller scale primary term lease acquisitions. During the third quarter of 2015, Lonestar leased or reached agreement to lease an additional 1,127 net acres. These acquisitions add an additional 16 drilling locations in the Company's Horned Frog and South Gonzales focus areas. Including these transactions, Lonestar's Eagle Ford Shale leasehold position has increased from 30,306 net acres at yearend 2014 to 35,487 net acres presently.
- On July 28, 2015, Lonestar closed a new $500 million Senior Secured Revolving Credit Facility led by Citibank, N.A.. The initial borrowing base was set at $180 million, a 20% increase over its prior level of $150 million. At September 30, 2015, $79 million was outstanding on the facility, leaving $101 million undrawn and available. The lead agent of its Senior Secured lender group has recommended that the borrowing base be reaffirmed at $180 million. Lonestar expects official confirmation within the next two weeks.
- Lonestar set another production record in the third quarter of 2015, registering sequential production growth of 14% over 2Q15 levels. The Company's net production for the third quarter of 2015 also represented a 42% increase over 3Q14 levels, rising to 6,614 BOEPD. Lonestar's Eagle Ford Shale drilling program continues to be the driver for the Company's record-setting production. Third quarter 2015 volumes were comprised of 4,631 barrels of oil per day, 840 barrels of NGL's per day, and 6,863 Mcf of natural gas per day. Third quarter 2015 production was comprised of 83% crude oil and natural gas liquids, and 17% natural gas.
- During the third quarter of 2015, Lonestar achieved considerable improvement in its lease operating expenses. Total Company lease operating expenses were $4.8 million, marginally above results one year ago, but down 4% sequentially from second quarter 2015 results. Continued production growth and cost containment combined to reduce Lonestar's lease operating expense on a unit basis by 17% from $9.43 per BOE in 2Q15 to $7.83 per BOE in the most recent quarter. Lonestar believes that continued production growth and cost reduction efforts should further reduce LOE per BOE in the fourth quarter of 2015.
- In the third quarter of 2015, Lonestar generated EBITDAX of $21.7 million, a 7% decrease from the 3Q14 EBITDAX of $23.4 million. A 42% increase in oil and gas production and a strong hedge position largely offset a 53% decrease in wellhead price realizations. Strong production growth and reductions in lease operating costs allowed EBITDAX to remain essentially flat versus 2Q15 results, despite a 20% decrease in WTI benchmark pricing, quarter to quarter.
- 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 2,551 barrels of oil per day for the remainder of 2015 at an average strike price of $82.23 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 which provide an effective floor of $55.25 per barrel with WTI prices between $40.00 per barrel and $60.00 per barrel but also gives upside to $80.25 per barrel.
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 the remainder of 2015 or 2016.
- Beall Ranch- In Dimmit County, Lonestar drilled and completed the Beall Ranch #26H-#28H during the third quarter of 2015. 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 feet. Lonestar achieved completed well costs of $3.3 million versus our pre-drill AFE of $3.7 million. While Lonestar has been developing Beall Ranch for over four years now, the Company continues to strive for improved results. Based on advanced log analysis, the #26H-28H wells were drilled in a narrower, refined target zone within the Eagle Ford Shale, and were fracked with markedly tighter stage spacing, achieving an average proppant concentration of 1,654 pounds per foot. The 3 new wells registered average Max-30 production rates of 329 bopd and 389 Mcfgpd, or a 3-stream rate of 419 BOEPD, on a 18/64" choke. Recent rates, achieved in the wells' 105th day of production were still averaging 365 BOEPD per well. To date, Lonestar's refinements to its targeting and stimulation designs appear to be achieving material improvements in recovery rates, with the #26H-28H producing 43% more oil per perforated foot than the #32-#34H, which are immediate offsets, and were completed in 2014.
- Burns Ranch Area- In northern La Salle County, Lonestar drilled and completed the Burns Ranch Eagle Ford Unit A #1H-3H wells with an average perforated interval of 7,970 feet. The three new wells, which were pad-drilled and zipper fracked with an average proppant concentration of 1,570 pounds per foot, 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' 180th day of production, were still averaging 390 BOEPD per well without artificial lift. Lonestar is extremely pleased with the results of its initial long laterals on the Burns Ranch and currently plans to drill additional wells on this property in 2016 which are currently categorized as Probable Undeveloped.
- Horned Frog- In La Salle County, Lonestar drilled and completed the Horned Frog A #1H & B #1H with an average perforated interval of 8,233 feet. The two new wells were fracked with an average proppant concentration of 1,556 pounds per foot. The Horned Frog A #1H tested 275 bopd and 5,527 Mcfgpd, or 1,542 BOEPD on a processed three-stream basis on a 20/64" choke and registered a 30-day production rate of 1,438 BOEPD. The Horned Frog B #1H tested 286 bopd and 5,311 Mcfgpd, or 1,658 BOEPD on a processed three-stream basis on a 20/64" choke and registered a 30-day production rate of 1,315 BOEPD. Lonestar continues to expand its leasehold position in the Horned Frog area. Since last report, Lonestar leased an additional 465 net acres, spending less than $0.5 million on lease bonuses to acquire these interests. Lonestar's current net leasehold stands at 4,402 gross / 4,063 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. Lonestar is currently drilling the Horned Frog D #1H & E #1H utilizing the IOG Capital Joint Venture in order to secure the aforementioned additional acreage. The Horned Frog D#1H & E #1H have been drilled and cased to an average total measured depth of 19,400 feet equating to an average perforated interval of 9,100 feet. Fracture stimulation is scheduled for mid-November with flowback expected to commence in early December. Lonestar is paying 10% of the well costs and will have an initial 15.0% working interest in these wells. Upon achievement of a specified IRR, Lonestar's working interest would increase to 57.5%.
EAGLE FORD SHALE TREND- CENTRAL REGION
- Pirate Area- In southwest Wilson County, Lonestar has drilled the Pirate #M1H and Pirate #N1H wells and cased them to an average measured depth of approximately 16,100 feet. Lonestar has a 100% working interest and an average 76.4% net revenue interest in these two wells. 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. These wells are awaiting fracture stimulation at a date which has yet to be determined.
- Southern Gonzales County- In Gonzales County, Lonestar's Harvey Johnson #1H-#6H continue to perform extremely well, with production from the six wells averaging 2,201 gross / 826 net BOEPD in the third quarter of 2015. Lonestar recently reached agreement to lease a total of 662 net acres which will accommodate 10 gross laterals with average lateral lengths of 7,200 feet. Lonestar is actively evaluating additional leasehold opportunities in the area.
EAGLE FORD SHALE TREND- EASTERN REGION
- Brazos & Robertson Counties - In Brazos Central County, Lonestar has permitted two 8,000-foot laterals. These wells are currently scheduled to be drilled on its Wildcat project in December, 2015. Lonestar has assembled a lease position while allowing other operators to drill and produce wells in the area, which reduces risk. The Company is encouraged by the results of offset drilling by a leading operator, who recently announced impressive production rates on four wells immediately offsetting Lonestar's leasehold. It has been reported that the 5,527' Rae #3H registered 30-day rates of 1,587 BOEPD while the 5,494' Rae #4H produced 1,520 BOEPD. The nearest of these wells are approximately 3,000 feet east of Lonestar's drilling locations. Additionally, it has been reported that the 6,841' Walker Family #1H registered 30-day rates of 1,897 BOEPD while the 6,841' Walker Family #3H produced 1,973 BOEPD. The nearest of these wells are 3,300 feet northeast of Lonestar's drilling locations.
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 October 2015, Lonestar received approval of the Stone Turtle Indian Exploratory unit by the Bureau of Land Management (BLM) and Bureau of Indian Affairs (BIA), which it has downsized to cover 44,084 gross / 28,655 net acres, with additional leasehold around the Unit's periphery. The unit establishes a 5-year primary term on all leasehold in the unit, in exchange for drilling activity. The long-awaited unit approval opens the door for development of the block either by Lonestar or a farm-in partner.
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, 2 of which it expects to complete in late 2015 that should see first production in 2016, as well as 3 wells which were drilled and completed in 2014 and turned to production in early 2015.
- 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 began production in July 2015. The Company completed two 8,000' laterals at Horned Frog (100% WI) (A#1H & B#1H) in La Salle County, which were fracked in August and commenced flowback in September.
- 4Q15- The Company has drilled the Pirate M#1H and N#1H in Wilson County. With production rates running ahead of budget and the Company keenly focused on matching capital spending and cash flow, Lonestar has deferred the fracture stimulation of the Pirate wells. Lonestar is currently drilling two wells on its Horned Frog acreage (15% WI) (D#1H & E#1H). The company also currently plans to spud 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.
While its 2016 budget will be confirmed at the Company's December 2015 meeting of its Board of Directors, Lonestar's preliminary plans would be to complete 14 to 16 Eagle Ford Shale wells at a budget of $70 to $80 million.
FOR THE COMPLETE QUARTERLY REPORT PLEASE GO TO WWW.LONESTARRESOURCES.COM UNDER THE INVESTOR RELATIONS DROPDOWN
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SOURCE Lonestar Resources, Ltd.
Source: PR Newswire
(October 29, 2015 - 4:12 PM EDT)
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