Earthstone Energy, Inc. Reports Fourth Quarter and Full Year 2018 Results THE WOODLANDS, Texas
Earthstone Energy, Inc. (NYSE: ESTE) (“Earthstone”, the “Company”, “we”
or “us”), today announced financial and operating results for the fourth
quarter and year ended December 31, 2018.
Fourth Quarter 2018 Highlights
-
Revenues of $41.2 million
-
Increased 16% over fourth quarter 2017
-
Average daily production of 10,454 Boepd(1)
-
Increased 15% over fourth quarter 2017 while the oil component
increased 27% over fourth quarter 2017
-
Net income of $81.0 million
-
Compared to $5.5 million in fourth quarter 2017
-
Net income attributable to Earthstone Energy, Inc. of $36.1 million,
or $1.26 per diluted share
-
Compared to $2.3 million, or $0.09 per diluted share in fourth
quarter 2017
-
Adjusted EBITDAX(2) of $23.9 million
-
Increased 8% over fourth quarter 2017
Full Year 2018 Highlights
-
Revenues of $165.4 million
-
Increased by 53% over 2017
-
Average daily production of 9,937 Boepd(1)
-
Increased by 26% over 2017 while the oil component increased 30%
over 2017
-
Net income of $95.2 million
-
Compared to a net loss of $44.7 million in 2017
-
Net income attributable to Earthstone Energy, Inc. of $42.3 million,
or $1.50 per diluted share
-
Compared to a net loss of $12.5 million, or a $0.53 loss per share
in 2017
-
Adjusted EBITDAX(2)(3) of $96.2 million
-
Increased by 59% over 2017
(1)
|
|
Represents reported sales volumes.
|
(2)
|
|
Adjusted EBITDAX is a non-GAAP financial measure. See “Non-GAAP
Financial Measures” section below.
|
(3)
|
|
Includes a $4.7 million charge to expense representing a lawsuit
settlement. Adjusted EBITDAX has not been increased to adjust for
this charge in the period presented (see “Non-GAAP Financial
Measures” below).
|
Management Comments
Robert J. Anderson, President of Earthstone, stated, “2018 was a very
successful year for Earthstone as we keenly focused on operating
efficiencies and thereby generated low-cost reserve additions and strong
cash margins. We realized significant improvement in every metric
including production, revenues and operating expenses, thus driving a
59% increase in Adjusted EBITDAX to $96.2 million for the year. We also
increased our proved reserves by 24% with a finding and development cost
of only $9.49 per Boe for extensions and discoveries. Considering that
we have only been operating in the Midland Basin for less than two
years, we are pleased with our accomplishments and the contributions of
all of our employees.
“For 2019, we have set high expectations for Earthstone as we build on
these successes. Our strong balance sheet, substantial hedge position
averaging over $65 per barrel of oil and positive operating margins give
us the confidence to increase our capital budget by approximately 25%,
allowing us the flexibility to continue to demonstrate the quality of
our acreage position through the drill bit. Also, we intend to evaluate
and pursue external growth opportunities as we have in the past, to
enhance our asset base and grow our scale through acreage trades and
acquisitions at attractive valuations, while maintaining low leverage.
“We are executing a successful one-rig development program in the
Midland Basin and expect to continue our multi-year growth in
production, although our 2019 production profile is projected to remain
lumpy with a majority of the completions scheduled in the second half of
the year. We presently estimate that we will achieve free cash flow in
2020 assuming we maintain our existing pace of development and current
commodity prices continue through such time.”
Selected Financial Data (unaudited)
($000s except where noted)
|
|
Three Months Ended December 31,
|
|
|
Years Ended December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
Total revenues
|
|
41,235
|
|
|
35,676
|
|
|
165,356
|
|
|
108,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expense
|
|
6,013
|
|
|
4,669
|
|
|
20,522
|
|
|
19,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expense (excluding stock-based
compensation)(1)
|
|
7,814
|
|
|
5,628
|
|
|
21,088
|
|
|
20,466
|
|
Stock-based compensation (non-cash)
|
|
1,536
|
|
|
1,956
|
|
|
7,071
|
|
|
6,601
|
|
Total general and administrative expense
|
|
9,350
|
|
|
7,584
|
|
|
28,159
|
|
|
27,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
80,986
|
|
|
5,497
|
|
|
95,213
|
|
|
(44,733
|
)
|
Less: Net income (loss) attributable to noncontrolling interest
|
|
44,856
|
|
|
3,173
|
|
|
52,888
|
|
|
(32,219
|
)
|
Net income (loss) attributable to Earthstone Energy, Inc.
|
|
36,130
|
|
|
2,324
|
|
|
42,325
|
|
|
(12,514
|
)
|
Net income (loss) per common share(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
1.26
|
|
|
0.09
|
|
|
1.50
|
|
|
(0.53
|
)
|
Diluted
|
|
1.26
|
|
|
0.09
|
|
|
1.50
|
|
|
(0.53
|
)
|
Adjusted EBITDAX(3)
|
|
23,928
|
|
|
22,102
|
|
|
96,167
|
|
|
60,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production(4):
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil (MBbls)
|
|
674
|
|
|
529
|
|
|
2,370
|
|
|
1,828
|
|
Gas (MMcf)
|
|
728
|
|
|
933
|
|
|
3,610
|
|
|
3,260
|
|
NGL (MBbls)
|
|
167
|
|
|
150
|
|
|
655
|
|
|
500
|
|
Total (MBoe)(5)
|
|
962
|
|
|
834
|
|
|
3,627
|
|
|
2,872
|
|
Average Daily Production (Boepd)
|
|
10,454
|
|
|
9,071
|
|
|
9,937
|
|
|
7,869
|
|
Average Prices:
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($/Bbl)
|
|
52.92
|
|
|
54.34
|
|
|
59.40
|
|
|
48.43
|
|
Gas ($/Mcf)
|
|
1.57
|
|
|
2.62
|
|
|
2.05
|
|
|
2.69
|
|
NGL ($/Bbl)
|
|
26.60
|
|
|
30.01
|
|
|
26.23
|
|
|
21.51
|
|
Total ($/Boe)
|
|
42.87
|
|
|
42.75
|
|
|
45.59
|
|
|
37.63
|
|
Adj. for Realized Derivatives Settlements:
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($/Bbl)
|
|
51.40
|
|
|
52.28
|
|
|
53.13
|
|
|
48.00
|
|
Gas ($/Mcf)
|
|
0.98
|
|
|
2.78
|
|
|
1.98
|
|
|
2.71
|
|
NGL ($/Bbl)
|
|
26.60
|
|
|
30.01
|
|
|
26.23
|
|
|
21.51
|
|
Total ($/Boe)
|
|
41.37
|
|
|
41.63
|
|
|
41.43
|
|
|
37.38
|
|
(1)
|
|
Includes bonuses accrued of $2.4 million for 2018 but not paid until
February 2019.
|
(2)
|
|
Net Income (loss) per common share attributable to Earthstone
Energy, Inc.
|
(3)
|
|
See “Non-GAAP Financial Measures” section below.
|
(4)
|
|
Represents reported sales volumes.
|
(5)
|
|
Barrels of oil equivalent have been calculated on the basis of six
thousand cubic feet (Mcf) of natural gas equals one barrel of oil
equivalent (Boe).
|
|
|
|
Financial Position
In November 2018, the Company had its borrowing base increased to $275.0
million under its senior secured revolving credit facility (“Credit
Facility”). At December 31, 2018, the Company had outstanding borrowings
under its Credit Facility of $78.8 million and a cash balance of
approximately $0.4 million.
Capital Expenditures
During 2018, in addition to completing a strategic acreage trade in
October 2018 for $27.8 million, we incurred capital expenditures of
approximately $153.2 million, on an accrual basis, primarily consisting
of drilling and completion costs, of which $41.4 million was incurred
during the fourth quarter of 2018.
As previously reported, the Company has currently established a 2019
capital expenditure budget of $190 million.
Hedging Update
Subsequent to December 31, 2018, we unwound 730 MBbls of Crude Oil Swaps
at a weighted average contract price of $54.97/Bbl and 92,000 MMBtu of
Natural Gas Swaps at a weighted average contract price of $2.87/MMBtu
for 2019. Additionally, we unwound 668 MBbls of WTI Midland Argus Crude
Basis Swaps at a weighted average contract price of $(7.19) and 92,000
MMBtu of Natural Gas WAHA Basis Swaps at a weighted average contract
price of $(1.07)/MMBtu for 2019. Accordingly, as of March 1, 2019, our
average crude oil swap prices for 2019 and 2020 are $65.67 and $65.87,
respectively.
The following tables set forth our outstanding derivative contracts as
of March 1, 2019 and December 31, 2018. When aggregating multiple
contracts, the weighted average contract price is disclosed.
As of March 1, 2019:
Period
|
|
Commodity
|
|
Volume
(Bbls / MMBtu)
|
|
Price
($/Bbl / $/MMBtu)
|
2019
|
|
Crude Oil Swap
|
|
2,292,100
|
|
$65.67
|
2019
|
|
Crude Oil Basis Swap (1)
|
|
365,000
|
|
$4.50
|
2019
|
|
Crude Oil Basis Swap (2)
|
|
2,007,500
|
|
$(5.36)
|
2019
|
|
Natural Gas Swap
|
|
3,740,500
|
|
$2.86
|
2019
|
|
Natural Gas Basis Swap (3)
|
|
3,740,500
|
|
$(1.14)
|
2020
|
|
Crude Oil Swap
|
|
1,464,000
|
|
$65.87
|
2020
|
|
Crude Oil Basis Swap (2)
|
|
1,464,000
|
|
$(2.74)
|
2020
|
|
Natural Gas Swap
|
|
2,562,000
|
|
$2.85
|
2020
|
|
Natural Gas Basis Swap (3)
|
|
2,562,000
|
|
$(1.07)
|
(1)
|
|
The basis differential price is between LLS Argus Crude and the WTI
NYMEX.
|
(2)
|
|
The basis differential price is between WTI Midland Argus Crude and
the WTI NYMEX.
|
(3)
|
|
The basis differential price is between W. Texas (WAHA) and the
Henry Hub NYMEX.
|
|
|
|
As of December 31, 2018:
Period
|
|
Commodity
|
|
Volume
(Bbls / MMBtu)
|
|
Price
($/Bbl / $/MMBtu)
|
2019
|
|
Crude Oil Swap
|
|
3,022,100
|
|
$63.09
|
2019
|
|
Crude Oil Basis Swap (1)
|
|
365,000
|
|
$4.50
|
2019
|
|
Crude Oil Basis Swap (2)
|
|
2,675,500
|
|
$(5.81)
|
2019
|
|
Natural Gas Swap
|
|
3,832,500
|
|
$2.86
|
2019
|
|
Natural Gas Basis Swap (3)
|
|
3,832,500
|
|
$(1.14)
|
2020
|
|
Crude Oil Swap
|
|
1,464,000
|
|
$65.87
|
2020
|
|
Crude Oil Basis Swap (2)
|
|
1,464,000
|
|
$(2.74)
|
2020
|
|
Natural Gas Swap
|
|
2,562,000
|
|
$2.85
|
2020
|
|
Natural Gas Basis Swap (3)
|
|
2,562,000
|
|
$(1.07)
|
(1)
|
|
The basis differential price is between LLS Argus Crude and the WTI
NYMEX.
|
(2)
|
|
The basis differential price is between WTI Midland Argus Crude and
the WTI NYMEX.
|
(3)
|
|
The basis differential price is between W. Texas (WAHA) and the
Henry Hub NYMEX.
|
|
|
|
Conference Call Details
Earthstone is hosting a conference call on Wednesday, March 13, 2019 at
11:00 a.m. Eastern (10:00 a.m. Central) to discuss the Company’s
operations and financial results for the fourth quarter and full year
2018 and its outlook for 2019. Prepared remarks by Frank A. Lodzinski,
Chief Executive Officer, Robert J. Anderson, President, and Mark
Lumpkin, Jr., Executive Vice President and Chief Financial Officer will
be followed by a question and answer session.
Investors and analysts are invited to participate in the call by dialing
877-407-6184 for domestic calls or 201-389-0877 for international calls,
in both cases asking for the Earthstone conference call. A webcast will
also be available through the Company's website (www.earthstoneenergy.com).
Please select "Events & Presentations" under the "Investors" section of
the Company's website and log on at least 10 minutes in advance to
register.
A replay of the call will be available on the Company’s website and by
telephone until 11:00 a.m. Eastern (10:00 a.m. Central), Wednesday,
March 27, 2019. The number for the replay is 877-660-6853 for domestic
calls or 201-612-7415 for international calls, using Replay ID: 13688462.
About Earthstone Energy, Inc.
Earthstone Energy, Inc. is a growth-oriented, independent energy company
engaged in developing and operating oil and gas properties. The
Company’s assets are located in the Midland Basin of west Texas and the
Eagle Ford trend of south Texas. Earthstone is listed on the NYSE under
the symbol “ESTE”. For more information, visit the Company’s website 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 (the “Securities
Act”), and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). 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,”
“guidance,” “target,” “potential,” “possible,” or “probable” or
statements that certain actions, events or results “may,” “will,”
“should,” or “could” be taken, occur or be achieved. 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 that involve various risks and uncertainties that could
cause actual results to differ materially from those reflected in the
statements. These risks include, but are not limited to, those set forth
in Earthstone’s annual report on Form 10-K for the year ended December
31, 2018 and other Securities and Exchange Commission filings.
Earthstone undertakes no obligation to revise or update publicly any
forward-looking statements except as required by law.
|
|
|
|
|
EARTHSTONE ENERGY, INC.
|
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
|
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
ASSETS
|
|
2018
|
|
2017
|
Current assets:
|
|
|
|
|
Cash
|
|
$
|
376
|
|
|
$
|
22,955
|
|
Accounts receivable:
|
|
|
|
|
Oil, natural gas, and natural gas liquids revenues
|
|
13,683
|
|
|
14,978
|
|
Joint interest billings and other, net of allowance of $134 and $138
at December 31, 2018 and 2017, respectively
|
|
4,166
|
|
|
7,778
|
|
Derivative asset
|
|
43,888
|
|
|
184
|
|
Prepaid expenses and other current assets
|
|
1,443
|
|
|
1,178
|
|
Total current assets
|
|
63,556
|
|
|
47,073
|
|
|
|
|
|
|
Oil and gas properties, successful efforts method:
|
|
|
|
|
Proved properties
|
|
755,443
|
|
|
605,039
|
|
Unproved properties
|
|
266,140
|
|
|
275,025
|
|
Land
|
|
5,382
|
|
|
5,534
|
|
Total oil and gas properties
|
|
1,026,965
|
|
|
885,598
|
|
|
|
|
|
|
Accumulated depreciation, depletion and amortization
|
|
(127,256
|
)
|
|
(118,028
|
)
|
Net oil and gas properties
|
|
899,709
|
|
|
767,570
|
|
|
|
|
|
|
Other noncurrent assets:
|
|
|
|
|
Goodwill
|
|
17,620
|
|
|
17,620
|
|
Office and other equipment, net of accumulated depreciation of
$2,490 and $2,093 at December 31, 2018 and 2017, respectively
|
|
662
|
|
|
947
|
|
Derivative asset
|
|
21,121
|
|
|
—
|
|
Other noncurrent assets
|
|
1,640
|
|
|
1,207
|
|
TOTAL ASSETS
|
|
$
|
1,004,308
|
|
|
$
|
834,417
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable
|
|
$
|
26,452
|
|
|
$
|
33,472
|
|
Revenues and royalties payable
|
|
28,748
|
|
|
10,288
|
|
Accrued expenses
|
|
22,406
|
|
|
8,707
|
|
Advances
|
|
3,174
|
|
|
4,587
|
|
Asset retirement obligation
|
|
557
|
|
|
—
|
|
Derivative liability
|
|
528
|
|
|
11,805
|
|
Total current liabilities
|
|
81,865
|
|
|
68,859
|
|
|
|
|
|
|
Noncurrent liabilities:
|
|
|
|
|
Long-term debt
|
|
78,828
|
|
|
25,000
|
|
Deferred tax liability
|
|
13,489
|
|
|
10,515
|
|
Asset retirement obligation
|
|
1,672
|
|
|
2,354
|
|
Derivative liability
|
|
1,891
|
|
|
1,826
|
|
Other noncurrent liabilities
|
|
71
|
|
|
131
|
|
Total noncurrent liabilities
|
|
95,951
|
|
|
39,826
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
Preferred stock, $0.001 par value, 20,000,000 shares authorized;
none issued or outstanding
|
|
—
|
|
|
—
|
|
Class A Common Stock, $0.001 par value, 200,000,000 shares
authorized; 28,696,321 and 27,584,638 issued and outstanding at
December 31, 2018 and 2017, respectively
|
|
29
|
|
|
28
|
|
Class B Common Stock, $0.001 par value, 50,000,000 shares
authorized; 35,452,178 and 36,052,169 issued and outstanding at
December 31, 2018 and 2017, respectively
|
|
35
|
|
|
36
|
|
Additional paid-in capital
|
|
517,073
|
|
|
503,932
|
|
Accumulated deficit
|
|
(182,497
|
)
|
|
(224,822
|
)
|
Total Earthstone Energy, Inc. equity
|
|
334,640
|
|
|
279,174
|
|
Noncontrolling interest
|
|
491,852
|
|
|
446,558
|
|
Total equity
|
|
826,492
|
|
|
725,732
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$
|
1,004,308
|
|
|
$
|
834,417
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARTHSTONE ENERGY, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
|
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
REVENUES
|
|
|
|
|
Oil
|
|
$
|
35,664
|
|
|
$
|
28,721
|
|
|
$
|
140,775
|
|
|
$
|
88,536
|
|
Natural gas
|
|
1,139
|
|
|
2,439
|
|
|
7,396
|
|
|
8,777
|
|
Natural gas liquids
|
|
4,432
|
|
|
4,516
|
|
|
17,185
|
|
|
10,765
|
|
Total revenues
|
|
41,235
|
|
|
35,676
|
|
|
165,356
|
|
|
108,078
|
|
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
Lease operating expense
|
|
6,013
|
|
|
4,669
|
|
|
20,522
|
|
|
19,658
|
|
Severance taxes
|
|
1,945
|
|
|
2,355
|
|
|
8,060
|
|
|
6,060
|
|
Impairment expense
|
|
3,748
|
|
|
5,451
|
|
|
4,581
|
|
|
72,191
|
|
Depreciation, depletion and amortization
|
|
14,206
|
|
|
8,657
|
|
|
47,568
|
|
|
36,915
|
|
General and administrative expense
|
|
9,350
|
|
|
7,584
|
|
|
28,159
|
|
|
27,067
|
|
Transaction costs
|
|
12,632
|
|
|
56
|
|
|
13,524
|
|
|
4,732
|
|
Accretion of asset retirement obligation
|
|
41
|
|
|
56
|
|
|
169
|
|
|
434
|
|
Exploration expense
|
|
630
|
|
|
—
|
|
|
630
|
|
|
1
|
|
Total operating costs and expenses
|
|
48,565
|
|
|
28,828
|
|
|
123,213
|
|
|
167,058
|
|
|
|
|
|
|
|
|
|
|
(Loss) gain on sale of oil and gas properties, net
|
|
(2,689
|
)
|
|
5,257
|
|
|
1,919
|
|
|
9,105
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
(10,019
|
)
|
|
12,105
|
|
|
44,062
|
|
|
(49,875
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
(1,110
|
)
|
|
(826
|
)
|
|
(2,898
|
)
|
|
(2,699
|
)
|
Write-off of deferred financing costs
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(526
|
)
|
Gain (loss) on derivative contracts, net
|
|
94,553
|
|
|
(12,123
|
)
|
|
60,947
|
|
|
(7,986
|
)
|
Litigation settlement
|
|
100
|
|
|
—
|
|
|
(4,675
|
)
|
|
—
|
|
Other (expense) income, net
|
|
(187
|
)
|
|
14
|
|
|
247
|
|
|
(20
|
)
|
Total other income (expense)
|
|
93,356
|
|
|
(12,935
|
)
|
|
53,621
|
|
|
(11,231
|
)
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
83,337
|
|
|
(830
|
)
|
|
97,683
|
|
|
(61,106
|
)
|
Income tax (expense) benefit
|
|
(2,351
|
)
|
|
6,327
|
|
|
(2,470
|
)
|
|
16,373
|
|
Net income (loss)
|
|
80,986
|
|
|
5,497
|
|
|
95,213
|
|
|
(44,733
|
)
|
|
|
|
|
|
|
|
|
|
Less: Net income (loss) attributable to noncontrolling interest
|
|
44,856
|
|
|
3,173
|
|
|
52,888
|
|
|
(32,219
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Earthstone Energy, Inc.
|
|
$
|
36,130
|
|
|
$
|
2,324
|
|
|
$
|
42,325
|
|
|
$
|
(12,514
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share attributable to Earthstone
Energy, Inc.:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
1.26
|
|
|
$
|
0.09
|
|
|
$
|
1.50
|
|
|
$
|
(0.53
|
)
|
Diluted
|
|
$
|
1.26
|
|
|
$
|
0.09
|
|
|
$
|
1.50
|
|
|
$
|
(0.53
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
28,576,995
|
|
|
26,425,780
|
|
|
28,153,885
|
|
|
23,589,973
|
|
Diluted
|
|
28,576,995
|
|
|
26,425,780
|
|
|
28,217,774
|
|
|
23,589,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARTHSTONE ENERGY, INC.
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
|
(In thousands)
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
2018
|
|
2017
|
Cash flows from operating activities:
|
|
|
Net income (loss)
|
|
$
|
95,213
|
|
|
$
|
(44,733
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
Impairment of proved and unproved oil and gas properties
|
|
4,581
|
|
|
72,191
|
|
Depreciation, depletion and amortization
|
|
47,568
|
|
|
36,915
|
|
Accretion of asset retirement obligations
|
|
169
|
|
|
434
|
|
Settlement of asset retirement obligations
|
|
(79
|
)
|
|
(9
|
)
|
Gain on sale of oil and gas properties, net
|
|
(1,919
|
)
|
|
(9,105
|
)
|
Total (gain) loss on derivative contracts, net
|
|
(60,947
|
)
|
|
7,986
|
|
Operating portion of net cash paid in settlement of derivative
contracts
|
|
(15,090
|
)
|
|
(708
|
)
|
Stock-based compensation
|
|
7,071
|
|
|
6,601
|
|
Deferred income taxes
|
|
2,470
|
|
|
(16,388
|
)
|
Write-off of deferred financing costs
|
|
—
|
|
|
526
|
|
Amortization of deferred financing costs
|
|
325
|
|
|
257
|
|
Changes in assets and liabilities:
|
|
|
|
|
(Increase) decrease in accounts receivable
|
|
(8,195
|
)
|
|
444
|
|
(Increase) decrease in prepaid expenses and other current assets
|
|
(376
|
)
|
|
(335
|
)
|
Increase (decrease) in accounts payable and accrued expenses
|
|
1,132
|
|
|
(282
|
)
|
Increase (decrease) in revenues and royalties payable
|
|
31,869
|
|
|
(2,888
|
)
|
Increase (decrease) in advances
|
|
(1,413
|
)
|
|
45
|
|
Net cash provided by operating activities
|
|
102,379
|
|
|
50,951
|
|
Cash flows from investing activities:
|
|
|
|
|
Acquisition of oil and gas properties
|
|
(32,551
|
)
|
|
(55,609
|
)
|
Additions to oil and gas properties
|
|
(149,999
|
)
|
|
(65,262
|
)
|
Additions to office and other equipment
|
|
(170
|
)
|
|
(167
|
)
|
Proceeds from sales of oil and gas properties
|
|
5,965
|
|
|
34,735
|
|
Net cash used in investing activities
|
|
(176,755
|
)
|
|
(86,303
|
)
|
Cash flows from financing activities:
|
|
|
|
|
Proceeds from borrowings
|
|
156,830
|
|
|
85,000
|
|
Repayments of borrowings
|
|
(103,002
|
)
|
|
(74,298
|
)
|
Cash paid related to the exchange and cancellation of Class A Common
Stock
|
|
(1,524
|
)
|
|
(675
|
)
|
Issuance of Class A Common Stock, net of offering costs of $2.2
million
|
|
—
|
|
|
39,438
|
|
Deferred financing costs
|
|
(507
|
)
|
|
(1,358
|
)
|
Net cash provided by financing activities
|
|
51,797
|
|
|
48,107
|
|
Net increase (decrease) in cash and cash equivalents
|
|
(22,579
|
)
|
|
12,755
|
|
Cash at beginning of period
|
|
22,955
|
|
|
10,200
|
|
Cash at end of period
|
|
$
|
376
|
|
|
$
|
22,955
|
|
Supplemental disclosure of cash flow
information
|
|
|
|
|
Cash paid for:
|
|
|
|
|
Interest
|
|
$
|
2,290
|
|
|
$
|
2,495
|
|
Non-cash investing and financing activities:
|
|
|
|
|
Class B Common stock issued in Bold Contribution Agreement
|
|
$
|
—
|
|
|
$
|
489,842
|
|
Class A Common stock issued in Bold Contribution Agreement
|
|
$
|
—
|
|
|
$
|
2,037
|
|
Accrued capital expenditures
|
|
$
|
22,801
|
|
|
$
|
19,883
|
|
Asset retirement obligations
|
|
$
|
252
|
|
|
$
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
Earthstone Energy, Inc. Non-GAAP Financial Measures Unaudited
I. Adjusted EBITDAX
The non-GAAP financial measure of Adjusted EBITDAX (as defined below),
as calculated by us below, is intended to provide readers with
meaningful information that supplements our financial statements
prepared in accordance with accounting principles generally accepted in
the United States (“GAAP”). Further, this non-GAAP measure should only
be considered in conjunction with financial statements and disclosures
prepared in accordance with GAAP and should not be considered in
isolation or as a substitute for GAAP measures, such as net income or
loss, operating income or loss or any other GAAP measure of financial
position or results of operations. Adjusted EBITDAX is presented herein
and reconciled from the GAAP measure of net income (loss) because of its
wide acceptance by the investment community as a financial indicator.
We define “Adjusted EBITDAX” as net income (loss) plus, when applicable,
accretion of asset retirement obligations; impairment expense;
depletion, depreciation and amortization; interest expense, net;
transaction costs; (gain) on sale of oil and gas properties, net;
exploration expense; unrealized loss (gain) on derivative contracts;
stock-based compensation; and income tax expense (benefit).
Our Adjusted EBITDAX measure provides additional information that may be
used to better understand our operations. Adjusted EBITDAX is one of
several metrics that we use as a supplemental financial measurement in
the evaluation of our business and should not be considered as an
alternative to, or more meaningful than, net income (loss) as an
indicator of operating performance. Certain items excluded from Adjusted
EBITDAX are significant components in understanding and assessing a
company’s financial performance, such as a company’s cost of capital and
tax structure, as well as the historic cost of depreciable and
depletable assets. Adjusted EBITDAX, as used by us, may not be
comparable to similarly titled measures reported by other companies. We
believe that Adjusted EBITDAX is a widely followed measure of operating
performance and is one of many metrics used by our management team and
by other users of our consolidated financial statements. For example,
Adjusted EBITDAX can be used to assess our operating performance and
return on capital in comparison to other independent exploration and
production companies without regard to financial or capital structure
and to assess the financial performance of our assets and our company
without regard to capital structure or historical cost basis.
The following table provides a reconciliation of Net income (loss) to
Adjusted EBITDAX for the periods indicated:
($000s)
|
|
Three Months Ended December 31,
|
|
Years Ended December 31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net income (loss) (1)
|
|
80,986
|
|
|
5,497
|
|
|
95,213
|
|
|
(44,733
|
)
|
Accretion of asset retirement obligations
|
|
41
|
|
|
56
|
|
|
169
|
|
|
434
|
|
Impairment expense
|
|
3,748
|
|
|
5,451
|
|
|
4,581
|
|
|
72,191
|
|
Depletion, depreciation and amortization
|
|
14,206
|
|
|
8,657
|
|
|
47,568
|
|
|
36,915
|
|
Interest expense, net
|
|
1,110
|
|
|
826
|
|
|
2,898
|
|
|
2,699
|
|
Transaction costs
|
|
12,632
|
|
|
56
|
|
|
13,524
|
|
|
4,732
|
|
Loss (gain) on sale of oil and gas properties
|
|
2,689
|
|
|
(5,257
|
)
|
|
(1,919
|
)
|
|
(9,105
|
)
|
Exploration expense
|
|
630
|
|
|
—
|
|
|
630
|
|
|
1
|
|
Unrealized loss (gain) on derivative contracts
|
|
(96,001
|
)
|
|
11,187
|
|
|
(76,038
|
)
|
|
7,278
|
|
Stock based compensation (non-cash)(2)
|
|
1,536
|
|
|
1,956
|
|
|
7,071
|
|
|
6,601
|
|
Income tax expense (benefit)
|
|
2,351
|
|
|
(6,327
|
)
|
|
2,470
|
|
|
(16,373
|
)
|
Adjusted EBITDAX
|
|
23,928
|
|
|
22,102
|
|
|
96,167
|
|
|
60,640
|
|
(1)
|
|
Includes a $4.7 million charge to expense in the third quarter
representing a lawsuit settlement. Adjusted EBITDAX has not been
increased to adjust for this charge in the period presented.
|
(2)
|
|
Included in General and administrative expense in the Condensed
Consolidated Statements of Operations.
|
II. F&D Costs per Unit
Proved F&D costs per unit is a non-GAAP metric commonly used in the oil
and gas exploration and production industry by companies, investors and
analysts in order to measure a company’s ability of adding and
developing reserves at a reasonable cost. F&D costs per unit is a
statistical indicator that has limitations, including its predictive and
comparative value. In addition, because F&D costs per unit do not
consider the costs or timing of future production of new reserves, such
measures may not be adequate measures of value creation. This reserve
metric may not be comparable to similarly titled measurements used by
other companies.
The calculation for F&D costs per unit is based on estimated costs
incurred in 2018. The calculation for F&D costs per unit does not
include future development costs required for the development of proved
undeveloped reserves.
The following table provides a calculation of the F&D costs per unit for
Extensions and Discoveries only as well as for All-Sources.
Costs Incurred ($ in thousands)
|
|
2018
|
Acquisition costs:
|
|
|
Proved
|
|
$
|
41,569
|
Unproved
|
|
31,268
|
Exploration costs
|
|
630
|
Development costs
|
|
153,161
|
Total additions
|
|
$
|
226,628
|
|
|
|
|
|
|
Reserve Additions (MBoe)
|
|
2018
|
Extensions and Discoveries
|
|
16,209
|
Purchases
|
|
6,810
|
Revisions
|
|
6,075
|
Total Reserves Added
|
|
29,094
|
|
|
|
|
|
|
Finding F&D Costs as typically calculated by analysts
|
|
$/Boe
|
Extensions and Discoveries
|
|
$
|
9.49
|
All-Sources, excluding Sales of minerals in place & Production
|
|
$
|
7.79
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20190312005886/en/ Copyright Business Wire 2019
Source: Business Wire
(March 12, 2019 - 4:11 PM EDT)
News by QuoteMedia
www.quotemedia.com
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