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Earthstone Energy, Inc. Reports Second Quarter and Year to Date 2018 Financial Results and Provides an Operations Update THE WOODLANDS, Texas
Earthstone Energy, Inc. (NYSE: ESTE) (“Earthstone”, the “Company”, “we”
or “us”), today announced financial and operating results for the
quarter and six months ended June 30, 2018.
Second Quarter 2018 Highlights
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Revenues of $37.2 million
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Average daily production of 8,845 Boepd(1)
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Adjusted EBITDAX(2) of $20.5 million
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Net income of $1.5 million
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Net income attributable to Earthstone Energy, Inc. of $0.7 million, or
$0.02 per diluted share
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Capital expenditures of $52.0 million
Year To Date 2018 Highlights
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Revenues of $78.0 million
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Average daily production of 9,252 Boepd(1)
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Adjusted EBITDAX(2) of $45.8 million
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Net income of $13.7 million
-
Net income attributable to Earthstone Energy, Inc. of $6.0 million, or
$0.21 per diluted share
-
Capital expenditures of $74.5 million
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(1)
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Represents reported sales volumes.
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(2)
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Adjusted EBITDAX is a non-GAAP financial measure. See
“Reconciliation of Non-GAAP Financial Measure” section below.
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Management Comments
Robert J. Anderson, President of Earthstone Energy, Inc., commented, “In
the second quarter, we elected to moderately slow the pace of our
Midland Basin development program, as a result of industry and market
conditions related to take-away capacity, increasing Midland Basin
differentials and certain land trades in progress that will ultimately
provide for longer laterals. While the economic returns from our
operations are very attractive at current levels and our wells are
meeting or exceeding our type curves, we are being impacted by the
negative differentials in the Midland Basin, which averaged -$5.15/Bbl
in the second quarter. In general, we temporarily delayed certain
completion activities and focused our operated drilling rig on certain
locations where we have future drilling obligations in order to insure
we maintain all leases over the long term. These actions resulted in
reduced average daily production in the second quarter.
Our recent eight-well completion program concluded in July. Accordingly,
production from newly completed wells will be mostly reflected in the
third quarter. We currently estimate July production at approximately
11,460 Boepd. Additionally, our drilling obligations in the Midland
Basin are now nominal, at 3 to 5 wells per year, for 2019 and beyond.
Thus far, we have chosen to delay the deployment of a second full-time
rig until late this year or early 2019, as we expect to have more
visibility on incremental take-away capacity.”
Mr. Anderson further commented, “We also revised our guidance downward
for both capital expenditures and production for 2018. We currently
estimate average production of 10,500 - 11,000 Boepd for the year and an
exit rate in the vicinity of 14,000 Boepd while only spending
approximately $140 million.”
Operational Update
Midland Basin: Our operated activities in the Midland Basin so
far this year have included drilling eight gross and 7.7 net operated
wells with our continuous one-rig drilling program as well as completing
eight gross and 6.3 net operated wells. The rig is currently drilling in
Upton County and we began a completion program last week on three gross
and net operated wells. In Midland County, we completed two wells in our
Hamman project (70% working interest), one in each of the Lower
Spraberry and Wolfcamp B. The wells achieved an average peak IP30 of
1,170 Boepd (88% oil) from an average completed lateral length of 6,842
feet. In our WTG project in southeast Reagan County (100% working
interest) we have completed our first Wolfcamp B Lower well. Although
this well has only been online since the middle of July, it has produced
at rates above 2,000 Boepd (93% oil) from a 10,339 foot lateral. The
Wolfcamp A well on this same pad is continuing to increase in oil cut
which is typical of this reservoir in Reagan County.
We have completed our first Wolfcamp C well along with a Wolfcamp B
Upper from our two-well West Hartgrove pad (87% working interest) which
had an average lateral of 5,785 feet. The Wolfcamp C has produced at
rates as high as 995 Boepd (77% oil). The Wolfcamp B Upper has produced
at rates up to 1,267 Boepd (86% oil). While both wells are still
flowing, we are currently restricted by commercial saltwater disposal
capacity. We are in talks with third-party providers to see if we can
increase our allocated capacity. If allocated saltwater disposal
capacity is increased in the near-term, we would expect to install
artificial lift on these wells which should improve peak 30-day rates.
In our Hartgrove 22A Unit (60% working interest), we have completed a
two-well pad in the Wolfcamp A and Wolfcamp B Lower with an average
lateral of 7,585 feet. Although these wells came online in late May, the
company-owned saltwater disposal well encountered 20 days of downtime
related to electrical outages and therefore the producing wells had to
be shut-in. The Wolfcamp A well has performed similarly to other A wells
in Reagan County and continues to increase in oil cut after the
electrical outage. The B Lower well has reached rates ranging from 889
to 1,030 Boepd (81-93% oil).
Eagle Ford: In our Eagle Ford asset, we drilled and completed our
five well Sayre Unit (17%) in southern Gonzales County, Texas with an
average lateral of 5,923 feet. These five wells began producing in
mid-July and are flowing at rates ranging from 558 to 732 Boepd (93-94%
oil) with approximately 1,050 – 1,150 psi of pressure utilizing
controlled flowback. We plan to drill an additional five to seven wells
in this area in the fourth quarter.
Selected Financial Data (unaudited)
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($000s except where noted)
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Three Months Ended June 30,
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Six Months Ended June 30,
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2018
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2017
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2018
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2017
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Total Revenues
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37,150
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25,777
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78,045
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41,120
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Lease operating expense
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5,009
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5,243
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9,666
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9,582
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General and administrative expense (excluding stock-based
compensation)
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5,213
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5,738
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9,852
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9,230
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Stock-based compensation (non-cash)
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2,073
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1,647
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4,013
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2,958
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General and administrative expense
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7,286
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7,385
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13,865
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12,188
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Net income (loss)
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1,472
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(54,967
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13,663
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(54,238
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Less: Net income (loss) attributable to noncontrolling interest
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822
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(37,844
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7,692
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(37,844
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Net income (loss) attributable to Earthstone Energy, Inc.
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650
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(17,123
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5,971
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(16,394
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Net income (loss) per common share(1)
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Basic
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0.02
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(0.75
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0.21
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(0.73
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Diluted
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0.02
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(0.75
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0.21
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(0.73
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Adjusted EBITDAX(2)
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20,503
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13,293
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45,796
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19,430
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Production(3):
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Oil (MBbls)
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505
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480
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1,051
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737
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Gas (MMcf)
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892
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729
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1,936
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1,361
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NGL (MBbls)
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151
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120
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301
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184
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Total (MBoe)(4)
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805
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721
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1,675
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1,148
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Average Daily Production (Boepd)
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8,845
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7,932
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9,252
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7,602
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Average Prices:
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Oil ($/Bbl)
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63.16
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44.88
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63.11
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46.23
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Gas ($/Mcf)
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2.00
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2.92
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2.31
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2.81
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NGL ($/Bbl)
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22.92
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17.39
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24.11
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17.47
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Total ($/Boe)
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46.16
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35.71
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46.60
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35.82
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Adj. for Realized Derivatives Settlements:
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Oil ($/Bbl)
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53.09
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45.67
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54.14
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46.32
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Gas ($/Mcf)
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2.10
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2.84
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2.39
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2.96
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NGL ($/Bbl)
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22.92
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17.39
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24.11
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17.47
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Total ($/Boe)
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39.95
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36.15
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41.07
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35.59
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(1)
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Net Income (Loss) Per Common Share attributable to Earthstone
Energy, Inc.
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(2)
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See “Reconciliation of Non-GAAP Financial Measure” section below.
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(3)
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Represents reported sales volumes.
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(4)
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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).
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Liquidity
As of June 30, 2018, we had $4.2 million in cash and $22.5 million of
long-term debt outstanding under our credit facility with a current
borrowing base of $225 million.
Capital Expenditures
During the three months ended June 30, 2018, we incurred capital
expenditures of approximately $52.0 million, on an accrual basis,
primarily consisting of drilling and completion costs.
Guidance
We have currently reduced our estimated 2018 capital budget to
approximately $140 million, which assumes a continuing one-rig program
for our operated acreage in the Midland Basin and a 10 well program for
our operated Eagle Ford acreage. At present, we are planning for a
second operated rig in the Midland Basin in late 2018 or early 2019.
Current estimated capital expenditures, production and operating costs
for 2018 are as follows:
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2018 Capital Expenditures
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$ millions
(Net)
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Number of
Gross / Net
Wells Spudded
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Number of
Gross / Net
Wells On Line
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Midland Basin:
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Operated Drilling and Completions
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$
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107
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15 / 13.4
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19 / 15.0
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Non-Operated Drilling and Completions
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12
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5 / 2
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5 / 2
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Land / Infrastructure
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9
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Eagle Ford
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12
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10 / 2.1
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16 / 3.6
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2018 Total Capital Expenditures
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$
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140
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2018 Average Daily Production (Boepd)
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10,500 – 11,000
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%Oil
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64%
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%Gas
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17%
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%NGL
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19%
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Exit Rate Average Daily Production (Boepd)
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13,500 – 14,000
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2018 Operating Costs
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Lease Operating and Workover ($/Boe)
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$5.25 – $5.50
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Production Taxes (% of Revenue)
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5.0% – 5.3%
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Cash G&A ($/Boe)
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$5.00 – $5.50
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Hedging Update
As of June 30, 2018, we had hedged a total of 873 MBbls of remaining
2018 oil production at an average price of $54.31/Bbl and 1,220,000
MMBtu of remaining 2018 natural gas production at average price of
$2.95/MMBbtu. As of June 30, 2018, we had hedged a total of 1,259 MBbls
of 2019 oil production at an average price of $57.15/Bbl. Additionally,
we had 303.6 MBbls of WTI Midland Argus Crude Oil Basis Swaps at
-$0.15/Bbl and 184 MBbls of LLS Crude Oil Basis Swaps at +$6.35/Bbl
remaining for 2018 oil production. For 2019, we had 365 MBbls of WTI
Midland Argus Crude Basis Swaps at -$5.95/Bbl and 365 MBbls of LLS Crude
Oil Basis Swaps at +$4.50/Bbl. For 2020, we had 366 MBbls of WTI Midland
Argus Crude Oil Swaps at -$5.95/Bbl.
On July 9, 2018, we entered into additional WTI Midland Argus Crude Oil
Basis Swaps with a weighted average price differential of -$7.75/Bbl for
547,500 Bbls of 2019 crude oil production.
Conference Call Details
Earthstone is hosting a conference call on Tuesday, August 7, 2018 at
11:00 a.m. Eastern (10:00 a.m. Central) to discuss the Company’s
operational and financial results for the second quarter of 2018 and its
outlook for the remainder of 2018. 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), Tuesday, August
21, 2018. The number for the replay is 877-660-6853 for domestic calls
or 201-612-7415 for international calls, using Replay ID: 136682047.
About Earthstone Energy, Inc.
Earthstone Energy, Inc. is a growth-oriented, independent energy company
engaged in the development and operation of oil and natural gas
properties. Its primary assets are located in the Midland Basin of west
Texas and the Eagle Ford Trend of south Texas. Earthstone is listed on
the New York Stock Exchange 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,”
“potential,” “possible,” or “probable” or statements that certain
actions, events or results “may,” “will,” “should,” or “could” be taken,
occur or be achieved. The forward-looking statements include statements
about the expected future reserves, production, financial position,
business strategy, revenues, earnings, costs, capital expenditures and
debt levels of the Company, and plans and objectives of management for
future operations. 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. However, whether actual
results and developments will conform to expectations is subject to a
number of material risks and uncertainties, including but not limited
to: risks relating to any unforeseen liabilities of the Company;
declines in oil, natural gas liquids or natural gas prices; the level of
success in exploration, development and production activities; adverse
weather conditions that may negatively impact development or production
activities; the timing of exploration and development expenditures;
inaccuracies of reserve estimates or assumptions underlying them;
revisions to reserve estimates as a result of changes in commodity
prices; impacts to financial statements as a result of impairment
write-downs; risks related to the level of indebtedness and periodic
redeterminations of the borrowing base under the Company’s credit
agreement; Earthstone’s ability to generate sufficient cash flows from
operations to meet the internally funded portion of its capital
expenditures budget; Earthstone’s ability to obtain external capital to
finance exploration and development operations and acquisitions; the
ability to successfully complete any potential asset acquisitions and
the risks related thereto; the impacts of hedging on results of
operations; uninsured or underinsured losses resulting from oil and
natural gas operations; Earthstone’s ability to replace oil and natural
gas reserves; and any loss of senior management or technical personnel.
Earthstone’s annual report on Form 10-K for the year ended December 31,
2017, quarterly reports on Form 10-Q, recent current reports on Form 8-K
and other Securities and Exchange Commission (“SEC”) filings discuss
some of the important risk factors identified that may affect
Earthstone’s business, results of operations, and financial condition.
Earthstone undertakes no obligation to revise or update publicly any
forward-looking statements except as required by law.
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EARTHSTONE ENERGY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands, except share and per share amounts)
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June 30,
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December 31,
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ASSETS
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2018
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2017
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Current assets:
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Cash
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$
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4,196
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$
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22,955
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Accounts receivable:
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Oil, natural gas, and natural gas liquids revenues
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13,564
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14,978
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Joint interest billings and other, net of allowance of $116 and $138
at June 30, 2018 and December 31, 2017, respectively
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5,011
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7,778
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Derivative asset
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—
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184
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Prepaid expenses and other current assets
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2,059
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1,178
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Total current assets
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24,830
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47,073
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Oil and gas properties, successful efforts method:
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Proved properties
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681,960
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605,039
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Unproved properties
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272,260
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275,025
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Land
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5,382
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5,534
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Total oil and gas properties
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959,602
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885,598
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Accumulated depreciation, depletion and amortization
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(138,313
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)
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(118,028
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)
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Net oil and gas properties
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821,289
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767,570
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Other noncurrent assets:
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Goodwill
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17,620
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17,620
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Office and other equipment, net of accumulated depreciation of
$2,272 and $2,093 at June 30, 2018 and December 31, 2017,
respectively
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764
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947
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Other noncurrent assets
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1,277
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1,207
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TOTAL ASSETS
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$
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865,780
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$
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834,417
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LIABILITIES AND EQUITY
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Current liabilities:
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Accounts payable
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$
|
12,307
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$
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33,472
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Revenues and royalties payable
|
|
|
|
18,725
|
|
|
|
|
10,288
|
|
|
Accrued expenses
|
|
|
|
18,499
|
|
|
|
|
8,707
|
|
|
Advances
|
|
|
|
18,746
|
|
|
|
|
4,587
|
|
|
Derivative liability
|
|
|
|
14,803
|
|
|
|
|
11,805
|
|
|
Total current liabilities
|
|
|
|
83,080
|
|
|
|
|
68,859
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent liabilities:
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
|
22,500
|
|
|
|
|
25,000
|
|
|
Deferred tax liability
|
|
|
|
10,461
|
|
|
|
|
10,515
|
|
|
Asset retirement obligation
|
|
|
|
1,834
|
|
|
|
|
2,354
|
|
|
Derivative liability
|
|
|
|
5,502
|
|
|
|
|
1,826
|
|
|
Other noncurrent liabilities
|
|
|
|
109
|
|
|
|
|
131
|
|
|
Total noncurrent liabilities
|
|
|
|
40,406
|
|
|
|
|
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; 28,131,464 issued and outstanding at June 30, 2018 and
27,584,638 issued and outstanding at December 31, 2017
|
|
|
|
28
|
|
|
|
|
28
|
|
|
Class B Common Stock, $0.001 par value, 50,000,000 shares
authorized; 35,846,928 shares issued and outstanding at June 30,
2018; 36,052,169 issued and outstanding at December 31, 2017
|
|
|
|
36
|
|
|
|
|
36
|
|
|
Additional paid-in capital
|
|
|
|
509,381
|
|
|
|
|
503,932
|
|
|
Accumulated deficit
|
|
|
|
(218,851
|
)
|
|
|
|
(224,822
|
)
|
|
Total Earthstone Energy, Inc. equity
|
|
|
|
290,594
|
|
|
|
|
279,174
|
|
|
Noncontrolling interest
|
|
|
|
451,700
|
|
|
|
|
446,558
|
|
|
Total equity
|
|
|
|
742,294
|
|
|
|
|
725,732
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
|
|
$
|
865,780
|
|
|
|
|
$
|
834,417
|
|
|
|
|
EARTHSTONE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
Oil
|
|
|
|
|
|
$
|
31,903
|
|
|
|
$
|
21,563
|
|
|
|
$
|
66,320
|
|
|
|
$
|
34,082
|
|
|
Natural gas
|
|
|
|
|
|
1,783
|
|
|
|
2,131
|
|
|
|
4,467
|
|
|
|
3,825
|
|
|
Natural gas liquids
|
|
|
|
|
|
3,464
|
|
|
|
2,083
|
|
|
|
7,258
|
|
|
|
3,213
|
|
|
Total revenues
|
|
|
|
|
|
37,150
|
|
|
|
25,777
|
|
|
|
78,045
|
|
|
|
41,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating expense
|
|
|
|
|
|
5,009
|
|
|
|
5,243
|
|
|
|
9,666
|
|
|
|
9,582
|
|
|
Severance taxes
|
|
|
|
|
|
1,824
|
|
|
|
1,327
|
|
|
|
3,861
|
|
|
|
2,117
|
|
|
Impairment expense
|
|
|
|
|
|
—
|
|
|
|
66,648
|
|
|
|
—
|
|
|
|
66,648
|
|
|
Depreciation, depletion and amortization
|
|
|
|
|
|
10,812
|
|
|
|
10,039
|
|
|
|
20,520
|
|
|
|
17,928
|
|
|
General and administrative expense
|
|
|
|
|
|
7,286
|
|
|
|
7,385
|
|
|
|
13,865
|
|
|
|
12,188
|
|
|
Transaction costs
|
|
|
|
|
|
—
|
|
|
|
3,764
|
|
|
|
—
|
|
|
|
4,567
|
|
|
Accretion of asset retirement obligation
|
|
|
|
|
|
43
|
|
|
|
154
|
|
|
|
84
|
|
|
|
306
|
|
|
Exploration expense
|
|
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
Total operating costs and expenses
|
|
|
|
|
|
24,974
|
|
|
|
94,561
|
|
|
|
47,996
|
|
|
|
113,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on sale of oil and gas properties
|
|
|
|
|
|
63
|
|
|
|
1,691
|
|
|
|
512
|
|
|
|
1,691
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
|
|
|
12,239
|
|
|
|
(67,093
|
)
|
|
|
30,561
|
|
|
|
(70,526
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
|
(610
|
)
|
|
|
(633
|
)
|
|
|
(1,223
|
)
|
|
|
(970
|
)
|
|
Write-off of deferred financing costs
|
|
|
|
|
|
—
|
|
|
|
(526
|
)
|
|
|
—
|
|
|
|
(526
|
)
|
|
(Loss) gain on derivative contracts, net
|
|
|
|
|
|
(10,850
|
)
|
|
|
3,340
|
|
|
|
(16,125
|
)
|
|
|
7,800
|
|
|
Other income, net
|
|
|
|
|
|
391
|
|
|
|
31
|
|
|
|
397
|
|
|
|
32
|
|
|
Total other income (expense)
|
|
|
|
|
|
(11,069
|
)
|
|
|
2,212
|
|
|
|
(16,951
|
)
|
|
|
6,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
1,170
|
|
|
|
(64,881
|
)
|
|
|
13,610
|
|
|
|
(64,190
|
)
|
|
Income tax benefit
|
|
|
|
|
|
302
|
|
|
|
9,914
|
|
|
|
53
|
|
|
|
9,952
|
|
|
Net income (loss)
|
|
|
|
|
|
1,472
|
|
|
|
(54,967
|
)
|
|
|
13,663
|
|
|
|
(54,238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income (loss) attributable to noncontrolling interest
|
|
|
|
|
|
822
|
|
|
|
(37,844
|
)
|
|
|
7,692
|
|
|
|
(37,844
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Earthstone Energy, Inc.
|
|
|
|
|
|
$
|
650
|
|
|
|
$
|
(17,123
|
)
|
|
|
$
|
5,971
|
|
|
|
$
|
(16,394
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share attributable to Earthstone
Energy, Inc.:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
$
|
0.02
|
|
|
|
$
|
(0.75
|
)
|
|
|
$
|
0.21
|
|
|
|
$
|
(0.73
|
)
|
|
Diluted
|
|
|
|
|
|
$
|
0.02
|
|
|
|
$
|
(0.75
|
)
|
|
|
$
|
0.21
|
|
|
|
$
|
(0.73
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
27,987,509
|
|
|
|
22,728,011
|
|
|
|
27,886,220
|
|
|
|
22,503,750
|
|
|
Diluted
|
|
|
|
|
|
28,036,052
|
|
|
|
22,728,011
|
|
|
|
27,967,421
|
|
|
|
22,503,750
|
|
|
|
|
|
|
EARTHSTONE ENERGY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In thousands)
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended
June 30,
|
|
|
|
|
|
|
|
2018
|
|
|
2017
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
$
|
13,663
|
|
|
|
$
|
(54,238
|
)
|
|
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
Impairment of proved and unproved oil and gas properties
|
|
|
|
|
|
—
|
|
|
|
66,648
|
|
|
Depreciation, depletion and amortization
|
|
|
|
|
|
20,520
|
|
|
|
17,928
|
|
|
Accretion of asset retirement obligations
|
|
|
|
|
|
84
|
|
|
|
306
|
|
|
Settlement of asset retirement obligations
|
|
|
|
|
|
(79
|
)
|
|
|
—
|
|
|
Gain on sale of oil and gas properties
|
|
|
|
|
|
(512
|
)
|
|
|
(1,691
|
)
|
|
Total loss (gain) on derivative contracts, net
|
|
|
|
|
|
16,125
|
|
|
|
(7,800
|
)
|
|
Operating portion of net cash paid in settlement of derivative
contracts
|
|
|
|
|
|
(9,267
|
)
|
|
|
(267
|
)
|
|
Stock-based compensation
|
|
|
|
|
|
4,013
|
|
|
|
2,958
|
|
|
Deferred income taxes
|
|
|
|
|
|
(54
|
)
|
|
|
(9,952
|
)
|
|
Write-off of deferred financing costs
|
|
|
|
|
|
—
|
|
|
|
526
|
|
|
Amortization of deferred financing costs
|
|
|
|
|
|
143
|
|
|
|
137
|
|
|
Changes in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
Decrease in accounts receivable
|
|
|
|
|
|
4,475
|
|
|
|
3,233
|
|
|
Increase in prepaid expenses and other current assets
|
|
|
|
|
|
(992
|
)
|
|
|
(522
|
)
|
|
Decrease in accounts payable and accrued expenses
|
|
|
|
|
|
(17,286
|
)
|
|
|
(3,148
|
)
|
|
Increase (decrease) in revenues and royalties payable
|
|
|
|
|
|
8,437
|
|
|
|
(1,905
|
)
|
|
Increase (decrease) in advances
|
|
|
|
|
|
14,159
|
|
|
|
(535
|
)
|
|
Net cash provided by operating activities
|
|
|
|
|
|
53,429
|
|
|
|
11,678
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Bold Contribution Agreement, net of cash acquired
|
|
|
|
|
|
—
|
|
|
|
(55,609
|
)
|
|
Additions to oil and gas properties
|
|
|
|
|
|
(68,516
|
)
|
|
|
(10,048
|
)
|
|
Additions to office and other equipment
|
|
|
|
|
|
(53
|
)
|
|
|
(103
|
)
|
|
Proceeds from sales of oil and gas properties
|
|
|
|
|
|
210
|
|
|
|
2,416
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
(68,359
|
)
|
|
|
(63,344
|
)
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings
|
|
|
|
|
|
25,000
|
|
|
|
70,000
|
|
|
Repayments of borrowings
|
|
|
|
|
|
(27,500
|
)
|
|
|
(10,792
|
)
|
|
Cash paid related to the exchange and cancellation of Class A Common
Stock
|
|
|
|
|
|
(1,116
|
)
|
|
|
—
|
|
|
Deferred financing costs
|
|
|
|
|
|
(213
|
)
|
|
|
(1,071
|
)
|
|
Net cash (used in) provided by financing activities
|
|
|
|
|
|
(3,829
|
)
|
|
|
58,137
|
|
|
Net (decrease) increase in cash
|
|
|
|
|
|
(18,759
|
)
|
|
|
6,471
|
|
|
Cash at beginning of period
|
|
|
|
|
|
22,955
|
|
|
|
10,200
|
|
|
Cash at end of period
|
|
|
|
|
|
$
|
4,196
|
|
|
|
$
|
16,671
|
|
|
Supplemental disclosure of cash flow
information
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
|
$
|
986
|
|
|
|
$
|
740
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
Accrued capital expenditures
|
|
|
|
|
|
$
|
25,791
|
|
|
|
$
|
27,054
|
|
|
Asset retirement obligations
|
|
|
|
|
|
$
|
(141
|
)
|
|
|
$
|
21
|
|
|
|
|
Earthstone Energy, Inc.
|
|
Reconciliation of Non-GAAP Financial Measure
|
|
Unaudited
|
I. Adjusted EBITDAX
Adjusted EBITDAX (as defined below) 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; depletion, depreciation and
amortization; interest expense, net; transaction costs; (gain) on sale
of oil and gas properties; unrealized loss (gain) on derivatives;
stock-based compensation; and income tax (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 June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
|
2018
|
|
2017
|
|
|
2018
|
|
2017
|
|
Net income (loss)
|
|
|
|
|
1,472
|
|
|
(54,967
|
)
|
|
|
13,663
|
|
|
(54,238
|
)
|
|
Accretion of asset retirement obligations
|
|
|
|
|
43
|
|
|
154
|
|
|
|
84
|
|
|
306
|
|
|
Impairment expense
|
|
|
|
|
—
|
|
|
66,648
|
|
|
|
—
|
|
|
66,648
|
|
|
Depletion, depreciation and amortization
|
|
|
|
|
10,812
|
|
|
10,039
|
|
|
|
20,520
|
|
|
17,928
|
|
|
Interest expense, net
|
|
|
|
|
610
|
|
|
633
|
|
|
|
1,223
|
|
|
970
|
|
|
Transaction costs
|
|
|
|
|
—
|
|
|
3,764
|
|
|
|
—
|
|
|
4,567
|
|
|
(Gain) on sale of oil and gas properties
|
|
|
|
|
(63
|
)
|
|
(1,691
|
)
|
|
|
(512
|
)
|
|
(1,691
|
)
|
|
Exploration
|
|
|
|
|
—
|
|
|
1
|
|
|
|
—
|
|
|
1
|
|
|
Unrealized loss (gain) on derivative contracts
|
|
|
|
|
5,858
|
|
|
(3,021
|
)
|
|
|
6,858
|
|
|
(8,067
|
)
|
|
Stock based compensation (non-cash)(1)
|
|
|
|
|
2,073
|
|
|
1,647
|
|
|
|
4,013
|
|
|
2,958
|
|
|
Income tax (benefit)
|
|
|
|
|
(302
|
)
|
|
(9,914
|
)
|
|
|
(53
|
)
|
|
(9,952
|
)
|
|
Adjusted EBITDAX
|
|
|
|
|
20,503
|
|
|
13,293
|
|
|
|
45,796
|
|
|
19,430
|
|
|
|
|
(1)
|
|
Included in General and administrative expense in the Condensed
Consolidated Statements of Operations.
|
View source version on businesswire.com: https://www.businesswire.com/news/home/20180806005596/en/ Copyright Business Wire 2018
Source: Business Wire
(August 6, 2018 - 4:10 PM EDT)
News by QuoteMedia
www.quotemedia.com
|
