August 6, 2018 - 4:30 PM EDT
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Jones Energy, Inc. Announces 2018 Second Quarter Financial and Operating Results

AUSTIN, Texas, Aug. 06, 2018 (GLOBE NEWSWIRE) -- Jones Energy, Inc. (NYSE:JONE) (“Jones Energy” or “the Company”) today announced financial and operating results for the second quarter ended June 30, 2018 as well as initial production guidance for the third quarter of 2018.

Highlights:

  • The Company has proactively initiated discussions with its unsecured noteholders. The aim of these liability management discussions is to achieve increased financial flexibility to optimize the value of Jones Energy’s core Merge and Western Anadarko Basin (“WAB”) assets for the benefit of all stakeholders.
  • Jones Energy remains active in its evaluation of strategic alternatives as well as its pursuit of a DrillCo with an exclusive joint development partner in order to accelerate drilling and value creation.
  • 2018 Merge wells brought online showing average peak IP30 of 183 boe/d per 1,000’ of lateral in the Meramec and 120 Boe/d per 1,000’ of lateral in the Woodford (3-stream).
  • Net loss for the second quarter of 2018 of $46.9 million, or a net loss of $0.47 per share, non-GAAP adjusted net loss of $28.7 million, or an adjusted net loss of $0.29 per share, and EBITDAX of $29.7 million.1

Operational and Strategic Direction Update

On July 23, 2018, the Company named Carl Giesler as Chief Executive Officer. Mr. Giesler commented, “Thank you to our Board of Directors and the entire Jones Energy team for the warm welcome and, more importantly, the renewed energy, commitment, and focus.”

Mr. Giesler continued, “From an operating perspective, production remained strong through the second quarter of 2018.  The Merge program now represents 41% of total company production, as compared to 8% this time last year. Additionally, our 2018 Merge HBP-focused drilling remains on-schedule to be completed in November. As part of ongoing operational improvements, we are tightening our landing-point selection and focusing on staying in zone. We are also enhancing casing and completion designs, refining flowback methodology and lifting techniques to minimize risk and optimize well results. We believe our contiguous position of 22,500 net acres with more than 500 identified operated drilling locations in the Merge will improve in value as we and other area operators test spacing and further refine completions and other processes.

“In the WAB, we have had consistently strong results in our core Cleveland drilling since improving our completions and flowback protocols in a cost-neutral manner late last year. Additionally, we are seeing early flowback from our first Marmaton well and other recent results from the Cleveland that highlight potential upside in the WAB.  We continue to identify operated producing well-bores for lower-risk, low-capex, high-return, quick-payback work-over opportunities as well as shutting-in wells that have become uneconomic. We believe there exists significant value, which is sometimes overlooked, in our Western Anadarko asset as part of the greater Jones Energy portfolio.

“From a strategic perspective, we believe our cash position provides us a multi-year runway to drive value through executing on our core Merge and WAB assets.  To extend that runway, management and the Board of Directors are focused on various initiatives to reduce our debt and increase our financial flexibility. We have taken several key steps in recent weeks and look forward to providing you additional updates as the DrillCo and other objectives are achieved.

“No doubt, we have a lot of work to do. Fortunately, we believe the quality of our people, the strength of our asset base and the improving commodity price environment will allow us to achieve our goals.”

Financial Results

Total operating revenues for the three months ended June 30, 2018 were $65.3 million as compared to $48.6 million for the three months ended June 30, 2017.  Total revenues, including current period settlements of matured derivative contracts, were $52.7 million for the three months ended June 30, 2018 as compared to $66.5 million for the three months ended June 30, 2017.  

Total operating expenses for the three months ended June 30, 2018 were $70.1 million as compared to $73.2 million for the three months ended June 30, 2017, excluding a one-time impairment charge of $148 million related to the Company’s sale of its Arkoma Basin properties. Lease Operating Expenses (“LOE”) for the three months ended June 30, 2018 totaled $11.6 million, or $5.10 per Boe, which is in line with the first quarter 2018 LOE which averaged $5.12 per Boe.

For the three months ended June 30, 2018, the Company reported a net loss of $46.9 million, of which a net loss of $43.5 million, or $0.47 per share, is attributable to common shareholders. This compares to a net loss of $134.0 million, of which a net loss of $84.2 million, or $1.28 per share, was attributable to common shareholders, for the three months ended June 30, 2017. Excluding, on a tax-adjusted basis, certain items that the Company does not view as indicative of its ongoing financial performance, the Company had adjusted net loss for the second quarter 2018 of $28.7 million, or adjusted net loss attributable to common shareholders of $0.29 per share, as compared to adjusted net income of $4.7 million, or net income of $0.10 per share for the three months ended June 30, 2017.

Earnings before interest, income taxes, depreciation, amortization, and exploration expense (“EBITDAX”) for the second quarter 2018 was $29.7 million. EBITDAX for the second quarter 2018 was negatively impacted by $12.5 million of hedging related losses. This compares to second quarter 2017 EBITDAX of $48.3 million.  

Preferred Dividend Update

During the second quarter, the Company’s Board of Directors declared a contingent dividend on the Company’s 8.0% Series A Perpetual Convertible Preferred Stock (“Preferred Stock”), payable in Class A common stock on May 15, 2018 to holders of record as of May 1, 2018. It was announced on May 15, 2018 that the Dividend Valuation Price did not meet the required Floor Price2, and the dividend was not paid. The right to receive that dividend accrued for holders of Preferred Stock. As a reminder, the Company has exercised one of its five dividend holidays available to it without penalty.  

Following the end of the 2018 second quarter, on July 17, 2018 the Company’s Board of Directors declared a contingent dividend on the Preferred Stock, payable in Class A common stock on August 15, 2018 to holders of record as of August 1, 2018 under the same terms, including the requirement that the Dividend Valuation Price of the stock must meet the required Floor Price in order to be paid. If the dividend is not paid, the right to receive the dividend will again accrue for holders of Preferred Stock and the Company will have exercised its second dividend holiday.

Operating Results

For the three months ended June 30, 2018, Jones Energy produced 2,272 MBoe, or 24,967 Boe/d, of which production from the Merge accounted for 41%. The table below provides a breakout of 2018 second quarter production.

 Three months ended June 30, 2018:  
 Oil
(MBbls)
 Natural Gas
(MMcf)
 NGLs
(MBbls)
 Total
(MBoe)
 % of Total
Cleveland339 3,048 383 1,230 54%
Merge291 2,309 261 937 41%
Other 404 30 105 5%
Total638 5,761 674 2,272 100%

Merge

During the second quarter, the Company spud three wells and completed seven wells in the Merge. Of the wells completed and brought online, three were landed in the Meramec and four were in the Woodford. Merge production for the second quarter 2018 of 10.3 MBoe/d represents an increase of 51% over first quarter 2018 production of 6.8 Mboe/d. The Merge now represents 41% of total Company production. 

Merge wells continue to show solid performance in the Company’s designated development areas of El Reno, Minco and Tuttle across Canadian and Grady Counties, OK. The average of wells drilled in the 2018 program in these areas have seen peak IP30 (3-stream) rates of 183 Boe/d per 1,000’ of lateral in the Meramec and 120 Boe/d per 1,000’ of lateral in the Woodford. Jones Energy continues to improve its operational performance by focusing on optimizing landing points, geo-steering and completion designs. Specifically, teams are fully integrating 3D seismic into their landing point selection and maximizing time in the most productive target interval as defined by proprietary data from our 40 operated wells in the Merge. Further, the Company has identified that certain casing designs, completion methods, flowback techniques and lift protocols correlate to improved performance. Regarding current completion designs, the Company has increased its stage count in the Meramec and improved cluster efficiency in both plays through limited entry perforating and effective fluid diversion. Jones Energy will continue to optimize all aspects of its early development efforts.

Jones Energy continues to progress its 2018 Merge HBP program and has one rig running on its Merge acreage. As of August 6, 2018, the Company has drilled 32 of its 38 operated sections and remains on-track to complete its HBP Merge program in November.

Western Anadarko Basin

Average daily net production was 13.5 MBoe/d in the WAB for the second quarter of 2018. During the quarter, the Company spud two wells and completed one well in the Western Anadarko. Of the two wells spud, one well was a Cleveland target and one well was an exploration Marmaton target. The single well completed and brought online during the quarter was a Cleveland well. The Marmaton target was completed in July and is in early stages of flowback. This Marmaton well represents the Company’s first operated well in that play, and if successful, could unlock additional upside for the WAB asset.

Jones Energy is enhancing base production on its 534 operated wells in the WAB employing industry best-practices to improve lifting efficiency. Examples include a targeted re-frac program, application of emerging artificial lift solutions, and field-wide telemetry installations. The Company believes this ongoing well-level focus serves to maximize production from existing wellbores in a known proven reservoir.

Jones Energy currently has one rig active in the WAB.

Capital Expenditures

During the second quarter 2018, the Company spent $47.1 million of capital expenditures, of which $39.2 million was related to operated drilling and completion (“D&C”) capital and $5.5 million was related to D&C spending on non-operated wells. 90% of all D&C capital was related to Merge activity. The remaining $2.4 million of capital spend was related to leasing and maintenance. Year-to-date capital expenditures for the Company total $110.5 million.

Initial 2018 Third Quarter Production Guidance

Jones Energy is announcing initial production guidance of 1.8 to 2.0 MMBoe, or 19,500 to 21,700 Boe/d, for the 2018 third quarter. Full-year production and cost guidance remain suspended and subject to the Company’s ongoing review of its financial and operating plans. The following table provides a breakout of initial 2018 third quarter production guidance.

  
 3Q 2018 Production Guidance3Q18E
  Total Production (MMBoe)1.8 – 2.0 
  Average Daily Production (MBoe/d)19.5 – 21.7
     Crude Oil (MBbl/d)5.6 – 6.2
     Natural Gas (MMcf/d)48.3 – 53.7
     NGLs (MBbl/d) 5.9 – 6.5

Liquidity and Hedging

During the second quarter of 2018, the Company used $25 million of cash to pay down its revolver balance and had no outstanding borrowings as of June 30, 2018 under that facility. Jones Energy also amended the terms of its credit facility, removing all financial maintenance covenants and aligning other covenants to those contained in the Company’s 9.25% senior secured first lien notes and reducing the borrowing base to twenty-five dollars. As of June 30, 2018, the Company had approximately $148 million in cash and as of August 2, 2018 had approximately $129 million of cash. The following table summarizes the Company’s net commodity derivative contracts outstanding as of August 6, 2018:

  3Q184Q18   2019 2020 
Oil Hedges       
Swaps Sold (MBbl)   630  620    1,020  660 
Price ($/Bbl) $50.94$50.92  $50.04$50.00 
        
Collars (MBbl)   -   -     810  -  
Floor ($/Bbl)   -   -   $48.52  -  
Ceiling ($/Bbl)  - -  $59.64 - 
        
Gas Hedges       
        
Swaps Sold (MMcf)   4,800  4,800    7,260  8,400 
Price ($/Mcf) $2.98$2.97  $2.84$2.79 
        
Collars (MMcf)   -   -     11,890  -  
Floor ($/Mcf)   -   -   $2.55  -  
Ceiling ($/Mcf)   -   -   $3.19  -  
        
NGL Swaps (MBbl)       
Ethane   -   -     -   -  
Propane   205  195    -   -  
Iso Butane   30  30    -   -  
Butane   80  75    -   -  
Natural Gasoline   90  90    -   -  
Total NGLs   405  390    -   -  
        
NGL Swap Prices ($/Gal)      
Ethane   -   -     -  - 
Propane $0.57$0.57    -  - 
Iso Butane   0.72  0.72    -  - 
Butane   0.69  0.69    -  - 
Natural Gasoline   1.05  1.05    -  - 

Jones Energy will not hold a conference call in conjunction with its second quarter 2018 earnings release and expects to file its 10-Q with the SEC on Wednesday, August 8, 2018.

About Jones Energy

Jones Energy, Inc. is an independent oil and natural gas company engaged in the exploration, development and acquisition of oil and natural gas properties in the Anadarko basin of Oklahoma and Texas.  Additional information about Jones Energy may be found on the Company’s website at: www.jonesenergy.com.

Investor Contact:

Page Portas, 512-493-4834
Investor Relations Associate
Or
Robert Brooks, 512-328-2953
Executive Vice President & CFO

[email protected]

____________________________

1Adjusted net income, adjusted net income per share and EBITDAX are supplemental non-GAAP financial measures that are used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. For additional information, including reconciliations to the most comparable GAAP financial measures, please see “Non-GAAP Financial Measures and Reconciliations” below.

2As defined in the Certificate of Designations for the Preferred Stock and as adjusted in accordance with the terms of the Certificate of Designations.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, updated guidance regarding the number of rigs that will be running in 2018, the timing and location of the development of the Merge, expectations regarding our liability management program and potential strategic transactions, including the proposed DrillCo, levels of single-well authorizations for expenditures and the cost to drill and complete wells and the resultant impact on the 2018 capital budget, and projections regarding total production, average daily production, percentage liquids, operating expenses, production and ad valorem taxes as a percentage of revenue, cash G&A expenses and capital expenditure levels for the full year and third quarter of 2018.  These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current economic and market conditions, anticipated future developments and other factors believed to be appropriate.  Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements.  These include, but are not limited to, changes in oil and natural gas prices, weather and environmental conditions, the timing and amount of planned capital expenditures, availability and method of funding of acquisitions and divestitures, or the ability to integrate any acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company’s ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company’s business and other important factors that could cause actual results to differ materially from those projected as described in the Company’s reports filed with the SEC.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

 

Jones Energy, Inc.
Consolidated Statement of Operations (Unaudited)

    
 Three months ended June 30,  Six months ended June 30, 
(in thousands of dollars except per share data)2018 2017 2018 2017
Operating revenues           
Oil and gas sales$64,748  $48,114  $122,886  $88,791 
Other revenues 507   512   (142)  1,068 
Total operating revenues 65,255   48,626   122,744   89,859 
Operating costs and expenses           
Lease operating 11,592   9,425   21,821   18,231 
Production and ad valorem taxes 3,284   2,790   6,035   1,884 
Transportation and processing costs 885      1,591    
Exploration 1,528   6,725   4,827   9,669 
Depletion, depreciation and amortization 44,729   45,336   86,170   80,990 
Impairment of oil and gas properties    148,016      148,016 
Accretion of ARO liability 264   266   515   467 
General and administrative 7,896   8,633   15,466   16,674 
Total operating expenses 70,178   221,191   136,425   275,931 
Operating income (loss) (4,923)  (172,565)  (13,681)  (186,072)
Other income (expense)           
Interest expense (23,055)  (12,677)  (44,917)  (25,564)
Net gain (loss) on commodity derivatives (30,145)  21,527   (39,167)  43,847 
Other income (expense) 5,774   27,501   13,504   28,081 
Other income (expense), net (47,426)  36,351   (70,580)  46,364 
Income (loss) before income tax (52,349)  (136,214)  (84,261)  (139,708)
Income tax provision (benefit) (5,418)  (2,236)  (8,410)  (2,215)
Net income (loss) (46,931)  (133,978)  (75,851)  (137,493)
Net income (loss) attributable to non-controlling interests (5,416)  (51,762)  (8,975)  (53,890)
Net income (loss) attributable to controlling interests$(41,515) $(82,216) $(66,876) $(83,603)
Dividends and accretion on preferred stock (1,963)  (1,966)  (3,931)  (3,993)
Net income (loss) attributable to common shareholders$(43,478) $(84,182) $(70,807) $(87,596)
            
Earnings (loss) per share:           
Basic - Net income (loss) attributable to common shareholders$(0.47) $(1.28) $(0.77) $(1.37)
Diluted - Net income (loss) attributable to common shareholders$(0.47) $(1.28) $(0.77) $(1.37)
            
Weighted average Class A shares outstanding:         
Basic 93,429   65,681   92,253   63,948 
Diluted 93,429   65,681   92,253   63,948 
                
                

Jones Energy, Inc.
Consolidated Balance Sheet (Unaudited)

    
 June 30,  December 31, 
(in thousands of dollars)2018 2017
Assets   
Current assets     
Cash and cash equivalents$148,070  $19,472 
Accounts receivable, net     
Oil and gas sales 39,990   34,492 
Joint interest owners 34,789   31,651 
Other 1,167   1,236 
Commodity derivative assets 723   3,474 
Other current assets 7,070   14,376 
Total current assets 231,809   104,701 
Oil and gas properties, net, at cost under the successful efforts method 1,620,083   1,597,040 
Other property, plant and equipment, net 2,243   2,719 
Commodity derivative assets 1,371   172 
Other assets 993   5,431 
Total assets$1,856,499  $1,710,063 
Liabilities and Stockholders' Equity     
Current liabilities     
Trade accounts payable$43,725  $72,663 
Oil and gas sales payable 39,930   31,462 
Accrued liabilities 46,199   21,604 
Commodity derivative liabilities 46,686   36,709 
Other current liabilities 3,863   4,049 
Total current liabilities 180,403   166,487 
Long-term debt 978,727   759,316 
Deferred revenue 4,675   5,457 
Commodity derivative liabilities 14,949   8,788 
Asset retirement obligations 20,146   19,652 
Liability under tax receivable agreement 50,529   59,596 
Other liabilities 874   811 
Deferred tax liabilities 9,732   14,281 
Total liabilities 1,260,035   1,034,388 
Commitments and contingencies (Note 15)     
Mezzanine equity     
Series A preferred stock, $0.001 par value; 1,837,995 shares issued and outstanding at June 30, 2018 and 1,839,995 shares issued and outstanding at December 31, 2017 91,534   89,539 
Stockholders' equity     
Class A common stock, $0.001 par value; 93,799,481 shares issued and 93,776,879 shares outstanding at June 30, 2018 and 90,139,840 shares issued and 90,117,238 shares outstanding at December 31, 2017 94   90 
Class B common stock, $0.001 par value; 9,074,330 shares issued and outstanding at June 30, 2018 and 9,627,821 shares issued and outstanding at December 31, 2017 9   10 
Treasury stock, at cost: 22,602 shares at June 30, 2018 and December 31, 2017 (358)  (358)
Additional paid-in-capital 611,242   606,319 
Retained (deficit) / earnings (207,081)  (136,274)
Stockholders' equity 403,906   469,787 
Non-controlling interest 101,024   116,349 
Total stockholders’ equity 504,930   586,136 
Total liabilities and stockholders' equity$1,856,499  $1,710,063 
        
        

Jones Energy, Inc.
Selected Financial and Operating Statistics

The following table sets forth summary data regarding revenues, production volumes, average prices and average production costs associated with our sale of oil and natural gas for the periods indicated:

   
  Three Months Ended June 30,
  2018 2017 Change
Revenues (in thousands of dollars):         
Oil and gas sales $64,748  $48,114 $16,634 
Other revenues  507   512  (5)
Current period settlements of matured derivative contracts  (12,537)  17,921  (30,458)
Total operating revenues $52,718  $66,547 $(13,829)
          
Net production volumes:         
Oil (MBbls)  638   525  113 
Natural gas (MMcf)  5,761   5,836  (75)
NGLs (MBbls)  674   668  6 
Total (MBoe)  2,272   2,166  107 
Average net (Boe/d)  24,967   23,802  1,165 
          
Average sales price, unhedged:         
Oil (per Bbl), unhedged $65.73  $44.40 $21.33 
Natural gas (per Mcf), unhedged  1.22   2.19  (0.97)
NGLs (per Bbl), unhedged  23.40   18.02  5.38 
Combined (per Boe), unhedged  28.50   22.21  6.29 
          
Average sales price, hedged:         
Oil (per Bbl), hedged $49.77  $61.30 $(11.53)
Natural gas (per Mcf), hedged  1.45   4.04  (2.59)
NGLs (per Bbl), hedged  17.93   15.36  2.57 
Combined (per Boe), hedged  22.98   30.49  (7.51)
          
Average costs (per BOE):         
Lease operating $5.10  $4.35 $0.75 
Production and ad valorem taxes  1.45   1.29  0.16 
Depletion, depreciation and amortization  19.69   20.93  (1.24)
General and administrative  3.48   3.99  (0.51)
          
          

Jones Energy, Inc.
Consolidated Statement of Cash Flow Data (Unaudited)

  Six months ended June 30, 
(in thousands of dollars) 2018 2017
Cash flows from operating activities      
Net income (loss) $(75,851) $(137,493)
Adjustments to reconcile net income (loss) to net cash provided by operating activities      
Depletion, depreciation, and amortization  86,170   80,990 
Exploration (dry hole and lease abandonment)  907   6,880 
Impairment of oil and gas properties     148,016 
Accretion of ARO liability  515   467 
Amortization of debt issuance costs  7,261   1,953 
Stock compensation expense  974   3,736 
Deferred and other non-cash compensation expense  84   180 
Amortization of deferred revenue  (782)  (942)
(Gain) loss on commodity derivatives  39,167   (43,847)
(Gain) loss on sales of assets  (1,945)  119 
Deferred income tax provision  (8,410)  6 
Change in liability under tax receivable agreement  (9,081)  (28,266)
Other - net  376   1,307 
Changes in operating assets and liabilities      
Accounts receivable  (9,246)  (4,188)
Other assets  7,574   (12,407)
Accrued interest expense  15,583   (1,301)
Accounts payable and accrued liabilities  (6,484)  6,268 
Net cash provided by operations  46,812   21,478 
Cash flows from investing activities      
Additions to oil and gas properties  (114,832)  (107,250)
Net adjustments to purchase price of properties acquired     2,391 
Proceeds from sales of assets  6,566   2,730 
Acquisition of other property, plant and equipment  (71)  (436)
Current period settlements of matured derivative contracts  (25,655)  45,738 
Net cash (used in) investing  (133,992)  (56,827)
Cash flows from financing activities      
Proceeds from issuance of long-term debt  20,000   75,000 
Repayment of long-term debt  (231,000)  (72,000)
Proceeds from senior notes  438,867    
Payment of debt issuance costs  (11,537)   
Payment of cash dividends on preferred stock  (97)  (3,367)
Net distributions paid to JEH unitholders     (562)
Net payments for share based compensation  (455)  (462)
Proceeds from sale of common stock     8,352 
Net cash provided by / (used in) financing  215,778   6,961 
Net increase (decrease) in cash and cash equivalents  128,598   (28,388)
Cash and cash equivalents      
Beginning of period  19,472   34,642 
End of period $148,070  $6,254 
Supplemental disclosure of cash flow information      
Cash paid for interest, net of capitalized interest $23,055  $24,064 
Change in accrued additions to oil and gas properties  (1,425)  13,155 
Asset retirement obligations incurred, including changes in estimate  280   395 
         
         

Jones Energy, Inc.
Non-GAAP Financial Measures and Reconciliations

EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies.

We define EBITDAX as earnings before interest expense, income taxes, depreciation, depletion and amortization, exploration expense, gains and losses from derivatives less the current period settlements of matured derivative contracts, and the other items described below.  EBITDAX is not a measure of net income as determined by United States generally accepted accounting principles, or GAAP.  Management believes EBITDAX is useful because it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure.  We exclude the items listed above from net income in arriving at EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.  EBITDAX has limitations as an analytical tool and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our liquidity. Certain items excluded from 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 historical costs of depreciable assets.  Our presentation of EBITDAX should not be construed as an inference that our results will be unaffected by unusual or non-recurring items and should not be viewed as a substitute for GAAP.  Our computations of EBITDAX may not be comparable to other similarly titled measures of other companies.

The following table sets forth a reconciliation of net income (loss) as determined in accordance with GAAP to EBITDAX for the periods indicated:

    
 Three Months Ended June 30,  Six Months Ended June 30, 
(in thousands of dollars)2018  2017  2018  2017 
Reconciliation of net income to EBITDAX           
Net income (loss)$(46,931) $(133,978) $(75,851) $(137,493)
Interest expense 23,055   12,677   44,917   25,564 
Exploration expense 1,528   6,725   4,827   9,669 
Income taxes (5,418)  (2,236)  (8,410)  (2,215)
Depreciation and depletion 44,729   45,336   86,170   80,990 
Impairment of oil and natural gas properties    148,016      148,016 
Accretion of ARO liability 264   266   515   467 
Change in TRA liability (5,599)  (27,598)  (9,081)  (28,266)
Other non-cash charges 25   1,266   376   1,307 
Stock compensation expense (356)  1,764   974   3,736 
Deferred and other non-cash compensation expense 7   44   84   180 
Net (gain) loss on derivative contracts 30,145   (21,527)  39,167   (43,847)
Current period settlements of matured derivative contracts (12,537)  17,921   (21,477)  44,253 
Amortization of deferred revenue (408)  (484)  (782)  (942)
(Gain) loss on sale of assets 1,179   55   (1,945)  119 
Financing expenses and other loan fees 34   24   59   48 
EBITDAX$29,717  $48,271  $59,543  $101,586 
                
                

Jones Energy, Inc. 
Non-GAAP Financial Measures and Reconciliations

Adjusted Net Income is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements.  We define Adjusted Net Income as net income excluding the impact of certain non-cash items including gains or losses on commodity derivative instruments not yet settled, impairment of oil and gas properties, non-cash compensation expense, and the other items described below.  We believe adjusted net income and adjusted earnings per share are useful to investors because they provide readers with a more meaningful measure of our profitability before recording certain items for which the timing or amount cannot be reasonably determined.  However, these measures are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP.  The following table provides a reconciliation of net income (loss) as determined in accordance with GAAP to adjusted net income for the periods indicated:

   
  Three Months Ended June 30, 
(in thousands except per share data) 2018 2017
Net income (loss) $  (46,931) $  (133,978)
Net (gain) loss on derivative contracts    30,145     (21,527)
Current period settlements of matured derivative contracts    (12,537)    17,921 
Impairment of oil and gas properties    —     148,016 
Exploration    1,528     6,725 
Non-cash stock compensation expense    (356)    1,764 
Deferred and other non-cash compensation expense    7     44 
Financing expenses    638     — 
Tax impact of adjusting items (1)    (3,645)    (31,247)
Change in TRA liability    (5,599)    (27,598)
Change in valuation allowance    8,067     44,577 
Adjusted net income (loss)    (28,683)    4,697 
Adjusted net income (loss) attributable to non-controlling interests    (3,659)    (3,991)
Adjusted net income (loss) attributable to controlling interests    (25,024)    8,688 
Dividends and accretion on preferred stock    (1,963)    (1,966)
Adjusted net income (loss) attributable to common shareholders $  (26,987) $  6,722 
       
Weighted average Class A shares outstanding:       
Basic    93,429     65,681 
Diluted    93,429     65,681 
       
Adjusted earnings per share (basic and diluted) $ (0.29) $ 0.10 
         
         

Jones Energy, Inc.
Non-GAAP Financial Measures and Reconciliations

Adjusted Earnings per Share is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements.  We define Adjusted Earnings per Share as earnings per share plus that portion of the components of adjusted net income allocated to the controlling interests divided by weighted average shares outstanding.  We believe adjusted earnings per share is useful to investors because it provides readers with a more meaningful measure of our profitability before recording certain items for which the timing or amount cannot be reasonably determined.  However, these measures are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP.  The following table provides a reconciliation of earnings per share to adjusted earnings per share for the period indicated:

    
   Three Months Ended June 30, 
   2018 2017
Earnings per share (basic and diluted): $(0.47)$(1.28)
Net (gain) loss on derivative contracts  0.29  (0.23)
Current period settlements of matured derivative contracts  (0.12) 0.19 
Impairment of oil and gas properties    1.55 
Exploration  0.01  0.07 
Non-cash stock compensation expense    0.02 
Deferred and other non-cash compensation expense     
Financing expenses  0.01   
Tax impact of adjusting items (1)  (0.04) (0.48)
Change in TRA liability  (0.06) (0.42)
Change in valuation allowance  0.09  0.68 
Adjusted earnings per share (basic and diluted) $(0.29)$0.10 
      
      
Weighted average Class A shares outstanding:      
Basic  93,429  65,681 
Diluted  93,429  65,681 
Effective tax rate on net income (loss) attributable to controlling interests  21.3% 40.3%

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Source: GlobeNewswire (August 6, 2018 - 4:30 PM EDT)

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