Oil and Gas 360


Publisher’s Note: PDC Energy, Inc. will be presenting next week at EnerCom Denver-The Energy Investment Conference from August 8-10, 2022. You can still register to attend. 
August 3, 2022 at 4:25 PM EDT – DENVER, Aug. 03, 2022 (GLOBE NEWSWIRE) — PDC Energy, Inc. (“PDC” or the “Company”) (Nasdaq:PDCE) today announced its 2022 second quarter financial and operating results, provided second half 2022 guidance and announced receiving Completeness Determination on the Guanella Comprehensive Area Plan (“CAP”) application.
PDC Energy, Inc. announces 2022 second quarter financial and operating results and announces receiving completeness determination on the Guanella Comprehensive Area Plan application- oil and gas 360

On August 2, the Company passed a major milestone in the permitting process by receiving the Completeness Determination on its Guanella CAP from the Colorado Oil & Gas Conservation Commission (“COGCC”). The Guanella CAP covers approximately 35,000 consolidated net acres in rural Weld County with approximately 450 well locations accessed by only 22 surface locations. With the Completeness Determination passed, PDC now enters the technical review phase and 60-day public comment period.

In June 2022, PDC was granted unanimous approval for a 69-well Oil and Gas Development Plan (“OGDP”) and a 30-well OGDP, the Company’s second and third approval under the new permitting process. Combined, these two approvals provided the Company 99 additional permits. Together, these approvals and the in progress Guanella CAP application, represent the Company’s planned Wattenberg Field turn-in-line (“TIL”) activity into 2028. Over the coming months, the Company expects to submit several additional OGDPs expanding its inventory of permitted locations to support the most efficient development of the core Wattenberg Field.

2022 Second Quarter Highlights:

  • Net cash from operating activities of approximately $747 million, adjusted cash flows from operations, a non-U.S. GAAP metric defined below, of approximately $695 million and oil and gas capital investments of approximately $290 million.
  • Approximately $405 million of adjusted free cash flow (“FCF”), a non-U.S. GAAP metric defined below.
  • Returned approximately $250 million of capital to shareholders through the repurchase of approximately 3.0 million shares of common stock outstanding and a $0.35 base dividend.
  • Closed on acquisition of Great Western Petroleum, LLC (the “Great Western Acquisition”) on May 6, 2022.
  • Extended multi-year DJ Basin permit inventory with approval of Kenosha and Broe OGDP permits accounting for 99 new wells.
  • Total production of 21.4 million barrels of oil equivalent (“MMBoe”) or approximately 235,000 Boe per day and oil production of 6.8 million barrels (“MMBbls”) or approximately 75,000 Bbls per day.

CEO Commentary

President and Chief Executive Officer, Bart Brookman, commented, “I commend our regulatory team at PDC and am pleased with the working relationship we have developed with the COGCC. In June, we obtained 99 additional permits, extending our mapped turn-in-line schedule well into 2025. Today’s announcement of the Completeness Determination on the Guanella CAP marks another key accomplishment in providing long-term visibility into the drilling permit process. We look forward to continuing this approval track record with our Guanella CAP and future OGDPs.

“For the quarter, we closed on the $1.4 billion Great Western transaction, which honored all PDC’s acquisition criteria and added complementary core inventory to our Wattenberg asset. The teams are diligently working to blend the two companies and we anticipate full integration will be complete by the end of 3rd quarter.

“Our results for the quarter are highlighted by the Company’s ability to generate more than $400 million in adjusted free cash flow (FCF) while returning approximately $250 million of capital to shareholders through the repurchase of common stock and base dividends. This represents an annualized free cash flow yield and shareholder return yield of approximately 26% and 16% respectively. PDC increased its base quarterly dividend to $0.35 per share after closing the Great Western acquisition, and remains committed to returning a minimum of 60% of its quarterly post dividend annual FCF to shareholders through the Company’s share repurchase program and a year-end special dividend if needed.”

Operations Update

In the second quarter of 2022, PDC invested approximately $290 million while delivering total production of 21.4 million Boe, or approximately 235,000 Boe per day, and oil production of 6.8 million barrels, or approximately 75,000 barrels per day. Total production and oil production represent a sequential increase of 19 percent and 17 percent respectively, compared to the first quarter of 2022, primarily driven by the production volumes from the Great Western Acquisition. Production came in lower than guidance as a result of a small number of compounding near term operational constraints including downtime associated with moving wells on the Great Western Raindance pad to gas lift, timing of temporary unplanned maintenance on third party midstream systems in the Wattenberg Field and delays in securing workover rigs in the Delaware Basin.

In the Wattenberg Field, the Company invested approximately $230 million to operate an average of three drilling rigs and one and a half completion crews in the second quarter, resulting in 54 spuds and 33 TILs and 50 in-process wells PDC acquired as part of the Great Western Acquisition. Shortly after closing of the Great Western Acquisition on May 6th, the Company dropped one of the two rigs that Great Western was operating. Considering the two rigs operated by PDC and one rig from Great Western, we operated a three rig program for the majority of the second quarter. Total production was 18.3 million Boe, or approximately 201,000 Boe per day, while oil production was approximately 5.5 million Bbls, or approximately 60,000 Bbls per day. PDC exited the second quarter with approximately 190 drilled, uncompleted wells (“DUCs”) and approximately 455 approved permits in-hand.

In June, the Company began moving the 35 well Raindance pad, located in a lower gas-oil ratio part of the core Wattenberg onto gas lift which required adjacent wells to be temporarily shut-in while equipment was moved and installed. Initial production response from wells where gas lift has been installed and been brought back online are meeting expectations and currently support longer term production forecasts. This work is expected to continue into the second half of the year and the impacts have been incorporated into our second half 2022 production guidance.

In the Delaware Basin, PDC invested approximately $60 million to operate one drilling rig and a completion crew, resulting in 4 spuds and 9 TILs. Total production was 3.1 million Boe, or approximately 34,000 Boe per day, while oil production was approximately 1.3 million Boe, or approximately 14,000 Boe per day.

Q2 2022 Shareholder Returns and Financial Position

The Company returned approximately $250 million of capital to shareholders through the repurchase of approximately 3.0 million shares of common stock outstanding and its a $0.35 per share base quarterly dividend. The Company has a $1.25 billion share repurchase program authorized, which is expected to be utilized by year end 2023. PDC remains committed to returning a minimum of 60 percent of its quarterly post-dividend annual FCF to shareholders through the Company’s share repurchase program and a year-end special dividend, if needed.

The Company had approximately $39 million cash on hand and approximately $755 million drawn on the credit facility as of June 30, 2022. The leverage ratio was 0.7x at June 30, 2022.

Second Half and Full Year 2022 Outlook

For the second half, the Company expects total production to be in a range of 245,000-255,000 Boe per day and 80,000-84,000 Bbls per day of oil production. Capital investments in crude oil and natural gas properties are expected to be between $515 and $565 million.

Based on our current operating results from the first half of the year, we now expect full-year 2022 production to range between 230,000 Boe to 240,000 Boe per day, of which approximately 73,000 Bbls to 77,000 Bbls is expected to be crude oil. Our planned 2022 capital investments in crude oil and natural gas properties are expected to be between $1.025 and $1.075 billion.

Environmental, Social and Governance (“ESG”)

Through the first six months of 2022, the Company is on schedule with its planned projects to meet its 15% and 30% GHG and methane reduction targets for the full year 2022, respectively.

The Company surpassed the four year mark with no lost time work injuries in both the Wattenberg and Delaware basins. Through the first six months of 2022, PDCE employee Total OSHA Recordable Injury Rate (TRIR) was 0.34, a mark ahead of the corporate target of 0.4.

Including its existing environmental, health and safety performance bonus metrics, along with GHG and methane intensity reduction goals, ESG is projected to account for approximately 25 percent of the Company’s short-term incentive program.

Second Quarter Oil and Gas Production, Sales and Operating Cost Data

Crude oil, natural gas and NGLs sales, excluding net settlements on derivatives were $1,238 million, a 40 percent increase compared to first quarter of 2022 of $882 million. The increase in sales between periods was due to a 17 percent increase in weighted average realized sales price per Boe to $57.81 from $49.23 and a 19 percent increase in production from 17.9 MMBoe to 21.4 MMBoe. The increase in sales price was primarily driven by 15 percent and 47 percent increases in weighted average realized crude oil and natural gas prices, respectively. The combined revenue from crude oil, natural gas and NGLs sales and net settlements on commodity derivative instruments was $939 million in the second quarter of 2022 compared to $721 million in the first quarter of 2022.

The following table provides weighted average sales price, by area, excluding net settlements on derivatives and transportation, gathering and processing expense (“TGP”), for the periods presented:

Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 Percent Change 2022 2021 Percent Change
Crude oil (MBbls)
Wattenberg Field 5,545 4,832 15 % 10,377 8,670 20 %
Delaware Basin 1,299 1,021 27 % 2,320 1,578 47 %
Total 6,844 5,853 17 % 12,697 10,248 24 %
Weighted average price $ 108.24 $ 93.93 15 % $ 101.64 $ 60.92 67 %
Natural gas (MMcf)
Wattenberg Field 43,244 37,663 15 % 80,907 73,742 10 %
Delaware Basin 6,573 5,456 20 % 12,029 9,770 23 %
Total 49,817 43,119 16 % 92,936 83,512 11 %
Weighted average price $ 5.57 $ 3.78 47 % $ 4.74 $ 2.29 107 %
NGLs (MBbls)
Wattenberg Field 5,575 4,291 30 % 9,866 8,153 21 %
Delaware Basin 688 594 16 % 1,282 844 52 %
Total 6,263 4,885 28 % 11,148 8,997 24 %
Weighted average price $ 34.99 $ 34.70 1 % $ 34.86 $ 20.61 69 %
Crude oil equivalent (MBoe)
Wattenberg Field 18,328 15,400 19 % 33,728 29,113 16 %
Delaware Basin 3,082 2,524 22 % 5,607 4,051 38 %
Total 21,410 17,924 19 % 39,335 33,164 19 %
Weighted average price $ 57.81 $ 49.23 17 % $ 53.90 $ 30.19 79 %

Production costs for the second quarter of 2022, which include LOE, production taxes and TGP, were $190 million, or $8.85 per Boe, compared to $145 million, or $8.09 per Boe, in the first quarter of 2022. The increase in production costs per Boe was primarily due to a 9 percent increase in LOE partially offset by a 12 percent decrease in TGP between periods. The increase in LOE per Boe between periods was due to increased well service costs driven by higher commodity prices and inflation, and an increase in environmental costs between periods. The decrease in TGP expense per Boe between periods was due to lower TGP rates on the acquired Great Western production.

The following table provides the components of production costs for the periods presented:

Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 2022 2021
Lease operating expenses $ 70.6 $ 54.2 $ 124.8 $ 84.2
Production taxes 89.3 62.9 152.2 56.5
Transportation, gathering and processing expenses 29.6 28.0 57.6 47.7
Total $ 189.5 $ 145.1 $ 334.6 $ 188.4
Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 2022 2021
Lease operating expenses per Boe $ 3.30 $ 3.02 $ 3.17 $ 2.54
Production taxes per Boe 4.17 3.51 3.87 1.70
Transportation, gathering and processing expenses per Boe 1.38 1.56 1.46 1.44
Total per Boe $ 8.85 $ 8.09 $ 8.50 $ 5.68

Financial Results

Net income for the second quarter of 2022 was $662 million, or $6.74 per diluted share, compared to a net loss of $32 million, or $0.33 per diluted share in the first quarter of 2022. The quarter-over-quarter change was primarily due to an increase in crude oil, natural gas and NGLs sales of $355 million, a $466 million decrease in commodity risk management loss between periods and a gain on bargain purchase from the Great Western Acquisition of $100.3 million in the second quarter of 2022, partially offset by a $128.0 million increase in income tax expense between periods. Adjusted net income, a non-U.S. GAAP financial measure defined below, was $502 million in the second quarter of 2022 compared to $359 million in the first quarter of 2022. The movement between periods is primarily attributable to the change in sales and settled derivatives.

Net cash from operating activities for the second quarter of 2022 was approximately $747 million compared to $489 million in the first quarter of 2022. Adjusted cash flows from operations, a non-U.S. GAAP metric defined below, was approximately $695 million and $539 million in the second and first quarter of 2022, respectively. The quarter-over-quarter increase in adjusted cash flows from operations was primarily due to the increase in sales partially offset by change in derivative settlements, and increases in costs and general administrative expense as a result of the Great Western Acquisition. Adjusted free cash flows, a non-U.S. GAAP metric defined below, increased to $404 million from $319 million in the first quarter of 2022.

G&A, which includes cash and non-cash expense and $13.0 million in Great Western transaction and transition related expense, was $46 million, or $2.13 per Boe in the second quarter of 2022 compared to $34 million, or $1.90 per Boe, in the first quarter of 2022. Excluding the transaction and transition costs associated with the Great Western Acquisition, G&A was $1.52 per Boe in the second quarter.

Reconciliation of Non-U.S. GAAP Financial Measures

We use “adjusted cash flows from operations,” “adjusted free cash flow (deficit),” “adjusted net income (loss)” and “adjusted EBITDAX,” non-U.S. GAAP financial measures, for internal management reporting, when evaluating period-to-period changes and, in some cases, in providing public guidance on possible future results. In addition, we believe these are measures of our fundamental business and can be useful to us, investors, lenders and other parties in the evaluation of our performance relative to our peers and in assessing acquisition opportunities and capital expenditure projects. These supplemental measures are not measures of financial performance under U.S. GAAP and should be considered in addition to, not as a substitute for, net income (loss) or cash flows from operations, investing or financing activities and should not be viewed as liquidity measures or indicators of cash flows reported in accordance with U.S. GAAP. The non-U.S. GAAP financial measures that we use may not be comparable to similarly titled measures reported by other companies. In the future, we may disclose different non-U.S. GAAP financial measures in order to help us and our investors more meaningfully evaluate and compare our future results of operations to our previously reported results of operations. We strongly encourage investors to review our financial statements and publicly filed reports in their entirety and to not rely on any single financial measure.

Adjusted cash flows from operations and adjusted free cash flow (deficit). We believe adjusted cash flows from operations can provide additional transparency into the drivers of trends in our operating cash flows, such as production, realized sales prices and operating costs, as it disregards the timing of settlement of operating assets and liabilities. We believe adjusted free cash flow (deficit) provides additional information that may be useful in an investor analysis of our ability to generate cash from operating activities from our existing oil and gas asset base to fund exploration and development activities and to return capital to stockholders in the period in which the related transactions occurred. We exclude from this measure cash receipts and expenditures related to acquisitions and divestitures of oil and gas properties and capital expenditures for other properties and equipment, which are not reflective of the cash generated or used by ongoing activities on our existing producing properties and, in the case of acquisitions and divestitures, may be evaluated separately in terms of their impact on our performance and liquidity. Adjusted free cash flow is a supplemental measure of liquidity and should not be viewed as a substitute for cash flows from operations because it excludes certain required cash expenditures. For example, we may have mandatory debt service requirements or other non-discretionary expenditures which are not deducted from the adjusted free cash flow measure.

We are unable to present a reconciliation of forward-looking adjusted cash flow because components of the calculation, including fluctuations in working capital accounts, are inherently unpredictable. Moreover, estimating the most directly comparable GAAP measure with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. We believe that forward-looking estimates of adjusted cash flow are important to investors because they assist in the analysis of our ability to generate cash from our operations.

Adjusted net income (loss). We believe that adjusted net income (loss) provides additional transparency into operating trends, such as production, realized sales prices, operating costs and net settlements on commodity derivative contracts, because it disregards changes in our net income (loss) from mark-to-market adjustments resulting from net changes in the fair value of our unsettled commodity derivative contracts, and these changes are not directly reflective of our operating performance.

Adjusted EBITDAX. We believe that adjusted EBITDAX provides additional transparency into operating trends because it reflects the financial performance of our assets without regard to financing methods, capital structure, accounting methods or historical cost basis. In addition, because adjusted EBITDAX excludes certain non-cash expenses, we believe it is not a measure of income, but rather a measure of our liquidity and ability to generate sufficient cash for exploration, development, and acquisitions and to service our debt obligations.

Cash Flows from Operations to Adjusted Cash Flows from Operations and Adjusted Free Cash Flow
Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 2022 2021
Cash flows from operations to adjusted cash flows from operations and adjusted free cash flow:
Net cash from operating activities $ 747.4 $ 489.0 $ 1,236.4 $ 577.4
Changes in assets and liabilities (52.7 ) 49.8 (2.9 ) 65.6
Adjusted cash flows from operations 694.7 538.8 1,233.5 643.0
Capital expenditures for midstream assets (3.0 ) (3.0 )
Capital expenditures for development of crude oil and natural gas properties (346.7 ) (187.0 ) (533.7 ) (240.3 )
Change in accounts payable related to capital expenditures for oil and gas development activities 58.8 (33.1 ) 25.7 (61.3 )
Adjusted free cash flow $ 403.8 $ 318.7 $ 722.5 $ 341.4
Net Loss to Adjusted Net Income (Loss) and Adjusted Earnings Per Share, Diluted
Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 2022 2021
Net income (loss) to adjusted net income (loss):
Net income (loss) $ 662.4 $ (32.0 ) $ 630.4 $ (96.1 )
Loss (gain) on commodity derivative instruments 102.0 568.1 670.0 489.5
Net settlements on commodity derivative instruments (298.7 ) (161.6 ) (460.3 ) (85.8 )
Tax effect of above adjustments (1) 36.4 (15.9 ) (41.9 )
Adjusted net income (loss) $ 502.1 $ 358.6 $ 798.2 $ 307.6
Earnings per share, diluted 6.83 $ (0.33 ) 6.42 (0.97 )
Loss (gain) on commodity derivative instruments 1.04 5.80 6.83 1.79
Net settlements on commodity derivative instruments (3.04 ) (1.65 ) (4.70 ) (0.85 )
Tax effect of above adjustments (1) 0.37 (0.16 ) (0.43 )
Adjusted earnings (loss) per share, diluted $ 5.11 $ 3.66 $ 8.13 $ (0.01 )
Weighted average diluted shares outstanding 98.2 98.0 98.2 100.7

_____________

(1)   Due to the full valuation allowance recorded against our net deferred tax assets, there is no tax effect for the six months ended June 30, 2021.

Adjusted EBITDAX
Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 2022 2021
Net income (loss) to adjusted EBITDAX:
Net income (loss) $ 662.4 $ (32.0 ) $ 630.4 $ (96.1 )
Loss (gain) on commodity derivative instruments 102.0 568.1 670.0 489.5
Net settlements on commodity derivative instruments (298.7 ) (161.6 ) (460.3 ) (85.8 )
Non-cash stock-based compensation 7.2 5.5 12.8 11.5
Interest expense, net 17.6 12.9 30.5 39.1
Income tax expense (benefit) 128.0 1.2 129.2 (0.1 )
Impairment of properties and equipment 0.5 0.9 1.5 0.3
Exploration, geologic and geophysical expense 0.3 0.3 0.6 0.6
Depreciation, depletion and amortization 191.1 151.1 342.1 309.0
Accretion of asset retirement obligations 3.4 3.0 6.3 6.4
Loss (gain) on sale of properties and equipment 0.5 (0.1 ) 0.4 (0.3 )
Adjusted EBITDAX $ 814.3 $ 549.3 $ 1,363.5 $ 674.1
Cash from operating activities to adjusted EBITDAX:
Net cash from operating activities $ 747.4 $ 489.0 $ 1,236.4 $ 577.4
Gain on bargain purchase 100.3 100.3
Interest expense, net 17.6 12.9 30.5 39.1
Amortization and write-off of debt discount, premium and issuance costs (1.3 ) (1.4 ) (2.7 ) (7.7 )
Exploration, geologic and geophysical expense 0.3 0.3 0.6 0.6
Other 2.7 (1.3 ) 1.3 (0.9 )
Changes in assets and liabilities (52.7 ) 49.8 (2.9 ) 65.6
Adjusted EBITDAX $ 814.3 $ 549.3 $ 1,363.5 $ 674.1

PDC ENERGY, INC. 
Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenues
Crude oil, natural gas and NGLs sales $ 1,237,680 $ 533,141 $ 2,120,058 $ 1,001,260
Commodity price risk management gain (loss), net (101,976 ) (308,253 ) (670,031 ) (489,509 )
Other income 2,787 3,981 4,912 3,154
Total revenues 1,138,491 228,869 1,454,939 514,905
Costs, expenses and other
Lease operating expense 70,611 42,395 124,767 84,199
Production taxes 89,251 26,968 152,167 56,460
Transportation, gathering and processing expense 29,584 25,989 57,555 47,721
Exploration, geologic and geophysical expense 320 286 573 640
General and administrative expense 45,649 32,843 79,756 65,520
Depreciation, depletion and amortization 191,061 162,210 342,116 308,973
Accretion of asset retirement obligations 3,352 3,232 6,339 6,360
Impairment of properties and equipment 510 62 1,453 252
Loss (gain) on sale of properties and equipment 498 (129 ) 373 (341 )
Other expense 2,145 2,193
Total costs, expenses and other 430,836 296,001 765,099 571,977
Income (loss) from operations 707,655 (67,132 ) 689,840 (57,072 )
Interest expense, net (17,565 ) (20,060 ) (30,510 ) (39,101 )
Gain on bargain purchase 100,273 100,273
Income (loss) before income taxes 790,363 (87,192 ) 759,603 (96,173 )
Income tax benefit (expense) (127,982 ) 155 (129,182 ) 100
Net income (loss) $ 662,381 $ (87,037 ) $ 630,421 $ (96,073 )
Earnings (Loss) per share:
Basic $ 6.83 $ (0.88 ) $ 6.52 $ (0.97 )
Diluted $ 6.74 $ (0.88 ) $ 6.42 $ (0.97 )
Weighted average common shares outstanding:
Basic 96,982 99,187 96,632 99,445
Diluted 98,246 99,187 98,150 99,445
Dividends declared per share $ 0.35 $ 0.12 $ 0.60 $ 0.12


PDC ENERGY, INC.

Condensed Consolidated Balance Sheets
(unaudited, in thousands, except share and per share data)

June 30, 2022 December 31, 2021
Assets
Current assets:
Cash and cash equivalents $ 38,528 $ 33,829
Accounts receivable, net 723,415 398,605
Fair value of derivatives 14,643 17,909
Prepaid expenses and other current assets 11,726 8,230
Total current assets 788,312 458,573
Properties and equipment, net 7,087,772 4,814,865
Fair value of derivatives 26,967 15,177
Other assets 73,190 48,051
Total Assets $ 7,976,241 $ 5,336,666
Liabilities and Stockholders’ Equity
Liabilities
Current liabilities:
Accounts payable $ 285,414 $ 127,891
Production tax liability 242,653 99,583
Fair value of derivatives 702,329 304,870
Funds held for distribution 548,185 285,861
Accrued interest payable 14,683 10,482
Other accrued expenses 85,021 91,409
Total current liabilities 1,878,285 920,096
Long-term debt 1,698,047 942,084
Asset retirement obligations 146,020 127,526
Fair value of derivatives 235,630 95,561
Deferred income taxes 186,383 26,383
Other liabilities 361,155 314,769
Total liabilities 4,505,520 2,426,419
Commitments and contingent liabilities
Stockholders’ equity
Common shares – par value $0.01 per share, 150,000,000 authorized, 97,047,329 and 96,468,071 issued as of June 30, 2022 and December 31, 2021, respectively 970 965
Additional paid-in capital 3,096,523 3,161,941
Retained earnings (accumulated deficit) 380,467 (249,954 )
Treasury shares – at cost, 120,143 and 54,960 as of June 30, 2022 and December 31, 2021, respectively (7,239 ) (2,705 )
Total stockholders’ equity 3,470,721 2,910,247
Total Liabilities and Stockholders’ Equity $ 7,976,241 $ 5,336,666


PDC ENERGY, INC. 

Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)

Six Months Ended June 30,
2022 2021
Cash flows from operating activities:
Net income (loss) $ 630,421 $ (96,073 )
Adjustments to net loss to reconcile to net cash from operating activities:
Net change in fair value of unsettled commodity derivatives 209,777 403,723
Depreciation, depletion and amortization 342,116 308,973
Impairment of properties and equipment 1,453 252
Accretion of asset retirement obligations 6,339 6,360
Non-cash stock-based compensation 12,770 11,515
Loss (gain) on sale of properties and equipment 373 (341 )
Amortization of debt discount, premium and issuance costs 2,715 7,714
Deferred income taxes 128,481
Gain on bargain purchase (100,273 )
Other (700 ) 875
Changes in assets and liabilities 2,909 (65,632 )
Net cash from operating activities 1,236,381 577,366
Cash flows from investing activities:
Capital expenditures for development of crude oil and natural gas properties (533,592 ) (240,266 )
Capital expenditures for midstream assets (3,015 )
Capital expenditures for other properties and equipment (2,537 ) (274 )
Cash paid for acquisition of an exploration and production business (1,068,241 )
Proceeds from sale of properties and equipment 461 4,414
Proceeds from divestitures 465
Net cash from investing activities (1,606,459 ) (236,126 )
Cash flows from financing activities:
Proceeds from revolving credit facility and other borrowings 1,372,000 429,800
Repayment of revolving credit facility and other borrowings (617,000 ) (597,800 )
Payment of debt issuance costs (47 )
Purchase of treasury shares for employee stock-based compensation tax withholding obligations (16,860 ) (5,656 )
Purchase of treasury shares (295,005 ) (47,694 )
Dividends paid (59,219 ) (11,885 )
Principal payments under financing lease obligations (962 ) (879 )
Net cash from financing activities 382,907 (234,114 )
Net change in cash, cash equivalents and restricted cash 12,829 107,126
Cash, cash equivalents and restricted cash, beginning of period 33,829 2,623
Cash, cash equivalents and restricted cash, end of period $ 46,658 $ 109,749

2022 Second Quarter Teleconference and Webcast

The Company invites you to join Bart Brookman, President and Chief Executive Officer; Scott Meyers, Chief Financial Officer; Lance Lauck, Executive Vice President Corporate Development and Strategy; and David Lillo, Senior Vice President Operations for a conference call at 11:00 a.m. ET on Thursday, August 4, 2022, to discuss the 2022 second quarter results. The related slide presentation will be available on PDC’s website at www.pdce.com.

To attend the conference call or webcast, participants should register online at http://www.pdce.com/investors-overview/events-calendar-webcasts-presentations/. Once registered, participants will receive the dial in details and a unique PIN number. Participants are requested to register a minimum 15 minutes before the start of the call.

A replay of the webcast will be available two hours after the call and archived on the same web page for six months.

Upcoming Investor Presentations

PDC is scheduled to participate in the 2022 EnerCom Denver – The Energy Investment Conference starting on Monday, August 8, 2022, the Barclays CEO Energy Power Conference starting on Tuesday, September 6, 2022 and the Wells Fargo Leveraged Finance Conference starting on Wednesday, September 7, 2022. Updated presentations will be posted to the Company’s website, www.pdce.com, prior to the start of each conference.

About PDC Energy, Inc.

PDC Energy, Inc. is a domestic independent exploration and production company that acquires, explores and develops properties for the production of crude oil, natural gas and NGLs, with operations in the Wattenberg Field in Colorado and Delaware Basin in west Texas. Its operations in the Wattenberg Field are focused in the horizontal Niobrara and Codell plays and our Delaware Basin operations are primarily focused in the horizontal Wolfcamp zones.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 (“Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”) and the United States (“U.S.”) Private Securities Litigation Reform Act of 1995 regarding our business, financial condition, results of operations and prospects. All statements other than statements of historical fact included in and incorporated by reference into this report are “forward-looking statements”. Words such as expect, anticipate, intend, plan, believe, seek, estimate, schedule and similar expressions or variations of such words are intended to identify forward-looking statements herein. Forward-looking statements include, among other things, statements regarding permitting matters; future production, costs and cash flows; impacts from the acquisition and integration of Great Western, including drilling locations, zones and growth opportunities; capital expenditures and projects; the return of capital to shareholders through buybacks of shares and/or payments of dividends, ESG matters; and our ability to fund planned activities.

The above statements are not the exclusive means of identifying forward-looking statements herein. Although forward-looking statements contained in this press release reflect our good faith judgment, such statements can only be based on facts and factors currently known to us. Forward-looking statements are always subject to risks and uncertainties, and become subject to greater levels of risk and uncertainty as they address matters further into the future. Throughout this press release or accompanying materials, we may use the term “projection” or similar terms or expressions, or indicate that we have “modeled” certain future scenarios. We typically use these terms to indicate our current thoughts on possible outcomes relating to our business or our industry in periods beyond the current fiscal year. Because such statements relate to events or conditions further in the future,
they are subject to increased levels of uncertainty.

Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to:

  • market and commodity price volatility, widening price differentials, and related impacts to the Company, including decreased revenue, income and cash flow, write-downs and impairments and decreased availability of capital;
  • difficulties in integrating our operations as a result of any significant acquisitions, including the Great Western Acquisition, or acreage exchanges;
  • adverse changes to our future cash flows, liquidity and financial condition;
  • changes in, and interpretations and enforcement of, environmental and other laws and other political and regulatory developments, including in particular additional permit scrutiny in Colorado;
  • the coronavirus 2019 (“COVID-19”) pandemic, including its effects on commodity prices, downstream capacity, employee health and safety, business continuity and regulatory matters;
  • declines in the value of our crude oil, natural gas and natural gas liquids (“NGLs”) properties resulting in impairments;
  • changes in, and inaccuracy of, reserve estimates and expected production and decline rates;
  • timing and extent of our success in discovering, acquiring, developing and producing reserves;
  • reductions in the borrowing base under our revolving credit facility;
  • availability and cost of capital;
  • risks inherent in the drilling and operation of crude oil and natural gas wells;
  • timing and costs of wells and facilities;
  • availability, cost, and timing of sufficient pipeline, gathering and transportation facilities and related infrastructure;
  • limitations in the availability of supplies, materials, contractors and services that may delay the drilling
    or
    completion of our wells;
  • potential losses of acreage or other impacts due to lease expirations, other title defects, or otherwise;
  • risks inherent in marketing crude oil, natural gas and NGLs;
  • effect of crude oil and natural gas derivative activities;
  • impact of environmental events, governmental and other third-party responses to such events and our ability to insure adequately against such events;
  • cost of pending or future litigation;
  • impact to our operations, personnel retention, strategy, stock price and expenses caused by the actions of activist shareholders;
  • uncertainties associated with future dividends to our shareholders or share buybacks;
  • timing and amounts of federal and state income taxes;
  • our ability to retain or attract senior management and key technical employees;
  • an unanticipated assumption of liabilities or other problems with the Great Western Acquisition or other acquisitions we may pursue;
  • civil unrest, terrorist attacks and cyber threats;
  • risks associated with recent inflationary trends and the potential for a recession; and
  • success of strategic plans, expectations and objectives for our future operations.

Further, we urge you to carefully review and consider the cautionary statements and disclosures, specifically those under the “Item 1A. Risk Factors” made in our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”) filed with the U.S. Securities and Exchange Commission (“SEC”) for further information on risks and uncertainties that could affect our business, financial condition, results of operations and prospects, which are incorporated by this reference as though fully set forth herein. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this release. We undertake no obligation to update any forward-looking statements in order to reflect any event or circumstance occurring after the date of this release or currently unknown facts or conditions or the occurrence of unanticipated events. All forward-looking statements are qualified in their entirety by this cautionary statement.

Contacts: Aaron Vandeford
Director Investor Relations
303-381-9493
[email protected]

 


Primary Logo

Source: PDC Energy, Inc.


Recent Company Earnings:


August 4, 2022

Oil and Gas 360


Publisher’s Note: SM Energy will be presenting on Monday, August 8, 2022 at the EnerCom Denver-The Energy Investment Conference next week from August 8-10, 2022. You can still register to attend. 

 

 

 

SM Energy reports second quarter 2022 results; leverage ratio target achieved- oil and gas 360

DENVERAug. 3, 2022 /PRNewswire/ — SM Energy Company (the “Company”) (NYSE: SM) today announced operating and financial results for the second quarter 2022 and provided certain third quarter and full year 2022 guidance.

Highlights include:

  • Leverage ratio target met, net debt target fast approaching. The Company remains ahead of schedule to meet its key strategic leverage targets of 1.0 times net-debt-to-adjusted EBITDAX(1) and $1.0 billion principal amount of debt net of cash, an inflection point the Company expects to meet in the fourth quarter 2022.
  • Well performance remains robust. Production in the second quarter 2022 was 13.3 MMBoe (146.6 MBoe/d) and was 46% oil. Production met the top end of guidance, supported by base well performance in both the Midland Basin and South Texas that met the high end of expectations. As a result of strong well performance, the Company is increasing production guidance for 2022 to 54-55 MMBoe, or 148-151 MBoe/d, up 4% at the mid-point.
  • Bottom line profitability. Net income in the second quarter 2022 was $323.5 million, or $2.60 per diluted common share, and Adjusted net income(1) was $2.19 per diluted common share.
  • Cash flow generation at record high. For the second quarter 2022, net cash provided by operating activities of $542.6 million before net change in working capital of $(28.2) million totaled $514.4 million.(1) Second quarter 2022 Adjusted EBITDAX(1) was $559.7 million, a one-quarter record high for the Company, and free cash flow(1) was $276.6 million. For the first half of 2022, net cash provided by operating activities of $884.7 million before net change in working capital of $109.7 million totaled $994.4 million, and free cash flow(1) was $590.9 million.
  • Senior secured revolving credit facility increased and extended. The initial borrowing base is increased to $2.5 billion and lender commitments increased to $1.25 billion. The term is five years, subject to certain early maturity events, as discussed in the Company’s second quarter 2022 Form 10-Q.
  • Bolstering methane detection with new technology. Following a successful pilot program, in the third quarter 2022 the Company plans to initiate a methane detection program using aerial-based LiDAR technology with baseline flyovers covering 100% of the Company’s operated production facilities. The technology is expected to provide the ability to pinpoint the emissions sources, which enables improved response times.

President and Chief Executive Officer Herb Vogel comments: “We enjoyed a successful first half of 2022 by executing on our core strategic objectives. Our leverage ratio(1) is now at 0.7 times and we have reduced the principal amounts of outstanding debt by $551.4 million, funded with $590.9 million in free cash flow(1) generated in the first half of 2022. We expect to reduce net debt(1) to around $1.0 billion in the coming months, and we look forward to the next phase of shareholder value creation.

“Operational results continue to meet or exceed the high end of expectations, supported by strong well performance in both the Midland Basin and South Texas. Higher than expected production and continued strength in commodity prices are significantly boosting cash flows, resulting in a lower than expected reinvestment rate(1) for the year of approximately 45%, despite the effects of inflation.”

SECOND QUARTER 2022 RESULTS

PRODUCTION BY OPERATING AREA

Midland Basin

South Texas

Total

Oil (MBbl / MBbl/d)

4,908 / 53.9

1,231 / 13.5

6,140 / 67.5

Natural Gas (MMcf / MMcf/d)

15,973 / 175.5

15,544 / 170.8

31,517 / 346.3

NGLs (MBbl / MBbl/d)

4 / –

1,945 / 21.4

1,949 / 21.4

Total (MBoe / MBoe/d)

7,575 / 83.2

5,767 / 63.4

13,342 / 146.6

Note: Totals may not calculate due to rounding.

  • Production volumes are approximately 57% from the Midland Basin and 43% from South Texas and were approximately 46% oil, 39% natural gas, and 15% NGLs.
  • Second quarter production volumes of 13.3 MMBoe (146.6 MBoe/d) were up 7% compared with the same period in 2021 and down 3% sequentially. Second quarter 2022 volumes reflect strong base production performance as a result of the larger stimulation design employed in certain Midland Basin wells as well as from South Texas. Sequentially, production decreased from both South Texas and the Midland Basin, in accordance with expectations that reflect the planned timing of completions over the past year in each region.

REALIZED PRICES BY OPERATING AREA

Midland Basin

South Texas

Total

(Pre/Post-hedge)(1)

Oil ($/Bbl)

$108.99

$107.28

$108.64 / $79.45

Natural Gas ($/Mcf)

$8.61

$6.68

$7.66 / $5.96

NGLs ($/Bbl)

nm

$42.11

$42.08 / $37.96

Per Boe

$88.80

$55.10

$74.23 / $56.20

Note: Totals may not calculate due to rounding.

In the second quarter, the average realized price before the effect of hedges was $74.23 per Boe and the average realized price after the effect of hedges (post-hedge) was $56.20 per Boe.(1)

  • Benchmark pricing for the quarter included NYMEX WTI at $108.41/Bbl, NYMEX Henry Hub natural gas at $7.17/MMBtu and Hart Composite NGLs at $50.05/Bbl.
  • The effect of commodity derivative settlements for the second quarter was a loss of $18.03 per Boe, or $240.6 million.

For additional operating metrics and regional detail, please see the Financial Highlights section below and the accompanying slide deck.

NET INCOME (LOSS), NET INCOME (LOSS) PER SHARE AND NET CASH PROVIDED BY OPERATING ACTIVITIES

Second quarter 2022 net income was $323.5 million, or $2.60 per diluted common share, compared with a net loss of $223.0 million, or $1.88 per diluted common share, for the same period in 2021. The current year period included a 76% increase in total oil, gas, and NGL production revenue and other income due to a 7% increase in production and a 64% increase in the average commodity price per Boe compared with the same period in 2021. This increase is partially offset by a derivative settlement loss of $240.6 million in the current year period versus a derivative settlement loss of $158.8 million in the prior year period and a recorded $67.2 million loss on extinguishment of debt related to the early redemption in June 2022 of the 10% Senior Secured Notes due 2025. The current year period also benefited from a 30% decline in DD&A per Boe. For the first six months of 2022, net income was $372.2 million, or $3.00 per diluted common share, compared with a net loss of $474.3 million, or $4.07 per diluted common share, in the same period in 2021.

Second quarter 2022 net cash provided by operating activities of $542.6 million before net change in working capital of $(28.2) million totaled $514.4 million,(1) which was up $300.5 million, or 140%, from the same period in 2021 with net cash provided by operating activities of $296.4 million before net change in working capital of $(82.5) million totaling $213.9 million.(1) For the first six months of 2022, net cash provided by operating activities of $884.7 million before net change in working capital of $109.7 million totaled $994.4 million, which was up $623.5 million from the same period in 2021. The increase in net cash provided by operating activities before net change in working capital for both the second quarter and first six months of 2022 compared with the same periods in 2021 was primarily due to the increases in both production volumes and realized prices after the effect of hedges.

ADJUSTED EBITDAX,(1) ADJUSTED NET INCOME (LOSS),(1) AND NET DEBT-TO-ADJUSTED EBITDAX(1)

Second quarter 2022 Adjusted EBITDAX(1) was $559.7 million, up $302.8 million, or 118%, from $256.9 million for the same period in 2021. For the first six months of 2022 Adjusted EBITDAX(1) was $1.1 billion compared with $471.9 million in the same period in 2021. The increase in Adjusted EBITDAX(1) was due to the increases in both production volumes and realized prices after the effect of hedges.

Second quarter 2022 Adjusted net income(1) was $272.8 million, or $2.19 per diluted common share, which compares with Adjusted net income(1) of $1.0 million, or $0.01 per diluted common share, for the same period in 2021. For the first six months of 2022, Adjusted net income was $518.8 million, or $4.17 per diluted common share, compared with an Adjusted net loss of $4.7 million, or $0.04 per diluted common share, for the same period in 2021.

At June 30, 2022, Net debt-to-Adjusted EBITDAX(1) was 0.72 times.

FINANCIAL POSITION, LIQUIDITY AND CAPITAL EXPENDITURES

On June 30, 2022, the outstanding principal amount of the Company’s long-term debt was $1.59 billion with zero drawn on the Company’s senior secured revolving credit facility, and cash and cash equivalents of $267.1 million. Net debt(1) was $1.32 billion.

On August 2, 2022, the Company and its lenders entered into a Seventh Amended and Restated Credit Agreement (“New Credit Agreement”). The New Credit Agreement provides for a senior secured revolving credit facility with an increased initial borrowing base of $2.5 billion and initial aggregate lender commitments totaling $1.25 billion. The maturity date is August 2, 2027 (absent certain early maturity events, as described in the Company’s second quarter 2022 Form 10-Q and the credit agreement filed as Exhibit 10.1), and customary covenants include, but are not limited to, a maximum total funded debt to 12-month trailing adjusted EBITDAX ratio of 3.50 to 1.00 and a minimum adjusted current ratio of 1.00 to 1.00. See the Company’s second quarter 2022 Form 10-Q for additional detail.

Second quarter 2022 capital expenditures of $215.6 million adjusted for increased capital accruals of $22.2 million were $237.8 million.(1) During the second quarter 2022, the Company drilled 23 net wells, of which 10 were in South Texas and 13 were in the Midland Basin, and added 9 net flowing completions, of which 2 were in South Texas and 7 were in the Midland Basin. The Company projected 20 flowing completions in the second quarter and, while all wells were fracture stimulated, drill out operations on certain wells took longer than anticipated, pushing 11 flowing completions into early July.

COMMODITY DERIVATIVES

As entered into as of July 27, 2022, commodity derivative positions for the second half of 2022 include:

  • Oil – Approximately 48% of expected oil production is hedged to WTI at an average price of $55.29/Bbl (weighted-average of collar ceilings and swaps).
  • Oil, Midland Basin differential – Approximately 4,900 MBbls are hedged to the local price point at a positive $1.15/Bbl basis.
  • Natural gas – Approximately 45% of expected natural gas production is hedged. 13,916 BBtu is hedged to HSC at an average price of $2.42/MMBtu, and 6,152 BBtu is hedged to WAHA at an average price of $2.21/MMBtu.
  • NGL hedges are by individual product and include propane swaps and collars.

The Company expects to hedge less than 30% of 2023 production.

A detailed schedule of these and other derivative positions are provided in the 2Q22 accompanying slide deck.

2022 OPERATING PLAN AND GUIDANCE

The Company is unable to provide a reconciliation of forward-looking non-GAAP capital expenditures because components of the calculation are inherently unpredictable, such as changes to, and timing of, capital accruals. The inability to project certain components of the calculation would significantly affect the accuracy of a reconciliation.

GUIDANCE FULL YEAR 2022:

  • Capital expenditures (net of the change in capital accruals): $870-900 million. The increase incorporates higher than expected inflation and the decision to retain current rig and pressure pumping crews through the end of the year to better ensure continuous and efficient operations in a supply-constrained environment. The Company expects to drill 98 net wells and complete 81 net wells in 2022, or with 52 net wells drilled and 54 net wells completed in the second half of the year, an increase of 6 and 3, respectively, from the February guidance.
  • Production: 54-55 MMBoe or 148-151 MBoe/d. This represents a 4% increase at the mid-point and is a result of well performance exceeding original expectations in both the Midland Basin and South Texas. Full year production is expected to be 46%-47% oil.
  • Production costs:
    • LOE: $4.75-$4.90/Boe. The increase reflects increasing costs for labor, fuel and power in the second half of the year.
    • Transportation: Unchanged at ~$3.00/Boe. This reflects higher South Texas volumes and the increased cost of fuel gas in the second half of the year.
    • Production and ad valorem taxes $3.75-$3.90/Boe, increased due to higher commodity prices.
  • DD&A: ~$11.50/Boe
  • Exploration expense: ~$50 million
  • G&A: Unchanged at ~$110 million

GUIDANCE THIRD QUARTER 2022:

  • Capital expenditures (net of the change in capital accruals): $250-270 million. In the third quarter 2022, the Company expects to drill 24 net wells, of which 11 are planned for South Texas and 13 are planned for the Midland Basin, and turn-in-line 35 net wells, of which 21 are planned for South Texas and 14 are planned for the Midland Basin.
  • Production: 13.2-13.6 MMBoe, or 143-148 MBoe/d, at approximately 46% oil.

UPCOMING EVENTS

EARNINGS Q&A WEBCAST AND CONFERENCE CALL

August 4, 2022 – Please join SM Energy management at 8:00 a.m. Mountain time/10:00 a.m. Eastern time for the second quarter 2022 financial and operating results Q&A session. This discussion will be accessible via webcast (available live and for replay) on the Company’s website at ir.sm-energy.com or by telephone. To join the live conference call, please register at the link below for dial-in information.

The call replay will be available approximately one hour after the call and until August 18, 2022.

CONFERENCE PARTICIPATION

  • August 8, 2022 – EnerCom Denver – The Energy Conference – President and Chief Executive Officer Herb Vogel will present at 2:20 pm Mountain time/4:20 pm Eastern time. The event will be webcast, accessible from the Company’s website, and available for replay for a limited period. The Company will post an investor presentation to its website the morning of the event.
  • September 8, 2022 – Inaugural Wells Fargo Leveraged Finance Conference – Chief Financial Officer Wade Pursell will present at 2:30 pm Central time/3:30 pm Eastern time. The event will be webcast, accessible from the Company’s website, and available for replay for a limited period. The Company will post an investor presentation to its website the morning of the event.

DISCLOSURES

FORWARD LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of securities laws. The words “estimate,” “expect,” “goal,” “generate,” “plan,” “target,” and similar expressions are intended to identify forward-looking statements. Forward-looking statements in this release include, among other things, projections for the full year and third quarter 2022, including guidance for capital expenditures, production, production costs, DD&A, exploration expense, G&A, reinvestment rate, the percent of future production to be hedged, and the number of wells the Company plans to drill and complete in 2022. These statements involve known and unknown risks, which may cause SM Energy’s actual results to differ materially from results expressed or implied by the forward-looking statements. Future results may be impacted by the risks discussed in the Risk Factors section of SM Energy’s most recent Annual Report on Form 10-K, as such risk factors may be updated from time to time in the Company’s other periodic reports filed with the Securities and Exchange Commission, specifically the second quarter 2022 Form 10-Q and the 2021 Form 10-K. The forward-looking statements contained herein speak as of the date of this release. Although SM Energy may from time to time voluntarily update its prior forward-looking statements, it disclaims any commitment to do so, except as required by securities laws.

FOOTNOTE 1

Indicates a non-GAAP measure. Please refer below to the section “Definitions of non-GAAP Measures as Calculated by the Company” in Financials Highlights for additional information.

ABOUT THE COMPANY

SM Energy Company is an independent energy company engaged in the acquisition, exploration, development, and production of oil, gas, and NGLs in the state of Texas. SM Energy routinely posts important information about the Company on its website. For more information about SM Energy, please visit its website at www.sm-energy.com.

SM ENERGY INVESTOR CONTACTS

Jennifer Martin Samuels, [email protected], 303-864-2507

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2022

Condensed Consolidated Balance Sheets

(in thousands, except share data)

June 30,

December 31,

ASSETS

2022

2021

Current assets:

Cash and cash equivalents

$            267,089

$            332,716

Accounts receivable

333,944

247,201

Derivative assets

18,308

24,095

Prepaid expenses and other

13,792

9,175

Total current assets

633,133

613,187

Property and equipment (successful efforts method):

Proved oil and gas properties

9,694,929

9,397,407

Accumulated depletion, depreciation, and amortization

(5,944,409)

(5,634,961)

Unproved oil and gas properties

577,854

629,098

Wells in progress

290,407

148,394

Other property and equipment, net of accumulated depreciation of $62,203 and $62,359, respectively

33,199

36,060

Total property and equipment, net

4,651,980

4,575,998

Noncurrent assets:

Derivative assets

8,236

239

Other noncurrent assets

45,775

44,553

Total noncurrent assets

54,011

44,792

Total assets

$         5,339,124

$         5,233,977

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses

$            583,236

$            563,306

Derivative liabilities

425,041

319,506

Other current liabilities

5,476

6,515

Total current liabilities

1,013,753

889,327

Noncurrent liabilities:

Revolving credit facility

Senior Notes, net

1,570,648

2,081,164

Asset retirement obligations

100,296

97,324

Deferred income taxes

102,371

9,769

Derivative liabilities

36,347

25,696

Other noncurrent liabilities

70,809

67,566

Total noncurrent liabilities

1,880,471

2,281,519

Stockholders’ equity:

Common stock, $0.01 par value – authorized: 200,000,000 shares; issued and outstanding: 121,959,282 and 121,862,248 shares, respectively

1,220

1,219

Additional paid-in capital

1,850,601

1,840,228

Retained earnings

605,564

234,533

Accumulated other comprehensive loss

(12,485)

(12,849)

Total stockholders’ equity

2,444,900

2,063,131

Total liabilities and stockholders’ equity

$         5,339,124

$         5,233,977

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2022

Condensed Consolidated Statements of Operations

(in thousands, except per share data)

For the Three Months Ended

June 30,

For the Six Months Ended

June 30,

2022

2021

2022

2021

Operating revenues and other income:

Oil, gas, and NGL production revenue

$        990,377

$        562,569

$      1,849,098

$         985,734

Other operating income

1,725

1,280

2,780

21,961

Total operating revenues and other income

992,102

563,849

1,851,878

1,007,695

Operating expenses:

Oil, gas, and NGL production expense

165,593

125,456

310,284

226,386

Depletion, depreciation, amortization, and asset retirement obligation liability accretion

154,823

204,714

314,304

371,674

Exploration (1)

20,868

8,714

29,914

18,037

Impairment

4,389

8,750

5,389

17,500

General and administrative (1)

28,291

24,639

53,287

49,353

Net derivative loss (2)

104,236

370,348

522,757

715,037

Other operating expense, net

1,096

1,852

1,401

1,253

Total operating expenses

479,296

744,473

1,237,336

1,399,240

Income (loss) from operations

512,806

(180,624)

614,542

(391,545)

Interest expense

(35,496)

(39,536)

(74,883)

(79,407)

Loss on extinguishment of debt

(67,226)

(2,144)

(67,605)

(2,144)

Other non-operating income (expense), net

112

(853)

(233)

(1,224)

Income (loss) before income taxes

410,196

(223,157)

471,821

(474,320)

Income tax (expense) benefit

(86,711)

162

(99,572)

56

Net income (loss)

$         323,485

$        (222,995)

$          372,249

$         (474,264)

Basic weighted-average common shares outstanding

121,910

118,357

121,909

116,568

Diluted weighted-average common shares outstanding

124,343

118,357

124,267

116,568

Basic net income (loss) per common share

$               2.65

$              (1.88)

$                3.05

$               (4.07)

Diluted net income (loss) per common share

$               2.60

$              (1.88)

$                3.00

$               (4.07)

Dividends per common share

$                   —

$                   —

$                0.01

$                0.01

(1)  Non-cash stock-based compensation included in:

Exploration expense

$                974

$                812

$              1,965

$              2,096

General and administrative expense

3,505

3,144

6,788

7,597

Total non-cash stock-based compensation

$             4,479

$             3,956

$              8,753

$              9,693

(2)  The net derivative loss line item consists of the following:

Derivative settlement loss

$         240,598

$         158,822

$         408,781

$          266,707

(Gain) loss on fair value changes

(136,362)

211,526

113,976

448,330

Total net derivative loss

$         104,236

$         370,348

$         522,757

$          715,037

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2022

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except share data and dividends per share)

Additional
Paid-in
Capital

Retained
Earnings

Accumulated
Other
Comprehensive
Loss

Total
Stockholders’
Equity

Common Stock

Shares

Amount

Balances, December 31, 2021

121,862,248

$           1,219

$   1,840,228

$       234,533

$             (12,849)

$      2,063,131

Net income

48,764

48,764

Other comprehensive income

182

182

Cash dividends declared, $0.01 per share

(1,218)

(1,218)

Issuance of common stock upon vesting of RSUs, net of shares used for tax withholdings

1,929

(24)

(24)

Stock-based compensation expense

4,274

4,274

Balances, March 31, 2022

121,864,177

$           1,219

$   1,844,478

$       282,079

$             (12,667)

$      2,115,109

Net income

323,485

323,485

Other comprehensive income

182

182

Issuance of common stock under Employee Stock Purchase Plan

65,634

1

1,644

1,645

Stock-based compensation expense

29,471

4,479

4,479

Balances, June 30, 2022

121,959,282

$           1,220

$   1,850,601

$       605,564

$             (12,485)

$      2,444,900

Additional
Paid-in
Capital

Accumulated
Other
Comprehensive
Loss

Total
Stockholders’
Equity

Common Stock

Retained
Earnings
(Deficit)

Shares

Amount

Balances, December 31, 2020

114,742,304

$           1,147

$   1,827,914

$       200,697

$             (13,598)

$      2,016,160

Net loss

(251,269)

(251,269)

Other comprehensive income

191

191

Cash dividends declared, $0.01 per share

(1,147)

(1,147)

Stock-based compensation expense

5,737

5,737

Balances, March 31, 2021

114,742,304

$           1,147

$   1,833,651

$       (51,719)

$             (13,407)

$      1,769,672

Net loss

(222,995)

(222,995)

Other comprehensive income

592

592

Cash dividends, $0.01 per share

(31)

(31)

Issuance of common stock under Employee Stock Purchase Plan

252,665

3

1,312

1,315

Stock-based compensation expense

57,795

1

3,955

3,956

Issuance of common stock through cashless exercise of Warrants

5,918,089

59

(59)

Balances, June 30, 2021

120,970,853

$           1,210

$   1,838,859

$     (274,745)

$             (12,815)

$      1,552,509

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2022

Condensed Consolidated Statements of Cash Flows

(in thousands)

For the Three Months Ended

June 30,

For the Six Months Ended

June 30,

2022

2021

2022

2021

Cash flows from operating activities:

Net income (loss)

$        323,485

$       (222,995)

$         372,249

$        (474,264)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depletion, depreciation, amortization, and asset retirement obligation liability accretion

154,823

204,714

314,304

371,674

Impairment

4,389

8,750

5,389

17,500

Stock-based compensation expense

4,479

3,956

8,753

9,693

Net derivative loss

104,236

370,348

522,757

715,037

Derivative settlement loss

(240,598)

(158,822)

(408,781)

(266,707)

Amortization of debt discount and deferred financing costs

3,597

4,722

7,607

9,445

Loss on extinguishment of debt

67,226

2,144

67,605

2,144

Deferred income taxes

81,000

(162)

92,948

(214)

Other, net

11,718

1,215

11,578

(13,377)

Net change in working capital

28,214

82,529

(109,748)

31,092

Net cash provided by operating activities

542,569

296,399

884,661

402,023

Cash flows from investing activities:

Capital expenditures

(215,618)

(222,614)

(365,745)

(370,177)

Other, net

292

221

Net cash used in investing activities

(215,618)

(222,322)

(365,745)

(369,956)

Cash flows from financing activities:

Proceeds from revolving credit facility

504,000

944,000

Repayment of revolving credit facility

(586,500)

(984,500)

Net proceeds from Senior Notes

393,583

393,583

Cash paid to repurchase Senior Notes

(480,176)

(385,296)

(584,946)

(385,296)

Net proceeds from sale of common stock

1,645

1,315

1,645

1,315

Dividends paid

(1,218)

(1,178)

(1,218)

(1,178)

Other, net

(1)

(24)

(1)

Net cash used in financing activities

(479,749)

(74,077)

(584,543)

(32,077)

Net change in cash, cash equivalents, and restricted cash

(152,798)

(65,627)

(10)

Cash, cash equivalents, and restricted cash at beginning of period

419,887

332,716

10

Cash, cash equivalents, and restricted cash at end of period

$        267,089

$                   —

$         267,089

$                    —

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2022

Condensed Consolidated Statements of Cash Flows (Continued)

(in thousands)

For the Three Months Ended

June 30,

For the Six Months Ended

June 30,

2022

2021

2022

2021

Supplemental schedule of additional cash flow information:

Operating activities:

Cash paid for interest, net of capitalized interest

$         (26,671)

$         (21,415)

$          (90,875)

$          (74,864)

Investing activities:

Increase (decrease) in capital expenditure accruals and other

$          22,153

$           (8,422)

$            37,780

$            28,987

Other information:

Net cash paid for income taxes

$         (10,452)

$           (1,247)

$          (10,502)

$                (621)

 

DEFINITIONS OF NON-GAAP MEASURES AS CALCULATED BY THE COMPANY

To supplement the presentation of its financial results prepared in accordance with U.S. generally accepted accounting principles (GAAP), the Company provides certain non-GAAP measures, which are used by management and the investment community to assess the Company’s financial condition, results of operations, and cash flows, as well as compare performance from period to period and across the Company’s peer group. The Company believes these metrics and performance measures are widely used by the investment community, including investors, research analysts and others, to evaluate and compare investments among upstream oil and gas companies in making investment decisions or recommendations. These measures, as presented, may have differing calculations among companies and investment professionals and may not be directly comparable to the same measures provided by others. A non-GAAP measure should not be considered in isolation or as a substitute for the most directly comparable GAAP measure or any other measure of a company’s financial or operating performance presented in accordance with GAAP. A reconciliation of each of these non-GAAP measures to the most directly comparable GAAP measure is presented below. These measures may not be comparable to similarly titled measures of other companies.

Adjusted EBITDAX : Adjusted EBITDAX is calculated as net income (loss) before interest expense, interest income, income taxes, depletion, depreciation, amortization and asset retirement obligation liability accretion expense, exploration expense, property abandonment and impairment expense, non-cash stock-based compensation expense, derivative gains and losses net of settlements, gains and losses on divestitures, gains and losses on extinguishment of debt, and certain other items. Adjusted EBITDAX excludes certain items that the Company believes affect the comparability of operating results, including items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. The Company believes that Adjusted EBITDAX provides useful information for internal analysis and for investors and analysts, as a performance and liquidity measure, to evaluate the Company’s ability to internally generate funds for exploration, development, acquisitions, and to service debt. The Company is also subject to financial covenants under the Company’s Credit Agreement and New Credit Agreement, a material source of liquidity for the Company, based on Adjusted EBITDAX ratios. Please reference the Company’s 2021 Form 10-K and second quarter 2022 Form 10-Q for discussion of the Credit Agreement and New Credit Agreement and its covenants.

Adjusted net income (loss) and adjusted net income (loss) per diluted common share  Adjusted net income (loss) and adjusted net income (loss) per diluted common share excludes certain items that the Company believes affect the comparability of operating results, including items that are generally non-recurring in nature or whose timing and/or amount cannot be reasonably estimated. These items include non-cash and other adjustments, such as derivative gains and losses net of settlements, impairments, net (gain) loss on divestiture activity, gains and losses on extinguishment of debt, and accruals for non-recurring matters. The Company uses these measures to evaluate the comparability of the Company’s ongoing operational results and trends and believes these measures provide useful information to investors for analysis of the Company’s fundamental business on a recurring basis.

Net debt : Net debt is calculated as the total principal amount of outstanding senior secured notes and senior unsecured notes plus amounts drawn on the revolving credit facility less cash and cash equivalents (also referred to as total funded debt). The Company uses net debt as a measure of financial position and believes this measure provides useful additional information to investors to evaluate the Company’s capital structure and financial leverage.

Free cash flow Free cash flow is calculated as net cash provided by operating activities before net change in working capital less capital expenditures before increase (decrease) in capital expenditure accruals and other. The Company uses this measure as representative of the cash from operations, in excess of capital expenditures that provides liquidity to fund non-discretionary obligations such as debt reduction, returning cash to shareholders or expanding the business.

  • Forward-looking free cash flow: Guidance or projected measures are not reconciled to the most comparable GAAP measure because components of the GAAP calculation are inherently difficult to project. Specifically, the timing of cash receipts and disbursements could not be projected with accuracy.

Net debt-to-Adjusted EBITDAX  Net debt-to-Adjusted EBITDAX is calculated as Net Debt (defined above) divided by Adjusted EBITDAX (defined above) for the trailing twelve-month period (also referred to as leverage ratio). A variation of this calculation is a financial covenant under the Company’s Credit Agreement. The Company and the investment community may use this measure in understanding the Company’s ability to service its debt and identify trends in its leverage position. The Company reconciles the two non-GAAP measure components of this calculation.

  • Forward-looking Net-debt-to-Adjusted EBITDAX: Guidance or projected measures are not reconciled to the most comparable GAAP measure because components of the GAAP calculation are inherently difficult to project. Specifically, non-cash components of earnings such as derivative gains and losses, gains and losses on divestitures, gains and losses on extinguishment of debt and unknown future events could not be projected with accuracy.

Adjusted operating margin : Adjusted operating margin is calculated as oil, gas, and NGL production revenues (before the effects of commodity derivative settlements), less operating expenses (specifically, LOE, transportation, production taxes, ad valorem taxes, and G&A). This calculation, when shown before the effect of derivative settlements, excludes derivative settlements, exploration expense, and DD&A and is reflected on a per BOE basis using net equivalent production for the period represented. This measure includes non-cash items in G&A, specifically stock compensation expense. The Company believes this metric provides management and the investment community with an understanding of the Company’s recurring operating margin before DD&A, which is helpful to compare period-to-period and across peers.

Post-hedge: Post-hedge is calculated as the average realized price after the effects of commodity derivative settlements. The Company believes this metric is useful to management and the investment community to understand the impacts of commodity derivative settlements on average price realized.

Reinvestment rate : Reinvestment rate is calculated as capital expenditures before increase (decrease) in capital expenditure accruals and other divided by net cash provided by operating activities before net change in working capital. The Company believes this metric is useful to management and the investment community to understand the Company’s ability to generate sustainable profitability and may be used to compare over periods of time across industry peers.

  • Forward-looking Reinvestment rate: Guidance or projected measures are not reconciled to the most comparable GAAP measure because components of the GAAP calculation are inherently difficult to project. Specifically, changes to current assets and liabilities, the timing of change in capital accruals, and unknown future events. The inability to project certain components of the calculation would significantly affect the accuracy of a reconciliation.

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2022

Production Data

For the Three Months Ended

Percent Change
Between

For the Six Months
Ended

Percent Change Between Periods

June 30,

March 31,

June 30,

2Q22 &
1Q22

2Q22 &
2Q21

June 30,

June 30,

2022

2022

2021

2022

2021

Realized sales price (before the effect of derivative settlements):

Oil (per Bbl)

$    108.64

$      94.03

$      65.34

16 %

66 %

$    101.15

$      61.30

65 %

Gas (per Mcf)

$        7.66

$        5.42

$        3.34

41 %

129 %

$        6.54

$        3.71

76 %

NGLs (per Bbl)

$      42.08

$      38.56

$      28.41

9 %

48 %

$      40.25

$      27.77

45 %

Equivalent (per Boe)

$      74.23

$      62.25

$      45.28

19 %

64 %

$      68.14

$      43.87

55 %

Realized sales price (including the effect of derivative settlements):

Oil (per Bbl)

$      79.45

$      74.03

$      45.23

7 %

76 %

$      76.67

$      45.55

68 %

Gas (per Mcf)

$        5.96

$        4.56

$        2.87

31 %

108 %

$        5.26

$        2.61

102 %

NGLs (per Bbl)

$      37.96

$      32.89

$      19.19

15 %

98 %

$      35.32

$      17.86

98 %

Equivalent (per Boe)

$      56.20

$      50.06

$      32.50

12 %

73 %

$      53.08

$      32.00

66 %

Net production volumes: (1)

Oil (MMBbl)

6.1

6.5

6.7

(5) %

(8) %

12.6

12.1

4 %

Gas (Bcf)

31.5

31.4

26.5

1 %

19 %

62.9

48.0

31 %

NGLs (MMBbl)

1.9

2.1

1.3

(8) %

46 %

4.1

2.4

72 %

Equivalent (MMBoe)

13.3

13.8

12.4

(3) %

7 %

27.1

22.5

21 %

Average net daily production: (1)

Oil (MBbls per day)

67.5

71.8

73.4

(6) %

(8) %

69.6

66.9

4 %

Gas (MMcf per day)

346.3

348.4

290.9

(1) %

19 %

347.4

265.3

31 %

NGLs (MBbls per day)

21.4

23.4

14.6

(9) %

46 %

22.4

13.1

72 %

Equivalent (MBoe per day)

146.6

153.3

136.5

(4) %

7 %

149.9

124.2

21 %

Per Boe data:

Realized price (before the effect of derivative settlements)

$      74.23

$      62.25

$      45.28

19 %

64 %

$      68.14

$      43.87

55 %

Lease operating expense

5.11

4.25

4.62

20 %

11 %

4.67

4.63

1 %

Transportation costs

2.87

2.74

3.01

5 %

(5) %

2.80

2.98

(6) %

Production taxes

3.75

2.93

2.03

28 %

85 %

3.33

1.99

67 %

Ad valorem tax expense

0.69

0.58

0.45

19 %

53 %

0.63

0.48

31 %

General and administrative (2)

2.12

1.81

1.98

17 %

7 %

1.96

2.20

(11) %

Adjusted operating margin (before the effect of derivative settlements) (1)(3)

$      59.70

$      49.94

$      33.20

20 %

80 %

$      54.74

$      31.59

73 %

Derivative settlement loss

(18.03)

(12.19)

(12.78)

(48) %

41 %

(15.06)

(11.87)

(27) %

Adjusted operating margin (including the effect of derivative settlements) (3)

$      41.67

$      37.75

$      20.42

10 %

104 %

$      39.68

$      19.73

101 %

Depletion, depreciation, amortization, and asset retirement obligation liability accretion

$      11.60

$      11.56

$      16.48

— %

(30) %

$      11.58

$      16.54

(30) %

(1) 

Amounts and percentage changes may not calculate due to rounding.

(2) 

Includes non-cash stock-based compensation expense per Boe of $0.26, $0.24, and $0.25 for the three months ended June 30, 2022, March 31, 2022, and June 30, 2021, respectively, and $0.25 and $0.34 for the six months ended June 30, 2022, and 2021, respectively.

(3) 

See “Definitions of non-GAAP Measures as Calculated by the Company” above.

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2022

Adjusted EBITDAX Reconciliation  (1)

(in thousands)

Reconciliation of net income (loss) (GAAP) and net cash provided by operating activities (GAAP) to Adjusted EBITDAX (non-GAAP)

For the Three Months
Ended June 30,

For the Six Months Ended
June 30,

Trailing Twelve
Months at
June 30,

2022

2021

2022

2021

2022

Net income (loss) (GAAP)

$       323,485

$      (222,995)

$       372,249

$      (474,264)

$           882,742

Interest expense

35,496

39,536

74,883

79,407

155,829

Income tax expense (benefit)

86,711

(162)

99,572

(56)

109,566

Depletion, depreciation, amortization, and asset retirement obligation liability accretion

154,823

204,714

314,304

371,674

717,016

Exploration (2)

19,894

7,902

27,949

15,941

47,354

Impairment

4,389

8,750

5,389

17,500

22,889

Stock-based compensation expense

4,479

3,956

8,753

9,693

17,879

Net derivative loss

104,236

370,348

522,757

715,037

709,379

Derivative settlement loss

(240,598)

(158,822)

(408,781)

(266,707)

(891,032)

Loss on extinguishment of debt

67,226

2,144

67,605

2,144

67,600

Other, net

(426)

1,512

(401)

1,502

(1,396)

Adjusted EBITDAX (non-GAAP)

$       559,715

$       256,883

$    1,084,279

$       471,871

$        1,837,826

Interest expense

(35,496)

(39,536)

(74,883)

(79,407)

(155,829)

Income tax (expense) benefit

(86,711)

162

(99,572)

56

(109,566)

Exploration (2)(3)

(7,911)

(7,902)

(15,966)

(15,941)

(35,371)

Amortization of debt discount and deferred financing costs

3,597

4,722

7,607

9,445

15,437

Deferred income taxes

81,000

(162)

92,948

(214)

102,727

Other, net

161

(297)

(4)

(14,879)

10,615

Net change in working capital

28,214

82,529

(109,748)

31,092

(23,429)

Net cash provided by operating activities (GAAP)

$       542,569

$       296,399

$       884,661

$       402,023

$        1,642,410

(1)

See “Definitions of non-GAAP Measures as Calculated by the Company” above.

(2) 

Stock-based compensation expense is a component of the exploration expense and general and administrative expense line items on the accompanying unaudited condensed consolidated statements of operations. Therefore, the exploration line items shown in the reconciliation above will vary from the amount shown on the accompanying unaudited condensed consolidated statements of operations for the component of stock-based compensation expense recorded to exploration expense.

(3) 

Amount is net of certain capital expenditures related to unsuccessful exploration efforts outside of our core areas of operations.

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2022

Adjusted Net Income (Loss) Reconciliation  (1)

(in thousands, except per share data)

Reconciliation of net income (loss) (GAAP) to adjusted net income (loss) (non-GAAP):

For the Three Months Ended

June 30,

For the Six Months Ended

June 30,

2022

2021

2022

2021

Net income (loss) (GAAP)

$        323,485

$       (222,995)

$       372,249

$      (474,264)

Net derivative loss

104,236

370,348

522,757

715,037

Derivative settlement loss

(240,598)

(158,822)

(408,781)

(266,707)

Impairment

4,389

8,750

5,389

17,500

Loss on extinguishment of debt

67,226

2,144

67,605

2,144

Other, net

69

1,566

133

1,583

Tax effect of adjustments (2)

14,035

(48,605)

(40,601)

(101,894)

Valuation allowance on deferred tax assets

48,605

101,894

Adjusted net income (loss) (non-GAAP)

$        272,842

$                 991

$       518,751

$          (4,707)

Diluted net income (loss) per common share (GAAP)

$               2.60

$              (1.88)

$              3.00

$            (4.07)

Net derivative loss

0.84

3.13

4.21

6.13

Derivative settlement loss

(1.93)

(1.34)

(3.29)

(2.29)

Impairment

0.04

0.07

0.04

0.15

Loss on extinguishment of debt

0.54

0.02

0.54

0.02

Other, net

(0.01)

0.01

0.02

Tax effect of adjustments (2)

0.11

(0.41)

(0.33)

(0.87)

Valuation allowance on deferred tax assets

0.41

0.87

Adjusted net income (loss) per diluted common share (non-GAAP)

$               2.19

$               0.01

$              4.17

$            (0.04)

Basic weighted-average common shares outstanding

121,910

118,357

121,909

116,568

Diluted weighted-average common shares outstanding

124,343

118,357

124,267

116,568

Note: Amounts may not calculate due to rounding.

(1) 

See “Definitions of non-GAAP Measures as Calculated by the Company” above.

(2) 

The tax effect of adjustments for each of the three and six months ended June 30, 2022, and 2021, was calculated using a tax rate of 21.7%. This rate approximates the Company’s statutory tax rate for the respective periods, as adjusted for ordinary permanent differences.

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS

June 30, 2022

Adjusted Operating Margin Reconciliation  (1)

Reconciliation of oil, gas, and NGL production revenue (GAAP) and income (loss) from operations (GAAP) to adjusted operating margin (non-GAAP):

For the Three Months Ended June 30,

2022

2021

(in thousands)

($/Boe)

(in thousands)

($/Boe)

Oil, gas, and NGL production revenue (GAAP)

$           990,377

$              74.23

$           562,569

$              45.28

Operating expenses:

Lease operating expenses

68,138

5.11

57,376

4.62

Transportation costs

38,258

2.87

37,351

3.01

Production taxes

50,031

3.75

25,170

2.03

Ad valorem tax expense

9,166

0.69

5,559

0.45

General and administrative (2)

28,291

2.12

24,639

1.98

Adjusted operating margin (before the effect of derivative settlements) (non-GAAP)

$           796,493

$              59.70

$           412,474

$              33.20

Derivative settlement loss

(240,598)

(18.03)

(158,822)

(12.78)

Adjusted operating margin (including the effect of derivative settlements) (non-GAAP)

$           555,895

$              41.67

$           253,652

$              20.42

Add: Other operating income

1,725

0.12

1,280

0.10

Derivative settlement loss

240,598

18.03

158,822

12.78

Less: Operating expenses

Depletion, depreciation, amortization, and asset retirement obligation liability accretion

154,823

11.60

204,714

16.48

Exploration

20,868

1.56

8,714

0.70

Impairment

4,389

0.33

8,750

0.70

Net derivative loss

104,236

7.81

370,348

29.81

Other operating expense, net

1,096

0.08

1,852

0.15

Income (loss) from operations (GAAP)

$           512,806

$              38.44

$         (180,624)

$             (14.54)

Net equivalent production volumes (MBOE)

13,342

12,423

Note: Amounts may not calculate due to rounding.

(1) 

See “Definitions of non-GAAP Measures as Calculated by the Company” above.

(2) 

Includes non-cash stock-based compensation expense per Boe of $0.26 and $0.25 for the three months ended June 30, 2022, and 2021, respectively.

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS

June 30, 2022

Adjusted Operating Margin Reconciliation  (1)

Reconciliation of oil, gas, and NGL production revenue (GAAP) and income (loss) from operations (GAAP) to adjusted operating margin (non-GAAP):

For the Six Months Ended June 30,

2022

2021

(in thousands)

($/Boe)

(in thousands)

($/Boe)

Oil, gas, and NGL production revenue (GAAP)

$       1,849,098

$              68.14

$           985,734

$              43.87

Operating expenses:

Lease operating expenses

126,701

4.67

104,034

4.63

Transportation costs

75,994

2.80

66,912

2.98

Production taxes

90,445

3.33

44,668

1.99

Ad valorem tax expense

17,144

0.63

10,772

0.48

General and administrative (2)

53,287

1.96

49,353

2.20

Adjusted operating margin (before the effect of derivative settlements) (non-GAAP)

$       1,485,527

$              54.74

$           709,995

$              31.59

Derivative settlement loss

(408,781)

(15.06)

(266,707)

(11.87)

Adjusted operating margin (including the effect of derivative settlements) (non-GAAP)

$       1,076,746

$              39.68

$           443,288

$              19.73

Add: Other operating income

2,780

0.10

21,961

0.99

Derivative settlement loss

408,781

15.06

266,707

11.87

Less: Operating expenses

Depletion, depreciation, amortization, and asset retirement obligation liability accretion

314,304

11.58

371,674

16.54

Exploration

29,914

1.10

18,037

0.80

Impairment

5,389

0.20

17,500

0.78

Net derivative loss

522,757

19.26

715,037

31.82

Other operating expense, net

1,401

0.05

1,253

0.06

Income (loss) from operations (GAAP)

$           614,542

$              22.65

$         (391,545)

$             (17.42)

Net production volumes equivalent (MMBOE)

27,136

22,472

Note: Amounts may not calculate due to rounding.

(1) 

See “Definitions of non-GAAP Measures as Calculated by the Company” above.

(2) 

Includes non-cash stock-based compensation expense per Boe of $0.25 and $0.34 for the six months ended June 30, 2022, and 2021, respectively.

 

SM ENERGY COMPANY

FINANCIAL HIGHLIGHTS (UNAUDITED)

June 30, 2022

Reconciliation of Total Principal Amount of Debt to Net Debt  (1)

(in thousands)

As of June 30, 2022

Principal amount of Senior Unsecured Notes (2)

$                               1,585,144

Revolving credit facility (2)

Total principal amount of debt (GAAP)

1,585,144

Less: Cash and cash equivalents

267,089

Net Debt (non-GAAP)

$                               1,318,055

(1) 

See “Definitions of non-GAAP Measures as Calculated by the Company” above.

(2) 

Amounts are from Note 5 – Long-term Debt in Part I, Item I of the Company’s Form 10-Q for the six months ended June 30, 2022.

 

Free Cash Flow (1)

(in thousands)

For the Three Months Ended

June 30,

For the Six Months Ended

June 30,

2022

2021

2022

2021

Net cash provided by operating activities (GAAP)

$        542,569

$        296,399

$        884,661

$        402,023

Net change in working capital

(28,214)

(82,529)

109,748

(31,092)

Cash flow from operations before net change in working capital

514,355

213,870

994,409

370,931

Capital expenditures (GAAP)

215,618

222,614

365,745

370,177

Increase (decrease) in capital expenditure accruals and other

22,153

(8,422)

37,780

28,987

Capital expenditures before accruals and other

237,771

214,192

403,525

399,164

Free cash flow (non-GAAP)

$        276,584

$               (322)

$        590,884

$         (28,233)

(1) 

See “Definitions of non-GAAP Measures as Calculated by the Company” above.

 

SOURCE SM Energy Company

August 3, 2022

Oil and Gas 360


Publisher’s Note: PDC Energy, Inc. will be presenting next week at EnerCom Denver-The Energy Investment Conference from August 8-10, 2022. You can still register to attend. 
August 3, 2022 at 4:25 PM EDT – DENVER, Aug. 03, 2022 (GLOBE NEWSWIRE) — PDC Energy, Inc. (“PDC” or the “Company”) (Nasdaq:PDCE) today announced its 2022 second quarter financial and operating results, provided second half 2022 guidance and announced receiving Completeness Determination on the Guanella Comprehensive Area Plan (“CAP”) application.
PDC Energy, Inc. announces 2022 second quarter financial and operating results and announces receiving completeness determination on the Guanella Comprehensive Area Plan application- oil and gas 360

On August 2, the Company passed a major milestone in the permitting process by receiving the Completeness Determination on its Guanella CAP from the Colorado Oil & Gas Conservation Commission (“COGCC”). The Guanella CAP covers approximately 35,000 consolidated net acres in rural Weld County with approximately 450 well locations accessed by only 22 surface locations. With the Completeness Determination passed, PDC now enters the technical review phase and 60-day public comment period.

In June 2022, PDC was granted unanimous approval for a 69-well Oil and Gas Development Plan (“OGDP”) and a 30-well OGDP, the Company’s second and third approval under the new permitting process. Combined, these two approvals provided the Company 99 additional permits. Together, these approvals and the in progress Guanella CAP application, represent the Company’s planned Wattenberg Field turn-in-line (“TIL”) activity into 2028. Over the coming months, the Company expects to submit several additional OGDPs expanding its inventory of permitted locations to support the most efficient development of the core Wattenberg Field.

2022 Second Quarter Highlights:

  • Net cash from operating activities of approximately $747 million, adjusted cash flows from operations, a non-U.S. GAAP metric defined below, of approximately $695 million and oil and gas capital investments of approximately $290 million.
  • Approximately $405 million of adjusted free cash flow (“FCF”), a non-U.S. GAAP metric defined below.
  • Returned approximately $250 million of capital to shareholders through the repurchase of approximately 3.0 million shares of common stock outstanding and a $0.35 base dividend.
  • Closed on acquisition of Great Western Petroleum, LLC (the “Great Western Acquisition”) on May 6, 2022.
  • Extended multi-year DJ Basin permit inventory with approval of Kenosha and Broe OGDP permits accounting for 99 new wells.
  • Total production of 21.4 million barrels of oil equivalent (“MMBoe”) or approximately 235,000 Boe per day and oil production of 6.8 million barrels (“MMBbls”) or approximately 75,000 Bbls per day.

CEO Commentary

President and Chief Executive Officer, Bart Brookman, commented, “I commend our regulatory team at PDC and am pleased with the working relationship we have developed with the COGCC. In June, we obtained 99 additional permits, extending our mapped turn-in-line schedule well into 2025. Today’s announcement of the Completeness Determination on the Guanella CAP marks another key accomplishment in providing long-term visibility into the drilling permit process. We look forward to continuing this approval track record with our Guanella CAP and future OGDPs.

“For the quarter, we closed on the $1.4 billion Great Western transaction, which honored all PDC’s acquisition criteria and added complementary core inventory to our Wattenberg asset. The teams are diligently working to blend the two companies and we anticipate full integration will be complete by the end of 3rd quarter.

“Our results for the quarter are highlighted by the Company’s ability to generate more than $400 million in adjusted free cash flow (FCF) while returning approximately $250 million of capital to shareholders through the repurchase of common stock and base dividends. This represents an annualized free cash flow yield and shareholder return yield of approximately 26% and 16% respectively. PDC increased its base quarterly dividend to $0.35 per share after closing the Great Western acquisition, and remains committed to returning a minimum of 60% of its quarterly post dividend annual FCF to shareholders through the Company’s share repurchase program and a year-end special dividend if needed.”

Operations Update

In the second quarter of 2022, PDC invested approximately $290 million while delivering total production of 21.4 million Boe, or approximately 235,000 Boe per day, and oil production of 6.8 million barrels, or approximately 75,000 barrels per day. Total production and oil production represent a sequential increase of 19 percent and 17 percent respectively, compared to the first quarter of 2022, primarily driven by the production volumes from the Great Western Acquisition. Production came in lower than guidance as a result of a small number of compounding near term operational constraints including downtime associated with moving wells on the Great Western Raindance pad to gas lift, timing of temporary unplanned maintenance on third party midstream systems in the Wattenberg Field and delays in securing workover rigs in the Delaware Basin.

In the Wattenberg Field, the Company invested approximately $230 million to operate an average of three drilling rigs and one and a half completion crews in the second quarter, resulting in 54 spuds and 33 TILs and 50 in-process wells PDC acquired as part of the Great Western Acquisition. Shortly after closing of the Great Western Acquisition on May 6th, the Company dropped one of the two rigs that Great Western was operating. Considering the two rigs operated by PDC and one rig from Great Western, we operated a three rig program for the majority of the second quarter. Total production was 18.3 million Boe, or approximately 201,000 Boe per day, while oil production was approximately 5.5 million Bbls, or approximately 60,000 Bbls per day. PDC exited the second quarter with approximately 190 drilled, uncompleted wells (“DUCs”) and approximately 455 approved permits in-hand.

In June, the Company began moving the 35 well Raindance pad, located in a lower gas-oil ratio part of the core Wattenberg onto gas lift which required adjacent wells to be temporarily shut-in while equipment was moved and installed. Initial production response from wells where gas lift has been installed and been brought back online are meeting expectations and currently support longer term production forecasts. This work is expected to continue into the second half of the year and the impacts have been incorporated into our second half 2022 production guidance.

In the Delaware Basin, PDC invested approximately $60 million to operate one drilling rig and a completion crew, resulting in 4 spuds and 9 TILs. Total production was 3.1 million Boe, or approximately 34,000 Boe per day, while oil production was approximately 1.3 million Boe, or approximately 14,000 Boe per day.

Q2 2022 Shareholder Returns and Financial Position

The Company returned approximately $250 million of capital to shareholders through the repurchase of approximately 3.0 million shares of common stock outstanding and its a $0.35 per share base quarterly dividend. The Company has a $1.25 billion share repurchase program authorized, which is expected to be utilized by year end 2023. PDC remains committed to returning a minimum of 60 percent of its quarterly post-dividend annual FCF to shareholders through the Company’s share repurchase program and a year-end special dividend, if needed.

The Company had approximately $39 million cash on hand and approximately $755 million drawn on the credit facility as of June 30, 2022. The leverage ratio was 0.7x at June 30, 2022.

Second Half and Full Year 2022 Outlook

For the second half, the Company expects total production to be in a range of 245,000-255,000 Boe per day and 80,000-84,000 Bbls per day of oil production. Capital investments in crude oil and natural gas properties are expected to be between $515 and $565 million.

Based on our current operating results from the first half of the year, we now expect full-year 2022 production to range between 230,000 Boe to 240,000 Boe per day, of which approximately 73,000 Bbls to 77,000 Bbls is expected to be crude oil. Our planned 2022 capital investments in crude oil and natural gas properties are expected to be between $1.025 and $1.075 billion.

Environmental, Social and Governance (“ESG”)

Through the first six months of 2022, the Company is on schedule with its planned projects to meet its 15% and 30% GHG and methane reduction targets for the full year 2022, respectively.

The Company surpassed the four year mark with no lost time work injuries in both the Wattenberg and Delaware basins. Through the first six months of 2022, PDCE employee Total OSHA Recordable Injury Rate (TRIR) was 0.34, a mark ahead of the corporate target of 0.4.

Including its existing environmental, health and safety performance bonus metrics, along with GHG and methane intensity reduction goals, ESG is projected to account for approximately 25 percent of the Company’s short-term incentive program.

Second Quarter Oil and Gas Production, Sales and Operating Cost Data

Crude oil, natural gas and NGLs sales, excluding net settlements on derivatives were $1,238 million, a 40 percent increase compared to first quarter of 2022 of $882 million. The increase in sales between periods was due to a 17 percent increase in weighted average realized sales price per Boe to $57.81 from $49.23 and a 19 percent increase in production from 17.9 MMBoe to 21.4 MMBoe. The increase in sales price was primarily driven by 15 percent and 47 percent increases in weighted average realized crude oil and natural gas prices, respectively. The combined revenue from crude oil, natural gas and NGLs sales and net settlements on commodity derivative instruments was $939 million in the second quarter of 2022 compared to $721 million in the first quarter of 2022.

The following table provides weighted average sales price, by area, excluding net settlements on derivatives and transportation, gathering and processing expense (“TGP”), for the periods presented:

Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 Percent Change 2022 2021 Percent Change
Crude oil (MBbls)
Wattenberg Field 5,545 4,832 15 % 10,377 8,670 20 %
Delaware Basin 1,299 1,021 27 % 2,320 1,578 47 %
Total 6,844 5,853 17 % 12,697 10,248 24 %
Weighted average price $ 108.24 $ 93.93 15 % $ 101.64 $ 60.92 67 %
Natural gas (MMcf)
Wattenberg Field 43,244 37,663 15 % 80,907 73,742 10 %
Delaware Basin 6,573 5,456 20 % 12,029 9,770 23 %
Total 49,817 43,119 16 % 92,936 83,512 11 %
Weighted average price $ 5.57 $ 3.78 47 % $ 4.74 $ 2.29 107 %
NGLs (MBbls)
Wattenberg Field 5,575 4,291 30 % 9,866 8,153 21 %
Delaware Basin 688 594 16 % 1,282 844 52 %
Total 6,263 4,885 28 % 11,148 8,997 24 %
Weighted average price $ 34.99 $ 34.70 1 % $ 34.86 $ 20.61 69 %
Crude oil equivalent (MBoe)
Wattenberg Field 18,328 15,400 19 % 33,728 29,113 16 %
Delaware Basin 3,082 2,524 22 % 5,607 4,051 38 %
Total 21,410 17,924 19 % 39,335 33,164 19 %
Weighted average price $ 57.81 $ 49.23 17 % $ 53.90 $ 30.19 79 %

Production costs for the second quarter of 2022, which include LOE, production taxes and TGP, were $190 million, or $8.85 per Boe, compared to $145 million, or $8.09 per Boe, in the first quarter of 2022. The increase in production costs per Boe was primarily due to a 9 percent increase in LOE partially offset by a 12 percent decrease in TGP between periods. The increase in LOE per Boe between periods was due to increased well service costs driven by higher commodity prices and inflation, and an increase in environmental costs between periods. The decrease in TGP expense per Boe between periods was due to lower TGP rates on the acquired Great Western production.

The following table provides the components of production costs for the periods presented:

Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 2022 2021
Lease operating expenses $ 70.6 $ 54.2 $ 124.8 $ 84.2
Production taxes 89.3 62.9 152.2 56.5
Transportation, gathering and processing expenses 29.6 28.0 57.6 47.7
Total $ 189.5 $ 145.1 $ 334.6 $ 188.4
Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 2022 2021
Lease operating expenses per Boe $ 3.30 $ 3.02 $ 3.17 $ 2.54
Production taxes per Boe 4.17 3.51 3.87 1.70
Transportation, gathering and processing expenses per Boe 1.38 1.56 1.46 1.44
Total per Boe $ 8.85 $ 8.09 $ 8.50 $ 5.68

Financial Results

Net income for the second quarter of 2022 was $662 million, or $6.74 per diluted share, compared to a net loss of $32 million, or $0.33 per diluted share in the first quarter of 2022. The quarter-over-quarter change was primarily due to an increase in crude oil, natural gas and NGLs sales of $355 million, a $466 million decrease in commodity risk management loss between periods and a gain on bargain purchase from the Great Western Acquisition of $100.3 million in the second quarter of 2022, partially offset by a $128.0 million increase in income tax expense between periods. Adjusted net income, a non-U.S. GAAP financial measure defined below, was $502 million in the second quarter of 2022 compared to $359 million in the first quarter of 2022. The movement between periods is primarily attributable to the change in sales and settled derivatives.

Net cash from operating activities for the second quarter of 2022 was approximately $747 million compared to $489 million in the first quarter of 2022. Adjusted cash flows from operations, a non-U.S. GAAP metric defined below, was approximately $695 million and $539 million in the second and first quarter of 2022, respectively. The quarter-over-quarter increase in adjusted cash flows from operations was primarily due to the increase in sales partially offset by change in derivative settlements, and increases in costs and general administrative expense as a result of the Great Western Acquisition. Adjusted free cash flows, a non-U.S. GAAP metric defined below, increased to $404 million from $319 million in the first quarter of 2022.

G&A, which includes cash and non-cash expense and $13.0 million in Great Western transaction and transition related expense, was $46 million, or $2.13 per Boe in the second quarter of 2022 compared to $34 million, or $1.90 per Boe, in the first quarter of 2022. Excluding the transaction and transition costs associated with the Great Western Acquisition, G&A was $1.52 per Boe in the second quarter.

Reconciliation of Non-U.S. GAAP Financial Measures

We use “adjusted cash flows from operations,” “adjusted free cash flow (deficit),” “adjusted net income (loss)” and “adjusted EBITDAX,” non-U.S. GAAP financial measures, for internal management reporting, when evaluating period-to-period changes and, in some cases, in providing public guidance on possible future results. In addition, we believe these are measures of our fundamental business and can be useful to us, investors, lenders and other parties in the evaluation of our performance relative to our peers and in assessing acquisition opportunities and capital expenditure projects. These supplemental measures are not measures of financial performance under U.S. GAAP and should be considered in addition to, not as a substitute for, net income (loss) or cash flows from operations, investing or financing activities and should not be viewed as liquidity measures or indicators of cash flows reported in accordance with U.S. GAAP. The non-U.S. GAAP financial measures that we use may not be comparable to similarly titled measures reported by other companies. In the future, we may disclose different non-U.S. GAAP financial measures in order to help us and our investors more meaningfully evaluate and compare our future results of operations to our previously reported results of operations. We strongly encourage investors to review our financial statements and publicly filed reports in their entirety and to not rely on any single financial measure.

Adjusted cash flows from operations and adjusted free cash flow (deficit). We believe adjusted cash flows from operations can provide additional transparency into the drivers of trends in our operating cash flows, such as production, realized sales prices and operating costs, as it disregards the timing of settlement of operating assets and liabilities. We believe adjusted free cash flow (deficit) provides additional information that may be useful in an investor analysis of our ability to generate cash from operating activities from our existing oil and gas asset base to fund exploration and development activities and to return capital to stockholders in the period in which the related transactions occurred. We exclude from this measure cash receipts and expenditures related to acquisitions and divestitures of oil and gas properties and capital expenditures for other properties and equipment, which are not reflective of the cash generated or used by ongoing activities on our existing producing properties and, in the case of acquisitions and divestitures, may be evaluated separately in terms of their impact on our performance and liquidity. Adjusted free cash flow is a supplemental measure of liquidity and should not be viewed as a substitute for cash flows from operations because it excludes certain required cash expenditures. For example, we may have mandatory debt service requirements or other non-discretionary expenditures which are not deducted from the adjusted free cash flow measure.

We are unable to present a reconciliation of forward-looking adjusted cash flow because components of the calculation, including fluctuations in working capital accounts, are inherently unpredictable. Moreover, estimating the most directly comparable GAAP measure with the required precision necessary to provide a meaningful reconciliation is extremely difficult and could not be accomplished without unreasonable effort. We believe that forward-looking estimates of adjusted cash flow are important to investors because they assist in the analysis of our ability to generate cash from our operations.

Adjusted net income (loss). We believe that adjusted net income (loss) provides additional transparency into operating trends, such as production, realized sales prices, operating costs and net settlements on commodity derivative contracts, because it disregards changes in our net income (loss) from mark-to-market adjustments resulting from net changes in the fair value of our unsettled commodity derivative contracts, and these changes are not directly reflective of our operating performance.

Adjusted EBITDAX. We believe that adjusted EBITDAX provides additional transparency into operating trends because it reflects the financial performance of our assets without regard to financing methods, capital structure, accounting methods or historical cost basis. In addition, because adjusted EBITDAX excludes certain non-cash expenses, we believe it is not a measure of income, but rather a measure of our liquidity and ability to generate sufficient cash for exploration, development, and acquisitions and to service our debt obligations.

Cash Flows from Operations to Adjusted Cash Flows from Operations and Adjusted Free Cash Flow
Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 2022 2021
Cash flows from operations to adjusted cash flows from operations and adjusted free cash flow:
Net cash from operating activities $ 747.4 $ 489.0 $ 1,236.4 $ 577.4
Changes in assets and liabilities (52.7 ) 49.8 (2.9 ) 65.6
Adjusted cash flows from operations 694.7 538.8 1,233.5 643.0
Capital expenditures for midstream assets (3.0 ) (3.0 )
Capital expenditures for development of crude oil and natural gas properties (346.7 ) (187.0 ) (533.7 ) (240.3 )
Change in accounts payable related to capital expenditures for oil and gas development activities 58.8 (33.1 ) 25.7 (61.3 )
Adjusted free cash flow $ 403.8 $ 318.7 $ 722.5 $ 341.4
Net Loss to Adjusted Net Income (Loss) and Adjusted Earnings Per Share, Diluted
Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 2022 2021
Net income (loss) to adjusted net income (loss):
Net income (loss) $ 662.4 $ (32.0 ) $ 630.4 $ (96.1 )
Loss (gain) on commodity derivative instruments 102.0 568.1 670.0 489.5
Net settlements on commodity derivative instruments (298.7 ) (161.6 ) (460.3 ) (85.8 )
Tax effect of above adjustments (1) 36.4 (15.9 ) (41.9 )
Adjusted net income (loss) $ 502.1 $ 358.6 $ 798.2 $ 307.6
Earnings per share, diluted 6.83 $ (0.33 ) 6.42 (0.97 )
Loss (gain) on commodity derivative instruments 1.04 5.80 6.83 1.79
Net settlements on commodity derivative instruments (3.04 ) (1.65 ) (4.70 ) (0.85 )
Tax effect of above adjustments (1) 0.37 (0.16 ) (0.43 )
Adjusted earnings (loss) per share, diluted $ 5.11 $ 3.66 $ 8.13 $ (0.01 )
Weighted average diluted shares outstanding 98.2 98.0 98.2 100.7

_____________

(1)   Due to the full valuation allowance recorded against our net deferred tax assets, there is no tax effect for the six months ended June 30, 2021.

Adjusted EBITDAX
Three Months Ended Six Months Ended June 30,
June 30, 2022 March 31, 2022 2022 2021
Net income (loss) to adjusted EBITDAX:
Net income (loss) $ 662.4 $ (32.0 ) $ 630.4 $ (96.1 )
Loss (gain) on commodity derivative instruments 102.0 568.1 670.0 489.5
Net settlements on commodity derivative instruments (298.7 ) (161.6 ) (460.3 ) (85.8 )
Non-cash stock-based compensation 7.2 5.5 12.8 11.5
Interest expense, net 17.6 12.9 30.5 39.1
Income tax expense (benefit) 128.0 1.2 129.2 (0.1 )
Impairment of properties and equipment 0.5 0.9 1.5 0.3
Exploration, geologic and geophysical expense 0.3 0.3 0.6 0.6
Depreciation, depletion and amortization 191.1 151.1 342.1 309.0
Accretion of asset retirement obligations 3.4 3.0 6.3 6.4
Loss (gain) on sale of properties and equipment 0.5 (0.1 ) 0.4 (0.3 )
Adjusted EBITDAX $ 814.3 $ 549.3 $ 1,363.5 $ 674.1
Cash from operating activities to adjusted EBITDAX:
Net cash from operating activities $ 747.4 $ 489.0 $ 1,236.4 $ 577.4
Gain on bargain purchase 100.3 100.3
Interest expense, net 17.6 12.9 30.5 39.1
Amortization and write-off of debt discount, premium and issuance costs (1.3 ) (1.4 ) (2.7 ) (7.7 )
Exploration, geologic and geophysical expense 0.3 0.3 0.6 0.6
Other 2.7 (1.3 ) 1.3 (0.9 )
Changes in assets and liabilities (52.7 ) 49.8 (2.9 ) 65.6
Adjusted EBITDAX $ 814.3 $ 549.3 $ 1,363.5 $ 674.1

PDC ENERGY, INC. 
Condensed Consolidated Statements of Operations

(unaudited, in thousands, except per share data)

Three Months Ended June 30, Six Months Ended June 30,
2022 2021 2022 2021
Revenues
Crude oil, natural gas and NGLs sales $ 1,237,680 $ 533,141 $ 2,120,058 $ 1,001,260
Commodity price risk management gain (loss), net (101,976 ) (308,253 ) (670,031 ) (489,509 )
Other income 2,787 3,981 4,912 3,154
Total revenues 1,138,491 228,869 1,454,939 514,905
Costs, expenses and other
Lease operating expense 70,611 42,395 124,767 84,199
Production taxes 89,251 26,968 152,167 56,460
Transportation, gathering and processing expense 29,584 25,989 57,555 47,721
Exploration, geologic and geophysical expense 320 286 573 640
General and administrative expense 45,649 32,843 79,756 65,520
Depreciation, depletion and amortization 191,061 162,210 342,116 308,973
Accretion of asset retirement obligations 3,352 3,232 6,339 6,360
Impairment of properties and equipment 510 62 1,453 252
Loss (gain) on sale of properties and equipment 498 (129 ) 373 (341 )
Other expense 2,145 2,193
Total costs, expenses and other 430,836 296,001 765,099 571,977
Income (loss) from operations 707,655 (67,132 ) 689,840 (57,072 )
Interest expense, net (17,565 ) (20,060 ) (30,510 ) (39,101 )
Gain on bargain purchase 100,273 100,273
Income (loss) before income taxes 790,363 (87,192 ) 759,603 (96,173 )
Income tax benefit (expense) (127,982 ) 155 (129,182 ) 100
Net income (loss) $ 662,381 $ (87,037 ) $ 630,421 $ (96,073 )
Earnings (Loss) per share:
Basic $ 6.83 $ (0.88 ) $ 6.52 $ (0.97 )
Diluted $ 6.74 $ (0.88 ) $ 6.42 $ (0.97 )
Weighted average common shares outstanding:
Basic 96,982 99,187 96,632 99,445
Diluted 98,246 99,187 98,150 99,445
Dividends declared per share $ 0.35 $ 0.12 $ 0.60 $ 0.12


PDC ENERGY, INC.

Condensed Consolidated Balance Sheets
(unaudited, in thousands, except share and per share data)

June 30, 2022 December 31, 2021
Assets
Current assets:
Cash and cash equivalents $ 38,528 $ 33,829
Accounts receivable, net 723,415 398,605
Fair value of derivatives 14,643 17,909
Prepaid expenses and other current assets 11,726 8,230
Total current assets 788,312 458,573
Properties and equipment, net 7,087,772 4,814,865
Fair value of derivatives 26,967 15,177
Other assets 73,190 48,051
Total Assets $ 7,976,241 $ 5,336,666
Liabilities and Stockholders’ Equity
Liabilities
Current liabilities:
Accounts payable $ 285,414 $ 127,891
Production tax liability 242,653 99,583
Fair value of derivatives 702,329 304,870
Funds held for distribution 548,185 285,861
Accrued interest payable 14,683 10,482
Other accrued expenses 85,021 91,409
Total current liabilities 1,878,285 920,096
Long-term debt 1,698,047 942,084
Asset retirement obligations 146,020 127,526
Fair value of derivatives 235,630 95,561
Deferred income taxes 186,383 26,383
Other liabilities 361,155 314,769
Total liabilities 4,505,520 2,426,419
Commitments and contingent liabilities
Stockholders’ equity
Common shares – par value $0.01 per share, 150,000,000 authorized, 97,047,329 and 96,468,071 issued as of June 30, 2022 and December 31, 2021, respectively 970 965
Additional paid-in capital 3,096,523 3,161,941
Retained earnings (accumulated deficit) 380,467 (249,954 )
Treasury shares – at cost, 120,143 and 54,960 as of June 30, 2022 and December 31, 2021, respectively (7,239 ) (2,705 )
Total stockholders’ equity 3,470,721 2,910,247
Total Liabilities and Stockholders’ Equity $ 7,976,241 $ 5,336,666


PDC ENERGY, INC. 

Condensed Consolidated Statements of Cash Flows
(unaudited, in thousands)

Six Months Ended June 30,
2022 2021
Cash flows from operating activities:
Net income (loss) $ 630,421 $ (96,073 )
Adjustments to net loss to reconcile to net cash from operating activities:
Net change in fair value of unsettled commodity derivatives 209,777 403,723
Depreciation, depletion and amortization 342,116 308,973
Impairment of properties and equipment 1,453 252
Accretion of asset retirement obligations 6,339 6,360
Non-cash stock-based compensation 12,770 11,515
Loss (gain) on sale of properties and equipment 373 (341 )
Amortization of debt discount, premium and issuance costs 2,715 7,714
Deferred income taxes 128,481
Gain on bargain purchase (100,273 )
Other (700 ) 875
Changes in assets and liabilities 2,909 (65,632 )
Net cash from operating activities 1,236,381 577,366
Cash flows from investing activities:
Capital expenditures for development of crude oil and natural gas properties (533,592 ) (240,266 )
Capital expenditures for midstream assets (3,015 )
Capital expenditures for other properties and equipment (2,537 ) (274 )
Cash paid for acquisition of an exploration and production business (1,068,241 )
Proceeds from sale of properties and equipment 461 4,414
Proceeds from divestitures 465
Net cash from investing activities (1,606,459 ) (236,126 )
Cash flows from financing activities:
Proceeds from revolving credit facility and other borrowings 1,372,000 429,800
Repayment of revolving credit facility and other borrowings (617,000 ) (597,800 )
Payment of debt issuance costs (47 )
Purchase of treasury shares for employee stock-based compensation tax withholding obligations (16,860 ) (5,656 )
Purchase of treasury shares (295,005 ) (47,694 )
Dividends paid (59,219 ) (11,885 )
Principal payments under financing lease obligations (962 ) (879 )
Net cash from financing activities 382,907 (234,114 )
Net change in cash, cash equivalents and restricted cash 12,829 107,126
Cash, cash equivalents and restricted cash, beginning of period 33,829 2,623
Cash, cash equivalents and restricted cash, end of period $ 46,658 $ 109,749

2022 Second Quarter Teleconference and Webcast

The Company invites you to join Bart Brookman, President and Chief Executive Officer; Scott Meyers, Chief Financial Officer; Lance Lauck, Executive Vice President Corporate Development and Strategy; and David Lillo, Senior Vice President Operations for a conference call at 11:00 a.m. ET on Thursday, August 4, 2022, to discuss the 2022 second quarter results. The related slide presentation will be available on PDC’s website at www.pdce.com.

To attend the conference call or webcast, participants should register online at http://www.pdce.com/investors-overview/events-calendar-webcasts-presentations/. Once registered, participants will receive the dial in details and a unique PIN number. Participants are requested to register a minimum 15 minutes before the start of the call.

A replay of the webcast will be available two hours after the call and archived on the same web page for six months.

Upcoming Investor Presentations

PDC is scheduled to participate in the 2022 EnerCom Denver – The Energy Investment Conference starting on Monday, August 8, 2022, the Barclays CEO Energy Power Conference starting on Tuesday, September 6, 2022 and the Wells Fargo Leveraged Finance Conference starting on Wednesday, September 7, 2022. Updated presentations will be posted to the Company’s website, www.pdce.com, prior to the start of each conference.

About PDC Energy, Inc.

PDC Energy, Inc. is a domestic independent exploration and production company that acquires, explores and develops properties for the production of crude oil, natural gas and NGLs, with operations in the Wattenberg Field in Colorado and Delaware Basin in west Texas. Its operations in the Wattenberg Field are focused in the horizontal Niobrara and Codell plays and our Delaware Basin operations are primarily focused in the horizontal Wolfcamp zones.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 (“Securities Act”) and Section 21E of the Securities Exchange Act of 1934 (“Exchange Act”) and the United States (“U.S.”) Private Securities Litigation Reform Act of 1995 regarding our business, financial condition, results of operations and prospects. All statements other than statements of historical fact included in and incorporated by reference into this report are “forward-looking statements”. Words such as expect, anticipate, intend, plan, believe, seek, estimate, schedule and similar expressions or variations of such words are intended to identify forward-looking statements herein. Forward-looking statements include, among other things, statements regarding permitting matters; future production, costs and cash flows; impacts from the acquisition and integration of Great Western, including drilling locations, zones and growth opportunities; capital expenditures and projects; the return of capital to shareholders through buybacks of shares and/or payments of dividends, ESG matters; and our ability to fund planned activities.

The above statements are not the exclusive means of identifying forward-looking statements herein. Although forward-looking statements contained in this press release reflect our good faith judgment, such statements can only be based on facts and factors currently known to us. Forward-looking statements are always subject to risks and uncertainties, and become subject to greater levels of risk and uncertainty as they address matters further into the future. Throughout this press release or accompanying materials, we may use the term “projection” or similar terms or expressions, or indicate that we have “modeled” certain future scenarios. We typically use these terms to indicate our current thoughts on possible outcomes relating to our business or our industry in periods beyond the current fiscal year. Because such statements relate to events or conditions further in the future,
they are subject to increased levels of uncertainty.

Important factors that could cause actual results to differ materially from the forward-looking statements include, but are not limited to:

  • market and commodity price volatility, widening price differentials, and related impacts to the Company, including decreased revenue, income and cash flow, write-downs and impairments and decreased availability of capital;
  • difficulties in integrating our operations as a result of any significant acquisitions, including the Great Western Acquisition, or acreage exchanges;
  • adverse changes to our future cash flows, liquidity and financial condition;
  • changes in, and interpretations and enforcement of, environmental and other laws and other political and regulatory developments, including in particular additional permit scrutiny in Colorado;
  • the coronavirus 2019 (“COVID-19”) pandemic, including its effects on commodity prices, downstream capacity, employee health and safety, business continuity and regulatory matters;
  • declines in the value of our crude oil, natural gas and natural gas liquids (“NGLs”) properties resulting in impairments;
  • changes in, and inaccuracy of, reserve estimates and expected production and decline rates;
  • timing and extent of our success in discovering, acquiring, developing and producing reserves;
  • reductions in the borrowing base under our revolving credit facility;
  • availability and cost of capital;
  • risks inherent in the drilling and operation of crude oil and natural gas wells;
  • timing and costs of wells and facilities;
  • availability, cost, and timing of sufficient pipeline, gathering and transportation facilities and related infrastructure;
  • limitations in the availability of supplies, materials, contractors and services that may delay the drilling
    or
    completion of our wells;
  • potential losses of acreage or other impacts due to lease expirations, other title defects, or otherwise;
  • risks inherent in marketing crude oil, natural gas and NGLs;
  • effect of crude oil and natural gas derivative activities;
  • impact of environmental events, governmental and other third-party responses to such events and our ability to insure adequately against such events;
  • cost of pending or future litigation;
  • impact to our operations, personnel retention, strategy, stock price and expenses caused by the actions of activist shareholders;
  • uncertainties associated with future dividends to our shareholders or share buybacks;
  • timing and amounts of federal and state income taxes;
  • our ability to retain or attract senior management and key technical employees;
  • an unanticipated assumption of liabilities or other problems with the Great Western Acquisition or other acquisitions we may pursue;
  • civil unrest, terrorist attacks and cyber threats;
  • risks associated with recent inflationary trends and the potential for a recession; and
  • success of strategic plans, expectations and objectives for our future operations.

Further, we urge you to carefully review and consider the cautionary statements and disclosures, specifically those under the “Item 1A. Risk Factors” made in our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Form 10-K”) filed with the U.S. Securities and Exchange Commission (“SEC”) for further information on risks and uncertainties that could affect our business, financial condition, results of operations and prospects, which are incorporated by this reference as though fully set forth herein. We caution you not to place undue reliance on the forward-looking statements, which speak only as of the date of this release. We undertake no obligation to update any forward-looking statements in order to reflect any event or circumstance occurring after the date of this release or currently unknown facts or conditions or the occurrence of unanticipated events. All forward-looking statements are qualified in their entirety by this cautionary statement.

Contacts: Aaron Vandeford
Director Investor Relations
303-381-9493
[email protected]

 


Primary Logo

Source: PDC Energy, Inc.

Yahoo Finance


LONDON – The West’s energy giants are set to return a record $30 billion to investors after reporting bumper profits in the second quarter of the year following a surge in energy prices.

 

Big Oil offers big returns but keeps spending tight- oil and gas 360

Source: Returns

But the top five Western oil and gas companies have shied away from investing more of their combined record profits of nearly $60 billion in new production as they weigh the impact of recession and climate change on future fossil fuel demand.

The reluctance to spend may exacerbate an energy supply crunch that has driven inflation to multi-decade highs and ignited calls from consumers and opposition leaders for governments to increase tax on energy companies.

The spending approach contrasts with previous cycles of high oil and gas prices, such as the boom of the late 2000s that spurred rapid spending to boost production.

“Given all the uncertainty in the world, now is not the time to lose discipline,” BP Chief Executive Bernard Looney told Reuters after reporting BP’s highest profit in 14 years.

The combined oil and gas output of BP, Shell, TotalEnergies, Chevron and Exxon in the first half of 2022 reached 14.6 million barrels of oil equivalent per day (boed), some 10% below its pre-pandemic levels, according to Reuters calculations.

Although some of the companies modestly increased 2022 spending plans in recent days, they remain within previous target spending ranges. Most of the extra funds are focused on projects that can start producing in a short timeframe or to accelerate starting dates for projects already under way.

TotalEnergies raised its 2022 spending guidance by $1 billion to a range of $16 billion in part to speed up field expansions in Angola, Chief Executive Officer Patrick Pouyanne told analysts last Thursday.

BP is increasing spending by $500 million this year, primarily to grow short-term production in the U.S. Hayensville onshore natural gas basin and the Gulf of Mexico, Looney told Reuters.

But BP’s 2022 spending budget of $14-$15 billion will remain unchanged, and does not alter its target of reducing oil and gas output by 40% by 2030 as part of Looney’s ambition to shift to renewables and low-carbon energy. Around two-thirds of BP’s budget is geared towards oil and gas in 2022.

Although the energy crisis caused by major fossil fuel producer Russia’s invasion of Ukraine has in the short term placed the focus on countries using all available supplies, even if that means carbon-intensive coal, Western governments longer term are striving to shift to low-carbon energy.

The International Energy Agency https://www.reuters.com/article/iea-emissions-idAFL5N2N42CV in May 2021 said investors should not fund new oil, gas and coal supply projects if the world wants to reach net zero emissions by the middle of the century to try to slow climate change.

Within the group of leading energy companies, there has been a clear divergence as Exxon, Chevron and TotalEnergies plan to expand output in the coming years, while BP and Shell aim to keep production largely flat.

Exxon expects its 2022 production to remain unchanged from a year earlier at 3.8 million boed, but plans to grow its output to 4.2 million boed by 2027, with most of the growth coming from U.S. shale and Guyana.

Chevron, which is investing heavily in the U.S. Permian basin and Kazakhstan, plans an annual growth of 3% over the next 5 years to reach over 3.5 million boed from 2.9 million boed today.

This year’s surge in energy prices is in part the result of years of underinvestment, which meant that when demand recovered from pandemic lockdowns, energy markets were very tight even before the disruption caused by war in Ukraine.

Shortly after Russia began the invasion it terms a “special military operation” on Feb. 24, gas prices in Europe touched record highs and international benchmark crude reached 14 year-highs.

The record shareholder returns of $30 billion compare to quarterly pre-pandemic returns of between $16-$20 billion – and they are set to increase again in the third quarter, mainly in the form of buybacks

August 2, 2022

Oil and Gas 360


Publishe’s Note: Northern Oil and Gas will be presenting on Monday, August 8, 2022 at 11:20 a.m. (MST) at  EnerCom Denver- The Energy Investment Conference next week on August 8-10, 2022. You can still register to attend and schedule one-on-one meetings.

Northern Oil and Gas, Inc. (NYSE: NOG) (“NOG” or the “Company”) today announced that its Board of Directors has declared a cash dividend on the Company’s common stock in the amount of $0.25 per share, representing a 32% increase from the prior quarterly dividend.

 

NOG declares $0.25 quarterly cash dividend, 32% increase over prior quarter, and provides share repurchase update- oil and gas 360

Source: Northern Oil and Gas

The dividend is payable on October 31, 2022, to stockholders of record as of the close of business on September 29, 2022. Additionally, the Company has provided an update on recently completed share repurchases.

SHARE REPURCHASE UPDATE

NOG repurchased approximately $12.8 million worth of common stock in the second quarter of 2022, an increase of $2.8 million from the most recent public announcement. In the second quarter, the company repurchased 447,051 shares at an average price of $28.65 per share.

In the third quarter-to-date, the Company has repurchased an additional $7.2 million worth of common stock. The company repurchased an additional 309,126 shares at an average price of $23.26 per share.

In total, year-to-date, the Company has repurchased 756,177 common shares at an average price of $26.45 for a total of $20.0 million and has $130.0 million remaining on its existing common stock repurchase authorization.

MANAGEMENT COMMENTS

“As expected, the Board of Directors has approved another substantial increase to our common stock dividend,” commented Chad Allen, NOG’s Chief Financial Officer. “With our significant free cash flow profile, we have taken an all-of-the-above approach to shareholder returns in 2022, growing our common stock dividend while also repurchasing and retiring common stock, preferred stock and senior notes.”

ABOUT NORTHERN OIL AND GAS

NOG is a company with a primary strategy of investing in non-operated minority working and mineral interests in oil & gas properties, with a core area of focus in the premier basins within the United States. More information about NOG can be found at www.northernoil.com .

SAFE HARBOR

This press release contains forward-looking statements regarding future events and future results that are subject to the safe harbors created under the Securities Act of 1933, as amended (the “Securities Act”), and the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts included in this press release regarding NOG’s dividend plans and practices, financial position, business strategy, plans and objectives for future operations, industry conditions, cash flow, and borrowings are forward-looking statements. When used in this presentation, forward-looking statements are generally accompanied by terms or phrases such as “estimate,” “project,” “predict,” “believe,” “expect,” “continue,” “anticipate,” “target,” “could,” “plan,” “intend,” “seek,” “goal,” “will,” “should,” “may” or other words and similar expressions that convey the uncertainty of future events or outcomes. Items contemplating or making assumptions about actual or potential future sales, market size, collaborations, and trends or operating results also constitute such forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties, and important factors (many of which are beyond NOG’s control) that could cause actual results to differ materially from those set forth in the forward-looking statements, including the following: changes in NOG’s capitalization, changes in crude oil and natural gas prices; the pace of drilling and completions activity on NOG’s properties and properties pending acquisition; the effects of the COVID-19 pandemic and related economic slowdown; NOG’s ability to acquire additional development opportunities; the projected capital efficiency savings and other operating efficiencies and synergies resulting from NOG’s acquisition transactions; integration and benefits of property acquisitions, or the effects of such acquisitions on NOG’s cash position and levels of indebtedness; changes in NOG’s reserves estimates or the value thereof; general economic or industry conditions, nationally and/or in the communities in which NOG conducts business; changes in the interest rate environment or market dividend practices, legislation or regulatory requirements; conditions of the securities markets; NOG’s ability to consummate any pending acquisition transactions; other risks and uncertainties related to the closing of pending acquisition transactions; NOG’s ability to raise or access capital; changes in accounting principles, policies or guidelines; and financial or political instability, acts of war or terrorism, and other economic, competitive, governmental, regulatory and technical factors affecting NOG’s operations, products, services and prices. Additional information concerning potential factors that could affect future plans and results is included in the section entitled “Item 1A. Risk Factors” and other sections of NOG’s most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q, as updated from time to time in amendments and subsequent reports filed with the SEC, which describe factors that could cause NOG’s actual results to differ from those set forth in the forward-looking statements.

NOG has based these forward-looking statements on its current expectations and assumptions about future events. While management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond NOG’s control. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except as may be required by applicable law or regulation, NOG does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect events or circumstances occurring after the date of such statements.

Investor Relations
952-476-9800
[email protected]

News Provided by Business Wire via QuoteMedia

CNBC


Publisher’s Note: BPX Energy will be the lunch keynote on Monday, August 8, 2022 at EnerCom Denver- The Energy Investment Conference. Please register and schedule your one-on-one meetings with presenters at  EnerCom Denver.

LONDON — U.K. oil giant BP on Tuesday raised its dividend and boosted share buybacks after tripling second-quarter profits on robust refining margins and trading.

 

Oil major BP boosts dividend as quarterly profits jump on high commodity prices- oil and gas 360

Source: CNBC

The British energy major posted second-quarter underlying replacement cost profit, used as a proxy for net profit, of $8.5 billion.

That compared with a profit of $6.2 billion in the first three months of the year and $2.8 billion for the second quarter of 2021. Analysts had expected BP to report first-quarter profit of $6.3 billion, according to Refinitiv.

BP also announced a 10% increase in its quarterly dividend payout to shareholders, raising it to 6.006 cents per ordinary share.

Shares of BP rose 4% during morning deals in London, trading near the top of the pan-European . The stock price is up over 23% year-to-date.

BP’s results once again underscore the stark contrast between Big Oil’s profit bonanza and those grappling with a deepening cost of living crisis.

The world’s largest oil and gas companies have shattered profit records in recent months, following a surge in commodity prices prompted by Russia’s invasion of Ukraine. For many fossil fuel firms, the immediate priority appears to be returning cash to shareholders via buyback programs.

Last week, BP’s U.K. rival  reported record second-quarter results of $11.5 billion and announced a $6 billion share buyback program, while British Gas owner Centrica reinstated its dividend after a massive increase in first-half profits.

Cost of living crisis

Environmental campaigners and union groups have condemned Big Oil’s surging profits and called on the U.K. government to impose meaningful measures to bring down the cost of rising energy bills.

“Every family should get a fair price for the energy they need. But with energy bills rising much faster than wages, high profits are an insult to families struggling to get by,” Trades Union Congress General Secretary Frances O’Grady said in a statement.

“For a fair approach to the cost of living crisis, price hikes and profits should be held back. Ministers must do more to get wages rising across the economy. And we should bring energy retail firms into public ownership so we can reduce bills for basic energy needs,” O’Grady said.

Last month, a cross-party group of U.K. lawmakers called on the government to increase the level of support to help households pay rising energy bills and outline a nationwide plan to insulate homes.

A price cap on the most widely used consumer energy tariffs is expected to rise by more than 60% in October due to surging gas prices, taking average household yearly dual fuel bills to more than £3,200 ($3,845).

Fuel poverty charity National Energy Action has warned that if this happens, it would push 8.2 million homes — or one-in-three British homes — into energy poverty. Fuel or energy poverty refers to when a household is unable to afford to heat their home to an adequate temperature.

“Ministers must impose a much tougher windfall tax on massive oil and gas firm profits. It beggars belief that these companies are raking in such huge sums in the midst of a cost-of-living crisis,” Sana Yusuf, energy campaigner at Friends of the Earth, said in reaction to BP’s earnings.

“It’s astonishing that energy efficiency has been given such a low priority. A nationwide insulation programme would cut bills, reduce energy-use and slash climate-changing emissions,” Yusuf said.

The burning of fossil fuels, such as oil and gas, is the chief driver of the climate crisis and researchers have found fossil fuel production remains “dangerously out of sync” with global climate targets.

Speaking in June, U.N. Secretary-General Antonio Guterres called for an abandonment of fossil fuel finance, describing new funding for fossil fuel exploration as “delusional.”

July 29, 2022

Yahoo


The world’s largest energy companies, including TotalEnergies, Exxon Mobil and Chevron are ramping up buyback programmes despite criticism that they are not moving swiftly enough to increase oil and gas output as high fuel prices pinch consumers worldwide.

Big oil’s Q2 profits hit record $50 billion – with BP yet to come- oil and gas 360

Source: Reuters

Exxon Mobil, Chevron, Shell and TotalEnergies produced a combined profit of $51 billion, with Exxon topping the pile at $18 billion.

BP is set to report next Tuesday.

That money is increasingly going into shareholder buybacks, which are frequently criticised by investor advocates as a less desirable use of funds than business investment.

Exxon, Chevron, Shell and Total returned a total of $23 billion to shareholders in the second quarter in dividends and share repurchases, based on Reuters calculations.

Companies are prioritising returning cash to investors rather than investing in new oil and gas production, and keeping their eye on capital discipline and the long-term shift to low carbon energy.

Chevron boosted its annual buyback plans to a range of $10 billion to $15 billion, up from $5 billion to $10 billion. Chief Financial Officer Pierre Breber said the company plans on maintaining a high levels of buybacks “for a number of years,” even if the investment cycle turns.

He added that the company will continue to pay down debt, and said that it can do that as well as increase output and investment.

Exxon aims to repurchase $30 billion of shares through 2022 and 2023. Shell said it would buy back $6 billion in shares in the current quarter after buying $8.5 billion in the first half.

The companies are also wary of investor pressure, after years when the oil and gas sector routinely underperformed broad-market indexes. Last year, Exxon Mobil lost an expensive proxy battle against a little-known hedge fund after major institutional shareholders backed a slate of new board members – in part due to the company’s weak returns.

FRICTION

The speed of the economic recovery from the pandemic has caught the energy industry wrong footed, and shortfalls in supply have been exacerbated by disruptions caused by Russia’s invasion of Ukraine.

This has caused friction with governments that are coming under pressure from voters struggling to pay soaring energy and fuel bills.

Earlier this month, Britain passed a 25% windfall tax on oil and gas producers. TotalEnergies Chief Executive Officer Patrick Pouyanne said the tax would cost his firm $500 million.

U.S. lawmakers have discussed a similar idea, though it faces long odds in Congress.

Shell Chief Executive Officer Ben van Beurden blamed the elevated energy prices on an investment shortfall of around $1 trillion in recent years as well as pressure on companies to move away from oil and gas towards renewables.

“These (profit) margins are not our doing, they are the doing of how global markets play out,” van Beurden told reporters.

In France, TotalEnergies has reduced fuel prices at its service stations, even as Finance Minister Bruno Le Maire ruled out taxing energy companies.

Yahoo Finance


HOUSTON – Exxon Mobil Corp on Friday posted its biggest quarterly profit ever on the back of soaring energy prices and as it kept a tight rein on spending.

 

Exxon posts record-breaking second-quarter profit-oil and gas 360

Source: Reuters

The top U.S. oil producer reported second-quarter net income of $17.9 billion, or $4.21 per share, an almost four-fold increase over the $4.69 billion, or $1.10 per share, it earned in the same period last year.

Oil and natural gas prices have scaled multi-year highs this year as Western sanctions against major exporter Russia squeezed an already under-supplied global market. Margins for making fuels like gasoline and diesel surged worldwide, boosting the profits of oil giants, including European majors Shell and TotalEnergies , both of which reported results on Thursday.

Exxon’s results also beat its best quarter of 2008, when Brent crude oil prices peaked at $147 per barrel, and its best-ever quarter reached in 2012, when the company earned $15.9 billion, largely due to asset sales in Japan and tax-related items.

Exxon’s first-quarter profits led U.S. President Joe Biden last month to say the company and other oil majors were capitalizing on a global supply shortage to fatten profits. Exxon, he said, was making “more money than God” after posting its biggest quarterly profit in seven years.

Exxon has been using extra cash to pay down debt and raise distributions to shareholders. It maintained its 88-cent-per-share dividend for the third quarter.

The company earlier this year more than doubled its projected buyback program to $30 billion through 2022 and 2023. Shell and Total on Thursday extended their share buybacks after their second-quarter results both beat what had been a record-breaking previous quarter.

Exxon kept its capital investments at $9.5 billion in the first half of the year, in line with full-year guidance. The profit included a $300 million booked identified item associated with the sale of the Barnett Shale upstream asset.

US News


The two largest U.S. oil companies, Exxon Mobil Corp and Chevron Corp, posted record revenue on Friday, bolstered by surging crude oil and natural gas prices and following similar results for European majors a day earlier.

U.S. majors Exxon, Chevron post blowout earnings, ramp up buybacks- oil and gas 360

Source: Reuters

The U.S. pair, along with UK-based Shell and France’s TotalEnergies, combined to earn nearly $51 billion in the most recent quarter, almost double what the group brought in for the year-ago period. All four have ramped up share buybacks in recent months, capitalizing on high margins derived from selling oil and gas.

Exxon outpaced its rivals with second-quarter net income of $17.9 billion, several billion dollars ahead of its previous record reached in 2012, which was aided by asset sales in Japan. The fifth major, BP Plc, reports next week.

The companies posted strong results in their production units, helped by the surge in benchmark Brent crude oil futures, which averaged around $114 a barrel in the quarter.

High crude oil prices can cut into margins for integrated oil majors, as they also bear the cost of crude used for refined products. However, following Russia’s invasion of Ukraine and numerous shutdowns of refineries worldwide in the wake of the coronavirus pandemic, refining margins exploded in the second quarter, outpacing the gains in crude, adding to earnings.

“The strong second-quarter results reflect a tight global market environment, where demand has recovered to near pre-pandemic levels and supply has attritted,” said Exxon Chief Executive Darren Woods, in a call with analysts. “Growing supply will not happen overnight.”

The results from the majors are sure to draw fire from politicians and consumer advocates who say the oil companies are capitalizing on a global supply shortage to fatten profits and gouge consumers. U.S. President Joe Biden last month said Exxon and others were making “more money than God” at a time when consumer fuel prices surged to records.

Earlier this month, Britain passed a 25% windfall tax on oil and gas producers in the North Sea. U.S. lawmakers have discussed a similar idea, though it faces long odds in Congress.

A windfall tax does not provide “incentive for increased production, which is really what the world needs today,” said Exxon Chief Financial Officer Kathryn Mikells, in an interview with Reuters.

The companies say they are merely meeting consumer demand, and that prices are a function of global supply issues and lack of investment. The majors have been disciplined with their capital and are resisting ramping up capital expenditure due to pressure from investors who want better returns and resilience during a down cycle.

“In the short term (cash from oil) goes to the balance sheet. There’s no nowhere else for it to go,” Chevron CFO Pierre Breber told Reuters.

Worldwide oil output has been held back by a slow return of barrels to the market from the Organization of the Petroleum Exporting Countries and allies, including Russia, as well as labor and equipment shortages hampering a swifter increase in supply in places like the United States.

Exxon earlier this year more than doubled its projected buyback program to $30 billion through 2022 and 2023. Shell said it would buy back $6 billion in shares in the current quarter, while Chevron boosted its annual buyback plans to a range of $10 billion to $15 billion, up from $5 billion to $10 billion.

Exxon shares were up 3.2% to $95.60 in morning trading. Chevron shares rose 6.5% to $160.06.

July 28, 2022

Yahoo Finance


LONDON – Europe’s biggest oil companies Shell and TotalEnergies extended share buybacks on Thursday after their second-quarter profits beat an already record-breaking previous quarter on the back of soaring crude, gas and oil product prices.

Shell, Total continue buyback bonanza after record profits- oil and gas 360

Source: Reuters

The two companies combined are buying back $8 billion in shares in the third quarter after recording their respective highest quarterly profits while keeping their dividends steady, which might disappoint some investors.

Benchmark Brent crude oil futures have risen more than 140% in the past twelve months, averaging around $114 a barrel in the quarter.

High crude prices normally weigh on refining margins, but tight refined fuel supply supported record profitability in the second quarter, with Shell’s refining margin virtually tripping to $28 a barrel.

Benchmark European natural gas prices and global liquefied natural gas prices were on average at all-time highs in the quarter.

Boosted by a record quarterly profit of $11.5 billion, Shell is buying back $6 billion of its own shares by late October, it said on Thursday, on the back of an $8.5 billion buyback scheme finished in the first half.

GRAPHIC: Shell’s profits hit new record https://graphics.reuters.com/SHELL-RESULTS/lbpgnwlwnvq/chart.png https://graphics.reuters.com/SHELL-RESULTS/lbpgnwlwnvq/chart.png

While this is in excess of the company’s guidance for shareholder returns of up to 30% of cash from operations, Shell did not raise its dividend from its current level of 25 cents a share, a 4% annual increase after a 60% cut during the pandemic.

TotalEnergies, with a 9% rise in quarterly profit to $9.8 billion, guided it would buy back $2 billion in the third quarter after purchasing $3 billion of its own shares in the first half of the year.

It had already announced a 5% yearly increase for its first quarterly dividend for this year to 0.69 euros per share, and said on Thursday it would keep that level for its second interim dividend of 2022.

“(TotalEnergies) has opted to maintain its buyback flat into (the third quarter), which may be disappointing to some investors given the current macro environment,” RBC analyst Biraj Borkhataria said.

TotalEnergies’ shares dipped 2.1% and Shell’s shares were up 1.6% after the results announcement, having risen about 35% and 49% respectively in the past twelve months.

This compares with an index of European oil and gas firms gaining 1.6% in early trading.

GRAPHIC: TotalEnergies https://graphics.reuters.com/TOTALENERGIES-RESULTS/gkvlgyownpb/chart.png

The buybacks from Europe’s two biggest oil and gas groups by market capitalisation came in the same week that Norway’s Equinor raised its dividend and share buyback guidance for 2022 by 30% to a total of around $13 billion.

Smaller rival Repsol also announced a boosted share buyback programme on Thursday on the back of bumper profits, which doubled in the first half.

A rapid recovery in demand following the end of pandemic lockdowns and a surge in energy prices driven by Russia’s invasion of Ukraine have boosted profits for energy companies after a two-year slump.

The strong profit windfall has allowed companies to reduce debt piles that grew sharply during the pandemic as well as boost returns to shareholders.

TotalEnergies’ debt-to-capital ratio, or gearing, fell to below 10%, or half its level a year ago, from 12.5% in the first quarter, while Shell’s dipped to 19.3% from 21.3%.

Eni, Exxon and Chevron are due to announce results on July 29 and BP on Aug. 2.

July 8, 2022

World Oil


(Bloomberg) — Shell Plc said soaring margins from fuel production may have added more than $1 billion to the earnings of its refining business last quarter, when gasoline prices broke records in several countries.

Shell adds $1 billion in refining profits from record fuel pricesShell adds $1 billion in refining profits from record fuel prices- oil and gas 360

Source: World Oil

The trading update from the London-based energy giant is the first indicator of just how much cash was flowing into the coffers of major oil companies due to the inflationary surge in the price of gasoline, which climbed above $5 a gallon in the US for the first time.

While the rising cost of energy is strengthening the oil majors after several tough years, it risks a political backlash. US President Joe Biden has directly called on fuel retailers to cut prices and companies are facing windfall taxes in some countries.

Shell’s indicative refining margin jumped to $28.04 a barrel in the second quarter from $10.23 in the first three months of the year, the company said in a statement on Thursday. That’s expected to have a positive impact of $800 million to $1.2 billion on the results of its products division, compared with the prior period.

Shell’s shares advanced as much as 2.5%, and traded up 1.2% at 1,997.2 pence as of 9:36 a.m. in London.

Still, analysts at RBC Europe Ltd. saw the update as “neutral,” citing uncertainty around the “magnitude of working capital outflows.” In May, Shell said that it would be hit by around $7.4 billion of working capital movements.

Oil prices have jumped 30% this year as the war in Ukraine stokes supply concerns. Having ramped up its long-term price assumptions, Shell now expects to reverse previous writedowns on asset values by $3.5 billion to $4.5 billion.

The company took a $3.9 billion impairment in the first quarter, stemming from its planned exit from ventures in Russia. It will take an additional hit of as much as $350 million from the loss of LNG volumes from the Russian Sakhalin-2 project, it said on Thursday.

Trading and optimization results from Shell’s sprawling integrated gas unit fell from the previous quarter, when the business benefited from “exceptional” trading opportunities. The renewables and energy solutions division is expected to report adjusted earnings of $400 million to $900 million for the second quarter amid an “exceptional market environment,” the statement showed.

Shell didn’t give an update on the future of its buyback program, having said it completed $8.5 billion of repurchases in the first half of the year. The company has previously signaled an acceleration in returns, saying that shareholder distributions would be in excess of 30% of operating cash flow.

April 26, 2022

World Oil


(Bloomberg) — The global oil industry is on pace to repeat or even surpass the heady days of 2008 when crude ascended to dizzying heights and drilling profits soared, according to the world’s biggest oilfield contractor.

Oil’s hired hands see outlook brighten as war fractures markets- oil and gas 360

Source: Reuters

In the sector’s most bullish forecast yet, Schlumberger told investors and analysts Friday that the widespread disarray set off by Russia’s invasion of Ukraine is creating growth opportunities last seen during the so-called supercycle of 14 years ago.

Exploration companies are now expanding the search for crude from onshore shale fields to the deep seas, spurred at least in part by a widespread aversion to Russia’s oil since it went to war in late February, Chief Executive Officer Olivier Le Peuch said during a conference call.

“The combination of these effects creates an exceptional sequence for our sector, likely resulting in a cycle of higher magnitude and duration than previously anticipated,” Le Peuch said after the company disclosed its strongest first-quarter margins since 2015 and rewarded investors with a surprise dividend increase.

Le Peuch’s optimism was the culmination of a week in which his biggest rivals — Halliburton Co. and Baker Hughes Co. — unveiled similarly positive, if more modest, business outlooks.

Fracing Giant 

Halliburton, which controls more fracing capacity than any other company, predicted North American explorers will boost spending by 35% this year, up from a pre-war forecast of 25%.

Meanwhile, Baker Hughes estimated that overseas growth will reach the low- to mid-double digits, while North America will see a 40% boost this year.

“We expect global oil and gas supply to remain constrained in the coming years which should support higher commodity prices and multiple years of spending growth from our customers,” Baker Hughes CEO Lorenzo Simonelli said earlier this week during a call with analysts and investors. “Recent geopolitical events have severely constrained what was already a tight global natural gas market and have refocused the world on the importance of energy, security, diversity and reliability.”

Feel The Boom

Often the first to feel the pain in a oil-price bust and the last to benefit from a boom, oilfield servicers are looking to cash in on the global energy rally.

Schlumberger’s allusion to 2008 resonates with oil-market veterans, for in that year international crude surged above $145 a barrel in a so-called supercycle that only ended when financial markets collapsed under the weight of the mortgage crisis.

Since then, the oil-services sector added capacity in order to meet customer demand only to run headlong into a worldwide crude glut that crushed prices and their order books. A wave of bankruptcies in subsequent years helped chew through that oversupply of gear, positioning contractors like Liberty Oilfield Services Inc. to capitalize going forward.

“The emerging cycle is likely to last longer and be characterized by a much slower and more modest rise in active frack,” Liberty CEO Chris Wright said. “It is encouraging to see improving returns moving the last sector that has yet to see them in the oil and gas industry: energy services.”

February 3, 2022

Finance Yahoo


LONDON – Shell again boosted its dividend and share repurchases on Thursday after fourth quarter profits hit their highest in eight years, fuelled by higher oil and gas prices and strong gas trading performance.

Shell ends 2021 on high note, hikes dividend and boosts buybacks- oil and gas 360

Source: Reuters

The strong results cap a dramatic recovery in 2021 for Shell and the oil and gas sector after energy demand and prices collapsed in 2020 in the wake of the COVID-19 pandemic.

Shell shares were up 0.7% by 1448 GMT, compared with a 0.5% decline for the broader European energy index.

Shell, which moved its headquarters from The Hague to London last month, said it expected to lift its dividend by 4% in the first quarter of 2022 to $0.25 per share, which would be the fourth rise since Shell cut its dividend in early 2020 for the first time since the 1940s.

The company also said it would buy back $8.5 billion worth of shares in the first half of 2022, including $5.5 billion from the sale of its Permian shale assets in the United States. That compares with share buybacks totalling $3.5 billion in 2021.

“2021 was a momentous year for Shell,” Chief Executive Ben van Beurden said in a statement.

Shell’s results came on the day British regulators hiked energy prices by 54% in response to higher power prices, prompting calls to levy a tax on oil and gas producers.

Natural gas and electricity prices around the world have soared since the middle of last year on tight gas supplies and higher demand as economies rebounded from the COVID-19 pandemic.

Benchmark European gas prices and Asian LNG prices hit all-time highs in the fourth quarter.

Shell, the largest trader of liquefied natural gas (LNG), said its integrated gas earnings were boosted by “significantly higher” profits from trading.

Trading helped offset an 11% fall in LNG sales and a 7% drop in LNG production in 2021 as a result of plant maintenance and unplanned outages, including at its flagship Prelude floating LNG plant in Australia.

Prelude would stay shut for the first three months of 2022, van Beurden told reporters, adding that Shell would help supply Europe with gas in case of Russian disruptions.

Shell’s profits

https://graphics.reuters.com/SHELL-RESULTS/akpeznoedvr/chart_eikon.jpg

HIGHER SPENDING

U.S. rival Exxon Mobil on Tuesday reported its largest profit in seven years, while Chevron’s profit missed estimates.

BP , TotalEnergies and Equinor report results next week.

Shell officially ditched “Royal Dutch” from its name this month and merged its dually-listed shares after moving its head office from The Hague to London as part of a tax and structure simplification drive, which van Beurden said would help the company plan to grow its low-carbon business.

Fourth-quarter 2021 adjusted earnings rose by 55% from the previous quarter to $6.4 billion, well above an average analyst forecast provided by the company for a $5.2 billion profit. It earned $393 million a year earlier.

For the year, Shell’s adjusted earnings rose to $19.3 billion, compared with $4.85 billion in 2020.

“Net income came in 22% ahead of consensus expectations and net debt fell sharply. On top, Shell announced an $8.5 billion share buyback programme for (the first half), also ahead of market expectations,” Morgan Stanley analyst Martijn Rats said.

The energy company said it planned this year’s spending at the lower end of the $23 billion-$27 billion after spending $20 billion in 2021.

Net debt dropped in the year to $52.55 billion from $75.4 billion at the end of 2020. Shell’s debt-to-capital ratio, or gearing, dropped to 23.1% from 32.2% over the same period.

Shell’s cash generation soared by a third to $45 billion in 2021 as global economic activity recovered from the pandemic.

GRAPHIC – Shell’s annual profits

https://graphics.reuters.com/SHELL-RESULTS/zdvxoaxawpx/chart_eikon.jpg

GRAPHIC – Shell’s dividend

https://graphics.reuters.com/SHELL-RESULTS/lbvgnwlznpq/chart.png

February 2, 2022

World Oil


(Bloomberg) — Exxon Mobil Corp. will accelerate the pace of a $10 billion share buyback after posting the biggest profit in almost eight years amid a broad rally in energy prices.

Exxon to accelerate buybacks after biggest profit since 2014- oil and gas 360

Source: Reuters

Net income adjusted for one-time items was $2.05 a share, 12 cents above the average of analyst estimates compiled by Bloomberg. Exxon paid down $9 billion in debt during the fourth quarter, reducing outstanding obligations to pre-pandemic levels. The shares rose as much as 5.9% to the highest intraday level since April 2019.

One measure of cash flow more than tripled to almost $18 billion during the final three months of 2021 compared with a year earlier as oil and gas prices soared. Exxon and its four supermajor peers probably raked in record free cash flow during 2021, according to analyst forecasts, and with energy prices still rising this year may be even more bountiful.

Chevron Corp. reported record free cash flow late last week. Shell Plc, BP Plc and TotalEnergies SE are scheduled to post fourth-quarter earnings during the next two weeks.

The boost in cash flow will allow Exxon to increase the pace of a $10 billion share buyback previously announced as taking place over two years. Now, the company expects the buybacks to be “faster than that 12-24 month pace,” Chief Financial Officer Kathy Mikells said during a conference call.

Exxon also expects to grow oil production in the Permian basin of West Texas by 25% in 2022 after increasing by the same amount from 2020 to 2021. That dwarfs the 10% increase that rival Chevron announced last week and is the latest sign that U.S. shale is ramping up again after years of restraint.

Exxon’s results come a day after the driller disclosed yet another belt-tightening move, this time involving shuttering its corporate headquarters in suburban Dallas and consolidating those offices near Houston. Exxon shares have risen more than 20% this year, capping an almost 50% advance in 2021 for the best annual performance in at least four decades.

Natural gas sales provided the primary uplift in fourth-quarter results as Exxon and other suppliers reaped hefty returns amid fuel shortages across Europe and parts of Asia. Escalating oil prices also proved a boon to the Western world’s largest crude explorer.

Chief Executive Officer Darren Woods’ decision to reverse course on a pre-pandemic growth plan and hold capital spending at historically low levels means high commodity prices are translating directly into massive cash flow.

While some observers have raised concerns about Exxon’s long-term commitment to fossil fuels, in the near term the company is profitably harvesting older reserves and replacing them with high-margin barrels from new discoveries in places such as Guyana.

In 2021, Exxon garnered ample cash to repair its balance sheet, pay the S&P 500 Index’s third-largest dividend and pledge to restart share buybacks. It’s a remarkable financial turnaround for the oil giant a year after it incurred its first annual loss in at least 40 years during the darkest days of the pandemic.

Exxon is under pressure to do more on climate change, especially after activist investor Engine No. 1’s success last year. Its recently announced ambition to eliminate emissions from its operations by 2050 is one step in that direction but the company will also have to allocate more cash to its low-carbon business over time, especially in areas like carbon capture and biofuels.

February 1, 2022

Yahoo Finance


HOUSTON -Exxon Mobil Corp on Tuesday reported a fourth-quarter profit of $8.87 billion, its largest in seven years, as the top U.S. oil producer benefited from strong energy prices.

Exxon posts biggest profit in seven years on high oil prices- oil and gas 360

Source: Reuters

The company slashed spending after fuel demand cratered two years ago. Since then, earnings have topped pre-pandemic levels, helped by the rise in oil prices, with the global oil benchmark Brent also at a seven-year high.

On Monday, Exxon disclosed a business shakeup to accelerate a $6-billion cut to operating expenses set in motion last year.

The revamping will “position us to lead in cash flow and earnings growth, operating performance, and the energy transition,” Chief Executive Darren Woods said in a statement.

A continuation of high oil prices would “cause us to increase the pace of the share repurchase program,” Chief Financial Officer Kathryn Mikells said. Exxon restarted buybacks last month after a long suspension, with pledge to buy $10 billion by the end of 2023.

Shares in midday trading went up 5% to $80.02, near a three-year high.

OIL EARNINGS JUMP

“ExxonMobil closed a tumultuous year with results that can be described as solid,” Peter McNally, global sector lead at research firm Third Bridge.

Exxon reported an adjusted profit of $2.05 per share, 11 cents above analysts’ forecast as the bottom line benefited from soaring oil and gas prices, higher volumes and asset sales. In the same quarter a year ago, Exxon posted an adjusted profit of 3 cents a share.

Oil and gas production, Exxon’s largest business, posted a $6.1 billion operating profit, the highest in two years. Earnings benefited from an 80% increase in oil prices and doubling of natural gas prices compared to 2020.

It now plans to raise production in the top U.S. shale basin by 25% this year, in addition to a similar increase last year in the Permian, where output reached 460,000 bpd.

Even with a substantial spending increase into the end of the year to $17 billion, Exxon managed to use the extra proceeds from oil prices to reduce debt, said Biraj Borkhataria, Co-Head European Energy Research at RBC Capital Markets.

DEBT REPAID

The company has eliminated the tab taken on during the 2020 downturn to keep paying dividends to shareholders. It has now returned to pre-pandemic debt levels, down $20 billion last year to $47.7 billion.

“We have been cautious on the Exxon investment case through the pandemic,” said Borkhataria. “But we believe the overall sector tailwinds are likely to outweigh company-specific factors in 2022.”

The company had flagged gains from asset sales and a $752 million, or 17 cents a share, hit to upstream results from impairment charges.

Its refining business posted fourth-quarter operating net of $1.4 billion, up sequentially and a big swing from a year ago when results were hurt by pandemic-related demand declines.

Chemical operating earnings were more than twice the profit a year ago when the business was hurt by the pandemic. Exxon said on Monday it would combine its refining and chemicals businesses.


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