FORT WORTH, Texas--(BUSINESS WIRE)--
Approach Resources Inc. (NASDAQ: AREX) today reported results for
first quarter 2014. Highlights for first quarter 2014 include:
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Production was 11.9 MBoe/d, a 42% increase over the prior-year quarter
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Revenues were $61.9 million, a 71% increase over the prior-year quarter
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Net income was $2.9 million, or $0.08 per diluted share
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Adjusted net income was $6.7 million, or $0.17 per diluted share
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EBITDAX was a quarterly record of $42.7 million, or $1.09 per diluted
share, and up 75% over the prior-year quarter
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Borrowing base increased to $450 million effective May 7th
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Company recently drilled 100th horizontal Wolfcamp well
Adjusted net income and EBITDAX are non-GAAP measures. See
“Supplemental Non-GAAP Measures” below for our definitions and
reconciliations of adjusted net income and EBITDAX to net income.
Management Comment
J. Ross Craft
, Approach’s President and Chief Executive Officer,
commented, “Our results this quarter reflect our team’s steadfast focus
on execution. We drilled and completed more horizontal wells this
quarter than any previous quarter, while maintaining best-in-class
horizontal well costs and delivering our fifth consecutive quarter of
record EBITDAX. Notably, over half of our completions this quarter were
stacked wellbores. With strong results from our stacked wellbore
program, we believe that stacked wellbore development is now largely
de-risked and, going forward, will help reduce our surface footprint and
optimize our completion design, well spacing and recoveries.
“In addition, our borrowing base now stands at $450 million,
strengthening our liquidity and putting us in a great position for
future growth. I’m also proud to report that our team drilled the
Company’s 100th horizontal Wolfcamp well in April 2014. This
is an important milestone for our Company as we continue to create value
for our shareholders.”
First Quarter 2014 Results
Production for first quarter 2014 totaled 1,067 MBoe (11.9 MBoe/d),
compared to production of 754 MBoe (8.4 MBoe/d) in first quarter 2013, a
42% increase. Oil production for first quarter 2014 increased 45% to 450
MBbls, compared to 310 MBbls produced in first quarter 2013. Production
for first quarter 2014 was 70% liquids (42% oil and 28% NGLs) and 30%
natural gas.
Net income for first quarter 2014 was $2.9 million, or $0.08 per diluted
share, on revenues of $61.9 million. This compares to a net loss for
first quarter 2013 of $0.3 million, or $0.01 per diluted share, on
revenues of $36.3 million. Net income for first quarter 2014 included an
unrealized loss on commodity derivatives of $5.9 million and a realized
loss on commodity derivatives of $1.3 million.
Excluding the unrealized loss on commodity derivatives and related
income taxes, adjusted net income (non-GAAP) for first quarter 2014 was
$6.7 million, or $0.17 per diluted share, compared to $2.4 million, or
$0.06 per diluted share, for first quarter 2013. EBITDAX (non-GAAP) for
first quarter 2014 was $42.7 million, or $1.09 per diluted share,
compared to $24.4 million, or $0.63 per diluted share, for first quarter
2013. See “Supplemental Non-GAAP Financial and Other Measures” below for
our reconciliation of adjusted net income and EBITDAX to net income.
Our average realized commodity price for first quarter 2014, before the
effect of commodity derivatives, was $58.04 per Boe. Our average
realized price, including the effect of commodity derivatives, was
$56.78 per Boe for first quarter 2014.
Lease operating expense (“LOE”) averaged $7.36 per Boe for first quarter
2014. LOE is generally higher in the winter months, resulting in LOE per
Boe in-line with the prior-year quarter. Sequentially higher LOE was due
to extreme weather-related compressor maintenance and workover expense.
Production and ad valorem taxes averaged $3.91 per Boe, or 6.7% of oil,
NGL and gas sales. Exploration costs were $0.69 per Boe. Cash general
and administrative expense averaged $5.51 per Boe. Depletion,
depreciation and amortization expense averaged $22.12 per Boe. Interest
expense totaled $5.1 million.
Operations Update
During first quarter 2014, we drilled 16 horizontal wells and completed
19 horizontal wells, including one well targeting the Wolfcamp A, 13
wells targeting the Wolfcamp B and five wells targeting the Wolfcamp C.
The average initial 24-hour rate for wells completed during first
quarter 2014 was 743 Boe/d (73% oil), excluding one short-lateral well.
Completion activity during first quarter 2014 included four two-well
pads in Project Pangea targeting Wolfcamp B and Wolfcamp C, and one
two-well pad in Pangea West targeting the Wolfcamp A and Wolfcamp C.
Results from our stacked wellbore program continue to be in-line with
the Company’s expectations, and we believe these results largely de-risk
the Company’s stacked wellbore development outlook. Notable results from
first quarter 2014 include the Baker B 255 HB and the Baker B 259 HC,
stacked B/C completions in central Project Pangea, that produced at an
average initial 24-hour rate of 842 Boe/d (79% oil).
Costs incurred during first quarter 2014 totaled $103.4 million and
included $97.1 million for drilling and completion activities, $6.1
million for infrastructure projects and equipment and $0.2 million for
acreage acquisitions and lease extensions.
Liquidity Update
At March 31, 2014, we had a $500 million revolving credit facility with
a $350 million borrowing base and no outstanding borrowings. At March
31, 2014, our liquidity and long-term debt-to-capital ratio were
approximately $354 million and 25.9%, respectively.
In May 2014, we entered into a new, $1 billion revolving credit facility
with a $450 million borrowing base. Pro forma for the borrowing base
increase, our liquidity was $454 million at March 31, 2014.
We enter into commodity derivatives positions to manage our exposure to
commodity price fluctuations. Please refer to the “Unaudited Commodity
Derivatives Information” table below for a detailed summary of the
Company’s derivatives positions at March 31, 2014.
Conference Call Information and Summary Presentation
The Company will host a conference call on Friday, May 9, 2014, at 10:00
a.m. Central Time (11:00 a.m. Eastern Time) to discuss financial and
operational results for first quarter 2014. The conference call may be
accessed via the Company’s website at www.approachresources.com
or by phone:
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Dial in:
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(877) 201-0168
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Intl. dial in:
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(647) 788-4901
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Passcode:
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Approach / 29361649
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A replay of the call will be available on the Company’s website or by
dialing (855) 859-2056 (passcode: 29361649).
In addition, a first quarter 2014 summary presentation is available on
the Company’s website.
About Approach Resources
Approach Resources Inc. is an independent energy company focused
on the exploration, development, production and acquisition of
unconventional oil and gas reserves in the Midland Basin of the greater
Permian Basin in West Texas. For more information about the Company,
please visit www.approachresources.com.
Please note that the Company routinely posts important information about
the Company under the Investor Relations section of its website.
This press release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of
the Securities Exchange Act of 1934. All statements, other than
statements of historical facts, included in this press release that
address activities, events or developments that the Company expects,
believes or anticipates will or may occur in the future are
forward-looking statements. Without limiting the generality of the
foregoing, forward-looking statements contained in this press release
specifically include expectations of anticipated financial and operating
results. These statements are based on certain assumptions made
by the Company based on management’s experience, perception of
historical trends and technical analyses, current conditions,
anticipated future developments and other factors believed to be
appropriate and reasonable by management. When used in this press
release, the words “will,” “potential,” “believe,” “estimate,” “intend,”
“expect,” “may,” “should,” “anticipate,” “could,” “plan,” “predict,”
“project,” “profile,” “model” or their negatives, other similar
expressions or the statements that include those words, are intended to
identify forward-looking statements, although not all forward-looking
statements contain such identifying words. Such statements are subject
to a number of assumptions, risks and uncertainties, many of which are
beyond the control of the Company, which may cause actual results to
differ materially from those implied or expressed by the forward-looking
statements. Further information on such assumptions, risks and
uncertainties is available in the Company’s Securities and Exchange
Commission (“SEC”) filings. The Company’s SEC filings are
available on the Company’s website at www.approachresources.com.
Any forward-looking statement speaks only as of the date on which
such statement is made and the Company undertakes no obligation to
correct or update any forward-looking statement, whether as a result of
new information, future events or otherwise, except as required by
applicable law.
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UNAUDITED RESULTS OF OPERATIONS
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Three Months Ended
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March 31,
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2014
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2013
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Revenues (in thousands):
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Oil
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$
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41,745
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$
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25,462
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NGLs
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10,298
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6,237
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Gas
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9,884
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4,570
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Total oil, NGL and gas sales
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61,927
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36,269
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Realized (loss) gain on commodity derivatives
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(1,339
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)
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307
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Total oil, NGL and gas sales including derivative impact
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$
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60,588
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$
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36,576
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Production:
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Oil (MBbls)
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450
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310
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NGLs (MBbls)
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295
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214
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Gas (MMcf)
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1,934
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1,378
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Total (MBoe)
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1,067
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754
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Total (MBoe/d)
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11.9
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8.4
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Average prices:
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Oil (per Bbl)
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$
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92.77
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$
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82.01
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NGLs (per Bbl)
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34.94
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29.17
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Gas (per Mcf)
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5.11
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3.32
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Total (per Boe)
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58.04
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48.10
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Realized (loss) gain on commodity derivatives (per Boe)
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(1.26
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)
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0.41
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Total including derivative impact (per Boe)
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$
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56.78
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$
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48.51
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Costs and expenses (per Boe):
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Lease operating
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$
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7.36
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$
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7.14
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Production and ad valorem
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3.91
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3.39
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Exploration
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0.69
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0.34
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General and administrative(1)
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8.00
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8.50
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Depletion, depreciation and amortization
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22.12
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22.62
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(1) Below is a summary of general and administrative expense:
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General and administrative – cash component
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$
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5.51
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$
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5.51
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General and administrative – noncash component
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$
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2.49
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$
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2.99
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APPROACH RESOURCES INC. AND SUBSIDIARIES
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UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
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(In thousands, except shares and per-share amounts)
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Three Months Ended
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March 31,
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2014
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2013
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REVENUES:
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Oil, NGL and gas sales
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$
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61,927
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$
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36,269
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EXPENSES:
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Lease operating
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7,851
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5,383
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Production and ad valorem taxes
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4,169
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2,556
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Exploration
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738
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260
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General and administrative
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8,535
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6,410
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Depletion, depreciation and amortization
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23,606
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17,056
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Total expenses
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44,899
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31,665
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OPERATING INCOME
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17,028
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4,604
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OTHER:
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Interest expense, net
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(5,137
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(1,229
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Equity in losses of investee
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—
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(116
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Realized (loss) gain on commodity derivatives
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(1,339
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)
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307
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Unrealized loss on commodity derivatives
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(5,926
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(4,100
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INCOME (LOSS) BEFORE INCOME TAX PROVISION (BENEFIT)
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4,626
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(534
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INCOME TAX PROVISION (BENEFIT)
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1,681
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(187
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)
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NET INCOME (LOSS)
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$
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2,945
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$
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(347
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EARNINGS (LOSS) PER SHARE:
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Basic
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$
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0.08
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$
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(0.01
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Diluted
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$
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0.08
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$
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(0.01
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WEIGHTED AVERAGE SHARES OUTSTANDING:
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Basic
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39,243,296
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38,924,163
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Diluted
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39,259,480
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38,924,163
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UNAUDITED SELECTED FINANCIAL DATA
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Unaudited Consolidated Balance Sheet Data
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March 31,
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December 31,
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(in thousands)
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2014
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2013
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Cash and cash equivalents
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$
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4,341
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$
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58,761
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Restricted cash
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7,350
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7,350
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Other current assets
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28,066
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24,302
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Property and equipment, net, successful efforts method
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1,126,314
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1,047,030
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Other assets
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11,821
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8,041
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Total assets
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$
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1,177,892
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$
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1,145,484
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Current liabilities
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$
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103,334
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$
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84,441
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Long-term debt(1)
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250,000
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250,000
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Other long-term liabilities
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108,698
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100,548
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Stockholders’ equity
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715,860
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710,495
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Total liabilities and stockholders’ equity
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$
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1,177,892
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$
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1,145,484
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(1) Long-term debt at March 31, 2014, and December 31, 2013, is
comprised of $250 million in 7% senior notes.
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Unaudited Consolidated Cash Flow Data
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Three Months Ended March 31,
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(in thousands)
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2014
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2013
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Net cash provided (used) by:
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Operating activities
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$
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48,993
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$
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29,638
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Investing activities
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$
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(103,413
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)
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$
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(75,986
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Financing activities
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$
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—
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$
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46,175
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UNAUDITED COMMODITY DERIVATIVES INFORMATION
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Commodity and Period
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Contract Type
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Volume Transacted
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Contract Price
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Crude Oil
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April 2014 – December 2014
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Collar
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550 Bbls/d
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$90.00/Bbl - $105.50/Bbl
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April 2014 – December 2014
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Collar
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950 Bbls/d
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$85.05/Bbl - $95.05/Bbl
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April 2014 – December 2014
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Collar
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2,000 Bbls/d
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$89.00/Bbl - $98.85/Bbl
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April 2014 – March 2015
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Collar
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1,500 Bbls/d
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$85.00/Bbl - $95.30/Bbl
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January 2015 – December 2015
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Collar
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2,600 Bbls/d
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$84.00/Bbl - $91.00/Bbl
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Natural Gas Liquids
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Propane
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April 2014 – December 2014
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Swap
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500 Bbls/d
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$41.16/Bbl
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Natural Gasoline
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April 2014 – December 2014
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Swap
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175 Bbls/d
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$83.37/Bbl
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Natural Gas
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April 2014 – December 2014
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Swap
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360,000 MMBtu/month
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$4.18/MMBtu
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April 2014 – December 2014
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Swap
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35,000 MMBtu/month
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$4.29/MMBtu
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April 2014 – December 2014
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Swap
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160,000 MMBtu/month
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$4.40/MMBtu
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September 2014 – June 2015
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Collar
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80,000 MMBtu/month
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$4.00/MMBtu - $4.74/MMBtu
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January 2015 – December 2015
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Swap
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200,000 MMBtu/month
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$4.10/MMBtu
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January 2015 – December 2015
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Collar
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130,000 MMBtu/month
|
|
|
$4.00/MMBtu - $4.25/MMBtu
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Non-GAAP Financial and Other Measures
This release contains certain financial measures that are non-GAAP
measures. We have provided reconciliations below of the non-GAAP
financial measures to the most directly comparable GAAP financial
measures and on the Non-GAAP Financials page in the Investor Relations
section of our website at www.approachresources.com.
Adjusted Net Income
This release contains the non-GAAP financial measures adjusted net
income and adjusted net income per diluted share, which excludes an
unrealized loss on commodity derivatives and related income tax effect.
The amounts included in the calculation of adjusted net income and
adjusted net income per diluted share below were computed in accordance
with GAAP. We believe adjusted net income and adjusted net income per
diluted share are useful to investors because they provide readers with
a more meaningful measure of our profitability before recording certain
items whose timing or amount cannot be reasonably determined. However,
these measures are provided in addition to, and not as an alternative
for, and should be read in conjunction with, the information contained
in our financial statements prepared in accordance with GAAP (including
the notes), included in our SEC filings and posted on our website.
The table below provides a reconciliation of adjusted net income and
adjusted net income per diluted share to net income (loss) for the three
months ended March 31, 2014 and 2013 (in thousands, except per-share
amounts).
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
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|
|
|
|
2014
|
|
|
2013
|
|
Net income (loss)
|
|
|
$
|
2,945
|
|
|
|
$
|
(347
|
)
|
|
Adjustments for certain items:
|
|
|
|
|
|
|
|
Unrealized loss on commodity derivatives
|
|
|
|
5,926
|
|
|
|
|
4,100
|
|
|
Related income tax effect
|
|
|
|
(2,154
|
)
|
|
|
|
(1,394
|
)
|
|
|
|
|
|
|
|
|
|
Adjusted net income
|
|
|
$
|
6,717
|
|
|
|
$
|
2,359
|
|
|
Adjusted net income per diluted share
|
|
|
$
|
0.17
|
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAX
We define EBITDAX as net income (loss), plus (1) exploration expense,
(2) depletion, depreciation and amortization expense, (3) share-based
compensation expense, (4) unrealized loss on commodity derivatives, (5)
interest expense, net, and (6) income tax provision (benefit). EBITDAX
is not a measure of net income or cash flow as determined by GAAP. The
amounts included in the calculation of EBITDAX were computed in
accordance with GAAP. EBITDAX is presented herein and reconciled to the
GAAP measure of net income because of its wide acceptance by the
investment community as a financial indicator of a company's ability to
internally fund development and exploration activities. This measure is
provided in addition to, and not as an alternative for, and should be
read in conjunction with, the information contained in our financial
statements prepared in accordance with GAAP (including the notes),
included in our SEC filings and posted on our website.
The table below provides a reconciliation of EBITDAX and EBITDAX per
diluted share to net income (loss) for the three months ended March 31,
2014 and 2013 (in thousands, except per-share amounts).
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
|
|
2014
|
|
|
2013
|
|
Net income (loss)
|
|
|
$
|
2,945
|
|
|
$
|
(347
|
)
|
|
Exploration
|
|
|
|
738
|
|
|
|
260
|
|
|
Depletion, depreciation and amortization
|
|
|
|
23,606
|
|
|
|
17,056
|
|
|
Share-based compensation
|
|
|
|
2,654
|
|
|
|
2,257
|
|
|
Unrealized loss on commodity derivatives
|
|
|
|
5,926
|
|
|
|
4,100
|
|
|
Interest expense, net
|
|
|
|
5,137
|
|
|
|
1,229
|
|
|
Income tax provision (benefit)
|
|
|
|
1,681
|
|
|
|
(187
|
)
|
|
|
|
|
|
|
|
|
|
EBITDAX
|
|
|
$
|
42,687
|
|
|
$
|
24,368
|
|
|
EBITDAX per diluted share
|
|
|
$
|
1.09
|
|
|
$
|
0.63
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
Liquidity is calculated by adding the net funds available under our
revolving credit facility and cash and cash equivalents. We use
liquidity as an indicator of the Company’s ability to fund development
and exploration activities. However, this measurement has limitations.
This measurement can vary from year-to-year for the Company and can vary
among companies based on what is or is not included in the measurement
on a company’s financial statements. This measurement is provided in
addition to, and not as an alternative for, and should be read in
conjunction with, the information contained in our financial statements
prepared in accordance with GAAP (including the notes), included in our
SEC filings and posted on our website.
The table below summarizes our liquidity at March 31, 2014, and our
liquidity at March 31, 2014, on a pro forma basis to give effect to our
May 2014 borrowing base increase (in thousands).
|
|
|
|
Liquidity at
March 31, 2014
|
|
|
Liquidity Pro Forma for
Borrowing Base
Increase
at
March 31, 2014
|
|
Borrowing base
|
|
|
$
|
350,000
|
|
|
|
$
|
450,000
|
|
|
Cash and cash equivalents
|
|
|
|
4,341
|
|
|
|
|
4,341
|
|
|
Outstanding letters of credit
|
|
|
|
(325
|
)
|
|
|
|
(325
|
)
|
|
Credit facility
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Liquidity
|
|
|
$
|
354,016
|
|
|
|
$
|
454,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt-to-Capital
Long-term debt-to-capital ratio is calculated by dividing long-term debt
(GAAP) by the sum of total stockholders’ equity (GAAP) and long-term
debt (GAAP). We use the long-term debt-to-capital ratio as a measurement
of our overall financial leverage. However, this ratio has limitations.
This ratio can vary from year-to-year for the Company and can vary among
companies based on what is or is not included in the ratio on a
company’s financial statements. This ratio is provided in addition to,
and not as an alternative for, and should be read in conjunction with,
the information contained in our financial statements prepared in
accordance with GAAP (including the notes), included in our SEC filings
and posted on our website.
The table below summarizes our long-term debt-to-capital ratio at March
31, 2014, and December 31, 2013 (in thousands).
|
|
|
|
March 31, 2014
|
|
|
December 31, 2013
|
|
Long-term debt(1)
|
|
|
$
|
250,000
|
|
|
|
$
|
250,000
|
|
|
Total stockholders’ equity
|
|
|
|
715,860
|
|
|
|
|
710,495
|
|
|
|
|
|
$
|
965,860
|
|
|
|
$
|
960,495
|
|
|
|
|
|
|
|
|
|
|
Long-term debt-to-capital
|
|
|
|
25.9
|
%
|
|
|
|
26.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Long-term debt at March 31, 2014, and December 31, 2013, is
comprised of $250 million in 7% senior notes.
Source: Approach Resources Inc.