FORT WORTH, Texas--(BUSINESS WIRE)--
Approach Resources Inc. (NASDAQ: AREX) today reported results for
first quarter 2016. Highlights for first quarter 2016 include:
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Production was 12.8 MBoe/d, a 10% decrease from the prior-year quarter
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Revenues totaled $17.6 million, EBITDAX (non-GAAP) was $8.7 million
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Adjusted net loss (non-GAAP) was $13.0 million, or $0.32 per diluted
share
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Per-unit cash operating expenses (non-GAAP) decreased 13% from the
prior-year quarter to $10.74 per Boe
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Drilled four horizontal wells during first quarter, and plan to resume
completion activities during second quarter 2016
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Borrowing base set at $325 million following Spring redetermination
Adjusted net loss, EBITDAX and cash operating expenses are non-GAAP
measures. See “Supplemental Non-GAAP Financial and Other Measures” below
for our definitions and reconciliations of adjusted net loss and EBITDAX
to net loss and cash operating expenses to operating expenses.
Management Comment
Ross Craft, Approach’s Chairman and CEO commented, “Commodity prices
continued to weigh heavily on the entire North American oil and gas
sector during the first quarter, as evidenced by numerous recent
bankruptcy and restructuring announcements. However, after falling to
new cycle lows in early 2016, I believe we may have reached an important
turning point in crude oil markets. Further declines in Lower-48
production and ongoing OPEC dysfunction have begun to drive a market
rebalancing. During first quarter 2016 we drilled our first wells since
August 2015 and are now preparing to complete at least two horizontal
Wolfcamp wells in the second quarter. Importantly, our recently
concluded borrowing base redetermination provides us with meaningful
financial flexibility and adequate liquidity to execute on our 2016
plans.”
First Quarter 2016 Results
Production for first quarter 2016 totaled 1,165 MBoe (12.8 MBoe/d), made
up of 31% oil, 31% NGLs and 38% natural gas. Average realized commodity
prices for first quarter 2016, before the effect of commodity
derivatives, were $27.10 per Bbl of oil, $8.90 per Bbl of NGLs and $1.76
per Mcf of natural gas. Our average realized price, including the effect
of commodity derivatives, was $18.12 per Boe for first quarter 2016.
Net loss for first quarter 2016 was $13.7 million, or $0.33 per diluted
share, on revenues of $17.6 million. Net loss for first quarter 2016
also included an unrealized loss on commodity derivatives of $1.0
million and a realized gain on commodity derivatives of $3.5 million.
Excluding the unrealized loss on commodity derivatives, adjusted net
loss (non-GAAP) for first quarter 2016 was $13.0 million, or $0.32 per
diluted share. EBITDAX (non-GAAP) for first quarter 2016 was $8.7
million, or $0.21 per diluted share. See “Supplemental Non-GAAP
Financial and Other Measures” below for our reconciliation of adjusted
net loss and EBITDAX to net loss.
Lease operating expenses averaged $5.45 per Boe. Production and ad
valorem taxes averaged $1.43 per Boe, or 9.4% of oil, NGL and gas sales.
Exploration costs were $0.49 per Boe. Cash general and administrative
costs averaged $3.86 per Boe. Depletion, depreciation and amortization
expense averaged $17.36 per Boe. Interest expense totaled $6.3 million.
Operations Update
During first quarter 2016, we drilled a total of four horizontal wells
but did not complete any horizontal wells. Of these, two wells were
drilled to the Wolfcamp A bench and two wells were drilled to the
Wolfcamp C bench. At March 31, 2016, we had nine horizontal wells
waiting on completion. We plan to complete two wells in second quarter
2016, and expect second quarter production to average around 12.3 MBoe/d.
Capital expenditures incurred during first quarter 2016 totaled $4.9
million and included $4.0 million for drilling activities and $0.9
million for infrastructure projects and equipment.
Liquidity Update
At March 31, 2016, we had a $1 billion revolving credit facility in
place, with a borrowing base and lender commitment amount of $450
million. Our liquidity and long-term debt-to-capital ratio were
approximately $178.5 million and 45.4%, respectively. See “Supplemental
Non-GAAP Financial and Other Measures” below for our definitions and
calculation of liquidity and long-term debt-to-capital.
Following the Spring redetermination in April, our lenders set the
borrowing base and lender commitment amount at $325 million, while
approving a number of amendments to our credit agreement, including a
reduction of the interest coverage covenant and the addition of a $150
million basket to allow for new junior secured debt. Importantly, we
believe this outcome provides the company with adequate near-term
liquidity and significant flexibility to continue working to de-lever
the balance sheet and position ourselves for a return to growth once
prices recover.
Commodity Derivatives Update
We enter into commodity derivatives positions to reduce the risk of
commodity price fluctuations. The table below is a summary of our
current derivatives positions.
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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 2016 – December 2016
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Swap
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750 Bbls/d
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$62.52/Bbl
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April 2016 – June 2016
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Swap
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1,000 Bbls/d
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$40.00/Bbl
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April 2016 – June 2016
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Swap
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500 Bbls/d
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$40.25/Bbl
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April 2016 – September 2016
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Swap
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750 Bbls/d
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$43.00/Bbl
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Natural Gas
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April 2016 – March 2017
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Swap
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400,000 MMBtu/month
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$2.45/MMBtu
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April 2016 – December 2016
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Swap
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200,000 MMBtu/month
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$2.93/MMBtu
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April 2017 – December 2017
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Collar
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200,000 MMBtu/month
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$2.30/MMBtu - $2.60/MMBtu
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Conference Call Information and Summary Presentation
The Company will host a conference call on Thursday, May 5, 2016, at
10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss first
quarter 2016 financial and operational results. Those wishing to listen
to the conference call, may do so by visiting the Events page under the
Investor Relations section of the Company’s website, 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/92942424
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A replay of the call will be available on the Company’s website or
by dialing:
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Dial in:
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(855) 859-2056
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Passcode:
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92942424
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In addition, a first quarter 2016 summary presentation will be 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 natural 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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2016
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2015
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Revenues (in thousands):
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Oil
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$
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9,687
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$
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21,302
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NGLs
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3,224
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5,152
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Gas
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4,704
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6,844
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Total oil, NGL and gas sales
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17,615
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33,298
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Realized gain on commodity derivatives
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3,500
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15,901
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Total oil, NGL and gas sales including derivative impact
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$
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21,115
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$
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49,199
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Production:
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Oil (MBbls)
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357
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493
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NGLs (MBbls)
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362
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370
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Gas (MMcf)
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2,673
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2,539
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Total (MBoe)
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1,165
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1,287
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Total (MBoe/d)
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12.8
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14.3
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Average prices:
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Oil (per Bbl)
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$
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27.10
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$
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43.17
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NGLs (per Bbl)
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8.90
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13.92
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Gas (per Mcf)
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1.76
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2.70
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Total (per Boe)
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15.12
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25.87
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Realized gain on commodity derivatives (per Boe)
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3.00
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12.36
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Total including derivative impact (per Boe)
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$
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18.12
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$
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38.23
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Costs and expenses (per Boe):
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Lease operating
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$
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5.45
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$
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5.55
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Production and ad valorem
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1.43
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2.20
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Exploration
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0.49
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0.85
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General and administrative(1)
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5.19
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6.30
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Depletion, depreciation and amortization
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17.36
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20.61
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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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3.86
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$
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4.58
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General and administrative – noncash component (share-based
compensation)
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$
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1.33
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$
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1.72
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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
March 31,
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2016
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2015
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REVENUES:
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Oil, NGL and gas sales
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$
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17,615
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$
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33,298
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EXPENSES:
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Lease operating
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6,356
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7,146
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Production and ad valorem taxes
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1,664
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2,828
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Exploration
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569
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1,090
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General and administrative
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6,051
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8,102
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Depletion, depreciation and amortization
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20,229
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26,520
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Total expenses
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34,869
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45,686
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OPERATING LOSS
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(17,254
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(12,388
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OTHER:
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Interest expense, net
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(6,298
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(5,922
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Realized gain on commodity derivatives
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3,500
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15,901
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Unrealized loss on commodity derivatives
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(957
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)
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(9,321
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Other income
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104
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26
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LOSS BEFORE INCOME TAX BENEFIT
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(20,905
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)
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(11,704
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INCOME TAX BENEFIT
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(7,245
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)
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(3,996
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)
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NET LOSS
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$
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(13,660
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)
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$
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(7,708
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)
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LOSS PER SHARE:
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Basic
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$
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(0.33
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)
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$
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(0.19
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Diluted
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$
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(0.33
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$
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(0.19
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)
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WEIGHTED AVERAGE SHARES OUTSTANDING:
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Basic
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41,069,071
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40,157,164
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Diluted
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41,069,071
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40,157,164
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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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2016
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2015
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Cash and cash equivalents
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$
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840
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$
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600
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Other current assets
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15,376
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19,838
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Property and equipment, net, successful efforts method
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1,138,868
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1,154,546
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Total assets
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$
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1,155,084
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$
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1,174,984
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Current liabilities
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$
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27,949
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$
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28,508
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Long-term debt (1)
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495,959
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496,587
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Other long-term liabilities
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35,325
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41,922
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Stockholders’ equity
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595,851
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607,967
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Total liabilities and stockholders’ equity
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$
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1,155,084
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$
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1,174,984
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(1)
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Long-term debt at March 31, 2016, is comprised of $230.3 million in
7% senior notes due 2021 and $272 million in outstanding borrowings
under our revolving credit facility, net of issuance costs of $4.3
million and $2.1 million, respectively. Long-term debt at December
31, 2015, is comprised of $230.3 million in 7% senior notes due 2021
and $273 million in outstanding borrowings under our revolving
credit facility, net of issuance costs of $4.5 million and $2.2
million, respectively.
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Supplemental Non-GAAP Financial and Other Measures
This release contains certain financial measures that are non-GAAP
measures. We have provided reconciliations below of the non-GAAP
financial measures to the most directly comparable GAAP financial
measures and on the Non-GAAP Financial Information page in the Investor
Relations section of our website at www.approachresources.com.
Adjusted Net Loss
This release contains the non-GAAP financial measures adjusted net loss
and adjusted net loss per diluted share, which exclude (1) unrealized
loss on commodity derivatives, (2) rig termination fees, and (3) related
income tax effect. The amounts included in the calculation of adjusted
net loss and adjusted net loss per diluted share below were computed in
accordance with GAAP. We believe adjusted net loss and adjusted net loss
per diluted share are useful to investors because they provide readers
with a meaningful measure of our profitability before recording certain
items whose timing or amount cannot be reasonably determined. However,
these measures are provided in addition to, and not as an alternative
for, and should be read in conjunction with, the information contained
in our financial statements prepared in accordance with GAAP (including
the notes), included in our SEC filings and posted on our website.
The table below provides a reconciliation of adjusted net loss to net
loss for the three months ended March 31, 2016 and 2015 (in thousands,
except per-share amounts).
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Three Months Ended
March 31,
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2016
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2015
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Net loss
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$
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(13,660
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$
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(7,708
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)
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Adjustments for certain items:
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Unrealized loss on commodity derivatives
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957
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9,321
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|
|
Rig termination fees
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–
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498
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|
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Related income tax effect
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(335
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)
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|
|
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(3,437
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)
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|
|
Adjusted net loss
|
|
|
|
$
|
(13,038
|
)
|
|
|
$
|
(1,326
|
)
|
|
Adjusted net loss per diluted share
|
|
|
|
$
|
(0.32
|
)
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
EBITDAX
We define EBITDAX as net 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 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 loss 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 to net loss for the
three months ended March 31, 2016 and 2015 (in thousands, except
per-share amounts).
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Net loss
|
|
|
|
$
|
(13,660
|
)
|
|
|
$
|
(7,708
|
)
|
|
Exploration
|
|
|
|
|
569
|
|
|
|
|
1,090
|
|
|
Depletion, depreciation and amortization
|
|
|
|
|
20,229
|
|
|
|
|
26,520
|
|
|
Share-based compensation
|
|
|
|
|
1,550
|
|
|
|
|
2,217
|
|
|
Unrealized loss on commodity derivatives
|
|
|
|
|
957
|
|
|
|
|
9,321
|
|
|
Interest expense, net
|
|
|
|
|
6,298
|
|
|
|
|
5,922
|
|
|
Income tax benefit
|
|
|
|
|
(7,245
|
)
|
|
|
|
(3,996
|
)
|
|
|
|
|
|
|
|
|
|
|
EBITDAX
|
|
|
|
$
|
8,698
|
|
|
|
$
|
33,366
|
|
|
EBITDAX per diluted share
|
|
|
|
$
|
0.21
|
|
|
|
$
|
0.83
|
|
|
|
|
|
|
|
|
|
|
Cash Operating Expenses
We define cash operating expenses as operating expenses, excluding (1)
exploration expense, (2) depletion, depreciation and amortization
expense, and (3) share-based compensation expense. Cash operating
expenses is not a measure of operating expenses as determined by GAAP.
The amounts included in the calculation of cash operating expenses were
computed in accordance with GAAP. Cash operating expenses is presented
herein and reconciled to the GAAP measure of operating expenses. We use
cash operating expenses as an indicator of the Company’s ability to
manage its operating expenses and cash flows. 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 cash operating expenses to
operating expenses for the three months ended March 31, 2016 and 2015
(in thousands, except per-Boe amounts).
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Operating expenses
|
|
|
|
$
|
34,869
|
|
|
|
$
|
45,686
|
|
|
Exploration
|
|
|
|
|
(569
|
)
|
|
|
|
(1,090
|
)
|
|
Depletion, depreciation and amortization
|
|
|
|
|
(20,229
|
)
|
|
|
|
(26,520
|
)
|
|
Share-based compensation
|
|
|
|
|
(1,550
|
)
|
|
|
|
(2,217
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash operating expenses
|
|
|
|
$
|
12,521
|
|
|
|
$
|
15,859
|
|
|
Cash operating expenses per Boe
|
|
|
|
$
|
10.74
|
|
|
|
$
|
12.32
|
|
|
|
|
|
|
|
|
|
|
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, 2016 (in
thousands).
|
|
|
|
|
|
|
|
|
|
|
Liquidity at
March 31, 2016
|
|
Borrowing base
|
|
|
|
$
|
450,000
|
|
|
Cash and cash equivalents
|
|
|
|
|
840
|
|
|
Revolving credit facility – outstanding borrowings
|
|
|
|
|
(272,000
|
)
|
|
Outstanding letters of credit
|
|
|
|
|
(325
|
)
|
|
Liquidity
|
|
|
|
$
|
178,515
|
|
|
|
|
|
|
|
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, 2016, and December 31, 2015 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2016
|
|
|
December 31,
2015
|
|
Long-term debt (1)
|
|
|
|
$
|
495,959
|
|
|
|
$
|
496,587
|
|
|
Total stockholders’ equity
|
|
|
|
|
595,851
|
|
|
|
|
607,967
|
|
|
|
|
|
|
$
|
1,091,810
|
|
|
|
$
|
1,104,554
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt-to-capital
|
|
|
|
|
45.4
|
%
|
|
|
|
45.0
|
%
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Long-term debt is net of debt issuance costs of $6.4 million and
$6.7 million at March 31, 2016 and December 31, 2015, respectively.
|
View source version on businesswire.com: http://www.businesswire.com/news/home/20160504006635/en/
Source: Approach Resources Inc.