Financial and operational highlights for first quarter 2019
- Production of 906 MBoe or 10.1 MBoe/day
-
Net loss was
$16.8 million or$0.18 per diluted share, and adjusted net loss (non-GAAP) was$8.2 million or$0.09 per diluted share -
Generated
$9.8 million of EBITDAX (non-GAAP) - Streamlined senior management structure, significantly decreasing current management compensation expenses
Adjusted net loss and EBITDAX 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.
Management Comment
Company Continues to Explore Deleveraging Alternatives
As of
As part of our review of deleveraging transactions, we are currently
engaged in discussions with
We have also reached an agreement with our credit facility lenders to
forgo enforcement of remedies for an event of default caused by our
failure to comply with certain financial covenants in the credit
facility for a period of 45 days. This agreement will terminate on
As we have previously disclosed, our Board has formed a committee of independent directors (the “Committee”) to evaluate a potential exchange transaction with the Wilks (the “Exchange Transaction”) as well as other financing alternatives and deleveraging transactions, including without limitation (i) amendments or waivers to the covenants or other provisions of our revolving credit facility, (ii) raising new capital in private or public markets and (iii) restructuring our balance sheet either in court or through an out of court agreement with creditors. We are also considering operational matters such as adjusting our capital budget and improving cash flows from operations by continuing to reduce costs, and intend to continue to evaluate other strategic alternatives, including: (i) acquiring assets with existing production and cash flows by issuing preferred and common equity to finance such acquisitions; (ii) selling existing producing or midstream assets; and (iii) merging with a strategic partner.
There can be no assurance that we will be able to implement any of these plans successfully, or that any of these discussions will result in an agreement.
First Quarter 2019 Results
Production for first quarter 2019 totaled 906 Mboe, or 10.1 MBoe/d, made
up of 24% oil, 36% NGLs and 40% natural gas. Average realized commodity
prices for first quarter 2019, before the effect of commodity
derivatives, were
Net loss for first quarter 2019 was
Lease operating expense ("LOE") averaged
Operations and Capital Budget
As we evaluate our deleveraging alternatives, and in light of changes to
company management, we are reevaluating our development plan. This
includes a review of our capital expenditure budget, the rates of return
across our portfolio of assets, the pace of development, drilling and
completion techniques and workovers. We initially set our 2019 capital
expenditure budget at a range of
Liquidity
We have historically defined liquidity as funds available under our
revolving credit facility and cash and cash equivalents. However, due to
our non-compliance with financial covenants under our revolving credit
facility, our current liquidity is limited to our available cash of
Commodity Derivatives
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.
| Contract | |||||||||
| Commodity and Period | Type | Volume Transacted | Contract Price | ||||||
| Crude Oil | |||||||||
| April 2019 – December 2019 | Collar | 500 Bbls/day | $65.00/Bbl - $71.00/Bbl | ||||||
| NGLs (C3 - Propane) | |||||||||
| April 2019 – June 2019 | Swap | 75 Bbls/day | $42.00/Bbl | ||||||
| NGLs (C5 - Pentane) | |||||||||
| April 2019 – December 2019 | Swap | 200 Bbls/day | $65.205/Bbl | ||||||
Conference Call Information and Summary Presentation
The Company will host a conference call on
Those wishing to listen to the conference call, may do so by visiting the Events and Presentations page under the Investor Relations section of the Company’s website, www.approachresources.com, or by phone:
| Conference ID | 7965058 | ||
| Participant Toll-Free Dial-In Number: | (844) 884-9950 | ||
| Participant International Dial-In Number: | (661) 378-9660 |
A replay of the call will be available on the Company’s website or by dialing:
| Replay Toll-Free: | (855) 859-2056 | ||
| Replay International: | (404) 537-3406 | ||
| Conference ID: | 7965058 |
In addition, a first quarter 2019 summary presentation will be available on the Company’s website.
About
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. These assumptions, risks and
uncertainties include, but are not limited to, our ability to execute
plans, the result of such plans if executed, our ability to reach
agreements with our lenders, our ability to comply with the covenants in
our revolving credit facility, our leverage negatively affecting a
redetermination or amendment under our credit facility, oil, NGL and
natural gas prices, our ability to obtain financing to fund our
long-term forecasted capital budget, and our ability to access capital
markets. Should one or more of these risks or uncertainties occur, or
should underlying assumptions prove incorrect, our actual results may
differ materially from those implied or expressed by the forward-looking
statements. Further information on assumptions, risks and uncertainties
related to the Company is available in the Company’s
|
UNAUDITED RESULTS OF OPERATIONS |
||||||||||
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Revenues (in thousands): | ||||||||||
| Oil | $ | 11,356 | $ | 16,343 | ||||||
| NGLs | 5,169 | 7,332 | ||||||||
| Gas | 2,718 | 5,097 | ||||||||
| Total oil, NGLs and gas sales | 19,243 | 28,772 | ||||||||
| Net cash receipt (payment) on derivative settlements | 1,477 | (1,531 | ) | |||||||
|
Total oil, NGLs and gas sales including derivative
impact |
$ | 20,720 | $ | 27,241 | ||||||
| Production: | ||||||||||
| Oil (MBbls) | 220 | 272 | ||||||||
| NGLs (MBbls) | 324 | 352 | ||||||||
| Gas (MMcf) | 2,172 | 2,376 | ||||||||
| Total (MBoe) | 906 | 1,020 | ||||||||
| Total (MBoe/d) | 10.1 | 11.3 | ||||||||
| Average prices: | ||||||||||
| Oil (per Bbl) | $ | 51.64 | $ | 60.04 | ||||||
| NGLs (per Bbl) | 15.95 | 20.84 | ||||||||
| Gas (per Mcf) | 1.25 | 2.15 | ||||||||
| Total (per Boe) | 21.24 | 28.21 | ||||||||
| Net cash receipt (payment) on derivative settlements (per Boe) | 1.63 | (1.50 | ) | |||||||
| Total including derivative impact (per Boe) | $ | 22.87 | $ | 26.71 | ||||||
| Costs and expenses (per Boe): | ||||||||||
| Lease operating | $ | 5.38 | $ | 5.16 | ||||||
| Production and ad valorem taxes | 2.13 | 2.45 | ||||||||
| Exploration | 0.01 | — | ||||||||
| General and administrative (1) | 4.15 | 6.44 | ||||||||
| Depletion, depreciation and amortization | 15.02 | 15.37 | ||||||||
| (1) Below is a summary of general and administrative expense: | ||||||||||
| General and administrative - cash component | $ | 4.58 | $ | 5.63 | ||||||
| General and administrative - noncash component (share-based compensation) | (0.43 | ) | 0.81 | |||||||
| APPROACH RESOURCES INC. AND SUBSIDIARIES | ||||||||||
| UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||
| (In thousands, except shares and per-share amounts) | ||||||||||
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| REVENUES: | ||||||||||
| Oil, NGLs and gas sales | $ | 19,243 | $ | 28,772 | ||||||
| EXPENSES: | ||||||||||
| Lease operating | 4,871 | 5,268 | ||||||||
| Production and ad valorem taxes | 1,935 | 2,500 | ||||||||
| Exploration | 9 | — | ||||||||
| General and administrative (1) | 3,762 | 6,567 | ||||||||
| Restructuring expenses | 6,282 | — | ||||||||
| Depletion, depreciation and amortization | 13,606 | 15,680 | ||||||||
| Impairment | 300 | — | ||||||||
| Gain on sale of assets | (66 | ) | — | |||||||
| Total expenses | 30,699 | 30,015 | ||||||||
| OPERATING LOSS | (11,456 | ) | (1,243 | ) | ||||||
| OTHER: | ||||||||||
| Interest expense, net | (6,773 | ) | (5,886 | ) | ||||||
| Commodity derivative loss | (2,846 | ) | (1,928 | ) | ||||||
| Other income | — | 1 | ||||||||
| LOSS BEFORE INCOME TAX BENEFIT | (21,075 | ) | (9,056 | ) | ||||||
| INCOME TAX BENEFIT | (4,279 | ) | (1,610 | ) | ||||||
| NET LOSS | $ | (16,796 | ) | $ | (7,446 | ) | ||||
| LOSS PER SHARE: | ||||||||||
| Basic | $ | (0.18 | ) | $ | (0.08 | ) | ||||
| Diluted | $ | (0.18 | ) | $ | (0.08 | ) | ||||
| WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||||
| Basic | 94,757,311 | 70,409,303 | ||||||||
| Diluted | 94,757,311 | 70,409,303 | ||||||||
| (1) Includes non-cash share-based compensation expense as follows: | (394 | ) | 828 | |||||||
| Unaudited Consolidated Balance Sheet Data | ||||||||
| (in thousands) | March 31, 2019 | December 31, 2018 | ||||||
| Cash and cash equivalents | $ | 15,721 | $ | 22 | ||||
| Other current assets | 13,009 | 16,203 | ||||||
| Property and equipment, net, successful efforts method | 1,053,808 | 1,068,422 | ||||||
| Other assets | 13,903 | — | ||||||
| Total assets | $ | 1,096,441 | $ | 1,084,647 | ||||
| Current liabilities (1) | $ | 347,464 | $ | 21,077 | ||||
| Long-term debt (2) | 84,562 | 384,993 | ||||||
| Deferred income taxes | 73,542 | 77,821 | ||||||
| Other long-term liabilities | 18,983 | 11,511 | ||||||
| Stockholders' equity | 571,890 | 589,245 | ||||||
| Total liabilities and stockholders' equity | $ | 1,096,441 | $ | 1,084,647 | ||||
|
(1) Current liabilities at March 31, 2019 includes $322 million in outstanding borrowings under our revolving credit facility, net of issuance costs of $0.8 million. |
|
(2) Long-term debt at March 31, 2019, is comprised of $85.2 million in 7% senior notes due 2021 net of issuance costs of $0.7 million. Long-term debt at December 31, 2018, is comprised of $85.2 million in 7% senior notes due 2021 and $301.5 million in outstanding borrowings under our revolving credit facility, net of issuance costs of $0.8 million and $1 million, respectively. |
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) non-cash fair
value loss on derivatives, (2) restructuring expenses, (3) impairment,
(4) tax effect and other discrete tax items. 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
The table below provides a reconciliation of adjusted net loss to net
loss for the three months ended
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Net Loss | $ | (16,796 | ) | $ | (7,446 | ) | ||||
| Adjustments for certain items: | ||||||||||
| Non-cash fair value loss on derivatives | 4,323 | 397 | ||||||||
| Restructuring expenses | 6,282 | — | ||||||||
| Impairment | 300 | — | ||||||||
| Tax effect and other discrete tax items (1) | (2,301 | ) | (13 | ) | ||||||
| Adjusted net loss | $ | (8,192 | ) | $ | (7,062 | ) | ||||
| Adjusted net loss per diluted share | $ | (0.09 | ) | $ | (0.07 | ) | ||||
| (1) The estimated income tax impacts on adjustments to net loss are computed based upon a statutory rate of 21%, for the three months ended March 31, 2019, and March 31, 2018, respectively. Additionally, this includes the tax impact of an excess tax benefit related to share-based compensation of $11,000 and a tax shortfall related to share-based compensation of $0.1 million for the three months ended March 31, 2019, and March 31, 2018, respectively. |
EBITDAX
We define EBITDAX as net loss, plus (1) exploration expense, (2)
depletion, depreciation and amortization expense, (3) share-based
compensation expense, (4) non-cash fair value loss on derivatives, (5)
restructuring expenses, (6) impairment, (7) interest expense, net, and
(8) 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
The table below provides a reconciliation of EBITDAX to net loss for the
three months ended
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2019 | 2018 | |||||||||
| Net Loss | $ | (16,796 | ) | $ | (7,446 | ) | ||||
| Exploration | 9 | — | ||||||||
| Depletion, depreciation and amortization | 13,606 | 15,680 | ||||||||
| Share-based compensation | (394 | ) | 828 | |||||||
| Non-cash fair value loss on derivatives | 4,323 | 397 | ||||||||
| Restructuring expenses | 6,282 | — | ||||||||
| Impairment | 300 | — | ||||||||
| Interest expense, net | 6,773 | 5,886 | ||||||||
| Income tax benefit | (4,279 | ) | (1,610 | ) | ||||||
| EBITDAX | $ | 9,824 | $ | 13,735 | ||||||
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INVESTOR CONTACT
Sergei Krylov
Chief Executive Officer
[email protected]
817.989.9000