Fourth Quarter 2018 Highlights
- Fourth quarter production of 963 MBoe or 10.5 MBoe/d
-
Net income was
$0.9 million , or$0.01 per diluted share. Adjusted net loss (non-GAAP) was$6.9 million , or$0.07 per diluted share -
EBITDAX (non-GAAP) of
$13.5 million -
Cash operating expenses (non-GAAP) of
$8.85 per Boe, a 28% decrease over the prior quarter
Full-Year 2018 Highlights
- Full year production of 4,082 MBoe or 11.2 MBoe/d
- Year-end 2018 proved reserves 180.1 MMBoe, an increase in oil reserves of 5% over the prior year
- Drilled six and completed nine horizontal Wolfcamp wells during the year with an inventory of seven drilled and uncompleted wells at year-end
-
Net loss was
$19.9 million , or$0.21 per diluted share. Adjusted net loss (non-GAAP) was$25 million , or$0.26 per diluted share -
EBITDAX (non-GAAP) of
$59 million , a 7% increase over the prior year -
Revenue of
$114 million , an 8% increase over the prior year -
Unhedged cash margin (non-GAAP) of
$16.19 per Boe, a 16% increase over the prior year
Adjusted net loss, EBITDAX, cash operating expenses and unhedged cash margin 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 income (loss) and unhedged cash margin to revenues.
Management Comment
Company Continues to Explore Deleveraging Alternatives
In order to improve our leverage position to meet upcoming financial
covenants under the revolving credit facility, we have been, and
currently are, pursuing or considering a number of deleveraging and
strategic actions, which in certain cases may require the consent of
current lenders, stockholders or bond holders. If we do not accomplish
one or more of the deleveraging transactions discussed below, we do not
believe we will be able to comply with the total leverage ratio covenant
in our revolving credit facility beginning with the measurement date of
On
In addition, management has reviewed numerous cash flow producing properties for potential acquisition over the last several years in order to grow our production base and reduce our leverage ratio to a sustainable level and one that is in compliance with our financial covenants. In early 2018, we retained a financial advisor, separate from the Committee’s advisor, and began discussions with a potential seller and multiple financing counterparties for the purchase of a set of substantial cash flow producing properties. Despite a deteriorating commodity price market, discussions with both the seller and financing parties progressed throughout 2018. However, no definitive agreements ultimately were executed, and the negotiations currently are not active.
In
If an event of default under our credit facility occurred, our lenders could accelerate the maturity of the outstanding indebtedness, making it immediately due and payable, and we would not have sufficient liquidity to repay those amounts. However, we believe we have adequate liquidity for current, near-term working capital needs from cash generated from operations and, to the extent available, unused borrowing capacity under our revolving credit facility, each assuming (i) no reduction in our borrowing base from our semi-annual borrowing base redetermination and (ii) no acceleration of amounts due under our revolving credit facility.
Fourth Quarter 2018 Results
Production for fourth quarter 2018 totaled 963 MBoe (10.5 MBoe/d), made
up of 26% oil, 35% NGLs and 39% natural gas. Average realized commodity
prices for fourth quarter 2018, before the effect of commodity
derivatives, were
Net income for fourth quarter 2018 was
Lease operating expense (“LOE”) averaged
Full-Year 2018 Results
Production for 2018 was 4,082 MBoe (11.2 MBoe/d), made up of 26% oil,
36% NGLs and 38% natural gas. Average realized commodity prices for
2018, before the effect of commodity derivatives, were
Net loss for 2018 was
LOE averaged
Operations Update
In light of continued commodity price deterioration and the extreme WAHA
gas discount in the basin, we deferred third and fourth quarter 2018
drilling and completion activities, and incurred capital expenditures of
In 2018, we focused on executing a disciplined capital budget and
managing natural production decline through surface facility
optimization, operating efficiencies and investment in well repairs,
workovers and maintenance. During 2018, we drilled six and completed
nine horizontal Wolfcamp wells. Of these, three wells were completed in
the A bench, three wells were completed in the B bench and three wells
were completed in the C bench. At
Our extensive infrastructure network of centralized production
facilities, water transportation, handling and recycling system, gas
lift lines and salt water disposal wells continues to provide
sustainable competitive advantages and environmentally responsible
facility operations. In 2018, we maintained an industry leading average
drilling and completion cost of
Fourth Quarter and Full-Year 2018 Production
Fourth quarter 2018 production totaled 963 MBoe (10.5 MBoe/d). Full-year 2018 production totaled 4,082 MBoe (11.2 MBoe/d).
| Three and 12 Months Ended | ||||||
| December 31, 2018 | ||||||
| Three months | 12 months | |||||
| Production: | ||||||
| Oil (MBbls) | 251 | 1,070 | ||||
| NGLs (MBbls) | 338 | 1,443 | ||||
| Gas (MMcf) | 2,240 | 9,408 | ||||
| Total (MBoe) | 963 | 4,082 | ||||
| Total (Mboe/d) | 10.5 | 11.2 | ||||
2018 Estimated Proved Reserves and Costs Incurred
Year-end 2018 proved reserves totaled 180.1 MMBoe. Year-end 2018 proved reserves were 29% oil, 31% NGLs and 40% natural gas. Proved developed reserves represent approximately 37% of total year-end 2018 proved reserves.
At
Extensions and discoveries for 2018 were 35 MMBoe, primarily
attributable to our development project in the Wolfcamp shale oil
resource play in the
The following table summarizes the changes in our estimated proved reserves during 2018.
| Oil | NGLs | Natural Gas | Total | |||||||||||||
| (MBbls) | (MBbls) | (MMcf) | (MBoe) | |||||||||||||
| Balance — December 31, 2017 | 50,060 | 57,948 | 441,228 | 181,545 | ||||||||||||
| Extensions and discoveries | 14,572 | 8,819 | 69,362 | 34,951 | ||||||||||||
| Production(1) | (1,070 | ) | (1,443 | ) | (10,793 | ) | (4,312 | ) | ||||||||
| Revisions to previous estimates | (11,104 | ) | (8,788 | ) | (73,359 | ) | (32,117 | ) | ||||||||
| Balance — December 31, 2018 | 52,458 | 56,536 | 426,438 | 180,067 | ||||||||||||
(1) Production includes 1,385 MMcf related to field fuel.
Our preliminary, unaudited estimate of the standardized after-tax
measure of discounted future net cash flows (“standardized measure”) of
our proved reserves at
The independent engineering firm DeGolyer and MacNaughton prepared our
estimates of year-end 2018 proved reserves and PV-10 at
Capital Expenditures
Fourth quarter capital expenditures were
Liquidity Update
At
Commodity Derivatives Update
We enter into commodity derivatives positions to reduce the risk of commodity price fluctuations. At present, approximately 19% of 2019 forecasted oil and 19% of NGL production is hedged. The table below is a summary of our current derivatives positions.
| Contract | |||||||||
| Commodity and Period | Type | Volume Transacted | Contract Price | ||||||
| Crude Oil | |||||||||
| January 2019 — December 2019 | Collar | 500 Bbls/day | $65.00/Bbl - $71.00/Bbl | ||||||
| NGLs (C2 - Ethane) | |||||||||
| January 2019 — March 2019 | Swap | 900 Bbls/day | $14.123/Bbl | ||||||
| NGLs (C3 - Propane) | |||||||||
| January 2019 — March 2019 | Swap | 600 Bbls/day | $35.165/Bbl | ||||||
| January 2019 — June 2019 | Swap | 75 Bbls/day | $42.00/Bbl | ||||||
| NGLs (NC4 - Butane) | |||||||||
| January 2019 — March 2019 | Swap | 200 Bbls/day | $38.63/Bbl | ||||||
| NGLs (C5 - Pentane) | |||||||||
| January 2019 — December 2019 | Swap | 100 Bbls/day | $65.10/Bbl | ||||||
| January 2019 — December 2019 | Swap | 100 Bbls/day | $65.31/Bbl | ||||||
Guidance
The Company’s capital budget for 2019 is a range of
| 2019 Guidance | |||
| Capital Expenditures (in millions) | $30 | ||
| Production: | |||
| Oil (MBbls) | 925 − 975 | ||
| NGLs (MBbls) | 1,250 − 1,350 | ||
| Gas (MMcf) | 8,650 − 8,750 | ||
| Total (MBoe) | 3,600 − 3,800 | ||
| Cash operating costs (per Boe): | |||
| Lease operating | $5.00 − 6.00 | ||
| Production and ad valorem taxes | 8.5% of oil and gas revenues | ||
| Cash general and administrative | $4.50 − 5.50 | ||
| Non-cash operating costs (per Boe): | |||
| Non-cash general and administrative | $0.75 − 1.25 | ||
| Exploration | $0.25 − 0.75 | ||
| Depletion, depreciation and amortization | $15.00 − 17.00 | ||
As further discussed below under “Forward-Looking and Cautionary Statements,” our guidance is forward-looking information that is subject to a number of risks and uncertainties, many of which are beyond our control. In addition, our 2019 capital budget excludes acquisitions and lease extensions and renewals and is subject to change depending upon a number of factors, including prevailing and anticipated prices for oil, NGLs and natural gas, results of horizontal drilling and completions, economic and industry conditions at the time of drilling, the availability of sufficient capital resources for drilling prospects, our financial results and the availability of lease extensions and renewals on reasonable terms.
Conference Call Information and Summary Presentation
The Company will host a conference call on
| Dial in: | (844) 884-9950 / Conference ID: 6089010 | ||
| International Dial In: | (661) 378-9660 | ||
| A replay of the call will be available on the Company’s website or by dialing: | |||
| Dial in: | (855) 859-2056 / Passcode: 6089010 | ||
In addition, a fourth quarter and full-year 2018 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 comply
with the covenants in our revolving credit facility, our leverage
negatively affecting a redetermination 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 to
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 | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| Revenues (in thousands): | ||||||||||||||||||||
| Oil | $ | 13,874 | $ | 14,082 | $ | 66,398 | $ | 52,748 | ||||||||||||
| NGLs | 6,730 | 8,530 | 14,033 | 27,702 | ||||||||||||||||
| Gas | 1,771 | 5,805 | 33,604 | 24,899 | ||||||||||||||||
| Total oil, NGLs and gas sales | 22,375 | 28,417 | 114,035 | 105,349 | ||||||||||||||||
| Net cash payment on derivative settlements | (364 | ) | (2,878 | ) | (7,050 | ) | (4,359 | ) | ||||||||||||
|
Total oil, NGLs and gas sales including derivative impact
|
$ | 22,011 | $ | 25,539 | $ | 106,985 | $ | 100,990 | ||||||||||||
| Production: | ||||||||||||||||||||
| Oil (MBbls) | 251 | 270 | 1,070 | 1,107 | ||||||||||||||||
| NGLs (MBbls) | 338 | 377 | 1,443 | 1,486 | ||||||||||||||||
| Gas (MMcf) | 2,240 | 2,498 | 9,408 | 9,829 | ||||||||||||||||
| Total (MBoe) | 963 | 1,064 | 4,082 | 4,232 | ||||||||||||||||
| Total (MBoe/d) | 10.5 | 11.6 | 11.2 | 11.6 | ||||||||||||||||
| Average prices: | ||||||||||||||||||||
| Oil (per Bbl) | $ | 55.23 | $ | 52.09 | $ | 62.04 | $ | 47.63 | ||||||||||||
| NGLs (per Bbl) | 19.91 | 22.61 | 23.28 | 18.64 | ||||||||||||||||
| Gas (per Mcf) | 0.79 | 2.32 | 1.49 | 2.53 | ||||||||||||||||
| Total (per Boe) | $ | 23.24 | $ | 26.71 | $ | 27.94 | $ | 24.89 | ||||||||||||
| Net cash payment on derivative settlements (per Boe) | (0.38 | ) | (2.70 | ) | (1.73 | ) | (1.03 | ) | ||||||||||||
| Total including derivative impact (per Boe) | $ | 22.86 | $ | 24.01 | $ | 26.21 | $ | 23.86 | ||||||||||||
| Costs and expenses (per Boe): | ||||||||||||||||||||
| Lease operating | $ | 5.21 | $ | 4.77 | $ | 5.18 | $ | 4.23 | ||||||||||||
| Production and ad valorem taxes | 1.80 | 2.09 | 2.19 | 2.04 | ||||||||||||||||
| Exploration | 0.43 | 0.38 | 0.10 | 0.86 | ||||||||||||||||
| General and administrative (1) | 2.80 | 5.16 | 5.13 | 5.75 | ||||||||||||||||
| Depletion, depreciation and amortization | 14.96 | 15.20 | 15.05 | 16.66 | ||||||||||||||||
| (1) Below is a summary of general and administrative expense: | ||||||||||||||||||||
| General and administrative - cash component | $ | 1.84 | $ | 4.09 | $ | 4.38 | $ | 4.65 | ||||||||||||
| General and administrative - noncash component (share-based compensation) | 0.96 | 1.07 | 0.75 | 1.10 | ||||||||||||||||
| APPROACH RESOURCES INC. AND SUBSIDIARIES | ||||||||||||||||||||
| UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| (In thousands, except shares and per-share amounts) | ||||||||||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| REVENUES: | ||||||||||||||||||||
| Oil, NGLs and gas sales | $ | 22,375 | $ | 28,417 | $ | 114,035 | $ | 105,349 | ||||||||||||
| EXPENSES: | ||||||||||||||||||||
| Lease operating | 5,013 | 5,076 | 21,129 | 17,902 | ||||||||||||||||
| Production and ad valorem taxes | 1,734 | 2,219 | 8,923 | 8,644 | ||||||||||||||||
| Exploration | 411 | 406 | 420 | 3,657 | ||||||||||||||||
| General and administrative | 2,693 | 5,491 | 20,922 | 24,333 | ||||||||||||||||
| Depletion, depreciation and amortization | 14,403 | 16,173 | 61,432 | 70,521 | ||||||||||||||||
| Total expenses | 24,254 | 29,365 | 112,826 | 125,057 | ||||||||||||||||
| OPERATING (LOSS) INCOME | (1,879 | ) | (948 | ) | 1,209 | (19,708 | ) | |||||||||||||
| OTHER: | ||||||||||||||||||||
| Interest expense, net | (6,595 | ) | (5,370 | ) | (25,117 | ) | (21,053 | ) | ||||||||||||
| Gain on debt extinguishment | — | — | — | 5,053 | ||||||||||||||||
| Commodity derivative gain (loss) | 9,747 | (1,377 | ) | (321 | ) | (262 | ) | |||||||||||||
| Other income (expense) | 1 | — | (29 | ) | 32 | |||||||||||||||
|
INCOME (LOSS) BEFORE INCOME TAX (BENEFIT) PROVISION |
1,274 | (7,695 | ) | (24,258 | ) | (35,938 | ) | |||||||||||||
| INCOME TAX (BENEFIT) PROVISION: | ||||||||||||||||||||
| Current | (66 | ) | — | (66 | ) | (66 | ) | |||||||||||||
| Deferred | 472 | (53,512 | ) | (4,281 | ) | 76,487 | ||||||||||||||
| NET INCOME (LOSS) | $ | 868 | $ | 45,817 | $ | (19,911 | ) | $ | (112,359 | ) | ||||||||||
| EARNINGS (LOSS) PER SHARE: | ||||||||||||||||||||
| Basic | $ | 0.01 | $ | 0.51 | $ | (0.21 | ) | $ | (1.35 | ) | ||||||||||
| Diluted | $ | 0.01 | $ | 0.51 | $ | (0.21 | ) | $ | (1.35 | ) | ||||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||||||||||||||
| Basic | 94,739,926 | 90,114,659 | 94,581,294 | 83,404,104 | ||||||||||||||||
| Diluted | 94,736,926 | 90,114,659 | 94,581,294 | 83,404,104 | ||||||||||||||||
|
UNAUDITED SELECTED FINANCIAL DATA |
||||||||
|
Unaudited Consolidated Balance Sheet Data |
December 31, | |||||||
| (in thousands) | 2018 | 2017 | ||||||
| Cash and cash equivalents | $ | 22 | $ | 21 | ||||
| Other current assets | 16,203 | 16,679 | ||||||
| Property and equipment, net, successful efforts method | 1,068,422 | 1,082,876 | ||||||
| Total assets | $ | 1,084,647 | $ | 1,099,576 | ||||
| Current liabilities | $ | 21,077 | $ | 25,067 | ||||
| Long-term debt (1) | 384,993 | 373,460 | ||||||
| Deferred income taxes | 77,821 | 82,102 | ||||||
| Other long-term liabilities | 11,511 | 11,531 | ||||||
| Stockholders' equity | 589,245 | 607,416 | ||||||
| Total liabilities and stockholders' equity | $ | 1,084,647 | $ | 1,099,576 | ||||
(1) Long-term debt at
|
Unaudited Consolidated Cash Flow Data |
Year Ended December 31, | |||||||||
| (in thousands) | 2018 | 2017 | ||||||||
| Net cash provided by (used in): | ||||||||||
| Operating activities | $ | 34,744 | $ | 37,454 | ||||||
| Investing activities | (42,764 | ) | (52,409 | ) | ||||||
| Financing activities | 8,021 | 14,955 | ||||||||
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 under the Financial Reporting subsection of 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 excludes (1) non-cash
fair value gain commodity derivatives, (2) gain on debt extinguishment,
(3) write-off of deferred tax assets, (4) acquisition related costs, (5)
tax benefit related to federal tax law change, and (6) related income
tax effect on adjustments 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
income (loss) for the three and twelve months ended
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| Net income (loss) | $ | 868 | $ | 45,817 | $ | (19,911 | ) | $ | (112,359 | ) | ||||||||||
| Adjustments for certain items: | ||||||||||||||||||||
| Non-cash fair value (gain) loss on derivatives | (10,111 | ) | (1,500 | ) | (6,729 | ) | (4,097 | ) | ||||||||||||
| Gain on debt extinguishment | — | — | — | (5,053 | ) | |||||||||||||||
| Write-off of deferred tax assets | — | — | — | 139,090 | ||||||||||||||||
| Acquisition related costs | — | 110 | — | 110 | ||||||||||||||||
| Tax benefit related to change in federal tax law | — | (51,939 | ) | — | (51,939 | ) | ||||||||||||||
| Tax effect and other discrete tax items (1) | 2,318 | 1,446 | 1,677 | 4,443 | ||||||||||||||||
| Adjusted net loss | $ | (6,925 | ) | $ | (6,066 | ) | $ | (24,963 | ) | $ | (29,805 | ) | ||||||||
| Adjusted net loss per diluted share | $ | (0.07 | ) | $ | (0.07 | ) | $ | (0.26 | ) | $ | (0.36 | ) | ||||||||
(1) The estimated income tax impacts on adjustments to net income (loss)
are computed based upon a statutory rate of 21% and 35%, applicable to
2018 and 2017, respectively. Additionally, this includes the tax impact
of a tax shortfall related to share-based compensation of
EBITDAX
We define EBITDAX as net income (loss), plus (1) exploration expense,
(2) depletion, depreciation and amortization expense, (3) share-based
compensation expense, (4) non-cash fair value (gain) loss on
derivatives, (5) gain on debt extinguishment, (6) interest expense, net,
and (7) 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 (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 income
(loss) for the three and twelve months ended
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| Net income (loss) | $ | 868 | $ | 45,817 | $ | (19,911 | ) | $ | (112,359 | ) | ||||||||||
| Exploration | 411 | 406 | 420 | 3,657 | ||||||||||||||||
| Depletion, depreciation and amortization | 14,403 | 16,173 | 61,432 | 70,521 | ||||||||||||||||
| Share-based compensation | 923 | 1,138 | 3,047 | 4,656 | ||||||||||||||||
| Non-cash fair value (gain) loss on derivatives | (10,111 | ) | (1,500 | ) | (6,729 | ) | (4,097 | ) | ||||||||||||
| Gain on debt extinguishment | — | — | — | (5,053 | ) | |||||||||||||||
| Interest expense, net | 6,595 | 5,370 | 25,117 | 21,053 | ||||||||||||||||
| Income tax provision (benefit) | 406 | (53,512 | ) | (4,347 | ) | 76,421 | ||||||||||||||
| EBITDAX | $ | 13,495 | $ | 13,892 | $ | 59,029 | $ | 54,799 | ||||||||||||
Unhedged Cash Margin and Cash Operating Expenses
We define unhedged cash margin as revenue, less 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. Unhedged cash margin
and cash operating expenses are not measures of operating income or cash
flows as determined by GAAP. The amounts included in the calculations of
unhedged cash margin and cash operating expenses were computed in
accordance with GAAP. Unhedged cash margin and cash operating expenses
are presented herein and reconciled to the GAAP measures of revenue and
operating expenses. We use unhedged cash margin and cash operating
expenses as an indicator of the Company’s profitability and ability to
manage its operating income 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
The table below provides a reconciliation of unhedged cash margin and
cash operating expenses to revenues and operating expenses for the three
and twelve months ended
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| Revenues | $ | 22,375 | $ | 28,417 | $ | 114,035 | $ | 105,349 | ||||||||||||
| Production (Mboe) | 963 | 1,064 | 4,082 | 4,232 | ||||||||||||||||
| Average realized price (per Boe) | $ | 23.24 | $ | 26.71 | $ | 27.94 | $ | 24.89 | ||||||||||||
| Operating expenses | $ | 24,254 | $ | 29,365 | $ | 112,826 | $ | 125,057 | ||||||||||||
| Exploration | (411 | ) | (406 | ) | (420 | ) | (3,657 | ) | ||||||||||||
| Depletion, depreciation and amortization | (14,403 | ) | (16,173 | ) | (61,432 | ) | (70,521 | ) | ||||||||||||
| Share-based compensation | (923 | ) | (1,138 | ) | (3,047 | ) | (4,656 | ) | ||||||||||||
| Cash operating expenses | $ | 8,517 | $ | 11,648 | $ | 47,927 | $ | 46,223 | ||||||||||||
| Cash operating expenses per Boe | $ | 8.85 | $ | 10.95 | $ | 11.75 | $ | 10.92 | ||||||||||||
| Unhedged cash margin | $ | 13,858 | $ | 16,769 | $ | 66,108 | $ | 59,126 | ||||||||||||
| Unhedged cash margin per Boe | $ | 14.39 | $ | 15.76 | $ | 16.19 | $ | 13.97 | ||||||||||||
PV-10
The present value of our proved reserves, discounted at 10% (“PV-10”),
was estimated at
PV-10 is our estimate of the present value of future net revenues from proved oil and gas reserves after deducting estimated production and ad valorem taxes, future capital costs and operating expenses, but before deducting any estimates of future income taxes. The estimated future net revenues are discounted at an annual rate of 10% to determine their “present value.” We believe PV-10 to be an important measure for evaluating the relative significance of our oil and gas properties and that the presentation of the non-GAAP financial measure of PV-10 provides useful information to investors because it is widely used by professional analysts and investors in evaluating oil and gas companies. Because there are many unique factors that can impact an individual company when estimating the amount of future income taxes to be paid, we believe the use of a pre-tax measure is valuable for evaluating the Company. We believe that PV-10 is a financial measure routinely used and calculated similarly by other companies in the oil and gas industry.
The table below reconciles PV-10 to our standardized measure of discounted future net cash flows, the most directly comparable measure calculated and presented in accordance with GAAP. PV-10 should not be considered as an alternative to the standardized measure as computed under GAAP.
| (in millions) | December 31, 2018 | ||||
| PV-10 | $ | 761.8 | |||
| Less income taxes: | |||||
| Undiscounted future income taxes | (478.2 | ) | |||
| 10% discount factor | 376.4 | ||||
| Future discounted income taxes | (101.8 | ) | |||
| Standardized measure of discounted future net cash flows | $ | 660 | |||
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
The table below summarizes our liquidity at
| Year Ended December 31, | ||||||||||
| 2018 | 2017 | |||||||||
| Credit Facility commitments | $ | 325,000 | $ | 325,000 | ||||||
| Cash and cash equivalents | 22 | 21 | ||||||||
| Long-term debt — Credit Facility | (301,500 | ) | (291,000 | ) | ||||||
| Undrawn letters of credit | (325 | ) | (325 | ) | ||||||
| Liquidity | $ | 23,197 | $ | 33,696 | ||||||
View source version on businesswire.com: https://www.businesswire.com/news/home/20190318005810/en/
Source:
Sergei Krylov
Executive Vice President & Chief Financial Officer
[email protected]
817.989.9000