Financial and operational highlights for third quarter 2018
- Drilled six wells and completed two horizontal Wolfcamp wells
- Production of 1,043 MBoe or 11.3 MBoe/day
-
Revenues of
$32.6 million , a 27% increase over prior year quarter -
Generated
$4.5 million of operating income -
Net loss was
$4.3 million or$0.05 per diluted share, and adjusted net loss (non-GAAP) was$4.2 million or$0.04 per diluted share -
Generated
$16.5 million of EBITDAX (non-GAAP), a 19% increase over prior year quarter -
Improved unhedged cash margin per Boe (non-GAAP) to
$18.88 per Boe, 40% over the prior year quarter
Adjusted net loss, EBITDAX 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, EBITDAX to net loss and unhedged cash margin.
Management Comment
“Despite improved oil and NGL prices, the extreme WAHA natural gas price
discount in the
Third Quarter 2018 Results
Production for third quarter 2018 totaled 1,043 Mboe, or 11.3 MBoe/d,
made up of 26% oil, 36% NGLs and 38% natural gas. Average realized
commodity prices for third quarter 2018, before the effect of commodity
derivatives, were
Net loss for third quarter 2018 was
Lease operating expense ("LOE") averaged
Operations Update
In the third quarter we drilled six horizontal Wolfcamp wells: four in
the A bench, one in the B bench and one in the C bench. During the
second half of the third quarter we completed two horizontal Wolfcamp
wells, both in Project Pangea. Of the completed wells, one well was in
the B bench and one well was in the C bench. At
As noted above, in light of the extreme WAHA gas discount in the basin,
we deferred third quarter completions and rescheduled fourth quarter
completions to preserve capital until basin gas differentials show signs
of improvement. We now expect full year capital expenses to be
Capital expenditures incurred during third quarter 2018 totaled
Liquidity Update
At
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.
| Contract | |||||||||
| Commodity and Period | Type | Volume Transacted | Contract Price | ||||||
| Crude Oil | |||||||||
| October 2018 – December 2018 | Swap | 300 Bbls/day | $50.00/Bbl | ||||||
| October 2018 – December 2019 | Collar | 500 Bbls/day | $65.00/Bbl - $71.00/Bbl | ||||||
| CMA Roll | |||||||||
| October 2018 – December 2018 | Swap | 2,000 Bbls/day | $0.66/Bbl | ||||||
| Natural Gas | |||||||||
| October 2018 – December 2018 | Swap | 200,000 MMBtu/month | $3.085/MMBtu | ||||||
| October 2018 – December 2018 | Swap | 250,000 MMBtu/month | $3.084/MMBtu | ||||||
| NGLs (C2 - Ethane) | |||||||||
| October 2018 – December 2018 | Swap | 1,000 Bbls/day | $11.424/Bbl | ||||||
| October 2018 – December 2018 | Swap | 400 Bbls/day | $14.70/Bbl | ||||||
| January 2019 – March 2019 | Swap | 900 Bbls/day | $14.123/Bbl | ||||||
| NGLs (C3 - Propane) | |||||||||
| October 2018 – December 2018 | Swap | 600 Bbls/day | $32.991/Bbl | ||||||
| October 2018 – December 2018 | Swap | 400 Bbls/day | $40.74/Bbl | ||||||
| October 2018 – June 2019 | Swap | 75 Bbls/day | $42.00/Bbl | ||||||
| January 2019 – March 2019 | Swap | 600 Bbls/day | $35.165/Bbl | ||||||
| NGLs (IC4 - Isobutane) | |||||||||
| October 2018 – December 2018 | Swap | 50 Bbls/day | $38.262/Bbl | ||||||
| NGLs (NC4 - Butane) | |||||||||
| October 2018 – December 2018 | Swap | 200 Bbls/day | $38.22/Bbl | ||||||
| January 2019 – March 2019 | Swap | 200 Bbls/day | $38.63/Bbl | ||||||
| NGLs (C5 - Pentane) | |||||||||
| October 2018 – December 2018 | Swap | 200 Bbls/day | $56.364/Bbl | ||||||
| January 2019 – December 2019 | Swap | 100 Bbls/day | $65.10/Bbl | ||||||
| January 2019 – December 2019 | Swap | 100 Bbls/day | $65.31/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 | 3063487 | ||
| 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: | 3063487 | ||
In addition, a third quarter 2018 summary presentation, including updated guidance, 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, 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
|
UNAUDITED RESULTS OF OPERATIONS |
||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| Revenues (in thousands): | ||||||||||||||||||||
| Oil | $ | 18,075 | $ | 12,464 | $ | 52,524 | $ | 38,666 | ||||||||||||
| NGLs | 10,690 | 7,093 | 26,874 | 19,172 | ||||||||||||||||
| Gas | 3,797 | 6,051 | 12,262 | 19,094 | ||||||||||||||||
| Total oil, NGLs and gas sales | 32,562 | 25,608 | 91,660 | 76,932 | ||||||||||||||||
| Net cash (payment) receipt on derivative settlements | (3,172 | ) | (523 | ) | (6,685 | ) | (1,481 | ) | ||||||||||||
| Total oil, NGLs and gas sales including derivative impact | $ | 29,390 | $ | 25,085 | $ | 84,975 | $ | 75,451 | ||||||||||||
| Production: | ||||||||||||||||||||
| Oil (MBbls) | 269 | 278 | 819 | 837 | ||||||||||||||||
| NGLs (MBbls) | 377 | 374 | 1,105 | 1,109 | ||||||||||||||||
| Gas (MMcf) | 2,388 | 2,455 | 7,168 | 7,331 | ||||||||||||||||
| Total (MBoe) | 1,043 | 1,061 | 3,119 | 3,168 | ||||||||||||||||
| Total (MBoe/d) | 11.3 | 11.5 | 11.4 | 11.6 | ||||||||||||||||
| Average prices: | ||||||||||||||||||||
| Oil (per Bbl) | $ | 67.28 | $ | 44.91 | $ | 64.13 | $ | 46.19 | ||||||||||||
| NGLs (per Bbl) | 28.38 | 18.96 | 24.31 | 17.28 | ||||||||||||||||
| Gas (per Mcf) | 1.59 | 2.46 | 1.71 | 2.60 | ||||||||||||||||
| Total (per Boe) | 31.21 | 24.14 | 29.39 | 24.28 | ||||||||||||||||
| Net cash (payment) receipt on derivative settlements (per Boe) | (3.04 | ) | (0.49 | ) | (2.14 | ) | (0.47 | ) | ||||||||||||
| Total including derivative impact (per Boe) | $ | 28.17 | $ | 23.65 | $ | 27.25 | $ | 23.81 | ||||||||||||
| Costs and expenses (per Boe): | ||||||||||||||||||||
| Lease operating | $ | 5.57 | $ | 4.16 | $ | 5.17 | $ | 4.05 | ||||||||||||
| Production and ad valorem taxes | 2.03 | 1.71 | 2.30 | 2.03 | ||||||||||||||||
| Exploration | — | 0.09 | — | 1.03 | ||||||||||||||||
| General and administrative (1) | 5.35 | 6.00 | 5.84 | 5.95 | ||||||||||||||||
| Depletion, depreciation and amortization | 13.90 | 15.88 | 15.08 | 17.15 | ||||||||||||||||
| (1) Below is a summary of general and administrative expense: | ||||||||||||||||||||
| General and administrative - cash component | $ | 4.73 | $ | 4.75 | $ | 5.16 | $ | 4.84 | ||||||||||||
| General and administrative - noncash component (share-based compensation) | 0.62 | 1.25 | 0.68 | $ | 1.11 | |||||||||||||||
| APPROACH RESOURCES INC. AND SUBSIDIARIES | ||||||||||||||||||||
| UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
| (In thousands, except shares and per-share amounts) | ||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| REVENUES: | ||||||||||||||||||||
| Oil, NGLs and gas sales | $ | 32,562 | $ | 25,608 | $ | 91,660 | $ | 76,932 | ||||||||||||
| EXPENSES: | ||||||||||||||||||||
| Lease operating | 5,816 | 4,418 | 16,116 | 12,826 | ||||||||||||||||
| Production and ad valorem taxes | 2,120 | 1,816 | 7,189 | 6,425 | ||||||||||||||||
| Exploration | 6 | 100 | 9 | 3,251 | ||||||||||||||||
| General and administrative (1) | 5,576 | 6,366 | 18,229 | 18,842 | ||||||||||||||||
| Depletion, depreciation and amortization | 14,500 | 16,843 | 47,029 | 54,348 | ||||||||||||||||
| Total expenses | 28,018 | 29,543 | 88,572 | 95,692 | ||||||||||||||||
| OPERATING INCOME (LOSS) | 4,544 | (3,935 | ) | 3,088 | (18,760 | ) | ||||||||||||||
| OTHER: | ||||||||||||||||||||
| Interest expense, net | (6,452 | ) | (5,304 | ) | (18,522 | ) | (15,683 | ) | ||||||||||||
| Gain on debt extinguishment | — | — | — | 5,053 | ||||||||||||||||
| Commodity derivative (loss) gain | (3,256 | ) | (3,560 | ) | (10,068 | ) | 1,115 | |||||||||||||
| Other (expense) income | (18 | ) | 29 | (30 | ) | 32 | ||||||||||||||
| LOSS BEFORE INCOME TAX (BENEFIT) PROVISION | (5,182 | ) | (12,770 | ) | (25,532 | ) | (28,243 | ) | ||||||||||||
| INCOME TAX (BENEFIT) PROVISION | (921 | ) | (4,258 | ) | (4,753 | ) | 129,933 | |||||||||||||
| NET LOSS | $ | (4,261 | ) | $ | (8,512 | ) | $ | (20,779 | ) | $ | (158,176 | ) | ||||||||
| LOSS PER SHARE: | ||||||||||||||||||||
| Basic | $ | (0.05 | ) | $ | (0.10 | ) | $ | (0.22 | ) | $ | (1.95 | ) | ||||||||
| Diluted | $ | (0.05 | ) | $ | (0.10 | ) | $ | (0.22 | ) | $ | (1.95 | ) | ||||||||
| WEIGHTED AVERAGE SHARES OUTSTANDING: | ||||||||||||||||||||
| Basic | 94,486,395 | 86,501,242 | 94,527,831 | 81,142,672 | ||||||||||||||||
| Diluted | 94,486,395 | 86,501,242 | 94,527,831 | 81,142,672 | ||||||||||||||||
| (1) Includes non-cash share-based compensation expense as follows: | 640 | 1,330 | 2,124 | 3,518 | ||||||||||||||||
| Unaudited Consolidated Balance Sheet Data | ||||||||
| (in thousands) | September 30, 2018 | December 31, 2017 | ||||||
| Cash and cash equivalents | $ | 22 | $ | 21 | ||||
| Other current assets | 14,474 | 16,679 | ||||||
| Property and equipment, net, successful efforts method | 1,082,845 | 1,082,876 | ||||||
| Total assets | $ | 1,097,341 | $ | 1,099,576 | ||||
| Current liabilities | $ | 41,252 | $ | 25,067 | ||||
| Long-term debt (1) | 378,732 | 373,460 | ||||||
| Deferred income taxes | 77,361 | 82,102 | ||||||
| Other long-term liabilities | 12,201 | 11,531 | ||||||
| Stockholders' equity | 587,795 | 607,416 | ||||||
| Total liabilities and stockholders' equity | $ | 1,097,341 | $ | 1,099,576 | ||||
(1) Long-term debt at
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 (gain) on derivatives, (2) gain on debt extinguishment, (3)
write-off of deferred tax assets, (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 and nine months ended
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| Net Loss | $ | (4,261 | ) | $ | (8,512 | ) | $ | (20,779 | ) | $ | (158,176 | ) | ||||||||
| Adjustments for certain items: | ||||||||||||||||||||
| Non-cash fair value loss (gain) on derivatives | 84 | 3,037 | 3,383 | (2,596 | ) | |||||||||||||||
| Gain on debt extinguishment | — | — | — | (5,053 | ) | |||||||||||||||
| Write-off of deferred tax assets | — | — | — | 139,090 | ||||||||||||||||
| Tax effect and other discrete tax items (1) | (17 | ) | (1,055 | ) | (640 | ) | 2,997 | |||||||||||||
| Adjusted net loss | $ | (4,194 | ) | $ | (6,530 | ) | $ | (18,036 | ) | $ | (23,738 | ) | ||||||||
| Adjusted net loss per diluted share | $ | (0.04 | ) | $ | (0.08 | ) | $ | (0.19 | ) | $ | (0.29 | ) | ||||||||
(1) The estimated income tax impacts on adjustments to net loss are
computed based upon a statutory rate of 21% and 35%, for the three and
nine months ended
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 (gain) on
derivatives, (5) gain on debt extinguishment, (6) interest expense, net,
and (7) income tax (benefit) provision. 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 and nine months ended
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| Net Loss | $ | (4,261 | ) | $ | (8,512 | ) | $ | (20,779 | ) | $ | (158,176 | ) | ||||||||
| Exploration | 6 | 100 | 9 | 3,251 | ||||||||||||||||
| Depletion, depreciation and amortization | 14,500 | 16,843 | 47,029 | 54,348 | ||||||||||||||||
| Share-based compensation | 640 | 1,330 | 2,124 | 3,518 | ||||||||||||||||
| Non-cash fair value loss (gain) on derivatives | 84 | 3,037 | 3,383 | (2,596 | ) | |||||||||||||||
| Gain on debt extinguishment | — | — | — | (5,053 | ) | |||||||||||||||
| Interest expense, net | 6,452 | 5,304 | 18,522 | 15,683 | ||||||||||||||||
| Income tax (benefit) provision | (921 | ) | (4,258 | ) | (4,753 | ) | 129,933 | |||||||||||||
| EBITDAX | $ | 16,500 | $ | 13,844 | $ | 45,535 | $ | 40,908 | ||||||||||||
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 nine months ended
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||||||
| Revenues | $ | 32,562 | $ | 25,608 | $ | 91,660 | $ | 76,932 | ||||||||||||
| Production (Mboe) | 1,043 | 1,061 | 3,119 | 3,168 | ||||||||||||||||
| Average realize price per Boe | $ | 31.21 | $ | 24.14 | $ | 29.39 | $ | 24.28 | ||||||||||||
| Operating expenses | $ | 28,018 | $ | 29,543 | $ | 88,572 | $ | 95,692 | ||||||||||||
| Exploration | (6 | ) | (100 | ) | (9 | ) | (3,251 | ) | ||||||||||||
| Depletion, depreciation and amortization | (14,500 | ) | (16,843 | ) | (47,029 | ) | (54,348 | ) | ||||||||||||
| Share-based compensation | (640 | ) | (1,330 | ) | (2,124 | ) | (3,518 | ) | ||||||||||||
| Cash operating expenses | $ | 12,872 | $ | 11,270 | $ | 39,410 | $ | 34,575 | ||||||||||||
| Cash operating expenses per Boe | $ | 12.33 | $ | 10.62 | $ | 12.63 | $ | 10.92 | ||||||||||||
| Unhedged cash margin | $ | 19,690 | $ | 14,338 | $ | 52,250 | $ | 42,357 | ||||||||||||
| Unhedged cash margin per Boe | $ | 18.88 | $ | 13.52 | $ | 16.76 | $ | 13.36 | ||||||||||||
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 and may further be subject to
covenants in a company’s loan agreements. 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
| Liquidity at | |||||
| September 30, | |||||
| 2018 | |||||
| Borrowing base | $ | 325,000 | |||
| Cash and cash equivalents | 22 | ||||
| Long-term debt – Credit Facility | (295,500 | ) | |||
| Undrawn letters of credit | (325 | ) | |||
| Liquidity | $ | 29,197 | |||
View source version on businesswire.com: https://www.businesswire.com/news/home/20181108006032/en/
Source:
Approach Resources Inc.
Suzanne Ogle, 817-989-9000
Vice
President – Investor Relations & Corporate Communications
[email protected]