SOURCE: Earthstone Energy, Inc.

Earthstone Energy, Inc.

August 13, 2015 08:00 ET

Earthstone Energy, Inc. Reports Second Quarter 2015 Financial Results

Quarterly Production of 4,517 Boepd

THE WOODLANDS, TX--(Marketwired - Aug 13, 2015) - Earthstone Energy, Inc. (NYSE MKT: ESTE) ("Earthstone" or the "Company"), today announced financial results for the three month period ended June 30, 2015.

Second Quarter 2015 Highlights

  • Average daily production of 4,517 Boepd, a 17% increase from the first quarter of 2015 and a 94% increase from the second quarter of 2014
  • Total revenue of $16.7 million, which excludes any effects from hedges
  • Reduced LOE and G&A on a per-unit basis of 18% and 19%, respectively, compared to the first quarter of 2015
  • Adjusted EBITDAX(1) of $8.7 million
  • Acquired 970 gross acres for Eagle Ford development and two Austin Chalk wells in southern Gonzales County. Completed the acquisition of 404 offsetting gross acres in Karnes County. These positions will provide for a total of 17 gross Eagle Ford wells, with drilling expected to begin in the fourth quarter of 2015 and continued development in 2016
  • Acquired additional acreage in existing Bakken/Three Forks producing units in McKenzie County, North Dakota, for $1.4 million
  • Divested North Louisiana properties for $3.5 million

(1) See "Reconciliation of Non-GAAP Financials Measures" section below.

Selected Financial and Operational Data

The below tables provide selected financial and operational data for the three months ended June 30, 2015, March 31, 2015, and June 30, 2014.

       
       
($000s except where noted)   Three Months Ended  
    June 30, 2015     March 31, 2015     June 30, 2014  
Total Revenue   16,733     11,320     12,145  
Realized Hedge Settlements Gain (Loss)   943     1,494     (549 )
Adjusted Revenue (including realized hedge settlements)   17,676     12,814     11,596  
Net (Loss) Income   (748 )   (1,114 )   1,530  
(Loss) Earnings Per Share (Diluted)   (0.05 )   (0.08 )   0.17  
Adjusted EBITDAX(1)   8,660     5,359     6,866  
                   
Production:                  
  Oil (MBbls)   230     208     86  
  Gas (MMcf)   739     558     566  
  NGL (MBbls)   58     45     31  
  Total (MBOE)   411     346     211  
  Total daily production (BOEPD)   4,517     3,849     2,325  
                   
Average prices:                  
  Oil ($/Bbl)   52.94     43.44     99.08  
  Gas ($/Mcf)   2.68     2.74     4.58  
  NGL ($/Bbl)   14.01     14.85     30.50  
  Total ($/Boe)   36.39     32.45     57.00  
                   
Adjusted for realized derivatives settlements:                  
  Oil ($/Bbl)   57.04     49.29     94.41  
  Gas ($/Mcf)   2.68     3.24     4.32  
  NGL ($/Bbl)   14.01     14.85     30.50  
  Total ($/Boe)   38.69     36.76     54.00  
                   
  (1) See "Reconciliation of Non-GAAP Financials Measures" section below.
   
   

Acquisitions and Divestitures

In June 2015, the Company acquired a 50% operated interest in two gross Austin Chalk wells which hold approximately 970 gross acres in Gonzales County, Texas. The acreage, acquired for Eagle Ford development, is 100% held-by-production, with current gross production of approximately 44 barrels of oil equivalent per day (100% oil). The property was acquired from an unaffiliated party and purchased jointly with a private company that will participate in development with a 50% non-operated interest. The newly acquired acreage is adjacent to our existing 404 gross acres located in Karnes County, Texas, and will allow for 13 gross Eagle Ford wells to be drilled with an average lateral length of approximately 6,000 feet. These two properties straddle the Gonzales-Karnes County line. Pending certain acreage trades, the Karnes County acreage (in which we have a 33% operated working interest) will allow for four gross wells with an average lateral length of approximately 6,900 feet. We intend to develop both areas using 500 foot spacing between wells. Current plans include drilling two gross wells on each property in the fourth quarter of 2015, with continued development in 2016.

In June 2015, the Company acquired additional acreage in existing Bakken/Three Forks producing units primarily located in the Banks Field of McKenzie County, North Dakota, for $1.4 million. The acquisition included 164 net acres which will allow us to increase our working interest in 41 producing wells and 21 wells that are drilling or in the process of completing.

In April 2015, the Company divested all of its properties located in North Louisiana for $3.5 million. The sale included 25 producing wells that were primarily located in DeSoto and Caddo Parishes.

Management Comments

Frank A. Lodzinski, President and Chief Executive Officer of Earthstone Energy, Inc., commented, "While commodity prices remain challenging we have benefited from a significant reduction in drilling and completion costs. In particular, completion costs are down 35% to 40%. These savings have resulted in our field level economics remaining competitive. Our strong operating and cost control capabilities and ability to consistently drill within budget are positive factors in this industry downturn. We are also focused on reducing operating and G&A costs on a per unit basis. Our operating and G&A costs decreased approximately 18% and 19%, respectively, between the first quarter and second quarter of 2015. Our cost improvements have allowed us to expand our activity with only a slight increase in our capital budget, resulting in continued growth into 2016. In the absence of protracted prices at current levels or further price declines, it is our intent to continue to run one rig consistently across existing and newly acquired acreage. We intend to continue to maintain our existing acreage in Fayette and Gonzales Counties and preserve future development potential in the Eagle Ford and other zones through economic drilling. In addition to expanding our acreage position, we are actively pursuing meaningful and attractive corporate M&A and asset acquisition opportunities. While relatively small, our acquisition and divestiture activities in the second quarter illustrate our direction, and we are working to expand such activities. We have sold certain assets with limited current production and future upside and redeployed proceeds into assets with current production and greater upside. Finally, we have experienced these significant price downturns before and are confident that we will continue our growth and acquire additional assets at attractive prices."

About Earthstone Energy, Inc.

Earthstone Energy, Inc. is a growth-oriented independent oil and gas exploration and production company engaged in the development and acquisition of oil and gas reserves through an active and diversified program that includes the acquisition, drilling and development of undeveloped leases, purchases of reserves, and exploration activities, with its current primary assets located in the Eagle Ford trend of south Texas and in the Williston Basin of North Dakota and Montana. Earthstone is traded on NYSE MKT under the symbol "ESTE." Our corporate headquarters is located in The Woodlands, Texas. Additional information on Earthstone can be found at www.earthstoneenergy.com.

FORWARD-LOOKING STATEMENTS

This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Statements that are not strictly historical statements constitute forward-looking statements and may often, but not always, be identified by the use of such words such as "expects," "believes," "intends," "anticipates," "plans," "estimates," "potential," "possible," or "probable" or statements that certain actions, events or results "may," "will," "should," or "could" be taken, occur or be achieved. The forward-looking statements include statements about future operations, expansion of production and development acreage, increased cash flow, earnings and assets and access to capital. Forward-looking statements are based on current expectations and assumptions and analyses made by Earthstone and its management in light of experience and perception of historical trends, current conditions and expected future developments, as well as other factors appropriate under the circumstances. However, whether actual results and developments will conform to expectations is subject to a number of material risks and uncertainties, including but not limited to: the risks of the oil and gas industry (for example, the recent rapid, significant decline in oil prices and operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits); the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future oil and gas prices, production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather; inability of management to execute its plans to meet its goals; unavailability of gathering systems, pipelines and processing facilities; and the possibility that government policies may change. Earthstone's annual report on Form 10-K for the year ended December 31, 2014, quarterly reports on Form 10-Q, recent current reports on Form 8-K, and other Securities and Exchange Commission filings discuss some of the important risk factors identified that may affect Earthstone's business, results of operations, and financial condition. Earthstone undertakes no obligation to revise or update publicly any forward-looking statements except as required by law.

   
EARTHSTONE ENERGY, INC.  
CONSOLIDATED BALANCE SHEETS  
(Unaudited)  
   
    June 30,     December 31,  
ASSETS   2015     2014  
Current assets:   (In thousands, except share amounts)  
  Cash and cash equivalents   $ 44,870     $ 100,447  
  Accounts receivable:                
      Oil, natural gas, and natural gas liquids revenues     15,010       14,016  
      Joint interest billings and other     3,903       9,417  
  Prepaid expenses and other current assets     1,176       1,578  
  Current derivative assets     600       3,569  
    Total current assets     65,559       129,027  
Oil and gas properties, successful efforts method:                
  Proved properties     349,589       317,006  
  Unproved properties     81,704       76,791  
  Total oil and gas properties     431,293       393,797  
  Accumulated depreciation, depletion, and amortization     (103,551 )     (97,920 )
  Net oil and gas properties     327,742       295,877  
Other noncurrent assets:                
  Goodwill     22,992       22,992  
  Office and other equipment, less accumulated depreciation of $733 and $474 at June 30, 2015 and December 31, 2014     2,130       2,109  
  Land     101       101  
  Other noncurrent assets     1,252       1,282  
TOTAL ASSETS   $ 419,776     $ 451,388  
LIABILITIES AND EQUITY                
Current liabilities:                
  Accounts payable   $ 21,806     $ 28,753  
  Accrued expenses     9,120       20,529  
  Revenues and royalties payable     14,421       17,364  
  Advances     13,810       21,398  
  Asset retirement obligations     350       408  
  Current derivative liability     15       --  
    Total current liabilities     59,522       88,452  
Noncurrent liabilities:                
  Long-term debt     11,191       11,191  
  Asset retirement obligations     5,653       5,670  
  Deferred tax liability     28,387       29,258  
  Noncurrent derivative liabilities     97       --  
  Other noncurrent liabilities     260       289  
    Total noncurrent liabilities     45,588       46,408  
      Total liabilities     105,110       134,860  
Commitments and Contingencies (Note 10)                
Equity:                
  Preferred stock, $0.001 par value, 20,000,000 shares authorized; none issuedor outstanding     --       --  
  Common stock, $0.001 par value, 100,000,000 shares authorized; 13,835,128 shares issued and outstanding at June 30, 2015 and December 31, 2014     14       14  
  Additional paid-in capital     358,086       358,086  
  Accumulated deficit     (42,974 )     (41,112 )
  Treasury stock, 15,414 shares at June 30, 2015 and December 31, 2014     (460 )     (460 )
      Total equity     314,666       316,528  
TOTAL LIABILITIES AND EQUITY   $ 419,776     $ 451,388  
                 
                 
   
EARTHSTONE ENERGY, INC.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(Unaudited)  
   
    Three months ended June 30,     Six months ended June 30,  
    2015     2014     2015     2014  
REVENUES   (In thousands, except share and per share amounts)  
  Oil, natural gas, and natural gas liquids revenues:                                
    Oil   $ 12,163     $ 8,508     $ 21,201     $ 16,376  
    Natural gas     1,982       2,593       3,512       5,346  
    Natural gas liquids     813       958       1,487       1,914  
      Total oil, natural gas, and natural gas liquids revenues     14,958       12,059       26,200       23,636  
  Gathering income     95       86       173       195  
  Gain on sales of oil and gas properties, net     1,680       --       1,680       --  
    Total revenues     16,733       12,145       28,053       23,831  
OPERATING COSTS AND EXPENSES                                
  Production costs:                                
    Lease operating expense     4,239       2,376       8,613       4,674  
    Severance taxes     746       509       1,376       998  
  Re-engineering and workovers     167       121       286       319  
  Exploration expense     142       --       142       --  
  Depreciation, depletion, and amortization     8,674       4,383       14,598       7,763  
  General and administrative expense     2,484       1,802       5,055       3,214  
    Total operating costs and expenses     16,452       9,191       30,070       16,968  
    Income (loss) from operations     281       2,954       (2,017 )     6,863  
OTHER INCOME (EXPENSE)                                
  Interest expense, net     (169 )     (152 )     (338 )     (297 )
  Net loss on derivative contracts     (1,318 )     (1,275 )     (644 )     (2,303 )
  Other income, net     163       3       257       7  
    Total other income (expense)     (1,324 )     (1,424 )     (725 )     (2,593 )
    (Loss) income before income taxes     (1,043 )     1,530       (2,742 )     4,270  
  Income tax benefit     (295 )     --       (880 )     --  
      Net (loss) income   $ (748 )   $ 1,530     $ (1,862 )   $ 4,270  
Net (loss) income per common share:                                
  Basic   $ (0.05 )   $ 0.17     $ (0.13 )   $ 0.47  
  Diluted   $ (0.05 )   $ 0.17     $ (0.13 )   $ 0.47  
Weighted average common shares outstanding:                                
  Basic     13,835,128       9,124,452       13,835,128       9,124,452  
  Diluted     13,835,128       9,124,452       13,835,128       9,124,452  
                                 
                                 
   
EARTHSTONE ENERGY, INC.  
CONSOLIDATED STATEMENTS OF CASH FLOWS  
(Unaudited)  
   
    Six months ended June 30,  
    2015     2014  
Cash flows from operating activities:   (In thousands)  
  Net (loss) income   $ (1,862 )   $ 4,270  
  Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:                
    Depreciation, depletion, and amortization     14,598       7,763  
    Unrealized loss on derivative contracts     3,081       1,214  
    Accretion of asset retirement obligations     282       151  
    Deferred income taxes     (871 )     --  
    Amortization of deferred financing costs     130       76  
    Settlement of asset retirement obligations     (46 )     (31 )
    Gain on sale of assets     (1,680 )     --  
  Changes in assets and liabilities:                
    Decrease (increase) in accounts receivable     4,397       (5,129 )
    Decrease (increase) in prepaid expenses and other     427       (450 )
    (Decrease) increase in accounts payable and accrued expenses     (18,356 )     5,453  
    (Decrease) increase in revenue and royalties payable     (2,895 )     7,382  
    (Decrease) increase in advances     (7,566 )     15,441  
      Net cash (used in) provided by operating activities     (10,361 )     36,140  
Cash flows from investing activities:                
  Acquisitions of oil and gas property     (5,430 )     --  
  Additions to oil and gas property and equipment     (42,888 )     (29,197 )
  Additions to other property and equipment     (279 )     (229 )
  Proceeds from sales of oil and gas properties     3,506       --  
      Net cash used in investing activities     (45,091 )     (29,426 )
Cash flows from financing activities:                
  Deferred financing costs     (125 )     (102 )
      Net cash used in financing activities     (125 )     (102 )
Net (decrease) increase in cash and cash equivalents     (55,577 )     6,612  
Cash and cash equivalents at beginning of period     100,447       25,423  
Cash and cash equivalents at end of period   $ 44,870     $ 32,035  
Supplemental disclosure of cash flow information                
Cash paid for:                
  Interest   $ 175     $ 221  
Non-cash investing and financing activities:                
  Asset retirement obligations   $ 91     $ 29  
                   
 
 
Earthstone Energy, Inc.
 Reconciliation of Non-GAAP Financial Measures
 (Unaudited)
 

Adjusted EBITDAX

Adjusted EBITDAX is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors, commercial banks and others, to assess our operating performance compared to that of other companies in our industry, without regard to financing methods, capital structure or historical costs basis. It is also used to assess our ability to incur and service debt and fund capital expenditures. We define "Adjusted EBITDAX" as net income (loss) plus (1) (gain) loss on sale of assets; (2) accretion; (3) depletion, depreciation, and amortization; (4) exploration expense; (5) interest expense; (6) interest income; (7) unrealized (gain) loss on derivatives; and (8) income tax expense (benefit).

Our Adjusted EBITDAX should not be considered an alternative to net income (loss), operating income (loss), cash flow provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with the generally accepted accounting principles ("GAAP"). Our Adjusted EBITDAX may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDAX in the same manner.

The following table provides a reconciliation of net income to Adjusted EBITDAX for the periods indicated (in thousands):

     
    Three Months Ended
    June 30, 2015     March 31, 2015     June 30, 2014
Net income (loss)   $ (748 )   $ (1,114 )   $ 1,530
(Gain) / loss on sale of assets     (1,680 )     -       -
Accretion     137       145       77
Depletion, depreciation, and amortization     8,674       5,924       4,383
Exploration expense     142       -       -
Interest expense     182       185       152
Interest income     (13 )     (16 )     -
Unrealized (gain) loss on derivative contracts     2,261       820       725
Income tax expense (benefit)     (295 )     (585 )     -
Adjusted EBITDAX   $ 8,660     $ 5,359     $ 6,867

Contact Information

  • Contact:
    Neil K. Cohen
    Vice President, Finance, and Treasurer
    Earthstone Energy, Inc.
    1400 Woodloch Forest Drive, Suite 300
    The Woodlands, TX 77380
    281-298-4246