SOURCE: Synergy Resources Corporation

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May 03, 2016 16:16 ET

Synergy Resources Reports First Quarter 2016 Results

Production Increased 65% Year Over Year

DENVER, CO--(Marketwired - May 03, 2016) - Synergy Resources Corporation (NYSE MKT: SYRG), a U.S. oil and gas exploration and production company focused on the Greater Wattenberg Area of the Denver-Julesburg Basin, reported its first quarter results for the period ended March 31, 2016.

First Quarter 2016 Financial Highlights

  • Revenues were $18.3 million
  • Net Loss was $51.4 million or $(0.42) per diluted share in the quarter which includes a full cost ceiling impairment charge of $45.6 million or $(0.37) per diluted share
  • Adjusted EBITDA of $10.2 million (see further discussion regarding the presentation of adjusted EBITDA in "About Non-GAAP Financial Measures" below)
  • As of March 31, 2016, the Company's cash and equivalents totaled $50.9 million and it had $145.0 million of availability on its credit facility for total liquidity of $195.9 million

Operational Highlights

  • Net oil and natural gas production increased 65% to 1,047 MBOE, as compared to 633 MBOE the same year ago quarter, and averaged 11,510 BOE per day (BOE/d) versus an average of 7,029 BOE/d in the same period a year ago

First Quarter 2016 Financial Results

Revenues in the first quarter of 2016 were $18.3 million, down from $18.9 million in the same year ago quarter. Higher year-over-year production volumes were more than offset by lower commodity prices. In the first quarter of 2016, the average realized price per barrel of oil was $23.89 versus a realized price per barrel of $37.35 in the year ago quarter, and the average realized price per Mcf for natural gas was $1.82 compared to $3.35 in the first quarter of 2015. The 2016 first quarter's net loss totaled $51.4 million or $(0.42) per diluted share compared to a net loss of $1.0 million or $(0.01) per diluted share in the year ago quarter. The first quarter 2016 net loss includes a full cost ceiling impairment charge of $45.6 million. Considering the effect of the income tax provision, which was impacted by the related valuation allowance change, the impairment charge reduced diluted earnings per share by $0.37. Adjusted EBITDA in the first quarter was $10.2 million as compared to $20.8 million in the year ago quarter.

Under the full cost ceiling impairment test, the value of the Company's reserves is calculated using the average of the published spot prices for WTI oil (per barrel) as of the first day of each of the previous twelve months, as well as the average of the published spot prices for Henry Hub (per MMBtu) as of the first day of each of the previous twelve months, each adjusted by lease or field for quality, transportation fees and regional price differentials. The March 31, 2016 ceiling test used average realized prices of $37.32 per barrel and $2.41 per Mcf, which were lower than the December 31, 2015 prices of $41.33 per barrel and $2.60 per Mcf, a decrease of approximately 10% and 7%, respectively. Using these prices, the Company's net capitalized costs for oil and natural gas properties exceeded the ceiling amount by $45.6 million at March 31, 2016, resulting in immediate recognition of a ceiling test impairment.

The following tables present certain per unit metrics that compare results of the corresponding quarterly reporting periods:

Net Production and Sales Prices Comparison   Three Months Ended   % Change
Net Volumes
(in thousands)
  3/31/2016   12/31/2015*   3/31/2015   Sequential Quarter   Qtr.-over- Qtr.
Crude Oil (Bbls)   527   na   361   na   46%
Natural Gas (Mcf)   3,121   na   1,630   na   91%
Sales Volumes: (BOE)   1,047   na   633   na   65%
Average Daily Volumes                    
Daily Production (BOE/day)   11,510   10,822   7,029   6%   64%
Product Price Received                    
Crude Oil ($/Bbl)   $23.89   $34.65   $37.35   (31)%   (36)%
Natural Gas ($/Mcf)   $1.82   $2.43   $3.35   (25)%   (46)%

* Amounts determined using data from the four months ended December 31, 2015
na - not applicable as inclusion of figures would result in the comparison of data for the three months ended March 31, 2016 and 2015 to data for the four months ended December 31, 2015

Unit Cost Analysis   Three Months Ended   % Change
3/31/2016   12/31/2015*   3/31/2015   Sequential Quarter   Qtr.-over- Qtr.
Average Realized Price ($ BOE)   $17.45   $25.86   $29.94   (33)%   (42)%
Lease Operating Expense ($ BOE)   4.10   4.41   6.51   (7)%   (37)%
Production Tax ($ BOE)   1.75   2.35   2.86   (26)%   (39)%
DD&A Expense ($ BOE)   11.55   14.22   22.24   (19)%   (48)%
Non-Cash G&A Expense ($ BOE)   2.41   6.45   2.14   (63)%   13%
Cash G&A Expense ($ BOE)   4.70   7.09   4.31   (34)%   9%
Total G&A Expense ($ BOE)   7.11   13.54   6.45   (47)%   10%

* Amounts determined using data from the four months ended December 31, 2015

Operations Update

The Company continues to operate one drilling rig and, as noted below, the rig is currently on the Company's Fagerberg Pad. Completion operations are underway on the Vista Pad. Both pads are located in Weld County, Colorado. Below is a pad by pad synopsis of recent well performance, current operations and the remaining 2016 drilling plan. Please note that the Working Interest and Net Revenue Interest percentages are subject to change through acquisitions, pooling, trades, swaps, earning agreements, and other reversionary interests.

  • Vista Pad: 85% Working Interest (WI); 72% Net Revenue Interest (NRI)
    • Completed drilling 10 standard length wells
    • Four wells being completed with sliding sleeves; six wells will be completed through plug and perforation completions
    • Completion operations are underway with flow back anticipated late second quarter
  • Fagerberg Pad: 96% WI; 76% NRI
    • Drilling underway for 14 mid-length wells
    • All wells drilled with a conventional monobore design and will utilize plug and perforation completions
  • Bestway Pad: 88% WI; 73% NRI
    • Four mid length lateral wells
    • 150 day production averaged ~750 BOE/day, (52% oil), exhibiting a type curve above 750M EUR*
  • Wind Pad: 100% WI; 75% NRI
    • Eight standard length lateral wells
    • 90 day production averaged ~270 BOE/day, (61% oil), exhibiting a type curve above 250M EUR*

* EUR estimates may not reflect reserves as determined in accordance with SEC rules.

  • 2016 Remaining Drilling Program
    • Evans Pad: 70% WI; 57% NRI
      • Two separate 11 well pads
      • Utilizing two drilling rigs
      • 18 long length lateral wells
      • Four extended length lateral wells
    • Williams Pad: 99% WI; 76% NRI
      • Nine mid length lateral wells
      • Permitting

Conference Call

The Company will not be holding the previously announced conference call on May 6, 2016. Please refer to Synergy's website at for the current corporate presentation and other news and information.

About Synergy Resources Corporation

Synergy Resources Corporation is a domestic oil and natural gas exploration and production company. Synergy's core area of operations is in the Wattenberg Field of the Denver-Julesburg Basin. The Denver-Julesburg Basin encompasses parts of Colorado, Wyoming, Kansas, and Nebraska. The Company's corporate offices are located in Denver, Colorado. More company news and information about Synergy Resources is available at

Important Cautions Regarding Forward Looking Statements

This press release may contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. The use of words such as "believes", "expects", "anticipates", "intends", "plans", "estimates", "should", "likely" or similar expressions, indicates a forward-looking statement. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, and information currently available to management. The actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. The identification in this press release of factors that may affect the Company's future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Factors that could cause the Company's actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: the success of the Company's exploration and development efforts; the price of oil and gas; worldwide economic situation; change in interest rates or inflation; willingness and ability of third parties to honor their contractual commitments; the Company's ability to raise additional capital, as it may be affected by current conditions in the stock market and competition in the oil and gas industry for risk capital; the Company's capital costs, which may be affected by delays or cost overruns; costs of production; environmental and other regulations, as the same presently exist or may later be amended; the Company's ability to identify, finance and integrate any future acquisitions; and the volatility of the Company's stock price.

Reconciliation of Non-GAAP Financial Measures

The Company defines adjusted EBITDA as net loss adjusted to exclude the impact of the items set forth in the table below. We believe adjusted EBITDA is relevant because similar measures are widely used in our industry. The following table presents a reconciliation of adjusted EBITDA, a non-GAAP financial measure, to net loss, its nearest GAAP measure:

(unaudited, in thousands)  
    Three Months Ended March 31,  
    2016     2015  
Adjusted EBITDA:                
  Net loss   $ (51,401 )   $ (993 )
  Depreciation, depletion, and accretion     12,092       14,077  
  Full cost ceiling impairment     45,621       -  
  Income tax benefit     -       (709 )
  Stock-based compensation     2,519       1,604  
  Mark to market of commodity derivative contracts:                
    Total gain on commodity derivatives contracts     (1,680 )     (3,461 )
    Cash settlements on commodity derivative contracts     3,059       13,742  
    Cash premiums paid for commodity derivative contracts     -       (3,498 )
  Interest expense (income)     (2 )     15  
      Adjusted EBITDA   $ 10,208     $ 20,777  

Financial Statements
Condensed financial statements are included below. Additional financial information, including footnotes that are considered an integral part of the financial statements, can be found in Synergy's Edgar Filings at on Form 10-Q for the period ended March 31, 2016.

(unaudited; in thousands)  
ASSETS   March 31, 2016     December 31, 2015  
Current assets:                
  Cash and cash equivalents   $ 50,937     $ 66,499  
  Other current assets     32,029       33,199  
    Total current assets     82,966       99,698  
Oil and gas properties and other equipment     488,010       526,847  
Goodwill     40,711       40,711  
Other assets     4,613       5,360  
      Total assets   $ 616,300     $ 672,616  
Current liabilities     56,011       74,706  
Revolving credit facility     -       78,000  
Asset retirement obligations     13,676       13,400  
      Total liabilities     69,687       166,106  
Shareholders' equity:                
  Common stock and paid-in capital     687,285       595,781  
  Retained (deficit) earnings     (140,672 )     (89,271 )
Total shareholders' equity     546,613       506,510  
Total liabilities and shareholders' equity   $ 616,300     $ 672,616  
(unaudited; in thousands)  
    Three Months Ended March 31,  
    2016     2015  
Cash flows from operating activities:                
  Net loss   $ (51,401 )   $ (993 )
  Adjustments to reconcile net loss to net cash provided by operating activities:                
    Depletion, depreciation, and accretion     12,092       14,077  
    Full cost ceiling impairment     45,621       -  
    Provision for deferred taxes     -       (709 )
    Other, non-cash items     3,898       8,387  
    Changes in operating assets and liabilities     (2,088 )     18,997  
Total adjustments     59,523       40,752  
    Net cash provided by operating activities     8,122       39,759  
Cash flows from investing activities:                
  Acquisition of oil and gas properties     (10,000 )     -  
  Well costs and other capital expenditures     (24,374 )     (57,811 )
  Net proceeds from sales of oil and gas properties     -       3,696  
    Net cash used in investing activities     (34,374 )     (54,115 )
Cash flows from financing activities:                
  Equity financing activities     88,882       190,774  
  Debt financing activities     (78,192 )     -  
    Net cash provided by financing activities     10,690       190,774  
Net (decrease) increase in cash and equivalents     (15,562 )     176,418  
Cash and equivalents at beginning of period     66,499       39,570  
Cash and equivalents at end of period     50,937       215,988  
Short term investments     -       -  
Cash, equivalents and short term investments   $ 50,937     $ 215,988  
(unaudited; in thousands, except share and per share data)  
    Three Months Ended March 31,  
    2016     2015  
Oil and gas revenues   $ 18,273     $ 18,938  
  Lease operating expenses     4,299       4,121  
  Production taxes     1,833       1,807  
  Depreciation, depletion, and accretion     12,092       14,077  
  Full cost ceiling impairment     45,621       -  
  Transportation commitment charge     68       -  
  General and administrative     7,443       4,081  
      Total expenses     71,356       24,086  
Operating loss     (53,083 )     (5,148 )
Other income (expense):                
  Commodity derivatives gain     1,680       3,461  
  Interest income and (expense), net     2       (15 )
      Total other income     1,682       3,446  
Loss before income taxes     (51,401 )     (1,702 )
Income tax benefit     -       (709 )
Net loss   $ (51,401 )   $ (993 )
Net loss per common share:                
  Basic   $ (0.42 )   $ (0.01 )
  Diluted   $ (0.42 )   $ (0.01 )
Weighted-average shares outstanding:                
  Basic     121,392,736       97,241,301  
  Diluted     121,392,736       97,241,301  

Contact Information

    Investor Relations Contact: 
    Jon Kruljac
    Synergy Resources Corporation
    Tel 720-616-4308