SOURCE: Synergy Resources Corporation

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January 07, 2016 16:05 ET

Synergy Resources Reports Fiscal First Quarter 2016 Results

Production increased 27% year over year; Liquidity of $166 million, including $81 million of cash and cash equivalents; Company to Host Investor Conference Call on Friday, January 8th, at 11:00 AM ET

DENVER, CO--(Marketwired - January 07, 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 fiscal first quarter results for the period ended November 30, 2015.

Fiscal First Quarter 2016 Financial Highlights

  • Revenues were $26.1 million
  • Net Loss was $122.3 million or $(1.14) per diluted share in the quarter which includes a full cost ceiling impairment charge of $125.2 million or $(1.10) per diluted share
  • Adjusted EBITDA of $11.9 million (see further discussion regarding the presentation of adjusted EBITDA in "About Non-GAAP Financial Measures" below)
  • As of November 30, 2015, the Company's cash and equivalents totaled $80.7 million, $85.0 million of availability on its credit facility, and $166 million of liquidity

Operational Highlights

  • Net oil and natural gas production increased 27% to 959,176 barrels of oil equivalent (BOE), as compared to 753,312 BOE the same year ago quarter, and averaged 10,540 BOE per day (BOE/d) versus an average of 8,278 BOE/d in the same period a year ago
  • 5 net operated wells were brought on line
  • Closed an acquisition in the Wattenberg Field comprised of 4,300 net acres

Fiscal First Quarter 2016 Financial Results

Revenues in the first fiscal quarter of 2016 were $26.1 million, down from $42.5 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 fiscal 2016, the average realized price per barrel of oil was $36.72 versus a realized price per barrel of $73.69 in the year ago quarter, and the average realized price per mcf for natural gas was $2.49 compared to $4.74 in the first quarter of fiscal 2015. The fiscal 2016 first quarter's net loss totaled $122.3 million or $(1.14) per diluted share compared to a net income of $21.2 million or $0.26 per diluted share in the year ago quarter. The first quarter 2016 net loss includes a full cost ceiling impairment charge of $125.2 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 $1.10. Adjusted EBITDA in the first quarter was $11.9 million as compared to $33.4 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 November 30, 2015 ceiling test used average realized prices of $42.54 per barrel and $2.77 per Mcf, which were lower than the August 31, 2015 prices of $53.27 per barrel and $3.28 per Mcf, a decrease of approximately 20% and 16%, respectively. Using these prices, the Company's net capitalized costs for oil and natural gas properties exceeded the ceiling amount by $125.2 million at November 30, 2015, 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)
11/30/2015   8/31/2015   11/30/2014   Sequential Quarter   Qtr.-over- Qtr.
Crude Oil (Bbls) 543   642   467   (15)%   16%
Natural Gas (Mcf) 2,500   2,180   1,720   15%   45%
Sales Volumes: (BOE) 959   1,005   753   (5)%   27%
  Average Daily Volumes                  
Daily Production (BOE/day) 10,540   10,925   8,278   (4)%   27%
  Product Price Received                  
Crude Oil ($/Bbl) $36.72   $42.21   $73.69   (13)%   (50)%
Natural Gas ($/Mcf) $2.49   $2.51   $4.74   (1)%   (47)%
Unit Cost Analysis Three Months Ended   % Change
11/30/2015   8/31/2015   11/30/2014   Sequential Quarter   Qtr.-over- Qtr.
Average Realized Price ($ BOE) $27.25   $32.39   $56.47   (16)%   (52)%
Lease Operating Expense ($ BOE) 3.97   4.69   4.04   (15)%   (2)%
Production Tax ($ BOE) 2.55   2.76   5.55   (8)%   (54)%
DD&A Expense ($ BOE) 15.30   17.42   21.84   (12)%   (30)%
Non-Cash G&A Expense ($ BOE) 7.59   4.22   0.89   80%   753%
Cash G&A Expense ($ BOE) 7.00   2.66   4.57   163%   53%
Total G&A Expense ($ BOE) 14.59   6.88   5.46   112%   167%

Operations Update

During the three months ended November 30, 2015, the Company completed 5 wells, including 4 mid length lateral wells (7,000 ft), and drilled 8 standard length lateral wells (4,000 ft). Production from the four mid length lateral wells on the Bestway pad averaged 612 BOE/day during their first 30 days, fitting a 550 mboe EUR model. The completed well costs on the Bestway pad are estimated to be less than $3.5 million each. Eight standard length lateral wells on the Wind pad were completed in December and continue to clean up during flowback.

In December, after drilling four standard length laterals on the Vista pad, the Company terminated its existing rig contract and subsequently signed a six month drilling contract on a new build rig that is expected to be more efficient and at a lower day rate compared to the previous contract. The new build rig will be mobilized onto the Vista pad mid-January 2016 to drill the remaining six wells.

During fiscal 2015, the Company entered into crude oil transportation agreements with three counterparties and a volume commitment to a third party refiner. Deliveries under two of the transportation agreements commenced during the quarter ended November 30, 2015. Deliveries under the third transportation agreement are not expected to commence until late 2016. The third party refinery volume commitment expired on December 31, 2015. Pursuant to these agreements, Synergy must deliver specific amounts of crude oil either from its own production or from oil acquired from third parties. During the quarter ended November 30, 2015, the Company incurred a transportation deficiency charge of $1.5 million as it did not meet all of the obligations during the quarter, and the Company estimates it could incur an additional $1.0 million deficiency charge in the month of December 2015. As of January 1, 2016, the Company's current production exceeds its delivery obligations, subsequent to the expiration of the volume commitment to the third party refiner.

Management Commentary

Lynn Peterson, CEO, of Synergy Resources commented, "In the current low commodity price environment, preservation of the balance sheet is a primary goal, and we remain in a net cash position at quarter end with $166 million of liquidity. Without a doubt, the current economic environment within our industry presents many challenges, and we continue to prepare for the possibility of "lower for longer" commodity prices. The impairment charge incurred for the period is a direct reflection of lower commodity prices and is not unique to our Company. In spite of these challenges, our low leveraged balance sheet allows us to look at this period of industry uncertainty as an opportunity to expand our leasehold position and grow our Company. Our team continues to evaluate assets in the core Wattenberg area and our ongoing drilling program contemplates mostly mid and extended reach wells during the second half of fiscal 2016, which is expected to provide increased efficiencies and improve our operating metrics."

Conference Call

Synergy Resources will host a conference call on Friday, January 8, 2016 at 11:00 a.m. Eastern time (9:00 a.m. Mountain time) to discuss its fiscal first quarter 2016 results. The call will be conducted by CEO and President Lynn Peterson, CFO James Henderson, COO Craig Rasmuson and VP Jon Kruljac.

Date: Friday, January 8, 2016
Time: 11:00 a.m. Eastern time (9:00 a.m. Mountain time)
Domestic Dial-In Number: 1-877-407-9122
International Dial-In Number: 1-201-493-6747

The conference call will be webcast simultaneously which you can access via this link: http// and via the investor section of the Company's web site at

Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Rhonda Sandquist with Synergy Resources at 720-616-4300.

A replay of the call will be available after 3:00 p.m. ET on the same day and until January 22, 2016.

Toll-free replay number: 1-877-660-6853
International replay number: 1-201-612-7415
Replay ID #: 411931

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 income 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 income (loss), its nearest GAAP measure:

(unaudited, in thousands)
  Three Months Ended November 30,
  2015   2014
Adjusted EBITDA:          
  Net (loss) income $ (122,328 )   $ 21,151
  Depreciation, depletion, accretion, and amortization   14,674       16,454
  Full cost ceiling impairment   125,230       -
  Income tax (benefit) provision   (10,007 )     11,744
  Stock-based compensation   7,197       793
  Mark to market of commodity derivative contracts:          
    Total gain on commodity derivatives contracts   (3,192 )     (18,140)
    Cash settlements on commodity derivative contracts   1,272       1,432
    Cash premiums paid for commodity derivative contracts   (959 )     -
      Adjusted EBITDA $ 11,887     $ 33,434

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 November 30, 2015.

(unaudited; in thousands)
ASSETS November 30,
  August 31,
Current assets:        
  Cash and cash equivalents $ 80,723   $133,908
  Other current assets   28,223   32,932
    Total current assets   108,946   166,840
Oil and gas properties and other equipment   527,596   534,740
Goodwill   40,711   40,711
Other assets   4,873   4,158
    Total assets $ 682,126   746,449
Current liabilities   83,878   73,711
Revolving credit facility   78,000   78,000
Deferred tax liability, net   -   10,007
Asset retirement obligations   12,444   12,334
    Total liabilities   174,322   174,052
Shareholders' equity:        
  Common stock and paid-in capital   596,471   538,736
  Retained (deficit) earnings   (88,667 ) 33,661
Total shareholders' equity   507,804   572,397
Total liabilities and shareholders' equity $ 682,126   $746,449
(unaudited; in thousands)  
  Three Months Ended
November 30,
  2015   2014  
Cash flows from operating activities:            
  Net (loss) income $ (122,328 )   $ 21,151  
  Adjustments to reconcile net income (loss) to net cash provided by operating activities:            
    Depletion, depreciation, accretion, and amortization   14,674       16,454  
    Full cost ceiling impairment   125,230       -  
    Provision for deferred taxes   (10,007 )     11,744  
    Other, non-cash items   4,318       (15,915 )
    Changes in operating assets and liabilities   9,200       1,001  
Total adjustments   143,415       13,284  
    Net cash provided by operating activities   21,087       34,435  
Cash flows from investing activities:            
  Acquisition of oil and gas properties   (35,045 )     -  
  Well costs and other capital expenditures   (39,073 )     (66,137 )
  Earnest money deposit   -       (6,250 )
    Net cash used in investing activities   (74,118 )     (72,387 )
Cash flows from financing activities:            
  Equity financing activities   (154 )     10,310  
  Debt financing activities   -       40,000  
    Net cash (used in) provided by financing activities   (154 )     50,310  
Net (decrease) increase in cash and equivalents   (53,185 )     12,358  
Cash and equivalents at beginning of period   133,908       34,753  
Cash and equivalents at end of period   80,723       47,111  
Short term investments   -       -  
Cash, equivalents and short term investments $ 80,723     $ 47,111  
(unaudited; in thousands, except share and per share data)
  Three Months Ended
November 30,
  2015   2014
Oil and gas revenues $ 26,137     $ 42,538
  Lease operating expenses   3,809       3,041
  Production taxes   2,443       4,178
  Depreciation, depletion, accretion, and amortization   14,674       16,454
  Full cost ceiling impairment   125,230       -
  Transportation commitment charge   1,518       -
  General and administrative   13,990       4,110
      Total expenses   161,664       27,783
Operating (loss) income   (135,527 )     14,755
Other income (expense):          
  Commodity derivative gain (loss)   3,192       18,140
  Interest income and (expense), net   -       -
      Total other income   3,192       18,140
(Loss) Income before income taxes   (132,335 )     32,895
Income tax (benefit) provision   (10,007 )     11,744
Net (loss) income $ (122,328 )   $ 21,151
Net (loss) income per common share:          
  Basic $ (1.14 )   $ 0.27
  Diluted $ (1.14 )   $ 0.26
Weighted-average shares outstanding:          
  Basic   107,105,253       79,008,719
  Diluted   107,105,253       80,141,152

Contact Information

  • Rhonda Sandquist
    Synergy Resources