Document



 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
FORM 8-K
 
 
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): August 7, 2018
 
 
 
EXTRACTION OIL & GAS, INC.
(Exact name of registrant as specified in its charter)
 
 
 
 
 
 
 
 
Delaware
 
001- 37907
 
46-1473923
(State or Other Jurisdiction
of Incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)
 
 
370 17th Street, Suite 5300
Denver, Colorado 80202
 
 
(Address of principal executive offices) (Zip Code)
 
 
Registrant’s telephone number, including area code (720) 557-8300
 
(Former name or former address, if changed since last report.)

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
¨            Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨            Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨            Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨            Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company ¨
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨


 






Item 2.02 Results of Operations and Financial Condition

On August 7, 2018, Extraction Oil & Gas, Inc. (the “Company”) issued a press release announcing its financial results for the three months and six months ended June 30, 2018. A copy of the press release covering such announcement and certain other matters is furnished as Exhibit 99.1 to this Current Report.
The information in this report, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, or the Exchange Act, as amended, except as specifically identified therein as being incorporated by reference.
Item 9.01                   Financial Statements and Exhibits.

(d)   Exhibits.

 
 
 
 
Exhibit No.
 
Description
 



1




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


 
 
 
 
EXTRACTION OIL & GAS, INC.
 
 
 
 
 
 
 
By:
/s/ RUSSELL T. KELLEY, JR.
 
 
Russell T. Kelley, Jr.
 
 
Chief Financial Officer


Dated: August 7, 2018



2
Exhibit
Exhibit 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12395311&doc=3

Extraction Oil & Gas, Inc. Announces Second-Quarter 2018 Results

DENVER - August 7, 2018 (GLOBE NEWSWIRE) -- Extraction Oil & Gas, Inc. (NASDAQ: XOG) (“Extraction” or the “Company”) today reported financial and operational results for the second quarter of 2018.

Second-Quarter 2018 Highlights

Second quarter average net sales volumes of 73,563 barrels of oil equivalent per day (BOE/d) including 38,804 barrels per day (Bbl/d) of crude oil;

For the second quarter, Extraction reported net income of $8.8 million, or $0.03 per basic and diluted share1, compared to net income of $7.2 million, or $0.02 per basic and diluted share1, for the same period in 2017. Adjusted EBITDAX, Unhedged2 was $189.5 million for the second quarter, up 154% year-over-year and up 14% sequentially. Adjusted EBITDAX was $153.1 million for the second quarter, up 105% year-over-year and up 9% sequentially; and

Drilling and completion (D&C) capital expenditures for the second quarter 2018 were $247 million.

Commenting on second quarter 2018 results, Extraction's Chairman and CEO Mark Erickson said: “During the second quarter, we reached another company record across all three production streams and saw higher revenues driven by higher oil production and improved oil yields."

"We continued to face a very challenging midstream environment leading up to the startup of DCP Midstream's Plant 10 last week. We intend to monitor the impact of the new plant on line pressures and expect that we will provide updates to our full year 2018 guidance, previously issued in December 2017, later in the third quarter. We remain focused on growing our crude oil production as it is the major driver of our revenues, cash flow and economics."

"Subsequent to quarter end, we had an additional $84 million asset sale associated with the sale of our ownership in Discovery Midstream, bringing our asset sale total to date to approximately $155 million. We are still evaluating further monetization of additional non-strategic assets."









 
1 For further information on the earnings per share, refer to the Condensed Consolidated Statement of Operations, included herein
2 Adjusted EBITDAX and Adjusted EBITDAX, Unhedged are non-GAAP financial measures. For a definition of Adjusted EBITDAX and Adjusted EBITDAX, Unhedged and a reconciliation to our most directly comparable financial measure calculated and presented in accordance with GAAP, read “-Reconciliation of Adjusted EBITDAX and Adjusted EBITDAX, Unhedged” included herein.





Financial Results

For the second quarter, Extraction reported oil, natural gas and NGL sales revenue of $260.2 million, as compared to $119.8 million during the same period in 2017, representing an increase of 117%. Revenue increased 13% sequentially, primarily driven by higher production, higher oil cuts and an improvement in crude oil price.

Extraction reported net income of $8.8 million, or $0.03 per basic and diluted share for the second quarter, compared to net income of $7.2 million for the same period in 2017. This increase in net income was driven predominately by a $59.9 million gain on the previously announced sale of approximately 15,100 non-strategic acres for $72.3 million. Adjusted EBITDAX, Unhedged was $189.5 million for the second quarter, up 154% year-over-year and up 14% sequentially. Adjusted EBITDAX was $153.1 million for the second quarter, up 105% year-over-year and up 9% sequentially. Please read “-Reconciliation of Adjusted EBITDAX and Adjusted EBITDAX, Unhedged”, included herein.




The following table provides a summary of our sales volumes, average sales prices and certain operating expenses on a per BOE basis for the three and six months ended June 30, 2018 and 2017, respectively:

 
For the Three Months Ended
 
For the Six Months Ended
 
June 30,

 
June 30,
 
2018
 
2017
 
2018
 
2017
Sales (MBoe)(1):
6,694

 
4,020

 
12,893

 
7,024

Oil sales (MBbl)
3,531

 
2,101

 
6,776

 
3,312

Natural gas sales (MMcf)
11,370

 
6,402

 
21,774

 
12,761

NGL sales (MBbl)
1,268

 
852

 
2,488

 
1,585

Sales (BOE/d)(1):
73,563

 
44,172

 
71,231

 
38,807

Oil sales (Bbl/d)
38,804

 
23,088

 
37,436

 
18,298

Natural gas sales (Mcf/d)
124,941

 
70,353

 
120,297

 
70,501

NGL sales (Bbl/d)
13,935

 
9,358

 
13,746

 
8,759

Average sales prices(2):
 
 
 
 
 
 
 
Oil sales (per Bbl)
$
60.46

 
$
40.64

 
$
58.11

 
$
41.52

Oil sales with derivative settlements (per Bbl)
48.89

 
40.70

 
47.28

 
39.14

Differential ($/Bbl) to Average NYMEX WTI
(7.45
)
 
(7.51
)
 
(7.35
)
 
(8.43
)
Natural gas sales (per Mcf)
1.74

 
2.89

 
2.02

 
3.01

Natural gas sales with derivative settlements (per Mcf)
2.19

 
2.90

 
2.53

 
2.94

Differential ($/Mcf) to Average NYMEX Henry Hub(3)
(1.37
)
 
(0.56
)
 
(1.10
)
 
(0.40
)
NGL sales (per Bbl)(3)
21.22

 
18.61

 
21.21

 
21.10

Average price per BOE
38.87

 
29.80

 
38.04

 
29.81

Average price per BOE with derivative settlements
33.53

 
29.84

 
33.22

 
28.55

Expense per BOE:
 
 
 
 
 
 
 
Lease operating expenses
$
3.10

 
$
3.51

 
$
3.22

 
$
3.72

Transportation and gathering
1.49

 
2.50

 
1.36

 
2.90

General and administrative expenses
5.11

 
5.84

 
5.06

 
7.00

Cash general and administrative expenses
2.46

 
2.64

 
2.46

 
2.93

Stock-based compensation
2.65

 
3.20

 
2.60

 
4.07

 
 
 
 
 
 
 
 
Production taxes as a % of Revenue
9.4
%
 
8.8
%
 
9.1
%
 
8.1
%
(1)
One BOE is equal to six thousand cubic feet (“Mcf”) of natural gas or one barrel (“Bbl”) of oil or NGL based on an approximate energy equivalency. This is an energy content correlation and does not reflect a value or price relationship between the commodities.
(2)
Average prices shown in the table reflect prices both before and after the effects of our settlements of our commodity derivative contracts. Our calculation of such effects includes both gains and losses on settlements for commodity derivatives and amortization of premiums paid or received on options that settled during the period.
(3)
As a result of the adoption of ASC 606 - Revenue from Contracts with Customers ("ASC 606") on January 1, 2018, certain costs previously classified as transportation and gathering expenses are presented on a net basis for proceeds expected to be received. For further information, see Note 2 - Adoption of ASC 606 of our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2018.

Operational Results

Second quarter crude oil volumes of 38,804 Bbl/d increased 68% year-over-year and increased 8% sequentially. Crude oil accounted for approximately 82% of the Company’s total revenues and over 53% of the Company’s total equivalent volumes recorded during the second quarter. Second quarter average net sales volumes were 73,563 BOE/d, an increase of 67% year-over-year and 7% sequentially.

For the second-quarter 2018, the Company’s aggregate drilling, completion, leasehold capital expenditures, totaled approximately $280 million, $247 million of which was for drilling and completion and $33 million on leasehold. In addition, Elevation Midstream, Extraction's wholly owned midstream subsidiary incurred $14 million of



midstream capital expenditures. Elevation's capital budget results in no capital outlay from Extraction and the financing is non-recourse to Extraction's balance sheet.

During the second quarter, Extraction reached total depth on 40 gross (29 net) wells with an average lateral length of approximately 7,725 feet and completed 61 gross (46 net) wells with an average lateral length of approximately 7,580 feet. We turned to sales 26 gross (19 net) wells with an average lateral length of approximately 5,586 feet. We completed 2,699 total stages during the quarter while pumping approximately 674 million pounds of proppant.

Updated Investor Presentation

Extraction has posted an updated investor presentation to its website. The investor presentation may be viewed on the Company’s website (www.extractionog.com) by selecting “Investors,” then “News and Events,” then “Presentations.”

Second-Quarter 2018 Earnings Conference Call Information

Those who would like to participate can dial into the number listed below approximately 15 minutes before the scheduled conference call time, and enter confirmation number 8778023 when prompted.

 
 
Date:
Wednesday, August 8, 2018
Time:
8:00 AM MDT / 10:00 AM EDT
Dial - In Numbers:
1-844-229-9561 (Domestic toll-free)
Conference ID:
8778023

To access the audio webcast and related presentation materials, please visit the Investor Relations section of the Company’s website at www.extractionog.com. A replay of the conference call will be available on the website for approximately 30 days following the call.

About Extraction Oil & Gas, Inc.

Denver-based Extraction Oil & Gas, Inc. is an independent energy exploration and development company focused on exploring, developing and producing crude oil, natural gas and NGLs primarily in the Wattenberg Field in the Denver-Julesburg Basin of Colorado. For further information, please visit www.extractionog.com. The Company's common shares are listed for trading on the NASDAQ under the symbol: “XOG.”

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this press release constitute “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. All statements, other than statements of historical facts, included herein concerning, among other things, planned capital expenditures, increases in oil and gas production, the number of anticipated wells to be drilled or completed after the date hereof, future cash flows and borrowings, pursuit of potential acquisition opportunities, our financial position, business strategy and other plans and objectives for future operations, are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as "may," "expect," "estimate," "project," "plan," "believe," "intend," "achievable," "anticipate," "will," "continue," "potential," "should," "could," and similar terms and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. These forward-looking statements represent our expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control that could cause actual results to differ materially from the results discussed in the forward-looking statements.




Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for us to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the “Risk Factors” section of our most recent Form 10-K and Forms 10-Q filed with the Securities and Exchange Commission and in our other public filings and press releases. These and other factors could cause our actual results to differ materially from those contained in any forward-looking statement.




EXTRACTION OIL & GAS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
 
June 30,
2018
 
December 31, 2017
ASSETS
 
 
 
Current Assets:
 
 
 
Cash and cash equivalents
$
68,249

 
$
6,768

Accounts receivable
135,485

 
139,348

Inventory and prepaid expenses
24,308

 
13,017

Commodity derivative asset
15,313

 
4,132

Total Current Assets
243,355

 
163,265

Property and Equipment (successful efforts method), at cost:
 
 
 
Oil and gas properties
4,361,943

 
3,825,912

Less: accumulated depletion, depreciation and amortization
(908,169
)
 
(709,662
)
Net oil and gas properties
3,453,774

 
3,116,250

Elevation gathering systems and facilities
26,417

 
4,889

Other property and equipment, net of accumulated depreciation
30,186

 
32,429

Net Property and Equipment
3,510,377

 
3,153,568

Non-Current Assets:
 
 
 
Commodity derivative asset
266

 

Goodwill and other intangible assets, net of accumulated amortization
55,757

 
55,453

Other non-current assets
14,305

 
12,383

Total Non-Current Assets
70,328

 
67,836

Total Assets
$
3,824,060

 
$
3,384,669

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Current Liabilities:
 
 
 
Accounts payable and accrued liabilities
$
252,051

 
$
211,581

Revenue and production taxes payable
151,179

 
90,249

Commodity derivative liability
153,567

 
67,428

Accrued interest payable
22,411

 
23,807

Asset retirement obligations
12,792

 
6,873

Total Current Liabilities
592,000

 
399,938

Non-Current Liabilities:
 
 
 
Credit facility
190,000

 
90,000

Senior Notes, net of unamortized debt issuance costs
1,131,579

 
933,361

Deferred tax liability
32,426

 
42,326

Commodity derivative liability
6,245

 
17,274

Other non-current liabilities
116,627

 
126,622

Total Non-Current Liabilities
1,476,877

 
1,209,583

 
 
 
 
Total Liabilities
2,068,877

 
1,609,521

Commitments and Contingencies
 
 
 
Series A Convertible Preferred Stock, $0.01 par value; 50,000,000 shares authorized; 185,280 issued and outstanding
161,298

 
158,383

Total Stockholders' Equity
1,593,885

 
1,616,765

Total Liabilities and Stockholders' Equity
$
3,824,060

 
$
3,384,669




EXTRACTION OIL & GAS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
 
For the Three Months Ended
June 30,

 
For the Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Oil sales
$
213,481

 
$
85,394

 
$
393,744

 
$
137,522

Natural gas sales
19,807

 
18,526

 
43,888

 
38,423

NGL sales
26,908

 
15,846

 
52,779

 
33,460

Total Revenues
260,196

 
119,766

 
490,411

 
209,405

Operating Expenses:
 
 
 
 
 
 
 
Lease operating expenses
20,774

 
14,125

 
41,477

 
26,161

Transportation and gathering
9,959

 
10,040

 
17,498

 
20,327

Production taxes
24,389

 
10,511

 
44,712

 
16,964

Exploration expenses
3,021

 
6,438

 
10,288

 
17,250

Depletion, depreciation, amortization and accretion
106,774

 
68,610

 
202,981

 
119,263

Impairment of long lived assets
128

 

 
128

 
675

(Gain) loss on sale of property and equipment
(59,902
)
 

 
(59,902
)
 
451

Acquisition transaction expenses

 

 

 
68

General and administrative expenses
34,231

 
23,487

 
65,200

 
49,175

Total Operating Expenses
139,374

 
133,211

 
322,382

 
250,334

Operating Income (Loss)
120,822

 
(13,445
)
 
168,029

 
(40,929
)
Other Income (Expense):
 
 
 
 
 
 
 
Commodity derivatives gain (loss)
(89,511
)
 
33,876

 
(139,839
)
 
84,298

Interest expense
(19,202
)
 
(9,021
)
 
(82,504
)
 
(18,681
)
Other income
939

 
250

 
1,267

 
818

Total Other Income (Expense)
(107,774
)
 
25,105

 
(221,076
)
 
66,435

Income (Loss) Before Income Taxes
13,048

 
11,660

 
(53,047
)
 
25,506

Income tax (expense) benefit
(4,200
)
 
(4,420
)
 
9,900

 
(9,550
)
Net Income (Loss)
$
8,848

 
$
7,240

 
$
(43,147
)
 
$
15,956

Income (Loss) Per Common Share(1)
 
 
 
 
 
 
 
Basic and diluted
$
0.03

 
$
0.02

 
$
(0.29
)
 
$
0.05

Weighted Average Common Shares Outstanding
 
 
 
 
 
 
 
Basic and diluted
175,762

 
171,835

 
174,992

 
171,835

(1)
For further information, see the reconciliation of Net Income (Loss) to Net Income (Loss) available to common shareholders in Note 10 of our Quarterly Report on Form 10-Q for the three and six months ended June 30, 2018 and 2017.




EXTRACTION OIL & GAS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
For the Three Months Ended June 30,
 
For the Six Months
Ended June 30,
 
2018
 
2017
 
2018
 
2017
Cash flows from operating activities:
 
 
 
 
 
 
 
Net income (loss)
$
8,848

 
$
7,240

 
$
(43,147
)
 
$
15,956

Reconciliation of net income (loss) to net cash provided by operating activities:
 
 
 
 
 
 
 
Depletion, depreciation, amortization and accretion
106,774

 
68,610

 
202,981

 
119,263

Abandonment and impairment of unproved properties
1,999

 
1,825

 
5,922

 
4,560

Impairment of long lived assets
128

 

 
128

 
675

(Gain) loss on sale of property and equipment
(59,902
)
 

 
(59,902
)
 
451

Amortization of debt issuance costs
926

 
867

 
11,368

 
1,712

Deferred rent
(505
)
 
(257
)
 
280

 
(156
)
(Gain) loss on commodity derivatives, including settlements and premiums paid
52,371

 
(37,987
)
 
68,289

 
(97,538
)
Earnings in unconsolidated subsidiaries
(704
)
 
10

 
(1,043
)
 
10

Distributions from unconsolidated subsidiaries
287

 

 
626

 

Make-whole premium paid on 2021 Senior Notes

 

 
35,600

 

Deferred income tax expense (benefit)
4,200

 
4,420

 
(9,900
)
 
9,550

Stock-based compensation
17,743

 
12,852

 
33,464

 
28,597

Changes in current assets and liabilities:
 
 

 
 
 
 
Accounts receivable
18,759

 
(15,691
)
 
5,035

 
(11,595
)
Inventory and prepaid expenses
(459
)
 
(243
)
 
(812
)
 
(103
)
Accounts payable and accrued liabilities
13,798

 
4,727

 
(10,248
)
 
(3,186
)
Revenue and production taxes payable
3,374

 
(10,358
)
 
54,879

 
(1,773
)
Accrued interest payable
3,306

 
10,829

 
(1,396
)
 
356

Asset retirement expenditures
(3,107
)
 
(350
)
 
(5,034
)
 
(952
)
Net cash provided by operating activities
167,836

 
46,494

 
287,090

 
65,827

Cash flows from investing activities:
 
 
 
 
 
 
 
Oil and gas property additions
(261,085
)
 
(237,499
)
 
(519,154
)
 
(572,105
)
Acquired oil and gas properties

 
(13,395
)
 

 
(17,225
)
Sale of property and equipment
72,345

 

 
72,345

 
2,000

Elevation gathering systems and facilities additions
(10,219
)
 

 
(16,055
)
 

Other property and equipment additions
(1,395
)
 
(2,559
)
 
(2,712
)
 
(5,790
)
Distributions from unconsolidated subsidiaries, return of capital
(137
)
 

 

 

Investment in unconsolidated subsidiaries
(293
)
 

 
(293
)
 

Net cash used in investing activities
(200,784
)
 
(253,453
)
 
(465,869
)
 
(593,120
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Borrowings under credit facility
185,000

 

 
430,000

 

Repayments under credit facility
(95,000
)
 

 
(330,000
)
 

Proceeds from the issuance of 2026 Senior Notes

 

 
739,664

 

Repayments of 2021 Senior Notes

 

 
(550,000
)
 

Make-whole premium paid on 2021 Senior Notes

 

 
(35,600
)
 

Repurchase of shares

 

 
(2,309
)
 

Payment of employee payroll withholding taxes
(226
)
 

 
(2,531
)
 

Dividends on Series A Preferred Stock
(2,722
)
 
(2,721
)
 
(5,443
)
 
(4,958
)
Debt issuance costs
(950
)
 
(95
)
 
(3,055
)
 
(109
)
Equity issuance costs
(268
)
 
(5
)
 
(466
)
 
(1,487
)
Net cash provided by (used in) financing activities
85,834

 
(2,821
)
 
240,260

 
(6,554
)
Increase (decrease) in cash, cash equivalents and restricted cash
52,886

 
(209,780
)
 
61,481

 
(533,847
)
Cash, cash equivalents and restricted cash at beginning of period
15,363

 
306,869

 
6,768

 
630,936

Cash, cash equivalents and restricted cash at end of the period
$
68,249

 
$
97,089

 
$
68,249

 
$
97,089

Supplemental cash flow information:
 
 
 
 
 
 
 
Property and equipment included in accounts payable and accrued liabilities
$
197,577

 
$
134,483

 
$
197,577

 
$
134,483

Cash paid for interest
$
17,073

 
$
507

 
$
41,607

 
$
22,256

Accretion of beneficial conversion feature of Series A Preferred Stock
$
1,476

 
$
1,331

 
$
2,914

 
$
2,627




EXTRACTION OIL & GAS, INC.
RECONCILIATION OF ADJUSTED EBITDAX AND ADJUSTED EBITDAX, UNHEDGED
(In thousands)
(Unaudited)
 
For the Three Months Ended June 30,

 
For the Six Months Ended
June 30,
 
2018
 
2017
 
2018
 
2017
Reconciliation of Net Income (Loss) to Adjusted EBITDAX:
 
 
 
 
 
 
 
Net income (loss)
$
8,848

 
$
7,240

 
$
(43,147
)
 
$
15,956

Add back:
 
 
 
 
 
 
 
Depletion, depreciation, amortization and accretion
106,774

 
68,610

 
202,981

 
119,263

Impairment of long lived assets
128

 

 
128

 
675

Exploration expenses
3,021

 
6,438

 
10,288

 
17,250

(Gain) loss on sale of property and equipment
(59,902
)
 

 
(59,902
)
 
451

Acquisition transaction expenses

 

 

 
68

(Gain) loss on commodity derivatives
89,511

 
(33,876
)
 
139,839

 
(84,298
)
Settlements on commodity derivative instruments
(35,652
)
 
(143
)
 
(58,905
)
 
(9,184
)
Premiums paid for derivatives that settled during the period
(730
)
 
313

 
(3,235
)
 
313

Stock-based compensation expense
17,743

 
12,852

 
33,464

 
28,597

Amortization of debt issuance costs
926

 
867

 
11,368

 
1,712

Make-whole premium on 2021 Senior Notes

 

 
35,600

 

Interest expense
18,276

 
8,154

 
35,536

 
16,969

Income tax expense (benefit)
4,200

 
4,420

 
(9,900
)
 
9,550

Adjusted EBITDAX
$
153,143

 
$
74,875

 
$
294,115

 
$
117,322

Deduct:
 
 
 
 
 
 
 
Settlements on commodity derivative instruments
(35,652
)
 
(143
)
 
(58,905
)
 
(9,184
)
Premiums paid for derivatives that settled during the period
(730
)
 
313

 
(3,235
)
 
313

Adjusted EBITDAX, Unhedged
$
189,525

 
$
74,705

 
$
356,255

 
$
126,193


Adjusted EBITDAX and Adjusted EBITDAX, Unhedged are not measures of net income (loss) as determined by United States generally accepted accounting principles (“GAAP”). Adjusted EBITDAX and Adjusted EBITDAX, Unhedged are supplemental non-GAAP financial measures that are used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDAX as net income (loss) adjusted for certain cash and non-cash items, including depletion, depreciation, amortization and accretion, impairment of long lived assets, exploration expenses, (gain) loss on sale of property and equipment, acquisition transaction expenses, (gain) loss on commodity derivatives, settlements on commodity derivative instruments, premiums paid for derivatives that settled during the period, stock-based compensation expense, amortization of debt issuance costs, make-whole premiums, interest expense, income taxes and non-recurring charges. We define Adjusted EBITDAX, Unhedged as Adjusted EBITDAX adjusted for settlements on commodity derivative instruments and premiums paid for derivative that settled during the period.

Management believes Adjusted EBITDAX and Adjusted EBITDAX, Unhedged are useful because they allow us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDAX and Adjusted EBITDAX, Unhedged because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX and Adjusted EBITDAX, Unhedged should not be considered as alternatives to, or more meaningful than, net income (loss) as determined in accordance with GAAP or as an indicator of our operating performance. Certain items excluded from Adjusted EBITDAX and Adjusted EBITDAX, Unhedged are significant components in



understanding and assessing a company’s financial performance, such as a company’s cost of capital, hedging strategy and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX and Adjusted EBITDAX, Unhedged. Our computations of Adjusted EBITDAX and Adjusted EBITDAX, Unhedged may not be comparable to other similarly titled measure of other companies. We believe that Adjusted EBITDAX and Adjusted EBITDAX, Unhedged are widely followed measures of operating performance. A reconciliation of Adjusted EBITDAX and Adjusted EBITDAX, Unhedged and net income (loss) for the three and six months ended June 30, 2018 and 2017 is provided in the table above. Additionally, our management team believes Adjusted EBITDAX and Adjusted EBITDAX, Unhedged are useful to an investor in evaluating our financial performance because these measures (i) are widely used by investors in the oil and natural gas industry to measure a company’s operating performance without regard to items excluded from the calculation of such term, among other factors; (ii) help investors to more meaningfully evaluate and compare the results of our operations from period to period by removing the effect of our capital structure from our operating structure; and (iii) are used by our management team for various purposes, including as a measure of operating performance, in presentations to our board of directors, as a basis for strategic planning and forecasting.



Investor Contact: Louis Baltimore, ir@extractionog.com, 720-974-7773
Media Contact: Brian Cain, info@extractionog.com, 720-974-7782