Extraction Oil & Gas, Inc. Announces First-Quarter 2017 Results; Exceeds High End of Production Guidance and Reaffirms 2017 Outlook
First-Quarter 2017 Highlights
- First quarter average net sales volumes of 33,383 barrels of oil equivalent per day (BOE/d) including 13,454 barrels per day (Bbl/d) of oil. Production volumes exceeded the midpoint of the Company’s oil guidance and exceeded the high end of the guidance range for total equivalent volumes;
- Extraction reported first quarter net income of
$8.7 million , or$0.03 per basic and diluted share1, compared to net loss of$45.5 million for the same period in 2016. Adjusted EBITDAX, Unhedged2 was$51.5 million for the first quarter, up 125% year-over-year and down 11% sequentially. Adjusted EBITDAX was$42.4 million , down 16% year-over-year and down 22% sequentially;
- Turned to sales 26 gross (25 net) operated wells with an average lateral length of approximately 7,000 feet, consistent with the Company’s plan, and completed 54 gross (47 net) wells with an average lateral length of approximately 7,000 feet; and
- Extraction expects second-quarter 2017 average net sales volumes to be 42-45 MBOE/d with 21-22 MBbl/d of crude oil and reaffirms the Company’s previous full-year 2017 production, capital and expense guidance.
Commenting on first-quarter 2017 results, Extraction's Chairman and CEO
“We are very encouraged by the results we are seeing from our first three pads utilizing enhanced completions, currently producing at or in excess of our enhanced completions type curves. In addition, we are seeing lower GORs along with no material declines on these pads, leading to the potential for additional separation from the type curves.”
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1 For further information on the earnings per share, refer to the Consolidated Statement of Operations
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.”
“We expect to turn three additional pads from our year-end DUC program to sales this quarter. Furthermore, towards the end of the quarter we expect to turn to sales several additional pads that were not part of our year-end DUC inventory. Our DUC inventory is currently at 59 wells with an average lateral length of approximately 8,600 feet.”
Financial Results
First quarter average net sales volumes were 33,383 BOE/d, an increase of 35% year-over-year and a decrease of 13% sequentially. Crude oil volumes exceeded the midpoint of Company guidance while total equivalent volumes exceeded the high end of the guidance range. Crude oil accounted for approximately 58% of our total revenues recorded during the first quarter of 2017.
For the first quarter, Extraction reported oil, natural gas and NGL sales revenue of
Adjusted EBITDAX, Unhedged was
For the first quarter, Extraction reported net income of
Lease operating expenses (LOE) excluding transportation and gathering expenses for the first quarter totaled
Transportation and gathering expense related to natural gas and NGL sales for the first quarter of
The following table provides a summary of our sales volumes, average prices and certain operating expenses on a per BOE basis for the first-quarter 2017 and 2016 respectively:
For the Three Months Ended | |||||||||
March 31, | |||||||||
2017 | 2016 | ||||||||
Sales (MBoe)(1): | 3,005 | 2,254 | |||||||
Oil sales (MBbl) | 1,211 | 1,259 | |||||||
Natural gas sales (MMcf) | 6,359 | 3,520 | |||||||
NGL sales (MBbl) | 734 | 408 | |||||||
Sales (BOE/d)(1): | 33,383 | 24,766 | |||||||
Oil sales (Bbl/d) | 13,454 | 13,840 | |||||||
Natural gas sales (Mcf/d) | 70,651 | 38,681 | |||||||
NGL sales (Bbl/d) | 8,154 | 4,479 | |||||||
Average sales prices(2): | |||||||||
Oil sales (per Bbl) | $ | 43.05 | $ | 27.08 | |||||
Oil sales with derivative settlements (per Bbl) | 36.42 | 46.30 | |||||||
Natural gas sales (per Mcf) | 3.13 | 1.88 | |||||||
Natural gas sales with derivative settlements (per Mcf) | 2.97 | 2.80 | |||||||
NGL sales (per Bbl) | 24.00 | 10.88 | |||||||
Average price per BOE | 29.83 | 20.03 | |||||||
Average price per BOE with derivative settlements | 26.82 | 32.20 | |||||||
Expense per BOE: | |||||||||
Lease operating expenses | $ | 7.43 | $ | 5.31 | |||||
Operating expenses | 4.01 | 3.49 | |||||||
Transportation and gathering | 3.42 | 1.82 | |||||||
Production taxes | 2.15 | 1.99 | |||||||
Exploration expenses | 3.60 | 1.26 | |||||||
Depletion, depreciation, amortization and accretion | 16.86 | 20.10 | |||||||
Impairment of long lived assets | 0.22 | 0.20 | |||||||
Other operating expenses | 0.15 | 0.40 | |||||||
Acquisition transaction expenses | 0.02 | — | |||||||
General and administrative expenses | 8.55 | 3.17 | |||||||
Cash general and administrative expenses | 3.31 | 2.56 | |||||||
Unit and stock-based compensation | 5.24 | 0.61 | |||||||
Total operating expenses per BOE | 38.98 | 32.43 | |||||||
(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.
Operational Results
During the first quarter, our aggregate drilling, completion, leasehold and midstream capital expenditures totaled approximately
Towards the end of the first quarter, Extraction turned to sales 24 gross (23 net) wells on two pads as part of its
Commenting on the early results from the Company’s pads completed using enhanced completions, Extraction's President
Second Quarter and Full-Year 2017 Outlook
For the second quarter, we expect our average net sales volumes to be 42-45 MBoe/d, which represents a 30% increase over our first quarter volumes at the midpoint. Our crude oil production is expected to average 21-22 MBbl/d, which represents a 60% increase over first quarter at the midpoint. We expect our second quarter LOE excluding transportation and gathering expense to be between
For the full-year 2017, we reaffirm our previously disclosed production, expense and capital guidance as operations remain on track with our prior forecast. Extraction continues to expect full-year 2017 net sales volumes to average between 48-54 MBoe/d. Our crude oil production is expected to average 23-26 MBbl/d.
Debt and Liquidity
Extraction ended the first quarter with
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.”
First-Quarter 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 4341676 when prompted.
First-Quarter 2017 Earnings Conference Call Information
Date: | Wednesday, May 10, 2017 | ||||
Time: | 8:00 AM MDT / 10:00 AM EDT | ||||
Dial - In Numbers: | 1-844-229-9561 (Domestic toll-free) | ||||
Conference ID: | 4341676 | ||||
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
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
EXTRACTION OIL & GAS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) (Unaudited) |
||||||||
March 31, | December 31, | |||||||
2017 | 2016 | |||||||
ASSETS | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 284,551 | $ | 588,736 | ||||
Accounts receivable | ||||||||
Trade | 21,775 | 23,154 | ||||||
Oil, natural gas and NGL sales | 31,066 | 34,066 | ||||||
Inventory and prepaid expenses | 9,715 | 7,722 | ||||||
Total Current Assets | 347,107 | 653,678 | ||||||
Property and Equipment (successful efforts method), at cost: | ||||||||
Proved oil and gas properties | 2,081,304 | 1,851,052 | ||||||
Unproved oil and gas properties | 479,710 | 452,577 | ||||||
Wells in progress | 141,423 | 98,747 | ||||||
Less: accumulated depletion, depreciation and amortization | (451,458 | ) | (402,912 | ) | ||||
Net oil and gas properties | 2,250,979 | 1,999,464 | ||||||
Other property and equipment, net of accumulated depreciation | 32,677 | 32,721 | ||||||
Net Property and Equipment | 2,283,656 | 2,032,185 | ||||||
Non-Current Assets: | ||||||||
Cash held in escrow | 22,318 | 42,200 | ||||||
Commodity derivative asset | 5,724 | — | ||||||
Goodwill and other intangible assets, net of accumulated amortization | 54,526 | 54,489 | ||||||
Other non-current assets | 1,947 | 2,224 | ||||||
Total Non-Current Assets | 84,515 | 98,913 | ||||||
Total Assets | $ | 2,715,278 | $ | 2,784,776 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued liabilities | $ | 88,166 | $ | 131,134 | ||||
Revenue payable | 34,499 | 35,162 | ||||||
Production taxes payable | 27,080 | 27,327 | ||||||
Commodity derivative liability | 9,002 | 56,003 | ||||||
Accrued interest payable | 9,148 | 19,621 | ||||||
Asset retirement obligations | 4,375 | 5,300 | ||||||
Total Current Liabilities | 172,270 | 274,547 | ||||||
Non-Current Liabilities: | ||||||||
Senior Notes, net of unamortized debt issuance costs | 538,684 | 538,141 | ||||||
Production taxes payable | 45,342 | 35,838 | ||||||
Commodity derivative liability | — | 6,738 | ||||||
Other non-current liabilities | 3,408 | 3,466 | ||||||
Asset retirement obligations | 53,751 | 50,808 | ||||||
Deferred tax liability | 111,156 | 106,026 | ||||||
Total Non-Current Liabilities | 752,341 | 741,017 | ||||||
Commitments and Contingencies | ||||||||
Total Liabilities | 924,611 | 1,015,564 | ||||||
Series A Convertible Preferred Stock, $0.01 par value; 50,000,000 shares authorized; 185,280 issued and outstanding | 154,360 | 153,139 | ||||||
Stockholders' Equity: | ||||||||
Common Stock, $0.01 par value; 900,000,000 shares authorized; 171,834,605 issued and outstanding | 1,718 | 1,718 | ||||||
Additional paid-in capital | 2,079,108 | 2,067,590 | ||||||
Accumulated deficit | (444,519 | ) | (453,235 | ) | ||||
Total Stockholders' Equity | 1,636,307 | 1,616,073 | ||||||
Total Liabilities and Stockholders' Equity | $ | 2,715,278 | $ | 2,784,776 |
EXTRACTION OIL & GAS INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) |
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For the Three Months Ended | ||||||||||
March 31, | ||||||||||
2017 | 2016 | |||||||||
Revenues: | ||||||||||
Oil sales | $ | 52,128 | $ | 34,088 | ||||||
Natural gas sales | 19,897 | 6,606 | ||||||||
NGL sales | 17,614 | 4,438 | ||||||||
Total Revenues | 89,639 | 45,132 | ||||||||
Operating Expenses: | ||||||||||
Lease operating expenses | 22,323 | 11,970 | ||||||||
Production taxes | 6,453 | 4,490 | ||||||||
Exploration expenses | 10,812 | 2,831 | ||||||||
Depletion, depreciation, amortization and accretion | 50,653 | 45,308 | ||||||||
Impairment of long lived assets | 675 | 446 | ||||||||
Other operating expenses | 451 | 891 | ||||||||
Acquisition transaction expenses | 68 | — | ||||||||
General and administrative expenses | 25,688 | 7,140 | ||||||||
Total Operating Expenses | 117,123 | 73,076 | ||||||||
Operating Loss | (27,484 | ) | (27,944 | ) | ||||||
Other Income (Expense): | ||||||||||
Commodity derivatives gain (loss) | 50,422 | (4,036 | ) | |||||||
Interest expense | (9,660 | ) | (13,568 | ) | ||||||
Other income | 568 | 28 | ||||||||
Total Other Income (Expense) | 41,330 | (17,576 | ) | |||||||
Net Income (Loss) Before Income Taxes | 13,846 | (45,520 | ) | |||||||
Income Tax Expense | 5,130 | — | ||||||||
Net Income (Loss) | $ | 8,716 | $ | (45,520 | ) | |||||
Earnings Per Common Share | ||||||||||
Basic and diluted | $ | 0.03 | ||||||||
Weighted Average Common Shares Outstanding | ||||||||||
Basic and diluted | 171,835 |
EXTRACTION OIL & GAS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
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For the Three Months Ended | |||||||||
March 31, | |||||||||
2017 | 2016 | ||||||||
Cash flows from operating activities: | |||||||||
Net income (loss) | $ | 8,716 | $ | (45,520 | ) | ||||
Reconciliation of net income (loss) to net cash provided by operating activities: | |||||||||
Depletion, depreciation, amortization and accretion | 50,653 | 45,308 | |||||||
Abandonment and impairment of unproved properties | 2,735 | — | |||||||
Impairment of long lived assets | 675 | 446 | |||||||
Loss on sale of property and equipment | 451 | — | |||||||
Amortization of debt issuance costs and debt discount | 845 | 1,198 | |||||||
Deferred rent | 101 | 242 | |||||||
Commodity derivatives (gain) loss | (50,422 | ) | 4,036 | ||||||
Settlements on commodity derivatives | (9,129 | ) | 29,072 | ||||||
Premiums paid on commodity derivatives | — | (30 | ) | ||||||
Deferred income tax expense | 5,130 | — | |||||||
Unit and stock-based compensation | 15,745 | 1,368 | |||||||
Changes in current assets and liabilities: | |||||||||
Accounts receivable—trade | 1,096 | 6,107 | |||||||
Accounts receivable—oil, natural gas and NGL sales | 3,000 | (557 | ) | ||||||
Inventory and prepaid expenses | 140 | 252 | |||||||
Accounts payable and accrued liabilities | (7,913 | ) | (17,738 | ) | |||||
Revenue payable | (663 | ) | (3,632 | ) | |||||
Production taxes payable | 9,248 | 5,816 | |||||||
Accrued interest payable | (10,473 | ) | 11,268 | ||||||
Asset retirement expenditures | (602 | ) | (96 | ) | |||||
Net cash provided by operating activities | 19,333 | 37,540 | |||||||
Cash flows from investing activities: | |||||||||
Oil and gas property additions | (334,606 | ) | (79,086 | ) | |||||
Acquired oil and gas properties | (3,830 | ) | — | ||||||
Sale of other property and equipment | 2,000 | 2,148 | |||||||
Other property and equipment additions | (3,231 | ) | (1,586 | ) | |||||
Cash held in escrow | 19,882 | — | |||||||
Net cash used in investing activities | (319,785 | ) | (78,524 | ) | |||||
Cash flows from financing activities: | |||||||||
Borrowings under credit facility | — | 10,000 | |||||||
Dividends on Series A Preferred stock | (2,237 | ) | — | ||||||
Debt issuance costs | (14 | ) | — | ||||||
Equity issuance costs | (1,482 | ) | (214 | ) | |||||
Net cash provided by (used in) financing activities | (3,733 | ) | 9,786 | ||||||
Decrease in cash and cash equivalents | (304,185 | ) | (31,198 | ) | |||||
Cash and cash equivalents at beginning of period | 588,736 | 97,106 | |||||||
Cash and cash equivalents at end of the period | $ | 284,551 | $ | 65,908 | |||||
Supplemental cash flow information: | |||||||||
Property and equipment included in accounts payable and accrued liabilities | $ | 71,308 | $ | 60,020 | |||||
Cash paid for interest | $ | 21,749 | $ | 2,064 | |||||
Accretion of beneficial conversion feature of Series A Preferred Stock | $ | 1,296 | $ | — |
EXTRACTION OIL & GAS, INC. RECONCILIATION OF ADJUSTED EBITDAX AND ADJUSTED EBITDAX, UNHEDGED (In thousands) |
||||||||
For the Three Months Ended | ||||||||
March 31, | ||||||||
2017 | 2016 | |||||||
Reconciliation of Adjusted EBITDAX: | ||||||||
Net income (loss) | $ | 8,716 | $ | (45,520 | ) | |||
Add back: | ||||||||
Depletion, depreciation, amortization and accretion | 50,653 | 45,308 | ||||||
Impairment of long lived assets | 675 | 446 | ||||||
Exploration expenses | 10,812 | 2,831 | ||||||
Rig termination fee | — | 891 | ||||||
Loss on sale of property and equipment | 451 | — | ||||||
Acquisition transaction expenses | 68 | — | ||||||
(Gain) loss on commodity derivatives | (50,422 | ) | 4,036 | |||||
Settlements on commodity derivative instruments | (9,041 | ) | 30,502 | |||||
Premiums paid for derivatives that settled during the period | — | (3,060 | ) | |||||
Unit and stock-based compensation expense | 15,745 | 1,368 | ||||||
Amortization of debt discount and debt issuance costs | 845 | 1,198 | ||||||
Interest expense | 8,815 | 12,370 | ||||||
Income tax expense | 5,130 | — | ||||||
Adjusted EBITDAX | $ | 42,447 | $ | 50,370 | ||||
Deduct: | ||||||||
Settlements on commodity derivative instruments | (9,041 | ) | 30,502 | |||||
Premiums paid for derivatives that settled during the period | — | (3,060 | ) | |||||
Adjusted EBITDAX, Unhedged | $ | 51,488 | $ | 22,928 | ||||
Adjusted EBITDAX and Adjusted EBITDAX, Unhedged are not measures of net income (loss) as determined by
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 months ended
For further information, please contact Mr.Louis Baltimore , Director of Investor Relations atExtraction Oil & Gas, Inc. at +1.720.974.7773