Attached files
EXHIBIT 99.1
Synergy Resources Reports Fiscal Fourth Quarter
and Year End 2012 Results
Full Year Revenues up 150% to Record $25.0 Million,
Driving Operating Income up 317% to Record $11.8 Million
and Net Income of $0.25 per Diluted Share Company to Host
Investor Conference Call Today, November 13, at 11:30 a.m. ET
PLATTEVILLE, Colo., November 13, 2012 -- Synergy Resources Corporation (NYSE
Mkt: SYRG), a U.S. oil and gas exploration and production company focused on
the Denver-Julesburg Basin, reported its fiscal fourth quarter and year end
results for the period ended August 31, 2012.
Fiscal Fourth Quarter and Year 2012 Financial Highlights as Compared to
the Same Year ago Periods
o Revenue increased 99% to $6.7 million in the fourth quarter, and was
up 150% to $25.0 million for the full year.
o Net income grew 22% to $1.9 million or $0.04 per diluted share in the
quarter and to $12.1 million or $0.25 per diluted share for the full
year as compared to a loss in fiscal 2011.
o Adjusted EBITDA was up 190% to a record $18.2 million in fiscal 2012,
representing a 73% return on revenue for the full year.
Operational Highlights
o In the fourth quarter, net oil and natural gas production increased
120% to 116,818 barrels of oil equivalent (BOE), as compared to the
same year-ago quarter, and averaged 1,270 BOE per day versus an
average of 577 BOE in the year ago quarter.
o Brought 52 new wells on-line during the year.
o Participated in five non-operated horizontal wells during the year.
o Increased estimated proved reserves to 5.1 million barrels of oil and
33 billion cubic feet of gas, or combined total BOE of 10.7 million.
The estimated present value of these reserves before tax and
discounted 10% is $148.8 million. Total BOE increased 140%, with
present value increasing by 107%, as compared to the annual reserve
report prepared on August 31, 2011.
Fiscal Fourth Quarter and Year-End 2012 Financial Results
Revenues for the fourth quarter totaled $ 6.7 million up 99% from $3.4 million
in the same quarter a year ago. The improvement from the year-ago quarter was
attributed to a 120% increase in production, driven primarily by the addition of
52 new producing wells brought on-line during the year.
Revenues for the full year of fiscal 2012 totaled $25.0 million, up 150% from
$10.0 million in the previous year. The yearly improvement was attributed to a
150% increase in production. Commodity pricing did not affect the comparison, as
average realized selling price per BOE was flat year-over-year.
1
Operating income for the fourth quarter was $3.4 million, up 117% from $1.6
million in the same year-ago period. Net income totaled $1.9 million, up 22% as
compared to $1.6 million in the comparable year-ago quarter. On a per share
basis, earnings were $0.04 per diluted share for both quarters. Operating income
for the full year was $11.8 million, up 317% from $2.8 million in the previous
year. Net income totaled $12.1 million during 2012 or $0.25 per diluted share,
as compared to a loss of $11.6 million or $(0.45) per diluted share a year ago.
The net loss in fiscal 2011 included aggregate non-cash costs of $14.4 million
associated with the amortization and conversion of $18 million in convertible
debt.
Adjusted EBITDA (a non-GAAP measure) in the fourth quarter was $5.0 million, up
105% from $2.4 million in the same year-ago quarter. Adjusted EBITDA in the
fourth fiscal quarter of 2012 represented a 74% return on revenue. Adjusted
EBITDA for the full year was $18.2 million, up 190% from $6.3 million in the
previous year, and representing a return on revenue for the year of 73% (see
further discussion about the presentation of adjusted EBITDA in "About Non-GAAP
Financial Measures," below).
As of August 31, 2012, the company's cash and equivalents totaled $19.3 million,
as compared to $9.5 million at August 31, 2011. The current ratio at August 31,
2012 was 1.7 to 1.
Fiscal Fourth Quarter as Compared to Fiscal Third Quarter
Results for the 2012 fiscal fourth quarter were down slightly compared to the
third quarter. Revenues were $6.7 million, down 10% from $7.5 million in the
third quarter. We attribute a majority of the decline in revenues to commodity
prices. Oil averaged $82.89 in the fourth quarter and $91.21 in the third
quarter, and the average price of natural gas declined 22%. Operating income for
the fourth quarter was $3.4 million, down 11% from $3.8 million in the previous
quarter. Net income totaled $1.9 million or $0.04 per diluted share, down 20% as
compared to $2.4 million or $0.05 per diluted share in the third quarter.
Adjusted EBITDA in the fourth quarter was $5.0 million, down 14% from $5.8
million in the previous quarter.
The following table presents certain per unit metrics that compare results of
the corresponding quarterly and twelve-month reporting periods:
Per Unit Metric Three Months Ended Twelve Months Ended
August August August August
31, 31, % 31, 31, %
2012 2011 Change 2012 2011 Change
---- ---- ------ ------- ------ ------
Sales volumes - oil
(Bbls) 72,361 26,582 172% 235,691 89,917 162%
Sales volumes - gas
(Mcf) 266,744 158,937 68% 1,109,057 450,831 146%
Sales Volumes - BOE 116,818 53,072 120% 420,534 165,056 155%
BOEPD 1,270 577 120% 1,149 452 154%
Average sales price -
oil ($/Bbls) $ 82.89 $ 89.91 -8% $ 87.59 $ 83.07 5%
Average sales price -
gas ($/Mcf) 2.82 6.22 -55% 3.90 5.12 -24%
Average sales price -
($/BOE) 57.78 63.65 -9% 59.38 59.24 0%
Lease operating expenses
($/BOE) 2.91 3.65(1) -20% 2.89 2.94 -2%
Production taxes)
($/BOE) 5.03 6.02(1) -16% 5.79 5.79 0%
DD&A expense ($/BOE) 12.07 14.61 -17% 14.29 16.62 -14%
G&A expense ($/BOE) 8.54 13.78 -38% 8.46 17.59 -52%
(1) Certain prior years amounts have been reclassified to conform with current
year presentation.
2
Operational Results for the Fourth Fiscal Quarter and Year 2012
As the company finished its fiscal year 2012, it reported that it had drilled 51
wells during the year, including 10 wells on which final completion activities
were in process. The wells in process are expected to begin producing in the
first quarter of fiscal 2013. In addition, Synergy participated as a
non-operating owner in 13 wells during the year, including 8 wells on which
final completion activities are currently in process.
All of the company's production is in the Wattenberg Field of the D-J Basin. As
of Aug 31, 2012, the company operated 156 gross wells (145 net) and holds an
ownership interest in 53 gross wells (13 net) operated by other companies.
During the fiscal fourth quarter, Synergy completed the Aims/ Greeley Country
Club pad (9 wells) and the Margil SE pad (7 wells). Production challenges at the
Aims/Greeley Country Club pad have prevented the wells from reaching full
production status. Despite these initial issues, management believes these 9
wells will be some of the best producing wells for the company once the near
term issues are remedied. Full production flows are expected from both pads by
the end of the first fiscal quarter of 2013.
The company exited the year under contract with two drilling rigs from Ensign
Drilling (Rig 136 and 226). Rig 226 is a top drive ADR rig and remains under a
longer term contract with Synergy, while Rig 136 was opportunistically
contracted to do work on the AVEX prospect. This rig was released when drilling
on the AVEX prospect was completed.
Management Commentary
"We had a very successful year achieving all of our stated drilling and
completion goals within the Wattenberg," said Ed Holloway, the CEO of Synergy
Resources. "Despite the difficult conditions for part of the year with high line
pressure in the Wattenberg and modest commodity price pressure in the fourth
quarter, neither within our control, we remain well positioned with our drilling
program to grow production in fiscal 2013. We have the capital, access to
equipment and talented management to ensure continued growth."
According to the company's V.P. of operations, Craig Rasmuson: "Our production
volumes across the Wattenberg field were impacted during the fiscal fourth
quarter by overall high line pressure within our midstream partners' collection
and gathering systems. We're confident that had this issue not occurred, our
production quantities would have improved significantly from the previous
quarter. We anticipate capital spending by our midstream partners on new
facilities will remedy this issue over the longer term. In the near term, we
have installed well head compression on six of our pads to improve our ability
to inject gas into the gathering system.
"We continue to gather information from our non-operated horizontal drilling
programs and will look to put this knowledge to work in the field as operator of
our horizontal wells in the second half of fiscal 2013. We have chosen to delay
this program briefly to let the new gathering and processing facilities come on
line prior to any new production from our horizontal wells."
Concluded Holloway: "We've continued to demonstrate that we can drill and
complete wells on time and on budget. Our team looks forward to the
opportunities presented by the start of our own operated horizontal drilling
program in the 2013 drilling year as we continue to utilize our acreage in the
core Wattenberg field."
3
Fiscal 2013 Outlook
Management anticipates updated CAPEX spending of $82 million on the following
programs with the majority of the drilling expenditures weighted towards the
second half of the fiscal year as the horizontal drilling program begins. The
company anticipates funding this program with cash on hand, cash flow from
revenues, and additional borrowings.
o $17 million to drill 4 new horizontal wells as operator;
o $15 million to drill 25 new vertical wells as operator;
o $14 million to participate as a non-operator to drill approximately 10
horizontal and 8 vertical wells;
o $1 million for existing well recompletions;
o $5 million for land leasing and acquisitions; and
o $30 million cash and $12 million stock for potential acquisition of
Orr Energy.
Conference Call
Synergy Resources will host a conference call today, Tuesday, November 13, 2012
at 11:30 a.m. Eastern time (9:30 a.m. Mountain time) to discuss its fiscal
fourth quarter and year end 2012 results. President and CEO Ed Holloway, Vice
President William Scaff, Jr. and CFO Monty Jennings will host the presentation,
followed by a question and answer period.
Date: Tuesday, November 13, 2012
Time: 11:30 a.m. Eastern time (9:30 a.m. Mountain time)
Domestic Dial-In Number: 1-877-941-8416
International Dial-In Number: 1-480-629-9808
Conference ID#: 4575640
The conference call will be broadcast simultaneously and available for replay
here and via the investor section of the company's web site at www.syrginfo.com.
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 Justin Vaicek of
Liolios Group at (949) 574-3860.
A replay of the call will be available after 2:30 p.m. Eastern time on the same
day and until December 13, 2012.
Toll-free replay number: 1-877-870-5176
International replay number: 1-858-384-5517
Replay pin #: 4575640
4
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 Denver-Julesburg
Basin, which encompasses Colorado, Wyoming, Kansas, and Nebraska. The Wattenberg
field in the D-J Basin ranks as one of the most productive fields in the U.S.
The company's corporate offices are located in Platteville, Colorado. More
company news and information about Synergy Resources is available at
www.SYRGinfo.com.
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.
About Reserve Estimates
Reserve estimates mentioned in this release were prepared in accordance with
guidelines established by the Securities and Exchange Commission for proved
reserves. Probable and possible reserves are excluded. Prices are based on a
trailing twelve month average and are held constant over the life of the
properties. Similarly, costs are held constant for the duration of the well.
About Non-GAAP Financial Measures
The company uses "adjusted cash flow from operations" and "adjusted EBITDA,"
both non-GAAP financial measures, for internal managerial purposes when
evaluating period-to-period comparisons. These measures are not measures of
financial performance under U.S. GAAP and should be considered in addition to,
not as a substitute for, cash flows from operations, investing, or financing
activities, net income, nor as a liquidity measure or indicator of cash flows or
an indicator of operating performance reported in accordance with U.S. GAAP. The
non-GAAP financial measures that the company uses may not be comparable to
measures with similar titles reported by other companies. Also, in the future,
the company may disclose different non-GAAP financial measures in order to help
investors more meaningfully evaluate and compare the company's future results of
operations to its previously reported results of operations. The company
strongly encourages investors to review its financial statements and
publicly-filed reports in their entirety and not rely on any single financial
measure. See, "Reconciliation of Non-GAAP Financial Measures," below for a
detailed description of these measures as well as a reconciliation of each to
the nearest U.S. GAAP measure.
5
Reconciliation of Non-GAAP Financial Measures
The company defines adjusted cash flow from operations as the cash flow earned
or incurred from operating activities without regard to timing differences in
the collection or payment of associated receivables and payables. The company
believes it is important to consider adjusted cash flow from operations as well
as cash flow from operations, as it often provides more transparency into what
drives the changes in the company's operating trends, such as production,
prices, operating costs, and related operational factors, without regard to
whether the earned or incurred item was collected or paid during the period. The
company also uses this measure because the collection of its receivables or
payment of obligations has not been a significant issue for its business, but
merely a timing issue from one period to the next.
The company defines adjusted EBITDA as net income (loss) plus net interest
expense, income taxes, and depreciation, depletion and amortization (including
amortization of non-cash stock-based compensation) for the period, plus/minus
the change in fair value of our derivative conversion liability. The company
believes adjusted EBITDA is relevant because it is a measure of cash available
to fund capital expenditures and service debt and is a metric used by some
industry analysts to provide a comparison of its results with its peers. The
following table presents a reconciliation of each of the company's non-GAAP
financial measures to the nearest GAAP measure.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited)
Twelve Months Ended Three Months Ended
---------------------- -------------------------------
August August August August May 31,
31, 2012 31, 2011 31, 2012 31, 2011 2012
---------------------- -------------------------------
Adjusted cash flow from
operations:
-----------
Net cash provided by
operating activities $21,252,102 $7,916,308 $4,174,093 $4,091,428 $7,446,885
Changes in assets and
liabilities (2,977,610) (1,569,508) 810,140 (1,662,160) (1,642,695)
------------ ---------- ---------- ---------- ----------
Adjusted cash flow
from operations: $18,274,492 $6,346,800 $4,984,233 $2,429,268 $5,804,190
============ ========== ========== ========== ==========
Adjusted EBITDA:
Net income (loss) $12,123,942 (11,600,158) $1,947,041 $1,589,818 $2,430,763
Interest and related
items, net (37,451) 4,191,169 (10,440) (14,101) (16,320)
Change in fair value
of derivative conversion
liability - 10,229,229 - - -
Income tax expense
(benefit) (332,000) - 1,477,000 - 1,432,000
Depletion, depletion,
and amortization 6,009,510 2,838,307 1,409,925 775,482 1,833,506
Stock based compensation 473,040 627,486 150,008 63,968 107,924
------------ ---------- ---------- ---------- ----------
Adjusted EBITDA $ 18,237,041 $6,286,033 $4,973,534 $2,415,167 $5,787,873
============ ========== ========== ========== ==========
6
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 www.sec.gov on
Form 10-K for the period ended August 31, 2012.
SYNERGY RESOURCES CORPORATION
CONDENSED BALANCE SHEETS
(unaudited)
August 31, August 31,
2012 2011
ASSETS
Cash and cash equivalents $ 19,284,382 $ 9,490,506
Other current assets 7,182,724 5,140,452
Total current assets 26,467,106 14,630,958
Oil and gas properties and other
equipment 92,702,571 48,898,064
Deferred tax asset, net 332,000 -
Other assets 1,229,611 168,863
Total assets $ 120,731,288 $ 63,697,885
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ 15,592,333 $ 13,946,413
Revolving credit facility 3,000,000 -
Asset retirement obligations 1,026,796 643,459
Total liabilities 19,619,129 14,589,872
Shareholders' equity:
Common stock and paid-in capital 123,927,798 84,047,594
Accumulated deficit (22,815,639) (34,939,581)
Total shareholders' equity 101,112,159 49,108,013
Total liabilities and
shareholders' equity $ 120,731,288 $ 63,697,885
7
SYNERGY RESOURCES CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Twelve Months Ended
August 31, August 31, August 31, August 31,
2012 2011 2012 2011
----------------------- ------------------------
Oil and gas revenues $6,749,541 $3,390,761 $24,969,213 $10,001,668
---------- ---------- ----------- -----------
Expenses:
Lease operating expenses 928,259 307,980 3,648,465 1,439,818
Depreciation, depletion,
and amortization 1,409,925 775,482 6,009,510 2,838,307
General and administrative 997,756 731,582 3,556,747 2,903,303
---------- ---------- ----------- -----------
Total expenses 3,335,940 1,815,044 13,214,722 7,181,428
---------- ---------- ----------- -----------
Operating income 3,413,601 1,575,717 11,754,491 2,820,240
---------- ---------- ----------- -----------
Other income (expense):
Change in fair value of
derivative conversion
liability - - - (10,229,229)
Interest income and expense,
net 10,440 14,101 37,451 (4,191,169)
---------- ---------- ----------- -----------
Total other (expense) 10,440 14,101 37,451 (14,420,398)
---------- ---------- ----------- -----------
Income tax
(expense)benefit (1,477,000) - 332,000 -
---------- ---------- ----------- -----------
Net income (loss) $1,947,041 $1,589,818 $12,123,942 $(11,600,158)
========== ========== =========== ============
Net income (loss)
per common share:
Basic $ 0.04 $ 0.04 $ 0.26 $ (0.45)
========== ========== =========== ============
Diluted $ 0.04 $ 0.04 $ 0.25 $ (0.45)
========== ========== =========== ============
Weighted average shares
outstanding:
Basic $51,409,340 $35,788,313 $46,587,558 $ 26,009,283
=========== =========== =========== ============
Diluted 53,072,619 35,788,313 48,359,905 26,009,283
========== ========== =========== ============
8
SYNERGY RESOURCES CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
For the twelve months ended August 31, 2012 and 2011
(unaudited)
2012 2011
------------ ---------
Cash flows from operating activities:
Net income (loss) $ 12,123,942 (11,600,158)
------------ ------------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation, depletion, and amortization 6,009,510 $ 2,838,307
Provision for deferred taxes (332,000) -
Other, non-cash items 473,040 15,108,652
Changes in operating assets and
liabilities 2,977,610 1,569,507
------------ ------------
Total adjustments 9,128,160 19,516,466
------------ ------------
Net cash provided by operating activities 21,252,102 7,916,308
------------ ------------
Cash flows from investing activities:
Acquisition of property and equipment (46,751,260) (30,247,327)
Net proceeds from sales of oil and gas
properties 71,251 8,382,167
------------ ------------
Net cash used in investing activities (46,680,009) (21,865,160)
------------ ------------
Cash flows from financing activities:
Net proceeds from sale of stock 37,421,783 16,690,721
Net proceeds from/(repayments of) revolving
credit facility 3,000,000 -
Principal repayment of related party notes
payable (5,200,000) -
------------ ------------
Net cash provided by financing activities 35,221,783 16,690,721
------------ ------------
Net increase in cash and equivalents
9,793,876 2,741,869
Cash and equivalents at beginning of period 9,490,506 6,748,637
------------ ------------
Cash and equivalents at end of period $ 19,284,382 $ 9,490,506
============ ===========
Company Contact:
Rhonda Sandquist
Synergy Resources Corporation
rsandquist@syrginfo.com
Tel (970) 737-1073
Investor Relations Contact:
Justin Vaicek
Liolios Group
SYRG@liolios.com
Tel (949) 574-3860
