Attached files
| file | filename |
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| 8-K - FORM 8-K - Oasis Petroleum Inc. | d491170d8k.htm |
Exhibit 99.1
Oasis Petroleum Inc. Announces Quarter and Year Ending December 31, 2012 Earnings
Houston, Texas — February 25, 2013 — Oasis Petroleum Inc. (NYSE: OAS) (“Oasis” or the “Company”) today announced financial results for the quarter and year ending December 31, 2012.
Financial Highlights in 2012:
| • | Increased revenue by 108% to $686.7 million in 2012, up from $330.4 million in the prior year. |
| • | Grew Adjusted EBITDA by 118% to $512.3 million in 2012, up from $234.5 million in the prior year. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities, see “Non-GAAP Financial Measures” below. |
| • | Increased net income by 93% to $153.4 million in 2012, up from $79.4 million in the prior year. |
Financial Update
Total revenue for the fourth quarter of 2012 was $214.3 million compared to $116.9 million for the fourth quarter of 2011, an increase of 83%. Sequential quarter-over-quarter revenue growth was $29.6 million, or 16%. Total revenue for the full year 2012 was $686.7 million compared to $330.4 million in 2011. This year-over-year increase was due to a $340.1 million increase in oil and gas revenues primarily related to higher production in 2012 and a $16.2 million increase in well services revenues related to Oasis Well Services LLC (“OWS”) commencing fracturing activity in 2012.
Lease operating expenses for the fourth quarter of 2012 totaled $16.9 million, or $6.68 per Boe, a 19% decrease per Boe over the fourth quarter of 2011 of $8.22 per Boe. Lease operating expenses for the full year 2012 totaled $54.9 million, or $6.68 per Boe, a 20% decrease per Boe over the full year 2011 of $8.36 per Boe. This year-over-year decrease was primarily due to the increase in production of 110% outpacing the Company’s overall net increase in costs of 68%. Increased costs primarily related to workovers, chemical treatments, equipment rental and fresh water injections, which have improved operational performance and minimized downtime in our wells. These cost increases were partially offset by salt water disposal activity and lower operating costs related to improved weather conditions as compared to the first half of 2011.
Well services operating expenses represent third-party working interests’ share of fracturing service costs incurred by OWS for fracturing jobs completed in 2012. Well services operating expenses totaled $4.7 million for the fourth quarter of 2012 and $11.8 million for the full year 2012. There were no well services operating expenses in 2011 because OWS did not commence fracturing activity until the first quarter of 2012.
Marketing, transportation and gathering expenses for the fourth quarter of 2012 totaled $2.0 million, or $0.78 per Boe, a 90% increase per Boe over the fourth quarter of 2011 of $0.41 per Boe. Marketing, transportation and gathering expenses for the full year 2012 totaled $9.3 million, or $1.13 per Boe, a $0.79 increase per Boe over the full year 2011 of $0.34 per Boe. This year-over-year increase was mainly attributable to increased oil transportation costs related to Oasis Petroleum Marketing LLC (“OPM”), which did not commence operations until late in the third quarter of 2011, combined with a $1.4 million cost for bulk oil purchases made by OPM in the first quarter of 2012, partially offset by a $0.7 million non-cash valuation charge on oil pipeline imbalances. Excluding this pipeline imbalance charge and bulk oil purchase costs, our marketing, transportation and gathering expenses would have been $1.04 per Boe for the full year 2012 and $1.03 for the fourth quarter of 2012. The increase in marketing, transportation and gathering in the fourth quarter 2012 over the fourth quarter of 2011 was primarily due to higher operated volumes flowing through third-party oil gathering pipelines, partially offset by a non-cash oil pipeline imbalance valuation charge. While transporting volumes through third-party oil gathering pipelines increases marketing, transportation and gathering expenses, it improves oil price realizations by eliminating trucking costs, which are reflected in the oil price differential rather than as an expense.
Production taxes for the fourth quarter of 2012 totaled $19.5 million, or 9.4% of oil and gas revenues. For the full year 2012, production taxes totaled $63.0 million, or 9.4% of oil and gas revenues. Production taxes decreased in 2012 compared to the full year 2011, at 10.2% of oil and gas revenues, primarily due to the increased weighting of oil revenues in Montana, which has lower incentivized production tax rates on certain new wells for the first twelve months of production.
Depreciation, depletion and amortization for the fourth quarter of 2012 totaled $66.0 million, or $26.01 per Boe, compared to $27.2 million, or $19.40 per Boe, in the fourth quarter of 2011. Depreciation, depletion and amortization for the full year 2012 totaled $206.7 million, or $25.14 per Boe, compared to $75.0 million, or $19.16 per Boe, for the full year 2011. The $131.8 million increase in DD&A expense for the year ended December 31, 2012 was primarily a result of our production increases from our 2012 well completions. The higher DD&A rate was a result of increased well costs in 2012, which outpaced the increase in associated reserves. The increased well costs were a result of increases in service costs in the Williston Basin during 2011 and the first half of 2012 and the addition of infrastructure assets, primarily our salt water disposal systems.
General and administrative expenses for the fourth quarter of 2012 totaled $17.6 million, or $6.93 per Boe, compared to $9.6 million, or $6.82 per Boe, in the fourth quarter of 2011. General and administrative expenses for the full year 2012 totaled to $57.2 million, or $6.95 per Boe, as compared to $29.4 million, or $7.52 per Boe, for the full year 2011. Of this $27.8 million year-over-year increase, approximately $20.3 million was due to the impact of the Company’s organizational growth on employee compensation and approximately $6.7 million was due to the amortization of restricted stock awards and performance share units. As of December 31, 2012, the Company had 281 full-time employees compared to 146 full-time employees as of December 31, 2011.
As a result of its derivative activities, the Company incurred net cash settlement gains of $3.8 million and $1.0 million in the fourth quarters of 2012 and 2011, respectively. As a result of forward oil price changes, the Company recognized non-cash unrealized mark-to-market derivative losses of $3.2 million and $66.5 million for the fourth quarters of 2012 and 2011, respectively. The Company incurred a net cash settlement gain of $6.5 million for the year ended December 31, 2012 and a net cash settlement loss of $3.8 million for the year ended December 31, 2011. In addition, as a result of forward oil price changes, the Company recognized non-cash unrealized mark-to-market derivative gains of $27.6 million and $5.4 million during the years ended December 31, 2012 and 2011, respectively.
Adjusted EBITDA for the fourth quarter of 2012 was $163.5 million, an increase of $77.6 million, or 90%, over the fourth quarter of 2011 of $85.9 million. Adjusted EBITDA for the full year 2012 was $512.3 million, an increase of $277.8 million, or 118%, over the full year 2011 of $234.5 million.
The Company reported net income of $42.6 million in the fourth quarter of 2012 compared to a net loss of $13.4 million in the fourth quarter of 2011. For the full year 2012, Oasis reported net income of $153.4 million compared to $79.4 million for the full year 2011. Excluding certain non-cash items and their tax effect in the fourth quarters of 2012 and 2011, Adjusted Net Income (non-GAAP) was $45.2 million, or $0.49 per diluted share, and $28.0 million, or $0.30 per diluted share, respectively. Excluding certain non-cash items and their tax effect for the years ending December 31, 2012 and 2011, Adjusted Net Income (non-GAAP) was $138.4 million, or $1.50 per diluted share, and $78.2 million, or $0.85 per diluted share, respectively. For a definition of Adjusted Net Income and a reconciliation of net income to Adjusted Net Income, see “Non-GAAP Financial Measures” below.
Capital Expenditures
Oasis’ capital expenditures (“CapEx”) were $276.3 million for the fourth quarter of 2012 and $1,148.6 million for the year ending December 31, 2012.
CapEx primarily consists of:
| • | $1,008 million of drilling and completion CapEx for operated and non-operated wells, including expected savings from services provided by OWS; |
| • | $64 million for constructing infrastructure to support production in Oasis’ core project areas, primarily related to salt water disposal systems; |
| • | $37 million for maintaining and expanding the Company’s leasehold position; |
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| • | $3 million for geology (micro-seismic); |
| • | $16 million for OWS; and |
| • | $21 million for other (facilities, district tools and administrative capital, including capitalized interest of $3 million). |
The following table depicts the Company’s CapEx for exploration and production (“E&P”), by project area, and non-E&P:
| 2012 | ||||||||||||||||||||
| ($ in millions) |
1Q | 2Q | 3Q | 4Q | FY | |||||||||||||||
| E&P CapEx by Project Area |
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| West Williston |
$ | 204.0 | $ | 187.9 | $ | 189.2 | $ | 144.7 | $ | 725.8 | ||||||||||
| East Nesson |
50.1 | 56.6 | 106.0 | 110.3 | 323.0 | |||||||||||||||
| Sanish |
12.9 | 18.7 | 16.2 | 15.1 | 62.9 | |||||||||||||||
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| Total E&P CapEx |
$ | 267.0 | $ | 263.2 | $ | 311.4 | $ | 270.1 | $ | 1,111.7 | ||||||||||
| Other Non E&P (1) |
21.3 | 4.1 | 5.3 | 6.2 | 36.9 | |||||||||||||||
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| Total Company CapEx (2) |
$ | 288.3 | $ | 267.3 | $ | 316.7 | $ | 276.3 | $ | 1,148.6 | ||||||||||
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| (1) | Non-E&P capital expenditures include such items as capital expenditures related to OWS, district tools, administrative capital and capitalized interest. |
| (2) | Capital expenditures reflected in the table above differ from the amounts shown in the statement of cash flows in the Company’s consolidated financial statements because amounts reflected in the table above include accrued liabilities for capital expenditures, while the amounts presented in the statement of cash flows are presented on a cash basis. |
Conference Call Information
Investors, analysts and other interested parties are invited to listen to the conference call:
| Date: | Tuesday, February 26, 2013 | |
| Time: | 10:00 a.m. Central Time | |
| Dial-in: | 855-384-2828 | |
| Intl. Dial in: | 706-634-0151 | |
| Conference ID: | 98545808 | |
| Website: | www.oasispetroleum.com |
A recording of the conference call will be available beginning at 1:00 p.m. Central Time on the day of the call and will be available until Tuesday, March 5, 2013 by dialing:
| Replay dial-in: | 855-859-2056 | |
| Intl. replay: | 404-537-3406 | |
| Conference ID: | 98545808 |
The conference call will also be available for replay for approximately 30 days at www.oasispetroleum.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, including the Company’s drilling program, production, derivatives activities, capital expenditure levels and other
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guidance included in this press release. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include changes in oil and natural gas prices, the timing of planned capital expenditures, availability of acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company’s ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company’s business and other important factors that could cause actual results to differ materially from those projected as described in the Company’s reports filed with the SEC.
Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
About Oasis Petroleum Inc.
Oasis is an independent exploration and production company focused on the acquisition and development of unconventional oil and natural gas resources, primarily operating in the Williston Basin. For more information, please visit the Company’s website at www.oasispetroleum.com.
Contact:
Oasis Petroleum Inc.
Richard Robuck, (281) 404-9600
4
Oasis Petroleum Inc. Financial Statements
OASIS PETROLEUM INC.
CONSOLIDATED BALANCE SHEET
| December 31, 2012 |
December 31, 2011 |
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| (In thousands, except share data) | ||||||||
| ASSETS | ||||||||
| Current assets |
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| Cash and cash equivalents |
$ | 213,447 | $ | 470,872 | ||||
| Short-term investments |
25,891 | 19,994 | ||||||
| Accounts receivable — oil and gas revenues |
110,341 | 52,164 | ||||||
| Accounts receivable — joint interest partners |
99,194 | 67,268 | ||||||
| Inventory |
20,707 | 3,543 | ||||||
| Prepaid expenses |
1,770 | 2,140 | ||||||
| Advances to joint interest partners |
1,985 | 3,935 | ||||||
| Derivative instruments |
19,016 | — | ||||||
| Deferred income taxes |
— | 3,233 | ||||||
| Other current assets |
335 | 491 | ||||||
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| Total current assets |
492,686 | 623,640 | ||||||
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| Property, plant and equipment |
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| Oil and gas properties (successful efforts method) |
2,348,128 | 1,235,357 | ||||||
| Other property and equipment |
49,732 | 20,859 | ||||||
| Less: accumulated depreciation, depletion, amortization and impairment |
(391,260 | ) | (176,261 | ) | ||||
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| Total property, plant and equipment, net |
2,006,600 | 1,079,955 | ||||||
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| Derivative instruments |
4,981 | 4,362 | ||||||
| Deferred costs and other assets |
24,527 | 19,425 | ||||||
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| Total assets |
$ | 2,528,794 | $ | 1,727,382 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities |
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| Accounts payable |
$ | 12,491 | $ | 12,207 | ||||
| Advances from joint interest partners |
21,176 | 9,064 | ||||||
| Revenues and production taxes payable |
71,553 | 19,468 | ||||||
| Accrued liabilities |
189,863 | 119,692 | ||||||
| Accrued interest payable |
30,096 | 15,774 | ||||||
| Derivative instruments |
1,048 | 5,907 | ||||||
| Deferred income taxes |
4,558 | — | ||||||
| Other current liabilities |
— | 472 | ||||||
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| Total current liabilities |
330,785 | 182,584 | ||||||
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| Long-term debt |
1,200,000 | 800,000 | ||||||
| Asset retirement obligations |
22,956 | 13,075 | ||||||
| Derivative instruments |
380 | 3,505 | ||||||
| Deferred income taxes |
177,671 | 92,983 | ||||||
| Other liabilities |
1,997 | 997 | ||||||
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| Total liabilities |
1,733,789 | 1,093,144 | ||||||
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| Commitments and contingencies |
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| Stockholders’ equity |
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| Common stock, $0.01 par value; 300,000,000 shares authorized; 93,432,712 issued and 93,303,298 outstanding at December 31, 2012 and 92,483,393 issued and 92,460,914 outstanding at December 31, 2011 |
925 | 921 | ||||||
| Treasury stock, at cost; 129,414 and 22,479 shares at December 31, 2012 and 2011, respectively |
(3,796 | ) | (602 | ) | ||||
| Additional paid-in-capital |
657,943 | 647,374 | ||||||
| Retained earnings (deficit) |
139,933 | (13,455 | ) | |||||
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| Total stockholders’ equity |
795,005 | 634,238 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 2,528,794 | $ | 1,727,382 | ||||
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OASIS PETROLEUM INC.
CONSOLIDATED STATEMENT OF OPERATIONS
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| (In thousands, except per share data) | ||||||||||||||||
| Revenues |
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| Oil and gas revenues |
$ | 208,634 | $ | 116,876 | $ | 670,491 | $ | 330,422 | ||||||||
| Well services revenues |
5,693 | — | 16,177 | — | ||||||||||||
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| Total revenues |
214,327 | 116,876 | 686,668 | 330,422 | ||||||||||||
| Expenses |
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| Lease operating expenses (1) |
16,945 | 11,529 | 54,924 | 32,707 | ||||||||||||
| Well services operating expense |
4,670 | — | 11,774 | — | ||||||||||||
| Marketing, transportation and gathering expenses |
1,974 | 568 | 9,257 | 1,365 | ||||||||||||
| Production taxes |
19,546 | 11,824 | 62,965 | 33,865 | ||||||||||||
| Depreciation, depletion and amortization |
65,951 | 27,210 | 206,734 | 74,981 | ||||||||||||
| Exploration expenses |
79 | 1,340 | 3,250 | 1,685 | ||||||||||||
| Impairment of oil and gas properties |
974 | 297 | 3,581 | 3,610 | ||||||||||||
| Loss on sale of properties |
— | 207 | — | 207 | ||||||||||||
| General and administrative expenses |
17,568 | 9,565 | 57,190 | 29,435 | ||||||||||||
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| Total expenses |
127,707 | 62,540 | 409,675 | 177,855 | ||||||||||||
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| Operating income |
86,620 | 54,336 | 276,993 | 152,567 | ||||||||||||
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| Other income (expense) |
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| Net gain (loss) on derivative instruments |
596 | (65,510 | ) | 34,164 | 1,595 | |||||||||||
| Interest expense |
(21,191 | ) | (10,873 | ) | (70,143 | ) | (29,618 | ) | ||||||||
| Other income (expense) |
2,339 | 420 | 4,860 | 1,635 | ||||||||||||
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| Total other income (expense) |
(18,256 | ) | (75,963 | ) | (31,119 | ) | (26,388 | ) | ||||||||
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| Income (loss) before income taxes |
68,364 | (21,627 | ) | 245,874 | 126,179 | |||||||||||
| Income tax benefit (expense) |
(25,774 | ) | 8,226 | (92,486 | ) | (46,789 | ) | |||||||||
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| Net income (loss) |
$ | 42,590 | $ | (13,401 | ) | $ | 153,388 | $ | 79,390 | |||||||
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| Earnings (loss) per share: |
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| Basic and diluted |
$ | 0.46 | $ | (0.15 | ) | $ | 1.66 | $ | 0.86 | |||||||
| Weighted average shares outstanding: |
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| Basic |
92,226 | 92,070 | 92,180 | 92,056 | ||||||||||||
| Diluted |
92,509 | 92,070 | 92,513 | 92,241 | ||||||||||||
| (1) | For both the three months and year ended December 31, 2011, lease operating expenses exclude marketing, transportation and gathering expenses to conform such amounts to current year classifications. |
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OASIS PETROLEUM INC.
SELECTED FINANCIAL AND OPERATIONAL STATS
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Operating results ($ in thousands): |
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| Revenues |
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| Oil |
$ | 199,761 | $ | 113,226 | $ | 643,446 | $ | 321,668 | ||||||||
| Natural gas |
8,873 | 3,650 | 27,045 | 8,754 | ||||||||||||
| Well services |
5,693 | — | 16,177 | — | ||||||||||||
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| Total revenues |
214,327 | 116,876 | 686,668 | 330,422 | ||||||||||||
| Production data: |
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| Oil (MBbls) |
2,301 | 1,325 | 7,533 | 3,732 | ||||||||||||
| Natural gas (MMcf) |
1,406 | 464 | 4,146 | 1,092 | ||||||||||||
| Oil equivalents (MBoe) |
2,535 | 1,402 | 8,224 | 3,914 | ||||||||||||
| Average daily production (Boe/d) |
27,556 | 15,243 | 22,469 | 10,724 | ||||||||||||
| Average sales prices: |
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| Oil, without realized derivatives (per Bbl) (1) |
$ | 86.82 | $ | 85.46 | $ | 85.22 | $ | 86.18 | ||||||||
| Oil, with realized derivatives (per Bbl) (1) (2) |
88.45 | 86.20 | 86.09 | 85.15 | ||||||||||||
| Natural gas (per Mcf) (3) |
6.31 | 7.86 | 6.52 | 8.02 | ||||||||||||
| Costs and expenses (per Boe of production): |
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| Lease operating expenses (4) |
$ | 6.68 | $ | 8.22 | $ | 6.68 | $ | 8.36 | ||||||||
| Marketing, transportation and gathering expenses |
0.78 | 0.41 | 1.13 | 0.34 | ||||||||||||
| Production taxes |
7.71 | 8.43 | 7.66 | 8.65 | ||||||||||||
| Depreciation, depletion and amortization |
26.01 | 19.40 | 25.14 | 19.16 | ||||||||||||
| General and administrative expenses |
6.93 | 6.82 | 6.95 | 7.52 | ||||||||||||
| (1) | For the year ended December 31, 2012, average sales prices for oil are calculated using total oil revenues, excluding bulk purchase sales of $1.5 million, divided by oil production. |
| (2) | Realized prices include realized gains or losses on cash settlements for commodity derivatives, which do not qualify for and were not designated as hedging instruments for accounting purposes. |
| (3) | Natural gas prices include the value for natural gas and natural gas liquids. |
| (4) | For both the three months and year ended December 31, 2011, lease operating expenses exclude marketing, transportation and gathering expenses to conform such amounts to current year classifications. |
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OASIS PETROLEUM INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
| Year Ended December 31, | ||||||||
| 2012 | 2011 | |||||||
| (In thousands) | ||||||||
| Cash flows from operating activities: |
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| Net income |
$ | 153,388 | $ | 79,390 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation, depletion and amortization |
206,734 | 74,981 | ||||||
| Impairment of oil and gas properties |
3,581 | 3,610 | ||||||
| Loss on sale of properties |
— | 207 | ||||||
| Deferred income taxes |
92,479 | 46,789 | ||||||
| Derivative instruments |
(34,164 | ) | (1,595 | ) | ||||
| Stock-based compensation expenses |
10,333 | 3,656 | ||||||
| Debt discount amortization and other |
2,810 | 1,561 | ||||||
| Working capital and other changes: |
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| Change in accounts receivable |
(90,103 | ) | (64,900 | ) | ||||
| Change in inventory |
(29,313 | ) | (2,550 | ) | ||||
| Change in prepaid expenses |
346 | (1,600 | ) | |||||
| Change in other current assets |
156 | (491 | ) | |||||
| Change in other assets |
(95 | ) | (139 | ) | ||||
| Change in accounts payable and accrued liabilities |
76,706 | 36,316 | ||||||
| Change in other current liabilities |
(472 | ) | 472 | |||||
| Change in other liabilities |
— | 317 | ||||||
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| Net cash provided by operating activities |
392,386 | 176,024 | ||||||
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| Cash flows from investing activities: |
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| Capital expenditures |
(1,053,315 | ) | (613,223 | ) | ||||
| Derivative settlements |
6,545 | (3,841 | ) | |||||
| Purchases of short-term investments |
(126,213 | ) | (184,907 | ) | ||||
| Redemptions of short-term investments |
120,316 | 164,913 | ||||||
| Advances to joint interest partners |
1,950 | (497 | ) | |||||
| Advances from joint interest partners |
12,112 | 5,963 | ||||||
| Proceeds from equipment and property sales |
— | 2,202 | ||||||
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| Net cash used in investing activities |
(1,038,605 | ) | (629,390 | ) | ||||
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| Cash flows from financing activities: |
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| Proceeds from issuance of senior notes |
400,000 | 800,000 | ||||||
| Purchases of treasury stock |
(3,194 | ) | (602 | ) | ||||
| Debt issuance costs |
(8,012 | ) | (18,680 | ) | ||||
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| Net cash provided by financing activities |
388,794 | 780,718 | ||||||
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| Increase (decrease) in cash and cash equivalents |
(257,425 | ) | 327,352 | |||||
| Cash and cash equivalents: |
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| Beginning of period |
470,872 | 143,520 | ||||||
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|
|
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| End of period |
$ | 213,447 | $ | 470,872 | ||||
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| Supplemental cash flow information: |
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| Cash interest paid, net of capitalized interest |
$ | 53,488 | $ | 13,748 | ||||
| Cash paid for taxes |
107 | — | ||||||
| Supplemental non-cash transactions: |
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| Change in accrued capital expenditures |
$ | 59,878 | $ | 58,205 | ||||
| Change in asset retirement obligations |
10,230 | 5,434 | ||||||
8
Non-GAAP Financial Measures
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, depletion, amortization, exploration expenses and other similar non-cash charges. Adjusted EBITDA is not a measure of net income or cash flows as determined by United States generally accepted accounting principles, or GAAP.
The following tables present a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to the GAAP financial measures of net income (loss) and net cash provided by operating activities, respectively.
Adjusted EBITDA Reconciliations
| Three Months Ended December 31, |
Year Ended December 31, |
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| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| (In thousands) | ||||||||||||||||
| Adjusted EBITDA reconciliation to Net Income (Loss): |
|
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| Net income (loss) |
$ | 42,590 | $ | (13,401 | ) | $ | 153,388 | $ | 79,390 | |||||||
| Change in unrealized (gain) loss on derivative instruments |
3,165 | 66,500 | (27,619 | ) | (5,436 | ) | ||||||||||
| Interest expense |
21,191 | 10,873 | 70,143 | 29,618 | ||||||||||||
| Depreciation, depletion and amortization |
65,951 | 27,210 | 206,734 | 74,981 | ||||||||||||
| Impairment of oil and gas properties |
974 | 297 | 3,581 | 3,610 | ||||||||||||
| Exploration expenses |
79 | 1,340 | 3,250 | 1,685 | ||||||||||||
| Loss on sale of properties |
— | 207 | — | 207 | ||||||||||||
| Stock-based compensation expenses |
3,706 | 1,064 | 10,333 | 3,656 | ||||||||||||
| Income tax (benefit) expense |
25,774 | (8,226 | ) | 92,486 | 46,789 | |||||||||||
| Other non-cash adjustments |
54 | — | (2 | ) | — | |||||||||||
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| Adjusted EBITDA |
$ | 163,484 | $ | 85,864 | $ | 512,294 | $ | 234,500 | ||||||||
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| Adjusted EBITDA reconciliation to Net Cash Provided by Operating Activities: |
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| Net cash provided by operating activities |
$ | 110,258 | $ | 36,342 | $ | 392,386 | $ | 176,024 | ||||||||
| Realized gain (loss) on derivative instruments |
3,761 | 990 | 6,545 | (3,841 | ) | |||||||||||
| Interest expense |
21,191 | 10,873 | 70,143 | 29,618 | ||||||||||||
| Exploration expenses |
79 | 1,340 | 3,250 | 1,685 | ||||||||||||
| Debt discount amortization and other |
(772 | ) | (520 | ) | (2,810 | ) | (1,561 | ) | ||||||||
| Income taxes |
(57 | ) | — | 7 | — | |||||||||||
| Changes in working capital |
28,970 | 36,839 | 42,775 | 32,575 | ||||||||||||
| Other non-cash adjustments |
54 | — | (2 | ) | — | |||||||||||
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| Adjusted EBITDA |
$ | 163,484 | $ | 85,864 | $ | 512,294 | $ | 234,500 | ||||||||
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Adjusted Net Income is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted Net Income as net income after adjusting first for (1) the impact of non-cash items, including changes in unrealized gains and losses on derivative instruments, impairment of oil and gas properties and other similar non-cash charges, and then (2) the non-cash items’ impact on taxes based on the Company’s effective tax rates in the same period. Adjusted Net Income is not a measure of net income as determined by GAAP.
The following table provides a reconciliation of the GAAP financial measure of net income (loss) to the non-GAAP financial measure of Adjusted Net Income for the periods presented.
9
Adjusted Net Income Reconciliation
| Three Months Ended December 31, |
Year Ended December 31, |
|||||||||||||||
| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| (In thousands, except per share amounts) | ||||||||||||||||
| Net income (loss) |
$ | 42,590 | $ | (13,401 | ) | $ | 153,388 | $ | 79,390 | |||||||
| Change in unrealized (gain) loss on derivative instruments |
3,165 | 66,500 | (27,619 | ) | (5,436 | ) | ||||||||||
| Impairment of oil and gas properties |
974 | 297 | 3,581 | 3,610 | ||||||||||||
| Other non-cash adjustments |
54 | — | (2 | ) | — | |||||||||||
| Tax impact (1) |
(1,581 | ) | (25,407 | ) | 9,043 | 677 | ||||||||||
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| Adjusted Net Income |
$ | 45,202 | $ | 27,989 | $ | 138,391 | $ | 78,241 | ||||||||
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| Adjusted earnings per share: |
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| Basic and diluted |
$ | 0.49 | $ | 0.30 | $ | 1.50 | $ | 0.85 | ||||||||
| Weighted average shares outstanding: |
||||||||||||||||
| Basic |
92,226 | 92,070 | 92,180 | 92,056 | ||||||||||||
| Diluted |
92,509 | 92,070 | 92,513 | 92,241 | ||||||||||||
| Effective Tax Rate |
37.7 | % | 38.0 | % | 37.6 | % | 37.1 | % | ||||||||
| (1) | The tax impact is computed utilizing the Company’s effective tax rate on the adjustments for certain non-cash items. |
10