Attached files
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| 8-K - FORM 8-K EARNINGS RELEASE Q2 2017 - ROAN RESOURCES, INC. | form8-kq22017earningsrelea.htm |
Exhibit 99.1
LINN ENERGY REPORTS SECOND-QUARTER 2017 RESULTS
HOUSTON, August 3, 2017 – LINN Energy, Inc. (OTCQB: LNGG) (“LINN” or the “Company”) announced today financial and operating results for the second quarter of 2017 and provided updated guidance for the third quarter, fourth quarter and full-year 2017.
The Company highlights the following:
• | Signed an agreement to form Roan Resources LLC as a Merge/SCOOP/STACK pure play company with a core, largely contiguous position of approximately 140,000 tier 1 total net acres |
• | Successfully tested third bench in the Merge with a peak IP-30 rate of more than 850 BOE/d (~64% liquids); lateral length of 4,186 feet in the Hunton |
• | Exceeded $1 billion in net cash proceeds from closed asset sales as of August 1, 2017 |
• | Eliminated all debt and is in the final stages of negotiating a new credit facility |
• | As of July 31, 2017, repurchased ~841,000 shares for ~$27 million as part of the share repurchase program |
• | Exceeded midpoint of adjusted production guidance with average daily production of 710 MMcfe/d |
• | Revised G&A guidance for 2017 is $95 million, down significantly from the previous guidance of $120 million |
• | Raised guidance for production and financial performance pro forma of announced asset sales |
• | Commenced construction of Chisholm Trail Cryogenic facility located in the prolific Merge/SCOOP/STACK play |
“We had another outstanding quarter as we outperformed midpoint of guidance for volumes, costs and financial targets along with executing on several strategic and value-adding initiatives. This is highlighted by signing an agreement to form Roan Resources LLC, a premier pure play company in the Merge/SCOOP/STACK. With 140,000 total net acres, Roan is expected to have the inventory depth to provide production and reserve growth for many years to come. In addition, LINN’s acreage committed in the deal will remain dedicated to our Chisholm Trail Cryogenic facility that is currently under construction. This year, we successfully closed on more than $1 billion of asset sales resulting in the Company extinguishing all its outstanding debt. This gives us tremendous financial flexibility as we finalize negotiations on a new credit facility and continue to work with the Board of Directors to maximize shareholder value,” said Mark E. Ellis, President and Chief Executive Officer.
Key Financial Results (1)
Second Quarter | ||
$ in millions, except per unit amounts | 2017 | 2016 |
Average daily production (MMcfe/d) | 710 | 802 |
Total oil, natural gas and NGL revenues | $243 | $196 |
Income from continuing operations | $223 | $204 |
Income (loss) from discontinued operations net of income taxes | $(3) | $4 |
Net income | $220 | $208 |
Adjusted EBITDAX (a non-GAAP financial measure)(3) | $112 | $179 |
Total debt(4) | $183 | $5,961(2) |
Net cash provided by operating activities | $103 | $536 |
Oil and natural gas capital | $71 | $14 |
Total capital | $96 | $23 |
(1) | All amounts reflect continuing operations with the exception of net income |
(2) | Includes approximately $4,023 million classified as liabilities subject to compromise on the balance sheet |
(3) | Excludes Adjusted EBITDAX from discontinued operations of approximately $12 million and $29 million for the three months ended June 30, 2017, and for the three months ended June 30, 2016, respectively |
(4) | As of June 30, 2017 and June 30, 2016 |
Formation of Roan Resources – Merge/SCOOP/STACK pure play company
On June 27, 2017, LINN and Citizen Energy II, LLC announced an agreement to contribute certain upstream assets to form a new company, Roan, which will be focused on the accelerated development of the prolific Merge/SCOOP/STACK play in the Anadarko Basin. In exchange, LINN will receive 50 percent of the equity interest in Roan. The combined entity is expected to have no outstanding debt at closing, intends to establish a revolving credit facility of approximately $100 million to $300 million that will be secured by its own assets. The transaction is expected to close in the third quarter of 2017. Roan continues to actively recruit an executive management team and there has been significant interest in this opportunity. Subject to market conditions, Roan anticipates an initial public offering in 2018.
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Positive test of a third bench in the Merge
In the second quarter of 2017, LINN completed its first horizontal test of the Hunton with positive results. The Campbell Farms 14-9-6 2H (lateral length of 4,186 feet) had a peak IP-30 rate (gross two-stream) of more than 850 BOE/d (~64% liquids). This test has the potential to add four to eight wells per drilling unit in specific areas of the Roan AMI (area of mutual interest). LINN is currently drilling both Sycamore and Woodford targets from multi-well pads with two operated drilling rigs and the next several completions are scheduled to commence early in the fourth quarter.
Exceeded $1 billion of proceeds from asset sales
As of August 1, 2017, net cash proceeds received from closed transactions this year have exceeded $1 billion, including $560 million for the Jonah and Pinedale fields in Wyoming, $351 million for the South Belridge and Brea fields in California, $76 million for the Salt Creek Field in Wyoming, $32 million for two South Texas asset packages and approximately $25 million (~$21 million and ~$4 million) for a portion of our Permian Basin assets.
The Company has also signed a purchase and sale agreement related to the majority of its remaining South Texas assets for approximately $20 million, subject to normal closing adjustments and transaction costs. We expect this transaction to close in the third quarter of 2017.
Pending and future asset sales
LINN continues to market the remaining packages in Permian, Williston and South Texas. Additionally, the Company plans to sell its interest in the Altamont Bluebell Field in Utah and its mature waterfloods in Oklahoma. LINN continues to work with Jefferies LLC to explore strategic alternatives for the Company.
Eliminated all debt and negotiating a new credit facility
As of August 1, 2017, the Company had extinguished all outstanding debt and is in the final stages of negotiating a new senior revolving credit facility. The new facility is expected to have an initial borrowing base of $500 million.
Initiated share repurchase program and evaluation of uplisting
On June 28, 2017, the Board of Directors authorized an increase in the share repurchase program to a total of $200 million, subject to the closing of the new credit facility. As of July 31, 2017, the Company had purchased approximately 841,000 shares in the open market for approximately $27 million at an average price of $32.41 per share and continues to evaluate further repurchases. In addition, LINN is evaluating uplisting to the New York Stock Exchange or NASDAQ in 2018.
General & administrative expense
Current general and administrative (“G&A”) expense guidance for 2017 is $95 million, down significantly from the previous 2017 guidance of $120 million. Following the completion of all contemplated asset sales, closing the Roan transaction and related transition periods, the Company expects an ongoing annual G&A run rate of approximately $60 million and continues to evaluate further value-adding reductions to our cost structure.
NW STACK activity continues to increase
The Company has a significant acreage position of approximately 105,000 net acres in the NW STACK and offset horizontal results in the Osage and Meramec have been positive with recent IP-30 rates of more than 1,000 BOE/d. Industry activity has significantly increased in the area, with 41 rigs currently running and 101 horizontal well permits filed in the second quarter of 2017 compared to 43 in the first quarter of 2017. LINN is evaluating adding a rig in the NW STACK to test horizontal potential along with evaluating several other potential productive horizons in the area.
Blue Mountain Midstream
The Company’s subsidiary, LINN Midstream, LLC, has been renamed Blue Mountain Midstream LLC (“Blue Mountain”) and holds all previously held LINN Midstream assets, including Chisholm Trail in central Oklahoma and the Jayhawk natural gas processing plant in southwest Kansas. The rebranding of Blue Mountain highlights the significant value of the Company’s growing midstream business that is additive to the upstream value estimates provided at emergence. Blue Mountain charges the upstream business a market rate that is included in the upstream economics.
Chisholm Trail Cryogenic gas plant in the Merge
Chisholm Trail is located in the heart of the prolific liquids-rich Merge/SCOOP/STACK play and has approximately 30 miles of existing gas gathering pipeline and approximately 60 MMcf/d of current refrigeration capacity. LINN acreage recently contributed to Roan remains dedicated to Chisholm Trail. Infrastructure expansions are underway to add 35 miles of low-pressure gathering, increase compression throughput and construct a new cryogenic plant to improve liquids recoveries. Blue
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Mountain has entered into a definitive agreement with BCCK to construct a highly efficient, state-of-the-art 225 MMcf/d cryogenic gas processing facility with a total capacity of 250 MMcf/d. Construction is underway and the facility is expected to be commissioned during the second quarter of 2018. Blue Mountain is also pursuing third-party dedications to accelerate throughput growth for the facility. The Company estimates that a midstream business of this type at full capacity could generate annual EBITDA (a non-GAAP financial measure) between $100 million and $125 million.
Jayhawk natural gas processing plant in the Hugoton Basin
Blue Mountain owns and operates the Jayhawk natural gas processing plant in southwest Kansas with a capacity of approximately 450 MMcf/d, allowing the Company to receive maximum value from the liquids-rich natural gas and helium produced in the area. The Company’s production in the area is delivered to the plant at market gathering rates via a system of approximately 3,930 miles of pipeline and related facilities operated by the Company, of which approximately 2,075 miles of pipeline are owned by the Company.
Emerging Growth Potential
North Louisiana
The Company has approximately 150,000 net acres that are largely held by production with a focus on acreage in the Ruston and Calhoun areas. There are 10 active rigs in the areas and more than 30 drilling permits have been filed in the first half of 2017. LINN recently drilled two operated horizontal wells in Ruston for our first test of the Lower Red and our third test of the Upper Red. The recently completed Lower Red test continues to clean up with a choked back 24-hr IP rate of 12.6 MMcf/d and the completion of the Upper Red is expected to commence in the next 30 days. Additionally, the Company plans to drill an operated horizontal well to test the Calhoun acreage in the fourth quarter of 2017.
East Texas
LINN has approximately 115,000 net acres that are held by production in East Texas. Horizontal activity is increasing in the area with seven active horizontal rigs and more than 40 horizontal drilling permits filed in the first half of 2017 that target several prospective formations including the Cotton Valley and Bossier formations. The Company sees significant upside by applying enhanced horizontal drilling and completion technologies across its acreage position and is currently drilling one of two planned operated horizontal wells for the second half of 2017.
Washakie
LINN has approximately 200,000 net acres that are held by production in the Washakie, where there has been significant offset horizontal activity. There are currently three active horizontal drilling rigs in the area with more than 60 horizontal drilling permits approved in the first half of 2017. Emerging horizontal targets include the Lewis, Almond marine bar and Middle Almond formations with peak IP-30 well results of greater than 10 MMcf/d. LINN continues to evaluate the play and plans to participate in non-operated horizontal activity in the second half of 2017.
Arkoma
The Company has approximately 49,000 net acres in the Arkoma area that are held by production and there are currently 10 active horizontal rigs in the area with 50 horizontal drilling permits filed in the first half of 2017. About 40 percent of the operated sections have only one horizontal well and LINN is evaluating infill development using enhanced drilling and completion technology.
Capital spending
Adjusted for discontinued operations and the sale of Jonah, LINN forecasted $49 million of oil and natural gas capital for the second quarter of 2017. Actual oil and gas capital for the quarter was approximately $71 million. This was higher than guidance primarily due to an increase in lease acquisition spending in the Merge.
The Company has reduced capital guidance for the full year 2017 from $413 million to $338 million. The reduction is primarily related to the expected closing of all announced asset sales and the contribution of our Merge/SCOOP/STACK acreage to Roan, partially offset by increased non-operated horizontal drilling capital and leasing in the Merge area.
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Second Quarter Actuals versus Adjusted Guidance
Second quarter guidance has been adjusted for the closing of the Jonah sale at the end of May and classification of California properties as discontinued operations.
Q2 Actuals | Adjusted Q2 Guidance | |||||
Net Production (MMcfe/d) | 710 | 663 | – | 737 | ||
Natural gas (MMcf/d) | 432 | 428 | – | 475 | ||
Oil (Bbls/d) | 21,600 | 19,122 | – | 21,609 | ||
NGL (Bbls/d) | 24,800 | 20,135 | – | 22,044 | ||
Other revenues, net (in thousands) (1) | $11,962 | $9,000 | – | $10,000 | ||
Costs (in thousands) | $126,316 | $122,000 | – | $137,000 | ||
Lease operating expenses | $71,057 | $68,000 | – | $75,000 | ||
Transportation expenses | $37,388 | $35,000 | – | $40,000 | ||
Taxes, other than income taxes | $17,871 | $19,000 | – | $22,000 | ||
General and administrative expenses (2) | $19,036 | $27,000 | – | $30,000 | ||
Costs per Mcfe (Mid-Point) | $1.96 | $2.03 | ||||
Lease operating expenses | $1.10 | $1.12 | ||||
Transportation expenses | $0.58 | $0.59 | ||||
Taxes, other than income taxes | $0.28 | $0.32 | ||||
General and administrative expenses (2) | $0.29 | $0.45 | ||||
Targets (Mid-Point) (in thousands) | ||||||
Adjusted EBITDAX(3) | $111,932 | $95,000 | ||||
Interest expense | $7,551 | $9,000 | ||||
Oil and natural gas capital | $70,640 | $49,000 | ||||
Total capital | $95,741 | $85,000 | ||||
Weighted Average NYMEX Differentials | ||||||
Natural gas (MMBtu) | ($0.37) | ($0.35) | – | ($0.15) | ||
Oil (Bbl) | ($2.86) | ($5.00) | – | ($3.00) | ||
NGL price as a % of crude oil price | 42% | 34% - 38% | ||||
_________________________________________________________
(1) | Includes other revenues and margin on marketing activities |
(2) | As included in operating cash flow and excludes share-based compensation expenses of approximately $15 million |
(3) | Excludes Adjusted EBITDAX from discontinued operations of approximately $12 million |
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Third Quarter, Fourth Quarter and Full Year 2017 Guidance Update
Guidance estimates have been adjusted for the closing of the Jonah, Salt Creek, South Texas, Permian and California sales as well as expected timing of the closing for Roan. The guidance provided below excludes LINN’s 50% equity interest in Roan after closing.
Q3 2017E | Q4 2017E | FY 2017E | |
Net Production (MMcfe/d) | 540 – 600 | 500 – 550 | 618 – 655 |
Natural gas (MMcf/d) | 330 – 365 | 325 – 355 | 390 – 415 |
Oil (Bbls/d) | 16,000 – 18,000 | 14,000 – 16,000 | 18,000 – 19,000 |
NGL (Bbls/d) | 19,000 – 21,000 | 15,000 – 16,500 | 20,000 – 21,000 |
Other revenues, net (in thousands) (1) | $7,000 – $8,000 | $7,000 – $8,000 | $40,000 – $42,000 |
Costs (in thousands) | $101,000 – $111,000 | $96,000 – $105,000 | $456,000 – $485,000 |
Lease operating expenses | $56,000 – $62,000 | $55,000 – $60,000 | $255,000 – $270,000 |
Transportation expenses | $31,000 – $34,000 | $28,000 – $31,000 | $136,000 – $144,000 |
Taxes, other than income taxes | $14,000 – $15,000 | $13,000 – $14,000 | $65,000 – $71,000 |
General and administrative expenses (2) | $24,000 – $27,000 | $22,000 – $24,000 | $92,000 – $99,000 |
Costs per Mcfe (Mid-Point) | $2.03 | $2.08 | $2.02 |
Lease operating expenses | $1.13 | $1.19 | $1.13 |
Transportation expenses | $0.62 | $0.61 | $0.60 |
Taxes, other than income taxes | $0.28 | $0.28 | $0.29 |
General and administrative expenses (2) | $0.49 | $0.48 | $0.41 |
Targets (Mid-Point) (in thousands) | |||
Adjusted EBITDAX(3) | $71,000 | $63,000 | $360,000 |
Interest expense | $1,000 | $– | $28,000 |
Oil and natural gas capital | $78,000 | $24,000 | $229,000 |
Total capital | $116,000 | $62,000 | $338,000 |
Weighted Average NYMEX Differentials | |||
Natural gas (MMBtu) | ($0.35) – ($0.25) | ($0.35) – ($0.25) | ($0.35) – ($0.25) |
Oil (Bbl) | ($4.00) – ($3.00) | ($4.00) – ($3.00) | ($4.00) – ($3.00) |
NGL price as a % of crude oil price | 34% – 40% | 34% – 40% | 36% – 42% |
Unhedged Commodity Price Assumptions (4) | July | Aug | Sept | Oct | Nov | Dec | 2017E |
Natural gas (MMBtu) | $3.07 | $2.97 | $2.96 | $3.00 | $3.07 | $3.22 | $3.15 |
Oil (Bbl) | $45.86 | $45.77 | $45.95 | $46.19 | $46.45 | $46.69 | $48.09 |
NGL (Bbl) | $17.04 | $16.99 | $17.28 | $17.02 | $17.09 | $17.17 | $18.95 |
_________________________________________________________
(1) | Includes other revenues and margin on marketing activities |
(2) | As included in operating cash flow and excludes share-based compensation expenses |
(3) | Excludes Adjusted EBITDAX from discontinued operations of approximately $4 million for Q3 2017E, and $31 million for FY 2017E |
(4) | Strip prices as of July 21, 2017 |
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Hedging Update
2017 | 2018 | 2019 | ||||
Natural Gas | Volume (MMMBtu/d) | Average Price (per MMBtu) | Volume (MMMBtu/d) | Average Price (per MMBtu) | Volume (MMMBtu/d) | Average Price (per MMBtu) |
Swaps | 370 | $3.17 | 131 | $3.01 | 31 | $2.97 |
Oil | Volume (Bbls/d) | Average Price (per Bbl) | Volume (Bbls/d) | Average Price (per Bbl) | Volume (Bbls/d) | Average Price (per Bbl) |
Swaps | 12,000 | $52.13 | 1,500 | $54.07 | – | – |
Collars | – | – | 5,000 | $50.00 – $55.50 | 5,000 | $50.00 – $55.50 |
Form 10‑Q / Earnings Call
LINN plans to file its Quarterly Report on Form 10-Q for the quarter ended June 30, 2017, with the Securities and Exchange Commission on August 3, 2017 and will host a conference call Thursday, August 3, 2017 at 10 a.m. (CDT) to discuss the Company’s second quarter 2017 results. Investors and analysts are invited to participate in the call by dialing (844) 625-4392, or (409) 497-0988 for international calls using Conference ID: 51104553. Interested parties may also listen over the internet at www.linnenergy.com. A replay of the call and a transcript will be available on the Company’s website until August 17, 2017.
Supplemental information can be found at the following link on our website: http://ir.linnenergy.com/presentations.cfm
About LINN Energy
LINN Energy, Inc. was formed in February 2017 as the reorganized successor to LINN Energy, LLC. Headquartered in Houston, Texas, the Company’s core focus is the upstream and midstream development of the Merge/SCOOP/STACK in Oklahoma. Additionally, the Company is pursuing emerging horizontal opportunities in the Mid-Continent, Rockies, North Louisiana and East Texas while continuing to add value by efficiently operating and applying new technology to a diverse set of long-life producing assets.
Forward-Looking Statements
Statements made in this press release that are not historical facts are “forward-looking statements.” These statements are based on certain assumptions and expectations made by the Company which reflect management’s experience, estimates and perception of historical trends, current conditions, and anticipated future developments. 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 anticipated in the forward-looking statements. These include risks relating to financial performance and results, ability to improve our financial results and profitability following emergence from bankruptcy, availability of sufficient cash flow to execute our business plan, ability to execute planned asset sales, continued low or further declining commodity prices and demand for oil, natural gas and natural gas liquids, ability to hedge future production, ability to replace reserves and efficiently develop current reserves, the capacity and utilization of midstream facilities, the regulatory environment and other important factors that could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. These and other important factors could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. Please read “Risk Factors” in the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other public filings. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information or future events.
CONTACTS: LINN Energy, Inc.
Investors:
Thomas Belsha, Vice President – Investor Relations & Corporate Development
(281) 840-4110
ir@linnenergy.com
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Condensed Consolidated Balance Sheets (Unaudited)
Successor | Predecessor | |||||||
June 30, 2017 | December 31, 2016 | |||||||
(in thousands) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 16,903 | $ | 694,857 | ||||
Accounts receivable – trade, net | 163,935 | 198,064 | ||||||
Derivative instruments | 23,959 | — | ||||||
Restricted cash | 98,616 | 1,602 | ||||||
Other current assets | 71,836 | 105,310 | ||||||
Assets held for sale | 236,421 | — | ||||||
Current assets of discontinued operations | 235,643 | 701 | ||||||
Total current assets | 847,313 | 1,000,534 | ||||||
Noncurrent assets: | ||||||||
Oil and natural gas properties (successful efforts method) | 1,444,110 | 12,349,117 | ||||||
Less accumulated depletion and amortization | (37,572 | ) | (9,843,908 | ) | ||||
1,406,538 | 2,505,209 | |||||||
Other property and equipment | 441,483 | 618,262 | ||||||
Less accumulated depreciation | (12,739 | ) | (217,724 | ) | ||||
428,744 | 400,538 | |||||||
Derivative instruments | 12,759 | — | ||||||
Deferred income taxes | 492,182 | — | ||||||
Other noncurrent assets | 13,980 | 13,984 | ||||||
Noncurrent assets of discontinued operations | — | 740,326 | ||||||
518,921 | 754,310 | |||||||
Total noncurrent assets | 2,354,203 | 3,660,057 | ||||||
Total assets | $ | 3,201,516 | $ | 4,660,591 | ||||
LIABILITIES AND EQUITY (DEFICIT) | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 268,605 | $ | 295,081 | ||||
Derivative instruments | 486 | 82,508 | ||||||
Current portion of long-term debt, net | — | 1,937,729 | ||||||
Other accrued liabilities | 135,416 | 25,979 | ||||||
Liabilities held for sale | 36,387 | — | ||||||
Current liabilities of discontinued operations | 28,218 | 321 | ||||||
Total current liabilities | 469,112 | 2,341,618 | ||||||
Derivative instruments | — | 11,349 | ||||||
Long-term debt | 183,430 | — | ||||||
Other noncurrent liabilities | 264,025 | 360,405 | ||||||
Noncurrent liabilities of discontinued operations | — | 39,202 | ||||||
Liabilities subject to compromise | — | 4,305,005 | ||||||
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Consolidated Balance Sheets - Continued (Unaudited)
Successor | Predecessor | |||||||
June 30, 2017 | December 31, 2016 | |||||||
(in thousands) | ||||||||
Temporary equity: | ||||||||
Redeemable noncontrolling interests | 28,132 | — | ||||||
Stockholders’/unitholders’ equity (deficit): | ||||||||
Predecessor units issued and outstanding | — | 5,386,885 | ||||||
Predecessor accumulated deficit | — | (7,783,873 | ) | |||||
Successor Class A common stock | 89 | — | ||||||
Successor additional paid-in capital | 2,043,927 | — | ||||||
Successor retained earnings | 212,801 | — | ||||||
Total stockholders’/unitholders’ equity (deficit) | 2,256,817 | (2,396,988 | ) | |||||
Total liabilities and equity (deficit) | $ | 3,201,516 | $ | 4,660,591 | ||||
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Condensed Consolidated Statements of Operations (Unaudited)
Successor | Predecessor | |||||||
Three Months Ended June 30, 2017 | Three Months Ended June 30, 2016 | |||||||
(in thousands, except per share and per unit amounts) | ||||||||
Revenues and other: | ||||||||
Oil, natural gas and natural gas liquids sales | $ | 243,167 | $ | 195,847 | ||||
Gains (losses) on oil and natural gas derivatives | 45,714 | (183,794 | ) | |||||
Marketing revenues | 12,547 | 8,551 | ||||||
Other revenues | 6,391 | 23,641 | ||||||
307,819 | 44,245 | |||||||
Expenses: | ||||||||
Lease operating expenses | 71,057 | 70,367 | ||||||
Transportation expenses | 37,388 | 41,092 | ||||||
Marketing expenses | 6,976 | 6,727 | ||||||
General and administrative expenses | 34,458 | 52,169 | ||||||
Exploration costs | 811 | 48 | ||||||
Depreciation, depletion and amortization | 51,987 | 86,358 | ||||||
Taxes, other than income taxes | 17,871 | 18,180 | ||||||
(Gains) losses on sale of assets and other, net | (306,969 | ) | 2,517 | |||||
(86,421 | ) | 277,458 | ||||||
Other income and (expenses): | ||||||||
Interest expense, net of amounts capitalized | (7,551 | ) | (50,320 | ) | ||||
Other, net | (1,163 | ) | (1,226 | ) | ||||
(8,714 | ) | (51,546 | ) | |||||
Reorganization items, net | (3,377 | ) | 485,798 | |||||
Income from continuing operations before income taxes | 382,149 | 201,039 | ||||||
Income tax expense (benefit) | 158,770 | (3,652 | ) | |||||
Income from continuing operations | 223,379 | 204,691 | ||||||
Income (loss) from discontinued operations, net of income taxes | (3,322 | ) | 3,801 | |||||
Net income | $ | 220,057 | $ | 208,492 | ||||
Income from continuing operations per share/unit – Basic | $ | 2.49 | $ | 0.58 | ||||
Income from continuing operations per share/unit – Diluted | $ | 2.47 | $ | 0.58 | ||||
Income (loss) from discontinued operations per share/unit – Basic | $ | (0.04 | ) | $ | 0.01 | |||
Income (loss) from discontinued operations per share/unit – Diluted | $ | (0.04 | ) | $ | 0.01 | |||
Net income per share/unit – Basic | $ | 2.45 | $ | 0.59 | ||||
Net income per share/unit – Diluted | $ | 2.43 | $ | 0.59 | ||||
Weighted average shares/units outstanding – Basic | 89,849 | 352,789 | ||||||
Weighted average shares/units outstanding – Diluted | 90,484 | 352,789 | ||||||
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Condensed Consolidated Statements of Operations - Continued (Unaudited)
Successor | Predecessor | |||||||||||
Four Months Ended June 30, 2017 | Two Months Ended February 28, 2017 | Six Months Ended June 30, 2016 | ||||||||||
(in thousands, except per share and per unit amounts) | ||||||||||||
Revenues and other: | ||||||||||||
Oil, natural gas and natural gas liquids sales | $ | 323,492 | $ | 188,885 | $ | 380,288 | ||||||
Gains (losses) on oil and natural gas derivatives | 33,755 | 92,691 | (74,341 | ) | ||||||||
Marketing revenues | 15,461 | 6,636 | 17,612 | |||||||||
Other revenues | 8,419 | 9,915 | 51,947 | |||||||||
381,127 | 298,127 | 375,506 | ||||||||||
Expenses: | ||||||||||||
Lease operating expenses | 95,687 | 49,665 | 153,613 | |||||||||
Transportation expenses | 51,111 | 25,972 | 83,623 | |||||||||
Marketing expenses | 9,515 | 4,820 | 14,560 | |||||||||
General and administrative expenses | 44,869 | 71,745 | 135,889 | |||||||||
Exploration costs | 866 | 93 | 2,741 | |||||||||
Depreciation, depletion and amortization | 71,901 | 47,155 | 175,467 | |||||||||
Impairment of long-lived assets | — | — | 123,316 | |||||||||
Taxes, other than income taxes | 24,948 | 14,877 | 35,541 | |||||||||
(Gains) losses on sale of assets and other, net | (306,524 | ) | 672 | 3,786 | ||||||||
(7,627 | ) | 214,999 | 728,536 | |||||||||
Other income and (expenses): | ||||||||||||
Interest expense, net of amounts capitalized | (11,751 | ) | (16,725 | ) | (134,193 | ) | ||||||
Other, net | (1,551 | ) | (149 | ) | (1,158 | ) | ||||||
(13,302 | ) | (16,874 | ) | (135,351 | ) | |||||||
Reorganization items, net | (5,942 | ) | 2,331,189 | 485,798 | ||||||||
Income (loss) from continuing operations before income taxes | 369,510 | 2,397,443 | (2,583 | ) | ||||||||
Income tax expense (benefit) | 153,455 | (166 | ) | 6,594 | ||||||||
Income (loss) from continuing operations | 216,055 | 2,397,609 | (9,177 | ) | ||||||||
Loss from discontinued operations, net of income taxes | (3,254 | ) | (548 | ) | (1,130,077 | ) | ||||||
Net income (loss) | $ | 212,801 | $ | 2,397,061 | $ | (1,139,254 | ) | |||||
Income (loss) from continuing operations per share/unit – Basic | $ | 2.41 | $ | 6.80 | $ | (0.02 | ) | |||||
Income (loss) from continuing operations per share/unit – Diluted | $ | 2.40 | $ | 6.80 | $ | (0.02 | ) | |||||
Loss from discontinued operations per share/unit – Basic | $ | (0.04 | ) | $ | (0.01 | ) | $ | (3.21 | ) | |||
Loss from discontinued operations per share/unit – Diluted | $ | (0.04 | ) | $ | (0.01 | ) | $ | (3.21 | ) | |||
Net income (loss) per share/unit – Basic | $ | 2.37 | $ | 6.79 | $ | (3.23 | ) | |||||
Net income (loss) per share/unit – Diluted | $ | 2.36 | $ | 6.79 | $ | (3.23 | ) | |||||
Weighted average shares/units outstanding – Basic | 89,849 | 352,792 | 352,511 | |||||||||
Weighted average shares/units outstanding – Diluted | 90,065 | 352,792 | 352,511 | |||||||||
14
Condensed Consolidated Statements of Cash Flows (Unaudited)
Successor | Predecessor | |||||||||||
Four Months Ended June 30, 2017 | Two Months Ended February 28, 2017 | Six Months Ended June 30, 2016 | ||||||||||
(in thousands) | ||||||||||||
Cash flow from operating activities: | ||||||||||||
Net income (loss) | $ | 212,801 | $ | 2,397,061 | $ | (1,139,254 | ) | |||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
Loss from discontinued operations | 3,254 | 548 | 1,130,077 | |||||||||
Depreciation, depletion and amortization | 71,901 | 47,155 | 175,467 | |||||||||
Impairment of long-lived assets | — | — | 123,316 | |||||||||
Deferred income taxes | 131,055 | (166 | ) | 3,850 | ||||||||
Noncash (gains) losses on oil and natural gas derivatives | (25,826 | ) | (104,263 | ) | 931,251 | |||||||
Share-based compensation expenses | 19,599 | 50,255 | 18,553 | |||||||||
Amortization and write-off of deferred financing fees | 82 | 1,338 | 9,227 | |||||||||
(Gains) losses on sale of assets and other, net | (293,811 | ) | 1,069 | 3,929 | ||||||||
Reorganization items, net | — | (2,359,364 | ) | (498,954 | ) | |||||||
Changes in assets and liabilities: | ||||||||||||
(Increase) decrease in accounts receivable – trade, net | 27,212 | (7,216 | ) | (12,046 | ) | |||||||
(Increase) decrease in other assets | (1,245 | ) | 402 | (19,039 | ) | |||||||
Increase in restricted cash | — | (80,164 | ) | — | ||||||||
Increase (decrease) in accounts payable and accrued expenses | (49,984 | ) | 20,949 | 47,062 | ||||||||
Increase in other liabilities | 22,421 | 2,801 | 26,150 | |||||||||
Net cash provided by (used in) operating activities – continuing operations | 117,459 | (29,595 | ) | 799,589 | ||||||||
Net cash provided by operating activities – discontinued operations | 13,966 | 8,781 | 1,612 | |||||||||
Net cash provided by (used in) operating activities | 131,425 | (20,814 | ) | 801,201 | ||||||||
Cash flow from investing activities: | ||||||||||||
Development of oil and natural gas properties | (61,534 | ) | (50,597 | ) | (80,909 | ) | ||||||
Purchases of other property and equipment | (27,287 | ) | (7,409 | ) | (13,655 | ) | ||||||
Proceeds from sale of properties and equipment and other | 641,219 | (166 | ) | (2,713 | ) | |||||||
Net cash provided by (used in) investing activities – continuing operations | 552,398 | (58,172 | ) | (97,277 | ) | |||||||
Net cash provided by (used in) investing activities – discontinued operations | (1,645 | ) | (584 | ) | 26,166 | |||||||
Net cash provided by (used in) investing activities | 550,753 | (58,756 | ) | (71,111 | ) | |||||||
15
Condensed Consolidated Statements of Cash Flows - Continued (Unaudited)
Successor | Predecessor | |||||||||||
Four Months Ended June 30, 2017 | Two Months Ended February 28, 2017 | Six Months Ended June 30, 2016 | ||||||||||
(in thousands) | ||||||||||||
Cash flow from financing activities: | ||||||||||||
Proceeds from rights offering, net | — | 514,069 | — | |||||||||
Proceeds from borrowings | 160,000 | — | 978,500 | |||||||||
Repayments of debt | (876,570 | ) | (1,038,986 | ) | (913,210 | ) | ||||||
Debt issuance costs paid | (2,973 | ) | — | (623 | ) | |||||||
Payment to holders of claims under the second lien notes | — | (30,000 | ) | — | ||||||||
Other | (87 | ) | (6,015 | ) | (20,687 | ) | ||||||
Net cash provided by (used in) financing activities – continuing operations | (719,630 | ) | (560,932 | ) | 43,980 | |||||||
Net cash used in financing activities – discontinued operations | — | — | (1,593 | ) | ||||||||
Net cash provided by (used in) financing activities | (719,630 | ) | (560,932 | ) | 42,387 | |||||||
Net increase (decrease) in cash and cash equivalents | (37,452 | ) | (640,502 | ) | 772,477 | |||||||
Cash and cash equivalents: | ||||||||||||
Beginning | 54,355 | 694,857 | 2,168 | |||||||||
Ending | 16,903 | 54,355 | 774,645 | |||||||||
Less cash and cash equivalents of discontinued operations at end of period | — | — | (15,008 | ) | ||||||||
Ending – continuing operations | $ | 16,903 | $ | 54,355 | $ | 759,637 | ||||||
16
Adjusted EBITDAX (Non-GAAP Measure)
The non-GAAP financial measure of adjusted EBITDAX, as defined by the Company, may not be comparable to similarly titled measures used by other companies. Therefore, this non-GAAP measure should be considered in conjunction with net income (loss) and other performance measures prepared in accordance with GAAP. Adjusted EBITDAX should not be considered in isolation or as a substitute for GAAP.
Adjusted EBITDAX is a measure used by Company management to evaluate the Company’s operational performance and for comparisons to the Company’s industry peers. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s financial results.
The following presents a reconciliation of net income (loss) to adjusted EBITDAX:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017(1) | 2016 | ||||||||||||
(in thousands) | |||||||||||||||
Net income (loss) | $ | 220,057 | $ | 208,492 | $ | 2,609,862 | $ | (1,139,254 | ) | ||||||
Plus (less): | |||||||||||||||
(Income) loss from discontinued operations | 3,322 | (3,801 | ) | 3,802 | 1,130,077 | ||||||||||
Interest expense | 7,551 | 50,320 | 28,476 | 134,193 | |||||||||||
Income tax expense (benefit) | 158,770 | (3,652 | ) | 153,289 | 6,594 | ||||||||||
Depreciation, depletion and amortization | 51,987 | 86,358 | 119,056 | 175,467 | |||||||||||
Exploration costs | 811 | 48 | 959 | 2,741 | |||||||||||
EBITDAX | 442,498 | 337,765 | 2,915,444 | 309,818 | |||||||||||
Plus (less): | |||||||||||||||
Impairment of long-lived assets | — | — | — | 123,316 | |||||||||||
Noncash (gains) losses on oil and natural gas derivatives | (43,567 | ) | 349,158 | (130,089 | ) | 574,416 | |||||||||
Noncash settlements on derivatives (2) | — | 34,335 | — | 34,335 | |||||||||||
Accrued settlements on oil derivative contracts related to current production period (3) | 1,583 | (65,492 | ) | 2,885 | (73,354 | ) | |||||||||
Share-based compensation expenses | 15,422 | 6,128 | 69,854 | 18,553 | |||||||||||
Write-off of deferred financing fees | — | 1,332 | — | 1,348 | |||||||||||
(Gains) losses on sale of assets and other, net (4) | (307,381 | ) | 2,018 | (307,407 | ) | 3,376 | |||||||||
Reorganization items, net (5) | 3,377 | (485,798 | ) | (2,325,247 | ) | (485,798 | ) | ||||||||
Adjusted EBITDAX | $ | 111,932 | $ | 179,446 | $ | 225,440 | $ | 506,010 | |||||||
In addition, the Company reported the following other items:
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2017 | 2016 | 2017(1) | 2016 | ||||||||||||
(in thousands) | |||||||||||||||
Prepetition restructuring costs included in general and administrative expenses (6) | $ | — | $ | 2,403 | $ | — | $ | 19,567 | |||||||
Premiums paid for put options that settled during the period (7) | — | (20,761 | ) | — | (58,246 | ) | |||||||||
(1) | All amounts reflect the combined results of the four months ended June 30, 2017 (successor) and the two months ended February 28, 2017 (predecessor). |
(2) | Represent derivative settlements that were paid directly by the counterparties to the lenders under the predecessor’s credit facility, and as such were not included on the Company’s consolidated statement of cash flows. |
(3) | Represent amounts related to oil derivative contracts that settled during the respective period (contract terms had expired) but cash had not been received as of the end of the period. |
17
Adjusted EBITDAX (Non-GAAP Measure) - Continued
(4) | Primarily represent gains or losses on the sale of assets, gains or losses on inventory valuation and amortization of basis difference for equity method investments. |
(5) | Represent costs and income directly associated with the Company’s filing for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code since the petition date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments are determined. |
(6) | Represent restructuring costs incurred by the Company prior to its filing for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code, which are included in general and administrative expenses. |
(7) | Represent premiums paid at inception for put options that settled during the respective period. The Company has not purchased any put options since 2012. |
18