Attached files

file filename
EX-32.2 - EX-32.2 - Montage Resources Corpecr-ex322_9.htm
EX-32.1 - EX-32.1 - Montage Resources Corpecr-ex321_8.htm
EX-31.2 - EX-31.2 - Montage Resources Corpecr-ex312_6.htm
EX-31.1 - EX-31.1 - Montage Resources Corpecr-ex311_7.htm
EX-10.1 - EX-10.1 - Montage Resources Corpecr-ex101_56.htm

 

s

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-36511

 

Eclipse Resources Corporation

(Exact name of registrant as specified in its charter)

 

 

Delaware

46-4812998

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

2121 Old Gatesburg Rd, Suite 110

State College, PA

16803

(Address of principal executive offices)

(Zip code)

(814) 308-9754

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes       No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  (Do not check if a small reporting company)

  

Small reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes      No

Number of shares of the registrant’s common stock outstanding at May 4, 2018: 302,092,885 shares

 

 

 

 


 

ECLIPSE RESOURCES CORPORATION

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

 

 

 

 

2


 

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenues and income or losses, projected costs and capital expenditures, prospects, plans and objectives of management are forward-looking statements. When used in this Quarterly Report, the words “will,” “plan,” “would,” “could,” “endeavor,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are or were, when made, based on our current expectations and assumptions about future events and are or were, when made, based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 2, 2018.

Forward-looking statements may include statements about, among other things:

 

realized prices for natural gas, natural gas liquids (“NGLs”) and oil and the volatility of those prices;

 

write-downs of our natural gas and oil asset values due to declines in commodity prices;

 

our business strategy;

 

our reserves, including the impact of current commodity prices on our estimated year end reserves;

 

general economic conditions;

 

our financial strategy, liquidity and capital required for developing our properties and the timing related thereto;

 

the timing and amount of future production of natural gas, NGLs and oil;

 

our hedging strategy and results;

 

future drilling plans;

 

competition and government regulations, including those related to hydraulic fracturing;

 

the anticipated benefits under our commercial agreements;

 

marketing of natural gas, NGLs and oil;

 

leasehold and business acquisitions and joint ventures;

 

leasehold terms expiring before production can be established and our costs to extend such terms;

 

the costs, terms and availability of gathering, processing, fractionation and other midstream services;

 

credit markets;

 

uncertainty regarding our future operating results, including initial production rates and liquid yields in our type curve areas; and

 

plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical.

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the exploration for and development, production, gathering and sale of natural gas, NGLs and oil. These risks include, but are not limited to, legal and environmental risks, drilling and other operating risks, regulatory changes, commodity price volatility and the significant decline of the price of natural gas, NGLs and oil from historic highs, inflation, lack of availability of drilling, production and processing equipment and services, counterparty credit risk, the uncertainty inherent in estimating natural gas, NGLs and oil reserves and in projecting future rates of production, cash flow and access to capital, risks associated with our level of indebtedness, the timing of development expenditures, and the other risks described in “Item 1A. Risk Factors” of our Annual Report on Form 10-K, filed with the SEC on March 2, 2018.

3


 

Reserve engineering is a process of estimating underground accumulations of natural gas, NGLs and oil that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data, the interpretation of such data and price and cost assumptions made by reserve engineers. In addition, the results of drilling, testing and production activities may justify revisions of estimates that were made previously. If significant, such revisions could change the schedule of any further production and development drilling. Accordingly, reserve estimates may differ significantly from the quantities of natural gas, NGLs and oil that are ultimately recovered.

Should one or more of the risks or uncertainties described in this Quarterly Report occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

Except as otherwise required by applicable law, we disclaim any duty to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect new information obtained or events or circumstances that occur after the date of this Quarterly Report.

 

 

4


 

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

ECLIPSE RESOURCES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

2018

 

 

December 31,

2017

 

ASSETS

 

 

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

21,801

 

 

$

17,224

 

Accounts receivable

 

 

113,208

 

 

 

77,609

 

Assets held for sale

 

 

 

 

 

206

 

Other current assets

 

 

8,350

 

 

 

12,023

 

Total current assets

 

 

143,359

 

 

 

107,062

 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT AT COST

 

 

 

 

 

 

 

 

Oil and natural gas properties, successful efforts method:

 

 

 

 

 

 

 

 

Unproved properties

 

 

537,958

 

 

 

459,549

 

Proved oil and gas properties, net

 

 

694,599

 

 

 

647,881

 

Other property and equipment, net

 

 

6,785

 

 

 

6,942

 

Total property and equipment, net

 

 

1,239,342

 

 

 

1,114,372

 

 

 

 

 

 

 

 

 

 

OTHER NONCURRENT ASSETS

 

 

 

 

 

 

 

 

Other assets

 

 

5,617

 

 

 

2,093

 

TOTAL ASSETS

 

$

1,388,318

 

 

$

1,223,527

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

 

 

Accounts payable

 

$

96,048

 

 

$

76,174

 

Accrued capital expenditures

 

 

12,689

 

 

 

10,658

 

Accrued liabilities

 

 

39,423

 

 

 

41,662

 

Accrued interest payable

 

 

10,433

 

 

 

21,100

 

Total current liabilities

 

 

158,593

 

 

 

149,594

 

 

 

 

 

 

 

 

 

 

NONCURRENT LIABILITIES

 

 

 

 

 

 

 

 

Debt, net of unamortized discount and debt issuance costs

 

 

495,707

 

 

 

495,021

 

Credit facility

 

 

65,000

 

 

 

 

Asset retirement obligations

 

 

6,269

 

 

 

6,029

 

Other liabilities

 

 

2,100

 

 

 

529

 

Total liabilities

 

 

727,669

 

 

 

651,173

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Preferred stock, 50,000,000 authorized, no shares issued and outstanding

 

 

 

 

 

 

Common stock, $0.01 par value, 1,000,000,000 authorized, 301,771,111

   and 262,740,355 shares issued and outstanding, respectively

 

 

3,033

 

 

 

2,637

 

Additional paid in capital

 

 

2,059,418

 

 

 

1,967,958

 

Treasury stock, shares at cost; 1,499,566 and 992,315 shares, respectively

 

 

(3,031

)

 

 

(2,096

)

Accumulated deficit

 

 

(1,398,771

)

 

 

(1,396,145

)

Total stockholders' equity

 

 

660,649

 

 

 

572,354

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

1,388,318

 

 

$

1,223,527

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

ECLIPSE RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share data)

(Unaudited)

 

 

 

For the Three Months Ended

March 31,

 

 

 

2018

 

 

2017

 

REVENUES

 

 

 

 

 

 

 

 

Natural gas, oil and natural gas liquids sales

 

$

110,184

 

 

$

99,432

 

Brokered natural gas and marketing revenue

 

 

8

 

 

 

2,431

 

Total revenues

 

 

110,192

 

 

 

101,863

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

Lease operating

 

 

9,390

 

 

 

2,343

 

Transportation, gathering and compression

 

 

27,689

 

 

 

32,877

 

Production and ad valorem taxes

 

 

2,445

 

 

 

1,931

 

Brokered natural gas and marketing expense

 

 

48

 

 

 

2,460

 

Depreciation, depletion and amortization

 

 

31,156

 

 

 

26,189

 

Exploration

 

 

15,278

 

 

 

11,581

 

General and administrative

 

 

9,757

 

 

 

10,132

 

Accretion of asset retirement obligations

 

 

155

 

 

 

124

 

(Gain) loss on sale of assets

 

 

(267

)

 

 

(5

)

Total operating expenses

 

 

95,651

 

 

 

87,632

 

OPERATING INCOME (LOSS)

 

 

14,541

 

 

 

14,231

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

Gain (loss) on derivative instruments

 

 

(4,215

)

 

 

25,097

 

Interest expense, net

 

 

(12,952

)

 

 

(12,462

)

Other income (expense)

 

 

 

 

 

(19

)

Total other income (expense), net

 

 

(17,167

)

 

 

12,616

 

INCOME (LOSS) BEFORE INCOME TAXES

 

 

(2,626

)

 

 

26,847

 

INCOME TAX BENEFIT (EXPENSE)

 

 

 

 

 

 

NET INCOME (LOSS)

 

$

(2,626

)

 

$

26,847

 

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER COMMON SHARE

 

 

 

 

 

 

 

 

Basic

 

$

(0.01

)

 

$

0.10

 

Diluted

 

$

(0.01

)

 

$

0.10

 

 

 

 

 

 

 

 

 

 

WEIGHTED AVERAGE COMMON SHARES

   OUTSTANDING

 

 

 

 

 

 

 

 

Basic

 

 

293,450

 

 

 

261,105

 

Diluted

 

 

293,450

 

 

 

264,215

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

 

6


 

ECLIPSE RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

(Unaudited)

 

 

 

Number of

Shares

 

 

Common

Stock

($0.01 Par)

 

 

Additional

Paid-in-

Capital

 

 

Treasury

Stock

 

 

Accumulated

Deficit

 

 

Total

 

Balances, December 31,

   2017

 

 

262,740,355

 

 

$

2,637

 

 

$

1,967,958

 

 

$

(2,096

)

 

$

(1,396,145

)

 

$

572,354

 

Stock-based compensation

 

 

 

 

 

 

 

 

1,981

 

 

 

 

 

 

 

 

 

1,981

 

Equity issuance costs

 

 

 

 

 

 

 

 

(145

)

 

 

 

 

 

 

 

 

(145

)

Shares of common stock

   issued in asset acquisition,

   net of equity issuance costs

 

 

37,823,596

 

 

 

378

 

 

 

89,642

 

 

 

 

 

 

 

 

 

90,020

 

Issuance of common stock

   upon vesting of  equity-

   based compensation

   awards, net of shares

   withheld for income

   tax withholdings

 

 

1,207,160

 

 

 

18

 

 

 

(18

)

 

 

(935

)

 

 

 

 

 

(935

)

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,626

)

 

 

(2,626

)

Balances, March 31,

   2018

 

 

301,771,111

 

 

$

3,033

 

 

$

2,059,418

 

 

$

(3,031

)

 

$

(1,398,771

)

 

$

660,649

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

7


 

ECLIPSE RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited) 

 

 

For the Three Months Ended

March 31,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(2,626

)

 

$

26,847

 

Adjustments to reconcile net income (loss) to net cash provided by

   (used in) operating activities

 

 

 

 

 

 

 

 

Depreciation, depletion and amortization

 

 

31,156

 

 

 

26,189

 

Exploration expense

 

 

6,790

 

 

 

4,988

 

Stock-based compensation

 

 

1,981

 

 

 

2,081

 

Accretion of asset retirement obligations

 

 

155

 

 

 

124

 

(Gain) loss on derivative instruments

 

 

4,215

 

 

 

(25,097

)

Net cash receipts (payments) on settled derivatives

 

 

141

 

 

 

(3,989

)

(Gain) loss on sale of assets

 

 

(267

)

 

 

(5

)

Amortization of deferred financing costs

 

 

554

 

 

 

502

 

Amortization of debt discount

 

 

332

 

 

 

330

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(35,499

)

 

 

10,478

 

Other assets

 

 

(459

)

 

 

943

 

Accounts payable and accrued liabilities

 

 

(3,179

)

 

 

(14,992

)

Net cash provided by operating activities

 

 

3,294

 

 

 

28,399

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Capital expenditures for oil and gas properties

 

 

(66,441

)

 

 

(66,005

)

Capital expenditures for other property and equipment

 

 

(155

)

 

 

(178

)

Proceeds from sale of assets

 

 

4,099

 

 

 

24

 

Net cash used in investing activities

 

 

(62,497

)

 

 

(66,159

)

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Debt issuance costs

 

 

(48

)

 

 

(1,231

)

Repayments of long-term debt

 

 

(92

)

 

 

(74

)

Proceeds from credit facility

 

 

65,000

 

 

 

 

Equity issuance costs

 

 

(145

)

 

 

 

Employee tax withholding for settlement of equity compensation awards

 

 

(935

)

 

 

(1,706

)

Net cash provided by (used in) financing activities

 

 

63,780

 

 

 

(3,011

)

Net increase (decrease) in cash and cash equivalents

 

 

4,577

 

 

 

(40,771

)

Cash and cash equivalents at beginning of period

 

 

17,224

 

 

 

201,229

 

Cash and cash equivalents at end of period

 

$

21,801

 

 

$

160,458

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

23,638

 

 

$

23,066

 

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES

 

 

 

 

 

 

 

 

Asset retirement obligations incurred, including changes in estimate

 

$

85

 

 

$

124

 

Additions of other property through debt financing

 

$

174

 

 

$

 

Additions to oil and natural gas properties - changes in accounts payable,

   accrued liabilities, and accrued capital expenditures

 

$

8,864

 

 

$

13,126

 

Asset acquisition through stock issuance

 

$

90,020

 

 

$

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

8


 

ECLIPSE RESOURCES CORPORATION

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 1—Organization and Nature of Operations

Eclipse Resources Corporation (the “Company”) is an independent exploration and production company engaged in the acquisition and development of oil and natural gas properties in the Appalachian Basin of the United States, which encompasses the Utica Shale and Marcellus Shale prospective areas.

 

 

Note 2—Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited except the condensed consolidated balance sheet at December 31, 2017, which is derived from the Company’s audited financial statements, and are presented in accordance with the requirements of accounting principles generally accepted in the United States (“U.S. GAAP”) for interim reporting. They do not include all disclosures normally made and contained in annual financial statements. In management’s opinion, all adjustments necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods disclosed have been made. All such adjustments are of a normal recurring nature.  These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements, and the notes to those statements, which are included in the Company’s Annual Report on Form 10-K filed with the SEC on March 2, 2018.

Operating results for interim periods may not necessarily be indicative of the results of operations for the full year ending December 31, 2018 or any other future periods.

Preparation in accordance with U.S. GAAP requires the Company to (1) adopt accounting policies within accounting rules set by the Financial Accounting Standards Board (“FASB”) and (2) make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and other disclosed amounts. Note 3—Summary of Significant Accounting Policies describes our significant accounting policies. The Company’s management believes the major estimates and assumptions impacting the condensed consolidated financial statements are the following:

 

estimates of proved reserves of oil and natural gas, which affect the calculations of depreciation, depletion and amortization and impairment of capitalized costs of oil and natural gas properties;

 

estimates of asset retirement obligations;

 

estimates of the fair value of oil and natural gas properties the Company owns, particularly properties that the Company has not yet explored, or fully explored, by drilling and completing wells;

 

impairment of undeveloped properties and other assets; and

 

depreciation and depletion of property and equipment.

Actual results may differ from estimates and assumptions of future events and these revisions could be material. Future production may vary materially from estimated oil and natural gas proved reserves. Actual future prices may vary significantly from price assumptions.

 

 

Note 3—Summary of Significant Accounting Policies

(a) Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash in banks and highly liquid instruments with original maturities of three months or less, primarily consisting of bank time deposits and investments in institutional money market funds. The carrying amounts approximate fair value due to the short-term nature of these items. Cash in bank accounts at times may exceed federally insured limits.

9


 

(b) Accounts Receivable

Accounts receivable are carried at estimated net realizable value. Receivables deemed uncollectible are charged directly to expense. Trade credit is generally extended on a short-term basis, and therefore, accounts receivable do not bear interest, although a finance charge may be applied to such receivables that are past due. A valuation allowance is provided for those accounts for which collection is estimated as doubtful and uncollectible accounts are written off and charged against the allowance. In estimating the allowance, management considers, among other things, how recently and how frequently payments have been received and the financial position of the counterparty. The Company did not deem any of its accounts receivables to be uncollectible as of March 31, 2018 or December 31, 2017.

The Company accrues revenue due to timing differences between the delivery of natural gas, natural gas liquids (NGLs), and crude oil and the receipt of a delivery statement. These revenues are recorded based upon volumetric data from the Company’s records and management’s estimates of the related commodity sales and transportation and compression fees. The Company had $51.3 million and $52.9 million of accrued revenues, net of certain expenses, at March 31, 2018 and December 31, 2017, respectively, which were included in accounts receivable within the Company’s condensed consolidated balance sheets.

(c) Property and Equipment

Oil and Natural Gas Properties

The Company follows the successful efforts method of accounting for its oil and natural gas operations. Acquisition costs for oil and natural gas properties, costs of drilling and equipping productive wells, and costs of unsuccessful development wells are capitalized and amortized on an equivalent unit-of-production basis over the life of the remaining related oil and gas reserves. The estimated future costs of dismantlement, restoration, plugging and abandonment of oil and gas properties and related disposal are capitalized when asset retirement obligations are incurred and amortized as part of depreciation, depletion and amortization expense (see “Depreciation, Depletion and Amortization” below).

Costs incurred to acquire producing and non-producing leaseholds are capitalized. All unproved leasehold acquisition costs are initially capitalized, including the cost of leasing agents, title work and due diligence. If the Company acquires leases in a prospective area, these costs are capitalized as unproved leasehold costs. If no leases are acquired by the Company with respect to the initial costs incurred or the Company discontinues leasing in a prospective area, the costs are charged to exploration expense. Unproved leasehold costs that are determined to have proved oil and gas reserves are transferred to proved leasehold costs.

Upon the sale or retirement of a complete field of a proved property, the cost is eliminated from the property accounts, and the resultant gain or loss is reclassified to the Company’s condensed consolidated statements of operations. Upon the sale of an individual well, the proceeds are credited to accumulated depreciation and depletion within the Company’s condensed consolidated balance sheets. Upon the sale of an entire interest in an unproved property where the property had been assessed for impairment individually, a gain or loss is recognized in the Company’s condensed consolidated statements of operations. Upon the sale of an entire interest in an unproved property where the property had been assessed for impairment on a group basis, no gain or loss is recognized in the Company’s consolidated statements of operations unless the proceeds exceed the original cost of the property, in which case a gain is recognized in the amount of such excess. If a partial interest in an unproved property is sold, any funds received are accounted for as a reduction of the cost in the interest retained.

A summary of property and equipment including oil and natural gas properties is as follows (in thousands):

 

 

 

March 31, 2018

 

 

December 31, 2017

 

Oil and natural gas properties:

 

 

 

 

 

 

 

 

Unproved

 

$

537,958

 

 

$

459,549

 

Proved

 

 

1,973,468

 

 

 

1,896,081

 

Gross oil and natural gas properties

 

 

2,511,426

 

 

 

2,355,630

 

Less accumulated depreciation, depletion and amortization

 

 

(1,278,869

)

 

 

(1,248,200

)

Oil and natural gas properties, net

 

 

1,232,557

 

 

 

1,107,430

 

Other property and equipment

 

 

13,837

 

 

 

13,508

 

Less accumulated depreciation

 

 

(7,052

)

 

 

(6,566

)

Other property and equipment, net

 

 

6,785

 

 

 

6,942

 

Property and equipment, net

 

$

1,239,342

 

 

$

1,114,372

 

 

10


 

Exploration expenses, including geological and geophysical expenses and delay rentals for unevaluated oil and gas properties are charged to expense as incurred. Exploratory drilling costs are initially capitalized as unproved property, not subject to depletion, but charged to expense if and when the well is determined not to have found proved oil and gas reserves.

The Company capitalized interest expense totaling $0.5 million and $0.4 million for the three months ended March 31, 2018 and 2017, respectively.

Other Property and Equipment

Other property and equipment include land, buildings, leasehold improvements, vehicles, computer equipment and software, telecommunications equipment, and furniture and fixtures. These items are recorded at cost, or fair value if acquired through a business acquisition.

(d) Revenue Recognition

Product Revenue

The Company’s revenues are primarily derived from the sale of natural gas and oil production, as well as the sale of NGLs that are extracted from the natural gas. Sales of natural gas, NGLs, and oil are recognized when the Company satisfies a performance obligation by transferring control of a product to a customer. Payment is generally received one month after the sale has occurred.

Natural Gas

Under the Company’s natural gas sales contracts, the Company delivers natural gas to the purchaser at an agreed upon delivery point. Natural gas is transported from the wellhead to delivery points specified under sales contracts. To deliver natural gas to these points, the Company uses third parties to gather, compress, process and transport the natural gas.  The Company maintains control of the natural gas during gathering, compression, processing, and transportation. The Company’s sales contracts provide that it receives a specific index price adjusted for pricing differentials. The Company transfers control of the product at the delivery point and recognizes revenue based on the contract price. The costs to gather, compress, process and transport the natural gas are recorded as transportation, gathering and compression expense.

NGLs

The Company sells NGLs directly to the NGLs purchaser. For these NGLs, the sales contracts provide that the Company delivers the product to the purchaser at an agreed upon delivery point and that the Company receives a specific index price adjusted for pricing differentials.  The Company transfers control of the product to the purchaser at the delivery point and recognizes revenue based on the contract price. The costs to further process and transport NGLs are recorded as transportation, gathering and compression expense.

Oil

Under the Company’s oil sales contracts, the Company generally sells oil to the purchaser from storage tanks near central stabilization facilities and collect a contractually agreed upon index price, net of pricing differentials. The Company transfers control of the product from the central stabilization facilities to the purchaser and recognizes revenue based on the contract price.

Marketing Revenue

Brokered natural gas and marketing revenues are derived from activities to purchase and sell third-party natural gas and to market excess firm transportation capacity to third parties. The Company retains control of the purchased natural gas and NGLs prior to delivery to the purchaser. The Company has concluded that it is the principal in these arrangements and therefore the Company recognizes revenue on a gross basis, with costs to purchase and transport natural gas presented as brokered natural gas and marketing expense. Contracts to sell third party natural gas are generally subject to similar terms as contracts to sell the Company’s produced natural gas and NGLs.  The Company satisfies performance obligations to the purchaser by transferring control of the product at the delivery point and recognizes revenue based on the price received from the purchaser.

Disaggregation of Revenue

  The following table illustrates the revenue disaggregated by type for the three months ended March 31, 2018 and 2017:

 

11


 

 

 

Three Months Ended

March 31,

 

 

 

2018

 

 

2017

 

Revenues (in thousands)

 

 

 

 

 

 

 

 

Natural gas sales

 

$

58,483

 

 

$

61,420

 

NGL sales

 

 

19,743

 

 

 

17,063

 

Oil sales

 

 

31,958

 

 

 

20,949

 

Brokered natural gas and marketing revenue

 

 

8

 

 

 

2,431

 

Total revenues

 

$

110,192

 

 

$

101,863

 

 

Transaction Price Allocated to Remaining Performance Obligations

A significant number of the Company’s product sales are short-term in nature with a contract term of one year or less.  For those contracts, the Company has utilized the practical expedient allowed in the revenue accounting standard that exempts the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligations is part of a contract that has an original expected duration of one year or less.

For any product sales that have a contract term greater than one year, the Company has also utilized the practical expedient that states that it is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation.  Under these product sales contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.  Currently, any product sales that have a contractual term greater than one year have no long-term fixed considerations.

Contract Balances

Under the Company’s sales contracts, customers are invoiced once performance obligations have been satisfied, at which point payment is unconditional.  Accordingly, the Company’s product sales contracts do not give rise to contract assets or liabilities.  Accounts receivable attributable to the Company’s revenue contracts with customers was $51.3 million and $52.9 million at March 31, 2018 and December 31, 2017, respectively.

(e) Concentration of Credit Risk

The Company’s principal exposures to credit risk are through the sale of its oil and natural gas production and related products and services, joint interest owner receivables and receivables resulting from commodity derivative contracts. The inability or failure of the Company’s significant customers or counterparties to meet their obligations or their insolvency or liquidation may adversely affect the Company’s financial results. The following table summarizes the Company’s concentration of receivables, net of allowances, by product or service as of March 31, 2018 and December 31, 2017 (in thousands):

 

 

 

March 31,

2018

 

 

December 31, 2017

 

Receivables by product or service:

 

 

 

 

 

 

 

 

Sale of oil and natural gas and related products

   and services

 

$

51,298

 

 

$

52,908

 

Joint interest owners

 

 

60,263

 

 

 

23,154

 

Derivatives

 

 

1,628

 

 

 

1,528

 

Other

 

 

19

 

 

 

19

 

Total

 

$

113,208

 

 

$

77,609

 

 

12


 

Oil and natural gas customers include pipelines, distribution companies, producers, gas marketers and industrial users primarily located in the State of Ohio. As a general policy, collateral is not required for receivables, but customers’ financial condition and credit worthiness are evaluated regularly. By using derivative instruments that are not traded on an exchange to hedge exposures to changes in commodity prices, the Company exposes itself to the credit risk of counterparties. Credit risk is the potential failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty is expected to owe the Company, which creates credit risk. To minimize the credit risk in derivative instruments, the Company’s policy is to enter into derivative contracts only with counterparties that are creditworthy financial institutions deemed by management as competent and competitive market makers. Additionally, the Company uses master netting agreements to minimize credit-risk exposure. The creditworthiness of the Company’s counterparties is subject to periodic review. The fair value of the Company’s unsettled commodity derivative contracts was a net liability position of ($8.9) million and ($5.1) million at March 31, 2018 and December 31, 2017, respectively. Other than, as provided by its revolving credit facility, the Company is not required to provide credit support or collateral to any of its counterparties under the Company’s contracts, nor are such counterparties required to provide credit support to the Company. As of March 31, 2018 and December 31, 2017, the Company did not have past-due receivables from or payables to any of such counterparties.

 

(f) Depreciation, Depletion and Amortization

Oil and Natural Gas Properties

Depreciation, depletion and amortization (“DD&A”) of capitalized costs of proved oil and natural gas properties is computed using the unit-of-production method on a field level basis using total estimated proved reserves. The reserve base used to calculate DD&A for leasehold acquisition costs and the cost to acquire proved properties is the sum of proved developed reserves and proved undeveloped reserves. The reserve base used to calculate DD&A for drilling, completion and well equipment costs, which include development costs and successful exploration drilling costs, includes only proved developed reserves. DD&A expense relating to proved oil and natural gas properties totaled approximately $30.7 million and $25.7 million for the three months ended March 31, 2018 and 2017, respectively.

Other Property and Equipment

Depreciation with respect to other property and equipment is calculated using straight-line methods based on expected lives of the individual assets or groups of assets ranging from 5 to 40 years. Depreciation totaled approximately $0.5 million for each of the three months ended March 31, 2018 and 2017. This amount is included in DD&A expense in the condensed consolidated statements of operations.

(g) Impairment of Long-Lived Assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an asset’s estimated future cash flows will not be sufficient to recover its carrying amount, an impairment charge will be recorded to reduce the carrying amount for that asset to its estimated fair value if such carrying amount exceeds the fair value.

The review for impairment of the Company’s oil and gas properties is done by determining if the historical cost of proved and unproved properties less the applicable accumulated DD&A and abandonment is less than the estimated expected undiscounted future cash flows. The expected future cash flows are estimated based on the Company’s plans to continue to produce and develop proved reserves and a risk-adjusted portion of probable reserves. Expected future cash flow from the sale of production of reserves is calculated based on estimated future prices. The Company estimates prices based upon current contracts in place, adjusted for basis differentials and market-related information, including published futures prices. The estimated future level of production is based on assumptions surrounding future prices and costs, field decline rates, market demand and supply and the economic and regulatory climates. If the carrying value exceeds the expected future cash flows, an impairment loss is recognized for the difference between the estimated fair market value (as determined by discounted future cash flows) and the carrying value of the assets.  There were no impairments of proved properties for the three months ended March 31, 2018 or the three months ended March 31, 2017.

When an impairment charge is recognized it represents a significant Level 3 measurement in the fair value hierarchy. The primary input used is the Company’s forecasted discount net cash flows.

13


 

The determination of oil and natural gas reserve estimates is a subjective process, and the accuracy of any reserve estimate depends on the quality of available data and the application of engineering and geological interpretation and judgment. Estimates of economically recoverable reserves and future net cash flows depend on a number of variable factors and assumptions that are difficult to predict and may vary considerably from actual results.

Unproved oil and natural gas properties are periodically assessed for impairment by considering future drilling and exploration plans, results of exploration activities, commodity price outlooks, planned future sales and expiration of all or a portion of the properties. An impairment charge is recorded if conditions indicate the Company will not explore the acreage prior to expiration of the applicable leases. The Company recorded impairment charges of unproved oil and gas properties related to lease expirations of approximately $6.7 million and $4.1 million for the three months ended March 31, 2018 and 2017, respectively. The increase in impairment charges during the three months ended March 31, 2018 is the result of an increase in expected lease expirations due to the reduction in the Company’s planned future drilling activity due to the current commodity price environment. These costs are included in exploration expense in the condensed consolidated statements of operations.

(h) Income Taxes

The Company accounts for income taxes, as required, under the liability method as set out in the FASB’s Accounting Standards Codification (“ASC”) Topic 740 “Income Taxes.” Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

ASC Topic 740 further provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of the uncertain tax position guidance and in subsequent periods. This interpretation also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company has not recorded a reserve for any uncertain tax positions to date.

(i) Fair Value of Financial Instruments

The Company has established a hierarchy to measure its financial instruments at fair value, which requires it to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The hierarchy defines three levels of inputs that may be used to measure fair value:

Level 1—Unadjusted quoted prices in active markets for identical, unrestricted assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.  The Company’s valuation models are primarily industry-standard models that consider various inputs including: (i) quoted forward prices for commodities, (ii) time value, (iii) current market and contractual prices for the underlying instruments and (iv) volatility factors, as well as other relevant economic measures.

Level 3—Unobservable inputs that reflect the entity’s own assumptions about the assumption market participants would use in the pricing of the asset or liability and are consequently not based on market activity but rather through particular valuation techniques.

Valuation techniques that maximize the use of observable inputs are favored. Assets and liabilities are classified in their entirety based on the lowest priority level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the placement of assets and liabilities within the levels of the fair value hierarchy.

(j) Derivative Financial Instruments

The Company uses derivative financial instruments to reduce exposure to fluctuations in the prices of the energy commodities it sells.

14


 

Derivatives are recorded at fair value and are included on the condensed consolidated balance sheets as current and noncurrent assets and liabilities. Derivatives are classified as current or noncurrent based on the contractual expiration date. Derivatives with expiration dates within the next 12 months are classified as current. The Company netted the fair value of derivatives by counterparty in the accompanying condensed consolidated balance sheets where the right to offset exists. The Company’s derivative instruments were not designated as hedges for accounting purposes for any of the periods presented. Accordingly, the changes in fair value are recognized in the condensed consolidated statements of operations in the period of change. Gains and losses on derivatives are included in cash flows from operating activities. Premiums for options are included in cash flows from operating activities.

The valuation of the Company’s derivative financial instruments represents a Level 2 measurement in the fair value hierarchy.

(k) Asset Retirement Obligation

The Company recognizes a legal liability for its asset retirement obligations (“ARO”) in accordance with ASC Topic 410, “Asset Retirement and Environmental Obligations,” associated with the retirement of a tangible long-lived asset, in the period in which it is incurred or becomes determinable, with an associated increase in the carrying amount of the related long-lived asset. The cost of the tangible asset, including the initially recognized asset retirement cost, is depreciated over the useful life of the asset and accretion expense is recognized over time as the discounted liability is accreted to its expected settlement value. The Company measures the fair value of its ARO using expected future cash outflows for abandonment discounted back to the date that the abandonment obligation was measured using an estimated credit adjusted rate, which was 10.33% for each of the three months ended March 31, 2018 and 2017.

Estimating the future ARO requires management to make estimates and judgments based on historical estimates regarding timing and existence of a liability, as well as what constitutes adequate restoration, inherent in the fair value calculation are numerous assumptions and judgments including the ultimate costs, inflation factors, credit adjusted discount rates, timing of settlement and changes in the legal, regulatory, environmental and political environments. To the extent future revisions to these assumptions impact the fair value of the existing ARO liability, a corresponding adjustment is made to the related asset.

The following table sets forth the changes in the Company’s ARO liability for the three months ended March 31, 2018 (in thousands):

 

 

 

Three Months Ended March 31, 2018

 

Asset retirement obligations, beginning of period

 

$

6,029

 

Additional liabilities incurred

 

 

85

 

Accretion

 

 

155

 

Asset retirement obligations, end of period

 

$

6,269

 

 

The inputs used to determine such fair value are primarily based upon costs incurred historically for similar work, as well as estimates from independent third parties for costs that would be incurred to restore leased property to the contractually stipulated condition. Additions to ARO represent a significant nonrecurring Level 3 measurement.

(l) Lease Obligations

The Company leases office space under an operating lease that expires in 2024. The lease term begins on the date of initial possession of the leased property for purposes of recognizing lease expense on a straight-line basis over the term of the lease. The Company does not assume renewals in its determination of the lease term unless the renewals are deemed to be reasonably assured at lease inception.

(m) Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements.

(n) Segment Reporting

The Company operates in one industry segment: the oil and natural gas exploration and production industry in the United States. All of its operations are conducted in one geographic area of the United States. All revenues are derived from customers located in the United States.

15


 

(o) Debt Issuance Costs

The expenditures related to issuing debt are capitalized and reported as a reduction of the Company’s debt balance in the accompanying balance sheets. These costs are amortized over the expected life of the related instruments using the effective interest rate method. When debt is retired before maturity or modifications significantly change the cash flows, related unamortized costs are expensed.

(p) Recent Accounting Pronouncements

The FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“Update 2014-09”), which supersedes the revenue recognition requirements (and some cost guidance) in Topic 605, Revenue Recognition, and most industry-specific guidance throughout the industry topics of the Accounting Standards Codification. In addition, the existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract with a customer (for example, assets within the scope of Topic 360, “Property, Plant and Equipment”, and intangible assets within the scope of Topic 350, “Intangibles—Goodwill and Other”) are amended to be consistent with the guidance on recognition and measurement (including the constraint on revenue) in Update 2014-09. Topic 606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  The Company adopted this standard effective January 1, 2018 using the modified retrospective method.  The Company did not recognize a significant impact on its financial position or results of operations.  Upon adoption of this new standard, the Company did not record a cumulative effect adjustment nor did the Company alter its existing information technology and internal controls outside of ongoing contract review processes in order to identify the impact of future revenue contracts entered into by the Company.  Additional disclosures have been included to provide further detail regarding the Company’s revenue recognition policies.  

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” The new standard provides guidance to increase transparency and comparability among organizations and industries by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. An entity will be required to recognize all leases in the statement of financial position as assets and liabilities regardless of the leases classification. These requirements are effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period with early adoption permitted. The Company plans to adopt this standard effective January 1, 2019 using the modified retrospective transition method and is evaluating the standard’s applicability to its various contractual arrangements.  Although the Company believes that the adoption of the standard will result in increases to its assets and liabilities on its consolidated balance sheet as well as changes to the presentation of certain operating expenses on its consolidated statement of operations, the Company has not yet determined the extent of the adjustments that will be required upon implementation of the standard.  The Company continues to monitor relevant industry guidance regarding the implementation of the standard.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.”  The new standard provides guidance on how certain cash receipts and cash payments are presented and classified on the statement of cash flows.  These requirements are effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with early adoption permitted. The Company adopted this standard effective January 1, 2018 and did not recognize a significant impact on its financial position, results of operations, or statement of cash flows.

In January 2017, the FASB issued ASU 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.”  Currently under the standard, there are three elements of a business: inputs, processes and outputs.  The revised guidance adds an initial screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single asset or group of similar assets.  If that screen is met, the set of assets is not a business.  The new framework also specifies the minimum required inputs and processes necessary to be a business.  This amendment is effective for periods after December 15, 2017, with early adoption permitted.  The Company adopted this standard effective January 1, 2018 and considered the new guidance in its assessment of the accounting treatment for the Flat Castle Acquisition. (See Note 4—Acquisition).

 

Note 4—Acquisition

On January 18, 2018, Eclipse Resources-PA, LP, a wholly owned subsidiary of the Company, completed its acquisition of certain oil and gas leases, one producing well and other oil and gas rights and interests covering approximately 44,500 net acres located in Tioga and Potter Counties, Pennsylvania from Travis Peak Resources, LLC for an aggregate adjusted purchase price of $90 million, which was paid entirely with approximately 37.8 million shares of the Company’s common stock (the “Flat Castle Acquisition”).  The transaction was accounted for as an asset acquisition.  Approximately $86 million of the purchase price was allocated to unproved oil and natural gas properties and approximately $4 million was allocated to proved oil and gas properties associated with the producing well acquired.  In addition, the Company capitalized approximately $1 million of transaction costs related to the acquisition.  

  

16


 

 

Note 5—Sale of Oil and Natural Gas Property Interests

During the three months ended March 31, 2018, the Company received approximately $3.8 million from a completed asset sale to a third party totaling approximately 400 acres.  No gain or loss was recognized for this transaction, which was recorded as a reduction of oil and natural gas properties.

During the three months ended March 31, 2018, the Company received approximately $0.3 million from an additional completed asset sale to a third party totaling approximately 50 acres.  As a result of this sale, the Company recognized a gain of approximately $0.3 million.

 

 

Note 6—Derivative Instruments

Commodity Derivatives

The Company is exposed to market risk from changes in energy commodity prices within its operations. The Company utilizes derivatives to manage exposure to the variability in expected future cash flows from forecasted sales of natural gas and oil. The Company currently uses a mix of over-the-counter fixed price swaps, basis swaps and put options spreads and collars to manage its exposure to commodity price fluctuations. All of the Company’s derivative instruments are used for risk management purposes and none are held for trading or speculative purposes.

The Company is exposed to credit risk in the event of non-performance by counterparties. To mitigate this risk, the Company enters into derivative contracts only with counterparties that are rated “A” or higher by S&P or Moody’s. The creditworthiness of counterparties is subject to periodic review. As of March 31, 2018, the Company’s derivative instruments were with Bank of Montreal, Citibank, Goldman Sachs, Morgan Stanley, Capital One N.A., BP Energy Company and KeyBank N.A. The Company has not experienced any issues of non-performance by derivative counterparties. Below is a summary of the Company’s derivative instrument positions, as of March 31, 2018, for future production periods:

17


 

Natural Gas Derivatives

 

Description

 

Volume

(MMBtu/d)

 

 

Production Period

 

Weighted Average

Price ($/MMBtu)

 

Natural Gas Swaps:

 

 

 

 

 

 

 

 

 

 

 

 

 

30,000

 

 

April 2018 – March 2019

 

$

2.90

 

 

 

 

20,000

 

 

April 2018 – December 2018

 

$

2.80

 

 

 

 

20,000

 

 

July 2018 – September 2018

 

$

2.81

 

 

 

 

40,000

 

 

October 2018 – December 2019

 

$

2.80

 

 

 

 

50,000

 

 

January 2019 – December 2019

 

$

2.87

 

Natural Gas Three-way Collars:

 

 

 

 

 

 

 

 

 

 

Floor purchase price (put)

 

 

30,000

 

 

April 2018 – March 2019

 

$

3.00

 

Ceiling sold price (call)

 

 

30,000

 

 

April 2018 – March 2019

 

$

3.40

 

Floor sold price (put)

 

 

30,000

 

 

April 2018 – March 2019

 

$

2.50

 

Floor purchase price (put)

 

 

40,000

 

 

April 2018 – December 2018

 

$

3.11

 

Floor purchase price (put)

 

 

60,000

 

 

April 2018 – December 2018

 

$

2.80

 

Ceiling sold price (call)

 

 

100,000

 

 

April 2018 – December 2018

 

$

3.36

 

Floor sold price (put)

 

 

100,000

 

 

April 2018 – December 2018

 

$

2.50

 

Floor purchase price (put)

 

 

20,000

 

 

October 2018 – December 2019

 

$

2.75

 

Ceiling sold price (call)

 

 

20,000

 

 

October 2018 – December 2019

 

$

3.10

 

Floor sold price (put)

 

 

20,000

 

 

October 2018 – December 2019

 

$

2.30

 

Floor purchase price (put)

 

 

57,500

 

 

January 2019 – December 2019

 

$

2.72

 

Ceiling sold price (call)

 

 

57,500

 

 

January 2019 – December 2019

 

$

3.02

 

Floor sold price (put)

 

 

57,500

 

 

January 2019 – December 2019

 

$

2.30

 

Natural Gas Call/Put Options:

 

 

 

 

 

 

 

 

 

 

Call sold

 

 

40,000

 

 

April 2018 – December 2018

 

$

3.75

 

Call sold

 

 

30,000

 

 

January 2019 – March 2019

 

$

3.50

 

Call sold

 

 

30,000

 

 

April 2019 – December 2019

 

$

3.00

 

Call sold

 

 

10,000

 

 

January 2019 – December 2019

 

$

4.75

 

Basis Swaps:

 

 

 

 

 

 

 

 

 

 

Appalachia - Dominion

 

 

12,500

 

 

April 2019 – October 2019

 

$

(0.52

)

Appalachia - Dominion

 

 

12,500

 

 

April 2020 – October 2020

 

$

(0.52

)

 

Oil Derivatives

 

Description

 

Volume

(Bbls/d)

 

 

Production Period

 

Weighted Average

Price ($/Bbl)

 

Oil Swaps:

 

 

 

 

 

 

 

 

 

 

 

 

 

1,000

 

 

July 2018 – March 2019

 

$

61.00

 

Oil Three-way Collars:

 

 

 

 

 

 

 

 

 

 

Floor purchase price (put)

 

 

4,000

 

 

April 2018 – December 2018

 

$

45.00

 

Ceiling sold price (call)

 

 

4,000

 

 

April 2018 – December 2018

 

$

53.47

 

Floor sold price (put)

 

 

4,000

 

 

April 2018 – December 2018

 

$

35.00

 

Floor purchase price (put)

 

 

2,000

 

 

January 2019 – December 2019

 

$

50.00

 

Ceiling sold price (call)

 

 

2,000

 

 

January 2019 – December 2019

 

$

60.56

 

Floor sold price (put)

 

 

2,000

 

 

January 2019 – December 2019

 

$

40.00

 

 

 

18


 

Fair Values and Gains (Losses)

The following table summarizes the fair value of the Company’s derivative instruments on a gross basis and on a net basis as presented in the condensed consolidated balance sheets (in thousands). None of the derivative instruments are designated as hedges for accounting purposes.

 

As of March 31, 2018

 

Gross Amount

 

 

Netting

Adjustments(a)

 

 

Net Amount

Presented in

Balance Sheets

 

 

Balance Sheet Location

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives - current

 

$

11,768

 

 

$

(6,258

)

 

$

5,510

 

 

Other current assets

Commodity derivatives - noncurrent

 

 

3,931

 

 

 

(14

)

 

 

3,917

 

 

Other assets

Total assets

 

$

15,699

 

 

$

(6,272

)

 

$

9,427

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives - current

 

$

(23,012

)

 

$

6,258

 

 

$

(16,754

)

 

Accrued liabilities

Commodity derivatives - noncurrent

 

 

(1,603

)

 

 

14

 

 

 

(1,589

)

 

Other liabilities

Total liabilities

 

$

(24,615

)

 

$

6,272

 

 

$

(18,343

)

 

 

 

As of December 31, 2017

 

Gross Amount

 

 

Netting

Adjustments(a)

 

 

Net Amount

Presented in

Balance Sheets

 

 

Balance Sheet Location

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity derivatives - current

 

$

15,971

 

 

$

(6,380

)

 

$

9,591

 

 

Other current assets

Commodity derivatives - noncurrent

 

 

469

 

 

 

(176

)

 

 

293

 

 

Other assets

Total assets

 

$

16,440

 

 

$

(6,556

)

 

$

9,884