Synergy Resources Slips on Weak Earnings

Synergy Resources

is down on Tuesday after missing second quarter EPS and revenue estimates. The Platteville, Colorado-based firm's EPS rose 25 percent to $0.05, but fell short of analysts' estimates of $0.06. Revenue finished up over 31 percent at $10.9 million. Yet, as with EPS, it missed the Wall Street consensus of $11.75 million.

Synergy's net natural gas and oil production climbed 89.5 percent to 2,067 barrels of oil equivalent (BOE) per day, totaling over 186,000 barrels during the quarter.

Synergy's sales soared 87.5 percent during the second quarter to over 186,000 BOE. Natural gas sales nearly doubled to over 512,000 Mcf (512 million cubic feet). Meanwhile, oil sales skyrocketed over 80 percent to around 100,700 barrels and accounted for 77.6 percent of the company's revenue.

Lower year-over-year oil prices hampered Synergy's revenue during the quarter. Price per barrel declined nearly nine percent to $84.20. A natural gas price increase partially offset the lower oil prices, but Synergy still realized a six percent lower average selling price per BOE.

On December 6, Synergy announced the completion of its acquisition of 36 oil and gas wells in the Wattenberg Field of the Denver-Julesberg Basin and a number of undeveloped leases in the Wattenberg and surrounding area. The company purchased the assets from Orr Energy for approximately $30 million in cash and $12 million in common stock. Synergy obtained a 100 percent working interest along with a 77 percent net revenue interest in 29 of its acquired wells, with a smaller interest in the other seven. As for its leased acreage, it will have a 100 percent working interest and 80 percent net revenue interest on a majority of wells drilled in the future. The drilled and un-drilled leases covered in the deal represent 3,196 net acres with the potential to drill approximately 130 new wells. Another 1,005 acres are included and, using seismic data provided as part of the deal, Synergy plans to establish a drilling program for the land.

On March 1, Synergy entered a joint venture with Texas-based Vecta Oil & Gas, Ltd., to develop oil and gas leases in Colorado. Each company will contribute acreage to two separate areas of mutual interest. Synergy will have a working interest in 35 percent of the first area, covering 45,661 net acres. It will have a 65 percent working interest in the remaining 2,983 acres, as well. As a result, its net acreage in the Wattenberg area has increased by 36 percent to 19,400 acres. The company will pay Vecta $2.84 million in cash and approximately $640,000 in stock.

After jumping 13.6 percent over the past two days of trading, Synergy has dropped on its weak earnings. It is down around 0.3 percent on Tuesday.