Market Overview

SRC Energy Inc. Reports Second Quarter 2018 Financial and Operating Results

Share:

DENVER, Aug. 01, 2018 (GLOBE NEWSWIRE) -- SRC Energy Inc. (NYSE:SRCI) ("SRC", the "Company", "we", "us" or "our"), a U.S. oil and gas exploration and production company with operations focused on the Wattenberg Field in the Denver-Julesburg Basin, reports its financial and operating results for the three and six months ended June 30, 2018.

Second Quarter 2018 Highlights

  • Revenues were $147.1 million for the three months ended June 30, 2018
  • Net income was $49.6 million or $0.20 per diluted share for the three months ended June 30, 2018
  • Adjusted EBITDA was $107.7 million and $223.4 million for the three and six months ended June 30, 2018 , respectively (see further discussion regarding the presentation of adjusted EBITDA in "About Non-GAAP Financial Measures" below)
  • Drilling and completion capital expenditures were $120.2 million and $231.2 million for the three and six months ended June 30, 2018, respectively

Second Quarter 2018 Financial Results

The following tables present certain per unit metrics that compare results of the corresponding reporting periods:

  Three Months Ended   Six Months Ended
Net Volumes 6/30/2018   6/30/2017   % Chg.   6/30/2018   6/30/2017   % Chg.
Crude Oil  (MBbls)   1,846     1,262   46 %     3,887     1,942   100 %
Natural Gas Liquids (MBbls)   992     662   50 %     1,750     1,005   74 %
Natural Gas (MMcf)   8,987     6,264   43 %     16,706     9,710   72 %
Sales Volumes: (MBOE)   4,336     2,969   46 %     8,422     4,566   84 %
Average Daily Volumes                      
Daily Production (BOE)   47,646     32,624   46 %     46,528     25,224   84 %
Product Price Received                      
Crude Oil ($/Bbl) $ 61.22   $ 41.11   49 %   $ 58.48   $ 41.60   41 %
Natural Gas Liquids ($/Bbl) $ 17.65     13.18   34 %   $ 18.30     14.12   30 %
Natural Gas ($/Mcf) $ 1.64   $ 2.29   (28 )%   $ 1.87   $ 2.42   (23 )%
Avg. Realized Price ($/BOE) $ 33.50   $ 25.26   33 %   $ 34.50   $ 25.96   33 %
Per Unit Cost Information ($/BOE)
Lease Operating Exp. $ 2.68   $ 1.67   60 %   $ 2.31   $ 1.91   21 %
Production Tax $ 3.47   $ 3.19   9 %   $ 3.38   $ 2.39   41 %
DD&A Expense $ 9.66   $ 8.90   9 %   $ 9.38   $ 8.69   8 %
Total G&A Expense $ 2.17   $ 2.56   (15 )%   $ 2.26   $ 3.46   (35 )%
 

Revenues for the three months ended June 30, 2018 increased 96% compared to the three months ended June 30, 2017.  This increase was driven by growth in sales volumes, combined with an improvement in realized oil price, which was partially offset by a decrease in realized gas prices.  The decreased gas price was primarily due to widening of differentials to the Colorado Interstate Gas index.

Lease operating expense for the three months ended June 30, 2018 increased due to the Company's ongoing growth and expanding asset base.  Elevated line pressures temporarily drove operating costs on a unit basis higher as the Company incurred incremental costs without the benefit of flush production from new wells.

The Company's 2018 second quarter net income totaled $49.6 million, or $0.20 per diluted share, compared to a net income of $27.9 million, or $0.14 per diluted share, in the year ago quarter.  Adjusted EBITDA in the second quarter of 2018 was $107.7 million as compared to $55.9 million in the year ago quarter.

During the second quarter of 2018, SRC entered into an agreement to purchase leasehold acreage and associated production for $31 million.  This transaction increases the Company's working interest in existing operations and planned wells.  Following the 2018 second quarter end, SRC reached an agreement to trade approximately 2,500 net acres with an undisclosed party.  These transactions further enhance the contiguous nature of the Company's acreage position.

Management Comment
Lynn A. Peterson, Chairman and CEO of SRC Energy Inc. commented, "As announced today by DCP Midstream, the Mewbourn 3 plant has been placed into service and is processing gas.  This is the first of several significant, new natural gas processing plants that have been announced for the DJ Basin over the next few quarters leading to a near doubling of capacity and a bright future for the Basin.  We now have line of sight on increased gas processing for several years and we look forward to a more stable operating environment.  Despite the curtailed production during the first half of 2018 the Company's capital expenditures have principally been funded by internally generated cash flows."

Concluding, Mr. Peterson added, "I would like to commend our field team for all of their hard work around the constraints associated with the lack of gas processing and our land team for the recent acreage transactions that have further enhanced SRC's acreage position"

Conference Call

The Company will host a conference call on Thursday, August 2, 2018 at 11:00 a.m. Eastern time (9:00 a.m. Mountain time) to discuss the results.  The call will be conducted by Chairman and CEO Lynn A. Peterson, CFO James Henderson, Chief Development Officer Nick Spence, Chief Operations Officer Mike Eberhard, and Manager of Investor Relations John Richardson.  A Q&A session will immediately follow the discussion of the results for the quarter.  Please refer to SRC's website at www.srcenergy.com for the most recent corporate presentation and other news and information.

To participate in this call please dial:
Domestic Dial-in Number:  (877) 407-9122
International Dial-in Number:  (201) 493-6747
Webcast: https://78449.themediaframe.com/dataconf/productusers/srci/mediaframe/25642/indexl.html

Replay Information:
Conference ID #:  411931
Replay Dial-In (Toll Free US & Canada):  877-660-6853
Replay Dial-In (International):  201-612-7415
Expiration Date:  8/16/18

About SRC Energy Inc.
SRC Energy Inc. is a domestic oil and natural gas exploration and production company. SRC's core area of operations is in the Greater Wattenberg Field of the Denver-Julesburg Basin.  The Denver-Julesburg Basin encompasses parts of Colorado, Wyoming, Kansas and Nebraska. The Company's corporate offices are located in Denver, Colorado. More company news and information about SRC is available at www.srcenergy.com.

Important Cautions Regarding Forward Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements other than statements of historical fact are forward-looking statements.  The use of words such as "believes", "expects", "anticipates", "intends", "plans", "estimates", "should", "likely", "guidance" or similar expressions indicates a forward-looking statement.  Forward-looking statements in the release relate to, among other things, the construction and impact of new midstream facilities in the DJ Basin.  These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, and information currently available to management. The actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. The identification in this press release of factors that may affect the Company's future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Factors that could cause the Company's actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: risks associated with the construction of new midstream facilities, the impact of those facilities and other risks associated with the availability of adequate midstream infrastructure; the success of the Company's exploration and development efforts; the price of oil and gas; worldwide economic situation; change in interest rates or inflation; willingness and ability of third parties to honor their contractual commitments; the Company's ability to raise additional capital, as it may be affected by current conditions in the stock market and competition in the oil and gas industry for risk capital; the Company's capital costs, which may be affected by delays or cost overruns; costs of production; environmental and other regulations, as the same presently exist or may later be amended; the Company's ability to identify, finance and integrate any future acquisitions; the volatility of the Company's stock price; and the other factors described in the "Risk Factors" sections of the Company's filings with the Securities and Exchange Commission, all of which are incorporated by reference in this release.

 

Reconciliation of Non-GAAP Financial Measures
We define adjusted EBITDA, a non-GAAP financial measure, as net income adjusted to exclude the impact of the items set forth in the table below.  We exclude those items because they can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures, and the method by which the assets were acquired.  We believe that adjusted EBITDA is widely used in our industry as a measure of operating performance and may also be used by investors to measure our ability to meet debt covenant requirements.  The following table presents a reconciliation of adjusted EBITDA to net income, its nearest GAAP measure:

 
SRC ENERGY INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands)
               
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
Adjusted EBITDA:              
Net income $ 49,624     $ 27,936     $ 115,420     $ 47,816  
Depreciation, depletion, and accretion 41,877     26,427     78,958     39,656  
Stock-based compensation 3,146     2,685     5,942     5,360  
Mark-to-market of commodity derivative contracts:              
Total gain on commodity derivatives contracts 14,294     (1,328 )   20,075     (4,707 )
Cash settlements on commodity derivative contracts (4,566 )   153     (6,121 )   234  
Interest income, net of interest expense (5 )   (20 )   (14 )   (31 )
Income tax expense 3,347         9,158      
Adjusted EBITDA $ 107,717     $ 55,853     $ 223,418     $ 88,328  


Condensed Consolidated Financial Statements
Condensed consolidated financial statements are included below. Additional financial information, including footnotes that are considered an integral part of the condensed consolidated financial statements, can be found in SRC's Quarterly Report on Form 10-Q for the period ended June 30, 2018, which is available at www.sec.gov.

 
SRC ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
       
ASSETS June 30, 2018   December 31, 2017
Current assets:      
Cash and cash equivalents $ 53,145     $ 48,772  
Other current assets 110,067     111,263  
Total current assets 163,212     160,035  
       
Oil and gas properties and other equipment 2,072,329     1,876,576  
Goodwill 40,711     40,711  
Other assets 6,294     2,242  
       
Total assets $ 2,282,546     $ 2,079,564  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities 249,949     202,307  
       
Revolving credit facility 25,000      
Notes payable, net of issuance costs 538,762     538,186  
Asset retirement obligations 23,154     28,376  
Other liabilities 11,556     2,261  
Total liabilities 848,421     771,130  
       
Shareholders' equity:      
Common stock and paid-in capital 1,484,785     1,474,514  
Retained deficit (50,660 )   (166,080 )
Total shareholders' equity 1,434,125     1,308,434  
       
Total liabilities and shareholders' equity $ 2,282,546     $ 2,079,564  
 


 
SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
 
  Six Months Ended June 30,
  2018   2017
Cash flows from operating activities:      
Net income $ 115,420     $ 47,816  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depletion, depreciation, and accretion 78,958     39,656  
Provision for deferred taxes 9,158      
Other, non-cash items 15,807     (505 )
Changes in operating assets and liabilities 16,419     (12,509 )
Net cash provided by operating activities 235,762     74,458  
       
Cash flows from investing activities:      
Acquisitions of oil and gas properties and leaseholds (16,402 )   (29,998 )
Capital expenditures for drilling and completion activities (213,906 )   (178,606 )
Other capital expenditures (25,404 )   (12,666 )
Proceeds from sales of oil and gas properties and other 766     77,155  
Net cash used in investing activities (254,946 )   (144,115 )
       
Cash flows from financing activities:      
Equity financing activities 3,025     (451 )
Debt financing activities 22,857     89,745  
Net cash provided by financing activities 25,882     89,294  
       
Net increase in cash, cash equivalents, and restricted cash 6,698     19,637  
Cash, cash equivalents, and restricted cash at beginning of period 48,772     36,834  
Cash, cash equivalents, and restricted cash at end of period $ 55,470     $ 56,471  
 


 
SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except share and per share data)
 
  Three Months Ended June 30,   Six Months Ended June 30,
  2018   2017   2018   2017
Oil, natural gas, and NGL revenues $ 147,087     $ 75,036     $ 294,320     $ 118,826  
               
Expenses:              
Lease operating expenses 11,612     4,970     19,508     8,692  
Transportation and gathering 1,880     48     3,735     298  
Production taxes 15,058     9,464     28,501     10,930  
Depreciation, depletion, and accretion 41,877     26,427     78,958     39,656  
Unused commitment charge             669  
General and administrative 9,406     7,605     19,006     15,805  
Total expenses 79,833     48,514     149,708     76,050  
               
Operating income 67,254     26,522     144,612     42,776  
               
Other income (expense):              
Commodity derivatives gain (loss) (14,294 )   1,328     (20,075 )   4,707  
Interest expense, net of amounts capitalized              
Interest income 5     20     14     31  
Other income 6     66     27     302  
Total other income (expense) (14,283 )   1,414     (20,034 )   5,040  
               
Income before income taxes 52,971     27,936     124,578     47,816  
               
Income tax expense 3,347         9,158      
Net income $ 49,624     $ 27,936     $ 115,420     $ 47,816  
               
Net income per common share:              
Basic $ 0.20     $ 0.14     $ 0.48     $ 0.24  
Diluted $ 0.20     $ 0.14     $ 0.47     $ 0.24  
               
Weighted-average shares outstanding:              
Basic 242,255,724     200,831,063     242,005,211     200,769,817  
Diluted 244,464,776     201,224,172     243,954,673     201,266,609  
                       

Company Contact:
John Richardson (Investor Relations Manager)
SRC Energy Inc.
Tel 720-616-4308
E-mail: jrichardson@srcenergy.com

Primary Logo

View Comments and Join the Discussion!