SRC Energy Inc. Reports Third Quarter 2017 Financial and Operating Results


DENVER, Nov. 01, 2017 (GLOBE NEWSWIRE) -- SRC Energy Inc. (NYSE Amex: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 nine months ended September 30, 2017.

Third Quarter 2017 Highlights

  • Revenues were $103.6 million for the three months ended September 30, 2017
  • Net income was $43.8 million or $0.22 per diluted share for the three months ended September 30, 2017
  • Adjusted EBITDA was $83.5 million for the three months ended September 30, 2017 (see further discussion regarding the presentation of adjusted EBITDA in "About Non-GAAP Financial Measures" below)

Third Quarter 2017 Financial Results

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

 Three Months Ended Nine Months Ended
Net Volumes9/30/2017 9/30/2016 % Chg.* 9/30/2017 9/30/2016 % Chg.*
 3-Stream 2-Stream   3-Stream 2-Stream  
Crude Oil  (MBbls)1,726 517 234% 3,668 1,552 136%
Natural Gas Liquids (MBbls)753  NM 1,758  NM
Natural Gas (MMcf)7,412 2,855 160% 17,122 8,991 90%
Sales Volumes: (MBOE)3,715 993 274% 8,280 3,050 171%
Average Daily Volumes           
Daily Production (BOE/day)40,378 10,794 274% 30,331 11,133 172%
Product Price Received           
Crude Oil ($/Bbl)$42.37 $35.67 19% $42.04 $31.47 34%
Natural Gas Liquids ($/Bbl)$17.32  NM $15.49  NM
Natural Gas ($/Mcf)$2.35 $2.73 (14)% $2.39 $2.18 10%
Average Realized Price ($/BOE)$27.89 $26.42 6% $26.86 $22.44 20%
Per Unit Cost Information ($/BOE)
Lease Operating Exp.$1.40 $3.84 (64)% $1.68 $4.90 (66)%
Production Tax$2.71 $(1.47) NM $2.54 $0.82 210%
DD&A Expense$9.08 $9.70 (6)% $8.86 $10.82 (18)%
Total G&A Expense$2.29 $8.29 (72)% $2.93 $7.61 (61)%
* SRC began reporting on a 3-Stream basis in the first quarter of 2017; therefore, some prior year comparisons may not be meaningful.
 

Oil, natural gas and natural gas liquids revenues for the three months ended September 30, 2017 increased 295% compared to the three months ended September 30, 2016.  This was due to a 274% increase in sales volumes combined with a 6% improvement in average realized sales price per BOE.  As of September 30, 2017, substantially all of SRC's production was from horizontal wells.

During the three months ended September 30, 2017, SRC experienced decreased lease operating expenses, on a per unit basis, compared to the three months ended September 30, 2016.  Unit operating costs continue to benefit from larger volumes of early production from horizontal wells turned to sales during the quarter and earlier in the year.

The Company's 2017 third quarter net income totaled $43.8 million, or $0.22 per diluted share compared to a net loss of $19.2 million or $(0.10) per diluted share in the year ago quarter. Net income for the three months ended September 30, 2016 was impacted by an impairment charge of $25.5 million.  Adjusted EBITDA in the third quarter of 2017 was $83.5 million as compared to $18.3 million in the year ago quarter.

Operational Status

Third Quarter 2017 Operating Activity
 Lateral
Length
# of
wells
on Pad
 WI % # of Wells
Drilled
 # of Wells
Completed
 # of Wells
Turned to
Sales
Orr PadML12 97%     12
Orr State PadML12 95%   6 12
Goetzel PadML12 76%   8 9
Hood PadML12 84%   12 5
Beebe PadML12 73% 5 10  
Leffler PadLL12 86% 8    
Ag PadLL12 79% 9    
Falken PadLL12 69% 2    
Total wells     24 36 38
ML ~7,500'  LL ~10,000'  XL ~12,000'
 

Conference Call

The Company will host a conference call on Thursday, November 2, 2017 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:  http://srcenergy.equisolvewebcast.com/q3-2017

Replay Information:
Conference ID #:  411931
Replay Dial-In (Toll Free US & Canada):  877-660-6853
Replay Dial-In (International):  201-612-7415
Expiration Date:  11/14/17

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.  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: 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 availability of adequate midstream infrastructure, 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 (loss) 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 (loss), its nearest GAAP measure:

 
SRC ENERGY INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands)
    
 Three Months Ended
September 30,
 2017 2016
Adjusted EBITDA:   
Net income (loss)$43,848  $(19,241)
Depreciation, depletion, and accretion33,740  9,635 
Full cost ceiling impairment  25,453 
Income tax expense  5 
Stock-based compensation3,030  2,374 
Mark-to-market of commodity derivative contracts:   
Total gain on commodity derivatives contracts2,383  (407)
Cash settlements on commodity derivative contracts544  486 
Cash premiums paid for commodity derivative contracts   
Interest income, net of interest expense(16) (11)
   Adjusted EBITDA$83,529  $18,294 
        

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 September 30, 2017, which is available at www.sec.gov.

 
SRC ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
    
ASSETSSeptember 30, 2017 December 31, 2016
Current assets:   
Cash and cash equivalents$21,325  $18,615 
Other current assets123,878  35,569 
Total current assets145,203  54,184 
    
Oil and gas properties and other equipment1,249,633  908,736 
Goodwill40,711  40,711 
Other assets2,359  20,482 
    
Total assets$1,437,906  $1,024,113 
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
Current liabilities233,427  92,240 
    
Revolving credit facility150,000   
Notes payable, net of issuance costs76,216  75,614 
Asset retirement obligations33,981  13,775 
Other liabilities2,662  1,745 
Total liabilities496,286  183,374 
    
Shareholders' equity:   
Common stock and paid-in capital1,158,518  1,149,199 
Retained deficit(216,898) (308,460)
Total shareholders' equity941,620  840,739 
    
Total liabilities and shareholders' equity$1,437,906  $1,024,113 
        


 
SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
  
 Nine Months Ended September 30,
 2017 2016
Cash flows from operating activities:   
Net income (loss)$91,664  $(224,490)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:   
Depletion, depreciation, and accretion73,396  33,001 
Full cost ceiling impairment  215,223 
Other, non-cash items2,767  15,843 
Changes in operating assets and liabilities(25,010) (6,384)
Net cash provided by operating activities142,817  33,193 
    
Cash flows from investing activities:   
Acquisitions of oil and gas properties and leaseholds(62,562) (503,357)
Capital expenditures for drilling and completion activities(305,636) (72,375)
Other capital expenditures(15,285) (6,417)
Cash held in escrow18,248  (18,244)
Proceeds from sales of oil and gas properties77,017  24,223 
Net cash used in investing activities(288,218) (576,170)
    
Cash flows from financing activities:   
Equity financing activities(517) 542,901 
Debt financing activities148,628  (2,666)
Net cash provided by financing activities148,111  540,235 
    
Net increase in cash and equivalents2,710  (2,742)
Cash and equivalents at beginning of period18,615  66,499 
Cash and equivalents at end of period$21,325  $63,757 
        


 
SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except share and per share data)
    
 Three Months Ended September 30, Nine Months Ended September 30,
 2017 2016 2017 2016
Oil, natural gas, and NGL revenues$103,593  $26,234  $222,419  $68,454 
Sales of purchased oil    1,268   
Total revenues103,593  26,234  223,687  68,454 
        
Expenses:       
Lease operating expenses5,154  3,819  13,894  14,963 
Production taxes10,083  (1,461) 21,013  2,509 
Costs of purchased oil    1,518   
Depreciation, depletion, and accretion33,740  9,635  73,396  33,001 
Full cost ceiling impairment  25,453    215,223 
Unused commitment charge  205  669  505 
General and administrative8,484  8,236  24,289  23,199 
Total expenses57,461  45,887  134,779  289,400 
        
Operating income (loss)46,132  (19,653) 88,908  (220,946)
        
Other income:       
Commodity derivatives gain (loss)(2,383) 407  2,324  (3,617)
Interest expense, net       
Interest income16  11  47  176 
Other income83  (1) 385  3 
Total other income(2,284) 417  2,756  (3,438)
        
Income (Loss) before income taxes43,848  (19,236) 91,664  (224,384)
        
Income tax expense  5    106 
Net income (loss)$43,848  $(19,241) $91,664  $(224,490)
        
Net income (loss) per common share:       
Basic$0.22  $(0.10) $0.46  $(1.36)
Diluted$0.22  $(0.10) $0.46  $(1.36)
        
Weighted-average shares outstanding:       
Basic200,881,447  200,515,555  200,807,436  164,771,544 
Diluted201,460,915  200,515,555  201,326,129  164,771,544 
            

            

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