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SRC Energy Inc. Reports First Quarter 2019 Financial Results

1118 Days ago

DENVER, May 01, 2019 (GLOBE NEWSWIRE) -- SRC Energy Inc. (NYSE American: 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 results for the three months ended March 31, 2019.

First Quarter 2019 Highlights

  • Revenues were $189.5 million for the three months ended March 31, 2019
  • Net income was $49.8 million or $0.20 per diluted share for the three months ended March 31, 2019
  • Adjusted EBITDA was $159.5 million for the three months ended March 31, 2019 (see further discussion regarding the presentation of adjusted EBITDA in "About Non-GAAP Financial Measures" below)
  • Drilling and completion capital expenditures of $110 million for the three months ended March 31, 2019 were funded from EBITDA

First Quarter 2019 Financial Results
The following table presents certain per unit metrics that compare results of the corresponding reporting periods:

    Three Months Ended
            Seq.       Y-o-Y
Net Volumes   3/31/2019   12/31/2018   % Chg.   3/31/2018   % Chg.
Crude Oil (MBbls)     2,967     2,590   15 %     2,041   45 %
Natural Gas Liquids (MBbls)     1,054     1,089   (3 )%     758   39 %
Natural Gas (MMcf)     11,391     10,946   4 %     7,719   48 %
Sales Volumes: (MBOE)     5,919     5,503   8 %     4,086   45 %
Average Daily Volumes                    
Daily Production (BOE)     65,771     59,821   10 %     45,397   45 %
Product Price Received                    
Crude Oil ($/Bbl) *   $48.33   $52.56   (8 )%   $56.01   (14 )%
Natural Gas Liquids ($/Bbl)   $12.59   $19.66   (36 )%     19.15   (34 )%
Natural Gas ($/Mcf) *   $2.52   $2.68   (6 )%   $2.14   18 %
Avg. Realized Price ($/BOE) *   $31.32   $33.97   (8 )%   $35.58   (12 )%
Per Unit Cost Information ($/BOE)                              
Lease Operating Exp.   $2.93   $2.44   20 %   $1.93   52 %
Production Tax   $1.20   $3.36   (64 )%   $3.29   (64 )%
DD&A Expense   $10.29   $10.11   2 %   $9.08   13 %
Total G&A Expense   $1.60   $1.62   nil     $2.35   (32 )%
* Includes transportation and gathering expense

Revenues for the three months ended March 31, 2019 were flat compared to the three months ended December 31, 2018 and increased 29% compared to the three months ended March 31, 2018.  While sales volumes grew 8% quarter-over-quarter, 8% lower average realized prices muted revenue growth in a quarter-over-quarter comparison.  The year-over-year increase in revenues was primarily driven by growth in sales volumes.  Natural gas liquids product pricing during the quarter ended March 31, 2019 were impacted by a redistribution of volume from Mont Belvieu to Conway, a market with lower price realizations, in order to insulate against processing throughput curtailment.

Production taxes for the three months ended March 31, 2019 were offset by a credit related to 2018 estimated severance tax, leading to a 64% decrease when compared to the three months ended December 31, 2018 and March 31, 2018.  For the remainder of 2019, production taxes are estimated to be approximately 8% of revenue.

The Company's 2019 first quarter net income totaled $49.8 million, or $0.20 per diluted share, compared to net income of $82.0 million, or $0.34 per diluted share, and $65.8 million, or $0.27 per diluted share, for the three-month periods ending December 31 and March 31, 2018, respectively.  Net income and earnings per share were impacted by non-cash changes to derivatives used for hedging, and changes in deferred income tax rates.   Adjusted EBITDA in the first quarter of 2019 was $159.5 million as compared to $143.0 million and $115.7 million for the three-month periods ending December 31 and March 31, 2018, respectively.

Credit Agreement
The Company recently completed the semi-annual redetermination of its borrowing base under its revolving credit facility. As a result, the borrowing base under the facility was increased to $700 million from $650 million while the aggregate elected commitments were increased to $550 million from $500 million.  As of March 31, 2019, the Company had $195 million drawn on the facility.

Management Comment
Lynn A. Peterson, Chairman and CEO of SRC Energy Inc. commented, "We are pleased with the progress being made in the Basin to address infrastructure expansion.  As we move ahead with the development of our properties we look forward to working with all of our stakeholders.  Safety of our employees and communities along with the protection of our environment remain core values of our Company."

Conference Call
The Company will host a conference call on Thursday, May 2, 2019 at 10:00 a.m. Eastern time (8:00 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/30055/indexl.html 

Replay Information:
Conference ID #:  13690162
Replay Dial-In (Toll Free US & Canada):  877-660-6853
Replay Dial-In (International):  201-612-7415
Expiration Date:  5/16/19

About SRC Energy Inc.
SRC Energy Inc. is a Denver based 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 of 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, future taxes and midstream matters.  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.  Please see our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 for discussion of the potential effects on our business of SB19-181, which was passed by the Colorado General Assembly in April 2019.

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

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:

(unaudited, in thousands)
  Three Months Ended
  March 31, 2019   December 31, 2018   March 31, 2018
Adjusted EBITDA:          
Net income $ 49,751     $ 81,974     $ 65,796  
Depreciation, depletion, and accretion 60,918     55,627     37,081  
Goodwill impairment     40,711      
Stock-based compensation 3,683     2,940     2,796  
Mark-to-market of commodity derivative contracts:          
Total gain on commodity derivatives contracts 22,913     (52,017 )   5,781  
Cash settlements on commodity derivative contracts 4,626     (6,096 )   (1,555 )
Cash premiums paid for commodity derivative contracts (319 )        
Interest income (69 )   (62 )   (9 )
Income tax expense 18,034     19,891     5,811  
Adjusted EBITDA $ 159,537     $ 142,968     $ 115,701  

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 March 31, 2019, which is available at www.sec.gov.

(unaudited; in thousands)
ASSETS March 31, 2019   December 31, 2018
Current assets:      
Cash and cash equivalents $ 56,813     $ 49,609  
Other current assets 147,562     182,831  
Total current assets 204,375     232,440  
Oil and gas properties and other equipment 2,583,700     2,518,700  
Other assets 8,588     3,574  
Total assets $ 2,796,663     $ 2,754,714  
Current liabilities 326,575     353,833  
Revolving credit facility 195,000     195,000  
Notes payable, net of issuance costs 539,666     539,360  
Asset retirement obligations 36,093     40,052  
Other liabilities 59,749     40,177  
Total liabilities 1,157,083     1,168,422  
Shareholders' equity:      
Common stock and paid-in capital 1,495,887     1,492,350  
Retained earnings 143,693     93,942  
Total shareholders' equity 1,639,580     1,586,292  
Total liabilities and shareholders' equity $ 2,796,663     $ 2,754,714  

(unaudited; in thousands)
  Three Months Ended March 31,
  2019   2018
Cash flows from operating activities:      
Net income $ 49,751     $ 65,796  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depletion, depreciation, and accretion 60,918     37,081  
Provision for deferred taxes 18,034     5,811  
Other, non-cash items 28,837     4,561  
Changes in operating assets and liabilities 3,133     14,432  
Net cash provided by operating activities 160,673     127,681  
Cash flows from investing activities:      
Acquisitions of oil and gas properties and leaseholds 2,623     (1,329 )
Capital expenditures for drilling and completion activities (148,904 )   (100,347 )
Other capital expenditures (6,378 )   (3,957 )
Proceeds from sales of oil and gas properties and other 124     728  
Net cash used in investing activities (152,535 )   (104,905 )
Cash flows from financing activities:      
Equity financing activities (876 )   431  
Debt financing activities (58 )   (236 )
Net cash provided by (used in) financing activities (934 )   195  
Net increase in cash and cash equivalents 7,204     22,971  
Cash and cash equivalents at beginning of period 49,609     48,772  
Cash and cash equivalents at end of period $ 56,813     $ 71,743  

(unaudited; in thousands, except share and per share data)
  Three Months Ended March 31,
  2019   2018
Oil, natural gas, and NGL revenues $ 189,455     $ 147,233  
Lease operating expenses 17,360     7,896  
Transportation and gathering 4,054     1,855  
Production taxes 7,086     13,443  
Depreciation, depletion, and accretion 60,918     37,081  
General and administrative 9,469     9,600  
Total expenses 98,887     69,875  
Operating income 90,568     77,358  
Other income (expense):      
Commodity derivatives loss (22,913 )   (5,781 )
Interest expense, net of amounts capitalized      
Interest income 69     9  
Other income 61     21  
Total other expense (22,783 )   (5,751 )
Income before income taxes 67,785     71,607  
Income tax expense 18,034     5,811  
Net income $ 49,751     $ 65,796  
Net income per common share:      
Basic $ 0.20     $ 0.27  
Diluted $ 0.20     $ 0.27  
Weighted-average shares outstanding:      
Basic 243,290,734     241,751,915  
Diluted 244,091,516     243,166,897  


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