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CST: 26/06/2019 17:24:49   

SRC Energy Inc. Reports Fourth Quarter and Year End 2018 Financial and Operating Results

126 Days ago

DENVER, Feb. 20, 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 and operating results for the three and twelve months ended December 31, 2018.

Fourth Quarter and Year End 2018 Highlights

  • Revenues were $190.3 million and $645.6 million for the three and twelve months ended December 31, 2018, respectively
  • Net income was $82.0 million, or $0.34 per diluted share, and $260.0 million, or $1.07 per diluted share, for the three and twelve months ended December 31, 2018, respectively
  • Adjusted EBITDA was $143.0 million and $487.9 million for the three and twelve months ended December 31, 2018, respectively (see further discussion regarding the presentation of adjusted EBITDA in "About Non-GAAP Financial Measures" below)

Fourth Quarter and Year End 2018 Financial Results
The following tables present certain per unit metrics that compare results of the corresponding quarterly and annual reporting periods:

  Three Months Ended   Year Ended
Net Volumes 12/31/2018   12/31/2017   % Chg.   12/31/2018   12/31/2017   % Chg.
Crude Oil (MBbls) 2,590   2,156   20%   8,392   5,824   44%
Natural Gas Liquids (MBbls) 1,089   760   43%   3,869   2,518   54%
Natural Gas (MMcf) 10,946   7,712   42%   37,123   24,834   49%
Sales Volumes: (MBOE) 5,503   4,201   31%   18,448   12,481   48%
Average Daily Volumes                      
Daily Production (BOE/day) 59,821   45,658   31%   50,543   34,194   48%
Product Price Received                      
Crude Oil ($/Bbl) * $52.56   $48.80   8%   $57.79   $44.35   30%
Natural Gas Liquids ($/Bbl) $19.66   $20.81   (6)%   $19.12   $17.10   12%
Natural Gas ($/Mcf) * $2.68   $2.21   21%   $2.09   $2.33   (10)%
Average Realized Price ($/BOE) * $33.97   $32.85   3%   $34.50   $28.79   20%
Per Unit Cost Information ($/BOE)                      
Lease Operating Exp. $2.44   $1.54   58%   $2.35   $1.56   51%
Production Tax $3.36   $3.63   (7)%   $3.24   $2.91   11%
DD&A Expense $10.11   $9.26   9%   $9.74   $9.00   8%
Total G&A Expense $1.62   $2.06   (21)%   $2.10   $2.64   (20)%
* Includes transportation and gathering.

Revenues for the year ended December 31, 2018, increased 78% as compared to the year ended December 31, 2017.  This was due to a 48% increase in sales volumes over the period along with a 30% increase in the average realized oil price over the period.

During the year ended December 31, 2018, we experienced increased production expense compared to the year ended December 31, 2017 primarily due to an increase in net operated wells. In addition, elevated line pressures temporarily drove per unit operating costs higher in the second and third quarters of 2018 as the Company  incurred incremental costs without the typical benefit of flush production from its new wells.

Net income for the year ended December 31, 2018, was $260.0 million, or $1.07 per share, as compared to net income of $142.5 million, or $0.69 per share, in the prior year.

Adjusted EBITDA for the year ended December 31, 2018 was $487.9 million compared to $282.6 million for 2017, a 73% year over year increase.

Management Comment

Lynn A. Peterson, Chairman and CEO of SRC commented, "Our accomplishments throughout 2018 while managing through numerous distractions are a tribute to SRC's staff, who are our greatest asset and truly represent the Company's competitive advantage.  Progress continues to be made with Colorado's new legislative leadership and we believe SRC's strategy will continue to create value for the Company's stakeholders while maintaining a safe environment for our fellow employees, contractors and the communities where we operate."

Conference Call

SRC will host a conference call on Thursday, February 21, 2019 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.

To participate in this call please dial:
Domestic Dial-in Number:  (877) 407-9122
International Dial-in Number:  (201) 493-6747
Webcast URL:  https://78449.themediaframe.com/dataconf/productusers/srci/mediaframe/28662/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:  3/7/19

Annual Shareholder Meeting

SRC Energy Inc. will host its Annual Shareholder Meeting on Wednesday May 15, 2019 at 8 A.M. Mountain Time in Denver, Colorado. Shareholders of record on March 22, 2019, the record date for the meeting, are entitled to receive notice of and to vote at the meeting.

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 Wattenberg Field of the Denver-Julesburg Basin.  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 herein include statements regarding future legislative and strategic developments. 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 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 recent or 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.

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

In addition to financial measures presented on the basis of accounting principles generally accepted in the United States of America ("US GAAP"), we present certain financial measures which are not prescribed by US GAAP ("non-GAAP"). The following is a summary of the measures we currently report.

Adjusted EBITDA

We use "adjusted EBITDA," a non-GAAP financial measure, for internal managerial purposes because it allows us to evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure.  We exclude the items listed in the table below from net income (loss) in arriving at adjusted EBITDA.  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.  Adjusted EBITDA is not a measure of financial performance under US GAAP and should be considered in addition to, not as a substitute for, net income.  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.  However, our definition of adjusted EBITDA may not be fully comparable to measures with similar titles reported by other companies.  We define adjusted EBITDA as net income adjusted to exclude the impact of the items set forth in the table below (amounts in thousands):

  Three Months Ended
December 31,
  Years Ended December 31,
  2018   2017   2018   2017
Adjusted EBITDA:              
Net income $ 81,974     $ 50,818     $ 260,022     $ 142,482  
Depletion, depreciation, and accretion 55,627     38,913     179,773     112,309  
Goodwill impairment 40,711         40,711      
Income tax expense (benefit) 19,891     (99 )   37,967     (99 )
Stock-based compensation expense 2,940     2,835     12,287     11,225  
Mark-to-market of commodity derivative contracts:              
Total (gain) loss on commodity derivative contracts (52,017 )   6,550     (23,413 )   4,226  
Cash settlements on commodity derivative contracts (6,096 )   164     (19,359 )   942  
Interest expense, net of interest income (62 )   11,526     (99 )   11,479  
Adjusted EBITDA $ 142,968     $ 110,707     $ 487,889     $ 282,564  

PV-10

PV-10 is a non-GAAP financial measure.  We believe that the presentation of PV-10 is relevant and useful to investors because it presents the discounted future net cash flows attributable to our estimated net proved reserves prior to taking into account future corporate income taxes, and it is a useful measure for evaluating the relative monetary significance of our oil and gas properties.  It is not intended to represent the current market value of our estimated reserves.  PV-10 should not be considered in isolation or as a substitute for the standardized measure reported in accordance with US GAAP, but rather should be considered in addition to the standardized measure.

PV-10 is derived from the standardized measure, which is the most directly comparable GAAP financial measure.  PV-10 is calculated using the same inputs and assumptions as the standardized measure, with the exception that it omits the impact of future income taxes.  It is considered to be a pre-tax measurement.

The following table provides a reconciliation of the standardized measure to PV-10:

  As of December 31,
  2018   2017
Standardized measure of discounted future net cash flows $ 2,675,648     $ 1,600,675  
Add: 10 percent annual discount, net of income taxes 1,941,844     1,267,258  
Add: future undiscounted income taxes 759,280     285,349  
Future pre-tax net cash flows $ 5,376,772     $ 3,153,282  
Less: 10 percent annual discount, pre-tax (2,215,621 )   (1,396,998 )
PV-10 $ 3,161,151     $ 1,756,284  

Consolidated Financial Statements
Condensed consolidated financial statements are included below.  Additional financial information, including footnotes that are considered an integral part of the consolidated financial statements, can be found in SRC's Annual Report on Form 10-K for the period ended December 31, 2018, which is available at www.sec.gov.

 
SRC ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
       
ASSETS December 31, 2018   December 31, 2017
Current assets:      
Cash and cash equivalents $ 49,609     $ 48,772  
Other current assets 182,831     111,263  
Total current assets 232,440     160,035  
       
Oil and gas properties and other equipment 2,518,700     1,876,576  
Goodwill     40,711  
Other assets 3,574     2,242  
       
Total assets $ 2,754,714     $ 2,079,564  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities 353,833     202,307  
       
Revolving credit facility 195,000      
Notes payable, net of issuance costs 539,360     538,186  
Asset retirement obligations 40,052     28,376  
Other liabilities 40,177     2,261  
Total liabilities 1,168,422     771,130  
       
Shareholders' equity:      
Common stock and paid-in capital 1,492,350     1,474,514  
Retained earnings (deficit) 93,942     (166,080 )
Total shareholders' equity 1,586,292     1,308,434  
       
Total liabilities and shareholders' equity $ 2,754,714     $ 2,079,564  
               


SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except share and per share data)
 
  Three Months Ended
December 31,
  Year Ended
December 31,
  2018   2017   2018   2017
Oil, natural gas, and NGL revenues $ 190,343     $ 140,097     $ 645,641     $ 362,516  
               
Expenses:              
Lease operating expenses 13,423     6,488     43,291     19,496  
Transportation and gathering 3,406     2,090     9,135     3,226  
Production taxes 18,505     15,253     59,830     36,266  
Depreciation, depletion, and accretion 55,627     38,913     179,773     112,309  
Goodwill impairment 40,711         40,711      
Unused commitment charge             669  
General and administrative 8,927     8,676     38,618     32,965  
Total expenses 140,599     71,420     371,358     204,931  
               
Operating income 49,744     68,677     274,283     157,585  
               
Other income (expense):              
Commodity derivatives gain (loss) 52,017     (6,550 )   23,413     (4,226 )
Interest expense, net of capitalized interest     (11,842 )       (11,842 )
Interest income 62     316     99     363  
Other income 42     118     194     503  
Total other expense 52,121     (17,958 )   23,706     (15,202 )
               
Income before income taxes 101,865     50,719     297,989     142,383  
               
Income tax expense (benefit) 19,891     (99 )   37,967     (99 )
Net income $ 81,974     $ 50,818     $ 260,022     $ 142,482  
               
Net income per common share:              
Basic $ 0.34     $ 0.23     $ 1.07     $ 0.69  
Diluted $ 0.34     $ 0.23     $ 1.07     $ 0.69  
               
Weighted-average shares outstanding:              
Basic 242,678,465     222,072,930     242,308,893     206,167,506  
Diluted 243,032,793     222,917,611     243,021,002     206,743,551  
                       



SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
 
  Year Ended December 31,
  2018   2017
Cash flows from operating activities:      
Net income $ 260,022     $ 142,482  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depletion, depreciation, and accretion 179,773     112,309  
Goodwill impairment 40,711      
Loss on extinguishment of debt     11,842  
Provision for deferred taxes 37,967      
Other, reconciling items (36,873 )   11,852  
Changes in operating assets and liabilities 39,543     12,830  
Net cash provided by operating activities 521,143     291,315  
       
Cash flows from investing activities:      
Acquisitions of oil and gas properties and leaseholds (149,658 )   (661,468 )
Capital expenditures for drilling and completion activities (516,480 )   (450,384 )
Other capital expenditures (50,955 )   (22,027 )
Proceeds from sales of oil and gas properties and other 1,627     93,573  
Net cash used in investing activities (715,466 )   (1,040,306 )
       
Cash flows from financing activities:      
Equity financing activities 3,024     312,308  
Debt financing activities 192,136     448,621  
Net cash provided by financing activities 195,160     760,929  
       
Net increase (decrease) in cash, cash equivalents, and restricted cash 837     11,938  
Cash, cash equivalents, and restricted cash at beginning of period 48,772     36,834  
Cash, cash equivalents, and restricted cash at end of period $ 49,609     $ 48,772  


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