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 $487.9 million for the
three and twelve months ended December 31, 2018, respectively
(see further discussion regarding the presentation of adjusted
EBITDA in "About Non-GAAP Financial Measures" below)
Fourth Quarter and Year End 2018 Financial
ResultsThe following tables present certain per unit
metrics that compare results of the corresponding quarterly and
annual reporting periods:
|
Three Months Ended |
|
Year Ended |
Net
Volumes |
12/31/2018 |
|
12/31/2017 |
|
%
Chg. |
|
12/31/2018 |
|
12/31/2017 |
|
%
Chg. |
Crude Oil (MBbls) |
2,590 |
|
2,156 |
|
20% |
|
8,392 |
|
5,824 |
|
44% |
Natural Gas Liquids (MBbls) |
1,089 |
|
760 |
|
43% |
|
3,869 |
|
2,518 |
|
54% |
Natural Gas (MMcf) |
10,946 |
|
7,712 |
|
42% |
|
37,123 |
|
24,834 |
|
49% |
Sales Volumes: (MBOE) |
5,503 |
|
4,201 |
|
31% |
|
18,448 |
|
12,481 |
|
48% |
Average Daily Volumes |
|
|
|
|
|
|
|
|
|
|
|
Daily Production (BOE/day) |
59,821 |
|
45,658 |
|
31% |
|
50,543 |
|
34,194 |
|
48% |
Product Price Received |
|
|
|
|
|
|
|
|
|
|
|
Crude Oil ($/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)
407-9122International Dial-in Number: (201) 493-6747Webcast
URL:
https://78449.themediaframe.com/dataconf/productusers/srci/mediaframe/28662/indexl.html
Replay Information:Conference ID #:
411931Replay Dial-In (Toll Free US & Canada):
877-660-6853Replay Dial-In (International):
201-612-7415Expiration 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 720-616-4308E-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 StatementsCondensed
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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