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 $110 million
for the three months ended March 31, 2019 were funded from
EBITDA
First Quarter 2019 Financial ResultsThe
following table presents certain per unit metrics that compare
results of the corresponding reporting periods:
|
|
Three Months Ended |
|
|
|
|
|
|
Seq. |
|
|
|
Y-o-Y |
Net Volumes |
|
3/31/2019 |
|
12/31/2018 |
|
% Chg. |
|
3/31/2018 |
|
% Chg. |
Crude Oil
(MBbls) |
|
|
2,967 |
|
|
2,590 |
|
15 |
% |
|
|
2,041 |
|
45 |
% |
Natural Gas Liquids (MBbls) |
|
|
1,054 |
|
|
1,089 |
|
(3 |
)% |
|
|
758 |
|
39 |
% |
Natural Gas (MMcf) |
|
|
11,391 |
|
|
10,946 |
|
4 |
% |
|
|
7,719 |
|
48 |
% |
Sales Volumes: (MBOE) |
|
|
5,919 |
|
|
5,503 |
|
8 |
% |
|
|
4,086 |
|
45 |
% |
Average Daily Volumes |
|
|
|
|
|
|
|
|
|
|
Daily Production (BOE) |
|
|
65,771 |
|
|
59,821 |
|
10 |
% |
|
|
45,397 |
|
45 |
% |
Product Price Received |
|
|
|
|
|
|
|
|
|
|
Crude Oil ($/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 AgreementThe 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 CommentLynn 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 CallThe 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)
407-9122International Dial-in Number: (201) 493-6747Webcast:
https://78449.themediaframe.com/dataconf/productusers/srci/mediaframe/30055/indexl.html
Replay Information:Conference ID #:
13690162Replay Dial-In (Toll Free US & Canada):
877-660-6853Replay Dial-In (International):
201-612-7415Expiration 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
StatementsThis 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 720-616-4308E-mail:
jrichardson@srcenergy.com
Reconciliation of Non-GAAP Financial MeasuresWe
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 |
|
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
StatementsCondensed 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.
|
SRC ENERGY
INC. |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(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 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
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 |
|
|
SRC ENERGY
INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(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 |
|
|
SRC ENERGY INC. |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(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 |
|
|
|
|
|
Expenses: |
|
|
|
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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