NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Description of Business and Business Combination
Alta Mesa Resources, Inc. (“AMR”), together with its consolidated subsidiaries (“we,” “us,” “our” or “the Company”), is an independent exploration and production company focused on the acquisition, development, exploration and production of unconventional onshore oil and natural gas reserves in the eastern portion of the Anadarko Basin in Oklahoma. We operate in two reportable business segments - Upstream and Midstream. Alta Mesa Holdings, LP (“Alta Mesa”) conducts our Upstream activities and owns our proved and unproved oil and gas properties located in an area of the Anadarko Basin commonly referred to as the STACK. We generate upstream revenue principally by the production and sale of oil, gas and NGLs. Kingfisher Midstream, LLC (“KFM”) conducts our Midstream operations. KFM has a gas and oil gathering network, a cryogenic gas processing plant with offtake capacity, field compression facilities and a produced water disposal system in the Anadarko Basin that generate revenue primarily through long-term, fee-based contracts. The KFM midstream assets are vital to our Upstream operations, which we conduct in the same region, and they are strategically positioned to provide similar services to other producers in the area.
We were originally incorporated in Delaware in November 2016 as a special purpose acquisition company under the name Silver Run Acquisition Corporation II for the purpose of effecting a merger, exchange, acquisition, purchase, reorganization or similar business combination involving it and one or more businesses. On February 9, 2018 we acquired interests in Alta Mesa, Alta Mesa Holdings GP, LLC (“Alta Mesa GP”) and KFM through a newly formed subsidiary, SRII Opco, LP (“SRII Opco”) in a transaction referred to as the “Business Combination”, and changed our name from “Silver Run Acquisition Corporation II” to “Alta Mesa Resources, Inc.”
In connection with the closing of the Business Combination, Alta Mesa distributed its non-STACK oil and gas assets and associated liabilities to its prior owner, High Mesa Holdings, LP (“High Mesa”). The non-STACK assets and liabilities are reflected as discontinued operations in the Predecessor portion of our financial statements.
As a result of our failure to comply with the continued listing requirements of the NASDAQ Capital Market (“NASDAQ”), trading in our Class A Common Stock and public warrants was suspended on September 24, 2019, and they are now traded over the counter under the trading symbols “AMRQQ” and “AMRWQ,” respectively.
Bankruptcy Accounting
As discussed further in Note 3, on September 11, 2019, AMR, Alta Mesa, Alta Mesa GP, OEM GP, LLC, Alta Mesa Finance Services Corp, Alta Mesa Services and Oklahoma Energy Acquisitions, LP (the “AMH Debtors” and together with AMR, the “Debtors”) filed voluntary petitions (“Bankruptcy Petitions”) for relief under Chapter 11 of the U.S. Bankruptcy Code (“Bankruptcy Code”) in the U.S. Bankruptcy Court for the Southern District of Texas (“Bankruptcy Court”). During the pendency of the Chapter 11 proceedings, the Debtors will operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. The condensed consolidated financial statements have been prepared as if the Company is a going concern and reflect the application of Accounting Standards Codification 852 “Reorganizations” (“ASC 852”). ASC 852 requires that the financial statements, for periods subsequent to the Chapter 11 filing, distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, certain expenses, gains and losses that are realized or incurred in the bankruptcy proceedings are recorded in “reorganization items, net” on the Company’s condensed consolidated statements of operations. In addition, prepetition unsecured and under-secured obligations that may be impacted by the bankruptcy reorganization process have been classified as “liabilities subject to compromise” on the Company’s condensed consolidated balance sheet at September 30, 2019. These liabilities are reported at the amounts expected to be allowed as claims by the Bankruptcy Court, although they may be settled for less. The accompanying condensed consolidated financial statements do not purport to reflect or provide for the consequences of the Chapter 11 proceedings. In particular, the condensed consolidated financial statements do not purport to show: (i) the realizable value of assets on a liquidation basis or their availability to satisfy liabilities; (ii) the amount of prepetition liabilities that may be allowed for claims or contingencies, or the status and priority thereof; (iii) the effect on stockholders’ deficit accounts of any changes that may be made to the Company’s capitalization; or (iv) the effect on operations of any changes that may be made to the Company’s business. While operating as debtor-in-possession under Chapter 11 of the Bankruptcy Code, the Company may sell or otherwise dispose of or liquidate
assets or settle liabilities in amounts other than those reflected on its condensed consolidated financial statements, subject to the approval of the Bankruptcy Court or otherwise as permitted in the ordinary course of business. Further, a plan of reorganization could materially change the amounts and classifications on the Company’s historical condensed consolidated financial statements.
Ability to Continue as a Going Concern
AMR’s only significant asset is its ownership of a partnership interest in SRII Opco. As such, we have no meaningful cash available to us to meet our obligations apart from cash held by our subsidiaries. In September 2019, KFM received a letter from the Administrative Agent whereby the lenders under the KFM Credit Facility allege a potential event of default in respect of liens placed on KFM’s assets. The Administrative Agent and the lenders have reserved their right to pursue any remedies available to them, including charging the default rate of interest, declaring any of the outstanding debt thereunder due and payable or foreclosing on, or instituting foreclosure proceedings against, or liquidating any collateral. Although the Administrative Agent and the lenders have not taken any such actions, KFM will not have access to the remaining borrowing capacity unless or until this matter is resolved, which could materially impact AMR’s and KFM’s ability to meet all financial obligations as they come due and KFM’s ability to make distributions to AMR that otherwise may have been permitted. As a result of Alta Mesa’s bankruptcy and the limitations imposed under a Bankruptcy Court approved cash collateral agreement and alleged defaults under the KFM Credit Facility, AMR’s only remaining source of liquidity is through non-debtor subsidiary SRII Opco. At October 31, 2019, SRII Opco had cash on hand of $5.5 million. We also believe that KFM will fail to meet the maintenance covenants of the KFM Credit Facility as early as the first quarter of 2020, which would prevent any further borrowings. These factors raise substantial unmitigated doubt about our ability to continue as a going concern.
Basis of Presentation
These financial statements include the consolidated financial positions, results of operations and cash flows of the Company, the AMH Debtors and our non-debtor subsidiaries, which are controlled by us. All intercompany transactions and accounts have been eliminated. These interim condensed consolidated financial statements are unaudited, but we believe these statements reflect all adjustments necessary for a fair presentation of the periods reported. All such adjustments are of a normal, recurring nature unless otherwise disclosed. These financial statements and disclosures have been prepared in accordance with the SEC’s rules for interim financial statements and do not include all the information and disclosures required by generally accepted accounting principles (“GAAP”) for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our 2018 10-K. The results for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the full year. We have no items of other comprehensive income during any period presented. Certain prior period amounts have been reclassified to conform to the current period presentation.
NOTE 2 — SUMMARY OF RECENTLY ISSUED ACCOUNTING STANDARDS APPLICABLE TO US
Adopted
Effective January 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires that lessees recognize a lease liability, which is a lessee’s discounted obligation to make payments under a lease, and a right-of-use asset, arising from a lessee’s right to use an asset over the lease term. Upon adoption, we used the modified retrospective method to apply the standard as of January 1, 2019 for existing leases with terms in excess of 12 months entered into prior to January 1, 2019.
Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard requires the use of a new “expected credit loss” impairment model rather than the “incurred loss” model we use today. With respect to our trade and notes receivables and certain other financial instruments, we may be required to (i) maintain and use lifetime loss information rather than annual loss data, (ii) forecast future economic conditions and quantify the effect of those conditions on future expected losses and (iii) provide additional disclosures regarding the credit quality of our trade and notes receivables and other financial instruments. Based on a tentative decision by the FASB, we expect this standard, including related amendments, will be effective for us beginning January 2023. No determination has yet been made of the impact of this new standard on our financial position or results of operations.
In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (“ASU 2018-15”). The amendments in this standard align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal use software (and hosting arrangements that include an internal-use software license). Under this new standard, a customer in a hosting arrangement that is a service contract is required to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as a prepaid asset related to the service contract and which costs to expense. The capitalized implementation costs are to be expensed over the term of the hosting arrangement and reflected in the same line in the consolidated statement of operations as the fees associated with the hosting element of the arrangement. Similarly, capitalized implementation costs are to be presented in the statement of cash flows in the same line as payments made for fees associated with the hosting element. We will adopt this new standard no earlier than January 1, 2020, although early adoption is permitted. We are currently evaluating the impact of this new standard on our consolidated financial position and results of operations and expect to apply the new standard prospectively to implementation costs incurred after the date of adoption.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”), which modifies the disclosure requirements of fair value measurements. ASU 2018-13 is effective for us no earlier than January 2020. Certain disclosures are required to be applied on a retrospective basis and others on a prospective basis. We do not expect the adoption of this standard to impact our financial position or results of operations.
NOTE 3 - CHAPTER 11 PROCEEDINGS
Voluntary Reorganization Under Chapter 11
On September 11, 2019, the Debtors filed the Bankruptcy Petitions for reorganization under the Bankruptcy Code in the Bankruptcy Court. The Bankruptcy Court has granted a motion seeking joint administration of the Chapter 11 cases under the caption In re Alta Mesa Resources, Inc., et. al., Case No. 19-35133. The Debtors continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code.
Certain of the Company’s other subsidiaries, including SRII Opco GP, LLC, SRII Opco, KFM and its subsidiaries, Kingfisher STACK Oil Pipeline, LLC and Oklahoma Produced Water Solutions, LLC, (together the “non-Debtors”) are not in bankruptcy or otherwise part of the Chapter 11 cases at this time.
Subject to certain exceptions, under the Bankruptcy Code, the filing of the Bankruptcy Petitions automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the date of the Bankruptcy Petitions. Accordingly, although the filing of the Bankruptcy Petitions triggered defaults on the AMH Debtors’ debt obligations, the creditors are stayed from taking any actions against the AMH Debtors as a result of such defaults, subject to certain limited exceptions provided by the Bankruptcy Code. Absent an order of the Bankruptcy Court, substantially all of the AMH Debtors’ prepetition liabilities are subject to compromise under the Bankruptcy Code.
Initial Orders and Other Filings
On September 12, 2019, the Bankruptcy Court entered various orders requested by the Debtors in order to stabilize their businesses and operations as they entered into Chapter 11 bankruptcy proceedings, including orders authorizing the Debtors to honor certain obligations to employees, vendors, and holders of royalty interests. In addition, the AMH Debtors have been authorized by the Bankruptcy Court to use cash collateral of the lenders under the Alta Mesa RBL. The current cash collateral order permits the AMH Debtors to use their cash and proceeds of their collateral until November 21, 2019 on the terms and conditions agreed by the AMH Debtors and their creditors (including the lenders under the Alta Mesa RBL) as set forth in the order. The terms and conditions include, without limitation, adherence to a budget with an agreed upon variance and meeting certain other milestones related to sale of the Debtor assets. The continued access to the cash collateral will also be dependent upon the Bankruptcy Court’s approval of future versions of the cash collateral order and the related terms and conditions provided therein.
On September 27, 2019, the United States Trustee for the Southern District of Texas appointed an official committee of unsecured creditors. On October 18, 2019, the Debtors filed schedules and statements with the Bankruptcy Court setting forth,
among other things, the assets and liabilities of the Debtors, subject to the assumptions filed in connection therewith. The schedules and statements may be subject to further amendment or modification after filing. Except as otherwise provided by the Bankruptcy Court, proofs of prepetition claims, including those arising from subsequent rejection of executory contracts and unexpired leases, must be on file by December 9, 2019, or by March 9, 2020, in the case of claims by governmental units. Differences between amounts scheduled by the Debtors and claims by creditors will be evaluated and resolved in connection with the claims resolution process.
The Debtors are in a marketing process to sell their assets along with KFM’s midstream assets. On October 11, 2019, the Bankruptcy Court entered an order approving, among other things, proposed bidding procedures and the dates for an auction, a hearing to approve the sale or sales of assets, and related dates and deadlines. The auction is scheduled to occur on January 8, 2020 and the sale hearing is scheduled to occur on January 10, 2020. Both of the scheduled dates are subject to postponement.
Certain of the AMH Debtors have also filed a complaint seeking a Bankruptcy Court determination that (i) the crude oil, gas, and water gathering agreements between Debtor Oklahoma Energy Acquisitions and non-Debtors KFM and its subsidiaries can be rejected by the Debtors, (ii) certain amendments to the crude oil and gas gathering agreements were constructive and actual fraudulent transfers, (iii) the crude oil and gas gathering agreements are subject to rescission as the products of breaches of fiduciary duty, and (iv) KFM and its subsidiaries materially breached the crude oil gathering agreement and that the agreement is therefore terminated. On October 25, 2019, the plaintiff AMH Debtors filed an amended complaint naming only KFM and Oklahoma Produced Water Solutions, LLC as Defendants. On November 4, 2019, the plaintiff AMH Debtors provided notice of alleged events of default under the crude oil and gas gathering agreements and reserved their rights and remedies, including termination of those agreements. The plaintiff AMH Debtors have also submitted a motion to file a second amended complaint to include these events of default allegations. The litigation is set for trial on December 9, 2019.
Liabilities Subject to Compromise
Liabilities subject to compromise represent the Debtors’ prepetition liabilities that have been allowed or that the Debtors anticipate will be allowed as claims in its Chapter 11 cases. The amounts represent the Debtors’ current estimate of known or potential obligations to be resolved in connection with the Chapter 11 proceedings. The differences between the liabilities the Debtors has estimated and the claims filed, or to be filed, will be evaluated and resolved in connection with the claims resolution process. We will continue to evaluate these liabilities throughout the Chapter 11 proceedings and adjust as necessary.
Following are the components of liabilities subject to compromise included on the condensed consolidated balance sheet:
|
|
|
|
|
(in thousands)
|
September 30, 2019
|
2024 Notes
|
$
|
500,000
|
|
Accounts payable and accrued liabilities
|
21,670
|
|
Accrued interest payable on 2024 Notes
|
9,515
|
|
Operating lease liabilities
|
1,996
|
|
Liabilities subject to compromise
|
$
|
533,181
|
|
Reorganization Items
The Company has incurred and is expected to continue to incur significant costs associated with the bankruptcy. These costs, which are expensed as incurred, are expected to significantly affect the Company’s results of operations. Reorganization items represent costs and income directly associated with the Chapter 11 proceedings since the Petition Date and also includes adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments are determined.
Following are the components of reorganization items, net included in our Condensed Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
(in thousands)
|
Three Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
Unamortized deferred financing fees and premiums
|
$
|
24,748
|
|
|
$
|
24,748
|
|
Terminated contracts
|
394
|
|
|
394
|
|
Legal and other professional advisory fees
|
(2,675
|
)
|
|
(2,675
|
)
|
Reorganization items, net
|
$
|
22,467
|
|
|
$
|
22,467
|
|
Interest Expense
Subject to certain exceptions, under the Bankruptcy Code, the filing of Bankruptcy Petitions automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to cover, collect or secure a claim arising prior to the Petition Date. Absent an order of the Bankruptcy Court, substantially all of the Debtors’ prepetition liabilities are subject to settlement under the Bankruptcy Code. Although the filing of Bankruptcy Petitions triggered defaults on the Debtors’ debt obligations, creditors are stayed from taking any actions against the Debtors as a result of such defaults, subject to certain limited exceptions permitted by the Bankruptcy Code. The Company did not record interest expense on its 2024 Notes for the period September 12, 2019 through September 30, 2019. For that period, the unrecorded contractual interest was approximately $2.0 million.
Executory Contracts
Subject to certain exceptions, under the Bankruptcy Code, the Debtors may assume, assign or reject certain executory contracts subject to the approval of the Bankruptcy Court and fulfillment of certain other conditions. Generally, the rejection of an executory contract or unexpired lease is treated as a prepetition breach of such executory contract or unexpired lease and, subject to certain exceptions, relieves the Debtors of performing their future obligations under such executory contract or unexpired lease but entitles the contract counterparty or lessor to prepetition general unsecured claim for damages caused by such deemed breach. Counterparties to such rejected contracts or leases may assert unsecured claims in the Bankruptcy Court against the applicable Debtors’ estate for damages. Generally, the assumption of an executory contract or unexpired lease requires the Debtors to cure existing monetary defaults under such executory contract or unexpired lease and provide adequate assurance of future performance. Accordingly, any description of an executory contract or unexpired lease with any of the Debtors in this Quarterly Report on Form 10-Q, including where applicable a quantification of the Company’s obligations under any such executory contract or unexpired lease with the applicable Debtor, is qualified by any overriding rejection rights the Company has under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease and the Debtors expressly preserve all of their rights with respect thereto.
On September 26, 2019, the Bankruptcy Court approved our request to reject an office lease extending through November 2023. Pursuant to this rejection, we de-recognized the right-of-use asset and liability, which resulted in a gain of $0.4 million (included in reorganization items, net). In October 2019, an additional lease and other less significant contracts were also rejected by the Bankruptcy Court. Pursuant to this rejection, we reported the corresponding current and long-term lease liability as liabilities subject to compromise at September 30, 2019.
Condensed Combined Financial Information of Debtors
Combined Statement of Operations (Unaudited)
|
|
|
|
|
|
|
|
|
(in thousands)
|
Three Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
Revenue
|
|
|
|
Oil
|
$
|
84,010
|
|
|
$
|
261,041
|
|
Natural gas
|
10,788
|
|
|
41,622
|
|
Natural gas liquids
|
8,333
|
|
|
29,800
|
|
Other
|
302
|
|
|
1,200
|
|
Operating revenue
|
103,433
|
|
|
333,663
|
|
Gain on sale of assets
|
—
|
|
|
1,483
|
|
Loss on derivatives
|
(379
|
)
|
|
(11,744
|
)
|
Total revenue
|
103,054
|
|
|
323,402
|
|
Operating expenses
|
|
|
|
|
|
Lease operating
|
18,071
|
|
|
62,302
|
|
Transportation and marketing
|
17,561
|
|
|
54,936
|
|
Production taxes
|
4,673
|
|
|
15,273
|
|
Workovers
|
757
|
|
|
1,366
|
|
Exploration
|
40,847
|
|
|
46,190
|
|
Depreciation, depletion and amortization
|
33,407
|
|
|
102,586
|
|
Impairment of assets
|
387,721
|
|
|
394,221
|
|
General and administrative
|
19,781
|
|
|
62,869
|
|
Total operating expenses
|
522,818
|
|
|
739,743
|
|
Operating income
|
(419,764
|
)
|
|
(416,341
|
)
|
Other income (expenses)
|
|
|
|
|
|
Interest expense
|
(12,233
|
)
|
|
(39,134
|
)
|
Interest income
|
45
|
|
|
126
|
|
Reorganization items, net
|
22,467
|
|
|
22,467
|
|
Total other income (expense), net
|
10,279
|
|
|
(16,541
|
)
|
Loss from continuing operations before income taxes
|
(409,485
|
)
|
|
(432,882
|
)
|
Net loss
|
$
|
(409,485
|
)
|
|
$
|
(432,882
|
)
|
Combined Balance Sheet (Unaudited)
|
|
|
|
|
(in thousands)
|
September 30, 2019
|
ASSETS
|
|
Current assets
|
|
Cash and cash equivalents
|
$
|
58,143
|
|
Restricted cash
|
951
|
|
Accounts receivable, net
|
55,666
|
|
Other receivables
|
1,171
|
|
Related party receivables, net
|
17,419
|
|
Note receivables from related parties, net
|
—
|
|
Prepaid expenses and other current assets
|
6,948
|
|
Total current assets
|
140,298
|
|
Property and equipment, net
|
|
Oil and gas properties, successful efforts method
|
365,343
|
|
Other property and equipment
|
36,818
|
|
Total property and equipment, net
|
402,161
|
|
Other assets
|
|
Investment in subsidiary
|
1,504,147
|
|
Operating lease right-of-use assets, net
|
7,113
|
|
Deposits and other long-term assets
|
6,171
|
|
Total other assets
|
1,517,431
|
|
Total assets
|
$
|
2,059,890
|
|
|
|
LIABILITIES AND PARTNERS’ CAPITAL
|
|
Current liabilities
|
|
Current portion of debt
|
$
|
340,004
|
|
Accounts payable and accrued liabilities
|
51,722
|
|
Accounts payable - related parties
|
18,301
|
|
Advances from non-operators
|
619
|
|
Advances from related party
|
2,607
|
|
Asset retirement obligations, current portion
|
74
|
|
Current operating lease liability
|
650
|
|
Total current liabilities
|
413,977
|
|
Long-term liabilities
|
|
Asset retirement obligations, net of current portion
|
12,717
|
|
Operating lease liabilities, net of current portion
|
10,569
|
|
Total long-term liabilities
|
23,286
|
|
Liabilities subject to compromise
|
533,181
|
|
Total liabilities
|
970,444
|
|
Partners’ capital
|
1,089,446
|
|
Total liabilities and partners’ capital
|
$
|
2,059,890
|
|
Combined Statement of Cash Flows (Unaudited)
|
|
|
|
|
(in thousands)
|
Nine Months Ended September 30, 2019
|
Cash flows from operating activities:
|
|
Net loss
|
$
|
(432,882
|
)
|
Adjustments to reconcile net loss to cash from operating activities:
|
|
Depreciation, depletion and amortization
|
102,586
|
|
Non-cash lease expense
|
2,216
|
|
Provision for uncollectible receivables
|
1,139
|
|
Impairment of assets
|
394,221
|
|
Non-cash reorganization items, net
|
(25,142
|
)
|
Amortization of deferred financing costs
|
195
|
|
Amortization of debt premium
|
(3,432
|
)
|
Equity-based compensation expense
|
4,453
|
|
Non-cash exploration expense
|
40,245
|
|
(Gain) loss on derivatives
|
11,744
|
|
Cash settlements of derivatives
|
7,642
|
|
Cash paid for derivatives
|
(1,906
|
)
|
Impact on cash from changes in:
|
|
Accounts receivable
|
12,441
|
|
Other receivables
|
5,097
|
|
Related party receivables
|
3,826
|
|
Prepaid expenses and other assets
|
(12,127
|
)
|
Advances from related party
|
(7,215
|
)
|
Settlement of asset retirement obligations
|
(180
|
)
|
Accounts payable, accrued liabilities and other liabilities
|
8,494
|
|
Operating lease obligations
|
(2,151
|
)
|
Cash from operating activities
|
109,264
|
|
Cash flows from investing activities:
|
|
Capital expenditures
|
(243,709
|
)
|
Distribution received from subsidiary
|
691
|
|
Cash from investing activities
|
(243,018
|
)
|
Cash flows from financing activities:
|
|
Proceeds from long-term debt borrowings
|
183,500
|
|
Repayments of long-term debt
|
(4,496
|
)
|
Payment of taxes withheld on equity-based compensation awards
|
(141
|
)
|
Cash from financing activities
|
178,863
|
|
Net increase in cash, cash equivalents and restricted cash
|
45,109
|
|
Cash, cash equivalents and restricted cash, beginning of period
|
13,985
|
|
Cash, cash equivalents and restricted cash, end of period
|
$
|
59,094
|
|
NOTE 4 — IMPAIRMENT OF ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
(in thousands)
|
Three Months Ended
September 30, 2019
|
|
Three Months Ended
September 30, 2018
|
|
|
Nine Months Ended
September 30, 2019
|
|
February 9, 2018
Through
September 30, 2018
|
|
|
January 1, 2018
Through
February 8, 2018
|
Upstream
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of proved properties
|
$
|
387,721
|
|
|
$
|
—
|
|
|
|
$
|
387,721
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
Impairment of operating lease right-of-use assets
|
—
|
|
|
—
|
|
|
|
6,500
|
|
|
—
|
|
|
|
—
|
|
Total Upstream impairment of assets
|
387,721
|
|
|
—
|
|
|
|
394,221
|
|
|
—
|
|
|
|
—
|
|
Midstream
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of property and equipment
|
303,402
|
|
|
—
|
|
|
|
303,402
|
|
|
—
|
|
|
|
—
|
|
Total Midstream impairment of assets
|
303,402
|
|
|
—
|
|
|
|
303,402
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impairment of assets
|
$
|
691,123
|
|
|
$
|
—
|
|
|
|
$
|
697,623
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
Impairment of Proved Properties
AMR and the AMH Debtors filed for bankruptcy protection in September 2019. As a result, our ability to incur the levels of spending necessary to continue to develop our properties has been significantly restricted. This has negatively impacted our future drilling plans and our expectations regarding production levels from our properties. As a result, we conducted an assessment of impairment and recognized impairment expense for our proved properties at September 30, 2019. In determining the amount of impairment for our properties, we utilized future expected cash flows from those properties (a Level 3 input), discounted at a market participant rate to estimate fair value.
Impairment of Operating Lease Right-of-Use Assets
During the second quarter of 2019, we consolidated employees in existing leased office space in Houston, Texas and Oklahoma City, Oklahoma. We sought to sublease the unused office space within three buildings but we were unable to fully recover the cash due to the lessor under the existing operating lease obligations in those three buildings with proceeds from subleases. As a result, we recognized a $6.5 million impairment of our existing right-of-use lease assets in those buildings during the three months ended June 30, 2019. This impairment had no impact to our lease liability.
Impairment of Midstream Property and Equipment
The majority of the oil, gas and produced water volumes gathered and processed by our Midstream segment arise from our Upstream segment. Due to the factors mentioned above, the volumes gathered and processed by our Midstream segment are expected to decline, resulting in reduced throughput and value of our Midstream assets. Accordingly, we conducted an assessment of impairment and recognized impairment expense for our Midstream property and equipment at September 30, 2019. In determining the amount of impairment for our Midstream property and equipment, we utilized future expected cash flows from those assets (a Level 3 input), discounted at a market participant rate to estimate fair value.
NOTE 5 — ADOPTION OF ASU NO. 2016-02, LEASES
ASU No. 2016-02 requires us to recognize a right-of-use (“ROU”) asset and a discounted lease liability on our balance sheet for all leases with a term longer than one year. We adopted ASU No. 2016-02 and related guidance using the modified retrospective method as of January 1, 2019, and this adoption had no effect on the earlier comparative periods presented. At adoption, we recognized operating lease ROU assets and operating lease liabilities totaling $15.4 million each. There was no adjustment to beginning retained earnings.
We lease office space, office equipment and field equipment, including compressors. Many of our leases include both lease and non-lease components which are primarily management services performed by the lessors for the underlying assets. All of our leases of office space and office equipment were classified as operating leases upon adoption. Our leases of field equipment had
remaining terms of less than one year at the date of adoption and were not recognized as operating leases on our balance sheet due to our election of the short term lease practical expedient described below. Our leases do not contain any residual value guarantees or restrictive covenants. We do not currently sublease any of our ROU assets, although we may sublease our unused office lease space in the future.
Operating fixed lease expenses are recognized on a straight-line basis over the lease term. Variable lease payments, which cannot be determined at the lease commencement date, are not included in ROU assets or lease liabilities and are expensed as incurred.
Upon adoption, we selected the following practical expedients:
|
|
|
|
Practical expedient package
|
|
We did not reassess whether any expired or existing contracts are, or contain, leases.
|
|
|
We did not reassess the lease classification of any expired or existing leases.
|
|
|
We did not reassess initial direct costs of any expired or existing leases.
|
|
|
|
Hindsight practical expedient
|
|
We did not elect to use the hindsight practical expedient which allows for the use of hindsight when determining lease term, including option periods, and impairment of operating assets.
|
|
|
|
Easement expedient
|
|
We elected to maintain the current accounting treatment of existing contracts and not reassess whether those contracts met the definition of a lease.
|
|
|
|
Combining lease and non-lease components expedient
|
|
We elected to account for lease and non-lease components as a single component.
|
|
|
|
Short-term lease expedient
|
|
We elected the short-term lease recognition exemption for all classes of underlying assets. Expense for short-term leases is recognized on a straight-line basis over the lease term. Leases with an initial term of 12 months or less and that do not include an option to purchase the underlying asset that is reasonably certain to be recognized are not recorded on the balance sheet.
|
As most leases do not have readily determinable implicit rates, we estimated the incremental borrowing rates for our future lease payments based on prevailing financial market conditions at the later of date of adoption or lease commencement, credit analysis of comparable companies and management judgments to determine the present values of our lease payments. We also apply the portfolio approach to account for leases with similar terms. At September 30, 2019, the weighted-average remaining lease term of our operating leases was approximately 8.3 years and the weighted-average discount rate applied was 14.5%.
Lease Costs
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Three Months Ended
September 30, 2019
|
|
Nine Months Ended September 30, 2019
|
Operating lease cost
|
|
$
|
668
|
|
|
$
|
2,343
|
|
Variable lease cost
|
|
210
|
|
|
1,059
|
|
Short-term lease cost
|
|
422
|
|
|
4,072
|
|
Total lease cost
|
|
$
|
1,300
|
|
|
$
|
7,474
|
|
|
|
|
|
|
Reported in:
|
|
|
|
|
Lease operating expense
|
|
$
|
378
|
|
|
$
|
4,016
|
|
General and administrative expense
|
|
922
|
|
|
3,458
|
|
Total lease cost
|
|
$
|
1,300
|
|
|
$
|
7,474
|
|
Remaining Operating Lease Liability Payments as of September 30, 2019
|
|
|
|
|
|
Fiscal year
|
|
(in thousands)
|
Remainder of 2019
|
|
$
|
649
|
|
2020
|
|
2,614
|
|
2021
|
|
2,581
|
|
2022
|
|
2,713
|
|
2023
|
|
2,718
|
|
Thereafter
|
|
12,647
|
|
Total lease payments
|
|
23,922
|
|
Less: imputed interest
|
|
(10,409
|
)
|
Less: reclassification to liabilities subject to compromise
|
|
(1,996
|
)
|
Present value of operating lease liabilities not subject to compromise
|
|
$
|
11,517
|
|
|
|
|
Current portion of operating lease liabilities
|
|
$
|
736
|
|
Operating lease liabilities, net of current portion
|
|
10,781
|
|
Present value of operating lease liabilities not subject to compromise
|
|
$
|
11,517
|
|
As described further in our 2018 10-K, our minimum future contractual lease payments under ASC 840 at December 31, 2018 were $2.8 million for 2019, $2.9 million for 2020, $2.9 million for 2021, $3.1 million for 2022, $3.0 million for 2023 and $12.2 million thereafter.
NOTE 6 - EARNINGS (LOSS) PER SHARE
The following table reflects the net income attributable to common stockholders and earnings per share for the periods indicated based on a weighted average number of common shares outstanding for the period:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, 2019
|
|
Three Months Ended
September 30, 2018
|
|
|
Nine Months Ended
September 30, 2019
|
|
February 9, 2018
Through
September 30, 2018
|
|
(in thousands, except shares and per share data)
|
Net income (loss) attributable to AMR Class A common stockholders
|
$
|
(342,187
|
)
|
|
$
|
6,973
|
|
|
|
$
|
(348,349
|
)
|
|
$
|
(12,957
|
)
|
Effect of dilutive Class C securities:
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests assumed to be redeemed for Class A Common Stock, net of tax
|
—
|
|
|
4,869
|
|
|
|
—
|
|
|
(5,227
|
)
|
Net income (loss) attributable to AMR Class A common stockholders after assumed redemption
|
$
|
(342,187
|
)
|
|
$
|
11,842
|
|
|
|
$
|
(348,349
|
)
|
|
$
|
(18,184
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average Class A common shares outstanding (Basic)
|
182,716,273
|
|
|
178,078,132
|
|
|
|
181,250,401
|
|
|
174,364,715
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Class A shares assumed issued to holders of noncontrolling interests upon redemption
|
—
|
|
|
132,428,358
|
|
|
|
—
|
|
|
59,006,903
|
|
Restricted stock and stock options
|
—
|
|
|
31,342
|
|
|
|
—
|
|
|
—
|
|
Weighted average common shares outstanding (Diluted)
|
182,716,273
|
|
|
310,537,832
|
|
|
|
181,250,401
|
|
|
233,371,618
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share attributable to AMR common stockholders:
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(1.87
|
)
|
|
$
|
0.04
|
|
|
|
$
|
(1.92
|
)
|
|
$
|
(0.07
|
)
|
Diluted
|
$
|
(1.87
|
)
|
|
$
|
0.04
|
|
|
|
$
|
(1.92
|
)
|
|
$
|
(0.08
|
)
|
NOTE 7 — SUPPLEMENTAL CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
(in thousands)
|
Nine Months Ended
September 30, 2019
|
|
February 9, 2018
Through
September 30, 2018
|
|
|
January 1, 2018
Through
February 8, 2018
|
Supplemental cash flow information:
|
|
|
|
|
|
|
Cash paid for interest
|
$
|
35,866
|
|
|
$
|
24,950
|
|
|
|
$
|
1,145
|
|
Cash paid for income taxes, net of refunds
|
706
|
|
|
1,573
|
|
|
|
—
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
Increase in asset retirement obligations
|
831
|
|
|
4,652
|
|
|
|
—
|
|
Increase (decrease) in accruals or payables for capital expenditures
|
(147,756
|
)
|
|
41,069
|
|
|
|
4,896
|
|
Distribution of non-STACK assets, net of liabilities
|
—
|
|
|
—
|
|
|
|
43,482
|
|
Equity issued in Business Combination
|
—
|
|
|
2,067,393
|
|
|
|
—
|
|
Release of common stock from possible redemption
|
—
|
|
|
966,384
|
|
|
|
—
|
|
Tax effect of redemption of noncontrolling interests in SRII Opco for Class A common shares and other
|
—
|
|
|
(905
|
)
|
|
|
—
|
|
Increase in accounts receivable for sale of assets
|
—
|
|
|
(524
|
)
|
|
|
—
|
|
We aggregate cash, cash equivalents and restricted cash in the statements of cash flows.
NOTE 8 — RECEIVABLES
Accounts Receivable
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30, 2019
|
|
December 31, 2018
|
Production and processing sales and fees
|
$
|
40,348
|
|
|
$
|
51,004
|
|
Joint interest billings
|
17,411
|
|
|
18,147
|
|
Pooling interest (1)
|
8,974
|
|
|
18,786
|
|
Allowance for doubtful accounts
|
(347
|
)
|
|
(95
|
)
|
Total accounts receivable, net
|
$
|
66,386
|
|
|
$
|
87,842
|
|
_________________
|
|
(1)
|
Pooling interest relates to Oklahoma’s forced pooling process which permits mineral interest owners the option to participate in the drilling of proposed wells. The pooling interest listed above represents unbilled costs for wells where the option remains pending. Depending upon the mineral owner’s decision, these costs will be billed to them or added to oil and gas properties.
|
Related Party Receivables
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30, 2019
|
|
December 31, 2018
|
Related party receivables
|
$
|
12,135
|
|
|
$
|
12,375
|
|
Allowance for doubtful accounts
|
(12,135
|
)
|
|
(9,034
|
)
|
Related party receivables, net
|
—
|
|
|
3,341
|
|
|
|
|
|
Notes receivable from related parties
|
13,403
|
|
|
13,403
|
|
Allowance for doubtful accounts
|
(13,403
|
)
|
|
(13,403
|
)
|
Notes receivable from related parties, net
|
—
|
|
|
—
|
|
Related party receivables, net
|
$
|
—
|
|
|
$
|
3,341
|
|
At December 31, 2018, we had a receivable of $2.3 million from KFM’s former owner, KFM Holdco, LLC (“KFM Holdco”), relating to transaction costs paid on KFM Holdco’s behalf before the Business Combination. During the third quarter 2019, we fully reserved this receivable based upon our assessment regarding collectibility. We have filed suit against KFM Holdco to seek payment for this receivable.
Management Services Agreement with High Mesa
|
|
|
|
|
(in thousands)
|
September 30, 2019
|
High Mesa related party receivable at December 31, 2018
|
$
|
10,066
|
|
Additions
|
832
|
|
Payments
|
(1,073
|
)
|
High Mesa related party receivable at September 30, 2019
|
9,825
|
|
Allowance for uncollectibility(1)
|
(9,825
|
)
|
Balance at September 30, 2019, net
|
$
|
—
|
|
_________________
|
|
(1)
|
$9.0 million of the allowance was recognized during the 2018 Successor Period.
|
Our management services agreement with HMI (“the High Mesa Agreement”) was terminated effective January 31, 2019. Through April 1, 2019, we were obligated to take all actions that HMI reasonably requested to effect the transition of the services to a successor service provider. During the transition period, HMI agreed to pay us (i) for all services performed, (ii) an amount equal to our costs and expenses incurred in connection with providing the services as provided for in the approved budget and (iii) an amount equal to our costs and expenses reimbursable pursuant to the High Mesa Agreement. As of September 30, 2019, and December 31, 2018, approximately $9.8 million and $10.1 million, respectively, were due from HMI for reimbursement of costs and expenses which are recorded as “Related party receivables, net” in the balance sheets. HMI has disputed certain of the amounts we billed. We are pursuing remedies under applicable law in connection with repayment of this receivable. There is no guarantee that HMI will pay the amounts it owes. In addition, our ability to collect these amounts or future amounts that may become due pursuant to indemnification obligations may be adversely impacted by liquidity and solvency issues at HMI. As a result of these circumstances, we have recognized an allowance for uncollectible accounts of $9.8 million and $9.0 million as of September 30, 2019 and December 31, 2018, respectively, to fully provide for the unremitted balances. We may also be subject to future contingent liabilities for the non-STACK assets for which we should have been indemnified, including liabilities associated with litigation relating to the non-STACK assets. As of September 30, 2019 and December 31, 2018, we have established no liabilities for contingent obligations associated with non-STACK assets owned by High Mesa.
Promissory notes receivable
High Mesa Services, LLC (“HMS”), a subsidiary of HMI, defaulted under the terms of a promissory note with us when it did not pay us on February 28, 2019, and HMS has failed to cure such default. We subsequently declared all amounts owed under the note immediately due and payable and we have fully reserved the promissory note balance, including interest paid-in-kind, totaling $1.7 million as of September 30, 2019 and December 31, 2018.
In addition, we have a note receivable from HMS which matures on December 31, 2019, and bears interest at 8% per annum, which may be paid-in-kind and added to the principal amount. HMI disputes its obligations under the note. As of September 30, 2019, and December 31, 2018, the note receivable balance, including interest paid-in-kind, amounted to $11.7 million, for each respective period. This balance was fully reserved at the end of both periods.
We oppose HMI’s claims and believe HMI’s obligations under the notes to be valid assets and that the full amount is payable to us. We are pursuing remedies under applicable law in connection with repayment of the promissory notes. As a result of the potential conflict of interest from certain of AMR’s directors who are also controlling holders of HMI, AMR’s disinterested directors will address any potential conflicts of interest with respect to this matter.
NOTE 9 — PROPERTY AND EQUIPMENT
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30, 2019
|
|
December 31, 2018
|
Oil and gas properties
|
|
|
|
Unproved properties
|
$
|
816,858
|
|
|
$
|
816,282
|
|
Accumulated impairment of unproved properties
|
(782,287
|
)
|
|
(742,065
|
)
|
Unproved properties, net
|
34,571
|
|
|
74,217
|
|
Proved oil and gas properties
|
2,240,337
|
|
|
2,110,346
|
|
Accumulated depletion and impairment
|
(1,909,565
|
)
|
|
(1,421,226
|
)
|
Proved oil and gas properties, net
|
330,772
|
|
|
689,120
|
|
Total oil and gas properties, net
|
365,343
|
|
|
763,337
|
|
Other property and equipment
|
|
|
|
Land
|
5,600
|
|
|
5,600
|
|
Fresh water wells
|
27,373
|
|
|
27,366
|
|
Produced water disposal system
|
108,422
|
|
|
104,498
|
|
Gas processing plant and gathering lines
|
413,793
|
|
|
380,470
|
|
Office furniture, equipment and vehicles
|
3,687
|
|
|
3,703
|
|
Accumulated depreciation and impairment
|
(392,300
|
)
|
|
(77,368
|
)
|
Other property and equipment, net
|
166,575
|
|
|
444,269
|
|
Total property and equipment, net
|
$
|
531,918
|
|
|
$
|
1,207,606
|
|
During the third quarter, we recognized a charge of $11.2 million as exploration expense to reduce unproved properties for third and fourth quarter 2019 expirations of leased acreage. As a significant portion of these expirations were located in Major County, we determined that, given limited availability of development capital, our intent was to continue to let leased acreage in Major County expire in the normal course, thus abandoning development of Major County. As such, we recorded an additional charge as exploration expense for all remaining acreage in Major County totaling $28.8 million.
Depletion and Depreciation Expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
(in thousands)
|
Three Months Ended
September 30, 2019
|
|
Three Months Ended
September 30, 2018
|
|
|
Nine Months Ended
September 30, 2019
|
|
February 9, 2018
Through
September 30, 2018
|
|
|
January 1, 2018
Through
February 8, 2018
|
Oil and gas properties depletion
|
$
|
32,652
|
|
|
$
|
44,593
|
|
|
|
$
|
100,617
|
|
|
$
|
81,452
|
|
|
|
$
|
11,021
|
|
Midstream depreciation
|
3,589
|
|
|
2,099
|
|
|
|
10,313
|
|
|
5,231
|
|
|
|
—
|
|
Other property and equipment depreciation
|
508
|
|
|
1,030
|
|
|
|
1,257
|
|
|
1,616
|
|
|
|
609
|
|
Total depletion and depreciation
|
$
|
36,749
|
|
|
$
|
47,722
|
|
|
|
$
|
112,187
|
|
|
$
|
88,299
|
|
|
|
$
|
11,630
|
|
NOTE 10 — DISCONTINUED OPERATIONS (Predecessor)
The results of operations of the non-STACK oil and gas assets and related liabilities distributed to High Mesa immediately prior to the Business Combination and presented as discontinued operations during the Predecessor Period were as follows:
|
|
|
|
|
|
Predecessor
|
(in thousands)
|
January 1, 2018
Through
February 8, 2018
|
Revenue
|
|
Oil
|
$
|
1,617
|
|
Natural gas
|
1,023
|
|
Natural gas liquids
|
236
|
|
Other
|
16
|
|
Operating revenue
|
2,892
|
|
Loss on sale of assets
|
(1,923
|
)
|
Total revenue
|
969
|
Operating expenses
|
|
Lease operating
|
1,770
|
|
Transportation and marketing
|
83
|
|
Production taxes
|
167
|
|
Workovers
|
127
|
|
Depreciation, depletion and amortization
|
884
|
|
Impairment of assets
|
5,560
|
|
General and administrative
|
21
|
|
Total operating expenses
|
8,612
|
|
Other expense
|
|
Interest expense
|
(103
|
)
|
Loss from discontinued operations, net of tax
|
$
|
(7,746
|
)
|
|
|
|
|
|
|
Predecessor
|
(in thousands)
|
January 1, 2018
Through
February 8, 2018
|
Total operating cash flows of discontinued operations
|
$
|
2,974
|
|
Total investing cash flows of discontinued operations
|
(601
|
)
|
NOTE 11 — DERIVATIVES
During September 2019, in connection with the Company’s restructuring efforts, we cancelled (prior to contract settlement date) all derivative contracts for net proceeds of approximately $4.0 million. Proceeds received were used to make permanent repayments against our outstanding borrowings under the Alta Mesa RBL. As of September 30, 2019, we held no open derivative positions.
The following summarizes the fair value and classification of our derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
Balance sheet location
|
|
Gross
fair value
of assets
|
|
Gross liabilities
offset against assets
in the Balance Sheet
|
|
Net fair
value of assets
presented in
the Balance Sheet
|
|
|
(in thousands)
|
Derivatives, current assets
|
|
$
|
22,512
|
|
|
$
|
(6,089
|
)
|
|
$
|
16,423
|
|
Derivatives, long-term assets
|
|
7,910
|
|
|
(4,963
|
)
|
|
2,947
|
|
Total
|
|
$
|
30,422
|
|
|
$
|
(11,052
|
)
|
|
$
|
19,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance sheet location
|
|
Gross
fair value
of liabilities
|
|
Gross assets
offset against liabilities
in the Balance Sheet
|
|
Net fair
value of liabilities
presented in
the Balance Sheet
|
|
|
(in thousands)
|
Derivatives, current liabilities
|
|
$
|
7,799
|
|
|
$
|
(6,089
|
)
|
|
$
|
1,710
|
|
Derivatives, long-term liabilities
|
|
5,143
|
|
|
(4,963
|
)
|
|
180
|
|
Total
|
|
$
|
12,942
|
|
|
$
|
(11,052
|
)
|
|
$
|
1,890
|
|
The following table summarizes the effect of our derivatives in our statements of operations (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
Derivatives not designated as hedges
|
Three Months Ended
September 30, 2019
|
|
Three Months Ended
September 30, 2018
|
|
|
Nine Months Ended
September 30, 2019
|
|
February 9, 2018
Through
September 30, 2018
|
|
|
January 1, 2018
Through
February 8, 2018
|
Gain (loss) on derivatives -
|
|
|
|
|
|
|
|
|
|
|
|
Oil
|
$
|
522
|
|
|
$
|
(12,339
|
)
|
|
|
$
|
(16,013
|
)
|
|
$
|
(62,995
|
)
|
|
|
$
|
4,796
|
|
Natural gas
|
(901
|
)
|
|
1,127
|
|
|
|
4,269
|
|
|
553
|
|
|
|
1,867
|
|
Total gain (loss) on derivatives
|
$
|
(379
|
)
|
|
$
|
(11,212
|
)
|
|
|
$
|
(11,744
|
)
|
|
$
|
(62,442
|
)
|
|
|
$
|
6,663
|
|
Other receivables at December 31, 2018 included $1.3 million of derivative positions settled in January 2019.
NOTE 12 — ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30, 2019
|
|
December 31, 2018
|
Accounts payable
|
$
|
22,406
|
|
|
$
|
20,422
|
|
|
|
|
|
Accruals for capital expenditures
|
4,879
|
|
|
139,904
|
|
Revenue and royalties payable
|
28,417
|
|
|
50,241
|
|
Accruals for operating expenses
|
18,324
|
|
|
21,830
|
|
Accrued interest
|
16,512
|
|
|
2,477
|
|
Derivative settlements
|
511
|
|
|
109
|
|
Other
|
1,137
|
|
|
12,456
|
|
Total accrued liabilities
|
69,780
|
|
|
227,017
|
|
Less: liabilities subject to compromise
|
(31,185
|
)
|
|
—
|
|
Accounts payable and accrued liabilities
|
$
|
61,001
|
|
|
$
|
247,439
|
|
NOTE 13 — ASSET RETIREMENT OBLIGATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
(in thousands)
|
Nine Months Ended
September 30, 2019
|
|
February 9, 2018
Through
September 30, 2018
|
|
|
January 1, 2018
Through
February 8, 2018
|
Balance, beginning of period
|
$
|
11,552
|
|
|
$
|
—
|
|
|
|
$
|
10,469
|
|
Liabilities assumed in Business Combination
|
—
|
|
|
5,998
|
|
|
|
—
|
|
Liabilities incurred
|
831
|
|
|
1,689
|
|
|
|
—
|
|
Liabilities settled
|
(180
|
)
|
|
(1,249
|
)
|
|
|
(63
|
)
|
Liabilities transferred in sale of properties
|
—
|
|
|
(20
|
)
|
|
|
—
|
|
Revisions to estimates
|
19
|
|
|
3,562
|
|
|
|
63
|
|
Accretion expense
|
720
|
|
|
489
|
|
|
|
40
|
|
Balance, end of period
|
12,942
|
|
|
10,469
|
|
|
|
10,509
|
|
Less: current portion
|
74
|
|
|
1,300
|
|
|
|
33
|
|
Long-term portion
|
$
|
12,868
|
|
|
$
|
9,169
|
|
|
|
$
|
10,476
|
|
NOTE 14 — DEBT
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30, 2019
|
|
December 31, 2018
|
Alta Mesa RBL
|
$
|
340,004
|
|
|
$
|
161,000
|
|
KFM Credit Facility
|
224,000
|
|
|
174,000
|
|
2024 Notes
|
500,000
|
|
|
500,000
|
|
Unamortized premium on 2024 Notes
|
—
|
|
|
29,123
|
|
Total debt, net
|
1,064,004
|
|
|
864,123
|
|
Less: liabilities subject to compromise
|
(500,000
|
)
|
|
—
|
|
Less: current portion
|
(564,004
|
)
|
|
(690,123
|
)
|
Long-term debt, net
|
$
|
—
|
|
|
$
|
174,000
|
|
Alta Mesa RBL
In April 2019, our borrowing base under the Alta Mesa RBL was reduced from $400.0 million to $370.0 million, leaving no meaningful remaining capacity available thereunder at that time. In August 2019, the Alta Mesa RBL lenders exercised their
ability to make an optional redetermination of our borrowing base ahead of the regular redetermination scheduled in October 2019, and via this redetermination, our borrowing base was reset to $200.0 million, effective August 13, 2019. As our combined borrowings and letters of credit outstanding exceeded the new borrowing base amount by $162.4 million, we had five months, beginning September 2019, to make ratable monthly payments of $32.5 million to cause utilization to be less than or equal to the borrowing base. As indicated above, AMR and the AMH Debtors filed for bankruptcy protection prior to making any of these payments.
The Alta Mesa RBL has two covenants that were tested quarterly:
|
|
•
|
a ratio of Alta Mesa’s current assets to current liabilities, inclusive of specified adjustments, of not less than 1.0 to 1.0; and
|
|
|
•
|
a ratio of Alta Mesa’s consolidated debt to its consolidated Adjusted EBITDAX (the “leverage ratio”) of not greater than 4.0 to 1.0.
|
Alta Mesa’s filing of the Bankruptcy Petitions constituted an event of default under the Alta Mesa RBL that accelerated Alta Mesa’s obligations thereunder. Under the Bankruptcy Code, the lenders under the Alta Mesa RBL are stayed from taking any action against the AMH Debtors as a result of an event of default.
KFM Credit Facility
The KFM Credit Facility, as amended, provides for an aggregate committed borrowing capacity of $300.0 million.
There are two maintenance covenants under the KFM Credit Facility that are tested quarterly:
|
|
•
|
a ratio of KFM’s total debt to its consolidated adjusted EBITDA of not greater than 4.5 to 1.0, (which increases to 4.75 after KFM exceeds consolidated EBITDA of $75.0 million) for any 4 quarter period; and
|
|
|
•
|
a minimum interest coverage ratio of KFM’s adjusted EBITDA to interest expense of not less than 2.5 to 1.0.
|
The KFM Credit Facility also limits KFM to holding no more than $15.0 million in cash and limits its ability to amend affiliate contracts. Our bankruptcy filing did not constitute an event of default under the KFM Credit Facility.
In September 2019, KFM received a letter from the Administrative Agent whereby the lenders under the KFM Credit Facility allege a potential event of default in respect of liens placed on KFM’s assets. The Administrative Agent and the lenders have reserved their right to pursue any remedies available to them, including charging the default rate of interest, declaring any of the outstanding debt thereunder due and payable or foreclosing on, or instituting foreclosure proceedings against, or liquidating any collateral. Although the Administrative Agent and the lenders have not taken any such actions, KFM will not have access to the remaining borrowing capacity unless or until this matter is resolved, which could materially impact AMR’s and KFM’s ability to meet all financial obligations as they come due and KFM’s ability to make distributions to AMR that otherwise may have been permitted. We also believe that KFM will fail to meet the maintenance covenants of the KFM Credit Facility as early as the first quarter of 2020, which would prevent any further borrowings. At October 31, 2019, undrawn borrowing capacity under the KFM Credit Facility totaled $76.0 million.
2024 Notes
We have estimated the fair value of the 2024 Notes to be $85.7 million at September 30, 2019, which is based on their most recent trading values, which is a Level 1 determination.
Alta Mesa’s filing of the Bankruptcy Petitions constituted an event of default under the 2024 Notes that accelerated Alta Mesa’s obligations thereunder. Under the Bankruptcy Code, the holders of the 2024 Notes are stayed from taking any action against Alta Mesa as a result of an event of default including acceleration.
Scheduled Maturities of Debt
|
|
|
|
|
|
Fiscal year
|
|
(in thousands)
|
2023
|
|
$
|
564,004
|
|
2024
|
|
500,000
|
|
|
|
$
|
1,064,004
|
|
Based upon our going concern conclusions, the default associated with Alta Mesa’s bankruptcy filing and KFM’s projected covenant violations, we believe that all of our indebtedness should be reported as current liabilities despite their scheduled maturities shown above.
NOTE 15 — COMMITMENTS AND CONTINGENCIES
There have been no material developments during the first nine months of 2019 in relation to our commitments and contingencies as compared to our discussion of those matters in our 2018 10-K except as discussed below. The commencement of the Chapter 11 proceedings automatically stayed certain actions against the Company, including the matters discussed in our 2018 10-K.
At December 31, 2018, Alta Mesa had an $18.3 million letter of credit issued to provide financial assurance for a multi-year obligation. During 2019, this letter of credit was reduced by $2.4 million in the ordinary course. In November 2019, the transportation company demanded full payment of $15.9 million for non-payment of $0.5 million in prepetition claims. This amount was paid by the administrative agent of the Alta Mesa RBL, but we believe the claims arising under the transportation contract were stayed by Alta Mesa’s bankruptcy filing. A demand letter has been sent to the transportation company to return the excess payment above the prepetition claims. It is unclear if or when this matter will be resolved.
NOTE 16 — SIGNIFICANT CONCENTRATIONS
During most of the first quarter of 2019 and throughout 2018, ARM Energy Management, LLC ("ARM") marketed our oil, gas and NGLs for a marketing fee that is deducted from sales proceeds collected by ARM from purchasers. The sales were generally made under short-term contracts with month-to-month pricing based on published regional indices, adjusted for transportation, location and quality. In March 2019, in preparation for handling oil and NGL marketing responsibilities internally, we began receiving payments for the sale of oil and NGLs directly from purchasers and separately paying the marketing fee owed to ARM. As of June 1, 2019, we terminated our oil and NGL marketing agreement with ARM and have begun marketing such products internally. We have extended the term of our gas marketing agreement with ARM through November 30, 2019.
ARM has also provided us with strategic advice, execution and reporting services with respect to our derivatives activities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
(in thousands)
|
Three Months Ended
September 30, 2019
|
|
Three Months Ended
September 30, 2018
|
|
|
Nine Months Ended
September 30, 2019
|
|
February 9, 2018
Through
September 30, 2018
|
|
|
January 1, 2018
Through
February 8, 2018
|
Revenue marketed by ARM on our behalf
|
$
|
7,643
|
|
|
$
|
114,109
|
|
|
|
$
|
117,003
|
|
|
$
|
234,850
|
|
|
|
$
|
28,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing and management fees paid to ARM
|
$
|
272
|
|
|
$
|
—
|
|
|
|
$
|
1,483
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
Fees paid to ARM for services relating to our derivatives
|
56
|
|
|
216
|
|
|
|
467
|
|
|
499
|
|
|
|
66
|
|
Total fees paid to ARM
|
$
|
328
|
|
|
$
|
216
|
|
|
|
$
|
1,950
|
|
|
$
|
499
|
|
|
|
$
|
66
|
|
Receivables from ARM for sales on our behalf were $5.4 million and $43.8 million as of September 30, 2019 and December 31, 2018, respectively, which are reflected in accounts receivable on our balance sheets.
We believe that the loss of any of our customers, or of our marketing agent ARM, would not have a material adverse effect on us because alternative purchasers and marketing firms are readily available.
NOTE 17 — EQUITY-BASED COMPENSATION (Successor)
Stock compensation expense recognized was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
(in thousands)
|
Three Months Ended
September 30, 2019
|
|
Three Months Ended
September 30, 2018
|
|
|
Nine Months Ended
September 30, 2019
|
|
February 9, 2018
Through
September 30, 2018
|
|
|
January 1, 2018
Through
February 8, 2018
|
Stock options
|
$
|
859
|
|
|
$
|
1,782
|
|
|
|
$
|
2,758
|
|
|
$
|
4,569
|
|
|
|
$
|
—
|
|
Restricted stock awards
|
600
|
|
|
1,271
|
|
|
|
2,068
|
|
|
3,764
|
|
|
|
—
|
|
Performance-based restricted stock units
|
47
|
|
|
(2,449
|
)
|
|
|
199
|
|
|
—
|
|
|
|
—
|
|
Total compensation expense
|
$
|
1,506
|
|
|
$
|
604
|
|
|
|
$
|
5,025
|
|
|
$
|
8,333
|
|
|
|
$
|
—
|
|
Performance-based restricted stock units (“PSUs”) issued in 2018 generally vest over three years at 20% during the first year (“2018 tranche”), 30% during the second year (“2019 tranche”), and 50% during the third year (“2020 tranche”). The number of PSUs vesting each year is based on achievement of annual company-specific performance goals and obligations applicable to
each year of vesting. Based on achievement of those goals and objectives, the number of PSUs that can vest range from 0% to 200% of the units issued in each tranche. The performance goals set for the 2018 tranche were not attained and, therefore, the 2018 tranche was forfeited as of December 31, 2018, except with respect to separations involving employment agreements whereby the separated employee was eligible to receive the award granted.
The performance targets for the 2019 tranche of performance-based restricted stock units were established in March 2019 and 572,990 PSUs were deemed granted at that time. The fair value of the 2019 tranche granted was $0.27 per unit, which will be recognized as expense over the remainder of 2019, subject to continued employment and our assessment of the probability of attainment of the established metrics.
No performance targets have yet been established for the 2020 tranche and therefore, no expense will be recognized for those awards until the specific targets have been established and probability of attainment can be measured.
NOTE 18 — RELATED PARTY TRANSACTIONS
David Murrell, our Vice President of Land and Business Development, is the principal of David Murrell & Associates, which provided land consulting services to us until termination of our contract in December 2018. The primary employee of David Murrell & Associates is his spouse, Brigid Murrell. Services were provided at a pre-negotiated hourly rate based on actual time utilized by us. Total expenditures under this arrangement were approximately $132,000 and $28,000 for the period February 9, 2018 through September 30, 2018, and the Predecessor Period, respectively. These amounts are recorded in general and administrative expenses.
David McClure, AMR’s former Vice President of Facilities and Infrastructure, and the son-in-law of our former President and Chief Executive Officer, Harlan H. Chappelle, received total compensation of approximately $769,000, $1,089,000 and $29,000 during the nine months ended September 30, 2019, the period February 9, 2018 through September 30, 2018, and the Predecessor Period, respectively. These amounts are included in general and administrative expense. Mr. McClure separated from the Company in February 2019.
David Pepper, Surface Land Manager for KFM, and the cousin of our Vice President of Land and Business Development, David Murrell, received total compensation of approximately $242,000, $264,000, 67,000, for the nine months ended September 30, 2019, the period February 9, 2018 through September 30, 2018, and the Predecessor Period, respectively. These amounts are included in general and administrative expense.
Bayou City Agreement
In January 2016, our wholly owned subsidiary Oklahoma Energy entered into a Joint Development Agreement, as amended on June 10, 2016 and December 31, 2016, (the “JDA”), with BCE, a fund advised by Bayou City, to fund a portion of our drilling operations and to allow us to accelerate development of our STACK acreage. The JDA established a development plan of 60 wells in three tranches, and provides opportunities for an additional 20 wells. Pursuant to the JDA, BCE committed to fund 100% of our working interest share up to a maximum average well cost of $3.2 million in drilling and completion costs per well for any tranche. We are responsible for any drilling and completion costs exceeding approved amounts. BCE may request refunds of certain advances from time to time if funded wells previously on the drilling schedule were subsequently removed. In exchange for funding the drilling and completion costs, BCE receives 80% of our working interest in each wellbore, which BCE interest will be reduced to 20% of our initial working interest upon BCE achieving a 15% internal rate of return on the wells within a tranche and automatically further reduced to 12.5% of our initial interest upon BCE achieving a 25% internal rate of return. Following the completion of each joint well, we and BCE will each bear our respective proportionate working interest share of all subsequent costs related to such joint well. Mr. William McMullen, one of our directors, is founder and managing partner of BCE. The approximate dollar value of the amount involved in this transaction, or Mr. McMullen’s interests in the transaction, depends on a number of factors outside his control and is not known at this time. During the Predecessor Period, BCE advanced us approximately $39.5 million to drill wells under the JDA. As of September 30, 2019, 61 joint wells have been drilled or spudded. At September 30, 2019 and December 31, 2018, $2.6 million and $9.8 million, respectively of revenue and net advances remaining from BCE for their working interest share of the drilling and development costs arising under the JDA were included as “Advances from related party” in our condensed consolidated balance sheets. At September 30, 2019, there were no funded horizontal wells in progress, and we do not expect any wells to be developed in 2019 pursuant to the JDA. On June 11, 2019, we received a letter from BCE noticing us of alleged defaults under the JDA. We dispute these allegations and intend to vigorously defend ourselves.
NOTE 19 — BUSINESS SEGMENT INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2019
|
(in thousands)
|
Exploration &
Production
|
|
Midstream
|
|
Corporate and Eliminations
|
|
Total
|
Revenue
|
|
|
|
|
|
|
|
Oil
|
$
|
84,010
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
84,010
|
|
Natural gas
|
10,788
|
|
|
—
|
|
|
—
|
|
|
10,788
|
|
Natural gas liquids
|
8,333
|
|
|
—
|
|
|
—
|
|
|
8,333
|
|
Sales of gathered production
|
—
|
|
|
8,387
|
|
|
—
|
|
|
8,387
|
|
Midstream revenue
|
—
|
|
|
20,326
|
|
|
(14,444
|
)
|
|
5,882
|
|
Segment sales revenue
|
103,131
|
|
|
28,713
|
|
|
(14,444
|
)
|
|
117,400
|
|
Other revenue
|
302
|
|
|
5,720
|
|
|
(3,879
|
)
|
|
2,143
|
|
Operating revenue
|
103,433
|
|
|
34,433
|
|
|
(18,323
|
)
|
|
119,543
|
|
Loss on sale of assets
|
—
|
|
|
(106
|
)
|
|
—
|
|
|
(106
|
)
|
Loss on derivatives
|
(379
|
)
|
|
—
|
|
|
—
|
|
|
(379
|
)
|
Total revenue
|
103,054
|
|
|
34,327
|
|
|
(18,323
|
)
|
|
119,058
|
|
Operating expenses
|
|
|
|
|
|
|
|
Lease operating
|
18,071
|
|
|
—
|
|
|
(3,879
|
)
|
|
14,192
|
|
Transportation, processing and marketing
|
17,561
|
|
|
3,062
|
|
|
(14,444
|
)
|
|
6,179
|
|
Midstream operating
|
—
|
|
|
6,621
|
|
|
—
|
|
|
6,621
|
|
Cost of sales for purchased gathered production
|
—
|
|
|
7,656
|
|
|
—
|
|
|
7,656
|
|
Production taxes
|
4,673
|
|
|
—
|
|
|
—
|
|
|
4,673
|
|
Workovers
|
757
|
|
|
26
|
|
|
—
|
|
|
783
|
|
Exploration
|
40,847
|
|
|
—
|
|
|
—
|
|
|
40,847
|
|
Depreciation, depletion and amortization
|
33,407
|
|
|
3,592
|
|
|
—
|
|
|
36,999
|
|
Impairment of assets
|
387,721
|
|
|
303,402
|
|
|
—
|
|
|
691,123
|
|
General and administrative
|
14,852
|
|
|
8,075
|
|
|
5,065
|
|
|
27,992
|
|
Total operating expenses
|
517,889
|
|
|
332,434
|
|
|
(13,258
|
)
|
|
837,065
|
|
Operating income
|
(414,835
|
)
|
|
(298,107
|
)
|
|
(5,065
|
)
|
|
(718,007
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
Interest expense
|
(12,233
|
)
|
|
(2,912
|
)
|
|
—
|
|
|
(15,145
|
)
|
Interest income
|
45
|
|
|
6
|
|
|
18
|
|
|
69
|
|
Equity in earnings of unconsolidated subsidiaries
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
Reorganization items, net
|
22,905
|
|
|
—
|
|
|
(438
|
)
|
|
22,467
|
|
Total other income (expense)
|
10,717
|
|
|
(2,935
|
)
|
|
(420
|
)
|
|
7,362
|
|
Income (loss) from continuing operations before income taxes
|
(404,118
|
)
|
|
(301,042
|
)
|
|
(5,485
|
)
|
|
(710,645
|
)
|
|
|
|
|
|
|
|
|
Interest expense
|
12,233
|
|
|
2,912
|
|
|
—
|
|
|
15,145
|
|
Depreciation, depletion and amortization
|
33,407
|
|
|
3,592
|
|
|
—
|
|
|
36,999
|
|
Loss on unrealized hedges
|
7,112
|
|
|
—
|
|
|
—
|
|
|
7,112
|
|
Impairment of assets
|
387,721
|
|
|
303,402
|
|
|
—
|
|
|
691,123
|
|
Equity-based compensation
|
1,396
|
|
|
110
|
|
|
—
|
|
|
1,506
|
|
Exploration
|
40,847
|
|
|
—
|
|
|
—
|
|
|
40,847
|
|
Severance costs
|
418
|
|
|
178
|
|
|
—
|
|
|
596
|
|
Strategic costs
|
3,647
|
|
|
1,397
|
|
|
3,397
|
|
|
8,441
|
|
Provision for uncollectible related party receivable
|
—
|
|
|
2,310
|
|
|
—
|
|
|
2,310
|
|
Reorganization items, net
|
(22,905
|
)
|
|
—
|
|
|
438
|
|
|
(22,467
|
)
|
Adjusted EBITDAX
|
$
|
59,758
|
|
|
$
|
12,859
|
|
|
$
|
(1,650
|
)
|
|
$
|
70,967
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
$
|
63,571
|
|
|
$
|
4,381
|
|
|
$
|
—
|
|
|
$
|
67,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, 2018
|
(in thousands)
|
Exploration &
Production
|
|
Midstream
|
|
Corporate and Eliminations
|
|
Total
|
Revenue
|
|
|
|
|
|
|
|
Oil
|
$
|
107,253
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
107,253
|
|
Natural gas
|
11,959
|
|
|
—
|
|
|
—
|
|
|
11,959
|
|
Natural gas liquids
|
13,880
|
|
|
—
|
|
|
—
|
|
|
13,880
|
|
Sales of gathered production
|
—
|
|
|
27,405
|
|
|
(18,276
|
)
|
|
9,129
|
|
Midstream revenue
|
—
|
|
|
20,775
|
|
|
(12,973
|
)
|
|
7,802
|
|
Segment sales revenue
|
133,092
|
|
|
48,180
|
|
|
(31,249
|
)
|
|
150,023
|
|
Other revenue
|
1,011
|
|
|
—
|
|
|
—
|
|
|
1,011
|
|
Operating revenue
|
134,103
|
|
|
48,180
|
|
|
(31,249
|
)
|
|
151,034
|
|
Loss on sale of assets
|
(18
|
)
|
|
—
|
|
|
—
|
|
|
(18
|
)
|
Loss on derivatives
|
(11,212
|
)
|
|
—
|
|
|
—
|
|
|
(11,212
|
)
|
Total revenue
|
122,873
|
|
|
48,180
|
|
|
(31,249
|
)
|
|
139,804
|
|
Operating expenses
|
|
|
|
|
|
|
|
Lease operating
|
16,351
|
|
|
—
|
|
|
—
|
|
|
16,351
|
|
Transportation, processing and marketing
|
15,820
|
|
|
2,334
|
|
|
(12,973
|
)
|
|
5,181
|
|
Midstream operating
|
—
|
|
|
4,507
|
|
|
—
|
|
|
4,507
|
|
Cost of sales for purchased gathered production
|
—
|
|
|
27,737
|
|
|
(18,276
|
)
|
|
9,461
|
|
Production taxes
|
6,311
|
|
|
—
|
|
|
—
|
|
|
6,311
|
|
Workovers
|
1,065
|
|
|
—
|
|
|
—
|
|
|
1,065
|
|
Exploration
|
1,029
|
|
|
—
|
|
|
—
|
|
|
1,029
|
|
Depreciation, depletion and amortization
|
45,849
|
|
|
7,254
|
|
|
—
|
|
|
53,103
|
|
Impairment of assets
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
General and administrative
|
7,918
|
|
|
3,423
|
|
|
561
|
|
|
11,902
|
|
Total operating expenses
|
94,343
|
|
|
45,255
|
|
|
(30,688
|
)
|
|
108,910
|
|
Operating income
|
28,530
|
|
|
2,925
|
|
|
(561
|
)
|
|
30,894
|
|
Other income (expense)
|
|
|
|
|
|
|
|
Interest expense
|
(11,008
|
)
|
|
(1,339
|
)
|
|
—
|
|
|
(12,347
|
)
|
Interest income
|
322
|
|
|
3
|
|
|
32
|
|
|
357
|
|
Total other income (expense)
|
(10,686
|
)
|
|
(1,336
|
)
|
|
32
|
|
|
(11,990
|
)
|
Income (loss) from continuing operations before income taxes
|
17,844
|
|
|
1,589
|
|
|
(529
|
)
|
|
18,904
|
|
|
|
|
|
|
|
|
|
Interest expense
|
11,008
|
|
|
1,339
|
|
|
—
|
|
|
12,347
|
|
Depreciation, depletion and amortization
|
45,849
|
|
|
7,254
|
|
|
—
|
|
|
53,103
|
|
Gain on unrealized hedges
|
(2,655
|
)
|
|
—
|
|
|
—
|
|
|
(2,655
|
)
|
Equity-based compensation
|
326
|
|
|
278
|
|
|
—
|
|
|
604
|
|
Exploration
|
1,029
|
|
|
—
|
|
|
—
|
|
|
1,029
|
|
Adjusted EBITDAX
|
$
|
73,401
|
|
|
$
|
10,460
|
|
|
$
|
(529
|
)
|
|
$
|
83,332
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
$
|
169,967
|
|
|
$
|
13,047
|
|
|
$
|
—
|
|
|
$
|
183,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30, 2019
|
(in thousands)
|
Exploration &
Production
|
|
Midstream
|
|
Corporate and Eliminations
|
|
Total
|
Revenue
|
|
|
|
|
|
|
|
Oil
|
$
|
261,041
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
261,041
|
|
Natural gas
|
41,622
|
|
|
—
|
|
|
—
|
|
|
41,622
|
|
Natural gas liquids
|
29,800
|
|
|
—
|
|
|
—
|
|
|
29,800
|
|
Sales of gathered production
|
—
|
|
|
28,386
|
|
|
—
|
|
|
28,386
|
|
Midstream revenue
|
—
|
|
|
64,814
|
|
|
(45,228
|
)
|
|
19,586
|
|
Segment sales revenue
|
332,463
|
|
|
93,200
|
|
|
(45,228
|
)
|
|
380,435
|
|
Other revenue
|
1,200
|
|
|
20,094
|
|
|
(13,052
|
)
|
|
8,242
|
|
Operating revenue
|
333,663
|
|
|
113,294
|
|
|
(58,280
|
)
|
|
388,677
|
|
Gain (loss) on sale of assets
|
1,483
|
|
|
(106
|
)
|
|
—
|
|
|
1,377
|
|
Loss on derivatives
|
(11,744
|
)
|
|
—
|
|
|
—
|
|
|
(11,744
|
)
|
Total revenue
|
323,402
|
|
|
113,188
|
|
|
(58,280
|
)
|
|
378,310
|
|
Operating expenses
|
|
|
|
|
|
|
|
Lease operating
|
62,302
|
|
|
—
|
|
|
(13,052
|
)
|
|
49,250
|
|
Transportation, processing and marketing
|
54,936
|
|
|
7,911
|
|
|
(45,228
|
)
|
|
17,619
|
|
Midstream operating
|
—
|
|
|
19,292
|
|
|
—
|
|
|
19,292
|
|
Cost of sales for purchased gathered production
|
—
|
|
|
26,071
|
|
|
—
|
|
|
26,071
|
|
Production taxes
|
15,273
|
|
|
—
|
|
|
—
|
|
|
15,273
|
|
Workovers
|
1,366
|
|
|
537
|
|
|
—
|
|
|
1,903
|
|
Exploration
|
46,190
|
|
|
—
|
|
|
—
|
|
|
46,190
|
|
Depreciation, depletion and amortization
|
102,586
|
|
|
10,321
|
|
|
—
|
|
|
112,907
|
|
Impairment of assets
|
394,221
|
|
|
303,402
|
|
|
—
|
|
|
697,623
|
|
General and administrative
|
51,522
|
|
|
21,462
|
|
|
11,698
|
|
|
84,682
|
|
Total operating expenses
|
728,396
|
|
|
388,996
|
|
|
(46,582
|
)
|
|
1,070,810
|
|
Operating income
|
(404,994
|
)
|
|
(275,808
|
)
|
|
(11,698
|
)
|
|
(692,500
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
Interest expense
|
(39,134
|
)
|
|
(8,226
|
)
|
|
—
|
|
|
(47,360
|
)
|
Interest income
|
126
|
|
|
16
|
|
|
57
|
|
|
199
|
|
Equity in earnings of unconsolidated subsidiaries
|
—
|
|
|
713
|
|
|
—
|
|
|
713
|
|
Reorganization items, net
|
22,905
|
|
|
—
|
|
|
(438
|
)
|
|
22,467
|
|
Total other income (expense)
|
(16,103
|
)
|
|
(7,497
|
)
|
|
(381
|
)
|
|
(23,981
|
)
|
Income (loss) from continuing operations before income taxes
|
(421,097
|
)
|
|
(283,305
|
)
|
|
(12,079
|
)
|
|
(716,481
|
)
|
|
|
|
|
|
|
|
|
Interest expense
|
39,134
|
|
|
8,226
|
|
|
—
|
|
|
47,360
|
|
Depreciation, depletion and amortization
|
102,586
|
|
|
10,321
|
|
|
—
|
|
|
112,907
|
|
Loss on unrealized hedges
|
19,386
|
|
|
—
|
|
|
—
|
|
|
19,386
|
|
Impairment of assets
|
394,221
|
|
|
303,402
|
|
|
—
|
|
|
697,623
|
|
Equity-based compensation
|
4,453
|
|
|
572
|
|
|
—
|
|
|
5,025
|
|
Exploration
|
46,190
|
|
|
—
|
|
|
—
|
|
|
46,190
|
|
Severance costs
|
5,002
|
|
|
2,162
|
|
|
—
|
|
|
7,164
|
|
Strategic costs
|
6,489
|
|
|
1,397
|
|
|
3,397
|
|
|
11,283
|
|
Provision for uncollectible related party receivable
|
—
|
|
|
2,310
|
|
|
—
|
|
|
2,310
|
|
Reorganization items, net
|
(22,905
|
)
|
|
—
|
|
|
438
|
|
|
(22,467
|
)
|
Adjusted EBITDAX
|
$
|
173,459
|
|
|
$
|
45,085
|
|
|
$
|
(8,244
|
)
|
|
$
|
210,300
|
|
|
|
|
|
|
|
|
|
Equity method investment at period end
|
$
|
—
|
|
|
$
|
1,813
|
|
|
$
|
—
|
|
|
$
|
1,813
|
|
Capital expenditures
|
243,709
|
|
|
72,185
|
|
|
—
|
|
|
315,894
|
|
Total assets at period end
|
552,744
|
|
|
156,225
|
|
|
(11,902
|
)
|
|
697,067
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 9, 2018 Through September 30, 2018
|
(in thousands)
|
Exploration &
Production
|
|
Midstream
|
|
Corporate and Eliminations
|
|
Total
|
Revenue
|
|
|
|
|
|
|
|
Oil
|
$
|
222,822
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
222,822
|
|
Natural gas
|
25,149
|
|
|
—
|
|
|
—
|
|
|
25,149
|
|
Natural gas liquids
|
28,835
|
|
|
—
|
|
|
—
|
|
|
28,835
|
|
Sales of gathered production
|
—
|
|
|
59,039
|
|
|
(37,113
|
)
|
|
21,926
|
|
Midstream revenue
|
—
|
|
|
44,446
|
|
|
(26,567
|
)
|
|
17,879
|
|
Segment sales revenue
|
276,806
|
|
|
103,485
|
|
|
(63,680
|
)
|
|
316,611
|
|
Other revenue
|
3,795
|
|
|
—
|
|
|
—
|
|
|
3,795
|
|
Operating revenue
|
280,601
|
|
|
103,485
|
|
|
(63,680
|
)
|
|
320,406
|
|
Gain on sale of assets
|
5,058
|
|
|
—
|
|
|
—
|
|
|
5,058
|
|
Loss on derivatives
|
(62,442
|
)
|
|
—
|
|
|
—
|
|
|
(62,442
|
)
|
Total revenue
|
223,217
|
|
|
103,485
|
|
|
(63,680
|
)
|
|
263,022
|
|
Operating expenses
|
|
|
|
|
|
|
|
Lease operating
|
37,347
|
|
|
—
|
|
|
—
|
|
|
37,347
|
|
Transportation, processing and marketing
|
32,608
|
|
|
7,895
|
|
|
(26,567
|
)
|
|
13,936
|
|
Midstream operating
|
—
|
|
|
8,407
|
|
|
—
|
|
|
8,407
|
|
Cost of sales for purchased gathered production
|
—
|
|
|
59,285
|
|
|
(37,113
|
)
|
|
22,172
|
|
Production taxes
|
10,332
|
|
|
—
|
|
|
—
|
|
|
10,332
|
|
Workovers
|
2,643
|
|
|
—
|
|
|
—
|
|
|
2,643
|
|
Exploration
|
10,697
|
|
|
—
|
|
|
—
|
|
|
10,697
|
|
Depreciation, depletion and amortization
|
83,557
|
|
|
19,159
|
|
|
—
|
|
|
102,716
|
|
Impairment of assets
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
General and administrative
|
60,383
|
|
|
9,736
|
|
|
1,991
|
|
|
72,110
|
|
Total operating expenses
|
237,567
|
|
|
104,482
|
|
|
(61,689
|
)
|
|
280,360
|
|
Operating income
|
(14,350
|
)
|
|
(997
|
)
|
|
(1,991
|
)
|
|
(17,338
|
)
|
Other income (expense)
|
|
|
|
|
|
|
|
Interest expense
|
(26,565
|
)
|
|
(3,005
|
)
|
|
—
|
|
|
(29,570
|
)
|
Interest income
|
1,688
|
|
|
3
|
|
|
36
|
|
|
1,727
|
|
Total other income (expense)
|
(24,877
|
)
|
|
(3,002
|
)
|
|
36
|
|
|
(27,843
|
)
|
Income (loss) from continuing operations before income taxes
|
(39,227
|
)
|
|
(3,999
|
)
|
|
(1,955
|
)
|
|
(45,181
|
)
|
|
|
|
|
|
|
|
|
Interest expense
|
26,565
|
|
|
3,005
|
|
|
—
|
|
|
29,570
|
|
Depreciation, depletion and amortization
|
83,557
|
|
|
19,159
|
|
|
—
|
|
|
102,716
|
|
Loss on unrealized hedges
|
30,241
|
|
|
—
|
|
|
—
|
|
|
30,241
|
|
Equity-based compensation
|
6,714
|
|
|
784
|
|
|
835
|
|
|
8,333
|
|
Exploration
|
10,697
|
|
|
—
|
|
|
—
|
|
|
10,697
|
|
Business Combination
|
23,717
|
|
|
—
|
|
|
—
|
|
|
23,717
|
|
Adjusted EBITDAX
|
$
|
142,264
|
|
|
$
|
18,949
|
|
|
$
|
(1,120
|
)
|
|
$
|
160,093
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
$
|
489,009
|
|
|
$
|
34,636
|
|
|
$
|
—
|
|
|
$
|
523,645
|
|
Total assets at period end
|
2,957,284
|
|
|
1,447,913
|
|
|
7,862
|
|
|
4,413,059
|
|