Earthstone Energy, Inc. (NYSE: ESTE) (“Earthstone”, the
“Company”, “our” or “we”), today announced its year-end 2018
estimated proved reserves of approximately 98.8 MMBoe, representing
a 24% increase compared to year-end 2017 proved reserves of 80.0
MMBoe.
Year-End 2018 Estimated Proved Reserves Highlights:
- Total Proved Reserves increased 18.8
MMBoe or 24% over year-end 2017
- Proved Developed reserves increased 3.7
MMBoe or 18% over year-end 2017
- Proved Reserves are 60% oil, 21%
natural gas liquids, 19% natural gas
- Proved Reserves are 24% Proved
Developed and 76% Proved Undeveloped
- Finding and Development (“F&D”)
costs from Extensions and Discoveries of $9.49 per Boe
- F&D costs from all sources,
including acquisitions, of $7.79 per Boe
- Extensions and Discoveries replaced
447% of the Company’s 2018 production
- Total reserve replacement of 520% from
all sources
As shown in the table below, the Company’s estimated proved
reserves at year-end 2018, which were prepared in accordance with
Securities and Exchange Commission (“SEC”) guidelines by Cawley,
Gillespie & Associates, Inc. (“CGA”), an independent petroleum
engineering firm, were approximately 98.8 million barrels of oil
equivalent (“MMBoe”).
Year-End 2018 SEC
Proved Reserves
Oil Gas NGL Total PV-10
Reserve Category (MBbls) (MMcf) (MBbls)
(MBoe) ($ in thousands) Proved Developed 14,325
26,110 4,969 23,646 435,736 Proved Undeveloped 44,709 87,107 15,974
75,201 572,764 Total 59,034 113,217 20,943 98,847 1,008,500
Note: PV-10 is a non-GAAP financial
measure. See “Non-GAAP Financial Measures.”
In 2018, the Company added approximately 16.2 MMBoe of proved
reserves through drilling and completion activities representing
approximately 447% of estimated 2018 production of 3.6 MMBoe.
Management estimates F&D costs from extensions and discoveries
were $9.49 per Boe of proved reserves while F&D from
all-sources, including acquisitions and trades, was $7.79 per Boe.
The 2018 year-end reserve report includes 182 proved undeveloped
locations, representing approximately 19% of Earthstone’s estimated
968 total drilling locations. For further discussion of F&D
costs, please see “Non-GAAP Financial Measures.”
A reconciliation of proved reserves from the end of 2017 is
shown below.
Total (MMBoe) Proved Reserves at December 31, 2017
80.0 Extensions and discoveries 16.2 Sales of minerals in place
(6.6) Purchases of minerals in place 6.8 Production (3.6) Revision
to previous estimates 6.0 Proved Reserves at December 31, 2018 98.8
SEC rules require that calculations of economically recoverable
reserves use the unweighted average price on the first day of the
month for the prior twelve-month period. The resulting oil and
natural gas prices used for the Company’s 2018 year-end reserve
report, prior to adjusting for quality and basis differentials,
were $65.56 per barrel and $3.10 per million British Thermal Units
(“MMBtu”), respectively. SEC prices net of differentials were
$61.52 per barrel and $2.16 per Mcf.
To illustrate the effects of commodity price fluctuations on
estimated reserve quantities and present values, Earthstone is also
providing an alternative summary of proved reserves, calculated in
accordance with SEC rules, with the exception of using constant
prices of $55.00 per barrel for oil and $2.75 per MMBtu for natural
gas, as shown in the table below.
Year-End 2018
Alternative Proved Reserves at $55/bbl and
$2.75/MMBtu
Oil Gas NGL Total PV-10
Reserve Category (MBbls) (MMcf) (MBbls)
(MBoe) ($ in thousands) Proved Developed 13,957
25,393 4,830 23,019 351,024 Proved Undeveloped 39,252 72,821 13,294
64,683 347,477 Total 53,209 98,214 18,124 87,702 698,501
During 2018, the Company incurred approximately $153 million of
development costs, of which approximately $15.0 million relate to
certain wells in progress at year-end. In addition, activities
related to acquisitions, divestitures and trades include
approximately $73 million for gross acquisitions offset by
approximately $42.2 million related to divestitures.
Financial Position
In November 2018, the Company completed an increase in its
borrowing base to $275.0 million under its senior secured revolving
credit facility (“Credit Facility”). At December 31, 2018, the
Company had outstanding borrowings under its Credit Facility of
$78.8 million and a cash balance of approximately $1.4 million.
Management Comments
Mr. Robert J. Anderson, President of Earthstone, commented, “Our
successful drilling program, along with our acquisition and trade
activities throughout 2018, resulted in a 24% increase in proved
reserves for the year. Additionally, we had six gross (4.2 net)
wells in progress at year-end 2018 which are already producing or
frac’d and will be producing before the end of the first quarter of
2019. We estimate that these wells will result in an increase in
our PV-10 of proved reserves to $773 million with $414 million
being proved developed, using prices of $55.00 per barrel for oil
and $2.75 per MMBtu for natural gas. These PV-10 values would imply
$12.05 per share for proved reserves and $6.45 per share for proved
developed reserves based on our current 64.1 million shares of
Class A and Class B shares outstanding as of year-end.”
Mr. Anderson commented further, “We are pleased with our results
in 2018 and intend to continue running a single rig in the Midland
Basin while remaining focused on operating efficiently and
generating attractive well returns. We estimate that the F&D
costs of proved reserve additions from extensions and discoveries
in 2018 averaged only $9.49 per Boe, and we anticipate that as we
apply the knowledge we gained over the last 20 months operating our
Midland Basin assets, we expect to reduce F&D costs even
further in 2019. Overall, we are meeting or exceeding our type
curves and generating solid returns from our valuable asset base.
We presently estimate that we will achieve free cash flow in 2020
assuming we maintain our existing pace of development and current
commodity prices continue through such time.”
About Earthstone
Earthstone Energy, Inc. is a growth-oriented, independent energy
company engaged in developing and operating oil and gas properties.
The Company’s primary assets are located in the Midland Basin of
west Texas and the Eagle Ford trend of south Texas. Earthstone is
listed on the NYSE under the symbol “ESTE.” For more information,
visit the Company’s website at www.earthstoneenergy.com.
Forward-Looking
Statements
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended
(the “Securities Act”), and Section 21E of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”). Statements that are
not strictly historical statements constitute forward-looking
statements and may often, but not always, be identified by the use
of such words such as “expects,” “believes,” “intends,”
“anticipates,” “plans,” “estimates,” “guidance,” “target,”
“potential,” “possible,” or “probable” or statements that certain
actions, events or results “may,” “will,” “should,” or “could” be
taken, occur or be achieved. Forward-looking statements are based
on current expectations and assumptions and analyses made by
Earthstone and its management in light of experience and perception
of historical trends, current conditions and expected future
developments, as well as other factors appropriate under the
circumstances that involve various risks and uncertainties that
could cause actual results to differ materially from those
reflected in the statements. These risks include, but are not
limited to, those set forth in Earthstone’s annual report on Form
10-K for the year ended December 31, 2017, quarterly reports on
Form 10-Q, recent current reports on Form 8-K and Form 8-K/A, and
other SEC filings. Earthstone undertakes no obligation to revise or
update publicly any forward-looking statements except as required
by law.
Non-GAAP Financial Measures
PV-10
PV-10 is derived from the standardized measure of discounted
future net cash flows (“Standardized Measure”), which is the most
directly comparable financial measure under the generally accepted
accounting principles in the United States of America (“GAAP”).
PV-10 is a computation of the Standardized Measure on a pre-tax
basis. PV-10 is equal to the Standardized Measure at the applicable
date, before deducting future income taxes, discounted at 10%. We
believe that the presentation of PV-10 is relevant and useful to
investors because it presents the discounted future net cash flows
attributable to our estimated net proved reserves prior to taking
into account future corporate income taxes, and it is a useful
measure for evaluating the relative monetary significance of our
oil and natural gas properties. Further, investors may utilize
the measure as a basis for comparison of the relative size and
value of our reserves to other companies. We use this measure
when assessing the potential return on investment related to our
oil and natural gas properties. PV-10, however, is not a
substitute for the Standardized Measure. Our PV-10 measure and
the Standardized Measure do not purport to present the fair value
of our oil and natural gas reserves.
The following table provides a reconciliation of PV-10 of the
Company’s estimated proved properties to the Standardized Measure
(in thousands):
Present value of estimated future net revenues
(PV-10) $ 1,008,500 Future income taxes, discounted at 10%
(49,048 ) Standardized measure of discounted future net cash flows
$ 959,452
F&D Costs per Unit
Proved F&D costs per unit is a non-GAAP metric commonly used
in the oil and gas exploration and production industry by
companies, investors and analysts in order to measure a company’s
ability of adding and developing reserves at a reasonable cost.
F&D costs per unit is a statistical indicator that has
limitations, including its predictive and comparative value. In
addition, because F&D costs per unit do not consider the costs
or timing of future production of new reserves, such measures may
not be adequate measures of value creation. This reserve metric may
not be comparable to similarly titled measurements used by other
companies.
The calculation for F&D costs per unit is based on estimated
costs incurred in 2018. The calculation for F&D costs per unit
does not include future development costs required for the
development of proved undeveloped reserves.
The following table provides a calculation of the F&D costs
per unit for Extensions and Discoveries only as well as for
All-Sources.
Costs Incurred ($ in thousands) 2018
Acquisition costs: Proved $ 41,569 Unproved 31,268 Exploration
costs 630 Development costs 153,161 Total
additions $ 226,628 Reserve Additions
(MBoe) 2018 Extensions and Discoveries 16,209
Purchases 6,810 Revisions 6,075 Total Reserves
Added 29,094 Finding F&D
Costs as typically calculated by analysts $/Boe
Extensions and Discoveries $ 9.49 All-Sources, excluding Sales of
minerals in place & Production $ 7.79
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version on businesswire.com: https://www.businesswire.com/news/home/20190226005417/en/
Mark Lumpkin, Jr.Executive Vice President – Chief Financial
OfficerEarthstone Energy, Inc.1400 Woodloch Forest Drive, Suite
300The Woodlands, TX
77380281-298-4246mark.lumpkin@earthstoneenergy.com
Scott ThelanderVice President of FinanceEarthstone Energy,
Inc.1400 Woodloch Forest Drive, Suite 300The Woodlands, TX
77380281-298-4246scott@earthstoneenergy.com
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