Approach Resources Inc. (NASDAQ: AREX) today reported
first quarter 2018 financial and operational results.
First Quarter 2018 and Other
Highlights
- Met quarterly production guidance with
11.3 MBoe/d, and increased daily crude oil production 3% over prior
quarter
- Revenues of $28.8 million, a 9%
increase over the prior year quarter
- Net loss was $7.4 million or $0.08 per
diluted share. Adjusted net loss (non-GAAP) was $7.1 million, or
$0.07 per diluted share
- Generated $13.7 million of EBITDAX
(non-GAAP)
- Bank group unanimously reaffirmed $325
million borrowing base
Adjusted net loss and EBITDAX are non-GAAP measures. See
“Supplemental Non-GAAP Financial and Other Measures” below for our
definitions and reconciliations of adjusted net loss and EBITDAX to
net loss.
Management Comment
Ross Craft, Approach’s Chairman and CEO, commented, “We
completed four wells during the second half of the quarter, two in
our Pangea area and two in our Pangea West area. The two Pangea
wells are performing above our 700 MBoe type curve. The two Pangea
West wells are in the post-frac flowback and clean up stage. We
delivered production of 11.3 MBoe/d, in line with guidance, and
increased daily oil production quarter over quarter. We continue to
experiment with our completion techniques and are pleased with the
solid results we are realizing. We remain focused on operating
substantially within cash flow and will align our annual capital
expenditures as closely as possible within our anticipated annual
cash flow.”
“Looking forward we will continue to use our resources and
experience to generate additional shareholder value. We see four
key strategies that will add value to Approach: (1) continuing to
improve recoveries in our core southern Midland Basin Wolfcamp
shale acreage; (2) maintaining our industry-leading operating
efficiencies and costs; (3) continuing to strengthen our balance
sheet; and (4) pursuing mergers and acquisitions that are accretive
to shareholders and can fuel balanced and sustained growth.”
First Quarter 2018 Results
Production for first quarter 2018 totaled 1,020 Mboe, or 11.3
MBoe/d, made up of 27% oil, 34% NGLs and 39% natural gas. Average
realized commodity prices for first quarter 2018, before the effect
of commodity derivatives, were $60.04 per Bbl of oil, $20.84 per
Bbl of NGLs and $2.15 per Mcf of natural gas. Our average realized
price, including the effect of commodity derivatives, was $26.71
per Boe for first quarter 2018.
Net loss for first quarter 2018 was $7.4 million, or $0.08 per
diluted share, on revenues of $28.8 million. Excluding the decrease
in the fair value of our commodity derivatives of $0.4 million,
adjusted net loss (non-GAAP) for first quarter 2018 was $7.1
million, or $0.07 per diluted share. EBITDAX (non-GAAP) for first
quarter 2018 was $13.7 million. See “Supplemental Non-GAAP
Financial and Other Measures” below for our reconciliation of
adjusted net loss and EBITDAX to net loss.
Lease operating expenses (“LOE”) averaged $5.16 per Boe, a 9%
increase over the prior quarter, driven primarily by lease
maintenance, winter related expenditures and facility repairs. We
expect LOE per Boe to decrease from the current level in subsequent
quarters. Production and ad valorem taxes averaged $2.45 per Boe,
or 8.7% of oil, NGL and gas sales. Total general and administrative
(“G&A”) costs averaged $6.44 per Boe, including cash G&A
costs of $5.63 per Boe. Depletion, depreciation and amortization
expense averaged $15.37 per Boe. Interest expense totaled $5.9
million.
Operations Update
During the second half of the first quarter 2018, we completed
four horizontal wells: two wells in the Wolfcamp A bench, one well
in the Wolfcamp B bench and one well in the Wolfcamp C bench. The
two wells completed in our Pangea area are tracking above our 700
MBoe type curve. The two wells completed in our Pangea West area
are currently in the post-frac flowback and clean up stages. We are
encouraged by the early results of these two wells. At March 31,
2018, we had six horizontal wells waiting on completion.
Capital expenditures incurred during first quarter 2018 totaled
$13.7 million and included $12.4 million for drilling and
completion activities, and $1.3 million for infrastructure projects
and equipment.
Liquidity Update
At March 31, 2018, we had a $1 billion revolving credit facility
in place, with a borrowing base and lender commitment amount of
$325 million, and liquidity of $32.7 million. Our semi-annual
borrowing base redetermination was completed on May 1, 2018, and
our borrowing base and aggregate lender commitments were reaffirmed
at $325 million. See “Supplemental Non-GAAP Financial and Other
Measures” below for our definition and calculation of
liquidity.
Commodity Derivatives Update
We enter into commodity derivatives positions to reduce the risk
of commodity price fluctuations. The table below is a summary of
our current derivatives positions.
Commodity and Period Contract
Type
Volume Transacted
Contract Price Crude Oil April 2018 – December 2018
Swap 300 Bbls/day $50.00/Bbl April 2018 – June 2018 Collar 500
Bbls/day $55.00/Bbl - $60.00/Bbl April 2018 – September 2018 Swap
1,500 Bbls/day $60.50/Bbl
CMA Roll May 2018 –
December 2018 Swap 2,000 Bbls/day $0.66/Bbl
Natural
Gas April 2018 – December 2018 Swap 200,000 MMBtu/month
$3.085/MMBtu April 2018 – December 2018 Swap 250,000 MMBtu/month
$3.084/MMBtu
NGLs (C2 - Ethane) April 2018 – December
2018 Swap 1,000 Bbls/day $11.424/Bbl
NGLs (C3 - Propane)
April 2018 – December 2018 Swap 600 Bbls/day $32.991/Bbl
NGLs
(IC4 - Isobutane) April 2018 – December 2018 Swap 50 Bbls/day
$38.262/Bbl
NGLs (NC4 - Butane) April 2018 – December 2018
Swap 200 Bbls/day $38.22/Bbl
NGLs (C5 - Pentane) April 2018
– December 2018 Swap 200 Bbls/day $56.364/Bbl
Conference Call Information and Summary Presentation
The Company will host a conference call on Thursday, May 3,
2018, at 10:00 AM CT (11:00 AM ET) to discuss first quarter 2018
financial and operating results.
Those wishing to listen to the conference call, may do so by
visiting the Events and Presentations page under the Investor
Relations section of the Company’s website,
www.approachresources.com, or by phone:
Conference ID 3869258 Participant Toll-Free
Dial-In Number: (844) 884-9950 Participant International Dial-In
Number: (661) 378-9660
A replay of the call will be available on the Company’s website
or by dialing:
Replay Toll-Free: (855) 859-2056 Replay
International: (404) 537-3406 Conference ID: 3869258
In addition, a first quarter 2018 summary presentation will be
available on the Company’s website.
About Approach Resources
Approach Resources Inc. is an independent energy company
focused on the exploration, development, production and acquisition
of unconventional oil and natural gas reserves in the Midland Basin
of the greater Permian Basin in West Texas. For more information
about the Company, please visit www.approachresources.com. Please
note that the Company routinely posts important information about
the Company under the Investor Relations section of its
website.
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, included in this press
release that address activities, events or developments that the
Company expects, believes or anticipates will or may occur in the
future are forward-looking statements. Without limiting the
generality of the foregoing, forward-looking statements contained
in this press release specifically include expectations of
anticipated financial and operating results. These statements are
based on certain assumptions made by the Company based on
management’s experience, perception of historical trends and
technical analyses, current conditions, anticipated future
developments and other factors believed to be appropriate and
reasonable by management. When used in this press release, the
words “will,” “potential,” “believe,” “estimate,” “intend,”
“expect,” “may,” “should,” “anticipate,” “could,” “plan,”
“predict,” “project,” “profile,” “model” or their negatives, other
similar expressions or the statements that include those words, are
intended to identify forward-looking statements, although not all
forward-looking statements contain such identifying words. Such
statements are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of the Company,
which may cause actual results to differ materially from those
implied or expressed by the forward-looking statements. Further
information on such assumptions, risks and uncertainties is
available in the Company’s Securities and Exchange Commission
(“SEC”) filings. The Company’s SEC filings are available on the
Company’s website at www.approachresources.com. Any forward-looking
statement speaks only as of the date on which such statement is
made and the Company undertakes no obligation to correct or update
any forward-looking statement, whether as a result of new
information, future events or otherwise, except as required by
applicable law.
UNAUDITED RESULTS OF OPERATIONS
Three Months Ended March 31, 2018
2017 Revenues (in thousands): Oil $
16,343 $ 13,694 NGLs 7,332 6,060 Gas 5,097
6,601 Total oil, NGLs and gas sales 28,772 26,355 Net
cash payment on derivative settlements (1,531 ) (961
)
Total oil, NGLs and gas sales including
derivative impact
$ 27,241 $ 25,394
Production: Oil
(MBbls) 272 278 NGLs (MBbls) 352 352 Gas (MMcf) 2,376
2,377 Total (MBoe) 1,020 1,027 Total (MBoe/d) 11.3
11.4
Average prices: Oil (per Bbl) $ 60.04 $ 49.17
NGLs (per Bbl) 20.84 17.20 Gas (per Mcf) 2.15
2.78 Total (per Boe) 28.21 25.67 Net cash payment on
derivative settlements (per Boe) (1.50 ) (0.94 )
Total including derivative impact (per Boe) $ 26.71 $ 24.73
Costs and expenses (per Boe): Lease operating
$ 5.16 $ 4.06 Production and ad valorem taxes 2.45 2.29 Exploration
— 1.02 General and administrative (1) 6.44 5.77 Depletion,
depreciation and amortization 15.37 17.49 (1) Below is a
summary of general and administrative expense: General and
administrative - cash component $ 5.63 $ 4.64 General and
administrative - noncash component (share-based compensation) 0.81
1.13
APPROACH RESOURCES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS (In
thousands, except shares and per-share amounts)
Three Months EndedMarch
31,
2018 2017 REVENUES: Oil, NGLs
and gas sales $ 28,772 $ 26,355
EXPENSES: Lease
operating 5,268 4,170 Production and ad valorem taxes 2,500 2,357
Exploration — 1,043 General and administrative (1) 6,567 5,928
Depletion, depreciation and amortization 15,680
17,962 Total expenses 30,015
31,460
OPERATING LOSS (1,243 ) (5,105 )
OTHER: Interest expense, net (5,886 ) (5,463 ) Gain on debt
extinguishment — 5,053 Commodity derivative (loss) gain (1,928 )
3,444 Other income 1 3
LOSS
BEFORE INCOME TAX PROVISION (BENEFIT) (9,056 ) (2,068 )
INCOME TAX PROVISION (BENEFIT) (1,610 )
138,700
NET LOSS $ (7,446 ) $ (140,768 )
LOSS PER SHARE: Basic $ (0.08 ) $ (2.00 ) Diluted $
(0.08 ) $ (2.00 )
WEIGHTED AVERAGE SHARES
OUTSTANDING: Basic 94,516,280 70,409,303 Diluted 94,516,280
70,409,303 (1) Includes non-cash share-based compensation
expense as follows: 828 1,159
Unaudited Consolidated Balance Sheet Data
(in thousands)
March 31, 2018 December 31, 2017 Cash and cash
equivalents $ 22 $ 21 Other current assets 12,522 16,679 Property
and equipment, net, successful efforts method 1,081,154
1,082,876 Total assets $ 1,093,698 $ 1,099,576
Current liabilities $ 26,657 $ 25,067 Long-term debt (1) 374,709
373,460 Deferred income taxes 80,492 82,102 Other long-term
liabilities 11,646 11,531 Stockholders' equity 600,194
607,416 Total liabilities and stockholders' equity $
1,093,698 $ 1,099,576
(1) Long-term debt at March 31, 2018, is comprised of $85.2
million in 7% senior notes due 2021 and $292 million in outstanding
borrowings under our revolving credit facility, net of issuance
costs of $1 million and $1.6 million, respectively. Long-term debt
at December 31, 2017, is comprised of $85.2 million in 7% senior
notes due 2021 and $291 million in outstanding borrowings under our
revolving credit facility, net of issuance costs of $1.1 million
and $1.7 million, respectively.
Supplemental Non-GAAP Financial and Other Measures
This release contains certain financial measures that are
non-GAAP measures. We have provided reconciliations below of the
non-GAAP financial measures to the most directly comparable GAAP
financial measures and on the Non-GAAP Financial Information page
in the Investor Relations section of our website at
www.approachresources.com.
Adjusted Net Loss
This release contains the non-GAAP financial measures adjusted
net loss and adjusted net loss per diluted share, which exclude (1)
non-cash fair value loss (gain) on derivatives, (2) gain on debt
extinguishment, (3) write-off of deferred tax assets, (4) tax
effect and other discrete tax items. The amounts included in the
calculation of adjusted net loss and adjusted net loss per diluted
share below were computed in accordance with GAAP. We believe
adjusted net loss and adjusted net loss per diluted share are
useful to investors because they provide readers with a meaningful
measure of our profitability before recording certain items whose
timing or amount cannot be reasonably determined. However, these
measures are provided in addition to, and not as an alternative
for, and should be read in conjunction with, the information
contained in our financial statements prepared in accordance with
GAAP (including the notes), included in our SEC filings and posted
on our website.
The table below provides a reconciliation of adjusted net loss
to net loss for the three months ended March 31, 2018 and 2017 (in
thousands, except per-share amounts).
Three Months Ended March 31,
2018 2017 Net Loss $ (7,446 ) $
(140,768 )
Adjustments for certain items: Non-cash fair
value loss (gain) on derivatives 397 (4,405 ) Gain on debt
extinguishment — (5,053 ) Write-off of deferred tax assets —
139,090 Tax effect and other discrete tax items (1) (13 )
3,600
Adjusted net loss $ (7,062 ) $ (7,536 )
Adjusted net loss per diluted share $ (0.07 ) $ (0.11 )
(1) The estimated income tax impacts on adjustments to net loss
are computed based upon a statutory rate of 21% and 35%, for the
three months ended March 31, 2018, and March 31, 2017,
respectively. Additionally, this includes the tax impact of a tax
shortfall related to share-based compensation of $0.1 million, and
$0.3 million for the three months ended March 31, 2018, and March
31, 2017, respectively.
EBITDAX
We define EBITDAX as net loss, plus (1) exploration expense, (2)
depletion, depreciation and amortization expense, (3) share-based
compensation expense, (4) non-cash fair value loss (gain) on
derivatives, (5) gain on debt extinguishment, (6) interest expense,
net, and (7) income tax (benefit) provision. EBITDAX is not a
measure of net income or cash flow as determined by GAAP. The
amounts included in the calculation of EBITDAX were computed in
accordance with GAAP. EBITDAX is presented herein and reconciled to
the GAAP measure of net loss because of its wide acceptance by the
investment community as a financial indicator of a company's
ability to internally fund development and exploration activities.
This measure is provided in addition to, and not as an alternative
for, and should be read in conjunction with, the information
contained in our financial statements prepared in accordance with
GAAP (including the notes), included in our SEC filings and posted
on our website.
The table below provides a reconciliation of EBITDAX to net loss
for the three months ended March 31, 2018 and 2017 (in
thousands).
Three Months Ended March 31,
2018 2017 Net Loss $ (7,446 ) $
(140,768 ) Exploration — 1,043 Depletion, depreciation and
amortization 15,680 17,962 Share-based compensation 828 1,159
Non-cash fair value loss (gain) on derivatives 397 (4,405 ) Gain on
debt extinguishment — (5,053 ) Interest expense, net 5,886 5,463
Income tax (benefit) provision (1,610 ) 138,700
EBITDAX $ 13,735 $ 14,101
Liquidity
Liquidity is calculated by adding the net funds available under
our revolving credit facility and cash and cash equivalents. We use
liquidity as an indicator of the Company’s ability to fund
development and exploration activities. However, this measurement
has limitations. This measurement can vary from year-to-year for
the Company and can vary among companies based on what is or is not
included in the measurement on a company’s financial statements and
may further be subject to covenants in a company’s loan agreements.
This measurement is provided in addition to, and not as an
alternative for, and should be read in conjunction with, the
information contained in our financial statements prepared in
accordance with GAAP (including the notes), included in our SEC
filings and posted on our website.
The table below summarizes our liquidity at March 31, 2018 (in
thousands).
Liquidity at March 31, 2018 Borrowing
base $ 325,000 Cash and cash equivalents 22 Long-term debt – Credit
Facility (292,000 ) Undrawn letters of credit (325 )
Liquidity $ 32,697
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180502006833/en/
Approach Resources Inc.Suzanne Ogle, 817-989-9000Vice President
– Investor Relations & Corporate
Communicationsir@approachresources.com
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