PostRock Energy Corporation (Nasdaq:PSTR) today
announced results for the third quarter of 2011. Oil and gas
revenues totaled $20.5 million, a 4.4% decrease from the prior-year
quarter. Lower revenue was the result of lower natural gas
production and prices. Excluding asset sales, production fell 3.6%
to an average of 51.4 Mmcfe per day. Gathering revenue decreased
3.8% to $1.4 million due to lower volumes. The Company expects
gathering revenue to decrease substantially following resolution of
its Kansas royalty owner litigation. Pipeline revenue rose 4.1% to
$2.5 million on increased volumes. Realized hedging gains in the
quarter totaled $7.3 million, a 6.4% increase from the prior-year
period.
Production costs, including lease operating expenses ("LOE") and
production taxes, totaled $11.8 million. The Company spent $196,000
less on LOE than in the prior year period and expects additional
reductions in coming quarters. Production taxes increased $1.1
million as ad valorem taxes in the prior-year quarter were revised
to reflect lower reserve values assessed by taxing authorities.
Production costs, excluding production taxes, totaled $2.13 per
Mcfe, compared to $2.07 in the prior-year. Pipeline operating
expense totaled $1.1 million, a 20.9% decrease from the prior-year
quarter, primarily due to a reduction in capacity expense. General
and administrative expenses totaled $4.2 million, an 8.6% decrease
from the prior-year period. The decrease resulted from lower legal
and Board fees, partially offset by a one-time charge of $757,000
related to the closure of the Company's Houston office.
In September, PostRock reached an agreement in principle,
subject only to court approval, to settle its Kansas royalty owner
litigation. The litigation reserve was increased by $2 million to
$7 million to reflect the terms of the preliminary settlement. The
reserve represents the present value of a $3 million cash payment
expected to be made in January 2012 and $4.5 million one year
thereafter. The Kansas royalty litigation represents the last
material liability remaining from PostRock's predecessors.
Several significant changes to the balance sheet occurred since
year-end 2010. Inventory decreased $1.7 million as a result of
company initiatives to improve efficiency. Further reductions in
inventory are expected by year end. Other current assets increased
primarily as a result of the $3.6 million Appalachian asset sale
escrow account moving from the other non-current assets account.
Accounts payable decreased $2.7 million due to reduced capital and
operating expenses. Accrued expenses increased $6 million primarily
related to the Appalachian asset sale escrow account. Other
non-current liabilities are mostly comprised of the $4 million
portion of the Kansas royalty owner litigation reserve expected to
be paid in 2013 and the Houston office closure liability.
PostRock holds natural gas hedges covering 37 Mmcf a day for the
fourth quarter of 2011 at an average price of $6.51 per Mcf. Hedges
covering 30.1 Mmcf a day in 2012 and 24.7 Mmcf a day in 2013 at an
average price of $6.56 and $6.58 per Mcf, respectively, are also
held. The fair value of these hedges at September 30, 2011, totaled
$54.3 million. This value changes daily based on oil and gas price
fluctuations and the monthly roll off of hedges.
|
Remainder
of |
|
|
|
|
|
2011 |
2012 |
2013 |
|
|
|
|
|
|
|
|
Price |
Volume |
Price |
Volume |
Price |
Volume |
|
(Mmbtu) |
(Mmbtu) |
(Mmbtu) |
(Mmbtu) |
(Mmbtu) |
(Mmbtu) |
Southern Star Gas Swaps |
$6.53 |
1,256,241 |
$6.72 |
2,000,004 |
-- |
-- |
NYMEX Gas Swaps |
$7.19 |
2,155,068 |
$7.22 |
9,000,000 |
$7.28 |
9,000,003 |
Southern Star Basis Swaps |
($0.70) |
2,155,068 |
($0.70) |
9,000,000 |
($0.71) |
9,000,003 |
|
|
|
|
|
|
|
|
(Bbl) |
(Bbls) |
(Bbl) |
(Bbls) |
(Bbl) |
(Bbls) |
|
|
|
|
|
|
|
NYMEX Oil Swaps |
$85.90 |
12,000 |
$87.90 |
42,000 |
-- |
-- |
Debt and Liquidity
At September 30, 2011, PostRock had $196 million of debt,
consisting of $190 million of Borrowing Base loans and $6 million
of pipeline debt. The pipeline loan is being paid off in equal
monthly installments through March 2012. Debt increased $4 million
during the quarter as pipeline debt was reduced $3 million and an
additional $7 million was drawn on the Borrowing Base Facility to
fund the investment in Constellation Energy Partners ("CEP") and
the settlement of the Oklahoma royalty owner litigation. Including
$1.6 million of outstanding letters of credit and $58,000 of cash,
available liquidity approximated $8.4 million. As of November 8,
2011, available liquidity had increased to approximately $10.5
million.
PostRock elected to pay-in-kind the quarterly dividend to White
Deer which increased the liquidation value of PostRock's Series A
Preferred Stock by $2.0 million to $67.7 million. This resulted in
White Deer receiving 636,335 additional warrants with a strike
price of $3.10. This raised White Deer's overall holdings to 20.8
million warrants that are exercisable at a weighted average price
of $3.25.
|
December 31,
2010 |
September 30,
2011 |
|
(in thousands) |
|
Cash and equivalents |
$ 730 |
$ 58 |
|
|
|
Long-term debt (including current
maturities) |
|
|
Borrowing base facility |
$ 187,000 |
$ 190,000 |
Secured pipeline loan |
13,500 |
6,000 |
QER loan |
19,721 |
-- |
Total |
$ 220,221 |
$ 196,000 |
|
|
|
Redeemable preferred stock |
$ 50,622 |
$ 55,092 |
Stockholders' equity (deficit) |
(12,792) |
24 |
Total capitalization |
$ 258,051 |
$ 251,116 |
Capital Expenditures
During the first three quarters of the year, capital
expenditures totaled $24.5 million, a $1.7 million decrease from
the prior-year period. Capital expenditures included $20.6 million
spent on development, $2.5 million on equipment and maintenance,
$840,000 on land and $642,000 on the interstate pipeline.
Management Comment
Terry Carter, PostRock's President and Chief Executive Officer
said, "We made additional progress on our strategic plan in the
third quarter. We are focused on reducing our ongoing costs of
operation: G&A, pipeline expense and lease operating expense.
In total, these costs declined 4% from the second quarter of 2011.
At the same time, we are determining ways to improve individual
well performance on both existing producing wells and newly drilled
wells in this challenging gas price environment."
"We reached an agreement resolving our Kansas royalty owner
litigation and structured the payments to reduce the near-term
liquidity impact. When the settlement is finalized, no material
disputes from our predecessor entities will remain. We hope to use
our acquisition of a 14.9% voting interest in CEP to improve
efficiency in the Cherokee Basin. Specifically, we asked CEP to
exchange operating, production and reserve data with the idea of
exploring the possibility of joint ventures, sales, exchanges or
other commercial arrangements. To date, they have refused to share
such information unless we agree to be prohibited from making any
disclosures to their or our shareholders regarding "the existence
and substance of discussions or negotiations related to" any
proposed transaction. As we have previously publicly announced our
intention to pursue such a transaction, CEP's condition of
non-disclosure is not something that we are willing to accept."
"Through September, we had drilled and connected 83 new
development wells, completed 10 wells drilled in prior periods,
recompleted or connected 83 wells and returned 53 wells to
production in the Cherokee Basin. Aggregate production from the
wells is meeting expectations. Given the decline in gas prices, and
the even greater need to better understand results, we have kept
our drilling activity below budgeted levels. Year-to-date drilling
and development expenditures are 42% below budget. We plan to
drill, complete and connect approximately 15 wells in the fourth
quarter."
"Our interstate pipeline continues to benefit from cost
reductions and increasing utilization. The segment's gross margin
improved 41% from the year ago period. We believe the pipeline may
well have significant additional value due to its location in the
emerging Mississippian play. We continue to explore different
options to try and capitalize on this."
PostRock Energy Corporation is engaged in the acquisition,
exploration, development, production and transportation of oil and
natural gas, primarily in the Cherokee Basin of Kansas and
Oklahoma. The Company owns and operates over 3,000 wells and nearly
2,200 miles of gas gathering lines in the Basin. It also owns a
1,120 mile interstate natural gas pipeline, which transports
natural gas from northern Oklahoma and western Kansas to Wichita
and Kansas City.
Webcast and Conference Call
PostRock will host its quarterly webcast and conference call
tomorrow, Thursday, November 10, 2011 at 10:00 a.m. Central Time.
The live webcast will be accessible on the 'Investors' page at
www.pstr.com, where it will also be available for replay. The
conference call number for participation is 866-516-1003.
The PostRock Energy Corp. logo is available at
http://www.globenewswire.com/newsroom/prs/?pkgid=7221
Forward-Looking Statements
Opinions, forecasts, projections or statements, other than
statements of historical fact, are forward-looking statements that
involve risks and uncertainties. Forward-looking statements in this
announcement are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Although the
Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to be correct. Actual results may
differ materially due to a variety of factors, some of which may
not be foreseen by PostRock. These risks and other risks are
detailed in the Company's filings with the Securities and Exchange
Commission, including risk factors listed in the Company's Annual
Report on Form 10-K and other filings with the SEC. The Company's
filings with the SEC may be found at www.pstr.com or www.sec.gov.
By making these forward-looking statements, the Company undertakes
no obligation to update these statements for revisions or changes
after the date of this release.
Reconciliation of
Non-GAAP Financial Measures |
|
|
|
The following table represents a
reconciliation of net income (loss) to EBITDA and Adjusted EBITDA,
as defined, for the period presented. |
|
|
|
|
Three Months
Ended September 30, |
|
2010 |
2011 |
|
|
|
|
|
|
Net income (loss) attributable to controlling
interest |
$28,189 |
$7,007 |
Adjusted for: |
|
|
Net income (loss) attributable to
non-controlling interest |
-- |
-- |
Income taxes |
-- |
-- |
Interest expense, net |
8,602 |
2,611 |
Depreciation, depletion and
amortization |
4,874 |
6,755 |
EBITDA |
$41,665 |
$16,373 |
Other (income) expense, net |
(58) |
(23) |
(Gain) from troubled debt
restructuring |
-- |
-- |
Unrealized (gain) loss from derivative
financial instruments |
(25,445) |
(4,689) |
Recovery of misappropriated funds |
(997) |
-- |
Stock based compensation |
353 |
(156) |
(Gain) loss on disposal of assets |
(9) |
(28) |
Impairment |
-- |
-- |
Office closure costs |
-- |
757 |
Loss from investment in affiliate |
-- |
859 |
Adjusted EBITDA |
$15,509 |
$13,093 |
|
|
|
Although adjusted EBITDA is not a
measure of performance calculated in accordance with generally
accepted accounting principles, or GAAP, management considers it an
important measure of performance. Adjusted EBITDA is not a
substitute for the GAAP measures of earnings or cash flow and is
not necessarily a measure of the Company's ability to fund its cash
needs. In addition, it should be noted that companies calculate
adjusted EBITDA differently, and therefore adjusted EBITDA as
presented herein may not be comparable to adjusted EBITDA reported
by other companies. Adjusted EBITDA has material limitations as a
performance measure because it excludes, among other things, (a)
interest expense, which is a necessary element of business to the
extent that an entity incurs debt, (b) depreciation, depletion and
amortization, which are necessary elements of any business that
uses capital assets, (c) impairments of oil and gas properties,
which may at times be a material element of an independent oil
company's business, and (d) income taxes, which may become a
material element of the Company's operations in the future. Because
of its limitations, adjusted EBITDA should not be considered a
measure of discretionary cash available to us to invest in the
growth of PostRock's business. |
|
POSTROCK ENERGY
CORPORATION |
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS |
(in thousands, except
per share data) |
(Unaudited) |
|
|
|
|
Three Months Ended
September 30, |
|
2010 |
2011 |
|
|
|
Revenues |
|
|
Oil and gas sales |
$ 21,484 |
$ 20,543 |
Gathering |
1,437 |
1,383 |
Pipeline |
2,402 |
2,501 |
Total |
25,323 |
24,427 |
Costs and expenses |
|
|
Production expense |
10,904 |
11,845 |
Pipeline expense |
1,431 |
1,132 |
General and administrative |
4,638 |
4,241 |
Litigation reserve |
20 |
1,981 |
Depreciation, depletion and
amortization |
4,874 |
6,755 |
(Gain) loss on sale of assets |
(9) |
(28) |
Recovery of misappropriated funds |
(997) |
-- |
Total |
20,861 |
25,926 |
|
|
|
Operating income (loss) |
4,462 |
(1,499) |
|
|
|
Other income (expense) |
|
|
Gain from derivative financial
instruments |
32,271 |
11,953 |
Loss from investment in
affiliate |
-- |
(859) |
Gain on forgiveness of debt |
-- |
-- |
Other income (expense), net |
58 |
23 |
Interest expense, net |
(8,602) |
(2,611) |
Total |
23,727 |
8,506 |
Income before income taxes |
28,189 |
7,007 |
Income taxes |
-- |
-- |
Net income |
28,189 |
7,007 |
Net income attributable to non-controlling
interest |
-- |
-- |
Net income attributable to controlling
interest |
28,189 |
7,007 |
Preferred dividends |
(180) |
(1,973) |
Accretion of redeemable preferred
stock |
(29) |
(406) |
Net income available to common stock |
$ 27,980 |
$ 4,628 |
Net income per common share |
|
|
Basic |
$ 3.47 |
$ 0.51 |
Diluted |
$ 3.21 |
$ 0.29 |
Weighted average common shares
outstanding |
|
|
Basic |
8,063 |
9,009 |
Diluted |
8,719 |
16,009 |
|
POSTROCK ENERGY
CORPORATION |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(in
thousands) |
|
|
|
|
December 31,
2010 |
September 30,
2011 |
|
|
(Unaudited) |
ASSETS |
Current assets |
|
|
Cash and equivalents |
$ 730 |
$ 58 |
Accounts receivable - trade,
net |
11,845 |
10,727 |
Other receivables |
1,153 |
777 |
Inventory |
6,161 |
4,499 |
Other current assets |
2,799 |
7,526 |
Derivative financial
instruments |
31,588 |
35,366 |
Total |
54,276 |
58,953 |
Oil and gas properties, full cost,
net |
116,488 |
121,973 |
Pipeline assets, net |
61,148 |
59,511 |
Other property and equipment, net |
15,964 |
15,109 |
Investment in affiliate |
-- |
10,673 |
Other noncurrent assets, net |
9,303 |
4,486 |
Derivative financial instruments |
39,633 |
29,229 |
Total assets |
$ 296,812 |
$ 299,934 |
|
|
|
LIABILITIES AND
EQUITY |
Current liabilities |
|
|
Accounts payable |
$ 7,030 |
$ 4,319 |
Revenue payable |
5,898 |
5,359 |
Accrued expenses and other current
liabilities |
7,190 |
13,150 |
Litigation reserve |
1,020 |
3,070 |
Current portion of long-term debt |
10,500 |
6,000 |
Derivative financial
instruments |
3,792 |
4,737 |
Total |
35,430 |
36,635 |
Derivative financial instruments |
6,681 |
5,581 |
Long-term debt |
209,721 |
190,000 |
Asset retirement obligations |
7,150 |
7,726 |
Other noncurrent liabilities |
-- |
4,876 |
Total liabilities |
258,982 |
244,818 |
|
|
|
Commitments and contingencies |
-- |
-- |
Series A cumulative redeemable preferred
stock |
50,622 |
55,092 |
|
|
|
Stockholders' equity |
|
|
Preferred stock |
2 |
2 |
Common stock |
82 |
95 |
Additional paid-in capital |
377,538 |
379,664 |
Accumulated deficit |
(390,414) |
(379,737) |
Total equity (deficit) |
(12,792) |
24 |
Total liabilities and equity |
$ 296,812 |
$ 299,934 |
|
POSTROCK ENERGY
CORPORATION |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(in
thousands) |
(Unaudited) |
|
|
|
|
(Predecessors) |
|
|
|
January 1, 2010 to March 5,
2010 |
March 6, 2010 to September
30, 2010 |
Nine Months Ended September
30, 2011 |
|
|
|
|
Cash flows from operating
activities |
|
|
|
Net income |
$ 21,736 |
$ 35,612 |
$ 10,677 |
Adjustments to reconcile net income to
cash provided by operations |
|
|
|
Depreciation, depletion and
amortization |
4,164 |
10,882 |
20,482 |
Stock-based compensation |
808 |
987 |
1,184 |
Amortization of deferred loan
costs |
2,094 |
5,339 |
1,278 |
Change in fair value of derivative
financial instruments |
(21,573) |
(32,804) |
6,471 |
Litigation reserve |
-- |
-- |
6,031 |
Loss (gain) on disposal of property and
equipment |
-- |
131 |
(12,385) |
(Gain) on forgiveness of debt |
-- |
-- |
(1,647) |
Loss from investment in
affiliate |
|
|
859 |
Other non-cash changes to net
income |
-- |
111 |
562 |
Change in assets and
liabilities |
|
|
|
Receivables |
777 |
5,021 |
1,494 |
Payables |
743 |
1,312 |
(2,806) |
Other |
468 |
(506) |
(2,725) |
Cash flows from operating
activities |
9,217 |
26,085 |
29,475 |
|
|
|
|
Cash flows from investing
activities |
|
|
|
Restricted cash |
(1) |
331 |
28 |
Proceeds from sale of equity
securities |
-- |
-- |
1,634 |
Investment in affiliate |
-- |
-- |
(6,864) |
Proceeds from sale of oil and gas
properties |
-- |
110 |
10,706 |
Equipment, development, leasehold and
pipeline |
(2,282) |
(20,588) |
(23,398) |
Cash flows from investing
activities |
(2,283) |
(20,147) |
(17,894) |
|
|
|
|
Cash flows from financing
activities |
|
|
|
Proceeds from issuance of preferred stock
and warrants |
-- |
60,000 |
-- |
Proceeds from debt |
900 |
2,100 |
3,000 |
Repayments of debt |
(41) |
(88,976) |
(15,319) |
Proceeds from stock option
exercise |
-- |
-- |
66 |
Refinancing and equity offering
costs |
-- |
(6,477) |
-- |
Cash flows from financing
activities |
859 |
(33,353) |
(12,253) |
Net increase (decrease) in cash |
7,793 |
(27,415) |
(672) |
Cash and equivalents-beginning of
period |
20,884 |
28,677 |
730 |
Cash and equivalents-end of period |
$ 28,677 |
$ 1,262 |
$ 58 |
CONTACT: Jack Collins
Chief Financial Officer
(405) 702-7460
North Whipple
Manager, Corporate Development & Investor Relations
(405) 702-7423
Grafico Azioni PostRock Energy (CE) (USOTC:PSTRQ)
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Grafico Azioni PostRock Energy (CE) (USOTC:PSTRQ)
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Da Lug 2023 a Lug 2024