PostRock Energy Corporation (Nasdaq:PSTR) today
announced its third quarter 2012 results. As previously announced,
PostRock completed the sale of its interstate pipeline business on
September 28, 2012. Accordingly, the interstate business has now
been classified as a discontinued operation.
Natural gas revenue fell 42.7% from the prior-year period to
$10.8 million. The decline was caused by a 34.4% drop in realized
gas prices to $2.69 per Mcf and a 12.7% decline in gas production
to 43.8 MMcf per day. The decline in gas production is the result
of suspended gas development during the low gas price environment
in 2012. All development efforts have been redirected to oil
projects. Oil revenue increased 34.9% from the prior-year period to
$2.2 million. The increase was caused by a 5.1% increase in
realized oil prices to $89.15 per Bbl and a 28.4% increase in
production to 272 Bbls per day. During September 2012, net
production averaged 307 Bbls per day. Gathering revenue fell by
53.3% to $646,000. The majority of the decline resulted from the
royalty settlement, however, $144,000 resulted from the Company's
production decline and $111,000 resulted from third party volumes
and pricing.
Realized hedging gains decreased 63.3% from the prior-year
period to $2.7 million. The decrease was primarily the result of
the monetization and re-pricing of our July and August NYMEX gas
swap contracts in April 2012.
Production costs, consisting of lease operating expenses,
gathering costs and production taxes, totaled $9.9 million, a 16.3%
decrease from the prior-year period. Primarily as a result of field
optimization projects, labor costs decreased $727,000, vehicle and
equipment costs decreased $371,000, repair and maintenance costs
decreased $512,000, gathering costs fell $153,000 and various other
expenses decreased $106,000. In addition, we saw a $732,000
reduction in production taxes driven by the decline in pricing and
production. These reductions were partly offset by a decline of
$672,000 in capitalized costs. In total, production costs were
$2.38 an Mcfe, a 5.2% decrease from the prior-year quarter.
General and administrative expenses totaled $3.5 million, an
11.6% decrease from the prior-year period. During the 2011 period,
a $757,000 charge was recorded for the closure of our Houston
office. During the 2012 period, a $435,000 severance charge was
recorded for the restructuring of our Oklahoma City office.
Excluding these charges, general and administrative expenses were
$135,000, or 4.2%, lower than the prior-year period. The decrease
was primarily due to reduced wages and bonuses of $373,000, lower
legal, accounting and audit fees of approximately $278,000 and a
reduction in other categories totaling $59,000. Partially
offsetting these reductions was higher stock compensation expense
of $575,000 as a result of the forfeiture of unvested grants in the
prior-year period.
Each quarter, PostRock is required to assess the recoverability
of the carrying value of its oil and gas properties against their
present value utilizing a first-of-the-month twelve-month average
price for oil and natural gas. Driven by a 30.7% decrease in third
quarter prices compared to the prior-year period, the twelve-month
average natural gas price decreased significantly. This resulted in
the carrying value of PostRock's oil and natural gas properties
exceeding the present value under the prescribed methodology. As a
result, an impairment of oil and gas properties of $4.3 million was
recognized in the current period.
Natural gas prices during the fourth quarter of 2011 averaged
$3.63 per MMBtu. To date, prices in the fourth quarter of 2012 have
averaged $3.30 per MMBtu. Absent an increase in natural gas prices,
another impairment may be recognized at year-end.
Due to further declines in the unit price of Constellation
Energy Partners in the quarter, the Company recorded a
mark-to-market loss of $2.1 million.
Hedges
In April, PostRock re-priced its June, July and August NYMEX gas
swap contracts. In May, the June contract was rolled into 2016
hedges. Since these transactions, the new contracts have
experienced $1.8 million in losses. Of this amount, $514,000 was
paid in July, $617,000 was paid in August and $683,000 represents
the current, unrealized loss on the 2016 hedges. On November 5th,
PostRock monetized its NYMEX gas swap contracts held between July
2013 and December 2013 for $14.8 million. Proceeds were used to
reduce debt.
PostRock still holds hedges covering 30 MMcf a day of gas for
December 2012 at an average price of $6.82 per Mcf and 25 MMcf a
day during the first six months of 2013 at an average price of
$6.71 per Mcf. PostRock also holds Southern Star Basis Swaps
covering 25 MMcf a day for the last six months of 2013 at an
average price of ($0.75) per Mcf. The following table summarizes
the Company's position at September 30, 2012 after giving effect to
the November 5th monetization.
|
|
|
|
Oct. - Dec. |
|
|
|
|
|
|
|
|
2012 |
2013 |
2014 |
2015 |
2016 |
Natural Gas Hedges |
|
|
|
|
|
|
|
|
Southern Star Gas Swaps |
|
|
|
|
|
|
|
|
Volume (MMBtu) |
|
|
|
500,001 |
-- |
-- |
-- |
-- |
Weighted Average Price
(MMBtu) |
|
|
|
$6.80 |
-- |
-- |
-- |
-- |
NYMEX Gas Swaps |
|
|
|
|
|
|
|
|
Volume (MMBtu) |
|
|
|
2,262,295 |
4,463,015 |
-- |
-- |
1,047,000 |
Weighted Average Price
(MMBtu) |
|
|
|
$7.31 |
$7.37 |
-- |
-- |
$4.00 |
Southern Star Basis
Swaps |
|
|
|
|
|
|
|
|
Volume (MMBtu) |
|
|
|
2,262,295 |
9,000,003 |
-- |
-- |
-- |
Weighted Average Price
(MMBtu) |
|
|
|
($0.71) |
($0.71) |
-- |
-- |
-- |
|
|
|
|
|
|
|
|
|
Oil Hedges |
|
|
|
|
|
|
|
|
NYMEX Oil Swaps |
|
|
|
|
|
|
|
|
Volume (Bbls) |
|
|
|
16,671 |
65,892 |
61,680 |
58,164 |
53,892 |
Weighted Average Price
(Bbl) |
|
|
|
$93.86 |
$101.70 |
$97.00 |
$93.40 |
$91.10 |
Debt
At September 30, 2012, including $1.4 million of letters of
credit, PostRock had $104.3 million utilized on its revolving
credit facility, a decrease of $64.5 million from the second
quarter of 2012. The reduction was funded with proceeds from the
KPC sale and a $12 million investment by White Deer Energy in
August. Since the end of the quarter, debt has been reduced an
additional $16.5 million resulting in total utilization of $87.8
million at November 7, 2012. The reduction was primarily due to
monetizing certain 2013 hedges.
In connection with the borrowing base redetermination based on
June 30, 2012 reserves, PostRock expects that on November 9, 2012
the borrowing base will be reduced to $98 million. The Company is
no longer subject to monthly amortization payments or additional
interest on amounts outstanding. The Company recently selected a
bank to lead a new borrowing base facility. If successful, this
will permit the full refinancing of PostRock's existing bank
facility. Given current gas prices, the Company does not anticipate
having meaningful liquidity for some time unless it completes the
refinancing. Working capital needs and capital expenditures are
expected to be funded with cash flow from operations.
At September 30, 2012, PostRock elected to pay-in-kind the
quarterly dividend to White Deer which increased the liquidation
value of Series A Preferred Stock outstanding by $2.3 million to
$82.3 million. White Deer also received 1.4 million additional
warrants with a weighted average strike price of $1.72 a share. In
total, White Deer holds 28.1 million warrants exercisable at an
average price of $2.93 a share and 5.3 million common shares.
|
December 31,
2011 |
September 30,
2012 |
|
(in
thousands) |
|
|
|
Cash and equivalents |
$ 349 |
$ 162 |
|
|
|
Long-term debt (including current
maturities) |
|
|
Borrowing base facility |
$ 190,000 |
$ 102,855 |
Secured pipeline loan |
3,000 |
-- |
Total |
$ 193,000 |
$ 102,855 |
|
|
|
Redeemable preferred stock |
$ 56,736 |
$ 66,613 |
Stockholders' equity (deficit) |
7,810 |
(17,247) |
Total capitalization |
$ 257,546 |
$ 152,221 |
Significant Events
On August 1, 2012, White Deer invested a further $12 million in
PostRock equity, comprised of 50% common and 50% preferred stock.
White Deer acquired 3,076,923 shares of common stock at a price of
$1.95 per share and $6 million of 12% cumulative redeemable
preferred stock and received 3,076,923 warrants to purchase common
stock at a price of $1.95 a share. Proceeds from the investment
were used to reduce debt and provide working capital.
Simultaneously, White Deer extended the period during which
PostRock may pay-in-kind the dividends on all preferred stock held
by White Deer by eighteen months to December 2014.
On September 28, 2012, PostRock KPC Pipeline, LLC was sold to MV
Pipelines, LLC for a price of $53.5 million. After a working
capital adjustment, $52.9 million in cash was received. An
additional $500,000 is in escrow pending cleanup of a former KPC
site. These funds should be released in February 2013. After $2.0
million in transaction costs related to retention benefits,
professional fees and clean-up, the Company recorded a loss on the
sale of $5.6 million.
Capital Expenditures
During the third quarter, capital expenditures totaled $3.5
million. This included $2.3 million spent on oil directed drilling
and recompletions, $330,000 on vehicle and equipment replacement,
$592,000 on compressor optimization, IT and other maintenance
projects and $261,000 on KPC.
Year to date capital expenditures totaled $12.7 million. This
included $6.4 million spent on oil directed drilling and
recompletions, $2.0 million on vehicle and equipment replacement,
$1.2 million to connect two sections of the gathering system, $2.4
million to complete facility, compressor optimization, IT and other
projects, $638,000 on KPC and $119,000 to extend leases.
Management Comment
Terry W. Carter, PostRock's President and Chief Executive
Officer, said, "With natural gas prices at levels unprofitable for
new development, we are focused on oil projects on our existing
leasehold, retiring debt and reducing our cost structure. During
the quarter, we took the next step in our efforts to reduce costs
by restructuring our Oklahoma City office and eliminating
approximately 14% of our G&A staff. Combined with the
reductions associated with the sale of KPC, our G&A staff is
now 24% lower than it was in June. These changes, along with a
continued focus on eliminating unnecessary spending, are expected
to save approximately $3 million in annual G&A costs going
forward. Additionally, the completion of the sale of KPC in
September coupled with the $12 million investment by White Deer in
August enabled us to further reduce debt by $64.5 million during
the quarter. Our recent hedge transaction helped reduce debt
another $16.5 million subsequent to quarter end. All of our efforts
to reduce costs and debt while developing oil on our existing
leasehold have strengthened our balance sheet and improved our
outlook. During the fourth quarter our focus will be on refinancing
our current credit facility and continuing to develop our oil
projects."
"Since February 2012, we have performed 75 Cherokee Basin
recompletions targeting behind-pipe oil potential. Of these, 50
have been producing long enough to determine their results. Peak
production rates from successful recompletions have averaged 7
gross Bbls of oil per day. Recompletion projects currently have a
50% success rate at finding new oil production. The cash cost of a
successful recompletion is approximately $67,000, including a new
tank battery, and the cash cost of an unsuccessful recompletion is
$22,000. Assuming current prices, capital costs and success rate,
early results indicate our recompletion program should yield a rate
of return greater than 45%. For the remainder of 2012, we plan to
complete 27 oil recompletions and 16 new oil wells at a total cost
of approximately $3 million."
Webcast and Conference Call
PostRock will host its quarterly webcast and conference call
tomorrow, Thursday, November 8, 2012, 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.
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 and
operates minor oil producing properties in Oklahoma and oil and gas
producing properties in the Appalachian Basin.
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 periods
presented.
|
Three Months
Ended September 30, |
|
2011 |
2012 |
|
(in
thousands) |
|
|
|
Net income (loss) from continuing
operations |
$ 6,938 |
$ (19,930) |
Adjusted for: |
|
|
Income taxes |
-- |
-- |
Interest expense,
net |
2,485 |
2,615 |
Depreciation, depletion, and
amortization |
5,874 |
7,321 |
EBITDA |
$ 15,297 |
$ (9,994) |
Other income, net |
(23) |
(62) |
Loss on equity investment |
859 |
2,111 |
Unrealized (gain) loss from
derivative financial instruments |
(4,689) |
6,523 |
Impairment of oil and gas
properties |
-- |
4,309 |
Gain on forgiveness of
debt |
-- |
-- |
(Gain) loss on disposal of
assets |
(32) |
64 |
Litigation reserve |
1,981 |
-- |
Office Closure Costs |
757 |
-- |
Stock-based compensation |
(157) |
463 |
Adjusted EBITDA |
$ 13,993 |
$ 3,414 |
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, |
|
2011 |
2012 |
Revenue |
|
|
Natural gas sales |
$ 18,889 |
$ 10,819 |
Crude oil sales |
1,654 |
2,232 |
Gathering |
1,383 |
646 |
Total |
21,926 |
13,697 |
Costs and expenses |
|
|
Production expense |
11,845 |
9,917 |
General and administrative |
3,952 |
3,495 |
Litigation reserve |
1,981 |
-- |
Depreciation, depletion and
amortization |
5,874 |
7,321 |
Impairment of oil and gas
properties |
-- |
4,309 |
Loss (gain) on disposal of
assets |
(32) |
64 |
Total |
23,620 |
25,106 |
|
|
|
Operating loss |
(1,694) |
(11,409) |
|
|
|
Other income (expense) |
|
|
Realized gain from derivative
financial instruments |
7,264 |
2,666 |
Unrealized gain (loss) from
derivative financial instruments |
4,689 |
(6,523) |
Loss on equity
investment |
(859) |
(2,111) |
Other income, net |
23 |
62 |
Interest expense,
net |
(2,485) |
(2,615) |
Total |
8,632 |
(8,521) |
Income (loss) from continuing operations
before income taxes |
6,938 |
(19,930) |
Income taxes |
-- |
-- |
Net income (loss) from continuing
operations |
6,938 |
(19,930) |
Discontinued operations |
69 |
(5,244) |
Net income (loss) |
7,007 |
(25,174) |
Preferred stock dividends |
(1,973) |
(2,341) |
Accretion of redeemable
preferred stock |
(406) |
(568) |
Net income (loss) available to common
stock |
$ 4,628 |
$ (28,083) |
Income (loss) per common
share |
|
|
Basic income (loss) per share -
continuing ops |
$ 0.51 |
$ (1.58) |
Basic income (loss) per share -
discontinued ops |
-- |
(0.36) |
Basic income (loss) per
share |
$ 0.51 |
$ (1.94) |
|
|
|
Diluted income (loss) per share
- continuing ops |
$ 0.28 |
$ (1.58) |
Diluted income (loss) per share
- discotinued ops |
0.01 |
(0.36) |
Diluted income (loss) per
share |
$ 0.29 |
$ (1.94) |
|
|
|
Weighted average common shares
outstanding |
|
|
Basic |
9,009 |
14,477 |
Diluted |
16,009 |
14,477 |
|
|
|
|
|
|
POSTROCK ENERGY
CORPORATION |
CONDENSED CONSOLIDATED
BALANCE SHEETS |
(in
thousands) |
(Unaudited) |
|
|
|
|
December 31,
2011 |
September 30,
2012 |
ASSETS |
Current assets |
|
|
Cash and equivalents |
$ 349 |
$ 162 |
Accounts receivable - trade,
net |
7,785 |
5,474 |
Other receivables |
1,164 |
212 |
Inventory |
1,681 |
1,374 |
Other |
7,455 |
3,713 |
Derivative financial
instruments |
42,803 |
34,484 |
Assets of discontinued
operations |
1,585 |
-- |
Total |
62,822 |
45,419 |
Oil and gas properties, full cost,
net |
124,068 |
110,774 |
Other property and equipment, net |
14,465 |
14,900 |
Equity investment |
12,994 |
8,416 |
Other, net |
2,812 |
512 |
Derivative financial instruments |
29,516 |
8,585 |
Assets of discontinued operations |
60,034 |
-- |
Total assets |
$ 306,711 |
$ 188,606 |
|
|
|
LIABILITIES AND EQUITY
(DEFICIT) |
Current liabilities |
|
|
Accounts payable |
$ 5,723 |
$ 2,717 |
Revenue payable |
4,972 |
3,915 |
Accrued expenses and other |
8,327 |
7,883 |
Litigation reserve |
3,081 |
4,484 |
Current portion of long-term
debt |
3,000 |
102,855 |
Derivative financial
instruments |
5,223 |
4,440 |
Liabilities of discontinued
operations |
936 |
-- |
Total |
31,262 |
126,294 |
Derivative financial instruments |
4,611 |
1,980 |
Long-term debt |
190,000 |
-- |
Asset retirement obligations |
10,087 |
10,665 |
Other |
4,559 |
301 |
Liabilities of discontinued operations |
1,646 |
-- |
Total liabilities |
242,165 |
139,240 |
|
|
|
Commitments and contingencies |
|
|
Series A cumulative redeemable preferred
stock |
56,736 |
66,613 |
|
|
|
Stockholders' equity |
|
|
Preferred stock |
2 |
2 |
Common stock |
99 |
156 |
Additional paid-in
capital |
378,093 |
389,314 |
Accumulated deficit |
(370,384) |
(406,719) |
Total equity (deficit) |
7,810 |
(17,247) |
Total liabilities and equity (deficit) |
$ 306,711 |
$ 188,606 |
|
|
|
|
|
|
POSTROCK ENERGY
CORPORATION |
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS |
(in
thousands) |
(Unaudited) |
|
|
|
|
Nine Months Ended
Sepember 30, |
|
2011 |
2012 |
Cash flows from operating
activities |
|
|
Net income
(loss) |
$ 10,677 |
$ (36,335) |
Adjustments to reconcile
net income (loss) to net cash from operations |
|
|
Depreciation, depletion
and amortization |
20,482 |
22,960 |
Stock-based
compensation |
1,184 |
1,554 |
Impairment of oil and gas
properties |
-- |
4,309 |
Amortization of deferred
loan costs |
1,278 |
1,208 |
Change in fair value of
derivative financial instruments |
6,471 |
25,836 |
Litigation
reserve |
6,031 |
-- |
Loss (gain) on disposal
of assets |
(12,385) |
5,811 |
Gain on forgiveness of
debt |
(1,647) |
(255) |
Loss from equity
investment |
859 |
4,578 |
Other non-cash
changes |
562 |
389 |
Change in assets and
liabilities |
|
|
Receivables |
1,494 |
3,253 |
Payables |
(2,806) |
(8,803) |
Other |
(2,725) |
4,927 |
Net cash flows from operating
activities |
29,475 |
29,432 |
|
|
|
Cash flows from investing
activities |
|
|
Restricted
cash |
28 |
-- |
Proceeds from sale of
equity securities |
1,634 |
-- |
Equity
investment |
(6,864) |
-- |
Proceeds from sale of
assets |
10,706 |
53,201 |
Equipment, development,
leasehold and pipeline |
(23,398) |
(12,276) |
Net cash flows from (used in) investing
activities |
(17,894) |
40,925 |
|
|
|
Cash flows from financing
activities |
|
|
Proceeds from issuance of
preferred stock and warrants |
-- |
6,000 |
Proceeds from
debt |
3,000 |
-- |
Repayments of
debt |
(15,319) |
(90,145) |
Proceeds from issuance of
common stock |
-- |
13,682 |
Proceeds from stock
option exercise |
66 |
-- |
Equity issuance
costs |
-- |
(81) |
Net cash flows used in financing
activities |
(12,253) |
(70,544) |
Net decrease in cash |
(672) |
(187) |
Cash and equivalents - beginning of
period |
730 |
349 |
Cash and equivalents - end of
period |
$ 58 |
$ 162 |
CONTACT: North Whipple
Director, Finance & Investor Relations
nwhipple@pstr.com
(405) 702-7423
Grafico Azioni PostRock Energy (CE) (USOTC:PSTRQ)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni PostRock Energy (CE) (USOTC:PSTRQ)
Storico
Da Lug 2023 a Lug 2024