HOUSTON, TX -- (Marketwired) -- 03/27/15 -- Earthstone Energy, Inc. (NYSE MKT: ESTE) ("Earthstone" or the "Company"), today announced financial and operating results for the three and twelve month periods ended December 31, 2014.
Recent Transactions - Basis of Reporting
On December 19, 2014, the Company completed a strategic combination with Oak Valley Resources, LLC ("Oak Valley"), which resulted in a change of control, and concurrently acquired additional interests in an existing Eagle Ford development project located in Fayette and Gonzales Counties, Texas. The Company's property portfolio now includes activities in the Eagle Ford trend of south Texas and in the Williston Basin, including both North Dakota and Montana. The strategic combination has been accounted for as a reverse acquisition whereby the subsidiaries of Oak Valley are considered the acquirer for accounting and reporting purposes. Accordingly, all historical information provided in this release and in Earthstone's 2014 Annual Report on Form 10-K and other filings with the Securities and Exchange Commission is that of Oak Valley, with the Earthstone and the Eagle Ford transactions treated as acquisitions on December 19, 2014. Additionally, the Company adopted Oak Valley's fiscal year-end of December 31.
Full Year 2014 Highlights Compared to Full Year 2013
- Average daily production of 2,416 Boepd, a 20% increase;
- Oil, natural gas, and NGL sales of $47.6 million, a 61% increase;
- Adjusted EBITDAX(1) of $28.5 million, a 121% increase; and
- PV-10(1) of $344.8 million, a 175% increase.
Fourth Quarter 2014 Highlights Compared to Fourth Quarter 2013
- Average daily production of 2,760 Boepd, a 29% increase;
- Oil, natural gas, and NGL sales of $12.0 million, 32% increase; and
- Adjusted EBITDAX(1) of $7.3 million, a 79% increase.
(1) See "Reconciliation of Non-GAAP Financials Measures" section below.
2014 Year-End Proved Reserves
SEC rules require that the reserve calculations utilize the unweighted average price on the first day of the month for the prior twelve-month period. Oil, natural gas, and natural gas liquids prices used for our 2014 year-end reserve report, prior to adjusting for quality and basis differentials, were $94.99 per barrel, $4.309 per MMBtu (million British Thermal units), and $30.19 per barrel, respectively. The following table indicates estimated proved reserves by category as of December 31, 2014.
Oil Gas NGL Total PV-10 Reserve Category (MMBbls) (Bcf) (MMBbls) (MMBOE) ($mm) ---------------------------------------------------------------------------- Proved Developed 6.1 16.2 1.0 9.8 235.4 Proved Undeveloped 7.7 22.4 1.0 12.4 109.4 ---------------------------------------------------------------------------- Total 13.8 38.6 2.0 22.2 344.8 Note: PV-10 is a non-GAAP financial measure. See "Reconciliation of Non-GAAP Financial Measures" section below.
Selected Financial Data
Three Months Ended Years Ended
December 31, December 31,
------------------------ ------------------------
2014 2013 Change 2014 2013 Change
------- ------- ------ ------- ------- ------
Total Revenue 12,108 9,124 33% 47,994 29,943 60%
Net Loss (37,318) (12,854) (28,834) (19,875)
Earnings Per Share
(Diluted) (3.83) (1.41) (3.11) (2.18)
Adjusted EBITDAX(1) 7,336 4,101 79% 28,455 12,894 121%
Production:
Oil (MBbls) 141 64 121% 403 163 147%
Gas (MMcf) 487 616 (21%) 2,132 2,635 (19%)
NGL (MBbls) 32 31 3% 124 134 (8%)
Total (MBOE) 254 197 29% 882 737 20%
Total daily
production (BOEPD) 2,760 2,142 29% 2,416 2,019 20%
Average prices:
Including realized
derivatives
settlements:
Oil ($/Bbl) 78.22 96.60 (19%) 88.76 99.02 (10%)
Gas ($/Mcf) 4.26 3.88 10% 4.29 3.77 14%
NGL ($/Bbl) 20.97 30.57 (31%) 28.29 28.88 (2%)
Total ($/BOE) 54.19 48.15 13% 54.87 40.69 35%
Excluding realized
derivatives
settlements:
Oil ($/Bbl) 67.05 92.43 (27%) 86.29 98.32 (12%)
Gas ($/Mcf) 3.91 3.70 6% 4.39 3.69 19%
NGL ($/Bbl) 20.97 30.57 (31%) 28.29 28.88 (2%)
Total ($/BOE) 47.33 46.22 2% 53.99 40.22 34%
1. See "Reconciliation of Non-GAAP Financials Measures" section below.
Note: Net loss includes $22.1 million of deferred income tax expense
resulting from the strategic combination and $19.4 million of impairment
expense, both of which are non-cash charges.
Please see our annual report on Form 10-K for the year ended December
31, 2014 for further information.
Management Comments
Frank A. Lodzinski, President and Chief Executive Officer of Earthstone Energy, Inc., commented, "Our senior management team has re-entered the public markets for the fourth time with our December 2014 strategic combination with Earthstone, and despite the current price environment, we look forward to achieving profitable growth. We are pleased with our accomplishments to-date. In just two short years since we acquired and recapitalized Oak Valley, we have assembled a significant reserve and production position. We achieved this growth, as we have in prior public entities, through a combination of development drilling, asset acquisitions and corporate M&A activities. Our goals are to continue this significant progress with continued development of our current assets, expansion of additional acreage positions, and acquisitions. In addition, we will continue to pursue Corporate M&A opportunities. We intend to pursue such opportunities aggressively but prudently."
About Earthstone Energy, Inc.
Earthstone Energy, Inc. is a growth-oriented independent oil and gas exploration and production company engaged in the development and acquisition of oil and gas reserves through an active and diversified program that includes the acquisition, drilling and development of undeveloped leases, and purchases of reserves and exploration activities, with its current primary assets located in the Eagle Ford trend of south Texas and in the Williston Basin of North Dakota and Montana. Earthstone is traded on NYSE MKT under the symbol "ESTE." Information on Earthstone can be found at www.earthstoneenergy.com. Our corporate headquarters is located in The Woodlands, Texas. We also have an operating office in Denver, Colorado.
FORWARD-LOOKING STATEMENTS
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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," "potential," "possible," or "probable" or statements that certain actions, events or results "may," "will," "should," or "could" be taken, occur or be achieved. The forward-looking statements include statements about future operations, expansion of production and development acreage, increased cash flow, earnings and assets and access to capital. 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. However, whether actual results and developments will conform to expectations is subject to a number of material risks and uncertainties, including but not limited to: the risks of the oil and gas industry (for example, the recent rapid, significant decline in oil prices and operational risks in exploring for, developing and producing crude oil and natural gas; risks and uncertainties involving geology of oil and gas deposits); the uncertainty of reserve estimates; the uncertainty of estimates and projections relating to future oil and gas prices, production, costs and expenses; potential delays or changes in plans with respect to exploration or development projects or capital expenditures; health, safety and environmental risks and risks related to weather; inability of management to execute its plans to meet its goals; unavailability of gathering systems, pipelines and processing facilities; and the possibility that government policies may change. Earthstone's annual report on Form 10-K for the year ended December 31, 2014, recent current reports on Form 8-K, and other SEC filings discuss some of the important risk factors identified that may affect Earthstone's business, results of operations, and financial condition. Earthstone undertakes no obligation to revise or update publicly any forward-looking statements except as required by law.
EARTHSTONE ENERGY, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
December 31,
--------------------
ASSETS 2014 2013
--------- ---------
Current assets:
Cash and cash equivalents $ 100,447 $ 25,423
Accounts receivable:
Oil, natural gas, and natural gas liquids
revenues 14,016 8,122
Joint interest billings and other 9,417 7,541
Current derivative assets 3,569 154
Prepaid expenses and other current assets 1,578 122
--------- ---------
Total current assets 129,027 41,362
--------- ---------
Oil and gas properties, successful efforts method:
Proved properties 317,006 184,075
Unproved properties 76,791 43,011
--------- ---------
Total oil and gas properties 393,797 227,086
--------- ---------
Accumulated depreciation, depletion, and
amortization (97,920) (79,789)
--------- ---------
Net oil and gas properties 295,877 147,297
Other noncurrent assets:
Goodwill 22,992 --
Office and other equipment, less accumulated
depreciation of $474 and $191, respectively 2,109 560
Land 101 101
Other noncurrent assets 1,282 538
--------- ---------
TOTAL ASSETS $ 451,388 $ 189,858
========= =========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 28,753 $ 7,428
Accrued expenses 20,529 5,768
Revenues and royalties payable 17,364 10,184
Advances 21,398 3,520
Current derivative liabilities -- 172
Asset retirement obligations 408 70
--------- ---------
Total current liabilities 88,452 27,142
Noncurrent liabilities:
Noncurrent derivative liabilities -- 28
Long-term debt 11,191 10,825
Asset retirement obligations 5,670 2,941
Deferred tax liability 29,258 --
Other noncurrent liabilities 289 --
--------- ---------
Total noncurrent liabilities 46,408 13,794
--------- ---------
Total liabilities 134,860 40,936
--------- ---------
Commitments and Contingencies (Note 11)
Equity:
Members' equity -- 148,922
Preferred stock, $0.001 par value, 20,000,000 shares
authorized; none issued or outstanding -- --
Common stock, $0.001 par value, 100,000,000 shares
authorized; 13,835,128 shares issued and
outstanding in 2014 and none in 2013 14 --
Additional paid-in capital 358,086 --
Accumulated deficit (41,112) --
Treasury stock, 15,414 shares in 2014 and none in
2013 (460) --
--------- ---------
Total equity 316,528 148,922
--------- ---------
TOTAL LIABILITIES AND EQUITY $ 451,388 $ 189,858
========= =========
EARTHSTONE ENERGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
Years Ended December 31,
-------------------------------
2014 2013 2012
--------- --------- ---------
REVENUES
Oil, natural gas, and natural gas liquids
revenues:
Oil $ 34,734 $ 16,038 $ 8,679
Natural gas 9,367 9,714 6,064
Natural gas liquids 3,510 3,882 2,348
--------- --------- ---------
Total oil, natural gas, and natural
gas liquids revenues 47,611 29,634 17,091
Gathering income 383 430 419
(Loss) gain on sale of oil and gas
properties -- (121) 4,785
--------- --------- ---------
Total revenues 47,994 29,943 22,295
--------- --------- ---------
OPERATING COSTS AND EXPENSES
Production costs:
Lease operating expense 10,122 8,426 6,211
Severance taxes 2,002 1,225 608
Re-engineering and workovers 708 342 570
Impairment expense 19,359 12,298 52,475
Depreciation, depletion, and amortization 18,414 17,111 12,191
Exploration expense 111 2,490 57
General and administrative expense 7,864 7,751 3,280
--------- --------- ---------
Total operating costs and expenses 58,580 49,643 75,392
--------- --------- ---------
Loss from operations (10,586) (19,700) (53,097)
OTHER INCOME (EXPENSE)
Interest expense, net (597) (487) (273)
Net gain on derivative contracts 4,392 296 --
Other income, net 62 16 49
--------- --------- ---------
Total other income (expense) 3,857 (175) (224)
--------- --------- ---------
Loss before income taxes (6,729) (19,875) (53,321)
Income tax expense 22,105 -- --
--------- --------- ---------
Net loss $ (28,834) $ (19,875) $ (53,321)
========= ========= =========
Net loss per common share:
Basic $ (3.11) $ (2.18) $ (5.84)
Diluted $ (3.11) $ (2.18) $ (5.84)
Weighted average common shares outstanding:
Basic 9,279,32 9,124,45 9,124,45
4 2 2
Diluted 9,279,32 9,124,45 9,124,45
4 2 2
EARTHSTONE ENERGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Years Ended December 31,
-------------------------------
2014 2013 2012
--------- --------- ---------
Cash flows from operating activities:
Net loss $ (28,834) $ (19,875) $ (53,321)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation, depletion, and
amortization 18,414 17,111 12,191
Impairment of proved and unproved oil
and gas properties 19,359 12,298 52,475
Unrealized (gain) loss on derivative
contracts (3,614) 45 --
Dry hole costs -- 2,096 57
Loss (gain) on sales of oil and gas
properties -- 121 (4,785)
Accretion of asset retirement
obligations 317 217 179
Deferred income taxes 22,105 -- --
Amortization of deferred financing
costs 164 103 48
Settlement of asset retirement
obligations (56) -- --
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (5,305) (12,141) 1,202
(Increase) decrease in prepaid expenses
and other (194) (81) 89
Increase in accounts payable and
accrued expenses 28,408 2,171 6,762
Increase in revenue and royalties
payable 7,099 9,698 88
Increase in advances 17,925 3,520 --
--------- --------- ---------
Net cash provided by operating
activities 75,788 15,283 14,985
--------- --------- ---------
Cash flows from investing activities:
Acquisitions of proved and unproved
property (18,772) (86,687) --
Additions to oil and gas property and
equipment (83,041) (31,162) (39,433)
Additions to other property and equipment (1,385) (678) (97)
Reverse acquisition with Oak Valley, net
of cash (4,239) -- --
Insurance proceeds -- 923 --
Proceeds from sales of oil and gas
properties -- 488 9,976
--------- --------- ---------
Net cash used in investing activities (107,437) (117,116) (29,554)
--------- --------- ---------
Cash flows from financing activities:
Issuance of long-term debt 11,191 -- 10,825
Reduction of long-term debt (10,825) -- (5,192)
Deferred financing costs (613) (425) (20)
Contributions, net of issuance costs 106,920 107,530 24,790
Distributions -- -- (1,187)
--------- --------- ---------
Net cash provided by financing
activities 106,673 107,105 29,216
--------- --------- ---------
Net increase in cash and cash equivalents 75,024 5,272 14,647
Cash and cash equivalents at beginning of
period 25,423 20,151 5,504
--------- --------- ---------
Cash and cash equivalents at end of period $ 100,447 $ 25,423 $ 20,151
========= ========= =========
Supplemental disclosure of cash flow
information
-------------------------------------------
Cash paid for:
Interest $ 493 $ 375 $ 238
Non-cash investing and financing
activities:
Asset retirement obligations $ 237 $ 1,033 $ 66
Stock issued for 2014 Eagle Ford
Acquisition Properties $ 56,425 $ -- $ --
Earthstone Energy, Inc.
Reconciliation of Non-GAAP Financial Measures
Unaudited
I. PV-10
PV-10 is derived from the Standardized Measure of discounted future net cash flows, which is the most directly comparable GAAP financial measure. 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 our proved properties to the Standardized Measure (in thousands):
Years Ended
December 31,
-----------------------
2014 2013
---------- -----------
Present value of estimated future net revenues (PV-
10) $ 344,800 $ 125,357
Future income taxes, discounted at 10%(1) (88,944) -
---------- -----------
Standardized measure of discounted future net
revenues $ 255,856 $ 125,357
========== ===========
(1) As a result of the strategic combination, all historical financial
information is that of Oak Valley and its subsidiaries. Oak Valley is a
partnership for federal tax purposes and is not subject to federal income
taxes or state or local income taxes that follow the federal treatment, and
therefore Oak Valley did not pay or accrue for such taxes in 2013. Pursuant
to the strategic combination, OVR's subsidiaries have become subsidiaries
of Earthstone Energy, Inc., which is a taxable entity; as such, estimated
tax expense was included in the Standardized Measure for December 31, 2014.
II. Adjusted EBITDAX
Adjusted EBITDAX is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors, commercial banks and others, to assess our operating performance compared to that of other companies in our industry, without regard to financing methods, capital structure or historical costs basis. It is also used to assess our ability to incur and service debt and fund capital expenditures. We define "Adjusted EBITDAX" as net income (loss) plus (1) (gain) loss on sale of assets; (2) accretion; (3) impairment expense; (4) depletion, depreciation, and amortization; (5) exploration expense; (6) interest expense; (7) interest income; (8) unrealized (gain) loss on derivatives; and (9) income tax expense (benefit).
Our Adjusted EBITDAX should not be considered an alternative to net income (loss), operating income (loss), cash flow provided by (used in) operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Our Adjusted EBITDAX may not be comparable to similarly titled measures of another company because all companies may not calculate Adjusted EBITDAX in the same manner.
The following table provides a reconciliation of net income to Adjusted EBITDAX for the periods indicated:
Years Ended
December 31,
----------------------
2014 2013
---------- ----------
Net loss $ (28,834) $ (19,875)
Loss on sale of assets - 121
Accretion 317 217
Impairment expense 19,359 12,298
Depletion, depreciation, and amortization 18,414 17,111
Exploration expense 111 2,490
Interest expense 606 487
Interest income (9) -
Unrealized (gain) loss on derivative contracts (3,614) 45
Income tax expense (benefit) 22,105 -
---------- ----------
Adjusted EBITDAX $ 28,455 $ 12,894
========== ==========
Three Months Ended
December 31,
----------------------
2014 2013
---------- ----------
Net (loss) $ (37,318) $ (12,854)
Loss on sale of assets - 67
Accretion 88 81
Impairment expense 19,359 12,253
Depletion, depreciation, and amortization 5,383 3,214
Exploration expense 28 823
Interest expense 160 153
Interest income (10) -
Unrealized (gain) loss on derivative contracts (2,459) 364
Income tax expense (benefit) 22,105 -
---------- ----------
Adjusted EBITDAX $ 7,336 $ 4,101
========== ==========
Contact:
Neil K. Cohen
Vice President, Finance, and Treasurer
Earthstone Energy, Inc.
1400 Woodloch Forest Drive, Suite 300
The Woodlands, TX 77380
281-298-4246
