PostRock Energy Corporation (Nasdaq:PSTR)
("PostRock" or the "Company") today announced its results for the
year ended December 31, 2011. The Company identified the following
as key events that took place during 2011.
- 116 wells were completed and 49 recompletions executed in the
Cherokee Basin.
- The final phases of the sale of certain Appalachian assets were
closed.
- A 26.4% stake in Constellation Energy Partners was purchased
for $17.6 million including $13 million in cash, 1 million shares
of common stock and warrants to acquire 673,822 shares.
- Initiated a strategic review of the KPC pipeline.
- Reduced debt $27.2 million, another $11 million was paid down
in early 2012.
- Settled the Oklahoma and Kansas royalty lawsuits.
- Reduced general and administrative expenses by $7.6 million, or
30.6%.
- Implemented a field optimization program that reduced operating
costs by $932,000.
2011 Results
Revenues fell to $96.3 million, a 7.3% decline from the prior
year. The decline reflected reduced volumes and lower gas prices.
Excluding asset sales, production fell 3.5% to 51.4 MMcfe a day.
Average prices for the year, excluding hedging, decreased to $4.25
per Mcfe. Gathering revenue declined 10.4% to $5.2 million.
Gathering revenue will remain lower going forward due to reduced
charges agreed to in settling the royalty litigation. Pipeline
revenue increased 10.4% to $11.2 million. Realized hedging gains,
which are not included in revenue, totaled $33.7 million.
Production costs, including lease operating expenses ("LOE"),
gathering and severance and ad valorem taxes, remained flat at $47
million. Production costs totaled $2.51 per Mcfe, a 5.0% increase
from 2010, driven by lower production. While our initial field
optimization programs resulted in significant improvements in
compression and vehicle and equipment costs, the reductions were
offset by increased labor and repair and maintenance costs.
Optimization projects initiated since year-end are addressing those
areas. Pipeline operating expense fell 17.2% to $5.2 million.
General and administrative expenses dropped 30.6% to $17.2 million,
reflecting a significant reduction in professional services.
Fourth Quarter Results
Revenues fell 7.9% from the prior year period to $21.6 million.
The decline reflected reduced volumes and lower gas prices.
Excluding asset sales, production declined 6.3% to 50.4 MMcfe a
day. Average prices, excluding hedging, decreased 1.5% to $3.79 per
Mcfe in the quarter. Gathering revenue declined 32.4% to $967,000,
principally due to the recent royalty litigation settlement.
Pipeline revenue increased 7.9%, to $3.0 million. Realized hedging
gains, which are not included in revenue, totaled $10.5
million.
Production costs increased slightly to $11.5 million. The
increase was primarily due to workovers as efficiency gains were
offset by increased labor costs. Production costs totaled $2.47 per
Mcfe, a 9.0% increase from the prior year. This reflected the cost
of workovers coupled with declining production. Pipeline operating
expenses decreased 26.8% to $1.1 million. General and
administrative expenses fell 40.8% to $2.9 million, reflecting
significantly reduced professional services.
Hedges
At December 31, 2011, PostRock held natural gas hedges covering
30.1 MMcf a day for 2012 at an average price of $6.56 per Mcf and
oil hedges covering 115 Bbls a day at $87.90 a Bbl. The Company
also holds gas hedges covering 24.7 MMcf a day in 2013 at an
average price of $6.58. The value of these hedges at December 31,
2011, was $62.5 million. This value changes daily based on oil and
gas price fluctuations and the monthly roll off of hedges.
In the first quarter of 2012, crude oil hedges covering 260
MBbls of oil production through 2016 were entered into. The new
swaps cover an additional 67 Bbls a day at $104.00 a Bbl starting
in March 2012. The swaps cover 181 Bbls a day at $101.70 a Bbl in
2013, 169 Bbls a day at $97.00 a Bbl in 2014, 159 Bbls a day at
$93.40 a Bbl in 2015 and 148 Bbls a day at $91.10 a Bbl in
2016.
Debt and Liquidity
At December 31, 2011, PostRock had $193 million of debt,
consisting of $190 million of Borrowing Base loans and $3 million
of pipeline debt. The pipeline loan was fully retired subsequent to
year-end. Including $1.6 million of letters of credit, available
liquidity at year-end approximated $8.7 million. As announced, the
Company sold $7.5 million of common stock to White Deer Energy L.P.
on February 9, 2012. The sale covered 2,180,233 common shares at a
price of $3.44 a share. These funds plus cash flows during the
period increased liquidity to approximately $20 million at March 5,
2012. At year-end, PostRock elected to again pay-in-kind White
Deer's quarterly preferred dividend. This increased the liquidation
value of PostRock's Preferred by $2.0 million to $69.8 million. As
a result, White Deer also received 725,649 additional warrants with
a strike price of $2.80. White Deer currently holds a total of 21.6
million warrants exercisable at an average price of $3.23 a share
and 2,180,233 common shares.
|
December
31, |
|
2010 |
2011 |
|
(in
thousands) |
|
|
|
Cash and equivalents |
$ 730 |
$ 349 |
|
|
|
Long-term debt (including current
maturities) |
|
|
Borrowing base facility |
$ 187,000 |
$ 190,000 |
Secured pipeline loan |
13,500 |
3,000 |
QER loan |
19,721 |
-- |
Total |
$ 220,221 |
$ 193,000 |
|
|
|
Redeemable preferred stock |
$ 50,622 |
$ 56,736 |
Stockholders' equity (deficit) |
(12,792) |
7,810 |
Total capitalization |
$ 258,051 |
$ 257,546 |
Capital Expenditures
Capital expenditures in 2011 totaled $30.3 million, a slight
decrease from the amount spent in 2010. This spending included
$29.3 million related to oil and gas operations and $1.0 million to
KPC Pipeline. In the Cherokee Basin, 116 wells were completed, of
which 17 had been drilled prior to 2011.
For 2012, the Company has budgeted $22.4 million of capital
spending. Of this amount, $12.1 million will pay for the drilling
and completion of 34 new wells in the Cherokee Basin, 36
recompletions in Appalachia and 8 recompletions and 5 wells in
central Oklahoma. In addition, $9.6 million has been budgeted for
leasehold acquisition, land, infrastructure and equipment purchases
and approximately $764,000 for the KPC Pipeline. These capital
expenditures are expected to be funded with internal cash flow.
Reserves
Proved reserves decreased 7.6% to 124.7 Bcfe at year end 2011.
The decline was the result of a reduced capital development plan
and a decrease in year-end SEC pricing which caused the majority of
our PUD locations to become uneconomic. The decline was partially
offset by additions that were mostly driven by revisions to
previous estimates, which added 7.2 Bcfe, and an additional 2.1
Bcfe was added from our drilling program. At year-end 2011,
approximately 99.2% of the Company's reserves were classified as
proved developed.
|
Gas (Mcf) |
Oil (Bbls) |
Total (Mcfe) |
Balance, December 31,
2010 |
130,462,031 |
744,266 |
134,927,627 |
Purchase of reserves in place |
-- |
-- |
-- |
Extensions, discoveries, and other
additions |
1,752,746 |
54,761 |
2,081,312 |
Sale of reserves |
(754,479) |
-- |
(754,479) |
Revisions of previous estimates |
5,068,946 |
352,981 |
7,186,831 |
Production |
(18,309,056) |
(78,087) |
(18,777,578) |
Balance, December 31,
2011 |
118,220,188 |
1,073,921 |
124,663,713 |
Management Comment
Terry Carter, PostRock's President and Chief Executive Officer,
said, "Although we continue to make good progress on the
turnaround, 2011 results did not meet expectations. Our proven
reserves, production and revenue declined for the second straight
year and we only added 2.1 Bcfe of new reserves through the drill
bit. As we mentioned in our November earnings call, we generally
stopped drilling new wells in the Cherokee Basin as gas prices
continued to fall. We made this decision due to a combination of
poor results and declining gas prices. Our typical Cherokee Basin
CBM well is expected to recover 110-140 MMcf of dry gas. For a
group of 90 wells completed during the year, ultimate recovery is
likely to be slightly less than projected. At current gas prices,
returns are in the mid-teens instead of the 20-30% indicated in
pre-drill analyses. Development costs averaged $1.62/Mcf versus our
goal of $1.50/Mcf. We continue work to determine how we can combine
appropriate technology with reduced costs to improve overall
results in our CBM opportunities. However, until results materially
improve or new technologies prove to be commercial, we have
adjusted our development plan to focus entirely on select oil
opportunities and holding expiring acreage.
Both G&A and the total oil and gas production expense have
declined a combined $7.4 million from 2010. Additionally, changes
made in the first quarter of 2012 will reduce our overall costs by
another $2 million a year going forward and we expect to find more
improvements as we move through the year. Importantly, we continued
to improve our balance sheet in this environment. Debt was reduced
$27.2 million in 2011, and exclusive of asset sales or unplanned
investments, we expect a similar or greater reduction in 2012. In
alignment with our overall strategy to focus completely on the
E&P business, we retained Robert W. Baird & Co.
Incorporated to advise us on strategic opportunities involving KPC.
That process could further de-lever the Company.
We remain committed to our strategy of consolidating operations
in the Basin. In the current gas price environment, the benefits of
potential cost sharing matter more than ever. Finally, we remain
committed to a constant focus on technology and systems that can
improve how we exploit and expand our reserve base and reduce
costs."
Webcast and Conference Call
PostRock will host its quarterly webcast and conference call
tomorrow, Thursday, March 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 a
1,120 mile interstate natural gas pipeline, which transports
natural gas from northern Oklahoma and western Kansas to Wichita
and Kansas City.
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 to
EBITDA and adjusted EBITDA, as defined, for the period
presented.
|
Three Months
Ended December 31, |
Year Ended
December 31, |
|
2010 |
2011 |
(Combined) 2010 |
2011 |
|
(in
thousands) |
|
|
|
|
|
Net income attributable to controlling
interest |
$ 9,609 |
$ 9,353 |
$ 56,999 |
$ 20,030 |
Adjusted for: |
|
|
|
|
Net income attributable to
non-controlling interest |
-- |
-- |
9,958 |
-- |
Income taxes |
-- |
-- |
-- |
-- |
Interest expense,
net |
3,112 |
2,774 |
25,473 |
10,707 |
Depreciation, depletion,
accretion and amortization |
7,801 |
7,180 |
22,847 |
27,662 |
EBITDA |
$ 20,522 |
$ 19,307 |
$ 115,277 |
$ 58,399 |
Other (income) expense,
net |
(8) |
(14) |
28 |
(207) |
(Gain) on forgiveness of
debt |
(2,909) |
-- |
(2,909) |
(1,647) |
Loss from equity
investment |
-- |
3,748 |
-- |
4,607 |
Unrealized (gain) loss from
derivative financial instruments |
13,193 |
(8,208) |
(41,184) |
(1,737) |
Recovery of misappropriated
funds |
(595) |
-- |
(1,592) |
-- |
(Gain) loss on disposal of
assets |
(13,626) |
1,825 |
(13,495) |
(10,560) |
Litigation reserve |
-- |
11 |
1,640 |
11,592 |
Stock based compensation |
648 |
74 |
2,443 |
1,258 |
Impairment |
-- |
-- |
-- |
-- |
Office closure costs |
-- |
-- |
-- |
757 |
Adjusted EBITDA |
$ 17,225 |
$ 16,743 |
$ 60,208 |
$ 62,462 |
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 |
CONSOLIDATED STATEMENTS
OF OPERATIONS |
(in thousands, except
per share data) |
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended December 31, |
Year Ended
December 31, |
|
2010 |
2011 |
(Combined)
2010 |
2011 |
Revenue |
|
|
|
|
Oil and gas sales |
$ 19,202 |
$ 17,582 |
$ 87,936 |
$ 79,887 |
Gathering |
1,430 |
967 |
5,847 |
5,239 |
Pipeline |
2,819 |
3,043 |
10,129 |
11,183 |
Total |
23,451 |
21,592 |
103,912 |
96,309 |
Costs and expenses |
|
|
|
|
Production expense |
11,302 |
11,451 |
46,974 |
47,136 |
Pipeline expense |
1,463 |
1,071 |
6,305 |
5,219 |
General and administrative |
4,933 |
2,922 |
24,800 |
17,199 |
Litigation reserve |
-- |
11 |
1,640 |
11,592 |
Depreciation, depletion and
amortization |
7,801 |
7,180 |
22,847 |
27,662 |
(Gain) loss on disposal of
assets |
(13,626) |
1,825 |
(13,495) |
(10,560) |
Recovery of misappropriated
funds |
(595) |
-- |
(1,592) |
-- |
Total |
11,278 |
24,460 |
87,479 |
98,248 |
|
|
|
|
|
Operating income (loss) |
12,173 |
(2,868) |
16,433 |
(1,939) |
|
|
|
|
|
Other income (expense) |
|
|
|
|
Gain (loss) from derivative
financial instruments |
(2,369) |
18,729 |
73,116 |
35,429 |
Loss from equity
investment |
-- |
(3,748) |
-- |
(4,607) |
Gain on forgiveness of
debt |
2,909 |
-- |
2,909 |
1,647 |
Other income
(expense) |
8 |
14 |
(28) |
207 |
Interest expense,
net |
(3,112) |
(2,774) |
(25,473) |
(10,707) |
Total |
(2,564) |
12,221 |
50,524 |
21,969 |
Income before income taxes |
9,609 |
9,353 |
66,957 |
20,030 |
Income taxes |
-- |
-- |
-- |
-- |
Net income |
9,609 |
9,353 |
66,957 |
20,030 |
Net income attributable to non-controlling
interest |
-- |
-- |
(9,958) |
-- |
Net income attributable to controlling
interest |
9,609 |
9,353 |
56,999 |
20,030 |
Preferred stock dividends |
(1,800) |
(2,032) |
(1,980) |
(7,779) |
Accretion of redeemable
preferred stock |
(298) |
(439) |
(327) |
(1,580) |
Net income available to common stock |
$ 7,511 |
$ 6,882 |
$ 54,692 |
$ 10,671 |
Net income per common
share |
|
|
|
|
Basic |
$ 0.91 |
$ 0.72 |
n/m |
$ 1.21 |
Diluted |
$ 0.66 |
$ 0.69 |
n/m |
$ 0.71 |
Weighted average common shares
outstanding |
|
|
|
|
Basic |
8,239 |
9,550 |
n/m |
8,786 |
Diluted |
11,372 |
10,018 |
n/m |
15,050 |
|
|
|
|
|
|
POSTROCK ENERGY
CORPORATION |
CONSOLIDATED BALANCE
SHEETS |
(in
thousands) |
|
|
|
|
|
|
|
December
31, |
|
2010 |
2011 |
ASSETS |
Current assets |
|
|
Cash and cash
equivalents |
$ 730 |
$ 349 |
Accounts receivable - trade,
net |
11,845 |
9,123 |
Other receivables |
1,153 |
1,267 |
Inventory |
6,161 |
1,788 |
Other current assets |
2,799 |
7,492 |
Derivative financial
instruments |
31,588 |
42,803 |
Total |
54,276 |
62,822 |
Oil and gas properties, full cost,
net |
116,488 |
124,068 |
Pipeline assets, net |
61,148 |
59,088 |
Other property and equipment, net |
15,964 |
14,726 |
Equity investment |
-- |
12,994 |
Other noncurrent assets, net |
9,303 |
3,497 |
Derivative financial instruments |
39,633 |
29,516 |
Total assets |
$ 296,812 |
$ 306,711 |
|
|
|
LIABILITIES AND
EQUITY |
Current liabilities |
|
|
Accounts payable |
$ 7,030 |
$ 6,286 |
Revenue payable |
5,898 |
4,972 |
Accrued expenses and other
current liabilities |
7,190 |
8,700 |
Litigation reserve |
1,020 |
3,081 |
Current portion of long-term
debt |
10,500 |
3,000 |
Derivative financial
instruments |
3,792 |
5,223 |
Total |
35,430 |
31,262 |
Derivative financial instruments |
6,681 |
4,611 |
Long-term debt |
209,721 |
190,000 |
Asset retirement obligations |
7,150 |
11,733 |
Other noncurrent liabilities |
-- |
4,559 |
Total liabilities |
258,982 |
242,165 |
|
|
|
Commitments and contingencies |
|
|
Series A cumulative redeemable preferred
stock |
50,622 |
56,736 |
|
|
|
Stockholders' equity |
|
|
Preferred stock |
2 |
2 |
Common stock |
82 |
99 |
Additional paid-in
capital |
377,538 |
378,093 |
Accumulated deficit |
(390,414) |
(370,384) |
Total (deficit) equity |
(12,792) |
7,810 |
Total liabilities and equity |
$ 296,812 |
$ 306,711 |
|
|
|
|
|
|
|
|
POSTROCK ENERGY
CORPORATION |
CONSOLIDATED STATEMENTS
OF CASH FLOWS |
(in
thousands) |
|
|
|
|
|
(Predecessors) |
|
|
|
January 1, 2010 to March 5,
2010 |
March 6, 2010 to December 31,
2010 |
Year Ended December 31,
2011 |
Cash flows from operating
activities |
|
|
|
Net income |
$ 21,736 |
$ 45,221 |
$ 20,030 |
Adjustments to reconcile
net income to cash provided by operations |
|
|
|
Depreciation, depletion
and amortization |
4,164 |
18,683 |
27,662 |
Stock-based
compensation |
808 |
1,635 |
1,258 |
Impairments |
-- |
-- |
-- |
Amortization of deferred
loan costs |
2,094 |
5,753 |
1,709 |
Change in fair value of
derivative financial instruments |
(21,573) |
(19,611) |
(1,737) |
Litigation
reserve |
-- |
270 |
6,042 |
Recovery of
misappropriated funds |
|
(487) |
|
(Gain) on disposal of
assets |
-- |
(13,495) |
(10,560) |
(Gain) on forgiveness of
debt |
-- |
(2,909) |
(1,647) |
Loss from equity
investment |
|
-- |
4,607 |
Other non-cash changes to
net income |
-- |
138 |
618 |
Change in assets and
liabilities |
|
|
|
Accounts
receivable |
777 |
2,201 |
2,696 |
Other current
assets |
466 |
(486) |
(1,281) |
Other assets |
2 |
(3,224) |
(649) |
Accounts
payable |
(240) |
(4,613) |
(2,521) |
Accrued
expenses |
983 |
465 |
(3,502) |
Other |
-- |
17 |
(17) |
Cash flows from operating
activities |
9,217 |
29,558 |
42,708 |
|
|
|
|
Cash flows from investing
activities |
|
|
|
Restricted
cash |
(1) |
691 |
28 |
Proceeds from sale of
equity securities |
-- |
-- |
1,634 |
Equity
investment |
-- |
-- |
(12,883) |
Proceeds from sale of
assets |
-- |
14,062 |
12,723 |
Equipment, development,
leasehold and pipeline |
(2,282) |
(25,858) |
(29,338) |
Cash flows from investing
activities |
(2,283) |
(11,105) |
(27,836) |
|
|
|
|
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) |
(102,023) |
(18,319) |
Proceeds from stock
option exercise |
-- |
-- |
66 |
Debt and equity financing
costs |
-- |
(6,477) |
-- |
Cash flows from financing
activities |
859 |
(46,400) |
(15,253) |
Net increase (decrease) in
cash |
7,793 |
(27,947) |
(381) |
Cash and equivalents-beginning of
period |
20,884 |
28,677 |
730 |
Cash and equivalents-end of
period |
$ 28,677 |
$ 730 |
$ 349 |
CONTACT: North Whipple
Director, Finance & Investor Relations
nwhipple@pstr.com
(405) 702-7423
PostRock Energy (CE) (USOTC:PSTRQ)
Historical Stock Chart
From Apr 2024 to May 2024
PostRock Energy (CE) (USOTC:PSTRQ)
Historical Stock Chart
From May 2023 to May 2024