Sanchez Energy Corporation (NYSE:SN) (“Sanchez
Energy” or the “Company”) today announced financial and operating
results for the fourth quarter and full year 2017. Highlights
include:
- Fourth quarter 2017 production of nearly 82,000 barrels of oil
equivalent per day (“Boe/d”), or 7.5 million barrels of oil
equivalent (“MMBoe”), at the midpoint of the Company’s 80,000 Boe/d
to 84,000 Boe/d guidance for the quarter;
- Full year 2017 production was approximately 25.7 MMBoe, or
70,320 Boe/d, for a year-over-year growth rate of 31
percent;
- Proved reserves increased 88 percent, to a record 363 MMBoe,
with a reserve replacement ratio in excess of 760 percent and an
organic reserve replacement of approximately 172
percent;
- The Company’s year-end Comanche drilling inventory increased by
approximately 800 gross locations, a result of successful staggered
Lower Eagle Ford development tests;
- A 17 well four-zone stack development test was completed at
Briscoe Catarina South in Comanche Area 3, with wells averaging
30-day peak production rates of approximately 1,252 Boe/d from the
two Lower Eagle Ford zones and 675 Boe/d from the two Upper Eagle
Ford zones;
- The successful stacked development test at Briscoe Catarina
South confirms up to four economic targets in certain parts of the
Comanche acreage;
- The Company reported a net loss of $61.4 million for the fourth
quarter 2017, net income of $35.8 million for the third quarter
2017, and net income of $12.3 million for the fourth quarter
2016;
- The Company reported net income of $43.2 million for the year
ended December 31, 2017, compared to a net loss of $141.5 million
for the year ended December 31, 2016;
- Fourth quarter 2017 revenues of approximately $246 million were
33 percent higher compared to third quarter 2017 and 96 percent
higher compared to fourth quarter 2016;
- Adjusted revenues (a non-GAAP financial measure that includes
hedge settlements) were approximately $244.3 million during fourth
quarter 2017, 25 percent higher compared to third quarter 2017 and
68 percent higher compared to fourth quarter 2016;
- Full year 2017 revenues were approximately $740.3 million
and full year 2017 Adjusted revenues (a non-GAAP financial measure
that includes hedge settlements) were approximately $753.5
million;
- Adjusted EBITDAX (a non-GAAP financial measure) was
approximately $137.4 million during fourth quarter 2017,
39 percent higher compared to third quarter 2017 and 89 percent
higher compared to fourth quarter 2016;
- Full year 2017 Adjusted EBITDAX (a non-GAAP financial measure)
was approximately $372 million, a 27 percent increase compared
to full year 2016;
- In February 2018, the Company announced and closed a
comprehensive financing strategy which is expected to fully fund
capital plans for the next several years; and
- The Company has converted its accounting convention from the
full-cost method to the successful efforts method, providing
increased transparency and comparability to peers.
MANAGEMENT
COMMENTS
“2017 was a transformational year for Sanchez as
we successfully integrated the Comanche asset, providing a
tremendous growth platform and pathway to deleveraging the balance
sheet,” said Tony Sanchez, III, Chief Executive Officer of Sanchez
Energy. “The Comanche Transaction resulted in a significant
increase in the scope and scale of our operations, creating a
dominant acreage position for Sanchez Energy in the Western Eagle
Ford. With approximately 487,000 gross (285,000 net)
leasehold acres and roughly 3,700 identified net drilling locations
in the Eagle Ford, we now project more than 15 years of capital
efficient development opportunities, with over one billion barrels
of net oil equivalent (“Boe”) resource potential.
“As previously reported, we had strong operating
results in the fourth quarter, with production increasing to nearly
82,000 Boe/d, or 7.5 MMBoe, and we finished 2017 with full year
production of approximately 25.7 MMBoe. The year-over-year
production growth rate of 31 percent was accentuated by an 88
percent increase in proved reserves at year-end 2017, leading to
record proved reserves of 363 MMBoe. As a key measure of our
success, we achieved an organic reserve replacement ratio of
approximately 172 percent in 2017, in large part due to the
expansion of proved locations in Central Catarina and the
identification of a second Lower Eagle Ford target at
Comanche. We continue to add drilling locations through our
multi-zone development of the Lower Eagle Ford, our recently
announced four-zone stack development tests at Briscoe Catarina
South, and our step-out well tests at Chupadera Ranch in Comanche
Area 7.
“This quarter’s strong operating performance,
together with increases in oil and NGL prices during the latter
part of the year, resulted in Adjusted EBITDAX of $137.4 million
for the fourth quarter 2017, an increase of 39 percent compared to
third quarter 2017, and full year 2017 Adjusted EBITDAX of $372
million, an increase of 27 percent compared to the full year
2016. Importantly, the Company’s operating margins continue
to expand as our Eagle Ford assets realize the benefit of premium
Gulf Coast pricing and increases in production are driving our
per-unit operating costs lower.
“The new three-year plan we announced last month
reinforces our commitment to financial discipline and capital
efficiency. While the plan calls for the Company to reduce
annual capital spending for the years 2018 through 2020 to levels
approximately $100 million lower when compared to 2017, we continue
to project significant production growth in 2018 and over the
three-year planning horizon. The Company’s inventory of
low-cost, high rate of return drilled-but-uncompleted wells, or
“DUCs,” and active drilling program are expected to organically
increase production and cash flow over this period. These
higher production levels, together with better operating margins
and improving oil price fundamentals, give us line of sight to
full-cycle free cash flow generation at the corporate level.
“We announced a comprehensive financing strategy
in February 2018 to fully fund our growth plans for the next
several years. After successfully executing this plan, we
currently have liquidity totaling $834 million, which includes $650
million in cash and $184 million of borrowing availability under
two credit facilities. Given this significant liquidity
position and potential for additional strategic divestitures, we
see an opportunity to fully develop the Company’s world-class asset
base and provide the cash flow needed to reduce our financial
leverage over the next two to three years. With a continuous
focus on financial discipline, measured growth and deleveraging, we
believe we are well positioned to deliver significant shareholder
value.”
OPERATIONS UPDATE
During the fourth quarter 2017, the Company spud
38 gross (14.3 net) wells and completed 80 gross (35.6 net) wells
and brought on-line 64 wells at Comanche, 8 wells at Catarina, and
13 wells at Maverick.
As previously reported, the Company’s year-end
2017 Comanche drilling inventory increased by approximately 800
gross locations as a result of successful staggered Lower Eagle
Ford development tests. A four-zone stack development test of
17 wells was completed at Briscoe Catarina South, in Comanche Area
3, with wells averaging 30-day peak production rates of
approximately 1,252 Boe/d from the two Lower Eagle Ford zones and
675 Boe/d from the two Upper Eagle Ford zones. The successful
stacked development test at Briscoe Catarina South confirms up to
four economic targets in certain parts of the Comanche acreage.
As of June 30, 2017, the Company had maximized
the allowable 30 well drilling bank at Catarina that can be applied
towards its current annual drilling commitment period, which
extends from July 1, 2017 to June 30, 2018. As of Dec. 31,
2017, the Company had drilled an additional 10 wells towards its
annual 50 well drilling commitment at Catarina for the one-year
drilling period ending June 30, 2018, resulting in a total of 40
wells towards the annual 50 well drilling commitment.
As of Dec. 31, 2017, the Company had 2,165 gross
(861.6 net) producing wells with 78 gross wells in various stages
of completion, as detailed in the following table:
|
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|
|
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|
|
|
|
Project
Area |
|
Gross
Producing
Wells |
|
Gross Wells
Waiting/Undergoing
Completion |
|
|
Catarina |
|
389 |
|
4 |
|
|
Comanche |
|
1,582 |
|
71 |
|
|
Maverick |
|
63 |
|
— |
|
|
Palmetto |
|
84 |
|
3 |
|
|
TMS /
Other |
|
47 |
|
— |
|
|
Total |
|
2,165 |
|
78 |
|
PRODUCTION VOLUMES, AVERAGE SALES PRICES, AND OPERATING
COSTS PER BOE
The Company’s production mix during the fourth
quarter 2017 consisted of approximately 34 percent oil, 34 percent
natural gas liquids (“NGLs”), and 32 percent natural gas. By
asset area, Catarina, Comanche, Maverick, and Palmetto/TMS/Other
comprised approximately 53 percent, 38 percent, eight percent, and
one percent, respectively, of the Company’s total fourth quarter
2017 production volumes.
Revenues of approximately $246 million during
the fourth quarter 2017 were 96 percent higher compared to the
fourth quarter 2016 and 33 percent higher compared to third quarter
2017 revenues of approximately $184.8 million. Adjusted
revenues for the fourth quarter 2017, a non-GAAP financial measure
that includes a $1.7 million loss in hedge settlements, were $244.3
million, 68 percent higher compared to the fourth quarter 2016 and
25 percent higher compared to third quarter 2017 Adjusted revenues
of $195.3 million.
Commodity price realizations during the fourth
quarter 2017, which include the impact of hedge settlements, were
$54.51 per barrel (“Bbl”) of oil, $22.81 per Bbl of NGLs, and $3.20
per thousand cubic feet (“Mcf”) of natural gas.
Production, average sales prices, and operating
costs and expenses per barrel of oil equivalent for the fourth
quarter 2017 are summarized in the following table:
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|
|
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|
Three Months Ended |
|
Twelve Months Ended |
|
|
|
|
December
31, |
|
December
31, |
|
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
Net Production: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
(MBbl) |
|
|
2,559 |
|
|
1,534 |
|
|
8,217 |
|
|
6,370 |
|
|
Natural
gas liquids (MBbl) |
|
|
2,552 |
|
|
1,340 |
|
|
8,342 |
|
|
5,960 |
|
|
Natural
gas (MMcf) |
|
|
14,585 |
|
|
10,098 |
|
|
54,651 |
|
|
43,189 |
|
|
Total oil
equivalent (MBoe)(1) |
|
|
7,542 |
|
|
4,557 |
|
|
25,667 |
|
|
19,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Sales Price Excluding
Derivatives(2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($
per Bbl) |
|
$ |
56.32 |
|
$ |
45.14 |
|
$ |
48.69 |
|
$ |
37.95 |
|
|
Natural
gas liquids ($ per Bbl) |
|
|
22.81 |
|
|
18.81 |
|
|
20.52 |
|
|
13.72 |
|
|
Natural
gas ($ per Mcf) |
|
|
2.99 |
|
|
3.10 |
|
|
3.10 |
|
|
2.50 |
|
|
Oil
equivalent ($ per Boe) |
|
$ |
32.62 |
|
$ |
27.59 |
|
$ |
28.84 |
|
$ |
22.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Sales Price Including
Derivatives(3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($
per Bbl) |
|
$ |
54.51 |
|
$ |
56.88 |
|
$ |
50.12 |
|
$ |
55.37 |
|
|
Natural
gas liquids ($ per Bbl) |
|
|
22.81 |
|
|
18.81 |
|
|
20.52 |
|
|
13.73 |
|
|
Natural
gas ($ per Mcf) |
|
|
3.20 |
|
|
3.25 |
|
|
3.12 |
|
|
3.07 |
|
|
Oil
equivalent ($ per Boe) |
|
$ |
32.40 |
|
$ |
31.89 |
|
$ |
29.39 |
|
$ |
29.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average unit costs per Boe: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
natural gas production expenses(4) |
|
$ |
9.81 |
|
$ |
7.40 |
|
$ |
9.52 |
|
$ |
7.97 |
|
|
Production and ad valorem taxes |
|
$ |
1.32 |
|
$ |
1.22 |
|
$ |
1.43 |
|
$ |
1.01 |
|
|
Depreciation, depletion, amortization and accretion |
|
$ |
8.27 |
|
$ |
8.57 |
|
$ |
6.90 |
|
$ |
7.55 |
|
|
Impairment of oil and natural gas properties |
|
$ |
4.91 |
|
$ |
2.99 |
|
$ |
1.54 |
|
$ |
2.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Includes approximately 2,417 Boe of production associated with
UnSub for the three months ended December 31, 2017. |
|
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|
|
|
(2)
Excludes the impact of derivative instrument settlements. |
|
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|
|
|
|
|
|
|
|
|
(3)
Includes the impact of derivative instrument settlements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4) Includes a $5.9 million and $23.7 million
non-cash gain for the three and twelve months ended December 31,
2017, respectively, and $5.9 million and $23.7 million non-cash
gain for the three and twelve months ended December 31, 2016,
respectively, from the amortization of the deferred gain on Western
Catarina Midstream divestiture. |
|
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|
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|
CAPITAL EXPENDITURESCapital expenditures
incurred during the full year 2017 totaled approximately $551.4
million, which were allocated approximately 95 percent to drilling,
completion, infrastructure, and geology and geophysics activities,
and 5 percent to leasing and business development activities.
METHOD OF ACCOUNTINGThe Company has elected to
convert from the full cost method to the successful efforts method
of accounting, in order to provide increased transparency of its
financial statements and comparability to peers. Accordingly,
financial information for prior periods contained in this release
has been recast to reflect retrospective application of the
successful efforts method. Under the successful efforts
method of accounting, Sanchez Energy recognized a $37 million
impairment charge in the fourth quarter 2017, largely as a result
of the reduced value of undeveloped Tuscaloosa Marine Shale acreage
in Mississippi and Louisiana. Additionally, the Company
recognized a $73 million gain on the sale of its Javelina asset,
which closed in the third quarter 2017.
FINANCIAL RESULTS
The Company reported a net loss attributable to
common stockholders of $79.4 million for the fourth quarter 2017,
which includes $61.2 million in non-cash mark-to-market losses
related to hedging activities, a $37 million non-cash impairment
charge, and $1.8 million in one-time acquisition and divestiture
costs and other non-recurring items. This compares to the
Company’s reported net income attributable to common stockholders
of $7.4 million for the fourth quarter 2016.
The Company reported a net loss attributable to
common stockholders of $35.1 million for the full year 2017.
This compares to the Company’s reported net loss attributable to
common stockholders of $157.4 million for the full year 2016.
The Company’s fourth quarter 2017 Adjusted
EBITDAX (a non-GAAP financial measure) of approximately $137.4
million was 39 percent higher when compared to third quarter 2017
Adjusted EBITDAX of $98.9 million and 89 percent higher when
compared to the fourth quarter 2016. The Company’s Adjusted
Earnings (a non-GAAP financial measure) for the fourth quarter 2017
of $21.8 million excludes $61.2 million in non-cash mark-to-market
losses related to hedging activities, a $37 million non-cash
impairment charge, and $1.8 million in one-time acquisition and
divestiture costs and other non-recurring items.
For the full year 2017, the Company reported
Adjusted EBITDAX of $372 million, which is 27 percent higher when
compared to full year 2016 Adjusted EBITDAX of $293 million.
The Company’s Adjusted Loss (a non-GAAP financial measure) for the
full year 2017 of $24.6 million excludes $19.2 million in non-cash
mark-to-market losses related to hedging activities, a $39.6
million non-cash impairment charge, and $30.5 million in one-time
acquisition and divestiture costs and other non-recurring
items. Adjusted EBITDAX and Adjusted Earnings (Loss) are
non-GAAP financial measures defined in the tables included with
today’s news release.
GENERAL AND ADMINISTRATIVE EXPENSE
The Company reported general and administrative
(“G&A”) expenses of $32.6 million in the fourth quarter 2017.
Included in G&A expenses is $1.8 million in acquisition
and divestiture costs, $5.6 million of non-cash equity
compensation, and $3.6 million associated with the change in value
of the phantom units that vest periodically in accordance with the
terms of the Company’s equity-based incentive awards. Excluding
these items, Base G&A expenses (a non-GAAP financial measure
defined as G&A expenses less these items) during the fourth
quarter 2017 were approximately $21.5 million.
The Company presents Base G&A expense in
addition to reported G&A expense in accordance with U.S.
GAAP. The Company has included Base G&A in this press
release because this measure is commonly used by management,
analysts and investors as an indicator of cost management and
operating efficiency on a comparable basis from period to
period. The following table presents a reconciliation of our
G&A to Base G&A (in thousands):
|
|
|
Three Months Ended December
31, |
|
Twelve Months Ended
December 31, |
|
|
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Total general and
administrative |
$ |
32,557 |
|
$ |
39,682 |
|
$ |
144,401 |
|
$ |
110,081 |
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation - restricted stock (non-cash) |
5,572 |
|
|
7,057 |
|
|
22,909 |
|
|
24,961 |
Stock-based compensation - phantom units |
3,632 |
|
|
4,008 |
|
|
17,388 |
|
|
12,128 |
Acquisition and divestiture costs included in G&A |
|
|
1,834 |
|
|
6,575 |
|
|
30,527 |
|
|
8,404 |
Base general and administrative |
$ |
21,519 |
|
$ |
22,042 |
|
$ |
73,577 |
|
$ |
64,588 |
HEDGING UPDATE
On a consolidated basis, the Company has hedged approximately
22,000 Bbls per day of its 2018 oil production and 189,000 million
British thermal units (“MMBtu”) per day of its 2018 natural gas
production, and approximately 10,600 Bbls per day of its 2019 oil
production and 48,000 MMBtu per day of its 2019 natural gas
production. Additional information on the Company’s hedge
positions can be found in the Sanchez Energy Investor Presentation
posted at www.sanchezenergycorp.com.
LIQUIDITY AND CREDIT FACILITY
As of Dec. 31, 2017, the Company had liquidity of approximately
$589 million, which consisted of $184 million in cash and cash
equivalents, $250 million of borrowing capacity under a revolving
credit facility available to the Company and its restricted
subsidiaries with a borrowing base of $350 million and an elected
commitment amount of $300 million (the “Sanchez Energy Credit
Facility”), and $155 million of borrowing capacity under a
subsidiary-level revolving credit facility, non-recourse to Sanchez
Energy, with a borrowing base and elected commitment of $330
million.
In February 2018, the Company announced and
closed a comprehensive financing strategy that included the sale of
$500 million in 7.25% Senior Secured First Lien Notes due 2023.
In conjunction with the financing strategy, the Company
reduced the size of the Sanchez Energy Credit Facility from a
commitment level of $300 million to $25 million, which remains
available for working capital and to support credit and hedging
activities of the Company and its restricted subsidiaries.
The maturity date of the Sanchez Energy Credit Facility was also
extended from 2019 to 2023.
SHARE COUNT
As of Dec. 31, 2017, the Company had
approximately 84 million common shares outstanding. Assuming
all Series A Convertible Perpetual Preferred Stock and Series B
Convertible Perpetual Preferred Stock were converted, total
outstanding common shares as of Dec. 31, 2017, would have been
approximately 96.5 million. For the three months ended Dec.
31, 2017, the weighted average number of unrestricted common shares
used to calculate net loss attributable to common stockholders,
basic and diluted, which are determined in accordance with GAAP,
was 78.8 million.
CONFERENCE CALL
Sanchez Energy will host a conference call for
investors on Monday, Feb. 26, 2018, at 9:00 a.m. Central Time
(10:00 a.m. Eastern Time). Interested investors can listen to
the call via webcast, both live and rebroadcast, over the Internet
at:
https://edge.media-server.com/m6/p/zezsac6o
ABOUT SANCHEZ ENERGY
CORPORATIONSanchez Energy Corporation (NYSE:SN) is an
independent exploration and production company focused on the
acquisition and development of U.S. onshore unconventional oil and
natural gas resources, with a current focus on the Eagle Ford Shale
in South Texas where we have assembled approximately 285,000 net
acres. For more information about Sanchez Energy Corporation,
please visit our website: www.sanchezenergycorp.com.
FORWARD LOOKING STATEMENTS
This press release contains, and our officers
and representatives may from time to time make, 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. All statements, other than statements of
historical facts, included in this press release that address
activities, events or developments that Sanchez Energy expects,
believes or anticipates will or may occur in the future are
forward-looking statements, including statements relating to future
financial and operating results and returns, our strategy and
plans, including future drilling plans and economic drilling zones,
our ability to increase reserves and production and generate income
or cash flows, our ability to keep well costs down, the benefits
related to the Comanche transaction and the Company’s anticipated
ability to fund capital expenditures or reduce its leverage.
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," “budget,” “forecast,” “guidance,” "profile,"
"model," "strategy," "future," 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 Sanchez Energy, which may cause actual results to differ
materially from those implied or expressed by the forward-looking
statements, including, but not limited to the failure to
successfully execute our business and financial strategies, the
failure of acquired assets, including
the Comanche assets, and our joint ventures (including
our partnership with affiliates of the Blackstone Group, L.P.)
to perform as anticipated, the inability to successfully integrate
the various assets acquired by us into our operations, fully
identify potential problems with respect to such properties and
accurately estimate reserves, production and costs with respect to
such properties, the failure to continue to produce oil and gas at
historical rates, the costs of operations, delays, and any other
difficulties related to producing oil or gas, the price of oil or
gas, the failure to realize benefits from our transactions with
Sanchez Midstream Partners LP, the marketing and sales of produced
oil and gas, the estimates made in evaluating reserves,
competition, general economic conditions and the ability to manage
our growth, our expectations regarding our future liquidity,
leverage or production, our expectations regarding the results of
our efforts to improve the efficiency of our operations to reduce
our costs, disruptions due to extreme weather conditions, such as
extreme rainfall, hurricanes or tornadoes and other factors
described in Sanchez Energy's most recent Annual Report on Form
10-K and any updates to those risk factors set forth in Sanchez
Energy's Quarterly Reports on Form 10-Q or Current Reports on Form
8-K. Further information on such assumptions, risks and
uncertainties is available in Sanchez Energy's filings with the
U.S. Securities and Exchange Commission (the "SEC"). Sanchez
Energy's filings with the SEC are available on our website at
www.sanchezenergycorp.com and on the SEC's website at www.sec.gov.
In light of these risks, uncertainties and assumptions, the events
anticipated by Sanchez Energy's forward-looking statements may not
occur, and, if any of such events do occur, Sanchez Energy may not
have correctly anticipated the timing of their occurrence or the
extent of their impact on its actual results. Accordingly,
you should not place any undue reliance on any of Sanchez Energy's
forward-looking statements. Any forward-looking statement
speaks only as of the date on which such statement is made, and
Sanchez Energy 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.
SANCHEZ ENERGY
CORPORATIONCONSOLIDATED STATEMENT OF OPERATIONS DATA
(unaudited) (in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
December
31, |
|
December
31, |
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
Oil
sales |
|
$ |
144,133 |
|
|
$ |
69,257 |
|
|
$ |
400,045 |
|
|
$ |
241,766 |
|
Natural
gas liquid sales |
|
|
58,217 |
|
|
|
25,209 |
|
|
|
171,139 |
|
|
|
81,744 |
|
Natural
gas sales |
|
|
43,629 |
|
|
|
31,269 |
|
|
|
169,147 |
|
|
|
107,816 |
|
Total
revenues |
|
|
245,979 |
|
|
|
125,735 |
|
|
|
740,331 |
|
|
|
431,326 |
|
OPERATING COSTS AND EXPENSES: |
|
|
|
|
|
|
|
|
|
Oil and natural gas production expenses |
74,012 |
|
|
|
33,731 |
|
|
|
244,461 |
|
|
|
155,660 |
|
Exploration expenses |
— |
|
|
|
54 |
|
|
|
5,755 |
|
|
|
403 |
|
Production and ad valorem taxes |
9,946 |
|
|
|
5,581 |
|
|
|
36,615 |
|
|
|
19,633 |
|
Depreciation, depletion, amortization and accretion |
62,372 |
|
|
|
39,064 |
|
|
|
177,078 |
|
|
|
147,485 |
|
Impairment of oil and natural gas properties |
37,018 |
|
|
|
13,606 |
|
|
|
39,574 |
|
|
|
47,381 |
|
General
and administrative (1) |
|
|
32,557 |
|
|
|
39,682 |
|
|
|
144,401 |
|
|
|
110,081 |
|
Total operating costs and expenses |
|
215,905 |
|
|
|
131,718 |
|
|
|
647,884 |
|
|
|
480,643 |
|
Operating income (loss) |
30,074 |
|
|
|
(5,983 |
) |
|
|
92,447 |
|
|
|
(49,317 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
Interest income |
|
166 |
|
|
|
227 |
|
|
|
836 |
|
|
|
856 |
|
Other income |
|
5,648 |
|
|
|
329 |
|
|
|
11,102 |
|
|
|
134 |
|
Gain on disposal of assets |
— |
|
|
|
85,322 |
|
|
|
81,955 |
|
|
|
85,322 |
|
Interest expense |
|
(35,492 |
) |
|
|
(31,747 |
) |
|
|
(140,163 |
) |
|
|
(126,973 |
) |
Earnings from equity investments |
— |
|
|
|
311 |
|
|
|
779 |
|
|
|
3,466 |
|
Net losses on commodity derivatives |
|
(62,877 |
) |
|
|
(35,796 |
) |
|
|
(6,100 |
) |
|
|
(53,149 |
) |
Total other income (expense) |
|
(92,555 |
) |
|
|
18,646 |
|
|
|
(51,591 |
) |
|
|
(90,344 |
) |
Income (loss) before income taxes |
(62,481 |
) |
|
|
12,663 |
|
|
|
40,856 |
|
|
|
(139,661 |
) |
Income tax benefit (expense) |
|
1,129 |
|
|
|
(384 |
) |
|
|
2,336 |
|
|
|
(1,825 |
) |
Net income (loss) |
|
(61,352 |
) |
|
|
12,279 |
|
|
|
43,192 |
|
|
|
(141,486 |
) |
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends |
(3,987 |
) |
|
|
(3,987 |
) |
|
|
(15,948 |
) |
|
|
(15,948 |
) |
Preferred unit dividends and distributions |
(8,497 |
) |
|
|
— |
|
|
|
(44,259 |
) |
|
|
— |
|
Preferred unit amortization |
(5,530 |
) |
|
|
— |
|
|
|
(18,039 |
) |
|
|
— |
|
Net income allocable to participating securities |
— |
|
|
|
(851 |
) |
|
|
— |
|
|
|
— |
|
Net income (loss) attributable to
common stockholders |
$ |
(79,366 |
) |
|
$ |
7,441 |
|
|
$ |
(35,054 |
) |
|
$ |
(157,434 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share - basic |
$ |
(1.01 |
) |
|
$ |
0.09 |
|
|
$ |
(0.46 |
) |
|
$ |
(2.67 |
) |
Weighted
average number of shares used to calculate net loss attributable to
common stockholders - basic |
|
|
78,804 |
|
|
|
78,491 |
|
|
|
75,608 |
|
|
|
58,900 |
|
Net income (loss) per common share - diluted |
$ |
(1.01 |
) |
|
$ |
0.09 |
|
|
$ |
(0.46 |
) |
|
$ |
(2.67 |
) |
Weighted
average number of shares used to calculate net income (loss)
attributable to common stockholders - diluted (2) (3) |
|
|
78,804 |
|
|
|
78,491 |
|
|
|
75,608 |
|
|
|
58,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) Inclusive of non-cash stock-based compensation
expense of $5.6 million and $7.1 million, respectively, for the
three months ended December 31, 2017 and 2016, and $22.9 million
and $25.0 million, respectively, for the years ended December 31,
2017 and 2016. 2) The three months ended December 31, 2016
excludes 1,314,980 shares of weighted average restricted stock and
12,554,481 shares of common stock resulting from an assumed
conversion of the Company's Series A Preferred Stock and Series B
Preferred Stock from the calculation of the denominator for diluted
earnings (loss) per common share as these shares were
anti-dilutive.3) The year ended December 31, 2017 excludes
2,755,893 shares of weighted average restricted stock and
12,520,179 shares of common stock resulting from an assumed
conversion of the Company's Series A Preferred Stock and Series B
Preferred Stock and 100,000 contingently issuable shares from the
calculation of the denominator for diluted loss per common share as
these shares were anti-dilutive. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SANCHEZ ENERGY
CORPORATIONCONSOLIDATED BALANCE SHEET (unaudited)(in
thousands, except per share amounts)
|
|
December 31, |
|
|
2017 |
|
|
2016 |
|
ASSETS |
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
184,434 |
|
|
$ |
501,917 |
|
Oil and natural gas receivables |
101,396 |
|
|
|
41,077 |
|
Joint interest billings receivables |
22,569 |
|
|
|
476 |
|
Accounts receivable - related entities |
4,491 |
|
|
|
6,401 |
|
Fair value of derivative instruments |
16,430 |
|
|
|
— |
|
Other current assets |
|
21,478 |
|
|
|
12,934 |
|
Total current assets |
|
350,798 |
|
|
|
562,805 |
|
Oil and natural gas properties, on the basis of successful
efforts accounting: |
|
Proved oil and natural gas properties |
3,130,407 |
|
|
|
1,849,732 |
|
Unproved oil and natural gas properties |
|
398,605 |
|
|
|
225,023 |
|
Total oil and natural gas properties |
3,529,012 |
|
|
|
2,074,755 |
|
Less:
Accumulated depreciation, depletion, amortization and
impairment |
|
|
(1,501,553 |
) |
|
|
(1,370,236 |
) |
Total oil and natural gas properties, net |
|
2,027,459 |
|
|
|
704,519 |
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
Fair value of derivative instruments |
1,428 |
|
|
|
— |
|
Investments (Investment in SNMP measured at fair value of $25.2
million and $26.8 million as of December 31, 2017 and 2016,
respectively) |
|
|
38,462 |
|
|
|
39,656 |
|
Other assets |
|
52,488 |
|
|
|
25,231 |
|
Total
assets |
|
$ |
2,470,635 |
|
|
$ |
1,332,211 |
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable |
$ |
14,994 |
|
|
$ |
1,076 |
|
Other payables |
|
81,970 |
|
|
|
2,251 |
|
Accrued liabilities: |
|
|
|
|
|
Capital expenditures |
|
85,340 |
|
|
|
35,154 |
|
Other |
|
|
84,794 |
|
|
|
82,458 |
|
Deferred premium liability |
— |
|
|
|
2,079 |
|
Fair value of derivative instruments |
56,190 |
|
|
|
31,778 |
|
Short-term debt |
|
23,996 |
|
|
|
— |
|
Other current liabilities |
|
115,244 |
|
|
|
31,108 |
|
Total current liabilities |
|
462,528 |
|
|
|
185,904 |
|
|
|
|
|
|
|
|
Long term debt, net of premium, discount and debt issuance
costs |
1,930,683 |
|
|
|
1,712,767 |
|
Asset retirement obligations |
36,098 |
|
|
|
25,087 |
|
Fair value of derivative instruments |
17,474 |
|
|
|
3,236 |
|
Other liabilities |
|
65,480 |
|
|
|
89,199 |
|
Total liabilities |
|
2,512,263 |
|
|
|
2,016,193 |
|
Commitments and contingencies |
|
|
|
|
Mezzanine equity: |
|
|
|
|
|
Preferred
units ($1,000 liquidation preference, 500,000 units authorized;
500,000 and zero units issued and outstanding as of December 31,
2017 and 2016, respectively) |
|
|
427,512 |
|
|
|
— |
|
Stockholders' equity: |
|
|
|
|
|
Preferred
stock ($0.01 par value, 15,000,000 shares authorized; 1,838,985
shares issued and outstanding as of December 31, 2017 and 2016 of
4.875% Convertible Perpetual Preferred Stock, Series A; 3,527,830
shares issued and outstanding as of December 31, 2017 and 2016 of
6.500% Convertible Perpetual Preferred Stock, Series B) |
|
|
53 |
|
|
|
53 |
|
Common
stock ($0.01 par value, 150,000,000 shares authorized; 83,984,327
and 66,622,624 shares issued and outstanding as of December 31,
2017 and 2016, respectively |
|
|
845 |
|
|
|
670 |
|
Additional paid-in capital |
|
1,362,118 |
|
|
|
1,112,397 |
|
Accumulated deficit |
|
(1,832,156 |
) |
|
|
(1,797,102 |
) |
Total stockholders' deficit |
|
(469,140 |
) |
|
|
(683,982 |
) |
Total liabilities and stockholders' deficit |
$ |
2,470,635 |
|
|
$ |
1,332,211 |
|
|
|
|
|
|
|
|
SANCHEZ ENERGY CORPORATIONNon-GAAP Reconciliation
– Adjusted EBITDAX
Adjusted EBITDAX is a non‑GAAP financial measure
that 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 as 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. Our
Adjusted EBITDAX should not be considered an alternative to net
income (loss), operating income (loss), cash flows provided by
(used in) operating activities or any other measure of financial
performance or liquidity presented in accordance with
U.S. 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 presents a reconciliation of our net loss to
Adjusted EBITDAX (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, |
|
Three Months Ended September 30, |
|
Twelve Months Ended December
31, |
|
|
|
2017 |
|
|
2016 |
|
|
|
2017 |
|
|
2017 |
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
(61,352 |
) |
|
$ |
12,279 |
|
|
$ |
35,823 |
|
|
$ |
43,192 |
|
|
$ |
(141,486 |
) |
|
Adjusted by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
35,492 |
|
|
|
31,747 |
|
|
|
35,686 |
|
|
|
140,163 |
|
|
|
126,973 |
|
|
Net
losses on commodity derivative contracts |
|
|
62,877 |
|
|
|
35,796 |
|
|
|
41,719 |
|
|
|
6,100 |
|
|
|
53,149 |
|
|
Net
settlements received on commodity derivative contracts (1) |
|
|
(1,659 |
) |
|
|
19,602 |
|
|
|
10,527 |
|
|
|
13,141 |
|
|
|
135,600 |
|
|
Exploration expense |
|
— |
|
|
|
54 |
|
|
|
957 |
|
|
|
5,755 |
|
|
|
403 |
|
|
Depreciation, depletion, amortization and accretion |
62,372 |
|
|
|
39,064 |
|
|
|
47,431 |
|
|
|
177,078 |
|
|
|
147,485 |
|
|
Impairment of oil and natural gas properties |
37,018 |
|
|
|
13,606 |
|
|
|
740 |
|
|
|
39,574 |
|
|
|
47,381 |
|
|
Stock-based compensation expense (non-cash) |
5,572 |
|
|
|
7,057 |
|
|
|
911 |
|
|
|
22,909 |
|
|
|
24,961 |
|
|
Acquisition and divestiture costs included in general and
administrative |
1,834 |
|
|
|
6,575 |
|
|
|
1,771 |
|
|
|
30,527 |
|
|
|
8,404 |
|
|
Income tax expense (benefit) |
(1,129 |
) |
|
|
384 |
|
|
|
— |
|
|
|
(2,336 |
) |
|
|
1,825 |
|
|
Gain on sale of oil and natural gas properties |
— |
|
|
|
(85,322 |
) |
|
|
(71,589 |
) |
|
|
(81,955 |
) |
|
|
(85,322 |
) |
|
(Gain) loss on embedded derivatives |
3,603 |
|
|
|
— |
|
|
|
(1,804 |
) |
|
|
1,551 |
|
|
|
— |
|
|
(Gain) loss on investments |
(1,099 |
) |
|
|
(1,818 |
) |
|
|
2,776 |
|
|
|
871 |
|
|
|
(1,818 |
) |
|
Amortization of deferred gain on Western Catarina Midstream
Divestiture |
(5,929 |
) |
|
|
(5,930 |
) |
|
|
(5,929 |
) |
|
|
(23,720 |
) |
|
|
(23,719 |
) |
|
Interest income |
|
(166 |
) |
|
|
(227 |
) |
|
|
(163 |
) |
|
|
(836 |
) |
|
|
(856 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDAX(2) |
$ |
137,434 |
|
|
$ |
72,867 |
|
|
$ |
98,856 |
|
|
$ |
372,014 |
|
|
$ |
292,980 |
|
|
|
|
|
(1) This amount has been reduced by premiums
associated with derivatives that settled during the respective
periods, which may include premiums accrued but not yet paid as of
the end of the quarter based on timing of cash settlement payments
with counterparties. |
|
|
(2) UnSub
component of 4Q17 Adjusted EBITDAX was approximately 30
percent. |
|
SANCHEZ ENERGY CORPORATIONNon-GAAP Reconciliation
– Adjusted Earnings (Loss)
We present Adjusted Earnings (Loss) attributable
to common stockholders (“Adjusted Earnings (Loss)”) in addition to
our reported net income (loss) in accordance with U.S. GAAP.
This information is provided because management believes exclusion
of the impact of the items included in our definition of Adjusted
Earnings (Loss) below will help investors compare results between
periods, identify operating trends that could otherwise be masked
by these items and highlight the impact that commodity price
volatility has on our results. Adjusted Earnings (Loss) is
not intended to represent cash flows for the period, nor is it
presented as a substitute for net income (loss), operating income
(loss), cash flows provided by (used in) operating activities or
any other measure of financial performance or liquidity presented
in accordance with U.S. GAAP. The following table
presents a reconciliation of our net income (loss) to Adjusted
Earnings (Loss) (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31, |
|
Three Months Ended, September
30 |
|
Twelve Months Ended December
31, |
|
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2017 |
|
|
2016 |
|
|
Net income (loss) |
$ |
(61,352 |
) |
|
$ |
12,279 |
|
|
$ |
35,823 |
|
|
$ |
43,192 |
|
|
$ |
(141,486 |
) |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock dividends |
(3,987 |
) |
|
|
(3,987 |
) |
|
|
(3,987 |
) |
|
|
(15,948 |
) |
|
|
(15,948 |
) |
|
Preferred unit dividends and distributions |
(8,497 |
) |
|
|
— |
|
|
|
(8,347 |
) |
|
|
(44,259 |
) |
|
|
— |
|
|
Preferred unit amortization |
|
(5,530 |
) |
|
|
— |
|
|
|
(5,517 |
) |
|
|
(18,039 |
) |
|
|
— |
|
|
Net income (loss) attributable to
common shares and participating
securities |
(79,366 |
) |
|
|
8,292 |
|
|
|
17,972 |
|
|
|
(35,054 |
) |
|
|
(157,434 |
) |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net losses on commodity derivatives contracts |
62,877 |
|
|
|
35,796 |
|
|
|
41,719 |
|
|
|
6,100 |
|
|
|
53,149 |
|
|
Net settlements received on commodity derivative contracts
(1) |
(1,659 |
) |
|
|
19,602 |
|
|
|
10,527 |
|
|
|
13,141 |
|
|
|
135,600 |
|
|
Impairment of oil and natural gas properties |
37,018 |
|
|
|
13,606 |
|
|
|
740 |
|
|
|
39,574 |
|
|
|
47,381 |
|
|
Stock-based compensation expense (non-cash) |
5,572 |
|
|
|
7,057 |
|
|
|
911 |
|
|
|
22,909 |
|
|
|
24,961 |
|
|
Acquisition and divestiture costs included in general and
administrative |
1,834 |
|
|
|
6,575 |
|
|
|
1,771 |
|
|
|
30,527 |
|
|
|
8,404 |
|
|
Gain on sale of oil and natural gas properties |
— |
|
|
|
(85,322 |
) |
|
|
(71,589 |
) |
|
|
(81,955 |
) |
|
|
(85,322 |
) |
|
(Gain) loss on embedded derivatives |
3,603 |
|
|
|
— |
|
|
|
(1,804 |
) |
|
|
1,551 |
|
|
|
— |
|
|
(Gain) loss on investments |
(1,099 |
) |
|
|
(1,818 |
) |
|
|
2,776 |
|
|
|
871 |
|
|
|
(1,818 |
) |
|
Amortization of deferred gain on Western Catarina Midstream
Divestiture |
(5,929 |
) |
|
|
(5,930 |
) |
|
|
(5,929 |
) |
|
|
(23,720 |
) |
|
|
(23,719 |
) |
|
Tax impact of adjustments to net income (loss) (2) |
|
413 |
|
|
|
(65 |
) |
|
|
— |
|
|
|
1,490 |
|
|
|
(16 |
) |
|
Adjusted Earnings (Loss) |
23,264 |
|
|
|
(2,207 |
) |
|
|
(2,906 |
) |
|
|
(24,566 |
) |
|
|
1,186 |
|
|
Adjusted Earnings allocable to
participating securities
(3) |
(1,453 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(140 |
) |
|
Adjusted Earnings (Loss) attributable
to common stockholders |
$ |
21,811 |
|
|
$ |
(2,207 |
) |
|
$ |
(2,906 |
) |
|
$ |
(24,566 |
) |
|
$ |
1,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares used to calculate income (loss)
attributable to common stockholders - basic |
|
|
78,804 |
|
|
|
78,491 |
|
|
|
77,453 |
|
|
|
75,608 |
|
|
|
58,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) This amount has been reduced by premiums associated
with derivatives that settled during the respective periods, which
may include premiums accrued but not yet paid as of the end of the
quarter based on timing of cash settlement payments with
counterparties. |
|
(2) The tax impact is computed by utilizing the Company’s
effective tax rate on the adjustments to reconcile net income
(loss) to Adjusted Loss. |
|
(3) The Company's restricted shares of common stock are
participating securities. |
|
|
|
|
|
|
|
|
|
|
|
|
|
SANCHEZ ENERGY CORPORATIONNon-GAAP Reconciliation
– Adjusted Revenues
We present Adjusted Revenues in addition to our
reported Revenues in accordance with U.S. GAAP. The Company defines
Adjusted Revenues as follows: total revenues plus cash settled
derivatives. The Company believes Adjusted Revenues provides
investors with helpful information with respect to the performance
of the Company's operations and management uses Adjusted Revenues
to evaluate its ongoing operations and for internal planning and
forecasting purposes. See the table below which reconciles Adjusted
Revenues and total revenues.
|
|
Three Months Ended
December 31, |
|
Three Months Ended September
30, |
|
Twelve Months Ended December
31, |
|
|
2017 |
|
|
2016 |
|
2017 |
|
2017 |
|
2016 |
Total Revenues |
$ |
245,979 |
|
|
$ |
125,735 |
|
$ |
184,806 |
|
$ |
740,331 |
|
$ |
431,326 |
Net
settlements received on commodity derivative contracts (1) |
|
|
(1,659 |
) |
|
|
19,602 |
|
|
10,527 |
|
|
13,141 |
|
|
135,600 |
Adjusted Revenue |
$ |
244,320 |
|
|
$ |
145,337 |
|
$ |
195,333 |
|
$ |
753,472 |
|
$ |
566,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) This amount has been reduced by premiums associated
with derivatives that settled during the respective periods, which
may include premiums accrued but not yet paid as of the end of the
quarter based on timing of cash settlement payments with
counterparties. |
COMPANY CONTACT:
General Inquiries: (713) 783-8000
www.sanchezenergycorp.com
Kevin SmithVP Investor Relations(281)
925-4828
Cham KingInvestor Relations & Capital
Markets(713) 756-2797