Sanchez Energy Corporation (NYSE:SN) ("Sanchez Energy" or the
"Company") today announced financial and operating results for the
first quarter 2018. First quarter 2018 highlights include:
- Production of nearly 7.3 million barrels of oil equivalent
("MMBoe"), or 80,572 barrels of oil equivalent per day ("Boe/d");
- Revenues of approximately $251 million, an 88 percent increase
compared to the first quarter 2017;
- A net loss of $4.8 million, which includes a non-cash
mark-to-market hedging loss of $24.4 million and compares to net
income of $15.7 million for the first quarter of 2017;
- Adjusted EBITDAX (a non-GAAP financial measure) of
approximately $117.9 million which includes $19.7 million in
realized hedging losses and represents an increase of approximately
133 percent compared to the first quarter 2017;
- At Catarina, four South Central wells averaged 30-day peak
production rates of approximately 1,785 Boe/d, 37 percent oil;
- At the Briscoe Metcalf Lease of Comanche, six Lower Eagle Ford
wells achieved average 30-day peak production rates of
approximately 1,342 Boe/d, 60 percent oil;
- Second quarter 2018 production guidance of 80,000 Boe/d to
84,000 Boe/d, and updated full year 2018 production guidance of
80,000 Boe/d to 84,000 Boe/d; and
- As of March 31, 2018, the Company's liquidity was approximately
$734 million, with approximately $550 million in cash and cash
equivalents and approximately $184 million of combined borrowing
capacity under the Company's two bank credit facilities.
MANAGEMENT COMMENTS
"As recently reported, several factors
contributed to production coming in below our guidance range for
the first quarter of 2018, which impacted our financial results,"
said Tony Sanchez, III, Chief Executive Officer of Sanchez Energy.
"Among the factors that were within our control were a variety of
operational tests that were conducted at Comanche with the goal of
optimizing well productivity. These tests failed to meet our
expectations and underperformed legacy well results. We have
therefore taken all corrective measures. Additional items that
negatively impacted production were a weather-related disruption
and a temporary third-party bottleneck in natural gas gathering
capacity.
"The three main variables we tested included (1)
hybrid completion designs, (2) more aggressive choke management,
and (3) the completion of drilled-but-uncompleted wells ("DUCs")
acquired with the Comanche assets, many of which were spaced
tighter than our normal drilling program. Post the operational
tests, we have transitioned to the exclusive use of slickwater
design completions on all of the Comanche properties, and project
improved production rates as these wells begin producing
hydrocarbons later in the second quarter. We also returned to a
more conservative choke management strategy, which we expect to
result in lower base decline rates and a more stable production
profile, allowing us to optimize the productivity of the multi-zone
development plan at Comanche.
"Taking all these factors into consideration, we
currently project second quarter, and full year 2018, production of
80,000 Boe/d to 84,000 Boe/d.
"We continue to achieve strong well results in
Central Catarina, which resulted in higher than expected production
at Catarina for the quarter. During the first quarter of 2018, four
E32 wells in South Central Catarina delivered average 30-day peak
production rates of approximately 1,785 Boe/d, 37 percent of which
was oil. In North Central Catarina, we recently brought a six well
pad on-line that is also outperforming expectations. These wells
delivered average 30-day peak production rates of approximately
1,300 Boe/d, 40 percent of which was oil. These results further
confirm the extent of the North Central fairway at Catarina, which
has a rate of return profile second only to South Central Catarina.
Given these strong production results, we have added 12 additional
wells to our 2018 Catarina drilling plan. These new wells are
expected to come on-line late in 2018, with the production
primarily impacting 2019. Taking these added wells into account,
along with higher working interests and the move to full slickwater
completions, we now expect our full year capital budget to be
between $475 million and $525 million.
"After successfully completing a $500
million notes offering in February 2018, we exited the quarter with
approximately $550 million in cash on the balance sheet and an
additional $184 million of undrawn revolver capacity under the
Company's two credit facilities. Additionally, we continue to
pursue strategic divestitures to reduce debt and further increase
our liquidity. We believe that we have sufficient liquidity to fund
a multi-year capital program, enabling us to develop the Company's
world-class asset base while at the same time providing the cash
flow needed to reduce our financial leverage over the next two to
three years.
"For the quarter, we reported Adjusted EBITDAX
(a non-GAAP financial measure) of approximately $117.9 million, an
increase of approximately 133 percent compared to the first quarter
2017. Importantly, the operating environment has improved
considerably over the last 12 months as oil price fundamentals have
significantly strengthened. As a result, Sanchez Energy's first
quarter of 2018 realized oil price before hedges was over $60 per
barrel ("Bbl"), the first time since 2014 we've reached this level
of realized price. We expect to see additional improvement in the
Company's financial position as operating margins increase which we
believe will help drive shareholder value."
PRODUCTION VARIANCES
The Company's first quarter 2018 production came
in below corporate guidance due to a weather-related disruption, a
temporary third-party bottleneck in natural gas takeaway capacity,
and a variety of operational issues associated with completions
tests conducted with the goal of optimizing the development of the
Comanche asset. The table below details the quarterly impact of
each of those items.
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First Quarter 2018 Production
Variances |
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|
Estimated |
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|
Key Drivers |
Impact
(1) |
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|
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|
|
|
|
Comanche Step Out and Zone Testing |
(1,900) |
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|
Choke Management |
(1,000) |
|
|
Completion Design |
(750) |
|
|
Well Spacing |
(750) |
|
|
Weather, Midstream Constraints, and Other |
(1,000) |
|
|
Catarina Well Outperformance and Operations |
1,900 |
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|
Total Impact (Boe/d) |
(3,500) |
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(1) "Estimated Impact" reflects our reasonable
estimate of the drivers of the production variance as well as their
relative weightings. |
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OPERATIONS UPDATE
During the first quarter 2018, the Company
drilled 49 gross (25.67 net) wells and completed 73 gross (23.3
net) wells. The Company brought 62 wells on-line at Comanche and 6
wells on-line at Catarina during the quarter.
The Company finished completion activities
during the first quarter 2018 on all of the 132 gross DUCs acquired
with the Comanche assets in March 2017. With continuous drilling
activity on the asset, the Company exited the first quarter 2018
with 42 gross DUCs at Comanche, a more normalized inventory level
for the asset.
As of March 31, 2018, the Company had 2,233
gross (883.2 net) producing wells with 59 gross wells in various
stages of completion, as detailed in the following table:
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Project
Area |
|
Gross
Producing
Wells |
|
Gross Wells
Waiting/Undergoing
Completion |
Catarina |
|
395 |
|
13 |
Comanche |
|
1,644 |
|
42 |
Maverick |
|
63 |
|
— |
Palmetto |
|
84 |
|
4 |
TMS /
Other |
|
47 |
|
— |
Total |
|
2,233 |
|
59 |
PRODUCTION VOLUMES, AVERAGE SALES PRICES, AND OPERATING
COSTS PER BOE
The Company's production mix during the first
quarter 2018 consisted of approximately 35 percent oil, 33 percent
natural gas liquids ("NGLs"), and 32 percent natural gas. By asset
area, Catarina, Comanche, Maverick, and Palmetto/TMS/Other
comprised approximately 48 percent, 44 percent, seven percent, and
one percent, respectively, of the Company's total first quarter
2018 production volumes.
Revenue from the sale of oil, natural gas, and
NGLs was approximately $246 million during the first quarter 2018,
approximately 84 percent higher when compared to the first quarter
2017. Adjusted Revenue for the first quarter 2018, a non-GAAP
financial measure that includes a $19.7 million loss in hedge
settlements, and $4.8 million in sales and marketing revenue, was
$232 million, 77 percent higher compared to the first quarter
2017.
Commodity price realizations during the first
quarter 2018, which include the impact of hedge settlements, were
$53.32 per Bbl of oil, $20.50 per Bbl of NGLs, and $3.09 per
thousand cubic feet ("Mcf") of natural gas.
Production, average sales prices, and operating
costs and expenses per barrel of oil equivalent ("Boe") for the
first quarter 2018 are summarized in the following table:
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Three Months Ended |
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March 31, |
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2018 |
|
2017 |
|
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Net Production: |
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|
|
|
|
|
|
|
Oil
(MBbl) |
|
|
2,521 |
|
|
1,549 |
|
|
|
Natural
gas liquids (MBbl) |
|
|
2,406 |
|
|
1,371 |
|
|
|
Natural
gas (MMcf) |
|
|
13,950 |
|
|
10,456 |
|
|
|
Total oil
equivalent (MBoe)(1) |
|
|
7,251 |
|
|
4,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Sales Price Excluding
Derivatives(2): |
|
|
|
|
|
|
|
|
|
Oil ($
per Bbl) |
|
$ |
61.64 |
|
$ |
47.31 |
|
|
|
Natural
gas liquids ($ per Bbl) |
|
|
20.50 |
|
|
19.77 |
|
|
|
Natural
gas ($ per Mcf) |
|
|
2.99 |
|
|
3.20 |
|
|
|
Oil
equivalent ($ per Boe) |
|
$ |
33.98 |
|
$ |
28.71 |
|
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Average Sales Price Including
Derivatives(3): |
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|
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|
Oil ($
per Bbl) |
|
$ |
53.32 |
|
$ |
47.26 |
|
|
|
Natural
gas liquids ($ per Bbl) |
|
|
20.50 |
|
|
19.77 |
|
|
|
Natural
gas ($ per Mcf) |
|
|
3.09 |
|
|
2.93 |
|
|
|
Oil
equivalent ($ per Boe) |
|
$ |
31.27 |
|
$ |
28.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Average unit costs per Boe: |
|
|
|
|
|
|
|
|
|
Oil and
natural gas production expenses(4) |
|
$ |
9.92 |
|
$ |
8.15 |
|
|
|
Production and ad valorem taxes |
|
$ |
1.86 |
|
$ |
1.40 |
|
|
|
Depreciation, depletion, amortization and accretion |
|
$ |
8.17 |
|
$ |
5.66 |
|
|
|
Impairment of oil and natural gas properties |
|
$ |
0.13 |
|
$ |
0.40 |
|
|
|
|
|
|
|
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|
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|
(1) Includes approximately 2,515 Boe and 876 Boe of production
associated with UnSub for the three months ended March 31, 2018 and
2017, respectively. |
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(2)
Excludes the impact of derivative instrument settlements. |
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(3)
Includes the impact of derivative instrument settlements. |
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(4) Includes a $5.9 million and $5.9 million non-cash gain for
the three and months ended March 31, 2018 and 2017, respectively,
from the amortization of the deferred gain on Western Catarina
Midstream divestiture. |
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CAPITAL EXPENDITURES
Capital expenditures incurred during the first quarter 2018
totaled approximately $150 million, which were allocated
approximately 99 percent to drilling, completion, and
infrastructure, and 1 percent to leasing and business development
activities.
FINANCIAL RESULTS
The Company reported a net loss of $4.8 million
for the first quarter 2018, which includes $24.4 million in
non-cash mark-to-market losses related to hedging activities. This
compares to the Company's reported net income of $15.7 million for
the first quarter 2017. The Company's Adjusted Loss to common
stockholders (a non-GAAP financial measure) for the first quarter
2018 was $4.4 million.
The Company's first quarter 2018 Adjusted
EBITDAX (a non-GAAP financial measure) of approximately $117.9
million was 133 percent higher when compared to first quarter 2017
Adjusted EBITDAX of $50.6 million. Adjusted EBITDAX and Adjusted
Earnings (Loss) are non-GAAP financial measures. Reconciliations of
these, and other, non-GAAP measures to their related GAAP measures
is provided within the tables of this release.
GENERAL AND ADMINISTRATIVE EXPENSE
The Company reported general and administrative
("G&A") expenses of $22.4 million in the first quarter 2018.
Included in G&A expenses are $0.4 million in acquisition and
divestiture costs, $(0.4) million of non-cash restricted stock, and
$(0.9) million associated with a change in the value of phantom
units that periodically vest in accordance with the terms of the
Company's stock-based compensation plan. Excluding these items,
Base G&A expense (a non-GAAP financial measure defined as
G&A expenses less non-recurring and non-cash items described
above) during the first quarter 2018 was approximately $23.3
million.
The Company presents Base G&A expense in
addition to reported G&A expense in accordance with 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):
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Three Months Ended March
31, |
|
|
|
|
|
|
Total
general and administrative expense |
|
2017 |
|
|
2016 |
|
|
|
Less: |
|
$ |
22,420 |
|
|
$ |
67,465 |
|
|
|
Stock-based compensation (non-cash) - restricted stock (expense)
benefit |
|
|
|
|
|
|
|
|
Stock-based compensation - phantom units (expense)
benefit |
|
|
375 |
|
|
|
(12,091 |
) |
|
|
Acquisition and divestiture costs included in G&A |
|
|
898 |
|
|
|
(10,941 |
) |
|
|
Base general and administrative expense |
|
|
(365 |
) |
|
|
(24,074 |
) |
|
|
|
|
$ |
23,328 |
|
|
$ |
20,359 |
|
|
|
|
|
|
|
|
|
|
|
|
GUIDANCE
The Company's production for the second quarter
is projected to average between 80,000 Boe/d and 84,000 Boe/d. The
company now projects an average production rate of between 80,000
Boe/d and 84,000 Boe/d for the full year.
Operating costs and expenses, including cash
production expense per Boe, are summarized in the following
table:
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Guidance |
|
|
|
2Q 2018 |
|
Full Year 2018 |
|
|
Production
Volumes: |
|
|
|
|
|
Oil
(Bbls/d) |
28,000 - 29,000 |
|
28,000 - 29,000 |
|
|
NGL
(Bbls/d) |
27,000 - 28,000 |
|
27,000 - 28,000 |
|
|
Natural
Gas (Mcf/d) |
152,000 - 160,000 |
|
152,000 - 160,000 |
|
|
Barrel of Oil Equivalent (Boe/d) |
80,000 - 84,000 |
|
80,000 - 84,000 |
|
|
|
|
|
|
|
|
Operating Costs
& Expenses : |
|
|
|
|
|
Cash
Production Expense ($/Boe)(1) |
$10.00 - $11.00 |
|
$10.00 - $11.00 |
|
|
Non-Cash
Production Expense ($MM) |
$5.9 |
|
$23.6 |
|
|
Production & Ad Valorem Taxes (% of O&G Revenue) |
5% - 6% |
|
5% - 6% |
|
|
Cash
G&A ($MM)(2) |
$22.5 |
|
$90.0 |
|
|
|
|
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|
|
(1) Cash Production Expense guidance only relates to production
expenses reported on the cash flow statement and does not include
the effect from the deferred gain related to the Western Catarina
Midstream divestiture. |
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|
(2) Excludes all restricted stock but includes phantom stock
based compensation. |
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|
Note: Cash Production Expense, Non-Cash Production Expense and
Cash G&A are Non-GAAP Financial Measures. See "Non-GAAP
Financial Measures" at the end of this press release. |
|
HEDGING UPDATE
On a consolidated basis, the Company has hedged
approximately 22,000 Bbls per day of its 2018 oil production and
191,000 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
FACILITIES
In February 2018, the Company announced and
closed a comprehensive financing strategy that included the
issuance 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 its parent-level 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 that facility was also extended from 2019 to
2023.
As of March 31, 2018, the Company had liquidity
of approximately $734 million, which consisted of $550 million in
cash and cash equivalents, $184 million of combined borrowing
capacity under two credit facilities, which include the
parent-level credit facility, which was undrawn, and a
subsidiary-level ("UnSub") revolving credit facility with a
borrowing base and commitment amount of $330 million and $159
million of available borrowing capacity. After the end of the
quarter, the Company repaid $4 million of principal under the UnSub
revolving credit facility.
SHARE
COUNT
As of March 31, 2018, the Company had
approximately 85.2 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 March 31, 2018, would have been
approximately 97.7 million. For the three months ended March 31,
2018, 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 80.9 million.
CONFERENCE CALL
Sanchez Energy will host a conference call for
investors on Tuesday, May 8, 2018, at 10:00 a.m. Central Time
(11:00 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/e9hvbth9 |
ABOUT SANCHEZ ENERGY
CORPORATION
Sanchez 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)
|
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|
|
Three Months Ended |
|
|
|
March 31, |
|
|
|
2018 |
|
|
2017* |
|
REVENUES: |
|
|
|
|
|
|
|
Oil
sales |
|
$ |
155,392 |
|
|
$ |
73,276 |
|
|
Natural
gas liquid sales |
|
|
49,305 |
|
|
|
27,100 |
|
|
Natural
gas sales |
|
|
41,729 |
|
|
|
33,467 |
|
|
Sales and
marketing revenues |
|
|
4,802 |
|
|
|
— |
|
|
Total
revenues |
|
|
251,228 |
|
|
|
133,843 |
|
|
OPERATING COSTS AND EXPENSES: |
|
|
|
|
|
|
|
Oil and
natural gas production expenses |
|
|
71,948 |
|
|
|
37,998 |
|
|
Exploration expenses |
|
|
33 |
|
|
|
352 |
|
|
Sales and
marketing expenses |
|
|
4,173 |
|
|
|
— |
|
|
Production and ad valorem taxes |
|
|
13,469 |
|
|
|
6,524 |
|
|
Depreciation, depletion, amortization and accretion |
|
|
59,248 |
|
|
|
26,404 |
|
|
Impairment of oil and natural gas properties |
|
|
948 |
|
|
|
1,845 |
|
|
General
and administrative (1) |
|
|
22,420 |
|
|
|
67,465 |
|
|
Total
operating costs and expenses |
|
|
172,239 |
|
|
|
140,588 |
|
|
Operating income (loss) |
|
|
78,989 |
|
|
|
(6,745 |
) |
|
Other
income (expense): |
|
|
|
|
|
|
|
Interest
income |
|
|
742 |
|
|
|
357 |
|
|
Other
income |
|
|
3,428 |
|
|
|
10,535 |
|
|
Gain on
sale of oil and natural gas properties |
|
|
— |
|
|
|
4,344 |
|
|
Interest
expense |
|
|
(43,920 |
) |
|
|
(33,025 |
) |
|
Earnings
from equity investments |
|
|
— |
|
|
|
435 |
|
|
Net gains
(losses) on commodity derivatives |
|
|
(44,054 |
) |
|
|
38,881 |
|
|
Total
other income (expense) |
|
|
(83,804 |
) |
|
|
21,527 |
|
|
Income
(loss) before income taxes |
|
|
(4,815 |
) |
|
|
14,782 |
|
|
Income
tax benefit |
|
|
— |
|
|
|
953 |
|
|
Net income (loss) |
|
|
(4,815 |
) |
|
|
15,735 |
|
|
Less: |
|
|
|
|
|
|
|
Preferred
stock dividends |
|
|
(3,987 |
) |
|
|
(3,987 |
) |
|
Preferred
unit dividends and distributions |
|
|
(9,908 |
) |
|
|
(16,466 |
) |
|
Preferred
unit amortization |
|
|
(5,930 |
) |
|
|
(1,710 |
) |
|
Net loss attributable to common stockholders |
|
$ |
(24,640 |
) |
|
$ |
(6,428 |
) |
|
|
|
|
|
|
|
|
|
Net loss
per common share - basic and diluted |
|
$ |
(0.30 |
) |
|
$ |
(0.09 |
) |
|
Weighted
average number of shares used to calculate net loss attributable to
common stockholders - basic and diluted (2) (3) |
|
|
80,919 |
|
|
|
69,659 |
|
|
|
|
|
|
|
|
|
|
1) Inclusive of non-cash stock-based compensation
benefit of $0.4 million and expense of $12.1 million, respectively,
for the three months ended March 31, 2018 and 2017. |
|
|
2) The three months ended March 31, 2018 excludes
1,287,113 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 from the calculation of the denominator for diluted
loss per common share as these shares were anti-dilutive. |
|
|
|
3) The three months ended March 31, 2017 excludes
1,477,299 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 from the calculation of the denominator for diluted
loss per common share as these shares were anti-dilutive. |
|
|
|
*Financial information for 2017 has been recast to reflect
retrospective application of the successful efforts method of
accounting. |
|
SANCHEZ ENERGY
CORPORATIONCONSOLIDATED BALANCE SHEET (unaudited)(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December
31, |
|
|
|
|
2018 |
|
|
2017 |
|
ASSETS |
|
|
|
|
|
|
|
Current
assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
550,044 |
|
|
$ |
184,434 |
|
|
Oil and
natural gas receivables |
|
|
86,018 |
|
|
|
101,396 |
|
|
Joint
interest billings receivables |
|
|
20,715 |
|
|
|
22,569 |
|
|
Accounts
receivable - related entities |
|
|
4,823 |
|
|
|
4,491 |
|
|
Fair
value of derivative instruments |
|
|
12,019 |
|
|
|
16,430 |
|
|
Other
current assets |
|
|
12,852 |
|
|
|
21,478 |
|
|
Total
current assets |
|
|
686,471 |
|
|
|
350,798 |
|
|
Oil and
natural gas properties, on the basis of successful efforts
accounting: |
|
|
|
|
|
|
|
Proved
oil and natural gas properties |
|
|
3,278,731 |
|
|
|
3,130,407 |
|
|
Unproved
oil and natural gas properties |
|
|
399,144 |
|
|
|
398,605 |
|
|
Total oil
and natural gas properties |
|
|
3,677,875 |
|
|
|
3,529,012 |
|
|
Less:
Accumulated depreciation, depletion, amortization and
impairment |
|
|
(1,558,802 |
) |
|
|
(1,501,553 |
) |
|
Total
oil and natural gas properties, net |
|
|
2,119,073 |
|
|
|
2,027,459 |
|
|
|
|
|
|
|
|
|
|
Other
assets: |
|
|
|
|
|
|
|
Fair
value of derivative instruments |
|
|
8,778 |
|
|
|
1,428 |
|
|
Investments (Investment in SNMP measured at fair value of $23.5
million and $25.2 million as of March 31, 2018 and December 31,
2017, respectively) |
|
|
37,312 |
|
|
|
38,462 |
|
|
Other
assets |
|
|
52,208 |
|
|
|
52,488 |
|
|
Total
assets |
|
$ |
2,903,842 |
|
|
$ |
2,470,635 |
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
10,688 |
|
|
$ |
14,994 |
|
|
Other
payables |
|
|
84,688 |
|
|
|
81,970 |
|
|
Accrued
liabilities: |
|
|
|
|
|
|
|
Capital
expenditures |
|
|
98,819 |
|
|
|
85,340 |
|
|
Other |
|
|
76,131 |
|
|
|
84,794 |
|
|
Fair
value of derivative instruments |
|
|
73,997 |
|
|
|
56,190 |
|
|
Short-term debt |
|
|
23,996 |
|
|
|
23,996 |
|
|
Other
current liabilities |
|
|
105,938 |
|
|
|
115,244 |
|
|
Total
current liabilities |
|
|
474,257 |
|
|
|
462,528 |
|
|
Long
term debt, net of premium, discount and debt issuance costs |
|
|
2,366,495 |
|
|
|
1,930,683 |
|
|
Asset
retirement obligations |
|
|
37,030 |
|
|
|
36,098 |
|
|
Fair
value of derivative instruments |
|
|
20,272 |
|
|
|
17,474 |
|
|
Other
liabilities |
|
|
39,209 |
|
|
|
65,480 |
|
|
Total
liabilities |
|
|
2,937,263 |
|
|
|
2,512,263 |
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
Mezzanine equity: |
|
|
|
|
|
|
|
Preferred
units ($1,000 liquidation preference, 500,000 units authorized,
issued and outstanding as of March 31, 2018 and December 31, 2017,
respectively) |
|
|
433,442 |
|
|
|
427,512 |
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
Preferred
stock ($0.01 par value, 15,000,000 shares authorized; 1,838,985
shares issued and outstanding as of March 31, 2018 and December 31,
2017 of 4.875% Convertible Perpetual Preferred Stock, Series A;
3,527,830 shares issued and outstanding as of March 31, 2018 and
December 31, 2017 of 6.500% Convertible Perpetual Preferred Stock,
Series B) |
|
|
53 |
|
|
|
53 |
|
|
Common
stock ($0.01 par value, 150,000,000 shares authorized; 85,172,408
and 83,984,827 shares issued and outstanding as of March 31, 2018
and December 31, 2017, respectively |
|
|
858 |
|
|
|
845 |
|
|
Additional paid-in capital |
|
|
1,366,283 |
|
|
|
1,362,118 |
|
|
Accumulated deficit |
|
|
(1,834,057 |
) |
|
|
(1,832,156 |
) |
|
Total
stockholders' deficit |
|
|
(466,863 |
) |
|
|
(469,140 |
) |
|
Total
liabilities and stockholders' deficit |
|
$ |
2,903,842 |
|
|
$ |
2,470,635 |
|
|
|
|
|
|
|
|
|
|
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
March 31, |
|
|
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(4,815 |
) |
|
$ |
15,735 |
|
|
|
Adjusted
by: |
|
|
|
|
|
|
|
|
Interest
expense |
|
|
43,920 |
|
|
|
33,025 |
|
|
|
Net
(gains) losses on commodity derivative contracts |
|
|
44,054 |
|
|
|
(38,881 |
) |
|
|
Net
settlements paid on commodity derivative contracts (1) |
|
|
(19,651 |
) |
|
|
(2,907 |
) |
|
|
Exploration expense |
|
|
33 |
|
|
|
352 |
|
|
|
Depreciation, depletion, amortization and accretion |
|
|
59,248 |
|
|
|
26,404 |
|
|
|
Impairment of oil and natural gas properties |
|
|
948 |
|
|
|
1,845 |
|
|
|
Non-cash
stock-based compensation (benefit) expense |
|
|
(375 |
) |
|
|
12,091 |
|
|
|
Acquisition and divestiture costs included in general and
administrative |
|
|
365 |
|
|
|
24,074 |
|
|
|
Income
tax benefit |
|
|
— |
|
|
|
(953 |
) |
|
|
Gains on
sale of oil and natural gas properties |
|
|
— |
|
|
|
(4,344 |
) |
|
|
Gains on
other derivatives |
|
|
(336 |
) |
|
|
(685 |
) |
|
|
(Gains)
losses on investments |
|
|
1,150 |
|
|
|
(8,864 |
) |
|
|
Amortization of deferred gain on Western Catarina Midstream
Divestiture |
|
|
(5,929 |
) |
|
|
(5,929 |
) |
|
|
Interest
income |
|
|
(742 |
) |
|
|
(357 |
) |
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDAX(2) |
|
$ |
117,870 |
|
|
$ |
50,606 |
|
|
|
|
|
|
|
|
|
|
|
|
(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 1Q18 and 1Q17 Adjusted EBITDAX was approximately
40 percent and 14 percent, respectively. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
March 31, |
|
|
|
2018 |
|
|
2017 |
|
|
Net income (loss) |
|
$ |
(4,815 |
) |
|
$ |
15,735 |
|
|
Less: |
|
|
|
|
|
|
|
Preferred
stock dividends |
|
|
(3,987 |
) |
|
|
(3,987 |
) |
|
Preferred
unit dividends and distributions |
|
|
(9,908 |
) |
|
|
(16,466 |
) |
|
Preferred
unit amortization |
|
|
(5,930 |
) |
|
|
(1,710 |
) |
|
Net loss attributable to common shares and participating
securities |
|
|
(24,640 |
) |
|
|
(6,428 |
) |
|
Plus: |
|
|
|
|
|
|
|
Net
(gains) losses on commodity derivatives contracts |
|
|
44,054 |
|
|
|
(38,881 |
) |
|
Net
settlements paid on commodity derivative contracts (1) |
|
|
(19,651 |
) |
|
|
(2,907 |
) |
|
Impairment of oil and natural gas properties |
|
|
948 |
|
|
|
1,845 |
|
|
Non-cash
stock-based compensation (benefit) expense |
|
|
(375 |
) |
|
|
12,091 |
|
|
Acquisition and divestiture costs included in general and
administrative |
|
|
365 |
|
|
|
24,074 |
|
|
Gains on
sale of oil and natural gas properties |
|
|
— |
|
|
|
(4,344 |
) |
|
Gains on
other derivatives |
|
|
(336 |
) |
|
|
(685 |
) |
|
(Gains)
losses on investments |
|
|
1,150 |
|
|
|
(8,864 |
) |
|
Amortization of deferred gain on Western Catarina Midstream
Divestiture |
|
|
(5,929 |
) |
|
|
(5,929 |
) |
|
Tax
impact of adjustments to net loss (2) |
|
|
— |
|
|
|
1,936 |
|
|
Adjusted Loss |
|
|
(4,414 |
) |
|
|
(28,092 |
) |
|
Adjusted Loss allocable to participating
securities (3) |
|
|
- |
|
|
|
- |
|
|
Adjusted Loss attributable to common
stockholders |
|
$ |
(4,414 |
) |
|
$ |
(28,092 |
) |
|
|
|
|
|
|
|
|
|
Weighted
average number of shares used to calculate loss attributable to
common stockholders - basic and diluted |
|
|
80,919 |
|
|
|
69,659 |
|
|
|
|
|
(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
March 31, |
|
|
|
2018 |
|
|
2017 |
|
|
Total Revenues |
|
$ |
251,228 |
|
|
$ |
133,843 |
|
|
Net
settlements paid on commodity derivative contracts (1) |
|
|
(19,651 |
) |
|
|
(2,907 |
) |
|
Adjusted Revenue |
|
$ |
231,577 |
|
|
$ |
130,936 |
|
|
|
|
|
(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. |
|
|
|
|
|
|
|
|
|
SANCHEZ ENERGY CORPORATIONNon-GAAP Reconciliation
– Cash Production Expense,Non-Cash Production Expense and Cash
G&A
Cash production expense equals oil and natural
gas production expense minus non‐cash production expenses. Non-cash
production expense equals oil and natural gas production expense
minus cash production expenses. Cash G&A expense equals G&A
excluding certain non‐recurring acquisition and divestiture
expenses and stock based compensation (but includes phantom stock
compensation). Cash production expense, non-cash production expense
and cash G&A are presented herein in an attempt to assist the
public in understanding the difference between oil and natural gas
production expense and G&A as will be reported in SEC filed
financials. We also view the non‐GAAP measures of cash production
expense, non-cash production expense and cash G&A as a useful
tool for comparisons of our financial indicators with those of peer
companies. In addition, these measures are commonly used by
management, analysts and investors as an indicator of cost
management and operating efficiency on a comparable basis from
period to period. Cash production expense, non-cash production
expense and cash G&A should not be considered as an alternative
to oil and natural gas production expense or G&A presentations,
as defined by GAAP.
We are unable to provide a reconciliation of the
forward‐looking non‐GAAP financial measures, cash production
expense, non-cash production expense and cash G&A, to the most
directly comparable GAAP financial measure, oil and natural gas
production expense and G&A, because the information necessary
for a quantitative reconciliation of the forward‐looking non‐GAAP
financial measure to the most directly comparable GAAP financial
measure is not available to us without unreasonable efforts. The
probable significance of providing these forward‐looking non‐GAAP
financial measures without the directly comparable GAAP financial
measures is that such GAAP financial measures may be materially
different from the corresponding non‐GAAP financial measures.
COMPANY CONTACT:Kevin SmithVP
Investor Relations(281) 925-4828
Cham KingInvestor Relations & Capital
Markets(713) 756-2797
General Inquiries: (713)
783-8000www.sanchezenergycorp.com