Sanchez Energy Corporation (NYSE: SN) (“Sanchez Energy” or the
“Company”) today announced financial and operating results for the
second quarter 2018. Second quarter 2018 highlights include:
- Production of 7.2 million barrels of oil equivalent (“MMBoe”),
or 79,516 barrels of oil equivalent per day (“Boe/d”);
- Revenues of approximately $259 million, a 48 percent increase
compared to the second quarter 2017;
- A net loss of $35.0 million, which includes a non-cash
mark-to-market hedging loss of $43.6 million and compares to net
income of $53.0 million for the second quarter 2017;
- Adjusted EBITDAX (a non-GAAP financial measure) of
approximately $107.7 million, which includes $26.4 million in
realized hedging losses and represents an increase of approximately
27 percent compared to the second quarter 2017;
- At Catarina, the Company brought nine North Central wells
on-line late in the second quarter that are performing in-line with
expectations and help delineate the North Central
fairway;
- The Company engaged a leading global consulting firm to conduct
an assessment of its performance across all aspects of the
business, with a specific focus on operations; and
- As of June 30, 2018, the Company’s liquidity was approximately
$675.2 million, with approximately $437.7 million in cash and cash
equivalents and approximately $237.5 million of combined borrowing
capacity under the Company’s two bank credit facilities.
MANAGEMENT COMMENTS
“The second quarter 2018 was a challenging
operational quarter at Comanche, as we continued to see higher than
projected production declines from wells brought on-line during the
second half of 2017 and early 2018,” said Tony Sanchez, III, Chief
Executive Officer of Sanchez Energy. “As discussed last quarter,
the key issues leading to these decline rates include: (1) poor
Upper Eagle Ford well performance in several of the delineation and
step-out areas, (2) the testing of a more aggressive flowback
strategy that resulted in well decline rates in excess of legacy
well production profiles, (3) the use of hybrid completion designs,
and (4) tighter spacing of the drilled-but-uncompleted wells
acquired with the Comanche acquisition.
“A proactive effort to stabilize and improve
production performance is already underway, including shifting back
to a more conservative choke flowback plan which began at the start
of the second quarter. The positive production results from
the latest wells on restrictive chokes gives us confidence that we
will return to organically growing production in the coming
months.
“Additionally, we have implemented an
optimization strategy to adjust completion designs based on well
spacing and geological characteristics in specific areas at
Comanche. The asset, which encompasses a large and complex
acreage position, consists of approximately 318,000 gross acres and
spans both the volatile oil and the gas condensate windows of the
Eagle Ford shale trend. With a year of operating experience
at Comanche, Sanchez Energy is significantly better positioned to
tailor completion methods and designs optimally to the different
areas of the asset.
“Similar to our enhanced performance at Catarina
over the last 12 months, where after encountering production issues
in the first half of 2017 we took corrective actions and have since
grown production by over 23 percent, we are confident that our work
to improve the performance of Comanche is on the right course.
“We will not stop at these corrective actions in
our drive to gain operational efficiencies and to enhance
production and margin capture. Accordingly, management and
our board of directors have engaged a leading global consulting
firm to assist with a comprehensive review of the Company’s
performance across all aspects of the business, with a specific
focus on operational and technical strategies. The goal of this
review is to further enhance production and operating margins in
order to achieve the financial performance Sanchez Energy’s
shareholders expect. We believe this effort, combined with
the proactive initiatives already underway, will lead to improved
operational, production, and financial performance that will
ultimately deliver enhanced shareholder returns.”
OPERATIONS UPDATE
During the second quarter 2018, the Company
drilled 57 gross (33 net) wells and completed 41 gross (28 net)
wells. The Company brought 49 gross wells on-line, 27 at
Comanche and 22 at Catarina, during the quarter.
The Company drilled ten horizontal wells in the
Briscoe Metcalf area of Comanche at the end of the first quarter
2018 in a “quad stacked” pattern that targeted both the Lower and
Upper Eagle Ford shale using a new generation high volume, high
rate slickwater completion design. The wells have continued
to outperform the Company’s type curve forecast for this area with
average 30-day and 90-day production rates of approximately 1,368
Boe/d and 1,135 Boe/d, respectively. The wells have
materially outperformed adjacent wells, producing approximately 60
percent more over the same time period.
A significant amount of the Company’s completion
activity at Comanche in the second quarter 2018 was focused on the
Diamond H Ranch in the western portion of Area 5.
During the second quarter, Sanchez Energy placed 19 gross wells
on-line at the Diamond H Ranch. While still early, the Lower
Eagle Ford Diamond H Ranch wells are performing in-line with
expectations. All of the Diamond H Ranch wells used a high
volume, high rate slickwater completion design and were placed
on-line with a conservative flow back strategy.
At Catarina, the Company brought eight E31 and
E32 wells on-line in the South Central area of the asset during the
second quarter 2018. The wells are performing in-line with
expectations, with average 30-day production rates of approximately
1,200 Boe/d.
Additionally, the Company brought three North
Central wells on-line late in the second quarter 2018 that are
performing in-line with expectations. To date, the Company
has drilled and completed 19 North Central wells. With the
Company’s drilling success in North Central Catarina, Sanchez
Energy has de-risked its entire drilling inventory on the western
and central portions of its Catarina asset.
As of June 30, 2018, the Company had 2,278 gross
(918 net) producing wells with 73 gross wells in various stages of
completion, as detailed in the following table:
|
|
|
|
|
|
|
|
Project Area |
|
Gross Producing
Wells |
|
Gross Wells Waiting/Undergoing
Completion |
|
|
Catarina |
|
425 |
|
12 |
|
|
Comanche |
|
1,657 |
|
54 |
|
|
Maverick |
|
63 |
|
3 |
|
|
Palmetto |
|
86 |
|
4 |
|
|
TMS /
Other |
|
47 |
|
— |
|
|
Total |
|
2,278 |
|
73 |
|
|
|
|
|
|
|
|
PRODUCTION VOLUMES, AVERAGE SALES PRICES, AND OPERATING
COSTS PER BOE
The Company’s production mix during the second
quarter 2018 consisted of approximately 33 percent oil, 34 natural
gas liquids (“NGLs”), and 33 percent natural gas. By asset
area, Catarina, Comanche, Maverick, and Palmetto/Tuscaloosa Marine
Shale (“TMS”)/Other comprised approximately 51 percent, 43 percent,
five percent, and one percent, respectively, of the Company’s total
second quarter 2018 production volumes.
Revenue from the sale of oil, natural gas, and
NGLs was approximately $259 million during the second quarter 2018,
approximately 48 percent higher when compared to the second quarter
2017. Adjusted Revenue for the second quarter 2018, a
non-GAAP financial measure that includes a $26.4 million loss on
hedge settlements and $5.1 million in sales and marketing revenue,
was $232.9 million, which was 27 percent higher when compared to
the second quarter 2017.
Commodity price realizations during the second
quarter 2018, which include the impact of hedge settlements, were
$52.80 per Bbl of oil, $22.76 per Bbl of NGLs, and $3.21 per
thousand cubic feet (“Mcf”) of natural gas.
Production, average sales prices, and operating
costs and expenses per barrel of oil equivalent (“Boe”) for the
second quarter 2018 are summarized in the following table:
|
|
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
|
Net Production: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
(MBbl) |
|
|
2,377 |
|
|
2,075 |
|
|
4,898 |
|
|
3,624 |
|
Natural
gas liquids (MBbl) |
|
|
2,484 |
|
|
2,130 |
|
|
4,890 |
|
|
3,501 |
|
Natural
gas (MMcf) |
|
|
14,249 |
|
|
14,814 |
|
|
28,199 |
|
|
25,270 |
|
Total oil
equivalent (MBoe)(1) |
|
|
7,236 |
|
|
6,674 |
|
|
14,488 |
|
|
11,336 |
|
Average Sales Price Excluding
Derivatives(2): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($
per Bbl) |
|
$ |
65.86 |
|
$ |
43.90 |
|
$ |
63.68 |
|
$ |
45.36 |
|
Natural
gas liquids ($ per Bbl) |
|
|
22.76 |
|
|
17.31 |
|
|
21.64 |
|
|
18.27 |
|
Natural
gas ($ per Mcf) |
|
|
2.89 |
|
|
3.22 |
|
|
2.94 |
|
|
3.21 |
|
Oil
equivalent ($ per Boe) |
|
$ |
35.13 |
|
$ |
26.33 |
|
$ |
34.56 |
|
$ |
27.31 |
|
Average Sales Price Including
Derivatives(3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($
per Bbl) |
|
$ |
52.80 |
|
$ |
47.79 |
|
$ |
53.07 |
|
$ |
47.56 |
|
Natural
gas liquids ($ per Bbl) |
|
|
22.76 |
|
|
17.31 |
|
|
21.64 |
|
|
18.27 |
|
Natural
gas ($ per Mcf) |
|
|
3.21 |
|
|
3.16 |
|
|
3.14 |
|
|
3.07 |
|
Oil
equivalent ($ per Boe) |
|
$ |
31.48 |
|
$ |
27.40 |
|
$ |
31.35 |
|
$ |
27.68 |
|
Average unit costs per Boe: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
natural gas production expenses(4) |
|
$ |
10.73 |
|
$ |
9.38 |
|
$ |
10.33 |
|
$ |
8.88 |
|
Production and ad valorem taxes |
|
$ |
1.96 |
|
$ |
1.32 |
|
$ |
1.91 |
|
$ |
1.35 |
|
Depreciation, depletion, amortization and accretion |
|
$ |
8.61 |
|
$ |
6.12 |
|
$ |
8.39 |
|
$ |
5.93 |
|
Impairment of oil and natural gas properties |
|
$ |
0.03 |
|
$ |
— |
|
$ |
0.08 |
|
$ |
0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes approximately 2,300 Boe and 2,529 Boe
of production associated with SN EF UnSub, LP ("UnSub") for the
three months ended June 30, 2018 and 2017, respectively, and 4,815
Boe and 3,406 Boe of production associated with UnSub for the six
months ended June 30, 2018 and 2017, respectively. |
|
|
(2) Excludes the impact of derivative instrument
settlements. |
|
|
|
|
|
|
|
|
|
|
(3) Includes the impact of derivative instrument
settlements. |
|
|
|
|
|
|
|
|
|
|
(4) Includes a $5.9 million non-cash gain for the
three months ended June 30, 2018 and 2017 and a $11.8 million
non-cash gain for the six months ended June 30, 2018 and 2017 from
the amortization of the deferred gain on Western Catarina Midstream
divestiture. |
|
|
|
CAPITAL EXPENDITURES
Capital expenditures incurred during the second quarter 2018
totaled approximately $174 million, which were allocated
approximately 99 percent to drilling, completion, and
infrastructure, and one percent to leasing and business development
activities.
FINANCIAL RESULTS
The Company reported a net loss of $35.0 million
for the second quarter 2018, which includes $43.6 million in
non-cash mark-to-market losses related to hedging activities.
This compares to the Company’s reported net income of $53.0
million for the second quarter 2017. The Company’s Adjusted Loss to
common stockholders (a non-GAAP financial measure) for the second
quarter 2018 was $20.9 million.
The Company’s second quarter 2018 Adjusted
EBITDAX (a non-GAAP financial measure) of approximately $107.7
million was 27 percent higher when compared to second quarter 2017
Adjusted EBITDAX of $85.1 million.
A reconciliation of non-GAAP financial measures
to their related GAAP measures is provided in the tables of this
release.
GENERAL AND ADMINISTRATIVE EXPENSE
The Company reported general and administrative
(“G&A”) expenses of $29.5 million in the second quarter 2018.
Included in G&A expenses are $0.4 million in acquisition
and divestiture costs, $4.7 million of non-cash restricted stock,
and $5.0 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 second quarter 2018 was approximately $19.4
million.
A reconciliation of Base G&A to its related
GAAP measure is provided in the tables of this
release.
HEDGING UPDATE
On a consolidated basis, the Company has hedged
approximately 22,000 Bbls per day of its 2018 oil production and
190,000 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
As of June 30, 2018, the Company had liquidity
of approximately $675.2 million, which consisted of $437.7 million
in cash and cash equivalents, $237.5 million of combined borrowing
capacity under two credit facilities, which include the $25 million
parent-level credit facility, which was undrawn, and the UnSub
revolving credit facility, which has a borrowing base and
commitment amount of $380 million and $212.5 million of available
borrowing capacity.
SHARE COUNT
As of June 30, 2018, the Company had
approximately 87.8 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 June 30, 2018, would have
been approximately 100.3 million. For the three months ended
June 30, 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 81.8 million.
CONFERENCE CALL
Sanchez Energy will host a conference call for
investors on Tuesday, Aug. 7, 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/ucda6a3r
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 283,000 net
acres. For more information about Sanchez Energy Corporation,
please visit our website: www.sanchezenergycorp.com.
FORWARD LOOKING STATEMENTSThis
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 |
|
Six Months Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
2018 |
|
|
2017* |
|
2018 |
|
|
2017* |
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil
sales |
|
$ |
156,544 |
|
|
$ |
91,096 |
|
|
$ |
311,935 |
|
|
$ |
164,372 |
|
|
Natural
gas liquid sales |
|
|
56,533 |
|
|
|
36,873 |
|
|
|
105,838 |
|
|
|
63,973 |
|
|
Natural
gas sales |
|
|
41,141 |
|
|
|
47,735 |
|
|
|
82,870 |
|
|
|
81,201 |
|
|
Sales and
marketing revenues |
|
|
5,096 |
|
|
|
— |
|
|
|
9,897 |
|
|
|
— |
|
|
Total
revenues |
|
|
259,314 |
|
|
|
175,704 |
|
|
|
510,540 |
|
|
|
309,546 |
|
|
OPERATING COSTS
AND EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
natural gas production expenses |
|
|
77,644 |
|
|
|
62,620 |
|
|
|
149,592 |
|
|
|
100,620 |
|
|
Exploration expenses |
|
|
516 |
|
|
|
4,446 |
|
|
|
549 |
|
|
|
4,797 |
|
|
Sales and
marketing expenses |
|
|
5,086 |
|
|
|
— |
|
|
|
9,259 |
|
|
|
— |
|
|
Production and ad valorem taxes |
|
|
14,208 |
|
|
|
8,799 |
|
|
|
27,677 |
|
|
|
15,323 |
|
|
Depreciation, depletion, amortization and accretion |
|
|
62,323 |
|
|
|
40,842 |
|
|
|
121,571 |
|
|
|
67,245 |
|
|
Impairment of oil and natural gas properties |
|
|
194 |
|
|
|
— |
|
|
|
1,142 |
|
|
|
1,845 |
|
|
General
and administrative (1) |
|
|
29,467 |
|
|
|
29,713 |
|
|
|
51,887 |
|
|
|
97,178 |
|
|
Total
operating costs and expenses |
|
|
189,438 |
|
|
|
146,420 |
|
|
|
361,677 |
|
|
|
287,008 |
|
|
Operating income |
|
|
69,876 |
|
|
|
29,284 |
|
|
|
148,863 |
|
|
|
22,538 |
|
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
1,528 |
|
|
|
150 |
|
|
|
2,270 |
|
|
|
507 |
|
|
Other
income (expense) |
|
|
6,715 |
|
|
|
(6,618 |
) |
|
|
10,143 |
|
|
|
3,917 |
|
|
Gain on
sale of oil and natural gas properties |
|
|
1,528 |
|
|
|
6,022 |
|
|
|
1,528 |
|
|
|
10,366 |
|
|
Interest
expense |
|
|
(44,590 |
) |
|
|
(35,961 |
) |
|
|
(88,510 |
) |
|
|
(68,986 |
) |
|
Earnings
from equity investments |
|
|
— |
|
|
|
242 |
|
|
|
— |
|
|
|
677 |
|
|
Net
gains (losses) on commodity derivatives |
|
|
(70,044 |
) |
|
|
59,614 |
|
|
|
(114,098 |
) |
|
|
98,496 |
|
|
Total
other income (expense) |
|
|
(104,863 |
) |
|
|
23,449 |
|
|
|
(188,667 |
) |
|
|
44,977 |
|
|
Income (loss) before
income taxes |
|
|
(34,987 |
) |
|
|
52,733 |
|
|
|
(39,804 |
) |
|
|
67,515 |
|
|
Income tax benefit |
|
|
— |
|
|
|
255 |
|
|
|
— |
|
|
|
1,208 |
|
|
Net income
(loss) |
|
|
(34,987 |
) |
|
|
52,988 |
|
|
|
(39,804 |
) |
|
|
68,723 |
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividends |
|
|
(3,987 |
) |
|
|
(3,987 |
) |
|
|
(7,974 |
) |
|
|
(7,974 |
) |
|
Preferred
unit dividends and distributions |
|
|
(12,500 |
) |
|
|
(10,950 |
) |
|
|
(22,408 |
) |
|
|
(27,415 |
) |
|
Preferred
unit amortization |
|
|
(6,189 |
) |
|
|
(5,282 |
) |
|
|
(12,119 |
) |
|
|
(6,992 |
) |
|
Net
income allocable to participating securities |
|
|
— |
|
|
|
(2,378 |
) |
|
|
— |
|
|
|
(1,974 |
) |
|
Net income
(loss) attributable to common stockholders |
|
$ |
(57,663 |
) |
|
$ |
30,391 |
|
|
$ |
(82,305 |
) |
|
$ |
24,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share - basic |
|
$ |
(0.71 |
) |
|
$ |
0.40 |
|
|
$ |
(1.01 |
) |
|
$ |
0.33 |
|
|
Weighted average number
of shares used to calculate net income (loss)attributable to common
stockholders - basic |
|
|
81,787 |
|
|
|
76,395 |
|
|
|
81,356 |
|
|
|
73,045 |
|
|
Net income (loss) per
common share - diluted |
|
$ |
(0.71 |
) |
|
$ |
0.39 |
|
|
$ |
(1.01 |
) |
|
$ |
0.33 |
|
|
Weighted average number
of shares used to calculate net income (loss)attributable to common
stockholders - diluted(2) (3) (4) |
|
|
81,787 |
|
|
|
89,015 |
|
|
|
81,356 |
|
|
|
73,145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) Inclusive of non-cash stock-based compensation expense of $4.7
million and $4.3 million, respectively, for the three months ended
June 30, 2018 and 2017, respectively and $4.3 million and $16.4
million for the six months ended June 30, 2018 and 2017,
respectively. |
|
|
2) The three months ended June 30, 2017 excludes 942,841 shares of
weighted average restricted stock from the calculation of the
denominator for diluted loss per common share as these shares were
anti-dilutive. |
|
|
3) The six months ended June 30, 2017 excludes 1,304,160 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. |
|
|
|
4) The three and six months ended June 30, 2018 excludes 2,484,202
and 756,417 shares, respectively, 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)
|
|
June 30, |
|
Dec. 31, |
|
|
|
2018 |
|
2017 |
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
437,689 |
|
|
$ |
184,434 |
|
|
Oil and
natural gas receivables |
|
|
88,207 |
|
|
|
101,396 |
|
|
Joint
interest billings receivables |
|
|
15,793 |
|
|
|
22,569 |
|
|
Accounts
receivable - related entities |
|
|
6,192 |
|
|
|
4,491 |
|
|
Fair
value of derivative instruments |
|
|
3,241 |
|
|
|
16,430 |
|
|
Other
current assets |
|
|
10,877 |
|
|
|
21,478 |
|
|
Total
current assets |
|
|
561,999 |
|
|
|
350,798 |
|
|
Oil and natural gas
properties, on the basis of successful efforts accounting: |
|
|
|
|
|
|
|
Proved
oil and natural gas properties |
|
|
3,418,554 |
|
|
|
3,130,407 |
|
|
Unproved
oil and natural gas properties |
|
|
434,244 |
|
|
|
398,605 |
|
|
Total oil
and natural gas properties |
|
|
3,852,798 |
|
|
|
3,529,012 |
|
|
Less: Accumulated
depreciation, depletion, amortization and impairment |
|
|
(1,618,850 |
) |
|
|
(1,501,553 |
) |
|
Total oil and natural
gas properties, net |
|
|
2,233,948 |
|
|
|
2,027,459 |
|
|
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
Fair
value of derivative instruments |
|
|
8,836 |
|
|
|
1,428 |
|
|
Investments (Investment in SNMP measured at fair value of $26.8
million and $25.2 millionas of June 30, 2018 and Dec. 31, 2017,
respectively) |
|
|
46,758 |
|
|
|
38,462 |
|
|
Other
assets |
|
|
52,873 |
|
|
|
52,488 |
|
|
Total assets |
|
$ |
2,904,414 |
|
|
$ |
2,470,635 |
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
15,446 |
|
|
$ |
14,994 |
|
|
Other
payables |
|
|
100,451 |
|
|
|
81,970 |
|
|
Accrued
liabilities: |
|
|
|
|
|
|
|
Capital
expenditures |
|
|
93,506 |
|
|
|
85,340 |
|
|
Other |
|
|
96,036 |
|
|
|
84,794 |
|
|
Fair value of
derivative instruments |
|
|
102,904 |
|
|
|
56,190 |
|
|
Short-term debt |
|
|
23,996 |
|
|
|
23,996 |
|
|
Other current
liabilities |
|
|
71,107 |
|
|
|
115,244 |
|
|
Total
current liabilities |
|
|
503,446 |
|
|
|
462,528 |
|
|
Long term debt, net of
premium, discount and debt issuance costs |
|
|
2,364,749 |
|
|
|
1,930,683 |
|
|
Asset retirement
obligations |
|
|
38,499 |
|
|
|
36,098 |
|
|
Fair value of
derivative instruments |
|
|
31,132 |
|
|
|
17,474 |
|
|
Other liabilities |
|
|
34,332 |
|
|
|
65,480 |
|
|
Total
liabilities |
|
|
2,972,158 |
|
|
|
2,512,263 |
|
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Mezzanine equity: |
|
|
|
|
|
|
|
Preferred
units ($1,000 liquidation preference, 500,000 units authorized,
issued andoutstanding as of June 30, 2018 and Dec. 31, 2017,
respectively) |
|
|
452,131 |
|
|
|
427,512 |
|
|
Stockholders'
equity: |
|
|
|
|
|
|
|
Preferred
stock ($0.01 par value, 15,000,000 shares authorized; 1,838,985
shares issuedand outstanding as of June 30, 2018 and Dec. 31, 2017
of 4.875% Convertible PerpetualPreferred Stock, Series A; 3,527,830
shares issued and outstanding as of June 30, 2018 andDec. 31, 2017
of 6.500% Convertible Perpetual Preferred Stock, Series B) |
|
|
53 |
|
|
|
53 |
|
|
Common
stock ($0.01 par value, 300,000,000 shares authorized; 87,797,689
and83,984,827 shares issued and outstanding as of June 30, 2018 and
Dec. 31, 2017,respectively) |
|
|
884 |
|
|
|
845 |
|
|
Additional paid-in
capital |
|
|
1,370,908 |
|
|
|
1,362,118 |
|
|
Accumulated
deficit |
|
|
(1,891,720 |
) |
|
|
(1,832,156 |
) |
|
Total
stockholders' deficit |
|
|
(519,875 |
) |
|
|
(469,140 |
) |
|
Total liabilities and
stockholders' deficit |
|
$ |
2,904,414 |
|
|
$ |
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 June
30, |
|
Six Months Ended June 30, |
|
|
|
2018 |
|
|
2017* |
|
2018 |
|
|
2017* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) |
|
$ |
(34,987 |
) |
|
$ |
52,988 |
|
|
$ |
(39,804 |
) |
|
$ |
68,723 |
|
|
Adjusted by: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
|
44,590 |
|
|
|
35,961 |
|
|
|
88,510 |
|
|
|
68,986 |
|
|
Net
(gains) losses on commodity derivative contracts |
|
|
70,044 |
|
|
|
(59,614 |
) |
|
|
114,098 |
|
|
|
(98,496 |
) |
|
Net
settlements received (paid) on commodity derivative contracts |
|
|
(26,420 |
) |
|
|
7,177 |
|
|
|
(46,071 |
) |
|
|
4,273 |
|
|
Exploration expense |
|
|
516 |
|
|
|
4,446 |
|
|
|
549 |
|
|
|
4,797 |
|
|
Depreciation, depletion, amortization and accretion |
|
|
62,323 |
|
|
|
40,842 |
|
|
|
121,571 |
|
|
|
67,245 |
|
|
Impairment of oil and natural gas properties |
|
|
194 |
|
|
|
— |
|
|
|
1,142 |
|
|
|
1,845 |
|
|
Non-cash
stock-based compensation expense |
|
|
4,651 |
|
|
|
4,335 |
|
|
|
4,276 |
|
|
|
16,426 |
|
|
Acquisition and divestiture costs included in general and
administrative |
|
|
377 |
|
|
|
2,848 |
|
|
|
743 |
|
|
|
26,922 |
|
|
Income
tax benefit |
|
|
— |
|
|
|
(255 |
) |
|
|
— |
|
|
|
(1,208 |
) |
|
Gains on
sale of oil and natural gas properties |
|
|
(1,528 |
) |
|
|
(6,022 |
) |
|
|
(1,528 |
) |
|
|
(10,366 |
) |
|
(Gains)
losses on other derivatives |
|
|
4,862 |
|
|
|
437 |
|
|
|
4,526 |
|
|
|
(248 |
) |
|
(Gains)
losses on investments |
|
|
(9,445 |
) |
|
|
8,058 |
|
|
|
(8,296 |
) |
|
|
(806 |
) |
|
Amortization of deferred gain on Western Catarina Midstream
Divestiture |
|
|
(5,930 |
) |
|
|
(5,931 |
) |
|
|
(11,860 |
) |
|
|
(11,860 |
) |
|
Interest
income |
|
|
(1,528 |
) |
|
|
(150 |
) |
|
|
(2,270 |
) |
|
|
(507 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDAX(1) |
|
$ |
107,719 |
|
|
$ |
85,120 |
|
|
$ |
225,586 |
|
|
$ |
135,726 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) UnSub component of Adjusted EBITDAX for the three months ended
June 30, 2018 and 2017 was approximately 36 percent and 44 percent,
respectively, and 38 percent and 35 percent for the six and four
months ended June 30, 2018 and 2017, respectively. |
|
|
*Financial
information for 2017 has been recast to reflect retrospective
application of the successful efforts method of accounting. |
|
|
|
SANCHEZ ENERGY CORPORATIONNon-GAAP Reconciliation
– Adjusted Earnings (Loss)
We present Adjusted Earnings (Loss) attributable
to common stockholders (“Adjusted Earnings (Loss)”), a non-GAAP
financial measure, 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. Our Adjusted Earnings (Loss)
may not be comparable to similarly title measures of another
company because all companies may not calculate Adjusted Earnings
(Loss) in the same manner. The following table presents a
reconciliation of our net income (loss) to Adjusted Earnings (Loss)
(in thousands, except per share data):
|
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June 30, |
|
|
|
2018 |
|
|
2017* |
|
2018 |
|
|
2017* |
|
Net income
(loss) |
|
$ |
(34,987 |
) |
|
$ |
52,988 |
|
|
$ |
(39,804 |
) |
|
$ |
68,723 |
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividends |
|
|
(3,987 |
) |
|
|
(3,987 |
) |
|
|
(7,974 |
) |
|
|
(7,974 |
) |
|
Preferred
unit dividends and distributions |
|
|
(12,500 |
) |
|
|
(10,950 |
) |
|
|
(22,408 |
) |
|
|
(27,415 |
) |
|
Preferred
unit amortization |
|
|
(6,189 |
) |
|
|
(5,282 |
) |
|
|
(12,119 |
) |
|
|
(6,992 |
) |
|
Net income
(loss) attributable to common shares and participating
securities |
|
|
(57,663 |
) |
|
|
32,769 |
|
|
|
(82,305 |
) |
|
|
26,342 |
|
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(gains) losses on commodity derivatives contracts |
|
|
70,044 |
|
|
|
(59,614 |
) |
|
|
114,098 |
|
|
|
(98,496 |
) |
|
Net
settlements received (paid) on commodity derivative contracts |
|
|
(26,420 |
) |
|
|
7,177 |
|
|
|
(46,071 |
) |
|
|
4,273 |
|
|
Impairment of oil and natural gas properties |
|
|
194 |
|
|
|
— |
|
|
|
1,142 |
|
|
|
1,845 |
|
|
Non-cash
stock-based compensation expense |
|
|
4,651 |
|
|
|
4,335 |
|
|
|
4,276 |
|
|
|
16,426 |
|
|
Acquisition and divestiture costs included in general and
administrative |
|
|
377 |
|
|
|
2,848 |
|
|
|
743 |
|
|
|
26,922 |
|
|
Gains on
sale of oil and natural gas properties |
|
|
(1,528 |
) |
|
|
(6,022 |
) |
|
|
(1,528 |
) |
|
|
(10,366 |
) |
|
(Gains)
losses on other derivatives |
|
|
4,862 |
|
|
|
437 |
|
|
|
4,526 |
|
|
|
(248 |
) |
|
(Gains)
losses on investments |
|
|
(9,445 |
) |
|
|
8,058 |
|
|
|
(8,296 |
) |
|
|
(806 |
) |
|
Amortization of deferred gain on Western Catarina Midstream
Divestiture |
|
|
(5,930 |
) |
|
|
(5,931 |
) |
|
|
(11,860 |
) |
|
|
(11,860 |
) |
|
Tax impact of
adjustments to net loss (1) |
|
|
— |
|
|
|
77 |
|
|
|
— |
|
|
|
822 |
|
|
Adjusted
Loss |
|
|
(20,858 |
) |
|
|
(15,866 |
) |
|
|
(25,275 |
) |
|
|
(45,146 |
) |
|
Adjusted Loss
allocable to participating securities (2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Adjusted Loss attributable to common
stockholders |
|
$ |
(20,858 |
) |
|
$ |
(15,866 |
) |
|
$ |
(25,275 |
) |
|
$ |
(45,146 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of shares used to calculate loss attributable to common
stockholders - basic and diluted |
|
|
81,787 |
|
|
|
76,395 |
|
|
|
81,356 |
|
|
|
73,045 |
|
|
|
|
|
|
|
|
|
|
|
(1) The
tax impact is computed by utilizing the Company’s effective tax
rate on the adjustments to reconcile net income (loss) to Adjusted
Loss. |
(2) The Company's
restricted shares of common stock are participating
securities. |
|
|
|
|
|
|
|
|
|
|
|
|
|
*Financial
information for 2017 has been recast to reflect retrospective
application of the successful efforts method of accounting. |
|
|
|
SANCHEZ ENERGY CORPORATIONNon-GAAP Reconciliation
– Adjusted Revenues
We present Adjusted Revenues, a non-GAAP
financial measure, 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. Our Adjusted Revenues may not be comparable to
similarly titled measures of another company because all companies
may not calculate Adjusted Revenues in the same manner. The
following table presents a reconciliation of our total revenues to
Adjusted Revenues (in thousands).
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June 30, |
|
|
2018 |
|
|
2017 |
|
2018 |
|
|
2017 |
Total
Revenues |
|
$ |
259,314 |
|
|
$ |
175,704 |
|
$ |
510,540 |
|
|
$ |
309,546 |
Net
settlements received (paid) on commodity derivative contracts |
|
|
(26,420 |
) |
|
|
7,177 |
|
|
(46,071 |
) |
|
|
4,273 |
Adjusted
Revenue |
|
$ |
232,894 |
|
|
$ |
182,881 |
|
$ |
464,469 |
|
|
$ |
313,819 |
|
SANCHEZ ENERGY CORPORATIONNon-GAAP Reconciliation
– Base G&A Expense
The Company presents Base G&A expense, a
non-GAAP financial measure, 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. Our Base G&A may not be comparable to
similarly titled measures of another company because all companies
may not calculate Base G&A in the same manner. The
following table presents a reconciliation of our G&A to Base
G&A (in thousands):
|
|
|
|
|
|
|
Three Months Ended June
30, |
|
Six Months Ended June 30, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
Total general
and administrative expense |
|
$ |
29,467 |
|
|
$ |
29,713 |
|
|
$ |
51,887 |
|
|
$ |
97,178 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation (non-cash) - restricted stock expense |
|
|
(4,651 |
) |
|
|
(4,335 |
) |
|
|
(4,276 |
) |
|
|
(16,426 |
) |
Stock-based compensation - phantom units expense |
|
|
(5,017 |
) |
|
|
(3,024 |
) |
|
|
(4,119 |
) |
|
|
(13,965 |
) |
Acquisition and divestiture costs included in G&A |
|
|
(377 |
) |
|
|
(2,848 |
) |
|
|
(743 |
) |
|
|
(26,922 |
) |
Base general
and administrative expense |
|
$ |
19,422 |
|
|
$ |
19,506 |
|
|
$ |
42,749 |
|
|
$ |
39,865 |
|
|
COMPANY CONTACT:Kevin SmithVP
Investor Relations(281) 925-4828
Cham KingInvestor Relations & Capital
Markets(713) 756-2797
General Inquiries: (713)
783-8000 www.sanchezenergycorp.com