Sanchez Energy Corporation (NYSE: SN) today announced financial and
operating results for third quarter 2018. Highlights include:
- Production of 7.0 million barrels of oil equivalent (“MMBoe”),
or 75,750 barrels of oil equivalent per day (“Boe/d”);
- October 2018 production exceeded 80,000 Boe/d, as a focus on
drilling the Lower Eagle Ford formation at Comanche, implementation
of operational initiatives aimed at improving production results
and continued drilling success at Catarina combined to yield
production recovery and gains over the third quarter
2018;
- Revenues of approximately $277.7 million, a 50 percent increase
compared to third quarter 2017;
- Net income of $5.6 million, which includes a non-cash
mark-to-market hedging gain of $3.5 million, compared to net income
of $35.8 million for third quarter 2017;
- Adjusted EBITDAX (a non-GAAP financial measure) of
approximately $123.9 million, which includes $31.8 million in
realized hedging losses and represents an increase of 25 percent
compared to third quarter 2017;
- At Catarina, the company brought 16 wells online during third
quarter 2018 with several of those wells reaching peak production
in early October 2018, resulting in a production rate of
approximately 48,900 Boe/d during the month of October 2018;
and
- Drilling activity, which currently consists of four rigs and
three completion crews, is expected to decrease to three rigs by
the middle of fourth quarter 2018 as the company reduces capital
spending levels.
MANAGEMENT COMMENTS
“After fighting to offset production declines
throughout the first half of 2018, I am pleased to report the
company began to see the positive impact of recent operational
initiatives toward the end of third quarter 2018,” said Tony
Sanchez, III, President and Chief Executive Officer of Sanchez
Energy. “We knew the efforts undertaken to manage the declines
earlier this year – reverting to a more conservative choke
strategy, implementing a completions optimization strategy and
increasing artificial lift conversion and workover activity – would
take time to stabilize and ultimately improve our production
performance. We are now seeing the impact of these improvements in
the operational results, with production averaging over 80,000
Boe/d for the month of October 2018 despite weather-related issues
that negatively impacted Comanche production by approximately 3,000
Boe/d in mid-September through the first week of October. At
Catarina, the company’s strong production results continued during
the third quarter, with production further increasing to
approximately 48,900 Boe/d during October 2018 as several wells
reached peak production rates.
“Along with the improving well results at
Comanche and strong production results from Catarina, workover
activity increased during third quarter 2018 by approximately 30
percent compared to second quarter 2018. The number of wells that
were placed on artificial lift also doubled over that same time
period.
“With the company’s production declines
stabilizing and a shift in capital spending toward core areas well
underway, the company’s capital efficiency has greatly improved.
After peaking at eight rigs and four completion crews in May 2018,
drilling activity has been reduced to four rigs and three
completion crews. We expect to release one more rig by year-end
2018, resulting in an expected capital run rate of approximately
$350 million heading into 2019. As we develop the capital plan for
next year, we anticipate our better performing Catarina drilling
locations will continue to be prioritized over the company’s other
assets.
“Notably, during the first three quarters of
this year, our operating cash flow was negatively impacted by
approximately $78 million in realized hedging losses stemming
primarily from the settlement of oil hedges executed in a ~$50 per
barrel (“Bbl”) price environment. A significant portion of these
hedges expire at year-end 2018 and several of the company’s legacy
oil marketing contracts expired during the second and third
quarters of 2018. Accordingly, we anticipate that current marketing
alternatives, combined with a larger portion of production settling
at market prices, will result in better oil price realizations and
higher operating margins in 2019.
“Throughout 2018, we have undertaken a number of
initiatives to increase the efficiency of the company’s operations
and incorporate what we have learned about the large Comanche
asset. While the impact of some of these improvements is visible
through higher production, it may take months, and perhaps several
quarters, before the impact will be fully evident in our financial
results. In the upcoming quarters, we look forward to discussing in
greater detail the proactive measures underway to continuously
improve operations, production and financial performance.”
OPERATIONS UPDATE
Production during third quarter 2018 was 7.0
MMBoe, or 75,750 Boe/d. Third quarter 2018 production results were
negatively impacted by a high level of rainfall in South Texas,
which resulted in approximately 3,000 net Boe/d of shut-in
production at Comanche starting in mid-September 2018 and lasting
through the first week of October 2018.
The company drilled 41 gross (22 net) wells,
completed 59 gross (31 net) wells and brought 55 gross wells online
(36 at Comanche, 16 at Catarina and three at Maverick).
At Comanche, completions activity was
predominately split between Area 3 and Area 5. The company brought
a total of 36 gross wells online, all of which targeted the Lower
Eagle Ford A or B formations. The company also tested a more
cost-effective completion design in the Briscoe Catarina West area.
So far, production results from this test are in-line with a larger
completion design used on an adjacent pad. The company plans to
improve well economics by utilizing more cost-effective completion
designs on future wells.
At Catarina, the company brought 16 wells online
during the quarter, six of which were located in South Central
Catarina and 10 of which were located in Western Catarina.
Notably, seven wells brought online along the southern border of
Western Catarina have shown positive results, improving the
company’s confidence in the surrounding undrilled acreage.
At Maverick, three wells were brought online,
completing the 2018 development program for the asset.
As of Sept. 30, 2018, the company had 2,341
gross (908 net) producing wells with 47 gross wells in various
stages of completion, as detailed in the following table:
|
|
|
|
|
Project Area |
|
GrossProducingWells |
|
Gross WellsAwaiting/UndergoingCompletion |
Catarina |
|
441 |
|
10 |
Comanche |
|
1,701 |
|
33 |
Maverick |
|
66 |
|
— |
Palmetto |
|
86 |
|
4 |
TMS / Other |
|
47 |
|
— |
Total |
|
2,341 |
|
47 |
|
|
|
|
|
PRODUCTION VOLUMES, REVENUES, AVERAGE SALES PRICES AND
OPERATING COSTS
The company’s production mix during third
quarter 2018 consisted of approximately 33 percent oil, 35 percent
natural gas liquids (“NGLs”) and 32 percent natural gas. By asset
area, Catarina, Comanche, Maverick and Palmetto/Tuscaloosa Marine
Shale (“TMS”)/Other comprised approximately 54 percent, 40 percent,
five percent and one percent, respectively, of the company’s third
quarter 2018 production volumes.
Total revenue during third quarter 2018 was
$277.7 million, a 50 percent increase compared to third quarter
2017. Included in total revenue was $270.7 million in revenue from
the sale of oil, natural gas and NGLs and $7.0 million from
marketing activities. Adjusted Revenue for third quarter 2018, a
non-GAAP financial measure that includes $31.8 million in realized
hedging losses, was $245.9 million, approximately 26 percent higher
when compared to third quarter 2017.
Commodity price realizations during third
quarter 2018, including the impact of settlements during the
quarter on commodity derivatives used for hedging, were $55.19 per
Bbl of oil, $28.30 per Bbl of NGLs and $3.19 per thousand cubic
feet (“Mcf”) of natural gas.
Production, average sales prices and operating
costs and expenses per barrel of oil equivalent (“Boe”) for third
quarter 2018 are summarized in the following table:
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
Sept. 30, |
|
Sept. 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net
Production: |
|
|
|
|
|
|
|
|
|
|
|
|
Oil
(MBbl) |
|
|
2,300 |
|
|
2,033 |
|
|
7,198 |
|
|
5,657 |
Natural
gas liquids (MBbl) |
|
|
2,473 |
|
|
2,289 |
|
|
7,363 |
|
|
5,790 |
Natural
gas (MMcf) |
|
|
13,174 |
|
|
14,795 |
|
|
41,373 |
|
|
40,065 |
Total oil
equivalent (MBoe)(1) |
|
|
6,969 |
|
|
6,788 |
|
|
21,457 |
|
|
18,125 |
Average Sales
Price Excluding Derivatives(2): |
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($
per Bbl) |
|
$ |
70.11 |
|
$ |
45.02 |
|
$ |
65.74 |
|
$ |
45.24 |
Natural
gas liquids ($ per Bbl) |
|
|
28.30 |
|
|
21.38 |
|
|
23.88 |
|
|
19.50 |
Natural
gas ($ per Mcf) |
|
|
3.00 |
|
|
3.00 |
|
|
2.96 |
|
|
3.13 |
Oil
equivalent ($ per Boe) |
|
$ |
38.84 |
|
$ |
27.22 |
|
$ |
35.95 |
|
$ |
27.27 |
Average Sales
Price Including Derivatives(3): |
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($
per Bbl) |
|
$ |
55.19 |
|
$ |
49.18 |
|
$ |
53.75 |
|
$ |
48.14 |
Natural
gas liquids ($ per Bbl) |
|
|
28.30 |
|
|
21.38 |
|
|
23.88 |
|
|
19.50 |
Natural
gas ($ per Mcf) |
|
|
3.19 |
|
|
3.14 |
|
|
3.16 |
|
|
3.09 |
Oil
equivalent ($ per Boe) |
|
$ |
34.29 |
|
$ |
28.77 |
|
$ |
32.32 |
|
$ |
28.09 |
Average unit
costs per Boe: |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
natural gas production expenses(4) |
|
$ |
10.85 |
|
$ |
10.29 |
|
$ |
10.49 |
|
$ |
9.40 |
Production and ad valorem taxes |
|
$ |
2.18 |
|
$ |
1.67 |
|
$ |
2.00 |
|
$ |
1.47 |
Depreciation, depletion, amortization and accretion |
|
$ |
9.75 |
|
$ |
6.99 |
|
$ |
8.83 |
|
$ |
6.33 |
Impairment of oil and natural gas properties |
|
$ |
0.45 |
|
$ |
0.11 |
|
$ |
0.20 |
|
$ |
0.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes production associated with SN EF UnSub,
LP ("UnSub") of approximately 2,027 MBoe and 2,504 MBoe for the
three months ended Sept. 30, 2018 and 2017, respectively, and 6,843
MBoe and 5,910 MBoe for the nine months ended Sept. 30, 2018 and
seven months ended Sept. 30, 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 Sept. 30, 2018 and 2017, and a $17.8 million
non-cash gain for the nine months ended Sept. 30, 2018 and 2017
from the amortization of the deferred gain on Western Catarina
Midstream divestiture. |
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL EXPENDITURES
Capital expenditures incurred during third quarter 2018 totaled
approximately $155 million, which were allocated approximately 99
percent to drilling, completion and infrastructure, with the
remainder to leasing and other activities.
FINANCIAL RESULTS
The company reported net income of $5.6 million
for third quarter 2018, which includes a non-cash mark-to-market
hedging gain of $3.5 million and $31.8 million in realized hedging
losses resulting from settlement of commodity derivatives during
the quarter. This compares to the company’s reported net income of
$35.8 million for third quarter 2017. The company’s Adjusted Loss
attributable to common stockholders (a non-GAAP financial measure)
for third quarter 2018 was $12.7 million.
The company’s third quarter 2018 Adjusted
EBITDAX (a non-GAAP financial measure) of approximately $123.9
million was 25 percent higher when compared to third quarter 2017
Adjusted EBITDAX of $98.9 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 $21.3 million in third quarter 2018, which
includes a benefit of $1.4 million related to the valuation of
non-cash restricted stock and a benefit of $2.7 million associated
with a change in the value of phantom units, which 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 third
quarter 2018 was approximately $25.4 million.
A reconciliation of Base G&A expense to its
related GAAP measure is provided in the tables of this release.
HEDGING UPDATE
On a consolidated basis, the company has hedged
approximately 21,900 Bbls per day of its fourth quarter 2018 oil
production and 189,100 million British thermal units (“MMBtu”) per
day of its fourth quarter 2018 natural gas production, and
approximately 10,600 Bbls per day of its 2019 oil production and
48,300 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 Sept. 30, 2018, the company had liquidity
of approximately $606.2 million, which consisted of $368.7 million
in cash and cash equivalents, $237.5 million of combined borrowing
capacity under two credit facilities, consisting of the $25 million
parent-level credit facility, which was undrawn, and the UnSub
revolving credit facility, which had a borrowing base and
commitment amount of $380 million and $212.5 million of available
borrowing capacity. The company repaid $2.5 million of principal on
the UnSub revolving credit facility in October 2018.
SHARE COUNT
As of Sept. 30, 2018, the company had
approximately 87.5 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 Sept. 30, 2018, would have been
approximately 100 million. For the three months ended Sept. 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 82.1 million.
CONFERENCE CALL
Sanchez Energy will host a conference call for
investors on Thursday, Nov. 1, 2018, at 10 a.m. Central Time (11
a.m. Eastern Time). Interested investors can listen to the call via
webcast, both live and rebroadcast,
at: https://edge.media-server.com/m6/p/rdme7vy9
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. 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 CORPORATION |
CONSOLIDATED STATEMENT OF OPERATIONS DATA
(unaudited) |
(in thousands, except per share
amounts) |
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2018 |
|
2017* |
|
2018 |
|
2017* |
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
Oil sales |
|
$ |
161,243 |
|
|
$ |
91,541 |
|
|
$ |
473,178 |
|
|
$ |
255,913 |
|
Natural
gas liquid sales |
|
|
69,995 |
|
|
|
48,949 |
|
|
|
175,833 |
|
|
|
112,922 |
|
Natural
gas sales |
|
|
39,460 |
|
|
|
44,316 |
|
|
|
122,330 |
|
|
|
125,518 |
|
Sales and
marketing revenues |
|
|
7,012 |
|
|
|
— |
|
|
|
16,910 |
|
|
|
— |
|
Total
revenues |
|
|
277,710 |
|
|
|
184,806 |
|
|
|
788,251 |
|
|
|
494,353 |
|
OPERATING COSTS
AND EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Oil and
natural gas production expenses |
|
|
75,594 |
|
|
|
69,829 |
|
|
|
225,186 |
|
|
|
170,448 |
|
Exploration expenses |
|
|
2,698 |
|
|
|
957 |
|
|
|
3,247 |
|
|
|
5,755 |
|
Sales and
marketing expenses |
|
|
7,239 |
|
|
|
— |
|
|
|
16,498 |
|
|
|
— |
|
Production and ad valorem taxes |
|
|
15,221 |
|
|
|
11,346 |
|
|
|
42,898 |
|
|
|
26,669 |
|
Depreciation, depletion, amortization and accretion |
|
|
67,944 |
|
|
|
47,431 |
|
|
|
189,515 |
|
|
|
114,706 |
|
Impairment of oil and natural gas properties |
|
|
3,117 |
|
|
|
740 |
|
|
|
4,259 |
|
|
|
2,556 |
|
General
and administrative expenses (1) |
|
|
21,312 |
|
|
|
14,665 |
|
|
|
73,199 |
|
|
|
111,843 |
|
Total
operating costs and expenses |
|
|
193,125 |
|
|
|
144,968 |
|
|
|
554,802 |
|
|
|
431,977 |
|
Operating income |
|
|
84,585 |
|
|
|
39,838 |
|
|
|
233,449 |
|
|
|
62,376 |
|
Other income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
|
|
1,130 |
|
|
|
163 |
|
|
|
3,400 |
|
|
|
670 |
|
Other
income (expense) |
|
|
(7,677 |
) |
|
|
1,537 |
|
|
|
2,467 |
|
|
|
5,455 |
|
Gain on
sale of oil and natural gas properties |
|
|
— |
|
|
|
71,589 |
|
|
|
1,528 |
|
|
|
81,955 |
|
Interest
expense |
|
|
(44,154 |
) |
|
|
(35,686 |
) |
|
|
(132,664 |
) |
|
|
(104,672 |
) |
Earnings
from equity investments |
|
|
— |
|
|
|
102 |
|
|
|
— |
|
|
|
779 |
|
Net gains
(losses) on commodity derivatives |
|
|
(28,286 |
) |
|
|
(41,719 |
) |
|
|
(142,384 |
) |
|
|
56,777 |
|
Total
other income (expense) |
|
|
(78,987 |
) |
|
|
(4,014 |
) |
|
|
(267,653 |
) |
|
|
40,964 |
|
Income (loss) before
income taxes |
|
|
5,598 |
|
|
|
35,824 |
|
|
|
(34,204 |
) |
|
|
103,340 |
|
Income tax benefit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,208 |
|
Net income
(loss) |
|
|
5,598 |
|
|
|
35,824 |
|
|
|
(34,204 |
) |
|
|
104,548 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividends |
|
|
(3,987 |
) |
|
|
(3,988 |
) |
|
|
(11,961 |
) |
|
|
(11,962 |
) |
Preferred
unit dividends and distributions |
|
|
(12,500 |
) |
|
|
(8,347 |
) |
|
|
(34,908 |
) |
|
|
(35,762 |
) |
Preferred
unit amortization |
|
|
(6,458 |
) |
|
|
(5,517 |
) |
|
|
(18,577 |
) |
|
|
(12,509 |
) |
Net
income allocable to participating securities (2)(3) |
|
|
— |
|
|
|
(1,230 |
) |
|
|
— |
|
|
|
(3,221 |
) |
Net income
(loss) attributable to common stockholders |
|
$ |
(17,347 |
) |
|
$ |
16,742 |
|
|
$ |
(99,650 |
) |
|
$ |
41,094 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share - basic |
|
$ |
(0.21 |
) |
|
$ |
0.22 |
|
|
$ |
(1.22 |
) |
|
$ |
0.55 |
|
Weighted average number
of shares used to calculate net income attributable to common
stockholders - basic |
|
|
82,073 |
|
|
|
77,453 |
|
|
|
81,597 |
|
|
|
74,531 |
|
Net income (loss) per
common share - diluted |
|
$ |
(0.21 |
) |
|
$ |
0.22 |
|
|
$ |
(1.22 |
) |
|
$ |
0.55 |
|
Weighted average number
of shares used to calculate net income attributable to common
stockholders - diluted (4)(5)(6) |
|
|
82,073 |
|
|
|
77,553 |
|
|
|
81,597 |
|
|
|
74,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1) Inclusive of non-cash stock-based compensation
benefit of $1.4 million and expense of $0.9 million for the three
months ended September 30, 2018 and 2017, respectively and expense
of $2.9 million and $17.3 million for the nine months ended
September 30, 2018 and 2017, respectively. |
2) The company’s restricted shares of common stock are
participating securities. |
3) For the three and nine months ended September 30,
2018, no losses were allocated to participating restricted stock
because such securities do not have a contractual obligation to
share in the company’s losses. |
4) The three months ended September 30, 2017 excludes
694,793 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. |
5) The three and nine months ended September 30, 2018
excludes 1,840,007 and 2,591,553 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. |
6) The nine months ended September 30, 2017 excludes
1,101,020 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 CORPORATION |
CONSOLIDATED BALANCE SHEET
(unaudited) |
(in thousands, except per share
amounts) |
|
|
|
September 30, |
|
December 31, |
|
|
2018 |
|
2017 |
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and cash
equivalents |
|
$ |
368,672 |
|
|
$ |
184,434 |
|
Oil and
natural gas receivables |
|
|
98,064 |
|
|
|
101,396 |
|
Joint
interest billings receivables |
|
|
19,268 |
|
|
|
22,569 |
|
Accounts
receivable - related entities |
|
|
7,856 |
|
|
|
4,491 |
|
Fair
value of derivative instruments |
|
|
1,584 |
|
|
|
16,430 |
|
Other
current assets |
|
|
17,493 |
|
|
|
21,478 |
|
Total
current assets |
|
|
512,937 |
|
|
|
350,798 |
|
Oil and natural gas
properties, on the basis of successful efforts accounting: |
|
|
|
|
|
|
Proved
oil and natural gas properties |
|
|
3,597,896 |
|
|
|
3,130,407 |
|
Unproved
oil and natural gas properties |
|
|
407,485 |
|
|
|
398,605 |
|
Total oil
and natural gas properties |
|
|
4,005,381 |
|
|
|
3,529,012 |
|
Less: Accumulated
depreciation, depletion, amortization and impairment |
|
|
(1,684,659 |
) |
|
|
(1,501,553 |
) |
Total oil and natural
gas properties, net |
|
|
2,320,722 |
|
|
|
2,027,459 |
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
Fair
value of derivative instruments |
|
|
8,489 |
|
|
|
1,428 |
|
Investments (Investment in SNMP measured at fair value of $16.1
million and $25.2 million as of September 30, 2018 and December 31,
2017, respectively) |
|
|
35,101 |
|
|
|
38,462 |
|
Other
assets |
|
|
54,529 |
|
|
|
52,488 |
|
Total assets |
|
$ |
2,931,778 |
|
|
$ |
2,470,635 |
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable |
|
$ |
8,867 |
|
|
$ |
14,994 |
|
Other
payables |
|
|
98,929 |
|
|
|
81,970 |
|
Accrued
liabilities: |
|
|
|
|
|
|
Capital
expenditures |
|
|
109,992 |
|
|
|
85,340 |
|
Other |
|
|
96,987 |
|
|
|
84,794 |
|
Fair value of
derivative instruments |
|
|
103,760 |
|
|
|
56,190 |
|
Short term debt |
|
|
23,996 |
|
|
|
23,996 |
|
Other current
liabilities |
|
|
107,523 |
|
|
|
115,244 |
|
Total
current liabilities |
|
|
550,054 |
|
|
|
462,528 |
|
Long term debt, net of
premium, discount and debt issuance costs |
|
|
2,368,252 |
|
|
|
1,930,683 |
|
Asset retirement
obligations |
|
|
39,985 |
|
|
|
36,098 |
|
Fair value of
derivative instruments |
|
|
25,509 |
|
|
|
17,474 |
|
Other liabilities |
|
|
28,009 |
|
|
|
65,480 |
|
Total
liabilities |
|
|
3,011,809 |
|
|
|
2,512,263 |
|
Commitments and
contingencies |
|
|
|
|
|
|
Mezzanine equity: |
|
|
|
|
|
|
Preferred
units ($1,000 liquidation preference, 500,000 units authorized,
issued and outstanding as of September 30, 2018 and December 31,
2017, respectively) |
|
|
458,589 |
|
|
|
427,512 |
|
Stockholders'
equity: |
|
|
|
|
|
|
Preferred
stock ($0.01 par value, 15,000,000 shares authorized; 1,838,985
shares issued and outstanding as of September 30, 2018 and December
31, 2017 of 4.875% Convertible Perpetual Preferred Stock, Series A;
3,527,830 shares issued and outstanding as of September 30, 2018
and December 31, 2017 of 6.500% Convertible Perpetual Preferred
Stock, Series B) |
|
|
53 |
|
|
|
53 |
|
Common
stock ($0.01 par value, 300,000,000 shares authorized; 87,529,787
and 83,984,827 shares issued and outstanding as of September 30,
2018 and December 31, 2017, respectively) |
|
|
883 |
|
|
|
845 |
|
Additional paid-in
capital |
|
|
1,369,511 |
|
|
|
1,362,118 |
|
Accumulated
deficit |
|
|
(1,909,067 |
) |
|
|
(1,832,156 |
) |
Total
stockholders' deficit |
|
|
(538,620 |
) |
|
|
(469,140 |
) |
Total liabilities and
stockholders' deficit |
|
$ |
2,931,778 |
|
|
$ |
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 September
30, |
|
Nine Months Ended September 30, |
|
|
2018 |
|
2017* |
|
2018 |
|
2017* |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss) |
|
$ |
5,598 |
|
|
$ |
35,824 |
|
|
$ |
(34,204 |
) |
|
$ |
104,548 |
|
Adjusted by: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
|
44,154 |
|
|
|
35,686 |
|
|
|
132,664 |
|
|
|
104,672 |
|
Net
(gains) losses on commodity derivative contracts |
|
|
28,286 |
|
|
|
41,719 |
|
|
|
142,384 |
|
|
|
(56,777 |
) |
Net
settlements received (paid) on commodity derivative contracts |
|
|
(31,784 |
) |
|
|
10,527 |
|
|
|
(77,855 |
) |
|
|
14,800 |
|
Exploration expense |
|
|
2,698 |
|
|
|
957 |
|
|
|
3,247 |
|
|
|
5,755 |
|
Depreciation, depletion, amortization and accretion |
|
|
67,944 |
|
|
|
47,431 |
|
|
|
189,515 |
|
|
|
114,706 |
|
Impairment of oil and natural gas properties |
|
|
3,117 |
|
|
|
740 |
|
|
|
4,259 |
|
|
|
2,556 |
|
Non-cash
stock-based compensation (benefit) expense |
|
|
(1,399 |
) |
|
|
911 |
|
|
|
2,878 |
|
|
|
17,337 |
|
Acquisition and divestiture costs included in general and
administrative |
|
|
— |
|
|
|
1,771 |
|
|
|
744 |
|
|
|
28,693 |
|
Income
tax benefit |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(1,208 |
) |
Gains on
sale of oil and natural gas properties |
|
|
— |
|
|
|
(71,589 |
) |
|
|
(1,528 |
) |
|
|
(81,955 |
) |
(Gains)
losses on other derivatives |
|
|
736 |
|
|
|
(1,803 |
) |
|
|
5,262 |
|
|
|
(2,052 |
) |
Losses on
investments |
|
|
11,657 |
|
|
|
2,776 |
|
|
|
3,361 |
|
|
|
1,970 |
|
Amortization of deferred gain on Western Catarina Midstream
Divestiture |
|
|
(5,930 |
) |
|
|
(5,929 |
) |
|
|
(17,790 |
) |
|
|
(17,790 |
) |
Interest
income |
|
|
(1,130 |
) |
|
|
(163 |
) |
|
|
(3,400 |
) |
|
|
(670 |
) |
Adjusted EBITDAX(1) |
|
$ |
123,947 |
|
|
$ |
98,858 |
|
|
$ |
349,537 |
|
|
$ |
234,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) UnSub component of Adjusted EBITDAX for the three
months ended September 30, 2018 and 2017 was approximately 32
percent and 37 percent, respectively, and 36 percent and 35 percent
for the nine months ended September 30, 2018 and seven months ended
September 30, 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 September
30, |
|
Nine Months Ended September 30, |
|
|
2018 |
|
2017* |
|
2018 |
|
2017* |
Net income
(loss) |
|
$ |
5,598 |
|
|
$ |
35,824 |
|
|
$ |
(34,204 |
) |
|
$ |
104,548 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock dividends |
|
|
(3,987 |
) |
|
|
(3,988 |
) |
|
|
(11,961 |
) |
|
|
(11,962 |
) |
Preferred
unit dividends and distributions |
|
|
(12,500 |
) |
|
|
(8,347 |
) |
|
|
(34,908 |
) |
|
|
(35,762 |
) |
Preferred
unit amortization |
|
|
(6,458 |
) |
|
|
(5,517 |
) |
|
|
(18,577 |
) |
|
|
(12,509 |
) |
Net income
(loss) attributable to common shares and participating
securities |
|
|
(17,347 |
) |
|
|
17,972 |
|
|
|
(99,650 |
) |
|
|
44,315 |
|
Plus: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
(gains) losses on commodity derivatives contracts |
|
|
28,286 |
|
|
|
41,719 |
|
|
|
142,384 |
|
|
|
(56,777 |
) |
Net
settlements received (paid) on commodity derivative contracts |
|
|
(31,784 |
) |
|
|
10,527 |
|
|
|
(77,855 |
) |
|
|
14,800 |
|
Impairment of oil and natural gas properties |
|
|
3,117 |
|
|
|
740 |
|
|
|
4,259 |
|
|
|
2,556 |
|
Non-cash
stock-based compensation (benefit) expense |
|
|
(1,399 |
) |
|
|
911 |
|
|
|
2,878 |
|
|
|
17,337 |
|
Acquisition and divestiture costs included in general and
administrative |
|
|
— |
|
|
|
1,771 |
|
|
|
744 |
|
|
|
28,693 |
|
Gains on
sale of oil and natural gas properties |
|
|
— |
|
|
|
(71,589 |
) |
|
|
(1,528 |
) |
|
|
(81,955 |
) |
(Gains)
losses on other derivatives |
|
|
736 |
|
|
|
(1,803 |
) |
|
|
5,262 |
|
|
|
(2,052 |
) |
Losses on
investments |
|
|
11,657 |
|
|
|
2,776 |
|
|
|
3,361 |
|
|
|
1,970 |
|
Amortization of deferred gain on Western Catarina Midstream
Divestiture |
|
|
(5,930 |
) |
|
|
(5,929 |
) |
|
|
(17,790 |
) |
|
|
(17,790 |
) |
Tax impact of
adjustments to net loss (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
572 |
|
Adjusted
Loss |
|
|
(12,664 |
) |
|
|
(2,905 |
) |
|
|
(37,935 |
) |
|
|
(48,331 |
) |
Adjusted Loss
allocable to participating securities (2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Adjusted Loss attributable to common
stockholders |
|
$ |
(12,664 |
) |
|
$ |
(2,905 |
) |
|
$ |
(37,935 |
) |
|
$ |
(48,331 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of shares used to calculate loss attributable to common
stockholders - basic and diluted |
|
|
82,073 |
|
|
|
77,453 |
|
|
|
81,597 |
|
|
|
74,531 |
|
|
(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 September
30, |
|
Nine Months Ended September 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Total
Revenues |
|
$ |
277,710 |
|
|
$ |
184,806 |
|
$ |
788,251 |
|
|
$ |
494,353 |
Net
settlements received (paid) on commodity derivative contracts |
|
|
(31,784 |
) |
|
|
10,527 |
|
|
(77,855 |
) |
|
|
14,800 |
Adjusted
Revenue |
|
$ |
245,926 |
|
|
$ |
195,333 |
|
$ |
710,396 |
|
|
$ |
509,153 |
|
|
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 September
30, |
|
Nine Months Ended September 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Total general
and administrative expense |
|
$ |
21,312 |
|
$ |
14,665 |
|
|
$ |
73,199 |
|
|
$ |
111,843 |
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation (non-cash) - restricted stock benefit
(expense) |
|
|
1,399 |
|
|
(911 |
) |
|
|
(2,878 |
) |
|
|
(17,337 |
) |
Stock-based compensation - phantom units benefit (expense) |
|
|
2,652 |
|
|
209 |
|
|
|
(1,467 |
) |
|
|
(13,756 |
) |
Acquisition and divestiture costs included in G&A |
|
|
— |
|
|
(1,771 |
) |
|
|
(744 |
) |
|
|
(28,693 |
) |
Base general
and administrative expense |
|
$ |
25,363 |
|
$ |
12,192 |
|
|
$ |
68,110 |
|
|
$ |
52,057 |
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COMPANY CONTACT:Kevin SmithVP
Investor Relations(281) 925-4828
Cham KingInvestor Relations & Capital
Markets(713) 756-2797
General Inquiries: (713)
783-8000www.sanchezenergycorp.com