Centennial Resource Development, Inc. (“Centennial” or the
“Company”) (NASDAQ: CDEV) today announced first quarter 2021
financial and operational results.
Recent Financial and Operational
Highlights
-
Generated free cash flow for the third consecutive quarter
-
Increased pro forma liquidity by 22% compared to year-end
- Issued
$170 million of 3.25% convertible senior notes due 2028
-
Redeemed at par $127 million of 8.00% second lien senior secured
notes due 2025
-
Delivered first quarter average well costs below $800 per lateral
foot
Financial Results
For the first quarter, Centennial generated net
cash from operating activities of $72.3 million and free cash flow1
of $10.6 million. The Company reported a net loss during the
quarter of $34.6 million, or $0.12 per diluted share, compared to a
net loss of $548.0 million, or $1.99 per diluted share, in the
prior year period.
Total equivalent production during the first
quarter averaged 54,202 barrels of oil equivalent per day (“Boe/d”)
compared to 71,820 Boe/d in the prior year period. Average daily
crude oil production for the quarter was 28,239 barrels of oil per
day (“Bbls/d”) compared to 41,512 Bbls/d in the prior year period.
Impacted by Winter Storm Uri and related power outages, a majority
of the Company’s production was offline during a seven-day period
in February.
“Our team successfully resumed operational
activity during the quarter, while delivering production and costs
in-line with expectations in spite of the challenges posed by
severe winter weather,” said Sean R. Smith, Chief Executive
Officer. “Most importantly, Centennial has now transitioned to a
sustainable free cash flow generating company. At current strip
pricing, we expect to continue to repay borrowings on our credit
facility and organically delever the balance sheet through
year-end.”
In addition to its impact on production, severe
winter weather during the quarter also affected certain revenue and
cost items. For the first quarter, revenue from natural gas sales
increased 100% compared to the prior quarter, driven by higher
natural gas prices due to extreme cold temperatures across the
state of Texas and surrounding regions. Additionally, Centennial
incurred higher than expected lease operating expense (“LOE”)
related to elevated electricity costs. LOE for the quarter totaled
$25.9 million and, excluding one-time costs, was estimated to be
$24.1 million, or $4.93 per Boe. Lastly, higher natural gas prices
drove an increase in gathering, processing and transportation
expense.
“Higher natural gas revenue more than offset
increased operating costs during the quarter. We expect our unit
cost metrics to return to normalized levels beginning in the second
quarter and have reiterated our full-year production and cost
targets,” said Smith.
First Quarter Operational
Results
Using multi-well pads and extended laterals,
Centennial continues to efficiently develop its Delaware Basin
acreage position. For the full quarter, the Company operated a
two-rig drilling program with one completion crew and realized
additional efficiencies. These continued improvements, combined
with structural design changes, have resulted in lower drilling and
completion costs.
“During the quarter, we reduced our spud to rig
release times by 11% compared to the prior year period, while
increasing our average lateral length by 17%,” said Smith. “As a
result, our operations team achieved an average gross well cost of
$795 per lateral foot for the quarter. We are very pleased with
these results and will remain focused on driving additional
efficiencies throughout the year.”
Total capital expenditures incurred for the
quarter were $72.9 million. First quarter drilling, completion and
facilities costs totaled $70.6 million, reflecting higher
operational activity than originally expected. During the quarter,
Centennial replaced its previous drilling rigs with more efficient
walking rigs, which the Company expects to further reduce cycle
times going forward. Infrastructure, land and other capital
expenditures totaled $2.3 million.
Convertible Senior Notes
Offering
In March, Centennial issued $170 million of
3.25% convertible senior notes due 2028 for net proceeds of $163.7
million. Net proceeds from the offering were used to redeem at par
the $127.1 million 8.00% second lien senior secured notes due 2025
(the “senior secured notes”) subsequent to quarter-end, to repay
borrowings under the revolving credit facility and to fund the cost
of entering into a capped call transaction to minimize potential
future dilution. Upon maturity of the convertible senior notes, the
Company has the flexibility to settle these notes through cash,
stock or a combination thereof at Centennial’s discretion. As a
result of the redemption, the Company improved its liquidity
position through the elimination of the $31.8 million credit
facility availability blocker associated with the senior secured
notes that had previously restricted access to the full borrowing
base.
“This offering enabled Centennial to redeem our
highest coupon and nearest note maturity at par. The transaction
strengthens our maturity profile, reduces interest costs and
improves liquidity,” said Smith. “We now have a nearly five-year
runway until our first senior unsecured note maturity in 2026,
which provides significant financial flexibility.”
Capital Structure and
Liquidity
In April, Centennial’s bank group reaffirmed its
borrowing base at $700 million. At March 31, 2021, Centennial
had approximately $11 million in cash on hand and $160 million of
borrowings outstanding under its revolving credit facility which
reflects a temporary repayment using the net proceeds from the
convertible senior notes offering. Adjusted for the April
redemption of its senior secured notes using credit facility
borrowings, Centennial’s pro forma liquidity position increased by
approximately $76 million from year-end to $416 million, which is
based on its $700 million borrowing base, $291 million in
borrowings outstanding and $4 million in current letters of credit
outstanding, plus cash on hand.
A comparison between recent periods of
Centennial’s liquidity, including the pro forma impact of the
redemption of Centennial’s senior secured notes in April, is
provided below:
($'s in millions) |
December 31, 2020 (Actual) |
|
March 31, 2021 (Actual) |
|
March 31, 2021 (Pro
Forma)1 |
Borrowing Base |
$ |
700.0 |
|
|
$ |
700.0 |
|
|
$ |
700.0 |
|
Facility Amount |
|
668.2 |
|
|
|
668.2 |
|
|
|
700.0 |
|
Less: RCF Borrowings |
|
(330.0 |
) |
|
|
(160.0 |
) |
|
|
(290.8 |
) |
Less: Letters of Credit |
|
(4.3 |
) |
|
|
(4.3 |
) |
|
|
(4.3 |
) |
Plus: Cash |
|
5.8 |
|
|
|
10.9 |
|
|
|
10.9 |
|
Liquidity |
$ |
339.7 |
|
|
$ |
514.8 |
|
|
$ |
415.8 |
|
(1) |
Amounts as of March 31, 2021 in this column have been adjusted to
reflect the pro forma effects of (i) $130.8 million in borrowings
under the revolving credit facility (“RCF”) that were used to fund
the April redemption at par of all the senior secured notes and
accrued interest and (ii) the removal of the $31.8 million RCF
availability blocker. |
Hedge Position
For the remainder of 2021, Centennial has a
total of 13,811 Bbls/d of oil hedged, consisting of approximately
88% fixed price swaps. For the second quarter 2021, the Company
currently has 17,500 Bbls/d of oil hedged at weighted per barrel
average fixed prices of $43.18 WTI and $54.98 Brent. Also for the
second quarter, the Company has 2,500 Bbls/d of WTI oil collars in
place with a weighted average floor and ceiling price of $42.00 per
barrel and $51.14 per barrel, respectively. Notably, the Company
has significantly less oil hedges during the third and fourth
quarters of 2021. For the second half of 2021, the Company has
7,500 Bbls/d and 2,000 Bbls/d of oil hedged at weighted per barrel
average fixed prices of $45.74 WTI and $48.38 Brent, respectively.
Also during this time period, the Company has 1,250 Bbls/d of WTI
oil collars in place with a weighted average floor and ceiling
price of $44.60 per barrel and $53.28 per barrel, respectively. For
2022, Centennial has 500 Bbls/d of oil hedged during the first
quarter at a fixed price of $60.72 per barrel WTI. In addition,
Centennial has certain crude oil basis swaps in place for 2021 and
certain natural gas hedges in place for 2021 and 2022. (For a
summary table of Centennial’s derivative contracts as of
April 30, 2021, please see the Appendix to this press
release.)
Quarterly Report on Form
10-Q
Centennial’s financial statements and related
footnotes will be available in its Quarterly Report on Form 10-Q
for the quarter ended March 31, 2021, which is expected to be
filed with the U.S. Securities and Exchange Commission (“SEC”) on
May 5, 2021.
Conference Call and Webcast
Centennial will host an investor conference call
on Wednesday, May 5, 2021 at 8:00 a.m. Mountain (10:00 a.m.
Eastern) to discuss first quarter 2021 operating and financial
results. Interested parties may join the webcast by visiting
Centennial’s website at www.cdevinc.com and clicking on the
webcast link or by dialing (844) 348-0017, or (213) 358-0877 for
international calls, (Conference ID: 7578513) at least 15 minutes
prior to the start of the call. A replay of the call will be
available on Centennial’s website or by phone at (855) 859-2056
(Conference ID: 7578513) for a seven-day period following the
call.
About Centennial Resource Development,
Inc.
Centennial Resource Development, Inc. is an
independent oil and natural gas company focused on the development
of oil and associated liquids-rich natural gas reserves in the
Permian Basin. The Company’s assets and operations, which are held
and conducted through Centennial Resource Production, LLC, are
concentrated in the Delaware Basin, a sub-basin of the Permian
Basin. For additional information about the Company, please visit
www.cdevinc.com.
Cautionary Note Regarding
Forward-Looking Statements
The information in this press release includes
“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 fact included in this press release,
regarding our strategy, future operations, financial position,
estimated revenues and losses, projected costs, prospects, plans
and objectives of management are forward-looking statements. When
used in this press release, the words “could,” “may,” “believe,”
“anticipate,” “intend,” “estimate,” “expect,” “project,” “goal,”
“plan,” “target” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking
statements contain such identifying words. These forward-looking
statements are based on management’s current expectations and
assumptions about future events and are based on currently
available information as to the outcome and timing of future
events.
Forward-looking statements may include
statements about:
-
volatility of oil, natural gas and NGL prices or a prolonged period
of low oil, natural gas or NGL prices and the effects of actions
by, or disputes among or between, members of the Organization of
Petroleum Exporting Countries (“OPEC”), such as Saudi Arabia, and
other oil and natural gas producing countries, such as Russia, with
respect to production levels or other matters related to the price
of oil;
- the
effects of excess supply of oil and natural gas resulting from
reduced demand caused by the COVID-19 pandemic and the actions
taken in response by certain oil and natural gas producing
countries;
- our
business strategy and future drilling plans;
- our
reserves and our ability to replace the reserves we produce through
drilling and property acquisitions;
- our
drilling prospects, inventories, projects and programs;
- our
financial strategy, liquidity and capital required for our
development program;
- our
realized oil, natural gas and NGL prices;
- the
timing and amount of our future production of oil, natural gas and
NGLs;
- our
hedging strategy and results;
- our
competition and government regulations;
- our
ability to obtain permits and governmental approvals;
- our
pending legal or environmental matters;
- the
marketing and transportation of our oil, natural gas and NGLs;
- our
leasehold or business acquisitions;
- cost
of developing our properties;
- our
anticipated rate of return;
-
general economic conditions;
-
weather conditions in the areas where we operate;
- credit
markets;
-
uncertainty regarding our future operating results;
- our
plans, objectives, expectations and intentions contained in this
press release that are not historical; and
- the
other factors described in our most recent Annual Report on Form
10-K, and any updates to those factors set forth in our subsequent
Quarterly Reports on Form 10-Q or Current Reports on Form 8-K.
We caution you that these forward-looking
statements are subject to all of the risks and uncertainties, most
of which are difficult to predict and many of which are beyond our
control, incident to the development, production, gathering and
sale of oil and natural gas. These risks include, but are not
limited to, commodity price volatility, inflation, lack of
availability of drilling and production equipment and services,
environmental risks, drilling and other operating risks, regulatory
changes, the uncertainty inherent in estimating oil and gas
reserves and in projecting future rates of production, cash flow
and access to capital, the timing of development expenditures and
the other risks described in our filings with the SEC.
Reserve engineering is a process of estimating
underground accumulations of oil and natural gas that cannot be
measured in an exact way. The accuracy of any oil and gas reserve
estimate depends on the quality of available data, the
interpretation of such data, and price and cost assumptions made by
reserve engineers. In addition, the results of drilling, testing
and production activities may justify revisions of estimates that
were made previously. If significant, such revisions would change
the schedule of any further production and development drilling.
Accordingly, reserve estimates may differ significantly from the
quantities of oil and natural gas that are ultimately
recovered.
Should one or more of the risks or uncertainties
described in this press release occur, or should underlying
assumptions prove incorrect, our actual results and plans could
differ materially from those expressed in any forward-looking
statements. All forward-looking statements, expressed or implied,
included in this press release are expressly qualified in their
entirety by this cautionary statement. This cautionary statement
should also be considered in connection with any subsequent written
or oral forward-looking statements that we or persons acting on our
behalf may issue.
Except as otherwise required by applicable law,
we disclaim any duty to update any forward-looking statements, all
of which are expressly qualified by the statements in this section,
to reflect events or circumstances after the date of this press
release.
1) Free Cash Flow is a non-GAAP financial
measure. See “Non-GAAP Financial Measures” included within the
Appendix of this press release for related disclosures and a
reconciliation to net cash provided by operating activities, our
most directly comparable financial measure calculated and presented
in accordance with GAAP.
Contact:Hays MabryDirector,
Investor Relations(832) 240-3265ir@cdevinc.com
Centennial Resource Development,
Inc.
Operating Highlights
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Net revenues (in
thousands): |
|
|
|
Oil sales |
$ |
133,726 |
|
|
$ |
170,505 |
|
Natural gas sales |
35,451 |
|
|
8,358 |
|
NGL sales |
23,214 |
|
|
13,906 |
|
Oil and gas sales |
$ |
192,391 |
|
|
$ |
192,769 |
|
|
|
|
|
Average sales
prices: |
|
|
|
Oil (per Bbl) |
$ |
52.62 |
|
|
$ |
45.14 |
|
Effect of derivative settlements on average price (per Bbl) |
(9.43 |
) |
|
(0.01 |
) |
Oil net of hedging (per Bbl) |
$ |
43.19 |
|
|
$ |
45.13 |
|
|
|
|
|
Average NYMEX price for oil (per Bbl) |
$ |
57.84 |
|
|
$ |
46.19 |
|
Oil differential from NYMEX |
(5.22 |
) |
|
(1.05 |
) |
|
|
|
|
Natural gas (per Mcf) |
$ |
3.79 |
|
|
$ |
0.78 |
|
Effect of derivative settlements on average price (per Mcf) |
0.12 |
|
|
— |
|
Natural gas net of hedging (per Mcf) |
$ |
3.91 |
|
|
$ |
0.78 |
|
|
|
|
|
Average NYMEX price for natural gas (per Mcf) |
$ |
3.44 |
|
|
$ |
1.88 |
|
Natural gas differential from NYMEX |
0.35 |
|
|
(1.10 |
) |
|
|
|
|
NGL (per Bbl) |
$ |
29.78 |
|
|
$ |
14.30 |
|
|
|
|
|
Net
production: |
|
|
|
Oil (MBbls) |
2,542 |
|
|
3,778 |
|
Natural gas (MMcf) |
9,343 |
|
|
10,715 |
|
NGL (MBbls) |
780 |
|
|
972 |
|
Total (MBoe)(1) |
4,878 |
|
|
6,536 |
|
|
|
|
|
Average daily net
production: |
|
|
|
Oil (Bbls/d) |
28,239 |
|
|
41,512 |
|
Natural gas (Mcf/d) |
103,806 |
|
|
117,751 |
|
NGL (Bbls/d) |
8,662 |
|
|
10,683 |
|
Total (Boe/d)(1) |
54,202 |
|
|
71,820 |
|
(1) |
Calculated by converting natural gas to oil equivalent barrels at a
ratio of six Mcf of natural gas to one Boe. |
|
|
Centennial Resource Development,
Inc.
Operating Expenses
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Operating costs (in
thousands): |
|
|
|
Lease operating expenses |
$ |
25,861 |
|
$ |
32,639 |
Severance and ad valorem taxes |
12,583 |
|
16,573 |
Gathering, processing and transportation expenses |
20,625 |
|
16,939 |
Operating costs per
Boe: |
|
|
|
Lease operating expenses |
$ |
5.30 |
|
$ |
4.99 |
Severance and ad valorem taxes |
2.58 |
|
2.54 |
Gathering, processing and transportation expenses |
4.23 |
|
2.59 |
|
|
|
|
Centennial Resource Development,
Inc.Consolidated Statements of Operations
(unaudited)(in thousands, except per share
data)
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Operating revenues |
|
|
|
Oil and gas sales |
$ |
192,391 |
|
|
$ |
192,769 |
|
Operating expenses |
|
|
|
Lease operating expenses |
25,861 |
|
|
32,639 |
|
Severance and ad valorem taxes |
12,583 |
|
|
16,573 |
|
Gathering, processing and transportation expenses |
20,625 |
|
|
16,939 |
|
Depreciation, depletion and amortization |
63,783 |
|
|
101,258 |
|
Impairment and abandonment expense |
9,200 |
|
|
611,300 |
|
Exploration and other expenses |
1,095 |
|
|
4,009 |
|
General and administrative expenses |
25,256 |
|
|
18,870 |
|
Total operating expenses |
158,403 |
|
|
801,588 |
|
Net gain (loss) on sale of long-lived assets |
44 |
|
|
245 |
|
Income (loss) from operations |
34,032 |
|
|
(608,574 |
) |
|
|
|
|
Other income (expense) |
|
|
|
Interest expense |
(17,485 |
) |
|
(16,421 |
) |
Net gain (loss) on derivative instruments |
(51,199 |
) |
|
(8,505 |
) |
Other income (expense) |
7 |
|
|
(53 |
) |
Total other income (expense) |
(68,677 |
) |
|
(24,979 |
) |
|
|
|
|
Income (loss) before income taxes |
(34,645 |
) |
|
(633,553 |
) |
Income tax (expense) benefit |
— |
|
|
83,208 |
|
Net income (loss) |
(34,645 |
) |
|
(550,345 |
) |
Less: Net (income) loss attributable to noncontrolling
interest |
— |
|
|
2,362 |
|
Net income (loss) attributable to Class A Common Stock |
$ |
(34,645 |
) |
|
$ |
(547,983 |
) |
|
|
|
|
Income (loss) per share of Class A Common Stock: |
|
|
|
Basic |
$ |
(0.12 |
) |
|
$ |
(1.99 |
) |
Diluted |
$ |
(0.12 |
) |
|
$ |
(1.99 |
) |
|
|
|
|
|
|
|
|
Centennial Resource Development,
Inc.Consolidated Balance Sheets
(unaudited)(in thousands, except share and per
share data)
|
March 31, 2021 |
|
December 31, 2020 |
ASSETS |
|
|
|
Current assets |
|
|
|
Cash and cash equivalents |
$ |
10,936 |
|
|
$ |
5,800 |
|
Accounts receivable, net |
70,571 |
|
|
54,557 |
|
Prepaid and other current assets |
5,502 |
|
|
5,229 |
|
Total current assets |
87,009 |
|
|
65,586 |
|
Property and Equipment |
|
|
|
Oil and natural gas properties, successful efforts method |
|
|
|
Unproved properties |
1,192,712 |
|
|
1,209,205 |
|
Proved properties |
4,475,972 |
|
|
4,395,473 |
|
Accumulated depreciation, depletion and amortization |
(1,940,672 |
) |
|
(1,877,832 |
) |
Total oil and natural gas properties, net |
3,728,012 |
|
|
3,726,846 |
|
Other property and equipment, net |
12,161 |
|
|
12,650 |
|
Total property and equipment, net |
3,740,173 |
|
|
3,739,496 |
|
Noncurrent assets |
|
|
|
Operating lease right-of-use assets |
2,381 |
|
|
3,176 |
|
Other noncurrent assets |
18,758 |
|
|
19,167 |
|
TOTAL ASSETS |
$ |
3,848,321 |
|
|
$ |
3,827,425 |
|
LIABILITIES AND
EQUITY |
|
|
|
Current liabilities |
|
|
|
Accounts payable and accrued expenses |
$ |
144,958 |
|
|
$ |
110,439 |
|
Operating lease liabilities |
2,697 |
|
|
3,155 |
|
Other current liabilities |
46,536 |
|
|
18,274 |
|
Total current liabilities |
194,191 |
|
|
131,868 |
|
Noncurrent liabilities |
|
|
|
Long-term debt, net |
1,063,754 |
|
|
1,068,624 |
|
Asset retirement obligations |
17,158 |
|
|
17,009 |
|
Deferred income taxes |
2,589 |
|
|
2,589 |
|
Operating lease liabilities |
— |
|
|
422 |
|
Other noncurrent liabilities |
11,726 |
|
|
2,952 |
|
Total liabilities |
1,289,418 |
|
|
1,223,464 |
|
Commitments and contingencies
(Note 10) |
|
|
|
Shareholders’ equity |
|
|
|
Common stock, $0.0001 par value, 620,000,000 shares
authorized: |
|
|
|
Class A: 290,792,727 shares issued and 279,124,752 shares
outstanding at March 31, 2021 and 290,645,623 shares issued
and 278,551,901 shares outstanding at December 31, 2020 |
29 |
|
|
29 |
|
Additional paid-in capital |
2,994,020 |
|
|
3,004,433 |
|
Retained earnings (accumulated deficit) |
(435,146 |
) |
|
(400,501 |
) |
Total shareholders’ equity |
2,558,903 |
|
|
2,603,961 |
|
Noncontrolling interest |
— |
|
|
— |
|
Total equity |
2,558,903 |
|
|
2,603,961 |
|
TOTAL LIABILITIES AND EQUITY |
$ |
3,848,321 |
|
|
$ |
3,827,425 |
|
|
|
|
|
|
|
|
|
Centennial Resource Development,
Inc.Consolidated Statements of Cash Flows
(unaudited)(in thousands)
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Cash flows from
operating activities: |
|
|
|
Net income (loss) |
$ |
(34,645 |
) |
|
$ |
(550,345 |
) |
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation, depletion and amortization |
63,783 |
|
|
101,258 |
|
Stock-based compensation expense - equity awards |
4,585 |
|
|
6,409 |
|
Stock-based compensation expense - liability awards |
10,414 |
|
|
— |
|
Impairment and abandonment expense |
9,200 |
|
|
611,300 |
|
Deferred tax expense (benefit) |
— |
|
|
(83,208 |
) |
Net (gain) loss on sale of long-lived assets |
(44 |
) |
|
(245 |
) |
Non-cash portion of derivative (gain) loss |
28,313 |
|
|
8,452 |
|
Amortization of debt issuance costs and discount |
1,847 |
|
|
799 |
|
Changes in operating assets and liabilities: |
|
|
|
(Increase) decrease in accounts receivable |
(14,997 |
) |
|
41,026 |
|
(Increase) decrease in prepaid and other assets |
(264 |
) |
|
(263 |
) |
Increase (decrease) in accounts payable and other liabilities |
4,154 |
|
|
(34,365 |
) |
Net cash provided by operating activities |
72,346 |
|
|
100,818 |
|
Cash flows from
investing activities: |
|
|
|
Acquisition of oil and natural gas properties |
(433 |
) |
|
(5,795 |
) |
Drilling and development capital expenditures |
(46,152 |
) |
|
(161,895 |
) |
Purchases of other property and equipment |
(181 |
) |
|
(486 |
) |
Proceeds from sales of oil and natural gas properties |
168 |
|
|
1,200 |
|
Net cash used in investing activities |
(46,598 |
) |
|
(166,976 |
) |
Cash flows from
financing activities: |
|
|
|
Proceeds from borrowings under revolving credit facility |
70,000 |
|
|
195,000 |
|
Repayment of borrowings under revolving credit facility |
(240,000 |
) |
|
(135,000 |
) |
Proceeds from issuance of convertible senior notes |
170,000 |
|
|
— |
|
Debt issuance costs |
(5,444 |
) |
|
— |
|
Premiums paid on capped call transactions |
(14,688 |
) |
|
— |
|
Restricted stock used for tax withholdings |
(477 |
) |
|
(208 |
) |
Net cash (used in) provided by financing activities |
(20,609 |
) |
|
59,792 |
|
Net increase (decrease) in
cash, cash equivalents and restricted cash |
5,139 |
|
|
(6,366 |
) |
Cash, cash equivalents and
restricted cash, beginning of period |
8,339 |
|
|
15,543 |
|
Cash, cash equivalents
and restricted cash, end of period |
$ |
13,478 |
|
|
$ |
9,177 |
|
Reconciliation of cash, cash equivalents and
restricted cash presented on the Consolidated Statements of Cash
Flows for the periods presented:
|
Three Months Ended March 31, |
|
2021 |
|
2020 |
Cash and cash equivalents |
$ |
10,936 |
|
|
$ |
3,841 |
|
Restricted cash |
2,542 |
|
|
5,336 |
|
Total cash, cash equivalents
and restricted cash |
$ |
13,478 |
|
|
$ |
9,177 |
|
Non-GAAP Financial Measures
In addition to disclosing financial results
calculated in accordance with U.S. generally accepted accounting
principles (“GAAP”), our earnings release contains non-GAAP
financial measures as described below.
Adjusted EBITDAX
Adjusted EBITDAX is a supplemental non-GAAP
financial measure that is used by management and external users of
our consolidated financial statements, such as industry analysts,
investors, lenders and rating agencies. We define Adjusted EBITDAX
as net income before interest expense, income taxes, depreciation,
depletion and amortization, exploration and other expenses,
impairment and abandonment expenses, non-cash gains or losses on
derivatives, stock-based compensation and gains and losses from the
sale of assets. Adjusted EBITDAX is not a measure of net income as
determined by GAAP.
Our management believes Adjusted EBITDAX is
useful as it allows them to more effectively evaluate our operating
performance and compare the results of our operations from period
to period and against our peers, without regard to our financing
methods or capital structure. We exclude the items listed above
from net income in arriving at Adjusted EBITDAX because these
amounts can vary substantially from company to company within our
industry depending upon accounting methods and book values of
assets, capital structures and the method by which the assets were
acquired. Adjusted EBITDAX should not be considered as an
alternative to, or more meaningful than, net income as determined
in accordance with GAAP or as an indicator of our operating
performance or liquidity. Certain items excluded from Adjusted
EBITDAX are significant components in understanding and assessing a
company’s financial performance, such as a company’s cost of
capital and tax structure, as well as the historic costs of
depreciable assets, none of which are components of Adjusted
EBITDAX. Our presentation of Adjusted EBITDAX should not be
construed as an inference that our results will be unaffected by
unusual or nonrecurring items. Our computations of Adjusted EBITDAX
may not be comparable to other similarly titled measures of other
companies.
The following table presents a reconciliation of
Adjusted EBITDAX to net income, which is the most directly
comparable financial measure calculated and presented in accordance
with GAAP:
|
Three Months Ended March 31, |
(in
thousands) |
2021 |
|
2020 |
Adjusted EBITDAX reconciliation to net
income: |
|
|
|
Net income (loss) attributable to Class A Common Stock |
$ |
(34,645 |
) |
|
$ |
(547,983 |
) |
Net income (loss) attributable to noncontrolling interest |
— |
|
|
(2,362 |
) |
Interest expense |
17,485 |
|
|
16,421 |
|
Income tax expense (benefit) |
— |
|
|
(83,208 |
) |
Depreciation, depletion and amortization |
63,783 |
|
|
101,258 |
|
Impairment and abandonment expenses |
9,200 |
|
|
611,300 |
|
Non-cash derivative (gain) loss |
28,313 |
|
|
8,452 |
|
Stock-based compensation expense(1) |
14,624 |
|
|
5,892 |
|
Exploration and other expenses |
1,095 |
|
|
4,009 |
|
(Gain) loss on sale of long-lived assets |
(44 |
) |
|
(245 |
) |
Adjusted EBITDAX |
$ |
99,811 |
|
|
$ |
113,534 |
|
(1) |
Includes stock-based compensation for equity awards and also for
cash-based liability awards that have not yet been settled in cash,
both of which relate to general and administrative employees only.
Stock-based compensation amounts for geographical and geophysical
personnel are included within the Exploration and other expenses
line item. |
|
|
Free Cash Flow (Deficit)
Free cash flow (deficit) is a supplemental
non-GAAP financial measure that is used by management and external
users of our consolidated financial statements, such as industry
analysts, investors, lenders and rating agencies. We define free
cash flow (deficit) as net cash provided by operating activities
before changes in working capital, less incurred capital
expenditures.
Our management believes free cash flow (deficit)
is a useful indicator of the Company’s ability to internally fund
its exploration and development activities and to service or incur
additional debt, without regard to the timing of settlement of
either operating assets and liabilities or accounts payable related
to capital expenditures. The Company believes that this measure, as
so adjusted, presents a meaningful indicator of the Company’s
actual sources and uses of capital associated with its operations
conducted during the applicable period. Our computations of free
cash flow (deficit) may not be comparable to other similarly titled
measures of other companies. Free cash flow (deficit) should not be
considered as an alternative to, or more meaningful than, cash
provided by operating activities as determined in accordance with
GAAP or as indicator of our operating performance or liquidity.
Free cash flow (deficit) is not a financial
measure that is determined in accordance with GAAP. Accordingly,
the following table presents a reconciliation of free cash flow
(deficit) to net cash provided by operating activities, which is
the most directly comparable financial measure calculated and
presented in accordance with GAAP:
|
Three Months Ended March 31, |
(in
thousands) |
2021 |
|
2020 |
Net cash provided by operating activities |
$ |
72,346 |
|
|
$ |
100,818 |
|
Changes in working
capital: |
|
|
|
Accounts receivable |
14,997 |
|
|
(41,026 |
) |
Prepaid and other assets |
264 |
|
|
263 |
|
Accounts payable and other liabilities |
(4,154 |
) |
|
34,365 |
|
Discretionary cash flow |
83,453 |
|
|
94,420 |
|
Less: total capital
expenditures incurred |
(72,900 |
) |
|
(175,400 |
) |
Free cash flow (deficit) |
$ |
10,553 |
|
|
$ |
(80,980 |
) |
|
|
|
|
|
|
|
|
The following table summarizes the approximate
volumes and average contract prices of swap contracts the Company
had in place as of March 31, 2021 and additional contracts
entered into through April 30, 2021:
|
Period |
|
Volume(Bbls) |
|
Volume (Bbls/d) |
|
Wtd. Avg. Crude Price
($/Bbl)(1) |
Crude oil swaps |
|
|
|
|
|
|
|
NYMEX WTI |
April 2021 - June 2021 |
|
1,183,000 |
|
13,000 |
|
$43.18 |
|
July 2021 - September 2021 |
|
736,000 |
|
8,000 |
|
45.87 |
|
October 2021 - December 2021 |
|
644,000 |
|
7,000 |
|
45.59 |
|
January 2022 - March 2022 |
|
45,000 |
|
500 |
|
60.72 |
|
|
|
|
|
|
|
|
ICE Brent |
April 2021 - June 2021 |
|
409,500 |
|
4,500 |
|
$54.98 |
|
July 2021 - September 2021 |
|
184,000 |
|
2,000 |
|
48.25 |
|
October 2021 - December 2021 |
|
184,000 |
|
2,000 |
|
48.50 |
|
|
|
|
|
|
|
|
|
Period |
|
Volume(Bbls) |
|
Volume (Bbls/d) |
|
Wtd. Avg. Collar Price Ranges
($/Bbl)(2) |
Crude oil collars |
April 2021 - June 2021 |
|
227,500 |
|
2,500 |
|
$42.00 - $51.14 |
|
July 2021 - September 2021 |
|
138,000 |
|
1,500 |
|
46.33 - 55.40 |
|
October 2021 - December 2021 |
|
92,000 |
|
1,000 |
|
42.00 - 50.10 |
|
|
|
|
|
|
|
|
|
Period |
|
Volume(Bbls) |
|
Volume (Bbls/d) |
|
Wtd. Avg. Differential
($/Bbl)(3) |
Crude oil basis differential
swaps |
April 2021 - June 2021 |
|
1,183,000 |
|
13,000 |
|
$0.11 |
|
July 2021 - September 2021 |
|
736,000 |
|
8,000 |
|
0.26 |
|
October 2021 - December 2021 |
|
644,000 |
|
7,000 |
|
0.26 |
(1) |
These crude oil swap transactions are settled based on either the
NYMEX WTI or ICE Brent oil price, as applicable, on each trading
day within the specified monthly settlement period versus the
contractual swap price for the volumes stipulated. |
(2) |
These crude oil collars are settled based on the NYMEX WTI price on
each trading day within the specified monthly settlement period
versus the contractual floor and ceiling prices for the volumes
stipulated. |
(3) |
These oil basis swap transactions are settled based on the
difference between the arithmetic average of ARGUS MIDLAND WTI and
ARGUS WTI CUSHING indices, during each applicable monthly
settlement period. |
|
|
|
Period |
|
Volume(MMBtu) |
|
Volume(MMBtu/d) |
|
Wtd. Avg. Gas Price
($/MMBtu)(1) |
Natural gas swaps |
April 2021 - June 2021 |
|
3,640,000 |
|
40,000 |
|
$2.89 |
|
July 2021 - September 2021 |
|
3,680,000 |
|
40,000 |
|
2.89 |
|
October 2021 - December 2021 |
|
3,680,000 |
|
40,000 |
|
2.95 |
|
January 2022 - March 2022 |
|
1,800,000 |
|
20,000 |
|
3.00 |
|
|
|
|
|
|
|
|
|
Period |
|
Volume(MMBtu) |
|
Volume(MMBtu/d) |
|
Wtd. Avg. Differential
($/MMBtu)(2) |
Natural gas basis differential
swaps |
April 2021 - June 2021 |
|
3,640,000 |
|
40,000 |
|
$(0.30) |
|
July 2021 - September 2021 |
|
3,680,000 |
|
40,000 |
|
(0.30) |
|
October 2021 - December 2021 |
|
3,680,000 |
|
40,000 |
|
(0.28) |
|
January 2022 - March 2022 |
|
1,800,000 |
|
20,000 |
|
(0.26) |
(1) |
These natural gas swap contracts are settled based on the NYMEX
Henry Hub price on each trading day within the specified monthly
settlement period versus the contractual swap price for the volumes
stipulated. |
(2) |
These natural gas basis swap contracts are settled based on the
difference between the Inside FERC’s West Texas WAHA price and the
NYMEX price of natural gas, during each applicable monthly
settlement period. |
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