THE WOODLANDS, Texas,
May 4, 2022 /PRNewswire/
-- Earthstone Energy, Inc. (NYSE: ESTE) ("Earthstone", the
"Company", "we", "our" or "us"), today announced financial and
operating results for the three months ended March 31, 2022.
First Quarter 2022 Highlights
- Executed the Bighorn Acquisition PSA(1) on
January 30, 2022, which closed
subsequent to quarter-end on April 14,
2022
- In connection with the closing of the Bighorn Acquisition, we
also closed a $550 million Notes
Offering comprised of 8.0% senior unsecured notes on April 12, 2022
- Executed a Securities Purchase Agreement(2) on
January 30, 2022 for $280 million of Preferred Stock in a private
placement, which closed subsequent to quarter-end on April 14, 2022
- Closed the Chisholm Acquisition(3) on February 15,2022
- Net loss attributable to Earthstone Energy, Inc. of
$33.5 million, or $(0.53) per Diluted Share
- Net loss of $51.9 million, or
$(0.53) per Adjusted Diluted
Share(4)
- Adjusted net income(4) of $76.2 million, or $0.78 per Adjusted Diluted
Share(4)
- Adjusted EBITDAX(4) of $123.1
million, up 44% compared to 4Q 2021
- Net cash provided by operating activities of $83.0 million
- Free Cash Flow(4) of $35.7
million, up 25% compared to 4Q 2021
- Average daily production of 35,509 Boepd(5), up 17%
compared to 4Q 2021
- Capital expenditures of $82.1
million, 16% below the midpoint of 1Q 2022 guidance
(1)
|
On April 14, 2022, we
consummated the transactions contemplated in a purchase and sale
agreement (the "Bighorn Acquisition").
|
(2)
|
On April 14, 2022, we
consummated the sale and issuance of 280,000 shares of newly
authorized Series A convertible preferred stock of Earthstone (the
"Preferred Stock"), pursuant to a securities purchase agreement
(the "SPA"), expected to convert into approximately 25.2 million
shares of Class A common stock.
|
(3)
|
On February 15, 2022,
we consummated the transactions contemplated in the purchase and
sale agreements (the "Chisholm Acquisition").
|
(4)
|
See the "Non-GAAP
Financial Measures" section below.
|
(5)
|
Represents reported
sales volumes.
|
Management Comments
Robert J. Anderson, President and
Chief Executive Officer of Earthstone, stated, "Our strong first
quarter results reflect our ongoing transformation and the success
of our consolidation strategy to acquire and effectively develop
accretive assets. Adjusted EBITDAX for the quarter increased
approximately 44% sequentially to $123
million, driven by a 15% increase in production and higher
commodity prices, as well as our ability to control operating costs
and general and administrative expense which has allowed us to
maintain high cash margins. This accomplishment is with only having
our Delaware Basin assets acquired
in the Chisholm Acquisition for 45 days during the first
quarter.
"With the significant accomplishments of closing two
acquisitions approaching $1.5 billion
in purchase price and issuing $550
million of senior unsecured notes this year now behind us,
we are focused on executing efficiently with our much larger asset
base," added Mr. Anderson. "The early results of the first wells
completed on our newly acquired Delaware assets have been encouraging, and we
are eager to continue to see results from our Delaware Basin development program. We are
optimistic that we can continue to demonstrate the operational
excellence for which we are known, successfully execute on our
drilling program, and further increase free cash flow generation.
Our robust and growing free cash flow positions us to repay
significant amounts of debt for the remainder of the year and we
expect to end the year comfortably under our targeted leverage of
less than 1.0x debt to Adjusted EBITDAX under current commodity
prices.
"Over the last year and a half, we have acquired quality assets
that have significantly increased our production levels and cash
flows while providing substantial, high quality drilling
opportunities. We are pleased with the results of our acquisitions,
and we look forward to reporting on the results of our larger asset
base and drilling and completion program in the coming quarters. We
will remain focused on integrating these new assets, executing our
operational plan and generating record levels of free cash flow,
which we believe will drive meaningful shareholder value,"
concluded Mr. Anderson.
Operations Update
During the first quarter of 2022, we completed and turned to
sales five gross (5.0 net) operated wells and commenced drilling
ten gross (8.3 net) operated wells in the Midland Basin. In
April we completed six gross (6.0 net) wells in Upton County on our Benedum pad. These
wells are producing from the Wolfcamp A, B and C targets with
initial average results of approximately 900 Boepd (88% oil). These
wells averaged approximately 7,600 feet of completed lateral with
drilling and completion costs of approximately $800 per foot.
After acquiring the Delaware
Basin assets on February 15, 2022, we
commenced drilling three gross (1.9 net) operated wells in the
Delaware Basin in the first
quarter of 2022. We brought online the two-well Minis pad, our
first Earthstone completed wells, in April. These two wells, which
targeted the Third Bone Spring Harkey Sand formation and are
approximately 7,500-foot laterals, have averaged approximately
1,600 Boepd (87% oil) in the first 24 days online.
We continue to operate a four-rig drilling program, with two
drilling rigs in the Midland Basin and two drilling rigs in the
Delaware Basin. Currently, in the
Midland Basin, one rig is drilling a five-well pad in our
Barnhart project area in
Irion County (100% W.I.,
9,900-foot average lateral length). The other rig is drilling a
four-well project in our TSRH area in Reagan County (65% W.I., 14,300-foot average
lateral length). With two rigs operating in the Midland Basin, we
anticipate spudding 40 gross (35.8 net) operated wells and bringing
40 gross (36.7 net) operated wells online in 2022. In the
Delaware Basin, one rig is
drilling in our Ram project area in Lea County (98% W.I.,
10,000-foot average lateral length) on a two-well pad. The other
rig is drilling a two-well pad in our Cletus project area in Eddy
County (89% W.I., 10,000-foot average lateral length). With two
rigs operating in the Delaware
Basin, we anticipate spudding 20 gross (11.8 net) operated wells
and bringing 18 gross (11.6 net) operated wells online in 2022.
Selected Financial
Data (unaudited)
|
|
($000s except
where noted)
|
|
Three Months
Ended
March 31,
|
|
|
2022
|
|
2021
|
Total
revenues
|
|
$
196,150
|
|
$
75,572
|
|
|
|
|
|
Lease operating
expense
|
|
21,631
|
|
10,849
|
|
|
|
|
|
General and
administrative expense (excluding stock-based
compensation)
|
|
6,476
|
|
5,051
|
Stock-based
compensation
|
|
5,830
|
|
3,329
|
General and
administrative expense
|
|
$
12,306
|
|
$
8,380
|
|
|
|
|
|
Net loss
|
|
$
(51,877)
|
|
$
(10,556)
|
Less: Net loss
attributable to noncontrolling interest
|
|
(18,399)
|
|
(4,723)
|
Net loss attributable
to Earthstone Energy, Inc.
|
|
(33,478)
|
|
(5,833)
|
Net loss per common
share(1)
|
|
|
|
|
Basic and
Diluted
|
|
(0.53)
|
|
(0.14)
|
Adjusted
EBITDAX(2)
|
|
$
123,089
|
|
$
43,843
|
|
|
|
|
|
Production(3):
|
|
|
|
|
Oil
(MBbls)
|
|
1,417
|
|
1,057
|
Gas (MMcf)
|
|
5,639
|
|
2,445
|
NGL
(MBbls)
|
|
839
|
|
365
|
Total
(MBoe)(4)
|
|
3,196
|
|
1,829
|
Average Daily
Production (Boepd)
|
|
35,509
|
|
20,321
|
Average
Prices:
|
|
|
|
|
Oil
($/Bbl)
|
|
97.24
|
|
57.56
|
Gas
($/Mcf)
|
|
4.07
|
|
2.39
|
NGL
($/Bbl)
|
|
42.22
|
|
24.40
|
Total
($/Boe)
|
|
61.38
|
|
41.32
|
Adj. for Realized
Derivatives Settlements:
|
|
|
|
|
Oil
($/Bbl)
|
|
75.61
|
|
47.67
|
Gas
($/Mcf)
|
|
3.89
|
|
2.23
|
NGL
($/Bbl)
|
|
42.22
|
|
24.40
|
Total
($/Boe)
|
|
51.46
|
|
35.39
|
Operating Margin per
Boe
|
|
|
|
|
Average realized
price
|
|
$
61.38
|
|
$
41.32
|
Lease operating
expense
|
|
6.77
|
|
5.93
|
Production and ad
valorem taxes
|
|
4.17
|
|
2.75
|
Operating margin per
Boe(2)
|
|
50.44
|
|
32.64
|
Realized hedge
settlements
|
|
(9.92)
|
|
(5.93)
|
Operating margin per
Boe (including realized hedge settlements)(2)
|
|
$
40.52
|
|
$
26.71
|
|
|
|
|
|
(1)
|
Net loss per
common share attributable to Earthstone Energy, Inc.
|
(2)
|
See the
"Non-GAAP Financial Measures" section below.
|
(3)
|
Represents
reported sales volumes.
|
(4)
|
Barrels of oil
equivalent have been calculated on the basis of six thousand cubic
feet (Mcf) of natural gas equals one barrel of oil equivalent
(Boe).
|
Liquidity, Capital Expenditure Update and Equity
Capitalization
As of March 31, 2022, we had
$0.5 million in cash and $624.2 million of long-term debt outstanding
under our senior secured revolving credit facility (the "Credit
Facility") with a borrowing base of $825.0
million. With the $200.8
million of undrawn borrowing base capacity and $0.5 million in cash, we had total liquidity of
approximately $201.3 million.
Subsequent to March 31, 2022,
Earthstone closed on its previously announced Bighorn Acquisition,
closed the $550 million Notes
Offering, closed the $280 million
private placement of Preferred Stock and paid the $70 million of deferred cash consideration for
the Chisholm Acquisition. When adjusted to include the impact
of these activities and a voluntary reduction in the elected
commitments under the Credit Facility to $800 million, we had estimated total debt
outstanding of $1,013 million,
comprised of $550 million of senior
unsecured notes and $463 million of
debt outstanding under our Credit Facility, leaving $337 million of undrawn availability on the
$800 million of total commitments
under our Credit Facility.
Through March 31, 2022, we had
incurred $82.1 million of capital
expenditures, which is approximately 16% below the midpoint of our
first quarter 2022 guidance of $95-100 million. Our full year 2022 capital
expenditure guidance remains at $410-$440 million.
We expect to fund our remaining 2022 capital expenditures with cash
flow from operations while any excess cash flow will be used to pay
down debt.
As of April 28, 2022, there were
approximately 79.1 million shares of Class A common stock and
approximately 34.3 million shares of Class B common stock, or
approximately 113.4 million shares of combined common stock
outstanding. Additionally, there were 280,000 shares of Preferred
Stock outstanding that are expected to be converted into
approximately 25.2 million shares of Class A common stock. As of
April 28, 2022, assuming the
conversion of the Preferred Stock into Class A common stock, there
would have been a total of approximately 138.6 million shares of
common stock outstanding in aggregate.
Commodity Hedging
Hedging Activities
The following table sets forth our outstanding derivative
contracts as of March 31, 2022. When
aggregating multiple contracts, the weighted average contract price
is disclosed.
As of March 31, 2022:
|
|
Price
Swaps
|
Period
|
|
Commodity
|
|
Volume
(Bbls / MMBtu)
|
|
Weighted Average Price
($/Bbl /
$/MMBtu)
|
Q2 - Q4
2022
|
|
Crude Oil
|
|
3,247,250
|
|
$
65.96
|
Q1 - Q4
2023
|
|
Crude Oil
|
|
1,277,500
|
|
$
76.20
|
Q2 - Q4
2022
|
|
Crude Oil Basis Swap
(1)
|
|
3,377,500
|
|
$
0.51
|
Q1 - Q4
2023
|
|
Crude Oil Basis Swap
(1)
|
|
730,000
|
|
$
0.49
|
Q2 - Q4
2022
|
|
Natural
Gas
|
|
8,062,000
|
|
$
3.55
|
Q1 - Q4
2023
|
|
Natural
Gas
|
|
3,670,000
|
|
$
3.35
|
Q2 - Q4
2022
|
|
Natural Gas Basis
Swap (2)
|
|
5,500,000
|
|
$
(0.33)
|
Q1 - Q4
2023
|
|
Natural Gas Basis
Swap (2)
|
|
25,550,000
|
|
$
(1.28)
|
Q1 - Q4
2024
|
|
Natural Gas Basis
Swap (2)
|
|
25,620,000
|
|
$
(1.04)
|
(1)
|
The basis
differential price is between WTI Midland Crude and the WTI
NYMEX.
|
(2)
|
The basis
differential price is between W. Texas (WAHA) and the Henry Hub
NYMEX.
|
|
|
Costless
Collars
|
Period
|
|
Commodity
|
|
Volume
(Bbls / MMBtu)
|
|
Sold
Ceiling
($/Bbl /
$/MMBtu)
|
|
Bought
Floor
($/Bbl /
$/MMBtu)
|
Q2 - Q4
2022
|
|
Crude Oil Costless
Collar
|
|
1,560,000
|
|
$
83.59
|
|
$
69.42
|
Q1 - Q4
2023
|
|
Crude Oil Costless
Collar
|
|
1,715,500
|
|
$
80.34
|
|
$
62.98
|
Q2 - Q4
2022
|
|
Natural Gas Costless
Collar
|
|
12,782,500
|
|
$
5.47
|
|
$
3.66
|
Q1 - Q4
2023
|
|
Natural Gas Costless
Collar
|
|
13,188,000
|
|
$
4.84
|
|
$
3.28
|
Hedging Update
The following table sets forth our outstanding derivative
contracts at May 2, 2022. When
aggregating multiple contracts, the weighted average contract price
is disclosed.
|
|
Price
Swaps
|
Period
|
|
Commodity
|
|
Volume
(Bbls / MMBtu
/Gals)
|
|
Weighted Average Price
($/Bbl / $/MMBtu /
$/Gal)
|
Q2 - Q4
2022
|
|
Crude Oil
|
|
3,247,250
|
|
$
65.96
|
Q1 - Q4
2023
|
|
Crude Oil
|
|
1,277,500
|
|
$
76.20
|
Q2 - Q4
2022
|
|
Crude Oil Basis Swap
(1)
|
|
3,377,500
|
|
$
0.51
|
Q1 - Q4
2023
|
|
Crude Oil Basis Swap
(1)
|
|
1,825,000
|
|
$
0.57
|
Q2 - Q4
2022
|
|
Natural
Gas
|
|
8,062,000
|
|
$
3.55
|
Q1 - Q4
2023
|
|
Natural
Gas
|
|
3,670,000
|
|
$
3.35
|
Q2 - Q4
2022
|
|
Natural Gas Basis
Swap (2)
|
|
5,500,000
|
|
$
(0.33)
|
Q1 - Q4
2023
|
|
Natural Gas Basis
Swap (2)
|
|
25,550,000
|
|
$
(1.28)
|
Q1 - Q4
2024
|
|
Natural Gas Basis
Swap (2)
|
|
25,620,000
|
|
$
(1.04)
|
(1)
|
The basis
differential price is between WTI Midland Crude and the WTI
NYMEX.
|
(2)
|
The basis
differential price is between W. Texas (WAHA) and the Henry Hub
NYMEX.
|
|
|
Costless
Collars
|
Period
|
|
Commodity
|
|
Volume
(Bbls / MMBtu)
|
|
Sold
Ceiling
($/Bbl /
$/MMBtu)
|
|
Bought
Floor
($/Bbl /
$/MMBtu)
|
Q2 - Q4
2022
|
|
Crude Oil Costless
Collar
|
|
1,560,000
|
|
$
83.59
|
|
$
69.42
|
Q1 - Q4
2023
|
|
Crude Oil Costless
Collar
|
|
2,190,000
|
|
$
85.73
|
|
$
64.50
|
Q2 - Q4
2022
|
|
Natural Gas Costless
Collar
|
|
15,355,000
|
|
$
6.33
|
|
$
4.05
|
Q1 - Q4
2023
|
|
Natural Gas Costless
Collar
|
|
14,133,000
|
|
$
5.34
|
|
$
3.46
|
Conference Call Details
Earthstone is hosting a conference call on Thursday, May 5, 2022 at 12:00 p.m. Eastern (11:00
a.m. Central) to discuss the Company's financial results for
the first quarter of 2022 and its outlook for the remainder of
2022. Prepared remarks by Robert J.
Anderson, President and Chief Executive Officer,
Mark Lumpkin, Jr., Executive Vice
President and Chief Financial Officer and Steven C. Collins, Executive Vice President and
Chief Operating Officer, will be followed by a question and answer
session.
Investors and analysts are invited to participate in the call by
dialing 877-407-6184 for domestic calls or 201-389-0877 for
international calls, in both cases asking for the Earthstone
conference call. A webcast will also be available through the
Company website (www.earthstoneenergy.com). Please select "Events
& Presentations" under the "Investors" section of the Company's
website and log on at least 10 minutes in advance to register.
A replay of the call and webcast will be available on the
Company's website and by telephone until 12:00 p.m. Eastern (11:00
a.m. Central), Thursday, May 19,
2022. The number for the replay is 877-660-6853 for domestic
calls or 201-612-7415 for international calls, using Replay ID:
13729634.
About Earthstone Energy, Inc.
Earthstone Energy, Inc. is a growth-oriented, independent energy
company engaged in the acquisition, development and operation of
oil and natural gas properties. The Company's primary assets are
located in the Midland Basin in West
Texas, the Eagle Ford Trend in South Texas and the Delaware Basin in New Mexico. Earthstone is listed on NYSE under
the symbol "ESTE." For more information, visit the Company's
website at www.earthstoneenergy.com.
Forward-Looking Statements
This release contains 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.
Statements that are not strictly historical statements constitute
forward-looking statements and may often, but not always, be
identified by the use of such words such as "expects," "believes,"
"intends," "anticipates," "plans," "estimates," "forecast,"
"guidance," "target," "potential," "possible," or "probable" or
statements that certain actions, events or results "may," "will,"
"should," or "could" be taken, occur or be achieved.
Forward-looking statements are based on current expectations and
assumptions and analyses made by Earthstone and its management in
light of experience and perception of historical trends, current
conditions and expected future developments, as well as other
factors appropriate under the circumstances that involve various
risks and uncertainties that could cause actual results to differ
materially from those reflected in the statements. These risks
include, but are not limited to, those set forth in Earthstone's
annual report on Form 10-K for the year ended December 31, 2021, recent quarterly reports on
Form 10-Q, recent current reports on Form 8-K, and other Securities
and Exchange Commission ("SEC") filings. Earthstone undertakes no
obligation to revise or update publicly any forward-looking
statements except as required by law.
Contact
Mark Lumpkin, Jr.
Executive Vice President – Chief Financial Officer
Earthstone Energy, Inc.
1400 Woodloch Forest Drive, Suite 300
The Woodlands, TX 77380
281-298-4246
mark.lumpkin@earthstoneenergy.com
Scott Thelander
Vice President of Finance
Earthstone Energy, Inc.
1400 Woodloch Forest Drive, Suite 300
The Woodlands, TX 77380
281-298-4246
scott@earthstoneenergy.com
EARTHSTONE ENERGY,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands,
except share and per share amounts)
|
|
|
|
March
31,
|
|
December
31,
|
ASSETS
|
|
2022
|
|
2021
|
Current
assets:
|
|
|
|
|
Cash
|
|
$
482
|
|
$
4,013
|
Accounts
receivable:
|
|
|
|
|
Oil, natural gas, and
natural gas liquids revenues
|
|
98,182
|
|
50,575
|
Joint interest
billings and other, net of allowance of $19 and $19 at March 31,
2022 and December 31, 2021, respectively
|
|
11,980
|
|
2,930
|
Derivative
asset
|
|
1,849
|
|
1,348
|
Prepaid expenses and
other current assets
|
|
4,440
|
|
2,549
|
Total current
assets
|
|
116,933
|
|
61,415
|
|
|
|
|
|
Oil and gas
properties, successful efforts method:
|
|
|
|
|
Proved
properties
|
|
2,278,496
|
|
1,625,367
|
Unproved
properties
|
|
280,805
|
|
222,025
|
Land
|
|
5,382
|
|
5,382
|
Total oil and gas
properties
|
|
2,564,683
|
|
1,852,774
|
|
|
|
|
|
Accumulated
depreciation, depletion and amortization
|
|
(429,743)
|
|
(395,625)
|
Net oil and gas
properties
|
|
2,134,940
|
|
1,457,149
|
|
|
|
|
|
Other noncurrent
assets:
|
|
|
|
|
Office and other
equipment, net of accumulated depreciation and amortization of
$4,636 and $4,547 at March 31, 2022 and December 31, 2021,
respectively
|
|
2,389
|
|
1,986
|
Derivative
asset
|
|
5,810
|
|
157
|
Operating lease
right-of-use assets
|
|
2,310
|
|
1,795
|
Other noncurrent
assets
|
|
58,889
|
|
33,865
|
TOTAL
ASSETS
|
|
$
2,321,271
|
|
$
1,556,367
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
69,749
|
|
$
31,397
|
Revenues and royalties
payable
|
|
52,167
|
|
36,189
|
Accrued
expenses
|
|
39,179
|
|
31,704
|
Deferred acquisition
payment - Chisholm
|
|
70,000
|
|
—
|
Asset retirement
obligation
|
|
609
|
|
395
|
Derivative
liability
|
|
150,055
|
|
45,310
|
Advances
|
|
2,447
|
|
4,088
|
Operating lease
liabilities
|
|
747
|
|
681
|
Other current
liabilities
|
|
630
|
|
851
|
Total current
liabilities
|
|
385,583
|
|
150,615
|
|
|
|
|
|
Noncurrent
liabilities:
|
|
|
|
|
Long-term
debt
|
|
624,229
|
|
320,000
|
Deferred tax
liability
|
|
14,404
|
|
15,731
|
Asset retirement
obligation
|
|
21,509
|
|
15,471
|
Derivative
liability
|
|
21,775
|
|
571
|
Operating lease
liabilities
|
|
1,725
|
|
1,276
|
Other noncurrent
liabilities
|
|
9,744
|
|
6,442
|
Total noncurrent
liabilities
|
|
693,386
|
|
359,491
|
|
|
|
|
|
Equity:
|
|
|
|
|
Preferred stock,
$0.001 par value, 20,000,000 shares authorized; none issued or
outstanding
|
|
—
|
|
—
|
Class A Common Stock,
$0.001 par value, 200,000,000 shares authorized; 73,440,800 and
53,467,307 issued and outstanding at March 31, 2022 and December
31, 2021, respectively
|
|
73
|
|
53
|
Class B Common Stock,
$0.001 par value, 50,000,000 shares authorized; 34,271,766 and
34,344,532 issued and outstanding at March 31, 2022 and December
31, 2021, respectively
|
|
34
|
|
34
|
Additional paid-in
capital
|
|
967,093
|
|
718,181
|
Accumulated
deficit
|
|
(193,252)
|
|
(159,774)
|
Total Earthstone
Energy, Inc. equity
|
|
773,948
|
|
558,494
|
Noncontrolling
interest
|
|
468,354
|
|
487,767
|
Total
equity
|
|
1,242,302
|
|
1,046,261
|
|
|
|
|
|
TOTAL LIABILITIES
AND EQUITY
|
|
$
2,321,271
|
|
$
1,556,367
|
|
|
|
|
|
EARTHSTONE ENERGY,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands,
except share and per share amounts)
|
|
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2022
|
|
2021
|
REVENUES
|
|
|
Oil
|
|
$
137,752
|
|
$
60,819
|
Natural gas
|
|
22,958
|
|
5,852
|
Natural gas
liquids
|
|
35,440
|
|
8,901
|
Total
revenues
|
|
196,150
|
|
75,572
|
|
|
|
|
|
OPERATING COSTS
AND EXPENSES
|
|
|
|
|
Lease operating
expense
|
|
21,631
|
|
10,849
|
Production and ad
valorem taxes
|
|
13,315
|
|
5,027
|
Depreciation,
depletion and amortization
|
|
34,326
|
|
24,407
|
General and
administrative expense
|
|
12,306
|
|
8,380
|
Transaction
costs
|
|
10,742
|
|
2,106
|
Accretion of asset
retirement obligation
|
|
397
|
|
290
|
Exploration
expense
|
|
92
|
|
—
|
Total operating
costs and expenses
|
|
92,809
|
|
51,059
|
|
|
|
|
|
Income from
operations
|
|
103,341
|
|
24,513
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
Interest expense,
net
|
|
(5,318)
|
|
(2,217)
|
Loss on derivative
contracts, net
|
|
(151,480)
|
|
(33,263)
|
Other income,
net
|
|
47
|
|
103
|
Total other
expense
|
|
(156,751)
|
|
(35,377)
|
|
|
|
|
|
Loss before income
taxes
|
|
(53,410)
|
|
(10,864)
|
Income tax
benefit
|
|
1,533
|
|
308
|
Net loss
|
|
(51,877)
|
|
(10,556)
|
|
|
|
|
|
Less: Net loss
attributable to noncontrolling interest
|
|
(18,399)
|
|
(4,723)
|
|
|
|
|
|
Net loss
attributable to Earthstone Energy, Inc.
|
|
$
(33,478)
|
|
$
(5,833)
|
|
|
|
|
|
Net loss per common
share attributable to Earthstone Energy, Inc.:
|
|
|
|
|
Basic and
Diluted
|
|
$
(0.53)
|
|
$
(0.14)
|
|
|
|
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
Basic and
Diluted
|
|
63,445,649
|
|
42,778,916
|
|
|
|
|
|
EARTHSTONE ENERGY,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In
thousands)
|
|
|
|
For the Three
Months Ended
March 31,
|
|
|
2022
|
|
2021
|
Cash flows from
operating activities:
|
|
|
Net loss
|
|
$
(51,877)
|
|
$
(10,556)
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
34,326
|
|
24,407
|
Accretion of asset
retirement obligations
|
|
397
|
|
290
|
Settlement of asset
retirement obligations
|
|
(201)
|
|
(15)
|
Gain on sale of office
and other equipment
|
|
(22)
|
|
—
|
Total loss on
derivative contracts, net
|
|
151,480
|
|
33,263
|
Operating portion of
net cash paid in settlement of derivative contracts
|
|
(31,686)
|
|
(10,905)
|
Stock-based
compensation - equity portion
|
|
2,301
|
|
3,329
|
Deferred income
taxes
|
|
(1,327)
|
|
(308)
|
Amortization of
deferred financing costs
|
|
627
|
|
141
|
Changes in assets and
liabilities:
|
|
|
|
|
(Increase) decrease in
accounts receivable
|
|
(48,735)
|
|
(5,379)
|
(Increase) decrease in
prepaid expenses and other current assets
|
|
(1,896)
|
|
367
|
Increase (decrease) in
accounts payable and accrued expenses
|
|
21,783
|
|
5,389
|
Increase (decrease) in
revenues and royalties payable
|
|
14,932
|
|
(2,081)
|
Increase (decrease) in
advances
|
|
(7,100)
|
|
358
|
Net cash provided
by operating activities
|
|
83,002
|
|
38,300
|
Cash flows from
investing activities:
|
|
|
|
|
Acquisition of oil and
gas properties, net of cash acquired
|
|
(324,198)
|
|
(134,641)
|
Additions to oil and
gas properties
|
|
(55,925)
|
|
(8,913)
|
Additions to office
and other equipment
|
|
(590)
|
|
(226)
|
Net cash used in
investing activities
|
|
(380,713)
|
|
(143,780)
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from
borrowings
|
|
582,498
|
|
177,114
|
Repayments of
borrowings
|
|
(278,269)
|
|
(68,690)
|
Cash paid related to
the exchange and cancellation of Class A Common Stock
|
|
(3,898)
|
|
(2,080)
|
Cash paid for finance
leases
|
|
—
|
|
(20)
|
Deferred financing
costs
|
|
(6,151)
|
|
(891)
|
Net cash provided
by financing activities
|
|
294,180
|
|
105,433
|
Net decrease in
cash
|
|
(3,531)
|
|
(47)
|
Cash at beginning of
period
|
|
4,013
|
|
1,494
|
Cash at end of
period
|
|
$
482
|
|
$
1,447
|
Supplemental
disclosure of cash flow information
|
|
|
|
|
Cash paid
for:
|
|
|
|
|
Interest
|
|
$
4,580
|
|
$
1,922
|
Non-cash investing
and financing activities:
|
|
|
|
|
Class A Common Stock
issued in IRM Acquisition
|
|
$
—
|
|
$
76,572
|
Class A Common Stock
issued in Chisholm Acquisition
|
|
$
249,515
|
|
$
—
|
Deferred acquisition
payment - Chisholm
|
|
$
70,000
|
|
$
—
|
Accrued capital
expenditures
|
|
$
49,853
|
|
$
7,775
|
Lease asset additions
- ASC 842
|
|
$
678
|
|
$
—
|
Asset retirement
obligations
|
|
$
86
|
|
$
427
|
Earthstone Energy, Inc.
Non-GAAP Financial Measures
Unaudited
The non-GAAP financial measures of Adjusted Diluted Shares,
Adjusted EBITDAX, Adjusted Net Income, Free Cash Flow and Operating
Margin per Boe, as defined and presented below, are intended to
provide readers with meaningful information that supplements our
financial statements prepared in accordance with accounting
principles generally accepted in the
United States ("GAAP"). Further, these non-GAAP measures
should only be considered in conjunction with financial statements
and disclosures prepared in accordance with GAAP and should not be
considered in isolation or as a substitute for GAAP measures, such
as net income or loss, operating income or loss or any other GAAP
measure of financial position or results of operations. Adjusted
EBITDAX and Adjusted Net Income are presented herein and reconciled
from the GAAP measure of net loss because of their wide acceptance
by the investment community as a financial indicator.
I. Adjusted Diluted Shares
We define "Adjusted Diluted Shares" as the weighted average
shares of Class A Common Stock - Diluted outstanding plus the
weighted average shares of Class B Common Stock outstanding.
Our Adjusted Diluted Shares measure provides a comparable per
share measurement when presenting results such as Adjusted EBITDAX
and Adjusted Net Income that include the interests of both
Earthstone and the noncontrolling interest. Adjusted Diluted Shares
is used in calculating several metrics that we use as supplemental
financial measurements in the evaluation of our business, none of
which should be considered as an alternative to, or more meaningful
than, net income as an indicator of operating performance.
Adjusted Diluted Shares for the periods indicated:
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2022
|
|
2021
|
Class A Common Stock
- Diluted(1)
|
|
63,445,649
|
|
42,778,916
|
Class B Common
Stock
|
|
34,322,462
|
|
34,502,153
|
Adjusted Diluted
Shares
|
|
97,768,111
|
|
77,281,069
|
(1)
|
Does not
include potentially dilutive unvested restricted stock units and
performance units.
|
II. Adjusted EBITDAX
The non-GAAP financial measure of Adjusted EBITDAX (as defined
below), as calculated by us below, is intended to provide readers
with meaningful information that supplements our financial
statements prepared in accordance with GAAP. Further, this non-GAAP
measure should only be considered in conjunction with financial
statements and disclosures prepared in accordance with GAAP and
should not be considered in isolation or as a substitute for GAAP
measures, such as net income or loss, operating income or loss or
any other GAAP measure of financial position or results of
operations. Adjusted EBITDAX is presented herein and reconciled
from the GAAP measure of net loss because of its wide acceptance by
the investment community as a financial indicator.
We define "Adjusted EBITDAX" as net loss plus, when applicable,
accretion of asset retirement obligations; depreciation, depletion
and amortization; interest expense, net; transaction costs;
exploration expense; unrealized loss on derivative contracts;
stock-based compensation (non-cash and expected to settle in cash);
and income tax benefit.
Our Adjusted EBITDAX measure provides additional information
that may be used to better understand our operations. Adjusted
EBITDAX is one of several metrics that we use as a supplemental
financial measurement in the evaluation of our business and should
not be considered as an alternative to, or more meaningful than,
net loss as an indicator of operating performance. 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 cost of depreciable and depletable assets. Adjusted
EBITDAX, as used by us, may not be comparable to similarly titled
measures reported by other companies. We believe that Adjusted
EBITDAX is a widely followed measure of operating performance and
is one of many metrics used by our management team and by other
users of our consolidated financial statements. For example,
Adjusted EBITDAX can be used to assess our operating performance
and return on capital in comparison to other independent
exploration and production companies without regard to financial or
capital structure and to assess the financial performance of our
assets and our company without regard to capital structure or
historical cost basis.
The following table provides a reconciliation of Net loss to
Adjusted EBITDAX for the periods indicated:
($000s)
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2022
|
|
2021
|
Net loss
|
|
$
(51,877)
|
|
$
(10,556)
|
Accretion of asset
retirement obligations
|
|
397
|
|
290
|
Depreciation,
depletion and amortization
|
|
34,326
|
|
24,407
|
Interest expense,
net
|
|
5,318
|
|
2,217
|
Transaction
costs
|
|
10,742
|
|
2,106
|
Exploration
expense
|
|
92
|
|
—
|
Unrealized loss on
derivative contracts
|
|
119,794
|
|
22,358
|
Stock-based
compensation(1)
|
|
5,830
|
|
3,329
|
Income tax
benefit
|
|
(1,533)
|
|
(308)
|
Adjusted
EBITDAX
|
|
$
123,089
|
|
$
43,843
|
|
|
|
|
|
(1)
|
Consists of
expense for non-cash equity awards and cash-based liability awards
that are expected to be settled in cash. On February 9, 2022,
cash-based liability awards were settled in the amount of $8.1
million, all of which was recognized as Stock-based compensation in
the year ended December 31, 2021. Stock-based compensation is
included in General and administrative expense in the Condensed
Consolidated Statements of Operations.
|
III. Adjusted Net Income
We define "Adjusted Net Income" as net loss plus, when
applicable, unrealized loss on derivative contracts; transaction
costs; and the associated changes in estimated income tax.
Our Adjusted Net Income measure provides additional information
that may be used to further understand our operations. Adjusted Net
Income is one of several metrics that we use as a supplemental
financial measurement in the evaluation of our business and should
not be considered as an alternative to, or more meaningful than,
net loss as an indicator of operating performance. Certain items
excluded from Adjusted Net Income 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 cost of depreciable and depletable assets. Adjusted Net
Income, as used by us, may not be comparable to similarly titled
measures reported by other companies. We believe that Adjusted Net
Income is a widely followed measure of operating performance and is
one of many metrics used by our management team and by other users
of our consolidated financial statements. For example, Adjusted Net
Income can be used to assess our operating performance and return
on capital in comparison to other independent exploration and
production companies without regard to financial or capital
structure and to assess the financial performance of our assets and
our company without regard to capital structure or historical cost
basis.
The following table provides a reconciliation of Net loss to
Adjusted Net Income for the periods indicated:
($000s, except share
and per share data)
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2022
|
|
2021
|
Net loss
|
|
$
(51,877)
|
|
$
(10,556)
|
Unrealized loss on
derivative contracts
|
|
119,794
|
|
22,358
|
Transaction
costs
|
|
10,742
|
|
2,106
|
Income tax effect of
the above
|
|
(2,485)
|
|
(466)
|
Adjusted Net
Income
|
|
$
76,174
|
|
$
13,442
|
Adjusted Diluted
Shares(1)
|
|
97,768,111
|
|
77,281,069
|
Adjusted Net
Income per Adjusted Diluted Share
|
|
$
0.78
|
|
$
0.17
|
|
|
|
|
|
(1)
|
Does not
include potentially dilutive unvested restricted stock units and
performance units.
|
IV. Free Cash Flow
Free Cash Flow is a measure that we use as an indicator of our
ability to fund our development activities. We define Free Cash
Flow as Net cash provided by operating activities; less (1)
Settlement of asset retirement obligations, Gain on sale of office
and other equipment, Amortization of deferred financing costs and
Change in assets and liabilities from the Condensed Consolidated
Statements of Cash Flows; plus (2) Transaction costs, Exploration
expense and the current portion of Income tax benefit from the
Condensed Consolidated Statements of Operations; plus (3) the
liability portion of stock-based compensation which is included in
General and administrative expense in the Condensed Consolidated
Statements of Operations; plus (4) the current portion of income
tax benefit from the Condensed Consolidated Statements of
Operations; less (5) Capital expenditures (accrual basis).
Alternatively, Free Cash Flow could be defined as Adjusted EBITDAX
(defined above), less interest expense, less accrual-based capital
expenditures.
Management believes that Free Cash Flow, which measures our
ability to generate additional cash from our business operations,
is an important financial measure for use in evaluating the
Company's financial performance. Free Cash Flow should be
considered in addition to, rather than as a substitute for,
consolidated net income as a measure of our performance and net
cash provided by operating activities as a measure of our
liquidity.
Free Cash Flow for the periods indicated:
($000s)
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2022
|
|
2021
|
Net cash provided by
operating activities
|
|
$
83,002
|
|
$
38,300
|
Adjustments -
Condensed Consolidated Statements of Cash Flows
|
|
|
|
|
Settlement of asset
retirement obligations
|
|
201
|
|
15
|
Gain on sale of office
and other equipment
|
|
22
|
|
—
|
Amortization of
deferred financing costs
|
|
(627)
|
|
(141)
|
Change in assets and
liabilities
|
|
21,016
|
|
1,346
|
Adjustments -
Condensed Consolidated Statements of Operations
|
|
|
|
|
Transaction
costs
|
|
10,742
|
|
2,106
|
Exploration
expense
|
|
92
|
|
—
|
Income tax benefit -
current
|
|
(206)
|
|
—
|
Stock-based
compensation - liability portion
|
|
3,529
|
|
—
|
Capital expenditures
(accrual basis)
|
|
(82,109)
|
|
(9,801)
|
Free Cash
Flow
|
|
$
35,662
|
|
$
31,825
|
|
|
|
|
|
Alternate calculation of Free Cash Flow for the periods
indicated:
($000s)
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2022
|
|
2021
|
Adjusted
EBITDAX
|
|
$
123,089
|
|
$
43,843
|
Interest expense,
net
|
|
(5,318)
|
|
(2,217)
|
Capital expenditures
(accrual basis)
|
|
(82,109)
|
|
(9,801)
|
Free Cash
Flow
|
|
$
35,662
|
|
$
31,825
|
|
|
|
|
|
V. Operating Margin per Boe and Operating Margin per Boe
(including realized hedge settlements)
Operating Margin per Boe is a non-GAAP financial measure that we
use to evaluate our operating performance on a per Boe basis. We
define Operating Margin per Boe as average realized price per Boe
minus lease operating expense per BOE and production and ad valorem
taxes per Boe. Operating Margin per Boe (including realized hedge
settlements) is calculated as the sum of Operating Margin per Boe
and Realized hedge settlements per Boe.
Our Operating Margin per Boe measure provides additional
information that may be used to further understand our operating
margins. We use Operating Margin per Boe as a supplemental
financial measurement in the evaluation of our operational
performance. We believe that investors benefit from having access
to the same financial measures that our management uses in
evaluating our results. Operating Margin per Boe should not be
considered as an alternative to, or more meaningful than, net loss
as an indicator of operating performance. Operating Margin per Boe,
as used by us, may not be comparable to similarly titled measures
reported by other companies.
View original
content:https://www.prnewswire.com/news-releases/earthstone-energy-inc-reports-2022-first-quarter-financial-results-301540120.html
SOURCE Earthstone Energy, Inc.