Alta Mesa Resources, Inc. (NASDAQ: AMR, “Alta Mesa Resources” or
the “Company”) today announced its 2019 outlook, preliminary fourth
quarter 2018 production and volume results and certain other full
year 2018 unaudited financial and operational results for its
subsidiaries, Alta Mesa Holdings, LP ("Alta Mesa Upstream") and
Kingfisher Midstream, LLC ("Kingfisher Midstream"). The previously
announced call for tomorrow at 4 p.m. Central time will be
rescheduled and held after the Annual Report on Form 10-K for the
year ended December 31, 2018 (the "Annual Report") has been filed.
Additionally, an updated investor presentation has been posted to
the Company’s website at www.altamesa.net.
Key Updates:
- 2019 upstream capital program of $190 to $210 million is
expected to deliver full year 2019 average production of 29,500 to
31,500 BOE per day (45% oil, 70% liquids)
- 2019 midstream capital program of $55 to $60 million is
expected to deliver $55 to $60 million of 2019 Kingfisher Midstream
Adjusted EBITDA (See “Non-GAAP and Other Financial Information”
below)
- Q4-18 net production was approximately 37,600 BOE per day (50%
oil, 73% liquids) and December net production was approximately
39,100 BOE per day (50% oil, 74% liquids)
- Year-end 2018 proved reserves were 158 MMBOE (44% Proved
Developed)
James Hackett, Executive Chairman of the Board and Interim Chief
Executive Officer of the Company commented: “The Company has been
diligent in reducing activity levels and taking the initial steps
to right-size the cost structure for the current commodity
environment and business outlook. We’ve set an initial capital plan
that will allow us to test the spacing of infill wells that we
think will provide a better optimized balance of returns and
drilling inventory going forward. The plans announced today are
flexible and can be accelerated or reduced as results and commodity
prices dictate.”
2019 Outlook:
Alta Mesa Upstream 2019 Outlook:
Alta Mesa Upstream entered 2019 with six rigs actively working
but reduced the active rig count to zero by the end of January.
Year-to-date in 2019, Alta Mesa Upstream has brought eight wells on
production. These came on production during January and February as
completions activity focused on wells that were in process at
year-end 2018. We have identified an additional 16 drilled and
uncompleted wells that we intend to have on production by the end
of the second quarter of 2019. In late February, Alta Mesa Upstream
began taking steps to resume drilling operations. Alta Mesa
Upstream expects to utilize two rigs for March, April and May of
2019 and three rigs from June through December of 2019. The capital
forecasts and production outlook in the table below reflect these
assumptions. The Company continues to monitor well costs, well
productivity and commodity prices and has significant flexibility
to modify the drilling plans going forward. The overhead guidance
below does not reflect any potential severance or other costs
associated with our recent reduction in force.
2019 upstream activity will be focused on drilling and
completing wells at a density of four to five wells per section.
Alta Mesa Upstream will target drilling three infill wells in
sections with an existing unit well and five wells in sections with
no wells yet drilled. The drilling and completion designs for 2019
are targeting $3.2 to $3.5 million per developed well. The lower
costs compared to 2018 will be driven by returning to gas lift as
the primary lift method, reverting to a completions design more in
line with our 2017 well designs, which had fewer stages, and
capturing service cost savings from the re-bidding of services in
the current market.
Alta Mesa Upstream
Guidance |
2019E |
Net Production |
29,500 –
31,500 BOE/d |
Lease Operating and
Workover Expense |
$7.50 –
$8.50 / BOE |
Marketing and
Transportation Expense |
$5.10 –
$5.70 / BOE |
Production Tax |
5% – 6%
of Revenues |
Upstream Overhead –
G&A |
~$4
million / month |
Upstream Capital
Expenditures |
$190 –
$210 million |
Kingfisher Midstream 2019 Outlook:
The 2019 outlook for Kingfisher Midstream is based on the
expected activities of Alta Mesa Upstream and third-party customers
already under contract. Kingfisher Midstream expects such
third-parties to utilize an average of two to three rigs on the
dedicated acreage. Capital for 2019 will be focused on well
connects and plant upgrades that will provide incremental value to
upstream customers with regards to liquids sales points. Kingfisher
Midstream has made the decision to suspend future investments in
Cimarron Express Pipeline, LLC (“Cimarron Express”). The
anticipated volumes from the currently dedicated acreage, and the
resultant project economics, do not support additional investment
in Cimarron Express at this time. The midstream capital guidance
below, assumes no further investment in the project. The overhead
guidance below does not reflect any potential severance or other
onetime costs associated with our recent reduction in force. See
"Non-GAAP Financial and Other Information " below for further
discussion of 2019 Estimated Adjusted Midstream EBITDA.
Kingfisher Midstream
Guidance |
2019E |
System Gas Volumes |
110 – 120
MMcf/d |
Produced Water
Volumes |
70,000 –
80,000 Bbls/d |
Crude Oil Volumes |
6,000 –
6,500 Bbls/d |
Plant Operating
Expense |
~$0.30 /
MMBTU |
Gathering, Processing and
Transportation Expense |
~$700,000
/ month |
Water Operating
Expense |
~$0.37 /
Bbl |
Midstream Overhead –
G&A |
~$1
million / month |
Adjusted Midstream
EBITDA |
$55 – $60
million |
Midstream Capital
Expenditures |
$55 – $60
million |
Preliminary Fourth Quarter and Full Year 2018
Results:
Preliminary Q4-18 Operating Results:
In the fourth quarter, Alta Mesa Upstream drilled 47 wells and
brought 51 wells onto production. Of the wells brought onto
production, nine were funded under the joint development agreement
with BCE-STACK Development LLC. Volumes for the quarter are
summarized on the table below.
Q4-18 Alta Mesa Upstream
Net Production |
Total |
Per
Day |
Oil |
1,723
MBbl |
18,700
Bbl |
NGL |
806
MBbl |
8,800
Bbl |
Gas |
5,605
MMcf |
60,900
Mcf |
Total |
3,463
MBOE |
37,600
BOE |
Kingfisher Midstream’s fourth quarter volumes are summarized in
the table below. The produced water volumes reflect the average
since the system was purchased by Kingfisher Midstream in November
2018.
Q4-18 Kingfisher Midstream
Volumes |
Total |
Per
Day |
System Gas Volumes |
|
|
Alta
Mesa |
9,316
MMcf |
101
MMcf |
Third
Party |
2,088
MMcf |
23
MMcf |
Total System Gas
Volumes |
11,404
MMcf |
124
MMcf |
Produced Water
Volumes |
5,320
MBbl |
100,370
Bbl |
Crude Oil Volumes |
546
MBbl |
5,936
Bbl |
Preliminary 2018 Capital Spending:
Capital expenditures incurred for Alta Mesa Resources were $782
million for February 9, 2018 through December 31, 2018 (the
“Successor Period”). $695 million and $87 million of those capital
expenditures were for Alta Mesa Upstream and Kingfisher Midstream
respectively. These capital expenditure figures do not include $98
million associated with Kingfisher Midstream’s acquisition of the
produced water business from Alta Mesa Upstream during Q4-18. Alta
Mesa Upstream also incurred capital expenditures of $43 million
from January 1, 2018 through February 8, 2018 (the “Predecessor
Period”). In total for 2018, Alta Mesa Upstream capital
expenditures were $738 million.
Balance Sheet Update:
As of December 31, 2018, Alta Mesa Resources had debt with a
total face value of $835 million and cash of $27 million. Alta Mesa
Upstream’s total debt was $661 million, comprised of $161 million
drawn on the its credit facility and $500 million of senior notes.
Kingfisher Midstream’s total debt was $174 million comprised
entirely of borrowings under its credit facility. The current face
value of total debt for Alta Mesa Resources is $961 million. Since
year-end, Alta Mesa Upstream has borrowed an additional $117
million under its credit facility, bringing total borrowings under
that facility to $278 million. Kingfisher Midstream has borrowed an
additional $9 million since year-end bringing its total borrowings
to $183 million. We made the incremental borrowings in 2019
principally based on the reduction in negative working capital
attendant to the ramp down near year-end 2018. As of December 31,
2018, Alta Mesa Upstream and Kingfisher Midstream were in
compliance with the financial covenants contained in their
respective debt agreements.
Year-End 2018 Reserves:
Alta Mesa Upstream’s year-end 2018 total estimated proved
reserves were 158 MMBOE, a 13% reduction from year-end 2017. The
proved reserves were 44% proved developed and 67% liquids, when
computed on a percentage of total estimated proved reserves. The
reduction in proved reserves was driven primarily by revisions to
the assumptions around the recovery for proven undeveloped drilling
locations.
Corporate Items:
Alta Mesa Resources has determined that it had an ineffective
internal control over financial reporting due to an identified
material weakness in both the design of its controls and the
execution of its control procedures. As a result of this
determination, the Company is performing extensive additional
analyses and other procedures to ensure that its consolidated
financial statements to be included in the Annual Report are
prepared in accordance with US GAAP. Accordingly, the Company
expects it will need to file a Form 12b-25, Notification of Late
Filing, with the Securities and Exchange Commission indicating a
delay in the filing of its Annual Report. The extension period
provided by Form 12b-25 will give the Company until March 18, 2019
to file its Annual Report. While the Company is targeting that
timeframe, there can be no assurance that the Company will complete
the preparation and filing of the Annual Report within the
extension period.
Alta Mesa Resources expects to record material, non-cash asset
impairment charges to both of its upstream and midstream segments
in the fourth quarter of 2018. The Company does not expect the
impairment charge to have any impact on future operations, its
liquidity, cash flows from operating activities, or affect
compliance with provisions set forth in its debt instruments. The
impairment charge will reduce future depreciation, depletion and
amortization expense. The impairment expense is estimated to be
approximately $2.0 billion for the upstream segment and
approximately $1.1 billion for the midstream segment.
The Company did not complete any repurchases under its
previously announced $50 million share repurchase program during
the fourth quarter of 2018. Repurchases are done at the Company's
discretion in accordance with applicable securities laws from time
to time in open market or private transactions.
Safe Harbor Statement and Disclaimer:
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,
including but not limited to, Alta Mesa Resources’ fourth quarter
and year-end financial and operating results, 2019 outlook and
guidance, including estimates with respect to capital budget,
drilling plans, timing and amount of future production, throughput
and produced water volumes, expenses, cost reductions, overhead and
EBITDA, the timing of the filing of the Company’s Annual Report on
Form 10-K, anticipated impairments and the impacts of those
impairments, strategy, future operations, financial position,
prospects, plans and objectives of management are forward-looking
statements. When used in this press release, the words “could”,
“should”, “will”, “plan”, “believe”, “anticipate”, “intend”,
“estimate”, “expect”, “project” 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 Alta Mesa Resources'
current expectations and assumptions about future events and are
based on currently available information as to the outcome and
timing of future events. Alta Mesa Resources cautions 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 its control, incident to the exploration for
and development and production of oil and gas. These risks include,
but are not limited to, commodity price volatility, low prices for
oil and/or gas, global economic conditions, inflation, increased
operating cost, lack of availability of drilling and production
equipment and services, operating results, environmental risks,
weather 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
other risks. Information concerning these and other factors can be
found in Alta Mesa Resources' filings with the SEC, including its
Forms 10-K, 10-Q and 8-K, which can be obtained free of charge on
the SEC's web site at http://www.sec.gov. Should one or more of the
risks or uncertainties described in this press release occur, or
should underlying assumptions prove incorrect, Alta Mesa Resources’
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 may issue. Except as otherwise required by
applicable law, Alta Mesa Resources disclaims 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.
Non-GAAP and Other Financial Information:
This press release includes 2019 Estimated Adjusted Midstream
EBITDA, which represents a current estimate of Kingfisher
Midstream’s 2019 net income adjusted to exclude interest expense,
income taxes, depreciation and amortization, as well as other
adjustments. This is a forward-looking financial measure that is
not presented in accordance with generally accepted accounting
principles (“GAAP”). This non-GAAP financial measure is a numerical
measure of financial performance that excludes or includes amounts
so as to be different than the most directly comparable measure
that would be presented in accordance with GAAP in Alta Mesa
Resources’ income statement. Non-GAAP financial measures should not
be considered in isolation or as a substitute for the most directly
comparable GAAP measures. Alta Mesa Resources’ non-GAAP financial
measures may be different from non-GAAP financial measures used by
other companies. This forward-looking non-GAAP financial measure is
intended to provide additional information to investors regarding
Alta Mesa Resources’ current expectations surrounding the future
outlook of the business. The Company does not attempt to reconcile
this measure with the most directly comparable GAAP financial
measure because of the inherent difficulty in forecasting and
quantifying certain amounts that are necessary for such
reconciliations, including adjustments identified above, the
amounts of which could be material.
Historic and future upstream production and reserves are
reported assuming full ethane recovery of barrels. Actual NGL
barrels recovered may vary based on optimization of economic
recovery.
About Alta Mesa Resources:
Alta Mesa Resources, Inc. is an independent energy company
focused on the development and acquisition of unconventional oil
and gas reserves in the Anadarko Basin in Oklahoma, and through
Kingfisher Midstream, LLC, provides best-in-class midstream energy
services, including crude oil and gas gathering, processing and
marketing and produced water disposal to producers in the STACK
play.
Investor Relations Contact:
Email: IR@altamesa.net Phone: 281-943-5597
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