PostRock Energy Corporation (Nasdaq:PSTR) today
announced its results for the quarter ended March 31, 2013.
Highlights
- During the quarter, 55 oil wells were drilled and 42
recompleted
- Oil sales averaged 363 net Bbls a day, a 77.4% increase from
the prior-year period
- Production currently averages over 500 net Bbls a day
- Due to an increase in proved reserves value, the borrowing base
was increased to $95 million
Key Financial Results
- Revenue reached to $16.1 million, 12.1% above the prior-year
period
- Oil contributed 18% of revenues, versus 13% in the prior-year
period
- Operating expenses (production costs plus G&A) fell to
$13.3 million, 15.5% below the prior-year period
- Interest expense fell to $641,000, 76.2% below the prior-year
period
Development and Leasing Activities
Cherokee Basin. In the quarter, 55 oil wells were drilled and 40
recompleted. An additional 150 oil wells and 20 recompletions in
the Basin should be completed in the remainder of 2013.
Central Oklahoma. In the quarter, two oil wells were recompleted
in Central Oklahoma. Initial results indicate IRRs of more than
100%. During the period, approximately 1,100 additional acres were
acquired bringing leasehold to 2,500 net acres. PostRock plans to
recomplete seven additional wells and drill five wells, including
two horizontals in Central Oklahoma, by year-end while continuing
to add leasehold. Individual projects in Central Oklahoma are
expected to have a more significant impact on production and
reserves than those in the Cherokee Basin.
Financial Results
Natural gas revenue, excluding hedges, rose 5.7% from the
prior-year period to $12.4 million. The increase was due to a 22.3%
increase in realized gas prices, which reached $3.34 per Mcf,
partially offset by a 12.9% production decline to 41.3 MMcf per
day. The drop in gas production resulted from the absence of gas
development projects in the last 12 months as gas prices were at
uneconomic levels. Oil revenue rose 60.0% from the prior-year
period to $3.0 million. The increase was the result of a 77.4%
increase in sales volume, offset by an 8.8% decrease in realized
prices to $90.49 per Bbl. The Company received an average of $3.87
a barrel below the NYMEX price during the quarter. Gathering
revenue fell 6.4%, to $654,000, largely due to reduced volumes.
Production costs, including lease operating expenses, gathering
costs and production taxes, totaled $9.8 million, a 12.2% decrease
from $11.1 million during the prior-year period (excluding
non-recurring field restructuring costs of $368,000 in the
prior-year). The decrease was driven by lower maintenance, labor
and electricity costs and higher capitalized operating expenses.
Recurring production costs were $2.50 per Mcfe versus $2.51 in the
prior-year period.
General and administrative expenses fell to $3.5 million, a
16.8% decrease from the prior-year period, primarily due to lower
compensation costs of $482,000 and $231,000 lower legal and
professional fees.
The Company had a realized loss from derivative financial
instruments of $873,000 compared to a realized gain of $12.1
million in the prior-year period. The loss was due to $1.0 million
of realized losses on Southern Star basis swaps, partially offset
by $128,000 of realized gains on NYMEX oil swaps. The last of the
Southern Star basis swaps, which had a mark-to-market loss of $3.8
million at March 31st, expire in December 2013.
Due to appreciation of Constellation Energy Partners' unit price
during the quarter, a mark-to-market gain of $3.6 million was
recorded.
Hedges
In February, PostRock entered into additional oil and gas swaps
which took effect in March and April, respectively. In combination
with existing swaps, an average of 32 MMcf and 240 Bbls a day are
hedged for the remaining nine months of 2013 at weighted average
prices of $4.01 per Mcf and $100.49 per Bbl. It is expected that
the Southern Star basis swaps will have a loss of roughly $420,000
per month from April through December.
|
Apr. - Dec. |
|
|
|
|
2013 |
2014 |
2015 |
2016 |
NYMEX Gas Swaps |
|
|
|
|
Volume (MMBtu) |
8,711,037 |
10,327,572 |
8,983,560 |
7,814,028 |
Weighted Average Price
(MMBtu) |
$ 4.01 |
$ 4.01 |
$ 4.01 |
$ 4.01 |
|
|
|
|
|
NYMEX Oil Swaps |
|
|
|
|
Volume (Bbls) |
66,114 |
79,548 |
71,568 |
65,568 |
Weighted Average Price
(Bbl) |
$ 100.49 |
$ 96.28 |
$ 92.73 |
$ 90.33 |
Debt
At March 31, 2013, $66.0 million was borrowed under the
revolving credit facility, an increase of $8.5 million from
December 31, 2012. The increase was driven primarily by the fact
that $5.6 million of late December payments for the royalty
settlement and property taxes did not clear until early
January.
At March 31, 2013, the quarterly preferred dividend to White
Deer was paid-in-kind increasing its liquidation value by $2.7
million to $94.1 million. As part of the dividend, White Deer also
received 1.6 million additional warrants with an average exercise
price of $1.75 a share. White Deer currently holds 9.8 million
common shares and 35.9 million warrants exercisable at prices
between $1.42 and $6.39 per share.
On May 8th, the Company's borrowing base was increased by $5
million to $95 million based on year-end reserves. This was the
Company's first borrowing base increase in more than five
years.
|
December 31, |
March 31, |
|
2012 |
2013 |
|
(in
thousands) |
|
|
|
Cash and equivalents |
$ 525 |
$ 65 |
|
|
|
Long-term debt (incl. current
maturities) |
$ 57,500 |
$ 66,000 |
|
|
|
Redeemable preferred stock |
$ 73,152 |
$ 75,732 |
Stockholders' deficit |
(21,008) |
(27,571) |
Total capitalization |
$ 109,644 |
$ 114,161 |
Capital Expenditures
During the quarter, capital expenditures totaled $10.1 million.
This included $8.9 million on oil directed drilling and
recompletions, $791,000 on maintenance related projects, including
trucks and compressor optimization and $378,000 for leasehold.
Management Comment
Terry W. Carter, PostRock's President and Chief Executive
Officer, said, "We are very pleased with our early progress in oil
development. However, we recognize that our gas decline continues
to be significant as gas prices have not reached a point where we
can profitably invest in drilling. While we await a better gas
market, the ongoing reconfiguration of our compression fleet will
result in significant fuel savings and other cost reductions. This
should begin to moderate our gas production decline.
"Our recent Central Oklahoma successes, give me confidence that
we can significantly increase our oil production in the region. At
year end, Central Oklahoma represented less than 1% of our acreage
but more than 50% of our oil reserves. Our leasehold position in
the area is slowly but steadily increasing. We plan additional
recompletions in the second and third quarters and we plan to begin
development in this area in the third quarter. These projects are
expected to have a more significant impact on the Company's overall
reserves and production per project. As we build on our recent oil
production and development trend, we believe we will materially
enhance the value of our shareholders' investment."
Webcast and Conference Call
PostRock will host a webcast and conference call tomorrow, May
9, 2013, at 10:00 a.m. Central Time. The webcast will be accessible
on the 'Investors' page at www.pstr.com, where it will also be
available for replay. The conference call number for participation
is (866) 516-1003.
PostRock Energy Corporation is engaged in the acquisition,
exploration, development and production of oil and natural gas,
primarily in the Cherokee Basin of Kansas and Oklahoma. The Company
owns and operates over 3,000 wells and nearly 2,200 miles of gas
gathering lines in the Basin. It also owns and operates oil
producing properties in Central Oklahoma and minor oil and gas
producing properties in the Appalachian Basin.
Forward-Looking Statements
Opinions, forecasts, projections or statements, other than
statements of historical fact, are forward-looking statements that
involve risks and uncertainties. Forward-looking statements in this
announcement are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Although the
Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance
such expectations will prove correct. Actual results may differ
materially due to a variety of factors, some of which may not be
foreseen. These risks and other risks are detailed in the Company's
filings with the Securities and Exchange Commission, including risk
factors listed in the Annual Report on Form 10-K and other filings.
The Company's SEC filings may be found at www.pstr.com or
www.sec.gov. By making these forward-looking statements, the
Company undertakes no obligation to update these statements for
revisions or changes.
Reconciliation of Non-GAAP Financial
Measures
The following table represents a reconciliation of net income
(loss) to EBITDA and adjusted EBITDA, as defined, for the periods
presented.
|
Three Months
Ended March 31, |
|
2012 |
2013 |
|
(in
thousands) |
|
|
|
|
Net income (loss) from continuing
operations |
$ 6,008 |
$ (7,894) |
Adjusted for: |
|
|
Interest expense,
net |
2,696 |
641 |
Depreciation, depletion, and
amortization |
6,162 |
6,428 |
EBITDA |
$ 14,866 |
$ (825) |
Other income, net |
(11) |
(13) |
Gain on equity investment |
(4,169) |
(3,582) |
Unrealized loss from derivative
financial instruments |
60 |
6,248 |
(Gain) loss on disposal of
assets |
(104) |
31 |
Stock-based compensation |
442 |
719 |
Other non-cash
compensation |
-- |
209 |
Adjusted EBITDA |
$ 11,084 |
$ 2,787 |
Although adjusted EBITDA is not a measure of performance
calculated in accordance with generally accepted accounting
principles, or GAAP, management considers it an important measure
of performance. Adjusted EBITDA is not a substitute for the GAAP
measures of earnings or cash flow and is not necessarily a measure
of the Company's ability to fund its cash needs. In addition, it
should be noted that companies calculate adjusted EBITDA
differently, and therefore adjusted EBITDA as presented herein may
not be comparable to adjusted EBITDA reported by other companies.
Adjusted EBITDA has material limitations as a performance measure
because it excludes, among other things, (a) interest expense,
which is a necessary element of business to the extent that an
entity incurs debt, (b) depreciation, depletion and amortization,
which are necessary elements of any business that uses capital
assets, (c) impairments of oil and gas properties, which may at
times be a material element of an independent oil company's
business, and (d) income taxes, which may become a material element
of the Company's operations in the future. Because of its
limitations, adjusted EBITDA should not be considered a measure of
discretionary cash available to us to invest in the growth of
PostRock's business.
|
|
POSTROCK ENERGY
CORPORATION |
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS |
(in thousands, except
per share data) |
(Unaudited) |
|
|
|
|
Three Months
Ended March 31, |
|
2012 |
2013 |
Revenue |
|
|
Natural gas sales |
$ 11,774 |
$ 12,442 |
Crude oil sales |
1,848 |
2,957 |
Gathering |
699 |
654 |
Total |
14,321 |
16,053 |
Costs and expenses |
|
|
Production expense |
11,501 |
9,775 |
General and administrative |
4,263 |
3,546 |
Depreciation, depletion and
amortization |
6,162 |
6,428 |
Loss (gain) on disposal of
assets |
(104) |
31 |
Total |
21,822 |
19,780 |
|
|
|
Operating loss |
(7,501) |
(3,727) |
|
|
|
Other income (expense) |
|
|
Realized gains (losses) from
derivative financial instruments |
12,085 |
(873) |
Unrealized loss from derivative
financial instruments |
(60) |
(6,248) |
Gain on equity
investment |
4,169 |
3,582 |
Other income, net |
11 |
13 |
Interest expense,
net |
(2,696) |
(641) |
Total |
13,509 |
(4,167) |
Income (loss) from continuing operations
before income taxes |
6,008 |
(7,894) |
Income taxes |
-- |
-- |
Income (loss) from continuing operations |
6,008 |
(7,894) |
Income from discontinued operations |
1,339 |
-- |
Net income (loss) |
7,347 |
(7,894) |
Preferred stock dividends |
(2,093) |
(2,740) |
Accretion of redeemable
preferred stock |
(471) |
(778) |
Net income (loss) available to common
stockholders |
$ 4,783 |
$ (11,412) |
Income (loss) per common
share |
|
|
Basic income (loss) per share -
continuing operations |
$ 0.31 |
$ (0.50) |
Basic income (loss) per share -
discontinued operations |
0.12 |
-- |
Basic income (loss) per
share |
$ 0.43 |
$ (0.50) |
|
|
|
Diluted income (loss) per share
- continuing operations |
$ 0.27 |
$ (0.50) |
Diluted income (loss) per share
- discontinued operations |
0.10 |
-- |
Diluted income (loss) per
share |
$ 0.37 |
$ (0.50) |
|
|
|
Weighted average common shares
outstanding |
|
|
Basic |
11,206 |
22,763 |
Diluted |
12,786 |
22,763 |
|
|
POSTROCK ENERGY
CORPORATION |
CONDENSED
CONSOLIDATED BALANCE SHEETS |
(in
thousands) |
(Unaudited) |
|
|
December 31, |
March 31, |
|
2012 |
2013 |
ASSETS |
Current assets |
|
|
Cash and equivalents |
$ 525 |
$ 65 |
Restricted cash |
1,500 |
1,500 |
Accounts receivable - trade,
net |
7,207 |
6,944 |
Other receivables |
180 |
459 |
Inventory |
990 |
854 |
Other |
2,100 |
1,069 |
Derivative financial
instruments |
1,771 |
266 |
Total |
14,273 |
11,157 |
Oil and gas properties, full cost,
net |
107,531 |
112,000 |
Other property and equipment, net |
14,244 |
13,450 |
Other, net |
2,180 |
2,091 |
Equity investment |
7,820 |
11,402 |
Derivative financial instruments |
615 |
644 |
Total assets |
$ 146,663 |
$ 150,744 |
|
|
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT |
Current liabilities |
|
|
Accounts payable |
$ 9,373 |
$ 5,765 |
Revenue payable |
4,447 |
4,324 |
Accrued expenses and other |
4,928 |
3,165 |
Derivative financial
instruments |
4,449 |
5,723 |
Total |
23,197 |
18,977 |
Derivative financial instruments |
2,638 |
6,136 |
Long-term debt |
57,500 |
66,000 |
Asset retirement obligations |
10,868 |
11,190 |
Other |
316 |
280 |
Total liabilities |
94,519 |
102,583 |
|
|
|
Commitments and contingencies |
|
|
Series A cumulative redeemable preferred
stock |
73,152 |
75,732 |
|
|
|
Stockholders' deficit |
|
|
Preferred stock |
3 |
3 |
Common stock |
213 |
237 |
Additional paid-in
capital |
396,732 |
398,039 |
Accumulated deficit |
(417,956) |
(425,850) |
Total stockholders'
deficit |
(21,008) |
(27,571) |
Total liabilities and stockholders'
deficit |
$ 146,663 |
$ 150,744 |
|
|
POSTROCK ENERGY
CORPORATION |
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(in
thousands) |
(Unaudited) |
|
|
|
|
|
|
Three Month Ended
March 31, |
|
2012 |
2013 |
Cash flows from operating
activities |
|
|
Net income
(loss) |
$ 7,347 |
$ (7,894) |
Adjustments to reconcile
net income (loss) to net cash from (used in) operations |
|
|
Depreciation, depletion
and amortization |
7,013 |
6,428 |
Stock-based
compensation |
442 |
719 |
Other non-cash
compensation |
-- |
209 |
Amortization of deferred
loan costs |
409 |
104 |
Change in fair value of
derivative financial instruments |
60 |
6,248 |
Loss (gain) on disposal
of assets |
(109) |
31 |
Gain from equity
investment |
(4,169) |
(3,582) |
Other non-cash changes to
items affecting net loss |
130 |
(15) |
Changes in assets and
liabilities |
|
|
Receivable |
3,356 |
153 |
Payables |
(555) |
(5,559) |
Other |
(3,489) |
329 |
Net cash flows from (used in) operating
activities |
10,435 |
(2,829) |
|
|
|
Cash flows from investing
activities |
|
|
Proceeds from sale of
assets |
232 |
12 |
Expenditures for
equipment, development, leasehold and pipeline |
(4,491) |
(9,211) |
Net cash flows used in investing
activities |
(4,259) |
(9,199) |
|
|
|
Cash flows from financing
activities |
|
|
Proceeds from
debt |
-- |
8,500 |
Repayments of
debt |
(14,000) |
-- |
Debt and equity financing
costs |
-- |
(224) |
Proceeds from issuance of
common stock |
7,500 |
3,292 |
Net cash flows from (used in) financing
activities |
(6,500) |
11,568 |
Net decrease in cash and
equivalents |
(324) |
(460) |
Cash and equivalents - beginning of
period |
349 |
525 |
Cash and equivalents - end of
period |
$ 25 |
$ 65 |
CONTACT: David J. Klvac
EVP & Chief Financial Officer
dklvac@pstr.com
(405) 815-4304
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