Lonestar Resources US Inc. (NASDAQ: LONE) (including its subsidiaries, “Lonestar,” “we,” “us,” “our” or the “Company”) today reported financial and operating results for the three months ended March 31, 2020.
HIGHLIGHTS
OPERATIONAL UPDATE
EAGLE FORD SHALE TREND - WESTERN REGION
In our Western Region, production for 1Q20 averaged approximately 6,869 BOE per day, a 20% increase from 1Q19 production. The increase in production is associated with new completions at Horned Frog and Beall Ranch. Production consisted of 2,350 barrels of oil per day (34%), 1,943 barrels of NGLs per day (28%) and 15,458 Mcf of natural gas per day (38%). The Western region accounted for 48% of the Company’s production during the quarter.
In March, Lonestar began flowback operations on 2.0 gross / 2.0 net wells on its Horned Frog property, the Horned Frog AE A2H and Horned Frog AE B3H. Lonestar has a 100% WI / 78% NRI in these wells. These new wells have since cleaned up after flowback and registered the following Max-30 rates which average 1,761 BOE/d. Production was comprised of 53% crude oil and NGLs on an equivalent basis which is the highest liquid concentration to date at our Horned Frog Proper location.
Also in March, Lonestar commenced flowback operations on 2.0 gross / 2.0 net wells on its Beall Ranch property, the Beall Ranch #14H and #15H. Lonestar has a 98% WI / 73% NRI in these wells. These new wells have since cleaned up after flowback and registered the following Max-30 rates which average 711 BOE/d:
EAGLE FORD SHALE TREND - CENTRAL REGION
In our Central Region, 1Q20 production averaged approximately 7,281 BOE/d, a 35% increase over 1Q19 rates. Production consisted of 4,690 barrels of oil per day (64%), 1,344 barrels of NGLs per day (18%), and 7,486 Mcf of natural gas per day (17%). The growth in production is largely driven by development of our Cyclone/Hawkeye assets in Gonzales County. The Central region accounted for 50% of the Company’s production during the quarter.
In January, Lonestar began flowback operations on 3 gross / 3.0 net wells, the Cyclone 23H, Cyclone 36H, and Cyclone 37H. These wells recorded maximum rates over a 30-day period (“Max-30 rates”) of 638 BOE/d, 90% of which was crude oil. Now, through their first 120 days of production, these wells have produced an average of 48,000 BOE, which is in-line the 8 previous wells drilled at our Cyclone area, despite being up dip to our other producers. The Company holds an 80% working interest (“WI”) / 61% net revenue interest (“NRI”) in these wells.
In June, the Company began flowback operations on the Hawkeye #14H, Hawkeye #15H, and Hawkeye #16H. These wells were drilled to total measured depths of 21,221, 20,924, and 20,228 feet, respectively. The Hawkeye #14H, #15H, and #16H wells were fracture-stimulated in engineered completions using diverters with an average proppant concentration of 1,827 pounds per foot over 37, 36 and 34 stages, respectively. Lonestar currently holds a 90% WI / 67% NRI in these wells.
These wells are the first 3 wells completed on the previously announced JDA leasehold and these wells have set records as the largest oil producers in the Company’s history.
ABOUT LONESTAR RESOURCES US INC.
Lonestar is an independent oil and natural gas company, focused on the development, production, and acquisition of unconventional oil, NGLs, and natural gas properties in the Eagle Ford Shale in Texas, where we have accumulated approximately 72,642 gross (53,249 net) acres in what we believe to be the formation’s crude oil and condensate windows, as of March 31, 2020. For more information, please visit www.lonestarresources.com.
CAUTIONARY & FORWARD-LOOKING STATEMENTS
Lonestar Resources US Inc. cautions that this press release contains forward-looking statements, including, but not limited to; Lonestar’s execution of its growth strategies; growth in Lonestar’s leasehold, reserves and asset value; and Lonestar’s ability to create shareholder value. These statements involve substantial known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following: volatility of oil, natural gas and NGL prices, and potential write-down of the carrying values of crude oil and natural gas properties; inability to successfully replace proved producing reserves; substantial capital expenditures required for exploration, development and exploitation projects; potential liabilities resulting from operating hazards, natural disasters or other interruptions; risks related using the latest available horizontal drilling and completion techniques; uncertainties tied to lengthy period of development of identified drilling locations; unexpected delays and cost overrun related to the development of estimated proved undeveloped reserves; concentration risk related to properties, which are located primarily in the Eagle Ford Shale of South Texas; loss of lease on undeveloped leasehold acreage that may result from lack of development or commercialization; inaccuracies in assumptions made in estimating proved reserves; our limited control over activities in properties Lonestar does not operate; potential inconsistency between the present value of future net revenues from our proved reserves and the current market value of our estimated oil and natural gas reserves; risks related to derivative activities; losses resulting from title deficiencies; risks related to health, safety and environmental laws and regulations; additional regulation of hydraulic fracturing; reduced demand for crude oil, natural gas and NGLs resulting from conservation measures and technological advances; inability to acquire adequate supplies of water for our drilling operations or to dispose of or recycle the used water economically and in an environmentally safe manner; climate change laws and regulations restricting emissions of “greenhouse gases” that may increase operating costs and reduce demand for the crude oil and natural gas; fluctuations in the differential between benchmark prices of crude oil and natural gas and the reference or regional index price used to price actual crude oil and natural gas sales; and the other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or the SEC, on April 13, 2020, as well as other documents that we may file from time to time with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. The forward-looking statements in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.
Lonestar Resources US Inc. |
|||||||
Condensed Consolidated Balance Sheets |
|||||||
(In thousands, except par value and share data) |
|||||||
|
March 31,
|
|
December 31,
|
||||
Assets |
|||||||
Current assets |
|
|
|
||||
Cash and cash equivalents |
$ |
1,142 |
|
|
$ |
3,137 |
|
Accounts receivable |
|
|
|
||||
Oil, natural gas liquid and natural gas sales |
10,229 |
|
|
15,991 |
|
||
Joint interest owners and others, net |
836 |
|
|
1,310 |
|
||
Derivative financial instruments |
74,425 |
|
|
5,095 |
|
||
Prepaid expenses and other |
2,873 |
|
|
2,208 |
|
||
Total current assets |
89,505 |
|
|
27,741 |
|
||
Property and equipment |
|
|
|
||||
Oil and gas properties, using the successful efforts method of accounting |
|
|
|
||||
Proved properties |
1,083,692 |
|
|
1,050,168 |
|
||
Unproved properties |
77,162 |
|
|
76,462 |
|
||
Other property and equipment |
21,424 |
|
|
21,401 |
|
||
Less accumulated depreciation, depletion, amortization and impairment |
(688,692 |
) |
|
(464,671 |
) |
||
Property and equipment, net |
493,586 |
|
|
683,360 |
|
||
Accounts receivable – related party |
5,936 |
|
|
5,816 |
|
||
Derivative financial instruments |
25,434 |
|
|
1,754 |
|
||
Other non-current assets |
1,885 |
|
|
2,108 |
|
||
Total assets |
$ |
616,346 |
|
|
$ |
720,779 |
|
Liabilities and Stockholders' Equity |
|||||||
Current liabilities |
|
|
|
||||
Accounts payable |
$ |
33,284 |
|
|
$ |
33,355 |
|
Accounts payable – related party |
381 |
|
|
189 |
|
||
Oil, natural gas liquid and natural gas sales payable |
15,257 |
|
|
14,811 |
|
||
Accrued liabilities |
23,049 |
|
|
26,905 |
|
||
Derivative financial instruments |
1,501 |
|
|
8,564 |
|
||
Current maturities of long-term debt |
513,259 |
|
|
247,000 |
|
||
Total current liabilities |
586,731 |
|
|
330,824 |
|
||
Long-term liabilities |
|
|
|
||||
Long-term debt |
9,148 |
|
|
255,068 |
|
||
Asset retirement obligations |
6,888 |
|
|
7,055 |
|
||
Deferred tax liabilities, net |
— |
|
|
931 |
|
||
Warrant liability |
— |
|
|
129 |
|
||
Warrant liability – related party |
1 |
|
|
235 |
|
||
Derivative financial instruments |
1,896 |
|
|
1,898 |
|
||
Other non-current liabilities |
1,346 |
|
|
3,752 |
|
||
Total long-term liabilities |
19,279 |
|
|
269,068 |
|
||
Commitments and contingencies |
|
|
|
||||
Stockholders' Equity |
|
|
|
||||
Class A voting common stock, $0.001 par value, 100,000,000 shares authorized, 25,254,029 and 24,945,594 shares issued and outstanding, respectively |
142,655 |
|
|
142,655 |
|
||
Series A-1 convertible participating preferred stock, $0.001 par value, 102,585 and 100,328 shares issued and outstanding, respectively |
— |
|
|
— |
|
||
Additional paid-in capital |
175,978 |
|
|
175,738 |
|
||
Accumulated deficit |
(308,297 |
) |
|
(197,506 |
) |
||
Total stockholders' equity |
10,336 |
|
|
120,887 |
|
||
Total liabilities and stockholders' equity |
$ |
616,346 |
|
|
$ |
720,779 |
|
Lonestar Resources US Inc. |
|||||||
Unaudited Condensed Consolidated Statements of Operations |
|||||||
(In thousands) |
|||||||
|
Three Months Ended March 31, |
||||||
|
2020 |
|
2019 |
||||
Revenues |
|
|
|
||||
Oil sales |
$ |
29,990 |
|
|
$ |
33,584 |
|
Natural gas liquid sales |
2,599 |
|
|
3,393 |
|
||
Natural gas sales |
4,420 |
|
|
3,764 |
|
||
Total revenues |
37,009 |
|
|
40,741 |
|
||
Expenses |
|
|
|
||||
Lease operating and gas gathering |
9,788 |
|
|
7,710 |
|
||
Production and ad valorem taxes |
2,369 |
|
|
2,291 |
|
||
Depreciation, depletion and amortization |
24,354 |
|
|
17,970 |
|
||
Loss on sale of oil and gas properties |
— |
|
|
32,894 |
|
||
Impairment of oil and gas properties |
199,908 |
|
|
— |
|
||
General and administrative |
2,881 |
|
|
4,379 |
|
||
Other |
(223 |
) |
|
(2 |
) |
||
Total expenses |
239,077 |
|
|
65,242 |
|
||
Loss from operations |
(202,068 |
) |
|
(24,501 |
) |
||
Other income (expense) |
|
|
|
||||
Interest expense |
(11,610 |
) |
|
(10,656 |
) |
||
Change in fair value of warrants |
363 |
|
|
(102 |
) |
||
Gain (loss) on derivative financial instruments |
101,169 |
|
|
(36,238 |
) |
||
Total other income (expense) |
89,922 |
|
|
(46,996 |
) |
||
Loss before income taxes |
(112,146 |
) |
|
(71,497 |
) |
||
Income tax benefit |
1,355 |
|
|
12,933 |
|
||
Net Loss |
(110,791 |
) |
|
(58,564 |
) |
||
Preferred stock dividends |
(2,257 |
) |
|
(2,065 |
) |
||
Net loss attributable to common stockholders |
$ |
(113,048 |
) |
|
$ |
(60,629 |
) |
|
|
|
|
||||
Net loss per common share |
|
|
|
||||
Basic |
$ |
(4.52 |
) |
|
$ |
(2.45 |
) |
Diluted |
$ |
(4.52 |
) |
|
$ |
(2.45 |
) |
|
|
|
|
||||
Weighted average common shares outstanding |
|
|
|
||||
Basic |
25,003,977 |
|
|
24,698,372 |
|
||
Diluted |
25,003,977 |
|
|
24,698,372 |
|
Lonestar Resources US Inc. |
|||||||
Unaudited Condensed Consolidated Statements of Cash Flows |
|||||||
(In thousands) |
|||||||
|
Three Months Ended March 31, |
||||||
|
2020 |
|
2019 |
||||
Cash flows from operating activities |
|
|
|
||||
Net loss |
$ |
(110,791 |
) |
|
$ |
(58,564 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
||||
Accretion of asset retirement obligations |
86 |
|
|
79 |
|
||
Depreciation, depletion and amortization |
24,268 |
|
|
17,891 |
|
||
Stock-based compensation |
(2,022 |
) |
|
533 |
|
||
Deferred taxes |
(1,376 |
) |
|
(12,922 |
) |
||
(Gain) loss on derivative financial instruments |
(101,169 |
) |
|
36,238 |
|
||
Settlements of derivative financial instruments |
1,096 |
|
|
1,309 |
|
||
Impairment of oil and natural gas properties |
199,908 |
|
|
— |
|
||
Gain on disposal of property and equipment |
83 |
|
|
(17 |
) |
||
Loss on sale of oil and gas properties |
— |
|
|
32,894 |
|
||
Non-cash interest expense |
768 |
|
|
699 |
|
||
Change in fair value of warrants |
(363 |
) |
|
102 |
|
||
Changes in operating assets and liabilities: |
|
|
|
||||
Accounts receivable |
6,117 |
|
|
(2,016 |
) |
||
Prepaid expenses and other assets |
(374 |
) |
|
304 |
|
||
Accounts payable and accrued expenses |
(2,396 |
) |
|
(6,704 |
) |
||
Net cash provided by operating activities |
13,835 |
|
|
9,826 |
|
||
|
|
|
|
||||
Cash flows from investing activities |
|
|
|
||||
Acquisition of oil and gas properties |
(816 |
) |
|
(2,352 |
) |
||
Development of oil and gas properties |
(34,753 |
) |
|
(29,137 |
) |
||
Proceeds from sale of oil and gas properties |
317 |
|
|
12,107 |
|
||
Purchases of other property and equipment |
(524 |
) |
|
(2,916 |
) |
||
Net cash used in investing activities |
(35,776 |
) |
|
(22,298 |
) |
||
|
|
|
|
||||
Cash flows from financing activities |
|
|
|
||||
Proceeds from borrowings |
28,000 |
|
|
30,000 |
|
||
Payments on borrowings |
(8,054 |
) |
|
(19,116 |
) |
||
Net cash provided by financing activities |
19,946 |
|
|
10,884 |
|
||
Net decrease in cash and cash equivalents |
(1,995 |
) |
|
(1,588 |
) |
||
Cash and cash equivalents, beginning of the period |
3,137 |
|
|
5,355 |
|
||
Cash and cash equivalents, end of the period |
$ |
1,142 |
|
|
$ |
3,767 |
|
|
|
|
|
||||
Supplemental information: |
|
|
|
||||
Cash paid for interest |
$ |
3,957 |
|
|
$ |
16,743 |
|
Non-cash investing and financing activities: |
|
|
|
||||
Change in asset retirement obligation |
$ |
(253 |
) |
|
$ |
(522 |
) |
Change in liabilities for capital expenditures |
(1,040 |
) |
|
730 |
|
NON-GAAP FINANCIAL MEASURES (Unaudited)
Reconciliation of Non-GAAP Financial Measures
Adjusted EBITDAX
Adjusted EBITDAX is not a measure of net income as determined by GAAP. Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines Adjusted EBITDAX as net (loss) income attributable to common stockholders before depreciation, depletion, amortization and accretion, exploration costs, non-recurring costs, loss (gain) on sales of oil and natural gas properties, impairment of oil and gas properties, stock-based compensation, interest expense, income tax (benefit) expense, rig standby expense, other income (expense), unrealized (gain) loss on derivative financial instruments and unrealized (gain) loss on warrants.
Management believes Adjusted EBITDAX provides useful information to investors because it assists investors in the evaluation of the Company’s operating performance and comparison of the results of the Company’s operations from period to period without regard to its financing methods or capital structure. The Company excludes the items listed above from net (loss) income attributable to common stockholders in arriving at Adjusted EBITDAX to eliminate the impact of certain non-cash items or because these amounts can vary substantially from company to company within its 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 (loss) income attributable to common stockholders as determined in accordance with GAAP. 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. The Company’s 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 the GAAP financial measure of net (loss) income attributable to common stockholders for each of the periods indicated.
|
|
Three Months Ended March 31, |
||||||
($ in thousands) |
|
2020 |
|
2019 |
||||
Net Loss |
|
$ |
(113,048 |
) |
|
$ |
(60,629 |
) |
Income tax benefit |
|
(1,355 |
) |
|
(12,933 |
) |
||
Interest expense (1) |
|
13,867 |
|
|
12,721 |
|
||
Exploration expense |
|
— |
|
|
190 |
|
||
Depreciation, depletion and amortization |
|
24,354 |
|
|
17,970 |
|
||
EBITDAX |
|
$ |
(76,182 |
) |
|
$ |
(42,681 |
) |
Rig standby expense |
|
61 |
|
|
107 |
|
||
Stock-based compensation |
|
(1,802 |
) |
|
929 |
|
||
Loss on sale of oil and gas properties |
|
— |
|
|
32,894 |
|
||
Impairment of oil and gas properties |
|
199,908 |
|
|
— |
|
||
Unrealized (gain) loss on derivative financial instruments |
|
(92,988 |
) |
|
35,509 |
|
||
Unrealized (gain) loss on warrants |
|
(363 |
) |
|
102 |
|
||
Other expense |
|
223 |
|
|
183 |
|
||
Adjusted EBITDAX |
|
$ |
28,857 |
|
|
$ |
27,043 |
|
1 Interest expense also includes dividends paid on Series A Preferred Stock |
Adjusted Net Income (Loss)
Adjusted net (loss) income comparable to analysts’ estimates as set forth in this release represents income or loss before income taxes adjusted for certain non-cash items (detailed in the accompanying table) less income taxes. We believe adjusted net (loss) income is calculated on the same basis as analysts’ estimates and that many investors use this published research in making investment decisions and evaluating operational trends of the Company and its performance relative to other oil and gas producing companies.
The following table presents a reconciliation of Adjusted Net (Loss) Income to the GAAP financial measure of net income (loss) before taxes for each of the periods indicated.
Lonestar Resources US Inc. |
||||||||
Unaudited Reconciliation of Income (Loss) Before Taxes As Reported To Income (Loss) Before Taxes Excluding Certain Items, a non-GAAP measure (Adjusted Net Income (Loss)) |
||||||||
|
|
Three Months Ended March 31, |
||||||
($ in thousands) |
|
2020 |
|
2019 |
||||
Loss before income taxes, as reported |
|
$ |
(112,146 |
) |
|
$ |
(71,497 |
) |
Adjustments for special items: |
|
|
|
|
||||
Impairment of oil and gas properties |
|
199,908 |
|
|
— |
|
||
Rig standby expense |
|
61 |
|
|
— |
|
||
Non-recurring legal expense |
|
— |
|
|
482 |
|
||
Unrealized hedging (gain) loss |
|
(92,988 |
) |
|
35,509 |
|
||
Loss on sale of oil and gas properties |
|
— |
|
|
32,894 |
|
||
Stock based compensation |
|
(1,802 |
) |
|
929 |
|
||
Loss before income taxes, as adjusted |
|
$ |
(6,967 |
) |
|
$ |
(1,683 |
) |
|
|
|
|
|
||||
Income tax benefit (expense), as adjusted |
|
|
|
|
||||
Deferred (a) |
|
1,463 |
|
|
320 |
|
||
Net loss excluding certain items, a non-GAAP measure |
|
(5,504 |
) |
|
(1,363 |
) |
||
|
|
|
|
|
||||
Preferred stock dividends |
|
(2,257 |
) |
|
(2,065 |
) |
||
Net loss excluding certain items, a non-GAAP measure |
|
$ |
(7,761 |
) |
|
$ |
(3,428 |
) |
|
Lonestar Resources US Inc. |
||||||||
Unaudited Operating Results |
||||||||
In thousands, except per share and unit data |
|
Three Months Ended March 31, |
||||||
|
2020 |
|
2019 |
|||||
Operating Results |
|
|
|
|
||||
Net loss attributable to common stockholders |
|
$ |
(113,048 |
) |
|
$ |
(60,629 |
) |
Net loss per common share – basic |
|
(4.52 |
) |
|
(2.45 |
) |
||
Net loss per common share – diluted |
|
(4.52 |
) |
|
(2.45 |
) |
||
Net cash provided by operating activities |
|
13,835 |
|
|
9,826 |
|
||
Revenues |
|
|
|
|
||||
Oil |
|
$ |
29,990 |
|
|
$ |
33,584 |
|
NGLs |
|
2,599 |
|
|
3,393 |
|
||
Natural gas |
|
4,420 |
|
|
3,764 |
|
||
Total revenues |
|
$ |
37,009 |
|
|
$ |
40,741 |
|
Total production volumes by product |
|
|
|
|
||||
Oil (Bbls) |
|
658,476 |
|
|
590,096 |
|
||
NGLs (Bbls) |
|
303,485 |
|
|
217,561 |
|
||
Natural gas (Mcf) |
|
2,110,381 |
|
|
1,295,204 |
|
||
Total barrels of oil equivalent (6:1) |
|
1,313,691 |
|
|
1,023,524 |
|
||
Daily production volumes by product |
|
|
|
|
||||
Oil (Bbls/d) |
|
7,236 |
|
|
6,557 |
|
||
NGLs (Bbls/d) |
|
3,335 |
|
|
2,417 |
|
||
Natural gas (Mcf/d) |
|
23,191 |
|
|
14,391 |
|
||
Total barrels of oil equivalent (BOE/d) |
|
14,436 |
|
|
11,372 |
|
||
Average realized prices |
|
|
|
|
||||
Oil ($ per Bbl) |
|
$ |
45.54 |
|
|
$ |
56.90 |
|
NGLs ($ per Bbl) |
|
8.56 |
|
|
15.60 |
|
||
Natural gas ($ per Mcf) |
|
2.09 |
|
|
2.91 |
|
||
Total oil equivalent, excluding the effect from commodity derivatives ($ per BOE) |
|
28.17 |
|
|
39.80 |
|
||
Total oil equivalent, including the effect from commodity derivatives ($ per BOE) |
|
34.40 |
|
|
39.09 |
|
||
Operating and other expenses |
|
|
|
|
||||
Lease operating and gas gathering |
|
$ |
9,788 |
|
|
$ |
7,710 |
|
Production and ad valorem taxes |
|
2,369 |
|
|
2,291 |
|
||
Depreciation, depletion and amortization |
|
24,354 |
|
|
17,970 |
|
||
General and administrative |
|
2,881 |
|
|
4,379 |
|
||
Interest expense |
|
11,610 |
|
|
10,656 |
|
||
Operating and other expenses per BOE |
|
|
|
|
||||
Lease operating and gas gathering |
|
$ |
7.45 |
|
|
$ |
7.53 |
|
Production and ad valorem taxes |
|
1.80 |
|
|
2.24 |
|
||
Depreciation, depletion and amortization |
|
18.54 |
|
|
17.56 |
|
||
General and administrative (1) |
|
2.19 |
|
|
4.28 |
|
||
Interest expense (2) |
|
8.84 |
|
|
10.41 |
|
(1) |
General and administrative expenses include stock-based compensation |
(2) |
Interest expense includes amortization of debt issuance cost, premiums, and discounts |
View source version on businesswire.com: https://www.businesswire.com/news/home/20200705005004/en/
Chase Booth
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