News Releases

SRC Energy Inc. Reports First Quarter 2018 Financial and Operating Results; Announces Amended and Restated Credit Agreement with an Increased Borrowing Base

May 2, 2018

DENVER, May 02, 2018 (GLOBE NEWSWIRE) -- SRC Energy Inc. (NYSE American:SRCI) (“SRC”, the “Company”, “we”, “us” or “our”), a U.S. oil and gas exploration and production company with operations focused on the Wattenberg Field in the Denver-Julesburg Basin, reports its financial and operating results for the three months ended March 31, 2018 and announces an amended and restated credit agreement with an increase to its borrowing base.

First Quarter 2018 Highlights

  • Revenues were $147.2 million for the three months ended March 31, 2018
  • Net income was $65.8 million or $0.27 per diluted share for the three months ended March 31, 2018
  • Adjusted EBITDA was $115.7 million for the three months ended March 31, 2018 (see further discussion regarding the presentation of adjusted EBITDA in "About Non-GAAP Financial Measures" below)
  • Drilling and completion capital expenditures of $111.0 million for the three months ended March 31, 2018 were funded from EBITDA

First Quarter 2018 Financial Results

The following tables present certain per unit metrics that compare results of the corresponding reporting periods:

  Three Months Ended
Net Volumes 3/31/2018   3/31/2017   % Chg.
Crude Oil  (MBbls)   2,041     680   200 %
Natural Gas Liquids (MBbls)   758     343   121 %
Natural Gas (MMcf)   7,719     3,446   124 %
Sales Volumes: (MBOE)   4,086     1,597   156 %
Average Daily Volumes          
Daily Production (BOE/day)   45,397     17,743   156 %
Product Price Received          
Crude Oil ($/Bbl) $ 56.01   $ 42.50   32 %
Natural Gas Liquids ($/Bbl) $ 19.15     15.94   20 %
Natural Gas ($/Mcf) $ 2.14   $ 2.66   (20 )%
Average Realized Price ($/BOE) $ 35.58   $ 27.27   30 %
Per Unit Cost Information ($/BOE)
Lease Operating Exp. $ 1.93   $ 2.33   (17 )%
Production Tax $ 3.29   $ 0.92   258 %
DD&A Expense $ 9.08   $ 8.28   10 %
Total G&A Expense $ 2.35   $ 5.14   (54 )%
 
 

Oil, natural gas, and natural gas liquids revenues for the three months ended March 31, 2018 increased 236% compared to the three months ended March 31, 2017.  This was due to a 156% increase in sales volumes combined with a 30% improvement in average realized sales price per BOE.

Unit operating costs generally continue to benefit from larger volumes of production from horizontal wells turned to sales during the last twelve months.  Production taxes for the three months ended March 31, 2017 were favorably impacted by an adjustment to the Company's assumed ad valorem tax rate.

The Company's 2018 first quarter net income totaled $65.8 million, or $0.27 per diluted share, compared to a net income of $19.9 million, or $0.10 per diluted share, in the year ago quarter.  Adjusted EBITDA in the first quarter of 2018 was $115.7 million as compared to $32.5 million in the year ago quarter.

The Company accrued deferred tax expense of $5.8 million during the first quarter of 2018 as compared to no expense in the same period of 2017.  This is primarily a result of expectations for positive three-year cumulative taxable income through 2018. The Company expects an effective tax rate of approximately 8% through the remainder of the year.

Credit Agreement

On April 2, 2018 the Company entered into a new amended and restated credit agreement for its revolving credit facility. Among other provisions, the borrowing base under the credit agreement was increased to $550 million with aggregate elected commitments of $450 million.    The Company currently has no amounts drawn on the facility.

Operational Status

First Quarter 2018 Operating Activity
  Lateral Length # of wells on Pad   WI %   # of Wells Drilled   # of Wells Completed   # of Wells Turned to Sales
Leffler Pad LL 12   90 %           12
Ag Pad LL 12   89 %       12    
Goetzel Pad LL 12   92 %   1   6    
Falken Pad 6 SL, 12 LL 18   95 %   4        
Donn Pad LL 13   88 %   8        
Boomerang Pad 12 ML, 4 LL 16   83 %   15        
Total wells           28   18   12
SL ~4,500'  ML ~7,500'  LL ~10,000'
 

Conference Call

The Company will host a conference call on Thursday, May 3, 2018 at 11:00 a.m. Eastern time (9:00 a.m. Mountain time) to discuss the results.  The call will be conducted by Chairman and CEO Lynn A. Peterson, CFO James Henderson, Chief Development Officer Nick Spence, Chief Operations Officer Mike Eberhard, and Manager of Investor Relations John Richardson.  A Q&A session will immediately follow the discussion of the results for the quarter.  Please refer to SRC's website at www.srcenergy.com for the most recent corporate presentation and other news and information.

To participate in this call please dial:
Domestic Dial-in Number:  (877) 407-9122
International Dial-in Number:  (201) 493-6747

Webcast: https://78449.themediaframe.com/dataconf/productusers/srci/mediaframe/24383/indexl.html

Replay Information:
Conference ID #:  411931
Replay Dial-In (Toll Free US & Canada):  877-660-6853
Replay Dial-In (International):  201-612-7415
Expiration Date:  5/17/18

About SRC Energy Inc.

SRC Energy Inc. is a domestic oil and natural gas exploration and production company. SRC's core area of operations is in the Greater Wattenberg Field of the Denver-Julesburg BasinThe Denver-Julesburg Basin encompasses parts of Colorado, Wyoming, Kansas and Nebraska. The Company's corporate offices are located in Denver, Colorado. More company news and information about SRC is available at www.srcenergy.com.

Important Cautions Regarding Forward Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  All statements other than statements of historical fact are forward-looking statements.  The use of words such as "believes", "expects", "anticipates", "intends", "plans", "estimates", "should", "likely", “guidance” or similar expressions indicates a forward-looking statement.  These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, and information currently available to management. The actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. The identification in this press release of factors that may affect the Company's future performance and the accuracy of forward-looking statements is meant to be illustrative and by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Factors that could cause the Company's actual results to differ materially from those expressed or implied by forward-looking statements include, but are not limited to: the success of the Company's exploration and development efforts; the price of oil and gas; worldwide economic situation; change in interest rates or inflation; willingness and ability of third parties to honor their contractual commitments; the availability of adequate midstream infrastructure, the Company's ability to raise additional capital, as it may be affected by current conditions in the stock market and competition in the oil and gas industry for risk capital; the Company's capital costs, which may be affected by delays or cost overruns; costs of production; environmental and other regulations, as the same presently exist or may later be amended; the Company's ability to identify, finance and integrate any future acquisitions; the volatility of the Company's stock price; and the other factors described in the “Risk Factors” sections of the Company’s filings with the Securities and Exchange Commission, all of which are incorporated by reference in this release.

Reconciliation of Non-GAAP Financial Measures
We define adjusted EBITDA, a non-GAAP financial measure, as net income adjusted to exclude the impact of the items set forth in the table below.  We exclude those items because they can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures, and the method by which the assets were acquired.  We believe that adjusted EBITDA is widely used in our industry as a measure of operating performance and may also be used by investors to measure our ability to meet debt covenant requirements.  The following table presents a reconciliation of adjusted EBITDA to net income, its nearest GAAP measure:

SRC ENERGY INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands)
       
  Three Months Ended March 31,
  2018   2017
Adjusted EBITDA:      
Net income $ 65,796     $ 19,880  
Depreciation, depletion, and accretion 37,081     13,229  
Stock-based compensation 2,796     2,675  
Mark-to-market of commodity derivative contracts:      
Total gain on commodity derivatives contracts 5,781     (3,379 )
Cash settlements on commodity derivative contracts (1,555 )   81  
Interest income, net of interest expense (9 )   (11 )
Income tax expense 5,811      
Adjusted EBITDA $ 115,701     $ 32,475  
               

Condensed Consolidated Financial Statements
Condensed consolidated financial statements are included below. Additional financial information, including footnotes that are considered an integral part of the condensed consolidated financial statements, can be found in SRC's Quarterly Report on Form 10-Q for the period ended March 31, 2018, which is available at www.sec.gov.

SRC ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
       
ASSETS March 31, 2018   December 31, 2017
Current assets:      
Cash and cash equivalents $ 71,743     $ 48,772  
Other current assets 119,394     111,263  
Total current assets 191,137     160,035  
       
Oil and gas properties and other equipment 1,973,109     1,876,576  
Goodwill 40,711     40,711  
Other assets 2,049     2,242  
       
Total assets $ 2,207,006     $ 2,079,564  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities 257,154     202,307  
       
Revolving credit facility      
Notes payable, net of issuance costs 538,471     538,186  
Asset retirement obligations 25,330     28,376  
Other liabilities 8,140     2,261  
Total liabilities 829,095     771,130  
       
Shareholders' equity:      
Common stock and paid-in capital 1,478,195     1,474,514  
Retained deficit (100,284 )   (166,080 )
Total shareholders' equity 1,377,911     1,308,434  
       
Total liabilities and shareholders' equity $ 2,207,006     $ 2,079,564  
               


SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
   
  Three Months Ended March 31,
  2018   2017
Cash flows from operating activities:      
Net income $ 65,796     $ 19,880  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depletion, depreciation, and accretion 37,081     13,229  
Provision for deferred taxes 5,811      
Other, non-cash items 4,561     (1,387 )
Changes in operating assets and liabilities 14,432     (2,364 )
Net cash provided by operating activities 127,681     29,358  
       
Cash flows from investing activities:      
Acquisitions of oil and gas properties and leaseholds (1,329 )   (25,082 )
Capital expenditures for drilling and completion activities (100,347 )   (55,464 )
Other capital expenditures (3,957 )   (4,488 )
Proceeds from sales of oil and gas properties and other 728     70,689  
Net cash used in investing activities (104,905 )   (14,345 )
       
Cash flows from financing activities:      
Equity financing activities 431     (431 )
Debt financing activities (236 )    
Net cash provided by (used in) financing activities 195     (431 )
       
Net increase in cash and equivalents 22,971     14,582  
Cash and equivalents at beginning of period 48,772     36,834  
Cash and equivalents at end of period $ 71,743     $ 51,416  
               


SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except share and per share data)
   
  Three Months Ended March 31,
  2018   2017
Oil, natural gas, and NGL revenues $ 147,233     $ 43,790  
       
Expenses:      
Lease operating expenses 7,896     3,722  
Transportation and gathering 1,855     250  
Production taxes 13,443     1,466  
Depreciation, depletion, and accretion 37,081     13,229  
Unused commitment charge     669  
General and administrative 9,600     8,200  
Total expenses 69,875     27,536  
       
Operating income 77,358     16,254  
       
Other income (expense):      
Commodity derivatives gain (loss) (5,781 )   3,379  
Interest expense, net of amounts capitalized      
Interest income 9     11  
Other income 21     236  
Total other income (expense) (5,751 )   3,626  
       
Income before income taxes 71,607     19,880  
       
Income tax expense 5,811      
Net income $ 65,796     $ 19,880  
       
Net income per common share:      
Basic $ 0.27     $ 0.10  
Diluted $ 0.27     $ 0.10  
       
Weighted-average shares outstanding:      
Basic 241,751,915     200,707,891  
Diluted 243,166,897     201,309,251  
           

Released 5/2/2018

Company Contact:
John Richardson (Investor Relations Manager)
SRC Energy Inc.
Tel 720-616-4308
E-mail: jrichardson@srcenergy.com

Primary Logo

Source: SRC Energy Inc.