News Releases

SRC Energy Inc. Reports Third Quarter 2017 Financial and Operating Results

November 1, 2017

DENVER, Nov. 01, 2017 (GLOBE NEWSWIRE) -- SRC Energy Inc. (NYSE Amex: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 and nine months ended September 30, 2017.

Third Quarter 2017 Highlights

  • Revenues were $103.6 million for the three months ended September 30, 2017
  • Net income was $43.8 million or $0.22 per diluted share for the three months ended September 30, 2017
  • Adjusted EBITDA was $83.5 million for the three months ended September 30, 2017 (see further discussion regarding the presentation of adjusted EBITDA in "About Non-GAAP Financial Measures" below)

Third Quarter 2017 Financial Results

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

  Three Months Ended   Nine Months Ended
Net Volumes 9/30/2017   9/30/2016   % Chg.*   9/30/2017   9/30/2016   % Chg.*
  3-Stream   2-Stream       3-Stream   2-Stream    
Crude Oil  (MBbls) 1,726   517   234%   3,668   1,552   136%
Natural Gas Liquids (MBbls) 753     NM   1,758     NM
Natural Gas (MMcf) 7,412   2,855   160%   17,122   8,991   90%
Sales Volumes: (MBOE) 3,715   993   274%   8,280   3,050   171%
Average Daily Volumes                      
Daily Production (BOE/day) 40,378   10,794   274%   30,331   11,133   172%
Product Price Received                      
Crude Oil ($/Bbl) $42.37   $35.67   19%   $42.04   $31.47   34%
Natural Gas Liquids ($/Bbl) $17.32     NM   $15.49     NM
Natural Gas ($/Mcf) $2.35   $2.73   (14)%   $2.39   $2.18   10%
Average Realized Price ($/BOE) $27.89   $26.42   6%   $26.86   $22.44   20%
Per Unit Cost Information ($/BOE)
Lease Operating Exp. $1.40   $3.84   (64)%   $1.68   $4.90   (66)%
Production Tax $2.71   $(1.47)   NM   $2.54   $0.82   210%
DD&A Expense $9.08   $9.70   (6)%   $8.86   $10.82   (18)%
Total G&A Expense $2.29   $8.29   (72)%   $2.93   $7.61   (61)%
* SRC began reporting on a 3-Stream basis in the first quarter of 2017; therefore, some prior year comparisons may not be meaningful.
 

Oil, natural gas and natural gas liquids revenues for the three months ended September 30, 2017 increased 295% compared to the three months ended September 30, 2016.  This was due to a 274% increase in sales volumes combined with a 6% improvement in average realized sales price per BOE.  As of September 30, 2017, substantially all of SRC's production was from horizontal wells.

During the three months ended September 30, 2017, SRC experienced decreased lease operating expenses, on a per unit basis, compared to the three months ended September 30, 2016.  Unit operating costs continue to benefit from larger volumes of early production from horizontal wells turned to sales during the quarter and earlier in the year.

The Company's 2017 third quarter net income totaled $43.8 million, or $0.22 per diluted share compared to a net loss of $19.2 million or $(0.10) per diluted share in the year ago quarter. Net income for the three months ended September 30, 2016 was impacted by an impairment charge of $25.5 million.  Adjusted EBITDA in the third quarter of 2017 was $83.5 million as compared to $18.3 million in the year ago quarter.

Operational Status

Third Quarter 2017 Operating Activity
  Lateral
Length
# of
wells
on Pad
  WI %   # of Wells
Drilled
  # of Wells
Completed
  # of Wells
Turned to
Sales
Orr Pad ML 12   97%           12
Orr State Pad ML 12   95%       6   12
Goetzel Pad ML 12   76%       8   9
Hood Pad ML 12   84%       12   5
Beebe Pad ML 12   73%   5   10    
Leffler Pad LL 12   86%   8        
Ag Pad LL 12   79%   9        
Falken Pad LL 12   69%   2        
Total wells           24   36   38
ML ~7,500'  LL ~10,000'  XL ~12,000'
 

Conference Call

The Company will host a conference call on Thursday, November 2, 2017 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:  http://srcenergy.equisolvewebcast.com/q3-2017

Replay Information:
Conference ID #:  411931
Replay Dial-In (Toll Free US & Canada):  877-660-6853
Replay Dial-In (International):  201-612-7415
Expiration Date:  11/14/17

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 (loss) 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 (loss), its nearest GAAP measure:

 
SRC ENERGY INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(unaudited, in thousands)
       
  Three Months Ended
September 30,
  2017   2016
Adjusted EBITDA:      
Net income (loss) $ 43,848     $ (19,241 )
Depreciation, depletion, and accretion 33,740     9,635  
Full cost ceiling impairment     25,453  
Income tax expense     5  
Stock-based compensation 3,030     2,374  
Mark-to-market of commodity derivative contracts:      
Total gain on commodity derivatives contracts 2,383     (407 )
Cash settlements on commodity derivative contracts 544     486  
Cash premiums paid for commodity derivative contracts      
Interest income, net of interest expense (16 )   (11 )
   Adjusted EBITDA $ 83,529     $ 18,294  
               

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 September 30, 2017, which is available at www.sec.gov.

 
SRC ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
       
ASSETS September 30, 2017   December 31, 2016
Current assets:      
Cash and cash equivalents $ 21,325     $ 18,615  
Other current assets 123,878     35,569  
Total current assets 145,203     54,184  
       
Oil and gas properties and other equipment 1,249,633     908,736  
Goodwill 40,711     40,711  
Other assets 2,359     20,482  
       
Total assets $ 1,437,906     $ 1,024,113  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities 233,427     92,240  
       
Revolving credit facility 150,000      
Notes payable, net of issuance costs 76,216     75,614  
Asset retirement obligations 33,981     13,775  
Other liabilities 2,662     1,745  
Total liabilities 496,286     183,374  
       
Shareholders' equity:      
Common stock and paid-in capital 1,158,518     1,149,199  
Retained deficit (216,898 )   (308,460 )
Total shareholders' equity 941,620     840,739  
       
Total liabilities and shareholders' equity $ 1,437,906     $ 1,024,113  
               


 
SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
   
  Nine Months Ended September 30,
  2017   2016
Cash flows from operating activities:      
Net income (loss) $ 91,664     $ (224,490 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:      
Depletion, depreciation, and accretion 73,396     33,001  
Full cost ceiling impairment     215,223  
Other, non-cash items 2,767     15,843  
Changes in operating assets and liabilities (25,010 )   (6,384 )
Net cash provided by operating activities 142,817     33,193  
       
Cash flows from investing activities:      
Acquisitions of oil and gas properties and leaseholds (62,562 )   (503,357 )
Capital expenditures for drilling and completion activities (305,636 )   (72,375 )
Other capital expenditures (15,285 )   (6,417 )
Cash held in escrow 18,248     (18,244 )
Proceeds from sales of oil and gas properties 77,017     24,223  
Net cash used in investing activities (288,218 )   (576,170 )
       
Cash flows from financing activities:      
Equity financing activities (517 )   542,901  
Debt financing activities 148,628     (2,666 )
Net cash provided by financing activities 148,111     540,235  
       
Net increase in cash and equivalents 2,710     (2,742 )
Cash and equivalents at beginning of period 18,615     66,499  
Cash and equivalents at end of period $ 21,325     $ 63,757  
               


 
SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except share and per share data)
       
  Three Months Ended September 30,   Nine Months Ended September 30,
  2017   2016   2017   2016
Oil, natural gas, and NGL revenues $ 103,593     $ 26,234     $ 222,419     $ 68,454  
Sales of purchased oil         1,268      
Total revenues 103,593     26,234     223,687     68,454  
               
Expenses:              
Lease operating expenses 5,154     3,819     13,894     14,963  
Production taxes 10,083     (1,461 )   21,013     2,509  
Costs of purchased oil         1,518      
Depreciation, depletion, and accretion 33,740     9,635     73,396     33,001  
Full cost ceiling impairment     25,453         215,223  
Unused commitment charge     205     669     505  
General and administrative 8,484     8,236     24,289     23,199  
Total expenses 57,461     45,887     134,779     289,400  
               
Operating income (loss) 46,132     (19,653 )   88,908     (220,946 )
               
Other income:              
Commodity derivatives gain (loss) (2,383 )   407     2,324     (3,617 )
Interest expense, net              
Interest income 16     11     47     176  
Other income 83     (1 )   385     3  
Total other income (2,284 )   417     2,756     (3,438 )
               
Income (Loss) before income taxes 43,848     (19,236 )   91,664     (224,384 )
               
Income tax expense     5         106  
Net income (loss) $ 43,848     $ (19,241 )   $ 91,664     $ (224,490 )
               
Net income (loss) per common share:              
Basic $ 0.22     $ (0.10 )   $ 0.46     $ (1.36 )
Diluted $ 0.22     $ (0.10 )   $ 0.46     $ (1.36 )
               
Weighted-average shares outstanding:              
Basic 200,881,447     200,515,555     200,807,436     164,771,544  
Diluted 201,460,915     200,515,555     201,326,129     164,771,544  
                       
Company Contact:
John Richardson (Investor Relations Manager)
SRC Energy Inc.
Tel 720-616-4308
E-mail: jrichardson@srcenergy.com

Source: SRC Energy Inc.