News Releases

SRC Energy Inc. Reports Third Quarter 2018 Financial and Operating Results

October 31, 2018

DENVER, Oct. 31, 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 and nine months ended September 30, 2018.

Third Quarter 2018 Highlights

  • Revenues were $161.0 million for the three months ended September 30, 2018
  • Net income was $62.6 million or $0.26 per diluted share for the three months ended September 30, 2018
  • Adjusted EBITDA was $121.5 million and $344.9 million for the three and nine months ended September 30, 2018, respectively (see further discussion regarding the presentation of adjusted EBITDA in "About Non-GAAP Financial Measures" below)
  • Drilling and completion capital expenditures were $177.1 million and $408.3 million for the three and nine months ended September 30, 2018, respectively

Third Quarter 2018 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 9/30/2018   9/30/2017   % Chg.   9/30/2018   9/30/2017   % Chg.
Crude Oil  (MBbls)   1,915     1,726   11 %     5,802     3,668   58 %
Natural Gas Liquids (MBbls)   1,030     753   37 %     2,780     1,758   58 %
Natural Gas (MMcf)   9,471     7,412   28 %     26,177     17,122   53 %
Sales Volumes: (MBOE)   4,523     3,714   22 %     12,945     8,280   56 %
Average Daily Volumes                      
Daily Production (BOE)   49,165     40,378   22 %     47,416     30,331   56 %
Product Price Received                      
Crude Oil ($/Bbl) $ 63.48   $ 41.89   52 %   $ 60.13   $ 41.73   44 %
Natural Gas Liquids ($/Bbl) $ 19.93     17.32   15 %   $ 18.91     15.49   22 %
Natural Gas ($/Mcf) $ 1.79   $ 2.35   (24 )%   $ 1.84   $ 2.39   (23 )%
Avg. Realized Price ($/BOE) $ 35.15   $ 27.66   27 %   $ 34.73   $ 26.72   30 %
Per Unit Cost Information ($/BOE)
Lease Operating Exp. $ 2.29   $ 1.17   96 %   $ 2.31   $ 1.57   47 %
Production Tax $ 2.83   $ 2.71   4 %   $ 3.19   $ 2.54   26 %
DD&A Expense $ 9.99   $ 9.08   10 %   $ 9.59   $ 8.86   8 %
Total G&A Expense $ 2.36   $ 2.29   3 %   $ 2.29   $ 2.93   (22 )%
 

Revenues for the three months ended September 30, 2018 increased 55% compared to the three months ended September 30, 2017.  This increase was driven by growth in sales volumes, combined with an improvement in realized oil and natural gas liquids prices, which were partially offset by a decrease in realized natural gas prices.  The decreased gas price was primarily due to wide differentials to the Colorado Interstate Gas index.

The Company's 2018 third quarter net income totaled $62.6 million, or $0.26 per diluted share, compared to a net income of $43.8 million, or $0.22 per diluted share, in the year ago quarter.  Adjusted EBITDA in the third quarter of 2018 was $121.5 million as compared to $83.5 million in the year ago quarter.

Credit Agreement
On October 30, 2018 the Company closed on the semi-annual redetermination of its borrowing base under its revolving credit facility. As a result, the borrowing base under the facility was increased to $650 million from $550 million while the aggregate elected commitments were increased to $500 million from $450 million.  As of September 30, 2018, the Company had $115 million drawn on the facility.

Management Comment
Lynn A. Peterson, Chairman and CEO of SRC Energy Inc. commented, "When the dust settles from the midstream and political issues that have surrounded our Company this year, I hope that everyone will focus on the fact that we are on track to deliver 45% growth on a year over year basis which is being funded largely through internally generated cash flow.

Our industry is more unified than ever as we remind voters, leading into the November 6th election, about the significant contributions of a strong oil and gas industry in Colorado.  The process of educating Colorado communities about our industry from a perspective of health and safety has galvanized our strong pride in what we do every day.  Once the election results are known, it will be at that moment that we need to move forward and work to develop a cohesive relationship with the executive and legislative branches as well as the communities where we operate."

Conference Call
The Company will host a conference call on Thursday, November 1, 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/26936/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:  11/16/18

About SRC Energy Inc.

SRC Energy Inc. is a Denver based oil and natural gas exploration and production company. SRC's core area of operations is in the Greater Wattenberg Field of the Denver-Julesburg Basin of 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. Forward-looking statements in the release relate to, among other things, the ability to operate in Colorado in the future.  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: risks associated with the construction of new midstream facilities, the impact of those facilities and other risks associated with the availability of adequate midstream infrastructure; 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 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.  Please see our Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 for discussion of the potential effects on our business of Proposition 112, which will be voted on in November 2018.  We cannot predict the outcome of the vote on that or any other matter.

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 September 30,   Nine Months Ended September 30,
  2018   2017   2018   2017
Adjusted EBITDA:              
Net income $ 62,628     $ 43,848     $ 178,048     $ 91,664  
Depreciation, depletion, and accretion 45,188     33,740     124,146     73,396  
Stock-based compensation 3,405     3,030     9,347     8,390  
Mark-to-market of commodity derivative contracts:              
Total gain on commodity derivatives contracts 8,529     2,383     28,604     (2,324 )
Cash settlements on commodity derivative contracts (7,142 )   544     (13,263 )   778  
Interest income (23 )   (16 )   (37 )   (47 )
Income tax expense 8,918         18,076      
Adjusted EBITDA $ 121,503     $ 83,529     $ 344,921     $ 171,857  

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, 2018, which is available at www.sec.gov.

SRC ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
       
ASSETS September 30, 2018   December 31, 2017
Current assets:      
Cash and cash equivalents $ 19,236     $ 48,772  
Other current assets 152,467     111,263  
Total current assets 171,703     160,035  
       
Oil and gas properties and other equipment 2,362,919     1,876,576  
Goodwill 40,711     40,711  
Other assets 3,599     2,242  
       
Total assets $ 2,578,932     $ 2,079,564  
       
LIABILITIES AND SHAREHOLDERS' EQUITY      
Current liabilities 353,077     202,307  
       
Revolving credit facility 115,000      
Notes payable, net of issuance costs 539,050     538,186  
Asset retirement obligations 48,951     28,376  
Other liabilities 22,055     2,261  
Total liabilities 1,078,133     771,130  
       
Shareholders' equity:      
Common stock and paid-in capital 1,488,831     1,474,514  
Retained earnings (deficit) 11,968     (166,080 )
Total shareholders' equity 1,500,799     1,308,434  
       
Total liabilities and shareholders' equity $ 2,578,932     $ 2,079,564  


  Nine Months Ended September 30,
  2018   2017
Cash flows from operating activities:      
Net income $ 178,048     $ 91,664  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depletion, depreciation, and accretion 124,146     73,396  
Provision for deferred taxes 18,076      
Other, non-cash items 19,454     2,767  
Changes in operating assets and liabilities 3,830     (25,010 )
Net cash provided by operating activities 343,554     142,817  
       
Cash flows from investing activities:      
Acquisitions of oil and gas properties and leaseholds (129,069 )   (62,562 )
Capital expenditures for drilling and completion activities (331,702 )   (305,636 )
Other capital expenditures (29,353 )   (15,256 )
Proceeds from sales of oil and gas properties and other 1,233     77,017  
Net cash used in investing activities (488,891 )   (306,437 )
       
Cash flows from financing activities:      
Equity financing activities 3,039     (517 )
Debt financing activities 112,762     148,628  
Net cash provided by financing activities 115,801     148,111  
       
Net decrease in cash, cash equivalents, and restricted cash (29,536 )   (15,509 )
Cash, cash equivalents, and restricted cash at beginning of period 48,772     36,834  
Cash, cash equivalents, and restricted cash at end of period $ 19,236     $ 21,325  


  Three Months Ended September 30,   Nine Months Ended September 30,
  2018   2017   2018   2017
Oil, natural gas, and NGL revenues $ 160,978     $ 103,593     $ 455,298     $ 222,419  
               
Expenses:              
Lease operating expenses 10,360     4,316     29,868     13,008  
Transportation and gathering 1,994     838     5,729     1,136  
Production taxes 12,824     10,083     41,325     21,013  
Depreciation, depletion, and accretion 45,188     33,740     124,146     73,396  
Unused commitment charge             669  
General and administrative 10,685     8,484     29,691     24,289  
Total expenses 81,051     57,461     230,759     133,511  
               
Operating income 79,927     46,132     224,539     88,908  
               
Other income (expense):              
Commodity derivatives gain (loss) (8,529 )   (2,383 )   (28,604 )   2,324  
Interest expense, net of amounts capitalized              
Interest income 23     16     37     47  
Other income 125     83     152     385  
Total other income (expense) (8,381 )   (2,284 )   (28,415 )   2,756  
               
Income before income taxes 71,546     43,848     196,124     91,664  
               
Income tax expense 8,918         18,076      
Net income $ 62,628     $ 43,848     $ 178,048     $ 91,664  
               
Net income per common share:              
Basic $ 0.26     $ 0.22     $ 0.74     $ 0.46  
Diluted $ 0.26     $ 0.22     $ 0.73     $ 0.46  
               
Weighted-average shares outstanding:              
Basic 242,536,781     200,881,447     242,184,348     200,807,436  
Diluted 243,560,046     201,460,915     243,207,058     201,326,129  

 

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

SRC-Energy-Logo-VRT-4C[1].png

Source: SRC Energy Inc.