Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 8-K


Current Report

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): January 31, 2018 (January 30, 2018)


SRC Energy Inc.
(Exact name of registrant as specified in its charter)
______________________________

COLORADO
(State or other jurisdiction of
incorporation or organization)
001-35245
(Commission
File Number)
20-2835920
(I.R.S. Employer
Identification Number)


1675 Broadway, Suite 2600
Denver, Colorado 80202

Registrant’s telephone number, including area code: (720) 616-4300


(Former name or former address, if changed since last report)


______________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company    
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.








Item 2.02 Results of Operations and Financial Condition.
On January 30, 2018, SRC Energy Inc. (the “Company”) issued a press release describing preliminary financial highlights for the quarter ended December 31, 2017 and certain other related information. A copy of the press release is attached hereto as Exhibit 99.1.
The information in this Current Report on Form 8-K, including the information set forth in Exhibit 99.1 to this report, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.

 
 
 
Exhibit
No.
 
Description
 
 
99.1
 
Press Release dated January 30, 2018.
 






SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: January 31, 2018
SRC Energy Inc.

By:
/s/ James Henderson    
James Henderson
Chief Financial Officer







EXHIBIT INDEX
 
 
 
 
Exhibit
No.
 
Description
 
 
99.1
 
 
 
 



Exhibit

January 30, 2018         http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12013251&doc=3

SRC Energy Issues Preliminary Fourth Quarter 2017 Results; Operations Update; Initial 2018 Guidance; Fourth Quarter 2017 Earnings and Conference Call Dates
DENVER, CO January 30, 2018 (GlobeNewswire)—SRC Energy Inc. (NYSE AMEX: SRCI) (“SRC” or the “Company”), an oil and gas exploration and production company focused in the Denver-Julesburg Basin, today issues preliminary fourth quarter 2017 operating results, provides an operations update, issues initial 2018 guidance and announces its fourth quarter 2017 earnings release and conference call dates.

Production and Average Realized Pricing Summary
 
Three Months Ended
12/31/2017
9/30/2017
Sequential % Chg.
12/31/2016
Average Daily Volumes
3-Stream
 
2-Stream
Daily Production (BOE/day)
45,658
40,378
13%
13,269
Liquids %
69%
67%
 
58%
Product Price Received
 
 
 
 
Crude Oil ($/Bbl) *
$48.80
$41.89
16%
$40.94
Natural Gas Liquids ($/Bbl)
$20.81
$17.32
20%
NA
Natural Gas ($/Mcf)
$2.21
$2.35
-6%
$3.18
Differentials
 
 
 
 
NYMEX WTI *
$(6.570)
$(6.290)
4%
$(8.200)
NYMEX Henry Hub
$(0.690)
$(0.640)
8%
$0.14
Unit Costs
 
 
 
 
Lease Operating Expense ($/BOE)
$1.54
$1.17
32%
$4.08
* Adjusted to include transportation and gathering expense.
For the fourth quarter ended December 31, 2017 crude oil accounted for approximately 51% of total equivalent production volumes. For the year ended December 31, 2017, production averaged 34,194 BOE per day, 47% oil and slightly ahead of the mid-point of the Company’s previously issued guidance.





January 30, 2018         http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12013251&doc=3

2017 Preliminary Year-End Reserves
Proved developed reserves and total proved reserves at year-end 2017 increased 389% and 144%, respectively, over year-end 2016 proved reserves as shown in the following table:
YEAR-OVER-YEAR RESERVES
 
 
2017
 
2016 *
 
 
Reserve Category
 
Oil (MMbbls)
 
Gas (Bcf)
 
NGL (MMbbls)
 
Net MMBOE
 
Net MMBOE
 
Change %
Proved Developed
 
27
 
219
 
24
 
88
 
18
 
389%
Proved Undeveloped
 
43
 
341
 
40
 
139
 
75
 
85%
Total Proved
 
70
 
560
 
64
 
227
 
93
 
144%
* 2016 year-end reserves are reported in 2-stream equivalents
Capital Expenditures
Drilling and completion capital expenditures for the year ended December 31, 2017 were approximately $460 million. During the fourth quarter the Company chose to retain its interest in multiple non-operated wells located within SRC's core operating area which began producing late in Q4 2017. These wells represented approximately $35 million in non-operated drilling and completion capital expenditures in 2017. Given the timing of these wells, they had limited impact on SRC's 2017 production volumes; however, they should have a more measurable impact on 2018 production volumes.

Operations Update
During the quarter ended December 31, 2017, SRC drilled 27 gross (~25 net) wells and completed 12 gross (~11 net) wells. For the twelve months ended December 31, 2017, the Company drilled 115 gross (~103 net) wells and completed 115 gross (~102 net) wells.
The table below details all recent activity:




January 30, 2018         http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12013251&doc=3

 
 
 
Gross Well Count by Zone
 
Pad Name
Lateral Length
Avg. WI
Niobrara
Codell
Status
Beebe
12 ML
100%
7
5
TTS
Leffler
12 LL
90%
7
5
TTS
Ag
12 LL
89%
7
5
Stimulating
Falken
12 LL, 6 SL
94%
11
7
WOC
Goetzel
12 ML
92%
8
4
WOC
Boomerang
12 ML, 4LL
83%
10
6
Drilling
Donn
13 LL
91%
8
5
Drilling
TTS - Turned to sales | WOC - Waiting on completion

Preliminary 2018 Guidance
The Company expects full year 2018 production to be between 48,000 BOE/d and 52,000 BOE/d with oil making up 47% - 50% of production. The pace of completion activity is anticipated to be skewed towards the latter half of 2018 to align with natural gas processing capacity additions. Total drilling and completion capital expenditures are projected to be between $480 million and $540 million. In 2018 SRC expects to drill approximately 117 gross (100 net) wells and complete approximately 116 gross (103 net) wells on an operated basis. SRC's operational program for 2018 is similar to the program executed in 2017. The expected year-over-year capital expenditure increase is a function of productivity gains with respect to SRC's contiguous block of acreage, larger average working interest and anticipated cost pressures. Crude oil differentials, which include all transportation and gathering costs from the wellhead to the settlement point, are expected to remain relatively stable within a range of $6.00 to $6.50 per barrel.

Management Comment
Lynn A. Peterson, Chairman and CEO of SRC Energy commented, "Our team's execution through 2017 was very positive. We have continued our strong operational momentum into 2018, which should lead to an alignment of SRC's operating cash flow with capital expenditures while continuing to deliver robust year-over-year growth."

Mr. Peterson added, “As it relates to midstream infrastructure, 2018 will be a year of change. Multiple gas processing facilities as well as oil gathering assets are currently under construction or are on the drawing boards as midstream companies respond to the growing needs.” He concluded, “As good




January 30, 2018         http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12013251&doc=3

stewards of SRC’s capital, we intend to maintain our strong balance sheet and operational flexibility, while focusing on delivering favorable returns on capital for our shareholders.”

Fourth Quarter 2017 Earnings Release and Call
SRC plans to issue its fourth quarter earnings release on Wednesday, February 21, 2018 after the close of trading on the New York Stock Exchange.

SRC will host a conference call on Thursday, February 22, 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.

To participate in this call please dial:
Domestic Dial-in Number: (877) 407-9122
International Dial-in Number: (201) 493-6747
Webcast URL:  http://srcenergy.equisolvewebcast.com/q4-2017

Replay Information:
Conference ID #:  411931
Replay Dial-In (Toll Free US & Canada):  877-660-6853
Replay Dial-In (International):  201-612-7415
Expiration Date:  3/8/18

Upcoming Investor Conferences
Presentations provided in conjunction with these events will be available on SRC's website at www.srcenergy.com the morning of the respective presentation. Members of SRC senior management




January 30, 2018         http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12013251&doc=3

will participate in the following hosted investor events, please refer to the Company’s website for specific presentation dates and attendees:
JP Morgan Global High Yield & Leveraged Finance Conference - February 26-28, 2018 Miami, FL
Piper Jaffray Energy Conference - March 1, 2018 Las Vegas, NV
Raymond James Institutional Investor Conference - March 5-6, 2018 Orlando, FL
Scotia Howard Weil 2018 Energy Conference - March 25-28, 2018 New Orleans, LA

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 Wattenberg Field of the Denver-Julesburg Basin. 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. Forward-looking statements herein include statements regarding expected fourth quarter, full-year 2017 and 2018 results, including capital expenditures, costs, drilling and completion activities, midstream activities, differentials and production. 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




January 30, 2018         http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12013251&doc=3

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 recent or 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. Results presented for the fourth quarter of 2017 and for the full year 2017 are preliminary and subject to change as the Company finalizes its financial statements for the relevant periods.

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