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): May 2, 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):

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

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. o







Item 2.02 Results of Operations and Financial Condition.
On May 2, 2018, SRC Energy Inc. issued a press release describing operating and financial results for the quarter ended March 31, 2018 and certain 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 exhibit hereto, 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”), or otherwise subject to the liabilities of that section, 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 of SRC Energy Inc., dated May 2, 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: May 2, 2018
SRC Energy Inc.

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






EXHIBIT INDEX
Exhibit No.
 
Description
 
Press Release of SRC Energy Inc., dated May 2, 2018



Exhibit
Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12224702&doc=3

May 2, 2018

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


Denver--(GlobeNewswire - 5/2/2018) -- 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 Basin. The 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.


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





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