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 1, 2019


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 1, 2019, SRC Energy Inc. (the "Company") issued a press release describing operating and financial results for the quarter ended March 31, 2019 and certain related information. A copy of the press release is attached hereto as Exhibit 99.1.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 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 1, 2019








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 1, 2019
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 1, 2019



Exhibit
Exhibit 99.1
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12871980&doc=3

May 1, 2019

SRC Energy Inc. Reports First Quarter 2019 Financial Results


Denver--(GlobeNewswire - 5/1/2019) -- 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 results for the three months ended March 31, 2019.

First Quarter 2019 Highlights

Revenues were $189.5 million for the three months ended March 31, 2019
Net income was $49.8 million or $0.20 per diluted share for the three months ended March 31, 2019
Adjusted EBITDA was $159.5 million for the three months ended March 31, 2019 (see further discussion regarding the presentation of adjusted EBITDA in "About Non-GAAP Financial Measures" below)
Drilling and completion capital expenditures of $110 million for the three months ended March 31, 2019 were funded from EBITDA


First Quarter 2019 Financial Results

The following table presents certain per unit metrics that compare results of the corresponding reporting periods:
 
 
Three Months Ended
 
 
 
 
 
 
Seq.
 
 
 
Y-o-Y
Net Volumes
 
3/31/2019
 
12/31/2018
 
% Chg.
 
3/31/2018
 
% Chg.
Crude Oil (MBbls)
 
2,967
 
2,590
 
15%
 
2,041
 
45%
Natural Gas Liquids (MBbls)
 
1,054
 
1,089
 
(3)%
 
758
 
39%
Natural Gas (MMcf)
 
11,391
 
10,946
 
4%
 
7,719
 
48%
Sales Volumes: (MBOE)
 
5,919
 
5,503
 
8%
 
4,086
 
45%
Average Daily Volumes
 
 
 
 
 
 
 
 
 
 
Daily Production (BOE)
 
65,771
 
59,821
 
10%
 
45,397
 
45%
Product Price Received
 
 
 
 
 
 
 
 
 
 
Crude Oil ($/Bbl) *
 
$48.33
 
$52.56
 
(8)%
 
$56.01
 
(14)%
Natural Gas Liquids ($/Bbl)
 
$12.59
 
$19.66
 
(36)%
 
19.15
 
(34)%
Natural Gas ($/Mcf) *
 
$2.52
 
$2.68
 
(6)%
 
$2.14
 
18%
Avg. Realized Price ($/BOE) *
 
$31.32
 
$33.97
 
(8)%
 
$35.58
 
(12)%
Per Unit Cost Information ($/BOE)
Lease Operating Exp.
 
$2.93
 
$2.44
 
20%
 
$1.93
 
52%
Production Tax
 
$1.20
 
$3.36
 
(64)%
 
$3.29
 
(64)%
DD&A Expense
 
$10.29
 
$10.11
 
2%
 
$9.08
 
13%
Total G&A Expense
 
$1.60
 
$1.62
 
nil
 
$2.35
 
(32)%
* Includes transportation and gathering expense


Revenues for the three months ended March 31, 2019 were flat compared to the three months ended December 31, 2018 and increased 29% compared to the three months ended March 31, 2018. While sales volumes grew 8%



quarter-over-quarter, 8% lower average realized prices muted revenue growth in a quarter-over-quarter comparison. The year-over-year increase in revenues was primarily driven by growth in sales volumes. Natural gas liquids product pricing during the quarter ended March 31, 2019 were impacted by a redistribution of volume from Mont Belvieu to Conway, a market with lower price realizations, in order to insulate against processing throughput curtailment.

Production taxes for the three months ended March 31, 2019 were offset by a credit related to 2018 estimated severance tax, leading to a 64% decrease when compared to the three months ended December 31, 2018 and March 31, 2018. For the remainder of 2019, production taxes are estimated to be approximately 8% of revenue.
 
The Company's 2019 first quarter net income totaled $49.8 million, or $0.20 per diluted share, compared to net income of $82.0 million, or $0.34 per diluted share, and $65.8 million, or $0.27 per diluted share, for the three-month periods ending December 31 and March 31, 2018, respectively. Net income and earnings per share were impacted by non-cash changes to derivatives used for hedging, and changes in deferred income tax rates. Adjusted EBITDA in the first quarter of 2019 was $159.5 million as compared to $143.0 million and $115.7 million for the three-month periods ending December 31 and March 31, 2018, respectively.

Credit Agreement
The Company recently completed 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 $700 million from $650 million while the aggregate elected commitments were increased to $550 million from $500 million.  As of March 31, 2019, the Company had $195 million drawn on the facility.


Management Comment
Lynn A. Peterson, Chairman and CEO of SRC Energy Inc. commented, "We are pleased with the progress being made in the Basin to address infrastructure expansion. As we move ahead with the development of our properties we look forward to working with all of our stakeholders. Safety of our employees and communities along with the protection of our environment remain core values of our Company."


Conference Call
The Company will host a conference call on Thursday, May 2, 2019 at 10:00 a.m. Eastern time (8:00 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/30055/indexl.html

Replay Information:
Conference ID #:  13690162
Replay Dial-In (Toll Free US & Canada):  877-660-6853
Replay Dial-In (International):  201-612-7415
Expiration Date:  5/16/19


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, future taxes and midstream matters. 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 March 31, 2019 for discussion of the potential effects on our business of SB19-181, which was passed by the Colorado General Assembly in April 2019.


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, 2019
 
December 31, 2018
 
March 31, 2018
Adjusted EBITDA:
 
 
 
 
 
Net income
$
49,751

 
$
81,974

 
$
65,796

Depreciation, depletion, and accretion
60,918

 
55,627

 
37,081

Goodwill impairment

 
40,711

 

Stock-based compensation
3,683

 
2,940

 
2,796

Mark-to-market of commodity derivative contracts:
 
 
 
 
 
Total gain on commodity derivatives contracts
22,913

 
(52,017
)
 
5,781

Cash settlements on commodity derivative contracts
4,626

 
(6,096
)
 
(1,555
)
Cash premiums paid for commodity derivative contracts
(319
)
 

 

Interest income
(69
)
 
(62
)
 
(9
)
Income tax expense
18,034

 
19,891

 
5,811

Adjusted EBITDA
$
159,537

 
$
142,968

 
$
115,701






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, 2019, which is available at www.sec.gov.
SRC ENERGY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
 
 
 
 
ASSETS
March 31, 2019
 
December 31, 2018
Current assets:
 
 
 
Cash and cash equivalents
$
56,813

 
$
49,609

Other current assets
147,562

 
182,831

Total current assets
204,375

 
232,440

 
 
 
 
Oil and gas properties and other equipment
2,583,700

 
2,518,700

Other assets
8,588

 
3,574

 
 
 
 
Total assets
$
2,796,663

 
$
2,754,714

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current liabilities
326,575

 
353,833

 
 
 
 
Revolving credit facility
195,000

 
195,000

Notes payable, net of issuance costs
539,666

 
539,360

Asset retirement obligations
36,093

 
40,052

Other liabilities
59,749

 
40,177

Total liabilities
1,157,083

 
1,168,422

 
 
 
 
Shareholders' equity:
 
 
 
Common stock and paid-in capital
1,495,887

 
1,492,350

Retained earnings
143,693

 
93,942

Total shareholders' equity
1,639,580

 
1,586,292

 
 
 
 
Total liabilities and shareholders' equity
$
2,796,663

 
$
2,754,714




SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)

 
Three Months Ended March 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
49,751

 
$
65,796

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depletion, depreciation, and accretion
60,918

 
37,081

Provision for deferred taxes
18,034

 
5,811

Other, non-cash items
28,837

 
4,561

Changes in operating assets and liabilities
3,133

 
14,432

Net cash provided by operating activities
160,673

 
127,681

 
 
 
 
Cash flows from investing activities:
 
 
 
Acquisitions of oil and gas properties and leaseholds
2,623

 
(1,329
)
Capital expenditures for drilling and completion activities
(148,904
)
 
(100,347
)
Other capital expenditures
(6,378
)
 
(3,957
)
Proceeds from sales of oil and gas properties and other
124

 
728

Net cash used in investing activities
(152,535
)
 
(104,905
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Equity financing activities
(876
)
 
431

Debt financing activities
(58
)
 
(236
)
Net cash provided by (used in) financing activities
(934
)
 
195

 
 
 
 
Net increase in cash and cash equivalents
7,204

 
22,971

Cash and cash equivalents at beginning of period
49,609

 
48,772

Cash and cash equivalents at end of period
$
56,813

 
$
71,743




SRC ENERGY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except share and per share data)

 
Three Months Ended March 31,
 
2019
 
2018
Oil, natural gas, and NGL revenues
$
189,455

 
$
147,233

 
 
 
 
Expenses:
 
 
 
Lease operating expenses
17,360

 
7,896

Transportation and gathering
4,054

 
1,855

Production taxes
7,086

 
13,443

Depreciation, depletion, and accretion
60,918

 
37,081

General and administrative
9,469

 
9,600

Total expenses
98,887

 
69,875

 
 
 
 
Operating income
90,568

 
77,358

 
 
 
 
Other income (expense):
 
 
 
Commodity derivatives loss
(22,913
)
 
(5,781
)
Interest expense, net of amounts capitalized

 

Interest income
69

 
9

Other income
61

 
21

Total other expense
(22,783
)
 
(5,751
)
 
 
 
 
Income before income taxes
67,785

 
71,607

 
 
 
 
Income tax expense
18,034

 
5,811

Net income
$
49,751

 
$
65,796

 
 
 
 
Net income per common share:
 
 
 
Basic
$
0.20

 
$
0.27

Diluted
$
0.20

 
$
0.27

 
 
 
 
Weighted-average shares outstanding:
 
 
 
Basic
243,290,734

 
241,751,915

Diluted
244,091,516

 
243,166,897


Released 5/1/2019