THE
WOODLANDS, Texas, Aug. 4, 2022
/PRNewswire/ -- Earthstone Energy, Inc. (NYSE: ESTE) ("Earthstone",
the "Company", "we", "our" or "us"), today announced financial and
operating results for the three and six months ended June 30, 2022.
Second Quarter 2022 Highlights
- Executed the Titus Acquisition PSAs on June 27, 2022, which are expected to close in
mid-August 2022
- On April 12, 2022, closed a
$550 million offering of 8.0% senior
unsecured notes due 2027
- Closed the Bighorn Acquisition on April
14, 2022
- Issued $280 million of Preferred
Stock in a private placement on April 14,
2022, which was converted into 25,225,225 shares of our
Class A common stock on July 6,
2022
- Net income attributable to Earthstone Energy, Inc. of
$144.9 million, or $1.46 per Diluted Share
- Net income of $218.0 million, or
$1.60 per Adjusted Diluted
Share(1)
- Adjusted net income(1) of $175.7 million, or $1.29 per Adjusted Diluted
Share(1)
- Adjusted EBITDAX(1) of $300.9
million, up 144% compared to 1Q 2022
- Net cash provided by operating activities of $254.7 million
- Free Cash Flow(1) of $164.8
million, up 362% compared to 1Q 2022
- Average daily net production of 77,125 Boepd(2), up
117% compared to 1Q 2022
- Capital expenditures of $119.5
million
Year to Date 2022 Highlights
- Closed the Chisholm Acquisition on February 15, 2022
- Net income attributable to Earthstone Energy, Inc. of
$111.4 million, or $1.37 per Diluted Share
- Net income of $166.1 million, or
$1.40 per Adjusted Diluted
Share(1)
- Adjusted net income(1) of $251.9 million, or $2.12 per Adjusted Diluted
Share(1)
- Adjusted EBITDAX(1) of $424.0
million
- Net cash provided by operating activities of $337.7 million
- Free Cash Flow(1) of $200.5
million
- Average daily net production of 56,432 Boepd(2)
- Capital expenditures of $201.6
million
(1)
|
See the "Non-GAAP
Financial Measures" section below.
|
(2)
|
Represents reported
sales volumes.
|
Management Comments
Robert J. Anderson, President and
Chief Executive Officer of Earthstone, stated, "Our strong second
quarter results reflect the continued positive impacts of our
consolidation strategy. Over the last year and a half, we have
become a larger scale, low-cost producer and have grown production
volumes multiple times over while also adding to our robust
drilling inventory through accretive, well-priced acquisitions.
This ongoing transformation enabled us to substantially increase
Free Cash Flow in the second quarter by approximately 362%,
sequentially, to $165 million driven
by a step change in our daily production and the continued strength
of commodity prices."
"We have also been pleased with our ability to optimize our
operations, identify synergies within our recent acquisitions, and
manage our costs in this challenging inflationary environment,"
added Anderson. "We continue to drive down our LOE and cash G&A
per BOE which was, on a combined basis, 5% lower in the second
quarter compared to the first quarter. We are looking forward to
closing on the northern Delaware
Basin assets from the Titus Acquisition later this month and
incorporating this high-quality inventory into our development
plans. The Titus Acquisition is expected to increase our total
production to near 100,000 Boepd upon close, and we expect the
assets will contribute an incremental 30% to our Adjusted EBITDAX.
In the near-term, we intend to continue using our significant Free
Cash Flow to rapidly pay down debt in pursuit of our target Debt /
LQA Adjusted EBITDAX ratio of less than 1.0x by year-end. As
always, we will remain focused on executing our growing operational
program and generating record levels of free cash flow, which we
believe will drive meaningful shareholder value," concluded
Anderson.
Updated 2022 Guidance
We are providing updated guidance for 2022, which accounts for
the expected closing of the Titus Acquisition in mid-August 2022, increased drilling and
completion activity, a recent non-operated asset sale and updated
cost expectations. Estimated second half of 2022 capital
expenditures are $300-325 million,
which implies full year 2022 capital expenditure guidance of
$502-527 million. Incremental
activity including related infrastructure accounts for a 14%
increase at the midpoint of our prior full year 2022 capital
guidance while cost inflation on our base drilling program accounts
for a 7% increase. The updated capital guidance assumes
addition of a fifth rig during the fall which will be focused on
the Delaware Basin, bringing the
total rig count in the Delaware
Basin to three rigs, while maintaining two rigs in the Midland
Basin. We expect to complete an additional six gross operated wells
on the Titus Acquisition assets and spud an additional four gross
operated wells within our expanded capital program.
Production guidance for the second half of the year incorporates
the expected near-term closing of the Titus Acquisition as well as
a recent non-operated asset sale. The Company anticipates third
quarter production to be 86-90 MBoepd (~41% oil). Furthermore, we
expect production to average 96-100 MBoepd (~44% oil) in the fourth
quarter with a full impact from the Titus Acquisition.
Production
Guidance
|
|
1H22
Actuals
|
|
3Q22(1)
|
|
4Q22(1)
|
|
FY
2022(1)
|
Production
(Boe/d)
|
|
56,432
|
|
86,000 -
90,000
|
|
96,000 -
100,000
|
|
73,858 -
75,875
|
% Oil
|
|
39 %
|
|
~41%
|
|
~44%
|
|
~41%
|
% Liquids
|
|
67 %
|
|
~68%
|
|
~70%
|
|
~68%
|
|
|
|
|
|
|
|
|
|
Expense & Capex
Guidance
|
|
1H22
Actuals
|
|
Remainder of
2022(1)
|
|
FY
2022(1)
|
|
|
Total Capital
Expenditures ($MM)
|
|
$202
|
|
$300 - $325
|
|
$502 - $527
|
|
|
Lease Operating Expense
($/Boe)
|
|
$7.06
|
|
$7.50 -
$8.00
|
|
$7.33 -
$7.65
|
|
|
Production & Ad
Valorem Taxes (% of Revenue)
|
|
7.1 %
|
|
7.5% - 8.0%
|
|
7.3% - 7.7%
|
|
|
Cash G&A
($MM)(2)
|
|
$15
|
|
$20 - $22
|
|
$35 - $37
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes the projected
impact of the Titus Acquisition expected to close in mid-August
2022.
|
(2)
|
Cash G&A is defined
as general and administrative expenses excluding stock-based
compensation.
|
|
|
|
Note: Guidance is
forward-looking information that is subject to considerable change
and numerous risks and uncertainties, many of
which are beyond Earthstone's control. See "Forward-Looking
Statements" section below.
|
Operations Update
During the second quarter of 2022 for our Company-operated
activity, we commenced drilling seven gross (5.6 net) wells and
brought six gross (4.8 net) wells online in the Midland
Basin. In the Delaware
Basin, we commenced drilling eight gross (5.6 net) wells and
brought six gross (4.0 net) wells online.
We brought online a two-well pad in Lea County, the Bel-Air 5-8
pad, in late June. This pad is one of our first sets of wells
to be drilled and completed by us from start to finish after
closing on our initial Delaware
Basin acquisition earlier this year. After initially allowing
the wells to flow naturally, we recently installed artificial lift
and are seeing current average production rates of 1,085 Boepd (92%
oil) per well as the wells continue to clean up.
We are currently operating a four-rig drilling program, with two
rigs in the Midland Basin and two rigs in the Delaware Basin. We anticipate picking up a
fifth rig late in the third quarter of 2022 that will be operated
in the Delaware Basin. For full year 2022 and only for our
Company-operated activity, we anticipate spudding 38 gross (33.5
net) wells and bringing 34 gross (30.7 net) wells online in the
Midland Basin. In the Delaware
Basin, we anticipate spudding 28 gross (19.1 net) wells and
bringing 27 gross (19.3 net) wells online. This includes
spudding four more Delaware Basin
wells in 2022 compared to our prior plans as a result of drilling
efficiencies and also includes spudding an incremental four gross
(3.3 net) wells and bringing an incremental six gross (5.5 net)
wells online in the Delaware Basin
as a result of the Titus Acquisition and the expected addition of
the fifth rig.
Selected Financial
Data (unaudited)
|
|
($000s except where
noted)
|
Three Months
Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Total
revenues
|
$
472,551
|
|
$
89,671
|
|
$
668,701
|
|
$
165,243
|
|
|
|
|
|
|
|
|
Lease operating
expense
|
50,514
|
|
11,747
|
|
72,145
|
|
22,596
|
|
|
|
|
|
|
|
|
General and
administrative expense (excluding stock-based
compensation)
|
8,117
|
|
4,758
|
|
14,593
|
|
9,809
|
Stock-based
compensation
|
5,960
|
|
4,412
|
|
11,790
|
|
7,741
|
General and
administrative expense
|
$
14,077
|
|
$ 9,170
|
|
$
26,383
|
|
$
17,550
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
$
218,025
|
|
$
(15,831)
|
|
$
166,148
|
|
$
(26,387)
|
Less: Net income (loss)
attributable to noncontrolling interest
|
73,140
|
|
(6,960)
|
|
54,741
|
|
(11,683)
|
Net income (loss)
attributable to Earthstone Energy, Inc.
|
144,885
|
|
(8,871)
|
|
111,407
|
|
(14,704)
|
Net income (loss) per
common share(1)
|
|
|
|
|
|
|
|
Basic
|
1.85
|
|
(0.20)
|
|
1.57
|
|
(0.34)
|
Diluted
|
1.46
|
|
(0.20)
|
|
1.37
|
|
(0.34)
|
Adjusted
EBITDAX(2)
|
$
300,875
|
|
$
53,668
|
|
$
423,964
|
|
$
97,511
|
|
|
|
|
|
|
|
|
Production(3):
|
|
|
|
|
|
|
|
Oil (MBbls)
|
2,587
|
|
1,083
|
|
4,004
|
|
2,140
|
Gas (MMcf)
|
14,414
|
|
2,927
|
|
20,053
|
|
5,372
|
NGL (MBbls)
|
2,029
|
|
496
|
|
2,869
|
|
861
|
Total
(MBoe)(4)
|
7,018
|
|
2,067
|
|
10,214
|
|
3,896
|
Average Daily
Production (Boepd)
|
77,125
|
|
22,716
|
|
56,432
|
|
21,525
|
Average
Prices:
|
|
|
|
|
|
|
|
Oil ($/Bbl)
|
110.80
|
|
65.47
|
|
106.00
|
|
61.56
|
Gas ($/Mcf)
|
6.67
|
|
2.29
|
|
5.94
|
|
2.33
|
NGL ($/Bbl)
|
44.25
|
|
24.31
|
|
43.66
|
|
24.35
|
Total
($/Boe)
|
67.33
|
|
43.38
|
|
65.47
|
|
42.41
|
Adj. for Realized
Derivatives Settlements:
|
|
|
|
|
|
|
|
Oil ($/Bbl)
|
87.30
|
|
52.39
|
|
83.16
|
|
50.06
|
Gas ($/Mcf)
|
5.40
|
|
2.19
|
|
4.97
|
|
2.20
|
NGL ($/Bbl)
|
44.25
|
|
24.31
|
|
43.66
|
|
24.35
|
Total
($/Boe)
|
56.06
|
|
36.38
|
|
54.62
|
|
35.91
|
Operating Margin per
Boe
|
|
|
|
|
|
|
|
Average realized
price
|
$ 67.33
|
|
$ 43.38
|
|
$ 65.47
|
|
$ 42.41
|
Lease operating
expense
|
7.20
|
|
5.68
|
|
7.06
|
|
5.80
|
Production and ad
valorem taxes
|
4.87
|
|
2.50
|
|
4.65
|
|
2.62
|
Operating margin per
Boe(2)
|
55.26
|
|
35.19
|
|
53.76
|
|
33.99
|
Realized hedge
settlements
|
(11.27)
|
|
(7.00)
|
|
(10.85)
|
|
(6.50)
|
Operating margin per
Boe (including realized hedge settlements)(2)
|
$ 43.99
|
|
$ 28.19
|
|
$ 42.91
|
|
$ 27.49
|
|
|
|
|
|
|
|
|
(1)
|
Net income (loss) per
common share attributable to Earthstone Energy, Inc.
|
(2)
|
See the "Non-GAAP
Financial Measures" section below.
|
(3)
|
Represents reported
sales volumes.
|
(4)
|
Barrels of oil
equivalent have been calculated on the basis of six thousand cubic
feet (Mcf) of natural gas equals one barrel of oil equivalent
(Boe).
|
Liquidity and Equity Capitalization
As of June 30, 2022, we had
$395 million of long-term debt
outstanding under our senior secured credit facility ("Credit
Facility") with elected commitments of $800
million, resulting in available borrowings of approximately
$405 million. As of June 30, 2022, our borrowing base was
$1.4 billion.
During the month ended July 31,
2022, we paid down an additional $145
million on our Credit Facility, bringing the drawn amount to
$250 million. Additionally, we had
approximately $14 million of cash in
our bank accounts at July 31,
2022.
Through June 30, 2022, we had
incurred $201.6 million of capital
expenditures. We expect to fund the estimated $300-325 million of second half of 2022 capital
expenditures with cash flow from operations while any excess cash
flow will be used to repay borrowings under our Credit
Facility.
As of July 31, 2022, 104,442,648
shares of Class A Common Stock and 34,261,641 shares of Class B
Common Stock were outstanding.
Commodity Hedging
Hedging Activities
The following table sets forth our outstanding derivative
contracts as of June 30, 2022. When
aggregating multiple contracts, the weighted average contract price
is disclosed.
As of June 30, 2022:
|
|
Price
Swaps
|
Period
|
|
Commodity
|
|
Volume
(Bbls / MMBtu)
|
|
Weighted Average Price
($/Bbl /
$/MMBtu)
|
Q3 - Q4 2022
|
|
Crude Oil
|
|
2,162,000
|
|
$
66.70
|
Q1 - Q4 2023
|
|
Crude Oil
|
|
1,277,500
|
|
$
76.20
|
Q3 - Q4 2022
|
|
Crude Oil Basis Swap
(1)
|
|
3,082,000
|
|
$
0.61
|
Q1 - Q4 2023
|
|
Crude Oil Basis Swap
(1)
|
|
4,743,500
|
|
$
0.59
|
Q3 - Q4 2022
|
|
Natural Gas
|
|
5,159,500
|
|
$
3.52
|
Q1 - Q4 2023
|
|
Natural Gas
|
|
3,670,000
|
|
$
3.35
|
Q3 - Q4 2022
|
|
Natural Gas Basis Swap
(2)
|
|
3,680,000
|
|
$
(0.33)
|
Q1 - Q4 2023
|
|
Natural Gas Basis Swap
(2)
|
|
36,500,000
|
|
$
(1.47)
|
Q1 - Q4 2024
|
|
Natural Gas Basis Swap
(2)
|
|
36,600,000
|
|
$
(1.05)
|
|
|
(1)
|
The basis differential
price is between WTI Midland Crude and the WTI NYMEX.
|
(2)
|
The basis differential
price is between W. Texas (WAHA) and the Henry Hub
NYMEX.
|
|
|
|
|
Costless
Collars
|
Period
|
|
Commodity
|
|
Volume
(Bbls / MMBtu)
|
|
Bought
Floor
($/Bbl /
$/MMBtu)
|
|
Sold
Ceiling
($/Bbl /
$/MMBtu)
|
Q3 - Q4 2022
|
|
Crude Oil Costless
Collar
|
|
1,357,000
|
|
$
71.86
|
|
$
91.39
|
Q1 - Q4 2023
|
|
Crude Oil Costless
Collar
|
|
2,828,000
|
|
$
65.74
|
|
$
91.90
|
Q3 - Q4 2022
|
|
Natural Gas Costless
Collar
|
|
11,400,500
|
|
$
4.08
|
|
$
6.48
|
Q1 - Q4 2023
|
|
Natural Gas Costless
Collar
|
|
14,133,000
|
|
$
3.46
|
|
$
5.34
|
|
|
|
|
|
|
|
|
|
|
|
Deferred Premium
Puts
|
Period
|
|
Commodity
|
|
Volume
(Bbls / MMBtu)
|
|
$/Bbl (Put
Price)
|
|
$/Bbl (Net of
Premium)
|
Q3 - Q4 2022
|
|
Crude Oil
|
|
253,000
|
|
$
80.00
|
|
$
75.79
|
Q1 - Q4 2023
|
|
Crude Oil
|
|
638,000
|
|
$
70.00
|
|
$
62.85
|
Environmental Data Highlights
Consistent with Earthstone's commitment to environmental
stewardship, Earthstone has updated data on its emissions, flaring
and land impact, which is available under the "Sustainability"
section of our website. Key highlights for 2021 include:
- 36% reduction in Greenhouse Gas Emissions intensity to 7.9 mT
CO2e / MBoe compared to 2020, which is 44% below Permian peers
(1)
- 68% reduction in Flaring Intensity of 0.69% (gas flared / gas
produced) compared to 2020, which is 66% below Permian peers
(1)
- Zero reportable oil and water spills in 2020 and 2021
|
|
(1)
|
Greenhouse Gas
Emissions are based on reported gross operated production and
metrics are calculated in accordance with the standards of the U.S.
Environmental Protection Agency ("EPA"). Flaring Intensity is
based on gross reported operated production. Peers include
CDEV, CPE, FANG, LPI, MTDR, PXD and SM. Data compiled from
company published data for most recent available year (2020 or
2021) and from publicly available EPA reports as of June 30,
2022.
|
Conference Call Details
Earthstone is hosting a conference call on Friday, August 5, 2022 at 10:00 a.m. Eastern (9:00
a.m. Central) to discuss the Company's financial results for
the second quarter of 2022 and its outlook for the remainder of
2022. Prepared remarks by Robert J.
Anderson, President and Chief Executive Officer,
Mark Lumpkin, Jr., Executive Vice
President and Chief Financial Officer, and Steven C. Collins, Executive Vice President and
Chief Operating Officer, will be followed by a question and answer
session.
Investors and analysts are invited to participate in the call by
dialing 877-407-6184 for domestic calls or 201-389-0877 for
international calls, in both cases asking for the Earthstone
conference call. A webcast will also be available through the
Company website (www.earthstoneenergy.com). Please select "Events
& Presentations" under the "Investors" section of the Company's
website and log on at least 10 minutes in advance to register.
A replay of the call and webcast will be available on the
Company's website and by telephone until 10:00 a.m. Eastern (9:00
a.m. Central), Friday, August 19,
2022. The number for the replay is 877-660-6853 for domestic
calls or 201-612-7415 for international calls, using Replay ID:
13731790.
About Earthstone Energy, Inc.
Earthstone Energy, Inc. is a growth-oriented, independent energy
company engaged in the acquisition, development and operation of
oil and natural gas properties. The Company's primary assets are
located in the Midland Basin in West
Texas, the Eagle Ford Trend in South Texas and the Delaware Basin in New Mexico. Earthstone is listed on NYSE under
the symbol "ESTE." For more information, visit the Company's
website at www.earthstoneenergy.com.
Forward-Looking Statements
This release contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
Statements that are not strictly historical statements constitute
forward-looking statements and may often, but not always, be
identified by the use of such words such as "expects," "believes,"
"intends," "anticipates," "plans," "estimates," "forecast,"
"guidance," "target," "potential," "possible," or "probable" or
statements that certain actions, events or results "may," "will,"
"should," or "could" be taken, occur or be achieved.
Forward-looking statements are based on current expectations and
assumptions and analyses made by Earthstone and its management in
light of experience and perception of historical trends, current
conditions and expected future developments, as well as other
factors appropriate under the circumstances that involve various
risks and uncertainties that could cause actual results to differ
materially from those reflected in the statements. These risks
include, but are not limited to, those set forth in Earthstone's
annual report on Form 10-K for the year ended December 31, 2021, recent quarterly reports on
Form 10-Q, recent current reports on Form 8-K, and other Securities
and Exchange Commission ("SEC") filings. Earthstone undertakes no
obligation to revise or update publicly any forward-looking
statements except as required by law.
Contact
Scott Thelander
Vice President of Finance
Earthstone Energy, Inc.
1400 Woodloch Forest Drive, Suite 300
The Woodlands, TX 77380
281-298-4246
scott@earthstoneenergy.com
EARTHSTONE ENERGY,
INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(In thousands,
except share and per share amounts)
|
|
|
|
June
30,
|
|
December
31,
|
ASSETS
|
|
2022
|
|
2021
|
Current
assets:
|
|
|
|
|
Cash
|
|
$
—
|
|
$
4,013
|
Accounts
receivable:
|
|
|
|
|
Oil, natural gas, and
natural gas liquids revenues
|
|
230,449
|
|
50,575
|
Joint interest
billings and other, net of allowance of $19 and $19 at June 30,
2022 and
December 31, 2021, respectively
|
|
22,004
|
|
2,930
|
Derivative
asset
|
|
3,327
|
|
1,348
|
Prepaid expenses and
other current assets
|
|
13,646
|
|
2,549
|
Total current
assets
|
|
269,426
|
|
61,415
|
|
|
|
|
|
Oil and gas
properties, successful efforts method:
|
|
|
|
|
Proved
properties
|
|
3,167,140
|
|
1,625,367
|
Unproved
properties
|
|
282,569
|
|
222,025
|
Land
|
|
5,482
|
|
5,382
|
Total oil and gas
properties
|
|
3,455,191
|
|
1,852,774
|
|
|
|
|
|
Accumulated
depreciation, depletion and amortization
|
|
(495,971)
|
|
(395,625)
|
Net oil and gas
properties
|
|
2,959,220
|
|
1,457,149
|
|
|
|
|
|
Other noncurrent
assets:
|
|
|
|
|
Office and other
equipment, net of accumulated depreciation and amortization of
$4,761 and
$4,547 at June 30, 2022 and December 31, 2021,
respectively
|
|
2,944
|
|
1,986
|
Derivative
asset
|
|
3,523
|
|
157
|
Operating lease
right-of-use assets
|
|
2,423
|
|
1,795
|
Other noncurrent
assets
|
|
53,423
|
|
33,865
|
TOTAL
ASSETS
|
|
$
3,290,959
|
|
$
1,556,367
|
LIABILITIES AND
EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Accounts
payable
|
|
$
80,386
|
|
$
31,397
|
Revenues and royalties
payable
|
|
150,087
|
|
36,189
|
Accrued
expenses
|
|
72,168
|
|
31,704
|
Asset retirement
obligation
|
|
390
|
|
395
|
Derivative
liability
|
|
122,067
|
|
45,310
|
Advances
|
|
5,774
|
|
4,088
|
Operating lease
liabilities
|
|
850
|
|
681
|
Other current
liabilities
|
|
767
|
|
851
|
Total current
liabilities
|
|
432,489
|
|
150,615
|
|
|
|
|
|
Noncurrent
liabilities:
|
|
|
|
|
Revolving credit
facility
|
|
395,000
|
|
320,000
|
8.000% Senior Notes
due 2027, net
|
|
537,753
|
|
—
|
Deferred tax
liability
|
|
36,277
|
|
15,731
|
Asset retirement
obligation
|
|
35,555
|
|
15,471
|
Derivative
liability
|
|
19,761
|
|
571
|
Operating lease
liabilities
|
|
1,736
|
|
1,276
|
Other noncurrent
liabilities
|
|
13,004
|
|
6,442
|
Total noncurrent
liabilities
|
|
1,039,086
|
|
359,491
|
|
|
|
|
|
Equity:
|
|
|
|
|
Preferred stock,
$0.001 par value, 19,720,000 shares authorized; none issued or
outstanding
|
|
—
|
|
—
|
Series A Convertible
Preferred Stock, $0.001 par value, 280,000 shares authorized,
issued and
outstanding at June 30, 2022. None authorized, issued or
outstanding at December 31 2021
|
|
—
|
|
—
|
Class A Common Stock,
$0.001 par value, 200,000,000 shares authorized; 79,217,423 and
53,467,307 issued and outstanding at June 30, 2022 and December 31,
2021, respectively
|
|
79
|
|
53
|
Class B Common Stock,
$0.001 par value, 50,000,000 shares authorized; 34,261,641 and
34,344,532 issued and outstanding at June 30, 2022 and December 31,
2021, respectively
|
|
34
|
|
34
|
Additional paid-in
capital
|
|
1,326,293
|
|
718,181
|
Accumulated
deficit
|
|
(48,367)
|
|
(159,774)
|
Total Earthstone
Energy, Inc. equity
|
|
1,278,039
|
|
558,494
|
Noncontrolling
interest
|
|
541,345
|
|
487,767
|
Total
equity
|
|
1,819,384
|
|
1,046,261
|
|
|
|
|
|
TOTAL LIABILITIES
AND EQUITY
|
|
$
3,290,959
|
|
$
1,556,367
|
|
|
|
|
|
EARTHSTONE ENERGY,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands,
except share and per share amounts)
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
REVENUES
|
|
|
|
|
Oil
|
|
$
286,632
|
|
$
70,918
|
|
$
424,384
|
|
$
131,737
|
Natural gas
|
|
96,125
|
|
6,690
|
|
119,083
|
|
12,542
|
Natural gas
liquids
|
|
89,794
|
|
12,063
|
|
125,234
|
|
20,964
|
Total
revenues
|
|
472,551
|
|
89,671
|
|
668,701
|
|
165,243
|
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND
EXPENSES
|
|
|
|
|
|
|
|
|
Lease operating
expense
|
|
50,514
|
|
11,747
|
|
72,145
|
|
22,596
|
Production and ad
valorem taxes
|
|
34,195
|
|
5,176
|
|
47,510
|
|
10,203
|
Depreciation,
depletion and amortization
|
|
66,463
|
|
26,027
|
|
100,789
|
|
50,434
|
General and
administrative expense
|
|
14,077
|
|
9,170
|
|
26,383
|
|
17,550
|
Transaction
costs
|
|
(402)
|
|
507
|
|
10,340
|
|
2,613
|
Accretion of asset
retirement obligation
|
|
708
|
|
303
|
|
1,105
|
|
593
|
Exploration
expense
|
|
—
|
|
30
|
|
92
|
|
30
|
Total operating
costs and expenses
|
|
165,555
|
|
52,960
|
|
258,364
|
|
104,019
|
|
|
|
|
|
|
|
|
|
Gain on sale of oil
and gas properties
|
|
—
|
|
348
|
|
—
|
|
348
|
|
|
|
|
|
|
|
|
|
Income from
operations
|
|
306,996
|
|
37,059
|
|
410,337
|
|
61,572
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
|
|
|
|
|
Interest expense,
net
|
|
(16,625)
|
|
(2,401)
|
|
(21,943)
|
|
(4,618)
|
Loss on derivative
contracts, net
|
|
(49,907)
|
|
(51,175)
|
|
(201,387)
|
|
(84,438)
|
Other income,
net
|
|
249
|
|
200
|
|
296
|
|
303
|
Total other
expense
|
|
(66,283)
|
|
(53,376)
|
|
(223,034)
|
|
(88,753)
|
|
|
|
|
|
|
|
|
|
Income (loss)
before income taxes
|
|
240,713
|
|
(16,317)
|
|
187,303
|
|
(27,181)
|
Income tax (expense)
benefit
|
|
(22,688)
|
|
486
|
|
(21,155)
|
|
794
|
Net income
(loss)
|
|
218,025
|
|
(15,831)
|
|
166,148
|
|
(26,387)
|
|
|
|
|
|
|
|
|
|
Less: Net income
(loss) attributable to noncontrolling interest
|
|
73,140
|
|
(6,960)
|
|
54,741
|
|
(11,683)
|
|
|
|
|
|
|
|
|
|
Net income (loss)
attributable to Earthstone Energy, Inc.
|
|
$
144,885
|
|
$
(8,871)
|
|
$
111,407
|
|
$
(14,704)
|
|
|
|
|
|
|
|
|
|
Net income (loss) per
common share attributable to Earthstone Energy, Inc.:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
1.85
|
|
$
(0.20)
|
|
$
1.57
|
|
$
(0.34)
|
Diluted
|
|
$
1.46
|
|
$
(0.20)
|
|
$
1.37
|
|
$
(0.34)
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
78,291,037
|
|
44,127,718
|
|
70,909,353
|
|
43,457,043
|
Diluted
|
|
102,410,036
|
|
44,127,718
|
|
84,266,422
|
|
43,457,043
|
|
|
|
|
|
|
|
|
|
EARTHSTONE ENERGY,
INC.
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(In
thousands)
|
|
|
|
For the Three Months
Ended
June 30,
|
|
For the Six Months
Ended
June 30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
218,025
|
|
$
(15,831)
|
|
$
166,148
|
|
$
(26,387)
|
Adjustments to
reconcile net income (loss) to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
Depreciation,
depletion and amortization
|
|
66,463
|
|
26,027
|
|
100,789
|
|
50,434
|
Accretion of asset
retirement obligations
|
|
708
|
|
303
|
|
1,105
|
|
593
|
Settlement of asset
retirement obligations
|
|
(274)
|
|
(38)
|
|
(475)
|
|
(53)
|
(Gain) on sale of oil
and gas properties
|
|
—
|
|
(348)
|
|
—
|
|
(348)
|
Gain on sale of office
and other equipment
|
|
(24)
|
|
(114)
|
|
(46)
|
|
(114)
|
Total loss on
derivative contracts, net
|
|
49,907
|
|
51,175
|
|
201,387
|
|
84,438
|
Operating portion of
net cash paid in settlement of derivative contracts
|
|
(79,099)
|
|
(14,522)
|
|
(110,785)
|
|
(25,427)
|
Stock-based
compensation - equity portion
|
|
2,693
|
|
4,412
|
|
4,994
|
|
7,741
|
Deferred income
taxes
|
|
21,873
|
|
(486)
|
|
20,546
|
|
(794)
|
Amortization of
deferred financing costs
|
|
1,442
|
|
198
|
|
2,069
|
|
339
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
(Increase) decrease in
accounts receivable
|
|
(135,580)
|
|
1,198
|
|
(184,315)
|
|
(4,181)
|
(Increase) decrease in
prepaid expenses and other current assets
|
|
(9,207)
|
|
(481)
|
|
(11,103)
|
|
(114)
|
Increase (decrease) in
accounts payable and accrued expenses
|
|
49,671
|
|
2,963
|
|
71,454
|
|
8,352
|
Increase (decrease) in
revenues and royalties payable
|
|
70,638
|
|
3,876
|
|
85,570
|
|
1,795
|
Increase (decrease) in
advances
|
|
(2,561)
|
|
(3,188)
|
|
(9,661)
|
|
(2,830)
|
Net cash provided
by operating activities
|
|
254,675
|
|
55,144
|
|
337,677
|
|
93,444
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
Acquisition of oil and
gas properties, net of cash acquired
|
|
(711,091)
|
|
(53,162)
|
|
(1,035,289)
|
|
(187,803)
|
Additions to oil and
gas properties
|
|
(124,456)
|
|
(19,325)
|
|
(180,381)
|
|
(28,238)
|
Additions to office
and other equipment
|
|
(766)
|
|
(144)
|
|
(1,356)
|
|
(370)
|
Proceeds from sales of
oil and gas properties
|
|
—
|
|
200
|
|
—
|
|
200
|
Net cash used in
investing activities
|
|
(836,313)
|
|
(72,431)
|
|
(1,217,026)
|
|
(216,211)
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from
borrowings
|
|
889,074
|
|
182,964
|
|
1,471,572
|
|
360,078
|
Repayments of
borrowings
|
|
(1,118,303)
|
|
(165,028)
|
|
(1,396,572)
|
|
(233,718)
|
Proceeds from issuance
of 8% Senior Notes due 2027, net
|
|
537,250
|
|
—
|
|
537,250
|
|
—
|
Proceeds from issuance
of Series A Convertible Preferred Stock, net of
offering costs of $674
|
|
279,326
|
|
—
|
|
279,326
|
|
—
|
Cash paid related to
the exchange and cancellation of Class A Common
Stock
|
|
(719)
|
|
(741)
|
|
(4,617)
|
|
(2,821)
|
Cash paid for finance
leases
|
|
—
|
|
(50)
|
|
—
|
|
(70)
|
Deferred financing
costs
|
|
(5,472)
|
|
(827)
|
|
(11,623)
|
|
(1,718)
|
Net cash provided
by financing activities
|
|
581,156
|
|
16,318
|
|
875,336
|
|
121,751
|
Net decrease in
cash
|
|
(482)
|
|
(969)
|
|
(4,013)
|
|
(1,016)
|
Cash at beginning of
period
|
|
482
|
|
1,447
|
|
4,013
|
|
1,494
|
Cash at end of
period
|
|
$
—
|
|
$
478
|
|
$
—
|
|
$
478
|
Supplemental disclosure
of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid
for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
4,888
|
|
$
2,350
|
|
$
9,468
|
|
$
4,272
|
Income
taxes
|
|
$
625
|
|
$
—
|
|
$
625
|
|
$
797
|
Non-cash investing and
financing activities:
|
|
|
|
|
|
|
|
|
Class A Common Stock
issued in IRM Acquisition
|
|
$
—
|
|
$
—
|
|
$
—
|
|
$
76,572
|
Class A Common Stock
issued in Chisholm Acquisition
|
|
$
—
|
|
$
—
|
|
$
249,515
|
|
$
—
|
Class A Common Stock
issued in Bighorn Acquisition
|
|
$
77,757
|
|
$
—
|
|
$
77,757
|
|
$
—
|
Accrued capital
expenditures
|
|
$
(5,568)
|
|
$
3,641
|
|
$
44,285
|
|
$
11,416
|
Lease asset additions
- ASC 842
|
|
$
—
|
|
$
—
|
|
$
678
|
|
$
—
|
Asset retirement
obligations
|
|
$
198
|
|
$
(266)
|
|
$
284
|
|
$
161
|
Earthstone Energy, Inc.
Non-GAAP Financial Measures
Unaudited
The non-GAAP financial measures of Adjusted Diluted Shares,
Adjusted EBITDAX, Adjusted Net Income, Free Cash Flow and Operating
Margin per Boe, as defined and presented below, are intended to
provide readers with meaningful information that supplements our
financial statements prepared in accordance with accounting
principles generally accepted in the
United States ("GAAP"). Further, these non-GAAP measures
should only be considered in conjunction with financial statements
and disclosures prepared in accordance with GAAP and should not be
considered in isolation or as a substitute for GAAP measures, such
as net income or loss, operating income or loss or any other GAAP
measure of financial position or results of operations. Adjusted
EBITDAX and Adjusted Net Income are presented herein and reconciled
from the GAAP measure of net income (loss) because of their wide
acceptance by the investment community as a financial
indicator.
I. Adjusted Diluted Shares
We define "Adjusted Diluted Shares" as the weighted average
shares of Class A Common Stock - Diluted outstanding plus the
weighted average shares of Class B Common Stock outstanding.
Our Adjusted Diluted Shares is a non-GAAP financial measure that
provides a comparable per share measurement when presenting results
such as Adjusted EBITDAX and Adjusted Net Income that include the
interests of both Earthstone and the noncontrolling interest.
Adjusted Diluted Shares is used in calculating several metrics that
we use as supplemental financial measurements in the evaluation of
our business, none of which should be considered as an alternative
to, or more meaningful than, net income as an indicator of
operating performance.
Adjusted Diluted Shares for the periods indicated:
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Class A Common Stock -
Diluted(1)(2)
|
102,410,036
|
|
44,127,718
|
|
84,266,422
|
|
43,457,043
|
Class B Common
Stock
|
34,268,723
|
|
34,409,867
|
|
34,295,444
|
|
34,455,755
|
Adjusted Diluted
Shares
|
136,678,759
|
|
78,537,585
|
|
118,561,866
|
|
77,912,798
|
|
|
(1)
|
Includes dilutive
effect of Series A Convertible Preferred Stock issued on April 14,
2022 for the
three and six months ended June 30, 2022.
|
(2)
|
Does not include
potentially dilutive unvested restricted stock units and
performance units for the
three and six months ended June 30, 2021.
|
II. Adjusted EBITDAX
The non-GAAP financial measure of Adjusted EBITDAX (as defined
below), as calculated by us below, is intended to provide readers
with meaningful information that supplements our financial
statements prepared in accordance with GAAP. Further, this non-GAAP
financial measure should only be considered in conjunction with
financial statements and disclosures prepared in accordance with
GAAP and should not be considered in isolation or as a substitute
for GAAP measures, such as net income or loss, operating income or
loss or any other GAAP measure of financial position or results of
operations. Adjusted EBITDAX is presented herein and reconciled
from the GAAP measure of net income (loss) because of its wide
acceptance by the investment community as a financial
indicator.
We define "Adjusted EBITDAX" as net income (loss) plus, when
applicable, accretion of asset retirement obligations;
depreciation, depletion and amortization; interest expense, net;
transaction costs; (gain) on sale of oil and gas properties;
exploration expense; unrealized (gain) loss on derivative
contracts; stock-based compensation (non-cash and expected to
settle in cash); and income tax expense (benefit).
Our Adjusted EBITDAX measure provides additional information
that may be used to better understand our operations. Adjusted
EBITDAX is one of several metrics that we use as a supplemental
financial measurement in the evaluation of our business and should
not be considered as an alternative to, or more meaningful than,
net income (loss) as an indicator of operating performance. Certain
items excluded from Adjusted EBITDAX are significant components in
understanding and assessing a company's financial performance, such
as a company's cost of capital and tax structure, as well as the
historic cost of depreciable and depletable assets. Adjusted
EBITDAX, as used by us, may not be comparable to similarly titled
measures reported by other companies. We believe that Adjusted
EBITDAX is a widely followed measure of operating performance and
is one of many metrics used by our management team and by other
users of our consolidated financial statements. For example,
Adjusted EBITDAX can be used to assess our operating performance
and return on capital in comparison to other independent
exploration and production companies without regard to financial or
capital structure and to assess the financial performance of our
assets and our company without regard to capital structure or
historical cost basis.
The following table provides a reconciliation of Net income
(loss) to Adjusted EBITDAX for the periods indicated:
($000s)
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net income
(loss)
|
$
218,025
|
|
$
(15,831)
|
|
$
166,148
|
|
$
(26,387)
|
Accretion of asset
retirement obligations
|
708
|
|
303
|
|
1,105
|
|
593
|
Depreciation, depletion
and amortization
|
66,463
|
|
26,027
|
|
100,789
|
|
50,434
|
Interest expense,
net
|
16,625
|
|
2,401
|
|
21,943
|
|
4,618
|
Transaction
costs
|
(402)
|
|
507
|
|
10,340
|
|
2,613
|
(Gain) on sale of oil
and gas properties
|
—
|
|
(348)
|
|
—
|
|
(348)
|
Exploration
expense
|
—
|
|
30
|
|
92
|
|
30
|
Unrealized (gain) loss
on derivative contracts
|
(29,192)
|
|
36,653
|
|
90,602
|
|
59,011
|
Stock based
compensation(1)
|
5,960
|
|
4,412
|
|
11,790
|
|
7,741
|
Income tax expense
(benefit)
|
22,688
|
|
(486)
|
|
21,155
|
|
(794)
|
Adjusted
EBITDAX
|
$
300,875
|
|
$
53,668
|
|
$
423,964
|
|
$
97,511
|
|
|
|
|
|
|
|
|
(1)
|
Consists of expense for
non-cash equity awards and cash-based liability awards that are
expected to be settled
in cash. On February 9, 2022, cash-based liability awards were
settled in the amount of $8.1 million. Stock-based
compensation is included in General and administrative expense in
the Condensed Consolidated Statements of
Operations.
|
III. Adjusted Net Income
We define "Adjusted Net Income" as net income (loss) plus, when
applicable, unrealized gain (loss) on derivative contracts; (gain)
on sale of oil and gas properties; transaction costs; and the
associated changes in estimated income tax.
Our Adjusted Net Income is a non-GAAP financial measure that
provides additional information that may be used to further
understand our operations. Adjusted Net Income is one of several
metrics that we use as a supplemental financial measurement in the
evaluation of our business and should not be considered as an
alternative to, or more meaningful than, net income (loss) as an
indicator of operating performance. Certain items excluded from
Adjusted Net Income are significant components in understanding and
assessing a company's financial performance, such as a company's
cost of capital and tax structure, as well as the historic cost of
depreciable and depletable assets. Adjusted Net Income, as used by
us, may not be comparable to similarly titled measures reported by
other companies. We believe that Adjusted Net Income is a widely
followed measure of operating performance and is one of many
metrics used by our management team and by other users of our
consolidated financial statements. For example, Adjusted Net Income
can be used to assess our operating performance and return on
capital in comparison to other independent exploration and
production companies without regard to financial or capital
structure and to assess the financial performance of our assets and
our company without regard to capital structure or historical cost
basis.
The following table provides a reconciliation of Net income
(loss) to Adjusted Net Income for the periods indicated:
($000s, except share
and per share data)
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net income
(loss)
|
$
218,025
|
|
$
(15,831)
|
|
$
166,148
|
|
$
(26,387)
|
Unrealized gain (loss)
on derivative contracts
|
(29,192)
|
|
36,653
|
|
90,602
|
|
59,011
|
(Gain) on sale of oil
and gas properties
|
—
|
|
(348)
|
|
—
|
|
(348)
|
Transaction
costs
|
(402)
|
|
507
|
|
10,340
|
|
2,613
|
Income tax effect of
the above
|
(12,705)
|
|
(700)
|
|
(15,190)
|
|
(1,166)
|
Adjusted Net
Income
|
$
175,726
|
|
$
20,281
|
|
$
251,900
|
|
$
33,723
|
Adjusted Diluted
Shares(1)
|
136,678,759
|
|
78,537,585
|
|
118,561,866
|
|
77,912,798
|
Adjusted Net Income
per Adjusted Diluted Share
|
$
1.29
|
|
$
0.26
|
|
$
2.12
|
|
$
0.43
|
|
|
|
|
|
|
|
|
(1)
|
Does not include
potentially dilutive unvested restricted stock units and
performance units for the three and six months
ended June 30, 2021.
|
IV. Free Cash Flow
Free Cash Flow is a non-GAAP financial measure that we use as an
indicator of our ability to fund our development activities and
reduce our leverage. We define Free Cash Flow as Net cash provided
by operating activities; less (1) Settlement of asset retirement
obligations, Gain on sale of office and other equipment,
Amortization of deferred financing costs and Change in assets and
liabilities from the Condensed Consolidated Statements of Cash
Flows; plus (2) Transaction costs, Exploration expense and the
current portion of Income tax (expense) benefit from the Condensed
Consolidated Statements of Operations; plus (3) the liability
portion of stock-based compensation which is included in General
and administrative expense in the Condensed Consolidated Statements
of Operations; plus (4) the current portion of income tax (expense)
benefit from the Condensed Consolidated Statements of Operations;
less (5) Capital expenditures (accrual basis). Alternatively, Free
Cash Flow could be defined as Adjusted EBITDAX (defined above),
less interest expense, less accrual-based capital expenditures.
Management believes that Free Cash Flow, which measures our
ability to generate additional cash from our business operations,
is an important financial measure for use in evaluating the
Company's financial performance. Free Cash Flow should be
considered in addition to, rather than as a substitute for,
consolidated net income as a measure of our performance and net
cash provided by operating activities as a measure of our
liquidity.
Free Cash Flow for the periods indicated:
($000s)
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Net cash provided by
operating activities
|
|
$ 254,675
|
|
$
55,144
|
|
$ 337,677
|
|
$
93,444
|
Adjustments - Condensed
Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
Settlement of asset
retirement obligations
|
|
274
|
|
38
|
|
475
|
|
53
|
Gain on sale of office
and other equipment
|
|
24
|
|
114
|
|
46
|
|
114
|
Amortization of
deferred financing costs
|
|
(1,442)
|
|
(198)
|
|
(2,069)
|
|
(339)
|
Change in assets and
liabilities
|
|
27,039
|
|
(4,368)
|
|
48,055
|
|
(3,022)
|
Adjustments - Condensed
Consolidated Statements of Operations
|
|
|
|
|
|
|
|
|
Transaction
costs
|
|
(402)
|
|
507
|
|
10,340
|
|
2,613
|
Exploration
expense
|
|
—
|
|
30
|
|
92
|
|
30
|
Stock-based
compensation - liability portion
|
|
3,267
|
|
—
|
|
6,796
|
|
—
|
Income tax expense -
current
|
|
815
|
|
—
|
|
609
|
|
—
|
Capital expenditures
(accrual basis)
|
|
(119,451)
|
|
(22,820)
|
|
(201,560)
|
|
(32,621)
|
Free Cash
Flow
|
|
$
164,799
|
|
$
28,447
|
|
$
200,461
|
|
$
60,272
|
|
|
|
|
|
|
|
|
|
Alternate calculation of Free Cash Flow for the periods
indicated:
($000s)
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2022
|
|
2021
|
|
2022
|
|
2021
|
Adjusted
EBITDAX
|
$ 300,875
|
|
$
53,668
|
|
$ 423,964
|
|
$
97,511
|
Interest expense,
net
|
(16,625)
|
|
(2,401)
|
|
(21,943)
|
|
(4,618)
|
Capital expenditures
(accrual basis)
|
(119,451)
|
|
(22,820)
|
|
(201,560)
|
|
(32,621)
|
Free Cash
Flow
|
$
164,799
|
|
$
28,447
|
|
$
200,461
|
|
$
60,272
|
|
|
|
|
|
|
|
|
V. Operating Margin per Boe and Operating Margin per Boe
(including realized hedge settlements)
Operating Margin per Boe is a non-GAAP financial measure that we
use to evaluate our operating performance on a per Boe basis. We
define Operating Margin per Boe as average realized price per Boe
minus lease operating expense per BOE and production and ad valorem
taxes per Boe. Operating Margin per Boe (including realized hedge
settlements) is calculated as the sum of Operating Margin per Boe
and Realized hedge settlements per Boe.
Our Operating Margin per Boe measure provides additional
information that may be used to further understand our operating
margins. We use Operating Margin per Boe as a supplemental
financial measurement in the evaluation of our operational
performance. We believe that investors benefit from having access
to the same financial measures that our management uses in
evaluating our results. Operating Margin per Boe should not be
considered as an alternative to, or more meaningful than, net
income (loss) as an indicator of operating performance. Operating
Margin per Boe, as used by us, may not be comparable to similarly
titled measures reported by other companies.
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SOURCE Earthstone Energy, Inc.