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 SRC Energy Inc. Reports Third Quarter 2018 Financial and Operating Results
   Wednesday, October 31, 2018 4:02:00 PM ET

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 Volumes9/30/2018 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 accretion45,188  33,740  124,146  73,396 
Stock-based compensation3,405  3,030  9,347  8,390 
Mark-to-market of commodity derivative contracts:       
Total gain on commodity derivatives contracts8,529  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 expense8,918    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)
    
ASSETSSeptember 30, 2018 December 31, 2017
Current assets:   
Cash and cash equivalents$19,236  $48,772 
Other current assets152,467  111,263 
Total current assets171,703  160,035 
    
Oil and gas properties and other equipment2,362,919  1,876,576 
Goodwill40,711  40,711 
Other assets3,599  2,242 
    
Total assets$2,578,932  $2,079,564 
    
LIABILITIES AND SHAREHOLDERS' EQUITY   
Current liabilities353,077  202,307 
    
Revolving credit facility115,000   
Notes payable, net of issuance costs539,050  538,186 
Asset retirement obligations48,951  28,376 
Other liabilities22,055  2,261 
Total liabilities1,078,133  771,130 
    
Shareholders' equity:   
Common stock and paid-in capital1,488,831  1,474,514 
Retained earnings (deficit)11,968  (166,080)
Total shareholders' equity1,500,799  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 accretion124,146  73,396 
Provision for deferred taxes18,076   
Other, non-cash items19,454  2,767 
Changes in operating assets and liabilities3,830  (25,010)
Net cash provided by operating activities343,554  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 other1,233  77,017 
Net cash used in investing activities(488,891) (306,437)
    
Cash flows from financing activities:   
Equity financing activities3,039  (517)
Debt financing activities112,762  148,628 
Net cash provided by financing activities115,801  148,111 
    
Net decrease in cash, cash equivalents, and restricted cash(29,536) (15,509)
Cash, cash equivalents, and restricted cash at beginning of period48,772  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 expenses10,360  4,316  29,868  13,008 
Transportation and gathering1,994  838  5,729  1,136 
Production taxes12,824  10,083  41,325  21,013 
Depreciation, depletion, and accretion45,188  33,740  124,146  73,396 
Unused commitment charge      669 
General and administrative10,685  8,484  29,691  24,289 
Total expenses81,051  57,461  230,759  133,511 
        
Operating income79,927  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 income23  16  37  47 
Other income125  83  152  385 
Total other income (expense)(8,381) (2,284) (28,415) 2,756 
        
Income before income taxes71,546  43,848  196,124  91,664 
        
Income tax expense8,918    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:       
Basic242,536,781  200,881,447  242,184,348  200,807,436 
Diluted243,560,046  201,460,915  243,207,058  201,326,129 

 

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

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

Source: SRC Energy Inc.


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