EX-99.1 3 newsreleaseq31820180930.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1
scenergyhza06.jpg

October 31, 2018

SRC Energy Inc. Reports Third Quarter 2018 Financial and Operating Results

Denver--(GlobeNewswire - 10/31/2018) -- 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 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 Volumes
9/30/2018
 
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.


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 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 accretion
45,188

 
33,740

 
124,146

 
73,396

Stock-based compensation
3,405

 
3,030

 
9,347

 
8,390

Mark-to-market of commodity derivative contracts:
 
 
 
 
 
 
 
Total gain on commodity derivatives contracts
8,529

 
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 expense
8,918

 
—

 
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)
 
 
 
 
ASSETS
September 30, 2018
 
December 31, 2017
Current assets:
 
 
 
Cash and cash equivalents
$
19,236

 
$
48,772

Other current assets
152,467

 
111,263

Total current assets
171,703

 
160,035

 
 
 
 
Oil and gas properties and other equipment
2,362,919

 
1,876,576

Goodwill
40,711

 
40,711

Other assets
3,599

 
2,242

 
 
 
 
Total assets
$
2,578,932

 
$
2,079,564

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Current liabilities
353,077

 
202,307

 
 
 
 
Revolving credit facility
115,000

 
—

Notes payable, net of issuance costs
539,050

 
538,186

Asset retirement obligations
48,951

 
28,376

Other liabilities
22,055

 
2,261

Total liabilities
1,078,133

 
771,130

 
 
 
 
Shareholders' equity:
 
 
 
Common stock and paid-in capital
1,488,831

 
1,474,514

Retained earnings (deficit)
11,968

 
(166,080
)
Total shareholders' equity
1,500,799

 
1,308,434

 
 
 
 
Total liabilities and shareholders' equity
$
2,578,932

 
$
2,079,564



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

 
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 accretion
124,146

 
73,396

Provision for deferred taxes
18,076

 
—

Other, non-cash items
19,454

 
2,767

Changes in operating assets and liabilities
3,830

 
(25,010
)
Net cash provided by operating activities
343,554

 
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 other
1,233

 
77,017

Net cash used in investing activities
(488,891
)
 
(306,437
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Equity financing activities
3,039

 
(517
)
Debt financing activities
112,762

 
148,628

Net cash provided by financing activities
115,801

 
148,111

 
 
 
 
Net decrease in cash, cash equivalents, and restricted cash
(29,536
)
 
(15,509
)
Cash, cash equivalents, and restricted cash at beginning of period
48,772

 
36,834

Cash, cash equivalents, and restricted cash at end of period
$
19,236

 
$
21,325



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

 
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 expenses
10,360

 
4,316

 
29,868

 
13,008

Transportation and gathering
1,994

 
838

 
5,729

 
1,136

Production taxes
12,824

 
10,083

 
41,325

 
21,013

Depreciation, depletion, and accretion
45,188

 
33,740

 
124,146

 
73,396

Unused commitment charge
—

 
—

 
—

 
669

General and administrative
10,685

 
8,484

 
29,691

 
24,289

Total expenses
81,051

 
57,461

 
230,759

 
133,511

 
 
 
 
 
 
 
 
Operating income
79,927

 
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 income
23

 
16

 
37

 
47

Other income
125

 
83

 
152

 
385

Total other income (expense)
(8,381
)
 
(2,284
)
 
(28,415
)
 
2,756

 
 
 
 
 
 
 
 
Income before income taxes
71,546

 
43,848

 
196,124

 
91,664

 
 
 
 
 
 
 
 
Income tax expense
8,918

 
—

 
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:
 
 
 
 
 
 
 
Basic
242,536,781

 
200,881,447

 
242,184,348

 
200,807,436

Diluted
243,560,046

 
201,460,915

 
243,207,058

 
201,326,129


Released 10/31/2018