Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2018

The accompanying unaudited condensed consolidated financial statements of Lonestar Resources US Inc., and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. These financial statements and the notes thereto should be read in conjunction with our Annual Report on Form 10-K/A for the year ended December 31, 2017 (the “Form 10-K/A”). Unless indicated otherwise or the context requires, the terms “we,” “our,” “us,” “Company” or “Lonestar,” refer to Lonestar Resources US Inc. and its subsidiaries.

Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end, and the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the year. In management’s opinion, the accompanying unaudited condensed consolidated financial statements include all adjustments of a normal recurring nature necessary for a fair statement of our consolidated financial position as of March 31, 2018 and 2017, our consolidated results of operations for the three months ended March 31, 2018 and 2017, and our consolidated cash flows for the three months ended March 31, 2018 and 2017.

Reclassification

Reclassifications

Certain prior period amounts have been reclassified to conform to the current year presentation. Such reclassifications had no impact on our reported net (loss) income, current assets, current liabilities, total liabilities or stockholders’ equity.

Net (Loss) Income per Common Share

Basic net (loss) income per common share is computed by dividing the net (loss) income attributable to common stockholders by the weighted average number of common stock outstanding during the period. Diluted net (loss) income per common share is calculated in the same manner but includes the impact of potentially dilutive securities. Potentially dilutive securities consist of warrants, equity compensation awards and preferred equity shares under the as-converted method.

The following table is a reconciliation of the weighted average shares used in the basic and diluted net (loss) income per common share calculations for the periods indicated:

	Three Months Ended
	March 31,
(Unaudited)	2018		2017
Basic weighted average common shares outstanding		24,559,132		21,822,015
Potentially dilutive securities
Warrants		—		760,000
Restricted stock units		—		251,600
Diluted weighted average common shares outstanding		24,559,132		22,833,615

Basic weighted average common shares exclude shares of non-vested restricted stock. As these restricted shares vest, they will be included in the shares outstanding used to calculate basic net (loss) income per common share.

The following securities could potentially dilute earnings per share in the future, but were excluded from the computation of diluted net (loss) income per share, as their effect would have been antidilutive:

	Three Months Ended
	March 31,
(Unaudited)	2018		2017
Preferred stock		14,004,823		—
Warrants		760,000		—
Stock appreciation rights		690,000		—
Restricted stock units		448,709		—

Recent Accounting Pronouncements

Business Combinations. In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-01, Business Combinations: Clarifying the Definition of a Business (“ASU 2017-01”) in order to clarify the definition of a business as it relates to whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Effective January 1, 2018, the Company adopted ASU 2017-01, which will not have a material impact on the Company’s consolidated financial statements.

Leases. In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”), which will require organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. ASU 2016-02 is effective for the annual period beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. Entities must adopt the standard using a modified retrospective transition and apply the guidance to the earliest comparative period presented, with certain practical expedients that entities may elect to apply. Management is currently assessing the impact the adoption of ASU 2016-02 will have on our consolidated financial statements.

Revenue Recognition. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which created Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The objective of ASU 2014-09 is greater consistency and comparability across industries by using a five-step model to recognize revenue from customer contracts. Effective January 1, 2018, the Company adopted ASU 2014-09, using the modified retrospective method applied to contracts that were not completed as of January 1, 2018. Under the modified retrospective method, the Company recognizes the cumulative effect of initially applying ASU 2014-09 as an adjustment to the opening balance of accumulated deficit; however, no significant adjustment was required as a result of adopting the new standard. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606. The comparative information has not been restated and continues to be reported under historic accounting standards in effect for those periods. The impact of the adoption of ASU 2014-09 is expected to be immaterial to the Company’s net income on an ongoing basis. See Note 5. Revenue Recognition, for further discussion.