Synergy Resources Reports Third Quarter 2016 Financial and Operating Results; Increases 2016 Production Guidance
DENVER, CO--(Marketwired - November 03, 2016) - Synergy Resources Corp. (NYSE MKT: SYRG) ("Synergy", the "Company", "we", "us" or "our"), a U.S. oil and gas exploration and production company focused on the Wattenberg Area of the Denver-Julesburg Basin, reported its third quarter financial and operating results for the period ended September 30, 2016 and increases 2016 production guidance.
Third Quarter 2016 Highlights
- Revenues were $26.2 million
- Net loss was $19.2 million or $(0.10) per diluted share in the quarter which includes a full cost ceiling impairment charge of $25.5 million or $(0.13) per diluted share
- Adjusted EBITDA of $18.3 million (see further discussion regarding the presentation of adjusted EBITDA in "About Non-GAAP Financial Measures" below)
- Increased production guidance range
Third Quarter 2016 Financial Results
The following tables present certain per unit metrics that compare results of the corresponding quarterly reporting periods:
| Net Production and Sales Prices Comparison | Three Months Ended | Nine Months Ended | ||||||||||
| Net Volumes | 9/30/2016 | 9/30/2015 | % Chg. | 9/30/2016 | 9/30/2015 | % Chg. | ||||||
| Crude Oil (MBbls) | 517 | 692 | (25)% | 1,552 | 1,521 | 2% | ||||||
| Natural Gas (MMcf) | 2,855 | 2,458 | 16% | 8,991 | 5,813 | 55% | ||||||
| Sales Volumes: (MBOE) | 993 | 1,102 | (10)% | 3,050 | 2,490 | 22% | ||||||
| Average Daily Volumes | ||||||||||||
| Daily Production (BOE/day) | 10,794 | 11,975 | (10)% | 11,133 | 9,119 | 22% | ||||||
| Product Price Received | ||||||||||||
| Crude Oil ($/Bbl) | $35.67 | $39.05 | (9)% | $31.47 | $42.16 | (25)% | ||||||
| Natural Gas ($/Mcf) | $2.73 | $2.59 | 5% | $2.18 | $2.84 | (23)% | ||||||
| Unit Cost Analysis | Three Months Ended | Nine Months Ended | ||||||||||
| 9/30/2016 | 9/30/2015 | % Chg. | 9/30/2016 | 9/30/2015 | % Chg. | |||||||
| Average Realized Price ($/BOE) | $26.42 | $30.30 | (13)% | $22.44 | $32.38 | (31)% | ||||||
| Lease Operating Expense ($/BOE) | 3.84 | 4.61 | (17)% | 4.90 | 5.20 | (6)% | ||||||
| Production Tax ($/BOE) | (1.47) | 2.81 | (152)% | 0.82 | 3.01 | (73)% | ||||||
| DD&A Expense ($/BOE) | 9.70 | 16.71 | (42)% | 10.82 | 19.37 | (44)% | ||||||
| Total G&A Expense ($/BOE) | 8.29 | 4.92 | 68% | 7.61 | 6.33 | 20% | ||||||
| Non-Cash G&A Expense ($/BOE) | 2.39 | 1.60 | 49% | 2.39 | 2.89 | (17)% | ||||||
| Cash G&A Expense ($/BOE) | 5.90 | 3.32 | 78% | 5.22 | 3.44 | 52% | ||||||
Revenues in the third quarter of 2016 were $26.2 million, down from $33.4 million in the same year ago quarter. Lower year-over-year production volumes, 10,794 BOE per day (BOE/d) versus 11,975 BOE/d in the same period a year ago, in addition to lower third quarter 2016 oil prices, led to this decline. In the third quarter of 2016, the average realized price per barrel of oil was $35.67 versus a realized price per barrel of $39.05 in the year ago quarter, and the average realized price per Mcf for natural gas was $2.73 compared to $2.59 in the third quarter of 2015.
During the three months ended September 30, 2016, the Company reduced its estimate for production taxes based on recent historical experience and additional information received during the period. Based on this analysis, the Company's accrual was reduced, resulting in an approximate $3.6 million reduction to our production taxes. Sequentially, third quarter general and administrative expense (G&A) was elevated by expenses incurred in support of Colorado oil and gas regulatory activities.
The 2016 third quarter net loss totaled $19.2 million or $(0.10) per diluted share compared to a net loss of $77.9 million or $(0.74) per diluted share in the year ago quarter. The third quarter 2016 net loss includes a non-cash, full cost ceiling impairment charge of $25.5 million which reduced diluted earnings per share by $0.13. The September 30, 2016 ceiling test used average realized prices of $31.95 per barrel and $2.21 per Mcf, which compares to June 30, 2016 prices of $33.82 per barrel of oil and $2.16 per Mcf of natural gas. This 6% decrease in oil price more than offset the 2% increase in natural gas prices, resulting in immediate recognition of a ceiling test impairment. Adjusted EBITDA in the third quarter was $18.3 million as compared to $31.4 million in the year ago quarter.
2016 Guidance Update
The Company's outlook for the fourth quarter of 2016 has been adjusted for the timing of the production volumes from the Fagerberg pad. Management now expects 2016 full-year production to be in the range of 11,100 - 11,300 BOE/day. The Company's outlook for capital expenditures for the full-year is expected to be $145 million.
Management Commentary
Lynn A. Peterson, Chairman and CEO of Synergy, commented, "With the majority of 2016 now behind us, we continue to capitalize on the strong foundation for growth that we have built at Synergy over the last twelve months. As we move through the balance of the year and into 2017, the Greeley Crescent Development Area will continue to be in the forefront of our activity. We believe that by maintaining our strong, flexible balance sheet and continuing to be thoughtful stewards of capital, Synergy will be in position to take advantage of unique growth opportunities. In addition, working very closely with our midstream partners and the local community throughout the planning process continues to be a winning strategy and helps to reduce operational risk for Synergy."
Conference Call
The Company will host a conference call on Friday, November 4, 2016 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, co-COOs Nick Spence and Mike Eberhard and Manager of IR John Richardson. A Q&A session will immediately follow the discussion of the results for the quarter. Please refer to Synergy's website at www.syrginfo.com for the current corporate presentation and other news and information.
Dial-in (Toll-Free): (877) 407-9122
Dial-in (International): (201) 493-6747
Replay Information:
Conference ID #: 411931
Replay Dial-In (Toll Free): 877-660-6853
Replay Dial-In (International): 201-612-7415
Expiration Date: 11/18/16
Webcast URL: http://syrginfo.equisolvewebcast.com/q3-2016
About Synergy Resources Corporation
Synergy Resources Corp. is a domestic oil and natural gas exploration and production company. Synergy's core area of operations is in the Wattenberg Field of the Denver-Julesburg Basin. The Denver-Julesburg Basin encompasses parts of Colorado, Wyoming, Kansas, and Nebraska. The Company's corporate offices are located in Denver, Colorado. More company news and information about Synergy is available at www.syrginfo.com.
Important Cautions Regarding Forward Looking Statements
This press release may contain 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" or similar expressions, indicates a forward-looking statement. These statements are subject to risks and uncertainties and are based on the beliefs and assumptions of management, and information currently available to management. Forward-looking statements in this release include statements regarding Synergy's future production, capital expenditures and projects. 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: 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 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.
Reconciliation of Non-GAAP Financial Measures
We define adjusted EBITDA as net loss adjusted to exclude the impact of the items set forth in the table below because these amounts 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 could also be used by investors to measure our ability to meet debt covenant requirements. The following table presents a reconciliation of adjusted EBITDA, a non-GAAP financial measure, to net loss, its nearest GAAP measure:
| SYNERGY RESOURCES CORPORATION | |||||||||||||||||||
| RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | |||||||||||||||||||
| (unaudited, in thousands) | |||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | ||||||||||||||||
| Adjusted EBITDA: | |||||||||||||||||||
| Net loss | $ | (19,241 | ) | $ | (77,921 | ) | $ | (224,490 | ) | $ | (83,502 | ) | |||||||
| Depreciation, depletion, and accretion | 9,635 | 18,417 | 33,001 | 48,231 | |||||||||||||||
| Full cost ceiling impairment | 25,453 | 96,340 | 215,223 | 99,340 | |||||||||||||||
| Income tax expense (benefit) | 5 | (10,520 | ) | 106 | (14,132 | ) | |||||||||||||
| Stock-based compensation | 2,374 | 1,849 | 7,285 | 7,688 | |||||||||||||||
| Mark-to-market of commodity derivative contracts: | |||||||||||||||||||
| Total loss (gain) on commodity derivatives contracts | (407 | ) | (6,619 | ) | 3,617 | (5,697 | ) | ||||||||||||
| Cash settlements on commodity derivative contracts | 486 | 10,178 | 5,137 | 28,343 | |||||||||||||||
| Cash premiums paid for commodity derivative contracts | - | (445 | ) | - | (4,562 | ) | |||||||||||||
| Interest expense (income) | (10 | ) | 72 | (179 | ) | 178 | |||||||||||||
| Adjusted EBITDA | $ | 18,295 | $ | 31,351 | $ | 39,700 | $ | 75,887 | |||||||||||
Consolidated Financial Statements
Condensed consolidated financial statements are included below. Additional financial information, including footnotes that are considered an integral part of the consolidated financial statements, can be found in Synergy's Quarterly Report on Form 10-Q for the period ended September 30, 2016, which is available at www.sec.gov.
| SYNERGY RESOURCES CORPORATION | ||||||||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||
| (unaudited; in thousands) | ||||||||||
| ASSETS | September 30, 2016 | December 31, 2015 | ||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 63,757 | $ | 66,499 | ||||||
| Other current assets | 43,129 | 33,199 | ||||||||
| Total current assets | 106,886 | 99,698 | ||||||||
| Oil and gas properties and other equipment | 842,608 | 526,847 | ||||||||
| Goodwill | 40,711 | 40,711 | ||||||||
| Other assets | 2,414 | 5,360 | ||||||||
| Total assets | $ | 992,619 | $ | 672,616 | ||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||||
| Current liabilities | 72,525 | 74,706 | ||||||||
| Revolving credit facility | - | 78,000 | ||||||||
| Notes payable, net of issuance costs | 75,424 | - | ||||||||
| Commodity derivative contracts | 80 | - | ||||||||
| Asset retirement obligations | 11,529 | 13,400 | ||||||||
| Total liabilities | 159,558 | 166,106 | ||||||||
| Shareholders' equity: | ||||||||||
| Common stock and paid-in capital | 1,146,822 | 595,781 | ||||||||
| Retained deficit | (313,761 | ) | (89,271 | ) | ||||||
| Total shareholders' equity | 833,061 | 506,510 | ||||||||
| Total liabilities and shareholders' equity | $ | 992,619 | $ | 672,616 | ||||||
| SYNERGY RESOURCES CORPORATION | ||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| (unaudited; in thousands) | ||||||||||
| Nine Months Ended September 30, | ||||||||||
| 2016 | 2015 | |||||||||
| Cash flows from operating activities: | ||||||||||
| Net loss | $ | (224,490 | ) | $ | (83,502 | ) | ||||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||||
| Depletion, depreciation, and accretion | 33,001 | 48,231 | ||||||||
| Full cost ceiling impairment | 215,223 | 99,340 | ||||||||
| Provision for deferred taxes | - | (38,097 | ) | |||||||
| Other, non-cash items | 16,039 | 25,772 | ||||||||
| Changes in operating assets and liabilities | (6,580 | ) | 18,009 | |||||||
| Net cash provided by operating activities | 33,193 | 69,753 | ||||||||
| Cash flows from investing activities: | ||||||||||
| Acquisition of oil and gas properties | (499,831 | ) | - | |||||||
| Well costs and other capital expenditures | (82,318 | ) | (110,224 | ) | ||||||
| Earnest money deposit | (18,244 | ) | (5,850 | ) | ||||||
| Proceeds from sales of oil and gas properties | 24,223 | 6,239 | ||||||||
| Net cash used in investing activities | (576,170 | ) | (109,835 | ) | ||||||
| Cash flows from financing activities: | ||||||||||
| Equity financing activities | 542,901 | 190,224 | ||||||||
| Debt financing activities | (2,666 | ) | (68,000 | ) | ||||||
| Net cash provided by financing activities | 540,235 | 122,224 | ||||||||
| Net increase (decrease) in cash and equivalents | (2,742 | ) | 82,142 | |||||||
| Cash and equivalents at beginning of period | 66,499 | 39,570 | ||||||||
| Cash and equivalents at end of period | 63,757 | 121,712 | ||||||||
| Short term investments | - | - | ||||||||
| Cash, equivalents and short term investments | $ | 63,757 | $ | 121,712 | ||||||
| SYNERGY RESOURCES CORPORATION | ||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
| (unaudited; in thousands, except share and per share data) | ||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||||
| Oil and gas revenues | $ | 26,234 | $ | 33,378 | $ | 68,454 | $ | 80,602 | ||||||||||
| Expenses: | ||||||||||||||||||
| Lease operating expenses | 3,819 | 5,078 | 14,963 | 12,944 | ||||||||||||||
| Production taxes | (1,461 | ) | 3,099 | 2,509 | 7,485 | |||||||||||||
| Depreciation, depletion, and accretion | 9,635 | 18,417 | 33,001 | 48,231 | ||||||||||||||
| Full cost ceiling impairment | 25,453 | 96,340 | 215,223 | 99,340 | ||||||||||||||
| Transportation commitment charge | 205 | - | 505 | - | ||||||||||||||
| General and administrative | 8,236 | 5,432 | 23,199 | 15,755 | ||||||||||||||
| Total expenses | 45,887 | 128,366 | 289,400 | 183,755 | ||||||||||||||
| Operating loss | (19,653 | ) | (94,988 | ) | (220,946 | ) | (103,153 | ) | ||||||||||
| Other income (expense): | ||||||||||||||||||
| Commodity derivatives gain (loss) | 407 | 6,619 | (3,617 | ) | 5,697 | |||||||||||||
| Interest income and (expense), net | 10 | (72 | ) | 179 | (178 | ) | ||||||||||||
| Total other income (expense) | 417 | 6,547 | (3,438 | ) | 5,519 | |||||||||||||
| Loss before income taxes | (19,236 | ) | (88,441 | ) | (224,384 | ) | (97,634 | ) | ||||||||||
| Income tax expense (benefit) | 5 | (10,520 | ) | 106 | (14,132 | ) | ||||||||||||
| Net loss | $ | (19,241 | ) | $ | (77,921 | ) | $ | (224,490 | ) | $ | (83,502 | ) | ||||||
| Net loss per common share: | ||||||||||||||||||
| Basic | $ | (0.10 | ) | $ | (0.74 | ) | $ | (1.36 | ) | $ | (0.82 | ) | ||||||
| Diluted | $ | (0.10 | ) | $ | (0.74 | ) | $ | (1.36 | ) | $ | (0.82 | ) | ||||||
| Weighted-average shares outstanding: | ||||||||||||||||||
| Basic | 200,515,555 | 105,100,849 | 164,771,544 | 102,329,504 | ||||||||||||||
| Diluted | 200,515,555 | 105,100,849 | 164,771,544 | 102,329,504 | ||||||||||||||
Contact
John Richardson
720-360-7794
