MIDLAND, Texas, May 9, 2019 /PRNewswire/ -- Legacy Reserves Inc. ("Legacy") (NASDAQ:LGCY) today announced 2019 first quarter results including the following highlights:
- Generated quarterly oil production of 17,922 Bbls/d, a 4% increase relative to Q1'18;
- Reduced lease operating expense by 9% quarter-over-quarter; and
- Generated net loss of $78.4 million and adjusted EBITDA of $63.9 million.
As previously announced, Legacy is evaluating and exploring potential strategic alternatives. These alternatives include, among others, a sale or other business combination transaction, sales of assets, financing transactions, or some combination of these.
Financial and Operating Results - Three-Month Period Ended March 31, 2019 Compared to Three-Month Period Ended March 31, 2018
- Production increased 1% to 46,389 Boe/d from 46,078 Boe/d primarily due to additional oil production from our Permian Basin horizontal drilling program. This was partially offset by natural production declines.
- Average realized price, excluding net cash settlements from commodity derivatives, decreased 14% to $28.38 per Boe in 2019 from $33.15 per Boe in 2018 driven by a decrease in average realized price due to a decrease in the average West Texas Intermediate ("WTI") crude price of $8.09 per Bbl coupled with the widening Mid-Cush and other regional differentials, and a decrease in the realized NGL price of 44% to $0.45 per gallon in 2019 from $0.80 per gallon in 2018. These decreases were partially offset by an average realized natural gas price increase of 1% to $2.60 per Mcf in 2019 from $2.57 per Mcf in 2018.
- Production expenses, excluding ad valorem taxes, were relatively flat at $45.0 million in 2019, a decrease from $45.6 million in 2018.
- General and administrative expenses, excluding unit-based Long-Term Incentive Plan ("LTIP") compensation expense, increased to $12.4 million in 2019 from $11.3 million in 2018 due to a $0.9 million increase in costs related to our strategic alternative process.
- Cash settlements received on our commodity derivatives during 2019 were $9.6 million compared to $2.8 million paid in 2018. The increase in cash settlements is a result of lower commodity prices.
- Total development capital expenditures decreased to $39.4 million in 2019 from $59.7 million in 2018. The 2019 activity was in line with our previously announced capital budget and was primarily related to our Permian horizontal drilling program.
Quarterly Report on Form 10-Q
Financial results contained herein are preliminary and subject to the final, unaudited financial statements and related footnotes included in Legacy's Form 10-Q which will be filed on or about May 10, 2019.
About Legacy Reserves Inc.
Legacy is an independent energy company engaged in the development, production and acquisition of oil and natural gas properties in the United States. Its current operations are focused on the horizontal development of unconventional plays in the Permian Basin and the cost-efficient management of shallow-decline oil and natural gas wells in the Permian Basin, East Texas, Rocky Mountain and Mid-Continent regions. Additional information is available at www.LegacyReserves.com.
LEGACY RESERVES INC. | |||||
SELECTED FINANCIAL AND OPERATING DATA | |||||
Three Months Ended | |||||
March 31, | |||||
2019 | 2018 | ||||
(In thousands, except per unit data) | |||||
Revenues: | |||||
Oil sales | $ | 77,761 | $ | 93,411 | |
Natural gas liquids (NGL) sales | 4,515 | 7,396 | |||
Natural gas sales | 36,221 | 36,672 | |||
Total revenue | $ | 118,497 | $ | 137,479 | |
Expenses: | |||||
Oil and natural gas production, excluding ad valorem taxes | $ | 44,964 | $ | 45,585 | |
Ad valorem taxes | 2,513 | 2,382 | |||
Total oil and natural gas production | $ | 47,477 | $ | 47,967 | |
Production and other taxes | $ | 6,149 | $ | 7,326 | |
General and administrative, excluding transaction costs and LTIP | $ | 9,705 | $ | 9,502 | |
Transaction costs | 2,669 | 1,782 | |||
LTIP expense | 4,156 | 12,806 | |||
Total general and administrative | $ | 16,530 | $ | 24,090 | |
Depletion, depreciation, amortization and accretion | $ | 42,549 | $ | 36,547 | |
Commodity derivative cash settlements: | |||||
Oil derivative cash settlements (paid) received | $ | 7,045 | $ | (4,894) | |
Natural gas derivative cash settlements received | $ | 2,534 | $ | 2,099 | |
Production: | |||||
Oil (MBbls) | 1,613 | 1,547 | |||
Natural gas liquids (MGal) | 10,020 | 9,244 | |||
Natural gas (MMcf) | 13,938 | 14,280 | |||
Total (MBoe) | 4,175 | 4,147 | |||
Average daily production (Boe/d) | 46,389 | 46,078 | |||
Average sales price per unit (excluding derivative cash settlements): | |||||
Oil price (per Bbl) | $ | 48.21 | $ | 60.38 | |
Natural gas liquids price (per Gal) | $ | 0.45 | $ | 0.80 | |
Natural gas price (per Mcf) | $ | 2.60 | $ | 2.57 | |
Combined (per Boe) | $ | 28.38 | $ | 33.15 | |
Average sales price per unit (including derivative cash settlements): | |||||
Oil price (per Bbl) | $ | 52.58 | $ | 57.22 | |
Natural gas liquids price (per Gal) | $ | 0.45 | $ | 0.80 | |
Natural gas price (per Mcf) | $ | 2.78 | $ | 2.72 | |
Combined (per Boe) | $ | 30.68 | $ | 32.48 | |
Average WTI oil spot price (per Bbl) | $ | 54.82 | $ | 62.91 | |
Average Henry Hub natural gas index price (per MMbtu) | $ | 2.92 | $ | 3.08 | |
Average unit costs per Boe: | |||||
Oil and natural gas production, excluding ad valorem taxes | $ | 10.77 | $ | 10.99 | |
Ad valorem taxes | $ | 0.60 | $ | 0.57 | |
Production and other taxes | $ | 1.47 | $ | 1.77 | |
General and administrative excluding transaction costs and LTIP | $ | 2.32 | $ | 2.29 | |
Total general and administrative | $ | 3.96 | $ | 5.81 | |
Depletion, depreciation, amortization and accretion | $ | 10.19 | $ | 8.81 | |
LEGACY RESERVES INC. | |||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||
(UNAUDITED) | |||||
Three Months Ended | |||||
March 31, | |||||
2019 | 2018 | ||||
(In thousands, except per share / unit data) | |||||
Revenues: | |||||
Oil sales | $ | 77,761 | $ | 93,411 | |
Natural gas liquids (NGL) sales | 4,515 | 7,396 | |||
Natural gas sales | 36,221 | 36,672 | |||
Total revenues | 118,497 | 137,479 | |||
Expenses: | |||||
Oil and natural gas production | 47,477 | 47,967 | |||
Production and other taxes | 6,149 | 7,326 | |||
General and administrative | 16,530 | 24,090 | |||
Depletion, depreciation, amortization and accretion | 42,549 | 36,547 | |||
Impairment of long-lived assets | 7,398 | — | |||
(Gains) losses on disposal of assets | 1,034 | (20,395) | |||
Total expenses | 121,137 | 95,535 | |||
Operating income (loss) | (2,640) | 41,944 | |||
Other income (expense): | |||||
Interest income | 6 | 12 | |||
Interest expense | (37,119) | (27,368) | |||
Gain on extinguishment of debt | 13,105 | 51,693 | |||
Equity in income (loss) of equity method investees | — | 17 | |||
Net gains (losses) on commodity derivatives | (51,460) | (1,704) | |||
Other | (270) | 275 | |||
Loss before income taxes | (78,378) | 64,869 | |||
Income tax expense | — | (487) | |||
Net loss | $ | (78,378) | $ | 64,382 | |
Loss per share / unit - basic & diluted | $ | (0.70) | $ | 0.62 | |
Weighted average number of shares / units used in computing net loss per share / unit - | |||||
Basic | 111,225 | 103,994 | |||
Diluted | 111,225 | 104,301 | |||
LEGACY RESERVES INC. | ||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||
(UNAUDITED) | ||||||
ASSETS | ||||||
March 31, 2019 | December 31, 2018 | |||||
(In thousands) | ||||||
Current assets: | ||||||
Cash | $ | 1,491 | $ | 1,098 | ||
Accounts receivable, net: | ||||||
Oil and natural gas | 63,542 | 56,615 | ||||
Joint interest owners | 16,142 | 15,370 | ||||
Other | 283 | — | ||||
Fair value of derivatives | 9,708 | 66,662 | ||||
Prepaid expenses and other current assets | 13,335 | 11,347 | ||||
Total current assets | 104,501 | 151,092 | ||||
Oil and natural gas properties using the successful efforts method, at cost: | ||||||
Proved properties | 3,507,534 | 3,471,456 | ||||
Unproved properties | 19,680 | 19,863 | ||||
Accumulated depletion, depreciation, amortization and impairment | (2,221,624) | (2,177,006) | ||||
1,305,590 | 1,314,313 | |||||
Other property and equipment, net of accumulated depreciation and amortization of $2,432 and $2,464, respectively (Note 11) | 6,743 | 2,456 | ||||
Operating rights, net of amortization of $806 and $894, respectively | ||||||
Fair value of derivatives | — | 3,135 | ||||
Other assets | 3,304 | 3,935 | ||||
Total assets | $ | 1,420,138 | $ | 1,474,931 | ||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||
Current liabilities: | ||||||
Current debt, net | $ | 883,092 | $ | 856,646 | ||
Accounts payable | 28,658 | 11,227 | ||||
Accrued oil and natural gas liabilities | 76,284 | 98,886 | ||||
Fair value of derivatives | 2,207 | — | ||||
Asset retirement obligation | 3,938 | 3,938 | ||||
Other | 18,455 | 13,953 | ||||
Total current liabilities | 1,012,634 | 984,650 | ||||
Long-term debt, net | 416,328 | 432,923 | ||||
Asset retirement obligation | 250,867 | 248,796 | ||||
Fair value of derivatives | — | 550 | ||||
Other long-term liabilities | 3,190 | 643 | ||||
Total liabilities | 1,683,019 | 1,667,562 | ||||
Commitments and contingencies | ||||||
Partners' deficit | ||||||
Common stock, $0.01 par value; 945,000,000 shares authorized, 114,810,671 and 109,442,278 shares outstanding at March 31, 2019 and December 31, 2018, respectively | 1,148 | 1,094 | ||||
Additional paid-in capital | 32,571 | 24,752 | ||||
Accumulated deficit | (296,600) | (218,477) | ||||
Total stockholders' deficit | (262,881) | (192,631) | ||||
Total liabilities and stockholders' / partners' deficit | $ | 1,420,138 | $ | 1,474,931 | ||
Non-GAAP Financial Measures
"Adjusted EBITDA" is a non-generally accepted accounting principles ("non-GAAP") measure which may be used periodically by management when discussing our financial results with investors and analysts. The following presents a reconciliation of this non-GAAP financial measure to its nearest comparable generally accepted accounting principles ("GAAP") measure.
Adjusted EBITDA is presented as management believes it provides additional information concerning the performance of our business and is used by investors and financial analysts to analyze and compare our current operating and financial performance relative to past performance and such performances relative to that of other exploration and production companies. Adjusted EBITDA may not be comparable to similarly titled measures of other exploration and production companies because all companies may not calculate such measures in the same manner.
Certain factors impacting Adjusted EBITDA may be viewed as temporary, one-time in nature, or being offset by reserves from past performance or near-term future performance. Financial results are also driven by various factors that do not typically occur evenly throughout the year that are difficult to predict, including rig availability, weather, well performance, the timing of drilling and completions and near-term commodity price changes.
"Adjusted EBITDA" should not be considered as an alternative to GAAP measures, such as net income, operating income, cash flow from operating activities, or any other GAAP measure of financial performance.
The following table presents a reconciliation of our consolidated net loss to Adjusted EBITDA:
Three Months Ended | ||||||
March 31, | ||||||
2019 | 2018 | |||||
(In thousands) | ||||||
Net (loss) income | $ | (78,378) | $ | 64,382 | ||
Plus: | ||||||
Interest expense | $ | 37,119 | $ | 27,368 | ||
Gain on extinguishment of debt | (13,105) | (51,693) | ||||
Income tax expense | — | 487 | ||||
Depletion, depreciation, amortization and accretion | 42,549 | 36,547 | ||||
Impairment of long-lived assets | 7,398 | — | ||||
(Gain) loss on disposal of assets | 1,034 | (20,395) | ||||
Equity in (income) loss of equity method investees | — | (17) | ||||
Share-based compensation expense | 4,156 | 12,806 | ||||
Minimum payments received in excess of overriding royalty interest earned(1) | (543) | 522 | ||||
Net (gains) losses on commodity derivatives | 51,460 | 1,704 | ||||
Net cash settlements (paid) received on commodity derivatives | 9,579 | (2,795) | ||||
Transaction costs | 2,669 | 1,782 | ||||
Adjusted EBITDA | $ | 63,938 | $ | 70,698 | ||
(1) | Minimum payments received in excess of overriding royalties earned under a contractual agreement expiring December 31, 2019. The remaining amount of the minimum payments is recognized in net income. |
Commodity Derivative Contracts
We enter into oil and natural gas derivative contracts to help mitigate the risk of changing commodity prices. As of May 8, 2019, we had entered into derivative agreements to receive average prices as summarized below.