See feature articles below: Approach Resources Inc. (NASDAQ: AREX)
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Report For: Approach Resources Inc. (NASDAQ: AREX)
Shares of AREX are up 14% today at $2.90 with average trading volume.
Approach Resources Inc. is an independent energy company focused on the exploration, development, production and acquisition of unconventional oil and natural gas reserves in the Midland Basin of the greater Permian Basin in West Texas.
Approach Resources Inc. (AREX) reported results for first quarter 2016. Highlights for first quarter 2016 include:
Production was 12.8 MBoe/d, a 10% decrease from the prior-year quarter
Revenues totaled $17.6 million, EBITDAX (non-GAAP) was $8.7 million
Adjusted net loss (non-GAAP) was $13.0 million, or $0.32 per diluted share
Per-unit cash operating expenses (non-GAAP) decreased 13% from the prior-year quarter to $10.74 per Boe
Drilled four horizontal wells during first quarter, and plan to resume completion activities during second quarter 2016
Borrowing base set at $325 million following Spring redetermination
Adjusted net loss, EBITDAX and cash operating expenses are non-GAAP measures. See “Supplemental Non-GAAP Financial and Other Measures” below for our definitions and reconciliations of adjusted net loss and EBITDAX to net loss and cash operating expenses to operating expenses.
Management Comment
Ross Craft, Approach’s Chairman and CEO commented, “Commodity prices continued to weigh heavily on the entire North American oil and gas sector during the first quarter, as evidenced by numerous recent bankruptcy and restructuring announcements. However, after falling to new cycle lows in early 2016, I believe we may have reached an important turning point in crude oil markets. Further declines in Lower-48 production and ongoing OPEC dysfunction have begun to drive a market rebalancing. During first quarter 2016 we drilled our first wells since August 2015 and are now preparing to complete at least two horizontal Wolfcamp wells in the second quarter. Importantly, our recently concluded borrowing base redetermination provides us with meaningful financial flexibility and adequate liquidity to execute on our 2016 plans.”
First Quarter 2016 Results
Production for first quarter 2016 totaled 1,165 MBoe (12.8 MBoe/d), made up of 31% oil, 31% NGLs and 38% natural gas. Average realized commodity prices for first quarter 2016, before the effect of commodity derivatives, were $27.10 per Bbl of oil, $8.90 per Bbl of NGLs and $1.76 per Mcf of natural gas. Our average realized price, including the effect of commodity derivatives, was $18.12 per Boe for first quarter 2016.
Net loss for first quarter 2016 was $13.7 million, or $0.33 per diluted share, on revenues of $17.6 million. Net loss for first quarter 2016 also included an unrealized loss on commodity derivatives of $1.0 million and a realized gain on commodity derivatives of $3.5 million. Excluding the unrealized loss on commodity derivatives, adjusted net loss (non-GAAP) for first quarter 2016 was $13.0 million, or $0.32 per diluted share. EBITDAX (non-GAAP) for first quarter 2016 was $8.7 million, or $0.21 per diluted share. See “Supplemental Non-GAAP Financial and Other Measures” below for our reconciliation of adjusted net loss and EBITDAX to net loss.
Lease operating expenses averaged $5.45 per Boe. Production and ad valorem taxes averaged $1.43 per Boe, or 9.4% of oil, NGL and gas sales. Exploration costs were $0.49 per Boe. Cash general and administrative costs averaged $3.86 per Boe. Depletion, depreciation and amortization expense averaged $17.36 per Boe. Interest expense totaled $6.3 million.
Operations Update
During first quarter 2016, we drilled a total of four horizontal wells but did not complete any horizontal wells. Of these, two wells were drilled to the Wolfcamp A bench and two wells were drilled to the Wolfcamp C bench. At March 31, 2016, we had nine horizontal wells waiting on completion. We plan to complete two wells in second quarter 2016, and expect second quarter production to average around 12.3 MBoe/d.
Capital expenditures incurred during first quarter 2016 totaled $4.9 million and included $4.0 million for drilling activities and $0.9 million for infrastructure projects and equipment.
Liquidity Update
At March 31, 2016, we had a $1 billion revolving credit facility in place, with a borrowing base and lender commitment amount of $450 million. Our liquidity and long-term debt-to-capital ratio were approximately $178.5 million and 45.4%, respectively. See “Supplemental Non-GAAP Financial and Other Measures” below for our definitions and calculation of liquidity and long-term debt-to-capital.
Following the Spring redetermination in April, our lenders set the borrowing base and lender commitment amount at $325 million, while approving a number of amendments to our credit agreement, including a reduction of the interest coverage covenant and the addition of a $150 million basket to allow for new junior secured debt. Importantly, we believe this outcome provides the company with adequate near-term liquidity and significant flexibility to continue working to de-lever the balance sheet and position ourselves for a return to growth once prices recover.
Source – Company Press Release
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