DENVER, CO–(Marketwired – January 07, 2016) – Synergy Resources Corporation (NYSE MKT: SYRG), a U.S. oil and gas exploration and production company focused on the Greater Wattenberg Area of the Denver-Julesburg Basin, reported its fiscal first quarter results for the period ended November 30, 2015.
Fiscal First Quarter 2016 Financial Highlights
- Revenues were $26.1 million
- Net Loss was $122.3 million or $(1.14) per diluted share in the quarter which includes a full cost ceiling impairment charge of $125.2 million or $(1.10) per diluted share
- Adjusted EBITDA of $11.9 million (see further discussion regarding the presentation of adjusted EBITDA in “About Non-GAAP Financial Measures” below)
- As of November 30, 2015, the Company’s cash and equivalents totaled $80.7 million, $85.0 million of availability on its credit facility, and $166 million of liquidity
- Net oil and natural gas production increased 27% to 959,176 barrels of oil equivalent (BOE), as compared to 753,312 BOE the same year ago quarter, and averaged 10,540 BOE per day (BOE/d) versus an average of 8,278 BOE/d in the same period a year ago
- 5 net operated wells were brought on line
- Closed an acquisition in the Wattenberg Field comprised of 4,300 net acres
Fiscal First Quarter 2016 Financial Results
Revenues in the first fiscal quarter of 2016 were $26.1 million, down from $42.5 million in the same year ago quarter. Higher year-over-year production volumes were more than offset by lower commodity prices. In the first quarter of fiscal 2016, the average realized price per barrel of oil was $36.72 versus a realized price per barrel of $73.69 in the year ago quarter, and the average realized price per mcf for natural gas was $2.49 compared to $4.74 in the first quarter of fiscal 2015. The fiscal 2016 first quarter’s net loss totaled $122.3 million or $(1.14) per diluted share compared to a net income of $21.2 million or $0.26 per diluted share in the year ago quarter. The first quarter 2016 net loss includes a full cost ceiling impairment charge of $125.2 million. Considering the effect of the income tax provision, which was impacted by the related valuation allowance change, the impairment charge reduced diluted earnings per share by $1.10. Adjusted EBITDA in the first quarter was $11.9 million as compared to $33.4 million in the year ago quarter.
Under the full cost ceiling impairment test, the value of the Company’s reserves is calculated using the average of the published spot prices for WTI oil (per barrel) as of the first day of each of the previous twelve months, as well as, the average of the published spot prices for Henry Hub (per MMBtu) as of the first day of each of the previous twelve months, each adjusted by lease or field for quality, transportation fees and regional price differentials. The November 30, 2015 ceiling test used average realized prices of $42.54 per barrel and $2.77 per Mcf, which were lower than the August 31, 2015 prices of $53.27 per barrel and $3.28 per Mcf, a decrease of approximately 20% and 16%, respectively. Using these prices, the Company’s net capitalized costs for oil and natural gas properties exceeded the ceiling amount by $125.2 million at November 30, 2015, resulting in immediate recognition of a ceiling test impairment.
The following tables present certain per unit metrics that compare results of the corresponding quarterly reporting periods:
|Net Production and Sales Prices Comparison||Three Months Ended||% Change|
|11/30/2015||8/31/2015||11/30/2014||Sequential Quarter||Qtr.-over- Qtr.|
|Crude Oil (Bbls)||543||642||467||(15)%||16%|
|Natural Gas (Mcf)||2,500||2,180||1,720||15%||45%|
|Sales Volumes: (BOE)||959||1,005||753||(5)%||27%|
Average Daily Volumes
|Daily Production (BOE/day)||10,540||10,925||8,278||(4)%||27%|
Product Price Received
|Crude Oil ($/Bbl)||$36.72||$42.21||$73.69||(13)%||(50)%|
|Natural Gas ($/Mcf)||$2.49||$2.51||$4.74||(1)%||(47)%|
|Unit Cost Analysis||Three Months Ended||% Change|
|11/30/2015||8/31/2015||11/30/2014||Sequential Quarter||Qtr.-over- Qtr.|
|Average Realized Price ($ BOE)||$27.25||$32.39||$56.47||(16)%||(52)%|
|Lease Operating Expense ($ BOE)||3.97||4.69||4.04||(15)%||(2)%|
|Production Tax ($ BOE)||2.55||2.76||5.55||(8)%||(54)%|
|DD&A Expense ($ BOE)||15.30||17.42||21.84||(12)%||(30)%|
|Non-Cash G&A Expense ($ BOE)||7.59||4.22||0.89||80%||753%|
|Cash G&A Expense ($ BOE)||7.00||2.66||4.57||163%||53%|
|Total G&A Expense ($ BOE)||14.59||6.88||5.46||112%||167%|
During the three months ended November 30, 2015, the Company completed 5 wells, including 4 mid length lateral wells (7,000 ft), and drilled 8 standard length lateral wells (4,000 ft). Production from the four mid length lateral wells on the Bestway pad averaged 612 BOE/day during their first 30 days, fitting a 550 mboe EUR model. The completed well costs on the Bestway pad are estimated to be less than $3.5 million each. Eight standard length lateral wells on the Wind pad were completed in December and continue to clean up during flowback.
In December, after drilling four standard length laterals on the Vista pad, the Company terminated its existing rig contract and subsequently signed a six month drilling contract on a new build rig that is expected to be more efficient and at a lower day rate compared to the previous contract. The new build rig will be mobilized onto the Vista pad mid-January 2016 to drill the remaining six wells.
During fiscal 2015, the Company entered into crude oil transportation agreements with three counterparties and a volume commitment to a third party refiner. Deliveries under two of the transportation agreements commenced during the quarter ended November 30, 2015. Deliveries under the third transportation agreement are not expected to commence until late 2016. The third party refinery volume commitment expired on December 31, 2015. Pursuant to these agreements, Synergy must deliver specific amounts of crude oil either from its own production or from oil acquired from third parties. During the quarter ended November 30, 2015, the Company incurred a transportation deficiency charge of $1.5 million as it did not meet all of the obligations during the quarter, and the Company estimates it could incur an additional $1.0 million deficiency charge in the month of December 2015. As of January 1, 2016, the Company’s current production exceeds its delivery obligations, subsequent to the expiration of the volume commitment to the third party refiner.
Lynn Peterson, CEO, of Synergy Resources commented, “In the current low commodity price environment, preservation of the balance sheet is a primary goal, and we remain in a net cash position at quarter end with $166 million of liquidity. Without a doubt, the current economic environment within our industry presents many challenges, and we continue to prepare for the possibility of “lower for longer” commodity prices. The impairment charge incurred for the period is a direct reflection of lower commodity prices and is not unique to our Company. In spite of these challenges, our low leveraged balance sheet allows us to look at this period of industry uncertainty as an opportunity to expand our leasehold position and grow our Company. Our team continues to evaluate assets in the core Wattenberg area and our ongoing drilling program contemplates mostly mid and extended reach wells during the second half of fiscal 2016, which is expected to provide increased efficiencies and improve our operating metrics.”