AUSTIN, Texas, Aug. 06, 2018 (GLOBE NEWSWIRE) — Jones Energy, Inc. (NYSE:JONE) (“Jones Energy” or “the Company”) today announced financial and operating results for the second quarter ended June 30, 2018 as well as initial production guidance for the third quarter of 2018.
- The Company has proactively initiated discussions with its unsecured noteholders. The aim of these liability management discussions is to achieve increased financial flexibility to optimize the value of Jones Energy’s core Merge and Western Anadarko Basin (“WAB”) assets for the benefit of all stakeholders.
- Jones Energy remains active in its evaluation of strategic alternatives as well as its pursuit of a DrillCo with an exclusive joint development partner in order to accelerate drilling and value creation.
- 2018 Merge wells brought online showing average peak IP30 of 183 boe/d per 1,000’ of lateral in the Meramec and 120 Boe/d per 1,000’ of lateral in the Woodford (3-stream).
- Net loss for the second quarter of 2018 of $46.9 million, or a net loss of $0.47 per share, non-GAAP adjusted net loss of $28.7 million, or an adjusted net loss of $0.29 per share, and EBITDAX of $29.7 million.1
Operational and Strategic Direction Update
On July 23, 2018, the Company named Carl Giesler as Chief Executive Officer. Mr. Giesler commented, “Thank you to our Board of Directors and the entire Jones Energy team for the warm welcome and, more importantly, the renewed energy, commitment, and focus.”
Mr. Giesler continued, “From an operating perspective, production remained strong through the second quarter of 2018. The Merge program now represents 41% of total company production, as compared to 8% this time last year. Additionally, our 2018 Merge HBP-focused drilling remains on-schedule to be completed in November. As part of ongoing operational improvements, we are tightening our landing-point selection and focusing on staying in zone. We are also enhancing casing and completion designs, refining flowback methodology and lifting techniques to minimize risk and optimize well results. We believe our contiguous position of 22,500 net acres with more than 500 identified operated drilling locations in the Merge will improve in value as we and other area operators test spacing and further refine completions and other processes.
“In the WAB, we have had consistently strong results in our core Cleveland drilling since improving our completions and flowback protocols in a cost-neutral manner late last year. Additionally, we are seeing early flowback from our first Marmaton well and other recent results from the Cleveland that highlight potential upside in the WAB. We continue to identify operated producing well-bores for lower-risk, low-capex, high-return, quick-payback work-over opportunities as well as shutting-in wells that have become uneconomic. We believe there exists significant value, which is sometimes overlooked, in our Western Anadarko asset as part of the greater Jones Energy portfolio.
“From a strategic perspective, we believe our cash position provides us a multi-year runway to drive value through executing on our core Merge and WAB assets. To extend that runway, management and the Board of Directors are focused on various initiatives to reduce our debt and increase our financial flexibility. We have taken several key steps in recent weeks and look forward to providing you additional updates as the DrillCo and other objectives are achieved.
“No doubt, we have a lot of work to do. Fortunately, we believe the quality of our people, the strength of our asset base and the improving commodity price environment will allow us to achieve our goals.”
Total operating revenues for the three months ended June 30, 2018 were $65.3 million as compared to $48.6 million for the three months ended June 30, 2017. Total revenues, including current period settlements of matured derivative contracts, were $52.7 million for the three months ended June 30, 2018 as compared to $66.5 million for the three months ended June 30, 2017.
Total operating expenses for the three months ended June 30, 2018 were $70.1 million as compared to $73.2 million for the three months ended June 30, 2017, excluding a one-time impairment charge of $148 million related to the Company’s sale of its Arkoma Basin properties. Lease Operating Expenses (“LOE”) for the three months ended June 30, 2018 totaled $11.6 million, or $5.10 per Boe, which is in line with the first quarter 2018 LOE which averaged $5.12 per Boe.
For the three months ended June 30, 2018, the Company reported a net loss of $46.9 million, of which a net loss of $43.5 million, or $0.47 per share, is attributable to common shareholders. This compares to a net loss of $134.0 million, of which a net loss of $84.2 million, or $1.28 per share, was attributable to common shareholders, for the three months ended June 30, 2017. Excluding, on a tax-adjusted basis, certain items that the Company does not view as indicative of its ongoing financial performance, the Company had adjusted net loss for the second quarter 2018 of $28.7 million, or adjusted net loss attributable to common shareholders of $0.29 per share, as compared to adjusted net income of $4.7 million, or net income of $0.10 per share for the three months ended June 30, 2017.
Earnings before interest, income taxes, depreciation, amortization, and exploration expense (“EBITDAX”) for the second quarter 2018 was $29.7 million. EBITDAX for the second quarter 2018 was negatively impacted by $12.5 million of hedging related losses. This compares to second quarter 2017 EBITDAX of $48.3 million.
Preferred Dividend Update
During the second quarter, the Company’s Board of Directors declared a contingent dividend on the Company’s 8.0% Series A Perpetual Convertible Preferred Stock (“Preferred Stock”), payable in Class A common stock on May 15, 2018 to holders of record as of May 1, 2018. It was announced on May 15, 2018 that the Dividend Valuation Price did not meet the required Floor Price2, and the dividend was not paid. The right to receive that dividend accrued for holders of Preferred Stock. As a reminder, the Company has exercised one of its five dividend holidays available to it without penalty.
Following the end of the 2018 second quarter, on July 17, 2018 the Company’s Board of Directors declared a contingent dividend on the Preferred Stock, payable in Class A common stock on August 15, 2018 to holders of record as of August 1, 2018 under the same terms, including the requirement that the Dividend Valuation Price of the stock must meet the required Floor Price in order to be paid. If the dividend is not paid, the right to receive the dividend will again accrue for holders of Preferred Stock and the Company will have exercised its second dividend holiday.
For the three months ended June 30, 2018, Jones Energy produced 2,272 MBoe, or 24,967 Boe/d, of which production from the Merge accounted for 41%. The table below provides a breakout of 2018 second quarter production.
|Three months ended June 30, 2018:|
|% of Total|
During the second quarter, the Company spud three wells and completed seven wells in the Merge. Of the wells completed and brought online, three were landed in the Meramec and four were in the Woodford. Merge production for the second quarter 2018 of 10.3 MBoe/d represents an increase of 51% over first quarter 2018 production of 6.8 Mboe/d. The Merge now represents 41% of total Company production.
Merge wells continue to show solid performance in the Company’s designated development areas of El Reno, Minco and Tuttle across Canadian and Grady Counties, OK. The average of wells drilled in the 2018 program in these areas have seen peak IP30 (3-stream) rates of 183 Boe/d per 1,000’ of lateral in the Meramec and 120 Boe/d per 1,000’ of lateral in the Woodford. Jones Energy continues to improve its operational performance by focusing on optimizing landing points, geo-steering and completion designs. Specifically, teams are fully integrating 3D seismic into their landing point selection and maximizing time in the most productive target interval as defined by proprietary data from our 40 operated wells in the Merge. Further, the Company has identified that certain casing designs, completion methods, flowback techniques and lift protocols correlate to improved performance. Regarding current completion designs, the Company has increased its stage count in the Meramec and improved cluster efficiency in both plays through limited entry perforating and effective fluid diversion. Jones Energy will continue to optimize all aspects of its early development efforts.
Jones Energy continues to progress its 2018 Merge HBP program and has one rig running on its Merge acreage. As of August 6, 2018, the Company has drilled 32 of its 38 operated sections and remains on-track to complete its HBP Merge program in November.
Western Anadarko Basin
Average daily net production was 13.5 MBoe/d in the WAB for the second quarter of 2018. During the quarter, the Company spud two wells and completed one well in the Western Anadarko. Of the two wells spud, one well was a Cleveland target and one well was an exploration Marmaton target. The single well completed and brought online during the quarter was a Cleveland well. The Marmaton target was completed in July and is in early stages of flowback. This Marmaton well represents the Company’s first operated well in that play, and if successful, could unlock additional upside for the WAB asset.
Jones Energy is enhancing base production on its 534 operated wells in the WAB employing industry best-practices to improve lifting efficiency. Examples include a targeted re-frac program, application of emerging artificial lift solutions, and field-wide telemetry installations. The Company believes this ongoing well-level focus serves to maximize production from existing wellbores in a known proven reservoir.
Jones Energy currently has one rig active in the WAB.
During the second quarter 2018, the Company spent $47.1 million of capital expenditures, of which $39.2 million was related to operated drilling and completion (“D&C”) capital and $5.5 million was related to D&C spending on non-operated wells. 90% of all D&C capital was related to Merge activity. The remaining $2.4 million of capital spend was related to leasing and maintenance. Year-to-date capital expenditures for the Company total $110.5 million.
Initial 2018 Third Quarter Production Guidance
Jones Energy is announcing initial production guidance of 1.8 to 2.0 MMBoe, or 19,500 to 21,700 Boe/d, for the 2018 third quarter. Full-year production and cost guidance remain suspended and subject to the Company’s ongoing review of its financial and operating plans. The following table provides a breakout of initial 2018 third quarter production guidance.
|3Q 2018 Production Guidance||3Q18E|
|Total Production (MMBoe)||1.8 – 2.0|
|Average Daily Production (MBoe/d)||19.5 – 21.7|
|Crude Oil (MBbl/d)||5.6 – 6.2|
|Natural Gas (MMcf/d)||48.3 – 53.7|
|NGLs (MBbl/d)||5.9 – 6.5|
Liquidity and Hedging
During the second quarter of 2018, the Company used $25 million of cash to pay down its revolver balance and had no outstanding borrowings as of June 30, 2018 under that facility. Jones Energy also amended the terms of its credit facility, removing all financial maintenance covenants and aligning other covenants to those contained in the Company’s 9.25% senior secured first lien notes and reducing the borrowing base to twenty-five dollars. As of June 30, 2018, the Company had approximately $148 million in cash and as of August 2, 2018 had approximately $129 million of cash. The following table summarizes the Company’s net commodity derivative contracts outstanding as of August 6, 2018:
|Swaps Sold (MBbl)||630||620||1,020||660|
|Swaps Sold (MMcf)||4,800||4,800||7,260||8,400|
|NGL Swaps (MBbl)|
|NGL Swap Prices ($/Gal)|
Jones Energy will not hold a conference call in conjunction with its second quarter 2018 earnings release and expects to file its 10-Q with the SEC on Wednesday, August 8, 2018.
About Jones Energy
Jones Energy, Inc. is an independent oil and natural gas company engaged in the exploration, development and acquisition of oil and natural gas properties in the Anadarko basin of Oklahoma and Texas. Additional information about Jones Energy may be found on the Company’s website at: www.jonesenergy.com.
Page Portas, 512-493-4834
Investor Relations Associate
Robert Brooks, 512-328-2953
Executive Vice President & CFO
1Adjusted net income, adjusted net income per share and EBITDAX are supplemental non-GAAP financial measures that are used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. For additional information, including reconciliations to the most comparable GAAP financial measures, please see “Non-GAAP Financial Measures and Reconciliations” below.
2As defined in the Certificate of Designations for the Preferred Stock and as adjusted in accordance with the terms of the Certificate of Designations.