Synergy Resources Corporation (SYRG)

SYRG 
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Synergy Resources Corporation (SYRG)

F4Q12 Earnings Call

November 13, 2012 11:30 AM ET

Executives

Ed Holloway – President and CEO

Monty Jennings – Principal Financial Officer

Bill Scaff – VP, Secretary and Treasurer

Craig Rasmuson – VP, Operations and Production

Analysts

Irene Haas – Wunderlich Securities

Kim Pacanovsky – MLV & Company

Joel Musante – CK Cooper & Company

Welles Fitzpatrick – Johnson Rice

John Malone – Global Hunter Securities

Jeff Connolly – Brean Capital

Richard Dearnley – Longport Partners

Presentation

Operator

Good morning, everyone, and thank you for joining us to discuss Synergy Resources’ fourth quarter and year end results for the period ending August 31, 2012.

With us today are Synergy Resources’ President and CEO, Ed Holloway; the company’s Executive Vice President, William Scaff, Jr.; the company’s Vice President of Operations, Craig Rasmuson; and the CFO, Monty Jennings. Following the remarks, we’ll open the call for questions. Then, before the conclusion of today’s call, I’ll provide the necessary precautions regarding forward-looking statements made by management during this call.

I would like to remind everyone that today’s presentation will be available for telephone replay through December 13, 2012. The webcast replay will be available via the company’s website at www.syrginfo.com.

I would now like to turn the conference over to the President and CEO of Synergy Resources, Mr. Ed Holloway. Please go ahead, sir.

Ed Holloway

Thank you, Ian, and good morning, everyone. Thank you for joining us today. We issued a press release this morning announcing our financial results for our fiscal fourth quarter and year end August 31, 2012. As we reported, the continued execution of our ongoing drilling program in the Wattenberg field of the Denver-Julesburg Basin continues to drive solid year-over-year growth in revenue and adjusted EBITDA.

In fact, in the final quarter of the fiscal year, we achieved nearly a 100% increase in revenue year-over-year to $6.7 million and for the full year revenue up 150% to a record $25 million.

Net income in the fourth quarter increased by 22% year-over-year totaling $1.9 million or $0.04 per share, with net income for the full year totaling $12.1 million or $0.25 per diluted share.

Our fourth quarter performance reflected 120% increase in our oil and natural gas production year-over-year to 116,818 BOEs, while annually it was up 155% to 420,534 BOEs. This equates to an average of 1,270 BOEs per day during the quarter and 1,149 BOEs per day for the full year.

As operator, we drilled 51 wells during the year and brought 16 into production during the fourth quarter. We are currently completing 10 wells that will go into production during the first quarter of 2013. This increased the total number of gross wells to 209. We operate 156 gross wells and have participated in 53 non-op wells.

Our drilling, completion and production activity has led to an increase in our estimated proved reserves to 5.1 million barrels of oil and 33.4 billion cubic feet of gas as of August 31, 2012. The estimated present value of these reserves before taxes and discounted 10% is $149 million, up 140% year-over-year and 43% since we updated our reserve forward at mid-fiscal year.

Now I’d like to turn the call over to our CFO, Monty Jennings to take us through the details of our financial results. After Monty’s results, Bill Scaff and I will provide some additional operational highlights. Then finally, we will open up the calls to your questions. Monty?

Monty Jennings

Thank you, Ed, and good morning, everyone. Thanks for joining us today. As Ed mentioned, our revenues totaled $6.7 million in the fourth quarter of 2012. This represented a 99% increase from the same year-ago quarter. On a sequential quarter basis, fourth quarter revenues declined 10% from the third quarter.

Full year 2012 revenue totaled a record $25 million, up 150%. The sequential revenue decline in the fourth quarter was largely due to commodity price decreases and high line pressure we’ve been experiencing in the Wattenberg field that inhibited our ability to produce at full capacity. In fiscal Q4 2012, our average sale prices were $82.89 per barrel of oil and $2.82 per Mcf of gas as compared to $91.21 for oil and $3.62 for gas in the 2012 third quarter.

The year-over-year growth was driven by substantial improvements in our production. Fourth quarter 2012 production grew 120% over fourth quarter 2011, while full year 2012 production grew 151% over 2011. This increase was primarily attributed to new wells that have come online. We brought 52 wells online during the year and 16 of them late in the fourth quarter. Average annual sales price per BOE did not change significantly from year 2011 to year 2012.

Our operating income in the fourth quarter increased 117% to $3.4 million from the fourth quarter 2011. Net income in the fourth quarter increased by 22%, totaling $1.9 million as compared to $1.6 million in the same year-ago quarter. For both periods, earnings were $0.04 per diluted share.

For the full fiscal year, operating income increased 317% to a record $11.8 million and net income was a record $12.1 million or $0.25 per diluted share. Fiscal year 2011 was a loss of $11.6 million or $0.45 per basic and diluted share, and the loss was primarily due to $14.4 million non-cash charges related to our $18 million convertible debt offering.

Read the rest of this transcript for free on seekingalpha.com