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Synergy Resources Corporation (SYRG)
Q1 2013 Earnings Conference Call
January 09, 2013, 12:00 PM ET
Edward Holloway - President and CEO
Monty Jennings - Principal Financial Officer
William E. Scaff Jr. - VP, Secretary and Treasurer
Craig Rasmuson - VP, Operations and Production
Irene Haas - Wunderlich Securities
Kim Pacanovsky - MLV & Co.
Welles Fitzpatrick - Johnson Rice
Joel Musante - C.K. Cooper & Company
John Malone - Global Hunter Securities
Jared Lewis - Northland Securities
Robert Young - Wm Smith & Co.
Jeffrey Connolly - Brean Capital
Richard Dearnley - Longport Partners
Jon Jung - Trailhead Asset Management
Steve Emerson - Emerson Investment Group
Good morning, everyone, and thank you for joining us to discuss Synergy Resources’ First Quarter Results for the period ended November 30, 2012.
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Following the prepared remarks, we’ll open the call to your 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’d like to remind everyone that today’s audio conference call will be available for replay through February 9, 2013.
The webcast replay will also be available via the company's website at www.syrginfo.com.
I would now like to turn the call over to Executive Vice President, Mr. William Scaff. Sir, please proceed.
William E. Scaff, Jr.
Thank you, Ron, and good morning, everyone. Thank you for joining us today. We issued a press release this morning announcing our financial results for our fiscal first quarter that ended in November. We will follow the Form 10-Q shortly which will be available in the Investor Relations section of our website and on www.sec.gov.
As we reported in the release, we continued to successfully execute on our vertical and directional drilling program in the Wattenberg Field of the DJ Basin driving strong growth and production and revenue for the quarter. Revenue increased 86% over the year-ago quarter totaling 8.3 million. Operating income was up more than 119% to 3.5 million and net income totaled 2.2 million or $0.04 per share.
Fiscal Q1 2012 did not include any income tax expense while fiscal Q1 2013 included a deferred tax expense of 1.3 million. Keep in mind that's equivalent to $0.03 per share. The year results reflect an 89% increase in oil and gas production over the same year-ago quarter to 150,909 barrels of oil equivalent or BOE. This equates to an average of 1,658 BOE per day during the quarter versus the daily average of 876 BOE per day a year ago and a daily average of 1,270 BOE per day during the quarter ended August 31, 2012.
Sequential production growth on a quarterly basis was 29%. We continued to grow rapidly in the face of lingering high line pressure within the existing gathering and processing systems. As operator, we drilled 25 vertical directional wells and brought 15 into production during the quarter. In December, we drilled two more wells. This increased the total number of wells we have drilled since inception as an operator to 134 with 112 brought into commercial production so far. And as of December 31, 2012, the remaining 22 were being completed. Unless we experience weather problems or unforeseen delays, the wells in progress should commence production during the second quarter.
As of the end of December, our overall well count including operated wells, non-operated wells and producing wells acquired from our other owners included 250 gross production wells which equates to 197 net wells and 23 gross wells in progress. This productive activity has led to an increase in our estimated proved reserves. We currently estimate proved reserves of 5.2 million barrels of oil and 33.6 billion cubic feet of gas as of November 30, 2012. The estimated present value of these reserves before tax and discounted 10% is 160 million. Our next completed reserve analysis will be prepared with an effective date of February 28, 2013.
I'd like to now turn the call over to our CFO, Monty Jennings, to take us through the details of our financial results for the quarter.
Thank you, Bill and good morning everyone. Thanks for joining us today. Now turning to our income statement, as Bill mentioned, our revenues totaled $8.3 million in the first fiscal quarter of 2013. This represented a sequential increase of 23% from the previous quarter and an 86% increase from the same quarter a year ago.
The year-over-year improvement was due to the 89% increase in production that Bill discussed. This increase was primarily attributed to 73 new wells that have come online over the past year which was partially offset by a 2% decrease in our realized average selling price per BOE.
During fiscal Q1 2013, our average sales prices were $81.03 per barrel of oil and $4.27 per Mcf of gas as compared to year-ago prices of $83.03 for oil and $5.23 for gas. Our operating income increased 4% from the previous quarter to 3.5 million and increased 119% from the first quarter of last year.
Net income increased 15% from the previous quarter totaling $2.2 million or $0.04 per basic and diluted share and increased 38% from the first quarter a year ago. Although we do not have any income taxes currently payable the recognition of deferred income tax expense has become an important component of net income. We record an estimate of taxes that will be paid in the future after we use our net operating loss carry forward of $34 million. We use a tax rate estimate of 37%, which is based upon current tax law. Our estimated tax rate would change if new tax laws are enacted.