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Synergy Resources Corporation (SYRG)
Q3 2013 Earnings Conference Call
July 10, 2013, 12:00 PM ET
Edward Holloway - President and CEO
Frank L. Jennings - Chief Financial Officer
William E. Scaff Jr. - VP, Secretary and Treasurer
Craig Rasmuson - VP, Operations and Production
Welles Fitzpatrick - Johnson Rice
Irene Haas - Wunderlich Securities
Gabriel Daoud - Sidoti & Co.
David Beard - IBERIA Capital Partners
Jeffrey Connolly - Brean Capital, LLC.
David Snow - Energy Equities
Stephen Berman - Cannacord Genuity
Robert Young - William Smith & Co.
Richard Dearnley - Longport Partners
Jack Aydin - KeyBanc
Good morning, everyone, and thank you for joining us to discuss Synergy Resources' Third Quarter Results for the period ended May 31, 2013.
Previous Statements by SYRG
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Following the prepared remarks we'll open the call to your questions. And 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 audio conference call will be available for replay through July 24, 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 the President and CEO of Synergy Resources, Mr. Ed Holloway. Sir, please proceed.
Thank you, Jessie and thanks everyone for joining us today. We issued a press release this morning announcing our financial results for our fiscal quarter, our third quarter which ended May. We've also filled out our 10-Q which is available via the investor relations section of our website.
We continue to execute on the development and expansion of our assets in the Wattenberg Field which resulted in record revenue this quarter of 12.3 million. Our operating income grew to 4.9 million and generated net income of 3.6 million or $0.07 per share. During the quarter our oil and natural gas production increased 66% over the same year ago quarter to a total 207,543 BOEs. This equates to an average of 2,256 BOEs per day compared to 1,356 BOEs a day in the year-ago period. We also achieved a 9% production growth over the second quarter which is in line with our previous guidance, despite persistent midstream restraint still impacting production.
In May we began drilling our first of five horizontal wells planned on our Renfroe pad. This marks a turning point for the company as we focus on horizontal development of our asset base in the Wattenberg Field. Our participation in non-operator horizontal wells also increased during the quarter. Going forward production from horizontal wells will be our primary growth driver. With the remaining liquidity on our credit facility and the 78.3 million in net proceeds we received from the equity offering we closed on June 19th, we are well positioned to execute on our horizontal drillings plans.
I would like to now turn the call over to CFO, Monty Jennings to go through the details of our financial results for the quarter. Monty?
Frank L. Jennings
Thanks, Ed and good day to everyone. Turning to our income statement, as Ed mentioned our revenues totalled $12.3 million in the third fiscal quarter 2013. This represented a sequential increase of 13% from the previous quarter and up 64% from the same quarter a year-ago. The year-over-year improvement was due to the 66% increase in production which was partially offset by a 2% decrease in our realized average selling price per BOE. During fiscal Q3, 2013 our average sales prices were $83.98 per barrel of oil, $4.76 per MCF of gas, as compared to $91.21 and $3.62 for the year-ago quarter. Our operating income increased to 4.9 million, an increase of 26% from the third quarter of last year.
Net income increased 32% from the previous quarter totalling $3.6 million or $0.07 per basic and $0.06 per diluted share. Net income was up 49% from the quarter a year ago. Adjusted EBITDA, a non-GAAP term increased 19% from the previous quarter to $9.3 million, which represents 76% of revenue and is an increase from $5.8 million a year-ago. Please refer to our more detailed discussion about the use of adjusted EBITDA and its reconciliation to GAAP in our earnings release, which can be found in news section of our website.
Now briefly turning to the balance sheet we continue to deploy capital in a measured and consistent manner with a focus on driving strong production growth. As of May 31st, we had cash and equivalents in the bank of 19.2 million as compared to 19.3 million as of August 31, 2012, and pro forma for the recent equity offering our cash position was 97.5 million.
During the quarter we drew down $3 million from our credit facility with the Community Banks at Colorado, and as of May 31, 2013 we had borrowed $44.4 million. Based on our semi-annual re-determination we announced on June 3rd that our borrowing base increased to $75 million as a result of the increased PV-10 value of our proved reserves to $208 million. The next evaluation will be conducted at the end of our August 31st fiscal year-end. The current interest rate on our borrowings is approximately 3.5%.