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Synergy Resources Corporation (SYRG)
F1Q14 Earnings Conference Call
January 7, 2014 12:00 PM ET
Edward Holloway - President and CEO
Frank (Monty) Jennings - CFO
William Scaff, Jr. - EVP, Secretary and Treasurer
Craig Rasmuson - VP, Operations and Production
Bertrand Donnes, III - Johnson Rice
Ryan Oatman - SunTrust Robinson Humphrey
Irene Haas - Wunderlich Securities, Inc.
John Malone - Mizuho Securities
Joel Musante - Euro Pacific Equities
Ipsit Mohanty - Cannacord Genuity
Jared Lewis - Northland Capital Markets
David Snow - Energy Equities
Raymond Deacon - Brean Murray Carret & Co.
Joseph Reagor - Roth Capital Partners
David Beard - Iberia Capital Partners
Jack Aydin - Key Banc
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 30th, 2013.
Previous Statements by SYRG
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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 audio conference call will be available for replay through January 21st, 2014. 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, Manny, and thanks to everyone for joining us today and Happy New Year. We issued a press release this morning, announcing our financial results for our fiscal 2014 first quarter ending November 30, 2013. The first quarter of the fiscal year was notable, due to the commencement of our operated horizontal production from the Renfroe pad in the Wattenberg Field, which significantly contributed to the record revenue of $19.3 million in the quarter, compared to $8.3 million in revenue for our year ago period.
Our operating income grew to $7.2 million in the first quarter versus $3.5 million for the first quarter of 2013. During the quarter, our oil and natural gas production increased 93% over last year, to a total of nearly 292,000 BOEs. This equates to an average of 3,208 BOEs per day compared to 1,658 BOEs per day a year ago.
We also achieved a 31% production growth in the quarter over the fourth quarter, despite a catastrophic flooding in Colorado during September, and the persistent mid-stream restraints hindering production.
In the first quarter, we completed drilling horizontal wells at our Leffler pad and began completion of those wells in late November. We also began drilling the first of the six horizontal wells planned on the Phelps pad.
We are drilling and completing horizontal wells, significantly under the original budget of $4.5 million per well, and we estimate that our all-in costs per standard horizontal well will range between $3.4 million to $3.8 million, depending on the number of frac stages and lateral length of each well.
With our increased cash flow from operations, the $53 million remaining on our $90 million borrowing base for the terms of our $300 million credit facility, the $61 million of available cash on our balance sheet, and the continued cash proceeds from the exercise of our $6 warrants, we are well positioned to execute on an increased fiscal 2014 capital expenditure budget of $189 million.
I would like to now turn the call over to our CFO, Monty Jennings, to take us through the details of our financial results for the first quarter. Monty?
Frank (Monty) Jennings
Thank you, Ed, and good day to everyone. Now, turning to our income statement; our revenues totaled $19.3 million in the first fiscal quarter of 2014. This represented a sequential increase of 31% from the previous quarter, and up 132% from the same quarter a year ago. The year-over-year improvement was due to the 93% increase in production. The increase in production was enhanced by a 20% increase in our realized average selling price per BOE.
During fiscal Q1 2014, our average sales prices were $93.06 per barrel of oil and $4.86 per MCF of gas, as compared to $81.03 per barrel of oil, and $4.27 per MCF of gas for the year ago quarter.
Our operating income increased to $7.2 million, an increase of 103% from the first quarter of last year. Net income increased 173% from the year ago quarter, totaling $6.1 million or $0.08 per diluted share, versus $0.04 per share a year ago.
Adjusted EBITDA, a non-GAAP term, increased to $12.8 million in the first quarter, which represents 67% of revenue, and is a 113% increase from $6 million a year ago. Please refer to a more detailed discussion about our use of adjusted EBITDA, and its reconciliation to GAAP in our earnings release, which can be found in the news section of our website.
Now, briefly turning to the balance sheet; as of November 30, 2013, we had cash and equivalents and short term investments totaling $61 million, as compared to $12.5 million at November 30, 2012. We have $37 million outstanding on the credit facility, led by Community Banks of Colorado, as of November 30, 2013. The current interest rate on borrowings is approximately 2.7%.
We increased our commodity derivative activity during the quarter to mitigate short term price fluctuations in the price of oil. Using swaps and collars, we have hedged 30,680 barrels per month of future production, covering all of calendar year 2014. The average price of a swap position is approximately $92.22 per barrel.