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Harvest Oil & Gas Announces First Quarter 2019 Results

By GlobeNewswire,  May 15, 2019, 08:00:00 AM EDT

Harvest Oil & Gas Announces First Quarter 2019 Results


HOUSTON, May 15, 2019 (GLOBE NEWSWIRE) -- Harvest Oil & Gas Corp. (OTCQX:HRST) ("Harvest" or the "Company") today announced results for the first quarter of 2019 and the filing of its Form 10-Q with the Securities and Exchange Commission ("SEC") on May 15, 2019. Harvest is the successor reporting company to EV Energy Partners, L.P.

Key Highlights

  • Generated a net loss of $35.8 million, or $(3.56) per basic and diluted weighted average share outstanding, and Adjusted EBITDAX of $12.4 million for the first quarter of 2019

  • Average daily production was 137.2 MMcfe for the first quarter of 2019
  • Completed the sale of oil and gas properties in the San Juan Basin in New Mexico and Colorado for $37.2 million in April 2019, net of purchase price adjustments

  • Completed the sale of certain assets in the Mid-Continent area for $4.1 million, net of purchase price adjustments, in January and April 2019, which included $0.9 million of preferential rights to purchase expected to close during the second quarter of 2019

  • Borrowing base re-determined at $110 million on May 2, 2019

  • Reduced outstanding borrowings under the credit facility to $8 million, as of May 14, 2019

First Quarter 2019 Financial Results

           
    First Quarter   Fourth Quarter
$ in millions unless noted otherwise   2019   2018
Average daily production (MMcfe/d)   137.2     144.9  
Total revenues (1)   43.8     47.9  
Total assets (2)   442.3     534.5  
Net (loss) income (1) (3)   (35.8 )   34.3  
Adjusted EBITDAX (a non-GAAP  financial measure) (1)(4)   12.4     9.0  
Total debt (2)   55.0     115.0  
Net cash provided by operating activities   19.4     19.6  
Additions to oil and natural gas properties (5)   0.4     5.1  

______________________

(1)
 
Includes royalty adjustment of $5.0 million in the fourth quarter. See Note 13 of the Notes to Consolidated Financial Statements included under "Item 8. Financial Statements and Supplementary Data" contained in the Form 10-K filed March 29, 2019. Excluding this royalty adjustment, for the fourth quarter, total revenue would have been $52.9 million, net income would have been $39.3 million and Adjusted EBITDAX would have been $14.0 million.

(2)    As of March 31, 2019 and December 31, 2018

(3)    Includes $0.5 million of reorganization items, net, in the fourth quarter of 2018

(4)    Adjusted EBITDAX is a Non-GAAP financial measure and is described in the attached table under "Non-GAAP Measures"

(5)    Represents cash payments during the period

For the first quarter of 2019, Harvest reported a net loss of $35.8 million, or $(3.56) per basic and diluted weighted average share outstanding compared to a net income of $34.3 million, or $3.41 per basic and diluted weighted average share outstanding, for the fourth quarter of 2018. For the first quarter of 2018, Harvest's predecessor reported a net loss of $15.4 million, or $(0.31) per basic and diluted weighted average limited partner unit outstanding. Included in the 2019 first quarter net loss were the following items:

  • $26.1 million of impairment of oil and natural gas properties related to the San Juan Basin and Mid-Continent divestitures,

  • $17.5 million of non-cash losses on commodity derivatives,

  • $4.6 million of gain on equity securities,

  • $0.6 million of divestiture related expense contained in general and administrative expenses, and

  • $0.1 million of non-cash costs contained in general and administrative expenses.

Production for the first quarter of 2019 was 8.4 Bcf of natural gas, 178 MBbls of oil and 484 MBbls of natural gas liquids (NGLs), or 137.2 million cubic feet equivalent per day (MMcfe/d). This represents a 5 percent decrease from the fourth quarter of 2018 production of 144.9 MMcfe/d and a 24 percent decrease from the first quarter of 2018 production of 180.0 MMcfe/d. The decrease in production from the fourth quarter of 2018 was due to the divestiture of oil and gas properties in Central Texas and the Mid-Continent areas which closed in December 2018, a divestiture in the Mid-Continent area which closed in January 2019 and natural production declines. The decrease in production from the first quarter of 2018 was primarily due to the divestiture of the Central Texas and Karnes County, Texas properties, which closed in August 2018 and the Central Texas and the Mid-Continent area divestitures which closed in December 2018 and January 2019.

Adjusted EBITDAX for the first quarter of 2019 was $12.4 million, a 38 percent increase from the fourth quarter of 2018 and a 53 percent decrease from the first quarter of 2018. The increase in Adjusted EBITDAX from the fourth quarter of 2018 was primarily due to a fourth quarter royalty adjustment, realized hedge gains compared to realized hedge losses in the previous period, and a decrease in lease operating expenses, partially offset by a decrease in realized oil, natural gas, and natural gas liquids prices and the Central Texas and Mid-Continent area divestitures which closed in December 2018 and January 2019. The decrease in Adjusted EBITDAX from the first quarter of 2018 was primarily due to the divestitures which closed in 2018 and January 2019, a decrease in realized oil and natural gas liquids prices and a decrease in realized commodity hedge gains, partially offset by a decrease in restructuring costs and an increase in realized natural gas prices. Adjusted EBITDAX is a Non-GAAP financial measures and is described in the attached table under "Non-GAAP Measures."

Revolving Credit Facility and Liquidity

As of May 14, 2019, Harvest's borrowing base under its credit facility was $110 million, of which $8 million was drawn. Liquidity from borrowing base capacity and cash on hand is currently approximately $115 million. The decrease in the borrowing base during the Spring 2019 semi-annual redetermination was primarily a result of the divestitures of the San Juan Basin and Mid-Continent assets in April 2019 as well as a decline in bank commodity price assumptions. Harvest's next semi-annual borrowing base redetermination is scheduled for October 2019.

For more information regarding Harvest's debt and liquidity, please review Harvest's Quarterly Report on Form 10-Q filed on May 15, 2019 with the Securities and Exchange Commission.

Commodity Hedges

Since March 31, 2019, Harvest entered into the following commodity hedges.

               
Period   Index   Swap Volume   Swap Price
Natural Gas (MMBtus):              
Jan - Dec 2020   NYMEX   3,660,000   $ 2.73
               

Also, in April 2019 and in connection with the San Juan and Mid-Continent asset divestitures, Harvest terminated the following hedge positions at a net gain of $45 thousand.

        Swap Volume      
Period   Index   Terminated   Swap Price (1)
Natural Gas (MMBtus):              
May - Dec 2019   NYMEX   3,675,000   $ 2.76
               
Crude (Bbls):              
Apr - Dec 2019   WTI   75,625   $ 62.12
Jan - Dec 2020   WTI   64,050     60.49
               
Ethane (Bbls):              
Apr - Dec 2019   Mt Belvieu   68,750   $ 11.39
               
Propane (Bbls):              
May - Dec 2019   Mt Belvieu   24,500   $ 32.76
______________________
(1)  Executed price at time of entering into hedge

Details regarding Harvest's total current hedge position may be found in the Total Current Hedge Position table at the end of this press release.

Quarterly Report on Form 10-Q

Harvest's financial statements and related footnotes are available in its Quarterly Report on Form 10-Q, which was filed on May 15, 2019, and is available through the Investor Relations/SEC Filings section of the Harvest website at http://www.hvstog.com.

About Harvest Oil & Gas Corp.

Harvest is an independent oil and gas company engaged in the efficient operation and development of onshore oil and gas properties in the continental United States. The Company's assets consist primarily of producing and non-producing properties in the Barnett Shale, the Appalachian Basin (which includes the Utica Shale), Michigan, the Mid-Continent areas in Oklahoma, Texas, Arkansas, Kansas, the Permian Basin, and the Monroe Field in Northern Louisiana. More information about Harvest is available on the internet at https://www.hvstog.com.

Forward Looking Statements

This press release contains certain statements that are, or may be deemed to be, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. The Company has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting the financial condition of its business. These forward-looking statements are subject to a number of risks and uncertainties, most of which are difficult to predict and many of which are beyond its control. Please read the Company's filings with the Securities and Exchange Commission, including "Risk Factors" in its Annual Report on Form 10-K for the year ended December 31, 2018 and other public filings and press releases for a discussion of risks and uncertainties that could cause actual results to differ from those in such forward-looking statements. These risks include, but are not limited to, our inability to control our contract operator, EnerVest Operating, L.L.C., outside of the parameters of the Services Agreement, our ability to obtain needed capital or financing on satisfactory terms, fluctuations in prices of oil, natural gas and natural gas liquids and the length of time commodity prices remain depressed, our ability to maintain production levels through development drilling, risks associated with drilling and operating wells, the availability of drilling and production equipment, changes in applicable laws and regulations that adversely affect our operations and general economic conditions. The words "believe," "may," "estimate," "continue," "anticipate," "intend," "plan," "expect," "indicate" and similar expressions are intended to identify forward-looking statements. All statements other than statements of current or historical fact contained in this press release are forward-looking statements. Although the Company believes that the forward-looking statements contained in this press release are based upon reasonable assumptions, the forward-looking events and circumstances discussed in this press release may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.

Operating Statistics

                 
    Successor     Predecessor  
    Three Months     Three Months  
    Ended     Ended  
    March 31, 2019     March 31, 2018  
Production data:            
Oil (MBbls)     178       401  
Natural gas liquids (MBbls)     484       635  
Natural gas (MMcf)     8,375       9,980  
Net production (MMcfe)     12,349       16,199  
Average sales price per unit: (1)                
Oil (Bbl)   $ 53.00     $ 62.08  
Natural gas liquids (Bbl)     20.76       25.60  
Natural gas (Mcf)     2.84       2.64  
Mcfe     3.51       4.17  
Average unit cost per Mcfe:                
Production costs:                
Lease operating expenses   $ 1.88     $ 1.70  
Production taxes     0.18       0.22  
Total     2.06       1.92  
Depreciation, depletion and amortization     0.40       1.67  
General and administrative expenses     0.52       0.48  
______________________
(1)  Prior to realized $0.7 million and $1.6 million of net hedge gains on settlements of commodity derivatives for the three months ended March 31, 2019 and 2018, respectively.
 
 

Condensed Consolidated Balance Sheets

($ in thousands, except number of shares)

               
    March 31, 2019     December 31, 2018
ASSETS                  
Current assets:                  
Cash and cash equivalents   $ 19,439       $ 6,313  
Equity securities             47,082  
Accounts receivable:                
Oil, natural gas and natural gas liquids revenues     37,233         40,176  
Other     853         4,496  
Derivative asset     2,451         15,452  
Other current assets     769         2,314  
Total current assets     60,745         115,833  
                 
Oil and natural gas properties, net of accumulated depreciation, depletion                
and amortization; March 31, 2019, $16,787; December 31, 2018, $12,950     323,743         405,688  
Assets held for sale     48,998          
Long-term derivative asset     3,220         8,499  
Other assets     5,558         4,474  
Total assets   $ 442,264       $ 534,494  
                 
LIABILITIES AND EQUITY                
Current liabilities:                
Accounts payable and accrued liabilities   $ 26,043       $ 26,146  
Derivative liability     376         1,165  
Other current liabilities     763          
Total current liabilities     27,182         27,311  
                 
Asset retirement obligations     110,712         117,529  
Long-term debt, net     55,000         115,000  
Liabilities held for sale     9,455          
Other long-term liabilities     1,973         1,036  
                 
Commitments and contingencies                
                 
Mezzanine equity     117         79  
                 
Stockholders' equity:                
Common stock - $0.01 par value; 65,000,000 shares authorized;                
10,054,816 shares issued and 10,042,468 shares outstanding as of                
March 31, 2019 and December 31, 2018     100         100  
Additional paid-in capital     249,778         249,717  
Treasury stock at cost - 12,348 shares as of March 31, 2019 and                
December 31, 2018     (247 )       (247 )
Retained earnings (accumulated deficit)     (11,806 )       23,969  
Total stockholders' equity     237,825         273,539  
Total liabilities and equity   $ 442,264       $ 534,494  
                   
                   

Condensed Consolidated Statements of Operations

($ in thousands, except per share/unit data)

               
    Successor     Predecessor
    Three Months     Three Months
    Ended     Ended
    March 31, 2019     March 31, 2018
Revenues:              
Oil, natural gas and natural gas liquids revenues   $ 43,286       $ 67,558  
Transportation and marketing-related revenues     560         384  
Total revenues     43,846         67,942  
               
Operating costs and expenses:              
Lease operating expenses     23,200         27,544  
Cost of purchased natural gas     399         315  
Dry hole and exploration costs     39         82  
Production taxes     2,193         3,525  
Accretion expense on obligations     2,210         1,897  
Depreciation, depletion and amortization     4,972         27,002  
General and administrative expenses     6,370         7,725  
Restructuring costs             5,211  
Impairment of oil and natural gas properties     26,128         3  
Gain on sales of oil and natural gas properties     (13 )       (2 )
Total operating costs and expenses     65,498         73,302  
               
Operating loss     (21,652 )       (5,360 )
               
Other income (expense), net:              
Gain (loss) on derivatives, net     (16,774 )       399  
Interest expense     (1,519 )       (10,476 )
Gain on equity securities     4,593          
Other income (expense), net     (138 )       302  
Total other income (expense), net     (13,838 )       (9,775 )
               
Loss before income taxes     (35,490 )       (15,135 )
               
Income tax expense     (285 )       (314 )
               
Net loss   $ (35,775 )     $ (15,449 )
               
Basic and diluted earnings per share / unit:              
Net loss   $ (3.56 )     $ (0.31 )
               
Weighted average common shares / units outstanding:              
Basic     10,043         49,369  
Diluted     10,043         49,369  
                   
                   

Condensed Consolidated Statements of Cash Flows

($ in thousands)

               
    Successor     Predecessor
    Three Months     Three Months
    Ended     Ended
    March 31, 2019     March 31, 2018
Cash flows from operating activities:              
Net loss   $ (35,775 )     $ (15,449 )
Adjustments to reconcile net loss to net cash flows provided by              
operating activities:              
Accretion expense on obligations     2,210         1,897  
Depreciation, depletion and amortization     4,972         27,002  
Equity-based compensation cost     99         587  
Impairment of oil and natural gas properties     26,128         3  
Gain on sales of oil and natural gas properties     (13 )        
Gain on equity securities     (4,593 )        
(Gain) loss on derivatives, net     16,774         (399 )
Cash settlements of matured derivative contracts     717         1,509  
Other     205         280  
Changes in operating assets and liabilities:              
Accounts receivable     8,029         (2,327 )
Other current assets     1,546         (1,702 )
Accounts payable and accrued liabilities     (1,313 )       (469 )
Other, net     397         (3 )
Net cash flows provided by operating activities     19,383         10,929  
               
Cash flows from investing activities:              
Additions to oil and natural gas properties     (443 )       (19,478 )
Reimbursements related to oil and natural gas properties     626          
Proceeds from sale of oil and natural gas properties     1,872         3  
Proceeds from sale of equity securities     51,675          
Other     13         16  
Net cash flows provided by (used in) investing activities     53,743         (19,459 )
               
Cash flows from financing activities:              
Repayment of long-term debt borrowings     (60,000 )        
Long-term debt borrowings             34,000  
Net cash flows provided by (used in) financing activities     (60,000 )       34,000  
               
Increase in cash, cash equivalents and restricted cash     13,126         25,470  
Cash, cash equivalents and restricted cash - beginning of period     6,313         4,896  
Cash, cash equivalents and restricted cash - end of period   $ 19,439       $ 30,366  
                   

Non-GAAP Measures

The Company defines Adjusted EBITDAX as net (loss) income plus income taxes; interest expense, net; depreciation, depletion and amortization; accretion expense on obligations; loss (gain) on derivatives, net; cash settlements of matured commodity derivative contracts; non-cash equity-based compensation; impairment of oil and natural gas properties; non-cash oil inventory adjustment; dry hole and exploration costs; gain on sales of oil and natural gas properties; reorganization items, net; and (gain) loss on equity securities.

Adjusted EBITDAX is used by the Company's management to provide additional information and statistics relative to the performance of the business, including (prior to the creation of any reserves) the cash return on investment. The Company believes this financial measure may indicate to investors whether or not it is generating cash flow at a level that can support or sustain quarterly interest expense and capital expenditures. Adjusted EBITDAX should not be considered as an alternative to net income, operating income, cash flows from operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP. Adjusted EBITDAX excludes some, but not all, items that affect net income and operating income and this measure may vary among companies. Therefore, Harvest's Adjusted EBITDAX may not be comparable to similarly titled measures of other companies.

Reconciliation of Net (Loss) Income to Adjusted EBITDAX

($ in thousands)

                   
    Three Months Ended
    Successor   Predecessor   Successor
    Mar 31, 2019   Mar 31, 2018   Dec 31, 2018
Net (loss) income   $ (35,775 )   $ (15,449 )   $ 34,267  
                   
Add:                  
Income taxes     285       314       78  
Interest expense, net     1,519       10,475       1,991  
Depreciation, depletion and amortization     4,972       27,002       5,422  
Accretion expense on obligations     2,210       1,897       2,286  
Loss (gain) on derivatives, net     16,774       (399 )     (47,617 )
Cash settlements of matured commodity derivative contracts     717       1,559       (3,977 )
Non-cash equity-based compensation     99       587       83  
Impairment of oil and natural gas properties     26,128       3       500  
Non-cash oil inventory adjustment                 (12 )
Dry hole and exploration costs     39       82       113  
Gain on sales of oil and natural gas properties     (13 )     (2 )     (650 )
Reorganization items, net (1)                 543  
(Gain) loss on equity securities     (4,593 )           15,960  
Adjusted EBITDAX   $ 12,362     $ 26,069     $ 8,987  

______________________

(1)
  
Represent costs, gains and losses directly associated with the Company's filing for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code since the petition date, and also includes adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments are determined.

Total Current Hedge Position

Period   Index   Swap Volume   Swap Price

 
Natural Gas (MMBtus):                
Apr - Dec 2019   NYMEX    19,700,000   $  2.77  
Jan - Dec 2020   NYMEX    23,790,000      2.71  
                 
Crude (Bbls):                
Apr - Dec 2019   WTI    556,875   $  63.37  
Jan - Dec 2020   WTI    667,950      60.51  
                 
Ethane (Bbls):                
Apr - Dec 2019   Mt Belvieu    481,250   $  11.51  
Jan - Dec 2020   Mt Belvieu    512,400      11.91  
                 
Propane (Bbls):                
Apr - Dec 2019   Mt Belvieu    250,500   $  32.76  
Jan - Dec 2020   Mt Belvieu    256,200      29.23  
                 

Harvest Oil & Gas Corp., Houston, TX

Ryan Stash

713-651-1144

hvstog.com

 

Source: Harvest Oil & Gas Corp.

This article appears in: News Headlines

Referenced Stocks: HRST










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