Jones Energy, Inc. (NYSE:JONE) (“Jones Energy” or “the Company”)
today announced financial and operating results for the second
quarter ended June 30, 2018 as well as initial production guidance
for the third quarter of 2018.
Highlights:
- The Company has proactively
initiated discussions with its unsecured noteholders. The aim of
these liability management discussions is to achieve increased
financial flexibility to optimize the value of Jones Energy’s core
Merge and Western Anadarko Basin (“WAB”) assets for the benefit of
all stakeholders.
- Jones Energy remains active in its
evaluation of strategic alternatives as well as its pursuit of a
DrillCo with an exclusive joint development partner in order to
accelerate drilling and value creation.
- 2018 Merge wells brought online
showing average peak IP30 of 183 boe/d per 1,000’ of lateral in the
Meramec and 120 Boe/d per 1,000’ of lateral in the Woodford
(3-stream).
- Net loss for the second quarter of
2018 of $46.9 million, or a net loss of $0.47 per share, non-GAAP
adjusted net loss of $28.7 million, or an adjusted net loss of
$0.29 per share, and EBITDAX of $29.7 million.1
Operational and Strategic Direction
Update
On July 23, 2018, the Company named Carl Giesler
as Chief Executive Officer. Mr. Giesler commented, “Thank you to
our Board of Directors and the entire Jones Energy team for the
warm welcome and, more importantly, the renewed energy, commitment,
and focus.”
Mr. Giesler continued, “From an operating
perspective, production remained strong through the second quarter
of 2018. The Merge program now represents 41% of total
company production, as compared to 8% this time last year.
Additionally, our 2018 Merge HBP-focused drilling remains
on-schedule to be completed in November. As part of ongoing
operational improvements, we are tightening our landing-point
selection and focusing on staying in zone. We are also enhancing
casing and completion designs, refining flowback methodology and
lifting techniques to minimize risk and optimize well results. We
believe our contiguous position of 22,500 net acres with more than
500 identified operated drilling locations in the Merge will
improve in value as we and other area operators test spacing and
further refine completions and other processes.
“In the WAB, we have had consistently strong
results in our core Cleveland drilling since improving our
completions and flowback protocols in a cost-neutral manner late
last year. Additionally, we are seeing early flowback from our
first Marmaton well and other recent results from the Cleveland
that highlight potential upside in the WAB. We continue to
identify operated producing well-bores for lower-risk, low-capex,
high-return, quick-payback work-over opportunities as well as
shutting-in wells that have become uneconomic. We believe there
exists significant value, which is sometimes overlooked, in our
Western Anadarko asset as part of the greater Jones Energy
portfolio.
“From a strategic perspective, we believe our
cash position provides us a multi-year runway to drive value
through executing on our core Merge and WAB assets. To extend
that runway, management and the Board of Directors are focused on
various initiatives to reduce our debt and increase our financial
flexibility. We have taken several key steps in recent weeks and
look forward to providing you additional updates as the DrillCo and
other objectives are achieved.
“No doubt, we have a lot of work to do.
Fortunately, we believe the quality of our people, the strength of
our asset base and the improving commodity price environment will
allow us to achieve our goals.”
Financial Results
Total operating revenues for the three months
ended June 30, 2018 were $65.3 million as compared to $48.6 million
for the three months ended June 30, 2017. Total revenues,
including current period settlements of matured derivative
contracts, were $52.7 million for the three months ended June 30,
2018 as compared to $66.5 million for the three months ended June
30, 2017.
Total operating expenses for the three months
ended June 30, 2018 were $70.1 million as compared to $73.2 million
for the three months ended June 30, 2017, excluding a one-time
impairment charge of $148 million related to the Company’s sale of
its Arkoma Basin properties. Lease Operating Expenses (“LOE”) for
the three months ended June 30, 2018 totaled $11.6 million, or
$5.10 per Boe, which is in line with the first quarter 2018 LOE
which averaged $5.12 per Boe.
For the three months ended June 30, 2018, the
Company reported a net loss of $46.9 million, of which a net loss
of $43.5 million, or $0.47 per share, is attributable to common
shareholders. This compares to a net loss of $134.0 million, of
which a net loss of $84.2 million, or $1.28 per share, was
attributable to common shareholders, for the three months ended
June 30, 2017. Excluding, on a tax-adjusted basis, certain items
that the Company does not view as indicative of its ongoing
financial performance, the Company had adjusted net loss for
the second quarter 2018 of $28.7 million, or adjusted net loss
attributable to common shareholders of $0.29 per share,
as compared to adjusted net income of $4.7 million,
or net income of $0.10 per share for the three months
ended June 30, 2017.
Earnings before interest, income taxes,
depreciation, amortization, and exploration expense (“EBITDAX”) for
the second quarter 2018 was $29.7 million. EBITDAX for the
second quarter 2018 was negatively impacted by $12.5 million of
hedging related losses. This compares to second quarter 2017
EBITDAX of $48.3 million.
Preferred Dividend Update
During the second quarter, the Company’s Board
of Directors declared a contingent dividend on the Company’s 8.0%
Series A Perpetual Convertible Preferred Stock (“Preferred Stock”),
payable in Class A common stock on May 15, 2018 to holders of
record as of May 1, 2018. It was announced on May 15, 2018 that the
Dividend Valuation Price did not meet the required Floor Price2,
and the dividend was not paid. The right to receive that dividend
accrued for holders of Preferred Stock. As a reminder, the Company
has exercised one of its five dividend holidays available to it
without penalty.
Following the end of the 2018 second quarter, on
July 17, 2018 the Company’s Board of Directors declared a
contingent dividend on the Preferred Stock, payable in Class A
common stock on August 15, 2018 to holders of record as of August
1, 2018 under the same terms, including the requirement that the
Dividend Valuation Price of the stock must meet the required Floor
Price in order to be paid. If the dividend is not paid, the right
to receive the dividend will again accrue for holders of Preferred
Stock and the Company will have exercised its second dividend
holiday.
Operating Results
For the three months ended June 30, 2018, Jones
Energy produced 2,272 MBoe, or 24,967 Boe/d, of which production
from the Merge accounted for 41%. The table below provides a
breakout of 2018 second quarter production.
| |
Three months ended June 30, 2018: |
|
|
| |
Oil (MBbls) |
|
Natural Gas (MMcf) |
|
NGLs (MBbls) |
|
Total (MBoe) |
|
% of Total |
| Cleveland |
339 |
|
3,048 |
|
383 |
|
1,230 |
|
54 |
% |
| Merge |
291 |
|
2,309 |
|
261 |
|
937 |
|
41 |
% |
| Other |
8 |
|
404 |
|
30 |
|
105 |
|
5 |
% |
| Total |
638 |
|
5,761 |
|
674 |
|
2,272 |
|
100 |
% |
Merge
During the second quarter, the Company spud
three wells and completed seven wells in the Merge. Of the wells
completed and brought online, three were landed in the Meramec and
four were in the Woodford. Merge production for the second quarter
2018 of 10.3 MBoe/d represents an increase of 51% over first
quarter 2018 production of 6.8 Mboe/d. The Merge now represents 41%
of total Company production.
Merge wells continue to show solid performance
in the Company’s designated development areas of El Reno, Minco and
Tuttle across Canadian and Grady Counties, OK. The average of wells
drilled in the 2018 program in these areas have seen peak IP30
(3-stream) rates of 183 Boe/d per 1,000’ of lateral in the Meramec
and 120 Boe/d per 1,000’ of lateral in the Woodford. Jones Energy
continues to improve its operational performance by focusing on
optimizing landing points, geo-steering and completion designs.
Specifically, teams are fully integrating 3D seismic into their
landing point selection and maximizing time in the most productive
target interval as defined by proprietary data from our 40 operated
wells in the Merge. Further, the Company has identified that
certain casing designs, completion methods, flowback techniques and
lift protocols correlate to improved performance. Regarding current
completion designs, the Company has increased its stage count in
the Meramec and improved cluster efficiency in both plays through
limited entry perforating and effective fluid diversion. Jones
Energy will continue to optimize all aspects of its early
development efforts.
Jones Energy continues to progress its 2018
Merge HBP program and has one rig running on its Merge acreage. As
of August 6, 2018, the Company has drilled 32 of its 38 operated
sections and remains on-track to complete its HBP Merge program in
November.
Western Anadarko Basin
Average daily net production was 13.5 MBoe/d in
the WAB for the second quarter of 2018. During the quarter, the
Company spud two wells and completed one well in the Western
Anadarko. Of the two wells spud, one well was a Cleveland target
and one well was an exploration Marmaton target. The single well
completed and brought online during the quarter was a Cleveland
well. The Marmaton target was completed in July and is in early
stages of flowback. This Marmaton well represents the Company’s
first operated well in that play, and if successful, could unlock
additional upside for the WAB asset.
Jones Energy is enhancing base production on its
534 operated wells in the WAB employing industry best-practices to
improve lifting efficiency. Examples include a targeted re-frac
program, application of emerging artificial lift solutions, and
field-wide telemetry installations. The Company believes this
ongoing well-level focus serves to maximize production from
existing wellbores in a known proven reservoir.
Jones Energy currently has one rig active in the
WAB.
Capital Expenditures
During the second quarter 2018, the Company
spent $47.1 million of capital expenditures, of which $39.2 million
was related to operated drilling and completion (“D&C”) capital
and $5.5 million was related to D&C spending on non-operated
wells. 90% of all D&C capital was related to Merge activity.
The remaining $2.4 million of capital spend was related to leasing
and maintenance. Year-to-date capital expenditures for the Company
total $110.5 million.
Initial 2018 Third Quarter Production
Guidance
Jones Energy is announcing initial production
guidance of 1.8 to 2.0 MMBoe, or 19,500 to 21,700 Boe/d, for the
2018 third quarter. Full-year production and cost guidance remain
suspended and subject to the Company’s ongoing review of its
financial and operating plans. The following table provides a
breakout of initial 2018 third quarter production guidance.
| |
|
| 3Q 2018
Production Guidance |
3Q18E |
| Total Production
(MMBoe) |
1.8 –
2.0 |
| Average Daily
Production (MBoe/d) |
19.5 –
21.7 |
|
Crude Oil (MBbl/d) |
5.6 –
6.2 |
|
Natural Gas (MMcf/d) |
48.3 –
53.7 |
|
NGLs (MBbl/d) |
5.9 – 6.5 |
Liquidity and Hedging
During the second quarter of 2018, the Company
used $25 million of cash to pay down its revolver balance and had
no outstanding borrowings as of June 30, 2018 under that facility.
Jones Energy also amended the terms of its credit facility,
removing all financial maintenance covenants and aligning other
covenants to those contained in the Company’s 9.25% senior secured
first lien notes and reducing the borrowing base to twenty-five
dollars. As of June 30, 2018, the Company had approximately $148
million in cash and as of August 2, 2018 had approximately $129
million of cash. The following table summarizes the Company’s net
commodity derivative contracts outstanding as of August 6,
2018:
| |
|
3Q18 |
4Q18 |
|
|
|
2019 |
|
2020 |
|
| Oil Hedges |
|
|
|
|
|
|
|
| Swaps Sold (MBbl) |
|
|
630 |
|
620 |
|
|
|
1,020 |
|
660 |
|
| Price ($/Bbl) |
|
$ |
50.94 |
$ |
50.92 |
|
|
$ |
50.04 |
$ |
50.00 |
|
| |
|
|
|
|
|
|
|
| Collars (MBbl) |
|
|
- |
|
- |
|
|
|
810 |
|
- |
|
| Floor ($/Bbl) |
|
|
- |
|
- |
|
|
$ |
48.52 |
|
- |
|
| Ceiling ($/Bbl) |
|
|
- |
|
- |
|
|
$ |
59.64 |
|
- |
|
|
|
|
|
|
|
|
|
|
| Gas Hedges |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| Swaps Sold (MMcf) |
|
|
4,800 |
|
4,800 |
|
|
|
7,260 |
|
8,400 |
|
| Price ($/Mcf) |
|
$ |
2.98 |
$ |
2.97 |
|
|
$ |
2.84 |
$ |
2.79 |
|
| |
|
|
|
|
|
|
|
| Collars (MMcf) |
|
|
- |
|
- |
|
|
|
11,890 |
|
- |
|
| Floor ($/Mcf) |
|
|
- |
|
- |
|
|
$ |
2.55 |
|
- |
|
| Ceiling ($/Mcf) |
|
|
- |
|
- |
|
|
$ |
3.19 |
|
- |
|
| |
|
|
|
|
|
|
|
| NGL Swaps (MBbl) |
|
|
|
|
|
|
|
| Ethane |
|
|
- |
|
- |
|
|
|
- |
|
- |
|
| Propane |
|
|
205 |
|
195 |
|
|
|
- |
|
- |
|
| Iso Butane |
|
|
30 |
|
30 |
|
|
|
- |
|
- |
|
| Butane |
|
|
80 |
|
75 |
|
|
|
- |
|
- |
|
| Natural Gasoline |
|
|
90 |
|
90 |
|
|
|
- |
|
- |
|
| Total NGLs |
|
|
405 |
|
390 |
|
|
|
- |
|
- |
|
| |
|
|
|
|
|
|
|
| NGL Swap
Prices ($/Gal) |
|
|
|
|
|
|
| Ethane |
|
|
- |
|
- |
|
|
|
- |
|
- |
|
| Propane |
|
$ |
0.57 |
$ |
0.57 |
|
|
|
- |
|
- |
|
| Iso Butane |
|
|
0.72 |
|
0.72 |
|
|
|
- |
|
- |
|
| Butane |
|
|
0.69 |
|
0.69 |
|
|
|
- |
|
- |
|
| Natural Gasoline |
|
|
1.05 |
|
1.05 |
|
|
|
- |
|
- |
|
Jones Energy will not hold a conference call in
conjunction with its second quarter 2018 earnings release and
expects to file its 10-Q with the SEC on Wednesday,
August 8, 2018.
About Jones Energy
Jones Energy, Inc. is an independent oil and
natural gas company engaged in the exploration, development and
acquisition of oil and natural gas properties in the Anadarko basin
of Oklahoma and Texas. Additional information about Jones
Energy may be found on the Company’s website at:
www.jonesenergy.com.
Investor Contact:Page Portas,
512-493-4834Investor Relations AssociateOrRobert Brooks,
512-328-2953Executive Vice President & CFO
ir@jonesenergy.com
____________________________
1Adjusted net income, adjusted net income per
share and EBITDAX are supplemental non-GAAP financial measures that
are used by management and external users of our consolidated
financial statements, such as industry analysts, investors, lenders
and rating agencies. For additional information, including
reconciliations to the most comparable GAAP financial measures,
please see “Non-GAAP Financial Measures and Reconciliations”
below.
2As defined in the Certificate of Designations
for the Preferred Stock and as adjusted in accordance with the
terms of the Certificate of Designations.
Forward-Looking Statements
This press release contains 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. Without limiting the
generality of the foregoing, forward-looking statements contained
in this press release specifically include the expectations of
plans, strategies, objectives and anticipated financial and
operating results of the Company, updated guidance regarding the
number of rigs that will be running in 2018, the timing and
location of the development of the Merge, expectations regarding
our liability management program and potential strategic
transactions, including the proposed DrillCo, levels of single-well
authorizations for expenditures and the cost to drill and complete
wells and the resultant impact on the 2018 capital budget, and
projections regarding total production, average daily production,
percentage liquids, operating expenses, production and ad valorem
taxes as a percentage of revenue, cash G&A expenses and capital
expenditure levels for the full year and third quarter of
2018. These statements are based on certain assumptions made
by the Company based on management’s experience and perception of
historical trends, current economic and market conditions,
anticipated future developments and other factors believed to be
appropriate. Such statements are subject to a number of
assumptions, risks and uncertainties, many of which are beyond the
control of the Company, which may cause actual results to differ
materially from those implied or expressed by the forward-looking
statements. These include, but are not limited to, changes in
oil and natural gas prices, weather and environmental conditions,
the timing and amount of planned capital expenditures, availability
and method of funding of acquisitions and divestitures, or the
ability to integrate any acquisitions, uncertainties in estimating
proved reserves and forecasting production results, operational
factors affecting the commencement or maintenance of producing
wells, the condition of the capital markets generally, as well as
the Company’s ability to access them, the proximity to and capacity
of transportation facilities, and uncertainties regarding
environmental regulations or litigation and other legal or
regulatory developments affecting the Company’s business and other
important factors that could cause actual results to differ
materially from those projected as described in the Company’s
reports filed with the SEC.
Any forward-looking statement speaks only as of
the date on which such statement is made and the Company undertakes
no obligation to correct or update any forward-looking statement,
whether as a result of new information, future events or otherwise,
except as required by applicable law.
Jones Energy, Inc.Consolidated Statement of
Operations (Unaudited)
| |
|
|
|
| |
Three months ended
June 30, |
|
Six months ended
June 30, |
|
(in thousands of dollars except per share data) |
2018 |
|
2017 |
|
2018 |
|
2017 |
| Operating
revenues |
|
|
|
|
|
|
|
|
|
|
|
| Oil and gas sales |
$ |
64,748 |
|
|
$ |
48,114 |
|
|
$ |
122,886 |
|
|
$ |
88,791 |
|
| Other revenues |
|
507 |
|
|
|
512 |
|
|
|
(142 |
) |
|
|
1,068 |
|
| Total operating
revenues |
|
65,255 |
|
|
|
48,626 |
|
|
|
122,744 |
|
|
|
89,859 |
|
| Operating costs
and expenses |
|
|
|
|
|
|
|
|
|
|
|
| Lease operating |
|
11,592 |
|
|
|
9,425 |
|
|
|
21,821 |
|
|
|
18,231 |
|
| Production and ad
valorem taxes |
|
3,284 |
|
|
|
2,790 |
|
|
|
6,035 |
|
|
|
1,884 |
|
| Transportation and
processing costs |
|
885 |
|
|
|
— |
|
|
|
1,591 |
|
|
|
— |
|
| Exploration |
|
1,528 |
|
|
|
6,725 |
|
|
|
4,827 |
|
|
|
9,669 |
|
| Depletion, depreciation
and amortization |
|
44,729 |
|
|
|
45,336 |
|
|
|
86,170 |
|
|
|
80,990 |
|
| Impairment of oil and
gas properties |
|
— |
|
|
|
148,016 |
|
|
|
— |
|
|
|
148,016 |
|
| Accretion of ARO
liability |
|
264 |
|
|
|
266 |
|
|
|
515 |
|
|
|
467 |
|
| General and
administrative |
|
7,896 |
|
|
|
8,633 |
|
|
|
15,466 |
|
|
|
16,674 |
|
| Total operating
expenses |
|
70,178 |
|
|
|
221,191 |
|
|
|
136,425 |
|
|
|
275,931 |
|
| Operating income
(loss) |
|
(4,923 |
) |
|
|
(172,565 |
) |
|
|
(13,681 |
) |
|
|
(186,072 |
) |
| Other income
(expense) |
|
|
|
|
|
|
|
|
|
|
|
| Interest expense |
|
(23,055 |
) |
|
|
(12,677 |
) |
|
|
(44,917 |
) |
|
|
(25,564 |
) |
| Net gain (loss) on
commodity derivatives |
|
(30,145 |
) |
|
|
21,527 |
|
|
|
(39,167 |
) |
|
|
43,847 |
|
| Other income
(expense) |
|
5,774 |
|
|
|
27,501 |
|
|
|
13,504 |
|
|
|
28,081 |
|
| Other income (expense),
net |
|
(47,426 |
) |
|
|
36,351 |
|
|
|
(70,580 |
) |
|
|
46,364 |
|
| Income (loss) before
income tax |
|
(52,349 |
) |
|
|
(136,214 |
) |
|
|
(84,261 |
) |
|
|
(139,708 |
) |
| Income tax
provision (benefit) |
|
(5,418 |
) |
|
|
(2,236 |
) |
|
|
(8,410 |
) |
|
|
(2,215 |
) |
| Net income (loss) |
|
(46,931 |
) |
|
|
(133,978 |
) |
|
|
(75,851 |
) |
|
|
(137,493 |
) |
| Net income (loss)
attributable to non-controlling interests |
|
(5,416 |
) |
|
|
(51,762 |
) |
|
|
(8,975 |
) |
|
|
(53,890 |
) |
| Net income
(loss) attributable to controlling interests |
$ |
(41,515 |
) |
|
$ |
(82,216 |
) |
|
$ |
(66,876 |
) |
|
$ |
(83,603 |
) |
| Dividends and accretion
on preferred stock |
|
(1,963 |
) |
|
|
(1,966 |
) |
|
|
(3,931 |
) |
|
|
(3,993 |
) |
| Net income
(loss) attributable to common shareholders |
$ |
(43,478 |
) |
|
$ |
(84,182 |
) |
|
$ |
(70,807 |
) |
|
$ |
(87,596 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| Earnings (loss)
per share: |
|
|
|
|
|
|
|
|
|
|
|
| Basic - Net income
(loss) attributable to common shareholders |
$ |
(0.47 |
) |
|
$ |
(1.28 |
) |
|
$ |
(0.77 |
) |
|
$ |
(1.37 |
) |
| Diluted - Net income
(loss) attributable to common shareholders |
$ |
(0.47 |
) |
|
$ |
(1.28 |
) |
|
$ |
(0.77 |
) |
|
$ |
(1.37 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average Class A shares outstanding: |
|
|
|
|
|
|
|
|
|
| Basic |
|
93,429 |
|
|
|
65,681 |
|
|
|
92,253 |
|
|
|
63,948 |
|
| Diluted |
|
93,429 |
|
|
|
65,681 |
|
|
|
92,253 |
|
|
|
63,948 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jones Energy, Inc.Consolidated Balance Sheet
(Unaudited)
| |
|
|
|
| |
June 30, |
|
December 31, |
|
(in thousands of dollars) |
2018 |
|
2017 |
|
Assets |
|
|
|
| Current assets |
|
|
|
|
|
| Cash and
cash equivalents |
$ |
148,070 |
|
|
$ |
19,472 |
|
| Accounts
receivable, net |
|
|
|
|
|
| Oil and
gas sales |
|
39,990 |
|
|
|
34,492 |
|
| Joint
interest owners |
|
34,789 |
|
|
|
31,651 |
|
|
Other |
|
1,167 |
|
|
|
1,236 |
|
| Commodity
derivative assets |
|
723 |
|
|
|
3,474 |
|
| Other
current assets |
|
7,070 |
|
|
|
14,376 |
|
| Total
current assets |
|
231,809 |
|
|
|
104,701 |
|
| Oil and gas properties,
net, at cost under the successful efforts method |
|
1,620,083 |
|
|
|
1,597,040 |
|
| Other property, plant
and equipment, net |
|
2,243 |
|
|
|
2,719 |
|
| Commodity derivative
assets |
|
1,371 |
|
|
|
172 |
|
| Other assets |
|
993 |
|
|
|
5,431 |
|
| Total assets |
$ |
1,856,499 |
|
|
$ |
1,710,063 |
|
| Liabilities and
Stockholders' Equity |
|
|
|
|
|
| Current
liabilities |
|
|
|
|
|
| Trade accounts
payable |
$ |
43,725 |
|
|
$ |
72,663 |
|
| Oil and
gas sales payable |
|
39,930 |
|
|
|
31,462 |
|
| Accrued
liabilities |
|
46,199 |
|
|
|
21,604 |
|
| Commodity
derivative liabilities |
|
46,686 |
|
|
|
36,709 |
|
| Other
current liabilities |
|
3,863 |
|
|
|
4,049 |
|
| Total
current liabilities |
|
180,403 |
|
|
|
166,487 |
|
| Long-term
debt |
|
978,727 |
|
|
|
759,316 |
|
| Deferred
revenue |
|
4,675 |
|
|
|
5,457 |
|
| Commodity derivative
liabilities |
|
14,949 |
|
|
|
8,788 |
|
| Asset retirement
obligations |
|
20,146 |
|
|
|
19,652 |
|
| Liability under tax
receivable agreement |
|
50,529 |
|
|
|
59,596 |
|
| Other liabilities |
|
874 |
|
|
|
811 |
|
| Deferred tax
liabilities |
|
9,732 |
|
|
|
14,281 |
|
| Total liabilities |
|
1,260,035 |
|
|
|
1,034,388 |
|
| Commitments and
contingencies (Note 15) |
|
|
|
|
|
| Mezzanine
equity |
|
|
|
|
|
| Series A preferred
stock, $0.001 par value; 1,837,995 shares issued and outstanding at
June 30, 2018 and 1,839,995 shares issued and outstanding
at December 31, 2017 |
|
91,534 |
|
|
|
89,539 |
|
|
Stockholders' equity |
|
|
|
|
|
| Class A common stock,
$0.001 par value; 93,799,481 shares issued and 93,776,879 shares
outstanding at June 30, 2018 and 90,139,840 shares issued
and 90,117,238 shares outstanding at
December 31, 2017 |
|
94 |
|
|
|
90 |
|
| Class B
common stock, $0.001 par value; 9,074,330 shares issued and
outstanding at June 30, 2018 and 9,627,821 shares issued
and outstanding at December 31, 2017 |
|
9 |
|
|
|
10 |
|
| Treasury
stock, at cost: 22,602 shares at June 30, 2018 and
December 31, 2017 |
|
(358 |
) |
|
|
(358 |
) |
|
Additional paid-in-capital |
|
611,242 |
|
|
|
606,319 |
|
| Retained
(deficit) / earnings |
|
(207,081 |
) |
|
|
(136,274 |
) |
|
Stockholders' equity |
|
403,906 |
|
|
|
469,787 |
|
| Non-controlling
interest |
|
101,024 |
|
|
|
116,349 |
|
| Total stockholders’
equity |
|
504,930 |
|
|
|
586,136 |
|
| Total liabilities and
stockholders' equity |
$ |
1,856,499 |
|
|
$ |
1,710,063 |
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Jones Energy, Inc.Selected Financial and
Operating Statistics
The following table sets forth summary data regarding revenues,
production volumes, average prices and average production costs
associated with our sale of oil and natural gas for the periods
indicated:
| |
|
|
| |
|
Three Months Ended June 30, |
| |
|
2018 |
|
2017 |
|
Change |
| Revenues (in
thousands of dollars): |
|
|
|
|
|
|
|
|
|
| Oil and gas sales |
|
$ |
64,748 |
|
|
$ |
48,114 |
|
$ |
16,634 |
|
| Other revenues |
|
|
507 |
|
|
|
512 |
|
|
(5 |
) |
| Current period
settlements of matured derivative contracts |
|
|
(12,537 |
) |
|
|
17,921 |
|
|
(30,458 |
) |
| Total operating
revenues |
|
$ |
52,718 |
|
|
$ |
66,547 |
|
$ |
(13,829 |
) |
| |
|
|
|
|
|
|
|
|
|
| Net production
volumes: |
|
|
|
|
|
|
|
|
|
| Oil (MBbls) |
|
|
638 |
|
|
|
525 |
|
|
113 |
|
| Natural gas (MMcf) |
|
|
5,761 |
|
|
|
5,836 |
|
|
(75 |
) |
| NGLs (MBbls) |
|
|
674 |
|
|
|
668 |
|
|
6 |
|
| Total (MBoe) |
|
|
2,272 |
|
|
|
2,166 |
|
|
107 |
|
| Average net
(Boe/d) |
|
|
24,967 |
|
|
|
23,802 |
|
|
1,165 |
|
| |
|
|
|
|
|
|
|
|
|
| Average sales
price, unhedged: |
|
|
|
|
|
|
|
|
|
| Oil (per Bbl),
unhedged |
|
$ |
65.73 |
|
|
$ |
44.40 |
|
$ |
21.33 |
|
| Natural gas (per Mcf),
unhedged |
|
|
1.22 |
|
|
|
2.19 |
|
|
(0.97 |
) |
| NGLs (per Bbl),
unhedged |
|
|
23.40 |
|
|
|
18.02 |
|
|
5.38 |
|
| Combined (per Boe),
unhedged |
|
|
28.50 |
|
|
|
22.21 |
|
|
6.29 |
|
| |
|
|
|
|
|
|
|
|
|
| Average sales
price, hedged: |
|
|
|
|
|
|
|
|
|
| Oil (per Bbl),
hedged |
|
$ |
49.77 |
|
|
$ |
61.30 |
|
$ |
(11.53 |
) |
| Natural gas (per Mcf),
hedged |
|
|
1.45 |
|
|
|
4.04 |
|
|
(2.59 |
) |
| NGLs (per Bbl),
hedged |
|
|
17.93 |
|
|
|
15.36 |
|
|
2.57 |
|
| Combined (per Boe),
hedged |
|
|
22.98 |
|
|
|
30.49 |
|
|
(7.51 |
) |
| |
|
|
|
|
|
|
|
|
|
| Average costs
(per BOE): |
|
|
|
|
|
|
|
|
|
| Lease operating |
|
$ |
5.10 |
|
|
$ |
4.35 |
|
$ |
0.75 |
|
| Production and ad
valorem taxes |
|
|
1.45 |
|
|
|
1.29 |
|
|
0.16 |
|
| Depletion, depreciation
and amortization |
|
|
19.69 |
|
|
|
20.93 |
|
|
(1.24 |
) |
| General and
administrative |
|
|
3.48 |
|
|
|
3.99 |
|
|
(0.51 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Jones Energy, Inc.Consolidated Statement of
Cash Flow Data (Unaudited)
| |
|
Six months ended
June 30, |
|
(in thousands of dollars) |
|
2018 |
|
2017 |
| Cash flows from
operating activities |
|
|
|
|
|
|
| Net income (loss) |
|
$ |
(75,851 |
) |
|
$ |
(137,493 |
) |
| Adjustments to
reconcile net income (loss) to net cash provided by operating
activities |
|
|
|
|
|
|
|
Depletion, depreciation, and amortization |
|
|
86,170 |
|
|
|
80,990 |
|
|
Exploration (dry hole and lease abandonment) |
|
|
907 |
|
|
|
6,880 |
|
|
Impairment of oil and gas properties |
|
|
— |
|
|
|
148,016 |
|
| Accretion
of ARO liability |
|
|
515 |
|
|
|
467 |
|
|
Amortization of debt issuance costs |
|
|
7,261 |
|
|
|
1,953 |
|
| Stock
compensation expense |
|
|
974 |
|
|
|
3,736 |
|
| Deferred
and other non-cash compensation expense |
|
|
84 |
|
|
|
180 |
|
|
Amortization of deferred revenue |
|
|
(782 |
) |
|
|
(942 |
) |
| (Gain)
loss on commodity derivatives |
|
|
39,167 |
|
|
|
(43,847 |
) |
| (Gain)
loss on sales of assets |
|
|
(1,945 |
) |
|
|
119 |
|
| Deferred
income tax provision |
|
|
(8,410 |
) |
|
|
6 |
|
| Change in
liability under tax receivable agreement |
|
|
(9,081 |
) |
|
|
(28,266 |
) |
| Other -
net |
|
|
376 |
|
|
|
1,307 |
|
| Changes
in operating assets and liabilities |
|
|
|
|
|
|
| Accounts
receivable |
|
|
(9,246 |
) |
|
|
(4,188 |
) |
| Other
assets |
|
|
7,574 |
|
|
|
(12,407 |
) |
| Accrued
interest expense |
|
|
15,583 |
|
|
|
(1,301 |
) |
| Accounts
payable and accrued liabilities |
|
|
(6,484 |
) |
|
|
6,268 |
|
| Net cash
provided by operations |
|
|
46,812 |
|
|
|
21,478 |
|
| Cash flows from
investing activities |
|
|
|
|
|
|
| Additions to oil and
gas properties |
|
|
(114,832 |
) |
|
|
(107,250 |
) |
| Net adjustments to
purchase price of properties acquired |
|
|
— |
|
|
|
2,391 |
|
| Proceeds from sales of
assets |
|
|
6,566 |
|
|
|
2,730 |
|
| Acquisition of other
property, plant and equipment |
|
|
(71 |
) |
|
|
(436 |
) |
| Current period
settlements of matured derivative contracts |
|
|
(25,655 |
) |
|
|
45,738 |
|
| Net cash
(used in) investing |
|
|
(133,992 |
) |
|
|
(56,827 |
) |
| Cash flows from
financing activities |
|
|
|
|
|
|
| Proceeds from issuance
of long-term debt |
|
|
20,000 |
|
|
|
75,000 |
|
| Repayment of long-term
debt |
|
|
(231,000 |
) |
|
|
(72,000 |
) |
| Proceeds from senior
notes |
|
|
438,867 |
|
|
|
— |
|
| Payment of debt
issuance costs |
|
|
(11,537 |
) |
|
|
— |
|
| Payment of cash
dividends on preferred stock |
|
|
(97 |
) |
|
|
(3,367 |
) |
| Net distributions paid
to JEH unitholders |
|
|
— |
|
|
|
(562 |
) |
| Net payments for share
based compensation |
|
|
(455 |
) |
|
|
(462 |
) |
| Proceeds from sale of
common stock |
|
|
— |
|
|
|
8,352 |
|
| Net cash
provided by / (used in) financing |
|
|
215,778 |
|
|
|
6,961 |
|
| Net
increase (decrease) in cash and cash equivalents |
|
|
128,598 |
|
|
|
(28,388 |
) |
| Cash and cash
equivalents |
|
|
|
|
|
|
| Beginning of
period |
|
|
19,472 |
|
|
|
34,642 |
|
| End of period |
|
$ |
148,070 |
|
|
$ |
6,254 |
|
| Supplemental
disclosure of cash flow information |
|
|
|
|
|
|
| Cash paid for interest,
net of capitalized interest |
|
$ |
23,055 |
|
|
$ |
24,064 |
|
| Change in accrued
additions to oil and gas properties |
|
|
(1,425 |
) |
|
|
13,155 |
|
| Asset retirement
obligations incurred, including changes in estimate |
|
|
280 |
|
|
|
395 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Jones Energy, Inc.Non-GAAP Financial Measures
and Reconciliations
EBITDAX is a supplemental non-GAAP financial
measure that is used by management and external users of our
consolidated financial statements, such as industry analysts,
investors, lenders and rating agencies.
We define EBITDAX as earnings before interest
expense, income taxes, depreciation, depletion and amortization,
exploration expense, gains and losses from derivatives less the
current period settlements of matured derivative contracts, and the
other items described below. EBITDAX is not a measure of net
income as determined by United States generally accepted accounting
principles, or GAAP. Management believes EBITDAX is useful
because it allows them to more effectively evaluate our operating
performance and compare the results of our operations from period
to period and against our peers without regard to our financing
methods or capital structure. We exclude the items listed
above from net income in arriving at EBITDAX because these amounts
can vary substantially from company to company within our industry
depending upon accounting methods and book values of assets,
capital structures and the method by which the assets were
acquired. EBITDAX has limitations as an analytical tool and
should not be considered as an alternative to, or more meaningful
than, net income as determined in accordance with GAAP or as an
indicator of our liquidity. Certain items excluded from EBITDAX are
significant components in understanding and assessing a company’s
financial performance, such as a company’s cost of capital and tax
structure, as well as the historical costs of depreciable
assets. Our presentation of EBITDAX should not be construed
as an inference that our results will be unaffected by unusual or
non-recurring items and should not be viewed as a substitute for
GAAP. Our computations of EBITDAX may not be comparable to
other similarly titled measures of other companies.
The following table sets forth a reconciliation of
net income (loss) as determined in accordance with GAAP to EBITDAX
for the periods indicated:
| |
|
|
|
| |
Three Months Ended
June 30, |
|
Six Months Ended
June 30, |
|
(in thousands of dollars) |
2018 |
|
2017 |
|
2018 |
|
2017 |
| Reconciliation
of net income to EBITDAX |
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
$ |
(46,931 |
) |
|
$ |
(133,978 |
) |
|
$ |
(75,851 |
) |
|
$ |
(137,493 |
) |
| Interest expense |
|
23,055 |
|
|
|
12,677 |
|
|
|
44,917 |
|
|
|
25,564 |
|
| Exploration
expense |
|
1,528 |
|
|
|
6,725 |
|
|
|
4,827 |
|
|
|
9,669 |
|
| Income taxes |
|
(5,418 |
) |
|
|
(2,236 |
) |
|
|
(8,410 |
) |
|
|
(2,215 |
) |
| Depreciation and
depletion |
|
44,729 |
|
|
|
45,336 |
|
|
|
86,170 |
|
|
|
80,990 |
|
| Impairment of oil and
natural gas properties |
|
— |
|
|
|
148,016 |
|
|
|
— |
|
|
|
148,016 |
|
| Accretion of ARO
liability |
|
264 |
|
|
|
266 |
|
|
|
515 |
|
|
|
467 |
|
| Change in TRA
liability |
|
(5,599 |
) |
|
|
(27,598 |
) |
|
|
(9,081 |
) |
|
|
(28,266 |
) |
| Other non-cash
charges |
|
25 |
|
|
|
1,266 |
|
|
|
376 |
|
|
|
1,307 |
|
| Stock compensation
expense |
|
(356 |
) |
|
|
1,764 |
|
|
|
974 |
|
|
|
3,736 |
|
| Deferred and other
non-cash compensation expense |
|
7 |
|
|
|
44 |
|
|
|
84 |
|
|
|
180 |
|
| Net (gain) loss on
derivative contracts |
|
30,145 |
|
|
|
(21,527 |
) |
|
|
39,167 |
|
|
|
(43,847 |
) |
| Current period
settlements of matured derivative contracts |
|
(12,537 |
) |
|
|
17,921 |
|
|
|
(21,477 |
) |
|
|
44,253 |
|
| Amortization of
deferred revenue |
|
(408 |
) |
|
|
(484 |
) |
|
|
(782 |
) |
|
|
(942 |
) |
| (Gain) loss on sale of
assets |
|
1,179 |
|
|
|
55 |
|
|
|
(1,945 |
) |
|
|
119 |
|
| Financing expenses and
other loan fees |
|
34 |
|
|
|
24 |
|
|
|
59 |
|
|
|
48 |
|
| EBITDAX |
$ |
29,717 |
|
|
$ |
48,271 |
|
|
$ |
59,543 |
|
|
$ |
101,586 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jones Energy, Inc. Non-GAAP Financial
Measures and Reconciliations
Adjusted Net Income is a supplemental non-GAAP financial measure
that is used by management and external users of the Company’s
consolidated financial statements. We define Adjusted Net
Income as net income excluding the impact of certain non-cash items
including gains or losses on commodity derivative instruments not
yet settled, impairment of oil and gas properties, non-cash
compensation expense, and the other items described below. We
believe adjusted net income and adjusted earnings per share are
useful to investors because they provide readers with a more
meaningful measure of our profitability before recording certain
items for which the timing or amount cannot be reasonably
determined. However, these measures are provided in addition
to, not as an alternative for, and should be read in conjunction
with, the information contained in our financial statements
prepared in accordance with GAAP. The following table
provides a reconciliation of net income (loss) as determined in
accordance with GAAP to adjusted net income for the periods
indicated:
| |
|
|
| |
|
Three Months Ended
June 30, |
|
(in thousands except per share data) |
|
2018 |
|
2017 |
| Net income
(loss) |
|
$ |
(46,931 |
) |
|
$ |
(133,978 |
) |
| Net
(gain) loss on derivative contracts |
|
|
30,145 |
|
|
|
(21,527 |
) |
| Current
period settlements of matured derivative contracts |
|
|
(12,537 |
) |
|
|
17,921 |
|
|
Impairment of oil and gas properties |
|
|
— |
|
|
|
148,016 |
|
|
Exploration |
|
|
1,528 |
|
|
|
6,725 |
|
| Non-cash
stock compensation expense |
|
|
(356 |
) |
|
|
1,764 |
|
| Deferred
and other non-cash compensation expense |
|
|
7 |
|
|
|
44 |
|
| Financing
expenses |
|
|
638 |
|
|
|
— |
|
| Tax
impact of adjusting items (1) |
|
|
(3,645 |
) |
|
|
(31,247 |
) |
| Change in
TRA liability |
|
|
(5,599 |
) |
|
|
(27,598 |
) |
| Change in
valuation allowance |
|
|
8,067 |
|
|
|
44,577 |
|
| Adjusted
net income (loss) |
|
|
(28,683 |
) |
|
|
4,697 |
|
| Adjusted net income
(loss) attributable to non-controlling interests |
|
|
(3,659 |
) |
|
|
(3,991 |
) |
| Adjusted net income
(loss) attributable to controlling interests |
|
|
(25,024 |
) |
|
|
8,688 |
|
| Dividends and accretion
on preferred stock |
|
|
(1,963 |
) |
|
|
(1,966 |
) |
| Adjusted net income
(loss) attributable to common shareholders |
|
$ |
(26,987 |
) |
|
$ |
6,722 |
|
| |
|
|
|
|
|
|
| Weighted
average Class A shares outstanding: |
|
|
|
|
|
|
|
Basic |
|
|
93,429 |
|
|
|
65,681 |
|
|
Diluted |
|
|
93,429 |
|
|
|
65,681 |
|
| |
|
|
|
|
|
|
| Adjusted earnings per
share (basic and diluted) |
|
$ |
(0.29 |
) |
|
$ |
0.10 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
Jones Energy, Inc.Non-GAAP Financial Measures
and Reconciliations
Adjusted Earnings per Share is a supplemental non-GAAP financial
measure that is used by management and external users of the
Company’s consolidated financial statements. We define
Adjusted Earnings per Share as earnings per share plus that portion
of the components of adjusted net income allocated to the
controlling interests divided by weighted average shares
outstanding. We believe adjusted earnings per share is useful
to investors because it provides readers with a more meaningful
measure of our profitability before recording certain items for
which the timing or amount cannot be reasonably determined.
However, these measures are provided in addition to, not as an
alternative for, and should be read in conjunction with, the
information contained in our financial statements prepared in
accordance with GAAP. The following table provides a
reconciliation of earnings per share to adjusted earnings per share
for the period indicated:
| |
|
|
|
| |
|
|
Three Months Ended
June 30, |
| |
|
|
2018 |
|
2017 |
| Earnings per
share (basic and diluted): |
|
$ |
(0.47 |
) |
$ |
(1.28 |
) |
| Net
(gain) loss on derivative contracts |
|
|
0.29 |
|
|
(0.23 |
) |
| Current
period settlements of matured derivative contracts |
|
|
(0.12 |
) |
|
0.19 |
|
|
Impairment of oil and gas properties |
|
|
— |
|
|
1.55 |
|
|
Exploration |
|
|
0.01 |
|
|
0.07 |
|
| Non-cash
stock compensation expense |
|
|
— |
|
|
0.02 |
|
| Deferred
and other non-cash compensation expense |
|
|
— |
|
|
— |
|
| Financing
expenses |
|
|
0.01 |
|
|
— |
|
| Tax
impact of adjusting items (1) |
|
|
(0.04 |
) |
|
(0.48 |
) |
| Change in
TRA liability |
|
|
(0.06 |
) |
|
(0.42 |
) |
| Change in
valuation allowance |
|
|
0.09 |
|
|
0.68 |
|
| Adjusted
earnings per share (basic and diluted) |
|
$ |
(0.29 |
) |
$ |
0.10 |
|
| |
|
|
|
|
|
| |
|
|
|
|
|
| Weighted
average Class A shares outstanding: |
|
|
|
|
|
|
Basic |
|
|
93,429 |
|
|
65,681 |
|
|
Diluted |
|
|
93,429 |
|
|
65,681 |
|
| Effective tax rate on
net income (loss) attributable to controlling interests |
|
|
21.3 |
% |
|
40.3 |
% |