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CST: 13/12/2019 07:55:45   

Harvest Oil & Gas Announces Third Quarter 2019 Results

28 Days ago

HOUSTON, Nov. 14, 2019 (GLOBE NEWSWIRE) -- Harvest Oil & Gas Corp. (OTCQX: HRST) (“Harvest” or the “Company”) today announced results for the third quarter of 2019 and the filing of its Form 10-Q with the Securities and Exchange Commission (“SEC”) on November 14, 2019.

Key Highlights

  • Paid a one-time $7.00 cash dividend per share on October 28, 2019 to shareholders of record as of October 18, 2019
  • Entered into a new $10 million revolving credit facility with Regions Bank
  • Average daily production was 98.1 MMcfe for the third quarter of 2019
  • Completed previously announced sale of certain oil and gas interests in the Barnett Shale for $62.4 million, net of preliminary purchase price adjustments, and anticipate a subsequent closing for an additional $6.4 million, subject to purchase price adjustments, in the fourth quarter of 2019
  • Completed previously announced sale of certain oil and gas properties in the Mid-Continent area for $5.3 million, net of preliminary purchase price adjustments
  • In conjunction with the Barnett Shale and Mid-Continent area divestitures, unwound certain commodity derivative contracts for cash settlements received of $7.9 million
  • In October 2019, signed a definitive agreement to sell its Permian Basin oil and gas interests for $3.0 million, subject to purchase price adjustments, which is expected to close at the end of the fourth quarter of 2019

Third Quarter 2019 Financial Results

                   
      Third Quarter   Second Quarter
$ in millions unless noted otherwise     2019   2019
Average daily production (MMcfe/d)        98.1          112.3    
Total revenues     $  23.2       $  30.6    
Total assets        289.9          317.9    
Net loss        (19.5 )        (60.9 )  
Adjusted EBITDAX (a non-GAAP  financial measure) (1)        9.7          6.9    
Total debt        -          -    
Net cash provided by operating activities        14.9          9.7    
Additions to oil and natural gas properties (2)        0.3          1.4    

(1)   Adjusted EBITDAX is a Non-GAAP financial measure and is described in the attached table under “Non-GAAP Measures”
(2)   Represents cash payments during the period

For the third quarter of 2019, Harvest reported a net loss of $19.5 million, or $(1.93) per basic and diluted weighted average share outstanding compared to a net loss of $60.9 million, or $(6.05) per basic and diluted weighted average share outstanding, for the second quarter of 2019. For the third quarter of 2018, a net loss of $9.8 million or $(0.97) per basic and diluted weighted average share outstanding was reported. Included in the 2019 third quarter net loss were the following items:

  • $16.3 million of impairment of oil and natural gas properties primarily related to the write down of properties located in the Permian Basin and Mid-Continent area to their fair value, properties located in the Barnett Shale, Mid-Continent area, and San Juan Basin which were sold as of September 30, 2019 and the Monroe Field which was held for sale as of September 30, 2019,
  • $8.2 million of non-cash losses on commodity derivatives,
  • $1.4 million of stock-based compensation costs contained in general and administrative expenses,
  • $0.8 million of divestiture and transaction related expense contained in general and administrative expenses, and
  • $0.7 million related to additional severance tax assessments for properties sold in the San Juan Basin contained in general and administrative expenses.

Production for the third quarter of 2019 was 6.3 Bcf of natural gas, 145 MBbls of oil and 316 MBbls of natural gas liquids (NGLs), or 98.1 million cubic feet equivalent per day (MMcfe/d). This represents a 13 percent decrease from the second quarter of 2019 production of 112.3 MMcfe/d and a 44 percent decrease from the third quarter of 2018 production of 175.5 MMcfe/d. The decrease in production from the second quarter of 2019 was primarily due to the divestiture of oil and gas properties in the Barnett Shale and Mid-Continent area that closed in September 2019. The decrease in production from the third quarter of 2018 was primarily due to the divestiture of the Central Texas and Karnes County, Texas properties that closed in August 2018, the Central Texas area divestiture that closed in December 2018, the Mid-Continent area divestitures that closed in December 2018, January 2019, April 2019 and September 2019, the San Juan Basin divestiture that closed in April 2019, and the Barnett Shale divestiture that closed in September 2019.

Adjusted EBITDAX for the third quarter of 2019 was $9.7 million, a 42 percent increase over the second quarter of 2019 and a 66 percent decrease from the third quarter of 2018. The increase in Adjusted EBITDAX over the second quarter of 2019 was primarily due an increase in cash settlements received on commodity derivative contracts and on the termination of commodity derivative contracts in conjunction with the Barnett Shale and Mid-Continent area divestitures, partially offset by the Barnett Shale and Mid-Continent divestitures that closed in September 2019, a decrease in realized natural gas, natural gas liquids and crude oil prices, a decrease in other income, and an increase in general and administrative expenses. The decrease in Adjusted EBITDAX from the third quarter of 2018 was primarily due to the divestitures that closed in 2018, January 2019, April 2019 and September 2019, and a decrease in realized natural gas, natural gas liquids and crude oil prices, partially offset by cash settlements received on derivative contracts, and an increase in other income. Adjusted EBITDAX is a Non-GAAP financial measures and is described in the attached table under “Non-GAAP Measures.”

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 November 14, 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, and Louisiana, and the Permian Basin. 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, risks relating to pending asset sales, including risks relating to the consummation of such sales in accordance with their terms or at all, 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

             
    Three Months Ended
    September 30,
    2019   2018
Production data:        
Oil (MBbls)      145      341
Natural gas liquids (MBbls)      316      611
Natural gas (MMcf)      6,259      10,437
Net production (MMcfe)      9,025      16,147
Average sales price per unit: (1)            
Oil (Bbl)      54.02      68.20
Natural gas liquids (Bbl)      10.46      30.55
Natural gas (Mcf)      1.87      2.54
Mcfe      2.53      4.24
Average unit cost per Mcfe:            
Production costs:            
Lease operating expenses      2.17      1.75
Production taxes      0.18      0.18
Total      2.35      1.93
Depreciation, depletion and amortization      0.15      0.49
General and administrative expenses      0.86      0.48



(1)  Prior to realized $14.0 million of net gains and $1.8 million of net losses on settlements of commodity derivatives for the three months ended September 30, 2019 and 2018, respectively.

                           
    Successor     Predecessor    
                        Combined
    Nine Months   Four Months     Five Months   Nine Months
    Ended   Ended     Ended   Ended
    Sept 30, 2019   Sept 30, 2018     May 31, 2018   Sept 30, 2018
Production data:                  
Oil (MBbls)      470      449        662      1,111
Natural gas liquids (MBbls)      1,169      826        1,040      1,866
Natural gas (MMcf)      21,765      14,049        16,982      31,031
Net production (MMcfe)      31,596      21,695        27,193      48,888
Average sales price per unit: (1)                          
Oil (Bbl)   $  53.98      67.80     $  64.14   $  65.62
Natural gas liquids (Bbl)      16.14      29.51        25.86      27.48
Natural gas (Mcf)      2.39      2.50        2.41      2.45
Mcfe      3.05      4.15        4.06      4.10
Average unit cost per Mcfe:                          
Production costs:                          
Lease operating expenses   $  2.04      1.74     $  1.67   $  1.70
Production taxes      0.17      0.18        0.20      0.19
Total      2.21      1.92        1.87      1.89
Depreciation, depletion and amortization      0.34      0.49        1.70      1.16
General and administrative expenses      0.66      0.45        0.58      0.52

(1)  Prior to realized $17.5 million of net gains and $0.2 million of net losses on settlements of commodity derivatives for the nine months ended September 30, 2019 and 2018, respectively.


Unaudited Condensed Consolidated Balance Sheets
($ in thousands, except number of shares)

               
    September 30, 2019     December 31, 2018
ASSETS              
Current assets:              
Cash and cash equivalents   $  98,348       $  6,313  
Equity securities      —          47,082  
Accounts receivable:              
Oil, natural gas and natural gas liquids revenues      21,538          40,176  
Other      481          4,496  
Derivative asset      8,745          15,452  
Other current assets      406          2,314  
Total current assets      129,518          115,833  
               
Oil and natural gas properties, net of accumulated depreciation, depletion              
and amortization; September 30, 2019, $19,362; December 31, 2018, $12,950      142,471          405,688  
Assets held for sale      9,284          —  
Long-term derivative asset      1,933          8,499  
Other assets      6,679          4,474  
Total assets   $  289,885       $  534,494  
               
LIABILITIES AND EQUITY              
Current liabilities:              
Accounts payable and accrued liabilities   $  24,143       $  26,146  
Derivative liability      —          1,165  
Other current liabilities      684          —  
Total current liabilities      24,827          27,311  
               
Asset retirement obligations      101,374          117,529  
Long–term debt, net      —          115,000  
Liabilities held for sale      2,759          —  
Other long–term liabilities      1,638          1,036  
               
Commitments and contingencies              
               
Mezzanine equity      135          79  
               
Stockholders' equity:              
Common stock - $0.01 par value; 65,000,000 shares authorized;              
10,213,888 shares issued and 10,179,379 shares outstanding as of              
September 30, 2019; 10,054,816 shares issued and 10,042,468 shares              
outstanding as of December 31, 2018      102          100  
Additional paid-in capital      251,834          249,717  
Treasury stock at cost - 34,509 shares at September 30, 2019; 12,348              
shares at December 31, 2018      (542 )        (247 )
Retained earnings (accumulated deficit)      (92,242 )        23,969  
Total stockholders' equity      159,152          273,539  
Total liabilities and equity   $  289,885       $  534,494  


Unaudited Condensed Consolidated Statements of Operations
($ in thousands, except per share/unit data)

             
    Three Months Ended
    September 30,
    2019     2018  
Revenues:            
Oil, natural gas and natural gas liquids revenues   $  22,870     $  68,407  
Transportation and marketing–related revenues      379        559  
Total revenues      23,249        68,966  
             
Operating costs and expenses:            
Lease operating expenses      19,614        28,281  
Cost of purchased natural gas      255        393  
Dry hole and exploration costs      36        21  
Production taxes      1,634        2,973  
Accretion expense on obligations      1,995        2,345  
Depreciation, depletion and amortization      1,367        7,860  
General and administrative expenses      7,771        7,673  
Impairment of oil and natural gas properties      16,325        2,565  
Gain on sales of oil and natural gas properties      (661 )      (28 )
Total operating costs and expenses      48,336        52,083  
             
Operating income (loss)      (25,087 )      16,883  
             
Other income (expense), net:            
Gain (loss) on derivatives, net      5,718        (26,423 )
Interest expense      (501 )      (3,967 )
Gain on equity securities      —        4,830  
Other income (expense), net      341        (111 )
Total other income (expense), net      5,558        (25,671 )
             
Reorganization items, net      —        (972 )
             
Loss before income taxes      (19,529 )      (9,760 )
             
Income tax benefit      —        —  
             
Net loss   $  (19,529 )   $  (9,760 )
             
Basic and diluted earnings per share:            
Net loss   $  (1.93 )   $  (0.97 )
             
Weighted average common shares outstanding:            
Basic and Diluted      10,131        10,028  


                           
    Successor     Predecessor    
                        Combined
    Nine Months   Four Months     Five Months   Nine Months
    Ended   Ended     Ended   Ended
    Sept 30, 2019   Sept 30, 2018     May 31, 2018   Sept 30, 2018
Revenues:                          
Oil, natural gas and natural gas liquids revenues   $  96,285     $  89,942       $  110,307     $  200,249  
Transportation and marketing–related revenues      1,397        744          724        1,468  
Total revenues      97,682        90,686          111,031        201,717  
                           
Operating costs and expenses:                          
Lease operating expenses      64,568        37,656          45,372        83,028  
Cost of purchased natural gas      969        522          557        1,079  
Dry hole and exploration costs      75        64          122        186  
Production taxes      5,277        3,943          5,343        9,286  
Accretion expense on obligations      6,373        3,134          3,176        6,310  
Depreciation, depletion and amortization      10,712        10,590          46,196        56,786  
General and administrative expenses      20,794        9,702          15,648        25,350  
Restructuring costs      —        —          5,211        5,211  
Impairment of oil and natural gas properties      115,604        2,565          3        2,568  
(Gain) loss on sales of oil and natural gas properties      (679 )      (47 )        5        (42 )
Total operating costs and expenses      223,693        68,129          121,633        189,762  
                           
Operating income (loss)      (126,011 )      22,557          (10,602 )      11,955  
                           
Other income (expense), net:                          
Gain (loss) on derivatives, net      5,374        (30,655 )        444        (30,211 )
Interest expense      (3,335 )      (5,166 )        (13,652 )      (18,818 )
Gain on equity securities      4,593        4,830          —        4,830  
Other income (expense), net      3,168        (84 )        776        692  
Total other income (expense), net      9,800        (31,075 )        (12,432 )      (43,507 )
                           
Reorganization items, net      —        (1,780 )        (587,325 )      (589,105 )
                           
Loss before income taxes      (116,211 )      (10,298 )        (610,359 )      (620,657 )
                           
Income tax expense      —        —          (166 )      (166 )
                           
Net loss   $  (116,211 )   $  (10,298 )     $  (610,525 )   $  (620,823 )
                           
Basic and diluted earnings per share / unit:                          
Net loss   $  (11.53 )   $  (1.03 )     $  (12.12 )      
                           
Weighted average common shares / units outstanding:                          
Basic and Diluted      10,080        10,021          49,369        

Unaudited Condensed Consolidated Statements of Cash Flows
($ in thousands)

                     
    Successor     Predecessor
    Nine Months   Four Months     Five Months
    Ended   Ended     Ended
    Sept 30, 2019   Sept 30, 2018     May 31, 2018
Cash flows from operating activities:                    
Net loss   $  (116,211 )   $  (10,298 )     $  (610,525 )
Adjustments to reconcile net loss to net cash flows provided by                    
operating activities:                    
Accretion expense on obligations      6,373        3,134          3,176  
Depreciation, depletion and amortization      10,712        10,590          46,196  
Equity–based compensation cost      2,184        1,144          3,784  
Impairment of oil and natural gas properties      115,604        2,565          3  
(Gain) loss on sales of oil and natural gas properties      (679 )      (47 )        5  
Gain on equity securities      (4,593 )      (4,830 )        —  
(Gain) loss on derivatives, net      (5,374 )      30,655          (444 )
Cash settlements of derivative contracts (1)      17,483        (1,847 )        3,099  
Reorganization items, net      —        —          573,304  
Other      1,571        780          248  
Changes in operating assets and liabilities:                    
Accounts receivable      21,637        (2,014 )        (3,518 )
Other current assets      1,909        314          1,853  
Accounts payable and accrued liabilities      (4,061 )      (4,183 )        4,405  
Other, net      (2,531 )      (38 )        69  
Net cash flows provided by operating activities       44,024        25,925          21,655  
                     
Cash flows from investing activities:                    
Additions to oil and natural gas properties      (2,096 )      (22,307 )        (29,727 )
Reimbursements related to oil and natural gas properties      2,124        1,091          652  
Proceeds from sale of oil and natural gas properties      111,575        136,483          3  
Proceeds from sale of equity securities      51,675        —          —  
Other      38        16          26  
Net cash flows provided by (used in) investing activities      163,316        115,283          (29,046 )
                     
Cash flows from financing activities:                    
Repayment of long-term debt borrowings      (115,000 )      (164,000 )        —  
Long–term debt borrowings      —        —          34,000  
Loan costs incurred      —        —          (2,813 )
Purchase of treasury stock      (295 )      (247 )        —  
Contributions from general partner      —        —          40  
Other      (10 )      —          —  
Net cash flows provided by (used in) financing activities      (115,305 )      (164,247 )        31,227  
                     
Increase (decrease) in cash, cash equivalents and restricted cash      92,035        (23,039 )        23,836  
Cash, cash equivalents and restricted cash – beginning of period      6,313        28,732          4,896  
Cash, cash equivalents and restricted cash – end of period   $  98,348     $  5,693       $  28,732  

(1)   In the nine months ended September 30, 2019, $9.5 million of the $17.5 million of net gains on commodity derivatives was due to settlements received on the termination of commodity derivative contracts in conjunction with closed divestitures.

Non-GAAP Measures

The Company defines Adjusted EBITDAX as net loss plus income taxes; interest expense, net; depreciation, depletion and amortization; accretion expense on obligations; (gain) loss on derivatives, net; cash settlements of 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 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 to Adjusted EBITDAX
($ in thousands)

                               
    Successor    
                            Combined
    Three Months Ended   Nine Months   Nine Months
        Ended   Ended
    Sept 30,   Sept 30,   Jun 30,   Sept 30,   Sept 30,
    2019
  2018
  2019
  2019
  2018
Net loss   $  (19,529 )   $  (9,760 )   $  (60,907 )   $  (116,211 )   $  (620,823 )
                               
Add:                              
Income taxes      —        —        (285 )      —        166  
Interest expense, net      501        4,030        1,315        3,335        18,880  
Depreciation, depletion and amortization      1,367        7,860        4,373        10,712        56,786  
Accretion expense on obligations      1,995        2,345        2,168        6,373        6,310  
(Gain) loss on derivatives, net      (5,718 )      26,423        (16,430 )      (5,374 )      30,211  
Cash settlements of commodity derivative contracts      13,959        (1,847 )      2,807        17,483        (288 )
Non-cash equity-based compensation      1,421        1,144        664        2,184        4,928  
Impairment of oil and natural gas properties      16,325        2,565        73,151        115,604        2,568  
Non-cash oil inventory adjustment      —        24        —        —        (180 )
Dry hole and exploration costs      36        21        —        75        186  
Gain on sales of oil and natural gas properties      (661 )      (28 )      (5 )      (679 )      (42 )
Reorganization items, net (1)      —        972        —        —        589,105  
Gain on equity securities      —        (4,830 )      —        (4,593 )      (4,830 )
Adjusted EBITDAX   $  9,696     $  28,919     $  6,851     $  28,909     $  82,977  

(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 Derivative Position

In September 2019, in conjunction with the closings of the sales of oil and natural gas properties in the Barnett Shale and the Mid-Continent area, the Company unwound certain of its derivatives, which resulted in the receipt of a cash settlement of $7.9 million. The natural gas derivatives unwound included 2,990,000 MMBtus and 10,980,000 MMBtus for the periods of October through December 2019 and January through December 2020, respectively. The crude oil derivatives unwound included 85,400 Bbls and 228,750 Bbls for the periods of September through December 2019 and January through December 2020, respectively. The natural gas liquids derivatives unwound included 283,040 Bbls and 656,970 Bbls for the periods of September through December 2019 and January through December 2020, respectively.

In November 2019, the Company terminated 124,000 MMBtus of natural gas swaps for the month of December 2019 at a weighted average fixed price of $2.78 per MMBtu and 1,464,000 MMBtus of natural gas swaps for the period of January 2020 to December 2020 at a weighted average fixed price of $2.64 per MMBtu. These terminations resulted in a net cash settlement received of $150,000.

               
Period   Index   Swap Volume   Swap Price
Natural Gas (MMBtus):              
Oct - Dec 2019   NYMEX    3,326,000   $  2.78
Jan - Dec 2020   NYMEX    11,346,000      2.68
               
Crude (Bbls):              
Oct - Dec 2019   WTI    121,900   $  63.53
Jan - Dec 2020   WTI    439,200      60.50
               
Ethane (Bbls):              
Oct - Dec 2019   Mt Belvieu    14,720   $  11.60
Jan - Dec 2020   Mt Belvieu    54,900      11.91
               
Propane (Bbls):              
Oct - Dec 2019   Mt Belvieu    15,640   $  32.76
Jan - Dec 2020   Mt Belvieu    56,730      29.23

Harvest Oil & Gas Corp., Houston, TX
Ryan Stash
713-651-1144
hvstog.com 

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