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CST: 25/08/2019 04:38:34   

Harvest Oil & Gas Corp. Announces Fourth Quarter and Full Year 2018 Results, Year-end Proved Reserves and 2019 Guidance

148 Days ago

HOUSTON, March 29, 2019 (GLOBE NEWSWIRE) -- Harvest Oil & Gas Corp. (OTCQX: HRST) (“Harvest” or the “Company”) today announced results for the fourth quarter and full year of 2018 and the filing of its Form 10-K with the Securities and Exchange Commission (“SEC”). In addition, Harvest announced its 2018 year-end proved reserves and provided guidance for 2019.

Key Highlights

  • Average daily production was 144.9 MMcfe for the fourth quarter of 2018, which was in line with guidance of 143 to 150 MMcfe
  • Sold all of Harvest’s 4.2 million shares of Magnolia Oil & Gas Corporation (NYSE: MGY) stock for net proceeds of $51.7 million in January 2019
  • Sold oil and gas properties in Central Texas for total consideration of $2.6 million in December 2018
  • Sold oil and gas properties in the Mid-Continent area for total consideration of $2.7 million in December 2018 and January 2019
  • In February 2019, entered into definitive agreements to sell oil and gas properties in the San Juan Basin in New Mexico and Colorado for $42.8 million in cash and in the Mid-Continent area for $2.5 million in cash, each subject to purchase price adjustments
  • Reduced outstanding borrowings under the credit facility to $55 million, as of March 28, 2019

Fourth Quarter 2018 Results

           
    Fourth Quarter   Third Quarter
$ in millions unless noted otherwise   2018   2018
Average daily production (MMcfe/d)    144.9      175.5  
Total revenues (1)    47.9      69.0  
Total assets (2)    534.5      545.5  
Net income (loss) (1)(3)    34.3      (9.8 )
Adjusted EBITDAX (a non-GAAP          
 financial measure) (1)(4)    9.0      28.9  
Total debt (2)    115.0      133.0  
Net cash provided by operating activities    19.6      17.4  
Additions to oil and natural gas properties (5)    5.1      15.1  
  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 December 31, 2018 and September 30, 2018
  3. Includes $0.5 million and $1.0 million of reorganization items, net, in fourth and third quarter of 2018, respectively
  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 fourth quarter of 2018, Harvest reported net income of $34.3 million, or $3.41 per basic and diluted weighted average share outstanding, compared to a net loss of $40.3 million, or $(0.80) per basic and diluted weighted average limited partner unit outstanding, for the fourth quarter of 2017 reported by Harvest’s predecessor. For the third quarter of 2018, Harvest reported a net loss of $9.8 million, or $(0.97) per basic and diluted weighted average share outstanding. Included in 2018 fourth quarter net income were the following items:

  • $51.6 million of non-cash gains on commodity derivatives,
  • $16.0 million of non-cash losses on equity securities,
  • $5.0 million revenue decrease related to a royalty adjustment, 
  • $0.7 million of gain on sales of oil and natural gas properties,
  • $0.5 million of reorganization items, net,
  • $0.5 million of impairment charges related to the sale of proved oil and natural gas properties located in Central Texas and Karnes County, Texas,
  • $0.1 million of non-cash costs contained in general and administrative expenses, and
  • $0.1 million of dry hole and exploration costs.

Production for the fourth quarter of 2018 was 9.0 Bcf of natural gas, 194 Mbbls of oil and 523 Mbbls of natural gas liquids (“NGLs”), or 144.9 million cubic feet equivalent per day (Mmcfe/day). This represents a 16 percent decrease from the fourth quarter of 2017 production of 172.1 Mmcfe/day and a 17 percent decrease from the third quarter of 2018 production of 175.5 Mmcfe/day. The decreases in production from the fourth quarter of 2017 and third quarter of 2018 were primarily due to the divestiture of the Central Texas and Karnes County, Texas properties that closed on August 31, 2018, partially offset by the adoption of new revenue recognition standards in 2018. 

Adjusted EBITDAX for the fourth quarter of 2018 was $9.0 million, a 61 percent decrease from the fourth quarter of 2017 and a 69 percent decrease from the third quarter of 2018. The decrease in Adjusted EBITDAX from the fourth quarter of 2017 was primarily attributable to the divestiture of the Central Texas and Karnes County, Texas properties and a royalty adjustment, partially offset by a decrease in general and administrative expenses. The decrease in Adjusted EBITDAX from the third quarter of 2018 was primarily attributable to the divestiture of the Central Texas and Karnes County, Texas properties, a royalty adjustment and lower realized crude oil and natural gas liquids prices, partially offset by higher realized natural gas prices and a decrease in general and administrative expenses. Adjusted EBITDAX is a non-GAAP financial measure and is described in the attached table under “Non-GAAP Measures.”

Full Year 2018 Results

         
         
$ in millions unless noted otherwise   2018 (1)   2017
Average daily production (MMcfe/d)    170.5      170.7  
Total revenues (2)    249.6      225.7  
Total assets (3)    534.5      1,441.8  
Net loss (2)(4)    (586.6 )    (134.2 )
Adjusted EBITDAX (a non-GAAP        
 financial measure) (2)(5)    92.0      83.7  
Total debt (3)    115.0      605.5  
Net cash provided by operating activities    67.2      31.7  
Additions to oil and natural gas properties (6)    57.1      27.3  
  1. All amounts reflect the combined results of five months ended May 31, 2018 (Predecessor) and seven months ended December 31, 2018 (Successor)
  2. Includes royalty adjustment of $5.0 million in 2018. 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 2018, total revenue would have been $254.6 million, net loss would have been $581.6 million and Adjusted EBITDAX would have been $97.0 million.
  3. As of December 31, 2018 and 2017
  4. Includes $589.6 million of reorganization items, net, in 2018
  5. Adjusted EBITDAX is a non-GAAP financial measure and is described in the attached table under “Non-GAAP Measures”
  6. Represents cash payments during the period

For 2018, Harvest reported a net loss of $586.6 million which reflects the combined results of the five months ended May 31, 2018 (Predecessor) and seven months ended December 31, 2018 (Successor). For 2017, Harvest’s predecessor reported a net loss of $134.2 million. Included in net loss for 2018 were the following items:

  • $589.6 million of reorganization items, net,
  • $20.1 million of non-cash gains on commodity and interest rate derivatives,
  • $11.1 million of non-cash losses on equity securities,
  • $5.0 million revenue decrease related to a royalty adjustment, 
  • $3.1 million of impairment charges related to the sale of proved oil and natural gas properties located in Central Texas and Karnes County, Texas, and
  • $5.0 million of non-cash costs contained in general and administrative expenses.

Production for 2018 was 40.1 Bcf of natural gas, 1.3 Mmbbls of oil and 2.4 Mmbbls of natural gas liquids, or 170.5 Mmcfe/day, which is comparable to 2017 production of 170.7 Mmcfe/day. 

Adjusted EBITDAX for 2018 was $92.0 million, a 10 percent increase as compared to 2017. The increase in Adjusted EBITDAX as compared to 2017 is primarily due to higher realized oil and natural gas liquids prices, partially offset by the divestiture of the Central Texas and Karnes County, Texas properties, a royalty adjustment and lower realized natural gas prices.

Fresh Start Accounting and Factors Affecting the Comparability of the Results

Upon emergence from Chapter 11 proceedings on June 4, 2018 Harvest adopted fresh start accounting as required by Generally Accepted Accounting Principles (“GAAP”). As a result of adopting fresh start accounting, the Company’s consolidated financial statements and certain presentations are separated into two distinct periods, the period before the convenience date of May 31, 2018 (labeled “Predecessor”) and the period after the convenience date (labeled “Successor”), to indicate the application of different basis of accounting between the periods presented. Despite the separate presentation, there was continuity of the Company’s operations.

The Company’s operating results are presented herein on a combined basis (i.e., by combining the results of the applicable Predecessor and Successor periods).The Company believes that describing certain year-over-year variances and trends in its results for the three months and years ended December 31, 2018 and 2017 without regard to the concept of Successor and Predecessor (i.e. on a combined basis) facilitates a meaningful analysis of the results of operations. These combined results are not considered to be prepared in accordance with GAAP and have not been prepared as pro forma results under applicable regulations. The combined operating results may not reflect the actual results the Company would have achieved absent its emergence from bankruptcy and may not be indicative of future results.

Revolving Credit Facility and Liquidity

As of March 28, 2019, the Company’s borrowing base under its credit facility was $260.3 million, of which $55 million was drawn. Liquidity from borrowing base capacity and cash on hand as of March 28, 2019 is over $210 million. Harvest's next semi-annual borrowing base redetermination is scheduled for April 2019.

For more information regarding Harvest's debt and liquidity, please review Harvest's Annual Report on Form 10-K filed on March 29, 2019, with the SEC.

Commodity Hedges

In 2019, Harvest entered into the following commodity hedges.

               
        Swap   Swap
Period   Index   Volume   Price
Natural Gas (MmmBtus):              
Jan - Dec 2020   NYMEX    16,470.0   $  2.70

In addition, in January 2019, Harvest terminated 167 MBls of oil swaps for the period of February 2019 to December 2019 at a fixed price of $62.12 and received a total of $1.5 million. 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.

Year-end 2018 Estimated Net Proved Reserves

Harvest’s year-end 2018 estimated net proved reserves were 712 Bcfe. Approximately 67 percent were natural gas, 25 percent were natural gas liquids and 8 percent were crude oil. As specified by the SEC, the prices for oil, natural gas and natural gas liquids were the average prices during the year determined using the price on the first day of each month. The prices utilized in calculating the Company’s total estimated proved reserves at December 31, 2018 were $65.56 per Bbl of oil and $3.10 per MMBtu of natural gas.

At December 31, 2018, our proved reserves had a standardized measure of discounted future net cash flows of $436.4 million and a present value of future net pre-tax cash flows attributable to estimated net proved reserves, discounted at 10 percent per annum (“PV-10”) of $509.6 million based on SEC pricing. PV–10, is a computation of the standardized measure of discounted future net cash flows on a pre–tax basis and is computed on the same basis as standardized measure but does not include a provision for federal income taxes, Texas gross margin tax or other state taxes. PV–10 is considered a non–GAAP financial measure under the regulations of the SEC. We believe PV–10 to be an important measure for evaluating the relative significance of our oil and natural gas properties. We further believe investors and creditors may utilize our PV–10 as a basis for comparison of the relative size and value of our reserves to other companies. PV–10, however, is not a substitute for the standardized measure. See the attached table under

“Non-GAAP Measures” for a reconciliation of standardized measure to PV-10. Our PV–10 measure and standardized measure do not purport to present the fair value of our reserves.

                         
    Estimated Net Proved Reserves (1)
                      Natural Gas  
    Crude Oil     Natural Gas           Equivalents  
    (MMBbls)     (Bcf)     NGLs (MMBbls)     (Bcfe)  
Proved Reserves:                        
  Developed    9.9      468.5      28.5      698.5  
  Undeveloped    —      8.2      0.8      13.4  
Total    9.9      476.7      29.3      711.9  
  1. Since January 2019, Harvest has sold or entered into definitive agreements to sell all interests in the San Juan Basin representing 157.6 Bcfe and certain interests in the Mid-Continent area representing 9.5 Bcfe of our 2018 year-end proved reserves. Combined, the divestitures are considered 100% developed.

For comparative purposes, utilizing NYMEX forward closing prices for oil and natural gas at December 31, 2018 for January 1, 2019 through December 31, 2030, total proved reserves at December 31, 2018 were 694 Bcfe, with a PV–10 of $353 million, a decrease of 18 Bcfe versus SEC reserves and $157 million versus PV–10 using SEC prices. The unweighted average of the NYMEX strip prices used were $51.80 per Bbl of oil and $2.93 per MMBtu of natural gas. NYMEX forward strip-based proved reserves were calculated based on the SEC proved reserves estimation methodology, but applying NYMEX forward strip prices rather than SEC prices. We believe that investors and creditors may utilize our NYMEX strip-based PV-10 as a basis for comparison of the relative size and value of our reserves to other companies. The PV–10 of our NYMEX forward strip-based reserves is not a substitute for the standardized measure and does not purport to present the fair value of our reserves.

Guidance for 2019

The guidance table below assumes the San Juan and Mid-Continent divestitures close at the end of the first quarter (although the San Juan and Mid-Continent divestitures are expected to close at the beginning of April 2019).  Therefore, the guidance for the second quarter through the fourth quarter excludes these assets.

                         
($ in millions)     1Q 2019       2Q - 4Q 2019  
Net Production                        
Natural Gas (Mmcf)     8,062   - 8,911         20,128   - 22,247    
Crude Oil (Mbbls)     170   - 188         426   - 471    
Natural Gas Liquids (Mbbls)     464   - 513         1,017   - 1,124    
Total Mmcfe     11,867   - 13,116         28,790   - 31,820    
                         
Average Daily Production (Mmcfe/d)     132   - 146         105   - 116    
                         
Net Transportation Margin / Other Income (1)     $0.3   - $0.5         $0.9   - $1.5    
                         
Average Price Differential vs NYMEX                        
Natural Gas ($/Mcf)     ($0.62 ) - ($0.32 )       ($0.55 ) - ($0.25 )  
Crude Oil ($/Bbl)     ($4.20 ) - ($2.20 )       ($3.50 ) - ($1.50 )  
NGL (% of NYMEX Crude Oil)     38 %   - 42 %         35 %   - 39 %    
                         
Expenses                        
Operating Expenses:                        
LOE and other     $23.8   - $26.4         $58.7   - $64.9    
Production Taxes (as % of revenue)     4.5 %   - 5.1 %         2.8 %   - 3.4 %    
        -           -    
General and administrative expense (2)     $4.8   - $5.8         $13.9   - $14.9    
                         
Capital Expenditures (3)      $0.8   - $1.5         $2.3   - $4.5    
  1. Represents estimated transportation and marketing-related revenues less cost of purchased natural gas plus other income/(expense), net.
  2. Excludes non-cash general and administrative expense, of which non-cash share-based compensation is a part. Also excludes any amounts for divestiture or acquisition related due diligence and transaction costs.
  3. Represents estimates for drilling, capital workover and related capital expenditures.

Annual Report on Form 10-K

Harvest’s financial statements and related footnotes are available in the 2018 Form 10-K, which was filed today and is available through the Investor Relations/SEC Filings section of the Harvest website at http://www.hvstog.com.

Investor Presentation

As announced on March 21 2019, an updated investor presentation will be posted to the Investor Relations section of the Harvest website on March 29, 2019.

Unitholders’ Schedule K-1

EV Energy Partners, L.P. (EVEP) unitholders’ Schedule K-1s for the 2018 tax year are available for download at https://www.taxpackagesupport.com/evenergy. For questions regarding their Schedule K-1, unitholders are invited to call the Tax Package Support helpline at 1-800-973-7551. Unitholders should consult their personal tax advisors regarding tax related questions unique to each unitholder.

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 San Juan Basin, the Appalachian Basin (which includes the Utica Shale), Michigan, the Mid-Continent areas in Oklahoma, Texas, Arkansas, Kansas and Louisiana, 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
    December 31,      December 31, 
Production data:   2018     2017
Oil (MBbls)      194          370  
Natural gas liquids (MBbls)      523          584  
Natural gas (MMcf)      9,035          10,110  
Net production (MMcfe)      13,334          15,833  
Average sales price per unit: (1)                  
Oil (Bbl)   $  56.70       $  53.08  
Natural gas liquids (Bbl) (2)      15.17          24.77  
Natural gas (Mcf)      3.13          2.52  
Mcfe (2)      3.54          3.76  
Average unit cost per Mcfe:                  
Production costs:                  
Lease operating expenses   $  1.98       $  1.57  
Production taxes      0.19          0.17  
Total      2.17          1.74  
Depreciation, depletion and amortization      0.41          1.69  
General and administrative expenses      0.44          0.67  
  1. Prior to $4.0 million and $0.1 million of net hedge losses on settlements of commodity derivatives for the three months ended December 31, 2018 and 2017, respectively.

  2. Includes the effects of a 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, the average sales price for natural gas liquids for the fourth quarter would have been $24.74 per barrel and the average sales price per mcfe would have been $3.92.
                                   
    Successor     Predecessor           Predecessor
                      Combined        
    Seven Months     Five Months   Year   Year
    Ended     Ended   Ended   Ended
    December 31,      May 31,   December 31,    December 31, 
    2018     2018   2018   2017
Production data:                                  
Oil (MBbls)      642          662        1,304        1,387  
Natural gas liquids (MBbls)      1,348          1,040        2,388        2,165  
Natural gas (MMcf)      23,084          16,982        40,066        40,979  
Net production (MMcfe)      35,029          27,193        62,222        62,293  
Average sales price per unit: (1)                                  
Oil (Bbl)   $  64.45       $  64.14     $  64.32     $  47.41  
Natural gas liquids (Bbl) (2)      23.95          25.86        24.79        21.40  
Natural gas (Mcf)      2.75          2.41        2.61        2.71  
Mcfe (2)      3.92          4.06        3.98        3.58  
Average unit cost per Mcfe:                                  
Production costs:                                  
Lease operating expenses   $  1.83       $  1.67     $  1.76     $  1.63  
Production taxes      0.19          0.20        0.19        0.17  
Total      2.02          1.87        1.95        1.80  
Depreciation, depletion and amortization      0.46          1.70        1.00        1.56  
General and administrative expenses      0.45          0.58        0.50        0.52  
  1. Prior to $4.3 million and $2.3 million of net hedge losses on settlements of commodity derivatives for the year ended December 31, 2018 and 2017, respectively.

  2. Includes the effects of a royalty adjustment of $5.0 million in 2018. 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 seven months ended December 31, 2018, the average sales price for natural gas liquids would have been $27.66 per barrel and the average sales price per mcfe would have been $4.06, and for the combined year ended December 31, 2018, the average sales price for natural gas liquids would have been $26.88 per barrel and the average price per mcfe would have been $4.06.

Consolidated Balance Sheets
($ in thousands, except number of shares/units)

               
    Successor     Predecessor
    December 31,      December 31, 
    2018     2017
ASSETS              
Current assets:              
Cash and cash equivalents   $  6,313       $  4,896  
Equity Securities      47,082          —  
Accounts receivable:              
Oil, natural gas and natural gas liquids revenues      40,176          47,694  
Other      4,496          78  
Derivative asset      15,452          3,052  
Other current assets      2,314          5,713  
Total current assets      115,833          61,433  
               
Oil and natural gas properties, net of accumulated depreciation, depletion and amortization; December 31, 2018, $12,950; December 31, 2017, $1,191,559      405,688          1,375,527  
Long-term derivative asset      8,499          —  
Other assets      4,474          4,845  
Total assets   $  534,494       $  1,441,805  
               
LIABILITIES AND EQUITY              
Current liabilities:              
Accounts payable and accrued liabilities:              
Third party   $  26,146       $  43,817  
Related party      —          4,194  
Derivative liability      1,165          396  
Current portion of long-term debt      —          605,549  
Total current liabilities      27,311          653,956  
               
Asset retirement obligations      117,529          158,793  
Long–term debt, net      115,000          —  
Other long–term liabilities      1,036          1,044  
               
Commitments and contingencies              
               
Mezzanine equity      79          —  
               
Stockholders' / owners’ equity:              
Predecessor common unitholders – 49,368,869 units issued and outstanding as of December 31, 2017      —          648,371  
Predecessor general partner interest      —          (20,359 )
Successor common stock - $0.01 par value; 65,000,000 shares authorized; 10,054,816 shares issued and 10,042,468 shares outstanding as of December 31, 2018      100          —  
Successor additional paid-in capital      249,717          —  
Successor treasury stock at cost - 12,348 shares at December 31,2018      (247 )        —  
Successor retained earnings      23,969          —  
Total stockholder's / owners’ equity      273,539          628,012  
Total liabilities and equity   $  534,494       $  1,441,805  
                   


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

               
    Successor     Predecessor
    Three Months     Three Months
    Ended     Ended
    December 31,      December 31, 
    2018     2017
Revenues:              
Oil, natural gas and natural gas liquids revenues (1)   $  47,227       $  59,552  
Transportation and marketing–related revenues      687          451  
Total revenues (1)      47,914          60,003  
               
Operating costs and expenses:              
Lease operating expenses      26,444          24,809  
Cost of purchased natural gas      504          315  
Dry hole and exploration costs      113          223  
Production taxes      2,539          2,760  
Accretion expense on obligations      2,286          1,879  
Depreciation, depletion and amortization      5,422          26,680  
General and administrative expenses      5,924          10,659  
Impairment of oil and natural gas properties      500          25,591  
Gain on sales of oil and natural gas properties      (650 )        (70 )
Total operating costs and expenses      43,082          92,846  
               
Operating income (loss)      4,832          (32,843 )
               
Other income (expense), net:              
Gain on derivatives, net      47,617          2,266  
Interest expense      (2,059 )        (10,402 )
Loss on equity securities      (15,960 )        —  
Other income, net      458          557  
Total other income (expense), net      30,056          (7,579 )
               
Reorganization items, net      (543 )        —  
               
Income (loss) before income taxes      34,345          (40,422 )
               
Income tax (expense) benefit      (78 )        101  
               
Net income (loss) (1)   $  34,267       $  (40,321 )
               
Basic and diluted earnings per share / unit:              
Net income (loss)   $  3.41       $  (0.80 )
               
Weighted average common shares / units outstanding:              
Basic      10,042          49,369  
Diluted      10,047          49,369  
  1. Includes the effects of a royalty adjustment of $5.0 million in the three months ended December 31, 2018. 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 and net income would have been $39.3 million.


                           
    Successor     Predecessor         Predecessor
                  Combined      
    Seven Months     Five Months   Year   Year
    Ended     Ended   Ended   Ended
    December 31,      May 31,   December 31,    December 31, 
    2018     2018   2018   2017
Revenues:                          
Oil, natural gas and natural gas liquids revenues (1)   $  137,169       $  110,307     $  247,476     $  223,297  
Transportation and marketing–related revenues      1,431          724        2,155        2,396  
Total revenues (1)      138,600          111,031        249,631        225,693  
                           
Operating costs and expenses:                          
Lease operating expenses      64,100          45,372        109,472        101,591  
Cost of purchased natural gas      1,026          557        1,583        1,699  
Dry hole and exploration costs      177          122        299        413  
Production taxes      6,482          5,343        11,825        10,588  
Accretion expense on obligations      5,420          3,176        8,596        7,653  
Depreciation, depletion and amortization      16,012          46,196        62,208        96,901  
General and administrative expenses      15,626          15,648        31,274        32,290  
Restructuring costs      —          5,211        5,211        —  
Impairment of oil and natural gas properties      3,065          3        3,068        93,607  
(Gain) loss on sales of oil and natural gas properties      (697 )        5        (692 )      (981 )
Total operating costs and expenses      111,211          121,633        232,844        343,761  
                           
Operating income (loss)      27,389          (10,602 )      16,787        (118,068 )
                           
Other income (expense), net:                          
Gain on derivatives, net      16,962          444        17,406        22,854  
Interest expense      (7,225 )        (13,652 )      (20,877 )      (40,903 )
Loss on equity securities      (11,130 )        —        (11,130 )      —  
Other income, net      374          776        1,150        1,706  
Total other income (expense), net      (1,019 )        (12,432 )      (13,451 )      (16,343 )
                           
Reorganization items, net      (2,323 )        (587,325 )      (589,648 )      —  
                           
Income (loss) before income taxes      24,047          (610,359 )      (586,312 )      (134,411 )
                           
Income tax (expense) benefit      (78 )        (166 )      (244 )      210  
                           
Net income (loss) (1)   $  23,969       $  (610,525 )   $  (586,556 )   $  (134,201 )
                           
Basic and diluted earnings per share / unit:                          
Net income (loss)   $  2.39       $  (12.12 )         $  (2.66 )
                           
Weighted average common shares / units outstanding:                          
Basic      10,030          49,369              49,357  
Diluted      10,032          49,369              49,357  
  1. Includes the effects of a royalty adjustment of $5.0 million in the seven months ended December 31, 2018. 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 seven months ended December 31, 2018, total revenue would have been $143.6 million and net income would have been $29.0 million, and for the combined year ended December 31, 2018, total revenue would have been $254.6 million and net loss would have been $581.6 million.


Consolidated Statements of Cash Flows
($ in thousands)

                     
    Successor     Predecessor
    Seven Months     Five Months   Year
    Ended     Ended   Ended
    December 31,     May 31,   December 31, 
    2018     2018   2017
Cash flows from operating activities:                    
Net income (loss)   $  23,969       $  (610,525 )   $  (134,201 )
Adjustments to reconcile net income (loss) to net cash flows provided by operating activities:                    
                     
Accretion expense on obligations      5,420          3,176        7,653  
Depreciation, depletion and amortization      16,012          46,196        96,901  
Equity–based compensation cost      1,227          3,784        4,266  
Impairment of oil and natural gas properties      3,065          3        93,607  
(Gain) loss on sales of oil and natural gas properties      (697 )        5        (981 )
Loss of equity securities      11,130          —        —  
Gain on derivatives, net      (16,962 )        (444 )      (22,854 )
Cash settlements of matured derivative contracts      (5,824 )        3,099        (2,235 )
Gain on early extinguishment of debt      —          —        —  
Deferred taxes      —          —        —  
Reorganization items, net      —          573,304        —  
Other      1,020          248        1,411  
Changes in operating assets and liabilities:                    
Accounts receivable      7,823          (3,518 )      (2,670 )
Other current assets      (53 )        1,853        (1,585 )
Accounts payable and accrued liabilities      (513 )        4,405        (6,783 )
Income taxes      —          —        —  
Other, net      (60 )        69        (829 )
Net cash flows provided by operating activities       45,557          21,655        31,700  
                     
Cash flows from investing activities:                    
Acquisition of oil and natural gas properties      —          —        (61,400 )
Additions to oil and natural gas properties      (27,368 )        (29,727 )      (27,268 )
Reimbursements related to oil and natural gas properties      1,294          652        2,517  
Proceeds from sale of oil and natural gas properties      140,324          3        3,654  
Cash settlements from acquired derivative contracts      —          —        —  
Other      29          26        60  
Net cash flows provided by (used in) investing activities      114,279          (29,046 )      (82,437 )
                     
Cash flows from financing activities:                    
Repayment of long-term debt borrowings      (182,000 )        —        (28,000 )
Long–term debt borrowings      —          34,000        26,000  
Redemption of 8% Senior Notes due 2019      —          —        —  
Loan costs incurred      —          (2,813 )      —  
Purchase of treasury stock      (247 )        —        —  
Contributions from general partner      —          40        —  
Other      (8 )        —        —  
Net cash flows provided by (used in) financing activities      (182,255 )        31,227        (2,000 )
                     
Increase (decrease) in cash, cash equivalents and restricted cash      (22,419 )        23,836        (52,737 )
Cash, cash equivalents and restricted cash – beginning of period      28,732          4,896        57,633  
Cash, cash equivalents and restricted cash – end of period   $  6,313       $  28,732     $  4,896  
                           


Non-GAAP Measures

We define Adjusted EBITDAX as net income (loss) plus income taxes; interest expense, net; depreciation, depletion and amortization; accretion expense on obligations; (gain) loss 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; loss (gain) on equity securities and other income, net. 

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 Income (Loss) to Adjusted EBITDAX
($ in thousands)

                               
    Three Months Ended   Year Ended
    Successor   Predecessor   Successor   Combined   Predecessor
    Dec 31, 2018   Dec 31, 2017   Sep 30, 2018   Dec 31, 2018   Dec 31, 2017
Net income (loss) (1)   $  34,267     $  (40,321 )   $  (9,760 )   $  (586,556 )   $  (134,201 )
                               
Add:                              
Income taxes      78        (101 )      —        244        (210 )
Interest expense, net      1,991        10,402        4,030        20,871        40,903  
Depreciation, depletion and amortization      5,422        26,680        7,860        62,208        96,901  
Accretion expense on obligations      2,286        1,879        2,345        8,596        7,653  
(Gain) loss on derivatives, net      (47,617 )      (2,266 )      26,423        (17,406 )      (22,854 )
Cash settlements of matured commodity derivative contracts      (3,977 )      (99 )      (1,847 )      (4,265 )      (2,272 )
Non-cash equity-based compensation      83        976        1,144        5,011        4,266  
Impairment of oil and natural gas properties      500        25,591        2,565        3,068        93,607  
Non-cash oil inventory adjustment      (12 )      289        24        (192 )      713  
Dry hole and exploration costs      113        223        21        299        413  
Gain on sales of oil and natural gas properties      (650 )      (70 )      (28 )      (692 )      (981 )
Reorganization items, net (2)      543        —        972        589,648        —  
Loss (gain) on equity securities      15,960        —        (4,830 )      11,130        —  
Other income, net      —        —        —        —        (197 )
Adjusted EBITDAX (1)   $  8,987     $  23,183     $  28,919     $  91,964     $  83,741  
  1. Includes the effects of a royalty adjustment of $5.0 million in the three months and combined year ended December 31, 2018. 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 three months and combined year ended December 31, 2018, Adjusted EBITDAX would have been $14.0 million and $97.0 million, respectively.

  2. 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.


Reconciliation of Standardized Measure to PV-10 at December 31, 2018
($ in millions)

       
Standardized measure   $  436.4
Future income taxes, discounted at 10%      73.2
PV-10   $  509.6


Total Current Hedge Position

                     
        Swap     Swap  
Period   Index   Volume     Price  
Natural Gas (MmmBtus):                    
Jan - Dec 2019   NYMEX    31,025.0     $  2.77    
Jan - Dec 2020   NYMEX    16,470.0        2.70    
                     
Crude (MBbls):                    
Jan 2019   WTI    86.8     $  63.02    
Feb - Dec 2019   WTI    768.2        63.22    
Jan - Dec 2020   WTI    732.0        60.51    
                     
Ethane (MBbls):                    
Jan - Dec 2019   Mt Belvieu    730.0     $  11.50    
Jan - Dec 2020   Mt Belvieu    512.4        11.91    
                     
Propane (MBbls):                    
Jan - Dec 2019   Mt Belvieu    365.0     $  32.76    
Jan - Dec 2020   Mt Belvieu    256.2        29.23    
                     


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

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