MIDLAND, Texas, May 9,
2019 /PRNewswire/ -- Legacy Reserves Inc. ("Legacy")
(NASDAQ:LGCY) today announced 2019 first quarter results including
the following highlights:
- Generated quarterly oil production of 17,922 Bbls/d, a 4%
increase relative to Q1'18;
- Reduced lease operating expense by 9% quarter-over-quarter;
and
- Generated net loss of $78.4
million and adjusted EBITDA of $63.9
million.
As previously announced, Legacy is evaluating and exploring
potential strategic alternatives. These alternatives include, among
others, a sale or other business combination transaction, sales of
assets, financing transactions, or some combination of these.
Financial and Operating Results - Three-Month Period Ended
March 31, 2019 Compared to Three-Month Period Ended
March 31, 2018
- Production increased 1% to 46,389 Boe/d from 46,078 Boe/d
primarily due to additional oil production from our Permian Basin
horizontal drilling program. This was partially offset by natural
production declines.
- Average realized price, excluding net cash settlements from
commodity derivatives, decreased 14% to $28.38 per Boe in 2019 from $33.15 per Boe in 2018 driven by a decrease in
average realized price due to a decrease in the average West Texas
Intermediate ("WTI") crude price of $8.09 per Bbl coupled with the widening Mid-Cush
and other regional differentials, and a decrease in the realized
NGL price of 44% to $0.45 per gallon
in 2019 from $0.80 per gallon in
2018. These decreases were partially offset by an average realized
natural gas price increase of 1% to $2.60 per Mcf in 2019 from $2.57 per Mcf in 2018.
- Production expenses, excluding ad valorem taxes, were
relatively flat at $45.0 million in
2019, a decrease from $45.6 million
in 2018.
- General and administrative expenses, excluding unit-based
Long-Term Incentive Plan ("LTIP") compensation expense, increased
to $12.4 million in 2019 from
$11.3 million in 2018 due to a
$0.9 million increase in costs
related to our strategic alternative process.
- Cash settlements received on our commodity derivatives during
2019 were $9.6 million compared to
$2.8 million paid in 2018. The
increase in cash settlements is a result of lower commodity
prices.
- Total development capital expenditures decreased to
$39.4 million in 2019 from
$59.7 million in 2018. The 2019
activity was in line with our previously announced capital budget
and was primarily related to our Permian horizontal drilling
program.
Quarterly Report on Form 10-Q
Financial results contained herein are preliminary and subject
to the final, unaudited financial statements and related footnotes
included in Legacy's Form 10-Q which will be filed on or about
May 10, 2019.
About Legacy Reserves Inc.
Legacy is an independent energy company engaged in the
development, production and acquisition of oil and natural gas
properties in the United States.
Its current operations are focused on the horizontal development of
unconventional plays in the Permian Basin and the cost-efficient
management of shallow-decline oil and natural gas wells in the
Permian Basin, East Texas, Rocky
Mountain and Mid-Continent regions. Additional information is
available at www.LegacyReserves.com.
LEGACY RESERVES
INC.
|
SELECTED FINANCIAL
AND OPERATING DATA
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
|
(In thousands,
except per unit data)
|
Revenues:
|
|
|
|
Oil sales
|
$
|
77,761
|
|
$
|
93,411
|
Natural gas liquids
(NGL) sales
|
4,515
|
|
7,396
|
Natural gas
sales
|
36,221
|
|
36,672
|
Total
revenue
|
$
|
118,497
|
|
$
|
137,479
|
Expenses:
|
|
|
|
Oil and natural gas
production, excluding ad valorem taxes
|
$
|
44,964
|
|
$
|
45,585
|
Ad valorem
taxes
|
2,513
|
|
2,382
|
Total oil and natural
gas production
|
$
|
47,477
|
|
$
|
47,967
|
Production and other
taxes
|
$
|
6,149
|
|
$
|
7,326
|
General and
administrative, excluding transaction costs and LTIP
|
$
|
9,705
|
|
$
|
9,502
|
Transaction
costs
|
2,669
|
|
1,782
|
LTIP
expense
|
4,156
|
|
12,806
|
Total general and
administrative
|
$
|
16,530
|
|
$
|
24,090
|
Depletion,
depreciation, amortization and accretion
|
$
|
42,549
|
|
$
|
36,547
|
Commodity derivative
cash settlements:
|
|
|
|
Oil derivative cash
settlements (paid) received
|
$
|
7,045
|
|
$
|
(4,894)
|
Natural gas derivative
cash settlements received
|
$
|
2,534
|
|
$
|
2,099
|
Production:
|
|
|
|
Oil (MBbls)
|
1,613
|
|
1,547
|
Natural gas liquids
(MGal)
|
10,020
|
|
9,244
|
Natural gas
(MMcf)
|
13,938
|
|
14,280
|
Total
(MBoe)
|
4,175
|
|
4,147
|
Average daily
production (Boe/d)
|
46,389
|
|
46,078
|
Average sales price
per unit (excluding derivative cash settlements):
|
|
|
|
Oil price (per
Bbl)
|
$
|
48.21
|
|
$
|
60.38
|
Natural gas liquids
price (per Gal)
|
$
|
0.45
|
|
$
|
0.80
|
Natural gas price (per
Mcf)
|
$
|
2.60
|
|
$
|
2.57
|
Combined (per
Boe)
|
$
|
28.38
|
|
$
|
33.15
|
Average sales price
per unit (including derivative cash settlements):
|
|
|
|
Oil price (per
Bbl)
|
$
|
52.58
|
|
$
|
57.22
|
Natural gas liquids
price (per Gal)
|
$
|
0.45
|
|
$
|
0.80
|
Natural gas price (per
Mcf)
|
$
|
2.78
|
|
$
|
2.72
|
Combined (per
Boe)
|
$
|
30.68
|
|
$
|
32.48
|
Average WTI oil spot
price (per Bbl)
|
$
|
54.82
|
|
$
|
62.91
|
Average Henry Hub
natural gas index price (per MMbtu)
|
$
|
2.92
|
|
$
|
3.08
|
Average unit costs
per Boe:
|
|
|
|
Oil and natural gas
production, excluding ad valorem taxes
|
$
|
10.77
|
|
$
|
10.99
|
Ad valorem
taxes
|
$
|
0.60
|
|
$
|
0.57
|
Production and other
taxes
|
$
|
1.47
|
|
$
|
1.77
|
General and
administrative excluding transaction costs and LTIP
|
$
|
2.32
|
|
$
|
2.29
|
Total general and
administrative
|
$
|
3.96
|
|
$
|
5.81
|
Depletion,
depreciation, amortization and accretion
|
$
|
10.19
|
|
$
|
8.81
|
LEGACY RESERVES
INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(UNAUDITED)
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2019
|
|
2018
|
|
(In thousands,
except per share / unit data)
|
Revenues:
|
|
|
|
Oil sales
|
$
|
77,761
|
|
$
|
93,411
|
Natural gas liquids
(NGL) sales
|
4,515
|
|
7,396
|
Natural gas
sales
|
36,221
|
|
36,672
|
Total
revenues
|
118,497
|
|
137,479
|
|
|
|
|
Expenses:
|
|
|
|
Oil and natural gas
production
|
47,477
|
|
47,967
|
Production and other
taxes
|
6,149
|
|
7,326
|
General and
administrative
|
16,530
|
|
24,090
|
Depletion,
depreciation, amortization and accretion
|
42,549
|
|
36,547
|
Impairment of
long-lived assets
|
7,398
|
|
—
|
(Gains) losses on
disposal of assets
|
1,034
|
|
(20,395)
|
Total
expenses
|
121,137
|
|
95,535
|
|
|
|
|
Operating income
(loss)
|
(2,640)
|
|
41,944
|
|
|
|
|
Other income
(expense):
|
|
|
|
Interest
income
|
6
|
|
12
|
Interest
expense
|
(37,119)
|
|
(27,368)
|
Gain on extinguishment
of debt
|
13,105
|
|
51,693
|
Equity in income
(loss) of equity method investees
|
—
|
|
17
|
Net gains (losses) on
commodity derivatives
|
(51,460)
|
|
(1,704)
|
Other
|
(270)
|
|
275
|
Loss before income
taxes
|
(78,378)
|
|
64,869
|
Income tax
expense
|
—
|
|
(487)
|
Net loss
|
$
|
(78,378)
|
|
$
|
64,382
|
|
|
|
|
Loss per share / unit
- basic & diluted
|
$
|
(0.70)
|
|
$
|
0.62
|
Weighted average
number of shares / units used in computing net loss per share /
unit -
|
|
|
|
Basic
|
111,225
|
|
103,994
|
Diluted
|
111,225
|
|
104,301
|
LEGACY RESERVES
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(UNAUDITED)
|
ASSETS
|
|
|
March 31,
2019
|
|
December 31,
2018
|
|
|
(In
thousands)
|
Current
assets:
|
|
|
|
|
Cash
|
|
$
|
1,491
|
|
$
|
1,098
|
Accounts receivable,
net:
|
|
|
|
|
Oil and natural
gas
|
|
63,542
|
|
56,615
|
Joint interest
owners
|
|
16,142
|
|
15,370
|
Other
|
|
283
|
|
—
|
Fair value of
derivatives
|
|
9,708
|
|
66,662
|
Prepaid expenses and
other current assets
|
|
13,335
|
|
11,347
|
Total current
assets
|
|
104,501
|
|
151,092
|
Oil and natural gas
properties using the successful efforts method, at cost:
|
|
|
|
|
Proved
properties
|
|
3,507,534
|
|
3,471,456
|
Unproved
properties
|
|
19,680
|
|
19,863
|
Accumulated depletion,
depreciation, amortization and impairment
|
|
(2,221,624)
|
|
(2,177,006)
|
|
|
1,305,590
|
|
1,314,313
|
Other property and
equipment, net of accumulated depreciation and amortization of
$2,432 and $2,464, respectively (Note 11)
|
|
6,743
|
|
2,456
|
Operating rights, net
of amortization of $806 and $894, respectively
|
|
|
|
|
Fair value of
derivatives
|
|
—
|
|
3,135
|
Other
assets
|
|
3,304
|
|
3,935
|
Total
assets
|
|
$
|
1,420,138
|
|
$
|
1,474,931
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT
|
Current
liabilities:
|
|
|
|
|
Current debt,
net
|
|
$
|
883,092
|
|
$
|
856,646
|
Accounts
payable
|
|
28,658
|
|
11,227
|
Accrued oil and
natural gas liabilities
|
|
76,284
|
|
98,886
|
Fair value of
derivatives
|
|
2,207
|
|
—
|
Asset retirement
obligation
|
|
3,938
|
|
3,938
|
Other
|
|
18,455
|
|
13,953
|
Total current
liabilities
|
|
1,012,634
|
|
984,650
|
Long-term debt,
net
|
|
416,328
|
|
432,923
|
Asset retirement
obligation
|
|
250,867
|
|
248,796
|
Fair value of
derivatives
|
|
—
|
|
550
|
Other long-term
liabilities
|
|
3,190
|
|
643
|
Total
liabilities
|
|
1,683,019
|
|
1,667,562
|
Commitments and
contingencies
|
|
|
|
|
Partners'
deficit
|
|
|
|
|
Common stock, $0.01
par value; 945,000,000 shares authorized, 114,810,671 and
109,442,278 shares outstanding at March 31, 2019 and December 31,
2018, respectively
|
|
1,148
|
|
1,094
|
Additional paid-in
capital
|
|
32,571
|
|
24,752
|
Accumulated
deficit
|
|
(296,600)
|
|
(218,477)
|
Total stockholders'
deficit
|
|
(262,881)
|
|
(192,631)
|
Total liabilities and
stockholders' / partners' deficit
|
|
$
|
1,420,138
|
|
$
|
1,474,931
|
Non-GAAP Financial Measures
"Adjusted EBITDA" is a non-generally accepted accounting
principles ("non-GAAP") measure which may be used periodically by
management when discussing our financial results with investors and
analysts. The following presents a reconciliation of this non-GAAP
financial measure to its nearest comparable generally accepted
accounting principles ("GAAP") measure.
Adjusted EBITDA is presented as management believes it provides
additional information concerning the performance of our business
and is used by investors and financial analysts to analyze and
compare our current operating and financial performance relative to
past performance and such performances relative to that of other
exploration and production companies. Adjusted EBITDA may not be
comparable to similarly titled measures of other exploration and
production companies because all companies may not calculate such
measures in the same manner.
Certain factors impacting Adjusted EBITDA may be viewed as
temporary, one-time in nature, or being offset by reserves from
past performance or near-term future performance. Financial results
are also driven by various factors that do not typically occur
evenly throughout the year that are difficult to predict, including
rig availability, weather, well performance, the timing of drilling
and completions and near-term commodity price changes.
"Adjusted EBITDA" should not be considered as an alternative to
GAAP measures, such as net income, operating income, cash flow from
operating activities, or any other GAAP measure of financial
performance.
The following table presents a reconciliation of our
consolidated net loss to Adjusted EBITDA:
|
|
Three Months
Ended
|
|
|
March
31,
|
|
|
2019
|
|
2018
|
|
|
(In
thousands)
|
Net (loss)
income
|
|
$
|
(78,378)
|
|
$
|
64,382
|
Plus:
|
|
|
|
|
Interest
expense
|
|
$
|
37,119
|
|
$
|
27,368
|
Gain on extinguishment
of debt
|
|
(13,105)
|
|
(51,693)
|
Income tax
expense
|
|
—
|
|
487
|
Depletion,
depreciation, amortization and accretion
|
|
42,549
|
|
36,547
|
Impairment of
long-lived assets
|
|
7,398
|
|
—
|
(Gain) loss on
disposal of assets
|
|
1,034
|
|
(20,395)
|
Equity in (income)
loss of equity method investees
|
|
—
|
|
(17)
|
Share-based
compensation expense
|
|
4,156
|
|
12,806
|
Minimum payments
received in excess of overriding royalty interest
earned(1)
|
|
(543)
|
|
522
|
Net (gains) losses on
commodity derivatives
|
|
51,460
|
|
1,704
|
Net cash settlements
(paid) received on commodity derivatives
|
|
9,579
|
|
(2,795)
|
Transaction
costs
|
|
2,669
|
|
1,782
|
Adjusted
EBITDA
|
|
$
|
63,938
|
|
$
|
70,698
|
|
(1)
|
Minimum payments
received in excess of overriding royalties earned under a
contractual agreement expiring December 31, 2019. The remaining
amount of the minimum payments is recognized in net
income.
|
Commodity Derivative Contracts
We enter into oil and natural gas derivative contracts to help
mitigate the risk of changing commodity prices. As of May 8,
2019, we had entered into derivative agreements to receive average
prices as summarized below.
NYMEX WTI Crude Oil
Swaps:
|
Time
Period
|
|
Volumes
(Bbls)
|
|
Average Price
per
Bbl
|
|
Price Range per
Bbl
|
April-December
2019
|
|
2,475,000
|
|
$61.33
|
|
$57.15
|
-
|
$67.65
|
|
Midland-to-Cushing
WTI Crude Oil Differential Swaps:
|
|
Time
Period
|
|
Volumes
(Bbls)
|
|
Average Price
per
Bbl
|
|
Price Range per
Bbl
|
April-December
2019
|
|
1,743,000
|
|
$(3.61)
|
|
$(1.15)
|
-
|
$(5.60)
|
|
Midland-to-Cushing
WTI Crude Oil Differential Enhanced Swaps
|
|
Time
Period
|
|
Volumes
(Bbls)
|
|
Average Short
Price
Call per Bbl
|
|
Average Swap
Price
per Bbl
|
April-December
2019
|
|
1,100,000
|
|
$70.00
|
|
$(2.91)
|
|
NYMEX Natural Gas
Swaps (Henry Hub):
|
|
|
|
|
|
Average
|
|
Price Range
per
|
Time
Period
|
|
Volumes
(MMBtu)
|
|
Price per
MMBtu
|
|
MMBtu
|
April-December
2019
|
|
26,225,000
|
|
$3.30
|
|
$3.05
|
-
|
$3.39
|
Location and quality differentials attributable to our
properties are not reflected in the above prices. The agreements
provide for monthly settlement based on the difference between the
agreement fixed price and the actual reference oil and natural gas
index prices.
Cautionary Statement Relevant to Forward-Looking
Information
This press release includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, including, without limitation, the evaluation of financial
transactions and other strategic alternatives, statements regarding
the expected future growth and dividends of the company, and plans
and objectives of management for future operations. All statements,
other than statements of historical facts, included in this press
release that address activities, events or developments that Legacy
expects, believes or anticipates will or may occur in the future,
are forward-looking statements. Words such as "anticipates,"
"expects," "intends," "plans," "targets," "projects," "believes,"
"seeks," "schedules," "estimated," and similar expressions are
intended to identify such forward-looking statements. These
forward-looking statements rely on a number of assumptions
concerning future events and are subject to a number of
uncertainties, factors and risks, many of which are outside the
control of Legacy, which could cause results to differ materially
from those expected by management of Legacy. Such risks and
uncertainties include, but are not limited to, the structure and
timing of any financial, transactional, or other strategic
alternative and whether any such financial, transactional, or other
strategic alternative will be completed; whether Legacy will be
able to receive extension of it revolving credit facility; realized
oil and natural gas prices; production volumes, lease operating
expenses, general and administrative costs and finding and
development costs; future operating results; and the factors set
forth under the heading "Risk Factors" in Legacy's filings with the
U.S. Securities and Exchange Commission, including its Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K. The reader should not place undue reliance on
these forward-looking statements, which speak only as of the date
of this press release. Unless legally required, Legacy undertakes
no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events or
otherwise.
CONTACT:
|
Legacy Reserves
Inc.
|
|
Robert L.
Norris
|
|
Chief Financial
Officer
|
|
(432)
689-5200
|
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SOURCE Legacy Reserves Inc.