Harvest Oil & Gas Corp. Announces Fourth Quarter and Full Year 2018 Results, Year-end Proved Reserves and 2019 Guidance
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
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
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.
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.
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
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.
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
Consolidated Balance Sheets ($ in thousands, except number of shares/units)
Consolidated Statements of Operations ($ in thousands, except per share/unit data)
Consolidated Statements of Cash Flows ($ in thousands)
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
Reconciliation of Standardized Measure to PV-10 at December 31, 2018
Total Current Hedge Position
Harvest Oil & Gas Corp., Houston, TX Ryan Stash 713-651-1144 hvstog.com