Press Release

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11/14/18
Harvest Oil & Gas Announces Third Quarter 2018 Results

HOUSTON, Nov. 14, 2018 (GLOBE NEWSWIRE) -- Harvest Oil & Gas Corp. (OTCQX: HRST) (“Harvest” or the “Company”) today announced results for the third quarter of 2018 and the filing of its Form 10-Q with the Securities and Exchange Commission (“SEC”) on November 14, 2018. Harvest is the successor reporting company to EV Energy Partners, L.P., its predecessor.

Key Highlights

  • Generated Adjusted EBITDAX of $28.9 million and a net loss of $9.8 million, or $(0.97) per basic and diluted weighted average share outstanding for the third quarter of 2018
  • Average daily production was 175.5 MMcfe for the third quarter of 2018, which was at the high end of the guidance range of 167 to 176 MMcfe
  • Completed the sale of certain interests in its Central Texas and Karnes County, Texas properties to Magnolia Oil & Gas Corporation (“Magnolia”) for a total consideration of $133.3 million in cash (net of preliminary purchase price adjustments) and 4.2 million shares of Magnolia common stock (NYSE: MGY)
  • Completed the sale of certain Eagle Ford formation rights and existing production in Lee County, Texas for $3.5 million
  • Common stock and warrants commenced trading on the OTCQX® Best Market on September 20, 2018 under the tickers HRST and HRSTW, respectively

Third Quarter 2018 Financial Results

        
        
  Third Quarter  Second Quarter (1)
  
$ in millions unless noted otherwise 2018 2018
  
Average daily production (MMcfe/d) 175.5   181.8   
Total revenues 69.0   64.8   
Total assets 545.5   689.5   
Net loss (2) (9.8)  (595.6)  
Adjusted EBITDAX (a non-GAAP financial measure) (3) 28.9   28.0   
Total debt (4) 133.0   280.0   
Net cash provided by operating activities 17.4   19.2   
Additions to oil and natural gas properties 15.1   17.5   

(1)  All amounts reflect the combined results of two months ended May 31, 2018 (Predecessor) and one month ended June 30, 2018 (Successor)
(2)  Includes $1.0 million and $588.1 million of reorganization items, net in the third and second quarter of 2018, respectively
(3)  Adjusted EBITDAX is a Non-GAAP financial measure and is described in the attached table under “Non-GAAP Measures”
(4)  As of September 30, 2018 and June 30, 2018

For the third quarter of 2018, Harvest reported a net loss of $9.8 million, compared to a net loss of $595.6 million for the second quarter of 2018, which reflects the combined results of two months ended May 31, 2018 (Predecessor) and one month ended June 30, 2018 (Successor). For the third quarter of 2017, Harvest’s predecessor reported a net loss of $17.9 million. Included in the 2018 third quarter net loss were the following items:

  • $1.1 million of non-cash costs contained in general and administrative expenses,
  • $1.0 million of reorganization items, net,
  • $2.6 million of impairment of oil and natural gas properties,
  • $4.8 million of gain on equity securities, and
  • $24.6 million of non-cash losses on commodity derivatives.

Production for the third quarter of 2018 was 10.4 Bcf of natural gas, 341 MBbls of oil and 611 MBbls of natural gas liquids (NGLs), or 175.5 million cubic feet equivalent per day (MMcfe/d). This represents a 3 percent decrease from the second quarter of 2018 production of 181.8 MMcfe/d and a 5 percent increase from the third quarter of 2017 production of 167.1 MMcfe/d. The decrease in production from the second quarter of 2018 was primarily due to the divestiture of the Central Texas and Karnes County, Texas properties that closed on August 31, 2018. The increase in production from the third quarter of 2017 was primarily due to increased drilling activity and the adoption of a new revenue recognition standard in 2018.

Adjusted EBITDAX for the third quarter of 2018 was $28.9 million, a 3 percent increase from the second quarter of 2018 and a 70 percent increase from the third quarter of 2017. The increase in Adjusted EBITDAX from the second quarter of 2018 was primarily attributable to higher realized oil, natural gas and natural gas liquids prices and lower cash general and administrative expenses, partially offset by decreased oil, natural gas and natural gas liquids production and higher lease operating expenses. The increase in Adjusted EBITDAX from the third quarter of 2017 was primarily attributable to higher realized oil and natural gas liquids prices, increased oil, natural gas and natural gas liquids production and lower cash general and administrative expenses, partially offset by higher lease operating expenses. Adjusted EBITDAX is a Non-GAAP financial measures and is described in the attached table under “Non-GAAP Measures.”

Revolving Credit Facility and Liquidity

As of November 14, 2018, Harvest’s borrowing base under its credit facility was $264.6 million of which $125 million was drawn. Liquidity from borrowing base capacity and cash on hand is currently over $140 million. For more information regarding Harvest's debt and liquidity, please review Harvest's Quarterly Report on Form 10-Q filed on November 14, 2018 with the Securities and Exchange Comission.

Quarterly Report on Form 10-Q

Harvest financial statements and related footnotes are available in the Form 10-Q, which was filed on November 14, 2018, 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 San Juan Basin, the Appalachian Basin (which includes the Utica Shale), Michigan, the Mid-Continent areas in Oklahoma, Texas, Arkansas, Kansas, 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 and Section 21E of the Exchange Act. 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 and its Quarterly Reports on Form 10-Q and, if applicable, its Current Reports on Form 8-K, 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. 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.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise.


Operating Statistics

             
             
 Successor  Predecessor     
          
 Three Months  Three Months    
 Ended  Ended    
 September 30,  September 30,    
 2018  2017      
             
Production data:            
Oil (MBbls) 341   310      
Natural gas liquids (MBbls) 611   541      
Natural gas (MMcf) 10,437   10,263      
Net production (MMcfe) 16,147   15,373      
Average sales price per unit: (1)            
Oil (Bbl)$68.20   45.03      
Natural gas liquids (Bbl) 30.55   21.27      
Natural gas (Mcf) 2.54   2.59      
Mcfe 4.24   3.38      
Average unit cost per Mcfe:            
Production costs:            
Lease operating expenses$1.75   1.73      
Production taxes 0.18   0.17      
Total 1.93   1.90      
Depreciation, depletion and amortization 0.49   1.41      
General and administrative expenses 0.48   0.51      
             
 Successor  Predecessor    Predecessor
      Combined  
 Four Months  Five Months Nine Months Nine Months
 Ended  Ended Ended Ended
 September 30,  May 31, September 30 September 30,
 2018  2018 2018 2017
Production data:            
Oil (MBbls) 449   662  1,111  1,018
Natural gas liquids (MBbls) 826   1,040  1,866  1,581
Natural gas (MMcf) 14,049   16,982  31,031  30,869
Net production (MMcfe) 21,695   27,193  48,888  46,460
Average sales price per unit: (1)            
Oil (Bbl)$67.80  $64.14 $65.62 $45.34
Natural gas liquids (Bbl) 29.51   25.86  27.48  20.15
Natural gas (Mcf) 2.50   2.41  2.45  2.78
Mcfe 4.15   4.06  4.10  3.52
Average unit cost per Mcfe:            
Production costs:            
Lease operating expenses$1.74  $1.67 $1.70 $1.65
Production taxes 0.18   0.20  0.19  0.17
Total 1.92   1.87  1.89  1.82
Depreciation, depletion and amortization 0.49   1.70  1.16  1.51
General and administrative expenses 0.45   0.58  0.52  0.47

(1) Prior to $1.8 million of net hedge losses and $0.7 million of net hedge gains on settlements of commodity derivatives for the three months ended September 30, 2018 and 2017, respectively, and $0.2 million of net hedge losses and $2.2 million of net hedge losses on settlements of commodity derivatives for the nine months ended September 30, 2018 and 2017, respectively.


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

        
        
  Successor  Predecessor
  September 30,  December 31,
  2018
  2017
ASSETS       
Current assets:       
Cash and cash equivalents $5,693   $4,896 
Equity securities  63,042    - 
Accounts receivable:       
Oil, natural gas and natural gas liquids revenues  52,340    47,694 
Other  2,572    78 
Derivative asset  -    3,052 
Other current assets  1,960    5,713 
Total current assets  125,607    61,433 
        
Oil and natural gas properties, net of accumulated depreciation, depletion and       
amortization; September 30, 2018, $7,551; December 31, 2017, $1,191,559  415,260    1,375,527 
Other assets  4,679    4,845 
Total assets $545,546   $1,441,805 
        
LIABILITIES AND EQUITY       
Current liabilities:       
Accounts payable and accrued liabilities:       
Third party $27,671   $43,817 
Related party  -    4,194 
Derivative liability  18,313    396 
Current portion of long-term debt  -    605,549 
Total current liabilities  45,984    653,956 
        
        
Asset retirement obligations  115,769    158,793 
Long–term debt, net  133,000    - 
Long–term derivative liability  10,495    - 
Other long–term liabilities  1,022    1,044 
        
Commitments and contingencies       
        
Mezzanine Equity  49    - 
        
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 September 30, 2018  100    - 
Successor additional paid-in capital  249,672    - 
Successor treasury stock at cost - 12,348 shares at September 30, 2018  (247)   - 
Successor retained earnings (accumulated deficit)  (10,298)   - 
Total stockholders' / owners’ equity  239,227    628,012 
Total liabilities and equity $545,546   $1,441,805 


Condensed Consolidated Statements of Operations
(In thousands, except per share/unit data)

       
       
 Successor  Predecessor
     
 Three Months  Three Months
 Ended  Ended
 September 30, 2018  September 30, 2017
Revenues:      
Oil, natural gas and natural gas liquids revenues$68,407   $52,022 
Transportation and marketing–related revenues 559    629 
Total revenues 68,966    52,651 
       
Operating costs and expenses:      
Lease operating expenses$28,281   $26,608 
Cost of purchased natural gas 393    444 
Dry hole and exploration costs 21    135 
Production taxes 2,973    2,573 
Accretion expense on obligations 2,345    1,905 
Depreciation, depletion and amortization 7,860    21,710 
General and administrative expenses 7,673    7,912 
Impairment of oil and natural gas properties 2,565    32 
Gain on sales of oil and natural gas properties (28)   (876)
Total operating costs and expenses 52,083    60,443 
       
Operating income (loss) 16,883    (7,792)
       
Other income (expense), net:      
Loss on derivatives, net (26,423)   (152)
Interest expense (3,967)   (10,092)
Gain on equity securities 4,830     
Other income (expense), net (111)   68 
Total other income (expense), net (25,671)   (10,176)
       
Reorganization items, net (972)   - 
       
Loss before income taxes (9,760)   (17,968)
       
Income tax benefit -    80 
       
Net loss$(9,760)  $(17,888)
       
Basic and diluted earnings per share/unit:      
Net loss$(0.97)  $(0.36)
       
Weighted average common shares/units outstanding      
(basic and diluted) 10,028    49,369 



             
             
 Successor  Predecessor    Predecessor
      Combined  
 Four Months  Five Months Nine Months Nine Months
 Ended  Ended Ended Ended
 September 30,  May 31, September 30, September 30,
 2018
  2018
 2018
 2017
Revenues:            
Oil, natural gas and natural gas liquids revenues$89,942   $110,307  $200,249  $163,745 
Transportation and marketing–related revenues 744    724   1,468   1,945 
Total revenues 90,686    111,031   201,717   165,690 
             
Operating costs and expenses:            
Lease operating expenses$37,656   $45,372  $83,028  $76,782 
Cost of purchased natural gas 522    557   1,079   1,384 
Dry hole and exploration costs 64    122   186   190 
Production taxes 3,943    5,343   9,286   7,828 
Accretion expense on obligations 3,134    3,176   6,310   5,774 
Depreciation, depletion and amortization 10,590    46,196   56,786   70,221 
General and administrative expenses 9,702    15,648   25,350   21,631 
Restructuring costs -    5,211   5,211   - 
Impairment of oil and natural gas properties 2,565    3   2,568   68,016 
(Gain) loss on sales of oil and natural gas properties (47)   5   (42)  (911)
Total operating costs and expenses 68,129    121,633   189,762   250,915 
             
Operating income (loss) 22,557    (10,602)  11,955   (85,225)
             
Other income (expense), net:            
Gain (loss) on derivatives, net (30,655)   444   (30,211)  20,588 
Interest expense (5,166)   (13,652)  (18,818)  (30,501)
Gain on equity securities 4,830    -   4,830   - 
Other income (expense), net (84)   776   692   1,149 
Total other income (expense), net (31,075)   (12,432)  (43,507)  (8,764)
             
Reorganization items, net (1,780)   (587,325)  (589,105)  - 
             
Loss before income taxes (10,298)   (610,359)  (620,657)  (93,989)
             
Income tax (expense) benefit -    (166)  (166)  109 
             
Net loss$(10,298)  $(610,525) $(620,823) $(93,880)
             
Basic and diluted earnings per share/unit:            
Net loss$(1.03)  $(12.12)    $(1.86)
             
Weighted average common shares/units outstanding            
(basic and diluted) 10,021    49,369      49,353 

Condensed Consolidated Statements of Cash Flows
(In $ thousands)

           
           
  Successor  Predecessor
  Four Month  Five Months Nine Months
  Ended  Ended Ended
  September 30,  May 31, September 30,
  2018
  2018
  2017
Cash flows from operating activities:          
Net loss $(10,298)  $(610,525) $(93,880)
Adjustments to reconcile net loss to net cash flows provided by          
 operating activities:          
Accretion expense on obligations  3,134    3,176   5,774 
Depreciation, depletion and amortization  10,590    46,196   70,221 
Share–based compensation cost  1,144    3,784   3,290 
Impairment of oil and natural gas properties  2,565    3   68,016 
(Gain) loss on sales of oil and natural gas properties  (47)   5   (911)
Gain on equity securities  (4,830)   -   - 
(Gain) loss on derivatives, net  30,655    (444)  (20,588)
Cash settlements of matured derivative contracts  (1,847)   3,099   (2,196)
Reorganization items, net  -    573,304   - 
Other  780    248   820 
Changes in operating assets and liabilities:          
Accounts receivable  (2,014)   (3,518)  1,681 
Other current assets  314    1,853   (649)
Accounts payable and accrued liabilities  (4,183)   4,405   2,993 
Other, net  (38)   69   (235)
Net cash flows provided by operating activities   25,925    21,655   34,336 
           
Cash flows from investing activities:          
Acquisition of oil and natural gas properties  -    -   (61,400)
Additions to oil and natural gas properties  (22,307)   (29,727)  (9,344)
Reimbursements related to oil and natural gas properties  1,091    652   - 
Proceeds from sale of oil and natural gas properties  136,483    3   3,639 
Other  16    26   46 
Net cash flows provided by (used in) investing activities  115,283    (29,046)  (67,059)
           
Cash flows from financing activities:          
Repayment of long-term debt borrowings  (164,000)   -   (28,000)
Long-term debt borrowings  -    34,000   17,000 
Loan costs incurred  -    (2,813)  - 
Purchase of treasury stock  (247)   -   - 
Contributions from general partner  -    40   - 
Net cash flows provided by (used in) financing activities  (164,247)   31,227   (11,000)
           
Increase (decrease) in cash, cash equivalents and restricted cash  (23,039)   23,836   (43,723)
Cash, cash equivalents and restricted cash – beginning of period  28,732    4,896   57,633 
Cash, cash equivalents and restricted cash – end of period $5,693   $28,732  $13,910 
           

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 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, 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 Loss to Adjusted EBITDAX
(In $ thousands)

                
                
  Three Months Ended Nine Months Ended
  Successor Predecessor Combined Combined Predecessor
  Sep 30, 2018 Sep 30, 2017 Jun 30, 2018 Sep 30, 2018 Sep 30, 2017
                
Net loss $(9,760)  (17,888)  (595,614)  (620,823)  (93,880)
                
Add:               
Income taxes  -   (80)  (148)  166   (109)
Interest expense, net  4,030   10,092   4,375   18,880   30,501 
Depreciation, depletion and amortization  7,860   21,710   21,924   56,786   70,221 
Accretion expense on obligations  2,345   1,905   2,068   6,310   5,774 
(Gain) loss on derivatives, net  26,423   152   4,187   30,211   (20,588)
Cash settlements of matured commodity  (1,847)  684   -   (288)  (2,173)
derivative contracts               
Non-cash equity-based compensation  1,144   1,086   3,197   4,928   3,290 
Impairment of oil and natural gas properties  2,565   32   -   2,568   68,016 
Non-cash oil inventory adjustment  24   -   (204)  (180)  424 
Dry hole and exploration costs  21   135   83   186   190 
(Gain) loss on sales of oil and natural gas properties  (28)  (876)  (12)  (42)  (1,108)
Reorganization items, net (1)  972   -   588,133   589,105   - 
(Gain) loss on Equity Securities  (4,830)  -   -   (4,830)  - 
Other income, net  -   -   -   -   - 
Adjusted EBITDAX   28,919    16,952    27,989    82,977    60,558 

(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 Hedge Position

          
          
    Swap Swap  
Period Index Volume Price  
Natural Gas (MmmBtus):         
Oct - Dec 2018 NYMEX 8,280.0  2.91  
Jan - Dec 2019 NYMEX 31,025.0  2.77  
          
Crude (MBbls):         
Oct - Dec 2018 WTI 276.0  66.34  
Jan - Dec 2019 WTI 1,022.0  63.02  
Jan - Dec 2020 WTI 732.0  60.51  
          
Ethane (MBbls):         
Oct - Dec 2018 Mt Belvieu 184.0  12.51  
Jan - Dec 2019 Mt Belvieu 730.0  11.50  
Jan - Dec 2020 Mt Belvieu 512.4  11.91  
          
Propane (MBbls):         
Oct - Dec 2018 Mt Belvieu 92.0  37.44  
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

Production bar chart