UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM 8-K

 

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of Earliest Event Reported): April 1, 2019 (March 29, 2019)

 

 

 

Harvest Oil & Gas Corp.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware 001-33024 83-0656612
(State or other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
     
1001 Fannin Street, Suite 750, Houston, Texas 77002
(Address of Principal Executive Offices) (Zip Code)
     
Registrant’s telephone number, including area code: (713) 651-1144

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
   

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

 

 

 

Item 2.02Results of Operations and Financial Condition

 

On March 29, 2019, Harvest Oil & Gas Corp. issued a press release providing information on its results of operations for the fourth quarter and full year ended December 31, 2018, 2018 proved reserves and guidance for 2019. The press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

 

The information under this Item 2.02 and in Exhibit 99.1 in this Current Report on Form 8-K are being furnished and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information under this Item 2.02 and in Exhibit 99.1 in this Current Report on Form 8-K shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended.

 

Item 9.01Financial Statements and Exhibits.

 

(d)Exhibits

 

Exhibit Number

Description

99.1 Press release issued March 29, 2019.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  Harvest Oil & Gas Corp.
     
April 1, 2019 By: /s/ Ryan Stash
    Ryan Stash
    Vice President and Chief Financial Officer

 

 

 

 

 

Exhibit 99.1

 

 

 

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

         
   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