Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Approach Resources Inc | d817367d8k.htm |
| EX-99.2 - EX-99.2 - Approach Resources Inc | d817367dex992.htm |
| EX-99.1 - EX-99.1 - Approach Resources Inc | d817367dex991.htm |
| EX-10.1 - EX-10.1 - Approach Resources Inc | d817367dex101.htm |
 Third Quarter 2014 Results
NOVEMBER 5, 2014
Exhibit 99.3 |
 Forward-looking statements
2
Cautionary statements regarding oil & gas quantities
Third
Quarter
2014
Results
–
November
2014 |
 Company overview
AREX OVERVIEW
ASSET OVERVIEW
Enterprise value $710 MM
High-quality reserve base
Permian core operating area
2014 Capital program of $400 MM
Notes:
Proved
reserves
and
acreage
as
of
12/31/2013
and
9/30/2014,
respectively.
All
Boe
and
Mcfe
calculations
are
based
on
a
6
to
1
conversion
ratio.
Enterprise
value
is
equal
to
market
capitalization
using
the
closing
share
price
of
$9.44
per
share
on
11/3/2014,
plus
net
debt
as
of
9/30/2014.
See
“PV-10
(unaudited)”
slide.
3
Third
Quarter
2014
Results
–
November
2014
115 MMBoe proved reserves
$1.1 BN proved PV-10
99% Permian Basin
155,000 gross (136,500 net) acres
Running 3 HZ rigs in the Wolfcamp shale play to drill
70 wells during 2014
~1+ BnBoe gross, unrisked resource potential
~2,000+ Identified HZ drilling locations targeting
Wolfcamp A/B/C |
 3Q14 Key highlights
4
3Q14 HIGHLIGHTS
•
Drilled 18 and completed 16 HZ wells
•
Maintained best-in-class HZ well costs
•
New Elliott well expands Wolfcamp
development eastward
•
Increased 3Q14 production 61% YoY to
14.2 MBoe/d
•
Delivered seventh consecutive record
quarterly EBITDAX
•
Solid financial position further
strengthened by borrowing base increase
3Q14 SUMMARY RESULTS
Production (MBoe/d)
14.2
% Oil
39%
% Total liquids
69%
Average realized price ($/Boe)
Average realized price, excluding commodity derivatives impact
$
52.17
Average realized price, including commodity derivatives impact
51.59
Costs and expenses ($/Boe)
LOE
$
5.87
Production and ad valorem taxes
2.55
Exploration
0.68
General and administrative
5.88
G&A –
cash component
4.37
G&A –
noncash component
1.51
DD&A
19.88
Third
Quarter
2014
Results
–
November
2014 |
 Outperformance in gas/NGL volumes achieves higher reserve
recovery and drives production growth
Horizontal Wolfcamp Production by Commodity
83% oil growth since 3Q13
135% growth in HZ Wolfcamp
production since 3Q13
216% NGL growth since 3Q13
218% gas growth since 3Q13
Mboe
85
135
166
247
270
82
128
153
230
259
260
424
396
481
475
0
200
400
600
800
1,000
3Q13
4Q13
1Q14
2Q14
3Q14
Gas
NGLs
Oil
5
427
687
715
957
1,004
Third
Quarter
2014
Results
–
November
2014 |
 AREX HZ Wolfcamp Well Performance
6
AREX HZ WOLFCAMP (BOE/D)
Note: Daily production normalized for operational downtime.
Third
Quarter
2014
Results
–
November
2014
Production Data from
AREX A Bench Wells (11)
450 MBoe Type Curve
Wolfcamp Shale Oil
Production Data from
AREX B Bench Wells (74)
Production Data from
AREX C Bench Wells (13)
0
200
300
400
600
700
800
0
90
180
270
360
450
540
630
720
810
900
990
1080
1170
Time (Days)
100
500 |
 3Q14 Operating highlights
OPERATING HIGHLIGHTS
Maximizing
Returns
•
Oil differential of $(4.17)/Bbl
•
HZ well costs continue to track $5.5 MM per well
•
LOE of $5.87/Boe, improved 5% QoQ
Tracking
Development
Plan
•
Drilled
18
HZ
wells
and
completed
16
HZ
wells
•
Wolfcamp
A
–
2
wells,
Wolfcamp
B
–
7
wells
and
Wolfcamp
C
–
7
wells
•
HZ Wolfcamp B/C average IP 746 Boe/d (67% oil, 85% liquids)
•
Overall HZ well results continue to track at or above type curve
•
Impressive initial results from recent Elliott C bench well (IP of 806 Boe/d, 63%
oil and 83% liquids) expand Wolfcamp development eastward
Delivering
Production
Growth
•
Total production 14.2 MBoe/d (up 61% YoY)
•
Oil production 5.5 Mbbl/d (up 61% YoY)
7
Third
Quarter
2014
Results
–
November
2014 |
 3Q14 Financial highlights
FINANCIAL HIGHLIGHTS
Significant Cash
Flow
•
Record quarterly EBITDAX (non-GAAP) of $50.7 MM (up 60% YoY), or $1.29 per
diluted share (up 59% YoY)
•
Capital expenditures of $104.9 MM ($94 million for D&C)
Strong Financial
Position
•
Liquidity of $362MM at September 30
•
Increased borrowing base to $600 MM in November 2014
Increasing
Revenues
•
Revenues of $68.1 MM (up 54% YoY)
•
Net income of $22.4 MM, or $0.57 per diluted share
•
Adjusted net income (non-GAAP) of $10.5 MM, or $0.27 per diluted share
Strong Balance Sheet and Liquidity to Develop
HZ Wolfcamp Shale
Note:
See
“Adjusted
Net
Income,”
“EBITDAX”
and
“Strong,
Simple
Balance
Sheet”
slides.
8
Third
Quarter
2014
Results
–
November
2014
th |
 Current hedge position
9
Commodity & Period
Contract Type
Volume
Contract Price
Crude Oil
October 2014 –
December 2014
Collar
550 Bbls/d
$90.00/Bbl -
$105.50/Bbl
October 2014 –
December 2014
Collar
950 Bbls/d
$85.05/Bbl -
$95.05/Bbl
October 2014 –
December 2014
Collar
2,000 Bbls/d
$89.00/Bbl -
$98.85/Bbl
October 2014 –
March 2015
Collar
1,500 Bbls/d
$85.00/Bbl -
$95.30/Bbl
January 2015 –
December 2015
Collar
1,600 Bbls/d
$84.00/Bbl -
$91.00/Bbl
January 2015 –
December 2015
Collar
1,000 Bbls/d
$90.00/Bbl -
$102.50/Bbl
January 2015 –
December 2015
3-way Collar
500 Bbls/d
$75.00/Bbl -
$84.00/Bbl -
$94.00/Bbl
January 2015 –
December 2015
3-way Collar
500 Bbls/d
$75.00/Bbl -
$84.00/Bbl -
$95.00/Bbl
Natural Gas Liquids
Propane
October 2014 –
December 2014
Swap
500 Bbls/d
$41.16/Bbl
Natural Gasoline
October 2014 –
December 2014
Swap
175 Bbls/d
$83.37/Bbl
Natural Gas
October 2014 –
December 2014
Swap
360,000 MMBtu/month
$4.18/MMBtu
October 2014 –
December 2014
Swap
35,000 MMBtu/month
$4.29/MMBtu
October 2014 –
December 2014
Swap
160,000 MMBtu/month
$4.40/MMBtu
October 2014 –
June 2015
Collar
80,000 MMBtu/month
$4.00/MMBtu -
$4.74/MMBtu
January 2015 –
December 2015
Swap
200,000 MMBtu/month
$4.10/MMBtu
January 2015 –
December 2015
Collar
130,000 MMBtu/month
$4.00/MMBtu -
$4.25/MMBtu
Third
Quarter
2014
Results
–
November
2014 |
 Production and expense guidance
10
2014 Guidance
Production
Total (MBoe)
4,950
Oil (MBbls)
2,050 –
2,200
Percent total liquids
70%
Operating costs and expenses (per Boe)
Lease operating
$6.00 -
$6.75
Production and ad valorem taxes
6.5% of oil & gas revenues
Cash general and administrative
$4.50 -
$5.00
Exploration
$0.50 -
$1.00
Depletion, depreciation and amortization
$21.00 -
$23.00
Capital expenditures (in millions)
Approx. $400
Horizontal wells
70
Third
Quarter
2014
Results
–
November
2014 |
 Strong, simple balance sheet
11
FINANCIAL RESULTS ($MM)
As of
September 30, 2014
Summary Balance Sheet
Cash and Cash Equivalents
$1.6
Credit Facility
89.5
Senior Notes
250.0
Total Long-Term Debt
$339.5
Shareholders’
Equity
745.1
Total Book Capitalization
$1,084.6
Liquidity
Borrowing Base
$450.0
Cash and Cash Equivalents
1.6
Long-term Debt under Credit Facility
(89.5)
Undrawn Letters of Credit
(0.3)
Liquidity
$361.8
Key Metrics
LTM EBITDAX (non-GAAP)
$185.1
Total Reserves (MMBoe)
114.7
Proved Developed Reserves (MMBoe)
45.2
% Proved Developed
39%
% Liquids
69%
Credit Statistics
Debt / Book Capital
31%
Debt / LTM EBITDAX
1.8x
LTM EBITDAX / LTM Interest
8.7x
Debt / Proved Reserves ($/Boe)
$2.96
Third
Quarter
2014
Results
–
November
2014
Note: See “EBITDAX”
slide for reconciliation. |
 Appendix |
 Adjusted net income (unaudited)
13
(in thousands, except per-share amounts)
Three Months Ended
September 30,
2014
2013
Net income
$
22,447
$
495
Adjustments for certain items:
Unrealized (gain) loss on commodity derivatives
(18,810)
3,438
Related income tax effect
6,816
(1,169)
Adjusted net income
$
10,453
$
2,764
Adjusted net income per diluted share
$
0.27
$
0.07
The
amounts
included
in
the
calculation
of
adjusted
net
income
and
adjusted
net
income
per
diluted
share
below
were
computed
in
accordance
with
GAAP.
We
believe
adjusted
net
income
and
adjusted
net
income
per
diluted
share
are
useful
to
investors
because
they
provide
readers
with
a
more
meaningful
measure
of
our
profitability
before
recording
certain
items
whose
timing
or
amount
cannot
be
reasonably
determined.
However,
these
measures
are
provided
in
addition
to,
and
not
as
an
alternative
for,
and
should
be
read
in
conjunction
with,
the
information
contained
in
our
financial
statements
prepared
in
accordance
with
GAAP
(including
the
notes),
included
in
our
SEC
filings
and
posted
on
our
website.
The
following
table
provides
a
reconciliation
of
adjusted
net
income
to
net
income
for
the
three
months
ended
September
30,
2014
and
2013.
ADJUSTED NET INCOME (UNAUDITED)
Third
Quarter
2014
Results
–
November
2014 |
 EBITDAX (unaudited)
14
EBITDAX (UNAUDITED)
The
amounts
included
in
the
calculation
of
EBITDAX
were
computed
in
accordance
with
GAAP.
EBITDAX
is
not
a
measure
of
net
income
or
cash
flow
as
determined
by
GAAP.
EBITDAX
is
presented
herein
and
reconciled
to
the
GAAP
measure
of
net
income
because
of
its
wide
acceptance
by
the
investment
community
as
a
financial
indicator
of
a
company's
ability
to
internally
fund
development
and
exploration
activities.
This
measure
is
provided
in
addition
to,
and
not
as
an
alternative
for,
and
should
be
read
in
conjunction
with,
the
information
contained
in
our
financial
statements
prepared
in
accordance
with
GAAP
(including
the
notes),
included
in
our
SEC
filings
and
posted
on
our
website.
The
following
table
provides
a
reconciliation
of
EBITDAX
to
net
income
for
the
three
months
ended
September
30,
2014
and
2013.
(in thousands, except per-share amounts)
Three Months Ended
September 30,
2014
2013
Net income
$
22,447
$
495
Exploration
891
1,193
Depletion, depreciation and amortization
25,959
19,413
Share-based compensation
1,965
1,599
Unrealized (gain) loss on commodity derivatives
(18,810)
3,438
Interest expense, net
5,442
5,179
Income tax provision
12,756
270
EBITDAX
$
50,650
$
31,587
EBITDAX per diluted share
$
1.29
$
0.81
Third
Quarter
2014
Results
–
November
2014 |
 PV-10 (unaudited)
15
PV-10 (UNAUDITED)
(in millions)
December 31,
2013
PV-10
$
1,132
Less income taxes:
Undiscounted future income taxes
(919)
10% discount factor
463
Future discounted income taxes
(456)
Standardized measure of discounted future net cash flows
$
676
The
present
value
of
our
proved
reserves,
discounted
at
10%
(“PV-10”),
was
estimated
at
$1.1
billion
at
December
31,
2013,
and
was
calculated
based
on
the
first-of-the-month,
twelve-month
average
prices
for
oil,
NGLs
and
gas,
of
$97.28
per
Bbl
of
oil,
$30.16
per
Bbl
of
NGLs
and
$3.66
per
MMBtu
of
natural
gas.
PV-10
is
our
estimate
of
the
present
value
of
future
net
revenues
from
proved
oil
and
gas
reserves
after
deducting
estimated
production
and
ad
valorem
taxes,
future
capital
costs
and
operating
expenses,
but
before
deducting
any
estimates
of
future
income
taxes.
The
estimated
future
net
revenues
are
discounted
at
an
annual
rate
of
10%
to
determine
their
“present
value.”
We
believe
PV-10
to
be
an
important
measure
for
evaluating
the
relative
significance
of
our
oil
and
gas
properties
and
that
the
presentation
of
the
non-GAAP
financial
measure
of
PV-10
provides
useful
information
to
investors
because
it
is
widely
used
by
professional
analysts
and
investors
in
evaluating
oil
and
gas
companies.
Because
there
are
many
unique
factors
that
can
impact
an
individual
company
when
estimating
the
amount
of
future
income
taxes
to
be
paid,
we
believe
the
use
of
a
pre-tax
measure
is
valuable
for
evaluating
the
Company.
We
believe
that
PV-10
is
a
financial
measure
routinely
used
and
calculated
similarly
by
other
companies
in
the
oil
and
gas
industry.
The
following
table
reconciles
PV-10
to
our
standardized
measure
of
discounted
future
net
cash
flows,
the
most
directly
comparable
measure
calculated
and
presented
in
accordance
with
GAAP.
PV-10
should
not
be
considered
as
an
alternative
to
the
standardized
measure
as
computed
under
GAAP.
Third
Quarter
2014
Results
–
November
2014 |
 Contact information
SERGEI KRYLOV
Executive Vice President & Chief Financial Officer
817.989.9000
ir@approachresources.com
www.approachresources.com |