Attached files
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| 8-K - CURRENT REPORT - Yuma Energy, Inc. | yuma_8k.htm |
Exhibit 99.1
Yuma
Energy, Inc.|
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NEWS
RELEASE
Yuma Energy, Inc. Announces it is Actively Seeking Strategic
Alternatives,
Provides an update to its Liquidity and Operations,
and Reports First Quarter 2018 Financial Results
HOUSTON, TX – (PR Newswire – May 11, 2018) – Yuma
Energy, Inc. (NYSE American: YUMA) (the
“Company” or “Yuma”) today announced that it is actively seeking
strategic alternatives and provided information related to its
liquidity and operations. The Company also reported its financial
results for the quarter ended March 31, 2018.
Strategic Alternatives
Yuma is currently exploring strategic alternatives in order to
enhance and maximize shareholder value. These strategic
alternatives may include, but are not limited to, a business
combination, a merger, sale of assets, and possible capital market
transactions. Yuma will thoroughly evaluate all opportunities and
third-party proposals, if any, and will aggressively pursue options
which are intended to add incremental shareholder value relative to
its continued standalone activities.
Liquidity
Due to operating losses the Company sustained during recent
quarters, which were partially a result of several events outside
the reasonable control of the Company, including the suspension of
production from several wells for a period of time and other
associated factors, at March 31, 2018, the Company was not in
compliance with its total debt to EBITDAX covenant for the trailing
four quarter period under its credit facility. In addition, due to
this non-compliance and the Company’s anticipated
non-compliance at June 30, 2018, the Company classified its bank
debt as a current liability in its consolidated financial
statements as of and for the three months ended March 31, 2018. On
May 8, 2018, the Company received a waiver from its lenders to its
compliance with the fiscal period total debt to EBITDAX for the
trailing four quarter period financial ratio covenant for the
period ended March 31, 2018, as long as it does not exceed 3.75 to
1.00.
As of March 31, 2018, the Company had outstanding borrowings of
$27.05 million under its credit facility, and its total borrowing
base was $40.5 million, leaving $13.45 million of undrawn borrowing
base. As of May 8, 2018, the total borrowing base under the credit
facility was reduced to $35.0 million. Since March 31, 2018, the
Company has borrowed an additional $7.2 million for working
capital, leaving $750,000 of undrawn borrowing base as of the date
hereof.
A breach in the future of any of the terms and conditions of the
credit facility or a breach of the financial covenants thereunder
could result in acceleration of the Company’s indebtedness,
in which case the debt would become immediately due and payable.
The Company currently anticipates non-compliance with various
financial covenants at June 30, 2018.
The Company has initiated several strategic alternatives to remedy
its limited liquidity, its debt covenant compliance issues, and to
provide it with additional working capital to develop its existing
assets. These may include, but are not limited to, reducing or
eliminating capital expenditures previously planned for 2018;
entering into commodity derivatives for a significant portion of
its anticipated production for 2018; reducing general and
administrative expenses; selling non-core assets; seeking merger
and acquisition related opportunities; and potentially raising
proceeds from capital markets transactions, including the sale of
debt or equity securities. There can be no assurance that the
exploration of strategic alternatives will result in a
transaction.
The significant risks and uncertainties described above raise
substantial doubt about the Company’s ability to continue as
a going concern. The Company has prepared its consolidated
financial statements for the three months ended March 31, 2018 on a
going concern basis of accounting, which contemplates continuity of
operations, realization of assets, and satisfaction of liabilities
and commitments in the normal course of business. The
Company’s consolidated financial statements for the three
months ended March 31, 2018 do not include any adjustments that
might result from the outcome of the going concern
uncertainty.
Operations Update
In 2017, the Company entered the Permian Basin through a joint
venture with two privately held energy companies and established an
Area of Mutual Interest (“AMI”) covering approximately
33,280 acres in Yoakum County, Texas, located in the Northwest
Shelf of the Permian Basin. The primary target within the AMI is
the San Andres formation, which has been one of the largest
producing formations in Texas to date. As of May 1, 2018, the
Company held a 62.5% working interest in approximately 4,823 gross
acres (3,014 net acres) within the AMI. In November, 2017, the
Company spudded a salt water disposal well, the Jameson SWD #1.
Upon completion of the salt water disposal well, the drilling rig
was moved to the Company’s State 320 #1H horizontal San
Andres well, which was subsequently drilled and completed. The
Company opened the well on March 1, 2018 to begin the dewatering
process and establish production. As of May 6, 2018, the well
was producing 31 barrels of oil, 89 Mcf of natural gas, and 3,908
barrels of water per day. While significant water production is
typical and was expected from the well, early production rates have
not met management’s pre-drill expectations. The Company will
continue to evaluate well performance and the commerciality of
the prospect area, but given the well performance to date, the
ability to establish commercial production in the prospect area is
uncertain at this time. As of March 31, 2018, the salt water
disposal well and the State 320 #1H well were classified as
unproved properties within the Company’s consolidated
financial statements.
First Quarter 2018 Financial Results
Production
The
following table presents the net quantities of oil, natural gas and
natural gas liquids produced and sold by the Company for the three
months ended March 31, 2018 and 2017, and the average sales price
per unit sold.
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Three Months
Ended March 31,
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2018
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2017
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Production
volumes:
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Crude oil and
condensate (Bbls)
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47,157
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76,397
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Natural gas
(Mcf)
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633,440
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899,427
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Natural gas liquids
(Bbls)
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25,243
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33,474
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Total (Boe)
(1)
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177,973
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259,776
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Average prices
realized:
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Crude
oil and condensate (per Bbl)
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$65.02
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$49.95
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Natural
gas (per Mcf)
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$2.83
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$2.84
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Natural
gas liquids (per Bbl)
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$31.22
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$23.15
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(1)
Barrels of oil
equivalent have been calculated on the basis of six thousand cubic
feet (Mcf) of natural gas equal to one barrel of oil equivalent
(Boe).
Revenues
The
following table presents the Company’s revenues for the three
months ended March 31, 2018 and 2017.
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Three Months
Ended March 31,
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2018
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2017
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Sales of natural
gas and crude oil:
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Crude oil and
condensate
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$3,066,258
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$3,815,932
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Natural
gas
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1,791,251
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2,553,443
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Natural gas
liquids
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788,027
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775,049
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Total
revenues
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$5,645,536
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$7,144,424
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Expenses
The
Company’s lease operating expenses (“LOE”) and
LOE per Boe for the three months ended March 31, 2018 and 2017, are
set forth below:
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Three Months
Ended March 31,
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2018
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2017
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Lease operating
expenses
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$1,665,320
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$1,697,908
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Severance, ad
valorem taxes and marketing
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960,448
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963,356
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Total
LOE
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$2,625,768
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$2,661,264
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LOE per
Boe
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$14.75
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$10.24
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LOE per Boe without
severance, ad valorem taxes and marketing
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$9.36
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$6.54
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Commodity
Derivative
Instruments
Commodity
derivative instruments open as of March 31, 2018 are provided
below. Natural gas prices are NYMEX Henry Hub prices, and crude oil
prices are NYMEX West Texas Intermediate.
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2018
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2019
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Settlement
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Settlement
(1)
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NATURAL GAS
(MMBtu):
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Swaps
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Volume
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1,245,893
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373,906
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Price
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$3.00
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$3.00
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CRUDE OIL
(Bbls):
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Swaps
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Volume
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140,818
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156,320
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Price
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$53.17
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$53.77
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(1) Represents volumes through March
2019.
About Yuma Energy, Inc.
Yuma
Energy, Inc., a Delaware corporation, is an independent
Houston-based exploration and production company focused on
acquiring, developing and exploring for conventional and
unconventional oil and natural gas resources. Historically, the
Company’s operations have focused on onshore properties
located in central and southern Louisiana and southeastern Texas
where it has a long history of drilling, developing and producing
both oil and natural gas assets. More recently, the Company has
begun acquiring acreage in Yoakum County, Texas, with plans to
explore and develop oil and natural gas assets in the Permian
Basin. Finally, the Company has operated positions in Kern County,
California, and non-operated positions in the East Texas Woodbine
and the Bakken Shale in North Dakota. Its common stock is listed on
the NYSE American under the trading symbol
“YUMA.”
Forward-Looking Statements
This
release contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the
“Securities Act”), and Section 21E of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
Statements that are not strictly historical statements constitute
forward-looking statements and may often, but not always, be
identified by the use of such words such as “expects,”
“believes,” “intends,”
“anticipates,” “plans,”
“estimates,” “potential,”
“possible,” or “probable” or statements
that certain actions, events or results “may,”
“will,” “should,” or “could” be
taken, occur or be achieved. The forward-looking statements include
statements about future operations, and estimates of reserve and
production volumes. Forward-looking statements are based on current
expectations and assumptions and analyses made by the Company in
light of experience and perception of historical trends, current
conditions and expected future developments, as well as other
factors appropriate under the circumstances. However, whether
actual results and developments will conform with expectations is
subject to a number of risks and uncertainties, including but not
limited to: our limited liquidity; the risks of the oil and
natural gas industry (for example, operational risks in exploring
for, developing and producing crude oil and natural gas); risks and
uncertainties involving geology of oil and natural gas deposits;
the uncertainty of reserve estimates; revisions to reserve
estimates as a result of changes in commodity prices; the
uncertainty of estimates and projections relating to future
production, costs and expenses; potential delays or changes in
plans with respect to exploration or development projects or
capital expenditures; health, safety and environmental risks and
risks related to weather; declines in oil and natural gas prices;
inability of management to execute its plans to meet its goals,
shortages of drilling equipment, oil field personnel and services,
unavailability of gathering systems, pipelines and processing
facilities and the possibility that government policies may
change. The Company’s annual report on Form 10-K
for the year ended December 31, 2017, quarterly reports on Form
10-Q, recent current reports on Form 8-K, and other SEC filings
discuss some of the important risk factors identified that may
affect its business, results of operations, and financial
condition. The Company undertakes no obligation to revise or update
publicly any forward-looking statements, except as required by
law.
For more information, please contact:
James
J. Jacobs
Executive
Vice President, Treasurer and Chief Financial Officer
Yuma
Energy, Inc.
1177
West Loop South, Suite 1825
Houston,
TX 77027
Telephone:
(713) 968-7000
Yuma Energy, Inc.
CONSOLIDATED
BALANCE SHEETS
(Unaudited)
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March
31,
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December
31,
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2018
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2017
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ASSETS
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CURRENT
ASSETS:
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Cash and cash
equivalents
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$101,850
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$137,363
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Accounts
receivable, net of allowance for doubtful accounts:
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Trade
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3,569,760
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4,496,316
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Officer and
employees
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-
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53,979
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Other
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536,243
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1,004,479
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Prepayments
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837,877
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976,462
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Other deferred
charges
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406,881
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347,490
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Total current
assets
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5,452,611
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7,016,089
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OIL AND GAS
PROPERTIES (full cost method):
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Proved
properties
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494,700,559
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494,216,531
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Unproved properties
- not subject to amortization
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9,127,056
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6,794,372
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503,827,615
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501,010,903
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Less: accumulated
depreciation, depletion and amortization
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(423,342,487)
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(421,165,400)
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Net oil and gas
properties
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80,485,128
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79,845,503
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OTHER PROPERTY AND
EQUIPMENT:
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Land, buildings and
improvements
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1,600,000
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1,600,000
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Other property and
equipment
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2,845,459
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2,845,459
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4,445,459
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4,445,459
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Less: accumulated
depreciation and amortization
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(1,449,769)
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(1,409,535)
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Net other property
and equipment
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2,995,690
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3,035,924
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OTHER ASSETS AND
DEFERRED CHARGES:
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Deposits
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467,592
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467,592
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Other noncurrent
assets
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79,997
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270,842
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Total other assets
and deferred charges
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547,589
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738,434
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TOTAL
ASSETS
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$89,481,018
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$90,635,950
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Yuma Energy, Inc.
CONSOLIDATED
BALANCE SHEETS – CONTINUED
(Unaudited)
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March
31,
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December
31,
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2018
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2017
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LIABILITIES AND
EQUITY
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CURRENT
LIABILITIES:
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Current maturities
of debt
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$27,424,499
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$651,124
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Accounts payable,
principally trade
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13,778,740
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11,931,218
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Commodity
derivative instruments
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1,476,071
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903,003
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Asset retirement
obligations
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88,721
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277,355
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Other accrued
liabilities
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1,765,817
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2,295,438
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Total current
liabilities
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44,533,848
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16,058,138
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LONG-TERM
DEBT
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-
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27,700,000
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OTHER NONCURRENT
LIABILITIES:
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Asset retirement
obligations
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10,352,150
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10,189,058
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Commodity
derivative instruments
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485,234
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336,406
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Deferred
rent
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281,852
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290,566
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Employee stock
awards
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239,095
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191,110
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Total other
noncurrent liabilities
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11,358,331
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11,007,140
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COMMITMENTS AND
CONTINGENCIES (Notes 2 and 15)
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EQUITY
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Series D
convertible preferred stock
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($0.001 par value,
7,000,000 authorized, 1,937,262 issued and outstanding
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as of March 31,
2018, and 1,904,391 issued and outstanding as of
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December 31,
2017)
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1,937
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1,904
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Common
stock
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($0.001 par value,
100 million shares authorized, 23,230,169 outstanding as
of
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March 31, 2018 and
22,661,758 outstanding as of December 31, 2017)
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23,230
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22,662
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Additional paid-in
capital
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56,728,467
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55,064,685
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Treasury stock at
cost (369,238 shares as of March 31, 2018 and 13,343
shares
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as of December 31,
2017)
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(434,557)
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(25,278)
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Accumulated
earnings (deficit)
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(22,730,238)
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(19,193,301)
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Total
equity
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33,588,839
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35,870,672
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TOTAL LIABILITIES
AND EQUITY
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$89,481,018
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$90,635,950
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Yuma Energy, Inc.
CONSOLIDATED
STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months
Ended March 31,
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2018
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2017
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REVENUES:
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Sales of natural
gas and crude oil
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$5,645,536
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$7,144,424
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EXPENSES:
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Lease operating and
production costs
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2,625,768
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2,661,264
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General and
administrative – stock-based compensation
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296,293
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51,735
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General and
administrative – other
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1,749,237
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2,176,002
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Depreciation,
depletion and amortization
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2,217,321
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3,140,940
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Asset retirement
obligation accretion expense
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142,940
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138,569
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Bad debt
expense
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65,808
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-
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Total
expenses
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7,097,367
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8,168,510
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LOSS FROM
OPERATIONS
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(1,451,831)
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(1,024,086)
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OTHER INCOME
(EXPENSE):
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Net gains (losses)
from commodity derivatives
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(1,251,260)
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3,556,783
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Interest
expense
|
(466,292)
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(496,091)
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Gain on other
property and equipment
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-
|
555,642
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Other,
net
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(3,537)
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36,408
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Total other income
(expense)
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(1,721,089)
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3,652,742
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INCOME (LOSS)
BEFORE INCOME TAXES
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(3,172,920)
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2,628,656
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Income tax
expense
|
-
|
26,531
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|
|
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NET INCOME
(LOSS)
|
(3,172,920)
|
2,602,125
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PREFERRED
STOCK:
|
|
|
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Dividends paid in
kind
|
364,017
|
339,610
|
|
|
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NET INCOME (LOSS)
ATTRIBUTABLE TO
|
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COMMON
STOCKHOLDERS
|
$(3,536,937)
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$2,262,515
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INCOME (LOSS) PER
COMMON SHARE:
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|
Basic
|
$(0.16)
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$0.19
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Diluted
|
$(0.16)
|
$0.16
|
|
|
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WEIGHTED AVERAGE
NUMBER OF
|
|
|
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COMMON SHARES
OUTSTANDING:
|
|
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|
Basic
|
22,813,130
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12,211,256
|
|
Diluted
|
22,813,130
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14,056,170
|
Yuma Energy, Inc.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Three
Months Ended March 31,
|
|
|
|
2018
|
2017
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
Reconciliation
of net income (loss) to net cash provided by (used in)
|
|
|
|
operating
activities:
|
|
|
|
Net
income (loss)
|
$(3,172,920)
|
$2,602,125
|
|
Depreciation,
depletion and amortization of property and equipment
|
2,217,321
|
3,140,940
|
|
Amortization
of debt issuance costs
|
184,733
|
81,843
|
|
Deferred
rent liability, net
|
33,117
|
-
|
|
Stock-based
compensation expense
|
296,293
|
51,735
|
|
Settlement
of asset retirement obligations
|
(147,122)
|
-
|
|
Asset
retirement obligation accretion expense
|
142,940
|
138,569
|
|
Bad
debt expense
|
65,808
|
-
|
|
Net
(gains) losses from commodity derivatives
|
1,251,260
|
(3,556,783)
|
|
Gain
on sales of fixed assets
|
-
|
(555,642)
|
|
Loss
on write-off of liabilities net of assets
|
3,631
|
-
|
|
Changes
in assets and liabilities:
|
|
|
|
(Increase)
decrease in accounts receivable
|
879,333
|
(795,740)
|
|
Decrease
in prepaids, deposits and other assets
|
138,585
|
306,021
|
|
(Decrease)
increase in accounts payable and other current and
|
|
|
|
non-current
liabilities
|
2,507,831
|
(461,542)
|
|
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
4,400,810
|
951,526
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
Capital
expenditures for oil and gas properties
|
(3,507,005)
|
(2,053,826)
|
|
Proceeds
from sale of oil and gas properties
|
1,000,000
|
641,056
|
|
Derivative
settlements
|
(529,364)
|
98,700
|
|
NET
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
(3,036,369)
|
(1,314,070)
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
Proceeds
from borrowings on senior credit facility
|
6,350,000
|
-
|
|
Repayment
of borrowings on senior credit facility
|
(7,000,000)
|
-
|
|
Repayments
of borrowings - insurance financing
|
(276,625)
|
(255,026)
|
|
Debt
issuance costs
|
-
|
(76,452)
|
|
Shelf
registration costs
|
(64,050)
|
-
|
|
Treasury
stock repurchases
|
(409,279)
|
(4,170)
|
|
NET
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
(1,399,954)
|
(335,648)
|
|
|
|
|
|
NET
DECREASE IN CASH AND CASH EQUIVALENTS
|
(35,513)
|
(698,192)
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
|
137,363
|
3,625,686
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS AT END OF PERIOD
|
$101,850
|
$2,927,494
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
Interest
payments (net of interest capitalized)
|
$145,871
|
$264,542
|
|
Interest
capitalized
|
$115,541
|
$44,550
|
|
Supplemental
disclosure of significant non-cash activity:
|
|
|
|
(Increase)
decrease in capital expenditures financed by accounts
payable
|
$168,934
|
$(1,434,132)
|