o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
SYNERGY RESOURCES CORPORATION
|
(Exact Name of Registrant as Specified in its Charter)
|
Colorado
|
|
20-2835920
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
20203 Highway 60, Platteville, Colorado 80651
|
(Address of Principal Executive Offices) (Zip Code)
|
N/A
|
Former name, former address, and former fiscal year, if changed since last report
|
|
Large accelerated filer
|
x
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Accelerated filer
|
o
|
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
o
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Page
|
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Part I – FINANCIAL INFORMATION
|
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Item 1.
|
Financial Statements
|
|
|
|
|
|
|
|
Balance Sheets as of November 30, 2014 (unaudited)
and August 31, 2014 |
3
|
|
|
|
|
|
|
Statements of Operations for the three months ended
November 30, 2014 and November 30, 2013 (unaudited) |
4
|
|
|
|
|
|
|
Statements of Cash Flows for the three months ended
November 30, 2014 and November 30, 2013 (unaudited) |
5
|
|
|
|
|
|
|
Notes to Financial Statements (unaudited)
|
6
|
|
|
|
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
29
|
|
|
|
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
44
|
|
|
|
|
|
Item 4.
|
Controls and Procedures
|
44
|
|
|
|
|
|
Part II - OTHER INFORMATION
|
|
|
|
|
|
|
|
Item 6.
|
Exhibits
|
45
|
|
|
|
|
|
SIGNATURES
|
46
|
ASSETS
|
November 30,
2014
|
August 31,
2014
|
||||||
|
(unaudited)
|
|
||||||
Current assets:
|
|
|
||||||
Cash and cash equivalents
|
$
|
47,111
|
$
|
34,753
|
||||
Accounts receivable:
|
||||||||
Oil and gas sales
|
21,059
|
16,974
|
||||||
Joint interest billing and other
|
24,964
|
15,398
|
||||||
Commodity derivative
|
11,984
|
365
|
||||||
Earnest money deposit
|
6,250
|
-
|
||||||
Other current assets
|
1,074
|
750
|
||||||
Total current assets
|
112,442
|
68,240
|
||||||
|
||||||||
Property and equipment:
|
||||||||
Evaluated oil and gas properties, full cost method, net
|
295,396
|
275,018
|
||||||
Unevaluated oil and gas properties
|
126,994
|
95,278
|
||||||
Other property and equipment, net
|
4,849
|
9,104
|
||||||
Property and equipment, net
|
427,239
|
379,400
|
||||||
|
||||||||
Commodity derivative
|
4,534
|
54
|
||||||
Other assets
|
850
|
848
|
||||||
|
||||||||
Total assets
|
$
|
545,065
|
$
|
448,542
|
||||
|
||||||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
|
||||||||
Current liabilities:
|
||||||||
Trade accounts payable
|
$
|
354
|
$
|
1,747
|
||||
Well costs payable
|
69,511
|
71,849
|
||||||
Revenue payable
|
25,251
|
14,487
|
||||||
Production taxes payable
|
18,983
|
14,376
|
||||||
Other accrued expenses
|
1,818
|
817
|
||||||
Commodity derivative
|
-
|
302
|
||||||
Total current liabilities
|
115,917
|
103,578
|
||||||
|
||||||||
Revolving credit facility
|
77,000
|
37,000
|
||||||
Commodity derivative
|
-
|
307
|
||||||
Deferred tax liability, net
|
33,296
|
21,437
|
||||||
Asset retirement obligations
|
5,109
|
4,730
|
||||||
Total liabilities
|
231,322
|
167,052
|
||||||
Commitments and contingencies (See Note 13)
|
||||||||
|
||||||||
Shareholders' equity:
|
||||||||
Preferred stock - $0.01 par value, 10,000,000 shares authorized:
|
||||||||
no shares issued and outstanding
|
-
|
-
|
||||||
Common stock - $0.001 par value, 200,000,000 shares authorized:
|
||||||||
79,854,500 and 77,999,082 shares issued and outstanding, respectively
|
80
|
78
|
||||||
Additional paid-in capital
|
276,893
|
265,793
|
||||||
Retained earnings
|
36,770
|
15,619
|
||||||
Total shareholders' equity
|
313,743
|
281,490
|
||||||
|
||||||||
Total liabilities and shareholders' equity
|
$
|
545,065
|
$
|
448,542
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
|
|
|
||||||
Oil and gas revenues
|
$
|
42,538
|
$
|
19,266
|
||||
|
||||||||
Expenses
|
||||||||
Lease operating expenses
|
3,041
|
1,273
|
||||||
Production taxes
|
4,178
|
2,016
|
||||||
Depletion, depreciation
|
||||||||
and amortization
|
16,454
|
5,591
|
||||||
General and administrative
|
4,110
|
3,168
|
||||||
Total expenses
|
27,783
|
12,048
|
||||||
|
||||||||
Operating income
|
14,755
|
7,218
|
||||||
|
||||||||
Other income (expense)
|
||||||||
Commodity derivative realized gain (loss)
|
1,432
|
(398
|
)
|
|||||
Commodity derivative unrealized gain
|
16,708
|
2,636
|
||||||
Interest income
|
-
|
31
|
||||||
Total other income
|
18,140
|
2,269
|
||||||
|
||||||||
Income before income taxes
|
32,895
|
9,487
|
||||||
|
||||||||
Income tax provision
|
11,744
|
3,387
|
||||||
Net income
|
$
|
21,151
|
$
|
6,100
|
||||
|
||||||||
Net income per common share:
|
||||||||
Basic
|
$
|
0.27
|
$
|
0.08
|
||||
Diluted
|
$
|
0.26
|
$
|
0.08
|
||||
|
||||||||
Weighted average shares outstanding:
|
||||||||
Basic
|
79,008,719
|
73,674,865
|
||||||
Diluted
|
80,141,152
|
76,044,605
|
|
Three Months Ended
|
|||||||
|
November 30,
2014
|
November 30,
2013
|
||||||
Cash flows from operating activities:
|
|
|
||||||
Net income
|
$
|
21,151
|
$
|
6,100
|
||||
Adjustments to reconcile net income to net
|
||||||||
cash provided by operating activities:
|
||||||||
Depletion, depreciation and amortization
|
16,454
|
5,591
|
||||||
Provision for deferred taxes
|
11,744
|
3,387
|
||||||
Stock-based compensation
|
793
|
419
|
||||||
Valuation increase in commodity derivatives
|
(16,708
|
)
|
(2,636
|
)
|
||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
||||||||
Oil and gas sales
|
(4,085
|
)
|
(2,064
|
)
|
||||
Joint interest billing and other
|
(9,566
|
)
|
(768
|
)
|
||||
Accounts payable
|
||||||||
Trade
|
(1,393
|
)
|
(603
|
)
|
||||
Revenue
|
10,764
|
2,729
|
||||||
Production taxes
|
4,607
|
2,145
|
||||||
Accrued expenses
|
1,001
|
250
|
||||||
Other
|
(327
|
)
|
363
|
|||||
Total adjustments
|
13,284
|
8,813
|
||||||
Net cash provided by operating activities
|
34,435
|
14,913
|
||||||
|
||||||||
Cash flows from investing activities:
|
||||||||
Acquisition of property and equipment
|
(66,137
|
)
|
(57,127
|
)
|
||||
Short-term investments
|
-
|
19,987
|
||||||
Earnest money deposit
|
(6,250
|
)
|
||||||
Net cash used in investing activities
|
(72,387
|
)
|
(37,140
|
)
|
||||
|
||||||||
Cash flows from financing activities:
|
||||||||
Proceeds from exercise of warrants
|
10,699
|
23,771
|
||||||
Net proceeds from revolving credit facility
|
40,000
|
-
|
||||||
Shares withheld for payment of employee payroll taxes
|
(389
|
)
|
(34
|
)
|
||||
Net cash provided by financing activities
|
50,310
|
23,737
|
||||||
|
||||||||
Net increase in cash and cash equivalents
|
12,358
|
1,510
|
||||||
|
||||||||
Cash and cash equivalents at beginning of period
|
34,753
|
19,463
|
||||||
|
||||||||
Cash and cash equivalents at end of period
|
$
|
47,111
|
$
|
20,973
|
||||
|
||||||||
Supplemental Cash Flow Information (See Note 14)
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
Capitalized Overhead
|
$
|
503
|
$
|
317
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
Major Customers
|
2014
|
2013
|
||||||
Company A
|
68%
|
|
60%
|
|
||||
Company B
|
12%
|
|
15%
|
|
Major Customers
|
As of
November 30,
2014
|
As of
November 30,
2013
|
||||||
Company A
|
29%
|
|
29%
|
|
||||
Company B
|
(1)
|
16%
|
|
|||||
Company C
|
(1)
|
10%
|
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
|
|
|
||||||
Weighted-average shares outstanding-basic
|
79,008,719
|
73,674,865
|
||||||
Potentially dilutive common shares from:
|
||||||||
Stock Options
|
793,270
|
551,060
|
||||||
Warrants
|
339,163
|
1,818,680
|
||||||
|
1,132,433
|
2,369,740
|
||||||
Weighted-average shares outstanding - diluted
|
80,141,152
|
76,044,605
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
|
|
|
||||||
Employee stock options
|
523,000
|
810,000
|
2.
|
Property and Equipment
|
|
As of
|
As of
|
||||||
|
November 30, 2014
|
August 31, 2014
|
||||||
Oil and gas properties, full cost method:
|
|
|
||||||
Unevaluated costs, not subject to amortization:
|
|
|
||||||
Lease acquisition and other costs
|
$
|
61,133
|
$
|
41,531
|
||||
Wells in progress
|
65,861
|
53,747
|
||||||
Subtotal, unevaluated costs
|
126,994
|
95,278
|
||||||
|
||||||||
Evaluated costs:
|
||||||||
Producing and non-producing
|
366,951
|
329,926
|
||||||
Total capitalized costs
|
493,945
|
425,204
|
||||||
Less, accumulated depletion
|
(71,555
|
)
|
(54,908
|
)
|
||||
Oil and gas properties, net
|
422,390
|
370,296
|
||||||
|
||||||||
Land
|
4,478
|
3,898
|
||||||
Other property and equipment
|
822
|
5,961
|
||||||
Less, accumulated depreciation
|
(451
|
)
|
(755
|
)
|
||||
Other property and equipment, net
|
4,849
|
9,104
|
||||||
|
||||||||
Total property and equipment, net
|
$
|
427,239
|
$
|
379,400
|
3.
|
Acquisitions
|
Purchase Price
|
November 12,
2013
|
|||
Consideration Given
|
|
|||
Cash
|
$
|
15,902
|
||
Synergy Resources Corp. Common Stock *
|
2,896
|
|||
|
||||
Total consideration given
|
$
|
18,798
|
||
|
||||
Allocation of Purchase Price
|
||||
Proved oil and gas properties
|
$
|
11,514
|
||
Unproved oil and gas properties
|
$
|
7,725
|
||
Total fair value of oil and gas properties acquired
|
19,239
|
|||
|
||||
Working capital
|
$
|
(83
|
)
|
|
Asset retirement obligation
|
(358
|
)
|
||
|
||||
Fair value of net assets acquired
|
$
|
18,798
|
||
|
||||
Working capital acquired was estimated as follows:
|
||||
Accounts receivable
|
536
|
|||
Accrued liabilities and expenses
|
(619
|
)
|
||
|
||||
Total working capital
|
$
|
(83
|
)
|
Purchase Price
|
November 13,
2013
|
|||
Consideration Given
|
|
|||
Cash
|
$
|
14,688
|
||
Synergy Resources Corp. Common Stock *
|
5,432
|
|||
|
||||
Total consideration given
|
$
|
20,120
|
||
|
||||
Allocation of Purchase Price
|
||||
Proved oil and gas properties
|
$
|
13,284
|
||
Unproved oil and gas properties
|
$
|
7,577
|
||
Total fair value of oil and gas properties acquired
|
20,861
|
|||
|
||||
Working capital
|
$
|
(507
|
)
|
|
Asset retirement obligation
|
(234
|
)
|
||
|
||||
Fair value of net assets acquired
|
$
|
20,120
|
||
|
||||
Working capital acquired was estimated as follows:
|
||||
Accounts receivable
|
662
|
|||
Accrued liabilities and expenses
|
(1,169
|
)
|
||
|
||||
Total working capital
|
$
|
(507
|
)
|
4.
|
Depletion, depreciation and amortization (“DDA”)
|
|
Three Months ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
(in thousands)
|
2014
|
2013
|
||||||
Depletion
|
$
|
16,304
|
$
|
5,490
|
||||
Depreciation and amortization
|
150
|
101
|
||||||
Total DDA Expense
|
$
|
16,454
|
$
|
5,591
|
5
.
|
Asset Retirement Obligations
|
|
For the Three Months Ended
November 30,
|
|||||||
|
2014
|
2013
|
||||||
Inflation rate
|
3.90%
|
|
3.9 - 4.0%
|
|
||||
Estimated asset life
|
25.0 - 39.0 years
|
24.0 - 40.0 years
|
||||||
Credit adjusted risk free interest rate
|
8.0%
|
|
8.0%
|
|
Asset retirement obligations, August 31, 2014
|
$
|
4,730
|
||
Liabilities incurred
|
269
|
|||
Liabilities assumed
|
-
|
|||
Accretion expense
|
110
|
|||
Asset retirement obligations, November 30, 2014
|
$
|
5,109
|
6.
|
Revolving Credit Facility
|
7
.
|
Commodity Derivative Instruments
|
Settlement Period
|
Derivative
Instrument
|
Average Volumes
(BBls/MMBtu
per month)
|
Average
Strike
Price
|
Floor
Price
|
Celling
Price
|
|||||||||||||
Crude Oil - NYMEX WTI
|
|
|
|
|
|
|||||||||||||
Dec 1, 2014 - Dec 31, 2014
|
Collar
|
21,840
|
-
|
$
|
86.83
|
$
|
96.44
|
|||||||||||
Dec 1, 2014 - Dec 31, 2014
|
Swap
|
56,840
|
$
|
87.08
|
-
|
-
|
||||||||||||
|
|
|||||||||||||||||
Jan 1, 2015 - Jun 30, 2015
|
Collar
|
7,000
|
-
|
$
|
80.00
|
$
|
92.50
|
|||||||||||
Jan 1, 2015 - Jun 30, 2015
|
Collar
|
2,500
|
-
|
$
|
80.00
|
$
|
95.75
|
|||||||||||
Jul 1, 2015 - Dec 31, 2015
|
Collar
|
9,000
|
-
|
$
|
80.00
|
$
|
92.25
|
|||||||||||
Jan 1, 2015 - Dec 31, 2015
|
Collar
|
4,500
|
-
|
$
|
80.00
|
$
|
99.40
|
|||||||||||
Jan 1, 2015 - Dec 31, 2015
|
Collar
|
6,000
|
-
|
$
|
85.00
|
$
|
101.30
|
|||||||||||
Jan 1, 2015 - Jun 30, 2015
|
Swap
|
20,000
|
$
|
90.10
|
-
|
-
|
||||||||||||
Jul 1, 2015 - Dec 31, 2015
|
Swap
|
15,500
|
$
|
89.52
|
-
|
-
|
||||||||||||
Jan 1, 2015 - Oct 31, 2015
|
Swap
|
14,600
|
$
|
78.65
|
-
|
-
|
||||||||||||
|
|
|||||||||||||||||
Jan 1, 2016 - May 31, 2016
|
Collar
|
10,000
|
-
|
$
|
75.00
|
$
|
96.00
|
|||||||||||
Jan 1, 2016 - May 31, 2016
|
Collar
|
5,000
|
-
|
$
|
80.00
|
$
|
100.75
|
|||||||||||
Jun 1, 2016 - Aug 31, 2016
|
Collar
|
15,000
|
-
|
$
|
80.00
|
$
|
100.05
|
|||||||||||
Jan 1, 2016 - Aug 31, 2016
|
Swap
|
5,000
|
$
|
88.55
|
-
|
-
|
||||||||||||
Sep 1, 2016 - Dec 31, 2016
|
Swap
|
20,000
|
$
|
88.10
|
-
|
-
|
||||||||||||
Jan 1, 2016 - Oct 31, 2016
|
Swap
|
6,400
|
$
|
78.96
|
-
|
-
|
||||||||||||
|
|
|||||||||||||||||
|
|
|||||||||||||||||
|
|
|||||||||||||||||
Natural Gas - NYMEX Henry Hub
|
||||||||||||||||||
Dec 1, 2014 - Dec 31, 2014
|
Swap
|
80,000
|
$
|
4.58
|
-
|
-
|
||||||||||||
Dec 1, 2014 - Dec 31, 2014
|
Collar
|
30,000
|
-
|
$
|
4.07
|
$
|
4.18
|
|||||||||||
Jan 1, 2015 - Dec 31, 2015
|
Collar
|
72,000
|
-
|
$
|
4.15
|
$
|
4.49
|
|||||||||||
Jan 1, 2016 - May 31, 2016
|
Collar
|
60,000
|
-
|
$
|
4.05
|
$
|
4.54
|
|||||||||||
Jun 1, 2016 - Aug 31, 2016
|
Collar
|
60,000
|
-
|
$
|
3.90
|
$
|
4.14
|
|
|
As of November 30, 2014
|
||||||||||||
Underlying Commodity
|
Balance Sheet
Location
|
Gross Amounts of Recognized Assets and Liabilities
|
Gross Amounts Offset in the Balance Sheet
|
Net Amounts of Assets and Liabilities Presented in the Balance Sheet
|
||||||||||
Derivative contracts
|
Current assets
|
$
|
12,184
|
$
|
(200
|
)
|
$
|
11,984
|
||||||
Derivative contracts
|
Noncurrent assets
|
$
|
4,756
|
$
|
(222
|
)
|
$
|
4,534
|
||||||
Derivative contracts
|
Current liabilities
|
$
|
200
|
$
|
(200
|
)
|
$
|
-
|
||||||
Derivative contracts
|
Noncurrent liabilities
|
$
|
222
|
$
|
(222
|
)
|
$
|
-
|
|
|
As of August 31, 2014
|
||||||||||||
Underlying Commodity
|
Balance Sheet
Location
|
Gross Amounts of Recognized Assets and Liabilities
|
Gross Amounts Offset in the Balance Sheet
|
Net Amounts of Assets and Liabilities Presented in the Balance Sheet
|
||||||||||
Derivative contracts
|
Current assets
|
$
|
903
|
$
|
(538
|
)
|
$
|
365
|
||||||
Derivative contracts
|
Noncurrent assets
|
$
|
718
|
$
|
(664
|
)
|
$
|
54
|
||||||
Derivative contracts
|
Current liabilities
|
$
|
840
|
$
|
(538
|
)
|
$
|
302
|
||||||
Derivative contracts
|
Noncurrent liabilities
|
$
|
971
|
$
|
(664
|
)
|
$
|
307
|
|
Three Months ended
|
|||||
|
November 30
|
November 30
|
||||
|
2014
|
2013
|
||||
Unrealized gain on commodity derivatives
|
$
|
16,708
|
$
|
2,636
|
||
Realized gain (loss) on commodity derivatives
|
1,432
|
(398
|
)
|
|||
Total gain
|
$
|
18,140
|
$
|
2,238
|
8
.
|
Fair Value Measurements
|
·
|
Level 1: Quoted prices available in active markets for identical assets or liabilities;
|
·
|
Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability;
|
·
|
Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash or valuation models.
|
|
Fair Value Measurements at November 30, 2014
|
|||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Financial assets and liabilities:
|
|
|
|
|
||||||||||||
Commodity derivative asset
|
$
|
-
|
$
|
16,518
|
$
|
-
|
$
|
16,518
|
||||||||
Commodity derivative liability
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||||
|
||||||||||||||||
|
Fair Value Measurements at August 31, 2014
|
|||||||||||||||
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Financial assets and liabilities:
|
||||||||||||||||
Commodity derivative asset
|
$
|
-
|
$
|
419
|
$
|
-
|
$
|
419
|
||||||||
Commodity derivative liability
|
$
|
-
|
$
|
609
|
$
|
-
|
$
|
609
|
9.
|
Interest Expense
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
|
|
|
||||||
Revolving credit facility
|
$
|
378
|
$
|
251
|
||||
Amortization of debt issuance costs
|
137
|
94
|
||||||
Less, interest capitalized
|
(515
|
)
|
(345
|
)
|
||||
Interest expense, net
|
$
|
-
|
$
|
-
|
10.
|
Shareholders’ Equity
|
|
As of November 30,
|
As of August 31,
|
||||||
|
2014
|
2014
|
||||||
Preferred stock, shares authorized
|
10,000,000
|
10,000,000
|
||||||
Preferred stock, par value
|
$
|
0.01
|
$
|
0.01
|
||||
Preferred stock, shares issued and outstanding
|
nil
|
nil
|
||||||
Common stock, shares authorized
|
200,000,000
|
200,000,000
|
||||||
Common stock, par value
|
$
|
0.001
|
$
|
0.001
|
||||
Common stock, shares issued and outstanding
|
79,854,500
|
77,999,082
|
Description
|
Number of Warrants
|
Exercise Price
|
Remaining Contractual Life (in years)
|
Exercise Price times Number of Warrants
|
||||||||||||
Series C
|
778,330
|
|
$6.00
|
0.1
|
$
|
4,669,980
|
||||||||||
Series D
|
1,058
|
|
$1.60
|
0.1
|
$
|
1,693
|
||||||||||
|
779,388
|
$
|
4,671,673
|
|
Number of
Warrants
|
Weighted-Average
Exercise Price
|
||||||
Outstanding, August 31, 2014
|
2,562,473
|
$
|
6.00
|
|||||
Granted
|
-
|
$
|
-
|
|||||
Exercised
|
(1,783,085
|
)
|
$
|
6.00
|
||||
Expired
|
-
|
$
|
-
|
|||||
Outstanding, November 30, 2014
|
779,388
|
$
|
6.00
|
11.
|
Stock-Based Compensation
|
|
Three Months ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
Stock options
|
$
|
500
|
$
|
419
|
||||
Employee stock grants
|
293
|
-
|
||||||
|
$
|
793
|
$
|
419
|
|
Three Months ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
Number of options to purchase common shares
|
75,000
|
150,000
|
||||||
Weighted-average exercise price
|
$
|
12.87
|
$
|
9.98
|
||||
Term (in years)
|
10.0
|
10.0
|
||||||
Vesting Period (in years)
|
5
|
5
|
||||||
Fair Value (in thousands)
|
$
|
639
|
$
|
1,014
|
|
Three Months Ended
|
|||||||
|
November 30,
2014
|
November 30,
2013
|
||||||
Expected term
|
6.5 years
|
6.5 years
|
||||||
Expected volatility
|
72%
|
|
74%
|
|
||||
Risk free rate
|
1.95%
|
|
1.91%
|
|
||||
Expected dividend yield
|
0.00%
|
|
0.00%
|
|
||||
Forfeiture rate
|
0.30%
|
|
0.00%
|
|
|
Number
of Shares
|
Weighted-Average
Exercise Price
|
||||||
Outstanding, August 31, 2014
|
2,167,000
|
$
|
5.94
|
|||||
Granted
|
75,000
|
$
|
12.87
|
|||||
Exercised
|
(120,000
|
)
|
$
|
3.76
|
||||
Forfeited
|
-
|
-
|
||||||
Outstanding, November 30, 2014
|
2,122,000
|
$
|
6.31
|
Outstanding
Options
|
Vested
Options
|
|||||||
Number of shares
|
2,122,000
|
831,100
|
||||||
Weighted-average remaining contractual life
|
7.9 years
|
7.1 years
|
||||||
Weighted-average exercise price
|
$
|
6.31
|
$
|
4.87
|
||||
Aggregate intrinsic value (in thousands)
|
$
|
7,958
|
$
|
4,115
|
Unvested Options at
November 30,
2014
|
|||
Unrecognized compensation expense (in thousands)
|
$ 5,533
|
||
Remaining vesting phase
|
3.4 years
|
12.
|
Related Party Transactions
|
|
Three Months ended
|
||||||
|
November 30,
|
November 30,
|
|||||
|
2014
|
2013
|
|||||
Rent expense
|
$ |
|
45
|
$
|
45
|
|
Three Months ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
Total Royalty Payments
|
$
|
53
|
$
|
82
|
13.
|
Other Commitments and Contingencies
|
14.
|
Supplemental Schedule of Information to the Statements of Cash Flows
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
Supplemental cash flow information:
|
|
|
||||||
Interest paid
|
$
|
321
|
$
|
251
|
||||
Income taxes paid
|
110
|
-
|
||||||
|
||||||||
Non-cash investing and financing activities:
|
||||||||
Accrued well costs
|
$
|
69,511
|
$
|
26,813
|
||||
Assets acquired in exchange for common stock
|
-
|
9,898
|
||||||
Asset retirement costs and obligations
|
269
|
692
|
15.
|
Subsequent Events
|
·
|
non-operated working interests in 17 horizontal wells (including 4 mid-reach laterals);
|
·
|
73 operated and 11 non-operated vertical wells;
|
·
|
35 permit applications for operated horizontal wells (including 20 extended reach laterals);
|
·
|
5,040 gross acres (4,053 net) with rights to the Codell and Niobrara formations;
|
·
|
2,400 gross acres (1,739 net) with rights to other formations, including the Sussex, Shannon and J-Sands;
|
·
|
3-D seismic data; and
|
·
|
miscellaneous equipment.
|
|
HORIZONTAL WELLS
|
|||||||||||||||||||||||||||||||
OPERATED WELLS
|
NON-OPERATED WELLS
|
|||||||||||||||||||||||||||||||
|
Completed
|
Participated
|
Acquired
|
Total
|
||||||||||||||||||||||||||||
Years ended:
|
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
Gross
|
Net
|
||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
August 31, 2012
|
-
|
-
|
5
|
1
|
-
|
-
|
5
|
1
|
||||||||||||||||||||||||
August 31, 2013
|
-
|
-
|
11
|
2
|
-
|
-
|
11
|
2
|
||||||||||||||||||||||||
August 31, 2014
|
31
|
29
|
23
|
2
|
-
|
-
|
54
|
31
|
||||||||||||||||||||||||
November 30, 2014
|
8
|
6
|
36
|
6
|
-
|
-
|
44
|
12
|
||||||||||||||||||||||||
|
||||||||||||||||||||||||||||||||
Total
|
39
|
35
|
75
|
11
|
-
|
-
|
114
|
46
|
·
|
were the operator of 39 horizontal wells that were producing oil and gas and we were participating as a non-operating working interest owner in 75 horizontal producing wells;
|
·
|
were the operator of 269 vertical wells that were producing oil and gas and we were participating as a non-operating working interest owner in 65 producing wells;
|
·
|
were the operator of 23 wells in progress and we were participating as a non-operating working interest owner in 11 wells in progress;
|
·
|
held approximately 446,000 gross acres and 313,000 net acres under lease.
|
|
Years Ended August 31,
|
|||||||||||||||||||
|
2014
|
2013
|
2012
|
2011
|
2010
|
|||||||||||||||
Average NYMEX prices
|
|
|
|
|
||||||||||||||||
Oil (per bbl)
|
$
|
100.39
|
$
|
94.58
|
$
|
94.88
|
$
|
91.79
|
$
|
76.65
|
||||||||||
Natural gas (per mcf)
|
$
|
4.38
|
$
|
3.55
|
$
|
2.82
|
$
|
4.12
|
$
|
4.45
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
Oil (NYMEX WTI)
|
2014
|
2013
|
||||||
Average NYMEX Price
|
$
|
84.47
|
$
|
100.23
|
||||
Realized Price
|
$
|
73.69
|
$
|
93.06
|
||||
Differential
|
$
|
10.78
|
$
|
7.17
|
||||
|
||||||||
Gas (NYMEX Henry Hub)
|
||||||||
Average NYMEX Price
|
$
|
3.94
|
$
|
3.65
|
||||
Realized Price
|
$
|
4.74
|
$
|
4.86
|
||||
Differential
|
$
|
0.80
|
$
|
1.21
|
|
Three Months Ended
|
|
||||||||||
|
November 30,
2014
|
November 30,
2013
|
Change
|
|||||||||
Production:
|
|
|
|
|||||||||
Oil (Bbls
1
)
|
466,656
|
168,278
|
177
|
%
|
||||||||
Gas (Mcf
2
)
|
1,719,938
|
741,755
|
132
|
%
|
||||||||
|
||||||||||||
Total production in BOE
3
|
753,312
|
291,904
|
158
|
%
|
||||||||
|
||||||||||||
Revenues (in thousands):
|
||||||||||||
Oil
|
$
|
34,386
|
$
|
15,660
|
120
|
%
|
||||||
Gas
|
8,152
|
3,606
|
126
|
%
|
||||||||
|
$
|
42,538
|
$
|
19,266
|
121
|
%
|
||||||
Average sales price:
|
||||||||||||
Oil
|
$
|
73.69
|
$
|
93.06
|
-21
|
%
|
||||||
Gas
|
$
|
4.74
|
$
|
4.86
|
-2
|
%
|
||||||
BOE
|
$
|
56.47
|
$
|
66.00
|
-14
|
%
|
1
“Bbl” refers to one stock tank barrel, or 42 U.S. gallons liquid volume in reference to crude oil or other liquid hydrocarbons.
|
2
“Mcf” refers to one thousand cubic feet of natural gas.
|
3
“BOE” refers to barrel of oil equivalent, which combines Bbls of oil and Mcf of gas by converting each six Mcf of gas to one Bbl of oil.
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
Production Costs
|
$
|
3,035
|
$
|
1,203
|
||||
Work-Over
|
6
|
70
|
||||||
Lifting cost
|
3,041
|
1,273
|
||||||
Severance and ad valorem taxes
|
4,178
|
2,016
|
||||||
Total LOE
|
$
|
7,219
|
$
|
3,289
|
||||
|
||||||||
Per BOE:
|
||||||||
Production costs
|
$
|
4.03
|
$
|
4.12
|
||||
Work-Over
|
0.01
|
0.24
|
||||||
Lifting cost
|
4.04
|
4.36
|
||||||
Severance and ad valorem taxes
|
5.55
|
6.91
|
||||||
Total LOE
|
$
|
9.59
|
$
|
11.27
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
(in thousands)
|
2014
|
2013
|
||||||
Depletion
|
$
|
16,304
|
$
|
5,490
|
||||
Depreciation and amortization
|
150
|
101
|
||||||
Total DDA
|
$
|
16,454
|
$
|
5,591
|
||||
|
||||||||
DDA expense per BOE
|
$
|
21.84
|
$
|
19.15
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
(in thousands)
|
2014
|
2013
|
||||||
G&A costs incurred
|
$
|
4,613
|
$
|
3,485
|
||||
Capitalized costs
|
(503
|
)
|
(317
|
)
|
||||
Total G&A
|
$
|
4,110
|
$
|
3,168
|
||||
|
||||||||
G&A Expense per BOE
|
$
|
5.46
|
$
|
10.85
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
Cash provided by operations
|
$
|
34,435
|
$
|
14,913
|
||||
Capital expenditures
|
(66,137
|
)
|
(57,127
|
)
|
||||
Other investing activities
|
(6,250
|
)
|
19,987
|
|||||
Cash provided by equity financing activities
|
10,310
|
23,737
|
||||||
Net borrowings
|
40,000
|
-
|
||||||
Net increase in cash and cash equivalents
|
$
|
12,358
|
$
|
1,510
|
|
Three Months Ended
|
|||||||
|
November 30,
|
November 30,
|
||||||
|
2014
|
2013
|
||||||
Cash payments for capital expenditures
|
$
|
66,137
|
$
|
57,127
|
||||
Accrued costs, beginning of period
|
(71,849
|
)
|
(25,491
|
)
|
||||
Accrued costs, end of period
|
69,511
|
26,813
|
||||||
Non-cash acquisitions, common stock
|
-
|
9,898
|
||||||
Other
|
383
|
692
|
||||||
All inclusive capital expenditures
|
$
|
64,182
|
$
|
69,039
|
|
Three Months Ended
|
|||||||
|
November 30
|
November 30
|
||||||
(in thousands)
|
2014
|
2013
|
||||||
Adjusted EBITDA:
|
|
|
||||||
Net income
|
$
|
21,151
|
$
|
6,100
|
||||
Depletion, depreciation and amortization
|
16,454
|
5,591
|
||||||
Provision for income tax
|
11,744
|
3,387
|
||||||
Stock-based compensation
|
793
|
419
|
||||||
Commodity derivative change
|
(16,708
|
)
|
(2,636
|
)
|
||||
Interest income
|
-
|
(31
|
)
|
|||||
Adjusted EBITDA
|
$
|
33,434
|
$
|
12,830
|
|
•
|
|
volatility of oil and natural gas prices;
|
|
•
|
|
operating hazards that result in losses;
|
|
•
|
|
uncertainties in the estimates of proved reserves;
|
|
•
|
|
effect of seasonal weather conditions and wildlife restrictions on our operations;
|
|
•
|
|
our need to expand our oil and natural gas reserves;
|
|
•
|
|
our ability to obtain adequate financing;
|
|
•
|
|
availability and capacity of gathering systems and pipelines for our production;
|
|
•
|
|
effect of local and regional factors on oil and natural gas prices;
|
|
•
|
|
incurrence of ceiling test write-downs;
|
|
•
|
|
our inability to control operations on properties we do not operate;
|
|
•
|
|
our ability to market our production;
|
|
•
|
|
the strength and financial resources of our competitors;
|
|
•
|
|
identifying future acquisitions;
|
|
•
|
|
uncertainty in global economic conditions;
|
|
•
|
|
legal and/or regulatory compliance requirements;
|
|
•
|
|
the amount of our indebtedness and ability to maintain compliance with debt covenants;
|
|
•
|
|
our need for capital;
|
|
•
|
|
key executives allocating a portion of their time to other business interests; and
|
|
•
|
|
effectiveness of our disclosure controls and our internal controls over financial reporting.
|
10.32 | Fifth Amendment to Amended and Restated Credit Agreement dated December 15, 2014, among Synergy Resources Corporation, The Lenders From Time to Time Party Hereto, and SunTrust Bank and KeyBank National Association. |
10.33 | Purchase and Sale Agreement between Bayswater Exploration and Production, LLC, et al, as Sellers, and Synergy Resources Corporation, as Buyer, dated October 29, 2014. |
31.1 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for William Scaff, Jr. |
31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for Frank L. Jennings. |
31.2 | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for William Scaff, Jr. |
32 | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for William Scaff, Jr. and Frank L. Jennings. |
101 INS | XBRL Instance Document |
101 SCH | XBRL Schema Document |
101 CAL | XBRL Calculation Linkbase Document |
101 DEF | XBRL Definition Linkbase Document |
101 LAB | XBRL Label Linkbase Document |
101 PRE | XBRL Presentation Linkbase Document |
|
SYNERGY RESOURCES CORPORATION
|
January 9, 2015 | /s/ William Scaff, Jr. |
|
William Scaff, Jr, Co-Chief Executive Officer
(Principal Executive Officer)
|
January 9, 2015
|
/s/ Frank L. Jennings
|
|
Frank L. Jennings, Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
|
|
/s/ William Scaff, Jr.
|
|
William Scaff, Jr,
Co-Chief Executive Officer
(Principal Executive Officer)
|
|
/s/ Frank L. Jennings
|
|
Frank L. Jennings,
Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
|
|
/s/ William Scaff, Jr.
|
|
William Scaff, Jr, Co-Chief Executive Officer (Principal Executive Officer)
|
|
/s/ Frank L. Jennings
|
|
Frank L. Jennings, Chief Financial Officer
(Principal Financial and Principal Accounting Officer)
|
|
|
Page
|
SECTION 1.
|
Definitions.
|
2
|
SECTION 2.
|
Borrowing Base; Maximum Credit Amount
|
3
|
SECTION 3.
|
Extension of Maturity
|
3
|
SECTION 4.
|
Appointment of New Agent and Issuing Bank
|
3
|
SECTION 5.
|
Additional Amendments to Credit Agreement
|
3
|
SECTION 6.
|
Reallocation of Commitments
|
3
|
SECTION 7.
|
Conditions of Effectiveness
|
4
|
SECTION 8.
|
Post-Closing Requirements
|
5
|
SECTION 9.
|
Representations and Warranties
|
5
|
SECTION 10.
|
Miscellaneous.
|
6
|
SECTION 11.
|
NO ORAL AGREEMENTS
|
6
|
SECTION 12.
|
No Waiver | 7 |
BORROWER
:
|
|
SYNERGY RESOURCES CORPORATION
|
||
|
|
|
|
|
|
|
By:
|
/s/ Edward Holloway
|
|
|
|
|
Edward Holloway
|
|
|
|
|
Co-Chief Executive Officer
|
|
|
SUNTRUST BANK
,
as Administrative Agent and as an Issuing Bank and a Lender
|
||
|
|
|
|
|
|
|
By:
|
/s/ Scott Mackey
|
|
|
|
Name:
|
Scott Mackey
|
|
|
|
Title:
|
Director
|
|
|
COMMUNITY BANKS OF COLORADO
,
as Existing Administrative Agent
|
||
|
|
|
|
|
|
|
By:
|
/s/ Sarah E. Burchett
|
|
|
|
Name:
|
Sarah E. Burchett
|
|
|
|
Title:
|
Vice President
|
|
|
COMMUNITY BANKS OF COLORADO
,
as an Issuing Bank and a Lender
|
||
|
|
|
|
|
|
|
By:
|
/s/ Sarah E. Burchett
|
|
|
|
Name:
|
Sarah E. Burchett
|
|
|
|
Title:
|
Vice President
|
|
|
KEYBANK NATIONAL ASSOCIATION
,
as a Lender
|
||
|
|
|
|
|
|
|
By:
|
/s/ John Dravenstott
|
|
|
|
Name:
|
John Dravenstott
|
|
|
|
Title:
|
Vice President
|
|
|
JPMORGAN CHASE BANK, N.A.
as a Lender
|
||
|
|
|
|
|
|
|
By:
|
/s/ Darren Vanek
|
|
|
|
Name:
|
Darren Vanek
|
|
|
|
Title:
|
Senior Vice President
|
|
|
CREDIT AGRICOLE CORPORATE & INVESTMENT BANK
,
as a Lender
|
||
|
|
|
|
|
|
|
By:
|
/s/ Michael Willis
|
|
|
|
Name:
|
Michael Willis
|
|
|
|
Title:
|
Managing Director
|
|
By: | /s/ Sharada Manne | |||
Name: | Sharada Manne | |||
title: | Managing Director |
|
|
DEUTSCHE BANK AG NEW YORK BRANCH
,
as a Lender
|
||
|
|
|
|
|
|
|
By:
|
/s/ Kirk L. Tashjian
|
|
|
|
Name:
|
Kirk L. Tashjian
|
|
|
|
Title:
|
Vice President
|
|
By: | /s/ Peter Cucchiara | |||
Name: | Peter Cucchiara | |||
title: | Vice President |
|
|
IBERIABANK
,
as a Lender
|
||
|
|
|
|
|
|
|
By:
|
/s/ Tyler S. Thoem
|
|
|
|
Name:
|
Tyler S. Thoem
|
|
|
|
Title:
|
Vice President
|
Name of Lender
|
Applicable
Percentage
|
Maximum Credit Amount
|
Amount of Commitment on Amendment Effective Date
|
|||||||||
SunTrust Bank
|
17.3913
|
%
|
$
|
86,956,521.74
|
$
|
40,000,000.00
|
||||||
KeyBank National Association
|
15.2174
|
%
|
$
|
76,086,956.52
|
$
|
35,000,000.00
|
||||||
Amegy Bank National Association
|
13.0435
|
%
|
$
|
65,217,391.30
|
$
|
30,000,000.00
|
||||||
Community Banks of Colorado
|
13.0435
|
%
|
$
|
65,217,391.30
|
$
|
30,000,000.00
|
||||||
JPMorgan Chase Bank, N.A.
|
13.0435
|
%
|
$
|
65,217,391.30
|
$
|
30,000,000.00
|
||||||
Credit Agricole Corporate & Investment Bank
|
9.7826
|
%
|
$
|
48,913,043.48
|
$
|
22,500,000.00
|
||||||
Deutsche Bank AG
|
9.7826
|
%
|
$
|
48,913,043.48
|
$
|
22,500,000.00
|
||||||
IberiaBank
|
8.6957
|
%
|
$
|
43,478,260.87
|
$
|
22,500,000.00
|
||||||
|
||||||||||||
Total
|
100.0000
|
%
|
$
|
500,000,000.00
|
$
|
230,000,000.00
|
“(d) | Notes. Each Lender shall maintain in accordance with its usual practice appropriate records evidencing the Indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable thereon and paid to such Lender from time to time under this Agreement. The Administrative Agent shall maintain appropriate records in which shall be recorded (i) the Commitment of each Lender, (ii) the amount of each Loan made hereunder by each Lender, the Type thereof and, in the case of each Eurodollar Loan, the Interest Period applicable thereto, (iii) the date of any continuation of any Loan pursuant to Section 2.04 , (iv) the date of any conversion of all or a portion of any Loan to another Type pursuant to Section 2.04 , (v) the date and amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder in respect of the Loans and (vi) both the date and amount of any sum received by the Administrative Agent hereunder from the Borrower in respect of the Loans and each Lender’s pro rata share thereof. The entries made in such records shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided that the failure or delay of any Lender or the Administrative Agent in maintaining or making entries into any such record or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans (both principal and unpaid accrued interest) of such Lender in accordance with the terms of this Agreement. |
(A)
|
The first annual anniversary of the Fifth Amendment Closing Date;
|
(B)
|
The date on which the Borrower receives aggregate cash proceeds from the sale or issuance of Equity Interests or Debt (other than Loans and Letter of Credit obligations under this Agreement), net of commissions and fees paid to a capital markets adviser, in excess of the Non-Conforming Borrowing Base as most recently adjusted; and
|
(C)
|
The date the Conforming Borrower Base is greater than $230,000,000.00.
|
(i)
|
(A) information and documentation sufficient to obtain a standard life of loan flood hazard determination certificate issued by a flood hazard certification firm acceptable to the Administrative Agent (a “
SFHD
”) for such parcel or other portion of the Mortgaged Property upon which is located any Designated Building and (B) an SFHD indicating that the Designated Building is not located in a Special Flood Hazard Area, as defined in the Flood Disaster Protection Act of 1972 (as now or hereafter in effect or any successor statute thereto, the “
FDPA
”), or
|
(ii)
|
if the SFHD indicates that the Designated Building is located in a Special Flood Hazard Area, (A) a written notice of that fact, acknowledged by the Company and any applicable Guarantor, (B) evidence of adequate flood insurance on the Designated Building and its contents located on the Oil and Gas Properties and (C) such other information required by the Administrative Agent or any Lender for compliance with (1) any applicable requirements of the FDPA or other similar applicable laws, rules or regulations, or (2) promptly following written notice thereof from the Administrative Agent or any Lender, any applicable requirements of the Administrative Agent or any Lender in accordance with the Administrative Agent's or such Lender's standard policies and practices.
|
“(b) |
Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All such notices and other communications shall be effective upon actual receipt by the relevant Person or, if delivered by overnight courier service, upon the first Business Day after the date deposited with such courier service for overnight (next-day) delivery or, if sent by telecopy, upon transmittal in legible form by facsimile machine or, if mailed, upon the third Business Day after the date deposited into the mail or, if delivered by hand, upon delivery; provided that notices delivered to the Administrative Agent or the Issuing Bank shall not be effective until actually received by such Person at its address specified in this Section.
|
(c) | Any agreement of the Administrative Agent, the Issuing Bank or any Lender herein to receive certain notices by telephone or facsimile is solely for the convenience and at the request of the Borrower. The Administrative Agent, the Issuing Bank and each Lender shall be entitled to rely on the authority of any Person purporting to be a Person authorized by the Borrower to give such notice and the Administrative Agent, the Issuing Bank and the Lenders shall not have any liability to the Borrower or other Person on account of any action taken or not taken by the Administrative Agent, the Issuing Bank or any Lender in reliance upon such telephonic or facsimile notice. The obligation of the Borrower to repay the Loans and all other Indebtedness hereunder shall not be affected in any way or to any extent by any failure of the Administrative Agent, the Issuing Bank or any Lender to receive written confirmation of any telephonic or facsimile notice or the receipt by the Administrative Agent, the Issuing Bank or any Lender of a confirmation which is at variance with the terms understood by the Administrative Agent, the Issuing Bank and such Lender to be contained in any such telephonic or facsimile notice. |
(d) | Electronic Communications. (i) Notices and other communications to the Lenders and the Issuing Bank hereunder may be delivered or furnished by electronic communication (including e mail and Internet or intranet websites) pursuant to procedures approved by the Administrative Agent, provided that the foregoing shall not apply to notices to any Lender or the Issuing Bank pursuant to Article II, Article III, Article IV or Article V unless such Lender, the Issuing Bank, as applicable, and the Administrative Agent have agreed to receive notices under any Section thereof by electronic communication and have agreed to the procedures governing such communications. The Administrative Agent or the Borrower may, in its discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by the party receiving such notice or communication; provided that approval of such procedures may be limited to particular notices or communications. |
(A)
|
any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;
|
(B)
|
any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:
|
(1)
|
in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed copies of IRS Form W‑8BEN-E-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN-E-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;
|
(2)
|
executed copies of IRS Form W-8ECI;
|
(3)
|
in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit K-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”) and (y) executed copies of IRS Form W-8BEN-E-E; or
|
(4)
|
to the extent a Foreign Lender is not the beneficial owner, executed copies of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN-E-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit K-2 or Exhibit K-3, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit K-4 on behalf of each such direct and indirect partner;
|
(C)
|
any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed copies of any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and
|
(D)
|
if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
|
[NAME OF LENDER]
|
|
By:
_________________________________________________________
|
|
|
Name:
|
|
Title:
|
[NAME OF PARTICIPANT]
|
|
By:
____________________________________________________
|
|
|
Name:
|
|
Title:
|
[NAME OF PARTICIPANT]
|
|
By:
____________________________________________________
|
|
|
Name:
|
|
Title:
|
[NAME OF LENDER]
|
|
By:
___________________________________________________
|
|
|
Name:
|
|
Title:
|
|
|
|
PAGE
|
ARTICLE 1 DEFINED TERMS
|
1
|
||
|
1.1
|
General Definitions
|
1
|
|
1.2
|
Amendment of Defined Instruments
|
7
|
|
|
|
|
ARTICLE 2 PURCHASE AND SALE
|
7
|
||
|
2.1
|
Purchase and Sale
|
7
|
|
2.2
|
Assets
|
7
|
|
2.3
|
Excluded and Reserved Assets
|
8
|
|
2.4
|
Effective Time
|
10
|
|
|
|
|
ARTICLE 3 PURCHASE PRICE
|
10
|
||
|
3.1
|
Purchase Price
|
10
|
|
3.2
|
Adjustments to Purchase Price
|
11
|
|
3.3
|
Allocated Values
|
13
|
|
3.4
|
Valuation
|
13
|
|
|
|
|
ARTICLE 4 DUE DILIGENCE INSPECTION
|
13
|
||
|
4.1
|
Due Diligence
|
13
|
|
4.2
|
Records
|
13
|
|
4.3
|
No Representation or Warranty
|
13
|
|
|
|
|
ARTICLE 5 TITLE MATTERS
|
14
|
||
|
5.1
|
Defensible Title
|
14
|
|
5.2
|
Permitted Encumbrances
|
15
|
|
5.3
|
Notice of Title Defects
|
18
|
|
5.4
|
Defect Adjustments and Deductibles; Interest Additions
|
19
|
|
5.5
|
Post-Closing Cure of Title Defects
|
20
|
|
5.6
|
Post-Closing Determination of Title Defects
|
21
|
|
5.7
|
Changes in Product Prices; Wells or Other Events
|
21
|
|
5.8
|
Consents
|
22
|
|
5.9
|
Preferential Purchase Rights
|
23
|
|
5.10
|
Casualty Loss
|
23
|
|
|
|
|
ARTICLE 6 ENVIRONMENTAL MATTERS | 24 | ||
|
6.1
|
NORM and Asbestos
|
24
|
6.2 | Environmental Assessment | 24 | |
6.3 | Adjustments for Environmental Defects | 24 | |
6.4 | “ As Is, Where Is” Purchase | 26 | |
ARTICLE 7 SELLERS’ REPRESENTATIONS AND WARRANTIES | 26 | ||
7.1 | Existence | 26 | |
7.2 | Power and Authority | 26 | |
7.3 | Authorization | 26 | |
7.4 | Execution and Delivery | 26 | |
7.5 | Foreign Person | 27 |
|
7.6
|
Bankruptcy
|
27
|
|
7.7
|
Liabilities for Brokers’ Fees
|
27
|
|
7.8
|
Liens
|
27
|
|
7.9
|
Taxes
|
27
|
|
7.10
|
Litigation and Claims
|
27
|
|
7.11
|
Compliance with Laws
|
27
|
|
7.12
|
Governmental Licenses
|
28
|
|
7.13
|
No Notice of Violation from Governmental Agencies
|
28
|
|
7.14
|
Material Agreements; Notice of Defaults
|
28
|
|
7.15
|
Production Sales Contracts
|
29
|
|
7.16
|
Current Plugging Obligations
|
29
|
|
7.17
|
Imbalances |
29
|
|
7.18
|
Suspense Accounts
|
29
|
|
7.19
|
Preferential Purchase Rights
|
29
|
|
7.20
|
AFEs
|
29
|
|
7.21
|
Investment Representations
|
29
|
|
|
|
|
ARTICLE 8 BUYER’S REPRESENTATIONS AND WARRANTIES
|
30
|
||
|
8.1
|
Existence
|
30
|
|
8.2
|
Power and Authority
|
30
|
|
8.3
|
Authorization
|
30
|
|
8.4
|
Execution and Delivery
|
31
|
|
8.5
|
Bankruptcy
|
31
|
|
8.6
|
Liabilities for Brokers’ Fees
|
31
|
|
8.7
|
Litigation and Claims
|
31
|
|
8.8
|
Independent Evaluation
|
31
|
|
8.9
|
Qualification
|
32
|
|
8.10
|
Financial Resources
|
32
|
|
8.11
|
NYSE MKT Listing
|
32
|
|
8.12
|
Issuance of Stock Consideration
|
32
|
|
8.13
|
Issuance of Stock Consideration
|
32
|
|
8.14
|
Capitalization
|
32
|
|
8.15
|
Regulatory Matters; Reports
|
33
|
|
8.16
|
Financial Statements
|
33
|
8.17 | Undisclosed Liabilities | 32 | |
8.18 | No Buyer Material Adverse Condition | 33 | |
ARTICLE 9 COVENANTS AND AGREEMENTS | 34 | ||
9.1 | Covenants and Agreements | 34 | |
ARTICLE 10 CONDITIONS TO CLOSING | 39 | ||
10.1 | Sellers’ Conditions | 39 | |
10.2 | Buyer’s Conditions | 40 | |
ARTICLE 11 RIGHT OF TERMINATION AND ABANDONMENT | 41 | ||
11.1 | Termination | 41 | |
11.2 | Liabilities Upon Termination | 41 | |
|
|
|
|
ARTICLE 12 CLOSING
|
42
|
||
|
12.1
|
Date of Closing
|
42
|
|
12.2
|
Closing Obligations
|
42
|
|
|
|
|
ARTICLE 13 POST-CLOSING OBLIGATIONS
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43
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13.1
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Post-Closing Adjustments
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43
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13.2
|
Determination of Final Settlement Statement Disputes
|
44
|
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13.3
|
Records
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44
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13.4
|
Suspense Accounts
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44
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13.5
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Removal of Name
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44
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13.6
|
Further Assurances
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44
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ARTICLE 14 TAXES
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45
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14.1
|
Apportionment of Taxes
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45
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14.2
|
Transfer Taxes
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45
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14.3
|
Tax Reports and Returns
|
45
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14.4
|
Like-Kind Exchange
|
46
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ARTICLE 15 ASSUMPTION AND RETENTION OF OBLIGATIONS; INDEMNIFICATION
|
46
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15.1
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Buyer’s Assumption of Liabilities and Obligations
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46
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15.2
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Indemnification
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47
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15.3
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Procedure
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50
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15.4
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No Insurance; Subrogation
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51
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15.5
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Reservation as to Non-Parties
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51
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15.6
|
Exclusive Remedy
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51
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15.7
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Waiver of Right to Rescission
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51
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15.8
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Mutual Releases
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51
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15.9
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Anti-Indemnity Statute Limitation
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52
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ARTICLE 16 MISCELLANEOUS
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52
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16.1
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Exhibits and Schedules
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52
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16.2
|
Expenses
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52
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16.3
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Notices
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52
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16.4
|
Entire Agreement
|
53
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16.5 | Amendments and Waivers | 53 | |
16.6 | Assignment | 53 | |
16.7 | Confidentiality | 53 | |
16.8 | Press Releases | 53 | |
16.9 | Counterparts | 54 | |
16.10 | Headings, References, Titles and Construction | 54 | |
16.11 | Governing Law; Consent to Jurisdiction and Venue | 54 | |
16.12 | Binding Effect | 54 | |
16.13 | Survival | 54 | |
16.14 | No Third-Party Beneficiaries | 55 | |
16.15 | Severability | 55 | |
16.16 | Knowledge and Reasonable and Good Faith Efforts | 55 |
16.17 | Disclaimers | 55 | |
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Schedule 1.1
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Sellers’ Shares
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Schedule 3.2(a)(iii)
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Wells Not Completed as of Effective Time
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Schedule 9.1(p)
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Financial Statement Information Indemnification and Contribution
|
Schedule 16.16
|
Persons With Knowledge
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Exhibit
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Description
|
A
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B
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Wells and WI and NRI
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C
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Material Agreements
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D
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Pipeline and Gathering Systems
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E
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Yards - Fee and Leased Surface
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F-1
|
Allocated Value of Leases on Governmental Quarter-Quarter Section Basis
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F-2
|
Allocated Value of Wells
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G
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Form of Assignment, Bill of Sale and Conveyance
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H
I
|
Form of Non-Foreign Status Certificate
Form of Escrow Agreement
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b. Non-Required Consents. The following types of consents shall not constitute Required Consents: (I) consents to transfers of title by the BLM, the State of Colorado or any county, (II) consents set forth in, or arising out of, a farmout or similar agreement pursuant to which Sellers has already satisfied all conditions for earning any interests that constitute a part of the Assets and Sellers has received or is due an assignment of, the earned interests under such agreement, and (III) consents which if not obtained by Closing would not invalidate the conveyance of the Assets. For each of the consents of the type described in Section 5.8(b)(I), Buyer, within 30 days after Closing, shall file for approval with the applicable government agencies all federal, state and county transfer documents required to effectuate the transfer of the Assets. Buyer further agrees promptly after Closing to take all other actions required of it by federal, state or county agencies having jurisdiction to obtain all requisite regulatory approvals with respect to this transaction, and to use its best efforts to obtain the unconditional approval by such federal, state or county agencies, as applicable, of the assignment documents requiring federal, state or county approval in order for Buyer to be recognized by the federal, state or county agencies as the owner of the Assets. Buyer shall provide Sellers approved copies of the assignment documents and other federal, state and county transfer documents as soon as they are available.
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b. Legal Status. Each Seller and Buyer shall use all reasonable efforts to maintain its respective legal status from the date hereof until the Final Settlement Date and to assure that as of the Closing Date and the Final Settlement Date it will not be under any material corporate, legal or contractual restriction that would prohibit or delay the timely consummation of the transaction contemplated hereby.
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c. Notices of Claims. Sellers shall promptly notify Buyer and Buyer shall promptly notify Sellers if, between the date hereof and the Closing Date, Sellers or Buyer, as the case may be, receives notice of any claim, suit, action or other proceeding of the type referred to in Sections 7.10, 7.13, 7.14(b) or 8.6, and each Party. Each Party will notify the other Party promptly after any officer of the first Party obtains actual knowledge that any representation or warranty of the other Party contained in this Agreement is, becomes or will be untrue in any material respect on or before the Closing Date. No breach of any representation, warranty, covenant, agreement or condition of this Agreement shall be deemed to be a breach of this Agreement for any purpose under this Agreement, and no Party or any Affiliate of a Party shall have any claim or recourse against the other Party or any Affiliate of the other Party, or their respective directors, officers, employees, buyers, controlling Persons, agents, advisors or representatives with respect to such breach, if the first Party or any Affiliate of the first Party, or any of their respective officers or representatives, had knowledge prior to the Execution Date of such breach or of the threat of such breach or the circumstances giving rise to such breach.
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d. Compliance with Laws. During the period from the date of this Agreement to the Closing Date, Sellers shall attempt in good faith to comply in all material respects with all applicable statutes, ordinances, rules, regulations and orders relating to the ownership of its interest in the Assets and, to the extent that a Seller is the operator, the operation of the Assets by.
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e. Government Reviews and Filings. Before and after the Closing, Buyer and Sellers shall cooperate to provide requested information, make required filings with, prepare applications to and conduct negotiations with each governmental agency as required to consummate the transaction contemplated hereby, including any required filings under the Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended. Each Party shall make any governmental filings occasioned by its ownership or structure. Buyer shall make all filings after the Closing at its expense with governmental agencies necessary to transfer title to the Assets or to comply with laws and shall indemnify and hold harmless Sellers from and against all Losses arising out of Sellers’ holding of such title after the Closing and prior to the securing of any necessary governmental approvals of the transfer.
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f. Confidentiality. All data and information obtained by Buyer from Sellers and their representatives in connection with the Assets and the transactions contemplated by this Agreement, whether before or after the execution of this Agreement, and data and information generated by Buyer prior to the Closing Date in connection with the transactions contemplated by this Agreement (collectively, the “
Information
”) is deemed by the Parties to be confidential and proprietary to Sellers. Until completion of the Closing, except as required by law, Buyer and its officers, agents and representatives will hold in strict confidence all Information, except any Information which: (i) at the time of disclosure to Buyer by Sellers is in the public domain; (ii) after disclosure to Buyer by Sellers becomes part of the public domain by publication or otherwise, except by breach of this commitment by Buyer; (iii) Buyer can establish by competent proof was rightfully in its possession at the time of disclosure to Buyer by Sellers; (iv) Buyer rightfully receives from third parties free of any obligation of confidence; or (v) is developed independently by Buyer,
provided
that the Person or Persons developing the Information shall not have had access to the Information;
provided further
that Buyer may disclose Information as necessary to its consultants, investors and lenders who similarly agree to protect the confidentiality of such Information and agree to use such Information only for their due diligence evaluation of the Assets. If Closing occurs, that Confidentiality Agreement dated September 29, 2014 between Buyer and Sellers or Sellers’ Affiliates shall be deemed terminated.
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g. Return of Information. If the transaction contemplated by this Agreement does not close on or before the Closing Date, Buyer shall return to Sellers on or before the fifth Business Day thereafter all copies of the Information in the possession of Buyer obtained or generated by Buyer pursuant to any provision of this Agreement. The terms of Section 9.1(f) and this Section 9.1(g) shall survive termination of this Agreement.
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h. Required Bonding. Buyer shall obtain all required bonds and other surety arrangements relating to the ownership or operation of the Assets (including all bonds and surety arrangements required by the BLM and the State of Colorado) necessary to cause Sellers’ bonds and surety arrangements with respect to the Assets to be released. No later than three Business Days prior to Closing, Buyer shall provide Sellers with satisfactory evidence that all such bonds and surety arrangements have been obtained and will be unconditionally effective as of the Closing.
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i. Required Insurance. Buyer shall obtain and maintain such insurance coverages as are required under the applicable operating agreements under which Buyer will become the operator.
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j. Assets Not Operated by Sellers. Buyer acknowledges that Sellers own undivided interests in certain of the properties comprising the Assets that Sellers are not the operator thereof, and Buyer agrees that the acts or omissions of the other working interest owners (including the operators) who are not a Seller or an Affiliate of any Seller shall not constitute a breach of the provisions of this Section 9.1(j), and no action required by a vote of working interest owners shall constitute such a breach so long as Sellers have voted their interests in a manner that complies with the provisions of this Section 9.1.
|
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k. Successor Operator. Buyer acknowledges and agrees that Sellers cannot and do not covenant or warrant that Buyer shall become successor operator of those Assets operated by Sellers and that such succession is subject to operating or other agreements that control the appointment of a successor operator. Sellers agree, however, that, as to the Assets operated by a Seller, they shall use their commercially reasonable efforts to support Buyer’s efforts to become successor operator of such Assets (to the extent permitted under any applicable joint operating agreement) effective as of Closing (at Buyer’s sole cost and expense) and to designate or appoint, to the extent legally possible and permitted under any applicable joint operating agreement, Buyer as successor operator of such Assets effective as of Closing.
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l. Record Retention. Buyer shall and shall cause its successors and assigns to, for a period of seven years following Closing, (i) retain the Records, (ii) provide Sellers, their Affiliates and their respective officers, employees and representatives with access to the Records during normal business hours for review and copying at Sellers’ expense, and (iii) provide Sellers, their Affiliates and their respective officers, employees and representatives with access, during normal business hours, to materials received or produced after Closing relating to any indemnity claim made under Section 15.2 for review and copying at Sellers’ expense. At the end of such seven year period and prior to destroying any of the Records, Buyer shall notify Sellers in advance of such destruction and provide Sellers a reasonable opportunity to copy any or all of such Records at Sellers’ sole cost and expense.
|
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m. Amendment to Schedules. Buyer agrees that, with respect to the representations and warranties of Sellers contained in this Agreement, Sellers shall have the continuing right and obligation until Closing to add, supplement or amend the Disclosure Schedule to its representations and warranties with respect to any matter hereafter arising or discovered which, if existing or known on the Execution Date or thereafter, would have been required to be set forth or described in the Disclosure Schedule. For all purposes of this Agreement, including for purposes of determining whether the conditions set forth in Section 10.2 have been fulfilled, the Disclosure Schedule shall be deemed to include only that information contained therein on the Execution Date and shall be deemed to exclude all information contained in any addition, supplement or amendment thereto;
provided, however
, that if Closing shall occur, then all matters disclosed pursuant to any such addition, supplement or amendment at or prior to Closing shall be waived and Buyer shall not be entitled to make a claim with respect thereto pursuant to the terms of this Agreement or otherwise.
|
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n. [Intentionally omitted]
|
|
o. Several, Not Joint, Liability of Sellers. No Seller shall have any liability for (i) any breach of any warranty, representation, covenant or agreement of any other Seller under this Agreement, or (ii) any breach or default under this Agreement or any other document or instrument executed or delivered in connection with this Agreement by any other Seller.
|
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p. Historical Asset Revenue and Expense Information. Sellers shall cooperate with Buyer and make available, during normal business hours, to Buyer prior to and for a period of twelve (12) months following Closing any and all existing information and documents relating to revenues and expenses attributable to the Assets and in the possession of Sellers (subject to the rights of third parties) that Buyer may reasonably require to comply with Buyer’s tax and financial reporting requirements and audits, including any filings with any governmental entity and filings that may be required by the SEC under the Securities Act and/or the Exchange Act. Without limiting the generality of the foregoing, Sellers will use commercially reasonable efforts after execution of this Agreement and following Closing to cooperate with the independent auditors chosen by Buyer (“
Buyer’s Auditor
”) in connection with their audit or review of any revenue and expense records pertaining to the Assets that Buyer or any of its affiliates requires to comply with their tax, financial and other reporting requirements. Sellers’ cooperation will include (i) reasonable access during normal business hours to Sellers’ employees and representatives designated by Sellers who were responsible for preparing or maintaining the revenue and expense records and work papers and other supporting documents used in the preparation of such financial statements as may be required by Buyer’s Auditor to perform an audit or conduct a review in accordance with generally accepted auditing standards or to otherwise verify such financial statements; and (ii) delivery of one or more customary representation letters from Sellers to Buyer’s Auditor that are reasonably requested by Buyer to allow such auditors to complete an audit (or review of any financial statements), and to allow Buyer’s Auditor to issue an opinion with respect to its audit or review. Buyer shall indemnify and hold harmless Sellers to the extent and as provided in Schedule 9.1(p) attached hereto. The provisions of this Section and Schedule 9.1(p) shall survive the Closing and shall be binding upon any successors or assigns of Buyer.
|
|
q. Rule 144. With a view to making available to Sellers the benefits of Rule 144 promulgated under the Securities Act and any other similar rule or regulation of the SEC that may at any time permit Sellers to sell securities of Buyer to the public without registration, Buyer agrees to:
|
If to Sellers:
|
||
Bayswater Exploration & Production, LLC
|
||
730 17
th
Street, Suite 610
Denver, Colorado 80202
|
||
Telephone:
|
(303) 893-2503
|
|
Facsimile:
|
(303) 893-2508
|
|
Attention:
|
Steve Struna and Lynn Belcher
|
|
|
|
|
If to Buyer:
|
||
Synergy Resources Corporation
|
||
20203 Highway 60
|
||
Platteville, Colorado 80651
|
||
Telephone:
|
(970) 737-1073
|
|
Facsimile:
|
(970) 737-1045
|
|
Attention:
|
Ed Holloway and Bill Scaff
|
|
|
|
SELLERS:
|
||
Bayswater Exploration & Production, LLC
|
||
By:
|
/s/ Stephen M. Struna
|
|
Name: |
Stephen M. Struna
|
|
Title: |
President
|
Bayswater Blenheim Holdings, LLC
|
|
By:
|
/s/ Guy J. Castranova
|
Name:
|
Guy J. Castranova
|
Title:
|
Managing Director
|
|
|
Bayswater Blenheim Holdings II, LLC
|
|
By: | /s/ Guy J. Castranova |
Name:
|
Guy J. Castranova
|
Title:
|
Managing Director
|
BUYER:
|
|
|
|
Synergy Resources Corporation
|
|
By:
|
/s/ Ed Holloway
|
Name: | Ed Holloway |
Title: | Co-CEO |