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ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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COLORADO
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20-2835920
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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1625 Broadway, Suite 300, Denver, CO
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80202
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
ý
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Accelerated filer
o
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Non-accelerated filer
o
(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Page
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Part I - FINANCIAL INFORMATION
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Item 1.
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Financial Statements (unaudited)
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Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015
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Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015
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Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015
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Notes to Condensed Consolidated Financial Statements
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Item 2.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
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Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
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Item 4.
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Controls and Procedures
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Part II - OTHER INFORMATION
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Item 1.
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Legal Proceedings
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Item 1A.
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Risk Factors
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Item 2.
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Unregistered Sales of Equity Securities and Use of Proceeds
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Item 3.
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Defaults of Senior Securities
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Item 4.
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Mine Safety Disclosures
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Item 5.
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Other Information
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Item 6.
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Exhibits
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SIGNATURES
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ASSETS
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September 30, 2016
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December 31, 2015
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||||
Current assets:
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||||
Cash and cash equivalents
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$
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63,757
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$
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66,499
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Accounts receivable:
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|
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||||
Oil and gas sales
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11,925
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12,527
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Trade
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8,738
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12,156
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Commodity derivative assets
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1,610
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6,572
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Escrow deposit
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18,244
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—
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Other current assets
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2,612
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1,944
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Total current assets
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106,886
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99,698
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Property and equipment:
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||||
Oil and gas properties, full cost method:
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Unproved properties and land, not subject to depletion
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458,802
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103,423
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Proved properties, net of accumulated depletion
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382,180
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422,778
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Oil and gas properties, net
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840,982
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526,201
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Other property and equipment, net
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1,626
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646
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Total property and equipment, net
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842,608
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526,847
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||||
Commodity derivative assets
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22
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2,996
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Goodwill
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40,711
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40,711
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Other assets
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2,392
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2,364
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Total assets
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$
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992,619
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$
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672,616
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities:
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Accounts payable and accrued expenses
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$
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42,415
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$
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36,573
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Revenue payable
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13,614
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13,603
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Production taxes payable
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14,177
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24,530
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Asset retirement obligations
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2,319
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—
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Total current liabilities
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72,525
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74,706
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Revolving credit facility
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—
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78,000
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Notes payable, net of issuance costs
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75,424
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—
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Commodity derivative liabilities
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80
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—
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Asset retirement obligations
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11,529
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13,400
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Total liabilities
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159,558
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166,106
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Commitments and contingencies (See Note 16)
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Shareholders' equity:
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||||
Preferred stock - $0.01 par value, 10,000,000 shares authorized:
no shares issued and outstanding |
—
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—
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Common stock - $0.001 par value, 300,000,000 shares authorized: 200,537,625 and 110,033,601 shares issued and outstanding, respectively
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201
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110
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Additional paid-in capital
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1,146,621
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595,671
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Retained deficit
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(313,761
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)
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(89,271
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)
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Total shareholders' equity
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833,061
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506,510
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Total liabilities and shareholders' equity
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$
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992,619
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$
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672,616
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Three Months Ended September 30,
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Nine Months Ended September 30,
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||||||||||||
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2016
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2015
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2016
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2015
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||||||||
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Oil and gas revenues
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$
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26,234
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$
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33,378
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$
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68,454
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$
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80,602
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Expenses:
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Lease operating expenses
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3,819
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5,078
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14,963
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12,944
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|
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Production taxes
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(1,461
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)
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3,099
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2,509
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7,485
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Depreciation, depletion, and accretion
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9,635
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18,417
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33,001
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48,231
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Full cost ceiling impairment
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25,453
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96,340
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215,223
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99,340
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Transportation commitment charge
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205
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—
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505
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—
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||||
General and administrative
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8,236
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5,432
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23,199
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15,755
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||||
Total expenses
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45,887
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128,366
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289,400
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183,755
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||||||||
Operating loss
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(19,653
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)
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(94,988
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)
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(220,946
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)
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(103,153
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)
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||||
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||||||||
Other income (expense):
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Commodity derivatives gain (loss)
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407
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6,619
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(3,617
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)
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5,697
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|
||||
Interest expense, net
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—
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(87
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)
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—
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(247
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)
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||||
Interest income
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10
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15
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179
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69
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|
||||
Total other income (expense)
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417
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6,547
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(3,438
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)
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5,519
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|
||||
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||||||||
Loss before income taxes
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(19,236
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)
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(88,441
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)
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(224,384
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)
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(97,634
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)
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||||
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||||||||
Income tax expense (benefit)
|
5
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|
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(10,520
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)
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106
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(14,132
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)
|
||||
Net loss
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$
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(19,241
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)
|
|
$
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(77,921
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)
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$
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(224,490
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)
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$
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(83,502
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)
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||||||||
Net loss per common share:
|
|
|
|
|
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||||||||
Basic
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$
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(0.10
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)
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$
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(0.74
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)
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|
$
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(1.36
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)
|
|
$
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(0.82
|
)
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Diluted
|
$
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(0.10
|
)
|
|
$
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(0.74
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)
|
|
$
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(1.36
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)
|
|
$
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(0.82
|
)
|
|
|
|
|
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|
||||||||
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
200,515,555
|
|
|
105,100,849
|
|
|
164,771,544
|
|
|
102,329,504
|
|
||||
Diluted
|
200,515,555
|
|
|
105,100,849
|
|
|
164,771,544
|
|
|
102,329,504
|
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(224,490
|
)
|
|
$
|
(83,502
|
)
|
Adjustments to reconcile net loss to net cash provided by operating activities:
|
|
|
|
||||
Depletion, depreciation, and accretion
|
33,001
|
|
|
48,231
|
|
||
Full cost ceiling impairment
|
215,223
|
|
|
99,340
|
|
||
Provision for deferred taxes
|
—
|
|
|
(38,097
|
)
|
||
Stock-based compensation
|
7,285
|
|
|
7,688
|
|
||
Mark-to-market of commodity derivative contracts:
|
|
|
|
||||
Total loss (gain) on commodity derivatives contracts
|
3,617
|
|
|
(5,697
|
)
|
||
Cash settlements on commodity derivative contracts
|
5,137
|
|
|
28,343
|
|
||
Cash premiums paid for commodity derivative contracts
|
—
|
|
|
(4,562
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
|
|
|
||||
Oil and gas sales
|
602
|
|
|
8,678
|
|
||
Trade
|
2,679
|
|
|
12,686
|
|
||
Accounts payable and accrued expenses
|
1,761
|
|
|
663
|
|
||
Revenue payable
|
(363
|
)
|
|
(5,886
|
)
|
||
Production taxes payable
|
(10,158
|
)
|
|
2,695
|
|
||
Other
|
(1,101
|
)
|
|
(827
|
)
|
||
Net cash provided by operating activities
|
33,193
|
|
|
69,753
|
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
||||
Acquisition of oil and gas properties
|
(499,831
|
)
|
|
—
|
|
||
Well costs and other capital expenditures
|
(82,318
|
)
|
|
(110,224
|
)
|
||
Earnest money deposit
|
(18,244
|
)
|
|
(5,850
|
)
|
||
Proceeds from sales of oil and gas properties
|
24,223
|
|
|
6,239
|
|
||
Net cash used in investing activities
|
(576,170
|
)
|
|
(109,835
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from sale of stock
|
565,398
|
|
|
200,100
|
|
||
Offering costs
|
(21,987
|
)
|
|
(9,255
|
)
|
||
Shares withheld for payment of employee payroll taxes
|
(510
|
)
|
|
(621
|
)
|
||
Proceeds from revolving credit facility
|
55,000
|
|
|
—
|
|
||
Principal repayments on revolving credit facility
|
(133,000
|
)
|
|
(68,000
|
)
|
||
Financing fees on revolving credit facility
|
(269
|
)
|
|
—
|
|
||
Proceeds from issuance of notes payable
|
80,000
|
|
|
—
|
|
||
Financing fees on issuance of notes payable
|
(4,397
|
)
|
|
—
|
|
||
Net cash provided by financing activities
|
540,235
|
|
|
122,224
|
|
||
|
|
|
|
||||
Net increase (decrease) in cash and equivalents
|
(2,742
|
)
|
|
82,142
|
|
||
|
|
|
|
||||
Cash and equivalents at beginning of period
|
66,499
|
|
|
39,570
|
|
||
|
|
|
|
||||
Cash and equivalents at end of period
|
$
|
63,757
|
|
|
$
|
121,712
|
|
1
.
|
Organization and Summary of Significant Accounting Policies
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||
Major Customers
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Company A
|
|
27%
|
|
*
|
|
38%
|
|
*
|
Company B
|
|
20%
|
|
14%
|
|
20%
|
|
11%
|
Company C
|
|
12%
|
|
*
|
|
*
|
|
*
|
Company D
|
|
10%
|
|
*
|
|
11%
|
|
*
|
Company E
|
|
*
|
|
72%
|
|
*
|
|
65%
|
Company F
|
|
*
|
|
*
|
|
*
|
|
12%
|
|
|
As of
|
|
As of
|
Major Customers
|
|
September 30, 2016
|
|
December 31, 2015
|
Company A
|
|
24%
|
|
*
|
Company B
|
|
17%
|
|
*
|
Company C
|
|
15%
|
|
13%
|
Company D
|
|
*
|
|
13%
|
Company E
|
|
*
|
|
13%
|
2
.
|
Property and Equipment
|
|
As of
|
|
As of
|
||||
|
September 30, 2016
|
|
December 31, 2015
|
||||
Oil and gas properties, full cost method:
|
|
|
|
||||
Costs of unproved properties and land, not subject to depletion:
|
|
|
|
||||
Lease acquisition, land, and other costs
|
$
|
401,103
|
|
|
$
|
93,600
|
|
Wells in progress
|
57,699
|
|
|
9,823
|
|
||
Subtotal, unproved properties
|
458,802
|
|
|
103,423
|
|
||
|
|
|
|
||||
Costs of proved properties:
|
|
|
|
||||
Producing and non-producing
|
900,958
|
|
|
691,659
|
|
||
Wells in progress
|
12,594
|
|
|
11,487
|
|
||
Less, accumulated depletion and full cost ceiling impairments
|
(531,372
|
)
|
|
(280,368
|
)
|
||
Subtotal, proved properties, net
|
382,180
|
|
|
422,778
|
|
||
|
|
|
|
||||
Costs of other property and equipment:
|
|
|
|
||||
Other property and equipment
|
2,188
|
|
|
1,270
|
|
||
Less, accumulated depreciation
|
(562
|
)
|
|
(624
|
)
|
||
Subtotal, other property and equipment, net
|
1,626
|
|
|
646
|
|
||
|
|
|
|
||||
Total property and equipment, net
|
$
|
842,608
|
|
|
$
|
526,847
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Capitalized overhead
|
$
|
1,757
|
|
|
$
|
589
|
|
|
$
|
4,745
|
|
|
$
|
1,640
|
|
3
.
|
Acquisitions and Divestitures
|
Preliminary Purchase Price
|
June 14, 2016
|
||
Consideration given:
|
|
||
Cash
|
$
|
486,261
|
|
Net liabilities assumed, including asset retirement obligations
|
1,120
|
|
|
Total consideration given
|
$
|
487,381
|
|
|
|
||
Preliminary Allocation of Purchase Price
|
|
||
Proved oil and gas properties
(1)
|
$
|
133,870
|
|
Unproved oil and gas properties
|
353,511
|
|
|
Total fair value of assets acquired
|
$
|
487,381
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
(in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Oil and gas revenues
|
$
|
26,234
|
|
|
$
|
36,481
|
|
|
$
|
71,940
|
|
|
$
|
89,998
|
|
Net loss
|
$
|
(19,241
|
)
|
|
$
|
(79,471
|
)
|
|
$
|
(227,479
|
)
|
|
$
|
(87,104
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss per common share
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.10
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(1.14
|
)
|
|
$
|
(0.49
|
)
|
Diluted
|
$
|
(0.10
|
)
|
|
$
|
(0.44
|
)
|
|
$
|
(1.14
|
)
|
|
$
|
(0.49
|
)
|
Purchase Price
|
October 20, 2015
|
||
Consideration given:
|
|
||
Cash
|
$
|
35,045
|
|
Synergy Resources Corp. common stock
(1)
|
49,840
|
|
|
Net liabilities assumed, including asset retirement obligations
|
284
|
|
|
Total consideration given
|
$
|
85,169
|
|
|
|
||
Allocation of Purchase Price
|
|
||
Proved oil and gas properties
(2)
|
$
|
46,333
|
|
Unproved oil and gas properties
|
37,766
|
|
|
Other assets, including accounts receivable
|
1,070
|
|
|
Total fair value of assets acquired
|
$
|
85,169
|
|
(in thousands)
|
Three Months Ended September 30, 2015
|
|
Nine Months Ended September 30, 2015
|
||||
Oil and gas revenues
|
$
|
35,785
|
|
|
$
|
90,676
|
|
Net loss
|
$
|
(77,556
|
)
|
|
$
|
(82,923
|
)
|
|
|
|
|
||||
Net loss per common share
|
|
|
|
||||
Basic
|
$
|
(0.71
|
)
|
|
$
|
(0.78
|
)
|
Diluted
|
$
|
(0.71
|
)
|
|
$
|
(0.78
|
)
|
4
.
|
Depletion, depreciation, and accretion ("DD&A")
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Depletion of oil and gas properties
|
$
|
9,273
|
|
|
$
|
18,148
|
|
|
$
|
31,981
|
|
|
$
|
47,562
|
|
Depreciation and accretion
|
362
|
|
|
269
|
|
|
1,020
|
|
|
669
|
|
||||
Total DD&A Expense
|
$
|
9,635
|
|
|
$
|
18,417
|
|
|
$
|
33,001
|
|
|
$
|
48,231
|
|
5
.
|
Asset Retirement Obligations
|
Asset retirement obligations, December 31, 2015
|
$
|
13,400
|
|
Obligations incurred with development activities
|
366
|
|
|
Obligations assumed with acquisitions
|
2,046
|
|
|
Accretion expense
|
755
|
|
|
Obligations discharged with asset retirements and divestitures
|
(3,997
|
)
|
|
Revisions in previous estimates
|
1,278
|
|
|
Asset retirement obligations, September 30, 2016
|
$
|
13,848
|
|
Less, current portion
|
(2,319
|
)
|
|
Long-term portion
|
$
|
11,529
|
|
6
.
|
Revolving Credit Facility
|
7
.
|
Notes Payable
|
8
.
|
Commodity Derivative Instruments
|
Settlement Period
|
|
Derivative
Instrument
|
|
Average Volumes
(Bbls
per month)
|
|
Floor
Price
|
|
Ceiling
Price
|
|||||
Crude Oil - NYMEX WTI
|
|
|
|
|
|
|
|
|
|||||
Oct 1, 2016 - Dec 31, 2016
|
|
Purchased Put
|
|
25,000
|
|
|
$
|
50.00
|
|
|
—
|
|
|
Oct 1, 2016 - Dec 31, 2016
|
|
Purchased Put
|
|
10,000
|
|
|
$
|
45.00
|
|
|
—
|
|
|
Oct 1, 2016 - Dec 31, 2016
|
|
Collar
|
|
20,000
|
|
|
$
|
45.00
|
|
|
$
|
65.00
|
|
Oct 1, 2016 - Dec 31, 2016
|
|
Collar
|
|
30,667
|
|
|
$
|
40.00
|
|
|
$
|
60.00
|
|
|
|
|
|
|
|
|
|
|
|||||
Jan 1, 2017 - Apr 30, 2017
|
|
Purchased Put
|
|
20,000
|
|
|
$
|
50.00
|
|
|
—
|
|
|
May 1, 2017 - Aug 31, 2017
|
|
Purchased Put
|
|
20,000
|
|
|
$
|
55.00
|
|
|
—
|
|
|
Jan 1, 2017 - Dec 31, 2017
|
|
Collar
|
|
20,000
|
|
|
$
|
45.00
|
|
|
$
|
70.00
|
|
Jan 1, 2017 - Dec 31, 2017
|
|
Collar
|
|
30,417
|
|
|
$
|
40.00
|
|
|
$
|
60.00
|
|
|
|
|
|
|
|
|
|
|
|||||
Settlement Period
|
|
Derivative
Instrument
|
|
Average Volumes
(MMBtu
per month)
|
|
Floor
Price
|
|
Ceiling
Price
|
|||||
Natural Gas - CIG Rocky Mountain
|
|
|
|
|
|
|
|
|
|||||
Oct 1, 2016 - Dec 31, 2016
|
|
Collar
|
|
100,000
|
|
|
$
|
2.65
|
|
|
$
|
3.10
|
|
|
|
|
|
|
|
|
|
|
|||||
Jan 1, 2017 - Apr 30, 2017
|
|
Collar
|
|
100,000
|
|
|
$
|
2.80
|
|
|
$
|
3.95
|
|
May 1 2017 - Aug 31, 2017
|
|
Collar
|
|
110,000
|
|
|
$
|
2.50
|
|
|
$
|
3.06
|
|
Jan 1, 2017 - Dec 31, 2017
|
|
Collar
|
|
200,000
|
|
|
$
|
2.50
|
|
|
$
|
3.27
|
|
Jan 1, 2017 - Dec 31, 2017
|
|
Collar
|
|
100,000
|
|
|
$
|
2.60
|
|
|
$
|
3.20
|
|
Settlement Period
|
|
Derivative
Instrument
|
|
Average Volumes
(MMBtu per month) |
|
Floor
Price
|
|
Ceiling
Price
|
|||||
Crude Oil - NYMEX WTI
|
|
|
|
|
|
|
|
|
|||||
Jan 1, 2017 - Dec 31, 2017
|
|
Collar
|
|
30,417
|
|
|
$
|
40.00
|
|
|
$
|
65.00
|
|
|
|
|
|
|
|
|
|
|
|||||
Natural Gas - NYMEX Henry Hub
|
|
|
|
|
|
|
|
|
|||||
Jan 1, 2017 - Dec 31, 2017
|
|
Collar
|
|
100,000
|
|
|
$
|
2.75
|
|
|
$
|
4.00
|
|
|
|
|
|
As of September 30, 2016
|
||||||||||
Underlying
|
|
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
|
||||||
Commodity derivative contracts
|
|
Current assets
|
|
$
|
2,943
|
|
|
$
|
(1,333
|
)
|
|
$
|
1,610
|
|
Commodity derivative contracts
|
|
Noncurrent assets
|
|
$
|
627
|
|
|
$
|
(605
|
)
|
|
$
|
22
|
|
Commodity derivative contracts
|
|
Current liabilities
|
|
$
|
1,333
|
|
|
$
|
(1,333
|
)
|
|
$
|
—
|
|
Commodity derivative contracts
|
|
Noncurrent liabilities
|
|
$
|
685
|
|
|
$
|
(605
|
)
|
|
$
|
80
|
|
|
|
|
|
As of December 31, 2015
|
||||||||||
Underlying
|
|
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
|
||||||
Commodity derivative contracts
|
|
Current assets
|
|
$
|
6,719
|
|
|
$
|
(147
|
)
|
|
$
|
6,572
|
|
Commodity derivative contracts
|
|
Noncurrent assets
|
|
$
|
3,354
|
|
|
$
|
(358
|
)
|
|
$
|
2,996
|
|
Commodity derivative contracts
|
|
Current liabilities
|
|
$
|
147
|
|
|
$
|
(147
|
)
|
|
$
|
—
|
|
Commodity derivative contracts
|
|
Noncurrent liabilities
|
|
$
|
358
|
|
|
$
|
(358
|
)
|
|
$
|
—
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Realized gain (loss) on commodity derivatives
|
$
|
(13
|
)
|
|
$
|
9,579
|
|
|
$
|
2,868
|
|
|
$
|
26,896
|
|
Unrealized gain (loss) on commodity derivatives
|
420
|
|
|
(2,960
|
)
|
|
(6,485
|
)
|
|
(21,199
|
)
|
||||
Total gain (loss)
|
$
|
407
|
|
|
$
|
6,619
|
|
|
$
|
(3,617
|
)
|
|
$
|
5,697
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Monthly settlement
|
$
|
497
|
|
|
$
|
986
|
|
|
$
|
4,398
|
|
|
$
|
7,834
|
|
Previously incurred premiums attributable to settled commodity contracts
|
(510
|
)
|
|
(599
|
)
|
|
(1,530
|
)
|
|
(1,447
|
)
|
||||
Early liquidation
|
—
|
|
|
9,192
|
|
|
—
|
|
|
20,509
|
|
||||
Total realized gain (loss)
|
$
|
(13
|
)
|
|
$
|
9,579
|
|
|
$
|
2,868
|
|
|
$
|
26,896
|
|
9
.
|
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; and
|
•
|
Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash or valuation models.
|
|
Fair Value Measurements at September 30, 2016
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Financial assets and liabilities:
|
|
|
|
|
|
|
|
||||||||
Commodity derivative asset
|
$
|
—
|
|
|
$
|
1,632
|
|
|
$
|
—
|
|
|
$
|
1,632
|
|
Commodity derivative liability
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
80
|
|
|
Fair Value Measurements at December 31, 2015
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Financial assets and liabilities:
|
|
|
|
|
|
|
|
||||||||
Commodity derivative asset
|
$
|
—
|
|
|
$
|
9,568
|
|
|
$
|
—
|
|
|
$
|
9,568
|
|
Commodity derivative liability
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
10
.
|
Interest Expense
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Revolving bank credit facility
|
$
|
—
|
|
|
$
|
529
|
|
|
$
|
154
|
|
|
$
|
2,260
|
|
Notes payable
|
1,800
|
|
|
—
|
|
|
2,120
|
|
|
—
|
|
||||
Amortization of issuance costs
|
467
|
|
|
249
|
|
|
1,076
|
|
|
740
|
|
||||
Less, interest capitalized
|
(2,267
|
)
|
|
(691
|
)
|
|
(3,350
|
)
|
|
(2,753
|
)
|
||||
Interest expense, net
|
$
|
—
|
|
|
$
|
87
|
|
|
$
|
—
|
|
|
$
|
247
|
|
11
.
|
Shareholders’ Equity
|
|
As of
|
|
As of
|
||||
|
September 30, 2016
|
|
December 31, 2015
|
||||
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
|
300,000,000
|
|
|
300,000,000
|
|
||
Common stock, par value
|
$
|
0.001
|
|
|
$
|
0.001
|
|
Common stock, shares issued and outstanding
|
200,537,625
|
|
|
110,033,601
|
|
12
.
|
Weighted-Average Shares Outstanding
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||
Potentially dilutive common shares from:
|
|
|
|
|
|
|
|
||||
Stock options
|
5,903,500
|
|
|
4,476,500
|
|
|
5,903,500
|
|
|
4,476,500
|
|
Performance stock units
1
|
478,510
|
|
|
—
|
|
|
478,510
|
|
|
—
|
|
Restricted stock units and stock bonus shares
|
1,003,879
|
|
|
714,000
|
|
|
1,003,879
|
|
|
714,000
|
|
Total
|
7,385,889
|
|
|
5,190,500
|
|
|
7,385,889
|
|
|
5,190,500
|
|
13
.
|
Stock-Based Compensation
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Stock options
|
$
|
1,274
|
|
|
$
|
1,110
|
|
|
$
|
4,107
|
|
|
$
|
4,400
|
|
Performance stock units
|
354
|
|
|
—
|
|
|
692
|
|
|
—
|
|
||||
Restricted stock units and stock bonus shares
|
1,023
|
|
|
739
|
|
|
3,341
|
|
|
3,288
|
|
||||
Total stock-based compensation
|
$
|
2,651
|
|
|
$
|
1,849
|
|
|
$
|
8,140
|
|
|
$
|
7,688
|
|
Less: stock-based compensation capitalized
|
(278
|
)
|
|
(81
|
)
|
|
(856
|
)
|
|
(503
|
)
|
||||
Total stock-based compensation expensed
|
$
|
2,373
|
|
|
$
|
1,768
|
|
|
$
|
7,284
|
|
|
$
|
7,185
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Number of options to purchase common shares
|
350,000
|
|
|
450,000
|
|
|
944,500
|
|
|
2,482,500
|
|
||||
Weighted-average exercise price
|
$
|
6.55
|
|
|
$
|
10.31
|
|
|
$
|
7.20
|
|
|
$
|
11.33
|
|
Term (in years)
|
10 years
|
|
|
10 years
|
|
|
10 years
|
|
|
10 years
|
|
||||
Vesting Period (in years)
|
5 years
|
|
|
3 - 5 years
|
|
|
3 - 5 years
|
|
|
1 - 5 years
|
|
||||
Fair Value (in thousands)
|
$
|
1,253
|
|
|
$
|
2,377
|
|
|
$
|
3,381
|
|
|
$
|
13,692
|
|
|
Nine Months Ended September 30,
|
||||
|
2016
|
|
2015
|
||
Expected term
|
6.4 years
|
|
|
6.5 years
|
|
Expected volatility
|
55
|
%
|
|
48
|
%
|
Risk free rate
|
1.25 - 1.75%
|
|
|
1.35 - 2.02%
|
|
Expected dividend yield
|
—
|
%
|
|
—
|
%
|
|
Number of Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Life
|
|
Aggregate Intrinsic Value (thousands)
|
|||||
Outstanding, December 31, 2015
|
5,056,000
|
|
|
$
|
9.71
|
|
|
8.7 years
|
|
$
|
4,351
|
|
Granted
|
944,500
|
|
|
7.20
|
|
|
|
|
|
|||
Exercised
|
—
|
|
|
—
|
|
|
|
|
—
|
|
||
Expired
|
—
|
|
|
—
|
|
|
|
|
|
|||
Forfeited
|
(97,000
|
)
|
|
10.50
|
|
|
|
|
|
|||
Outstanding, September 30, 2016
|
5,903,500
|
|
|
$
|
9.29
|
|
|
8.2 years
|
|
$
|
2,763
|
|
Outstanding, Exercisable at September 30, 2016
|
2,223,950
|
|
|
$
|
8.20
|
|
|
7.1 years
|
|
$
|
2,194
|
|
Outstanding, Vested and expected to vest at September 30, 2016
|
5,829,108
|
|
|
$
|
9.27
|
|
|
8.2 years
|
|
$
|
2,763
|
|
|
|
Outstanding Options
|
|
Exercisable Options
|
|||||||||
Range of Exercise Prices
|
|
Options
|
Weighted-Average Remaining Contractual Life
|
Weighted-Average Exercise Price per Share
|
|
Options
|
Weighted-Average Exercise Price per Share
|
||||||
|
|
|
|
|
|
|
|
||||||
Under $5.00
|
|
650,000
|
|
5.0 years
|
$
|
3.51
|
|
|
583,000
|
|
$
|
3.47
|
|
$5.00 - $6.99
|
|
965,000
|
|
8.1 years
|
6.37
|
|
|
430,000
|
|
6.51
|
|
||
$7.00 - $10.99
|
|
1,546,500
|
|
8.7 years
|
9.43
|
|
|
334,450
|
|
9.63
|
|
||
$11.00 - $13.46
|
|
2,742,000
|
|
8.7 years
|
11.61
|
|
|
876,500
|
|
11.63
|
|
||
Total
|
|
5,903,500
|
|
8.2 years
|
$
|
9.29
|
|
|
2,223,950
|
|
$
|
8.20
|
|
Unrecognized compensation, net of estimated forfeitures (in thousands)
|
$
|
16,100
|
|
Remaining vesting phase
|
3.4 years
|
|
|
Number of Shares
|
|
Weighted-Average Grant-Date Fair Value
|
|||
Not vested, December 31, 2015
|
915,867
|
|
|
$
|
10.63
|
|
Granted
|
451,347
|
|
|
7.68
|
|
|
Vested
|
(305,598
|
)
|
|
10.12
|
|
|
Forfeited
|
(57,737
|
)
|
|
9.06
|
|
|
Not vested, September 30, 2016
|
1,003,879
|
|
|
$
|
9.55
|
|
Unrecognized compensation, net of estimated forfeitures (in thousands)
|
$
|
7,575
|
|
Remaining vesting phase
|
2.9 years
|
|
|
Nine Months Ended September 30, 2016
|
|
Weighted average expected term
|
2.7 years
|
|
Weighted average expected volatility
|
58
|
%
|
Weighted average risk free rate
|
0.87
|
%
|
14
.
|
Income Taxes
|
15
.
|
Related Party Transactions
|
16
.
|
Other Commitments and Contingencies
|
17
.
|
Supplemental Schedule of Information to the Condensed Consolidated Statements of Cash Flows
|
|
Nine Months Ended September 30,
|
||||||
Supplemental cash flow information:
|
2016
|
|
2015
|
||||
Interest paid
|
$
|
159
|
|
|
$
|
2,328
|
|
Income taxes paid
|
106
|
|
|
92
|
|
||
|
|
|
|
||||
Non-cash investing and financing activities:
|
|
|
|
||||
Accrued well costs as of period end
|
$
|
32,299
|
|
|
$
|
26,997
|
|
Assets acquired in exchange for common stock
|
—
|
|
|
9,097
|
|
||
Asset retirement obligations incurred with development activities
|
366
|
|
|
4,806
|
|
||
Asset retirement obligations assumed with acquisitions
|
2,046
|
|
|
—
|
|
||
Obligations discharged with asset retirements and divestitures
|
(3,997
|
)
|
|
—
|
|
18
.
|
Subsequent Event
|
ITEM
2
.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Four Months Ended December 31,
|
|
Year Ended August 31,
|
||||||||||||||||||||
|
2015
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
|
2011
|
||||||||||||
Average NYMEX prices
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Oil (per Bbl)
|
$
|
42.82
|
|
|
$
|
60.65
|
|
|
$
|
100.39
|
|
|
$
|
94.58
|
|
|
$
|
94.88
|
|
|
$
|
91.79
|
|
Natural gas (per Mcf)
|
$
|
2.26
|
|
|
$
|
3.12
|
|
|
$
|
4.38
|
|
|
$
|
3.55
|
|
|
$
|
2.82
|
|
|
$
|
4.12
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Oil (NYMEX WTI)
|
|
|
|
|
|
|
|
||||||||
Average NYMEX Price
|
$
|
44.90
|
|
|
$
|
46.42
|
|
|
$
|
41.23
|
|
|
$
|
51.00
|
|
Realized Price
|
$
|
35.67
|
|
|
$
|
39.05
|
|
|
$
|
31.47
|
|
|
$
|
42.16
|
|
Differential
|
$
|
(9.23
|
)
|
|
$
|
(7.37
|
)
|
|
$
|
(9.76
|
)
|
|
$
|
(8.84
|
)
|
|
|
|
|
|
|
|
|
||||||||
Gas (NYMEX Henry Hub)
|
|
|
|
|
|
|
|
||||||||
Average NYMEX Price
|
$
|
2.88
|
|
|
$
|
2.74
|
|
|
$
|
2.34
|
|
|
$
|
2.73
|
|
Realized Price
|
$
|
2.73
|
|
|
$
|
2.59
|
|
|
$
|
2.18
|
|
|
$
|
2.84
|
|
Differential
|
$
|
(0.15
|
)
|
|
$
|
(0.15
|
)
|
|
$
|
(0.16
|
)
|
|
$
|
0.11
|
|
Vertical Wells
|
||||||||||||||||
Operated Wells
|
|
Non-Operated Wells
|
|
Totals
|
||||||||||||
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
||||||
226
|
|
|
193
|
|
|
164
|
|
|
46
|
|
|
390
|
|
|
239
|
|
Horizontal Wells
|
||||||||||||||||
Operated Wells
|
|
Non-Operated Wells
|
|
Totals
|
||||||||||||
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
||||||
96
|
|
|
91
|
|
|
149
|
|
|
45
|
|
|
245
|
|
|
136
|
|
•
|
Concentrate on our existing core area in and around the D-J Basin, where we have significant operating experience.
All of our current wells and our undeveloped acreage is located either in or adjacent to the Wattenberg Field. Focusing our operations in this area leverages our management, technical and operational experience in the basin.
|
•
|
Develop and exploit existing oil and natural gas properties.
Since inception, our principal growth strategy has been to develop and exploit our properties to add reserves. In the Wattenberg Field, we target three benches of the Niobrara formation as well as the Codell formation for horizontal drilling and production. We believe horizontal drilling is the most efficient way to recover the potential hydrocarbons and consider the Wattenberg Field to be relatively low-risk because information gained from the large number of existing wells can be applied to potential future wells. There is enough similarity between wells in the Wattenberg Field that the exploitation process is generally repeatable.
|
•
|
Improve hydrocarbon recovery through increased well density.
We utilize what we believe to be industry best practices in our effort to determine the optimal recovery area for each well. Early horizontal well development in the Wattenberg Field generally assumed optimal recoveries would be obtained utilizing between 12 and 16 wells per 640-acre section. As horizontal well development has matured, well density assumptions have generally increased beyond 16 wells per section depending on the specific area of the field being drilled.
|
•
|
Complete selective acquisitions.
We seek to acquire developed and undeveloped oil and gas properties, primarily in the Wattenberg Field. We generally seek acquisitions that will provide us with opportunities for reserve additions and increased cash flow through production enhancement and additional development and exploratory prospect generation.
|
•
|
Retain control over the operation of a substantial portion of our production.
As operator of a majority of our wells and undeveloped acreage, we control the timing and selection of new wells to be drilled or existing wells to be re-completed. This allows us to modify our capital spending as our financial resources and underlying lease terms allow and market conditions permit.
|
•
|
Maintain financial flexibility while focusing on operational cost control.
We strive to be a cost-efficient operator and to maintain a relatively low utilization of debt, which enhances our financial flexibility. Our high degree of operational control, as well as our focus on operating efficiencies and short return on investment cycle times, is central to our operating strategy.
|
•
|
Use the latest technology to maximize returns.
Our development objective for individual well execution optimization is to drill and complete wells with lateral lengths of 7,000' to 10,000' as opposed to the 4,000' laterals that were initially drilled in the Wattenberg Field. Utilizing petrophysical and seismic data, a 3-D model is developed for each section to assist in determining optimal wellbore placement, well spacing, and stimulation design. This process is augmented with formation specific drilling and completion execution designs and coupled with localized production results to provide a continuous improvement philosophy in optimizing the value per acre of our leasehold throughout our development program.
|
|
Three Months Ended September 30,
|
|
Percentage
|
|||||||
|
2016
|
|
2015
|
|
Change
|
|||||
Production:
|
|
|
|
|
|
|||||
Oil (MBbls
1
)
|
517
|
|
|
692
|
|
|
(25
|
)%
|
||
Gas (MMcf
2
)
|
2,855
|
|
|
2,458
|
|
|
16
|
%
|
||
MBOE
3
|
993
|
|
|
1,102
|
|
|
(10
|
)%
|
||
BOED
4
|
10,794
|
|
|
11,975
|
|
|
(10
|
)%
|
||
|
|
|
|
|
|
|||||
Revenues (in thousands):
|
|
|
|
|
|
|||||
Oil
|
$
|
18,451
|
|
|
$
|
27,025
|
|
|
(32
|
)%
|
Gas
|
7,783
|
|
|
6,353
|
|
|
23
|
%
|
||
|
$
|
26,234
|
|
|
$
|
33,378
|
|
|
(21
|
)%
|
Average sales price:
|
|
|
|
|
|
|||||
Oil
|
$
|
35.67
|
|
|
$
|
39.05
|
|
|
(9
|
)%
|
Gas
|
$
|
2.73
|
|
|
$
|
2.59
|
|
|
5
|
%
|
BOE
|
$
|
26.42
|
|
|
$
|
30.30
|
|
|
(13
|
)%
|
|
Three Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
Production costs
|
$
|
3,529
|
|
|
$
|
4,385
|
|
Workover
|
290
|
|
|
693
|
|
||
Total LOE
|
$
|
3,819
|
|
|
$
|
5,078
|
|
|
|
|
|
||||
Per BOE:
|
|
|
|
||||
Production costs
|
$
|
3.55
|
|
|
$
|
3.98
|
|
Workover
|
0.29
|
|
|
0.63
|
|
||
Total LOE
|
$
|
3.84
|
|
|
$
|
4.61
|
|
|
Three Months Ended September 30,
|
||||||
(in thousands)
|
2016
|
|
2015
|
||||
Depletion of oil and gas properties
|
$
|
9,273
|
|
|
$
|
18,148
|
|
Depreciation and accretion
|
362
|
|
|
269
|
|
||
Total DD&A
|
$
|
9,635
|
|
|
$
|
18,417
|
|
|
|
|
|
||||
DD&A expense per BOE
|
$
|
9.70
|
|
|
$
|
16.71
|
|
|
Three Months Ended September 30,
|
||||||
(in thousands)
|
2016
|
|
2015
|
||||
G&A costs incurred
|
$
|
9,993
|
|
|
$
|
6,021
|
|
Capitalized costs
|
(1,757
|
)
|
|
(589
|
)
|
||
Total G&A
|
$
|
8,236
|
|
|
$
|
5,432
|
|
|
|
|
|
||||
Non-Cash G&A
|
$
|
2,375
|
|
|
$
|
1,768
|
|
Cash G&A
|
$
|
5,861
|
|
|
$
|
3,664
|
|
Total G&A
|
$
|
8,236
|
|
|
$
|
5,432
|
|
|
|
|
|
||||
Non-Cash G&A per BOE
|
$
|
2.39
|
|
|
$
|
1.60
|
|
Cash G&A per BOE
|
$
|
5.90
|
|
|
$
|
3.32
|
|
G&A Expense per BOE
|
$
|
8.29
|
|
|
$
|
4.92
|
|
|
Nine Months Ended September 30,
|
|
Percentage
|
|||||||
|
2016
|
|
2015
|
|
Change
|
|||||
Production:
|
|
|
|
|
|
|||||
Oil (MBbls)
|
1,552
|
|
|
1,521
|
|
|
2
|
%
|
||
Gas (MMcf)
|
8,991
|
|
|
5,813
|
|
|
55
|
%
|
||
MBOE
|
3,050
|
|
|
2,490
|
|
|
22
|
%
|
||
BOED
|
11,133
|
|
|
9,119
|
|
|
22
|
%
|
||
|
|
|
|
|
|
|||||
Revenues (in thousands):
|
|
|
|
|
|
|||||
Oil
|
$
|
48,838
|
|
|
$
|
64,107
|
|
|
(24
|
)%
|
Gas
|
19,616
|
|
|
16,495
|
|
|
19
|
%
|
||
|
$
|
68,454
|
|
|
$
|
80,602
|
|
|
(15
|
)%
|
Average sales price:
|
|
|
|
|
|
|||||
Oil
|
$
|
31.47
|
|
|
$
|
42.16
|
|
|
(25
|
)%
|
Gas
|
$
|
2.18
|
|
|
$
|
2.84
|
|
|
(23
|
)%
|
BOE
|
$
|
22.44
|
|
|
$
|
32.38
|
|
|
(31
|
)%
|
|
Nine Months Ended September 30,
|
||||||
(in thousands)
|
2016
|
|
2015
|
||||
Depletion of oil and gas properties
|
$
|
31,981
|
|
|
$
|
47,562
|
|
Depreciation and accretion
|
1,020
|
|
|
669
|
|
||
Total DD&A
|
$
|
33,001
|
|
|
$
|
48,231
|
|
|
|
|
|
||||
DD&A expense per BOE
|
$
|
10.82
|
|
|
$
|
19.37
|
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
Cash provided by operations
|
$
|
33,193
|
|
|
$
|
69,753
|
|
Acquisitions and development of oil and gas properties and equipment
|
(582,149
|
)
|
|
(110,224
|
)
|
||
Net cash provided by other investing activities
|
5,979
|
|
|
389
|
|
||
Net cash provided by equity financing activities
|
542,901
|
|
|
190,224
|
|
||
Net cash used in debt financing activities
|
(2,666
|
)
|
|
(68,000
|
)
|
||
Net increase (decrease) in cash and equivalents
|
$
|
(2,742
|
)
|
|
$
|
82,142
|
|
•
|
On January 27, 2016, we received cash proceeds of approximately
$89.2 million
(after underwriting discounts, commissions and expenses) from our public offering of
16,100,000
shares (including the shares sold pursuant to an over-allotment option exercised by the underwriters) at a price to us of
$5.545
per share. Proceeds were used to repay amounts borrowed under the Revolver and for general corporate purposes, which included continuing to develop our acreage position in the Wattenberg Field in Colorado and funding a portion of our 2016 capital expenditure program.
|
•
|
In January 2016, the Company repaid its outstanding borrowings under the Revolver of
$78 million
. In addition, on June 13, 2016, the Company borrowed approximately $55 million under the Revolver in order to pay a portion of the purchase price for the GC Acquisition pending receipt of proceeds from the issuance of the Senior Notes. The full amount borrowed was repaid on June 14, 2016.
|
•
|
On April 14, 2016, we received cash proceeds of approximately
$164.8 million
(after underwriting discounts, commissions and expenses) from our public offering of
22,425,000
shares (including the shares sold pursuant
|
•
|
In May and June 2016, we received cash proceeds of approximately
$289.4 million
(after underwriting discounts, commissions and expenses) from our public offering of
51,750,000
shares (including the shares sold pursuant to an over-allotment option exercised by the underwriters) at a price to us of
$5.597
per share. These proceeds were used for general corporate purposes, including to fund the GC Acquisition.
|
•
|
On June 14, 2016, the Company issued $80 million aggregate principal amount of 9.00% Senior Unsecured Notes ("Senior Notes") in a private placement to qualified institutional buyers. See "- Senior Notes" below. The net proceeds from the sale of the Senior Notes were
$75.2 million
after deductions of
$4.8 million
for expenses and underwriting discounts and commissions. The net proceeds were used to fund the GC Acquisition.
|
|
Nine Months Ended September 30,
|
||||||
|
2016
|
|
2015
|
||||
Cash payments for acquisitions
|
$
|
499,831
|
|
|
$
|
—
|
|
Asset retirement obligations assumed with acquisitions
|
2,046
|
|
|
—
|
|
||
Cash payments for capital expenditures
|
82,318
|
|
|
110,224
|
|
||
Accrued costs, beginning of period
|
(31,414
|
)
|
|
(52,747
|
)
|
||
Accrued costs, end of period
|
32,299
|
|
|
26,997
|
|
||
Non-cash acquisitions, common stock
|
—
|
|
|
9,840
|
|
||
Other
|
6,655
|
|
|
6,049
|
|
||
Accrual basis capital expenditures
|
$
|
591,735
|
|
|
$
|
100,363
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Adjusted EBITDA:
|
|
|
|
|
|
|
|
||||||||
Net loss
|
$
|
(19,241
|
)
|
|
$
|
(77,921
|
)
|
|
$
|
(224,490
|
)
|
|
$
|
(83,502
|
)
|
Depreciation, depletion, and accretion
|
9,635
|
|
|
18,417
|
|
|
33,001
|
|
|
48,231
|
|
||||
Full cost ceiling impairment
|
25,453
|
|
|
96,340
|
|
|
215,223
|
|
|
99,340
|
|
||||
Income tax expense (benefit)
|
5
|
|
|
(10,520
|
)
|
|
106
|
|
|
(14,132
|
)
|
||||
Stock-based compensation
|
2,374
|
|
|
1,849
|
|
|
7,285
|
|
|
7,688
|
|
||||
Mark-to-market of commodity derivative contracts:
|
|
|
|
|
|
|
|
||||||||
Total loss (gain) on commodity derivatives contracts
|
(407
|
)
|
|
(6,619
|
)
|
|
3,617
|
|
|
(5,697
|
)
|
||||
Cash settlements on commodity derivative contracts
|
486
|
|
|
10,178
|
|
|
5,137
|
|
|
28,343
|
|
||||
Cash premiums paid for commodity derivative contracts
|
—
|
|
|
(445
|
)
|
|
—
|
|
|
(4,562
|
)
|
||||
Interest expense (income)
|
(10
|
)
|
|
72
|
|
|
(179
|
)
|
|
178
|
|
||||
Adjusted EBITDA
|
$
|
18,295
|
|
|
$
|
31,351
|
|
|
$
|
39,700
|
|
|
$
|
75,887
|
|
•
|
extended or further decline in oil and natural gas prices;
|
•
|
operating hazards that adversely affect our ability to conduct business;
|
•
|
uncertainties in the estimates of proved reserves;
|
•
|
the effect of seasonal weather conditions and wildlife restrictions on our operations;
|
•
|
our ability to fund, develop, produce, and acquire additional oil and natural gas reserves that are economically recoverable;
|
•
|
our ability to obtain adequate financing;
|
•
|
the availability and capacity of gathering systems and pipelines for our production;
|
•
|
our ability to complete the second closing of the GC Acquisition and integrate the acquired properties, and the risks associated with liabilities assumed or other problems relating to that acquisition;
|
•
|
our ability to successfully identify, execute, or effectively integrate future acquisitions;
|
•
|
the effect of federal, state, and local laws and regulations;
|
•
|
the effects of, including cost to comply with, new environmental legislation or regulatory initiatives, including those related to hydraulic fracturing;
|
•
|
the effects of local moratoria or bans on our business;
|
•
|
the amount of our indebtedness and ability to maintain compliance with debt covenants;
|
•
|
the geographic concentration of our principal properties; and
|
•
|
the availability of water for use in our operations.
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
Item 1.
|
Legal Proceedings
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|||
July 1, 2016 - July 31, 2016
(1)
|
|
—
|
|
|
$
|
—
|
|
August 1, 2016 - August 31, 2016
(1)
|
|
10,675
|
|
|
$
|
6.64
|
|
September 1, 2016 - September 30, 2016
(1)
|
|
4,902
|
|
|
$
|
6.45
|
|
Total
|
|
15,577
|
|
|
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Exhibit
Number
|
|
Exhibit
|
31.1
|
|
Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
31.2
|
|
Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
32
|
|
Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to 18 USC 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
99.1
|
|
Ninth Amendment to Credit Agreement, dated as of October 14, 2016, among Synergy Resources Corporation, SunTrust Bank as Administrative Agent and as an Issuing Bank, and the lenders party thereto.
|
101.INS
|
|
XBRL
Instance Document
|
101.SCH
|
|
XBRL Taxonomy Extension Schema
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase
|
|
SYNERGY RESOURCES CORPORATION
|
|
|
|
/s/ Lynn A. Peterson
|
|
Lynn A. Peterson, President and Chief Executive Officer
(Principal Executive Officer)
|
|
|
|
/s/ James P. Henderson
|
|
James P. Henderson, Executive Vice President, Chief Financial Officer, and Treasurer
(Principal Financial Officer)
|
|
|
|
/s/ Jared C. Grenzenbach
|
|
Jared C. Grenzenbach, Vice President and Chief Accounting Officer
(Principal Accounting Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Synergy Resources Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Synergy Resources Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
(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.
|
Date:
|
November 3, 2016
|
By:
|
/s/ Lynn A. Peterson
|
|
|
|
|
Lynn A. Peterson, President and Chief Executive Officer
|
|
Date:
|
November 3, 2016
|
By:
|
/s/ James P. Henderson
|
|
|
|
|
James P. Henderson, Executive Vice President, Chief Financial Officer, and Treasurer
|
|
Name of Lender
|
Applicable
Percentage
|
Maximum Credit Amount
|
SunTrust Bank
|
17.50000%
|
$87,500,000.00
|
KeyBank National Association
|
15.00000%
|
$75,000,000.00
|
ZB N.A. dba Amegy Bank
|
12.50000%
|
$62,500,000.00
|
Community Banks of Colorado
|
12.50000%
|
$62,500,000.00
|
JPMorgan Chase Bank, National Association
|
12.50000%
|
$62,500,000.00
|
Deutsche Bank AG New York Branch
|
12.50000%
|
$62,500,000.00
|
Credit Agricole Corporate and Investment Bank
|
8.75000%
|
$43,750,000.00
|
IBERIABANK
|
8.75000%
|
$43,750,000.00
|
Total
|
100.00000%
|
$500,000,000.00
|