|
☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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☐
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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)
|
(I.R.S. Employer Identification No.)
|
Title of each class
|
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Trading Symbol(s)
|
|
Name of each exchange on which registered
|
Common stock $.001 par value
|
|
SRCI
|
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NYSE American
|
Large accelerated filer
|
☒
|
|
Accelerated filer
|
☐
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Non-accelerated filer
|
☐
|
|
Smaller reporting company
|
☐
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Emerging growth company
|
☐
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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 June 30, 2019 and December 31, 2018
|
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Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2019 and 2018
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018
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Condensed Consolidated Statements of Changes in Shareholders’ Equity for the six months ended June 30, 2019 and 2018
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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.
|
Legal Proceedings
|
|
|
|
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Item 1A.
|
Risk Factors
|
|
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|
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Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
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Item 3.
|
Defaults of Senior Securities
|
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Item 4.
|
Mine Safety Disclosures
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Item 5.
|
Other Information
|
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Item 6.
|
Exhibits
|
|
|
|
|
|
|
SIGNATURES
|
|
ASSETS
|
June 30, 2019
|
|
December 31, 2018
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
27,839
|
|
|
$
|
49,609
|
|
Accounts receivable:
|
|
|
|
||||
Oil, natural gas, and NGL sales
|
80,510
|
|
|
100,973
|
|
||
Trade
|
21,961
|
|
|
39,415
|
|
||
Commodity derivative assets
|
12,061
|
|
|
34,906
|
|
||
Other current assets
|
7,257
|
|
|
7,537
|
|
||
Total current assets
|
149,628
|
|
|
232,440
|
|
||
|
|
|
|
||||
Property and equipment:
|
|
|
|
||||
Oil and gas properties, full cost method:
|
|
|
|
||||
Proved properties, net of accumulated depletion
|
1,775,675
|
|
|
1,545,445
|
|
||
Wells in progress
|
175,400
|
|
|
227,262
|
|
||
Unproved properties and land, not subject to depletion
|
667,678
|
|
|
740,453
|
|
||
Oil and gas properties, net
|
2,618,753
|
|
|
2,513,160
|
|
||
Other property and equipment, net
|
4,881
|
|
|
5,540
|
|
||
Total property and equipment, net
|
2,623,634
|
|
|
2,518,700
|
|
||
Other assets
|
11,824
|
|
|
3,574
|
|
||
Total assets
|
$
|
2,785,086
|
|
|
$
|
2,754,714
|
|
|
|
|
|
||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
76,648
|
|
|
$
|
150,010
|
|
Revenue payable
|
95,838
|
|
|
97,030
|
|
||
Production taxes payable
|
81,905
|
|
|
95,099
|
|
||
Asset retirement obligations
|
10,608
|
|
|
11,694
|
|
||
Total current liabilities
|
264,999
|
|
|
353,833
|
|
||
|
|
|
|
||||
Revolving credit facility
|
165,000
|
|
|
195,000
|
|
||
Notes payable, net of issuance costs
|
539,977
|
|
|
539,360
|
|
||
Asset retirement obligations
|
38,609
|
|
|
40,052
|
|
||
Deferred taxes
|
74,238
|
|
|
37,967
|
|
||
Other liabilities
|
4,646
|
|
|
2,210
|
|
||
Total liabilities
|
1,087,469
|
|
|
1,168,422
|
|
||
|
|
|
|
||||
Commitments and contingencies (See Note 15)
|
|
|
|
|
|
||
|
|
|
|
||||
Shareholders' equity:
|
|
|
|
||||
Preferred stock - $0.01 par value, 10,000,000 shares authorized: no shares issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock - $0.001 par value, 400,000,000 shares authorized: 243,428,206 and 242,608,284 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively
|
243
|
|
|
243
|
|
||
Additional paid-in capital
|
1,499,213
|
|
|
1,492,107
|
|
||
Retained earnings
|
198,161
|
|
|
93,942
|
|
||
Total shareholders' equity
|
1,697,617
|
|
|
1,586,292
|
|
||
|
|
|
|
||||
Total liabilities and shareholders' equity
|
$
|
2,785,086
|
|
|
$
|
2,754,714
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Oil, natural gas, and NGL revenues
|
$
|
162,602
|
|
|
$
|
147,087
|
|
|
$
|
352,057
|
|
|
$
|
294,320
|
|
|
|
|
|
|
|
|
|
||||||||
Expenses:
|
|
|
|
|
|
|
|
||||||||
Lease operating expenses
|
13,230
|
|
|
11,612
|
|
|
30,590
|
|
|
19,508
|
|
||||
Transportation and gathering
|
4,664
|
|
|
1,880
|
|
|
8,718
|
|
|
3,735
|
|
||||
Production taxes
|
13,185
|
|
|
15,058
|
|
|
20,271
|
|
|
28,501
|
|
||||
Depreciation, depletion, and accretion
|
58,027
|
|
|
41,877
|
|
|
118,945
|
|
|
78,958
|
|
||||
General and administrative
|
9,243
|
|
|
9,406
|
|
|
18,712
|
|
|
19,006
|
|
||||
Total expenses
|
98,349
|
|
|
79,833
|
|
|
197,236
|
|
|
149,708
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Operating income
|
64,253
|
|
|
67,254
|
|
|
154,821
|
|
|
144,612
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Commodity derivative gain (loss)
|
8,285
|
|
|
(14,294
|
)
|
|
(14,628
|
)
|
|
(20,075
|
)
|
||||
Interest expense, net of amounts capitalized
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Interest income
|
92
|
|
|
5
|
|
|
161
|
|
|
14
|
|
||||
Other income
|
75
|
|
|
6
|
|
|
136
|
|
|
27
|
|
||||
Total other income (expense)
|
8,452
|
|
|
(14,283
|
)
|
|
(14,331
|
)
|
|
(20,034
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Income before income taxes
|
72,705
|
|
|
52,971
|
|
|
140,490
|
|
|
124,578
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income tax expense
|
18,237
|
|
|
3,347
|
|
|
36,271
|
|
|
9,158
|
|
||||
Net income
|
$
|
54,468
|
|
|
$
|
49,624
|
|
|
$
|
104,219
|
|
|
$
|
115,420
|
|
|
|
|
|
|
|
|
|
||||||||
Net income per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
0.43
|
|
|
$
|
0.48
|
|
Diluted
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
0.43
|
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
243,404,917
|
|
|
242,255,724
|
|
|
243,348,141
|
|
|
242,005,211
|
|
||||
Diluted
|
244,130,245
|
|
|
244,464,776
|
|
|
243,709,915
|
|
|
243,954,673
|
|
|
Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income
|
$
|
104,219
|
|
|
$
|
115,420
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depletion, depreciation, and accretion
|
118,945
|
|
|
78,958
|
|
||
Settlement of asset retirement obligations
|
(4,476
|
)
|
|
(4,089
|
)
|
||
Provision for deferred taxes
|
36,271
|
|
|
9,158
|
|
||
Stock-based compensation expense
|
6,825
|
|
|
5,942
|
|
||
Mark-to-market of commodity derivative contracts:
|
|
|
|
||||
Total loss on commodity derivatives contracts
|
14,628
|
|
|
20,075
|
|
||
Cash settlements on commodity derivative contracts
|
7,715
|
|
|
(6,121
|
)
|
||
Cash premiums paid for commodity derivative contracts
|
(977
|
)
|
|
—
|
|
||
Changes in operating assets and liabilities
|
18,433
|
|
|
16,419
|
|
||
Net cash provided by operating activities
|
301,583
|
|
|
235,762
|
|
||
|
|
|
|
||||
Cash flows from investing activities:
|
|
|
|
||||
Acquisition of oil and gas properties and leaseholds, net of post-closing adjustments
|
116
|
|
|
(16,402
|
)
|
||
Capital expenditures for drilling and completion activities
|
(276,095
|
)
|
|
(213,906
|
)
|
||
Other capital expenditures
|
(28,262
|
)
|
|
(23,823
|
)
|
||
Acquisition of land and other property and equipment
|
(304
|
)
|
|
(1,581
|
)
|
||
Proceeds from sales of oil and gas properties and other
|
12,802
|
|
|
766
|
|
||
Net cash used in investing activities
|
(291,743
|
)
|
|
(254,946
|
)
|
||
|
|
|
|
||||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from the employee exercise of stock options
|
—
|
|
|
4,192
|
|
||
Payment of employee payroll taxes in connection with shares withheld
|
(1,126
|
)
|
|
(1,010
|
)
|
||
Proceeds from the revolving credit facility
|
—
|
|
|
25,000
|
|
||
Principal repayments on the revolving credit facility
|
(30,000
|
)
|
|
—
|
|
||
Fees on debt and equity issuances and revolving credit facility amendments
|
(379
|
)
|
|
(2,165
|
)
|
||
Capital lease payments
|
(105
|
)
|
|
(135
|
)
|
||
Net cash provided by (used in) financing activities
|
(31,610
|
)
|
|
25,882
|
|
||
|
|
|
|
||||
Net increase (decrease) in cash and cash equivalents
|
(21,770
|
)
|
|
6,698
|
|
||
|
|
|
|
||||
Cash and cash equivalents at beginning of period
|
49,609
|
|
|
48,772
|
|
||
|
|
|
|
||||
Cash and cash equivalents at end of period
|
$
|
27,839
|
|
|
$
|
55,470
|
|
|
Number of Common
Shares |
|
Par Value
Common Stock |
|
Additional
Paid-In Capital |
|
Retained
Deficit |
|
Total Shareholders'
Equity |
|||||||||
Balance, December 31, 2017
|
241,365,522
|
|
|
$
|
241
|
|
|
$
|
1,474,273
|
|
|
$
|
(166,080
|
)
|
|
$
|
1,308,434
|
|
Shares issued under stock bonus and equity incentive plans
|
268,676
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||
Shares issued for exercise of stock options
|
268,303
|
|
|
—
|
|
|
1,064
|
|
|
—
|
|
|
1,064
|
|
||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
3,395
|
|
|
—
|
|
|
3,395
|
|
||||
Payment of tax withholdings using withheld shares
|
—
|
|
|
—
|
|
|
(705
|
)
|
|
—
|
|
|
(705
|
)
|
||||
Other activity
|
—
|
|
|
—
|
|
|
(73
|
)
|
|
—
|
|
|
(73
|
)
|
||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
65,796
|
|
|
65,796
|
|
||||
Balance, March 31, 2018
|
241,902,501
|
|
|
242
|
|
|
1,477,953
|
|
|
(100,284
|
)
|
|
1,377,911
|
|
||||
Shares issued under stock bonus and equity incentive plans
|
69,420
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Shares issued for exercise of stock options
|
524,159
|
|
|
—
|
|
|
3,127
|
|
|
—
|
|
|
3,127
|
|
||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
3,768
|
|
|
—
|
|
|
3,768
|
|
||||
Payment of tax withholdings using withheld shares
|
—
|
|
|
—
|
|
|
(305
|
)
|
|
—
|
|
|
(305
|
)
|
||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
49,624
|
|
|
49,624
|
|
||||
Balance, June 30, 2018
|
242,496,080
|
|
|
$
|
242
|
|
|
$
|
1,484,543
|
|
|
$
|
(50,660
|
)
|
|
$
|
1,434,125
|
|
|
Number of Common
Shares |
|
Par Value
Common Stock |
|
Additional
Paid-In Capital |
|
Retained
Earnings |
|
Total Shareholders'
Equity |
|||||||||
Balance, December 31, 2018
|
242,608,284
|
|
|
$
|
243
|
|
|
$
|
1,492,107
|
|
|
$
|
93,942
|
|
|
$
|
1,586,292
|
|
Shares issued under stock bonus and equity incentive plans
|
709,042
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
4,413
|
|
|
—
|
|
|
4,413
|
|
||||
Payment of tax withholdings using withheld shares
|
—
|
|
|
—
|
|
|
(876
|
)
|
|
—
|
|
|
(876
|
)
|
||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
49,751
|
|
|
49,751
|
|
||||
Balance, March 31, 2019
|
243,317,326
|
|
|
243
|
|
|
1,495,644
|
|
|
143,693
|
|
|
1,639,580
|
|
||||
Shares issued under stock bonus and equity incentive plans
|
110,880
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
3,819
|
|
|
—
|
|
|
3,819
|
|
||||
Payment of tax withholdings using withheld shares
|
—
|
|
|
—
|
|
|
(250
|
)
|
|
—
|
|
|
(250
|
)
|
||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
54,468
|
|
|
54,468
|
|
||||
Balance, June 30, 2019
|
243,428,206
|
|
|
$
|
243
|
|
|
$
|
1,499,213
|
|
|
$
|
198,161
|
|
|
$
|
1,697,617
|
|
1.
|
Organization and Summary of Significant Accounting Policies
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||
Major Customers
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Company A
|
|
28%
|
|
*
|
|
26%
|
|
*
|
Company B
|
|
20%
|
|
17%
|
|
21%
|
|
17%
|
Company C
|
|
16%
|
|
32%
|
|
18%
|
|
17%
|
Company D
|
|
11%
|
|
19%
|
|
10%
|
|
33%
|
Company E
|
|
*
|
|
21%
|
|
*
|
|
17%
|
|
|
As of
|
|
As of
|
Major Customers
|
|
June 30, 2019
|
|
December 31, 2018
|
Company A
|
|
18%
|
|
15%
|
Company B
|
|
15%
|
|
12%
|
Company C
|
|
13%
|
|
*
|
Company D
|
|
11%
|
|
13%
|
Company E
|
|
11%
|
|
12%
|
2.
|
Property and Equipment
|
|
As of
|
|
As of
|
||||
Oil and gas properties, full cost method:
|
June 30, 2019
|
|
December 31, 2018
|
||||
Costs of proved properties:
|
|
|
|
||||
Producing and non-producing
|
$
|
2,732,288
|
|
|
$
|
2,385,958
|
|
Less, accumulated depletion and full cost ceiling impairments
|
(956,613
|
)
|
|
(840,513
|
)
|
||
Subtotal, proved properties, net
|
1,775,675
|
|
|
1,545,445
|
|
||
|
|
|
|
||||
Costs of wells in progress
|
175,400
|
|
|
227,262
|
|
||
|
|
|
|
||||
Costs of unproved properties and land, not subject to depletion:
|
|
|
|
||||
Lease acquisition and other costs
|
658,283
|
|
|
731,058
|
|
||
Land
|
9,395
|
|
|
9,395
|
|
||
Subtotal, unproved properties and land
|
667,678
|
|
|
740,453
|
|
||
|
|
|
|
||||
Costs of other property and equipment:
|
|
|
|
||||
Other property and equipment
|
10,020
|
|
|
9,642
|
|
||
Less, accumulated depreciation
|
(5,139
|
)
|
|
(4,102
|
)
|
||
Subtotal, other property and equipment, net
|
4,881
|
|
|
5,540
|
|
||
|
|
|
|
||||
Total property and equipment, net
|
$
|
2,623,634
|
|
|
$
|
2,518,700
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Capitalized overhead
|
$
|
3,483
|
|
|
$
|
3,280
|
|
|
$
|
7,150
|
|
|
$
|
6,393
|
|
3.
|
Depletion, depreciation, and accretion ("DD&A")
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Depletion of oil and gas properties
|
$
|
56,597
|
|
|
$
|
40,927
|
|
|
$
|
116,025
|
|
|
$
|
77,029
|
|
Depreciation and accretion
|
1,430
|
|
|
950
|
|
|
2,920
|
|
|
1,929
|
|
||||
Total DD&A Expense
|
$
|
58,027
|
|
|
$
|
41,877
|
|
|
$
|
118,945
|
|
|
$
|
78,958
|
|
4.
|
Asset Retirement Obligations
|
|
Six Months Ended June 30, 2019
|
||
Asset retirement obligations, December 31, 2018
|
$
|
51,746
|
|
Obligations incurred with development activities
|
1,278
|
|
|
Accretion expense
|
1,779
|
|
|
Obligations discharged with asset retirements and divestitures
|
(5,586
|
)
|
|
Asset retirement obligation, June 30, 2019
|
$
|
49,217
|
|
Less, current portion
|
(10,608
|
)
|
|
Long-term portion
|
$
|
38,609
|
|
5.
|
Revolving Credit Facility
|
6.
|
Notes Payable
|
7.
|
Commodity Derivative Instruments
|
Settlement Period
|
|
Derivative
Instrument
|
|
Volumes
(Bbls per day)
|
|
Weighted-Average
Floor Price
|
|
Weighted-Average Ceiling Price
|
|||||
Crude Oil - NYMEX WTI
|
|
|
|
|
|
|
|
|
|||||
July 1, 2019 - Dec 31, 2019
|
|
Collar
|
|
16,000
|
|
|
$
|
55.00
|
|
|
$
|
70.65
|
|
|
|
|
|
|
|
|
|
|
|||||
Settlement Period
|
|
Derivative
Instrument
|
|
Volumes
(MMBtu per day)
|
|
Weighted-Average
Floor Price |
|
Weighted-Average Ceiling Price
|
|||||
Natural Gas - NYMEX Henry Hub
|
|
|
|
|
|
|
|
|
|||||
July 1, 2019 - Dec 31, 2019
|
|
Collar
|
|
30,000
|
|
|
$
|
3.00
|
|
|
$
|
3.50
|
|
|
|
|
|
|
|
|
|
|
|||||
Settlement Period
|
|
Derivative
Instrument
|
|
Volumes
(MMBtu per day)
|
|
Fixed Basis Difference
|
|
|
|||||
Natural Gas - CIG Rocky Mountain
|
|
|
|
|
|
|
|
|
|||||
July 1, 2019 - Dec 31, 2019
|
|
Swap
|
|
30,000
|
|
|
$
|
(0.75
|
)
|
|
|
||
|
|
|
|
|
|
|
|
|
|||||
Settlement Period
|
|
Derivative
Instrument
|
|
Volumes
(Bbls per day) |
|
Weighted-Average Fixed Price
|
|
|
|||||
Propane - Mont Belvieu
|
|
|
|
|
|
|
|
|
|||||
July 1, 2019 - Dec 31, 2019
|
|
Swap
|
|
2,000
|
|
|
$
|
37.52
|
|
|
|
|
|
|
|
As of June 30, 2019
|
||||||||||
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
|
|
$
|
15,749
|
|
|
$
|
(3,688
|
)
|
|
$
|
12,061
|
|
Commodity derivative contracts
|
|
Noncurrent assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Commodity derivative contracts
|
|
Current liabilities
|
|
3,688
|
|
|
(3,688
|
)
|
|
—
|
|
|||
Commodity derivative contracts
|
|
Noncurrent liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
As of December 31, 2018
|
||||||||||
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
|
|
$
|
39,485
|
|
|
$
|
(4,579
|
)
|
|
$
|
34,906
|
|
Commodity derivative contracts
|
|
Noncurrent assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Commodity derivative contracts
|
|
Current liabilities
|
|
4,579
|
|
|
(4,579
|
)
|
|
—
|
|
|||
Commodity derivative contracts
|
|
Noncurrent liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Realized gain (loss) on commodity derivatives
|
$
|
3,304
|
|
|
$
|
(5,883
|
)
|
|
$
|
8,217
|
|
|
$
|
(7,955
|
)
|
Unrealized gain (loss) on commodity derivatives
|
4,981
|
|
|
(8,411
|
)
|
|
(22,845
|
)
|
|
(12,120
|
)
|
||||
Total gain (loss)
|
$
|
8,285
|
|
|
$
|
(14,294
|
)
|
|
$
|
(14,628
|
)
|
|
$
|
(20,075
|
)
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Monthly settlement
|
$
|
3,962
|
|
|
$
|
(5,883
|
)
|
|
$
|
9,194
|
|
|
$
|
(7,955
|
)
|
Premiums paid
|
(658
|
)
|
|
—
|
|
|
(977
|
)
|
|
—
|
|
||||
Total realized gain (loss)
|
$
|
3,304
|
|
|
$
|
(5,883
|
)
|
|
$
|
8,217
|
|
|
$
|
(7,955
|
)
|
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; 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 June 30, 2019
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Financial assets and liabilities:
|
|
|
|
|
|
|
|
||||||||
Commodity derivative asset
|
$
|
—
|
|
|
$
|
12,061
|
|
|
$
|
—
|
|
|
$
|
12,061
|
|
Commodity derivative liability
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Fair Value Measurements at December 31, 2018
|
||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||
Financial assets and liabilities:
|
|
|
|
|
|
|
|
||||||||
Commodity derivative asset
|
$
|
—
|
|
|
$
|
34,906
|
|
|
$
|
—
|
|
|
$
|
34,906
|
|
Commodity derivative liability
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
9.
|
Interest Expense
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revolving credit facility
|
$
|
2,132
|
|
|
$
|
85
|
|
|
$
|
4,305
|
|
|
$
|
85
|
|
Notes payable
|
8,594
|
|
|
8,594
|
|
|
17,188
|
|
|
17,188
|
|
||||
Amortization of issuance costs and other
|
851
|
|
|
1,113
|
|
|
1,648
|
|
|
2,000
|
|
||||
Less: interest capitalized
|
(11,577
|
)
|
|
(9,792
|
)
|
|
(23,141
|
)
|
|
(19,273
|
)
|
||||
Interest expense, net of amounts capitalized
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
10.
|
Stock-Based Compensation
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Stock options
|
$
|
795
|
|
|
$
|
1,195
|
|
|
$
|
1,822
|
|
|
$
|
2,398
|
|
Performance-vested stock units
|
1,258
|
|
|
1,173
|
|
|
2,329
|
|
|
2,029
|
|
||||
Restricted stock units and stock bonus shares
|
1,766
|
|
|
1,400
|
|
|
4,081
|
|
|
2,736
|
|
||||
Total stock-based compensation
|
$
|
3,819
|
|
|
$
|
3,768
|
|
|
$
|
8,232
|
|
|
$
|
7,163
|
|
Less: stock-based compensation capitalized
|
(677
|
)
|
|
(622
|
)
|
|
(1,407
|
)
|
|
(1,221
|
)
|
||||
Total stock-based compensation expense
|
$
|
3,142
|
|
|
$
|
3,146
|
|
|
$
|
6,825
|
|
|
$
|
5,942
|
|
|
Number of Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Life
|
|
Aggregate Intrinsic Value (thousands)
|
|||||
Outstanding, December 31, 2018
|
4,652,634
|
|
|
$
|
10.06
|
|
|
6.4 years
|
|
$
|
49
|
|
Granted
|
—
|
|
|
—
|
|
|
|
|
|
|||
Exercised
|
—
|
|
|
—
|
|
|
|
|
—
|
|
||
Expired
|
(12,000
|
)
|
|
11.81
|
|
|
|
|
|
|||
Forfeited
|
(48,800
|
)
|
|
7.46
|
|
|
|
|
|
|||
Outstanding, June 30, 2019
|
4,591,834
|
|
|
$
|
10.09
|
|
|
5.9 years
|
|
$
|
58
|
|
Outstanding, Exercisable at June 30, 2019
|
3,771,134
|
|
|
$
|
10.30
|
|
|
5.7 years
|
|
$
|
58
|
|
|
|
Outstanding Options
|
|
Exercisable Options
|
||||||||||||||
Range of Exercise Prices
|
|
Options
|
|
Weighted-Average Exercise Price per Share
|
|
Weighted-Average Remaining Contractual Life
|
|
Options
|
|
Weighted-Average Exercise Price per Share
|
|
Weighted-Average Remaining Contractual Life
|
||||||
Under $5.00
|
|
35,000
|
|
|
$
|
3.31
|
|
|
3.1 years
|
|
35,000
|
|
|
$
|
3.31
|
|
|
3.1 years
|
$5.00 - $6.99
|
|
683,000
|
|
|
6.29
|
|
|
5.8 years
|
|
433,600
|
|
|
6.25
|
|
|
5.1 years
|
||
$7.00 - $10.99
|
|
1,360,334
|
|
|
9.42
|
|
|
5.9 years
|
|
997,934
|
|
|
9.40
|
|
|
5.8 years
|
||
$11.00 - $13.46
|
|
2,513,500
|
|
|
11.57
|
|
|
5.9 years
|
|
2,304,600
|
|
|
11.56
|
|
|
5.9 years
|
||
Total
|
|
4,591,834
|
|
|
$
|
10.09
|
|
|
5.9 years
|
|
3,771,134
|
|
|
$
|
10.30
|
|
|
5.7 years
|
Unrecognized compensation (in thousands)
|
$
|
2,484
|
|
Remaining vesting period
|
1.5 years
|
|
|
Number of Shares
|
|
Weighted-Average Grant-Date Fair Value
|
|||
Not vested, December 31, 2018
|
1,639,918
|
|
|
$
|
8.07
|
|
Granted
|
1,535,984
|
|
|
4.87
|
|
|
Vested
|
(582,615
|
)
|
|
8.62
|
|
|
Forfeited
|
(50,378
|
)
|
|
6.40
|
|
|
Not vested, June 30, 2019
|
2,542,909
|
|
|
$
|
6.04
|
|
Unrecognized compensation cost (in thousands)
|
$
|
12,065
|
|
Remaining vesting period
|
2.2 years
|
|
|
Six Months Ended June 30,
|
||||
|
2019
|
|
2018
|
||
Weighted-average expected term
|
2.9 years
|
|
|
2.8 years
|
|
Weighted-average expected volatility
|
48
|
%
|
|
52
|
%
|
Weighted-average risk-free rate
|
2.49
|
%
|
|
2.41
|
%
|
|
Number of Units1
|
|
Weighted-Average Grant-Date Fair Value
|
|||
Not vested, December 31, 2018
|
780,028
|
|
|
$
|
11.73
|
|
Granted
|
918,842
|
|
|
5.74
|
|
|
Vested
|
—
|
|
|
—
|
|
|
Forfeited
|
—
|
|
|
—
|
|
|
Not vested, June 30, 2019
|
1,698,870
|
|
|
$
|
8.49
|
|
11.
|
Weighted-Average Shares Outstanding
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Weighted-average shares outstanding — basic
|
243,404,917
|
|
|
242,255,724
|
|
|
243,348,141
|
|
|
242,005,211
|
|
Potentially dilutive common shares from:
|
|
|
|
|
|
|
|
||||
Stock options
|
13,719
|
|
|
421,316
|
|
|
12,611
|
|
|
387,634
|
|
TSR PSUs 1
|
277,364
|
|
|
1,372,019
|
|
|
209,431
|
|
|
1,223,542
|
|
Restricted stock units and stock bonus shares
|
434,245
|
|
|
415,717
|
|
|
139,732
|
|
|
338,286
|
|
Weighted-average shares outstanding — diluted
|
244,130,245
|
|
|
244,464,776
|
|
|
243,709,915
|
|
|
243,954,673
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Potentially dilutive common shares from:
|
|
|
|
|
|
|
|
||||
Stock options 1
|
4,556,834
|
|
|
3,353,700
|
|
|
4,556,834
|
|
|
3,564,617
|
|
TSR PSUs 1,2
|
773,954
|
|
|
—
|
|
|
1,233,375
|
|
|
—
|
|
Goal-Based PSUs 2,3
|
274,898
|
|
|
281,872
|
|
|
274,898
|
|
|
281,872
|
|
Restricted stock units and stock bonus shares 1
|
695,353
|
|
|
2,772
|
|
|
704,948
|
|
|
10,005
|
|
Total
|
6,301,039
|
|
|
3,638,344
|
|
|
6,770,055
|
|
|
3,856,494
|
|
12.
|
Income Taxes
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
Revenues (in thousands):
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Oil
|
$
|
132,098
|
|
|
$
|
114,857
|
|
|
$
|
279,178
|
|
|
$
|
231,061
|
|
Natural Gas and NGLs
|
30,504
|
|
|
32,230
|
|
|
72,879
|
|
|
63,259
|
|
||||
|
$
|
162,602
|
|
|
$
|
147,087
|
|
|
$
|
352,057
|
|
|
$
|
294,320
|
|
•
|
Discount Rate - Unless implicitly defined, the Company will determine the present value of future lease payments using an estimated incremental secured borrowing rate based on a yield curve analysis that factors in certain assumptions, including the term of the lease and credit rating of the Company at lease commencement.
|
•
|
Lease Term - The Company evaluates each contract containing a lease arrangement at inception to determine the length of the lease term when recognizing a ROU asset and corresponding lease liability. When determining the lease term, options available to extend or early terminate the arrangement are evaluated and included when it is reasonably certain these options will be exercised. There are no available options to extend that the Company is reasonably certain to exercise.
|
|
Three Months Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
||||
Finance lease cost:
|
|
|
|
||||
Amortization of ROU assets
|
$
|
63
|
|
|
$
|
123
|
|
Interest on lease liabilities
|
7
|
|
|
15
|
|
||
|
|
|
|
||||
Operating lease cost
|
1,173
|
|
|
1,777
|
|
||
Short-term lease cost 1
|
27,783
|
|
|
69,846
|
|
||
Total Lease Cost
|
$
|
29,026
|
|
|
$
|
71,761
|
|
|
Three Months Ended June 30, 2019
|
|
Six Months Ended June 30, 2019
|
||||
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
||||
Operating cash flows from operating leases
|
$
|
1,173
|
|
|
$
|
1,777
|
|
Financing cash flows from finance leases
|
47
|
|
|
105
|
|
||
|
|
|
|
||||
ROU assets obtained in exchange for new finance lease liabilities
|
43
|
|
|
138
|
|
||
ROU assets obtained in exchange for new operating lease liabilities
|
4,006
|
|
|
8,538
|
|
|
As of
June 30, 2019 |
|
Weighted-average remaining lease term - finance leases
|
3.0 years
|
|
Weighted-average remaining lease term - operating leases
|
2.0 years
|
|
Weighted-average discount rate - finance leases
|
4.75
|
%
|
Weighted-average discount rate - operating leases
|
4.75
|
%
|
Year
|
|
Finance Leases
|
|
Operating Leases
|
||||
2019
|
|
$
|
94
|
|
|
$
|
2,471
|
|
2020
|
|
188
|
|
|
4,684
|
|
||
2021
|
|
215
|
|
|
1,550
|
|
||
2022
|
|
185
|
|
|
500
|
|
||
2023
|
|
25
|
|
|
—
|
|
||
Thereafter
|
|
—
|
|
|
—
|
|
||
Total lease payments
|
|
$
|
707
|
|
|
$
|
9,205
|
|
Less imputed interest
|
|
(57
|
)
|
|
(420
|
)
|
||
Total lease liability
|
|
$
|
650
|
|
|
$
|
8,785
|
|
Year
|
|
Rig Contracts
|
|
Capital Leases
|
|
Operating Leases
|
||||||
2019
|
|
$
|
11,102
|
|
|
$
|
183
|
|
|
$
|
896
|
|
2020
|
|
—
|
|
|
186
|
|
|
916
|
|
|||
2021
|
|
—
|
|
|
204
|
|
|
913
|
|
|||
2022
|
|
—
|
|
|
167
|
|
|
500
|
|
|||
2023
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Thereafter
|
|
—
|
|
|
—
|
|
|
—
|
|
As of June 30, 2019
|
|
Financing Leases
|
|
Operating Leases
|
||||
Other property and equipment, net
|
|
$
|
755
|
|
|
$
|
—
|
|
Other assets
|
|
—
|
|
|
7,161
|
|
||
|
|
|
|
|
||||
Accounts payable and accrued expenses
|
|
161
|
|
|
4,629
|
|
||
Other liabilities
|
|
489
|
|
|
4,156
|
|
||
|
|
$
|
650
|
|
|
$
|
8,785
|
|
15.
|
Other Commitments and Contingencies
|
Year ending December 31, 2019
|
|
Oil
|
|
|
(MBbls)
|
||
Remainder of 2019
|
|
2,605
|
|
2020
|
|
4,003
|
|
2021
|
|
1,672
|
|
Total
|
|
8,280
|
|
16.
|
Supplemental Schedule of Information to the Condensed Consolidated Statements of Cash Flows
|
|
Six Months Ended June 30,
|
||||||
Supplemental cash flow information:
|
2019
|
|
2018
|
||||
Interest paid
|
$
|
21,139
|
|
|
$
|
17,448
|
|
|
|
|
|
||||
Non-cash investing and financing activities:
|
|
|
|
||||
Accrued well costs as of period end
|
$
|
52,531
|
|
|
$
|
75,705
|
|
Asset retirement obligations incurred with development activities
|
1,278
|
|
|
473
|
|
||
Asset retirement obligations assumed with acquisitions
|
—
|
|
|
5
|
|
||
Obligations discharged with asset retirements and divestitures
|
$
|
(5,586
|
)
|
|
$
|
(5,964
|
)
|
|
|
|
|
||||
Net changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
$
|
33,541
|
|
|
$
|
2,797
|
|
Accounts payable and accrued expenses
|
(685
|
)
|
|
(42
|
)
|
||
Revenue payable
|
(1,208
|
)
|
|
5,377
|
|
||
Production taxes payable
|
(13,849
|
)
|
|
8,199
|
|
||
Other
|
634
|
|
|
88
|
|
||
Changes in operating assets and liabilities
|
$
|
18,433
|
|
|
$
|
16,419
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
|
Year Ended December 31,
|
||||||||||||||
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||
Average NYMEX prices
|
|
|
|
|
|
|
|
||||||||
Oil (per Bbl)
|
$
|
64.94
|
|
|
$
|
50.93
|
|
|
$
|
43.20
|
|
|
$
|
48.73
|
|
Natural gas (per Mcf)
|
$
|
3.09
|
|
|
$
|
3.00
|
|
|
$
|
2.52
|
|
|
$
|
2.58
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Oil (NYMEX-WTI)
|
|
|
|
|
|
|
|
||||||||
Average NYMEX Price
|
$
|
59.78
|
|
|
$
|
68.03
|
|
|
$
|
57.31
|
|
|
$
|
65.46
|
|
Realized Price *
|
52.75
|
|
|
61.22
|
|
|
50.32
|
|
|
58.48
|
|
||||
Differential *
|
$
|
(7.03
|
)
|
|
$
|
(6.81
|
)
|
|
$
|
(6.99
|
)
|
|
$
|
(6.98
|
)
|
|
|
|
|
|
|
|
|
||||||||
Natural Gas (NYMEX-Henry Hub)
|
|
|
|
|
|
|
|
||||||||
Average NYMEX Price
|
$
|
2.64
|
|
|
$
|
2.80
|
|
|
$
|
2.89
|
|
|
$
|
2.90
|
|
Realized Price *
|
1.58
|
|
|
1.64
|
|
|
2.04
|
|
|
1.87
|
|
||||
Differential *
|
$
|
(1.06
|
)
|
|
$
|
(1.16
|
)
|
|
$
|
(0.85
|
)
|
|
$
|
(1.03
|
)
|
|
|
|
|
|
|
|
|
||||||||
NGL Realized Price
|
$
|
9.39
|
|
|
$
|
17.65
|
|
|
$
|
10.95
|
|
|
$
|
18.30
|
|
Vertical Wells
|
||||||||||||||||
Operated Wells
|
|
Non-Operated Wells
|
|
Totals
|
||||||||||||
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
||||||
512
|
|
|
495
|
|
|
165
|
|
|
44
|
|
|
677
|
|
|
539
|
|
Horizontal Wells
|
||||||||||||||||
Operated Wells
|
|
Non-Operated Wells
|
|
Totals
|
||||||||||||
Gross
|
|
Net
|
|
Gross
|
|
Net
|
|
Gross
|
|
Net
|
||||||
433
|
|
|
409
|
|
|
321
|
|
|
57
|
|
|
754
|
|
|
466
|
|
•
|
Maximize shareholder value and maintain financial discipline with a goal of establishing free cash flow at the corporate level. We have continued to align our capital expenditures with our cash flows by adjusting our operating activities depending on commodity prices and infrastructure capacity. We strive to be a cost-efficient operator and to maintain a relatively low utilization of debt. Towards this goal, we have reduced our operational activities during 2019 as further described below in Significant Developments.
|
•
|
Concentrate on our existing core area in the D-J Basin, where we have significant operating experience. All of our current wells and our proved undeveloped acreage are located in 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 gas properties. A 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
|
•
|
Use the latest technology to maximize returns and improve hydrocarbon recovery. Our development objective for individual well optimization is to primarily drill and complete wells with lateral lengths of 7,000' to 10,000'. Utilizing petrophysical and seismic data, a 3-D model is developed for each leasehold 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, coupled with production results, to implement a continuous improvement philosophy in optimizing the value per acre of our leasehold throughout our development program.
|
•
|
Control and reduce emissions from our drilling and completion activities and production facilities. We place high importance on achieving compliance with all applicable air quality rules and regulations and the further reduction of emissions continues to be a top priority. To minimize emissions, we employ best management practices such as contracting an electric hydraulic stimulation fleet, utilizing all available direct pipeline take-away access and pneumatic actuated instrument devices, and working with suppliers to deploy diesel engines that meet the U.S. Environmental Protection Agency Tier 4 standard. We control emissions and minimize flaring of gas during the drilling and completion process. We use additional vapor recovery equipment during production for further emissions reduction. We continue to evolve the design of our production facilities to produce oil and natural gas with fewer air emissions, including those emissions for which there are public health standards (e.g. ozone and particulate matter).
|
•
|
Operate in a safe manner and work in partnership with our surrounding stakeholders. While our scale of operations has increased significantly, we continue to focus on maintaining a safe workplace for our employees and contractors. Further, as technology for resource development has advanced, we seek to utilize best industry practices to meet or exceed regulatory requirements while reducing our impacts on neighboring communities. Such practices include building our infrastructure out ahead of operations to minimize traffic, working with our service providers to minimize dust and lighting issues, and constructing sound walls to minimize noise. We value our positive relationship with local governmental entities and the communities in which we operate and seek to continually achieve a status of operator of choice.
|
•
|
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. This allows us to modify our capital spending as our financial resources and underlying lease terms allow and market conditions, including midstream availability, permit. Our high degree of operational control, as well as our focus on operating efficiencies that provide short return on investment cycle times, is central to our operating strategy.
|
•
|
Acquire and develop assets near established infrastructure. We have historically targeted acquisitions of contiguous acreage to focus our development plans on areas where technically-capable, financially-stable midstream companies have existing assets and plans for additional investment. We continue to work collaboratively with these companies to proactively identify expansion opportunities that complement our current development plans. This enables the use of gathering pipelines, which reduces the need to use trucks and thereby reduces traffic and noise.
|
|
Three Months Ended June 30,
|
|
Percentage
|
|||||||
|
2019
|
|
2018
|
|
Change
|
|||||
Production:
|
|
|
|
|
|
|||||
Oil (MBbls) 1
|
2,441
|
|
|
1,846
|
|
|
32
|
%
|
||
Natural Gas (MMcf) 2
|
11,905
|
|
|
8,987
|
|
|
32
|
%
|
||
NGLs (MBbls) 1
|
1,111
|
|
|
992
|
|
|
12
|
%
|
||
MBOE 3
|
5,536
|
|
|
4,336
|
|
|
28
|
%
|
||
BOED 4
|
60,833
|
|
|
47,646
|
|
|
28
|
%
|
||
|
|
|
|
|
|
|||||
Revenues (in thousands):
|
|
|
|
|
|
|||||
Oil
|
$
|
132,098
|
|
|
$
|
114,857
|
|
|
15
|
%
|
Natural Gas
|
20,069
|
|
|
14,714
|
|
|
36
|
%
|
||
NGLs
|
10,435
|
|
|
17,516
|
|
|
(40
|
)%
|
||
|
$
|
162,602
|
|
|
$
|
147,087
|
|
|
11
|
%
|
Average sales price:
|
|
|
|
|
|
|||||
Oil 5
|
$
|
52.75
|
|
|
$
|
61.22
|
|
|
(14
|
)%
|
Natural Gas 5
|
1.58
|
|
|
1.64
|
|
|
(4
|
)%
|
||
NGLs
|
9.39
|
|
|
17.65
|
|
|
(47
|
)%
|
||
BOE 5
|
$
|
28.53
|
|
|
$
|
33.50
|
|
|
(15
|
)%
|
|
Three Months Ended June 30,
|
||||||
(in thousands)
|
2019
|
|
2018
|
||||
Depletion of oil and gas properties
|
$
|
56,597
|
|
|
$
|
40,927
|
|
Depreciation and accretion
|
1,430
|
|
|
950
|
|
||
Total DD&A
|
$
|
58,027
|
|
|
$
|
41,877
|
|
|
|
|
|
||||
DD&A expense per BOE
|
$
|
10.48
|
|
|
$
|
9.66
|
|
|
Three Months Ended June 30,
|
||||||
(in thousands)
|
2019
|
|
2018
|
||||
Total Non-Cash G&A
|
$
|
3,819
|
|
|
$
|
3,768
|
|
Total Cash G&A
|
8,932
|
|
|
8,953
|
|
||
Capitalized G&A Costs
|
(3,508
|
)
|
|
(3,315
|
)
|
||
Total G&A Expense
|
$
|
9,243
|
|
|
$
|
9,406
|
|
|
|
|
|
||||
Non-Cash G&A Expense
|
$
|
3,142
|
|
|
$
|
3,146
|
|
Cash G&A Expense
|
6,101
|
|
|
6,260
|
|
||
Total G&A Expense
|
$
|
9,243
|
|
|
$
|
9,406
|
|
|
|
|
|
||||
Non-Cash G&A Expense per BOE
|
$
|
0.57
|
|
|
$
|
0.73
|
|
Cash G&A Expense per BOE
|
1.10
|
|
|
1.44
|
|
||
G&A Expense per BOE
|
$
|
1.67
|
|
|
$
|
2.17
|
|
|
Six Months Ended June 30,
|
|
Percentage
|
|||||||
|
2019
|
|
2018
|
|
Change
|
|||||
Production:
|
|
|
|
|
|
|||||
Oil (MBbls)
|
5,408
|
|
|
3,887
|
|
|
39
|
%
|
||
Natural Gas (MMcf)
|
23,296
|
|
|
16,706
|
|
|
39
|
%
|
||
NGLs (MBbls)
|
2,165
|
|
|
1,750
|
|
|
24
|
%
|
||
MBOE
|
11,455
|
|
|
8,422
|
|
|
36
|
%
|
||
BOED
|
63,288
|
|
|
46,528
|
|
|
36
|
%
|
||
|
|
|
|
|
|
|||||
Revenues (in thousands):
|
|
|
|
|
|
|||||
Oil
|
$
|
279,178
|
|
|
$
|
231,061
|
|
|
21
|
%
|
Natural Gas
|
49,173
|
|
|
31,231
|
|
|
57
|
%
|
||
NGLs
|
23,706
|
|
|
32,028
|
|
|
(26
|
)%
|
||
|
$
|
352,057
|
|
|
$
|
294,320
|
|
|
20
|
%
|
Average sales price:
|
|
|
|
|
|
|||||
Oil
|
$
|
50.32
|
|
|
$
|
58.48
|
|
|
(14
|
)%
|
Natural Gas
|
2.04
|
|
|
1.87
|
|
|
9
|
%
|
||
NGLs
|
10.95
|
|
|
18.30
|
|
|
(40
|
)%
|
||
BOE
|
$
|
29.97
|
|
|
$
|
34.50
|
|
|
(13
|
)%
|
|
Six Months Ended June 30,
|
||||||
(in thousands)
|
2019
|
|
2018
|
||||
Depletion of oil and gas properties
|
$
|
116,025
|
|
|
$
|
77,029
|
|
Depreciation and accretion
|
2,920
|
|
|
1,929
|
|
||
Total DD&A
|
$
|
118,945
|
|
|
$
|
78,958
|
|
|
|
|
|
||||
DD&A expense per BOE
|
$
|
10.38
|
|
|
$
|
9.38
|
|
|
Six Months Ended June 30,
|
||||||
(in thousands)
|
2019
|
|
2018
|
||||
Total Non-Cash G&A
|
$
|
8,232
|
|
|
$
|
7,163
|
|
Total Cash G&A
|
17,682
|
|
|
18,299
|
|
||
Capitalized G&A Costs
|
(7,202
|
)
|
|
(6,456
|
)
|
||
Total G&A Expense
|
$
|
18,712
|
|
|
$
|
19,006
|
|
|
|
|
|
||||
Non-Cash G&A Expense
|
$
|
6,825
|
|
|
$
|
5,942
|
|
Cash G&A Expense
|
11,887
|
|
|
13,064
|
|
||
Total G&A Expense
|
$
|
18,712
|
|
|
$
|
19,006
|
|
|
|
|
|
||||
Non-Cash G&A Expense per BOE
|
$
|
0.60
|
|
|
$
|
0.71
|
|
Cash G&A Expense per BOE
|
1.04
|
|
|
1.55
|
|
||
G&A Expense per BOE
|
$
|
1.64
|
|
|
$
|
2.26
|
|
|
Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
Net cash provided by operations
|
$
|
301,583
|
|
|
$
|
235,762
|
|
Capital expenditures
|
(304,545
|
)
|
|
(255,712
|
)
|
||
Net cash provided by other investing activities
|
12,802
|
|
|
766
|
|
||
Net cash provided by (used in) equity financing activities
|
(1,126
|
)
|
|
3,025
|
|
||
Net cash provided by (used in) debt financing activities
|
(30,484
|
)
|
|
22,857
|
|
||
Net increase (decrease) in cash and cash equivalents
|
$
|
(21,770
|
)
|
|
$
|
6,698
|
|
|
Six Months Ended June 30,
|
||||||
|
2019
|
|
2018
|
||||
Capital expenditures for drilling and completion activities
|
$
|
202,119
|
|
|
$
|
231,196
|
|
Acquisitions of oil and gas properties and leasehold1
|
219
|
|
|
16,402
|
|
||
Capitalized interest, capitalized G&A, and other
|
32,489
|
|
|
26,753
|
|
||
Accrual basis capital expenditures2
|
$
|
234,827
|
|
|
$
|
274,351
|
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Adjusted EBITDA:
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
54,468
|
|
|
$
|
49,624
|
|
|
$
|
104,219
|
|
|
$
|
115,420
|
|
Depreciation, depletion, and accretion
|
58,027
|
|
|
41,877
|
|
|
118,945
|
|
|
78,958
|
|
||||
Stock-based compensation expense
|
3,142
|
|
|
3,146
|
|
|
6,825
|
|
|
5,942
|
|
||||
Mark-to-market of commodity derivative contracts:
|
|
|
|
|
|
|
|
||||||||
Total loss on commodity derivatives contracts
|
(8,285
|
)
|
|
14,294
|
|
|
14,628
|
|
|
20,075
|
|
||||
Cash settlements on commodity derivative contracts
|
3,089
|
|
|
(4,566
|
)
|
|
7,715
|
|
|
(6,121
|
)
|
||||
Cash premiums paid for commodity derivative contracts
|
(658
|
)
|
|
—
|
|
|
(977
|
)
|
|
—
|
|
||||
Interest income
|
(92
|
)
|
|
(5
|
)
|
|
(161
|
)
|
|
(14
|
)
|
||||
Income tax expense
|
18,237
|
|
|
3,347
|
|
|
36,271
|
|
|
9,158
|
|
||||
Adjusted EBITDA
|
$
|
127,928
|
|
|
$
|
107,717
|
|
|
$
|
287,465
|
|
|
$
|
223,418
|
|
•
|
declines in oil and natural gas prices;
|
•
|
the effects of, changes in and the costs of compliance with federal, state, and local regulations applicable to our business, including those related to hydraulic stimulation and SB19-181;
|
•
|
operating hazards that adversely affect our ability to conduct business;
|
•
|
uncertainties in the estimates of proved reserves;
|
•
|
the availability and capacity of gathering and processing systems, pipelines, and other midstream infrastructure for our production;
|
•
|
the effect of seasonal weather conditions and wildlife and plant species 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 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 that we do not operate;
|
•
|
the strength and financial resources of our competitors;
|
•
|
our ability to successfully identify, execute, and integrate acquisitions;
|
•
|
our ability to market our production;
|
•
|
the effect of environmental liabilities;
|
•
|
changes in U.S. tax laws;
|
•
|
our ability to satisfy our contractual obligations and commitments;
|
•
|
the amount of our indebtedness and our ability to maintain compliance with debt covenants;
|
•
|
the effectiveness of our disclosure controls and our internal controls over financial reporting;
|
•
|
the geographic concentration of our principal properties;
|
•
|
our ability to protect critical data and technology systems;
|
•
|
the availability of water for use in our operations; and
|
•
|
the risks and uncertainties described and referenced in "Risk Factors."
|
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
|
ITEM 4.
|
CONTROLS AND PROCEDURES
|
Item 1.
|
Legal Proceedings
|
Item 1A.
|
Risk Factors
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total Number of Shares Purchased
|
|
Average Price Paid per Share
|
|||
April 1, 2019 - April 30, 2019 (1)
|
|
24,609
|
|
|
$
|
5.12
|
|
May 1, 2019 - May 31, 2019 (1)
|
|
22,860
|
|
|
5.23
|
|
|
June 1, 2019 - June 30, 2019 (1)
|
|
996
|
|
|
$
|
4.71
|
|
Total
|
|
48,465
|
|
|
|
Item 3.
|
Defaults Upon Senior Securities
|
Item 4.
|
Mine Safety Disclosures
|
Item 5.
|
Other Information
|
Exhibit
Number
|
|
Exhibit
|
10.1
|
|
|
31.1
|
|
|
31.2
|
|
|
32.1
|
|
|
101.INS
|
|
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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
|
|
|
|
|
|
|
*
|
|
Filed herewith
|
**
|
|
Furnished herewith
|
|
SRC Energy Inc.
|
|
|
|
/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 and Chief Financial Officer
(Principal Financial Officer)
|
|
|
|
/s/ Jared C. Grenzenbach
|
|
Jared C. Grenzenbach, Vice President and Chief Accounting Officer
(Principal Accounting Officer)
|
Participant
|
[__________]
|
|
Grant Date
|
February 4, 2019
|
|
Target Number of Relative TSR PSUs (“Relative TSR Target PSUs”)
|
[__________]
|
|
Target Number of Absolute TSR PSUs (“Absolute TSR Target PSUs”)
|
[__________]
|
|
Overview
|
Relative TSR PSUs
Pursuant to the terms and conditions set forth below, Participant may vest in 0% - 200% of the Relative TSR Target PSUs, based on the relative total shareholder return (“TSR,” as defined below) of the Company over the Performance Period, measured against the PSU Peer Companies identified below.
Absolute TSR PSUs
Pursuant to the terms and conditions set forth below, Participant may vest in 0% - 200% of the Absolute TSR Target PSUs based on the Company’s TSR over the Performance Period as compared to predetermined Company TSR hurdle rates.
|
|
Employment Required
Except as set forth below under “Special Vesting Events,” Participant must be employed continuously from the Grant Date through the end of the Performance Period in order to vest in any PSUs hereunder.
|
|
Performance Period
|
January 1, 2019 – December 31, 2021
|
|
PSU Peer Companies
|
"PSU Peer Companies" means the thirteen companies listed below:
Callon Petroleum Company
Carrizo Oil & Gas Inc.
Centennial Resource Development
Extraction Oil & Gas Inc.
Gulfport Energy Corp.
High Point Energy Corp.
Jagged Peak Energy LLC
Laredo Petroleum, Inc.
Matador Resources Company
Oasis Petroleum Inc.
PDC Energy, Inc.
SM Energy Company
Whiting Petroleum Corporation
Any PSU Peer Company that ceases to be publicly traded on a national securities exchange at any time during the Performance Period, other than Failed Companies (as defined below) or Delisted Companies (as defined below), will be replaced as a PSU Peer Companies for the Performance Period and such replacement company will be treated as though initially included as a PSU Peer Company from the first day of the Performance Period. Replacement PSU Peer Companies shall be selected by the Administrator in its sole discretion from among the following companies:
Bonanza Creek Energy, Inc.
Berry Petroleum
Roan Resources
If none of the foregoing companies are available to serve as a replacement PSU Peer Company (because such entities are delisted, acquired, declare bankruptcy, etc.), the Administrator may select any necessary replacement PSU Peer Company in its discretion in a manner designed to preserve (but not enhance) the incentive intended by this Agreement.
|
|
“Failed Companies” shall mean PSU Peer Companies that cease to be publicly traded on a national securities exchange at any time during the Performance Period as a result of a liquidation commenced under Chapter 7 of the Bankruptcy Code, an assignment of the Company’s assets for the benefit of creditors under applicable state law, or the commencement of a reorganization proceeding under Chapter 11 of the Bankruptcy Code. “Delisted Companies” shall mean PSU Peer Companies that cease to be publicly traded on a national securities exchange at any time during the Performance Period (irrespective of whether they again become publicly traded on a national securities exchange during the Performance Period) as a result of any involuntary failure to meet the listing requirements of such national securities exchange (such as any failure to meet the minimum common stock price requirement of the exchange), but shall not include any PSU Peer Company that does not meet the listing requirements as a result of any voluntary going private or similar transaction.
|
|
Award Determination
(Relative TSR PSUs) |
Except as set forth below under the headings “Special Vesting Events” and “Change in Control,” the number of Relative TSR PSUs earned by the Participant hereunder shall be determined in accordance with this section. At the end of the Performance Period, the PSU Peer Companies and the Company shall be ranked together based on their TSR for the Performance Period with the highest TSR company being number 1 and the lowest TSR being the number of PSU Peer Companies, including the Company, remaining in the group at the end of the Performance Period, with any and all Failed Companies and Delisted Companies being ranked in last place on the list. In addition, of the PSU Peer Companies remaining in the group, the ones ranked first and last shall be disregarded from the overall ranking. Based on the Company's relative TSR rank among the remaining PSU Peer Companies (the “Remaining PSU Peer Companies”) for the Performance Period, Participant will vest in PSUs as determined by the Company's rank as follows:
• If the Company is ranked among the top three companies of the Remaining PSU Peer Companies (including the Company), Participant shall vest in 200% of the Relative TSR Target PSUs
• If the Company’s ranking is among four through seven (inclusive) of the Remaining PSU Peer Companies (including the Company), Participant shall vest in 100% of the Relative TSR Target PSUs
|
Special Vesting Events
|
Termination Without “Cause” or for “Good Reason”
In the event of the termination of Participant’s continuous employment by the Company without “cause” (as defined in the Plan), or for Good Reason (as defined below), then (A) the Participant’s Relative TSR Target PSUs and Absolute TSR PSUs (collectively the “Target PSUs”) shall each be reduced and upon termination shall be equal to the product of (i) the Target PSUs, multiplied by (ii) a fraction, (x) the numerator of which is the number of days Participant remained in continuous employment from the start of the Performance Period through the date of termination, and (y) the total number of days in the Performance Period, and (B) the Target PSUs shall remain outstanding and the Participant shall be entitled to receive payment (if any) in respect of such reduced Target PSUs at the end of the Performance Period or upon a Change in Control as if Participant’s employment had not terminated.
“Good Reason” shall mean the occurrence of any of the following without the express written consent of Participant, (i) a material reduction or change in Participant’s title or job duties, responsibilities and requirements inconsistent with Participant’s position with the Company and Participant’s prior duties, responsibilities and requirements, (ii) a material reduction in the Participant’s base salary or bonus opportunity unless a proportionate reduction is made to the base salary or bonus opportunity of all members of the Company’s senior management in accordance with a bona-fide downturn in the Company’s business; (iii) a change of more than 50 miles in the geographic location at which the Participant primarily performs services for the Company; or (iv) any material breach by the Company of any employment or severance agreement between the Company and the Participant. In the case of Participant’s allegation of Good Reason, (1) Participant shall provide written notice to the Company of the event alleged to constitute Good Reason within 30 days after the initial occurrence of such event, (2) the Company shall have the opportunity to remedy the alleged Good Reason event within 30 days from receipt of notice of such allegation, and (3) if the event is not timely remedied, the Participant must terminate employment within 30 days after the expiration of the cure period.
|
|
Death or Disability
In the event of the termination of Participant’s continuous employment with the Company on account of Participant’s death or Disability (as defined below), then the Performance Period shall be deemed to have ended as of the Participant’s termination of continuous employment, and Participant shall have earned one hundred percent (100%) of the Relative TSR Target PSUs and one hundred percent (100%) of the Absolute TSR Target PSUs. “Disability” shall have the meaning set forth in Treasury Regulation Section 1.409A-3(i)(4).
|
|
Change in Control
|
In the event of a Change in Control (as defined in the Plan), the Performance Period shall end as of the date of the Change in Control, and the Participant will vest in that number of PSUs determined in accordance with the methodology set forth in the “Award Determination (Relative TSR PSUs” and “Award Determination (Absolute TSR PSUs”) sections above, based on the Participant’s Target PSUs and the Company’s absolute and relative TSR as of the date of the Change in Control, as applicable.
|
|
Payment
|
Except as set forth below, the Company shall issue to Participant one share of Common Stock for each PSU that vests hereunder, with the delivery of such Common Stock to occur as soon as reasonably practicable following the certification of results for the Performance Period, but in all events within seventy-four (74) days following the last day of the Performance Period (as same may be truncated upon a Change in Control or termination of employment).
Notwithstanding the foregoing, if delivery of shares of Common Stock would, either alone or in combination with other Plan awards, result in the Company exceeding the Plan’s Share Limit, then the Company may instead settle some or all of the vested PSUs granted hereunder by paying cash to the Participant on the same date as when shares of Common Stock would have otherwise been issued to the Participant. The amount payable for each cash-settled vested PSU shall be equal to the Fair Market Value on the settlement date of one share of Common Stock. The determination as to whether any vested PSUs shall be settled in cash, and if so, the number thereof, shall be made by the Administrator in its sole and absolute discretion, and neither the Administrator nor the Company shall have any liability to the Participant with respect to any such determination. The Participant hereby acknowledges and agrees that the Administrator need not treat similar Plan awards or award holders the same, and may select in its discretion which Plan awards or portions therefor shall be settled in cash in order to stay within the Share Limit.
|
Dividend Equivalent Right
|
Participant shall be entitled in respect of any vested PSUs to receive an additional amount in cash equal to the value of all dividends and distributions made between the Grant Date and the PSU payment date with respect to a number of shares of Common Stock equal to the number of vested PSUs (the “Dividend Equivalent Amounts”). The Dividend Equivalent Amounts shall be accumulated and paid on the date on which the PSUs to which they relate are paid.
|
|
TSR and Related Definitions
|
TSR
TSR for the Company or any PSU Peer Company shall mean the percentage equal to (x) the Performance Period Value Change (as defined below) divided by (y) the Beginning Value (as defined below).
Beginning Value
Beginning Value for the Company or any PSU Peer Company shall mean the Average Share Price for the ten (10) trading days for the period ending on the first day of the Performance Period.
Performance Period Value Change
Performance Period Value Change for the Company or any PSU Peer Company shall mean the result of: (1) Average Share Price (as defined below) for the last ten (10) trading days of the Performance Period, minus (2) Beginning Value, plus (3) Dividends (cash or stock based on ex-dividend date) paid per share of company common stock over the Performance Period.
In the case of Change in Control, the actual share price used for consummation of the transaction shall be used in place of the Average Share Price (as defined below) for the last ten (10) trading days of the Performance Period.
|
|
|
Average Share Price
Average Share Price for the Company or any PSU Peer Company shall mean the average daily closing price of the applicable company’s common stock over the relevant period on the principal securities exchange on which such shares are traded, as published by a reputable source.
|
|
Other Terms and Conditions
|
Are set forth in the accompanying Performance Vested Stock Unit Grant Terms and Conditions and the Plan.
|
SRC ENERGY INC.
|
|
GRANTEE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lynn A Peterson
|
|
Name
|
|
Chief Executive Officer and President
|
|
|
|
Date
|
|
|
|
1.
|
I have reviewed this quarterly report on Form 10-Q of SRC Energy Inc.;
|
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 SRC Energy Inc.;
|
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):
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a)
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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
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b)
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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.
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(1)
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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(2)
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.
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Date:
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July 31, 2019
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By:
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/s/ Lynn A. Peterson
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Lynn A. Peterson, Principal Executive Officer
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Date:
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July 31, 2019
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By:
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/s/ James P. Henderson
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James P. Henderson, Principal Financial Officer
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