ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Nevada
|
|
74-3231613
|
(State or other jurisdiction of
incorporation or organization)
|
|
(I.R.S. Employer
Identification No.)
|
Title of each Class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock, $0.0001 par value
|
LLEX
|
NYSE American
|
Large accelerated filer
|
¨
|
Accelerated filer
|
ý
|
Non-accelerated filer
|
¨
|
Smaller reporting company
|
ý
|
Emerging growth company
|
¨
|
|
|
|
|
||
|
|
|
|
||
|
||
|
||
|
||
|
||
|
||
|
|
|
|
||
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
4,339
|
|
|
$
|
21,137
|
|
Accounts receivable, net of allowance of $11 and $25, respectively
|
23,565
|
|
|
20,546
|
|
||
Derivative instruments
|
2,388
|
|
|
2,551
|
|
||
Prepaid expenses and other current assets
|
2,707
|
|
|
1,851
|
|
||
Total current assets
|
32,999
|
|
|
46,085
|
|
||
Property and equipment:
|
|
|
|
||||
Oil and natural gas properties, full cost method of accounting, net
|
426,420
|
|
|
430,379
|
|
||
Other property and equipment, net
|
443
|
|
|
524
|
|
||
Total property and equipment, net
|
426,863
|
|
|
430,903
|
|
||
Right-of-use assets
|
10,635
|
|
|
—
|
|
||
Other assets
|
4,184
|
|
|
3,785
|
|
||
Total assets
|
$
|
474,681
|
|
|
$
|
480,773
|
|
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
10,033
|
|
|
$
|
47,112
|
|
Accrued liabilities and other
|
28,461
|
|
|
14,794
|
|
||
Revenue payable
|
8,955
|
|
|
14,546
|
|
||
Derivative instruments
|
2,855
|
|
|
515
|
|
||
Total current liabilities
|
50,304
|
|
|
76,967
|
|
||
Asset retirement obligations
|
2,709
|
|
|
2,433
|
|
||
Long-term debt
|
105,000
|
|
|
157,804
|
|
||
Long-term derivative instruments and other non-current liabilities
|
3,293
|
|
|
4,699
|
|
||
Long-term deferred revenue and other long-term liabilities
|
79,333
|
|
|
52,513
|
|
||
Total liabilities
|
240,639
|
|
|
294,416
|
|
||
Commitments and Contingencies (Note 20)
|
|
|
|
|
|
||
Mezzanine equity:
|
|
|
|
||||
10,000,000 shares of preferred stock authorized
|
|
|
|
||||
Series C-1 9.75% Participating Preferred Stock, 100,000 shares issued and outstanding with a stated value of $1,175 and $1,093, per share, as of September 30, 2019 and December 31, 2018, respectively
|
77,582
|
|
|
106,774
|
|
||
Series C-2 9.75% Participating Preferred Stock, 25,000 shares issued and outstanding with a stated value of $1,101 and $1,024, per share, as of September 30, 2019 and December 31, 2018, respectively
|
18,186
|
|
|
25,522
|
|
||
Series D 8.25% Participating Preferred Stock, 39,254 shares issued and outstanding with a stated value of $1,085 and $1,021, per share, as of September 30, 2019 and December 31, 2018, respectively
|
28,202
|
|
|
40,729
|
|
||
Series E 8.25% Convertible Participating Preferred Stock, 60,000 shares issued and outstanding with a stated value of $1,048, per share, as of September 30, 2019
|
64,988
|
|
|
—
|
|
||
Series F 9.00% Participating Preferred Stock, 55,000 shares issued and outstanding with a stated value of $1,052, per share, as of September 30, 2019
|
49,559
|
|
|
—
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Revenues:
|
|
|
|
|
|
|
|
||||||||
Oil sales
|
$
|
10,206
|
|
|
$
|
15,976
|
|
|
$
|
44,890
|
|
|
$
|
42,819
|
|
Natural gas sales
|
694
|
|
|
1,538
|
|
|
2,570
|
|
|
3,572
|
|
||||
Natural gas liquid sales
|
697
|
|
|
1,968
|
|
|
3,408
|
|
|
4,969
|
|
||||
Total revenues
|
11,597
|
|
|
19,482
|
|
|
50,868
|
|
|
51,360
|
|
||||
Operating expenses:
|
|
|
|
|
|
|
|
||||||||
Production costs
|
4,243
|
|
|
3,184
|
|
|
12,866
|
|
|
9,431
|
|
||||
Gathering, processing and transportation
|
942
|
|
|
963
|
|
|
3,355
|
|
|
2,297
|
|
||||
Production taxes
|
543
|
|
|
1,034
|
|
|
2,568
|
|
|
2,705
|
|
||||
General and administrative
|
4,852
|
|
|
6,838
|
|
|
23,913
|
|
|
24,682
|
|
||||
Depreciation, depletion, amortization and accretion
|
5,420
|
|
|
7,172
|
|
|
22,762
|
|
|
17,572
|
|
||||
Impairment of oil and gas properties
|
16,580
|
|
|
—
|
|
|
16,580
|
|
|
—
|
|
||||
Total operating expenses
|
32,580
|
|
|
19,191
|
|
|
82,044
|
|
|
56,687
|
|
||||
Operating income (loss)
|
(20,983
|
)
|
|
291
|
|
|
(31,176
|
)
|
|
(5,327
|
)
|
||||
Other income (expense):
|
|
|
|
|
|
|
|
||||||||
Loss on early extinguishment of debt
|
(1,299
|
)
|
|
—
|
|
|
(1,299
|
)
|
|
—
|
|
||||
Gain (loss) from commodity derivatives
|
3,943
|
|
|
(4,811
|
)
|
|
(3,733
|
)
|
|
(9,383
|
)
|
||||
Change in fair value of financial instruments
|
—
|
|
|
10,612
|
|
|
(335
|
)
|
|
19,499
|
|
||||
Interest expense
|
(2,186
|
)
|
|
(8,949
|
)
|
|
(8,859
|
)
|
|
(26,609
|
)
|
||||
Other income
|
116
|
|
|
1
|
|
|
31
|
|
|
2
|
|
||||
Total other income (expense)
|
574
|
|
|
(3,147
|
)
|
|
(14,195
|
)
|
|
(16,491
|
)
|
||||
Net loss before income taxes
|
(20,409
|
)
|
|
(2,856
|
)
|
|
(45,371
|
)
|
|
(21,818
|
)
|
||||
Income tax expense
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net loss
|
(20,409
|
)
|
|
(2,856
|
)
|
|
(45,371
|
)
|
|
(21,818
|
)
|
||||
Paid-in-kind dividends on preferred stock
|
(7,185
|
)
|
|
(2,410
|
)
|
|
(18,385
|
)
|
|
(6,527
|
)
|
||||
Net loss attributable to common stockholders
|
$
|
(27,594
|
)
|
|
$
|
(5,266
|
)
|
|
$
|
(63,756
|
)
|
|
$
|
(28,345
|
)
|
|
|
|
|
|
|
|
|
||||||||
Net loss per common share-basic and diluted: (Note 17)
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.30
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.74
|
)
|
|
$
|
(0.47
|
)
|
Diluted
|
$
|
(0.30
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.74
|
)
|
|
$
|
(0.47
|
)
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
91,349,994
|
|
|
64,572,104
|
|
|
86,734,449
|
|
|
60,082,902
|
|
||||
Diluted
|
91,349,994
|
|
|
88,710,081
|
|
|
86,734,449
|
|
|
60,082,902
|
|
|
Common Shares
|
|
Additional
Paid-In Capital |
|
Treasury Shares
|
|
Accumulated Deficit
|
|
Total
|
||||||||||||||||
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|||||||||||||||
Balance, June 30, 2019
|
91,451,836
|
|
|
$
|
9
|
|
|
$
|
356,210
|
|
|
(253,598
|
)
|
|
$
|
(997
|
)
|
|
$
|
(332,393
|
)
|
|
$
|
22,829
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
332
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
332
|
|
|||||
Common stock for restricted stock
|
422,789
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Common stock withheld for taxes on stock-based compensation
|
(77,661
|
)
|
|
—
|
|
|
(42
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(42
|
)
|
|||||
Dividends on preferred stock
|
—
|
|
|
—
|
|
|
(7,185
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,185
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(20,409
|
)
|
|
(20,409
|
)
|
|||||
Balance, September 30, 2019
|
91,796,964
|
|
|
$
|
9
|
|
|
$
|
349,315
|
|
|
(253,598
|
)
|
|
$
|
(997
|
)
|
|
$
|
(352,802
|
)
|
|
$
|
(4,475
|
)
|
|
Common Shares
|
|
Additional
Paid-In Capital
|
|
Treasury Shares
|
|
Accumulated Deficit
|
|
Total
|
||||||||||||||||
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|||||||||||||||
Balance, June 30, 2018
|
64,045,923
|
|
|
$
|
6
|
|
|
$
|
300,336
|
|
|
(253,598
|
)
|
|
$
|
(997
|
)
|
|
$
|
(322,250
|
)
|
|
$
|
(22,905
|
)
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
2,100
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,100
|
|
|||||
Common stock for restricted stock
|
335,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Common stock withheld for taxes on stock-based compensation
|
(181,204
|
)
|
|
—
|
|
|
(542
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(542
|
)
|
|||||
Exercise of warrants
|
1,127,517
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Exercise of stock options
|
441,672
|
|
|
—
|
|
|
1,555
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,555
|
|
|||||
Dividends on Series C convertible preferred stock
|
—
|
|
|
—
|
|
|
(2,410
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,410
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,856
|
)
|
|
(2,856
|
)
|
|||||
Balance, September 30, 2018
|
65,768,908
|
|
|
$
|
6
|
|
|
$
|
301,039
|
|
|
(253,598
|
)
|
|
$
|
(997
|
)
|
|
$
|
(325,106
|
)
|
|
$
|
(25,058
|
)
|
|
Common Shares
|
|
Additional
Paid-In Capital |
|
Treasury Shares
|
|
Accumulated Deficit
|
|
Total
|
||||||||||||||||
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|||||||||||||||
Balance, December 31, 2018
|
71,182,016
|
|
|
$
|
7
|
|
|
$
|
321,753
|
|
|
(253,598
|
)
|
|
$
|
(997
|
)
|
|
$
|
(307,431
|
)
|
|
$
|
13,332
|
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
6,333
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,333
|
|
|||||
Common stock for restricted stock
|
3,260,275
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Common stock withheld for taxes on stock-based compensation
|
(286,965
|
)
|
|
—
|
|
|
(452
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(452
|
)
|
|||||
Common stock issued for extinguishment of debt
|
17,641,638
|
|
|
2
|
|
|
32,988
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
32,990
|
|
|||||
Gain on extinguishment of debt
|
—
|
|
|
—
|
|
|
7,078
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,078
|
|
|||||
Dividends on preferred stock
|
—
|
|
|
—
|
|
|
(18,385
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(18,385
|
)
|
|||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45,371
|
)
|
|
(45,371
|
)
|
|||||
Balance, September 30, 2019
|
91,796,964
|
|
|
$
|
9
|
|
|
$
|
349,315
|
|
|
(253,598
|
)
|
|
$
|
(997
|
)
|
|
$
|
(352,802
|
)
|
|
$
|
(4,475
|
)
|
|
Common Shares
|
|
Additional
Paid-In Capital
|
|
Treasury Shares
|
|
Accumulated Deficit
|
|
Total
|
||||||||||||||||
|
Shares
|
|
Amount
|
|
|
Shares
|
|
Amount
|
|
|
|||||||||||||||
Balance, December 31, 2017
|
53,368,331
|
|
|
$
|
5
|
|
|
$
|
272,335
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
(303,288
|
)
|
|
$
|
(30,948
|
)
|
Stock-based compensation
|
—
|
|
|
—
|
|
|
7,654
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,654
|
|
|||||
Common stock for restricted stock
|
802,860
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Common stock withheld for taxes on stock-based compensation
|
(315,439
|
)
|
|
—
|
|
|
(1,051
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,051
|
)
|
|||||
Common stock for acquisition of oil and gas properties
|
6,940,722
|
|
|
1
|
|
|
24,777
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24,778
|
|
|||||
Exercise of warrants
|
3,975,957
|
|
|
—
|
|
|
1,051
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,051
|
|
|||||
Exercise of stock options
|
996,477
|
|
|
—
|
|
|
2,577
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,577
|
|
|||||
Reclassification of warrant derivative liabilities
|
—
|
|
|
—
|
|
|
223
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
223
|
|
|||||
Purchase of treasury stock
|
—
|
|
|
—
|
|
|
—
|
|
|
(253,598
|
)
|
|
(997
|
)
|
|
—
|
|
|
(997
|
)
|
|||||
Dividends on Series C convertible preferred stock
|
—
|
|
|
—
|
|
|
(6,527
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(6,527
|
)
|
|||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(21,818
|
)
|
|
(21,818
|
)
|
|||||
Balance, September 30, 2018
|
65,768,908
|
|
|
$
|
6
|
|
|
$
|
301,039
|
|
|
(253,598
|
)
|
|
$
|
(997
|
)
|
|
$
|
(325,106
|
)
|
|
$
|
(25,058
|
)
|
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net income (loss)
|
$
|
(45,371
|
)
|
|
$
|
(21,818
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
||||
Stock-based compensation
|
6,333
|
|
|
7,654
|
|
||
Bad debt recovery
|
(14
|
)
|
|
(14
|
)
|
||
Amortization of debt issuance cost and accretion of debt discount
|
2,295
|
|
|
13,023
|
|
||
Payable in-kind interest
|
1,590
|
|
|
9,810
|
|
||
Loss on early extinguishment of debts
|
1,299
|
|
|
—
|
|
||
Loss from commodity derivatives, net
|
3,733
|
|
|
7,250
|
|
||
Net settlements received (paid) on commodity derivatives
|
(2,594
|
)
|
|
2,133
|
|
||
Change in fair value of financial instruments
|
335
|
|
|
(19,499
|
)
|
||
Impairment of oil and gas properties
|
16,580
|
|
|
—
|
|
||
Depreciation, depletion, amortization and accretion
|
22,762
|
|
|
17,572
|
|
||
Operating lease ROU amortization
|
12
|
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(3,769
|
)
|
|
(7,818
|
)
|
||
Prepaid expenses and other assets
|
(670
|
)
|
|
(1,707
|
)
|
||
Accounts payable and accrued liabilities
|
(47,406
|
)
|
|
27,093
|
|
||
Proceeds from options associated with future midstream services
|
2,500
|
|
|
50,000
|
|
||
Net cash provided by (used in) operating activities
|
(42,385
|
)
|
|
83,679
|
|
||
Cash flows from investing activities:
|
|
|
|
||||
Acquisition of oil and natural gas properties
|
—
|
|
|
(61,416
|
)
|
||
Proceeds from the sale of assets
|
16,911
|
|
|
—
|
|
||
Capital expenditures
|
(55,628
|
)
|
|
(129,490
|
)
|
||
Net cash provided by (used in) investing activities
|
(38,717
|
)
|
|
(190,906
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Proceeds from term loans, net of financing costs
|
—
|
|
|
44,960
|
|
||
Proceeds from revolving credit agreement, net of financing costs
|
47,126
|
|
|
—
|
|
||
Repayment of term loans and notes payable
|
—
|
|
|
(31,821
|
)
|
||
Repayment of revolving credit agreement
|
(18,000
|
)
|
|
—
|
|
||
Proceeds from the issuance of Series C Preferred Stock
|
—
|
|
|
100,000
|
|
||
Proceeds from the Värde financing arrangement, net of transaction costs
|
38,230
|
|
|
—
|
|
||
Partial repayment of the Värde financing arrangement
|
(2,600
|
)
|
|
—
|
|
||
Repurchase of common stock
|
—
|
|
|
(997
|
)
|
||
Proceeds from exercise of warrants and stock options
|
—
|
|
|
3,628
|
|
||
Payment for tax withholding on stock-based compensation
|
(452
|
)
|
|
(1,051
|
)
|
||
Net cash provided by financing activities
|
64,304
|
|
|
114,719
|
|
||
Net increase (decrease) in cash and cash equivalents
|
(16,798
|
)
|
|
7,492
|
|
||
Cash and cash equivalents at beginning of period
|
21,137
|
|
|
17,462
|
|
||
Cash and cash equivalents at end of period
|
$
|
4,339
|
|
|
$
|
24,954
|
|
Supplemental disclosure:
|
|
|
|
||||
Cash paid for interest
|
$
|
4,829
|
|
|
$
|
3,776
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(In thousands)
|
||||||
Accrued personnel costs
|
$
|
900
|
|
|
$
|
2,300
|
|
Accrued drilling and completion costs
|
10,720
|
|
|
2,849
|
|
||
Drilling advances
|
2,311
|
|
|
5,001
|
|
||
Accrued production expenses
|
3,810
|
|
|
2,926
|
|
||
Other accrued liabilities
|
2,508
|
|
|
1,718
|
|
||
Short-term operating lease liabilities
|
8,212
|
|
|
—
|
|
||
|
$
|
28,461
|
|
|
$
|
14,794
|
|
Three Months Ended September 30, 2019
|
Short-term contracts
|
|
Long-term contracts
|
|
Total
|
||||||
Crude oil
|
$
|
—
|
|
|
$
|
10,206
|
|
|
$
|
10,206
|
|
Natural gas
|
18
|
|
|
676
|
|
|
694
|
|
|||
NGLs
|
6
|
|
|
691
|
|
|
697
|
|
Nine Months Ended September 30, 2019
|
Short-term contracts
|
|
Long-term contracts
|
|
Total
|
||||||
Crude oil
|
$
|
9,711
|
|
|
$
|
35,179
|
|
|
$
|
44,890
|
|
Natural gas
|
136
|
|
|
2,434
|
|
|
2,570
|
|
|||
NGLs
|
113
|
|
|
3,295
|
|
|
3,408
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||
Texican Crude & Hydrocarbon, LLC
|
—
|
%
|
|
80
|
%
|
|
16
|
%
|
|
84
|
%
|
ARM Energy Management, LLC
|
89
|
%
|
|
—
|
%
|
|
74
|
%
|
|
—
|
%
|
Lucid Energy Delaware, LLC
|
11
|
%
|
|
17
|
%
|
|
10
|
%
|
|
12
|
%
|
ETC Field Services LLC
|
—
|
%
|
|
2
|
%
|
|
—
|
%
|
|
3
|
%
|
Other below 10%
|
—
|
%
|
|
1
|
%
|
|
—
|
%
|
|
1
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(In thousands)
|
||||||
Oil and natural gas properties:
|
|
|
|
||||
Proved
|
$
|
413,065
|
|
|
$
|
358,858
|
|
Unproved
|
150,652
|
|
|
169,863
|
|
||
Total oil and natural gas properties
|
563,717
|
|
|
528,721
|
|
||
Accumulated depletion, depreciation, amortization and impairment
|
(137,297
|
)
|
|
(98,342
|
)
|
||
Oil and natural gas properties, net
|
$
|
426,420
|
|
|
$
|
430,379
|
|
•
|
Certain leasehold acreage in the Delaware Basin in Lea County, New Mexico from OneEnergy Partners Operating, LLC for $40.0 million in cash and 6,940,722 shares of the Company's common stock valued at approximately $24.9 million, for total consideration of approximately $64.9 million. Transaction costs associated with this acquisition were approximately $1.1 million. The transaction was recorded as an asset acquisition.
|
•
|
Certain leasehold interests and other oil and natural gas assets in Loving and Winkler Counties, Texas from VPD Texas, L.P. for total cash consideration of approximately $11.1 million, including approximately $0.5 million of related acquisition costs. The transaction was recorded as an asset acquisition.
|
•
|
Certain leasehold interests and other oil and natural gas assets in Loving and Winkler Counties, Texas from Anadarko for total cash consideration of $7.1 million. The transaction was recorded as an asset acquisition.
|
•
|
Certain leasehold interests and other oil and natural gas assets in Lea County, New Mexico from Ameradev II, LLC for total cash consideration of $7.2 million and was recorded as an adjustment to the full cost pool.
|
•
|
Certain leasehold interests and other oil and natural gas assets in Loving and Winkler Counties, Texas from Felix Energy Holdings II, LLC for total cash consideration of $0.4 million and was recorded as an adjustment to the full cost pool.
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(In thousands)
|
||||||
ARO, beginning of period
|
$
|
2,444
|
|
|
$
|
952
|
|
Additional liabilities incurred
|
152
|
|
|
374
|
|
||
Accretion expense
|
244
|
|
|
85
|
|
||
Liabilities settled
|
(78
|
)
|
|
(87
|
)
|
||
Revision in estimates
|
(42
|
)
|
|
1,120
|
|
||
ARO, end of period
|
2,720
|
|
|
2,444
|
|
||
Less: current portion of ARO
|
(11
|
)
|
|
(11
|
)
|
||
ARO, non-current
|
$
|
2,709
|
|
|
$
|
2,433
|
|
|
●
|
Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
|
●
|
Level 2 - Other inputs that are directly or indirectly observable in the marketplace.
|
|
●
|
Level 3 - Unobservable inputs which are supported by little or no market activity.
|
|
Fair Value Measurement Classification
|
|
|
||||||||||||
|
Quoted Prices in
Active Markets for
Identical Assets or
Liabilities
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
Total
|
||||||||
|
(In thousands)
|
||||||||||||||
As of September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
||||
Oil and natural gas derivative instruments:
|
|
|
|
|
|
|
|
||||||||
Oil and natural gas derivative swap contracts
|
$
|
—
|
|
|
$
|
(1,343
|
)
|
|
$
|
—
|
|
|
$
|
(1,343
|
)
|
Oil and natural gas derivative collar contracts
|
—
|
|
|
2,355
|
|
|
—
|
|
|
2,355
|
|
||||
Total
|
$
|
—
|
|
|
$
|
1,012
|
|
|
$
|
—
|
|
|
$
|
1,012
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
||||||||
Oil and natural gas derivative instruments:
|
|
|
|
|
|
|
|
||||||||
Oil and natural gas derivative swap contracts
|
$
|
—
|
|
|
$
|
(2,923
|
)
|
|
$
|
—
|
|
|
$
|
(2,923
|
)
|
Oil and natural gas derivative collar contracts
|
—
|
|
|
4,047
|
|
|
—
|
|
|
4,047
|
|
||||
Embedded derivative instruments:
|
|
|
|
|
|
|
|
||||||||
Second Lien Term Loan conversion features
|
—
|
|
|
—
|
|
|
(1,965
|
)
|
|
(1,965
|
)
|
||||
Total
|
$
|
—
|
|
|
$
|
1,124
|
|
|
$
|
(1,965
|
)
|
|
$
|
(841
|
)
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
(In thousands)
|
||||||
Derivative assets (liabilities):
|
|
|
|
||||
Derivative assets - current
|
$
|
2,388
|
|
|
$
|
2,551
|
|
Derivative assets - non-current (1)
|
2,155
|
|
|
1,822
|
|
||
Derivative liabilities - current
|
(2,855
|
)
|
|
(515
|
)
|
||
Derivative liabilities - non-current (2)(3)
|
(676
|
)
|
|
(4,699
|
)
|
||
Total derivative liabilities, net
|
$
|
1,012
|
|
|
$
|
(841
|
)
|
Description
|
|
|
Notional Volume (Bbls/d)
|
|
Production Period
|
|
Weighted Average Price ($/Bbl)
|
|||
Oil Positions
|
|
|
|
|
|
|
|
|||
Oil Swaps
|
|
|
173
|
|
|
October 2019 - December 2019
|
|
$
|
58.80
|
|
Oil Swaps
|
|
|
1,028
|
|
|
January 2020 - December 2020
|
|
$
|
56.28
|
|
Oil Swaps
|
|
|
370
|
|
|
January 2021 - December 2021
|
|
$
|
53.07
|
|
|
|
|
|
|
|
|
|
|||
Basis Swaps (1)
|
|
|
1,500
|
|
|
October 2019 - December 2019
|
|
$
|
(5.62
|
)
|
Basis Swaps (1)
|
|
|
1,500
|
|
|
January 2020 - December 2020
|
|
$
|
(5.62
|
)
|
|
|
|
|
|
|
|
|
|||
3 Way Collar
|
Floor sold price (put)
|
|
1,500
|
|
|
October 2019 - December 2019
|
|
$
|
45.00
|
|
3 Way Collar
|
Floor purchase price (put)
|
|
1,500
|
|
|
October 2019 - December 2019
|
|
$
|
55.00
|
|
3 Way Collar
|
Ceiling sold price (call)
|
|
1,500
|
|
|
October 2019 - December 2019
|
|
$
|
70.47
|
|
|
|
|
|
|
|
|
|
|||
Oil Collar
|
Floor purchase price (put)
|
|
500
|
|
|
October 2019 - December 2019
|
|
$
|
50.00
|
|
Oil Collar
|
Ceiling sold price (call)
|
|
500
|
|
|
October 2019 - December 2019
|
|
$
|
58.00
|
|
Oil Collar
|
Floor purchase price (put)
|
|
512
|
|
|
January 2020 - December 2020
|
|
$
|
49.50
|
|
Oil Collar
|
Ceiling sold price (call)
|
|
512
|
|
|
January 2020 - December 2020
|
|
$
|
63.87
|
|
Oil Collar
|
Floor purchase price (put)
|
|
742
|
|
|
January 2021 - December 2021
|
|
$
|
50.00
|
|
Oil Collar
|
Ceiling sold price (call)
|
|
742
|
|
|
January 2021 - December 2021
|
|
$
|
59.70
|
|
|
|
|
|
|
|
|
|
|||
Description
|
|
|
Notional Volume (MMBtus/d)
|
|
Production Period
|
|
Weighted Average Price ($/MMBtu)
|
|||
Natural Gas Positions
|
|
|
|
|
|
|
||||
Gas Swaps
|
|
|
4,807
|
|
|
October 2019 - December 2019
|
|
$
|
2.53
|
|
Gas Swaps
|
|
|
4,557
|
|
|
January 2020 - December 2020
|
|
$
|
2.57
|
|
Gas Swaps
|
|
|
4,184
|
|
|
January 2021 - March 2021
|
|
$
|
2.77
|
|
|
|
|
|
|
|
|
|
|||
Gas Collar
|
Floor purchase price (put)
|
|
6,921
|
|
|
November 2019 - December 2019
|
|
$
|
2.80
|
|
Gas Collar
|
Ceiling sold price (call)
|
|
6,921
|
|
|
November 2019 - December 2019
|
|
$
|
3.06
|
|
Gas Collar
|
Floor purchase price (put)
|
|
2,748
|
|
|
January 2020 - December 2020
|
|
$
|
2.55
|
|
Gas Collar
|
Ceiling sold price (call)
|
|
2,748
|
|
|
January 2020 - December 2020
|
|
$
|
3.07
|
|
Gas Collar
|
Floor purchase price (put)
|
|
4,464
|
|
|
January 2021 - December 2021
|
|
$
|
2.20
|
|
Gas Collar
|
Ceiling sold price (call)
|
|
4,464
|
|
|
January 2021 - December 2021
|
|
$
|
2.97
|
|
(1)
|
The weighted average price under these basis swaps is the fixed price differential between the index prices of the Midland WTI and the Cushing WTI.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
|
(in thousands)
|
|
(in thousands)
|
||||||||||||
Unrealized gain (loss) on unsettled derivatives
|
$
|
4,383
|
|
|
$
|
(4,008
|
)
|
|
$
|
(112
|
)
|
|
$
|
(7,250
|
)
|
Net settlements paid on derivative contracts
|
(233
|
)
|
|
(611
|
)
|
|
(3,414
|
)
|
|
(1,941
|
)
|
||||
Net settlements receivable (payable) on derivative contracts
|
(207
|
)
|
|
(192
|
)
|
|
(207
|
)
|
|
(192
|
)
|
||||
Net gain (loss) on commodity derivatives
|
$
|
3,943
|
|
|
$
|
(4,811
|
)
|
|
$
|
(3,733
|
)
|
|
$
|
(9,383
|
)
|
|
As of September 30, 2019
|
||||||||||
|
Gross Amount of Recognized Assets and Liabilities
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amounts Presented in the Condensed Consolidated Balance Sheets
|
||||||
|
(In thousands)
|
||||||||||
Offsetting Derivative Assets:
|
|
|
|
|
|
||||||
Current assets
|
$
|
2,750
|
|
|
$
|
(362
|
)
|
|
$
|
2,388
|
|
Long-term assets
|
2,227
|
|
|
(72
|
)
|
|
2,155
|
|
|||
Total assets
|
$
|
4,977
|
|
|
$
|
(434
|
)
|
|
$
|
4,543
|
|
Offsetting Derivative Liabilities:
|
|
|
|
|
|
||||||
Current liabilities
|
$
|
(3,217
|
)
|
|
$
|
362
|
|
|
$
|
(2,855
|
)
|
Long-term commodity derivative liabilities
|
(748
|
)
|
|
72
|
|
|
(676
|
)
|
|||
Total liabilities
|
$
|
(3,965
|
)
|
|
$
|
434
|
|
|
$
|
(3,531
|
)
|
|
As of December 31, 2018
|
||||||||||
|
Gross Amount of Recognized Assets and Liabilities
|
|
Gross Amounts Offset in the Condensed Consolidated Balance Sheets
|
|
Net Amounts Presented in the Condensed Consolidated Balance Sheets
|
||||||
|
(In thousands)
|
||||||||||
Offsetting Derivative Assets:
|
|
|
|
|
|
||||||
Current assets
|
$
|
4,122
|
|
|
$
|
(1,571
|
)
|
|
$
|
2,551
|
|
Long-term assets
|
1,854
|
|
|
(32
|
)
|
|
1,822
|
|
|||
Total assets
|
$
|
5,976
|
|
|
$
|
(1,603
|
)
|
|
$
|
4,373
|
|
Offsetting Derivative Liabilities:
|
|
|
|
|
|
||||||
Current liabilities
|
$
|
(2,086
|
)
|
|
$
|
1,571
|
|
|
$
|
(515
|
)
|
Long-term commodity derivative liabilities
|
(2,766
|
)
|
|
32
|
|
|
(2,734
|
)
|
|||
Long-term embedded derivative liabilities
|
(1,965
|
)
|
|
—
|
|
|
(1,965
|
)
|
|||
Total liabilities
|
$
|
(6,817
|
)
|
|
$
|
1,603
|
|
|
$
|
(5,214
|
)
|
Right of use assets:
|
|
|
||
Right of use assets - long-term (1)
|
|
$
|
10,635
|
|
|
|
|
||
Lease liabilities:
|
|
|
||
Lease liabilities - current (2)
|
|
$
|
8,212
|
|
Lease liabilities - long-term (3)
|
|
2,617
|
|
|
Total lease liabilities
|
|
$
|
10,829
|
|
|
Three Months Ended
September 30, 2019 |
|
Nine Months Ended
September 30, 2019 |
||||
Fixed lease costs
|
$
|
1,249
|
|
|
$
|
4,085
|
|
Short-term lease costs
|
120
|
|
|
329
|
|
||
Variable lease costs
|
508
|
|
|
626
|
|
||
Total lease costs
|
$
|
1,877
|
|
|
$
|
5,040
|
|
Lease Cost included in the Condensed Consolidated Financial Statements
|
|
Nine Months Ended September 30, 2019
|
||
Oil and natural gas properties, full cost method of accounting, net (1)
|
|
$
|
4,417
|
|
Total lease costs capitalized
|
|
4,417
|
|
|
|
|
|
||
Production costs
|
|
312
|
|
|
General and administrative
|
|
311
|
|
|
Total lease costs expensed
|
|
623
|
|
|
Total lease costs
|
|
$
|
5,040
|
|
Cash paid for amounts included in the measurement of operating lease liabilities:
|
|
|
||
Operating cash flows from operating leases
|
|
$
|
115
|
|
Investing cash flows from operating leases
|
|
$
|
3,767
|
|
Lease term and discount rate
|
|||
Weighted-average remaining lease term (years)
|
|
1.26
|
|
Weighted-average discount rate
|
|
5.6
|
%
|
Year
|
|
Amount
|
||
2019
|
|
$
|
2,168
|
|
2020
|
|
9,007
|
|
|
2021
|
|
79
|
|
|
2022
|
|
—
|
|
|
2023
|
|
—
|
|
|
After 2023
|
|
—
|
|
|
Less: the effects of discounting
|
|
(425
|
)
|
|
Present value of lease liabilities
|
|
$
|
10,829
|
|
Year
|
|
Amount
|
||
2019
|
|
$
|
7,586
|
|
2020
|
|
66
|
|
|
2021
|
|
—
|
|
|
2022
|
|
—
|
|
|
2023
|
|
—
|
|
|
After 2023
|
|
—
|
|
|
Total lease commitment
|
|
$
|
7,652
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
|
(In thousands)
|
||||||
8.25% Second Lien Term Loan, due 2021, net of debt issuance costs and debt discount
|
|
$
|
—
|
|
|
$
|
82,804
|
|
Revolving Credit Agreement, due October 2023
|
|
105,000
|
|
|
75,000
|
|
||
Total long-term debt
|
|
$
|
105,000
|
|
|
$
|
157,804
|
|
•
|
an aggregate of 55,000 shares of a newly created series of preferred stock of the Company, designated as "Series F 9.00% Participating Preferred Stock" (the "Series F Preferred Stock"), corresponding to $55 million of the Second Lien Exchange Amount based on the aggregate initial Stated Value (as defined in Note 14 - Preferred Stock) of the shares of Series F Preferred Stock;
|
•
|
an aggregate of 60,000 shares of a newly created series of preferred stock of the Company, designated as "Series E 8.25% Convertible Participating Preferred Stock" (the "Series E Preferred Stock"), corresponding to $60 million of the Second Lien Exchange Amount based on the aggregate initial Stated Value (as defined in Note 14 - Preferred Stock) of the shares of Series E Preferred Stock; and
|
•
|
9,891,638 shares of common stock, corresponding to approximately $18.6 million of the Second Lien Exchange Amount, based on the closing price of the Company's common stock on the NYSE American on March 4, 2019 of $1.88.
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Interest on debt
|
$
|
1,681
|
|
|
$
|
1,238
|
|
|
$
|
4,829
|
|
|
$
|
3,776
|
|
Net revenue payments on financing arrangement
|
146
|
|
|
—
|
|
|
146
|
|
|
—
|
|
||||
Paid-in-kind interest on term loans
|
—
|
|
|
3,373
|
|
|
1,590
|
|
|
9,810
|
|
||||
Amortization of debt financing costs
|
359
|
|
|
249
|
|
|
637
|
|
|
1,130
|
|
||||
Amortization of discount on term loans
|
—
|
|
|
4,089
|
|
|
1,657
|
|
|
11,893
|
|
||||
Total
|
$
|
2,186
|
|
|
$
|
8,949
|
|
|
$
|
8,859
|
|
|
$
|
26,609
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
||||
|
|
(in thousands)
|
||||||
Long-term deferred revenue liabilities
|
|
$
|
42,500
|
|
|
$
|
52,500
|
|
Other long-term liabilities
|
|
36,833
|
|
|
13
|
|
||
Total long-term deferred revenue liabilities and other long-term liabilities
|
|
$
|
79,333
|
|
|
$
|
52,513
|
|
|
|
|
|
As of September 30,
|
||||||
Related Party
|
|
Transactions
|
|
2019
|
|
2018
|
||||
|
|
|
|
(In thousands)
|
||||||
Directors and Officers:
|
|
|
|
|
|
|
|
|
||
Ronald D. Ormand (Former Chief Executive Officer)
|
|
Receivable for tax withholding on vested restricted shares. Additional Shares were canceled to cover this tax withholding
|
|
$
|
—
|
|
|
$
|
441
|
|
Värde Partners, Inc. (1)
|
|
The Company acquired oil and natural gas interests from VPD, an affiliate of Värde
|
|
—
|
|
|
10,705
|
|
||
|
|
Receivable balance outstanding as of September 30, 2019 for operating costs associated with VPD's producing wells
|
|
200
|
|
|
—
|
|
||
|
|
Payable to WLR for net proportionate share of production
|
|
(242
|
)
|
|
—
|
|
||
|
|
Asset disposition accounted for as a financing arrangement
|
|
(36,833
|
)
|
|
—
|
|
||
|
|
Total:
|
|
$
|
(36,875
|
)
|
|
$
|
11,146
|
|
|
|
Series C Preferred Stock
|
|
Series D Preferred Stock
|
|
Series E Preferred Stock
|
|
Series F Preferred Stock
|
||||||||||||||||||||
|
|
Number of Shares
|
|
Amount
|
|
Number of Shares
|
|
Amount
|
|
Number of Shares
|
|
Amount
|
|
Number of Shares
|
|
Amount
|
||||||||||||
|
|
(In thousands, except shares)
|
||||||||||||||||||||||||||
Balance, January 1, 2019
|
|
125,000
|
|
|
$
|
132,296
|
|
|
39,254
|
|
|
$
|
40,729
|
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
—
|
|
Change in carrying value due to modification
|
|
—
|
|
|
(46,633
|
)
|
|
—
|
|
|
(15,057
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Issuance of Preferred Stock in extinguishment of debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60,000
|
|
|
62,115
|
|
|
55,000
|
|
|
46,682
|
|
||||
Paid-in-kind dividends
|
|
—
|
|
|
10,105
|
|
|
—
|
|
|
2,530
|
|
|
—
|
|
|
2,873
|
|
|
—
|
|
|
2,877
|
|
||||
Balance, September 30, 2019
|
|
125,000
|
|
|
$
|
95,768
|
|
|
39,254
|
|
|
$
|
28,202
|
|
|
60,000
|
|
|
$
|
64,988
|
|
|
55,000
|
|
|
$
|
49,559
|
|
•
|
either (i) as of the optional redemption date, there are no shares of the Series F Preferred Stock outstanding or (ii) all outstanding shares of the Series F Preferred Stock are redeemed on such optional redemption date concurrently with such optional redemption of the Series E Preferred Stock in accordance with the terms of the Series F Certificate of Designation;
|
•
|
the aggregate Series E Optional Redemption Price for all shares of the Series E Preferred Stock to be redeemed pursuant to such optional redemption shall not exceed the aggregate amount of net cash proceeds received by the Company from a contemporaneous issuance of common stock issued for the purpose of redeeming such shares of Series E Preferred Stock; and
|
•
|
if the optional redemption date occurs prior to March 5, 2022, then (i) the VWAP for at least 20 trading days during the 30 trading day period immediately preceding the notice of the optional redemption has been at least 150% of the Conversion Price (as defined below) then in effect, and (ii) such optional redemption shall be for all (but not less than all) then-outstanding shares of Series E Preferred Stock.
|
|
Warrants
|
|
Weighted-
Average
Exercise Price
|
|||
Outstanding at January 1, 2019
|
5,017,329
|
|
|
$
|
3.83
|
|
Forfeited or expired
|
(2,263,267
|
)
|
|
$
|
2.81
|
|
Outstanding at September 30, 2019
|
2,754,062
|
|
|
$
|
4.67
|
|
|
Nine Months Ended September 30, 2019
|
|
Nine Months Ended September 30, 2018
|
||||||||||||||||||||
|
Stock
Options
|
|
Restricted Stock
|
|
Total
|
|
Stock
Options
|
|
Restricted Stock
|
|
Total
|
||||||||||||
Share based compensation expensed
|
$
|
290
|
|
|
$
|
6,043
|
|
|
$
|
6,333
|
|
|
$
|
1,796
|
|
|
$
|
5,858
|
|
|
$
|
7,654
|
|
Unrecognized share-based compensation costs
|
$
|
130
|
|
|
$
|
1,444
|
|
|
$
|
1,574
|
|
|
$
|
970
|
|
|
$
|
5,069
|
|
|
$
|
6,039
|
|
Weighted average amortization period remaining (in years)
|
1.64
|
|
|
1.27
|
|
|
|
|
|
0.44
|
|
|
0.50
|
|
|
|
|
|
Number of
Shares
|
|
Weighted
Average Grant
Date Price
|
|||
Outstanding at January 1, 2019
|
953,584
|
|
|
$
|
4.85
|
|
Granted
|
3,731,550
|
|
|
$
|
1.47
|
|
Vested and issued
|
(2,362,533
|
)
|
|
$
|
2.13
|
|
Forfeited or canceled (1)
|
(749,477
|
)
|
|
$
|
2.75
|
|
Outstanding at September 30, 2019
|
1,573,124
|
|
|
$
|
1.90
|
|
|
|
|
|
|
Stock Options Outstanding
and Exercisable
|
||||||
|
Number
of Options
|
|
Weighted
Average
Exercise
Price
|
|
Number
of Options
Vested/
Exercisable
|
|
Weighted
Average
Remaining
Contractual Life
(Years)
|
||||
Outstanding at January 1, 2019
|
5,031,578
|
|
|
$
|
3.81
|
|
|
5,035,317
|
|
|
7.9
|
Granted
|
135,000
|
|
|
$
|
2.17
|
|
|
|
|
|
|
Exercised
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
Forfeited or canceled (1)
|
(938,528
|
)
|
|
$
|
2.37
|
|
|
|
|
|
|
Outstanding at September 30, 2019
|
4,228,050
|
|
|
$
|
4.08
|
|
|
4,125,842
|
|
|
7.2
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Net income (loss)
|
$
|
(20,409
|
)
|
|
$
|
(2,856
|
)
|
|
$
|
(45,371
|
)
|
|
$
|
(21,818
|
)
|
Dividends on preferred stock
|
(7,185
|
)
|
|
(2,410
|
)
|
|
(18,385
|
)
|
|
(6,527
|
)
|
||||
Unallocated net income (loss)
|
$
|
(27,594
|
)
|
|
$
|
(5,266
|
)
|
|
$
|
(63,756
|
)
|
|
$
|
(28,345
|
)
|
|
|
|
|
|
|
|
|
||||||||
Numerator for basic earnings (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to common stockholders
|
$
|
(27,594
|
)
|
|
$
|
(5,266
|
)
|
|
$
|
(63,756
|
)
|
|
$
|
(28,345
|
)
|
|
|
|
|
|
|
|
|
||||||||
Denominator for basic loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average common shares outstanding
|
91,349,994
|
|
|
64,572,104
|
|
|
86,734,449
|
|
|
60,082,902
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic attributable to common stockholders
|
$
|
(0.30
|
)
|
|
$
|
(0.08
|
)
|
|
$
|
(0.74
|
)
|
|
$
|
(0.47
|
)
|
|
|
|
|
|
|
|
|
||||||||
Numerator for diluted loss per share:
|
|
|
|
|
|
|
|
||||||||
Net income (loss) attributable to common stockholders
|
$
|
(27,594
|
)
|
|
$
|
(5,266
|
)
|
|
$
|
(63,756
|
)
|
|
$
|
(28,345
|
)
|
Add: interest expense on convertible Second Lien Term Loan
|
—
|
|
|
7,499
|
|
|
—
|
|
|
—
|
|
||||
Less: gain on fair value change of embedded derivatives associated with Second Lien Term Loan
|
—
|
|
|
(10,612
|
)
|
|
—
|
|
|
—
|
|
||||
Net loss attributable to common stockholders
|
$
|
(27,594
|
)
|
|
$
|
(8,379
|
)
|
|
$
|
(63,756
|
)
|
|
$
|
(28,345
|
)
|
|
|
|
|
|
|
|
|
||||||||
Denominator for diluted net loss per share:
|
|
|
|
|
|
|
|
||||||||
Basic weighted average common shares outstanding
|
91,349,994
|
|
|
64,572,104
|
|
|
86,734,449
|
|
|
60,082,902
|
|
||||
Dilution effect of if-converted Second Lien Term Loan
|
—
|
|
|
24,137,977
|
|
|
—
|
|
|
—
|
|
||||
Diluted weighted average common shares outstanding
|
91,349,994
|
|
|
88,710,081
|
|
|
86,734,449
|
|
|
60,082,902
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net loss per share - diluted:
|
|
|
|
|
|
|
|
||||||||
Common shares (diluted)
|
$
|
(0.30
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
(0.74
|
)
|
|
$
|
(0.47
|
)
|
|
September 30,
|
||||
|
2019
|
|
2018
|
||
Stock Options
|
4,228,050
|
|
|
5,099,450
|
|
Series C Preferred Stock
|
—
|
|
|
20,807,726
|
|
Stock Purchase Warrants
|
2,754,062
|
|
|
5,137,329
|
|
Series E Preferred Stock
|
25,149,169
|
|
|
—
|
|
Conversion of term loans
|
—
|
|
|
24,143,977
|
|
|
32,131,281
|
|
|
55,188,482
|
|
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
|
(in thousands)
|
||||||
Non-cash investing and financing activities excluded from the statement of cash flows:
|
|
|
|
||||
Issued shares of common stock and preferred stock upon extinguishment of debt and modification of Series C Preferred Stock and Series D Preferred Stock
|
$
|
141,787
|
|
|
$
|
—
|
|
Common stock issued for acquisition of oil and gas properties
|
—
|
|
|
24,778
|
|
||
Cashless exercise of warrants
|
—
|
|
|
356
|
|
||
Deferred revenue realized upon purchase option exercise
|
11,700
|
|
|
—
|
|
||
Change in capital expenditures for drilling costs in accrued liabilities
|
7,871
|
|
|
17,313
|
|
||
Accrued cumulative paid in kind dividends on preferred stock
|
18,385
|
|
|
6,527
|
|
||
Change in asset retirement obligations
|
32
|
|
|
380
|
|
Date
|
Quantity (Barrels per Day)
|
March 2019 - June 2019
|
5,000
|
July 2019 - December 2019
|
4,000
|
January 2020 - June 2020
|
5,000
|
July 2020 - June 2021
|
6,000
|
July 2021 - December 2024 (1)
|
7,500
|
•
|
Significantly reduced cycle times under the Company's new operations team by reducing average drilling days for longer lateral wells from approximately 45 days (spud to total depth) to approximately 17 days
|
•
|
Achieved reduced drilling cycle times by incorporating oil-based drilling mud, a higher quality rig and better down hole tools/configurations
|
•
|
Achieved combined cost savings of over $4.3 million on the Grizzly A #2H, the Grizzly B #2H, and the East Shammo #3H wells due to reduced drilling days and drilling costs
|
•
|
Drilled the fastest well by the Company to date, the East Shammo #3H, at 15 days spud to total depth of 20,715 feet
|
•
|
Improved in-zone precision during drilling from approximately 89% in 2018 to approximately 100% in recent wells
|
•
|
Successfully completed both the Kudu A #2H and the Kudu B #2H under completion AFE cost estimates, and both wells are currently on flowback
|
•
|
Deployed our operations team with extensive Northern Delaware Basin experience, which has taken measures to standardize completion methods and adopt the latest techniques in-line with offset operators
|
•
|
Received 2-year extended flaring permits to mitigate the need for future shut-ins associated with regulatory flaring compliance and successfully brought all four previously shut-in wells back online and flowing to sales
|
•
|
Implemented solutions for delivering all produced natural gas to sales by year-end
|
•
|
Currently have 24 drilling permits in various stages of submittal and review with the Bureau of Land Management in New Mexico and expect to have multiple permits approved by year-end
|
•
|
Completed two significant transactions that brought approximately $56 million of capital into the Company
|
•
|
Sold 513 net undeveloped acres in New Mexico, noncontiguous to the Company's core operational area, for approximately $33,000 per net acre
|
•
|
Completed an overriding royalty interest and working interest transaction
|
•
|
Achieved significant general and administrative expenses savings by completing the closing of the Houston and San Antonio offices, consolidating all operations to a single location in Fort Worth, and reducing full-time equivalent employees (corporate, operations and field personnel) by approximately 28%
|
•
|
Realized oil pricing of 96% of WTI for the quarter, versus 93% of WTI in the second quarter of 2019
|
•
|
Achieved commodity volume mix of 66% Liquids, including 53% crude oil, resulting in 94% of revenue attributable to liquids sales during the third quarter
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
Variance
|
|
%
|
|||||||
Net sales volume:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Oil (Bbl)
|
188,913
|
|
|
302,448
|
|
|
(113,535
|
)
|
|
(38
|
)%
|
|||
Natural gas (Mcf)
|
716,197
|
|
|
856,865
|
|
|
(140,668
|
)
|
|
(16
|
)%
|
|||
NGL (Bbl)
|
47,225
|
|
|
68,844
|
|
|
(21,619
|
)
|
|
(31
|
)%
|
|||
Total (BOE)
|
355,504
|
|
|
514,102
|
|
|
(158,598
|
)
|
|
(31
|
)%
|
|||
Average daily sales volume (BOE/d)
|
3,864
|
|
|
5,588
|
|
|
(1,724
|
)
|
|
(31
|
)%
|
|||
Average realized sales price:
|
|
|
|
|
|
|
|
|||||||
Oil ($/Bbl)
|
$
|
54.03
|
|
|
$
|
52.82
|
|
|
$
|
1.20
|
|
|
2
|
%
|
Natural gas ($/Mcf)
|
0.97
|
|
|
1.79
|
|
|
(0.83
|
)
|
|
(46
|
)%
|
|||
NGL ($/Bbl)
|
14.76
|
|
|
28.59
|
|
|
(13.83
|
)
|
|
(48
|
)%
|
|||
Total ($/BOE)
|
$
|
32.62
|
|
|
$
|
37.90
|
|
|
$
|
(5.27
|
)
|
|
(14
|
)%
|
Oil, natural gas and NGL revenues (in thousands):
|
|
|
|
|
|
|
|
|||||||
Oil revenue
|
$
|
10,206
|
|
|
$
|
15,976
|
|
|
$
|
(5,770
|
)
|
|
(36
|
)%
|
Natural gas revenue
|
694
|
|
|
1,538
|
|
|
(844
|
)
|
|
(55
|
)%
|
|||
NGL revenue
|
697
|
|
|
1,968
|
|
|
(1,271
|
)
|
|
(65
|
)%
|
|||
Total revenue
|
$
|
11,597
|
|
|
$
|
19,482
|
|
|
$
|
(7,885
|
)
|
|
(40
|
)%
|
|
Nine Months Ended September 30,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
Variance
|
|
%
|
|||||||
Net sales volume:
|
|
|
|
|
|
|
|
|||||||
Oil (Bbl)
|
863,758
|
|
|
749,659
|
|
|
114,099
|
|
|
15
|
%
|
|||
Natural gas (Mcf)
|
2,558,714
|
|
|
2,017,509
|
|
|
541,205
|
|
|
27
|
%
|
|||
NGL (Bbl)
|
187,574
|
|
|
177,331
|
|
|
10,243
|
|
|
6
|
%
|
|||
Total (BOE)
|
1,477,785
|
|
|
1,263,241
|
|
|
214,544
|
|
|
17
|
%
|
|||
Average daily sales volume (BOE/d)
|
5,413
|
|
|
4,627
|
|
|
786
|
|
|
17
|
%
|
|||
Average realized sales price:
|
|
|
|
|
|
|
|
|||||||
Oil ($/Bbl)
|
$
|
51.97
|
|
|
$
|
57.12
|
|
|
$
|
(5.15
|
)
|
|
(9
|
)%
|
Natural gas ($/Mcf)
|
1.00
|
|
|
1.77
|
|
|
(0.77
|
)
|
|
(43
|
)%
|
|||
NGL ($/Bbl)
|
18.17
|
|
|
28.02
|
|
|
(9.84
|
)
|
|
(35
|
)%
|
|||
Total ($/BOE)
|
$
|
34.42
|
|
|
$
|
40.66
|
|
|
$
|
(6.24
|
)
|
|
(15
|
)%
|
Oil, natural gas and NGL revenues (in thousands):
|
|
|
|
|
|
|
|
|||||||
Oil revenue
|
$
|
44,890
|
|
|
$
|
42,819
|
|
|
$
|
2,071
|
|
|
5
|
%
|
Natural gas revenue
|
2,570
|
|
|
3,572
|
|
|
(1,002
|
)
|
|
(28
|
)%
|
|||
NGL revenue
|
3,408
|
|
|
4,969
|
|
|
(1,561
|
)
|
|
(31
|
)%
|
|||
Total revenue
|
$
|
50,868
|
|
|
$
|
51,360
|
|
|
$
|
(492
|
)
|
|
(1
|
)%
|
|
Three Months Ended September 30,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
Variance
|
|
%
|
|||||||
Operating Expenses per BOE:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Production costs
|
$
|
11.94
|
|
|
$
|
6.19
|
|
|
$
|
5.75
|
|
|
93
|
%
|
Gathering, processing and transportation
|
2.65
|
|
|
1.87
|
|
|
0.78
|
|
|
42
|
%
|
|||
Production taxes
|
1.53
|
|
|
2.01
|
|
|
(0.48
|
)
|
|
(24
|
)%
|
|||
General and administrative
|
13.65
|
|
|
13.30
|
|
|
0.35
|
|
|
3
|
%
|
|||
Depreciation, depletion, amortization and accretion
|
15.25
|
|
|
13.95
|
|
|
1.30
|
|
|
9
|
%
|
|||
Impairment of oil and gas properties
|
46.64
|
|
|
—
|
|
|
46.64
|
|
|
100
|
%
|
|||
Total operating expenses per BOE
|
$
|
91.66
|
|
|
$
|
37.32
|
|
|
$
|
54.34
|
|
|
146
|
%
|
|
|
|
|
|
|
|
|
|||||||
Operating Expenses (in thousands):
|
|
|
|
|
|
|
|
|
||||||
Production costs
|
$
|
4,243
|
|
|
$
|
3,184
|
|
|
$
|
1,059
|
|
|
33
|
%
|
Gathering, processing and transportation
|
942
|
|
|
963
|
|
|
(21
|
)
|
|
(2
|
)%
|
|||
Production taxes
|
543
|
|
|
1,034
|
|
|
(491
|
)
|
|
(47
|
)%
|
|||
General and administrative
|
4,852
|
|
|
6,838
|
|
|
(1,986
|
)
|
|
(29
|
)%
|
|||
Depreciation, depletion, amortization and accretion
|
5,420
|
|
|
7,172
|
|
|
(1,752
|
)
|
|
(24
|
)%
|
|||
Impairment of oil and gas properties
|
16,580
|
|
|
—
|
|
|
16,580
|
|
|
100
|
%
|
|||
Total operating expenses
|
$
|
32,580
|
|
|
$
|
19,191
|
|
|
$
|
13,389
|
|
|
70
|
%
|
|
|
|
|
|
|
|
|
|
Nine Months Ended September 30,
|
|
|
|||||||||||
|
2019
|
|
2018
|
|
Variance
|
|
%
|
|||||||
Operating Expenses per BOE:
|
|
|
|
|
|
|
|
|
|
|
|
|||
Production costs
|
$
|
8.71
|
|
|
$
|
7.47
|
|
|
$
|
1.24
|
|
|
17
|
%
|
Gathering, processing and transportation
|
2.27
|
|
|
1.82
|
|
|
0.45
|
|
|
25
|
%
|
|||
Production taxes
|
1.74
|
|
|
2.14
|
|
|
(0.40
|
)
|
|
(19
|
)%
|
|||
General and administrative
|
16.18
|
|
|
19.54
|
|
|
(3.36
|
)
|
|
(17
|
)%
|
|||
Depreciation, depletion, amortization and accretion
|
15.40
|
|
|
13.91
|
|
|
1.49
|
|
|
11
|
%
|
|||
Impairment of oil and gas properties
|
11.22
|
|
|
—
|
|
|
11.22
|
|
|
100
|
%
|
|||
Total operating expenses per BOE
|
$
|
55.52
|
|
|
$
|
44.88
|
|
|
$
|
10.64
|
|
|
24
|
%
|
|
|
|
|
|
|
|
|
|||||||
Operating Expenses (in thousands):
|
|
|
|
|
|
|
|
|
||||||
Production costs
|
$
|
12,866
|
|
|
$
|
9,431
|
|
|
$
|
3,435
|
|
|
36
|
%
|
Gathering, processing and transportation
|
3,355
|
|
|
2,297
|
|
|
1,058
|
|
|
46
|
%
|
|||
Production taxes
|
2,568
|
|
|
2,705
|
|
|
(137
|
)
|
|
(5
|
)%
|
|||
General and administrative
|
23,913
|
|
|
24,682
|
|
|
(769
|
)
|
|
(3
|
)%
|
|||
Depreciation, depletion, amortization and accretion
|
22,762
|
|
|
17,572
|
|
|
5,190
|
|
|
30
|
%
|
|||
Impairment of oil and gas properties
|
16,580
|
|
|
—
|
|
|
16,580
|
|
|
100
|
%
|
|||
Total operating expenses
|
$
|
82,044
|
|
|
$
|
56,687
|
|
|
$
|
25,357
|
|
|
45
|
%
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
Variance
|
|
%
|
|||||||
|
(In Thousands)
|
|
|
|
|
|||||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|||
Gain (loss) from early extinguishment of debt
|
$
|
(1,299
|
)
|
|
$
|
—
|
|
|
$
|
(1,299
|
)
|
|
100
|
%
|
Gain (loss) from commodity derivatives, net
|
3,943
|
|
|
(4,811
|
)
|
|
8,754
|
|
|
(182
|
)%
|
|||
Change in fair value of financial instruments
|
—
|
|
|
10,612
|
|
|
(10,612
|
)
|
|
(100
|
)%
|
|||
Interest expense
|
(2,186
|
)
|
|
(8,949
|
)
|
|
6,763
|
|
|
(76
|
)%
|
|||
Other income
|
116
|
|
|
1
|
|
|
115
|
|
|
100
|
%
|
|||
Total other income (expenses)
|
$
|
574
|
|
|
$
|
(3,147
|
)
|
|
$
|
3,721
|
|
|
(118
|
)%
|
|
Nine Months Ended September 30,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
Variance
|
|
%
|
|||||||
|
(In Thousands)
|
|
|
|
|
|||||||||
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|||
Gain (Loss) on early extinguishment of debt
|
$
|
(1,299
|
)
|
|
$
|
—
|
|
|
$
|
(1,299
|
)
|
|
—
|
%
|
Gain (Loss) from commodity derivatives, net
|
(3,733
|
)
|
|
(9,383
|
)
|
|
5,650
|
|
|
(60
|
)%
|
|||
Change in fair value of financial instruments
|
(335
|
)
|
|
19,499
|
|
|
(19,834
|
)
|
|
(102
|
)%
|
|||
Interest expense
|
(8,859
|
)
|
|
(26,609
|
)
|
|
17,750
|
|
|
(67
|
)%
|
|||
Other income
|
31
|
|
|
2
|
|
|
29
|
|
|
1450
|
%
|
|||
Total other income (expenses)
|
$
|
(14,195
|
)
|
|
$
|
(16,491
|
)
|
|
$
|
2,296
|
|
|
(14
|
)%
|
|
Nine Months Ended September 30,
|
||||||
|
2019
|
|
2018
|
||||
Cash provided by (used in):
|
|
|
|
|
|
||
Operating activities
|
$
|
(42,385
|
)
|
|
$
|
83,679
|
|
Investing activities
|
(38,717
|
)
|
|
(190,906
|
)
|
||
Financing activities
|
64,304
|
|
|
114,719
|
|
||
Net change in cash, cash equivalents
|
$
|
(16,798
|
)
|
|
$
|
7,492
|
|
•
|
approximately $55.6 million in drilling and completion costs; partially offset by
|
•
|
approximately $16.9 million in proceeds from the sale of assets.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Leasehold Acquisitions
|
|
|
|
|
|
|
|
||||||||
Proved
|
$
|
—
|
|
|
$
|
591
|
|
|
$
|
—
|
|
|
$
|
9,382
|
|
Unproved
|
447
|
|
|
2,842
|
|
|
1,802
|
|
|
89,036
|
|
||||
2017 Drilling & Completion Program
|
—
|
|
|
260
|
|
|
—
|
|
|
12,015
|
|
||||
2018 Drilling & Completion Program
|
36
|
|
|
41,007
|
|
|
2,994
|
|
|
107,337
|
|
||||
2018 Drilling & Completion Program-DUCs
|
(153
|
)
|
|
7,284
|
|
|
28,884
|
|
|
7,284
|
|
||||
2018 Working Interest Acquisitions
|
—
|
|
|
1,258
|
|
|
—
|
|
|
1,258
|
|
||||
2019 Drilling & Completion Program
|
11,837
|
|
|
—
|
|
|
21,633
|
|
|
—
|
|
||||
Facilities & Other Projects
|
2,180
|
|
|
2,433
|
|
|
8,262
|
|
|
5,916
|
|
||||
Total Capital Spending
|
$
|
14,347
|
|
|
$
|
55,675
|
|
|
$
|
63,575
|
|
|
$
|
232,228
|
|
•
|
Reduced our indebtedness by $133.6 million;
|
•
|
Decreased fully diluted share count by approximately 12 million shares;
|
•
|
Eliminated near-term cash service, as all series of preferred stock have PIK options;
|
•
|
Eliminated the 2021 maturity of the Second Lien Term Loan and extended the maturity of the Revolving Credit Agreement to 2023, resulting in no scheduled principal repayments required until 2023; and
|
•
|
Eliminated conversion features associated with the Second Lien Term Loan, Series C Preferred Stock, and Series D Preferred Stock and reduced Series C Preferred Stock redemption premium.
|
|
Lilis Energy, Inc.
|
|
|
|
|
Date: November 7, 2019
|
By:
|
/s/ Joseph C. Daches
|
|
|
Joseph C. Daches
|
|
|
Interim Chief Executive Officer, President,
|
|
|
Chief Financial Officer and Treasurer
|
|
|
(Principal Financial and Accounting Officer)
|
BORROWER:
|
LILIS ENERGY, INC.
|
|
|
|
|
|
By: /s/ Joseph C. Daches
|
|
Name: Joseph C. Daches
|
|
Title: President, Chief Financial Officer and Treasurer
|
GUARANTORS:
|
BRUSHY RESOURCES, INC.
|
|
|
|
|
|
By: /s/ Joseph C. Daches
|
|
Name: Joseph C. Daches
|
|
Title: President, Chief Financial Officer and Treasurer
|
|
HURRICANE RESOURCES LLC
|
|
|
|
By: /s/ Joseph C. Daches
|
|
Name: Joseph C. Daches
|
|
Title: President, Chief Financial Officer and Treasurer
|
|
IMPETRO OPERATING LLC
|
|
|
|
By: /s/ Joseph C. Daches
|
|
Name: Joseph C. Daches
|
|
Title: President, Chief Financial Officer and Treasurer
|
|
LILIS OPERATING COMPANY, LLC
|
|
|
|
|
|
By: /s/ Joseph C. Daches
|
|
Name: Joseph C. Daches
|
|
Title: President, Chief Financial Officer and Treasurer
|
|
IMPETRO RESOURCES, LLC
|
|
|
|
|
|
By: /s/ Joseph C. Daches
|
|
Name: Joseph C. Daches
|
|
Title: President, Chief Financial Officer and Treasurer
|
ADMINISTRATIVE AGENT:
|
BMO HARRIS BANK N.A.,
as Administrative Agent, and a Lender |
LENDERS:
|
SUNTRUST BANK,
as a Lender |
|
1.
|
I have reviewed this report on Form 10-Q of Lilis Energy, Inc. ("Registrant");
|
|
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 this 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.
|
I am 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.
|
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 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.
|
/s/ Joseph C. Daches
|
|
Joseph C. Daches
|
|
Interim Chief Executive Officer, President, Chief Financial Officer and Treasurer
|
|
/s/ Joseph C. Daches
|
|
Joseph C. Daches
|
|
Interim Chief Executive Officer, President, Chief Financial Officer and Treasurer
|
|
|
|