Note 1—Organization and basis of presentation
a. Organization
Laredo Petroleum, Inc. ("Laredo"), together with its wholly-owned subsidiaries, Laredo Midstream Services, LLC ("LMS") and Garden City Minerals, LLC ("GCM"), is an independent energy company focused on the acquisition, exploration and development of oil and natural gas properties, primarily in the Permian Basin of West Texas. The Company has identified one operating segment: exploration and production. In these notes, the "Company" refers to Laredo, LMS and GCM collectively, unless the context indicates otherwise. All amounts, dollars and percentages presented in these unaudited consolidated financial statements and the related notes are rounded and, therefore, approximate.
b. Basis of presentation
The unaudited consolidated financial statements were derived from the historical accounting records of the Company and reflect the historical financial position, results of operations and cash flows for the periods described herein. The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). All material intercompany transactions and account balances have been eliminated in the consolidation of accounts.
The unaudited consolidated financial statements have not been audited by the Company's independent registered public accounting firm, except that the consolidated balance sheet as of December 31, 2020 is derived from the Company's audited consolidated financial statements. In the opinion of management, the unaudited consolidated financial statements reflect all necessary adjustments to present fairly the Company's financial position as of March 31, 2021, results of operations for the three months ended March 31, 2021 and 2020 and cash flows for the three months ended March 31, 2021 and 2020.
Certain disclosures have been condensed or omitted from the unaudited consolidated financial statements. Accordingly, the unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the 2020 Annual Report.
Significant accounting policies
See Note 2 in the 2020 Annual Report for discussion of significant accounting policies.
Use of estimates in the preparation of interim unaudited consolidated financial statements
The preparation of the unaudited consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although management believes these estimates are reasonable, actual results could differ.
See Note 2.b in the 2020 Annual Report for further information regarding the use of estimates and assumptions.
Note 2—New accounting standards
The Company considered the applicability and impact of all accounting standard updates ("ASU") issued by the Financial Accounting Standards Board to the Accounting Standards Codification ("ASC") and has determined there are no ASUs that are not yet adopted and meaningful to disclose as of March 31, 2021.
Note 3—Acquisitions and divestiture
a. 2020 Asset acquisitions
On October 16, 2020 and November 16, 2020, the Company closed a bolt-on acquisition of 2,758 and 80 net acres, respectively, including production of 210 BOE per day, in Howard County, Texas for an aggregate purchase price of $11.6 million, subject to customary post-closing purchase price adjustments.
On April 30, 2020, the Company closed an acquisition of 180 net acres in Howard County, Texas for $0.6 million. The acquisition also provides for one or more potential contingent payments to be paid by the Company if the arithmetic average
Condensed notes to the consolidated financial statements
(Unaudited)
of the monthly settlement West Texas Intermediate ("WTI") NYMEX prices exceed certain thresholds for the contingency period beginning on January 1, 2021 and ending on the earlier of December 31, 2022 or the date the counterparty has received the maximum consideration of $1.2 million. The fair value of this contingent consideration was $0.2 million as of the acquisition date, which was recorded as part of the basis in the oil and natural gas properties acquired and as a contingent consideration derivative liability. See Notes 9.c and 10.a for additional discussion of this contingent consideration.
On February 4, 2020, the Company closed a transaction for $22.5 million acquiring 1,180 net acres and divesting 80 net acres in Howard County, Texas.
All transaction costs were capitalized and are included in "Oil and natural gas properties" on the consolidated balance sheet.
b. 2020 Divestiture
On April 9, 2020, the Company closed a divestiture of 80 net acres and working interests in two producing wells in Glasscock County, Texas for $0.7 million, net of customary post-closing sales price adjustments. The divestiture was recorded as an adjustment to oil and natural gas properties pursuant to the rules governing full cost accounting. Effective at closing, the operations and cash flows of these oil and natural gas properties were eliminated from the ongoing operations of the Company, and the Company has no continuing involvement in the properties. This divestiture did not represent a strategic shift and has not had a major effect on the Company's future operations or financial results.
c. Exchange of unevaluated oil and natural gas properties
From time to time, the Company exchanges undeveloped acreage with third parties. The exchanges are recorded at fair value and the difference is accounted for as an adjustment of capitalized costs with no gain or loss recognized pursuant to the rules governing full cost accounting, unless such adjustment would significantly alter the relationship between capitalized costs and proved reserves of oil, NGL and natural gas.
Note 4—Leases
The Company has recognized operating lease right-of-use assets and operating lease liabilities on the unaudited consolidated balance sheets for leases of commercial real estate with lease terms extending into 2027 and drilling, completion, production and other equipment leases with lease terms extending into 2022. The Company's lease costs include those that are recognized in net income (loss) during the period and capitalized as part of the cost of another asset in accordance with GAAP.
The lease costs related to drilling, completion and production activities are reflected at the Company's net ownership, which is consistent with the principles of proportional consolidation, and lease commitments are reflected on a gross basis. As of March 31, 2021, the Company had an average working interest of 97% in Laredo-operated active productive wells. See Note 5 in the 2020 Annual Report for additional discussion of the Company's leases.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 5—Property and equipment
The following table presents the Company's property and equipment as of the dates presented:
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|
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|
|
(in thousands)
|
|
March 31, 2021
|
|
December 31, 2020
|
|
Evaluated oil and natural gas properties
|
|
$
|
7,953,141
|
|
|
$
|
7,874,932
|
|
|
Less accumulated depletion and impairment
|
|
(6,852,688)
|
|
|
(6,817,949)
|
|
|
Evaluated oil and natural gas properties, net
|
|
1,100,453
|
|
|
1,056,983
|
|
|
|
|
|
|
|
|
Unevaluated oil and natural gas properties not being depleted
|
|
60,260
|
|
|
70,020
|
|
|
|
|
|
|
|
|
Midstream service assets
|
|
182,405
|
|
|
181,718
|
|
|
Less accumulated depreciation and impairment
|
|
(71,322)
|
|
|
(69,021)
|
|
|
Midstream service assets, net
|
|
111,083
|
|
|
112,697
|
|
|
|
|
|
|
|
|
Depreciable other fixed assets
|
|
37,612
|
|
|
37,454
|
|
|
Less accumulated depreciation and amortization
|
|
(24,937)
|
|
|
(24,344)
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|
|
Depreciable other fixed assets, net
|
|
12,675
|
|
|
13,110
|
|
|
|
|
|
|
|
|
Land
|
|
18,901
|
|
|
18,901
|
|
|
|
|
|
|
|
|
Total property and equipment, net
|
|
$
|
1,303,372
|
|
|
$
|
1,271,711
|
|
See Note 10.b for discussion of impairments of long-lived assets during the three months ended March 31, 2020. See Note 6 in the 2020 Annual Report for additional discussion of the Company's property and equipment.
The Company uses the full cost method of accounting for its oil and natural gas properties. Under this method, all acquisition, exploration and development costs, including certain employee-related costs, incurred for the purpose of acquiring, exploring for or developing oil and natural gas properties, are capitalized and, once evaluated, depleted on a composite unit-of-production method based on estimates of proved oil, NGL and natural gas reserves. The depletion base includes estimated future development costs and dismantlement, restoration and abandonment costs, net of estimated salvage values. Capitalized costs include the cost of drilling and equipping productive wells, dry hole costs, lease acquisition costs, delay rentals and other costs related to such activities. Costs, including employee-related costs, associated with production and general corporate activities are expensed in the period incurred.
The Company excludes unevaluated property acquisition costs and exploration costs from the depletion calculation until it is determined whether or not proved reserves can be assigned to the properties. The Company capitalizes a portion of its interest costs to its unevaluated properties and such costs become subject to depletion when proved reserves can be assigned to the associated properties. All items classified as unevaluated properties are assessed on a quarterly basis for possible impairment. The assessment includes consideration of the following factors, among others: intent to drill, remaining lease term, geological and geophysical evaluations, drilling results and activity, the assignment of proved reserves and the economic viability of development if proved reserves are assigned. During any period in which these factors indicate an impairment, the cumulative drilling costs incurred to date for such property and all or a portion of the associated leasehold costs are transferred to the full cost pool and are then subject to depletion.
Sales of oil and natural gas properties, whether or not being depleted currently, are accounted for as adjustments of capitalized costs, with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil, NGL and natural gas.
Condensed notes to the consolidated financial statements
(Unaudited)
The following table presents costs incurred in the acquisition, exploration and development of oil and natural gas properties, with asset retirement obligations included in evaluated property acquisition costs and development costs, for the periods presented:
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|
|
Three months ended March 31,
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(in thousands)
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2021
|
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2020
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|
|
|
|
|
Property acquisition costs:
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|
|
|
|
|
|
|
|
Evaluated
|
|
$
|
—
|
|
|
$
|
7,586
|
|
|
|
|
|
|
Unevaluated
|
|
—
|
|
|
15,556
|
|
|
|
|
|
|
Exploration costs
|
|
3,957
|
|
|
6,710
|
|
|
|
|
|
|
Development costs
|
|
64,492
|
|
|
146,158
|
|
|
|
|
|
|
Total oil and natural gas properties costs incurred
|
|
$
|
68,449
|
|
|
$
|
176,010
|
|
|
|
|
|
The aforementioned total oil and natural gas properties costs incurred included certain employee-related costs as shown in the table below.
The following table presents capitalized employee-related costs incurred in the acquisition, exploration and development of oil and natural gas properties for the periods presented:
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|
|
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|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
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|
|
(in thousands)
|
|
2021
|
|
2020
|
|
|
|
|
|
Capitalized employee-related costs
|
|
$
|
4,241
|
|
|
$
|
4,505
|
|
|
|
|
|
The following table presents depletion expense, which is included in "Depletion, depreciation and amortization" on the unaudited consolidated statements of operations, and depletion expense per BOE sold of evaluated oil and natural gas properties for the periods presented:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
(in thousands except per BOE data)
|
|
2021
|
|
2020
|
|
|
|
|
|
Depletion expense of evaluated oil and natural gas properties
|
|
$
|
34,725
|
|
|
$
|
57,752
|
|
|
|
|
|
|
Depletion expense per BOE sold
|
|
$
|
4.88
|
|
|
$
|
7.33
|
|
|
|
|
|
The full cost ceiling is based principally on the estimated future net cash flows from proved oil, NGL and natural gas reserves, which exclude the effect of the Company's commodity derivative transactions, discounted at 10%. SEC guidelines require companies to use the unweighted arithmetic average first-day-of-the-month price for each month within the 12-month period prior to the end of the reporting period before differentials ("Benchmark Prices"). The Benchmark Prices are then adjusted for quality, certain transportation fees, geographical differentials, marketing bonuses or deductions and other factors affecting the price received at the delivery point ("Realized Prices") without giving effect to the Company's commodity derivative transactions. The Realized Prices are utilized to calculate the estimated future net cash flows in the full cost ceiling calculation. Significant inputs included in the calculation of discounted cash flows used in the impairment analysis include the Company's estimate of operating and development costs, anticipated production of proved reserves and other relevant data. In the event the unamortized cost of evaluated oil and natural gas properties being depleted exceeds the full cost ceiling, as defined by the SEC, the excess is expensed in the period such excess occurs. Once incurred, a write-down of oil and natural gas properties is not reversible. The unamortized cost of evaluated oil and natural gas properties being depleted did not exceed the full cost ceiling as of March 31, 2021, and as such, the Company did not record a first-quarter full cost ceiling impairment.
Condensed notes to the consolidated financial statements
(Unaudited)
The following table presents the Benchmark Prices and the Realized Prices as of the dates presented:
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|
|
|
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|
|
March 31, 2021
|
|
December 31, 2020
|
|
September 30, 2020
|
|
June 30, 2020
|
|
|
|
Benchmark Prices:
|
|
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|
|
|
|
|
|
|
|
|
Oil ($/Bbl)
|
|
$
|
36.49
|
|
|
$
|
36.04
|
|
|
$
|
39.88
|
|
|
$
|
43.60
|
|
|
|
|
NGL ($/Bbl)(1)
|
|
$
|
19.24
|
|
|
$
|
16.63
|
|
|
$
|
16.95
|
|
|
$
|
16.87
|
|
|
|
|
Natural gas ($/MMBtu)
|
|
$
|
1.69
|
|
|
$
|
1.21
|
|
|
$
|
1.06
|
|
|
$
|
0.87
|
|
|
|
|
Realized Prices:
|
|
|
|
|
|
|
|
|
|
|
|
Oil ($/Bbl)
|
|
$
|
38.28
|
|
|
$
|
37.69
|
|
|
$
|
41.08
|
|
|
$
|
44.97
|
|
|
|
|
NGL ($/Bbl)
|
|
$
|
9.92
|
|
|
$
|
7.43
|
|
|
$
|
7.71
|
|
|
$
|
7.66
|
|
|
|
|
Natural gas ($/Mcf)
|
|
$
|
1.20
|
|
|
$
|
0.79
|
|
|
$
|
0.68
|
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
_____________________________________________________________________________
(1) Based on the Company's average composite NGL barrel.
The following table presents full cost ceiling impairment expense, which is included in "Impairment expense" on the unaudited consolidated statements of operations for the periods presented:
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|
|
|
|
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|
|
Three months ended March 31,
|
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|
|
(in thousands)
|
|
2021
|
|
2020
|
|
|
|
|
|
Full cost ceiling impairment expense
|
|
$
|
—
|
|
|
$
|
177,182
|
|
|
|
|
|
Note 6—Debt
a. January 2025 Notes and January 2028 Notes
On January 24, 2020, the Company completed an offer and sale (the "Offering") of $600.0 million in aggregate principal amount of 9 1/2% senior unsecured notes due 2025 (the "January 2025 Notes") and $400.0 million in aggregate principal amount of 10 1/8% senior unsecured notes due 2028 (the "January 2028 Notes"). Interest for both the January 2025 Notes and January 2028 Notes is payable semi-annually, in cash in arrears on January 15 and July 15 of each year. The first interest payment was made on July 15, 2020, and consisted of interest from closing to that date. The terms of the January 2025 Notes and January 2028 Notes include covenants, which are in addition to but different than similar covenants in the Senior Secured Credit Facility, which limit the Company's ability to incur indebtedness, make restricted payments, grant liens and dispose of assets.
The January 2025 Notes and January 2028 Notes are fully and unconditionally guaranteed on a senior unsecured basis by LMS, GCM and certain of the Company's future restricted subsidiaries, subject to certain automatic customary releases, including the sale, disposition or transfer of all of the capital stock or of all or substantially all of the assets of a subsidiary guarantor to one or more persons that are not the Company or a restricted subsidiary, exercise of legal defeasance or covenant defeasance options or satisfaction and discharge of the applicable indenture, designation of a subsidiary guarantor as a non-guarantor restricted subsidiary or as an unrestricted subsidiary in accordance with the applicable indenture, release from guarantee under the Senior Secured Credit Facility, or liquidation or dissolution (collectively, the "Releases").
The Company received net proceeds of $982.0 million from the Offering, after deducting underwriting discounts and commissions and estimated offering expenses. The proceeds from the Offering were used (i) to fund Tender Offers (defined below) for the Company's January 2022 Notes and March 2023 Notes (defined below), (ii) to repay the Company's January 2022 Notes and March 2023 Notes that remained outstanding after settling the Tender Offers and (iii) for general corporate purposes, including repayment of a portion of the borrowings outstanding under the Senior Secured Credit Facility.
In November 2020, the Company's board of directors authorized a $50.0 million bond repurchase program. During the year ended December 31, 2020, the Company repurchased $22.1 million in aggregate principal amount of the January 2025 Notes and $39.0 million in aggregate principal amount of the January 2028 Notes for aggregate consideration of $13.9 million and $24.2 million, respectively, plus accrued and unpaid interest. The Company recognized a gain on extinguishment
Condensed notes to the consolidated financial statements
(Unaudited)
of $22.3 million related to the difference between the consideration paid and the net carrying amounts of the extinguished portions of the January 2025 Notes and January 2028 Notes.
b. January 2022 Notes and March 2023 Notes
On January 23, 2014, the Company completed an offering of $450.0 million in aggregate principal amount of 5 5/8% senior unsecured notes due 2022 (the "January 2022 Notes"). The January 2022 Notes were due to mature on January 15, 2022 and bore an interest rate of 5 5/8% per annum, payable semi-annually, in cash in arrears on January 15 and July 15 of each year, commencing July 15, 2014. The January 2022 Notes were fully and unconditionally guaranteed on a senior unsecured basis by LMS, GCM and certain of the Company's future restricted subsidiaries, subject to certain Releases.
On March 18, 2015, the Company completed an offering of $350.0 million in aggregate principal amount of 6 1/4% senior unsecured notes due 2023 (the "March 2023 Notes"). The March 2023 Notes were due to mature on March 15, 2023 and bore an interest rate of 6 1/4% per annum, payable semi-annually, in cash in arrears on March 15 and September 15 of each year, commencing September 15, 2015. The March 2023 Notes were fully and unconditionally guaranteed on a senior unsecured basis by LMS, GCM and certain of the Company's future restricted subsidiaries, subject to certain Releases.
On January 6, 2020, the Company commenced cash tender offers and consent solicitations for any or all of its outstanding January 2022 Notes and March 2023 Notes (collectively, the "Tender Offers"). On January 24, 2020 and February 6, 2020, the Company settled the Tender Offers for the outstanding principal amounts of $428.9 million and $299.4 million, respectively, for consideration for tender offers and early tender premiums of $431.6 million and $304.1 million for the January 2022 Notes and March 2023 Notes, respectively, plus accrued and unpaid interest. On January 29, 2020, the Company redeemed the remaining $21.1 million of January 2022 Notes not tendered under the Tender Offers at a redemption price of 100.000% of the principal amount thereof, plus accrued and unpaid interest. On March 15, 2020, the Company redeemed the remaining $50.6 million of March 2023 Notes not tendered under the Tender Offers at a redemption price of 101.563% of the principal amount thereof, plus accrued and unpaid interest. The Company recognized a loss on extinguishment of $13.3 million related to the difference between the consideration for tender offers, early tender premiums and redemption prices and the net carrying amounts of the extinguished January 2022 Notes and March 2023 Notes.
c. Senior Secured Credit Facility
As of March 31, 2021, the Senior Secured Credit Facility, which matures on April 19, 2023, had a maximum credit amount of $2.0 billion, a borrowing base and an aggregate elected commitment of $725.0 million each, with $220.0 million outstanding, and was subject to an interest rate of 2.625%. The Senior Secured Credit Facility contains both financial and non-financial covenants, all of which the Company was in compliance with for all periods presented. Additionally, the Senior Secured Credit Facility provides for the issuance of letters of credit, limited to the lesser of total capacity or $80.0 million. As of March 31, 2021 and December 31, 2020, the Company had one letter of credit outstanding of $44.1 million under the Senior Secured Credit Facility. The Senior Secured Credit Facility is fully and unconditionally guaranteed by LMS and GCM. For additional information see Note 7.c in the 2020 Annual Report. See Note 18.a for discussion of a borrowing and a payment on the Senior Secured Credit Facility subsequent to March 31, 2021.
The Company's measurements of Adjusted EBITDA (non-GAAP) for financial reporting as compared to compliance under its debt agreements differ.
d. Debt issuance costs
The Company capitalized debt issuance costs of $18.4 million during the three months ended March 31, 2020 in connection with the issuance of the January 2025 Notes and January 2028 Notes. No debt issuance costs were capitalized during the three months ended March 31, 2021. The Company wrote off debt issuance costs during the three months ended March 31, 2020 in connection with the extinguishment of the January 2022 Notes and March 2023 Notes, which are included in "Loss on extinguishment of debt" on the unaudited consolidated statement of operations. No debt issuance costs were written off during the three months ended March 31, 2021.
The Company had total debt issuance costs of $15.7 million and $17.0 million, net of accumulated amortization of $23.1 million and $22.1 million, as of March 31, 2021 and December 31, 2020, respectively. Debt issuance costs related to the Company's January 2025 and January 2028 Notes are included in "Long-term debt, net" on the unaudited consolidated balance sheets. Debt issuance costs related to the Senior Secured Credit Facility are included in "Other noncurrent assets, net"
Condensed notes to the consolidated financial statements
(Unaudited)
on the unaudited consolidated balance sheets. Debt issuance costs are amortized on a straight-line basis over the respective terms of the notes and the Senior Secured Credit Facility. See Note 7.e for additional discussion of debt issuance costs.
e. Long-term debt, net
The following table presents the Company's long-term debt and debt issuance costs, net included in "Long-term debt, net" on the unaudited consolidated balance sheets as of the dates presented:
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|
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|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(in thousands)
|
|
Long-term debt
|
|
Debt issuance costs, net
|
|
Long-term debt, net
|
|
Long-term debt
|
|
Debt issuance costs, net
|
|
Long-term debt, net
|
|
January 2025 Notes
|
|
577,913
|
|
|
(7,931)
|
|
|
569,982
|
|
|
577,913
|
|
|
(8,676)
|
|
|
569,237
|
|
|
January 2028 Notes
|
|
361,044
|
|
|
(5,652)
|
|
|
355,392
|
|
|
361,044
|
|
|
(6,015)
|
|
|
355,029
|
|
|
Senior Secured Credit Facility(1)
|
|
220,000
|
|
|
—
|
|
|
220,000
|
|
|
255,000
|
|
|
—
|
|
|
255,000
|
|
|
Long-term debt, net
|
|
$
|
1,158,957
|
|
|
$
|
(13,583)
|
|
|
$
|
1,145,374
|
|
|
$
|
1,193,957
|
|
|
$
|
(14,691)
|
|
|
$
|
1,179,266
|
|
______________________________________________________________________________
(1)Debt issuance costs, net related to the Senior Secured Credit Facility of $2.1 million and $2.3 million as of March 31, 2021 and December 31, 2020, respectively, are included in "Other noncurrent assets, net" on the unaudited consolidated balance sheets.
Note 7—Stockholders' equity
a. ATM Program
On February 23, 2021, the Company entered into an equity distribution agreement (the "Equity Distribution Agreement") with Wells Fargo Securities, LLC acting as sales agent and/or principal (the "Sales Agent"), pursuant to which the Company may offer and sell, from time to time through the Sales Agent, shares of its common stock, par value $0.01 per share (the "common stock"), having an aggregate gross sales price of up to $75.0 million through an "at-the-market" equity program (the "ATM Program").
Pursuant to the Equity Distribution Agreement, shares of common stock may be offered and sold in privately negotiated transactions or transactions that are deemed to be "at-the-market" offerings as defined in Rule 415 under the Securities Act, including by ordinary brokers’ transactions through the facilities of the New York Stock Exchange, to or through a market maker or as otherwise agreed with the Sales Agent. Under the terms of the Equity Distribution Agreement, the Company may also sell common stock from time to time to the Sales Agent as principal for its own account at a price to be agreed upon at the time of sale. Any sale of common stock to the Sales Agent as principal would be pursuant to the terms of a separate terms agreement between the Company and the Sales Agent, which would be described in a separate prospectus supplement or pricing supplement.
As of March 31, 2021, the Company has sold 723,579 shares of its common stock pursuant to the ATM Program for net proceeds of approximately $26.9 million, after underwriting commissions and other related expenses. Proceeds from the share sales were utilized to reduce borrowings on the Senior Secured Credit Facility. The timing of any additional sales will depend on a variety of factors to be determined by the Company.
b. Reverse stock split and Authorized Share Reduction
On March 17, 2020, the board of directors authorized an amendment to the Company's amended and restated certificate of incorporation ("Certificate of Incorporation") to effect, at the discretion of the board of directors (i) a reverse stock split that would reduce the number of shares of outstanding common stock in accordance with a ratio to be determined by the board of directors within a range of 1-for-5 and 1-for-20 currently outstanding and (ii) a reduction of the number of authorized shares of common stock by a corresponding proportion ("Authorized Share Reduction").
On May 14, 2020, after receiving stockholder approval of the amendment to the Certificate of Incorporation, the board of directors approved the implementation of the reverse stock split at a ratio of 1-for-20 currently outstanding shares of common stock, and the related corresponding Authorized Share Reduction.
Condensed notes to the consolidated financial statements
(Unaudited)
On June 1, 2020, the amendment to the Certificate of Incorporation became effective and effected the 1-for-20 reverse stock split of the Company's issued and outstanding common stock and the related Authorized Share Reduction from 450,000,000 to 22,500,000 authorized shares, par value $0.01 per share, with authorized shares of preferred stock remaining unchanged at 50,000,000, par value $0.01 per share, for a total of 72,500,000 shares of capital stock. See Note 8 for discussion of the Equity Incentive Plan (defined below), that proportionately reduced the number of shares that may be granted.
c. Treasury stock
Treasury stock is recorded at cost, which includes incremental direct transaction costs, and is retired upon acquisition as a result of (i) stock exchanged to satisfy tax withholding that arises upon the lapse of restrictions on share-settled equity-based awards at the awardee's election or (ii) stock exchanged for the cost of exercise of stock options at the awardee's election.
Note 8—Equity Incentive Plan
The Laredo Petroleum, Inc. Omnibus Equity Incentive Plan (the "Equity Incentive Plan") provides for the granting of incentive awards in the form of restricted stock awards, stock option awards, performance share awards, outperformance share awards, performance unit awards, phantom unit awards and other awards. On June 1, 2020, in connection with the effectiveness of the reverse stock split and Authorized Share Reduction, the board of directors approved and adopted an amendment to the Equity Incentive Plan to proportionately adjust the limitations on awards that may be granted under the Equity Incentive Plan. Following the amendment, an aggregate of 1,492,500 shares of common stock may be issued under the Equity Incentive Plan. See Note 7.b for additional discussion of the reverse stock split and Authorized Share Reduction.
See Note 9.a in the 2020 Annual Report for additional discussion of the Company's equity-based compensation awards.
a. Restricted stock awards
Restricted stock awards granted to employees vest on a 33%, 33% and 34% schedule per year beginning on the first anniversary of the grant date and restricted stock awards granted to non-employee directors vest immediately on the grant date.
The following table reflects the restricted stock award activity for the three months ended March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except for weighted-average grant-date fair value)
|
|
Restricted stock awards
|
|
Weighted-average
grant-date fair value
(per share)
|
|
Outstanding as of December 31, 2020
|
|
309
|
|
|
$
|
44.88
|
|
|
Granted
|
|
188
|
|
|
$
|
34.45
|
|
|
Forfeited
|
|
(1)
|
|
|
$
|
83.04
|
|
|
Vested(1)
|
|
(103)
|
|
|
$
|
65.07
|
|
|
Outstanding as of March 31, 2021
|
|
393
|
|
|
$
|
34.50
|
|
_____________________________________________________________________________
(1)The aggregate intrinsic value of vested restricted stock awards for the three months ended March 31, 2021 was $3.5 million.
The Company utilizes the closing stock price on the grant date to determine the fair value of restricted stock awards. As of March 31, 2021, unrecognized equity-based compensation related to the restricted stock awards expected to vest was $11.9 million. Such cost is expected to be recognized over a weighted-average period of 2.18 years.
b. Stock option awards
As of March 31, 2021, the 11,362 outstanding stock option awards had a weighted-average exercise price of $257.42 per award and a weighted-average remaining contractual term of 3.75 years. There was no activity related to the stock option awards during the three months ended March 31, 2021. The vested and exercisable stock option awards as of March 31, 2021 had no intrinsic value.
Condensed notes to the consolidated financial statements
(Unaudited)
c. Performance share awards
Performance share awards, which the Company has determined are equity awards, are subject to a combination of market, performance and service vesting criteria. For portions of awards with market criteria, a Monte Carlo simulation prepared by an independent third party is utilized to determine the grant-date (or modification date) fair value, and the associated expense is recognized on a straight-line basis over the three-year requisite service period of the awards. For portions of awards with performance criteria, the fair value is equal to the Company's closing stock price on the grant date (or modification date), and for each reporting period, the associated expense fluctuates and is adjusted based on an estimated payout of the number of shares of common stock to be delivered on the payment date for the three-year performance period.
These awards were granted in 2019 and 2018, and their market criteria consists of: (i) the relative three-year total shareholder return ("TSR") comparing the Company's shareholder return to the shareholder return of the peer group specified in each award agreement ("RTSR Performance Percentage") and (ii) the Company's absolute three-year total shareholder return ("ATSR Appreciation"). The performance criteria for these awards consists of the Company's three-year return on average capital employed ("ROACE Percentage"). Any shares earned under performance share awards are expected to be issued in the first quarter following the completion of the respective requisite service periods based on the achievement of certain market and performance criteria, and the payout can range from 0% to 200%.
The following table reflects the performance share award activity for the three months ended March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except for weighted-average grant-date fair value)
|
|
Performance
share awards
|
|
Weighted-average
grant-date
fair value
(per share)
|
|
Outstanding as of December 31, 2020
|
|
97
|
|
|
$
|
84.06
|
|
|
|
|
|
|
|
|
Vested(1)
|
|
(15)
|
|
|
$
|
184.43
|
|
|
Outstanding as of March 31, 2021
|
|
82
|
|
|
$
|
65.98
|
|
______________________________________________________________________________
(1)The performance share awards granted on February 16, 2018 had a performance period of January 1, 2018 to December 31, 2020 and, as their market and performance criteria were partially satisfied, resulted in a 43% payout. As such, the granted awards vested and were converted into 6,343 shares of the Company's common stock during the three months ended March 31, 2021 based on this 43% payout.
As of March 31, 2021, unrecognized equity-based compensation related to the performance share awards expected to vest was $2.2 million. Such cost is expected to be recognized over a weighted-average period of 0.92 years. As of March 31, 2021, the expense per performance share, which is the fair value per performance share adjusted for the estimated payout of the performance criteria, was $88.16.
d. Outperformance share award
An outperformance share award was granted during the year ended December 31, 2019, in conjunction with the appointment of the Company's President, and is accounted for as an equity award. If earned, the payout ranges from 0 to 50,000 shares in the Company's common stock per the vesting schedule. This award is subject to a combination of market and service vesting criteria, therefore, a Monte Carlo simulation prepared by an independent third party was utilized to determine the grant-date fair value with the associated expense recognized over the requisite service period. The payout of this award is based on the highest 50 consecutive trading day average closing stock price of the Company that occurs during the performance period that commenced on June 3, 2019 and ends on June 3, 2022 ("Final Date"). Of the earned outperformance shares, one-third of the award will vest on the Final Date, one-third will vest on the first anniversary of the Final Date and one-third will vest on the second anniversary of the Final Date, provided that the participant has been continuously employed with the Company through the applicable vesting date.
As of March 31, 2021, unrecognized equity-based compensation related to the outperformance share award expected to vest was $0.4 million. Such cost is expected to be recognized over a weighted-average period of 3.25 years.
Condensed notes to the consolidated financial statements
(Unaudited)
e. Performance unit awards
Performance unit awards, which the Company has determined are liability awards since they are settled in cash, are subject to a combination of market, performance and service vesting criteria. For portions of awards with market criteria, a Monte Carlo simulation prepared by an independent third party is utilized to determine the fair value, and is re-measured at each reporting period until settlement. For portions of awards with performance criteria, the Company's closing stock price is utilized to determine the fair value and is re-measured on the last trading day of each reporting period until settlement and, additionally, the associated expense fluctuates based on an estimated payout for the three-year performance period. The expense related to the performance unit awards is recognized on a straight-line basis over the three-year requisite service period of the awards, and the life-to-date recognized expense is adjusted accordingly at each reporting period based on the quarterly fair value re-measurements and redetermination of the estimated payout for the performance criteria.
For performance unit awards granted in 2021, the market criteria consists of: (i) annual relative total shareholder return comparing the Company's shareholder return to the shareholder return of the E&P companies listed in the Russell 2000 index ("Relative TSR") and (ii) annual absolute total shareholder return ("Absolute Return"), together the "PSU Matrix." The performance criteria for these awards consists of: (i) earnings before interest , taxes, depreciation, amortization and exploration expense ("EBITDAX") and three-year total debt reduction (the "EBITDAX/Total Debt Component") and (ii) growth in inventory (the "Inventory Growth Component"). Any units earned are expected to be paid in cash during the first quarter following the completion of the requisite service period, based on the achievement of certain market and performance criteria, and the payout can range from 0% to 250% for the market criteria and 0% to 200% for the performance criteria.
For performance unit awards granted in 2020, the market criteria consists of: (i) the RTSR Performance Percentage and (ii) the ATSR Appreciation. The performance criteria for these awards consists of the ROACE Percentage. Any units earned are expected to be paid in cash during the first quarter following the completion of the requisite service period, based on the achievement of certain market and performance criteria, and the payout can range from 0% to 200%, but is capped at 100% if the ATSR Appreciation is zero or less.
The following table presents the assumptions used to estimate the fair value per performance unit for the performance unit awards granted in 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
March 9, 2021
|
|
Remaining performance period
|
|
2.81 years
|
|
Risk-free interest rate(1)
|
|
0.32
|
%
|
|
Dividend yield
|
|
—
|
%
|
|
Expected volatility(2)
|
|
114.60
|
%
|
|
Closing stock price on grant date
|
|
$
|
34.66
|
|
______________________________________________________________________________
(1)The remaining performance period matched zero-coupon risk-free interest rate was derived from the U.S. Treasury constant maturities yield curve on grant date.
(2)The Company utilized its own remaining performance period matched historical volatility in order to develop the expected volatility.
The following table reflects the performance unit award activity for the three months ended March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Performance units
|
|
Outstanding as of December 31, 2020
|
|
99
|
|
|
Granted
|
|
110
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of March 31, 2021
|
|
209
|
|
Condensed notes to the consolidated financial statements
(Unaudited)
As of March 31, 2021, unrecognized equity-based compensation related to the performance unit awards expected to vest was $7.0 million. Such cost is expected to be recognized over a weighted-average period of 2.62 years. As of March 31, 2021, the expense per performance unit, which is the fair value per performance unit adjusted for the estimated payout of the performance criteria, for the 2021 and 2020 performance unit awards was $39.77 and $41.82, respectively.
f. Phantom unit awards
Phantom unit awards, which the Company has determined are liability awards, represent the holder's right to receive the cash equivalent of one share of common stock of the Company for each phantom unit as of the applicable vesting date, subject to withholding requirements. Phantom unit awards granted to employees vest 33%, 33% and 34% per year beginning on the first anniversary of the grant date.
The following table reflects the phantom unit award activity for the three months ended March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except for weighted-average fair value)
|
|
Phantom units
|
|
|
|
Outstanding as of December 31, 2020
|
|
75
|
|
|
|
|
Granted
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Vested(1)
|
|
(25)
|
|
|
|
|
Outstanding as of March 31, 2021
|
|
55
|
|
|
|
______________________________________________________________________________
(1)On March 5, 2021, the vested phantom unit awards were settled and paid out in cash at a fair value of $34.24 based on the Company's closing stock price on the vesting date.
The Company utilizes the closing stock price on the last day of each reporting period to determine the fair value of phantom unit awards and the life-to-date recognized expense is adjusted accordingly. As of March 31, 2021, unrecognized equity-based compensation related to the phantom unit awards expected to vest was $1.6 million. Such cost is expected to be recognized over a weighted-average period of 2.08 years.
g. Equity-based compensation
The following table reflects equity-based compensation expense for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
(in thousands)
|
|
2021
|
|
2020
|
|
|
|
|
|
Equity awards:
|
|
|
|
|
|
|
|
|
|
Restricted stock awards
|
|
$
|
1,963
|
|
|
$
|
2,498
|
|
|
|
|
|
|
Performance share awards
|
|
725
|
|
|
756
|
|
|
|
|
|
|
Outperformance share award
|
|
43
|
|
|
44
|
|
|
|
|
|
|
Stock option awards
|
|
7
|
|
|
43
|
|
|
|
|
|
|
Total share-settled equity-based compensation, gross
|
|
$
|
2,738
|
|
|
$
|
3,341
|
|
|
|
|
|
|
Less amounts capitalized
|
|
(670)
|
|
|
(965)
|
|
|
|
|
|
|
Total share-settled equity-based compensation, net
|
|
$
|
2,068
|
|
|
$
|
2,376
|
|
|
|
|
|
|
Liability awards:
|
|
|
|
|
|
|
|
|
|
Performance unit awards
|
|
$
|
820
|
|
|
$
|
24
|
|
|
|
|
|
|
Phantom unit awards
|
|
506
|
|
|
25
|
|
|
|
|
|
|
Total cash-settled equity-based compensation, gross
|
|
$
|
1,326
|
|
|
$
|
49
|
|
|
|
|
|
|
Less amounts capitalized
|
|
(198)
|
|
|
(10)
|
|
|
|
|
|
|
Total cash-settled equity-based compensation, net
|
|
$
|
1,128
|
|
|
$
|
39
|
|
|
|
|
|
|
Total equity-based compensation, net
|
|
$
|
3,196
|
|
|
$
|
2,415
|
|
|
|
|
|
Condensed notes to the consolidated financial statements
(Unaudited)
Note 9—Derivatives
The Company has three types of derivative instruments as of March 31, 2021: (i) commodity derivatives, (ii) a debt interest rate derivative and (iii) a contingent consideration derivative. See Notes (i) 2.e in the 2020 Annual Report for the Company's significant accounting policies for derivatives and presentation, (ii) 10.a for fair value measurement of derivatives on a recurring basis and (iii) 18.b for derivatives subsequent events. The Company's derivatives were not designated as hedges for accounting purposes, and the Company does not enter into such instruments for speculative trading purposes. Accordingly, the changes in fair value are recognized in "Gain (loss) on derivatives, net" under "Non-operating income (expense)" on the unaudited consolidated statements of operations.
The following table summarizes components of the Company's gain (loss) on derivatives, net by type of derivative instrument for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
(in thousands)
|
|
2021
|
|
2020
|
|
Commodity
|
|
$
|
(154,033)
|
|
|
$
|
291,361
|
|
|
Interest rate
|
|
4
|
|
|
—
|
|
|
Contingent consideration
|
|
(336)
|
|
|
6,475
|
|
|
Gain (loss) on derivatives, net
|
|
$
|
(154,365)
|
|
|
$
|
297,836
|
|
a. Commodity
Due to the inherent volatility in oil, NGL and natural gas prices and differences in the prices of oil, NGL and natural gas between where the Company produces and where the Company sells such commodities, the Company engages in commodity derivative transactions, such as puts, swaps, collars and basis swaps, to hedge price risk associated with a portion of the Company's anticipated sales volumes. By removing a portion of the price volatility associated with future sales volumes, the Company expects to mitigate, but not eliminate, the potential effects of variability in cash flows from operations. See Note 9 in the 2020 Annual Report for discussion of transaction types and settlement indexes.
During the three months ended March 31, 2021, the Company’s derivatives were settled based on reported prices on commodity exchanges, with (i) oil derivatives settled based on Brent ICE pricing, (ii) NGL derivatives settled based on Mont Belvieu OPIS pricing and (iii) natural gas derivatives settled based on Henry Hub NYMEX and Waha Inside FERC pricing.
During the three months ended March 31, 2021, the Company completed a hedge restructuring by (i) selling 2,254,500 calendar year 2021 $55.00 per barrel Brent ICE puts, which volumetrically offset existing calendar year 2021 $55.00 per barrel Brent ICE puts, and receiving aggregate premiums of $9.0 million at inception of the contracts and (ii) entering into 2,254,500 calendar year 2021 Brent ICE swaps at a weighted-average price of $55.09 per barrel. Associated with the aforementioned existing calendar year 2021 $55.00 per barrel Brent ICE puts, which were entered into during 2020, were $50.6 million in aggregate premiums paid at the inception of the contacts.
During the three months ended March 31, 2020, the Company completed a hedge restructuring by early terminating collars and entering into new swaps. The following table presents the commodity derivatives that were terminated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate volumes (Bbl)
|
|
Floor price ($/Bbl)
|
|
Ceiling price ($/Bbl)
|
|
Contract period
|
|
WTI NYMEX - Collars
|
|
912,500
|
|
|
$
|
45.00
|
|
|
$
|
71.00
|
|
|
January 2021 - December 2021
|
Condensed notes to the consolidated financial statements
(Unaudited)
The following table summarizes open commodity derivative positions as of March 31, 2021, for commodity derivatives that were entered into through March 31, 2021, for the settlement periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Year 2021
|
|
Year 2022
|
|
|
|
Oil:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brent ICE - Swaps:
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
5,651,250
|
|
|
3,759,500
|
|
|
|
|
Weighted-average price ($/Bbl)
|
|
$
|
51.29
|
|
|
$
|
47.05
|
|
|
|
|
Brent ICE - Collars:
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
440,000
|
|
|
821,250
|
|
|
|
|
Weighted-average floor price ($/Bbl)
|
|
$
|
45.00
|
|
|
$
|
53.67
|
|
|
|
|
Weighted-average ceiling price ($/Bbl)
|
|
$
|
59.50
|
|
|
$
|
62.40
|
|
|
|
|
Total Brent ICE:
|
|
|
|
|
|
|
|
Total volume (Bbl)
|
|
6,091,250
|
|
|
4,580,750
|
|
|
|
|
Weighted-average floor price ($/Bbl)
|
|
$
|
50.83
|
|
|
$
|
48.24
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average ceiling price ($/Bbl)
|
|
$
|
51.88
|
|
|
$
|
49.81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NGL:
|
|
|
|
|
|
|
|
Mont Belvieu OPIS:
|
|
|
|
|
|
|
|
Purity Ethane - Swaps:
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
687,500
|
|
|
—
|
|
|
|
|
Weighted-average price ($/Bbl)
|
|
$
|
12.01
|
|
|
$
|
—
|
|
|
|
|
Non-TET Propane - Swaps:
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
1,825,725
|
|
|
—
|
|
|
|
|
Weighted-average price ($/Bbl)
|
|
$
|
22.90
|
|
|
$
|
—
|
|
|
|
|
Non-TET Normal Butane - Swaps:
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
608,575
|
|
|
—
|
|
|
|
|
Weighted-average price ($/Bbl)
|
|
$
|
25.87
|
|
|
$
|
—
|
|
|
|
|
Non-TET Isobutane - Swaps:
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
166,100
|
|
|
—
|
|
|
|
|
Weighted-average price ($/Bbl)
|
|
$
|
26.55
|
|
|
$
|
—
|
|
|
|
|
Non-TET Natural Gasoline - Swaps:
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
663,850
|
|
|
—
|
|
|
|
|
Weighted-average price ($/Bbl)
|
|
$
|
38.16
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total NGL volume (Bbl)
|
|
3,951,750
|
|
|
—
|
|
|
|
|
Natural gas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Henry Hub NYMEX - Swaps:
|
|
|
|
|
|
|
|
Volume (MMBtu)
|
|
32,037,500
|
|
|
3,650,000
|
|
|
|
|
Weighted-average price ($/MMBtu)
|
|
$
|
2.59
|
|
|
$
|
2.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Waha Inside FERC to Henry Hub NYMEX - Basis Swaps:
|
|
|
|
|
|
|
|
Volume (MMBtu)
|
|
42,680,000
|
|
|
18,067,500
|
|
|
|
|
Weighted-average differential ($/MMBtu)
|
|
$
|
(0.47)
|
|
|
$
|
(0.41)
|
|
|
|
Condensed notes to the consolidated financial statements
(Unaudited)
b. Interest rate
Due to the inherent volatility in interest rates, the Company has entered into an interest rate derivative swap to hedge interest rate risk associated with a portion of the Company's anticipated outstanding debt under the Senior Secured Credit Facility. The Company will pay a fixed rate over the contract term for that portion. By removing a portion of the interest rate volatility associated with anticipated outstanding debt, the Company expects to mitigate, but not eliminate, the potential effects of variability in cash flows from operations.
The following table summarizes the Company's interest rate derivative:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional amount
(in thousands)
|
|
Fixed rate
|
|
|
|
Contract period
|
|
LIBOR - Swap
|
|
$
|
100,000
|
|
|
0.345
|
%
|
|
|
|
April 16, 2020 - April 18, 2022
|
c. Contingent consideration
The Company's asset acquisition of oil and natural gas properties that closed on April 30, 2020 provides for potential contingent payments to be paid by the Company if the arithmetic average of the monthly settlement WTI NYMEX prices exceed certain thresholds for the contingency period beginning on January 1, 2021 and ending on the earlier of December 31, 2022 or the date the counterparty has received the maximum consideration of $1.2 million. See Note 3.a for further discussion of the Company's asset acquisition associated with potential contingent consideration payments. At each quarterly reporting period, the Company remeasures its contingent consideration with the changes in fair values recognized in earnings.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 10—Fair value measurements
See the beginning of Note 11 in the 2020 Annual Report for information about the fair value hierarchy levels.
a. Fair value measurement on a recurring basis
See Note 9 for further discussion of the Company's derivatives, and see Note 2.e in the 2020 Annual Report for the Company's significant accounting policies for derivatives.
Balance sheet presentation
The following tables present the Company's derivatives by (i) balance sheet classification, (ii) derivative type and (iii) fair value hierarchy level, and provide a total, on a gross basis and a net basis reflected in "Derivatives" on the unaudited consolidated balance sheets as of the dates presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
(in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total gross fair value
|
|
Amounts offset
|
|
Net fair value presented on the unaudited consolidated balance sheets
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity - Oil
|
|
$
|
—
|
|
|
$
|
6,197
|
|
|
$
|
—
|
|
|
$
|
6,197
|
|
|
$
|
(6,197)
|
|
|
$
|
—
|
|
|
Commodity - NGL
|
|
—
|
|
|
1,735
|
|
|
—
|
|
|
1,735
|
|
|
(1,735)
|
|
|
—
|
|
|
Commodity - Natural gas
|
|
—
|
|
|
(195)
|
|
|
—
|
|
|
(195)
|
|
|
195
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity - Oil
|
|
$
|
—
|
|
|
$
|
3,928
|
|
|
$
|
—
|
|
|
$
|
3,928
|
|
|
$
|
(3,928)
|
|
|
$
|
—
|
|
|
Commodity - NGL
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Commodity - Natural gas
|
|
—
|
|
|
545
|
|
|
—
|
|
|
545
|
|
|
(545)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity - Oil
|
|
$
|
—
|
|
|
$
|
(73,960)
|
|
|
$
|
—
|
|
|
$
|
(73,960)
|
|
|
$
|
6,197
|
|
|
$
|
(67,763)
|
|
|
Commodity - NGL
|
|
—
|
|
|
(39,133)
|
|
|
—
|
|
|
(39,133)
|
|
|
1,735
|
|
|
(37,398)
|
|
|
Commodity - Natural gas
|
|
—
|
|
|
(21,726)
|
|
|
—
|
|
|
(21,726)
|
|
|
(195)
|
|
|
(21,921)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate - LIBOR
|
|
—
|
|
|
(197)
|
|
|
—
|
|
|
(197)
|
|
|
—
|
|
|
(197)
|
|
|
Contingent consideration
|
|
—
|
|
|
(1,115)
|
|
|
—
|
|
|
(1,115)
|
|
|
—
|
|
|
(1,115)
|
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity - Oil
|
|
$
|
—
|
|
|
$
|
(32,534)
|
|
|
$
|
—
|
|
|
$
|
(32,534)
|
|
|
$
|
3,928
|
|
|
$
|
(28,606)
|
|
|
Commodity - NGL
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Commodity - Natural gas
|
|
—
|
|
|
(1,746)
|
|
|
—
|
|
|
(1,746)
|
|
|
545
|
|
|
(1,201)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate - LIBOR
|
|
—
|
|
|
(13)
|
|
|
—
|
|
|
(13)
|
|
|
—
|
|
|
(13)
|
|
|
Contingent consideration
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
—
|
|
|
(1)
|
|
|
Net derivative liability positions
|
|
$
|
—
|
|
|
$
|
(158,215)
|
|
|
$
|
—
|
|
|
$
|
(158,215)
|
|
|
$
|
—
|
|
|
$
|
(158,215)
|
|
Condensed notes to the consolidated financial statements
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
(in thousands)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total gross fair value
|
|
Amounts offset
|
|
Net fair value presented on the
consolidated balance sheets
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity - Oil
|
|
$
|
—
|
|
|
$
|
32,958
|
|
|
$
|
—
|
|
|
$
|
32,958
|
|
|
$
|
(24,930)
|
|
|
$
|
8,028
|
|
|
Commodity - NGL
|
|
—
|
|
|
2,720
|
|
|
—
|
|
|
2,720
|
|
|
(2,720)
|
|
|
—
|
|
|
Commodity - Natural gas
|
|
—
|
|
|
521
|
|
|
—
|
|
|
521
|
|
|
(656)
|
|
|
(135)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity - Oil
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Commodity - NGL
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Commodity - Natural gas
|
|
—
|
|
|
535
|
|
|
—
|
|
|
535
|
|
|
(535)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity - Oil
|
|
$
|
—
|
|
|
$
|
(25,118)
|
|
|
$
|
—
|
|
|
$
|
(25,118)
|
|
|
$
|
24,930
|
|
|
$
|
(188)
|
|
|
Commodity - NGL
|
|
—
|
|
|
(16,185)
|
|
|
—
|
|
|
(16,185)
|
|
|
2,720
|
|
|
(13,465)
|
|
|
Commodity - Natural gas
|
|
—
|
|
|
(17,958)
|
|
|
—
|
|
|
(17,958)
|
|
|
656
|
|
|
(17,302)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate - LIBOR
|
|
—
|
|
|
(206)
|
|
|
—
|
|
|
(206)
|
|
|
—
|
|
|
(206)
|
|
|
Contingent consideration
|
|
—
|
|
|
(665)
|
|
|
—
|
|
|
(665)
|
|
|
—
|
|
|
(665)
|
|
|
Noncurrent:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity - Oil
|
|
$
|
—
|
|
|
$
|
(10,932)
|
|
|
$
|
—
|
|
|
$
|
(10,932)
|
|
|
$
|
—
|
|
|
$
|
(10,932)
|
|
|
Commodity - NGL
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Commodity - Natural gas
|
|
—
|
|
|
(1,476)
|
|
|
—
|
|
|
(1,476)
|
|
|
535
|
|
|
(941)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate - LIBOR
|
|
—
|
|
|
(63)
|
|
|
—
|
|
|
(63)
|
|
|
—
|
|
|
(63)
|
|
|
Contingent consideration
|
|
—
|
|
|
(115)
|
|
|
—
|
|
|
(115)
|
|
|
—
|
|
|
(115)
|
|
|
Net derivative liability positions
|
|
$
|
—
|
|
|
$
|
(35,984)
|
|
|
$
|
—
|
|
|
$
|
(35,984)
|
|
|
$
|
—
|
|
|
$
|
(35,984)
|
|
See Note 11.a in the 2020 Annual Report for discussion of the significant Level 2 inputs used in the fair value mark-to-market analysis of commodity, interest rate and contingent consideration derivatives. The Company reviewed the third-party specialist's valuations of commodity, interest rate and contingent consideration derivatives, including the related inputs, and analyzed changes in fair values between reporting dates.
The Company's acquisition of oil and natural gas properties that closed on April 30, 2020 provides for potential contingent payments to be paid by the Company. The fair value of the contingent consideration derivative liability was $1.1 million and $0.8 million as of March 31, 2021 and December 31, 2020, respectively. See Note 3.a for further discussion of the Company's asset acquisition associated with the potential contingent consideration payments.
b. Fair value measurement on a nonrecurring basis
See Note 2.i in the 2020 Annual Report for the Level 2 fair value hierarchy input assumptions used in estimating the net realizable value ("NRV") of inventory used to determine the $1.3 million impairment expense of inventory recorded during the three months ended March 31, 2020, pertaining to line-fill and other inventories. There were no impairments of inventory recorded during the three months ended March 31, 2021.
See Note 11.b in the 2020 Annual Report for the Level 3 fair value hierarchy input assumptions used in the fair value measurement of long-lived assets used to determine the $8.2 million impairment expense of long-lived assets recorded during the three months ended March 31, 2020, pertaining to midstream service assets. There were no impairments of long-lived assets recorded during the three months ended March 31, 2021.
Condensed notes to the consolidated financial statements
(Unaudited)
c. Items not accounted for at fair value
The carrying amounts reported on the unaudited consolidated balance sheets for cash and cash equivalents, accounts receivable, accounts payable, accrued capital expenditures, undistributed revenue and royalties and other accrued assets and liabilities approximate their fair values.
The Company has not elected to account for its debt instruments at fair value. The following table presents the carrying amounts and fair values of the Company's debt as of the dates presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
(in thousands)
|
|
Long-term
debt
|
|
Fair
value(1)
|
|
Long-term
debt
|
|
Fair
value(1)
|
|
January 2025 Notes
|
|
$
|
577,913
|
|
|
$
|
556,288
|
|
|
$
|
577,913
|
|
|
$
|
499,299
|
|
|
January 2028 Notes
|
|
361,044
|
|
|
346,064
|
|
|
361,044
|
|
|
299,667
|
|
|
Senior Secured Credit Facility
|
|
220,000
|
|
|
220,130
|
|
|
255,000
|
|
|
255,187
|
|
|
Total
|
|
$
|
1,158,957
|
|
|
$
|
1,122,482
|
|
|
$
|
1,193,957
|
|
|
$
|
1,054,153
|
|
______________________________________________________________________________
(1)The fair values of the outstanding notes were determined using the Level 1 fair value hierarchy quoted market prices for each respective instrument as of March 31, 2021 and December 31, 2020. The fair values of the outstanding debt under the Senior Secured Credit Facility were estimated utilizing the Level 2 fair value hierarchy pricing model for similar instruments as of March 31, 2021 and December 31, 2020.
Note 11—Net income (loss) per common share
Basic and diluted net income (loss) per common share are computed by dividing net income (loss) by the weighted-average common shares outstanding for the period. Diluted net income (loss) per common share reflects the potential dilution of non-vested restricted stock awards, outstanding stock option awards, non-vested performance share awards and the non-vested outperformance share award. See Note 8 for additional discussion of these awards. For the three months ended March 31, 2021, all of these awards were anti-dilutive due to the Company's net loss and, therefore, were excluded from the calculation of diluted net loss per common share. The dilutive effects of these awards were calculated utilizing the treasury stock method for the three months ended March 31, 2020.
The following table reflects the calculations of basic and diluted (i) weighted-average common shares outstanding and (ii) net income (loss) per common share for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
(in thousands, except for per share data)
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) (numerator)
|
|
$
|
(75,439)
|
|
|
$
|
74,646
|
|
|
|
|
|
|
Weighted-average common shares outstanding (denominator)(1):
|
|
|
|
|
|
|
|
|
|
Basic
|
|
11,918
|
|
|
11,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
11,918
|
|
|
11,673
|
|
|
|
|
|
|
Net income (loss) per common share(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(6.33)
|
|
|
$
|
6.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(6.33)
|
|
|
$
|
6.39
|
|
|
|
|
|
_____________________________________________________________________________
(1)For the three months ended March 31, 2020, shares and per share data have been retroactively adjusted to reflect the Company's 1-for-20 reverse stock split effective June 1, 2020, as described in Note 7.b.
Condensed notes to the consolidated financial statements
(Unaudited)
Note 12—Commitments and contingencies
a. Litigation
From time to time, the Company is subject to various legal proceedings arising in the ordinary course of business, including proceedings for which the Company may not have insurance coverage. While many of these matters involve inherent uncertainty, as of the date hereof, the Company does not currently believe that any such legal proceedings will have a material adverse effect on the Company's business, financial position, results of operations or liquidity.
b. Drilling rig contract
The Company enters into drilling rig contracts to ensure availability of desired rigs to facilitate drilling plans. The Company has two operating leases for terms of multiple months, both of which contain early termination clauses that require the Company to potentially pay penalties to the third party should the Company cease drilling efforts. These penalties would negatively impact the Company's financial statements upon early contract termination. There were no penalties incurred for early contract termination for either of the three months ended March 31, 2021 or 2020. As these drilling rig contracts are operating leases, the present value of the future commitment as of March 31, 2021 related to the drilling rig contract with an initial term greater than 12 months is included in current and noncurrent "Operating lease liabilities" on the unaudited consolidated balance sheet as of March 31, 2021. The future commitment of $1.7 million as of March 31, 2021 related to the drilling rig contract with an initial term less than 12 months is not recorded on the unaudited consolidated balance sheets. See Note 5 in the 2020 Annual Report for additional discussion of the Company's leases.
c. Firm sale and transportation commitments
The Company has committed to deliver, for sale or transportation, fixed volumes of product under certain contractual arrangements that specify the delivery of a fixed and determinable quantity. If not fulfilled, the Company is subject to firm transportation payments on excess pipeline capacity and other contractual penalties. These commitments are normal and customary for the Company's business. In certain instances, the Company has used spot market purchases to meet its commitments in certain locations or due to favorable pricing. A portion of the Company's commitments are related to transportation commitments with a certain pipeline pertaining to the gathering of the Company's production from established acreage that extends into 2024. The Company was unable to satisfy a portion of this particular commitment with produced or purchased oil, therefore, the Company expensed firm transportation payments on excess capacity of $1.6 million during the three months ended March 31, 2021, which is recorded in "Transportation and marketing expenses" on the unaudited consolidated statement of operations. No firm transportation payments on excess pipeline capacity were incurred during the three months ended March 31, 2020. The Company's estimated aggregate liability of firm transportation payments on excess capacity is $4.4 million as of March 31, 2021, and is included in "Accounts payable and accrued liabilities" on the unaudited consolidated balance sheet. As of March 31, 2021, future firm sale and transportation commitments of $258.8 million are expected to be satisfied, and as such, are not recorded as a liability on the unaudited consolidated balance sheet.
d. Sand purchase commitment
During the year ended December 31, 2020, the Company entered into an agreement to take delivery of processed sand at a fixed price for one year, which is utilized in the Company's completions activities, from its sand mine that is operated by a third-party contractor. As of March 31, 2021, under the terms of this agreement, the Company is required to purchase a certain volume remaining under its commitment or it would incur a shortfall payment of $3.4 million at the end of the contract period.
e. Federal and state regulations
Oil and natural gas exploration, production and related operations are subject to extensive federal and state laws, rules and regulations. Failure to comply with these laws, rules and regulations can result in substantial penalties. The regulatory burden on the oil and natural gas industry increases the cost of doing business and affects profitability. The Company believes that it is in compliance with currently applicable federal and state regulations related to oil and natural gas exploration and production, and that compliance with the current regulations will not have a material adverse impact on the financial position or results of operations of the Company. These rules and regulations are frequently amended or reinterpreted; therefore, the Company is unable to predict the future cost or impact of complying with these regulations.
Condensed notes to the consolidated financial statements
(Unaudited)
f. Environmental
The Company is subject to extensive federal, state and local environmental laws and regulations. These laws, among other things, regulate the discharge of materials into the environment and may require the Company to remove or mitigate the environmental effects of the disposal or release of petroleum or chemical substances at various sites. Environmental expenditures are expensed in the period incurred. Liabilities for expenditures of a non-capital nature are recorded when environmental assessment or remediation is probable and the costs can be reasonably estimated. Such liabilities are generally undiscounted unless the timing of cash payments is fixed and readily determinable. Management believes no materially significant liabilities of this nature existed as of March 31, 2021 or December 31, 2020.
Note 13—Supplemental cash flow and non-cash information
The following table presents supplemental cash flow and non-cash information for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
(in thousands)
|
|
2021
|
|
2020
|
|
Supplemental cash flow information:
|
|
|
|
|
|
Cash paid for interest, net of $449 and $1,181 of capitalized interest, respectively
|
|
$
|
48,030
|
|
|
$
|
23,697
|
|
|
|
|
|
|
|
|
Supplemental non-cash investing information:
|
|
|
|
|
|
|
|
|
|
|
|
Change in accrued capital expenditures
|
|
$
|
(351)
|
|
|
$
|
16,272
|
|
|
|
|
|
|
|
|
Capitalized share-settled equity-based compensation
|
|
$
|
670
|
|
|
$
|
965
|
|
|
Capitalized asset retirement cost
|
|
$
|
397
|
|
|
$
|
886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 14—Asset retirement obligations
See Note 2.k in the 2020 Annual Report for discussion of the Company's significant accounting policies for asset retirement obligations.
The following table reconciles the Company's asset retirement obligation liability associated with tangible long-lived assets for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
(in thousands)
|
|
2021
|
|
2020
|
|
Liability at beginning of period
|
|
$
|
68,326
|
|
|
$
|
62,718
|
|
|
Liabilities added due to acquisitions, drilling, midstream service asset construction and other
|
|
397
|
|
|
886
|
|
|
Accretion expense (1)
|
|
1,143
|
|
|
1,106
|
|
|
Liabilities settled due to plugging and abandonment or removed due to sale
|
|
(57)
|
|
|
(497)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability at end of period
|
|
$
|
69,809
|
|
|
$
|
64,213
|
|
_____________________________________________________________________________
(1)Accretion expense is included in "Other operating expenses" on the unaudited consolidated statements of operations.
Note 15—Revenue recognition
Oil, NGL and natural gas sales and sales of purchased oil are generally recognized at the point in time that control of the product is transferred to the customer. Midstream service revenues are recognized over time as the customer benefits from these services when provided. A more detailed summary of the underlying contracts that give rise to the Company's revenues and methods of recognition can be found in Note 14 in the 2020 Annual Report.
Note 16—Income taxes
The Company is subject to federal and state income taxes and the Texas franchise tax. As of March 31, 2021, the Company had federal net operating loss carryforwards totaling $2.1 billion, and of this amount, $1.7 billion will begin to expire in 2026 and $397.6 million will not expire but may be limited in future periods, and state of Oklahoma net operating loss
Condensed notes to the consolidated financial statements
(Unaudited)
carryforwards totaling $34.5 million that will begin to expire in 2032. As of March 31, 2021, the Company believes it is more likely than not that a portion of the net operating loss carryforwards are not fully realizable. The Company continues to consider new evidence, both positive and negative, in determining whether, based on the weight of that evidence, a valuation allowance is needed. Such consideration includes projected future cash flows from its oil, NGL and natural gas reserves (including the timing of those cash flows), the reversal of deferred tax liabilities recorded as of March 31, 2021, the Company's ability to capitalize intangible drilling costs, rather than expensing these costs and future projections of Oklahoma sourced income. As of March 31, 2021, a total valuation allowance of $505.1 million has been recorded to offset the Company's federal and Oklahoma net deferred tax assets, resulting in a Texas net deferred tax asset of $2.2 million, which is included in "Other noncurrent assets, net" on the unaudited consolidated balance sheets.
Note 17—Related parties
Halliburton
The Chairman of the Company's board of directors is on the board of directors of Halliburton Company ("Halliburton"). Halliburton provides drilling and completions services to the Company.
The following table presents the capital expenditures for oil and natural gas properties paid to Halliburton included in the unaudited consolidated statements of cash flows for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
(in thousands)
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
Capital expenditures for oil and natural gas properties
|
|
$
|
11,780
|
|
|
$
|
27,225
|
|
Condensed notes to the consolidated financial statements
(Unaudited)
Note 18—Subsequent events
a. Senior Secured Credit Facility
On April 6, 2021 and April 26, 2021, the Company borrowed an additional $20.0 million and made a $10.0 million payment, respectively, on the Senior Secured Credit Facility. As a result, the outstanding balance under the Senior Secured Credit Facility was $230.0 million as of May 3, 2021. See Note 6.c for additional discussion of the Company's Senior Secured Credit Facility.
b. Commodity derivatives
The following table presents the commodity derivatives that were entered into by the Company subsequent to March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate volumes (Bbl)
|
|
Weighted-average price ($/Bbl)
|
|
Contract period
|
|
Brent ICE - Swaps
|
|
365,000
|
|
|
$
|
61.55
|
|
|
January 2022 - December 2022
|
The following table summarizes the resulting open oil derivative position as of March 31, 2021, updated for the above derivative transactions through May 3, 2021, for the settlement periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining Year 2021
|
|
Year 2022
|
|
|
|
Oil:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brent ICE - Swaps:
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
5,651,250
|
|
|
4,124,500
|
|
|
|
|
Weighted-average price ($/Bbl)
|
|
$
|
51.29
|
|
|
$
|
48.34
|
|
|
|
|
Brent ICE - Collars:
|
|
|
|
|
|
|
|
Volume (Bbl)
|
|
440,000
|
|
|
821,250
|
|
|
|
|
Weighted-average floor price ($/Bbl)
|
|
$
|
45.00
|
|
|
$
|
53.67
|
|
|
|
|
Weighted-average ceiling price ($/Bbl)
|
|
$
|
59.50
|
|
|
$
|
62.40
|
|
|
|
|
Total Brent ICE:
|
|
|
|
|
|
|
|
Total volume (Bbl)
|
|
6,091,250
|
|
|
4,945,750
|
|
|
|
|
Weighted-average floor price ($/Bbl)
|
|
$
|
50.83
|
|
|
$
|
49.22
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average ceiling price ($/Bbl)
|
|
$
|
51.88
|
|
|
$
|
50.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
See Note 9 for additional discussion regarding the Company's derivatives. There has been no other derivative activity subsequent to March 31, 2021.
