AUSTIN, Texas, May 03, 2017 (GLOBE NEWSWIRE) -- Jones Energy, Inc. (NYSE:JONE) (“Jones Energy” or “the Company”) today announced financial and operating results for the quarter ended March 31, 2017 and provided initial guidance for second quarter 2017.
Highlights
- Average daily net production for the first quarter of 2017 of 18.9 Mboe/d, 1.4 Mboe/d above midpoint of guidance.
- First three operated Merge wells all successfully completed and flowing back with production increasing on all three wells. IP30 has not been reached yet on any of the wells.
- Completions beginning on the Company’s first Meramec target this week from the Company’s second two-well Merge pad (wells four and five).
- Added 3,688 net acres in the Merge for an average price of $7,500 per acre to the initial 18,000 net acre position since September 2016. Position is currently 21,724 net acres.
- Initiated long lateral program in Western Anadarko Cleveland with continued strong results and base production outperformance.
- Net loss for the first quarter of 2017 of $3.5 million, or a loss of $0.05 per share, non-GAAP adjusted net income of $3.9 million, or $0.01 per share and EBITDAX of $53 million.1
Jonny Jones, the Company’s Founder, Chairman, and CEO, commented, “2017 is a transition year for Jones Energy from a Western Anadarko (Cleveland) focused company to a Merge focused company. During the first quarter, our production was driven by strong base production from the Western Anadarko, exceeding the top end of guidance despite a crippling ice storm in early January. Strong performance from our Cleveland development program has highlighted that the asset still competes for capital and continues to outperform expectations today as we are well into the second quarter. Our team has also quickly pivoted to the Merge, where we have kicked-off drilling and intend to build to a three-rig program as soon as possible. It is still early days in the Merge, and the three wells we have on production are in the clean-up phase with production still increasing. Average oil cuts are over 50% on the first three wells, and we expect to report max IP30 rates on these wells after peak production is reached. Our first quarter results highlight our ability to successfully begin the asset transition while managing our production profile and balance sheet.”
Financial Results
Total operating revenues for the three months ended March 31, 2017 were $41.2 million as compared to $25.9 million for the three months ended March 31, 2016. Total revenues including current period settlements of matured derivative contracts were $67.6 million for the three months ended March 31, 2017 as compared to $68.5 million for the three months ended March 31, 2016.
Total operating expenses for the three months ended March 31, 2017 were $54.7 million as compared to $59.9 million for the three months ended March 31, 2016. Operating expenses were lower on a year over year basis largely as a result of lower depletion, depreciation and amortization costs.
For the three months ended March 31, 2017, the Company reported a net loss of $3.5 million, or a loss of $0.05 per share as compared to net income of $48.5 million, or $0.57 per share for the three months ended March 31, 2016. Excluding, on a tax-adjusted basis, certain items that the Company does not view as indicative of its ongoing financial performance, and adjusting for non-controlling interest, the Company had adjusted net income for the first quarter 2017 of $3.9 million, or adjusted net income of $0.01 per share, as compared to adjusted net loss of $3.5 million, or a loss of $0.03 per share for the three months ended March 31, 2016.
Earnings before interest, income taxes, depreciation, amortization, and exploration expense (“EBITDAX”) for the first quarter 2017 was $53.3 million. This compares to first quarter 2016 EBITDAX of $51.1 million.
First quarter 2017 lease operating expense (“LOE”) of $8.8 million was approximately 2% higher than first quarter 2016 LOE of $8.6 million. On a dollar per boe basis, first quarter 2017 LOE was $5.18 per boe, approximately 11% higher compared to first quarter 2016 LOE which was $4.65 per boe due to lower production and higher operated well count.
Operating Results
Western Anadarko (Cleveland)
During the first quarter, the Company spud 15 wells, completed 19 wells, which included 7 wells carried into 2017 from fourth quarter 2016, and brought 17 wells online in the Cleveland formation. Average daily net production in the Cleveland was 13.6 MBoe/d in the first quarter of 2017. To date, 60% of wells brought online in 2017 are performing above expectations, 6 of which have exceeded IP30 rates of 600 Boe/d (31% oil), two of which have achieved IP30 rates above 1,000 Boe/d (34% oil). These recent outstanding results illustrate the upside that still exists in our Cleveland development program even after drilling more than 550 horizontal wells.
Subsequent to the end of the first quarter, Jones Energy initiated drilling a new development area in Hutchinson County, TX. This area offsets the Company’s Coble 496-2H which is a 100% Jones Energy operated well drilled to a 4,255’ lateral length that achieved an IP30 of 790 Boe/d (63% oil) and has an EUR of 873 MBoe after being online for nearly 20 months. The Coble well has opened a new area of Cleveland development where Jones Energy has accumulated over 14,000 net acres with approximately 60 potential drilling locations. Furthermore, the Company intends to drill long laterals in this new area, with the first 7,500’ long lateral currently drilling. A successful outcome in this new area could have a meaningful positive impact to Cleveland production expectations. The Company anticipates drilling several more long-lateral wells in the second quarter, and as many as 12 gross (11.6 net) in 2017.
Eastern Anadarko (Merge)
During the first quarter, the Company spud two wells and completed three wells, all being Woodford targets in the Merge. Due to the timing of the completions, these initial Merge wells did not significantly contribute to first quarter production.
Jones Energy continues to run one rig in the Merge and still anticipates adding a second rig in July with a third rig likely to follow by year end 2017. Drilling has just finished on the two-well BOMHOFF pad, which includes the BOMHOFF 20-12-7 1H, a Woodford target, and the BOMHOFF 20-12-7 2H, which is the Company’s first Meramec target. Completion operations on the pad are expected to begin this week.
Leasing efforts continue to enhance the Company’s position in the Merge. As of May 3, 2017, the Company held approximately 21,700 net acres. This represents an increase of approximately 21% from the initial acquisition of 18,000 net acres, all through leasehold acquisitions and pooling efforts. Jones Energy continues to aggressively seek opportunities to grow the asset through acquisitions, leasing and pooling.
Capital Expenditures
During the first quarter of 2017, the Company spent $45.7 million on capital expenditures excluding lease acquisitions, of which $43.7 million was drilling and completion capital and the remainder was related to maintenance capital and spending on non-operated wells. The Company spent $12.4 million on lease acquisitions in the first quarter, bringing total capital expenditures for the first quarter of 2017 to $58.0 million. The $12.4 million in lease acquisitions capital expenditures includes $11.1 million of Merge leasing completed during the first quarter.
2017 Guidance
Jones Energy reiterates its 2017 guidance for the full year, projecting average daily production of 20,700 to 23,000 Boe per day. The Company also announces second quarter 2017 guidance projecting average daily production of 20,700 to 21,700 Boe per day. A table has been provided below with full year and second quarter 2017 guidance by category.
| 2017 Guidance | ||||
| 2017E | 2Q17E | |||
| Total Production (MMBoe) | 7.6 – 8.4 | 1.9 – 2.0 | ||
| Average Daily Production (MBoe/d) | 20.7 – 23.0 | 20.7 – 21.7 | ||
| Crude Oil (MBbl/d) | 5.7 – 6.3 | |||
| Natural Gas (MMcf/d) | 51 – 57 | |||
| NGLs (MBbl/d) | 6.5 – 7.2 | |||
| Lease Operating Expense ($mm) | $45.0 –$50.0 | |||
| Production Taxes (% of Unhedged Revenue) * | 4.5% – 5.5% | |||
| Ad Valorem Taxes ($mm) * | $2.7 – $3.0 | |||
| Cash G&A Expense ($mm) | $23 – $25 | |||
| Capital Expenditures ($mm) | ||||
| Merge Drilling and Completion (D&C) | ||||
| JONE Operated D&C | $ | 88 | ||
| Non-Operated D&C and Other | 22 | |||
| Total Merge D&C | $ | 110 | ||
| Merge Leasing and Pooling | 20 | |||
| Total Merge Capital Expenditures | $ | 130 | ||
| Cleveland D&C | $ | 122 | ||
| Cleveland Leasing | 5 | |||
| Total Cleveland Capital Expenditures | $ | 127 | ||
| Other | $ | 18 | ||
| Total Capital Expenditures | $ | 275 | ||
| * Production and ad valorem taxes are included as one line item on the Company’s income statement | ||||
Liquidity and Hedging
As of March 31, 2017, the Company had outstanding borrowings under its revolving credit facility of $155 million. The Company has $270 million of available borrowings under its revolving credit facility and approximately $9 million in cash, resulting in $279 million of total liquidity.
On March 31, 2017, the Company issued a special stock dividend of 0.087423 shares of Class A common stock for each outstanding share of Class A common stock. As a holder of common units of Jones Energy Holdings, LLC (“JEH”), the Company received cash distributions from JEH during 2016 and the first quarter of 2017 to cover certain tax obligations. The cash distributions the Company received from JEH are in excess of the amount required to satisfy the Company’s associated tax obligations. The Company contributed $17.5 million of this excess cash to JEH in exchange for 4,999,927 newly-issued JEH units, and JEH used the contributed cash to pay down outstanding borrowings under its revolving credit facility. The special stock dividend was declared in order to equalize the number of shares of Class A common stock outstanding to the number of JEH units that the Company holds. The weighted average number of shares of Class A common stock outstanding during the first quarter of 2017 was 62.2 million.
The estimated mark-to-market value of the Company’s commodity price hedges as of March 31, 2017 was approximately $47.2 million incorporating strip pricing as of April 28, 2017. During the first quarter of 2017, Jones Energy unwound approximately $20 million of its crystalized 2018 and 2019 hedges. Net proceeds from the unwind have the effect of reducing debt and increasing EBITDAX by approximately $20 million. The following table summarizes the Company’s net commodity derivative contracts outstanding as of May 3, 2017 and summarizes approximately $24 million in remaining crystallized hedge gains in 2018 and 2019:
| 2Q17 | 3Q17 | 4Q17 | Remaining 2017 | 2018 | 2019 | 2020 | ||||||||||||
| Oil Hedges | ||||||||||||||||||
| Swaps Sold (MBbl) | 465 | 525 | 480 | 1,470 | 1,679 | 300 | 240 | |||||||||||
| Price ($/Bbl) | $ | 66.28 | $ | 62.48 | $ | 63.43 | $ | 63.99 | $ | 51.54 | $ | 50.25 | $ | 50.10 | ||||
| Swaps Sold Related to Offsets (MBbl) | - | - | - | - | 318 | - | - | |||||||||||
| Price ($/Bbl) | - | - | - | - | $ | 77.59 | - | - | ||||||||||
| Offset Swaps Purchased (MBbl) | - | - | - | - | 318 | - | - | |||||||||||
| Price ($/Bbl) | - | - | - | - | $ | 46.77 | - | - | ||||||||||
| Collars (MBbl) | - | - | - | - | - | 810 | - | |||||||||||
| Floor ($/Bbl) | - | - | - | - | - | $ | 48.52 | - | ||||||||||
| Ceiling ($/Bbl) | - | - | - | - | - | $ | 59.64 | - | ||||||||||
| Gas Hedges | ||||||||||||||||||
| Swaps Sold (MMcf) | 4,530 | 5,110 | 5,070 | 14,710 | 22,310 | 9,820 | 3,600 | |||||||||||
| Price ($/Mcf) | $ | 3.89 | $ | 3.72 | $ | 3.70 | $ | 3.76 | $ | 2.96 | $ | 2.83 | $ | 2.81 | ||||
| Swaps Sold Related to Offsets (MMcf) | - | - | - | - | 9,540 | - | - | |||||||||||
| Price ($/Mcf) | - | - | - | - | $ | 4.24 | - | - | ||||||||||
| Offset Swaps Purchased (MMcf) | - | - | - | - | 9,540 | - | - | |||||||||||
| Price ($/Mcf) | - | - | - | - | $ | 2.81 | - | - | ||||||||||
| Collars (MMcf) | - | - | - | - | - | 11,890 | - | |||||||||||
| Floor ($/Mcf) | - | - | - | - | - | $ | 2.55 | - | ||||||||||
| Ceiling ($/Mcf) | - | - | - | - | - | $ | 3.19 | - | ||||||||||
| NGL Swaps (MBbl) | ||||||||||||||||||
| Ethane | - | - | - | - | - | - | - | |||||||||||
| Propane | 224 | 231 | 227 | 682 | 850 | - | - | |||||||||||
| Iso Butane | 27 | 25 | 24 | 76 | 120 | - | - | |||||||||||
| Butane | 76 | 81 | 81 | 238 | 335 | - | - | |||||||||||
| Natural Gasoline | 83 | 93 | 93 | 269 | 360 | - | - | |||||||||||
| Total NGLs | 410 | 430 | 425 | 1,265 | 1,665 | - | - | |||||||||||
| NGL Swap Prices ($/Gal) | ||||||||||||||||||
| Ethane | - | - | - | - | - | - | - | |||||||||||
| Propane | $ | 0.46 | $ | 0.47 | $ | 0.47 | $ | 0.46 | 0.57 | - | - | |||||||
| Iso Butane | 0.66 | 0.60 | 0.57 | 0.61 | 0.72 | - | - | |||||||||||
| Butane | 0.63 | 0.61 | 0.61 | 0.62 | 0.69 | - | - | |||||||||||
| Natural Gasoline | 1.05 | 1.04 | 1.04 | 1.04 | 1.05 | - | - | |||||||||||
Conference Call Details
Jones Energy will host a conference call for investors and analysts to discuss its results on Thursday, May 4, 2017 at 10:30 a.m. ET (9:30 a.m. CT). The conference call can be accessed via webcast through the Investor Relations section of Jones Energy’s website, www.jonesenergy.com, or by dialing (866) 393-4306 (for domestic U.S.) or (734) 385-2616 (International) and entering conference code 7807207. If you are not able to participate in the conference call, the webcast replay and a downloadable audio file will be available shortly following the call through the Investor Relations section of the Company’s website, www.jonesenergy.com.
About Jones Energy
Jones Energy, Inc. is an independent oil and natural gas company engaged in the development and acquisition of oil and natural gas properties in the Anadarko and Arkoma basins of Texas and Oklahoma. Additional information about Jones Energy may be found on the Company’s website at: www.jonesenergy.com.
1 Adjusted net income, adjusted net income per share and EBITDAX are supplemental non-GAAP financial measures that are used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. For additional information, including reconciliations to the most comparable GAAP financial measures, please see “Non-GAAP Financial Measures and Reconciliations” below.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include the expectations of plans, strategies, objectives and anticipated financial and operating results of the Company, continuing guidance regarding the number of rigs that will be running in 2017, the timing of the development of the new Merge acreage, the anticipated acquisition of additional acreage in the Merge, the cost to drill and complete wells and the resultant impact on the 2017 capital budget, and projections regarding total production, average daily production, percentage liquids, operating expenses, production and ad valorem taxes as a percentage of revenue, cash G&A expenses and capital expenditure levels for the full year and second quarter of 2017. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current economic and market conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements. These include, but are not limited to, changes in oil and natural gas prices, weather and environmental conditions, the timing and amount of planned capital expenditures, availability and method of funding of acquisitions and divestitures, or the ability to integrate any acquisitions, uncertainties in estimating proved reserves and forecasting production results, operational factors affecting the commencement or maintenance of producing wells, the condition of the capital markets generally, as well as the Company’s ability to access them, the proximity to and capacity of transportation facilities, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting the Company’s business and other important factors that could cause actual results to differ materially from those projected as described in the Company’s reports filed with the SEC.
Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.
Jones Energy, Inc.
Consolidated Statement of Operations (Unaudited)
| Three months ended March 31, | ||||||||
| (in thousands of dollars except per share data) | 2017 | 2016 | ||||||
| Operating revenues | ||||||||
| Oil and gas sales | $ | 40,677 | $ | 25,080 | ||||
| Other revenues | 556 | 778 | ||||||
| Total operating revenues | 41,233 | 25,858 | ||||||
| Operating costs and expenses | ||||||||
| Lease operating | 8,806 | 8,617 | ||||||
| Production and ad valorem taxes | (906 | ) | 1,601 | |||||
| Exploration | 2,944 | 162 | ||||||
| Depletion, depreciation and amortization | 35,654 | 41,762 | ||||||
| Accretion of ARO liability | 201 | 293 | ||||||
| General and administrative | 8,041 | 7,504 | ||||||
| Total operating expenses | 54,740 | 59,939 | ||||||
| Operating income (loss) | (13,507 | ) | (34,081 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense | (12,887 | ) | (14,798 | ) | ||||
| Gain on debt extinguishment | — | 90,652 | ||||||
| Net gain (loss) on commodity derivatives | 22,320 | 17,219 | ||||||
| Other income (expense) | 580 | 225 | ||||||
| Other income (expense), net | 10,013 | 93,298 | ||||||
| Income (loss) before income tax | (3,494 | ) | 59,217 | |||||
| Income tax provision (benefit) | 21 | 10,703 | ||||||
| Net income (loss) | (3,515 | ) | 48,514 | |||||
| Net income (loss) attributable to non-controlling interests | (2,128 | ) | 29,603 | |||||
| Net income (loss) attributable to controlling interests | $ | (1,387 | ) | $ | 18,911 | |||
| Dividends and accretion on preferred stock | (2,027 | ) | — | |||||
| Net income (loss) attributable to common shareholders | $ | (3,414 | ) | $ | 18,911 | |||
| Earnings (loss) per share (1): | ||||||||
| Basic - Net income (loss) attributable to common shareholders | $ | (0.05 | ) | $ | 0.57 | |||
| Diluted - Net income (loss) attributable to common shareholders | $ | (0.05 | ) | $ | 0.57 | |||
| Weighted average Class A shares outstanding (1): | ||||||||
| Basic | 62,197 | 33,222 | ||||||
| Diluted | 62,197 | 33,222 | ||||||
(1) All share and earnings per share information presented has been recast to retrospectively adjust for the effects of the 0.087423 per share Special Stock Dividend distributed on March 31, 2017.
Jones Energy, Inc.
Consolidated Balance Sheet (Unaudited)
| March 31, | December 31, | ||||||||
| (in thousands of dollars) | 2017 | 2016 | |||||||
| Assets | |||||||||
| Current assets | |||||||||
| Cash | $ | 8,708 | $ | 34,642 | |||||
| Accounts receivable, net | |||||||||
| Oil and gas sales | 25,787 | 26,568 | |||||||
| Joint interest owners | 6,533 | 5,267 | |||||||
| Other | 4,218 | 6,061 | |||||||
| Commodity derivative assets | 30,101 | 24,100 | |||||||
| Other current assets | 7,278 | 2,684 | |||||||
| Total current assets | 82,625 | 99,322 | |||||||
| Oil and gas properties, net, at cost under the successful efforts method | 1,764,947 | 1,743,588 | |||||||
| Other property, plant and equipment, net | 2,920 | 2,996 | |||||||
| Commodity derivative assets | 17,767 | 34,744 | |||||||
| Other assets | 5,762 | 6,050 | |||||||
| Total assets | $ | 1,874,021 | $ | 1,886,700 | |||||
| Liabilities and Stockholders' Equity | |||||||||
| Current liabilities | |||||||||
| Trade accounts payable | $ | 55,757 | $ | 36,527 | |||||
| Oil and gas sales payable | 28,112 | 28,339 | |||||||
| Accrued liabilities | 24,948 | 25,707 | |||||||
| Commodity derivative liabilities | 8,717 | 14,650 | |||||||
| Other current liabilities | 3,223 | 2,584 | |||||||
| Total current liabilities | 120,757 | 107,807 | |||||||
| Long-term debt | 701,586 | 724,009 | |||||||
| Deferred revenue | 6,591 | 7,049 | |||||||
| Commodity derivative liabilities | 178 | 1,209 | |||||||
| Asset retirement obligations | 20,035 | 19,458 | |||||||
| Liability under tax receivable agreement | 41,720 | 43,045 | |||||||
| Other liabilities | 949 | 792 | |||||||
| Deferred tax liabilities | 2,926 | 2,905 | |||||||
| Total liabilities | 894,742 | 906,274 | |||||||
| Series A preferred stock, $0.001 par value; 1,840,000 shares issued and outstanding at March 31, 2017 and December 31, 2016 | 89,162 | 88,975 | |||||||
| Stockholders' equity | |||||||||
| Class A common stock, $0.001 par value; 63,395,635 shares issued and 63,373,033 shares outstanding at March 31, 2017 and 57,048,076 shares issued and 57,025,474 shares outstanding at December 31, 2016 | 63 | 57 | |||||||
| Class B common stock, $0.001 par value; 29,832,098 shares issued and outstanding at March 31, 2017 and December 31, 2016 | 30 | 30 | |||||||
| Treasury stock, at cost: 22,602 shares at March 31, 2017 and December 31, 2016 | (358 | ) | (358 | ) | |||||
| Additional paid-in-capital | 470,107 | 447,137 | |||||||
| Retained (deficit) / earnings | (30,272 | ) | (8,652 | ) | |||||
| Stockholders' equity | 439,570 | 438,214 | |||||||
| Non-controlling interest | 450,547 | 453,237 | |||||||
| Total stockholders’ equity | 890,117 | 891,451 | |||||||
| Total liabilities and stockholders' equity | $ | 1,874,021 | $ | 1,886,700 | |||||
Jones Energy, Inc.
Consolidated Statement of Cash Flow Data (Unaudited)
| Three months ended March 31, | ||||||||
| (in thousands of dollars) | 2017 | 2016 | ||||||
| Cash flows from operating activities | ||||||||
| Net income (loss) | $ | (3,515 | ) | $ | 48,514 | |||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities | ||||||||
| Depletion, depreciation, and amortization | 35,654 | 41,762 | ||||||
| Exploration (dry hole and lease abandonment) | 1,643 | 27 | ||||||
| Accretion of ARO liability | 201 | 293 | ||||||
| Amortization of debt issuance costs | 977 | 1,129 | ||||||
| Stock compensation expense | 1,972 | 1,185 | ||||||
| Deferred and other non-cash compensation expense | 136 | 268 | ||||||
| Amortization of deferred revenue | (458 | ) | (645 | ) | ||||
| (Gain) loss on commodity derivatives | (22,320 | ) | (17,219 | ) | ||||
| (Gain) loss on sales of assets | 64 | 4 | ||||||
| (Gain) on debt extinguishment | — | (90,652 | ) | |||||
| Deferred income tax provision | 21 | 10,564 | ||||||
| Other - net | (627 | ) | (963 | ) | ||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | (220 | ) | 10,655 | |||||
| Other assets | (4,912 | ) | (1,730 | ) | ||||
| Accrued interest expense | 3,348 | (384 | ) | |||||
| Accounts payable and accrued liabilities | 1,619 | (7,634 | ) | |||||
| Net cash provided by operations | 13,583 | (4,826 | ) | |||||
| Cash flows from investing activities | ||||||||
| Additions to oil and gas properties | (47,110 | ) | (7,176 | ) | ||||
| Net adjustments to purchase price of properties acquired | 2,391 | — | ||||||
| Proceeds from sales of assets | 144 | 3 | ||||||
| Acquisition of other property, plant and equipment (net of reimbursements) | (192 | ) | 40 | |||||
| Current period settlements of matured derivative contracts | 27,854 | 42,298 | ||||||
| Net cash (used in) investing | (16,913 | ) | 35,165 | |||||
| Cash flows from financing activities | ||||||||
| Proceeds from issuance of long-term debt | 30,000 | 75,000 | ||||||
| Repayment of long-term debt | (53,000 | ) | — | |||||
| Purchase of senior notes | — | (73,427 | ) | |||||
| Payment of dividends on preferred stock | (1,840 | ) | — | |||||
| Net distributions paid to JEH unitholders | (562 | ) | — | |||||
| Net payments for share based compensation | (31 | ) | — | |||||
| Proceeds from sale of common stock | 2,829 | — | ||||||
| Net cash provided by financing | (22,604 | ) | 1,573 | |||||
| Net increase (decrease) in cash | (25,934 | ) | 31,912 | |||||
| Cash | ||||||||
| Beginning of period | 34,642 | 21,893 | ||||||
| End of period | $ | 8,708 | $ | 53,805 | ||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid for interest | $ | 8,559 | $ | 14,053 | ||||
| Change in accrued additions to oil and gas properties | 13,294 | (686 | ) | |||||
| Asset retirement obligations incurred, including changes in estimate | 413 | 50 | ||||||
Jones Energy, Inc.
Selected Financial and Operating Statistics
The following table sets forth summary data regarding revenues, production volumes, average prices and average production costs associated with our sale of oil and natural gas for the periods indicated:
| Three Months Ended March 31, | |||||||||||
| 2017 | 2016 | Change | |||||||||
| Revenues (in thousands of dollars): | |||||||||||
| Oil and gas sales | $ | 40,677 | $ | 25,080 | $ | 15,597 | |||||
| Other revenues | 556 | 778 | (222 | ) | |||||||
| Current period settlements of matured derivative contracts | 26,332 | 42,671 | (16,339 | ) | |||||||
| Total revenues including derivative impact | $ | 67,565 | $ | 68,529 | $ | (964 | ) | ||||
| Net production volumes: | |||||||||||
| Oil (MBbls) | 385 | 479 | (94 | ) | |||||||
| Natural gas (MMcf) | 4,655 | 4,920 | (265 | ) | |||||||
| NGLs (MBbls) | 538 | 555 | (17 | ) | |||||||
| Total (MBoe) | 1,699 | 1,854 | (155 | ) | |||||||
| Average net (Boe/d) | 18,878 | 20,374 | (1,496 | ) | |||||||
| Average sales price, unhedged: | |||||||||||
| Oil (per Bbl), unhedged | $ | 47.45 | $ | 27.80 | $ | 19.65 | |||||
| Natural gas (per Mcf), unhedged | 2.45 | 1.33 | 1.12 | ||||||||
| NGLs (per Bbl), unhedged | 20.41 | 9.41 | 11.00 | ||||||||
| Combined (per Boe), unhedged | 23.94 | 13.53 | 10.41 | ||||||||
| Average sales price, hedged: | |||||||||||
| Oil (per Bbl), hedged | $ | 111.33 | $ | 84.03 | $ | 27.30 | |||||
| Natural gas (per Mcf), hedged | 3.60 | 3.67 | (0.07 | ) | |||||||
| NGLs (per Bbl), hedged | 13.76 | 17.04 | (3.28 | ) | |||||||
| Combined (per Boe), hedged | 39.44 | 36.54 | 2.90 | ||||||||
| Average costs (per BOE): | |||||||||||
| Lease operating | $ | 5.18 | $ | 4.65 | $ | 0.53 | |||||
| Production and ad valorem taxes | (0.53 | ) | 0.86 | (1.39 | ) | ||||||
| Depletion, depreciation and amortization | 20.99 | 22.53 | (1.54 | ) | |||||||
| General and administrative | 4.73 | 4.05 | 0.68 | ||||||||
Jones Energy, Inc.
Non-GAAP Financial Measures and Reconciliations
EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies.
We define EBITDAX as earnings before interest expense, income taxes, depreciation, depletion and amortization, exploration expense, gains and losses from derivatives less the current period settlements of matured derivative contracts, and the other items described below. EBITDAX is not a measure of net income as determined by United States generally accepted accounting principles, or GAAP. Management believes EBITDAX is useful because it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. EBITDAX has limitations as an analytical tool and should not be considered as an alternative to, or more meaningful than, net income as determined in accordance with GAAP or as an indicator of our liquidity. Certain items excluded from EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historical costs of depreciable assets. Our presentation of EBITDAX should not be construed as an inference that our results will be unaffected by unusual or non-recurring items and should not be viewed as a substitute for GAAP. Our computations of EBITDAX may not be comparable to other similarly titled measures of other companies.
The following table sets forth a reconciliation of net income (loss) as determined in accordance with GAAP to EBITDAX for the periods indicated:
| Three Months Ended March 31, | ||||||||
| (in thousands of dollars) | 2017 | 2016 | ||||||
| Reconciliation of EBITDAX to net income | ||||||||
| Net income (loss) | $ | (3,515 | ) | $ | 48,514 | |||
| Interest expense | 12,887 | 14,798 | ||||||
| Exploration expense | 2,944 | 162 | ||||||
| Income taxes | 21 | 10,703 | ||||||
| Depreciation and depletion | 35,654 | 41,762 | ||||||
| Accretion of ARO liability | 201 | 293 | ||||||
| Change in TRA liability | (668 | ) | (429 | ) | ||||
| Other non-cash charges | 41 | (534 | ) | |||||
| Stock compensation expense | 1,972 | 1,185 | ||||||
| Deferred and other non-cash compensation expense | 136 | 268 | ||||||
| Net (gain) loss on derivative contracts | (22,320 | ) | (17,219 | ) | ||||
| Current period settlements of matured derivative contracts | 26,332 | 42,671 | ||||||
| Amortization of deferred revenue | (458 | ) | (645 | ) | ||||
| (Gain) loss on sale of assets | 64 | 4 | ||||||
| (Gain) on debt extinguishment | — | (90,652 | ) | |||||
| Financing expenses and other loan fees | 24 | 200 | ||||||
| EBITDAX | $ | 53,315 | $ | 51,081 | ||||
Jones Energy, Inc.
Non-GAAP Financial Measures and Reconciliations
Adjusted Net Income is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements. We define Adjusted Net Income as net income excluding the impact of certain non-cash items including gains or losses on commodity derivative instruments not yet settled, impairment of oil and gas properties, non-cash compensation expense, and the other items described below. We believe adjusted net income and adjusted earnings per share are useful to investors because they provide readers with a more meaningful measure of our profitability before recording certain items for which the timing or amount cannot be reasonably determined. However, these measures are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP. The following table provides a reconciliation of net income (loss) as determined in accordance with GAAP to adjusted net income for the periods indicated:
| Three Months Ended March 31, | ||||||||
| (in thousands except per share data) | 2017 | 2016 | ||||||
| Net income (loss) | $ | (3,515 | ) | $ | 48,514 | |||
| Net (gain) loss on derivative contracts | (22,320 | ) | (17,219 | ) | ||||
| Current period settlements of matured derivative contracts | 26,332 | 42,671 | ||||||
| Exploration | 2,944 | 162 | ||||||
| Non-cash stock compensation expense | 1,972 | 1,185 | ||||||
| Deferred and other non-cash compensation expense | 136 | 268 | ||||||
| (Gain) on debt extinguishment | — | (90,652 | ) | |||||
| Change in TRA liability | (668 | ) | (429 | ) | ||||
| Tax impact of adjusting items (1) | (1,877 | ) | 11,059 | |||||
| Change in valuation allowance | 912 | 989 | ||||||
| Adjusted net income (loss) | 3,916 | (3,452 | ) | |||||
| Adjusted net income (loss) attributable to non-controlling interests | 973 | (2,618 | ) | |||||
| Adjusted net income (loss) attributable to controlling interests | 2,943 | (834 | ) | |||||
| Dividends and accretion on preferred stock | (2,027 | ) | — | |||||
| Adjusted net income (loss) attributable to common shareholders | $ | 916 | $ | (834 | ) | |||
| Weighted average Class A shares outstanding (2): | ||||||||
| Basic | 62,197 | 33,222 | ||||||
| Diluted | 62,197 | 33,222 | ||||||
| Adjusted earnings per share (basic and diluted) (2) | $ | 0.01 | $ | (0.03 | ) | |||
(1) In arriving at adjusted net income, the tax impact of the adjustments to net income is determined by applying the appropriate tax rate to each adjustment and then allocating the tax impact between the controlling and non-controlling interests.
(2) All share and earnings per share information presented has been recast to retrospectively adjust for the effects of the 0.087423 per share Special Stock Dividend distributed on March 31, 2017.
Jones Energy, Inc.
Non-GAAP Financial Measures and Reconciliations
Adjusted Earnings per Share is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements. We define Adjusted Earnings per Share as earnings per share plus that portion of the components of adjusted net income allocated to the controlling interests divided by weighted average shares outstanding. We believe adjusted earnings per share is useful to investors because it provides readers with a more meaningful measure of our profitability before recording certain items for which the timing or amount cannot be reasonably determined. However, these measures are provided in addition to, not as an alternative for, and should be read in conjunction with, the information contained in our financial statements prepared in accordance with GAAP. The following table provides a reconciliation of earnings per share to adjusted earnings per share for the period indicated:
| Three Months Ended March 31, | |||||||||
| 2017 | 2016 | ||||||||
| Earnings (loss) per share (basic and diluted) | $ | (0.05 | ) | $ | 0.57 | ||||
| Net (gain) loss on commodity derivatives | (0.24 | ) | (0.26 | ) | |||||
| Current period settlements of matured derivative contracts | 0.28 | 0.63 | |||||||
| Exploration | 0.03 | — | |||||||
| Non-cash stock compensation expense | 0.02 | 0.02 | |||||||
| Deferred and other non-cash compensation expense | — | — | |||||||
| (Gain) on debt extinguishment | — | (1.34 | ) | ||||||
| Stand-by rig costs | — | — | |||||||
| Financing expenses | — | — | |||||||
| Change in TRA liability | (0.01 | ) | (0.01 | ) | |||||
| Tax impact of adjusting items (1) | (0.03 | ) | 0.33 | ||||||
| Change in valuation allowance | 0.01 | 0.03 | |||||||
| Adjusted earnings (loss) per share (basic and diluted) (2) | $ | 0.01 | $ | (0.03 | ) | ||||
| EPS attributed to Q1 2017 hedge unwinds (gains) | (0.14 | ) | — | ||||||
| Adjusted earnings per share (basic and diluted), adjusted for hedge unwinds | $ | (0.13 | ) | $ | — | ||||
| Shares (Basic) (2) | 62,197 | 33,222 | |||||||
| Shares (Diluted) (2) | 62,197 | 33,222 | |||||||
| Effective tax rate on net income attributable to controlling interests | 37.6 | % | 31.3 | % | |||||
(1) In arriving at adjusted net income, the tax impact of the adjustments to net income is determined by applying the appropriate tax rate to each adjustment and then allocating the tax impact between the controlling and non-controlling interests.
(2) All share and earnings per share information presented has been recast to retrospectively adjust for the effects of the 0.087423 per share Special Stock Dividend distributed on March 31, 2017.