(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Large Accelerated Filer ☐ | ||||||||
Non-Accelerated Filer ☐ | Smaller Reporting Company Emerging Growth Company |
Page | ||||||||
PART I – FINANCIAL INFORMATION | ||||||||
Item 1. | Condensed Financial Statements (unaudited) | |||||||
Condensed Balance Sheets | ||||||||
Condensed Statements of Operations | ||||||||
Condensed Statements of Cash Flows | ||||||||
Condensed Statements of Stockholders’ Equity | ||||||||
Notes to Condensed Financial Statements | ||||||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | |||||||
Item 4. | Controls and Procedures | |||||||
PART II – OTHER INFORMATION | ||||||||
Item 1. | Legal Proceedings | |||||||
Item 1A. | Risk Factors | |||||||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | |||||||
Item 6. | Exhibits | |||||||
Signatures |
(In thousands, except par value and share data) | June 30, 2020 | December 31, 2019 | |||||||||
Assets | (Unaudited) | ||||||||||
Current Assets: | |||||||||||
Cash and Cash Equivalents | $ | $ | |||||||||
Accounts Receivable, Net | |||||||||||
Advances to Operators | |||||||||||
Prepaid Expenses and Other | |||||||||||
Derivative Instruments | |||||||||||
Income Tax Receivable | |||||||||||
Total Current Assets | |||||||||||
Property and Equipment: | |||||||||||
Oil and Natural Gas Properties, Full Cost Method of Accounting | |||||||||||
Proved | |||||||||||
Unproved | |||||||||||
Other Property and Equipment | |||||||||||
Total Property and Equipment | |||||||||||
Less – Accumulated Depreciation, Depletion and Impairment | ( | ( | |||||||||
Total Property and Equipment, Net | |||||||||||
Derivative Instruments | |||||||||||
Deferred Income Taxes | |||||||||||
Acquisition Deposit | |||||||||||
Other Noncurrent Assets, Net | |||||||||||
Total Assets | $ | $ | |||||||||
Liabilities and Stockholders' Equity | |||||||||||
Current Liabilities: | |||||||||||
Accounts Payable | $ | $ | |||||||||
Accrued Liabilities | |||||||||||
Accrued Interest | |||||||||||
Derivative Instruments | |||||||||||
Current Portion of Long-term Debt | |||||||||||
Other Current Liabilities | |||||||||||
Total Current Liabilities | |||||||||||
Long-term Debt | |||||||||||
Derivative Instruments | |||||||||||
Asset Retirement Obligations | |||||||||||
Other Noncurrent Liabilities | |||||||||||
Total Liabilities | $ | $ | |||||||||
Commitments and Contingencies (Note 8) | |||||||||||
Stockholders’ Equity | |||||||||||
Preferred Stock, Par Value $ | |||||||||||
Common Stock, Par Value $ | |||||||||||
Additional Paid-In Capital | |||||||||||
Retained Deficit | ( | ( | |||||||||
Total Stockholders’ Equity | |||||||||||
Total Liabilities and Stockholders’ Equity | $ | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
(In thousands, except share and per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Revenues | |||||||||||||||||||||||
Oil and Gas Sales | $ | $ | $ | $ | |||||||||||||||||||
Gain (Loss) on Commodity Derivatives, Net | ( | ( | |||||||||||||||||||||
Other Revenue | |||||||||||||||||||||||
Total Revenues | ( | ||||||||||||||||||||||
Operating Expenses | |||||||||||||||||||||||
Production Expenses | |||||||||||||||||||||||
Production Taxes | |||||||||||||||||||||||
General and Administrative Expense | |||||||||||||||||||||||
Depletion, Depreciation, Amortization and Accretion | |||||||||||||||||||||||
Impairment of Other Current Assets | |||||||||||||||||||||||
Impairment Expense | |||||||||||||||||||||||
Total Operating Expenses | |||||||||||||||||||||||
Income (Loss) From Operations | ( | ( | ( | ||||||||||||||||||||
Other Income (Expense) | |||||||||||||||||||||||
Interest Expense, Net of Capitalization | ( | ( | ( | ( | |||||||||||||||||||
Loss on Unsettled Interest Rate Derivatives, Net | ( | ( | |||||||||||||||||||||
Gain (Loss) on Extinguishment of Debt, Net | ( | ( | ( | ||||||||||||||||||||
Debt Exchange Derivative Gain/(Loss) | ( | ||||||||||||||||||||||
Contingent Consideration Loss | ( | ( | |||||||||||||||||||||
Other Income (Expense) | ( | ||||||||||||||||||||||
Total Other Income (Expense) | ( | ( | ( | ( | |||||||||||||||||||
Income (Loss) Before Income Taxes | ( | ( | ( | ||||||||||||||||||||
Income Tax Provision (Benefit) | ( | ||||||||||||||||||||||
Net Income (Loss) | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Cumulative Preferred Stock Dividend | ( | ( | |||||||||||||||||||||
Net Income (Loss) Attributable to Common Shareholders | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Net Income (Loss) Per Common Share – Basic | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Net Income (Loss) Per Common Share – Diluted | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Weighted Average Common Shares Outstanding – Basic | |||||||||||||||||||||||
Weighted Average Common Shares Outstanding – Diluted |
Six Months Ended June 30, | |||||||||||
(In thousands) | 2020 | 2019 | |||||||||
Cash Flows from Operating Activities | |||||||||||
Net Income (Loss) | $ | ( | $ | ( | |||||||
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities: | |||||||||||
Depletion, Depreciation, Amortization and Accretion | |||||||||||
Amortization of Debt Issuance Costs | |||||||||||
Loss on Extinguishment of Debt | |||||||||||
Amortization of Bond Premium on Long-term Debt | ( | ( | |||||||||
Deferred Income Taxes | |||||||||||
(Gain) Loss of Derivative Instruments | ( | ||||||||||
Gain on Debt Exchange Derivative | ( | ||||||||||
Loss on Contingent Consideration | |||||||||||
PIK Interest on Second Lien Notes | |||||||||||
Stock-Based Compensation Expense | |||||||||||
Impairment of Other Current Assets | |||||||||||
Impairment Expense | |||||||||||
Other | ( | ( | |||||||||
Changes in Working Capital and Other Items: | |||||||||||
Accounts Receivable, Net | |||||||||||
Prepaid and Other Expenses | ( | ||||||||||
Accounts Payable | ( | ||||||||||
Accrued Interest | ( | ||||||||||
Accrued Liabilities | ( | ||||||||||
Net Cash Provided by Operating Activities | |||||||||||
Cash Flows from Investing Activities | |||||||||||
Drilling and Development Capital Expenditures | ( | ( | |||||||||
Acquisition of Oil and Natural Gas Properties | ( | ( | |||||||||
Acquisition Deposit | ( | ( | |||||||||
Purchases of Other Property and Equipment | ( | ( | |||||||||
Net Cash Used for Investing Activities | ( | ( | |||||||||
Cash Flows from Financing Activities | |||||||||||
Advances on Revolving Credit Facility | |||||||||||
Repayments on Revolving Credit Facility | ( | ( | |||||||||
Repurchases of Second Lien Notes | ( | ( | |||||||||
Debt Issuance Costs Paid | ( | ( | |||||||||
Debt Exchange Derivative Settlements | ( | ||||||||||
Contingent Consideration Settlements | ( | ||||||||||
Repurchases of Common Stock | ( | ||||||||||
Restricted Stock Surrenders - Tax Obligations | ( | ( | |||||||||
Net Cash Used for Financing Activities | ( | ( | |||||||||
Net Increase (Decrease) in Cash and Cash Equivalents | ( | ||||||||||
Cash and Cash Equivalents - Beginning of Period | |||||||||||
Cash and Cash Equivalents - End of Period | |||||||||||
(In thousands, except share data) | Common Stock | Preferred Stock | Additional Paid-In | Retained Earnings | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | (Deficit) | (Deficit) | |||||||||||||||||||||||||||||||||||
December 31, 2019 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
Issuance of Common Stock | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Share Based Compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Restricted Stock Surrenders - Tax Obligations | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Issuance of Preferred Stock, Net of Issuance Costs | — | — | — | ||||||||||||||||||||||||||||||||||||||
Net Income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
March 31, 2020 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
Issuance of Common Stock | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Restricted Stock Forfeitures | ( | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Share Based Compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Restricted Stock Surrenders - Tax Obligations | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Issuance under Debt Exchange Agreements | — | — | — | ||||||||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
June 30, 2020 | $ | $ | $ | $ | ( | $ |
Common Stock | Preferred Stock | Additional Paid-In | Retained Earnings | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||
(In thousands, except share data) | Shares | Amount | Shares | Amount | Capital | (Deficit) | (Deficit) | ||||||||||||||||||||||||||||||||||
December 31, 2018 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
Issuance of Common Stock | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Restricted Stock Forfeitures | ( | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Stock-Based Compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Restricted Stock Surrenders - Tax Obligations | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Repurchases of Common Stock | ( | ( | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Contingent Consideration Settlements | — | — | — | ||||||||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | ( | ( | ||||||||||||||||||||||||||||||||||
March 31, 2019 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
Issuance of Common Stock | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Restricted Stock Forfeitures | ( | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Stock-Based Compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Restricted Stock Surrenders - Tax Obligations | ( | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||
Equity Offerings | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||
Issuance under Debt Exchange Agreements | — | — | — | ||||||||||||||||||||||||||||||||||||||
Contingent Consideration Settlements | — | — | — | ||||||||||||||||||||||||||||||||||||||
Net Income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
June 30, 2019 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
(In thousands, except share and per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Net Income (Loss) | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Less: Cumulative Dividends on Preferred Stock | ( | ( | |||||||||||||||||||||
Net Income (Loss) Attributable to Common Stock | $ | ( | $ | ( | ( | ||||||||||||||||||
Weighted Average Common Shares Outstanding: | |||||||||||||||||||||||
Weighted Average Common Shares Outstanding – Basic | |||||||||||||||||||||||
Plus: Dilutive Effect of Restricted Stock | |||||||||||||||||||||||
Plus: Dilutive Effect of Preferred Shares | |||||||||||||||||||||||
Weighted Average Common Shares Outstanding – Diluted | |||||||||||||||||||||||
Net Income (Loss) per Common Share: | |||||||||||||||||||||||
Basic | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Diluted | $ | ( | $ | $ | ( | $ | ( | ||||||||||||||||
Shares Excluded from EPS Due to Anti-Dilutive Effect: | |||||||||||||||||||||||
Restricted Stock | |||||||||||||||||||||||
Preferred Stock |
Six Months Ended June 30, | |||||||||||
(In thousands) | 2020 | 2019 | |||||||||
Supplemental Cash Items: | |||||||||||
Cash Paid During the Period for Interest, Net of Amount Capitalized | $ | $ | |||||||||
Non-cash Investing Activities: | |||||||||||
Oil and Natural Gas Properties Included in Accounts Payable and Accrued Liabilities | |||||||||||
Capitalized Asset Retirement Obligations | |||||||||||
Compensation Capitalized on Oil and Gas Properties | |||||||||||
Non-cash Financing Activities: | |||||||||||
Issuance of | |||||||||||
Issuance of Common Stock for 2L Notes Repurchase | |||||||||||
Issuance of Preferred Stock for 2L Notes Repurchase | |||||||||||
Debt Exchange Derivative Liability Settlements | |||||||||||
Contingent Consideration Settlements | |||||||||||
(In thousands) | ||||||||
Fair value of net assets: | ||||||||
Proved oil and natural gas properties | $ | |||||||
Asset retirement cost | ||||||||
Total assets acquired | ||||||||
Asset retirement obligations | ( | |||||||
Derivative instruments | ( | |||||||
Net assets acquired | $ | |||||||
Fair value of consideration paid for net assets: | ||||||||
Cash consideration | $ | |||||||
Issuance of common stock ( | ||||||||
Unsecured VEN Bakken Note | ||||||||
Total fair value of consideration transferred | $ |
Three Months Ended | Six Months Ended | |||||||||||||
(In thousands) | June 30, 2019 | June 30, 2019 | ||||||||||||
Revenues | $ | $ | ||||||||||||
Net Income (Loss) | ( |
(in thousands) | June 30, 2020 | December 31, 2019 | ||||||||||||
Revolving Credit Facility | $ | $ | ||||||||||||
Second Lien Notes due 2023 | ||||||||||||||
Unsecured VEN Bakken Note | ||||||||||||||
Total principal | ||||||||||||||
Unamortized debt discounts and premiums | ||||||||||||||
Unamortized debt issuance costs(1) | ( | ( | ||||||||||||
Total debt | ||||||||||||||
Less current portion of long-term debt | ( | |||||||||||||
Total long-term debt | $ | $ |
Service-based Awards | Service and Performance-based Awards | Service and Market-based Awards | Service, Performance, and Market-based Awards | ||||||||||||||||||||||||||||||||||||||||||||
Number of Shares | Weighted-average Grant Date Fair Value | Number of Shares | Weighted-average Grant Date Fair Value | Number of Shares | Weighted-average Grant Date Fair Value | Number of Shares | Weighted-average Grant Date Fair Value | ||||||||||||||||||||||||||||||||||||||||
Outstanding at December 31, 2019 | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||
Shares granted | |||||||||||||||||||||||||||||||||||||||||||||||
Shares forfeited | ( | ||||||||||||||||||||||||||||||||||||||||||||||
Shares vested | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Outstanding at June 30, 2020 | $ | $ | $ | $ |
Fair Value Measurements at June 30, 2020 Using | |||||||||||||||||
(In thousands) | Quoted Prices In Active Markets for Identical Assets (Liabilities) (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||
Commodity Derivatives – Current Asset | $ | $ | $ | ||||||||||||||
Commodity Derivatives – Noncurrent Asset | |||||||||||||||||
Commodity Derivatives – Current Liabilities | ( | ||||||||||||||||
Commodity Derivatives – Noncurrent Liabilities | ( | ||||||||||||||||
Interest Rate Derivatives – Current Liabilities | ( | ||||||||||||||||
Interest Rate Derivatives – Noncurrent Liabilities | ( | ||||||||||||||||
Total | $ | $ | $ |
Fair Value Measurements at December 31, 2019 Using | |||||||||||||||||
(In thousands) | Quoted Prices In Active Markets for Identical Assets (Liabilities) (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | ||||||||||||||
Commodity Derivatives – Current Asset | $ | $ | $ | ||||||||||||||
Commodity Derivatives – Current Liabilities | ( | ||||||||||||||||
Commodity Derivatives – Noncurrent Asset | |||||||||||||||||
Commodity Derivatives – Noncurrent Liabilities | ( | ||||||||||||||||
Total | $ | $ | ( | $ |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
(In thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Gain on Settled Commodity Derivatives | $ | $ | $ | $ | |||||||||||||||||||
Gain (Loss) on Unsettled Commodity Derivatives | ( | ( | |||||||||||||||||||||
Gain (Loss) on Commodity Derivatives, Net | $ | ( | $ | $ | $ | ( |
Year | Volumes (Bbl) | Weighted Average Price ($) | ||||||||||||
2020 | ||||||||||||||
2021(1) | ||||||||||||||
2022(2) |
Year | Volumes (MMBtu) | Weighted Average Price ($) | ||||||||||||
2020 | ||||||||||||||
2021 | ||||||||||||||
Type of Contract | Balance Sheet Location | June 30, 2020 Estimated Fair Value | December 31, 2019 Estimated Fair Value | |||||||||||||||||
Derivative Assets: | (In thousands) | |||||||||||||||||||
Commodity Price Swap Contracts | Current Assets | $ | $ | |||||||||||||||||
Interest Rate Swap Contracts | Current Assets | |||||||||||||||||||
Commodity Price Swap Contracts | Noncurrent Assets | |||||||||||||||||||
Interest Rate Swap Contracts | Noncurrent Assets | |||||||||||||||||||
Total Derivative Assets | $ | $ | ||||||||||||||||||
Derivative Liabilities: | ||||||||||||||||||||
Commodity Price Swap Contracts | Current Liabilities | $ | ( | $ | ( | |||||||||||||||
Interest Rate Swap Contracts | Current Liabilities | ( | ||||||||||||||||||
Commodity Price Swap Contracts | Noncurrent Liabilities | ( | ( | |||||||||||||||||
Interest Rate Swap Contracts | Noncurrent Liabilities | ( | ||||||||||||||||||
Commodity Price Swaptions Contracts | Noncurrent Liabilities | ( | ( | |||||||||||||||||
Total Derivative Liabilities | $ | ( | $ | ( |
Estimated Fair Value at June 30, 2020 | |||||||||||||||||
(In thousands) | Gross Amounts of Recognized Assets (Liabilities) | Gross Amounts Offset on the Balance Sheet | Net Amounts of Assets (Liabilities) Presented in the Balance Sheet | ||||||||||||||
Offsetting of Derivative Assets: | |||||||||||||||||
Current Assets | $ | $ | $ | ||||||||||||||
Noncurrent Assets | ( | ||||||||||||||||
Total Derivative Assets | $ | $ | ( | $ | |||||||||||||
Offsetting of Derivative Liabilities: | |||||||||||||||||
Current Liabilities | $ | ( | $ | $ | ( | ||||||||||||
Noncurrent Liabilities | ( | ( | |||||||||||||||
Total Derivative Liabilities | $ | ( | $ | $ | ( |
Estimated Fair Value at December 31, 2019 | |||||||||||||||||
(In thousands) | Gross Amounts of Recognized Assets (Liabilities) | Gross Amounts Offset on the Balance Sheet | Net Amounts of Assets (Liabilities) Presented in the Balance Sheet | ||||||||||||||
Offsetting of Derivative Assets: | |||||||||||||||||
Current Assets | $ | $ | ( | $ | |||||||||||||
Non-Current Assets | ( | ||||||||||||||||
Total Derivative Assets | $ | $ | ( | $ | |||||||||||||
Offsetting of Derivative Liabilities: | |||||||||||||||||
Current Liabilities | $ | ( | $ | $ | ( | ||||||||||||
Non-Current Liabilities | ( | ( | |||||||||||||||
Total Derivative Liabilities | $ | ( | $ | $ | ( |
Three Months Ended June 30, | |||||||||||
2020 | 2019 | ||||||||||
Average NYMEX Prices(1) | |||||||||||
Natural Gas (per Mcf) | $ | 1.70 | $ | 2.56 | |||||||
Oil (per Bbl) | $ | 27.95 | $ | 59.89 |
Six Months Ended June 30, | |||||||||||
2020 | 2019 | ||||||||||
Average NYMEX Prices(1) | |||||||||||
Natural Gas (per Mcf) | $ | 1.80 | $ | 2.74 | |||||||
Oil (per Bbl) | $ | 36.69 | $ | 57.42 |
Three Months Ended June 30, | |||||||||||||||||
2020 | 2019 | % Change | |||||||||||||||
Net Production: | |||||||||||||||||
Oil (Bbl) | 1,659,293 | 2,562,513 | (35) | % | |||||||||||||
Natural Gas and NGLs (Mcf) | 3,041,418 | 3,715,936 | (18) | % | |||||||||||||
Total (Boe) | 2,166,196 | 3,181,835 | (32) | % | |||||||||||||
Net Sales (in thousands): | |||||||||||||||||
Oil Sales | $ | 28,784 | $ | 139,810 | (79) | % | |||||||||||
Natural Gas and NGL Sales | (8,120) | 10,037 | |||||||||||||||
Gain on Settled Commodity Derivatives | 77,439 | 4,734 | |||||||||||||||
Gain (Loss) on Unsettled Commodity Derivatives | (150,077) | 31,857 | |||||||||||||||
Other Revenue | 3 | 2 | |||||||||||||||
Total Revenues | (51,971) | 186,440 | |||||||||||||||
Average Sales Prices: | |||||||||||||||||
Oil (per Bbl) | $ | 17.35 | $ | 54.56 | (68) | % | |||||||||||
Effect of Gain on Settled Oil Derivatives on Average Price (per Bbl) | 46.19 | 1.85 | |||||||||||||||
Oil Net of Settled Oil Derivatives (per Bbl) | 63.54 | 56.41 | 13 | % | |||||||||||||
Natural Gas and NGLs (per Mcf) | (2.67) | 2.70 | |||||||||||||||
Effect of Gain on Settled Natural Gas Derivatives on Average Price (per Mcf) | 0.26 | — | |||||||||||||||
Natural Gas and NGLs Net of Settled Natural Gas Derivatives (per Mcf) | (2.41) | 2.70 | |||||||||||||||
Realized Price on a Boe Basis Excluding Settled Commodity Derivatives | 9.54 | 47.09 | (80) | % | |||||||||||||
Effect of Gain on Settled Commodity Derivatives on Average Price (per Boe) | 35.75 | 1.49 | |||||||||||||||
Realized Price on a Boe Basis Including Settled Commodity Derivatives | 45.29 | 48.58 | (7) | % | |||||||||||||
Operating Expenses (in thousands): | |||||||||||||||||
Production Expenses | $ | 26,638 | $ | 26,132 | 2 | % | |||||||||||
Production Taxes | 1,917 | 14,033 | (86) | % | |||||||||||||
General and Administrative Expenses | 4,709 | 5,250 | (10) | % | |||||||||||||
Depletion, Depreciation, Amortization and Accretion | 36,756 | 46,091 | (20) | % | |||||||||||||
Costs and Expenses (per Boe): | |||||||||||||||||
Production Expenses | $ | 12.30 | $ | 8.21 | 50 | % | |||||||||||
Production Taxes | 0.89 | 4.41 | (80) | % | |||||||||||||
General and Administrative Expenses | 2.17 | 1.65 | 32 | % | |||||||||||||
Depletion, Depreciation, Amortization and Accretion | 16.97 | 14.49 | 17 | % | |||||||||||||
Net Producing Wells at Period End | 466.0 | 340.6 | 37 | % |
Three Months Ended June 30, | |||||||||||||||||||||||
2020 | 2019 | $ Change | % Change | ||||||||||||||||||||
Depletion | $ | 16.80 | $ | 14.41 | $ | 2.39 | 17 | % | |||||||||||||||
Depreciation, Amortization and Accretion | 0.17 | 0.08 | 0.09 | 113 | % | ||||||||||||||||||
Total DD&A Expense | $ | 16.97 | $ | 14.49 | $ | 2.48 | 17 | % |
Six Months Ended June 30, | |||||||||||||||||
2020 | 2019 | % Change | |||||||||||||||
Net Production: | |||||||||||||||||
Oil (Bbl) | 4,797,673 | 5,103,745 | (6) | % | |||||||||||||
Natural Gas and NGLs (Mcf) | 8,090,538 | 7,151,720 | 13 | % | |||||||||||||
Total (Boe) | 6,146,096 | 6,295,698 | (2) | % | |||||||||||||
Net Sales (in thousands): | |||||||||||||||||
Oil Sales | $ | 145,116 | $ | 263,423 | (45) | % | |||||||||||
Natural Gas and NGL Sales | 5,744 | 19,107 | (70) | % | |||||||||||||
Gain on Settled Commodity Derivatives | 108,944 | 17,280 | |||||||||||||||
Gain (Loss) on Unsettled Commodity Derivatives | 194,999 | (120,311) | |||||||||||||||
Other Revenue | 11 | 7 | |||||||||||||||
Total Revenues | 454,815 | 179,506 | 153 | % | |||||||||||||
Average Sales Prices: | |||||||||||||||||
Oil (per Bbl) | $ | 30.25 | $ | 51.65 | (41) | % | |||||||||||
Effect of Gain on Settled Oil Derivatives on Average Price (per Bbl) | 22.54 | 3.39 | |||||||||||||||
Oil Net of Settled Oil Derivatives (per Bbl) | 52.79 | 55.04 | (4) | % | |||||||||||||
Natural Gas and NGLs (per Mcf) | 0.71 | 2.67 | (73) | % | |||||||||||||
Effect of Gain on Settled Natural Gas Derivatives on Average Price (per Mcf) | 0.10 | — | |||||||||||||||
Natural Gas and NGLs Net of Settled Natural Gas Derivatives (per Mcf) | 0.81 | 2.67 | (70) | % | |||||||||||||
Realized Price on a Boe Basis Excluding Settled Commodity Derivatives | 24.55 | 44.88 | (45) | % | |||||||||||||
Effect of Gain on Settled Commodity Derivatives on Average Price (per Boe) | 17.72 | 2.74 | |||||||||||||||
Realized Price on a Boe Basis Including All Realized Derivative Settlements | 42.27 | 47.62 | (11) | % | |||||||||||||
Operating Expenses (in thousands): | |||||||||||||||||
Production Expenses | $ | 63,974 | $ | 50,799 | 26 | % | |||||||||||
Production Taxes | 13,813 | 26,553 | (48) | % | |||||||||||||
General and Administrative Expenses | 9,580 | 11,300 | (15) | % | |||||||||||||
Depletion, Depreciation, Amortization and Accretion | 98,565 | 91,225 | 8 | % | |||||||||||||
Costs and Expenses (per Boe): | |||||||||||||||||
Production Expenses | $ | 10.41 | $ | 8.07 | 29 | % | |||||||||||
Production Taxes | 2.25 | 4.22 | (47) | % | |||||||||||||
General and Administrative Expenses | 1.56 | 1.79 | (13) | % | |||||||||||||
Depletion, Depreciation, Amortization and Accretion | 16.04 | 14.49 | 11 | % | |||||||||||||
Net Producing Wells at Period End | 466.0 | 340.6 | 37 | % |
Six Months Ended June 30, | |||||||||||||||||||||||
2020 | 2019 | $ Change | % Change | ||||||||||||||||||||
Depletion | $ | 15.92 | $ | 14.41 | $ | 1.51 | 10 | % | |||||||||||||||
Depreciation, Amortization and Accretion | 0.12 | 0.08 | 0.04 | 50 | % | ||||||||||||||||||
Total DD&A Expense | $ | 16.04 | $ | 14.49 | $ | 1.55 | 11 | % |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
(In thousands, except share and per share data) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Net Income (Loss) | $ | (899,200) | $ | 44,399 | $ | (530,914) | $ | (62,762) | |||||||||||||||
Add: | |||||||||||||||||||||||
Impact of Selected Items: | |||||||||||||||||||||||
(Gain) Loss on Unsettled Commodity Derivatives | 150,077 | (31,857) | (194,999) | 120,311 | |||||||||||||||||||
Impairment of Other Current Assets | — | 2,694 | — | 2,694 | |||||||||||||||||||
(Gain) Loss on Extinguishment of Debt | (217) | 425 | 5,310 | 425 | |||||||||||||||||||
Debt Exchange Derivative (Gain) Loss | — | 4,873 | — | (1,413) | |||||||||||||||||||
Contingent Consideration Loss | — | 24,763 | — | 23,371 | |||||||||||||||||||
Acquisition Transaction Costs | — | 513 | — | 513 | |||||||||||||||||||
Loss on Unsettled Interest Rate Derivatives | 752 | — | 1,429 | — | |||||||||||||||||||
Impairment Expense | 762,716 | — | 762,716 | — | |||||||||||||||||||
Selected Items, Before Income Taxes | 913,328 | 1,411 | 574,456 | 145,901 | |||||||||||||||||||
Income Tax of Selected Items(1) | (3,461) | (346) | (10,668) | (20,696) | |||||||||||||||||||
Selected Items, Net of Income Taxes | 909,866 | 1,065 | 563,788 | 125,205 | |||||||||||||||||||
Adjusted Net Income | $ | 10,667 | $ | 45,465 | $ | 32,874 | $ | 62,443 | |||||||||||||||
Weighted Average Shares Outstanding – Basic | 415,356,043 | 378,368,462 | 409,509,292 | 374,927,630 | |||||||||||||||||||
Weighted Average Shares Outstanding – Diluted | 515,569,721 | 378,724,511 | 509,897,841 | 375,736,820 | |||||||||||||||||||
Net Income (Loss) Per Common Share – Basic | $ | (2.16) | $ | 0.12 | $ | (1.30) | $ | (0.17) | |||||||||||||||
Add: | |||||||||||||||||||||||
Impact of Selected Items, Net of Income Taxes | 2.19 | — | 1.38 | 0.33 | |||||||||||||||||||
Adjusted Net Income Per Common Share – Basic | $ | 0.03 | $ | 0.12 | $ | 0.08 | $ | 0.16 | |||||||||||||||
Net Income (Loss) Per Common Share – Diluted | $ | (1.74) | $ | 0.12 | $ | (1.04) | $ | (0.17) | |||||||||||||||
Add: | |||||||||||||||||||||||
Impact of Selected Items, Net of Income Taxes | 1.76 | — | 1.10 | 0.33 | |||||||||||||||||||
Adjusted Net Income Per Common Share – Diluted | $ | 0.02 | $ | 0.12 | $ | 0.06 | $ | 0.16 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
(In thousands) | 2020 | 2019 | 2020 | 2019 | |||||||||||||||||||
Net Income (Loss) | $ | (899,200) | $ | 44,399 | $ | (530,914) | $ | (62,762) | |||||||||||||||
Add: | |||||||||||||||||||||||
Interest Expense | 13,957 | 17,778 | 30,508 | 37,327 | |||||||||||||||||||
Income Tax Provision (Benefit) | — | — | (166) | — | |||||||||||||||||||
Depreciation, Depletion, Amortization and Accretion | 36,756 | 46,091 | 98,565 | 91,225 | |||||||||||||||||||
Impairment of Other Current Assets | — | 2,694 | — | 2,694 | |||||||||||||||||||
Non-Cash Stock-Based Compensation | 1,214 | 1,643 | 2,293 | 4,394 | |||||||||||||||||||
(Gain) Loss on Extinguishment of Debt | (217) | 425 | 5,310 | 425 | |||||||||||||||||||
Debt Exchange Derivative (Gain) Loss | — | 4,873 | — | (1,413) | |||||||||||||||||||
Contingent Consideration Loss | — | 24,763 | — | 23,371 | |||||||||||||||||||
Loss on Unsettled Interest Rate Derivatives | 752 | — | 1,429 | — | |||||||||||||||||||
(Gain) Loss on Unsettled Commodity Derivatives | 150,077 | (31,857) | (194,999) | 120,311 | |||||||||||||||||||
Impairment Expense | 762,716 | — | 762,716 | — | |||||||||||||||||||
Adjusted EBITDA | $ | 66,055 | $ | 110,810 | $ | 174,742 | $ | 215,572 |
Six Months Ended June 30, | |||||||||||
2020 | 2019 | ||||||||||
(in thousands, unaudited) | |||||||||||
Net Cash Provided by Operating Activities | $ | 202,239 | $ | 198,300 | |||||||
Net Cash Used for Investing Activities | (190,514) | (191,141) | |||||||||
Net Cash Used for Financing Activities | (25,955) | (6,723) | |||||||||
Net Change in Cash | $ | (14,229) | $ | 436 |
Six Months Ended June 30, | |||||||||||
2020 | 2019 | ||||||||||
(in millions, unaudited) | |||||||||||
Drilling and Development Capital Expenditures | $ | 163.6 | $ | 139.6 | |||||||
Acquisition of Oil and Natural Gas Properties | 25.5 | 19.4 | |||||||||
Other Capital Expenditures | 0.6 | 0.5 | |||||||||
Total | $ | 189.7 | $ | 159.5 |
Contract Period | Oil (Barrels) | Weighted Average Price ($) | ||||||||||||
Swaps-Crude Oil | ||||||||||||||
2020: | ||||||||||||||
Q3 | 2,501,348 | $ | 58.47 | |||||||||||
Q4 | 2,372,362 | 58.03 | ||||||||||||
2021(1): | ||||||||||||||
Q1 | 2,201,250 | $ | 55.53 | |||||||||||
Q2 | 1,997,458 | 55.88 | ||||||||||||
Q3 | 1,809,410 | 53.46 | ||||||||||||
Q4 | 1,800,506 | 53.47 | ||||||||||||
2022(2): | ||||||||||||||
Q1 | — | $ | — | |||||||||||
Q2 | — | — | ||||||||||||
Q3 | — | — | ||||||||||||
Q4 | — | — |
Contract Period | Gas (MMBTU) | Weighted Average Price ($) | ||||||||||||
Swaps-Natural Gas | ||||||||||||||
2020: | ||||||||||||||
Q3 | 1,610,000 | $ | 2.35 | |||||||||||
Q4 | 1,610,000 | 2.35 | ||||||||||||
2021: | ||||||||||||||
Q1 | 2,700,000 | $ | 2.43 | |||||||||||
Q2 | 2,275,000 | 2.43 | ||||||||||||
Q3 | 2,300,000 | 2.43 | ||||||||||||
Q4 | 2,300,000 | 2.43 | ||||||||||||
Period | Total Number of Shares Purchased(1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs(2) | ||||||||||||||||||||||
Month #1 | ||||||||||||||||||||||||||
April 1, 2020 to April 30, 2020 | 9,440 | $ | 0.84 | — | $ 68.1 million | |||||||||||||||||||||
Month #2 | ||||||||||||||||||||||||||
May 1, 2020 to May 31, 2020 | — | — | — | 68.1 million | ||||||||||||||||||||||
Month #3 | ||||||||||||||||||||||||||
June 1, 2020 to June 30, 2020 | — | — | — | 68.1 million | ||||||||||||||||||||||
Total | 9,440 | $ | 0.84 | — | $ 68.1 million |
Exhibit No. | Description | Reference | ||||||||||||
Restated Certificate of Incorporation of Northern Oil and Gas, Inc., dated August 24, 2018 | Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on August 27, 2018 | |||||||||||||
By-Laws of Northern Oil and Gas, Inc. | Incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 15, 2018 | |||||||||||||
Certificate of Designations of 6.500% Series A Perpetual Cumulative Convertible Preferred Stock of Northern Oil and Gas, Inc., dated November 22, 2019 | Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 26, 2019 | |||||||||||||
Certificate of Amendment to the Certificate of Designations of 6.500% Series A Perpetual Cumulative Convertible Preferred Stock of Northern Oil and Gas, Inc., dated January 2, 2020 | Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 6, 2020 | |||||||||||||
Certificate of Amendment to the Certificate of Designations of 6.500% Series A Perpetual Cumulative Convertible Preferred Stock of Northern Oil and Gas, Inc., dated January 17, 2020 | Incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on January 22, 2020 | |||||||||||||
Indenture, dated May 15, 2018, between Northern Oil and Gas, Inc. and Wilmington Trust, National Association, as trustee (including Form of 8.50% Senior Secured Second Lien Notes due 2023) | Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 18, 2018 | |||||||||||||
First Supplemental Indenture, dated September 18, 2018, between Northern Oil and Gas, Inc. and Wilmington Trust, National Association, as trustee | Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on September 18, 2018 | |||||||||||||
Second Supplemental Indenture, dated October 5, 2018, between Northern Oil and Gas, Inc. and Wilmington Trust, National Association, as trustee | Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on October 9, 2018 | |||||||||||||
Third Supplemental Indenture, dated November 22, 2019, between Northern Oil and Gas, Inc. and Wilmington Trust, National Association, as trustee | Incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on November 26, 2019 | |||||||||||||
First Amendment to the Second Amended and Restated Credit Agreement, dated July 8, 2020, by and among Northern Oil and Gas, Inc. and Wells Fargo Bank, National Association and the Lenders party thereto | Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on July 13, 2020 | |||||||||||||
Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | |||||||||||||
Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | Filed herewith | |||||||||||||
32.1 | Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | Filed herewith | ||||||||||||
101.INS | XBRL Instance Document | Filed herewith | ||||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document | Filed herewith | ||||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Filed herewith |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Filed herewith | ||||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Filed herewith | ||||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Filed herewith | ||||||||||||
104 | The cover page from Northern Oil and Gas, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline XBRL | Filed herewith |
Date: | August 7, 2020 | By: | /s/ Nicholas O’Grady | |||||||||||
Nicholas O’Grady, Chief Executive Officer and principal executive officer (on behalf of Registrant) | ||||||||||||||
Date: | August 7, 2020 | By: | /s/ Chad Allen | |||||||||||
Chad Allen, Chief Financial Officer and principal accounting officer |
1. | I have reviewed this quarterly report on Form 10-Q of Northern Oil and Gas, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: August 7, 2020 | By: /s/ Nicholas O’Grady | ||||
Nicholas O’Grady Principal Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Northern Oil and Gas, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weakness in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: August 7, 2020 | By: /s/ Chad Allen | ||||
Chad Allen Principal Financial Officer |
Dated: August 7, 2020 | By: /s/ Nicholas O’Grady | ||||
Nicholas O’Grady Principal Executive Officer |
Dated: August 7, 2020 | By: /s/ Chad Allen | ||||
Chad Allen Principal Financial Officer |
CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, shares outstanding (in shares) | 2,294,702 | 1,500,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 675,000,000 | 675,000,000 |
Common stock, shares outstanding (in shares) | 436,439,915 | 406,085,183 |
ORGANIZATION AND NATURE OF BUSINESS |
6 Months Ended |
---|---|
Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION AND NATURE OF BUSINESS | ORGANIZATION AND NATURE OF BUSINESS Northern Oil and Gas, Inc. (the “Company,” “Northern,” “our” and words of similar import), a Delaware corporation, is an independent energy company engaged in the acquisition, exploration, exploitation, development and production of crude oil and natural gas properties. The Company’s common stock trades on the NYSE American market under the symbol “NOG”. Northern’s principal business is crude oil and natural gas exploration, development, and production with operations that primarily target the Bakken and Three Forks formations in the Williston Basin of the United States. The Company acquires leasehold interests that comprise of non-operated working interests in wells and in drilling projects within its area of operations.
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The financial information included herein is unaudited. The balance sheet as of December 31, 2019 has been derived from the Company’s audited financial statements for the year ended December 31, 2019. However, such information includes all adjustments (consisting of normal recurring adjustments and change in accounting principles) that are, in the opinion of management, necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods. The results of operations for interim periods are not necessarily indicative of the results to be expected for an entire year. Certain information, accounting policies, and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted in this Form 10-Q pursuant to certain rules and regulations of the Securities and Exchange Commission (“SEC”). The condensed financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2019, which were included in the Company’s 2019 Annual Report on Form 10-K for the fiscal year ended December 31, 2019. The Company considered the impact of the novel coronavirus 2019 (“COVID-19”) pandemic on the assumptions and estimates used by management in the unaudited condensed financial statements for the reporting periods presented. As a result of the significant decline in current and expected future commodity prices, the Company recognized a material impairment charge during the three months ended June 30, 2020 (see Note 3). Management’s estimates and assumptions were based on historical data and consideration of future market conditions. Given the uncertainty inherent in any projection, which is heightened by the possibility of unforeseen additional impacts from the COVID-19 pandemic, actual results may differ from the estimates and assumptions used, and conditions may change, which could materially affect amounts reported in the unaudited condensed financial statements in the near term. Use of Estimates The preparation of financial statements under GAAP requires management to make estimates and assumptions that 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. The most significant estimates relate to proved crude oil and natural gas reserves, estimates relating to certain crude oil and natural gas revenues and expenses, fair value of derivative instruments, fair value of contingent consideration, acquisition date fair values of assets acquired and liabilities assumed, impairment of oil and natural gas properties, asset retirement obligations and deferred income taxes. Actual results may differ from those estimates. Adopted and Recently Issued Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of credit losses on financial instruments, which requires a company immediately recognize management’s current estimated credit losses (“CECL”) for all financial instruments that are not accounted for at fair value through net income. Previously, credit losses on financial assets were only required to be recognized when they were incurred. The Company adopted ASU 2016-13 on January 1, 2020. The guidance did not have a significant impact on the condensed financial statements or notes accompanying the condensed financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair value measurement (Topic 820) - Disclosure framework - Changes to the disclosure requirements for fair value measurement, which modifies the disclosure requirements on fair value measurements in Topic 820. The Company adopted ASU 2018-13 on January 1, 2020. The guidance did not have a significant impact on the condensed financial statements or notes accompanying the condensed financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as separate entity financial statements and interim recognition of enactment of tax laws or rate changes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim reporting periods within those years. The Company is currently evaluating the effect of ASU 2019-12, but does not expect the adoption of this guidance to have a material impact on its financial position, cash flows or result of operations. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (LIBOR). The amendment provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This amendment is effective upon issuance and expires on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company’s condensed financial statements. Revenue Recognition The Company’s revenues are primarily derived from its interests in the sale of oil and natural gas production. The Company recognizes revenue from its interests in the sales of oil and natural gas in the period that its performance obligations are satisfied. Performance obligations are satisfied when the customer obtains control of product, when the Company has no further obligations to perform related to the sale, when the transaction price has been determined and when collectability is probable. A wellhead imbalance liability equal to the Company’s share is recorded to the extent that the Company’s well operators have sold volumes in excess of its share of remaining reserves in an underlying property. However, for the three and six months ended June 30, 2020 and 2019, the Company’s natural gas production was in balance, meaning its cumulative portion of natural gas production taken and sold from wells in which it has an interest equaled its entitled interest in natural gas production from those wells. The Company’s disaggregated revenue has two revenue sources, which are oil sales and natural gas and NGL sales, and the Company only operates in one geographic area, the Williston Basin in the United States, primarily in North Dakota and Montana. Oil sales for the three months ended June 30, 2020 and 2019 were $28.8 million and $139.8 million, respectively. Natural gas and NGL sales for the three months ended June 30, 2020 and 2019 were $(8.1) million and $10.0 million, respectively. Oil sales for the six months ended June 30, 2020 and 2019 were $145.1 million and $263.4 million, respectively. Natural gas and NGL sales for the six months ended June 30, 2020 and 2019 were $5.7 million and $19.1 million, respectively. Concentrations of Market, Credit and Other Risks The future results of the Company’s crude oil and natural gas operations will be affected by the market prices of crude oil and natural gas. The availability of a ready market for crude oil and natural gas products in the future will depend on numerous factors beyond the control of the Company, including weather, imports, marketing of competitive fuels, proximity and capacity of crude oil and natural gas pipelines and other transportation facilities, any oversupply or undersupply of crude oil, natural gas and liquid products, economic disruptions resulting from the COVID-19 pandemic, the regulatory environment, the economic environment, and other regional and political events, none of which can be predicted with certainty. The Company operates in the exploration, development and production sector of the crude oil and natural gas industry. The Company’s receivables include amounts due, indirectly via the third-party operators of the wells, from purchasers of its crude oil and natural gas production. While certain of these customers, as well as third-party operators of the wells, are affected by periodic downturns in the economy in general or in their specific segment of the crude oil or natural gas industry, the Company believes that its level of credit-related losses due to such economic fluctuations have been immaterial. As a non-operator, 100% of the Company’s wells are operated by third-party operating partners. As a result, the Company is highly dependent on the success of these third-party operators. If they are not successful in the development, exploitation, production and exploration activities relating to the Company’s leasehold interests, or are unable or unwilling to perform, the Company’s financial condition and results of operation could be adversely affected. These risks are heightened in the current low commodity price environment, which may present significant challenges to these third-party operators. The Company’s third-party operators will make decisions in connection with their operations that may not be in the Company’s best interests, and the Company may have little or no ability to exercise influence over the operational decisions of its third-party operators. For the three and six months ended June 30, 2020, the Company’s top four operators made up 57% and 51%, respectively, of total oil and gas sales, compared to 55% and 57% for the three and six months ended June 30, 2019. The Company faces concentration risk due to the fact that all of its oil and natural gas properties are located in the Williston Basin, primarily in North Dakota and Montana. As a result, the Company is disproportionately exposed to risks affecting its single geographic area of operations. The Company manages and controls market and counterparty credit risk. In the normal course of business, collateral is not required for financial instruments with credit risk. Financial instruments which potentially subject the Company to credit risk consist principally of temporary cash balances and derivative financial instruments. The Company maintains cash and cash equivalents in bank deposit accounts which, at times, may exceed the federally insured limits. The Company has not experienced any significant losses from such investments. The Company attempts to limit the amount of credit exposure to any one financial institution or company. The Company believes the credit quality of its counterparties is generally high. In the normal course of business, letters of credit or parent guarantees may be required for counterparties which management perceives to have a higher credit risk. Net Income (Loss) Per Common Share Basic earnings per share (“EPS”) are computed by dividing net income (loss) available to common stockholders (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted EPS is computed by dividing net income (loss) by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include shares issuable upon exercise of stock options and vesting of restricted stock awards, and shares issuable upon conversion of the Series A Preferred Stock (see Note 5). The number of potential common shares outstanding are calculated using the treasury stock or if-converted method. The reconciliation of the denominators used to calculate basic EPS and diluted EPS for the three and six months ended June 30, 2020 and 2019 are as follows:
Supplemental Cash Flow Information The following reflects the Company’s supplemental cash flow information:
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CRUDE OIL AND NATURAL GAS PROPERTIES |
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Oil and Gas Exploration and Production Industries Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CRUDE OIL AND NATURAL GAS PROPERTIES | CRUDE OIL AND NATURAL GAS PROPERTIES The Company follows the full cost method of accounting for crude oil and natural gas operations whereby all costs related to the exploration and development of crude oil and natural gas properties are capitalized into a single cost center (“full cost pool”). Such costs include land acquisition costs, geological and geophysical expenses, carrying charges on non-producing properties, costs of drilling directly related to acquisition, and exploration activities. Internal costs that are capitalized are directly attributable to acquisition, exploration and development activities and do not include costs related to production, general corporate overhead or similar activities. Costs associated with production and general corporate activities are expensed in the period incurred. Under the full cost method of accounting, the Company is required to perform a ceiling test each quarter. The test determines a limit, or ceiling, on the book value of the proved oil and gas properties. Net capitalized costs are limited to the lower of unamortized cost net of deferred income taxes, or the cost center ceiling. As a result of low commodity prices and their effect on the proved reserve values of properties, the Company recorded a non-cash ceiling test impairment of $762.7 million for both the three and six months ended June 30, 2020. The Company did not have any impairment of its proved oil and gas properties during 2019. At June 30, 2020, the Company’s impairment review used prices that reflect an average of the trailing 12-month prices as prescribed pursuant to the SEC’s guidelines. The average prices used in the June 30, 2020 impairment review are significantly higher than the actual and currently forecasted prices for 2020. As lower average monthly pricing is reflected in the trailing 12-month average pricing calculation for future fiscal quarters, the present value of the Company’s future net revenues is expected to decline and additional impairments are expected to be recognized. Given the current oil and natural gas pricing environment, the Company expects it will have additional noncash ceiling test write-downs of its oil and natural gas properties in 2020. The book value of the Company’s crude oil and natural gas properties consists of all acquisition costs (including cash expenditures and the value of stock consideration), drilling costs and other associated capitalized costs. Acquisitions are accounted for as purchases and, accordingly, the results of operations are included in the accompanying condensed statements of operations from the closing date of the acquisition. Acquired assets and liabilities assumed are recorded based on their estimated fair value at the time of the acquisition. Acquisitions have been funded with internal cash flow, bank borrowings and the issuance of debt and equity securities. 2020 Acquisitions The Company acquired oil and natural gas properties, through a number of independent transactions, for a total of $0.4 million and $25.9 million during the three and six months ended June 30, 2020, respectively. These amounts include $0.1 million and $18.4 million, respectively, of development costs that occurred prior to the closings of the acquisitions. 2019 Acquisitions The Company acquired oil and natural gas properties, through a number of independent transactions, for a total of $11.3 million and $19.7 million during the three and six months ended June 30, 2019, respectively. VEN Bakken Acquisition On July 1, 2019, the Company completed its acquisition (the “VEN Bakken Acquisition”) of certain oil and gas properties and interests from VEN Bakken, LLC (“VEN Bakken”), effective as of July 1, 2019. VEN Bakken is a wholly-owned subsidiary of Flywheel Bakken, LLC. At closing the acquired assets consisted of approximately 90.1 net producing wells and 3.3 net wells in process, as well as approximately 18,000 net acres substantially all in North Dakota. The Company also assumed certain crude oil derivative contracts from VEN Bakken as part of the acquisition. The VEN Bakken Acquisition was completed pursuant to the purchase and sale agreement between the Company and VEN Bakken, dated as of April 18, 2019. The total estimated consideration paid by the Company was $315.3 million, consisting of (i) $174.9 million in cash, (ii) 5,602,147 shares of Company common stock valued at $11.7 million, based on the $2.09 per share closing price of Company common stock on the closing date of the acquisition and (iii) $128.7 million of value attributable to a 6.0% unsecured promissory note due July 1, 2022 issued by the Company to VEN Bakken in the aggregate principal amount of $130.0 million (the “Unsecured VEN Bakken Note”). The Company incurred $1.8 million of transactions costs in connection with the acquisition, which are included in general and administrative expense in the condensed statement of operations. The following table reflects the fair values of the net assets and liabilities as of the date of acquisition:
Pro Forma Information The following summarized unaudited pro forma condensed statement of operations information for the three and six months ended June 30, 2019, assumes that the VEN Bakken Acquisition occurred as of January 1, 2019. There is no pro forma information included for the three and six months ended June 30, 2020, because the Company’s actual financial results for such periods fully reflect this acquisition. The Company prepared the following summarized unaudited pro forma financial results for comparative purposes only. The summarized unaudited pro forma information may not be indicative of the results that would have occurred had the Company completed the acquisition as of January 1, 2019, or that would be attained in the future.
Unproved Properties All properties that are not classified as proved properties are considered unproved properties and, thus, the costs associated with such properties are not subject to depletion. Once a property is classified as proved, all associated acreage and drilling costs are subject to depletion. The Company historically has acquired unproved properties by purchasing individual or small groups of leases directly from mineral owners, landmen, or lease brokers, which leases historically have not been subject to specified drilling projects, and by purchasing lease packages in identified project areas controlled by specific operators. The Company generally participates in drilling activities on a heads up basis by electing whether to participate in each well on a well-by-well basis at the time wells are proposed for drilling. The Company believes that the majority of its unproved costs will become subject to depletion within the next five years by proving up reserves relating to the acreage through exploration and development activities, by impairing the acreage that will expire before the Company can explore or develop it further or by determining that further exploration and development activity will not occur. The timing by which all other properties will become subject to depletion will be dependent upon the timing of future drilling activities and delineation of its reserves. Capitalized costs associated with impaired unproved properties, which includes leases that have expired or have been deemed uneconomic, and capitalized costs related to properties having proved reserves, plus the estimated future development costs and asset retirement costs, are depleted and amortized on the unit-of-production method. Under this method, depletion is calculated at the end of each period by multiplying total production for the period by a depletion rate. The depletion rate is determined by dividing the total unamortized cost base plus future development costs by net equivalent proved reserves at the beginning of the period. The costs of unproved properties are withheld from the depletion base until such time as they are either developed or abandoned. When proved reserves are assigned or the property is considered to be impaired, the cost of the property or the amount of the impairment is added to costs subject to depletion and full cost ceiling calculations. For the three months ended June 30, 2020 and 2019, unproved properties of $0.4 million and $1.0 million, respectively, were impaired. For the six months ended June 30, 2020 and 2019, unproved properties of $2.0 million and $1.8 million, respectively, were impaired.
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LONG-TERM DEBT |
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LONG-TERM DEBT | LONG-TERM DEBT The Company’s long-term debt consists of the following:
________________ (1)Debt issuance costs related to the Company’s revolving credit facility of $8.8 million and $9.8 million as of June 30, 2020 and December 31, 2019, respectively, are recorded in “Other Noncurrent Assets, Net” on the balance sheets. Revolving Credit Facility On November 22, 2019, the Company entered into a Second Amended and Restated Credit Agreement (the “Revolving Credit Facility”) with Wells Fargo Bank, National Association, as administrative agent, and the lenders from time to time party thereto, which amended and restated the Company’s prior revolving credit facility that was entered into on October 5, 2018. The Revolving Credit Facility is scheduled to mature on November 22, 2024, provided that the maturity date shall be 91 days prior to the scheduled maturity date of the earlier of (i) the Second Lien Notes (defined below) if any Second Lien Notes remain outstanding on such date or (ii) the Unsecured VEN Bakken Note if any principal amount of the Unsecured VEN Bakken Note remains outstanding on such date. The Revolving Credit Facility is subject to a borrowing base with maximum loan value to be assigned to the proved reserves attributable to the Company and its subsidiaries’ (if any) oil and gas properties. The borrowing base as of June 30, 2020 was $800.0 million. The borrowing base will be redetermined semiannually on or around April 1st and October 1st, with one interim “wildcard” redetermination available between scheduled redeterminations. The April 1st scheduled redetermination shall be based on a January 1st engineering report audited by a third party (reasonably acceptable by the Agent). The most recent redetermination was completed on July 8, 2020, with the borrowing base reduced to $660.0 million (see Note 12). At the Company’s option, borrowings under the Revolving Credit Facility shall bear interest at the base rate or LIBOR plus an applicable margin. Base rate loans bear interest at a rate per annum equal to the greatest of: (i) the agent bank’s prime rate; (ii) the federal funds effective rate plus 50 basis points; and (iii) the adjusted LIBOR rate for a one-month interest period plus 100 basis points. The applicable margin for base rate loans ranges from 100 to 200 basis points, and the applicable margin for LIBOR loans ranges from 200 to 300 basis points, in each case depending on the percentage of the borrowing base utilized. The Revolving Credit Facility contains negative covenants that limit the Company’s ability, among other things, to pay dividends, incur additional indebtedness, maintain excess cash liquidity, sell assets, enter into certain derivatives contracts, change the nature of its business or operations, merge, consolidate, or make certain types of investments. In addition, the Revolving Credit Facility requires that the Company comply with the following financial covenants: (i) as of the date of determination, the ratio of total net debt to EBITDAX (as defined in the Revolving Credit Facility) shall be no more than 3.50 to 1.00, measured on a pro forma rolling four quarter basis, and (ii) the current ratio (defined as consolidated current assets including unused amounts of the total commitments, but excluding non-cash assets under FASB ASC 815, divided by consolidated current liabilities excluding current non-cash obligations under FASB ASC 815 and current maturities under the Revolving Credit Facility, the Second Lien Notes and the Unsecured VEN Bakken Note) shall not be less than 1.00 to 1.00. The Company is in compliance with these financial covenants as of June 30, 2020. The Company’s obligations under the Revolving Credit Facility may be accelerated, subject to customary grace and cure periods, upon the occurrence of certain Events of Default (as defined in the Revolving Credit Facility). Such Events of Default include customary events for a financing agreement of this type, including, without limitation, payment defaults, the inaccuracy of representations and warranties, defaults in the performance of affirmative or negative covenants, defaults on other indebtedness of us or the Company’s subsidiaries, defaults related to judgments and the occurrence of a Change in Control (as defined in the Revolving Credit Facility). The Company’s obligations under the Revolving Credit Facility are secured by mortgages on not less than 90% of the value of proven reserves associated with the oil and gas properties included in the determination of the borrowing base. Additionally, the Company entered into a Guaranty and Collateral Agreement in favor of the Agent for the secured parties, pursuant to which the Company’s obligations under the Revolving Credit Facility are secured by a first priority security interest in substantially all of the Company’s assets. Second Lien Notes due 2023 On May 15, 2018, the Company issued 8.500% senior secured second lien notes due 2023 (the “Second Lien Notes”) with an aggregate principal amount of $344.3 million (the “Original 2L Notes”) in exchange for certain previously outstanding 8.000% senior unsecured notes due June 1, 2020 (the “Unsecured Notes”). In October 2018, the Company issued an additional $350.0 million aggregate principal amount of Second Lien Notes (the “Additional 2L Notes”), the proceeds of which were used in connection with the retirement of the Company’s prior term loan credit agreement. In addition, as of and through June 30, 2020, the Company had issued another $4.3 million of additional aggregate principal amount of Second Lien Notes pursuant to the interest payment-in-kind provisions thereof. During 2019, the Company repurchased and retired $10.1 million in aggregate principal amount of Second Lien Notes in open market transactions. In November 2019, the Company completed a cash tender offer to redeem and repay $200.0 million principal amount of Second Lien Notes. Also in November 2019, the Company redeemed and repaid $70.8 million principal amount of Second Lien Notes in exchange for Series A Preferred Stock. In the first quarter of 2020, the Company completed four independent, separately negotiated purchase agreements to repurchase and retire $76.7 million aggregate principal amount of Second Lien Notes in exchange for Series A Preferred Stock and cash. In the second quarter of 2020, the Company completed five independent, separately negotiated exchange agreements to retire $30.2 million aggregate principal amount of Second Lien Notes in exchange for 28.5 million shares of common stock. During the six months ended June 30, 2020, the Company repurchased and retired $13.5 million aggregate principal amount of Second Lien Notes in open market transactions. The terms of the Second Lien Notes include those stated in the Indenture entered into on May 15, 2018 by the Company and Wilmington Trust, National Association, as trustee (the “Original 2L Indenture”), as amended by the First Supplemental Indenture, dated September 18, 2018 (the “First Supplemental 2L Indenture”), the Second Supplemental Indenture, dated October 5, 2018 (the “Second Supplemental 2L Indenture”), and the Third Supplemental Indenture, dated November 22, 2019 (the “Third Supplemental 2L Indenture” and, together with the Original 2L Indenture, the First Supplemental 2L Indenture, and the Second Supplemental 2L Indenture, the “2L Indenture”). The Second Lien Notes are the senior secured obligations of the Company and rank equal in right of payment to all existing and future senior indebtedness of the Company and its subsidiaries. The Second Lien Notes are secured by second priority security interests in substantially all assets of the Company, subject to certain exceptions. The Second Lien Notes will be guaranteed by all of the Company’s direct and indirect subsidiaries that guarantee indebtedness under any other indebtedness for borrowed money of the Company or any of the Company’s subsidiary guarantors. As of June 30, 2020, the Company did not have any subsidiaries. The Second Lien Notes will mature on May 15, 2023. Interest on the Second Lien Notes accrues at a rate of 8.500% per annum payable in cash quarterly in arrears on the first day of each calendar quarter. Additional interest may accrue depending on the Company’s total debt to EBITDAX ratio as of each December 31st and June 30th, provided that any such additional interest would be payable in kind (the “PIK Interest”). No PIK Interest will accrue so long as the Company’s total debt to EBITDAX ratio remains below 2.50 to 1.00 as of each applicable measurement date. PIK Interest of 1.00% per annum will accrue if the Company’s total debt to EBITDAX ratio is less than 2.75 to 1.00 but equal to or greater than 2.50 to 1.00. PIK Interest of 2.00% per annum will accrue if the Company’s total debt to EBITDAX ratio is less than 3.00 to 1.00 but equal to or greater than 2.75 to 1.00. PIK Interest of 3.00% per annum will accrue if the Company’s total debt to EBITDAX ratio is greater than or equal to 3.00 to 1.00. No PIK Interest has accrued since March 31, 2019. Default interest will be payable in cash on demand at the then applicable interest rate plus 3.00% per annum. The Company may redeem all or a portion of any of the Second Lien Notes at the following redemption prices during the following time periods (plus accrued and unpaid interest on the Second Lien Notes redeemed): (i) from and after May 15, 2018 until May 15, 2021, 104%, (ii) on and after May 15, 2021 until May 15, 2022, 102%, and (iii) on and after May 15, 2022, 100%. Subject to the terms of an intercreditor agreement, the Company is also required to offer to prepay the Second Lien Notes with 100% of the net cash proceeds of asset sales, casualty events and condemnations in excess of $20.0 million not required to be used to pay down the loans under the Revolving Credit Facility, subject to customary exclusions and reinvestment provisions. Mandatory prepayment offers will be subject to payment of the make whole premium and redemption price set forth above, as applicable. If a change of control occurs, the Company will be required to offer to repurchase the Second Lien Notes at the repurchase price of 101% of the principal amount of repurchased Second Lien Notes (subject to the prepayment provisions of the Revolving Credit Facility). The Second Lien Notes contain negative covenants that limit the Company’s ability, among other things, to pay cash dividends, incur additional indebtedness, sell assets, enter into certain derivatives contracts, change the nature of its business or operations, merge, consolidate, make certain types of investments, amend other debt documents, and incur any additional debt on a subordinated or junior basis to the Revolving Credit Facility and on a senior basis to the Second Lien Notes. The Second Lien Notes do not include any financial maintenance covenants. The obligations of the Company under the Second Lien Notes may be accelerated upon the occurrence of an Event of Default (as such term is defined in the 2L Indenture). Events of Default include customary events for a capital markets debt financing of this type, including, without limitation, payment defaults, the inaccuracy of representations and warranties, defaults in the performance of affirmative or negative covenants, defaults on other indebtedness of the Company or its subsidiaries, bankruptcy or related defaults, defaults related to judgments and the occurrence of a Change of Control (as such term is defined in the 2L Indenture). Unsecured VEN Bakken Note On July 1, 2019, in connection with the completion of the VEN Bakken Acquisition, the Company issued the Unsecured VEN Bakken Note in the original principal amount of $130.0 million (see Note 3 above). Fifty percent (50%) of the original principal amount of the Unsecured VEN Bakken Note is required to be repaid by the Company on or before January 1, 2021, and the remaining unpaid principal amount is required to be repaid by the Company on or before July 1, 2022, in each case together with all accrued but unpaid interest thereon. Interest, at a rate of 6.0% per annum, is due quarterly in arrears on the first day of each calendar quarter, commencing on October 1, 2019. The Unsecured VEN Bakken Note does not include any financial maintenance covenants and is unsecured. The obligations of the Company under the Unsecured VEN Bakken Note may be accelerated, subject to certain grace and cure periods, upon the occurrence of an event of default. Events of default include customary events, including, without limitation, payment defaults, the inaccuracy of representations and warranties, defaults in the performance of certain affirmative or negative covenants, defaults on other indebtedness of the Company, and bankruptcy or insolvency related defaults. The Unsecured VEN Bakken Note contains negative covenants that limit the Company’s ability, among other things, to pay dividends, repurchase equity, incur additional indebtedness, sell assets, terminate or unwind certain derivatives contracts, change the nature of its business or operations and merge or consolidate. In addition, the Unsecured VEN Bakken Note is subject to a mandatory prepayment offer in connection with a change of control.
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COMMON AND PREFERRED STOCK |
6 Months Ended |
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Jun. 30, 2020 | |
Equity [Abstract] | |
COMMON AND PREFERRED STOCK | COMMON AND PREFERRED STOCK Common Stock The Company is authorized to issue up to 675,000,000 shares of common stock, par value $0.001 per share. As of June 30, 2020, the Company had 436,439,915 shares of common stock issued and outstanding. Preferred Stock The Company is authorized to issue up to 5,000,000 shares of preferred stock, par value $0.001 per share, with such designations, voting and other rights and preferences as may be determined from time to time by the Board of Directors. As of June 30, 2020, the Company had 2,294,702 shares of preferred stock issued and outstanding, respectively, all of which were shares of 6.500% Series A Perpetual Cumulative Convertible Preferred Stock (the “Series A Preferred Stock”). The terms of the Series A Preferred Stock are set forth in the Certificate of Designations for the Series A Preferred Stock (the “Certificate of Designations”), as originally filed with the Delaware Secretary of State on November 22, 2019, and as amended thereafter. The Series A Preferred Stock ranks senior to the Company’s common stock with respect to the payment of dividends and distribution of assets upon liquidation, dissolution or winding-up. Holders of the Series A Preferred Stock are entitled to receive, when, as and if declared by the board of directors of the Company, cumulative dividends in cash, at a rate of 6.500% per annum on the sum of (i) the $100 liquidation preference per share of Series A Preferred Stock (the “Liquidation Preference”) and (ii) all accumulated and unpaid dividends (if any), payable semi-annually in arrears on May 15 and November 15 of each year, commencing on May 15, 2020. As of June 30, 2020, no dividends had been declared or paid, and there were $9.1 million of accumulated dividends on the Series A Preferred Stock. The Series A Preferred Stock is convertible at the holders’ option (an “Optional Conversion”) into common stock at a conversion rate set forth in the Certificate of Designations, subject to customary adjustments as provided for therein. As of June 30, 2020, the conversion rate was 43.63 shares of common stock for each share of Series A Preferred Stock (which is equivalent to a conversion price of approximately $2.292 per share of Common Stock). Holders may be entitled to additional shares of common stock or cash in connection with a conversion that occurs in connection with a Fundamental Change (as defined in the Certificate of Designations). The Series A Preferred Stock is convertible at the Company’s option (a “Mandatory Conversion”) if the closing sale price of the Company’s common stock equals or exceeds 145% of the conversion price for at least 20 trading days (whether or not consecutive) in a period of 30 consecutive trading days. A Mandatory Conversion would also entitle the holder to a cash payment equal to eight semi-annual dividend payments, less an amount equal to all cash dividend payments made in respect of such holder’s shares of Series A Preferred Stock prior to such Mandatory Conversion. The occurrence of any Optional Conversion or Mandatory Conversion is subject to various terms and limitations set forth in the Certificate of Designations. The Certificate of Designations also sets forth additional information relating to the payment of dividends, voting, conversion rights, consent rights, liquidation rights, the ranking of the Series A Preferred Stock in comparison with the Company’s other securities, and other matters. 2020 Activity Common Stock During the six months ended June 30, 2020, 0.3 million shares of common stock were surrendered by certain employees of the Company to cover tax obligations in connection with their restricted stock awards. The total value of these shares was approximately $0.4 million, which is based on the market prices on the dates the shares were surrendered. During the six months ended June 30, 2020, the Company issued 28.5 million shares of common stock as part of separate exchange transactions pursuant to which the Company retired $30.2 million in aggregate principal amount of Second Lien Notes (see Note 4). Preferred Stock During the six months ended June 30, 2020, the Company issued 794,702 shares of Series A Preferred Stock as part of separate transactions pursuant to which the Company retired $76.7 million in aggregate principal amount of Second Lien Notes (see Note 4). Stock Repurchase Program In May 2011, the Company’s board of directors approved a stock repurchase program to acquire up to $150.0 million of the Company’s outstanding common stock. The stock repurchase program allows the Company to repurchase its shares from time to time in the open market, block transactions and in negotiated transactions. During the three and six months ended June 30, 2020, the Company did not repurchase shares of its common stock under the stock repurchase program. During the six months ended June 30, 2019, the Company repurchased 5.6 million shares of its common stock under the stock repurchase program at a total cost of $16.3 million, of which $1.2 million was recorded as a settlement of contingent consideration liabilities. The Company’s accounting policy upon the repurchase of shares is to deduct its par value from common stock and to reflect any excess of cost over par value as a deduction from Additional Paid-in Capital. All repurchased shares are now included in the Company’s pool of authorized but unissued shares.
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STOCK-BASED COMPENSATION |
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STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company’s 2018 Equity Incentive Plan (the “2018 Plan”), which replaced the Company’s prior 2013 Incentive Plan (the “2013 Plan”), authorized 15,000,000 shares for grant under the 2018 Plan, plus the 769,775 shares remaining available for future grants under the 2013 Plan on the date the stockholders approved the 2018 Plan. No future awards will be made under the 2013 Plan. The 2013 Plan continues to govern awards that were made thereunder, which remain in effect pursuant to their terms. As of June 30, 2020, there were 10,370,794 shares available for future awards under the 2018 Plan. The Company recognizes the fair value of stock-based compensation awards expected to vest over the requisite service period as a charge against earnings, net of amounts capitalized. The Company’s stock-based compensation awards are accounted for as equity instruments and are included in the “General and administrative” line item in the unaudited statements of operations. The Company capitalizes a portion of stock-based compensation for employees who are directly involved in the acquisition of oil and natural gas properties into the full cost pool. Capitalized stock-based compensation is included in the “Oil and natural gas properties” line item on the unaudited balance sheets. The 2018 Plan and 2013 Plan award types are summarized as follows: Restricted Stock Awards The Company issues restricted stock awards (“RSAs”) subject to various vesting conditions as compensation to executive officers, employees and directors of the Company. RSAs issued to employees and executive officers generally vest over three years, provided that any performance and/or market conditions are also met. RSAs issued to directors generally vest over one year, provided that any performance and/or market conditions are also met. For RSAs subject to service and/or performance vesting conditions, the grant-date fair value is established based on the closing price of the Company’s common stock on such date. Stock-based compensation expense for awards subject to only service conditions is recognized on a straight-line basis over the service period. Stock-based compensation expense for awards with both service and performance conditions is recognized on a graded basis only if it is probable that the performance condition will be achieved. The Company accounts for forfeitures of awards granted under these plans as they occur in determining stock-based compensation expense. For awards subject to a market condition, the grant-date fair value is estimated using a Monte Carlo valuation model. The Company recognizes stock-based compensation expense for awards subject to market-based vesting conditions regardless of whether it becomes probable that these conditions will be achieved or not, and stock-based compensation expense for any such awards is not reversed if vesting does not actually occur. The Monte Carlo model is based on random projections of stock price paths and must be repeated numerous times to achieve a probabilistic assessment. Expected volatility is calculated based on the historical volatility and implied volatility of the Company’s common stock, and the risk-free interest rate is based on U.S. Treasury yield curve rates with maturities consistent with the three-year vesting period. The following table reflects the outstanding RSAs and activity related thereto for the six months ended June 30, 2020:
At June 30, 2020, there was $3.2 million of total unrecognized compensation expense related to unvested RSAs. That cost is expected to be recognized over a weighted average period of 1.0 years. For the six months ended June 30, 2020 and 2019, the total fair value of the Company’s restricted stock awards vested was $1.9 million and $2.6 million, respectively.
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RELATED PARTY TRANSACTIONS |
6 Months Ended |
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Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS | RELATED PARTY TRANSACTIONSOn October 21, 2019, the Company announced the commencement of (i) a cash tender offer (the “Tender Offer”) to purchase up to $200.0 million in aggregate principal amount of the Company’s Second Lien Notes; (ii) an exchange offer (the “Exchange Offer”) to eligible holders of Second Lien Notes to exchange up to $70.8 million in aggregate principal amount of Second Lien Notes for shares of the Company’s newly issued Series A Preferred Stock; (iii) a related solicitation of consents (the “Consent Solicitation”) to adopt certain proposed amendments to the indenture for the Second Lien Notes; and (iv) an offer to eligible holders of Second Lien Notes to subscribe to purchase for up to $75.0 million in cash additional shares of Series A Preferred Stock (the “Subscription Offer”). Parties affiliated with TRT Holdings, Inc. (collectively, the “TRT Parties”) held Second Lien Notes and thus had the right to participate in the Tender Offer, Exchange Offer, Consent Solicitation and Subscription Offer on terms identical to the terms generally offered to all holders of Second Lien Notes. These transactions closed on November 22, 2019, with the TRT Parties (i) exchanging $1.0 million aggregate principal amount of Second Lien Notes for 10,947 shares of Series A Preferred Stock pursuant to the Exchange Offer and (ii) acquiring 10,947 additional shares of Series A Preferred Stock for a purchase price of $1.1 million pursuant to the Subscription Offer. On February 20, 2020, the Company entered into an exchange agreement (the “Exchange Agreement”) with the TRT Parties related to the Series A Preferred Stock, as follows. The certificate of designations of the Series A Preferred Stock, as amended (the “Certificate of Designations”), contains limitations on the ability of the company or holders of Series A Preferred Stock to effect conversions of shares of Series A Preferred Stock for shares of the Company’s common stock if after a conversion a holder would beneficially own shares of common stock in excess of 9.99% of the aggregate number of shares of the Company’s common stock outstanding immediately after giving pro forma effect to the issuance of shares upon such conversion (the “Conversion Cap”). As of the date of the Exchange Agreement, the TRT Parties collectively beneficially owned a number of shares of the Company’s common stock in excess of the Conversion Cap. The Exchange Agreement provides, notwithstanding anything to the contrary in the Certificate of Designations, including the Conversion Cap, for the TRT Parties to be able to exchange shares of Series A Preferred Stock for shares of the Company’s common stock in the manner otherwise contemplated by the Certificate of Designations. As of the date hereof, the TRT Parties have not exchanged or converted any shares of Series A Preferred Stock into Common Stock. Two of our directors, Mr. Frantz and Mr. Popejoy, are employed by the TRT Parties and the TRT Parties beneficially owned in excess of 10% of the Company’s outstanding common stock at the time of the transactions described in this paragraph. In January 2019, the Company repurchased 3.7 million shares of Company common stock from W Energy Partners LLC (“W Energy”) for cash consideration of $11.1 million. The repurchased shares were originally issued by the Company as partial consideration for an acquisition of oil and gas properties from W Energy during 2018. W Energy beneficially owned in excess of 10% of the Company’s outstanding common stock at the time of the repurchase transactions. The Company’s Audit Committee is responsible for approving all transactions involving related parties, including each of the transactions identified above.
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COMMITMENTS & CONTINGENCIES |
6 Months Ended |
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Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS & CONTINGENCIES | COMMITMENTS & CONTINGENCIES Litigation The Company is engaged in various proceedings incidental to the normal course of business. Due to their nature, such legal proceedings involve inherent uncertainties, including but not limited to, court rulings, negotiations between affected parties and governmental intervention. Based upon the information available to the Company and discussions with legal counsel, it is the Company’s opinion that the outcome of the various legal actions and claims that are incidental to its business will not have a material impact on the Company’s financial position, results of operations or cash flows. Such matters, however, are subject to many uncertainties, and the outcome of any matter is not predictable with assurance. The Company’s interests in certain crude oil and natural gas leases from the State of North Dakota are subject to an ongoing dispute over the ownership of minerals underlying the bed of the Missouri River within the boundaries of the Fort Berthold Reservation. The ongoing dispute is between the State of North Dakota and three affiliated tribes, both of whom have purported to lease mineral rights in tracts of riverbed within the reservation boundaries. In the event the ongoing dispute results in a final judgment that is adverse to the Company’s interests, the Company would be required to reverse approximately $4.5 million in revenue (net of accrued taxes) that has been accrued since the first quarter of 2013 based on the Company’s purported interest in the crude oil and natural gas leases at issue. Due to the long-term nature of this title dispute, the $4.5 million in accounts receivable is included in “Other Noncurrent Assets, Net” on the condensed balance sheets. The Company fully maintains the validity of its interests in the crude oil and natural gas leases.
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INCOME TAXES |
6 Months Ended |
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Jun. 30, 2020 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | INCOME TAXES Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items which are recorded in the interim period. The provision for income taxes for the three and six months ended June 30, 2020 and 2019 differs from the amount that would be provided by applying the statutory U.S. federal income tax rate of 21% to pre-tax income due to the recognition of a full valuation allowance during both the three and six months ended June 30, 2020 and 2019, respectively. In assessing the realizability of deferred tax assets (“DTAs”), management considers whether it is more likely than not that some portion, or all, of the Company’s DTAs will not be realized. In making such determination, the Company considers all available positive and negative evidence, including (i) its earnings history, (ii) its ability to recover net operating loss carry-forwards, (iii) the projected future income and results of operations, and (iv) its ability to use tax planning strategies. If the Company concludes that it is more likely than not that some portion, or all, of its DTAs will not be realized, the tax asset is reduced by a valuation allowance. The Company assesses the appropriateness of its valuation allowance on a quarterly basis. At June 30, 2020 and December 31, 2019, the Company maintains a full valuation allowance on its net DTAs. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law making several changes to the Internal Revenue Code. The changes include, but are not limited to: increasing the limitation on the amount of deductible interest expense, allowing companies to carryback certain net operating losses, and increasing the amount of net operating loss carryforwards that corporations can use to offset taxable income. The tax law changes in the Act did not have a material impact on the Company’s income tax provision.
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FAIR VALUE |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE | FAIR VALUE Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Financial Assets and Liabilities As required, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2020 and December 31, 2019:
Commodity Derivatives. The Level 2 instruments presented in the tables above consist of commodity derivative instruments (see Note 11). The fair value of the Company’s commodity derivative instruments is determined based upon future prices, volatility and time to maturity, among other things. Counterparty statements are utilized to determine the value of the commodity derivative instruments and are reviewed and corroborated using various methodologies and significant observable inputs. The Company’s and the counterparties’ nonperformance risk is evaluated. The fair value of commodity derivative contracts is reflected on the condensed balance sheet. The current derivative asset and liability amounts represent the fair values expected to be settled in the subsequent twelve months. Interest Rate Derivatives. The Level 2 instruments presented in the tables above consist of interest rate derivative instruments (see Note 11). The fair value of the Company’s interest rate derivative instruments is determined based upon contracted notional amounts, active market-quoted LIBOR yield curves, and time to maturity, among other things. Counterparty statements are utilized to determine the value of the interest rate derivative instruments and are reviewed and corroborated using various methodologies and significant observable inputs. The Company’s and the counterparties’ nonperformance risk is evaluated. The fair value of interest rate derivative contracts is reflected on the condensed balance sheet. The current derivative asset and liability amounts represent the fair values expected to be settled in the subsequent twelve months. Fair Value of Other Financial Instruments The carrying amounts of cash equivalents, receivables and payables approximate fair value due to the highly liquid or short-term nature of these instruments. Long-term debt is not presented at fair value on the balance sheets, as it is recorded at carrying value, net of unamortized debt issuance costs and unamortized premium or discount (see Note 4). The fair value of the Company’s Second Lien Notes is $254.2 million and $434.4 million at June 30, 2020 and December 31, 2019, respectively. The fair value of the Company’s Second Lien Notes are based on active market quotes, which represent Level 1 inputs. There is no active market for the Revolving Credit Facility or the Unsecured VEN Bakken Note. The recorded value of the Revolving Credit Facility approximates its fair value because of its floating rate structure based on the LIBOR spread, secured interest, and the Company’s borrowing base utilization. The recorded fair value of the VEN Bakken Note is based primarily on estimated current rates available to us for debt of the same remaining duration and adjusted for nonperformance risk and credit risk (see Note 3). The fair value measurements for the Revolving Credit Facility and the Unsecured VEN Bakken Note represent Level 2 inputs. Non-Financial Assets and Liabilities The Company estimates asset retirement obligations pursuant to the provisions of ASC 410. The initial measurement of asset retirement obligations at fair value is calculated using discounted cash flow techniques and based on internal estimates of future retirement costs associated with oil and natural gas properties. Given the unobservable nature of the inputs, including plugging costs and reserve lives, the initial measurement of the asset retirement obligations liability is deemed to use Level 3 inputs. Asset retirement obligations incurred and acquired during the six months ended June 30, 2020 were approximately $0.3 million. Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value. There were no transfers of financial assets or liabilities between Level 1, Level 2 or Level 3 inputs for the six months ended June 30, 2020.
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DERIVATIVE INSTRUMENTS AND PRICE RISK MANAGEMENT |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS AND PRICE RISK MANAGEMENT | DERIVATIVE INSTRUMENTS AND PRICE RISK MANAGEMENT The Company utilizes commodity price swaps, basis swaps, swaptions and collars (purchased put options and written call options) to (i) reduce the effects of volatility in price changes on the crude oil and natural gas commodities it produces and sells, (ii) reduce commodity price risk and (iii) provide a base level of cash flow in order to assure it can execute at least a portion of its capital spending. In addition, in the first quarter of 2020, the Company began to utilize interest rate swaps to mitigate exposure to changes in interest rates on the Company’s variable-rate indebtedness. All derivative instruments are recorded on the Company’s balance sheet as either assets or liabilities measured at their fair value (see Note 10). The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative trading purposes. If a derivative does not qualify as a hedge or is not designated as a hedge, the changes in the fair value are recognized in the Company’s condensed statements of operations as a gain or loss on derivative instruments. Mark-to-market gains and losses represent changes in fair values of derivatives that have not been settled. The Company’s cash flow is only impacted when the actual settlements under the derivative contracts result in making or receiving a payment to or from the counterparty. These cash settlements represent the cumulative gains and losses on the Company’s derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled. The Company has master netting agreements on individual derivative instruments with certain counterparties and therefore the current asset and liability are netted on the balance sheet and the non-current asset and liability are netted on the balance sheet for contracts with these counterparties. Commodity Derivative Instruments The following table presents settlements on commodity derivative instruments and unsettled gains and losses on open commodity derivative instruments for the periods presented which is recorded in the revenue section of our condensed financial statements:
As of June 30, 2020, the Company had a total volume on open commodity oil price swaps of 12.7 million barrels at a weighted average price of approximately $56.05 per barrel. The following table reflects the weighted average price of open commodity price swap derivative contracts as of June 30, 2020, by year with associated volumes.
______________ (1)The Company has entered into crude oil derivative contracts that give counterparties the option to extend certain current derivative contracts for additional periods. Options covering a notional volume of 0.3 million barrels for 2021 are exercisable on or about December 31, 2020. If the counterparties exercise all such options, the notional volume of the Company’s existing crude oil derivative contracts will increase by 0.3 million barrels at a weighted average price of $57.84 per barrel for 2021. (2)The Company has entered into crude oil derivative contracts that give counterparties the option to extend certain current derivative contracts for additional periods. Options covering a notional volume of 3.1 million barrels for 2022 are exercisable on or about December 31, 2021. If the counterparties exercise all such options, the notional volume of the Company’s existing crude oil derivative contracts will increase by 3.1 million barrels at a weighted average price of $52.68 per barrel for 2022. Additionally, counterparties have options covering a notional volume of 0.7 million barrels for 2023 at a weighted average price of $44.86 per barrel. As of June 30, 2020, the Company had a total volume on open commodity natural gas price swaps of 12.8 million MMbtu at a weighted average price of approximately $2.41 per MMBtu. The following table reflects the weighted average price of open commodity natural gas price swap derivative contracts as of June 30, 2020, by year with associated volumes.
Interest Rate Derivative Instruments The Company uses interest rate swaps to effectively convert a portion of its variable rate indebtedness to fixed rate indebtedness. As of June 30, 2020, the Company had interest rate swaps with a total notional amount of $200.0 million. The settlement of these derivative instruments is recognized as a component of interest expense in the condensed statements of operations. The mark-to-market component of these derivative instruments is recognized in gain (loss) on unsettled interest rate derivatives, net in the condensed statements of operations. Other Information Regarding Derivative Instruments The following table sets forth the amounts, on a gross basis, and classification of the Company’s outstanding derivative financial instruments at June 30, 2020 and December 31, 2019, respectively. Certain amounts may be presented on a net basis on the condensed financial statements when such amounts are with the same counterparty and subject to a master netting arrangement.
The use of derivative transactions involves the risk that the counterparties will be unable to meet the financial terms of such transactions. When the Company has netting arrangements with its counterparties that provide for offsetting payables against receivables from separate derivative instruments these assets and liabilities are netted on the balance sheet. The tables presented below provide reconciliation between the gross assets and liabilities and the amounts reflected on the balance sheet. The amounts presented exclude derivative settlement receivables and payables as of the balance sheet dates.
All of the Company’s outstanding derivative instruments are covered by International Swap Dealers Association Master Agreements (“ISDAs”) entered into with parties that are also lenders under the Company’s Revolving Credit Facility. The Company’s obligations under the derivative instruments are secured pursuant to the Revolving Credit Facility, and no additional collateral had been posted by the Company as of June 30, 2020. The ISDAs may provide that as a result of certain circumstances, such as cross-defaults, a counterparty may require all outstanding derivative instruments under an ISDA to be settled immediately. See Note 10 for the aggregate fair value of all derivative instruments that were in a net liability position at June 30, 2020 and December 31, 2019.
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SUBSEQUENT EVENTS |
6 Months Ended |
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Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTSOn July 8, 2020, the Company entered into an amendment (the “Amendment”) to its Revolving Credit Facility. Pursuant to the Amendment, the Company’s semi-annual borrowing base redetermination was completed and the borrowing base under the Revolving Credit Facility was reduced to $660.0 million. As of June 30, 2020, the Company had $568.0 million in outstanding borrowings under the credit facility. The next redetermination of the borrowing base is scheduled for October 1, 2020. The Amendment also amends certain other provisions of the Revolving Credit Facility, including among other things to limit the Company’s ability to maintain excess cash liquidity without using it to reduce outstanding borrowings under the Revolving Credit Facility. |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
6 Months Ended |
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Jun. 30, 2020 | |
Accounting Policies [Abstract] | |
Use of Estimates | Use of Estimates The preparation of financial statements under GAAP requires management to make estimates and assumptions that 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. The most significant estimates relate to proved crude oil and natural gas reserves, estimates relating to certain crude oil and natural gas revenues and expenses, fair value of derivative instruments, fair value of contingent consideration, acquisition date fair values of assets acquired and liabilities assumed, impairment of oil and natural gas properties, asset retirement obligations and deferred income taxes. Actual results may differ from those estimates.
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Adopted and Recentily Issued Accounting Pronouncements | Adopted and Recently Issued Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of credit losses on financial instruments, which requires a company immediately recognize management’s current estimated credit losses (“CECL”) for all financial instruments that are not accounted for at fair value through net income. Previously, credit losses on financial assets were only required to be recognized when they were incurred. The Company adopted ASU 2016-13 on January 1, 2020. The guidance did not have a significant impact on the condensed financial statements or notes accompanying the condensed financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair value measurement (Topic 820) - Disclosure framework - Changes to the disclosure requirements for fair value measurement, which modifies the disclosure requirements on fair value measurements in Topic 820. The Company adopted ASU 2018-13 on January 1, 2020. The guidance did not have a significant impact on the condensed financial statements or notes accompanying the condensed financial statements. In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles and also simplification of areas such as separate entity financial statements and interim recognition of enactment of tax laws or rate changes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, including interim reporting periods within those years. The Company is currently evaluating the effect of ASU 2019-12, but does not expect the adoption of this guidance to have a material impact on its financial position, cash flows or result of operations. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (LIBOR). The amendment provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This amendment is effective upon issuance and expires on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company’s condensed financial statements.
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Revenue Recognition | Revenue Recognition The Company’s revenues are primarily derived from its interests in the sale of oil and natural gas production. The Company recognizes revenue from its interests in the sales of oil and natural gas in the period that its performance obligations are satisfied. Performance obligations are satisfied when the customer obtains control of product, when the Company has no further obligations to perform related to the sale, when the transaction price has been determined and when collectability is probable. A wellhead imbalance liability equal to the Company’s share is recorded to the extent that the Company’s well operators have sold volumes in excess of its share of remaining reserves in an underlying property. However, for the three and six months ended June 30, 2020 and 2019, the Company’s natural gas production was in balance, meaning its cumulative portion of natural gas production taken and sold from wells in which it has an interest equaled its entitled interest in natural gas production from those wells.
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Concentrations of Market, Credit and Other Risks | Concentrations of Market, Credit and Other Risks The future results of the Company’s crude oil and natural gas operations will be affected by the market prices of crude oil and natural gas. The availability of a ready market for crude oil and natural gas products in the future will depend on numerous factors beyond the control of the Company, including weather, imports, marketing of competitive fuels, proximity and capacity of crude oil and natural gas pipelines and other transportation facilities, any oversupply or undersupply of crude oil, natural gas and liquid products, economic disruptions resulting from the COVID-19 pandemic, the regulatory environment, the economic environment, and other regional and political events, none of which can be predicted with certainty. The Company operates in the exploration, development and production sector of the crude oil and natural gas industry. The Company’s receivables include amounts due, indirectly via the third-party operators of the wells, from purchasers of its crude oil and natural gas production. While certain of these customers, as well as third-party operators of the wells, are affected by periodic downturns in the economy in general or in their specific segment of the crude oil or natural gas industry, the Company believes that its level of credit-related losses due to such economic fluctuations have been immaterial. As a non-operator, 100% of the Company’s wells are operated by third-party operating partners. As a result, the Company is highly dependent on the success of these third-party operators. If they are not successful in the development, exploitation, production and exploration activities relating to the Company’s leasehold interests, or are unable or unwilling to perform, the Company’s financial condition and results of operation could be adversely affected. These risks are heightened in the current low commodity price environment, which may present significant challenges to these third-party operators. The Company’s third-party operators will make decisions in connection with their operations that may not be in the Company’s best interests, and the Company may have little or no ability to exercise influence over the operational decisions of its third-party operators. The Company faces concentration risk due to the fact that all of its oil and natural gas properties are located in the Williston Basin, primarily in North Dakota and Montana. As a result, the Company is disproportionately exposed to risks affecting its single geographic area of operations. The Company manages and controls market and counterparty credit risk. In the normal course of business, collateral is not required for financial instruments with credit risk. Financial instruments which potentially subject the Company to credit risk consist principally of temporary cash balances and derivative financial instruments. The Company maintains cash and cash equivalents in bank deposit accounts which, at times, may exceed the federally insured limits. The Company has not experienced any significant losses from such investments. The Company attempts to limit the amount of credit exposure to any one financial institution or company. The Company believes the credit quality of its counterparties is generally high. In the normal course of business, letters of credit or parent guarantees may be required for counterparties which management perceives to have a higher credit risk.
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Net Income (Loss) Per Common Share | Net Income (Loss) Per Common ShareBasic earnings per share (“EPS”) are computed by dividing net income (loss) available to common stockholders (the numerator) by the weighted average number of common shares outstanding for the period (the denominator). Diluted EPS is computed by dividing net income (loss) by the weighted average number of common shares and potential common shares outstanding (if dilutive) during each period. Potential common shares include shares issuable upon exercise of stock options and vesting of restricted stock awards, and shares issuable upon conversion of the Series A Preferred Stock (see Note 5). The number of potential common shares outstanding are calculated using the treasury stock or if-converted method. |
Fair Value | Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Financial Assets and Liabilities As required, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. Commodity Derivatives. The Level 2 instruments presented in the tables above consist of commodity derivative instruments (see Note 11). The fair value of the Company’s commodity derivative instruments is determined based upon future prices, volatility and time to maturity, among other things. Counterparty statements are utilized to determine the value of the commodity derivative instruments and are reviewed and corroborated using various methodologies and significant observable inputs. The Company’s and the counterparties’ nonperformance risk is evaluated. The fair value of commodity derivative contracts is reflected on the condensed balance sheet. The current derivative asset and liability amounts represent the fair values expected to be settled in the subsequent twelve months. Interest Rate Derivatives. The Level 2 instruments presented in the tables above consist of interest rate derivative instruments (see Note 11). The fair value of the Company’s interest rate derivative instruments is determined based upon contracted notional amounts, active market-quoted LIBOR yield curves, and time to maturity, among other things. Counterparty statements are utilized to determine the value of the interest rate derivative instruments and are reviewed and corroborated using various methodologies and significant observable inputs. The Company’s and the counterparties’ nonperformance risk is evaluated. The fair value of interest rate derivative contracts is reflected on the condensed balance sheet. The current derivative asset and liability amounts represent the fair values expected to be settled in the subsequent twelve months.
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Derivative Instruments and Price Risk Management | The Company utilizes commodity price swaps, basis swaps, swaptions and collars (purchased put options and written call options) to (i) reduce the effects of volatility in price changes on the crude oil and natural gas commodities it produces and sells, (ii) reduce commodity price risk and (iii) provide a base level of cash flow in order to assure it can execute at least a portion of its capital spending. In addition, in the first quarter of 2020, the Company began to utilize interest rate swaps to mitigate exposure to changes in interest rates on the Company’s variable-rate indebtedness. All derivative instruments are recorded on the Company’s balance sheet as either assets or liabilities measured at their fair value (see Note 10). The Company has not designated any derivative instruments as hedges for accounting purposes and does not enter into such instruments for speculative trading purposes. If a derivative does not qualify as a hedge or is not designated as a hedge, the changes in the fair value are recognized in the Company’s condensed statements of operations as a gain or loss on derivative instruments. Mark-to-market gains and losses represent changes in fair values of derivatives that have not been settled. The Company’s cash flow is only impacted when the actual settlements under the derivative contracts result in making or receiving a payment to or from the counterparty. These cash settlements represent the cumulative gains and losses on the Company’s derivative instruments for the periods presented and do not include a recovery of costs that were paid to acquire or modify the derivative instruments that were settled. The Company has master netting agreements on individual derivative instruments with certain counterparties and therefore the current asset and liability are netted on the balance sheet and the non-current asset and liability are netted on the balance sheet for contracts with these counterparties.
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of denominators used to calculate basic and diluted EPS | The reconciliation of the denominators used to calculate basic EPS and diluted EPS for the three and six months ended June 30, 2020 and 2019 are as follows:
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Supplemental cash flow activity | The following reflects the Company’s supplemental cash flow information:
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CRUDE OIL AND NATURAL GAS PROPERTIES (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Acquisition [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pro forma information | The summarized unaudited pro forma information may not be indicative of the results that would have occurred had the Company completed the acquisition as of January 1, 2019, or that would be attained in the future.
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VEN Bakken LLC | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Acquisition [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preliminary estimate of the fair values of the assets and liabilities | The following table reflects the fair values of the net assets and liabilities as of the date of acquisition:
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LONG-TERM DEBT (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt instruments | The Company’s long-term debt consists of the following:
________________ (1)Debt issuance costs related to the Company’s revolving credit facility of $8.8 million and $9.8 million as of June 30, 2020 and December 31, 2019, respectively, are recorded in “Other Noncurrent Assets, Net” on the balance sheets.
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STOCK-BASED COMPENSATION (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation expense activity | The following table reflects the outstanding RSAs and activity related thereto for the six months ended June 30, 2020:
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FAIR VALUE (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial instruments measured at fair value on recurring basis | The following tables set forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2020 and December 31, 2019:
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DERIVATIVE INSTRUMENTS AND PRICE RISK MANAGEMENT (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of non-cash gains or losses on derivative contracts | The following table presents settlements on commodity derivative instruments and unsettled gains and losses on open commodity derivative instruments for the periods presented which is recorded in the revenue section of our condensed financial statements:
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Schedule of weighted average price of open commodity derivative contracts | The following table reflects the weighted average price of open commodity price swap derivative contracts as of June 30, 2020, by year with associated volumes.
______________ (1)The Company has entered into crude oil derivative contracts that give counterparties the option to extend certain current derivative contracts for additional periods. Options covering a notional volume of 0.3 million barrels for 2021 are exercisable on or about December 31, 2020. If the counterparties exercise all such options, the notional volume of the Company’s existing crude oil derivative contracts will increase by 0.3 million barrels at a weighted average price of $57.84 per barrel for 2021. (2)The Company has entered into crude oil derivative contracts that give counterparties the option to extend certain current derivative contracts for additional periods. Options covering a notional volume of 3.1 million barrels for 2022 are exercisable on or about December 31, 2021. If the counterparties exercise all such options, the notional volume of the Company’s existing crude oil derivative contracts will increase by 3.1 million barrels at a weighted average price of $52.68 per barrel for 2022. Additionally, counterparties have options covering a notional volume of 0.7 million barrels for 2023 at a weighted average price of $44.86 per barrel. The following table reflects the weighted average price of open commodity natural gas price swap derivative contracts as of June 30, 2020, by year with associated volumes.
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Schedule of derivatives | The following table sets forth the amounts, on a gross basis, and classification of the Company’s outstanding derivative financial instruments at June 30, 2020 and December 31, 2019, respectively. Certain amounts may be presented on a net basis on the condensed financial statements when such amounts are with the same counterparty and subject to a master netting arrangement.
The use of derivative transactions involves the risk that the counterparties will be unable to meet the financial terms of such transactions. When the Company has netting arrangements with its counterparties that provide for offsetting payables against receivables from separate derivative instruments these assets and liabilities are netted on the balance sheet. The tables presented below provide reconciliation between the gross assets and liabilities and the amounts reflected on the balance sheet. The amounts presented exclude derivative settlement receivables and payables as of the balance sheet dates.
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2020
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Jun. 30, 2019
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Jun. 30, 2020
USD ($)
geographic_area
revenue_source
|
Jun. 30, 2019
USD ($)
|
|
Accounting Policies [Line Items] | ||||
Number of revenue sources | revenue_source | 2 | 2 | ||
Number of geographic areas in which entity operates | geographic_area | 1 | 1 | ||
Oil | ||||
Accounting Policies [Line Items] | ||||
Sales | $ 28,800 | $ 139,800 | $ 145,100 | $ 263,400 |
Natural Gas and NGL | ||||
Accounting Policies [Line Items] | ||||
Sales | (8,100) | 10,000 | 5,700 | 19,100 |
Oil and Gas Sales | ||||
Accounting Policies [Line Items] | ||||
Sales | $ 20,664 | $ 149,847 | $ 150,860 | $ 282,530 |
Oil and Gas Sales | Sales | Operator Concentration Risk | Top Four Operators | ||||
Accounting Policies [Line Items] | ||||
Concentration risk percentage | 57.00% | 55.00% | 51.00% | 57.00% |
CRUDE OIL AND NATURAL GAS PROPERTIES - Fair Values of the Net Assets and Liabilities as of the Date of Acquisition (Details) - USD ($) $ / shares in Units, $ in Thousands |
Jul. 01, 2019 |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|---|
Fair value of net assets: | |||
Proved oil and natural gas properties | $ 4,300,151 | $ 4,178,605 | |
VEN Bakken LLC | |||
Fair value of net assets: | |||
Proved oil and natural gas properties | $ 324,974 | ||
Asset retirement cost | 2,680 | ||
Total assets acquired | 327,654 | ||
Asset retirement obligations | (2,680) | ||
Derivative instruments | (9,694) | ||
Net assets acquired | 315,280 | ||
Fair value of consideration paid for net assets: | |||
Cash consideration | 174,912 | ||
Issuance of common stock | 11,708 | ||
Unsecured VEN Bakken Note | 128,660 | ||
Total fair value of consideration transferred | $ 315,280 | ||
Issuance of common stock (in shares) | 5,602,147 | ||
Share price at issuance (in dollars per share) | $ 2.09 |
CRUDE OIL AND NATURAL GAS PROPERTIES - Summarized Unaudited Pro Forma Financial Information (Details) - VEN Bakken LLC - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Asset Acquisition [Line Items] | ||
Revenues | $ 221,347 | $ 207,832 |
Net Income (Loss) | $ 54,468 | $ (85,275) |
LONG-TERM DEBT - Schedule of Debt (Details) - USD ($) $ in Thousands |
Jun. 30, 2020 |
Dec. 31, 2019 |
Oct. 21, 2019 |
---|---|---|---|
Debt Instrument [Line Items] | |||
Principal Balance | $ 995,287 | $ 1,127,733 | |
Unamortized debt discounts and premiums | 2,615 | 4,860 | |
Unamortized debt issuance costs | (8,731) | (14,432) | |
Total debt | 989,171 | 1,118,161 | |
Less current portion of long-term debt | (65,000) | 0 | |
Total long-term debt | 924,171 | 1,118,161 | |
Second Lien Notes due 2023 | Line of Credit | |||
Debt Instrument [Line Items] | |||
Principal Balance | 297,287 | 417,733 | |
Unsecured VEN Bakken Note | |||
Debt Instrument [Line Items] | |||
Principal Balance | 130,000 | 130,000 | |
Revolving Credit Facility | |||
Debt Instrument [Line Items] | |||
Principal Balance | 568,000 | 580,000 | |
Revolving Credit Facility | Other Noncurrent Assets, Net | |||
Debt Instrument [Line Items] | |||
Unamortized debt issuance costs | $ (8,800) | $ (9,800) | |
Revolving Credit Facility | Second Lien Notes due 2023 | |||
Debt Instrument [Line Items] | |||
Total debt | $ 200,000 |
LONG-TERM DEBT - Unsecured VEN Bakken Note (Details) - Unsecured VEN Bakken Note - VEN Bakken LLC |
Jul. 01, 2019
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
Principal amount | $ 130,000,000.0 |
Percent of principal | 50.00% |
Interest rate | 6.00% |
COMMITMENTS & CONTINGENCIES (Details) $ in Millions |
Jun. 30, 2020
USD ($)
|
---|---|
Other Noncurrent Assets, Net | |
Loss Contingencies [Line Items] | |
Loss contingency accounts receivable | $ 4.5 |
FAIR VALUE - Narrative (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
|
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Asset retirement obligations | $ 294 | $ 470 | |
Second Lien Notes due 2023 | Estimated Fair Value | |||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||
Fair value of senior unsecured notes | $ 254,200 | $ 434,400 |
DERIVATIVE INSTRUMENTS AND PRICE RISK MANAGEMENT - Gains/Losses on Derivatives (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||
Gain on Settled Commodity Derivatives | $ 77,439 | $ 4,734 | $ 108,944 | $ 17,280 |
Gain (Loss) on Unsettled Commodity Derivatives | (150,077) | 31,857 | 194,999 | (120,311) |
Gain (Loss) on Commodity Derivatives, Net | $ (72,638) | $ 36,591 | $ 303,943 | $ (103,031) |
DERIVATIVE INSTRUMENTS AND PRICE RISK MANAGEMENT - Narrative (Details) bbl in Millions, $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
$ / bbl
bbl
| |
Open Commodity Swaps | |
Derivative [Line Items] | |
Volume (in barrels) | bbl | 12.7 |
Weighted average price (in dollars per barrel) | $ / bbl | 56.05 |
Open Commodity Natural Gas Price Swap | |
Derivative [Line Items] | |
Volume (in barrels) | bbl | 12.8 |
Weighted average price (in dollars per barrel) | $ / bbl | 2.41 |
Interest Rate Swap | |
Derivative [Line Items] | |
Notional amount | $ | $ 200.0 |
SUBSEQUENT EVENTS (Details) - Revolving Credit Facility - USD ($) |
Jul. 08, 2020 |
Jun. 30, 2020 |
---|---|---|
Subsequent Event [Line Items] | ||
Borrowing base | $ 800,000,000.0 | |
Outstanding borrowings under credit facility | $ 568,000,000.0 | |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Borrowing base | $ 660,000,000.0 |
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