(Mark One) | |||
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
For the quarterly period ended June 30, 2019 | |||
OR | |||
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 80-0411494 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
5847 San Felipe, Suite 3000 Houston, Texas | 77057 | |
(Address of Principal Executive Offices) | (Zip Code) |
o | Large accelerated filer | o | Accelerated filer | ||
☑ | Non-accelerated filer | ☑ | Smaller reporting company | ||
o | Emerging growth company |
Title of each class | Ticker symbol(s) | Name of each exchange on which registered |
— | — | — |
Page | ||
/day | = per day | Mcf | = thousand cubic feet | |
Bbls | = barrels | Mcfe | = thousand cubic feet of natural gas equivalents | |
Bcf | = billion cubic feet | MMBbls | = million barrels | |
Bcfe | = billion cubic feet equivalents | MMBOE | = million barrels of oil equivalent | |
BOE | = barrel of oil equivalent | MMBtu | = million British thermal units | |
Btu | = British thermal unit | MMcf | = million cubic feet | |
MBbls | = thousand barrels | MMcfe | = million cubic feet of natural gas equivalents | |
MBOE | = thousand barrels of oil equivalent | NGLs | = natural gas liquids |
• | our ability to continue as a going concern; |
• | our ability to achieve the anticipated benefits from the consummation of the Chapter 11 Cases (as defined herein); |
• | our ability to execute our business strategies, including our business strategies following emergence from the Chapter 11 Cases; |
• | our ability to meet our liquidity needs and service our indebtedness; |
• | the potential adverse effects of the consummation of the Plan (as defined herein) on our liquidity and results of operations; |
• | the impact of the Chapter 11 Cases on the liquidity and market price of our units and on our ability to access the public capital markets; |
• | ability to maintain relationships with suppliers, customers, employees and other third parties as a result of our Bankruptcy Petitions (as defined herein) and following emergence from the Chapter 11 Cases; |
• | the effects of the Bankruptcy Petitions on the Company and on the interests of various constituents, including holders of our Common and Preferred Units (as defined herein); |
• | the outcome of all other pending litigation; |
• | the potential adverse effects of the consummation of the Chapter 11 Cases on our liquidity and results of operations; |
• | increased advisory costs and professional fees to implement the reorganization; |
• | risks relating to any of our unforeseen liabilities; |
• | declines in oil, NGLs or natural gas prices; |
• | the level of success in exploration, development and production activities; |
• | adverse weather conditions that may negatively impact development or production activities; |
• | the timing of exploitation and development expenditures; |
• | inaccuracies of reserve estimates or assumptions underlying them; |
• | revisions to reserve estimates as a result of changes in oil, natural gas and NGLs prices; |
• | impacts to financial statements as a result of impairment write-downs; |
• | risks related to the level of indebtedness and periodic redeterminations of the borrowing base under our credit agreements; |
• | ability to generate sufficient cash flows from operations to meet the internally funded portion of any capital expenditures budget; |
• | ability to obtain external capital to finance exploration and development operations and acquisitions; |
• | compliance with applicable laws, rules and regulations; |
• | federal, state and local initiatives and efforts relating to the regulation of development drilling and hydraulic fracturing; |
• | failure of properties to yield oil or natural gas in commercially viable quantities; |
• | uninsured or underinsured losses resulting from oil and natural gas operations; |
• | ability to access oil and natural gas markets due to market conditions or operational impediments; |
• | the impact and costs of compliance with laws and regulations governing oil and natural gas operations; |
• | ability to replace oil and natural gas reserves; |
• | any loss of senior management or critical technical personnel; |
• | competition in the oil and natural gas industry; |
• | ability to execute our strategy including the divestment of assets; |
• | the costs and effects of litigation; and |
• | sabotage, terrorism or other malicious intentional acts (including cyber-attacks), war and other similar acts that disrupt operations or cause damage greater than covered by insurance. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Oil sales | $ | 37,150 | $ | 46,503 | $ | 69,897 | $ | 92,614 | |||||||
Natural gas sales | 29,132 | 42,623 | 91,446 | 97,890 | |||||||||||
NGLs sales | 13,702 | 22,587 | 27,749 | 44,484 | |||||||||||
Oil, natural gas and NGLs sales | 79,984 | 111,713 | 189,092 | 234,988 | |||||||||||
Net losses on commodity derivative contracts | (9,063 | ) | (45,332 | ) | (70,202 | ) | (63,917 | ) | |||||||
Total revenues and losses on commodity derivative contracts | 70,921 | 66,381 | 118,890 | 171,071 | |||||||||||
Costs and expenses: | |||||||||||||||
Production: | |||||||||||||||
Lease operating expenses | 29,035 | 36,763 | 55,282 | 67,758 | |||||||||||
Transportation, gathering, processing and compression | 8,484 | 9,768 | 18,006 | 21,270 | |||||||||||
Production and other taxes | 7,833 | 7,971 | 17,656 | 17,752 | |||||||||||
Depreciation, depletion, amortization, and accretion | 39,044 | 38,711 | 74,758 | 78,750 | |||||||||||
Impairment of oil and natural gas properties | 323,188 | 7,552 | 323,626 | 22,153 | |||||||||||
Exploration expense | 275 | 430 | 476 | 1,746 | |||||||||||
Selling, general and administrative expenses | 9,238 | 11,108 | 21,795 | 23,844 | |||||||||||
Total costs and expenses | 417,097 | 112,303 | 511,599 | 233,273 | |||||||||||
Loss from operations | (346,176 | ) | (45,922 | ) | (392,709 | ) | (62,202 | ) | |||||||
Other income (expense): | |||||||||||||||
Interest expense (excludes contractual interest expense of $15.7 million for each of the three and six months ended June 30, 2019) | (1,680 | ) | (15,870 | ) | (18,655 | ) | (30,623 | ) | |||||||
Net gain (loss) on divestitures of oil and natural gas properties | — | 4,900 | (458 | ) | 4,900 | ||||||||||
Other | 497 | (175 | ) | 586 | (26 | ) | |||||||||
Total other expense, net | (1,183 | ) | (11,145 | ) | (18,527 | ) | (25,749 | ) | |||||||
Loss before reorganization items | (347,359 | ) | (57,067 | ) | (411,236 | ) | (87,951 | ) | |||||||
Reorganization items (Note 2) | (24,743 | ) | (610 | ) | (43,131 | ) | (2,317 | ) | |||||||
Net loss | (372,102 | ) | (57,677 | ) | (454,367 | ) | (90,268 | ) | |||||||
Less: Net income attributable to non-controlling interests | — | (96 | ) | — | (189 | ) | |||||||||
Net loss attributable to Common stockholders | $ | (372,102 | ) | $ | (57,773 | ) | $ | (454,367 | ) | $ | (90,457 | ) | |||
Net loss per share – basic and diluted | $ | (18.49 | ) | $ | (2.87 | ) | $ | (22.58 | ) | $ | (4.50 | ) | |||
Weighted average Common shares outstanding | |||||||||||||||
Common shares – basic and diluted | 20,124 | 20,100 | 20,124 | 20,100 |
June 30, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 44,782 | $ | 33,538 | ||||
Trade accounts receivable, net | 42,892 | 62,073 | ||||||
Derivative assets | — | 6,287 | ||||||
Restricted cash | 4,449 | 4,450 | ||||||
Prepaid drilling costs | 4,916 | 12,476 | ||||||
Other current assets | 9,770 | 5,663 | ||||||
Total current assets | 106,809 | 124,487 | ||||||
Oil and natural gas properties | ||||||||
Proved properties | 1,574,565 | 1,567,903 | ||||||
Unproved properties | 81,215 | 81,597 | ||||||
1,655,780 | 1,649,500 | |||||||
Accumulated depletion, amortization and impairment | (661,137 | ) | (269,972 | ) | ||||
Oil and natural gas properties, net – successful efforts | 994,643 | 1,379,528 | ||||||
Other assets | ||||||||
Lease assets | 13,661 | — | ||||||
Derivative assets | — | 6,766 | ||||||
Other assets | 16,422 | 9,321 | ||||||
Total assets | $ | 1,131,535 | $ | 1,520,102 | ||||
Liabilities and equity | ||||||||
Current liabilities | ||||||||
Accounts payable: | ||||||||
Trade | $ | 4,476 | $ | 29,709 | ||||
Accrued liabilities: | ||||||||
Lease operating | 10,628 | 13,140 | ||||||
Developmental capital | 3,298 | 6,937 | ||||||
Interest | 330 | 4,999 | ||||||
Production and other taxes | 23,358 | 23,658 | ||||||
Other | 23,371 | 12,175 | ||||||
Derivative liabilities | — | 6,483 | ||||||
Oil and natural gas revenue payable | 19,969 | 35,802 | ||||||
Long-term debt classified as current | — | 879,181 | ||||||
Short-term debt | 20,000 | — | ||||||
Other current liabilities | 11,122 | 9,091 | ||||||
Total current liabilities | 116,552 | 1,021,175 | ||||||
Long-term debt, net of current portion (Note 5) | — | 5,446 | ||||||
Asset retirement obligations | 141,019 | 139,433 | ||||||
Other long-term liabilities | 8,020 | 523 | ||||||
Total liabilities not subject to compromise | 265,591 | 1,166,577 | ||||||
Liabilities subject to compromise (Note 2) | 965,605 | — | ||||||
Total liabilities | 1,231,196 | 1,166,577 | ||||||
Commitments and contingencies (Note 10) | ||||||||
Stockholders’ equity (deficit) (Note 11) | ||||||||
Common stock ($0.001 par value, 50,000,000 shares authorized; 20,124,081 and 20,124,080 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively) | 20 | 20 | ||||||
Additional paid-in capital | 510,067 | 508,886 | ||||||
Accumulated deficit | (609,748 | ) | (155,381 | ) | ||||
Total stockholders’ equity (deficit) | (99,661 | ) | 353,525 | |||||
Total liabilities and equity (deficit) | $ | 1,131,535 | $ | 1,520,102 |
Three Months Ended June 30, 2019 | |||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Deficit | ||||||||||||||||
Shares | Amount | ||||||||||||||||||
Balance at March 31, 2019 | 20,124 | $ | 20 | $ | 509,477 | $ | (237,646 | ) | $ | 271,851 | |||||||||
Net loss | — | — | — | (372,102 | ) | (372,102 | ) | ||||||||||||
Share-based compensation | — | — | 590 | — | 590 | ||||||||||||||
Balance at June 30, 2019 | 20,124 | $ | 20 | $ | 510,067 | $ | (609,748 | ) | $ | (99,661 | ) |
Six Months Ended June 30, 2019 | |||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Deficit | ||||||||||||||||
Shares | Amount | ||||||||||||||||||
Balance at December 31, 2018 | 20,124 | $ | 20 | $ | 508,886 | $ | (155,381 | ) | $ | 353,525 | |||||||||
Net loss | — | — | — | (454,367 | ) | (454,367 | ) | ||||||||||||
Share-based compensation | — | — | 1,181 | — | 1,181 | ||||||||||||||
Balance at June 30, 2019 | 20,124 | $ | 20 | $ | 510,067 | $ | (609,748 | ) | $ | (99,661 | ) |
Three Months Ended June 30, 2018 | |||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Non-controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||
Balance at March 31, 2018 | 20,100 | $ | 20 | $ | 507,136 | $ | (144,094 | ) | $ | 2,194 | $ | 365,256 | |||||||||||
Net income (loss) | — | — | — | (57,773 | ) | 96 | (57,677 | ) | |||||||||||||||
Share-based compensation | — | — | 579 | — | — | 579 | |||||||||||||||||
Potato Hills cash distribution to non-controlling interest | — | — | — | — | (250 | ) | (250 | ) | |||||||||||||||
Balance at June 30, 2018 | 20,100 | $ | 20 | $ | 507,715 | $ | (201,867 | ) | $ | 2,040 | $ | 307,908 |
Six Months Ended June 30, 2018 | |||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Non-controlling Interest | Total Stockholders’ Equity | |||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||
Balance at December 31, 2017 | 20,100 | $ | 20 | $ | 506,640 | $ | (111,410 | ) | $ | 2,278 | $ | 397,528 | |||||||||||
Net income (loss) | — | — | — | (90,457 | ) | 189 | (90,268 | ) | |||||||||||||||
Share-based compensation | — | — | 1,075 | — | — | 1,075 | |||||||||||||||||
Potato Hills cash distribution to non-controlling interest | — | — | — | — | (427 | ) | (427 | ) | |||||||||||||||
Balance at June 30, 2018 | 20,100 | $ | 20 | $ | 507,715 | $ | (201,867 | ) | $ | 2,040 | $ | 307,908 |
Six Months Ended | ||||||||
June 30, | ||||||||
(in thousands) | 2019 | 2018 | ||||||
Operating activities | ||||||||
Net loss | $ | (454,367 | ) | $ | (90,268 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Depreciation, depletion, amortization, and accretion | 74,758 | 78,750 | ||||||
Impairment of oil and natural gas properties | 323,626 | 22,153 | ||||||
Amortization of deferred financing costs | 841 | 1,361 | ||||||
Share-based compensation | 1,181 | 1,075 | ||||||
Net losses on commodity derivative contracts | 70,202 | 63,917 | ||||||
Cash settlements paid on matured commodity derivative contracts | (9,762 | ) | (27,139 | ) | ||||
Net (gain) loss on divestiture of oil and natural gas properties | 458 | (4,900 | ) | |||||
Non-cash reorganization items (Note 2) | 20,365 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Trade accounts receivable | 18,723 | 14,124 | ||||||
Other current assets | (4,158 | ) | (1,357 | ) | ||||
Accounts payable and oil and natural gas revenue payable | (24,051 | ) | (136 | ) | ||||
Accrued expenses and other current liabilities | (2,666 | ) | (6,598 | ) | ||||
Other assets | (7,291 | ) | 126 | |||||
Net cash provided by operating activities | 7,859 | 51,108 | ||||||
Investing activities | ||||||||
Additions to property and equipment | (39 | ) | (94 | ) | ||||
Additions to oil and natural gas properties | (6,801 | ) | (42,637 | ) | ||||
Deposits and prepayments of oil and natural gas properties | (7,086 | ) | (49,256 | ) | ||||
Proceeds from the sale of oil and natural gas properties | 4,461 | 59,876 | ||||||
Net cash used in investing activities | (9,465 | ) | (32,111 | ) | ||||
Financing activities | ||||||||
Proceeds from long-term debt | — | 90,000 | ||||||
Repayment of long-term debt | (7,145 | ) | (104,702 | ) | ||||
Proceeds from debtor-in-possession financing | 20,000 | — | ||||||
Potato Hills distribution to non-controlling interest | — | (427 | ) | |||||
Financing fees | (6 | ) | (172 | ) | ||||
Net cash provided by (used in) financing activities | 12,849 | (15,301 | ) | |||||
Net increase in cash, cash equivalents and restricted cash | 11,243 | 3,696 | ||||||
Cash, cash equivalents and restricted cash, beginning of period | 37,988 | 10,017 | ||||||
Cash, cash equivalents and restricted cash, end of period | $ | 49,231 | $ | 13,713 | ||||
Supplemental cash flow information: | ||||||||
Cash paid for interest | $ | 9,937 | $ | 29,988 | ||||
Non-cash financing and investing activities: | ||||||||
Lease assets obtained in exchange for lease liabilities | $ | 182 | $ | — | ||||
Asset retirement obligations, net | $ | 251 | $ | 12,294 | ||||
Reconciliation of Cash and Cash Equivalents and Restricted Cash | ||||||||
Cash and cash equivalents at beginning of period | $ | 33,538 | $ | 2,762 | ||||
Restricted cash at beginning of period | 4,450 | 7,255 | ||||||
Cash and cash equivalents and restricted cash at beginning of period | $ | 37,988 | $ | 10,017 | ||||
Cash and cash equivalents at end of period | $ | 44,782 | $ | 7,502 | ||||
Restricted cash at end of period | 4,449 | 6,211 | ||||||
Cash and cash equivalents and restricted cash at end of period | $ | 49,231 | $ | 13,713 |
• | the Green River Basin in Wyoming; |
• | the Piceance Basin in Colorado; |
• | the Permian Basin in West Texas and New Mexico; |
• | the Arkoma Basin in Oklahoma; |
• | the Gulf Coast Basin in Texas, Louisiana and Alabama; |
• | the Big Horn Basin in Wyoming and Montana; |
• | the Anadarko Basin in Oklahoma and North Texas; |
• | the Wind River Basin in Wyoming; and |
• | the Powder River Basin in Wyoming. |
(a) | Basis of Presentation and Principles of Consolidation |
(b) | Oil and Natural Gas Properties |
(c) | Income Taxes |
(d) | New Pronouncements Recently Adopted |
(e) | Use of Estimates |
• | a super-priority senior secured revolving credit facility in the aggregate amount of up to $65.0 million (the “New Money Facility”), of which $20.0 million was drawn on April 4, 2019 and an additional $5.0 million was drawn in July 2019; |
• | a “roll up” of $65.0 million of the outstanding principal amount of the revolving loans under the VNG Credit Facility (as defined in Note 5) (the “Roll-Up”, and, together with the New Money Facility, collectively, the “DIP Facility”); |
• | proceeds of the New Money Facility were to be used by the DIP Borrower to (i) pay certain costs and expenses related to the Chapter 11 Cases, (ii) make payments provided for in the DIP Motion, including in respect of certain “adequate protection” obligations and (iii) fund working capital needs, capital improvements and other general corporate purposes of the DIP Borrower and its subsidiaries, in all cases subject to the terms of the DIP Credit Agreement and applicable orders of the Bankruptcy Court; |
• | the DIP Credit Agreement was paid off prior to maturity on July 16, 2019 in connection with Grizzly’s emergence from the Chapter 11 Cases; |
• | interest accrued at a rate per year equal to the LIBOR rate plus 5.50%, or the adjusted base rate plus 4.50% per annum; and |
• | in addition to other fees paid to the DIP Agent, the DIP Borrower was required to pay to the DIP Agent for the account of the lenders under the DIP Credit Agreement, an unused commitment fee equal to 1.0% of the daily average of each lender’s unused commitment under the New Money Facility, which was payable in arrears on the last day of each calendar month and on the termination date for the facility for any period for which the unused commitment fee was not previously paid. |
• | holders of an allowed claim related to the DIP Credit Agreement to receive their pro rata share of participation in the Revolving Loans/Term Loan A (each as defined below); |
• | holders of allowed RBL Claims and allowed Secured Swap Claims to receive their pro rata share of and interest in: (i) the Term Loan B (as defined below); (ii) the Series A Preferred Units (the “Series A Preferred Units”); and (iii) 75% of the Series C Common Units (the “Series C Common Units”); |
• | holders of allowed claims under the senior secured term loan credit facility pursuant to the VNG Credit Facility to receive a pro rata share and interest in 10% of the Series C Common Units, as well as at the option of each holder of an Allowed Term Loan Claim, either: (i) such holder’s pro rata share of the Series A Preferred Units; or (ii) such holder’s pro rata share of the Series B Preferred Units (the “Series B Preferred Units” and together with the Series A Preferred Units, the “Preferred Units”); |
• | holders of allowed claims related to the VNG Notes to receive a pro rata share and interest in: (i) 15% of the Series C Common Units, if the class of Allowed Senior Note Claims voted to accept the Plan; (ii) the Series A Preferred Units; and (iii) cash; |
• | holders of certain other allowed general unsecured claim to receive 2% of the face amount of its unpaid claim as further described in the Plan; and |
• | customary releases, exculpations, and injunctions. |
• | $677.7 million in unpaid principal with respect to the VNG Revolving Loan (defined in Note 5), $123.4 million in unpaid principal with respect to the Term Loan (defined in Note 5), and approximately $11.6 million of interest, fees, and other expenses arising under or in connection with the VNG Credit Facility; and |
• | $80.7 million in unpaid principal, plus interest, fees, and other expenses, arising in connection with the VNG Notes issued pursuant to the Amended and Restated Indenture. |
June 30, 2019 | |||
(in thousands) | |||
Accounts payable | $ | 3,233 | |
Accrued liabilities | 308 | ||
Undistributed oil and gas revenues | 13,782 | ||
Derivative liabilities | 53,870 | ||
Other liabilities | 5 | ||
Debt and accrued interest | 894,407 | ||
Liabilities subject to compromise | $ | 965,605 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Professional and legal fees (1) | $ | 24,743 | $ | 610 | $ | 36,820 | $ | 2,317 | |||||||
Deferred financing costs and debt discount (2) | — | — | 6,311 | — | |||||||||||
Total Reorganization items | $ | 24,743 | $ | 610 | $ | 43,131 | $ | 2,317 |
(1) | Includes $14.1 million of accrued reorganization costs as of June 30, 2019 representing unpaid professional and legal fees directly related to the Chapter 11 Cases. Total payments made for professional and legal fees related to the Chapter 11 Cases amounted to $22.7 million for the six months ended June 30, 2019. |
(2) | Includes a non-cash charge to write off of the unamortized debt issuance costs and debt discounts of $6.3 million related to the VNG Revolving Loan, Term Loan and VNG Notes as these debt instruments were expected to be impacted by the bankruptcy reorganization process. |
• | We sell oil production at the wellhead and collect an agreed-upon index price, net of pricing differentials. In this scenario, we recognize revenue when control transfers to the purchaser at the wellhead at the net price received. |
• | We deliver oil to the purchaser at a contractually agreed-upon delivery point at which the purchaser takes custody, title, and risk of loss of the product. Under this arrangement, we pay a third party to transport the product and receive a specified index price from the purchaser with no deduction. In this scenario, we recognize revenue when control transfers to the purchaser at the delivery point based on the price received from the purchaser. Oil revenues are recorded net of these third-party transportation fees in our condensed consolidated statements of operations. |
Description | Interest Rate | Maturity Date | June 30, 2019 | December 31, 2018 | ||||||||
VNG Revolving Loan | Variable (1) | February 1, 2021 | $ | 677,718 | $ | 682,145 | ||||||
Term Loan | Variable (2) | May 1, 2021 | 123,438 | 123,438 | ||||||||
New Money Facility | Variable (3) | 20,000 | — | |||||||||
VNG Notes | 9.0% | February 15, 2024 | 80,722 | 80,722 | ||||||||
Lease Financing Obligations | 4.16% | August 10, 2020 (4) | — | 10,454 | ||||||||
Unamortized deferred financing costs | — | (7,124 | ) | |||||||||
Total debt | $ | 901,878 | $ | 889,635 | ||||||||
Less: | ||||||||||||
Liabilities subject to compromise (Note 2) | (881,878 | ) | — | |||||||||
Short-term debt | (20,000 | ) | — | |||||||||
Long-term debt classified as current (5) | — | (879,181 | ) | |||||||||
Current portion of Lease Financing Obligation (4) | — | (5,008 | ) | |||||||||
Total long-term debt | $ | — | $ | 5,446 |
(1) | Variable interest rate of 6.27% at December 31, 2018. In accordance with ASC 852, Reorganizations, we have accrued interest expense only up to the Petition Date. |
(2) | Variable interest rate of 9.96% at December 31, 2018. In accordance with ASC 852, Reorganizations, we have accrued interest expense only up to the Petition Date. |
(3) | Variable interest rate of 7.92% at June 30, 2019. Borrowings under the New Money Facility were paid off prior to maturity on July 16, 2019 in connection with Grizzly’s emergence from the Chapter 11 Cases. |
(4) | Under ASU No. 2016-02, the lease financing obligations are classified and presented under the “Lease Liabilities” line item in the Balance Sheet. See Note 9, “Leases,” for a detailed discussion of our leases. |
(5) | Under ASC Topic 470, “Debt,” as a result of our debt covenant violations, we classified our debt under our VNG Revolving Loan, Term Loan and VNG Notes as current at December 31, 2018. |
December 31, 2018 | ||||||||||||
Offsetting Derivative Assets: | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | |||||||||
Commodity price derivative contracts | $ | 22,361 | $ | (9,308 | ) | $ | 13,053 | |||||
Total derivative instruments | $ | 22,361 | $ | (9,308 | ) | $ | 13,053 | |||||
Offsetting Derivative Liabilities: | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Condensed Consolidated Balance Sheets | Net Amounts Presented in the Condensed Consolidated Balance Sheets | |||||||||
Commodity price derivative contracts | $ | (15,791 | ) | $ | 9,308 | $ | (6,483 | ) | ||||
Total derivative instruments | $ | (15,791 | ) | $ | 9,308 | $ | (6,483 | ) |
Six Months Ended June 30, 2019 | Year Ended December 31, 2018 | ||||||
Derivative asset (liability) at beginning of period, net | $ | 6,570 | $ | (64,437 | ) | ||
Net losses on commodity derivative contracts | (70,202 | ) | (9,259 | ) | |||
Cash settlements paid on matured commodity derivative contracts | 9,762 | 80,266 | |||||
Termination of commodity derivative contracts | 53,870 | — | |||||
Derivative asset at end of period, net | $ | — | $ | 6,570 |
December 31, 2018 | ||||||||
Fair Value Measurements | Assets/Liabilities | |||||||
Using Level 2 | at Fair Value | |||||||
Assets: | ||||||||
Commodity price derivative contracts | $ | 13,053 | $ | 13,053 | ||||
Total derivative instruments | $ | 13,053 | $ | 13,053 | ||||
Liabilities: | ||||||||
Commodity price derivative contracts | $ | (6,483 | ) | $ | (6,483 | ) | ||
Total derivative instruments | $ | (6,483 | ) | $ | (6,483 | ) |
Asset retirement obligation at January 1, 2018 | $ | 157,424 | ||
Liabilities added during the current period | 610 | |||
Accretion expense | 9,295 | |||
Liabilities related to assets divested | (16,687 | ) | ||
Retirements | (2,499 | ) | ||
Change in estimate | (4,935 | ) | ||
Asset retirement obligation at December 31, 2018 | 143,208 | |||
Liabilities added during the current period | 65 | |||
Accretion expense | 4,377 | |||
Liabilities related to assets divested | (294 | ) | ||
Retirements | (1,563 | ) | ||
Change in estimate | (22 | ) | ||
Asset retirement obligation at June 30, 2019 | 145,771 | |||
Less: current obligations | (4,752 | ) | ||
Long-term asset retirement obligation at June 30, 2019 | $ | 141,019 |
Three Months Ended | Six Months Ended | |||||||||
Lease Expense | Classification | June 30, 2019 | June 30, 2019 | |||||||
Assets | ||||||||||
Short-term lease cost | Selling, general and administrative expenses or Lease operating expenses | $ | 371 | $ | 666 | |||||
Operating lease cost | Selling, general and administrative expenses or Lease operating expenses | 670 | 1,521 | |||||||
Finance lease cost | ||||||||||
Amortization of lease assets | Depreciation, depletion, amortization and accretion | 1,341 | 2,674 | |||||||
Interest on lease liabilities | Interest expense | 125 | 262 | |||||||
Net lease cost | $ | 2,507 | $ | 5,123 |
June 30, 2019 | |||
Weighted-average remaining lease term (years) | |||
Operating leases | 5.8 | ||
Finance leases | 1.6 | ||
Weighted-average discount rate | |||
Operating leases | 18.5 | % | |
Finance leases | 5.7 | % |
Leases (in thousands) | Classification | June 30, 2019 | ||||
Assets | ||||||
Operating lease assets | Lease assets | $ | 5,699 | |||
Finance lease assets, at cost | Lease assets | 10,636 | ||||
Accumulated amortization | Lease assets | (2,674 | ) | |||
Finance lease assets, net | Lease assets | 7,962 | ||||
Total lease assets | $ | 13,661 | ||||
Liabilities | ||||||
Current | ||||||
Operating | Liabilities subject to compromise | $ | 1,116 | |||
Finance | Liabilities subject to compromise | 5,183 | ||||
Long-Term | ||||||
Operating | Liabilities subject to compromise | 5,051 | ||||
Finance | Liabilities subject to compromise | 2,969 | ||||
Total lease liabilities | $ | 14,319 |
Operating Leases | Finance Leases | Total | ||||||||||
2019 (remaining of year) | $ | 1,221 | $ | 2,755 | $ | 3,976 | ||||||
2020 | 1,763 | 4,427 | 6,190 | |||||||||
2021 | 1,557 | 1,347 | 2,904 | |||||||||
2022 | 1,255 | 55 | 1,310 | |||||||||
2023 | 1,247 | — | 1,247 | |||||||||
Thereafter | 3,150 | — | 3,150 | |||||||||
Total undiscounted lease liability | 10,193 | 8,584 | 18,777 | |||||||||
Imputed interest | (4,026 | ) | (432 | ) | (4,458 | ) | ||||||
Total discounted liability | $ | 6,167 | $ | 8,152 | $ | 14,319 |
Six Months Ended | ||||
June 30, 2019 | ||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||
Operating cash flows from operating leases | $ | 1,870 | ||
Operating cash flows from finance leases | $ | 262 | ||
Financing cash flows from finance leases | $ | 2,484 |
Lease Payments | ||||
(in thousands) | ||||
2019 | $ | 1,211 | ||
2020 | 1,149 | |||
2021 | 1,169 | |||
2022 | 1,204 | |||
2023 | 1,241 | |||
Thereafter | 3,262 | |||
Total | $ | 9,236 |
June 30, 2019 | ||||
(in thousands) | ||||
July 1, 2019 - December 31, 2019 | $ | 410 | ||
2020 | 410 | |||
Total | $ | 820 |
Time-Based Restricted Stock Units | Weighted Average Grant Date Fair Value | ||||||
Non-vested at December 31, 2018 | 244,496 | $ | 16.62 | ||||
Vested | (1,473 | ) | $ | 11.99 | |||
Non-vested at June 30, 2019 | 243,023 | $ | 16.65 |
• | the Green River Basin in Wyoming; |
• | the Piceance Basin in Colorado; |
• | the Permian Basin in West Texas and New Mexico; |
• | the Arkoma Basin in Oklahoma; |
• | the Gulf Coast Basin in Texas, Louisiana and Alabama; |
• | the Big Horn Basin in Wyoming and Montana; |
• | the Anadarko Basin in Oklahoma and North Texas; |
• | the Wind River Basin in Wyoming; and |
• | the Powder River Basin in Wyoming. |
• | a super-priority senior secured revolving credit facility in the aggregate amount of up to $65.0 million (the “New Money Facility”), of which $20.0 million was drawn on April 4, 2019 and an additional $5.0 million was drawn in July 2019; |
• | a “roll up” of $65.0 million of the outstanding principal amount of the revolving loans under the VNG Credit Facility (as defined in Note 5 to the condensed consolidated financial statements) (the “Roll-Up”, and, together with the New Money Facility, collectively, the “DIP Facility”); |
• | proceeds of the New Money Facility were to be used by the DIP Borrower to (i) pay certain costs and expenses related to the Chapter 11 Cases, (ii) make payments provided for in the DIP Motion, including in respect of certain “adequate protection” obligations and (iii) fund working capital needs, capital improvements and other general corporate purposes of the DIP Borrower and its subsidiaries, in all cases subject to the terms of the DIP Credit Agreement and applicable orders of the Bankruptcy Court; |
• | the DIP Credit Agreement was paid off prior to maturity on July 16, 2019 in connection with Grizzly’s emergence from the Chapter 11 Cases; |
• | interest accrued at a rate per year equal to the LIBOR rate plus 5.50%, or the adjusted base rate plus 4.50% per annum; and |
• | in addition to other fees paid to the DIP Agent, the DIP Borrower was required to pay to the DIP Agent for the account of the lenders under the DIP Credit Agreement, an unused commitment fee equal to 1.00% of the daily average of each lender’s unused commitment under the New Money Facility, which was payable in arrears on the last day of each calendar |
• | holders of an allowed claim related to the DIP Credit Agreement to receive their pro rata share of participation in the Revolving Loans/Term Loan A (each as defined below); |
• | holders of allowed RBL Claims and allowed Secured Swap Claims to receive their pro rata share of and interest in: (i) the Term Loan B (as defined below); (ii) the Series A Preferred Units; and (iii) 75% of the Series C Common Units; |
• | holders of allowed claims under the senior secured term loan credit facility pursuant to the VNG Credit Facility to receive a pro rata share and interest in 10% of the Series C Preferred Units, as well as at the option of each holder of an Allowed Term Loan Claim, either: (i) such holder’s pro rata share of the Series A Preferred Units; or (ii) such holder’s pro rata share of the Series B Preferred Units; |
• | holders of allowed claims related to the VNG Notes to receive a pro rata share and interest in: (i) 15% of the Series C Common Units, if the class of Allowed Senior Note Claims voted to accept the Plan; (ii) the Series A Preferred Units; and (iii) cash; |
• | holders of certain other allowed general unsecured claim to receive 2% of the face amount of its unpaid claim as further described in the Plan; and |
• | customary releases, exculpations, and injunctions. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Oil sales | $ | 37,150 | $ | 46,503 | $ | 69,897 | $ | 92,614 | |||||||
Natural gas sales | 29,132 | 42,623 | 91,446 | 97,890 | |||||||||||
NGLs sales | 13,702 | 22,587 | 27,749 | 44,484 | |||||||||||
Oil, natural gas and NGLs sales | 79,984 | 111,713 | 189,092 | 234,988 | |||||||||||
Net losses on commodity derivative contracts | (9,063 | ) | (45,332 | ) | (70,202 | ) | (63,917 | ) | |||||||
Total revenues and losses on commodity derivative contracts | $ | 70,921 | $ | 66,381 | $ | 118,890 | $ | 171,071 | |||||||
Costs and expenses: | |||||||||||||||
Production: | |||||||||||||||
Lease operating expenses | 29,035 | 36,763 | 55,282 | 67,758 | |||||||||||
Transportation, gathering, processing and compression | 8,484 | 9,768 | 18,006 | 21,270 | |||||||||||
Production and other taxes | 7,833 | 7,971 | 17,656 | 17,752 | |||||||||||
Depreciation, depletion, amortization, and accretion | 39,044 | 38,711 | 74,758 | 78,750 | |||||||||||
Impairment of oil and natural gas properties | 323,188 | 7,552 | 323,626 | 22,153 | |||||||||||
Exploration expense | 275 | 430 | 476 | 1,746 | |||||||||||
Selling, general and administrative expenses | 8,648 | 10,529 | 20,614 | 22,769 | |||||||||||
Share-based compensation | 590 | 579 | 1,181 | 1,075 | |||||||||||
Total costs and expenses | $ | 417,097 | $ | 112,303 | $ | 511,599 | $ | 233,273 | |||||||
Other income (expense): | |||||||||||||||
Interest expense (excludes contractual interest expense of $15.7 million for each of the three and six months ended June 30, 2019) | $ | (1,680 | ) | $ | (15,870 | ) | $ | (18,655 | ) | $ | (30,623 | ) | |||
Net gain (loss) on divestitures of oil and natural gas properties | — | 4,900 | (458 | ) | 4,900 | ||||||||||
Other | 497 | (175 | ) | 586 | (26 | ) | |||||||||
Reorganization items | (24,743 | ) | (610 | ) | (43,131 | ) | (2,317 | ) |
Three Months Ended | ||||||||
June 30, | ||||||||
2019 | 2018 | |||||||
Average realized prices, excluding hedges: | ||||||||
Oil (Price/Bbl) | $ | 55.13 | $ | 59.32 | ||||
Natural Gas (Price/Mcf) | $ | 1.57 | $ | 1.81 | ||||
NGLs (Price/Bbl) | $ | 19.37 | $ | 28.45 | ||||
Average realized prices, including hedges (a): | ||||||||
Oil (Price/Bbl) | $ | 55.13 | $ | 40.65 | ||||
Natural Gas (Price/Mcf) | $ | 1.57 | $ | 1.88 | ||||
NGLs (Price/Bbl) | $ | 19.37 | $ | 22.18 | ||||
Average NYMEX prices: | ||||||||
Oil (Price/Bbl) | $ | 59.83 | $ | 67.89 | ||||
Natural Gas (Price/Mcf) | $ | 2.64 | $ | 2.80 | ||||
Total production volumes: | ||||||||
Oil (MBbls) | 674 | 784 | ||||||
Natural Gas (MMcf) | 18,587 | 23,573 | ||||||
NGLs (MBbls) | 707 | 794 | ||||||
Combined (MMcfe) | 26,874 | 33,041 | ||||||
Average daily production volumes: | ||||||||
Oil (Bbls/day) | 7,405 | 8,615 | ||||||
Natural Gas (Mcf/day) | 204,250 | 259,049 | ||||||
NGLs (Bbls/day) | 7,772 | 8,725 | ||||||
Combined (Mcfe/day) | 295,314 | 363,088 |
(a) | Excludes the premiums paid, whether at inception or deferred, for derivative contracts that settled during the period. We have no commodity derivative contracts as of June 30, 2019. |
Six Months Ended | ||||||||
June 30, | ||||||||
2019 | 2018 | |||||||
Average realized prices, excluding hedges: | ||||||||
Oil (Price/Bbl) | $ | 55.43 | $ | 57.24 | ||||
Natural Gas (Price/Mcf) | $ | 2.41 | $ | 2.09 | ||||
NGLs (Price/Bbl) | $ | 20.41 | $ | 28.18 | ||||
Average realized prices, including hedges (a): | ||||||||
Oil (Price/Bbl) | $ | 52.19 | $ | 41.17 | ||||
Natural Gas (Price/Mcf) | $ | 2.02 | $ | 2.25 | ||||
NGLs (Price/Bbl) | $ | 22.59 | $ | 22.48 | ||||
Average NYMEX prices: | ||||||||
Oil (Price/Bbl) | $ | 57.78 | $ | 65.31 | ||||
Natural Gas (Price/Mcf) | $ | 2.90 | $ | 2.89 | ||||
Total production volumes: | ||||||||
Oil (MBbls) | 1,261 | 1,618 | ||||||
Natural Gas (MMcf) | 37,886 | 46,944 | ||||||
NGLs (MBbls) | 1,360 | 1,578 | ||||||
Combined (MMcfe) | 53,611 | 66,122 | ||||||
Average daily production volumes: | ||||||||
Oil (Bbls/day) | 6,967 | 8,939 | ||||||
Natural Gas (Mcf/day) | 209,316 | 259,359 | ||||||
NGLs (Bbls/day) | 7,512 | 8,721 | ||||||
Combined (Mcfe/day) | 296,191 | 365,315 |
(a) | Excludes the premiums paid, whether at inception or deferred, for derivative contracts that settled during the period. We have no commodity derivative contracts as of June 30, 2019. |
Six Months Ended | ||||||||
June 30, | ||||||||
2019 | 2018 | |||||||
Net cash provided by operating activities | $ | 7,859 | $ | 51,108 | ||||
Net cash used in investing activities | $ | (9,465 | ) | $ | (32,111 | ) | ||
Net cash provided by (used in) financing activities | $ | 12,849 | $ | (15,301 | ) |
• | Net income attributable to non-controlling interest. |
• | Interest expense; |
• | Depreciation, depletion, amortization, and accretion; |
• | Impairment of oil and natural gas properties; |
• | Exploration expense; |
• | Change in fair value of commodity derivative contracts; |
• | Termination of commodity derivative contracts; |
• | Net (gain) loss on divestitures of oil and natural gas properties; |
• | Share-based compensation expense; |
• | Reorganization items; |
• | Severance costs; |
• | Costs incurred on strategic transactions; and |
• | Non-controlling interest amounts attributable to each of the items above which revert the calculation back to an amount attributable to the Vanguard stockholders. |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net loss attributable to Vanguard stockholders | $ | (372,102 | ) | $ | (57,773 | ) | $ | (454,367 | ) | $ | (90,457 | ) | ||||
Add: Net income attributable to non-controlling interests | — | 96 | — | 189 | ||||||||||||
Net loss | $ | (372,102 | ) | $ | (57,677 | ) | $ | (454,367 | ) | $ | (90,268 | ) | ||||
Plus: | ||||||||||||||||
Interest expense | 1,680 | 15,870 | 18,655 | 30,623 | ||||||||||||
Depreciation, depletion, amortization, and accretion | 39,044 | 38,711 | 74,758 | 78,750 | ||||||||||||
Impairment of oil and natural gas properties | 323,188 | 7,552 | 323,626 | 22,153 | ||||||||||||
Exploration expense | 275 | 430 | 476 | 1,746 | ||||||||||||
Termination of commodity derivative contracts | 47,543 | — | 47,543 | — | ||||||||||||
Change in fair value of commodity derivative contracts(a) | (38,480 | ) | 27,485 | 6,570 | 36,778 | |||||||||||
Net (gain) loss on divestitures of oil and natural gas properties | — | (4,900 | ) | 458 | (4,900 | ) | ||||||||||
Share-based compensation | 590 | 579 | 1,181 | 1,075 | ||||||||||||
Reorganization items | 24,743 | 610 | 43,131 | 2,317 | ||||||||||||
Severance costs | 273 | 1,845 | 1,061 | 4,101 | ||||||||||||
Costs incurred on strategic transactions | — | — | — | 148 | ||||||||||||
Adjusted EBITDA before non-controlling interest | 26,754 | 30,505 | 63,092 | 82,523 | ||||||||||||
Adjusted EBITDA attributable to non-controlling interest | — | (38 | ) | — | (75 | ) | ||||||||||
Adjusted EBITDA attributable to Vanguard stockholders | $ | 26,754 | $ | 30,467 | $ | 63,092 | $ | 82,448 |
(a) | These items are included in the net losses on commodity derivative contracts line item in the condensed consolidated statements of operations as follows: |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net cash settlements paid on matured commodity derivative contracts | $ | — | $ | (17,847 | ) | $ | (9,762 | ) | $ | (27,139 | ) | |||||
Loss on matured commodity derivative contracts not settled | — | — | (6,327 | ) | — | |||||||||||
Change in fair value of commodity derivative contracts | 38,480 | (27,485 | ) | (6,570 | ) | (36,778 | ) | |||||||||
Termination of derivative contracts | (47,543 | ) | — | (47,543 | ) | — | ||||||||||
Net losses on commodity derivative contracts | $ | (9,063 | ) | $ | (45,332 | ) | $ | (70,202 | ) | $ | (63,917 | ) |
• | key suppliers, vendors or other contract counterparties may terminate their relationships with us or require additional financial assurances or enhanced performance from us; |
• | our ability to renew existing contracts and compete for new business may be adversely affected; |
• | our ability to attract, motivate and/or retain key executives and employees may be adversely affected; |
• | employees may be distracted from performance of their duties or more easily attracted to other employment opportunities; and |
• | competitors may take business away from us, and our ability to attract and retain customers may be negatively impacted. |
• | provides that our Board and our managers and officers will not have any liability to us or our unitholders for decisions made so long as our Board or any manager or officer acted in good faith; and |
• | provides that we and our officers and managers will not be liable to us or our unitholders for losses sustained or liabilities incurred as a result of any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction determining in respect of such matter or question that we or such other persons acted in bad faith or engaged in fraud, willful misconduct or, in the case of a criminal matter, acted with knowledge that the conduct was criminal. |
• | our existing unitholders’ proportionate ownership interest in us may decrease; |
• | the amount of cash available for distribution on each unit may decrease; |
• | the relative voting strength of each previously outstanding unit may be diminished; and |
• | the market price of our common units may decline. |
• | 39,063,570 Series A Preferred Units and 75,000 Series C Common Units were issued pro rata to holders of claims arising from the revolving credit facility provided under the RBL Credit Agreement and certain secured swaps; |
• | 5,975,091 Series A Preferred Units, 861,252 Series B Preferred Units and 10,000 Series C Common Units were issued pro rata to holders of claims arising from the Term Loan provided under the Term Loan Credit Agreement; and |
• | 700,000 Series A Preferred Units and 15,000 Series C Common Units were issued pro rata to holders of claims arising under the VNG Notes. |
Exhibit Number | Description of Exhibit | |
2.1 | ||
3.1 | ||
3.2 | ||
3.3 | ||
10.1 | ||
10.2 | ||
10.3 | ||
10.4 | ||
10.5 | ||
10.6 | ||
10.7 | ||
10.8 | ||
10.9 | ||
31.1* | ||
31.2* | ||
32.1** | ||
32.2** |
Exhibit Number | Description of Exhibit | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Schema Document | |
101.CAL* | XBRL Calculation Linkbase Document | |
101.DEF* | XBRL Definition Linkbase Document | |
101.LAB* | XBRL Label Linkbase Document | |
101.PRE* | XBRL Presentation Linkbase Document |
* | Provided herewith. |
** | Furnished herewith. |
GRIZZLY ENERGY, LLC | ||
(Registrant) | ||
Date: August 19, 2019 | /s/ Ryan Midgett | |
Ryan Midgett | ||
Chief Financial Officer | ||
(Principal Financial Officer and Authorized Officer) |
1. | I have reviewed this Quarterly Report on Form 10-Q of Grizzly Energy, LLC (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ R. Scott Sloan | |
R. Scott Sloan | |
President and Chief Executive Officer (Principal Executive Officer) Grizzly Energy, LLC |
1. | I have reviewed this Quarterly Report on Form 10-Q of Grizzly Energy, LLC (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Ryan Midgett | |
Ryan Midgett | |
Chief Financial Officer (Principal Financial Officer) Grizzly Energy, LLC |
/s/ R. Scott Sloan | |
R. Scott Sloan | |
President and Chief Executive Officer (Principal Executive Officer) |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Ryan Midgett | |
Ryan Midgett | |
Chief Financial Officer (Principal Financial Officer) |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Aug. 16, 2019 |
|
Document Information [Line Items] | ||
Entity Registrant Name | Grizzly Energy, LLC | |
Entity Central Index Key | 0001384072 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Common Class C | ||
Document Information [Line Items] | ||
Entity Common Shares, Shares Outstanding | 100,000 | |
Series A Preferred Stock | ||
Document Information [Line Items] | ||
Entity Common Shares, Shares Outstanding | 45,738,661 | |
Series B Preferred Stock | ||
Document Information [Line Items] | ||
Entity Common Shares, Shares Outstanding | 861,252 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Income Statement [Abstract] | ||
Interest Expense | $ 15.7 | $ 15.7 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (usd per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (shares) | 50,000,000 | 50,000,000 |
Common stock, issued (shares) | 20,124,081 | 20,124,080 |
Common stock, outstanding (shares) | 20,124,081 | 20,124,080 |
General |
6 Months Ended | ||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||
General | General References to the “Company,” refer to Grizzly Energy, LLC and its consolidated subsidiaries as a whole or an individual basis. References to “Vanguard” refer to the Company during the period prior to the Effective Date while references to “Grizzly” refer to the Company during the period following the Effective Date. Description of the Business We are an exploration and production company engaged in the production and development of oil and natural gas properties in the United States. We are currently focused on adding value by efficiently operating our producing assets and, in certain areas, applying modern drilling and completion technologies in order to fully assess and realize potential development upside. Our primary business objective is to maintain reserves, production and cash flow in a capital efficient manner while identifying opportunities to return cash to stakeholders. Through our operating subsidiaries, as of June 30, 2019, we own properties and oil and natural gas reserves primarily located in nine operating areas:
On March 31, 2019 (the “Petition Date”), the Company and its subsidiaries (such subsidiaries, together with the Company, the “Debtors”) filed voluntary petitions for relief (collectively, the “Bankruptcy Petitions” and, the cases commenced thereby, the “Chapter 11 Cases”) under Chapter 11 of title 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”). The Chapter 11 Cases were jointly administered under the caption “In re Vanguard Natural Resources, Inc., et al.” On July 9, 2019, the Bankruptcy Court entered an order confirming the Amended Joint Plan of Reorganization (as Modified) of Vanguard Natural Resources, Inc. and its Debtor Affiliates (the “Plan”) and on July 16, 2019, the Company consummated the Plan and emerged from the Chapter 11 Cases. As part of the transactions undertaken pursuant to the Plan, Vanguard was converted from a Delaware corporation to a Delaware limited liability company and renamed Grizzly Energy, LLC (“Grizzly”). See Note 2 for a discussion of the Chapter 11 proceedings. |
Summary of Significant Accounting Policies |
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Jun. 30, 2019 | |||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies The accompanying condensed consolidated financial statements are unaudited and were prepared from our records. We derived the condensed consolidated balance sheet as of December 31, 2018 from the audited financial statements contained in our 2018 Annual Report. Because this is an interim period filing presented using a condensed format, it does not include all of the disclosures required by generally accepted accounting principles in the United States (“GAAP”). You should read this Quarterly Report along with our 2018 Annual Report, which contains a summary of our significant accounting policies and other disclosures. In our opinion, we have made all adjustments which are of a normal, recurring nature to fairly present our interim period results. Information for interim periods may not be indicative of our operating results for the entire year. As of June 30, 2019, our significant accounting policies, except for those related to the effects of our Chapter 11 Cases discussed below, are consistent with those discussed in Note 1 of the Notes to the Consolidated Financial Statements contained in our 2018 Annual Report.
The condensed consolidated financial statements as of June 30, 2019 and December 31, 2018, and for the three and six months ended June 30, 2019 and 2018, respectively, include our accounts and those of our subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation. Prior to August 2018, we consolidated the Potato Hills Gas Gathering System as we had the ability to control the operating and financial decisions and policies of the entity through our 51% ownership and reflected the non-controlling interest as a separate element in our condensed consolidated financial statements. On August 1, 2018, we completed the sale of our 51% joint venture interest in Potato Hills Gas Gathering System, including the compression assets relating to the gathering system and our working interest in related oil and natural gas producing properties. For periods subsequent to filing the Bankruptcy Petitions, we have prepared our consolidated financial statements in accordance with Accounting Standards Codification 852, Reorganizations (“ASC 852”). ASC 852 requires that the financial statements distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, professional fees incurred in the Chapter 11 Cases have been recorded in a reorganization line item on the consolidated statements of operations. In addition, ASC 852 provides for changes in the accounting and presentation of significant items on the consolidated balance sheets, particularly liabilities. Prepetition obligations that are potentially impacted by the Chapter 11 reorganization process have been classified on the consolidated balance sheets in liabilities subject to compromise. These liabilities are reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts.
The successful efforts method of accounting is used to account for oil and natural gas properties. Under the successful efforts method, we capitalize the costs of acquiring unproved and proved oil and natural gas leasehold acreage. When proved reserves are found on an unproved property, the associated leasehold cost is transferred to proved properties. Significant unproved leases are reviewed periodically, and a valuation allowance is provided for any estimated decline in value. In determining whether an unproved property is impaired, the Company considers numerous factors including, but not limited to, current exploration and development plans, favorable or unfavorable exploration activity on the property being evaluated and/or adjacent properties, and the remaining months in the lease term for the property. Development costs are capitalized, including the costs of unsuccessful and successful development wells and the costs to drill and equip exploratory wells that find proved reserves. Exploration costs, including unsuccessful exploratory wells and geological and geophysical costs, are expensed as incurred. Depreciation, depletion and amortization Depreciation, depletion and amortization (“DD&A”) of the leasehold and development costs that are capitalized into proved oil and natural gas properties are computed using the units-of-production method, at the district level, based on total proved reserves and proved developed reserves, respectively. Upon sale or retirement of oil and natural gas properties, the costs and related accumulated DD&A are eliminated from the accounts and the resulting gain or loss is recognized. Impairment of Oil and Natural Gas Properties Proved oil and natural gas properties are assessed for impairment in accordance with ASC Topic 360, Property, Plant and Equipment, when events and circumstances indicate a decline in the recoverability of the carrying values of such properties, such as a negative revision of reserves estimates or sustained decrease in commodity prices, but at least annually. We estimate future cash flows expected in connection with the properties and compare such future cash flows to the carrying amount of the properties to determine if the carrying amount is recoverable. If the sum of the undiscounted pretax cash flows is less than the carrying amount, then the carrying amount is written down to its estimated fair value. Unproved properties are evaluated on a specific-asset basis or in groups of similar assets, as applicable. The Company performs periodic assessments of unproved oil and natural gas properties for impairment and recognizes a loss at the time of impairment. In determining whether an unproved property is impaired, the Company considers numerous factors including, but not limited to, current development and exploration drilling plans, favorable or unfavorable exploration activity on adjacent leaseholds, future reserve cash flows and the remaining lease term.
Vanguard was a C corporation subject to federal and state income taxes. Grizzly has elected to be treated as a C corporation for federal and state income taxes. As a C corporation, we account for income taxes, as required, under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in net income or loss in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company incurred a net taxable loss in the current taxable period. Thus no current income taxes are anticipated to be paid and no net benefit will be recorded in the Company’s condensed consolidated financial statements due to the full valuation allowance on the tax assets. Our policy is to record interest and penalties relating to uncertain tax positions in income tax expense. At June 30, 2019, we did not have any accrued liability for uncertain tax positions and do not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months.
In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC Topic 842) (“ASU 2016-02”), which requires lessees to recognize at the commencement date for all leases, with the exception of short-term leases, (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 took effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The ASU requires adoption using a modified retrospective transition approach with either (a) periods prior to the adoption date being recast or (b) a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast. We adopted ASU No. 2016-02 as of January 1, 2019, using the targeted improvement transition option included in ASU No. 2018-11 - Leases (Topic 842). The targeted improvement approach allows us to apply the standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to carry forward the historical lease classification and not capitalize leases with terms of 12 months or less. In addition, it allowed us not to separate lease and non-lease components. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. The adoption of ASU 2016-02 resulted in the recording of additional net lease assets and lease liabilities of approximately $17.5 million and $18.0 million, respectively, as of January 1, 2019, with the difference largely due to prepaid and deferred rent that were reclassified to the right-of-use (“ROU”) asset value. The standard did not require any adjustment to the opening balance of retained earnings and had no impact on cash flows. Please see Note 9, “Leases,” for further details. In June 2016, the FASB issued ASU 2016-13 - Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To comply with this, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. In May 2019, the FASB updated Topic 326 by issuing ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which provides entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments-Credit Losses - Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The amendments in these Updates will be applied using a modified-retrospective approach and, for public entities, are effective for fiscal years beginning after December 15, 2019 and interim periods within those annual periods. Management does not expect this update to have a material impact on the Company's financial statements.
The preparation of financial statements in conformity with 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 pertain to proved oil, natural gas and NGLs reserves and related future cash flows, the fair value of derivative contracts, asset retirement obligations, accrued oil, natural gas and NGLs revenues and expenses, as well as estimates of expenses related to DD&A and accretion expense, income taxes, and share-based compensation. Actual results could differ from those estimates. |
Chapter 11 Proceedings |
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Reorganizations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chapter 11 Proceedings | Chapter 11 Proceedings Commencement of Bankruptcy Cases On the Petition Date, the Debtors filed the Chapter 11 Cases under the Bankruptcy Code in the Bankruptcy Court. The Debtors were jointly administered under the caption “In re Vanguard Natural Resources, Inc., et al.” The subsidiary Debtors in the Chapter 11 Cases were GNG, GEH, GO, EOC, EAC, GAC, GUD, GAP, GAC II, GUD II and GAP II. Reorganization Process Throughout the Chapter 11 Cases, we operated our business as a debtor-in-possession in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. We generally continued our operations without interruption during the pendency of the Chapter 11 Cases. To continue ordinary course operations, we secured orders from the Bankruptcy Court approving a variety of “first day” motions, including motions that authorized us to maintain our existing cash management system, to secure debtor-in-possession financing and other customary relief. These motions were designed primarily to minimize the effect of bankruptcy on the Company’s operations, customers and employees. Subject to certain exceptions provided for in section 362 of the Bankruptcy Code, all judicial and administrative proceedings against us or our property were automatically enjoined, or stayed, as of the Petition Date. In addition, subject to certain exceptions, the filing of new judicial or administrative actions against us or our property for claims arising prior to the Petition Date were automatically enjoined. This prohibited, for example, our lenders, noteholders and other creditors from pursuing claims for defaults under our debt agreements and our contract counterparties from pursuing claims for defaults under our contracts. Accordingly, all of our prepetition liabilities and obligations were settled or compromised under the Bankruptcy Code through the Chapter 11 Cases. Our operations and ability to execute our business remain subject to the risks and uncertainties arising as a result of our Chapter 11 Cases, and the number and nature of our outstanding common units and unitholders, assets, liabilities, officers and managers could change materially because of our Chapter 11 Cases. In addition, the descriptions of our prepetition operations, properties and capital plans may not accurately reflect our post-emergence operations, properties and capital plans. Creditors’ Committees - Appointment & Formation On April 11, 2019, the Office of the United States Trustee appointed the Official Committee of Unsecured Creditors (the “Unsecured Creditors Committee”) pursuant to section 1102 of the Bankruptcy Code. The Unsecured Creditors Committee consisted of the following three members: (i) Enterprise Jonah Gas Gathering LLC; (ii) Viva Energy Services LLC; and (iii) Trinity Environmental SWD I, LLC. Schedules and Statements - Claims & Claims Resolution Process On May 6, 2019 each of the Debtors filed a Schedule of Assets and Liabilities and Statement of Financial Affairs (collectively, the “Schedules and Statements”) with the Bankruptcy Court. These documents set forth, among other things, the assets and liabilities of each of the Debtors, including executory contracts to which each of the Debtors was a party, subject to the qualifications and assumptions included therein. The Schedules and Statements were subject to further amendment or modification after filing. Many of the claims identified in the Schedules and Statements were listed as disputed, contingent or unliquidated. Pursuant to the Federal Rules of Bankruptcy Procedure, creditors who wished to assert prepetition claims against us and whose claim (i) were not listed in the Schedules and Statements or (ii) were listed in the Schedules and Statements as disputed, contingent, or unliquidated, were required to file a proof of claim with the Bankruptcy Court prior to the bar dates set by the court. The bar dates are June 14, 2019, for non-governmental creditors, and September 27, 2019, for governmental creditors. As of August 14, 2019, approximately 1,405 claims totaling $7.7 billion were filed with the Bankruptcy Court against the Debtors by approximately 1,206 claimants. We expect additional claims to be filed prior to the last bar date. In addition, creditors who have already filed claims may amend or modify their claims in ways we cannot reasonably predict. The amounts of these additional claims and/or amendments or modifications to claims already filed may be material. We anticipate the claims filed against the Debtors in the Chapter 11 Cases will be numerous. We expect the process of resolving claims filed against the Debtors to be complex and lengthy. We plan to investigate and evaluate all filed claims in connection with the Plan. As part of the process, we will work to resolve differences in amounts scheduled by the Debtors and the amounts claimed by creditors, including through the filing of objections with the Bankruptcy Court where necessary. Accordingly, the ultimate number and amount of claims that will be allowed against the Debtors is not presently known, nor can the ultimate recovery with respect to allowed claims be reasonably estimated. As discussed above, the claims resolution process continues following our emergence from the Chapter 11 Cases. Plan Support Agreement On May 8, 2019, the Debtors entered into a Plan Support Agreement (the “Plan Support Agreement”) with (a) certain holders (the “RBL Lenders”) constituting over 66 2/3% in amount and over 50.1% in number of the revolving credit facility claims and over 66 2/3% in amount and over 50.1% in number of those certain secured swap claims, in each case under that certain Fourth Amendment and Restated Credit Agreement, dated as of August 1, 2017, by and among Vanguard Natural Gas, LLC (“VNG”), as borrower, the guarantors party thereto, Citibank N.A., as Administrative Agent, and the other lenders party thereto from time to time (as amended, the “VNG Credit Facility” and the claims thereunder, the “RBL Claims” and “Secured Swap Claims,” as applicable); and (b) certain holders (the “Term Loan Lenders” and, collectively with the RBL Lenders, the “Plan Support Parties”), constituting over 66 2/3% in amount and over 50.1% in number of the term loan claims under the VNG Credit Facility (the “Term Loan Claims”). On July 3, 2019, the Plan Support Agreement was amended to reflect the support of over 66 2/3% of Second Lien Notes. A summary of the restructuring transactions agreed to by the Plan Support Parties and effectuated through the Plan is included below. Debtor-in-Possession Financing In connection with the Chapter 11 Cases, on the Petition Date, the Debtors filed a motion (the “DIP Motion”) seeking, among other things, interim and final approval of the Debtors’ use of cash collateral and debtor-in-possession financing on terms and conditions set forth in a proposed Debtor-in-Possession Credit Agreement (the “DIP Credit Agreement”) among VNG, as borrower (the “DIP Borrower”), Citibank, N.A., as administrative agent and issuing bank (the “DIP Agent”), and the financial institutions or other entities from time to time parties thereto, as lenders, and the DIP Agent. The initial lender under the DIP Credit Agreement was Citibank N.A. The DIP Credit Agreement contained the following terms:
Plan of Reorganization On July 9, 2019, the Bankruptcy Court entered an order confirming the Amended Joint Plan of Reorganization (as Modified) of Vanguard Natural Resources, Inc. and its Debtor Affiliates (the “Plan”) and on July 16, 2019, the Company consummated the Plan. The Plan provides for the reorganization of the Debtors as a going concern and will significantly reduce long-term debt and annual interest payments of the reorganized Debtors. The following is a summary of the material terms of the Plan. This summary highlights only certain substantive provisions of the Plan and is not intended to be a complete description of the Plan. The Plan provided for:
Pursuant to the Plan, the terms of the Vanguard’s board of directors expired as of the Effective Date. Our current board of managers (the “Board”) consists of five members who, except for one manager, are different from those who previously served on Vanguard’s board of directors. Preferred and Common Units The Preferred Units have no stated maturity and are not subject to mandatory redemption or any sinking fund and will remain outstanding indefinitely unless repurchased or redeemed by us, at our option, in accordance with the terms of the Company’s limited liability company agreement (the “LLC Agreement”). The Preferred Units had an initial liquidation preference of $10.00 per unit (the “Initial Liquidation Preference”). From and after the date on which the Term Loan B is repaid, the Company may redeem, in whole or in part, the Series A Preferred Units, at such times as determined by the Board in its sole discretion at the price set forth in the LLC Agreement (the “Series A Redemption Price”). The Series A Redemption Price, at a given date of determination, is based upon an amount equal to the Initial Liquidation Preference increased each month by an annualized rate equal to the LIBO rate for such month, plus 9.5%, compounding monthly on the last day of each such month. Upon the redemption of any Series A Preferred Units and the payment in full to the holders thereof, such Series A Preferred Units will cease to be outstanding. From and after the date on which all Series A Preferred Units are redeemed by Grizzly and are no longer outstanding (the “Series A Redemption Date”), the Company may redeem, in whole or in part, the Series B Preferred Units, at such times as determined by the Board in its sole discretion at the price set forth in the LLC Agreement (the “Series B Redemption Price”). The Series B Redemption Price, at a given date of determination, is based upon an amount equal to the Initial Liquidation Preference increased each month by an annualized rate equal to the LIBO rate for such month, plus 10.5%, compounding monthly on the last day of each such month. Upon the redemption of any Series B Preferred Units and the payment in full to the holders thereof, such Series B Preferred Units will cease to be outstanding. The Common Units represent limited liability company interests. Record holders of Common and Preferred Units are entitled to vote at meetings of members and shall be entitled to one vote for each outstanding unit that is registered in the name of such member on the record date for such meeting. Exit Facility Grizzly has entered into that certain Fifth Amended and Restated Credit Agreement dated as of July 16, 2019 (the “RBL Credit Agreement”), among GNG, as borrower (the “RBL Borrower”), Grizzly, as parent, Citibank, N.A., as administrative agent, issuing bank and collateral agent, and the lenders party thereto from time to time. Pursuant to the RBL Credit Agreement, the lenders party thereto agreed to provide a new first-lien reserved-based credit facility with first-out revolving credit commitments in the aggregate amount of $65.0 million (the “Revolving Loans”) and a second-out term loan in the aggregate amount of $65.0 million (the “Term Loan A”). The initial borrowing base under the RBL Credit Agreement is $65.0 million. The borrowing base will be redetermined semi-annually on April 1st and October 1st of each year, commencing on April 1, 2020. The maturity date of the RBL Credit Agreement, including the Term Loan A, is July 16, 2022. Until the maturity date, the Term Loan A shall bear interest at a rate per annum equal to 3.0% plus the adjusted LIBO rate for an alternate base rate loan, or 4.0% plus the adjusted LIBO rate for a Eurodollar loan, and the Revolving Loans shall bear interest based on borrowing base utilization percentage at a rate per annum equal to the alternate base rate plus a margin ranging from 2.0% to 3.0% for alternative base rate loans or the adjusted LIBO rate plus a margin ranging from 3.0% to 4.0% for Eurodollar loans. Unused commitments under the RBL Credit Agreement will accrue a commitment fee at a rate of 0.5%, payable quarterly in arrears. The RBL Borrower will be required to repay the Term Loan A at the end of each quarter in equal quarterly installments at a rate of 1.0% per annum of the original principal amount of the Term Loan A. Grizzly has also entered into that certain Term Loan Credit Agreement dated as of July 16, 2019 (the “Term Loan Credit Agreement”) among GNG, as borrower (the “Term Loan Borrower”), Grizzly, as parent, Citibank, N.A., as administrative agent and collateral agent, and the lenders party thereto from time to time. Pursuant to the Term Loan Credit Agreement, the lenders party thereto agreed to provide a first-lien, last-out term loan in the aggregate amount of $285.0 million (the “Term Loan B”). The Term Loan Credit Agreement and the RBL Credit Agreement together are referred to herein as the “Exit Facility”. The maturity date of the Term Loan Credit Agreement is January 16, 2023. Until the maturity date, the Term Loan B shall bear interest at a rate per annum equal to (i) the alternate base rate plus an applicable margin of 6.5% for an alternate base rate loan or (ii) the adjusted LIBO rate plus an applicable margin of 7.5% for a Eurodollar loan. The obligations under the Exit Facility are guaranteed by Grizzly and all of Grizzly’s subsidiaries (the “Guarantors”), subject to limited exceptions, and secured on a first-priority basis by substantially all of Grizzly’s and the Guarantors’ assets, including, without limitation, liens on at least 95% of the total value of Grizzly’s and the Guarantors’ oil and natural gas properties, and pledges of equity interests of all other direct and indirect subsidiaries of Grizzly, subject to certain limited exceptions. The Exit Facility also contains certain financial covenants. The RBL Credit Agreement requires that as of the last day of any fiscal quarter commencing with the third full fiscal quarter ending after the effective date of the RBL Credit Agreement, that (i) the consolidated first-out leverage ratio not exceed 2.50 to 1.00 and (ii) current ratio not be less than 1.00 to 1.00. The Term Loan Credit Agreement requires that as of January 1 of each year and July 1 of each year, commencing with the first such date after the effective date of the Term Loan Credit Agreement, that the proved developed producing coverage ratio not be less than 1.00 to 1.00. Amended and Restated Employment Agreements Richard Scott Sloan Amended and Restated Employment Agreement On July 16, 2019, Grizzly entered into an Amended and Restated Employment Agreement with its President and Chief Executive Officer, Richard Scott Sloan (the “Sloan Employment Agreement”). The initial term of the Sloan Employment Agreement will begin on July 16, 2019, and end on December 31, 2020, which term shall automatically renew for one-year periods unless Grizzly or Mr. Sloan gives notice that it or he, as applicable, does not wish to extend the agreement. The employment agreement provides that Mr. Sloan is entitled to receive an annual base salary of $720,000 and an annual target bonus equal to 100% of his base salary; provided that during the 2019 calendar year, Mr. Sloan will instead participate in a quarterly bonus arrangement that provides him the opportunity to earn a target quarterly bonus of $180,000 (the “Sloan STIP”). The Sloan STIP permits Mr. Sloan to earn a quarterly bonus if performance metrics are achieved during the applicable calendar quarter on either a stand-alone or “catch up” basis. Mr. Sloan can earn up to 150% of his quarterly target bonus if the applicable performance metrics are exceeded. The other terms of the Sloan Employment Agreement are generally consistent with the terms of Mr. Sloan’s prior agreement, except that: (i) the Effective Date of the Plan shall constitute a Change of Control (as defined therein), and (ii) Mr. Sloan’s voluntary resignation during the 30-day period following the three-month anniversary of the Effective Date of the Plan shall constitute Good Reason (as defined herein). Ryan Midgett Amended and Restated Employment Agreement On July 16, 2019, Grizzly entered into an Amended and Restated Employment Agreement with its Chief Financial Officer, Ryan Midgett (the “Midgett Employment Agreement”). The initial term of the Midgett Employment Agreement will begin on July 16, 2019, and end on December 31, 2020, which term shall automatically renew for one-year periods unless Grizzly or Mr. Midgett gives notice that it or he, as applicable, does not wish to extend the agreement. The Midgett Employment Agreement provides that Mr. Midgett is entitled to receive an annual base salary of $325,000 and an annual target bonus equal to 80% of his base salary; provided that during the 2019 calendar year, Mr. Midgett will instead participate in a quarterly bonus arrangement that provides him the opportunity to earn a target quarterly bonus of $65,000 (the “Midgett STIP”). The Midgett STIP permits Mr. Midgett to earn a quarterly bonus if performance metrics are achieved during the applicable calendar quarter on either a stand-alone or “catch up” basis. Mr. Midgett can earn up to 150% of his quarterly target bonus if the applicable performance metrics are exceeded. The other terms of the agreement are generally consistent with the terms of Mr. Midgett’s prior agreement, except that: (i) the Effective Date of the Plan shall constitute a Change of Control (as defined therein), and (ii) Mr. Midgett’s voluntary resignation during the 30-day period following the three-month anniversary of the Effective Date of the Plan shall constitute Good Reason (as defined herein). Jonathan C. Curth Amended and Restated Employment Agreement On July 16, 2019, Grizzly entered into an Amended and Restated Employment Agreement with its General Counsel, Corporate Secretary and Vice President of Land, Jonathan C. Curth (the “Curth Employment Agreement”). The initial term of the Curth Employment Agreement will begin on July 16, 2019, and end on December 31, 2020, which term shall automatically renew for one-year periods unless the Company or Mr. Curth gives notice that it or he, as applicable, does not wish to extend the agreement. The Curth Employment Agreement provides that Mr. Curth is entitled to receive an annual base salary of $380,000 and an annual target bonus equal to 80% of his base salary; provided that during the 2019 calendar year, Mr. Curth will instead participate in a quarterly bonus arrangement that provides him the opportunity to earn a target quarterly bonus of $76,000 (the “Curth STIP”). The Curth STIP permits Mr. Curth to earn a quarterly bonus if performance metrics are achieved during the applicable calendar quarter on either a stand-alone or “catch up” basis. Mr. Curth can earn up to 150% of his quarterly target bonus if the applicable performance metrics are exceeded. The other terms of the agreement are generally consistent with the terms of Mr. Curth’s prior agreement, except that: (i) the Effective Date of the Plan shall constitute a Change of Control (as defined therein), and (ii) Mr. Curth’s voluntary resignation during the 30-day period following the three-month anniversary of the Effective Date of the Plan shall constitute Good Reason (as defined herein). Emergence from Chapter 11 On the Effective Date, the Debtors substantially consummated the Plan and emerged from the Chapter 11 Cases. As part of the transactions undertaken pursuant to the Plan, Vanguard was converted to a Delaware limited liability company and renamed Grizzly Energy, LLC. Acceleration of Debt Obligations As of December 31, 2018, the Company was not in compliance with certain covenants under the VNG Credit Facility (as defined in Note 5). Accordingly, all amounts due under the VNG Credit Facility and VNG Notes (as defined in Note 5) (collectively, the “Debt Instruments”) were classified as current in the accompanying consolidated balance sheets as of that date. The commencement of the Chapter 11 Cases was an event of default that accelerated the Debtors’ obligations under the following Debt Instruments:
As of June 30, 2019, amounts outstanding under the Debt Instruments are included in liabilities subject to compromise in the condensed consolidated balance sheets. Further, in accordance with accounting guidance in ASC 852, we did not accrue interest on the Debt Instruments during the pendency of the 2019 Chapter 11 Cases. Liabilities Subject to Compromise Liabilities subject to compromise represent estimates of known or potential prepetition claims expected to be resolved in connection with the Chapter 11 Cases. Due to the uncertain nature of many of the potential claims, the magnitude of potential claims is not reasonably estimable at this time. Potential claims not currently included with liabilities subject to compromise in our Consolidated Balance Sheets may be material. In addition, differences between amounts we are reporting as liabilities subject to compromise and the amounts attributable to such matters claimed by our creditors or approved by the Bankruptcy Court may be material. We will continue to evaluate our liabilities throughout the Chapter 11 process, and we will make adjustments in future periods as necessary and appropriate. Such adjustments may be material. Under the Bankruptcy Code, we had the right to assume, assign or reject certain executory contracts and unexpired leases, subject to the approval of the Bankruptcy Court and certain other conditions. Rejections of contracts or leases, generally (1) were treated as a prepetition breach of the contract or lease, (2) subject to certain exceptions, relieved the Debtors of performing their future obligations under such contract or lease and (3) entitled the counterparty thereto to a prepetition general unsecured claim for damages caused by such deemed breach. Assumption of executory contracts or unexpired leases, generally required the Company to cure any existing monetary defaults under such contract or lease and provide adequate assurance of future performance to the counterparty. Accordingly, any description of an executory contract or unexpired lease, including any quantification of our obligations under any such contract or lease, is wholly qualified by the rejection rights we had under the Bankruptcy Code. Further, nothing herein is or shall be deemed an admission with respect to any claim amounts or calculations arising from the rejection of any executory contract or unexpired lease and we expressly preserve all of our rights with respect thereto. The following table summarizes the components of liabilities subject to compromise included in our Consolidated Balance Sheets as of June 30, 2019:
Interest Expense We discontinued recording interest on debt classified as liabilities subject to compromise on the Petition Date. Contractual interest on liabilities subject to compromise not reflected in the consolidated statements of operations was approximately $15.7 million, representing contractual interest expense from the Petition Date through June 30, 2019. Reorganization Items We have incurred and will continue to incur significant costs associated with the reorganization. The amount of these costs, which are being expensed as incurred, are expected to significantly affect our results of operations. The following table summarizes the components included in reorganization items on our consolidated statements of operations for the three and six months ended June 30, 2019 and 2018:
Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. However, the Chapter 11 Cases raised substantial doubt about our ability to continue as a going concern. The consolidated financial statements and related notes do not include any adjustments related to the recoverability and classification of recorded asset amounts or adjustments as a result of this substantial doubt. |
Revenues |
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Jun. 30, 2019 | |||||||||
Revenue from Contract with Customer [Abstract] | |||||||||
Revenues | Revenues Revenue from Contracts with Customers Sales of oil, natural gas and NGLs are recognized at the point control of the product is transferred to the customer and collectability is reasonably assured. Virtually all of our contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, quality of the oil or natural gas, and prevailing supply and demand conditions. As a result, the price of the oil, natural gas, and NGLs fluctuates to remain competitive with other available oil, natural gas, and NGLs supplies. Natural gas and NGLs Sales Under most of our natural gas processing contracts, we deliver natural gas to a midstream processing entity at the wellhead or the inlet of the midstream processing entity’s system. The midstream processing entity gathers and processes the natural gas and remits proceeds to us for the resulting sales of NGLs and residue gas. In these scenarios, the Company evaluates whether we are the principal or the agent in the transaction. For those contracts where we have concluded we are the principal and the ultimate third party is our customer, we recognize revenue on a gross basis, with transportation, gathering, processing and compression fees presented as an expense in our condensed consolidated statement of operations. Alternatively, for those contracts where we have concluded the Company is the agent and the midstream processing entity is our customer, we recognize natural gas and NGLs revenues based on the net amount of the proceeds received from the midstream processing. In certain natural gas processing agreements, we may elect to take our residue gas and/or NGLs in-kind at the tailgate of the midstream entity’s processing plant and subsequently market the product. Through the marketing process, we deliver product to the ultimate third-party purchaser at a contractually agreed-upon delivery point and receive a specified index price from the purchaser. In this scenario, we recognize revenue when control transfers to the purchaser at the delivery point based on the index price received from the purchaser. The gathering, processing and compression fees attributable to the gas processing contract, as well as any transportation fees incurred to deliver the product to the purchaser, are presented as Transportation, gathering, processing and compression expense in our condensed consolidated statements of operations. Oil sales Our oil sales contracts are generally structured in one of the following ways:
Transaction price allocated to remaining performance obligations A significant number of our product sales are short-term in nature with a contract term of one year or less. For those contracts, we have utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. For our product sales that have a contract term greater than one year, we have utilized the practical expedient in ASC 606-10-50-14(a) which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required. Contract balances Under our product sales contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our product sales contracts do not give rise to contract assets or liabilities under ASC Topic 606. Prior-period performance obligations We record revenue in the month production is delivered to the purchaser. However, settlement statements for certain natural gas and NGL sales may not be received for 30 to 90 days after the date production is delivered, and as a result, we are required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. We record the differences between our estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. For the six months ended June 30, 2019, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material. |
Divestitures |
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Jun. 30, 2019 | |
Business Combinations [Abstract] | |
Divestitures | Divestitures During March 2019, the Company completed the sale of certain oil and natural gas properties in the Jonah Field in the Green River Basin. Cash proceeds received from the sale were approximately $4.4 million, subject to customary post-closing adjustments, net of costs to sell of $0.2 million. The net cash proceeds from this divestment were used to pay down outstanding debt under the VNG Credit Facility (defined in Note 5, “Debt”). |
Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Our financing arrangements consisted of the following as of the date indicated (in thousands):
Acceleration of Debt Obligations As of December 31, 2018, the Company was not in compliance with certain covenants under the VNG Credit Facility (defined herein). Accordingly, all amounts due under the Debt Instruments are classified as current in the accompanying consolidated balance sheets as of that date. The commencement of the Chapter 11 Cases is an event of default that accelerated the Debtors’ obligations under these Debt Instruments. As of June 30, 2019, amounts outstanding under the Debt instruments are included in liabilities subject to compromise in the condensed consolidated balance sheets. Any efforts to enforce such obligations under the Debt Instruments are stayed automatically as a result of the filing of the Bankruptcy Petitions and the holders’ rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code. We accelerated the amortization of the remaining debt issue costs of $6.3 million associated with the Debt Instruments, fully amortizing those amounts as of the Petition Date. Since the commencement of the Bankruptcy Petitions, no interest has been paid to the holders of the Debt Instruments. Also, in accordance with ASC 852, Reorganizations, we have accrued interest expense on the Debt Instruments only up to the Petition Date. The total amount accrued of $12.5 million is reflected as liabilities subject to compromise on the consolidated balance sheet as of June 30, 2019. In addition, contractual interest on liabilities subject to compromise not reflected in the consolidated statements of operations was approximately $15.7 million, representing interest expense from the Petition Date through June 30, 2019. Additional information regarding the Chapter 11 cases is included in Note 2. Chapter 11 Cases. VNG Credit Facility Under the Company’s Fourth Amended and Restated Credit Agreement (the “VNG Credit Facility”), the lenders party thereto agreed to provide VNG with an $850.0 million senior secured reserve-based revolving credit facility (the “VNG Revolving Loan”). The VNG Credit Facility also included an additional $125.0 million senior secured term loan (the “Term Loan”). As of June 30, 2019, the VNG Credit Facility had a borrowing base of $677.9 million. Pursuant to the Plan, on the Effective Date, the Company’s obligations with respect to the VNG Credit Facility were canceled and discharged. VNG Notes On June 30, 2019, we had $80.7 million outstanding in aggregate principal amount of 9.0% Senior Secured Second Lien Notes due 2024 (the “VNG Notes”). Pursuant to the Plan, on the Effective Date, the Company’s obligations with respect to the VNG Notes were canceled and discharged. Exit Facility Grizzly has entered into the RBL Credit Agreement. Pursuant to the RBL Credit Agreement, the lenders party thereto agreed to provide the Revolving Loans and the Term Loan A. The initial borrowing base on the Revolving Loans is $65.0 million. The maturity date of the RBL Credit Agreement is July 16, 2022. The Company has also entered into that certain Term Loan Credit Agreement. Pursuant to the Term Loan Credit Agreement, the lenders party thereto agreed to provide a first-lien, last-out term loan in the aggregate amount of $285.0 million. The maturity date of the Term Loan Credit Agreement is January 16, 2023. See Note 2 for a detailed discussion of the Exit Facility. |
Price Risk Management Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Price Risk Management Activities | Price Risk Management Activities Historically, we entered into derivative contracts primarily with counterparties that were also lenders under our VNG Credit Facility to hedge price risk associated with a portion of our oil, natural gas and NGLs production. Our derivative contracts with these counterparties were governed by master agreements, which generally specify that a default under any of our debt agreements as well as any bankruptcy filing is an event of default which may result in early termination of such derivative contracts. As a result of our defaults under our debt agreements and our Bankruptcy Petitions, we were in default under our derivative contracts. In addition, our derivative contract counterparties were permitted to terminate any outstanding derivative transactions and to calculate the amounts due to or from the Debtors as a result of such terminations, in accordance with the terms of the agreements governing such derivative contracts. In April 2019, our derivative contract counterparties unilaterally terminated all derivative contracts to which we were a party and the net settlement owed to counterparties amounted to $53.9 million and was included in Liabilities Subject to Compromise on the Consolidated Balance Sheet as of June 30, 2019. The Company has not entered into any commodity derivative contracts subsequent to June 30, 2019. Balance Sheet Presentation Our commodity derivatives are presented on a net basis in “derivative assets” and “derivative liabilities” on the condensed consolidated balance sheets as governed by the International Swaps and Derivatives Association Master Agreement with each of the counterparties. The following table summarizes the gross fair values of our derivative instruments, presenting the impact of offsetting the derivative assets and liabilities on our condensed consolidated balance sheets for the period indicated (in thousands):
By using derivative instruments to economically hedge exposures to changes in commodity prices and interest rates, we expose ourselves to credit risk and market risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. When the fair value of a derivative contract is positive, the counterparty owes us, which creates credit risk. As previously discussed, all of our counterparties were participants in our VNG Credit Facility (see Note 5, “Debt” for further discussion), which is secured by our oil and natural gas properties; therefore, we were not required to post any collateral. As of June 30, 2019, we had no outstanding commodity price or interest rate derivative contracts, and therefore no credit risk related to derivative instruments. Changes in fair value of our commodity derivatives for the periods indicated are as follows (in thousands):
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Fair Value Measurements |
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements Financial assets and financial liabilities measured at fair value on a recurring basis are summarized below (in thousands):
During periods of market disruption, including periods of volatile oil and natural gas prices, there may be certain asset classes that were in active markets with observable data that become illiquid due to changes in the financial environment. In such cases, some derivative instruments may fall to Level 3 and thus require more subjectivity and management judgment. Further, rapidly changing commodity and unprecedented credit and equity market conditions could materially impact the valuation of derivative instruments as reported within our condensed consolidated financial statements and the period-to-period changes in value could vary significantly. Decreases in value may have a material adverse effect on our results of operations or financial condition. The Company periodically reviews oil and natural gas properties for impairment when facts and circumstances indicate that their carrying value may not be recoverable. During the six months ended June 30, 2019, we incurred impairment charges of $323.6 million as oil and natural gas properties with a net cost basis of $546.2 million were written down to their fair value of $222.6 million. The most significant factors causing us to record an impairment of oil and natural gas properties in 2019 was the reduction in our proved reserves and the reduction in the value of our unproved properties resulting from a decline in forward natural gas prices. During the six months ended June 30, 2018, we incurred impairment charges of $22.2 million as oil and natural gas properties with a net cost basis of $89.1 million were written down to their fair value of $66.9 million. The write downs in 2018 primarily relate to downward revisions of unproved property leasehold acreage and working interest in certain of our undeveloped leasehold as well as the reduction in the value of certain of our operating districts due to a decline in forward natural gas prices. In order to determine whether the carrying value of an asset is recoverable, the Company compares net capitalized costs of proved oil and natural gas properties to estimated undiscounted future net cash flows using management’s expectations of future oil and natural gas prices. These future price scenarios reflect the Company’s estimation of future price volatility. If the net capitalized cost exceeds the undiscounted future net cash flows, the Company writes the net cost basis down to the discounted future net cash flows, which is management’s estimate of fair value. Significant inputs used to determine the fair value include estimates of: (i) reserves; (ii) future operating and development costs; (iii) future commodity prices; and (iv) a market-based weighted average cost of capital rate. The inputs used by management for the fair value measurements utilized in this review include significant unobservable inputs, and therefore, the fair value measurements employed are classified as Level 3 for these types of assets. |
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Asset Retirement Obligations | Asset Retirement Obligations The following provides a roll-forward of our asset retirement obligations (in thousands):
Inputs to the valuation of additions to the asset retirement obligation liability and certain changes in the estimated fair value of the liability include: (i) estimated plug and abandonment cost per well based on our experience; (ii) estimated remaining life per well based on average reserve life per field; (iii) our credit-adjusted risk-free interest rate and (iv) the average inflation factor. These inputs require significant judgments and estimates by the Company’s management at the time of the valuation and are sensitive and subject to change. During the year ended December 31, 2018, we used credit-adjusted risk-free interest rate ranging between 6.5% and 7.1%; and the average inflation factor of 1.7%. During the six months ended June 30, 2019, we used credit-adjusted risk-free interest rate ranging from 6.3% to 6.8% and the average inflation factor was 1.6%. |
Leases |
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Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Leases We determine if an arrangement is a lease at inception. Operating leases and finance leases are included in lease assets, other current liabilities and other long-term liabilities on our consolidated balance sheets. Operating leases with lease term of 12 months or less are not capitalized and excluded from operating lease ROU assets. The lease payments are expensed on a straight-line basis over the term of the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. We do not have any variable lease payments. We lease certain real estate, well equipment, vehicles, and information technology equipment. For certain well equipment, real-estate, and vehicle leases we account for the lease and non-lease components as a single lease component. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 10 years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The components of lease expense for the three and six months ended June 30, 2019 were as follows (in thousands):
Information regarding our lease terms and discount rates as of June 30, 2019 were as follows:
Supplemental balance sheet information related to leases as of June 30, 2019 was as follows:
The maturity of our lease liabilities as of June 30, 2019 were as follows (in thousands):
Supplemental cash flow and other information related to leases for the six months ended June 30, 2019 was as follows (in thousands):
Rent expense for our office leases was $0.6 million and $1.1 million for the three and six months ended June 30, 2018, respectively. The rent expense was for the lease of our office space in Houston, Texas as well as office leases in our other operating areas. Prior to the adoption of ASU No. 2016-02, our policy was to amortize the total payments under the lease agreement on a straight-line basis over the term of the lease. |
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Leases | Leases We determine if an arrangement is a lease at inception. Operating leases and finance leases are included in lease assets, other current liabilities and other long-term liabilities on our consolidated balance sheets. Operating leases with lease term of 12 months or less are not capitalized and excluded from operating lease ROU assets. The lease payments are expensed on a straight-line basis over the term of the lease. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. We do not have any variable lease payments. We lease certain real estate, well equipment, vehicles, and information technology equipment. For certain well equipment, real-estate, and vehicle leases we account for the lease and non-lease components as a single lease component. Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to 10 years or more. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The components of lease expense for the three and six months ended June 30, 2019 were as follows (in thousands):
Information regarding our lease terms and discount rates as of June 30, 2019 were as follows:
Supplemental balance sheet information related to leases as of June 30, 2019 was as follows:
The maturity of our lease liabilities as of June 30, 2019 were as follows (in thousands):
Supplemental cash flow and other information related to leases for the six months ended June 30, 2019 was as follows (in thousands):
Rent expense for our office leases was $0.6 million and $1.1 million for the three and six months ended June 30, 2018, respectively. The rent expense was for the lease of our office space in Houston, Texas as well as office leases in our other operating areas. Prior to the adoption of ASU No. 2016-02, our policy was to amortize the total payments under the lease agreement on a straight-line basis over the term of the lease. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Lease Commitments As of December 31, 2018, the minimum contractual obligations under our lease commitments were approximately $9.2 million in the aggregate. Please see Note 9, “Leases,” for a detailed discussion of our current accounting for leases with the adoption of ASU 2016-02.
Transportation Demand Charges As of June 30, 2019, we have a contract that provides firm transportation capacity on pipeline systems. The remaining term on this contract is approximately one year and requires us to pay transportation demand charges regardless of the amount of pipeline capacity we utilize. The values in the table below represent gross future minimum transportation demand charges we are obligated to pay as of June 30, 2019. However, our financial statements will reflect our proportionate share of the charges based on our working interest and net revenue interest, which will vary from property to property.
Development Commitments We have commitments to third-party operators under joint operating agreements relating to the drilling and completion of oil and natural gas wells. As of June 30, 2019, total estimated costs to be spent in 2019 is approximately $9.6 million, of which $2.5 million relates to our drilling and completion commitments in the Pinedale field in the Green River Basin, and $6.1 million is for facility redevelopment costs for the Cotton Valley gas plant in Gulf Coast. Legal Proceedings We are defendants in certain legal proceedings arising in the normal course of our business. Management does not believe that it is probable that the outcome of these actions will have a material adverse effect on the Company’s condensed consolidated financial position, results of operations or cash flow, although the ultimate outcome and impact of such legal proceedings on the Company cannot be predicted with certainty. Furthermore, our insurance may not be adequate to cover all liabilities that may arise out of claims brought against us. If one or more negative outcomes were to occur relative to these matters, the aggregate impact to our financial position, results of operations or cash flow could be material. In addition, we are not aware of any legal or governmental proceedings against us, or contemplated to be brought against us, under applicable environmental laws, that could reasonably be expected to have a material adverse effect on the Company’s condensed consolidated financial position, results of operations or cash flow. Pursuant to 11 U.S.C. § 362, with certain exceptions, our legal proceedings were automatically stayed as to the Debtors through the Effective Date. Please see Note 2, “Chapter 11 Proceedings,” for information regarding our Chapter 11 Cases. |
Stockholders’ Equity (Deficit) |
6 Months Ended |
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Jun. 30, 2019 | |
Equity [Abstract] | |
Stockholders’ Equity (Deficit) | Stockholders’ Equity (Deficit) Effect of Filing on Shareholders Under the priority scheme established by the Bankruptcy Code, unless creditors agree otherwise, prepetition debt liabilities and post-petition liabilities must be satisfied in full before the holders of our common shares and warrants are entitled to receive any distribution or retain any property under a plan of reorganization. Pursuant to the Plan the common shares and warrants of Vanguard were cancelled and Grizzly and its affiliates do not have any obligations thereunder. Earnings Per Share Basic earnings per share is computed by dividing net earnings attributable to stockholders by the weighted average number of shares outstanding during the period. Diluted earnings per share is computed by adjusting the average number of shares outstanding for the dilutive effect, if any, of potential common shares. The Company uses the treasury stock method to determine the dilutive effect. The diluted earnings per share calculation for the six months ended June 30, 2019 and 2018 excluded 301,065 restricted stock units (“RSUs”) and 143,181 RSUs, respectively, and approximately 1.3 million warrants for each of the period, that were antidilutive. |
Share-Based Compensation |
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Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Share-Based Compensation | Share-Based Compensation Effect of Emergence from Bankruptcy on Share-Based Compensation Pursuant to the Plan, all unvested equity grants outstanding immediately before the Effective Date were canceled and of no further force or effect as of the Effective Date. In addition, on the Effective Date, the Company’s 2017 Management Incentive Plan (“MIP”) was canceled and extinguished, and participants in the 2017 MIP received no payment or other distribution on account of the 2017 MIP. 2017 MIP Restricted Stock Units The following table summarizes our time-based RSUs as of June 30, 2019:
As of June 30, 2019, the total remaining unearned compensation related to non-vested time-based RSUs was $2.7 million with a weighted-average remaining service period of 1.5 years. In addition, the total remaining unearned compensation related to TSR performance RSUs as of June 30, 2019 was $0.8 million, with a weighted-average remaining service period of 1.5 years. Pursuant to the Plan, all RSUs issued by Vanguard were cancelled and Grizzly and its affiliates do not have any obligations related thereto. Our condensed consolidated statements of operations reflect non-cash compensation related to our MIP of $0.6 million for each of the three months ended June 30, 2019 and 2018, and $1.2 million and $1.1 million for the six months ended June 30, 2019 and 2018, respectively. |
Income Taxes |
6 Months Ended |
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Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes For the six months ended June 30, 2019, we recorded no income tax expense or benefit. The difference between our effective tax rate and the federal statutory income tax rate of 21% is primarily due to the effect of changes in the Company’s valuation allowance. As described in Note 2, “Chapter 11 Proceedings,” in accordance with the Plan, our long-term debt was reorganized and significantly reduced. The Internal Revenue Code (“IRC”) of 1986, as amended, provides that a debtor in a Chapter 11 bankruptcy case may exclude cancellation of debt income (“CODI”) from taxable income but must reduce certain of its tax attributes by the amount of any CODI realized as a result of the consummation of a plan of reorganization. The amount of CODI realized by a taxpayer is determined based on the fair market value of the consideration received by the creditors in settlement of outstanding indebtedness. Upon emergence from Chapter 11 bankruptcy proceedings, the CODI may reduce some or all of the amount of prior U.S. tax attributes. The actual reduction in tax attributes will not occur until after the determination of tax for the 2019 taxable year. The utilization of certain remaining U.S. tax attributes are expected to be limited under IRC Section 382 due to the ownership change resulting from the Plan. Based on historical results and ownership change limitations, during the six months ended June 30, 2019, the Company recorded a full valuation allowance against its deferred tax position. A valuation allowance has been recorded as management does not believe that it is more-likely-than-not that its deferred tax assets will be realized. Upon emergence, the Company has elected to be treated as a C corporation for federal and state income taxes. |
Related Parties (Notes) |
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Jun. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Parties | Related Parties One of the members of the Company’s Board, Kevin Asarnow, is also an Executive Director at RPA Advisors, LLC (“RPA”). RPA served as the financial advisor to the holders of allowed RBL Claims and allowed Secured Swap Claims during the Chapter 11 Cases. The Company incurred professional fees related to services provided by RPA of approximately $2.2 million for the six months ended June 30, 2019. We accrued professional services expense of $0.5 million for services rendered but not yet paid as of June 30, 2019. Until August 2018, Dean E. Swick, also a member of the Company’s Board and Audit Committee Chairman, was a Managing Director at Alvarez & Marsal North America, LLC (“A&M”) where he served as the Co-Leader of Energy Restructuring. Another Alvarez & Marsal entity (the “A&M entity”) provided services to the Company related to the analysis of executive compensation. The Company incurred professional fees related to services provided by the A&M entity of approximately $0.2 million for the six months ended June 30, 2019. There were no outstanding amounts owed to the A&M entity as of June 30, 2019. |
Summary of Significant Accounting Policies (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The condensed consolidated financial statements as of June 30, 2019 and December 31, 2018, and for the three and six months ended June 30, 2019 and 2018, respectively, include our accounts and those of our subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation. Prior to August 2018, we consolidated the Potato Hills Gas Gathering System as we had the ability to control the operating and financial decisions and policies of the entity through our 51% ownership and reflected the non-controlling interest as a separate element in our condensed consolidated financial statements. On August 1, 2018, we completed the sale of our 51% joint venture interest in Potato Hills Gas Gathering System, including the compression assets relating to the gathering system and our working interest in related oil and natural gas producing properties. For periods subsequent to filing the Bankruptcy Petitions, we have prepared our consolidated financial statements in accordance with Accounting Standards Codification 852, Reorganizations (“ASC 852”). ASC 852 requires that the financial statements distinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business. Accordingly, professional fees incurred in the Chapter 11 Cases have been recorded in a reorganization line item on the consolidated statements of operations. In addition, ASC 852 provides for changes in the accounting and presentation of significant items on the consolidated balance sheets, particularly liabilities. Prepetition obligations that are potentially impacted by the Chapter 11 reorganization process have been classified on the consolidated balance sheets in liabilities subject to compromise. These liabilities are reported at the amounts expected to be allowed by the Bankruptcy Court, even if they may be settled for lesser amounts. |
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Oil and Natural Gas Properties | Oil and Natural Gas Properties The successful efforts method of accounting is used to account for oil and natural gas properties. Under the successful efforts method, we capitalize the costs of acquiring unproved and proved oil and natural gas leasehold acreage. When proved reserves are found on an unproved property, the associated leasehold cost is transferred to proved properties. Significant unproved leases are reviewed periodically, and a valuation allowance is provided for any estimated decline in value. In determining whether an unproved property is impaired, the Company considers numerous factors including, but not limited to, current exploration and development plans, favorable or unfavorable exploration activity on the property being evaluated and/or adjacent properties, and the remaining months in the lease term for the property. Development costs are capitalized, including the costs of unsuccessful and successful development wells and the costs to drill and equip exploratory wells that find proved reserves. Exploration costs, including unsuccessful exploratory wells and geological and geophysical costs, are expensed as incurred. Depreciation, depletion and amortization Depreciation, depletion and amortization (“DD&A”) of the leasehold and development costs that are capitalized into proved oil and natural gas properties are computed using the units-of-production method, at the district level, based on total proved reserves and proved developed reserves, respectively. Upon sale or retirement of oil and natural gas properties, the costs and related accumulated DD&A are eliminated from the accounts and the resulting gain or loss is recognized. Impairment of Oil and Natural Gas Properties Proved oil and natural gas properties are assessed for impairment in accordance with ASC Topic 360, Property, Plant and Equipment, when events and circumstances indicate a decline in the recoverability of the carrying values of such properties, such as a negative revision of reserves estimates or sustained decrease in commodity prices, but at least annually. We estimate future cash flows expected in connection with the properties and compare such future cash flows to the carrying amount of the properties to determine if the carrying amount is recoverable. If the sum of the undiscounted pretax cash flows is less than the carrying amount, then the carrying amount is written down to its estimated fair value. Unproved properties are evaluated on a specific-asset basis or in groups of similar assets, as applicable. The Company performs periodic assessments of unproved oil and natural gas properties for impairment and recognizes a loss at the time of impairment. In determining whether an unproved property is impaired, the Company considers numerous factors including, but not limited to, current development and exploration drilling plans, favorable or unfavorable exploration activity on adjacent leaseholds, future reserve cash flows and the remaining lease term. |
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Income Taxes | Income Taxes Vanguard was a C corporation subject to federal and state income taxes. Grizzly has elected to be treated as a C corporation for federal and state income taxes. As a C corporation, we account for income taxes, as required, under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in net income or loss in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company incurred a net taxable loss in the current taxable period. Thus no current income taxes are anticipated to be paid and no net benefit will be recorded in the Company’s condensed consolidated financial statements due to the full valuation allowance on the tax assets. Our policy is to record interest and penalties relating to uncertain tax positions in income tax expense. At June 30, 2019, we did not have any accrued liability for uncertain tax positions and do not anticipate recognition of any significant liabilities for uncertain tax positions during the next 12 months. |
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New Pronouncements Recently Adopted | New Pronouncements Recently Adopted In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC Topic 842) (“ASU 2016-02”), which requires lessees to recognize at the commencement date for all leases, with the exception of short-term leases, (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 took effect for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The ASU requires adoption using a modified retrospective transition approach with either (a) periods prior to the adoption date being recast or (b) a cumulative-effect adjustment recognized to the opening balance of retained earnings on the adoption date with prior periods not recast. We adopted ASU No. 2016-02 as of January 1, 2019, using the targeted improvement transition option included in ASU No. 2018-11 - Leases (Topic 842). The targeted improvement approach allows us to apply the standard at the adoption date and recognize a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed us to carry forward the historical lease classification and not capitalize leases with terms of 12 months or less. In addition, it allowed us not to separate lease and non-lease components. We also elected the practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements. The adoption of ASU 2016-02 resulted in the recording of additional net lease assets and lease liabilities of approximately $17.5 million and $18.0 million, respectively, as of January 1, 2019, with the difference largely due to prepaid and deferred rent that were reclassified to the right-of-use (“ROU”) asset value. The standard did not require any adjustment to the opening balance of retained earnings and had no impact on cash flows. Please see Note 9, “Leases,” for further details. In June 2016, the FASB issued ASU 2016-13 - Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which provides financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To comply with this, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount. In May 2019, the FASB updated Topic 326 by issuing ASU 2019-05, Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief, which provides entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments-Credit Losses - Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. The amendments in these Updates will be applied using a modified-retrospective approach and, for public entities, are effective for fiscal years beginning after December 15, 2019 and interim periods within those annual periods. Management does not expect this update to have a material impact on the Company's financial statements. |
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Use of Estimates | Use of Estimates The preparation of financial statements in conformity with 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 pertain to proved oil, natural gas and NGLs reserves and related future cash flows, the fair value of derivative contracts, asset retirement obligations, accrued oil, natural gas and NGLs revenues and expenses, as well as estimates of expenses related to DD&A and accretion expense, income taxes, and share-based compensation. Actual results could differ from those estimates. |
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Revenue Recognition | Revenue from Contracts with Customers Sales of oil, natural gas and NGLs are recognized at the point control of the product is transferred to the customer and collectability is reasonably assured. Virtually all of our contracts’ pricing provisions are tied to a market index, with certain adjustments based on, among other factors, whether a well delivers to a gathering or transmission line, quality of the oil or natural gas, and prevailing supply and demand conditions. As a result, the price of the oil, natural gas, and NGLs fluctuates to remain competitive with other available oil, natural gas, and NGLs supplies. Natural gas and NGLs Sales Under most of our natural gas processing contracts, we deliver natural gas to a midstream processing entity at the wellhead or the inlet of the midstream processing entity’s system. The midstream processing entity gathers and processes the natural gas and remits proceeds to us for the resulting sales of NGLs and residue gas. In these scenarios, the Company evaluates whether we are the principal or the agent in the transaction. For those contracts where we have concluded we are the principal and the ultimate third party is our customer, we recognize revenue on a gross basis, with transportation, gathering, processing and compression fees presented as an expense in our condensed consolidated statement of operations. Alternatively, for those contracts where we have concluded the Company is the agent and the midstream processing entity is our customer, we recognize natural gas and NGLs revenues based on the net amount of the proceeds received from the midstream processing. In certain natural gas processing agreements, we may elect to take our residue gas and/or NGLs in-kind at the tailgate of the midstream entity’s processing plant and subsequently market the product. Through the marketing process, we deliver product to the ultimate third-party purchaser at a contractually agreed-upon delivery point and receive a specified index price from the purchaser. In this scenario, we recognize revenue when control transfers to the purchaser at the delivery point based on the index price received from the purchaser. The gathering, processing and compression fees attributable to the gas processing contract, as well as any transportation fees incurred to deliver the product to the purchaser, are presented as Transportation, gathering, processing and compression expense in our condensed consolidated statements of operations. Oil sales Our oil sales contracts are generally structured in one of the following ways:
Transaction price allocated to remaining performance obligations A significant number of our product sales are short-term in nature with a contract term of one year or less. For those contracts, we have utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less. For our product sales that have a contract term greater than one year, we have utilized the practical expedient in ASC 606-10-50-14(a) which states the Company is not required to disclose the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under these sales contracts, each unit of product generally represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required. Contract balances Under our product sales contracts, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our product sales contracts do not give rise to contract assets or liabilities under ASC Topic 606. Prior-period performance obligations We record revenue in the month production is delivered to the purchaser. However, settlement statements for certain natural gas and NGL sales may not be received for 30 to 90 days after the date production is delivered, and as a result, we are required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. We record the differences between our estimates and the actual amounts received for product sales in the month that payment is received from the purchaser. For the six months ended June 30, 2019, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material. |
Chapter 11 Proceedings (Tables) |
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Reorganizations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Liabilities Subject to compromise | The following table summarizes the components of liabilities subject to compromise included in our Consolidated Balance Sheets as of June 30, 2019:
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Schedule of Reorganization Items | The following table summarizes the components included in reorganization items on our consolidated statements of operations for the three and six months ended June 30, 2019 and 2018:
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Debt (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financing Arrangements | Our financing arrangements consisted of the following as of the date indicated (in thousands):
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Price Risk Management Activities (Tables) |
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Fair Value of Derivatives Outstanding | The following table summarizes the gross fair values of our derivative instruments, presenting the impact of offsetting the derivative assets and liabilities on our condensed consolidated balance sheets for the period indicated (in thousands):
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Schedule of Changes in Fair Value of Commodity and Interest Rate Derivatives | Changes in fair value of our commodity derivatives for the periods indicated are as follows (in thousands):
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Fair Value Measurements (Tables) |
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Schedule of Financial Assets and Financial Liabilities Measured at Fair Value on a Recurring Basis | Financial assets and financial liabilities measured at fair value on a recurring basis are summarized below (in thousands):
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Asset Retirement Obligations (Tables) |
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Schedule of Changes in Asset Retirement Obligations | The following provides a roll-forward of our asset retirement obligations (in thousands):
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Leases (Tables) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Supplemental cash flow and other information related to leases for the six months ended June 30, 2019 was as follows (in thousands):
The components of lease expense for the three and six months ended June 30, 2019 were as follows (in thousands):
Information regarding our lease terms and discount rates as of June 30, 2019 were as follows:
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Supplemental Balance Sheet Information | Supplemental balance sheet information related to leases as of June 30, 2019 was as follows:
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Finance Lease Maturity | The maturity of our lease liabilities as of June 30, 2019 were as follows (in thousands):
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Operating Lease Maturity | The maturity of our lease liabilities as of June 30, 2019 were as follows (in thousands):
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Commitments and Contingencies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Future Minimum Rental Payments for Operating Leases | Please see Note 9, “Leases,” for a detailed discussion of our current accounting for leases with the adoption of ASU 2016-02.
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Schedule of Future Minimum Transportation Demand Charges | The values in the table below represent gross future minimum transportation demand charges we are obligated to pay as of June 30, 2019. However, our financial statements will reflect our proportionate share of the charges based on our working interest and net revenue interest, which will vary from property to property.
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Share-Based Compensation (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Nonvested Restricted Stock Units Activity | The following table summarizes our time-based RSUs as of June 30, 2019:
|
General (Details) |
6 Months Ended |
---|---|
Jun. 30, 2019
operating_area
| |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Number of operating areas | 9 |
Summary of Significant Accounting Policies (Narrative) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Jan. 01, 2019 |
---|---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Lease assets | $ 13,661 | |
Lease liability | $ 14,319 | |
ASU 2016-02 | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Lease assets | $ 17,500 | |
Lease liability | $ 18,000 | |
Potato Hills Gas Gathering System | ||
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | ||
Ownership percentage | 51.00% |
Chapter 11 Proceedings (Creditors’ Committees - Appointment & Formation and Schedules and Statements - Claims & Claims Resolution Process) (Details) $ in Billions |
Aug. 14, 2019
USD ($)
claimant
claim
|
Apr. 11, 2019
member
|
---|---|---|
Subsequent Event [Line Items] | ||
Number of members on committee | member | 3 | |
Subsequent Event | ||
Subsequent Event [Line Items] | ||
Number claims filed | claim | 1,405 | |
Amount of claims filed | $ | $ 7.7 | |
Number of claimants | claimant | 1,206 |
Chapter 11 Proceedings (Plan Support Agreement) (Details) |
Jul. 03, 2019 |
May 08, 2019 |
---|---|---|
Revolving Credit Facility | ||
Subsequent Event [Line Items] | ||
Percentage of debt | 66.66% | |
Percentage of number of loans included | 50.10% | |
Line of Credit | Secured Swap Debt | ||
Subsequent Event [Line Items] | ||
Percentage of debt | 66.66% | |
Percentage of number of loans included | 50.10% | |
Term Loan | Term Loan | ||
Subsequent Event [Line Items] | ||
Percentage of debt | 66.66% | |
Percentage of number of loans included | 50.10% | |
Term Loan | Second Lien Notes | Subsequent Event | ||
Subsequent Event [Line Items] | ||
Percentage of debt | 66.66% |
Chapter 11 Proceedings (Debtor-in-Possession Financing) (Details) - Debtor-in-Possession Financing - USD ($) $ in Millions |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2019 |
Jul. 12, 2019 |
Apr. 04, 2019 |
|
Debt Instrument [Line Items] | |||
Commitment fee (percent) | 1.00% | ||
LIBOR | |||
Debt Instrument [Line Items] | |||
Applicable margin on variable rate (percent) | 5.50% | ||
Base Rate | |||
Debt Instrument [Line Items] | |||
Applicable margin on variable rate (percent) | 4.50% | ||
New Money Facility | |||
Debt Instrument [Line Items] | |||
Aggregate debt | $ 65.0 | ||
Amount drawn | $ 20.0 | ||
New Money Facility | Subsequent Event | |||
Debt Instrument [Line Items] | |||
Amount drawn | $ 5.0 | ||
Rollup Facility | |||
Debt Instrument [Line Items] | |||
Aggregate debt | $ 65.0 |
Chapter 11 Proceedings (Plan of Reorganization) (Details) - member |
Jul. 09, 2019 |
Jun. 30, 2019 |
---|---|---|
Class of Stock [Line Items] | ||
Number of members on board of managers | 5 | |
Subsequent Event | ||
Class of Stock [Line Items] | ||
Percent of face amount, unpaid claim | 2.00% | |
Term Loan B | Term Loan | Series C Preferred Units | Subsequent Event | ||
Class of Stock [Line Items] | ||
Percentage of pro-rata share | 75.00% | |
VNG Credit Facility | Line of Credit | Series C Preferred Units | Subsequent Event | ||
Class of Stock [Line Items] | ||
Percentage of pro-rata share | 10.00% | |
VNG Notes | Senior Notes | Common Class C | Subsequent Event | ||
Class of Stock [Line Items] | ||
Percentage of pro-rata share | 15.00% |
Chapter 11 Proceedings (Preferred and Common Units) (Details) |
Jun. 30, 2019
vote
$ / shares
|
---|---|
Class of Stock [Line Items] | |
Liquidation preference (USD per unit) | $ / shares | $ 10 |
Number of votes for each outstanding unit | vote | 1 |
Series A Preferred Stock | |
Class of Stock [Line Items] | |
Basis spread on variable rate | 9.50% |
Series B Preferred Stock | |
Class of Stock [Line Items] | |
Basis spread on variable rate | 10.50% |
Chapter 11 Proceedings (Acceleration of Debt) (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
Aug. 01, 2017 |
|
Interest expense | $ 11,600 | ||
VNG Revolving Loan | Line of Credit | |||
Debt amount outstanding | 677,718 | $ 682,145 | |
Term Loan | Term Loan | |||
Debt amount outstanding | $ 123,438 | $ 123,438 | $ 125,000 |
Chapter 11 Proceedings (Liabilities Subject to Compromise) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Reorganizations [Abstract] | ||
Accounts payable | $ 3,233 | |
Accrued liabilities | 308 | |
Undistributed oil and gas revenues | 13,782 | |
Derivative liabilities | 53,870 | |
Other liabilities | 5 | |
Debt and accrued interest | 894,407 | |
Liabilities subject to compromise | $ 965,605 | $ 0 |
Chapter 11 Proceedings (Interest Expense) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Reorganizations [Abstract] | ||
Interest Expense | $ 15.7 | $ 15.7 |
Chapter 11 Proceedings (Reorganization Items) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Reorganizations [Abstract] | ||||
Professional and legal fees | $ 24,743 | $ 610 | $ 36,820 | $ 2,317 |
Deferred financing costs and debt discount | 0 | 0 | 6,311 | 0 |
Total Reorganization items | 24,743 | $ 610 | 43,131 | $ 2,317 |
Accrued reorganization costs | 14,100 | 14,100 | ||
Total payments made for professional and legal fees related to Chapter 11 Cases | 22,700 | |||
Unamortized debt issuance costs and debt discounts | $ 6,300 | $ 6,300 |
Divestitures (Narrative) (Details) - USD ($) $ in Millions |
1 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Jun. 30, 2019 |
|
Business Combinations [Abstract] | ||
Proceeds from divestiture | $ 4.4 | |
Transaction costs | $ 0.2 |
Debt (Acceleration of Debt Obligations) (Details) $ in Millions |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019
USD ($)
|
Jun. 30, 2019
USD ($)
|
|
Debt Disclosure [Abstract] | ||
Debt issuance costs | $ 6.3 | |
Accrued liabilities | $ 12.5 | 12.5 |
Interest Expense | $ 15.7 | $ 15.7 |
Debt (VNG Credit Facility) (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
Aug. 01, 2017 |
---|---|---|---|
VNG Revolving Loan | |||
Debt Instrument [Line Items] | |||
Current borrowing capacity | $ 677,900 | $ 850,000 | |
Term Loan | Term Loan | |||
Debt Instrument [Line Items] | |||
Debt amount outstanding | $ 123,438 | $ 123,438 | $ 125,000 |
Debt (VNG Notes) (Details) - VNG Notes - Senior Notes $ in Millions |
Aug. 01, 2017
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
Debt amount outstanding | $ 80.7 |
Stated interest rate (percent) | 9.00% |
Debt (Exit Facility) (Details) - Subsequent Event - USD ($) |
Jul. 16, 2019 |
Jul. 15, 2019 |
---|---|---|
Line of Credit | Revolving Loans | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 65,000,000.0 | $ 65,000,000.0 |
Term Loan | Term Loan B | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 285,000,000.0 | $ 285,000,000.0 |
Price Risk Management Activities (Narrative) (Details) - USD ($) $ in Thousands |
Apr. 01, 2019 |
Dec. 31, 2018 |
---|---|---|
Derivative [Line Items] | ||
Gross Amounts of Recognized Assets | $ 22,361 | |
Commodity Contract | ||
Derivative [Line Items] | ||
Estimate of possible loss due to counterparty failure to perform, maximum | $ 53,900 | |
Gross Amounts of Recognized Assets | $ 22,361 |
Price Risk Management Activities (Change in Fair Value of Derivatives) (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Dec. 31, 2018 |
|
Fair Value, Net Derivative Asset (Liability), Reconciliation [Roll Forward] | |||
Derivative asset (liability) at beginning of period, net | $ 6,570 | $ (64,437) | $ (64,437) |
Net losses on commodity derivative contracts | (70,202) | (9,259) | |
Cash settlements paid on matured commodity derivative contracts | 9,762 | $ 27,139 | 80,266 |
Termination of commodity derivative contracts | 53,870 | 0 | |
Derivative asset at end of period, net | $ 0 | $ 6,570 |
Fair Value Measurements (Assets and Liabilities Measured at Fair Value on Recurring Basis) (Details) - Fair Value Measured on a Recurring Basis $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Derivative Asset [Abstract] | |
Commodity price derivative contracts | $ 13,053 |
Total derivative instruments | 13,053 |
Liabilities: | |
Commodity price derivative contracts | (6,483) |
Total derivative instruments | (6,483) |
Fair Value Measurements Using Level 2 | |
Derivative Asset [Abstract] | |
Commodity price derivative contracts | 13,053 |
Total derivative instruments | 13,053 |
Liabilities: | |
Commodity price derivative contracts | (6,483) |
Total derivative instruments | $ (6,483) |
Fair Value Measurements (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Impairment of oil and natural gas properties | $ 323,188 | $ 7,552 | $ 323,626 | $ 22,153 |
Properties Subject to Impairment Review | Fair Value Measurements Using Level 3 | ||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||||
Oil and natural gas properties, net cost basis | 546,200 | 89,100 | 546,200 | 89,100 |
Oil and natural gas properties, fair value | $ 222,600 | $ 66,900 | $ 222,600 | $ 66,900 |
Asset Retirement Obligations (Details) - USD ($) $ in Thousands |
6 Months Ended | 12 Months Ended |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Roll-forward of asset retirement obligations: | ||
Asset retirement obligation, beginning balance | $ 143,208 | $ 157,424 |
Liabilities added during the current period | 65 | 610 |
Accretion expense | 4,377 | 9,295 |
Liabilities related to assets divested | (294) | (16,687) |
Retirements | (1,563) | (2,499) |
Change in estimate | (22) | (4,935) |
Asset retirement obligation, ending balance | 145,771 | 143,208 |
Less: current obligations | (4,752) | |
Long-term asset retirement obligation | $ 141,019 | $ 139,433 |
Future inflation factor | 1.60% | 1.70% |
Minimum | ||
Roll-forward of asset retirement obligations: | ||
Credit-adjusted risk-free interest rate | 6.30% | 6.50% |
Maximum | ||
Roll-forward of asset retirement obligations: | ||
Credit-adjusted risk-free interest rate | 6.80% | 7.10% |
Leases (Lease Expense) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2019 |
|
Lessee, Lease, Description [Line Items] | ||
Short-term lease cost | $ 371 | $ 666 |
Operating lease cost | 670 | 1,521 |
Amortization of lease assets | 1,341 | 2,674 |
Interest on lease liabilities | 125 | 262 |
Net lease cost | $ 2,507 | $ 5,123 |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Renewal term | 1 year | |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Renewal term | 10 years |
Leases (Lease Terms and Discount Rates) (Details) |
Jun. 30, 2019 |
---|---|
Leases [Abstract] | |
Weighted-average remaining lease term, Operating leases | 5 years 9 months 27 days |
Weighted-average remaining lease term, Finance leases | 1 year 7 months 9 days |
Weighted-average discount rate, Operating leases | 18.50% |
Weighted-average discount rate, Finance leases | 5.70% |
Leases (Supplemental Balance Sheet Information) (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
---|---|
Leases [Abstract] | |
Operating lease assets | $ 5,699 |
Finance lease assets, at cost | 10,636 |
Accumulated amortization | (2,674) |
Finance lease assets, net | 7,962 |
Total lease assets | 13,661 |
Operating, current | 1,116 |
Finance, current | 5,183 |
Operating, long-term | 5,051 |
Finance, long-term | 2,969 |
Total lease liabilities | $ 14,319 |
Leases (Maturity) (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
---|---|
Operating Leases | |
2019 (remaining of year) | $ 1,221 |
2020 | 1,763 |
2021 | 1,557 |
2022 | 1,255 |
2023 | 1,247 |
Thereafter | 3,150 |
Total undiscounted lease liability | 10,193 |
Imputed interest | (4,026) |
Total discounted liability | 6,167 |
Finance Leases | |
2019 (remaining of year) | 2,755 |
2020 | 4,427 |
2021 | 1,347 |
2022 | 55 |
2023 | 0 |
Thereafter | 0 |
Total undiscounted lease liability | 8,584 |
Imputed interest | (432) |
Total discounted liability | 8,152 |
Total | |
2019 (remaining of year) | 3,976 |
2020 | 6,190 |
2021 | 2,904 |
2022 | 1,310 |
2023 | 1,247 |
Thereafter | 3,150 |
Total undiscounted lease liability | 18,777 |
Imputed interest | (4,458) |
Total discounted liability | $ 14,319 |
Leases (Supplemental Cash Flow) (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Leases [Abstract] | |||
Operating cash flows from operating leases | $ 1,870 | ||
Operating cash flows from finance leases | 262 | ||
Financing cash flows from finance leases | $ 2,484 | ||
Rent expense | $ 600 | $ 1,100 |
Commitments and Contingencies (Narrative) (Details) - USD ($) $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Dec. 31, 2018 |
|
Other Commitments [Line Items] | ||
Lease commitments | $ 9,236 | |
Remaining term of contracts | 1 year | |
Estimated commitments to third-party operators under joint operating agreements, due in the next 12 months | $ 9,600 | |
Pinedale Field Drilling And Green RIver Basin | ||
Other Commitments [Line Items] | ||
Estimated commitments to third-party operators under joint operating agreements, due in the next 12 months | 2,500 | |
Cotton Valley Gas Plant in Gulf Coast | ||
Other Commitments [Line Items] | ||
Estimated commitments to third-party operators under joint operating agreements, due in the next 12 months | $ 6,100 |
Commitments and Contingencies (Lease Commitments) (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
2019 | $ 1,211 |
2020 | 1,149 |
2021 | 1,169 |
2022 | 1,204 |
2023 | 1,241 |
Thereafter | 3,262 |
Total | $ 9,236 |
Commitments and Contingencies (Transportation Demand Charges) (Details) $ in Thousands |
Jun. 30, 2019
USD ($)
|
---|---|
Gross future minimum transportation demand | |
July 1, 2019 - December 31, 2019 | $ 410 |
Due 2020 | 410 |
Total | $ 820 |
Stockholders’ Equity (Deficit) (Earning Per Share) (Details) - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Restricted Stock Units (RSUs) | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (shares) | 301,065 | 143,181 |
Warrant | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of earnings per share (shares) | 1,300,000 | 1,300,000 |
Share-Based Compensation (MIP Restricted Stock) (Details) - Restricted Stock Units (RSUs) |
6 Months Ended |
---|---|
Jun. 30, 2019
$ / shares
shares
| |
Time-Based Restricted Stock Units | |
Non-vested units at beginning of period (in units) | shares | 244,496 |
Vested (in units) | shares | (1,473) |
Non-vested units at end of period (in units) | shares | 243,023 |
Weighted Average Grant Date Fair Value | |
Non-vested units at beginning of period (in dollars per unit) | $ / shares | $ 16.62 |
Vested (in dollars per unit) | $ / shares | 11.99 |
Non-vested units at end of period (in dollars per unit) | $ / shares | $ 16.65 |
Share-Based Compensation (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Non-cash compensation | $ 0.6 | $ 0.6 | $ 1.2 | $ 1.1 |
Restricted Stock Units (RSUs) | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Unrecognized compensation cost | 2.7 | $ 2.7 | ||
Unrecognized compensation cost recognition period (in years) | 1 year 6 months | |||
TSR Performance RSU Replacement Awards | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Unrecognized compensation cost | $ 0.8 | $ 0.8 | ||
Unrecognized compensation cost recognition period (in years) | 1 year 6 months |
Related Parties (Details) - Professional fees $ in Millions |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
RPA | |
Related Party Transaction [Line Items] | |
Professional fees | $ 2.2 |
Accrued professional services expense | 0.5 |
A&M Entity | |
Related Party Transaction [Line Items] | |
Professional fees | $ 0.2 |
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