ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
COLORADO | 20-2835920 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1625 Broadway, Suite 300, Denver, CO | 80202 |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer ý | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Page | |||
Part I - FINANCIAL INFORMATION | |||
Item 1. | Financial Statements (unaudited) | ||
Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015 | |||
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015 | |||
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 | |||
Notes to Condensed Consolidated Financial Statements | |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | ||
Item 4. | Controls and Procedures | ||
Part II - OTHER INFORMATION | |||
Item 1. | Legal Proceedings | ||
Item 1A. | Risk Factors | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||
Item 3. | Defaults of Senior Securities | ||
Item 4. | Mine Safety Disclosures | ||
Item 5. | Other Information | ||
Item 6. | Exhibits | ||
SIGNATURES |
ASSETS | September 30, 2016 | December 31, 2015 | |||||
Current assets: | |||||||
Cash and cash equivalents | $ | 63,757 | $ | 66,499 | |||
Accounts receivable: | |||||||
Oil and gas sales | 11,925 | 12,527 | |||||
Trade | 8,738 | 12,156 | |||||
Commodity derivative assets | 1,610 | 6,572 | |||||
Escrow deposit | 18,244 | — | |||||
Other current assets | 2,612 | 1,944 | |||||
Total current assets | 106,886 | 99,698 | |||||
Property and equipment: | |||||||
Oil and gas properties, full cost method: | |||||||
Unproved properties and land, not subject to depletion | 458,802 | 103,423 | |||||
Proved properties, net of accumulated depletion | 382,180 | 422,778 | |||||
Oil and gas properties, net | 840,982 | 526,201 | |||||
Other property and equipment, net | 1,626 | 646 | |||||
Total property and equipment, net | 842,608 | 526,847 | |||||
Commodity derivative assets | 22 | 2,996 | |||||
Goodwill | 40,711 | 40,711 | |||||
Other assets | 2,392 | 2,364 | |||||
Total assets | $ | 992,619 | $ | 672,616 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 42,415 | $ | 36,573 | |||
Revenue payable | 13,614 | 13,603 | |||||
Production taxes payable | 14,177 | 24,530 | |||||
Asset retirement obligations | 2,319 | — | |||||
Total current liabilities | 72,525 | 74,706 | |||||
Revolving credit facility | — | 78,000 | |||||
Notes payable, net of issuance costs | 75,424 | — | |||||
Commodity derivative liabilities | 80 | — | |||||
Asset retirement obligations | 11,529 | 13,400 | |||||
Total liabilities | 159,558 | 166,106 | |||||
Commitments and contingencies (See Note 16) | |||||||
Shareholders' equity: | |||||||
Preferred stock - $0.01 par value, 10,000,000 shares authorized: no shares issued and outstanding | — | — | |||||
Common stock - $0.001 par value, 300,000,000 shares authorized: 200,537,625 and 110,033,601 shares issued and outstanding, respectively | 201 | 110 | |||||
Additional paid-in capital | 1,146,621 | 595,671 | |||||
Retained deficit | (313,761 | ) | (89,271 | ) | |||
Total shareholders' equity | 833,061 | 506,510 | |||||
Total liabilities and shareholders' equity | $ | 992,619 | $ | 672,616 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Oil and gas revenues | $ | 26,234 | $ | 33,378 | $ | 68,454 | $ | 80,602 | |||||||
Expenses: | |||||||||||||||
Lease operating expenses | 3,819 | 5,078 | 14,963 | 12,944 | |||||||||||
Production taxes | (1,461 | ) | 3,099 | 2,509 | 7,485 | ||||||||||
Depreciation, depletion, and accretion | 9,635 | 18,417 | 33,001 | 48,231 | |||||||||||
Full cost ceiling impairment | 25,453 | 96,340 | 215,223 | 99,340 | |||||||||||
Transportation commitment charge | 205 | — | 505 | — | |||||||||||
General and administrative | 8,236 | 5,432 | 23,199 | 15,755 | |||||||||||
Total expenses | 45,887 | 128,366 | 289,400 | 183,755 | |||||||||||
Operating loss | (19,653 | ) | (94,988 | ) | (220,946 | ) | (103,153 | ) | |||||||
Other income (expense): | |||||||||||||||
Commodity derivatives gain (loss) | 407 | 6,619 | (3,617 | ) | 5,697 | ||||||||||
Interest expense, net | — | (87 | ) | — | (247 | ) | |||||||||
Interest income | 10 | 15 | 179 | 69 | |||||||||||
Total other income (expense) | 417 | 6,547 | (3,438 | ) | 5,519 | ||||||||||
Loss before income taxes | (19,236 | ) | (88,441 | ) | (224,384 | ) | (97,634 | ) | |||||||
Income tax expense (benefit) | 5 | (10,520 | ) | 106 | (14,132 | ) | |||||||||
Net loss | $ | (19,241 | ) | $ | (77,921 | ) | $ | (224,490 | ) | $ | (83,502 | ) | |||
Net loss per common share: | |||||||||||||||
Basic | $ | (0.10 | ) | $ | (0.74 | ) | $ | (1.36 | ) | $ | (0.82 | ) | |||
Diluted | $ | (0.10 | ) | $ | (0.74 | ) | $ | (1.36 | ) | $ | (0.82 | ) | |||
Weighted-average shares outstanding: | |||||||||||||||
Basic | 200,515,555 | 105,100,849 | 164,771,544 | 102,329,504 | |||||||||||
Diluted | 200,515,555 | 105,100,849 | 164,771,544 | 102,329,504 |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (224,490 | ) | $ | (83,502 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | |||||||
Depletion, depreciation, and accretion | 33,001 | 48,231 | |||||
Full cost ceiling impairment | 215,223 | 99,340 | |||||
Provision for deferred taxes | — | (38,097 | ) | ||||
Stock-based compensation | 7,285 | 7,688 | |||||
Mark-to-market of commodity derivative contracts: | |||||||
Total loss (gain) on commodity derivatives contracts | 3,617 | (5,697 | ) | ||||
Cash settlements on commodity derivative contracts | 5,137 | 28,343 | |||||
Cash premiums paid for commodity derivative contracts | — | (4,562 | ) | ||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | |||||||
Oil and gas sales | 602 | 8,678 | |||||
Trade | 2,679 | 12,686 | |||||
Accounts payable and accrued expenses | 1,761 | 663 | |||||
Revenue payable | (363 | ) | (5,886 | ) | |||
Production taxes payable | (10,158 | ) | 2,695 | ||||
Other | (1,101 | ) | (827 | ) | |||
Net cash provided by operating activities | 33,193 | 69,753 | |||||
Cash flows from investing activities: | |||||||
Acquisition of oil and gas properties | (499,831 | ) | — | ||||
Well costs and other capital expenditures | (82,318 | ) | (110,224 | ) | |||
Earnest money deposit | (18,244 | ) | (5,850 | ) | |||
Proceeds from sales of oil and gas properties | 24,223 | 6,239 | |||||
Net cash used in investing activities | (576,170 | ) | (109,835 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from sale of stock | 565,398 | 200,100 | |||||
Offering costs | (21,987 | ) | (9,255 | ) | |||
Shares withheld for payment of employee payroll taxes | (510 | ) | (621 | ) | |||
Proceeds from revolving credit facility | 55,000 | — | |||||
Principal repayments on revolving credit facility | (133,000 | ) | (68,000 | ) | |||
Financing fees on revolving credit facility | (269 | ) | — | ||||
Proceeds from issuance of notes payable | 80,000 | — | |||||
Financing fees on issuance of notes payable | (4,397 | ) | — | ||||
Net cash provided by financing activities | 540,235 | 122,224 | |||||
Net increase (decrease) in cash and equivalents | (2,742 | ) | 82,142 | ||||
Cash and equivalents at beginning of period | 66,499 | 39,570 | |||||
Cash and equivalents at end of period | $ | 63,757 | $ | 121,712 |
1. | Organization and Summary of Significant Accounting Policies |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||
Major Customers | 2016 | 2015 | 2016 | 2015 | ||||
Company A | 27% | * | 38% | * | ||||
Company B | 20% | 14% | 20% | 11% | ||||
Company C | 12% | * | * | * | ||||
Company D | 10% | * | 11% | * | ||||
Company E | * | 72% | * | 65% | ||||
Company F | * | * | * | 12% |
As of | As of | |||
Major Customers | September 30, 2016 | December 31, 2015 | ||
Company A | 24% | * | ||
Company B | 17% | * | ||
Company C | 15% | 13% | ||
Company D | * | 13% | ||
Company E | * | 13% |
2. | Property and Equipment |
As of | As of | ||||||
September 30, 2016 | December 31, 2015 | ||||||
Oil and gas properties, full cost method: | |||||||
Costs of unproved properties and land, not subject to depletion: | |||||||
Lease acquisition, land, and other costs | $ | 401,103 | $ | 93,600 | |||
Wells in progress | 57,699 | 9,823 | |||||
Subtotal, unproved properties | 458,802 | 103,423 | |||||
Costs of proved properties: | |||||||
Producing and non-producing | 900,958 | 691,659 | |||||
Wells in progress | 12,594 | 11,487 | |||||
Less, accumulated depletion and full cost ceiling impairments | (531,372 | ) | (280,368 | ) | |||
Subtotal, proved properties, net | 382,180 | 422,778 | |||||
Costs of other property and equipment: | |||||||
Other property and equipment | 2,188 | 1,270 | |||||
Less, accumulated depreciation | (562 | ) | (624 | ) | |||
Subtotal, other property and equipment, net | 1,626 | 646 | |||||
Total property and equipment, net | $ | 842,608 | $ | 526,847 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Capitalized overhead | $ | 1,757 | $ | 589 | $ | 4,745 | $ | 1,640 |
3. | Acquisitions and Divestitures |
Preliminary Purchase Price | June 14, 2016 | ||
Consideration given: | |||
Cash | $ | 486,261 | |
Net liabilities assumed, including asset retirement obligations | 1,120 | ||
Total consideration given | $ | 487,381 | |
Preliminary Allocation of Purchase Price | |||
Proved oil and gas properties (1) | $ | 133,870 | |
Unproved oil and gas properties | 353,511 | ||
Total fair value of assets acquired | $ | 487,381 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
(in thousands) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Oil and gas revenues | $ | 26,234 | $ | 36,481 | $ | 71,940 | $ | 89,998 | |||||||
Net loss | $ | (19,241 | ) | $ | (79,471 | ) | $ | (227,479 | ) | $ | (87,104 | ) | |||
Net loss per common share | |||||||||||||||
Basic | $ | (0.10 | ) | $ | (0.44 | ) | $ | (1.14 | ) | $ | (0.49 | ) | |||
Diluted | $ | (0.10 | ) | $ | (0.44 | ) | $ | (1.14 | ) | $ | (0.49 | ) |
Purchase Price | October 20, 2015 | ||
Consideration given: | |||
Cash | $ | 35,045 | |
Synergy Resources Corp. common stock (1) | 49,840 | ||
Net liabilities assumed, including asset retirement obligations | 284 | ||
Total consideration given | $ | 85,169 | |
Allocation of Purchase Price | |||
Proved oil and gas properties (2) | $ | 46,333 | |
Unproved oil and gas properties | 37,766 | ||
Other assets, including accounts receivable | 1,070 | ||
Total fair value of assets acquired | $ | 85,169 |
(in thousands) | Three Months Ended September 30, 2015 | Nine Months Ended September 30, 2015 | |||||
Oil and gas revenues | $ | 35,785 | $ | 90,676 | |||
Net loss | $ | (77,556 | ) | $ | (82,923 | ) | |
Net loss per common share | |||||||
Basic | $ | (0.71 | ) | $ | (0.78 | ) | |
Diluted | $ | (0.71 | ) | $ | (0.78 | ) |
4. | Depletion, depreciation, and accretion ("DD&A") |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Depletion of oil and gas properties | $ | 9,273 | $ | 18,148 | $ | 31,981 | $ | 47,562 | |||||||
Depreciation and accretion | 362 | 269 | 1,020 | 669 | |||||||||||
Total DD&A Expense | $ | 9,635 | $ | 18,417 | $ | 33,001 | $ | 48,231 |
5. | Asset Retirement Obligations |
Asset retirement obligations, December 31, 2015 | $ | 13,400 | |
Obligations incurred with development activities | 366 | ||
Obligations assumed with acquisitions | 2,046 | ||
Accretion expense | 755 | ||
Obligations discharged with asset retirements and divestitures | (3,997 | ) | |
Revisions in previous estimates | 1,278 | ||
Asset retirement obligations, September 30, 2016 | $ | 13,848 | |
Less, current portion | (2,319 | ) | |
Long-term portion | $ | 11,529 |
6. | Revolving Credit Facility |
7. | Notes Payable |
8. | Commodity Derivative Instruments |
Settlement Period | Derivative Instrument | Average Volumes (Bbls per month) | Floor Price | Ceiling Price | |||||||||
Crude Oil - NYMEX WTI | |||||||||||||
Oct 1, 2016 - Dec 31, 2016 | Purchased Put | 25,000 | $ | 50.00 | — | ||||||||
Oct 1, 2016 - Dec 31, 2016 | Purchased Put | 10,000 | $ | 45.00 | — | ||||||||
Oct 1, 2016 - Dec 31, 2016 | Collar | 20,000 | $ | 45.00 | $ | 65.00 | |||||||
Oct 1, 2016 - Dec 31, 2016 | Collar | 30,667 | $ | 40.00 | $ | 60.00 | |||||||
Jan 1, 2017 - Apr 30, 2017 | Purchased Put | 20,000 | $ | 50.00 | — | ||||||||
May 1, 2017 - Aug 31, 2017 | Purchased Put | 20,000 | $ | 55.00 | — | ||||||||
Jan 1, 2017 - Dec 31, 2017 | Collar | 20,000 | $ | 45.00 | $ | 70.00 | |||||||
Jan 1, 2017 - Dec 31, 2017 | Collar | 30,417 | $ | 40.00 | $ | 60.00 | |||||||
Settlement Period | Derivative Instrument | Average Volumes (MMBtu per month) | Floor Price | Ceiling Price | |||||||||
Natural Gas - CIG Rocky Mountain | |||||||||||||
Oct 1, 2016 - Dec 31, 2016 | Collar | 100,000 | $ | 2.65 | $ | 3.10 | |||||||
Jan 1, 2017 - Apr 30, 2017 | Collar | 100,000 | $ | 2.80 | $ | 3.95 | |||||||
May 1 2017 - Aug 31, 2017 | Collar | 110,000 | $ | 2.50 | $ | 3.06 | |||||||
Jan 1, 2017 - Dec 31, 2017 | Collar | 200,000 | $ | 2.50 | $ | 3.27 | |||||||
Jan 1, 2017 - Dec 31, 2017 | Collar | 100,000 | $ | 2.60 | $ | 3.20 |
Settlement Period | Derivative Instrument | Average Volumes (MMBtu per month) | Floor Price | Ceiling Price | |||||||||
Crude Oil - NYMEX WTI | |||||||||||||
Jan 1, 2017 - Dec 31, 2017 | Collar | 30,417 | $ | 40.00 | $ | 65.00 | |||||||
Natural Gas - NYMEX Henry Hub | |||||||||||||
Jan 1, 2017 - Dec 31, 2017 | Collar | 100,000 | $ | 2.75 | $ | 4.00 |
As of September 30, 2016 | ||||||||||||||
Underlying | Balance Sheet Location | Gross Amounts of Recognized Assets and Liabilities | Gross Amounts Offset in the Balance Sheet | Net Amounts of Assets and Liabilities Presented in the Balance Sheet | ||||||||||
Commodity derivative contracts | Current assets | $ | 2,943 | $ | (1,333 | ) | $ | 1,610 | ||||||
Commodity derivative contracts | Noncurrent assets | $ | 627 | $ | (605 | ) | $ | 22 | ||||||
Commodity derivative contracts | Current liabilities | $ | 1,333 | $ | (1,333 | ) | $ | — | ||||||
Commodity derivative contracts | Noncurrent liabilities | $ | 685 | $ | (605 | ) | $ | 80 |
As of December 31, 2015 | ||||||||||||||
Underlying | Balance Sheet Location | Gross Amounts of Recognized Assets and Liabilities | Gross Amounts Offset in the Balance Sheet | Net Amounts of Assets and Liabilities Presented in the Balance Sheet | ||||||||||
Commodity derivative contracts | Current assets | $ | 6,719 | $ | (147 | ) | $ | 6,572 | ||||||
Commodity derivative contracts | Noncurrent assets | $ | 3,354 | $ | (358 | ) | $ | 2,996 | ||||||
Commodity derivative contracts | Current liabilities | $ | 147 | $ | (147 | ) | $ | — | ||||||
Commodity derivative contracts | Noncurrent liabilities | $ | 358 | $ | (358 | ) | $ | — |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Realized gain (loss) on commodity derivatives | $ | (13 | ) | $ | 9,579 | $ | 2,868 | $ | 26,896 | ||||||
Unrealized gain (loss) on commodity derivatives | 420 | (2,960 | ) | (6,485 | ) | (21,199 | ) | ||||||||
Total gain (loss) | $ | 407 | $ | 6,619 | $ | (3,617 | ) | $ | 5,697 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Monthly settlement | $ | 497 | $ | 986 | $ | 4,398 | $ | 7,834 | |||||||
Previously incurred premiums attributable to settled commodity contracts | (510 | ) | (599 | ) | (1,530 | ) | (1,447 | ) | |||||||
Early liquidation | — | 9,192 | — | 20,509 | |||||||||||
Total realized gain (loss) | $ | (13 | ) | $ | 9,579 | $ | 2,868 | $ | 26,896 |
9. | Fair Value Measurements |
• | Level 1: Quoted prices available in active markets for identical assets or liabilities; |
• | Level 2: Quoted prices in active markets for similar assets and liabilities that are observable for the asset or liability; and |
• | Level 3: Unobservable pricing inputs that are generally less observable from objective sources, such as discounted cash or valuation models. |
Fair Value Measurements at September 30, 2016 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets and liabilities: | |||||||||||||||
Commodity derivative asset | $ | — | $ | 1,632 | $ | — | $ | 1,632 | |||||||
Commodity derivative liability | $ | — | $ | 80 | $ | — | $ | 80 |
Fair Value Measurements at December 31, 2015 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial assets and liabilities: | |||||||||||||||
Commodity derivative asset | $ | — | $ | 9,568 | $ | — | $ | 9,568 | |||||||
Commodity derivative liability | $ | — | $ | — | $ | — | $ | — |
10. | Interest Expense |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revolving bank credit facility | $ | — | $ | 529 | $ | 154 | $ | 2,260 | |||||||
Notes payable | 1,800 | — | 2,120 | — | |||||||||||
Amortization of issuance costs | 467 | 249 | 1,076 | 740 | |||||||||||
Less, interest capitalized | (2,267 | ) | (691 | ) | (3,350 | ) | (2,753 | ) | |||||||
Interest expense, net | $ | — | $ | 87 | $ | — | $ | 247 |
11. | Shareholders’ Equity |
As of | As of | ||||||
September 30, 2016 | December 31, 2015 | ||||||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 | |||||
Preferred stock, par value | $ | 0.01 | $ | 0.01 | |||
Preferred stock, shares issued and outstanding | nil | nil | |||||
Common stock, shares authorized | 300,000,000 | 300,000,000 | |||||
Common stock, par value | $ | 0.001 | $ | 0.001 | |||
Common stock, shares issued and outstanding | 200,537,625 | 110,033,601 |
12. | Weighted-Average Shares Outstanding |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||
Potentially dilutive common shares from: | |||||||||||
Stock options | 5,903,500 | 4,476,500 | 5,903,500 | 4,476,500 | |||||||
Performance stock units 1 | 478,510 | — | 478,510 | — | |||||||
Restricted stock units and stock bonus shares | 1,003,879 | 714,000 | 1,003,879 | 714,000 | |||||||
Total | 7,385,889 | 5,190,500 | 7,385,889 | 5,190,500 |
13. | Stock-Based Compensation |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Stock options | $ | 1,274 | $ | 1,110 | $ | 4,107 | $ | 4,400 | |||||||
Performance stock units | 354 | — | 692 | — | |||||||||||
Restricted stock units and stock bonus shares | 1,023 | 739 | 3,341 | 3,288 | |||||||||||
Total stock-based compensation | $ | 2,651 | $ | 1,849 | $ | 8,140 | $ | 7,688 | |||||||
Less: stock-based compensation capitalized | (278 | ) | (81 | ) | (856 | ) | (503 | ) | |||||||
Total stock-based compensation expensed | $ | 2,373 | $ | 1,768 | $ | 7,284 | $ | 7,185 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Number of options to purchase common shares | 350,000 | 450,000 | 944,500 | 2,482,500 | |||||||||||
Weighted-average exercise price | $ | 6.55 | $ | 10.31 | $ | 7.20 | $ | 11.33 | |||||||
Term (in years) | 10 years | 10 years | 10 years | 10 years | |||||||||||
Vesting Period (in years) | 5 years | 3 - 5 years | 3 - 5 years | 1 - 5 years | |||||||||||
Fair Value (in thousands) | $ | 1,253 | $ | 2,377 | $ | 3,381 | $ | 13,692 |
Nine Months Ended September 30, | |||||
2016 | 2015 | ||||
Expected term | 6.4 years | 6.5 years | |||
Expected volatility | 55 | % | 48 | % | |
Risk free rate | 1.25 - 1.75% | 1.35 - 2.02% | |||
Expected dividend yield | — | % | — | % |
Number of Shares | Weighted-Average Exercise Price | Weighted-Average Remaining Contractual Life | Aggregate Intrinsic Value (thousands) | |||||||||
Outstanding, December 31, 2015 | 5,056,000 | $ | 9.71 | 8.7 years | $ | 4,351 | ||||||
Granted | 944,500 | 7.20 | ||||||||||
Exercised | — | — | — | |||||||||
Expired | — | — | ||||||||||
Forfeited | (97,000 | ) | 10.50 | |||||||||
Outstanding, September 30, 2016 | 5,903,500 | $ | 9.29 | 8.2 years | $ | 2,763 | ||||||
Outstanding, Exercisable at September 30, 2016 | 2,223,950 | $ | 8.20 | 7.1 years | $ | 2,194 | ||||||
Outstanding, Vested and expected to vest at September 30, 2016 | 5,829,108 | $ | 9.27 | 8.2 years | $ | 2,763 |
Outstanding Options | Exercisable Options | ||||||||||||
Range of Exercise Prices | Options | Weighted-Average Remaining Contractual Life | Weighted-Average Exercise Price per Share | Options | Weighted-Average Exercise Price per Share | ||||||||
Under $5.00 | 650,000 | 5.0 years | $ | 3.51 | 583,000 | $ | 3.47 | ||||||
$5.00 - $6.99 | 965,000 | 8.1 years | 6.37 | 430,000 | 6.51 | ||||||||
$7.00 - $10.99 | 1,546,500 | 8.7 years | 9.43 | 334,450 | 9.63 | ||||||||
$11.00 - $13.46 | 2,742,000 | 8.7 years | 11.61 | 876,500 | 11.63 | ||||||||
Total | 5,903,500 | 8.2 years | $ | 9.29 | 2,223,950 | $ | 8.20 |
Unrecognized compensation, net of estimated forfeitures (in thousands) | $ | 16,100 | |
Remaining vesting phase | 3.4 years |
Number of Shares | Weighted-Average Grant-Date Fair Value | |||||
Not vested, December 31, 2015 | 915,867 | $ | 10.63 | |||
Granted | 451,347 | 7.68 | ||||
Vested | (305,598 | ) | 10.12 | |||
Forfeited | (57,737 | ) | 9.06 | |||
Not vested, September 30, 2016 | 1,003,879 | $ | 9.55 |
Unrecognized compensation, net of estimated forfeitures (in thousands) | $ | 7,575 | |
Remaining vesting phase | 2.9 years |
Nine Months Ended September 30, 2016 | ||
Weighted average expected term | 2.7 years | |
Weighted average expected volatility | 58 | % |
Weighted average risk free rate | 0.87 | % |
Number of Units1 | Weighted-Average Grant-Date Fair Value | |||||
Not vested, December 31, 2015 | — | $ | — | |||
Granted | 490,713 | 8.10 | ||||
Vested | — | — | ||||
Forfeited | (12,203 | ) | 8.22 | |||
Not vested, September 30, 2016 | 478,510 | $ | 8.09 |
14. | Income Taxes |
15. | Related Party Transactions |
16. | Other Commitments and Contingencies |
Year ending December 31, | |||
(in MBbls/year) | |||
Remainder of 2016 | 704 | ||
2017 | 3,944 | ||
2018 | 4,255 | ||
2019 | 4,255 | ||
2020 | 3,700 | ||
Thereafter | 1,672 | ||
Total | 18,530 |
17. | Supplemental Schedule of Information to the Condensed Consolidated Statements of Cash Flows |
Nine Months Ended September 30, | |||||||
Supplemental cash flow information: | 2016 | 2015 | |||||
Interest paid | $ | 159 | $ | 2,328 | |||
Income taxes paid | 106 | 92 | |||||
Non-cash investing and financing activities: | |||||||
Accrued well costs as of period end | $ | 32,299 | $ | 26,997 | |||
Assets acquired in exchange for common stock | — | 9,097 | |||||
Asset retirement obligations incurred with development activities | 366 | 4,806 | |||||
Asset retirement obligations assumed with acquisitions | 2,046 | — | |||||
Obligations discharged with asset retirements and divestitures | (3,997 | ) | — |
18. | Subsequent Event |
ITEM 2. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Four Months Ended December 31, | Year Ended August 31, | ||||||||||||||||||||||
2015 | 2015 | 2014 | 2013 | 2012 | 2011 | ||||||||||||||||||
Average NYMEX prices | |||||||||||||||||||||||
Oil (per Bbl) | $ | 42.82 | $ | 60.65 | $ | 100.39 | $ | 94.58 | $ | 94.88 | $ | 91.79 | |||||||||||
Natural gas (per Mcf) | $ | 2.26 | $ | 3.12 | $ | 4.38 | $ | 3.55 | $ | 2.82 | $ | 4.12 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Oil (NYMEX WTI) | |||||||||||||||
Average NYMEX Price | $ | 44.90 | $ | 46.42 | $ | 41.23 | $ | 51.00 | |||||||
Realized Price | $ | 35.67 | $ | 39.05 | $ | 31.47 | $ | 42.16 | |||||||
Differential | $ | (9.23 | ) | $ | (7.37 | ) | $ | (9.76 | ) | $ | (8.84 | ) | |||
Gas (NYMEX Henry Hub) | |||||||||||||||
Average NYMEX Price | $ | 2.88 | $ | 2.74 | $ | 2.34 | $ | 2.73 | |||||||
Realized Price | $ | 2.73 | $ | 2.59 | $ | 2.18 | $ | 2.84 | |||||||
Differential | $ | (0.15 | ) | $ | (0.15 | ) | $ | (0.16 | ) | $ | 0.11 |
Vertical Wells | ||||||||||||||||
Operated Wells | Non-Operated Wells | Totals | ||||||||||||||
Gross | Net | Gross | Net | Gross | Net | |||||||||||
226 | 193 | 164 | 46 | 390 | 239 |
Horizontal Wells | ||||||||||||||||
Operated Wells | Non-Operated Wells | Totals | ||||||||||||||
Gross | Net | Gross | Net | Gross | Net | |||||||||||
96 | 91 | 149 | 45 | 245 | 136 |
• | Concentrate on our existing core area in and around the D-J Basin, where we have significant operating experience. All of our current wells and our undeveloped acreage is located either in or adjacent to the Wattenberg Field. Focusing our operations in this area leverages our management, technical and operational experience in the basin. |
• | Develop and exploit existing oil and natural gas properties. Since inception, our principal growth strategy has been to develop and exploit our properties to add reserves. In the Wattenberg Field, we target three benches of the Niobrara formation as well as the Codell formation for horizontal drilling and production. We believe horizontal drilling is the most efficient way to recover the potential hydrocarbons and consider the Wattenberg Field to be relatively low-risk because information gained from the large number of existing wells can be applied to potential future wells. There is enough similarity between wells in the Wattenberg Field that the exploitation process is generally repeatable. |
• | Improve hydrocarbon recovery through increased well density. We utilize what we believe to be industry best practices in our effort to determine the optimal recovery area for each well. Early horizontal well development in the Wattenberg Field generally assumed optimal recoveries would be obtained utilizing between 12 and 16 wells per 640-acre section. As horizontal well development has matured, well density assumptions have generally increased beyond 16 wells per section depending on the specific area of the field being drilled. |
• | Complete selective acquisitions. We seek to acquire developed and undeveloped oil and gas properties, primarily in the Wattenberg Field. We generally seek acquisitions that will provide us with opportunities for reserve additions and increased cash flow through production enhancement and additional development and exploratory prospect generation. |
• | Retain control over the operation of a substantial portion of our production. As operator of a majority of our wells and undeveloped acreage, we control the timing and selection of new wells to be drilled or existing wells to be re-completed. This allows us to modify our capital spending as our financial resources and underlying lease terms allow and market conditions permit. |
• | Maintain financial flexibility while focusing on operational cost control. We strive to be a cost-efficient operator and to maintain a relatively low utilization of debt, which enhances our financial flexibility. Our high degree of operational control, as well as our focus on operating efficiencies and short return on investment cycle times, is central to our operating strategy. |
• | Use the latest technology to maximize returns. Our development objective for individual well execution optimization is to drill and complete wells with lateral lengths of 7,000' to 10,000' as opposed to the 4,000' laterals that were initially drilled in the Wattenberg Field. Utilizing petrophysical and seismic data, a 3-D model is developed for each section to assist in determining optimal wellbore placement, well spacing, and stimulation design. This process is augmented with formation specific drilling and completion execution designs and coupled with localized production results to provide a continuous improvement philosophy in optimizing the value per acre of our leasehold throughout our development program. |
Three Months Ended September 30, | Percentage | |||||||||
2016 | 2015 | Change | ||||||||
Production: | ||||||||||
Oil (MBbls 1) | 517 | 692 | (25 | )% | ||||||
Gas (MMcf 2) | 2,855 | 2,458 | 16 | % | ||||||
MBOE 3 | 993 | 1,102 | (10 | )% | ||||||
BOED 4 | 10,794 | 11,975 | (10 | )% | ||||||
Revenues (in thousands): | ||||||||||
Oil | $ | 18,451 | $ | 27,025 | (32 | )% | ||||
Gas | 7,783 | 6,353 | 23 | % | ||||||
$ | 26,234 | $ | 33,378 | (21 | )% | |||||
Average sales price: | ||||||||||
Oil | $ | 35.67 | $ | 39.05 | (9 | )% | ||||
Gas | $ | 2.73 | $ | 2.59 | 5 | % | ||||
BOE | $ | 26.42 | $ | 30.30 | (13 | )% |
Three Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Production costs | $ | 3,529 | $ | 4,385 | |||
Workover | 290 | 693 | |||||
Total LOE | $ | 3,819 | $ | 5,078 | |||
Per BOE: | |||||||
Production costs | $ | 3.55 | $ | 3.98 | |||
Workover | 0.29 | 0.63 | |||||
Total LOE | $ | 3.84 | $ | 4.61 |
Three Months Ended September 30, | |||||||
(in thousands) | 2016 | 2015 | |||||
Depletion of oil and gas properties | $ | 9,273 | $ | 18,148 | |||
Depreciation and accretion | 362 | 269 | |||||
Total DD&A | $ | 9,635 | $ | 18,417 | |||
DD&A expense per BOE | $ | 9.70 | $ | 16.71 |
Three Months Ended September 30, | |||||||
(in thousands) | 2016 | 2015 | |||||
G&A costs incurred | $ | 9,993 | $ | 6,021 | |||
Capitalized costs | (1,757 | ) | (589 | ) | |||
Total G&A | $ | 8,236 | $ | 5,432 | |||
Non-Cash G&A | $ | 2,375 | $ | 1,768 | |||
Cash G&A | $ | 5,861 | $ | 3,664 | |||
Total G&A | $ | 8,236 | $ | 5,432 | |||
Non-Cash G&A per BOE | $ | 2.39 | $ | 1.60 | |||
Cash G&A per BOE | $ | 5.90 | $ | 3.32 | |||
G&A Expense per BOE | $ | 8.29 | $ | 4.92 |
Nine Months Ended September 30, | Percentage | |||||||||
2016 | 2015 | Change | ||||||||
Production: | ||||||||||
Oil (MBbls) | 1,552 | 1,521 | 2 | % | ||||||
Gas (MMcf) | 8,991 | 5,813 | 55 | % | ||||||
MBOE | 3,050 | 2,490 | 22 | % | ||||||
BOED | 11,133 | 9,119 | 22 | % | ||||||
Revenues (in thousands): | ||||||||||
Oil | $ | 48,838 | $ | 64,107 | (24 | )% | ||||
Gas | 19,616 | 16,495 | 19 | % | ||||||
$ | 68,454 | $ | 80,602 | (15 | )% | |||||
Average sales price: | ||||||||||
Oil | $ | 31.47 | $ | 42.16 | (25 | )% | ||||
Gas | $ | 2.18 | $ | 2.84 | (23 | )% | ||||
BOE | $ | 22.44 | $ | 32.38 | (31 | )% |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Production costs | $ | 14,464 | $ | 11,678 | |||
Workover | 499 | 1,266 | |||||
Total LOE | $ | 14,963 | $ | 12,944 | |||
Per BOE: | |||||||
Production costs | $ | 4.74 | $ | 4.69 | |||
Workover | 0.16 | 0.51 | |||||
Total LOE | $ | 4.90 | $ | 5.20 |
Nine Months Ended September 30, | |||||||
(in thousands) | 2016 | 2015 | |||||
Depletion of oil and gas properties | $ | 31,981 | $ | 47,562 | |||
Depreciation and accretion | 1,020 | 669 | |||||
Total DD&A | $ | 33,001 | $ | 48,231 | |||
DD&A expense per BOE | $ | 10.82 | $ | 19.37 |
Nine Months Ended September 30, | |||||||
(in thousands) | 2016 | 2015 | |||||
G&A costs incurred | $ | 27,944 | $ | 17,395 | |||
Capitalized costs | (4,745 | ) | (1,640 | ) | |||
Total G&A | $ | 23,199 | $ | 15,755 | |||
Non-Cash G&A | $ | 7,285 | $ | 7,185 | |||
Cash G&A | $ | 15,914 | $ | 8,570 | |||
Total G&A | $ | 23,199 | $ | 15,755 | |||
Non-Cash G&A per BOE | $ | 2.39 | $ | 2.89 | |||
Cash G&A per BOE | $ | 5.22 | $ | 3.44 | |||
G&A Expense per BOE | $ | 7.61 | $ | 6.33 |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash provided by operations | $ | 33,193 | $ | 69,753 | |||
Acquisitions and development of oil and gas properties and equipment | (582,149 | ) | (110,224 | ) | |||
Net cash provided by other investing activities | 5,979 | 389 | |||||
Net cash provided by equity financing activities | 542,901 | 190,224 | |||||
Net cash used in debt financing activities | (2,666 | ) | (68,000 | ) | |||
Net increase (decrease) in cash and equivalents | $ | (2,742 | ) | $ | 82,142 |
• | On January 27, 2016, we received cash proceeds of approximately $89.2 million (after underwriting discounts, commissions and expenses) from our public offering of 16,100,000 shares (including the shares sold pursuant to an over-allotment option exercised by the underwriters) at a price to us of $5.545 per share. Proceeds were used to repay amounts borrowed under the Revolver and for general corporate purposes, which included continuing to develop our acreage position in the Wattenberg Field in Colorado and funding a portion of our 2016 capital expenditure program. |
• | In January 2016, the Company repaid its outstanding borrowings under the Revolver of $78 million. In addition, on June 13, 2016, the Company borrowed approximately $55 million under the Revolver in order to pay a portion of the purchase price for the GC Acquisition pending receipt of proceeds from the issuance of the Senior Notes. The full amount borrowed was repaid on June 14, 2016. |
• | On April 14, 2016, we received cash proceeds of approximately $164.8 million (after underwriting discounts, commissions and expenses) from our public offering of 22,425,000 shares (including the shares sold pursuant |
• | In May and June 2016, we received cash proceeds of approximately $289.4 million (after underwriting discounts, commissions and expenses) from our public offering of 51,750,000 shares (including the shares sold pursuant to an over-allotment option exercised by the underwriters) at a price to us of $5.597 per share. These proceeds were used for general corporate purposes, including to fund the GC Acquisition. |
• | On June 14, 2016, the Company issued $80 million aggregate principal amount of 9.00% Senior Unsecured Notes ("Senior Notes") in a private placement to qualified institutional buyers. See "- Senior Notes" below. The net proceeds from the sale of the Senior Notes were $75.2 million after deductions of $4.8 million for expenses and underwriting discounts and commissions. The net proceeds were used to fund the GC Acquisition. |
Nine Months Ended September 30, | |||||||
2016 | 2015 | ||||||
Cash payments for acquisitions | $ | 499,831 | $ | — | |||
Asset retirement obligations assumed with acquisitions | 2,046 | — | |||||
Cash payments for capital expenditures | 82,318 | 110,224 | |||||
Accrued costs, beginning of period | (31,414 | ) | (52,747 | ) | |||
Accrued costs, end of period | 32,299 | 26,997 | |||||
Non-cash acquisitions, common stock | — | 9,840 | |||||
Other | 6,655 | 6,049 | |||||
Accrual basis capital expenditures | $ | 591,735 | $ | 100,363 |
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Adjusted EBITDA: | |||||||||||||||
Net loss | $ | (19,241 | ) | $ | (77,921 | ) | $ | (224,490 | ) | $ | (83,502 | ) | |||
Depreciation, depletion, and accretion | 9,635 | 18,417 | 33,001 | 48,231 | |||||||||||
Full cost ceiling impairment | 25,453 | 96,340 | 215,223 | 99,340 | |||||||||||
Income tax expense (benefit) | 5 | (10,520 | ) | 106 | (14,132 | ) | |||||||||
Stock-based compensation | 2,374 | 1,849 | 7,285 | 7,688 | |||||||||||
Mark-to-market of commodity derivative contracts: | |||||||||||||||
Total loss (gain) on commodity derivatives contracts | (407 | ) | (6,619 | ) | 3,617 | (5,697 | ) | ||||||||
Cash settlements on commodity derivative contracts | 486 | 10,178 | 5,137 | 28,343 | |||||||||||
Cash premiums paid for commodity derivative contracts | — | (445 | ) | — | (4,562 | ) | |||||||||
Interest expense (income) | (10 | ) | 72 | (179 | ) | 178 | |||||||||
Adjusted EBITDA | $ | 18,295 | $ | 31,351 | $ | 39,700 | $ | 75,887 |
• | extended or further decline in oil and natural gas prices; |
• | operating hazards that adversely affect our ability to conduct business; |
• | uncertainties in the estimates of proved reserves; |
• | the effect of seasonal weather conditions and wildlife restrictions on our operations; |
• | our ability to fund, develop, produce, and acquire additional oil and natural gas reserves that are economically recoverable; |
• | our ability to obtain adequate financing; |
• | the availability and capacity of gathering systems and pipelines for our production; |
• | our ability to complete the second closing of the GC Acquisition and integrate the acquired properties, and the risks associated with liabilities assumed or other problems relating to that acquisition; |
• | our ability to successfully identify, execute, or effectively integrate future acquisitions; |
• | the effect of federal, state, and local laws and regulations; |
• | the effects of, including cost to comply with, new environmental legislation or regulatory initiatives, including those related to hydraulic fracturing; |
• | the effects of local moratoria or bans on our business; |
• | the amount of our indebtedness and ability to maintain compliance with debt covenants; |
• | the geographic concentration of our principal properties; and |
• | the availability of water for use in our operations. |
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS |
ITEM 4. | CONTROLS AND PROCEDURES |
Item 1. | Legal Proceedings |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period | Total Number of Shares Purchased | Average Price Paid per Share | |||||
July 1, 2016 - July 31, 2016 (1) | — | $ | — | ||||
August 1, 2016 - August 31, 2016 (1) | 10,675 | $ | 6.64 | ||||
September 1, 2016 - September 30, 2016 (1) | 4,902 | $ | 6.45 | ||||
Total | 15,577 |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Mine Safety Disclosures |
Item 5. | Other Information |
Exhibit Number | Exhibit | |
31.1 | Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
32 | Certifications of the Principal Executive Officer and Principal Financial Officer pursuant to 18 USC 1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
99.1 | Ninth Amendment to Credit Agreement, dated as of October 14, 2016, among Synergy Resources Corporation, SunTrust Bank as Administrative Agent and as an Issuing Bank, and the lenders party thereto. | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase | |
101.LAB | XBRL Taxonomy Extension Label Linkbase | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase |
SYNERGY RESOURCES CORPORATION | |
/s/ Lynn A. Peterson | |
Lynn A. Peterson, President and Chief Executive Officer (Principal Executive Officer) | |
/s/ James P. Henderson | |
James P. Henderson, Executive Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer) | |
/s/ Jared C. Grenzenbach | |
Jared C. Grenzenbach, Vice President and Chief Accounting Officer (Principal Accounting Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Synergy Resources Corporation; |
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 the 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. |
1. | I have reviewed this quarterly report on Form 10-Q of Synergy Resources Corporation; |
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 the 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. |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
Date: | November 3, 2016 | By: | /s/ Lynn A. Peterson | |
Lynn A. Peterson, President and Chief Executive Officer |
Date: | November 3, 2016 | By: | /s/ James P. Henderson | |
James P. Henderson, Executive Vice President, Chief Financial Officer, and Treasurer |
Name of Lender | Applicable Percentage | Maximum Credit Amount |
SunTrust Bank | 17.50000% | $87,500,000.00 |
KeyBank National Association | 15.00000% | $75,000,000.00 |
ZB N.A. dba Amegy Bank | 12.50000% | $62,500,000.00 |
Community Banks of Colorado | 12.50000% | $62,500,000.00 |
JPMorgan Chase Bank, National Association | 12.50000% | $62,500,000.00 |
Deutsche Bank AG New York Branch | 12.50000% | $62,500,000.00 |
Credit Agricole Corporate and Investment Bank | 8.75000% | $43,750,000.00 |
IBERIABANK | 8.75000% | $43,750,000.00 |
Total | 100.00000% | $500,000,000.00 |
Document and Entity Information - shares |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Oct. 28, 2016 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2016 | |
Entity Registrant Name | SYNERGY RESOURCES CORP | |
Entity Central Index Key | 0001413507 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2016 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 200,577,084 |
CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Preferred stock, par value per share (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value per share (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, shares issued | 200,537,625 | 110,033,601 |
Common stock, shares outstanding | 200,537,625 | 110,033,601 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Statement [Abstract] | ||||
Oil and gas revenues | $ 26,234 | $ 33,378 | $ 68,454 | $ 80,602 |
Expenses: | ||||
Lease operating expenses | 3,819 | 5,078 | 14,963 | 12,944 |
Production taxes | (1,461) | 3,099 | 2,509 | 7,485 |
Depreciation, depletion, and accretion | 9,635 | 18,417 | 33,001 | 48,231 |
Full cost ceiling impairment | 25,453 | 96,340 | 215,223 | 99,340 |
Transportation commitment charge | 205 | 0 | 505 | 0 |
General and administrative | 8,236 | 5,432 | 23,199 | 15,755 |
Total expenses | 45,887 | 128,366 | 289,400 | 183,755 |
Operating loss | (19,653) | (94,988) | (220,946) | (103,153) |
Other income (expense): | ||||
Commodity derivatives gain (loss) | 407 | 6,619 | (3,617) | 5,697 |
Interest expense, net | 0 | (87) | 0 | (247) |
Interest income | 10 | 15 | 179 | 69 |
Total other income (expense) | 417 | 6,547 | (3,438) | 5,519 |
Loss before income taxes | (19,236) | (88,441) | (224,384) | (97,634) |
Income tax expense (benefit) | 5 | (10,520) | 106 | (14,132) |
Net loss | $ (19,241) | $ (77,921) | $ (224,490) | $ (83,502) |
Net loss per common share: | ||||
Basic (in dollars per share) | $ (0.10) | $ (0.74) | $ (1.36) | $ (0.82) |
Diluted (in dollars per share) | $ (0.10) | $ (0.74) | $ (1.36) | $ (0.82) |
Weighted-average shares outstanding: | ||||
Basic (in shares) | 200,515,555 | 105,100,849 | 164,771,544 | 102,329,504 |
Diluted (in shares) | 200,515,555 | 105,100,849 | 164,771,544 | 102,329,504 |
Organization and Summary of Significant Accounting Policies |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization and Summary of Significant Accounting Policies | Organization and Summary of Significant Accounting Policies Organization: Synergy Resources Corporation (the "Company," "we," "us," or "our") is engaged in oil and gas acquisition, exploration, development, and production activities, primarily in the Denver-Julesburg Basin ("D-J Basin") of Colorado. The Company’s common stock is listed and traded on the NYSE MKT under the symbol "SYRG." Basis of Presentation: The Company operates in one business segment, and all of its operations are located in the United States of America. At the directive of the Securities and Exchange Commission ("SEC") to use "plain English" in public filings, the Company will use such terms as "we," "our," or the "Company" in place of Synergy Resources Corporation. When such terms are used in this manner throughout this document, they are in reference only to the corporation, Synergy Resources Corporation, and are not used in reference to the Board of Directors, corporate officers, management, or any individual employee or group of employees. The Company prepares its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). Change of Year End: On February 25, 2016, the Company's board of directors approved a change in fiscal year end from August 31 to December 31 effective with the fiscal year ending December 31, 2016. The prior year figures presented herein have been recast to conform to the new fiscal year end. Interim Financial Information: The unaudited condensed consolidated interim financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the SEC as promulgated in Rule 10-01 of Regulation S-X. The condensed consolidated balance sheet as of December 31, 2015 was derived from the Company's Transition Report on Form 10-K for the four months ended December 31, 2015 as filed with the SEC on April 22, 2016. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such SEC rules and regulations. The Company believes that the disclosures included are adequate to make the information presented not misleading and recommends that these condensed financial statements be read in conjunction with the audited financial statements and notes thereto for the four months ended December 31, 2015. In our opinion, the unaudited condensed consolidated financial statements contained herein reflect all adjustments, consisting solely of normal recurring items, which are necessary for the fair presentation of the Company's financial position, results of operations, and cash flows on a basis consistent with that of its prior audited financial statements. However, the results of operations for interim periods may not be indicative of results to be expected for the full fiscal year. Major Customers: The Company sells production to a limited number of customers. Customers representing 10% or more of our oil and gas revenue for each of the periods presented are shown in the following table:
* less than 10% Based on the current demand for oil and natural gas, the availability of other buyers, and the Company having the option to sell to other buyers if conditions warrant, the Company believes that its oil and gas production can be sold in the market in the event that it is not sold to the Company’s existing customers. Accounts receivable consist primarily of receivables from oil and gas sales and amounts due from other working interest owners who are liable for their proportionate share of well costs. The Company typically has the right to withhold future revenue disbursements to recover outstanding joint interest billings on outstanding receivables from joint interest owners. Customers with balances greater than 10% of total receivable balances as of each of the periods presented are shown in the following table:
* less than 10% The Company operates exclusively within the United States of America and, except for cash and short-term investments, all of the Company’s assets are utilized in, and all of its revenues are derived from, the oil and gas industry. Goodwill: The Company’s goodwill represents the excess of the purchase price over the fair value of net identifiable assets acquired in a business combination. Goodwill is not amortized and is tested for impairment annually or whenever other circumstances or events indicate that the carrying amount of goodwill may not be recoverable. We have historically performed the annual impairment assessment as of August 31st. During 2016, we changed the date of our annual goodwill impairment assessment to October 1st. With respect to its annual goodwill testing date, management believes that this voluntary change in accounting method is preferable as it better aligns the annual impairment testing date with the Company’s new fiscal year end, which was also changed in 2016. This change in assessment date was applied prospectively and did not delay, accelerate or avoid a potential impairment charge. When evaluating goodwill for impairment, the Company may first perform an assessment of qualitative factors to determine if the fair value of the reporting unit is more-likely-than-not greater than its carrying amount. If, based on the review of the qualitative factors, the Company determines it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying value, the required two-step impairment test can be bypassed. If the Company does not perform a qualitative assessment or if the fair value of the reporting unit is not more-likely-than-not greater than its carrying value, the Company must perform the first step of the two-step impairment test and calculate the estimated fair value of the reporting unit. If the carrying value of the reporting unit exceeds the estimated fair value, there is an indication that impairment may exist, and the second step must be performed to measure the amount of impairment loss. The amount of impairment for goodwill is measured as the amount by which the carrying amount of the goodwill exceeds the implied fair value of the goodwill. As a result of declining oil prices, the Company performed an interim goodwill test as of March 31, 2016 which did not result in an impairment. The Company utilized a market approach in estimating the fair value of the reporting unit. The primary assumptions used in the Company's impairment evaluations are based on the best available market information at the time and reflect significant management judgments. Changes in these assumptions or future economic conditions could impact the Company's conclusion regarding an impairment of goodwill and potentially result in a non-cash impairment loss in a future period. Recently Issued Accounting Pronouncements: We evaluate the pronouncements of various authoritative accounting organizations to determine the impact of new accounting pronouncements on us. In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"), which intends to improve the accounting for share-based payment transactions. The ASU changes several aspects of the accounting for share-based payment award transactions, including: (1) Accounting and Cash Flow Classification for Excess Tax Benefits and Deficiencies, (2) Forfeitures, and (3) Tax Withholding Requirements and Cash Flow Classification. ASU 2016-09 is effective for public businesses for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact of the adoption on our condensed consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), which establishes a comprehensive new lease standard designed to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous US GAAP. ASU 2016-02 is effective for public businesses for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact of the adoption of this standard on our condensed consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09"), which establishes a comprehensive new revenue recognition standard designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In doing so, companies may need to use more judgment and make more estimates than under current revenue recognition guidance. ASU 2014-09 allows for the use of either the full or modified retrospective transition method, and the standard will be effective for annual reporting periods beginning after December 15, 2017 including interim periods within that period, with early adoption permitted for annual reporting periods beginning after December 15, 2016. We are currently evaluating which transition approach to use and the impact of the adoption of this standard on our condensed consolidated financial statements. There were various updates recently issued by the FASB, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our reported financial position, results of operations, or cash flows. Change in estimate: During the three months ended September 30, 2016, the Company reduced its estimate for production taxes based on recent historical experience and additional information received during the period. As a result, the Company decreased the accrual for production taxes to be paid by approximately $3.6 million which reduced our operating loss for the three- and nine-months ended September 30, 2016 by a corresponding amount, or $0.02 per basic and diluted common share. Reclassifications: We have reclassified costs attributable to surface locations of $4.5 million from "Other property and equipment, net" to "Unproved properties and land, not subject to depletion" within the accompanying condensed consolidated balance sheets to conform prior period balances to current period presentation. |
Property and Equipment |
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Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and Equipment | Property and Equipment The capitalized costs related to the Company’s oil and gas producing activities were as follows (in thousands):
The Company periodically reviews its oil and gas properties to determine if the carrying value of such assets exceeds estimated fair value. For proved producing and non-producing properties, the Company performs a ceiling test each quarter to determine whether there has been an impairment to its capitalized costs. Under the ceiling test, the value of the Company’s reserves is calculated using the average of the published spot prices for WTI oil (per barrel) as of the first day of each of the previous twelve months, as well as the average of the published spot prices for Henry Hub (per MMBtu) as of the first day of each of the previous twelve months, each adjusted by lease or field for quality, transportation fees, and regional price differentials. The September 30, 2016 ceiling test used average realized prices of $31.95 per barrel and $2.21 per Mcf as compared to the June 30, 2016 prices of $33.82 per barrel and $2.16 per Mcf, a change of approximately (6)% and 2%, respectively. As a result of these periodic reviews, the Company concluded that its net capitalized costs of oil and natural gas properties exceeded the ceiling amount, resulting in the recognition of ceiling test impairments totaling $25.5 million and $215.2 million during the three and nine months ended September 30, 2016, respectively. During the three and nine months ended September 30, 2015, the Company's ceiling tests resulted in total impairments of $96.3 million and $99.3 million, respectively. Capitalized Overhead: A portion of the Company’s overhead expenses are directly attributable to acquisition, exploration, and development activities. Under the full cost method of accounting, these expenses, in the amounts shown in the table below, were capitalized in the full cost pool (in thousands):
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Acquisitions and Divestitures |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisitions and Divestitures | Acquisitions and Divestitures Acquisitions As a strategy, the Company seeks to acquire developed and undeveloped oil and gas properties, primarily in the core Wattenberg Field. The objective of these acquisitions is to provide additional mineral acres upon which the Company can drill wells and produce hydrocarbons. The Company acquired certain oil and gas and other assets that affect the comparability between the nine months ended September 30, 2016 and 2015, as described below. August 2016 Acquisition During August 2016, the Company completed two acquisitions of certain assets for a total purchase price of $3.9 million composed of cash and assumed liabilities. The acquired properties were comprised primarily of undeveloped oil and gas leasehold interests. June 2016 Acquisition On May 2, 2016, we entered into a purchase and sale agreement ("GC Agreement") with a large publicly-traded company, pursuant to which we agreed to acquire a total of approximately 72,000 gross (33,100 net) acres in an area referred to as the Greeley-Crescent project in the Wattenberg Field for $505 million (the "GC Acquisition"). Estimated net daily production from the acquired properties was approximately 2,400 barrels of oil equivalent ("BOE") at the time of entering into the GC Agreement. On June 14, 2016, the Company closed on the portion of the assets comprised of the undeveloped oil and gas leasehold interests and non-operated production. The effective date of this part of the transaction was April 1, 2016. A second closing will cover the operated producing properties and is expected to be completed in 2017. The Company has placed $18.2 million in escrow to be released upon the second closing. For the second closing, the effective date will be April 1, 2016 for the horizontal wells to be acquired, and the first day of the calendar month in which the closing for such properties occurs for the vertical wells. The second closing is subject to certain closing conditions, including the receipt of regulatory approval. Accordingly, the second closing of the transaction may not close in the expected time frame or at all. The first closing on June 14, 2016 was for a total purchase price of $487.4 million, net of customary closing adjustments. The purchase price was composed of $486.3 million in cash plus the assumption of certain liabilities. The first closing encompassed approximately 33,100 net acres of oil and gas leasehold interests and related assets and net production of approximately 800 BOE per day ("BOED") at the time of entering into the GC Agreement. The first closing was accounted for using the acquisition method under ASC 805, Business Combinations, which requires the acquired assets and liabilities to be recorded at fair values as of the acquisition date of June 14, 2016. Transaction costs of $0.5 million related to the acquisition were expensed as incurred. The following allocation of the purchase price is preliminary and includes significant use of estimates. The fair values of the assets acquired and liabilities assumed are preliminary and are subject to revision as the Company continues to evaluate the fair value of this acquisition. Accordingly, the allocation will change as additional information becomes available and is assessed, and the impact of such changes may be material. The following table summarizes the preliminary purchase price and preliminary estimated fair values of assets acquired and liabilities assumed (in thousands):
(1) Proved oil and gas properties were measured primarily using an income approach. The fair value measurements of the oil and gas assets were based, in part, on significant inputs not observable in the market and thus represent a Level 3 measurement. The significant inputs included assumed future production profiles, commodity prices (mainly based on observable market inputs), a discount rate of 11.5%, and assumptions regarding the timing and amount of future development and operating costs. For the three and nine months ended September 30, 2016, the results of operations of the acquired assets, representing approximately $2.0 million and $2.6 million of revenue and $1.8 million and $2.3 million of operating income, respectively, have been included in the Company's condensed consolidated statements of operations. The following table presents the unaudited pro forma combined results of operations for the three and nine months ended September 30, 2016 as if the first closing had occurred on January 1, 2015. The unaudited pro forma results reflect significant pro forma adjustments related to funding the acquisition through cash, additional depreciation expense, costs directly attributable to the acquisition, and operating costs incurred as a result of the assets acquired. The pro forma results do not include any cost savings or other synergies that may result from the acquisition or any estimated costs that have been or will be incurred by the Company to integrate the properties acquired. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of the period, nor are they necessarily indicative of future results.
February 2016 Acquisition On February 4, 2016, the Company completed the acquisition of undeveloped oil and gas leasehold interests for a total purchase price of $10.0 million. The purchase price has been allocated as $8.6 million to proved oil and gas properties and $1.4 million to unproved oil and gas properties on a preliminary basis. This allocation reflects significant use of estimates. October 2015 Acquisition On October 20, 2015, the Company closed the acquisition of certain assets ("KPK Acquisition") from a private company for a total purchase price of $85.2 million, net of customary closing adjustments. The purchase price was composed of $35.0 million in cash and $49.8 million in restricted common stock of the Company plus the assumption of certain liabilities. The KPK Acquisition encompassed approximately 4,300 net acres of oil and gas leasehold interests and related assets and net production of approximately 1,200 BOED at the time of purchase. The acquisition was accounted for using the acquisition method under ASC 805, Business Combinations, which requires the acquired assets and liabilities to be recorded at fair values as of the acquisition date of October 20, 2015. Transaction costs related to the acquisition were expensed as incurred. The following table summarizes the final purchase price and final fair values of assets acquired and liabilities assumed (in thousands):
(1) The fair value of the consideration attributed to the common stock under ASC 805 was based on the Company's closing stock price on the measurement date of October 20, 2015 (4,418,413 shares at $11.28 per share). (2) Proved oil and gas properties were measured primarily using an income approach. The fair value measurements of the oil and gas assets were based, in part, on significant inputs not observable in the market and thus represent a Level 3 measurement. The significant inputs included assumed future production profiles, commodity prices (mainly based on observable market inputs), a discount rate of 12%, and assumptions regarding the timing and amount of future development and operating costs. For the three and nine months ended September 30, 2016, the results of operations of the acquired assets, representing approximately $1.2 million and $3.7 million of revenue and $1.0 million and $3.3 million of operating income, respectively, have been included in the Company's condensed consolidated statements of operations. The following table presents the unaudited pro forma combined results of operations for the three and nine months ended September 30, 2015 as if the transaction had occurred on January 1, 2015. The unaudited pro forma results reflect significant pro forma adjustments related to funding the acquisition through the issuance of common stock and cash, additional depreciation expense, costs directly attributable to the acquisition, and operating costs incurred as a result of the assets acquired. The pro forma results do not include any cost savings or other synergies that may result from the acquisition or any estimated costs that have been or will be incurred by the Company to integrate the properties acquired. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of the period, nor are they necessarily indicative of future results.
Divestitures During the second quarter of 2016, the Company closed on two transactions involving the divestiture of approximately 3,700 net undeveloped acres and 107 vertical wells primarily in Adams County, Colorado for total consideration of $25.2 million, subject to customary purchase price adjustments. We received $24.2 million in cash and transferred liabilities of $0.5 million to the buyers, and $0.5 million in cash was released to us from escrow in October 2016. The divested assets had associated production of approximately 200 BOED at the time of sale. The vertical well transaction closed in April 2016, and the undeveloped acreage transaction closed in June 2016. |
Depletion, depreciation, and accretion ("DDA") |
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Other Costs and Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depletion, depreciation, and accretion (DDA) | Depletion, depreciation, and accretion ("DD&A") Depletion, depreciation, and accretion consisted of the following (in thousands):
Capitalized costs of proved oil and gas properties are depleted quarterly using the units-of-production method based on a depletion rate, which is calculated by comparing production volumes for the quarter to estimated total reserves at the beginning of the quarter. For the three and nine months ended September 30, 2016, production of 993 MBOE and 3,050 MBOE, respectively, represented 0.8% and 2.4% of estimated total proved reserves, respectively. For the three and nine months ended September 30, 2015, production of 1,102 MBOE and 2,490 MBOE, respectively, represented 1.9% and 4.3% of estimated total proved reserves, respectively. DD&A expense was $9.70 per BOE and $16.71 per BOE for the three months ended September 30, 2016 and 2015, respectively. For the nine months ended September 30, 2016 and 2015, DD&A expense was $10.82 per BOE and $19.37 per BOE, respectively. |
Asset Retirement Obligations |
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Asset Retirement Obligations | Asset Retirement Obligations The following table summarizes the changes in asset retirement obligations associated with the Company's oil and gas properties (in thousands).
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Revolving Credit Facility |
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Sep. 30, 2016 | |
Line of Credit Facility [Abstract] | |
Revolving Credit Facility | Revolving Credit Facility The Company maintains a revolving credit facility ("Revolver") with a bank syndicate with a maturity date of December 15, 2019. The Revolver is available for working capital requirements, capital expenditures, acquisitions, general corporate purposes, and to support letters of credit. As of September 30, 2016, the terms of the Revolver provide for up to $500 million in borrowings, subject to a borrowing base limitation of $145 million. As of September 30, 2016, there was no outstanding principal balance as compared to a principal balance of $78.0 million as of December 31, 2015. The Company has an outstanding letter of credit of approximately $0.5 million. On October 14, 2016, the Revolver was increased from $145 million to $160 million in connection with the semi-annual redetermination of the borrowing base. The next semi-annual redetermination is scheduled for May 2017. Interest under the Revolver accrues monthly at a variable rate. For each borrowing, the Company designates its choice of reference rates, which can be either the Prime Rate plus a margin or the London Interbank Offered Rate ("LIBOR") plus a margin. The interest rate margin, as well as other bank fees, varies with utilization of the Revolver. The average annual interest rate for borrowings during the nine months ended September 30, 2016 and 2015 was 2.63% and 2.5%, respectively. Certain of the Company’s assets, including substantially all of the producing wells and developed oil and gas leases, have been designated as collateral under the Revolver. The borrowing commitment is subject to scheduled redeterminations on a semi-annual basis. If certain events occur, or if the bank syndicate or the Company so elects, an unscheduled redetermination could be prepared. The Revolver contains covenants that, among other things, restrict the payment of dividends and limits our overall commodity derivative position to a maximum position that varies over 5 years as a percentage of estimated proved developed producing or total proved reserves as projected in the semi-annual reserve report. Furthermore, the Revolver requires the Company to maintain compliance with certain financial and liquidity ratio covenants. Under the requirements, the Company, on a quarterly basis, must not (a) at any time permit its ratio of total funded debt as of such time to EBITDAX, as defined in the agreement, to be greater than or equal to 4.0 to 1.0; or (b) as of the last day of any fiscal quarter permit its current ratio, as defined in the agreement, to be less than 1.0 to 1.0. As of September 30, 2016, the most recent compliance date, the Company was in compliance with these loan covenants and expects to remain in compliance throughout the next 12-month period. |
Notes Payable |
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Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Notes Payable | Notes Payable On June 14, 2016, the Company issued $80 million aggregate principal amount of 9.00% Senior Unsecured Notes ("Senior Notes") in a private placement to qualified institutional buyers. The maturity for the payment of principal is June 13, 2021. Interest on the Notes accrues at 9.00% and began accruing on June 14, 2016. Interest is payable on June 15 and December 15 of each year, beginning on December 15, 2016. The Senior Notes were issued pursuant to an indenture dated as of June 14, 2016 (the "Indenture") and are guaranteed on a senior unsecured basis by the Company’s existing and future subsidiaries that incur or guarantee certain indebtedness, including indebtedness under the revolving credit facility. The net proceeds from the sale of the Senior Notes were $75.2 million after deductions of $4.8 million for expenses and underwriting discounts and commissions. The net proceeds were used to fund the GC Acquisition as discussed further in Note 3. At any time prior to December 14, 2018, the Company may redeem all or a part of the Senior Notes subject to the Make-Whole Price (as defined in the Indenture) and accrued and unpaid interest. On and after December 14, 2018, the Company may redeem all or a part of the Senior Notes at the redemption price at a specified percentage of the principal amount of the redeemed notes (104.50% for 2018, 102.25% for 2019, and 100.0% for 2020 and thereafter, during the twelve-month period beginning on December 14 of each applicable year), plus accrued and unpaid interest. Additionally, prior to December 14, 2018, the Company can, on one or more occasions, redeem up to 35% of the principal amount of the Senior Notes with all or a portion of the net cash proceeds of one or more Equity Offerings (as defined in the Indenture) at a redemption price equal to 109.00% of the principal amount of the redeemed notes, plus accrued and unpaid interest, subject to certain conditions. The Indenture contains covenants that restrict the Company’s ability and the ability of certain of its subsidiaries to, among other restrictions and limitations: (i) incur additional indebtedness; (ii) incur liens; (iii) pay dividends; (iv) consolidate, merge or transfer all or substantially all of its or their assets; (v) engage in transactions with affiliates; or (vi) engage in certain restricted business activities. These covenants are subject to a number of exceptions and qualifications. As of September 30, 2016, the most recent compliance date, the Company was in compliance with these loan covenants and expects to remain in compliance throughout the next 12-month period. |
Commodity Derivative Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity Derivative Instruments | Commodity Derivative Instruments The Company has entered into commodity derivative instruments, as described below. Our commodity derivative instruments may include but are not limited to "collars," "swaps," and "put" positions. Our derivative strategy, including the volume amounts, whether we utilize oil and/or natural gas instruments, and the relevant commodity prices, is based in part on our view of expected future market conditions and our analysis of well-level economic return potential. In addition, our use of derivative contracts is subject to stipulations set forth in the Revolver. A "put" option gives the owner the right, but not the obligation, to sell the underlying commodity at a specified price (strike price) within a specific time period. Depending on market conditions, strike prices, and the value of the contracts, we may, at times, purchase put options, which require us to pay premiums at the time we purchase the contracts. These premiums represent the fair value of the purchased put as of the date of purchase. Conversely, a "call" option gives the owner the right, but not the obligation, to purchase the underlying commodity at a specified price (strike price) within a specific time period. Depending on market conditions, strike prices, and the value of the contracts, we may, at times, sell call options in conjunction with the purchase of put options to create "collars." We regularly utilize "no premium" (a.k.a. zero cost) collars where, at settlement, we receive the difference between the published index price and a floor price if the index price is below the floor. We pay the difference between the ceiling price and the index price if the index price is above the contracted ceiling price. No amounts are paid or received if the index price is between the floor and the ceiling price. Additionally, at times, we may enter into swaps. Swaps are derivative contracts which obligate two counterparties to effectively trade the underlying commodity at a set price over a specified term. The Company may, from time to time, add incremental derivatives to cover additional production, restructure existing derivative contracts or enter into new transactions to modify the terms of current contracts in order to realize the current value of the Company’s existing positions. The Company does not enter into derivative contracts for speculative purposes. The use of derivatives involves the risk that the counterparties to such instruments will be unable to meet the financial terms of such contracts. The Company’s derivative contracts are currently with four counterparties and an exchange. Two of the counterparties are lenders in the Revolver. The Company has netting arrangements with the counterparties that provide for the offset of payables against receivables from separate derivative arrangements with the counterparty in the event of contract termination. The derivative contracts may be terminated by a non-defaulting party in the event of default by one of the parties to the agreement. The Company’s commodity derivative instruments are measured at fair value and are included in the accompanying condensed consolidated balance sheets as commodity derivative assets or liabilities. Unrealized gains and losses are recorded based on the changes in the fair values of the derivative instruments. Both the unrealized and realized gains and losses resulting from contract settlement of derivatives are recorded in the condensed consolidated statements of operations. The Company’s cash flow is only impacted when the actual settlements under commodity derivative contracts result in making or receiving a payment to or from the counterparty. Actual cash settlements can occur at either the scheduled maturity date of the contract or at an earlier date if the contract is liquidated prior to its scheduled maturity. These settlements under the commodity derivative contracts are reflected as operating activities in the Company’s condensed consolidated statements of cash flows. The Company’s commodity derivative contracts as of September 30, 2016 are summarized below:
Subsequent to September 30, 2016, the Company added the following positions:
Offsetting of Derivative Assets and Liabilities As of September 30, 2016 and December 31, 2015, all derivative instruments held by the Company were subject to enforceable master netting arrangements held by various financial institutions. In general, the terms of the Company’s agreements provide for offsetting of amounts payable or receivable between the Company and the counterparty, at the election of either party, for transactions that occur on the same date and in the same currency. The Company’s agreements also provide that, in the event of an early termination, each party has the right to offset amounts owed or owing under that and any other agreement with the same counterparty. The Company’s accounting policy is to offset these positions in its condensed consolidated balance sheets. The following table provides a reconciliation between the net assets and liabilities reflected on the accompanying condensed consolidated balance sheets and the potential effect of master netting arrangements on the fair value of the Company’s derivative contracts (in thousands):
The amount of gain (loss) recognized in the condensed consolidated statements of operations related to derivative financial instruments was as follows (in thousands):
Realized gains and losses include cash received from the monthly settlement of derivative contracts at their scheduled maturity date, the proceeds from early liquidation of in-the-money derivative contracts, and the previously incurred premiums attributable to settled commodity contracts. During the nine months ended September 30, 2015, the Company liquidated oil derivatives with an average strike price of $82.79 and covering 372,500 bbls of oil and received cash settlements of approximately $20.5 million. The following table summarizes derivative realized gains and losses during the periods presented (in thousands):
Credit Related Contingent Features As of September 30, 2016, two of the five counterparties to the Company's derivative instruments were members of the Company’s credit facility syndicate. The Company’s obligations under the credit facility and its derivative contracts are secured by liens on substantially all of the Company’s producing oil and gas properties. The agreement with the third and fourth counterparties, which are not lenders under the credit facility, are unsecured and do not require the posting of collateral. The agreement with the fifth counterparty is subject to an inter-creditor agreement between the counterparty and the Company’s lenders under the credit facility. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements ASC Topic 820, Fair Value Measurements and Disclosure, establishes a hierarchy for inputs used in measuring fair value for financial assets and liabilities that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the reliability of the inputs as follows:
The financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The Company’s non-recurring fair value measurements include asset retirement obligations and purchase price allocations for the fair value of assets and liabilities acquired through business combinations. The Company determines the estimated fair value of its asset retirement obligations by calculating the present value of estimated cash flows related to plugging and abandonment liabilities using Level 3 inputs. The significant inputs used to calculate such liabilities include estimates of costs to be incurred, the Company’s credit-adjusted risk-free rate, inflation rates, and estimated dates of abandonment. The asset retirement liability is accreted to its present value each period, and the capitalized asset retirement cost is depleted as a component of the full cost pool using the units-of-production method. See Note 5 for additional information. The acquisition of a group of assets in a business combination transaction requires fair value estimates for assets acquired and liabilities assumed. The fair value of assets and liabilities acquired through business combinations is calculated using a net discounted cash flow approach for the producing properties. The discounted cash flows are developed using the income approach and are based on management’s expectations for the future. Unobservable inputs include estimates of future oil and gas production from the Company’s reserve reports, commodity prices based on the NYMEX forward price curves as of the date of the estimate (adjusted for basis differentials), estimated operating and development costs, and a risk-adjusted discount rate (all of which are designated as Level 3 inputs within the fair value hierarchy). For unproved properties, fair value is determined using market comparables. For the asset retirement liability assumed, the fair value is determined using the same inputs as described in the paragraph above. See Note 3 for additional information. The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2016 and December 31, 2015 by level within the fair value hierarchy (in thousands):
Commodity Derivative Instruments The Company determines its estimate of the fair value of commodity derivative instruments using a market approach based on several factors, including quoted market prices in active markets, quotes from third parties, the credit rating of each counterparty, and the Company’s own credit standing. In consideration of counterparty credit risk, the Company assessed the possibility of whether the counterparties to its derivative contracts would default by failing to make any contractually required payments. The Company considers the counterparties to be of substantial credit quality and believes that they have the financial resources and willingness to meet their potential repayment obligations associated with the derivative transactions. At September 30, 2016, derivative instruments utilized by the Company consist of puts and collars. The crude oil and natural gas derivative markets are highly active. Although the Company’s derivative instruments are based on several factors, including public indices, the instruments themselves are primarily traded with third-party counterparties. As such, the Company has classified these instruments as Level 2. Fair Value of Financial Instruments The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, commodity derivative instruments (discussed above), notes payable, and credit facility borrowings. The carrying values of cash and cash equivalents, accounts receivable, and accounts payable are representative of their fair values due to their short-term maturities. Due to the variable interest rate paid on the credit facility borrowings, the carrying value is representative of its fair value. The fair value of the notes payable is estimated to be $78.0 million at September 30, 2016. The Company determined the fair value of its notes payable at September 30, 2016 by using observable market based information for debt instruments of similar amounts and duration. The Company has classified the notes as Level 2. |
Interest Expense |
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Interest and Debt Expense [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest Expense | Interest Expense The components of interest expense are (in thousands):
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Shareholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | Shareholders’ Equity The Company's classes of stock are summarized as follows:
Preferred stock may be issued in series with such rights and preferences as may be determined by the Board of Directors. Since inception, the Company has not issued any preferred shares. Shares of the Company’s common stock were issued during the nine months ended September 30, 2016 as described further below. Sales of common stock In January 2016, the Company completed a public offering of its common stock in an underwritten public offering. The Company agreed to sell 14,000,000 shares of its common stock to the Underwriters at a price of $5.545 per share. In addition, pursuant to the Underwriting Agreement, the Underwriters were granted an option, exercisable within 30 days, to purchase up to an additional 2,100,000 shares of common stock on the same terms and conditions. The option was exercised on January 26, 2016, bringing the total number of shares issued to 16,100,000. Net proceeds to the Company, after deduction of underwriting discounts and expenses payable by the Company, were $89.2 million. Proceeds were used to repay amounts borrowed under the Revolver and for general corporate purposes, which included continuing to develop our acreage position in the Wattenberg Field in Colorado and funding a portion of our 2016 capital expenditure program. In April 2016, the Company completed a public offering of its common stock in an underwritten public offering. The Company agreed to sell 19,500,000 shares of its common stock to the Underwriters at a price of $7.3535 per share. In addition, pursuant to the Underwriting Agreement, the Underwriters were granted an option, exercisable within 30 days, to purchase up to an additional 2,925,000 shares of common stock on the same terms and conditions. The option was exercised on April 12, 2016, bringing the total number of shares issued to 22,425,000. Net proceeds to the Company, after deduction of underwriting discounts and expenses payable by the Company, were $164.8 million. The Company used a portion of the proceeds of the offering to pay a portion of the purchase price of the GC Acquisition described in Note 3. In May 2016, the Company completed a public offering of its common stock in an underwritten public offering. The Company agreed to sell 45,000,000 shares of its common stock to the Underwriters at a price of $5.597 per share. In addition, pursuant to the Underwriting Agreement, the Underwriters were granted an option, exercisable within 30 days, to purchase up to an additional 6,750,000 shares of common stock on the same terms and conditions. The option was exercised on June 6, 2016, bringing the total number of shares issued to 51,750,000. Net proceeds to the Company, after deduction of underwriting discounts and expenses payable by the Company, were $289.4 million. The Company used a portion of the proceeds of the offering to pay a portion of the purchase price of the GC Acquisition described in Note 3. |
Weighted-Average Shares Outstanding |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Weighted-Average Shares Outstanding | Weighted-Average Shares Outstanding For the three and nine months ended September 30, 2016 and 2015, none of the Company's outstanding equity grants had a dilutive effect on earnings per share. The following potentially dilutive securities outstanding for the periods presented were not included in the respective weighted-average shares outstanding-diluted calculation, as such securities had an anti-dilutive effect on earnings per share:
1 The number of awards assumes that the associated vesting condition is met at the target amount. The final number of shares of the Company’s common stock issued may vary depending on the performance multiplier, which ranges from zero to two, depending on the level of satisfaction of the vesting condition. |
Stock-Based Compensation |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation In addition to cash compensation, the Company may compensate employees and directors with equity-based compensation in the form of stock options, restricted stock units, stock bonus shares, warrants, and other equity awards. The Company records its equity compensation by pro-rating the estimated grant date fair value of each grant over the period of time that the recipient is required to provide services to the Company (the "vesting phase"). The calculation of fair value is based, either directly or indirectly, on the quoted market value of the Company’s common stock. Indirect valuations are calculated using the Black-Scholes-Merton option pricing model or a Monte Carlo Model. For the periods presented, all stock-based compensation was classified either as a component within general and administrative expense in the Company's condensed consolidated statements of operations, or, for that portion which is directly attributable to individuals performing acquisition, exploration, and development activities, was capitalized to the full cost pool. The amount of stock-based compensation was as follows (in thousands):
Stock options During the three and nine months ended September 30, 2016 and 2015, the Company granted the following stock options:
The assumptions used in valuing stock options granted during each of the periods presented were as follows:
The following table summarizes activity for stock options for the nine months ended September 30, 2016:
The following table summarizes information about issued and outstanding stock options as of September 30, 2016:
The estimated unrecognized compensation cost from stock options not vested as of September 30, 2016, which will be recognized ratably over the remaining vesting phase, is as follows:
Restricted stock units and stock bonus awards The Company grants restricted stock units and stock bonus awards to directors, eligible employees and officers as a part of its equity incentive plan. Restrictions and vesting periods for the awards are determined by the Compensation Committee of the Board of Directors and are set forth in the award agreements. Each restricted stock unit or stock bonus award represents one share of the Company’s common stock to be released from restrictions upon completion of the vesting period. The awards typically vest in equal increments over three to five years. Restricted stock units and stock bonus awards are valued at the closing price of the Company’s common stock on the grant date and are recognized over the vesting period of the award. The following table summarizes activity for restricted stock units and stock bonus awards for the nine months ended September 30, 2016:
The estimated unrecognized compensation cost from restricted stock units and stock bonus awards not vested as of September 30, 2016, which will be recognized ratably over the remaining vesting phase, is as follows:
Performance-vested stock units In March 2016, the Company granted performance-vested stock units ("PSUs") to certain executives under its long term incentive plan. The number of shares of the Company’s common stock that may be issued to settle PSUs ranges from zero to two times the number of PSUs awarded. The shares issued for PSUs are determined based on the Company’s performance over a three-year measurement period and vest in their entirety at the end of the measurement period. The PSUs will be settled in shares of the Company’s common stock following the end of the three-year performance cycle. Any PSUs that have not vested at the end of the applicable measurement period are forfeited. The vesting criterion for the PSUs is based on a comparison of the Company’s total shareholder return ("TSR") for the measurement period compared with the TSRs of a group of peer companies for the same measurement period. As the vesting criterion is linked to the Company's share price, it is considered a market condition for purposes of calculating the grant-date fair value of the awards. The fair value of the PSUs was measured at the grant date with a stochastic process method using a Monte Carlo simulation. A stochastic process is a mathematically defined equation that can create a series of outcomes over time. These outcomes are not deterministic in nature, which means that by iterating the equations multiple times, different results will be obtained for those iterations. In the case of the Company’s PSUs, the Company cannot predict with certainty the path its stock price or the stock prices of its peers will take over the performance period. By using a stochastic simulation, the Company can create multiple prospective stock pathways, statistically analyze these simulations, and ultimately make inferences regarding the most likely path the stock price will take. As such, because future stock prices are stochastic, or probabilistic with some direction in nature, the stochastic method, specifically the Monte Carlo Model, is deemed an appropriate method by which to determine the fair value of the PSUs. Significant assumptions used in this simulation include the Company’s expected volatility, risk-free interest rate based on U.S. Treasury yield curve rates with maturities consistent with the measurement period, as well as the volatilities for each of the Company’s peers. The assumptions used in valuing the PSUs granted were as follows:
During the nine months ended September 30, 2016, the Company granted 490,713 PSUs to certain executives. The fair value of the PSUs granted during the nine months ended September 30, 2016 was $4.0 million. As of September 30, 2016, unrecognized compensation expense for PSUs was $3.2 million and will be amortized through 2018. A summary of the status and activity of PSUs is presented in the following table:
1 The number of awards assumes that the associated vesting condition is met at the target amount. The final number of shares of the Company’s common stock issued may vary depending on the performance multiplier, which ranges from zero to two, depending on the level of satisfaction of the vesting condition. |
Income Taxes |
9 Months Ended |
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Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We evaluate and update our estimated annual effective income tax rate on a quarterly basis based on current and forecasted operating results and tax laws. Consequently, based upon the mix and timing of our actual earnings compared to annual projections, our effective tax rate may vary quarterly and may make quarterly comparisons not meaningful. The quarterly income tax provision is generally comprised of tax expense on income or benefit on loss at the most recent estimated annual effective tax rate, adjusted for the effect of discrete items. The effective tax rate for the nine months ended September 30, 2016 was 0% compared to 14% for the nine months ended September 30, 2015. The effective tax rate for the nine months ended September 30, 2016 is based upon a full year forecasted tax provision and differs from the statutory rate, primarily due to the recognition of a valuation allowance recorded against deferred tax assets. The effective tax rate for the nine months ended September 30, 2015 differs from the statutory rate primarily due to state taxes and nondeductible officers' compensation, partially offset by percentage depletion. There were no significant discrete items recorded during the three and nine months ended September 30, 2016 and 2015. As of September 30, 2016, we had no liability for unrecognized tax benefits. The Company believes that there are no new items, nor changes in facts or judgments that should impact the Company’s tax position. Given the substantial NOL carryforwards at both the federal and state levels, it is anticipated that any changes resulting from a tax examination would simply adjust the carryforwards, and would not result in significant interest expense or penalties. Most of the Company's tax returns filed since August 31, 2011 are still subject to examination by tax authorities. As of the date of this report, we are current with our income tax filings in all applicable state jurisdictions, and we are not currently under any state income tax examinations. No significant uncertain tax positions were identified as of any date on or before September 30, 2016. The Company’s policy is to recognize interest and penalties related to uncertain tax benefits in income tax expense. As of September 30, 2016, the Company has not recognized any interest or penalties related to uncertain tax benefits. Each period, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon our cumulative losses through September 30, 2016, we have provided a full valuation allowance reducing the net realizable benefits. |
Related Party Transactions |
9 Months Ended |
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Sep. 30, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions Consulting agreements: Subsequent to their tenure as co-CEOs, which ended on December 31, 2015, the Company entered into consulting agreements with Ed Holloway and William Scaff, Jr. through May 31, 2016. During this period, each was paid $70,000 per month, or $350,000 for the nine months ended September 30, 2016. |
Other Commitments and Contingencies |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Other Commitments and Contingencies | Other Commitments and Contingencies Volume Commitments The Company has crude oil transportation agreements with three counterparties. Deliveries under two of the transportation agreements commenced during 2015. Deliveries under the third transportation agreement are not expected to commence until late in 2016. Pursuant to these agreements, we must deliver specific amounts of crude oil either from our own production or from oil we acquire from third parties. If we are unable to fulfill all of our contractual obligations, we may be required to pay penalties or damages pursuant to these agreements. As of September 30, 2016, our commitments over the next five years are as follows:
During the nine months ended September 30, 2016, the Company incurred transportation deficiency charges of $505,000 as we were unable to meet all of the obligations during the period. We anticipate that our current gross operated production will be near our delivery obligations for the fourth quarter of 2016. Office and yard leases In September 2016, the Company entered into a new sixty-five-month lease for the Company’s principal office space located in Denver, which is expected to commence in the first quarter of 2017. At the Company's current location, lease expense is approximately $50,000 per month which will continue until the new space is ready to be occupied. Rent under the new lease is approximately $62,000 per month. In July 2016, the Company entered into a field office lease in Greeley which requires monthly payments of $7,500 through October 2021. The Company intends to terminate its current Platteville office lease once the field personnel are fully relocated to the Greeley office, which is anticipated to occur by year end 2016. The Platteville lease expense is currently $15,000 per month on a month-to-month basis and is leased from two former members of the Company’s board of directors. Litigation From time to time, the Company is a party to various commercial and regulatory claims, pending or threatened legal action, and other proceedings that arise in the ordinary course of business. It is the opinion of management that none of the current matters of contention are reasonably likely to have a material adverse impact on our business, financial position, results of operations, or cash flows. On June 1, 2015, the Company filed a complaint in the District Court of Weld County, Colorado, against Briller, Inc., R.W.L. Enterprises, and Robert W. Loveless (together, the "Defendants") arising from a dispute concerning the validity of certain leases covering oil and gas properties in Weld County, Colorado. In June 2015, the Defendants removed the case to the Federal District Court of Colorado and filed an answer and counterclaims including claims for trespass. In May 2016, the Court ruled that the Defendants’ lease is valid. In October 2016, a jury heard evidence on the trespass issue and found against the Company. The Company and Defendants are in negotiations to settle this matter, but cannot guarantee that a settlement will be reached. The Company does not believe that any terms reached in a settlement would have a material effect on the Company. If no settlement is reached, the equitable remedy awarded to Defendants, if any, would be determined by the judge in the case. At this time, it is not possible to estimate what the equitable remedy, if any, would be. Environmental Due to the nature of the natural gas and oil industry, we are exposed to environmental risks. We have various policies and procedures to minimize and mitigate the risks from environmental contamination. We conduct periodic reviews and simulated drills to identify changes in our environmental risk profile. Liabilities are recorded when environmental damages resulting from past events are probable, and the costs can be reasonably estimated. As of September 30, 2016, we had accrued environmental liabilities in the amount of $0.4 million, included in accounts payable and accrued expenses on the condensed consolidated balance sheet. We are not aware of any environmental claims existing as of September 30, 2016 which have not been provided for or would otherwise have a material impact on our condensed consolidated financial statements; however, there can be no assurance that current regulatory requirements will not change or that unknown past non-compliance with environmental laws or unknown historic releases will not be discovered on our properties. In addition, in July 2016, we were informed by the Colorado Department of Public Health and Environment's Air Quality Control Commission's Air Pollution Control Division ("CDPHE") that it expects to expand its inspection of the Company's facilities in connection with a Compliance Advisory previously issued by the CDPHE and subsequent inspections conducted by the CDPHE. The Compliance Advisory alleged issues at five Company facilities regarding leakages of volatile organic compounds from storage tanks, all of which were promptly addressed. A subsequent August 2016 tolling agreement between the Company and CDPHE alleged similar storage tank leakage issues at three additional Company facilities, all of which were also promptly addressed. We are working with the CDPHE to respond to any continuing concerns, but have not yet been informed of additional facilities to be inspected or additional issues that have been identified. We cannot predict the outcome of this matter. |
Supplemental Schedule of Information to the Statements of Cash Flows |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Schedule of Information to the Statements of Cash Flows | Supplemental Schedule of Information to the Condensed Consolidated Statements of Cash Flows The following table supplements the cash flow information presented in the condensed consolidated financial statements for the periods presented (in thousands):
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Event On September 26, 2016, the Company entered into two purchase and sale agreements for certain assets for a total purchase price of $8.0 million, subject to customary closing conditions and purchase price adjustments. The acquired properties were comprised solely of oil and gas leasehold interests in the D-J Basin of Colorado. The acquisition's preliminary closing was on October 21, 2016 with an effective date of July 1, 2016. |
Organization and Summary of Significant Accounting Policies (Policies) |
9 Months Ended |
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Sep. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation: The Company operates in one business segment, and all of its operations are located in the United States of America. At the directive of the Securities and Exchange Commission ("SEC") to use "plain English" in public filings, the Company will use such terms as "we," "our," or the "Company" in place of Synergy Resources Corporation. When such terms are used in this manner throughout this document, they are in reference only to the corporation, Synergy Resources Corporation, and are not used in reference to the Board of Directors, corporate officers, management, or any individual employee or group of employees. The Company prepares its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("US GAAP"). Change of Year End: On February 25, 2016, the Company's board of directors approved a change in fiscal year end from August 31 to December 31 effective with the fiscal year ending December 31, 2016. The prior year figures presented herein have been recast to conform to the new fiscal year end. |
Interim Financial Information | Interim Financial Information: The unaudited condensed consolidated interim financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the SEC as promulgated in Rule 10-01 of Regulation S-X. The condensed consolidated balance sheet as of December 31, 2015 was derived from the Company's Transition Report on Form 10-K for the four months ended December 31, 2015 as filed with the SEC on April 22, 2016. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such SEC rules and regulations. The Company believes that the disclosures included are adequate to make the information presented not misleading and recommends that these condensed financial statements be read in conjunction with the audited financial statements and notes thereto for the four months ended December 31, 2015. In our opinion, the unaudited condensed consolidated financial statements contained herein reflect all adjustments, consisting solely of normal recurring items, which are necessary for the fair presentation of the Company's financial position, results of operations, and cash flows on a basis consistent with that of its prior audited financial statements. However, the results of operations for interim periods may not be indicative of results to be expected for the full fiscal year. |
Major Customers | Based on the current demand for oil and natural gas, the availability of other buyers, and the Company having the option to sell to other buyers if conditions warrant, the Company believes that its oil and gas production can be sold in the market in the event that it is not sold to the Company’s existing customers. Accounts receivable consist primarily of receivables from oil and gas sales and amounts due from other working interest owners who are liable for their proportionate share of well costs. The Company typically has the right to withhold future revenue disbursements to recover outstanding joint interest billings on outstanding receivables from joint interest owners. |
Goodwill | Goodwill: The Company’s goodwill represents the excess of the purchase price over the fair value of net identifiable assets acquired in a business combination. Goodwill is not amortized and is tested for impairment annually or whenever other circumstances or events indicate that the carrying amount of goodwill may not be recoverable. We have historically performed the annual impairment assessment as of August 31st. During 2016, we changed the date of our annual goodwill impairment assessment to October 1st. With respect to its annual goodwill testing date, management believes that this voluntary change in accounting method is preferable as it better aligns the annual impairment testing date with the Company’s new fiscal year end, which was also changed in 2016. This change in assessment date was applied prospectively and did not delay, accelerate or avoid a potential impairment charge. When evaluating goodwill for impairment, the Company may first perform an assessment of qualitative factors to determine if the fair value of the reporting unit is more-likely-than-not greater than its carrying amount. If, based on the review of the qualitative factors, the Company determines it is not more-likely-than-not that the fair value of a reporting unit is less than its carrying value, the required two-step impairment test can be bypassed. If the Company does not perform a qualitative assessment or if the fair value of the reporting unit is not more-likely-than-not greater than its carrying value, the Company must perform the first step of the two-step impairment test and calculate the estimated fair value of the reporting unit. If the carrying value of the reporting unit exceeds the estimated fair value, there is an indication that impairment may exist, and the second step must be performed to measure the amount of impairment loss. The amount of impairment for goodwill is measured as the amount by which the carrying amount of the goodwill exceeds the implied fair value of the goodwill. As a result of declining oil prices, the Company performed an interim goodwill test as of March 31, 2016 which did not result in an impairment. The Company utilized a market approach in estimating the fair value of the reporting unit. The primary assumptions used in the Company's impairment evaluations are based on the best available market information at the time and reflect significant management judgments. Changes in these assumptions or future economic conditions could impact the Company's conclusion regarding an impairment of goodwill and potentially result in a non-cash impairment loss in a future period. |
Recent Accounting Pronouncements | Recently Issued Accounting Pronouncements: We evaluate the pronouncements of various authoritative accounting organizations to determine the impact of new accounting pronouncements on us. In March 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"), which intends to improve the accounting for share-based payment transactions. The ASU changes several aspects of the accounting for share-based payment award transactions, including: (1) Accounting and Cash Flow Classification for Excess Tax Benefits and Deficiencies, (2) Forfeitures, and (3) Tax Withholding Requirements and Cash Flow Classification. ASU 2016-09 is effective for public businesses for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016, with early adoption permitted. We are currently evaluating the impact of the adoption on our condensed consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" ("ASU 2016-02"), which establishes a comprehensive new lease standard designed to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous US GAAP. ASU 2016-02 is effective for public businesses for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the impact of the adoption of this standard on our condensed consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09"), which establishes a comprehensive new revenue recognition standard designed to depict the transfer of goods or services to a customer in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In doing so, companies may need to use more judgment and make more estimates than under current revenue recognition guidance. ASU 2014-09 allows for the use of either the full or modified retrospective transition method, and the standard will be effective for annual reporting periods beginning after December 15, 2017 including interim periods within that period, with early adoption permitted for annual reporting periods beginning after December 15, 2016. We are currently evaluating which transition approach to use and the impact of the adoption of this standard on our condensed consolidated financial statements. There were various updates recently issued by the FASB, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on our reported financial position, results of operations, or cash flows. |
Organization and Summary of Significant Accounting Policies (Tables) |
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Schedule of Customers With Balances Greater Than 10% of Total Receivables | The Company sells production to a limited number of customers. Customers representing 10% or more of our oil and gas revenue for each of the periods presented are shown in the following table:
* less than 10% |
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Schedule of Customers With Balances Greater Than 10% of Total Receivables | Customers with balances greater than 10% of total receivable balances as of each of the periods presented are shown in the following table:
* less than 10% |
Property and Equipment (Tables) |
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Capitalized Costs | The capitalized costs related to the Company’s oil and gas producing activities were as follows (in thousands):
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Schedule of Capitalized Overhead | Under the full cost method of accounting, these expenses, in the amounts shown in the table below, were capitalized in the full cost pool (in thousands):
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Acquisitions and Divestitures (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GC Agreement [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Acquisition | Accordingly, the allocation will change as additional information becomes available and is assessed, and the impact of such changes may be material. The following table summarizes the preliminary purchase price and preliminary estimated fair values of assets acquired and liabilities assumed (in thousands):
(1) Proved oil and gas properties were measured primarily using an income approach. The fair value measurements of the oil and gas assets were based, in part, on significant inputs not observable in the market and thus represent a Level 3 measurement. The significant inputs included assumed future production profiles, commodity prices (mainly based on observable market inputs), a discount rate of 11.5%, and assumptions regarding the timing and amount of future development and operating costs. The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of the period, nor are they necessarily indicative of future results.
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K.P. Kauffman Company, Inc. [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Acquisition [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Acquisition | The following table summarizes the final purchase price and final fair values of assets acquired and liabilities assumed (in thousands):
(1) The fair value of the consideration attributed to the common stock under ASC 805 was based on the Company's closing stock price on the measurement date of October 20, 2015 (4,418,413 shares at $11.28 per share). (2) Proved oil and gas properties were measured primarily using an income approach. The fair value measurements of the oil and gas assets were based, in part, on significant inputs not observable in the market and thus represent a Level 3 measurement. The significant inputs included assumed future production profiles, commodity prices (mainly based on observable market inputs), a discount rate of 12%, and assumptions regarding the timing and amount of future development and operating costs. |
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Schedule of Pro Forma Results | The pro forma results are not necessarily indicative of what actually would have occurred if the acquisition had been completed as of the beginning of the period, nor are they necessarily indicative of future results.
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Depletion, depreciation, and accretion ("DDA") (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Costs and Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Depletion, Depreciation and Amortization | Depletion, depreciation, and accretion consisted of the following (in thousands):
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Asset Retirement Obligations (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Schedule of Asset Retirement Obligations | The following table summarizes the changes in asset retirement obligations associated with the Company's oil and gas properties (in thousands).
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Commodity Derivative Instruments (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Commodity Derivative Contracts | The Company’s commodity derivative contracts as of September 30, 2016 are summarized below:
Subsequent to September 30, 2016, the Company added the following positions:
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Schedule of Fair Value of Derivatives | The following table provides a reconciliation between the net assets and liabilities reflected on the accompanying condensed consolidated balance sheets and the potential effect of master netting arrangements on the fair value of the Company’s derivative contracts (in thousands):
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Schedule of Loss Recognized in Statements of Operations | The amount of gain (loss) recognized in the condensed consolidated statements of operations related to derivative financial instruments was as follows (in thousands):
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Schedule of Hedge Realized Gains (Losses) | The following table summarizes derivative realized gains and losses during the periods presented (in thousands):
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Fair Value Measurements (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assets and Liabilities Measured on a Recurring Basis | The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis as of September 30, 2016 and December 31, 2015 by level within the fair value hierarchy (in thousands):
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Interest Expense (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest and Debt Expense [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of the Components of Interest Expense | The components of interest expense are (in thousands):
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Shareholders' Equity (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Classes of Stock | The Company's classes of stock are summarized as follows:
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Weighted-Average Shares Outstanding (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | The following potentially dilutive securities outstanding for the periods presented were not included in the respective weighted-average shares outstanding-diluted calculation, as such securities had an anti-dilutive effect on earnings per share:
1 The number of awards assumes that the associated vesting condition is met at the target amount. The final number of shares of the Company’s common stock issued may vary depending on the performance multiplier, which ranges from zero to two, depending on the level of satisfaction of the vesting condition. |
Stock-Based Compensation (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock-based Compensation Expense Recognized | The amount of stock-based compensation was as follows (in thousands):
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Schedule of Employee Stock Options Granted During the Period | During the three and nine months ended September 30, 2016 and 2015, the Company granted the following stock options:
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Schedule of Assumptions Used In Valuing Stock Options | The assumptions used in valuing stock options granted during each of the periods presented were as follows:
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Summary of Stock Option Activity Under Stock Option | The following table summarizes activity for stock options for the nine months ended September 30, 2016:
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Schedule of Issued and Outstanding Stock Options | The following table summarizes information about issued and outstanding stock options as of September 30, 2016:
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Schedule of Unrecognized Compensation Cost | The estimated unrecognized compensation cost from stock options not vested as of September 30, 2016, which will be recognized ratably over the remaining vesting phase, is as follows:
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Summary of Restricted Stock Awards | The following table summarizes activity for restricted stock units and stock bonus awards for the nine months ended September 30, 2016:
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Restricted Stock [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Unrecognized Compensation Cost | The estimated unrecognized compensation cost from restricted stock units and stock bonus awards not vested as of September 30, 2016, which will be recognized ratably over the remaining vesting phase, is as follows:
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Performance Stock Units [Member] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Assumptions Used In Valuing Stock Options | The assumptions used in valuing the PSUs granted were as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Performance Share Units | A summary of the status and activity of PSUs is presented in the following table:
1 The number of awards assumes that the associated vesting condition is met at the target amount. The final number of shares of the Company’s common stock issued may vary depending on the performance multiplier, which ranges from zero to two, depending on the level of satisfaction of the vesting condition. |
Other Commitments and Contingencies (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Fiscal Year Maturity Schedule of Contractual Obligations | As of September 30, 2016, our commitments over the next five years are as follows:
|
Supplemental Schedule of Information to the Statements of Cash Flows (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Cash Flow Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Supplemental Information to the Statements of Cash Flows | The following table supplements the cash flow information presented in the condensed consolidated financial statements for the periods presented (in thousands):
|
Property and Equipment (Narrative) (Details) $ in Thousands |
3 Months Ended | 9 Months Ended | ||||
---|---|---|---|---|---|---|
Sep. 30, 2016
USD ($)
$ / bbl
$ / Mcf
|
Sep. 30, 2015
USD ($)
|
Nov. 30, 2014
USD ($)
|
Sep. 30, 2016
USD ($)
$ / bbl
$ / Mcf
|
Sep. 30, 2015
USD ($)
|
Jun. 30, 2016
$ / bbl
$ / Mcf
|
|
Reserve Quantities [Line Items] | ||||||
Full cost ceiling impairment | $ 25,453 | $ 96,340 | $ 215,223 | $ 99,340 | ||
Full cost pool | $ 0 | |||||
Oil [Member] | ||||||
Reserve Quantities [Line Items] | ||||||
Prices per unit | $ / bbl | 31.95 | 31.95 | 33.82 | |||
Prices per unit, percentage change | (6.00%) | |||||
Natural Gas [Member] | ||||||
Reserve Quantities [Line Items] | ||||||
Prices per unit | $ / Mcf | 2.21 | 2.21 | 2.16 | |||
Prices per unit, percentage change | 2.00% |
Property and Equipment (Schedule of Capitalized Overhead) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Property, Plant and Equipment [Abstract] | ||||
Capitalized overhead | $ 1,757 | $ 589 | $ 4,745 | $ 1,640 |
Acquisitions and Divestitures (Schedule of Pro Forma Results) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
GC Agreement [Member] | D-J Basin [Member] | ||||
Business Acquisition [Line Items] | ||||
Oil and gas revenues | $ 26,234 | $ 36,481 | $ 71,940 | $ 89,998 |
Net loss | $ (19,241) | $ (79,471) | $ (227,479) | $ (87,104) |
Net loss per common share | ||||
Basic (in dollars per share) | $ (0.10) | $ (0.44) | $ (1.14) | $ (0.49) |
Diluted (in dollars per share) | $ (0.10) | $ (0.44) | $ (1.14) | $ (0.49) |
K.P. Kauffman Company, Inc. [Member] | ||||
Business Acquisition [Line Items] | ||||
Oil and gas revenues | $ 35,785 | $ 90,676 | ||
Net loss | $ (77,556) | $ (82,923) | ||
Net loss per common share | ||||
Basic (in dollars per share) | $ (0.71) | $ (0.78) | ||
Diluted (in dollars per share) | $ (0.71) | $ (0.78) |
Depletion, depreciation, and accretion ("DDA") (Details) Boe in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016
USD ($)
Boe
$ / Boe
|
Sep. 30, 2015
USD ($)
Boe
$ / Boe
|
Sep. 30, 2016
USD ($)
Boe
$ / Boe
|
Sep. 30, 2015
USD ($)
Boe
$ / Boe
|
|
Other Costs and Disclosures [Abstract] | ||||
Depletion of oil and gas properties | $ 9,273 | $ 18,148 | $ 31,981 | $ 47,562 |
Depreciation and accretion | 362 | 269 | 1,020 | 669 |
Total DDA Expense | $ 9,635 | $ 18,417 | $ 33,001 | $ 48,231 |
Production of BOE (in Boe's) | Boe | 993 | 1,102 | 3,050 | 2,490 |
Percentage of total reserves | 0.80% | 1.90% | 2.40% | 4.30% |
DDA expense per BOE (in dollars per BOE) | $ / Boe | 9.70 | 16.71 | 10.82 | 19.37 |
Asset Retirement Obligations (Schedule of Asset Retirement Obligations) (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Dec. 31, 2015 |
|
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward] | ||
Beginning asset retirement obligation | $ 13,400 | |
Obligations incurred with development activities | 366 | |
Obligations assumed with acquisitions | 2,046 | |
Accretion expense | (755) | |
Obligations discharged with asset retirements and divestitures | (3,997) | |
Revisions in previous estimates | 1,278 | |
Ending asset retirement obligation | 13,848 | |
Less, current portion | (2,319) | |
Long-term portion | $ 11,529 | $ 13,400 |
Revolving Credit Facility (Details) |
9 Months Ended | |||
---|---|---|---|---|
Sep. 30, 2016
USD ($)
|
Sep. 30, 2015 |
Oct. 14, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
|
Line of Credit Facility [Line Items] | ||||
Amount outstanding | $ 0 | $ 78,000,000 | ||
Line of Credit [Member] | Revolving Credit Facility [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Total borrowing commitment | 500,000,000 | |||
Borrowing base | 145,000,000 | |||
Amount outstanding | $ 0 | |||
Average interest rate | 2.63% | 2.50% | ||
Maximum funded debt to EBITDAX | 4.0 | |||
Current ratio covenant | 1.0 | |||
Line of Credit [Member] | Revolving Credit Facility [Member] | Subsequent Event [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Borrowing base | $ 160,000,000 | |||
Line of Credit [Member] | Letter of Credit [Member] | ||||
Line of Credit Facility [Line Items] | ||||
Amount outstanding | $ 500,000 |
Notes Payable (Details) - Senior Notes [Member] - 9% Senior Notes Due 2021 [Member] |
Jun. 14, 2016
USD ($)
|
---|---|
Debt Instrument [Line Items] | |
Debt instrument principal amount | $ 80,000,000 |
Debt instrument stated interest rate (percent) | 9.00% |
Proceeds from sale of Senior Notes | $ 75,200,000 |
Debt issuance costs | $ 4,800,000 |
2018 [Member] | |
Debt Instrument [Line Items] | |
Redemption price (percent) | 104.50% |
2019 [Member] | |
Debt Instrument [Line Items] | |
Redemption price (percent) | 102.25% |
2020 [Member] | |
Debt Instrument [Line Items] | |
Redemption price (percent) | 100.00% |
Prior to December 14, 2018 [Member] | |
Debt Instrument [Line Items] | |
Redemption price (percent) | 109.00% |
Amount of principal that can be redeemed (percent) | 35.00% |
Commodity Derivative Instruments (Schedule of Gain (Loss) Recognized in Statements of Operations) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||
Realized gain (loss) on commodity derivatives | $ (13) | $ 9,579 | $ 2,868 | $ 26,896 |
Unrealized gain (loss) on commodity derivatives | 420 | (2,960) | (6,485) | (21,199) |
Total gain (loss) | $ 407 | $ 6,619 | $ (3,617) | $ 5,697 |
Commodity Derivative Instruments (Derivative Gains (Losses) Realized) (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||
Monthly settlement | $ 497 | $ 986 | $ 4,398 | $ 7,834 |
Previously incurred premiums attributable to settled commodity contracts | (510) | (599) | (1,530) | (1,447) |
Early liquidation | 0 | 9,192 | 0 | 20,509 |
Total realized gain (loss) | $ (13) | $ 9,579 | $ 2,868 | $ 26,896 |
Commodity Derivative Instruments (Narrative) (Details) $ in Millions |
9 Months Ended | |
---|---|---|
Sep. 30, 2016
USD ($)
counterparty
$ / bbl
bbl
|
Dec. 31, 2015
counterparty
|
|
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Number of counterparties | 5 | |
Average strike price of liquidated swaps (in dollars per share) | $ / bbl | 82.79 | |
Number of barrels liquidated | bbl | 372,500 | |
Cash settlements | $ | $ 20.5 | |
Credit Facility Syndicate [Member] | ||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||
Number of counterparties | 2 | 2 |
Fair Value Measurements (Details) - USD ($) $ in Thousands |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Level 2 [Member] | Estimate of Fair Value Measurement [Member] | ||
Financial Liabilities: | ||
Fair value of notes payable | $ 78,000 | |
Recurring [Member] | ||
Financial Assets: | ||
Commodity derivative asset | 1,632 | $ 9,568 |
Financial Liabilities: | ||
Commodity derivative liability | 80 | 0 |
Recurring [Member] | Level 1 [Member] | ||
Financial Assets: | ||
Commodity derivative asset | 0 | 0 |
Financial Liabilities: | ||
Commodity derivative liability | 0 | 0 |
Recurring [Member] | Level 2 [Member] | ||
Financial Assets: | ||
Commodity derivative asset | 1,632 | 9,568 |
Financial Liabilities: | ||
Commodity derivative liability | 80 | 0 |
Recurring [Member] | Level 3 [Member] | ||
Financial Assets: | ||
Commodity derivative asset | 0 | 0 |
Financial Liabilities: | ||
Commodity derivative liability | $ 0 | $ 0 |
Interest Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Debt Instrument [Line Items] | ||||
Amortization of issuance costs | $ 467 | $ 249 | $ 1,076 | $ 740 |
Less, interest capitalized | (2,267) | (691) | (3,350) | (2,753) |
Interest expense, net | 0 | 87 | 0 | 247 |
Notes payable [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest from debt | 1,800 | 0 | 2,120 | 0 |
Revolving bank credit facility [Member] | Line of Credit [Member] | ||||
Debt Instrument [Line Items] | ||||
Interest from debt | $ 0 | $ 529 | $ 154 | $ 2,260 |
Shareholders' Equity (Common Stock Transactions) (Details) - $ / shares |
Sep. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Classes of stock | ||
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, par value per share (in dollars per share) | $ 0.01 | $ 0.01 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, shares authorized | 300,000,000 | 300,000,000 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares issued | 200,537,625 | 110,033,601 |
Common stock, shares outstanding | 200,537,625 | 110,033,601 |
Shareholders' Equity (Sale of Common Stock) (Details) - USD ($) $ / shares in Units, $ in Millions |
1 Months Ended | ||||
---|---|---|---|---|---|
Apr. 12, 2016 |
Jan. 26, 2016 |
May 31, 2016 |
Apr. 30, 2016 |
Jan. 31, 2016 |
|
Class of Stock [Line Items] | |||||
Number of common shares sold | 22,425,000 | 16,100,000 | 51,750,000 | ||
Net proceeds | $ 164.8 | $ 89.2 | $ 289.4 | ||
IPO [Member] | |||||
Class of Stock [Line Items] | |||||
Number of common shares sold | 45,000,000 | 19,500,000 | 14,000,000 | ||
Price per share sold (in dollars per share) | $ 5.597 | $ 7.3535 | $ 5.545 | ||
Over-Allotment Option [Member] | |||||
Class of Stock [Line Items] | |||||
Number of common shares sold | 6,750,000 | 2,925,000 | 2,100,000 | ||
Over-allotment exercise period | 30 days | 30 days | 30 days |
Stock-Based Compensation (Non-Qualified Stock Options Granted) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of options to purchase common shares (shares) | 350,000 | 450,000 | 944,500.0 | 2,482,500.0 |
Weighted-average exercise price (in dollars per share) | $ 6.55 | $ 10.31 | $ 7.20 | $ 11.33 |
Term | 10 years | 10 years | 10 years | 10 years |
Vesting Period | 5 years | |||
Fair Value | $ 1,253 | $ 2,377 | $ 3,381 | $ 13,692 |
Minimum [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting Period | 3 years | 3 years | 1 year | |
Maximum [Member] | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting Period | 5 years | 5 years | 5 years |
Stock-Based Compensation (Stock Option Assumptions) (Details) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term | 6 years 4 months 23 days | 6 years 5 months 16 days |
Expected volatility (percent) | 55.00% | 48.00% |
Expected dividend yield (percent) | 0.00% | 0.00% |
Performance Stock Units [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term | 2 years 8 months 26 days | |
Expected volatility (percent) | 58.00% | |
Risk-free rate (percent) | 0.87% | |
Minimum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free rate (percent) | 1.25% | 1.35% |
Maximum [Member] | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Risk-free rate (percent) | 1.75% | 2.02% |
Income Taxes (Narrative) (Details) |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Income Tax Disclosure [Abstract] | ||
Effective rate expressed as a percentage | 0.00% | 14.00% |
Related Party Transactions (Details) - Director [Member] |
9 Months Ended |
---|---|
Sep. 30, 2016
USD ($)
| |
Related Party Transaction [Line Items] | |
Monthly wages | $ 70,000 |
Salary expense | $ 350,000 |
Other Commitments and Contingencies (Volume Commitments) (Details) bbl / yr in Thousands |
Dec. 31, 2015
bbl / yr
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Remainder of 2016 | 704 |
2017 | 3,944 |
2018 | 4,255 |
2019 | 4,255 |
2020 | 3,700 |
Thereafter | 1,672 |
Total | 18,530 |
Supplemental Schedule of Information to the Statements of Cash Flows (Details) - USD ($) $ in Thousands |
9 Months Ended | |
---|---|---|
Sep. 30, 2016 |
Sep. 30, 2015 |
|
Supplemental cash flow information: | ||
Interest paid | $ 159 | $ 2,328 |
Income taxes paid | 106 | 92 |
Non-cash investing and financing activities: | ||
Accrued well costs as of period end | 32,299 | 26,997 |
Assets acquired in exchange for common stock | 0 | 9,097 |
Asset retirement obligations incurred with development activities | 366 | 4,806 |
Asset retirement obligations assumed with acquisitions | 2,046 | 0 |
Obligations discharged with asset retirements and divestitures | $ (3,997) | $ 0 |
Subsequent Events (Details) - Series of Individually Immaterial Business Acquisitions [Member] $ in Millions |
1 Months Ended | ||
---|---|---|---|
Sep. 26, 2016
USD ($)
acquisition
|
Feb. 04, 2016
USD ($)
|
Aug. 31, 2016
USD ($)
acquisition
|
|
Subsequent Event [Line Items] | |||
Number of acquisitions | acquisition | 2 | ||
Total purchase price | $ | $ 10.0 | $ 3.9 | |
D-J Basin [Member] | |||
Subsequent Event [Line Items] | |||
Number of acquisitions | acquisition | 2 | ||
Total purchase price | $ | $ 8.0 |
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