8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  February 25, 2014

ATHLON ENERGY INC.

(Exact name of registrant as specified in its charter)

Delaware	001-36026	46-2549833
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification No.)

420 Throckmorton Street, Suite 1200, Fort Worth, Texas	76102
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:  (817) 984-8200

Not applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02Results of Operations and Financial Condition.

On February 25, 2014, Athlon Energy Inc. (“Athlon”) issued a press release announcing, among other things, (1) its unaudited fourth quarter and full year of 2013 results and (2) estimated proved oil and natural gas reserves as of December 31, 2013.  A copy of the press release is furnished as Exhibit 99.1 to this Form 8-K.

The attached press release includes, among other things, the following reserve and financial measures:

·Reserve Replacement Ratio:  Reserve replacement ratio calculated as the sum of reserve extensions, discoveries, and revisions of previous estimates divided by production.  The following table shows the calculation of reserve replacement ratio for 2013 (unaudited):

Extensions and discoveries (MBOE)	41,031
Revisions of previous estimates (MBOE)	3,873
Total development reserve additions (MBOE)	44,904
Divided by production (MBOE)	4,458
Reserve replacement ratio	10.1

Given the inherent decline of reserves resulting from production, an oil and natural gas company must more than offset produced volumes with new reserves in order to grow.  Athlon’s management uses the reserve replacement ratio as an indicator of its ability to replenish annual production volumes and grow its reserves.  Athlon’s management believes that reserve replacement ratio is relevant and useful information that is commonly used by analysts, investors, and other interested parties in the oil and gas industry as a means of evaluating the operational performance and prospects of entities engaged in the production and sale of depleting natural resources.  It should be noted that the reserve replacement ratio is a statistical indicator that has limitations.  As an annual measure, the reserve replacement ratio is limited because it typically varies widely based on the extent and timing of new discoveries and property acquisitions.  Its predictive and comparative value is also limited for the same reasons.  In addition, since the reserve replacement ratio does not consider the cost or timing of future production of new reserves, it cannot be used as a measure of value creation.  The reserve replacement ratio does not distinguish between changes in reserve quantities that are developed and those that will require additional time and funding to develop.

·Drill Bit Finding and Development (“F&D”) Cost:  Drill bit F&D cost was calculated as the sum of development and exploration costs (excluding asset retirement obligations incurred) divided by the sum of reserve extensions, discoveries, and revisions of previous estimates.  The following table shows the calculation for drill bit F&D cost for 2013 (unaudited):

Extensions and discoveries (MBOE)	41,031
Revisions of previous estimates (MBOE)	3,873
Total development reserve additions (MBOE)	44,904
Development costs incurred (in thousands)	$	180,011
Exploration costs incurred (in thousands)	218,680
Total development and exploration costs incurred (in thousands)	398,691
Less: asset retirement obligations incurred (in thousands)	(1,013		)
Total development and exploration costs incurred,
excluding asset retirement obligations (in thousands)	397,678
Divided by total development reserve additions (MBOE)	44,904
Drill bit F&D cost per BOE	$	8.86

Consistent with industry practice, future capital costs to develop proved undeveloped reserves were not included in the calculation of costs incurred.  Athlon’s calculation of reserve replacement cost includes costs and reserve additions related to the purchase of proved reserves.  The methods used to calculate Athlon’s drill bit F&D cost may differ significantly from methods used by other companies to compute similar measures.  As a result, Athlon’s drill bit F&D cost may not be comparable to similar measures provided by other companies.  Athlon believes that providing drill bit F&D cost is useful in evaluating the total cost of reserves additions.  However, this measure is provided in addition to, and not as an alternative for, and should be read in conjunction with, the information contained in Athlon’s consolidated financial statements prepared in accordance with generally accepted accounting principles.  Due to various factors, including timing differences in reserves additions and the related costs to develop those reserves, drill bit F&D cost does not necessarily reflect precisely the costs associated with particular reserves.  As a result of various factors that could materially affect the timing and amounts of future increases in reserves and the timing and amounts of future costs, Athlon cannot assure you that its future drill bit F&D cost will not differ materially from those presented herein.

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·Present value of future net revenues (“PV-10”):  PV-10 is the estimated future gross revenue to be generated from the production of proved reserves, net of estimated production and future development and abandonment costs, using prices and costs in effect at the determination date, before income taxes, and without giving effect to non-property related expenses, discounted to a present value using an annual discount rate of 10% in accordance with the guidelines of the SEC.  The following table provides a reconciliation of PV-10 to standardized measure of discounted future net cash flows as of December 31, 2013 (in millions):

PV-10 of proved reserves	$	1,635.5
Less: present value of future income tax discounted at 10%	(535.8		)
Standardized measure of discounted future net cash flows	$	1,099.7

Athlon believes that the presentation of PV-10 is relevant and useful to investors because it presents the relative monetary significance of Athlon’s properties regardless of tax structure.  Further, investors may utilize the measure as a basis for comparison of the relative size and value of our proved reserves to other companies.  Athlon uses this measure when assessing the potential return on investment related to its oil and natural gas properties.  However, PV-10 is not equal to, nor a substitute for, the standardized measure of discounted future net cash flows.  Athlon’s PV-10 and the standardized measure of discounted future net cash flows do not purport to present the fair value of Athlon’s proved reserves.

In accordance with General Instruction B.2 of Form 8-K, the press release is deemed to be “furnished” and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall such information and Exhibit be deemed incorporated by reference into any filing under the Securities Act or the Securities Exchange Act of 1934, each as amended.

Item 9.01Financial Statements and Exhibits.

(d)Exhibits.

99.1Press Release dated February 25, 2014 regarding unaudited fourth quarter and full year of 2013 results and year-end 2013 proved reserves.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	ATHLON ENERGY INC.
Date:     February 26, 2014	By:	/s/ William B. D. Butler
		William B. D. Butler
		Vice President—Chief Financial Officer and
		Principal Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Press Release dated February 25, 2014 regarding unaudited fourth quarter and full year of 2013 results and year-end 2013 proved reserves.

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EX-99.1

Exhibit 99.1

ATHLON ENERGY ANNOUNCES 2013 FINANICAL RESULTS

AND PROVIDES OPERATIONAL UPDATE

FORT WORTH, Texas—(BUSINESS WIRE)—February 25, 2014

Athlon Energy (NYSE: ATHL) (“Athlon” or the “Company”) today reported fourth quarter and full-year 2013 financial results, announced year-end 2013 proved reserves, and provided an operational update on vertical and horizontal drilling results.

Company Highlights

·Adjusted EBITDA increased 103% to $70.2 million for the fourth quarter 2013 as compared to $34.6 million for the fourth quarter 2012.

·Discretionary cash flow increased 101% to $60.4 million for the fourth quarter 2013 as compared to $30.1 million for the fourth quarter 2012.

·Average daily production volumes for the fourth quarter 2013 increased 69% to 14,689 BOE/D as compared to 8,710 BOE/D produced in the fourth quarter 2012, despite the negative impact of severe winter weather, with oil volumes growing 83%.

·Direct LOE decreased 24% to $7.22 per BOE for the fourth quarter 2013 from $9.55 per BOE for the fourth quarter 2012.

·Year-end 2013 total proved reserves were 127.3 MMBOE, up 48% as compared with 86.0 MMBOE year-end 2012.

·Year-end 2013 proved developed reserves were 46.7 MMBOE (37% of total proved reserves), up 82% from 25.7 MMBOE year-end 2012 (30% of total proved reserves).

·Athlon’s 2013 exploration and development program replaced 44.9 MMBOE (over 10x 2013 production) at a drill bit F&D cost of $8.86 per BOE.

·Athlon’s first horizontal well in Glasscock County, the Wilkinson 31 #8H, produced a peak 3-phase 24-hour IP rate of 1,734 BOE/D (71% oil) and a peak 3-phase 30-day IP rate of 1,562 BOE/D (69% oil).

·Athlon closed on its previously announced $88 million acquisition and signed additional working interests for $8.7 million.

“We are proud to report exceptional financial results for the fourth quarter and full-year 2013, as well as outstanding growth in our year-end proved reserves.  Athlon’s robust economic returns on our capital investments delivered record financial performance for our investors this year. Low-risk vertical development coupled with high-impact horizontal upsides give us a stable base to deliver exceptional results for many years to come,” noted Bob Reeves, Chairman, President, and Chief Executive Officer.  “We see 2014 as yet another year of tremendous returns that leads to fast-paced organic growth. With a strong balance sheet, we have the ability to accelerate drilling later this year or may seek to complement our assets through opportunistic acquisitions within our core operating areas.”

Fourth Quarter 2013 Financial Update

Athlon’s total revenues increased 98% to $91.0 million in the fourth quarter 2013 as compared to $46.0 million in the fourth quarter 2012.  Oil revenues comprised 84% and 80% of total revenues during the respective periods.  Athlon’s average wellhead oil price, which represents the net price received for oil production, rose to $93.58 per Bbl in the fourth quarter 2013 from $82.11 per Bbl in the fourth quarter 2012.  Athlon’s average oil differential to NYMEX WTI tightened to $3.92 per Bbl in the fourth quarter 2013 from $6.09 per Bbl in the fourth quarter 2012.  Athlon’s realized natural gas price increased to $3.25 per Mcf in the fourth quarter 2013 from $3.10 per Mcf in the fourth quarter 2012.  Athlon realized a $0.36 per Mcf differential to NYMEX Henry Hub in the fourth quarter 2013 compared to $0.30 per Mcf in the fourth quarter 2012.  Fourth quarter 2013 realized NGL prices increased to $33.25 per Bbl from $33.09 per Bbl during the fourth quarter 2012.

Direct lease operating expenses (“LOE”) were $9.8 million ($7.22 per barrel of oil equivalent or “BOE”) for the fourth quarter 2013 versus $7.6 million ($9.55 per BOE) for the fourth quarter 2012.  Athlon was able to realize lower per unit production expenses despite severe winter weather that resulted in widespread power outages and interruptions at various production facilities.

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Production, severance, and ad valorem taxes were $5.7 million for the fourth quarter 2013 versus $2.8 million for the fourth quarter 2012.  As a percentage of wellhead revenues, taxes were 6.2% in the fourth quarter 2013 as compared to 6.1% in the fourth quarter 2012.

Cash general and administrative (“G&A”) expenses for the fourth quarter 2013 were $4.5 million ($3.36 per BOE), excluding acquisition and other non-recurring costs of $0.2 million, versus $2.4 million cash G&A expenses ($3.04 per BOE) for the fourth quarter 2012, excluding $0.9 million in acquisition costs.  The increase in G&A was primarily due to higher employee count and additional public company related expenses.

Derivative fair value gains for the fourth quarter 2013 were $3.2 million versus a loss of $0.3 million for the fourth quarter 2012.  Since Athlon does not use hedge accounting, changes in the fair value of its derivatives are recognized as gains and losses in the current period.  Included in these gains were total cash settlements paid on derivatives, adjusted for recovered premiums, during the fourth quarter 2013 of $0.9 million as compared to total cash settlements received on derivatives, adjusted for recovered premiums, of $1.4 million during the fourth quarter 2012.

In the fourth quarter 2013, Athlon recorded an income tax provision of $12.3 million on pretax income of $35.1 million compared to an income tax provision of $0.4 million on pretax income of $10.9 million in the fourth quarter 2012.  Prior to April 26, 2013, Athlon Holdings LP, Athlon’s accounting predecessor, was a limited partnership not subject to federal income taxes. Athlon expects its effective tax rate to be approximately 37.5% for the first quarter 2014.

Net income attributable to stockholders for the fourth quarter 2013 was $22.0 million, or $0.27 per diluted share, as compared to $10.5 million, or $0.15 per diluted share for the fourth quarter 2012.  Net income excluding certain items increased 46% to $19.6 million, or $0.24 per diluted share, for the fourth quarter 2013 as compared to $13.5 million, or $0.20 per diluted share, for the fourth quarter 2012.

Adjusted EBITDA, Discretionary cash flow, and Net income excluding certain items, are non-GAAP financial measures, which are defined and reconciled to their most directly comparable GAAP measures in the attached financial schedules.

Proved Reserves and Finding Costs

Athlon’s total proved reserves at December 31, 2013 as evaluated by Cawley, Gillespie & Associates (“CG&A”) were 127.3 million barrels of oil equivalent (“MMBOE”), up 48% from year-end 2012.  Proved reserves were calculated utilizing twelve-month first-day-of-the-month average price realizations during 2013 of $92.27 per Bbl for oil and $3.29 per Mcf for natural gas. Oil reserves totaled 71.2 million barrels, and combined with natural gas liquids of 30.7 million barrels, equaled 80% of total reserves.  Proved developed (“PD”) reserves were 46.7 MMBOE (37% of total proved reserves) up 82% from year-end 2012.  The Company’s proved undeveloped (“PUD”) locations were comprised of 659 gross (632.3 net) potential vertical drilling locations. Proved reserves included four horizontal wells categorized as PD locations and no horizontals included in the PUD category.  Athlon’s present value (“PV-10”) associated with proved reserves was $1.6 billion (61% of which was attributed to PD reserves), up approximately 89% from year-end 2012.

The following table summarizes the changes in Athlon’s estimated net proved reserves for 2013:

			Natural		Natural		Oil
	Oil		Gas		Gas Liquids		Equivalent
	(MBbls)		(MMcf)		(MBbls)		(MBOE)
Balance, December 31, 2012	49,423		103,683		19,275		85,979
Purchases of minerals-in-place	495		877		197		838
Extensions and discoveries	23,895		45,424		9,566		41,031
Revisions of previous estimates	43		7,149		2,638		3,874
Production	(2,682	)	(4,927	)	(954	)	(4,458	)
Balance, December 31, 2013	71,174		152,206		30,722		127,264

Athlon’s exploration and development program added 44.9 MMBOE, replacing 10.1x of 2013 production (as defined by the sum of reserve extensions, discoveries, and revisions, divided by annual production). The Company’s exploration and development costs (excluding asset retirement obligations) in 2013 were $397.7 million, resulting in a drill bit finding and development (“F&D”) cost of $8.86 per BOE (defined as exploration and development costs divided by the sum of reserve extensions, discoveries, and revisions).

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The following table summarizes Athlon’s development reserve additions, development and exploration costs incurred, and drill bit F&D cost for 2013:

Extensions and discoveries (MBOE)	41,031
Revisions of previous estimates (MBOE)	3,873
Total development reserve additions (MBOE)	44,904
Development costs incurred (in thousands)	$	180,011
Exploration costs incurred (in thousands)	218,680
Total development and exploration costs incurred (in thousands)	398,691
Less: asset retirement obligations incurred (in thousands)	(1,013		)
Total development and exploration costs incurred, excluding asset retirement obligations (in thousands)	397,678
Divided by total development reserve additions (MBOE)	44,904
Drill Bit F&D cost per BOE	$	8.86

Operational Update

During the fourth quarter 2013, Athlon drilled 46 gross operated vertical wells (45 net) while operating seven vertical rigs, which was unchanged from third quarter and two more wells than budgeted despite severe winter weather during the quarter.  The Company exited 2013 with eight operated vertical rigs and, in January 2014, drilled its 350th gross vertical well since inception. During the fourth quarter 2013, Athlon also drilled 2 gross horizontal wells (1.6 net) in Glasscock County while operating one horizontal rig and completed 2 gross horizontal wells (2 net) in Midland County. The Company incurred $118.8 million in development capital expenditures during the fourth quarter 2013.

Athlon had previously disclosed a peak 3-phase 20-day initial production (“IP”) rate of 1,759 BOE/D (71% oil) on its second horizontal well in Midland County, Davidson 27C #12H (100% WI), which had not yet reached its peak 30-day rate. The well was completed using a 30-stage hybrid fracture stimulation over a perforated lateral length of 7,426 ft. drilled in the Wolfcamp B zone.  The well has now achieved a peak 3-phase 30-day IP rate of 1,717 BOE/D (69% oil), which the Company believes represents one of the highest normalized 30-day IP rates of any reported horizontal Wolfcamp well to-date in the Basin.

Athlon’s first horizontal well in Glasscock County, Wilkinson 31 #8H, was drilled and completed in partnership with Laredo Petroleum Inc. in order to optimize horizontal development economics with longer lateral lengths, whereby the Company retained a 58% operated working interest. The well was drilled in the Wolfcamp A zone and completed using a 30-stage hybrid fracture stimulation over a perforated lateral length of 7,132 ft. The Wilkinson 31 #8H achieved a peak 3-phase 24-hour IP rate of 1,734 BOE/D (71% oil) producing on gas lift and a peak 3-phase 30-day IP rate of 1,562 BOE/D (69% oil). The Company believes that this represents the highest 30-day IP rate of any reported horizontal well to-date on the east-side of the Midland Basin.

The second Glasscock County well, Lawson #2703H (100% WI), was successfully drilled to a lateral length of 8,096 ft. in the Wolfcamp A zone. The well was completed utilizing a 30-stage hybrid fracture stimulation over a perforated lateral length of 7,618 ft.  The well has recently been placed on production and the Company is encouraged by early results.

In Howard County, Abel 18 #3H (100% WI) was successfully drilled and cased to a lateral length of 8,294 ft. in the Wolfcamp A zone, and is currently waiting on completion.  Athlon’s horizontal rig is currently drilling Williams 17 #3H (100% WI) targeting the Wolfcamp A, which represents the Company’s sixth overall horizontal well and second well in Howard County.  Afterward, the rig will drill a third horizontal well targeting the Wolfcamp A zone in Howard County.  The Company expects the rig to then return to Glasscock County during the second quarter 2014 to drill multiple wells to protect lease boundaries from competitive development by operators directly offsetting Athlon’s acreage.

Athlon continues to perform extensive evaluation on these early horizontal wells to enhance future well performance, which results in additional associated costs. The Company is currently in negotiations to contract a second horizontal drilling rig and expects delivery in the first part of the second quarter 2014.

Acquisition Update

Athlon closed its January announced $88 million acquisition concentrated in Midland, Upton, Martin, and Andrews counties on February 6, 2014. The Company has agreed to acquire additional working interests in the properties, partially offset by the exercise of certain preferential rights, with the net effect of an $8.7 million purchase price increase. This represents an additional 770 net acres.

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Liquidity Update

Athlon had a pro forma total liquidity position of $541.3 million at year-end 2013.  This consisted of $113.0 million in cash on hand as of December 31, 2013, $525 million of undrawn borrowing capacity under its credit facility, and is pro forma for the January announced acquisition and additional rights of $96.7 million. The Company believes its liquidity is sufficient to meet current cash requirements. Athlon expects its borrowing base to increase substantially at its next redetermination in April 2014 as a result of the Company’s successful drilling program as evidenced in the year-end 2013 reserve report and the recent acquisition.

Conference Call Details

Title: Athlon Energy Q4 2013 Earnings Conference Call

Date and Time: Wednesday, February 26, 2014 at 9:30 a.m. Central Time

Webcast: Listen to the live broadcast via http://www.athlonenergy.com

Telephone: Dial 1-888-679-8035 ten minutes prior to the scheduled time and request the conference call by supplying the title specified above or ID 75346082.

A replay of the conference call will be archived and available via Athlon’s website at the above web address or by dialing 1-888-286-8010 and entering conference ID 59652576.  The replay will be available through March 12, 2014.  International callers can dial 617-213-4848 for the live broadcast or 617-801-6888 for the replay.

About Athlon Energy

Athlon Energy is an independent exploration and production company focused on the acquisition, development, and exploitation of unconventional oil and liquids-rich natural gas reserves in the Permian Basin.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements contained in this press release constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements, including those with respect to Athlon’s drilling plan, capital budget, expected borrowing base increases, and effective tax rates represent Athlon’s expectations or beliefs concerning future events, and it is possible that the results described in this press release will not be achieved.  These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of Athlon’s control, which could cause actual results to differ materially from the results discussed in the forward-looking statements.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, Athlon does not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events, or otherwise.  New factors emerge from time to time, and it is not possible for Athlon to predict all such factors.  When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in Athlon’s filings with the United States Securities and Exchange Commission.  The risk factors and other factors noted in Athlon’s filings could cause Athlon’s actual results to differ materially from those contained in any forward-looking statement.

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Athlon Energy Inc.

Condensed Consolidated Statements of Operations

(unaudited)

	Three Months Ended						Year Ended
	December 31,						December 31,
	2013			2012			2013			2012
	(in thousands, except per share amounts)
Revenues:
Oil	$	76,672		$	36,674		$	252,606		$	128,081
Natural gas	4,726			3,092			16,620			8,415
NGLs	9,639			6,236			30,147			20,615
Total revenues	91,037			46,002			299,373			157,111
Expenses:
Production:
Lease operating - direct	9,752			7,649			33,323			25,474
Lease operating - non-cash equity-based compensation	250			8			453			29
Production, severance, and ad valorem taxes	5,668			2,821			19,048			10,438
Processing, gathering, and overhead	53			29			222			84
Depletion, depreciation, and amortization	25,149			16,686			87,171			54,456
General and administrative	8,029			3,342			21,752			10,554
Contract termination fee	—			—			2,408			—
Derivative fair value loss (gain)	(3,216		)	297			18,115			(9,293		)
Accretion of discount on asset retirement obligations	190			135			675			478
Total expenses	45,875			30,967			183,167			92,220
Operating income	45,162			15,035			116,206			64,891
Other income (expenses):
Interest	(10,074		)	(4,147		)	(36,669		)	(9,951		)
Other	5			—			35			2
Total other expenses	(10,069		)	(4,147		)	(36,634		)	(9,949		)
Income before income taxes	35,093			10,888			79,572			54,942
Income tax provision	12,345			382			19,150			1,928
Consolidated net income	22,748			10,506			60,422			53,014
Less: net income attributable to noncontrolling interest	743			—			1,359			—
Net income attributable to stockholders	$	22,005		$	10,506		$	59,063		$	53,014
Net income per common share:
Basic	$	0.27		$	0.16		$	0.80		$	0.80
Diluted	$	0.27		$	0.15		$	0.80		$	0.78
Weighted average common shares outstanding:
Basic	82,129			66,340			72,915			66,340
Diluted	82,129			68,196			74,771			68,196

Athlon Energy Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

	Year Ended
	December 31,
	2013			2012
	(in thousands)
Consolidated net income	$	60,422		$	53,014
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Non-cash and other items	126,081			48,347
Changes in operating assets and liabilities	(2,866		)	(6,059		)
Net cash provided by operating activities	183,637			95,302
Net cash used in investing activities	(424,746		)	(347,259		)
Financing activities:
Net proceeds from long-term debt	123,066			188,672
Net proceeds from IPO	295,697			—
Distributions to partners	(75,000		)	—
Contributions from partners	1,500			40,166
Other	—			(40		)
Net cash provided by financing activities	345,263			228,798
Increase (decrease) in cash and cash equivalents	104,154			(23,159		)
Cash and cash equivalents, beginning of period	8,871			32,030
Cash and cash equivalents, end of period	$	113,025		$	8,871

Athlon Energy Inc.

Condensed Consolidated Balance Sheets

(unaudited)

	December 31,
	2013		2012
	(in thousands)
Total assets	$	1,355,451	$	852,298
Liabilities (excluding long-term debt)	$	217,616	$	69,421
Long-term debt	500,000		362,000
Equity	637,835		420,877
Total liabilities and equity	$	1,355,451	$	852,298
Working capital (a)	$	45,414	$	(22,249	)

(a)  Working capital is defined as current assets minus current liabilities.

Athlon Energy Inc.

Selected Operating Results

(unaudited)

	Three Months Ended				Year Ended
	December 31,				December 31,
	2013		2012		2013		2012
Total production volumes:
Oil (MBbls)	819		447		2,682		1,457
Natural gas (MMcf)	1,453		998		4,927		3,163
NGLs (MBbls)	290		188		954		595
Combined (MBOE)	1,351		801		4,458		2,579
Average daily production volumes:
Oil (Bbls/D)	8,905		4,855		7,349		3,981
Natural gas (Mcf/D)	15,791		10,843		13,497		8,641
NGLs (Bbls/D)	3,151		2,048		2,614		1,625
Combined (BOE/D)	14,689		8,710		12,213		7,047
Average realized prices:
Oil ($/Bbl) (before impact of cash settled derivatives)	$	93.58	$	82.11	$	94.17	$	87.90
Oil ($/Bbl) (after impact of cash settled derivatives)	92.48		85.27		90.89		87.16
Natural gas ($/Mcf)	3.25		3.10		3.37		2.66
NGLs ($/Bbl)	33.25		33.09		31.60		34.65
Combined ($/BOE) (before impact of cash settled derivatives)	67.37		57.41		67.16		60.91
Combined ($/BOE) (after impact of cash settled derivatives)	66.70		59.17		65.18		60.50
Average expenses per BOE:
Lease operating - direct	$	7.22	$	9.55	$	7.48	$	9.88
Production, severance, and ad valorem taxes	4.19		3.52		4.27		4.05
Depletion, depreciation, and amortization	18.61		20.82		19.56		21.11
Cash general and administrative (a)	3.36		3.04		3.20		3.51

(a)  For the three months ended December 31, 2013, excludes (1) non-cash equity-based compensation of $3.3 million and (2) acquisition, corporate reorganization, and secondary offering costs of $0.2 million.  For the three months ended December 31, 2012, excludes (1) acquisition costs of $0.9 million and (2) non-cash equity-based compensation of $26,000.  For the year ended December 31, 2013, excludes (1) non-cash equity-based compensation of $3.8 million, (2) non-recurring IPO costs of $2.1 million, (3) nonrecurring corporate reorganization costs of $0.6 million, (4) advisory fees of $0.5 million, and (5) acquisition and secondary offering costs of $0.4 million.  For the year ended December 31, 2012, excludes (1) acquisition costs of $0.9 million, (2) advisory fees of $0.5 million, and (3) non-cash equity-based compensation of $0.1 million.

Athlon Energy Inc.

Derivative Summary as of February 25, 2014

(unaudited)

Period	Average  Daily Swap  Volume	Weighted- Average  Swap Price
	(Bbl)	(per Bbl)
Q1 2014	8,606	$	92.70
Q2 2014	8,950	92.71
Q3 2014	9,950	92.52
Q4 2014	9,950	92.52
2014	9,369	92.61
Q1 2015	4,300	91.29
Q2 2015	4,300	91.29
Q3 2015	1,300	93.18
Q4 2015	1,300	93.18
2015	2,788	91.74

Athlon Energy Inc.

Non-GAAP Financial Measures

(unaudited)

This press release includes a discussion of "Adjusted EBITDA," which is a non-GAAP financial measure.  The following table provides reconciliations of "Adjusted EBITDA" to consolidated net income and net cash provided by operating activities, Athlon's most directly comparable financial performance and liquidity measures calculated and presented in accordance with GAAP, for the periods indicated:

	Three Months Ended						Year Ended
	December 31,						December 31,
	2013			2012			2013			2012
	(in thousands)
Consolidated net income	$	22,748		$	10,506		$	60,422		$	53,014
Interest expense	10,074			4,147			36,669			9,951
Interest income	(10		)	—			(15		)	(2		)
Income taxes	12,345			382			19,150			1,928
Depletion, depreciation, and amortization	25,149			16,686			87,171			54,456
Corporate reorganization costs	(35		)	—			626			—
Acquisition costs	241			876			421			876
Advisory fees	—			—			500			493
Contract termination fee	—			—			2,408			—
Non-recurring IPO costs	—			—			2,251			—
Secondary offering costs	25			—			25			—
Non-cash equity-based compensation	3,508			34			4,138			152
Derivative fair value loss (gain)	(3,216		)	297			18,115			(9,293		)
Net derivative settlements received (paid), adjusted for recovered premiums	(903		)	1,411			(8,809		)	(1,074		)
Accretion of discount on asset retirement obligations	190			135			675			478
Other non-cash operating items	65			86			218			181
Adjusted EBITDA	70,181			34,560			223,965			111,160
Changes in operating assets and liabilities	(12,630		)	2,321			(2,866		)	(6,059		)
Current income taxes	(1,135		)	—			(1,135		)	—
Cash interest expense	(9,499		)	(3,563		)	(31,971		)	(8,850		)
Corporate reorganization costs	35			—			(626		)	—
Acquisition costs	(241		)	(876		)	(421		)	(876		)
Advisory fees	—			—			(500		)	(493		)
Contract termination fee	—			—			(2,408		)	—
Cash non-recurring IPO costs	—			—			(1,082		)	—
Secondary offering costs	(25		)	—			(25		)	—
Amortization of deferred premiums paid	176			106			706			420
Net cash provided by operating activities	$	46,862		$	32,548		$	183,637		$	95,302

“Adjusted EBITDA” is used as a supplemental financial measure by Athlon’s management and by external users of Athlon’s consolidated financial statements, such as investors, lenders under Athlon’s credit agreement, commercial banks, research analysts, and others, to assess: (1) the financial performance of Athlon’s assets without regard to financing methods, capital structure, or historical cost basis; (2) Athlon’s operating performance and return on capital as compared to those of other companies in the upstream energy sector, without regard to financing or capital structure; and (3) the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.

“Adjusted EBITDA” should not be considered an alternative to consolidated net income, operating income, net cash provided by operating activities, or any other measure of financial performance presented in accordance with GAAP.  Athlon’s definition of “Adjusted EBITDA” may not be comparable to other similarly titled measures of other companies because all companies may not calculate “Adjusted EBITDA” in the same manner.

This press release also includes a discussion of “Discretionary cash flow”, which is a non-GAAP financial measure. The following tables provide a reconciliation of “Discretionary cash flow” to consolidated net income, Athlon’s most directly comparable financial measure calculated and presented in accordance with GAAP for the periods indicated:

	Three Months Ended					Year Ended
	December 31,					December 31,
	2013			2012		2013			2012
	(in thousands)
Consolidated net income	$	22,748		$	10,506	$	60,422		$	53,014
Non-cash interest expense	565			584		4,683			1,099
Deferred income taxes	12,345			382		19,150			1,928
Depletion, depreciation, and amortization	25,149			16,686		87,171			54,456
Non-cash equity-based compensation	3,508			34		4,138			152
Derivative fair value loss (gain)	(3,216		)	297		18,115			(9,293		)
Net derivative settlements received (paid), adjusted for recovered premiums	(903		)	1,411		(8,809		)	(1,074		)
Accretion of discount on asset retirement obligations	190			135		675			478
Corporate reorganization costs	(35		)	—		626			—
Contract termination fee	—			—		2,408			—
Non-recurring IPO costs	—			—		2,251			—
Secondary offering costs	25			—		25			—
Other non-cash operating items	65			86		218			181
Discretionary cash flow	$	60,441		$	30,121	$	191,073		$	100,941

“Discretionary cash flow” is used by the investment community as a financial indicator of an oil and natural gas company’s ability to generate cash to internally fund exploration and development activities and to service debt. “Discretionary cash flow” is also useful because it is widely used by professional research analysts in valuing, comparing, rating, and providing investment recommendations of companies in the oil and gas exploration and production industry.  In turn, many investors use this published research in making investment decisions.

“Discretionary cash flow” should not be considered an alternative to consolidated net income, operating income, net cash provided by operating activities, or any other measure of financial performance presented in accordance with GAAP.  Athlon’s definition of “Discretionary cash flow” may not be comparable to other similarly titled measures of other companies because all companies may not calculate “Discretionary cash flow” in the same manner.

This press release also includes a discussion of “Net income excluding certain items”, which is a non-GAAP financial measure. The following tables provide a reconciliation of “Net income excluding certain items” to net income attributable to stockholders, Athlon’s most directly comparable financial measure calculated and presented in accordance with GAAP for the periods indicated:

	Three Months Ended						Year Ended
	December 31,						December 31,
	2013			2012			2013			2012
	(in thousands, except per share amounts)
Net income attributable to stockholders	$	22,005		$	10,506		$	59,063		$	53,014
Less: derivative losses (gains) in excess of recovered premiums	(4,119		)	1,708			9,306			(10,367		)
Add: write-off of debt issuance costs	—			387			2,838			445
Add: corporate reorganization costs	(35		)	—			626			—
Add: acquisition costs	241			876			421			876
Add: contract termination fee	—			—			2,408			—
Add: non-recurring IPO costs	—			—			2,251			—
Add: secondary offering costs	25			—			25			—
Change in noncontrolling interest for above items	86			—			(418		)	—
Tax effect of above items	1,411			(17		)	(7,603		)	104
Net income excluding certain items	$	19,614		$	13,460		$	68,917		$	44,072
Diluted weighted average common shares outstanding	82,129			68,196			72,915			68,196
Net income excluding certain items per diluted share	$	0.24		$	0.20		$	0.94		$	0.65

Athlon believes that the exclusion of these items enables it to evaluate operations more effectively period-over-period and to identify operating trends that could otherwise be masked by the excluded items.   Athlon believes “Net income excluding certain items” comparable to analysts’ estimates is calculated on the same basis as analysts’ estimates and that many investors use this published research in making investment decisions useful in evaluating operational trends of Athlon and its performance relative to other oil and natural gas exploration and production companies.

“Net income excluding certain items” should not be considered an alternative to net income attributable to stockholders, operating income, net cash provided by operating activities, or any other measure of financial performance presented in accordance with GAAP.  Athlon’s definition of “Net income excluding certain items” may not be comparable to similarly titled measures of another entity because all entities may not calculate “Net income excluding certain items” in the same manner.

The following table summarizes Athlon’s costs incurred related to oil and natural gas properties for 2013 (in thousands):

Acquisitions:
Proved properties (a)	$	19,609
Unproved properties (b)	34,922
Total acquisitions	54,531
Development (c)	180,011
Exploration (d)	218,680
Total costs incurred	$	453,222

(a) Includes asset retirement obligations incurred of approximately $395,000.

(b) Costs incurred for unproved properties are excluded from the amortization base.

(c) Includes asset retirement obligations incurred of approximately $609,000.

(d) Includes asset retirement obligations incurred of approximately $404,000.

Source: Athlon Energy

Contact Information

William Butler

Chief Financial Officer

(817) 984-8220

InvestorRelations@athlonenergy.com