FORM 10-Q |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
GOODRICH PETROLEUM CORPORATION (Exact name of registrant as specified in its charter) |
Delaware (State or other jurisdiction of incorporation or organization) | 76-0466193 (I.R.S. Employer Identification No.) |
801 Louisiana, Suite 700 Houston, Texas 77002 (Address of principal executive offices) (Zip Code) (Registrant’s telephone number, including area code): (713) 780-9494 |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |
(Do not check if a smaller reporting company) | Emerging growth company | ☐ |
Page | ||
PART I | ||
ITEM 1 | ||
ITEM 2 | ||
ITEM 3 | ||
ITEM 4 | ||
PART II | ||
ITEM 1 | ||
ITEM 1A | ||
ITEM 6 |
March 31, 2017 | December 31, 2016 | ||||||
ASSETS | (Unaudited) | ||||||
CURRENT ASSETS: | |||||||
Cash and cash equivalents | $ | 37,949 | $ | 36,850 | |||
Accounts receivable, trade and other, net of allowance | 260 | 1,998 | |||||
Accrued oil and natural gas revenue | 3,841 | 3,142 | |||||
Inventory | 4,008 | 4,125 | |||||
Prepaid expenses and other | 374 | 755 | |||||
Total current assets | 46,432 | 46,870 | |||||
PROPERTY AND EQUIPMENT: | |||||||
Unevaluated properties | 13,367 | 24,206 | |||||
Oil and natural gas properties (full cost method) | 78,047 | 60,936 | |||||
Furniture, fixtures and equipment | 986 | 984 | |||||
92,400 | 86,126 | ||||||
Less: Accumulated depletion, depreciation and amortization | (6,245 | ) | (4,006 | ) | |||
Net property and equipment | 86,155 | 82,120 | |||||
Other | 723 | 322 | |||||
TOTAL ASSETS | $ | 133,310 | $ | 129,312 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Accounts payable | $ | 16,256 | $ | 14,392 | |||
Accrued liabilities | 8,094 | 3,882 | |||||
Fair value of commodity derivatives | 804 | — | |||||
Total current liabilities | 25,154 | 18,274 | |||||
Long term debt, net | 49,132 | 47,205 | |||||
Accrued abandonment cost | 3,023 | 2,933 | |||||
Total liabilities | 77,309 | 68,412 | |||||
Commitments and contingencies (See Note 7) | |||||||
STOCKHOLDERS’ EQUITY: | |||||||
Common stock: $0.01 par value, 75,000,000 shares authorized, and 9,108,826 shares issued and outstanding | 91 | 91 | |||||
Additional paid in capital | 65,942 | 65,116 | |||||
Accumulated deficit | (10,032 | ) | (4,307 | ) | |||
Total stockholders’ equity | 56,001 | 60,900 | |||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 133,310 | $ | 129,312 |
Successor | Predecessor | ||||||
Three Months Ended March 31, | Three Months Ended March 31, | ||||||
2017 | 2016 | ||||||
REVENUES: | |||||||
Oil and natural gas revenues | $ | 9,411 | $ | 6,464 | |||
Other | 2 | (219 | ) | ||||
9,413 | 6,245 | ||||||
OPERATING EXPENSES: | |||||||
Lease operating expense | 4,311 | 2,336 | |||||
Production and other taxes | 659 | 739 | |||||
Transportation and processing | 1,176 | 431 | |||||
Depreciation, depletion and amortization | 2,294 | 3,145 | |||||
Exploration | — | 197 | |||||
General and administrative | 4,463 | 6,364 | |||||
Gain on sale of assets | — | (837 | ) | ||||
12,903 | 12,375 | ||||||
Operating loss | (3,490 | ) | (6,130 | ) | |||
OTHER INCOME (EXPENSE): | |||||||
Interest expense | (2,179 | ) | (8,313 | ) | |||
Interest income and other | 9 | — | |||||
(Loss)/gain on derivatives not designated as hedges | (260 | ) | 24 | ||||
(2,430 | ) | (8,289 | ) | ||||
Restructuring | — | (4,314 | ) | ||||
Reorganization items, net | 195 | — | |||||
Loss before income taxes | (5,725 | ) | (18,733 | ) | |||
Income tax benefit | — | — | |||||
Net loss | (5,725 | ) | (18,733 | ) | |||
Preferred stock, net | — | 1,004 | |||||
Net loss applicable to common stock | $ | (5,725 | ) | $ | (19,737 | ) | |
PER COMMON SHARE | |||||||
Net loss applicable to common stock - basic | $ | (0.63 | ) | $ | (0.26 | ) | |
Net loss applicable to common stock - diluted | $ | (0.63 | ) | $ | (0.26 | ) | |
Weighted average common shares outstanding - basic | 9,109 | 74,521 | |||||
Weighted average common shares outstanding - diluted | 9,109 | 74,521 |
Successor | Predecessor | ||||||
Three Months Ended March 31, | Three Months Ended March 31, | ||||||
2017 | 2016 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net loss | $ | (5,725 | ) | $ | (18,733 | ) | |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | |||||||
Depletion, depreciation and amortization | 2,294 | 3,145 | |||||
Loss/(gain) on commodity derivatives not designated as hedges | 260 | (24 | ) | ||||
Net cash received in settlement of commodity derivative instruments | 142 | — | |||||
Amortization of leasehold costs | — | 24 | |||||
Share based compensation (non-cash) | 1,008 | 1,070 | |||||
Bonus share based compensation (non-cash) | 720 | — | |||||
Gain on sale of assets | — | (837 | ) | ||||
Embedded derivative | — | (3,845 | ) | ||||
Amortization of finance cost, debt discount, paid in-kind interest and accretion | 1,927 | 4,329 | |||||
Materials inventory write-down | — | 156 | |||||
Reorganization items, net | (181 | ) | — | ||||
Change in assets and liabilities: | |||||||
Accounts receivable, trade and other, net of allowance | 1,738 | 892 | |||||
Accrued oil and natural gas revenue | (699 | ) | 419 | ||||
Inventory | — | (512 | ) | ||||
Prepaid expenses and other | 88 | 735 | |||||
Accounts payable | 1,864 | (3,867 | ) | ||||
Accrued liabilities | 1,229 | 6,560 | |||||
Net cash provided by (used in) operating activities | 4,665 | (10,488 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Capital expenditures | (3,384 | ) | (1,006 | ) | |||
Proceeds from sale of assets | — | 289 | |||||
Net cash used in investing activities | (3,384 | ) | (717 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from bank borrowings | — | 13,000 | |||||
Payments related to Convertible Second Lien Notes | (36 | ) | — | ||||
Note conversions | — | (804 | ) | ||||
Registration costs | (146 | ) | (88 | ) | |||
Other | — | (5 | ) | ||||
Net cash (used in) provided by financing activities | (182 | ) | 12,103 | ||||
INCREASE IN CASH AND CASH EQUIVALENTS | 1,099 | 898 | |||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 36,850 | 11,782 | |||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 37,949 | $ | 12,680 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid for Interest | $ | 309 | $ | 451 |
(In thousands) | March 31, 2017 | December 31, 2016 | ||||
Trade payables | $ | 4,522 | $ | 2,004 | ||
Revenue payable | 11,101 | 11,296 | ||||
Prepayments from partners | 496 | 965 | ||||
Miscellaneous payables | 137 | 127 | ||||
Total accounts payable | $ | 16,256 | $ | 14,392 |
• | Level 1 Inputs— unadjusted quoted market prices in active markets for identical assets or liabilities. We have no Level 1 instruments; |
• | Level 2 Inputs— quotes which are derived principally from or corroborated by observable market data. Included in this Level are our Exit Credit Facility and commodity derivatives whose fair values are based on third-party quotes or available interest rate information and commodity pricing data obtained from third party pricing sources and our creditworthiness or that of our counterparties; and |
• | Level 3 Inputs— unobservable inputs for the asset or liability, such as discounted cash flow models or valuations, based on our various assumptions and future commodity prices. Included in this Level would be acquisitions and impairments of oil and natural gas properties, if any, and our asset retirement obligations. |
March 31, 2017 | |||
Beginning balance at December 31, 2016 | $ | 2,933 | |
Liabilities incurred | 35 | ||
Accretion expense | 55 | ||
Ending balance at March 31, 2017 | $ | 3,023 | |
Current liability | $ | — | |
Long term liability | $ | 3,023 |
March 31, 2017 | December 31, 2016 | |||||||||||||||
Principal | Carrying Amount | Principal | Carrying Amount | |||||||||||||
Exit Credit Facility | $ | 16,651 | $ | 16,651 | $ | 16,651 | $ | 16,651 | ||||||||
13.50% Convertible Second Lien Senior Secured Notes due 2019 (1) | 42,559 | 32,481 | 41,170 | 30,554 | ||||||||||||
Total debt | $ | 59,210 | $ | 49,132 | $ | 57,821 | $ | 47,205 |
Successor | Predecessor | ||||||||||||
March 31, 2017 | March 31, 2016 | ||||||||||||
Interest Expense | Effective Interest Rate | Interest Expense | Effective Interest Rate | ||||||||||
Successor Exit Credit Facility | $ | 252 | 6.1 | % | $ | — | — | % | |||||
13.50% Convertible Second Lien Senior Secured Notes due 2019 (1) | 1,927 | 24.2 | % | — | — | % | |||||||
Predecessor Senior Credit Facility | — | — | % | 870 | 7.2 | % | |||||||
8.0% Second Lien Senior Secured Notes due 2018 ** | — | — | % | 1,109 | 18.7 | % | |||||||
8.875% Senior Notes due 2019 | — | — | % | 2,688 | 9.1 | % | |||||||
3.25% Convertible Senior Notes due 2026 | — | — | % | 3 | 3.3 | % | |||||||
5.0% Convertible Senior Notes due 2029 | — | — | % | 84 | 5.0 | % | |||||||
5.0% Convertible Senior Notes due 2032 | — | — | % | 2,053 | 8.4 | % | |||||||
5.0% Convertible Exchange Senior Notes due 2032 | — | — | % | 1,484 | * | ||||||||
Other | — | — | % | 22 | * | ||||||||
Total debt | $ | 2,179 | $ | 8,313 |
Successor | Predecessor | |||||||
Three Months Ended March 31, | Three Months Ended March 31, | |||||||
2017 | 2016 | |||||||
(Amounts in thousands, except per share data) | ||||||||
Basic and Diluted loss per share: | ||||||||
Net loss applicable to common stock | $ | (5,725 | ) | $ | (19,737 | ) | ||
Weighted average shares of common stock outstanding | 9,109 | 74,521 | ||||||
Basic and Diluted loss per share (1) (2) (3) (4) | $ | (0.63 | ) | $ | (0.26 | ) | ||
(1) Common shares issuable upon assumed conversion of convertible preferred stock or dividends paid were not presented as they would have been anti-dilutive. | — | 16,878 | ||||||
(2) Common shares issuable upon assumed conversion of the 2026 Notes, 2029 Notes, 2032 Exchange Notes and 2032 Notes or interest paid were not presented as they would have been anti-dilutive. | — | 5,910 | ||||||
(3) Common shares issuable on assumed conversion of restricted stock were not included in the computation of diluted loss per common share since their inclusion would have been anti-dilutive. | 288 | 13,949 | ||||||
(4) Common shares issuable on the 13.50% Convertible Second Lien Senior Secured Notes due 2019, associated warrants and unsecured claim holders were not included in the computation of diluted loss per common share since their inclusion would have been anti-dilutive. | 5,664 | — |
Successor | Predecessor | |||||||
Three Months Ended March 31, | Three Months Ended March 31, | |||||||
Oil and Natural Gas Derivatives (in thousands) | 2017 | 2016 | ||||||
Gain on commodity derivatives not designated as hedges, settled | $ | 142 | $ | — | ||||
Gain (loss) on commodity derivatives not designated as hedges, not settled | (402 | ) | 24 | |||||
Total gain (loss) on commodity derivatives not designated as hedges | $ | (260 | ) | $ | 24 |
Contract Type | Daily Volume (MMBtu) | Total Volume (MMBtu) | Fixed Price | Fair Value at March 31, 2017 (In thousands) | ||||||||||
Natural Gas Swaps | ||||||||||||||
2017 | 6,000 | 1,470,000 | $ | 3.20 | $ | (182 | ) | |||||||
2018 | 12,000 | 4,380,000 | $3.00 - $3.015 | $ | (79 | ) | ||||||||
Natural Gas Costless Collars | ||||||||||||||
2017 | 12,000 | 3,300,000 | $3.00 - $3.60 | $ | (141 | ) |
Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Current Assets Commodity Derivatives | $ | — | $ | — | $ | — | $ | — | ||||||||
Non-current Assets Commodity Derivatives | — | 402 | — | 402 | ||||||||||||
Current Liabilities Commodity Derivatives | — | (804 | ) | — | (804 | ) | ||||||||||
Non-current Liabilities Commodity Derivatives | — | — | — | — | ||||||||||||
Total | $ | — | $ | (402 | ) | $ | — | $ | (402 | ) |
March 31, 2017 | December 31, 2016 | |||||||||||||||||||||||
Fair Value of Oil and Natural Gas Derivatives (in thousands) | Gross Amount | Amount Offset | As Presented | Gross Amount | Amount Offset | As Presented | ||||||||||||||||||
Current Assets Commodity Derivatives | $ | 336 | $ | (336 | ) | $ | — | $ | — | $ | — | $ | — | |||||||||||
Fair Value of Commodity Derivatives - Other Non-current Assets | 413 | (11 | ) | 402 | — | — | — | |||||||||||||||||
Fair Value of Commodity Derivatives - Current Liability | (1,140 | ) | 336 | (804 | ) | — | — | — | ||||||||||||||||
Non-current Liabilities Commodity Derivatives | (11 | ) | 11 | — | — | — | — | |||||||||||||||||
Total | $ | (402 | ) | $ | — | $ | (402 | ) | $ | — | $ | — | $ | — |
• | the market prices of oil and natural gas; |
• | volatility in the commodity-futures market; |
• | financial market conditions and availability of capital; |
• | future cash flows, credit availability and borrowings; |
• | sources of funding for exploration and development; |
• | our financial condition; |
• | our ability to repay our debt; |
• | the securities, capital or credit markets; |
• | planned capital expenditures; |
• | future drilling activity; |
• | uncertainties about the estimated quantities of our oil and natural gas reserves; |
• | production; |
• | hedging arrangements; |
• | litigation matters; |
• | pursuit of potential future acquisition opportunities; |
• | general economic conditions, either nationally or in the jurisdictions in which we are doing business; |
• | legislative or regulatory changes, including retroactive royalty or production tax regimes, hydraulic-fracturing regulation, drilling and permitting regulations, derivatives reform, changes in state and federal corporate taxes, environmental regulation, environmental risks and liability under federal, state and foreign laws, and local environmental laws and regulations; |
• | the impact of restrictive covenants in our debt agreements; |
• | the creditworthiness of our financial counterparties and operation partners; |
• | failure to satisfy our short- or long-term liquidity needs, including our inability to generate sufficient cash flow from operations or to obtain adequate financing to fund our capital expenditures and meet working capital needs; and |
• | other factors discussed below and elsewhere in this Quarterly Report on Form 10-Q and in our other public filings, press releases and discussions with our management. |
Three Months Ended March 31, | ||||||||||||||
Successor | Predecessor | |||||||||||||
(In thousands, except for price data) | 2017 | 2016 | Variance | |||||||||||
Revenues: | ||||||||||||||
Natural gas | $ | 5,301 | $ | 1,567 | $ | 3,734 | 238 | % | ||||||
Oil and condensate | 4,110 | 4,897 | (787 | ) | (16 | )% | ||||||||
Natural gas, oil and condensate | 9,411 | 6,464 | 2,947 | 46 | % | |||||||||
Net Production: | ||||||||||||||
Natural gas (MMcf) | 1,833 | 1,571 | 262 | 17 | % | |||||||||
Oil and condensate (MBbls) | 82 | 154 | (72 | ) | (47 | )% | ||||||||
Total (Mmcfe) | 2,324 | 2,494 | (170 | ) | (7 | )% | ||||||||
Average daily production (Mcfe/d) | 25,822 | 27,403 | (1,581 | ) | (6 | )% | ||||||||
Average realized sales price per unit: | ||||||||||||||
Natural gas (per Mcf) | $ | 2.89 | $ | 1.00 | $ | 1.89 | 189 | % | ||||||
Natural gas (per Mcf) including cash settled derivatives | $ | 2.97 | $ | 1.00 | $ | 1.97 | 197 | % | ||||||
Oil and condensate (per Bbl) | $ | 50.12 | $ | 31.84 | $ | 18.28 | 57 | % | ||||||
Average realized price (per Mcfe) | $ | 4.05 | $ | 2.59 | $ | 1.46 | 56 | % |
Three Months Ended March 31, | ||||||||||||||
Successor | Predecessor | |||||||||||||
Operating Expenses (in thousands) | 2017 | 2016 | Variance | |||||||||||
Lease operating expenses | $ | 4,311 | $ | 2,336 | $ | 1,975 | 85 | % | ||||||
Production and other taxes | 659 | 739 | (80 | ) | (11 | )% | ||||||||
Transportation and processing | 1,176 | 431 | * | * | ||||||||||
Exploration | — | 197 | * | * | ||||||||||
Operating Expenses per Mcfe | ||||||||||||||
Lease operating expenses | $ | 1.86 | $ | 0.94 | $ | 0.92 | 98 | % | ||||||
Production and other taxes | 0.28 | 0.30 | (0.02 | ) | (7 | )% | ||||||||
Transportation and processing | 0.51 | 0.17 | * | * | ||||||||||
Exploration | — | 0.08 | * | * |
Three Months Ended March 31, | |||||||||||
Successor | Predecessor | ||||||||||
Operating Expenses (in thousands) | 2017 | 2016 | Variance | ||||||||
Depreciation, depletion and amortization | $ | 2,294 | $ | 3,145 | * | * | |||||
General and administrative | 4,463 | 6,364 | * | * | |||||||
Operating Expenses per Mcfe | |||||||||||
Depreciation, depletion and amortization | $ | 0.99 | $ | 1.26 | * | * | |||||
General and administrative | 1.92 | 2.55 | * | * |
Three Months Ended March 31, | ||||||||
Other income (expense) (in thousands): | Successor | Predecessor | ||||||
2017 | 2016 | |||||||
Interest expense | $ | (2,179 | ) | $ | (8,313 | ) | ||
Gain (loss) on commodity derivatives not designated as hedges | (260 | ) | 24 | |||||
Average funded borrowings adjusted for debt discount and accretion | $ | 49,132 | $ | 431,901 | ||||
Average funded borrowings | $ | 59,210 | $ | 434,196 |
Three Months Ended March 31, | ||||||||
Adjusted EBITDA/EBITDAX (in thousands) | Successor | Predecessor | ||||||
2017 | 2016 | |||||||
Net loss (US GAAP) | $ | (5,725 | ) | $ | (18,733 | ) | ||
Exploration expense | — | 197 | ||||||
Interest expense | 2,179 | 8,313 | ||||||
Depreciation, depletion and amortization | 2,294 | 3,145 | ||||||
Share based compensation expense | 1,728 | 1,070 | ||||||
(Gain) loss on commodity derivatives not designated as hedges | 260 | (24 | ) | |||||
Net cash received in settlement of derivative instruments | 142 | — | ||||||
Other items (1) | (204 | ) | 3,633 | |||||
Adjusted EBITDA/EBITDAX | $ | 674 | $ | (2,399 | ) |
(1) | Other items include interest income, gain on sale of assets, restructuring, reorganization and other expense. |
• | sale of non-core assets; |
• | joint venture partnerships in our TMS, Eagle Ford Shale Trend, and/or core Haynesville Shale Trend acreage; |
• | entering into a replacement bank credit facility; and |
• | issuance of debt or equity securities. |
Three Months Ended March 31, | ||||||||
Successor | Predecessor | |||||||
2017 | 2016 | |||||||
Cash flow statement information: | ||||||||
Net cash: | ||||||||
Provided by (used in) operating activities | $ | 4,665 | $ | (10,488 | ) | |||
Used in investing activities | (3,384 | ) | (717 | ) | ||||
(Used in) provided by financing activities | (182 | ) | 12,103 | |||||
Increase in cash and cash equivalents | $ | 1,099 | $ | 898 |
March 31, 2017 | December 31, 2016 | |||||||||||||||
Principal | Carrying Amount | Principal | Carrying Amount | |||||||||||||
Exit Credit Facility | $ | 16,651 | $ | 16,651 | $ | 16,651 | $ | 16,651 | ||||||||
13.50% Convertible Second Lien Senior Secured Notes due 2019 (1) | 42,559 | 32,481 | 41,170 | 30,554 | ||||||||||||
Total debt | $ | 59,210 | $ | 49,132 | $ | 57,821 | $ | 47,205 |
3.1 | Second Amended and Restated Certificate of Incorporation of Goodrich Petroleum Corporation, dated October 12, 2016, (Incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-8 (File No. 333-214080) filed on October 12, 2016). |
3.2 | Second Amended and Restated Bylaws of Goodrich Petroleum Corporation, dated October 12, 2016, (Incorporated by reference to Exhibit 4.2 of the Company’s Registration Statement on Form S-8 (File No. 333-214080) filed on October 12, 2016). |
10.1* | First Amendment and Consent to Exit Credit Agreement dated as of December 22, 2016 among Goodrich Petroleum Corporation, as Parent Guarantor, Goodrich Petroleum Company, L.L.C., as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and the lenders party thereto. |
10.2* | Second Amendment to Exit Credit Agreement dated as of March 31, 2017 among Goodrich Petroleum Corporation, as Parent Guarantor, Goodrich Petroleum Company, L.L.C., as Borrower, Wells Fargo Bank, National Association, as Administrative Agent, and the lenders party thereto. |
31.1* | Certification by Chief Executive Officer Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* | Certification by Chief Financial Officer Pursuant to 15 U.S.C. Section 7241, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1** | Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
32.2** | Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
101.INS* | XBRL Instance Document |
101.SCH* | XBRL Schema Document |
101.CAL* | XBRL Calculation Linkbase Document |
101.LAB* | XBRL Labels Linkbase Document |
101.PRE* | XBRL Presentation Linkbase Document |
101.DEF* | XBRL Definition Linkbase Document |
* | Filed herewith |
** | Furnished herewith |
GOODRICH PETROLEUM CORPORATION (Registrant) | ||
Date: May 9, 2017 | By: | /S/ Walter G. Goodrich |
Walter G. Goodrich | ||
Chairman & Chief Executive Officer | ||
Date: May 9, 2017 | By: | /S/ Robert T. Barker |
Robert T. Barker | ||
Vice President, Controller, Chief Accounting Officer and Chief Financial Officer |
Name: | Michael J. Killelea |
Title: | Executive Vice President, General Counsel and Corporate Secretary |
Name: | Michael J. Killelea |
Title: | Executive Vice President, General Counsel and Corporate Secretary |
ADMINISTRATIVE AGENT: | WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and as a Lender |
LENDER: | BANK OF MONTREAL, as a Lender |
LENDER: | COMPASS BANK, as a Lender |
LENDER: | JPMORGAN CHASE. BANK, N.A., as a Lender |
LENDER: | BANK OF AMERICA, N.A., as a Lender |
LENDER: | ROYAL BANK OF CANADA, as a Lender |
LENDER: | THE BANK OF NOVA SCOTIA, as a Lender |
Name: | Michael J. Killelea |
Name: | Michael J. Killelea |
ADMINISTRATIVE AGENT: | WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent and as a Lender |
LENDER: | BANK OF MONTREAL, as a Lender |
LENDER: | COMPASS BANK, as a Lender |
LENDER: | JPMORGAN CHASE. BANK, N.A., as a Lender |
LENDER: | BANK OF AMERICA, N.A., as a Lender |
LENDER: | ROYAL BANK OF CANADA, as a Lender |
LENDER: | THE BANK OF NOVA SCOTIA, as a Lender |
1. | I have reviewed this quarterly report on Form 10-Q of Goodrich Petroleum Corporation (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e), and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f), and 15d-15(f)), for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Walter G. Goodrich |
Walter G. Goodrich |
Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Goodrich Petroleum Corporation (the “registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e), and 15d-15(e)), and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f), and 15d-15(f)), for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ Robert T. Barker |
Robert T. Barker |
Vice President, Controller, Chief Accounting Officer and Chief Financial Officer |
(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 operations of the Company. |
/s/ Walter G. Goodrich |
Walter G. Goodrich |
Chief Executive Officer |
May 9, 2017 |
(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 operations of the Company. |
/s/ Robert T. Barker |
Robert T. Barker |
Vice President, Controller, Chief Accounting Officer and Chief Financial Officer |
May 9, 2017 |
Document and Entity Information - shares |
3 Months Ended | |
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Mar. 31, 2017 |
May 09, 2017 |
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Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Mar. 31, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | GDP | |
Entity Registrant Name | GOODRICH PETROLEUM CORP | |
Entity Central Index Key | 0000943861 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 9,108,826 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2017 |
Dec. 31, 2016 |
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Statement of Financial Position [Abstract] | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 9,108,826 | 9,108,826 |
Common stock, shares outstanding | 9,108,826 | 9,108,826 |
Description of Business and Significant Accounting Policies |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Description of Business and Significant Accounting Policies | Description of Business and Significant Accounting Policies Goodrich Petroleum Corporation (together with its subsidiary, “we,” “our,” or the “Company”) is an independent oil and natural gas company engaged in the exploration, development and production of oil and natural gas on properties primarily in (i) Northwest Louisiana and East Texas, which includes the Haynesville Shale Trend, (ii) Southwest Mississippi and Southeast Louisiana, which includes the Tuscaloosa Marine Shale Trend (“TMS”), and (iii) South Texas, which includes the Eagle Ford Shale Trend. Basis of Presentation The consolidated financial statements of the Company included in this Quarterly Report on Form 10-Q have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and accordingly, certain information normally included in financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) has been condensed or omitted. This information should be read in conjunction with our consolidated financial statements and notes contained in our annual report on Form 10-K for the year ended December 31, 2016. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the full year or for any interim period. Certain data in prior periods’ financial statements have been adjusted to conform to the presentation of the current period. Fresh Start Accounting—We applied fresh start accounting upon emergence from bankruptcy on October 12, 2016 (the "Effective Date"). This resulted in the Company becoming a new entity for financial reporting purposes. Upon adoption of fresh start accounting, our assets and liabilities were recorded at their fair values as of the Effective Date. As a result, our consolidated statement of operations subsequent to the Effective Date are not comparable to our consolidated statement of operations prior to the Effective Date. Our consolidated financial statements and related footnotes are presented in a format that illustrates the lack of comparability between amounts presented on or after October 12, 2016 and dates prior. Our financial results for future periods following the application of fresh-start accounting will be different from historical trends and the differences may be material. All references made to "Successor" or "Successor Company" relate to the Company on and subsequent to the Effective Date. References to the “Successor" in this quarterly report relate to the periods after October 12, 2016 which includes the first quarter of 2017. References to "Predecessor" or “Predecessor Company” in this quarterly report refer to the Company prior to the Effective Date which includes the first quarter of 2016. Principles of Consolidation—The consolidated financial statements include the financial statements of the Company and the Subsidiary. Intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation. Use of Estimates— Our management has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with US GAAP. Cash and Cash Equivalents—Cash and cash equivalents includes cash on hand, demand deposit accounts and temporary cash investments with maturities of ninety days or less at the date of purchase. Accounts Payable—Accounts payable consisted of the following amounts as of March 31, 2017 and December 31, 2016:
Inventory –Inventory consists of casing and tubulars that are expected to be used in our capital drilling program. Inventory is carried on the Consolidated Balance Sheets at the lower of cost or market. Property and Equipment—Under US GAAP, two acceptable methods of accounting for oil and natural gas properties are allowed. These are the Successful Efforts Method and the Full Cost Method. Entities engaged in the production of oil and natural gas have the option of selecting either method for application in the accounting for their properties. The principal differences between the two methods are in the treatment of exploration costs, the computation of Depreciation, Depletion and Amortization (“DD&A”) expense and the assessment of impairment of oil and natural gas properties. Upon emergence from bankruptcy, we elected to adopt the Full Cost Method. Under the Full Cost Method, we capitalize all costs associated with acquisitions, exploration, development and estimated abandonment costs. We capitalize internal costs that can be directly identified with the acquisition of leasehold, as well as drilling and completion activities, but do not include any costs related to production, general corporate overhead or similar activities. Unevaluated property costs are excluded from the amortization base until we make a determination as to the existence of proved reserves on the respective property or impairment. We review our unevaluated properties at the end of each quarter to determine whether the costs should be reclassified to proved oil and natural gas properties and thereby subject to DD&A and the full cost ceiling test. Our sales of oil and natural gas properties are accounted for as adjustments to net proved oil and natural gas properties with no gain or loss recognized, unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves. We amortize our investment in oil and natural gas properties through DD&A expense using the units of production (the “UOP”) method. This entails the quarterly provision for DD&A expense being computed by dividing production volumes for the period by the total proved reserves as of the beginning of the period (beginning of period reserves being determined by adding production to the end of period reserves), and applying the respective rate to the net cost of proved oil and natural gas properties and future development costs. Full Cost Ceiling Test—The Full Cost Method requires that at the conclusion of each financial reporting period, the present value of estimated future net cash flows from proved reserves (adjusted for hedges and excluding cash flows related to estimated abandonment costs), be compared to the net capitalized costs of proved oil and natural gas properties, net of related deferred taxes. This comparison is referred to as a "ceiling test". If the net capitalized costs of proved oil and natural gas properties exceed the estimated discounted future net cash flows from proved reserves, we are required to write-down the value of our oil and natural gas properties to the value of the discounted cash flows. Estimated future net cash flows from proved reserves are calculated based on a 12-month average pricing assumption. There were no Full Cost Ceiling Test write-downs for the quarter ended March 31, 2017. Impairment—Prior to October 12, 2016 under the Successful Efforts Method of Accounting, we periodically assessed our long-lived assets recorded in oil and natural gas properties on the Consolidated Balance Sheets to ensure that they were not overstated or carried in excess of fair value, which was computed using Level 3 inputs such as discounted cash flow models or valuations. Significant Level 3 assumptions associated with discounted cash flow models or valuations used in the impairment evaluation included estimates of future crude oil and natural gas prices, production costs, development expenditures, anticipated production of proved reserves, appropriate risk-adjusted discount rates and other relevant data. An evaluation was performed on a field-by-field basis at least annually or whenever changes in facts and circumstances indicated that our oil and natural gas properties may be impaired. To determine if a field was impaired, we compared the carrying value of the field to the undiscounted future net cash flows by applying management’s estimates of proved reserves, future oil and natural gas prices, future production of oil and natural gas reserves and future operating costs over the economic life of the property. In addition, other factors such as probable and possible reserves were taken into consideration when justified by economic conditions and the availability of capital to develop proved undeveloped reserves. For each property determined to be impaired, we recognized an impairment loss equal to the difference between the estimated fair value and the carrying value of the field. Fair value was estimated to be the present value of expected future net cash flows. Any impairment charge incurred was recorded in accumulated depletion, depreciation and amortization to reduce the carrying value of the field. Each part of this calculation was subject to a large degree of judgment, including the determination of the fields’ estimated reserves, future cash flows and fair value. We had no impairment for the quarter ended March 31, 2016. Fair Value Measurement—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, whether in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, our credit risk. We use various methods, including the income approach and market approach, to determine the fair values of our financial instruments that are measured at fair value on a recurring basis, which depend on a number of factors, including the availability of observable market data over the contractual term of the underlying instrument. For some of our instruments, the fair value is calculated based on directly observable market data or data available for similar instruments in similar markets. For other instruments, the fair value may be calculated based on these inputs as well as other assumptions related to estimates of future settlements of these instruments. We separate our financial instruments into three Levels (Levels 1, 2 and 3) based on our assessment of the availability of observable market data and the significance of non-observable data used to determine the fair value of our instruments. Our assessment of an instrument can change over time based on the maturity or liquidity of the instrument, which could result in a change in the classification of the instruments between Levels. Each of these Levels and our corresponding instruments classified by Level are further described below:
As of March 31, 2017 and December 31, 2016, the carrying amounts of our cash and cash equivalents, trade receivables and payables represented fair value because of the short-term nature of these instruments. Depreciation and Depletion—Depreciation and depletion of producing oil and natural gas properties is calculated using the units-of-production method. Proved developed reserves are used to compute unit rates for unamortized tangible and intangible development costs, and proved reserves are used for unamortized leasehold costs. Depreciation of furniture, fixtures and equipment, consisting of office furniture, computer hardware and software and leasehold improvements, is computed using the straight-line method over their estimated useful lives, which vary from three to five years. Asset Retirement Obligations—Asset retirement obligations are related to the abandonment and site restoration requirements that result from the exploration and development of our oil and natural gas properties. We record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Accretion expense is included in “Depreciation, depletion and amortization” on our Consolidated Statements of Operations. See Note 2. The estimated fair value of the Company’s asset retirement obligations at inception is determined by utilizing the income approach by applying a credit-adjusted risk-free rate, which takes into account the Company’s credit risk, the time value of money, and the current economic state, to the undiscounted expected abandonment cash flows. Given the unobservable nature of the inputs, the measurement of the asset retirement obligations was classified as Level 3 in the fair value hierarchy. Revenue Recognition—Oil and natural gas revenues are recognized when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectability of the revenue is probable. Revenues from the production of crude oil and natural gas properties in which we have an interest with other producers are recognized using the entitlements method. We record a liability or an asset for natural gas balancing when we have sold more or less than our working interest share of natural gas production, respectively. At March 31, 2017 and December 31, 2016, the net liability for natural gas balancing was immaterial. Differences between actual production and net working interest volumes are routinely adjusted. Derivative Instruments—We use derivative instruments such as futures, forwards, options, collars and swaps for purposes of hedging our exposure to fluctuations in the price of crude oil and natural gas and to hedge our exposure to changing interest rates. Accounting standards related to derivative instruments and hedging activities require that all derivative instruments subject to the requirements of those standards be measured at fair value and recognized as assets or liabilities in the balance sheet. We offset the fair value of our asset and liability positions with the same counterparty for each commodity type. Changes in fair value are required to be recognized in earnings unless specific hedge accounting criteria are met. All of our realized gain or losses on our derivative contracts are the result of cash settlements. We have not designated any of our derivative contracts as hedges; accordingly, changes in fair value are reflected in earnings. See Note 6. Income Taxes—We account for income taxes, as required, under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We recognize, as required, the financial statement benefit of an uncertain tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. See Note 5. Net Income or Net Loss Per Share—Basic income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders for each reporting period by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders for each reporting period by the weighted average number of common shares outstanding during the period, plus the effects of potentially dilutive restricted stock calculated using the treasury stock method and the potential dilutive effect of the conversion of convertible securities, such as warrants and convertible notes, into shares of our common stock. See Note 4. Commitments and Contingencies—Liabilities for loss contingencies, including environmental remediation costs, arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Recoveries from third parties, when probable of realization, are separately recorded and are not offset against the related environmental liability. See Note 7. Share-Based Compensation—We account for our share-based transactions using the fair value as of the grant date and recognize compensation expense over the requisite service period. The fair value of each restricted stock award is measured using the closing price of our common stock on the day of the award. New Accounting Pronouncements On March 30, 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. For public entities, the amendments are effective for annual periods beginning after December 15, 2016. We adopted this standard in 2017 and anticipate no material impact on our consolidated financial statements until the fourth quarter of 2017, when the initial vestings of restricted stock issued under our Management Incentive Plan occur. On February 25, 2016 the FASB issued ASU 2016-02, Leases (Topic 842). The key difference between the existing standards and ASU 2016-02 is the requirement for lessees to recognize on their balance sheet all lease contracts with lease terms greater than 12 months, including operating leases. Specifically, lessees are required to recognize on the balance sheet at lease commencement, both (i) a right-of-use asset, representing the lessee’s right to use the leased asset over the term of the lease, and (ii) a lease liability, representing the lessee’s contractual obligation to make lease payments over the term of the lease. For lessees, ASU 2016-02 requires classification of leases as either operating or finance leases, which are similar to the current operating and capital lease classifications. However, the distinction between these two classifications under the ASU does not relate to balance sheet treatment, but relates to treatment and recognition in the statements of income and cash flows. Lessor accounting is largely unchanged from current US GAAP. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for public entities. Early application is permitted. We are currently evaluating the provisions of this ASU and assessing the impact it may have on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 will supersede most of the existing revenue recognition requirements in US GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which it expects to be entitled in exchange for transferring goods or services to a customer. The new standard also requires disclosures that are sufficient to enable users to understand an entity’s nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). This update provides clarifications in the assessment of principal versus agent considerations in the new revenue standard. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients. The update reduces the potential for diversity in practice at initial application of Topic 606 and the cost and complexity of applying Topic 606. In May 2016, the FASB issued ASU 2016-11, Revenue Recognition and Derivatives and Hedging: Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting. This update rescinds certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities-Oil and Gas, effective upon adoption of Topic 606. These ASUs are effective for annual and interim periods beginning after December 15, 2017. We are assessing the impact that the adoption of these standards will have on our consolidated financial statements. |
Asset Retirement Obligations |
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Asset Retirement Obligation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Asset Retirement Obligations | Asset Retirement Obligations The reconciliation of the beginning and ending asset retirement obligation for the period ending March 31, 2017 is as follows (in thousands):
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Debt | Debt Debt consisted of the following balances as of the dates indicated (in thousands):
(1) The debt discount is being amortized using the effective interest rate method based upon a maturity date of August 30, 2019. The principal includes $2.6 million and $1.2 million of paid in-kind interest at March 31, 2017 and December 31, 2016, respectively. The carrying value includes $10.1 million and $10.6 million of unamortized debt discount at March 31, 2017 and December 31, 2016, respectively. The following table summarizes the total interest expense for the periods shown including contractual interest expense, amortization of debt discount, accretion and financing costs and the effective interest rate on the liability component of the debt (amounts in thousands, except effective interest rates).
(1) Interest expense for the period ended Mach 31, 2017 includes $0.5 million of debt discount amortization and $1.4 million of paid in-kind interest. * - Not meaningful. ** - Includes $3.8 million gain from the change in fair value of the embedded derivative associated with the 8.0% Second Lien Notes. Exit Credit Facility On October 12, 2016, upon consummation of the plan of reorganization, the Company entered into an Exit Credit Agreement (the “Exit Credit Agreement”) with the Subsidiary, as borrower (the “Borrower”), and Wells Fargo Bank, National Association, as administrative agent (“the Administrative Agent”), and certain other lenders party thereto. Pursuant to the Exit Credit Agreement, the lenders party thereto agreed to provide the Borrower with a $20.0 million senior secured term loan credit facility (the “Exit Credit Facility”), with available borrowing capacity of $20.0 million. As of March 31, 2017, we had $16.7 million outstanding on the Exit Credit Facility. The maturity date of the Exit Credit Agreement is September 30, 2018, unless the Borrower notifies the Administrative Agent that it intends to extend the maturity date to September 30, 2019, subject to certain conditions and the payment of a fee. Until such maturity date, the Loans (as defined in the Exit Credit Agreement) under the Exit Credit Agreement shall bear interest at a rate per annum equal to (i) the alternative base rate plus an applicable margin of 4.50% or (ii) adjusted LIBOR plus an applicable margin of 5.50%. As of March 31, 2017, the interest rate on the Exit Credit Facility was 6.53%. The Borrower may elect, at its option, to prepay any borrowing outstanding under the Exit Credit Agreement without premium or penalty (except with respect to any break funding payments which may be payable pursuant to the terms of the Exit Credit Agreement). The Borrower may be required to make mandatory prepayments of the Loans under the Exit Credit Agreement if the total borrowings exceed the aggregate credit amounts, and if the Borrower is not in compliance with the Total Proved Asset Coverage Ratio (as defined in the Exit Credit Agreement) or the Secured Debt Asset Coverage Ratio (as defined in the Exit Credit Agreement). Additionally, if the Borrower has outstanding borrowings and the Consolidated Cash Balance (as defined in the Exit Credit Agreement and the First Amendment and Consent to Exit Credit Agreement dated December 22, 2016) exceeds (i) the sum of $27.5 million plus $21.3 million, which is calculated as the Equity Issuance Net Proceeds from the December 19, 2016 private placement less $2.5 million, as of the close of business on the most recently ended business day on or before March 31, 2018 or (ii) $7.5 million as of the close of business on the most recently ended business day on or after April 1, 2018, the Borrower may also be required to make mandatory prepayments in an aggregate principal amount equal to such excess. Furthermore, the Borrower is required to make certain mandatory prepayments within one business day of (i) the issuance of any Equity Interests (as defined in the Exit Credit Agreement) of the Company, (ii) the consummation of any sale or other disposition of Property (as defined in the Exit Credit Agreement) and (iii) the assignment, termination or unwinding of any Swap Agreements (as defined in the Exit Credit Agreement). Amounts outstanding under the Exit Credit Agreement are guaranteed by the Company and secured by a security interest in substantially all of the assets of the Company and the Borrower. The Exit Credit Agreement contains certain customary representations and warranties, including as to organization; powers; authority; enforceability; approvals; no conflicts; financial condition; no material adverse change; litigation; environmental matters; compliance with laws and agreements; no defaults; Investment Company Act; taxes; ERISA; disclosure; no material misstatements; insurance; restrictions on liens; subsidiaries; location of business and offices; properties; titles, etc.; maintenance of properties; gas imbalances, prepayments; marketing of production; swap agreements; use of loans; solvency; sanctions laws and regulations; foreign corrupt practices; money laundering laws; and embargoed persons. The Exit Credit Agreement also contains certain affirmative and negative covenants, including delivery of financial statements; conduct of business; reserve reports; title information; collateral and guarantee requirements; indebtedness; liens; dividends and distributions; investments; sale or discount of receivables; mergers; sale of properties; termination of swap agreements; transactions with affiliates; negative pledges; dividend restrictions; gas imbalances; take-or-pay or other prepayments; and swap agreements. The Exit Credit Agreement also contains certain financial covenants, including the maintenance of (i) a Total Proved Asset Coverage Ratio (as defined in the Exit Credit Agreement) not to be less than 1.5 to 1.0 initially, and increasing to 2.0 to 1.0 or after December 31, 2018, (ii) Secured Debt Asset Coverage Ratio (as defined in the Exit Credit Agreement) not to be less than 1.10 to 1.00 initially, and increasing to 1.35 to 1.00 and 1.50 to 1.00 after March 31, 2017 and September 30, 2017, respectively, in the case of clauses (i) and (ii), to be determined as of January 1 and July 1 each year and as of the date of any Material Acquisition (as defined in the Exit Credit Agreement) or Material Disposition (as defined in the Exit Credit Agreement), (iii) commencing with the fiscal quarter ending March 31, 2018, a ratio of Debt (as defined in the Exit Credit Agreement) as of the end of each fiscal quarter to EBITDAX for the twelve months ending on the last day of such fiscal quarter, not to exceed 4.00 to 1.00, (iv) limitations on Consolidated Cash Balance, (v) limitations on general and administrative expenses and (vi) minimum liquidity requirements. The Exit Credit Agreement also contains certain events of default, including non-payment; breaches of representations and warranties; non-compliance with covenants or other agreements; cross-default to material indebtedness; voluntary and involuntary bankruptcy; judgments; and change of control. As of March 31, 2017, we were in compliance with all covenants within the Exit Credit Agreement. 13.50% Convertible Second Lien Senior Secured Notes Due 2019 On October 12, 2016, the Company and the Subsidiary, entered into a purchase agreement (the “Purchase Agreement”) with each entity identified as a Shenkman Purchaser on Appendix A to the Purchase Agreement (collectively, the “Shenkman Purchasers”), CVC Capital Partners (acting through such of its affiliates to managed funds as it deems appropriate), J.P. Morgan Securities LLC (acting through such of its affiliates or managed funds as it deems appropriate), Franklin Advisers, Inc. (as investment manager on behalf of certain funds and accounts), O’Connor Global Multi-Strategy Alpha Master Limited and Nineteen 77 Global Multi-Strategy Alpha (Levered) Master Limited (collectively, and together with each of their successors and assigns, the “Purchasers”), in connection with the issuance of $40.0 million aggregate principal amount of the Company’s 13.50% Convertible Second Lien Senior Secured Notes due 2019 (the “Convertible Second Lien Notes”). The aggregate principal amount of the Convertible Second Lien Notes is convertible at the option of the Purchasers at any time prior to the scheduled maturity date into an amount of the Company’s common stock equal to 15% of the common stock of the reorganized Company on a fully diluted basis, subject to adjustments. At closing, the Purchasers were issued 10-year costless warrants for common stock equal to 20% of the New Common Stock of the reorganized Company on a fully diluted basis. Holders of the Convertible Second Lien Notes have a second priority lien on all assets of the Debtors, and have a continuing right to appoint two members to the Board as long as the Convertible Second Lien Notes are outstanding. The Convertible Second Lien Notes will mature on August 30, 2019, or such later date as set forth in the Convertible Second Lien Notes, but in no event later than March 30, 2020. The Convertible Second Lien Notes bear interest at the rate of 13.50% per annum, payable quarterly in arrears on January 15, April 15, July 15 and October 15 of each year. The Company may elect to pay all or any portion of interest in-kind on the then outstanding principal amount of the Convertible Second Lien Notes by increasing the principal amount of the outstanding Convertible Second Lien Notes or by issuing additional Second Lien Notes (“PIK Interest Notes”). The PIK Interest Notes are not convertible. During such time as the Exit Credit Agreement (but not any refinancing or replacement thereof) is in effect, interest on the Convertible Second Lien Notes must be paid in-kind. The Indenture governing the Convertible Second Lien Notes contains certain covenants pertaining to us and our subsidiary, including delivery of financial reports; environmental matters; conduct of business; use of proceeds; operation and maintenance of properties; collateral and guarantee requirements; indebtedness; liens; dividends and distributions; limits on sale of assets and stock; business activities; transactions with affiliates; and changes of control. The Indenture also contains certain financial covenants, including the maintenance of (i) a Total Proved Asset Coverage Ratio (as defined in the Exit Credit Agreement) not to be less than 1.10 to 1.00 on or before March 31, 2017 initially and increasing to 1.35 to 1.00 after March 31, 2017 but on or before September 30, 2017 and 1.50 to 1.00 after September 30, 2017, to be determined as of January 1 and July 1 of each year; (ii) limitations on general and administrative expenses and (iii) minimum liquidity requirements. Upon issuance of the Convertible Second Lien Notes in October 2016, in accordance with accounting standards related to convertible debt instruments that may be settled in cash upon conversion as well as warrants on the debt instrument, we recorded a debt discount of $11.0 million, thereby reducing the $40.0 million carrying value upon issuance to $29.0 million and recorded an equity component of $11.0 million. The debt discount is amortized using the effective interest rate method based upon an original term through August 30, 2019. $10.1 million of debt discount remains to be amortized on the Convertible Second Lien Notes as of March 31, 2017. As of March 31, 2017, we were in compliance with all covenants within the Indenture that governs the Convertible Second Lien Notes. |
Net Loss Per Common Share |
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Net Loss Per Common Share | Net Loss Per Common Share Upon our emergence from bankruptcy on October 12, 2016, as discussed in Note 1, the Predecessor Company's outstanding common stock and preferred stock were canceled, and new common stock and warrants were then issued. Net loss applicable to common stock was used as the numerator in computing basic and diluted loss per common share for the three months ended March 31, 2017 and 2016. The following table sets forth information related to the computations of basic and diluted loss per share.
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Income Taxes |
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Mar. 31, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes We recorded no income tax expense or benefit for the three months ended March 31, 2017. We recorded a valuation allowance at December 31, 2016 which resulted in no net deferred tax asset or liability appearing on our statement of financial position. We recorded this valuation allowance after an evaluation of all available evidence (including our recent history of net operating losses in 2016 and prior years) that led to a conclusion that based upon the more-likely-than-not standard of the accounting literature, our deferred tax assets were unrecoverable. Considering the Company’s taxable income forecasts, our assessment of the realization of our deferred tax assets has not changed, and we continue to maintain a full valuation allowance for our net deferred tax assets as of March 31, 2017. As of March 31, 2017, we have no unrecognized tax benefits. There were no significant changes to the calculation since December 31, 2016. |
Commodity Derivative Activities |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commodity Derivative Activities | Commodity Derivative Activities We use commodity and financial derivative contracts to manage fluctuations in commodity prices and interest rates. We are currently not designating our derivative contracts for hedge accounting. All derivative gains and losses are from our oil and natural gas derivative contracts and have been recognized in “Other income (expense)” on our Consolidated Statements of Operations. The following table summarizes gains and losses we recognized on our oil and natural gas derivatives for the three months ended March 31, 2017 and 2016:
Commodity Derivative Activity We enter into swap contracts, costless collars or other derivative agreements from time to time to manage commodity price risk for a portion of our production. Our policy is that all derivatives are approved by the Hedging Committee of the Board, and reviewed periodically by the Board. Despite the measures taken by us to attempt to control price risk, we remain subject to price fluctuations for natural gas and crude oil sold in the spot market. Prices received for natural gas sold on the spot market are volatile due primarily to seasonality of demand and other factors beyond our control. Decreases in domestic crude oil and natural gas spot prices will have a material adverse effect on our financial position, results of operations and quantities of reserves recoverable on an economic basis. We routinely exercise our contractual right to net realized gains against realized losses when settling with our financial counterparties. Neither our counterparties nor we require any collateral upon entering derivative contracts. We were not at risk of losing any fair value amounts had our counterparties been unable to fulfill their obligations as of March 31, 2017 and December 31, 2016 because we did not have a net derivative asset on our Consolidated Balance Sheets at those periods. As of March 31, 2017, the open positions on our outstanding commodity derivative contracts, all of which were natural gas contracts with BP, were as follows:
The following table summarizes the fair values of our derivative financial instruments that are recorded at fair value classified in each Level as of March 31, 2017 (in thousands). We measure the fair value of our commodity derivative contracts by applying the income approach. See Note 1 for our discussion regarding fair value, including inputs used and valuation techniques for determining fair values.
We enter into oil and natural gas derivative contracts under which we have netting arrangements with each counter party. The following table discloses and reconciles the gross amounts to the amounts as presented on the Consolidated Balance Sheets for the periods ending March 31, 2017 and December 31, 2016:
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Commitments and Contingencies |
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Mar. 31, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies We are party to various lawsuits from time to time arising in the normal course of business, including, but not limited to, royalty, contract, personal injury, and environmental claims. We have established reserves as appropriate for all such proceedings and intend to vigorously defend these actions. Management believes, based on currently available information, that adverse results or judgments from such actions, if any, will not be material to our consolidated financial position results of operations or liquidity. Operating Leases—We have commitments under an operating lease agreement for office space and office equipment. Total rent expense for the three months ended March 31, 2017 and March 31, 2016 was approximately $0.4 million and $0.4 million, respectively. Defined Contribution Plan – We have a defined contribution plan (“DCP”) which has a Company matching option to employees' contributions. Participation in the DCP is voluntary and all employees of the Company are eligible to participate. We suspended the Company's match in April 2016. We charged to expense plan contributions of zero and $0.1 million for the three months ended March 31, 2017 and March 31, 2016, respectively. |
Description of Business and Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||
Basis of Presentation | Basis of Presentation The consolidated financial statements of the Company included in this Quarterly Report on Form 10-Q have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and accordingly, certain information normally included in financial statements prepared in accordance with United States Generally Accepted Accounting Principles (“US GAAP”) has been condensed or omitted. This information should be read in conjunction with our consolidated financial statements and notes contained in our annual report on Form 10-K for the year ended December 31, 2016. Operating results for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for the full year or for any interim period. Certain data in prior periods’ financial statements have been adjusted to conform to the presentation of the current period. Fresh Start Accounting—We applied fresh start accounting upon emergence from bankruptcy on October 12, 2016 (the "Effective Date"). This resulted in the Company becoming a new entity for financial reporting purposes. Upon adoption of fresh start accounting, our assets and liabilities were recorded at their fair values as of the Effective Date. As a result, our consolidated statement of operations subsequent to the Effective Date are not comparable to our consolidated statement of operations prior to the Effective Date. Our consolidated financial statements and related footnotes are presented in a format that illustrates the lack of comparability between amounts presented on or after October 12, 2016 and dates prior. Our financial results for future periods following the application of fresh-start accounting will be different from historical trends and the differences may be material. All references made to "Successor" or "Successor Company" relate to the Company on and subsequent to the Effective Date. References to the “Successor" in this quarterly report relate to the periods after October 12, 2016 which includes the first quarter of 2017. References to "Predecessor" or “Predecessor Company” in this quarterly report refer to the Company prior to the Effective Date which includes the first quarter of 2016. |
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Principles of Consolidation | Principles of Consolidation—The consolidated financial statements include the financial statements of the Company and the Subsidiary. Intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements reflect all normal recurring adjustments that, in the opinion of management, are necessary for a fair presentation. |
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Use of Estimates | Use of Estimates— Our management has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with US GAAP. |
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Cash and Cash Equivalents | Cash and Cash Equivalents—Cash and cash equivalents includes cash on hand, demand deposit accounts and temporary cash investments with maturities of ninety days or less at the date of purchase. |
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Inventory | Inventory –Inventory consists of casing and tubulars that are expected to be used in our capital drilling program. Inventory is carried on the Consolidated Balance Sheets at the lower of cost or market. |
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Property and Equipment | Property and Equipment—Under US GAAP, two acceptable methods of accounting for oil and natural gas properties are allowed. These are the Successful Efforts Method and the Full Cost Method. Entities engaged in the production of oil and natural gas have the option of selecting either method for application in the accounting for their properties. The principal differences between the two methods are in the treatment of exploration costs, the computation of Depreciation, Depletion and Amortization (“DD&A”) expense and the assessment of impairment of oil and natural gas properties. Upon emergence from bankruptcy, we elected to adopt the Full Cost Method. Under the Full Cost Method, we capitalize all costs associated with acquisitions, exploration, development and estimated abandonment costs. We capitalize internal costs that can be directly identified with the acquisition of leasehold, as well as drilling and completion activities, but do not include any costs related to production, general corporate overhead or similar activities. Unevaluated property costs are excluded from the amortization base until we make a determination as to the existence of proved reserves on the respective property or impairment. We review our unevaluated properties at the end of each quarter to determine whether the costs should be reclassified to proved oil and natural gas properties and thereby subject to DD&A and the full cost ceiling test. Our sales of oil and natural gas properties are accounted for as adjustments to net proved oil and natural gas properties with no gain or loss recognized, unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves. We amortize our investment in oil and natural gas properties through DD&A expense using the units of production (the “UOP”) method. This entails the quarterly provision for DD&A expense being computed by dividing production volumes for the period by the total proved reserves as of the beginning of the period (beginning of period reserves being determined by adding production to the end of period reserves), and applying the respective rate to the net cost of proved oil and natural gas properties and future development costs. Full Cost Ceiling Test—The Full Cost Method requires that at the conclusion of each financial reporting period, the present value of estimated future net cash flows from proved reserves (adjusted for hedges and excluding cash flows related to estimated abandonment costs), be compared to the net capitalized costs of proved oil and natural gas properties, net of related deferred taxes. This comparison is referred to as a "ceiling test". If the net capitalized costs of proved oil and natural gas properties exceed the estimated discounted future net cash flows from proved reserves, we are required to write-down the value of our oil and natural gas properties to the value of the discounted cash flows. Estimated future net cash flows from proved reserves are calculated based on a 12-month average pricing assumption. |
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Impairment | Impairment—Prior to October 12, 2016 under the Successful Efforts Method of Accounting, we periodically assessed our long-lived assets recorded in oil and natural gas properties on the Consolidated Balance Sheets to ensure that they were not overstated or carried in excess of fair value, which was computed using Level 3 inputs such as discounted cash flow models or valuations. Significant Level 3 assumptions associated with discounted cash flow models or valuations used in the impairment evaluation included estimates of future crude oil and natural gas prices, production costs, development expenditures, anticipated production of proved reserves, appropriate risk-adjusted discount rates and other relevant data. An evaluation was performed on a field-by-field basis at least annually or whenever changes in facts and circumstances indicated that our oil and natural gas properties may be impaired. To determine if a field was impaired, we compared the carrying value of the field to the undiscounted future net cash flows by applying management’s estimates of proved reserves, future oil and natural gas prices, future production of oil and natural gas reserves and future operating costs over the economic life of the property. In addition, other factors such as probable and possible reserves were taken into consideration when justified by economic conditions and the availability of capital to develop proved undeveloped reserves. For each property determined to be impaired, we recognized an impairment loss equal to the difference between the estimated fair value and the carrying value of the field. Fair value was estimated to be the present value of expected future net cash flows. Any impairment charge incurred was recorded in accumulated depletion, depreciation and amortization to reduce the carrying value of the field. Each part of this calculation was subject to a large degree of judgment, including the determination of the fields’ estimated reserves, future cash flows and fair value. |
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Fair Value Measurement | Fair Value Measurement—Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, whether in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, our credit risk. We use various methods, including the income approach and market approach, to determine the fair values of our financial instruments that are measured at fair value on a recurring basis, which depend on a number of factors, including the availability of observable market data over the contractual term of the underlying instrument. For some of our instruments, the fair value is calculated based on directly observable market data or data available for similar instruments in similar markets. For other instruments, the fair value may be calculated based on these inputs as well as other assumptions related to estimates of future settlements of these instruments. We separate our financial instruments into three Levels (Levels 1, 2 and 3) based on our assessment of the availability of observable market data and the significance of non-observable data used to determine the fair value of our instruments. Our assessment of an instrument can change over time based on the maturity or liquidity of the instrument, which could result in a change in the classification of the instruments between Levels. Each of these Levels and our corresponding instruments classified by Level are further described below:
As of March 31, 2017 and December 31, 2016, the carrying amounts of our cash and cash equivalents, trade receivables and payables represented fair value because of the short-term nature of these instruments. |
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Depreciation | Depreciation and Depletion—Depreciation and depletion of producing oil and natural gas properties is calculated using the units-of-production method. Proved developed reserves are used to compute unit rates for unamortized tangible and intangible development costs, and proved reserves are used for unamortized leasehold costs. Depreciation of furniture, fixtures and equipment, consisting of office furniture, computer hardware and software and leasehold improvements, is computed using the straight-line method over their estimated useful lives, which vary from three to five years. |
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Asset Retirement Obligations | Asset Retirement Obligations—Asset retirement obligations are related to the abandonment and site restoration requirements that result from the exploration and development of our oil and natural gas properties. We record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. Accretion expense is included in “Depreciation, depletion and amortization” on our Consolidated Statements of Operations. See Note 2. The estimated fair value of the Company’s asset retirement obligations at inception is determined by utilizing the income approach by applying a credit-adjusted risk-free rate, which takes into account the Company’s credit risk, the time value of money, and the current economic state, to the undiscounted expected abandonment cash flows. Given the unobservable nature of the inputs, the measurement of the asset retirement obligations was classified as Level 3 in the fair value hierarchy. |
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Revenue Recognition | Revenue Recognition—Oil and natural gas revenues are recognized when production is sold to a purchaser at a fixed or determinable price, when delivery has occurred and title has transferred, and if collectability of the revenue is probable. Revenues from the production of crude oil and natural gas properties in which we have an interest with other producers are recognized using the entitlements method. We record a liability or an asset for natural gas balancing when we have sold more or less than our working interest share of natural gas production, respectively. At March 31, 2017 and December 31, 2016, the net liability for natural gas balancing was immaterial. Differences between actual production and net working interest volumes are routinely adjusted. |
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Derivative Instruments | Derivative Instruments—We use derivative instruments such as futures, forwards, options, collars and swaps for purposes of hedging our exposure to fluctuations in the price of crude oil and natural gas and to hedge our exposure to changing interest rates. Accounting standards related to derivative instruments and hedging activities require that all derivative instruments subject to the requirements of those standards be measured at fair value and recognized as assets or liabilities in the balance sheet. We offset the fair value of our asset and liability positions with the same counterparty for each commodity type. Changes in fair value are required to be recognized in earnings unless specific hedge accounting criteria are met. All of our realized gain or losses on our derivative contracts are the result of cash settlements. We have not designated any of our derivative contracts as hedges; accordingly, changes in fair value are reflected in earnings. See Note 6. |
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Income Taxes | Income Taxes—We account for income taxes, as required, under the liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. |
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Net Income or Net Loss Per Share | Net Income or Net Loss Per Share—Basic income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders for each reporting period by the weighted-average number of common shares outstanding during the period. Diluted income (loss) per common share is computed by dividing net income (loss) applicable to common stockholders for each reporting period by the weighted average number of common shares outstanding during the period, plus the effects of potentially dilutive restricted stock calculated using the treasury stock method and the potential dilutive effect of the conversion of convertible securities, such as warrants and convertible notes, into shares of our common stock. See Note 4. |
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Commitments and Contingencies | Commitments and Contingencies—Liabilities for loss contingencies, including environmental remediation costs, arising from claims, assessments, litigation, fines and penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment and/or remediation can be reasonably estimated. Recoveries from third parties, when probable of realization, are separately recorded and are not offset against the related environmental liability. |
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Share-based Compensation | Share-Based Compensation—We account for our share-based transactions using the fair value as of the grant date and recognize compensation expense over the requisite service period. The fair value of each restricted stock award is measured using the closing price of our common stock on the day of the award. |
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New Accounting Pronouncements | New Accounting Pronouncements On March 30, 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments in this ASU are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. For public entities, the amendments are effective for annual periods beginning after December 15, 2016. We adopted this standard in 2017 and anticipate no material impact on our consolidated financial statements until the fourth quarter of 2017, when the initial vestings of restricted stock issued under our Management Incentive Plan occur. On February 25, 2016 the FASB issued ASU 2016-02, Leases (Topic 842). The key difference between the existing standards and ASU 2016-02 is the requirement for lessees to recognize on their balance sheet all lease contracts with lease terms greater than 12 months, including operating leases. Specifically, lessees are required to recognize on the balance sheet at lease commencement, both (i) a right-of-use asset, representing the lessee’s right to use the leased asset over the term of the lease, and (ii) a lease liability, representing the lessee’s contractual obligation to make lease payments over the term of the lease. For lessees, ASU 2016-02 requires classification of leases as either operating or finance leases, which are similar to the current operating and capital lease classifications. However, the distinction between these two classifications under the ASU does not relate to balance sheet treatment, but relates to treatment and recognition in the statements of income and cash flows. Lessor accounting is largely unchanged from current US GAAP. The amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, for public entities. Early application is permitted. We are currently evaluating the provisions of this ASU and assessing the impact it may have on our consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. ASU 2014-09 will supersede most of the existing revenue recognition requirements in US GAAP and will require entities to recognize revenue at an amount that reflects the consideration to which it expects to be entitled in exchange for transferring goods or services to a customer. The new standard also requires disclosures that are sufficient to enable users to understand an entity’s nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net). This update provides clarifications in the assessment of principal versus agent considerations in the new revenue standard. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients. The update reduces the potential for diversity in practice at initial application of Topic 606 and the cost and complexity of applying Topic 606. In May 2016, the FASB issued ASU 2016-11, Revenue Recognition and Derivatives and Hedging: Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting. This update rescinds certain SEC Staff Observer comments that are codified in Topic 605, Revenue Recognition, and Topic 932, Extractive Activities-Oil and Gas, effective upon adoption of Topic 606. These ASUs are effective for annual and interim periods beginning after December 15, 2017. We are assessing the impact that the adoption of these standards will have on our consolidated financial statements. |
Description of Business and Significant Accounting Policies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Payable | Accounts Payable—Accounts payable consisted of the following amounts as of March 31, 2017 and December 31, 2016:
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Asset Retirement Obligations (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||
Asset Retirement Obligation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Reconciliation of Asset Retirement Obligations | The reconciliation of the beginning and ending asset retirement obligation for the period ending March 31, 2017 is as follows (in thousands):
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Debt (Tables) |
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of Debt | Debt consisted of the following balances as of the dates indicated (in thousands):
(1) The debt discount is being amortized using the effective interest rate method based upon a maturity date of August 30, 2019. The principal includes $2.6 million and $1.2 million of paid in-kind interest at March 31, 2017 and December 31, 2016, respectively. The carrying value includes $10.1 million and $10.6 million of unamortized debt discount at March 31, 2017 and December 31, 2016, respectively. |
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Schedule of Interest Expense and Effective Interest | The following table summarizes the total interest expense for the periods shown including contractual interest expense, amortization of debt discount, accretion and financing costs and the effective interest rate on the liability component of the debt (amounts in thousands, except effective interest rates).
(1) Interest expense for the period ended Mach 31, 2017 includes $0.5 million of debt discount amortization and $1.4 million of paid in-kind interest. * - Not meaningful. ** - Includes $3.8 million gain from the change in fair value of the embedded derivative associated with the 8.0% Second Lien Notes. |
Net Loss Per Common Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Computation of Net Income (Loss) Per Common Share | The following table sets forth information related to the computations of basic and diluted loss per share.
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Commodity Derivative Activities (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Gains and Losses on Derivatives | The following table summarizes gains and losses we recognized on our oil and natural gas derivatives for the three months ended March 31, 2017 and 2016:
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Schedule of Price Risk Derivatives | As of March 31, 2017, the open positions on our outstanding commodity derivative contracts, all of which were natural gas contracts with BP, were as follows:
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Derivative Assets and Liabilities Recorded at Fair Value | The following table summarizes the fair values of our derivative financial instruments that are recorded at fair value classified in each Level as of March 31, 2017 (in thousands). We measure the fair value of our commodity derivative contracts by applying the income approach. See Note 1 for our discussion regarding fair value, including inputs used and valuation techniques for determining fair values.
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Offsetting Assets | We enter into oil and natural gas derivative contracts under which we have netting arrangements with each counter party. The following table discloses and reconciles the gross amounts to the amounts as presented on the Consolidated Balance Sheets for the periods ending March 31, 2017 and December 31, 2016:
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Offsetting Liabilities | The following table discloses and reconciles the gross amounts to the amounts as presented on the Consolidated Balance Sheets for the periods ending March 31, 2017 and December 31, 2016:
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Description of Business and Significant Accounting Policies - Schedule of Accounts Payable (Details) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Accounting Policies [Abstract] | ||
Trade payables | $ 4,522 | $ 2,004 |
Revenue payable | 11,101 | 11,296 |
Prepayments from partners | 496 | 965 |
Miscellaneous payables | 137 | 127 |
Total accounts payable | $ 16,256 | $ 14,392 |
Description of Business and Significant Accounting Policies - Narrative (Detail) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Description Of Company And Significant Accounting Policies [Line Items] | ||
Full Cost Ceiling Test write-downs | $ 0 | |
Asset impairment charges | $ 0 | |
Minimum [Member] | ||
Description Of Company And Significant Accounting Policies [Line Items] | ||
Useful life | 3 years | |
Maximum [Member] | ||
Description Of Company And Significant Accounting Policies [Line Items] | ||
Useful life | 5 years |
Reconciliation of Asset Retirement Obligations (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Dec. 31, 2016 |
|
Asset Retirement Obligation, Roll Forward [Roll Forward] | ||
Beginning balance | $ 2,933 | |
Liabilities incurred | 35 | |
Accretion expense | 55 | |
Ending balance | 3,023 | |
Current liability | 0 | |
Long term liability | $ 3,023 | $ 2,933 |
Debt - Components of Debt (Detail) - USD ($) $ in Thousands |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Debt Instrument [Line Items] | ||
Principal | $ 59,210 | $ 57,821 |
Carrying Amount | 49,132 | 47,205 |
Second Lien Term Loan [Member] | ||
Debt Instrument [Line Items] | ||
Principal | 42,559 | 41,170 |
Carrying Amount | 32,481 | 30,554 |
Paid-in kind interest | 2,600 | 1,200 |
Unamortized discount | $ 10,100 | $ 10,600 |
Income Taxes - Additional Information (Detail) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Dec. 31, 2016 |
|
Income Tax Disclosure [Abstract] | ||
Income tax expense or benefit | $ 0 | |
Unrecognized tax benefits | $ 0 | $ 0 |
Commodity Derivative Activities - Summary of Gains and Losses on Derivatives (Detail) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Successor [Member] | ||
Derivative [Line Items] | ||
Total gain (loss) on commodity derivatives not designated as hedges | $ (260) | |
Successor [Member] | Commodity Derivatives [Member] | ||
Derivative [Line Items] | ||
Gain on commodity derivatives not designated as hedges, settled | 142 | |
Gain (loss) on commodity derivatives not designated as hedges, not settled | (402) | |
Total gain (loss) on commodity derivatives not designated as hedges | $ (260) | |
Predecessor [Member] | ||
Derivative [Line Items] | ||
Total gain (loss) on commodity derivatives not designated as hedges | $ 24 | |
Predecessor [Member] | Commodity Derivatives [Member] | ||
Derivative [Line Items] | ||
Gain on commodity derivatives not designated as hedges, settled | 0 | |
Gain (loss) on commodity derivatives not designated as hedges, not settled | 24 | |
Total gain (loss) on commodity derivatives not designated as hedges | $ 24 |
Commodity Derivative Activities - Commodity Derivative Activities - Additional Information (Detail) - USD ($) |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Derivative assets | $ 0 | $ 0 |
Commitments and Contingencies (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2017 |
Mar. 31, 2016 |
|
Commitments and Contingencies Disclosure [Abstract] | ||
Rent expense | $ 400,000 | $ 400,000 |
Employer discretionary contribution amount | $ 0 | $ 100,000 |
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