Exhibit 99.1
News Release
Approach Resources Inc.
Reports Results for Fourth Quarter and Year End 2009
Fort Worth, Texas, March 9, 2010 — Approach Resources Inc. (NASDAQ: AREX) today reported
financial and operating results for the fourth quarter and year ended December 31, 2009.
Highlights for the year ended December 31, 2009 include:
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• |
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Production of 8,808 MMcfe |
| |
| |
• |
|
Net loss of $5.2 million, or $0.25 per diluted share |
| |
| |
• |
|
Adjusted net income (non-GAAP) of $3.3 million, or $0.16 per diluted share |
| |
| |
• |
|
EBITDAX (non-GAAP) of $36.7 million, or $1.75 per diluted share |
| |
| |
• |
|
Long-term debt-to-capital ratio and liquidity of 13% and $85.4 million, respectively |
Year End 2009 Results
Production for 2009 totaled 8,808 MMcfe (24.1 MMcfe/d), compared to 8,755 MMcfe (23.9 MMcfe/d)
produced in 2008. Production for 2009 was 72% natural gas and 28% oil and NGLs, compared 81%
natural gas and 19% oil and NGLs in 2008.
Net loss for 2009 was $5.2 million, or $0.25 per diluted share, on revenues of $40.6 million,
compared to net income of $23.4 million, or $1.12 per diluted share, on revenues of $79.9 million,
for 2008. Net loss for 2009 included a pre-tax, unrealized loss on commodity derivatives of $9.9
million and an impairment of unproved properties of $3 million related to our exploratory acreage
position in Northeast British Columbia.
Excluding the unrealized loss on commodity derivatives, the
impairment of unproved properties and related income taxes, adjusted net income (non-GAAP) for 2009 was $3.3 million, or
$0.16 per diluted share, compared to adjusted net income of $23.5 million, or $1.13 per diluted
share, for 2008. See “Supplemental Non-GAAP Financial and Other Measures” below for our
reconciliation of adjusted net income to net (loss) income.
EBITDAX (non-GAAP) for 2009 was $36.7 million, or $1.75 per diluted share, compared to $63.2
million, or $3.03 per diluted share, for 2008. See “Supplemental Non-GAAP Financial and Other
Measures” below for our reconciliation of EBITDAX to net (loss) income.
Our financial results for 2009 were negatively impacted by a sharp decline in realized
commodity prices over the prior year. Average realized natural gas, oil and NGL prices for 2009,
before the effect of commodity derivatives, were $3.70 per Mcf, $54.97 per Bbl and $28.32 per Bbl,
respectively, compared to $8.29 per Mcf, $93.79 per Bbl and $45.46 per Bbl, respectively, for 2008.
The Company’s average realized price, including the effect of commodity derivatives, was $6.27 per
Mcfe for 2009, compared to $9.46 per Mcfe for 2008, a decrease of 33.7%. Of the $39.2 million
decrease in revenues, approximately $41.1 million was attributable to a decrease in oil and gas
prices, partially offset by $1.9 million in revenues attributable to the slight increase in
production volumes over the prior year.
Lease operating expenses (“LOE”) for 2009 were $7.8 million, or $0.88 per Mcfe, compared to
$7.6 million, or $0.87 per Mcfe, in 2008.
Severance and production taxes for 2009 were $2 million, or 4.9% of oil and gas sales,
compared to $4.2 million, or 5.3% of oil and gas sales, in 2008. The decrease in production taxes
was a function of the decrease in oil and gas sales between 2009 and 2008.
Exploration expense for 2009 and 2008 was $1.6 million and $1.5 million, respectively.
Exploration expense for 2009 resulted primarily from 3-D seismic acquired across Cinco Terry and
the expiration of leases in Ozona Northeast and North Bald Prairie. We have re-leased or expect to
re-lease substantially all of the expired acreage. Exploration expense for 2008 resulted from one
dry hole drilled in Ozona Northeast and $965,000 of lease extensions in Ozona Northeast.
Impairment of unproved properties for 2009 was $3 million, compared to $6.4 million in 2008.
The 2009 impairment resulted from a non-cash write-off of $3 million in acreage costs in Northeast
British Columbia, and represents the remaining carrying value we have recorded for the project.
The 2008 impairment resulted from the write-off of drilling and completion costs of three wells in
Northeast British Columbia and drilling costs of three wells in Southwest Kentucky.
General and administrative expenses (“G&A”) for 2009 were $10.6 million, or $1.21 per Mcfe,
compared to $8.9 million, or $1.01 per Mcfe, for 2008. G&A for 2009 included higher share-based
compensation, as well as higher salaries and related employee benefit costs attributable to an
increase in staff from the prior year period and a severance payment to a former officer. G&A for
2009 also included an increase in franchise taxes.
Depletion, depreciation and amortization expenses (“DD&A”) for 2009 were $24.7 million, or
$2.80 per Mcfe, compared to $23.7 million, or $2.71 per Mcfe, for 2008. The increase in DD&A
expense was primarily attributable to an increase in oil and gas property costs, partially offset
by an increase in our estimated proved oil and gas reserves.
Capital expenditures during 2009 totaled $29 million.
Fourth Quarter 2009 Results
Net loss for the fourth quarter of 2009 was $2.3 million, or $0.11 per diluted share, on
revenues of $11.9 million, compared to net loss of $152,000, or $0.01 per diluted share, on
revenues of $14.7 million, for the fourth quarter of 2008. Net loss for fourth quarter of 2009
included the effect of an impairment of non-producing properties of $3 million related to our
exploratory acreage position in Northeast British Columbia and a pre-tax, unrealized loss on
commodity derivatives of $1.3 million.
Excluding the impairment, unrealized loss on commodity derivatives and related income taxes,
adjusted net income (non-GAAP) for the fourth quarter of 2009 was $539,000, or $0.03 per diluted
share, compared to adjusted net income of $2.6 million, or $0.13 per diluted share, for the fourth
quarter of 2008. See “Supplemental Non-GAAP Financial and Other Measures” below for our
reconciliation of adjusted net income to net (loss) income.
EBITDAX (non-GAAP) for the fourth quarter of 2009 was $9.3 million, or $0.44 per diluted
share, compared to $11.6 million, or $0.56 per diluted share, for the fourth quarter of 2008. See
“Supplemental Non-GAAP Financial and Other Measures” below for our reconciliation of EBITDAX to net
(loss) income.
LOE for the fourth quarter of 2009 was $1.8 million, or $0.88 per Mcfe, compared to $2.5
million, or $0.95 per Mcfe, in the fourth quarter of 2008. The decrease in LOE in the fourth
quarter of
2
2009 compared to
the fourth quarter of 2008 is primarily a result of a concentrated
effort on lowering fixed costs.
Severance and production taxes for the fourth quarter of 2009 were $604,000, or 5.1% of oil
and gas sales, compared to $1.3 million, or 8.9% of oil and gas sales, in the fourth quarter of
2008. The decrease in production taxes was due to the decrease in oil and gas sales between the
fourth quarter of 2009 and the fourth quarter of 2008, and lower production tax rates applied
specifically to Cinco Terry.
Exploration expense for the fourth quarter of 2009 was $1.1 million. Exploration expense for
the fourth quarter of 2009 resulted primarily from 3-D seismic data acquired across Cinco Terry and
the expiration of leases in Ozona Northeast and North Bald Prairie. We expect to re-lease
substantially all of the expired acreage.
Impairment of unproved properties for the fourth quarter of 2009 was $3 million, compared to
$6.4 million in the fourth quarter of 2008. The impairment expense for the fourth quarter of 2009
resulted from a non-cash write-off of $3 million in acreage costs in Northeast British Columbia,
and represents the remaining carrying value we have recorded for the project.
G&A for the fourth quarter of 2009 was $3.3 million, or $1.68 per Mcfe, compared to $3.2
million, or $1.20 per Mcfe, for the fourth quarter of 2008. Our G&A for the fourth quarter of 2009
included higher share-based compensation, higher salaries and related employee benefit costs
attributable to our increase in staff from the fourth quarter of 2008 and a severance payment to a
former officer.
DD&A for the fourth quarter of 2009 was $5.9 million, or $2.96 per Mcfe, compared to $7.5
million, or $2.80 per Mcfe, for the fourth quarter of 2008. The increase in DD&A was primarily
attributable to an increase in oil and gas property costs, partially offset by an increase in our
estimated proved oil and gas reserves.
Capital expenditures during the fourth quarter of 2009 totaled $10 million.
Liquidity and Commodity Derivatives Update
At December 31, 2009, we had a $200 million revolving credit facility with a $115 million
borrowing base, of which $32.3 million and $37.9 million were drawn at December 31, 2009 and
February 28, 2010, respectively. As of December 31, 2009, our long-term debt-to-capital ratio and
liquidity were 13% and $85.4 million, respectively, compared to 16% and $60.5 million at December
31, 2008. See “Supplemental Non-GAAP Financial and Other Measures” below for our definitions of
“long-term debt-to-capital ratio” and “liquidity.”
At December 31, 2009, we had the following commodity derivative positions outstanding:
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|
|
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|
|
|
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|
Volume (MMBtu) |
|
|
$/MMBtu |
|
| Period |
|
Monthly |
|
|
Total |
|
|
Fixed |
|
NYMEX — Henry Hub |
|
|
|
|
|
|
|
|
|
|
|
|
Price swaps 2010 |
|
|
150,000 |
|
|
|
1,800,000 |
|
|
$ |
5.85 |
|
Price swaps 2010 |
|
|
150,000 |
|
|
|
1,800,000 |
|
|
$ |
6.40 |
|
Price swaps 2010 |
|
|
100,000 |
|
|
|
1,200,000 |
|
|
$ |
6.36 |
|
WAHA basis differential |
|
|
|
|
|
|
|
|
|
|
|
|
Basis swaps 2010 |
|
|
415,000 |
|
|
|
4,980,000 |
|
|
$ |
(0.71 |
) |
Basis swaps 2011 |
|
|
300,000 |
|
|
|
3,600,000 |
|
|
$ |
(0.53 |
) |
3
2010 Outlook
We currently are operating two rigs in Cinco Terry and one rig in Ozona Northeast. Average
daily production for February 2010 was 22.6 MMcfe/d.
Our 2010 capital budget for exploration and development expenditures currently is $53 million.
We intend to fund 2010 capital expenditures, excluding any acquisitions, primarily out of
internally-generated cash flows and, as necessary, borrowings under our credit facility.
Approximately $48.5 million, or 92%, of the capital budget is allocated to our core development
areas of operation in the Permian Basin, where we plan to drill 48 gross (24 net) wells in Cinco
Terry and 36 gross (36 net) wells in Ozona Northeast.
The table below sets forth our 2010 financial and operational guidance, which remains
unchanged from our prior disclosure in November 2009. The 2010 guidance is forward-looking
information that is subject to a number of risks and uncertainties, many of which are beyond the
Company’s control.
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|
|
| |
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2010 |
|
| |
|
Guidance |
|
Production: |
|
|
|
|
Total (MMcfe) |
|
|
8,900 — 9,400 |
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
Lease operating expense (per Mcfe) |
|
$ |
0.85 — 0.95 |
|
Severance and production taxes (percent of oil and gas sales) |
|
|
5% — 6% |
|
General and administrative (per Mcfe) |
|
$ |
1.05 — 1.15 |
|
Depletion, depreciation and amortization (per Mcfe) |
|
$ |
2.50 — 3.00 |
|
Conference Call Information
The Company will host a conference call on Wednesday, March 10, 2010, at 10:00 a.m. Central
Time (11:00 a.m. Eastern Time) to discuss fourth quarter and year end 2009 results. To participate
in the conference call, domestic participants should dial (866) 543-6403 and international
participants should dial (617) 213-8896 approximately 15 minutes before the scheduled conference
time. To access the simultaneous webcast of the conference call, please visit the Calendar of
Events page under the Investor Relations section of the Company’s website,
www.approachresources.com, 15 minutes before the scheduled conference time to register for the
webcast and install any necessary software. A replay of the webcast will be available for one year
on the Company’s website.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements,
other than statements of historical facts, included in this press release that address activities,
events or developments that the Company expects, believes or anticipates will or may occur in the
future are forward-looking statements. Without limiting the generality of the foregoing,
forward-looking statements contained in this press release specifically include the expectations of
plans, strategies, objectives and anticipated financial and operating results of the Company,
including as to the Company’s expected 2010 production and operating costs and expenses guidance,
capital expenditures (including, without limitation, the amount, location and category of such
expenditures), the Company’s drilling program and internally-generated cash flow. These statements
are based on certain assumptions made by the Company based on management’s experience and
perception of historical trends, current conditions, anticipated future developments and other
factors believed to be appropriate. Such statements are subject to a number of assumptions, risks
and uncertainties, many of which are beyond the control of the Company, which may cause actual
results to differ materially from those implied or expressed by the forward-looking
4
statements. Further information on such assumptions, risks and uncertainties is available in
the Company’s Securities and Exchange Commission (“SEC”) filings. Our SEC filings are available on
our website at www.approachresources.com. Any forward-looking statement speaks only as of the date
on which such statement is made and the Company undertakes no obligation to correct or update any
forward-looking statement, whether as a result of new information, future events or otherwise,
except as required by applicable law.
About Approach Resources Inc.
Approach Resources Inc. is an independent energy company engaged in the exploration,
development, production and acquisition of natural gas and oil properties in the United States. The
Company operates or has interests in Texas, Kentucky and New Mexico. For more information about the
Company, please visit www.approachresources.com. Please note that the Company routinely posts
important information about the Company under the Investor Relations section of its website.
5
UNAUDITED RESULTS OF OPERATIONS
| |
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Three Months Ended |
|
|
Years Ended |
|
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas |
|
$ |
6,470 |
|
|
$ |
10,919 |
|
|
$ |
23,406 |
|
|
$ |
58,819 |
|
Oil |
|
|
3,623 |
|
|
|
3,190 |
|
|
|
11,323 |
|
|
|
16,413 |
|
NGLs |
|
|
1,788 |
|
|
|
583 |
|
|
|
5,919 |
|
|
|
4,637 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil and gas sales |
|
|
11,881 |
|
|
|
14,692 |
|
|
|
40,648 |
|
|
|
79,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain on commodity derivatives |
|
|
2,763 |
|
|
|
3,612 |
|
|
|
14,659 |
|
|
|
2,936 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total oil and gas sales including
derivative impact |
|
$ |
14,644 |
|
|
$ |
18,304 |
|
|
$ |
55,307 |
|
|
$ |
82,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Production: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas (MMcf) |
|
|
1,420 |
|
|
|
2,165 |
|
|
|
6,320 |
|
|
|
7,092 |
|
Oil (MBbls) |
|
|
51 |
|
|
|
55 |
|
|
|
206 |
|
|
|
175 |
|
NGLs (MBbls) |
|
|
45 |
|
|
|
27 |
|
|
|
209 |
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (MMcfe) |
|
|
1,991 |
|
|
|
2,659 |
|
|
|
8,808 |
|
|
|
8,755 |
|
Total (MMcfe/d) |
|
|
21.6 |
|
|
|
28.9 |
|
|
|
24.1 |
|
|
|
23.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average prices: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gas (per Mcf) |
|
$ |
4.56 |
|
|
$ |
5.04 |
|
|
$ |
3.70 |
|
|
$ |
8.29 |
|
Oil (per Bbl) |
|
|
71.04 |
|
|
|
58.00 |
|
|
|
54.97 |
|
|
|
93.79 |
|
NGLs (per Bbl) |
|
|
39.73 |
|
|
|
21.59 |
|
|
|
28.32 |
|
|
|
45.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (per Mcfe) |
|
$ |
5.97 |
|
|
$ |
5.53 |
|
|
$ |
4.61 |
|
|
$ |
9.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Realized gain on commodity derivatives (per Mcfe) |
|
|
1.39 |
|
|
|
1.36 |
|
|
|
1.66 |
|
|
|
0.34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total including derivative impact (per Mcfe) |
|
$ |
7.36 |
|
|
$ |
6.89 |
|
|
$ |
6.27 |
|
|
$ |
9.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses (per Mcfe): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating |
|
$ |
0.88 |
|
|
$ |
0.95 |
|
|
$ |
0.88 |
|
|
$ |
0.87 |
|
Severance and production taxes |
|
|
0.30 |
|
|
|
0.49 |
|
|
|
0.23 |
|
|
|
0.48 |
|
Exploration |
|
|
0.55 |
|
|
|
¯ |
|
|
|
0.18 |
|
|
|
0.17 |
|
Impairment of unproved properties |
|
|
1.49 |
|
|
|
2.40 |
|
|
|
0.34 |
|
|
|
0.73 |
|
General and administrative |
|
|
1.68 |
|
|
|
1.20 |
|
|
|
1.21 |
|
|
|
1.01 |
|
Depletion, depreciation and amortization |
|
|
2.96 |
|
|
|
2.80 |
|
|
|
2.80 |
|
|
|
2.71 |
|
6
APPROACH RESOURCES INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except shares and per-share amounts)
| |
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|
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|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Years Ended |
|
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Oil and gas sales |
|
$ |
11,881 |
|
|
$ |
14,692 |
|
|
$ |
40,648 |
|
|
$ |
79,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease operating |
|
|
1,761 |
|
|
|
2,526 |
|
|
|
7,777 |
|
|
|
7,621 |
|
Severance and production taxes |
|
|
604 |
|
|
|
1,311 |
|
|
|
1,996 |
|
|
|
4,202 |
|
Exploration |
|
|
1,087 |
|
|
|
¯ |
|
|
|
1,621 |
|
|
|
1,478 |
|
Impairment of unproved properties |
|
|
2,964 |
|
|
|
6,379 |
|
|
|
2,964 |
|
|
|
6,379 |
|
General and administrative |
|
|
3,340 |
|
|
|
3,195 |
|
|
|
10,617 |
|
|
|
8,881 |
|
Depletion, depreciation and amortization |
|
|
5,894 |
|
|
|
7,453 |
|
|
|
24,660 |
|
|
|
23,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses |
|
|
15,650 |
|
|
|
20,864 |
|
|
|
49,635 |
|
|
|
52,271 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING (LOSS) INCOME |
|
|
(3,769 |
) |
|
|
(6,172 |
) |
|
|
(8,987 |
) |
|
|
27,598 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of investment |
|
|
¯ |
|
|
|
(917 |
) |
|
|
¯ |
|
|
|
(917 |
) |
Interest expense, net |
|
|
(434 |
) |
|
|
(355 |
) |
|
|
(1,787 |
) |
|
|
(1,269 |
) |
Realized gain on commodity derivatives |
|
|
2,763 |
|
|
|
3,612 |
|
|
|
14,659 |
|
|
|
2,936 |
|
Unrealized (loss) gain on commodity
derivatives |
|
|
(1,310 |
) |
|
|
3,089 |
|
|
|
(9,899 |
) |
|
|
7,149 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME BEFORE INCOME TAX (BENEFIT)
PROVISION |
|
|
(2,750 |
) |
|
|
(743 |
) |
|
|
(6,014 |
) |
|
|
35,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX (BENEFIT) PROVISION |
|
|
(468 |
) |
|
|
(591 |
) |
|
|
(785 |
) |
|
|
12,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME |
|
$ |
(2,282 |
) |
|
$ |
(152 |
) |
|
$ |
(5,229 |
) |
|
$ |
23,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) EARNINGS PER SHARE: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.11 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.25 |
) |
|
$ |
1.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted |
|
$ |
(0.11 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.25 |
) |
|
$ |
1.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
20,959,114 |
|
|
|
20,668,222 |
|
|
|
20,869,832 |
|
|
|
20,647,339 |
|
Diluted |
|
|
20,959,114 |
|
|
|
20,668,222 |
|
|
|
20,869,832 |
|
|
|
20,824,905 |
|
7
UNAUDITED SELECTED FINANCIAL DATA
| |
|
|
|
|
|
|
|
|
| Unaudited Consolidated Balance Sheet Data |
|
December 31, |
|
|
December 31, |
|
| (in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
2,685 |
|
|
$ |
4,077 |
|
Other current assets |
|
|
9,318 |
|
|
|
30,760 |
|
Property and equipment, net, successful efforts method |
|
|
304,483 |
|
|
|
303,404 |
|
Other assets |
|
|
2,440 |
|
|
|
¯ |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
318,926 |
|
|
$ |
338,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
$ |
21,996 |
|
|
$ |
30,775 |
|
Long-term debt |
|
|
32,319 |
|
|
|
43,537 |
|
Other long-term liabilities |
|
|
44,115 |
|
|
|
40,116 |
|
Stockholders’ equity |
|
|
220,496 |
|
|
|
223,813 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
318,926 |
|
|
$ |
338,241 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
| Unaudited Consolidated Cash Flow Data |
|
Years Ended December 31, |
|
| (in thousands) |
|
2009 |
|
|
2008 |
|
Operating activities |
|
$ |
39,761 |
|
|
$ |
56,435 |
|
Investing activities |
|
$ |
(29,553 |
) |
|
$ |
(100,633 |
) |
Financing activities |
|
$ |
(11,618 |
) |
|
$ |
43,696 |
|
Effect of foreign currency translation |
|
$ |
18 |
|
|
$ |
(206 |
) |
Supplemental Non-GAAP Financial and Other Measures
This release contains certain financial measures that are non-GAAP measures. We have provided
reconciliations within this release of the non-GAAP financial measures to the most directly
comparable GAAP financial measures here and on the Non-GAAP Financial Information page in the
Investor Relations section of our website at www.approachresources.com.
Adjusted Net Income
This release contains the non-GAAP financial measures adjusted net income and adjusted net
income per diluted share, which exclude an impairment of long-lived assets, the unrealized, pre-tax
loss (gain) on commodity derivatives and related income taxes.
The
amounts included in the calculation of adjusted net income and adjusted net income per
diluted share below were computed in accordance with GAAP. We believe adjusted net income and
adjusted net income per diluted share are useful to investors because they provide readers with a
more meaningful measure of our profitability before recording certain items whose timing or amount
cannot be reasonably determined. However, these measures are provided in addition to, and not as
an alternative for, and should be read in conjunction with, the information contained in our
financial statements prepared in accordance with GAAP (including the notes), included in our SEC
filings and posted on our website.
The following table provides a reconciliation of adjusted net income to net (loss) income for
the three months and years ended December 31, 2009 and 2008, respectively (in thousands, except
per-share amounts):
8
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Years Ended |
|
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(2,282 |
) |
|
$ |
(152 |
) |
|
$ |
(5,229 |
) |
|
$ |
23,386 |
|
Adjustments for certain non-cash items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment of unproved properties |
|
|
2,964 |
|
|
|
6,379 |
|
|
|
2,964 |
|
|
|
6,379 |
|
Impairment of investment |
|
|
¯ |
|
|
|
917 |
|
|
|
¯ |
|
|
|
917 |
|
Unrealized loss (gain) on
commodity derivatives |
|
|
1,310 |
|
|
|
(3,089 |
) |
|
|
9,899 |
|
|
|
(7,149 |
) |
Related income tax effect |
|
|
(1,453 |
) |
|
|
(1,430 |
) |
|
|
(4,373 |
) |
|
|
(50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income |
|
$ |
539 |
|
|
$ |
2,625 |
|
|
$ |
3,261 |
|
|
$ |
23,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income per diluted share |
|
$ |
0.03 |
|
|
$ |
0.13 |
|
|
$ |
0.16 |
|
|
$ |
1.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAX
We define EBITDAX as net (loss) income, plus (1) exploration expense, (2) impairment of
unproved properties, (3) depletion, depreciation and amortization expense, (4) share-based
compensation expense, (5) impairment of investment, (6) unrealized loss (gain) on commodity
derivatives, (7) interest expense and (8) income taxes. EBITDAX is not a measure of net income or
cash flow as determined by GAAP. The amounts included in the calculation of EBITDAX were computed
in accordance with GAAP. EBITDAX is presented herein and reconciled to the GAAP measure of net
(loss) income because of its wide acceptance by the investment community as a financial indicator
of a company’s ability to internally fund development and exploration activities. This measure is
provided in addition to, and not as an alternative for, and should be read in conjunction with, the
information contained in our financial statements prepared in accordance with GAAP (including the
notes), included in our SEC filings and posted on our website.
The following table provides a reconciliation of EBITDAX to net (loss) income for the three
months and years ended December 31, 2009 and 2008, respectively (in thousands, except per-share
amounts):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Years Ended |
|
| |
|
December 31, |
|
|
December 31, |
|
| |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(2,282 |
) |
|
$ |
(152 |
) |
|
$ |
(5,229 |
) |
|
$ |
23,386 |
|
Exploration |
|
|
1,087 |
|
|
|
¯ |
|
|
|
1,621 |
|
|
|
1,478 |
|
Impairment of unproved properties |
|
|
2,964 |
|
|
|
6,379 |
|
|
|
2,964 |
|
|
|
6,379 |
|
Depletion, depreciation and amortization |
|
|
5,894 |
|
|
|
7,453 |
|
|
|
24,660 |
|
|
|
23,710 |
|
Share-based compensation |
|
|
392 |
|
|
|
300 |
|
|
|
1,826 |
|
|
|
1,100 |
|
Impairment of investment |
|
|
¯ |
|
|
|
917 |
|
|
|
¯ |
|
|
|
917 |
|
Unrealized loss (gain) on commodity
derivatives |
|
|
1,310 |
|
|
|
(3,089 |
) |
|
|
9,899 |
|
|
|
(7,149 |
) |
Interest expense, net |
|
|
434 |
|
|
|
355 |
|
|
|
1,787 |
|
|
|
1,269 |
|
Income tax (benefit) provision |
|
|
(468 |
) |
|
|
(591 |
) |
|
|
(785 |
) |
|
|
12,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAX |
|
$ |
9,331 |
|
|
$ |
11,572 |
|
|
$ |
36,743 |
|
|
$ |
63,201 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDAX per diluted share |
|
$ |
0.44 |
|
|
$ |
0.56 |
|
|
$ |
1.75 |
|
|
$ |
3.03 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
Long-Term Debt-to-Capital Ratio
Long-term debt-to-capital ratio is calculated as of December 31, 2009, and by dividing
long-term debt (GAAP) of $32.3 million by the sum of total stockholders’ equity (GAAP) and
long-term debt (GAAP) of $252.8 million. We use the long-term debt-to-capital ratio as a
measurement of our overall financial leverage. However, this ratio has limitations. This ratio can
vary from year to year for the Company and can vary among companies based on what is or is not
included in the ratio on a company’s financial statements. This ratio is provided in addition to,
and not as an alternative for, and should be read in conjunction with, the information contained in
our financial statements prepared in accordance with GAAP (including the notes), included in our
SEC filings and posted on our website.
Liquidity
Liquidity is calculated by adding the net funds available under our revolving credit facility
and cash and cash equivalents. We use liquidity as an indicator of the Company’s ability to fund
development and exploration activities. However, this measurement has limitations. This
measurement can vary from year to year for the Company and can vary among companies based on what
is or is not included in the measurement on a company’s financial statements. This measurement is
provided in addition to, and not as an alternative for, and should be read in conjunction with, the
information contained in our financial statements prepared in accordance with GAAP (including the
notes), included in our SEC filings and posted on our website.
| |
|
|
|
|
|
|
|
|
| |
|
December 31, |
|
|
December 31, |
|
| Summary of Liquidity Position |
|
2009 |
|
|
2008 |
|
| (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowing base |
|
$ |
115,000 |
|
|
$ |
100,000 |
|
Cash and cash equivalents |
|
|
2,685 |
|
|
|
4,077 |
|
Long-term debt |
|
|
(32,319 |
) |
|
|
(43,537 |
) |
|
|
|
|
|
|
|
Liquidity |
|
$ |
85,366 |
|
|
$ |
60,540 |
|
|
|
|
|
|
|
|
Glossary:
Bbl. One stock tank barrel, of 42 U.S. gallons liquid volume, used herein to reference oil,
condensate or NGLs.
GAAP. Generally accepted accounting principles in the United States.
MBbl. Thousand barrels of oil, condensate or NGLs.
Mcf. Thousand cubic feet of natural gas.
Mcfe. Thousand cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one
Bbl of oil, condensate or NGLs.
MMcf. Million cubic feet of natural gas.
MMcfe. Million cubic feet equivalent, determined using the ratio of six Mcf of natural gas to one
Bbl of oil, condensate or NGLs.
NGLs. Natural gas liquids.
/d. “Per day” when used with volumetric units or dollars.
Contact:
J. Ross Craft, President and Chief Executive Officer
Steven P. Smart, Executive Vice President and Chief Financial Officer
Megan P. Brown, Investor Relations and Corporate Communications
Approach Resources Inc.
(817) 989-9000
* * * * * *
10
