Bonanza Creek Energy Announces Fourth Quarter and Full-Year 2018 Results

DENVER, Feb. 27, 2019 (GLOBE NEWSWIRE) — Bonanza Creek Energy, Inc. (NYSE: BCEI) (the “Company” or “Bonanza Creek”) today announced its fourth quarter and full-year 2018 financial results and has posted an updated investor presentation on its corporate website.

Highlights of the fourth quarter and full-year 2018 include:

• Net oil and gas revenue of $66.2 million and $276.7 million for the three and twelve months ended December 31, 2018, respectively
• Wattenberg lease operating expenses of $3.27 per Boe and $4.76 per Boe for the three and twelve months ended December 31, 2018, respectively
• Rocky Mountain Infrastructure (“RMI”) operating expenses of $1.06 per Boe and $1.35 per Boe for the three and twelve months ended December 31, 2018, respectively
• GAAP net income of $106.1 million, or $5.15 per diluted share, and $168.2 million, or $8.16 per diluted share, for the three and twelve months ended December 31, 2018, respectively
• Adjusted EBITDAX⁽¹⁾ of $41.9 million and $144.8 million for the three and twelve months ended December 31, 2018, respectively
• Year-end 2018 Wattenberg reserves of 116.8 MMBoe, up 29% from prior year-end reserves with PV-10 growth of 60% to $955.0 million^{(2)
  (1)}   Adjusted EBITDAX is a non-GAAP measure. Please see Schedule 5 at the end of this release for additional disclosures related to Adjusted EBITDAX and a reconciliation to net income (loss) (GAAP).
  ⁽²⁾   PV-10 is a non-GAAP measure. Please see Schedule 6 at end of this release for additional disclosures related to PV-10 and a reconciliation to Standardized Measure (GAAP).

Eric Greager, Chief Executive Officer of Bonanza Creek, commented, “We exited 2018 with significant momentum as adjusted EBITDAX increased to $41.9 million in the fourth quarter of 2018, up 9% sequentially from third quarter of 2018.  Our results continue to demonstrate the quality of our assets and our technical and operational capabilities. Our returns focused capital program, combined with an improved cost structure, provide a disciplined path to achieving greater than 30% Wattenberg production growth while maintaining leverage of approximately 0.5x in 2019.”

Fourth Quarter 2018 Results

During the fourth quarter of 2018, the Company reported Wattenberg average daily sales of 17.7 Mboe per day, which increased 5% from the third quarter 2018, driven by high-intensity completion designs and consistently low gathering system pressures on the Company’s RMI system. Product mix for the fourth quarter of 2018 was 62% oil, 17% NGLs, and 21% residue natural gas. During the fourth quarter of 2018, the Company drilled 28 gross (21.8 net) operated wells, 8 of which were extended reach lateral (“XRL”) wells, and turned to sales 17 gross (12.8 net) operated wells, 9 of which were XRL wells.

The table below provides operating statistics for our Wattenberg assets.

(1) Results for three and twelve months ended are for Wattenberg only. Please see tables in the back of this press release and the Annual Report on Form 10-K filed on February 27, 2019 for total Company operating statistics.
(2) 2017 does not include the impacts of adoption ASC 606. Please refer to Note 2 – Revenue Recognition in Annual Report on Form 10-K filed on February 27, 2019 for more information.

Net oil and gas revenue for the fourth quarter of 2018 was $66.2 million compared to $74.4 million for the third quarter of 2018. The decrease in fourth quarter 2018 net revenue compared to third quarter was primarily a result of the sale of production associated with the Mid-Continent divestiture in August of 2018. Crude oil accounted for approximately 83% of total revenue in the fourth quarter. Differentials for the Company’s Wattenberg oil production during the quarter averaged approximately $5.53 per barrel off of NYMEX WTI.

Wattenberg LOE for the fourth quarter of 2018 on a unit basis decreased by 23% to $3.27 per Boe from $4.26 per Boe in the third quarter of 2018 and compared favorably to fourth quarter guidance of $3.90 per Boe to $4.30 per Boe. Additionally, RMI operating expenses for the fourth quarter were $1.06 per Boe compared to $1.00 per Boe in the third quarter of 2018 and fourth quarter guidance of $1.20 per Boe to $1.40 per Boe.

Unit operating expenses continue to benefit from lower regulatory, compliance, and labor costs. Additionally, the Company’s completed compressor replacement program resulted in significant reductions in maintenance and rental costs. Unit operating expenses have also benefited from new well production, re-use of centralized facilities and well maintenance activities, which have helped improve base production performance.

Production taxes in the fourth quarter of 2018 were positively impacted by a $5.1 million net ad valorem tax settlement. The $5.1 ad valorem settlement is net of $2.3 million due to the Company’s associated interest owners and is presented as a reimbursement in the severance and ad valorem taxes line items in the 2018 financial statements in the back of this press release. Please see the Company’s Form 10-K filed on February 27, 2019 for more information regarding this settlement.

The Company continued to benefit from multiple delivery points on the RMI system in the fourth quarter. The Company’s fourth gas processor (Cureton Midstream) brought online a 60 MMcf per day cryogenic gas processing plant in the fourth quarter, further enhancing the Company’s downstream optionality. This delivery point flexibility, combined with consistently low line pressures on RMI, have helped ensure minimal production constraints. Line pressure on the Company’s RMI system has remained consistent between 50 and 100 psi, well below typical field-wide operating pressures outside of RMI. The Company’s 2018 development program did not experience constraints or delays due to access to third-party gas processing, nor does the Company anticipate any constraints in 2019.

The Company’s general and administrative (“G&A”) expense was $12.1 million for the fourth quarter of 2018, which includes $2.2 million in stock compensation. Cash G&A expense, which excludes stock compensation, was $9.9 million for the fourth quarter and totaled $35.3 million for the full-year. Cash G&A is a non-GAAP measure. Please see Schedule 7 at the end of this release for a reconciliation from GAAP figure of general and administrative expense to cash G&A.

2018 Proved Reserves, Costs Incurred, and Finding and Development Costs

As previously reported, Bonanza Creek’s year-end 2018 proved reserves were 116.8 MMBoe, a 29% increase from year-end 2017 Wattenberg reserves.  The Company’s year-end 2018 proved reserves were comprised of 64.4 MMbbls of oil, 24.9 MMbbls of NGLs, and 165.0 Bcf of natural gas and were 42% proved developed producing. At year-end the Company’s proved reserves PV-10 utilizing Securities and Exchange Commission (“SEC”) pricing was $955.0 million. Bonanza Creek’s independent reserve engineering firm, Netherland, Sewell & Associates, Inc., completed its estimate of the Company’s year-end 2018 proved reserves in accordance with SEC guidelines using pricing of $65.56 per barrel for crude oil and $3.10 per million British Thermal Units (MMBtu) for natural gas. Please see Schedule 6 at the end of this release for information on SEC pricing and a reconciliation of PV-10 to the GAAP figure “Standardized Measure of Oil and Gas.”

A breakout of the Company’s costs incurred are provided in the table below.

1. Acquisition costs for unproved properties were $2.5 million in 2018.  Acquisition costs for proved properties were $0.4 million in 2018.
2. Development costs include workover costs of $4.3 million.
3. Includes amounts relating to asset retirement obligations of ($9.0) million.

Proved Reserve Roll-Forward

Conference Call Information

The Company will host a conference call to discuss these financial and operating results on February 28, 2019 at 10:00 a.m. Mountain Time (12:00 p.m. Eastern Time). A webcast of the live event, as well as a replay, will be available on the Investor Relations section of the Company’s website at www.bonanzacrk.com. Dial-in information for the conference call is included below.

About Bonanza Creek Energy, Inc.

Bonanza Creek Energy, Inc. is an independent oil and natural gas company engaged in the acquisition, exploration, development, and production of onshore oil and associated liquids-rich natural gas in the United States. The Company’s assets and operations are concentrated in the Rocky Mountain region in the Wattenberg Field, focused on the Niobrara and Codell formations. The Company’s common shares are listed for trading on the NYSE under the symbol: “BCEI.” For more information about the Company, please visit www.bonanzacrk.com. Please note that the Company routinely posts important information about the Company under the Investor Relations section of its 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. These statements are based on certain assumptions made by the Company based on management’s experience, perception of historical trends and technical analyses, current conditions, anticipated future developments and other factors believed to be appropriate and reasonable by management. When used in this press release, the words “will,” “potential,” “believe,” “estimate,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “plan,” “predict,” “project,” “profile,” “model” or their negatives, other similar expressions or the statements that include those words, are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These statements include statements regarding development and completion expectations and strategy; decreasing operating and capital costs; impact of the Company’s reorganization; and initial 2019 guidance. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, that may cause actual results to differ materially from those implied or expressed by the forward-looking statements, including the following: changes in natural gas, oil and NGL prices; general economic conditions, including the performance of financial markets and interest rates; drilling results; shortages of oilfield equipment, services and personnel; operating risks such as unexpected drilling conditions; ability to acquire adequate supplies of water; risks related to derivative instruments; access to adequate gathering systems and pipeline take-away capacity; and pipeline and refining capacity constraints. Further information on such assumptions, risks and uncertainties is available in the Company’s SEC filings. We refer you to the discussion of risk factors in our Annual Report on Form 10-K for the year ended December 31, 2018, filed on February 28, 2019, and other filings submitted by us to the Securities Exchange Commission. The Company’s SEC filings are available on the Company’s website at www.bonanzacrk.com and on the SEC’s website at www.sec.gov. All of the forward-looking statements made in this press release are qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which such statement is made, including guidance, 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.

For further information, please contact:
Doug Atkinson
Senior Manager, Investor Relations
720-225-6690
[email protected]

Schedule 1: Statement of Operations
(in thousands, expect for per share amounts, unaudited)

• The Successor Company follows the treasury stock method to compute basic and diluted net income (loss) per share. Please refer to Note 14 – Earnings per Share in the Form 10-K, for a detailed calculation.
  (1) Includes $5.1 million reimbursement related to an ad valorem tax settlement. Please refer to Note 8 – Commitment and Contingencies in the Form 10-K for additional information.

• The Predecessor Company followed the two-class method when computing the basic and diluted income (loss) per share, which allocates earnings between common shareholders and unvested participating securities. The Successor Company follows the treasury stock method to compute basic and diluted net income (loss) per share. Please refer to Note 14 – Earnings per Share in the Form 10-K, for a detailed calculation.

(1) Includes $5.1 million reimbursement related to an ad valorem tax settlement. Please refer to Note 8 – Commitment and Contingencies in the Form 10-K for additional information.

Schedule 2: Statement of Cash Flows
(in thousands, unaudited)

Schedule 3: Balance Sheets
(in thousands, unaudited)

Schedule 4: Per unit operating margins
(unaudited)

Schedule 5: Adjusted EBITDAX
(in thousands, unaudited)

Adjusted EBITDAX is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines adjusted EBITDAX as earnings before interest expense, income taxes, depreciation, depletion, amortization, impairment, exploration expenses and other similar non-cash and non-recurring charges. Adjusted EBITDAX is not a measure of net income (loss) or cash flows as determined by GAAP.

The following table presents a reconciliation of GAAP financial measures of net income (loss) to the non-GAAP financial measure of Adjusted EBITDAX.

Schedule 6: PV-10 of Estimated Proved Reserves

PV-10 is derived from the Standardized Measure, which is the most directly comparable GAAP financial measure. PV-10 is a computation of the Standardized Measure on a pre-tax basis. PV-10 is equal to the Standardized Measure at the applicable date, before deducting future income taxes, discounted at 10%. We believe that the presentation of PV-10 is relevant and useful to investors because it presents the discounted future net cash flows attributable to our estimated net proved reserves prior to taking into account future corporate income taxes, and it is a useful measure for evaluating the relative monetary significance of our oil and natural gas properties. Further, investors may utilize the measure as a basis for comparison of the relative size and value of our reserves to other companies. We use this measure when assessing the potential return on investment related to our oil and natural gas properties. PV-10, however, is not a substitute for the Standardized Measure. Our PV-10 measure and the Standardized Measure do not purport to present the fair value of our proved oil and natural gas reserves.

The following table presents a reconciliation of non-GAAP financial measure of PV-10 to the GAAP Standardized Measure.

Schedule 7: Cash G&A
(in thousands, unaudited)

Cash G&A is a supplemental non-GAAP financial measure that is used by management and external users of the Company’s consolidated financial statements, such as industry analysts, investors, lenders and rating agencies. The Company defines cash G&A as GAAP general and administrative expense exclusive of the Company’s stock based compensation. The Company refers to cash G&A to provide typical cash G&A costs that are planned for in a given period. Cash G&A is not a fully inclusive measure of general and administrative expense as determined by GAAP.

The following table presents a reconciliation of GAAP financial measures of G&A expense to the non-GAAP financial measure of cash G&A.