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Lonestar Announces Fourth Quarter 2018 Financial Results And Provides Operational Update


FORT WORTH, TexasMarch 7, 2019 /PRNewswire/ — Lonestar Resources US Inc. (NASDAQ: LONE) (including its subsidiaries, “Lonestar,” “we,” “us,” “our” or the “Company”) today reported financial and operating results for the three months and year ended December 31, 2018.

HIGHLIGHTS

  • Lonestar reported an 81% increase in net oil and gas production to 13,152 Boe/d during the three months ended December 31, 2018 (“4Q18”), compared to 7,272 Boe/d for the three months ended December 31, 2017 (“4Q17”). The Company’s record production volumes exceeded the Company’s guidance of 12,600 – 12,800 Boe/d and were 80% crude oil and NGL’s on an equivalent basis.
  • Lonestar reported a net income attributable to its common stockholders of $75.2 million during 4Q18 compared to a net loss of $17.6 million during 4Q17.   Excluding, on a tax-adjusted basis, certain items that the Company does not view as either recurring or indicative of its ongoing financial performance, Lonestar’s adjusted net income for 4Q18 was $5.4 million, or $0.22 per basic common share.  Most notable among these items include: unrealized hedging gains/losses on financial derivatives and stock-based compensation. Please see Non-GAAP Financial Measures at the end of this release for the definition of Adjusted Net Income (Loss) to adjusted net income (loss), a reconciliation of net income before taxes to adjusted net income (loss), and the reasons for its use.
  • Lonestar reported a 99% increase in Adjusted EBITDAX for the three months ended December 31, 2018 of $40.7 million compared to $20.5 million for 4Q17, which was in the higher end of our guidance of $39.0 – $41.0 million and set another record for the Company. This improvement was driven by an 81% increase in production and a 10% reduction in unit cash operating expenses. Please see Non-GAAP Financial Measures at the end of this release for the definition of Adjusted EBITDAX, a reconciliation of net loss to Adjusted EBITDAX, and the reasons for its use.
  • Lonestar has issued production guidance of 11,200 to 12,000 Boe/d for the first quarter of 2019. As commodity prices fell precipitously in the fourth quarter of 2018, Lonestar suspended drilling operations pending the negotiation of contracts for drilling and completion operations which gave the Company sufficient flexibility to “dial-in” activity levels to react to commodity prices and expected cash flow generation capacity. Consequently, Lonestar anticipates the completion of 3 gross/2.9 net wells late in the first quarter of 2019. The midpoint of guidance represents a 49% increase over 1Q18 results.
  • Despite a delayed start in completion activity, Lonestar has reiterated its previously-issued 2019 production guidance of 13,700 to 14,700 Boe/d for 2019, which equates to production growth of 27% over 2018 levels. Based the onstream dates associated with its current program, Lonestar has issued Adjusted EBITDAX guidance for 2019 of $140 to $155 million.
  • Given the success Lonestar was able to achieve with a dedicated frac spread in 2018, the Company recently executed an agreement with another leading energy service provider for a dedicated frac spread for 2019. This agreement should drive cost down significantly year over year on a per well basis as well as continue to improve our ability to turn wells into production in a timely and efficient fashion, delivering more predictable results to our shareholders.
  • Lonestar continually evaluates its asset portfolio and constantly seeks to improve its capital structure and returns profile. As part of this process, Lonestar has agreed to sell its Pirate assets in Wilson County for $12.3 million. The sale is anticipated to close prior to the end of March 2019. In February, 2019, average daily sales volumes were 219 Boe/d. The Pirate asset is comprised of 3,400 net undeveloped acres and held 7 Proved Undeveloped locations at December 31, 2018.

Lonestar’s Chief Executive Officer, Frank D. Bracken, III, commented, “2018 was another year of tremendous per-share growth for Lonestar, coming from a balanced program of drilling and acquisitions.  We generated a 81% increase in production and a 99% increase in Adjusted EBITDAX.  We extended our track-record of low-cost reserve growth, registering all-sources finding and development costs of $9.07 per BOE while increasing our Proved reserves by 27%. In 2018, we demonstrated substantial improvements in productivity and returns in our core areas, and the focus of our 2019 and 2020 drilling programs will be in these core areas, and additionally on our recently-acquired Sooner property. We have designed our 24-month plan to focus our drilling on areas where we have demonstrated the highest IRR’s in our portfolio, which are in both the crude oil window (Cyclone/Hawkeye and Karnes County), which are 85% oil / 7% NGL’s / 5% gas, and condensate windows (Horned Frog and Sooner), which are 16% oil / 45% NGLs / 39% gas. This returns-focused program is expected to generate 20+% growth in production and EBITDAX through 2020. Importantly, this program is designed to allow the Lonestar to become cash flow self-sufficient in the second half of 2019 and for the full-year in 2020.  As a result, we believe that Lonestar will be one of the few companies among its peers who can generate these levels of growth while doing so with internally generated cash flow.”

OPERATIONAL UPDATE

  • Lonestar reported net oil and gas production of 13,152 Boe/d during the three months ended December 31, 2018, an increase of 81% compared to 7,272 Boe/d during the three months ended December 31, 2017. 4Q18 production volumes consisted of 7,883 barrels of oil per day (60%), 2,675 barrels of NGLs per day (20%), and 15,561 Mcf of natural gas per day (20%). The Company’s production mix for the three months ended December 31, 2018 was 80% liquid hydrocarbons.
  • Lonestar’s Eagle Ford Shale assets delivered excellent wellhead realizations in 4Q18. Lonestar’s realized wellhead crude oil price was $64.86 per barrel, which reflects a positive differential of $6.05 /bbl vs. West Texas Intermediate. Lonestar’s realized NGL price was $22.48 per barrel, which at 38% of WTI, was the highest quarterly percentage realizations for NGLs in 2018. Lonestar’s realized wellhead natural gas price was $3.72 per Mcf, reflecting a $0.08/Mcf discount to Henry Hub.
  • Lonestar delivered a 10% reduction per Boe in cash operating costs (outlined below) in 4Q18. Total cash expenses, which includes the cash portions of lease operating, gathering, processing, transportation, production taxes, general and administrative, and interest expenses, for the three months ended December 31, 2018 were $25.1 million, which was 63% higher than cash expenses of $15.4 million in the three months ended December 31, 2017. However, on a unit-of-production basis, cash expenses decreased 10% from $20.70 per Boe in the three months ended December 31, 2018 to $23.01 per Boe in the three months ended December 31, 2017.
    • Lease Operating Expenses (“LOE”) for the three months ended December 31, 2018 were $7.3 million, which was 50% higher than LOE of $4.9 million in the three months ended December 31, 2017 but was outpaced by an 81% increase in production. On a unit-of-production basis, lease operating expenses decreased 17% to $6.01 per Boe for the three months ended December 31, 2018. For 2019, the Company expects LOE to average between $5.50 and $6.00 per Boe.
    • Gathering, Processing & Transportation Expenses (“G, P&T”) for the three months ended December 31, 2018 were $1.0 million, which was 113% higher than the G, P&T of $0.5 million in the three months ended December 31, 2017, commensurate with a 161% increase in gas production. On a unit-of-production basis, G, P&T increased 18% to $0.80 per Boe for the three months ended December 31, 2018. For 2019, the Company expects G, P&T expense to average between $1.00 and $1.25 per Boe.
    • Production taxes for the three months ended December 31, 2018 were $2.9 million, which was 54% higher than production taxes of $1.9 million in the three months ended December 31, 2017, driven largely by an 84% increase in wellhead oil and gas revenues. On a unit-of-production basis, production taxes decreased 15% to $2.38 per Boe for the three months ended December 31, 2018.
    • General & Administrative Expenses, excluding stock-based compensation of $0.6 million in the three months ended December 31, 2017 and ($1.7) million in the three months ended December 31, 2018(“G&A”), increased from $3.2 million to $4.4 million, respectively. On a unit-of-production basis, G&A per Boe was reduced 25% year over year, from $4.79 per Boe in 2017 to $3.62 per Boe in 2018. For 2019, the Company expects G&A to average between $2.50 and $3.00 per Boe.
    • Interest Expense excluding amortization of debt issuance cost, premiums, and discounts increased year over year from $5.3 million in the three months ended December 31, 2017 to $9.5 million in 2018. On a unit-of-production basis, interest per Boe decreased 1% year over year from $7.95 per Boe in 2017 to $7.89 per Boe in 2018. For 2019, the Company expects interest expense to average between $7.25 and $8.00 per Boe.
  • In the fourth quarter of 2018, Lonestar expanded its Eagle Ford footprint with the Sooner Acquisition, expanding its operational footprint into DeWitt county. Additionally, the Company placed 4 gross / 3.3 net wells online, which included 2 gross / 1.9 net wells in Dimmit County and 2 / 1.4 net wells in Gonzales County. Lonestar expects to continue to grow production organically during 2019 while continuing to look for additional acquisition opportunities within the Eagle Ford. After negotiating updated contracts with its service providers, Lonestar’s Board has approved a capital-flexible budget which ranges from 17 gross / 15.6 net wells, which it estimates will cost $107 million, to 20 gross / 18.6 net wells, which are budgeted to cost $130 million.

EAGLE FORD SHALE TREND- WESTERN REGION

In our Western Region, production for the fourth quarter of 2018 averaged approximately 6,825 Boe per day, a 141% increase over the prior year. In October 2018, the Company completed drilling operations on the Asherton #1HN and Asherton #3HN. Through their first 90 days of production, these wells have produced on average 50,000 barrels of oil and 112,550 Mcf of natural gas, or 75,800 barrels of oil equivalent on a three-stream basis, or an average of 843 Boe/d per well over the first 90 days of production.

During 2019 the Company plans to drill 7 gross / 6.9 net wells in its Western region. In La Salle County, the first three wells, the Burns Ranch #11H, Burns Ranch #12H, and Burns Ranch #13H, began flowback operations and are the only wells being brought onstream during the first quarter of 2019. These wells were drilled to average total measured depths of 15,020, 15,030, and 15,036 feet, respectively.  The Burns Ranch #11H, #12H, and #13H wells were fracture-stimulated in engineered completions using diverters with an average proppant concentration of 1,485 pounds per foot over 11 stages, 22 stages, and 22 stages, respectively.  Lonestar has a 96% WI and 72% NRI in these wells.

Our second set of wells in our Western Region, the Horned Frog NW #4H and Horned Frog NW #5H, finished drilling operations last week and were drilled to total measured depths of 19,716 and 19,672 feet, respectively. Fracture stimulation operations are to begin next week with average proppant concentrations of 2,000 pounds per foot. These wells should begin flowback operations in mid-late April. Lonestar has a 100% WI and 75% NRI in these wells.

EAGLE FORD SHALE TREND- CENTRAL REGION

In our Central Region, production for the fourth quarter of 2018 averaged approximately 5,991 Boe per day, a 56% increase over the prior year.  The continued growth of the region was driven by the drilling and completion 2 gross / 1.3 net wells in the Hawkeye area in addition to production acquired in our Sooner Acquisition.

The acquisition, which occurred in November 2018, is 95% operated, included approximately 3,071 gross acres (2,693 net acres) and approximately 800 BOE/d of production on the date of the acquisition. It provides the Company with 26 drilling locations and expands Lonestar’s Eagle Ford footprint into its 11th county, DeWitt. The Company plans to drill its first 3 gross / 3.0 net wells during the third quarter of 2019.

In December, the Company began flowback operations on the Hawkeye #24H and Hawkeye #25H. These wells were drilled to total measured depths of 20,050 and 19,665 feet, respectively. The Hawkeye #24H and #25H wells were fracture-stimulated in engineered completions using diverters with an average proppant concentration of 1,517 pounds per foot over 37 stages and 33 stages, respectively. The Hawkeye #24H was completed with a perforated interval of 10,407 feet and tested 937 Bbls/d of oil and 444 Mcf/d of natural gas, or 1,038 Boe/d (three-stream) on a 28/64” choke. The Hawkeye #25H was completed with a perforated interval of 9,901 feet and tested 912 Bbls/d of oil and 385 Mcf/d of natural gas, or 1,000 Boe/d (three-stream) on a 26/64” choke. Collectively, these wells have average Max-30 IP’s of 764 Bbls/d oil and 397 Mcf/d of natural gas, or 855 Boe/d (three-stream) on a 32/64” choke. Lonestar holds a 68% WI / 53% NRI in these wells.

During 2019 the Company plans to drill 12 gross / 11.2 net wells in its Central region. Lonestar is currently drilling its first set of wells in the region for 2019, the Georg #3H, Georg #4H, Georg #5H, and Georg #6H. These wells have planned total measured depths of approximately 16,400 feet and expected perforated intervals of 7,250 feet. Lonestar has an 80% WI / 61% NRI in these wells.

EAGLE FORD SHALE TREND- EASTERN REGION

In our Eastern Region, production for the fourth quarter of 2018 averaged approximately 336 Boe per day, a 43% decrease over the prior year. The Company did not complete any wells in this region in 2018.  Lonestar plans to return to Brazos during 2Q19 to drill a 1 gross / 0.5 net well. Lonestar will have a 50% WI / 39% NRI in this well.

CONFERENCE CALL DETAILS

Lonestar will host a live conference call on Friday, March 8, 2019 at 9:00 AM CDT to discuss the fourth quarter 2018 results and operational highlights.

To access the conference call, participants should dial:

USA: 877-256-6033
International: +1-303-223-2698
A playback of the conference call will be available on the Investor Relations section of Company’s website beginning approximately March 11, 2019.

ABOUT LONESTAR RESOURCES US, INC.

Lonestar is an independent oil and natural gas company, focused on the development, production and acquisition of unconventional oil, NGLs and natural gas properties in the Eagle Ford Shale in Texas, where we accumulated approximately 78,193 gross (57,491 net) acres in what we believe to be the formation’s crude oil and condensate windows, as of December 31, 2018. For more information, please visit www.lonestarresources.com.

Cautionary & Forward-Looking Statements

Lonestar Resources US Inc. cautions that this press release contains forward-looking statements, including, but not limited to; Lonestar’s execution of its growth strategies; growth in Lonestar’s leasehold, reserves and asset value; and Lonestar’s ability to create shareholder value. These statements involve substantial known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the following:  volatility of oil, natural gas and NGL prices, and potential write-down of the carrying values of crude oil and natural gas properties; inability to successfully replace proved producing reserves; substantial capital expenditures required for exploration, development and exploitation projects; potential liabilities resulting from operating hazards, natural disasters or other interruptions; risks related using the latest available horizontal drilling and completion techniques; uncertainties tied to lengthy period of development of identified drilling locations; unexpected delays and cost overrun related to the development of estimated proved undeveloped reserves; concentration risk related to properties, which are located primarily in the Eagle Ford Shale of South Texas; loss of lease on undeveloped leasehold acreage that may result from lack of development or commercialization; inaccuracies in assumptions made in estimating proved reserves; our limited control over activities in properties Lonestar does not operate; potential inconsistency between the present value of future net revenues from our proved reserves and the current market value of our estimated oil and natural gas reserves; risks related to derivative activities; losses resulting from title deficiencies; risks related to health, safety and environmental laws and regulations; additional regulation of hydraulic fracturing; reduced demand for crude oil, natural gas and NGLs resulting from conservation measures and technological advances; inability to acquire adequate supplies of water for our drilling operations or to dispose of or recycle the used water economically and in an environmentally safe manner; climate change laws and regulations restricting emissions of “greenhouse gases” that may increase operating costs and reduce demand for the crude oil and natural gas; fluctuations in the differential between benchmark prices of crude oil and natural gas and the reference or regional index price used to price actual crude oil and natural gas sales; and the other important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K/A filed with the Securities and Exchange Commission, or the SEC, on November 2, 2018, as well as other documents that we may file from time to time with the SEC. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. The forward-looking statements in this press release represent our views as of the date of this press release. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.

(Financial Statements to Follow)

Lonestar Resources US Inc.

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except par value and share data) 

December 31,

2018

2017

Assets

Current assets

Cash and cash equivalents

$

5,355

$

2,538

Accounts receivable

Oil, natural gas liquid and natural gas sales

15,103

12,289

Joint interest owners and other, net

4,541

794

Related parties

301

162

Derivative financial instruments

15,841

472

Prepaid expenses and other

1,966

2,365

Total current assets

43,107

18,620

Property and equipment

Oil and gas properties, using the successful efforts method of accounting

Proved properties

960,711

747,370

Unproved properties

81,850

81,511

Other property and equipment

17,727

15,763

Less accumulated depreciation, depletion, amortization and impairment

(369,529)

(274,374)

Property and equipment, net

690,759

570,270

Derivative financial instruments

7,302

Other non-current assets

2,944

2,918

Total assets

$

744,112

$

591,808

Liabilities and Stockholders’ Equity

Current liabilities

Accounts payable

$

18,260

$

25,901

Accounts payable – related parties

181

389

Oil, natural gas liquid and natural gas sales payable

13,022

8,747

Accrued liabilities

28,128

16,583

Derivative financial instruments

430

12,336

Total current liabilities

60,021

63,956

Long-term liabilities

Long-term debt

436,882

301,155

Asset retirement obligations

7,195

5,649

Deferred tax liability, net

12,370

4,769

Equity warrant liability

366

508

Equity warrant liability – related parties

689

963

Derivative financial instruments

21

9,802

Other non-current liabilities

4,021

1,316

Total long-term liabilities

461,544

324,162

Commitments and contingencies

Stockholders’ equity

Class A voting common stock, $0.001 par value, 100,000,000 shares authorized, 24,645,825 and 24,506,647 issued and outstanding, respectively

142,655

142,655

Class B non-voting common stock, $0.001 par value, 5,000 shares authorized, 0 and 10,000 issued and outstanding, respectively

Series A-1 convertible participating preferred stock, $0.001 par value, 91,784 and 83,968 shares issued and outstanding, respectively

Additional paid-in capital

174,379

174,871

Accumulated deficit

(94,487)

(113,836)

Total stockholders’ equity

222,547

203,690

Total liabilities and stockholders’ equity

$

744,112

$

591,808

Lonestar Resources US Inc.

Unaudited Condensed Consolidated Statements of Operations

(In thousands, except per share data)

3 Months Ended December 31,

Year Ended December 31,

2018

2017

2018

2017

Revenues

Oil sales

$

47,038

$

27,763

$

167,743

$

80,505

Natural gas liquid sales

5,319

1,406

18,471

7,086

Natural gas sales

5,532

2,265

14,955

6,477

Total revenues

57,889

31,434

201,169

94,068

Expenses

Lease operating and gas gathering

8,247

6,331

26,008

17,385

Production and ad valorem taxes

2,884

1,867

11,029

5,523

Depreciation, depletion and amortization

23,645

14,954

83,582

56,957

Loss on sale of oil and gas properties

466

Impairment of oil and gas properties

6,332

12,169

33,413

General and administrative

2,632

3,840

16,017

12,626

Acquisition costs and other

(47)

1,821

3,139

Total expenses

37,361

33,324

150,626

129,509

Income (loss) from operations

20,528

(1,890)

50,543

(35,441)

Other income (expense)

Interest expense

(10,173)

(6,255)

(38,943)

(26,071)

Unrealized gain (loss) on warrants

2,522

(198)

416

3,088

Gain (loss) on derivative financial instruments

77,596

(20,585)

22,744

(14,080)

Loss on extinguishment of debt

(8,620)

Total other income (expense), net

69,945

(27,038)

(24,403)

(37,063)

Income (loss) before income taxes

90,473

(28,928)

26,140

(72,504)

Income tax (expense) benefit

(13,283)

13,165

(6,792)

29,019

Net income (loss)

77,190

(15,763)

19,348

(43,485)

Preferred stock dividends

(2,020)

(1,848)

(7,816)

(3,968)

Net income (loss) attributable to common stockholders

$

75,170

$

(17,611)

$

11,532

$

(47,453)

Net income (loss) per common share attributable to common stockholders

Basic

$

3.05

$

(0.81)

$

0.47

$

(2.13)

Weighted Average Shares Outstanding

Basic

24,644,407

21,822,015

24,619,730

22,252,149

Lonestar Resources US Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)

3 Months Ended December 31,

Year Ended December 31,

2018

2017

2018

2017

Cash flows from operating activities

Net income (loss)

$

77,190

$

(15,763)

$

19,348

$

(43,485)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation, depletion and amortization

23,645

14,954

83,582

56,957

Stock-based compensation

(1,932)

644

1,707

1,629

Share-based payments

(601)

Deferred taxes

14,746

(13,075)

7,601

(29,191)

(Gain) loss on derivative financial instruments

(77,596)

20,585

(22,744)

14,080

Settlements of derivative financial instruments

(5,292)

313

(22,623)

5,207

Impairment of oil and gas properties

6,332

12,169

33,413

Loss on abandoned property and equipment

170

Non-cash interest expense

638

196

5,194

4,571

Unrealized (gain) loss on warrants

(2,522)

198

(416)

(3,088)

Changes in operating assets and liabilities:

Accounts receivable

(2,103)

(1,637)

(5,391)

(6,851)

Prepaid expenses and other assets

(1,460)

4,393

(3,296)

833

Accounts payable and accrued expenses

6,939

(2,160)

13,372

9,371

Net cash provided by operating activities

32,253

14,979

88,072

43,446

Cash flows from investing activities

Acquisition of oil and gas properties

(40,776)

(4,695)

(45,539)

(113,726)

Development of oil and gas properties

(48,722)

(24,957)

(171,413)

(81,875)

Purchases of other property and equipment

(887)

(1,562)

(2,518)

(13,142)

Net cash used in investing activities

(90,385)

(31,214)

(219,470)

(208,743)

Cash flows from financing activities

Proceeds from borrowings and related party borrowings

75,000

20,980

423,745

123,968

Payments on borrowings and related party borrowings

(16,053)

(6,513)

(289,520)

(34,017)

Proceeds from sale of preferred stock

77,800

Repurchase and retire Class B Common Stock

(10)

Cost to issue equity

(506)

(3,296)

Payments of debt issuance costs

(2,688)

Net cash provided by financing activities

58,947

13,961

134,215

161,767

Net (decrease) in cash and cash equivalents

813

(2,274)

2,817

(3,530)

Cash and cash equivalents, beginning of the period

4,542

4,812

2,538

6,068

Cash and cash equivalents, end of the period

$

5,355

$

2,538

$

5,355

$

2,538

Supplemental information:

Cash paid for taxes

$

95

$

9

$

1,242

$

2,474

Cash paid for interest

2,071

9,329

24,395

20,389

Non-cash investing and financing activities:

Preferred stock issued for business acquisitions

10,795

Asset retirement obligation

1,109

509

1,331

2,827

Increase (decrease) in liabilities for capital expenditures

(21,591)

6,709

(4,603)

8,379

NON-GAAP FINANCIAL MEASURES (Unaudited)

Reconciliation of Non-GAAP Financial Measures

Adjusted EBITDAX

Adjusted EBITDAX is not a measure of net income as determined by GAAP. 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 net (loss) income before depreciation, depletion, amortization and accretion, exploration costs, non-recurring costs, (gain) loss on sales of oil and natural gas properties, impairment of oil and gas properties, stock-based compensation, interest expense, income tax (benefit) expense, rig standby expense, other income (expense), unrealized (gain) loss on derivative financial instruments and unrealized (gain) loss on warrants.

Management believes Adjusted EBITDAX provides useful information to investors because it assists investors in the evaluation of the Company’s operating performance and comparison of the results of the Company’s operations from period to period without regard to its financing methods or capital structure. The Company excludes the items listed above from net income in arriving at Adjusted EBITDAX to eliminate the impact of certain non-cash items or because these amounts can vary substantially from company to company within its industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDAX should not be considered as an alternative to, or more meaningful than, net income (loss) as determined in accordance with GAAP. Certain items excluded from Adjusted EBITDAX are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDAX. The Company’s computations of Adjusted EBITDAX may not be comparable to other similarly titled measures of other companies.

The following table presents a reconciliation of Adjusted EBITDAX to the GAAP financial measure of net income (loss) for each of the periods indicated.

Three Months Ended December 31,

Year Ended December 31,

($ in thousands)

2018

2017

2018

2017

Net (Loss) Income

$

75,170

$

(17,611)

$

11,532

$

(47,453)

Income tax expense (benefit)

13,283

(13,165)

6,792

(29,019)

Interest expense (1)

12,192

8,102

46,759

30,039

Exploration expense

416

109

627

Depreciation, depletion and amortization

23,645

14,954

83,582

56,957

EBITDAX

$

124,290

$

(7,304)

$

148,774

$

11,151

Rig standby expense

561

27

622

Non-recurring costs (2)

436

173

782

3,637

Stock-based compensation

(1,746)

644

1,908

1,629

(Gain) loss on sale of oil and gas properties

466

Impairment of oil and gas properties

6,332

12,169

33,413

Unrealized (gain) loss on derivative financial instruments

(79,776)

19,860

(43,376)

17,188

Unrealized (gain) loss on warrants

(2,522)

198

(416)

(3,088)

Other (income) expense

(31)

10,397

(54)

Adjusted EBITDAX

$

40,651

$

20,464

$

130,265

$

64,964

1 Interest expense also includes dividends paid on Series A Preferred Stock

2 Non-recurring costs consists of Acquisitions Costs.

Adjusted Net Income (Loss)

Adjusted net income (loss) comparable to analysts’ estimates as set forth in this release represents income or loss from operations before income taxes adjusted for certain non-cash items (detailed in the accompanying table) less income taxes.  We believe adjusted net income (loss) is calculated on the same basis as analysts’ estimates and that many investors use this published research in making investment decisions and evaluating operational trends of the Company and its performance relative to other oil and gas producing companies.  Diluted earnings per share (adjusted) as set forth in this release represents adjusted net income (loss) comparable to analysts’ estimates on a diluted per share basis.

The following table presents a reconciliation of Adjusted Net Income (Loss) to the GAAP financial measure of net income (loss) before taxes for each of the periods indicated.

Lonestar Resources US Inc.

Unaudited Reconciliation of Income (Loss) Before Taxes As Reported To Income (Loss) Before Taxes Excluding Certain Items, a non-GAAP measure (Adjusted Net Income (Loss))

Three Months Ended December 31,

Year Ended December 31,

2018

2017

2018

2017

(In thousands)

(In thousands)

Income (loss) before income taxes, as reported

$

90,473

$

(30,307)

$

26,140

$

(72,504)

Adjustments for special items:

Impairment of oil and gas properties

6,332

12,169

33,413

Early payment premium on Second Lien Notes

1,050

Warrant discount recognition due to early payment on Second Lien Notes

1,991

Legal expenses for corporate governance and public reporting setup

229

628

General & administrative non-recurring costs

436

337

503

886

Rig standby expense

561

27

622

Non-recurring legal expense

233

Loss on extinguishment of debt

8,620

Unrealized hedging (gain) loss

(79,776)

19,860

(43,376)

17,188

Lease write-off

1,568

Stock-based compensation

(1,746)

644

1,908

1,629

Advisory fees for completion of acquisition

2,726

Income (loss) before income taxes, as adjusted

9,387

(2,344)

7,792

(12,371)

Income tax (expense) benefit, as adjusted

Deferred income tax (expense) benefit, as adjusted (a)

(1,971)

820

(1,636)

4,330

Net income (loss) excluding certain items, a non-GAAP measure

$                 7,416

$              (1,524)

$                6,156

$              (8,041)

Preferred stock dividends

(2,020)

(1,848)

(7,816)

(3,968)

Net income (loss) after preferred dividends excluding certain items, a non-GAAP measure

$

5,396

$

(3,372)

$

(1,660)

$

(12,009)

Non-GAAP income (loss) per common share

Basic

$

0.22

$

(0.15)

$

(0.07)

$

(0.54)

Non-GAAP basic shares outstanding

24,644,407

21,822,015

24,619,730

22,252,149

(a)     Effective tax rate for 2018 and 2017 is estimated to be approximately 21% and 35%, respectively.

Lonestar Resources US Inc.

Unaudited Operating Results

Three Months Ended
December 31,

Year Ended
December 31,

In thousands, except per share and unit data

2018

2017

2018

2017

Operating results

Net income (loss) attributable to common stockholders

$

75,169

$

(17,611)

$

11,533

$

(47,453)

Net income (loss) per common share — basic

0.22

(0.75)

0.47

(2.13)

Operating revenues

Oil

$

47,038

$

27,764

$

167,743

$

80,505

NGLs

5,533

1,405

18,471

7,086

Natural gas

5,318

2,265

14,955

6,477

Total operating revenues

$

57,889

$

31,434

$

201,169

$

94,068

Total production volumes by product

Oil (Bbls)

725,236

479,964

2,483,799

1,579,720

NGLs (Bbls)

246,100

97,704

817,431

390,185

Natural gas (Mcf)

1,431,612

548,044

4,622,815

2,404,620

Total barrels of oil equivalent (6:1)

1,209,938

669,009

4,071,700

2,370,675

Daily production volumes by product

Oil (Bbls/d)

7,883

5,217

6,805

4,328

NGLs (Bbls/d)

2,675

1,062

2,239

1,069

Natural gas (Mcf/d)

15,561

5,957

12,665

6,588

Total barrels of oil equivalent (BOE/d)

13,152

7,272

11,155

6,495

Average realized prices

Oil ($ per Bbl)

$

64.86

$

57.85

$

67.53

$

50.96

NGLs ($ per Bbl)

22.48

23.18

22.6

18.48

Natural gas ($ per Mcf)

3.72

2.56

3.24

2.73

Total oil equivalent, excluding the effect from hedging ($ per BOE)

47.84

46.99

49.41

39.77

Total oil equivalent, including the effect from hedging ($ per BOE)

46.04

46.22

41.08

41.08

Operating and other expenses

Lease operating and gas gathering

$

8,247

$

6,331

$

26,008

$

17,385

Production and ad valorem taxes

2,884

1,868

11,029

5,523

Depreciation, depletion and amortization

23,645

16,333

83,582

56,957

General and administrative

2,632

3,840

16,017

12,626

Interest expense

10,173

6,255

38,943

26,071

Operating and other expenses per BOE

Lease operating and gas gathering

$

6.82

$

9.46

$

6.39

$

7.33

Production and ad valorem taxes

2.38

2.79

2.71

2.33

Depreciation, depletion and amortization

19.54

24.41

20.53

24.03

General and administrative

2.18

5.74

3.93

5.33

Interest expense

8.41

9.35

9.56

11.00

(1)     General and administrative expenses include stock-based compensation

(2)     Interest expense includes amortization of debt issuance cost, premiums, and discounts

SOURCE Lonestar Resources US Inc.



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