Linn Energy
LINN ENERGY, INC. (Form: 8-K, Received: 11/14/2017 09:12:36)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934



Date of Report (Date of earliest event reported)
 
November 14, 2017
 
 
(November 14, 2017)



EARNINGSR_IMAGE1A03.JPG

LINN ENERGY, INC.
(Exact name of registrant as specified in its charter)


Delaware
000-51719
81-5366183
(State or other jurisdiction of incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)


600 Travis
Houston, Texas
77002
(Address of principal executive offices)
(Zip Code)
 
Registrant’s telephone number, including area code:  (281) 840-4000
 
NOT APPLICABLE
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))




Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company     ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     ¨





Item 2.02      Results of Operations and Financial Condition.
On November 14, 2017, Linn Energy, Inc. issued a press release announcing its earnings for the quarter ended September 30, 2017, and its updated outlook for 2017. The press release is being furnished as Exhibit 99.1 to this Current Report on Form 8‑K and is incorporated herein by reference.
This Form 8-K and the exhibit hereto shall be deemed “furnished” and not “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any registration statement of the issuer.
Item 9.01      Financial Statements and Exhibits.
(d)     Exhibit.


3



SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
LINN ENERGY, INC.
 
(Registrant)
 
 
 
 
Date: November 14, 2017
/s/ David B. Rottino
 
David B. Rottino
 
Executive Vice President and Chief Financial Officer


4

Exhibit 99.1

LINN ENERGY REPORTS THIRD-QUARTER 2017 RESULTS
HOUSTON, November 14, 2017 - LINN Energy, Inc. (OTCQB: LNGG) (“LINN” or the “Company”) announces financial and operating results for the third quarter of 2017 and provides updated guidance for the fourth quarter and full-year 2017.
The Company highlights the following:
Met or exceeded production, revenue and expense guidance for the last three quarters in a row
Exceeded $1.5 billion in closed and pending asset sales, with additional transactions expected to be announced before year end
Pro forma for pending transactions, LINN is expected to have more than $430 million in cash and is actively evaluating ways to return capital to its shareholders
Eliminated all debt and negotiated a new $500 million credit facility
Increased share repurchase program to $400 million and as of October 31, 2017, repurchased ~5.2 million shares for ~$179 million at an average price of $34.52 per share, representing almost 6 percent of outstanding shares
Closed on the transaction to form Roan Resources LLC (“Roan”)
Tony Maranto, former head of EOG-Oklahoma City, named as President and Chief Executive Officer of Roan
Successfully drilled and completed two horizontal wells in Ruston, North Louisiana with peak IP-30 rates of 11 MMcf/d and 19.4 MMcf/d, respectively
“Our tremendous success this year is evident in our share performance as we have consistently met or exceeded operating guidance. During the quarter we met a major milestone as we closed on the transaction to form Roan, a new pure play company with approximately 140,000 total net acres (1) focused on the accelerated development of the prolific Merge/SCOOP/STACK play in Oklahoma. Tony Maranto was recently named Chief Executive Officer for Roan and we are confident that his leadership and strong operating background in the Mid-Continent will lead this new company to a successful future. In addition, construction of LINN’s Chisholm Trail Cryogenic facility remains on track and we are also evaluating development plans for several emerging growth plays, including the NW STACK, North Louisiana and East Texas,” said Mark E. Ellis, LINN’s President and Chief Executive Officer.
(1)  
Total net acres is defined as the sum of LINN net acres and Citizen Energy II, LLC net acres as represented for each company in the agreement
“Over the past eight months, we have surpassed $1.5 billion of announced asset sales from more than a dozen separate transactions. This success allowed us to eliminate all our debt and repurchase our shares at attractive prices. With the closing of the Williston and Washakie transactions, we anticipate a sizeable cash balance and are actively evaluating ways to return capital to our shareholders,” said Evan Lederman, Chairman of the Board.
Key Financial Results (1)  
 
Third Quarter
$ in millions, except per unit amounts
2017
2016
Average daily production (MMcfe/d)
586
809
Total oil, natural gas and NGL revenues
$ 206
$ 238
Income (loss) from continuing operations
$ 51
$ (96)
Income (loss) from discontinued operations, net of income taxes
$ 86
$ (102)
Net income (loss)
$ 137
$ (198)
Adjusted EBITDAX (a non-GAAP financial measure) (3)
$ 93
$ 91
Total debt (4)
$ –
$ 5,961 (2)
Net cash provided by operating activities
$ 75
$ 51
Oil and natural gas capital
$ 81
$ 26
Total capital
$ 123
$ 44
(1)  
All amounts reflect continuing operations with the exception of net income
(2)  
Includes approximately $4,023 million classified as liabilities subject to compromise on the balance sheet
(3)  
Excludes Adjusted EBITDAX from discontinued operations of approximately $3 million and $56 million for the three months ended September 30, 2017, and for the three months ended September 30, 2016, respectively
(4)  
As of September 30, 2017 and September 30, 2016

5



Asset Sales Exceed $1.5 Billion; Additional Transactions Expected Before Year End
In October, LINN announced the sale of its Williston properties for $285 million and its Washakie properties for $200 million, which are expected to close in the fourth quarter of 2017. Year-to-date, the Company has exceeded $1.5 billion in announced and closed asset sales from more than a dozen separate transactions. LINN is currently marketing its remaining assets in the Permian Basin along with its interest in the Altamont Bluebell Field in Utah. The Company is also beginning to market its mature waterfloods in Oklahoma and plans to sell its interest in the Drunkards Wash Field in Utah. LINN continues to evaluate strategic opportunities that increase shareholder value, which may include the sale of additional assets.
Strong Balance Sheet and Share Repurchase Program
With the proceeds received from its successful divestiture program, LINN has extinguished all outstanding debt, negotiated a new $500 million credit facility and begun executing on a share repurchase program. As of October 31, 2017, LINN has repurchased approximately 5.2 million shares for $179 million at an average price of $34.52 per share. On October 4, 2017, the Board of Directors authorized an increase to the share repurchase program to $400 million. For clarification, the recent S‑1 registration statement and prospectus filed with the Securities and Exchange Commission relates to the resale of shares originally issued at emergence from bankruptcy. No new shares are being issued or offered.
Roan Resources LLC
On August 31, 2017, the Company completed a transaction in which LINN and Citizen Energy II, LLC each contributed certain upstream assets located in the prolific Merge/SCOOP/STACK play in Oklahoma to a newly formed company, Roan Resources LLC (“Roan”). In exchange, each party received a 50 percent equity interest in Roan, subject to customary post-closing adjustments.
Roan recently announced Tony Maranto has been named President and Chief Executive Officer and a member of the Board of Directors. He has two decades of leadership experience at EOG Resources, Inc., including more than a decade as Vice President and General Manager of EOG - Oklahoma City and was responsible for their Mid-Continent operations. Mr. Maranto brings more than 35 years of experience in the oil and natural gas industry to Roan. He holds a Master of Business Administration from Centenary College and a Bachelor of Science in Petroleum Engineering from Louisiana Tech University.
Operationally, Roan averaged net production of approximately 23,500 BOE/d in September 2017 and currently operates five drilling rigs. Entering the fourth quarter, Roan has 25 drilled but uncompleted wells (DUCs) with approximately 38 miles of uncompleted lateral length. During the quarter, Roan accelerated its pace of activity by increasing from three frac crews to four and plans on adding a sixth drilling rig in the quarter.
NW STACK
The Company has a significant acreage position in the NW STACK in which offset horizontal results in the Osage and Meramec have been positive with recent IP-30 rates of more than 1,000 BOE/d. With increased industry activity in the area, LINN is evaluating deploying a rig in 2018 to test horizontal development potential.
Chisholm Trail Update
All of LINN’s acreage contributed to Roan remains dedicated to Chisholm Trail, which is located in the heart of the prolific liquids-rich Merge/SCOOP/STACK play. It has ~30 miles of existing gas gathering pipeline, a 60 MMcf/d refrigeration facility with current throughput of 40 MMcf/d and has access to offload an additional 20 MMcf/d. Construction is underway on a highly efficient, state-of-the-art cryogenic gas processing system with a total capacity of 250 MMcf/d which is expected to be commissioned during the second quarter of 2018. Blue Mountain Midstream LLC, a LINN subsidiary, is pursuing third-party dedications to accelerate throughput growth for the facility.
North Louisiana Update
LINN recently drilled two operated horizontal wells in Ruston for its first test of the Lower Red and its third test of the Upper Red. The recently completed Lower Red test resulted in a choke managed 24-hr IP rate of 12.7 MMcf/d and a peak IP-30 rate of 11 MMcf/d. The Upper Red test resulted in a choke managed 24-hr IP rate of 20.4 MMcf/d a peak IP-30 rate of 19.4 MMcf/d.
East Texas Update
Horizontal activity is increasing in several prospective formations in East Texas including the Cotton Valley and Bossier formations. The Company sees significant upside by applying enhanced horizontal drilling and completion technologies across its acreage position where LINN has successfully drilled and completed two operated horizontal wells. Both of these wells are in initial flow back operations.

6



Capital
The Company has increased capital guidance for the full year 2017 from $338 million to $360 million. The increase is primarily related to value accretive leasing in the Merge and the acceleration of Chisholm Trail capital.
Third Quarter Actuals versus Adjusted Guidance
 
Q3 Actuals
Adjusted Q3 Guidance
Net Production (MMcfe/d)
586
540
600
Natural gas (MMcf/d)
368
330
365
Oil (Bbls/d)
17,700
16,000
18,000
NGL (Bbls/d)
18,500
19,000
21,000
 
 
 
 
 
Other revenues, net (in thousands)  (1)
$ 10,762
$ 7,000
$ 8,000
 
 
 
 
 
Costs (in thousands)
$ 108,181
$ 101,000
$ 111,000
Lease operating expenses
$ 61,272
$ 56,000
$ 62,000
Transportation expenses
$ 34,541
$ 31,000
$ 34,000
Taxes, other than income taxes
$ 12,368
$ 14,000
$ 15,000
 
 
 
 
 
General and administrative expenses (2)
$ 23,758
$ 24,000
$ 27,000
 
 
 
 
 
Costs per Mcfe (Mid-Point)
$ 2.01
$ 2.03
Lease operating expenses
$ 1.14
$ 1.13
Transportation expenses
$ 0.64
$ 0.62
Taxes, other than income taxes
$ 0.23
$ 0.28
 
 
 
General and administrative expenses (2)
$ 0.44
$ 0.49
 
 
 
Targets (Mid-Point) (in thousands)
 
 
Adjusted EBITDAX (3)
$ 93,411
$ 71,000
Interest expense
$ 223
$ 1,000
Oil and natural gas capital
$ 80,814
$ 78,000
Total capital
$ 123,109
$ 116,000
 
 
 
Weighted Average NYMEX Differentials
 
 
 
 
 
 
Natural gas (MMBtu)
($0.27)
($0.35)
($0.25)
Oil (Bbl)
($2.62)
($4.00)
($3.00)
NGL price as a % of crude oil price
51%
34% – 40%
_________________________________________________________
(1)  
Includes other revenues and margin on marketing activities
(2)  
As included in operating cash flow and excludes share-based compensation expenses of approximately $6 million
(3)  
Excludes Adjusted EBITDAX from discontinued operations of approximately $3 million

7



Fourth Quarter and Full Year 2017 Guidance Update
Guidance estimates have been adjusted for the sale assets located in Jonah, Salt Creek, South Texas, Permian, California, Washakie and Williston and for the assets contributed to Roan. The guidance provided below excludes LINN’s 50 percent equity interest in Roan after closing.
 
Q4 2017E
FY 2017E
Net Production (MMcfe/d)
472  507
620  645
Natural gas (MMcf/d)
300  324
394  408
Oil (Bbls/d)
12,400  13,200
17,700  18,500
NGL (Bbls/d)
16,300  17,300
20,000  21,000
 
 
 
Other revenues, net (in thousands)  (1)
$ 8,000  $ 10,000
$ 45,000  $ 47,000
 
 
 
Costs (in thousands)
$ 94,000  $ 100,000
$ 465,000  $ 471,000
Lease operating expenses
$ 54,000  $ 57,000
$ 261,000   $ 264,000
Transportation expenses
$ 28,000  $ 30,000
$ 140,000  $ 142,000
Taxes, other than income taxes
$ 12,000  $ 13,000
$ 64,000  $ 65,000
 
 
 
General and administrative expenses (2)
$ 20,000  $ 23,000
$ 91,000  $ 93,000
 
 
 
Costs per Mcfe (Mid-Point)
$ 2.15
$ 2.03
Lease operating expenses
$ 1.23
$ 1.14
Transportation expenses
$ 0.64
$ 0.61
Taxes, other than income taxes
$ 0.28
$ 0.28
 
 
 
General and administrative expenses (2)
$ 0.48
$ 0.40
 
 
 
Targets (Mid-Point) (in thousands)
 
 
Adjusted EBITDAX (3)
$ 67,000
$ 386,000
Interest expense
$
$ 29,000
Oil and natural gas capital
$ 37,000
$ 245,000
Total capital
$ 77,000
$ 360,000
 
 
 
Weighted Average NYMEX Differentials
 
 
Natural gas (MMBtu)
($ 0.34)  ($ 0.28)
($ 0.29)  ($ 0.26)
Oil (Bbl)
($ 3.50)  ($ 2.50)
($ 3.50)  ($ 3.00)
NGL price as a % of crude oil price
40%  44%
40%  45%

Unhedged Commodity Price Assumptions (4)
Oct
Nov
Dec
2017E
Natural gas (MMBtu)
$ 2.97
$ 2.75
$ 2.98
$ 3.10
Oil (Bbl)
$ 51.60
$ 54.83
$ 55.64
$ 50.59
NGL (Bbl)
$ 21.15
$ 22.52
$ 24.79
$ 21.49
_________________________________________________________
(1)  
Includes other revenues and margin on marketing activities
(2)  
As included in operating cash flow and excludes share-based compensation expenses
(3)  
Excludes Adjusted EBITDAX from discontinued operations of approximately $30 million for FY 2017E
(4)  
Strip prices as of November 3, 2017

8



Hedging Update
In October, the Company added 60 MMMBtu/d of 2018 natural gas hedges.
 
4Q 2017
2018
2019
Natural Gas
Volume (MMMBtu/d)
Average Price
(per MMBtu)
Volume (MMMBtu/d)
Average Price
(per MMBtu)
Volume (MMMBtu/d)
Average Price
(per MMBtu)
Swaps
340
$3.18
191
$3.02
31
$2.97
Oil
Volume (Bbls/d)
Average Price
(per Bbl)
Volume
(Bbls/d)
Average Price
(per Bbl)
Volume
(Bbls/d)
Average Price
(per Bbl)
Swaps
12,000
$52.13
1,500
$54.07
Collars
5,000
$50.00 - $55.50
5,000
$50.00 - $55.50

Form 10‑Q / Earnings Call
LINN plans to file its Quarterly Report on Form 10-Q for the quarter ended September 30, 2017, with the Securities and Exchange Commission on November 14, 2017, and will host a conference call Tuesday, November 14, 2017, at 11 a.m. (CDT) to discuss the Company’s third quarter 2017 results followed by a question and answer session. Investors and analysts are invited to participate in the call by dialing (844) 625-4392, or (409) 497-0988 for international calls using Conference ID: 97163522. Interested parties may also listen over the internet at www.linnenergy.com . A replay of the call will be available on the company’s website or by phone until November 28, 2017. The number for the replay is (855) 859-2056 or (404) 537-3406 for international calls using Conference ID: 97163522.
Supplemental information can be found at the following link on our website: http://ir.linnenergy.com/presentations.cfm
About LINN Energy
LINN Energy, Inc. was formed in February 2017 as the reorganized successor to LINN Energy, LLC. Headquartered in Houston, Texas, the Company’s current focus is the development of the Merge/SCOOP/STACK in Oklahoma through its equity interest in Roan Resources LLC, as well as through its midstream operations in that area. Additionally, the Company is pursuing emerging horizontal opportunities in Oklahoma, North Louisiana and East Texas, while continuing to add value by efficiently operating and applying new technology to a diverse set of long-life producing assets.
Forward-Looking Statements
Statements made in this press release that are not historical facts are “forward-looking statements.” These statements are based on certain assumptions and expectations made by the Company reflect management’s experience, estimates and perception of historical trends, current conditions, and anticipated future developments. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company and may cause actual results to differ materially from those implied or anticipated in the forward-looking statements. These include risks relating to the timing and outcome of the accounting work and audit for the third quarter 2017, any delay in filing of required periodic reports with the Securities and Exchange Commission, our financial performance and results, availability of sufficient cash flow to execute our business plan, ability to execute planned asset sales, continued low or further declining commodity prices and demand for oil, natural gas and natural gas liquids, ability to hedge future production, ability to replace reserves and efficiently develop current reserves, the capacity and utilization of midstream facilities and the regulatory environment. These and other important factors could cause actual results to differ materially from those anticipated or implied in the forward-looking statements. Please read “Risk Factors” in the Company’s Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and other public filings. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information or future events.
CONTACTS: LINN Energy, Inc.
Investors:
Thomas Belsha, Vice President - Investor Relations & Corporate Development
(281) 840-4110
ir@linnenergy.com


9


Condensed Consolidated Balance Sheets (Unaudited)


 
Successor
 
 
Predecessor
 
September 30,
2017
 
 
December 31,
2016
(in thousands)
 
 
 
 
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
$
32,042

 
 
$
694,857

Accounts receivable – trade, net
165,045

 
 
198,064

Derivative instruments
6,220

 
 

Restricted cash
51,322

 
 
1,602

Other current assets
85,937

 
 
105,310

Current assets of discontinued operations

 
 
701

Total current assets
340,566

 
 
1,000,534

 
 
 
 
 
Noncurrent assets:
 
 
 
 
Oil and natural gas properties (successful efforts method)
1,248,246

 
 
12,349,117

Less accumulated depletion and amortization
(53,370
)
 
 
(9,843,908
)
 
1,194,876

 
 
2,505,209

 
 
 
 
 
Other property and equipment
472,332

 
 
618,262

Less accumulated depreciation
(22,067
)
 
 
(217,724
)
 
450,265

 
 
400,538

 
 
 
 
 
Derivative instruments
4,582

 
 

Deferred income taxes
476,419

 
 

Equity method investments
461,460

 
 
6,200

Other noncurrent assets
7,449

 
 
7,784

Noncurrent assets of discontinued operations

 
 
740,326

 
949,910

 
 
754,310

Total noncurrent assets
2,595,051

 
 
3,660,057

Total assets
$
2,935,617

 
 
$
4,660,591

 
 
 
 
 
LIABILITIES AND EQUITY (DEFICIT)
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable and accrued expenses
$
280,797

 
 
$
295,081

Derivative instruments
547

 
 
82,508

Current portion of long-term debt, net

 
 
1,937,729

Other accrued liabilities
100,755

 
 
25,979

Current liabilities of discontinued operations

 
 
321

Total current liabilities
382,099

 
 
2,341,618


10


Condensed Consolidated Balance Sheets - Continued (Unaudited)

 
Successor
 
 
Predecessor
 
September 30,
2017
 
 
December 31,
2016
(in thousands)
 
 
 
 
Derivative instruments
229

 
 
11,349

Other noncurrent liabilities
260,133

 
 
360,405

Noncurrent liabilities of discontinued operations

 
 
39,202

Liabilities subject to compromise

 
 
4,305,005

 
 
 
 
 
Equity (deficit):
 
 
 
 
Predecessor units issued and outstanding

 
 
5,386,885

Predecessor accumulated deficit

 
 
(7,783,873
)
Successor Class A common stock
85

 
 

Successor additional paid-in capital
1,926,722

 
 

Successor retained earnings
349,864

 
 

Total common stockholders’/unitholders’ equity (deficit)
2,276,671

 
 
(2,396,988
)
Noncontrolling interests
16,485

 
 

Total equity (deficit)
2,293,156

 
 
(2,396,988
)
Total liabilities and equity (deficit)
$
2,935,617

 
 
$
4,660,591





11


Condensed Consolidated Statements of Operations (Unaudited)

 
Successor
 
 
Predecessor
 
Three Months Ended September 30, 2017
 
 
Three Months Ended September 30, 2016
(in thousands, except per share and per unit amounts)
 
 
 
 
Revenues and other:
 
 
 
 
Oil, natural gas and natural gas liquids sales
$
206,318

 
 
$
237,986

Gains (losses) on oil and natural gas derivatives
(14,497
)
 
 
166

Marketing revenues
38,493

 
 
9,249

Other revenues
6,368

 
 
19,574

 
236,682

 
 
266,975

Expenses:
 
 
 
 
Lease operating expenses
61,272

 
 
67,234

Transportation expenses
34,541

 
 
40,986

Marketing expenses
34,099

 
 
6,933

General and administrative expenses
30,035

 
 
48,471

Exploration costs
171

 
 
4

Depreciation, depletion and amortization
29,657

 
 
87,413

Impairment of long-lived assets

 
 
41,728

Taxes, other than income taxes
12,368

 
 
18,003

(Gains) losses on sale of assets and other, net
(26,977
)
 
 
2,532

 
175,166

 
 
313,304

Other income and (expenses):
 
 
 
 
Interest expense, net of amounts capitalized
(223
)
 
 
(25,283
)
Earnings from equity method investments
2,575

 
 
222

Other, net
(4,237
)
 
 
(200
)
 
(1,885
)
 
 
(25,261
)
Reorganization items, net
(2,605
)
 
 
(28,361
)
Income (loss) from continuing operations before income taxes
57,026

 
 
(99,951
)
Income tax expense (benefit)
5,996

 
 
(3,650
)
Income (loss) from continuing operations
51,030

 
 
(96,301
)
Income (loss) from discontinued operations, net of income taxes
86,099

 
 
(102,064
)
Net income (loss)
137,129

 
 
(198,365
)
Net income attributable to noncontrolling interests
66

 
 

Net income (loss) attributable to common stockholders/unitholders
$
137,063

 
 
$
(198,365
)
 
 
 
 
 
Income (loss) per share/unit attributable to common stockholders/unitholders:
 
 
 
 
Income (loss) from continuing operations per share/unit – Basic
$
0.58

 
 
$
(0.27
)
Income (loss) from continuing operations per share/unit – Diluted
$
0.57

 
 
$
(0.27
)
 
 
 
 
 
Income (loss) from discontinued operations per share/unit – Basic
$
0.98

 
 
$
(0.29
)
Income (loss) from discontinued operations per share/unit – Diluted
$
0.97

 
 
$
(0.29
)
 
 
 
 
 
Net income (loss) per share/unit – Basic
$
1.56

 
 
$
(0.56
)
Net income (loss) per share/unit – Diluted
$
1.54

 
 
$
(0.56
)
 
 
 
 
 
Weighted average shares/units outstanding – Basic
87,796

 
 
352,792

Weighted average shares/units outstanding – Diluted
88,999

 
 
352,792




12


Condensed Consolidated Statements of Operations - Continued (Unaudited)

 
Successor
 
 
Predecessor
 
Seven Months Ended September 30, 2017
 
 
Two Months Ended February 28, 2017
 
Nine Months Ended September 30, 2016
(in thousands, except per share and per unit amounts)
 
 
 
 
 
 
Revenues and other:
 
 
 
 
 
 
Oil, natural gas and natural gas liquids sales
$
529,810

 
 
$
188,885

 
$
618,274

Gains (losses) on oil and natural gas derivatives
19,258

 
 
92,691

 
(74,175
)
Marketing revenues
53,954

 
 
6,636

 
26,861

Other revenues
14,787

 
 
9,915

 
71,521

 
617,809

 
 
298,127

 
642,481

Expenses:
 
 
 
 
 
 
Lease operating expenses
156,959

 
 
49,665

 
220,847

Transportation expenses
85,652

 
 
25,972

 
124,609

Marketing expenses
43,614

 
 
4,820

 
21,493

General and administrative expenses
74,904

 
 
71,745

 
184,360

Exploration costs
1,037

 
 
93

 
2,745

Depreciation, depletion and amortization
101,558

 
 
47,155

 
262,880

Impairment of long-lived assets

 
 

 
165,044

Taxes, other than income taxes
37,316

 
 
14,877

 
53,544

(Gains) losses on sale of assets and other, net
(333,371
)
 
 
829

 
6,607

 
167,669

 
 
215,156

 
1,042,129

Other income and (expenses):
 
 
 
 
 
 
Interest expense, net of amounts capitalized
(11,974
)
 
 
(16,725
)
 
(159,476
)
Earnings from equity method investments
2,705

 
 
157

 
511

Other, net
(5,788
)
 
 
(149
)
 
(1,358
)
 
(15,057
)
 
 
(16,717
)
 
(160,323
)
Reorganization items, net
(8,547
)
 
 
2,331,189

 
457,437

Income (loss) from continuing operations before income taxes
426,536

 
 
2,397,443

 
(102,534
)
Income tax expense (benefit)
159,451

 
 
(166
)
 
2,944

Income (loss) from continuing operations
267,085

 
 
2,397,609

 
(105,478
)
Income (loss) from discontinued operations, net of income taxes
82,845

 
 
(548
)
 
(1,232,141
)
Net income (loss)
349,930

 
 
2,397,061

 
(1,337,619
)
Net income attributable to noncontrolling interests
66

 
 

 

Net income (loss) attributable to common stockholders/unitholders
$
349,864

 
 
$
2,397,061

 
$
(1,337,619
)
 
 
 
 
 
 
 
Income (loss) per share/unit attributable to common stockholders/unitholders:
 
 
 
 
 
 
Income (loss) from continuing operations per share/unit – Basic
$
3.00

 
 
$
6.80

 
$
(0.30
)
Income (loss) from continuing operations per share/unit – Diluted
$
2.97

 
 
$
6.80

 
$
(0.30
)
 
 
 
 
 
 
 
Income (loss) from discontinued operations per share/unit – Basic
$
0.93

 
 
$
(0.01
)
 
$
(3.49
)
Income (loss) from discontinued operations per share/unit – Diluted
$
0.93

 
 
$
(0.01
)
 
$
(3.49
)
 
 
 
 
 
 
 
Net income (loss) per share/unit – Basic
$
3.93

 
 
$
6.79

 
$
(3.79
)
Net income (loss) per share/unit – Diluted
$
3.90

 
 
$
6.79

 
$
(3.79
)
 
 
 
 
 
 
 
Weighted average shares/units outstanding – Basic
88,966

 
 
352,792

 
352,606

Weighted average shares/units outstanding – Diluted
89,784

 
 
352,792

 
352,606





13


Condensed Consolidated Statements of Cash Flows (Unaudited)

 
Successor
 
 
Predecessor
 
Seven Months Ended September 30, 2017
 
 
Two Months Ended February 28, 2017
 
Nine Months Ended September 30, 2016
(in thousands)
 
 
 
 
 
 
Cash flow from operating activities:
 
 
 
 
 
 
Net income (loss)
$
349,930

 
 
$
2,397,061

 
$
(1,337,619
)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
 
 
 
 
 
 
(Income) loss from discontinued operations
(82,845
)
 
 
548

 
1,232,141

Depreciation, depletion and amortization
101,558

 
 
47,155

 
262,880

Impairment of long-lived assets

 
 

 
165,044

Deferred income taxes
116,446

 
 
(166
)
 
831

Noncash (gains) losses on oil and natural gas derivatives
380

 
 
(104,263
)
 
931,085

Share-based compensation expenses
25,876

 
 
50,255

 
24,514

Amortization and write-off of deferred financing fees
3,349

 
 
1,338

 
11,288

(Gains) losses on sale of assets and other, net
(357,510
)
 
 
1,069

 
5,534

Reorganization items, net

 
 
(2,359,364
)
 
(485,831
)
Changes in assets and liabilities:
 
 
 
 
 
 
(Increase) decrease in accounts receivable – trade, net
15,549

 
 
(7,216
)
 
(27,857
)
(Increase) decrease in other assets
3,908

 
 
402

 
(17,111
)
(Increase) decrease in restricted cash
2,151

 
 
(80,164
)
 

Increase (decrease) in accounts payable and accrued expenses
(43,213
)
 
 
20,949

 
64,252

Increase in other liabilities
56,460

 
 
2,801

 
21,679

Net cash provided by (used in) operating activities – continuing operations
192,039

 
 
(29,595
)
 
850,830

Net cash provided by operating activities – discontinued operations
2,566

 
 
8,781

 
34,362

Net cash provided by (used in) operating activities
194,605

 
 
(20,814
)
 
885,192

 
 
 
 
 
 
 
Cash flow from investing activities:
 
 
 
 
 
 
Development of oil and natural gas properties
(136,638
)
 
 
(50,597
)
 
(118,920
)
Purchases of other property and equipment
(60,656
)
 
 
(7,409
)
 
(25,955
)
Proceeds from sale of properties and equipment and other
703,234

 
 
(166
)
 
(3,321
)
Net cash provided by (used in) investing activities – continuing operations
505,940

 
 
(58,172
)
 
(148,196
)
Net cash provided by (used in) investing activities – discontinued operations
345,643

 
 
(584
)
 
19,133

Net cash provided by (used in) investing activities
851,583

 
 
(58,756
)
 
(129,063
)
 
 
 
 
 
 
 

14


Condensed Consolidated Statements of Cash Flows - Continued (Unaudited)

 
Successor
 
 
Predecessor
 
Seven Months Ended September 30, 2017
 
 
Two Months Ended February 28, 2017
 
Nine Months Ended September 30, 2016
(in thousands)
 
 
 
 
 
 
Cash flow from financing activities:
 
 
 
 
 
 
Proceeds from rights offerings, net

 
 
514,069

 

Repurchases of shares
(156,091
)
 
 

 

Proceeds from borrowings
190,000

 
 

 
978,500

Repayments of debt
(1,090,000
)
 
 
(1,038,986
)
 
(913,210
)
Debt issuance costs paid
(7,229
)
 
 

 
(692
)
Payment to holders of claims under the second lien notes

 
 
(30,000
)
 

Other
(5,181
)
 
 
(6,015
)
 
(20,687
)
Net cash provided by (used in) financing activities – continuing operations
(1,068,501
)
 
 
(560,932
)
 
43,911

Net cash used in financing activities – discontinued operations

 
 

 
(1,701
)
Net cash provided by (used in) financing activities
(1,068,501
)
 
 
(560,932
)
 
42,210

 
 
 
 
 
 
 
Net increase (decrease) in cash and cash equivalents
(22,313
)
 
 
(640,502
)
 
798,339

Cash and cash equivalents:
 
 
 
 
 
 
Beginning
54,355

 
 
694,857

 
2,168

Ending
32,042

 
 
54,355

 
800,507

Less cash and cash equivalents of discontinued operations at end of period

 
 

 
(29,647
)
Ending – continuing operations
$
32,042

 
 
$
54,355

 
$
770,860





15



Adjusted EBITDAX (Non-GAAP Measure)

The non-GAAP financial measure of adjusted EBITDAX, as defined by the Company, may not be comparable to similarly titled measures used by other companies. Therefore, this non-GAAP measure should be considered in conjunction with net income (loss) and other performance measures prepared in accordance with GAAP. Adjusted EBITDAX should not be considered in isolation or as a substitute for GAAP.
Adjusted EBITDAX is a measure used by Company management to evaluate the Company’s operational performance and for comparisons to the Company’s industry peers. Management also believes this information may be useful to investors and analysts to gain a better understanding of the Company’s financial results.
The following presents a reconciliation of net income (loss) to adjusted EBITDAX:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017 (1)
 
2016
 
(in thousands)
 
 
 
 
 
 
 
 
Net income (loss)
$
137,129

 
$
(198,365
)
 
$
2,746,991

 
$
(1,337,619
)
Plus (less):
 
 
 
 
 
 
 
(Income) loss from discontinued operations
(86,099
)
 
102,064

 
(82,297
)
 
1,232,141

Interest expense
223

 
25,283

 
28,699

 
159,476

Income tax expense (benefit)
5,996

 
(3,650
)
 
159,285

 
2,944

Depreciation, depletion and amortization
29,657

 
87,413

 
148,713

 
262,880

Exploration costs
171

 
4

 
1,130

 
2,745

EBITDAX
87,077

 
12,749

 
3,002,521

 
322,567

Plus (less):
 
 
 
 
 
 
 
Impairment of long-lived assets

 
41,728

 

 
165,044

Noncash (gains) losses on oil and natural gas derivatives
26,346

 
(166
)
 
(103,743
)
 
574,250

Noncash settlements on derivatives (2)

 

 

 
34,335

Accrued settlements on oil derivative contracts related to current production period (3)
(1,685
)
 

 
1,200

 
(73,354
)
Share-based compensation expenses
6,277

 
5,961

 
76,131

 
24,514

Write-off of deferred financing fees
2,975

 
54

 
2,975

 
1,402

Earnings from equity method investments
(2,575
)
 
(222
)
 
(2,862
)
 
(511
)
(Gains) losses on sale of assets and other, net  (4)
(27,609
)
 
2,384

 
(334,729
)
 
6,049

Reorganization items, net (5)
2,605

 
28,361

 
(2,322,642
)
 
(457,437
)
Adjusted EBITDAX
$
93,411

 
$
90,849

 
$
318,851

 
$
596,859



16



Adjusted EBITDAX (Non-GAAP Measure) - Continued

In addition, the Company reported the following other items:
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2016
 
2017 (1)
 
2016
 
(in thousands)
 
 
 
 
 
 
 
 
Prepetition restructuring costs included in general and administrative expenses  (6)
$

 
$

 
$

 
$
19,567

Premiums paid for put options that settled during the period (7)

 

 

 
(58,246
)
(1)
All amounts reflect the combined results of the seven months ended September 30, 2017 (successor) and the two months ended February 28, 2017 (predecessor).
(2)
Represent derivative settlements that were paid directly by the counterparties to the lenders under the predecessor’s credit facility, and as such were not included on the Company’s consolidated statement of cash flows.
(3)
Represent amounts related to oil derivative contracts that settled during the respective period (contract terms had expired) but cash had not been received as of the end of the period.
(4)
Primarily represent gains or losses on the sale of assets and gains or losses on inventory valuation.
(5)
Represent costs and income directly associated with the Company’s filing for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code since the petition date, and also include adjustments to reflect the carrying value of certain liabilities subject to compromise at their estimated allowed claim amounts, as such adjustments are determined.
(6)
Represent restructuring costs incurred by the Company prior to its filing for voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code, which are included in general and administrative expenses.
(7)
Represent premiums paid at inception for put options that settled during the respective period. The Company has not purchased any put options since 2012.


17