FORT WORTH, Texas, May 16, 2016 /PRNewswire/ -- Lonestar Resources, Ltd. (ASX:LNR, OTCQX: LNREF) is pleased to provide an update on its financial and operational results for the three months ended March 31, 2016 (1Q16).
First Quarter Highlights
- Lonestar Resources registered an 18% increase in net oil and gas production to 6,553 BOEPD in 1Q16, vs. 5,547 BOEPD in 1Q15. In the first quarter, 74% of the Company's production was crude oil and NGL's.
- The Company continues to focus its technical and capital resources on the Eagle Ford Shale, where it generated a 23% increase in net oil and gas production over 1Q15 results, to 5,954 BOEPD.
- EBITDAX was $13.6 million for 1Q16 vs. $21.7 million for 1Q15, as increased production volumes and incremental revenues from crude oil hedges helped offset a 31% decrease in West Texas Intermediate oil prices.
- Lonestar reported a net loss of $11.3 million for 1Q16 vs. a net loss of $0.7 million in 1Q15. Excluding a $8.4 million unrealized loss on commodity derivative and the associated non-cash expense, Lonestar would have reported a net loss of $2.9 million for 1Q16.
- At March 31, 2016, $86 million was outstanding on the facility on its $180 million Senior Secured facility, currently leaving $94 million undrawn and available.
- Lonestar is making progress towards its corporate objective of moving the Company's domicile and public equity listing to the United States. On March 10, 2016 Lonestar received overwhelming approval from its shareholders in support of this objective. The Company continues to respond to comments from the U.S. Securities & Exchange Commission ("SEC"), and believes that it is close to receiving clearance from the SEC. Upon clearance from the SEC, Lonestar will schedule a second Court hearing in Australia to gain final approval of the move to the United States. Lonestar filed an application for listing on the NASDAQ: NMS and reserved the ticker "LONE" for trading in the United States, which when effective, will coincide with a delisting from the Australian Stock Exchange.
1 Please see the Notes & Disclosures on page 15 of the complete document
Management's Discussion and Analysis
Lonestar Resources, Ltd. is pleased to announce its operational and unaudited financial results for the quarter ended March 31, 2016.
Lonestar Resources, Ltd. ("Lonestar" or the "Company") is listed on the Australian Securities Exchange (ASX) and the OTCQX in the United States, and is headquartered in Fort Worth, Texas. Lonestar Resources is focused on the acquisition, development and production of unconventional resources in the United States. While optimizing cash flows from its Conventional assets, Lonestar is focusing its attention and capital to continuing its growth strategy in the Eagle Ford Shale. Lonestar currently operates 100% of over 35,000 net acres in the Eagle Ford, and continues to expand its leasehold. Lonestar believes it is capitalized to fund the development of its existing Eagle Ford Shale drilling inventory through internal means. Lonestar is also engaged in an early-stage project in the Bakken Petroleum System, where it has assembled a 52,559 acre leasehold (34,163 net acres) and tested light oil from the Bakken, Three Forks and Lower Lodgepole formations.
Lonestar continues to make strides towards its core goal of expanding its resource base during the current downturn in commodity prices. Lonestar's preference is to use its flexible drilling schedule and its $100 million Joint Development Agreement ("JDA") with IOG Capital, LLC to gain access to additional leasehold and reserves in proven areas via farm-in, supplemented by primary term leases. This strategy allows Lonestar to grow its asset base without straining its liquidity, as the Company continues to endeavor to retain unused borrowing base.
In the current commodity price environment, Lonestar has adopted a highly flexible capital spending plan for 2016 with a principal focus on maintaining current debt levels and maximizing liquidity while continuing to avail the Company to new leasehold opportunities. Lonestar currently plans to drill and complete a total of 6 to 7 net wells (9 to 10 gross wells) at today's NYMEX strip prices, with a focus on Dimmit, LaSalle and Gonzales Counties. The Company's plan is intended to result in no change in the Company's net debt position at December 31, 2016 and yield annual average production which Lonestar estimates would range from flat to an increase of up to 10% over 2015 results. Importantly, Lonestar has no commitment wells until July 2017, which reduces pressure to drill wells solely to hold leases by production. With an eye to growth, Lonestar may utilize funds from its $100 million JDA with IOG Capital to gain access to new farm-in opportunities while maintaining its capital budget. As market conditions change, Lonestar remains flexible in its ability to modify its spending in alignment that is in the best interests of its shareholders.
- Lonestar reported an 18% increase in total company production, and a 23% increase in its Eagle Ford Shale production. First quarter 2016 volumes of 6,553 BOEPD were comprised of 3,414 barrels of oil per day, 1,404 barrels of NGL's per day, and 10,411 Mcf of natural gas per day. The Company's 1Q16 results followed an impressive year as full-year 2015 production averaged 6,407 BOEPD, an increase of 43% over 2014 results. Production in the first quarter of 2016 experienced significant, temporary curtailment which averaged 355 BOEPD. The leading contributors included a severe fire at Southcross Energy, L.P.'s Lancaster gas processing plant created a force majeure situation, which rendered all of the Company's natural gas and natural gas liquids unsaleable in the months of February and March, reducing sales by 115 BOEPD in the quarter. The Lancaster plant has recently resumed normal operations and Burns Ranch sales volumes have recovered. Second, certain wells in proximity to the Company's recently drilled Beall Ranch #20H, #21H, and #22H wells were either shut-in or taken offline during fracture stimulation operations during the quarter. These production deferrals averaged 185 BOEPD. Since the fracture stimulation operations, the affected wells have returned to levels that meet or exceed our projections. Lastly, third party pipeline shut-ins curtailed natural gas sales at our Horned Frog property which reduced volumes by an average of 41 BOEPD. Since then, the metering and pipeline issues responsible for these shut-ins have been resolved with natural gas and NGL's returning to forecasted levels.
- Crude oil hedging continues to be an important element of Lonestar's strategy, providing visibility to cash flow streams and associated liquidity in the current crude oil price environment. After adding to its 2016 crude oil swaps positions after the rally in crude oil futures prices, the Company has West Texas Intermediate (WTI) swaps covering 2,801 barrels of oil per day for April 2016 through December 2016 at an average strike price of $69.49 per barrel. For 2017, The Company has three-way collars covering 1,000 bopd, which provide an effective floor of $55.25 per barrel with WTI prices between $40.00 per barrel and $60.00 per barrel but also gives upside to $80.25 per barrel. At March 31, 2016, the mark-to-market value of Lonestar's hedge portfolio was $24.1million.
EAGLE FORD SHALE TREND- WESTERN REGION
- Asherton- In central Dimmit County, no new wells were completed during the quarter. However, production rates from the 4 producing wells continued to outperform the third-party engineering projections. The Asherton leasehold is Held by Production, and Lonestar does not plan drilling activity here in 2016.
- Beall Ranch- In Dimmit County, Lonestar drilled and completed the Beall Ranch #20H - #22H with an average perforated interval of 6,075 feet. Certain wells in proximity to these wells were either shut-in or taken offline during fracture stimulation operations during the quarter. These production deferrals averaged 185 BOEPD. Since the fracture stimulation operations, the affected wells have returned to levels that meet or exceed our projections. The three new wells were fracture stimulated with an average proppant concentration of 1,520 pounds per foot, and commenced flowback on March 10th, 2016. The Beall Ranch #20H tested 576 bopd and 413 Mcfgpd, or 671 BOEPD on a processed three-stream basis on an 18" choke and registered a 30-day production rate of 574 BOEPD. The Beall Ranch #21H tested 813 bopd and 539 Mcfgpd, or 937 BOEPD on a processed three-stream basis on a 18/64" choke and registered a 30-day production rate of 755 BOEPD. The Beall Ranch #22H tested 781 bopd and 441 Mcfgpd, or 882 BOEPD on a processed three-stream basis on a 18/64" choke and registered a 30-day production rate of 709 BOEPD. Originally AFE'd for an average of $4.4 million, these wells have been drilled and completed at an average cost of $4.1 million. Lonestar continues to register significant reductions in well costs. The recently-drilled Beall Ranch #20H-22H cost an average of 21% more on an absolute dollar basis compared to the #26H-28H, which were drilled and completed in 2Q15. However, the Beall Ranch #20H-22 wells had a perforated lateral length 91% longer than the wells drilled in 2Q15, resulting in a 37% reduction in costs per perforated foot.
- Burns Ranch Area- Burns Ranch production was curtailed during the first quarter of 2016 by a severe fire at Southcross Energy, L.P.'s Lancaster gas processing plant created a force majeure situation, which rendered all of the Company's natural gas and natural gas liquids unsaleable in the months of February and March, reducing sales by 115 BOEPD in the quarter. The Lancaster plant has recently resumed normal operations and Burns Ranch sales volumes have recovered. Since its initial entry into the area as part of its acquisition of properties from Clayton Williams Energy, Inc., Lonestar has increased its leasehold position in the Greater Burns Ranch Area from 1,280 gross / 800 net acres in January, 2013 to its current position of 3,857 gross / 3,125 net acres at March 31, 2016. This acreage is configured in a manner that allows Lonestar to drill 8,000-foot laterals, which it believes are necessary to achieve attractive internal rates of return in the current price environment. Lonestar is pleased with the results of its initial 8,000' laterals it drilled on the Burns Ranch in 2015, and is evaluating the potential of drilling 9,000 foot laterals on this leasehold.
- Horned Frog- Third party pipeline shut-ins curtailed natural gas sales at our Horned Frog property which reduced volumes by an average of 41 BOEPD. While the metering and pipeline issues responsible for these shut-ins have been resolved, second quarter volumes will be curtailed for approximately a two week period due to electrical issues at a third party processing plant in early May. Natural gas sales have since returned to levels prior to these issues.
EAGLE FORD SHALE TREND- CENTRAL REGION
- Pirate Area- In southwest Wilson County, Lonestar has drilled the Pirate #M1H and Pirate #N1H wells and cased them to an average measured depth of approximately 16,100 feet. Lonestar has a 100% working interest and an average 76.4% net revenue interest in these two wells. These wells are being held in inventory awaiting fracture stimulation. Lonestar will continue to weigh allocating capital to completion of these wells versus other projects in the Company which compete for capital.
- Southern Gonzales County- In Gonzales County, Lonestar commenced drilling operations on the Cyclone #9H and #10H in the first quarter of 2016. Lonestar holds a 40% working interest in these wells. Since then, the Cyclone #9H & #10H have reached total depth with an average perforated lateral length of 7,150 feet. The wells were fracked in late April with an average proppant concentration of 1,420 pounds per foot and expect to begin flowback operations within the next week. To date, Lonestar has leased a total of 1,130 net acres which will accommodate 10 gross laterals with average lateral lengths of 7,200 feet and has top-leased an additional 1,726 net acres associated with marginally economic Austin Chalk units. If fully executed, Lonestar's total leasehold of 2,856 net acres would accommodate a total of 31 gross laterals with an average lateral length of 7,000 feet. Lonestar estimates that remaining potential leasehold expenditures are less than $2.1 million, equating to lease costs of $1,429 per net acre.
EAGLE FORD SHALE TREND- EASTERN REGION
- Brazos & Robertson Counties- In central Brazos County, Lonestar has permitted two 8,000-foot laterals with the Texas Railroad Commission and on March, 8th, 2016 Lonestar was granted operations permits with the City of College Station. The Company is encouraged by the results of offset drilling by a leading operator, who recently announced impressive 30-day production rates on four wells immediately offsetting Lonestar's leasehold, which have ranged from 1,587 to 1,973 BOE per day. Lonestar will drill these permitted wells when market conditions and its liquidity position indicate that it is prudent to do so.
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SOURCE Lonestar Resources, Ltd.