Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Sep. 30, 2014 | Nov. 11, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'EARTHSTONE ENERGY INC | ' |
Entity Central Index Key | '0000010254 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--03-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 1,737,360 |
Document Fiscal Period Focus | 'Q2 | ' |
Document Fiscal Year Focus | '2015 | ' |
Condensed_Consolidated_Balance
Condensed Consolidated Balance Sheets (USD $) | Sep. 30, 2014 | Mar. 31, 2014 |
ASSETS | ' | ' |
Cash and cash equivalents | $2,687,000 | $2,671,000 |
Accounts receivable: | ' | ' |
Oil and gas sales | 4,058,000 | 3,895,000 |
Joint interest and other receivables net of allowance of ($15,000) at September 30, 2014 and March 31, 2014 | 321,000 | 758,000 |
Other current assets | 1,174,000 | 1,043,000 |
Total current assets | 8,240,000 | 8,367,000 |
Oil and gas properties, full cost method: | ' | ' |
Proved properties | 71,301,000 | 67,186,000 |
Unproved properties | 643,000 | 773,000 |
Accumulated depletion and impairment | -33,769,000 | -31,496,000 |
Net oil and gas properties | 38,175,000 | 36,463,000 |
Support equipment and other non-current assets net of accumulated depreciation of ($469,000) and ($514,000), respectively | 747,000 | 791,000 |
Total non-current assets | 38,922,000 | 37,254,000 |
Total assets | 47,162,000 | 45,621,000 |
LIABILITIES AND SHAREHOLDERS' EQUITY | ' | ' |
Accounts payable | 1,278,000 | 430,000 |
Accrued liabilities | 5,220,000 | 5,243,000 |
Total current liabilities | 6,498,000 | 5,673,000 |
Long-term liabilities: | ' | ' |
Long-term debt | 7,000,000 | 9,000,000 |
Deferred tax liability | 4,902,000 | 4,486,000 |
Asset retirement obligation, less current portion | 2,170,000 | 2,068,000 |
Total long-term liabilities | 14,072,000 | 15,554,000 |
Total liabilities | 20,570,000 | 21,227,000 |
Shareholders' equity: | ' | ' |
Preferred shares, $0.001 par value, 600,000 authorized and none issued or outstanding | 0 | 0 |
Common shares, $0.001 par value, 6,400,000 shares authorized and 1,768,000 and 1,753,000 shares issued, respectively | 18,000 | 18,000 |
Additional paid-in capital | 23,525,000 | 23,436,000 |
Treasury stock, at cost, 15,000 and 24,000 shares, respectively | -460,000 | -458,000 |
Retained earnings | 3,509,000 | 1,398,000 |
Total shareholders' equity | 26,592,000 | 24,394,000 |
Total liabilities and shareholders' equity | $47,162,000 | $45,621,000 |
Condensed_Consolidated_Balance1
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | Sep. 30, 2014 | Mar. 31, 2014 |
Assets: | ' | ' |
Allowance of joint interest and other receivable, net | ($15,000) | ($15,000) |
Accumulated depreciation on support equipment and other non-current assets, net | ($469,000) | ($514,000) |
Shareholders' Equity: | ' | ' |
Preferred stock, par value | $0.00 | $0.00 |
Preferred stock, Authorized | 600,000 | 600,000 |
Preferred stock, Issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | $0.00 | $0.00 |
Common stock, Authorized | 6,400,000 | 6,400,000 |
Common stock, Issued | 1,768,000 | 1,753,000 |
Treasury stock, shares | 15,000 | 24,000 |
Condensed_Consolidated_Stateme
Condensed Consolidated Statements of Operations (USD $) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Revenues: | ' | ' | ' | ' |
Oil and gas sales | $5,161,000 | $4,627,000 | $10,375,000 | $8,209,000 |
Well service and water-disposal revenue | 32,000 | 45,000 | 56,000 | 58,000 |
Total revenues | 5,193,000 | 4,672,000 | 10,431,000 | 8,267,000 |
Expenses: | ' | ' | ' | ' |
Oil and gas production | 1,198,000 | 868,000 | 2,217,000 | 1,703,000 |
Production tax | 500,000 | 431,000 | 973,000 | 740,000 |
Well service and water-disposal | 30,000 | 19,000 | 49,000 | 56,000 |
Depletion and depreciation | 1,185,000 | 980,000 | 2,330,000 | 1,766,000 |
Accretion of asset retirement obligation | 54,000 | 49,000 | 107,000 | 98,000 |
General and administrative | 771,000 | 659,000 | 2,029,000 | 1,352,000 |
Total expenses | 3,738,000 | 3,006,000 | 7,705,000 | 5,715,000 |
Income from operations | 1,455,000 | 1,666,000 | 2,726,000 | 2,552,000 |
Other income (expense): | ' | ' | ' | ' |
Interest and other income | 5,000 | 7,000 | 9,000 | 15,000 |
Interest and other expenses | -53,000 | -44,000 | -114,000 | -77,000 |
Total other income (expense) | -48,000 | -37,000 | -105,000 | -62,000 |
Income before income tax | 1,407,000 | 1,629,000 | 2,621,000 | 2,490,000 |
Current income tax expense | 86,000 | 43,000 | 92,000 | 70,000 |
Deferred income tax expense | 207,000 | 362,000 | 418,000 | 503,000 |
Total income tax expense | 293,000 | 405,000 | 510,000 | 573,000 |
Net income | $1,114,000 | $1,224,000 | $2,111,000 | $1,917,000 |
Per share amounts: | ' | ' | ' | ' |
Basic | $0.65 | $0.72 | $1.23 | $1.12 |
Diluted | $0.64 | $0.72 | $1.22 | $1.12 |
Weighted average common shares outstanding: | ' | ' | ' | ' |
Basic | 1,718,964 | 1,710,445 | 1,719,003 | 1,710,445 |
Diluted | 1,728,794 | 1,710,445 | 1,727,804 | 1,710,445 |
Condensed_Consolidated_Stateme1
Condensed Consolidated Statements of Cash Flows (USD $) | 6 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Cash flows from operating activities: | ' | ' |
Net income | $2,111,000 | $1,917,000 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Depletion and depreciation | 2,330,000 | 1,766,000 |
Deferred income tax expense | 418,000 | 503,000 |
Accretion of asset retirement obligation | 107,000 | 98,000 |
Share-based compensation | 89,000 | 95,000 |
Amortization of deferred financing costs | 8,000 | 5,000 |
Change in: | ' | ' |
Accounts receivable, net | 274,000 | -328,000 |
Other current assets | -223,000 | 98,000 |
Accounts payable, accrued and other liabilities | 1,110,000 | 63,000 |
Net cash provided by operating activities | 6,224,000 | 4,217,000 |
Cash flows from investing activities: | ' | ' |
Oil and gas properties | -4,234,000 | -7,457,000 |
Purchases of support equipment and other non-current assets | -37,000 | -164,000 |
Other | 65,000 | -27,000 |
Net cash used in investing activities | -4,206,000 | -7,648,000 |
Cash flows from financing activities: | ' | ' |
Repayments on long-term debt | -2,000,000 | 0 |
Borrowings on long-term debt | 0 | 4,000,000 |
Deferred financing fees | 0 | -5,000 |
Repurchase of common shares | -2,000 | 0 |
Net cash (used in) provided by financing activities | -2,002,000 | 3,995,000 |
Cash and cash equivalents: | ' | ' |
Net increase in cash and cash equivalents | 16,000 | 564,000 |
Cash and cash equivalents, beginning of period | 2,671,000 | 2,180,000 |
Cash and cash equivalents, end of period | 2,687,000 | 2,744,000 |
Supplemental disclosure of cash flow information: | ' | ' |
Cash paid for interest | 101,000 | 60,000 |
Cash paid for income tax | 0 | 1,000 |
Non-cash: | ' | ' |
Increase in oil and gas property due to asset retirement obligation | 20,000 | 63,000 |
Accrued capital expenditures | 0 | 2,193,000 |
Prepaid capital expenditures | $35,000 | $0 |
1_Basis_of_Presentation
1. Basis of Presentation | 6 Months Ended |
Sep. 30, 2014 | |
Accounting Policies [Abstract] | ' |
1. Basis of Presentation | ' |
The accompanying interim financial statements of Earthstone Energy, Inc. (formerly Basic Earth Science Systems, Inc.) are unaudited. However, in the opinion of management, the interim data includes any applicable adjustments necessary for a fair presentation of the financial and operational results for the interim period according to generally accepted accounting principles in the United States of America (“U.S. GAAP”). | |
At the directive of the Securities and Exchange Commission ("SEC") to use “plain English” in public filings, the Company will use such terms as “we,” “our,” “us” or “the Company” in place of Earthstone Energy, Inc. and its wholly-owned subsidiary. When such terms are used in this manner throughout the notes to the unaudited condensed consolidated financial statements, they are in reference only to the corporation, Earthstone Energy, Inc. and its subsidiaries, and are not used in reference to the Board of Directors, corporate officers, management, or any individual employee or group of employees. | |
The financial statements included herein have been prepared by the Company pursuant to the rules and regulations of the SEC. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. We believe the disclosures made are adequate to make the information not misleading and suggest that these financial statements be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the previous fiscal year-end. | |
Further, the results of operations for the three and six months covered by this report, are not necessarily indicative of the operating results that may be expected for the full fiscal year. | |
Pending Strategic Combination. On May 15, 2014, the Company and Oak Valley Resources, LLC ("Oak Valley"), entered into an Exchange Agreement (the "Exchange Agreement"). The Exchange Agreement provides that upon the terms and subject to the conditions set forth in the Exchange Agreement, Oak Valley will contribute to the Company the membership interests of its three subsidiaries, each a limited liability company, inclusive of producing assets, undeveloped acreage and an estimated $142.5 million in cash and contractually obligated capital contributions, in exchange for the issuance of approximately 9.1 million shares of the Company's common stock ("Common Stock") to Oak Valley (the "Exchange"). Following the Exchange, current Earthstone stockholders will own 16% of the Company's outstanding Common Stock and Oak Valley will own 84% of the Company's outstanding Common Stock. The Exchange Agreement has been approved by the Board of Directors of Earthstone and the board of managers of Oak Valley. Following the execution of the Exchange Agreement, Oak Valley brought a proposed acquisition to Earthstone that would increase the combined Company’s interest in Oak Valley’s principal operated properties (the “Flatonia contribution”). After consideration and approval by the Earthstone Board of Directors, a contribution agreement relating to the Flatonia contribution was entered into on October 16, 2014. The consideration for the Flatonia contribution, which is subject to Earthstone stockholder approval and conditioned on the closing of the Exchange, is the issuance of 21.4% of the outstanding shares of Earthstone common stock after giving effect to the exchange and the Flatonia contribution, approximately 2.95 million shares. After giving effect to the two transactions, the existing stockholders of Earthstone will own 12.6%, Oak Valley will own 66.0%, and Flatonia Energy LLC, the contributing party in the Flatonia contribution (“Flatonia”), will own 21.4%, respectively, of Earthstone. | |
Pending closing of the Exchange, the Company has agreed in the Exchange Agreement to various covenants and restrictions related to the conduct of its business including, among others (i) to conduct its business in the ordinary course consistent with past practices, (ii) to retain the services of its present officers and key employees, (iii) to use commercially reasonable efforts to comply, in all material respects, with applicable laws and material contracts, (iv) not to issue, sell, grant, dispose of, accelerate or modify, as appropriate, any of its securities, (v) not to redeem, purchase or acquire any of its outstanding securities, except in connection with vesting, settlement of, forfeiture of, or tax withholding with respect to, any equity or equity-based awards granted under any Company equity plan that is outstanding as of the date of the Exchange Agreement, (vi) not to incur, refinance or assume any indebtedness for borrowed money other than borrowings under the Company's existing credit facility, (viii) not to sell, transfer, lease, farmout or otherwise dispose of any of the Company's properties with a fair market value in excess of $1 million, (ix) not to make any unbudgeted capital expenditure(s) in excess of $5 million without the consultation and consent of Oak Valley, which consent shall not be unreasonably withheld, delayed or conditioned, or except as may be reasonably required to conduct emergency operations, repairs or replacements on any well, pipeline or other facility, or (x) not to (A) materially increase the compensation of any executive officer, (B) pay any bonus or incentive compensation, (C) grant any new equity or non-equity based compensation award, except as required by applicable law or any employee benefit plans. The Company does not anticipate that the subject covenants and restrictions agreed to in the Exchange Agreement will materially interfere with, change, alter or otherwise impact the Company's ongoing continuing activities over the next several months until the Exchange is consumated or otherwise terminated. | |
The foregoing descriptions of the Exchange Agreement, the Exchange, and the Flatonia contribution do not purport to be complete and are qualified in their entirety by the other terms and provisions of the Exchange Agreement, copies of which are attached to the Current Report on Form 8-K as filed by the Company with the SEC on May 16, 2014 and October 17, 2014. Copies of these subject Form 8-Ks can be obtained by accessing the SEC's website at http://www.sec.gov. | |
Fair Value Measurements. Financial instruments and nonfinancial assets and liabilities, whether measured on a recurring or non-recurring basis, are recorded at fair value. A fair value hierarchy, established by the Financial Accounting Standards Board (“FASB”), prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). | |
The Company’s financial instruments consist of cash and cash equivalents, trade receivables, trade payables, accrued liabilities, and long-term debt, all of which are considered to be representative of their fair market value, due to the short-term highly liquid nature and/or the floating interest rate structure of these instruments. | |
Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions concern matters that are inherently uncertain. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results could differ from those estimates. | |
Recent Accounting Pronouncements. In July 2013, the FASB issued, ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 addresses the diversity in practice that exists for the balance sheet presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. ASU No. 2013-11 was effective for the Company’s fiscal quarter ending June 30, 2014. ASU 2013-11 impacts balance sheet presentation only. The impact of the new rule is not material. |
2_Earnings_Per_Share
2. Earnings Per Share | 6 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Per share amounts: | ' | ||||||||||||||||
2. Earning Per Share | ' | ||||||||||||||||
Basic earnings per share attributable to Earthstone shareholders is computed by dividing net income attributable to Earthstone shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share attributable to Earthstone shareholders is computed by dividing the net income attributable to Earthstone shareholders by the weighted average number of common shares outstanding during the period adjusted to include the effects of potentially dilutive securities. Potentially dilutive securities include incremental shares issuable upon the vesting of common shares issued to the employees and directors of Earthstone. | |||||||||||||||||
The amounts used in computing earnings per share and the effects of potentially dilutive securities on the weighted average number of common shares were as follows: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
9/30/14 | 9/30/13 | 9/30/14 | 9/30/13 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Net income attributable to Earthstone | |||||||||||||||||
Energy, Inc. shareholders | $ | 1,114,000 | $ | 1,224,000 | $ | 2,111,000 | $ | 1,917,000 | |||||||||
Weighted average number of shares | |||||||||||||||||
used in basic earnings per share | 1,718,964 | 1,710,445 | 1,719,003 | 1,710,445 | |||||||||||||
Effects of dilutive securities: | |||||||||||||||||
Unvested common shares * | 9,830 | - | 8,801 | - | |||||||||||||
Weighted average number of shares | |||||||||||||||||
used in diluted earnings per share | 1,728,794 | 1,710,445 | 1,727,804 | 1,710,445 | |||||||||||||
Basic earnings per share attributable to | |||||||||||||||||
Earthstone Energy, Inc. shareholders | $ | 0.65 | $ | 0.72 | $ | 1.23 | $ | 1.12 | |||||||||
Diluted earnings per share attributable to | |||||||||||||||||
Earthstone Energy, Inc. shareholders | $ | 0.64 | $ | 0.72 | $ | 1.22 | $ | 1.12 | |||||||||
* As of September 30, 2013, we have excluded unvested common shares outstanding from the calculation of diluted earnings per share, as the inclusion of these shares would have been anti-dilutive. |
3_Other_Current_Assets
3. Other Current Assets | 6 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
3. Other Current Assets | ' | ||||||||
9/30/14 | 3/31/14 | ||||||||
(Unaudited) | |||||||||
Drilling and completion cost prepayments | $ | 543,000 | $ | 223,000 | |||||
Prepaid income tax | 289,000 | 379,000 | |||||||
Lease and well equipment inventory | 253,000 | 310,000 | |||||||
Other current assets | 49,000 | 40,000 | |||||||
Prepaid insurance premiums | 40,000 | 91,000 | |||||||
Total other current assets | $ | 1,174,000 | $ | 1,043,000 |
4_Accrued_Liabilities
4. Accrued Liabilities | 6 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
4. Accrued Liabilities | ' | ||||||||
9/30/14 | 3/31/14 | ||||||||
(Unaudited) | |||||||||
Accrued operations payable | $ | 4,227,000 | $ | 4,209,000 | |||||
Accrued compensation | 341,000 | 317,000 | |||||||
Short-term asset retirement obligation | 291,000 | 411,000 | |||||||
Accrued income tax payable and other | 221,000 | 180,000 | |||||||
Revenue and production taxes payable | 140,000 | 126,000 | |||||||
Total accrued liabilities | $ | 5,220,000 | $ | 5,243,000 |
5_Oil_and_Gas_Properties
5. Oil and Gas Properties | 6 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
5. Oil and Gas Properties | ' | ||||||||
9/30/14 | 3/31/14 | ||||||||
(Unaudited) | |||||||||
Proved properties | $ | 71,301,000 | $ | 67,186,000 | |||||
Unproved properties | 643,000 | 773,000 | |||||||
Less accumulated depletion and impairment | (33,769,000 | ) | (31,496,000 | ) | |||||
Net oil and gas properties | $ | 38,175,000 | $ | 36,463,000 | |||||
As of September 30, 2014, the Company has recorded $71,301,000 as proved property costs. As of March 31, 2014, the Company had recorded $67,186,000 as proved property costs. Additions of $3,985,000 have been recorded during the six months ended September 30, 2014, and included in these additions are $3,916,000 related to intangible drilling and completion costs and tangible drilling and completion costs. Of the total additions recorded during the six months ended September 30, 2014, 80% relate to our work in North Dakota. | |||||||||
As of September 30, 2014, the Company has recorded $643,000 as unproved property costs. As of March 31, 2014, the Company had recorded $773,000 as unproved property costs. For the six months ended September 30, 2014, the Company recorded additional unproved property costs of $29,000 related to wells in progress. During the six months ended September 30, 2014, $50,000 in well costs and $54,000 in costs related to acreage were transferred from unevaluated to depletable properties. In addition, there were leased acreage expirations of approximately $55,000. |
6_Long_Term_Debt
6. Long Term Debt | 6 Months Ended |
Sep. 30, 2014 | |
Debt Disclosure [Abstract] | ' |
6. Long Term Debt | ' |
During the six months ended September 30, 2014, the Company repaid $2 million of the outstanding balance on its credit facility. As of September 30, 2014, the Company had an outstanding balance under the Credit Facility of $7 million. |
7_Income_Tax
7. Income Tax | 6 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
7. Income Tax | ' | ||||||||||||||||
The provision for income tax is comprised of: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Current: | |||||||||||||||||
Federal | $ | 77,000 | $ | 35,000 | $ | 79,000 | $ | 55,000 | |||||||||
State | 9,000 | 8,000 | 13,000 | 15,000 | |||||||||||||
Total current income tax | 86,000 | 43,000 | 92,000 | 70,000 | |||||||||||||
Deferred: | |||||||||||||||||
Federal | 197,000 | 342,000 | 397,000 | 475,000 | |||||||||||||
State | 10,000 | 20,000 | 21,000 | 28,000 | |||||||||||||
Total deferred income tax | 207,000 | 362,000 | 418,000 | 503,000 | |||||||||||||
Income tax expense | $ | 293,000 | $ | 405,000 | $ | 510,000 | $ | 573,000 | |||||||||
A reconciliation between the income tax provision at the statutory rate on income tax and the income tax provision for the three and six months ended is as follows: | |||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Federal tax at statutory rate | $ | 478,000 | $ | 555,000 | $ | 891,000 | $ | 847,000 | |||||||||
State taxes, net of federal benefit | 14,000 | 23,000 | 26,000 | 32,000 | |||||||||||||
Excess percentage depletion | (200,000 | ) | (175,000 | ) | (403,000 | ) | (310,000 | ) | |||||||||
Other adjustments, net | 1,000 | 2,000 | (4,000 | ) | 4,000 | ||||||||||||
Income tax expense | $ | 293,000 | $ | 405,000 | $ | 510,000 | $ | 573,000 | |||||||||
Effective rate expressed as a percentage | |||||||||||||||||
of income before income tax | 20.8 | % | 24.9 | % | 19.5 | % | 23 | % | |||||||||
The overall effective tax rate expressed as a percentage of book income before income tax for the current three and six month periods, as compared to the same periods in the prior year, was lower due to an increase in the deduction for excess percentage depletion related to an increase in annualized oil and gas sales. | |||||||||||||||||
Net deferred tax assets and liabilities were comprised of: | September 30, | March 31, | |||||||||||||||
2014 | 2014 | ||||||||||||||||
(Unaudited) | |||||||||||||||||
Deferred tax assets: | |||||||||||||||||
Statutory depletion carry-forward | $ | 2,466,000 | $ | 2,190,000 | |||||||||||||
Net operating loss carry-forward | 14,000 | - | |||||||||||||||
Other accruals | 67,000 | 103,000 | |||||||||||||||
Allowance for doubtful accounts | 5,000 | 5,000 | |||||||||||||||
Gross deferred tax assets | 2,552,000 | 2,298,000 | |||||||||||||||
Deferred tax liabilities: | |||||||||||||||||
Depletion, depreciation and intangible drilling costs | (7,454,000 | ) | (6,784,000 | ) | |||||||||||||
Gross deferred tax liabilities | (7,454,000 | ) | (6,784,000 | ) | |||||||||||||
Deferred tax liabilities, net | $ | (4,902,000 | ) | $ | (4,486,000 | ) | |||||||||||
Projections of future income taxes and their timing require significant estimates with respect to future operating results. Accordingly, deferred taxes may change significantly as more information and data is gathered with respect to such events as changes in commodity prices, their effect on the estimate of oil and gas reserves and the depletion of these long-lived reserves. | |||||||||||||||||
The Company is subject to U.S. federal income tax and income tax from multiple state jurisdictions. | |||||||||||||||||
The Company's federal income tax returns for the prior three tax years of filings and state income tax returns for the prior four years of tax filings are still subject to examination by tax authorities. |
1_Summary_of_Significant_Accou
1. Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Sep. 30, 2014 | |
Accounting Policies [Abstract] | ' |
Fair Value Measurements | ' |
Financial instruments and nonfinancial assets and liabilities, whether measured on a recurring or non-recurring basis, are recorded at fair value. A fair value hierarchy, established by the Financial Accounting Standards Board (“FASB”), prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). | |
The Company’s financial instruments consist of cash and cash equivalents, trade receivables, trade payables, accrued liabilities, and long-term debt, all of which are considered to be representative of their fair market value, due to the short-term highly liquid nature and/or the floating interest rate structure of these instruments. | |
Use of Estimates | ' |
The preparation of financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions concern matters that are inherently uncertain. Estimates and assumptions are revised periodically and the effects of revisions are reflected in the financial statements in the period it is determined to be necessary. Actual results could differ from those estimates. | |
Recent Accounting Pronouncements | ' |
In July 2013, the FASB issued, ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”). ASU 2013-11 addresses the diversity in practice that exists for the balance sheet presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 requires that an unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. ASU No. 2013-11 was effective for the Company’s fiscal quarter ending June 30, 2014. ASU 2013-11 impacts balance sheet presentation only. The impact of the new rule is not material. |
2_Earnings_Per_Share_Tables
2. Earnings Per Share (Tables) | 6 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Earnings Per Share Tables | ' | ||||||||||||||||
Amounts used in computing earnings per share and the effects of potentially dilutive securities | ' | ||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
9/30/14 | 9/30/13 | 9/30/14 | 9/30/13 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Net income attributable to Earthstone | |||||||||||||||||
Energy, Inc. shareholders | $ | 1,114,000 | $ | 1,224,000 | $ | 2,111,000 | $ | 1,917,000 | |||||||||
Weighted average number of shares | |||||||||||||||||
used in basic earnings per share | 1,718,964 | 1,710,445 | 1,719,003 | 1,710,445 | |||||||||||||
Effects of dilutive securities: | |||||||||||||||||
Unvested common shares * | 9,830 | - | 8,801 | - | |||||||||||||
Weighted average number of shares | |||||||||||||||||
used in diluted earnings per share | 1,728,794 | 1,710,445 | 1,727,804 | 1,710,445 | |||||||||||||
Basic earnings per share attributable to | |||||||||||||||||
Earthstone Energy, Inc. shareholders | $ | 0.65 | $ | 0.72 | $ | 1.23 | $ | 1.12 | |||||||||
Diluted earnings per share attributable to | |||||||||||||||||
Earthstone Energy, Inc. shareholders | $ | 0.64 | $ | 0.72 | $ | 1.22 | $ | 1.12 | |||||||||
* As of September 30, 2013, we have excluded unvested common shares outstanding from the calculation of diluted earnings per share, as the inclusion of these shares would have been anit-dilutive. |
3_Other_Current_Assets_Tables
3. Other Current Assets (Tables) | 6 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Other Current Assets Tables | ' | ||||||||
Other Current Assets | ' | ||||||||
9/30/14 | 3/31/14 | ||||||||
(Unaudited) | |||||||||
Drilling and completion cost prepayments | $ | 543,000 | $ | 223,000 | |||||
Prepaid income tax | 289,000 | 379,000 | |||||||
Lease and well equipment inventory | 253,000 | 310,000 | |||||||
Other current assets | 49,000 | 40,000 | |||||||
Prepaid insurance premiums | 40,000 | 91,000 | |||||||
Total other current assets | $ | 1,174,000 | $ | 1,043,000 |
4_Accrued_Liabilities_Tables
4. Accrued Liabilities (Tables) | 6 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Accrued Liabilities Tables | ' | ||||||||
Accrued Liabilities | ' | ||||||||
9/30/14 | 3/31/14 | ||||||||
(Unaudited) | |||||||||
Accrued operations payable | $ | 4,227,000 | $ | 4,209,000 | |||||
Accrued compensation | 341,000 | 317,000 | |||||||
Short-term asset retirement obligation | 291,000 | 411,000 | |||||||
Accrued income tax payable and other | 221,000 | 180,000 | |||||||
Revenue and production taxes payable | 140,000 | 126,000 | |||||||
Total accrued liabilities | $ | 5,220,000 | $ | 5,243,000 |
5_Oil_And_Gas_Properties_Table
5. Oil And Gas Properties (Tables) | 6 Months Ended | ||||||||
Sep. 30, 2014 | |||||||||
Oil And Gas Properties Tables | ' | ||||||||
Oil and Gas Properties | ' | ||||||||
9/30/14 | 3/31/14 | ||||||||
(Unaudited) | |||||||||
Proved properties | $ | 71,301,000 | $ | 67,186,000 | |||||
Unproved properties | 643,000 | 773,000 | |||||||
Less accumulated depletion and impairment | (33,769,000 | ) | (31,496,000 | ) | |||||
Net oil and gas properties | $ | 38,175,000 | $ | 36,463,000 |
6_Income_Tax_Tables
6. Income Tax (Tables) | 6 Months Ended | ||||||||||||||||
Sep. 30, 2014 | |||||||||||||||||
Income Tax Tables | ' | ||||||||||||||||
Provision for income tax | ' | ||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Current: | |||||||||||||||||
Federal | $ | 77,000 | $ | 35,000 | $ | 79,000 | $ | 55,000 | |||||||||
State | 9,000 | 8,000 | 13,000 | 15,000 | |||||||||||||
Total current income tax | 86,000 | 43,000 | 92,000 | 70,000 | |||||||||||||
Deferred: | |||||||||||||||||
Federal | 197,000 | 342,000 | 397,000 | 475,000 | |||||||||||||
State | 10,000 | 20,000 | 21,000 | 28,000 | |||||||||||||
Total deferred income tax | 207,000 | 362,000 | 418,000 | 503,000 | |||||||||||||
Income tax expense | $ | 293,000 | $ | 405,000 | $ | 510,000 | $ | 573,000 | |||||||||
Reconciliation between the income tax provision at the statutory rate on income tax and the income tax provision | ' | ||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
September 30, | September 30, | ||||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Federal tax at statutory rate | $ | 478,000 | $ | 555,000 | $ | 891,000 | $ | 847,000 | |||||||||
State taxes, net of federal benefit | 14,000 | 23,000 | 26,000 | 32,000 | |||||||||||||
Excess percentage depletion | (200,000 | ) | (175,000 | ) | (403,000 | ) | (310,000 | ) | |||||||||
Other adjustments, net | 1,000 | 2,000 | (4,000 | ) | 4,000 | ||||||||||||
Income tax expense | $ | 293,000 | $ | 405,000 | $ | 510,000 | $ | 573,000 | |||||||||
Effective rate expressed as a percentage | |||||||||||||||||
of income before income tax | 20.8 | % | 24.9 | % | 19.5 | % | 23 | % | |||||||||
Net deferred tax assets and liabilities | ' | ||||||||||||||||
Net deferred tax assets and liabilities were comprised of: | September 30, | March 31, | |||||||||||||||
2014 | 2014 | ||||||||||||||||
(Unaudited) | |||||||||||||||||
Deferred tax assets: | |||||||||||||||||
Statutory depletion carry-forward | $ | 2,466,000 | $ | 2,190,000 | |||||||||||||
Net operating loss carry-forward | 14,000 | - | |||||||||||||||
Other accruals | 67,000 | 103,000 | |||||||||||||||
Allowance for doubtful accounts | 5,000 | 5,000 | |||||||||||||||
Gross deferred tax assets | 2,552,000 | 2,298,000 | |||||||||||||||
Deferred tax liabilities: | |||||||||||||||||
Depletion, depreciation and intangible drilling costs | (7,454,000 | ) | (6,784,000 | ) | |||||||||||||
Gross deferred tax liabilities | (7,454,000 | ) | (6,784,000 | ) | |||||||||||||
Deferred tax liabilities, net | $ | (4,902,000 | ) | $ | (4,486,000 | ) |
2_Earnings_Per_Share_Details
2. Earnings Per Share (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||||||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |||||
Earnings Per Share Details | ' | ' | ' | ' | ||||
Net income attributable to Earthstone Energy, Inc. Shareholders | $1,114,000 | $1,224,000 | $2,111,000 | $1,917,000 | ||||
Weighted average number of shares used in basic earnings per share | 1,718,964 | 1,710,445 | 1,719,003 | 1,710,445 | ||||
Effects of dilutive securities: | ' | ' | ' | ' | ||||
Unvested common shares* | $9,830 | [1] | $0 | [1] | $8,801 | [1] | $0 | [1] |
Weighted average number of shares used in diluted earnings per share | 1,728,794 | 1,710,445 | 1,727,804 | 1,710,445 | ||||
Basic earnings per share attributable to Earthstone Energy, Inc. Shareholders | $0.65 | $0.72 | $1.23 | $1.12 | ||||
Diluted earnings per share attributable to Earthstone Energy, Inc. Shareholders | $0.64 | $0.72 | $1.22 | $1.12 | ||||
[1] | *As of September 30, 2013, we have excluded unvested common shares outstanding from the calculation of diluted earnings per share, as the inclusion of these shares would have been anti-dilutive. |
3_Other_Current_Assets_Details
3. Other Current Assets (Details) (USD $) | Sep. 30, 2014 | Mar. 31, 2014 |
Other Current Assets Details | ' | ' |
Drilling and completion cost prepayments | $543,000 | $223,000 |
Prepaid income tax | 289,000 | 379,000 |
Lease and well equipment inventory | 253,000 | 310,000 |
Other current assets | 49,000 | 40,000 |
Prepaid insurance premiums | 40,000 | 91,000 |
Total other current assets | $1,174,000 | $1,043,000 |
4_Accrued_Liabilities_Details
4. Accrued Liabilities (Details) (USD $) | Sep. 30, 2014 | Mar. 31, 2014 |
Accrued Liabilities Details | ' | ' |
Accrued operations payable | $4,227,000 | $4,209,000 |
Accrued compensation | 341,000 | 317,000 |
Short-term asset retirement obligation | 291,000 | 411,000 |
Accrued income tax payable and other | 221,000 | 180,000 |
Revenue and production taxes payable | 140,000 | 126,000 |
Total accrued liabilities | $5,220,000 | $5,243,000 |
5_Oil_and_Gas_Properties_Detai
5. Oil and Gas Properties (Details) (USD $) | Sep. 30, 2014 | Mar. 31, 2014 |
Oil And Gas Properties Details | ' | ' |
Proved properties | $71,301,000 | $67,186,000 |
Unproved properties | 643,000 | 773,000 |
Less accumulated depletion and impairment | -33,769,000 | -31,496,000 |
Net oil and gas properties | $38,175,000 | $36,463,000 |
6_Long_Term_Debt_Details_Narra
6. Long Term Debt (Details Narrative) (USD $) | 6 Months Ended |
Sep. 30, 2014 | |
Long Term Debt Details Narrative | ' |
Repayment of Outstanding balance on credit facility | $2,000,000 |
Outstanding balance on credit facility | $7,000,000 |
7_Income_Tax_Details
7. Income Tax (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Current: | ' | ' | ' | ' |
Federal | $77,000 | $35,000 | $79,000 | $55,000 |
State | 9,000 | 8,000 | 13,000 | 15,000 |
Total current income tax | 86,000 | 43,000 | 92,000 | 70,000 |
Deferred: | ' | ' | ' | ' |
Federal | 197,000 | 342,000 | 397,000 | 475,000 |
State | 10,000 | 20,000 | 21,000 | 28,000 |
Total deferred income tax | 207,000 | 362,000 | 418,000 | 503,000 |
Income tax expense | $293,000 | $405,000 | $510,000 | $573,000 |
7_Income_Tax_Details_1
7. Income Tax (Details 1) (USD $) | 3 Months Ended | 6 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Income Tax Details 1 | ' | ' | ' | ' |
Federal tax at statutory rate | $478,000 | $555,000 | $891,000 | $847,000 |
State taxes, net of federal benefit | 14,000 | 23,000 | 26,000 | 32,000 |
Excess percentage depletion | -200,000 | -175,000 | -403,000 | -310,000 |
Other adjustments, net | 1,000 | 2,000 | -4,000 | 4,000 |
Income tax expense | $293,000 | $405,000 | $510,000 | $573,000 |
Effective rate expressed as a percentage of income before income tax | 20.80% | 24.90% | 19.50% | 23.00% |
7_Income_Tax_Details_2
7. Income Tax (Details 2) (USD $) | Sep. 30, 2014 | Mar. 31, 2014 |
Deferred tax assets: | ' | ' |
Statutory depletion carry-forward | $2,466,000 | $2,190,000 |
Net operating loss carry-forward | 14,000 | 0 |
Other accruals | 67,000 | 103,000 |
Allowance for doubtful accounts | 5,000 | 5,000 |
Gross deferred tax assets | 2,552,000 | 2,298,000 |
Deferred tax liabilities: | ' | ' |
Depletion, depreciation and intangible drilling costs | -7,454,000 | -6,784,000 |
Gross deferred tax liabilities | -7,454,000 | -6,784,000 |
Deferred tax liabilities, net | ($4,902,000) | ($4,486,000) |