Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 01, 2019 | |
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q2 | |
Trading Symbol | AREX | |
Entity Registrant Name | APPROACH RESOURCES INC. | |
Entity Central Index Key | 0001405073 | |
Entity Current Reporting Status | Yes | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity File Number | 001-33801 | |
Entity Tax Identification Number | 510424817 | |
Entity Address, Address Line One | One Ridgmar Centre | |
Entity Address, Address Line Two | 6500 West Freeway | |
Entity Address, Address Line Three | Suite 800 | |
Entity Address, City or Town | Fort Worth | |
Entity Address, State or Province | Texas | |
Entity Address, Postal Zip Code | 76116 | |
City Area Code | 817 | |
Local Phone Number | 989-9000 | |
Entity Common Stock, Shares Outstanding | 93,664,421 |
Unaudited Consolidated Balance
Unaudited Consolidated Balance Sheets - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
CURRENT ASSETS: | ||
Cash and cash equivalents | $ 7,198 | $ 22 |
Accounts receivable: | ||
Joint interest owners | 82 | 89 |
Oil, NGLs and gas sales | 4,326 | 6,710 |
Derivative instruments | 1,340 | 5,946 |
Prepaid expenses and other current assets | 4,554 | 3,458 |
Assets held for sale | 1,188 | |
Total current assets | 18,688 | 16,225 |
PROPERTIES AND EQUIPMENT: | ||
Oil and gas properties, at cost, using the successful efforts method of accounting | 1,976,505 | 1,976,699 |
Furniture, fixtures and equipment | 3,855 | 5,689 |
Total oil and gas properties and equipment | 1,980,360 | 1,982,388 |
Less accumulated depletion, depreciation and amortization | (939,386) | (913,966) |
Net oil and gas properties and equipment | 1,040,974 | 1,068,422 |
Right of use operating lease assets | 12,419 | |
Total assets | 1,072,081 | 1,084,647 |
CURRENT LIABILITIES: | ||
Accounts payable | 3,099 | 9,768 |
Oil, NGLs and gas sales payable | 4,251 | 4,968 |
Operating lease liabilities | 6,599 | |
Accrued liabilities | 5,813 | 6,341 |
Senior secured credit facility, net | 321,379 | |
Total current liabilities | 341,141 | 21,077 |
NON-CURRENT LIABILITIES: | ||
Senior secured credit facility, net | 300,507 | |
Senior notes, net | 84,637 | 84,486 |
Deferred income taxes | 70,122 | 77,821 |
Asset retirement obligations | 11,672 | 11,424 |
Operating lease liabilities | 5,929 | |
Other non-current liabilities | 8 | 87 |
Total liabilities | 513,509 | 495,402 |
COMMITMENTS AND CONTINGENCIES | ||
STOCKHOLDERS’ EQUITY: | ||
Preferred stock, $0.01 par value, 10,000,000 shares authorized, none outstanding | ||
Common stock, $0.01 par value, 180,000,000 shares authorized, 93,679,776 and 95,030,569 issued and outstanding, respectively | 937 | 950 |
Additional paid-in capital | 743,859 | 744,126 |
Accumulated deficit | (186,224) | (155,831) |
Total stockholders’ equity | 558,572 | 589,245 |
Total liabilities and stockholders’ equity | $ 1,072,081 | $ 1,084,647 |
Unaudited Consolidated Balanc_2
Unaudited Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2019 | Dec. 31, 2018 |
Statement Of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.01 | $ 0.01 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 180,000,000 | 180,000,000 |
Common stock, issued | 93,679,776 | 95,030,569 |
Common stock, outstanding | 93,679,776 | 95,030,569 |
Unaudited Consolidated Statemen
Unaudited Consolidated Statements of Operations - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | ||
REVENUES: | |||||
Revenues | $ 14,720 | $ 30,326 | $ 33,963 | $ 59,098 | |
EXPENSES: | |||||
Lease operating | 4,178 | 5,032 | 9,049 | 10,300 | |
Production and ad valorem taxes | 1,539 | 2,569 | 3,474 | 5,069 | |
Exploration | 1,439 | 3 | 1,448 | 3 | |
General and administrative | [1] | 4,315 | 6,086 | 8,077 | 12,653 |
Restructuring expenses | 142 | 6,424 | |||
Depletion, depreciation and amortization | 13,068 | 16,849 | 26,674 | 32,529 | |
Impairment | 300 | ||||
Gain on sale of assets | (1) | (67) | |||
Total expenses | 24,680 | 30,539 | 55,379 | 60,554 | |
OPERATING LOSS | (9,960) | (213) | (21,416) | (1,456) | |
OTHER: | |||||
Interest expense, net | (7,412) | (6,184) | (14,185) | (12,070) | |
Commodity derivative gain (loss) | 355 | (4,884) | (2,491) | (6,812) | |
Other income | (13) | (12) | |||
LOSS BEFORE INCOME TAX BENEFIT | (17,017) | (11,294) | (38,092) | (20,350) | |
INCOME TAX BENEFIT | (3,420) | (2,222) | (7,699) | (3,832) | |
NET LOSS | $ (13,597) | $ (9,072) | $ (30,393) | $ (16,518) | |
LOSS PER SHARE: | |||||
Basic | $ (0.15) | $ (0.10) | $ (0.32) | $ (0.17) | |
Diluted | $ (0.15) | $ (0.10) | $ (0.32) | $ (0.17) | |
WEIGHTED AVERAGE SHARES OUTSTANDING: | |||||
Basic | 93,693,117 | 94,470,636 | 94,222,277 | 94,548,898 | |
Diluted | 93,693,117 | 94,470,636 | 94,222,277 | 94,548,898 | |
[1] | Includes non-cash share-based compensation expense (benefit) as follows: |
Unaudited Consolidated Statem_2
Unaudited Consolidated Statements of Operations (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Statement [Abstract] | ||||
Includes non-cash share-based compensation expense (benefit) | $ 281 | $ 656 | $ (113) | $ 1,484 |
Unaudited Consolidated Statem_3
Unaudited Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | ||
Statement Of Income And Comprehensive Income [Abstract] | |||||
NET LOSS | $ (13,597) | $ (9,072) | $ (30,393) | $ (16,518) | |
Other comprehensive loss, net of tax | |||||
Net unrealized loss on cash flow hedges | [1] | (156) | (156) | ||
Other comprehensive loss | (156) | (156) | |||
COMPREHENSIVE LOSS | $ (13,597) | $ (9,228) | $ (30,393) | $ (16,674) | |
[1] | Includes income tax benefit as follows: |
Unaudited Consolidated Statem_4
Unaudited Consolidated Statements of Comprehensive Loss (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2018 | Jun. 30, 2018 | |
Statement Of Income And Comprehensive Income [Abstract] | ||
Includes income tax benefit | $ 41 | $ 41 |
Unaudited Consolidated Statem_5
Unaudited Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands | Total | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Accumulated Deficit [Member] |
Beginning balance, value at Dec. 31, 2017 | $ 607,416 | $ 945 | $ 742,391 | $ (135,920) | |
Beginning balance, shares at Dec. 31, 2017 | 94,533,246 | ||||
Issuance of common shares to directors for compensation, value | 318 | $ 1 | 317 | ||
Issuance of common shares to directors for compensation, shares | 106,001 | ||||
Restricted stock issuance, net of cancellations, shares | 173,481 | ||||
Share-based compensation expense | 1,166 | 1,166 | |||
Retirement of common shares in connection with acquisition, value | (380) | $ (1) | (379) | ||
Retirement of common shares in connection with acquisition, shares | (142,362) | ||||
Surrender of restricted shares for payment of income taxes, value | (632) | (632) | |||
Surrender of restricted shares for payment of income taxes, shares | (199,730) | ||||
Net loss | (16,518) | (16,518) | |||
Other comprehensive loss | (156) | $ (156) | |||
Ending balance, value at Jun. 30, 2018 | 591,214 | $ 945 | 742,863 | (156) | (152,438) |
Ending balance, shares at Jun. 30, 2018 | 94,470,636 | ||||
Beginning balance, value at Mar. 31, 2018 | 600,194 | $ 946 | 742,614 | (143,366) | |
Beginning balance, shares at Mar. 31, 2018 | 94,605,086 | ||||
Issuance of common shares to directors for compensation, value | 55 | 55 | |||
Issuance of common shares to directors for compensation, shares | 22,176 | ||||
Restricted stock issuance, net of cancellations, shares | (4,360) | ||||
Share-based compensation expense | 601 | 601 | |||
Retirement of common shares in connection with acquisition, value | (380) | $ (1) | (379) | ||
Retirement of common shares in connection with acquisition, shares | (142,362) | ||||
Surrender of restricted shares for payment of income taxes, value | (28) | (28) | |||
Surrender of restricted shares for payment of income taxes, shares | (9,904) | ||||
Net loss | (9,072) | (9,072) | |||
Other comprehensive loss | (156) | (156) | |||
Ending balance, value at Jun. 30, 2018 | 591,214 | $ 945 | 742,863 | $ (156) | (152,438) |
Ending balance, shares at Jun. 30, 2018 | 94,470,636 | ||||
Beginning balance, value at Dec. 31, 2018 | 589,245 | $ 950 | 744,126 | (155,831) | |
Beginning balance, shares at Dec. 31, 2018 | 95,030,569 | ||||
Issuance of common shares to directors for compensation, value | 29 | $ 1 | 28 | ||
Issuance of common shares to directors for compensation, shares | 27,644 | ||||
Restricted stock issuance, net of cancellations, value | $ (14) | 14 | |||
Restricted stock issuance, net of cancellations, shares | (1,205,627) | ||||
Share-based compensation expense | (142) | (142) | |||
Surrender of restricted shares for payment of income taxes, value | (167) | (167) | |||
Surrender of restricted shares for payment of income taxes, shares | (172,810) | ||||
Net loss | (30,393) | (30,393) | |||
Ending balance, value at Jun. 30, 2019 | 558,572 | $ 937 | 743,859 | (186,224) | |
Ending balance, shares at Jun. 30, 2019 | 93,679,776 | ||||
Beginning balance, value at Mar. 31, 2019 | 571,890 | $ 937 | 743,580 | (172,627) | |
Beginning balance, shares at Mar. 31, 2019 | 93,706,945 | ||||
Restricted stock issuance, net of cancellations, shares | (19,061) | ||||
Share-based compensation expense | 281 | 281 | |||
Surrender of restricted shares for payment of income taxes, value | (2) | (2) | |||
Surrender of restricted shares for payment of income taxes, shares | (8,108) | ||||
Net loss | (13,597) | (13,597) | |||
Ending balance, value at Jun. 30, 2019 | $ 558,572 | $ 937 | $ 743,859 | $ (186,224) | |
Ending balance, shares at Jun. 30, 2019 | 93,679,776 |
Unaudited Consolidated Statem_6
Unaudited Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
OPERATING ACTIVITIES: | ||
Net loss | $ (30,393) | $ (16,518) |
Adjustments to reconcile net loss to cash (used in) provided by operating activities: | ||
Depletion, depreciation and amortization | 26,674 | 32,529 |
Impairment | 300 | |
Exploration expense | 1,399 | |
Amortization of debt issuance costs | 523 | 525 |
Commodity derivative loss | 2,491 | 6,812 |
Settlements of commodity derivatives | 2,115 | (3,513) |
Share-based compensation expense | (113) | 1,484 |
Deferred income tax benefit | (7,699) | (3,832) |
Other non-cash items | (67) | 12 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 2,390 | (1,123) |
Prepaid expenses and other current assets | 1,051 | (811) |
Accounts payable | (4,751) | (4,047) |
Oil, NGLs and gas sales payable | (717) | 620 |
Accrued liabilities | (363) | 2,112 |
Cash (used in) provided by operating activities | (7,160) | 14,250 |
INVESTING ACTIVITIES: | ||
Additions to oil and gas properties | (1,683) | (27,142) |
Additions to furniture, fixtures and equipment | (185) | (31) |
Sale of equipment | 70 | |
Change in working capital related to investing activities | (433) | 7,710 |
Cash used in investing activities | (2,231) | (19,463) |
FINANCING ACTIVITIES: | ||
Borrowings under credit facility | 23,500 | 60,850 |
Repayment of amounts outstanding under credit facility | (3,000) | (54,350) |
Tax withholdings related to restricted stock | (167) | (632) |
Debt issuance costs | (14) | |
Change in working capital related to financing activities | (3,766) | (640) |
Cash provided by financing activities | 16,567 | 5,214 |
CHANGE IN CASH AND CASH EQUIVALENTS | 7,176 | 1 |
CASH AND CASH EQUIVALENTS, beginning of period | 22 | 21 |
CASH AND CASH EQUIVALENTS, end of period | 7,198 | 22 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||
Cash paid for interest | 13,088 | 11,619 |
SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTION: | ||
Asset retirement obligations capitalized | $ 2 | $ 2 |
Summary of Significant Accounti
Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | 1. Summary of Significant Accounting Policies Organization and Nature of Operations Approach Resources Inc. (“Approach,” the “Company,” “we,” “us” or “our”) is an independent energy company engaged in the exploration, development, production and acquisition of oil and gas properties. We focus on finding and developing oil and natural gas reserves in oil shale and tight gas sands. Our properties are primarily located in the Permian Basin in West Texas. We also own interests in the East Texas Basin. Consolidation, Basis of Presentation and Significant Estimates The interim consolidated financial statements of the Company are unaudited and contain all adjustments (consisting primarily of normal recurring accruals) necessary for a fair statement of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full year, due in part to the volatility in prices for oil, natural gas liquids (“NGLs”) and gas, future commodity prices for commodity derivative contracts, global economic and financial market conditions, interest rates, access to sources of liquidity, estimates of reserves, drilling risks, geological risks, transportation restrictions, the timing of acquisitions, product supply and demand, market competition and interruptions of production. You should read these consolidated interim financial statements in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on March 18, 2019. The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions are eliminated. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures of contingencies. Actual results may differ from those estimates. Significant assumptions are required in the valuation of proved oil and gas reserves, which affect our estimate of depletion expense as well as our impairment analyses. Significant assumptions also are required in our estimation of accrued liabilities, commodity derivatives, income tax provision, share-based compensation and asset retirement obligations. It is at least reasonably possible these estimates could be revised in the near term, and these revisions could be material. Certain prior-year amounts have been reclassified to conform to current-year presentation. These classifications have no impact on the net loss reported. Going Concern These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and other commitments in the normal course of business for the twelve-month period following the date of issuance of these consolidated financial statements. As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amount, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern. Our liquidity and ability to comply with financial covenants under our revolving credit facility have been negatively impacted by the volatility in commodity prices, and by the severe natural gas price discount in the Permian Basin. As of June 30, 2019, our revolving credit facility contains three principal financial covenants: (i) a consolidated interest coverage ratio, (ii) a consolidated modified current ratio and (iii) a consolidated total leverage ratio. See Note 5 for additional information regarding the financial covenants under our revolving credit facility. As of June 30, 2019, we were not in compliance with two of the financial covenants under our revolving credit facility, which represents an event of default under our revolving credit facility. As a result, we have classified the outstanding balance on our revolving credit facility as a current liability as of June 30, 2019. These factors raise substantial doubt about our ability to continue as a going concern. In order to improve our leverage position, we currently are pursuing or considering a number of actions, which in certain cases may require the consent of current lenders, stockholders or bond holders. As part of our review of deleveraging transactions, we currently are engaged in discussions and negotiations with Wilks Brothers, LLC, and its affiliate SDW Investments, LLC (collectively, “Wilks”) regarding their investment in the Company, including, without limitation, a possible debt for equity exchange of approximately $62.3 million aggregate principal amount of 7% Senior Notes due 2021 (the “Senior Notes”) currently held by Wilks and an additional capital infusion into Approach (the “Exchange Transaction”). We have engaged advisors in these discussions and negotiations, but there can be no assurance that these discussions and negotiations will result in the consummation of any transaction in a timely manner, or at all. Further, the consummation of an Exchange Transaction is contingent on the successful consummation of an extension and amendment under our credit agreement, as further discussed below. Pursuant to the terms of a limited forbearance agreement, our credit facility lenders have agreed to forbear from exercising their rights and remedies under the revolving credit facility (and related loan documents) and applicable law with respect to the occurrence or continuance of events of default caused by our failure to comply with certain financial covenants in the credit facility. This limited forbearance agreement will terminate on August 21, 2019, unless earlier extended, or earlier terminated due to additional Events of Default under our revolving credit facility, or a default under the forbearance agreement. In addition, we are in continuing discussions and negotiations with the lenders regarding a potential extension of and amendments to the existing credit agreement. There can be no assurance that these discussions and negotiations will result in the consummation of any extension or amendment in a timely manner, or at all. An extension of and amendments to the existing credit agreement would be contingent on the successful and timely consummation of an Exchange Transaction. In the event the Exchange Transaction, and credit agreement extension and amendment, are not timely completed, we anticipate that we will pursue a restructuring of our balance sheet through an in-court Chapter 11 proceeding. As we have previously disclosed, our Board has formed a committee of independent directors (the “Committee”) to evaluate the Exchange Transaction as well as other financing alternatives and deleveraging transactions, including without limitation (i) amendments or waivers to the covenants or other provisions of our revolving credit facility, (ii) raising new capital in private or public markets and (iii) restructuring our balance sheet either through an in-court Chapter 11 proceeding or through an out-of-court agreement with creditors. We also continue to review operational matters such as adjusting our capital budget and continuing to reduce costs in an effort to improve cash flows from operations, and intend to continue to evaluate other strategic alternatives, including without limitation: (i) acquiring assets with existing production and cash flows by issuing preferred or common equity to finance such acquisitions; (ii) selling existing producing or midstream assets; and (iii) merging with a strategic partner. As of June 30, 2019, we have incurred approximately $3.7 million in costs related to the potential issuance of equity in the above alternatives, which are recorded in prepaid expenses and other current assets. There can be no assurance that we will be able to implement any of these plans successfully, or that such plans, if executed, will result in compliance with our credit facility financial covenants. Recent Accounting Pronouncements On January 1, 2019, we adopted the Financial Accounting Standards Board (“FASB”) account standards update for “Leases”, which amended existing guidance to require lessees to recognize liabilities and right-of-use (“ROU”) assets on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. We adopted this guidance using a modified retrospective approach on January 1, 2019 using the transition method that allows a cumulative-effect adjustment to the opening balance to retained earnings in the period of adoption. We have completed our process to implement this standard, and we have designed processes and internal controls necessary for adoption of this standard. We have made policy elections to (i) not capitalize short-term leases for all asset classes, (ii) not separate non-lease components from lease components for all of our existing asset classes, (iii) apply the package of practical expedients that allows us to not reassess: whether any expired or existing contracts contain leases, lease classification for any expired or existing leases and initial direct costs for existing leases, (iv) apply the land easement practical expedient to not evaluate land easements that existed or expired prior to adoption and (v) apply the practical expedient to apply hindsight in estimating lease term and impairment. The impact of applying this standard is not expected to significantly impact our results of operations or cash flows. As of January 1, 2019, we recognized ROU assets and liabilities of approximately $15 million from operating leases on our consolidated balance sheet. See Note 10 for additional disclosures related to our adoption this accounting standards update. Prepaid Expenses and Other Assets In April 2017, we entered into an agreement that secured pricing of a hydraulic fracturing services crew. Under this agreement, we made a prepayment of $5 million, to be used as we completed wells. We have used $1.2 million of this prepayment related to hydraulic fracturing services provided during the first year of the agreement. In March 2018, this agreement was terminated, and $3.8 million of the unused prepaid balance was refunded to us. |
Restructuring Expenses
Restructuring Expenses | 6 Months Ended |
Jun. 30, 2019 | |
Restructuring And Related Activities [Abstract] | |
Restructuring Expenses | 2. Restructuring Expenses During the six months ended June 30, 2019, we recorded restructuring charges of $6.4 million in connection with the departures of certain executives and in connection with the review of the potential financing alternatives and deleveraging transactions discussed above. Additionally, in connection with the departure of certain executives, 960,890 unvested shares of restricted stock and 691,509 unvested cash-settled performance awards were forfeited, which resulted in a reduction in general and administrative expenses of $1.1 million during the six months ended June 30, 2019. The following table summarizes the Company’s restructuring accrual for the three and six months ended June 30, 2019, which is included under the caption “accrued liabilities” on our consolidated balance sheet (in thousands). Three months ended Six months ended June 30, 2019 June 30, 2019 Beginning balance $ 5,799 $ — Restructuring expenses incurred 142 6,424 Cash payments (5,665 ) (6,148 ) Ending balance $ 276 $ 276 |
Revenue Recognition
Revenue Recognition | 6 Months Ended |
Jun. 30, 2019 | |
Revenue From Contract With Customer [Abstract] | |
Revenue Recognition | 3. Revenue Recognition Revenues for the sale of oil, NGLs and gas are recognized as the product is delivered to our customers’ custody transfer points and collectability is reasonably assured. We fulfill the performance obligations under our customer contracts through daily delivery of oil, NGLs and gas to our customers’ custody transfer points and revenues are recorded on a monthly basis. The prices received for oil, NGLs and natural gas sales under our contracts are generally derived from stated market prices which are then adjusted to reflect deductions including transportation, fractionation and processing. As a result, our revenues from the sale of oil, natural gas and NGLs will decrease if market prices decline. To the extent actual volumes and prices of oil and natural gas sales are unavailable for a given reporting period because of timing or information not received from third parties, the expected sales volumes and prices for those properties are estimated and recorded. The following table presents our disaggregated revenue by major source for the three and six months ended June 30, 2019, and 2018 (in thousands). Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Revenues (in thousands): Oil $ 11,261 $ 18,044 $ 22,616 $ 34,388 NGLs 4,030 8,852 9,199 16,184 Gas (571 ) 3,368 2,148 8,464 Total revenue from contracts with customers 14,720 30,264 33,963 59,036 Commodity derivatives designated as cash flow hedges — 62 — 62 Total oil, NGLs and gas sales $ 14,720 $ 30,326 $ 33,963 $ 59,098 |
Earnings Per Common Share
Earnings Per Common Share | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Earnings Per Common Share | 4. Earnings Per Common Share We report basic earnings per common share, which excludes the effect of potentially dilutive securities, and diluted earnings per common share, which includes the effect of all potentially dilutive securities unless their impact is antidilutive. There were no potentially dilutive securities in the three or six months ended June 30, 2019, and June 30, 2018. The following table provides a reconciliation of the numerators and denominators of our basic and diluted earnings per share (dollars in thousands, except per-share amounts). Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Income (numerator): Net loss – basic $ (13,597 ) $ (9,072 ) $ (30,393 ) $ (16,518 ) Weighted average shares (denominator): Weighted average shares – basic 93,693,117 94,470,636 94,222,277 94,548,898 Dilution effect of share-based compensation, treasury method — — — — Weighted average shares – diluted 93,693,117 94,470,636 94,222,277 94,548,898 Net loss per share: Basic $ (0.15 ) $ (0.10 ) $ (0.32 ) $ (0.17 ) Diluted $ (0.15 ) $ (0.10 ) $ (0.32 ) $ (0.17 ) |
Long-Term Debt
Long-Term Debt | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | 5. Long-Term Debt The following table provides a summary of our long-term debt at June 30, 2019, and December 31, 2018 (in thousands). June 30, December 31, 2019 2018 Senior secured credit facility: Outstanding borrowings $ 322,000 $ 301,500 Debt issuance costs (621 ) (993 ) Senior secured credit facility, net 321,379 300,507 Senior notes: Principal 85,240 85,240 Debt issuance costs (603 ) (754 ) Senior notes, net 84,637 84,486 Total debt $ 406,016 $ 384,993 Senior Secured Credit Facility At June 30, 2019, the borrowing base and aggregate lender commitments under our amended and restated senior secured credit facility (the “Credit Facility”) were $325 million, with maximum commitments from the lenders of $1 billion. The Credit Facility has a maturity date of May 7, 2020. The borrowing base is redetermined semi-annually based on our oil, NGLs and gas reserves. We, or the lenders, can each request one additional borrowing base redetermination each calendar year. At June 30, 2019, borrowings under the Credit Facility bore interest based on the agent bank’s prime rate plus an applicable margin ranging from 2% to 3%, or the sum of the LIBOR rate plus an applicable margin ranging from 3% to 4%. In addition, we pay an annual commitment fee of 0.50% of unused borrowings available under the Credit Facility. Margins vary based on the borrowings outstanding compared to the borrowing base of the lenders. We had outstanding borrowings of $322 million under the Credit Facility at June 30, 2019, compared to $301.5 million of outstanding borrowings at December 31, 2018. The weighted average interest rate applicable to borrowings under the Credit Facility for the three months ended June 30, 2019, was 6.7%. We had outstanding unused letters of credit under the Credit Facility totaling $0.3 million at June 30, 2019, and December 31, 2018, respectively, which reduce amounts available for borrowing under the Credit Facility. Obligations under the Credit Facility are secured by mortgages on substantially all of the oil and gas properties of the Company and its subsidiaries. The Company is required to grant liens in favor of the lenders covering the oil and gas properties of the Company and its subsidiaries representing at least 95% of the total value of all oil and gas properties of the Company and its subsidiaries. Covenants The Credit Facility contains three principal financial covenants: • a consolidated interest coverage ratio covenant that requires us to maintain a ratio of (i) consolidated EBITDAX for the period of four fiscal quarters then ending to (ii) Cash Interest Expense for such period as of the last day of any fiscal quarter of not less than 2.25 to 1.0 through December 31, 2019, and 2.5 to 1.0 thereafter. EBITDAX is defined as consolidated net (loss) income plus (i) interest expense, net, (ii) income tax provision (benefit), (iii) depreciation, depletion, amortization, (iv) exploration expenses and (v) other non-cash loss or expense (including share-based compensation and the change in fair value of any commodity derivatives), less non-cash income. Cash Interest Expense is calculated as interest expense, net less amortization of debt issuance costs. At , 2019, our consolidated interest coverage ratio was 1.5 to 1.0 • a consolidated modified current ratio covenant that requires us to maintain a ratio of not less than 1.0 to 1.0 as of the last day of any fiscal quarter. The consolidated modified current ratio is defined as the ratio of (i) current assets plus funds available under our revolving credit facility, less the current derivative asset, to (ii) current liabilities less the current derivative liability and the current operating lease liabilities. At , 2019, our consolidated modified current ratio was 1.3 to 1.0; and • a consolidated total leverage ratio covenant that imposes a maximum permitted ratio of (i) Total Debt to (ii) EBITDAX for the period of four fiscal quarters then ending of not more than 5.0 to 1.0, as of the last day of any fiscal quarter through June 30, 2019, thereafter not more than 4.75 to 1.0 as of the last day of any fiscal quarter through December 31, 2019, and (iii) not more than 4.0 to 1.0 as of the last day of any fiscal quarter thereafter. Total Debt is defined as the face or principal amount of debt. At June 30 As of June 30, 2019, as a result of prolonged low commodity prices and restructuring expenses incurred in the six months ended June 30, 2019, we were not in compliance with the interest coverage ratio and total leverage ratio financial covenants under the Credit Facility, which represents an Event of Default (as defined in the Credit Facility). As a result, we have presented the outstanding balance under the Credit Facility as a current liability as of June 30, 2019. In the case of an Event of Default, the lenders (i) are not required to lend any additional amounts to us, (ii) could elect to declare all outstanding borrowings, together with accrued and unpaid interest and fees to be payable, (iii) could require us to apply all of our available cash to repay these borrowings and (iv) could prevent us from making debt service payments under our other agreements. Pursuant to the terms of a limited forbearance agreement, our credit facility lenders have agreed to forbear from exercising their rights and remedies under the Credit Facility (and related loan documents) and applicable law with respect to the occurrence or continuance of events of default caused by our failure to comply with certain financial covenants in the Credit Facility. This limited forbearance agreement will terminate on August 21, 2019, unless earlier terminated due to additional Events of Default under our Credit Facility, or a default under the forbearance agreement. The Credit Facility also contains covenants restricting cash distributions and other restricted payments, transactions with affiliates, incurrence of other debt, consolidations and mergers, the level of operating leases, asset sales, investment in other entities and liens on properties. In addition, the obligations of the Company may be accelerated upon the occurrence of other Events of Default (as defined in the Credit Facility). Events of Default include customary events for a financing agreement of this type, including, without limitation, payment defaults, the inaccuracy of representations and warranties, defaults in the performance of affirmative or negative covenants, defaults on other indebtedness of the Company or its subsidiaries, bankruptcy or related defaults, defaults related to judgments and the occurrence of a Change of Control (as defined in the Credit Facility), which includes instances where a third party becomes the beneficial owner of more than 50% of the Company’s outstanding equity interests entitled to vote. Senior Notes At June 30, 2019, and December 31, 2018, $85.2 million of Senior Notes were outstanding. We issued the Senior Notes under an indenture dated June 11, 2013, among the Company, our subsidiary guarantors and Wilmington Trust, National Association, as successor trustee. The senior indenture, as supplemented by supplemental indentures dated June 11, 2013, and December 20, 2016, is referred to as the “Indenture.” We may redeem some or all of the Senior Notes at specified redemption prices, plus accrued and unpaid interest to the redemption date. The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by each of our subsidiaries, subject to certain customary release provisions. A subsidiary guarantor may be released from its obligations under the guarantee: • in connection with any sale or other disposition of all or substantially all of the assets of that guarantor (including by way of merger or consolidation) to a person that is not (either before or after giving effect to such transaction) the Company or a subsidiary guarantor, if the sale or other disposition otherwise complies with the Indenture; • in connection with any sale or other disposition of the capital stock of that guarantor to a person that is not (either before or after giving effect to such transaction) the Company or a subsidiary guarantor, if that guarantor no longer qualifies as a subsidiary of the Company as a result of such disposition and the sale or other disposition otherwise complies with the Indenture; • if the Company designates any restricted subsidiary that is a guarantor to be an unrestricted subsidiary in accordance with the Indenture; • upon defeasance or covenant defeasance of the notes or satisfaction and discharge of the Indenture, in each case, in accordance with the Indenture; • upon the liquidation or dissolution of that guarantor, provided that no default or event of default occurs under the Indenture as a result thereof or shall have occurred and is continuing; or • in the case of any restricted subsidiary that, after the issue date of the notes is required under the Indenture to guarantee the notes because it becomes a guarantor of indebtedness issued or an obligor under a credit facility with respect to the Company and/or its subsidiaries, upon the release or discharge in full from its (i) guarantee of such indebtedness or (ii) obligation under such credit facility, in each case, which resulted in such restricted subsidiary’s obligation to guarantee the notes. The Indenture contains limited events of default. An event of default under the Credit Facility does not result in an event of default under our Senior Notes. Subsidiary Guarantors The Senior Notes are guaranteed on a senior unsecured basis by each of our consolidated subsidiaries. Approach Resources Inc. is a holding company with no independent assets or operations. The subsidiary guarantees are full and unconditional and joint and several, and any subsidiaries of the Company other than the subsidiary guarantors are minor. There are no significant restrictions on the Company’s ability, or the ability of any subsidiary guarantor, to obtain funds from its subsidiaries through dividends, loans, advances or otherwise. |
Commitments and Contingencies
Commitments and Contingencies | 6 Months Ended |
Jun. 30, 2019 | |
Commitments And Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | 6. Commitments and Contingencies Our contractual obligations include long-term debt, operating lease obligations, asset retirement obligations and employment agreements with our executive officers. Since December 31, 2018, other than the restructuring expenses disclosed in Note 2, there have been no material changes to our contractual obligations. We are involved in various legal and regulatory proceedings arising in the normal course of business. While we cannot predict the outcome of these proceedings with certainty, we do not believe that an adverse result in any pending legal or regulatory proceeding, individually or in the aggregate, would be material to our consolidated financial condition or cash flows. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | 7. Income Taxes For the three months ended June 30, 2019, our income tax benefit was $3.4 million, compared to $2.2 million for the three months ended June 30, 2018. The following table reconciles our income tax benefit for the three and six months ended , 2019, and 2018, to the U.S. federal statutory rates of 21% (dollars in thousands). Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Statutory tax at 21% $ (3,574 ) $ (2,372 ) $ (7,999 ) $ (4,274 ) State taxes, net of federal impact 64 112 127 274 Share-based compensation tax shortfall 12 — 1 70 Nondeductible compensation 74 36 167 93 Other differences 4 2 5 5 Income tax benefit $ (3,420 ) $ (2,222 ) $ (7,699 ) $ (3,832 ) |
Derivative Instruments and Fair
Derivative Instruments and Fair Value Measurements | 6 Months Ended |
Jun. 30, 2019 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Derivative Instruments and Fair Value Measurements | 8. Derivative Instruments and Fair Value Measurements We enter into commodity derivative contracts to reduce our exposure to fluctuations in commodity prices related to our oil, NGLs and gas production. We record open derivative instruments at fair value on our consolidated balance sheets as either current or non-current assets or liabilities based on the anticipated timing of cash settlements under the related contracts. Changes in fair value of our commodity derivative contracts, not designated as cash-flow hedges, and cash settlements are recorded in earnings as they occur on our consolidated statements of operations under the caption entitled “Commodity derivative gain (loss).” In April 2018, we entered into swaps for the NYMEX Calendar Monthly Average Roll (the “CMA Roll”) covering 2,000 Bbls of oil per day for May 2018 through December 2018 at $0.66/bbl. Swaps for the CMA Roll are pricing adjustments to the trade month versus the delivery month for contract pricing. These derivative contracts were designated as cash-flow hedges. The changes in fair value of the derivative contracts designated as cash-flow hedges, to the extent the hedge is effective, will be recognized in other comprehensive income until the hedged item is recognized in revenue. As of June 30, 2019, we had no outstanding derivative instruments designated as cash-flow hedges. The following table provides our outstanding commodity derivative positions at June 30, 2019. Commodity and Period Contract Type Volume Transacted Contract Price Crude Oil July 2019 – December 2019 Collar 500 Bbls/day $65.00/Bbl - $71.00/Bbl NGLs (C5 - Pentane) July 2019 – December 2019 Swap 200 Bbls/day $65.205/Bbl The following table summarizes the fair value of our open commodity derivatives as of June 30, 2019, and December 31, 2018 (in thousands). Balance Sheet Location Fair Value June 30, December 2019 2018 Derivatives not designated as hedging instruments Commodity derivatives Derivative assets $ 1,340 $ 5,946 The following table summarizes the change in the fair value of our commodity derivatives (in thousands). Three Months Ended Six Months Ended Income Statement Location June 30, June 30, 2019 2018 2019 2018 Derivatives not designated as hedging instruments Net cash receipt (payment) on derivative settlements $ 639 $ (1,982 ) $ 2,115 $ (3,513 ) Non-cash fair value loss on derivatives (284 ) (2,902 ) (4,606 ) (3,299 ) Commodity derivative gain (loss) $ 355 $ (4,884 ) $ (2,491 ) $ (6,812 ) Derivatives designated as cash-flow hedges Oil, NGLs and gas sales $ — $ 62 $ — $ 62 The following table summarizes the changes in accumulated other comprehensive income (“AOCI”) for the three months ended June 30, 2018 (in thousands). Pre-Tax Tax Benefit Net of Tax Balance at March 31, 2018 $ — $ — $ — Other comprehensive loss before reclassifications (135 ) 28 (107 ) Amounts reclassified from AOCI (62 ) 13 (49 ) Net other comprehensive loss (197 ) 41 (156 ) Balance at June 30, 2018 $ (197 ) $ 41 $ (156 ) The following table summarizes the changes in AOCI for the six months ended June 30, 2018 (in thousands). Pre-Tax Tax Benefit Net of Tax Balance at December 31, 2017 $ — $ — $ — Other comprehensive loss before reclassifications (135 ) 28 (107 ) Amounts reclassified from AOCI (62 ) 13 (49 ) Net other comprehensive loss (197 ) 41 (156 ) Balance at June 30, 2018 $ (197 ) $ 41 $ (156 ) We estimate the fair value of swap contracts based on the present value of the difference in exchange-quoted forward price curves and contractual settlement prices multiplied by notional quantities. We internally valued the option contracts using industry-standard option pricing models and observable market inputs. We use our internal valuations to determine the fair values of the contracts that are reflected on our consolidated balance sheets. We are exposed to credit losses in the event of nonperformance by the counterparties on our commodity derivatives positions and have considered the exposure in our internal valuations. However, we do not anticipate nonperformance by the counterparties over the term of the commodity derivatives positions. To estimate the fair value of our commodity derivatives positions, we use market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated or generally unobservable. We primarily apply the market approach for recurring fair value measurements and attempt to use the best available information. We determine the fair value based upon the hierarchy that 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 measurement) and lowest priority to unobservable inputs (Level 3 measurement). The three levels of fair value hierarchy are as follows: • Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. At June 30, 2019, we had no Level 1 measurements. • Level 2 — Pricing inputs are other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Our derivatives, which consist primarily of commodity swaps and collars, are valued using commodity market data, which is derived by combining raw inputs and quantitative models and processes to generate forward curves. Where observable inputs are available, directly or indirectly, for substantially the full term of the asset or liability, the instrument is categorized in Level 2. At June 30, 2019, all of our commodity derivatives were valued using Level 2 measurements. • Level 3 — Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. At June 30, 2019, we had no recurring Level 3 measurements. Nonrecurring Fair Value Measurements Assets Held for Sale During the six months ended June 30, 2019, we initiated a plan to market certain corporate assets for sale. The assets are available for immediate sale and are being actively marketed. The corporate assets held for sale were recorded at their estimated fair value less costs to sell as of March 31, 2019, which is a Level 3 fair value measurement. As a result, we recognized an impairment loss of $0.3 million for the difference between the asset’s carrying value and the estimated fair value less costs to sell during the six months ended June 30, 2019. Financial Instruments Not Recorded at Fair Value The following table sets forth the fair values of financial instruments that are not recorded at fair value on our financial statements (in thousands). June 30, 2019 Carrying Amount Fair Value Senior Notes $ 84,637 $ 21,756 The fair value of the Senior Notes is based on quoted market prices, but the Senior Notes are not actively traded in the public market. Accordingly, the fair value of the Senior Notes would be classified as Level 2 in the fair value hierarchy. |
Share-Based Compensation
Share-Based Compensation | 6 Months Ended |
Jun. 30, 2019 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Share-Based Compensation | 9. Share-Based Compensation Nonvested Shares During the six months ended June 30, 2019, 960,890 unvested shares of restricted stock were forfeited in connection with the departures of certain executives. As a result, we recorded a reduction in share-based compensation expense of $0.9 million related to the forfeitures. Cash-settled performance awards As of June 30, 2019, we had 191,731 unvested cash-settled performance awards, subject to certain performance conditions outstanding. The cash-settled performance awards represent a non-equity unit with a conversion value equal to the fair market value of a share of the Company’s common stock at the vesting date. These awards are classified as liability awards due to the cash settlement feature. Compensation costs associated with the cash-settled performance awards are re-measured at each interim reporting period and an adjustment is recorded in general and administrative expenses on our consolidated statements of operations. During the six months ended June 30, 2019, 691,509 unvested cash-settled performance awards were forfeited in connection with the departures of certain executives. As a result, we recorded a reduction in general and administrative expense of $0.2 million related to the forfeitures. For the three and six months ended June 30, 2019, including the forfeitures, we recognized a benefit of $28,000 and $0.5 million, respectively. For the three and six months ended June 30 2018, we recognized an expense of $0.5 million and $0.8 million, respectively. At June 30, 2019, we recorded a current liability of $33,000 and a non-current liability of $8,000 related to the cash-settled performance awards on our consolidated balance sheets. During the six months ended June 30, 2019, we paid $0.7 million related to vested cash-settled performance awards. |
Leases
Leases | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Leases | 10. Leases We determine if an arrangement is a lease at inception of the arrangement. To the extent that we determine an arrangement represents a lease, we evaluate whether the lease will be classified as an operating lease or a finance lease. As of June 30, 2019, we do not have any finance leases. We capitalize our operating leases on our consolidated balance sheet under the caption entitled “Right of use operating lease assets” and a corresponding lease liability under the caption “Operating lease liabilities.” The operating lease liabilities are classified as current or non-current based on the estimated timing of payment. The ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Short-term leases that have an initial term of one year or less are not capitalized but are disclosed below. Short-term lease costs exclude expenses related to leases with a lease term of one month or less. We currently enter into lease agreements to support our operations. These agreements are for leases on assets such as office space, compressors and well equipment. Below is a detailed description of our significant lease types. Office Space We lease our corporate office space under a non-cancelable agreement that expires on September 30, 2021. We have concluded that this arrangement represents an operating lease with a lease term that equals the primary non-cancelable contract term. Upon completion of the primary term, both parties have substantive rights to terminate the lease. As a result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term. Compressors We lease compressors for gas lift on our wells and for delivery of gas to our purchasers. Our compressor contracts typically have an initial lease term of one to four years, cancelable at our option with thirty-day written notice. Subsequent to the expiration of the initial term, the compressor leases will continue on a month-to-month basis cancelable by either party upon thirty-day written notice. Other equipment We lease other equipment to support our operations, with non-cancelable terms of two to three years. We have concluded that these arrangements represent operating leases with a lease term that equals the primary non-cancelable contract term. Upon completion of the primary term, both parties have substantive rights to terminate the lease. As a result, enforceable rights and obligations do not exist under the rental agreements subsequent to the primary term. Discount Rate Our leases typically do not provide an implicit rate. Accordingly, we are required to use our incremental borrowing rate in determining the present value of lease payments based on the information available at the lease commencement date. Our incremental borrowing rate reflects the estimated rate of interest that we would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Our operating leases have a weighted average remaining lease term of 2 years and a weighted average discount rate of 6.5%. The following table summarizes our operating lease liabilities with contract terms that are greater than one year as follows (in thousands). Operating Leases Remainder of 2019 $ 3,411 2020 6,833 2021 3,005 2022 121 2023 — Total lease payments 13,370 Less imputed interest (842 ) Total operating lease liabilities 12,528 Current operating lease liabilities 6,599 Long-term operating lease liabilities 5,929 Total operating lease liability $ 12,528 The following table summarizes the components of our total lease expenses for the three and six months ended June 30, 2019 (in thousands). Three months ended Six months ended Statement of Operations Location June 30, 2019 June 30, 2019 Operating lease expense General and administrative expense $ 246 $ 497 Operating lease expense Lease operating expense 1,387 2,770 Short-term lease expense (1) General and administrative expense 10 19 Short-term lease expense (1) Lease operating expense 62 132 Total lease expense $ 1,705 $ 3,418 (1) Short-term lease expense represents expense related to leases with a contract term of one year or less. The following table summarizes the cash flow information related to our operating leases for the three and six months ended June 30, 2019 (in thousands). Three months ended Six months ended June 30, 2019 June 30, 2019 Cash paid for amounts included in the measurement of operating lease liabilities $ (1,705 ) $ (3,415 ) Amounts billed to other owners (1) 66 140 Total net lease cash flow $ (1,639 ) $ (3,275 ) (1) For a portion of our operating leases, the costs of the applicable operating leases are shared with other working interest or royalty interest owners. These amounts are recorded as a reduction in oil and gas sales payable as incurred. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2019 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 11. Related Party Transactions Wilks, a related party, has purchased a portion of our outstanding Senior Notes in the open market. The Company believes that Wilks held approximately $62.3 million of our outstanding Senior Notes as of June 30, 2019. The Senior Notes held by Wilks are included in Senior Notes, net on our consolidated balance sheets. Our interest expense includes interest attributable to any Senior Notes held by Wilks on our consolidated statements of operations. Wilks currently are engaged in discussions and negotiations with the Company regarding their investment in the Company, including a possible debt for equity exchange of the Senior Notes and an additional capital infusion. We have engaged advisors in these discussions and negotiations, but t here can be no assurance that these discussions will result in the consummation of any transaction in a timely manner, or at all. In April 2018, we engaged ProFrac Services, LLC (“ProFrac”) to perform completion services for the Company. There is no required minimum or maximum number of wells committed. Matthew D. Wilks, a member of our Board of Directors, serves as the Chief Financial Officer of ProFrac, and Wilks has an equity ownership in ProFrac. During the three months ended June 30, 2018, we incurred capital expenditures of $5.1 million for hydraulic fracturing services with ProFrac, which is included in additions to oil and gas properties on our consolidated statements of cash flows. We have not utilized ProFrac completion services in the three and six months ended June 30, 2019. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
Organization and Nature of Operations | Organization and Nature of Operations Approach Resources Inc. (“Approach,” the “Company,” “we,” “us” or “our”) is an independent energy company engaged in the exploration, development, production and acquisition of oil and gas properties. We focus on finding and developing oil and natural gas reserves in oil shale and tight gas sands. Our properties are primarily located in the Permian Basin in West Texas. We also own interests in the East Texas Basin. |
Consolidation, Basis of Presentation and Significant Estimates | Consolidation, Basis of Presentation and Significant Estimates The interim consolidated financial statements of the Company are unaudited and contain all adjustments (consisting primarily of normal recurring accruals) necessary for a fair statement of the results for the interim periods presented. Results for interim periods are not necessarily indicative of results to be expected for a full year, due in part to the volatility in prices for oil, natural gas liquids (“NGLs”) and gas, future commodity prices for commodity derivative contracts, global economic and financial market conditions, interest rates, access to sources of liquidity, estimates of reserves, drilling risks, geological risks, transportation restrictions, the timing of acquisitions, product supply and demand, market competition and interruptions of production. You should read these consolidated interim financial statements in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on March 18, 2019. The accompanying interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the accounts of the Company and its wholly owned subsidiaries. Intercompany accounts and transactions are eliminated. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures of contingencies. Actual results may differ from those estimates. Significant assumptions are required in the valuation of proved oil and gas reserves, which affect our estimate of depletion expense as well as our impairment analyses. Significant assumptions also are required in our estimation of accrued liabilities, commodity derivatives, income tax provision, share-based compensation and asset retirement obligations. It is at least reasonably possible these estimates could be revised in the near term, and these revisions could be material. Certain prior-year amounts have been reclassified to conform to current-year presentation. These classifications have no impact on the net loss reported. |
Going Concern | Going Concern These consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and other commitments in the normal course of business for the twelve-month period following the date of issuance of these consolidated financial statements. As such, the accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and their carrying amount, or the amount and classification of liabilities that may result should the Company be unable to continue as a going concern. Our liquidity and ability to comply with financial covenants under our revolving credit facility have been negatively impacted by the volatility in commodity prices, and by the severe natural gas price discount in the Permian Basin. As of June 30, 2019, our revolving credit facility contains three principal financial covenants: (i) a consolidated interest coverage ratio, (ii) a consolidated modified current ratio and (iii) a consolidated total leverage ratio. See Note 5 for additional information regarding the financial covenants under our revolving credit facility. As of June 30, 2019, we were not in compliance with two of the financial covenants under our revolving credit facility, which represents an event of default under our revolving credit facility. As a result, we have classified the outstanding balance on our revolving credit facility as a current liability as of June 30, 2019. These factors raise substantial doubt about our ability to continue as a going concern. In order to improve our leverage position, we currently are pursuing or considering a number of actions, which in certain cases may require the consent of current lenders, stockholders or bond holders. As part of our review of deleveraging transactions, we currently are engaged in discussions and negotiations with Wilks Brothers, LLC, and its affiliate SDW Investments, LLC (collectively, “Wilks”) regarding their investment in the Company, including, without limitation, a possible debt for equity exchange of approximately $62.3 million aggregate principal amount of 7% Senior Notes due 2021 (the “Senior Notes”) currently held by Wilks and an additional capital infusion into Approach (the “Exchange Transaction”). We have engaged advisors in these discussions and negotiations, but there can be no assurance that these discussions and negotiations will result in the consummation of any transaction in a timely manner, or at all. Further, the consummation of an Exchange Transaction is contingent on the successful consummation of an extension and amendment under our credit agreement, as further discussed below. Pursuant to the terms of a limited forbearance agreement, our credit facility lenders have agreed to forbear from exercising their rights and remedies under the revolving credit facility (and related loan documents) and applicable law with respect to the occurrence or continuance of events of default caused by our failure to comply with certain financial covenants in the credit facility. This limited forbearance agreement will terminate on August 21, 2019, unless earlier extended, or earlier terminated due to additional Events of Default under our revolving credit facility, or a default under the forbearance agreement. In addition, we are in continuing discussions and negotiations with the lenders regarding a potential extension of and amendments to the existing credit agreement. There can be no assurance that these discussions and negotiations will result in the consummation of any extension or amendment in a timely manner, or at all. An extension of and amendments to the existing credit agreement would be contingent on the successful and timely consummation of an Exchange Transaction. In the event the Exchange Transaction, and credit agreement extension and amendment, are not timely completed, we anticipate that we will pursue a restructuring of our balance sheet through an in-court Chapter 11 proceeding. As we have previously disclosed, our Board has formed a committee of independent directors (the “Committee”) to evaluate the Exchange Transaction as well as other financing alternatives and deleveraging transactions, including without limitation (i) amendments or waivers to the covenants or other provisions of our revolving credit facility, (ii) raising new capital in private or public markets and (iii) restructuring our balance sheet either through an in-court Chapter 11 proceeding or through an out-of-court agreement with creditors. We also continue to review operational matters such as adjusting our capital budget and continuing to reduce costs in an effort to improve cash flows from operations, and intend to continue to evaluate other strategic alternatives, including without limitation: (i) acquiring assets with existing production and cash flows by issuing preferred or common equity to finance such acquisitions; (ii) selling existing producing or midstream assets; and (iii) merging with a strategic partner. As of June 30, 2019, we have incurred approximately $3.7 million in costs related to the potential issuance of equity in the above alternatives, which are recorded in prepaid expenses and other current assets. There can be no assurance that we will be able to implement any of these plans successfully, or that such plans, if executed, will result in compliance with our credit facility financial covenants. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements On January 1, 2019, we adopted the Financial Accounting Standards Board (“FASB”) account standards update for “Leases”, which amended existing guidance to require lessees to recognize liabilities and right-of-use (“ROU”) assets on the balance sheet for the rights and obligations created by long-term leases and to disclose additional quantitative and qualitative information about leasing arrangements. We adopted this guidance using a modified retrospective approach on January 1, 2019 using the transition method that allows a cumulative-effect adjustment to the opening balance to retained earnings in the period of adoption. We have completed our process to implement this standard, and we have designed processes and internal controls necessary for adoption of this standard. We have made policy elections to (i) not capitalize short-term leases for all asset classes, (ii) not separate non-lease components from lease components for all of our existing asset classes, (iii) apply the package of practical expedients that allows us to not reassess: whether any expired or existing contracts contain leases, lease classification for any expired or existing leases and initial direct costs for existing leases, (iv) apply the land easement practical expedient to not evaluate land easements that existed or expired prior to adoption and (v) apply the practical expedient to apply hindsight in estimating lease term and impairment. The impact of applying this standard is not expected to significantly impact our results of operations or cash flows. As of January 1, 2019, we recognized ROU assets and liabilities of approximately $15 million from operating leases on our consolidated balance sheet. See Note 10 for additional disclosures related to our adoption this accounting standards update. |
Prepaid Expenses and Other Assets | Prepaid Expenses and Other Assets In April 2017, we entered into an agreement that secured pricing of a hydraulic fracturing services crew. Under this agreement, we made a prepayment of $5 million, to be used as we completed wells. We have used $1.2 million of this prepayment related to hydraulic fracturing services provided during the first year of the agreement. In March 2018, this agreement was terminated, and $3.8 million of the unused prepaid balance was refunded to us. |
Derivatives Designated as Cash Flow Hedge | In April 2018, we entered into swaps for the NYMEX Calendar Monthly Average Roll (the “CMA Roll”) covering 2,000 Bbls of oil per day for May 2018 through December 2018 at $0.66/bbl. Swaps for the CMA Roll are pricing adjustments to the trade month versus the delivery month for contract pricing. These derivative contracts were designated as cash-flow hedges. The changes in fair value of the derivative contracts designated as cash-flow hedges, to the extent the hedge is effective, will be recognized in other comprehensive income until the hedged item is recognized in revenue. As of June 30, 2019, we had no outstanding derivative instruments designated as cash-flow hedges. |
Restructuring Expenses (Tables)
Restructuring Expenses (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Restructuring And Related Activities [Abstract] | |
Summary of Company's Restructuring Accrual | The following table summarizes the Company’s restructuring accrual for the three and six months ended June 30, 2019, which is included under the caption “accrued liabilities” on our consolidated balance sheet (in thousands). Three months ended Six months ended June 30, 2019 June 30, 2019 Beginning balance $ 5,799 $ — Restructuring expenses incurred 142 6,424 Cash payments (5,665 ) (6,148 ) Ending balance $ 276 $ 276 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Revenue From Contract With Customer [Abstract] | |
Schedule of Disaggregated of Revenue by Major Source | The following table presents our disaggregated revenue by major source for the three and six months ended June 30, 2019, and 2018 (in thousands). Three Months Ended Six Months Ended June 30, June 30, 2019 2018 2019 2018 Revenues (in thousands): Oil $ 11,261 $ 18,044 $ 22,616 $ 34,388 NGLs 4,030 8,852 9,199 16,184 Gas (571 ) 3,368 2,148 8,464 Total revenue from contracts with customers 14,720 30,264 33,963 59,036 Commodity derivatives designated as cash flow hedges — 62 — 62 Total oil, NGLs and gas sales $ 14,720 $ 30,326 $ 33,963 $ 59,098 |
Earnings Per Common Share (Tabl
Earnings Per Common Share (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Earnings Per Share [Abstract] | |
Reconciliation of Numerators and Denominators of Basic and Diluted Earnings Per Share | The following table provides a reconciliation of the numerators and denominators of our basic and diluted earnings per share (dollars in thousands, except per-share amounts). Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Income (numerator): Net loss – basic $ (13,597 ) $ (9,072 ) $ (30,393 ) $ (16,518 ) Weighted average shares (denominator): Weighted average shares – basic 93,693,117 94,470,636 94,222,277 94,548,898 Dilution effect of share-based compensation, treasury method — — — — Weighted average shares – diluted 93,693,117 94,470,636 94,222,277 94,548,898 Net loss per share: Basic $ (0.15 ) $ (0.10 ) $ (0.32 ) $ (0.17 ) Diluted $ (0.15 ) $ (0.10 ) $ (0.32 ) $ (0.17 ) |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Debt Disclosure [Abstract] | |
Schedule of Long Term Debt | The following table provides a summary of our long-term debt at June 30, 2019, and December 31, 2018 (in thousands). June 30, December 31, 2019 2018 Senior secured credit facility: Outstanding borrowings $ 322,000 $ 301,500 Debt issuance costs (621 ) (993 ) Senior secured credit facility, net 321,379 300,507 Senior notes: Principal 85,240 85,240 Debt issuance costs (603 ) (754 ) Senior notes, net 84,637 84,486 Total debt $ 406,016 $ 384,993 |
Income Taxes (Tables)
Income Taxes (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Income Tax Disclosure [Abstract] | |
Reconciles of Income Tax Expense to the U.S. Federal Statutory Rate | The following table reconciles our income tax benefit for the three and six months ended , 2019, and 2018, to the U.S. federal statutory rates of 21% (dollars in thousands). Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Statutory tax at 21% $ (3,574 ) $ (2,372 ) $ (7,999 ) $ (4,274 ) State taxes, net of federal impact 64 112 127 274 Share-based compensation tax shortfall 12 — 1 70 Nondeductible compensation 74 36 167 93 Other differences 4 2 5 5 Income tax benefit $ (3,420 ) $ (2,222 ) $ (7,699 ) $ (3,832 ) |
Derivative Instruments and Fa_2
Derivative Instruments and Fair Value Measurements (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | |
Outstanding Commodity Derivative Volumes and Prices | The following table provides our outstanding commodity derivative positions at June 30, 2019. Commodity and Period Contract Type Volume Transacted Contract Price Crude Oil July 2019 – December 2019 Collar 500 Bbls/day $65.00/Bbl - $71.00/Bbl NGLs (C5 - Pentane) July 2019 – December 2019 Swap 200 Bbls/day $65.205/Bbl |
Summary of Fair Value of Open Commodity Derivatives | The following table summarizes the fair value of our open commodity derivatives as of June 30, 2019, and December 31, 2018 (in thousands). Balance Sheet Location Fair Value June 30, December 2019 2018 Derivatives not designated as hedging instruments Commodity derivatives Derivative assets $ 1,340 $ 5,946 |
Summary of Change in Fair Value of Commodity Derivatives | The following table summarizes the change in the fair value of our commodity derivatives (in thousands). Three Months Ended Six Months Ended Income Statement Location June 30, June 30, 2019 2018 2019 2018 Derivatives not designated as hedging instruments Net cash receipt (payment) on derivative settlements $ 639 $ (1,982 ) $ 2,115 $ (3,513 ) Non-cash fair value loss on derivatives (284 ) (2,902 ) (4,606 ) (3,299 ) Commodity derivative gain (loss) $ 355 $ (4,884 ) $ (2,491 ) $ (6,812 ) Derivatives designated as cash-flow hedges Oil, NGLs and gas sales $ — $ 62 $ — $ 62 |
Summary of Changes in Accumulated Other Comprehensive Income ("AOCI") | The following table summarizes the changes in accumulated other comprehensive income (“AOCI”) for the three months ended June 30, 2018 (in thousands). Pre-Tax Tax Benefit Net of Tax Balance at March 31, 2018 $ — $ — $ — Other comprehensive loss before reclassifications (135 ) 28 (107 ) Amounts reclassified from AOCI (62 ) 13 (49 ) Net other comprehensive loss (197 ) 41 (156 ) Balance at June 30, 2018 $ (197 ) $ 41 $ (156 ) The following table summarizes the changes in AOCI for the six months ended June 30, 2018 (in thousands). Pre-Tax Tax Benefit Net of Tax Balance at December 31, 2017 $ — $ — $ — Other comprehensive loss before reclassifications (135 ) 28 (107 ) Amounts reclassified from AOCI (62 ) 13 (49 ) Net other comprehensive loss (197 ) 41 (156 ) Balance at June 30, 2018 $ (197 ) $ 41 $ (156 ) |
Summary of Financial Instruments Not Recorded at Fair Value | The following table sets forth the fair values of financial instruments that are not recorded at fair value on our financial statements (in thousands). June 30, 2019 Carrying Amount Fair Value Senior Notes $ 84,637 $ 21,756 |
Leases (Tables)
Leases (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Leases [Abstract] | |
Schedule of Operating Lease Liabilities | The following table summarizes our operating lease liabilities with contract terms that are greater than one year as follows (in thousands). Operating Leases Remainder of 2019 $ 3,411 2020 6,833 2021 3,005 2022 121 2023 — Total lease payments 13,370 Less imputed interest (842 ) Total operating lease liabilities 12,528 Current operating lease liabilities 6,599 Long-term operating lease liabilities 5,929 Total operating lease liability $ 12,528 |
Components of Lease Expenses | The following table summarizes the components of our total lease expenses for the three and six months ended June 30, 2019 (in thousands). Three months ended Six months ended Statement of Operations Location June 30, 2019 June 30, 2019 Operating lease expense General and administrative expense $ 246 $ 497 Operating lease expense Lease operating expense 1,387 2,770 Short-term lease expense (1) General and administrative expense 10 19 Short-term lease expense (1) Lease operating expense 62 132 Total lease expense $ 1,705 $ 3,418 (1) Short-term lease expense represents expense related to leases with a contract term of one year or less. |
Summary of Cash Flow Information Related to Operating Leases | The following table summarizes the cash flow information related to our operating leases for the three and six months ended June 30, 2019 (in thousands). Three months ended Six months ended June 30, 2019 June 30, 2019 Cash paid for amounts included in the measurement of operating lease liabilities $ (1,705 ) $ (3,415 ) Amounts billed to other owners (1) 66 140 Total net lease cash flow $ (1,639 ) $ (3,275 ) (1) For a portion of our operating leases, the costs of the applicable operating leases are shared with other working interest or royalty interest owners. These amounts are recorded as a reduction in oil and gas sales payable as incurred. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Thousands | 1 Months Ended | 6 Months Ended | ||
Mar. 31, 2018 | Apr. 30, 2017 | Jun. 30, 2019 | Jan. 01, 2019 | |
Summary Of Significant Accounting Policies [Line Items] | ||||
Termination of agreement | Aug. 21, 2019 | |||
Right-of-use asset | $ 12,419 | |||
Lease liability | 12,528 | |||
Prepayment under the agreement | $ 5,000 | |||
Utilization of prepayment related to hydraulic fracturing services provided | $ 1,200 | |||
Agreement termination date | Mar. 31, 2018 | |||
Accounting Standards Update 2016-02 [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Right-of-use asset | $ 15,000 | |||
Lease liability | $ 15,000 | |||
Prepaid expenses and other current assets [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Equity issuance costs | $ 3,700 | |||
Unused Prepaid Balance [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Proceeds from prepayment under the agreement | $ 3,800 | |||
Wilks [Member] | 7% Senior Notes Due 2021 [Member] | ||||
Summary Of Significant Accounting Policies [Line Items] | ||||
Debt exchange to common stock, principal amount | $ 62,300 | |||
Debt conversion, interest rate of debt | 7.00% | |||
Debt instrument. maturity year | 2021 |
Restructuring Expenses - Additi
Restructuring Expenses - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Restructuring Cost And Reserve [Line Items] | ||
Restructuring charges recorded | $ 142 | $ 6,424 |
Executives [Member] | ||
Restructuring Cost And Reserve [Line Items] | ||
Restructuring charges recorded | 6,400 | |
Reduction in share based compensation expense related to forfeiture | 900 | |
Executives [Member] | General and Administrative Expenses [Member] | ||
Restructuring Cost And Reserve [Line Items] | ||
Reduction in share based compensation expense related to forfeiture | $ 1,100 | |
Executives [Member] | Restricted Stock [Member] | ||
Restructuring Cost And Reserve [Line Items] | ||
Number of unvested share awards forfeited | 960,890 | |
Executives [Member] | Cash Settled Performance Awards [Member] | ||
Restructuring Cost And Reserve [Line Items] | ||
Number of unvested share awards forfeited | 691,509 |
Restructuring Expenses - Summar
Restructuring Expenses - Summary of Company's Restructuring Accrual (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Restructuring Cost And Reserve [Line Items] | ||
Restructuring expenses incurred | $ 142 | $ 6,424 |
Accrued Liabilities [Member] | ||
Restructuring Cost And Reserve [Line Items] | ||
Beginning balance | 5,799 | |
Restructuring expenses incurred | 142 | 6,424 |
Cash payments | (5,665) | (6,148) |
Ending balance | $ 276 | $ 276 |
Revenue Recognition - Schedule
Revenue Recognition - Schedule of Disaggregated of Revenue by Major Source (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 14,720 | $ 30,326 | $ 33,963 | $ 59,098 |
Oil [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 11,261 | 18,044 | 22,616 | 34,388 |
NGLs [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | 4,030 | 8,852 | 9,199 | 16,184 |
Gas [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | (571) | 3,368 | 2,148 | 8,464 |
Oil, NGLs and Gas Sales [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 14,720 | 30,264 | $ 33,963 | 59,036 |
Commodity Derivatives Designated As Cash Flow Hedges [Member] | ||||
Disaggregation of Revenue [Line Items] | ||||
Total revenue | $ 62 | $ 62 |
Earnings Per Common Share - Add
Earnings Per Common Share - Additional Information (Detail) - shares | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2018 | |
Earnings Per Share [Abstract] | ||
Potentially dilutive securities | 0 | 0 |
Earnings Per Common Share - Rec
Earnings Per Common Share - Reconciliation of Numerators and Denominators of Basic and Diluted Earnings Per Share (Detail) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Earnings Per Share [Abstract] | ||||
Net loss | $ (13,597) | $ (9,072) | $ (30,393) | $ (16,518) |
Weighted average shares – basic | 93,693,117 | 94,470,636 | 94,222,277 | 94,548,898 |
Dilution effect of share-based compensation, treasury method | 0 | 0 | ||
Weighted average shares – diluted | 93,693,117 | 94,470,636 | 94,222,277 | 94,548,898 |
Basic | $ (0.15) | $ (0.10) | $ (0.32) | $ (0.17) |
Diluted | $ (0.15) | $ (0.10) | $ (0.32) | $ (0.17) |
Long-Term Debt - Schedule of Lo
Long-Term Debt - Schedule of Long Term Debt (Detail) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Debt Instrument [Line Items] | ||
Senior notes, net | $ 84,637 | $ 84,486 |
Total debt | 406,016 | 384,993 |
Senior Notes [Member] | ||
Debt Instrument [Line Items] | ||
Principal | 85,240 | 85,240 |
Debt issuance costs | (603) | (754) |
Senior notes, net | 84,637 | 84,486 |
Senior Secured Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Outstanding borrowings | 322,000 | 301,500 |
Debt issuance costs | (621) | (993) |
Senior secured credit facility, net | $ 321,379 | $ 300,507 |
Long-Term Debt - Additional Inf
Long-Term Debt - Additional Information (Detail) | 6 Months Ended | |
Jun. 30, 2019USD ($) | Dec. 31, 2018USD ($) | |
Line of Credit Facility [Line Items] | ||
Maturity period of senior secured credit facility | Aug. 21, 2019 | |
Senior Notes [Member] | ||
Line of Credit Facility [Line Items] | ||
Senior notes outstanding | $ 85,200,000 | |
Senior Secured Credit Facility [Member] | ||
Line of Credit Facility [Line Items] | ||
Senior secured credit facility, borrowing base | 325,000,000 | |
Senior secured facility, maximum borrowing capacity | $ 1,000,000,000 | |
Maturity period of senior secured credit facility | May 7, 2020 | |
Additional borrowing base, re-determination description | We, or the lenders, can each request one additional borrowing base redetermination each calendar year. | |
Annual commitment fee of unused borrowings | 0.50% | |
Senior secured credit facility, interest rate description | Borrowings under the Credit Facility bore interest based on the agent bank's prime rate plus an applicable margin ranging from 0.50% to 1.50%, or the sum of the LIBOR rate plus an applicable margin ranging from 1.50% to 2.50%. In addition, we pay an annual commitment fee ranging from 0.375% to 0.50% of unused borrowings available. | |
Senior secured credit facility | $ 322,000,000 | $ 301,500,000 |
Interest rate applicable of senior secured credit facility | 6.70% | |
Unused letters of credit outstanding | $ 300,000 | $ 300,000 |
Production from liens covering the oil and gas properties | 95.00% | |
Consolidated interest coverage ratio | 1.5 | |
Consolidated modified current ratio | 1.3 | |
Outstanding equity interests ownership percentage | 50.00% | |
Senior Secured Credit Facility [Member] | Covenants Agreements One [Member] | ||
Line of Credit Facility [Line Items] | ||
Covenant description | a consolidated interest coverage ratio covenant that requires us to maintain a ratio of (i) consolidated EBITDAX for the period of four fiscal quarters then ending to (ii) Cash Interest Expense for such period as of the last day of any fiscal quarter of not less than 2.25 to 1.0 through December 31, 2019, and 2.5 to 1.0 thereafter. EBITDAX is defined as consolidated net (loss) income plus (i) interest expense, net, (ii) income tax provision (benefit), (iii) depreciation, depletion, amortization, (iv) exploration expenses and (v) other non-cash loss or expense (including share-based compensation and the change in fair value of any commodity derivatives), less non-cash income. Cash Interest Expense is calculated as interest expense, net less amortization of debt issuance costs. At June 30, 2019, our consolidated interest coverage ratio was 1.5 to 1.0 | |
Minimum interest coverage ratio, through December 31, 2019 | 2.25 | |
Interest coverage ratio, thereafter | 2.5 | |
Senior Secured Credit Facility [Member] | Covenants Agreements Two [Member] | ||
Line of Credit Facility [Line Items] | ||
Minimum current ratio | 1 | |
Senior Secured Credit Facility [Member] | Minimum [Member] | ||
Line of Credit Facility [Line Items] | ||
Leverage ratio | 1 | |
Senior Secured Credit Facility [Member] | Minimum [Member] | Prime Rate [Member] | ||
Line of Credit Facility [Line Items] | ||
Senior secured credit facility, marginal percentage | 2.00% | |
Senior Secured Credit Facility [Member] | Minimum [Member] | London Interbank Offered Rate (LIBOR) [Member] | ||
Line of Credit Facility [Line Items] | ||
Senior secured credit facility, marginal percentage | 3.00% | |
Senior Secured Credit Facility [Member] | Maximum [Member] | ||
Line of Credit Facility [Line Items] | ||
Leverage ratio | 10.4 | |
Senior Secured Credit Facility [Member] | Maximum [Member] | Covenants Agreements Three [Member] | ||
Line of Credit Facility [Line Items] | ||
Leverage ratio, through June 30, 2019 | 5 | |
Leverage ratio, September 30, 2019 | 4.75 | |
Leverage ratio, through December 31, 2019 | 4.75 | |
Leverage ratio, thereafter | 4 | |
Senior Secured Credit Facility [Member] | Maximum [Member] | Prime Rate [Member] | ||
Line of Credit Facility [Line Items] | ||
Senior secured credit facility, marginal percentage | 3.00% | |
Senior Secured Credit Facility [Member] | Maximum [Member] | London Interbank Offered Rate (LIBOR) [Member] | ||
Line of Credit Facility [Line Items] | ||
Senior secured credit facility, marginal percentage | 4.00% |
Income Taxes - Additional Infor
Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Income tax benefit | $ 3,420 | $ 2,222 | $ 7,699 | $ 3,832 |
Income Taxes - Reconciles of In
Income Taxes - Reconciles of Income Tax Expense to the U.S. Federal Statutory Rate (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Statutory tax at 21% | $ (3,574) | $ (2,372) | $ (7,999) | $ (4,274) |
State taxes, net of federal impact | 64 | 112 | 127 | 274 |
Share-based compensation tax shortfall | 12 | 1 | 70 | |
Nondeductible compensation | 74 | 36 | 167 | 93 |
Other differences | 4 | 2 | 5 | 5 |
Income tax benefit | $ (3,420) | $ (2,222) | $ (7,699) | $ (3,832) |
Income Taxes - Reconciles of _2
Income Taxes - Reconciles of Income Tax Expense to the U.S. Federal Statutory Rate (Parenthetical) (Detail) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | ||||
Statutory tax rate | 21.00% | 21.00% | 21.00% | 21.00% |
Derivative Instruments and Fa_3
Derivative Instruments and Fair Value Measurements - Additional Information (Detail) $ in Thousands | 6 Months Ended | 8 Months Ended |
Jun. 30, 2019USD ($)DerivativeInstrument | Dec. 31, 2018$ / bblbbl | |
Derivative Instruments And Hedging Activities Disclosures [Line Items] | ||
Impairment loss | $ 300 | |
Nonrecurring Fair Value Measurements [Member] | Level 3 [Member] | ||
Derivative Instruments And Hedging Activities Disclosures [Line Items] | ||
Impairment loss | $ 300 | |
Cash Flow Hedges [Member] | ||
Derivative Instruments And Hedging Activities Disclosures [Line Items] | ||
Number of outstanding derivative instruments | DerivativeInstrument | 0 | |
Swap for CMA Roll [Member] | ||
Derivative Instruments And Hedging Activities Disclosures [Line Items] | ||
Volume Transacted | bbl | 2,000 | |
Contract Price | $ / bbl | 0.66 |
Derivative Instruments and Fa_4
Derivative Instruments and Fair Value Measurements - Outstanding Commodity Derivative Volumes and Prices (Detail) | 6 Months Ended | 8 Months Ended |
Jun. 30, 2019$ / bblbbl | Dec. 31, 2018$ / bblbbl | |
Swap [Member] | ||
Derivatives Fair Value [Line Items] | ||
Volume Transacted | bbl | 2,000 | |
Contract Price | 0.66 | |
Crude Oil July 2019 - December 2019 Contract [Member] | Collar [Member] | ||
Derivatives Fair Value [Line Items] | ||
Volume Transacted | bbl | 500 | |
Crude Oil July 2019 - December 2019 Contract [Member] | Collar [Member] | Minimum [Member] | ||
Derivatives Fair Value [Line Items] | ||
Contract Price | 65 | |
Crude Oil July 2019 - December 2019 Contract [Member] | Collar [Member] | Maximum [Member] | ||
Derivatives Fair Value [Line Items] | ||
Contract Price | 71 | |
NGLs (C5 - Pentane) July 2019 - December 2019 Contract [Member] | Swap [Member] | ||
Derivatives Fair Value [Line Items] | ||
Volume Transacted | bbl | 200 | |
Contract Price | 65.205 |
Derivative Instruments and Fa_5
Derivative Instruments and Fair Value Measurements - Summary of Fair Value of Open Commodity Derivatives (Detail) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Commodity Derivatives [Member] | ||
Derivatives Fair Value [Line Items] | ||
Derivatives not designated as hedging instruments, Derivatives assets, Fair Value | $ 1,340 | $ 5,946 |
Derivative Instruments and Fa_6
Derivative Instruments and Fair Value Measurements - Summary of Change in Fair Value of Commodity Derivatives (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Derivatives Not Designated as Hedging Instruments [Member] | ||||
Derivatives Fair Value [Line Items] | ||||
Commodity derivative gain (loss) | $ 355 | $ (4,884) | $ (2,491) | $ (6,812) |
Derivatives Not Designated as Hedging Instruments [Member] | Net Cash Receipt (Payment) on Derivatives Settlements [Member] | ||||
Derivatives Fair Value [Line Items] | ||||
Commodity derivative gain (loss) | 639 | (1,982) | 2,115 | (3,513) |
Derivatives Not Designated as Hedging Instruments [Member] | Non-Cash Fair Value Loss on Derivatives [Member] | ||||
Derivatives Fair Value [Line Items] | ||||
Commodity derivative gain (loss) | $ (284) | (2,902) | $ (4,606) | (3,299) |
Derivatives Designated as Hedging [Member] | Oil, NGLs and Gas Sales [Member] | Cash Flow Hedges [Member] | ||||
Derivatives Fair Value [Line Items] | ||||
Commodity derivative gain (loss) | $ 62 | $ 62 |
Derivative Instruments and Fa_7
Derivative Instruments and Fair Value Measurements - Summary of Changes in Accumulated Other Comprehensive Income ("AOCI") (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2018 | Jun. 30, 2018 | |
Derivative Instruments And Hedging Activities Disclosure [Abstract] | ||
Other comprehensive loss before reclassifications, Pre-Tax | $ (135) | $ (135) |
Amounts reclassified from AOCI, Pre-Tax | (62) | (62) |
Net other comprehensive loss, Pre-Tax | (197) | (197) |
Ending balance, Pre-Tax | (197) | (197) |
Other comprehensive loss before reclassifications, Tax Benefit | 28 | 28 |
Amounts reclassified from AOCI, Tax Benefit | 13 | 13 |
Net other comprehensive loss, Tax Benefit | 41 | 41 |
Ending balance, Tax Benefit | 41 | 41 |
Other comprehensive loss before reclassifications, Net-of Tax | (107) | (107) |
Amounts reclassified from AOCI, Net-of Tax | (49) | (49) |
Other comprehensive loss | (156) | (156) |
Ending balance, Net-of Tax | $ (156) | $ (156) |
Derivative Instruments and Fa_8
Derivative Instruments and Fair Value Measurements - Summary of Financial Instruments Not Recorded at Fair Value (Detail) $ in Thousands | Jun. 30, 2019USD ($) |
Carrying Amount [Member] | |
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | |
Senior Notes | $ 84,637 |
Fair Value [Member] | |
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items] | |
Senior Notes | $ 21,756 |
Share-Based Compensation - Addi
Share-Based Compensation - Additional Information (Detail) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Executives [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Reduction in share based compensation expense related to forfeiture | $ 900,000 | |||
Restricted Stock [Member] | Executives [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Number of unvested share awards forfeited | 960,890 | |||
Cash Settled Performance Awards [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Number of unvested share awards outstanding | 191,731 | 191,731 | ||
Share-based compensation, current liability | $ 33,000 | $ 33,000 | ||
Share-based compensation, non-current liability | 8,000 | 8,000 | ||
Payments to vested awards | 700,000 | |||
Cash Settled Performance Awards [Member] | General and Administrative Expenses [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Reduction in share based compensation expense related to forfeiture | 200,000 | |||
Share-based compensation (benefit) expense | $ (28,000) | $ 500,000 | $ (500,000) | $ 800,000 |
Cash Settled Performance Awards [Member] | Executives [Member] | ||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||||
Number of unvested share awards forfeited | 691,509 |
Leases - Additional Information
Leases - Additional Information (Detail) | 6 Months Ended |
Jun. 30, 2019 | |
Lessee Lease Description [Line Items] | |
Operating leases, Weighted average remaining lease term (years) | 2 years |
Operating leases, Weighted average discount rate | 6.50% |
Compressor Contracts [Member] | |
Lessee Lease Description [Line Items] | |
Option to Cancel lease term wrriten notice period | 30 days |
Compressor Contracts [Member] | Minimum [Member] | |
Lessee Lease Description [Line Items] | |
Operating lease, term of contract | 1 year |
Compressor Contracts [Member] | Maximum [Member] | |
Lessee Lease Description [Line Items] | |
Operating lease, term of contract | 4 years |
Office Space [Member] | |
Lessee Lease Description [Line Items] | |
Lease expiration date | Sep. 30, 2021 |
Other Equipment [Member] | Minimum [Member] | |
Lessee Lease Description [Line Items] | |
Operating lease, term of contract | 1 year |
Other Equipment [Member] | Maximum [Member] | |
Lessee Lease Description [Line Items] | |
Operating lease, term of contract | 3 years |
Leases - Schedule of Operating
Leases - Schedule of Operating Lease Liabilities (Detail) $ in Thousands | Jun. 30, 2019USD ($) |
Leases [Abstract] | |
Remainder of 2019 | $ 3,411 |
2020 | 6,833 |
2021 | 3,005 |
2022 | 121 |
Total lease payments | 13,370 |
Less imputed interest | (842) |
Lease liability | 12,528 |
Current operating lease liabilities | 6,599 |
Long-term operating lease liabilities | 5,929 |
Total operating lease liability | $ 12,528 |
Leases - Components of Lease Ex
Leases - Components of Lease Expenses (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Lessee Lease Description [Line Items] | ||
Total lease expense | $ 1,705 | $ 3,418 |
General and Administrative Expenses [Member] | ||
Lessee Lease Description [Line Items] | ||
Operating lease expense | 246 | 497 |
Short-term lease expense | 10 | 19 |
Lease Operating Expense [Member] | ||
Lessee Lease Description [Line Items] | ||
Operating lease expense | 1,387 | 2,770 |
Short-term lease expense | $ 62 | $ 132 |
Leases - Summary of Cash Flow I
Leases - Summary of Cash Flow Information Related to Operating Leases (Detail) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended |
Jun. 30, 2019 | Jun. 30, 2019 | |
Leases [Abstract] | ||
Cash paid for amounts included in the measurement of operating lease liabilities | $ (1,705) | $ (3,415) |
Amounts billed to other owners | 66 | 140 |
Total net lease cash flow | $ (1,639) | $ (3,275) |
Related Party Transactions - Ad
Related Party Transactions - Additional Information (Detail) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | 6 Months Ended | ||
Aug. 31, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | Dec. 31, 2018 | |
Related Party Transaction [Line Items] | |||||
Capital expenditures for hydraulic fracturing services | $ 1,683 | $ 27,142 | |||
ProFrac [Member] | |||||
Related Party Transaction [Line Items] | |||||
Capital expenditures for hydraulic fracturing services | $ 5,100 | ||||
Senior Notes [Member] | |||||
Related Party Transaction [Line Items] | |||||
Senior notes outstanding | 85,240 | $ 85,240 | |||
Senior Notes [Member] | Wilks [Member] | |||||
Related Party Transaction [Line Items] | |||||
Senior notes outstanding | $ 62,300 | ||||
Senior Notes [Member] | Wilks [Member] | Subsequent Event [Member] | |||||
Related Party Transaction [Line Items] | |||||
Legal fees | $ 200 |