Exhibit 99.1
For Immediate Release
PostRock Reports First Quarter Results
OKLAHOMA CITY– May 8, 2013 –PostRock Energy Corporation (NASDAQ: PSTR)today announced its results for the quarter ended March 31, 2013.
Highlights
| | • | | During the quarter, 55 oil wells were drilled and 42 recompleted |
| | • | | Oil sales averaged 363 net Bbls a day, a 77.4% increase from the prior-year period |
| | • | | Production currently averages over 500 net Bbls a day |
| | • | | Due to an increase in proved reserves value, the borrowing base was increased to $95 million |
Key Financial Results
| | • | | Revenue reached to $16.1 million, 12.1% above the prior-year period |
| | • | | Oil contributed 18% of revenues, versus 13% in the prior-year period |
| | • | | Operating expenses (production costs plus G&A) fell to $13.3 million, 15.5% below the prior-year period |
| | • | | Interest expense fell to $641,000, 76.2% below the prior-year period |
Development and Leasing Activities
Cherokee Basin. In the quarter, 55 oil wells were drilled and 40 recompleted. An additional 150 oil wells and 20 recompletions in the Basin should be completed in the remainder of 2013.
Central Oklahoma. In the quarter, two oil wells were recompleted in Central Oklahoma. Initial results indicate IRRs of more than 100%. During the period, approximately 1,100 additional acres were acquired bringing leasehold to 2,500 net acres. PostRock plans to recomplete seven additional wells and drill five wells, including two horizontals in Central Oklahoma, by year-end while continuing to add leasehold. Individual projects in Central Oklahoma are expected to have a more significant impact on production and reserves than those in the Cherokee Basin.
Financial Results
Natural gas revenue, excluding hedges, rose 5.7% from the prior-year period to $12.4 million. The increase was due to a 22.3% increase in realized gas prices, which reached $3.34 per Mcf, partially offset by a 12.9% production decline to 41.3 MMcf per day. The drop in gas production resulted from the absence of gas development projects in the last 12 months as gas prices were at uneconomic levels. Oil revenue rose 60.0% from the prior-year period to $3.0 million. The increase was the result of a 77.4% increase in sales volume, offset by an 8.8% decrease in realized prices to $90.49 per Bbl. The Company received an average of $3.87 a barrel below the NYMEX price during the quarter. Gathering revenue fell 6.4%, to $654,000, largely due to reduced volumes.
Production costs, including lease operating expenses, gathering costs and production taxes, totaled $9.8 million, a 12.2% decrease from $11.1 million during the prior-year period (excluding non-recurring field restructuring costs of $368,000 in the prior-year). The decrease was driven by lower maintenance, labor and electricity costs and higher capitalized operating expenses. Recurring production costs were $2.50 per Mcfe versus $2.51 in the prior-year period.
General and administrative expenses fell to $3.5 million, a 16.8% decrease from the prior-year period, primarily due to lower compensation costs of $482,000 and $231,000 lower legal and professional fees.
The Company had a realized loss from derivative financial instruments of $873,000 compared to a realized gain of $12.1 million in the prior-year period. The loss was due to $1.0 million of realized losses on Southern Star basis swaps, partially offset by $128,000 of realized gains on NYMEX oil swaps. The last of the Southern Star basis swaps, which had a mark-to-market loss of $3.8 million at March 31st, expire in December 2013.
Due to appreciation of Constellation Energy Partners’ unit price during the quarter, a mark-to-market gain of $3.6 million was recorded.
Hedges
In February, PostRock entered into additional oil and gas swaps which took effect in March and April, respectively. In combination with existing swaps, an average of 32 MMcf and 240 Bbls a day are hedged for the remaining nine months of 2013 at weighted average prices of $4.01 per Mcf and $100.49 per Bbl. It is expected that the Southern Star basis swaps will have a loss of roughly $420,000 per month from April through December.
| | | | | | | | | | | | | | | | |
| | | Apr. - Dec.
2013 | | | 2014 | | | 2015 | | | 2016 | |
NYMEX Gas Swaps | | | | | | | | | | | | | | | | |
Volume (MMBtu) | | | 8,711,037 | | | | 10,327,572 | | | | 8,983,560 | | | | 7,814,028 | |
Weighted Average Price (MMBtu) | | $ | 4.01 | | | $ | 4.01 | | | $ | 4.01 | | | $ | 4.01 | |
| | | | |
NYMEX Oil Swaps | | | | | | | | | | | | | | | | |
Volume (Bbls) | | | 66,114 | | | | 79,548 | | | | 71,568 | | | | 65,568 | |
Weighted Average Price (Bbl) | | $ | 100.49 | | | $ | 96.28 | | | $ | 92.73 | | | $ | 90.33 | |
| | | | | | | | | | | | | | | | |
Debt
At March 31, 2013, $66.0 million was borrowed under the revolving credit facility, an increase of $8.5 million from December 31, 2012. The increase was driven primarily by the fact that $5.6 million of late December payments for the royalty settlement and property taxes did not clear until early January.
At March 31, 2013, the quarterly preferred dividend to White Deer was paid-in-kind increasing its liquidation value by $2.7 million to $94.1 million. As part of the dividend, White Deer also received 1.6 million additional warrants with an average exercise price of $1.75 a share. White Deer currently holds 9.8 million common shares and 35.9 million warrants exercisable at prices between $1.42 and $6.39 per share.
On May 8th, the Company’s borrowing base was increased by $5 million to $95 million based on year-end reserves. This was the Company’s first borrowing base increase in more than five years.
| | | | | | | | |
| | | December 31, | | | March 31, | |
| | | 2012 | | | 2013 | |
| | | (in thousands) | |
Cash and equivalents | | $ | 525 | | | $ | 65 | |
| | | | | | | | |
Long-term debt (incl. current maturities) | | $ | 57,500 | | | $ | 66,000 | |
| | |
Redeemable preferred stock | | $ | 73,152 | | | $ | 75,732 | |
Stockholders’ deficit | | | (21,008 | ) | | | (27,571 | ) |
| | | | | | | | |
Total capitalization | | $ | 109,644 | | | $ | 114,161 | |
| | | | | | | | |
Capital Expenditures
During the quarter, capital expenditures totaled $10.1 million. This included $8.9 million on oil directed drilling and recompletions, $791,000 on maintenance related projects, including trucks and compressor optimization and $378,000 for leasehold.
Management Comment
Terry W. Carter, PostRock’s President and Chief Executive Officer, said, “We are very pleased with our early progress in oil development. However, we recognize that our gas decline continues to be significant as gas prices have not reached a point where we can profitably invest in drilling. While we await a better gas market, the ongoing reconfiguration of our compression fleet will result in significant fuel savings and other cost reductions. This should begin to moderate our gas production decline.
Our recent Central Oklahoma successes, give me confidence that we can significantly increase our oil production in the region. At year end, Central Oklahoma represented less than 1% of our acreage but more than 50% of our oil reserves. Our leasehold position in the area is slowly but steadily increasing. We plan additional recompletions in the second and third quarters and we plan to begin development in this area in the third quarter. These projects are expected to have a more significant impact on the Company’s overall reserves and production per project. As we build on our recent oil production and development trend, we believe we will materially enhance the value of our shareholders’ investment.”
Webcast and Conference Call
PostRock will host a webcast and conference call tomorrow, May 9, 2013, at 10:00 a.m. Central Time. The webcast will be accessible on the ‘Investors’ page at www.pstr.com, where it will also be available for replay. The conference call number for participation is (866) 516-1003.
PostRock Energy Corporation is engaged in the acquisition, exploration, development and production of oil and natural gas, primarily in the Cherokee Basin of Kansas and Oklahoma. The Company owns and operates over 3,000 wells and nearly 2,200 miles of gas gathering lines in the Basin. It also owns and operates oil producing properties in Central Oklahoma and minor oil and gas producing properties in the Appalachian Basin.
Forward-Looking Statements
Opinions, forecasts, projections or statements, other than statements of historical fact, are forward-looking statements that involve risks and uncertainties. Forward-looking statements in this announcement are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance such expectations will prove correct. Actual results may differ materially due to a variety of factors, some of which may not be foreseen. These risks and other risks are detailed in the Company’s filings with the Securities and Exchange Commission, including risk factors listed in the Annual Report on Form 10-K and other filings. The Company’s SEC filings may be found at www.pstr.com or www.sec.gov. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes.
Company Contact:
David J. Klvac
EVP & Chief Financial Officer
dklvac@pstr.com
(405) 815-4304
Reconciliation of Non-GAAP Financial Measures
The following table represents a reconciliation of net income (loss) to EBITDA and adjusted EBITDA, as defined, for the periods presented.
| | | | | | | | |
| | | Three Months Ended March 31, | |
| | | 2012 | | | 2013 | |
| | | (in thousands) | |
Net income (loss) from continuing operations | | $ | 6,008 | | | $ | (7,894 | ) |
Adjusted for: | | | | | | | | |
Interest expense, net | | | 2,696 | | | | 641 | |
Depreciation, depletion, and amortization | | | 6,162 | | | | 6,428 | |
| | | | | | | | |
EBITDA | | $ | 14,866 | | | $ | (825 | ) |
| | | | | | | | |
Other income, net | | | (11 | ) | | | (13 | ) |
Gain on equity investment | | | (4,169 | ) | | | (3,582 | ) |
Unrealized loss from derivative financial instruments | | | 60 | | | | 6,248 | |
(Gain) loss on disposal of assets | | | (104 | ) | | | 31 | |
Stock-based compensation | | | 442 | | | | 719 | |
Other non-cash compensation | | | — | | | | 209 | |
| | | | | | | | |
Adjusted EBITDA | | $ | 11,084 | | | $ | 2,787 | |
| | | | | | | | |
Although adjusted EBITDA is not a measure of performance calculated in accordance with generally accepted accounting principles, or GAAP, management considers it an important measure of performance. Adjusted EBITDA is not a substitute for the GAAP measures of earnings or cash flow and is not necessarily a measure of the Company’s ability to fund its cash needs. In addition, it should be noted that companies calculate adjusted EBITDA differently, and therefore adjusted EBITDA as presented herein may not be comparable to adjusted EBITDA reported by other companies. Adjusted EBITDA has material limitations as a performance measure because it excludes, among other things, (a) interest expense, which is a necessary element of business to the extent that an entity incurs debt, (b) depreciation, depletion and amortization, which are necessary elements of any business that uses capital assets, (c) impairments of oil and gas properties, which may at times be a material element of an independent oil company’s business, and (d) income taxes, which may become a material element of the Company’s operations in the future. Because of its limitations, adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of PostRock’s business.
POSTROCK ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
| | | | | | | | |
| | | Three Months Ended March 31, | |
| | | 2012 | | | 2013 | |
Revenue | | | | | | | | |
Natural gas sales | | $ | 11,774 | | | $ | 12,442 | |
Crude oil sales | | | 1,848 | | | | 2,957 | |
Gathering | | | 699 | | | | 654 | |
| | | | | | | | |
Total | | | 14,321 | | | | 16,053 | |
Costs and expenses | | | | | | | | |
Production expense | | | 11,501 | | | | 9,775 | |
General and administrative | | | 4,263 | | | | 3,546 | |
Depreciation, depletion and amortization | | | 6,162 | | | | 6,428 | |
Loss (gain) on disposal of assets | | | (104 | ) | | | 31 | |
| | | | | | | | |
Total | | | 21,822 | | | | 19,780 | |
| | | | | | | | |
Operating loss | | | (7,501 | ) | | | (3,727 | ) |
| | |
Other income (expense) | | | | | | | | |
Realized gains (losses) from derivative financial instruments | | | 12,085 | | | | (873 | ) |
Unrealized loss from derivative financial instruments | | | (60 | ) | | | (6,248 | ) |
Gain on equity investment | | | 4,169 | | | | 3,582 | |
Other income, net | | | 11 | | | | 13 | |
Interest expense, net | | | (2,696 | ) | | | (641 | ) |
| | | | | | | | |
Total | | | 13,509 | | | | (4,167 | ) |
| | | | | | | | |
Income (loss) from continuing operations before income taxes | | | 6,008 | | | | (7,894 | ) |
Income taxes | | | — | | | | — | |
| | | | | | | | |
Income (loss) from continuing operations | | | 6,008 | | | | (7,894 | ) |
Income from discontinued operations | | | 1,339 | | | | — | |
| | | | | | | | |
Net income (loss) | | | 7,347 | | | | (7,894 | ) |
Preferred stock dividends | | | (2,093 | ) | | | (2,740 | ) |
Accretion of redeemable preferred stock | | | (471 | ) | | | (778 | ) |
| | | | | | | | |
Net income (loss) available to common stockholders | | $ | 4,783 | | | $ | (11,412 | ) |
| | | | | | | | |
Income (loss) per common share | | | | | | | | |
Basic income (loss) per share - continuing operations | | $ | 0.31 | | | $ | (0.50 | ) |
Basic income (loss) per share - discontinued operations | | | 0.12 | | | | — | |
| | | | | | | | |
Basic income (loss) per share | | $ | 0.43 | | | $ | (0.50 | ) |
| | | | | | | | |
Diluted income (loss) per share - continuing operations | | $ | 0.27 | | | $ | (0.50 | ) |
Diluted income (loss) per share - discontinued operations | | | 0.10 | | | | — | |
| | | | | | | | |
Diluted income (loss) per share | | $ | 0.37 | | | $ | (0.50 | ) |
| | | | | | | | |
Weighted average common shares outstanding | | | | | | | | |
Basic | | | 11,206 | | | | 22,763 | |
| | | | | | | | |
Diluted | | | 12,786 | | | | 22,763 | |
| | | | | | | | |
POSTROCK ENERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(Unaudited)
| | | | | | | | |
| | | December 31,
2012 | | | March 31,
2013 | |
| ASSETS | |
Current assets | | | | | | | | |
Cash and equivalents | | $ | 525 | | | $ | 65 | |
Restricted cash | | | 1,500 | | | | 1,500 | |
Accounts receivable - trade, net | | | 7,207 | | | | 6,944 | |
Other receivables | | | 180 | | | | 459 | |
Inventory | | | 990 | | | | 854 | |
Other | | | 2,100 | | | | 1,069 | |
Derivative financial instruments | | | 1,771 | | | | 266 | |
| | | | | | | | |
Total | | | 14,273 | | | | 11,157 | |
Oil and gas properties, full cost, net | | | 107,531 | | | | 112,000 | |
Other property and equipment, net | | | 14,244 | | | | 13,450 | |
Other, net | | | 2,180 | | | | 2,091 | |
Equity investment | | | 7,820 | | | | 11,402 | |
Derivative financial instruments | | | 615 | | | | 644 | |
| | | | | | | | |
Total assets | | $ | 146,663 | | | $ | 150,744 | |
| | | | | | | | |
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
Current liabilities | | | | | | | | |
Accounts payable | | $ | 9,373 | | | $ | 5,765 | |
Revenue payable | | | 4,447 | | | | 4,324 | |
Accrued expenses and other | | | 4,928 | | | | 3,165 | |
Derivative financial instruments | | | 4,449 | | | | 5,723 | |
| | | | | | | | |
Total | | | 23,197 | | | | 18,977 | |
Derivative financial instruments | | | 2,638 | | | | 6,136 | |
Long-term debt | | | 57,500 | | | | 66,000 | |
Asset retirement obligations | | | 10,868 | | | | 11,190 | |
Other | | | 316 | | | | 280 | |
| | | | | | | | |
Total liabilities | | | 94,519 | | | | 102,583 | |
| | |
Commitments and contingencies | | | | | | | | |
Series A cumulative redeemable preferred stock | | | 73,152 | | | | 75,732 | |
| | |
Stockholders’ deficit | | | | | | | | |
Preferred stock | | | 3 | | | | 3 | |
Common stock | | | 213 | | | | 237 | |
Additional paid-in capital | | | 396,732 | | | | 398,039 | |
Accumulated deficit | | | (417,956 | ) | | | (425,850 | ) |
| | | | | | | | |
Total stockholders’ deficit | | | (21,008 | ) | | | (27,571 | ) |
| | | | | | | | |
Total liabilities and stockholders’ deficit | | $ | 146,663 | | | $ | 150,744 | |
| | | | | | | | |
POSTROCK ENERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
| | | | | | | | |
| | | Three Month Ended March 31, | |
| | | 2012 | | | 2013 | |
Cash flows from operating activities | | | | | | | | |
Net income (loss) | | $ | 7,347 | | | $ | (7,894 | ) |
Adjustments to reconcile net income (loss) to net cash from (used in) operations | | | | | | | | |
Depreciation, depletion and amortization | | | 7,013 | | | | 6,428 | |
Stock-based compensation | | | 442 | | | | 719 | |
Other non-cash compensation | | | — | | | | 209 | |
Amortization of deferred loan costs | | | 409 | | | | 104 | |
Change in fair value of derivative financial instruments | | | 60 | | | | 6,248 | |
Loss (gain) on disposal of assets | | | (109 | ) | | | 31 | |
Gain from equity investment | | | (4,169 | ) | | | (3,582 | ) |
Other non-cash changes to items affecting net loss | | | 130 | | | | (15 | ) |
Changes in assets and liabilities | | | | | | | | |
Receivable | | | 3,356 | | | | 153 | |
Payables | | | (555 | ) | | | (5,559 | ) |
Other | | | (3,489 | ) | | | 329 | |
| | | | | | | | |
Net cash flows from (used in) operating activities | | | 10,435 | | | | (2,829 | ) |
| | | | | | | | |
Cash flows from investing activities | | | | | | | | |
Proceeds from sale of assets | | | 232 | | | | 12 | |
Expenditures for equipment, development, leasehold and pipeline | | | (4,491 | ) | | | (9,211 | ) |
| | | | | | | | |
Net cash flows used in investing activities | | | (4,259 | ) | | | (9,199 | ) |
| | | | | | | | |
Cash flows from financing activities | | | | | | | | |
Proceeds from debt | | | — | | | | 8,500 | |
Repayments of debt | | | (14,000 | ) | | | — | |
Debt and equity financing costs | | | — | | | | (224 | ) |
Proceeds from issuance of common stock | | | 7,500 | | | | 3,292 | |
| | | | | | | | |
Net cash flows from (used in) financing activities | | | (6,500 | ) | | | 11,568 | |
| | | | | | | | |
Net decrease in cash and equivalents | | | (324 | ) | | | (460 | ) |
Cash and equivalents - beginning of period | | | 349 | | | | 525 | |
| | | | | | | | |
Cash and equivalents - end of period | | $ | 25 | | | $ | 65 | |
| | | | | | | | |
