QuickLinks -- Click here to rapidly navigate through this document
WILDHORSE RESOURCE DEVELOPMENT CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Dollars in Thousands)
| | For the Six Months Ended June 30, | For the Year Ended December 31, | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||
Income (loss) before income taxes | $ | (177,317 | ) | $ | 11,056 | $ | (52,651 | ) | $ | (32,436 | ) | $ | (14,595 | ) | ||
Add: | ||||||||||||||||
Fixed charges | 31,351 | 36,740 | 8,857 | 9,107 | 3,245 | |||||||||||
Amortization of capitalized interest(3) | 1,847 | 367 | 218 | 129 | 13 | |||||||||||
| | | | | | | | | | | | | | | | | |
Subtotal | $ | (144,119 | ) | $ | 48,163 | $ | (43,576 | ) | $ | (23,200 | ) | $ | (11,337 | ) | ||
Less: | ||||||||||||||||
Capitalized interest | (2,278 | ) | (3,092 | ) | (62 | ) | (842 | ) | (197 | ) | ||||||
| | | | | | | | | | | | | | | | | |
Total Earnings | $ | (146,397 | ) | $ | 45,072 | $ | (43,638 | ) | $ | (24,042 | ) | $ | (11,534 | ) | ||
Fixed charges: | ||||||||||||||||
Interest expense | 25,783 | 29,016 | 7,834 | 6,943 | 2,680 | |||||||||||
Capitalized interest | 2,278 | 3,092 | 62 | 842 | 197 | |||||||||||
Amortized premiums, discounts and capitalized expenses related to indebtedness | 1,526 | 2,917 | 479 | 711 | — | |||||||||||
Interest portion of rental expense | 1,764 | 1,715 | 482 | 611 | 368 | |||||||||||
| | | | | | | | | | | | | | | | | |
Total fixed charges | $ | 31,351 | $ | 36,740 | $ | 8,857 | $ | 9,107 | $ | 3,245 | ||||||
Preferred stock cash dividends requirement(4) | 9,230 | — | — | — | — | |||||||||||
| | | | | | | | | | | | | | | | | |
Combined fixed charges and preferred stock dividends | $ | 40,581 | $ | 36,740 | $ | 8,857 | $ | 9,107 | $ | 3,245 | ||||||
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Ratio of earnings to fixed charges(1) | * | 1.23x | * | * | * | |||||||||||
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Ratio of earnings to combined fixed charges and preferred stock dividends(2) | * | 1.23x | * | * | * | |||||||||||
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
- (1)
- Earnings were inadequate to cover fixed charges by $14.8 million for the year ended December 31, 2014; $33.1 million for the year ended December 31, 2015; $52.5 million for the year ended December 31, 2016; and $177.7 million for the six months ended June 30, 2018.
- (2)
- Earnings were inadequate to cover fixed charges plus preferred stock cash dividends by $187.0 million for the for the six months ended June 30, 2018.
- (3)
- Includes write-off of the unamortized capitalized interest associated with our North Louisiana properties that were sold on March 29, 2018.
- (4)
- The pre-tax earnings required to pay preference security dividend requirements is calculated using the effective tax rate of 26.8%.
Our computation of ratio of earnings to fixed charges takes into account our combined financial position and results attributable to our predecessor and previous owners for those dates prior to our initial public offering. For periods after the completion of our initial public offering, our consolidated financial statements include our accounts and those of our subsidiaries.
For the purpose of computing the ratio of earnings to fixed charges, the term "earnings" is the amount resulting from adding and subtracting the following items (as applicable). Add the following:
(i) pre-tax income from continuing operations before adjustment for income or loss from equity investees; (ii) fixed charges; (iii) amortization of capitalized interest; (iv) distributed income of equity investees; and (v) our share of pre-tax losses of equity investees for which charges arising from guarantees are included in fixed charges. From the total of the added items, subtract the following: (i) interest capitalized; (ii) preference security dividend requirements of consolidated subsidiaries; and (iii) the noncontrolling interest in pre-tax income of subsidiaries that have not incurred fixed charges.
The term "fixed charges" means the sum of the following: (i) interest expensed and capitalized, (ii) amortized premiums, discounts and capitalized expenses related to indebtedness, (iii) an estimate of the interest within rental expense, and (iv) preference security dividend requirements of consolidated subsidiaries.
"Preference security dividend" is the amount of pre-tax earnings that is required to pay the dividends on outstanding preference securities. The dividend requirement must be computed as the amount of the dividend divided by (1 minus the effective income tax rate applicable to continuing operations).
Our Series A Perpetual Convertible Preferred Stock (the "Preferred Stock") was issued on June 30, 2017. We are allowed, at our option, to pay cash dividends or pay dividends in-kind through an adjustment to the Preferred Stock's liquidation preference. We paid our first $6.7 million cash dividend on the Preferred Stock on April 30, 2018.
WILDHORSE RESOURCE DEVELOPMENT CORPORATION COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (Dollars in Thousands)